Peter Samuelson, President of Ardeo Education Solutions
Peter is a graduate of Yale Law School and a former management consultant with McKinsey & Company. Peter is now the President of Ardeo Education Solutions, a public benefit company that partners with higher education institutions to provide Loan Repayment Assistance Programs (LRAPs) that are financially smart for students and for colleges. He developed the idea for Ardeo while serving on the Board of Directors of a private liberal arts college that was searching for ways to increase enrollment and help more students attend their first-choice college.
Questions Answered Today:
What are loan repayment assistance programs (LRAPs) and how can they help families?
LRAPs, which were pioneered in law schools about 40 years back, were designed to guarantee that a student will be able to pay off loans after graduating from college. They’re basically a promise or an insurance that if the student’s income after college graduation is too low to pay off student loans, the student will receive “help” from LRAPs to pay off those loans.
All in all, LRAPs soften the blow of spending too much on a college that may or may not be worth the price.
Look at this scenario:
A student gets into her dream school, but her family found it to be too pricey. It would be truly a hard decision to make, as it’s the student’s dream versus the family’s financial capability, which are both equally important.
Since the family is not sure if they should spend that much money, it may be wise for the student to get into an LRAP.
That way, when the student graduates and gets into a good company and starts earning a lot, then there’s no use for the insurance. However, if the student graduates and fails to get a high-paying job, then the LRAP can either pay off the student loans or help in paying them off. Either way, the family won’t really suffer that much damage.
How do LRAPs work?
To get into LRAPs, the first thing families need to do is to find a college that offers them.
Some colleges provide LRAPs to all students, while some colleges only give them to a handful of students as needed, so make sure to inquire and specifically ask.
If a student is in a college LRAP program, once they graduate and their employment income is lower than $20,000, the college will pay for 100% of their student loan payments, which include:
- Federal student loans
- Any private alternative loans
- Parent Plus loans.
To qualify, the student must graduate and must be working at least 30 hours a week. The graduate must earn minimum wage, so volunteer work may not qualify.
Note: Jobs with lower income by choice may qualify. Some examples include:
- Working in a Catholic school in the inner city
- Working for a non-profit organization.
If the graduate continuously struggles to find a job that pays more, their LRAP support continues until their loan is fully paid.
Peter also remarks that the LRAP support depends on the graduate’s income, which means that, as their income increases, the help they’re getting decreases. The upper income threshold, according to Peter, is usually $45,000 to $50,000.
This means that once the student gets a job that pays about $45,000 to $50,000, the assistance stops, and the student becomes fully responsible for paying for their loans because they have become capable of doing so.
CAUTION: LRAP programs can vary significantly and may have different rules and restrictions in order to qualify for benefits. Be sure to get complete LRAP information from the colleges you are considering, as they are the provider of the program and benefits, and they set the terms and conditions.
What are the general tips you have around borrowing money for college?
Here are some things to ponder:
- For Peter, the general rule is to avoid borrowing $100,000 for an undergraduate degree, although there would be some rare exceptions where it would make sense.
- A common tip from college advisors: Don’t borrow more than you think you’re going to earn in the first year of working. There are two possible side of the coin following this tip:
- If you’re studying computer science, perhaps you can borrow a little bit more because there may be a lot of opportunities waiting.
- If you’re studying Archaeology, for example, since it’s hard to find paid positions in a short time, maybe it would be wise to borrow a bit less.
- Statistics say that if a student goes to a school they love, their chances of graduating and having a higher GPA is higher. Why? Because the student is more engaged and passionate if they’re somewhere they want to be.
- If you’re afraid to borrow more, but you need to, make sure to have a safety net such as LRAPs.
What do you think about the low-cost options more common than the LRAPs—community college and being a working student?
Peter sees community colleges as a strategy proven many times to be effective in terms of cost-saving. However, Peter points out that it takes a strong, dedicated student to succeed in community colleges. If the student chooses this path, they should remain engaged and avoid distractions if they want to get that degree.
Also, the parents also need to pay attention to the social aspect of going to community colleges. The best people and networking are normally found in the freshman year of college. Students who transfer in the latter years in college find it hard to engage with others and find real connections.
Brad also pointed out that while working part-time is generally a good choice for many, families should still make sure that it’s the best career path for their students. As an example:
A student juggles working and studying nursing. After eight years of living like a college student, taking classes here and there while working, and figuring out if he likes to really pursue nursing, the student gets a nursing degree and clears out his student debt.
This sounds like a great deal, right? Now here’s another scenario:
A student who’s always wanted to be a nurse works hard getting a nursing degree in four years. Even after getting a degree, the student lives a disciplined life in order to pay for his college loans. After 8 years, the student has a degree, has four years of experience as a full-time nurse, and has been promoted twice.
