MONEY 529 plans

Why the Best College Savings Plans Are Getting Better

stack of money under 5-2-9 number blocks
Jan Cobb Photography Ltd—Getty Images

Low-cost 529 college savings plans continue to rise to the top in Morningstar's latest ratings.

Competition is creating ever-better investment options for parents who want to save for their kids’ college costs through tax-preferred 529 college savings plans, according to Morningstar’s annual ratings of the 64 largest college savings plans.

In a report released today, the firm gave gold stars to 529 plans featuring funds managed by T. Rowe Price and Vanguard. The Nevada 529 plan, for example, which offers Vanguard’s low-cost index funds, has long been one of Morningstar’s top-rated college savings options. The plan became even more attractive this year when it cut the fees it charges investors from 0.21% of assets to 0.19%, says Morningstar senior analyst Kathryn Spica.

“In general, the industry is improving” its offerings to investors, Spica adds.

You can invest in any state’s 529. In many states, however, you qualify for special tax breaks by investing in your home-state 529 plan. If you don’t, you should shop nationally, paying attention to fees and investment choices.

Morningstar raised Virginia’s inVEST plan, which offers investment options from Vanguard, American Funds and Aberdeen, from bronze to silver ratings, in part because Virginia cut its fees from 0.20% to 0.15% early this year.

Virginia’s CollegeAmerica plan continued as Morningstar’s top-rated option for those who pay a commission to buy a 529 plan through an adviser. American Funds, which manages the plan, announced in June it would waive some fees, such as set-up charges.

But there are exceptions. Morningstar downgraded two plans—South Dakota’s CollegeAccess 529 and Arizona’s Ivy Funds InvestEd 529 Plan—to “negative” because of South Dakota’s high fees and problems with Arizona’s fund managers.

Rhode Island’s two college savings plans moved off the negative list this year after the state started offering a new investment option based on Morningstar’s recommended portfolio of low-cost index funds. Given the potential conflict of interest, Morningstar did not rate the plans in 2014.

Joseph Hurley, founder of Savingforcollege.com, which also rates 529 plans, says he hasn’t analyzed the Morningstar-modeled funds because they are new and don’t have enough of a track record. But, he adds, the Rhode Island direct-sold 529 plan offers several low-cost index fund options.

Here are Morningstar’s top-rated 529 plans for 2014:

State Fund company Investment method Expenses (% of assets) for moderate age-based portfolio (ages 7 to 12) Five-year annualized return for moderate age-based portfolio (ages 7 to 12)
Alaska T. Rowe Price Active 0.88% 11.25%
Maryland T. Rowe Price Active 0.88% 11.42%
Nevada Vanguard Passive 0.19% 8.65%
Utah Vanguard Passive 0.22% 8.01%

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MONEY family money

This Company Will Give You $500 If You Have a Baby Today. Wait, What?

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Mike Kemp—Getty Images

It's no joke. As part of its rebranding campaign, investment firm Voya will give money to the newest of new parents.

Lucky for you if you’re in labor right now.

A company called Voya Financial has announced that it will give every baby born today—Monday, Oct. 20, 2014—500 bucks.

The promotion, timed to coincide with National Save for Retirement Week, is part of a marketing campaign to alert the public that the business that once was the U.S. division of ING is now a separate public company with a new name.

Get out the castor oil and order in Indian if you’ve already hit 40 weeks, because the offer is only available to those who exit the womb before midnight tonight—though soon-to-be-sleep-deprived new parents have until December 19 to register a child.

Voya estimates that it may have to kick in as much as $5 million, since there are about 10,000 babies born every day in the U.S.

While the company has promised that families will not have to sit through a marketing pitch to get the money, and that the baby’s information would be kept private, this special delivery still comes with a catch.

The money is automatically invested into Voya’s Global Target Payment Fund, which according to Morningstar has above-average costs and below-average performance.

Regarding the fees, Voya’s Chief Marketing Officer Ann Glover says that the funds Morningstar uses as comparison are not apples to apples. In any case, Glover says families are free to sell out of the fund if they so choose. “Of course, we would hope people would hold on to the investment,” she adds.

But hey, money is money, so if you’re due, you may as well take what you’re due.

And for those mamas and papas whose progenies aren’t quite ready to make their debuts? While you won’t get money from Voya, you may have other opportunities to get big bucks for your little one.

Start by checking in with your employer to see whether the company helps with college savings. A growing number do. Unum, for example, offers its workers with newborns $500 towards a college savings account.(Our Money 101 can help you find the best 529 college savings plan.)

Also, in several communities around the country, charitable or government programs seed savings accounts for kids. For example, residents of northern St. Louis County in Missouri can get $500 through the 24:1 Promise Accounts. Babies born in Connecticut get $100, plus $150 in matching funds by age four, thanks to the CHET Baby Scholars program.

“This is gaining significant momentum nationwide,” says Colleen Quint, who heads one of the nation’s most generous free savings program, the Harold Alfond College Challenge. Started by the founder of Dexter Shoes, the charity gives every resident newborn in Maine a $500 college savings account.

