Nine Myths of College

I have been reading the best book I've ever read on preparing financially for college. The book is Debt-Free U: How I Paid for an Outstanding College Education Without Loans, Scholarships, or Mooching off My Parents and I'll be sharing a bit of it over the next several days. Today I want to share what the author says are the nine myths of college:

1. It's important for parents to do what they can to help pay for their kid's educational expenses, even if that means taking out a loan.

2. Scholarships and financial aid will alleviate the burden of spiraling college costs.

3. It's unreasonable to expect students to be major sources of financing for their educational expenses while they are in college.

4. Student loans are a good form of debt: leverage. My child will be able to pay them off out of his future earnings. Student loans are unfortunate, but they won't have a serious negative impact on his life.

5. The name of the school on my child's diploma will have a strong impact on her career and life prospects. The better the college she goes to, the more doors she'll have open to her.

6. "Thrifty" approaches to education like community college will have an adverse effect on my child's life. You get what you pay for.

7. The most important thing when it comes to selecting a college is finding a good fit.

8. Guidance counselors, admissions officers, campus tours, and anecdotes from former students are great sources of advice and wisdom on the college application and financing process.

9. The quality of the education my child receives will be largely a factor of the college he attends. Guides like US News and World Report's "America's Best Colleges" are valuable resources in evaluating possibilities.

My take on these:

1. I would say that it IS important for parents to help their kids get through the entire college process and in our case that means saving in advance to help them pay for the cost of it. I agree that parents do NOT want to take out loans to pay college costs for their children.

2. My plan is to assume my kids will get NOTHING in the form of scholarships and save accordingly. If either one of them (or both!) do get any aid, it will be a bonus.

3. The author says that 1) students have plenty of time to work while in college (he lists studies showing how much time is wasted on various activities), 2) working actually helps the student focus more and thus perform better in school, and 3) paying for school through working helps the student appreciate and value the degree/education more than if it was paid for by someone else.

4. The author hates debt of any sort (me too!) and details how many kids with college loans end up defaulting (it's actually a much higher number than I would have guessed.) As such, he recommends a plan to get through college with no debt at all. Student debt also influences the types of jobs students have to take (limits their occupational choices) in order to pay for the debt.

5. The student herself is the biggest factor in whether or not she'll be successful after college graduation. If she's a go-getter, it's likely that she'll be a success whether she attends Harvard or State University.

6. Going to Community College (for two years -- then transferring to a bigger school) can be a great way to save and has little to no impact on how successful the college grad will be. The most important factor: the student herself (see the preceding point).

7. Fit is over-rated. You'll need to read the book to see why, but the author makes a good case for it not being the end-all be-all that many people make it out to be.

8. Guidance counselors, admissions officers, campus tours, and anecdotes from former students may all be well-intentioned, but they often give you advice that is incorrect, unneeded, and costly.

9. The quality of the education a child receives is based on the child (as noted above.) And the author actually hates (and details why) guides like US News and World Report's "America's Best Colleges".

As you can see, this book has a go-against-the-flow style/contrarian advice -- that's why I LOVE it! It details the conventional wisdom around paying for college and makes a very compelling case for why it's actually incorrect. Stay tuned. There's more coming up over the next several days.

Comments

[Doug @ CheapScholar.org]

The myths mentioned are pretty common and I have heard many of them time and time again. Unfortunately, each myth is really more like an excuse that families and students sometime use to justify a decision they make in the college funding/selection process. Sometimes their situations don't leave them with many options and they need to hold onto these myths/excuses to make them feel better about their situation.

[Matt]

Ditto Doug

I knew for well that 15 years ago my son would not get any help paying for college in the plain and simple facts that his mother and father would make too much money to qualify for financial need based.( I call this the middle class shaft) So I started ever so little 15 years ago contributing to a 529 plan and have about 2 years worth of college saved up in that plan. Yes he has tried to find work in this miserable economy and has made some money but not enough. We will continue to save and he will probably borrow some but he will also look for scholarship opprotunities but lets face the facts.

When someone borrowed 100K for a degree in womens studies and can't find a job and can not pay back the money who is the one that is getting hurt? My son who will only be able to borrow $5000 due to the finacial limitations and expected family contributions etc. He would be someone who would make sure he would pay it back becasue he would be getting an engineering degree.

College funding is the next bubble.

[jim]

#2 - Financial aid can certainly help many people. It won't help higher income people but it definitely helps lower /middle income individuals substantially. Scholarships are much less dependable as a source of funding.

#4 - Theres nothing wrong with a small/moderate amount of student loan debt. Going overboard on student loans is a very bad idea but moderate amount of debt is fine. I think its more important to match your debt to your future career salary level. $100k debt for a doctor is acceptable, but $60k debt for a social worker is a big mistake. I graduated with about $5k in loans and I have zero regret about those loans and they helped me get through college. If you can get through college without loans then great, but I don't think that people should go without college or take any measure just to avoid a student loan. I wouldn't take out any private student loans though, since the terms on those can really suck.