These two students had the same time frame, but they used their time differently. This is because they also had different dispositions—one was still testing the waters, while the other one had everything figured out.
As Peter says, “Life is not a raise.” It doesn’t matter who gets where first, as long as the student finds a life-long career they’d be happy with and, of course, a career that will earn a return on everything they invested.
What are your tips for parents who are afraid of debt?
Some parents are comfortable with credit and have used it pretty well, while some have pessimistic views of debt. Peter reminds parents how the way parents see debt greatly affects their decision making. Here are some tips Peter has for parents who are too afraid to borrow money:
Interest rates for student loans are low and income-based, so they’re usually a good debt.
While you really can’t predict how well your student will do in college, there are indicators to look at, such as:
- Straight A – You probably don’t need to worry about them. They’re motivated and can do well on their own.
- C+ up to A- – Are they willing to be more disciplined and do better?
- C- or lower – You may have to look for alternatives
- Test scores (ACT and SAT) are indicative of how well the student can do in college as well.
Some students may be late bloomers, so make sure to give them time to explore and find things they would enjoy and a place where they will grow.
Don’t be afraid of what the media says about loans. Sometimes they twist things to make their stories interesting. You’d probably see horror stories of students incurring $100,000 of debt, but that rarely happens. Only 1% of students end up with that much debt.
Getting a college degree has monetary and non-monetary benefits. Statistically, the average earnings of a college graduate can be as much as double of what a high school graduate earns.
But more than the money, compared to others, a college graduate has:
- A lot more enjoyment in life
- A healthier civic participation
- Higher score of happiness.
Where can I learn more about LRAPs?
- REMEMBER: The eligibility requirements, terms and conditions of LRAPs are set by the colleges that offer them. Always make sure to get complete LRAP information from the colleges you are considering, as they are the provider of the program and benefits, and they set the requirements, terms and conditions.
- Peter’s company’s website, Ardeo Education Solutions, offers a complete list of colleges in the U.S. that offer LRAPs.
- All top law schools have been big on LRAPs, so they may be a good start as well.
- Google ‘LRAPs’ and you’ll find them in news, newspapers, and press releases.
- You can contact Peter at firstname.lastname@example.org
Today, I’d like to recommend CollegeData.Com. It’s a credible website you will want to visit in case you get waitlisted.
What’s good about being waitlisted?
While you don’t get a spot in a college, you may be prioritized once a spot opens up in the future.
What’s bad about being waitlisted?
Being on a waitlist, for many colleges, is equivalent to ‘no.’ Some colleges put 1000 people on the waitlist but only take 12 to 13 people (sometimes zero) off the waitlist. There are instances where a waitlisted student can actually get in, but that’s very rare.
Being waitlisted puts families in a very difficult spot especially if the student gets put on their dream school’s waitlist. Needless to say, it gets complicated with decision-making.
How can CollegeData.Com help a waitlisted student?
Students can look up the statistics of a particular college in terms of accepting students in the waitlist. It can show how many students are waitlisted, and how many were taken off. This makes the decision-making a little bit easier.
What are the limitations of CollegeData.Com I should know about?
You can’t see multiple years’ history. It’s limited to a year’s history. Therefore, it’s a bit difficult to conclude if their waitlist data has always been like that, or just for that particular year.
Links and Resources
Helpful Articles and Resources
- Taming The High Cost Of College
- Peter Samuelson’s Contact Info:
- Website – Ardeo Education Solutions
- Twitter – Ardeo
- Twitter – Peter
- LinkedIn – Peter
- Email – email@example.com
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Is college worth it? And using loan repayment assistance programs to make sure that it is? Stay tuned.
You have kids, they grow up, and before you know it, it's time to plan for college. Where do you start? How much is it going to cost? Will you qualify for financial aid? Should you be looking into scholarship? When will you be able to retire? What about student loans? The list of questions is never-ending. The good news is all the answers are right here. Welcome to the Taming the High Cost of College Podcast. Here is your host, certified financial planner, Brad Baldridge.
