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With or without student loan forgiveness, college still costs too much

With or without student loan forgiveness, college still costs too much

The Biden administration has promised to make a decision on student loan forgiveness within weeks, or even days. And yet, college affordability will remain an issue for years to come, experts say.

Increasingly, high school students are rethinking the value of a four-year degree. Many now say it’s just not worth the sky-high cost.

“More and more people are asking ‘is college even worth it?'” said Jason Wingard, the president of Temple University and author of “The College Devaluation Crisis.”

More from Personal Finance:
College enrollment continues to slide
Inflation is making college even more expensive
Would you be included in student loan forgiveness?

“For 50 or 60 years, it was unquestionable; now, what we’re seeing is a flatline,” he added. “Higher education — for the first time — has to pivot in order to be relevant.”

The college system should be more responsive to rapidly evolving needs in the workplace to better position graduates for employment and career success, Wingard argued in his book.

Corporate hiring practices are starting to favor skills over credentials, he said. For higher education, “that means being more applied and not just theoretical.” (Some institutions have already slashed the academic programs that were once central to a liberal arts education.)

College is only getting more expensive

Temple University President Jason Wingard speaks during funeral services for the victims of a deadly row house fire, at Temple University in Philadelphia, Monday, Jan. 17, 2022.

A college education is now the second-largest expense an individual is likely to make in a lifetime — right after purchasing a home.

But it wasn’t always that way.

Deep cuts in state funding for higher education have contributed to significant tuition increases and pushed more of the costs of college onto students, according to an analysis by the Center on Budget and Policy Priorities, a nonpartisan research group based in Washington, DC

Schools are under continued pressure cut costs, admit more students who need less aid or raise tuition. This year, some colleges are hiking tuition as much as 5%, citing inflation and other concerns.

“We’re not getting more money from the state, and the market wants us to charge less,” Wingard said, but “every single cost is going through the roof,” he noted, referring to the rising expense of faculty, buildings and maintenance, books and materials, technology and cyber security. “It’s impossible to do that.”

“We need to make sure education is more affordable for students,” he added. “If the government can’t help make education more affordable, then students are going to stop considering higher education as a viable choice, as a valuable choice.

“This is a critical time.”

“I don’t believe that higher education should be this expensive,” said Kaya Jones, 23, who graduated from Temple in 2020 with a bachelor’s degree in political science and journalism.

To pay for school, Jones worked two jobs and relied on a combination of resources, including contributions from friends and family and student debt.

“It definitely took a whole village,” she said.

Jones is now a program coordinator at Ignite, a political leadership program for women, and still owes roughly $35,000 in loans, not including the Parent PLUS loan in her mother’s name.

Students want colleges that offer better value

For now, 83% of college students are completely, very or somewhat confident “they will earn enough money to make the cost of college worth it,” according to the 2022 College Confidence Index by GradGuard and College Pulse. Parents are less convinced: 63% are confident that a college education will allow their children to get a good job, and only 60% said it is worth the investment.

“Students and their families are prudent to evaluate the return on investment of college like other large consumer purchases,” said John Fees, co-founder and managing director of GradGuard, a tuition insurance provider. Further, “this has implications for how institutions operate,” he added.

There’s much more talk about pre-professionalism.

Eric Greenberg

president of Greenberg Educational Group

These days, students and parents want to get the best value for their college dollars, according to Eric Greenberg, president of the Greenberg Educational Group, a New York-based consulting firm.

“There’s much more talk about pre-professionalism,” he said.

Along with the cost and academic offerings, families should look at the preprofessional services, alumni networks, job placement and average salary just starting out, as well as 10 to 15 years down the road, he said. Then, Greenberg said, it “becomes less about the [name brand].”

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These 30 companies will help employees pay off their student loans

These 30 companies will help employees pay off their student loans

Federal student loan payments, most of which were paused during the pandemic, are set to resume in September.

And yet, 93% borrowers say they are not financially prepared to restart payments, according to a survey by the Student Debt Crisis Center and Savi. With no break in sight for rising prices, many Americans are simply stretched too thin, other studies show.

The Biden administration is currently deciding how to proceed with student loan forgiveness, and there are signs that the repayment pause may be extended yet again. But in the meantime, more employers are offering to help.

More from Personal Finance:
What we know about student loan forgiveness
Here are the ‘most employable’ college degrees
5 things borrowers can do while they wait for loan forgiveness

About 8% of employers offered student loan debt in 2021 but 33% were considering adding it, according to the most recent data from Willis Towers Watson, a compensation assistance consulting firm.

“There’s a lot of interest across the board,” said Lydia Jilek, Willis Towers Watson’s senior director for voluntary benefits. “A greater swath of the population has student loan debt than many people think.”

“It continues to be a benefit of significant interest and value for employees as well as employers,” she added.

Remote-friendly companies offering student loan help

Meanwhile, many Americans also want to continue working remotely instead of going back to the office, at least some of the time. A Prudential survey found that financial stability, job benefits and a better work/life balance are top priorities going forward.

To that end, FlexJobs identified 30 companies — now hiring — that offer student loan repayment assistance as well as the ability to work-from-home.

