I have heard some student loan horror stories this week, as part of the research for an article that I'm writing. Here's some advice that I've picked up and I thought I would pass it along:
1. Be careful of Associates degress from community colleges in special fields, like medical technician or fashion. Those degrees are fine, if you a 100% certain that you're going to go into those fields, but if you change your mind, none of those credits will transfer. If you are uncertain, then get a general associates degree, so the gen ed credits will transfer to the next college. Liberal arts classes will transfer, but nothing else.
2. Be careful of terminal masters programs that aren't really necessary in your chosen profession.
3. Hunt down your faculty advisor and double, no triple, check that you are taking the correct classes in the correct order. Even plan out the following semester of classes and have them eyeball it. Take notes in your discussion. The best way to keep loans managable is to finish in four years.
4. Live at home.
5. Keep track of your loans. Make the Financial Aid office tally up your total amount of loans, including loans from others schools. Make them tell you exactly how much you'll pay on monthly basis once you graduate. Find out if your loans are accruing interest, while you are in school.
6. Work when you're in school. But not too much, otherwise you'll interfere with rule #3.
7. Try not to transfer. Credits will be lost and it will add time onto your college career.
8. Figure out what you want to do as quickly as possible, talk to people who do that sort of work, and confirm with them that you are on the right educational track.
9. Shop around for colleges and see which school will offer you the best deal. Even if you are limited, because you have to live from home, there are usually at least a couple of schools that you can attend. Which school has the best four year graduation rate? Best faculty? Cheapest tuition? Can you get a needs based scholarship at any of those schools? Do your homework.
Apt. 11d 
These all seem like good advice except maybe the living at home one. It would have been impossible for me anyway. Until my senior year, my parents’ house was 75 miles from the nearest community college and 180 from the nearest passable university. But, even if it were possible, learning to live on your own was an important part of what I learned at college. Plus, my mom would have made it nearly impossible for me to drink a plausible amount.
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But there’s that thing about having your laundry done for you…
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I certainly did less house cleaning type work during my entire four years at college than I did at home for a single summer. Or during a single week currently.
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I’m starting to think I’m going to encourage my kids to take a year off to work and save. I know the old thinking is that if they start that, they won’t go back into school…I think it’s gotten expensive enough that slowing down is a good idea.
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1. Be careful of Associates degress from community colleges in special fields, like medical technician or fashion. Those degrees are fine, if you a 100% certain that you’re going to go into those fields,
I’d go beyond that and say to check out “Help Wanted” ads for the jobs you want. Do all of the ads for Med Techs say they want applicants to have a Bachelor’s Degree? Do they say you should have a certificate as a training phlebotomist as well? Too often, Associates Degrees will give you skills, but they won’t qualify you for a job (the opposite of Bachelor’s Degrees, which can qualify you for a job without giving you any skills.)
Generally, I’m skeptical of the advice from people with “student loan horror stories” because the issue isn’t really what they did, but how often what they did happens. It’s the same reason I’m skeptical of the “Be like Steve Jobs/ Bill Gates/ Lee Iococca” celebrity biographies. You did X (took a huge risk, started a business, went against the grain) and it worked out great for you and now you’re a billionaire. Great. How many other people did essentially the same thing but didn’t become billionaires so there’s no books about them.
There can’t be any real insights from studying just the winners (or just the losers). The unemployed schmoe may have a terminal masters after six years and three transfers, but maybe the head of the company does to. (“All of my friends were going into engineering, but I said ‘I’ve got to be me!’ I went against the grain and switched colleges and changed my major to dance and economics, and that’s why I’m the tap dancing billionaire Wall Street guru I am today!”)
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I think that people should also seriously consider going to less expensive schools. The belief that people must go to an “elite” school is mostly an East Coast thing anyway. (When I’m out in the west, where I’m from originally, and moving to again soon, and tell people that I went to Penn, they mostly stare blankly and assume it must be a state school. I’d be shocked if more than half the people in Denver have even heard of Swarthmore or Amherst. They think of Georgetown and Villanova as essentially the same.)
When I went to Boise State as an undergrad, for in-state students it cost $900/semester, not including housing. I just looked it up, and it’s now $2900/semester. That’s a fair increase in % terms, but still pretty cheap. For out of state students, it’s still less than $10K for tuition and fees, I think. Housing is more, but then, renting an apartment in Boise, even near the university, is also very cheap. (I easily paid rent, tuition, and drank beer on a part-time job.) I’m not suggesting that everyone should look to Boise State or the like, and the place certainly has its drawbacks. You won’t get everything you’d get at Duke or Williams or Reed, (though you will get more time with professors than at Michigan or the like, I suspect.) But the idea that one must spend $30-$50K/year for a good education just isn’t true.