Hello and welcome to Taming the High Cost of College. I'm your host Brad Baldridge. Today we have an interview with Peter Samuelson. He is the founder and CEO of Ardeo Education Solutions. He runs a company that helps colleges put together LRAP programs or loan repayment assistance programs. We also talk about 'is college worth it' because an LRAP program is a program that essentially helps guarantee that you can afford to pay your loans once you graduate. It guarantees that you will have an income that makes college worth it, so to speak. So we're going to learn more about how that an LRAP program can help give you a little more comfort and assurance that you will be able to afford your loans once you graduate and how these programs work. And of course, we also talk in general about how to figure out if college is worth it. You know, the short answer in my opinion is it depends on your student and it depends on your financial situation, for sure, as to how much is reasonable to spend on college. So sometimes I think it's worth it. Oftentimes it's worth it. But there are situations where maybe you are spending too much. And we'll get into some of those details in this interview. Show notes for this episode can be found at tamingthehighcostofcollege/152. As this is episode 152. Let's go ahead and jump into the interview.
Today we're talking with Peter Samuelsson, founder and president of Ardeo Education Solutions. Welcome, Peter.
Thank you, Brad. Thanks for having me.
All right. So you obviously founded a company called Ardeo, and 'Education Solutions,' but doesn't tell us exactly what your company is about. So can you tell us a little bit more about what you guys do and why it's relevant to a typical parent?
I'm happy to. So we help students go to college. We have a program called a loan repayment assistance program, or LRAP for short. And LRAPs have been around for about 40 years now they were started by law schools. And they promise a student that if your income after graduation is low, we'll help you make your loan payments. So it happens all the time that a student gets admitted to a college. At that point, they're excited, right? It's January, it's September, whenever it is, months later, they get the financial aid award. And now we're not so excited, right? Mom and dad starts saying, 'We can't afford it, maybe you should look at a cheaper option.' So a lot of students face really hard decision where they want to go to a school, it's their first choice, their preferred school, but they just feel like they shouldn't borrow that much money. And that's where an LRAP comes in. We provide that negative. For some reason you have a lower income, we'll help you make those loan payments. And there's really two ways you end up with a lower income, you're unlucky. Or some people choose a life of service, right? They're going to work in a nonprofit, they're going to work at a Catholic high school in the inner city, or whatever and their income is by choice lower than others. And we're happy to help either kind of student with our loan repayment assistance program.
Right? Okay, so is this then a product that a parent or student would go out and seek and say, 'Okay, I'd like to get one of those assistance programs that'll help me...'
Now that's a great point. I've had so many families, family members, friends, asked me that. Now we don't sell to individual families, we sell the program to colleges, and colleges give it to incoming students. There's some colleges give it to all of their incoming freshmen, some give it to just a handful of them and everywhere in between.
Right. So good, so then, in essence, what families, if they're interested in this type of program, they'd need to find a school that's offering it so you have some sort of access to that information that, where a website or something where we could get that list, so to speak?
Absolutely. So our website is ardeo A-R-D-E-O dot O-R-G. And that will list a lot of the colleges and universities across the US that offer LRAPs. Another place is just Google it because a lot of them it has come up in some news, press release, newspaper story. And the other thing to keep in mind is that this started in law schools and all the big law schools, all the top law schools have a very robust LRAP program. The smaller ones not so much. But I'd say Google is your friend, ardeo.org will show you a lot of them. Add new stories from time to time, covered as well.
All right. So essentially, if we're getting involved in loans, and we want this type of guarantee, so to speak, can you tell us a little bit more about when you say your income is low? Or what does that typically mean?
Sure. So we said what we call an upper income threshold for every college or university that uses it. Generally, that's about $45,000. So the promise to the student is you have to come to this college because this college is paying for it, you have to graduate, and you have to be working at least 30 hours a week. And then if your income is below $20,000 a year, we're going to reimburse you every quarter for 100% of your loan payments, as the income goes up from 20,000, to that upper income threshold, usually 45, maybe $50,000, then that benefit that assistance phases out, once you cross that upper income threshold for a few a full year, then you're done, no more assistance after that. The college promised you'd get a job that would help you get a good income, you got that good income for a year, you're done, the college has made good on its promise. But if your income stays below that threshold, we're going to help you make your loan payments until the loans are paid off, for as long as that takes.
Right. So then I guess there's a, you're avoiding one that a gaming system, so to speak, where I had a good job, but I decided to quit. Now my income is low again, I changed careers, whatever I didn't like it. That would typically not allow them to go back and get reimbursements again, is that...
Absolutely, that's a really common situation, right? Just the college isn't insuring the rest of the student's life, they're providing a guarantee that when they graduate, they'll get that good job. So there are some time criteria in there. But if you only have that good income for less than a year, then you can continue to get the assistance. But you're right, if you've had that good job for five years, and now you decide you want to go do nonprofit work, or now a recession hits the college didn't guarantee the rest of your life, they just guaranteed what happens right after graduation.
Right? Now what if you're just having a hard time finding work in your field, like, there's, the rumor out there like archeology, it's really hard to get your foot in the door, it might take a year or two or three where you are maybe doing volunteer work, essentially, to get some experience before you can get a paid position.
