Saving for Change

Managing the High Cost of College
by Pat Philippe

On May 20, 2007, I watched my sister graduate from the University of Maryland-College Park. She earned a degree in Communications, a minor concentration in finance and is in the top 5% of her class. As I sat with my family I watched speaker after speaker give speeches that were ignored by giddy graduates occupying their time by tossing beach balls, text messaging, or throwing paper airplanes. To my left my mother sat with tears in her eyes as her only daughter graduated from college, to my right my father had fallen asleep and taken off his shoes, and behind me my younger brother passed the time by playing Madden on his Nintendo DS. As I browsed through the program I read that there are about 6500 graduates in this years graduating class. Although this was my sister’s big day and I am so proud of her and everything that she has accomplished, I couldn’t help but wonder how much debt accompanied these degrees.

According to the National Postsecondary Student Aid Study, the average student loan debt among 2003-04 graduating seniors is $19,237 (excluding PLUS Loans but including Stafford, Perkins, state, college, and private loans). The figures are likely much higher for 2006-07 graduates. Tuition has gone up almost 7% per year—exceeding wages, inflation, and the average financial aid award. Additionally, some colleges have admitted to taking kickbacks from student loan companies, and as a result, it has become more difficult for students to get better deals and make better choices about student loans.

I graduated college not too long ago, and like most of my classmates I used credit cards to buy textbooks, supplies, food, and pay tuition balances. I couldn’t walk from the cafeteria to my dorm room without getting at least two to four credit card offers per week. With most college students, if you offer a free t-shirt and a coupon book to Taco Bell, KFC, or Pizza Hut, we will sign anything. And like most students, I became enslaved to the credit card companies.

So, how can you avoid some of these college debt traps? Here are five things you should know:

• You do not have to go to a “name-brand” college to get a quality education. Like most things, you will get out of school what you put into it. Graduates of smaller, more affordable schools are able to compete in this job market with their Brown, Harvard, and Columbia counterparts.
• Look into a 529 college savings plan. Talk to an investment professional before investing in one, but with this plan your money grows tax-deferred and is tax-free when withdrawn if it is used to pay qualified education expenses.
• There may be no place like home. Consider commuting from home. You may save money on room and board, food, and transportation.
• When it comes to textbooks, think used. Trade textbooks with your friends, go online (boxofbooks.com, craigslist.com, amazon.com, etc), or simply check them out at your local library. Also keep in mind that some professors may require the most recent edition of a textbook (which they may have authored), but the previous edition can be just as good and may save you 50%-90%.
• Search for scholarships, search for scholarships, search for scholarships. I cannot emphasize this enough. Start searching for scholarships, grants, and awards at least 1-2 years before you plan to enroll. One of the best places to start is your local library. The Martin Luther King, Jr. Memorial Library (located at 9th and G Streets NW) has a college resource center. Visit www.DC.gov and go to the DC State Education Office and the DC Education Opportunity Center websites. You can also contact Capital Area Asset Builders (CAAB) about matched savings accounts that you can use for post-secondary education.

In the final analysis, even with rising college costs and unscrupulous student loan companies, higher education is still a good bet as the income gap between those with college degrees and those without continues to grow. There are just more opportunities for those with college degrees. The best way to graduate college without huge student loan debt is to start planning now!