Want to earn a million dollars more?

Going to College Can Increase Lifetime Earnings

Why should you go to college? While there are many potential benefits of a college experience, one of the most obvious and tangible reasons to attend college is what happens after graduation—in other words, how attending college affects a person’s career path and earning potential.

Using the measure of earning potential, the evidence is clear that college is a smart investment. Not only are people with a Bachelor’s Degree more likely to be employed, they also make more on average over a lifetime of working.

Higher Employment Rates

Pulled from data provided by the Bureau of Labor Statistics, the graph below illustrates how people with different levels of education have fared since the recession began in 2008. The top line represents a 9 percentage point increase in employment for people with college degrees. By contrast, the bottom line represents a 14 percent decrease in employment for those with less than a high school diploma. People with a high school diploma are 9 percent less likely to be employed now than in 2008.

Unemployment graph

Source: Bureau of Labor Statistics and the New York Times

Clearly, those with a college degree are faring better, even in a difficult economic environment. In fact, the New York Times reports that the unemployment rate for people with a college degree is only 3.9%, compared to 7.5% for the workforce as a whole. Split by education level, college graduates are the only group more likely to be employed in 2013 than they were in 2008.

Higher Lifetime Earnings

Not only are college graduates more likely to have jobs, they also make more on average over a lifetime of working, no matter the field that the graduate chooses after completing college. In 2012, the average full-time worker with a Bachelor’s Degree made 79% more than the average full-time worker with a high school degree. Even after factoring in the money lost while students are not working, the return on investment for a college degree is 15.2% annually, a rate five times higher than the returns on home ownership.

 lifetime earnings

 Source: Georgetown University Center on Education and the Workforce

This graph from a study of lifetime earnings done by the Georgetown University Center on Education and the Workforce illustrates the median lifetime earnings broken out by level of education attained. People with a Bachelor’s Degree earn about a million dollars more over a lifetime compared with those who have only completed a high school degree. While there is a large jump between the median amount earned by holders of Associate’s and Bachelor’s Degrees, even attending some college increases lifetime earnings. So yes, even if the upfront costs seem like too big a hurdle, a college choice that is smart both financially and personally is worth balanced borrowing.

Tools: Questions to Ask Colleges about Career Preparation

A key factor in choosing a best fit college for a student is the resources a college or university has for career exploration and preparedness. The following is a list of questions for families to ask as they begin exploring college choices:

  • Does the college have a career office? What internship, job shadowing, or other career preparation programs are available for students?
  • How does the university support preparation for my career interests? Work experiences aligned with a rigorous academic experience will best prepare you for career success.
  • Are there other resources available for conducting a job search, such as guidance on writing a resume or cover letter or perfecting interviewing skills?
  • What organizations and companies recruit on campus or participate in on-campus job fairs?
  • Does the college have a strong alumni network? Do alumni participate in career exploration programs through the college?
  • What do students do after graduation? What percentage were employed, versus pursuing further study, doing volunteer work, or joining the military? What are students doing one year, five years, and ten years after graduation?

Try this Experiment: Go to the sample Career Services sites below of schools that will attend the June 15th DCPS College Readiness Workshop. How many of the questions above you can answer using their website?

Amherst College Career Center

University of Florida Career Resource Center

North Carolina A&T Office of Career Services

University of Pennsylvania Career Services

Wellesley College Center for Work & Service

Have more questions about lifetime earnings of college graduates? Leave us a comment here or send us an email at dcpscollegereadiness@dc.gov.

Junior Year Financial Aid Checklist

As high school juniors begin to research colleges and build a college list, they should also research financial aid opportunities. Here’s a checklist of steps that juniors should undertake before September of their senior year.

Learn about types of financial aid: There are many different resources to help you understand the basics of financial aid. See the Collchecklistege Board’s post Financial Aid Can Help You Afford College, the Federal Student Aid website, or past Financial Aid Friday posts on DCPS College Talk. FinAid.org is another great source to learn about types of financial aid.

Understand the difference between net price and sticker price: See our post about the difference between the published “sticker price” of a college and the actual price.