In fact, Mainers can get the most free money for their children according to a survey of such programs by the Corporate for Enterprise Development, which has gathered details on at least 29 free childrens’ savings programs.

Besides the $500 college savings account, a state agency will match 50¢ for every $1 parents contribute each year up to $100 a year and $1,000 over a child’s lifetime. So Mainers can, in theory at least, get up to $1,500 in free college savings money on top of any additional freebies they can get from companies.

That should be more than enough to buy a chemistry textbook in 2032.

MONEY College

This “Smart” Way to Pay for College Could End Up Costing You an Extra 3%

A senior at Western Kentucky University walks past flowering cherry trees on WKU's campus on his way home from class.
Western Kentucky University has one of the highest credit card surcharges. Alex Slitz—AP

A new study from CreditCards.com finds that colleges are increasingly adding surcharges for charging tuition. And these fees typically exceed any potential miles or cash back earned from your card.

It’s getting harder to turn junior’s college tuition bills into free vacations for Mom and Dad.

Wealthy parents have long tried to lessen the pain of paying their kids’ tuition bills by charging the costs to a credit card that pays rewards, with the hope of getting a bit of cash back or a roundtrip flight to Rome out of the deal.

But colleges are now making this strategy less profitable by adding fees for charging tuition, according to a study released Tuesday by Creditcards.com.

The survey of the largest public, private, and community colleges found that 90% of the 100 biggest public universities that accept credit cards charge convenience fees, and almost 70% of the 100 biggest private colleges. (Only 12% of the largest community colleges add credit card surcharges, but community colleges tuition tends to be quite low.)

In most cases, the fees now exceed the value of frequent flier miles or cash back that the parents can earn on a rewards card.

The average reward mile or point is worth less than 2¢, says Matt Schulz, senior industry analyst for CreditCards.com. Meanwhile, the average big college now charges 2.62% for processing tuition through a credit card, according to the survey.

And some schools charge much more. According to the CreditCards.com survey, the big colleges charging the highest fees are:

School State Type Convenience fee rate
Western Kentucky University KY Public 2.99%
Saint Joseph’s University PA Private 2.99%
Roger Williams University RI Private 2.99%
Kansas State University KS Public 2.90%
Ohio University-Main Campus OH Public 2.90%
Kent State University at Kent OH Public 2.90%
University of Akron Main Campus OH Public 2.90%
Bowling Green State University-Main Campus OH Public 2.90%

The Impetus for the Fees

Such fees have become increasingly common in the last decade. A separate survey last year by the National Association of College and University Business Officers had found that 44% of colleges charged a fee for using a credit card, up from 14% in 2003.

Colleges have been adding surcharges in part because they have come under pressure to pare expenses. And credit card companies charge all vendors—including colleges—for processing payments. In 2013, for example, MasterCard’s fees ran from 1.05% to 3.16%.

In addition, schools that do charge fees appear to be encouraging their competitors to follow suit.

“I get a lot of complaints from other schools” that charge fees, says Michael Reynolds, executive director of student financial services at Auburn University, which doesn’t add a surcharge. Reynolds says Auburn absorbs the surcharge—which he estimates at between 1% and 2% of the amount charged—as a cost of doing business.

He estimates that about half Auburn’s tuition bills are put on credit cards. In most cases, he says, it’s just a matter of convenience for the parent or student. But he added that some families do seem to be trying to build up rewards.

The Better Alternative for Most

The fees are just one of many reasons financial experts warn parents away from charging tuition.

Credit card interest rates are usually so high that parents who don’t have enough ready cash to pay off the bill immediately could end up paying thousands of dollars in extra interest, says Kevin Yuann, director of credit cards for NerdWallet.

Anyone who can’t pay cash up front for tuition would really be better off with federal student or parent loans.

Compared to the 15.66% average annual percentage rate on credit cards, federal student loans charge just 4.9% this year, after fees are added in. Parent PLUS loans have a total APR, including fees, of 8.1%.

The federal loans also have much more flexible repayment options, allowing borrowers to stretch out payments for up to 25 years or adjust the payments downwards if their incomes fall. Students working in public service jobs can also get some of their federal loans forgiven.

The Best Reward for the Rest

Absolutely sure you can pay off the big credit card balance quickly? Contact your school to find out whether there’s a fee for swiping.

While the majority have one, there are still several schools that do not charge students or parents extra. For example:

School State Type
Auburn University AL Public
DePaul University IL Private
St John’s University-New York NY Private
The University of Alabama AL Public
University of Nevada-Las Vegas NV Public

And then, assuming there is no charge, make sure you’re getting the most back you can.

Nick Ewen, a frequent business traveler who writes often on rewards at ThePointsGuy.com, says parents with lots of ready cash can turn tuition into valuable goodies.

One British Airways card, for example, offers a free companion ticket to those who spend at least $30,000 a year. And Southwest Airlines offers a year’s worth of free companion tickets to those who earn at least 110,000 points each calendar year.

