By executive order, President Obama has made a few minor changes to the student loan industry designed to help students and former students with unmanageable student loan debt. Anyone who began their undergraduate studies in 2006 probably did so with the reasonable assumption that they’d have a job after graduation. By the time these students graduated with bachelors’ degrees, the economic situation offered a different reality. The unemployment rate for Americans between the ages of 20 and 24 as of September 2011 was 14.7% according to the Bureau of Labor Statistics.

Last year, the total amount of student loan debt surpassed credit card debt for the first time. Student loans and the value of an education is now such a popular debate that it sparked a discussion at dinner last night with several colleagues. With tuition costs rising much faster than inflation, the only financially responsible path to take is for a family to carefully consider whether the expense of college is worth the benefit. If the only benefit is perceived in terms of financial return on investment (ROI), it can be very difficult in many cases to justify private school tuition.

One liberal arts graduate at the table pointed out that there is more to gain from education than immediate high salaries, and this is something that I’ve discussed recently in terms of building human capital. The expense of higher education is subject to Maslow’s Hierarchy of Needs. While citizens of the United States often consider higher education as a right, it is a privilege. While everyone should go to college, or at least have the opportunity to do so, being able to afford a school that matches any student’s skills and desires can be beyond financial reach.

It is possible to earn a degree without going into debt, but when part of the American dream is providing every opportunity for our children to succeed without barriers, finances often don’t stand in the way. To make those dreams happen, someone often needs to sacrifice the future. Today, former students are sacrificing their financial well-being for the opportunity to have completed their degree at their preferred institution.

Last year, Congress agreed to some changes to the student loan industry to help students and former students struggling with student loan debt, and Obama’s “Pay As You Earn” plan expands on these benefits for students with federal student loans, not private loans, with at least one loan borrowed directly from the government and one borrowed from a bank.

• In 2012, borrowers will be able to reduce their monthly payments from 15% to 10% of their discretionary spending. The original law waited until 2014 to make this change.
• In 2012, borrowers will be able to forgive the balance of their loans after 20 years of faithful payments, up from 25 years. Last year’s law would have put this into effect in 2014.
• Student loan consolidation will return, allowing current and recent students to save up to 50 basis points on their loans.

The student loan industry is dysfunctional. The availability of student loans makes it possible for colleges and universities to raise tuition without significantly affecting demand. By not solving the problem of rising tuition prices, the government gives a boost to the organizations, both semi-public and private, that finance and underwrite student loans. Furthermore, student loan debt is not forgivable in bankruptcy, unlike almost all other forms of debt. In a volatile job market, it’s riskier to have a student loan than it is to have credit card debt.

I’d like to have children at some point, and I’d like for them to have the opportunity to attend college. I would not like for them to need to sacrifice a significant portion of their future in order for them to receive the education that’s best for them. At this rate in two decades, a college education at a private school will be unaffordable for middle class families without student loan debt that requires a lifetime of servitude.

Photo: JoshBerglund19
Bureau of Labor Statistics, CBS News, New York Times

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Last year, I offered ten ways to boost your human capital. I’ve spent the past few years concerned mostly with the net worth, income, and expense measurements of personal finance, but human capital is just as important as monetary capital. By increasing human capital, you increase your value to society as well as potential future income. In this series, I’m taking a deeper look at how you can increase your human capital.

If you read a fair amount of financial writing, whether in mainstream media or on personal finance blogs, you may have come to question the value of higher education. It’s a reasonable question. After all, student loan debt has surpassed credit card debt as the Untied States’ heaviest pull on net worth. An increasing number of students leave college with student loans that will take an increasing amount of time to pay off, and in an economy where graduates are lucky to have jobs that pay well, or even lucky to have jobs, the increasing cost of college is raising questions as to whether the financial sacrifice is worth the education.

Numerous surveys should that in general, income levels increase significantly with each degree, with the most significant increase being from a high school degree to a bachelor’s degree. Despite this, the increases don’t always continue into advanced graduate degrees or professional degrees if you look at each industry separately. As a result, financial writers look at the return on investment (ROI) of any particular education and often determine that for many people it makes more sense to join the workforce right out of high school.

The numbers don’t tell the full story, however. Someone whose job is a mortgage broker might not see an income gain from finishing a bachelor’s degree. In fact, he could earn more by starting right out of high school with a head start of up to four of five years. This can be a lucrative position for someone particularly skilled at sales. However, as many mortgage brokers have seen since 2008, the income potential can be limited by the economy. Most brokers are primarily paid in commission, and if banks aren’t lending, brokers make very little money. Most quit.

With a boarder education, such as a degree in a different field or certification in something related, like financial planning, they would have flexibility. Their income would not be subject to market forces as much if they had education that might take them elsewhere.

Again, looking at averages, it’s not always the subject of a degree that’s important. Most jobs require a college degree, but the degree doesn’t always need to be in the same field as the job. One type of degree could increase your suitability for a number of jobs. At one time, I was considering going back to school to earn a law degree. I wasn’t interested in being a courtroom lawyer, but the degree could have opened doors for me in the future in any number of fields.

It can be difficult to earn degrees later in life when there are more responsibilities to be concerned about, but it can be done.

• If you don’t have a bachelor’s degree, earn one now. If you’re interested in boosting your human capital and allowing yourself greater flexibility, don’t be concerned about which school. Find a convenient program, perhaps at a local community college, and take classes at night until you can walk away with a bachelor’s degree.
• Take classes online. Regardless of whether you’re aiming for a degree, consider enrolling in online courses. While the difficulty of the courses can be higher than classroom-based courses, you may have freedom to learn the material on your own schedule. In my experience, online courses required more teamwork than traditional courses, so you’ll need to reserve time to work together with your classmates.
• Have a goal of certification rather than a degree. Friends of mine who enjoy technology found more opportunities for greater income when they became certified with certain hardware and software.
• Enroll in classes unrelated to your field. If you’re not passionate about your work, you may benefit from changing course. You don’t necessarily need to leave your current job behind, but taking classes that allow you to learn more about a topic you’re passionate about can increase your versatility as well as invigorate your desire to succeed in any field. Over the last few years, I’ve been taking photography classes, and it’s helped me view the world more artistically, and that may pay off some day if I focus on taking photography to the next level, or it may only pay off in the way I look at the world around me.

Most importantly, and particularly for younger people, higher education and the habits that come with succeeding at higher education help develop advanced cognitive skills that allow people to have a better understanding of the world around them. That’s a concept to which it’s difficult to assign a finite value, but it is important in the development of someone seeking to reach the top of Maslow’s Hierarchy of Needs pyramid.

Education is an important component of human capital. Do you consider it worthwhile to increase your education?

Photo: mathplourde

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Sallie Mae and Ipsos Public Affairs, a research company, shared some good news for college students and their families. In the latest research results, gleaned from a representative sample of 1,600 undergraduates and their families, the total amount paid for a year in college has decreased. With tuition costs increasing every year faster than the official rate of inflation, this is good news. Despite cost increases, more students are taking advantage of grants and scholarships to help pay for higher education.

From the 2009-2010 to the 2010-2011 academic year, families who received grants and scholarships increased from 55 percent to 67 percent. Overall, the cost decrease can be attributed to students and families choosing lower-cost schools to save money amid the recession, living at home rather than on campus, and reducing the academic schedule to part time.

The study also showed that families are looking more at the practical reasons for attending college rather than idealistic reasons. A larger percentage of students and families believe that earning a bachelor’s degree and receiving a college education is necessary for their intended occupation and for increasing income potential throughout their lives.

Digging deeper into the data, it’s interesting that most of the positive changes from one year to the next occurred for middle-income and higher-income earners. While the cost of college for families earning over $35,000 decreased, and this decrease was even more substantial for families with household incomes over $100,000, low-income earners saw the overall price paid for a year at school increase.

On the other hand, a glance at a chart shows that academic year 2009-2010 may have been the surprise rather than the most recent year. The cost of college was higher in that previous year than would be expected following the trend through from 2007-2008 to 2010-2011.

While access to grants and scholarships increased for families above the $35,000 annual income mark, these opportunities for low-income families stayed flat in terms of funding source. Low-income families have also increased as a percentage of the overall population of college students, and that is reflected in the most recent sample.

Here are some additional data points I found interesting from the study.

• Overall, more college-bound families are using the FAFSA to qualify for federal student aid, up to 80 percent in 2011 from 72 percent in 2010.
• Cost is still a significant factor when students and their families choose a college, with 64 percent of families eliminating colleges by the time in the application and acceptance process that the financial aid details are revealed. Fewer families eliminated a college based on cost earlier in the process, before researching schools, which seems to mean more families held out hope that financial aid would be bountiful.
• More than any time in the last four years of the study, students are willing to stretch financially for a good education (60 percent). Only 51 percent of parents were willing to stretch, though, own significantly from 64 percent.
• Ninety percent of students see college as an investment in their future, the highest percentage in the last four years.
• Down one point from last year, thirty percent of students want the experience of a college of education regardless of the potential of future earnings. Parents’ attitudes about the experience dropped nine points to twenty-four percent.

Whether a college degree is worthwhile will always be a hotly contested issue, particularly for career paths where the differential in income between high school graduates and college graduates is not stark. When families suffer economic hardships, or even when the general economic milieu is tending towards financial concern or volatility, family finances come into focus. Financial return on investment, at least for middle-income and high-income families, becomes a priority. While a college education is not the best idea for every high school graduate, I still would not discourage a student from enrolling in college and giving higher education a concerted effort.

Photo: NazarethCollege
Sallie Mae/Ipsos

The original version of this article, Low Income Families Paid More for College While Everyone Else Paid Less, is copyrighted by Consumerism Commentary.

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This is a guest article by Kiley Theiring. Kiley is a film student and freelance writer. In this article, she questions the value of private elementary school and reflects on her own experiences to offer suggestions to parents.

As a parent, you are interested in giving your child all the best opportunities that you can find. At the top of this list is your kids’ education. When you are considering saving for your child’s education, college and high school are the first priorities. But what about elementary school? To provide the best opportunities, many parents choose to send their children to a private elementary school.

At costs of at least $3,000 a year, is private elementary school really worth the money?

Why parents choose private school

Parents have many good reasons for sending their kids to private school, but often there are much cheaper alternatives. For example, my mother chose private school for me and my siblings mainly because of the rich extra-curricular programs like band and chess club. However, even after the multi-thousand dollar tuition, these things all cost extra. You could easily take those funds and look into a separate after-school program for an activity that interests your children. This way, your children will also get to interact with other kids their age that they otherwise would not see at school.

Many parents also choose private schools based on their religious affiliation. Unlike public schools, private elementary schools have a portion of the curriculum dedicated to the religion that they represent. Instead of opting for a private school to give your children a religious and moral foundation, attend your affiliated church, synagogue, or other house of worship regularly. You can get the same –- if not better — religious education without shelling out a four digit figure. Take some responsibility and start teaching your child about morality and ethics at home. Your kids look up to you and will inevitably learn from you, so set a good example.

“Isn’t the core curriculum important?”

Of course the basics are important, but are they $24,000 important? If you’re worried about your kids falling behind privately educated students, enroll them in advanced programs or hire a tutor. Either way, it will be cheaper than funding eight years of private school. With all the money you spend on private elementary school, you can afford a whole semester or an entire year of college, depending on where your kids go.

“I want my kids to be accepted at a private high school.”

If you’re considering putting your kids into a private high school, I would definitely recommend private elementary school — but only for the last two years. Private high school admissions offices usually only care about your child’s success in seventh and eighth grades. Your child’s extra-curricular activities and service hours are what make them stand out as applicants, and both of these can be improved on, even while they are in public school.

Private high schools are generally much harder to get into than private elementary schools, so I recommend enrollment for seventh and eighth grade. Even if your local public school’s curriculum lags behind the private schools nearby, the gap will likely be small enough that your child would have no trouble catching up if they enroll starting in seventh grade.

Was my pricey grade school education worthwhile?

In retrospect, probably not.

I’ve never set foot in a public school before, and my parents are in huge amounts of debt because of it. Although I am glad that my participation in service hours and membership in the school band helped me ease my way into a prestigious private high school, many of my extra-curricular activities were programs created by organizations outside of school.

I only played club sports and I completed many volunteer hours outside of the school campus. I can’t say that I got too much out of the material taught in the classes, either. In high school, private vs. public school definitely matters because there is such a wide array of optional classes offered. In elementary school, there is no standard “advanced” program, and even if there is it’s usually just working a grade above your own level.

Avoid private elementary school until the last few years. Private schools may be great institutions, but they will eat up your child’s college fund without any real long-lasting benefits. Remember that you are your child’s greatest teacher, so think about what you can teach them at home before you enroll them in an expensive school.

Flexo’s thoughts: Not every private school is excellent, and not every public school is wanting. In my experience, I’ve seen more and a wider variety of extra-curricular activities offered at public schools than private schools. From a student’s perspective, the right attitude and appreciation for learning can lead to success regardless of the school, public or private.

Because private school is a large financial commitment for the parents, those parents would do their own finances a favor by carefully evaluating the local educational options and recognizing the educational needs of their children before choosing a school.

What are your thoughts on private elementary school?

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Pair a recession with escalating college tuition prices and the result is overall skepticism of post-secondary education. As the public begins to question the long-term viability of investing in the stock market after a crash, they criticize the perceived value of a degree when the job market is difficult and loans are oppressive.

There is no question that on average, earning a degree will increase your potential lifetime earnings over someone who receives only a high school education. Before long in economies like today’s, however, people begin trumpeting famous college drop-outs who went on to become leaders of their universe, uncompromisingly wealthy, or both, giving hope to slackers everywhere. Bill Gates dropped out of college, for example.

Aside from personal obligations, people drop out of college for two major reasons. Either they fail out because they can’t handle work, or they leave because they’ve created an amazing opportunity for themselves. The message we can take from Bill Gates’ experience is not that a below-average student who has trouble in college can still be an amazingly successful individual, but that some people who work hard, benefit from luck, and who create their own opportunities do not need to bother with formalized education in order to guarantee a lifetime of financial abundance.

Even those destined to drop out of college could benefit from a year in school. An education has value beyond the increased earnings over time. Even students who end up in fields not requiring a bachelor’s degree benefit. A college education sharpens cognitive and social skills and exposes students to two of what the most important aspects of human knowledge and understanding, cultural awareness and varied worldviews.

According to statistics in a recent New York Times article, 80 percent of high school students in the bottom quarter of their class will never manage to earn even a two-year associate’s degree. Should these students be directed elsewhere, particularly when the cost of college is high and they likely won’t qualify for scholarships or grants?

