By Nathan Munits, Accredited Investment Fiduciary (AIF®)
New research from Prudential finds Americans are questioning college debt more than ever before. While a college education is still highly valued, many graduates end up questioning whether the cost of attending college is worth the financial sacrifice.
Among the findings:
- Only 1 in 4 surveyed graduates who borrowed for college call the debt they incurred “good debt.”
- Only 4 in 10 say that borrowing for college proved worthwhile.
- Many students borrow without understanding the terms of their debt.
- Student loans are causing graduates to delay or forego saving for retirement, building up emergency savings, or buying a home.
Read the full study here.
The student debt overhang is a big reason more kids are living with their parents later in life or receiving financial help from their parents into their late 20’s and 30’s. However much of this “epidemic” is avoidable by students and parents simply making better educational choices.
If you have a child who will be selecting a college in the next few years, you will be soon be faced with a potentially challenging conversation. Their first choice school may have a total cost of $60,000 per year or more! As a parent you may be able to help some and financial aid may play a role too. However, statistics suggest your child will likely subsidize any shortfall with a massive amount of debt.
Research has shown that while college has gotten much more expensive to attend over the past 10 years, investment in actual education has not increased that much. What has increased has been administrative expenses and improving the college ‘experience’. Many campuses seem more like high tech spas. They now often compete based on which one has the most compelling amenities rather than which provides the greatest value.
Colleges however are not entirely to blame for the inflationary pressure. They simply provide a service that reflects the demands of their student clients. Only when students and parents begin demanding better educational value will colleges start to compete by keeping costs down.
Seventeen year olds are generally poorly equipped to make astute financial choices. They often end up attending schools that will saddle them with debt they can hardly appreciate. It is only once they graduate and enter the real world do they have to face up to the consequences of their decisions.
If you know a high school student, or the parent of one, have them read this study. It’s a great first step in building financial responsibility and ultimately having financial success in life.