Pandering

The American Heritage Dictionary says that to Pander is to give gratification (to weaknesses or desires); something politicians on both sides of the aisle are adept at, as is evident in this editorial from the Washington Post.

The recent news about how the interest rate of Federally Subsidized Stafford Loans is set to increase from 3.4% to 6.8% for new loan originations after July 1, 2012, is missing the larger point.

College students do not need to be bogged down by political banter on a short-term fix that may help them “save” the less than 30 cents a day it would cost them should rates rise to 6.8% on the subsidized loan. Students should understand that the taxpayers are already footing the bill for the unsecured debt that was given to them with no collateral, to help them pay for an intangible asset (the student’s education).  Phew, that’s a mouthful!

Students and taxpayers alike, are smart enough to know that this election year gimmick will only add to the already unsustainable national debt that they will end up paying anyway. As Ben Franklin once said, “never confuse motion with action.” In other words, don’t put off until tomorrow, what can be done today.

Pay the Piper now.

Instead of worrying about the interest rate changes on student loans, students would be better served planning for their college years, both financially and academically, before their Sophomore year of high school is complete. When families know how to make practical decisions planning for the cost of higher education, they tend to find more success meeting their financial goals.

The CollegeSearchGamePlan helps families get started on the right foot. Learn more about making informed choices for college by listening to the Affordability Review and the ancillary videos.

High school Seniors have just made their choices on what college to attend on May 1st. Now, the Juniors right behind them, are going to be moving to the college application “frontline!”

How do you help your student make the best choice for their education and later on, their career opportunities? Do you use “Best College” lists published by more than 20 different entities? Or do you focus more on an appropriate financial and academic “fit” for your student?

I would strongly suggest the latter.

Lists such as this one recently published by AOL, can be misleading at best. It talks about 20 colleges that have a low return on investment when it comes to graduation results versus cost of attendance.

After reviewing one of the schools, Savannah College of Art and Design(SCAD) with an admissions representative from that school, Julie Comforti, I learned that all is not as it seems. The “poor” rating of a particular arts school on the list of “20 Colleges Not Worth Their Tuition” was refuted by details that were not taken into account by the writer of the article.

A Beautiful Road To Nowhere?

Ms. Comforti said, “The article has a lot of issues with its research. To start, the “methodology” automatically excludes the self-employed, people working on a contract basis, free-lancers, and anyone with a graduate degree. Not only does this eliminate much of America, and the bulk of the American economy, it specifically eliminates successful SCAD alumni. Additionally, writers, actors and leaders in the film industry; painters, photographers, illustrators and graphic designers; architects and stylists and innovative entrepreneurs who are changing the world —- all of these are SCAD grads, and none of them were included in the PayScale Survey because the methodology automatically excludes them. Also, SCAD’s student loan default rate is almost two-thirds less than the national average.”

The point I’m trying to make is that LISTS of any reputation, should be taken as suspect, until proven true by the student’s research of their potential college has been completed. In order to help families find appropriate colleges for their students and their wallet, they should join the conversation at the CollegeSearchGamePlan membership site.

A guest post by Molly Mitchell.

The Pros and Cons of Earning an Economics Degree

Question: what do Arnold Schwarzenegger, Donald Trump and Tiger Woods all have in common, besides success in their respective careers?

Answer: they all graduated from college with a bachelor’s degree in economics.

Economics is the study of the production, distribution and consumption of goods and services. It is a social science that encompasses several theories, including those that involve statistics and mathematics.

Whether having a degree in economics was necessary for Arnold, Donald, and Eldrick’s success is debatable, but what we can say for certain is that the knowledge gained from studying economics did help them make better business decisions and take the best advantage of the market.

Are you interested in succeeding in a particular business endeavor or do you enjoy learning about the history of human consumption and business? If so, getting a bachelor’s degree in economics may be for you.