Or, consider the winners of MONEY’s Best Credit Cards of 2014. The Barclaycard Arrival Plus World Elite offers two points per $1 spent and miles can be applied to your credit card bill to offset the costs of any kind of travel. Or if you prefer cash back, Citi Double Cash and Fidelity Investment Rewards American Express each give you 2% on every purchase.

With the latter, you can direct your earnings to a 529 college savings account—thereby reducing the amount you have to charge next semester.

MONEY College

5 Quick College Diplomas That Can Lead to Good-Paying Jobs

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Blend Images—Getty Images

You don't have to spend four years on a bachelor's degree to get a job that pays at least $40,000 a year. New research from one state identifies several shorter college programs that can lead to lucrative jobs.

Over the long run, people with four-year college degrees and graduate educations earn more on average than workers who spend just a few years in school. But you don’t necessarily have to invest a lot of time and money in a four-year degree to get ahead. In some cases, new research confirms, a quicker education can lead to a good-paying job.

“There are many paths to the middle class, including two-year technical degrees from community colleges,” says Mark Schneider, president of College Measures, who authored a study of recent graduates of Tennessee colleges that was released today.

The findings are based on College Measures’ analysis of earnings data for millions of workers collected from state unemployment insurance offices. So far six states, Arkansas, Colorado, Florida, Tennessee, Texas and Virginia, have allowed researchers to track government-reported earnings after students leave school.

For the latest state report, College Measures tracked five years worth of earnings for all Tennessee workers who earned any kind of college certificate, diploma, or degree in 2006, drilling down to which majors, and which schools, produce the highest earners. The results, says Schneider, “confirms other findings from other states.”

Only a few types of two-year degrees consistently lead to high-paying jobs, however, and there is a wide variation in earnings by college, some of which may have to do with the local labor market. “You do have to be really careful about which degree you get,” Schneider says.

Those with associate’s degrees in electrical engineering earned annual salaries of about $42,000 within a year of leaving school. They typically progressed to more than $61,000 after five years. Those who earned certificates in heavy equipment maintenance made about $35,000 within a year on average and about $42,000 after five years.

Similarly, a 2011 report by Georgetown University’s Center for Education and the Workforce found that 28% of people with associate’s degrees earned more than the average salary reported by those with bachelor’s degrees.

This new data from states is helpful because it identifies exactly which community college and which majors produce students most likely to earn bigger paychecks, says Jeff Strohl, research director for the Georgetown center. “If you are going to roll the dice on a particular school or major,” says Strohl, “the new data will give you an idea of how people end up, earnings-wise.”

According to College Measures’s new report on Tennessee workers, these five programs that don’t take four years can lead to good-paying jobs.

Degree type Subject Avg. earnings in 1st year Avg. earnings in 5th year
1-2 year certificate Precision metal working $33,100 $41,900
1-2 year certificate Heavy equipment maintenance $34,800 $42,600
Associate’s Industrial production $41,400 $46,200
Associate’s Nursing $47,300 $54,300
Associate’s Electrical Engineering $42,000 $61,500

The earnings reports, however, are sobering for those who get associate’s degree in other fields. The average starting salary for Tennesseans with an associate’s in liberal arts was about $28,000. Five years out those folks were earning about $35,000, roughly equal to the pay of those who earned an associate’s in business but less than most workers with technical degrees.

What’s more, students shouldn’t assume they will earn the average earnings published in these kinds of reports, warns Thomas Bailey, director of the Community College Research Center at Columbia University. “A lot of this depends on other factors, such as the local labor market and the student.” In other words, your coursework and workplace performance matters too.

To find four-year colleges that are likely to help you find a good-paying job, you can search Money’s rankings of the best value colleges – colleges across the country with the best combination of net price and high-earning alumni. (College Measures advised Money on the development of the rankings, which used earnings estimates from a 2010 to 2013 national survey of 1.4 million Americans by Payscale.com.)

MONEY Student Loans

8 Ways to Stop Student Loans From Ruining Your Life

Hello my debt is $127,086 name label
MONEY (photo illustration)—Shawn Patrick Ouellette/Getty Images

New tools and services are making it easier to lower your monthly payments, pay off loans faster, and avoid borrowing too much in the first place.

As tuition and student debt have soared, so has the number of college graduates struggling financially under the weight of hefty school loans. About one in four borrowers is at least a month behind on their federal student-loan payments, the Department of Education reported this summer, and the number of defaulters has jumped by more than 500,000 in the past year, bringing the total number of student loans gone bad to about 7 million. And that’s not even counting the many more borrowers who keep up with their payments but find themselves stretched to make rent, buy groceries, pay everyday bills, or start saving for the future.

The ray of hope in this black cloud: A growing number of government programs and private start-ups are offering new tools and services to help student borrowers avoid borrowing too much, get out from under onerous monthly payments, or dig their way out if they’re in financial trouble.

