Let's face it: If you're a college student, you're probably deep enough in the financial hole to prove it. Combine the climbing costs of tuition, textbooks and room and board with sluggish financial aid and mounting credit card debt and you've got a recipe for losing sleep.
Welcome to Generation Debt.
"The problem is certainly not going to get any easier. In fact, it is most likely going to get more difficult," said Kalman Chany, author of "How to Pay for College Without Going Broke." "The hike in tuition is in part because the colleges know how much money they can squeeze people for before they are really crying uncle. What they're thinking is, 'Well, applications are up and more people want to go to college, so therefore we can charge more money.' "
According to "Trends in College Pricing 2005," a study released Tuesday by the College Board (a nonprofit association of more than 4,500 colleges and universities), the average tuition for a four-year public university increased more than 7 percent in the last year, climbing to just about $5,500 a year. For private institutions the increase was slightly less, at 5.9 percent — but, with the average cost already looming around $21,000, that'll make an even bigger dent in your wallet.
Add room and board to that equation and you can expect to shell out about $30K and $12K a year for private and public schools, respectively.
But that's just enough to get you to the door of the classroom — then come the textbooks. Textbook prices are getting so high that a coalition of several hundred math and physics professors issued a protest letter to a leading publishing firm to ask them to stop rolling out so many revised, and often unnecessary, editions (see "Professors Try To Make It Easier For Students To Get Used"). The average college student shells out $900 a year on textbooks alone.
But wait, there is good news. While tuition rates may be on the rise, so is financial aid, according to the College Board — and therein lies the key: You must learn how to work the system to your advantage.
"The most important thing for students to know is that even though the costs may seem insurmountable, it is still doable. You can go to college, but you need to be assertive with the process," Chany said. "The theory is that the money will go to the people who need it, but the reality is that the money goes to the folks who best understand how the process works."
Truth is most students never end up having to shell out the full fare. Sixty-three percent of those enrolled receive some form of aid to help foot the cost, whether it be through grants, scholarships or, of course, the most common type of financial aid: student loans. (By the time a college student graduates, he or she can expect to accrue just about $20,000 in student loan debt, according to the U.S. Department of Education. That's more than double the amount just eight years ago.) It can take up to 20 years to pay off that debt, and with interest accruing at an adjustable rate, you can end up adding 30 percent to the cost of your student loan over that time.
One of the easiest ways to build up debt is to take out loans without really considering the consequences, Chany says. "It's easy to sign on the dotted line, but most students don't have experience in terms of managing a budget, so they don't realize how paying $400 a month for the next 10 years will impact their lifestyle."
"What I would tell students is that if you're in college, about to go to college, or just thinking about continuing your education, borrow wisely," said Martha Holler, a spokesperson for Sallie Mae, one of the top lenders in the student-loan market. "It's pretty simple: Every dollar that you do not borrow is one that you do not have to repay."
There are other options as well. By completing the Free Application for Student Aid, you are also eligible for state, federal and school grants. Federal grant aid is up by $8 billion in the last 10 years, according to the College Board. The average college student usually receives about $9,600 of aid in the form of grants and tax benefits at private colleges, and nearly $3,300 at public institutions.
Chany, who is also a prominent speaker on high school and college campuses, says one of the biggest mistakes students and their parents make is locking their eyes on one specific (and usually prominent and costly) school. "Price isn't necessarily synonymous with quality," he noted. "Some students think, 'If I go to this school then I'll be set for life,' but that's not the case. Students have to consider, does it really make sense to go into all that debt when you can get the same quality education at a state school? What's going to be more important is what personal skills they develop, not what bumper sticker they have on the back of their car."
Sure, an Ivy League degree gets name-brand recognition, but it does not guarantee success. An article in the November 1, 1999, issue of Newsweek published a report by Alan Krueger, an economist at Princeton University, that studied the difference in income between those who graduated from an elite school like Stanford versus a graduate from, say, Arizona State. The result? There was no difference. Krueger concluded that it was the student (and his or her concerted effort) that determined their overall success after college — not the name of the school printed on their diploma.
According to the College Board, students entering the workforce with a bachelor's degree earned an average of nearly $50,000 a year; those who went to college but had no degree raked in about $35,700; and those with just a high school diploma took in just about $31,000. That means that over the course of their careers, college grads will make 73 percent more than those who only graduate from high school.
Chany adds the earlier you start planning for your future, the better off you'll be. "Time is your greatest asset," he said. "Take advantage of it."