Navigating Postsecondary Finances: Planning for Debt-Free Education
The burden of student loan debt looms large over millions of Americans, with the average borrower owing nearly $38,000 (Federal Student Aid, 2024). Yet, shockingly, approximately $100 million in scholarship funds goes unclaimed each year (Forbes, 2021). This stark contrast begs the question: how can we equip our students with the tools to navigate the complex world of postsecondary funding and avoid embarking on adulthood under a financial burden?
Unlocking Potential: The Power of Postsecondary Education
Higher education is a powerful tool for students. Research clearly shows that it can significantly boost earning potential, job satisfaction, and overall well-being. It's like leveling up in the game of life. However, the cost (literally and figuratively) can be steep, so helping students develop a solid financial plan is essential.
Understanding the Costs of Higher Education
The increase in earning power through education is undeniable. Those with just a high school diploma typically earn around $30,000 annually. Adding some college credits can boost that by about 30%, while an associate degree sees earnings increase by 60%. Bachelor's degree holders often earn more than twice as much as their high school-only peers, and the earnings keep climbing for those with advanced degrees (Gallup & Lumina Foundation, 2024).
While the benefits of postsecondary education are clear, the initial financial investment can be daunting. Understanding the costs of different types of programs is crucial. Public 2-year colleges offer the most affordable option, with an average annual tuition of around $4,000. In contrast, private non-profit 4-year colleges can cost closer to $40,000 per year. When considering the cost of postsecondary education, it's important to factor in not just tuition, but also fees, room and board, and other expenses. Careful planning can help students finance their education without going into debt.
Testing Out Career Paths: It's Okay to Explore!
It's okay if students don't have their entire life figured out just yet. The average person changes careers a whopping 12.7 times over their working life! While having a good idea of their goals before diving into expensive training is ideal, life is a journey, not a destination. Encourage students to explore their interests, make informed choices, and embrace the flexibility that comes with lifelong learning.
Recommendations for Career Exploration:
Complete career assessments and interest inventories.
Talk to friends, family, and peers.
Gain practical experience through job shadowing, internships, or volunteering.
Crunching the Numbers: Understanding the Costs
Once students have a potential career path in mind, it's time to crunch some numbers. The cost of postsecondary education includes tuition, fees, books, supplies, housing, and living expenses. Factors like choosing between in-state or out-of-state schools, public versus private institutions, and living arrangements can significantly impact costs.
This visual provides a nice overview of general trends in expenses for education and training.
When we consider tuition, housing, and supplies, there's a general trend in postsecondary education costs. Typically, options range from less to more expensive like this: military → apprenticeships → internships → adult education → community college → vocational school → public four-year college → private four-year college. It's important to remember that these are general patterns, not hard-and-fast rules. There are always exceptions, but this table might help students compare their options before narrowing in their research.
Guiding Students Through Financial Planning
Step 1: Calculate the Costs of Postsecondary Education
Start by helping students understand the comprehensive costs involved in pursuing higher education. These include tuition, fees, books, supplies, housing, and living expenses. Costs can vary widely depending on factors such as the type of institution (public vs. private, in-state vs. out-of-state), and the chosen living arrangements. Use resources like school websites and government data to provide accurate estimates.
Step 2: Assess Available Financial Resources
Next, guide students in assessing their current financial resources. This includes personal savings, income from part-time jobs, potential contributions from family or community organizations, and existing educational savings accounts. It's important to approach this step with sensitivity, recognizing that personal and financial situations can vary greatly among students.
Step 3: Develop a Funding Plan to Bridge the Gap
Once students have a clear understanding of their education costs and available resources, the next step is to develop a plan to fund the difference. Encourage students to explore various financial aid options such as scholarships, grants, loans, and work-study programs. Here’s a breakdown of these options:
Scholarships: Awarded based on merit or need, scholarships provide free money for education and typically require applications with essays or recommendations.
Grants: Need-based financial aid offered by governments or institutions, grants are awarded based on financial circumstances and do not require repayment.
Loans: Borrowed money to cover educational costs, with federal loans offering lower interest rates and more flexible repayment terms compared to private loans.
Work-Study Programs: Part-time jobs on campus or with approved employers that allow students to earn money while studying.
Encourage students to fill out the FAFSA early to access federal aid and explore other funding opportunities such as military benefits, service programs, and loan forgiveness options. If you are interested in a deeper dive, Mapping Your Money: Funding Postsecondary Education & Training guides students through these steps of creating a personalized financial plan for their education or training goals.
Step 4: Empower Students to Start Saving Early
Work with students to prioritize scholarships, grants, fee waivers, and work-study. Here are 19 ways students can start saving early to avoid having to take on debt for their education and training:
Part-Time Job: Work after school or on weekends to earn income.
Summer Jobs: Take advantage of summer breaks to work full-time.
Tutoring: Offer tutoring services in subjects you excel in.
Babysitting: Babysit for neighbors or family friends.
Dog Walking/Pet Sitting: Offer pet care services in your neighborhood.
Sell Crafts: Create and sell handmade crafts or art online or at local markets.
Freelance Services: Offer services like graphic design, writing, or photography.
Household Chores: Run errands or offer to do extra chores for family or neighbors.
Investments: Start a small investment portfolio with parental guidance.
Budgeting: Learn to budget effectively to save more of your income.
Cut Expenses: Reduce spending on non-essential items like entertainment or fast food.
529 Plan: Open a 529 savings plan for investment options and tax benefits.
Crowdfunding: Use online platforms to raise funds for specific educational goals.
Summer Programs: Work at daycare or summer camp programs.
Sell items: Offload seldom-used items like sports equipment or electronics.
Side Hustles: Mow lawns, shovel snow, or wash cars.
Money Apps: Use apps that help teens manage and save money effectively.
Financial Literacy Courses: Take courses or workshops on financial planning and saving.
Free Classes: Take AP, dual enrollment, or community college classes for a head start.
Challenge students to identify 19 more! (You may want to remind them that these should be legal, socially-appropriate methods ;)
Empowering Students for Success
By understanding these financial aid options and planning ahead, students can make informed decisions about financing their postsecondary education. Remember, prioritizing scholarships, grants, and work-study opportunities can help minimize or eliminate the need for student loans.
Final Thoughts: Guiding Students Toward a Bright Future
As educators, we play a crucial role in guiding students toward financial literacy and success. Encourage them to set goals, break them down into achievable steps, and embrace lifelong learning. Together, we can empower students to turn their dreams into reality without the burden of unnecessary debt.
