Smart Financial Planning for College

Today we are joined by guest blogger Drew Cloud and talking about smart financial planning and college.  I hope you enjoy! 

Why Families Should Use SDRSI Before Decision Day

As the constantly increasing cost of earning a college degree outpaces the rise of early career wages, many families should dedicate extra time to choose the most affordable school for their high school graduate to make sure they can afford the student loan payments. One of the tools they can use before decision day is the Student Debt Repayment Success Indicator (SDRSI) as they select the best college.

What is SDRSI?

The Student Debt Repayment Success Indicator (SDRSI) uses the median salary of new graduates, the average debt per graduate, and a college’s default rate within the first three years of graduation to compute the likelihood that future college graduates will be able to successfully repay their student loans after graduation. A higher SDRSI score means a higher probability that if your child attends that college, they are more likely to afford the monthly student loan payment than going to a school with a lower SDRSI score.

Here is how to calculate the SDRSI score for a particular school.

  1. Divide the Early Career Pay (Median salary of alumni 0-5 years from graduation) by the average Debt per Borrower of each college graduate.
  2. Multiply that number by one minus the school’s default rate.

This number is the SDRSI score.

Comparing the SDRSI of Two Colleges

As an example let’s assume your child wants to attend school in Virginia by comparing the two colleges in Virginia with the highest and lowest SDRSI scores for that state.

The University of Mary Washington has the highest SDRSI score for Virginia colleges and universities with a score of 2.51 and is ranked 44th in the nation.

Bridgewater College has an SDRSI of 1.00 and is ranked 710th in the nation.

The primary reason the University of Mary Washington has a much higher score is because it has a higher early career salary, a notably lower average debt balance, and a lower default rate.

While attending a school with a higher SDRSI doesn’t guarantee a high starting salary or on-time student loan payments, it can help you and other families get a better idea if a college degree can be more lucrative than a degree from another college.

Colleges Might Not Disclose Default Statistics

It’s easy for most families to primarily focus on the degree options, proximity, or special programs that a particular college offers. That means it is easy to overlook the default statistics as a college might not be so quick to publicize a high default rate or student loan balance in promotional material that high school student looks at unless they have really good alumni placement or debt repayment statistics.

Another reason families should use the SDRSI is because it can be hard to estimate the total cost of college while their student is still in high school.

They might not be sure the exact amount of financial aid from grants and scholarships they will receive each year, if the student will need 5 years to graduate instead of 4 years, or the rate of future tuition increases.

Why the SDRSI is Good

The SDRSI helps assign a grade for each school when it comes to student loan repayment of its recent graduates to help high school families make an informed decision to help prepare their child to receive a degree at the lowest possible price and earn the highest starting salary possible. Success alone isn’t determined by a single score, but, it makes planning for the future easier.

Drew Cloud started The Student Loan Report after he graduated from college. While he pays off his student loans, working his life away, Drew took a liking to journalistic writing which led him to funneling all his energy into the website, turning it into a news outlet for the student loan industry.

Linking Up With:  The Homeschool Nook

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