[jim]

Matt: "College funding is the next bubble."

I don't understand how people get to this conclusion.
What test do you use to decide if its a bubble? Increasing prices doesn't equal a bubble.

[Joe]

I think a lot of us really need to change the way we think about paying for college. I know when I was a high schooler, I assumed I would take out loans to pay for school and somehow magically pay it all back with a fabulous job afterwards. And my parents did nothing to correct that thought. We probably all need to sit down with our children when they're in grade school and talk to them about putting aside money for college as they grow up. Teach them to save as early as possible.

[Jclimber]

The types of jobs that students usually have while going to college are the low-wage kind, and those wages haven't changed much in twenty years. So twenty years ago it was easier to pay for some of college while working, now less so.

Caveat: co-op or intern jobs where you leave school and work for a semester can pay much better. I never worked while actually on-campus, but I did 5 co-ops (semester long each time) to help pay for college (and more valuable - gained experience).

[KH]

Even low wage jobs while in school can help a LOT with expenses. It is a huge mistake to assume that working while in college is counterproductive or somehow isn't worth it.

I worked 20+ hrs / week while taking a full load and living on campus & got my BS chem in 4 yrs with 3.98 GPA. The last 2 years of college I worked in laboratories and this gave me valuable experience & connections in my field that made it easier to get a job when I finished.

And of course...students should NEVER major in English or women's studies or such. By all means, take liberal arts classes to expand your mind. But be sure to take your degree in something that will give you a career (unless you're independently wealthy).

[MasterPo]

#1 and #5.

As much as MasterPo doesn't want to spend the rest of his life in long term debt, for my children - so what?! They can repossess the house, they can't repossess the kids degrees. If it came down to it - that being the kids have a chance to go to whatever school or whatever program - and it was merely a matter of money, there is no choice. They will be around long after MasterPo and Mrs. MasterPo are gone. It's only green paper with pics of dead presidents.

College name DOES make a HUGE difference in both work and social settings. You just can't escape that. May matter more in some circles than others but no one ever shrugs their shoulder of gives an "eh" to an MIT graduate (except maybe a CMU graduate ;-) ).

[Venkat]

College does not matter, a friend of mine's Spouse went to "IVY League", she makes the same amount of the money as my spouse(without the "IVY League" Gold Plating). Sure, she had the pleasure of spending $100 K to get her MBA from that school. When she graduated from the school, it took her almost 1 plus years to find a job.
I have also seen many graduates from MIT/Harvard/Columbia, used to work for big 5 consulting firm, who were in debt up to their eye balls(upwards of 90K for their education) and would stoop to do anything to retain their employment. School Name does not guarantee free pass, this is a competitive world, everybody has to prove their mettle at every stage.
I come from developing economy, I had more well rounded education than most of the people who had gone to IVY league school. Sure they may have strong alumni associations and networking but in the end, is it worth the cost? I honestly don't think so, of course, this is my 2 cents...

[bb]

The school name does matter to an extend. HR and hiring managers see the resumes before the real persons.

[Mark]

Everyone can quote anecdotes, and show examples of people who did just fine from ANY school. The most important point is that "The quality of the education a child receives is based on the child". In other words, most of the person's future is dependent on their personal characteristics and abilities.

Having said that, if that person with all the right characteristics also gets to go to the "right" school, won't they do even better than they otherwise would have?

In real life, school name definitely can make a difference. I work for an engineering company and we only consider graduates from 40 specific universities in the US, and a total of 100 in the world.

If you went somewhere else, you are not given an interview - period.

I'm sure there are plenty of great people from other schools, and plenty of less-than-great people at these great schools, but a manager explained it to me this way: "The highly-selective schools have already performed the first filter for us. We will take it from there."

My high-school senior daughter is working on her college applications right now. The level of effort and quality of essay required to get into the highly-selective schools is immense. I can see why employers would consider it an achievement simply to be accepted.

[Georgia]

Thomas Sowell, a well known economist, says that the reason health and college costs have skyrocked past the COLA's is because of the third parties involved - insurance and guaranted student loans. I fully believe this.

When I went to college in 1956-58, I worked 40-48 hours a week (for food, books and other expenses) and took a full load at our church college. I had worked and saved for a year before I went. I had a $50 grant-in-aid. I came out with no loans or debt of any kind. Of course, my total cost for room and tuition for the 2 years was $1,600.00 This was before guaranteed student loans. Now, to attend the same school I would be out $29-30k a year for everything.

Also, I do not believe in saving a lot of money for my kids to go to college. There are many ways to get an education and they need to be doing the work on most of it. If you work for things, you more often value them more. My daughter has about $15k in student loans and I helped when I could. My son went into the Army and got no education there. He now works in a good job for his area that pays for his education.

