Your Money

Education: An investment requiring extensive research

Certified financial plannerOctober 13, 2013 

Education savings

KAREN ROACH

It is a commonly held belief that education is the catalyst that allows individuals to improve their earning potential and quality of life.

One of the types of institutions that has encountered public scrutiny in recent years is the for-profit higher education business model. These schools provide certificate and degree programs, with the majority of their student body often enrolled in associate’s degree programs.

While the programs may be similar in nature to the traditional community college, the cost is often significantly more expensive. Additionally, the for-profit education sector tends to have less favorable graduation, job placement, and student loan default rates than their counterparts.

So what does this mean from a financial perspective? At a minimum, prospective students should conduct a cost-benefit analysis before choosing a school and degree program. This concept is not specific to for-profit institutions; it is a practical consideration for students attending traditional colleges, as well. After all, there is nothing more discouraging than being saddled with student loan debt with few prospects of a viable way to pay for it.

When calculating the value of the education from your prospective school, conduct objective research to answer the following questions before making a final decision:

•  What companies recruit from this specific school and campus for your field of study? This question provides insight about life after graduation. When selecting a school, ignore the elaborate marketing campaign and focus on the facts. Only consider those programs with a proven track record of placing its graduates in competitive positions that align with their education and experience.

•  What is the average starting salary for graduates within the same field of study? I am not suggesting that students select a field of study based on that profession’s earning potential. I am suggesting that one of the variables worth considering is the capacity in which the degree can help secure a job that enhances the ability to provide for one’s family while repaying the loans.

Research has shown that a large percentage of the for-profit graduates secure jobs that pay marginally better than a high school diploma, and are more likely to default on their student loans than their counterparts who attend traditional schools. Current and prospective students are wise to investigate the expected earnings of those with their degree and compare that to the cost of acquiring it.

•  Will my credits transfer? One of the reasons students opt for these programs is because of the ease of entrance. The intent of some students is to do well in the for-profit setting and later transfer to traditional schools to acquire other degrees like a bachelor’s or master’s degree. The process is rarely that simple. Many traditional four-year public and private colleges and universities do not honor credits earned at for-profit schools. Consequently, those students are required to either start a degree program from scratch at the traditional school or enroll in another for-profit degree program. Both options result in a higher net cost for the student. Before settling on a school, make a point to research the school’s accrediting agency, as schools with the same accrediting body tend to honor one another’s credits.

Education is an investment in one’s future, but it should be researched.

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Life is a journey. Plan for it.

Ashleigh Brooker, CFP, is the principal of A.J. Brooker Financial Associates in Columbia. Reach her at info@AJBrooker.com or (803) 724-1235.

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