If you are a parent with a child in high school, you have undoubtedly heard the horror stories about rising college costs.
Though some students will only be able to go to college if there is a significant financial aid award and others have families that will pay the tab no matter what the cost, most American families are in the middle ground.
In other words, they need to determine if it is better to go into debt to attend a more elite college or to go to the less expensive yet less prestigious one.
As student loan debts continue to skyrocket, it is becoming increasingly important that families weigh their options carefully before they take their final college choice.
I see this all the time.
- In one case, I was working with a talented vocalist who desperately wanted to attend Berklee College of Music. Though he received a full ride merit scholarship to Miami University to study music, he turned it down. Instead, he attended Berklee where he had to pay full price. He graduated with over $120,000 in debt and has struggled to find full-time employment ever since.
- In another case, a student was awarded a $20,000/year scholarship to George Washington University. This was almost half off the tuition and was a very generous offer. The student turned it down to attend another school where the family had to pay out of pocket upwards of $57,000/year.
Family Financial Decisions
These families are not alone. So many parents will make irrational financial decisions in an effort to give their child the best. And many parents think that a more prestigious university will ensure a rock solid career for their child down the road.
Economists don’t necessarily agree, however.
In a famous study about the value of a degree from an elite college, Alan Krueger argued that students with similar academic credentials earned about the same amount of money whether they had gone to elite universities or less selective schools.
Students from poorer backgrounds, however, tended to have better earnings if they attended the top-tier colleges.
So what should you do?
It is important to talk about future careers before your child applies to college. You need to have an idea of what sort of salary your child might be earned down the road. While most 17 year-olds are fickle and these career plans might change, it is critical that your child has at least an idea of their career.
Once they have that, you should visit Payscale and see what salaries are for any given career. This will give you an idea of how much your child will need in earnings to pay back students loans. It is crucial to determine how much student loan debt your family is willing to take on to pay for college.
And you should be having this discussion now…not in December when the applications are due.