Start exploring college net price calculators: A net price calculator can help a student and their parents/guardians get a sense of out of pocket college expenses, based on financial information provided by the family. See our post on net price vs. sticker price for further details. You can also compare information for selected colleges’ net price calculators on CollegeAbacus.com.

Make a list of your interests, strengths, and passions: What do you like to do? What do you enjoy learning? What activities do you do outside of class? Making an inventory of your interests and achievements can help you identify potential scholarships.

Start researching scholarships: Check out our weekly highlighted scholarships and follow DCPS College Prep on Twitter for the Scholarship of the Day. FinAid.org and FastWeb.com have national scholarship search services. Naviance Family Connection, an online portal to search for and apply to colleges, is available to every DCPS student and also has scholarship search capabilities. Ask your school counselor about accessing Naviance.

dcps-college-prep-logo.jpg

Attend the DCPS College Readiness Workshop on June 15 at University of the District of Columbia: On June 15, 2013 from 9:30 am – 2:30 pm, college admissions officers and financial aid representatives from the nation’s most selective colleges and universities will join the DCPS College Readiness Initiative team at University of the District of Columbia to lead workshops on the college admissions process and applying for financial aid. There will also be a college fair where families can speak to college admissions officers directly. Get more details about the day and register online here.

 Questions about financial aid? Leave us a comment or send us an email at dcpscollegereadiness@dc.gov.

Need-based aid vs. merit based aid – what’s the difference?

Word of the Week

Merit-based financial aid (n). Financial aid that is awarded based on student characteristics or abilities. Unlike need-based financial aid, merit-based aid is not tied to family income or other aspects of a family’s financial situation. Some types of financial aid, such as certain scholarships, may be awarded on both need-based and merit-based criteria.

As families begin the discussion about how to finance college for a student, it is important to be aware of two of the major categories of financial aid: need-based aid and merit-based aid. Need-based aid typically has income guidelines or cutoffs, often dependent on the number of people in a family. Merit-based aid is awarded based on other characteristics or abilities of a student—having a certain grade point average or standardized test score, writing an excellent essay, or demonstrating a talent such as singing or athletic ability. Depending on a family’s financial circumstances, they may finance college through need-based aid only, merit-based aid only, or a combination of the two. Families may access both types of awards from a range of sources: government (federal, state or city), colleges, or private funders (such as the highlighted scholarships on this blog!)

coin dollar cartoon

Types of Need-Based Aid

Federal, State, and City Government Aid

The government, particularly the federal government, offers multiple types of need-based aid. Need-based aid includes grants (free money), loans, or work-study awards.

Federal Pell Grant: In the 2012-2013 academic year, eligible students could receive a maximum of $5,500 per year toward a two- or four-year college if enrolled full- or part-time. Pell is a grant, so students do not have to repay money awarded.

Federal Perkins Loan: Students with “exceptional financial need” can receive $5,500 per year as a subsidized loan (a total of $27,500 as an undergraduate). As a loan, students must eventually repay the borrowed amount plus interest.

Federal Subsidized Loans: A dependent student can receive up to $5,500 in her first year, $6,500 in her second year, and $7,500 in each of her third and fourth year (a total of $27,000 over four years). Independent students may borrow more. Similar to Perkins, student must eventually repay the borrowed amount plus interest.

Federal Work Study: Some colleges participate in this program that provides employment to undergraduate and graduate students to work part-time while in college. Usually, students are employed by the college.

DC Tuition Assistance Grant (DC TAG): The Office of the State Superintendent of Education (OSSE) provides DC TAG for Washington DC residents earning under $1 million per year. Students attending public colleges or universities can receive up to $10,000 annually towards the difference between in-state and out-of-state tuition. Students attending private Historically Black Colleges and Universities (HBCUs) and private colleges in the DC area can receive up to $2,500 per year for college expenses.

Non-Government Aid

Financial Aid from Colleges and Universities: Colleges may award grants or loans to students based on need. Every college has different financial aid policies, so check with the college’s financial aid office.

Outside Scholarships: Some organizations award scholarships based on need, however, many scholarship awarding organizations are also interested in other student characteristics such as student academic achievement (GPA, rigorous course work, recommendations) and extracurricular achievement (athletic, arts, community service, leadership).

