Where Students Can Cover College Tuition with a Part-Time Job: Study

Students Studying Learning Education

Affordability was a major factor when 19-year-old Bintou Kabba was considering colleges to attend after high school.  She enrolled at CUNY Lehman, a four-year public university in her native Bronx, N.Y. The 10-minute commute from her home, where she lives with her parents and six siblings, was part of the allure. But the low cost of tuition was essential for Kabba, an ambitious student with dreams of becoming a neonatal gynecologist but without the financial means to afford a pricey university. Most CUNY Lehman students pay just $2,374 out of pocket for a year of schooling.

But before she began classes, Kabba needed a job. “I was broke and I needed money so badly,” she told MagnifyMoney. So, she joined the ranks of so-called “working learners” attempting to counter the costs of college with part-time jobs. About 40 percent of undergraduates and 76 percent of graduate students work at least 30 hours a week throughout the school year, according to the Georgetown Center on Education and the Workforce.

As college costs have skyrocketed in recent years, the old adage “Work your way through college” has become increasingly out of touch with reality. Students who work rarely earn enough to truly cover the costs of their education.

MagnifyMoney sought to find out which colleges are still affordable enough for working students to afford on part-time wages. In a new study released Nov. 9, we found a student earning the federal minimum wage ($7.25/hr) would have to work full-time — nearly 44 hours per week — to afford the average annual net tuition at a four-year public institution today.

We then wanted to see how far a student working 20 hours per week at their state’s minimum wage could get toward covering their net tuition. Their post-tax annual earnings were compared with the net tuition price at more than 2,500 public and private non-profit institutions.

Key findings:

  • We found it is impossible to cover the tuition gap at most four-year schools, both private and public.
  • Students can afford to cover their net tuition costs with a part-time job at only 50 out of 645 (7.75%) of four-year public institutions. Students can feasibly cover net tuition costs with a part-time job at just 24 out of 1,208 private nonprofit four-year institutions (2%).
  • Two-year public institutions were significantly more affordable — it was feasible for part-time working students to cover net tuition at 287 out of 656  two-year public schools (56.25%). On average, a student earning the federal minimum wage would only need to work roughly 25 hours per week to cover net tuition costs at a two-year public institution.
  • Less than 5% of private two-year and private four-year institutions are affordable enough for a part-time working student, MagnifyMoney found.

The cost of going to college has outpaced the rise in wages by a staggering amount over the last decade. When faced with a gap in college costs and earnings, families typically have just one place to turn – student loan debt.

Kabba wanted to avoid student debt at all costs. That drove her decision to enroll at CUNY Lehman. The school is the fourth most affordable four-year public college on our list. Earning the New York state minimum wage of $9/hour, a part-time working student could pocket more than enough to cover their expenses.

Still, working long hours to cover college expenses is far from the ideal college experience.

Research has shown demanding work schedules can all too easily conflict with student’s academic performance. Georgetown’s Center on Education and the Workforce warns against any job that demands more than 30 hours per week from a full-time student.

On a tip from her high school counselor, Kabba landed a $10/hour gig soliciting telephone donations at a midtown-New York charity. During her freshman year, she worked 20 hours most weeks. With a full course load to juggle as well, it wasn’t long before Kabba started to feel the pressure of conflicting responsibilities.

“It was just too much,” she said. To get to work each day, she took a 45-minute train ride from the Bronx to midtown. Rather than working around her class schedule, she had to work her class schedule around her job, because the charity had strict guidelines on when workers could call donors. By the end of her freshman year, her grades started to reflect her strain.

“I decided I’d rather be unemployed and actually do well in school,” says Kabba. She quit before her sophomore year.

Not long after leaving her inflexible charity job, Kabba found another solution. Through a special program offered at CUNY Lehman, she landed a job on campus that paid $9/hour and only required 10 hours of work per week. Reducing her hours and pay meant smaller paychecks, but a better chance she’ll earn the grades she needs to achieve her goal of going to medical school. “It’s on campus and it’s convenient,” she said.

