All posts by CollegeFinancialLady

To Borrow or Not to Borrow

Planning for college cash flow can be tricky. It’s not just that the average public university costs over $25,000 per year whereas the average family has saved just over $18,000 total. There’s also the combination of tax credits and their attendant rules, a confusing menu of borrowing options, and misunderstandings about how aid formulas treat savings. Add multiple children with overlapping college years and it’s no wonder many parents throw up their hands in despair. One common theme I hear from parents is a version of, “We’ll just spend our savings until it’s gone and then borrow what we need.” This may or may not be the right answer. Continue reading To Borrow or Not to Borrow

Student Loans and Mortgages

There’s been a great deal of press in recent years about the impact student loans have on the larger economy, especially home purchasing. A Federal Reserve Bank of New York report showed a decline of 8 percentage points in home ownership among 28-to-30-year-olds from 2007 to 2015, and estimated that about 1/3 of that can be attributed to student loan debt. Because that’s all a little abstract, and because decisions families make now about college and student loans have the potential to cast a long shadow on the student’s life, I asked mortgage broker Tim McBratney of Pacific Residential Mortgage to explain how student loans affect the mortgage qualification process. He notes that the process has gotten more difficult with respect to student loan debt. Continue reading Student Loans and Mortgages

AOTC And New Tax Law

One of the big changes to the tax bill was making our young adult children less valuable to their parents from a tax perspective. The dependent exemption is gone and the child tax credit for 18- to 23-year-old dependents is only $500. The change does open a door to higher-income families for the American Opportunity Tax Credit, though.  The AOTC phases out at MAGI of $160,000, so it’s not unusual for families to be ineligible but to still find college unaffordable.

Here’s how the AOTC works, from irs.gov: Continue reading AOTC And New Tax Law

A Tale of Two Acceptances

(Or: Why You Should Talk to Your Kids About Money Before Applying)

My son applied to two schools: In-State-U and an Out-Of-State-U-With-A-Scholarship. I’m fairly certain that a big reason for applying to OOSU was that his sister is applying to a number of schools and he felt like maybe he’d be doing something wrong if he didn’t. He wants to attend a big school; he loves sports and wants a D-1 sports program to be part of his college experience. His GPA isn’t fabulous but he did really well on the ACT, so he did some research and discovered that OOSU has a big scholarship for out of state students that’s based solely on test scores. Continue reading A Tale of Two Acceptances

Does it Matter Where You Go to College?

In 2002, a paper in the Quarterly Journal of Economics by economists Stacy Dale and Alan Krueger showed that for most students, the incremental value of attending an elite college was virtually nil. Instead, the paper showed that similar students– especially those with similar test scores– fared similarly in life regardless of where they attended college. Happy news for the majority of us who did not and will not attend elite schools.

A new paper shows a slight twist to this story: while individual characteristics may be more determinate for many students, particularly upper middle class white males, for others, especially women, minorities and students whose parents did not attend college, school choice can make a big difference. Here is a great article summarizing the findings.

Where do Massive Student Loan Balances Come From?

Education is a good investment, and assuming some debt to earn a bachelor’s or advanced degree tends to pay off for most. For example, a student who took out the maximum direct student loan each year for four years would pay a little over $300 per month for 10 years to fully repay their loans. The average salary for a recent college graduate is over $51,000, and the Bureau of Labor Statistics shows median weekly earnings for bachelor’s degree holders being $461 higher than the median for those with Continue reading Where do Massive Student Loan Balances Come From?

College Prep by Grade

I gave a financial aid talk to college and career center volunteers at our high school recently. One question stood out: “This is a lot of information to absorb at once. Can you break it down into some specific suggestions by grade?” Two ideas are important here: College planning is a process that should start well before senior year, and there are things that can be done at any point to make things go more smoothly when the time comes to start applying. So here goes. Continue reading College Prep by Grade