The Four Year Myth

Complete College America is a non-profit formed to address the obvious problem of students attending but, seemingly, never graduating with a marketable education. Among the group's publications is the "Four-Year Myth."

Are you operating under the delusion of that myth?

I can't recount how many parents (especially dads) have assured me, "I've told my kid 4 years -- that's it!" Then what? With your students and you into the thing at costs approaching, if not exceeding, six figures are you really going to abandon it? Can you send your children off into the workplace with "some college" as their resume enhancement? In this and several, successive entries I will summarize and comment on the key points.

First: In American higher education, it has become the accepted standard to measure graduation rates at four-year colleges on a six-year time frame. . . .  As lifetime savings are depleted and financial aid packages run out, the extra time on campus means even more debt, and for far too many students, additional semesters do not result in a degree or credential.
There are two, primary reasons students do not finish a "four-year degree" in four years.

  • Changing majors mid-stream
  • Transferring between colleges even from a community college to a four-year institution.
Think about those:
  • How can you reach your destination when you don't know where, from the outset, you're going? Succeed Where It Counts, Inc. offers each student the opportunity to complete a Birkman Assessment. Some parents resist the idea that their 16-year-old can have any clear idea of a career, but the evidence indicates otherwise. Teenagers not only can, but in fact, should know their strengths, weaknesses, aptitudes and interests as measured through an objective, scientific tool. If nothing else, such a strategy offers the opportunity for teens to break free from the trap of less-than-helpful peer influence. Every high school student should be applying for college admission based on a clear sense of career direction from the outset.
  • Another vital component to achieving four-year success is research on, and visits to every college under serious consideration.
    • Does the school offer the major you seek?
    • Is that academic major a flagship program, or one of the "we offer that, too" after thoughts?
    • Do you like the campus?  Geography, architecture, campus life and other factors of personal taste matter a lot when you consider that the college you attend will be your place of residence and work for four years 24/7.
    • Meet the professors in your proposed major subject. Are they friendly, approachable, persons with whom you otherwise would be comfortable associating? How do you know? A campus visit.
    • Talk to current students and ask what it is they love and what it is they're not so crazy about. How do you do that? A campus visit.
Next blog will address the hidden costs of extended stays in college. For now we'll leave it with this quote from Complete College America.
However, something is clearly wrong when the overwhelming majority of
public colleges graduate less than 50 percent of their full-time students in four years.
Current on-time graduation rates suggest that the "four-year degree" . . .  [has] become little more than modern myths for far too many of our students. The reality is that our system of higher education costs too much, takes too long, and graduates too few.

Posted in College Planning, College Planning Strategies.

Gately offers Invocation for Maryland Senate

Pictured are Maryland State Senator Michael Hough, Mrs. JoeyLynn Hough and Rev. Dr. George Gately. Mike invited me to offer the invocation for the Senate of Maryland Friday, February 17, 2017. It was my pleasure and honor to do so.

Mike is my cousin. His great-grandfather, Stanley Gately, was my father's brother. Stanley was killed in battle in September, 1944, Germany. He is buried at Arlington National Cemetery. Following his death my father and mother took in his daughter Regina "Jean" Gately, and raised her until her 18th birthday; at which time she attained employment and moved out on her own. Jean married Earl Dilley, and they brought three children into this world -- Catherine, David and Beth. Beth is Michael's mother.

Here is a transcript of the Invocation:
ALMIGHTY GOD, we address you this morning from the common ground of our faith and dependence on you. Giver of life and all good things, we acknowledge your providential care and benevolence; and we do so with thankful hearts.
First, as we are admonished to do, we give thanks for our nation and those who lead us in government. May they be conscious of the benefits of faith and prayer, and may they each and all draw faithfully upon that wisdom which is from on high: first pure, then peaceable, gentle, open to reason, full of mercy and good fruits, without uncertainty or insincerity.  And the harvest of righteousness is sown in peace by those who make peace.
We also give thanks and lift up to you those who serve this sovereign and good State of Maryland.