Behind the data

To make our findings more exact, we used the minimum wage of the state in which each school resides to determine the annual earnings of working students. Next, we analyzed data from the National Center for Education Statistics to determine the net tuition costs of each school. The net price is more accurate than a college’s sticker price because it factors in financial aid, scholarships and grants. The net price is what students and families actually pay out of pocket.

We stuck to a 20-hour part-time work schedule because we thought it was unrealistic to assume students could juggle a full-time course schedule and a full-time job. In fact, Georgetown recommends students work no more than 30 hours per week in order to maintain good grades in college.

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Tips for working college students

It is virtually impossible to “work your way through school” anymore. The old adage just doesn’t apply to today’s college students, who are paying more than ever for college tuition and can’t feasibly cover their expenses with part-time income alone.

However, there are still benefits to working while in college. Here are some tips on how to maximize savings as a working student.

How to save on college costs with a part-time job

  1. Start small. Try going to a lower cost community college and transferring your credits to a larger institution later. As our study shows, it’s possible for students working part-time to cover net tuition at the majority of two-year public institutions (56.25%). By covering tuition and fees with a part-time job at a two-year school, you can reduce your need for financial aid by half and still graduate from a four-year institution.
  2. Work part-time at a campus job or through a work-study program. Jobs tied to campus are more likely to work around your course schedule and be flexible during unusually demanding times of year, such as quarterly exams and finals.
  3. Stay close to home. Not only will you save on tuition by enrolling at an in-state school, but if you are close enough to continue to live with your family while you’re studying, you could save big on housing expenses. If living at home means commuting by car or public transit for classes, factor in those additional costs.
  4. Don’t rely on student loan debt for expenses you can cover with part-time work. Save the student debt for tuition and other fees that are usually required in one lump-sum payment at the beginning of the semester. When it comes to extra expenses, like your trip to Key West for spring break, or moving to an off-campus apartment, lean on income earned from a part-time job. If you move off campus, you might find it is possible to afford rent (with support from roommates) with income from a part-time job.
  5. Choose your job wisely. If possible, find work in your area of study, which can give you an early jump start in the job market before you even graduate. If you have several years of job experience under your belt at graduation, you’ll be light years ahead of your peers graduating with a comparatively thin resume. Another study by Georgetown’s Center on Education and the Workforce found college students who worked or took internships while in college were more upwardly mobile after graduation and more likely to move into managerial positions.
  6. Take advantage of in-state tuition rates even if you are not a permanent state resident. Each state has its own residency requirements for students looking to qualify for in-state tuition rates, which can be significantly lower than out-of-state rates. Some states will allow students to qualify for in-state tuition if at least one of their parents has been a resident for at least one full year before the student enrolls. If the student is independent — meaning they do not receive financial assistance from a parent to attend college — most states require at least one year of residency in the state. There are other documentation requirements, which can be found at FinAid.org.
  7. Don’t sacrifice your studies for a paycheck. At a certain point, the financial benefits of working part-time might not be worth the additional stress and attention a job might demand. The majority of working students ages 16-29 work 20 hours or less per week. However, research has shown both working and non-working college students graduate with similar levels of student loan debt — 34% of working college students graduate with $25,000 or more in student loan debt, compared to 37% college students who don’t work while in school.
  8. Graduate early (or on time). Dragging out your time in college is a quick way to add thousands of dollars to your student debt load. And it happens more often than you might think. Only 40% of students graduate within four years of enrollment across all types of institutions, according to the Department of Education. Less than one-third of college students graduate on time at public institutions. Save additional tuition expenses by completing your degree in four years or less.

 

The post Where Students Can Cover College Tuition with a Part-Time Job: Study appeared first on MagnifyMoney.

MagnifyMoney: 2016 Housing Affordability Study

Housing Affordability StudyAs the cost of housing soars ever higher and household earnings remain stubbornly stagnant, how realistic is homeownership for young people today?

