Why do some Middle Class Parents Pay so Little for College?

Many families miss out on thousands in financial aid dollars each year while their children are in college because they believe they will not qualify for aid and do not bother applying.  This is the number one- biggest mistake– any parent could make when sending their student to college.

Yes, it is true that some parents do make too much to qualify for aid, but for many it is simply a matter of planning for college and ensuring your finances are in line before applying for financial aid.

This short video will unlock the secret of why some families pay so little for college, while others (who earn the same) may pay thousands more:

Be sure to check back next week for secret number 2 in this 7 part series: Why High School Financial Aid Nights can be Hazardous to your Wealth. 


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For-Profit Colleges… Are They All That Bad?

For-profit colleges have recently made the news as predators against military personnel, their spouses and low income students.  I went into writing this week’s blog with the intention of warning students against for-profit colleges, but the more I learned, the less convinced I became that for-profit colleges are bad for the American higher education system.

The major difference between for-profit and not-for-profit schools is in their mission. For-profit schools are backed by investors and operate like any other business in our capitalist society in that once expenses are paid, profits are disbursed to investors.  At not-for-profit schools, profits are put back into the school to pay for things such as athletic facilities, faculty research, scholarships and campus development.  Both for-profit and not-for-profit colleges offer a variety of programs and degrees, are able to apply for accreditation from the U.S. Department of Education and, if accredited, can award federal financial aid to their students.  Regardless of how profits are spent, both depend on a minimum number of students to attend, paying tuition, in order to stay in operation. All of this is reasonable, so why do for-profit colleges have such a bad rap?

The main critics of for-profit colleges look at them as preying on low income students- burying them in debt that they cannot possibly pay back. According to a Campus Progress report “For-profit schools currently serve 10 percent of U.S. students but account for 25 percent of federal student aid- and nearly half of student loan defaults”. This statement certainly raised concern for me at first, but if you look into the structure of many for-profit colleges, you will not find many liberal arts degrees that teach students to think, but instead career-focused programs designed to help students gain real-world skills and training.  Their programs are more flexible than those offered at traditional universities with many evening and weekend courses that allow students to work full-time as they earn their degree.

With this in mind, it is not hard to see why this type of school would appeal to person of lower income who does not have the luxury to take 4 years off work to attend a traditional university.  It may be that a for-profit college program is the only option for non-traditional students to receive the training or degree needed to advance their career.

Is it a risk to admit these students? Yes.  Working full time and going to school will be too much for some and they will drop out.  Without earning the degree they set out to earn, their income will not increase and they will likely default on their loan.

Should these students not be given the chance to earn their degree in the first place?  I don’t think so.  A student’s ability to pay, or risk of them defaulting on a loan in the future, should not lock them out of the chance to earn a degree.

I will admit that the concept of for-profit colleges is still relatively new and has grown significantly over the past decade with little oversight.  And as in any business there has been corruption in the race to share in profits, but in time these bad seeds will be weeded out.  But responsibility needs to also be put on the student to research the college they plan to attend (for-profit or not-for-profit) to ensure that it is the best fit for them before applying.

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Part II: Creativity, Innovation And Education

A new book was released May 22nd by University of California Berkeley Economics Professor, Enrico Bonetti. The book is called, The New Geography  Of Jobs, and every high school student should read it before choosing a major or a college because Moretti’s book sheds a lot of light on where the good jobs are and why those jobs are where they are at. In short, your future salary may well depend more on where your job is located than on your resume. The following is an interview with Enrico Moretti.

1.       What is the New Geography of Jobs? 

If you look at the economic map of America today, you do not see just one country. You see three increasingly different countries. On one hand there are cities like Seattle, San Francisco, Raleigh-Durham or Austin, with a strong innovation-based economy and workers who are among the most creative and best paid on the planet. At the other extreme are former manufacturing centers like Detroit, Flint or Cleveland, where jobs and salaries are plummeting. In the middle, there is the rest of America, apparently undecided on which direction to take.

The difference between the three Americas was small in the 1980’s and has been growing ever since. My book explores this new geography of jobs, and especially its root causes and what it means for our country.

