Costly Myths Scholarships True Cost of College and Dream School
[Music]
october 12
1983 three jobs 35 credit hours
ramen noodles i was one of many students
scraping by to
pay their way through school i was the
real
starving college student i had to lift
food from the college cafeteria
so i could eat on the weekend i held my
breath
hoping my tuition checks would clear
my dream was to have a college degree i
just never
expected the financials troubles that i
would face
later as a parent i wanted the best for
my kids
from the time they were young i had
planned for them to go to college
conversations would begin with when you
go to college
not if you go to college
but what does society tell us about
getting that college degree
of course there’s the ever-popular
having a college degree
ensures your financial success according
to a report by the u.s
board of labor statistics having a
bachelor’s degree
earns an average of 26 thousand dollars
more per year
than a high school diploma alone a
significant amount over a lifetime
but this as well as other studies does
not account
for the effect of college debt in these
figures
another common belief is that the degree
must come from a name recognized
top 20 school there were several
scandals in the last year alone of
parents teachers and counselors cheating
to get their children accepted to these
name brand schools
yet the dale and krueger study of 2011
found that students who were accepted
to name brand schools yet chose to
attend a state university
earned the same average salaries as
those who attended
the name brand schools your success
depends on you
not the name on your diploma and of
course we can’t forget
college is so expensive everyone
has college debt we can’t escape it we
hear it all the time about the high cost
of college the
student loan debt crisis but is it
really
according to the federal reserve 70
of college students graduate with
college debt and the average debt
balance is thirty thousand dollars with
an average monthly payment
of three hundred ninety three dollars
but thirty percent of college students
graduate
debt free let me repeat that
70 percent of college students graduate
with
student loan debt but 30 percent
graduate debt free college
doesn’t have to be a debt sentence
yes i had planned for my children to go
to college
but i failed to plan financially for
college
just before my oldest was to start high
school my husband was laid off
twice then the stock market crashed
we used what was left in savings and the
stock market to pay the bills
but eventually that money ran out
and we had no choice but to declare
bankruptcy
with the bankruptcy we lost
everything
my daughter was just starting high
school college wouldn’t be far away
how would we get her into college would
she be accepted how do we
pay for it that’s when i realized
we couldn’t we had no savings and with a
bankruptcy meant
we had no credit to co-sign for student
loans
what would we do would she have to go
through what i did
to get her degree i felt desperate
but desperation became focused
determination
i was determined to uncover what the
thirty percent are doing
at the seventy percent or not with more
than seven
thousand hours of research i discovered
that nearly six
hundred thousand college students
graduate debt-free
every year and they’re all using a
common strategy
i had cracked the code to free college
in my research i discovered that those
who graduate debt-free understand what i
call
money math why are college loans
such a big deal anyway when i was in
school you
signed a contract for 10 years and you
paid it off in 10 years
today students take an average of 21
years to pay off a bachelor’s degree
while the average college debt is only
30 000
so why 21 years the answer
is simple students are offered repayment
options
that reduce their monthly payment they
can put payments on hold
they can pay a smaller percentage of
their income
options like these remove the incentive
to make wise
financial choices they’re designed to
keep two
students in debt because well that’s how
loan issuers make money
and most students don’t understand the
math
the compound interest continues to build
every day
working against them not only are they
lengthening the loan
they’re increasing the balance those who
graduate debt-free
understand the loan contract and how it
affects
their financial future they did the math
as a parent i understand you want the
best for your kids i get it i did the
same
but sometimes we feel powerless and find
ourselves between a rock and a hard
place
from one parent to another let me share
with you alice’s
dilemma my client’s daughter alice
had an offer to attend a school her mom
could afford
but alice wanted to attend her dream
school
mom didn’t want to be the one to say new
to alice
so she called me i showed alice that the
entry-level salary for her chosen career
is 35 000
the monthly take-home pay will be just
under 2500
now to a teenager that’s a lot of money
now let’s talk about dream school the
four-year cost to attend dream school
is 260 000
and the 10-year monthly note will be
just
under 2 900
in this scenario alice walks out of
college and is immediately
bankrupt even if we lengthen the loan to
15 years or 20 years
she still can’t afford to pay the note
and eat
much less afford a place to live but
what gets forgotten
is the amount of interest paid over the
life of the loan
if alice has a 20-year loan she’ll pay
187 000 in interest alone
but compound interest works for you when
you’re investing
as i said the average debt is 30
000 with an average monthly note just
under 400.