Saving up for a new home can feel like an endless slog for young working Americans. The upfront costs alone — the down payment, closing costs, property taxes, etc. — are enough to scare off prospective buyers who are struggling to make ends meet.

Just over one-third of Americans under age 35 owned homes as of mid-2016, down 12% from 2010, according to U.S. Census data. While homeownership rates fell across all age groups during that same period, none experienced a steeper drop-off than the under-35s.

MagnifyMoney wanted to figure out how realistic homeownership is for young Americans today — that is, how long it would take them to save up for a new home in their area if they started saving now.

Calculating Home Affordability

Our analysis revealed two different sets of buyers — those who can afford the cost of a new home in their area and those who cannot. Affordability was largely driven by a worker’s ability to qualify for a mortgage loan large enough to cover the cost of a median-priced home in their metro area. Given these two different cases, we used two methods to determine how long it would take these groups to save for a home.

For buyers who can’t afford a large enough mortgage:

We assumed that the borrower can spare 35% of their monthly income toward mortgage-related payments. Based on this amount and the current interest rates for a 30-year fixed-rate mortgage, we calculated the total mortgage that the borrower can afford to take.

We then took the mortgage amount they would qualify for and subtracted it from the cost of a median-priced home in their area to find the mortgage gap they need to fill. Then, we added other necessary upfront costs: 4.5% closing costs and a standard emergency cash reserve equal to one month’s mortgage payment.

We determined, based on the median income for their age, how long it would take to save that amount, assuming a 20% savings rate.

Example:

We estimate a 25 to 44 year-old homebuyer in Salinas, Calif., would reasonably qualify for a $275,385 mortgage. A median-priced home in Salinas, Calif., costs $750,000. So, she would have to save at least $474,615 to fill the mortgage gap. On top of that, she would pay another $33,750 in closing costs (assuming an estimate of 4.5%) and need to set aside a $1,274 emergency cash reserve.

In total, she would need to come up with $509,612 to be able to buy a home in her area. If she saved 20% of her income toward that goal, it would take her 46.75 years.

For buyers who can afford a large enough mortgage:

Once again, we assumed that the borrower can spare 35% of their monthly income toward mortgage-related payments. Based on this amount and the current interest rates for a 30-year fixed-rate mortgage, we calculated the total mortgage the borrower can afford to take.

We then determined how much they’d need to save for a 20% down payment. We added to that the cost of closing costs and a one-month mortgage reserve.

For example:

A median-priced home in Johnstown, Penn., costs $74,900. So this buyer would have to save at least $14,980 to cover a 20% down payment. On top of that, he would pay another $3,370 in closing costs (assuming an estimate of 4.5%) and set aside $1,370 in an emergency cash reserve.

In total, he’d need to save $19,720. Saving 20% of his income toward this goal, it would take him 1.85 years.

Key Findings

  • Get ready for the long haul: Of the 380 metro areas we analyzed, we found no place in America where a worker of any age group could realistically save up for a new home in less than a year.Across all 380 metro areas analyzed…
    • 45 to 65 year-olds would need an average of 4.69 years to save for a home.
    • 25 to 44 year-olds would need an average of 5.63 years to save for a home.
    • 15 to 24 year-olds would an average of 27.2 years to save for a home.
  • Where homeownership is completely out of reach:
    • In 79% of metros (79 out of 380), workers of all age groups wouldn’t be able to qualify for a mortgage loan large enough to cover the cost of a median-priced home.
    • 15 to 24 year-olds wouldn’t qualify for a mortgage loan large enough to cover the cost of a median priced home in 357 out of 380 metros analyzed (93.95%).
    • 25 to 44 year-olds wouldn’t qualify for a mortgage loan large enough to cover the cost of a median-priced home in 68 out of 380 metros analyzed (17.89%).
    • 45 to 65 year-olds wouldn’t qualify for a mortgage loan large enough to cover the cost of a median-priced home in 29 out of 380 metros analyzed (7.63%).

