HRD Consulting

94% of Undergrads Now Borrow to Pay for Education

This article in the New York Times, “A Generation Hobbled by the Soaring Cost of College,” attempts to explain the depth and breadth of the problem students and their families face today in trying to pay for college — the main problem being that after graduation, they are saddled with an alarming amount of student loan debt which they are then paying back for many, many years.

According to the writers of the article, Andrew Martin and Andrew W. Lehren, this problem is made even worse because the job prospects for college graduate are rather dim. Approximately 50% of graduates cannot find employment for at least one year after graduation. In many cases, colleges sell the incoming student and the family on the financial value of a college education, but do not also point out how much money the graduate will have to pay for many years into the future, and that they may have to postpone buying a home, getting married, and having children.

The authors cite many examples of graduates who can’t find “real” jobs. One young college grad, Kelsey Griffith, is working at two restaurants, earning only $225 per week, which she uses to pay for her $900 per month college loan payment; she has $120,000 in outstanding student loans. And did Ms. Griffith go to an expensive Ivy League school?  No, she attended Ohio Northern University, a church-related institution, identified as having the most indebted recent college grads in the U.S.

What’s the solution? It is important to note that college debt can not be eliminated by declaring bankruptcy. Kelsey’s Griffith’s mother took out an insurance policy on her daughter’s life, just to be on the safe side, because she is the co-signer of Kelsey’s loans. But those are solutions AFTER the fact. A better solution is to develop a plan for your children while they are very young, to identify the best way to start accumulating money now that won’t negatively affect your child’s eligibility for scholarships and financial aid, and to prepare your child to get into the best schools.

Financial Aid: Buyer Beware!

People don’t usually realize that the financial aid office at a college is not working for them, the parents of college students and the college students themselves. The college financial aid office staff work for the college, not for you. The more YOU pay, the better they are doing their jobs, in the eyes of the college administrators. And there’s a lot of “fuzzy math” and fine print when it comes to college financial aid promises and packages, according to this article from Bloomberg Businessweek: — in fact, as the author, Janet Lorin, discloses, the format for financial aid packages “varies by school, making it difficult to comparison shop: Loans and grants offered by the federal government are lumped together with the school’s scholarships, and the statements often don’t include information on interest rates.”

My point is, as always, buyer beware! You need to know the right questions to ask, and you need to know how best to position your family and your college-bound child so that you will be eligible for the most financial aid, as well as scholarships. You need to start the process early. And you need to know how to navigate the complexities. In short, you may need some professional guidance.

Child Tax Benefits – Coverdell and 529 Plans – The Pros and Cons

Helping people save money on taxes is a good thing. That’s what I like what I do. And one of the things I do is caution people not to believe everything they read. This article makes suggestions about two types of savings vehicles — Coverdell and 529 Plans. Though the suggestions may be good in general, these savings options may not provide the same benefit for you that they might provide for a family who is looking for ways to put aside money to cover the cost of their child’s education, while getting the maximum tax breaks.

For the most part, money invested in a Coverdell or 529 is invested in mutual funds.  Putting aside for now what the long-term prospects are for the economy, let’s look at two considerations that have a more direct impact on families who are trying to accumulate funds to pay for their children’s education:

Coverdells can be a good thing, and can seem like a sure thing, because you can put $2,000 away per year, free of tax on the accumulation, for each of your children for their educational expenses. In addition, this money can be used for many legitimate K-12 expenses.  However, the amount one can put into these plans is small, relatively speaking, and won’t accumulate much, unless it’s started when a child is very young.  In a bad economy, the maintenance fees for the account may even negate any interest earned.

Likewise, 529 plans, in general, are a good thing because a parent or grandparent can contribute up to $13,000 a year, (to avoid gift taxes,) to a child’s 529 plan and the child, or owner of the 529, will not be taxed on that “income.”  The not-so-good thing about 529 plans is that the money in the 529 will reduce the amount of financial aid your child will qualify for when completing the financial aid forms. If the owner dies before the funds are dispersed for educational purposes, there could be an estate tax.

Good thing?  Bad thing? A lot depends upon your own particular situation.  I always suggest that parents speak with a qualified educational consultant in advance of starting these plans. Planning for your child’s educational expenses should be part of your family’s overall financial plan.