Here’s what you need to know to get your student loans under control, no matter where you are in the borrowing process:

If you’re currently a student—or will be soon:

Look for colleges that help you rely less on loans. Uncle Sam is making it easier for students to identify and avoid colleges that tend to overload students with debt. The Department of Education is cracking down on colleges with high default rates—an indication that students there routinely have to take on more debt than they can afford. Schools where 40% of borrowers stop making loan payments over a three-year period, for instance, will no longer be eligible for federal loans to students. In addition, the agency is posting each college’s default rate online. Favor schools with low three-year default rates: “At four-year schools, 5% is pretty reasonable,” while anything above 10% should be considered a danger sign, says Ben Miller, a former DOE official who is now a senior education policy analyst for the New America Foundation. You can also check out MONEY’s list of The 100 Best Private Colleges If You Need Student Loans, which identifies the schools with the best records of manageable debt loads, and the 25 Most Affordable Colleges. Keep in mind, however, that all default rates and debt stats are averages, and may not reflect the personalized financial aid package you get from an individual school.

Know your limit. Don’t borrow more to get your degree than the salary you can reasonably expect to make in your first year out of school, recommends Mark Schneider, president of College Measures and the adviser to MONEY’s Best Colleges rankings. (MONEY’s Best Colleges rankings include estimates of student debt loads at graduation for all 665 colleges on the list.) If you stick with that rule of thumb, your payments will likely amount to no more than 11% of your gross income, which is usually considered a manageable amount, Schneider says. The key is to be realistic about your first-year salary, which is sometimes tough given that stats on how much recent college grads make are spotty beyond broad averages. CollegeMeasures.org offers the only data that breaks down first-year earnings by major, and they only have the figures for six states. To get a ballpark estimate, pick a state and school that seem similar to yours and search for the first-year earnings for your anticipated major. The MONEY rankings also include early career earnings data from Payscale.com, but the average annual salaries listed are for the first five years after graduation, not year one.

If you’re paying off students loans now—or will be soon:

Pick the repayment plan that suits your needs. Federal student loan programs automatically enroll all borrowers in a standard 10-year repayment plan, with first payments due six months after graduation. That’s next month for many borrowers who got their degrees in May. But the government offers six other repayment options that may result in lower payments now or allow you to delay paying altogether. The Education Department has created a simple tool that will help you figure out your best choice.The new income-driven plans are generally the most attractive because they adjust monthly bills to your salary and offer the possibility that the loan may be forgiven before you’ve totally paid it off, says Lauren Asher, president of the Institute for College Access and Success. Under these plans, if you work in a government, nonprofit, or other public service job and pay on time every month for 10 years, you can have the remainder of your debt forgiven, without paying taxes on the balance. Other student borrowers who elect income-based repayment may be eligible to have their loans forgiven in 20 or 25 years, depending on when you borrowed, but you will owes taxed on the outstanding amount.

Put payments on automatic. Most lenders cut rates or offer other bonuses if you agree to have payments automatically deducted from your bank account every month. The federal government cuts your rate by one-quarter of a percentage point, which amounts to about $500 if you pay a $30,000 debt over 10 years.

Reduce your principal. Got a little extra cash you want to use to pay down your student debt faster? Make sure it goes toward lowering the original amount you borrowed. The Consumer Financial Protection Bureau says it has received many complaints from borrowers alleging that their lenders applied extra payments to their next month’s bill instead of reducing the principal. Since it’s financially advantageous to pay down your highest-interest debt first, that can be a costly misstep. To make sure there is no confusion, the CFPB suggests borrowers send a letter to their lender with specific instructions about how to credit extra payments. Here’s their sample letter.

Reduce your rate. If you have a steady job and your monthly paychecks total at least $1,000 more than your total monthly debt, there’s a good chance you can refinance a high-interest student loan into a lower rate one that will lower your monthly costs and allow you to pay off your debt sooner. “The refinance market is heating up,” says Bill Hubert of Overture Marketplace, a loan shopping website. Refinancing a high-rate private loan into a lower-rate private one is a no-brainer. But a growing number of banks and start-ups are offering to refinance federal student loans, some of which have annual rates as high as 7.9%, into loans with rates as low as 3.6%. Weigh that decision carefully. Switching from a standard $30,000 federal Stafford loan at 6.8% to, say, a 4% private loan would cut your payments by about $40 a month, and slash the total interest you’d shell out over five years by about $5,000. But you’d lose other benefits like the guaranteed ability to switch to other payment plans and potential forgiveness of your loan.

If you’re having serious trouble making your loan payments:

Act quickly: Although it is human nature to ignore unpleasant confrontations such as those with bill collectors, there’s a big financial payoff to calling your lender as soon as you start missing payments. As long as you haven’t missed more than eight consecutive monthly payments on a federal student loan, you can switch to a more attractive payment plan and get back on track without having to pay any extra collection fees or penalties, says Jason Deslisle, a debt expert at the New America Foundation.

If all else fails, try bankruptcy. Bankruptcy should be a last resort, in part because it remains on your credit record for seven years. What’s more, any relief might be indirect. The laws governing student loans make it very difficult for bankruptcy judges to free borrowers from their student loan debt. But there are two small bits of good news for those in desperate straits: A recent study by a Princeton graduate student found that bankruptcy courts reduced or eliminated student loans for almost 40% of those who asked. Jason Iuliano found that thousands more borrowers would likely also have gotten relief, if only they had asked. What’s more, many borrowers could get relief without having to hire an attorney. Iuliano found that borrowers who represented themselves were just as successful at getting relief as those who hired attorneys.Even if you aren’t able to get relief from your student loans, the bankruptcy court will likely reduce or eliminate some of your other debts—such as credit card obligations—thus freeing up money you can use to pay off your student loans.