It’s necessary to take a fiscally responsible viewpoint and evaluate the probability of financial success in life. For some students, college could simply be a waste of time, either because they don’t focus on some of the benefits available with a higher education beyond career preparation for a field that doesn’t require a degree, or because they attend a college that isn’t designed to offer anything beyond career preparation for a field that again doesn’t require a degree.

To see the most non-financial benefit in college, a student should seek out exposure to different fields. Spend some time with as many interests as possible because the likelihood of having immediate access to excellent resources later in life will be significantly lower. When this is the approach, even a few years of post-secondary education is worthwhile, and you can attend a great private college for less money than a public college.

It’s a bad idea to discourage any student from attending college, even if they perform poorly in high school. A fulfilled life is defined only minimally by net worth and income, if at all.

Photo: Schlüsselbein2007
New York Times

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In a domain once reserved for U.S. News & World Report, the government is stepping in to rank United States colleges by affordability, as mandated by Congress. This ties right into zeitgeist; thousands of families are thinking about college as we head deeper into summer, and high school students and their parents are evaluating their options in a period of higher unemployment and lower income.

The U.S. Department of Education has developed an online tool that allows visitors to view a list of the top and bottom colleges as ranked by total tuition and required fees and by total net cost, the latter taking grants and scholarships into account. The reports can be filter by type of institution from among the following choices:

• 4-year public
• 4-year private not-for-profit
• 4-year private for-profit
• 2-year public
• 2-year private not-for-profit
• 2-year private for-profit
• Less than 2-year public
• Less than 2-year private not-for-profit
• Less than 2-year private for-profit

The tool also conveniently offers a summary of schools that have seen the largest increase in fees from one year to the next, leading into the year for which the latest data are available. Among four-year public schools, for example, the highest increase in net costs is Northwest Indian College, which soared from $484 one year to $11,731 the next, an increase of over 2,000 percent. While I’m not familiar with the details of this particular schools, I am aware that many institutions are losing state funding due to a variety of budget crises, and as a result, must lean more on tuition to fund operations rather than state aid. This highest increase among private four-year colleges is striking, as well, with Our Lady of Holy Cross College students seeing increased costs from $428 to $2,874, a 571 percent increase.

For colleges that charge out-of-state visiting students a different tuition schedule than they charge in-state residents, the information presented through this tool will be unreliable. As a New Jersey resident, for example, I couldn’t use this tool to compare my expected cost difference between attending a college in New Jersey and in Delaware. Attending school in Delaware, I would need to pay the out-of-state rate, which is often significantly higher than the in-state rate. Since the tool only includes in-state tuition costs, I’d have to do more research to compare my options.

I never suggest people should shop around for the absolute lowest cost, whether pertaining to colleges or any other product. Saving money is a worthy goal, but it makes sense to pay for value. For many products, measuring value is relatively easily (except for the needed circumvention of the effects of marketing and advertising). Estimating the value of one particular college over another is quite difficult, so students often end up choosing the school that feels right — unless the choice is dictated by the parents.

Here are the five lowest-cost private four-year schools:

Here are the five lowest-cost public four-year schools:

How did the cost of tuition factor in which college to attend (for you or your children)? Is cost a good method of choosing a college? Is the Department of Education’s new tool helpful for making this decision?

College Affordability and Transparency Center, Department of Education via CNN

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College tuition costs for undergraduates increase beyond the rate of inflation. Particularly in a recession-focused economy, it’s popular to question whether college degrees are worth spending the money. It’s hard to escape bias in opinions; successful college graduates see their circle of friends who have college degrees and are succeeding at a level higher than those they know without degrees, and those who have been successful without completing college often see their peers exceeding the success of those who hold a degree.

That’s why I like reading about studies. While they are often not perfectly executed, they do eliminate at least this one personal bias. The Brookings Institute just released a study that shows that a college degree is not only worth the investment, it’s a much better investment than even the stock market.

In today’s tough labor market, a college degree dramatically boosts the odds of finding a job and making more money. 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.

The study even considers the cost of giving up four years of salary, considering a student who goes to college gets a later start on earning income. The total cost for a four-year degree within the study is about $102,000. The study finds that the increased earnings over a lifetime are worth the $102,000 in up-front costs that those who go to work right after high school avoid. According to the study’s calculations, a two-year Associate’s Degree provides an even better return than a four-year Bachelor’s Degree, but only due to significantly lower up-front costs, not an increased lifetime income.

Another calculation analyzed by the study is the net present value of a lifetime of earnings (age 22 through 64) for works whose highest education levels are some high school, a high school diploma, an Associate’s Degree, and a Bachelor’s Degree. The NPV for the earnings proceed in that order, less than $300,000, less than $500,000, more than $600,000, and more than $1,000,000 (as measured visually from the chart provided — the report from the Brookings Institute did not include a link to the full study).

The study doesn’t seem to take into account the cost of debt, however. Most students do not pay tuition up front. In addition to the costs of missing out on four years of salary, students who go into debt can take ten years to pay off student loan bills, racking up thousands of dollars in interest payments.

While it is possible for those without college degrees to succeed, the cost of a college degree is, on average, worthwhile. The relationship between the degree is not necessary based on cause and effect; the same external factors that drive one to complete a college degree might be the same factors that drive that person to earn a higher income throughout their lifetime. College degrees help in this regard, particularly in a low-employment environment when employers can afford to be selective about new hires. A Bachelor’s Degree, regardless of the field of study, is the ground floor. To compete in a tough job market, make sure you’ve invested in your education and walked away with the parchment to show for your work.

When I worked with a touring drum and bugle corps, the touring caravan included two semi-trailer trucks, one box truck, four buses, and three vans. One of the truck drivers mentioned to me that he saw no purpose in a college education — he could make a good living, $50,000 a year, as a truck driver. That was more than my salary as a program manager in a non-profit organization at the time. Without a college education, a truck driver may earn $50,000, but that won’t grow much over the course of his lifetime unless he goes into management — and the college degrees are favored for management jobs, even in the trucking industry. With a college degree, salaries may start less than $50,000, but on average, the lifetime potential income is much greater.

The study compares the $102,000 investment in college with the same cash investment in other sectors, like stocks, and shows that the return or a college degree, through higher income, is better than the other investments. It’s not a likely scenario because of the logistics of paying for a college degree — most families do not choose between paying for college and investing in lump sums. Nevertheless, the comparison is interesting because the expense of paying for college can be perceived as an investment in someone’s future.

Has your college degree proven to be worthwhile in your experience? Or if you do not have a college degree, are you successfully competing with those who have?

Brookings Institute via Fortune Magazine

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From 2003 to 2006, I took classes at the University of Phoenix Online with the eventual grant of a Masters in Business Administration (MBA) degree. After receiving the degree, I wrote about my experiences with the school in a five part series. For some background, read the series in these parts: The Decision, Admissions, Course Logistics, Curriculum, and The Team Experience. At the time, I planned to extend the series to share my thoughts on dealing with the administration and financial aid, but the will to continue to series waned, and I ended the series with just five articles, more than enough to give readers an adequate picture of completing this degree.

The University of Phoenix Online is a “for-profit” school, and by this virtue, there isn’t much respect for the school in the academic community — a community that also looks for profit despite “not-for-profit” status with the government. Most of the derision is not deserved, but that is the state of the community today, and it is not changing. There are, of course, other differences between The University of Phoenix and a traditional research-focused university, and those can’t be ignored. The question is whether they matter.

I should also point out what the University of Phoenix Online is not: It is not a research-based institution, which means that they don’t provide grants to professors, faculty, or graduate students to embark on studies that advance the field of knowledge in any particular academic area. It is also not a diploma mill; I am not familiar with the experience at this University at the undergraduate level, but with the MBA I pursued, the courses generally increased in difficulty to the point where at the end of my studies, the only classmates who survived were very knowledgeable in their own fields, mostly upper-level executives in major companies or entrepreneurs who ran their own businesses, and at least twice my age. (I was thirty when I received my degree.) These MBA degrees were not handed out willy-nilly to anyone who paid the price of tuition.

In terms of tuition, the courses were not inexpensive. I wouldn’t have enrolled in the first place if my employer didn’t offer to pay for almost all of the costs. In fact, I was more interested in furthering my education in any way possible; my employer would only pay for a master’s degree in business.

As I mentioned in the article about my decision to earn an MBA at this school, I had my first exposure to online-based learning models for higher education through a graduate program at the University of Delaware in 1998. The concept of meeting with professors and classmates online and using the internet to facilitate learning was not new to me in 2003 when I enrolled at the University of Phoenix Online. I knew that most people didn’t understand the concept of earning a degree online and there were still strong misconceptions. I saw the trend of other, more reputable schools beginning to imitate the University of Phoenix Online model, so I assumed that within a few years, this type of learning would be more mainstream.

Time has shown that this assumption was wrong. People generally still do not respect “online degrees,” particularly not from schools whose organization is a for-profit public corporation.

At the same time, more people were earning MBA degrees than ever before, leading others to question the value of this degree regardless of the name of the school. For me, an MBA was the best way to continue my education and earn a new degree spending very little money. I could continue to spend my time working at my day job, building Consumerism Commentary and other online projects, and perhaps learn information that would help me with both of those aspects of my life.

If I had waited another year before embarking on this journey, I might have seen more traditional schools offering similar programs and chosen to attend online classes offered by a more reputable institution.

Today, the content I learned during these MBA courses has been somewhat helpful, but not essential, to where I am today. I gained some insight about operating a business and decision making, but I might have just as well come to the same conclusions through working experience. The team environment within the courses did provide unique opportunities for dealing with uncooperative teammates and resolving conflicts, skills which should be useful when working with others, but I have to say I have met few people as useless as the teammates in the first few courses at the University of Phoenix Online. The skills I learned in conflict resolution in the class helped more with dealing with the university’s financial aid department than dealing with anyone outside of the university.

In all seriousness, most of what I learned through these classes I could have learned on my own but didn’t; being in an organized class thrust the knowledge upon me. The classes didn’t get really interesting until the last few, in which the coursework pertained to meaningful executive-level decision making through simulations, case studies, and discussions with classmates who had vast experience to share.

If I were given the opportunity to earn an MBA today with the goal of getting a great job at a company that respects MBA degrees in general, all other things being equal, I’d choose a top school. If the flexibility of taking classes online is important and I had no concern for the additional work that is required to succeed in a virtual environment, only then would I choose an online program. If I were to consider price alone without the need for any perceived prestige, I would choose the school that offers the degree for the best cost. With any degree, the level of education you receive corresponds to the amount of effort you put into the academic portion of taking the class, so if the only consideration is the knowledge and you enjoy the type of guidance that comes through a structured degree program, then any degree program will do.

If you want to be loved by Human Resources departments, list a top school on your résumé and don’t include the word “online.” If you plan to succeed on your own terms, do whatever you like. Either way, always continue learning.

The original version of this article, Reevaluating My MBA From the University of Phoenix Online, is copyrighted by Consumerism Commentary.

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Since a college degree is the baseline for most middle-class jobs for people not yet old enough to have equivalent experience, and getting that experience in the first place would be difficult without a college degree, it always surprises me that people question the value of getting a college degree at all. While it’s true that the group of degree-holders is not as exclusive a club as it once was, that’s just a reason to strive for even more education. From a societal viewpoint, it’s clear that college degrees aren’t for everyone because the world relies on work that does not require that level of education.

In the financial world, people are often looking for a return on investment. This is a filtered lens for viewing society, and it’s limited. When you’re the proverbial hammer, everything looks like a nail. As I’ve been writing for Consumerism Commentary since 2003, finance is only a small part of the world I live in, and I try not to limit my worldview to just this one lens. While finances are certainly an important aspect of someone’s life — and with limited finances, the importance is even greater — money does not form 100% of every decision one makes in one’s life.

There’s more to an education than just the income it will provide over time, over and above the income you would earn without that education. Whenever I think about this topic, I remember the time I spent working with a drum and bugle corps, touring the country for eight weeks over the summer. Our caravan consisted of four buses, three vans, two eighteen-wheel tractor-trailers, and one box truck. I don’t remember the context as this was many years ago, but one of the truck drivers said to me he doesn’t understand why people would go to college when they could easily make a living earning $40,000 a year driving a truck.

While I’m sure truck driving has its moments that test any brave soul, it may not be the right challenge for everyone. Depending on skills and interests, someone could go to college, spend money to earn a degree, and not reach an annual salary of $40,000 for many years, if ever. They may recover their tuition costs over time, and if student loan debt is involved, that could be a long time. Even if they make their way up the latter to become the CEO of a non-profit organization, they may be financially worse off in the end than if they skipped college and got a job driving a truck across the country.

Each year, there is a new report ranking colleges — and ranking colleges is such a popular topic in the media — in terms of the best return on investment. The methodology of the popular survey by PayScale is interesting in that it completely ignores those who have continued their education to earn a degree beyond a Bachelor’s degree. Only those who have completed their education with a standard four-year degree are considered. The survey also neglects to include self-employed individuals, small-business owners, and contractors. Keep in mind, also, that these are actual data based on people who have been working for thirty years — so this reflects what graduate degrees were worth in the 1970s and early 1980s, while using today’s tuition costs. This basically keeps all values as 2011 dollars, but ignores changes in each college’s reputation over the past thirty years.

The California Institute of Technology tops the list of colleges ranked by best ROI over thirty years with thirty-year net return of $1,713,000. Princeton University is the first Ivy League school on the list with a net ROI of $1,494,000, and is fourth overall. Here are the top ten:

1. California Institute of Technology (Caltech)
2. Harvey Mudd College
3. Massachusetts Institute of Technology (MIT)
4. Princeton University
5. Stanford University
6. Dartmouth College
7. Duke University
8. Harvard University
9. University of Notre Dame
10. University of Pennsylvania

As Zac Bissonnette, author of Debt-Free U and recent guest on the Consumerism Commentary Podcast, points out, the data and methodologies are questionable. Regardless of the quality of data, beyond determining whether you can afford college or not, it’s mostly pointless to consider return on investment as a point in favor in one school over another. If a student’s two legitimate choices are Princeton and Stanford, figures like these are meaningless. Additionally, a student who is considering the school with the lowest ROI on this list won’t necessarily be also considering Caltech.

Payscale

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If there is a college graduate in your life, he or she is about to receive a number of gifts. The first gift will be the realization that it can be difficult to find a job in this economy right now if the goal is to get a job in the same field of study as the degree. Without a job, our graduate might have little choice but to move back in with mom and/or dad and weather through the recession with curfews as if life were to replay high school.

The next gift will be the shock of the real world in the form of a job. Suddenly the graduate will have to report to work, perhaps at 8:00 am. It might have been easy to blow off early morning classes, but consequences in college were limited compared to the thread of being fired in the first month on the job.

Soon after that, perhaps six months after graduation, the first student loan payment will be due, shackling the graduate into earning enough money to pay off college debt in ten or more years.

