Schools are ranked on quality of undergraduate academics, costs to attend (including room and board), and financial aid availability. The key to ranking high is thus to provide a top notch education while keeping things affordable, either through low tuition or generous aid packages.

Here are the top ten public schools:

1. UNC Chapel Hill (Chapel Hill, NC)
2. University of Virginia (Charlottesville, VA)
3. New College of Florida (Sarasota, FL)
4. SUNY Binghamton (Binghamton, NY)
5. University of Wisconsin (Madison, WI)
6. College of William and Mary (Williamsburg, VA)
7. University of Florida (Gainesville, FL)
8. University of Georgia (Athens, GA)
9. University of Washington (Seattle, WA)
10. University of Texas at Austin

And here are the top ten private schools:

1. Williams College (Williamstown, MA)
2. Swarthmore College (Swarthmore, PA)
3. Princeton University (Princeton, NJ)
4. Harvard College (Cambridge, MA)
5. Rice University (Houston, TX)
6. Pomona College (Claremont, CA)
7. Washington University (St. Louis, MO)
8. Yale University (New Haven, CT)
9. California Institute of Technology (Pasadena, CA)
10. Hamilton College (Hamilton, NY)

Overall, they ranked the top 150 schools (75 public and 75 private) from an initial list of 650 institutions with a reputation for having excellent academics.

What do you think? Do you give lists like this much weight? There are certainly a number of excellent schools listed above, both public and private. Is your undergrad alma mater on the list? Mine isn’t… But I still turned out okay.

Source: Princeton Review

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No one can argue that college costs have become exorbitant. Even during the recent recession, schools continued increasing tuition. Student loan repayments are thus taking even longer to pay off, as college graduates are having trouble finding a decent job, or any job at all.

Amidst this gloom and doom, there is some positive news. President Obama seeks to accelerate changes to Income-Based Repayment, a student loan repayment program available for many federally-guaranteed student loans.

Geared for low-income families, the unemployed, and people with lower-paying, public service jobs in education or non-profit organizations, this program caps monthly payoff amounts at affordable levels relative to your income, family size, and the state in which you reside.

Currently, the IBR program forgives debt still owed after 25 years of consistent repayment, and caps payments at 15 percent of discretionary income. Under the President’s proposal, students who took out their first loan during or after 2008 and opened at least one additional loan during or after 2012 will see the cap drop to 10 percent and the forgiveness period reduced to 20 years.

This change would not only expand the number of people who are eligible for this program, but also make it even more useful to qualifying students. Is this a program that will benefit you? Here’s what you need to know.

Who is eligible for IBR?

This program is available to federal student loan borrowers in both the Direct and Guaranteed (FEEL) loan programs, and covers most student loans, with the exception of those made to parents.

This includes all Stafford, PLUS, and Consolidation Loans, but not ParentPLUS or Consolidation Loans containing Parent PLUS Loans. Private student loans don’t qualify for IBR. Bottom line: to qualify for a reduced payment, you must have enough debt relative to your income.

How are payment amounts determined under IBR?

This program uses a sliding scale to determine how much students can afford to pay. For example, if you have a family income of $40,000/year with four family members, you would pay 2.4% of your income towards student loans. That amount jumps to 8.9% if your household has only one family member.

If your income is $100,000/year and you have a family of four, you would pay 10% of your family income versus 12.5% if you were in a single-person household. Under this program, you are required to submit updated income documentation each year.

Obviously, the repayment amount will increase if your income rises.

What about interest under this program?

IBR typically extends the loan’s term, so be prepared to pay more interest than you would with a traditional 10-year payoff period. You should also be aware that, in some cases, the IBR payments may not cover the interest on your loans.

If this is the case, the government will pay interest on Subsidized Stafford Loans for your first three years in the IBR program. After this period, and for other loan types, interest is added to the total amount owed. Keep in mind that loan amounts still owed after 25 years of qualifying payments (or 20 years when the President’s IBR changes are implemented), are automatically forgiven.

What are IBR’s qualifying payments?

According to the Department of Education, payments that count toward IBR’s forgiveness period include payments made in the Income Contingent Repayment (ICR) plan before July 1, 2009; all payments made on or after July 1, 2009 in the IBR, ICR, and Standard 10-year Repayment plans; if your income is at or below 150% of the poverty level and you have calculated a payment of zero in IBR or ICR; and periods on or after July 1, 2009 if you have been granted an economic hardship deferment.

What are the advantages of IBR?

Not only will monthly payment amounts be less under IBR than under a 10-year standard repayment plan, but the government will pay your unpaid accrued interest on Subsidized Stafford Loans for up to three consecutive years from the date you began repaying your IBR loan.

In addition to having your loan forgiven after a period of time, if you work in public service, the IBR payments will count toward the required monthly payments for you to receive loan forgiveness through the Public Service Loan Forgiveness Program.

What are the disadvantages of IBR?

It’s important to note that you may pay more interest under this program, since it typically extends your repayment period. Also, you are required to submit annual documentation about your income and family size to qualify. If you don’t provide this, annual payment amounts will change to a 10-year standard repayment plan based on the amount you owed when you began repaying under IBR.

Your student loan servicer can provide additional information about IBR, including whether you qualify and how to apply.

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To many, the holidays are a time of big spending and blown budgets. But to millions of households with children, mine included, back to school shopping can also wreak havoc on our finances.

Between the trendy clothes, new shoes, and endless amount of school supplies, it is not difficult to put a noticeably big dent in our savings.

As I contemplated the many needs of my children in the weeks before school starts, I wondered if there isn’t a way to get through it without spending a fortune.

Good news! It really is possible to get everything our children need for a successful school year without breaking the bank.

Yes, it takes discipline and perseverance. You may even need to leave the kids at home if they are overly persistent. But with a little planning, you can stick to an acceptable budget and still send the kids back to school with everything they need and even some things they actually want.

Here are some valuable tips to follow that can help you save you money, you’re your sanity, during the pricey back to school shopping season:

1. Before replenishing fall and winter clothes, take stock of what your kids already have. Do their jeans still fit? Is that jacket good for one more year? Also take advantage of hand-me-downs from an older sibling or cousin. My daughter has benefitted from many unworn clothes her older sister has handed down. Whatever is not yet worn is new again!
2. Yes, those adorable fall clothes are on display and your teen just has to have the newest sweater vest, but summer weather doesn’t stop for school. You can shop summer sales for back to school clothes, which kids can wear for a few more weeks. This is the one time I don’t mind that my kids like wearing short sleeves and camis year round.
3. Watch for office supply store coupons. You may have to wait until right before classes start, but if you hit it right, this could mean big savings.
4. Don’t veer from the school supply list. This also means stick to the cheaper, plain folders rather than the cool, trendy ones. Don’t grab the first spiral notebook you see. Be aware of prices, which can vary greatly, and shop around when out at different stores. This may be easier to do if the kids stay home.
5. Check with the kids to see if they brought home leftover supplies from the prior school year. This includes folders that are in decent condition and barely-used spiral notebooks, in addition to crayons, markers, pens and pencils. I always make a point of digging through last year’s backpack and usually come up with a bounty.
6. Plan to shop during tax holidays, which many states offer. This can be used for school-related shopping, such as clothes and shoes, in addition to school supplies. Last year, I was able to combine tax free shopping with valuable clothes coupons. You’ll be amazed at the savings!
7. Price shop online before heading to the stores. Sometimes it pays to hit more than one store for school supplies. Make sure you’re getting the best deal possible and the most for your money.
8. I tend to want to rush through school supply shopping. After all, pencils and paper are not complex purchases. However, it’s best to take your time and look around for the best deals. If you’re harried and hurried, the tendency is to grab the first binder you see. This is where mistakes happen. You pick up a 1.50 inch binder when you need a 1.75 inch size. Or the loose leaf paper is college ruled when your child needs wide ruled. Who said back to school shopping was easy?

Back to school shopping is not a science, but it could be. For those parents who plan ahead, shop around and do their homework, there are big savings that can be had.

And we all know too well how fast the holidays are upon us after the kids head back to school. By saving on back to school shopping, you can leave money in the coffer for Christmas gifts, including that trendy new sweater vest your child has been eyeing since August.

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If you have little kids, you probably see college expenses as some distant cloud hardly deserving attention. But as your kids age, that cloud gets closer, darker, and larger, until suddenly you realize it’s a raging storm that threatens to wreck your personal finances. The sooner you start dealing with the likelihood of that storm, the better your finances will weather it.

Here are seven clever ways to get ahead of the college finance situation.

1. Have your kid apply for the small scholarships. When you’re facing a college bill in the tens of thousands, applying for the $250 Lions Club scholarship might seem like a waste of time. It’s not, and here’s why… First, obviously, it is some money. A few of those little scholarships can add up to serious money. Second, college financial aid officers like it when a student brings third-party money to the pot, and may sweeten the package in order to attract that student. For example, if two students with similar qualifications and financial needs apply, but one brings along a few small scholarships, the financial aid office may offer a more lucrative overall package to the student with the scholarships. Ironic? Yes, but it makes sense.
2. Put your kid to work looking for those scholarships. Tell your daughter to spend one hour per week during her junior year in high school seeking and applying for scholarships. Have her look for scholarships related to her ethnicity, your line of work, your geography, her interests, clubs, hobbies, etc. There are thousands of scholarships available in countless niches. If your child scores one decent scholarship, her effort could be worth way more than a summer’s worth of flipping burgers.
3. Have your kid take a few Advanced Placement (AP) courses. Yes, these courses are hard, and not every kid can hack it. But having taken a few AP courses looks good on a college application (which can increase the financial aid package in itself), and most colleges provide bona fide college credit for successful AP tests. That can mean serious savings down the road. The catch is that colleges differ as to what scores on the AP test they accept; if a student gets a 5 on an AP test, he’ll get credit at just about any college, but if he gets a 3, many colleges will not give credit. The subject plays a role, too — a 3 in chemistry is more likely to be accepted than a 3 in history.
4. Look for more money the second year. Once your son is accepted and working his way through freshman year, start looking for more money for his sophomore year. Students drop out during their freshman year in large numbers, so it stands to reason that many previously claimed scholarships become suddenly unclaimed. Your son should visit the school’s financial aid office and ask for options about increasing his package.
5. Consider junior college classes, even in high school. There’s no question that junior colleges and community colleges cost less than four-year colleges, but many students want to get away from home and start a four-year college as soon as possible. That doesn’t mean they can’t take advantage of junior colleges. If they take one or two core classes each summer or in the evening during their senior year of high school, they will probably not have to take the same classes at their four-year school. Just make sure the credits all transfer.
6. Start saving early. Okay, this is obvious, but many parents assume that their incomes will rise proportionately with childcare and education costs… And many of them realize how wrong they were when the first giant tuition bill arrives. Find a good college savings account and start dumping money into it the day the baby is born. You’ll need it!
7. Finally, choose your college wisely. This is another obvious one, but you may not know the deal. Some state schools actively seek out-of-state students and give them good deals, which means forcing your kid to attend the local state college is not necessarily the most financially prudent move. And private colleges, many of which have giant tuitions, often give away more financial aid than state schools. And they don’t care what state you live in, so the in-state issue is moot. If your kid wants to go far away to school, take the time to shop around. You may be surprised to find that you don’t have to pay any more than if Johnny stayed close to home.

What other suggestions do you have for helping pay for your kids to go to college?

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It was once considered gospel that, for most families, college educations were the second largest expenses they would ever assume, right after buying a home.

But the way college costs are rising (and home values are decreasing), I’m not sure college educations haven’t graduated into first place. Of course, a funny thing happened on the way to good ol’-fashioned college degrees growing ever more costly.

They appeared to lose a lot of their career-guaranteeing value, based on all the people with college degrees working at jobs that don’t require degrees. You’ve got sizable percentages of college grads, for instance, working as bellmen and porters, as well as limo and taxi drivers, writes Richard Vedder, author of Going Broke by Degree: Why College Costs Too Much. And those are the ones who have found employment. Worse yet, many are burdened with tens of thousands of dollars in college debts.

The problem, it would appear, is that parents are in love with the idea of a college degree, and will go to the poor house – or guarantee their kid winds up in one – to ensure that junior strides away from college with a sheepskin. Bearing that diploma from dear old State, he should be good to go, into a career filled with similarly-educated grads all whittling away at debts that could take them decades to pay off.

College is great for many folks, and I was surely one of them. I would not have bypassed the educations I received from numerous curvy coeds – of both the blonde and brunette persuasions – for anything. But if I was considering the idea of taking on $50,000 in debt today in return for iffy job prospects, I might pursue a different route.

Time for a different route?

Happily, there is a different route, one that involves a lot less expense and may be more likely to yield a solid career. It’s called an associate’s degree from the U.S. community college system, one of the nation’s most underrated educational assets.

Community colleges play a different role than do four-year public and private colleges and universities. In their towns and cities, community college administrators typically work closely with area employers, the very people most likely to be able to identify the workplace skills needed now, and those that will be required in the future. Then the community colleges tailor degree programs to train folks for those fields. It’s a direct “needs equal jobs” equation that community colleges attempt to solve.

In many cases, the skills needed by employers and offered up by community colleges are those that prepare students for “mid-skill jobs,” the kinds of jobs requiring more than a high school degree and less than a four-year college bachelor’s degree. In recent years, many mid-skill jobs have gone unfilled for lack of trained candidates, while jobs calling for four-year degrees or better have been overloaded with candidates.

