The interview published above is from SDPB’s daily public affairs program, In the moment with Lori Walsh.
Rick Kahler is a wealth advisor, financial therapist and president of Kahler Financial Group in Rapid City.
Blog by Rick Kahler
Debt-free education A head start to success
Here’s a strategy to get you off to a good start on career success: get a college degree with little or no debt. It may be more difficult than before, but with planning and commitment it can always be done. You might consider these possibilities:
1. Shop for college like any other major purchase. Not all schools offer the same quality of education; paying more does not guarantee better quality either. Collegecalc.org lists the best value colleges in America in terms of academic quality per dollar for 2019. Topping the list is the University of North Carolina at Chapel Hill with a quality rating of 95 out of 100 and a cost of $10,936 per year.
2. Compare the average starting salary for your field with the total cost of education. While earning a degree from MIT may seem daunting, the four-year average cost of around $200,000 does not guarantee a better-paying job than earning a degree from the South Dakota School of Mines & Technology at an average cost over four years of approximately $82,000. MIT students received average salary offers of $70,300 in 2015 according to Business Insider, while SDSM&T students received $61,346 in 2016.
Looked at another way, the total cost difference between MIT and SDSM&T is about $118,000. For this, you get an additional income of $9,000 per year. However, if you apply all the extra gains to amortizing the extra cost of $118,000 at 5%, it will take you over 20 years to break even. It’s not a good deal.
3. Work out before and during college and save money for college expenses. Every little bit counts, and research from Berkeley shows that kids who work themselves out in college do better academically.
4. Get good grades and apply for as many scholarships as possible. For example, a South Dakota Opportunity Scholarship pays $6,500 over four years. Qualifying is relatively easy, requiring a GPA of 3.00 or better, or ACT composite scores of 24 or higher.
5. Discuss college funding with your parents. Too many families don’t have these important conversations. A child assumed that his parents would pay all his tuition fees, only to painfully discover a month before the first tuition installment was due that they paid nothing. Another assumed he was on his own, went to college, then learned that his parents would have paid all his tuition if he had asked them.
6. Consider asking parents and grandparents to contribute to a 529 college savings plan instead of other gifts. (Ideally, of course, do this when you’re nine months old.)
7. Consider how important the traditional college experience is to you, including dorm life, extracurricular activities, and even finishing in four years. It can be worth taking lighter course loads, working more hours, and graduating in five or six years, but without going into debt. Investing extra time instead of going into debt could make financial sense.
8. Before borrowing anything, ask specific questions about repayment schedules and amounts. Determine if you can afford these payments on starting salaries in your field. A beginning elementary school teacher and a beginning engineer can have very different budgets.
9. If you’re taking a gap year after high school to work and save for college, have a specific, family-supported plan to make the most of your income. For example, you could live rent-free at home with clear work-sharing agreements and save perhaps 80% of your salary.
Graduating with little or no college debt is admittedly a challenge. Yet, making the effort to earn a debt-free degree is an investment in yourself that will pay off in valuable benefits for a lifetime.