If there is a college graduate in your life this year, consider these graduation gift suggestions.

1. Free room and board. There is a time and place for the “sink or swim” mentality, which comes from the idea that throwing a baby into a pool will force it to instantly learn to swim in order to survive. I’ve never known anyone to take this literal approach, but in the current state of the economy you could do your graduate a favor by allowing her to start her career without having to worry about the first several rent checks.

Rent-free living should not last forever.

2. Clothing. Every job has expected attire, even if the environment is very casual. Professionals need professional clothing, whether for interviews or in the office. The graduate is going to need to project an image in the workplace, and clothing is important to making that happen. A gift certificate would work well for clothing, allowing the graduate to choose her attire, but some guidance may be necessary because not every graduate has experience in dressing appropriately for professional situations.

3. A computer. Powerful and reliable notebook computers are relatively inexpensive now. Remember to pre-load important software for someone who will be starting their first post-college job: financial management software. I use Quicken 2011, which is available on sale here, and I still prefer the robustness and flexibility of desktop software like Quicken over web-based financial management like Mint.

4. A gas gift card or monthly commuter pass. Transportation is one of the many expenses new workers have to pay up front before receiving their first pay check. If your graduate has a job lined up and a place to live, she should have determined her transportation needs.

5. A car. If you have the means, a used car would make a good gift for the graduate as well. It doesn’t have to be the latest model, but employers expect employees to have reliable transportation; a clunker that breaks down once a week and causes the new employee to be late arriving to the office will not make a good impression and will not do any favors for career advancement.

6. Cash. Money is helpful when wielded for the forces of good. If you trust the graduate to use the money responsibly, to pay down debt for example, cash can be a good way to go. But don’t give cash if you will be offended if the recipient chooses to use the money for vacation or entertainment. If you cannot give cash with no strings attached, don’t give cash — try a gift card.

7. The gift of mistakes. The last thing a graduate wants is to be told what choices to make. Some guidance is helpful, particularly in choosing the first job out of college, as many graduates do not know the effect this choice can have on earning potential for the rest of the graduate’s life. But let them make mistakes, and when they do, help them interpret them as learning opportunities.

If you are a parent of a graduate this year, what gifts, if any, will you be bestowing upon your graduates?

Students and former students, what gifts have you received or would you have liked to receive?

The original version of this article, Seven Great Gifts for College Graduates, is copyrighted by Consumerism Commentary.

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A new study following thousands of college students from 2005 through 2009 concludes that students are not learning the basic cognitive skills required for functioning properly in life, namely critical thinking, complex reasoning, and communication skills. The primary assumption that the goal of earning a college degree is obtaining these particular skills is where this study went wrong.

Not everyone agrees that this is the purpose of a college education. While these core cognitive skills are imperative for life outside of college, the trend has been to downplay these qualities. Because of the long-term trend of increasing availability and affordability of a college degree, this level of education is often required, even for jobs that in the past did not require it. The country has moved away from a manufacturing economy to an information economy, and a college degree is what gets you in the door for a typical middle-class career. Even though tuition costs have been exceeding inflation, there are more people attending college now than any time in the history of Western civilization.

When college degrees were for the privileged, the curriculum could focus exclusively on these skills and the liberal arts, but a college education has recently become more focused on practical applications and learning specific, job-related skills — the function of apprenticeship in the past. It’s no surprise that when separated by degree type such as, engineering vs. liberal arts, the engineering students did not gain critical thinking skills but did gain specific skills that would help them in a specific industry, while the liberal arts students did increase their level of cognitive skills.

Students who majored in the traditional liberal arts — including the social sciences, humanities, natural sciences and mathematics — showed significantly greater gains over time than other students in critical thinking, complex reasoning and writing skills. Students majoring in business, education, social work and communications showed the least gains in learning. However, the authors note that their findings don’t preclude the possibility that such students “are developing subject-specific or occupationally relevant skills.”

Much of the blame for the overall cognitive failure of these sampled college students will go to the students themselves. Perhaps they should have applied themselves more or studied more efficiently. The study showed that students who study alone were more likely to gain needed skills than those who study in groups. Much of the blame will also go to the colleges and universities, whose professors often focus on their research rather than instructing and don’t challenge the students enough.

Looking at the bigger picture, we’re doing fine. Today, students learn in elementary school facts about the world that were discovered by people considered the geniuses of their day many centuries ago. In high school, students learn science that was not general knowledge only a few hundred years ago. College students have the opportunity to learn more about the world than the best scientists and philosophers understood only decades ago.

Yet, the college degree is so commonplace now that in the same breath we can both question whether the increasing cost of a college education renders a degree no longer financially worthwhile and state that since the job market for middle-class careers sees the college degree as an entrance barrier, it is more like a high school degree less than once century ago.

The college degree is having an identity crisis. I’m not surprised a study finds that students aren’t learning cognitive skills in the four years they are enrolled.

Study: Many college students not learning to think critically
Photo: ralph and jenny

The original version of this article, Study: College Students Aren’t Learning Basic Skills, is copyrighted by Consumerism Commentary.

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College can be an expensive waste of time. Not everyone has the capability or will-power to make the most of higher education. That’s perfectly acceptable. If you look at specific cases, a bachelor’s degree is often not worth the time, effort, and money.

On average, college graduates earn more than those with nothing more than a high school diploma, and most of the time, college opens opportunities for earning back the investment. How do you know whether this generalization will apply to you? If your chosen career path involves a low-paying salary but requires a college degree, it could be many years before the cost of the degree is recovered by increased income, if ever.

People love hearing stories about famous — and rich — individuals who never earned their college degree. The typical examples include Bill Gates, who dropped out of Harvard to create Microsoft. Mark Zuckerberg also dropped out of Harvard following the success of Facebook. Lady Gaga left the Tisch School of the Arts to be a burlesque dancer, and soon after established an amazing music career.

These examples may give some hope to the underachiever, not performing well in college, or the confused high school student unsure whether he’s ready to take on more education. Some commentators go so far to say that the fact that superstars have gone on to become wildly successful without completing a degree is proof that anyone could, and should, do the same.

The thought is motivational in the “you can do anything you put your mind to” way, but it’s crazy. A select few can become wildly successful without a college degree, but that doesn’t mean a college degree is unnecessary. Nor is it necessary, but it opens doors that would not have been available otherwise. Although Mark Zuckerberg dropped out, he wouldn’t have had the same opportunities to create Facebook, although it’s difficult to argue a hypothetical situation.

Most of the time, opportunities come to these superstars (or they bring about the opportunities through their actions), changing their life path. This is not a typical situation and should not be motivation to ditch a college education. For a few talented kids, reading the stories of Bill Gates, Frank Lloyd Wright, and Harrison Ford — all drop-outs — might be the motivation they need to leave the books behind and realize their full potential without wasting more time earning a degree. But for most, the danger is it can instill a sense that there’s little value to education after high school.

Moderate success can be likely without a college degree, particularly for those who have an entrepreneurial spirit, even without billion-dollar ideas. And certainly not every college student is making the most of her time, seeking opportunities to develop. Society needs people to fill the roles that don’t require college degrees, so there’s no dishonor in not attending college, but someone who strives to reach his full potential in life should not drop out.

Be cool. Stay in school. Unless you are presented with a life-changing opportunity. But don’t count on it.

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Earlier this year, the State of New Jersey missed out in $400 million in federal aid for public schools due to an administrative error and the political inability to take the educational needs of the state’s students seriously. This money would have been part of the federal Race to the Top program, a set of competitive grants awarded to states that show they could, theoretically, spend the money effectively.

While this fair state missed out on Race to the Top funds, New Jersey qualified to receive $268 million from the federal jobs program. This money is being distributed to districts, with some receiving a few hundred thousand dollars and some receiving over a million, though the share calculation has been kept private. The federal government is not the only entity interested in putting money into public schools to aid the neediest programs.

The public schools in the city of Newark will win the funding race thanks to the young founder of Facebook, Mark Zuckerberg. Newark mayor Cory Booker met Zuckerberg only in July, but the two have been communicating since then. This fast friendship has resulted in the wunderkind donating $100 million in the form of Facebook stock to Newark’s schools. Unfortunately, the value of this stock is based on a Facebook total valuation of $33 billion which may be a bit optimistic.

Why Newark? Why not. Zuckerberg has no direct connection with the city, but the district is surely needier than the his hometown’s public schools in White Plains, New York.

With a movie coming out in October that is sure to paint the Facebook founder perhaps unfairly in a negative light, a generous philanthropic gesture could do wonders for his image. Money is money, though, and to the students in Newark who will be the beneficiaries of this generosity, the donor’s motivation shouldn’t be too important. I would like to believe that the money will be managed properly and find its way to the direct benefit of students in the city.

The original version of this article, Newark Public Schools to Receive $100 Million, is copyrighted by Consumerism Commentary.

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Several years ago, I decided to take advantage of an opportunity to pursue a master’s degree in business. I had been working in finance for a while, and as someone who believes in lifelong education, I figured it wouldn’t hurt to obtain an MBA. I took the relatively unpopular route of pursuing a degree where the instruction takes place online.

The choice was spurred mainly by the fact that when I attended college as an undergraduate, I participated in a class with a professor who designed one of the first web-based campus learning systems. This was exciting technology.

I’ve written extensively but not completely about my experiences obtaining this MBA. In summary: the experience was not perfect, the courses were much more difficult and required more teamwork and focus on communication in difficult circumstances than typical, classroom-based education, and this type of education still suffers and will probably for a long time suffer from a stigma. Like any graduate program, the first classes were full of students who were not dedicated and were not the caliber of learner and communicator you would expect in a graduate level course, but by the end of the program, I was amazed with the level of professionalism, dedication, and proven success among my classmates in my final courses.

I learned interesting information, so my main goal was achieved, though I often question my desire to learn more about business and corporate finance anyway.

This also came at a time when MBA graduates were common, eventually decreasing the value of that degree in the employment marketplace overall. And of course, the fallout in the finance industry has continued to mar the reputation of the MBA, even degrees awarded by Ivy League institutions.

I would argue that an undergraduate degree is always worthwhile; here are some thoughts for determining whether a graduate degree is also worthwhile.

What are your goals? When it comes to MBAs, I can safely say most people pursue this degree in order to increase their salary. In this case, the only measurement that matters is the same one you’ll focus on in an MBA financial class: a cost-benefit analysis based purely on the numbers. But this is not the only reason people decide to attend graduate school.

Some people decide to go to graduate school, particularly in an economy with high unemployment, to mark time while they’re waiting for better job offers to come around. Others choose to pursue post-graduate education because they have a thirst for knowledge and feel comfortable in an academic setting.

There are many career paths that require a postgraduate degree, as well. If your goal is to succeed as a doctor or a lawyer, a graduate degree is not only worthwhile but necessary.

How important is prestige? Perception is reality. It’s quite possible that you can get a better graduate education at a state university than you can at an Ivy League school. If the people you want to work for generally have Ivy League degrees, you will want to emulate your future bosses and mentors. If the purpose of pursuing education is broadening your knowledge, then all you need to worry about is finding the best education for the best price.

Will you recover the cost of tuition? If you’re working for a company that’s willing to pay for most or all of your education, go wild. If the employer restricts the benefit to those who stay with the company for a certain amount of years and requires you to reimburse the company for tuition if you leave, consider whether the company will really provide the opportunities you’d be interested in with your new degree. Sometimes the best offers only come when you move from one company to another.

If you aren’t receiving any tuition assistance, and particularly if you have to take out loans, finances must be at least one of your considerations. Is it likely your income will increase with this new degree? How long will it take for your salary differential to cover the cost of tuition and interest on the loans? How long will you have to continue paying off those loans?

Also consider whether taking on a master’s degree will require you to take classes full-time and cut back or eliminate the time you spend working, drastically reducing your income over that time. A break in income can have long-term detrimental effects to your wealth accumulation as well as future salaries.

For the numbers, Liz Pulliam Weston offers an analysis of averages.

While the decision to pursue a graduate degree must consider finances, money isn’t the only factor. It’s dangerous to take on a program that would put your financial situation in jeopardy. Decide if the benefits you could receive from a graduate degree, financial and otherwise, outweigh the costs. Choose the graduate program that is best for you and your goals. Perhaps you can reach your goals through continuing education outside of a master’s degree, too.

If you keep these things in mind and decide to pursue a master’s degree, you will find that it is worthwhile.

The original version of this article, Is a Graduate Degree Worthwhile or Worthless?, is copyrighted by Consumerism Commentary.

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If you’re on Facebook, you might have seen the latest hoax. Hoaxes like these allow me to feel confident about my decision not to install any applications on Facebook or participate in any shady-looking groups. I ignore the endless petitions and attempts to find 1,000,000 fans for the latest trend. The latest hoax invites people to “like” a page that promises to reveal a hidden status update that got a high school student rejected from Harvard.

This is a hoax because the offending status update is not revealed when “liking” the page; instead, the visitor will be presented with survey spam. But there is truth behind the status update, or at least a reasonable thought. Perhaps this Facebook user’s comment denigrating Harvard didn’t get him rejected, but your public presence on the internet plays a big role when it comes to admissions as well as job applications.

College admissions offices certainly have better things to do than check thousands of Facebook profiles, MySpace pages, and Twitter updates to evaluate each applicant’s suitability. They don’t have to, however. Admissions offices and marketing teams will certainly monitor social networking websites for information posted related to their organization, and if you make yourself visible in a bad way, you can be certain you will attract some attention.

Last year, a new Cisco hire posted on Twitter a hint that she might hate the work, and a Cisco employee found the tweet and a sensation ensued.

Leaving a public record of thoughtless remarks is only one way to make yourself seem less qualified than your peers. You should evaluate your total online presence and control as much of it as possible. If you want to be taken seriously, make sure your Facebook profile doesn’t give the impression that you’re playing online games 24 hours a day.

If you are a strong final candidate for a job, you can be sure that the evaluation process at that level will include full online research. All other things being equal, if you appear less professional than the other final candidate, you will most likely lose.

Enter your name in Google’s search page and take a look at the results from an employer’s or a college’s perspective. If there’s anything unprofessional, change what you can.

Photo credit: jaycameron

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I’m a big fan of a continuous education that lasts a lifetime, whether earning degrees or just gaining knowledge in topics you’re not normally exposed to. But when you start focusing on money, it’s easy to raise questions about how much education is worthwhile. There is a war over the value of higher education.

College graduates on average earn significantly more than individuals without a degree. According to the Bureau of Labor Statistics, income increases with successive degrees. The median weekly earnings, including wages and salary, jumps 64% between those with high school diploma and those with a Bachelor’s degree. If you hang your Master’s degree on your wall, you’ll earn a 100% premium, doubling your income. This income advantage snowballs by millions of dollars over time.

