Ask Linda P. Taylor

Comment on Direct Vs Private Loans - Misdirection is the Game

2009-03-20T10:08:47-07:00

This morning I posted a comment to an article from Inside HIgher Ed on the muted response from Financial Aid Advisors (FAA) on the proposal to eliminate private lenders from student loans and let the Federal Government be the only provider effectively making ALL Federal Family Education Loans (FFEL) DIrect Loans.

The article itself is interesting but it is in the comments that we see the REAL problem with student loans! It is a "them versus us" dialog that shows the gulf is between the colleges and the recipients! The premise of manyof the comments is the "evil" nature of FAAs and their representative body the National Association of Student Financial Aid Advisors (NASFAA). Following is my comment to the dialog:

We all know one (or more) rotten apples in any group. We also know many good people in that same group. The "good" or "rotten" actions of indivuduals is not evidence of the value or honesty of the group. It is the VALUE of the service that the group renders that counts. The service itself needs to be judged.

As a financial professional, am I tarnished by AIG? Yes. Do I or did I personally have anything to do with AIG? No. But I suffer under whatever consequences regulators choose to apply. And worse, I suffer because of client and prospect perception that all financial professionals are greedy and scammers. As a college funding expert for over 30 years, I have the same problem with FAAs perceiving me as somehow scamming their colleges when I have NEVER hidden assets to made a family "poor" to qualify for more aid. But every year the NASFAA put out their official "warning" about paying someone like me to do the FAFSA.

The comments about individual kick-backs is true for a small minority BUT it distracts from the real problem -- the universal use of loans is what is rotten. Arguing over Direct versus private lenders is CLASSIC misdirection. Argue over the paint color instead of arguing over the house being in the wrong place.

Crushing student loans - REGARDLESS of origin be it Direct or private lender - are destroying the dreams of students? Have there been kick-backs and sweetheart deals? Yes! Have all FAA participated? No. But ALL FAAs and their organizations are tarnished not because of that. The college funding sysem in which FAAs live is broken. So sorry, you ALL take the heat when you live in the kitchen - good guy or bad, lender or "pimp" for the lender.

It is a FACT that virtually ALL students who are not at the handful of Ivies without student loans WILL have the MAXIMUM allowed in FFEL loans - REGARDLESS OF LENDER. The debt load is even WORSE when that student is in a major like education that requires a graduate degree where the maximum loan jumps to nearly $20,000 per year.

Arguing about where the loan originates is misdirection. It is rearranging the deck chairs on the Titanic. No one is addressing the REAL problem - out of control lending is destroying the hopes and dreams of our students.

I think loans overall need to be rethought.Where do YOU stand on loans and changing to the Direct-only route?

The Next Financial Blow - No Scholarships

2009-03-11T18:49:11-07:00

Students and their parents are learning the market meltdown has once again hit them in the college funding pocket. The endowments of many colleges have taken such severe hits that many are being forced to reduce and cut scholarships for the coming 2009-2010 school year.

A survey from the nonprofit Commonfund Institute of Wilton, Conn., found that college endowments across the nation lost an average of 24% -- one fourth -- of their value by Dec. 31, 2008. That means at LEAST a 25% cut in scholarships if not more. Here are just a few examples:

An endowment drop of 22% at Rhode Island College put most of the school's endowed scholarship funds "underwater" - below the amount of money used to start the fund - so the college foundation has decided to STOP payment of endowed scholarships for next year

Because of a drop in its endowment, the University of Wisconsin-Superior plans to give away about $100,000 less in endowed scholarships for next fall.

The University of Washington has cut 70 jobs from its fundraising office to save money, the prospect for next year's scholarships is still uncertain, said Kay Lewis, director of student financial aid.

Western Washington University in Bellingham has increased scholarship fundraising to make up for a 30% drop in its endowment, which has resulted in a decrease from $900,000 in endowed scholarships this academic year to a projected $200,000 available next year, said Stephanie Bowers, vice president for university advancement and the Western foundation.