The least and most affordable metros for 25 to 44-year-olds

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A closer look at the housing market for 25 to 44-year-olds:

  • The most affordable metro area: Johnstown, Penn., is the easiest place for 25 to 44 year-olds to save for a home. The key: Affordable housing is in abundance. A median-priced home in Johnstown is $74,900. With a goal of saving enough to cover a 20% down payment, closing costs, and a one-month mortgage payment reserve, the total amount workers would need to save is $19,720. Earning the median annual income for that area of $53,164, they would need just 1.85 years to save.
  • The least affordable metro area: Salinas, Calif., is the most difficult metro area for 25 to 44 year-olds dreaming of homeownership. Earning the median annual salary of $54,499 and looking at a median-priced home listed at $750,000, they would need a staggering 46.75 years to save up enough. The reason? On an annual household income of $54,499, a homebuyer would only realistically be able to qualify for a $271,000 30-year fixed-rate mortgage loan, leaving a half-million-dollar gap to fill.
  • Midwest is best: 9 out of the 10 most affordable metro areas are located in the Midwest, where housing prices are significantly lower compared to other regions. On average, it would take just 2.28 years for a 25 to 44 year-old to save for a home in the 10 most affordable metros.
  • California is where homeownership dreams go to die: 9 out of the top 10 most expensive metro areas for 25 to 44 year-old homebuyers are in California.
    • The average time needed to save for a home in the top 10 most expensive metro areas is a whopping 29.15 years.
    • It would take 25 to 44 year-olds at least three years to save for a home in 7.37% of metro areas.
    • It would take 25 to 44 year-olds between three and five years to save for a home in 53.16% of metro areas.
    • It would take 25 to 44 year-olds between five and 10 years to save for a home in 34.47% of metro areas.
    • It would take 25 to 44 year-olds more than 10 years to save for a home in 5.00% of metro areas.

The least and most affordable metros for 45 to 65-year-olds

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A closer look at the housing market for 45 to 65-year-olds:

  • The most affordable metro area: Danville, Ill., is the easiest place for 45 to 65 year-olds to save for a home today. A median-priced home in Danville is $68,200. With goal of saving enough to cover a 20% down payment, closing costs, and a one-month mortgage payment reserve, the total amount workers would need to save is $18,012. Earning the median annual income for their age group in that area ($51,975), they would need just 1.73 years to save.
  • The least affordable metro area: Homeownership dreams don’t get any more realistic with age in Salinas, Calif. It is also the most difficult metro area for 45 to 65 year-olds dreaming of homeownership. Even though this age group earns a median income 22% higher than 25 to 44 year-olds in this area, it would still take them nearly three decades (28.98 years) to save up for a median-priced home of $750,000. On an annual household income of $70,368, a 45 to 65 year-old homebuyer would only realistically be able to qualify for a $377,567 30-year fixed-rate loan, leaving a massive gap to fill — even without including closing costs and a one-month mortgage reserve.
    • It would take 45 to 65 year-olds at least three years to save for a home in 16.32% of metro areas.
    • It would take 45 to 65 year-olds between three and five years to save for a home in 57.37% of metro areas.
    • It would take 45 to 65 year-olds between five and 10 years to save for a home in 23.16% of metro areas.
    • It would take 45 to 65 year-olds more than 10 years to save for a home in 3.16% of metro areas.
  • Midwest is best: 9 out of the 10 most affordable metro areas for 45 to 65 year-olds are also located in the Midwest, where housing prices are significantly lower compared to other regions.
    • On average, it would take just under three years (2.08) to save for a home in the 10 most affordable metros.
  • The California struggle: 9 out of the top 10 most expensive metro areas for 45 to 65 year-old homebuyers also are in California.
    • The average time needed to save for a home in the top 10 most expensive metro areas for this age group is a whopping 19.72 years.