  • Governor Larry Hogan,
  • his cabinet and staff;
  • Senate President Mike Miller and Pro Tem Nathaniel McFadden;
  • the leaders of each party Senators Peters and Jennings.
  • Blessings upon them each and all, and upon each person who serves as a Maryland State Senator today.
Our prayer of gratitude and for mercy is made also on behalf of the Staff of the Senate, and in particular those who labor here year-round and keep this government running well. We also include those who serve in often unnoticed ways, but without whom our work would grind to a halt -- those who serve in maintenance and security and clerical positions.
Setting aside our partisan differences for this moment of unity in your presence, merciful God, we ask that you give us wisdom with compassion in these tumultuous days of strong opinions. We ask that you help us balance
  • public safety and security with mercy;
  • fiscal stewardship with mindfulness of the poor and destitute;
  • strong, informed points of view with a spirit of understanding and unity.
You are God Almighty, and you are the author of our lives. We close this petition for your grace with this: every Senator is also a member of a family. They love their families and their families love them. We pray for the health, the safety and the general well-being of each Senator and each senator's family.
Dear God, thank you for your presence among us, for listening with a mind to answer, and for the gift of life which has been imparted to us through your own Spirit. Amen.

College-&-Retirement -- #4 of 4

Taken up in this blog:

  • Social Security
Previous blogs in this series:
  • Retirement Readiness
  • Paying cash -- is it always best?
  • Parent borrowing -- it costs more than you may think
Can the federal government seize your social security benefit to satisfy delinquent education loans?
Yes, your social security benefit can be, and will be reduced in order to satisfy a delinquent education loan balance.

There is another interesting survey-based indication that, across three generations from baby-boomers to millenials, people indicate they plan to continue working in their retirement years. Fifty-percent and more say they do not look forward to idleness as part of old age. They want to work. The follow-up question is, however, do you want to have that choice, or do you want to be forced to continue working in order to make ends meet?

Social Security is not a retirement income. However, for those who plan well, that universal benefit does provide an irreducible minimum, a floor if you will, and a hedge against inflation for a diminishing nest egg as the years roll on.

A "must-know" fact for parents and grandparents who are borrowing money, or co-signing loans to help fund their children's educations, is that most of those loans are federal guaranteed. What that means is the federal government can, and will attach your assets, including your Social Security benefits in order to satisfy the debt.

Succeed Where It Counts, Inc. advises against borrowing for college, beyond the Federal Student Aid opportunity. FSA loans are limited to $27,000 over the course of undergraduate studies (that ceiling may rise by an additional $4,500 for some students). For students who earn their degrees, and who secure employment in a career-quality job, that is manageable -- in the $250-$300 per month range, depending on the interest rates.

And that brings us to another subject -- student debt and the expectation of loan forgiveness -- for our next blog.

Posted in College Planning, Retirement Planning, Wealth Creation Strategies.

College-&-Retirement -- #3 of 4

February 22, 2017

Taken up in this blog:
  • Parent borrowing
Taken up in the upcoming 4th blog:
  • Social Security
Previous blogs in this series:
  • Retirement Readiness
  • Paying cash -- is it always best?
Loans to pay for the costs of college, for many people, seem an inevitable choice. There are two, common sources of loans that involve parents and/or grandparents.
  • PLUS
  • SallieMae
PLUS is the acronym for Parent Loan for Undergraduate Students. As with the Stafford Loan program which is a loan directly to the student, PLUS is federally guaranteed with an interest rate tied to the T-Bill. For the current school year, that rate is 6.31%. The loan origination fee is 4.276%.

SallieMae loans are often co-signed by the student and parent or grandparent. Although no loan fee is charged, interest rates are variable and approach 10%.

