Paying for College

Every Bank On participant knows that education = opportunity.  As you increase your knowledge and skills, you have more flexibility in your employment options and greater access to higher salaries.  While we all want to gain access to higher income, we also need to be smart about how we pay for that education. 

In the Commonwealth of Virginia, the average cost for a state-run University degree over the course of 4 years is right around $44,000.  That is a heap of dough to dish out for tuition, books, fees etc.  If you finance the cost of this education using a Stafford loan, you are likely paying 6.8% interest (with interest rates expected to rise in 2014).  You can expect to repay $506 monthly over 10 years to finance that education and pay approximately $17,000 in interest!  That is an equalivalent of reducing your annual salary by $1,676 per year just to pay the interest or $6,076 to make payments annually!

The picture gets much worse if I roll in the housing expenses to the total cost of education.  You would have to increase your salary over $10,000 annually to pay for the costs. 

Finance  Borrowed Amount   Payment   Total Payments   Total Interest  Ann. Salary Equivalent for Interest 
4 Yr University  $             44,000  $              506  $        60,763  $        16,763  $           (1,676)
2 yrs Comm College then 2 yr University  $             30,000  $              345  $        41,429  $        11,429  $           (1,143)
Rolling in Housing Expenses  $           100,000  $          1,151  $     139,097  $        38,097  $           (3,809)

Paying for college doesn't need to be this painful.  With some wise planning, you can make college or other higher education pay off.  Too many students are sold on the need for education without having a solid plan for the costs.  To help you build your career without all the debt, consider some of these strategies:

1. Qualify for Grants and Scholarships:  Grants allow you to reduce the cost of education.  Grants do not need to be repaid and can be a great resource.  Check out the Education Opportunity Center to meet with a counselor who can get you started.  EOC will help you complete your FASFA application and has career counselors who can match you up with an education plan that is in demand assuring your employment after graduation.  You can reach the EOC at 757-683-2312.

2.  Living at home:  As long as your parents will allow, live at home and save the cost of room and board at the university.  As you can see, financing these costs can more than double the cost of your degree.

3.  Work as you go:  Paying for education as you are working can reduce the amount you need to borrow.  Having employment allows you to gain experience, thus building your resume demonstrating you have what it takes to be a long term employee after you graduate.

4.  Career laddering:  Consider layering certifications, diplomas and degrees.  For instance, if you are interested in a career in the medical field, consider getting certification in pharmacy or emergency medical technician allowing you to work in your field.  As you pursue your education, look for ways to layer certificates and 2 year degrees to allow you to grow your income even as you are working toward a 4 year, Masters or even Doctorate degree. 

5. Virginia Individual Development Accounts:  IDA's pay you $2 for ever $1 you save.  Over the course of 2 years, you can save up to $2,000 and get a $4,000 match to help you reduce the cost of education.  Consider if you can use VIDA along with grants, and some work as you go, you could get through your 4 years of education with very little debt at all.

We are always looking for ideas on ways to acheive education goals.  Do you have a strategy that works for you?  Write us and tell us about it.

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