How to Pay Less for College: Don’t Mortgage Your Future through Student Loan Debt

If it seems like student loans have been discussed in the media more and more lately, it’s not your imagination. Though student loans have been around for decades, they have exploded in popularity in recent years. Unfortunately, the costs of attending college have skyrocketed as well—meaning that the average student today graduates with a much higher debt level than ever before. In fact, student loans have become so pervasive that they recently surpassed credit cards as the single highest “category” of debt in the United States.

These realities, and the recent media coverage, has caused many high school and college students to fear whether they are taking on too much debt. A recent LA Times article explains the findings of a recent survey conducted by the Princeton Review:

High school seniors are more worried about burdensome student-loan debt than about getting into the college of their dreams.[…]

Thirty-eight percent of students surveyed listed “level of debt incurred to pay for the degree” as their primary concern.

That edged out the top answer the previous three years, which was getting into their preferred school but not being able to afford it or get enough financial aid. This year, 33% listed that as their biggest worry.

The high percentage for the two answers, both financially related, demonstrate how significantly thinking has changed among the college-bound.

In 2009, the top concern was simply about getting accepted to a first-choice school.

That seems to be almost an afterthought today. Just 1 in 5 students — 22% — ranked that as their biggest fear.

While it is unfortunate that financial concerns have become a more pressing issue than even getting into a great school, the reality is that these students are wise to be concerned. It’s very easy for students to end up with a huge amount of student loan debt upon graduation—leading to monthly loan payments that are often more expensive than a car payment or even a mortgage! Worse, many students are currently struggling to find work in this still-weak economy, making repaying loans nearly impossible. Those that are able to find work still often find themselves living with their parents and foregoing purchases (such as a new car) in order to make their loan payments.

It’s a grim state of affairs. And many activists and politicians have begun looking for solutions. But amazingly, there’s another angle to this issue that is barely discussed in the media: what if college wasn’t so expensive?

At US College Planning, that’s our approach. We work to make college less expensive for students and families. We do this through little-known strategies that lead to higher scholarships, better financial aid packages, and ultimately less debt. The end result is that students are able to attend top-notch colleges and universities without mortgaging their future, or draining their parents’ retirement account.

If you’d like to learn more, we would love to help. Please contact us today!

Student Loan Debt Can Be Suffocating: Is Relief on the Way?

We’ve written regularly about the growing student loan crisis in America—millions of students collectively hundreds of billions of dollars in debt, and before long the total will surpass a trillion dollars.

Now, in principle, student loans can be very helpful. They give students who may otherwise not be able to afford higher education an opportunity to do so. It’s an investment that student and their family makes, and they are able to repay that investment once the student achieves his or her degree and obtains a job.

Unfortunately, the process doesn’t work that well in practice. For one thing, many students end up borrowing far more than they should. Worse, because of the down economy, millions of these students aren’t able to get a job, and therefore aren’t able to repay their debt. Now, as the crisis continues to grow, government authorities are beginning to pay attention. Marketwatch reports:

The Consumer Financial Protection Bureau last week said it’s seeking proposals on ways to make debt repayments more manageable for borrowers of private student loans — especially those who encounter financial hardships. In a call with reporters on Thursday, Rohit Chopra, the CFPB’s student-loan ombudsman, said private student-loan borrowers face bigger challenges than those with federal loans because they typically don’t have flexible repayment options, such as “income-based repayment,” where borrowers make payments based on their income rather than the amount they owe, and “extended repayment,” which lowers the monthly payment by lengthening the loan’s duration.

Currently, repayment options for private-loan borrowers who fall into hardship vary by lender — though they tend to be fewer and more limited than what federal loans offer.

The bureau is also exploring other options, such as letting private loan borrowers refinance their loans. That would allow them to take advantage of low market rates, which in turn would reduce their monthly payment. Comments from lenders, colleges and the public are due by April 8, after which the bureau will announce recommendations for altering private loans.

The new initiative comes as more students take on this debt — and growing numbers of them fall behind on payments. Students who graduated with a Bachelor’s degree last spring left school with roughly $28,700 in student debt, up 31% from five years ago, according to FinAid.org, which tracks student-loan debt. Meanwhile, 11% of student loans were 90 days or more past due in the third quarter, up from 8.8% a year prior — and marking the highest level of student loan delinquencies since at least 2003, according to the Federal Reserve Bank of New York.

Obviously this is good news for those that have a high level of student loan debt.

But clearly, the best situation for students and families is to avoid going into debt in the first place. And that is where we can help. The truth is that thousands of students and their families are paying far more for college than they should. If you’d like to learn more, or if you’re ready to create a plan to pay less for college and avoid student loan debt, please get in touch with us today!

Paying for College: In Case You Haven’t Noticed, It’s Become a Crisis

If you have children, or if you’re a student yourself, you’re probably aware that college costs have skyrocketed in recent years. It’s gotten to the point where many students and families are taking out so many student loans that they practically have to make a second mortgage payment each month.

The good news is that the issue is beginning to receive significant attention from the media—highlighting the problem and hopefully prompting the powers-that-be to work out a solution.

This month, Forbes published an article addressing this problem. Below is an excerpt:

Is this system nuts, or what? College has gotten insanely expensive, and the tuition aid formulas have gotten insanely complicated. But if you don’t figure them out you will be crushed.

Poor, brilliant students get a free ride at Harvard or Princeton. Rich families don’t care about costs. Everyone else–and that would be about 90% of America–has a problem.

The fanciest colleges cost $55,000 a year. Suppose you have three youngsters who will be attending a decade from now. If prices climb as they have over the past decade, you’ll spend $990,000. This has to come out of your take-home pay. So go ask your boss for a $1.5 million bonus.

If that isn’t feasible, learn how to work the system. Below, we outline a dozen techniques that families use to make bachelor’s degrees and graduate degrees more affordable.

Some families find a way to get a price break that isn’t contingent on income. Some outsmart the aid formulas, which, like the tax code, are full of traps for the unwary and rich in opportunities for the well-informed. Did you know that if your child is applying to certain elite schools, including Dartmouth and Duke, you should use extra cash to pay down your mortgage?

The entire article is very helpful and worth reading. Below are three of the strategies they recommend:

Accelerated Learning

Stockpile Advanced Placement credits from high school, do some summer courses and keep a heavy course load at college: You may be able to graduate in three years. American University, Bates College and the University of Massachusetts at Amherst are among the schools where a fast-track degree is very doable.

Employer Aid

Adam Reynolds, a psychotherapist at Mount Sinai Hospital in New York City, got a master’s in social work two years ago at Hunter College. It was a four-way win for him: The city gave him a grant to cover the tuition, the aid was not taxable, he got time off for class work, and Mount Sinai was so impressed with the results that it promoted him into a supervisory position.

Bunching

All three aid formulas give a break to families with more than one child attending college at once. Suppose, for example, that you have income of $160,000 and assets of $900,000 and the formula dictates that you can afford to spend $80,000 a year on college. If you have one student in a $55,000 school you get nothing. If you have two you get $30,000.

In conclusion, the bad news is that college costs are skyrocketing. But the good news is that there is a lot a family or a student can do to keep their own costs down. If you’d like to learn more, or if you’re ready to create a plan to keep costs down for your student or for yourself, please get in touch with us today!

College Planning 101: Community College Costs Rising, For-Profit Colleges Becoming Popular Choice

Community colleges and other public institutions have been a popular route for many students to receive higher education in recent decades. However, funding cuts have led many of these public universities to limit the number of students they take on—and as a result, more students than ever before are choosing to attend “for profit” schools. The Huffington Post reports:

A report released this month by the U.S. Treasury Department shows a correlation between state budget cuts to community colleges over the past decade and a growth in enrollment at for-profit colleges.

The report, titled “The Economics of Higher Education,” examined both employment and income characteristics of Americans who attain some form of a post-secondary education alongside funding and tuition costs at public and private colleges.

The report notes that more high school students are graduating and going on to colleges and universities. Most attend public schools, many with shrinking state funding, which puts added pressure on community colleges:

“Community colleges are highly dependent on state funding since, unlike four-year, public schools, they do not have diversified revenue sources such as hospitals, endowments, or research grants. While enrollments have been increasing, state support per student has remained relatively flat. In 2009, community colleges received approximately $6,450 per FTE (full-time equivalent) student, only slightly higher than the $6,210 in 1999.”

According to the report, the funding decline for public colleges and universities bottomed out in 2005, then slightly increased before dropping again in 2008.

Because of the budget squeeze, community colleges are pushed to either raise tuition or or to limit class size, and often choose the latter, leading to a correlating spike in for-profit college enrollment. According to the report, community colleges are “more likely to serve low-income and first-generation student populations than four-year schools, and these students now constitute the bulk of the student population at for-profit schools.”

For their part, for-profit colleges are targeting these low-income students in their marketing and recruitment efforts, court documents revealed earlier this year.

At the for-profits, students are more likely to default on their student loans and struggle to find work, compared to their counterparts at public colleges. The average graduation rate at for-profit colleges is unimpressive, often falling below 30 percent, compared to public and private non-profits with graduation rates above 65 percent.

As you probably know by now, the process of planning for your (or your student’s) higher education is very complex. There are many factors to be balanced—including cost, quality of education, employment prospects, and many more. And as the report we’ve highlighted points out, the college landscape is constantly changing. And many students are responding to the changing environment by making choices which may not be good ones in the long run.

So what do you do? It starts with understanding that there is no “one size fits all” solution. Every student is different, and so every student’s “ideal path” is different. If you’d like to work with our team to create a plan for your student that allows him (or her) to achieve his (or her) dreams, without handing over your life’s savings to pay for it, please get in touch with us today!

College Planning 101: Why Do College Costs Keep Climbing?

It is no secret that college costs are skyrocketing. But why? A recent article on Chronicle.com examines the root of the issue:

Most colleges are nonprofit and spend all the money they get, so there are three big numbers to watch here: (1) how much colleges spend per student; (2) how much money comes into the system from sources other than students; and (3) how much students and their families pay out of pocket. Colleges prefer to ignore (1) as a contributing factor to unaffordability and focus on the broadly correct argument that (2) and (3) vary inversely: If state subsidies decline or endowments take a hit, then student charges must rise in order to maintain spending. Similarly, if Pell Grants go up, then students pay less out of pocket.

That’s all generally true. But ignore (1) at your peril because college spending is the driving force behind affordability or lack thereof in the long run. External subsidies and student charges are both limited in how much they can increase over time by a combination of overall growth in economic output (particularly as it’s distributed among families of college-age students) and the political economy of government fiscal policy.

In other words, people have only so much money to pay for college, endowments can earn only so much of a return in the financial markets, and, practically speaking, state and local governments will provide only so much in the way of subsidies given how people think about taxation and government spending circa 2012.

Institutional spending, by contrast, is limited only by the ambition of institutions, which is to say not at all. And as this report shows, per-capita institutional spending on education and related expenditures continued to rise from 2000 to 2010, even after accounting for a huge influx of new students, inflation, and the revenue shock of the Great Recession.

Inflation-adjusted per-student spending at private research universities, in particular, increased sharply, and private universities set the aspirational standards for the industry as a whole in terms of what scholars and administrators should be paid, what campuses should look like, and what the general higher-education experience for students and faculty should be. (And that’s only spending on education; the numbers cited above don’t include research, athletics, and the administration to support them.)

So ultimately, the reason the cost of higher education is skyrocketing is because colleges and universities continue to spend money at an ever-increasing rate. And while scholarships and other financial aid provide assistance to many students, these tools alone are not enough to keep costs under control.

Unfortunately, there is little that you and I can do to convince these institutions to rein in their costs. However, we CAN take action to ensure that you don’t end up paying too much for college. Many families don’t realize that there are a variety of strategies that can be used to lower costs, increase grants and scholarships, and ultimately make college more affordable. Contact us today if you would like to learn more!

College Planning 101: How Should You Choose Your Major?

Choosing which degree to major in has always been a difficult decision for many college students. However, in today’s economic climate the stakes are even higher—as competition for jobs increases, a student’s choice in major will almost certainly impact their employment prospects.

But what does that mean about your decision? Should you choose your college degree based solely on what gives you the best chance to get a job? Or should you pursue your passion?

A recent article posted by Marcia Y. Cantarella on the Huffington Post gives some interesting perspective:

Students are told to be practical and find a major that will serve them in practical terms carrying them to a life in engineering or accounting. Or they are told to find a passion and follow that. Neither is quite right. The reality is that few people remain in jobs that relate to their majors in any way. Certainly my first career in corporate marketing did not relate to my political science major. A major is a vehicle for skill delivery. It can be viewed then as the medicine that delivers skills or as the food that delivers nutrition. I like the analogy of food better. You can find foods that both nourish you and are yummy and fun — these days even chocolate has benefits. A major should be like that — both feed you skills and feel like something you want.

Because any major — pretty much across the board — except perhaps in some clinical areas like engineering, will give you skill and experience in thinking critically, engaging in research and problem solving, hopefully in writing and communicating what you choose is important only in that it allows you to manifest your excellence. Going for the practical when it does not suit your learning style or aptitude will only leave students frustrated and failing. We wonder why so many students leave college. They are taking classes that they don’t understand from a skills relevance standpoint or that they don’t like and so don’t do well in.

We honor the high GPA. But the student trapped in the practical can’t achieve that GPA stuck in a bio major that they hate. Certainly I would not have graduated with honors if I had been pre-med to fulfill someone else’s dream. I loved my major and devoured the texts and the debates in class. It was a path to success IN college. But after college the skills which I could have gotten from a psychology major or an economics major or an English major according to my classmates with those majors, have been what lead to professional success in a field that I can declare as a passion — the field of higher education.

To get there however I had to have many other jobs — some I actually also reveled in. But the skills I have applied regardless of context have been the same skills. So you have CEOs like Ken Chenault of American Express who was a History major and the Assistant Treasurer of the State of Tennessee who was an English major and the list goes on.

Finding a passion is a lifetime activity that we get to practice in college in finding a major where we can revel in something that engages us at our best. Then the world will offer opportunities to work in areas that may become new passions that were never even on the radar screen.

There’s no question that choosing your major is a big decision. And the truth is that there is no black and white solution. It’s a decision that must be made while considering a variety of factors, including career opportunities. If you’d like to talk to an expert as you wrestle with this important choice, please give us a call today!

Student Loan Debt is Growing Out of Control: Don’t Mortgage Your Future

40 years ago, excess student loan debt wasn’t something that most people worried about. Times have certainly changed- today, student loans are among the most significant debt that most families and students must face. And unlike mortgage debt, student loan debt impacts most students before they have a steady job with a reasonable salary, meaning that they are often forced to forego big purchases like a car or a home. As the Christian Science Monitor reports, this problem is getting worse, not better:

With college enrollment growing, student debt has stretched to a record number of U.S. households — nearly 1 in 5 — with the biggest burdens falling on the young and poor.

Analysis by the Pew Research Center found that 22.4 million households, or 19 percent, had college debt in 2010. That is double the share in 1989, and up from 15 percent in 2007, just prior to the recession — representing the biggest three-year increase in student debt in more than two decades.

The increase was driven by higher tuition costs as well as rising college enrollment during the economic downturn. The biggest jumps occurred in households at the two extremes of the income distribution. More well-off families are digging deeper into their pockets to pay for costly private colleges, while lower-income people in search of higher-wage jobs are enrolling in community colleges, public universities and other schools as a way to boost their resumes.

Because of the sluggish economy, fewer college students than before are able to settle into full-time careers immediately upon graduation, contributing to a jump in debt among lower-income households as the young adults take on part-time jobs or attend graduate school, according to Pew.

As a share of household income, the debt burden was the greatest for the poorest 20 percent of households, or those making less than $21,044. In all, 40 percent of U.S. households headed by someone younger than age 35 owed college debt, the highest share of any age group.

The richest households saw significant increases in per-household debt. For those with annual income of $97,586 to $146,791, college debt rose from $25,921 in 2007 to $31,989. For the richest 10 percent, making at least $146,792, college debt increased from $36,033 to $44,810.

Across all households, the average outstanding college debt increased from $23,349 to $26,682. For the poorest 20 percent of households, the average debt rose from $19,018 to $20,640.

Student loan debt is out of control—and most families recognize this. However, many of them don’t feel that they have a choice. After all, college is essential for the success of their children… but it’s expensive, and financial aid only covers so much. What can they do besides borrow money?

Actually, there’s a lot you can do to avoid excess student loan debt. Most families don’t know this, unfortunately, because banks have a vested interest in issuing more loans. At US College Planning, we specialize in helping families avoid debt by increasing scholarships, grants, and need-based financial aid. We help families negotiate more effectively with financial aid officers, we help families to structure their finances in such a way as to (legally!) receive more aid, and much more.

So if you feel like you have no choice but to drown in student loan debt, we’ve got good news. We CAN help you pay less and borrow less for college. Contact us today to learn more!

College is More Important Than Ever… But Also More Expensive!

The competitive job market we are currently experiencing means that a college degree is more important for career success than ever before. Unfortunately, as you probably know, the cost of attending college is also at an all-time high. A recent study reveals that middle-class families are being hit particularly hard. A recent article posted on the Indiana Economic Digest explains:

According to study by the Lumina Foundation and Georgetown University’s Center on Education and the Workforce, bad economic conditions have made getting a college degree a higher priority. Workers with high school degrees lost 5.8 million jobs between December 2007 and February 2012, while those with bachelor’s degrees gained 2.2 million.

A study from the University of Wisconsin, meanwhile, shows that middle-class families take on more college debt than any other group. Students from households earning between $40,000 and $99,000 annually graduate with $4,000 to $6,000 more debt than students with lower incomes.

Thomas Ratliff, associate vice president from financial aid at IWU explains “We know that college costs have gone up, but the demands to get someone ready for the workplace have also done so exponentially in recent years,” he said. “We offer an extensive amount of both merit-based and financial-need-based gift aid in scholarships and grants to help families hit the target figures and keep college affordable. We’d prefer that students graduate with no debt, but that’s not always possible.

“There’s a lot of gift aid available at the federal and state levels for the highest financial-need students, and a little bit more merit aid goes to high-income families that have higher education backgrounds with the parents and a lot of support to encourage students to excel. The middle-income families are particularly getting stung.”

John Lightle, dean of Ivy Tech’s Marion campus, said he’s seen more students he would describe as middle-class in the halls over the past couple years, and he encourages students to consider all their options when choosing a college.

“For a lot of students a university is a good fit, but there’s a group that plan to go and after orientation have a ‘reality moment,’ that this is a lot more expensive that what they can afford,” he said. “The amount of debt being accumulated is a concern for all colleges, which is why we all encourage families to search what their options are and make the best decision for them.”

The bottom line is that today’s college students and their families are trapped between a rock and a hard place, as the saying goes. On one hand, a college degree is all but required for most career paths—particularly so in today’s competitive job market. On the other hand, earning a degree means taking on tens of thousands of dollars in student loan debt for many students and their families.

But there is a bit of good news. There are proven strategies which can help students and their parents pay considerably less for college. We’ve written about them in depth in previous articles and blog entries—and if you would like to learn more about the options that are available to you in order to make college more affordable, give us a call today!

College Planning 101: How to Land a Great Job

Attending college is beneficial for a wide variety of reasons. It’s an opportunity for students to discover and pursue their passion. It’s an opportunity to meet friends that often last a lifetime. It’s an opportunity to enrich both mind and body through education, extra-curricular activities, and more. And let’s not kid ourselves, it’s an opportunity to have a great time with fellow students.

But at the end of the day, students attend college for one overriding reason—to prepare for a great career. So today, we’re going to talk a bit about that process. Specifically, we’re going to address a common misconception, and share an under-utilized strategy for landing a great job.

First, the misconception: Moststudents believe that the job search begins upon graduation. But it doesn’t—or at least, it shouldn’t. In fact, the job search process can begin as early as your first or second year of school.

And here’s how: by pursuing internships in fields relevant to your desired career path.

You see, the right internships can be a bigger asset to your career than virtually anything else—including your GPA, your extra-curricular accomplishments, and any honor societies you join. Why? Because an internship is real life experience. Unlike class work, it’s not theoretical. It is real. You learn important skills, such as:

• How to relate to other professionals
• How to earn respect from colleagues and supervisors
• How to deal with the “nuts and bolts” of daily work
• How to multitask
• How to produce results and meet deadlines

These skills are every bit as important to your career trajectory as are your academic skills.

But there’s more. Arguably the best part of an internship is that it is an opportunity to build relationships with professionals and employers in your industry. The supervisor during your internship may have the ability to hire you when you graduate, or at least put in a good word with you to human resources. And if that particular business isn’t hiring, you can bet that your supervisor will be happy to put in a good word for you as you apply for jobs elsewhere

.

So if you’re a college student right now, or you’re about to enter college, here’s some of the most important advice we can give you regarding your career: make landing an internship a top priority. And don’t settle for just one. Many colleges nowadays require that a student experience an internship in order to graduate—but there is no reason to settle for just one. The more opportunities you get to experience “real life” in your desired industry, the better off you will be for it. If you’re not sure where to begin, speak to the career center at your school—they will have resources and advice for you, and in many cases they will even be able to line up interviews. In the meantime, feel free to get in touch with us if you’d like to learn more!

College Planning 101: Don’t Drown In Student Loan Debt

Student loan debt has been rapidly growing in the United States for many years. It has become a cause of concern for economic analysts and college experts alike. Recently, entrepreneur Mark Cuban wrote a blog post on the subject and raised several important points:

Remember the housing meltdown? Tough to forget isn’t it. The formula for the housing boom and bust was simple. A lot of easy money being lent to buyers who couldn’t afford the money they were borrowing. That money was then spent on homes with the expectation that the price of the home would go up and it could easily be flipped or refinanced at a profit.  Who cares if you couldn’t afford the loan. As long as prices kept on going up, everyone was happy. And prices kept on going up. And as long as pricing kept on going up real estate agents kept on selling homes and finding money for buyers.

Until the easy money stopped.  When easy money stopped, buyers couldn’t sell. They couldn’t refinance.  First sales slowed, then prices started falling and then the housing bubble burst. Housing prices crashed. We know the rest of the story. We are still mired in the consequences.

Can someone please explain to me how what is happening in higher education is any different?

Its far too easy to borrow money for college.  Did you know that there is more outstanding debt for student loans than there is for Auto Loans or Credit Card loans ? Thats right. The 37mm holders of student loans have more debt than the 175mm or so credit card owners in this country and more than the all of the debt on cars in this country. While the average student loan debt is about 23k. The median is close to $12,500. And growing. Past 1 TRILLION DOLLARS.

We freak out about the Trillions of dollars in debt our country faces. What about the TRILLION DOLLARs plus in debt college kids are facing ?

From an objective perspective, the concerns that Cuban raises are very serious. As the global economy seeks to recover from the financial meltdown of 2007 and 2008, the last thing we can afford is another major “bubble burst” in the form of student loan defaults.

However, most of you reading this aren’t doing so objectively—because you or your children are preparing for college, and are looking at the possibility of taking out student loans as well. You’re not alone. These days, it seems that graduating from college debt-free is a very rare occurrence. Unfortunately, many students find themselves saddled with a significant amount of debt after graduation. Many can’t afford their monthly payments—and those who can afford them must often make significant sacrifices elsewhere, like moving back in with parents and forgoing the purchase of a car.

At US College Planning, we believe that every student should have an opportunity to receive a world-class education. But we also believe that they shouldn’t have to sacrifice their future in order to do so. We’ve helped hundreds of students and their families chart a financially responsible course through college—if you’d like to learn more, our team is standing by to talk to you today!