Students face tough realities in paying for college

Escalating college costs and an uncertain economy make paying for college a struggle for families from all walks of life.
Here, we explore three different scenarios:

•A low-income student who gets more need-based aid up front, but still comes up short when it’s time to set up a household and pay for basic living expenses.

•A middle-income student who has family support and encouragement, but still gets squeezed by the interest on unsubsidized loans.

•A student from a large, high-income family whose income has taken a hit in the recent recession realizes there isn’t enough left over to pay for their education.

Low-income students

A student from a household at or below poverty level may be first in line for need-based aid and have a better shot at some scholarships, but they come to college with significant disadvantages.

Many low-income students are the first in their families to attend college. They may miss out on the encouragement and practical advice doled out in families with a legacy of higher education.

What’s more, students from low-income families may be intimidated by the notion of spending tens of thousands of dollars to obtain a degree. And low-income students who can’t get enough need-based aid to finance their education may not have anyone at home to co-sign for more loans. This could lead them to take extremely high interest loans – like Sallie Mae loans, with interest rates up to 9.8 percent – that require payments during college.

Low-income students face other, less obvious disadvantages too.

There’s nobody to buy you a set of dishes, a couch, a TV or a vacuum, nobody to co-sign for the apartment, the car, or pay the cell phone bill or the parking tickets. Need emergency cash? Now you’re looking at selling your plasma, pawning your holiday gifts or charging to a high-interest credit card.

It’s the low-income students who must work two or three jobs, and who can’t afford to take time to study and focus on their classes. Not surprisingly, many low-income students fail to earn a degree.

For some students healthcare can be hard to come by. Though the new Obama healthcare plan allows most students to stay on their parents’ healthcare until they’re 27, if your parents don’t have health care you have to rely on free or college clinics. Foster kids can only stay on state health plans until they’re 21, which may not even last them through their degree.

For some students, being one of the first members of their family to pursue higher education can be all the motivation they need to send themselves through school.

But for others, the challenge is realizing their own potential and the opportunities they can take advantage of to achieve that success.

Middle-income students

When it comes to aid distribution, the middle-income bracket is just that: somewhere in the middle.

Imagine a family of four. They live in a nice, three-bedroom home. The kids get new shoes to start the school year, and a little cash to go to the movies. The mother works a job making around $60,000, while the father owns a small business. The family doesn’t live paycheck-to-paycheck, nor are they knee deep in debt, but the money isn’t exactly flowing, either.

In fact, the flow slows to a trickle when the oldest child applies to a four-year university. When filing for FAFSA and scholarship forms, only student and parent loans are available to most middle-class families. Given that a bachelor’s degree is required for a majority of jobs, the student takes out the loans, in hopes of security later in life.

The logic of the FAFSA is that when the family’s income reaches a certain level, a portion of that may be used for college, tax-free. So a family earning $80,000 a year – and spending it on groceries, a mortgage and health insurance – is still expected to have something left over for college.

There’s a glittering promise of not having to pay loans back until graduation. However, a subsidized loan is the only loan available from FAFSA that doesn’t accrue interest while in college. Both the Parent PLUS loan and the unsubsidized loan accumulate interest before the student has graduated.

So sitting in a struggling economy, with student loans stacking up and a second child to send off to college, many middle-class parents feel stuck between two choices: spiraling into debt, or forcing their kids to finance their education on their own.

High-income students

Upper-class families seem to be stuck in a stiff dilemma these days. Financial realities are changing in this new economy.  Parents who once pulled in $120,000 a year may be down to half that.

It’s unfair to assume that every student that is a part of this income bracket has parents supporting their every move when it comes to budgeting college finances.

Think – you’re the youngest of four children and all three of your siblings have already been through college and received degrees. If your parents make $100,000 a year or more, factor in mortgages, car payments, insurance and other expenses.

How fair is it to assume that your parents can afford to put a fourth child through college?

Not all wealthy families have perfect circumstances. Special situations, like health problems, paying for multiple educations and unexpected debt can make it difficult for even those more affluent families to afford college.

In this economy, even those with higher income have realized they can’t afford to pay for college entirely out of pocket and other means of financing are necessary.
Students that come from a legacy of relatives that have already received four-year degrees sometimes get stuck in a rut. On one hand they don’t want to disappoint the family tree and they may feel forced into college education. On the other hand, they might not feel as obligated to cruise through school – and the longer it takes you to decide on a major and earn a degree, the more expensive college becomes.

Alan K. Fox

Sports Editor

Phone: (541) 817-5455
E-mail: afox@lcctorch.com
Twitter: @alankfox