70% of Iowans say a college degree is worth the financial investment
DES MOINES, IA (July 21, 2014) — According to the Mid-Year 2014 Consumer Survey by the Iowa Credit Union League (ICUL), more than 70 percent of respondents noted a college degree was worth the financial investment and more than 55 percent noted saving for college expenses was important to them. Just over 33 percent indicated they believe student loans are a good way to finance a college education.
The College Board© recently showed the average college expense (tuition, fees, room and board) at a four-year, in-state public institution for the 2013-2014 academic year was $18,391. This is up 3.2 percent from the prior year. Expenses at private institutions averaged $40,917, up 3.7 percent from the 2012-2013 academic year.
So, is it worth it? A recent analysis of Labor Department statistics by the Economic Policy Institute in Washington revealed the earnings gap among young people with a college degree versus those without reached a record high in 2013. Americans with a four-year college degree made an average of 98 percent more per hour last year than those without a college degree. This number is up from 85 percent in 2003 and 64 percent in the early 1980s. Despite the significant financial investment, there is a true return in the job market.
The Labor Department noted approximately two-thirds of full-time undergraduate college students receive some form of financial aid, ranging from student loans, scholarships and grants, to college savings accounts and work-study programs.
“With tuition costs on the rise, it’s important for consumers to begin planning their financing as soon as possible,” said Jaimie Miller, Executive Director, Iowa Credit Union Foundation (ICUF). “There are many college financing options available, and which one you choose will depend on your individual needs. Once you learn the benefits of each, you can make an educated decision on which strategy is best for you.”
ICUF recommends the following tips for financing a college education:
- Start Saving Now: Whether you are months, years or decades away from paying for college, start saving today. The earlier you begin putting money into a college savings plan, the more time it has to grow. Take advantage of college savings calculators to determine how much you will need to save.
- Seek Assistance: It’s always a good idea to speak with an experienced financial advisor about college savings goals and financing options. There are advantages to every choice, you just need to understand each and decide which is the best for you and your financial situation.
- Do Your Research: Below are a few options you have for financing a college education. Research each option and speak with a financial advisor to ensure you understand the full benefits of each.
- Scholarships & Grants: Before you borrow, make sure you have exhausted all sources for free money from scholarships and grants. Opportunities can be found through academic performance, athletic performance, workplace benefits, church and community organizations, in-state lottery funded programs and more.
- Prepaid Tuition Plans: Many institutions of higher learning offer in-state residents the opportunity to lock in a tuition rate to public colleges and universities years in advance. If you have enough money now, you could prepay for a complete four-year degree or, just prepay a portion of the expenses now.
- 529 College Savings Plans: Each state offers its own 529 plan or plans, some with special tax incentives. All account earnings are tax-free on the federal and state level as long as the money is used for higher-education expenses including tuition, fees, books, room and board.
- Coverdell Education Savings Accounts: You can also put money aside in a Coverdell Education Savings Account. The non-tax deductible contributions are only $2,000 per year and the account grows tax-free until the funds are distributed.
- Work-Study Programs: Offered by the federal government, state governments or by specific colleges and universities, these programs help fill the gaps in financial aid. Student hours are limited and the pay is not high, however participation can be beneficial.
- Individual Retirement Accounts (IRAs): You can use money saved in an IRA to fund educational expenses. With a Roth IRA (most common for this use) you generally have more control over how the money is invested, but there are lower annual contribution limits than for 529 plans. You can also avoid the 10 percent early withdrawal penalty if the funds are used for qualified college expenses. If you end up not needing the funds for college expenses, the money can remain in the Roth for retirement.
More than 1,500 Iowans responded to ICUL’s mid-year consumer survey.
About the Iowa Credit Union League
The Iowa Credit Union League is the trade association that represents the interests of Iowa credit unions and their nearly one million members. Credit unions are not-for-profit, financial cooperatives owned and operated by their members. Iowans use their credit union membership to receive higher interest rates on savings and lower interest rates on loans. For more information on ICUL and Iowa credit unions, visitwww.IowaCreditUnions.com. Follow ICUL on Twitter at www.twitter.com/icul or on Facebook atwww.facebook.com/iowacreditunions.
About the Iowa Credit Union Foundation
Founded in 1995 as the philanthropic arm of the Iowa Credit Union League, the Iowa Credit Union Foundation’s (ICUF) primary focus is to eliminate poverty in the state of Iowa. ICUF seeks to carry out its mission to help Iowans build wealth, responsibility and independence through its various programs, grants and scholarships. For more information, visit www.IowaCreditUnionFoundation.org.