The Importance of College Choice

Photo: The University of Washington campus in Seattle, Washington. Photo taken September of 2010.

I continue to hear that America has a student loan crisis. In all reality, it is a crisis. The student loan debt, in America, has now reached $1.3 trillion dollars, with millions of students in default or behind with payments. Some suggest that a way to relieve the student loan crisis is to make college free. Others believe that it would be best to spread the loan payments out over longer terms. 

In both cases, I would disagree. First, college will not be free, but instead it will cost us more in taxes. So, we would be just moving money around to be able to make college free for everybody. It's a false sense of 'free.' Second, extending the payment terms will just lead to student loans hanging around even longer. Debt that hangs around benefits the banks, not the consumer. Some people may need lower payments, while they get rid of some of their other debt. Once their other debt is gone, then they can destroy their student loans as fast as possible. I hate letting debt just hang around like a pet. It needs to be dealt with fast and efficiently. It's an emergency and should not be held onto for 30 years.

Instead of trying to fix the problem after it has become a problem, let's come up with a solution that gets rid of student debt all together. This solution would be paying for college without student debt. That's right, avoid the student loans. I made some suggestions on ways to pay for college without debt in a previous article. One of the suggestions was college choice. 

You may be thinking, "How can college choice save me money?" That's easy, pick a school that you can afford. Don't attend a private institution, if you don't have the money to pay for it. Go to a state school instead. It will be cheaper. If you have the money to pay for a private school, then by all means attend the private school.

I attended the University of Nebraska-Lincoln, which is a state school. I made it out of college with $20,000 in student loans. This is by far not as bad as some other people, but still its $20,000. I was able to keep it lower, because I paid for two summer classes out of my own pocket, received Pell Grants, received some scholarships and I was a resident assistant for a year and a half. Just think, all I needed was to save $20,000 in high school, and I would have graduated college debt free. 

Is it possible to save $20,000 before you even step foot on a college campus? Of course it is. My sister will be a senior in high school this year. She has been saving money like crazy, because last summer I told her about the importance of getting through college debt free. She has amassed a savings account of about $13,000 in one year. This is being done by a young girl, who saves 80% of her monthly paycheck. With one more year of work ahead, she will have more than enough to make it through a couple of years of college. Anyone can do what my sister is doing. Save money now, so that way you can come out of college debt free.

But it matters that I go to college at a prestigious school, right? Multiple studies have shown that there is no correlation between what school you attend and the amount of money you make. Most employers don't care about the school, they just care about the quality of candidate that they are hiring. In an article titled, "Forget Harvard and Stanford. It doesn't really matter where you go to college," the author states that only about 30 of the 100 fortune 500 CEO's graduated from Ivy league schools. For those of you not good at math, that is only 30%. With all the prestige of these schools, you would expect that most of the CEOs would come from the top schools. That is not the case.

Another article titled, "It Doesn't Matter Where You Go to College," stated the following:

“Research on the impact of college selection has focused on comparing the earnings of graduates of different colleges. In 1999, economists Alan Krueger and Stacy Berg Dale published a widely read study that compared the earnings of graduates of elite colleges with those of ‘moderately selective’ schools. The latter group was composed of people who had been admitted to an elite college but chose to attend another school. The economists found that the earnings of the two groups 20 years after graduation differed little or not at all. A larger follow-up study, released in 2011 and covering 19,000 college graduates, reached a similar conclusion: whether you went to Penn or Penn State, Williams College or Miami University of Ohio, job outcomes were unaffected in terms of earnings.”
— Michael Bernick - Time

In both of the articles cited above, there was a consensus that employers did not look at college, but instead look at the individual person and what they brought to the table. This trend of hiring has led to pretty equal incomes for employees no matter where they went to school.

Since the choice of school doesn't affect my earning potential, what is the biggest factor when choosing a school? The one and only financial factor that you should consider is being able to afford the school. This will look different to lots of people, but find out how much money you have for college and then base you school on affordability. Don't base your school on a pretty campus or a football team. Choose your school, with the future of financial security in mind.

Let's compare three schools and make the decision based on where I currently live:

Source: Texas A&MRice; and Nebraska (Click on Image to make it clearer).

By looking at the data above, we would see that the best option financially for me (living in Texas) would be Texas A&M. Both Texas A&M and Nebraska have similar costs for in-state tuition, but I would be charged as an out-of-state student today. This would increase my costs by around $17,000. This would still be cheaper than attending Rice University, which is a private institution. A private institution charges the same for in-state students as for out-of-state students. The cost to attend Rice is around $24,000 more a year than to attend Texas A&M. 

Most of the time, the best way to save on college costs is to attend an in-state school. Most of the state schools, like Nebraska and Texas A&M, charge about the same each year for in-state students. The added cost comes when you cross over the state lines. The best way to prepare for debt free college is to talk with your parents and find out the budget. The money can come from college funds that are saved up by your parents and they can come from your own personal savings. It is best to understand all financial figures, prior to choosing a school.

I am not opposed to anyone going to Stanford, Yale or Rice, but if you go to these schools, then have the money to pay for them. By having the money, then you will come out of school debt free. By graduating college debt free, you will have so many opportunities available to you. You won't have the student loans and this will allow you to save money and live the life that you want.

Reaching the Financial Summit, Starts with You!

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