College Finances 101: Introduction to college funding and financial aid is now available for review.  This recording was made on the evening of December 8th, 2009 and covers the following:

• The college funding environment
• The college financial aid system
• Expected Family Contribution (EFC)
• FAFSA
• CSS Profile
• Financial Aid Priority Deadlines
• College Financial Track Records
• College Application Strategies
• College Financing
• Strategies and Tactics to Minimize College Costs and Increase College Financial Offers
• Negotiating the College Financial Award

This overview runs about 71 minutes. After you have finished watching, click the link below the video to request a PDF of the presentation be emailed to you.

Should you have any problems viewing the video, you may need to update your computer’s flash player.  You can do that at the Adobe website.

Webinar Response Form

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In July of this year, I published an article titled The Mythical Ivy Impact.  I discussed the evidence which suggests striving to get into prestigous colleges like Harvard, Stanford, or Yale may not be worth it if you have to take on substantial debt to do so.  Now it’s the fall, and discussions about college selection are flying all over forums on the Internet.  And I am still surprised how quickly the knives come out when you suggest it may be better to take the money and go to a so called “second tier” school, as opposed to mortgaging your future to pay for an Ivy or near-Ivy college.

I invite you to read my full article at the link above.  Also, here are the links to the supporting articles from USA Today and the Brookings Institute:

USA Today: Wanted: CEO, No Ivy Required PDF

Brookings Institute: Who Needs Harvard PDF

In a nutshell, don’t get hung up chasing prestigious named schools.  If you get in and it’s reasonably affordable, great!  But there is no reason to put yourself under a mountain of debt.

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What does it cost to send a child to college is one of the most commonly asked questions by parents and students alike.  Of course, everyone first thinks about the differences in costs between in-state schools and out-of-state schools.  Then perhaps they think about the differences in costs of public versus private colleges and universities.  Sometimes families will assign the same in-state, out-of-state cost differences to private colleges as well.  There are no in-state versus out-of-state costs differences by the way.  It’s a common misconception.

Then you can figure in starting with the lower costs of a community college for the first two years.  What about scholarships and financial aid?  Those ultimately have an impact on costs… don’t they?  Tax credits… subsidized loans… financial aid… college savings plans… military service… these all get thrown into the mix in determining how a family is supposed to pay for it.  Are you confused yet?

Let’s just start looking at the numbers.

First thing to keep in mind is that tuition is not the only number you want to pay attention to.  Tuition, room and board, books & supplies, transportation, and other miscellaneous costs make up a number called the cost of attendance.  This is a holistic number that the schools use to describe what a typical, full-time student’s one year experience will cost at that school.  This however is not what the typical student pays at the school.  Amount paid and cost often have nothing to do with one another when it comes to college.  For example, below are the national average costs of attendance for college according to Collegeboard’s 2008 Trends in College Pricing:

• Community College – $14,054
• In-state, Four Year – $18,326
• Out-of-state, Four Year – $29,193
• Private, Four Year – $37,390

Now compare the costs above with the average amount paid to the schools:

• Community College – $7,440
• In-state, Four Year – $10,600
• Private, Four Year – $23,920

There are some very big differences between those numbers.  And you know what is even more irritating?  Those averages really don’t mean much… unless you particularly want to know the midpoint of a couple million college students.

Do you have an “average” student, with “average” costs, at an “average” college?  No you probably don’t.  You can rest assured of two things from those numbers.  Half of the students paid more, and half of the students paid less.  But there is one more thing to take away from those numbers… families rarely pay sticker price for college.

So the bottom line answer to the question “What will it cost to send my child to college?” is this… you’re asking the wrong question.  Stop worrying about what the average cost is, and start figuring out how to increase your chances of paying below the average.  That’s the key to lowering your costs for college.

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The Maximizing Money for College online webinar appears to have been a big hit last Thursday night.  I know many of you have been very interested in seeing the replay of the webinar, so I’ve set up the recording online for easy access.

