Beating the College Debt Trap: Getting a Degree without Going Broke

Beating the College Debt Trap: Getting a Degree without Going Broke

by Alex Chediak

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Overview

Beating the College Debt Trap presents students with a better way to do college. The radically counter-cultural truth is that students don’t have to be totally dependent on Mom, Dad, or Uncle Sam to get the most out of college. Graduation on a solid financial foundation is possible. But it will require intentionality, creativity, hard work, and a willingness to delay gratification.

Chediak gets into the nitty-gritty of how to pay less for college, get meaningful workduring college (while setting yourself up for success after college), , pay off any loans quickly, spend less, save more, and stay out of debt for good. He also unpacks how to transition from college into career, honor God while achieving financial independence, and use your finances to make a positive, eternally-significant difference in the lives of others.

As a young engineering professor with an aptitude for finances and money management, Chediak has become particularly concerned with the financial health of students, especially in light of the ever increasing costs of college. In Beating the College Debt Trap he helps do something about this problem. He engages, in a friendly manner, the “real world” financial issues that 17-25 year olds face, with clarity, practical help, lots of illustrations, and a little humor, while conveying a distinctly Christian perspective.

Product Details

ISBN-13: 9780310337423
Publisher: Zondervan
Publication date: 12/29/2015
Pages: 224
Product dimensions: 5.40(w) x 8.30(h) x 0.70(d)

Read an Excerpt

Beating the College Debt Trap

Getting a Degree without Going Broke


By Juan Alexander Chediak

ZONDERVAN

Copyright © 2015 Juan Alexander Chediak
All rights reserved.
ISBN: 978-0-310-33742-3



CHAPTER 1

TRAP 1

EVERYONE MUST GO TO A FOUR-YEAR COLLEGE

Be true to how you're wired


Many people saunter into a four-year college with far less critical thought than they give to the decision to buy a car. I'm not talking about the question of which four-year college to attend; I'm talking about the decision to go in the first place. Too often, it's more of an assumption than a decision.

This chapter is about examining that assumption. Like a snowboard, an iPad, a car, or any other major purchase, a four-year college education is a product. It's something you purchase — with lots of money. Unlike other products, it also costs you lots of time. It's dangerous to assume it's necessary to buy something, especially if that something comes with a hefty price tag. It's smart to consider if our desires fall under the umbrella of "needs" or "wants." And no matter what you may have heard, four-year colleges are not for everyone. They're especially not for everyone who's barely eighteen and has just finished high school.

Perhaps you've never asked yourself whether or not you should go to a four-year college. Maybe you think, Of course I'm going to college! High school is wrapping up soon. What else would I do next? Rest assured, you haven't picked up an anti-college screed. I'm assuming that anyone reading this book is either hoping to get a degree or is in the process of getting one. And for good reason. Just about all of us need some kind of degree, certification, or advanced training to be successful in the twenty-first century workforce.

But that doesn't mean everyone should pursue a bachelor's degree immediately after high school. What kind of training to get, when to get it, and where to get it are decisions you should make in a deliberate manner. If what you're after is a ticket to the middle class, a bachelor's degree is not the only way to get there, and depending on how you're wired, it may not be the best way. Let me at least give you several equally valid, less expensive, and less time-consuming alternatives to consider.

A four-year college is too expensive to wander into just because it's somehow expected of you or because you have nothing better to do. Only go to a four-year college if it makes sense.


Three Reasons to Reconsider the "Go Right to a Four-Year College" Assumption

1. Getting accepted into a four-year college may not mean much. That probably sounds weird or even rude, so let me explain. Throughout most of U.S. history, getting accepted into a four-year college was itself a big deal. It meant you had done well in your previous schooling and that your teachers along with the college admissions folks recognized your potential for greater intellectual feats. College was for the few, not the many. But it's not like those who didn't go to college were condemned to a life of poverty. They went on to enjoy meaningful jobs, stable careers, and middle-class lifestyles. As recently as 1970, only one in four members of the middle-class workforce had any formal education beyond high school.