Either way the loan is offered based on credit-worthiness, and shows on future credit reports. PLUS and SallieMae loans begin accruing interest upon disbursement. Repayment forbearance is available upon application and approval, but the interest continues to accrue and capitalizes into the balance due on the loan anniversary.

What does that look like in real life? Take a family with two children. The parents are on the hook for $50,000 for each child (either PLUS or as co-signers on SallieMae). Let's assume SallieMae offers the same 6.31% as PLUS (just to keep the math simple). After ten years the $100,000 principle plus interest = $184,392. 

Let's say those parents were 45 when they took the loans to pay for college for the kids. Had they paid that $100,000 into their retirement accounts, netting a modest 5% (five and not 6.31) per annum, by their 75th birthday they would have an additional $432,000 for those later retirement years.

That number ($432,000) is called Opportunity Cost. It is, in fact, the true cost of paying for your children's college education.

Is that really what you want to do?

Posted in College Planning, Retirement Planning, Wealth Creation Strategies.

College-&-Retirement -- #2 of 4

Taken up in this blog:
  • Paying cash -- is it always best?
Taken up in successive blogs:
  • Parent borrowing
  • Social Security
Previous blogs in this series:
  • Retirement Readiness
Few people stop to think and realize that paying cash and borrowing are, in fact, both forms of financing a purchase. Paying cash is nothing less than self-financing.
Here's a specific illustration using the Federal Student Loan program as an example.
  • Parent "I don't want my child graduating with debt. Therefore, I will pay the costs of college."
  • Stafford Loan privileges = $27,000 over four years ($5,500, $6,500, $7,500, $7,500) @ 3.76% p.a.
  • Repayment amortized over 10 years.
  • Assuming you can earn 3.76% on your money, if you pay cash and thereby give up that principle plus the accumulating, compounding interest, over 10 years you will realize a cost of $39,054. If your student takes the Stafford Loan and repays over 10 years, the sum of the repayments equals $39,054.
  • In addition, by taking advantage of the Stafford Loan, you keep control over your money; you have the cash to pay off the balance owed at any time, and your student creates a positive credit history.
  • Obviously, if you can earn more than 3.76% on your money then borrowing makes even more sense. You are leveraging your cash to create wealth.
The single most important tool in wealth creation is to take advantage of uninterrupted, compounding interest. If interest rates are favorable to borrowing, then paying cash is less advantageous than it appears on the surface.
"Debt free" is the mantra of a money talking entertainer heard on radio stations across the land. What the talk-radio host fails to disclose is this fact: there is a difference between a debt and a loan.
  • Debt = a financial obligation which is not offset by collateral of equal or greater value, and which can be discharged only from future earnings.
  • Loan = a leveraged position using collateral to retain access, use and control of your cash. A loan, balanced by collateral of equal or greater value, can be satisfied on any given day. Amortization is a tool to retain access, use and control of your cash; or to perhaps even gain wealth through more favorable rates of growth than the loan rates cost.
Remember: you finance every purchase you make. You either pay cash and lose the interest you could have earned, or you borrow at the same or lesser interest and leverage your cash position. Given the relatively low interest rates of Stafford Loans, those should be considered as an option for college expenses. We can help you with the math. 

Posted in College Planning, Retirement Planning, Wealth Creation Strategies.

College-&-Retirement -- #1 of 4

Taken up in this blog:
  • Retirement Readiness
Taken up in successive blogs:
  • Paying Cash
  • Parent Borrowing
  • Social Security

