Before College: Education After High School? Oh, Yeah, It’s Worth It!

Oddly enough, some people are still selling the idea education after high school isn’t worthwhile.

Former U.S. Secretary of Education William Bennett is one. Colleges and universities promise personal growth and significant financial returns, but most let their students down, he argues in Is College Worth It?. Old Bill must not have been too disappointed with his bachelor’s degree and PhD, both in philosophy, because he then got a law degree.

In The Case Against Education, George Mason University economics professor Bryan Caplan argues that little of the return on college degrees come from knowledge and skills learned in classrooms. But would Professor Caplan be Professor Caplan without what he learned while getting his bachelor’s degree and PhD in economics?

The Motley Fool says “42% of Americans feel their college degrees weren’t worth the amount of debt they created.” Coincidentally, 42% of Americans also believe in ghosts, aren’t saving for retirement, and cite lack of time as their excuse for not exercising.

Let’s get serious!

Postsecondary learning’s value is overwhelmingly evident, even if it’s only measured in dollars and cents.

Researchers with the Federal Reserve Bank of New York note that, “In recent years, the average college graduate with a bachelor’s degree earned about $78,000 compared to $45,000 for the average worker with only a high school diploma.”

The U.S. Bureau of Labor Statistics’ 2019 Education Pays chart shows “the more you learn, the more you earn” and the less likely you are to suffer unemployment.

What’s going on? According to Georgetown University’s Center on Education and the Workforce (CEW), two-thirds of entry-level jobs once required high school diplomas or less. Today, two-thirds of such jobs require some postsecondary education.

CEW also reports that 20% of today’s “good” jobs — positions paying 25-44 year olds at least $35,000 and 45-64 year olds $45,000 or more — are held by workers with high school diplomas or less; but 24% are taken by workers completing more than high school but not bachelor’s degrees and 56% engage those with bachelor’s degrees or higher.

And postsecondary education’s payoff isn’t all about jobs and earnings. The College Board found that, as education increases, so does parental involvement with children, civic involvement, and voter turnout; while obesity, smoking, and use of public assistance all decline.

Of course, Americans needn’t be doctors, lawyers, or executives to have adequate pay and fulfilling lives. But learning after high school clearly helps make these outcomes more likely.

The big challenge is how to acquire quality postsecondary education while minimizing educational indebtedness. There are ways to do this. For links to over 150 articles on such strategies, see College Affordability Solutions’ Topical Index.

Contact College Affordability Solutions for advice on postsecondary affordability strategies to use before, during, and after college. College Affordability Solutions’ consults with students and parents at no charge.

After College: Easily Avoided Student Loan Repayment Mistakes

Did you borrow student loans to help pay your college expenses? Did you just graduate from college? If your answer to these is yes, this article’s for you.

Here are 5 easily avoided mistakes borrowers make when repaying student loans . . .

(1) Not Knowing Who and How Much You Owe

The Federal Direct Loan Program (FDLP) and Federal Perkins Loan Program make 90% of all student loans, so you probably owe these programs. The Federal Student Aid Information Center can tell you who and how much you owe on these loans.

If you borrowed from your state or private lender, contact the state agency or lender that made your loan(s) for this information. Not sure who to contact? Get help from your alma mater’s financial aid office.

(2) Not Using Your Grace Period Wisely

You get a 6-month post-enrollment grace period during which FDLP loan payments aren’t required, and your first FDLP payment occurs 30-60 days after that. So no need to do anything about these loans now, right? Wrong!

Your federal student loan servicer will send you a repayment schedule this fall. It’ll show when your payments begin and what your monthly payment amount would be under the standard, 10-year federal repayment plan. But payments can be lower if you choose a different repayment plan or consolidate your federal college debts. Research this using Washington’s Repayment Plan and Loan Consolidation web pages, plus its Federal Student Loan Repayment Estimator.

State and private loans may not have as many options as federal loans, but call your lender(s) about what they can do.

(3) Letting Your Contact Information With Your Loan Servicer Lapse

Student loan borrowers who fall behind on payments often complain they never heard from their loan servicers. This is usually because their phone numbers or mailing and email addresses changed, but they never told their servicers. Nevertheless, their repayment obligations took effect. Avoid the legal but heavy-handed collection tactics accompanying student loan delinquency and default by emailing or phoning your servicer whenever your contact information changes.