But then low-skill jobs started disappearing, and college graduates began to see their earnings rise dramatically, particularly those in fields like technology, finance, law, and health care. High schools and parents got the memo and ramped up a campaign to pitchfork more teens into the halls of higher education. By 1990, about six in ten high school graduates immediately headed to college, and by the year 2002, that figure had reached 65 to 70 percent, where it remains today.

As the number of students going to college was rapidly increasing, the number of colleges was also on the rise. You may recognize the terms supply and demand. When there is a lot of demand for a product — higher education, in this case — it invites more participants to enter the market. More than one out of three of today's four-year colleges did not exist in 1980. As these new colleges popped up, many of them implemented an open admissions policy, a trend that had begun a decade or two earlier. As long as an applicant met certain minimum standards (test scores, high school GPA) — and in some cases, no standard other than a GED or high school diploma — they were guaranteed admission.

Now where did this open admission trend come from? On the one hand, there was a sincere desire to give everyone a crack at a college education. To the extent that a slew of high-paying careers were increasingly accessible only to those with a bachelor's degree, colleges viewed minimal entrance standards as a means of avoiding elitism. The value of everyone having equal access to all that America represents had gripped the nation in the days of Martin Luther King Jr. and the Civil Rights movement. Colleges were simply following suit. If someone had completed high school and aspired to earn a bachelor's degree, why would you deny him or her that opportunity?

But there's also a more cynical interpretation: The colleges wanted the extra business. Tuition dollars are the lifeblood of all but the most elite colleges and universities. New colleges in particular often feel compelled to attract more students in order to pay their bills, service their debt, and develop their limited and often dilapidated infrastructure. In 2013, education expert Jeffrey Selingo estimated that one-third of all colleges were on an unsustainable financial path, and another quarter of colleges were in serious risk of joining them. And a 2014 survey of college and university presidents found that only half were confident in their institution's financial model over the next decade.

Colleges that are desperate for tuition dollars are more than happy to squeeze a few more students into a classroom. The upshot is that if you graduate from high school and have a pulse, you can probably get into college somewhere. Frank Brock, a former president of Covenant College (a respected Christian college in Georgia), put it this way: "Students used to worry about getting into college; today enrollment-driven colleges worry about getting students." That's why you probably have a large box of college advertisement mail and why you see ads and billboards for colleges everywhere, especially niche graduate programs in fields you didn't know existed.

Maybe you'd be the first member of your family to graduate from a four-year college. Everyone is pushing you to just waltz into the financial aid office, secure a slew of loans, and get on with it. But just because a college wants you doesn't mean you should want them. And just because a college wants you doesn't mean you'll graduate, which leads me to the next point.

2. Almost half (44 percent) of those who start off at four-year colleges or universities haven't graduated ... six years later. Almost no one starts college thinking he or she is going to be in that statistic, yet that's where almost half of incoming freshmen end up. Graduation rates are much higher at some colleges than others, but high school academic performance and a student's financial status are remarkably good predictors. So the good news is that you can size up your chances of making it right from the get-go. Of those who finished high school in the bottom 40 percent of their high school class, three out of four will not complete a bachelor's degree, even if given eight and a half years to do so. Among incoming students told they need to repeat high school level coursework (a.k.a., be remediated), only one in three will complete his or her bachelor's degree in six years. The upshot? If high school academics weren't your thing, a traditional four-year college probably won't be either. Do something else.

Financial status is an even stronger predictor of college success than high school academic performance. Regardless of academic ability, it's reported that among students whose families are in the bottom income quartile (lowest 25 percent), only 8 percent will earn their bachelor's degree by age twenty-four. But if your family is in the top income quartile, your odds of having a bachelor's degree at age twenty-four are better than 80 percent.

