Why High School Freshmen (and Their Parents) Should Be Talking College Now

Editors' pick: Originally published August 19.

A new class of freshmen is headed off to college, but it's the freshman classes of next year and beyond that should be pricing out the realities of their college dreams.

According to student loan and financial advice site Edvisors.com, last year the average student loan debt for a graduate who just received a bachelor's degree was $35,051. That debt was carried by 70.9% of all graduates. That's up from $12,759 two decades ago, when just 54% of all students graduated with debt.

Larry Elkin, financial planner, certified public accountant and president of Palisades Hudson Financial Group in Scarsdale, N.Y., says that if you're spending that much cash on a diploma, at minimum, you should at least shop around. He compares it to the car-buying process: If you have your heart set on one make and model, you have no bargaining power and stand to dig yourself a deep hold of debt.

"If you are willing to consider any vehicle that can take you where you want to go, there are many opportunities to save money," he says. "You'll get the best long-term value for your education dollar if you consider your options with an independent attitude and an open mind."

At the very least, you'll have less to pay off than many other students and their parents. According to the Federal Reserve Bank of New York, total student loan debt reached $1.26 trillion by the end of June. That's up $69 billion from a year earlier and is the second largest pile of U.S. consumer debt behind mortgage debt (at $8.36 trillion, up $246 billion from a year ago). More than one in ten (11.1%) student loans are past due. That's a worse delinquency rate than even that of credit card bills, of which 7.2% are past due.

That's tough enough to pay off with a job, never mind when you're unemployed right out of college. Though the Bureau of Labor Statistics puts the current unemployment rate at 4.9%, that jumps to 9% for people ages 20 to 24 -- or roughly the age of most recent college graduates. Only 70.7% of people that age are an active part of the workforce, compared to nearly 81% of those between 25 and 54.

Despite all of those post-recession obstacles, it's still more costly to forgo college than to get a degree and pay off your debts. According to a 2014 study by Pew Research Center, those who graduated with bachelor's degrees or better saw their unemployment rate drop to 2.5% compared to 4.4% for those with some college education or an associate's degree or 5.2% for high school graduates. More than 70% of those with bachelor's degrees or better are employed, compared to 54% to 64% of those without said degrees. Perhaps most importantly, the median annual income of college graduates ranged from $57,200 for those with a bachelor's degree to $85,228 for those with professional degrees. That's compared to $37,436 for high school graduates and roughly $40,000 for those with some college or an associate's degree.

That's one high-stakes gamble, which is why Darla Kashian, a financial advisor with RBC Wealth Management in Minneapolis, suggests that parents and students start having a conversation about college in ninth grade. That's a good time to see if they'd prefer to learn a trade, enlist in military service or, in the case of the children of high-net-worth adults, just spare their parents the money. If college still looks like an option after that, you can ask questions, including "What do I expect from you academically for what I'm willing to provide financially?" and "What is the contribution that you're expected to make both academically and financially to this equation?"

That discussion can get parents and students on the same page and help them figure out how to make themselves more desirable to colleges and securing more lucrative financial aid packages. Kashian says that may involve spurning a favorite in-state school in favor of a similar school out of state, but it also involves playing a longer game.

Elkin advises notes that applying to multiple colleges that would consider you an asset puts ou in a position to bargain with those schools. That takes early decision enrollment, off the table -- which reduces certainty, but increases your haggling advantage -- and also keeps would-be student from seeming too eager.

"The other thing I advise clients is if their kid is set on a specific school, look at their first offer as an entry-level offer and then go back and negotiate with the college," Kashian says. "You have nothing to lose and, assuming one is well-mannered in doing that, you can likely find some additional financial aid to make up that gap."

In the meantime, students can start chipping away at other potential financial obstacles while they're in high school. Elkin advises students to take advantage of advanced placement and college-level classes while they're in high school to cut down on the length of time they'd need to stay in college and the amount they'd have to pay.

"Don't pay for more college than you need," Elkin says.

But do see it through. According to a 2014 study by Pew Research Center, those who graduated with bachelor's degrees or better saw their unemployment rate drop to 2.5% compared to 4.4% for those with some college education or an associate's degree or 5.2% for high school graduates. More than 70% of those with bachelor's degrees or better are employed, compared to 54% to 64% of those without said degrees. Perhaps most importantly, the median annual income of college graduates ranged from $57,200 for those with a bachelor's degree to $85,228 for those with professional degrees. That's compared to $37,436 for high school graduates and roughly $40,000 for those with some college or an associate's degree.

That's the biggest reason why, as HSBC Group discovered, 60% of parents would be willing to go into debt to fund their child's college education. With 98% of U.S. parents looking to send their kids to college, costs are key. Roughly 60% of parents say that paying for their child's education makes it more difficult to keep up with other financial commitments like long-term savings (40%), credit card repayment (37%), and retirement savings (37%). As a result, U.S. parents spend an average of $14,678 a year to fund their child's college education, or almost double the global average of $7,631. Even at that, students are stuck paying 37% of college costs, second only to students in Canada (39%) and well more than their contemporaries in Egypt (less than 1%), India (1%), Hong Kong (4%) and Singapore (5%).

That's a tough reality to face, and Elkin notes that if students feel they need a year or two to figure it out or save up, that's exactly what they should do. Also, if you can start somewhere less expensive where a student's AP credits go further, that student can always transfer to the college of their dreams later and get the same degree.

"You should treat college as exactly what it is: one of the most expensive purchases you are likely ever to make," Elkin says. "Sometimes the best decision is to forego the brand-name college and start life without a big debt."

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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