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Table 10.9

You may need to adjust your college plan as circumstances change for you and in the job market. You can
modify plans based on funding opportunities available to you (see next sections) and your location. You may
prefer a community-college-only education, or you may complete two years at a community college and then
14 https://www.forbes.com/sites/prestoncooper2/2017/07/13/new-york-fed-highlights-underemployment-among-collegegraduates/#55be172f40d8
15 https://www.communitycollegereview.com/blog/studies-show-community-college-may-offer-superior-roi-to-some-four-yearschools
16 https://www.usnews.com/education/best-colleges/paying-for-college/articles/what-you-need-to-know-about-college-tuitioncosts

317

318

10 • Understanding Financial Literacy

transfer to a university to complete a bachelor’s degree. Living at home for the first two years or all of your
college education will save a lot of money if your circumstances allow. Be creative!

Key to Success: Matching Student Debt to Postgraduation Income
Students and parents often ask, “How much debt should I have?” The problem is that the correct answer
depends on your personal situation. A big-firm attorney in a major city might make $120,000 in their first year
as a lawyer. Having $100,00 or even $200,000 in student debt in this situation may be reasonable. But a high
school teacher making $40,000 in their first year would never be able to pay off the debt.
The amount of debt you take on should be tied to the income you expect.

Figure 10.10 Each field of employment brings with it an average income and assumed debt. This graph shows the impact of an
attorney’s income versus debt, and then compares a teacher who took a $100,000 loan with one who took a $30,000 loan. Note the
teacher’s income is the same in both cases. (Credit: Based on information from National Association of Colleges and Employers and
US Bureau of Labor Statistics.)

Research Your Starting Salary
Begin by researching your expected starting salary when you graduate. Most students expect to make
17
significantly more than they will actually make. As a result, your salary expectations are likely much higher
than reality. Ask professors at your college what is typical for a recent graduate in your field, or do
informational interviews with human resource managers at local companies. Explore the US Bureau of Labor
Statistics’ Occupational Outlook Handbook (https://openstax.org/l/OOH). PayScale (https://openstax.org/l/
salariesbyoccupation) also has a handy tool for getting general information based on your personal
experience and location. Search websites and talk to employees of companies that interest you for future
employment to identify real starting salaries.

Undergraduate Degree: 1 x Annual Salary
For students working toward a bachelor’s or associate degree, both forms of undergraduate degrees, you
should try to keep your student loans equal to or less than your expected first year’s salary. So if, based on
research, you expect to make $40,000 in your first year out of college, then $33,000 in student loans would be
a reasonable amount for you to pay out of a monthly budget with some sacrifice.

Advanced Degrees: 1–2 x Annual Salary
Once you’ve graduated with your bachelor’s degree, you may want to get an advanced degree such as a
17 Hess, Abigail. “College Grades expect to earn $60,000.” 2019. CNBC. https://www.cnbc.com/2019/02/15/college-grads-expect-toearn-60000-in-their-first-job----few-do.html

Access for free at openstax.org

10.5 • Education Debt: Paying for College

master’s degree, a law degree, a medical degree, or a doctorate. While these degrees can greatly increase your
income, you still need to match your student debt to your expected income. Advanced degrees can often
double your expected annual salary, meaning your total debt for all your degrees should be equal to or less
than twice your expected first job income. A lower number for the debt portion of your education would be
more manageable.
Your goal should be to pay for college using multiple methods so your student loan debt can be as small as
possible, rather than just making low monthly payments on a large loan that will lead to a higher overall cost.

Types of Financial Aid: How to Pay for College
The true cost of college may be more than you expected, but you can make an effort to make the cost less
than many might think. While the price tag for a school might say $40,000, the net cost of college may be
significantly less. The net price for a college is the true cost a family will pay when grants, scholarships, and
education tax benefits are factored in. The net cost for the average family at a public in-state school is only
$3,980. And for a private school, free financial aid money reduces the cost to the average family from $32,410
per year to just $14,890.
If you haven’t visited your college’s financial aid office recently, it’s probably worth it to talk with them. You
must seek out opportunities, complete paperwork, and learn and meet criteria, but it can save you thousands
of dollars.
Type of College

Average Published Yearly Tuition and Fees

Public Two-Year College (in-district students)

$3,440

Public Four-Year College (in-state students)

$9,410

Public Two-Year College (out-of-state students)

$23,890

Private Four-Year College

$32,410

Table 10.10

Grants and Scholarships
Grants and scholarships are free money you can use to pay for college. Unlike loans, you never have to pay
back a grant or a scholarship. All you have to do is go to school. And you don’t have to be a straight-A student
to get grants and scholarships. There is so much free money, in fact, that billions of dollars go unclaimed every

