Maximizing your college tuition return on investment

College costs keep rising, but there’s a unique program at Purdue University where you get your education today, but pay a percentage of your future wages after graduation. And The Princeton Review’s Editor-in-Chief on how to select a “value” college with tips on maximizing your tuition return on investment by finding the right school that you can afford to attend.

Savannah williams is an education major in her third year at purdue university she knew going in the math was not on her side i’m going to be a teacher and i won’t make a whole lot of income in the future how to pay for her education without drowning in debt purdue offered an alternative instead of taking out loans savannah will pay a percentage of her income for

10 years after she graduates i would have gone with a traditional loan i would have had to pay it all off you know who knows how long that would have taken it’s called an income sharing agreement the latest attempt to tackle america’s college debt crisis that crisis is massive a 1.6 trillion dollar drag on the economy affecting people’s ability to buy a home by a

Car start a family four years after graduation purdue’s president says the program now in its third year shifts the risk away from the student it’s a gives them certainty and some protection and safety they’re not going to have that much money borrowed piling up compound interest whether they’re doing well or not if the graduate doesn’t work she doesn’t pay and

If she does really well her total payments are capped 2017 graduates charlotte herbert who got a job as a technical writer making about $32,000 a year financed her senior year with the programs i think it’s a good balance between you have to pay for school and keeping people from decades and decades of unmanageable debt purdue says it’s the first four-year college

To offer income sharing but the concept is taking off elsewhere in higher education as well in san francisco austin allred co-founded the lambda school which teaches computer coding free up front in exchange for seventeen percent of your income for two years if you make fifty thousand dollars a year if your job as a school is effectively promising a job it doesn’t

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Make sense that a student pays you a bunch of money and it doesn’t work out on the other side schools don’t want to do that for obvious reasons too soon to tell if income sharing will be the way everyone pays for college in the future the programs are unregulated so far and they still leave graduates with an obligation not that much different from student loans

But this is one way some schools are trying to bend the curve of the price of admission for on the money i’m scott cohen in west lafayette indiana so how can students find the right school that they can actually afford to attend rob franek is editor-in-chief of the princeton review he’s also the author of the 2019 edition of the best value colleges and rob thanks

So much for being good to be back thank you all right let’s talk first about what we just saw with university this is a really unusual experiment you pay three to four percent getting out over a period of time and is that a good deal it could be a good deal but there are really very few schools that are doing it of course purdue is one of the newest ones norwich

University clarkson university upstate new york relative handful but there is an initiative in the senate right now that says listen let’s try to simplify the repayment process one of those simplifications are going to be income share agreements same thing with the california state house i mean i completely get it it’s a great way for a student to say okay i’m

Betting on my future absolutely but my guess would be there are gonna be some students who actually end up paying more and that’s what i think a lot of students don’t know about if you do better financially over those ten years of time and that’s the traditional repayment time then you could actually pay much more for an isa than if traditional i mean it’s lower

Risk and you’re not gonna be mired in debt so i guess that’s the trade-off people would be willing to take that’s for cuz it works on the inverse as well if a student makes generally between less than $25,000 than those than those payments would stop student debt is such a huge problem yeah a trillion and a half dollars is that a sustainable debt load is it going

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To continue to grow like well it’s a scary number and it scares college bound students and parents and counselors sort of advising them in the college present but just a level set the number one point five trillion also includes grad arts and sciences lost or b-school med school as well as for-profit colleges so it brings it down well below the 40% mark for the 1.5

Trillion but it still is a scary number but a lot of students just simply are not paying that number if they’re going to state schools nearly 80% of all students across the country will go to a state university i mean the other big problem is that for so many of those people who take out loans they don’t finish their degree meaning that they never get the upside in

They’re saddled with the downs which is the saluté soul-crushing part of it that dirt you didn’t process you didn’t succeed but you’re still saddled with with the death so in terms of what you figure out here for the best value colleges i flipped through it and there’s a lot of state schools in it there’s some schools i’ve never heard of but there’s also schools

Like johns hopkins and harvard in really expensive schools what’s the what’s the framework that you use for this how do you find best value a couple of different we looked at 40 different factors overall we started with a little over nine hundred schools two hundred schools in the book roughly two-thirds are private and one-third are public but schools that we’ve

All heard of you know many of the ivy league’s are in this in this book because they have a great financial wherewithal so harvard for example can meet your financial need 100 percent as well as some of the other schools some schools will eat it you know mean it at ninety percent eighty percent seventy five percent but the thing that these schools are all doing is

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Not making you mortgage out your future to actually pay for school look i think part of the problem is you don’t know what kind of financial aid you’re necessarily going to get how does that process work does that in itself scare people off and keep them from actually ever applying it does it is one of the things that we see most crossing an expensive school off

Of your list of consideration when only looking at sticker costs but the truth is i mean this is what i do for a living a principal view is do the homework so that when you’re a college bound student with your parents with your counselors that you can actually say you know what you know bates college is charging nearly seventy nine thousand sixty nine thousand

Dollars but their average aid package is around forty six thousand dollars bringing that down to about what a student could expect to pay for one year of public college so just kind of level setting it you know defusing some of the frenzy and giving you the information that you need when finding fit what’s the biggest secret that people don’t understand beyond

What you just told us about the financial aid what’s the biggest secret people don’t understand when they’re going through this process trying to figure it out things i would say oh my gosh if i knew that a year ago if i knew that three months ago yeah totally and one of the things that i say to students in parenting i talk to a lot of them a hundred and eighty

Billion dollars in aid financial aid is given out each year that’s a huge number if you cross that stream with really doing well in high school doing all the sat and a ct then that factors in academic prowess your academic merit combine that with need-based grants and college can actually become affordable and that’s what i would love for students to know when

They’re sophomores in high schools and juniors in high schools along with their parents you you

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Maximizing your college tuition return on investment By CNBC Television