So what might these mid-skill jobs be? I turned to Erin Brooks, spokeswoman for Harper College in Palatine, IL, one of the Chicago area’s leading community colleges, to name some of those jobs, and the yearly incomes they generate.

Four of Harper’s top programs train students for the mid-skills jobs of registered nurse ($63,900 median annual wage in 2009, per Illinois Department of Employment Security), Dental Hygienists ($62,100), Firefighters ($51,800), and welders $33,900.

According to Illinois Department of Employment Security’s labor market economist Mitch Daniels, other mid-skill jobs calling for community college associate’s degrees include carpenters and electricians, machinists, health information technicians, auto service technicians, chefs, accounting technicians, and computer support specialists.

Jobs going begging

In many parts of the country, great mid-skill jobs like auto service technicians and HVAC technicians are going unfilled, Harper College president Ken Ender told me not long ago. These are not the old “grease monkey” jobs of yore, but sophisticated and technical jobs requiring utilization of head and hands. HVAC and auto service tech jobs once went to high school grads, but today demand associate’s degree-level skills.

Ender adds, “Most of the new jobs of mid-skills levels haven’t even been created yet.” Many will require knowledge of two or more of these disciplines: biotechnology, nanotechnology, information technology, and manufacturing technology.

When you consider that not everyone wants or needs to gain a four-year degree, community colleges loom as an even wiser educational solution.

Jeannine Kubalewski, for instance, is a graduate of Harper College’s Fire Science program, and now works for the Elk Grove Township Fire Department in northwest suburban Chicago as a firefigher/paramedic.

“I really wasn’t into the 9-to-5 office thing; it wasn’t something I wanted to do,” Kubalewski said last year. “I always wanted to do something that most people don’t … I love my job, I love where I work … I wouldn’t change a thing about it.”

But let’s say the community college grad gets into the workforce and decides to take their education further. They’ll find this is a flexible route. So says Glenda Gallisath, associate vice-president for academic affairs at Glen Ellyn, IL-based College of DuPage, another premier Chicago-area community college. “What typically happens is they … Are successful in their fields, they’re valuable employees who know the technical side. But to move up into management, their employer encourages them to go back and get a bachelor’s degree … Many employers will support them financially, and the four-year institutions give them incentives to come, like flexible schedules.”

So if you’re seeking a way to slash tens of thousands of dollars in line item expenses from your household budget, while also helping to possibly better ensure your son, daughter, or perhaps even yourself gains skills in demand by area employers, you might want to trade a bachelor’s for an associate’s – at least at first.

See, the whole issue is really a question of degree.

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I recently met with new clients who happen to be religious people. The couple is very nice. In fact, they are wonderful people. But they struggle financially. Why? Do they have lousy jobs? Nope. They are great earners. Are they big spenders. Not really. They live very frugally except for the one item – a private, religious school. They strongly believe in sending their children to religious school at all costs – so they do.

You know the first question that Joan (the wife) asked when they came into my office?

“Should we refinance our mortgage to pay for our childrens’ education?”

They showed me the tuition they were paying to send their children to elementary school and I just about fell off my chair. The first thing that popped into my head was that I should start a school! With that kind of tuition, it looks like one of the great entrepreneurial ideas of our time!

I can understand their position, of course. Everyone has their own priorities and life isn’t all about money. But at what point do you draw the line? Would you pump all your money into a private school at the cost of your financial security and retirement? Investing in our kids is one of the best investments we can make. But does that mean mortgaging our future is the way to go?

My wife and I faced this question about 18 years ago. We lived in a nice area, but the public schools were not an option. We just didn’t feel comfortable sending our children to public school. The alternatives were to send the little ones to private religious school (in our case) or move.

We opted for the private religious school. The religious element wasn’t critical for us, but it was a nice add-on. In our situation, the cost difference between this private religious and a private secular school was insignificant. Our kids went there for three years, and then we decided it wasn’t worth the trade-off. We moved to a community with better public schools and, in our case, it worked out great.

Now, I have to admit that if the question is simply private versus good public schools, I have my answer. I’ve seen private schools first-hand and have yet to see a higher quality outcome from private versus public schools. Of course, many very successful people went to private schools. But there are plenty of successful people that come from public schools as well. That has been my experience at least. The cost of raising a child is high enough. I’ve never felt the need to make it more expensive.

But when it comes to private religious school, the equation changes. My experience tells me that people send their children to private religious school often without really considering the intended outcome. If you have a strong religious conviction and want to pass that along to the children, I get it.

But is sending your children to private religious school the best and most economical way to achieve your goal if you want to pass on your religious beliefs? I fear that most people who send their kids to these schools don’t even ask themselves these questions. Many people simply accept as fact that sending the kids to religious school is a better way to provide religious training so they start writing those big checks. And I’m not sure that’s always the case.

Again, if you can afford it, more power to you. But what if you can’t? What if you face the choice between saving for retirement or sending the kids to religious school?

What kind of message do you send to your kids when you fail to put anything aside for yourself or your future? Of course, depending on your own religious beliefs, this might be okay, but many religions also talk about personal responsibility. Is mortgaging your future consistent with that?

If you consider this question from a practical standpoint, the question you have to ask is, “will my child come out of religious school with a greater appreciation and respect for our religion than if she attends public school?” If that’s your main concern, that’s a fair question, and perhaps the most important one you need to ask yourself. But do you ask it? Do you consider the alternatives?

Is your desired outcome guaranteed by sending the kids to private religious school? Nope. Some people report less inclination to follow religious practices specifically because they went to religious school.

Are there moral and religious down sides to sending the kids to a school that saps all the family’s financial resources? I believe there could be.

The family that I met with has 3 wonderful kids in religious school – and no money. The family is deep in debt with no hope of getting out.

I’m not saying that religious school is a bad idea. I’m simply trying to get folks to consider it as one alternative rather than the only alternative.

When it comes to making financial decisions I just don’t think it’s in anyone’s interest to make those decisions with blinders on. You may not face these same challenges, but you might have other “sacred cows” that you spend money on without really considering the alternatives and the cost.

When my daughter got into NYU and Berklee School of Music, my family thought I was a regular Scrooge for even suggesting we consider these schools as just alternatives. When I suggested that we consider the cost/benefit trade off, I quickly became persona non grata. They had a “sacred cow”. Luckily, I held my ground and they came to their senses. I was adamant that high cost college doesn’t equal high value career. When I got them engaged in the conversation, things went much better.

How do you side on the issue of religious school? I’m especially interested to hear from you if you do send your kids and find the cost a burden. If that describes you, what is your rationale?

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If you are like most people I know, you go through financial ups and downs. When this happens, do you talk about it with the kids or pretend nothing is wrong? If you decide to share it with your children, how? And how much do you share? I faced this dilemma a few years ago.

I’ve been pretty diligent about my finances for years. I save, invest, and (most important) track my spending. But, like a lot of people, I took a huge hit in 2008. My income plummeted at the perfect time – just when my middle daughter was about to start college. We had saved for college since the time she was born, but the investments were crushed at the same time that my income withered. The perfect storm. We weren’t in danger of losing our home or our good credit, but we were facing some difficult decisions.

We could either borrow money to pay for an expensive school my daughter got accepted into and live as if nothing had changed, or we could adjust our lives to the new reality.

My children were money savvy. They knew what was going on in the financial world by just seeing my face. And they knew my business was hit. They just didn’t know how bad things were and what it all meant.

I understood the anxiety my kids were feeling. I personally lived through very tough financial times growing up. My parents didn’t plan well at all and we paid the price for it big time. I wasn’t about to repeat their mistakes.

As a family, we talked it through and decided (I convinced them…) that borrowing money was the worst alternative, and that going to a lower-priced college was the way to go. In order to get their support, I had to be very frank about our financial situation without being needlessly gloomy. Here’s the way I approached it.

1. Honesty

As I said, everyone knew what was going on and they could see I was very concerned in a way I hadn’t been before. It never occurred to me to try to hide what was going on. But I knew that it was important for the family to have the facts.

I shared the numbers. What they were before the hit and what they were likely to be in the foreseeable future. My wife and I didn’t hold back anything from our oldest two children, but we didn’t share the numbers with our youngest, who was nine at the time. She couldn’t possibly understand what the numbers meant so we just skipped this step with her.

2. Meaning

Numbers without context have no value. We explained what was going to stay the same and what would change. I told them we were not moving and that we were secure. That’s all they cared about. I did explain that we’d be cutting back on lots of discretionary items and they seemed more than OK with that.

Without explaining what was going to change and what was going to stay the same, they would probably have assumed the worst. In retrospect, by talking about this in detail, we actually relieved their anxiety.

3. Options for school

We spoke openly about all the options for college – including borrowing. While I was dead set against taking on debt for college, it was important to discuss it. I wanted my kids to understand the pros and cons of borrowing. I wanted them to see that we could survive just fine by tightening our belts and didn’t have to solve all our problems by borrowing. Sure we’d give up some experiences – but we’d gain others.

4. Unintended payoffs

I believe that involving our children in this difficult financial process was by far the best financial lesson my wife and I could possibly provide. They learned how much it costs to live and they don’t take their lifestyle for granted. I don’t think they live in financial fear but they are financially sober. They don’t think money grows on trees anymore. They understand that they are expected to support themselves when they get out of college so they study in areas that will help them achieve that objective.

My middle daughter went to a state college and thanks us for sending her there. She is super-involved on campus and is doing great. She actually has more opportunities to shine at the state school than she probably would have had at the expensive school that she first wanted to attend.

I believe the kids got another really important message. They saw that being self-employed provides (at least in our case) more security than having a job. Many of their friends families were faced with much greater problems. If I was an employee, I could have lost my job and thereby lost everything. Unfortunately, that happened to many people.

By having my own shop, I didn’t have to worry about being fired. My kids saw the value of being self-employed (which I am a huge fan of) and the absolute necessity of running the business well.

Why is this an important issue to you?

It’s been almost three years since the financial melt-down. Many people are struggling now more than ever. Even if you are fortunate enough to have escaped that catastrophe, it’s really important to involve your entire family in your finances.

Remember, nobody taught you about money. You had to learn the hard way. Do you really want your kids to go through the same wringer that you did? If you do want to educate your children about money, what better way than to involve them in your daily financial life?

Let them see how you make decisions. Let them participate in the process. Have them experience making financial trade-offs – saying YES to one thing and having to say NO to something else. Teach them that decisions have immediate and long-term consequences. You can talk about these things and that’s fine. But there is no better way to have them integrate that education than by inviting them into your process.

What’s your experience? Do you think that sharing your finances with your children is too much of a burden? Or do you think it’s a good idea? How much do you share, and how?

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We’ve talked in the past about how much your college degree is worth. Given the current economic environment, especially as it relates to employment opportunities (or lack thereof), I’d be willing to bet that many recent graduates are second guessing their decision to lay out the money required for a college degree.

According to a recent study from the Brookings Institute, however, higher education is a better investment than the alternatives, even for the “Class of the Great Recession.” Really? Really.

Jumping ahead to the punchline, the study concludes:

On average, the benefits of a four-year college degree are equivalent to an investment that returns 15.2 percent per year. This is more than double the average return to stock market investments since 1950, and more than five times the returns to corporate bonds, gold, long-term government bonds, or home ownership. From any investment perspective, college is a great deal.

Breaking down the cost of college

So how much does college really cost?

Considering both public and private schools, a four-year college degree costs an average of $48k. When you factor in the opportunity cost of not working during those years, the total rises to $102k.

Note: On average, an 18-19 year old with a high school diploma earns an average of just $11,600/year whereas a 20-21 year old in the same situation earns just $15,400/year.

On the other hand, if you pursue an associate’s degree, you can expect to spend an average of $5200. Adding in two years of missed work (ages 18-19) brings the total to $28k.

College compared to investment alternatives

Now that we have a baseline cost, let’s consider the return-on-investment for a college degree vs. alternative investment options. Let’s start by assuming that a recent high school graduate has the choice of investing $102k (or $28k) in a bachelor’s (or associate’s) degree, or putting it into an alternative investment of some sort.

What should our hypothetical graduate do?

If you run the numbers, and account for differences in lifetime earning potential, you’ll learn that the investment in a bachelor’s degree returns an average of 15.4%, whereas the associate’s degree returns an average of just over 20%.

Wow. We should all favor an associate’s degree over a bachelor’s degree, right? Not so fast… The advantage of an associate’s degree is primarily due to its low cost. When comparing lifetime earning potential, the bachelor’s degree wins by a mile.

Note: This isn’t an entirely fair comparison, as the hypothetical associate’s student should have $102k – $28k = $74k left over for alternative investments, and the study doesn’t account for this.

In terms of raw numbers, the average four-year graduate earns $570k more over their lifetime than the average high school graduate. The two-year degree holder, on the other hand, earns $170k more over their lifetime than the high school graduate.

What about the alternatives? Looking across the past 60 years, the stock market returned an average of 6.8%, corporate bonds returned 2.9%, gold returned 2.3%, long-term government bonds returned 2.2%, and housing returned 0.4%. All of these pale in comparison to the 15-20% returns associated with higher education.

Beware the averages…

Of course, any study of this sort is loaded with caveats. For example, an individual that goes to an extremely expensive school and picks a low paying major will have very different results from an individual who attends a less expensive school and chooses a high paying major.

It’s also worth noting that college is not a silver bullet. Not everyone is cut out for college, and there are likely to be major differences (on average) in socioeconomic status, innate ability, etc. between those who choose to pursue college and those who do not. It’s thus not entirely fair to ascribe the earnings advantage to the additional layer of education.

