College - or Retirement? You Choose!

The “bible” on Higher Education, “Inside Higher Ed,” recently published some alarming financial statistics on the choices that families are being forced to make when financing their student’s college education.

The Gallup Poll found that 47% of families utilize student and/or family borrowing to pay for college. Many of those parents (32%) “tap into” home equity lines of credit----on average OVER $10,000 per year.

The financial community sings the praises of 529 college savings plans, but they were used by ONLY 9% of the respondents and averaged less than $8,000 per year towards the college’s cost.

The future graduates are also being financially-strapped in obtaining that degree, as 23% of students have loans averaging $7,000 per year.

A Vice-President for Sallie Mae (the Poll’s sponsor) is quoted as saying that “the number 1 piece of good news is the OVERWHELMING consensus that college is worth it, AND the students and families are willing to do what it takes to pay for it”----WOW----that IS good news !!

EVEN THOUGH----the AVERAGE (inflation-adjusted) starting salary for college graduates HAS NOT RISEN in 30 years!!

Who Should You Trust?

Sallie Mae and the Gallup Polling Organization recently released the results of a survey entitled “How America Pays for College.” The survey was conducted during the 2007-2008 academic year and questioned 684 students and 720 parents of traditional-aged undergraduates.

The results underscore the lack of understanding in general about the entire college process and the expected payback resulting from an expensive and prestigious college degree.

Most respondents felt that “the best assistance available on figuring out their family’s financial situation was the college’s financial aid office.” This belief can be compared to following the financing and purchasing advice of your local car dealer when buying an automobile!!

One respondent to the survey results wrote: “when I went to college, I was pushed hard by the FINANCIAL AID OFFICE to take out the full $40,000 in federal and private loans. They told me it was because a BA degree GUARANTEED me a starting salary of $50,000. Well, it’s 9 years later, and I’m still waiting to see that starting salary. Sometimes it’s NOT what the consumer knows, but what the financial aid people do to the consumer.”

Perhaps the most startling finding was that 40% of families DO NOT CONSIDER the cost of a college when making a decision on attendance!!

Where have ALL the lenders gone?

Last year I had the privilege of listening to a Senior Vice-President of Western New York's largest bank explain how "his" bank felt it was a public responsibility to participate in the college lending marketplace.

I received phone calls today from two families who placed college loans with this bank last year, and they informed me that this bank now says that they "no longer participate" in college lending.

What happened to the sense of public responsibility that was expressed last year??

OR----has this bank decided (like most American colleges) that families can bear the burden of college on their own.

With the nationwide credit crunch AND lending interest rates under intense scrutiny----all of a sudden responsibility to (and concern for) borrowers has disappeared.

Isn't it about time for families to cease submitting to colleges (which appear to be the LAST NON-regulated industry in the USA)??

Compared to colleges and lending institutions, the oil industry looks like the Pillsbury Doughboy!!