The Government is Here to Help?

Most people know that there are some tax benefits for higher education expenses, and they are correct.  In fact, the Economic Recovery Advisory Board found 18 “education provisions” for higher education!  What’s more, they have different eligibility requirements, income limitations and phase-outs, and apply to different years of school.  They have different definitions of income and qualified expenses.  Oh and they also overlap–you have to be sure you don’t use the same expenses for more than one provision.

Sound complicated?  It is.  The best example of this is that one of the biggest and best publicized provisions, the American Opportunity Tax Credit, was only claimed on 38% of eligible tax returns, according to a report released last week by the U.S. Treasury.  That says it all.

Make sure your college funding plan includes all the tax breaks you are entitled to.


The College Jobs Gap

The Wall Street Journal reports today that as bleak as the job picture is in America right now, those faring best are college graduates:

The unemployment rate for workers 25-and-older with a bachelor’s degree or higher was 4.6% in August, for example, compared with 10.3% for those with just a high-school diploma. That’s a 5.7-percentage-point gap, compared with a gap of only 2.6 percentage points in December 2007 when the recession began.

Clearly the current economic malaise has increased the relative value of a college degree.  But let’s look at some other numbers.  A recent survey found that the number of people that thought college was a good investment dropped from 79% to 64% over the last year, a reflection on the rising costs.  Also, a diploma no longer guarantees a wage that rises faster than inflation, as the WSJ story mentions.  Quite a contradiction:  if you want to increase your chances of getting a job, go to college; but, the job you get might not give you the earnings you need to offset the huge cost.

Maybe there’s something else going on here.  Maybe there are more variables than simple summary statistics can measure.  Are the students that make the most of their college years doing better than those that slide through?  Are responsible, hard-working kids doing better in the employment world than those with entitlement syndrome?  The numbers won’t say, but parents probably know the answers.

What can you do, other than worry?  (1) Make sure your college costs are as low as possible, following a good college funding plan can help with that.  (2) Realize that behind all these statistics are real students and what is “right” for your son’s best friend might not be right for your son.  By being proactive, you can resist the pressure of getting caught up in what everyone else is doing.  Investigate the options, keep an open mind, and continue to communicate with your teenager.  (3) Don’t get too locked-in to numbers like those reported above, they’ll be different in a year.  What you should get locked-in to though are the principles and values that you are teaching your kids as you take on the college process.


The Importance of The List

Many high school sophomores and juniors and their parents are spending time working on the list of possible colleges to attend.  Input is being sought from guidance counselors and guide books.  It seems that another new ranking of “the best” colleges comes out weekly.  The mail is filled with glossy viewbooks.  Factor in the silent network of friends’ opinions and  Facebook comments and before you know it a list starts to form.

The list matters, maybe more than you know.  Schools that are left off the early editions are hard to add later.  The focus is on winnowing, not expanding.  Perhaps that’s a practical necessity, but that also means you need to start with a good foundation.  Don’t worry about being selective initially; in fact, be inclusive.  Make it a point to add schools that you have to research to find, ones that don’t come immediately to mind.

This is especially true for parents.  Our impressions of schools might be based on more years of life than our teens but that does not mean they are more accurate if we are relying on ideas we’ve held for years.  Colleges change, often dramatically, and if we think we know exactly what a school is like because that’s how it was when we were teenagers we are sorely mistaken.

This is a two-part challenge. To students, keep your mind open.  Don’t get locked in to big name schools, or to one rating system, or to one counselor’s suggestions.   To parents, don’t rely on stale opinions.  Do your own, new research.  Make a point to find at least five schools that surprise you as possible places for your son or daughter.  They are out there, you just need to look.

Our College Match helps your family do just that.


When does your teenager become an adult?

A recent spate of articles on “Letting Go” and “Helicopter Parenting” surrounding the difficult event of parents dropping teenagers off at college included one about parents who choose to stay around after the drop-off for a couple days.  Why would they do that?  “Just in case Junior needs something.”  Maybe that’s not the real reason.

Colleges are seeing this more and more and some are scheduling specific times to say goodbye.  Some have workshops on transitions.  Some suggest parents rediscover their romantic lives.  Expensive therapy!