Economics - You don't have to be glum like Mr. John Stuart Mill

Of course, as with all things, there are pros and cons to earning an economics degree. To help you find out what those are, we asked a graduate student with a degree in economics his thoughts on the matter.

Below is his pro/con list:

Pros

• You will study a broad range of topics, including accounting, management, finance, sociology, statistics and political science. All of these things come together to help you better understand economics, and you will become knowledgeable in a little bit of everything, as an economics student.
• The degree is a popular one and is offered at most public and private universities and colleges. Of course, some programs are better than others, in terms of faculty and research, but you should be able to find a college near you that offers a degree in economics. There are now even online programs offered at many schools.
• When you graduate, you will be qualified for many different jobs in several different business sectors. Many economics graduates work in sales and marketing, finance and investment banking, business management and economic research and data analysis. With extra schooling, you can also become a teacher or professor of economics.
• When it comes to personal finance, economics majors have great success. This is because they have been educated in how to manage and invest their money wisely.

Cons

• Although you will be qualified for many different jobs, some of those jobs will require extra training, schooling and testing. For example, if you are interested in becoming a financial advisor, you will have to study for and pass the Series 7 and Series 66 exams before you begin working. This can take several months and can be costly, if you don’t pass. If you are ever interested in becoming an accountant, you will have to take additional courses in accounting and pass a CPA exam. Lastly, if you are interested in becoming an economic researcher or professor, you will have to earn your PhD.
• Those with a bachelor’s degree in economics usually find jobs soon after graduating, but they don’t often make a big salary right off the bat. For some, it can take several years of moving up the company ladder before they make more than $60,000 per year. However, those who continue to work up the ladder are often very successful, often earning more than $150,000 per year.
• Economics is quickly becoming a very popular degree choice for many college students. For this reason, the competition for scholarships is increasing. Nowadays, you have to graduate from high school with a 4.0 GPA, get a top score on your college entrance exam and prove that you deserve the scholarship to even contend.

This article was written by Molly Mitchell, owner of EconomicsDegree.net. Molly can be reached via email at: molly@economicsdegree.net.

College Admissions – How Parents Go Astray

According to a survey by Alliance Bernstein published in 2006 (well before the financial downturn in 2008, so it’s bound to be as bad or even worse today), the majority of parents are misinformed when it comes to understanding how college admissions works hand in hand with college financial aid. 

The following hard facts are taken from Ric Edelman’s “The Lies about Money” (2007) based on the Alliance Bernstein survey.

College Scholarships – Mistaken Perceptions & Mindsets

• 72 % of parents believe their children have special or unique talents that will earn them scholarships
• 68% believe colleges will design aid packages they can reasonably afford
• 31% who plan to help fund the children’s college education have not started saving yet
• 31 to 58% of families spend more on everything from restaurants to vacations to electronics than they save for college

Typical parents only save enough to pay for 23% of children’s undergraduate expenses and fail to account for the 4-6% per year inflation in college costs and assume second and third child expenses will be the same as the first child.

Difficult Financial Circumstances

• 42% are living paycheck to paycheck
• 14% have sold possessions to make ends meet
• 27% have delayed medical or dental treatment
• 44% have delayed buying a house
• 40% don’t have a savings account they routinely contribute to

No Planning For Money For College

• 70% don’t have a financial plan that takes college into account
• 80 % have not sought help from a financial advisor
• 53% plan to take out loans for college
• 60 % plan to draw down money saved for other purposes (retirement etc.)
• College costs have increased 5-6% per year every year in the last decade.

As stated above, all of the above are based on survey by Alliance Bernstein published in 2006 well before the financial downturn in 2008.

So it’s bound to be as bad or even worse today.

Again, here is the authoritative source:  “The Lies about Money”, (Edelman), published in 2007.

