In this week’s blog, Financial Planner and Financial Wellness Coach, Amy Irvine, CFP®, EA, MPAS®, CCFC digs into selection criteria often overlooked when selecting a college.
Does the school really matter? — Unless you’re planning to enter a highly specialized field, the school may not be as important as you think it is. As long as the school has a good reputation — like many state colleges and universities — why pay more than necessary to obtain a degree? Caution: No matter which school you select, make sure it’s accredited and that the credits will transfer if you need or want to switch to another school or obtain a higher degree.
Do they offer the right degree program? — The degree can pay for itself over and over again...or be worthless to employers. While you may have a strong interest in the historical events of the 1700s, it may be difficult to find a job that pays for this type of knowledge. The greatest current demand is in one of the STEM (Science, Technology, Engineering, and Math) fields, but of course, there are other rewarding areas of study as well. Go to PayScale: Majors That Pay You Back to learn more about salaries in your chosen field.
What’s the cost? — CNNMoney’s Cost of College Estimator will provide the estimated annual cost, including tuition, fees, and room and board. It also provides the estimated cost after grants and scholarships — both for one year and all four years — based on family income. Looking at the estimated costs both before and after grants and scholarships can have a huge impact on your ultimate choice. Another source is the Department of Education’s Net Price Calculator Center.
Caution: Many schools include access to student loans in their financial aid numbers and sales materials. Dig a little deeper to find out if it’s truly free money or simply the ability to incur more debt.
Caution: Most students are unaware that subsidized (the government pays it) student loan interest doesn’t last forever. For first-time borrowers on or after July 1, 2013, the clock is ticking on the time the government will pay interest on their loans. Switching majors, taking too long to graduate, etc., can trigger thousands of dollars of interest on top of the loan amount borrowed.
Solution: Follow the new guidelines at Federal Student Aid Loan Subsidy [PDF] and New Rules for Subsidized Loans.
What’s the graduation rate? — The ultimate objective for most students is to complete their education in the shortest amount of time, and with the degree needed to secure the best job. Plus, if students don’t graduate, it will be hard for them to repay their loans.
Yet, the National Center for Education Statistics reports that it took six years for 59% of first-time students at four-year institutions to complete their degrees. Obviously, being able to graduate in less time — ideally four years or less — illustrates the school’s commitment to helping students keep costs down and move into the workforce sooner.
There are two factors to evaluate in this category:
The number of years it takes the average student to graduate — College Results will help compare multiple colleges’ four-, five-, and six-year graduation rates. Also, consider the Pros and Cons of ThreeYear Degree Programs. Example: Rachel failed to research her school before she attended. Due to the schedule of when classes were offered, it was virtually impossible to graduate in less than six years. She is now struggling to repay $65,000 more in student loan debt than friends who graduated in four years.
The percentage of students who actually graduate — College Completion is a site that identifies graduation rates for two and four-year schools. PayScale is a similar site that highlights graduation rates, college costs, and overall value.
How much is the student loan balance for new grads? — As CBS Money Watch highlights, student loan debt continues to rise. The level of debt ties back to the cost of the school, how long it takes students to graduate, and how much of the total cost is covered by grants and financial aid (other than student loans). Locate the best and worst states with student debt at WalletHub, but ask about the actual debt levels at specific schools of interest as well. Some of the lists in #8 include this important data.
ROI: Will the numbers work? — The bottom line for all students is how much they’ll be able to earn once they graduate...and if it will be enough to repay the cost of the education. For example, the Center for College Affordability reports that engineering and economics graduates typically earn almost double what social work and education graduates receive by mid-career.
When comparing potential salaries, there are two criteria to evaluate:
1) The average salary per graduate of a specific school: PayScale.com: College ROI Report (click on the specific school for details)
2) The average salary paid for specific degree programs: PayScale.com: Salaries per Degree
Before applying for a student loan, estimate the costs of the college(s), how much you’ll need to borrow, and the projected income in your chosen field. Then go to FinAid.org to calculate monthly payments and determine if the numbers will work.
What’s the student loan default rate? — Schools with a high student loan default rate (often referred to as the cohort rate) send a big red flag to prospective students that the school may be too expensive, the students may be borrowing too much, it takes too long to graduate, or that students can’t find a job upon graduation. To check a school’s three-year cohort default rate, search College Navigator or the Department of Education’s Cohort Default Rate Database.
How are the schools rated? — Another step is exploring the myriad Best Of rankings. There are all types of comparisons in these lists, from generic ratings like the Best Schools in the Midwest (best regional schools) or the ones with the prettiest campuses to more specific lists such as the Top Undergrad Schools for Video Game Design (best schools for specific fields/industries).
Carefully review the scoring system used to create these lists. In some cases they are so subjective, they may not be of much value, but any information will help you become a more informed consumer. When thousands of dollars are at stake and your future career is at risk, it will pay to dig into the details. For more details on the validity of lists, see Do College Rankings Mean Anything?
Here are just a few of the lists and sites to help compare schools. Some are free or provide only limited information, but others charge a fee for complete access. Many of these 10 questions can be answered by several of the following comprehensive rating lists:
▪ Money’s Best Colleges (free basic info; full access $24.95/year)
▪ U.S. News: Best Colleges (free basic info; full access $29.95/year)
▪ Princeton Review’s Best 380 Colleges (create a free account for basic info; buy the book for $23.99)
▪ 50 Best Online Colleges (free)
▪ 100 Best Colleges & Universities by State (free)
Caution: Again, evaluate rankings carefully. These lists are all different, so it’s important to look at the methodology each list uses to rank schools, their rating criteria, and if they allow “featured” schools.
College Navigator — While this site won’t provide an external rating of the quality of a school, it’s a free government source to build your own table of preferred colleges to compare fees, financial aid, net price, programs and majors, and student loan default rates.
Will the school survive huge debt obligations? — In recent months, new regulations and overwhelming debt loads have caused more private and for-profit schools to struggle to stay afloat. Shark Tank’s Mark Cuban warns that this is just the start of the college implosion. This dramatic trend will not only affect current students but graduates as well. A degree from a school that is no longer in operation can lose its value quickly.
The Department of Education has compiled a list of schools with questionable finances or that may lose access to Federal Student Aid. Consider avoiding schools that don’t meet the 90/10 Rule, where more than 90% of their income comes from Title IV (Federal Student Aid) sources.
What’s the mean SAT or ACT score? — This may sound like a trivial reason to select a school, but it’s actually an important stat to consider. If the mean (average) SAT score is 1600 at the college or university, and yours is closer to 1200, what’s going to happen when professors grade on a curve? While ambition is important, barely qualifying to get into a school could set some students up for failure, and could be a major reason they eventually drop out. Go to CollegeSimply: Colleges by Test Score or CollegeBoard: Test Scores & Selectivity to find a school that matches your scores.
This article is shared under the expressed permission and collaboration with Fiscal Fitness Clubs of America. Copyright 2017, Fiscal Fitness Clubs of America. This in an unpublished work of authorship protected by the laws of the U.S.A. It may not be reproduced, copied, published or loaned to other parties without the expressed written consent of Fiscal Fitness Clubs of America, LLC.