 2.       You write a lot about the importance of high tech and innovation for American jobs. But not everyone can work at Google or Apple. What about the rest of us? Where are the jobs for the average American supposed to come from?

This is the most important part of the story. You are right: The average American will never work for Google or Apple. But the rise of the high tech sector matters to all of us, including those who work outside high tech.

One important reason is that attracting an Internet company or a biotech company to a city results in significant job gains for workers in the local service sector – occupations like waiters, carpenters, doctors and teachers.  I call this the multiplier effect. This multiplier effect is surprisingly large. My research shows that for each new high tech job in a city, five additional jobs are created outside high tech in that city. In essence, from the point of view of a city, a high-tech job is much more than a job.

Take Apple, for example. It employs 13,000 workers in Cupertino, but it generates almost 70,000 additional service jobs in the region.  This means that remarkably, Apple’s main effect is not among high tech workers — it is outside high tech.

Most sectors of our economy have a multiplier effect, but the innovation sector has the largest multiplier: about three times larger than that of traditional manufacturing.  An important implication for policy makers is that the best way for a city to generate jobs for less skilled workers is to attract innovative companies that hire highly skilled ones.

 3.       Is geographical location more important than your college degree or which college major you choose?

Geographical location is increasingly important, although not as important as going to college. One of the most intriguing paradoxes is that our global economy is becoming increasingly local. Despite all the hype about exploding connectivity and the death of distance, where we live and work is more important than ever. Our best ideas still reflect the daily, unpredictable stimuli that we receive from the people we come across and our immediate social environment. Most of our crucial interactions are still face-to-face, and most of what we learn that is valuable comes from the people we know, not from Wikipedia. The vast majority of the world’s phone calls, Web traffic, and investments are still local. Telecommuting is still incredibly rare. Video conferencing, e-mail, and Skype have not made a dent in the need for innovative people to work side by side. In fact, that is more important than ever. At the same time that goods and information travel at faster and faster speeds to all corners of the globe, we are witnessing an inverse gravitational pull toward certain key urban centers. Globalization and localization seem to be two sides of the same coin. More than ever, local communities are the secret of economic success. As Yaniv Bensadon, an Israeli entrepreneur who recently moved his startup to Silicon Valley, put it, “It is true that things can be done anywhere on the Internet, but at the end of the day, it’s still a people business.”

 4.       In the last two years, American manufacturing has been doing very well. Even the car companies are hiring. But you seem pessimistic about the future of American manufacturing. What’s so wrong about manufacturing? And what is so special about the innovation sector?

The last two years have been good years for manufacturing employment. But they are the exception. The previous two years have been terrible. More in general, for the past 30 years, we have been losing an average of 370,000 jobs per year in manufacturing, and not just during recessions.  This trend reflects the adoption of new technologies that make production of physical good increasingly automated. For example, for each car produced, GM today needs 70% fewer workers than in 1950. American manufacturing companies produce today more goods than in 1980, but they only need a fraction of the workers. I do not think these trends are likely to change in any significant way.

By contrast, the innovation sector is growing, both in terms of jobs and salaries. For example, jobs in the Internet sector have been growing 200 faster than the rest of the labor market. For all the talk about outsourcing, software is also growing. And it is not just high tech:

Scientific R&D, pharmaceutical, digital entertainment, parts of marketing and finance are creating jobs.



Enrico Moretti

Author: The New Geography Of Jobs

Economics Professor at the University of California—Berkeley


Images courtesy of: http://www.quailridgebooks.com

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Attending Your Summer Orientation

Going to college is an entirely new experience. While you may have toured the campus several times when deciding on the right college for you, touring after accepting admission presents a whole new purpose.  Most colleges offer a summer orientation program that shows new incoming freshman around the campus and provides valuable information on how college works. Some things you’ll learn at such an orientation include:

The location of important buildings and offices

  • The college’s academic requirements
  • How to register for classes
  • Assistance in registering for classes
  • Tips on getting to know instructors
  • How to make the most of your college experience
  • Where to go to join clubs and become involved, etc.

