Mendelsohn reinforces his message through a series of one-on-one counseling sessions that include frank discussions about a student’s finances. He goes into detail about how long it might take to pay back student loans to cover tuition at a pricey private or out-of-state school, which so many young people believe is necessary to ensure a profitable career path and a successful future.
Mendelsohn encourages students to game out what a typical college graduate in the student’s desired profession might earn. He then guides them to figure out how much would be left in the student’s anticipated budget to cover the monthly student-loan payment after standard expenses like rent, transportation, and food are deducted. The living costs are an educated guess based on the location. But the loan calculations are in real dollars and cents, based on the tuition and aid offered by a specific school, averaged at a rate of 5 percent over 10 years to balance out subsidized and unsubsidized loans.
“Our bottom line is: How can we put you in the best position to succeed in all ways, including, especially, financially?” Mendelsohn says. “When students aren’t sure about what they want to do, we are saying, ‘Don’t take on more financial risk than you can handle…. If you are unsure it’s just foolish to take out tons of loans.’ ”
The missing link
This is the conversation that is not happening nearly enough in America today. Personal financial education is not a part of the curriculum. The vast majority of high school guidance counselors are stretched so thin that they are doing well if they can remind students about college application deadlines, much less walk through which schools tend to offer more-generous aid packages or discuss the pitfalls of excessive debt loads.
This is true nationwide. A survey by lender Sallie Mae found that 84 percent of undergraduates feel they need more financial-management education, and it shows.
The costs of a college education are soaring, and with it the debt burdens that more and more young people are assuming.
In the decade leading up to the 2011-2012 school year, tuition and fees at private schools rose by an average of 2.6 percent per year beyond increases in the Consumer Price Index and by 5.6 percent per year at public four-year colleges, according to the not-for-profit College Board. To put those increases into perspective, if the cost of consumer goods had kept pace with tuition hikes since 1985, a gallon of milk would cost $18.65.
In March, the Consumer Financial Protection Bureau announced that student-loan debt had topped the $1 trillion mark, exceeding credit-card debt.
The financial hurdle of higher education hits some people even before they start college. According to the National Center for Education Statistics, 10 percent of those planning to attend a university don’t make it to the start of classes because they can’t afford the first bill. The “summer melt” phenomenon, as it is called, rises to 20 percent for lower-income students like Bertrand. It’s something that UAspire is trying to stop.
For those who do start college, swelling financial pressures strain their career-path options and increase the risk that they will drop out. Students who drop out are four times more likely to default on their loans than those who push through and get a degree, according to a study by the Education Sector, an independent think tank.
What’s more, young people ages 18-24 are now spending twice as much of their monthly income on repaying debt than they did just a decade ago.
Only about a dozen groups, including government-funded agencies and not-for-profit organizations, are focused on college affordability. UAspire, Mendelsohn’s organization, serves about 10,000 students a year and boasts that 84 percent of the students it counsels make it past the critical drop-off point and return for the second year, compared with the national average of just 66 percent. It has ambitious plans to increase the number of kids impacted, but the national need is beyond its capacity.
In this endeavor, Deloitte is investing $212,000 in pro bono consulting work with UAspire to come up with a model for exporting financial-education training more broadly to existing youth mentors, such as school guidance counselors and Big Brothers and Big Sisters groups. The proposal could serve as a model for combatting the nation’s ballooning student-loan debt burden.
Vanessa’s plan
In Bertrand’s mind, her path was set by the eighth grade. Given her penchant for science and math, adoration for babies, and all of those inspiring lectures from her father and Cliff Huxtable, being an obstetrician was the only thing she could picture herself doing, aside from running for president.
At an IHOP restaurant a month before leaving for college this summer, Bertrand sits eating buttermilk pancakes cut meticulously into pie-shaped wedges. Her eyes light up when she describes a day she spent shadowing physicians at Massachusetts General Hospital during her junior year of high school. She recounts the excitement of observing two deliveries, one a C-section.
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