In a Prudential Investments [] study of American's preparations for retirement the facts revealed are
  • 80% of us claim that retirement is our top financial priority;
  • most surveyed adults gave themselves a grade of C or worse for their own preparation;
  • 40% claimed they have no idea how to better prepare;
  • 63% say investing is too confusing; and
  • well over half plan to work beyond retirement age, at least to supplement retirement income.
There are four questions, the answers to which everyone must know:
  1. For your nest egg to provide you with the standard of living you want, and still last your natural lifetime, what rate of return must you earn in your current retirement plan?
  2. For your nest egg to provide you with the standard of living you want, and still last your natural lifetime how much more do you need to be saving on a monthly or annual basis?
  3. For your nest egg to provide you with the standard of living you want, and still last your natural lifetime how many more years will you have to work?
  4. If you make no changes to your current retirement plan, by how much will you have to reduce your lifestyle so that your nest egg will last your natural lifetime?
Given that the number one fear of currently reitred Americans is that they will outlive their money, would you like to know your answers to those 4 questions? Contact me via the tab "Contact Us" -- top right corner.

Posted in College Planning Strategies, Retirement Planning.

Insights Gleaned from Top Economist

      Sarah Watt House
Economist at Wells Fargo Securities
 spoke this morning (January 19, 2017) at the Business Today Newsmakers Breakfast, Cornelius, NC. My interpolations from her insights include:

  • Be ever more careful and reluctant to borrow money to pay for college
  • By exploiting relaxed repayment plans, more students and parents are loan-current, but . . .
  • Employment outlook for college graduates is looking favorable.
Borrowing Be Reluctant
Federal Student Aid and the Parent Loan for Undergraduate Students (PLUS Loan) are linked to the Treasury Bill rate. Inflation is rising, interest rates are rising, and each (more than likely) shall continue to rise. Although Federal loans are at a fixed interest rate, that rate is adjusted annually (linked to the T-Bill rate) for each new installment.

In other words, assuming you graduate in four years, you do so with four different loans, each carrying its own interest rate. As T-Bill rates rise, so will each, successive year's loan rate. If you enter college depending on borrowing as your primary means of paying, you may find yourself, financially, between-a-rock-and-a-hard-spot before you complete your degree.

I recommend that no parent use PLUS. If you do not see how you can send your child without that, please contact me. I may be able to help you discover alternatives (usually; but not always call me and let's talk).

Pros/Cons of Repayment Plans
According to Ms. House more students are utilizing the federal IBR (Income-Based Repayment) plans []. The upside is that your debt-service is more manageable, relating to your income. The down side is that, often, repayment is stretched out over many, many years. That impacts debt-to-income credit worthiness when you are seeking a loan for a major consumer purchase (house and car, in particular).

There are also possibilities for student loan forgiveness based on tightly defined public service jobs. Although an option, remember that any amount forgiven is 1099'd in the year forgiven, and creates a tax-obligation for which you may be unprepared. I know a woman who successfully applied for forgiveness of over $100, 000 (one hundred thousand!) in student debt. She was elated until, the following January, the 1099 came in the mail. Her income for the previous year jumped from under $30,000 to more than $130,000 with the consequent income tax due by April 15.

Employment Outlook
Sarah is confident that employment outlook for college graduates is good, and shall remain so, at least in 2017, if not beyond. Good news for sure!

My caveat to that is, depending on your degree and planned career, not all job markets are equal. At the breakfast where Sarah spoke I was sitting with a gentleman whose 11th grader was thinking of either a degree in business or a law degree. My advice to him was to check the Bureau of Labor Statistics employment forecasts for specific professions, trades and industries. If the family heeds my advice the choice of majors will be resolved, I feel confident.

Posted in College Planning, College Planning Strategies.