What scares me is students and their families will now turn to the internet and the scam artists who offer 1 $10,000 scholarship to 1.8 gazillion applicants and turn their information over the mass marketing companies for 4 to 10 times the profit! I STRONGLY recommend families ALWAYS read the Terms and Conditions and Privacy tabs before sharing information for scholarship sites. Stick to well-known companies and sites.

Prepaid 529 Plans in Danger! - Part 2

2009-03-10T17:40:47-07:00

I had no sooner posted my blog artice about 529 Plans being potentially pillaged by Florida Legislature when MSN posts this article about the underfunding of several other PREPAID plans that may destroy the savings of families for college in several states! To see the full article: CLICK HERE.

This one is even MORE disturbing than the previous posting. Florida at least had funded the deposits of trusting families so they are getting their promised returns. There is just so much money sitting in the savings account "lockbox" that the state is drooling over the prospect of unused money.

Per this article, State-run trust funds for parents who want to pay off college tuition before their children enroll are running short on cash, and program officials worry they won't be able to pay for students who are counting on the money! The rising cost of college and plunging stock market have combined to create a disparity between what some of the 18 states' prepaid tuition plans have on the books and what they're supposed to pay.

The worst case is in Alabama, where the market meltdown cut funds nearly in half. Alabama officials are telling parents the full cost of college isn't a sure thing. "I thought the money was in the bank," said Montgomery attorney Larry Menefee, who was caught by surprise when he received a letter telling him tuition for his triplet sons wasn't guaranteed.

WOW! How would you feel if your PREPAID COLLEGE account was not really prepaid or safe in the hands of the state?! Is a deal a deal?

Keeping Florida Legislature's Hands Off College Money

2009-03-10T16:26:32-07:00

I just downloaded an article on how the Florida Legislature is eyeing the PREPAID 529 Plan to fill in their budget shortfall! Get your copy here: CLICK FOR ARTICLE.

If you are unfamiliar with 529 Plans, there are two generic types: Prepaid and Savings.

SAVINGS: Most families are familiar with the savings plan which is a lot like an IRA or 401(k). You put money into a fund managed by a financial company and pick types of accounts, mutual funds or a CD. These funds respond to market forces and can grow - or as we have seen in the market meltdown - decrease! The key for a savings 529 Plan is there is no specific relationship to the cost of college, you are simply saving money in an account dedicated to college. You HOPE you get growth close to the inflation in college prices (sadly, most don't). The sole benefit to using this kind of 529 Plan is the growth MAY be used tax-free if used for properly Adjusted Qualified Higher Education Expenses (AQHEE).

PREPAID COLLEGE SAVINGS: Prepaid plans are much rarer because where you put money into an account and it is guaranteed to keep up with college inflation. You are literally prepaying college costs. There is no chance of losing money because it is a prepayment of college expenses and NOT an investment exposed to the markets.

Now there is a REAL risk that money may "evaporate" from this supposedly safe program in the state of Florida. Your opinion of a potential grab of SAVINGS that were promised to be there for college use by the families who trusted this program? To me this is a scary road where the legislature uses your money for their pet programs leaving behind IOU's.

What do you think of this idea?

Sarah Lawrence Most Expensive College in US

2009-03-02T14:08:43-08:00

The Total Cost of Attendance (COA) for Sarah Lawrence passed the magic $50,000 per year mark for this current 2008-2009. SL now has the dubious distinction of being the most expensive college in the US. Here are some of the others:

Highest Total Cost 2008-2009

College	Total Cost
1. Sarah Lawrence College	$53,166
2. George Washington University	$50,312
3. New York University	$50,182
4. Georgetown University	$49,689
5. Connecticut College	$49,385
6. Bates College	$49,350
7. Johns Hopkins University	$49,278
8. Skidmore College	$49,266
9. Scripps College	$49,236
10. Middlebury College	$49,210
11. Carnegie Mellon University	$49,200
12. Boston College	$49,020
13. Wesleyan University	$49,000
14. Colgate University	$48,900
15. Claremont McKenna College	$48,755
16. Vassar College	$48,675
17. Haverford College	$48,625
18. University of Chicago	$48,588
19. Union College (NY)	$48,552
20. Colby College	$48,520
21. Mount Holyoke College	$48,500
22. Tufts University	$48,470
23. Bard College at Simon's Rock	$48,460
24. Franklin & Marshall College	$48,450
25. Bard College	$48,438

The SCARY fact is these will likely rise for the upcoming 2009-2010 school year. Historically costs rise on the average of 6%. That would put everyone of these schools over $50,000 per year! But in these tough economic times, it will be interesting to see what the rate will be.