Absolutely. So we do say that volunteer work doesn't qualify, it has to be minimum wage to qualify. And the group we see all the time more than archaeology is teachers. So it's really common for someone who gets a teaching degree to come out. And they can't get the full-time job in the local school system, right. So they're gonna substitute teach for a year for six months. And while there's substitute teaching, they're probably a barista at Starbucks or doing some other part time work, right. So that's a large group that we help for that year or two until they find that full time job. But that's pretty common. There's a lot of jobs where the entry level doesn't pay much, they might supplement it with another part time job. And that's fine. We're trying to help people through that, that dip until their income goes up. And what's interesting is we do see a lot of graduates who start with a low income, and within a year, their income usually goes up by 15% or more, you know, they get that first promotion, they land that full time job instead of two part time jobs. There's a lot of people to see a really big increase one year out. That's delightful. Right? That's exactly what we want to see.
Right? Absolutely. Okay, so I guess let's talk a little broader about student loans. Because I think there's a media, almost like they're conspiring to shock and awe around student loans. I was watching some of your material. And you had some statistics on what the average loan actually as compared to what the media talks about, can you give us a little more about that information?
Sure. And I'm not sure it's a conspiracy by the media, but they don't publish boring stories. And it's way more interesting to find someone with 100,000 of student loans, and say, 'Look at this poor soul who's just been crushed by this debt,' right? And that's a horrible situation if you have a bachelor's degree and 100,000 in student debt. Now, the great news is, that's only about 1% of college graduates end up with that much debt. And that probably reflects some poor decisions along the way, you shouldn't borrow that much for an undergraduate degree. Almost all the people with 100,000 of debt are doctors and lawyers. No one's crying for doctors and lawyers. But we will cry for that bachelor student getting crushed. Now, most undergrads come out with 27,000 a debt, mom and dad might have a little more Parent PLUS debt on top of that, but most grads can pay off their loans in seven years. So that's radically different than the stories you hear the media. And it's sad, because when the media paints that horrible picture, it's an easy story to write, they get their clicks, they get their eyeballs, but it really does discourage some high school students from looking at college or thinking that they can borrow, and really does change the decision making they make there, and sometimes it changes the advice that mom and dad give their son or daughter. And that can be unfortunate when you know students get guided to a lesser option when they should have have just because people have not understood the actual facts out there and have just been misled by those media stories.
Right. So there's a contingent out there that say, 'Well, college is so expensive now. It's just not worth it.' I would argue with that. And I'm just curious what your opinion is on, where's the line? How much can we, how much should we borrow, how do we make that decision of when is it worth it, when is it not worth it, how do we think through that in a reasonable way?
Sure. So we like to say the college is worth it, sometimes who takes college is still worth it. And we usually add a little footnote on the end that says, 'College is worth it for most students most of the time,' right? I already said that you shouldn't borrow 100,000 for an undergraduate degree, in most cases, you know, there's going to be exceptions to that where it makes great sense. For a long time, I've heard college advisors use a rule that say you shouldn't borrow more than you think you're going to earn your first year after college in whatever fields you have, right. So if you're in STEM, if you're studying computer science, you can borrow a little bit more. If you're studying humanities, you referenced archaeology, maybe you're a performance artist, right? Maybe you're singing, maybe you're doing some other music, your income is going to be lower the first year out, you should borrow less. And you should make decisions about where you go to college, in keeping with where you think your career is going to take you. Unless you have a safety net, like, LRAP, then you can borrow a little bit more to get that safety net. But definitely there are people who choose to borrow too much. And on the flip side, there's people who don't borrow enough, and they should have gone to that, that college they really wanted to go to. One of those statistics I love is that there's a higher graduation rate with a higher GPA if you go to the college you want to go to, when you study what you want to study, right? If you're at the place you wanted to be, and if you're studying what you're passionate about, you're just more engaged, and you're gonna have a better outcome.
Right, absolutely. So there's a strategy out there where families like to use it, talk about maybe going to a two year community college or other low cost options, and then transferring to where you want to be as a way to save money, which, again, mathematically, I think that works out as far as saving money may be true. But I think the other side of it is the success factor that you just mentioned. Can you speak to that a little bit?