And, of course, there are the extreme outliers. I’m thinking here of those who never went to college (or who started and quit) but wound up making a fortune. See, for example, Bill Gates.

What do you think? Is college worth the cost?

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Related Articles at fivecentnickel.com:

» Saving for College
» The Best Values in Colleges – 2012 Edition
» The Least (and Most) Expensive College Towns
» The Best 529 Plans – 2009 Edition
» The Value of a College Education: Tuition Costs, Earning Power, and Unemployment Rates
» What is a 529 Plan?
» Five Lowest Paying College Majors
» The Cheapest 529 Plans

Over the weekend I checked in on our Upromise account. In case you’re not familiar with Upromise, it’s a free service that allows you to earn money toward college by shopping online, buying groceries, dining out, etc.

Here’s how it works:

First, you need to create an account. From there, you have a variety of options. The easiest things to do are to register your grocery and drugstore loyalty cards as well as your credit cards so that they can credit your account when you buy eligible products, meals, or services from their partners.

You can also initiate online purchases by clicking through from their “online mall” and receive anywhere from 1-25% of your purchase in cash back, or book travel through their partners (including Priceline, Expedia, etc.) and receive up to 4% cash back. Note that these rewards are in addition to any credit card rewards that you might otherwise earn.

Another option would be to sign up for the Upromise-branded credit card, which pays 1% cash back. You can also complete a number of other “high ticket” actions like requesting life insurance quotes, applying for a home loan, etc. If you do so, you’ll receive a bounty for each.

In general terms, the intended endgame is for you to link your account to a Upromise 529 account and have your earnings deposited straight into it. You can, however, withdraw your funds directly if that’s what you prefer.

The primary downside of using Upromise is that you’re giving up a slice of your privacy. That being said, their privacy policy clearly states that they don’t share any personally-identifying with their partners. They do, however, use the information to improve ad targeting, etc. Pretty harmless stuff, and really no worse than what credit card companies and grocery/drug stores are already doing with this information.

Honestly, I’ve been a pretty lightweight user of Upromise, having just registered our loyalty cards and credit cards, and then just going on with my daily business as if nothing is happening. Nonetheless, I’ve earned a couple hundred dollars since first signing, and could have done better if I had been a bit more diligent about updating our credit card info when we switched cards, and so forth.

In the end, this isn’t going to be a major contributor to our kids’ college educations, but hey… It’s free money, so why not take advantage of it?

Are you using Upromise?

Please share your thoughts and experiences in the comments section.

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Earlier this week, I ran across a study from the Georgetown University Center on Education and the Workforce. The primary goal of this study was to estimate the economic value of various college majors, and the results were quite interesting.

One of the big takeaways from this study is that college graduates can expect to earn 84% more over their lifetime (on average, of course) than someone with nothing more than a high school diploma. But what about difference between majors. Surely some degrees result in higher earnings than others. Right? Right.

In fact, the highest earning major (Petroleum Engineer) has a median salary that is more than 300% higher than the median salary of the lowest earning major (Counseling/Psychology). Curious as to how the other undergraduate majors stacked up? Read on…

Ten highest earning majors

Here are the ten majors with the highest median annual earnings:

1. Petroleum Engineer ($120,000)
2. Pharmacy/Pharmaceutical Sciences and Administration ($105,000)
3. Math and Computer Science ($98,000)
4. Aerospace Engineering ($87,000)
5. Chemical Engineering ($86,000)
6. Electrical Engineering ($85,000)
7. Naval Architecture and Marine Engineering ($82,000)
8. Mechanical Engineering ($80,000)
9. Metallurgical Engineering ($80,000)
10. Mineral Engineering ($80,000)

Ten lowest earning majors

And here are the ten majors with the lowest median annual earnings:

1. Counseling/Psychology ($29,000)
2. Early Childhood Education ($36,000)
3. Theology and Religious Vocations ($38,000)
4. Human Services and Community Organizations ($38,000)
5. Social Work ($39,000)
6. Drama and Theater Arts ($40,000)
7. Studio Arts ($40,000)
8. Communication Disorders ($40,000)
9. Visual and Performing Arts ($40,000)
10. Health and Medical Preparatory Programs ($40,000)

Other general findings

Some other general findings were that Liberal Arts and Humanities majors tend to end up somewhere in the middle of the pack, with a median annual income of $47,000. Also, there are still clear racial and gender gaps in most fields.

For example, even in a highly specialized field such as Electrical Engineering, African Americans earn $22,000/year less that Caucasians and $12,000 less than Asians with the same major. As for gender differences, there is a tendency for women to hold degrees in lower paying fields, but even in higher paying fields such as Chemical Engineering, they earn $20,000 less than their male counterparts.

What about graduate degrees? The good news is that a graduate degree does add to your earning potential, though the extent of this effect depends on your field of study. The largest gain is in the general areas of Healthcare and Biology, with the lowest gains coming in Atmospheric Sciences, Studio Arts, and Petroleum Engineering.

Finally, what about finding a job? The fields with the highest likelihood of finding employment include Geological and Geophysical Engineering, Military Technologies, Pharmacology, and School Student Counseling. At the other end of the spectrum are Social Psychology, Nuclear Engineering, and Education Administration and Supervision.

What about you?

Okay, now it’s your turn… Did earning potential influence your choice of major? Are you actually working in a field relevant to your undergraduate education? Have you sought out graduate training? If so, was it worth it? Please share your thoughts in the comments.

Source: Georgetown CEW

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Related Articles at fivecentnickel.com:

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» Why a Degree From a Fancy College Isn’t Worth It
» Cutting Your College Expenses
» Save for Retirement Before You Save for College

Over the past year or so, we’ve seen a lot of debate over the definition of wealthy. Much of this discussion has centered on whether or not individuals (or families) earning $250k or more per year are “rich” and should see their tax rates rise.

Without getting into the underlying politics, I think that one thing that most of us can agree on is that people with that kind of earning power are definitely not poor. Or are they? I recently ran across a story over on MSN Money that questioned whether or not $250k is enough to make ends meet.

For starters, I’ll just say this: Yes, $250k/year is clearly enough to make ends meet. As evidence, I offer the fact that less than 3% of American households earn that much, but most of use are getting by. I’d go so far as to say that if you’re earning that much and struggling, then you must be making some really bad decisions when it comes to managing your money.

And yet… When BDO USA, a national tax accounting firm, analyzed the finances of a hypothetical family of four (Mr. and Mrs. Jones and their two lovely children) living one of eight different locales, they concluded something entirely different:

It’s not exactly Easy Street for our $250,000-a-year family, especially when they live in high-tax areas on either coast. Even with an additional $3,000 in investment income, they end up in the red — after taxes, saving for retirement and their children’s education, and a middle-of-the-road cost of living — in seven out of the eight communities in the analysis.

They attribute these difficulties in large part to high levels of student loan debt, a pair of car loans, and a mortgage for 80% of the value of a “typical” home for a family of four. This “typical” home was a huge variable, as real estate prices varied widely across communities.

Taxes also take a big bite, and can vary widely based on where you live. And taxes aren’t the only thing that varies amongst locations. Other components of the cost-of-living vary widely from one locale to another, with groceries cost 72% more in New York vs. Idaho (for example). And those sorts of differences occur across the board in most spending categories.

Overall, the worst scenario included in the analysis was Glendale, CA, where Mr. and Mrs. Jones would wind up over $23k in the hole. Of course, this is a bit overblown, as the number crunching included $33k per year going into retirement accounts, and $8k per year in college savings. The best case scenario was Plano, TX, where the Jones family would nearly $5k left over at the end of the year.

Is $250k/year enough?

What do you think about all of this? Is $250k enough to make ends meet? If anything, I’d say that this is a perfect example of why it’s so dangerous to try to keep up with the proverbial Jones’.

Don’t break the bank paying for college, scale back on your house to reduce your mortgage payment (not to mention property taxes and maintenance), resist the temptation to borrow money for new cars (much less two of them), and so on.

Like I said above, if you can’t make ends meet on $250k/year, then you’re doing something very, very wrong.

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College is one of the best investments you can make – if it’s done right. If you or someone you support is getting ready to go to college, I have great news. You can go to college and graduate without being saddled with huge debts when it’s over.

The following advice is mainly going to help those with limited resources. If you’re in the fortunate situation of being wealthy and having unending financial support (even after you graduate), then the following post may not be very helpful to you. With that said, let’s dig in.

1. Be practical

College isn’t an extension of high school. If it were, they’d call it grades 13 through 16. But they don’t. They call it college. It’s very different than high school and you should approach it as such. The purpose of college is to learn something to help you make a living after you graduate and have a full life. It’s not play time.

So the first tip is, if you don’t know what you want to do after you graduate college, don’t spend a lot of money at college trying to find out. The last thing you want is to graduate and then have to deal with getting out of debt if you don’t know why you’re doing it. You can be just as confused at community college, and it’s a lot cheaper.

And you should also think seriously about picking a high-paying major. I know that it’s not very “PC” to say this, but it’s the truth. This doesn’t mean you shouldn’t study English, if that’s your choice. But if you decide to study in the Liberal Arts department, do it for a reason.

Do you want to be a writer or a lawyer? Great. Studying English might make sense. But I reiterate, if you don’t know what you want to do, don’t waste money on an expensive school. In fact, sometimes it pays to go to private career colleges rather than a 4 year school. This way you learn a trade and start making a living fast.

2. Stay close to home

If you don’t have the resources to go away to college, then don’t get into debt in order to buy that “college experience.” It’s not worth it. True, you won’t have the full on “living on your own” experience, but you will have the “living like an adult who doesn’t spend money he/she doesn’t have” experience. I think the latter will pay dividends far beyond the former.

3. Work it baby – maybe

You may be able to arrange your classes so that you can have a number of free days and you can earn some extra money during that time. This isn’t a bad idea, but you should really scrutinize this decision. If you work 20 hours per week and earn $10 per hour, that’s and extra $200 per week or $800 per month.

Depending on where you go to college, that could really go along way. But remember… There is a cost to working – and that’s time. Consider not working and taking extra units. If you could do that – and really dive into your studies – maybe you’d be able to graduate a semester or two early. And that means you’ll start earning more money sooner. That might be a better decision and if that’s the way you go, take courses during the summer too.

4. Get tuition assistance

Some employers will pay all or part of your college costs. Before shouldering the entire burden yourself, look into internship programs that offer these benefits.

5. Discover the benefits of community college

Even if your goal is to get a four year degree, you can and should take advantage of the community college system. General education classes will be cheaper, easier to get, and count for as much credit as they do at your four year school. If you really want to save, go to community college for all your general education courses for the first two years, and then transfer.

6. Apply for financial aid

Make sure to fill out the Free Application for Federal Student Aid (FAFSA). Depending on your situation, you may be qualify for some grants – or at least low interest loans. This system is based purely on financial need. This is my least favorite option, so please don’t get into debt if there is any way around it.

7. Never pay out-of-state tuition

If you have your heart set on going to an out-of-state school, move there and work for a year to establish residency. A client of mine sent his daughter to a school that charges $18,000 a year for in-state tuition, and double that for out-of-state tuition.

By having his daughter work for a year, she’ll be saving up money for college and she’ll be able to qualify for in state tuition too. That will save the family a total of $64,000 – not too shabby.

8. Slash housing costs

There are a number of ways to slash housing costs. The best thing to do is stay out of the dorms because they are the most expensive alternative there is. The food plans are expensive, too.

Live a mile or two off campus, buy a cookbook, and get a bike. You’ll save a tremendous amount of money on housing and food, and you’ll also forgo the need to join a gym. You’ll get all the exercise you need peddling back and forth to school.

9. Textbooks

Don’t buy new text books. Period. Buy used or rent.

10. Don’t be a snob

Other than in very unique circumstances, it doesn’t matter where you get your undergraduate degree. What you get out of college will be in direct proportion to what you put into it. And keep in mind that very few people work in the same field that they studied in undergraduate school. So don’t don’t get all excited about it and think the school you go to is the most important decision you’ll ever make – it isn’t.

My neighbor’s boys went to a very prestigious school in Boston and each graduated with $150k in debt. Of course, that was after they cleaned out their parent’s home equity and retirement accounts. They’re now working at nice jobs in the music business, which is what they studied. But they are working along side graduates from local four year schools. In their case, the fancy price tab only set them back, it didn’t help them in any way.

I hear story after story like this and I’m sure you do too. Don’t fall for the fancy snob stories about all the benefits of going to an expensive college for undergraduate work. It just isn’t worth it. I’ll even go one step further. My child got accepted to that same fancy school in Boston, but we talked it through and we decided as a family that the price wasn’t worth it.

Instead, she’s going to a four year state college and getting a much better education. How? She’s gotten super involved with the honors programs on campus and she’s rubbing elbows with the best and the brightest the campus has to offer.

Bonus Tip #11 – Remember who the boss is

If you’re paying for your daughter or son’s education, you get to decide how much to spend. I see far too many people who pay for the school their child gets accepted to as if it’s their responsibility to do so. Don’t fall for it. Since when did it become your reasonability to do that? Regardless of what you dreamed of (or what your child envisions for his or her college experience), there are economic realities and they must be considered.

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The tax treatment of scholarships is address in IRS Publication 970. For starters, let’s define some terms. The IRS defines a scholarship as:

“…an amount paid or allowed to, or for the benefit of, a student at an educational institution to aid in the pursuit of studies. The student may be either an undergraduate or a graduate.”

In contrast, they define a fellowship as:

“…an amount paid for the benefit of an individual to aid in the pursuit of study or research.”

