Business

Determine how much college costs - before and after graduation

Repaying loans needs to be an important part of the equation

Nate Matherson is a co-founder and CEO at LendEDU, a marketplace for student loans and the student loan refinance that was born out of the Iowa Startup Accelerator in Cedar Rapids.
Nate Matherson is a co-founder and CEO at LendEDU, a marketplace for student loans and the student loan refinance that was born out of the Iowa Startup Accelerator in Cedar Rapids.

As high school seniors start receiving their college acceptance letters this spring, the conversations around the dinner table likely will shift to discussing the advantages and disadvantages of different college choices.

But it can be difficult to measure one school against another, as there are a lot of factors to consider. Things such as the quality of the academics, the diversity of student life and the cost of tuition will be important.

For most families, the cost of attending each college will be a significant factor in their decision. That’s because college is expensive.

According to College Board, in 2016-17, it cost on average $24,610 to attend an in-state public school, around $39,890 to go to an out-of-state school and a shocking $49,320 per year to attend a private school.

Most families can’t pay for those costs out of pocket and so resort to student loans. In fact, the average borrower has around $29,000 in student debt upon graduation. In Iowa, the average borrower has $30,250 in student debt upon graduation.

That has left many college graduates struggling to repay their student debt.

But how much you earn upon graduation can greatly impact your ability to repay your student debt. That’s why I would like to add one factor for parents and future freshmen to consider when making their college decisions.

The College Risk-Reward Indicator is a way to measure how easy it will be for new graduates to repay their student loans when they graduate based on the school that they attended.

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The CRRI measures how much the average graduate at any particular college owes in student debt upon graduation against how much the typical graduate makes in the first five years of their careers. You can see the list at http://thegaz.co/2nt6pIp.

Especially in the first few years after graduation, it can be difficult to repay student debt, as that’s when a college graduate’s salary is at its lowest. If they’re able to easily repay their loans in these critical years, that likely means that their student debt is manageable and less likely to pose an undue burden on their lives.

This debt creates a lot of stress and could lead to severe financial consequences if the borrower ends up being unable to make payments on their loans. The impact of missed payments or of defaulting on loans could have long-standing impacts on a borrower’s credit score.

Iowa Schools

In our analysis, we looked at the CRRI of 752 public and private colleges across the United States. When it comes to Iowa colleges, we found significant divergences in risk and reward.

The college with the highest CRRI — or the school where it would be easiest to repay your loans — was Grinnell College, with a CRRI of 4.36. That’s because graduates tend to only have $9,420 in student debt, but make $41,100 a year during the first years of their careers.

The Iowa school that fared lowest was Clarke University with a CRRI of 1.18. That means that student debt was almost equal to one year’s pay.

Other schools that stood out as having good CRRIs include the University of Iowa at 3.31, Upper Iowa University at 3.12, Iowa State University of Science and Technology at 2.90, University of Northern Iowa at 2.55, and Drake University at 2.26.

All the rest of the schools fell below a CRRI of 2, including:

— Mount Mercy University — 1.85

— Cornell College — 1.80

— Coe College — 1.70

— Luther College — 1.54

— Buena Vista University — 1.51

— Central College — 1.49

— St. Ambrose University — 1.46

— Briar Cliff University — 1.42

— Simpson College — 1.42

— Morningside College — 1.26

— Grand View University — 1.22.

While the CRRI is an important indicator, it’s critical to take it in context. If your child receives a larger than average package of financial or merit aid to a particular school, they’ll likely end up graduating with lower than average student loans, of course.

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What a graduate is likely to make in the first five years of her or his careers also will depend on what degree that person takes. Certain majors will end up making more in those early career years than majors in other fields that aren’t as lucrative.

While the CRRI shouldn’t be the only thing that you consider when deciding on a school, it’s a useful addition to the criteria typically used to make college choices. By giving families a snapshot into how easy it will be to repay student loans, they can choose a college that potentially could prevent their child from taking on more debt than they’ll be able to manage.

l Nate Matherson is a co-founder and CEO at LendEDU, a marketplace for student loans and the student loan refinance that was born out of the Iowa Startup Accelerator in Cedar Rapids; nate@lendedu.com

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