Sure. So one of the data, I mean, I would agree it works out mathematically. And there's lots of examples of people who started at community college, got their basic classes done, you know, very cheap, and then moved on to a four year school and graduated. So it's definitely doable. I think the risk point for a student, the danger point is they have to make sure they're disciplined and they don't get distracted. What happens way too often is someone starts at a community college, they're doing college part time, they're working part time, they're not as committed to the college part of it, they start working 20 hours a week instead of 10 hours a week, and then they're working 30 hours a week, and then they're working full time. They're skipping classes, they're taking fewer classes, they just can't get engaged from college, and they just don't finish. And that can be really unfortunate for a student. Now, there are students who didn't do so well in high school, they struggled, school isn't for them, college isn't for them, they should find a vocational path, they should find an apprenticeship, right? There's a lot of good options for them that are better than a path where they're struggling. But certainly the student who has studied got good grades, and is looking into community college just to quote 'save a few dollars.' They are making a real risk in terms of are they going to be disciplined enough to get there. Now, that's the financial side of the arguments. The other side of the argument to that is worth keeping in mind, if you're that student or that parent giving that advice is, for a lot of people, their lifelong best friends really are made out of a made up of the people that I've met as a freshman in college, right? You start out on a freshman dorm, you go through a lot of life experiences in that first and second year of college. And when people transfer in, I noticed this when I was in college, we had a lot of people transferring as juniors, it was hard for them to get as engaged and as connected with the rest of us. Some of them did very well, some of the did less well. Right. And so that's just another difficulty and a challenge to keep in mind.
Right? Absolutely. And I think there's a, especially for the strong students, right, I mean, if you have a strong student that can do well and knock out a four year degree in four years, and then move on to a successful career. I think most people don't understand, they discount the idea of that time that's lost, as well.
So using the example, I think a common one would be in nursing, where you start out with a low level nursing certificate of some sort, which allows you to go to work and get some nursing experience. And then you slowly work your way up until you get your four year nursing degree. Now, if you do that, and you struggle through that, and it takes you eight years, and you live like a college student for eight years, and take classes part time while working and all that kind of stuff, and then you graduate eight years later with no debt and you have your nursing degree. That seems like an accomplishment. But on the flip side, a nurse earns a lot of money once they have that four year degree. And a typical student if they worked hard for four years in the nursing program, obviously in the nursing program as a student, they're gonna live like a student. If they have the discipline to say 'I'm going to continue to live like a student for four more years.' They could pretty easily pay off the loans that they would have had to borrow to make the four years happen, getting them to the same place, except they would have four years of nursing experience and maybe already have a promotion or two, after that same eight years?
I would say absolutely right. So the first thought that comes to mind is, life isn't a race. And if it takes them eight years, because they're figuring out that they really like nursing, this is what they want to pursue, then that's fine. If they choose that long path, because they want to, quote, save money, it always is a shame to earn minimum wage to pay for a college degree when, like you said, if you borrow the money and you graduate, now you're earning way more than minimum wage when you pay it off. And usually, that's a good trade off. Usually, you want that higher income before you start paying for the product you just purchased. And usually that's a good trade for the person because it's really painful to accumulate enough money to save enough while you're earning minimum wage or close to it.
Right. Absolutely. That's, that's a good point. I hadn't thought of it that way. As in essence, you are low income versus high income to buy the same product makes a big difference. All right
That's what you're paying for this product. And in the interest rates on student loans are generally pretty low. So it's, it's usually a pretty good debt. And if you're borrowing the federal student loans, they have an income-based component as well, which is very similar to the LRAPs we're using. So I would definitely advise my own daughter who's taking a gap year right now and going out to go into college next year. And I have advised her borrow as much money as you need to go through college, and don't worry about it, because you're gonna get a good job afterwards. You're gonna do fine.
Right? Absolutely. And I think the another factor that needs to be rolled in here, again, is the the ability of the student, we kind of mentioned that offhandedly. But I think you really need to focus in on that. There's a big difference between that go getter student that has always done well as an academic superstar, and figures things out and can roll with life and is not set back by the minor tribulations that all of us go through, as compared to the student that's maybe the B-C student who is struggling a little bit in high school and is thinking about college, because that's kind of what everybody does. And maybe they're not real passionate about college, or maybe they're not real passionate about any particular career, yet, they haven't figured out life. You know, that's two different scenarios, and should be treated differently. I think. And most, when you see, is college worth it, and all these people putting up all the math, they don't really talk about that stuff very often. What have you experienced there?