The least and most affordable metros for 15 to 24-year-olds

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A closer look at the housing market for 15 to 24-year olds:

Of course, we don’t know many 15-year-olds who are shopping around for a single-family home these days, but U.S. Census Bureau data limited us to this age range. However, our findings still shine a light into the challenges facing the youngest homebuyers.

  • It would take 15 to 24 year-olds at least three years to save for a home in 0% of metro areas.
  • It would take 15 to 24 year-olds between three and five years to save for a home in 1.58% of metro areas.
  • It would take 15 to 24 year-olds between five and 10 years to save for a home in 23.42% of metro areas.
  • It would take 15 to 24 year-olds more than 10 years to save for a home in 75.00% of metro areas.
  • The most affordable metro area: Sheboygan, Wisc., is the easiest place for 15 to 24 year-olds to save for a home today. Although median-priced homes are relatively more expensive in Sheboygan ($134,900) than other inexpensive metro areas on this list, young workers there earn relatively higher salaries, which enables them to save more toward future home costs. With a goal of saving enough to cover a 20% down payment, closing costs, and a one-month mortgage payment reserve, the total amount workers would need to save is $33,877. Earning the median annual income for their age group in that area ($38,510), they would need just 4.40 years to save.
  • The least affordable metro area: Santa Cruz-Watsonville, Calif., isn’t simply a difficult place for young workers to save for a home — it’s pretty much impossible. On an annual household income of $21,178, a 15 to 24 year-old homebuyer would only realistically be able to qualify for a $36,506 30-year fixed-rate mortgage loan. With a median-priced home listed at $769,500, their mortgage loan would hardly make a dent. They would need 181.27 years to save enough to fill in that gap.
    • In the 10 most expensive metros, it would take 15 to 24 year-olds an average of 129.53 years to save for a home.
  • Things look much better in the South and Midwest: The 10 most affordable metro areas for 15 to 24 year-olds are also located in the Midwest and the South, where housing prices are significantly lower compared to other regions.
    • On average, it would take just under five years (4.79) to save for a home in the 10 most affordable metros.
  • Surprisingly expensive metros for 15 to 24 year-olds:
    • While 6 out of the 10 most expensive metro areas are located in California, there were some surprising findings in other states.
      • The 4th most expensive metro is Corvallis, Ore. Home prices are half as high as the most expensive metros on this list, but median incomes for this age group are among the lowest: $12,369.
      • Morgantown, W.Va., is the 6th most unaffordable metro for the youngest workers. 15 to 24 year-old workers in Morgantown earn among the lowest median incomes in the 380 metros we analyzed: $8,805.

Housing Affordability Calculator

Find out how long it would take you to save up for a home in your area.

Download the data behind this report:

Data analysis was conducted by Naveen Agarwal, MagnifyMoney Senior Data Analyst.

Metro Rankings for Ages 15 to 25

Metro Rankings for Ages 25 to 44

Metro Rankings for Ages 45 to 65

Metro Rankings for Ages 65 and Up

Metros by State: Searchable Database

Full Study Data

Appendix/Data Sources

Home prices: June 2016 median listing prices data provided by Zillow

Median income: Annual household income by age group and metropolitan area for 2014: U.S. Census Bureau.

Real Estate/Property Taxes: Real estate taxes for owner occupied units for metropolitan areas: U.S. Census Bureau

Mortgage interest rate: Bankrate.com National average on a 30-year fixed rate mortgage is 3.57% as of Sept. 1, 2016.

Downpayment: We assume a downpayment of 20%.

Savings rate: We assume homebuyers would save 20% of their annual take-home pay.

Closing costs: We assume closing costs of 4.5%.

Home Insurance rates by metro area: National Association of Insurance Commissioners (NAIC)

The post MagnifyMoney: 2016 Housing Affordability Study appeared first on MagnifyMoney.

Even 3-Year-Olds Know When You Owe Them

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Perhaps we can all be grateful that toddlers aren’t professional debt collectors.

