College is a financial decision

Financially Inclined March 21, 2025 Transcript

Note: Marketplace podcasts are meant to be heard, with emphasis, tone and audio elements a transcript can’t capture. Transcripts are generated using a combination of automated software and human transcribers, and may contain errors. Please check the corresponding audio before quoting.

Yanely Espinal: What’s up, everybody? I’m Yanely Espinal and this is Financially Inclined from Marketplace. We’re sharing money lessons for living life your own way.

Finishing high school is a big accomplishment. I know y’all have worked really hard to get where you are now. And there are so many options for what can come next. Like do you want to go to college? What kind of school is right for you? Does a two-year or a four-year program make more sense for your goals? All of these options are exciting to think about and maybe also a little bit overwhelming. But I want you to remember that this is also a financial decision. In fact, choosing a college is one of the biggest financial decisions you’ll make in your life. It’s going to impact your career path, job opportunities, future income, and of course, your debt.

To help us think through your return on investment for your college choice, I’m talking with college counselor Ralph Johnson. Ralph works at Democracy Prep Public Schools in New York City, where he’s the Vice President of College Success. Over the years, he’s helped so many students navigate these big choices and make sense of all of the associated costs. So I knew he’d be the perfect guest to help us out today. And I’m really excited to hear his expert advice. All right, let’s get into it.

Espinal: Ralph, you’ve been in college counseling for over 10 years, and working with students day in and day out, how do you approach the conversation with a student about this decision they’re about to make: what life looks like after high school, beyond high school graduation? How do you approach those conversations? 

Ralph Johnson: I think it’s always great to start out with a conversation that includes what their desired career path is, what is the educational path that’ll best get them there, what the cost associated with that educational path is? Also things like, what do they want in the future? Like what kind of lifestyle do they want to have? Where do they want to live? Because I think when you establish those things, then the conversation is really about, what’s the return on your invested time and capital? And I think framing that in that way makes it a lot easier to have all of the other conversations about making choices about education and next steps with relation to their dollars.

Espinal: Now, but when you say college, I think a lot of people just kind of think of it as just one big bucket term, like this umbrella term, but there’s a lot more to college. Like there’s different types of colleges. So if somebody is thinking about college and they’re sort of unsure, what are the different types of colleges a student might have as an option?

Johnson: Public schools, private schools, big schools, small schools, far away from home, close to home. Sometimes the conversation is: Hey, do you want to be on a big campus where there are endless opportunities to meet people and you’re learning in a classroom that has lots of people, lots of different people you can interact with or do you learn better in a smaller environment where you’re more likely to know your professors and you can get that individual attention, where you might know everybody in your class. Are you really looking to get farther away from home or stay closer to home? So there’s some financial considerations, there’s what you want to study considerations, like the academics, there’s the social fit. These are all some things that you can really think about when you’re choosing a school. 

Espinal: Can you talk about the pros and cons also of like community college? Like what might a student not pay attention to that could potentially be a benefit of considering community colleges, which maybe it had not been on their radar? 

Johnson: I’m actually a huge fan of community colleges for a few different reasons. It’s going to be an opportunity to get a two-year degree, an associate’s degree, at a very low cost in comparison to your typical four-year college. There are some people who then take that associate’s degree and then use that to work, like work in IT or to work in entry-level sort of medical field. So you find that at community colleges and you find it at a fraction of the cost of what it would cost at a four-year school. But here’s the other thing that I really like about the community college option: Many community colleges have agreements with four-year schools that say as long as you take a specific set of classes, it will automatically admit you to this four-year school. So there’s some, for some students, it could make a lot of financial sense to say, I’m gonna get two to three years of credits under my belt at community college prices and then go to a four-year school that’s more expensive to finish out my last two years or year and a half. And in that way, you can save a lot of money by going to the community college before going to the four-year school. A downside with community college that I have seen: the completion rates for community colleges can be lower than comparable four-year schools. And so I think it’s really important to, you know, assess how much support is available from that community college and look at whatever completion rate data is available for the school you’re considering so that you can choose a school that is likely to support you through completion of your degree.

Espinal: What are like the criteria or like the list of things that students should consider because I remember just getting a bunch of pamphlets in the mail, seeing a bunch of ads online for all these different colleges and universities and they’re all wanting you to apply and go to their school but you sort of have to have some criteria for like, what is the right fit for you? You mentioned like, pay attention to the graduation rates and look at what support you’ll get. What else? What are some other criteria that students should pay attention to? 