How to Prep for New SAT, ACT Writing Tests

Posted on  by WOW Writing Workshop
By Jed Applerouth
Applerouth Tutoring Services

Jed Applerouth
Beginning this spring, students will need to flex their critical thinking and composition skills when they tackle the new writing sections on both the SAT and ACT. The SAT has been completely redesigned, and the ACT has made multiple updates. As a result, the essay sections for both tests are now completely different from what they looked like a year ago. They are more rigorous than prior versions, however, these tests better reflect the kind of writing assignments students will typically face in college.
To succeed on either writing test, students need to get the basics right first. They need to understand the formats for the new essay prompts, and know what the graders will be looking for in a student's response.
The SAT essay
The SAT essay writing exercise has been transformed from an opinion piece into an exercise in textual analysis and critical thinking; this is similar to exercises on certain AP exams. Students will be asked to read a short (600-700-word) persuasive passage and write an essay response that explains how the author develops and supports an argument.
It is irrelevant whether or not the student agrees with the author (the task of the old SAT essay); the student's task on the new test is to articulate how the author uses evidence, rhetorical devices and structure to support a claim. Students will be evaluated on three measures:
  • Reading of the provided text
  • Analysis of the text
  • Writing skills
To optimize their scores, students will need to:
  • Actively read the passage
  • Scour for evidence that supports the author's main argument
  • Use quotes that demonstrate they understand the author's argument
  • Write a structured, organized essay that stays on topic
  • Use smooth transitions between paragraphs
  • Have an introduction, body and conclusion
  • Use a variety of sentence structures
  • Skillfully use vocabulary
  • Write significantly longer essays
While longer essays typically generate higher scores, students will be evaluated on both the quality and the length of their essay. The College Board, which administers the SAT, has doubled the time (50 minutes!) allotted for the new essay, and will provide four pages (up from two) of paper to write.
The ACT essay
On the ACT's revamped essay, students will get 40 minutes to analyze and respond to three distinct perspectives on a topic that concerns a broad, national issue. Students will be asked to:
  • Analyze and evaluate the three given perspectives
  • State and develop their own perspective
  • Explain why they agree or disagree with the perspectives given
  • Support their ideas with logical reasoning
  • Support their idea with detailed, persuasive examples
Essays will be evaluated using four metrics:
  • Analysis
  • Development and support
  • Organization
  • Language use
To generate higher scores, students must take their critical thinking up a level to identify the overarching themes across the three perspectives. For instance, do the perspectives address tension between change and tradition, or between the needs of an individual versus that of the collective?
Graders want students to critically evaluate the logic of the perspectives, and also to identify errors, assumptions, and potential pitfalls. Students need to organize their essay, use words properly, pay attention to grammar, transition smoothly between paragraphs and vary the sentence structure.
Is the essay optional?
Both the SAT and ACT have now moved their essays to the end of their tests and made them optional. But some colleges might require a writing test. It's best for you to find out how a school uses the writing test in admissions before making the decision to not take it. We always encourage students to write the essay, even if they think their schools won't require it. We've seen too many students discover after taking the test without the writing section that their new stretch schools require the essay. The additional time spent to stay for the essay can save a student unnecessary stress and headaches down the road.
The new SAT and ACT essays raise the bar for critical thinking and analysis, allowing students a chance to show off their thinking and writing skills. Students aiming for a highly competitive essay score would benefit from timed practice with the new forms and corrective feedback. This will help identify strengths and weaknesses early, allowing students to make adjustments and go into the official test ready to hit their optimal score.
Jed Applerouth is the founder and CEO of Applerouth Tutoring Services, an education services company with offices in major metropolitan areas across the country. A graduate of the University of Pennsylvania and Georgia State University, Jed is a Nationally Certified Counselor with a PhD in Educational Psychology. Since 2001, Jed and his team of educators have helped thousands of students across the country optimize their scores on the SAT, ACT, and other admissions tests

Posted in College Planning, College Planning Strategies.

Free Tuition for All?

Free Tuition? What might that look like? This is my thinking, and nothing more. I may be completely wrong, entirely right or (likely) a little right and a little wrong.