Table 10.9

You may need to adjust your college plan as circumstances change for you and in the job market. You can

modify plans based on funding opportunities available to you (see next sections) and your location. You may

prefer a community-college-only education, or you may complete two years at a community college and then

14 https://www.forbes.com/sites/prestoncooper2/2017/07/13/new-york-fed-highlights-underemployment-among-collegegraduates/#55be172f40d8

15 https://www.communitycollegereview.com/blog/studies-show-community-college-may-offer-superior-roi-to-some-four-yearschools

16 https://www.usnews.com/education/best-colleges/paying-for-college/articles/what-you-need-to-know-about-college-tuitioncosts

317

318

10 • Understanding Financial Literacy

transfer to a university to complete a bachelor’s degree. Living at home for the first two years or all of your

college education will save a lot of money if your circumstances allow. Be creative!

Key to Success: Matching Student Debt to Postgraduation Income

Students and parents often ask, “How much debt should I have?” The problem is that the correct answer

depends on your personal situation. A big-firm attorney in a major city might make $120,000 in their first year

as a lawyer. Having $100,00 or even $200,000 in student debt in this situation may be reasonable. But a high

school teacher making $40,000 in their first year would never be able to pay off the debt.

The amount of debt you take on should be tied to the income you expect.

Figure 10.10 Each field of employment brings with it an average income and assumed debt. This graph shows the impact of an

attorney’s income versus debt, and then compares a teacher who took a $100,000 loan with one who took a $30,000 loan. Note the

teacher’s income is the same in both cases. (Credit: Based on information from National Association of Colleges and Employers and

US Bureau of Labor Statistics.)

Research Your Starting Salary

Begin by researching your expected starting salary when you graduate. Most students expect to make

17

significantly more than they will actually make. As a result, your salary expectations are likely much higher

than reality. Ask professors at your college what is typical for a recent graduate in your field, or do

informational interviews with human resource managers at local companies. Explore the US Bureau of Labor

Statistics’ Occupational Outlook Handbook (https://openstax.org/l/OOH). PayScale (https://openstax.org/l/

salariesbyoccupation) also has a handy tool for getting general information based on your personal

experience and location. Search websites and talk to employees of companies that interest you for future

employment to identify real starting salaries.

Undergraduate Degree: 1 x Annual Salary

For students working toward a bachelor’s or associate degree, both forms of undergraduate degrees, you

should try to keep your student loans equal to or less than your expected first year’s salary. So if, based on

research, you expect to make $40,000 in your first year out of college, then $33,000 in student loans would be

a reasonable amount for you to pay out of a monthly budget with some sacrifice.

Advanced Degrees: 1–2 x Annual Salary

Once you’ve graduated with your bachelor’s degree, you may want to get an advanced degree such as a

17 Hess, Abigail. “College Grades expect to earn $60,000.” 2019. CNBC. https://www.cnbc.com/2019/02/15/college-grads-expect-toearn-60000-in-their-first-job----few-do.html

Access for free at openstax.org

10.5 • Education Debt: Paying for College

master’s degree, a law degree, a medical degree, or a doctorate. While these degrees can greatly increase your

income, you still need to match your student debt to your expected income. Advanced degrees can often

double your expected annual salary, meaning your total debt for all your degrees should be equal to or less

than twice your expected first job income. A lower number for the debt portion of your education would be

more manageable.

Your goal should be to pay for college using multiple methods so your student loan debt can be as small as

possible, rather than just making low monthly payments on a large loan that will lead to a higher overall cost.

Types of Financial Aid: How to Pay for College

The true cost of college may be more than you expected, but you can make an effort to make the cost less

than many might think. While the price tag for a school might say $40,000, the net cost of college may be

significantly less. The net price for a college is the true cost a family will pay when grants, scholarships, and

education tax benefits are factored in. The net cost for the average family at a public in-state school is only

$3,980. And for a private school, free financial aid money reduces the cost to the average family from $32,410

per year to just $14,890.

If you haven’t visited your college’s financial aid office recently, it’s probably worth it to talk with them. You

must seek out opportunities, complete paperwork, and learn and meet criteria, but it can save you thousands

of dollars.

Type of College

Average Published Yearly Tuition and Fees

Public Two-Year College (in-district students)

$3,440

Public Four-Year College (in-state students)

$9,410

Public Two-Year College (out-of-state students)

$23,890

Private Four-Year College

$32,410

Table 10.10

Grants and Scholarships

Grants and scholarships are free money you can use to pay for college. Unlike loans, you never have to pay

back a grant or a scholarship. All you have to do is go to school. And you don’t have to be a straight-A student

to get grants and scholarships. There is so much free money, in fact, that billions of dollars go unclaimed every