National Black MBA Association – Metro New York Chapter

2013 C.A.S.H. Program

Student Case Competition

The Economics of Choosing College

University 101

Written by Program Director, Tyrone Scott

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Table of Contents

Why Decide To Go to College--------------------------------------------------------------------------Pg. 2

Financing Your Education-------------------------------------------------------------------------------Pg. 3

Scholarships vs. Loans

Grants and Fellowships

Family Support

Cost of Staying Local vs. Going Away to College--------------------------------------------------Pg. 5

Managing Your Monthly Budget While in School-------------------------------------------------Pg. 6

Working While in School---------------------------------------------------------------------------------Pg. 8

Part-Time Job

Internship

Work Study Program

Graduation and Your Big Payday-----------------------------------------------------------------------Pg. 9

Case Questions----------------------------------------------------------------------------------------------Pg. 12

Case Competition Instructions-------------------------------------------------------------------------Pg. 13

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Why Decide To Go To College

There are many considerations students need to make as they make their college

decisions. First and foremost are the cost considerations. Like everything else, the cost of

going to college is increasing but seemingly at a faster rate than most consumer services.

Students need to start early to research ALL options for financing their college education. This

case will ask students to research the various options for paying for college. The point is no

matter how you pay for it—it is imperative that young people GO TO COLLEGE these days.

The decision to go to college is not necessarily all about making more money

throughout your career although that is a huge factor but the opportunities to get ahead in life

whether it’s financial or otherwise is enhanced tremendously the more education one has.

Doors open for those who finish college as opposed to choosing not to go. In fact, one of the

reasons why the United States is losing its competitive advantage over many countries is our

rate of people acquiring a higher education is decreasing compared to that in other countries.

See Figure 1 below. Today’s youth are competing against young people from around the world

whose sole focus is education more than anything. These folks understand that the more of it

they have, the better the opportunity. They don’t think of it in terms of money—they think of it

as a chance to get ahead in life. We seem to have lost that focus in America.

As many know or are starting to realize with the most recent economic downtown is

that the types of jobs that used to exist in abundance, are disappearing or no longer exist. Or

they do not exist in the manner in which they might have twenty years ago. Take an auto

mechanic for example. As a student do you really honestly believe that today’s mechanic

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requires the exact same skills that he or she had many years ago? Most cars today are run by

electronics and computer sensors as much as they are by engines and gasoline. Now a

mechanic has to be educated on the most advanced circuitry among other things. In today’s

competitive world, young people need to do everything in their power to make sure they are

the ones getting ahead of their competition.

Financing Your Education

When it comes to paying for college, many students are faced with the prospects of

taking out a loan because they did not get enough scholarship money from their school of

choice. There are many reasons why students do not get scholarships but this should not be

from lack of trying. The majority of scholarships that are given out by schools are given to the

students who deserve them but also put forth the effort to research and apply for them way

China

India

Europe

SE Asia

Brazil

Japan

Figure 1

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before the scholarship deadline. Scholarships are typically based on one of two criteria that

colleges and universities establish:

a) Merit-based scholarships

b) Need-based scholarships

Merit-based scholarships are awarded to students based upon their academic achievement in

high school and their college prep test scores such as ACT or SAT. The better you do and the

more seriously you take your high school academics, the longer term the ramifications of those

early years will have on you.

Need-based scholarships are based on your financial situation as well as your family’s.

If students cannot get scholarships, many resort to taking out loans to pay for college.

This can be good and bad. First of all a student loan should be the last option for paying for

your college but they are not necessarily a ‘bad choice’. Out of all of the debts that a young

person can and will accumulate, a student loan is one that ranks the highest in terms of

credibility. Still, you want to take loans LAST. In addition, you want to make sure you

understand the full terms of your loan. And you also need to understand that once you leave

school, whether it’s via graduation or if you decide to stop going ; repayment of that loan must

begin in earnest in order for you to maintain a good credit history. Again, know the full terms

of any loan.

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TO DO: Teams should do a consider doing a comparative analysis of scholarships and loans.

Research should be done on both to determine all of the factors of each, both pros and cons

to take under consideration for both of these college payment options.

Other options for paying for college include getting grants and/or fellowships. These are

usually provided by either companies or organizations and foundations that choose to support

a particular field or discipline. The final option to be considered for college financing in terms

of this case is the money that is provided by either the student themselves or from family

support. Now if you are like the writer of this case, the option of having family provide funding

for YOUR education is not really an option and that’s ok because that is the real-world scenario

for millions of young people. The same can be said with providing your own funding. It’s not

like young adults have an extra $100,000 sitting around to pay for college.

TO DO: Teams should conduct research on grants and fellowships, in addition students should

consider reviewing the FAFSA form which is the government form that any student entering

college has to complete and submit which details their family and personal finances and

determines how much funding a student should receive from a school for their education.

