“Do the math before shelling out for private university” |
| Do the math before shelling out for private university Posted: 05 Nov 2010 09:56 PM PDT www.STLtoday.com | | Posted: Saturday, November 6, 2010 12:00 pm Courtney Boyce, 27, graduated from Webster University last year with a master's degree in international relations and $110,000 in student loan debt. Starting soon, she'll be paying about $600 a month on her loans, and she'll be paying for the next quarter-century. Boyce is beginning her working life with the equivalent of a mortgage, without the house to go with it. The heavy debt means an apartment in a "less safe" part of town, she says. It means driving a tiny Toyota Yaris. Still, she'd do it all again. "Without my degree, I wouldn't have the job I do now," says Boyce, who makes $61,000 at a defense consulting firm. "I'm very happy. I just have to watch it. If it means going out less, so be it." It's November, which means that high school seniors around St. Louis are preparing college applications, while their parents suffer sticker shock at the cost of education. For most students, going to college means going into debt. As Boyce discovered, that debt can pile up fast. In choosing a college, smart students weigh how much they are likely to earn when they graduate. If you're planning to be a teacher, consider this: The average graduate with an education degree starts work at $35,100, and it's $31,600 for those in elementary education, according to Payscale.com. Majoring in social work? Expect $31,800. Criminal justice? $35,600. Journalism? $35,800, if you can find a job at all. Now, imagine starting a career at that flimsy pay while owing $50,000 in college loans. You'll be driving a clunker and brown-bagging peanut butter sandwiches for lunch until you spot your first wrinkle. "If you want to major in elementary education or social work, unless you come from a very wealthy family, you can't justify the cost of private college tuition. The return is horrible," says Al Lee, director of quantitative analysis at Payscale.com, a compensation data company. Go to Cheap State U. instead, he says. Boyce grew up in the small town of Owensville in Gasconade County. Her family didn't expect her to go to college and couldn't afford to help her. She chose Webster, a private college where tuition, room and board run $31,000 per year. She financed it through waitressing part time, and through more than $50,000 in student loans. She graduated in 2006 with a degree in public relations, and got a job selling advertising for about $30,000 a year. "I had an apartment and I shared that, and I definitely had to watch it. I kept a spreadsheet with my finances on it. But it wasn't hard until I went to grad school," she says. Webster's graduate program had her studying in England, Holland, Austria, Switzerland and Thailand. It drove her student debt to $110,000. Boyce's case is extreme, but it's not hard to find yourself debt-poor as a new grad. In Missouri, 66 percent of bachelor's degree students graduate with student loans, and the burden averages $21,360, according to the Project on Student Debt. In Illinois, 60 percent graduate in hock, with the typical burden $22,049. The figures don't include the sums students run up on their credit cards, or what parents borrow. Boyce returned to St. Louis jobless, then found part-time work at $22,000 a year. "There was no way I could afford my loans on that. I had to live with my mother," she says. International affairs isn't a big business in St. Louis. "So I woke up one day, sold my car, and moved to Washington, D.C. I moved onto my friend's couch," she recalled. The move worked, eventually landing her a PR job at good pay. "I'm very, very happy," she says. Wooing new students is an art form at college admissions offices. They'll ballyhoo their winning football teams, plush dorms and swim-up juice bars at the student rec-plex. A practical-minded family will perform a cold calculation: What salary bang will we get for our educational buck? And will Posh U. leave me in hock until my hair is gray? Higher education definitely pays off. The median family income for people with bachelor's degrees or higher was $99,707 last year, compared with $48,637 for those with a high school diploma, according to the College Board. Payscale, which tracks millions of salaries, likes to compare the pay of graduates to college costs, then calculate the return on educational investment. The annual return on investment ranged from 4.3 percent at Black Hills State University in Spearfish, S.D., to 14 percent at the University of Virginia. (The site didn't offer a return for Webster University.) At Washington University, where a year's schooling runs $52,000, a grad will earn $891,000 more than a high school grad over 30 years, for a 10 percent annual return on his or her educational investment. At the University of Missouri-St. Louis — a much cheaper option — a typical grad will be up $227,000, for an 8.1 percent return. A Southern Illinois University Carbondale grad gains $292,000 for a 9.5 percent return. (The earnings figures are the present value of future pay, discounted by wage inflation.) Those figures disguise an obvious fact: Some majors pay a lot better than others, and engineering tops all. Petroleum engineers start at a median salary of $93,000. An electrical engineer starts at $60,800. "If you go to MIT, it doesn't matter what you pay. Any reasonable loan is justified if you become an engineer," says Lee. A Massachusetts Institute of Technology grad pulls in an extra $1.7 million over 30 years. Other math-heavy majors also pay well. Economics majors with bachelor's degrees start at $48,800, physics at $50,700, applied mathematics at $56,400. Graduates of prestige, highly selective schools do make more than others. But that doesn't necessarily mean that pricey schools make the difference. Would a kid smart enough to get into Washington U. do just as well if he went to UMSL at half the price? Last month, I sat at dinner with a chief financial officer who makes nearly $800,000 a year at a big-name company in St. Louis. He went to UMSL. If you're wrestling with the college decision, here are a few things to keep in mind: • The 'sticker price" — published tuition — probably isn't what you'll have to pay. Two-thirds of students get grants or scholarships. Pricey schools give the biggest discounts and offer more breaks based on financial need. Cheaper state schools lean more toward academic merit in awarding scholarships. If you have your heart set on Posh U., apply and see what you're offered. But apply at affordable state schools as well. • Apply early for financial aid — kitties run dry. And always fill out the Free Application for Federal Student Aid, a task as pleasant as a mugging. It's required by most schools and needed for federal student loans. • If you have to borrow, beware of "private" student loans. Federally backed Stafford loans generally offer lower rates and much easier terms in repayment. Parent Plus loans are the best option for parent borrowers. "Only consider private loans as a very last resort," says Lauren Asher, president of the Project on Student Debt. "They are a risky form of private debt, and they are not even dischargeable in bankruptcy." Federal loans aren't dischargeable either. But federal student loans, including Stafford, federal consolidation and Grad Plus loans, offer an "income-based repayment" plan that reduces payments for people with low incomes. It generally keeps payments under 10 percent of income. You can find information at ibr.info.org. Parent Plus and private loans don't qualify for income-based repayment. Boyce is taking advantage of that option for federal student loans. Because she made little money last year, her payments now are light. But they'll jump after she reports her new salary. "I shudder to think about the day I'll get that letter," says Boyce. This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read our FAQ page at fivefilters.org/content-only/faq.php |
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