MONEY Student Loans

The 5 Colleges That Leave the Most Students Crippled By Debt

Almost 650,000 federal student loan borrowers have defaulted on their debt, new data shows. A handful of for-profit schools are a big part of the problem.

UPDATED: September 25, 2014

More than one out of eight students who had a federal student loan and left college or graduate school in 2011 has since defaulted—a total of almost 650,000 Americans, the U.S. Department of Education reported today.

In all, 13.7% of the 4.8 million federal student loan borrowers who graduated or dropped out of a higher education program in 2011 have gone at least nine months without making a payment on that debt.

That number is alarming to many analysts because new flexible repayment programs have made it much easier to repay federal student loans. Some of the government’s new income-driven repayment plans, for example, cap payments at 10% of a borrower’s discretionary income.

Students and parents should be wary of colleges with high default rates, advises Debbie Cochrane, research director of The Institute for College Access and Success. “At schools with both high borrowing rates and high default rates, too many students are clearly leaving school worse off than before they entered,” she says.

A handful of for-profit colleges are responsible for a disproportionate number of the defaults, according to the new government statistics.

The Education Department says it will stop making loans to students at the 21 colleges with the worst default rates. (It will cut off schools with a three-year default rate above 40%, or three consecutive three-year default rates above 30%.) Twenty of those schools are for-profit colleges.

Many of the colleges with the highest default rates are trade schools, and many are comparatively small. The Coast Career Institute, a California-based trade school with a 56% default rate, for example, currently reports having only 169 students. Eleven of the 21 colleges with the worst default records are beauty or barbering schools. On average, 19% of students at for-profit schools who left school in 2011 have defaulted.

What’s more, several other government agencies are looking into whether some for-profit colleges are trying to attract students using false or misleading marketing. Allegations of fraud leveled by the California attorney general have forced for-profit Corinthian College to shut down.

Overall, the default rates for public colleges was 12.9%. The default rate for private, non-profit colleges was 7.2%. But the four colleges with the largest numbers of defaulters were for-profit schools. They produced a combined total of more than 75,000 defaulters in the past three years.

The University of Phoenix, a for-profit company and the nation’s largest higher education system, with 242,000 students, accounted for more than 45,000 of the defaulters in the most recent three-year group. That represented 19% of all of the Phoenix students whose bills started coming due in 2011.

Spokesmen for Phoenix and an association of for-profit schools note that their default rates have been declining. The University of Phoenix’s three-year default rate for students who graduated or dropped out in 2010 was 26%, for example.

The largest producer of defaulters among public schools was Ivy Tech, a community college in Indiana, where 23% of the student borrowers who left there in 2011 have since defaulted on their student loans. On average, 20% of community college borrowers have defaulted over the past three years. Community college officials note that their students generally tend to borrow less than others because the schools charge lower tuition.

These five schools have the highest numbers of defaulters among those who left school in 2011, according the Education Department.

College Type # of federal student loan defaulters, 2011-14 % of borrowers who defaulted on federal loans due in 2011
1 University of Phoenix For-profit 45,123 19%
2 ITT Technical Institute For-profit 11,260 22%
3 Kaplan University For-profit 10,684 20%
4 DeVry University For-profit 9,081 19%
5 Ivy Tech Community College of Indiana Public community college 7,237 23%

Update: This post has been updated to add more information about schools with the highest default rates and to correct the Department of Education’s policy on loans for schools with high default rates.

MONEY College

21 Schools Where a Liberal Arts Degree Can Pay Off Big

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Carleton College, where grads clear $118,000 on average 10 years out. Steve Skjold—Alamy

It's not just math and science programs that launch college graduates into six-figure careers, a new study finds.

Updated: Sept. 10, 2014

Good news, poets and philosophers. At nearly two dozen liberal arts colleges, graduates typically go on to earn at least $100,000 a year by the time they reach their thirties, according to a new report from the salary website PayScale.com.

At Harvey Mudd College, the top school on the list, alums earn $134,000 on average a decade out of school. To be fair, many Mudd students get degrees in math and science, but other schools in the top 10, including Carleton, Haverford and Williams, focus on the humanities.

Of course, many graduates of even the top-earning schools—especially those who choose public service jobs such as teaching—make much less. And at many of the colleges, alumni typically earn six-figure salaries only after getting a graduate degree.

But overall this new data backs up other research that has identified a long, slow—yet real—payoff to the pursuit of a liberal arts degree.

In a study published in January, the American Association of Colleges and Universities found that by their fifties, college grads who had majored in liberal arts were earning, on average, about $2,000 more per year than those who had majored in pre-professional subjects.

“It is not all gloom and doom” for liberal arts graduates, says Patrick Kelly, a co-author of the AAC&U study and a senior associate at the National Center for Higher Education Management Systems.