One of the most important factors of this orientation is the campus tour. Trying to find your classes without having been shown around campus first can be next to impossible.  If you’ve already scheduled your classes, take your schedule with you on the tour and be sure to note the locations of buildings where you will have class.

Other important buildings to locate include:

  • Dining Hall(s)
  • Health Services
  • Student Union
  • Bookstore
  • Recreational buildings (fitness center, theater, stadium(s), etc.)
  • Library

Most importantly, have fun! This is the campus where you will spend the next 4 years.  Enjoy yourself as you take it all in!

Photo courtesyof: http://www.faithoncampus.com

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Why Should You Care About Student Debt?

The New York Times kicked off its series “Degrees of Debt” with an article entitled A Generation Hobbled by the Soaring Cost of College. This article touches on how the cost of college has skyrocketed and how that increasing cost has and will affect the current generation of students.  This is a very timely piece with the state of the currentUS economy and the impending debate on student loan rates on Capitol Hill.

I’ve discussed this issue with my friends over the past week and have heard repeatedly- ‘why should I care?  I’m not in college.’  My response (much to the chagrin of my father) is in the form of a question- why would you not care?  If only because one day your children will want to go to college and their tuition bill will follow, but more so because of the lasting affects this will have on the American economy.  In the article Rajeeve V. Date, deputy director of the Consumer Financial Protection Bureau, draws likeness to the predatory lending norms associated with the current housing crisis- and we have all felt the lasting effects of allowing that crisis to continue on too long.

But could this be worse? An entire generation is graduating from college with a student loan payment that is double (or triple) the amount of an average mortgage payment. These students should be coming out of college, finding jobs, buying new cars, traveling the country, getting married and buying houses (they are our economic stimulus package!).  But instead, they are living with their parents, taking on whatever job they can find to make ends meet and putting every cent they have into paying off their debt to keep from defaulting on a loan that was taken out so they could better their lives through education.  Ironic, right?

So what is the answer?  Not go to college? Increase taxes to fund higher education?  Very few would agree that those are good answers.  My answer is proper planning.  Choosing the right college and knowing how you are going to pay for it BEFORE your tuition bill comes.  One could argue that proper financial planning for college should start at the moment a woman finds out she will become a mother, but we live in the real world and life often gets in the way of funding a college savings plan. Most parents don’t start planning for college until their student starts seriously talking about going college (sometime around their sophomore year of high school), and that’s OK.  Just make sure that you have a plan; this will help you avoid the last minute panic of taking out too much in student loans.

Let’s face it, student loans are a reality. Most students are going to need to take out some amount in loans to pay for college, but there is no acceptable reason that a student should be surprised by a $900/month student loan payment after graduation.  Proper planning for college is about knowing what to expect.  If you’re wondering what to expect in the coming years- sign up for a free consultation with one of our College Planning Advisors or submit a question.  We’ve been there and we are here to help.


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Part I: Creativity, Innovation And Education

Creativity is the foundation of innovation, but are kids in our American education system being encouraged to create, and innovate; letting their right brains make the connections that spark creativity and innovation? Unfortunately, the answer is no.

This two-part series focuses on Creativity, Innovation and Education and will explore how students learn and how to stimulate creativity and innovation which are so critical in the knowledge society that we live in today.

The following is an excerpt from a blog post by Erica Swallow, a contributor to Forbes.com. Her post is based on an interview with Harvard Innovation Education Fellow , Tom Wagner, and his research.

Over two years of research involving interviews with executives, college teachers, community leaders, and recent graduates, Wagner defined the skills needed for Americans to stay competitive in an increasingly globalized workforce. As lined out in his book, “The Global Achievement Gap,” that set of core competencies that every student must master before the end of high school is:

– Critical thinking and problem solving (the ability to ask the right questions)
– Collaboration across networks and leading by influence
– Agility and adaptability
– Initiative and entrepreneurialism
– Accessing and analyzing information
– Effective written and oral communication
– Curiosity and imagination