How much sense does that make? It's heartbreaking. Many of us grew up believing that social mobility — the idea that if you work hard and play by the rules, you can begin life in poverty but rise as high as your talents, efforts, and accomplishments take you — is the birthright for all Americans. But we're not seeing enough of it these days. Good people of various persuasions are debating how to increase social mobility and college graduation rates, but since this isn't a public policy book, I'm not planning to go there. I want to focus on how you can beat the college debt trap. Today. Regardless of our broken system. Because if there's one thing I've learned, it's that you can't wait until the world is perfect to start doing what only you can do to build a better life.

We'll talk later about how to lower the expense of college. For now, let's just observe that it's important to count the cost before even starting. Make sure you have what it takes to graduate — financially, academically, and in terms of personal commitment and discipline. A four-year college or university can be a great investment, but you really do need to graduate.

Caveat: Regardless of your family income, if you were a top student in high school, or you did well on your SAT or ACT, do not assume that four-year colleges will be too pricey. There are schools out there with the resources to be generous to students like you. More about this in Trap 3.

3. Attending a four-year college is superexpensive. This isn't a reason never to pursue a bachelor's degree. It's perhaps a reason to delay that pursuit until you've earned or saved enough money to at least start college relatively debt-free. And if your parents are planning on helping you pay for college, they could use the extra time as well. Avoiding loans, especially in the early years, is a great strategy, because the less time interest is accruing, the less you end up having to pay back.

Even if you go for a bachelor's degree, there are expensive ways and inexpensive ways to earn one (as we'll discuss in Trap 3). The former can lock you into years of crushing debt, as it did for my friend Michael. He spent five years at a community college followed by four years at a university until he finally picked up his bachelor's degree — and more than $80,000 of debt. Some ten months after graduating, he landed a job with the county as an environmental safety inspector. He's now thirty and living with his parents, who are helping him pay off his loans and avoid bankruptcy.

So if a four-year college isn't the best move for you, or at least not the best move right away, what else is out there? Let me walk you through a few alternatives, all of which can save you tens of thousands of dollars now, and none of which close the door on getting your bachelor's degree later.


Alternatives to Going Straight from High School to a Four-Year College

1. Get an associate's degree in a strategic, marketable field. In 2014, of the 18 million students in undergraduate programs, 7.3 million were at two-year colleges. That's not terribly lopsided, but many of those two-year students don't ultimately earn associate degrees. They just pick up credits on the cheap and, if all goes well, transfer them into bachelor's degree programs — usually a smart, cost-saving move.

There's nothing wrong with wanting a bachelor's degree. It's what I did, and it worked out great. But here's the thing: Depending on what field you pursue, there may or may not be a job waiting on the other side. A 2010 report from Georgetown University economists predicted that future job openings for college graduates will be split roughly fifty-fifty between those requiring bachelor's or advanced degrees and those requiring associate's degrees or occupational certificates. But in 2012, bachelor's degree recipients outstripped associate's degree recipients by about 75 percent.

Part of the problem is that many high school guidance counselors, teachers, and parents look down on associate's degrees as second class, mere consolation prizes for those who can't cut it at "real" colleges, and one-way tickets to a lower income and a less fulfilling life. So they push everyone to the four-year colleges and universities, which, as I explained earlier, virtually any high school graduate can get into these days.

But are these negative perceptions about associate's degrees accurate? The graph below shows the annual salaries for three occupations that you can access with an associate's degree, each of which the Bureau of Labor Statistics expects to be among the fastest-growing fields through 2020.20 The average salary for someone with a bachelor's degree is also shown for comparison.

It turns out you can do well with an associate's degree compared to a bachelor's degree, especially considering that an associate's degree can usually be earned in less time and at less cost.

A handful of states have begun publishing the average earnings of recent graduates from two-year and four-year colleges for the spectrum of disciplines that students can pursue. Texas found that "a year after graduation, students with two-year technical degrees have first-year median earnings of more than $50,000, just over $11,000 more than graduates of bachelor's degree programs across the state." In Colorado, one year after graduation, students with career-oriented Associate of Applied Sciences (AAS) degrees were "earning almost $7,000 more than graduates of bachelor's degree programs across the state." In Virginia, "graduates of occupational/technical associate's degree programs, with an average salary of just under $40,000, out-earned not only nonoccupational associate's degree graduates — by about $6,000 — but also bachelor's degree graduates by almost $2,500 statewide." You get the picture.