While the averages tell one story, practicality tells another. If you earn an expensive degree or two then work in the arts, non-profit, or the public sector, it will be more difficult to recoup the costs of that education. A lot of generic financial advice, particularly the advice that can be found online for a mass audience, suggests earning a degree without going into debt, finding the cheapest college education you can, and even forgoing higher education completely and entering the “real world” as soon as possible to begin earning income.

You could look at the cost of education from a pure return-on-investment perspective and get discouraged about the value of an education. These calculations consider college expenses like tuition, boarding, and course materials. They usually conclude that it makes more financial sense to acquire the least expensive four-year degree based on tuition rates.

What these calculations don’t often take into account is that you can attend Ivy League and other private colleges for less money than many public colleges. Many private colleges offer financial aid packages that bring the costs of an education further towards affordability than public colleges. At least fifty colleges include no or only small loads with their financial aid, in order to save their graduates from the burden of student loan debt.

For example, Harvard’s tuition is $52,000. Racking up over $200,000 in college costs for a four-year degree does not sound like a good use of a family income — and you can practically forget about having your child “work his way through college.” But families earning $80,000 a year can send a child to Harvard for $6,567 a year, a contribution of less than 10%. With an income of $120,000, tuition at this Ivy League school is reduced to $16,000. See more about private colleges offering loan-free financial aid at CNN Money.

College isn’t for everyone, but for those who choose this path, I would encourage attending the best institution possible. There are a lot of different variables that go into determining what the “best institution” is, and that’s going to be difficult to quantify. I was surprised to see how inexpensive an Ivy League education could be, and my experience tells me that if you can attend an Ivy League school, you should.

The original version of this article, Attend a Great Private College for Less Money Than a Public College, is copyrighted by Consumerism Commentary.

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Upromise is sponsoring a contest in honor of Financial Literacy Month. There are two grand prizes of $10,000, cash that can be used for higher education expenses. We touched on the topic of the cost of education on yesterday’s podcast with financial columnist Kara McGuire. I have no children, but thinking about potential children’s projected college expenses at least two decades down the road makes me shudder.

Salaries don’t naturally rise at nearly the same rate as education expenses, so it is imperative to take advantage of any opportunity possible to help pay for those expenses. Personally, I won’t want my children to be burdened much with student loan debt, yet I would like them to have the best educational opportunities possible. I’ll be thinking about tax-free investments for education, scholarships, and grants when (and if) the concept of children becomes part of my life.

I’m writing about this contest because $10,000 can go a long way to pay for college expenses today — and judging by the current entrants in the contest, someone with a talent for video should be able to set themselves apart. To enter the contest, Upromise requests you submit a 30-second video documenting your planning, saving, or paying strategies for dealing with higher education expenses.

Consumerism Commentary readers are creative, so I believe one of you has a good chance of winning this contest. Beyond the grand prize, Upromise is also offering 8 first prizes, a $500 gift card. More information is here.

Here’s an example of a current video. Go get that $10,000.

The original version of this article, Win $10,000 for Tuition or a $500 Gift Card, is copyrighted by Consumerism Commentary.

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Last week I offered some last-minute tax filing tips, and the IRS deadline is looming. I’m happy to tackle tax questions, and Consumerism Commentary reader Eric has one. Eric was a full-time student through May 2009, and he, like many former students, is dealing with the cost of a college education. Eric is looking for more information on the American Opportunity Tax Credit.

Here is what I know.

The American Opportunity Tax Credit is one of the many benefits enacted within the American Recovery and Investment Act (ARRA) of 2009, otherwise known as the 2009 economic stimulus. This new credit changes the Hope Tax Credit, a benefit designed to encourage more people to attend college. The American Opportunity Credit goes farther than the Hope Credit in a number of ways.

The American Opportunity Credit allows taxpayers to get credit for money spent on tuition and some other education-related fees in 2009 and 2010. Unlike the Hope Credit, you can file to receive the new credit for expenses for each of the first four years of higher education. The maximum credit you can receive is $2,500 this year for 2009 expenses and $2,500 next year for 2010 expenses.

The new tax credit is partially refundable. That does not mean you have to pay part of the benefit back to the government. “Refundable” means that the credit can become a refund to be sent to you, even if you owe less tax overall than the amount of the credit. Your tax bill can go “below zero,” resulting in a check from the government to you. This is a great benefit for current and recently-graduated students whose income may not be significant. Only 40% of the total deduction is refundable, however, so those who owe no tax will only receive a credit of at most $1,000.

Who is eligible for the American Opportunity Tax Credit?

Only taxpayers whose modified adjusted gross income is less than $80,000 (or $160,000 for joint filers) is eligible for the full amount of the credit. With a higher MAGI, the maximum credit begins to phase out until it is gone completely for taxpayers earning more than $90,000 (or $180,000). The taxpayer claiming the credit needs to have paid qualifying tuition or other education expenses.

You may want to consider taking either the Lifetime Learning Credit or a tax deduction for tuition and education expenses. Taxpayers can only claim one credit or the deduction for each student. For example, parents claiming a daughter and a son, both in college, as dependents could choose a Lifetime Learning Credit for one and the American Opportunity Credit for the other. They could not, however, claim both credits or one credit and the deduction for their son.

Here is where the beauty of most online tax filing software is revealed; most will ask you to list your expenses and will tell you which filing option will be best for you based on your entire tax situation.

What form should be used to claim the American Opportunity Tax Credit?

The latest Form 8663 from the IRS includes the American Opportunity Tax Credit. If you are claiming this credit, you cannot use Form 1040-EZ for filing your taxes. You will need to use Form 1040 or 1040A.

The original version of this article, The American Opportunity Tax Credit, is copyrighted by Consumerism Commentary.

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This is a guest article by Investor Junkie, a blogger who writes about investing and being an entrepreneur.

In the past 10 years we’ve had many financial bubbles. First it was the tech bubble, and then it was the housing bubble. But do we have a higher education bubble? Having a web site named Investor Junkie I’m obviously into investments. With proper planning, I believe a higher education can be a profitable investment.

With the amount it costs for an education today, it’s important to consider the return on your investment. It’s an important investment of your time and money that if done carefully, can reap years of rewards. The CollegeBoard has some interesting statistics about the average cost of a college education for this year. According to their stats, these are the average yearly costs.

Private: $26,273 (up 4.4% from last year)
Public: $7,020 (up 6.5% from last year)

This doesn’t even include food, board, and book fees. In comparison to these increases, the average annual inflation rate was only -0.34% last year. (See later in the article how this rate might be questioned.) FinAid makes this depressing statement on their web site:

A good rule of thumb is that tuition rates will increase at about twice the general inflation rate. During any 17-year period from 1958 to 2001, the average annual tuition inflation rate was between 6% and 9%, ranging from 1.2 times general inflation to 2.1 times general inflation.

How can they justify the increases that over the past 10 years doubling inflation? If I earned the same investment returns colleges had with their tuition fee increases, I would have made out like a bandit.

Paying for college

How can someone save for college when the increase of college costs are beating most investments? Assume the average rate of the stock market is 8%. When starting with zero savings, this means you are almost ensured your goal will not be met.

I currently have two children with a third on the way. We are saving for our children’s education, but with the rate of increases it will be impossible to completely pay for our children’s education through saving alone. Just to keep up with the increase in costs, you need fund the total amount today ($105,092 for private schooling) so you are prepared in the future. This also assumes your investment matches the typical stock returns; if not, look out!

If your child isn’t first draft in college football picks, what are you other options? The CollegeBoard has an answer for this (emphasis is by me):

There is more than $168 billion in financial aid available. And, despite all of these college price increases, a college education remains an affordable choice for most families.

So if your family can’t afford it, don’t worry. There is massive amounts of money still available. What exactly is “affordable” if you have a college payment that equals a home mortgage in some parts of the country? The key part of this equation is for those who qualify for scholarships. For most, the logical conclusion is to get a college loan to pay for some or all of it. Debt is debt, no matter if it’s for consumer items, a house or an investment. Eventually it needs to be repaid. The worst part of college debt is it hangs around you forever. No bankruptcy will eliminate it. It doesn’t take a PhD degree to determine that $100,000 (at least in today’s value) will take years to recoup in salary.

If a recent graduate is able to get a job, according a BusinessWeek, they made on average $49,307 in 2009. In December 2009, the Wall Street Journal reported the rate of unemployment for recent college graduates was 10.6%, similar to the national level. Once a graduate gets a job and has other living expenses, how quickly will they be able to pay it off?

An education is an investment in your future, with the hope your salary increases because of the higher education. With any investment the goal is to achieve gains you wouldn’t have if you didn’t invest. The question is at what point does the amount of money required for a college education becomes not worth it? When does the ROI (return on investment) outweigh other investment choices? If you look at it from purely an investment standpoint and not for “enlightenment,” your choice of major and school might be different. The end goal should be getting the best bang for you buck.

What’s the cause?

Why is the cost of a college education rising as such a rapid rate? I only come to two valid conclusions. One option to consider, is the inflation rate is not an accurate representation. This could also explain increases health care and commodities. Maybe statistics like ShadowStats are discussing in fact showing the true inflation rate and better explain the reason education costs are increasing at the current pace.

The other conclusion is government intervention into the education system is causing the increases in pricing, whether through loan guarantees or loan offers direct to students. The government putting out more money to the public than what normally would be available makes more dollars chase after too few resources.

Regardless of the root cause, the cost increases are not sustainable. Students and parents can make other choices, such as attending a two-year college, attending a trade school, purchasing a business franchise, investing in a new business, or (in my opinion the worst option) not going to college at all. As many recent graduates have found out, a college education does not guarantee a job.

These recent graduates have the most amount of amount of debt compared to any previous generation. Today’s college education is equivalent to yesterday’s high school graduation, except with massive debt. That’s not a great situation to be in when just starting your career and life.

The original version of this article, The College Education Bubble, is copyrighted by Consumerism Commentary.

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Over the next couple of weeks, six finalists will be auditioning for the opening of “staff writer” at Consumerism Commentary. Each will be providing two guest articles to share with readers. After the six writers have shared their guest articles, readers will have an opportunity to provide feedback before we select the staff writer.

This article is presented by Debbie Dragon, a full time freelance writer and co-owner of ReliableWriters.

Last year, in spite of the recession, the difference in the median earnings between high school graduates and college graduates rose to record highs according to The New York Times’ David Leonardt. He reported on the average earnings of graduates, based on information from the Census Bureau which state the following average annual salaries for people of varying education levels:

• High School Graduates: $27,000
• Some College (no degree): $33,000
• Bachelor’s Degree: $47,000

What isn’t clear from Leonardt’s argument that college is the best investment a person can make, is how much debt the average student graduates with in order to complete their education. As a 29 year old college graduate still paying student loans for a Bachelor’s Degree obtained in 2002, I think the amount of student loan debt a student must carry to complete their education is an integral part for determining whether the education was worth the investment or not.

The College Board reports the average cost of tuition in 2009-2010 as:

• Public 2-year colleges: $2,544
• Public 4-year colleges: $7,020
• Private 4-year colleges; $26,273

These numbers represent tuition only, and do not include room and board, books and other miscellaneous fees which anyone who has gone to college or paid to put their child through college knows can add up to considerable amounts each semester. It’s true that many students receive grants (money that doesn’t have to be paid back) which helps reduce the amount they pay out of pocket or through loans — but according to The Project on Student Debt, graduating seniors who receive educational grants actually end up with higher student loan debt than students who do not receive grants. Graduating college seniors receiving Pell Grants had an average debt of $24,800 in 2008. Other than academic or merit-based grants and scholarships, students receiving grants usually have lower family incomes than students who are not eligible for grants –- so it makes sense that they would go on to borrow more money to cover the miscellaneous fees, room and board and books in addition to tuition costs.

Average student debt upon graduating, according to the Project on Student Debt in 2008:

• Public Universities: $20,200 in debt
• Private Non-Profit Universities: $27,650 in debt
• Private For-Profit Universities: $33,050 in debt

So while there is no question that statistics show us that most college graduates earn a higher annual salary than non-graduates, there are still other factors to consider to declare whether the cost of education was a good investment.

Adrian Cartwood, a blogger at 7million7years.com, questioned about the extra 4 years a high school graduate has in the workforce while the college students are still in school. Don’t they average a 4 year head start earning money? He shows that if the high school graduate saved 15% of his or her earnings every year and earned the average 8% return, he or she would end up with $468,168 after 26 years of working and saving (based on the U.S. Census Bureau’s 2007 American Community Survey of estimated salaries for high school graduates and a 4% income increase annually). He determined the college grad, even after getting a 4-year later start on saving and starting out with $20,000 in debt, would end up with $794,000 at the end of 26 years. In Adrian’s example, we see that college is worth $326,000.

All of these statistics and examples have made good points, but I think the answer to whether or not a college education was worth the investment depends on each individual and really can’t be summarized by “averages.” If a student goes through college and graduates unable to get a job in his or her field of study –- chances are they’re going to earn wages that are closer to the high school graduates’ salary. That income is not likely enough for the new graduate to pay back student loan debt, pay for their living expenses, and begin saving for retirement upon graduation. There are even college graduates who DO get positions in their field of study that don’t start out at the top of the pay scale which makes it difficult for them to keep up with living expenses and student loan repayments after graduating. Since there are never guarantees that a college graduate will land a well paying position due to their degree, I think a college education might better be classified as a high-risk investment.

This is a guest article by Debbie Dragon, one of six finalists interested in being Consumerism Commentary’s staff writer.

Photo credit: Yakinodi
Is college worth the money?, MSN Money, Morning Joe video, September 28, 2009
College Costs – Average College Tuition Cost, The College Board
Project on Student Debt

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Or maybe not. Capital One conducted a survey of high school seniors to determine how many of these young adults are prepared to handle finances on their own. The company asked the students to rate their own levels of knowledge of personal finance. The results may be interesting, but they don’t reveal anything about financial preparedness.

If you ask students or anyone to rate their own knowledge, they can’t produce accurate answers. According to the survey results, 65 percent of the male students rated themselves “highly knowledgeable” about personal finance while only 49 percent of the female students rated themselves the same. With this information, Capital One came to the conclusion that young men are more prepared to handle personal finances independently than young women. That is the wrong conclusion here. This only proves that male students rate themselves higher than female students rate themselves.

Asking people to rate themselves is more a measure of confidence than actual knowledge. When it comes to knowledge, there are things you know, things you know you don’t know, and things you don’t know you don’t know. Think of the “known unknowns” and the “unknown unknowns” popularized by Donald Rumsfeld a few years ago. The world mocked him for sounding somewhat ridiculous, but in the case of this survey, students may not realize how many aspects of personal finance of which they have no knowledge.

