Dear High School Seniors: It’s Time to Consider Your Options

Celebration Education Graduation Student Success Learning Concept

Dear High School Seniors,

You have had a memorable last year and a half of school, and not in a particularly good way. Circumstances completely outside of your control have reshaped a process that, up until about 12 months ago, had been a regular occurrence in thousands of schools across the country. As a self-proclaimed eye-roller at cliches, I’ll refrain from repeating one that you’ve probably already heard this week, but I do want to acknowledge that there’s no other way around it–this stinks, it isn’t fair, and whatever your feelings are toward the pandemic’s effect on your life over the past year, they are valid.

My own 10-year high school reunion is coming up in a couple of months, and I’m not so far removed from your shoes that I’ve forgotten how they felt. Even as someone who was no one’s definition of a social butterfly, at least my actions at that age were of my own choice and not decided for me. I’ll be the first one to acknowledge that none of the technological marvels available at our fingertips can fully replace the interaction you’ve had with your closest friends for the last decade-plus of your education, and you deserve to hear that if you haven’t already from those around you. This has been an unpredictable time for all of us regardless of how many trips around the sun we’ve accumulated, and you’ve been asked to step up in ways that some with many multiples of your time on earth have struggled with. Except you’re doing this while trying to keep your grades up, apply to colleges, figure out what you want to do with your life, and maintain some semblance of what “normal” has been for a high schooler for about as long as there have been high schools. You have my respect for doing the best you can in this “draw 25” meme we’re all participating in. 

Ten Years Goes by Quickly

With that in mind, I wanted to impart a few thoughts of my own as you figure out the latest iteration of “What am I going to do with my life?’” Now being (almost) a decade out of high school, I feel like I have enough wisdom that I can impart at least some half-decent information. Looking back on where life has taken me, the time truly has passed quickly. I’ve lived in four different states and two different countries; I’ve had eleven different U.S. addresses (including that of my parents, which–as of only  four months ago–I no longer need to use as my permanent address for important documents I didn’t want to get lost in the mail. Thanks, Mom and Dad!). I started college as a pre-pharmacy major; took a semester of biology and chemistry before seeing myself off to the business side of campus; took two years off of school and lived in Chile; returned home and found myself in an accounting class because it was the only course that both of the two majors I was considering required; ended up becoming an accounting major before feeling like I was going to flame out of the program completely; took a personal finance class on a whim because it was right after my accounting class block; immediately discovered that financial planning clicked intuitively in my mind; graduated in accounting after all; and moved five hours from the closest major city you’ve heard of in Texas to earn a Master’s in Personal Financial Planning. From there it was a move to another state I had no ties to (Arizona) as I started my first post-graduate job and studying for and passing three exams my employment was contingent upon—including a six-hour doozy with a 60% pass rate—as I progressed towards what I thought was my dream job.

Finding out that what I thought was a dream job wasn’t quite what I had hoped fueled my desire to move closer to family and avoid 110-degree summers. Ultimately, I found a role that did check more of those “dream job” boxes, which led me to HFG Trust. Now here I am, six months into that journey. Oh, and while trying to figure out the educational/professional side of my life I fell in love, convinced my now-wife that if nothing else at least the ride with me would be fun (even if we never did nail down the destination), got married, had a kid, and bought a house.

How’s that for “summarize the craziest decade of your life in 5 sentences or less”?

I don’t consider myself an emotional person but man, there were some thrilling highs and agonizing lows in those years. As I reflect on some of the memories, even on the far side of that decade, I find that perhaps those sentiments are not as far from the surface as I expected them to be. The perspective granted by the passing of time has tempered the initial reactions I have to both precious and paralyzing moments, but I also find that they can be reached rather quickly if I allow my mind to drift. This includes how I was feeling my last semester of high school leading up to graduation—countless options ahead of me, then having to make the best decisions I could with the information I had available to me at the time. For the record, I’m extremely happy with how things have turned out, but don’t take for granted the fact that you’ll likely never have as many possibilities in front of you as you do right now.

Education Funding—Be Aware in Advance

Given that you’re reading this on a financial planning firm’s website, there’s a good chance your parents, grandparents, family, or friends work with HFG Trust already. If that is the case, our advisors will have talked with them to see if they have any education goals for their children and/or grandchildren. This is a deeply personal decision and there are sound arguments both in favor of and against helping with higher education costs. In other words, don’t take it personally if the next sentence does not apply to you. That being said, there may be a plan in place to cover at least part of your higher education expenses, and now would be as good a time as any to ask your parents if this is something you should be aware of. If they say that it is, please consider expressing your gratitude to those who made this a possibility for you. There were undoubtedly sacrifices of varying degrees made to set aside those funds for your benefit, especially when raising you to age 18 probably didn’t come cheap in the first place–and remember, that figure is before factoring in higher education costs. As you will soon learn, many of your future classmates will be paying for college completely on their own, without the luxury of knowing that at least some of their expenses are being taken care of. 

If on the other hand, you will be paying for college on your own, it is better to be aware of that now than after you’ve already had your heart set on attending a specific university. I’m here to tell you that by no means is a degree from your dream school out of reach, it just may not be a straightforward journey. That isn’t always a bad thing.