For those who haven’t yet seen or participated in Maximizing Money for College, it is a comprehensive overview of the college funding and selection process.

In 80 minutes, I cover the most important aspects of minimizing your students’ costs for college.  You will learn…

• How parents can often send their children to expensive private colleges for less money than a state school.
• How to fix lost money caused by popular college savings plans.
• How to identify schools that give you more free money.
• The great myths and misconceptions about college funding that can cost you thousands of dollars.
• What assets are penalized 4 times higher than others when applying for help.
• Why waiting one year can cost you as much as $5,000.

To view the recoding, click the link below…

Maximizing Money for College Webinar

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Maximizing Money for College has now come to the web.  Attendees have been praising this ground breaking presentation for years; now you can participate in the comfort of your own home or at work.

In 60 minutes, I will cover the most important aspects of minimizing your students’ costs for college.  You will learn…

• How parents can often send their children to expensive private colleges for less money than a state school.
• How to fix lost money caused by popular college savings plans.
• How to identify schools that give you more free money.
• The great myths and misconceptions about college funding that can cost you thousands of dollars.
• What assets are penalized 4 times higher than others when applying for help.
• Why waiting one year can cost you as much as $5,000.

“The information Mr. Anderson shared was
incredibly eye opening.” — Tricia Christiansen, Guidance Counselor,
Hampton-Dumont HS, Hampton, Iowa

“What an eye opener! We wish we had
attended this seminar sooner. This seminar has given us ideas and
information but also hope…” — Dave & Maria Sullivan, Rock
Island, Illinois

“He has provided our families with
invaluable information. Scott does an excellent job…” — Linda
Cutler, Guidance Counselor, Rockridge High School, Taylor Ridge,
Illinois

“Listening to all the options available
to pay for college encouraged us that we don’t have to sacrifice a
quality education because of a lack of money.” Pastor Scott & Tonya
Culley, Silvis, Illinois

This seminar will be here on the Web on Thursday, September 24th, at 6:00pm Central time.

To register, simply enter your email address below.

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Kiplinger recently published an article comparing the average student debt and average income, state by state.  Obviously this is not a definitive comparison, but it does give more insight into college finances.

Although some of their college costs don’t add up (which is not unusual for many college rating sites), I did find many interesting results in their analysis.  Here are just a few…

The University of North Carolina at Chapel Hill is one of the most highly respected public universities in the country.  It is also one of the most affordable in-state and out-of-state.

The three states with the lowest percentage of college graduates with debt are:

• Hawaii – 35%
• Utah – 42%
• Tennessee – 47%

The three states with the highest percentage of college graduates with debt are:

• South Dakota – 81%
• North Dakota – 80%
• Iowa – 74%

The three states with the lowest average student debt are:

• Utah – $13,299
• Hawaii – $15,199
• Wyoming – $16,005

The three states with the highest average student debt are:

• Iowa – $26,210
• Arizona – $25,628
• New Hampshire – $25,466

Below is the summary map, produced by Kiplinger.  Click on the map to enlarge.

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The FAFSA income protection allowance used to compute financial aid eligibility is taking a big jump for 2010’s dependent student filers.  According to the Department of Education, the income protection allowance is being increased from $3,750 (2009/10) to $4,500 (2010/11).  This is the largest single year increase I can recall in 10 years.

The income protection allowance is the amount of money a dependent student can earn in a non-work-study job, before that money is assessed towards their expected family contribution (EFC).  The increase of the allowance will allow students to earn more money without fear of losing half of it on their EFC.  This is very good news for many students who feel they are being punished for taking responsibility for their own education costs.

Here’s how this works.  Under the 2009 rules (applied to 2008 income), a student who earned $5,000, would be assessed on $1,250 of their income towards their EFC.  This would increase their EFC by approximately $625.  This year, the student earning $5,000 will be assessed on only $500 of their income; increasing their EFC by approximately $250.

