Each generation develops different ways of paying for college. The Baby Boomers might have relied on college savings accounts, decided not to go at all, or used the G.I. Bill. Gen Xers might have worked a few jobs over the summer to pull down enough money to cover expenses. But Millennials face a different set of financial circumstances, and are forced to forge new paths on the road to a higher education.
While college costs are increasing at a rapid pace, money to pay for it is harder to find. Parents and grandparents who might have started 529 Savings Plans watched in horror as the value of those accounts diminished with the economic crisis. Federal cut-backs and sequestration cast an uneasy pall over college financial aid. And student loans, often the only way to pay for college expenses, are receiving a lot of negative publicity. But the Millennials are incredibly resilient, and find new ways to deal with the question of how to pay for college:
• Community Colleges are a Bigger Part of the Education Process: With the higher expenses of traditional colleges, community colleges are more attractive as one of the initial steps in the education process. According to the Institute for College Access & Success, the good news is that the vast majority of community college students do not borrow federal loans at all, and the few who do borrow do not take out large loan amounts. Although the vast majority (82%) of full-time community college students does rely on some type of financial aid to cover some of their costs, they are finding ways other than borrowing to make up any short-falls.
• Student Loans Are Part of the Puzzle: For those attending the higher-cost four year universities, federal and private student loans are still an important piece of the payment puzzle. In a policy brief entitled, “The Student Debt Review,” Ben Miller of New America stated that the average college graduate with a bachelor’s degree owes almost $30,000 in student loans. The Millennials are using their degrees to obtain jobs that will help them repay these loans, investigating loan consolidation and income-based repayment options, or thinking about careers in public service which might allow them to have their loans forgiven after ten years of payments.
• Financial Aid Affects College Choice: PwC’s report on “Millennials and College Planning” found that 60 percent of Millennials said that financial aid is a deciding factor in their school choice. The Millennials are looking closely at their financial aid packages and making decisions accordingly.
• Mom and Dad are Helping: A USA TODAY/Bank of America Better Money Habits survey found that today’s young adults are three times as likely to say they got a lot of financial help from their parents as when their parents were starting out.
It’s a whole new world but, when it comes to college, clearly the Millennials have found their own paths to figure out ways to pay for it.