This brings up the question, when does your child become an adult?  Is it 4pm on drop-off day? Is it his 18th birthday; her 21st?  Obviously there is no one answer, but the reality is that when you leave them at school, as far as everyone else is concerned, they are adults.  The challenges that start from that moment are huge:  coed dorms, roommates, parties, homework, varied schedules, group activities, a new town to drive around in.  How your teenager handles these has nothing to do with the definition of when they become an adult and everything to do with where they are on the maturity spectrum.

Our job as parents is to start early, giving our teens pieces of freedom while they are in high school, seeing what their choices are, and talking about them.  The more we do that, the better they can handle what college life throws at them.  So parents, talk to each other about how you are doing.  How much freedom does your son or daughter have to make choices, including ones you don’t agree with?  After drop-off time, you won’t even know the choices they make.  Start preparing them for that now, at home, where you can help.


Now you see it, Now you don’t

How has the recent government stimulus affected your college plans?  There was the American Opportunity Tax Credit.  And the broadening of 529 plans to cover computers and internet service.  Stimulus = Good, right?  Not really.

Now that the “stimulus” has run its course, the real effects are coming.  The U.S. News and World Report notes that federally funded work-study jobs will drop by 162,000 to 768,000 for the 2010-2011 academic year.  Why?  No more “stimulus”.

Students hoping to earn a little extra cash on campus this fall will have a tougher time as the number of federally funded work-study college jobs nationwide will drop by 162,000 to 768,000 for the 2010-2011 academic year.  Why?  No more “stimulus.”

Or this:  Thirty-nine states used “stimulus” money to keep public colleges and universities afloat.  Families are likely to see large tuition increases as “stimulus” funds run out.  Virginia is in the middle of this where “stimulus” funds reduced a possible 15% budget cut to 4%.  State tax revenues are unlikely to increase nearly enough to offset this lost transfer payment.

Perhaps it was less of a stimulus and more of trying to buy some time.  The time is running out.  In this changing landscape, don’t rely on the government to come up with answers for your family.  We can help you with your plan.


Teenagers and Human Capital

Interesting piece in the Wall Street Journal about personal risk management, and how you need to evaluate not only the risk in your investment capital but also in your human capital – your measure of your future earnings based on where you are in life.  As a student, your human capital far exceeds your investment capital – your portfolio.  The author, a college professor, has some concluding advice for students:  “…too many students (and some parents) view education as a consumption good.  They immerse…without any regard for how this might influence the future dividends of their human capital.  It’s time to wake up and measure the internal rates of return from your undergraduate major…Do not let your kids leave college without a hedge for the human capital.”  It’s worth some thought.


The Shocking True Cost of Student Loans

What does your student loan cost you? The conventional answer is to look at the monthly payment times the number of months and get the total. If you graduate with $20,000 in Stafford Loans, paying them back at $230/month for ten years, you’ll pay right around $27,600 total. But there is a huge flaw with this logic.

What will you NOT be doing with that $230 per month while you are young and working? Answer: saving and investing it. Compare two graduates, Susie Stafford with the loan payments shown above, and Nellie No-loan graduating debt free. With plenty of time to retirement, they can each have aggressively invested portfolios. Each invests similarly.  How do they fare when they are 65?

Susie Stafford will have $600,000 less in her retirement account than Nellie No-loan will, given the same return assumptions (available upon request.) In reality, it may be worse than that because Susie will have to be exposed to more risk in her portfolio as she ages than Nellie will.

When you think about the true cost of borrowing money for college, remember to include the opportunity cost of the money you will NOT have to invest for your retirement.


Tuition Increase Numbers Are In

Virginia public colleges have reported their planned tuition for 2010-2011.  Below are the planned increases in tuition and mandatory fees.  Does your college funding plan deal with how to pay for these?

Christopher Newport


William & Mary


George Mason


James Madison




Norfolk State


Old Dominion




Mary Washington








Virginia State


Virginia Tech



How money can be a factor

Here’s a good listen from Marketplace on how some families are having to deal with bringing the cost of college front and center in making decisions. Does this sound familiar to your family?
To go directly to the page with the audio, click here.


Deadlines Matter

Two stories this week really brought home the matter of getting your college business taken care of early. States are running out of grant money. The Illinois Student Assistance Commission announced it was suspending awards for students that had not yet submitted the FAFSA. The Kentucky Higher Education Assistance Authority will only be able to pay out money to students who applied by March 7, 2010, even though the application deadline was March 15. Other states are making similar tough decisions.