Perhaps, in addition to finance, schools and parents should be teaching high school students how to understand statistics to better help detect false conclusions drawn from inadequate data. If drawn from a large enough sample size, we might conclude than male high school seniors are more likely to rate their personal finance knowledge highly, but we should not conclude that boys are more mentally prepared to handle their own finances than girls.

Capital One Survey of High School Seniors Reveals Gender Gaps in Financial Literacy

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I’ve often written here about the disappointing lack of financial education in schools, and it’s this same dearth of vital information that has apparently led to a new special airing on ABC this Friday:

Schools teach us almost everything, but not “Money 101.” For the basics on finance, turn to UN-BROKE: What You Need to Know About Money. It’s an unconventional look at the fundamentals of everyday finance with all the facts about credit cards, mortgages, stocks and bonds, investing and 401(k)’s, in a fresh new format combining information and humor. The one-hour special airs FRIDAY, MAY 29 (9:00-10:00 p.m., ET) on the ABC Television Network.

Here’s an example video of actor/producer Seth Green’s take on the MTV show “Cribs”:

I encourage you and your families to watch the show, as TV networks almost never take time out of their programming schedule to present the kind of information that, while basic, refuses to graduate to “common knowledge.”

Personally, I plan to set the DVR to record it, and then skip the commercials.

The original version of this article, Un-broke TV Special on Friday, May 29th, is copyrighted by Consumerism Commentary.

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Although the latest figures indicate job loss is slowing, at 8.9% the unemployment rate is continuing to increase. Some unemployed individuals who want to take classes to build skills while looking for a job experience some roadblocks:

• Searching for work can be a full-time job. Finding time for all your responsibilities and desires can be a challenge in addition to tailoring resumes, connecting with contacts, traveling to interviews. There may be more daylight in the summer, but there are still only twenty-four hours in a day.
• If you expect long-term unemployment and want to use the time to go to college full time, under current rules, you lose your unemployment benefits. You have to be actively searching for work in order to qualify, and full-time education usually disqualifies you.
• Financial aid is based on the prior year’s income, so newly unemployed individuals may not qualify despite their lower income this year.

The key to building a strong community, a competitive country, and prosperous world is education. This is true not only for education in finance, but for education in science, history, and the arts. It’s good to hear that education is back on the agenda. President Obama wants to change the rules to benefit the millions of unemployed individuals who want to increase their knowledge.

The President has proposed using current rather than the prior year’s income to determine whether an student qualifies for the Pell Grant, financial aid for low-income families. Another proposal would ensure that students would not lose their unemployment benefits while enrolled in classes and training.

As the proposal takes shape over the next few weeks a government website, Opportunity.gov, will provide resources for unemployed individuals who wish to expand their knowledge through education. States will also be sending letters to residents receiving unemployment benefits to inform them of the new opportunities coming soon.

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President Obama has proposed a number of changes that will affect how college students qualify for and receive loans to finance higher education. The plan calls for significant changes and like many other changes in the government over the past month, it is causing some controversy.

Currently, the government subsidizes student loans offered by banks and other private companies, like Sallie Mae, the biggest college loan company. Low interest rates are offered to students, and in turn, the federal government pays lenders to take on this debt. These subsidies are costly, and eliminating them in 2010 would save $4 billion each year according to Education Secretary Arnie Duncan.

The money saved will be used to increase the level of money distributed to students as grants, making college more affordable to more people. Lenders are concerned about this plan. Sallie Mae stands to lose seventy-five percent of its loan origination business to the government, and banks will lose the ability to offer low-interest government-backed student loans. Without subsidies, it’s unlikely that banks will be able or willing to offer competitive products, and that could reduce choices for students shopping for loans.

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Having done all of my formal schooling in New Jersey, some of it more successful than the rest, I was excited to see a short story in NJ’s Daily Record about a bill passing through the NJ State Senate that would require basic financial skills to be taught in High Schools.

This is sorely needed in all public schools. Too many graduates don’t know how to write a check, balance a checkbook, deal with credit card bills, or what goes on when buying a house. All of those topics, and hopefully more, would be included in the proposed classes.

The State Legislature Web site has multiple bills with similar titles, but I believe this is the core of the matter:

The goal of the pilot program will be to ensure that high school graduates in the pilot districts receive instruction on budgeting, savings and investment, credit card debt, and other issues associated with personal financial responsibility. At the conclusion of the pilot program, the commissioner will report to the Governor and the Legislature on the feasibility of implementing the program on a Statewide basis.

Many of the comments on the Daily Record story are concerned with overloading the curriculum and/or extending the school day. Some have questioned whether the new class should replace Home Economics.

This is Home Economics. In my Home Economics class, we learned how to make pancakes and pillows. I would be much better off having learned to balance a checkbook. Besides, my Home Economics class was in 6th grade, and these new classes would be in High School. I recommend using “Finance 101″ to replace European History.

Thanks to Consumerist.com for highlighting this story.

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If the only value of higher education is the money you earn throughout your lifetime with your college degree, then SmartMoney’s recent study might help you decide where to matriculate. Ivy League schools don’t pay off as much as one might expect. The magazine surveyed the annual salaries earned by graduates of 50 of the most expensive four-year schools, three years and fifteen years after graduation. The data were used to determine a “payback ratio.” You can compare payback ratios of different schools to get an idea of whether and how fast the cost of tuition will pay off in terms of income earned.

Here is what SmartMoney has to say about this survey’s approach:

Ultimately, we weren’t trying to measure the quality of education or colleges’ selectivity. Other rankings take ample care of that, and dedicated students will thrive at any of these fine schools. But with boutique private colleges coming under heavy criticism for spiraling costs, our payback numbers certainly raise questions about the actual “return” on an educational investment.

“Return” is more than the financial benefits you receive from an education, and putting that aside to look just at the dollars creates an interesting comparison. But this shouldn’t be the only factor or the deciding factor when choosing a college. There is a tendency for business-minded folk to measure everything through “ROI” (return on investment) or to look purely at numbers through a “cost/benefit analysis.” Decisions based on pure financial anlysis don’t necessarily result in happiness or satisfaction with long-term goals.

Here are the top 5 public schools, liberal arts schools, and Ivy League schools based on SmartMoney’s “payback ratio.”

Top 5 public schools

1. University of Georgia: 338%
2. Texas A&M: 315%
3. University of Texas, Austin: 306%
4. Georgia Tech: 263%
5. University of Washington: 225%

Top 5 liberal arts schools

1. Washington and Lee: 145%
2. University of Richmond: 130%
3. Lafayette College: 115%
4. College of the Holy Cross: 114%
5. Bucknell College: 114%

Top 5 Ivy League schools

1. Princeton: 132%
2. Dartmouth College: 131%
3. Yale University: 127%
4. Harvard University: 124%
5. University of Pennsylvania: 124%

The original version of this article, Getting Paid Back for a College Education: 15 Top Schools, is copyrighted by Consumerism Commentary.

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Last year, I asked in high schools should require money management classes. My point of view is that such classes should be optional and/or lessons in personal finance can be incorporated into other classes throughout middle school and high school. Not everyone agrees with me, however, considering the state of financial distress many in this country face.

A commenter wrote in to describe his experience with a specific money management curriculum called Real Money, Real World, part of the Your Money NOW program sponsored by the Ohio Treasurer of State.

Schools can devote as little as 90 minutes or as much as a grading period to the program.

It works like this: Students get jobs and salaries based on their current GPA (the higher your GPA, the better paying job you get). Several booths are set-up with different signs relating life events. Students go to each to add children, housing, entertainment, cars, etc into their budget. At the end, they have to have a balanced budget.

I helped out at one of these events at my local high school and it was great to see these kids doing the math and complaining how much kids cost or how they can’t buy the clothes they want because their job doesn’t allow it.

The program sounds like a good start. I particularly like this resource: a description of the savings you could experience [pdf] by maintaining a credit score of 680 rather than 580.

The original version of this article, Real Money, Real World: A Resource for High School Personal Finance Classes, is copyrighted by Consumerism Commentary.

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When I was applying for colleges for my undergraduate degree, a scholarship agent came to our house. I think he was referred to us by a friend of mine, and even then I wondered whether this was the time of arrangement where someone gets a referral bonus. The scholarship agent entered our house with a several fairly large binders, supposedly containing information about thousands of scholarships, and I could be a match for many of these. The agent asked about my interests and activities and turned to the appropriate pages in the binders.

I may be somewhat fuzzy with this memory; my parents were handling the financial considerations of my college experience. I believe this consultation cost somewhere around $200, and I don’t think there was anything gained from the meeting. The scholarship agent couldn’t complain, though. By showing up with his binders and meeting with my parents for a couple of hours, he was a few hundred dollars richer.

This was a year or two before “The Web” would become accessible to those with Mosaic and an internet account. This was several more years before a wealth of information about scholarships could be found online. The dissemination of scholarship information was apparently accomplished through traveling agents, moving from referral to referral. Besides a scholarship from the local university where my mother worked, most of my education was funded by loans, either taken by me or by my parents.

Here are three tips from SmartMoney for scoring more financial aid.

Plan ahead. College-planning specialists have grown to more than 1,200 in number since the National Institute of Certified College Planners was founded, in 2002. They offer ways to boost aid eligibility (deferring income, for example) and take advantage of tax benefits. NICCP.com has a list of specialists; check with the Certified Financial Planner Board of Standards to ensure they’re also certified financial planners.

Was the agent who came to our door a “Certified College Planning Specialist?” At the time, I wasn’t paying attention to the details, so I don’t know. I’d be willing to bet that such a designation didn’t exist at that time. The CCPS is a type of financial adviser that focuses on planning for college. If you already have a financial adviser, would it be worthwhile to hire a specialist?

Dig for scholarships. By last count there was over $3 billion in private aid available, with $100 million going unused annually. David Rye, author of The Complete Idiot’s Guide to Financial Aid for College, says people don’t realize it’s there. Employers and churches can be sources of scholarships, and you can search on sites like Petersons.com.

My memory, which often resembles swiss cheese, is hinting at a scholarship a friend from college received. I seem to remember that she received funds every year from the Daughters of the American Revolution even though she had no genealogical ties to the organization.

Follow up. If the school’s aid offer is insufficient, The National Association of Student Financial Aid Administrators recommends writing a letter, especially if there are recent changes in the family finances. If the need is real, says NASFAA’s Justin Draeger, they won’t “turn their backs on you.” Be sure to provide evidence, such as tax returns, to support your claims.

It can’t hurt to ask for more, especially if you can prove a financial need. It also doesn’t hurt to have schools compete over you. If there are two schools on equal footing, and one offers more financial aid, don’t hesitate to let the other school know. Perhaps they can match the offer.

If I have children, I’ll be going through this process again, only I plan to be more involved. Costs for college and private school are advancing much faster than anything else other than health care, and competition for scholarships can only get tougher.

Image credit: talaba
Score More Financial Aid [SmartMoney]

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A week ago, U.S. Senator Patty Murray introduced legislation proposing an investment of $250 million to support personal finance education in public schools and colleges. Education is the key to improving the financial stability of future generations, and parents have the strongest side of responsibility. While the general media doesn’t encourage fiscal responsibility through excessive commercialism, this message may not be balanced by education at home or in school. The problem is that many parents don’t have the ability to pass on solid knowledge because they didn’t receive good habits from their own parents. The cycle has to be broken somehow, and public education is a good start.

The public school curriculum is already packed with essential education in science, math, humanities, languages, and arts. Adding a separate personal finance requirement to the curriculum would require cutbacks in other areas of education, and I cannot support that. Alternatively, schools can incorporate money management into other classes or offer elective courses.

This legislation would provide needed funds for teaching financial literacy in whatever manner appropriate and necessary.

Of the $250 million in grant funding, $125 million will go to support classes in local colleges that students, working adults, and seniors can access to learn crucial financial basics. Another $125 million will go toward K-12 schools to teach financial literacy, help teachers incorporate financial lessons in other subjects, set new financial literacy standards, and develop innovative afterschool programs.

A public school that receives a grant under this program would be required to implement teacher training programs to embed financial literacy and personal finance education into core academic subjects, administer financial literacy assessments on at least an annual basis, and implement financial literacy activities within core academic subjects.

The bill was introduced and referred to the Committee on Health, Education, Labor, and Pensions, chaired by Senator Ted Kennedy.

Senator Murray Acts to Improve Financial Literacy Programs in America’s Schools and Colleges
S. 2671

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The Catholic Diocese of Brooklyn is concerned that the recent rash of foreclosures, if it continues, will degenerate the neighborhood into its recent crime-ridden past. To combat this possible future, the church has now begun offering “Housing Crisis” workshops alongside its Sunday school religious lessons.

Are pastors and Sunday school teachers extolling the values of living within your means, buying only what you can afford, and negotiating with creditors to manage your mortgage payments? No, the church is bringing in housing experts, unaffiliated I would assume, to speak to the congregation.

This program seems to be a good idea on the surface. I don’t think the religious setting would cause too much conflict. I think secular schools and other community institutions would benefit — and it would benefit their communities as well — by offering adult education courses following this example.

A Sunday school lesson in mortgages [Marketplace]

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Existence of music education in one’s curriculum is related to higher incomes and more education later in life, according to a new study by Harris Interactive.

Three-quarters (75%) of American adults were involved in some type of music program while in school. Half (51%) were involved in chorus while 42 percent had some type of formal instrumental lessons. Just over one-third (35%) were in a school instrumental ensemble, such as an orchestra or band while 14 percent were part of an informal group, such as a garage band and 12 percent had formal vocal lessons.

Music education is associated with those who go on to higher education. In looking at what groups may have participated more in music, education shows the largest differences. Two-thirds (65%) of those with a high school education or less participated in music compared to four in five (81%) with some college education and 86 percent of those with a college education. The largest group to participate in music, however, are those with a post graduate education as almost nine in ten (88%) of this group participated while in school.

Music education is also associated with higher incomes. Three-quarters of people (74%) with household incomes of $34,999 or less and 72 percent of those with incomes of $35,000-$49,999 participated in music, compared to 83 percent of those with incomes of $150,000 or more.

The findings are interesting, but it’s important to note that the survey doesn’t prove a cause-and-effect relationship, just correlations between music education and higher education and between music education and higher income.

Music education was obviously a big part of my life, as my original career choice was to become a music teacher. Its funding often sits second chair to “core” subjects however, and I’m disappointed when untapped talent or interest can’t be explored because schools have no money for instruments.

Those with More Education and Higher Household Incomes are More Likely to Have Had Music Education [HarrisInteractive]

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Earlier this year, I shared my opinion that personal finance classes should not be required in high school thanks to an overloaded general curriculum and dubious results. My opinion is that basic money management is better taught — if in school at all — in the earlier years.