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“Even if you are limited, because you have to live from home, there are usually at least a couple of schools that you can attend.”
Not really. Similar to MH’s story, even the local community college would have been a 90 minute commute for me (it has since started offering more classes in town, a 30-minute commute). The closest four year college would probably have been a four-hour one-way commute.
Matt said:
“When I’m out in the west, where I’m from originally, and moving to again soon, and tell people that I went to Penn, they mostly stare blankly and assume it must be a state school.”
I’m a Westerner also, and that’s so true. In fact, I probably thought that about Penn until a few years ago.
“I’d be shocked if more than half the people in Denver have even heard of Swarthmore or Amherst. They think of Georgetown and Villanova as essentially the same.”
Oh, yes. I think people here would be surprised how much the academic reputation of a school hinges on its athletic prowess in the minds of the general public. (That’s the issue with confusing Georgetown and Villanova, right?)
I can’t tell you all the times that I’ve mentioned that I went to USC and had people ask, “Which one?” thinking that it was part of the University of California system.
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I think people here would be surprised how much the academic reputation of a school hinges on its athletic prowess in the minds of the general public. (That’s the issue with confusing Georgetown and Villanova, right?)
Right- I think that for most people outside of the North East who are not involved in higher ed or certain professions (top law firms, etc.), Georgetown and Villanova are both just East Coast Catholic schools with good basketball programs.
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Ha ha this cracks me up because my husband went to Purdue and I worked there. Our westerner families thought it was a ritzy private school. Now I work at Boise State. Ha!
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A motivated student can get an excellent education at a cheaper school, but the alumni networks at the top 50 schools can be a complete game-changer for a new grad, even if your average Joe outside the NE confuses Amherst College and UMass Amherst. I’m just saying…
Regarding specialized associates degrees – I’d go outside the help wanted listings and actually talk to multiple employers to ask what they look for in new hires. I’d also look for a program that offered internships and practicums.
Regarding loans, NEVER EVER EVER take out anything other than a federal load.
Ever.
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“A motivated student can get an excellent education at a cheaper school, but the alumni networks at the top 50 schools can be a complete game-changer for a new grad, even if your average Joe outside the NE confuses Amherst College and UMass Amherst. I’m just saying…”
But that’s only going to work within a particular geographic area or within certain professions. If you’re looking for a job in Denver and outside of the really pedigree-conscious professions, there may not be any premium for going to the “right” Amherst. Average Joe runs a lot of businesses and does a lot of hiring.
The trick is knowing where in the country you want to be and how important particular schools are in your chosen profession. As we were discussing, it’s often very unpredictable how different schools are viewed outside their local circle of influence. (Rutgers is my go-to example–until my husband interviewed there, I had no idea it wasn’t a fancy pants private school.)
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I grew up in upstate new york and moved to Virginia about ten years ago. I was equally surprised at the fact that even my neighbors in a ritzy Northern Virginia suburb were very impressed by Virginia Tech and Elon and a bunch of other southern LAC’s that I had never heard of — and most had never heard of Bowdoin, Colgate, Bates, etc.
I’ve also found myself thinking about the importance of LOCAL networks — if your child wants to come home and work as a teacher in your home town, then chances are she’d be better off at a more local school where she’d make the connections to break into teaching, etc. This may be true if your child wants to practice law in your hometown, join an existing veterinary practice, etc. I was certainly unaware of this growing up.
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I think one thing that may be causing confusion in these discussions is that in the NE, the famous Ivy League schools are doing double duty–they are both nationally prestigious and provide access to local networks. However, once you move outside the NE (or certain professions), those schools no longer provide access to local networks.
I wonder if certain NE credentials might even be harmful outside of the NE because they raise the question, “If Tom is so smart and went to Harvard, why wasn’t he able to hack it in the Northeast?” That is pure speculation, of course.
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That’s my sense too. There are certainly people in these parts who would assume that your child went to Williams, for example, because they couldn’t get into Virginia Tech — which passes for prestigious here.
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re: how many people have big loans. It’s concentrated in certain groups of kids. Take all the people who go to college, control for the kids from wealthy to upper middle class families, the kids who have parents who went to college, the kids with good SAT scores, the kids who extremely poor, the kids who come from underrepresented parts of the country who are likely to be recruited, and you’re left with my group of big debtors. Kids from NJ (NJ is over represented in colleges), working-class (not eligible for extreme need based scholarships), attending schools that don’t have endowments or the ability to provide any merit or need scholarships, attending schools that have weak suupport for the kids. These kids are in trouble. And they are very, very angry.
