We continue to see a trend in which employers are considering how to help their people tackle the challenges of paying off high student loan debt. If this seems outside the norm, think again. In fact, we believe the need for employer assistance on student loans should only continue to grow based on the statistics we see such as the one from the Federal Reserve Bank of New York that estimates student loans have risen to 10.6% of all U.S. household debt or about $1.3 trillion. To give you some context, that percentage of household debt is more than triple what it was less than 15 years ago.
When more student debt is coupled with incomes that simply aren’t keeping pace, we have to ask: How do we deal with this financial challenge that isn’t going away and in fact may only worsen with delinquencies on the rise? Certainly more employers could help in this regard, which is encouraging, but we can’t count on that happening across the board. To help our kids chart their own course responsibly, we need to be education shopping. That’s right. We need to shop around for our education as if it were any other product.
We Need To Be More Educated…On Education.
All of the online tools we have at our disposal help arm us with a stunning amount of research and insight in an instant. We can check prices in the store against the best deal they can find on the Internet. Websites from Kelly Blue Book and NADA provide auto shoppers with data about what they should pay for their new car before they ever step onto the lot. This availability of information has helped us become more knowledgeable on how to stretch our retail dollar.
So, with this in mind, why aren’t we as consumers more educated…on education? If we treat education as a product like a house or car, we can educate ourselves on how to get the most value for our dollar.
Here’s an example:
- An 18-year-old from Illinois thinks he wants to become an elementary school teacher and eventually a principal. He is accepted to and attends the University of Illinois, earning an undergrad degree in Elementary Education.
The total 4-year cost of the degree is $140,000. In his first year teaching 4th grade, he earns $40,000.
- A different 18-year-old from Illinois also wants to become an elementary school teacher and principal. She is also accepted to the University of Illinois, but elects to attend a nearby community college for her first 2 years. She earns an Associate’s degree in Elementary Education, transfers to the University of Illinois as a junior and earns her undergrad degree after 4 years of hard work.
The total 4-year cost of her education is $79,000. In her first year teaching 3rd grade, she earns $40,000.
Same degree from the same school, right? Except with our second example, she will pay for her entire education in the first 2 years of her career. On the other hand, our first example will require 3½ years to pay for the same product.
Of course a college education is important, but it’s also more expensive than ever. Perhaps your household (or someone you know) is going to have to navigate that marketplace. If you shop around so that you get the biggest bang for the buck for your education, your future self may thank you – and will probably do so much earlier in your career compared to someone else who is still paying down loans years and years after they’ve graduated.
Not Just A College Financial Plan.
It’s An After-College Financial Plan.
We need to approach a college education for our children with the kind of financial plan that considers the immediate years after college, not just “how are we going to pay for it.” In our two examples above, the difference in charting a course wisely resulted in one individual starting on her financial goals a full year and a half before the other. However, in so many cases, a college grad can be years and years into his or her professional life before they can finally put student loans in the rearview mirror.
By that time, what is the collateral damage on their financial goals and dreams? What life events did they have to delay? What type of saving, such as putting money into a 401(k), did they put off?
Households don’t have to be saddled with this burden for the long-term if they plan wisely with a partner early on. In doing so, other financial goals don’t have to be negatively influenced, such as a time horizon to retirement. It’s why many clients of Fiduciary Financial Partners have conversations with us that help preserve the goals they’ve been working on while giving their children the best opportunity to confidently embrace their financial futures. Time flies when it comes to your kids – so let’s make a financial plan that helps them start off with possibilities after graduation. Not limitations. Call FFP today at 630.780.1534.
Miaciah Manuel, CFP®
Miaciah brings over a decade of financial planning experience to the team. He provides comprehensive financial planning services to FFP private clients, as well as, installation and ongoing support for our retirement plan clients. Miaciah is passionate about collaborating with our clients to solve their problems and ensure their success.
His expertise includes:
- Comprehensive Financial planning
- Employer Sponsored Retirement Plans
- 401(k) Participant Education
- Portfolio Analysis
- Insurance analysis
Fiduciary Financial Partners, LLC is a Registered Investment Adviser. This blog is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Fiduciary Financial Partners, LLC and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Fiduciary Financial Partners, LLC unless a client service agreement is in place.