that doesn’t sound like much so let’s
assume the student
pays the note in 10 years and is done
with it and can begin investing
that 400 per month at age 32.
if they continually invest at four
hundred dollars per month until
retirement
they could reach a one million dollar
net worth by age 63.
that’s great but what if they never have
college debt at all and can begin
investing 10 years earlier
at age 22. alice has that choice
if alice begins investing 400 by age 22
every month and is consistent she could
reach that one million dollar net worth
10 years earlier but the best part is
continuing to invest
through retirement at age 67. then her
net worth could be more than
4 million dollars
the difference because of a 30 000
student loan
is 2.8 million dollars lost that’s what
you lose
by waiting 10 years to begin investing
we’re so caught up in our children
attending the college of their dreams or
having the college experience
we forget that the debt could prevent
them from living
the life of their dreams college
doesn’t have to be a debt sentence
not only do our kids need to learn money
mass
but one of the most important points in
the book cracking the code to free
college
is that those who graduate debt-free
start early
they knew early how much money their
family could or could not invest
in their college education they began
applying for scholarships
very early there are scholarships from
as young as
kindergarten scholarships for red hair
duck calling yodeling a zombie
apocalypse scholarship
most applications are just a short essay
those who graduate debt-free prepared
for college early
they started working on getting good
grades from the moment they walked into
high school
they took college entrance exams from as
early as the seventh grade
taking the exams multiple times knowing
the scores they need for scholarships
those exams combined with good grades
often determine scholarships worth tens
of thousands of dollars
if you don’t like your score you can
take it as often as you like
until you get the score that gets the
money
my daughter took the a.c.t exam
11 times my son took the s.a.t exam
one more time and increased his score
enough for an additional
ten thousand dollar scholarship college
doesn’t have to be a debt sentence
number three those who graduate
debt-free
did the research we research when we buy
a car
is it stylish does it have the right
features is it reliable how much will it
cost
can i afford it most of us wouldn’t walk
into a tesla showroom and say
i’ll take the red one most of us know
we’re only there to drool over the
pretty cars
but we’re not driving out with one but
we’re more emotional when it comes to
choosing a college and we don’t consider
the cost in the same way
college doesn’t have to be a debt
sentence
those who graduate debt-free researched
colleges scholarships college major and
career paths
they made financially sound choices
there are more than
4 000 colleges and universities in the
u.s and nearly 23 billion dollars
in scholarship opportunities we’ve
allowed
social influences and college marketing
to affect our judgment
as parents and advisors our teens are
trusting us
to use our knowledge wisdom and
experience to guide them
it’s not the high cost of college or
student loan programs
that have failed our kids it’s us
not only do our kids need to learn money
math
and start early and do the research
they also need to work
you need to work for the grades and the
test scores during high school
they need to work for applying for
scholarships and doing the research
but it also takes work yes i’m talking
about getting a job and a side gig
but most importantly is the
determination to make it happen
like the 30 percent my kids applied for
scholarships
every week never giving up my daughter’s
first scholarship
that she applied for and won was a ten
thousand dollar national scholarship in
her high school junior year
all combined my kids scholarships
totaled
199 thousand dollars for four years of
college
debt-free with cash left over
years later i’m grateful for the
bankruptcy
i wouldn’t have done the research i
wouldn’t have been
as determined kids
wouldn’t have had this result without it
this strategy is repeatable six hundred
thousand college students graduate debt
free
every year college
doesn’t have to be a debt sentence
i cracked the code to free college for
both my kids
and so can you
you