NEW YORK – (June 9, 2008) –Parents of college-bound students and college students believe the mounting cost of college is unjustified and that the price of education is a serious national issue deserving priority attention by the next president.

When it came down to it, the cost of the college education parents had planned was more than they anticipated.  On top of frustration regarding the cost of college, parents are worried about the debt that their children and they themselves are taking on – and, at the same time, confounded, and misinformed, when it comes to intelligent student loan borrowing.

These insights are among the findings of a recent major survey of 1,000 parents of college-bound high school students and students currently in college. The survey was sponsored by student loan company MyRichUncle (MRU Holdings, Inc. [NASDAQ:UNCL]).

“Parents and students should not lose sight of the importance of higher education. It is probably the most important investment they will ever make.  The frustration is understandable, as education costs are substantial and as economic uncertainty squeezes many families,” said MyRichUncle Co-founder and President Raza Khan.

“Figuring out the best process to pay for college is not an easy task, but parents and students need to do the research and do the math so they can accurately gauge the total expense of an education and the true cost of borrowing. Because the process can be complicated, we agree with America’s parents that education finance should be a priority issue for the next administration,” he added.

College Costs are Unjustified – Leading Some Parents and Students to Consider a Range of Alternatives

Two-thirds of parents – 66% – say annual increases of 5% to 8% in the cost of college are not acceptable.  Far more parents in the Northeast (75%) feel this way, according to the survey. 

Despite this, 76% of parents say it’s a “good value” to “great value.”   However, a significant minority – 22% – say the return on the investment in college is a “fair to poor value.” Importantly, parents with household incomes under $50,000 are most likely to discount the value of investing in a college education.

A third of parents say they’re counseling their children to consider living at home or to attend a lower-choice college, if it offers financial aid, in order to save money.  Twenty-seven percent say they’re discussing with their children the option of spending less on an undergraduate school so they will be able to spend more on a high-quality graduate education.   

According to the survey, 40% of parents believe education costs represent “a major national issue needing priority attention from the next president.”  The parents most likely to agree with this position are those who did not attend college themselves (53% agree) and those with household incomes below $50,000.

Anxiety About Paying for College – and About Indebtedness – is Heightened

Sixty-two percent of parents say the cost of obtaining a college education is beyond what they anticipated, and 59% say they can only pay part of the cost, with 32% saying they’ll pay less than half. 

Seven out of 10 parents who do not expect to pay most or all of the bill say student loans will be a necessary funding source.

The vast majority of parents of college-bound high school students (77%) are worried that paying for their children’s education will hurt their retirement nest eggs. Even the wealthiest parents – 63% of those with over $100,000 in household income – say college costs will stress their savings or prompt borrowing.

The subprime mortgage crisis is adding to anxiety over college costs: Most parents (59%) believe the subprime situation and economic climate will make it more difficult for them and their children to qualify for loans to pay for college.

And, at the same time, student indebtedness is a source of concern. Three-quarters of parents are worried about the college debt their children are taking on. Indeed, 51% of parents are “very concerned.”  Moreover, 85% of parents whose children have already taken loans say they’re concerned about the debt.

Worries May be Compounded by the Unknowns and Surprises Surrounding Paying for College

“Anxiety surrounding paying for college and the debt it often entails is certainly understandable. Our view is that these concerns are heightened because there is so much that’s unknown: Parents find it difficult to estimate the cost of school and are often taken aback by the real costs.  Going into the process with eyes wide open – and doing the math – may be difficult at first but should reduce stress going forward,” said Mr. Khan.

Seven out of 10 parents say they have found it challenging to estimate the total costs of their children’s college education. In fact, nearly four in 10 (39%) say it’s “very” or “extremely” challenging.  (55% of parents whose household incomes are under $50,000 find it “very” or “extremely” challenging to estimate the cost.) A full quarter of parents – including those with children already in college – admit that they are not sure how much money will be required to finance an undergraduate education.

Parents are finding themselves surprised at the price tag for a college education. Most parents – 62% – say the total cost of an undergraduate degree is more than they anticipated, with 22% saying it’s significantly more.

Underestimation of the total cost is more likely to occur among parents with children in private colleges.  The probable cost of college is about $129,000 for four years at a private college, yet parents with children in private colleges underestimate the cost by as much as 44%; they believe it will only cost $89,000.

Borrowing for College: A Sea of Misconceptions, Unknowns and Potentially Costly Mistakes

“The reality is that most people – 69%, according to our survey – believe their children will have to borrow to pay for college.  Borrowing can be a very smart move, if the overall gain from education exceeds the cost, but there are potential mistakes and pitfalls for the parent or student who does not take the time to understand the process and choices.  Going in with the attitude, ‘I’ll borrow what I need now and worry about it later,’ can be detrimental in the long run.  Families need to borrow with the level of knowledge, research, seriousness and business-mindedness that they use when securing an auto loan or choosing a health insurance plan,” said Mr. Khan.

“That’s one of the key reasons why we at MyRichUncle strive to provide tools, guidance and information that enable parents and students to make smart decisions about student loan borrowing. It’s good for the family, and it’s good for our business,” said Mr. Khan.