How To Improve Your Earnings Potential

Kelly and his co-author, Debra Humphreys, AAC&U’s vice president for policy and public engagement, point out that as a liberal arts student you need to do three things to improve your chances of working your way up to six figures:

1. Budget time and money for graduate study. “If you expect to have reasonably high earnings, statistically speaking, you need to go to graduate school,” Kelly says. While their research didn’t identify which graduate degrees paid off the most, Kelly notes that many high-earning liberal arts majors work in the legal profession, in finance, or in business.

2. Work and intern during college. “You have to demonstrate workforce readiness to employers through means other than your schoolwork,” says Humphreys. That could include job experience, on-the-job training, or a technical certificate.

3. Spend a few years working and exploring before picking a grad program. “Don’t go to graduate school right away,” says Humphreys. “You might borrow $200,000 to go to law school and discover you hate being a lawyer.” Know what you want to do, and make sure that there are jobs in that field, before you spend time and money on more coursework.

The Liberal Arts Leaders

This new earnings report is based on surveys filled out on PayScale.com by some 1.4 million Americans over the past two years. It reflects the self-reported earnings of college graduates with at least 10 years of work experience.

The 21 liberal arts colleges below that offer the best shot at a six-figure income tend to have tough admissions standards. The easiest one to get into is Whitman College in Washington State, which accepts half of applicants. The most selective is Pomona College in California, which accepts just over one in ten.

Other elite liberal colleges that didn’t make the list because too few grads filled out PayScale surveys over the past two years, including Amherst, Bowdoin, and Earlham, likely have high-earning alums as well. In Money’s rankings of the best liberal arts colleges, based on earnings data collected by PayScale in the past three years, those colleges produce high earners. What’s more, in our rankings, we only considered the early- and mid-career earnings of those with bachelors’ degrees, not students who had gone on to graduate school.

College State Avg. earnings with a B.A. only and 10 years of work experience Avg. earnings with a graduate degree and 10 years of work experience Acceptance rate Money Value Rank
Harvey Mudd College Calif. $134,000 $138,000 19% 8
Colgate University N.Y. $127,000 $122,000 29% 28
Washington and Lee University Va. $124,000 $134,000 19% 40
Carleton College Minn. $118,000 $112,000 26% 80
Haverford College Penn. $115,000 N.A. 23% 123
Virginia Military Institute Va. $115,000 $116,000 46% 19
Williams College Mass. $111,000 $114,000 17% 15
Swarthmore College Penn. $109,000 N.A. 14% 33
Kenyon College Ohio $103,000 $108,000 36% 95
Lafayette College Penn. $103,000 $103,000 34% 29
Occidental College Calif. $102,000 $103,000 39% 286
Bucknell University Penn. $102,000 $106,000 27% 46
Union College N.Y. $101,000 $114,000 38% 167
Gettysburg College Penn. $100,000 $101,000 40% 139
College of the Holy Cross Mass. $100,000 $104,000 34% 102
Whitman College Wash. $98,000 $111,000 49% 215
Franklin & Marshall College Penn. $98,000 $110,000 39% 249
Pomona College Calif. $92,000 $107,000 13% 51
Wesleyan University Conn. $91,000 $100,000 24% 170
Davidson College N.C. $90,000 $100,000 25% 73
Skidmore College N.Y. $90,000 $100,000 42% 28
MONEY Kids and Money

3 Ways to Make Sure a Costly College Degree Pays Off

Graduation cap on sidewalk with change in it
Brother, can you spare a better college experience? Paul Hudson—Getty Images

A new study finds a widespread "failure to launch" among millennials fresh out of school. How to make those four years count.

Two years after graduating from college, a significant portion of the class of 2009 was economically and professionally “adrift,” according to a new book by two well-respected educational researchers. And while these young adults had the bad luck to graduate during the Great Recession, how they spent their college years was a large part of the problem too.

Two-thirds of the roughly 1,000 members of the class of 2009 in the study were in the job market in 2011 (about 30% were in graduate school), and almost 40% of that group were unemployed, underemployed, or earning less than $20,000 a year, reports the newly released Aspiring Adults Adrift, by Richard Arum, a New York University sociologist, and Josipa Roksa, associate director of the University of Virginia’s Center for Advanced Study of Teaching and Learning in Higher Education.

Many “are not making the transition to adulthood,” Arum says, noting that two years after graduation, 75% of the group were receiving some sort of financial assistance from their parents, with about a quarter living at home. Many weren’t engaged as citizens—more than two-thirds, for instance, said they didn’t bother reading about current affairs.

Low Expectations

Parents, colleges, and the students themselves share the blame for this “failure to launch,” Arum says, but, he adds, “We think it is very important not to disparage a generation. These students have been taught and internalized misconceptions about what it takes to be successful.”

One example, says Arum: “They have learned through their interactions with educational institutions that it is possible to succeed with minimal effort.” In their study, students who studied alone less than an hour a day still managed to earn an above-average GPA of 3.2.

Another problem, says Roksa, is that many colleges have shifted their emphasis from tough classes to social life and amenities because that is what attracts more students and tuition dollars.

