College Bound, Career Ready?

College Bound, Career Ready?

Compounding the burden of education cost is that many students struggle to find good-paying jobs upon graduation.

April 18, 2016

“College readiness is more than an academic issue—it’s a financial one,” notes a recent Gallup article. Currently, 79% of Americans think education beyond high school is not an affordable option for everyone.

The costs of further education continue to escalate, and “Americans have more than $1 trillion in outstanding student loan debt.”

Compounding the burden of education cost is that many students struggle to find good-paying jobs upon graduation. Another Gallup survey shows merely 11% of the nation’s business leaders “strongly agree” grads have necessary skills and competencies that contribute to business success.

“There is a growing body of research that career and technical education can be a driver of both success in the classroom and preparation for college and the workplace,” notes the article.

This preparation can help young consumers grow skill sets so they’re not only active participants in a healthy economy but enjoy the benefits of their own healthy financial state.

This week, learn about hurdles today’s college-bound consumers face and understand their financial circumstances upon graduation.

What can be done to enhance their readiness?

‘All things are ready, if our mind be so.’ --Shakespeare

High-school students are not always academically prepared for college, a reality that adds significantly to the costs of higher education, according to a new study from Education Reform Now

Americans spend $1.5 billion for college remediation classes, and the middle class is paying the most.

About 25% of college students had to take remedial courses, typically in math or composition, and 45% of them came from middle- and upper-income families.

According to one of the authors, “Inadequate high-school preparation, as reflected by postsecondary remedial course enrollment… has real out-of-pocket financial consequences for all.”

Students pay, on average, an additional $3,000—borrowing an extra $1,000—for remedial classes during their freshman year. Those in the top income level attending pricey private four-year schools pay an additional $12,000.

Typically, students taking remedial classes are in school 11 months longer than others, and are 74% more apt to drop out.

“Imagine how much more affordable college could be if we could get more students to graduate and graduate on time,” notes another study author.

It Takes a Village of Options to Pay College Tuition,” says an article at Reuters.

Sallie Mae indicates 20% of families can cover college tuition out of pocket. But most need help financing the endeavor, and need to consider financial aid strategies.

Some tips:

• Know that payment plans vary. Some schools require students to pay in spring rather than fall. Financial aid offers come in March, payments may be required that spring or in fall.

• Stretch out 529s to keep earning from the investments.

• Take loans. Thirty-percent opt for federal loans; 7% take private loans. It is suggested loans be taken in the student’s name because of low interest rates that do not accumulate until graduation.

• Tap other accounts. Roth IRAs, for instance, can be accessed without penalty.

A Student Loan for the Parents”? “Parent loans are becoming increasingly prevalent as tuition costs continue to escalate and college students confront hefty bills,” notes CUNA’s “Research Roundup” blog post.

These innovative loans are designed to help with no upfront fees.  Parents can take loans with 10-year terms at interest rates ranging from 3.75% to 13%.

‘Opportunity doesn’t make appointments.’ --Tim Fargo, author and entrepreneur

“A bachelor’s degree is the closest thing we have to a guaranteed ticket to the middle class,” notes Brookings. But few children from poorer homes are likely to end up with such a degree.

Among those who are economically disadvantaged, 20% fail to graduate high school. Among those who do, about half will continue education.

Two-thirds of these students will need to take remedial coursework.

The article argues that technical education is a better approach for many to attain social mobility. Currently, only 19% of high school students focus on career or technical education.

Such programs, however, “have great promise in engaging students, helping them succeed academically, boosting college completion rates, and brightening career prospects.”

Usually by the time they are 20, such students “have academic credentials, technical credentials, and work experience—and, usually, well-paying jobs.”

Two Year Grads Satisfied With Cost of Degree,” notes Gallup. As four-year degrees increase in costs, two-year degrees gain popularity.

A survey shows of those with two-year degrees, 46% think they were worth the cost and 41% found them essential in reaching career goals.

“But at the same time, associate degree holders trail bachelor’s degree holders in several key aspects of their lives.”

Associate degrees typically yield lesser income than bachelor’s degrees, and “associate degree holders are also more likely to be unemployed.”

Other variables like early education and family background may be contributors to this notion, and associate degree holders fare better than those with only a high school diploma.

In comparison to 46% of associate degree holders, 45% of those with bachelor’s degrees felt their education was worth the expense. Forty-one percent of associate degree holders think they will need to get a higher degree to advance in their jobs.

‘There’s no harm in hoping for the best as long as you’re prepared for the worst.’ –Stephen King

Those seeking four-year degrees have decisions to make regarding area of study and these choices are impactful in labor market outcomes. See “The Labor Market for Recent College Graduates” by the Federal Reserve Bank of New York and note various employment rates, compensation trends, and percentages of grads within fields of study who attain advanced degrees.

Wage disparities and employment opportunities will be influential for those considering various careers.

The good news is there is “A Brighter Job Market, for Some,” according to The New York Times.

Michigan State University anticipates “hiring will be up 15% across all degree levels from last year,” although “applicants’ experiences will vary, perhaps significantly, depending on their field of study and position sought.”

Occupation-specific majors like accounting and finance fare better than general studies majors.

Underemployment remains an issue as 44% of grads between the ages of 22 and 27 hold jobs that do not require degrees, “high by historical standards.”

The lowest rate of underemployment was 38% in 2000.

The median wage for recent bachelor’s degree holders was $43,000 in 2015, up from $40,000 in 2014.

High school students confront a barrage of financial choices and career decisions at a time in their lives when they may not understand the long-term significance of such deliberations.

If you help them and their families navigate the maze of options, the long-term reward of readiness will be not only their personal achievement and sense of satisfaction, but a healthy economy.

LORA BRAY is an information research analyst for CUNA’s economics and statistics department. Follow her on Twitter via @Bray_Lora and visit the CUNA blogThe Research Roundup: Economic Perspectives.