Episode 86 - College Planning: Begin with the End in Mind

If you are a parent, this episode is for you. Let's begin to discuss college planning. If you haven't given college planning any thought, this is for you. If you have given it thought and are unsure where to begin, this is for you. We will start with the end in mind. 

Transcript

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Paul, Welcome to Catholic money talk, where we talk about all things money and finance, and we try to do it through a lens of being Catholic, where our ultimate goal is to one day be in Heaven with the Lord. I am your host. Paul Scarfone, thank you for being here today. Welcome back to Catholic money talk. Today I want to talk about college costs and college planning. If you are a parent of a junior in high school that's finishing out the year and going to be looking at colleges this summer, or maybe you're a high schooler listening to the podcast today, we're going to talk about the cost of college and how to begin to create a plan to tackle that. But before we start, let's say a prayer in the name of the Father and of the Son and of the Holy Spirit. Amen, Heavenly Father. We thank you for this day. We thank you for all the ways you love and bless us, Lord. We know that you have an awesome plan for us, a plan full of hope, full of joy, Lord, allow us to surrender all of our plans to yours. Allow us to invite the Holy Spirit in give us great peace knowing that you have a great plan for us. We ask this all in Jesus name amen, in the name of the Father and of the Son of the Holy Spirit, Amen. So this seems like a very timely topic, especially as we're the beginning of June, the end of a school year, and for juniors in high school, and possibly even sophomores and maybe even younger than that, this summer is going to be spent. A lot of the summer might be spent looking at colleges, looking at universities, visiting some schools, and trying to create a plan for after college. But let's remember one thing that we learned in Stephen Covey's book, The Seven Habits of Highly Successful People start with the end in mind, what is the plan? Just recently, I was teaching the juniors at my children's school and helping them try to start thinking about this topic. And one of the things we did, if we looked at the scenario of a young couple who was going to be they just finished school. They were planning on getting married, but they each had$80,000 worth of student loan debt, and when they got married, they now had 160,000 total, right, 80 each. It's combined once you're married, and their monthly payment was $1,800 for 10 years. So they not only end up paying the $160,000 back, but an additional 56% or 56% 56,000 in interest, right? So they end up paying $216,000 back for the 160 they borrowed$1,800 a month, and so at the end of 10 years, right? So let's say they graduate college. 2223 they get married. 10 years later, they've just paid all that money back. Well, what if they had created a plan to go to school without using student loans, and when they graduated, they had zero student loan payments. But let's say they still had that 1800 available, and instead of paying it towards student loans, they were able to start saving it and investing it for their future. Well, if they invested the $1,800 a month for 10 years at a decent interest rate of a well diversified portfolio in investments, they would end with over $300,000 at the end of 10 years. So those are two scenarios, the first one with student loans, 10 years post college, having paid back$216,000 or 10 years post college, with an investment account worth over 300,000 when those are those are two different options, and they're just two points on the spectrum. There's worse scenarios, there's better scenarios, and there's a ton in between. My point is, as we start to plan for school, let's start with the end in mind, what is the the goal? What is the future state that we're working towards? Because without that, we're just going to get lost in the the waves and the turbulence of decisions and money, and you're going to wander into student loan debt, and there's no way to wander out of it. It is a hard, hard trudge out of student loan debt. So as you start to think of a plan, that's the starting point right. Begin with the end. In mind, what are you working towards? When I talk to parents and I talk to students about, hey, what's your plan to go to college? Dollars. When I asked them, Do you know how much school costs, most of them don't, I would say 90. 95% of them don't. They don't have any idea. They haven't actually looked it up. They start telling, well, I think my cousin said it was like 20,000 a year, or is it like 60 grand for the whole you know? And they just don't know. So a very helpful resource is from College Board, college board.org they gather and compile tons of average and national data points on schools, and so I pulled their report just last week, it is the the College Board trends in college pricing and student aid from 2024 so this is, this is our year. You know, this is regarding this year that we're completing now, right? So just, just the beginning of the school year. This is very, very hot off the press. So to give you an idea, in 2425 right? The school year, we're just ending the private nonprofit four year cost is $43,350 right? So private nonprofit four year, the public four year average tuition 11,610 right? So those are just tuition numbers. When we look at housing and food, the private four year was 58,600, a year, and the public four year was 24,920 per year. So about 50, almost 59,000 for everything, in private school and in public colleges, four year, it was just about 25,000 total, right? If you don't live there, it's it's a little bit cheaper. So here's the thing to remember, these are national averages. So if you live in a place in the country like I do in New Jersey, where things are more expensive, don't go off of these numbers. Actually look up real numbers, and I've done that today, and I'll give you an example of it. But in this College Board report, it also starts to talk about averages as it relates to financial aid versus household income and things of that nature, right? This is not scholarship. This is just financial aid. And when your household income is over$120,000 that student