(4) Hiding From Your Servicer

When you owe someone money you can’t pay, its natural to avoid them. But it’s dumb, too. Student loan lenders and servicers have many options to help you lower, postpone, or even cancel your payments. If you get into a bind, call them first.

(5) Only Paying Required Amounts Although You Could Pay More

Required monthly payments are the minimum amounts needed to eliminate debts by the end of repayment plans. But interest always builds on loan principal, so paying more than required monthly amounts, or making extra payments each year, reduces what you repay and eliminates your college debt faster.

Need help mapping out how to manage your student loan debts? Contact College Affordability Solutions for assistance. All of our consultations with students and their parents are free.

Before College: Get Your New College Student Ready to Handle Their Finance’s

If you have a child heading to college in the Fall, congratulations! You have survived the application process, the agonizing wait for acceptances, and the storms of the final year (almost). With any luck, your child is ready and waiting to get out of the house and take on their own life. But have you prepared them financially?

Young people are so sure that they know everything, but in the world of finances they may have little understanding of critical things like budgets and debt. Especially in their first semester before they get their feet on the ground, new students can be easy targets for lenders and vendors. One business owner near a campus referred to each Fall’s arrival of new freshmen as “the restocking of the herring” in the school.

It is important, ideally at the beginning of the summer, to sit down with your child and write out the plan for their college finances, discuss what you will pay for and what they are responsible for, and work out how they will manage the pieces that they are in charge of. Doing it now gives them a chance to work through the whole summer (and save that money), and it also gives them and you a chance to start thinking about how to set things up.

Firstly, at the big picture level, write out the numbers for the whole school year:

• Tuition and fees (subtract any scholarships):

• Room:

• Board (food):

• Books:

• Travel home:

• Personal expenses:

• TOTAL:

In addition to the numbers, write down who will be responsible for each item. Even if your child is paying entirely for their own college, go through this exercise with them to help them understand the full picture.

The first five items can be fairly easy to get accurate numbers for, but the last tends to be the most difficult. Personal expenses can vary from almost nothing to really any large number, depending mostly on what you and/or your student decide. The biggest question is typically whether or not they will have a car. Owning and maintaining a car can cost easily $6,000 per year, including insurance, gas, parking, maintenance, fees, and any tickets or accidents, so if money is an issue, this is a good one to skip. Beyond that, make your best guess together for what their personal expenses might be. Lastly, help them plan for where the money will come from, and how to manage it.

Putting together a plan for college costs at the beginning of the summer can take a lot of pressure off both you and your child, and give you a chance to prepare in advance. Best of luck to both of you for this big transition!

Today’s guest author is Linda Matthew, an Accredited Financial Counselor® and the owner of MoneyMindful Personal Financial Coaching, with which College Affordability Solutions has partnered since 2016. Linda has clients all through the U.S. and Canada. She is also the parent of one college graduate and one current college student.

Linda’s new book, Teach Your Children About Money, describes age-appropriate methods for helping youngsters learn about themselves and different ways to manage their money. It also has a special section just for college.

Go to the MoneyMindful website for more about Linda, to arrange a free consultation and to order your copy of Teach Your Children About Money.

Before and During College: Hey Parents, If You Really Need a Federal PLUS Loan But Have an Adverse Credit History, Here’s What to Do

Melissa’s a widow with three children and a $50,000 per year income. She’s proud of her oldest, Madison, a daughter who’ll start at the state’s flagship university in August.

The total cost of attending the university during Madison’s first year is predicted to be $29,000.

With two children still at home, Melissa can afford to give Madison just $200 a month for each of her nine months at school. So Madison’s determined to save $3,000 from her summer job and earn another $3,000 from part-time jobs while enrolled.

Madison’s financial aid for the year consists of grants and scholarships totaling $9,500, plus the $5,500 maximum a freshman may borrow from the Federal Direct Loan Program (FDLP).

This leaves Madison $800 a month short of what she needs. So Melissa consulted the financial aid office. She came away convinced that borrowing an FDLP Parent PLUS loan of $7,000 is the only way to send Madison to the university.

Unlike other federal college loans, the U.S. Education Department (ED) runs a credit report on each PLUS applicant. It disqualifies anyone with an “adverse credit history.”