Is my scholarship or fellowship taxable?

As for the tax treatment of scholarships and fellowships, they are tax free only if:

• You are a degree candidate at an eligible educational institution, and
• You use the scholarship or fellowship to pay qualified education expenses

Defining a few more terms…

You are a degree candidate if you attend a primary or secondary school or are pursuing a degree at a college or university, or you attend an accredited institution that is authorized to provide a program that is acceptable for full credit toward a bachelor’s degree or higher, or a program of training that is designed to prepare student for gainful employment in a “recognized occupation.”

An eligible educational institution is one that maintains a regular faculty and curriculum and has a regularly enrolled student body in attendance “at the place where it carries on its educational activities.”

Finally, qualified education expenses (i.e., those eligible for tax-free treatment) include tuition and fees required to enroll at or attend an eligible educational institution, and course-related expenses such as fees, books, supplies, and equipment that are required for courses at such an institution.

Costs related to the following categories are not considered to be qualified educational expenses:

• Room and board
• Travel
• Research
• Clerical help
• Non-required equipment or other expenses

If your scholarship or fellowship (or a portion thereof) does not meet the above requirements, then it is taxable.

The only exceptions to this rule are if your receive a scholarship or fellowship that represents payment for teaching, research, or other services from the National Health Service Corps Scholarship Program, or the Armed Forces Health Professions Scholarship and Financial Assistance Program, and you are a degree candidate at an eligible institution and you use part of the award to pay qualified education expenses.

Whew! Got that? Here’s a handy table from the IRS to help you sort things out…

So, in general terms, if you’re not a degree candidate, then your scholarship or fellowship will be taxable. If, on the other hand, you are a degree candidate, then scholarship or fellowship funds spent on tuition may be tax free if you use them to pay for tuition or fees, or required books, supplies, or equipment.

How to report scholarships and fellowships

If your only income is a tax-free scholarship or fellowship, then you don’t have to file a tax return. If all or part of your scholarship or fellowship is taxable, then you’re required to file a tax return – whether or not receive a W-2 form related to the award.

If you use Form 1040EZ, the taxable amount should be included in the total on line 1. If you didn’t receive a W-2, you should enter “SCH” and the taxable amount in the space to the left of line 1.

If you use either Form 1040A or Form 1040, the taxable amount should be included in the total on line 7. As above, if you don’t receive a W-2, then you should enter “SCH” and the taxable amount in the space to the left of line 7.

Depending on the amount in question, you may also have to file 1040 Schedule SE to figure your self employment tax. In general, if you have less than $400 in “self employment” income, including taxable scholarship or fellowship income, you will not have an additional tax obligation.

As with all tax issues, you should consult directly with the IRS, or a qualified tax professional, if you’re not 100% sure how to handle things.

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Last week, I announced that we’re having our first child, and I talked about some of the financial impacts and decisions that we’ll face. We received an incredible amount of valuable feedback and advice, for which my husband and I are both thankful. In a followup comment, Investor Junkie got us thinking about saving for college in a 529 plan. I decided to take him up on his advice and started looking into it.

What is a 529 plan?

A 529 plan, also known as a Qualified Tuition Program (QTP) is a tax-advantaged savings plan. Its nickname comes from the section of the Internal Revenue Code that authorizes it. Contributions to 529 plans are not federally tax deductible, but qualified distributions are, making it a bit like a Roth IRA for education. On top of this, some states offer income tax deductions for contributions for the plans.

As far as qualified expenses go, the money in a 529 plan can be used for tuition, fees, books, supplies, a computer or laptop, and room and board at an accredited vocational, college, or university in the United States.

There are two types of 529s – prepaid plans and savings plans. As the name implies, prepaid plans have you buy at a locked-in tuition price. Savings plans are more like IRAs, where you can choose from different investing options to meet your goals. It’s also worth noting that you can even start a 529 plan for an unborn child by naming someone else as the beneficiary and transferring it to them when they are born.

Each of the two major types of plans has their own pros and cons that you have to weigh for yourself to see what would be right for your family.

Pros of prepaid plans

• States usually guarantee their own plans
• Predictable, fixed payments based on child’s age
• No nasty tuition surprises at the end

Pros of savings plans

• All qualified expenses are covered
• Flexibility to go to college anywhere without complications
• No age limits

Based on the above information, if we decide to go the 529 route I’m leaning more towards opening a savings plan for our child.

Why save for college now?

There are a few reasons why you might want to start saving for college now rather than later than waiting to do so later.

• Lower annual contributions – I know it may seem crazy to talk about college so early in the game, but you can minimize your monthly obligation if you start sooner rather than later. Giving yourself more time can be a huge asset.
• Gift tax limits – Even if you’re able to set aside a large sum in a short period, you need to be aware that 529 plan contributions are subject to gift tax limitations. The gift tax exclusion is currently $13k/year, though a “five year election” lets you bunch five years worth of contributions into just a single year.
• More time to build up enough to cover it all – It’s our hope that our child doesn’t have depend on student loans to pay for his/her education.
• Rising tuition rates – Even attending a good quality state school can cost a lot of money. As we’ve been seeing locally with UNC’s tuition hikes, we know that that college will be expensive, so we’ll need all the time we can get.

If our child decides for some reason he/she wants to attend a much more expensive school, they’ll be free to do that. We won’t, however, support that particular financial decision, and they will more thank likely have to apply for student loans to cover the costs.

Prioritizing expenses and looking at alternatives

We’re definitely planning on setting aside money for our child’s education expenses in the relatively near future, but right now isn’t an ideal time. While I’m not in Financial Peace University, I do like the order of financial goals that Dave Ramsey encourages. There are some bills, savings, and debts that we’d like to handle before we tackle college savings.

Besides getting our house ready for the new addition, we want to pay off some debts in hopes of improving our monthly cash flow. Hopefully, we’ll be able to re-evaluate our financial situation in the near future so we can get started.

We also want to explore other alternatives before committing to a 529 plan. For example, Coverdell Education Savings Accounts (originally referred to as Educational IRAs) provide another avenue for college savings, and we want to research those sorts of options before making a decision.

For those of you who are ready to start a 529, Nickel has written some wonderful posts on the topic, including the myths associated with 529 plans, some facts about 529 plans and scholarships, and also a list of some of the cheapest plans out there.

Your thoughts on 529 plans

Okay… Now I’m curious to get your thoughts and feedback on this. How many of you have funded a 529 account for your child(ren)? How did you go about selecting your 529 plan? Do you have enough allocated in the account for expected tuition costs? If not, are you going to continue saving, or do you expect your child(ren) to come up with the difference?

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I’ve talked quite a bit in the past about 529 plans. What they are, which ones are good, which ones are bad, etc.

Today I want to drill down a bit further and look at which 529 plans are the cheapest. I’m particularly interested in this topic because a recent Morningstar study revealed that mutual fund expense ratios are an excellent predictor of mutual fund performance.

Thus, assuming that you’re looking at plans that offer similar investment styles, you should strongly consider the costs associated with each. Of course, there are other factors such as state tax breaks that can offset higher costs (at least to a point) but costs are still a very important factor.

In general terms, you’ll find that direct-sold 529 plans are significantly cheaper than advisor-sold plans, which are typically laden with high fees and sales loads. But amongst the direct-sold plans, there is a good bit of variation in costs.

What follows are the ten cheapest 529 plans in terms of annual account fees (most are zero) and investment expenses. The data come from a study by SavingForCollege.com, and I’ve also included the current “star rating” (out of five) for residents and non-residents in brackets after each entry.

• Louisiana START Saving Program [Residents only, 4.5]
• Ohio CollegeAdvantage 529 Savings Plan [5.0, 4.5]
• Virginia Education Savings Trust (VEST) [4.5, 4.0]
• Utah Educational Savings Plan (UESP) [5.0, 4.5]
• Fidelity Arizona College Savings Plan [4.0, 4.0]
• California ScholarShare College Savings Plan [4.0, 4.0]
• Delaware College Investment Plan [4.0, 4.0]
• Massachusetts U.Fund College Investing Plan [4.0, 4.0]
• New Hampshire UNIQUE College Investing Plan [4.0, 4.0]
• Kansas Learning Quest 529 Education Savings Program [4.5, 4.0]

Note that the Kansas plan offers both a direct-sold and an advisor-sold version, so the less expensive direct-sold expense data was used.

If you’ve been contributing to a 529 plan, I’d love to hear the details. Which plan? How did you choose it? And how do you like it?

And remember… You have until the end of the year (12/31) to fund a plan for 2010. While some states will actually give you a state income tax deduction up until the filing deadline, your contribution will count against the gift tax exclusion for the year in which it was made.

Source: Saving for College

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Why you need a coach

As I see it, there are three situations when you need a coach:

1. Your life/business stinks and you are convinced you can’t do anything about it.

Well, you could be right, but you only know what you know. You might be surprised. Folks sometimes assume that their life or business situation is set and can’t be changed. Never assume something as dangerous as this. There are wonderful people out there who can help you transform your situation. They’re just waiting for you to ask.

Just the same, if you really felt that your situation couldn’t improve, you probably wouldn’t be reading this post. That means, by definition, you do have hope. That’s encouraging.

2. Your life/business stinks and you have no idea what to do about it.

If this describes you, you are the perfect candidate for a coach. Read on.

3. You are satisfied with your situation.

I’m a huge fan of finding satisfaction in life regardless of the circumstances. Things could always be worse. You are blessed if are content in life. But that doesn’t mean you should go live in a cave. Anyway, if you have read this far, you’ve told me that there are some elements of your life or business you’d like to change.

Be clear and specific about where you need help

When I started my career as a financial planner, I had absolutely no idea how to sell, how to do financial planning, or how to run a business. I also had no money and needed to get up to speed fast.

When I started my blog, I was also at a complete loss. I had zero technical skills, and no understanding on how to make any money blogging. I wasn’t even convinced I should have a blog.

Both these situations created tons of anxiety and I can’t stand living in anxiety. I knew that the only way I’d ever get clarity would be to ask help from people who have what I wanted. I was really clear and specific on what I wanted help on.

Pinpoint who can provide it

In both of the situations described above, I was clear on what I wanted. All I had to do was to find people who had it already.

That was easy. With regards to my financial planning career, I just looked within the firm that hired me. I observed the most successful people and I got to know as many as I could. I was looking for people who seemed to be interested in others, not just themselves. It didn’t take long to find lots of great candidates.

On the blog, I just threw myself out there. I commented on other blogs and made friends. Fortunately, in the personal finance blogging world, almost everyone is happy to help. That goes from the top bloggers to the newbies. Everyone seems to be delighted to lend a hand.

The approach

Hiring a coach for free is far better than paying a coach. Someone who joins your team without being compensated does so because she cares about you. She’ll go far beyond what a paid coach will do. OK, so how does someone come to care about you?

People care about you when they realize you care about them. You can’t fake this. You have to actually care. Express interest and mean it. Find ways to serve your would-be coach without being asked. Don’t manipulate. It won’t work. Find a place within yourself that really cares about this other person and express it by deeds.

Once you’ve established a caring relationship, ask your future coach for a 5 minute conversation. Tell them what you are struggling with and ask if they would be willing to help you. If you’ve done your homework, the answer will be ‘yes’ 90% of the time.

During your 5 minute talk, ask if they would be willing to take short calls from you from time to time. Don’t abuse your relationship. Everyone is busy, so make appointments and don’t call them randomly. Get to the point and respect your coach’s time whenever you call. At the end of each call, ask your coach what you can do for them. Even if she says there is nothing, look for ways to be helpful and deliver.

For example, let’s assume I ask you to help me understand how much money I need to retire, and you help me do the calculations because you’re a math wiz. Clearly, I can’t help you in the same area… But maybe you need to earn some extra money. I can put the word out and really go the extra mile to help you find those opportunities… Right?

Why your coach would love to help for free

Your coach got help along the way to success. Also, the most successful people in life love people. Look around and you’ll see it’s true. Let me ask you this: how do you feel when you know you’ve helped someone else? There isn’t a better feeling in the world, is there? That’s why your coach wants to help you (as long as you show that you care about them and respect their time).

Have many coaches and let some go

Over time, your coach will have taught you what you need to know. You’re needs will change and you might need the assistance of someone else. There is nothing wrong with that. Just remember to check in from time to time with your old coach. They care about you so let them know how you’re doing – and continue looking for ways to help them.

Be a coach

When all is said and done, you learn more as a teacher than a student. That’s another reason coaches love to help you. They learn too. When you get into a position to be helpful to others, take advantage of it. Look for opportunities to do so. When you see someone struggling, lend a hand. The only way you’ll ever get into that position is if you ask for help when you need it.

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So you’ve finally hit that stage… You’re sending your kids off to college. This phase is one of the most important and trying times both for parents and children. Parents finally need to let go, and kids are moving on to an environment that will test their independence for the first time.

While there are several factors to consider when selecting and applying for different universities, one of the most important thing to keep in mind is this: how much will it all actually cost?

Once those college acceptance letters come rolling in, you’ll hopefully not have to pay full tuition, as tuition rates have skyrocketed in the past few years, going well past the rate of inflation. The good news is that many schools offer generous financial aid packages, though such packages often include large student loans.

Once you’ve deciphered all the different financial aid packages that accompany the acceptance letters, you should begin putting together a personal budget before you and your child make any decisions. While financial aid packages will usually approximate how much the costs of living are beyond tuition, room, and board, these estimates often fall well below the mark.

