As you no doubt remember, we’ve designated March as “Millennial Money Month”, and we’re going to spend these weeks discussing life and financial issues faced by young adults, ages 18 or so to 35 or so.
This week we’ll spend some time discussing education options after you earn your high school degree.
Be smart about school
Unless you have something better to do, it’s usually a good idea to go off to some form of higher education after you’re done with high school.
But don’t waste your time and your parents’ money. If you’re not sure of what you want to study and where you want to go, maybe take a year off of school and work someplace full time (chances are that rigors of that job will get you more excited about getting a degree, and a better job in the future . . . ).
If you want to earn some general credits as you plot your path, err on the side of an inexpensive education. Go to a 2- or 4-year school that allows you to live at home, thereby saving half the cost of college.
If and when you’re ready to commit full-time to going to college, you should try to find a public school that offers you in-state tuition rates.
Most of the time, out-of-state public universities and private colleges cost much more. Unless you’re getting substantial financial aid assistance to cover the extra cost, the benefits of such schools generally aren’t worth the substantial difference in price.
This goes double if you plan on attending some form of graduate school after you earn your undergraduate degree. Employers usually care most about where you last went to school (and received a degree), not where you started out.
When to work
You can certainly help pay the cost of college by picking up a part-time job during the school year, and/or a full-time job in the summer.
But if the job hinders your grades or the course load you can handle, you may end up taking five or more years to graduate.
That means your entrance to the workforce will be delayed by a year or more, and you’ll have to spend thousands of extra dollars on tuition and living expenses during your extra year(s) of school.
Therefore it may make more sense to instead borrow more money to pay for school, and take more credits during the school year (and the summer) to get out with a degree as soon as possible.
Deciding on debt
Unless you’re independently wealthy or showered with scholarships, it’s difficult to get any kind of advanced degree without incurring some deb. The trick is to only take on debt that you can eventually (and hopefully) pay back.
One rule of thumb to decide how much is too much is to check with your intended school to get two important pieces of information.
The first one is to see what percentage of the recent graduates in your intended major at the school achieved employment within the year after graduation.
Then try to find out what the median or average starting salary was for those graduates. Finally, multiply the two figures by each other to figure out how much money you should borrow to pay for that particular education.
For instance, let’s say you’re going into nursing, and you find out that 90% of the nursing graduates at your intended school landed jobs in their field within the first year.
And suppose their average annual starting salary was $40,000. If you multiply 90% by $40,000, you get $36,000—the amount of money you could reasonably borrow to get that degree.
At say, 6% interest, a loan of that amount could be repaid in ten years by making payments of about $400 per month. A decent amount, but one you can afford if you’re earning $40,000 per year.
Keep the questions coming
If you’re a young adult with a money question (or someone who cares about a young adult who has a money question), send it to [email protected] All names will remain confidential, although we may not be able to answer each question we receive.