Student Loan Debt Tops $1 Trillion

It’s official. Student debt is approaching one trillion dollars — or “a thousand billion dollars,” as stated in this article from Education News. “There is now more debt on students loans in the US than Americans have on credit cards, and while consumer credit card and home loan debt has been falling over the past five years, student borrowing has been moving rapidly in the opposite direction, doubling even after adjusting for inflation.”

Most people don’t realize student debt can’t be eliminated simply by declaring bankruptcy. So, before you get your family into a position in which you wish you COULD declare bankruptcy to get out from under the burden of too many loans for college, what can you do about it? Plan to start the process early. Learn which colleges cost less, and do not assume that state schools cost less. Make sure the method you’re using to save money for college is one that puts you in a favorable position in order for your child to qualify for financial aid. And there are many other ways you can help your child get a better education for the least amount of money.

Review my web site, www.HRD-Consulting and plan to attend one of my free workshops to learn how to qualify for the most financial aid, how to save in the plan that won’t reduce the amount of financial aid you could qualify for, and of course, how to help your child get into that top college.

Why do colleges cost so much?

One  answer:  Because the colleges CAN charge so much. But where is that money going? Frequently, those tuition raises aren’t spent on anything beneficial to the students who are paying tuition. While cutting back funds for various departments, the college mentioned in this NY Post news article created a new post for a Vice Chancellorship in an area that was already heavily funded. In doing so, they lost two of their three cancer researchers to another college, because the cancer research funding was cut.

Is that type of college you want your child to attend?  And if they are accepted into their school of choice, how are you going to pay for it? Start the process now. Start planning how to get your child into a better school, how to qualify for the most financial aid, and how to position your family’s tax situation and financial plan when your child is young.

Starting College Funding Preparation Early is Key to Saving Money on Tuition

Some friends of mine are worried. Their child was accepted into the college she so desperately wanted to attend, but based on the government’s formula of how much the parents should contribute to their child’s education, their Expected Family Contribution, or (EFC), has the parents wondering where they will get the money the government’s formula thinks they should be able to pay.

Make sure you don’t find yourself in the same situation (worrying where you’ll get the money to pay for your child’s education) by starting your preparation early. How can your child qualify for that dream college? How can you qualify for the most financial aid? Which method of saving for education works best? Addressing these three questions separately will cost your family a lot more money than if you plan for all three at the same time.

Come to a free workshop and learn how to avoid the worries and extra expenses that my friends are dealing with now, because they didn’t do their planning in time. Workshops are currently being held in Patchogue, New York; Melville, New York, and in New York City (lower Manhattan).

US Recovery Threatened by Runaway Student Loan Debt

People with a bachelor’s degree earn over $1,000,000 more during their lifetime than those without this basic college credential, according to various reports. However, our children are caught in a new kind of “sandwich” generation problem — they borrow more money for their education than many of us borrowed for our first homes. But then at graduation, they can’t find jobs to help pay off those loans. Adding a graduate or professional degree frequently makes matters worse, because the loans continue to pile up — into more than a hundred thousand dollars for many graduates.  Just read this current article from Crains New York Business,

It doesn’t have to be that way. You, your family, and your child should not have to accumulate mountains of debt in order to get a college education. But what are the alternatives?

Come to one of my workshops and learn the best savings options and tax breaks for education funding, in addition to learning how to qualify for the most financial aid. The sooner you start this process, the better off financially you and your family will be.

College Debts Prevent Graduates From Buying Houses

If there are less people attempting to buy homes than there are homes for sale, the value of all homes will decrease. If our children and grandchildren can’t afford the down payment of buying a new home because they are mired in college debt well into their 30’s, the real estate market could be in trouble.  As reported by Education News, “The housing market has been dealt a further setback, as it is revealed that student debt is stifling the ability of graduates to get mortgages.”

As the country’s total college debt passed the $1 trillion mark and overtook the total credit-card debt for the first time, the repercussions are being felt in the housing market, as first-time homebuyers are limited in their options when it comes to taking out mortgages.