AwardTypes of Merit-Based Aid

Financial Aid from Colleges and Universities: Many colleges offer merit-based aid awards as an incentive for students to attend the college. Always check the requirements for a scholarship: students may have to maintain a high grade point average to continue receiving the award. Some colleges only offer need-based aid. Make sure to ask the college’s admissions or financial aid office how they award financial aid to students.

Outside Scholarships: Many scholarships are merit-based, and often depend on the mission of the organization sponsoring the scholarship. For example, an organization that supports women’s athletics may sponsor a scholarship for female athletes entering college.

Smart College Planning Includes Applying for Need- and Merit-Based Aid

Many families will qualify for both need-based and merit-based aid, and every family should consider financing college with a combination of both types of awards.

• After January 1st, fill out the Free Application for Federal Student Aid (FAFSA). This federal aid form will inform a family if they may qualify for some of the need-based types of financial aid above. It is necessary to complete the FAFSA to apply for financial aid from a college and to apply for some scholarships.

Complete the CSS/Financial Aid PROFILE if required. Some colleges require an additional financial aid application, produced by the College Board, which asks for additional financial information.

Complete college-specific financial aid forms. Some colleges/universities may ask families to fill out institution-specific paperwork. Check with the college’s financial aid office.

Search for outside scholarships. All DCPS students have access to scholarship listings through the Individual Graduation Portfolio (IGP) and their Naviance account. Families should consult their school counselor for details about accessing either tool. Some search engines are FinAid.org, Fastweb.com, and the C3N Network Scholarship Page. DCPS College Talk also features scholarships for DC area students on this blog and we share the Scholarship of the Day on Twitter. You can follow us @dcpscollegeprep.

Have more questions about need-based and merit-based financial aid? Leave us a comment here or email us at dcpscollegereadiness@dc.gov

Scholarship Highlights – May 17, 2013

DC Public Housing Commitment to Excellence Scholarship

June 8, 2013

Max Award: $5000 for students with at least a 3.5 GPA; $1000 for students with at least a 2.5 GPA

DC Public Housing awards scholarships annually to students who are residents of DC public housing or participants in the Housing Choice Voucher Program. Minimum GPA of 2.5 required.

Big Sun Scholarship for Student Athletes

June 21, 2013

Max Award: $500

Student athletes are eligible for this award. Students must answer a three-part essay question.

Automotive Hall of Fame Scholarship

June 30, 2013

The Automotive Hall of Fame awards students who demonstrate a sincere interest in a career in the automotive field. Minimum GPA of 3.0. Please see website for application requirements.

 

Not All College Loans are Made Equal: Knowing a Smart Loan from a Bad Loan

Word of the Week

Interest (n). The fee you pay for borrowing money as part of an educational loan. Usually, interest is charged monthly. The fee is calculated as a percentage of the total amount you borrowed, also called the interest rate. For example, if the interest rate is 3.4%, and your monthly payment is $100, you owe an additional $3.40 each month, for a total payment of $103.40 per month.

Bank

Much of the information in the media about college loans is terrifying. Stories about students and graduates unable to find jobs and drowning in debt seem commonplace. National student loan debt recently surpassed credit card debt. However, not all loans are made alike, and sometimes borrowing money is a good decision that allows a student to attend his or her best fit college. The key is to understand the different types of loans, choose the least expensive loans, and to understand the size of payments post-graduation.

Types of Loans

Just like scholarships, loans are financed by a number of different agencies. Who provides the funding for the loan can change how expensive the loan will be for the borrower. Some loans are also only available to families who demonstrate financial need.

Choose loans that will be the least expensive to repay. Usually, federally funded loans with interest rates that don’t change are the best choice. Big Future at the College Board has a helpful chart comparing loan types and interest rates.

Federal Government Loans—Need Based

Federal Direct Perkins Loans

These loans are awarded by the college/university to students with the highest amount of financial need.

Interest rate: 5.0% (fixed)

Federal Direct Subsidized Loans

These loans are subsidized, which means the federal government pays the interest while the student is enrolled in school. Students must begin re-paying the loan with interest six months after they are no longer enrolled at least half-time in college.

