Wes Moss: The truth about paying for college

Certified financial planner Wes Moss provides personal finance advice and accessible investment strategies. His guest post appears here weekly.

Wes Moss hosts 'Money Matters' Sunday mornings on AM750 and 95.5FM News/Talk WSB

Wes Moss hosts 'Money Matters' Sunday mornings on AM750 and 95.5FM News/Talk WSB

The soaring cost of higher education has prompted talk about a “college bubble” and raised questions about the value of investing in a college degree.

The debate is legitimate, but it’s still important to get that diploma. On average, college graduates earn $1 million more during their careers than non-college grads. What’s more, those with a college degree are better insulated against job loss. For example, the current jobless rate for college degree holders is 4.2 percent, while those without are suffering an 8.3 percent rate.

Of course, higher education isn’t free — unless you are extremely good at a certain sport. The rising cost of college combined with greater access for more students has pushed total student loan debt to $1 trillion – more than we borrow to buy cars. The average loan balance student carried by college borrowers is upwards of $25,000, according to the Project on Student Debt.

As a result of their debt obligations, many college grads don’t begin out-earning their high school grad buddies on a net basis until their early thirties. But again, at the career finish line, the college guy or gal will have dramatically out-earned the high school grad.

And there is no tuition relief in site. I predict that in just over a decade, an in-state University of Georgia four-year degree will cost about $128,000.

That’s just too much for most parents to scrape together, especially on top of retirement. So how will modern families send their kids to college? Here’s a common arrangement I think makes sense – chopping the tuition monster into thirds:

Savings: One-third of the college cost comes from a lifetime of saving, ideally using a tax-advantaged 529 college savings account.

Cash flow: One-third comes from the family’s current income while kids are in college.

Loans: The student pays one-third of his tuition from loans and/or money they have earned. I especially like this because it forces the child to have “skin in the game” and truly appreciate the sacrifices being made for his or her education.

Remember, too, that higher education is like any other investment or product — you need to shop for the best value. Prestige and exclusivity are nice, but how much are you willing/able to pay for that — especially when in many fields, including entrepreneurship, public college grads achieve more success than peers who attend elite private schools?

Kiplinger’s list of the best values in public colleges is a great place to start your shopping. My alma mater, UNC-Chapel Hill, frequently holds the top spot on that list, and to my delight this year UGA is in the Top 10. That’s a ranking I really need the Dawgs to maintain!

How do you plan on paying for college…and do you think high-priced schools are worth it?

– By Wes Moss, for Atlanta Bargain Hunter

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ALittleConfused

April 9th, 2012
9:41 am

Question: What are the certain sports? Doesn’t every sport where one receives a full scholarship provide a free education? Football, swimming, tennis, basketball, soccer, volleyball, hockey, lacrosse, etc.? Some people receive full athletic scholarships in those sports as well as some who don’t. Are there certain sports where people DON’T receive a free education? I only ask because you mentioned “certain” sports so if you could please let us know.

Beyond what you wrote, people should realize that they have CHOICES. A culmination of CHOICES lead up to where one is just prior to qualifying for a mortgage, getting married, and yes paying (or not having to pay) for college. The most successful/prepared people I’ve seen began researching the process years before their child was to attend college. They prepared themselves by making good choices before, during, and even after the application process.

nelsonhoward

April 9th, 2012
9:54 am

From all I have seen and all I have heard is students with the top grades are welcome at college regardless of money, not to say that some money is needed. That is the way it should be.The moe technical the education the more financially rewarding it is, that is the way it should be. If universities and parents want their children in school if only to take the “fluff courses” with only marginal rewards after grauation,let them pay for it.

experiential education practitioner

April 9th, 2012
11:04 am

It’s called Cooperative Education. Ga Tech has one of the largest and oldest programs in the US, celebrating its centennial this year. (www.coop100.gatech.edu) Many schools have these types of programs available, where you work in your major field of study, gain experience, and have money to pay for school. Check it out….it’s a no brainer.

MM

April 9th, 2012
5:09 pm

Education: Another example of what happens when the “free market” is allowed to rework what had previously a domain of the public sector.

This is an egregious example of how administrative salaries, top-level professors, and out-of-control building programs for non-essential rock walls and glossy buildings on campuses, and a government unsupportive of the long-term benefits of education conspire to make the rich richer while ordinary people lose out.

What sounds good to many Americans in the abstract becomes a nightmare in reality. Cherished myths go down hard and many suffer before obvious lessons are learned.

Kenneth S

April 10th, 2012
11:35 am

“current jobless rate for college degree holders is 4.2 percent, while those without are suffering an 8.3 percent rate.”

Not sure I follow since the national rate is 8.3%?

atlmom

April 10th, 2012
12:57 pm

MM: It is the subsidies from the federal govt that are getting what you describe.
A little confused: Ivy league schools will allow you to attend, if you are good at a sport (ie., it is what can put you over the top) – but they don’t give scholarships for sports.

wolfman

April 10th, 2012
7:50 pm