For his latest book, “Creating Innovators: The Making of Young People Who Will Change The World,” Wagner has extended his studies to address the problem of how we teach students these skills. He has come to the conclusion that our country’s economic problems are based in its education system.
In an effort to discern teaching and parenting patterns, Wagner interviewed innovators in their 20s, followed by interviews with their parents and the influential teachers and mentors in the students’ lives. He found stunning similarities between the teaching styles and goals he encountered with these influential teachers at all levels of education and concludes, “The culture of schooling as we all know it is radically at odds with the culture of learning that produces innovators.” He identified five ways in which America’s education system is stunting innovation:

1. Individual achievement is the focus: Students spend a bulk of their time focusing on improving their GPAs — school is a competition among peers. “But innovation is a team sport,” says Wagner. “Yes, it requires some solitude and reflection, but fundamentally problems are too complexto innovate or solve by ones self.”

2. Specialization is celebrated and rewarded: High school curriculum is structured using Carnegie units, a system that is 125 years old, says Wagner. He says the director of talent at Google once told him, “If there’s one thing that educators need to understand, it’s that you can neither understand nor solve problems within the context and bright lines of subject content.” Wagner declares, “Learning to be an innovator is about learning to cross disciplinary boundaries and exploring problems and their solutions from multiple perspectives.”

3. Risk aversion is the norm: “We penalize mistakes,” says Wagner. “The whole challenge in schooling is to figure out what the teacher wants. And the teachers have to figure out what the superintendent wants or the state wants. It’s a compliance-driven, risk-averse culture.” Innovation, on the other hand, is grounded in taking risks and learning via trial and error. Educators could take a note from design firm IDEO with its mantra of “Fail early, fail often,” says Wagner. And at Stanford’s Institute of Design, he says they are considering ideas like, “We’re thinking F is the new A.” Without failure, there is no innovation.

4. Learning is profoundly passive: For 12 to 16 years, we learn to consume information while in school, says Wagner. He suspects that our schooling culture has actually turned us into the “good little consumers” that we are. Innovative learning cultures teach about creating, not consuming, he says.

5. Extrinsic incentives drive learning: “Carrots and sticks, As and Fs,” Wagner remarks. Young innovators are intrinsically motivated, he says. They aren’t interested in grading scales and petty reward systems. Parents and teachers can encourage innovative thinking by nurturing the curiosity and inquisitiveness of young people, Wagner says. As he describes it, it’s a pattern of “play to passion to purpose.” Parents of innovators encouraged their children to play in more exploratory ways, he says. “Fewer toys, more toys without batteries, more unstructured time in their day.” Those children grow up to find passions, not just academic achievement, he says. “And that passion matures to a profound sense of purpose.  Every young person I interviewed wants to make a difference in the world, put a ding in the universe.”

“”We have to transition to an innovation-driven culture, an innovation-driven society,” says Wagner. “A consumer society is bankrupt — it’s not coming back.  To do that, we’re going to have to work with young people — as parents, as teachers, as mentors, and as employers — in very different ways.  They want to, you want to become innovators.  And we as a country need the capacity to solve many different kinds of problems in multiple ways.  It requires us to have a very different vision of education, of teaching and learning for the 21st century.  It requires us to have a sense of urgency about the problem that needs to be solved.”


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College Pricing Tips

Satellite or Mother Ship? The vast majority of state-owned university systems have one “main campus” and several “satellite” campuses located throughout the state.  The cost of attending one of the satellite campuses is usually less than attending the main campus, even though the name on the diploma at graduation will be the same. For example, you can attend the Penn State Altoona campus for about $1,500 less per year than you would pay at the University Park campus.

College of Charleston or Stanford? ($20,000 Degrees of Separation) These colleges could fall in the famous category, but the point here is that one is a lower cost state school and the other a higher priced private school. For some common types of degrees – education, nursing and biology, for example – it might not “pay” to go to a private school that is $20,000 more per year when you might be able to get an equivalent education at a less costly college. Of course, this is no reflection on Stanford or the value inherent in a Stanford education.

The No Shame Game: There is no shame in attending a local community college for the first few years of college to complete the majority of the general education classes that most four-year colleges require.


