During College: You Should Be Protesting If Your Student’s Not Detesting Cryptocurrency Investing!

It’s bad enough that 75% of college students gamble. But now another perilous student behavior has emerged. A recent survey by The Student Loan Report indicates that 21% of student borrowers invest in cryptocurrencies such as Bitcoin.IMG_1834

As a responsible parent you of course advise your student not to gamble. But also urge him to stay away from cryptocurrency investments!

Unfortunately, these investments are easy to make. After loan and other aid money pays tuition and fees for an academic term, your student gets the remainder to cover that term’s books and other necessary expenses. Now he could have up to a few thousand dollars in hand.

He can invest these funds — hopefully in a safe and secure bank account, but also in high-risk opportunities such as cryptocurrencies. Wherever he invests, he’ll still need to pay for necessities like books, housing, and food as the term progresses.

IMG_1779What makes cryptocurrencies so dicey for college students? It’s what investment professionals call “volatility.” Cryptocurrencies can become really volatile really fast!

For example, Bitcoin’s value on January 10 was $14,890.72. But by February 5 it’s value dropped to $6,914.26 — a 54% loss! So if your student bought a $2,000 share in Bitcoin on January 10 and sold this share just 25 days later, he lost $1,080 of his investment! Meanwhile, thousands in costs for the term remain to be paid.

Some call Bitcoin the potentially biggest “bubble” in history. A $1,080 loss from his IMG_1782limited pool of funds could easily place your child among the 52% of college students facing high levels of food insecurity, or the 12% college students who are homeless.

Difficulty paying for basic needs undermines academic performance, and money shortages have long been among the most common reasons why students leave college without degrees, so cryptocurrency financial losses could also end up placing your student among the 25% who drop out every year.

Far better for your student to spend as conservatively as possible and, toward the end of the term, if he has money he doesn’t need, return it to the government. For every $100 of his spring Federal Direct Unsubsidized Loan he returns within 120 days of its disbursement, Washington will immediately cancel all fees and interest applicable to that $100. The result is that for every $100 he returns, the total amount he’ll ultimately repay on this loan will be cut by up to $191!

There’s an old saying, “Never gamble unless you can afford to lose the money.” If your student needs loans and/or other financial aid to help pay for college, he certainly cannot afford to lose money on erratic investments such as cryptocurrencies!

College Affordability Solutions has 40 years of experience in counseling students and parents on ways to manage their dollars for college. Call (512) 366-5354 or email collegeafford@gmail.com for a no-cost consultation.

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Before and During College: Games the Government Plays — Federal TEACH Grants

Maybe your high school senior is planning to be a teacher, or your college student’s already an education major. Her 2018-19 financial aid offer may include a Federal TEACH Grant. If so, she needs to be extremely careful about that grant!

IMG_1648TEACH Grants aren’t grants at all. Financial aid pros call them “groans” — grants that all-too easily turns into loans.

TEACH Grant Basics

TEACH Grants provide up to $4,000 per academic year. Their eligibility requirements include financial need and:

Teachers must submit forms for each year they plan to fulfill TEACH Grant service requirements in low-income schools, then submit proof they completed those requirements — all to FedLoans, a private company hired to administer TEACH Grants.

The Risk

If your student fails to timely document four years of required service within eight years of leaving the major for which she got a TEACH Grant, her grant will turn into a Federal Direct Unsubsidized Loan. Interest then gets charged going back to the dates her TEACH Grant was disbursed. For example, if a $4,000 TEACH Grant received eight years ago converted to an unsubsidized loan today, your student could end up repaying $9,360 in principal and interest.

So it’ll be quite costly if your student receives a TEACH Grant but then moves to IMG_1651another major (80% of all students change majors), doesn’t teach, or teaches in a school or subject that doesn’t fulfill TEACH Grant service requirements. Small wonder a recent U.S. Department of Education study shows that 63% of TEACH Grants have been converted to unsubsidized loans.

Compounding the Risk

Some teachers also allege their TEACH Grants were falsely turned into loans due to minor paperwork errors or FedLoans losing their documents.