Cost of Staying Local vs. Going Away To College

Another economic calculation students must make before going off to college is to

understand the financial implications of attending a local school in or near their home or going

away to go to college. Staying within the same state might be desirable if a student doesn’t

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want to rack up out-of-state tuition fees and other non-resident costs. But of course this may

all be a moot point if the school of their choice is offering a full “free ride”. Then going out of

state may be something the student chooses to do just to have new experiences outside of the

area in which they are from. But even staying within the area means there are different

economics involved. Do you continue to live at home and attend St. Johns University or do you

pay a little more, scholarship notwithstanding to stay in the state but go to school up in Albany?

And what if your desire is to go to UCLA on the west coast? What are the economic impacts of

that from an out of pocket cost standpoint compared to the two local and semi-local choices?

Not only do students need to think about the tuition for their geographical choices, and

this is not to say that geography is not among the highest considerations, but there are things

like the cost of living in the city or town you are going to live in. New York City for example is

on one end of the scale, whereas Tupelo, MS is on the other. All things to think about when

you put everything side-by-side and weigh all of your college options BEFORE you decide to pick

a school or have a school pick you.

Managing Your Monthly Budget While in School

Now assuming everything has gone your way in your quest to “get into college”. Now

you’re there and now comes the economics of managing your money while you’re there. Many

students are so focused on school grades and well, yes partying that they may tend to forget

about managing a month’s budget. This would be a terrible mistake that would not only cost

them while in school but most definitely will have lifelong ramifications. If young people learn

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Directions

2. Add lines 1-5 to determine a monthly figure.

CATEGORY (1) (2) (3)

AMOUNT AMOUNT SURPLUS (+)

BUDGETED SPENT OR

SHORTAGE (-)

1. FIXED EXPENSES $0.00 $0.00 $0.00

2. PERIODIC FIXED EXPENSES $0.00 $0.00 $0.00

3. VARIABLE EXPENSES $0.00 $0.00 $0.00

4. DEBTS $0.00 $0.00 $0.00

5. SAVINGS & INVESTMENTS $0.00 $0.00 $0.00

TOTAL MONTHLY EXPENDITURES $0.00 $0.00 $0.00

1. Transfer the dollar amounts from each of the subtotals on the previous budget pages to this summary chart.

3. Review Column 3 carefully. Are these places where expenses should be reduced? Are these places where a

surplus can be identified for an additional savings opportunity?

BUDGET SUMMARY

MANAGING YOUR MONTHLY BUDGET

HANDOUT - PG.5

how to effectively manage their monthly budgets while going to college, they will set

themselves apart from their wasteful spending peers.

Students need to think about how their housing and food are paid for. Now of course

this may already be worked into their package for attending that school but if not, you need to

think about how you pay the rent each month. At some point while in college, whether it’s

early on or in their senior year, students WILL be faced with paying their own rent for the first

time in their lives and the prospect of that could be quite daunting.

Other considerations that students need to think about are how they pay for things like

books, laundry, school supplies, items for discretionary spending like haircuts, movies with

friends, pizza, clothes, transportation and any other things that college students spend their

money on seemingly without thinking about how to pay for it all.

TO DO: Students should prepare a monthly budget similar to the detailed budget posted on

the C.A.S.H. site for Financial Literacy II: Budgeting and Credit. See Figure 2 below. The only

difference is this budget should be applied to their first year of college so some of the

categories on the form may not apply to them but at the same time, there may be categories

missing that do pertain to a college student.

Figure 2

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Working While in School

Many young adults are already familiar with the working world before they even get

into college. Many have done part-time jobs or internships throughout high school. Some of

these jobs are pay-based while others are no-pay and simply offer valuable experience in a field

of choice. But when you get to college you need to decide if you will be a working student or

choose not to work at all and only focus on your studies. Often times the economics may be

such that you have no choice ‘but’ to work while in school.

Many students work part-time jobs while they are in school to help supplement their

income with whatever financing they have already received before entering college. It is often

not advisable to work so many hours such that your school work begins to suffer but

sometimes you need to do what you need to do. The case writer for example, had to work 32

hours a week while also attending school full-time just to make it by. It was extremely difficult

but things turned out pretty well in the end. Each student must make that choice for

themselves. But keep in mind, that part-time job in college is only a means to an end and

nothing more. You are in school to learn, not to make $10 an hour at the campus McDonalds.

Internships are important for college as well because these often come during the non-

school breaks thus providing students the chance to solely focus on their studies and take

summers to work as much as they can to get experience and money that should be saved for

the fall semester. There are also work study programs available through some colleges. These

allow the student to work in lieu of taking certain credit hours. The student reaps several

benefits such as continuing their education on time, saving money while also getting great work

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experience within the field and not to mention getting school credit for the work they are

doing.

TO DO: The teams should do an economic comparative analysis where they present side-by-

side scenarios of a student not working at all and only attending college full-time vs. one

working say 15=20 hours a week and still in school full-time vs. someone in school part-time

and working part-time vs. someone only doing an internship in the summer vs. someone who

goes to school but also participates in a work study program.