Interest rate: 3.4% (fixed)

Federal Government Loans—Not Need Based

Federal Direct Unsubsidized Loans

While the government provides the funding for these loans, they are not subsidized, which means students are responsible for paying the interest that adds up while the student is enrolled in college. Over time, the student ends up paying more.

Interest rate: 6.8% (fixed)Loan post

Federal Parent PLUS Loans

Unlike all the other types of loans listed here, these loans are available to parents or guardians. Parents can borrow the entire amount of a college education minus other financial aid.

Interest rate: 7.9% (fixed)

State Loans

Some states also finance educational loans. While Washington DC does not operate a loan program for students, students may be eligible for a college loan from the state they attend college. For examples, see MEFA Loans in Massachusetts and NJCLASS Loans in New Jersey. The U.S. Department of Education also provides a list of all U.S. State Boards of Higher Education.

Private Loans

There are other ways to borrow money for college. Private loans, sometimes referred to as alternative loans, are not sponsored by the government and often have higher interest rates than federal loans. Students and families pay more over time. Private loans should be a last option.

  • Banks offer a range of private loans with varying interest rates. They often require a parent or guardian to cosign with a student. The parent is therefore responsible for the loan repayment if the student cannot pay.
  • Some colleges and universities may also offer loans as part of their financial aid package. Make sure to ask about the interest rate and repayment terms of the loan.

No Loans are Free

All loans must eventually be repaid, so it’s important for students to fully understand what current borrowing choices will mean for their future. In most cases, it is the student’s responsibility alone to pay back a college loan. As a family, it is important to discuss post-college graduation budgeting and financial planning. Consider these questions:

  • If the parents decide to take out a Parent PLUS Loan or other private loan that requires repayment to begin immediately on a monthly basis, is it a feasible within the family’s budget (including if an unexpected expense occurs such car home maintenance, medical emergency, etc.)?
  • How much will the student’s total loan payment(s) be after college?
  • Using estimated expenses for necessities such as housing, food, and transportation, how much will the student need to earn directly after college in order to meet monthly loan payments?
  • Is the resulting salary figure a realistic number for a new college graduate? If not, the college in consideration might not be the best financial choice.

Loan Forgiveness

A few programs allow borrowers in certain fields to qualify for loan forgiveness.

  • Borrowers who pursue a career in public service are eligible for loan forgiveness of Federal Direct Subsidized and Unsubsidized Loans after 10 years if they have made 120 monthly payments towards the balance of the loan. Public service includes federal, state, and local government work, employment with tax-exempt non-profit organizations, and certain private organizations that provide public service such as the military, health providers, and emergency response workers.
  • Borrowers who teach in certain low-income schools full-time for five consecutive years may be eligible for loan forgiveness or loan cancellation. The Federal Direct Subsidized and Unsubsidized Loans and Perkins Loans are eligible loans for this program.

Tools: Loan Calculators

Loan calculators provide a figure for expected monthly repayment, based on the amount of a loan, designated interest rate, and selected repayment schedule.

FinAid.org Loan Calculator

College Board Loan Calculator

Still have questions about loans? Leave us a comment here or send us an email: dcpscollegereadiness@dc.gov.

Please remember that this post is intended for informational purposes. Always consult the college/university financial aid office and/or a tax professional for financial advice.

Scholarship Highlights – May 10, 2013

Team DC Scholarship

June 1, 2013

Max Award: $2000

Student athletes who identify as lesbian, gay, bisexual, transgender and/or queer are eligible for the Team DC Scholarship.

Development Fund for Black Students in Science and Technology

June 15, 2013

Max Award: $2000, renewable for four years

African-American students majoring in or planning on majoring in a Science, Technology, Engineering, or Math (STEM) field are eligible for this scholarship. Students must be planning on attending one of a specified list of Historically Black Colleges/Universities in Fall 2013.

Herb Block Foundation Schoalarship

July 7, 2013

Max Award: $8000, renewable for two years

Residents of the DC area who are attending an area community college in Fall 2013 are eligible for the Herb Block Foundation Scholarship. Applicants must show financial need. The award is intended as a “last dollar” award to bridge the gap between what the student can pay and other financial aid already awarded.