I would separate it into three scenarios, because I totally agree with your two scenarios. But I would add a third one, you know, I look at the straight A students, they're gonna do great. They're self motivated, they've mastered high school, they're doing fine, right? And then you've got the students who really struggled with call it C or worse in high school, that's a group that may want to look at alternatives, right. But if you are a C plus student up through a B student, maybe an A minus student, your mom and dad love you, but they want the best in life, and they're not sure how you're going to do, right? So even someone who wants to be pre med, are you really going to get through organic chemistry in college? Right? We're not sure. And if you are a B minus student, are you gonna develop the discipline to get what you want? So yeah, those are the students where it's really hard to predict what the outcome is at college and at life. And it's interesting, when you look at the studies, the high school grades and the high school test, the ACT, SAT, they're somewhat predictive of college, but very little predictive of life outcomes. Because you often get that student who might have been a B minus student in high school, but they're a great salesperson. And they do just fine in life, where maybe they weren't that good of a student, but they're a great manager of people. And they do just fine in life, right, where they discover they're really good at computer science, and they enjoy it. So a lot of people are late bloomers, and you have to allow them time to find what their, what excites them in life, and then find a place where they can plant themselves and then bloom. So college, I think, back to the question, is college worth it? I think it's worth it for an awful lot of those students, they do want to be careful that they don't borrow too much, they don't end up in a place where it hurts.
Right. And let's talk a little bit more about that borrow too much, because again, they talk about that student that borrowed $100,000. But what a lot of especially if you're, just have high school kids, you're not deeply into the college process yet. I mean, the reality of it is most students can't borrow much more than 5500 as a freshman, and 6500, and then 7500, as a sophomore, junior and senior. So all in, they can borrow about 27,000 with their own signature in their own name, they don't really need mom and dad to participate. But after that, for many students, it's mom and dad that are borrowing or co-signing or somehow facilitating additional loans. And I think you know, so theoretically, you, mom and dad are the adult in the room and you're the one that has to say, 'This is a little more than what's reasonable.' And I think it's especially true if as if you're saying, 'Well, I need to borrow in order to get to the low cost option,' then that, maybe that's more reasonable, but to borrow a lot of extra money, because there's some Chinese school out there that has done a good job selling, and now you think it's worth it? You know, is it really worth it? I think I'd parents again, you need to push back a little bit. As most 17-year-olds don't understand what an extra $50,000 in loans really means.
You know, it's really a challenge, right. And I would say that part of it depends on mom and dad's experience with credit and their own incomes as well, right? Some parents are very comfortable with credit, they have car loans, they've got home loans, they've used credit cards wisely. And they see credit just as a tool in life. And they're gonna guide their student through pretty seamlessly on that. For a lot of parents, though they've had trouble paying that car loan, maybe they don't have a home, maybe they rent, maybe they got in trouble with credit cards, so credit something a little more scary. And I tend to think of college loans similar to a home loan, that it's a really good investment in life. You don't want to buy the shiny car that depreciates right when you drive it off the lot. And now you're stuck with a huge car payments. And you certainly can replicate that with college, if you go to like you said the 'shiny college' and you pay too much for it. But for most students, they're going to find out that a college investment is similar to the mortgage on the house, and that it has a real lifetime value. You know, it's great when you look at the statistics for earnings, the average college graduate earns, you know, a lot of people disagree on this number, whether it's a million more than high school graduates, 600,000 more, double with a high school graduate earns in a lifetime. But it's clear that there's a real earnings premium, not to mention just a lot of enjoyment in life, civic participation healthier, generally score happier on scores of happiness. So there's a lot of the non-financial benefits as well. But you're right, mom and dad are the adults in the room. And they have to provide some guidance to the students. And that can be challenging if mom and dad are not comfortable with credit themselves.
Right. And I think it swings both ways. I think some families, some parents are more pessimistic than they need to be and they're afraid of debt. And they were willing to just kill the whole idea of college just because they don't want to deal with the loans. And I think there's parents on the other side too, they're the ones that are pushing for that name brand school, or the ultra expensive path. And they're willing to spend the money and they're pushing to get it done. And where the student might be just as happy in either location. But the parents want the bragging rights of, I get to talk about my son or daughter at XYZ college. And that makes them proud, so to speak.
You know, it's great to be a proud parents, we really shouldn't let that as parents drive how we advise our kids. Now, I should put in a plug for the name brand schools, I went to Yale Law School, had an amazing experience met a really interesting group of fellow classmates. And it's been really fun, just, you know, be good friends with a lot of them and watch other ones go through their careers. So I think sometimes the name brand school is worth it. But you're right, there's trade offs there. And you need to understand what is the student's likely outcome? And are we doing this just because mom and dad want to brag? Are we doing this because this really is the best pathway for the students?
And you know, we started it's putting a shameless plug in for Ardeo and LRAP, where a student can get a safety net, like an LRAP, it makes a great difference. So there's a lot of factors that come into play, the students' GPAs the students' ambition, mom and dad's comfort, so many factors that have to be weighed, carefully balanced to make a really good decision there.