If beginning January 20, 2017 the next President declares free college tuition for everyone, this is what I think that would look like:

  • Tuition will not appear as a "cost" line item at colleges continuing to participate in the Federal Student Aid program. Some private colleges will opt out.
  • Costs may change at first, but they will creep up year-by-year until the "free tuition" is replaced by other fees and charges. Even with free tuition, room and board, mandatory fees and books will not be free.
  • Admissions criteria will roil with confusion. If college is free because of federal tax supplements, how can a student be denied admission? To manage enrollment, free tuition will be offered for limited college choices based on students' home zip codes?
  • If anyone can attend, and everyone attends tuition-free, there will be an impact on the marketplace value of a college degree. Degrees from private colleges that have opted out, and continue charging tuition, will be perceived as meritorious, and a two-tiered market value will emerge.
  • If college is tuition-free, what will be the motivation to complete a degree in four years? Students may find it much easier to stay, and stay and stay in the crafted comfort of higher education.
  • The federal government will seize some portion, or the entirety of current 529 Plan accounts, using the rationale that they are no longer needed. The argument will be made those funds are needed by the federal treasury to cover the costs of making college free.
  • The IRS will impose a new federal surtax to cover U.S. Treasury disbursements. It may be a tax added to filers with AGI above a certain dollar amount. It may be a surtax on filers above a certain income level who also have students attending college during that tax year. It may be a tax on intercollegiate sporting events and revenue. It may be all of those, and more.
  • Colleges participating in the free-tuition-program will be monitored as to salaries and capital expenditures. The federal government will not, you can be certain, pay a per-student tuition reimbursement college comptrollers think is fair (to wit: Medicare and Medicaid reimbursements to doctors). Tuition reimbursement will be according to a federal schedule, based on per capita census, with regional cost-of-living adjustments.
  • Professors will retire early; will exit for higher-paying, private-sector employment, or will devote less time to education and more time to writing, speech-making, fee-based private education, and other means of sustaining and increasing their personal incomes.
Where's the "free" in all of that?

Posted in College Planning.

College Affordability -- the sooner you know, the better

Do you understand affordability? How much money, per year, can you lay out on college costs for your children?  What factors must you consider?  What can you do to bridge the gap?

  1. How much money per year can you lay out on college costs for your children?
    1. Know the actual costs per year.
    2. Colleges publish "Cost of Attendance" estimates.
    3. Cost of Attendance includes tuition, mandatory fees, dormitory rent, on-campus meals, books and supplies, travel costs to and from home, miscellaneous out-of-pocket expenses
    4. Without borrowing any money, how much of that total can you pull from your monthly cash flow?
  2. What factors must you consider?
    1. What is the anticipated college-costs inflation rate? The prices do tend to go up every couple of years.
    2. Never, never, never touch retirement funds to pay for college. That includes money already set aside, and monthly contributions from current income.
    3. There are four questions about retirement to consider, all determined by your current retirement funding plans.  Based on what you are doing now (err on the side of caution), for your money to last throughout your spouse's and your life expectancy:
      1. What Rate of Return must your accounts average?
      2. How many more years will retirement needs require you to work?
      3. How much more do you need to be saving monthly?
      4. By how much will you be forced to reduce your lifestyle in retirement?**
**if you think you can do that, why not start now and put those extra dollars into your retirement account?
3. What can you do to bridge the gap?
a. Every student is eligible for the Federal Student Aid program (college loans to the student for which the parents have no obligation).  The loan amounts top out at around $27,000 over four years (with some additional possible up to about $31,000 total).
b. Federal Pell Grants may be offered for students from lower income families.  Those are need-based grants-in-aid, not loans.
c. Draw on resources that present the lowest, possible risk. Some people go to home equity.  The risk is, should something happen to your income down the road, you could lose your home to foreclosure. Obviously, reducing current lifestyle expenses during the college years is the safest option (although not the most pleasant) to free-up extra cash.

Sometimes families are transferring wealth away unknowingly and unnecessarily.  We offer a no-obligation/no-charge audit to help you know.

Posted in College Planning, College Planning Strategies, Retirement Planning. Tagged as Cost of College; College Affordability;.

« Newer Posts Older Posts »

Keep in Touch