College 101: financial literacy

As college tuition rises, high schools and colleges are trying to teach financial literacy, reports Ed Week.

Tidewater Community College in Norfolk, Virginia requires all would-be borrowers to complete a current budget showing income and expenses and a future budget, including expected earnings, showing how they’ll repay the loan.

Reason Chandler looked up his potential salary as an urban planner, to write his repayment plan.

“This budget worksheet slows you down a bit and makes you realize, ‘Hey, I have to pay this money back,’ ” said the 26-year-old, who says it took just 15 minutes to meet the college’s new financial-aid requirement. Despite qualifying for Pell Grants and veterans’ benefits, Mr. Chandler estimates he will have accumulated $45,000 in debt by the time he finishes his education, including a master’s degree. “I’m pretty confident that once I’m done with college, I’ll be able to secure a stable job, start my career, and I’ll be able to balance things out easily.”

Four states have made financial literacy a graduation requirement and 19 others require financial education to be included in the curriculum, reports Ed Week.

Ken Krause of Fitzgerald High School in Warren, Mich., teaches a personal-finance class using free resources from the National Endowment for Financial Education, a Denver-based nonprofit.

. . . Since the students don’t have a good grasp of how long it takes to earn a certain amount of money, they build budgets for college and for work in various careers. The class learns about the potential salary boost that comes with a college degree. Mr. Krause doesn’t want to discourage his students from college, but he wants to prepare them for the long-term consequences of borrowing too much.

Rivier College, a private school in New Hampshire, offers money-management workshops for students like Jessica Harringon, a sophomore majoring in early-childhood education.

“I knew when I applied that it was a really expensive college,” said Ms. Harrington, who expects to have $100,000 in debt when she graduates and expects to earn $16,000 to $34,000 a year as a teacher. “I’m hoping the caliber of the education will allow me to get a job that will make it easier to pay off.”

Looking ahead to graduate school, Ms. Harrington is hoping to get a position on campus that would cover her costs so she doesn’t have to borrow more.

If she owes $100,000 and works for $16,000 to $34,000 a year — even with a college degree, preschool teachers don’t earn much — how can she possibly make loan payments?

I guess the new, improved Pay As You Earn would help by limiting payments to 10 percent of her above-poverty income for 20 years. In fact, she’d pay nothing at $16,000 a year and only $150 a month if she reached the top end of the range. She might as well borrow more for that master’s degree, because she’ll hit the payment cap long before she can pay back $100,000. Of course, if she marries a guy with a decent income, her payments will go up. She can’t count on being poor.

There are low-cost ways to earn a degree — or the equivalent.