College: Don’t buy a Rolls-Royce when you can only afford (or only need) a Honda!

by Nick on September 7, 2010

J Money, the mastermind behind Budgets are Sexy, recently wrote about college costs.  He brings up a lot of value that “economists” and “personal finance gurus” often seem to forget.  Specifically, he recognizes the value of the life lessons, friends and other connections you gain - the college experience.  I admit that I don’t always assign a value to those factors when I run the costs in my head.  My bad.  You convinced me.  But let’s talk a bit about finding the right financial “fit” for your college education.  I don’t want to see anyone coming out drowning in debt.  Do it right!

So I’ll start with the premise that the college experience is valuable and you should go to college if you can.  But the geek in me will not let you overspend “just to go” to college.  There are many options for college.  You don’t “have” to spend $40,000 per year to get a good education (education is important too, right?) and the college experience. 

To put it another way, not everyone needs or can afford a Rolls-Royce (I had to look up the spelling on that…some day I’ll just look in the driveway…).  Finding the right education for you is like finding the right car.  If you make $40,000 per year as an accountant you probably shouldn’t buy a $60,000 Hummer (unless you have that much paperwork to bring home… and, if you do, you probably have bigger problems than your car…).  But a 2 or 3 year-old Honda may be a good fit. 

And if you expect to make $40,000 per year as an accountant for a local business in Cleveland, Ohio, going to Harvard or Yale (or some other school that could cost you upwards of $40,000 per year) is probably not the right fit either.  (In fact, it could hurt your chances of landing a job where there is a strong state school network and if you’re far away from the school you attend.)  So find the right college for you!  Don’t overspend just to “go to college.”

In a similar light (and because I can’t resist the urge to give some thoughts about how to save money), here are some ideas for controlling college costs / maximizing the value of college:

  • Don’t take out student loans that are more than your first year’s expected starting salary (this is key for me);
  • If you take out student loans, don’t take out loans for “living expenses” if at all possible- tuition only!;
  • Don’t take “private” student loans (those are killers!);
  • Shop around for schools.  State schools can provide great educations and experiences.  And their alumni associates are some of the strongest networking groups around;
  • Shop around for scholarships.  There are tons of them out there.  Spend an afternoon and talk with anyone you know who may have recently gone through it;
  • Work at least part time (delivering pizzas, bartending, waiting tables, etc.);
  • Beg for work-study (Secret: Try to score a work study in the financial aid or student loan office.  I did and learned all the tricks on how to maximize my financial aid package (this sounds odd, but was totally legit – I just learned the process and became on a first name basis with my financial aid advisor who saw how hard I worked.  My university grant was as high as I qualified for.  Saved me a bunch of cash for sure.));
  • Always, always, always apply for financial aid.  And always, always, always appeal your award (they have wiggle room – or at least they did when I was there);
  • Both before and after your financial aid application, award and appeal, sit down with your financial aid advisor.  He or she should become your best friend.  Ask what you can do to get more money that you won’t have to pay back (work study / grants / scholarships);
  • Take an extra class (or more) starting second semester of freshman year to try and finish a semester or two early.  This could save a bunch of money – especially if the school offers free one- or two-credit classes.  Mine did.  I took a few and had a nice and easy senior year because I could take one class less per semester.  If I took more I could have saved a bunch of cash and cut out an entire semester.  Oh well; and
  • (I wish I did this one when I was in school – I hear way too many stories of folks who do this and are millionaires right now).  Start a LEGAL business freshman year (or sophomore year at the latest).  Yes, you heard me right.  Start a legal business.  Do it slow and right.  Don’t go into credit card debt or anything like that.  But find something you want to do part time and do it.  This can be anything: T-shirts, landscaping, snow removal, study guides, etc.  Anything legal.  Be creative.  You’ll learn a ton.

Bottom line:
Go to college if you can.  But like with everything don’t just apply, sign up and go.  Enjoy college for sure.  But do what you can to keep the costs under control.  If you expect to make $40,000 per year to start and max out at $100,000, being $80,000 in debt will handicap your finances.  Do what you can to bring your costs down.  Make college worth it.  I know you can do it.

And, of course, put your credit card down and slowly step away from the mall!

PS: While I got this idea from J Money, he got to thinking about college costs from a group writing project on education and wealth.   To read other opinions or participate in the writing project yourself, go “here.” 

You can also vote for me there!

Very cool stuff.  Thanks Go Banking Rates for organizing it.

Image: Sharron Goodyear / FreeDigitalPhotos.net

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