It’s no longer “if” you get a college education, it’s “where.”
In 2016, the employment rate was 88% for young adults with a bachelor’s degree, and the earnings gap between college graduates and everyone else has reached its widest point on record. Because of this, attending and graduating from college has become more important than ever. However, where millennials have chosen to go to school involves one factor above any other.
Common factors when grading prospective universities include school size, academic programs offered, location, and social environment. However, as I learned, the most influential determinant of millennial school selection is cost.
Vince Lazar is the current men and women’s golf coach at DePauw University in Indiana. He has been recruiting and interacting with prospective students for almost 20 years. He knows what drives their decision-making process.
“In meetings, 80% of the time money is approached. Sometimes it’s a concern, other times they know the expense and are looking for strategies to give themselves the best opportunities for scholarships,” Lazar says. “Financial reasons cause at least half of admitted students to choose another schools. I’d be shocked if that number wasn’t higher.”
Even so, in 2017 the average college student graduated over $37,000 in debt. For many, there was little choice.
Johnny Grogan is a 21-year-old Callahan & Associates intern and rising senior at George Washington University in Washington, DC. He took out loans from his bank for his undergraduate degree. The process was simple.
“It was pretty easy taking out student loans. I got a lot of help from my mom,” he says. So easy, in fact, that Grogan had minimal interactions with his bank. “A lot of the stuff we did online,” he says, “I think we went into the actual bank once.”
Is It Too Easy?
For a process that could load a student with a lifetime of debt, it seems too easy. So the question becomes: if 44 million young adults have outstanding student loans, how many actually understand the process they went through and their own long-term financial outlook?
Grogan is still learning. “My mom had to explain to me the difference between a Perkins loan and whatever the other type of loan I have is,” he says.
Kelsey Keilman, a 20-year-old student at Indiana's St. Mary’s College, also has student loans for her undergraduate degree and she found it simple. “I didn’t really meet with my bank. I ended up not going to the meeting. My parents did and they didn’t really tell me how it went.”
Keilman has loans out in her name and she didn’t even need to be present to qualify for them.
Maybe it really is that easy. Qualify for a loan. Go to college. Graduate. Get a job. Pay off the loan.
Except, the current default rate on student loans is almost 12%. This is the highest it’s been since 1993, when it was 11.6%. So are recent millennials just unprepared for life after college?
Says Grogan, “I think my loans will impact my future plans. I haven’t really thought about it that far in advance yet.”
Now That I Think About It
For many people, that thinking occurs post-graduation.
But what about those who want to continue their education? The costs of graduate school are significant, as the typical graduate student averages more than $57,000 in debt, post-graduation.
Some students who see graduate school in their future plan ahead. Not only financially, but also in where they attend undergrad.
As Nora Pendergast, a 20-year-old Indiana University student, puts it, “My parents laid it out for me. They said I’d have more money for other things like graduate school if I chose a cheaper undergrad. They were just telling me the facts and the consequences of my decision.”
Had cost not been a factor, there is a good chance Pendergast would be at another university.
Pendergast plans to attend medical school. While this path may or may not include student loans, she avoided undergraduate loans at all costs at the expense of a higher-ranking degree at a less-affordable school. Because this career path requires a few more years of school and the high possibility of future loans, she has avoided accumulating any amount of debt thus far.
Grogan plans to work in environmental policy. He desires to go abroad to work in his field post-graduation. He’s even considering law school in his future, but as he states, “If I wanted to continue with school, I would need to take out more loans. That’s one of the things stopping me currently.”
Keilman is in the nursing program at St. Mary’s. She foresees continued education in her pursuit of becoming a nurse practitioner. Before she can do that though, she will need to work for several years as registered nurse. During this time, she plans to pay off her accumulated loans and save for further education while maintaining her day-to-day expenses: a financial balance with which she is currently not concerned.
The entire education process is a constant cycle of tradeoffs between what students need today versus what they will need tomorrow. And the decisions being made are not ones to take lightly.
What can credit unions do to help?
The industry must continue to provide other ways for young people to finance any level of education. Scholarships and financial aid exist to alleviate the burden of student loans. University job programs are also offered to help students self-finance their education. These aids are underutilized even though they have similar qualifications to federal student loans.
Regardless, student loans remain a necessary evil. But as the cost of college continues to rise, the process of educating individuals who are taking out loans is one that needs to be emphasized.
Assist current students and graduates in setting up realistic payment plans. Eliminate confusion about the process and make sure millennials taking on new loans fully understand the long-term commitment they are making.
Provide aggressive notifications for payments due dates and ample, easy-to-use resources for millennials to minimize their debt as quickly as possible.
A recent survey shows the biggest monetary concern for millennials are their student loans closely followed by managing day-to-day expenses. Lazar sees the same thing in his conversations with prospective students.
“The students have questions regarding the campus, the majors, and what it might mean to be an athlete,” Depauw’s golf coach says. “The parents will focus more on post-graduation and finances.”
Clearly millennials have a much more short-term vision in mind. But that’s a topic for another blog.