aid, that financial aid just seems to dive off very, very quickly. So just something, as you're planning, you think, Oh, we have a lot of maybe we have a lot of kids, or a big Catholic family, maybe we have a lot of kids. Maybe we don't feel like we make that much money. Again, national averages, the average income is, so the average household income in the United States in 2023 was 80,000 Okay, so if you're making, you know, 130,000 you might look at your peers and go on, other people are making more than me, Yeah, but you're still, like, 50% over 50% more than the average. So this is just something important to to know, don't bake bank on getting just a bunch of financial aid. You might be quickly disappointed with how much is actually available to you. So start with the end in mind and get an idea of how much school costs. So again, these are national averages. I'm just going to pick the the example I gave the kids last week, the students at school. And these are New Jersey schools. So this is just the cost from their website. So this doesn't have any scholarships or financial aid or anything to it. So Rutgers, Rutgers, university to state school, New Jersey, four year school, tuition and fees, I'll add them both together, was just under $18,000 so we will say $18,000 so that means living at home, right? So $18,000 times four is 72,000 so $72,000 is what it would cost to go to Rutgers for four years, right? Not living there, living at home. Union County College, which is where my son goes, in state residence. There's 2700 a semester. So that's 5400 a year, right? So if you do 5400 a year for the first two years, and then go to a state school like Rutgers for 18,000 year, instead of being 72,000 for four years, it's about 47,000 Person for for four years. Okay, so big savings Seton Hall, which is a private Catholic University in New Jersey, South Lawrence, New Jersey, so for there a full time student, is 26,000 per semester. So that's 52,000 actually, that doesn't include the fees. It's 27,600 so per semester, so for a year, it's basically 55,000 a year. So that's 220,000 for four years, not living at school. Oh, my goodness, if you live at Rutgers, that number I had said, was it 72,000 you're gonna basically add, you're gonna add about 15,000 a year to that. Okay, so that adds up quickly. Seton Hall, living on campus, you're going to add about 16,000 a year to those numbers, right? So that's probably 15, 16,000 a year. It's probably what you're looking at room and board food in, you know, a dorm room at four year schools, if you're living there. So those are some real numbers, right? So you go to county college a little bit, you're looking at 47,000 to then go to a state school, putting a private university over $200,000 over almost $300,000 if you're gonna live there, right? These are big, big numbers, even if you get half off right of a private school, 300,000 that's that's still 150,000 you do that over four years, you're looking at almost $40,000 a year. So these are big, big numbers. So I'm not saying this to scare you or to talk you out of going to college. Here's the deal. I think everyone should, you know, create a plan of what you want to do, and if you can afford to go to school to get a degree go but the this the problem I have with a lot of people, and this is just whether it's academics, teachers, guidance counselors, parents, friends, relatives, whoever's trying to influence the Child, right, the student, here's a challenge that I have no no time in life. Do we just kind of throw common sense out the window the way we do with looking at universities? What do I mean by that? If you if your car broke down, you need to getting a different car right, a new to you car. Normally, people would sit down and say, how much can I afford? And they might look at how much cash do I have to buy a vehicle. Some people that might, I don't know, embrace loans. Might say, Oh, what's a monthly payment I can afford? Right? And then, then from there, whether it's cash or a loan you're getting, how much of a car can I afford? Then you go look at cars in that price range, right? Homes are similar to that, right? We have to go to the bank and say, Hey, how much can I afford? And they give us a number. Then you go shopping student loan, you know, college educations. Oh, what's the best school? They just go to the best goal. This is so nice here. It's got all these great awards and reputation. And I just want to go here and go the financial aid office, and they find a way to make it happen, right? And then you're burdened by potentially hundreds and hundreds of 1000s of dollars worth of student loans. Don't do that, sit down first and figure out what can we afford, and then make a plan from there. And part of affording to go to school means we got to work on grades right now so that we can get some academic scholarships, right, some reward for having good grades in school we can take tests, right? S, A, T, A, C, T, whatever all those standardized tests are that have the potential to earn us additional scholarships. And then there's a whole host of different scholarships out there that people can apply for. There's essays you have to write, committees that you might have to present to, but that's a chance to earn some more dollars for school. And I hear stories fairly often of kids and families that were hustling, that were able to get full rides to some very nice, elite schools, but because they worked hard at it, they just didn't play video games and hang out with their friends or sleep in and hoping that some magical free ride to school was going to show up, right? No, there's work and effort, but you have to create a plan, and a plan might look something like we're gonna work. You know, as a high schooler this junior year, gonna work 30 hours a week, save up as much money as you possibly can. Save up $1,000 a month. We're also going to apply for. Are two scholarships a week. And this collegeboard.org, if you go there, that has some links to some different scholarships. But you know, two scholarships a week if you if you spend an hour applying for a scholarship, and you do 10 scholarships, and you get one for 25 for $250 it's almost like you earned $25 an hour, like it was well worth the time. It's better than any high school job you're gonna get, or if you get a $500 