IMG_1658The situation’s so bad that at least one state’s Attorney General is trying to sue FedLoans for “callous disregard” of ex-students’ needs. But the current Secretary of Education is protecting FedLoans by asserting that it’s immune from state consumer protection lawsuits as a federal contractor. Ultimately, the courts will have to resolve this matter.

A Bad Deal!

If your student’s awarded a TEACH Grant, suggest she request other grants instead. If she must take the TEACH Grant, stress the importance of completing its service requirements and carefully documenting everything she does to provide FedLoans with proof that she fulfilled them. Even then, that TEACH Grant may still be a bad deal!

Need help deciphering financial aid offers? Contact College Affordability Solutions at (512) 366-5354 or collegeafford@gmail.com for a no-cost consultation!

Before College: Games Colleges Play — Deposit Deadlines

By now, your high school senior probably has 2018-19 admission offers. If so, a key deadline is coming. If any colleges impose earlier deadlines, they’re likely being unethical.

IMG_1518Most prospective freshmen must pay non-refundable deposits to secure enrollment, on-campus housing, and even places in summer orientation/registration sessions at their colleges of choice by May 1. Often, that’s also the last day for them to accept financial aid offered by those schools.

The May 1 deadline is specified on pages 5-6 of the National Association of College Admission Counseling’s (NACAC’s) professional code of ethics. All NACAC-member schools — including most 2 and 4-year nonprofit and public colleges and universities — agree to use it.

Why one national deadline? Most 17-18 year olds (and their families) require time to evaluate their college options — to figure out which institutions are good “fits” for them; confirm their tuition and fees and other costs of attendance at these institutions; and to assess how much their financial aid offers, most of which arrive in late March or early April, will discount their costs.

Put another way, if colleges could set their own deadlines, some would lock prospective low and middle-income students in or out with exorbitant, non-refundable deposits that come due well before students and parents are ready to make careful, well-informed enrollment choices.

Most NACAC schools take the May 1 deadline very seriously and seldom, if ever, IMG_1519violate it. But if one does try to force your student into paying a non-refundable deposit payment before May 1, here’s what to do:

  1. Search NACAC’s membership directory to make sure the school’s in NACAC.
  2. If it is, contact it’s admissions director and president. Demand it hold to the May 1 deadline.
  3. File a complaint with NACAC (see pages 13-15 of NACAC’s professional code of ethics) if necessary.

NACAC permits two exceptions to May 1. One is for Early Decision admission programs (see page 6 of NACAC’s code); the other applies to refundable deposits at colleges lacking the capacity to house all their freshmen on-campus (NACAC code, page 7).

Otherwise, any NACAC-member school trying to rush your student into a pre-May 1 deposit payment is being unethical. So think carefully — do you trust such an institution to take care of your student for the next 4 years?

College Affordability Solutions provides guidance at no charge on ways to make higher learning less expensive. Call (512) 417-7660 or email collegeafford@gmail.com if you have questions.

Before College: Games Colleges Play — Financial Aid Offers

The costs of attendance (“sticker prices”) colleges publish are not always what their students pay. In addition to federal and state awards, many schools offer their own gift aid (grants and scholarships) to discount tuition, fees, and even other expenses.

If an institution promises your prospective student a certain amount of institutional gift aid, analyze its offer carefully. It may be designed to “game” your student by discounting his initial sticker price, but then maximumize the tuition he pays in the future.

Here are some tactics to be on guard against:

Bait and SwitchIMG_1387

Institutional aid offers may be part of sleazy bait and switch strategies that even some reputable colleges employ. The most obvious of these is loss leader awards — first-year gift aid without renewal commitments for subsequent years. But they can be part of more subtle and sophisticated schemes, too. For more about the latter, see “Before College: Beware of Bait and Switch.

IMG_1388Wait and See

Be careful if an institutional representative suggests your student pay expensive and non-refundable enrollment deposits now, then hold on to find out if more grant or scholarship funding can be freed up for him later. Your student may or may not get additional gift aid — absent a written commitment, there’s no assurance of it — or the added aid may not match his needs or expectations.

