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Finance smarter for higher ed opportunity

Posted by Chad O'Connor  September 4, 2013 11:00 AM

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The average college student drinks at least their weight in beer, attends 144 hours worth of classes, and is in $30,000 worth of debt. Foregoing the debate on whether higher ed is worth it (most times it is) there is a growing need for students to take ownership over their financial destiny.

This is the current landscape our intrepid freshman are about to navigate:

80% of freshmen are going to be undecided into their sophomore year. This means they are missing out on targeted scholarships which would off-set the costs of the higher ticket programs. This also means they are picking their college based off of the residential life and party scene, not the programs themselves.

Most undergrad and grad financial aid package will include at least a $5,500 loan at 6.8% and 8.9% respectively. This is before EFC is taken into account. These loans are issued without credit check and risk assessment which means people are being given loans regardless of ability to pay them back. What's worse, these loans are being issued by the Federal Government, and account for the deceptive $70 billion of financial aid students appear to receive (The College Board, 2011 Trends in Student Aid). One last sad fact before we move on - 30% of students who borrow drop out due to financial concerns. Yes they still have that debt, and yes it keeps accruing.

The minimum wage is so universally low and the costs of tuition are so high that students can no longer meaningfully work while they study. This chart illustrates it. What this in turn means, in conjunction with the disconnect between classes and needed skills in the workforce, is college grads need to assume more debt while being less prepared to face real world standards and tasks.

So how can you avoid this perfect storm? Here's ta few simple financial aid tips for current and future college students:

Get FASFAs and scholarships done early. Over $100 million in scholarships goes unawares nationally every year, largely due to not enough applicants. While groups like Angel Ed can help match scholarship funds directly to you via crowdfunding, you should always maintain your own pipeline of scholarships and keep them organized by deadline and type (will they give you money because of your demographic? your proclaimed area of study? or your location?).

Speaking of crowdfunding, you need to use crowdfunding. Not only will this give you access to funds with far more reasonable loan terms (potentially none at all) it will teach you valuable skills the workforce will value. By successfully crowdfunding, you demonstrate you can appropriately forecast budgets, market and communicate, and sell the most valuable product in the world: you.

While minimum wage no longer keeps up with tuition rates, that doesn't mean there aren't employment opportunities out there to build experience, your portfolio, and your checking account. Sites like TaskRabbit, CrowdSpring, and allow you to do real world jobs and get real world pay, without eating into your academic or social schedual. Jobs can be anything from creating a url for a Website to researching market trends and compiling findings into a report.

Consider opening a student bank account after doing research into the terms of each bank, and if the bank will make sense for you as your banking needs mature. Bank of America branches are everywhere and have neat customer perks, but some of the terms can be a little steep (like paying for credit/debit cards). CitiBank has a fantastic referral program and a little more leeway when it comes to fees and ATM’s, but once you’re done qualifying for a student account, you’re going to pay a maintenance fee for any account under $10K or that doesn’t have at least five bills auto-paying from that account. TD Bank is one of the most forgiving banks on terms, but most require in person transactions and their online-banking isn’t as robust as competitors.

The best thing you can do help your loved one or yourself be fiscally stable is to be informed and be confident in your knowledge. Higher education is a good investment; with the right tricks up your sleeve, it doesn’t have to break the bank.

Navah Fuchs is the co-founder of Angel Ed Join the conversation on Twitter @Angel_Ed_Grants.

This blog is not written or edited by or the Boston Globe.
The author is solely responsible for the content.

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