The takeaway? If you are applying for financial aid for your state, do not wait. File early.

And have a back-up plan!


Zany Scholarships

The Wall Street Journal highlights wacky scholarships in a front page article.Talk of Duck Tape contests, tall people awards, and strange last names are fun, and maybe they even interest you.At College Funding Group, we encourage students to “look local” first.The CFG ScholarBankTM might be your ticket to do just that.With over $900,000 in scholarships that metro-Richmond students can win, the null is sure worth more of your time than researching strange last names!If you need any help, please let us know.


Cars vs. College

As teenagers get their driver’s licenses, talk often turns to what car they can drive. Driving is an expensive proposition in it’s own right but college isn’t far off, and this is a great time to start setting the stage for how your family handles major financial matters. Let’s look at just three areas:

1.  Choice: Parents often start out with the idea that they will get a nice, safe, used car. Perhaps you’ve looked at the list in Consumer Reports. Maybe you checked CarMax to see what was available. All good ideas. But then your son gets involved and, “Mom, a VW Rabbit? Are you serious?” Does your conviction start to weaken? Do you end up with a what they want to drive?

2. Cost: Not many teenagers have the resources to pay cash for a car, or the income to support a car loan. How are you going to handle that? Do you make a formal loan, or do you just buy it? Do you require your teen to make any payments to you? Whose name do you put the title in?

3.  Operating expenses: Insurance is very expensive, and at $3 a gallon, gas isn’t far behind. Who is paying for these costs, and how formal is this arrangement? What if the car needs tires or some engine work?

There are lots of points that we could cover here, but the important thing is to think about these sorts of things before you buy the car, just like you need to think about them before you “buy college.” How will you decide what colleges to consider? How much involvement should you teenager have in the cost?  And who is funding their ongoing living expenses?

If you find that a relatively simple transaction like buying a car causes you, as a parent, to compromise your values, will you be able to handle it when it comes to paying for college?


Grants vs. Loans

Financial aid award letters are coming in soon, and it is important that you read them carefully. Aid comes in different forms. The total amount of the aid package is less significant than the mix of grants vs. loans. Packages heavy on grants are what you want.

There is no standard form to the award letters, so they can be difficult to compare from school to school. Be sure to double check the Cost of Attendance (COA) for each school, and look at the individual components to confirm they are accurate for your family (items like personal expenses and transportation for example.) You can find COA information on the school’s website or on

When looking at the award, identify the amount for grants, work-study, and need-based loans. See if non need-based loans are included in the letter. Write down the amount for each category.

Here’s a tip: when you subtract the amount of the grants, work-study and need-based loans from the COA, you should be close to your Expected Family Contribution.

The letters can be confusion, so if you are not clear on what the college is offering, have your son or daughter pick up the phone and call the aid office. Ask them to explain the package, specifically the amount of grants vs. loans. Your student will get a better understanding of how this process works and so will you.

If you have any questions, we’re here to help.


Beyond the ScholarBank

Parents, thank you for coming to check out the CFG ScholarBank.  Going after private scholarships can be an excellent way to get your son or daughter closely involved in the college process, and help them work on some lifelong skills like marketing themselves, meeting people, writing essays, and carefully following directions.  Even if they don’t win, they will greatly benefit from the process.

Helping your family with scholarships is only one small part of what we do at College Funding Group. We encourage you to read our Services page to see how we can help you every step of the way through this maze, including being sure you have a plan to reduce your out-of-pocket cost as much as possible.  Click Start a Conversation and let us know what we can do for your family.  It’s never too early to be proactive!


Protests and Budget Cuts

March 4th was a National Day of Action for Public Education, designed to draw students to protest planned increases in college tuition. The movement started in California but has found allies all over the country. Georgia is battling a massive budget shortfall and on top of huge layoffs and program cuts, there is talk of a 30+% tuition increase. Sadly these types of stories are becoming more common, as states grapple with the realities of the economy.

Here’s an important tip for students considering public colleges, especially those out of state. Check the state’s finances first! You might know the tuition for your freshman year, but at the rate things are going, your senior year could be significantly different.

It’s not hard to find articles on state finances. Try searching Google News or the Wall Street Journal. Check the local newspapers in the state capital. Do some investigation and it might affect your decision.