“However, according to our survey, not enough families are as informed as we’d like,” he added.

Borrowing Should be More Thoughtful

Smart borrowing is important, as the level of student loan borrowing is significant.  According to the survey, parents believe their children will finish college with between $20,000 and $25,000 of debt. Parents in the Northeast estimate that it will be $27,500.  (One in 10 parents believes their children will have $50,000 or more in college debt.) 

Beyond their children taking out student loans, parents believe that they themselves will borrow.  55% – and 64% in the Northeast – say they will do so.  The amount they estimate borrowing is $25,000, but the estimated amount goes up as children progress in college. Parents of sophomores, juniors and seniors think they’ll borrow a total of $30,000.

“Borrowing for college is a reality for many families.  As they consider this option, they should know there are smart college borrowing rules of thumb, which are critical, that too many parents and students either are not aware of, overlook or do not know how to follow,” said Mr. Khan.

According to Mr. Khan, the rules of thumb for student loan borrowing are:

o   Do not borrow a dollar more than you really need.
o   Assume the cost will rise by approximately 5% to 6% each year.
o   Look for and secure grants and scholarships before loans.
o   Look for cheap money: Federally-guaranteed Stafford loans are less expensive than private student loans.
o   Look for the “cheapest cheap money”: Some lenders charge less than others for federally-guaranteed student loans. (The government does not set the rate; it sets the maximum rate.)
o   Private student loans should only be considered as a way to fill any gap.  (Know that private student loans are almost always cheaper than credit cards.)
o   When going for private loans, shop hard and thoroughly, and do the math: One percentage point of interest can make a big difference in terms of the total amount you have to pay back.
o   Carefully consider the pros and cons of loan repayment options, including deferment while in school.  Deferring reduces the strain of making payments while so much capital is being spent on tuition and other expenses.  However, deferring does increase the overall cost of borrowing. 
o   Do not borrow more than you believe you can afford based your expected income post-graduation.

“Unfortunately, these guidelines are not made clear to significant portions of parents, according to our survey, which makes it a costly scenario,” said Mr. Khan.

For instance:

o   More than a quarter of parents – 27% – say efforts to shop for better loan rates or fill out paperwork for cost reductions are not worth the trouble.
o   A quarter (25%) of parents with children in college who are using student loans believe it is not necessary to shop around for student loans because they (mistakenly) believe interest rates are fixed by the government.
o   Nearly one in four parents believes that a 1% difference in student loan rates does not make that much difference in the long term. (This includes 25% of parents of college students who are now using student loans.)

“These are all serious misconceptions,” said Mr. Khan.  “We believe current information sources are failing parents and leaving them and their children at a considerable disadvantage when it comes to funding a college education.”

The survey results suggest that student loan borrowing mistakes and misconceptions stem from the fact that the process confuses parents and leaves them uncertain about choices they must make.

o   57% of parents of college-bound high school students are not confident that they know which student loans should be applied for first.
o   Most parents of college-bound high school students – (57%) – and nearly half of parents with children already in college (43%) say they are not confident they understand the range of interest rates on student loans.
o   The majority of parents (54%) say they do not understand the options for obtaining student loans from lenders.
o   Nearly half of parents (48%) say they do not understand the repayment options on student loans.
o   While 77% of parents say they understand how to obtain scholarships for their children, 37% say they do not have an understanding of the process of how to obtain a Federal student loan.
o   Two-thirds of parents say they feel the student loan application process is difficult.  Interestingly, more parents with children going to private colleges – 74% – say it’s difficult.
o   In contrast to their level of understanding student loans, most parents – 70% – say they’re confident they understand how to obtain home equity loans.

Unfortunately, the difficulty in understanding how to get student loans is more prevalent among parents with household incomes under $50,000 than parents with greater incomes.

“The knowledge gap and confusion that the survey confirms suggest that more focus needs to be devoted to providing guidance, education and clarity regarding how to pay for college,” said Mr. Khan. “Accordingly, we at MyRichUncle are working hard to ensure that our materials and Web site offer accurate, clear and time-tested guidance and education.”

The results suggest that parents feel – and are – adrift when it comes to education finance. For instance,

“We cannot emphasize strongly enough that, particularly in today’s market, parents and students need to become active, educated and thoughtful participants in the process of figuring out how to pay for college.  To leave the onus on the financial aid office could mean setting yourself up for unnecessary debt burdens long into the future.  A college education is truly an important investment and securing it with the least financial burden should be the goal for every family today,” Mr. Khan said.

*Survey results are based on completed interviews with a total of 1,000 parents of college (n=500) and college-bound high school students (n=500) conducted by telephone from January 29 through February 11, 2008.  This national public opinion survey was designed and conducted by Michaels Opinion Research, Inc.

A preliminary national telephone survey of 1,000 Americans age 18 and older utilizing a random-digit-dial sampling methodology to accurately reflect all households in the US was conducted to establish the incidence of households with college and college-bound high school students (20%).

The margin of error for results based on the total national sample of 1,000 parents is ±3.1 percentage points.  For subgroups of parents of college-bound high school and current college students (500 each) the margin of error is ±4.4 percentage points.