Eclipsing the cost and competition students face when getting into college, today’s campus crisis is about student mental health, and it’s shaping college planning for the next year or two at least, industry experts say, as the nation finds its footing in a post-pandemic world.
A recent Gallup poll revealed that a third of college students have considered dropping out in the last six months. Teachers nationwide have corroborated that roughly a third of their students are absent from class or not participating when they’re there, according to the Chronicle of Higher Education.
Given that college is one of the most asset-absorbing investments a family can make, any disruption to their children’s pursuit of 120 credits over four years is risky behavior, experts say. As a result, it has never been as important for financial planners to help their clients—and their in-college or college-bound children—navigate that risk than it is right now. In doing so, advisors report that they’re hearing the words “gap year” with surprising frequency.
Even before Covid-19 changed college enrollment, only about 60% of students would graduate from four-year B.A. programs, taking as long as six years to do it, according to the National Student Clearinghouse Research Center. The remaining 40% either took longer than six years, or left one school to transfer to another, or dropped out altogether.
“What I do is help families make their best financial decision when it comes to college and their kids. We want them to have a wonderful experience, but minimize the dollars that are spent on that exercise,” says Heidi Huiskamp Collins, a financial advisor in Bettendorf, Iowa. When she realized college planning was about so much more than 529 plans, she recently added the designation of “certified college planning specialist” to her various licenses. “If 40% of students are dropping out or transferring, that’s super-impactful on the financial well-being of the family.”
In a back-of-the-envelope example, she cites a hypothetical family with a college savings balance of $200,000 and a child going to Princeton or Stanford, which is $70,000 for tuition, room and board. “If then the kid drops out in year two, that’s $140,000, gone. Even if the kid re-enrolls somewhere else, now you have to set aside more money.”
Helping clients avoid situations where students drop out, therefore, is a valuable service, she says, because if families get this wrong, it could result in a year or two of tuition down the drain.
But if families get this right, the 2022-2023 academic year might be a valuable growth experience that could make up for the emotional impact of the pandemic and enable students to complete a degree within four years when they eventually do go to college, which is the average length of time it takes “gappers” who have had that extra year to focus, says the Gap Year Association.
Joseph Bogardus, a CFP at Barnum Financial Group’s Center for College Planning in Shelton, Conn., says that even before the pandemic, not all kids were ready to go to college at 18, even if they did get into their dream school. “But I think Covid brought this out a little bit more because kids didn’t get a good experience their junior and senior year of high school. I have had more students delay going to school because they didn’t feel ready.”
Financial Planning Solutions’ Rick Fingerman, a financial planner in Newton, Mass., agrees that a gap year can be a great option for the right kids. “I’ve had more clients now telling me their child is taking a gap year, and that can be a good idea. The kids are looking at their first year and saying, ‘I want to be engaged.’ So they’re taking extra time.”
These planners and their clients are far from alone, says the Cooperative Institutional Research Program at UCLA. A study by the program found that, before the pandemic, only 3% of American students took a year off between high school and college, a number that jumped to 20% for the 2020-2021 school year. It’s expected that 2021-2022 saw the same level or even higher, researchers say, as enrollment rates continued to fall for that academic year.
Jessie Keyt, an undergraduate professor at New York University, says she always thought a good number of her freshman students would have benefited from taking a year between high school and college. “[But] after the disruption of Covid, I think a pause before college is an even better idea, and would likely help mitigate the uptake in crippling anxiety that I see in students now.”
Having a plan for the year off—whether that’s travel for a particular reason (language skills, job training, cultural immersion), volunteering, or even working at a coffee shop, basically any situation in which there are clear expectations—could go a long way in building maturity and confidence, she says.
Another year of maturity can make a huge difference. “Quite frankly, from an admissions point of view, those candidates who have taken a gap year tend to stand out a bit more in the applicant pool,” she says. “And in my experience, the kids who’ve taken time off before college tend to perform better in the classroom.”
The Risk Of Going To College Only To Drop Out
Without doubt, the possibility that college freshman will be so overwhelmed by the experience that they have to return home is something no parent wants to think about. But it happens.
“The kids who were college freshmen this year, or sophomores, their last couple of years of high school were predominantly online,” Huiskamp Collins says. “And I saw so much anxiety among those kids as they went to college. Now they’re coming home after a semester or two because they can’t handle it. Or worse.”
She points to the publicized suicide deaths of five college student athletes in the last two months—Sarah Shulze in Wisconsin, Katie Meyer in California, Jayden Hill in Michigan, Robert Martin in New York and Lauren Bernett in Virginia—as evidence that across the nation too many students are unable to cope with the ways in which the world changed over the last two years. “They lost almost two years of social development. And there is this hyper-pressure to perform and excel—to get the 4.0, to start the non-profit,” she continues. “They’re not equipped to go off and be by themselves. Emotionally, they’re more like 10th graders.”
And the college reality they’ll be going into is far from back to normal, statistics say, as 32% of their classmates are thinking of leaving. That percentage is surprisingly similar to the 2020 level Gallup found of 33%, which was understandable at the height of lockdowns that had no real end in sight. But two years later, with vaccines aplenty, many students’ need for a break hasn’t budged.
The most common reason given for this (cited by 76% of students) was emotional stress, and another primary reason (cited by 34%) was that they found the coursework too difficult. In the previous poll in 2020, emotional stress was cited only 42% of the time, and difficult coursework was noted just 17% of the time. Something happened between the fall of 2020 and the summer of 2021 to skew mental health issues to an unsustainable level, Gallup found.