ED would consider Melissa’s credit history “adverse” if her credit report shows that:

• She’s 90 or more days delinquent on one or more debts which, collectively, equal over $2,085; or

• During the last two years, she had more than $2,085 in debt placed in collection or charged off; or

• In the last five years she:

• Defaulted on a debt, suffered a foreclosure, or had something repossessed; or

• Had a federal student loan debt charged-off or written-off; or

• Was subject to a wage garnishment or tax-lien.

Melissa can still qualify by undergoing PLUS credit counseling and:

1. Obtaining an endorser (who agrees to repay the loan if Melissa can’t) without an adverse credit history. Madison, the loan’s beneficiary, can’t be the endorser.

2. Providing documents convincing ED that her adverse credit rating is based on inaccurate information.

3. Sending documentation that persuades ED her adverse credit situation is subject to “extenuating circumstances.” Example? If Melissa defaulted during the last five years, providing ED with a letter from the debt’s current owner or loan servicer confirming she met its conditions for resolving her default could prove an extenuating circumstance.

For more guidance, see ED’s Document Extenuating Circumstances (Appeal) instructions on the Federal Student Aid website.

Even if she qualifies for a PLUS loan, Melissa should tap any other financial resources available to her instead of borrowing it. PLUS is the costliest FDLP loan. It generates debt. But it doesn’t improve Melissa’s earning potential at all.

Nevertheless, because incomes and grants haven’t kept pace with inflation, PLUS has increasingly become a necessity for college parents such as Melissa.

Contact College Affordability Solutions for free consultations on strategies that can help make postsecondary education more affordable before, during, and after college.

Before and During College: Federal Student Loan Interest Rates Drop for 2019-20

Here’s some good news for students and parents borrowing to pay for college — Federal Direct Loan Program (FDLP) interest rates are dropping effective July 1.

The U.S. Education Department (ED) hasn’t yet announced this, but the New York Times and other reputable publications such as Forbes have run stories about it based on expert analysis.

These reductions leave interest rates above their 2017-18 levels, and at best they’ll reduce borrowing costs for the typical FDLP borrower by a few dollars a month. So don’t let the new interest rates motivate you to borrow more than you absolutely need. Nevertheless, it’s better to have an interest rate decrease than an interest rate increase.

Some of the most common questions borrowers have about FDLP interest rates are:

How long may I borrow at the interest rates that begin this coming July 1?

Each FDLP interest rate year runs from July 1 through June 30. The 2019-20 rates apply to loans made — i.e. first applied to what you owe your school or released directly to you or your bank account — on or after July 1, 2019 all the way through June 30, 2020, even if portions of those loans are made after June 30, 2020.

I understand each year’s loans are at “fixed” interest rates. What’s this mean?

The rates on loans you get each year will never change. For example, a 2018-19 FDLP unsubsidized loan you borrowed at 5.05% will still have a 5.05% interest rate when you finish repaying that loan.

If my interest rates on FDLP loans never change, what’s the rate on my combined loans?

It’s a “weighted average” interest rate that reflects the interest rate of each of your loans as a share of your total debt. So if you borrowed a subsidized loan of $2,000 at 4.45% in 2017-18 and $2,000 at 5.05% in 2018-19, the weighted average interest rate on your combined debt of $4,000 is 4.75%.

Will the FDLP interest rate reductions apply to private student loans?

No, but they may influence private lenders who compete with the FDLP to cut their interest rates.

How are each year’s FDLP interest rates set?

They’re based “the highest priced 10-year Treasury notes auctioned at the final auction held prior . . . to June 1.” Then there’s an add-on of 2.05% for subsidized and unsubsidized loans for undergraduates, 3.6% for unsubsidized loans for graduate and professional students, and 4.6% for all PLUS loans regardless of their borrowers. There are also maximums past which interest rates may not go — 8.25% for undergraduate subsidized and unsubsidized loans, 9.5% for graduate and professional student unsubsidized loans, and 10.5% for PLUS loans.

Contact College Affordability Solutions if you have additional questions about the federal student loan programs in general or their interest rates in particular. As with all of College Affordability Solutions’ services for college students and their families, you’ll not be charged for this.

Before College: Is Orientation Worth the Cost?

College costs students pay before classes begin can be shocking — including and especially expenses for attending summer orientation. Freshmen-to-be and incoming transfers often ask, “Is orientation worth the cost of attending it?”

As with so many questions about higher learning, the answer is absolutely definite and crystal clear . . . it depends!

It depends on the costs you’ll incur. Your orientation “budget” should include travel to and from your college or university’s campus, your orientation registration fee, and lodging and meal expenses. Also, don’t forget any wages lost by you and the parent(s) accompanying you to orientation.

