Over the last 50 years, going to college has become an expected rite of passage for a large majority of high school seniors. According to the Bureau of Labor Statistics, in 2013 two-thirds of those graduating from high school enrolled in college. Of those students who enrolled in college, about 60% were enrolled in a four-year college. (http://www.bls.gov/news.release/hsgec.nr0.htm)
The National Center for Education Statistics reported that “in fall 2013, a record 21.8 million students are expected to attend American colleges and universities, constituting an increase of about 6.5 million since fall 2000. Nearly 7.5 million students will attend public two-year institutions, and 0.5 million will attend private two-year colleges. Some 8.2 million students are expected to attend public four-year institutions, and about 5.6 million will attend private four-year institutions.”
The National Center for Education Statistics also has reported that based on the 2011-2012 academic year “the average annual price for undergraduate tuition, fees, room, and board was $14,292 at public institutions (including $5,500 for in-state tuition) and $33,047 at private nonprofit and for-profit institutions. In this year, the average annual price for undergraduate tuition, fees, room, and board was $16,789 at public four-year institutions, $37,906 at private nonprofit four-year institutions, and $23,364 at private for-profit four-year institutions. Charges for tuition and required fees averaged $7,701 at public four-year colleges, $2,647 at public two-year institutions, $27,686 at private nonprofit four-year institutions, $14,193 at private nonprofit two-year institutions, $13,819 at private for-profit four-year institutions, and $13,834 at private for-profit two-year institutions.” http://nces.ed.gov/fastfacts/display.asp?id=372
HowToGetIn.com is an Edvisors company and is a leader in college search, college preparation and financial services. On their website (http://www.howtogetin.com/financial-aid-101/cost-of-attendance.php) they report the cost per year to attend a Prestige school (Ivy League or near-Ivy League) will be $44,592 per year. The cost to attend a private four-year university is estimated to be $26,226 per year compared to attending a State university or public school of $18,452 per year.
According to Van Thompson in the article “What Percentage of High School Students Attend College After Graduation?” (http://classroom.synonym.com/percentage-high-school-students-attend-college-after-graduation-1423.html), “A number of factors play a role in a student's decision to attend college. Family environment is particularly important; children whose parents don't value education, don't encourage them to go to college and don't help them with the college application process are less likely to choose higher education. Poverty is also a significant factor; the cost of a college application can be prohibitive for some students, and many of these students are concerned that they will be unable to afford college or are worried about getting a job to help support their families. Teen pregnancy, learning disabilities and academic difficulties during high school can also decrease the likelihood that a student will attend college.”
In an article published in Forbes this summer, Robert Farrington reports that because “98% of American families agree that college is a worthwhile investment (and) as a result, more than eight in ten families indicate they are willing to stretch themselves financially to obtain the opportunities afforded by higher education.”
Further, Farrington reports, “students and families are realizing there are alternatives to student loans to pay for college. While families spent about the same amount on college this year compared to last year, the way they covered the bill changed. In general, families borrowed less and paid more out of pocket. This year, families reached into their pockets to cover more than 40% of college costs.”
It is also interesting to see the alternatives that Farrington reports that families are using to reduce the cost of college:
- 69% Opting to attend institutions in-state
- 61% Attending school closer to home to reduce travel expenses
- 54% Living at home or with relatives
- 42% Filing for education tax credits
- 41% Getting a room-mate
- 34% Choosing to attend two-year public institutions
- 28% Accelerating the pace of coursework
The following is an example of how one family has addressed the challenge of paying for college. This is a financial planning client of mine that has given me permission to use their story. The names are changed.
This is a single mom (Jan) with one child (Johnny). When Johnny was two years old she decided to begin setting aside money for his college fund. She was told at the time that she should set aside $400 per month to have enough to fund the future expected cost of his college. However, as with most young families, that was more than she could fit into her budget and she could not imagine that college costs would actually inflate by that large of a margin in fifteen years. But to her credit she did the best she could and began to save $100 per month and invested it for growth.
Johnny did his part over the years by being an outstanding student. He made great grades throughout school and managed to graduate in the top ten out of a senior class of over 400 students. He made excellent scores on his SAT and ACT. In addition to great grades, he was a well-rounded student. He was in Boy Scouts and in high school he lettered in basketball, band, drumline, academics and debate. He also began a part-time job when he turned 16 and had the self-discipline to save most of his earnings.
As he got into his high school years, they began to pay more attention to the cost of college. They made a strategic decision that he would keep his options open and they hoped to be able to have multiple universities that would accept his application. Their hope was to have options among them to help make college more affordable. During high school Johnny concluded that he wanted to major in physics (more specifically astrophysics) and that it was highly important to him to play on the drumline in an awesome band.