If you save and your kids are feeling pressured to go to college, they may not do as well, or they will squander it. I also went to the Univ of IL for one semester and I could not believe the amount of kids there who absolutely squandered time, money, and education. If they want to go and try to get there, you can be ready to help.

[jdgjdg]

I teach at a top tier private university. I give academic advice and approve transfer credit. I am fortunate to have top tier students. I'd like to address a few of these points.

If financially possible, students shouldn't be working a job during school, unless it's related to their studies. Unless you need the money and can't find a better job, grunt jobs are not worth the "character-building", as they are mainly time-sucks distracting you from what you should be doing. Doing well at a tough school often involves 60 hours or more a week of classwork.

Community colleges serve a purpose. But don't expect them to replace the first two years of a top university. You'll often find that only half of your credit transfers because the courses aren't as advanced.

During the economic downturn, my field also suffered. However, students from our department had no problem getting job offers. A colleague from a medium-quality state school indicated that many of their students had trouble finding work.
School reputations aren't everything, but they are important.

[FMF]

jdgjdg --

The book addresses many of the issues you raise in more depth and I'll be posting on them in future. As you might guess, he disagrees with much of what you say (and, for example, backs up his "time spent by students in various activities" with research studies -- citing the hours students spend watching TV, drinking, playing video games, etc.) Stay tuned.

[jim]

"Doing well at a tough school often involves 60 hours or more a week of classwork."

I highly doubt anymore than a tiny minority of students spend 60 hours a week at classwork.
It doesn't sound like anyone I've ever known ever who went to any college anywhere. 60 hours classwork sounds more like med. school.

Full time college students spend an average of 3.3 hours a day on classwork:
http://www.bls.gov/tus/charts/students.htm

[MBTN]

At the risk of sounding like a broken record, people keep forgetting that the tuition quoted in the brochure is the sticker price. The Ivies have huge endowments that they use the lavish financial aid on students. They are among the most generous with it. Princeton, for instance, does not give loans as part of their aid package - their aid is either scholarships or work-study. Princeton has an "aid estimator" on their web site where you can put in your financial information and they will give you an estimate of how much aid you can expect. I put in numbers for a family with an income of $100,000 with $100,000 in parent savings and $10,000 in child savings. The calculator came back saying that your financial aid need would be $40,000 per year, which means your contribution would be about $13,000. That is on par with what you could expect to pay at a good state school. Wouldn't you want to go to Princeton for the price of a state school?

Also, I worked with a brilliant guy (he works at Google now) who went to a state school. I asked him what his opinion was about state school vs private school. Obviously, going to a state school didn't "hurt" him since he would have been successful anywhere. He said that he was successful IN SPITE OF going to a state school, not because of it. He said that many of his classes had hundreds of students with very little student -professor interaction. Tests were often multiple choice and cheating was rampant (especially if you belonged to the right fraternity). Because of the vagaries of the state budget process, the school would end up cutting services, dropping classes, etc (but somehow he said that the football team always had what they needed). The sheer size of the school meant that the bureaucracy was very impersonal and the place was very cold. He thought that the only thing that he got out of it was the piece of paper at the end, and that he didn't really feel like the school played much of a role in his education.

On the other hand, I know a person who did go to an Ivy League school - another smart guy. He said that the environment, the classes, but most of all his fellow students, pushed him and contributed to his success in life. He said that in high school, he got good grades, but he was able to coast through without much effort, so he never developed much of a work ethic. He could pass test with A's in high school without cracking open a book. However, when he arrived at college, he soon realized that if he wanted to survive he needed to actually study and push himself. At first, it was slow going for him, and he said that considered transferring. However, by learning to apply himself and push himself to the limits, he realized that he was just as good as the people around him. He eventually graduated with honors. He said that if he had gone to a state school, he probably would have continued to coast, not having to push himself to the limit, and he might not have turned out as successful.

The punch line is that, even though he came from a solid middle class home, he got a nice financial aid package so that the Ivy League school was only marginally more expensive for his family then the state school!

[MasterPo]

"I highly doubt anymore than a tiny minority of students spend 60 hours a week at classwork.
It doesn't sound like anyone I've ever known ever who went to any college anywhere. 60 hours classwork sounds more like med. school."

Jim - You obviously have never been to a top school like MIT or CMU. At a school like that 60 hr/week is the norm just to stay on track. Between class work, homework, and expected projects (plus outside activities that you will need for your first job application as it is EXPECTED of students at such school) 60/hrs week may even be an understatement.

[jdgjdg]

I conducted a mini-survey of 6 freshmen this morning, asking about only course-related work. Two said that 60 hours/week was on the high end. Four said 70-80 hours/week.

[FMF]

jdgjdg --

I'm sure you know that that's not a valid sample nor representative of any actual approved market research technique. ;-)

You may want to check out the book and look over the actual research it gives on the issue of how students spend their time in college...