Scholarship Highlights – May 3, 2013

Women’s Sports Foundation Linda Riddle Endowed Scholarship

May 10, 2013

Max Award: $3000

Female athletes who have participated in high school sports and are planning to pursue athletics in college are invited to apply for this award.

Society of Women Engineers Scholarship

May 15, 2013

Max Award: $20,000

The Society of Women Engineers Scholarship Program provides financial assistance to women admitted to accredited baccalaureate or graduate programs, in preparation for careers in engineering, engineering technology and computer science.

Educated Eats Scholarship

May 31, 2013

Max award: $2,500

Students who have at least 400 hours of culinary/food service experience and minimum 2.75 GPA are eligible to apply. Students should be pursuing the culinary field and current food industry/culinary professionals wanting to deepen their study.

Net Price vs. Sticker Price

Word of the WeekStack of quarters

Net price (n.) The full cost of attendance for a particular college, minus scholarships and grants awarded to a student. Cost of attendance includes tuition and fees, room and board, books, transportation, and other miscellaneous expenses. The net price for a college will be specific to each family because it is based both on a family’s financial situation and the financial aid policies of the college.

Why is Net Price Important?

As high school sophomores and juniors begin the college search and start to look at how much college can cost, some families might experience sticker shock. Many private four-year colleges have a listed price of over $40,000 yearly, and the cost of public state university increased a record 8.3% last year alone. Families may even find themselves saying, “Let’s cross this potential college off the list right now. There’s no point in even considering colleges we can’t afford.” However, it’s important to consider the difference between sticker price, the amount published on the university website, and net price.

Don’t Get Sticker Shock

While college is certainly an investment for most families, the costs published on a college’s website is not necessarily the amount a family will pay for a student to attend that college. Why? When a student applies for college, the student and family will also apply for financial aid using the Free Application for Federal Student Aid (FAFSA), the CSS College PROFILE, and/or other financial aid forms required by the college. A student may also apply for merit-based scholarships. For many families, theses financial aid awards will greatly reduce the cost of college. This is the difference between sticker price and net price. In fact, the College Board reports that while the average sticker price for public colleges is $8,660 annually, the average net price is only $2,910. For private colleges, the average sticker price is $29,060, but the average net price is less than half of that, at $13,380. For families making less than $30,000 per year, it can be much lower. An American Enterprise Institute study notes that a family in this category paid only $4,496 to attend Stanford University in California, which had a sticker price of $55,918 in 2011.

It is necessary to have an honest family conversation about what is affordable when it comes to financing college. But as students begin to build a list of prospective colleges, don’t eliminate schools because they look expensive. Depending on the financial situation of the family and the resources of the school, a college with a higher sticker price may actually end up being less expensive than a college with a lower published cost. More expensive colleges often have higher endowments, with more money to spend on student financial aid.

Calculator.pngTools: Net Price Calculators

Since 2011, all colleges and universities that receive money from the federal government must display a net price calculator on their website. Students and parents enter their financial situation (family information, income, assets, etc.) in the calculator. The data is used to calculate the grants and scholarships that will be offered to the family. Depending on the calculator, it may also include loans that are available as part of a financial aid package. Finally the calculator displays an estimated net price based on the information entered. While it is only an estimate and not a promise of financial aid, the net price calculator can be a useful tool to understand the amount of aid a college may award to a family. Make sure to put in the most accurate information possible when using a net price calculator—the information you receive is only as good as the information you enter. The net price calculator is usually located on the financial aid webpage of a college or university. See below for examples of net price calculators.

Examples of Net Price Calculators

Davidson College, Davidson, NC

Georgetown University, Washington, DC

Princeton University, Princeton, NJ

University of District of Columbia, Washington, DC

University of Wisconsin, Madison, WI

University of Virginia, Charlottesville, VA

Wellesley College, Wellesley, MA

Xavier University, New Orleans, LA

Colleges and Universities Using College Board Net Price Calculator

U.S. News and World Report Top 300 List of Net Price Calculators

Have questions? Leave us a comment or email us at dcpscollegereadiness@dc.gov