Keep in mind that most people with an associate's degree earn less than most people with a bachelor's degree. So to earn a higher salary, you have to choose a strategic field (the health care and technology sectors are strong). Also note that the figures in the previous paragraph are for recent graduates. Over the long run, bachelor's degree recipients can experience large salary increases, depending on their industry and especially if they move into management. But it's also true that an associate's degree can be a stepping-stone to a bachelor's degree or some other advanced certificate. In the meantime, you're out of school faster and earning real money sooner.

2. Learn a skilled trade. While many college graduates struggle to find full-time work in their field, on the other side of the spectrum, we've got employers complaining that they can't find enough people with the right skills to hire. Manpower Group, a North American – based multinational human resource consulting firm, conducts a massive annual survey to identify which jobs employers have the most difficulty filling. At the top of the list, for four years in a row (2010 – 2013), are skilled trade workers. Think electricians, welders, mechanics, HVACR technicians, and so on.

Why don't we have enough skilled trade workers? Here's how Manpower put it in their 2012 Talent Shortage Survey report: "As educational systems around the world have focused on four-year university education, this has resulted in the decline of vocational/ technical programs — both curricula and enrollments have eroded over the past several decades. In addition, with fewer new workers to offset current retirements in the skilled trades, many economies will face continued shortages in the future."

What they're saying is that the "everyone should go to a four-year college" pendulum has swung too far. Many high schools have emphasized four-year college preparation at the expense of vocational preparation. High school classes such as auto repair, welding, electronics, and woodworking have largely gone the way of the dinosaur. I think Advanced Placement and International Baccalaureate classes are important, but there needs to be a balance. We all depend on skilled workers to provide us with paved roads, indoor plumbing, new buildings, working electricity, and much more. While our economy needs more well-trained four-year college graduates, we also need more young adults with strategic associate's degrees or certificates in the skilled trades. With only 44 percent of the twenty-five- to thirty-four-year-old population having any sort of post-high school degree, we must have an "all of the above" approach.


(Continues...)

Excerpted from Beating the College Debt Trap by Juan Alexander Chediak. Copyright © 2015 Juan Alexander Chediak. Excerpted by permission of ZONDERVAN.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

Table of Contents

Checklist for Getting a Degree without Going Broke 13

Preface: Why This Book? 15

Introduction: Take Ownership of Your Financial Future 17

Part 1 Examining Assumptions: Thinking Realistically

Trap 1 Everyone Must Go to a Four-Year College: Be true to how you're wired 31

Trap 2 It's All Just Going to Work Out: Understand why college is expensive, and take responsibility for how you pay for it 45

Part 2 Making Smart Decisions: Knowing Your Options

Trap 3 Spend a Fortune on Prestige (and Other Bad Ideas): Let your head lead your heart 63

Trap 4 Choose Your Major on a Whim: Know what you're getting into 81

Trap 5 Student Loans Are Always Worth It: Develop awareness and exercise foresight 97

Part 3 Taking Charge: Earning and Managing Your Money

Trap 6 I Can't Get Meaningful Work as a Student: Be creative and resourceful - you'll set yourself up for long-term success 121

Trap 7 I Can't Control My Expenses: If you don't, who will? 137

Part 4 Keeping It Going: Succeeding after College

Trap 8 Finding a High-Paying Job Will Be a Breeze: Set yourself up for professional and financial success 157

Trap 9 I've Got a Paycheck and Can Finally Live It Up! Live within your means while pursuing financial independence 177

Conclusion: Be Free from Student Debt So You Can Live with Impact 197

Acknowledgments 201

Appendix 1 Eight Takeaways You Don't Want to Miss 203

Appendix 2 Twelve Books to Help You Learn More 205

Notes 206

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