I will also be interesting to see if the colleges loudly announce they have frozen tuition while quietly increasing other "fees" that are not usually noticed.

New Spouse Pays for Step-Kids College

2009-03-02T08:54:09-08:00

Right on schedule - I just got my annual call from a divorced parent who got remarried last year and is now trying to keep the new spouse's income and assets "off the college forms". I usually hear lots of yelling when the new step-parent discovers that their income and assets are now included for college support.

Then I am always told about the (1) prenuptial agreement clearly stating the new spouse is NOT responsible for the new step-kids and (2) her lawyer has put all her money into a "trust" so it's not really available anymore. Both of which mean NOTHING to the FAFSA or FAP process!

So here is today's teachable moment - You get married while you have children in college, the new spouse's income and assets are INCLUDED for the FAFSA if you are the tax custodial parent. They are included for the FAP regardless of whether you are the custodial or noncustodial parent!

If your ex has tax custody (take a tax deduction), then your new spouse (and you) are not included on the FAFSA. But if your student is at a college requiring the FAP, your new spouse will be included either as the custodial spouse or the noncustodial spouse, period

PRE-NUPTIALS: Financial aid providers - the Department of Ed, your state and the college - were not parties to the pre-nuptial and are not legally bound to the agreement. So the process requires that custodial parents (including step) are included in the income and asset calculation for the FAFSA. ALL parents including steps are included for the FAP.

TRUSTS: When parents tell me about a trust tht was set up by a new spouse, they almost always mean a "living" or inter-vivos trust. But if the new step (or any parent for that matter) has "control and receipt" of the assets in a trust, they are included in the financial aid process. That means a "living trust" is NOT a real "trust" for college purposes because the donor is usually the trustee and can use the assets any way they like. The trust would have to be irrevocable and the new spouse would NOT have access to the assets for it to be "invisible" for college purposes.

If you have any questions, make a comment or go to http://www.CollegeFundingNetwork.com and use the Contact Us form.

The Brick Walls Keeping Education from Improving

2009-02-27T10:48:35-08:00

US News & World Report's Education Blog has a GREAT blog article on how the eduation "community" received President Obama's proposals for improving education. The differing opinions on what he said and what needs to be done is sadly another example of why it will be so difficult to improve education in America.

To refresh your recollection, President Obama said he wants the United States to have the highest proportion of college graduates in the world by 2020 and asked every American to complete a year or more of college or career training. He talked about the need for more reform in education and said he wants to reward teacher performance and grow the number of charter schools. He also talked about providing ore financial support from pre-school through college.

Sadly, as usual, the "education community" was NOT pulling together. As usual the entrenched interests looked at their position and as the comments of the various "experts" show - they are all going in different directions.

I am becoming so frustrated that I voiced my opinion in the comments section! To read the article AND my comments, go to the On Education Blog Comment Section. Then add your own comments there or here!

Is The Idea of Need-Based Aid Flawed?

2009-02-26T14:40:06-08:00

An article in the February 21st New York Times focused on the infamous FAFSA - Free Application for Student Aid - the gateway form for getting money for college. The story focused on how terrifying, confusing and frustrating completing the form has become. As with just about everything associated with college, the views of the people interviewed show that change is not going to happen anytime soon.

In my opinion - and the opinion of many others involved in helping families pay for college - the basic premise of need-based financial aid is flawed. Therefore, the system designed to measure the need and then determine how to meet that need is flawed!

What is that flawed premise?

The idea is that (a) everyone should have access to college regardless of ability to pay and (b) if you cannot afford the cost of a particular college, the "system" should fill in the gap between what you can afford and what it costs.