Graduation and Your Big Payday

Once you finally put in all the hard work and effort and your graduation day is upon you,

many of you may be so excited you will not know what to do. There is literally no feeling in the

entire world like knowing you are about to receive a prestigious diploma certifying that you

have completed all of the required work that makes you a part of a special group of people—

college graduates. As hard as it might have been for those 4-6 years, that was the easy part.

Now comes the real world! It’s your first job after finishing college and now comes your big

payday. On average a person who graduates with a four year degree, regardless of what field

they go into will make at least twice as much to three times as much in their lifetime compared

to a person who does not either finish college or attend at all. See Figures 3 & 4 below. These

numbers are fact and have been statistically proven over and over throughout time. When it

comes to lifetime money earned, education is the absolute differentiator—no ifs and or buts!

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Of course the field you choose also plays a factor. If you graduate with a liberal arts

degree and receive a Bachelor of Arts (BA) degree, you might not make as much money as

someone who graduates with a Bachelor of Science (BS) degree. That doesn’t make your field

any less important but you have to understand the end-game economics before choosing your

major. If money is not your major concern and you want to be a piano player, then be the best

piano player you can be and you will be just fine in that field. Or if you want to be a doctor and

attend years of school and rack up thousands of dollar in debt doing so, but then receive the

huge payday at the end, then do that and be the best doctor you can be. The bottom line is you

go to college to do what is best for YOU—not your teachers or your parents or anyone else. It’s

your life and you are the one that is going to have to live with the lifetime of economics that

were the consequence of your college major or for that matter the college you chose in the first

place. Just remember, whatever that first job you get upon graduation, chances are you will

NOT remain in that job for more than five years. This next generation is different in that regard

compared to those before them. It has less patience and demands immediate gratification at a

time when gratifying jobs may be at their all-time lowest. So this trend means that this

generation of workers will go through many jobs throughout their career anyway.

TO DO: Think about what are the economics if you choose a liberal arts major compared to

choosing a math, business or science major? Project these ramifications throughout the

course of your working lifetime. Does this impact your college decision or your decision of

major or what city or state you will live in or your field of choice?

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(in Millions of Dollars)

Figure 3

Figure 4

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Case Questions

The following are a few questions your team needs to take into consideration when analyzing

the case. During your presentation you will be judged on how well you grasp the material

presented plus how creative you are in thinking outside the box without rehashing the details

of the case. You have to present your own ideas in a thought-provoking manner. You don’t

have to present answers to every single question, but you want to choose which questions help

your team to come to the conclusion that allows you to present your interpretation of the case

in the best way possible. Remember there is NO right or wrong answer unless you don’t try.

Questions that your team needs to consider in your analysis include the following:

1. Complete a lifetime projection of earnings and types of jobs available to a person who does NOT go to college at all vs. a person who drops out of college after 2 years vs. a person who goes on to acquire a Master’s degree. What does your team make of these differences in lifetime value upon concluding your research?

2. What are the considerations you should think about when you get a partial scholarship at a school located about 1,000 miles away from your hometown vs. getting a full scholarship at a less prestigious school but that is located 20 minutes from your house? Walk through your decisions in this scenario.

3. Explore some options of a person managing their monthly budget for the first time in their lives while away at college. What does this person’s life look like for the 9 months out of the year that they are in school (financially speaking)? Does it look any different in the summer month? Again this is in terms of the economics of their life.

4. Present the case of 3-4 different students living different lives at different colleges under different circumstances. For example, one goes to school fulltime in New York City and works part-time and is on full scholarship at a local college. Another might be attending Florida A&M and is on 50% scholarship and works in the local pizza shop to help make ends meet. These are just examples. What other scenarios considering all the facts in the case along with your own research can you consider to create the financial and economic aspects of these diverse students?

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Case Competition Instructions

1. Take a few minutes to read over the case individually then begin discussing as a team.

Think “outside the box” and consider college considerations that are not presented in

the case. This is your chance as young people to fully and completely understand how

the economics of college and the impact these economics will have on your life. There

is no right or wrong answer—it’s how your team interprets the case.

2. Be sure to consider the case questions at the end of the case to support your team’s

theories on how different economic and financial scenarios play out.

3. This part is very important. Your team can choose which of the case questions to

answer and you do not have to answer ALL of them, nor are you expected to. You must

however submit a PowerPoint presentation with any number of pages, as you make

your live presentation.

4. Choose a format to present your case. Your team can choose any format including

video, debate, skit, surveys, on-stage props, sitcom, serious analysis, audience

discussion, etc. Whatever you feel is appropriate to get your team’s point across as long

as you adhere to the case competition protocols.

5. Be sure to cite your sources of research no matter what format your team chooses to

present in. This will be very important in your score.

6. Also, you need to have a page on screen or verbal announcement or something

introducing your team and the members of the team who are presenting to the

audience.

7. Each of the eight teams will present their case in a maximum of 15 minutes each. You

can present in less than 15 minutes with no penalty but if you go over 15 minutes you

will be penalized 5 points for each minute over.

8. Prizes will be awarded to the 1st, 2nd, and 3rd place teams to be announced during the

graduation ceremony on June 24th. However, each team will receive feedback on their performance.