Orientation sessions are usually in June or July — the middle of summer travel season. They’re typically two to four days long, although they can last a week. The result? Orientation spending can add up to several hundreds or thousands of dollars — especially at cash-strapped schools that are just looking to generate extra revenues from their students.

It also depends on the opportunities orientation presents you. The National Student Loan Clearinghouse reports that, “Of all students who started college in fall 2015, 73.4 percent persisted at any college in fall 2016, while 61.1 percent were retained at their starting institution.” So orientation is increasingly being called upon to help improve these percentages.

The University of Connecticut at Storrs’ orientation program notes research showing “that students who feel a connection to their new school and other students during orientation are more likely to persist and graduate.” It’s director asserts that “orientation can be an effective way to engage new students, acclimate them to campus, and acquaint them with resources and services that will allow them to hit the ground running — and ultimately graduate.”

So carefully check your school’s orientation schedule. Look for a balance of sessions designed to engage you with your fellow students, acclimate you to your campus, and brief you about campus services. If these are lacking and there are too many parties, receptions or “spirit-building” sessions, orientation may not be worth the money you’d spend on it.

However, one activity can make all the difference. It’s the opportunity to register for fall classes. If your school’s summer orientation program offers this, attend the earliest session possible to reduce your chances of being shut out of classes you need. Otherwise, you may have to wait until just before fall classes begin to register, when you’ll be limited to whatever classes are left — unless your institution offers opportunities to register online from home during the summer. Contact your school’s orientation office to ask about this if necessary.

Finally, it depends on what you put into orientation should you attend it — but hey, that applies to everything you do in college!

Need to control your college costs with sacrificing the quality of your education? Contact College Affordability Solutions for free consultations during which you’ll get the benefit of 44 years helping students and their families develop strategies on this and similar issues.

During and After College: Was Your TEACH Grant Wrongly Turned Into A Loan? Now You Can Get That Fixed!

Do you have a Federal TEACH Grant that’s been turned into an expensive Federal Direct Unsubsidized Loan? Right now it may be eligible for conversion back into a TEACH Grant!

Since their creation in 2007, TEACH Grants have provided $4,000 per academic year to more than 112,000 college students studying to become highly-qualified teachers in high-need fields within low-income K-12 schools.

In April 2018 College Affordability Solutions warned that TEACH Grants were a bad deal because:

• The U.S. Education Department (ED) converts them into Federal Direct Unsubsidized Loans if recipients fail to complete four years of the teaching as described above within eight years of leaving college; and

• ED and its contractors inflicted the same heavy-handed punishment on recipients who allegedly failed to comply exactly with what Public Citizen, a nonprofit consumer protection group, subsequently described as ED’s overly-complicated, even unlawful TEACH Grant regulations.

The result is that 63% of TEACH Grant recipients who began teaching before July 2014 saw their grants transformed to Federal Direct Unsubsidized Loans before June 2016. This turned their $4,000 grants into debts exceeding $9,000.

If you were caught up in this fiasco, you can now have your case reviewed. Here are three way to get this started:

1. If you received a February 2019 email from “noreply@studentloans.gov” about this, follow its directions;

2. Call (855) 499-9543 between 8:00 am and 9:00 pm eastern time Monday through Friday to ask FedLoan, ED’s current TEACH Grant contractor, to initiate a review; or

3. Email “TEACHgrantconversions@myfedloans.org” to request a review.

FedLoan will audit your account, plus other information it may need from you. No matter what, it’ll let you know the result. For example, ED says that if you have, or still can, complete four years of required teaching within eight years of leaving college, your loan could converted into a grant.

But be careful! National Public Radio reports indicate that ED and it’s contractors have mismanaged the TEACH Grant program for years. Although ED’s now pledged to do better, but whenever you deal with ED or FedLoans, be sure to keep:

• A copy of every email, form, or letter you send or receive; and always get a delivery confirmation on anything you send; and

• Notes on every conversation you have with them — who you spoke with, on what date, at what time, the exactly what was said?

In short, act like you’ll someday need to take ED and its contractors to court to get what’s rightfully yours under TEACH Grant law and regulations. Hopefully you’ll never have to do this, but better safe than sorry!

Contact College Affordability Solutions for a free consultation if you need help understanding your rights and responsibilities as a financial aid recipient.