Higher Education: Why It Matters, How You Can Prepare
A recent study of black parents found that nearly all of them consider a college education key to future success. But a lack of information about paying for higher education has created a gap between aspiration and realization, especially for black and Latino families.
The study of black students and parents in five cities, conducted by the United Negro College Fund (UNCF)'s Patterson Institute, found that 99 percent of black families believe a college education is an important part of success in life. But almost half of the parents could not name a single source of financial aid and 70 percent of students indicated they wanted to receive financial-aid information earlier in their high-school years.
"The unfortunate effect of that gap is preventing many thousands of high-aspiring kids from those communities from going on to college because there is this perception that college is out of reach," says Hugh Rosen, a spokesperson for The Sallie Mae Fund.
Part of the problem is the way information is being disseminated. It's important to reach out to underserved communities through local organizations, from churches to grassroots groups. For example, a California program run by Wells Fargo, No. 17 on The 2006 DiversityInc Top 50 Companies for Diversity list, arms mothers with the knowledge they need to run financial-education workshops for their peers. The classes, held in schools, churches and private homes, are informal and relaxed.
In October, on the heels of the UNCF study, The Sallie Mae Fund kicked off its campaign to improve higher-education access among black students by offering free "Paying for College" workshops in community centers and local schools.
"This work is about getting knowledge out in ways these communities would like to receive it," Rosen says.
Sallie Mae also announced a commitment to renew its "American Dream" scholarship program with the UNCF, pledging to provide a $500,000 grant for 2006–2007 academic-year scholarships. The fund has made $2 million in scholarships available since 2003.
This work is an off-shoot of the fund's Project Access, a program focused on providing information and opportunities to underserved populations. It was launched in response to a 2002 Harris poll commissioned by The Sallie Mae Fund, which found that families with the lowest income levels had the least amount of financial-aid information at their disposal.
Of families that earned less than $50,000 a year, about 60 percent said they needed more information about how to pay for college, compared with 37 percent of families making $75,000 or more. People of color, in particular, are victims of a knowledge gap, according to the survey. Two-thirds of all black parents and 62 percent of Latino parents surveyed said they needed more information about paying for their children's college education, compared with 44 percent of white parents.
Adding to the problem is the size of the country's unbanked population. An estimated 10 percent of the U.S. population does not use the banking system. The problem affects all lower-income Americans but is most common among Latinos. Only half of the nation's 40 million Latinos have checking accounts, according to the American Bankers Association.
In a 2005 survey of New York City Latinos, Charlotte, N.C.–based Bank of America, No. 25 on The 2006 DiversityInc Top 50 Companies for Diversity list, found that 34 percent hadn't established a relationship with a mainstream bank.
Many of the unbanked Latinos are undocumented immigrants who can't legally open an account. But about half of undocumented residents come from Mexico, a country that issues matricula consular cards, which can be used to open bank accounts in the United States.
Knowledge about creating banking relationships is increasing as financial-services institutions continue to roll out financial-literacy initiatives. Particularly noteworthy is San Francisco–based Wells Fargo's recent work in Southern California.
For the past few years, hundreds of women who call themselves "comadres" (Spanish for "comrades" or "sisterhood") have been attending a series of five financial-literacy classes organized by Wells Fargo with the help of the Valley Economic Development Center.
The classes were needed in the small, immigrant-heavy city of Pacoima in the San Fernando Valley, where some people thought high-fee check-cashing facilities were their only option, says Wells Fargo spokesperson Dolores Arredondo.
When the company opened a branch in the community, it realized that without education, few people would walk through the doors. "We had to go to them," Arredondo says.
One of the most popular modules focuses on saving for kids' college educations. "Once we got past those initial banking issues, we got into saving for your children's education," Arredondo says.
"A lot of the comadres are now experiencing their kids going to college, so there's a huge emphasis on saying it's possible, our kids from Pacoima can go to college if we prepare," says Gloria Lazalde, a former Valley Economic Development Center employee who continues to help organize the comadres.
How do they make college a reality for their children? Before talking about what to do, Diane Maloney, a financial planner in Plainfield, Ill., likes to discuss what not to do. At the top of her list, if it can be avoided, is accumulating debt by way of student loans, home-equity loans or borrowing from retirement plans.
"If you've got a youngster in their last semester of college and there are no funds available, then a small, short-term debt intended to be paid off as soon as possible may be the only way to go," she says. But "starting life as a student going into the working world with a lot of debt is a really bad idea."
Both Maloney and James Suh, regional sales manager, Wells Fargo Private Client Services, are less enthusiastic about UGMA (Uniform Gift to Minors Act) or UTMA (Uniform Transfers to Minors Act) accounts. They are created in the child's name with the parent acting as the guardian—until the child reaches the age of maturity, which is set by state law and ranges from 18 to 21. Then, the child controls the money.
"Some 18- or 21-year-olds are not ready for that responsibility," Suh says. Maloney agrees, mentioning one student she knows who blew his entire savings on gambling boats in one night.
Especially when advising middle- or lower-class families, Suh advises that people "save as much as you can without it causing stress. I always tell clients to have a balance."
If parents can't afford to set aside much money, don't stress. There are options available.
In addition to various federal student-aid possibilities, students can take advantage of work-study programs. Ambitious undergraduates sometimes can accelerate their college experience by completing a degree in three years instead of the typical four.
Scholarships remain an overlooked option for many. Maloney recommends that parents get a copy of the list of their local high school's scholarship winners, which typically is handed out at graduation ceremonies. "Get a hold of that a couple of years before your youngster is going to be a senior and identify which might be possible," she says.
Maloney also guides parents to programs such as Dollars for Scholars, a network of more than 1,200 grassroots community-based, volunteer-driven scholarship foundations located throughout the United States. Last year, Dollars for Scholars chapters awarded about $29 million in scholarships to more than 35,000 students.
"With enough lead time, you can groom yourself to be acceptable for an award. And don't stop at one," she says.
Often, a combination of savings, scholarships, grants and loans is required, especially if a child wants to attend a private university.
Whether parents start saving during pregnancy or when those college applications arrive, there's always a way to make higher education a reality. And as other companies continue improving the education of their workers, education becomes an increasingly important investment for U.S. parents, Maloney says.
Adds Suh, "My dad used to tell me knowledge is the one thing a thief can't take away."