Corrective Action Needed:

• Correcting so many wrong perceptions, poor plans, bad decisions as well as difficult financial situations requires dedicated focus, education and discipline on the part of parents, college counselors and financial advisors alike.
• Time is the enemy.
• Every stakeholder must begin corrective action when children are in elementary school.
• Waiting until the traditional window for college planning in high school is too late because there is no meaningful recovery time for planning let alone actually repairing finances and saving for college.

Key questions to be asked and answered:

• What do the stakeholders want to occur?
• What has to occur to enable the objective to be met?
• Are the stakeholders capable of making it happen?
• Do the stakeholders have the motivation, discipline and commitment needed for success?

Note: the above corrective action questions are a paraphrase of similar points made in an article published May 9, 2011 by John Sullivan of Advisorone.com. Mr. Sullivan’s piece examined and discussed prevalent behavior of financial planning clients.

The title might raise the eyebrow: Financial Planning Clients Exhibit Same Behavior as Weight-Loss Patients

It is a strange phenomenon that families remain in denial when facing college costs that range into significant six figures. It is even more perplexing that parents typically don’t take some timely and positive action.

We believe that the most effective influencers in a position to remedy this are local financial professionals as well as independent college counselors. People who are able to speak personally and demonstrate the benefits of planning before it is too late.

For further information, please visit College Search Game Plan Members.

We thought our subscribers would enjoy seeing the new dashboard for our CSGP members.
You can see that the dashboard is set up for parents, professionals and whoever might just be curious.
(Click here to see the real page)
Feedback and comments are welcome. Thanks from the team!

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The membership courses provide families with the tools for effective planning for college.  Professional members can help their clients cope with the challenges of funding as well as managing the college admissions process.

Issues such as student debt, college funding, parental debt for college, PLUS loans, scholarships, and college search are just the tip of the iceberg in planning for college.

Our goal is to help families, financial and other professional advisers navigate through this difficult process.

Click here to see the CSGP Members Dashboard.

Student debt, college funding and parental debt for college raise their ugly heads on a regular basis in our world.

In response to a recent inquiry, we put together some quite hard statements and advice regarding how parents and their family should view and approach certain aspects of college funding.

The # 1 College Funding Rule

It is unwise to borrow for college if you do so by weakening the core of your and your family’s financial well-being.

Your income must be secure enough now and in the future to ensure that your cash flow can cover loan payments. This means that there should not be wild swings from month to month or simply hanging on by a thread. You will experience major stress and this is no way to live (for the majority of us at least).

Eroding your retirement dollars via debt (even if permitted by law) is foolish.  There is insufficient time after college to rebuild what will be needed to get by when you are no longer working.

Though tempting, borrowing from the cash value of your life insurance policy makes little or no sense.

Why? You end up paying interest to use your own money. And a direct withdrawal may end up as a taxable event thus increasing the EFC (expected family contribution) and reducing aid eligibility.

Putting your house at risk is not a good trade-off when compared to the Federal parent loan program (PLUS Loan).

A PLUS loan is a non-collateralized signature loan. The interest rate is somewhat higher than home equity, but it’s deductible. Run the numbers before you put a hook in your home for college.

The PLUS loan principal on the other hand grows each year you borrow. This can be a trap if your cash flow is not sufficiently robust.

Early saving for college is obviously the best idea and should start with the child’s parents from elementary school on. This gives the family maximum amount of time to accumulate what is needed to pay for college without taking on a huge or unmanageable debt burden.

This approach also allows for a more balanced approach to college search and planning in the high school years.

Most parents feel unable to accumulate savings for college funding at such an early stage in life.

However, “A penny saved is a penny earned” (Benjamin Franklin) can be a good way to approach the issue. Squirreling away a few dollars on a regular basis could provide a very useful cushion down the road.

An unfortunate conclusion is that we live in a time in which people view borrowing as a way to live beyond their means rather than spend the time and effort to find a better solution – a solution that may be less convenient or one that does not yield immediate gratification.

In terms of college a more clinical and logical approach may mean attending a school that is not the latest “rage” or a much promoted “desirable” brand-name. If you have read some of our articles, you will have seen that many of these elite colleges are not considered the best sources for company recruitment.

