If you want to buy a home, what steps do you take? Save money, find a house, get a mortgage, move in. A fairly easy process. In the not-to-distant future, your son or daughter is heading off to college. What steps do you take? Save, find a college, take out some loans, graduate in four years. A fairly easy process.
Well, we may have oversimplified those a bit. In fact, the intricacies of buying a home are strikingly similar to those of buying a college education. The novice home buyer might describe their plan for purchasing a house as it was laid out above. Save money. Find house. Get a mortgage. Move in.
A seasoned home buyer understands that the above plan omits a few pertinent steps and fails to address a few inconsequential questions. Questions like, how much should I save for a down payment? What is PMI and will I be required pay it? Where should I find a realtor? What style of home am I looking for? How do I negotiate the asking price down? When and how do I lock in my interest rate? What type of mortgage aligns best with my future goals? How does credit factor into my interest rate? Do I need a home inspector? Will my house appreciate? Who will be involved in my purchase other than my realtor and me? Am I asking the right questions, and am I doing the right things at the right time, to maximize the value of my dollar and ensure I’ve set myself up for success?
In retrospect, these might actually be pertinent questions with profound consequences. And the team behind the simplest of real estate transactions often includes an army of professionals: realtor, appraiser, lender, loan officer, inspector, title agent, attorney, processor, seller’s agent, and the list goes on. And keep in mind, the transaction, once complete, will ensure that a valuable and resalable asset has transferred from seller to buyer. Should the buyer eventually want or need to relocate, they simply follow the same process and recover most, all or MORE than their original investment.
The complexity of a college degree purchase is similarly masked by the assumption from most families, that the processes are simple, and everything will just work out. The statistics suggest a very different outcome. A four-year degree in four years is a reality for fewer than 40% of incoming freshmen.
$1.6 Trillion dollars of outstanding student loan debt suggests that even step one (save) is largely missing the mark. And in terms of who is involved in a transaction, the cost of which can eclipse $100,000 and sometimes reach $250,000 or more? USUALLY, the family, perhaps an admissions officer at the college, and maybe a guidance counselor.
Just as home purchase should involve professional expertise to ensure a smooth and money wise home purchase, purchasing a college degree might also be well served by taking a logical, well-structured approach that takes advantage of professional guidance and tools. Remember, a college degree, unlike a home, cannot be resold. The investment is FINAL and its value may only be determined well after the commitment to a college is made.