Books and other learning materials are one very big cost of attending a university. Even at used book stores, textbook prices can be exorbitant. Caution your child to shop around and make sure to check online used book retailers like Amazon and eBay. Textbooks that sell for $150 at the campus bookstore can often be had for $40-$50.

The only unique thing that offline stores offer is convenience, but if your child plans ahead, they can get a jumpstart by ordering their books in advance. It’s also worth noting that new federal regulations will improve transparency when it comes to the pricing of textbooks.

Another cost that parents and students don’t really plan for are the personal costs associated with an enhanced social life. This can be especially costly at higher end private universities. In high school, students mostly socialize at each other’s homes. At college, however, the rules change.

When the on-campus cafeteria gets old, many students will want to go out to eat, which fills the void left by not having home-cooked meals. Entertainment options also broaden in scope, as do extra-curricular activities like camping trips, fraternity and sorority fees, etc.

While it is important to set a limit for your child’s extra spending, it is also important to remember that the social aspect of attending college is an important dimension. When estimating the associated costs, be sure to also keep in mind the city where your child is moving. For example, the social costs of attending school in New York City will be significantly more than in, say, Houston.

In the final analysis, it’s important to be completely aware of all possible college costs. Whether your or child will be footing the bill for college, this is a huge financial decision. Choose schools wisely and plan ahead.

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Related Articles at fivecentnickel.com:

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» The Best 529 Plans, Revisited
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If that’s your goal, then you might be interested in this list of the top US universities in terms the number of graduates to have become billionaires (in parentheses).

• Harvard (50)
• Stanford (30)
• Univ of Pennsylvania (27)
• Yale (19)
• Columbia (15)
• Princeton (13)
• NYU (10)
• Univ of Chicago (10)
• Cornell; MIT; Northwestern; UC-Berkeley; UCLA; USC (9)

Not surprisingly, the majority of these billionaires were business majors at their respective campuses.

Interestingly, NYU also has five dropouts who went on to become billionaires – including financier Carl Icahn, who left med school to become a stock broker.

And yes, I do realize that that it might be the students who choose to attend these schools, rather than the schools themselves, that make the difference. Either way, it’s still a fun list to look at.

Source: Forbes.com

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What follows is an alphabetical listing of state sales tax holidays along with a brief summary of what’s included in each case, as well as a link to more information. This should be a fairly comprehensive list, but it’s always possible that I missed something. If I did, please let me know so I can update the list.

Sales tax holidays, state-by-state

Alabama: August 6th-8th. Includes clothing up to $100/item, computers up to $750/item, school supplies up to $50/item, and books up to $30/item. (link)

Connecticut: August 15th-21st. Includes clothing and footwear up to $300/item. (link)

Florida: August 13th-15th. Includes clothing and books up to $50/item and school supplies up to $10/item. (link)

Illinois: August 6th-15th. Includes clothing, footwear, and school supplies up to $100/item. (link)

Iowa: August 6th-7th. Includes clothing up to $100/item. (link)

Louisiana: August 6th-7th. Includes the first $2500 of the purchase price of all “tangible personal property,” not including vehicles. (link)

Maryland: August 8th-14th. Includes clothing and footwear up to $100/item. (link)

Mississippi: July 30th-31st. Includes clothing and footwear up to $100/item. (link)

Missouri: August 6th-8th. Includes clothing up to $100/item, computer software up to $350/item, computers hardware up to $3500/item, and school supplies up to $15/item. (link)

New Mexico: August 6th-8th. Includes clothing up to $100/item, computers up to $1000/item, associated peripherals up to $500/item, and school supplies up to $15/item. (link)

North Carolina: August 6th-8th. Includes clothing and school supplies up to $100/item, instructional materials up to $300/item, computers up to $3500/item, computer supplies up to $250/item, and sports/recreation equipment up to $50/item. (link)

Oklahoma: August 6th-8th. Includes clothing up to $100/item. (link)

South Carolina: August 6th-8th. Includes clothing, clothing accessories, footwear, school supplies, computers, printers, software, and a variety of housewares. No stated limit on value/item. (link)

Tennessee: August 6th-8th. Includes clothing up to $100/item, school supplies up to $100/item, and computers up to $1500/item. (link)

Texas: August 20th-22nd. Includes clothing, footwear, book bags, and school supplies up to $100/item. (link)

Virginia: August 6th-8th. Includes clothing and footwear up to $100/item and school supplies up to $20/item. (link)

Note: There are a handful of other sales tax holidays throughout the year covering things like hurricane preparedness, Energy Star products, and even guns. My focus here was just on the back-to-school sales tax holidays.

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Everyone, though, would love to get their education cheaper if possible. Besides hunting for scholarships (which is a must), I wanted to share two ways to significantly cut down on college expenses.

Attend community college first

For some people, a community college may not seem to be a good choice. Community colleges sometimes get a bad rap for offering low quality educations. While there are certainly some bad apples, I think many would be surprised at the caliber of education you can get at a community college.

If you’re considering whether to attend a community college, let me point out some of the benefits.

Much lower costs to attend: Community colleges are usually significantly less expensive than attending a full-fledged university. If you have a great university nearby, you may be able to get a steal, as some professors may teach at both the university and the community college. In such cases, you can get a great education for a fraction of the price.

Flexible course schedules: Since many students have jobs, families, military obligations, etc., community colleges typically have much more varied class schedules.

Some may balk at attending community colleges because they think their classmates couldn’t make the admission requirements for a ‘real’ college. While there are certainly a percentage of many student bodies that fit into that category, many good students are going there for the convenience and low cost. In the end, it really is what you make of it.

You can always transfer to a higher quality university in the future – just be sure to check with your desired university so you’ll know what’s transferable. The great thing is that you’ll have significantly reduced your bill compared to many of your classmates.

CLEP some courses

The College-Level Examination Program (CLEP) tests your knowledge in several subjects that many students take during their first two years of college. Depending on how well you do, you may be able to earn college credits by taking the test.

There are currently 33 CLEP exams offered, including:

• College Composition
• French, German, and Spanish (Levels I & II)
• American Literature
• American Government
• Introduction to Psychology
• Economics (Micro and Macro)
• Biology
• Chemistry
• Calculus
• Marketing
• Business Law

Each institution has its own guidelines on how much credit they will give to their students, so you might want to wait until after you’re enrolled and to take the CLEP exams that the school accepts and that you’re comfortable with.

Advantages of CLEP exams

Like community college, CLEP exams can give students an edge if they play their cards right. The key is being knowledgeable about what CLEP offers as well as your school’s policies.

• Costs: As of July 1, 2010, CLEP exams are $77 each. That’s much cheaper than taking an introductory class in either community college or a university.
• Time: If you know the material already, why waste the time learning it again? You can either finish your degree faster or enrich your education by taking more specialized courses during the time that you saved.

Likewise, if you have kids in high school, encourage them to take some AP classes and take the exam. It can put them ahead of the game when they start college and they can shave some time (and money) off their degree.

Your thoughts on cutting college expenses

College can be a very good investment. Just like with any aspect of your finances, however, you have to have a game plan to get the most bang for your educational buck. I’d also point out that some very expensive schools offer full scholarships for students with limited incomes so, even if the above tips don’t work for you, you may be able to get a great deal on a high end education.

I’d love to hear your thoughts on getting a good education without breaking the bank. What have you done to cut down on college expenses? Have you ever attended a community college? Or maybe tested out of required courses? Any other tips?

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I’ve heard that if your child obtains a scholarship, you can withdraw that amount from the 529 plan without paying the 10% penalty. Is that true?

The last thing that you want is to save diligently for your child’s education, only to be penalized when they receive a scholarship and don’t need all of the money that you’ve socked away. So… What’s the deal with scholarship and 529 plans?

As it turns out, the typical 10% penalty on non-qualified distributions is waived when withdrawals can be attributed to a scholarship that the beneficiary has received. More specifically, section 530(d)(4) of the Internal Revenue Code states that this penalty exception applies to distributions made “on account of” a scholarship.

What’s less clear is when you have to take the distribution to qualify for penalty-free status. Do you need to take the withdrawal during the year in which the scholarship was awarded, or can you wait until later? The IRS hasn’t provided any clear guidance on this question.

While you you won’t have to pay the penalty for a scholarship-related withdrawals, however, you will have to pay income tax on the earnings portion of your withdrawal. Of course, even if your kid gets a major scholarship, they may have enough other education-related expenses to draw down your 529 savings plan.

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As great as these accounts are, however, there are a lot of misconceptions out there about exactly how they work. Earlier this week, I was catching up on some podcasts when I ran across one from Vanguard covering five such myths.

Here they are, along with a healthy dose of the truth about each one:

1. Myth #1: 529 accounts are difficult to open and maintain. In reality, accounts can be opened online in just a few minutes. You’ll need the beneficiary’s birth date and SSN but, aside from that, it’s very easy. Also, because most plans offer age-based allocations, there’s no need to manage the investments on a daily basis.
2. Myth #2: You can only use 529 assets for schools in the state that sponsors the plan. While 529 are all sponsored by individual states, you can use proceeds from them to cover eligible expenses at most 4 year colleges and universities, as many two years schools and technical colleges. The primary exception to this are pre-paid tuition plans, which are typically tied to a particular state.
3. Myth #3: If your child doesn’t go to college, you’ll lose your assets. If the beneficiary doesn’t go to college, or if there is money left over when they’re done, you have two options. First, you can transfer the account another beneficiary (including yourself), or withdraw and pay taxes plus a 10% penalty. This latter option isn’t great, but it’s far better than losing your account balance.
4. Myth #4: 529 investments dramatically reduce financial aid eligibility. While it’s true that parent-owned account are included in financial aid calculations, less than 6% of the money in these accounts is counted when filling out the FAFSA. The situation is even better for grandparent-owned accounts, which have no effect whatsoever on financial aid calculations.
5. Myth #5: Only account owners can contribute to a 529 plan. While 529 college savings accounts can only have a single owner, anyone (family, friends, etc.) can contribute to the account on behalf of the beneficiary.

If you’re currently in the market for a 529 college savings plan, you might also be interested in the following articles from the archives:

• The Best 529 Plans – 2009 Edition
• The Worst 529 Plans – 2009 Edition
• The Best 529 Plans, Revisited
• The Three Best 529 Plans

Do you have a 529 account? If so, which one? And what do you like/dislike about it?

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The cost of a college education

For starters, let’s take a look at the cost of a college education. According to CollegeBoard, a private four-year college in 2009-2010 costs an average of $26,273/year. In contrast, the average cost of a public four-year college is $7,020/year (presumably for in-state tuition/fees).

Adding it up, and ignoring possible inflation while you’re attending, students attending a public school can expect to pay around $30k for a four-year degree, whereas those at a private school are looking at a tuition bill somewhere north of $100k. Of course, there are also living expenses, though you’d likely incur those whether or not you were in college.

Earnings as a function of education

Next up, let’s take a look at the effect of education on your earning power. While there are obviously exceptions (e.g., Bill Gates, LeBron James, etc.), the general rule is that your earnings increase significantly with increasing education.

What follows is a breakdown of the 2009 median salary numbers of full-time workers aged 25 and over based on their level of education.

Simply finishing high school results in a 38% in median salary, whereas completing that bachelor’s degree results in a 41% increase over some college (or an associate’s degree), and a whopping 64% increase over just having a high school diploma.

Unemployment as a function of education

Finally, let’s set aside earning potential for the time being, and simply look at unemployment rates as a function of education. As you’ve no doubt heard, things are tough all over… Or are they?

What follows is a breakdown of unemployment rates as of February 2010 based on level of education.

While unemployment rates have been hovering around 10%, those with a college degree have an unemployment rate that’s right around half the national average.

While all of the numbers in the table above are higher than normal given the current state of the economy, a college education appears to provide a clear benefit when it comes to finding and/or keeping a job.

You make the call

So… Given the above numbers, what’s your take? Is a college degree worth the investment? In my book, the answer is yes — assuming that you’re qualified. That being said, it also pays to make smart decisions when it comes to selecting a major.

Source: BusinessWeek and CollegeBoard

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I recently graduated from college with a B.S. in Psychology. I have no student loans. I have $4,600 in credit card debt. I also have $2,500 loan on a motorcycle, but my dad bought it from me and is making the monthly payment of $114.00. With the economy the way it is, however, I may have to take it back. I have no rent payment since I live at home, but I also don’t have a job right now, so finances are tight.

I’m looking at going to graduate school to become a licensed counselor, but I’m really wrestling with this decision. My dream is to go to graduate school, and considering all my gifts and passions, as well as my desire to continue learning, this school in particular is perfect. However, my finances are in rough shape, and I’d have to take out $60,000 in loans to go to this school — and counselors don’t get paid a whole lot.

In short, this school would be a great experience, but then I would owe all this money, and it would just weigh over me like a stack of bricks. There is another program in England where I could go to for three months to learn, read, grow, get to know people in a community setting, etc. I’m really torn over this decision. My heart is drawn toward this grad school, but I can’t ignore the possible impact on my finances.

I’ve edited this for brevity, but it’s clear from what she wrote that Shana is strongly drawn toward a graduate education, and to this school in particular.

Scholarships and grants

I would start by asking whether you have done any research into the types of scholarships and/or grants that are available to someone in your position? I’m willing to bet that a little digging could produce some great results.

By the sounds of it, neither you nor your family are wealthy, so there’s a good chance you would qualify for grant money or a scholarship of some sort. Be sure to do your homework in this area.

Work your way through graduate school

You said that you are currently unemployed. What if you were to go to graduate school part-time while working? Robert Espe, a staff writer over at Debt Free Adventure, worked his way through school without taking on any education loan debt… Robert is but one of many who go this route, so it’s definitely possible to make it work.