Recent college graduates carry an average debt load of more than $25,000, limiting their ability to qualify for mortgages even if they’re able to land a job in a market with an unemployment rate of 9 percent for 25- to 34-year-olds, writes Bob Willis at Bloomberg.

As recent Federal Reserve data shows, over the last ten years the number of 29- to 34-year-olds getting a first-time mortgage had decreased by 8 percent.

Read more about the affects of college debt in this article from Education News:

Some College Savings Recommendations Work Against the Average Family

It concerns me that the people who publish this information regarding saving for your child’s or grandchild’s education do not seem to understand what happens when applying for college aid. They apparently overlook the fact that private colleges can cost less than public schools for many reasons, not the least of which is that private colleges almost always have more money for financial aid. In addition, all too frequently state schools cancel classes that are necessary for graduation because of low enrollment, resulting in higher costs per credit hour and of course more expenses for more time spent at school waiting for the required course to be offered again. Additionally, I’m wondering if these authors or editors checked to see how the “college savings plans” impact a family’s ability to qualify for financial aid? I doubt it – otherwise they would have known that some of their recommendations are working against the average family in their search for college education funding. Educational consultants know this. Perhaps the authors and editors should check with the professionals in this field the next time they publish something on this subject!

Can Your Facebook Profile Predict Your Job Performance?

Facebook can be a big help, as this recent Wall Street Journal article indicates:

Could your Facebook profile be a predictor of job performance?

A new study from Northern Illinois University, the University of Evansville and Auburn University suggests it can.

In an experiment, three “raters”—comprising one university professor and two students—were presented with the Facebook profiles of 56 college students with jobs.

After spending roughly 10 minutes perusing each profile, including photos, wall posts, comments, education and hobbies, the raters answered a series of personality-related questions, such as “Is this person dependable?” and “How emotionally stable is this person?”

However, if you are applying to college, or for a new job, think “will my Facebook profile help or hinder me?”  Be aware that what you post on social media sites can come back to haunt you.  Colleges and potential employers are more savvy and review the social media sites of potential candidates.

Saving for tomorrow, tomorrow

This video from TED, Shlomo Benartzi: Saving for tomorrow, tomorrow,  is about saving, and some of what is discussed may be the reason that parents do not save enough for their children’s education and their own retirement. The statistics and analogy’s here might just be the thing that gets you to start saving now. 

It’s easy to imagine saving money next week, but how about right now? Generally, we want to spend it. Economist Shlomo Benartzi says this is one of the biggest obstacles to saving enough for retirement, and asks: How do we turn this behavioral challenge into a behavioral solution?

Shlomo Benartzi uses behavioral economics to study how and why we plan well for the future (or fail to), and uses that to develop new programs to encourage saving for retirement.

Shlomo Benartzi: Saving for tomorrow, tomorrow

A Summary of Recent Changes for Those Paying for College

They system for applying for college financial in complicated. President Obama has asked congress to simplify this process. Recently, the Arizona Daily Star published an article summarizing some of the recent changes to consider when applying for college financial aid.  As stated in the article:

The problem is that navigating the universe of financial aid can be confusing. That’s because there’s a vast patchwork of grants, scholarships and loans available. But a failure to properly compare the options and explore the alternatives could mean the difference in thousands of dollars in debt upon graduation.

Read more here:

8 Subtle Ways to Prepare Middle Schoolers for College

I have always stated that it is important to start saving for college early – when your children are very young. More time saving means more interest accrued.  However, that’s NOT the only thing children and parents should start early. In his Washington Post article, 8 Subtle Ways to Prepare Middle Schoolers for College, Jay Matthews provides 8 good suggestions on what parents and their future college students can do to start the preparation process early.  These include:

  1. Notice what they enjoy doing, and help them do more of it.
  2. Make sure your child knows that B’s are fine in middle school and that fun is important.
  3. Enroll them in Algebra I in the eighth grade.
  4. Insist they develop some practical housework skills.
  5. Flavor family trips with a bit of college atmosphere.
  6. Encourage children who are curious about the world to take a foreign language.
  7. Character counts. Encourage its development.
  8. Do everything you can to encourage reading.

One more suggestion I would like to make is to instill financial responsibility at a young age.  This will teach them the value of saving early.