Colleges applicants respond more positively to improved dorms and gyms than descriptions of demanding classes. Plus, add Roksa, schools are increasingly hiring non-tenured professors and keeping them based at least in part on student enrollment and reviews. Research shows that students tend to give better reviews to classes taught by easy graders.

What Goes Wrong at College

The college experience has left these millennials ill-equipped to find good jobs for three reasons, the researchers say.

  • Not enough learning. In their groundbreaking 2010 book Academically Adrift, Arum and Roksa reported that 45% of their study group exhibited no gain in critical thinking in the first two years of college, generally because they took undemanding classes and spent little time studying alone. In this follow-up study, the authors found that the students who failed to develop higher-level thinking skills were twice as likely to have lost a job between 2010 and 2011 than were those who scored well on such tests as seniors.
  • Majors that are not valued by employers. As other studies have concluded, engineers had high employment and earnings rates. Business majors were more likely to land jobs as well. But those who majored in social sciences, humanities, social work, or communications had comparatively high unemployment rates, ranging from 7% to 9%.
  • Undemanding colleges. Students who applied themselves and chose an in-demand major were more likely to prosper no matter what college they attended, say Arum and Roksa. But when all other characteristics were held constant, college choice explained about 24% of the variation in student learning gains. Generally, students who attended more selective colleges did better—perhaps because classes were more demanding. Graduates of less-selective colleges were almost twice as likely to work in low-skill jobs.

How to Do Better

Students are unlikely to make spontaneous changes. Many of the undergraduates studied expressed the belief that social skills would win them good jobs. And many who spent their undergrad years socializing and coasting through easy classes were satisfied with their college experience.

Arum and Roksa note that parents may not realize how much leverage they have to push colleges and students for more academic rigor and a focus on skills valued by the job market. Here’s how to make that effort.

1. Talk turkey. Arum, who has two kids in college, says that parents need to show their children the relationship between discipline, learning, and success later in life from an early age. And keep the message going. “I don’t want to advocate increased helicopter parenting, but we need to orient our children so that they understand that college is a time when one needs to invest in rigorous academic coursework,” he says. “The social aspects of college should complement the academic core.”

2. Demand evidence: When a high school senior is shopping for colleges, remember that a “tour is a marketing exercise by the college,” Roksa says. Ignore the hype and press admissions officers and other officials for evidence of their school’s academic rigor. Ask what percentage of classes require at least 40 pages of reading a week and at least 20 pages of writing a semester, and how much time the average student spends studying alone, all of which this research showed led to greater learning.

Among the evidence she suggests you ask for: student scores on tests of critical thinking such as the Collegiate Learning Assessment, or responses to questions about class assignments on the National Survey of Student Engagement (NSSE). Many schools collect such data but don’t like to release it to parents or the public.

3. Emphasize career planning: More than 40% of the group found full-time jobs through their college’s career services office, or from an internship, volunteer work, or another previous job. Arum and Roksa discovered that the jobs students got through their college career office tended to be better than those secured through personal connections. So parents should push schools to improve their career services, as well as urge their kids to take full advantage of internships, practice interviews, and other services. To find out which colleges launch students into the best-paying jobs, check out Money’s best college rankings, including this list of the 25 schools that add the most value.

MONEY

How This Weekend’s College Football Rivals Stack Up as College Values

The college football season has kicked off. We looked at which of the schools in this weekend's games are the winners in Money's Best Colleges rankings.

  • Texas A&M v. University of South Carolina

    Left: Reveille cheers on the Texas A&M Aggies. Right: South Carolina Gamecocks mascot Sir Big Spur on his perch during the game.
    Brian Bahr/Getty Images (left)—Joe Robbins/Getty Images (right)

     

    When: Thursday Aug. 28, 6 p.m. EDT

    The Winner: Texas A&M, which came into the game ranked 21st in the AP poll, upset the 9th-ranked Gamecocks.

    MONEY’s pick for college value: Texas A&M.

    Texas A&M is one of the most affordable and highest quality public universities in the country. MONEY estimates that the total cost of a degree for freshmen starting this fall will average $86,000—$14,000 less than a degree from the University of South Carolina. Also, Aggies earn, on average, about $52,000 a year within five years of graduation, according to data from Payscale.com. Gamecocks report earning only about $41,300.

  • Penn State v. University of Central Florida

    When: Saturday, August 30, 8:30 a.m. EDT

    Oddsmakers’ pick to win: UCF is given a slight edge thanks to its returning veteran defensive line.

    MONEY’s pick for college value: Penn State

    True, Penn State is expensive—a degree costs Nittany Lions an average of $142,000, or $41,000 more than Knights pay for their degrees—but Penn Staters are much more likely to graduate and earn healthy salaries. Penn Staters report earning almost $51,000 within five years of graduation, almost $10,000 more than UCF grads.

     

  • Florida State University v. Oklahoma State University

    140828_FF_Rivalries_FSUOSU_2
    Getty Images

     

    When: Saturday, August 30, 8 p.m. EDT

    Oddsmakers’ pick to win: FSU, last year’s national champion, is also the top-ranked team this fall, and has top-notch players at nearly every position.

