Summer classes: A good deal for you?

Light summer reading.  Photo courtesy of Nina Hale, though a creative commons license.

Indiana University announced an interesting plan last week to reduce education costs (and more effectively utilize its academic buildings year-round).  IU is now offering a 25% reduction in tuition for summer classes. This is a great deal for some students. Is a summer class -- discounted or not -- a great deal for you?  Ask yourself a few questions before signing up for summer.

Will the course(s) help you graduate on time? Will it help you graduate early?

Talk to your academic advisor about this one.  Behind in credits? Summer classes are a great way to catch up so that you can graduate on time. Ahead on credits? A well-chosen summer class or four might even mean you can graduate a semester early. 

Will summer coursework help you with a goal?

Maybe summer coursework doesn't bring graduation closer, but helps you gain a valuable or valued minor or certificate that you don't have time for otherwise. You might be an art major who seeks a business minor or vice versa thanks to summer study.  

Will you be paying the rent anyway?

If you have a 12-month lease, you are paying for a large part of your educational expense whether present at school or not. 

If you normally live on campus with a 8- or 9-month lease, sub-leasing an apartment can be a cost-effective option for summer study.  In college towns such as IU's Bloomington, IN, students leave an abundance of empty houses and apartments behind in the summer. It's a sub-leaser's market.  You might also check with your residence hall to see if they are looking for summer help in return for a place to stay.

How will you pay for the class?

Are you at Big State, but paying out-of-state tuition? Even with a special discount, the price tag can be high.  Are you at the small private and paying tuition to match?  Add up the costs and compare to the alternatives. It might make more sense to go home for the summer and take a class at the local community college. Talk with your academic advisor about transfer policies and procedures.

What are you giving up?

The summers of college are not likely to be replicated in your later adult life. It's a chance to recharge, to gain important experiences or to work ahead in non-academic ways. A prestigious internship might mean more to your future than graduating early; summer jobs can take the edge off of academic-year costs. Think about the opportunity costs of taking summer classes.

Will taking summer classes affect you financially in the future? 

 Ask yourself if it affects your financial aid (loan or scholarship) and talk with your financial aid counselor or scholarship coordinator if you don't know the answer. Some scholarships are finite and taking a summer class now means there is less funding for a future semester. In the long run, this might be fine, but all the more reason to make sure the summer classes count.

But, what about the fun of learning, you say? Perhaps you want to take a class for the fun of it this summer? By all means, but know the opportunity costs.  Prudent scholars don't take summer classes without weighing their options.

Don't Spend Your Inheritance

"We're spending our children's inheritance."
~ bumper sticker

Your parents might joke that they are spending your inheritance. They might very well be spending it -- on you.  According to Sallie Mae, 24% of college savers use retirement accounts as college savings vehicles. 

Parents shouldn't tap their retirement savings to put you through school.  Why?  Because your parents will need that money to live on and they are going to need a lot of it. They could live a long, long time. Every dollar they take out for your college education is a dollar they don't have accruing interest to cushion their old age -- and your middle age as a caregiver.

Retirement savings is built on the miracle of compound interest. Compound interest needs time to work, and tapping savings mucks it all up. It reduces interest, which reduces interest, which reduces interest. See the Motley Fool's explanation and illustrations of compound interest.

Prudent scholars don't drain their parents' retirement accounts. 

Further Reading:
"Don't raid an IRA to pay for college" at Investment News
"An Introduction to 529 plans" by the U.S. Securities and Exchange Commission

The Anti-dowry: Student Loan Debt

Are student loans bad debt?   Photo: Tom Peck

The New York Times reports this week about rising student loan debt and the ramifications. In 2010, the average debt of college students graduating with loans was $24,000.  The gist of the article is that student debt is becoming more of a factor in American life. More college graduates have it and more of them have a lot of it. 

It's sometimes called the anti-dowry because unlike a dowry, which in some cultures helps a young couple get set up in life, a student loan debt can delay marriage, family, and home ownership.

Let's look at some salient findings and facts from the article.

The bad
- Student loans cannot be discharged by bankruptsy.
- Students who borrow from for-profit colleges especially likely to default.

The good
- College graduates earn more over their lifetime.
- College graduates are less likely to be unemployed.

The interesting
- President and Mrs. Obama finished their educations with a combined $120,000 of debt.
The Times reports that some economists are concerned that the scary stories of college debt will discourage people from attending college. But, college debt is seen by other experts as "good debt."

The Take-away: 
If you need to take on a loan to take on college, do it. Do it with careful deliberation and don't be part of the lost generation of young people who either forsake an education or spend too much on one. How do you know what's too much?  We'll explore in future posts.