“The two issues—academic challenge and mental health—are highly related, as coursework challenges can increase feelings of stress, and stress can make concentrating on schoolwork and studying even more difficult,” Gallup wrote in the poll findings. “The implications are devastating for students, their families and their institutions.”
(If one looks at the trend and thinks American kids are just spoiled and need to find their mislaid bootstraps, a study in London found that one in four Brits between 16 and 25 thinks it’s unlikely they’ll ever fully recover from the emotional impact of the Covid-19 pandemic.)
The mental health problem among students will likely run into another college problem: family finances. There are families who likely chose schools beyond their price range because borrowing was easy, advisors say. But at least some of the financial aid has to be repaid anyway if a student drops out.
How much has to be paid back (and when) can vary, but the easy answer is pretty much all of it, and soon. “Once you’re out of school for six months, the repayment of federal student loans starts, and sometimes of scholarships, too, depending on the institution,” warns Joe Messinger, a CFP who also developed the planning software College Aid Pro.
Portions of federal grants tied to classes that were never completed also might have to be paid back, and possibly other grants and scholarships as well. For private student loans, the repayment schedules can vary, but often they’re either already being paid back or repayment starts six months after the student leaves school.
The sting of repaying loans without a degree to show for them can be a harsh and painful reality, Messinger says. “There’s no value to going to school for a couple of years. You have to finish.” With that in mind, for a certain kind of client with a certain kind of student, Messinger says he recommends tuition insurance.
This covers the nonrefunded costs of attending college, including tuition, fees, room and board, if a student leaves school for a qualified reason, including a mental health condition such as severe depression or anxiety. Some schools include insurance in the cost of attendance; if they don’t, it typically needs to be purchased by the first day of class, and it covers the following semester. Fees can range from 1% to 2% of college costs, and policies are reupped every term.
“This is a risk mitigation,” Messinger says. “For parents who aren’t really sure about how their child is going to do but want to give it a chance, they should really consider insurance. That way if the kid comes home halfway through the second semester, everyone’s protected.”
The Risk In Gapping
As much as a gap year sounds like a reasonable solution, a chance for young adults to make up for social isolation by getting out of their house and out into the world—through a structured volunteer program like AmeriCorps, perhaps—there are some significant financial consequences just ahead.
American families are about to come into a world of hurt in the form of tuition hikes, changes to the Free Application for Federal Student Aid form (also known as FAFSA; see sidebar) and the grinding beatdown of a period of high inflation, sources say. Put it all together, and delays to starting that four-year degree will mean higher costs in the future.
Mark Kantrowitz, financial aid consultant and author of the book How to Appeal for More College Financial Aid, says that colleges and universities keep tuition hikes fairly low during difficult times, as they did during the Great Recession or during the first two years of the pandemic. But then, historically, they go through a period of large hikes to make up for the drop in state support when there’s less tax revenue to pull from.
“Pricing is cyclical. Tuition inflation moderates during a recession, but towards the end you see above-average tuition inflation, especially at public colleges,” he says. “Like everyone else, the schools have lost ground when they have to adjust for inflation. Costs, energy and equipment prices have all gone up. Some colleges are seeing budgets go up and re-enrollments go down. So there’s a lot of pressure on them to raise tuition.”
Even though Kantrowitz says he expects more schools to bump tuition “significantly” in the 2023-2024 school year, some aren’t waiting. Boston University last month announced it will raise tuition 4.25% to $61,050 in the fall—its largest increase in 14 years.
Other schools that have already announced increases include the University of Virginia, which is raising undergraduate tuition and fees this fall by 4.7% and by another 3.7% for the fall of 2023, while room and board each will jump 4%. Lafayette College and Carnegie Mellon University are enacting 4% increases this fall, while Texas Christian University will bump its tuition 4.5%.
“For the first time in a long time, I’ve had parents and students say college is expensive,” Bogardus says, adding that his client demographic in the Northeast means it’s not atypical for a family to spend $50,000 to $80,000 a year on college.
As Bogardus weighs options with his clients, he often suggests that uncertain students start college now if they can, but consider attending a good, less-expensive school where there might be under less pressure so they can excel. “They can go for two years, do well, and then transfer.”
SIDEBAR: A Lighter, Leaner FAFSA
It’s been 12 years since the last overhaul of higher education rules, but Congress used the Consolidated Appropriations Act 2021 to make applying for college easier through the simplification of the Free Application for Federal Student Aid (FAFSA) form.
Most noticeably, the number of questions will drop from a dreaded 108 to a more manageable 36. Some of the provisions will take place in academic year 2023-2024 (with the FAFSA form coming available October 1, 2022), and some will take place the following year.
• The current expected family contribution (EFC) will be replaced by a student aid index (SAI).
• Untaxed income lines are streamlined to only those items broken out on the federal tax return.
• Divorced and separated parents will continue to have only one parent’s information on the FAFSA, but now it will be the parent who provided the greater portion of the child’s financial support who counts.
• The new SAI formula removes the question about cash support, so funds coming from a 529 college savings account owned by anyone other than the student or parent (a grandparent, for example) will not be part of the income equation.
• Students who require more than four years to complete a B.A. program will no longer be cut off from receiving subsidized student loans after year six.
• The biggest change is that the EFC/SAI will no longer be divided by the number of household members enrolled in college at the same time, a calculation that gave these families a discount. However, the income protection allowance has been increased significantly to buffer the impact for the average family.
• Additional changes include counting foreign income as income, expanding aid eligibility to applicants with drug convictions, no longer requiring males to register with the Selective Service System, increasing the amounts of Pell Grants and expanding their eligibility to incarcerated students, and expanding the authority of financial aid administrators to make local decisions about aid under certain circumstances.