Q&A With Joseph Orsolini: Is College Worth The Money? Yes, But Maybe Not A Brand Name College.

by Kristi Eaton on January 20, 2011

Harvard may not be worth the money. Photo by pegase 1972/Flickr, used under a Creative Commons license.

We heard yesterday from a lawyer who is so chagrined about her employment possibilities that she put her law degree for sale on eBay. So law may be a bad bet – how about college?

OOTS News contributor Kristi Eaton set out to see how things are faring for college grads, and to find out: is the B.A. worth the money?

Less than 50 percent of undergraduate college students are graduating in four years, and when they do finally get that piece of paper, they are tens — if not hundreds — of thousands of dollars in debt. With unemployment reaching close to 5 percent for college graduates, it begs the question: Is an undergraduate degree worth it in today’s economy?

It is, according to Joseph Orsolini, a certified financial planner with CollegeAidPlanners.com.

The problem, Orsolini says, is how people are paying for their undergraduate degrees. He says parents and students are making poor choices in picking a school, selecting based on brand name recognition rather than looking at the best value for their money.

“It is like buying a car,” he says. “You can go out and buy a Cadillac Escalade or you can get a Kia with cracked windows.  Both get you from this side of town to that side of town.  People need to re-look at how much they are paying and investing in college.”

Below, Orsolini speaks with Out of the Storm News about what parents and students need to consider before signing on the dotted line.

OOTS: What do people need to do differently to pay for college?

Joseph Orsolini: There are a couple of things to think about. The age-old idea of going off to college, the ivy-covered building, four years on campus was great, but college cost has just gone up so much in the last 25 to 30 years that a lot of parents — their college experience is going to be completely different from kids today.  Some of the things people have to start looking at is maybe starting out at a junior college, living at home for a couple of years or maybe commuting before going off to that four-year school.  Room and board nationally is about $9,200 per year.  Living at home saves you close to $40,000 for the cost of college.

OOTS: I know some students think they need the brand name undergraduate degree to get a good job or get into a good masters program. Is that not the case?

Orsolini: I don’t think so. And a study by a professor says this, too. He went back and looked at two sample groups from the 1970’s.  He tracked their academic profiles.  One group went to the Ivy League schools; the other group went to the state schools. He tracked those groups over a 25-year period. There was no significant difference in income.  That kind of tells me that if might help for the first job a little bit, but after that it is like, what have you done for me? If you think about it, who is the most highly educated person in your life?  Your doctor is. Do you have any idea where your doctor went to college? Most people don’t.  They have no idea.

OOTS: You are working with a girl who wanted to go to a brand name school and is now more than a $100,000 in debt. Can you talk a little about her case?

Orsolini: She wanted to go to the brand name school, so she went to Notre Dame, didn’t care what it cost.  She ended up piling up a huge amount of debt, $172,000.  This poor girl is working at the local mall right now making $800 a month.  She had to go back to community college to get in the certificate program so that she didn’t have to pay it all back immediately. She makes $800 a month; her loan payments are  $1,200 a month. She’s going to start law school this week.  She will probably pile on another $130,000.  This poor girl will be 26 years old and $300,000 in debt.

OOTS: Will she ever be able to pay that off?

Orsolini: Her plan is to be a prosecutor.  She will be making $45,000 to $60,000.  She’s not going to be able to pay that money back.  If she ever moves out of her parents’ house or buys a car, it will be a miracle. I kind of joke that if she ever gets married, it will be for true love because nobody is going to sign on board for $300,000 of debt.

OOTS: In her case was it choosing the brand name?

Orsolini: That was the thing, she wanted to go to the brand name school and have that diploma from there.  She could have just as easily gotten into the law school with a degree from a lesser school, which probably would have given her more money and she wouldn’t have to pay the whole sticker price.

OOTS: With students taking out so many loans today, is there anything that they need to consider?  I know there is a big issue on student loan companies.  What are your thoughts on that?

Orsolini: If you are going to borrow, borrow the max you can from federal loan programs.   You can borrow $27,000 over the course of four years — $5,500, $6,500, $7,500 and $7,500 over the four years, with $311-a-month payment when you graduate.  That is fine, it is do able for kids.  You go beyond that, you are getting into private loans and the private loans are going to be variable rates, which might be cheap now, but a couple years down the line it might spike.  You are going to run into nightmares there.  I have a young lady who is a teacher. She just graduated and started a teaching job. Her loan payment was $685 a few months ago when I got an e-mail from her.  Her payment had gone up because interest rates had gone up.  She is now paying $775.  That is a third of her take-home pay.  She makes $2,000 a month. She will pay a third of her pay for her student loans until she is 38 years old.  That impacts everything in your life.  I tell parents when they are thinking about kids borrowing money, I say, ‘How many grandchildren do you want to have?’  If your daughter is $300,000 in debt, you are probably not going to have as many grandchildren as you want to have.

OOTS: What do parents need to do differently in their role?

Orsolini: One of the problems with college is the tail wags the dog. The kids go out and pick a college they like and then it comes up to the parents to find a way to pay for it.  Parents need to do a better job of setting parameters for their kids on what they can afford to pay for college.  Maybe you can’t go to that out-of-state public university. Maybe you have to stay instate where you can get a tuition discount.  Maybe you have to commute and live at home for a couple of years.  Parents should do a better job of planning and saving for it, but when it comes to the decision time, they need to set parameters with kids to let them know what the family is going to be able to do to help them pay for it.  Too often parents will either jeopardize their retirement and not save enough for retirement, or they’ll let the kids go into debt.

When you are 18 years old, you have no idea what borrowing $100,000 is like.  So it is important for parents to make working budgets for kids if they are talking about borrowing.  They need to show them, this is what your life is going to be like once you graduate.

OOTS: Would you like to add anything else?

Orsolini: The biggest thing parents have to focus on today is the school selection piece.  Try not to get tied into brand names.  I had a family come in where the son was going to be an engineer. He had a free ride to a big state university or an opportunity to go to one of these elite private schools, which was going to cost them $50,000 a year.  Guess which one this family picked?  They are going to spend $200,000 for their kid to get an engineering degree and then maybe go on to grad school after that.  I asked this family, ‘How much more do you think he is going to make by going to that elite school?  Do you think it will be $10,000 more a year?’  They said, ‘No, not that much.’  Well, that is a 20-year payback if he even makes $10,000 more a year to pay back that $200,000.  Parents have to do a lot better at working with their kids with planning and working on the school selection.

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