Curbing Comparative Shopping

Thousands of postsecondary schools reportedly provide the Financial Aid Shopping Sheet with their financial aid offers. This document lays out sticker prices and financial aid awards in a common format, making it easy to do a side-by-side IMG_1389comparison of the net first-year prices your student will face at various colleges.

The Shopping Sheet also divulges the median amount borrowed by a college’s graduates, plus graduation and student loan default rates for its undergraduates — the last two being relative measures of institutional quality.

Unfortunately, the Shopping Sheet is voluntary. Some schools don’t provide it, making it difficult to measure them against their competitors. Before your student pays an expensive enrollment deposit to such a school, ask why it isn’t revealing it’s comparative data. In short — what is the school trying to hide?

Even colleges making honest and straightforward aid offers can be expensive. So help your student avoid falling prey to the games some schools play with aid offers so his higher education will be as affordable as possible.

College Affordability Solutions has 40 years experience with strategies that help make education beyond high school more affordable. For a no-charge consultation about such strategies, call (512) 366-5354 or email collegeafford@gmail.com.

Before College: Games Colleges Play — Tuition and Fee Disclosures

No, this isn’t about March Madness. It’s about the Cost of Attendance (COA) figures disclosed on financial aid offers your student will soon receive from postsecondary schools that admitted him. Bottom line — these figures aren’t always precise or accurate.

IMG_1289Federal rules require schools to disclose tuition and fees charged to full and part-time students. But you need to understand exactly what is and isn’t being disclosed, because these may be the largest and most crucial costs your student will incur.

 

Tuition

Tuition varies based on the number of credit or clock hours a student takes. But tuition communicated to prospective freshmen generally reflects the minimum number of hours required for full-time enrollment. At public colleges, it should also reflect your student’s residency status because such schools vary tuition on this basis — i.e. community colleges charge less to residents of their tax districts than non-residents, and 4-year public institutions charge out-of-state residents more than in-state residents.

Some institutions also have different tuition rates for different majors. So make sure the tuition revealed to your student reflects the major into which he’s been admitted.

Because tuition is sensitive to the hours for which your student registers, his residency status, and maybe his major, be sure the aid offer lists the appropriate tuition amount.

Fees

Sometimes the fees charged students actually exceed tuition. However, fees are combined with tuition when schools disclose COA. So if your student’s being offered a tuition scholarship or tuition waiver, it’s important to understand whether or not this award also covers fees.

Also, fees divulged on aid offers are usually the required fees all students must pay. IMG_1294Other, hidden fees aren’t listed. These are sometimes called “discretionary” or “optional” fees. They’re charged for everything from attending intercollegiate athletic events to participating in intramural sports. But they may also be required for essentials such as taking certain required classes or using campus labs.

If the aid offer doesn’t fully explain the tuition and fee amount it discloses, contact the financial aid office for more and better information about this disclosure. Otherwise, you and your student could be in for a rude shock when it’s time to pay the school.

There are four other COA categories besides tuition and fees. Read Games Colleges Play — Disclosing Room, Board, and Other Costs for what to watch for in these categories.

College Affordability Solutions helps parents and students decipher financial aid offers. Call (512) 366-5354 or email collegeafford@gmail.com if you need a no-cost consultation for this purpose.

Games Colleges Play — Disclosing Room, Board, and Other Costs

Don’t rely too much on the Cost of Attendance (COA) figures disclosed on your student’s financial aid offers from colleges to which she’s been admitted. Sad to say, they’re often inaccurate.

Games Colleges Play: Tuition and Fee Disclosures focuses on one critical COA category, IMG_1280 but federal rules also require postsecondary institutions to communicate other sets of costs:

  • Room and board;
  • Books and supplies;
  • Transportation; and
  • Miscellaneous.

Colleges often determine these costs by sampling local prices or surveying current-students. These methods typically cause them to publish average costs, which means some students spend more while others spend less in each category. Hopefully, your student can be often among those who spend less.

Unfortunately, colleges may also deliberately downsize amounts they disclose so their published COAs appear to be lower than those of their competitors. And sometimes institutional administrators simply believe students shouldn’t be allowed to spend what their own research shows students are spending in certain categories.