Right. So I guess, something that we neglected to talk a little bit about when you mentioned the LRAP and the help with loans. So going back to the idea that the student borrows some, and then mom and dad may borrow some on top? Are you helping mom and dad with their loans as well?
We do, because we want to cover that entire cost of attendance, so the student can go to their first choice school. So we're gonna cover the federal student loans, any private alternative loans, and also the Parent Plus loans. And what we do is we're gonna help mom and dad make their payments based on the students who didn't come when they graduate, just like we're helping the student make their payments based on that student's income.
All right, so I guess, is it like a flat dollar amount? Or is it more like a percentage, so obviously, if the income is really low, you're gonna pay 100% of the loans. And if the income is really high, you're gonna pay zero. But if you're somewhere in between, is it just like, what we're gonna pay 50% of mom and dads and the students loans? Or is it more, 'We've got $500 You guys need to figure out where you want to apply it.'
So we do a percentage. So we say that at $20,000, we pay 100%. And at the upper threshold and save 50,000, we pay zero, right? So if you're halfway in between, we're gonna pay half and you're gonna pay half and then slides up and down from there. It's pretty common that we're paying about 60%, 65% or reimbursing the students 60%, 65% for their loans and their parents' PLUS loans. You know, both the students or the parent get the same percentage reimbursement because we're looking at the same students income for that. And generally what happens is we see that within several years after graduating, well we see that every year, generally the students incomes goes up, unless they've chosen that altruistic volunteer work, semi volunteer work where they're choosing to make less income. But if they're on a income driven path where they're trying to get those promotions get that higher income. Generally, we see every year or two, their income goes up. And then after several years, we quit hearing from them because they've graduated from the program and their income has exceeded that top level. And now they're, they're doing much better.
Right. Okay. So again, another technical question, because I like to get in the weeds sometimes.
If you're paying 50% of mom and dad's loan, and you're paying 50% of the students loan, are you are reimbursing? I guess, are you cutting two checks one to the student, one of the parents?
We normally cut two checks. There's all kinds of privacy laws and contract laws that come into play here. So as long as the student, you know, there's some questions like getting information about mom and dad's loans as well. But almost always what happens is, yeah, we're cutting two checks one directly to mom and dad and one's the student.
Right? And then is, are they both asking for reimbursement separately? Or is it they need to do that jointly?
So that is jointly through the student, the student has to coordinate that and sometimes there's little paperwork lag or challenge between mom and dad and the student. But even if it lags a bit, that's fine. We can get that request a little later.
Right. Okay. So I like the idea of the program. I think it's a great idea where it takes a little that uncertainty, I mean, it boils down to another form of insurance, right? I don't know, my house is gonna burn down. But in case it does, it's good to have homeowners insurance?
Well, absolutely right, because you hate to be that person whose house burned down, and you still owe the bank the full amount, right? And, you know, one of the interesting things is, you know, the student is going to pay, a call at $50,000 for this college education, it's a really large investment, and they can't diversify that risk, which is why we love our LRAP, because we diversify that risk for them. And then if they get the good outcome, and they get the good income, more power to them, they keep the income. And if they have a bad outcome, and they need some help, we're there to help them.
Right, exactly. And I think that's the point there is, it's not a program that's designed to automatically help you. It's designed to help if you need it, just like and that's kind of the definition of insurance, right? Where...
The insurance is one of those things, you want to have the safety net, but you never want to collect.
Exactly. You know, I'm very happy to pay for my homeowners for the rest of my life and never once collect. Because...
Nobody wants to go through the pain and agony of actually collecting it. Because no matter what the they said, when they sold you the insurance, is never going to be fun.
I had to make a claim last year on my homeowners, that is painful. And car accidents are the same way, right? You never want to have that car accident. But when it happens, you're really glad you have insurance for it.
Right, exactly. All right. Well, I really appreciate all the great information. So can you tell us again, where more information can be found and your contact information or company information if people want to learn more?
Absolutely. Thank you, Brad. So our company is our Ardeo Education Solutions. The website is ardeo, A-R-D-E-O dot O-R-G and my email, if you want to reach out to me to ask any questions, it's firstname.lastname@example.org. Brad, thanks for having me, 'been great to talk about all this.
Yeah, I appreciate it. You got some great insight. And we'll stay in touch.
Thank you, Brad.