Newsflash: College Can Be Expensive

As you’re well aware, college can be extremely expensive. The sticker price for undergraduate resident tuition and books at Washington’s most recognized schools comes out at $11,720 (Washington State University), $12,645 (University of Washington), and $48,772 (Gonzaga) for the 2021-2022 academic year. That puts you in the neighborhood of $50,000 for a four-year degree, and that’s before rent, food, transportation, fun, and emergencies. Even with interest rates at their current lows of 2.75% for undergrad federal student loans, and assuming your loans are subsidized and therefore do not accrue interest while you are in school, $50,000 in loans comes out to nearly $900 per month if you want to pay them off within five years of graduation (or in the neighborhood of $475 per month to get them paid off in the first decade after graduation). If we assume that your starting salary is $50,000 after graduation, that’s 10% of your paycheck spoken for right off the top before other expenses and financial goals.

Where am I going with this?  Let’s say that your financial situation is not one where cost is completely irrelevant and as such, you’ll need to make some potentially difficult decisions over the next 6 months. Your choice may come down to a couple of options: 1. Attend your dream school right out of high school and be prepared to take out loans to cover excess costs or 2. Look to attend a less expensive school that perhaps isn’t your first choice. I want to bring up a third option to consider that would allow you to potentially graduate from your dream school and to do so at a much lower cost. To illustrate this, let’s use an example.

Off-Cycle Pit Stops—Using Community Colleges to Reduce Total Costs

In auto racing, there is a concept called off-cycle pit stops. Conventional wisdom is that you change to new tires when the set on your car is approaching the lap window where they’re at risk of deteriorating to the point of blowing apart, or when a caution flag has come out and forces the field to slow down. In both circumstances, most of the field will generally come to the pit lane around the same time. This works just fine when your car is running well and you’re toward the front of the field, but for those running toward the middle and back of the pack, a different approach is often required if you’re trying to position yourself to go for the win. In an off-cycle pit stop toward the end of a race, you stay out on the track when most of the field comes to pit. You’ve had most of the race to see what your car can and can’t do, and today is just one of those days where your car isn’t as good as some of the others out there. You could follow the cars you’re trailing to pit lane; but instead, you roll the dice and stay out. When these cars finish their pit stop and rejoin the track, you’re now ahead of them, albeit with the disadvantage of having older tires that will be slower over the course of the coming laps.

You may be asking yourself what the purpose of a plan is when it gives you only a temporary advantage, and you’d be right. Remember though—you’re executing this strategy because enough of the race has gone by to where you see your race is already setting up to be an OK one at best. So now either a) you get lucky and hold off the cars behind you, b) another caution flag comes out at which point you can fuel up and change tires (likely with much of the field following your lead, as even tires with only a handful of laps on them can be slower than new tires) or c) your old tires aren’t enough to stave off the pack, and you gradually start getting passed by quicker cars on your way back to the middle of the pack where you started. In other words, the worst off you’d likely be is right where you started, and best-case scenario you’ve put yourself at the front of the field to go for a win.

When it comes to higher education, attending a community college and earning your associate’s degree before transferring to and graduating from your dream school is the “off-cycle” strategy to consider.  Our assumption has been that there is a finite dollar amount available for your higher education and that you don’t want to be paying out 10% of your income for the next decade for a piece of paper that you can get elsewhere for a fraction of the cost.

There are a total of 34 community and technical colleges in Washington, and since it’s the community college of choice if you’re looking to stay in the Tri-Cities, I’ll use Columbia Basin College for this example. Annual tuition for a Washington state resident taking 15 units a semester? About $3,400 per year. That savings of over $8,000 per year (and over $15,000 over the course of earning your associate’s degree) compared to our cheapest of the three options above is in tuition alone, without even factoring in the savings that could come from living at home, keeping a job with an employer you may have worked with during high school, and again, still staying on course to graduate from the school you ultimately want to attend.

You see, four-year universities know there are students like you out there. Whether it be for financial, academic, or other reasons, not everyone has the chance to go directly from high school to a school everyone has heard of. The transfer process is the way by which you can attend a community college, knock out your required GE credits, take a variety of different classes that can help you decide what career path you want to pursue, and be prepared to jump right into upper-division coursework in your given major at a four-year institution. Thanks to initiatives like the Washington 45 and the Direct Transfer Agreement, there are already mechanisms in place to make sure your community college experience is one that gives you the best possible chance of getting to the university you want your ever-important piece of paper from. In the process, you’ll likely save an amount of cash significant to the point where graduating with little or no debt may be a real possibility.

In Closing

Once again, good on you for making it through to this point in your high school career. You’ve had it rougher than most over the past year, and my hope is that over your first decade out of high school you have many, many joyful experiences that help to take the sting out of this not-so-happy period. As you look toward the next exciting phase of your life, remember that if a four-year degree is your goal, there are multiple ways to reach that destination. If going to a four-year university would require you to come out on the other side with substantial student loans, don’t rule out community college as a stepping-stone to both a quality education and a bright financial future.

All the best,

Nick Parker, CFP®

Wealth Planner, HFG Trust

Planning for your education is like any other financial goal. It requires long-term investing, making smart decisions, and at times giving something up right now to earn a better return for your future.

To learn more on how HFG Trust helps our clients plan for their children’s or their own education, contact us at (509) 735-7507 to schedule a meeting with one of our financial advisors.