Johnson: I think affordability is a huge one. And every school on its website will have what’s called a net price calculator. I think that’s a really great way to assess whether it’s something that you can afford. I look at the six-year graduation rate of the school, and I like to see when that number is 70% or higher. The higher the graduation rate, the higher the likelihood is that that school provides the type of support that enables students to graduate.

Espinal: Yep.

Johnson: Another thing that I like to look at is the percentage of need-met financial aid provided by the school. I like when that number is as close to 100 as possible, because what that means is the school will make sure that you get every dollar you need to be able to attend that school. I like to look at the alumni giving rate. The alumni giving rate of a college can give you a sense of how satisfied people were. Like if you went to the college, you spent all of this money to go there and then you decide to give money once you’re gone, it means that the school really treated you well. It means that something about the experience was really special for you. It’s also important to look at what are the most popular majors and whether the school offers some of the degree programs that you might be interested in. Last thing that I sometimes look at too is just, what are the demographics of students?Where do they come from? What do they look like? Because I think that can sort of help you determine whether or not you’ll feel at home on that campus. 

Espinal: Yeah, I love those. Those are so great. And there’s a few in there that I wouldn’t even have considered. So I like that. Dropping, dropping some gems for us.

Johnson: Thank you.

Espinal: I learned a lot when I was talking to Ralph and I hope you did too. So I wanna go ahead and review some of the new vocabulary terms that he brought up. 

Graduation rate: This is the percentage of students who complete their degree within a specific timeframe. Ralph mentioned the six-year graduation rate, which means how many students graduate within six years. And this is a really good measure of how much a school is supporting their students. 

Net price: This is the total actual cost that you’ll pay for something after all the different fees and discounts have been accounted for. So when we’re talking about the net price of college, that would be tuition times four years, or however long it’s going to take you to graduate, plus your room and board, the cost of your textbooks, and then minus any grants or scholarships that you might be awarded. Now, if you take out loans, then don’t forget to consider the interest you will have to pay on that too. It sounds a little complicated, but luckily there are net price calculators available online which you can use for free.

FAFSA: Free Application for Federal Student Aid. This is a form that you fill out to determine how much your family can afford to pay for college. We’re going to be talking about this a lot more in the next episode, so make sure you come back and check that out.

Now, one other thing that Ralph mentioned was the net price calculator. So I want to take a minute to talk about that a little bit more. A net price calculator can be a very helpful tool to weigh your options and figure out what you can afford. When you look at the college admissions websites and pamphlets, the tuition price they tell you up front is called the “sticker price.” And that’s the official price, and it does not take into consideration any scholarships or financial aid you might qualify for. So that means the amount you actually pay could be a lot cheaper. That’s where net price calculators come in. Most colleges have their own version of this tool available on their website. Basically, it’s a form where you plug in a bunch of information about yourself, like where you live, what your grades are, how much money your family has. And then the calculator uses that information to come up with an estimate of how much the college is actually going to cost you. The more information you can plug in, the more accurate the estimate is going to be. This tool is always free to use, and it probably only takes you like 15 minutes of your time, so it’s definitely worth it. 

I hope today’s episode puts you in a better position to tackle these big decisions about your future. I know you got this. 

If you have any questions for us or you want to share your own story, our email is financiallyinclined@marketplace.org.

Financially Inclined is brought to you by Marketplace from American Public Media, in collaboration with Next Gen Personal Finance. I’m your host, Yanely Espinal. Our Senior Producer is Zoë Saunders. Our Video Editor is Francesca Manto, and our Graphics Artist is Mallory Brangan. The podcast was edited by Katie Reuther. Gary O’Keefe is our Sound Engineer. Bridget Bodnar is the Director of Podcasts. Francesca Levy is the Executive Director. Neal Scarbrough is the VP & General Manager of Marketplace. Our theme music is by Wonderly.

Financially Inclined is funded in part by the Sy Syms Foundation, partnering with organizations and people working for a better and more just future since 1985. And special thanks to the Ranzetta Family Charitable Fund and Next Gen Personal Finance for continuing to support Marketplace in its work to make younger audiences smarter about the economy.