All right, that was a great interview about LRAPs and 'Is college worth it?' It seems like these new LRAPs and other insurance programs are something new that's coming to the college landscape. We have an interview coming up in a few weeks with another idea around insurance and college. But in a nutshell, I think what industry is trying to do is to protect you if you happen to be the instance where college is not worth it in your situation. In other words, if you looked at a batch of graduates, you might say, 'Well 90%, it made sense hands down, it was a great thing to do. But for 10%, maybe they didn't get as much of a strong income or they weren't able to find work or whatever it might be.' So in their situation, their financial situation did not turn out. And that's where an LRAP would kick in and help pay. And, again, the industry is now starting to address the fact that how do you know if you're the 10%, where it's not going to work out instead of the 90% where it does? And within LRAP, now, if you happen to fall in that 10%, where it didn't work out, you've got some protection. So this is a new idea. I'm not sure if it's going to take off across the board, or if it's just going to be select colleges and majors or how it's all going to turn out. But there are a few different companies now that are starting to work on this. Now, most of them are working with the colleges themselves in order to spread the risk, they need to, instead of having just an individual come and buy it, mof these programs that I've seen so far, require that the college be involved and they buy it for all their graduates in a major or some other way. In other words to spread the risk and it can't just be the poor students or the unlikely students that are allowed to purchase it, it needs to be purchased for everybody. Again, similar to homeowners insurance where you need to spread the risk by having lots of people involved and not everybody gets to collect All right. As always, we appreciate any reviews that you can do in iTunes or wherever you are getting your podcast. If you're finding value in what you're listening to please share it with your friends and family so that they too can learn more about the college process. That's all we have for today. We'll see you next week.
The latest tips, tricks and tools you can use today. This is Brad Recommends on Taming the High Cost of College.
Today, I'm recommending collegedata.com. Now the reason I'm recommending collegedata.com is it's one of the databases out there that actually has information on waitlist. I used to get my information on waitlist from Big Future. Unfortunately, when they redesigned, they took that information out. So what is a waitlist? Let's talk about that for a second. So many colleges offer a waitlist so they accept as many students as they feel they have spots for and then they put everybody else on a waitlist or at least offer to put other people on a waitlist, maybe not everybody. So after you apply to a college, you get one of three decisions, they accept you, they deny you, or they put you on a waitlist in case a spot opens up in the future. Now the challenge was waitlist is it strings people along and a lot of colleges will put a lot more people on the waitlist than they will ever take off the waitlist. And that's where collegedata.com comes in to be a little bit useful. You can actually go look up the statistics of a particular college. And again, it's only a one year snapshot. And that's the other question is it changes year to year potentially. But at least you can see that many colleges might put 1000 people on the waitlist and only take 10 or 12 off the waitlist or maybe zero or maybe they put 300 on the waitlist and they take off 150 or whatever it might have been, but some history on how the waitlist works. I think the big challenge on waitlist is a lot of times a student will be waitlisted at a college they really want to go to. And they're hoping that even after they make a decision and choose to go some other school, that their dream college will take them off the waitlist and then accept them in the future. It's an easy way for colleges to kind of let you down gently because they're not saying no, they're just saying you're on the waitlist instead. But for parents and students, I think you have to consider the harsh reality that a waitlist at many colleges is essentially the equivalent of a no. Now that being said, a couple of years ago, I had a student where we're put on the waitlist and on May 1st, they had to make decisions that there are other options, so they chose an option. And then into June, they did get taken off the waitlist and then that student decided to forfeit their deposit at the college that they committed to and accept the waitlist position at the college that they really wanted to go to. Now again, I've not seen people come off the waitlist a lot. So I think you need to balance that with that bad harsh reality of again, a lot of times, it's not likely you'll come off the waitlist. And one of the things that you can do is work, call the college or work with the college a little bit to figure out if waitlist has any true bearing on your decision, you could ask them well how many people came off the waitlist over the last few years and see what response you get and how likely it is. So again, collegedata.com as a resource that you can actually look up how many students were offered the waitlist and how many were taken off. And for each school, unfortunately, it's only a one year history. So you can't see multiple years. But it is a, really, some data. And that's the only database I'm aware of that continues to have waitlist data. Alright, that's all we have for today. As always, we appreciate any sort of reviews that you can leave for us at iTunes or wherever you're getting your podcasts. And we will see you again next week.
Thank you for listening to the Taming the High Cost of Podcast. Now, it's time for you to take action. Head to tamingthehighcostofcollege.com for show notes, bonus content, and to leave feedback for Brad. The next step on your college journey starts now. Brad Baldridge is a registered representative of Cambridge Investment Research and an investment advisor representative of Cambridge Investment Research Advisors, a registered investment advisor. Securities are offered through Cambridge Investment Research Incorporated, a broker dealer and member of FINRA and SIPC. Brad owns two companies, Baldridge Wealth Management and Baldridge College Solutions. The Baldrige companies are not affiliated with Cambridge Investment Research.
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