For some, attending a community college or enrolling in a two-year program and then completing education later in life might be the best option. This is certainly a valid choice when compared to acquiring tens of thousands of dollars of debt that you, your spouse and/or your children must endure later in life.

If this seems to be a defeatist attitude, consider the fact that we encourage our families to consider the student’s academic competitive position, a personal assessment, personal traits and preferences, as well as the issues of paying for college.

Getting the student into the right place allows a greater chance of overall “life” success, and protects against the alarming drop out and transfer statistics (33-42% after the freshman year). It also avoids paying for six years of college rather than four – an economy in of itself.

Debt of any kind should be considered a last resort not a first choice and certainly should not undermine your retirement, your home, or jeopardize your daily life.

We have developed a comprehensive web based program, College Search Game Plan Members based on 22 years in private practice for families who are entering the college years.

The program provides a true step by step college planning program, supported by software and applications to complete a successful college search and admissions campaign for parents and students.

For blog updates on college search issues, subscribe to College Search Game Plan.

If you haven’t done it already, you may be “late!”

Today is a key date in the financial aid process around the country. The FAFSA is due for hundreds of colleges considering high school seniors as “priority candidates” for financial aid.

Are you ready to tackle the paperwork?

The FAFSA (Free Application for Federal Student Aid) is the form a student needs to file early in the new year to see what type and how much federal need-based aid he or she will be eligible for in the upcoming school year.

When filing for aid for the Fall of 2012, a student and family is requested to use their 2011 tax year information.

Unfortunately, most tax returns have not been started, much less completed, by the earliest priority filing date found at hundreds of colleges around the country of February 1, 2012.

Waiting to have your family tax return done so that you can file with accurate numbers, can lead to disaster.

In my past life as a financial aid administrator, I saw countless students shocked when their aid packages were not sufficient, or renewed simply because they missed the filing deadline.

Whether it be federal or institutional money that a student is applying for, there is a finite amount of aid available each year. Schools have filing deadlines for a reason. They have to be able to distribute the available funds to those who filed “on time” …

And then give whatever is left, to those who did not file on time.

The underlying advice from this post is to get your FAFSA (and ancillary financial aid forms) filed ON TIME, with numbers as accurate as possible. Then, when your taxes are done in a month or two, go ahead and update the FAFSA and the financial aid office directly.

It is more important to file on time with your best estimate for your taxes, than to wait until the tax returns are complete and file accurate numbers past the priority deadlines.

Check the financial aid websites of the college(s) your high school senior is applying to and make sure you meet the deadlines.

A guest post by Suzan Bekiroglu.

In October of 2011, President Obama unveiled changes to the federal student loan program.

The changes he introduced could affect millions of student loan borrowers.

If you are a college student, student loan borrower or a high school student looking towards the future, then you should be aware of the changes to federal student loans that will take effect in 2012. If you are considering federal student loan consolidation, it is helpful to know what to expect ahead of time.

Eligibility

Only federal student loans are eligible to be consolidated under this program and there is an estimated 5.8 million borrowers who would be eligible.

If you have at least one federal student loan that was borrowed directly from the government rather than a private or bank lender, then you may qualify under the new rules.

If you do have federal student loans, but have obtained them from a bank or private lend-ing institute, you can still consolidate your loans under the original loan program, but it will not save you money.

Also, important to note, if your loans are in default, you are not eligible regardless of who the lender was.

Income Based Repayment Plan

The first change is in capping monthly payments due on federal student loans to what the borrower can afford to pay.

For example, if a teacher makes $45,000 a year and owes $60,000 in student loans, under the typical repayment plan, he or she would most likely pay about $690 a month.

But, now with the In-come Based Repayment plan, the payment would be reduced to $358 as it is capped to 15% of her discretionary income. In 2014, the IBR’s rates are scheduled to change from 15% of discretionary income down to 10%. Loan forgiveness after 25 years is also included in this plan.