Career salary and education debt

Another important point to consider is whether or not your aspiring career will pay a salary commensurate with the cost of the debt you are about to incur.

You mention wanting to be a counselor, and express some concern over the earning potential of this sort of position. The salary ranges for counseling positions differ quite a bit. For example, according to salary.com, the U.S. national average salary for a Licensed Professional Counselor is $35,000/year, for Academic Advisors the average is slightly higher at $40,000/year, and Chemical Dependency Counselors average an even higher amount of $46,000/year.

To help put this in context, my wife is a school counselor with a graduate degree. After graduation, she secured a position with compensation in the high $30k/year range. Eight years out of graduate school she still owes over $34,000 on her education loans and has been paying the entire time (with no deferrals or forbearance).

I should also note that education debt is a much bigger deal than the student loan people make it out to be… Just ask anyone who is currently repaying their loans.

Although I’m not a counselor, I am a working professional earning a decent salary. Ten years out of college I still have $31,000 in education debt. While I deferred payments for a few years, the burden is still very real. You indicate a strong dislike for debt and even mention that a graduate degree is not a necessity for your career path. If I were you, I would give strong consideration to alternate options.

In summary

Whatever you do, make sure you spend ample time considering the debt before jumping in head first, as most students do. If I were you, I would use the existing bachelor’s degree to secure a position in the field, then establish a savings plan for future education costs. Save money first, then go back to school.

If nothing else, securing any available scholarship/grant monies and working your way through grad school will help lessen the blow of the education debt burden you need to take on.

Ultimately, taking on the debt is a personal decision. Since the graduate degree is not necessary (or appears not to be based on your reference to another, shorter program in England) I would advise against borrowing to make it a reality. Taking on unnecessary debt is never (or at least very rarely) a sound financial decision.

Your thoughts

What do you think? Should Shana quit worrying about the debt and secure student loans? Are there any useful bits of advice that I failed to mention that can help Shana with her decision?

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Only student loan and mortgage debt left

Remember the Jeep that I totaled and had in the shop for 8 months last year? Well, I didn’t technically own it until three days ago. Last August, I consolidated the amounts owed on my Jeep and the debt still owed on the credit cards that I shredded with a Lending Club loan of $11,000. It took less than seven months to settle those debts once we got focused.

Now the only affiliation I have with Lending Club is that of an investor extraordinaire, and I’m setting my sights on the next debt in line – I’m just not sure exactly which one to pick. Here’s a list of our remaining debts we have left:

• First mortgage = $118,950 at 5.5% fixed with 20 years remaining (recently refinanced)
• Second mortgage = $39,700 at 8.8% fixed with 27 years remaining
• My student loan = $31,850 at 6% fixed
• Her student loan = $34,200 at 4% fixed

Unless something unexpected happens, we should have at least $1,500 in extra cash to put toward our debts each month. This is above and beyond our regularly scheduled payments, so we should really be able to accelerate our debt reduction.

I was planning to shift our debt snowball to our secpnd mortgage until it dawned on me… What if the housing market rebounds?

Repay student loan first?

Should I repay my student loan before my second mortgage? Here are some of the factors that are influencing my thinking:

• The housing market might rebound. We plan to sell our home as soon as we can get what we owe on it. If we focus on the student loan and the market rebounds, then I can repay my mortgages with the proceeds from the house sale, and my student loan will have been greatly reduced.
• The mortgage interest deduction. If I repay my student loan first, I’ll still have a much larger interest deduction to claim come tax time 2010 and 2011.
• Student loan debt is not dischargeable. Not that I would ever file bankruptcy, but the simple fact that student loan debt is not dischargeable in bankruptcy makes me question if it would be wise to make this a priority over a second mortgage.
• The psychological factor. I’m the type of person who would rather focus on paying off a higher interest loan to realize the savings (i.e., our second mortgage), rather than paying off a smaller loan for a psychological boost.

Repay second mortgage first?

I’m already leaning toward paying off our second mortgage first, chiefly because the rate is 2.8% higher than my student loan rate, and 4.8% higher than my wife’s. So… If you think it’s better to pay off my student loan off first, you’ll need to convince me.

• Higher interest rate. As I mentioned above, our second mortgage interest rate is considerably higher than the rate on my student loan, so I stand to save more on interest paid by attacking this debt first.
• The housing market probably won’t rebound quickly. I’m not a real estate agent or an economist, but I believe that both would agree that the housing market will not rebound to 2007 values anytime soon.
• We want to sell ASAP. To be honest, I would like to sell my home tomorrow… And I certainly do not want to wait 5 – 10 years or possibly longer for the market to get our heads above water. By paying down this debt, we’ll be able to sell sooner.

Value of my home vs. amount owed

Lastly, I wanted to throw out some more numbers to help you understand the decision we’re facing. It’s important to keep in mind that I live in Michigan, and that our housing market is worse than most. My home was originally appraised at $170,000 in April of 2007, and our purchase price was $165,000. When we refinanced our first mortgage last week, the lender estimated the current value of the home at $120,000 though I’ve seen online estimates as low as $107,000.

Which should we pay off first?

If you were in my shoes, would you focus your debt sledgehammer on the second mortgage, thereby enabling us to sell our home and downsize ASAP? Or are we better off knocking attacking our student loan debt? Whichever you think is better, I’m very interested in hearing your reasoning.

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My earliest memory of personal finance (though I didn’t know the term at the time) was when I was in middle school. My mother had always told me the importance of saving, but one afternoon, she pulled me aside and took out a few sheets of paper – the amortization schedule for the 30-year mortgage on our first home.

She then showed me how much interest we could save over the life of our loan if we accelerated payments on the principal during the early years of the loan. Although my mom first framed the session as an applied math lesson (percentages! subtraction!), that would be my most memorable lesson in financial decision-making.

Many experts say that leading by example is the way to show your kid show to be financially responsible adults. Show, don’t tell, they say. I agree that action is important, but my experience with my parents lets me know that parents should show AND tell. Kids learn from your actions, but they also benefit tremendously from words that explain the reason behind the actions.

Growing up, frugality was the normal state of things for me. My mother was aggressively paying off our mortgage. Every month whenever there was something extra, she put it into the house. As I grew up – and as I ventured into the homes of friends or classmates and become more exposed to malls and advertising – I come to realize that my parents led a very frugal lifestyle.

They bought reliable cars new, but then drove them for over a decade; they almost never went out to eat; and they refrained from buying a DVD player until a few years ago, when it was utterly clear that VCRs were truly machines of the past. Married for almost 30 years, my parents have rarely been on a vacation by themselves.

So I grew up in an environment where saving money is normal. Had my mother not told me later the reasons behind her aggressive payment of the mortgage (financial freedom, she would explain to me patiently), however, that lesson may not have stuck with me for all these years.

Even when I was a little kid, looking at the papers and the rows of figures under the Interest Saved, Years Remaining, Principal Paid columns, I knew I was looking at something powerful. Those numbers were the reason we sat in faded fabric couches when my parents might have upgraded to leather, and had the thermostat set 66 degrees instead of 72 in the winter.

Because of the choices my parents made, they were able to ultimately pay off their mortgage a decade early, invest in other real estate ventures, and pay for my college education. I didn’t quite realize it then, but I realize it now – that amortization schedule was much more than an applied math lesson.

It was a show and tell of a careful weighing and calibration of dreams – of choosing to forgo something (nicer cars, bigger TV, more stylish clothing) in exchange for gaining something else that my parents deemed more important – the ability to pay off our home years ahead of schedule, thus freeing up cash flow for other goals. To this day, I think that amortization schedule explained to me the essence of personal finance more than any expert every could.

Note: Also check out GetRichSlowly’s post on how to raise money-smart kids. JD Roth polled readers who provided tips on how their parents helped prepare them for financial independence.

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I’ve taken out student loans to support my education in the past and, like some, I wasn’t responsible with all that I borrowed. While I blew some of the cash, however, I soon realized that I needed to pay it all back. I got serious, created a spreadsheet, and got back on budget so I can pay back what I owe.

Work with your lender

Managing your student loan payments depends on several factors, with your lender being the biggest one. With federal student loans, you can usually find a workable solution to get you get back on your feet. Private loans can be a bit harder to negotiate, but it’s still possible.

Either way, you have to come prepared with numbers. Before calling your lender, organize a budget and have a ballpark figure of what you can afford to pay right now. If the customer service representative doesn’t give you a practical number, speak up and tell them what you can afford.

Consider your options

When trying to improve your situation, there are several options you may wish to pursue in hopes of getting back on top of your debt.

Choose a repayment plan that better fits your situation. You may be able to switch to a graduated payment plan with lower initial payments that gradually increase over the term of the loan. You’ll pay more in interest in the long run, but it may be worth it. Alternatively, if your current income has decreased, an income-based payment plan may be a beneficial option. If you have a Federal loan, you can change your payment plan by logging on at Federal Direct Loans.

Apply for a deferment to buy yourself some time. A loan deferment allows excuses you from making payments on your student loan for a set period of time. I’ve had friends use this option as they were job hunting and they resumed payments once they found employment. You can also defer loans when you return to school.

Apply for a forbearance. With a loan forbearance, you may be able to make reduced payments for a limited time, or stop making payment altogether (though interest will continue to accrue). With Federal loans, you can get more information about deferments and forbearances by calling Federal Direct Loans at 800-848-0979. For private loans, contact your lender to inquire about your options.

Consolidate your student loans. If you’re looking for a long-term plan to reduce your student loan payments, loan consolidation may be right for you. Depending on your interest rate, you may be able to consolidate your loans, reduce your interest payment, and have only one monthly payment to make. For private loans, check with your lender to see if there is a minimum amount to consolidate. If you have a mix of Federal and private student loans, you should keep your Federal loans separate as they tent to have very competitive rates.

Your take

Have you ever had to adjust your student loan payments or otherwise modify your loan agreement in order to make ends meet? If so, please share any tips, tricks, or experiences in the comments section.

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Earlier this week, I ran across some interesting data from the National Association of Colleges and Employers. More specifically, they had a listing of the ten highest paying college degrees of 2010.

Note that they’re talking specifically about Bachelor’s degrees here, so things like doctors, lawyers, etc. are off limits. Here’s the list:

1. Petroleum Engineering ($86,220)
2. Chemical Engineering ($65,142)
3. Mining & Mineral Engineering (incl. Geological) ($64,552)
4. Computer Science ($61,205)
5. Computer Engineering ($60,879)
6. Electrical/Electronics & Communications Engineering ($59,074)
7. Mechanical Engineering ($58,392)
8. Industrial/Manufacturing Engineering ($57,734)
9. Aerospace/Aeronautical/Astronautical Engineering ($57,231)
10. Information Sciences & Systems ($54,038)

Notice anything about the entries on that list? Every single one of them involves science, engineering, or computers. This probably shouldn’t come as too much of a surprise, though I did sort of expect to see something in the finance sector creep onto that list.

Just for the sake of contrast, check out this list of the lowest paying college majors that I published last fall:

1. Social work
2. Special education
3. Elementary education
4. Home economics
5. Music and dance

Quite a difference, huh? This isn’t to say that you (or your children) should pick a major based solely on future earning potential. After all, not everyone is cut out to be a petroleum engineer, and fewer yet would be happy showing up to work as one on a daily basis. Nonetheless, future earning potential is one of many factors that should probably be kept in mind during the overall decision-making process.

What did you major in, and do you have any regrets?

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While I attended college on a mix of financial aid grants and scholarships, so far my siblings have been able to pay without resorting to loans (learning from my mistakes has some benefits).

Whenever I received money while attending school, I was in the habit of saving some of it and spending the rest frivolously. Looking back, I wish I had been more prudent with my money. It would’ve put me in a much better situation and I could’ve taken significantly less loans out.

That being the case, I wanted to share some better ways to use your tuition refund, or any other windfall.

Start or build up your emergency fund

If you haven’t done so already, establishing an emergency fund can be a smart move. Just because you’re in college doesn’t mean you won’t have emergencies. Keep your money in a high yield savings account to help it gain interest while you attend school.

Many college students have low necessary expenses, so even a small tuition refund can be a big help. Each semester, you can grow the fund with your refunds. An added bonus is that, when you graduate, you’ll have a bit of cushion to help you transition to the “real world.”

Pay off your credit card debt

I listed this second because I think an emergency fund is vital. If you’re like me, however, you probably have a couple of credit cards with balances on them. Instead of waiting, use the refund to pay down your debt. I’m all for using the debt snowball method, as knocking out those low balance debts can be a huge boost.

Unless you have a regular source of income and can handle them responsibly, you should then hide your credit cards. If you’re looking to build your credit history, consider setting up a small recurring payment ($40 or less) and pay it off every month.

Invest your money in an IRA

If you’ve saved some money and have no debts, you’re in a very good position. You should consider putting some of your tuition refund away in a Roth IRA. The benefit of a Roth IRA is that, while you pay taxes on the money before you put it in, you can withdraw funds without taxes or penalties once you’ve reached age 59-1/2 and held the funds in the Roth for at least five years.

I don’t think many college student get this much back, but I should mention that the annual contribution limit is $5,000 ($6,000 if you’re 50 or older). Since you’ll be starting young, you’ll also gain the advantage of compound interest. Let that compound interest to work in your favor by investing for your long-term future.

Set aside some money for fun

You’ve worked hard, so it’s not a bad idea to splurge a bit. Remember, though, to set a limit and keep it. For example, put aside some money in a savings account for a summer trip. That way you can have a wonderful experience to remember without worrying about debt. It’s really up to you as to what you consider fun.