The Citi Foundation sponsors a financial education program, offering a curriculum appropriate for kindergarten through eighth grade as well as adults. High school students might be able to relate to the lessons for adults. The curriculum includes lesson plans, handouts, and tips for teachers. The program is quite comprehensive.

Here are the suggested lessons for third through fifth grade:

“What Matters Most?” How many times in a single day do you use the words needs and wants? Do you know the difference in the two words? Do you have the same wants and needs as your best friend? You just might be surprised. Continue with this activity to learn more about wants and needs.

“Is It Really Worth It?” What makes you buy things? Do your friends encourage you to buy things that you really do not need? Continue with this activity to become a “Smart Shopper”.

“Where Does My Money Go?” Have you ever wanted to do something or buy something – but you didn’t have the money you needed? What happened to your money? Continue with this activity to learn how to manage your money.

“Which is Better – Piggy bank or Savings Account?” Do you have any pennies or nickels in your pocket? Take a coin out and look at it. Have you ever wished that the nickel you are holding would become a quarter or even a dollar? Continue with this activity to learn how you can save money and make it grow.

The included lessons plans are conceived well and can easily be related to state and federal educational standards. The adult/high school lessons are mildly interesting and would be appropriate for a short elective but not a replacement for any other required course. Citi offers lesson plans aligned with the National Standards for Financial Education (from the Jump$tart Coalition for Financial Literacy) and the National Council for Economic Education, covering banking services, money management and credit. The full list of lessons is extensive.

For an example lesson plan, take a look at this lesson on prime and subprime lending, whose timing is appropriate.

I tend to be skeptical when it comes to corporations increasing their involvement in public education, whether explicit like Coca-Cola’s junk food exclusivity deals or subtle like Citi’s promotion of the financial curriculum.

Is there a conflict of interest? These lesson plans are developed by the non-profit foundation arm of a financial company. If these lessons are properly indoctrinated into the minds of today’s youth, the eventual outcome includes more assets under banks’ and brokers’ management. The success of the financial services industry depends on the public knowledge of these services. Citi has a vested interest in spreading the word about good money management habits, which include the use of banks like CitiBank. On the other hand, the industry is well poised to provide some of the best information about the skills necessary for the financial survival of future generations.

If you don’t like corporate involvement, there is another choice for curriculum information. The National Endowment for Financial Education is “the only private, nonprofit, national foundation wholly dedicated to improving the financial well-being of all Americans,” and their High School Financial Planning Program. From what I can tell from GuideStar, this organization has no corporate contributors.

The original version of this article, Financial Curriculum: Classes About Money Management, is copyrighted by Consumerism Commentary.

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Among the high-powered analysts and hedge-fund superstars, obtaining an MBA is losing its attraction. Even degrees from the most prestigious schools like Harvard and Wharton are viewed as a waste of time and money if the student could be earning hundreds of thousands of dollars a year as a stock analyst or millions as a hedge fund manager.

At funds that manage $1 billion to $3 billion, people with just a few years of finance experience will make $337,000 this year, Mr. Zoia says, and those with five to nine years of experience will average $830,000, up 6 percent from last year. These estimates include analysts and researchers but not portfolio traders, who can make much more because they sometimes share in profits.

This seems obvious. If you’re making six or seven figures a year, taking time off of your job for a two-year full-time program is a bad move financially. If that program is expensive, the loss is even greater. In fact, such a move would be seen by future employers as poor financial decision. I can understand why the MBA would be overlooked for a job in which financial analysis is a component. In many cases it shows a poor grasp of cost-benefit analysis.

Not everyone is making six figures when they decide to enroll in a business school graduate program. Also, for someone switching careers or considering entrepreneurship, the MBA can be a gateway. While the article contains some good points for those in high-performance finance careers, there are millions of other perspectives out there.

Just like all college degrees, MBAs are more common. This commoditization causes devaluation. Having a masters degree in business once set someone apart from the crowd, but now it is the crowd. If your goal is to set yourself apart from other people, say, in competition for a career, there are other ways to stand out. According to the article, having a superior stock trading record is a surefire way to rake in big bucks.

Before deciding to undertake any graduate or postgraduate degree — particularly if it involves leaving salary on the table — figure out what your goals are. If your goal is to finish life with the most money, more school (particularly business school) may not be the best option. If lifelong education is part of your personal mission, go for it. If you want a degree only for its potential boost in income, you may have to look at the latest data to determine if your chosen industry perceives the degree as the asset you are hoping it is.

The original version of this article, The Declining Value of the MBA, is copyrighted by Consumerism Commentary.

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College classes have already begun around the country, and it’s not too late to start listening to Ben Stein. He has some great advice for those matriculating. His son is just starting college, so I would imagine Ben has been giving this topic a lot of thought lately.

Make friends with your teachers. While seeing your teachers socially was unacceptable in high school, as adults, the teacher-student relationship takes another form. I had no problem with attending barbecues hosted by my professors, going out for meals, or just relating on a more personal level. We discussed sports and books, music and logic.

Ben goes on to address ways to become friends, but they all pertain to situations in class. While I was in college, a lot of the real relating took place outside of the classroom, but that may be more a result of the type of degree I was pursuing.

Do your assignments neatly, correctly, and timely. Ben Stein mentions that college is about learning to budget your time. Looking back, I wish I had done this better. My time commitments pushed me in a number of different directions and I was always finding it difficult to fir everything I wanted to do inside of the day. I still have this problem now.

I find it hard to believe that people have to be reminded to spell correctly. I’ve encountered horrible spelling from my classmates as a graduate student, and I just don’t understand what the excuse is. Grammar is one thing; there are times when the correct grammatical rules to apply are confusing. Poor spelling is inexcusable. I am sure I’ve made spelling errors in the past, but I would be embarrassed if I spelled as poorly as some of my classmates.

Be well-rounded. I applaud Ben for writing this. Many times, people are encouraged to pick one topic and become an expert without much thought to the larger world around them. Ben Stein wants people to study history, geography, Shakespeare, poetry, literature, biology, physics, and mathematics. Of course, I would add visual and performing arts to his list. All of this teaches more about human understanding than would any business psychology or human resources class.

You probably won’t call upon these subjects in your daily life when you enter the workforce, but they’re vitally important in teaching you how to think. And learning how to think is, above all, the main challenge you face in school. It’s true that you have to know certain basic facts, but you should also know how to approach a problem, break it down, solve it, and write about it. That’s why it’s important to take English composition, and take it seriously.

Join a fraternity or a sorority. Social groups can be positive or negative, so be choosy about which groups you hang out with. My fraternity, which was new on campus when I joined as a freshman, was more of an honor society or service group during the first few years. We didn’t have a house so there are no movies that quite exemplify our dynamic, but we became decent friends as we did as much as we could to follow the fraternity’s national “purpose.”

As Ben notes, the good thing about a group of friends is the support they can provide when it is most needed. Chances are there will be some time during your time in college when you need that support.

Neatness counts. Image is always important.

If you wear sloppy clothes, be clean inside them and have your thoughts especially well-ordered to offset your appearance. You’ll need to work twice as hard so your teachers know you’re smarter on the inside than on the outside.

Don’t smoke or drink to excess. Anything in excess is bad. Aim for moderation and limit any unhealthful habits.

Play a sport. Is marching band a sport? I guess it depends on the marching band.

Have a roommate you like. Personally, I preferred having no roommate and spending most of my time in the dorms with my girlfriend. I never had to worry about disturbing anyone. I did live in a special interest dorm, where everyone on the floor was interested in the same thing. For my floor, that was music. In return for living in the nicest dorms on campus, for which we had to apply separately from the standard housing application, we had service responsibilities to the community. I enjoyed this type of environment.

Try to have a significant other. I am a strong supporter of this idea, but I would suggest not staying with the same significant other for your entire college experience unless you are sure you are going to get married. College is a great time to learn about yourself and determine you compatibilities.

Develop good work habits.

College is where you learn to allocate your time, get your assignments done, and develop a good rapport with your fellow workers (students) and your bosses (teachers), and make them all your friends.

Ben notes that in all likelihood, you’ll spend the rest of your life working. This is the reality, so it is best to make the most of it. I didn’t work as hard as I should have while I was running around leading various organizations. I put my priorities elsewhere when I should have worked for more balance between classwork, practicing (I majored in music education), activities, and socialization.

As a leader among my peers in high school in college, this hasn’t translated as well to the working world as I would like. While I’m happy with my experiences, and changing anything about my personal history would change my identity, there was possibly a little room for improvement when it came to getting the right things done at the right time.

Chances are you won’t get everything exactly right. Ben Stein’s tips will get you started in the right direction.

The original version of this article, Ben Stein’s Tips for New College Students, is copyrighted by Consumerism Commentary.

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Last year, I began sharing the details about my experience with the University of Phoenix‘s online campus. I completed an MBA through this program, and experienced the best and the worst of what the school has to offer. Nowhere is the wide range of possible experienced more clear than in dealing with the university’s “learning teams.”

To freshen up on my experience, please read the decision, admissions, course logistics, and the curriculum, as well an aside about the university’s purchase of naming rights to a professional sports stadium.

The basis for a significant portion of the assignments throughout each course is the “learning team.”

The teams are usually assigned by the facilitator during the first week of each six week course on the basis of similar degree focus or time zone, but some facilitators allow the students to suggest their teammates.

Throughout the remainder of each course, the learning team would be required to meet several times a week. For the online courses, this was accomplished using the chat room feature of whichever instant messaging software the team could agree on. Early on in the degree, it was also required for the teams to submit to the facilitator a chat log of the discussion, but somewhere along the lines, this requirement disappeared.

Each six-week course required, in addition to the papers written individually, three team hypothetical business case papers, business case simulation reflections, and in the case of some courses, problem sets. In order to get everything done, it usually meant you would be spending several hours a day working with your team members or working on the team assignments and submitting them for review by other team members.

This is project management on steroids. It’s a reflection — albeit intensified — of real working conditions in the corporate world. Working closely with three to five other students to complete quality work over the internet is an interesting experience, and there were many obstacles to ensuring that level of quality, especially during the first year.

When working with randomly assigned team members, some of whom have nothing in common, differences in work habits become apparent. Some students wanted to control all aspects of the assignment while others wanted to do as little work as possible. Part of working as a team is adjusting to the strengths and weaknesses of others, all of which is intensified due to the style of communication that was foreign to many people.

In the first few classes through working in teams, I discovered a number of people who should not have been attempting to earn a master’s degree. I’m not trying to be judgmental, but a certain level of familiarity with the English language should be a requirement for earning a bachelor’s degree, a prerequisite for the master’s degree. I am not referring to individuals who have spoken a non-English language their entire life, I’m referring to native English speakers who cannot string two sentences together or create a paragraph with a concrete main idea. I won’t hesitate to mention the creative spelling, punctuation, and grammar I encountered. This made editing and proofreading papers containing contributions from all team members one of the most difficult parts of group assignments.

This issue of “skill level” largely disappeared by the time I was attending the more important management decision making courses later in the program. In fact, in my “Cases in Decision Making” course, my team consisted of some of the most intelligent and experienced individuals I’ve “met” in the world of business.

The “learning team” approach to education is something that is missing from many traditional master’s degrees. You certainly get more from your education by working with your peers than you would if you’re just sitting in the back of a lecture hall and working on all assignments individually. I’m glad the team experience was a part of my education at the University of Phoenix despite its immense frustrations at the beginning.

It certainly gave me a lot of experience working with and getting results from people who don’t want to be there, shouldn’t be there, or have a wide range of personalities and strengths, just like I do now at my day job. It also provided me with exposure to high-level executives of a variety of companies, large and small, from whom I was happy to learn.

This learning team experience is at the same time one of the best and worst aspects of the University of Phoenix MBA program. I’m glad I stuck with the program to the end for the opportunity to learn from intelligent and hard-working businesspeople, and looking back I see the value in learning how to manage a team of people not committed to excellence, but it was a rough experience most of the time.

I don’t miss waiting up at the last minute — 2:00 or 3:00 am Eastern time — for the last team member to submit a portion of the particular assignment so I could finish combining all contributions and turn a mish-mash of style, voice, and interpretive grammar into a cohesive, readable paper.

This is Part 5 of a series about my experiences with the University of Phoenix Online. Here is what has been published so far.

• Part 1: The Decision
• Part 2: Admissions
• Part 3: Course Logistics
• Part 4: Curriculum
• Part 5: The Team Experience

The original version of this article, My MBA at the University of Phoenix Online, Part 5: The Team Experience, is copyrighted by Consumerism Commentary.

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In England and Australia, it is more common than in the United States for a student to take a year after high school to travel or experience the world before entering college. According to SmartMoney, it may not be such a bad idea.

The argument is that students who take a break from institutionalized education will come back to college — if they come back — with a fresh outlook on what they want to do with their life, their passions, and their attitude for learning.

This concept comes at a great expense. Delaying college for one year can mean increased tuition costs of 8% or more. In addition to higher education costs, the cost of the gap year can be large, depending on the activities the student chooses.

Delaying college for a year will also likely mean delaying the start of a career. The missed earnings in what would have been the first year of income, thanks to compounded interest, can mean hundreds of thousands of dollars forgone by the time retirement rolls around.

All things considered, I might have liked taking a gap year. For all I know, during that year, I might have changed my mind about my career path, which at the time was music education with the goal of becoming a high school music teacher.

‘Gap Years’ Can Be Smart Move for High School Seniors [SmartMoney]
Photo credit: malias

The original version of this article, Taking a Gap Year Before College: Good Idea?, is copyrighted by Consumerism Commentary.

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A couple of weeks ago, I wrote about options for going to college without going into debt, in response to an article about the near impossibility of doing so.

Commenter “t” shared his or her experience:

I also chose the state school route. I’m lucky enough to have grown up in a state (washington) with an outstanding public university (it wasn’t really luck, it was a conscious decision on my parents’ part), and I went to the best university in the state. With good grades and test scores, I got even that paid for – a state tuition waiver for my HS grades, and a series of scholarships and research jobs that came with stipends.

One thing I didn’t know and just lucked out on was that by applying for so many scholarships, I not only got things paid for, but I developed a great resume. When it came time to apply for graduate training, that made a huge difference – not only did I get in with full funding to every program I applied to including the three most competitive programs nationally, but I even got a 10k signing bonus to sweeten the deal.

Another streak of good luck attached to this strategy: at a large state school, you typically have first rate professors, and a mix of highly motivated students (so you have plenty of peers to challenge you) and less motivated / more distracted students (so your professors aren’t yet sick of students who all want extra attention, and are instead still happy to have you show up with further questions / ask to work in their lab).

I was really unsure when I made my decision to go to a public university when all the rest of my peers were going to private universities – but it’s made all the difference. I would do it the same way again in a heartbeat.

Get good grade in high school, apply for lots of scholarships, and live where the state college system is inexpensive and provides a good education.