Who is Getting Squeezed?

A recent study on college perceptions contained an interesting finding, an example of Positive Illusion as it applies to college. See if this sounds familiar to your situation.

Only twenty-eight percent of respondents believe that the vast majority of qualified, motivated students have the opportunity to attend college. In other words, college is so expensive it is out of reach of far too many kids. Read on: Ninety percent of these same parents of high school students believe that their child is going to college!

How can those both be true? College is out of reach for everyone else but their own kids? Perhaps what is going on here is that parents hope that somehow their own kids are going to college, even if they see that it is far too expensive for most families.

Fortunately, there is something proactive parents can do. Click Start A Conversation to find out what.

The report is titled Squeeze Play 2010 and it was put out by the Public Agenda and the National Center for Public Policy and Higher Education.


The Importance of Finances

An article in the New York Times by Kate Zernike describes the importance of financial considerations to college freshmen.  Check out this quote from said John H. Pryor, director of the Cooperative Institutional Research Program at the University of California, Los Angeles, which conducts the survey:

“What was more surprising,” he said, “was that it goes beyond just [how finances impact the ability to pay] into other areas. Everywhere we turned, whether it was how you chose your college or what do you think you are going to do in college, everywhere the finances piece popped out.”

We encourage you to contact us to discuss your family’s situation.


Having “The Talk” — Get the Right College Fit for Your Student & Your Budget

So your kid has finished with college visits and read through all the admissions brochures and has decided on their top-choice colleges. Now is the time to make sure that potential schools are a good fit–for both of you.
Many parents overlook just how much emotion comes into play when making college decisions. Hopefully, your student has more stringent criteria than which school has the best football team or simply wanting to go to the same school as their friends. Your emotions can also get in the way when faced with the reality of your child heading off to college and the desire to make their dream school a reality. These emotions can lead to some very expensive tuition bills.
No worries, we’re here to remind you about your financial priorities. Before the college applications are submitted and the “dream” school chosen, you need to decide what the maximum out-of-pocket costs you are willing to pay each year for your child’s college education. Setting these funds aside will affect your retirement plans, so you need to feel very comfortable with the amount.
The next step is to sit down your student and share this budget with them. Any school that doesn’t fit in this budget, after merit aid and any additional financial assistance, needs to be taken off the list of potential colleges. By proactively discussing your budget and working with your student on their college list, making a final college choice when the acceptance letters pour in will go that much smoother.
College Funding Group can help your family identify dozens of colleges around the country that are the right fit for your student and your budget. Find out more about College Funding Group’s services.


Top 5 Reasons to Have a College Funding Plan

You’ve been saving money for college since the day your child was born. You’ve got a tidy bucket of cash in a 529 plan. Now your little one is a rising junior, and it’s time to plan for her or his college career.

What’s your plan?

If you think that, given your income and/or assets, that you’ll just have to write a check, you’re making a mistake. Would you pay sticker price for a car? Why would you pay sticker price for a college education?

Here are the top 5 reasons to have a college funding plan:

1.    You can pay for college with pre-tax dollars.

  • By taking advantage of often overlooked portions of the tax code, your family can create “tax scholarships.”  A tax scholarship is any new found tax deduction that creates money you can use to reduce the cost of college. In essence, you can have the IRS pay a big piece of your college expenses.

2.    You can get tuition discounts from schools, even if you don’t qualify for need-based aid.

  • If your child is a great fit for a school, that college or university will want your child to attend. Use that to your financial advantage and negotiate with the school, ask about discounts and grant programs that can reduce the sticker price of tuition.

3.    You can send your child to a top school for the same price as a small state college.

  • Using tax scholarships, tuition discounts, merit-based aid, grants, and your negotiating skills, you can reduce the cost of an expensive private university to less than a state school.

4.    You can achieve your family’s educational goals without sacrificing your values.

  • Help your child get a great education without putting yourself in debt, or sacrificing your retirement goals. Demonstrate financial responsibility in service of a life goal.

5.    Your child learns the value of planning, and participates in charting his or her own future.

  • Your college-bound child can learn valuable life lessons by leading the charge on discovering private scholarships, learning how to assess their interests and skills to find the right college fit, and becoming the project lead on one of life’s most important projects.

Work with your college-bound student to help get him, or her, off to a great start on a meaningful education, and career. It’s all in the planning!