If you talk to the families of those kids about their college experiences, their faces turn bright red with fury. In some cases that fury is fueling the OWS movement. Other times, it’s benefitting other types who put down intellectuals and the elites that seemingly have constructed a system that takes their kids’ money and still denies them good jobs.
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That’s probably people from the same families (or types of families) who took the worst of the housing crisis. Not that wealthier families didn’t lose money, but the level of vulnerability is higher and the terms of the loan worse as you drop down from the middle class.
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“That’s probably people from the same families (or types of families) who took the worst of the housing crisis…”
Yes and no. At this point in the housing meltdown, there are people in that category who have been living rent-free for the past 3-5 years. I’m sure it’s very stressful not to know when the sheriff’s going to come and put your stuff on the street, but that’s a heap of money saved if you should happen to win the foreclosure lotto.
Here’s a recent example from Jim the Realtor in Southern California:
http://www.bubbleinfo.com/2012/07/17/more-drippings/
“This guy worked the program nicely – his first NOD [notice of default] was filed in April, 2008
“By the time this got foreclosed in May, 2012, the back payments, penalty fees, and negative amortization added up to more than $250,000…”
That’s nearly an $800,000 home, which doesn’t sound very middle class, but back in the day, very ordinary families were living in that kind of house in CA (there’s a famous true housing bubble story involving a strawberry picker and his $720k house).
The other thing that makes housing and college not totally analogous is that they are treated very differently under bankruptcy law–a house is much simpler to get out from under. Certainly, there are resemblances, but the differences are very important.
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Re: regional schools–totally agree. I am from the South and went to a SLAC that was ranked in the top 25 nationally. Everyone in the south had heard of it and was impressed by it. Once I got out of the south, no one had heard of it, though I did run into a few people who had or who knew/were alums which opened a few doors for me. My dad always regretted not going to the state school for law school in the state where he ended up practicing. He didn’t know where he was going to end up at the time, but his advice was to go to the best school you can in the state where you want to practice.
My kid is not going to qualify for the elite schools. We’re in state school and second tier SLAC territory. We will actually be looking at endowments and viability of some of those schools. We can only afford so much. I’m thinking about having Geeky Boy guest blog some of his thoughts right now on college. I think you’ll see that most high school kids are clueless about the financial issues and the kinds of things they think about aren’t the kinds of things their parents–or the commenters here think about.
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What do families actually pay for college? On average, the answer was $20,902 in 2011-2012, which is down from $24,097 in 2009-2010.
That is from Timothy Taylor. That is not deflation due to higher productivity, but rather mostly the result of a series of substitutions, including living at home and switching to two-year colleges.
http://marginalrevolution.com/marginalrevolution/2012/07/college-fact-of-the-day.html#comments
If there is a higher ed bubble, does a 20% drop over two years count as the bubble popping? Have any colleges gone out of business due to declining enrollment?
Have if a bubble pops and there’s no one there to hear it?
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If there is a higher ed bubble, does a 20% drop over two years count as the bubble popping?
That’s pretty much the way the housing bubble started popping. Once growth stopped, the problems started slow and took years to build. I don’t think every sector of the post secondary education field will be declining. A housing bubble burst and my house is probably worth 15% to 20% more than when I bought in 2003. But the amount of money coming in to universities is certainly being reduced.
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Certainly California’s public system has cut the equivalent in budget and students of several small colleges.
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“If there is a higher ed bubble, does a 20% drop over two years count as the bubble popping?”
Oh, yes. This is an example of how the housing and college situations are analogous, because the collapse in housing prices has been a very slow, painful process (I should know–we’ve been waiting to buy a house for a long, long time). I’m having a hard time finding a good treatment of this online, but as of this year, home prices in the US are down about 1/3 off peak prices. It’s taken half a decade to get to this point and we’re not done yet.
Bubble language is misleading, because it suggests a short, violent finale. While that is somewhat true in the more exciting housing markets (Florida or Nevada or Arizona), what we’ve generally seen in the national housing market is slow, steady deflation of the balloon. In most places, the story of the housing bubble is one of years of denial (“It’s different here”), followed by panic (“Nobody saw it coming”). And some of the price declines are going to be camouflaged by inflation–the nominal declines may not look that bad, but inflation will be nibbling away at property values. For instance, while MH’s house may be nominally worth 15-20% more since 2003, it may or may not have been keeping up with inflation.
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