MYTH NO. 4
The myth: Student loans will cripple your child financially.
The reality: You've heard the horror stories about college grads hobbled by debt, and the facts can indeed be scary: The typical student at schools such as American University and NYU leaves with over $35,000 in loans; 2% of all student borrowers owe more than $50,000.
Rising costs are one reason for those hefty debt loads, but a less obvious problem is the increasing time young people are taking to get their degrees. Just 32% of public college students and 52% who attend a typical private school get out in four years -- taking six years is more common.
At more selective schools like Davidson and Lafayette, on the other hand, 85% or more of students finish in four years. Plus, such schools tend to offer strong alumni networks that can help with job leads.
"If you can attend a good school that helps you graduate on time with great skills and contacts, borrowing can be worth it," says O'Shaughnessy. That's especially true if taking on a manageable amount of debt will help your child attend a better school than your family could otherwise afford. "Manageable" is the operative word.
What to do
Get your kid's stats. Check graduation rates for the schools your child is interested in at college navigator.gov. Find the likely salary of careers he might pursue and the typical income of students who graduate from schools on his list at PayScale.com.
Use the right benchmark. To ensure payments will be bearable, your child should borrow less than what she can expect to make in her first job, says Kantrowitz. The average grad's $27,000 in loans would total $33,000 with interest over 10 years, if the 3.9% rate recently worked out by Congress goes into effect. (That rate is tied to 10-year Treasuries and is likely to rise in coming years for future borrowers.) If your child earns a typical starting salary of $45,000, she could afford that debt.
Don't fight the feds. For student borrowers, government Stafford loans, which limit debt to $31,000 over four years, are the best bet. Unlike private loans, the federal program offers income-based payment and public-service debt forgiveness, says Lauren Asher, head of the Project on Student Debt.
See PLUS as a minus. Parent borrowers should just say no to federal loans. PLUS loans let you borrow the full cost of college regardless of income, at expected rates of about 6.4% (plus fees of at least 4%), which can rise to 10.5% for future borrowers under the new rate formula. "You can borrow more than you can afford at a high rate -- what can possibly go wrong?" says policy analyst Rachel Fishman at the New American Foundation. A lower-rate option that limits how much you can borrow: a home-equity line of credit (4.5% to 5%).
MYTH NO. 5
The myth: Starting at community college, then transferring, is a great way to cut the cost of a BA.
The reality: Sure, community college is a lot cheaper than a four-year school, but students who start there are less likely to earn their bachelor's degree..
Part of the problem: Many four-year colleges make transferring credits tough. While two-thirds of states have articulation agreements to ensure that community-college courses are accepted at specific four-year schools, loopholes abound -- some allow discretion about which credits to accept, or a certain GPA may be required. And articulation agreements shouldn't be confused with a guarantee that your child will get an open slot at a four-year college, says Stephen Handel, a College Board specialist in community colleges.
For many teens, the lack of a strong peer group also makes it hard to stay focused, says Tatiana Melguizo, a USC associate education professor; community college students tend to be older and attend part-time.
What to do
Go for ironclad. See if any community colleges in your area offer a guaranteed transfer to a four-year school. In Virginia, 23 community colleges guarantee admission for students with high GPAs into certain programs at 20 state four-year schools. Others, such as Portland Community and Portland State University in Oregon, offer co-enrollment programs that allow students to shift seamlessly into the four-year program after earning a two-year degree.
Talk to the target. Ask the admissions office at the four-year school your child wants to attend about the transfer requirements and how many two-year college students it accepts. The good news: "If your child does transfer, her odds of getting a BA are as good as those for four-year college students," Melguizo says. Savings and a degree? Maybe you can afford grad school after all.
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