    MONEY’s pick for college value: It’s a tie.

    Schools within about 30 places in our value rankings are very similar, as shown by the slight differences between Oklahoma State, ranked 194, and FSU, 223. OSU’s graduation rate of 62% is significantly worse than FSUs 75%. But OSU students who do make it through tend to earn more: $44,400 a year within five years, versus FSU’s average of $41,600.

  • University of Miami v. University of Louisville

    When: Monday, Sept. 4, 8 p.m. EDT

    Oddsmakers’ pick to win: Louisville beat the Miami Hurricanes soundly in the 2013 Russell Athletic Bowl. But oddsmakers are giving them only a slight edge in the rematch.

    MONEY’s pick for college value: Louisville

    MONEY ranks Louisville No. 382 for value in the country–not great–in part because of its painfully low graduation rate of just 51% (compared with 81% for the University of Miami.) But as a public school, Louisville charges Kentuckians, on average, less than $100,000 for a degree, about half what students at the private Miami typically pay. Those high costs are one reason we ranked Miami 536 out of 665 on our list.

     

  • University of Notre Dame v. Rice University

    When: Saturday, August 30, 3:30 p.m. EDT

    Oddmakers’ pick to win: Notre Dame, even though some its best players have been sidelines by an academic investigation. The Fighting Irish are ranked 17 by the AP poll; Rice is unranked.

    MONEY’s pick for college value: It’s a tie.

    You really can’t lose with either of this schools. MONEY ranks both Notre Dame and Rice equally at 20th place for value. They both have stellar graduation rates of more than 90%. And students go on to earn salaries in the mid $50,000s within five years of graduation, according to Payscale.com. Notre Dame costs more (a degree costs about $185,000, versus $150,000 for Rice), but the higher cost was balanced out by unusually high earnings reported by Notre Dame’s non-science majors.

    See more of Money’s Best Colleges:
    The 25 Most Affordable Colleges
    The 25 Colleges That Add the Most Value
    The 25 Best Colleges That You Can Actually Get Into

MONEY College

The 10 Top Colleges Students Really Want to Attend

Stanford University
If you're accepted at Stanford University, chances are you'll go. iStock

A new study of which schools high school seniors actually pick turns up prestigious names you know. Good thing these colleges also offer good value.

Not surprisingly, if you get into an elite college, chances are high you’ll say yes. But which of the elite schools are most likely to be students’ first choice? In a new analysis of acceptance and enrollment data, Stanford, MIT, Harvard, Yale, and Princeton top the list for this fall,

Parchment, a company that specializes in transferring student records from high schools and colleges, analyzed the college acceptances of 27,723 high school seniors who filled out the company’s survey this spring and summer. The company’s analysis, says chief executive officer Matthew Pittinsky, reveals which schools students are flocking to—and from.

Overall, the typical student in the study reported being accepted by three or four colleges. By comparing the schools the high schoolers got into with the ones they picked and rejected in the end, Parchment calculated a popularity score for 726 schools. Of the 265 colleges for which Parchment had records of at least 100 decisions, the 10 below are the most popular.

This report provides a slightly different and more up-to-date view of college popularity than the standard federal statistics on the percentage of admitted students who enroll. By those numbers, Harvard, with 81% of the admitted students enrolling in 2013, was the most popular elite school in the country. On this list, it’s No. 3.

Some of Parchment’s most popular schools are somewhat surprising given their official acceptance stats. Almost 100 members of the study group got into the University of Chicago and at least one other college, for example. And those students generally chose Chicago, where just about half of accepted students say yes, over almost every other school.

The good news is that these 10 most popular schools, while elite and expensive, also offer some of the best bangs for the tuition buck in the country, according to Money’s new college value rankings, which take into account net total costs after scholarships and grants as well as typical post-graduation earnings.

And some of the more expensive schools in the country appear to be students’ safety or backup schools in Parchment’s analysis. More than 100 members of the study group got into Drexel University (where only 8% of accepted students enroll) and at least one other college, for example. But most of those students opted for another choice.

In Money’s rankings of the 665 schools with graduation rates at or above the median and enough data for Money to examine, Drexel ranked 596th, in part because of its high cost. Money estimates a degree from Drexel, after all costs are included and grants or scholarship from the college are subtracted, will cost current freshmen about $218,000. That’s $72,000 more than a typical degree from highly popular Princeton University, for example, and $20,000 more than a degree from Chicago.

Popularity rank* % accepted who enroll College Money value ranking Net cost of a degree
1 76% Stanford University 5 $168,800
2 72% Massachusetts Institute of Technology 3 $154,700
3 81% Harvard University 6 $181,200
4 66% Yale University 15 $182,800
5 65% Princeton University 4 $146,200
6 63% University of Pennsylvania 11 $201,600
7 42% Duke University 32 $192,800
8 60% Columbia University 22 $206,800
9 53% University of Chicago 101 $188,800
10 58% Brown University 19 $192,000

*Of schools with at least 100 decisions.

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