They researched the rankings of the physics departments of the universities in Texas. Johnny applied to several universities and was accepted by three Division One universities in Texas (I will refer to them as D1, D2 and D3). From a financial standpoint, this will afford him a smaller price tag than a private university like Jan had been able to attend. Because of his SAT/ACT scores and grades, he was offered varying amounts of scholarships. He had no expectations of playing basketball in college or earning a music scholarship.
Jan looked at the current balance of the college fund and it appeard to be enough to pay for one of the upcoming four years for his bachelor’s degree and he expects to need to attend graduate school to some magnitude. So they begin to evaluate the financial packages from his top three picks. D1 is the largest of the three and is a very competitive university to gain admission. However because of those factors, they do not need to offer much assistance to recruit students. Therefore, it should not have been a big surprise that they offered a financial package that had very little in scholarships or grants and was comprised mostly of student loans.
D2 and D3 were much more competitive and offered more in their packages for scholarships and grants. They both seemed to “put their money” on the table and offered enough to get Jan and Johnny’s attention.
It should not be surprising that as they began to make their decision of which school to attend that two non-financial factors came to the table. All three universities have outstanding marching bands. However, it became apparent that at D1 and D2 it would be a long shot for Johnny to march in the band since he is not planning to major in music. Also, a significant number of Johnny’s close high school friends have chosen D3. So now the commitment has been made, the application from D3 accepted, deposits have been made for a dorm room and a close high school friend is confirmed as roommate. Then the story takes a big turn!
Jan is taking her mother to a doctor’s appointment. Jan is having a casual conversation with the doctor’s nurse who has a son in high school who is one year behind Johnny. They are sharing stories about the high cost of going to college and where is Johnny planning to attend. Then the nurse tells Jan that her son is going to get his tuition and fees paid in full as long as he attends a state supported college in Texas.
So Jan is all ears. The nurse tells Jan about the Hazlewood Act. The Hazlewood Act is a State of Texas benefit that provides qualified Veterans, spouses, and dependent children with an education benefit of up to 150 hours of tuition exemption, including most fee charges, at public institutions of higher education in Texas. This does NOT include living expenses, books, or supply fees.
The Hazlewood Act was written to afford a benefit to any Veteran who meets the following criteria:
- At the time of entry into the U.S. Armed Forces the person designated Texas as Home of Record; or entered the service in Texas; or was a Texas resident;
- Received an honorable discharge or separation or a general discharge under honorable conditions;
- Served at least 181 days of active duty service (excluding training);
- Have no federal Veteran’s education benefits, or have no federal Veteran’s education benefits dedicated to the payment of tuition and fees only (such as Chapter 33 or 31) for term or semester enrolled that do not exceed the value of Hazlewood benefits;
- Not be in default on a student loan made or guaranteed by the State of Texas;
- Enroll in classes for which the college receives tax support (i.e., a course that does not depend solely on student tuition and fees to cover its cost), unless the college’s governing board has ruled to let Veterans receive the benefit while taking non-funded courses; and
- Meet the GPA requirement of the institution's satisfactory academic progress policy in a degree or certificate program as determined by the institution's financial aid policy. (Effective fall 2014)
Jan immediately begins to confirm all the elements. Jan’s ex-husband (Johnny’s father) was in the Army. However, that was prior to Jan meeting him and she had the impression that he had joined the Army in another state. A conversation later in the day, revealed that he actually enlisted in the Army with Amarillo as his point of entry and had lived in Texas at that time. Jan calls the financial aid office at D3 and confirms the eligibility and gets more information including what she needs to obtain and send to the financial aid office.
As it turns out, this one casual conversation at the doctor’s office gave Jan the one piece of information that no other source had provided. This information did not come from any of the high school counselors or any of the financial aid offices. To give them some credit all of them had been very helpful to Jan and Johnny and one can easily conclude that a family would likely know if they were eligible for the Hazlewood Act without being told about it. Furthermore, all of the high school counselors and the staff in financial aid offices of universities have hundreds or thousands of students they are attempting to give information. However, the lesson for everyone to learn is that each family should ask everyone involved in the financial aid aspect questions to explore what may be little known benefits.
This story is on its way to turn out like a fairy tale. The take away for anyone reading this article is that we all know that college is very expensive. We also know that only a small percentage of families have successfully saved enough to pay for it. Every family with a person about to enroll in college needs to be faithful in exploring all their options and carefully listen to explore options available to you.
Jerry Love, CPA is the sole owner of Jerry Love CPA, LLC in Abilene, TX. Contact him at
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