Talk about financial cold showers! Imagine being a high school senior who has worked hard across his or her school years, done all the "right things" as far as activities and community involvement go, and has hovered near the top of his or her class, earning global respect and dazzling recommendations. The reward has come in a pile of fat envelopes and a seeming embarrassment of great choices.
Question: What could possibly be wrong with this picture?
Answer: The Economy . . . and its family-related fallout.
Teens and their families all over the country are making the all-important decision of where to go to college. Unfortunately for most, deciding where to go isn’t the only question facing those families, but now also how they will pay for their education. Junior Achievement recently surveyed teens about their college plans with some interesting findings.
What follows is information regarding a new Junior Achievement-Allstate survey that found nearly two-thirds of teens are changing their college plans due to the economy.
College-Bound Teens Face budget squeeze; many alter plans
As incoming college freshmen prepare to turn in their acceptance letters on May 1, many families are scrambling to figure out how to fund their teens’ education. Nearly two-thirds (63 percent) of teens surveyed indicated they had changed their college plans because of the economy, up from 55 percent last year. This is among the key findings of the 2010 Junior Achievement/Allstate Foundation “Teens and Personal Finance” Survey, now in its eleventh year of gauging teen attitudes and behaviors in money matters.
Included within the 63 percent whose college plans have changed, 41 percent are working more to pay for college, 37 percent are staying closer to home or are not attending college out of state, 21 percent plan on going to a community college and 15 percent may delay school for one year or longer.
Economic pressures and steadily increasing tuition are forcing teens and their families to exercise financial discipline to pay college costs. An overwhelming majority of teens—90 percent—report they and their families are saving for college, with 53 percent of those teens saving their own money and 83 percent reporting their parents are saving for their college educations. However, a quarter (25 percent) hasn’t determined how they will pay for college.
Interestingly, 86 percent of teens say they plan on getting college scholarships. Yet, only 66 percent of all undergraduates received some type of financial aid in 2007–08, including grants, loans and scholarships, according to the U.S. Department of Education (the most recent year for which information is available). Those who miss out on financial aid opportunities will be left with tough financial decisions to make.
Of those students who do receive some type of financial aid, U.S. Department of Education data show that the median amount of student-loan debt carried by 2007-08 bachelor’s degree recipients at public four-year colleges was $17,700 and $22,375 at private four-year institutions
This debt level has taken its toll on students’ ability to repay their loans, as evidenced in the rise of student-loan default rates. The latest data from the U.S. Department of Education show that default rates are up from 5.2 percent in 2006 to 6.7 percent in 2007.
Considering that nearly seven percent of college graduates default on their student loans, it is imperative that teens weigh their ability to service their student loans when making college and career choices—equally important are solid financial planning and disciplined money management.
Jack Kosakowski, president of Junior Achievement USA, noted, “Selecting a college and weighing whether to take on student-loan debt are not solely education-related decisions; they are also major financial decisions. We don’t want our newly minted college graduates defaulting on their student loans which can affect their credit rating for years, or struggling to service those loans. Junior Achievement aims to provide students with a strong set of money-management skills, so they can effectively budget, use credit, invest and save. Since April is Financial Literacy Month, it is a great time to reinforce the importance of those skills.”
Junior Achievement and The Allstate Foundation have partnered to create Junior Achievement, $ave USA, a financial literacy initiative comprised of free, downloadable money management exercises for parents and their children to do together—and free, downloadable classroom lessons for students at the elementary, middle, and high school levels.
For an executive summary of the survey results, click here.
If you have had to change your college plans due to family economic realities, let us know. Take comfort in knowing that you're not alone.
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