Sponsored post by Principal Preservation Services and Principal Wealth Services
With the 4th of July behind us, August is coming quickly, and with that, our children are considering going to college or back to school. Based off of our story recently on Alpha News, many parents are not as confident as they used to be that college is the right decision for our children.
Cost of education today
Some four-year state universities are costing around $50K for a four-year education, but some of these private schools are charging that price per year—so around $200K for a four-year education without housing costs! If you visit USdebtclock.org, you can see that the student loan debt crisis is upon us. The student loan debt is $1.78 trillion and the average student loan debt per student is almost $40K. I believe that we are setting our children up for failure from the start—or at least creating bad habits of teaching them that debt is OK.
To pay or not to pay?
It depends on a couple of factors:
- Can you afford it? If this doesn’t derail your financial situation or delay your retirement, it might be OK. I look at college as a privilege and not a right like some people think. I’ve known some people who take advantage of their parents’ generosity and don’t take college seriously. Not all children are like this. Some children are very appreciative and will take college more seriously because they know their parents are paying for it. The key point is, it should never push your retirement plan off kilter. If you have to stop funding your IRAs and 401ks or even take out a 401k loan to pay for your children’s education, it’s not the best decision to do that.
- If the route is to take out student loans, then that could start your children off on the wrong foot as well. With student loan rates at 6.5-12%, a $40,000 loan could end up costing double to triple over the life of the loan when interest is added on. This is hurting college graduates’ launch out of college. They are delaying getting married, buying a house, and having children because of this overwhelming debt.
Recommendations?
Start saving early. I think it’s great that parents and grandparents have been funding a 529 plan or an UTMA account (uniform transfer to minors act) for future schooling.
The other option is that maybe college isn’t the best choice. Maybe a trade school or professional school certification is a better option. A recent article found that 52% of college graduates are underemployed a year after graduation, and a decade after graduation, 45% of them are working a job that doesn’t require a four-year degree.
There are many trades that are in need of workers, like welders, electricians, plumbers, airplane mechanics and many more that pay well without having outrageous debt. The average trade school is 1-2 years and the cost is usually ¼ to ½ the cost of a four-year state university. Not only that, a higher percentage of trade school graduates find jobs sooner and stay in that field longer than college graduates. Even in my industry, you don’t have to have a four-year degree to be a financial advisor. It takes some hard studying and testing to be one, but a four-year education is not required.
Mike Kojonen
Mike Kojonen is an Investment Advisor Representative and the founder and owner of Principal Wealth Services and Principal Preservation Services. He can be reached at: zvxr@cevapvcnycerfreingvbafreivprf.pbz