Any other thoughts?

My view is that you should do whatever you can to establish good habits as early as possible. After you graduate, you’ll be thrilled that you started off on the right foot. If you’re still in college, you should apply for as many scholarships and grants that you can. Sure, it takes some work, but it’s well worth the effort.

For those of you that are out of college, if you could go back, what (if anything) would you change?

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Lowest paying college majors

1. Social work
2. Special education
3. Elementary education
4. Home economics
5. Music and dance

Rounding out the top (bottom?) ten are: drama, leisure studies, philosophy, art, and audiology. I’ve gotta say, the contents of this list aren’t all that surprising.

Maintaining perspective

Something to keep in mind here is that there’s more to life than money. If you’re passionate about something on this list, then by all means you should pursue it. Just be aware of what you’re getting yourself into, and set your expectations accordingly. If you seem destined for a low-paying vocation, you might want to re-think that high cost education.

Another important point is that lists of this sort are based on overall averages, so nothing is set in stone. Some people will end up making a lot of money regardless of their major, and others… Well, not so much.

Source: “College Majors Handbook“

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Have you ever wondered if it makes sense to spend big bucks on an undergraduate education or whether you should at least consider less expensive state schools or online degrees? Some time ago, I read another blogger’s post explaining why college is worth the cost.

The value of education

This particular blogger’s logic was interesting and unique — he calculated the added income received as a result of having a fancy degree versus what the student could have earned with the money in alternative investments. After all, spending money on college is an investment and should be evaluated as such. Right?

He found that you (or your child or grandchild) usually do well by biting the bullet and spending the money. Let’s say, for example, that it costs you $200k to go to college. As a result of attending college, let’s further assume that you earn an additional $25k per year for the rest of your life. He argues that it’s a hands-down smart investment.

A different view

As far as I’m concerned, the foregoing math is right, but the comparison is wrong — or at least incomplete. I do agree that college is an investment. It costs way too much money and takes way too much time to just be considered as an “experience” — or at least that’s how I see it.

You’ll have one set of “experiences” at a prestigious Ivy League school, and a different set of “experiences” at a less expensive state college, and even another if you decide to become a student at one of many smaller graphic design colleges. There’s no way of knowing in advance which will be more important, or which will have a greater positive impact.

No, the way to decide where to do your undergraduate work is to consider the extra income you could produce as a result of going to an expensive school vs. getting the same degree at a less expensive school. That’s it. And when you look at it that way, the result favors spending as little as possible on undergraduate school.

Should you pay more?

Let’s consider the facts:

The most selective — and generally most expensive — schools usually attract the brightest students. And you’d expect those bright kids to excel once they join the workforce no matter where they went to school, right?

So the real question is: Do the bright students who attend top schools earn more over their lifetimes than they would have had they gone to a less prestigious and less expensive school?

Said another way, are your lifetime earnings a result of who you are or where you went to school?

Princeton economist Alan Krueger and Andrew W. Mellon Foundation researcher Stacy Berg Dale tried to answer this question. They looked at students who were smart enough to be accepted at the top schools, but who chose to go to less selective (and lower cost) institutions.

What do you think they learned?

Smart kids who went to the expensive schools were no more successful than similarly qualified students who attended less expensive schools. In other words, the student matters. The school doesn’t.

A real-life example

Not convinced? Here’s a true story from my own neighborhood.

My daughter just graduated high school. Her ultimate goal is to work on the business side of music performance. She was accepted at NYU, Berklee School of Music, and two state colleges. NYU and Berklee both cost north of $55k/year. The state colleges cost 75% less.

A few months ago, my wife was talking with our neighbor about the situation. My wife didn’t know it at the time, but our neighbor’s two sons were recent graduates of the Berklee School of Music.

When my wife told our neighbor about our situation, she immediately asked her two sons (living at home) to come out and speak to my wife. They told her what a great school Berklee was, and how much they regretted going there. Why?

Two reasons:

First, each child was now saddled with over $100,000 in debt. They calculated that it would take 7 to 10 years to get out of debt.

Second, while they were both working in the music industry, they were working alongside other recent graduates who attended cheaper state schools. It turned out that they didn’t need the expensive college degree to qualify for the jobs they wanted.

My wife asked the boys which state college the boys’ co-workers attended. The boys told my wife that 5 out of 6 of their co-workers went to one of the state colleges my daughter was accepted to. Where do you think my daughter is going to attend?

Here’s a hint: Go State!

What do you think?

Do you think it’s worth selling a kidney to cover the cost of an undergraduate education? Why or why not?

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The five worst 529 plans

• Tomorrow’s Scholar (Wisconsin; Wells Fargo)
• John Hancock Freedom 529 (Alaska; T. Rowe Price)
• Franklin Templeton 529 College Saving (New Jersey; Franklin Templeton)
• Columbia New York Advisor 529 Plan (New York; UPromise/Columbia Management)
• Columbia 529 Plan (Nevada; Columbia Management)

Is your state on the list?

The good news for those that live in one of the states listed above is that most states offer multiple plans. Hopefully you’ll be able to find something more acceptable. If not, you may want to look outside your state. Yes, you’ll be giving up any possible state income tax breaks by doing this, but that’s probably a better option than putting your money into a bad plan.

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The following list of the best 529 plans is based on investment flexibility, fees and expenses, and 2008 performance. While it’s tough to learn much from performance during such a dismal year, some plans have clearly been holding inappropriate allocations. For example, one of Utah’s age-based portfolios, which is targeted at students over the age of sixteen (i.e., with just 1-2 years before they need the money), was so heavily weighted toward stocks that it lost over 26% last year.

With that as a backdrop, here are the ratings…

The five best 529 plans

• Path2College 529 Plan (Georgia; TIAA-CREF)
• College Savings Iowa (Iowa; Vanguard/Upromise)
• Bright Start College Savings Program (Illinois; Oppenheimer)
• Mississippi Affordable College Savings Program (Mississippi; TIAA-CREF)
• Direct Portfolio College Savings Plan (Colorado; Vanguard/Upromise)

Note that, as long as you’re using a “college savings plan” as opposed to a “pre-paid tuition plan,” you’re not locked into a particular school (or even state). See my earlier article for details.

Don’t forget the tax breaks

Another factor to consider is that many 529 plans offer state residents an income tax deduction on at least a portion of their contributions. While that won’t be enough to tip the scales in favor of a fee-laden plan, it might be enough to make a decent plan look great.

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In general terms, 529 plans com in two flavors: pre-paid tuition plans, and college savings plans. I’ve put together a thumbnail sketch of each type, below.

529 Pre-Paid Tuition Plans

Pre-paid tuition plans allow people to pre-pay for all or part of a future college education at today’s prices. Some of these plans allow you to buy “units” of tuition (corresponding either to a set number of credit hours, or a percentage of the tuition bill), whereas others allow you to purchase contracts for one to five years of tuition.

The advantage of these plans are that they are guaranteed to cover the future cost of education. A major disadvantage is that they are targeted toward public colleges or universities, and are typically limited to state residents. Beyond this, pre-paid tuition plans cover only tuition and mandatory fees, though some plans offer a room and board option, or let you use excess tuition credits for other expenses.

529 College Savings Plans

College savings plans allow an account holder to save and invest for future college expenses on behalf of a beneficiary. The account holder can choose amongst a number of investment options including stock and bond mutual funds, money market funds, and age-based portfolios.

These plans are similar to Roth IRAs in that there are no federal income tax benefits, but withdrawals are tax free as long as you use them to cover qualified expenses. Qualified expenses include tuition, fees, room and board, textbooks, and computers (if required).

The contribution limits on these plans are very high, generally in excess of $200k total, and they are also more flexible than pre-paid plans in that you’re not locked into a particular school (or even state). The primary disadvantage is that there is no guarantee that your investments will cover the future cost of a college education.

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Most college students cannot pay for college out of pocket. Therefore, they must apply for loans or financial aid. Because financial aid is basically free money, all students should apply for it before considering loans. Today I will discuss six common mistakes that people make when applying for financial aid.

1. Not applying – As obvious as it may seem, many college students never even apply for financial aid. They simply assume that they could not get it. However, nearly everyone can get at least some financial aid. For example, even families who make more that $100,000 can get financial assistance. The American Council on Education estimated in 2006 that 1.8 million low- to middle-income families did not even file the FAFSA (Free Application for Federal Student Aid). They also estimated that 1.5 million of those same families could have qualified for a Pell Grant. Always apply for financial aid, chances are you will get some aid.
2. Missing deadlines – Because if can be worth thousands of dollars, you would think that all students would file the FAFSA as soon as possible. Surprisingly, many families wait until the last minute. That is a big mistake! If you miss the FAFSA deadline, you will not qualify for financial aid! This is a big deal. File your FAFSA as early as possible. Make it your goal to be the first person in the whole nation to submit your FAFSA. Even after you’ve met the FAFSA deadline, you will still have more deadlines to meet. Every school, for example, will have a their own deadlines and requirements. Make sure you meet them. Set yourself a deadline two weeks before the real deadline. That way, if you miss your first deadline, you still have some time before the final cutoff point.
3. Paying for something that is free – For what does “FAFSA” stand? It means the Free Application for Federal Student Aid. Therefore, if any website wants you to pay them for help you with the financial aid process, they are most likely trying to rip you off. The basic rule of thumb for financial aid is “If you have to pay money to get money, it’s probably a scam.” Avoid paying anyone for help with the FAFSA. Instead, get free online support or call your local college – they are normally more than happy to help.
4. Forgetting scholarships – While you are busy filing your FAFSA, do not forget about regular scholarships. Hundreds of thousands of dollars are available in scholarships. Find a good free scholarship search like Fast Web and start applying for scholarships. Just like the FAFSA, make sure you meet all the deadlines and be very wary of paying money for “scholarship help”.
5. Living like you have a rich uncle - Even if you get lots of scholarships and other financial aid, you are most likely still going to be short of cash. Do not live like you have tons of spare cash. If, like most students, you must take out a student loan, you want it to be as small as possible. College is the time for frugality. If you live cheaply in college, you might be able to live more expensively after college. Every time that you want to buy something extra ask yourself, “Do I have to get this now, or can it wait until after college?” Obviously, some extra spending is understandable, but try to be frugal.
6. Ignoring federal loans – If you do have to get a student loan, apply for federal loans before you consider private loans. Normally, federal loans have much lower interest rates than private loans. Unfortunately, federal loans have lower borrowing limits that private loans. Federal loans amount to an average limit of $4,000/year. The first year you can only borrow about $2,000, but by the last year you can borrow about $8,000. For a good comparison of federal loans vs. private loans, read this article by Business Week.

Obviously, these are only a few of the mistakes that can be made.

What mistakes do you think are the most dangerous?

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1. Start an emergency fund. If you don’t have an emergency fund, consider opening a high-yield savings account and depositing your windfall for a rainy day. While it might not be enough to create a full-fledged emergency fund, it’ll be a good start. And if you already have an emergency fund, consider adding to it.

2. Pay down your debt. Whether it’s credit cards, an auto loan, or a student loan, you need to get that monkey of your back. So add your windfall to your debt snowball and keep on digging.

3. Invest in yourself. Use the money to cover tuition for a course about something that interests you, or which increases your earning potential.

4. Prepay your mortgage. Send your windfall to your mortgage lender. You’ll realize savings over the life of your loan, and you’ll own your house outright sooner than expected.

5. Refinance your mortgage. While refinancing your mortgage to a lower rate can result in substantial savings, you typically need to bring some cash to the table. In this case, your tax windfall could be just what the doctor ordered.

6. Fund your IRA. Did you know that you can have the IRS direct deposit your refund into your Roth, Traditional, or SEP-IRA? While it’s too late to arrange for that this year, it’s never too late to write a check to your IRA custodian when your refund arrives.

7. Invest in your children. Start a college fund for your kids. Whether it’s an Education Savings Account (ESA) or a 529 plan, there’s no time better than the present to get started.

8. Support your favorite charity. Not only does making a charitable donation help a worthy cause, it’s also deductible on next year’s taxes.

9. Add it to you “sunny day” fund. While emergency funds are all well and good, everyone needs a bit of fun and games every now and then. Why not set some aside for a future vacation or some other special expenditure?

10. Adjust your withholding. Last but certainly not least, you should consider adjusting your withholding so you don’t end up giving the government an interest free loan during the upcoming year.

If you have any other suggestions, please feel free to share them in the comments.

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For reference, I previous picked the following three as my top choices:

Illinois BrightStart Savings (Link)
Ohio CollegeAdvantage 529 Savings Plan (Link)
Utah Education Savings Program (Link)

Click through to my original “Best 529 Plans” post to get details as to why I like these plans. In short, they all feature Vanguard funds and have dirt-cheap fees.

Next up, we have the Money Guy’s favorites:

Utah Education Savings Plan (Link)
New York 529 College Savings Program (Link)
Alaska College Savings Plan (Link)
California Scholarshare 529 Plan (Link)
Georgia’s Path2College 529 Plan (Link)

First, you’ll notice that the only overlap between our lists is Utah. While there’s nothing particularly bad about the balance of his favorites, their fees aren’t quite as low as in the plans that I picked. Like Utah, New York is a Vanguard plan. In contrast, Alaska and Georgia are T. Rowe Price plans, whereas California features Fidelity funds. I should also note that he’s partial to Georgia because that’s where he lives, and he gets a state tax break.