The original version of this article, Go to College Without Going Into Debt: An Example, is copyrighted by Consumerism Commentary.

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According to the Motley Fool UK, the Consumer Credit Counseling Service (CCCS) has stated that unless parents are in the fortunate position to provide their children with “absolute financial support” during higher education, that students must accept debt as a fact of life. (Students Must Accept Debt, Motley Fool UK.) The rising cost of a college education contributes to this, of course, as does the necessity of a degree for the “best” career paths — those with the highest earning potential.

In general, individuals with a college education will earn more over their lifetime (though there are notable exceptions), justifying the extra expense up front. The best of both worlds is then to limit the expense where possible, and therefore the debt, and still earn that worthwhile degree.

Here are some options beyond loans for students whose parents are not in the position to provide “absolute financial support.” If these can be combined, the student will have less exposure to debt.

Get scholarships. It is possible for scholarships to pay for your entire college education, but not easy. Most scholarship programs require students to excel in a certain area, academic or extracurricular, and the chances of exceling at enough different areas is low. Some scholarships are based on your ethnicity, as well. If you’re a minory, you may be in luck. Start with the College Board’s Scholarship Search.

Find grants. Grants are the next best things to scholarships. In general, the funds are more limited, and are based mostly on need rather than academic prowress. Grants are also used to encourage students to undertake certain disciplines. For example, as teaching is often an unattractive profession — this comes and goes in phases — grants (and loan forgiveness) are occasionally offered to those studying education. Here’s a good overview of what may be available.

Attend a low-cost college. Attend a public university rather than a private university. Still, rather than a public university for four years, spend two at a community college and finish the degree at a public university. Take into account that the connections you make at college and the degree you receive, in some disciplines, may have an effect on the first job you receive out of college. That first job — if you continue your entire life on that same career path — can affect your earnings over your lifetime. (My first job was for a non-profit organization earning about $550 a week. I could have done that without a fancy bachelor’s degree from my private land-grant university.)

Take advantage of work-study programs. If you qualify, a work-study program is a way to earn income that can be used for paying college and living expenses while still earning the degree. This is my less favored option, as to make the most of the educational process, the stress of a job can be distracting from the true goal of the four years. Not all college jobs are created equal; A minimum-wage job at the university library, would not be too distracting at all, unlike a higher-paying job at the local strip club (not endorsed by the Federal Work-Study program).

Corporate sponsorship. My current company offers significant tuition reimbursement — enough to cover public university tuition in many cases — for those employees earning the bachelor’s degree. Other corporations provide the same benefits. There may be a requirement that the degree be in a field related to the company’s business or the division. For example, a financial services company may require a degree in business, accounting, finance. If you work in the company’s human resources department, you may need to earn a degree in human resources to qualify for reimbursement.

The company will pay the school in advance of each semester, so you do not have to deal with loans at all — though college aid advisors recommend getting a federal loan and using the reimbrusement to pay back the loan immediately. This ends up costing more thanks to origination fees. It also opens up the chance of not using the reimbursement to pay off the loan.

Other options. If I remember correctly, I could have gone to Princeton University for free, if I had been accepted. That benefit would be awarded to me because my mother worked there for the time I was going to college. I didn’t apply to Princeton as they surprisingly do not have a strong undergraduate music program and I probably didn’t have the GPA. (I later discovered, as an undergraduate playing in ensembles when home over the summer with Princeton graduate students, that I might have received a better education and had exposure to better peers in my chosen field than where I was.)

It’s going to take a combination of all of the above to completely avoid debt when it comes to paying for higher education. I believe it can be done, but in some cases, such as working and maintaining eligibility for scholarships, may put too much of a strain on the student.

I’d like to hear stories from anyone who has managed to graduate with a bachelor’s degree without incurring any debt. What choices did you make and were there any sacrifices? Please feel free to share.

Photo credit: jasonhe

The original version of this article, Go to College Without Going Into Debt: Impossible?, is copyrighted by Consumerism Commentary.

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If you are a student, the New York Times will now allow you to have access to their premium content (TimesSelect) for free. Technically, you don’t have to be a student. All that is required is an email address with the “edu” top level domain.

Some universities offer “edu” email addresses to their alumni as well, so if you’re lucky enough to have one of these addresses, you can still access TimesSelect for free. Visitors to Freakonomics have noted that many current students located outside the United States do not have “edu” email addresses. Unfortunately, they will miss out on this offer.

The original version of this article, Read the New York Times Online for Free, is copyrighted by Consumerism Commentary.

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Upromise is a loyalty rebate program which rewards its members by investing a percentage of purchases into accounts for education expenses, namely 529 College Savings Plans. Just register your credit cards and your supermarket membership cards and the different rebates are credited to your account to be invested at a later date. These rebates are in addition to any you may receive from your credit card.

The primary intent with Upromise is to use the cash back savings and investment to pay for your children’s education. Some lenders also allow you to apply Upromise’s balance directly to your own student loan.

Personally, with no children, I prefer to receive my rebates in the form of cash back. Upromise doesn’t publicize this option much as they would prefer you invest directly in the accounts from brokerages who have negotiated a partnership with the company. Hidden deep within Upromise’s website are the instructions for requesting a check for the balance of your rebate to be sent to you within 12 weeks. Here are the instructions, out in the open, for everyone to see:

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.

The original version of this article, How to Withdraw Money from Upromise, is copyrighted by Consumerism Commentary.

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A while ago, I started a series reviewing my experience with the University of Phoenix Online. I attended this school through its online master’s degree program and I earned my MBA several months ago. So far, I’ve discussed how I decided to go this route, their admission philosophy and policies, and what it’s like attending a course online.

The next part, a review of my curriculum is long past due. I’ve procrastinated this section as I originally intended to take a quick look at each course and write about the merits of each. This was a daunting task hindering me from continuing the series. I’ve decided to take a different, more general approach.

The bottom line is that there were only a few courses from which I feel I gained useful knowledge. The first course was a three-week, 1 credit course called “Managerial Communication.” The class allowed the students to get their feet wet with the format, which for some students was quite foreign and a major change. It forced us to rethink the techniques we’ve learned throughout our lives for effective learning. My prior experience with technology and online learning helped make it a quick transition for me, but others were not as successful. Here are the “highlights” of the rest of the curriculum.

• Human Relations and Organizational Behavior: the theory behind behavior I’ve observed in the workplace, and how to manage people and projects.
• Statistics: I’ll still need to use reference materials if my job every required statistical analysis, but the classes was good practice.
• Accounting: I’ve been “in accounting” for a while but never had an overview of its theories and practices, just learned on the job. The class added some technical knowledge, but not much practical ideas.
• Finance: These classes were helpful in terms of reading and analyzing financial statements and preparing budgets and forecasts.
• Project Management: I did pick up useful tools and techniques for running projects, something which I didn’t have extensive experience on the job.
• Information Management and e-Business: Nothing I didn’t already know from my own experiences, these classes added very little.
• Cases in Decision Making: This class did a good job of bringing together everything from the two years of classes and running decision-making scenarios.

My path at the University of Phoenix involved a curriculum of 46 credits for a general MBA. The University’s program description is a little different as it provides this information:

The MBA consists of 39 credit hours and includes three proficiency courses (MBA 501, MBA 502, MBA 503) which may be satisfied using an undergraduate business degree, undergraduate coursework or graduate coursework. Students may also waive an additional nine credits using graduate courses and may qualify for a 21-credit hour residency.

During my time enrolled, the University updated the curriculum several times. In the middle of my degree pursuit, I dropped to part time employment at my job to teach music full time in a high school for six months. (This time also coincided with a hiatus on Consumerism Commentary.) I paused my degree for a year, and when I returned, there were several changes to the curriculum and to my overall experience, but I’ll get to that in Part 5.

This is Part 4 of a series about my experiences with the University of Phoenix Online. Here is what has been published so far.

• Part 1: The Decision
• Part 2: Admissions
• Part 3: Course Logistics
• Part 4: Curriculum
• Part 5: The Team Experience

The original version of this article, My MBA at the University of Phoenix Online, Part 4: Curriculum, is copyrighted by Consumerism Commentary.

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If you’re an undergraduate student at Princeton University, you may be happy to hear that tuition for the 2007-08 year will hold steady at $33,000, or only $3,000 more than a seminar with the Maui Millionaires.

Don’t get too excited, tiger. While tuition isn’t increasing, the costs for room and board will be substantially higher. Total cost to attend Princeton on campus next year will be $43,980.

Princeton was able to keep tuition costs at bay thanks to donations and strong performance in their endowment, now totalling $13 billion. At a safe withdrawal rate of 4%, that’s $520,000,000 each year that the University could withdraw and use for scholarships or programs.

According to Wikipedia, Princeton University has the fewest students graduating with debt. That’s an interesting statistic, but it’s provided without a source.

The original version of this article, Princeton University Holds Tuition Steady, is copyrighted by Consumerism Commentary.

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Earlier this morning, the Carnival of Personal Finance was posted at City Girl’s Financial Blog. There are a lot of good articles this week, so take a look.

What interested me the most were three very different reactions to an article on Yahoo monetizing the worth of a Bachelor’s degree at $23,000 a year. Mac’s Money finds fault in the calculation as it uses an unfair comparison, Free Money Finance acknowledges education is a great investment with wicked returns, and Wenchypoo brings politics into the discussion.

The original version of this article, The Carnival is Up!, is copyrighted by Consumerism Commentary.

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Last week, I started a short series looking at Money Magazine’s 25 rules to grow rich by. I’m breaking down the advice within the article into five separate blog entries here; you can find part one here and part two here. Here are the next five tips, with a bit of my own commentary thrown in when appropriate.

11. If you don’t understand how an investment works, don’t buy it. Don’t bother with futures options, and don’t let your broker talk you into them, unless you have done some indepent research and you know what you’re getting into.

If a stranger wants a few thousand to invest in his new business, you’re not oging to give him the money without determining what it will be used for, checking his business plan, and making sure there’s a good chance he’ll be able to pay back as promised. The same theory is true for any type of investment, especially those beyond the basic stock or bond.

12. If you’re not saving 10% of your salary, you aren’t saving enough. Saving 10% can be difficult for people with little education, making minimum wage, and living in a high expense area. Some people will need to save much more than 10%, particularly if they started saving later in life and are trying to catch up before retirement. For those extremes, 10% is not appropriate. But for others, it’s a decent starting point. Of course, the more you can put away rather than spend, the better.

13. Keep three months’ worth of living expenses in a bank savings account or a high-yield money-market fund for emergencies. If you have kids or rely on one income, make it six months’. Creating an Emergency Fund is usually the first step once one decides to get financially in gear. Everyone will experience some kind of emergency eventually, so it’s good to have cash stashed. This way, there is no need to rely on credit card or emergency 401(k) loans to help.

One way to painlessly create an Emergency Fund is to handle the deposits automatically.

14. Aim to accumulate enough money to pay for a third of your kids’ college costs. You can borrow the rest or use some of your income to help out when your child is in college. First things first: make sure you are set before you save for your kids’ education. That is the approach that most financial planners suggest.

I’m not quite sure I agree due to the strong emphasis I place on quality education and my belief that too many “real world” jobs can distract students from focusing on school when their brains are the most impressionable for higher-level learning (high school and college). Parents should provide as much financial support for college as practical.

Tuition prices are only increasing, and doing so at a rate much higher than “official” inflation. A high debt burden when exiting college can dissuade students from taking on degree programs that are not predicted to be the most lucrative. It’s important that there continue to be people in the world studying and becoming experts in literature, art, music, education, history and social sciences.

15. You need enough life insurance to replace at least five years of your salary – as much as 10 years if you have several young children or significant debts. I have no life insurance. There’s no one depending on my salary other than myself at this time. Thus, life insurance hasn’t been on my list yet. This rule of thumb sounds good to me, but if anyone has any thoughts on life insurance to share, please feel free to educate me by leaving comments below.

This series will continue with Part 4 in the next day or so. I’ll also finish writing the series on my experiences with the University of Phoenix Online soon. There is much to be said, so it’s taking some time to put all of my thoughts together.

The original version of this article, Money Magazine: 25 Rules to Grow Rich By, Part 3, is copyrighted by Consumerism Commentary.

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Money Magazine is running an extended feature targeting 7 of the most annoying money problems, and proving some easy solutions. Here is a shortcut to the seven shortcuts:

1. Ace your retirement. Buy a target-retirement fund in your 401(k). If you believe you’ll be retiring in 2030, you can buy a fund that targets that date and has “appropriate” risk for that time frame. The article doesn’t mention that with any fund of funds, you’re also paying fees on top of fees.

2. Invest (almost) like a pro. If you don’t want to buy a target-retirememnt fund, use a stock index fund and a bond index fund to achieve the level of risk you’re willing to undertake. Here’s their rule of thumb. Subtract your age from 120 and put that percentage into the stock fund. I’ve heard this rule using 100 as the baseline rather than 120.

3. Cruise into college. The Utah Educational Savings Plan will configure your 529, a college savings investment plan, using low-cost Vanguard funds. Or view your local options at savingforcollege.com.

4. Disaster-proof your family. Build an emergency fund, buy life insurance, and write a will. The first part applies to anyone, including single men like me. Once I have a family, I’ll take care of the rest.

5. Protect your identity. Opt out of receiving junk mail, which is targeted by identity thieves, by calling 888-567-8688. Shred paperwork and opt to receive statements via email rather than snail mail. Get your credit report for free three times a year from AnnualCreditReport.com.

6. Shop smart for a car. If you don’t want to deal with the hassle, hire a buyer for $400 to $800. Buying online is an option, as well.

7. Simplify your credit life. If you carry a balance, use a low-rate card. Call the company and ask if they can lower your interest rate. If you pay in full like I do, use a rewards card.

The original version of this article, Money Magazine: 7 Shortcuts for Major Money Hassles, is copyrighted by Consumerism Commentary.

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Before reading on, if you haven’t participated in this week’s giveaway, open up this article in a new window or tab and add your comments about asset allocation. You can win two interesting books just by leaving a comment.

Thanks to everyone who contributed to the discussion about who is to blame for poor money management skills that lead individuals, especially younger people, into debt and other financial problems. Do we blame the individual solely? The parents, school system, or government? Or does the fault reside with the “evil” credit card companies who use clever marketing?

Here are some of the thoughts presented by commenters. Broadway says:

I believe that any blame must be assigned equally to all parties. Attempting to point a finger at one entity and assigning all or most of the blame to it is what is wrong with society. There are no quick fixes or easy solutions. Society is complex… One solution that I believe will attack the cause(s) is to teach critical thinking skills early (and often) in our educational system.

S/100/30 says:

There’s a lot of discussion about how parents don’t teach their children “about money,” but I think the problem goes far beyond whether parents fail to explicitly discuss compounding interest with their children — the astounding number of parents who actively encourage their children to spend money foolishly on image.

