Episode 6: College: Is it worth it?
In this episode, Randy and Lance discuss the various options available to college students and how to get the most bang for your buck. They review financial aid and financing, public vs. private universities, and the importance of the college experience. Additionally, they discuss the impact of COVID on the value of education today.
What you’ll learn in this episode:
- Funding your retirement may ultimately be the biggest expense in over the course of a person’s life, but along the way between working and when you retire, there are other major expenses, of which college is the biggest one (even bigger than a wedding or a down payment on a home). It’s a $40-60,000 per year expense, times four or five years, times number of children.
- Lance estimates that he spent $250,000 for his daughter’s education so she could come out and get a job paying $60,000. He questions if that kind of investment makes sense.
- Randy explains that college is generally set up as an after-tax cost. In general, you’re paying with 70 cent dollars after paying 30% in taxes – which translates to having to make $130,000 to be able to pay, after taxes, a $100,000 tuition. With that knowledge, Lance revises his estimate from $250,000 to $350,000 or more. Randy says he paid 20-30% more for college because he paid with after tax dollars. His role as financial advisor is to help find ways to pay for college for our students, our children, with pre-tax dollars.
- While some students receive grants and scholarships, most are not eligible for the popular, top level ones. So the search for scholarships and funding among the lesser known options has to begin early. Randy says the money is out there, but you have to go looking for it.
- The “sticker price” for college is not what you end up paying for it. The sticker price can be high, but if a college is willing to chip in money for your student, the net cost will be lower. All the major colleges have fulfillments and slots they want to fill. If your student can fill a slot that they want, you’re likely to receive more benefits.
- Randy looks at the bigger picture of what college is supposed to provide. Fundamentally, we think of college as providing an education. They break it down to a core level of math and English and the basics you were supposed to get in high school (but some high schools don’t do a good job at). Many kids test poorly on these subjects and have to take remedial classes after college. When that’s the case, parents are paying for high school education for the first two years of the college experience.
- Randy says you have to figure out the benefits of college to each of your children individually. For many, the benefits are not there. If they’re going to be a doctor, engineer or attorney or another professional that requires a college degree, that’s the only pathway. But if that’s not what your son or daughter wants to do, college can be a waste of time and money. They come out the other end and have received a glorified high school education at a huge expense.
- There is a downside to the fact that financing has become very easy to get. Students graduate with $100-500,000 worth of student loans. They start out their careers half a million dollars in debt. You pay those loans after tax dollars, so ultimately, with taxes and interest, you may have to earn as much as $800,000 to pay them off.
- Lance brings up the topic of public vs. private school because there’s a big price difference. He put his daughter through a private university but would have had no qualms about her going to a public school because he had good experiences at both kinds when he was a student.
- Randy talks about the benefits of starting at community college, which is way less expensive than either a public or private university. For the first two years, the students get the same credits they would have at an Ivy League school. It’s basic fundamentals – advanced high school type education, but at a tenth of the cost. Then they can go on and get their degree from whatever school they want. In his view, community college lets your kids mature and figure out what they want to be when they grow up.
- One thing you gain in college is lifelong relationships that can not only create great friendships but huge business opportunities. Students form those relationships with friends who are members of fraternities and sororities and other organizations they’re involved with. In Randy’s view, that’s the big thing the brand name colleges sell – the network of alumni and the hiring opportunities therein.
- Parents should decided if their kids are college material, or would be better off learning a trade or a skill or something else that would serve them better. Lance breaks down the cost effectiveness of leaving college for a $60,000 a year job vs. earning that same amount as a welder coming out of a much less expensive trade school.
- With COVID-19 and the resulting shift to online learning, Randy believes there will be massive upheavals in the value propositions colleges are going to have to put out. For the past two decades, they’ve charged whatever they wanted because there were an oversupply of students and an undersupply of places to get the education. That’s changing.
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Lifetime Paradigm had a new financial planning module for parents of college-bound children. Their new module is called The College Cost Eliminator sm. Check it out here:
Resources:
Grab a FREE Copy of Lance’s Best Selling Book, How to Make Big Money in Small Apartments here.
Get Access to Lance’s Best-selling Small Apartment Wholesaling Course here.
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