This premise sets up the need to detemine how much you should pay based on your financial situation called the Expected Family Contribution (EFC). That means someone has to decide how to measure your ability to pay (EFC) and then set some value or percentage that you should pay before getting outside help.

This also sets up the assumption that someone else will fill in your gap between cost of attendance (COA) and your EFC. That "someone" starts with the government (Federal and State) and then the individual college. What has happened is the need gap is NOT being filled. For too many families, the FAFSA has simply become a loan application!

I have several students with ZERO EFC getting nothing but Federal loans. The get the maximum in loans, grants and work-study but still cannot get close enough to the cost to make college affordable. Unless a college meets 100% of need for all admitted students, families will face gaps as severe as before the premise of need-based aid!

So before we discuss changing the FAFSA, how about revisiting the ENTIRE concept of paying for college! Your comments?

Cutting College Costs - A Fable that is not so Fictional

2009-02-20T09:49:48-08:00

As the financial markets and tax revenues tumble, states like California are making steep cuts to education including cuts to the support for state-run colleges like the University of California (UC) and the California State Universities (CSU). The budget that will be signed today imposes a 10 percent across-the-board cut to the UCs and CSUs, saving $264.4 million.

California is not alone. Massachussetts is planning 11.6 percent in cuts for their state colleges. Florida is starting at 4 percent but more cuts are planned. New York state is cutting between 6 and 7 percent. Google the phrase "xxx budget cuts to colleges" and insert your state for xxx and you'll see what you are facing.

This means college administrators will soon be living the fable presented by John Lombardi of Louisiana State University at his blog "Reality Check" called "Budget Crisis, Academic Change:A Fable"!

I STRONGLY recommend that everyone who cares about higher education - both inside and outside the education "industry" - read Lombardi's blog. How you react to the story will help you understand why there is no clear path to making colleges more accountable and affordable! Politics, political correctness, turf wars, protectionism, etc., etc., keeps the colleges stuck where they are.

What do you think is going to be cut by the all these colleges? What do you think should be done? What sacrifices/changes can be made? One thing for sure, aid will go down, class size will go up, space for new students will go down, services will go down, and tuition will go up!

As the daughter of a college dean, I understand the desire to protect and provide resources that serve more intangible needs like obscure languages, art and music. But when your children are starving, having a Monet on the wall is probably NOT the best use of your resources.

This brings me back to my question to the social media universe - "What is College For"? What should we focus on in these times? What should money be spent on?

College Students Want a "B" Just for Showing Up!

2009-02-19T17:20:34-08:00

WOW! An article by the New York Times highlights the incredible sense of entitlement student have about college grades! And this does NOT bode well for their future in the job market!!

A recent study by researchers at the University of California, Irvine, found that a third of students surveyed said that they expected B’s just for attending lectures, and 40 percent said they deserved a B for simply completing the required reading.

This attitude is says the problem is so common that colleges are holding classes about how college grading works! James Hogge, associate dean of the Peabody School of Education at Vanderbilt University said: “Students often confuse the level of effort with the quality of work. There is a mentality in students that ‘if I work hard, I deserve a high grade.’ “

Per the article,Dean Hogge says this is about “the locus of control.” The goal is to put the academic burden on the student.“Instead of getting an A, they [need to] make an A,” he said,"... if they make a lesser grade, it is not the teacher’s fault. Attributing the outcome of a failure to someone else is a common problem.”

Grade inflation and self-esteem programs have apparently created a generation of students who do not recognize that doing what is simply required makes you an "average" or a "C" student. Instead, students see an "A" the starting point. They do not understand that "trying hard" is not the same as "getting results"

This article shines a light on the problems a lot of my newly graduated students are experiencing in their jobs. They do not seem to understand the difference between adequate (C) and outstanding (A) behavior and the difference between trying (C) and achieving results (A). Several have lost jobs in this melt-down and they couldn't understand why they were let go when they "tried" so hard. They couldn't understand why the employer would be "grading" them on concrete results.

Anyone in education see this problem in your schools? What do you employers want to say?