Here are some commonly played games in COA categories other than tuition and fees:

Room and Board: This is usually based on what the school’s housing and food service department charges to live on-campus with a roommate for up to nine months. Such departments object to giving “extra” financial aid to help students reside off-campus, so colleges often apply their on-campus amounts to students who dine and rent off-campus — largely under leases landlords require to be for 12 months.

Books and Supplies: This category normally divulges average book and supply expenses for all students. But some majors have extraordinary high book and supply costs, so this amount could be way too low.

Transportation: This figure commonly reflects what in-state students spend to travel between campus and home a few times each academic year. It seldom covers long-distance travel expenses for out-of-state students or costs for students who must drive to and from off-campus jobs.

Miscellaneous: This covers personal purchases — clothing, entertainment, snacks, etc. But institutions are particularly likely to “lowball” the costs disclosed in this category.

So determine whether you can actually afford a college even with the financial aid it’s offering. Do your own research about its COA — speak with current students and their parents, examine on-campus dorm prices, sample off-campus rents, independently calculate your student’s transportation expenses, etc. Doing so can avert financial disaster for you and your student!

College Affordability Solutions helps parents and students decipher financial aid offers. Call (512) 366-5354 or email collegeafford@gmail.com if you need a no-cost consultation for this purpose.

Before and During College: Parent Loans — Helpful Today, But a Potential Curse Tomorrow

IMG_1169Federal Direct Parent PLUS Loans. They’re often the way families fill the gap between their resources, financial aid, and costs their undergraduates incur at college. But parent PLUS loans have their pros and cons.

Parent PLUS loan advantages:

  • There’s no PLUS borrowing limit other than the cost of attendance for the student for whom you borrow (i.e. your “beneficiary”) minus her other financial aid.
  • The interest rate on each academic year’s PLUS loan is fixed so, unlike this rate on many private loans, it’ll never go up.
  • The only fee is a 1.069% federal loan fee.
  • Amounts you repay within 120 days of disbursement reduces principal and IMG_1150cancels interest and loan fee on that principal.
  • Your payments may be deferred while your beneficiary is enrolled at least half-time and during her 6-month post half-time grace period.
  • Payments may also be postponed under other federal deferment and forbearance programs.
  • Should you die or become totally and permanently disabled, or if your beneficiary dies, your PLUS debt will be discharged.

Parent PLUS loan downsides include:

  • The highest interest rate of all federal college loans. Currently 7.0%, this rate’s expected to rise on PLUS loans borrowed for the next few academic years. But with fixed rates, PLUS interest is still likely to be lower than variable rate private education loans.
  • To borrow a PLUS loan, you (or a cosigner) must have a sound credit history. IMG_1152Your credit history isn’t “sound” for PLUS if (1) when your credit report runs, you don’t owe over $2,085 that’s 90 or more days delinquent, or (2) for five years before your report runs, you’ve had no charge-offs, bankruptcies, defaults, foreclosures, repossessions, tax-liens, wage garnishments, or write-offs.
  • PLUS debt isn’t legally transferable to anyone else unless it’s privately refinanced.
  • Parent PLUS debt isn’t easily forgiven. Bankruptcy generally won’t discharge it, and it’s not eligible for the federal teacher loan forgiveness program. But, in addition to the discharges described above, it is eligible for Public Service Loan Forgiveness.

IMG_1151Borrow parent PLUS loans only as a resort, especially if you’re approaching retirement. Why? The Government Accountability Office recently found 17% of 65-74 year old parent borrowers had defaulted on such loans — subjecting themselves to expensive collection fees and the confiscation of their Social Security benefits and tax refunds. So while PLUS can be helpful today, it can be a curse tomorrow.

Note: College Affordability Solutions will be on “spring break” next week and so won’t be posting a blog. But look here again on Wednesday, March 21, for another post on issues related to keeping college affordable.

Contact College Affordability Solutions at (512) 366-5354 or collegeafford.gmail.com if you’re looking for a no-cost consultation on strategies for minimizing college costs.