Challenges in paying for a college degree, and how the dream of a college education can be made affordable

In his article, Making Higher Ed Accessible, Affordable for All, Misericordia University President Michael A. MacDowell points out several key factors driving college costs for parents and students to consider. One of the important points in this University President’s article is that “less than 40% of incoming freshmen who matriculated to the nation’s colleges last fall will graduate in four years.”

Since the cost of college goes up almost every year, and the additional costs associated with room and board, parents and students need to pay even more attention to the real costs of a college education, and how to plan ahead.

Should You Work With A College Consultant?

Do you really need a financial consultant just to help you get a handle on your child’s college expenses?  Someone who specializes in this field just to help you get your child into the right college, with the lowest possible out-of-pocket cost? Someone who will help make sure you have enough money to cover the difference between the financial aid you qualify for, and the actual total cost of education?

The answer is yes—IF it is important that your child (or grandchild) gets a college education at one of their schools of choice, and IF you don’t want to spend decades after their college graduation paying off loans.

Consider that colleges have raised their rates 6-8% every year while inflation only averaged about 3% for decades. If you invest money in today’s economy, will you earn even 6-8% it takes to stay on top of college tuition inflation? Will your investments earn even the 3-4% it takes to stay on top of inflation?

Believe it or not, yes — there are ways to stay on top of all this inflation through tried-and-true guaranteed investments, which are tailored to your family’s specific needs and situation. This is just one reason you need someone to give you professional advice.

The competition is fierce

Here is something that most parents don’t consider: There are over 24,000 high schools in this country alone, which means there are over 24,000 students who will graduate as Number One in their high school graduating class, and another 24,000 who will rank Number Two. And that’s just the students graduating from U.S. secondary schools. When you visit college campuses, be sure to notice how many international students are walking around, exploring the same school.

Stanford received a record 32,022 applications in 2010 from students it called “simply amazing,” and accepted 7 percent of them, according to an article in the New York TimesBrown saw an unprecedented 30,135 applicants, who left the admissions staff “deeply impressed and at times awed.” Nine percent were admitted. 

Can you imagine each admittance officer reading all those college essays they have to read?  If your child isn’t Number One or Two, and isn’t naturally talented in academics, sports, music, art, or science, how are they going to stand out from the crowd to be selected for scholarships?

Yes, the competition is fierce, and waiting until your child is in high school filling out college application forms is waiting way too long to meet the challenge of how you and your family are going to pay for it all. You will have lost so many options by then.

Who should you get advice from?

Stock brokers understand investments, but how well have they done in this economy? Private bankers and insurance agents only know what they have been taught by the organization they work for. Accountants use various software programs, and they know a lot about tax preparation and tax advantages, but they aren’t trained in investments. Guidance counselors have training to guide your child to the best college choice, but know nothing about investing for education funding and how to use the tax codes to your advantage.

Suddenly, doesn’t it make infinite sense to be working with a specialist who is aware of all the various options and pitfalls, someone who knows that one size does not fit all situations?

Remember, if you are having a heart attack, you want a cardiologist, not a dermatologist, psychiatrist, or a general practicitioner. All went to medical school, but which gives you the best chance of survival?

I always advise my clients and anyone who will listen: Start saving for your child’s education when that child is still very young.

But to figure out which is the best type of savings and investment plan, one that takes maximum advantage of current tax codes, one that will work best for your own family’s situation — consult a professional who is trained and licensed in the area of education funding planning.

Getting into College – a Three-Step Approach

Three-legged Stool - Approach to Getting into CollegeI look at getting into the best college possible as a three-legged stool: 1) preparing your child for college; 2) starting a savings plan for your child’s education early on; and 3) qualifying for the most financial aid possible.

