According to the College Board, for the 2016-2017 school year, the average total cost of attendance for an in-state public college is around $24,610. Even worse, attending an out-of-state public college costs around $39,890 this year while a private college costs $49,320, on average.
With these high costs, it is crucial for students and their families to consider how they pay for their higher education. College savings accounts, grants and scholarships, and financial aid often knock out a portion of the bill, but they rarely cover all of it.
So how do these families bridge the gap?
Unfortunately, in most cases, the answer is student debt.
Last year, 6 out of 10 students graduated with student loan debt, with the average borrower holding around $28,400, according to our college debt statistics. That is not a small chunk of change, and repayment is often more difficult than students could have ever imagined during their time in college. Over 10% of federal student loan borrowers are now in default, and millions more are currently deferring payments.
Student loans aren’t all bad though. They do open up opportunities for young adults that would never have been previously possible. Taking out student loans in order to obtain an advanced education can be worth it, if they are used responsibly.
The first step to responsible student loan borrowing is figuring out how much college will cost and how any debt that is taken on will be repaid. At LendEDU, our goal is to help students and their families financially plan for college and post-graduation. This is why last year we released our first CRRI report. Many of our readers found the report helpful in gauging the risk/reward of attending specific colleges, so we decided to do it again in 2017!
This year, we crunched the numbers again to answer the same question…
What is the risk-reward of attending a 4-year college or university?
To answer this question, we defined the risk of attending college as the average student loan debt per graduate and the reward as the average early career pay for graduates, or the median salary for alumni with 0-5 years of experience. It should be noted that this year we used debt per graduate instead of debt per borrower which we used in 2016. To calculate CRRI we used the following formula:
College Risk-Reward Indicator:
Average Early Career Pay ($)
Average Student Loan Debt at Graduation ($)
Why Should Students, Families, and Institutions Consider CRRI?
The years immediately following graduation are the most critical in terms of successful student loan repayment. Early on in repayment, principal balances are the highest and more interest accrues than any other time (unless you make no payments, of course!). This is why we used early career pay as opposed to another metric, such as mid-career pay.
The key to being financially prosperous as a young college graduate is having low student loan debt and a high early career pay. On the other hand, having high debt and low pay is a recipe for financial hardship and stress.
If students are unable to afford their debt, they will often miss payments and may even become delinquent. This has a devastating and lasting effect on credit scores, which could haunt borrowers for years to come. Though it may not be immediately apparent, student loans can impact eligibility for auto loans, mortgages, and low-interest credit cards. Student loan debt can also hold back young adults from saving for retirement and investing.
For this year’s CRRI report, we analyzed 752 public and private 4-year colleges and universities in the United States. Schools with the highest CRRI values (College of the Ozarks – 100.27) should be considered the best risk adjusted choice for undergraduate students. Schools with the lowest CRRI values (Grambling State University – 0.79), on the other hand, should be considered the worst risk adjusted choice for students.
CRRI Rankings for 2017
In the following table, the column header abbreviations represent the following:
CRRI: College Risk-Reward Indicator value (see above)
ECP: Early Career Pay (median salary for graduates from that school with 0-5 years of experience)
DPG: Debt Per Graduate (average debt per graduate from that school)
Hints: Use the search function to find a specific school. Search a state’s postal code to see the rankings in that state.
Author: Dave Rathmanner
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