scholarship, it's like you made $50 an hour. That's incredible. So create a plan, put in the time, right? Creating the plan. It's like what I say about personal finance, 20% of it is actually just putting the plan together. The other 80% is actually doing it and executing it. It's the hardest part. So that's my encouragement. Start with the end in mind, create the goal. What is the goal? Do we want to graduate? Do we want to go to college? Right? That's the first question. And if we do, do we want to graduate debt free? Or are we happy having some amount of loans? Right? I am totally debt averse. I'm so happy that we have no debt. We don't owe anybody a dime, right? And I don't want my kids get student loans. So our goal is no student loan debt. But if I want to graduate no student loan debt, what's my plan? How much money can I save? How much can how much can I work to save to pay towards school, and then figure out those dollars, how many dollars am I going to be able to accumulate every year to pay towards school? And then that's my budget for going to college. That's my budget for paying for school if I want to graduate with no student loans. So am I making sense here? Hopefully I am. Start with, the end in mind, if I as a student, as a parent of a student, if we've got a goal, the chose, the child wants to graduate with a degree in pre law, pre med, business history, a teaching certificate, whatever it might be, right? What's the plan? And then do we want to graduate debt free? If we do How much have you know, the the equation goes like this, how much have do we save for college? Do the parents have any money saved to help this kid pay for college. Does a child have any money saved to go towards college? How much can they work now during the summers, during school, to accumulate money to pay for college? Are the parents going to be able to contribute anything throughout the college years towards paying for college? Can we apply for some scholarships? Are we going to get some financial aid. And then one of my favorite is tuition reimbursement. I leveraged that when I was a kid, a kid, when I was an adult, I was 2526 working on my MBA, and the bank that I was working for reimbursed me up to $5,000 a year towards my masters. And over three years, they gave me 15,000 towards it, right? The degree cost me like 25,000 so I had to pay 10 myself. But 15 was towards it. So other jobs that kids can get, there's some great places students can get jobs that offer tuition reimbursement, which is a huge piece of it. If you can get 2500 a year, 5000 year. That's 10 to $20,000 towards the total cost of college. That's amazing. But begin with the end in mind, draw a line in the sand. What is our goal? What are we working towards? And then begin to formulate a plan to achieve that. So I hope this has been helpful. If you're a parent of a high school student, a middle school student, and you're hearing this, you're going, oh my goodness, I had no idea, start to come up with a plan. Now, one of the things we did with our kids is when we knew we wanted to live debt free, and we started that journey over 10 years ago. One of the things we started talking to our middle schoolers about Josh, our oldest was probably even pre middle school at the time, we just started telling them we're not going to be borrowing money to pay for college. If you want to go to school, we're going to have to save and you're going to have to work, and we're going to have to pay for it as we go. And there was no surprise like junior year or senior year, when we were like, Hey, we're not just gonna let you go wherever you want to go and and flip the bill, right? They knew that we were working towards a plan, that we were saving towards a plan. And Josh knows right now every month he's got to throw$700 into savings to be able to pay for school. So during the summer, he's able to do more than that. During the school year, he wasn't able to work as much, and so it was less than that, but on average, right? He's he's looking to put $8,400 a year into savings to pay for school, right? And we've made a deal with him that work. Over in the other piece of that. So we've had some some college savings, not a lot, but hey, with our mortgage paid off now we're also able to throw a few dollars towards that, and that was always kind of been the plan pay off the house so that when the kids are in starting college, we have some extra funds that we can help them out. Because we don't want them to have student loans, right? We know student loans aren't a blessing when political candidates can run on a promise to try to get student loans forgiven. I mean, come on, but we're still writing them. Schools. The government is still writing student loans, and we've all acknowledged that they're horrible, and yet new parents of new college students are more than happy to just sign up for them because they can't see any other way to go to school. Why? Because they haven't actually sat down and tried to create a plan. They haven't sat down and try to figure out, how do we do this without borrowing money? Oh, yes, it's gonna take work, but I promise you three, four years of work to work your butt off and save up money so you can pay for for school. That's so much better than 10 plus years of the work it takes to pay off these stupid student loans. I promise you, I promise you, I had student loans and I had to pay them off. Man, I wish I had busted my butt more when I was in college and those summers to save up so I didn't have to do that, because when I was married with kids and trying to, you know, we're having babies and paying those medical bills and I'm still paying my student loans, give me a break that got old so quickly. So do your kids a favor. Parents. Help them come up with a plan. Try to avoid student loans. Just draw a line in the sand. We are not borrowing. Take them off the table. You'll still find a way to go to college, if that's where you feel the Lord's calling you, I promise you, I promise you. All right, I'm gonna hop off my soapbox here. Hopefully this was helpful. Thank you for joining me today. God bless you. Thank you for listening to Catholic money talk. I hope you join us again next time, please click Subscribe in your podcast app to get notified of new episodes. God bless you and have a great day. You.