Many of the employers on the list will provide a monthly payment towards student loans, while others make yearly contributions. The payments range from $50 to several thousands, usually with a maximum lifetime benefit, and may depend on full-time or part-time status, according to FlexJobs.

  1. Abbott
  2. Aetna
  3. American Family Insurance
  4. Americas
  5. Atticus Law
  6. BAM Communications
  7. Chow Now
  8. Common Bond, Inc.
  9. cross media
  10. evercommerce
  11. Fidelity Investments
  12. Google
  13. GumGum
  14. HCA Healthcare
  15. Homesite Insurance
  16. live nation
  17. Main Street Bank
  18. Medix
  19. new york life
  20. NVIDIA
  21. Parallon
  22. Platoon
  23. pricewaterhousecoopers
  24. Pure Insurance
  25. Real Chemistry
  26. SoFi – Social Finance
  27. teachable
  28. The Hartford
  29. vituity
  30. weedmaps

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Business

Three things to watch out for when using the Bank of Mum and Dad

Cash being handed away by an elderly person

No queues, no paperwork, no PINs to remember, very few customers to deal with — it’s the family-owned bank of your dreams and it has a name: the Bank of Mum and Dad.

It was reported last year that 60 per cent of first-home buyers needed to borrow funds from their parents to get into the property market.

And while doing so is hassle free for many, the seemingly easy-going arrangement can be where the danger lies.

Brisbane lawyer Brian Herd specializes in elder law and often sees clients who have seen the bad side.

“Because the deposits are so high these days and prices are so high, [some clients] can’t afford these deposits by themselves. Nor will the bank lend them the additional deposit,” Mr Herd says.

“So the obvious candidate to do so are their parents.”

Mr Herd spoke to ABC Radio Sydney about the main things parents need to be aware of when lending their children money to access the property market.

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Categories
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Is the economy in a recession? Top economists weigh in

Is the economy in a recession? Top economists weigh in

‘We should have an objective definition’

Officially, the NBER defines a recession as “a significant decline in economic activity that is spread across the economy and lasts more than a few months.” In fact, the latest quarterly gross domestic product report, which tracks the overall health of the economy, showed a second consecutive contraction this year.

Still, if the NBER ultimately declares a recession, it could be months from now, and it will factor in other considerations, as well, such as employment and personal income.

What really matters is their paychecks aren’t reaching as far.

Thomas Philipson

former acting chair of the White House Council of Economic Advisers

That puts the country in a gray area, Philipson said.

“Why do we let an academic group decide?” he said. “We should have an objective definition, not the opinion of an academic committee.”

Consumers are behaving like we’re in a recession

For now, consumers should be focusing on energy price shocks and overall inflation, Philipson added. “That’s impacting everyday Americans.”

To that end, the Federal Reserve is making aggressive moves to temper surging inflation, but “it will take a while for it to work its way through,” he said.

“Powell is raising the federal funds rate, and he’s leaving himself open to raise it again in September,” said Diana Furchtgott-Roth, an economics professor at George Washington University and former chief economist at the Labor Department. “He’s saying all the right things.”

However, consumers “are paying more for gas and food so they have to cut back on other spending,” Furchtgott-Roth said.

“Negative news continues to mount up,” she added. “We are definitely in a recession.”

What comes next: ‘The path to a soft landing’

The direction of the labor market will be key in determining the future state of the economy, both experts said.

Decreases in consumption come first, Philipson noted. “If businesses can’t sell as much as they used to because consumers aren’t buying as much, then they lay off workers.”

On the upside, “we have twice the number of job openings as unemployed people so employers are not going to be so quick to lay people off,” according to Furchtgott-Roth.

“That’s the way to a soft landing,” she said.

3 ways to prepare your finances for a recession

While the impact of record inflation is being felt across the board, every household will experience a pullback to a different degree, depending on their income, savings and job security.

Still, there are a few ways to prepare for a recession that are universal, according to Larry Harris, the Fred V. Keenan Chair in Finance at the University of Southern California Marshall School of Business and a former chief economist of the Securities and Exchange Commission .

Here’s his advice:

  1. Streamline your spending. “If they expect they will be forced to cut back, the sooner they do it, the better off they’ll be,” Harris said. That may mean cutting a few expenses now that you just want and really don’t need, such as the subscription services that you signed up for during the Covid pandemic. If you don’t use it, lose it.
  2. Avoid variable-rate debts. Most credit cards have a variable annual percentage rate, which means there’s a direct connection to the Fed’s benchmark, so anyone who carries a balance will see their interest charges jump with each move by the Fed. Homeowners with adjustable-rate mortgages or home equity lines of credit, which are pegged to the prime rate, will also be affected.

    That makes this a particularly good time to identify the loans you have outstanding and see if refinancing makes sense. “If there’s an opportunity to refinance into a fixed rate, do it now before rates rise further,” Harris said.

  3. Consider stashing extra cash in Series I bonds. These inflation-protected assets, backed by the federal government, are nearly risk-free and pay a 9.62% annual rate through October, the highest yield on record.

    Although there are purchase limits and you can’t tap the money for at least one year, you’ll score a much better return than a savings account or a one-year certificate of deposit, which pays less than 2%. (Rates on online savings accounts, money market accounts and certificates of deposit are all poised to go up but it will be a while before those returns compete with inflation.)

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