Hypothetically speaking, let’s say you’re in debt and someone sent a 3-year-old to your door. One glance at those large, innocent eyes looking up at you and asking you to settle up would probably send you running for your checkbook. I doubt you’d even attempt to negotiate your debt. You definitely wouldn’t slam any doors in their faces.

But watch out if a toddler ever wants to loan you something; you might just fall into accidental debt. A new study demonstrates that three-year-olds know when you owe them.

In order to get a true measure of indebtedness, a series of experiments was performed with resources a toddler might value most: stickers and toys. Markus Paulus at Ludwig-Maximilians-University of Munich, took three-year-olds and five-year-olds in groups ranging between 28 and 43 kids and had them participate in a sharing game. The toddlers were tested individually, and had to choose how many of their stickers they wanted to share with specific toy animals of different colors. The game was intentionally crafted so that the toddler would choose a favorite animal to share more stickers with. There were winners and losers. Sadly — if you can feel sorry for a toy — one toy animal only got one sticker or no stickers at all. Such is life.

Researchers leveled the toy animal playing field by showing the toddlers that each of the animals was actually IW (independently wealthy), with its own sticker collection. After adding them all up, kids were shown that each toy animal had the same number of stickers, so even the sad, disadvantaged animals balanced out to the same amount.

Then came time for payback. Suddenly, the toy animals were gifted with irresistible toys that would cause even the most disciplined three-year-olds to stop in their tracks, swoon and start to whine, er, pine — colorful balloons, oh-so-shiny marbles and coloring books graced each animal. Each animal had the same number and type of toys. For a few rounds, the toddlers were told to choose which animals they’d ask to share its alluring resources. Time and time again, the toddlers approached the animals to whom they had given the most stickers.

“At this age, expectations for reciprocity seem to develop, and these expectations start to affect children’s behavior,” Paulus told Credit.com.

If No One Sees It, It Never Happened

Interestingly, researchers then varied the study a little. This time, they had the animals leave the room before the toddlers decided how many stickers to share with each one. So, technically, the toy animals never “saw” when toddlers gave them preferential treatment or more stickers. But by age 3, their young minds already knew that a favor done without a happy recipient didn’t count in the favor bank. When it came time for the toddlers to hit up which animal they’d ask for toys, they no longer asked more from the animals to whom they’d given more stickers. They seemed to know the favor would never be recognized if it hadn’t been seen.

Why It Matters

“I think it really helps us to know how deeply wired we are for relatedness,” said child psychologist Dr. Bob Bartlett in White Plains, NY. From the moment a child is born, the little person relies on expectancies and patterns to navigate life, he said. Nursing mothers and their newborns often perform a “complicated dance” of relating and needing space through body posturing and eye contact, says Bartlett. “That becomes woven into the way we connect with other people as we go forward. So we’re really wired for a sense of expectancy.” Our first experiences of fairness and indebtedness shape our philosophies of meaningful relationships.

“From early on, our parents and caregivers help teach us what to expect from relationships — how sharing is undertaken, how others are thought about. They emerge and really take shape,” Bartlett continued. And we learn reciprocity as it is reinforced by our family and by larger communal settings such as preschool, he said.

It can be witnessed when a toddler’s sense of unfairness is spot on — as soon as they see another kid receive something they don’t have, says Dr. Bartlett. (Just hand an ice-cream cone to another toddler, and see what happens with yours.)  “Automatically a child will want what’s given to another,” Bartlett says. “It’s all based on our own need of wanting others to attend to us and give to us.”

And adorable toddlers certainly know how to gain credit in your heart.

Remember, modeling good financial habits can help your kids later in life. You can go here to learn about getting control of your money. And you can view a free snapshot of your credit report by enrolling in an account on Credit.com.

Image: Christopher Futcher

The post Even 3-Year-Olds Know When You Owe Them appeared first on Credit.com.