Of the three, starting a savings plan when a child is very young is the one thing that parents most frequently forget to include in the planning process. College is expensive — the top colleges cost $60,000 per year — and college costs have increased at more than double the rate of inflation. There are many different ways to save to meet these costs, yet many parents don’t think about this until their child is filling out college application forms, and then it’s too late to save.  You should review your financial situation with a professional when your child is young, so that you can find a college funding plan that doesn’t disqualify you from being eligible for the maximum financial aid and at the same time takes maximum advantage of tax laws.
When it comes to scholarships and financial aid, I advise parents to start searching for scholarships while their child is in the 7th grade. There are many scholarships that go unrewarded because no one applies for them. Also, parents need to know how to review their assets so that they can make the necessary adjustments or reallocations to help their child qualify for the most financial aid. And just as important is to consider taxes. I have given many seminars with experienced accountants who were unaware of tax savings available for parents of a college-bound child, especially to business owners. And if your accountant doesn’t know about these tax advantages, how can you be expected to know?
There are many other things you or your child can do to get into the college of their choice. Selecting the best schools for your child requires advance study. Taking the SATs every time they are offered, in both the junior and senior years of high school, will help because most schools look at the highest scores. It will also help to apply to 7-8 colleges that are competitors of the preferred college or university, because two of the important ratios colleges strive for are: 1) the ratio of entering freshmen who go on to graduate; and 2) the ratio of students who accept an offer, to those who are offered enrollment.
I have just skimmed the surface of the many things one can do to get into the best possible schools for them, how to fund that college education, and especially how to qualify for the most aid. Come to one of my free workshops and learn how to get your plan off the ground, and especially how you can save tens of thousands of dollars in college expenses.

Research Job Prospects Before Investing in Your Education

Law degrees are expensive.  “According to ABA statistics, the average amount borrowed for law school by 2009-2010 graduates was $106,249 for private schools and $68,827 for public schools.”  The US News University Directory article Research Job Prospects Before Investing in Your Education, indicates these costs but also points out that only about 30% of the positions available to law school graduates require a law degree. But will those jobs pay enough income to offset the debt incurred by attending law school?

Saving for your education is never easy. What is easy is “putting off” saving. It never gets easier because the longer you wait to start, the less interest you’ll earn and the larger your savings deposits would have to be to accumulate what you’ll need. There is a lot to consider. A specialist that has studied ALL the methods of accumulating money for college is worth the small amount of time it would take to start plan for you and/or your children. Remember, it’s easier to start now and you might as well start with the plan that is best for you.

Military Spouse Education and Tuition Assistance Benefit Programs

Studies continue to show that the higher your level of education, the more income you can earn and the less unemployment you will have to deal with, on average. If you are a military spouse, there are benefits available to you. Now might be a good time to finish your education, whether it’s finishing a degree or earning an advanced degree. When your spouse’s military career is over, you both could be in a better financial position. The attached article, Military Spouse Education and Tuition Assistance Benefit Programs, from US News University Director might give you some idea’s.  As the article mentions:

Benefits may be used for a variety of approved training and educational opportunities, including:

  • Graduate and undergraduate degrees at four-year universities and community colleges.
  • Vocational or technical training, such as mechanical certification, licensed practical nursing or professional hairdressing or cosmetology.
  • On-the-job or apprenticeship training, such as union plumber or electrician training.
  • Flight training.
  • Licensing and certification tests.
  • National testing fees, such as the Scholastic Assessment Test (SAT) Graduate Record Exam (GRE) or the Dental Admissions Test (DAT).
  • Tutorial training.

Training and College Affordability Priorities in Ed Budget

Education News just posted exciting information about Training and College Affordability Priorities in Ed Budget to parents and children who are wondering how they can afford to pay for college.  However, the current book with the instructions on how to complete the FAFSA form, required of all college applicants to attend almost every state school and many of the private schools, is over 1,100 pages!

You need the help of a specialist, but this just means there will be more money available. Now how can your child get the most? Join me at one of my workshops or pick up a copy of my book to learn more about the 10 most common ways to fund a child’s education without giving up your retirement.

Best College Majors for Steady Work and High Earnings

LearnVest posted about The Best College Majors for Steady Work and High Earnings today.  This is very good information and should be considered by both students and parents alike when planning for college. The graphs show both unemployment rates and incomes for levels of education and experience in specific fields of study. As they state, “…majors aside, the other trend we see loud and clear here is that, on average, those with more education earn more and suffer less unemployment.” However, make sure the increased income is justified by the cost of education and the interest on those education loans.

Join 355 other followers

Like HRD Consulting on Facebook

Follow on Twitter: @hrdaisley

%d bloggers like this: