Most Colleges Give Inaccurate Price Details in Financial-Aid Letters, Federal Report Finds

 "GAO blasts poor disclosures to students, calls for legislation standardizing cost and aid information," according to The Wall Street Journal (12/6/22) writer Melissa Korn. 

According to the Government Accountability Office (GAO), most schools provide "woefully inadequate and even misleading" information to prospective students. 

I noticed this problem with my niece's college aid offers that listed federal student loans as "financial aid" in the same column with actual scholarships (that don't require repayment), implying that loans requiring repayment fit in the same category. And we all know how controversial student loans are as the burden for many students, especially those who borrow but don't graduate, is often far more than anticipated.

"Aid letters that are supposed to lay out tuition, fees and other expenses, and what grants, loans and other financing options are available to cover those costs, lack crucial information that would allow families to compare institutions. At their worst, some financial aid offer letters lead students to enroll in schools they can’t afford."

"One of the most troubling findings from its review, the GAO said, was that 91% of schools don’t properly list their net price, or the amount a student is expected to pay for tuition, fees, room, board and other expenses after taking into account scholarships and grants."

College Scorecard: Find the right higher ed fit for you

The Department of Education's College Scorecard website https://collegescorecard.ed.gov/ is designed to help you find the best higher education institution for your needs. You can ask to "Show me Options" to search nearby schools, institutions where most students graduate, and other options. Search "Fields of Study" to find the best institution for your career goals. Already narrowed down school choices? Check out and compare your options. 

Explore: 

• Costs
• Graduation and Retention
• Financial aid and Debt
• Typical Earnings
• Student Body Characteristics
• Test Scores and Acceptance Rates
  

Information is provided on:

Alternative Pathways to a Career 

Learn More About Paying for College 

 

 

Law School or MBA? Consider the debt implications

"Most M.B.A. programs leave federal student-loan borrowers with manageable debt loads, a WSJ analysis found. At about 98% of universities that offer the masters of business administration programs, graduates typically made more money two years out of school than they had borrowed, according to the Journal’s analysis of federal student-loan data for nearly 600 programs found. That stands in contrast to law schools, where roughly 6% of programs had graduates with higher median earnings than debt in the same time frame." From The Wall Street Journal, October 27, 2021.

Students considering graduate programs need to do research before they decide to pursue higher education.

 

Strategies to pay for college webinar March 25, 2021

 Strategies to pay for college

Thursday, March 25, 2021, 2-3 p.m. ET 

Presented by the Consumer Financial Protection Bureau

Join us for a presentation on how to finance higher education. You’ll hear from our Office for Students and Young Consumers on the federal financial aid process, college funding sources, and college budgeting techniques. What’s more, we will discuss nonfinancial ways to help students reach their higher education goals.

Audio and presentation:  https://cfpbgov.webex.com/cfpbgov/onstage/g.php?MTID=e1d33a400bde6b8f04104c4c1ace9d61b

Event number: 199 682 7962

Audio only:
Dial-in:   +14043971590
Access code:   199 682 7962
Event Password: 3VfPQmvpm*42 (38377687 from phones)

How Home Equity Affects College Aid

 Now that you've filled out the FAFSA (free application for federal financial aid) it's time to tackle the College Scholarship Service Profile (CSS Profile) for non-federal financial aid. 

Be ready to provide your home's purchase price, year of purchase, current value (check your property tax bill) and current debt to determine your home equity. 

Schools that require the CSS treat home equity very differently, ranging from including 100% of equity in parents' assets (Boston College) to not considering home equity at all (Stanford). Cornell factors in 50% of equity. You aren't necessarily expected to tap home equity to pay for college but it is used to determine how much parents should be able to pay. If you own more than one home or other real estate assets, expect to disclose this information on the CSS profile.

Parental contributions are typically 5% of their assets. Also factored in are the number of siblings attending college and many other factors. 

So, how colleges treat home equity has "an Enormous impact on what parents" are expected to pay. 

When borrowing against home equity to pay for college, avoid a home-equity loan because the entire amount available to you is considered an asset. A better choice is a home-equity line of credit. 

Lots to consider when comparing the cost of various colleges! 

And Covid-related financial set-back such as job loss further complicate the analysis. 

Thanks to Beth DeCarbo, writing for The Wall Street Journal, 10/4/19.

Your financial path to college graduation

 The Consumer Financial Protection Bureau (CFPB) offers lots of help for college students. https://www.consumerfinance.gov/paying-for-college/

Check out:

 "Your financial path to graduation" https://www.consumerfinance.gov/paying-for-college/your-financial-path-to-graduation/?utm_source=newsletter&utm_medium=email&utm_campaign=gradpath&houx=826&fdx=340&clhx=87&trnx=324&hltx=121&entx=94&retx=22&taxx=-6&othx=385

This tool can help you:

• Understand your financial aid offer
• Plan to cover the remaining costs
• Estimate how much you’ll owe and if you can afford that debt
• Compare offers from different schools
• Decide what to do next
  

Keep coming back as your plan evolves.

For many students, planning how to pay for school is complicated. It may require multiple conversations with family, advisers, and the school financial aid office to get more information. As you figure out your best options, come back and update your plan as many times as you need!

This tool does not save your personal data. Learn how we got the numbers and guidelines for our calculations.

To start, you will need:

• Your financial aid offer(s)
• An idea of how much money you and your family can put towards school
• A private loan offer (if you have one)
• The phone number or email address of someone in the financial aid office – it’s their job to answer your questions!

You may want to use this tool with someone you trust who can help you weigh your options.

 

College Debt Resources

About 45 million Americans owe more than $1.6 trillion in student loan debts. Let those numbers sink in a moment...
And there are plenty of too-good-to-be-true offers to help out.
Where can you go for reliable help?

Federal Resources
Office of Federal Student Aid (for federal student loans) https://studentaid.gov/
provides free info on managing loans and programs like the Public Service Loan Forgiveness and income driven repayment plans. Check out their Student Loan Simulator https://studentaid.gov/loan-simulator/ to help locate the best repayment plan for individuals.

Low cost/Free resources
Forgive My Student Debt http://www.forgivemystudentdebt.org/
Higher Ed not Debt https://higherednotdebt.org/ 
National Consumer Law Center's Student Loan Borrower Assistance Project https://www.studentloanborrowerassistance.org/
National Foundation for Credit Counseling https://www.nfcc.org/
Financial Counseling Association of America https://fcaa.org/
The Institute of Student Loan Advisors (TISLA) https://freestudentloanadvice.org/

The last 3 organizations on the list can help with a variety of credit difficulties. 

College Co-op Programs

"The right work experience can give graduates a boost, but there are lots of questions to ask."

Cheryl Winokur Munk, The Wall Street Journal, 2/10/20.

"About 60 schools offer a formal cooperative-education, or co-op, program, where students generally alternate periods of work and classes. These schools include Drexel University in Philadelphia, Northeastern University in Boston and the University of Cincinnati." Other colleges offer formal career-related internship or apprenticeship programs. 

Since only 10% of college students graduate with formal work experience, it can give them an advantage in finding employment.

"Co-op programs and other work opportunities vary from one institution to another, so students need to understand the particulars of each program they consider. To help them make informed choices, students should consider these questions:"

What is the nature of the program?

"In co-op programs, students usually spend at least one period of several months working, during which time they scale back or suspend their studies. They may or may not have to pay tuition while they’re working, depending on the program." How many opportunities are offered? When spending time away from classes for co-op, students may need an extra year to graduate. How does this affect tuition costs? 

Who are "typical employers, what types of job opportunities exist, and whether they are for pay, school credit or some combination of the two."

"Drexel University, for instance, generally offers two co-op programs for undergraduates, one with three co-ops over five years, or a four-year program with one co-op—both for the same tuition. Generally, students are on each co-op for six months, alternating with six months of classroom study. They don’t pay tuition while on a co-op, but they do pay certain university fees. Typically a co-op is a paid, full-time work experience for which students also receive college credit."  

"Endicott College in Beverly, Mass., requires all students to complete two 120-hour internships, one during freshman year and one during sophomore year. Students are also required during junior or senior year to complete a semester long for-credit internship. For this, students are required to work four days a week and attend an on-campus seminar once a week. They earn a total of 12 credits for successfully completing the work and seminar components, and they pay normal semester tuition charges. There is no requirement for students to be paid, but they can be."

Taxes: "pay from a co-op is subject to income taxes." "Co-op earnings are excluded from the federal aid determination process—except for any portion unspent at the time the Free Application for Federal Student Aid, or Fafsa, is filed, which will be counted as student assets. Students might consider using at least a portion of co-op earnings to fund a Roth IRA, since retirement assets aren’t considered for federal aid purposes."

 

What Parents Need to Know Before Borrowing Money to Pay for College

"With college costs burgeoning, parents often consider taking on debt to help their children cover tuition. It could be a smart move. But it could also have a devastating financial impact, so parents should understand the pros and cons of each option."
Thanks to Cheryl Winokur Munk, writing in The Wall Street Journal, 11/1/19.

Federal Direct Plus loans

• "Graduate and professional students can use these loans, as well; when parents do, the loans are commonly known as Parent Plus loans."
• offer some protections that private loans don’t.
• can be consolidated into a federal Direct Consolidation loan to access an income-based repayment plan.
• eligible for economic-hardship deferments; disability or death discharge; graduated or extended repayment plans; and Public Service Loan Forgiveness.
• charge higher interest rates and fees than other federal student loans.
• "There is no annual percentage rate provided on these loans. But free online calculators such as the Experian APR Calculator can help families calculate the APR and better compare the costs with loans from private lenders."

Private Parent loans

• every lender has different rates, perks and requirements, and some have application, origination or disbursement fees.
• private loans don’t have the same types of consumer protections of federal Plus loans.  

Home-equity line of credit or home-equity loan

• Credit Line: floating interest rate, and 10 to 20 years to repay. 
• Home-equity loan is a one-time lump-sum with a fixed interest rate. 
• limited repayment options compared with other types of college loans, 
• loans must be repaid if the home is sold. 
• Any unspent proceeds are counted as an asset on the Free Application for Federal Student Aid (Fafsa)

It is more important for parents to invest for retirement than to help their children pay for a college that may be beyond their ability to afford. Children can find less expensive ways to attend college.

How "No Loan" College Works (It doesn't mean free)

Although rare, more private colleges are joining the club of offering sufficient grants and work options to help students avoid or minimize student loan debt. Princeton started the trend more than 20 years ago. (Good luck getting accepted).
Writing for The Wall Street Journal, (12/9/19), Cheryl Winokur Munk explains.

1. "No loans" doesn't mean no out of pocket costs. Once the college determines a student's financial aid needs, they expect a contribution from parents and the student. So plan on working summers in high school to save some money for college.
Example: Cost of attendance (tuition, room, board, other costs) = $65,000. Depending on the family circumstances, they may be expected to contribute $25,000/year. The remaining $40k might be offered as grants and student employment.

Expected family contribution: https://studentaid.gov/help-center/answers/article/what-is-efc

2. Few schools offer "no loan" options and they tend to be selective.
While about 6 dozen institutions offer the program, that's a tiny segment of higher education. They are the highly selective, competitive institutions.
Examples: Amherst, Bowdoin, Brown, Colby, College of Ozarks, Columbia, Davidson, Harvard, Johns Hopkins, Princeton, Swarthmore, U of Pennsylvania, Vanderbilt, Washington & Lee, and Yale.
However, that means that "smart students from poorer families could end up paying less to go to a top private university with a no-loan policy than to a state school with a lower sticker price."

3. No-Loan policies vary
Every institution has it's own policies so check the fine print.

4. Still... you may still graduate with loans.
Some students may choose to take out loans to cover their expected student contribution rather than working as much as might otherwise be required. 

The Economics of a College Education

For Many, A College Degree Is A Bad Investment

Richard Vedder Contributor Distinguished Professor of Economics Emeritus at Ohio University, writing in Forbes makes the following observations:

 

"The conventional wisdom is that attending college is a good investment. College graduates over a lifetime make, in present value terms, on average about $1 million more than those with high school diplomas. Since the cost of obtaining a degree, even including costs associated with earnings foregone while studying in college (as opposed to working full-time) is vastly less than$1 million, obtaining a college degree is a good investment."

"A more correct nuanced view is that obtaining a college degree is a good investment for a significant subset of the young American population. However, for another large segment of the population, it is actually not a viable proposition on strictly economic grounds."
"For every 100 students entering a four-year college on a full-time basis, only about 60 obtain a bachelor’s degree after six (not the advertised four) years. Moreover, according to the Federal Reserve Bank of New York, about 40 % of that 60% who graduate actually become underemployed —taking jobs typically filled by those with lesser education, especially a high school diploma. Thus out of every 100 students who start college full-time, only about 36 typically actually both graduate and get a good job in a timely manner. College is a risky investment."

A really big factor in the financial analysis is student loan debt of about $1.5 trillion. Too many students borrow far too much money when their prospects of earning a degree in a field that will provide sufficient salary to repay the debt is poor. As a retired university professor I can attest to the many students who attend college because it seems to be the thing to do yet they are not prepared for the rigors of college and are not motivated to excel. They would be far better off taking a gap year or two to earn money, explore career options, and mature to the point where they are prepared for college.

Will we have enough plumbers, machinists, mechanics, and other 'blue-collar" professionals in the future? 

https://www.forbes.com/sites/richardvedder/2020/01/27/for-many-a-college-degree-is-a-bad-investment/#14b1aefe4f52

Where to search for college scholarships AND How to avoid scams

Rather than conducting a random search which might result in scams, use these resources recommended by The Wall Street Journal (complied by Cheryl Winokur Munk, 1/6/20):
CareerOneStop: sponsored by the US Labor Department. careeronestop.org and click on Toolkit, then scholarship Finder.
Lots more help from these sources listed in the WSJ article: 
https://www.cappex.com/

https://www.studentscholarshipsearch.com/
https://www.fastweb.com/
https://www.fastweb.com/
https://pages.collegeboard.org/scholarship-opportunities-from-collegeboard
https://scholarshipamerica.org/
https://www.scholarships.com/
https://www.scholarsnapp.org/
https://www.unigo.com/

The Federal Trade Commission (FTC) got 725 complains in 2018 about scholarship scams. Of course, this number only counts people who complained to the FTC. Lots more victims didn't know where or how to complain or were too embarrassed to complain. 

Warning signs of scholarship scams:
1. NEVER pay to apply for a scholarship! 
2. Be wary of unsolicited offers.
3. Avoid giving personal information. Sure you need to provide your name, year in school and email address, but never give personal or financial info such as Social Security, driver's license, or credit card number. "All of the financial information that scholarships use to determine eligibility comes from the Free Application for Federal Student Aid, or Fafsa."
4. Beware of pressure tactics.
If you see the word "guarantee" it's got to be a scam.  

529 Education Savings Accounts

Utah's 529 education savings plan is the best way to save for your child's (or your grandchild's or your own) education.
"For the ninth year in a row, (Utah's) my529 has been awarded the coveted Morningstar Analyst Rating™ of Gold."
"Whether through free services or commercial software and online products, you can contribute your refund to your my529 account when you file your state taxes electronically."
Check out: https://my529.org/

Learn the basics of 529 tax-advantaged education savings plans (thanks to Washington Post financial writer Michelle Singletary):

529 plans can help you save for college, so let’s get started with the basics

What people get wrong about 529 college-savings plans

Even if your child is just a few years away from college, it’s not too late to fund a 529 plan

 

Avoiding scholarship scams

If it sounds too good to be true, it probably is. C.W. Munk, writing for The Wall Street Journal (1/6/20) offers this advice to students seeking scholarships:

1. Never pay for scholarship opportunities. 
Students should never pay to become eligible for a scholarship; avoid "money-back" guarantees. Instead of randomly searching online for scholarships, use resources provided by college counselors; see related Blog post.

2. Be wary of unsolicited offers. 
Some scammers use scholarship offers to obtain personal and financial information from students. Unsolicited offers are a major RED FLAG. If you receive a check and congratulations for a scholarship you haven't applied for notify the Federal Trade Commission at FTC.gov. "Legitimate scholarship providers don't distribute money randomly to students, and it's likely the check will bounce, or the student might be asked to send funds back for 'processing' or for an 'accidental' overpayment" all ways to bilk students.

3. Avoid giving personal information.
Beyond providing your name, year in school and email address, never give out personal information like Social Security number, driver's license, bank or credit card info. All the info the scholarship provider needs is available from the Free Application for Federal Student aid (FAFSA).

4. Beware of pressure tactics. 
If you feel you are being pressured, it could be a scam. Guarantees and unrealistic promises are further red flags.

Help choosing a college major and potential career

The Utah legislature mandated creation of a website to help college students choose a major and explore career options. Check out: https://www.utahfutures.org/

It is still a work in progress with features under construction. It's a good way for high school and college students (and their parents) to explore the important decisions facing post-secondary students.

 Thanks to Eric S. Peterson, Tori waltz, and McKhelyn Jones writing for The Salt Lake Tribune. 10/9/19

How to afford college

"COLLEGE STUDENTS who borrow graduate with an average $37,000 in loans. While many people believe loans are the only way to finance a college education, that’s simply not the case."
Author Kristine Hayes is a departmental manager at a small, liberal arts college.

Here are five ways to get an advanced education while minimizing debt:"

1. Stay close to home.

2. Comparison shop. On paper, private schools typically appear to cost more than public institutions, but it’s worth digging into the details.

3. Scholarships. Billions of dollars in scholarships are given to college students every year.

4. Condensed degree programs.

5. Tap your employer. Some employers offer tuition reimbursement programs

"Many hospitals offer these types of programs for students interested in nursing. It’s even possible to attend medical school for free. Kaiser Permanente recently announced that the first five cohorts of students to attend its new medical school will pay no tuition. With medical doctors typically graduating with nearly $200,000 in debt, Kaiser’s program will no doubt generate significant interest."

 Read the full article for details: https://humbledollar.com/2019/09/educated-consumers/

Finding an affordable college

The college selection process has become more complicated over the years due to the rising cost. Significant planning should be done before students apply if your goal is to an affordable institution. By estimating Expected Family Contribution (EFC) and net cost of college before your child applies, you can eliminate those schools that will put your student’s future in financial jeopardy.

Need-based or Merit Aid?

The vast majority of aid falls into the need-based and merit categories. Since need-based awards (on average) are larger than merit awards, the first step should be to see if they qualify for need-based aid, and that means calculating Expected Family Contribution (EFC).

Step 1: Calculate EFC

Calculating and minimizing EFC for both FAFSA and CSS Profile is a critical first step in the effort to save on the cost of college. My favorite calculator is the College Board’s calculator, because it calculates EFC under both methodologies.

Step 2: Compare EFC to COAs

Compare the EFC it to the Cost of Attendance (COA, which is tuition + room and board + books and fees + travel). You can find the COA and other data on Collegedata.com. You can utilize the College Match search engine there to filter schools by over 15 different criteria, including geography, major, four-year graduation rate and financial aid criteria.

Author: Robert J Falcon, CFP®, CPA/PFS, is the founder of College Funding Solutions LLC, and the founder of Falcon Wealth Managers LLC, both in Concordville, Pa.

Read the complete article at: https://onefpablog.org/2019/02/07/buying-college-in-the-21st-century-clients-should-search-for-colleges-they-can-afford/?utm_source=informz&utm_medium=email&utm_campaign=membership&utm_content=date_description

Navigating the college financial aid maze

While written for financial planners, "Walking Clients Through the Financial Aid Maze," by Lynn O'Shaughnessy, describes nine steps to understanding college financial aid rules and practices. Don't wait until you or your child is on the verge of applying, learn the strategies to put in place to get the best financial aid offer.
http://www.wealthmanagement.com/college-planning/walking-clients-through-financial-aid-maze

Help Navigating the College Debt Jungle

"Using this interactive map, parents can compare the average debt levels for 2016 graduates and the odds of graduating with debt reported by more than 1,000 U.S. colleges." Check out this great resource from The Squared Away Blog to get info on college graduates' debt levels. The blog post explains what to look for in the data. http://squaredawayblog.bc.edu/squared-away/help-navigating-the-college-debt-jungle/ 

How to pay for college in face of rising costs

"A common misperception among parents with children heading to college is that they should go to any length to keep the student from taking on debt, says financial planner Davon Barrett. He notes that the alternatives, such as tapping into retirement savings or reducing contributions, can be more damaging to their finances than taking out a loan." Read: Ready, Set, Student Debt" at https://www.financial-planning.com/news/ready-set-student-debt-prepare-clients-and-their-kids-for-financing-school-student-loans-student-debt-financial-aid-fafsa