Facing rising costs, college students seek varied pathways to meet goals

Bill Cass, CFP®, CPWA®

Bill Cass, CFP®, CPWA®, 05/18/22

The value of a college education is a persistent debate. Each year, research continues to validate the economic advantages of earning a college degree.

How students achieve this goal, however, varies broadly as families use creative ways and new programs to find affordable opportunities.

New trends are emerging, including studying outside the U.S., enhanced attention on community college, and opportunities out-of-state.

Return on investment

Educational attainment impacts income. College grads with a bachelor’s degree earn an average of $34,000 more per year than high school grads (Census Bureau, 2020). That translates into significant lifetime earnings. According to Georgetown University’s The College Payoff 2021, high school graduates are on track to earn a median of $1.6 million over their lifetimes, while those with some college earn $1.9 million. Earnings increase with educational attainment, with a median of $2 million for those with an associate’s degree and $2.8 million for a bachelor’s degree holder.

College grads are also more likely to be working, according to the College Board. For individuals with at least a bachelor's degree, the unemployment rate has been consistently half the rate for high school graduates.

With rising costs, comes rising debt

Student debt soared to $1.7 trillion in 2021. Over the past decade, federal financial aid has seen a 36% decline in funds. Today, loans comprise 65% of federal aid. As families try to save more to avoid borrowing, a focus on college costs is naturally part of the planning.

Here are some trends that have developed as families take a closer look at tuition and expenses.

Study outside of the United States. The number of students studying abroad more than doubled in the past 15 years. In the 2019–2020 academic year, the number of students studying abroad for credit set a record at 347,099. That total declined 53% to 162,633 due to restrictions from the Covid-19 pandemic (NAFSA, 2021). The majority of U.S. study abroad takes place in Europe with 44% of students attending college in Spain, Italy, the U.K., France, and Ireland.

Depending on the college and the length of the trip, a travel-abroad program may mean that the parent will not have to pay full tuition for the semester, which could represent significant savings. In some cases, a semester on campus is more expensive than a semester abroad. Of course, additional travel expenses need to be considered.

In another developing trend, virtual study abroad opportunities surged during the pandemic. Many of these programs are still available and serving a whole new population of students who cannot travel or prefer not to at this time (gooverseas.com).

Most universities have opened study abroad programs to international students in 2022. The availability of these programs depends on the university.

Travel out-of-state for reciprocity of in-state tuition. A number of regional partnerships or exchanges are organized around the country where students from out-of-state may attend college in another state at the in-state rate. Some institutions offer significant discounts depending on the partnership agreement. Some states only offer this benefit when the student chooses a major that is not available at their resident state school. Regional exchange programs exist in New England and the Midwest, southern, and western regions.

Free community college. More than 20 states have programs offering free tuition at community colleges. Some programs are available for students in specific degree programs. Most programs are need-based, determined by income. Many have additional requirements such as maintaining a certain GPA. Some cities have their own programs, offering free tuition to residents by partnering with community colleges. While tuition and fees may be covered, there could be other costs that the student is responsible for such as books or transportation. About six million people — or one out of four college students — attend a community college.

Planning can make a difference

Families with a plan for college are more likely to achieve the highest efficiencies. Beginning to plan as early as possible can help families optimize college savings and other financial strategies. To get started, read “Early college planning for a growing family.” As trends emerge — driven by new technology or policy changes — it is important for families to stay up to date with current developments and meet with a financial professional with expertise in college planning.

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