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Cassie Murphy's college tuition bill is a moving target.
Three years ago, the Phoenix native received an acceptance letter and
a hefty scholarship to the University of San Francisco, which she
gladly accepted, thinking she'd pay about $400 out of pocket each
semester for tuition.
But that was before USF raised its tuition by 12.2% over the last three academic years.
The
21-year-old international studies major now has to pay nearly $3,000
for her remaining two semesters and faces almost $15,000 in student
loans upon graduation, a number she expected to be near zero.
“I
turned down offers at better schools to go to USF with the intention
that it’d be a really good way to save money," Murphy said. "But, as
they continued to increase tuition, I started to go into debt and me
wasn’t planning on it.”
Murphy works at nanny full-time during the
school year and shares a small two-bedroom apartment with three other
students to help offset the unexpected costs, but said there's only so
much she can do while being a full-time student.
Mounting tuition
fees and high-stress levels have left more than three-fourths of Gen
Zers and millennials stressed about tuition, living expenses, getting
good grades and finding a career that pays well, according to a study released Tuesday by TD Ameritrade, a financial service company.
Some young people are considering online classes or skipping a
four-year degree altogether when they can't pay the college sticker price, the survey of 3,000 found.
High anxiety and nontraditional routes shouldn’t be surprising, as college costs are rising at levels higher than inflation, Dara Luber, a senior retirement manager at TD Ameritrade said.
“As
college becomes more expensive and debt becomes more prevalent, young
Americans are really concerned about college costs,” Luber said. “A lot
of them are exploring options outside of their parents paying for it.”
Student debt has more than tripled in the past two years from an average of $10,205 to $31,370, according to a similar 2017 TD Ameritrade study.
Total student loan debt in the United States reached almost $1.5
trillion during the first quarter of 2019, according to the Federal
Reserve Bank of New York.
Covering costs
Almost 60% of Gen Zers plan to
receive scholarships or grants, and 46% will work a summer job to
cover tuition, according to the study. About four in 10 also plan to
take out student loans, apply for financial aid and work at least one
part-time job while in college.
Gen Zers and millennials are also considering cost-effective pathways outside a four-year degree. Half are considering online classes and one-third are considering community college before a four-year degree, according to the report.
Despite
96% of parents still expecting their children to pursue higher
education, one in five young people may opt-out of college entirely.
Parents are chipping in
Students
draw from many financial sources to pay for college, including student loans, scholarships, grants, and part-time work. A majority also contribute cash from their own savings. According to TD Ameritrade,
millennials saved an average of $9,258 on their own for college, while
Gen Zers have saved $4,734.
Parents also chip in, with 44% of young millennials and 62% of Gen Zers reporting parental help, according to the report. However, almost half of Millennials and 27% of Gen Zers plan to pay for 75% or more of college expenses on their own.
TD
Ameritrade also showed that parents are increasingly involved in their
children’s lives after they leave for college, with one-third having
done their children’s laundry and over half texting daily.
“Parents
are going beyond their kid’s tuition,” Luber said. “They’re continuing to be involved in their children’s lives, even when they’re in college.
The adult thing’s a process.”
University of San Francisco's Murphy
said her parents didn't save any cash for her college fund, but
they're always available in case of emergencies.
TD Ameritrade's Luber has suggestions for both parents and students to get ahead of student debt early on.
Start saving early and regularly
Luber
suggests that parents start a 529 or similar college savings plan for
their children as early as possible. For holidays, family members and
friends can choose to send cash to save for college rather than give a
physical gift, as the impact will be more far-reaching.
“Even if it’s a small step today, take advantage of the college savings vehicles that are out there,” Luber said.
Talk about the debt before choosing a path after high school
Student
debt can have substantial effects after monthly payments and interest rates are taken into account, Luber said. This can delay major adult milestones like buying a home, getting married, or saving for retirement.
Taking these factors into account may affect when and where students choose to attend college.
Be ready for a trade-off
Not every family can afford to send their children to their dream college.
Even
after scholarships, grants and savings are factored in, the numbers
still might not add up, Luber said. Be prepared to have tough
conversations about choosing a more affordable college, pursuing a
two-year degree or working a part-time job to help cover costs.
“It’s
a team effort between young people and their parents as they successfully prepare for college,” Luber said. “It’s really important to
communicate and talk about your expectations.”
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