Debt Consolidation for Easier Payments and Reducing Default Risk

The second change has to do with the federal government’s *student loan consolidation program which encourages borrowers towards federal student loan consolidation.

It is important to note that these changes only affect the federal student loan program- private and bank loans will remain the same as before.

The Department of Education is encouraging borrowers with multiple student loan payments to consolidate their debt under the Direct Loan program. Eligible borrowers should be notified by the Department of Education to let them know more about this opportunity.

For example, if a borrower is about to start making payments with two FFEL Stafford Loans for $4,500 each with an interest rate of 6% and one direct Stafford Loan for $5,500 at 4.5% interest, this borrower will be paying over $4,300 in interest until the loan repayment terms are satisfied.

However, if he consolidates his loans, they would save almost $400 a month in interest and have only one monthly payment to make, rather than multiple payments.

*You can find the article at Student Loan Consolidation

About the author

This guest post is written by Suzan Bekiroglu. Ms. Bekiroglu is a published freelance writer and editorial and SEO consultant. After receiving a Bachelor of Arts degree from the University of South Florida, she faced the obstacle of paying over $24,000 in student loan debt. Ever since, she has sought to educate prospective students and parents on student loan debt. She also writes about general personal finance and money saving tips.

A note from the CSGP team.

We think you will find this post informative and useful. We stress that is essential for families to plan college finance as far in advance as possible, in order to avoid the heavy burden of debt on students and, increasingly, on parents. We address this in great detail in the CSGP membership site.

Today we introduce you to one of our advisory board members, Christine Moriarty.

Christine is a Certified Financial Planner with a very unique specialty area:  helping couples manage their money and their financial decisions.  She has worked with thousands of people to create financial peace of mind.

She is often seen in The Boston Herald as a featured financial planner, and has shared her insights on families and money with publications including USA Today, Good Housekeeping, the Boston Globe, Better Homes and Gardens, Fidelity Focus Magazine and The LA Times.  

Because planning and paying for college is at the forefront of our professional services, I’m sure you can easily see how Christine and I found our “common ground.”

The college decision nowadays represents one the largest – if not the largest – financial decisions a couple will make with their children.  It deserves our full attention even though the ripple effects of paying for college won’t be felt for years.  Christine is a resource for couples who will be making decisions like this.

Since many of us make financial resolutions for the New Year, I asked Christine to give us something for you to think about as we move into 2012.   Christine can be reached through her company’s website, MONEYPEACE, and  here is a brief sampling of her thinking:

One critical chapter of married life is money, and how that money gets handled is an essential component of any relationship.          

Money, like love, is fluid and personal.  No two relationships are alike and no two people handle money the same way.  After years of coaching couples, I have discovered that all couples have issues around cash flow and control of money.  Each couple resolves money issues in some way or another with a conversation, but real, deep communication seldom happens around money.

When couples solve the problem by merging all assets or by separating all money, they feel they have fixed the problem.  They fail to recognize that their lives are ever changing and how they deal with their money needs to be reviewed often.

The true strength of a financial partnership is measured by the teamwork involved. 

Can you say you are on a financial team with your partner?  Are you striving toward mutual goals? Do each of you understand financially where you stand?

Teams make better choices.  Regular coaching and meetings keep teams focused and trained for whatever life deals them. 

Enlightened Finance for Couples is one tool that offers a framework for how a couple can work together toward their goals and share their financial life.  Creating a team takes time, energy and a willingness to adapt. 

No matter how you seek to build your financial partnership – with therapy, coaching, a certified financial planner or enlightened finance for couples; know that your investment will pay off for the long-term.  The value will be found in your relationship and in your net worth. 

Learn more about Christine’s coaching techniques and her Enlightened Finance for Couples Workshop by visiting her MONEYPEACE web site.  And do subscribe to her mailing list.  Her insights are unique.