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Estimating College Aid Eligibility Part II

Cost of Attendance:
Cost of attendance is obviously one of the two variables needed to determine need-based aid eligibility.  Cost of attendance is the total cost of enrolling at a college, including tuition, fees, room & board, books, travel and personal expenses. So if you know the cost of a specific college you can subtract your child’s EFC from that cost to determine if your child is eligible for need-based financial aid at that college. If you don’t know the cost of a specific college, you can use the 2011-2012 national average costs for a 2 year public college ($16,000), a 4 year public college ($20,000), a 4 year private college ($42,000) or 4 year elite college (the most selective and most expensive colleges nationwide, at $56,000 per year), to get a general idea of your child’s aid eligibility.

Example 1: Your Child Qualifies for Need-Based Financial Aid For example, if your income is $70,000 and you have two dependent children, your EFC based on that income alone is about $7,385 which means that based on this income only estimated EFC (your actual EFC may be higher), your child should qualify for need-based financial aid at all three types of colleges. As a result, your child is eligible to receive need-based grants, scholarships, work study and student loans as part of the child’s financial aid package. Eligibility does not mean certainty however. You will have to wait to see what form of aid the child gets and how much it is worth.

Example 2: Your child doesn’t qualify for need-based financial aid on the other hand, if your income is $250,000 and you have one dependent child, then your EFC is $64,371, which means that your child won’t likely qualify for need-based aid at any of the four types of schools used (Two-year public, four-year public, four-year private and fouryear elite private colleges).  But, that doesn’t mean that you have to pay $64,371 per year because the “sticker prices” are less than that. You will never pay more than the cost of attendance.  Keep in mind too that the costs used to create the table are national average costs for these types of colleges and that the cost of attendance of a specific college will be different than the national average.  The Ivy League colleges and most of the elite private colleges are as much $56,000 annually, but the 2011-2012 national average cost for 4 year private colleges is $42,000.

Merit Aid
Merit aid is another form of student aid that is based on the student’s academic, athletic, music and other merits, not family finances. Therefore, any student can receive merit aid.  The best things about merit aid are 1) merit awards are typically grants, scholarships or tuition discounts that don’t need to be repaid, unlike student loans and 2) students can be awarded merit aid regardless of the family’s overall income or how much the family has saved for college.

Academic merit aid is typically based on the student’s grade point average (GPA) and standardized test scores (SAT and ACT), and occasionally on class rank. It is pretty black and white; if you have the grades – you get the aid.  Student Gets Merit Aid But No Need-Based Aid if your child doesn’t qualify for need based financial aid, but is awarded merit
aid, then your out-of-pocket cost will be the sticker price minus the merit aid award. For example, if the college costs $35,000 per year and your EFC is $40,000 per year, you will be expected to pay the “sticker price” of $35,000 per year minus your child’s $10,000 merit aid award, for an out-of-pocket cost of $25,000 per year.

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Estimating College Aid Eligibility Part 1

The process of applying for need-based financial aid for college begins by students and parents completing one or two financial aid forms, the FAFSA (Free Application for Federal Student Aid) and/or the CSS Profile. Any college or university that awards federal student aid must require that students complete the FAFSA in order to determine eligibility for federal aid (it works for most state aid too). Most colleges and universities nationwide use the FAFSA as their sole application for need-based financial aid, so students applying for aid at those colleges only need to complete the FAFSA.

However, there are about 300 colleges which require that the CSS Profile also be completed in addition to the FAFSA. Those colleges use the CSS profile to assess the student’s eligibility for the college’s own institutional aid dollars. Typically, “Profile” colleges are very selective private colleges, including the Ivies, but the University of Michigan at Ann Arbor and the University of North Carolina at Chapel Hill are examples of flagship state universities that also require the Profile.

Calculating the Family’s Expected Contribution (EFC)
Regardless of the aid form (s) the student is required to complete and submit as part of the process of applying for financial aid, and after all of the time and information it takes to complete the form (s), it all boils down to three letters, EFC.

You provide your financial information on the aid forms (FAFSA and CSS Profile), submit the forms online to the processing centers for each respective form, and the information from the forms goes into the aid calculations (the Federal Methodology and the Institutional Methodology). The output of those need analysis calculations is the student’s expected family contribution (EFC) toward the cost of college. The student’s EFC is the minimum amount the student is expected to contribute toward the cost of college. Thus, EFC represents a dollar amount. It is the “output” of the aid forms and calculations.