MillionDollarCountdown takes responsibility:

From my point of view its personal responsibility. No one forces me to buy anything. Yes, I know there are advertisements and the peer pressure. But all said and done its me who pulled out the credit card.

Others say:

* “There is ONLY ONE THING TO BLAME (if you must call it that) and it is GREED!”
* “Maybe there really is nobody to blame. CC companies operate within the law… I think it’s the responsibility of parents and our educational system to do a better job of teaching people how to manage their finances.”
* “Yes, the CC companies are taking advantage of people that simply are not educated on the issue of personal finance. But is it really their responsibility to ensure that their customers do not abuse the credit they have?… I attended a top notch private college preparatory school… it is inexcusable that they never touched on the issue of personal finance. I think it should be mandatory.”
* “[U]nless we do something to change the sort of thinking that says new clothes are more important than a $0 balance, the debtors are going to outweigh the rest of us.”

Finally, here are my thoughts.

First of all, I loaded the discussion question by asking who is to blame, as if one entity could be the cause of everything that is wrong with society. Of course, that is not the case; there is a lot of stupidity out there. That’s a little harsh. Stupidity isn’t really the issue. Here is what I do see in my unscientific observations:

Step 1. Parents model behavior and attitudes towards materialism. Before kids are exposed to media and are able to comprehend messages from marketers, they watch their parents. They see their parents acquiring things before the children are old enough to understand the concept of money exchange. The message they learn: “Things make people happy, things are good.”

Step 2. Children develop the concept of desire based on what they see in their parents and in older siblings, playmates, etc. They see people having desire for things, and experiencing happiness when those things are received. They don’t always see that sometimes desire must go unfulfilled. Desire leads to acquiring things, which leads to pleasure.

Step 3. Thanks to the child’s environment, children attach the feeling of desire to the objects that appear to be the most desirable by others. Johnny has a T.M.X. Elmo, the toy is fun and Johnny is happy, therefore I want a T.M.X. Elmo so I can be happy (and attract the attention and envy of the social group and move up the ladder).

Step 4. Here’s Spongebob (and any children’s show designed to sell its own merchandise and sell ad space). Children, instead of playing with their friends, get pleasure from watching television. Most of television is designed to sell. Commercials depict kids expressing desire, receiving things, and being happy. Kids immediately relate to the characters in the commercials and know they will also be happy with the things being sold.

Interlude. At this stage, the parents can exert influence, if they choose to do so. It’s hard to compete with social groups and television, but if the parents model moderate materialism and delayed gratification, children may be more prone not to express frustration if they cannot have what they want. In the same vein, excessive spoling and catering to the children’s perceived desires may also damage the situation in the long run.

Let’s fast-forward a little bit.

Step 5. As children mature, they begin to understand the concept of earning and spending money. If they’re not taught by their parents, they will learn elsewhere. Any lack of knowledge creates a void that will be filled in by whoever manages their first exposure. This is why it might be a good idea for some children to get a job during high school. I wouldn’t say that’s a good idea for everyone, but some children may need this hands-on experience before tackling the ideas in a more conceptual manner. Working at a job, with monitoring by parents, can be better for financial education than a class in school, which brings me to the next point.

Step 6. Schools, especially those in the government-controlled public school system, will generally not teach money management classes. Why not? Schools are all ready under pressure to expand their offerings to include humanities, philosophy, arts, music, foreign languages, physical education, and extracurricular activites aside from the science, social studies, mathematics, history, and English core curriculum. There is too much competition for time, not enough teachers, and far too little money. Is money management more important than the other subjects above? Some may say yes, but that doesn’t mean it’s the job of the public school system.

Interlude. There’s the popular belief that the public school system exists to create good, loyal consumers, without much independent thinking. I wouldn’t say that’s the case everywhere, but if it is true, it runs counter to the idea that money management classes should be offered.

By the way, personal finance classes have been shown to do more harm than good for teenagers in at least one study.

Step 7. Before you know it, your children are off to get a full-time job or enroll in a public or private college. Money management courses are generally not found here, either. If the college student is like most, this is the first significant time away from the constant influence of parents. If you haven’t done a good job as a parent by this point, you may just have to pray that they are able to figure things out on their own. It starts with college orientation: these days, you’ll find booths and tables set up with representatives giving away free things (remeber “things” from the earlier stages above?) like t-shirts and Frisbees. The light goes on… all that’s needed for the pathway to endless instant gratification is to fill out an application. The kids are used to applications at this point, having applied to a bunch of schools: one or two they’d never get into, a few safe schools, and several realistic choices.

This is the moment of truth. Perhaps the student is prepared to handle a credit card wisely. However, remember that if there is a void of knowledge, the void will be filled by the first reasonable association. That might be a free t-shirt and the promise that anything can be bought — even necessary things, like food — without any supporting funds. Is it the credit card company’s fault that no one has fully educated some of these children? Of course not, but the credit card companies make a lot of money catering to the empty-headed students, and the companies do not put any effort into fully educating the prospective customers.

At this age, some children (yes, they are children in some ways, even at 18 years old) are not ready to handle the responsibility that is being dangled in front of them like a carrot, even after the best modeling and teaching by parents in earlier years. I’m not saying that there should be a required age before credit is issued, like a driver’s license, but different people develop mentally at different speeds, regardless of the effort parents put into modeling and teaching.

So no one’s fully to blame, but my observations lead me to believe most of the damage is done earlier rather than later, and the point at which parents can have the most influence is also earlier rather than later. The trick is that many kids don’t have the cognitive ability to understand the intricacies (or even the basics) of money management at the time they are most susceptible to their parents. This is what makes development so difficult and creates a “blank slate” that credit companies are eager to fill with nonsense.

On the other hand, parents cannot be quick to fully dismiss societal habits that allow children to move upwards in the social ladder. There is much more that goes into teaching kids how to function in society besides moderating materialistic intentions. Most of the times I speak to parents — I am not a parent myself — who have well-functioning older children, they attribute the situation to luck.

Feel free to share any comments, including your own experiences even (and especially) if they contradict anything I’ve written.

The original version of this article, The Blame Game: Poor Money Management, Part 2, is copyrighted by Consumerism Commentary.

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There’s a discussion at StopBuyingCrap about credit card companies’ evil tacticts. In fact, Cap comes clean with this humble admission:

No body forced me to buy the mountains of Japanese comic books, computer hardware, and automotive parts. Sure, the credit card made it easier for me to spend money I didn’t have — but the reason why I spent frivolously was because I was a complete moron.

An anonymous commenter responded to Cap’s post:

Yes, personal responsibility is important. Many young people, however, have never been taught thing one about managing money. They simply don’t understand how it works. The companies take advantage of that. There are thousands of people who sit in their offices all day thinking up new ways to take advantage of that.

I tried to respond with my thoughts, but it was 3:45 am, so it didn’t come out completely the way I intended. So I’ll expand on this a bit.

This is an age-old debate. Whose fault is it that people go deeper into debt? Is it the young adult who lacks the basic math skills to understand the effects of compound interest? Perhaps it is the credit card companies whose marketing efforts, especially on college campuses, may be excessive? Can we turn to the primary and secondary school administrators who feel that money management cannot be shoved into an already-packed schedule? And then there are the parents, who perhaps fail to model appropriate behavior (implicit teaching) or explicitly teach their kids about handling money.

Obvisouly someone should be blamed when college students graduate with thousands of dollars in credit card debt, debt they have little to show for as it the money probably went to clothes that don’t last, food, entertainment, and status symbols that become old quickly.

I’ll pose this question to my readers before going any further. Who deserves all of the blame? If not all, who deserves most of it? Are the credit card companies and marketers evil when they prey on young “minds?” I touched this topic a while ago when I asked the question of the day, but now I want to know exactly what is wrong with society, where it fails, so we can fix the problem and move on.

Please share your opinion, and in a follow-up post, I’ll write a bit about what I believe, hopefully more coherently than how I commented on StopBuyingCrap.

The original version of this article, The Blame Game: Poor Money Management, Part 1, is copyrighted by Consumerism Commentary.

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As you may know, I’ve been writing a series about my experiences with the University of Phoenix Online. So far, I’ve written about my decision, the admissions process and course logistics. Before continuing with the rest of the series, I wanted to mention a recent development.

The University has purchased naming rights to the stadium in which the NFL‘s Arizona Cardinals play. Thus, the professional sports arena will be known as University of Phoenix Stadium. This is another good business move for the Apollo Group, the parent company of the University, but it doesn’t play well in real life. A stadium name like that implies the sports team that plays there is affiliated with the university. Apollo Stadium would have been a much better choice in my opinion, but it wouldn’t put forth the brand identity that the University wants to enhance. The University has more students than any other private school in the country, but does not have its own football team.

I don’t think this was a smart move, all things considered. The University of Phoenix is now paying $154 million over 20 years for something that just doesn’t sit quite right with a lot of people, although they will be hosting the Fiesta Bowl and the 2008 Super Bowl.

How’s the media taking the news? The jokes are flying. A letter to the editor of the Arizona Republic says, “The University of Phoenix has become synonymous with overpriced, mediocre education… The Arizona Cardinals provide an overpriced product that appears to be still struggling to rise to the level of mediocrity. It is indeed a delicious irony that these two corporations have mated.” There is more irony in the move as the Cardinals had played in a college stadium until the new one was built, and the new stadium is in Glendale, Arizona, not Phoenix.

The good news is that the football organization might be able to take the money earned from selling the naming rights and build a better team.

The original version of this article, My MBA at the University of Phoenix Online, Part 3.5: The Stadium, is copyrighted by Consumerism Commentary.

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While we’re on the topic of education, Kiplinger’s Personal Finance has conducted a survey to determine this year’s best values in public colleges for undergraduates. In order to rank the schools, Kiplinger’s used SAT/ACT scores, admission rates, freshmen retention rates, student-faculty ratios, graduation rates, tuition costs and other fees, financial aid, and accumulated student debt, while prioritizing academic quality first.

My alma mater, the University of Delaware, placed 17th for out-of-state admission and 26th for in-state.

My undergraduate education was paid for by a combination of money from my parents, a grant from Princeton University, a few small scholarships, money I had earned through short stints of working, and student loans.

Search for your school here.

The original version of this article, Kiplinger’s 50 Best Values in Public Colleges, is copyrighted by Consumerism Commentary.

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If you’ve been following Consumerism Commentary, you may know that I recently completed my Master of Business Administration (MBA) degree at the University of Phoenix Online. I’ve been writing a series, which is basically a review of the University of Phoenix.

The choice to take this nontraditional route was not a difficult decision for me due to my previous experiences with online education, but many people I’ve talked to have considered it without making a decision due to lack of information.

The question asked of me most often is simply, “How does it work?” Here’s how.

Each course except for the first is worth 3 credits. In a traditional setting, that means (at least) three hours should be spent in class each week. However, rather than having a fifteen-week semester in which 12 to 18 credits are undertaken, the students have one 3-credit class for six weeks and optionally a week off before the next 3-credit course begins.

It is highly recommended to only take one course at a time. While the University’s guidelines require participation only two days out of the week for attendance, each class will require active participation four or five days out of seven in order to receive full credit. The amount of work will be unreasonable for five-day participation in more than one course at the same time. Remember, all students are actively employed.

The “week” for each class begins on Tuesday and ends the following Monday. This allows use of the weekend for wrapping up assignments, which are generally due at the end of each week. Assignments almost always take the form of individual writing assignments (“papers”) or group writing assignments. Yes, a significant paper is due each week.

There are three main tools available to each student for communication and research. All class communication takes place in the University’s newsgroups and Outlook Express is required for access. (Alternatively, the student can access the classes through Outlook Web Access, but the interface is unstable and doesn’t work properly with many browsers.)

Each class has several newsgroups, shared only between those enrolled in the particular section. The Main newsgroup is where most of the discussion takes place. There is a “chat room” newsgroup for miscellaneous conversation, a “course materials” newsgroup for the facilitator to post lectures, presentations, and other learning tools, an “assignment” newsgroup for posting final versions of assignments in a location where other students cannot read them, and “team” newsgroups for each team within the class. There will be more on teams later.

The second tool is the University’s eResource, for which an additional fee is paid each course. This is a website that contains more course materials, including the text book for the particular class. The text books are either in a downloadable Adobe Acrobat (PDF) format or a digital rights-managed (DRM) version of Acrobat. The DRM was very frustrating to deal with and I much preferred the standard PDFs. The text books are all current, with case examples relevant to today’s business environment. Most of the texts have these cases updated every few years; I never read a text that was revised prior to 2003.

The University also provides a library of articles, including selected news magazines and peer-reviewed journals. Librarians are familiar with the databases offered to every student which include EBSCOhost, ProQuest, and several others.

The University labels its teachers or professors “facilitators.” These are individuals, all with MBAs and some with PhDs, who are leaders in their businesses and have extensive knowledge of the topics they are instructing. While each individual facilitator has his or her own style insofar as involvement in class discussions, I was not disappointed in the knowledge of any.

Before each week, the facilitator posts the lecture as well as several questions designed to inspire discussion, based on the text and article readings for the week. Each student is required to respond to the discussion questions as well as to others’ responses to the questions. The facilitator helps to guide the discussions when necessary, but for the most part allows the students to learn from each other’s experiences.

In my experience, some classes had very active discussions while other courses inspired much slower conversations. In the first case, the only way to keep up with the discussions was to log into the newsgroups at least once a day. In several classes, in order to keep up with the discussions, a dedication of several hours a day, seven days a week, was necessary. Technically, one could put in the minimum requried (four or five days, two significant contributions to discussions each day), but that would not be making the most of the course.

The students in each class are divided into teams. This was an interesting way to foster better communication through a medium and method (sitting by yourself at the computer) that lends itself mostly to individual work, opposed to meeting people in person. It also is a good way to mirror real business situations. In the most organized courses, each of the six weeks alternated with a major individual assignment due and a major team assignment due. Again, I’ll have more to say about teams in a future post.

Some of my classmates were undertaking the MBA at the University of Phoenix Online as their second Master’s degree. The consensus was that working towards the online MBA was more intense, required much more teamwork, and was more like “the real world” — in structure as well as by having facilitators who are actively involved with what they teach, not life-long academics — than any traditional Master’s degree curriculum.

Speaking of curriculum, that will be the topic of the next post in this series.

This is Part 3 of a series about my experiences with the University of Phoenix Online. Here is what has been published so far.

• Part 1: The Decision
• Part 2: Admissions
• Part 3: Course Logistics
• Part 4: Curriculum
• Part 5: The Team Experience

The original version of this article, My MBA at the University of Phoenix Online, Part 3: Course Logistics, is copyrighted by Consumerism Commentary.

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