Now for the Morningstar list of the worst 529 plans:

Alabama Higher Education 529 Fund (Van Kampen)
Arizona PF 529 College Savings Plan (Pacific Funds)
Arizona SM&R Family College Savings Program (SM&R/Alger)
Nebraska AIM College Savings Plan (AIM)
North Carolina National College Savings Program (Seligman)
North Dakota College SAVE (Morgan Stanley)
Wyoming College Achievement Plan (Merrill Lynch)

Finally, a word to the wise… Many states have multiple plans, so be sure you’re getting the one that you want.

[Source: Money-Guy.com, 10/08/2007]

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» Tax Credit for Retirement Savings Contributions

I am looking to pay off a student loan of just under $22,000 and saw that I can borrow from my IRA to pay for school without incurring the added 10% tax penalty, would this also apply to paying off a student loan? This is a private loan not federal and my rate is around 10%, it’s adjustable. What do you think I should and can do?

The ability to use IRA funds to pay for Qualified Higher Education Expenses (QHEEs) without incurring the 10% penalty is described in Chapter 9 of IRS Publication 970. As far as I can tell, the Qualified Higher Education Expenses don’t include student loan repayment. Rather, qualified expenses include things like tuition, mandatory fees, books, supplies, equipment, and room and board. Based on that, it seems that you can’t use IRA funds to pay off your student loans (at least not without incurring the 10% penalty).

The one obvious exception to this is Roth IRA contributions (but not earnings), which can be withdrawn at any time, for any reason, without penalty. Note that I’m not saying this is a good idea, I’m just saying that it’s possible.

Also, just to clarify something from the original question… You’re not really “borrowing” when you take a qualified distribution. You’re making a withdrawal, and the only way you can put the money back in (short of sticking the money back in within 60 days) is by making regular contributions, which are subject to annual limits as well as income restrictions.

Of course, I’m not a tax expert, so it might be a good idea to run this stuff past a pro before acting on it.

This article is part of my Money Q&A Series.

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In short, this means that my wife and I would be limited to a combined annual deduction of $2000 even if we set up separate plans for all four boys. On top of thiswe’re not crazy about the investment options, and we’re also planning on saving a lot more than $2k/year. Sure, we could do $2k in state to get the deduction and then focus our efforts elsewhere, but I’m not sure that it’s worth the trouble of keeping track of yet another account. Thus, we’re looking for an out-of-state plan to hold most, if not all, of our contributions.

After reading through the responses to my original post and doing some more research on my own, I’ve identified what appear to be the three best plans for our circumstances. They are (in no particular order): Illinois, Ohio, and Utah. What follows is a breakdown of the key features of each state’s plans. Note that I’m looking at all three of these plans through the eyes of an out-of-state investor. In some cases, the account maintnenance fees may be waived or at least reduced for state residents. Likewise, there may be tax benefits for in-state investors. But since those don’t apply in our case, I’m ignoring them.

Without further ado, here are my top choices:

Illinois BrightStart Savings (Link)

Account maximum: $235,000 per beneficiary (across all Illinois accounts)
Minimum contributions: $25 initial investment, $15 minimum for subsequent contributions.
Investment options: Two age-based options (active vs. index) and four static investments options. Age-based portfolios are held at Oppenheimer Investments whereas static portfolios are held in Vanguard mutual funds.
Fees & expenses: Account maintenance fee of $10/year. Investment expenses range from 0.20-0.23% for the Vanguard funds.

Ohio CollegeAdvantage 529 Savings Plan (Link)

Account maximum: $306,000 per beneficiary (across all Ohio accounts)
Minimum contributions: $15 per investment option.
Investment options: Investments are offered through Putnam (for Ohio residents only), Fifth Third, and Vanguard. I’m focusing on the latter, which means there are three age-based options and eleven static options.
Fees & expenses: There is no account maintenance fee. Vanguard funds have a management fee of 0.20%-0.30% and an underlying expense ratio of 0.05%-0.13%.

Utah Education Savings Program (Link)

Account maximum: $319,000 per beneficiary (across all Utah accounts)
Minimum contributions: None.
Investment options: Five age-based options and four static investments options. Investment Investments are held in Vanguard mutual funds or in the State Treasurer’s fixed income portfolio.
Fees & expenses: Account maintenance fee of $4 per $1,000 invested up to a maximum of $20 per year (waived for Utah residents). Annual program management fee of 0.25%. Investment expenses range from 0.025% to 0.13% annually, except for the State Treasurer’s Investment Fund which has no additional expenses.

Since all three offer very similar investment options (and all would allow us to invest through Vanguard, our preferred vendor) our decision will turn mainly on cost. Based on that, it looks like Ohio comes out on top until you get to higher balances, at which point Illinois looks to be the best choice, with Utah coming in last.

I’m still somewhat undecided as to whether or not we should put the first $2k into our state plan to capture the tax deduction and invest the balance elsewhere, or to just forego the small(ish) deduction, streamline our investments, and put it all in one state.

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I’ve heard especially good things about the Utah plan, which has five age-based options as well as four static options – not complete flexibility, but I can probably make do with the static options. They assess an administrative fee of 0.25% of invested assets plus $25 $20 per year (this latter fee is actually $5 $4 per $1000 invested, up to a maximum of $25 $20). In addition to this, investments are subject to Vanguard’s fees, which range form 0.025% to 0.13% for the fund combinations available. This means that the management fees will be less than 0.40% of invested assets per year, not including the $25 flat fee. Oh, and they currently have a maximum contribution limit of $319,000.

From what I’ve seen, this makes Utah look like one of the cheapest and most attractive plans, but I was wondering if anyone out there has specific recommendations as to other programs that we should be looking at…

Update: Illinois has just re-worked their 529 plan, known as BrightStart, to include Vanguard Index Funds as an option (they also have actively-managed Oppenheimer funds). Their expenses are low (a total of 0.20-0.23% for the Vanguard funds plus a $10 annual account maintenance fee) and their investment options look similar to Utah. If you’re concerned about maximum contributions, however, they’re capped at $235,000 in Illinois, considerably lower than what is available in Utah). The new plan was made available yesterday.

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Below, I’ve compiled a list of current 0% balance transfer credit card offers from a variety of issuers. These cards are a great tool for killing off high-interest credit card debt. When combined with a high-yield online savings account these cards are also great for credit card arbitrage. All of these cards offer 0% APR and no annual fee, and some also offer rewards credit card and/or signup bonuses.

Zero Percent APR Balance Transfer Offers

1. Citi Platinum Select Mastercard has the longest 0% balance transfer offer at 18 months. Also 0% intro APR on purchases for 18 months. No annual fee.
2. Citi Diamond Preferred 0% Intro APR on Purchases for 18 months and 0% on Balance Transfers for 18 months. After that, the APR will vary with the market based on the Prime Rate. Both the rate and term of this offer will be based on your creditworthiness. No annual fee.
3. Chase Freedom Visa – $100 Bonus Cash Back + 0% Intro APR 0% APR & balance transfers for 12 months, no annual fee. 5% cash back offers in bonus categories like gas stations, restaurants, hotels, movie theaters and more subject to quarterly enrollment and maximum. 1% unlimited cash back on all other purchases with no spending tiers or caps on how much you can earn.
4. Discover More 0% intro APR on balance transfers for a full 15 months. 0% intro APR on purchases for a full 15 months.  No annual fee. 5% cash back bonus in categories that change like gas, restaurants, department stores and more. Limitations apply*
5. Pen Fed Promise Visa Absolutely no fees, including no fee on balances transferred. Introductory Purchase Rate 7.49% APR for the first 36 months. Afterwords, the APR will vary with the Prime Rate and is currently 9.99% APR. No annual fee.
6. Slate(SM) from Chase – No Balance Transfer Fee with excellent or good credit this card offers 0% Intro APR for up to 15 months on both balance transfer and purchases. No balance transfer fee when you transfer your higher rate balances during the first 30 days your account is open. No annual fee.

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For the most part, I just ignore the fact that we even an account, but every once in awhile I log in and check out our balance. This past weekend I did just that, and discovered that we have $44.96 in savings built up — mostly from . Woohoo! That’s enough money to go to the trouble of withdrawing it. What’s that you say? You didn’t know that you could just withdraw the funds rather than investing them through Upromise? Sure enough, you can do just that.

Here’s the scoop straight from Upromise:

Can I withdraw company contributions from my Upromise account without transferring them to a savings plan, and if so, how?

You can withdraw your Upromise contributions at any time during your membership. To withdraw company contributions from your Upromise account, submit a letter in writing to Upromise requesting a withdrawal from your Upromise account. The letter must state your full name and exact amount that you would like to withdraw, up to total amount available in your account, pending contributions are not eligible for withdrawal.

For the protection of our members, we require that your letter either be notarized or contain a Signature Guarantee if the withdrawal request is in excess of $200. A Signature Guarantee is a guarantee you can obtain from a financial institution, such as your bank, that your signature is yours and that it is genuine.

Withdrawal letters should be sent to:

Upromise
ATTN: Customer Care
P.O. Box 55555
Boston, MA 02205-5555

Checks are sent once per calendar quarter, so you should typically receive your check within 12 weeks of your request being received.

To make your savings work for you, you may want to consider transferring your company contributions to an investing plan for a future college student.

So there you have it… Just whip up a letter including the requested information, send it to the above address, and then wait. As long as you’re withdrawing less than $200, there’s no need to deal with obtaining a Signature Guarantee.In my experience, it actually takes quite awhile to get your check — they say up to 12 weeks because checks are sent once per quarter, and it was at least that — but the check does come. You’re then free to do anything you want with the money.

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I think most people have enough trouble just saving adequately for their retirement. Throw in college education and it just becomes too overwhelming. Too often the result is that people don’t address either goal adequately, or they get so discouraged that they sometimes give up altogether, figuring it’s hopeless.

That’s why I recommend that people avoid trying to do too much and, instead, adopt a realistic saving plan that focuses on the most important goals first and then moving on to secondary ones.

He then goes on to rank things as follows:

(1) Emergency fund
(2) Stuffing your retirement accounts with as much money as possible
(3) Everything else (including education)

This is pretty sound advice in my book. As they say, you can’t borrow for retirement, so make sure that’s taken care of before you start saving for other things.

Source: CNN/Money

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The problem is that these same sorts of withdrawals are subject to a 10% penalty (plus applicable taxes) when you’re dealing with a 401(k). Granted, you can always take a loan from your 401(k) to get around the penalties, but the loan will likely come due immediately if you quit your job or get fired and, if you can’t pay it all back at once, the outstanding amount will be subject to the same penalties you were trying to avoid in the first place.

Another thing to watch out for is that, even if you opt to make the withdrawals from an IRA, you could face penalties if you pull out more in a given year than you actually spend. So if you’re going back to school for, say, two years, don’t pull the full amount all at once. Rather, spread it across the years or you’ll get nicked for the 10% penalty on whatever you don’t spend in the first year.

Oh, and one last thing… If you leave your job, you can always roll your 401(k) into an IRA, at which point you’re free to take advantage of the comparatively generous IRA withdrawal rules. Again, I’d personally avoid tapping my retirement funds if at all possible. But if you have to do it, make sure you’re smart about how you go about it.

[Source: WashingtonPost.com]

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First off, here are the ten most affordable college towns, including average home prices:

1. Texas Tech University, Lubbock, TX — $164,133
2. Mississippi State University, Starkville, MS — $169,433
3. Louisiana State University, Baton Rouge, LA — $173,317
4. Notre Dame, South Bend, IN — $173,600
5. University of Tennessee, Knoxville, TN — $175,250
6. Clemson University, Clemson, SC — $176,475
7. Baylor University, Waco, TX — $178,500
8. University of Mississippi, Oxford, MS — $179,550
9. Kansas State University, Manhattan, KS — $185,850
10. University of South Carolina, Columbia, SC — $190,058

And now for the top 10 most expensive college towns — to be fair, most of these aren’t what I’d consider to be true college towns, but they are home to some pretty major Universities.

1. Stanford University, Palo Alto, CA — $1,550,000
2. UCLA, Los Angeles, CA — $1,274,342
3. USC, Los Angeles, CA — $1,274,342
4. University of California, Berkeley, CA — $1,186,500
5. Boston College, Chestnut Hill, MA — $811,525
6. Northwestern University, Evanston, IL — $674,250
7. University of Miami, Coral Gables, FL — $671,854
8. Colorado University, Boulder, CO — $546,350
9. University of Maryland, College Park, MD — $462,035
10. University of Minnesota, Minneapolis, MN — $397,133

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If you’re looking for more information on 529 plans, check out The Best Way to Save for College by Joseph Hurley, which is a great book on 529 plans. Also check out Joe’s website, Savingforcollege.com, which is an excellent online resource. Then again, you could always just call your rich uncle.

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According to Orman:

“You need to listen up here: You must take care of your other financial needs before you save one penny for your kids’ college educations. That means getting rid of your high-rate credit card debt, contributing enough to your 401(k) to get the maximum company match, saving up for a home if you don’t yet own one, funding a Roth every year if you meet the income eligibility requirement (under $95,000 for a single tax filer, $150,000 for married couples filing a joint return), and saving up an eight-month emergency cash fund. And when all of that is done, go back and max out on your 401(k) contribution and save a bit more for retirement in a regular taxable account.”

While opinions vary on issues such as the size of your emergency cash fund (eight months is on the high side of most recommendations), Orman makes a number of good points, particularly with regard to retirement savings… After all, your kid(s) can always get financial aid to help pay for college, but the same can’t be said for your retirement.

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