Both of the EFC formulas focus primarily on the assets and income of the parents and student, family size and the number of dependent children enrolled in college in a given year to assess the family’s ability to pay for college using the income and assets that they have. And because the two formulas calculate EFC differently, it’s likely that the student’s EFC under each formula will also be different.

Using a Student’s EFC to Determine the Need for Financial Aid
EFC is used to analyze a students’ need for financial aid using a simple formula that subtracts the student’s expected family contribution (EFC) from a college’s total cost of attendance (Cost of Attendance – EFC = Financial Need). If a student’s EFC is less than a college’s cost of attendance, then the student qualifies for need-based financial aid.


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Unemployment Rates of College Majors

The big question: Can I get a job when I get out of college, has been answered by a new study from the Center on Education and the Workforce at Georgetown University.

The study, Hard Times: Not All College Majors Are Created Equal, was published in January of 2012, and offers valuable insight into the employment and earnings potential of various college majors.

The table above provides the unemployment rate and average earnings of recent college graduates in several categories of study, but the report also breaks each of these categories into more specific majors. “The risk of unemployment among recent college graduates depends on their major. The unemployment rate for recent graduates is highest in Architecture (13.9 percent) because of the collapse of the construction and home building industry in the recession. Unemploymentrates are generally higher in non-technical majors, such as the Arts (11.1 percent), Humanities and Liberal Arts (9.4 percent), Social Science (8.9 percent)1 and Law and Public Policy (8.1 percent). “

Technical majors are experiencing good employment and good initial earnings, but both vary depending on the specific area of the major.  “Unemployment in majors related to computers and mathematics vary widely depending on the technical and scientific content of the major.

Employers are still hiring technical computer specialists who can write software and invent new applications. But for information specialists who use software to manipulate, mine, and disseminate information, hiring slows down in recessions. We can see the difference in unemployment between people who invent computer technology as opposed to people who use computer technology.

The unemployment rate for recent college graduates in Information Systems has spiked to 11.7 percent, while the rates for majors in Computer Science and Mathematics are 7.8 percent and 6.0 percent, respectively. “

“Majors that are more closely aligned with particular occupations and industries tend to experience lower unemployment rates. Majors such as Healthcare, education and those related to technical occupations tend to have lower unemployment rates than more general majors, like Humanities and Liberal Arts, where graduates are broadly dispersed across occupations and industries.  Unemployment rates for recent graduates in Healthcare and Education are 5.4 percent compared to 9.4 percent for
people who majored in Humanities and the LiberalArts.”

Researchers Carnevale, Cheah and Strohl have decades of high level expertise in education, the economy and the workforce. This study is not only helpful and insightful, but it addresses the big question that has been widely debated in the media in recent years as the economy weakened, college costs have risen and jobs have become more difficult to get. “The question, as we slowly
dig out from under the wreckage left by the Great Recession, is unavoidable: “Is college worth it?” Our answer: “Yes, extensive research, ours included, finds that a college degree is still worth it.” A Bachelor’s degree is one of the best weapons a job seeker can wield in the fight for employment and earnings. And staying on campus to earn a graduate degree provides safe shelter
from the immediate economic storm, and will pay off with greater employability and earnings once the graduate enters the labor market. “

“Although differences remain high among majors, graduate education raises earnings across the board. The average earnings for BA’s now stands at $48,000 compared with $62,000 for graduate degrees. With the exception the Arts and Education, earnings for graduate workers range between $60,000 and $100,000.  It is easy to look at unemployment rates for new college graduates or hear stories about degree-holders forced to tend bar and question the wisdom of investing in higher education when times are
bad. But those questions should last only until you compare how job seekers with college degrees are doing compared to those with out college degrees.

Today’s best advice, then, is that high school students who can go on to college should do so with one caveat. They should do their homework before picking a major because, when it comes to employment prospects and compensation, not all college degrees are created equal.”


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