Now here’s the really good news.  For many students, this will mean they could earn up to $7,000 or more in 2009 without it negatively impacting their expected family contribution.  How is this so?  Remember that work-study income is not assessed towards the EFC at all.

So let’s assume that a student is awarded a work-study position at their college for $2,500.  They work this job over the school year.  The student can have a second part time job or a summer job as well where they earn up $4,500 for a total of $7,000 in annual income… and not increase their EFC.

The key is maximizing work-study income.  The more you can gain in work-study, the more benefit the student gets out of their income protection allowance.  If the student can get $1,500 in work-study, they can earn $6,000 total.  If they can get $3,000 in work-study, they can earn $7,500 total.  This is an excellent example of why you always want to include work-study in your FAFSA application.

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I still remember a few years ago when in an online discussion a student asked, “is a hundred thousand dollars a lot of money to borrow?”  The question nearly knocked me out of my chair.  I know I’ve become desensitized when the question now is “is $250,000 a lot of money to borrow?”, but I only shake my head.  Students in particular need to get an understanding of what is reasonable debt, and what is a life-killing nightmare.

A good place to start is a college debt calculator like the one at Collegeboard.com. Calculators like these give students and parents a much clearer picture of just what their student loans are going to cost them over the long term.

Let’s look at an example…  According to the National Association of Colleges and Employers (NACE), the average 2008 starting salary for a college graduate (B.S. in Business Management) is around $43,800.  Typical monthly take home pay for that level annual income would be about $2,823.

If a student took out only the Stafford loans (typical loans included in the financial aid package) and graduated after four years with $27,000 in debt, then his or her monthly payments on those loans would be $311 per month.  That’s just about 11% of the graduate’s total monthly take home income.  11% is considered pretty reasonable by most experts.

Now what if the student borrows that $100,000 as I mentioned in the first paragraph?  We’ll be generous and assume they can get the additional $73,000 at the same interest rate as the Staffords (in reality, the interest rate will be higher).  The graduate’s monthly payment is now $1,151 every month.  That payment represents over 40% of their monthly take home income.  That kind of payment is insane.  There is no way a newly minted college graduate is going to be able pay for those students loans and cover the cost of their rent, their car, their utilities, their groceries.  It’s just financial suicide.

Before you decide that you just can’t live without the degree from a college that is going to put you in the hole above you neck, you better get a handle on what the real cost of that debt will be.

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Westwood College has published a great explanation of the typical student’s budget.  If you have ever wanted to know where a student’s money goes, you can check it out here…

Source:  Westwood College

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Last week, I got on my College Financial Watch soapbox and blasted the lack of financial literacy in this country as a prime contributor to the problem of student debt.  Later in the week, I was part of an online discussion again discussing what is reasonable for a student to borrow for college.  I recommended that the student get a copy of Rich Dad, Poor Dad by Robert Kiyosaki and improve his financial literacy.  I never knew that recommending someone beef up their financial knowledge would be so vehemently criticized, but it was.

In January of 2008, President Bush formed the Advisory Council on Financial Literacy.  In May 2008, the council conducted a nationwide youth financial literacy contest on the web.  Over 46,000 high school students participated.  The students had to answer 35 basic questions about money, banking, and financial products.  The average score was 56%.  Did you follow that?  As a whole, our students are failing financial literacy.  And we wonder why there is such a high level of student debt.

Do you want to know what is even more tragic.  The online discussion I mentioned above was at a website dedicated to helping students get into college and provide answers for financial aid questions.  There are people out there who are acting like they understand finances, but are actively trying to keep students in the dark.  Now the action is likely out of ignorance, but the motivation does not matter a hill of beans to the outcome.

We have to face facts.  The majority of students and adults as well in this country are woefully undereducated when it comes to personal finance.  Before you start complaining about student debt, you need to get yourself and your student educated on the matter.  That is why I am now including two books from Robert Kiyosaki in my Recommended section at www.RealCollegeSavings.com

Rich Dad, Poor Dad

and

Rich Dad, Poor Dad for Teens

Go get these now.

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