One of our many mantras for investors is, “Your child can borrow money for college; you cannot borrow money for retirement.” We also stress the importance of saving early and saving often to those in their 20s who just landed their first full-time job with a 401(k). However, the reality is that 2016’s college graduates from both public and private four-year colleges are estimated to owe an average $37,100 in student loans.
How can we recommend starting out life with such debt and expect society’s newest workers to fund their own retirement? It comes down to making smart decisions about how much you borrow, how hard you try to reduce college costs, and making some sound financial decisions along the way. Starting out life with considerable debt is not ideal, but taking out school loans is definitely not the worst decision. For college graduates, annual earnings are an average of $23,000 higher compared to high school graduates.
In Georgia, the HOPE programs, funded by the Georgia Lottery for Education, offers six different aid programs, with the most recognizable being the HOPE scholarship. The scholarship is merit based, requiring the student to graduate high school with a minimum 3.0 grade point average and maintain a 3.0 or better throughout their college enrollment. The award is only applied to tuition, but can considerably reduce the overall cost of attendance. Other HOPE programs include the Zell Miller Scholarship, HOPE and Zell Miller Grants, HOPE GED Grant and the Strategic Industries Grant. Georgia also has a host of other scholarship, grant and loan programs for eligible students. Students can apply by filling out the Georgia Student Financial Aid Application System, available at www.gafutures.org.
When your student completes the Free Application for Federal Student Aid, they are first considered for federal need-based aid, such as Pell Grants, work-study programs or Federal Supplemental Education Opportunity Grants. If the student does not have an exceptional financial need, the government then offers one of the many loan programs. Your school often determines the amount a student can borrow based on the cost of attendance, which is why school selection is important.
While you should consider the school’s academic reputation for your student’s desired major, you should also consider a school’s graduation rate and alumni salary. Collegescorecard.ed.gov from the U.S. Department of Education allows you to search schools using this criteria so you can weigh the cost of attendance with the benefit the school has to offer. Elite schools may have earned their reputation on one or two majors. Furthermore, you may not want to pay Ivy League prices for a degree in Folklore and Mythology.
To help keep your costs in check, consider having your student live at home rather than spending borrowed money on a dorm or an apartment. While it is not necessary to live the cliché of a poor college student who only eats $0.13-packages of ramen noodles for each meal, it is likewise unnecessary to live in a 1,200 square foot, two bedroom luxury apartment with no roommate.
With more than 70% of students borrowing money to pay for college, beginning a career with debt is a very real reality. However, a college education often is still a solid investment in your child’s future. If you have questions regarding how you can help your student with college costs, the experts at Henssler Financial will be glad to help:
- Experts Request Form
- Email: experts@henssler.com
- Phone: 770-429-9166.
Disclosures: This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
