MONEY College

How to Judge a College By Its Career Services Office

ESPN "This is SportsCenter" campaign with Bucky the Badger, the official mascot of the University of Wisconsin–Madison, by Wieden+Kennedy.
Will your child's dream school land him his dream cubicle? Wieden+Kennedy

The placement office is now one of the most important stops on the campus tour.

With loan-burdened students and parents increasingly demanding that a BA lead to a J-O-B, colleges are beefing up their placement services. This year, for the first time since the financial crisis, the typical career office—which has struggled with caseloads of about 1,500 undergrads per staffer—­enjoyed a boost in operating budget instead of a cut, the National Asso­ciation of Colleges and Employers (NACE) reports. “We’re about to experience the golden era of career services,” says Thomas Devlin, director of UC Berkeley’s career center.

To ensure that gold enriches your kid’s job search, look for colleges with good answers to the following questions. Just be sure to temper sales spiels with feedback from students and alumni, plus data from sources like

How is the office staffed? The best career offices have caseloads of fewer than 1,100 undergrads per counselor, allowing at least one staff hour per student per year. Expertise matters too. “It’s a bad signal if a school doesn’t have someone dedicated to encouraging employers to recruit,” says Andy Chan, vice president of career development at Wake Forest. Each office should also have a person who specializes in connecting students with alumni, as well as an expert in technology and social media (like LinkedIn).

What services are offered? Employers prefer to recruit at campuses where students come to interviews prepared and book meetings only for jobs they’d actually consider, says Dan Black, president of NACE and Americas director of recruiting at professional services firm EY. So confirm that the school works with students one-on-one to narrow the
ir career focus and coaches them for interviews, he says. And ask if there are formal ways of networking with alums, like shadowing or mentoring; if academic departments also work on career skills; and what help is offered to grads, whether it’s simply job listings (eh) or counseling (better).

When does career prep begin? Studies show that the sooner students start working on career preparedness, the better they do in the job market. Ideally, the college will be equipped to work with students during their first or second year. Since underclassmen tend to steer clear of career services, though, some schools are experimenting with ways to motivate young’uns to think about vocations. Willamette University, in Salem, Ore., for example, requires freshmen to create a résumé before registering for sophomore classes.

Are internships a priority? On-campus recruiting by prestigious employers is definitely a good sign, but few undergrads get jobs that way, says Bob Orndorff, associate director of employer relations at Penn State. Meanwhile, at least 24% of internships lead to job offers, NACE reports. “Employers are looking for recruits with rele­vant experience,” Orndorff says. So find out how the school helps arrange internships and what percentage of students get them. The more students doing paid internships, especially, the better.

Hire Ed


WATCH: Was your college’s career services office any help?

MONEY 101: How to start saving for college

MONEY cars

Money Hero: Rosemary Shahan

Rosemary Shahan, president and founder of Consumers for Auto Reliability and Safety Why she’s a hero: Shahan, 62, has spent three decades fighting on drivers’ behalf for more effective repairs, improved safety, and fairer financing. Turned activist in 1979 when a garage failed to fix her VW Dasher, the California college instructor lobbied the state for better protection; her model lemon law requiring timely repairs and dealer disclosures sparked legislation nationwide. Her current passion: She’s pushing the Federal Trade Commission to crack down on “yo-yo financing” — a bait-and-switch practice in which car buyers drive off the lot believing that their loan has been approved but are told later that they’ll have to pay a much higher interest rate. Quote: “Concerns about auto safety are in my bones. My parents were hit by a drunk driver when I was about 10. My mother never fully recovered. She lived to be 86, and to her dying day she asked me, ‘Could you rub my shoulder?’ ” — Kim Clark For a special feature in our July issue, MONEY magazine is searching for 50 more Money Heroes. Do you know of an unsung person who has made an extraordinary effort to improve other people’s personal finances? If so, please tell us about your Money Hero in the form below, and a MONEY staffer will follow up on your suggestions. Thanks!

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MONEY College

How to Tell Your Kid You Can’t Afford Her Dream College

You meant it when you said, "Study hard in high school, and we'll send you to the best college you get into." But now you're looking at the cost of Dream U -- and panicking.

Sticker prices at the top private colleges exceed $60,000. Even with scholarships, typical middle-class families face bills totaling $24,500 a year at private colleges, and $16,500 at public ones, the Department of Education reports.

Think you’ll have to tell your kid that her top prospect isn’t a possibility? Better to do it sooner than later. “Ideally, parents would have the affordability conversation when the child is starting high school so he or she can be realistic,” says Mark Montgomery, a college-admissions adviser in Denver.

The Ground Rules

Get the facts. Prepare a summary of your family’s financial situation along with the amount you can afford to contribute to college expenses vs. the net prices provided by the colleges’ aid letters or their net price calculators, says Deborah Fox, a college-funding adviser in San Diego.

Be the grownup. Don’t let your kid’s anger and disappointment cause you to do something you’ll regret, like fighting back or taking loans you can’t afford. “Hold your line,” says Mashpee, Mass., social worker Beth Wechsler.

When You’re Face to Face

1. Show, don’t tell: “Honey, we are so proud of you. But you’ve heard how the prices of some colleges have gone crazy. Let’s look at our family finances to see whether your top picks are in our reach.”

Why this works: “Saying no without explanation may cause kids to shut down,” says Nathan Dungan, a Minneapolis family wealth consultant and founder of Instead, treat your child as the adult he or she is becoming: Explain what you can afford, what the school will cost, and the impact of any gap.

Related: How to ace your annual review

2. Apologize: “We’re sorry. We should have looked at the numbers before promising that you could go to any school you wanted.”

Why this works: Some children will become upset at parents who change the terms of a commitment, says psychologist Laura Markham, author of Peaceful Parent, Happy Kids.

You won’t be able to move the conversation forward until you acknowledge the mistake, she adds. Apologize without getting defensive about past spending. “Don’t say, ‘But the old car was breaking down.’ Say, ‘I know how you had your heart set on going there. I understand why you’re so upset,'” Markham advises.

3. Allow for grief: “Let’s take a break and reconvene later.”

Why this works: A child who is fixated on a particular college “will go through all the grieving stages, including denial, rage, and acceptance” when that dream dies, Markham says. To have a productive conversation, wait until the emotions on both sides calm down.

Related: Baby on the way? Time to make a budget

4. Ask open-ended questions: “What about this school made it so attractive to you?”

Why this works: By pinning down what the student is seeking, families can focus on lower-cost alternatives that still match the student’s dreams, says Wechsler.

5. Make a game plan: “Let’s figure out what our options are.”

Why this works: “You’re getting the family working together as a team” while nudging the child to take responsibility for charting his own future, says Montgomery. Offer help with options that won’t harm the family’s finances, such as applying for more aid, starting out at a lower-cost school, or deferring for a year to allow Junior to work and save.


Are we at risk of another banking crisis?

One bank's failure can take down other banks -- and the economy, says Anat Admati, an economics professor at Stanford's Graduate School of Business. Photo: Joe Pugliese

Anat Admati, professor of finance and economics at Stanford University’s Graduate School of Business explains how to prevent another meltdown from taking place in the U.S. banking sector.

The big question: Are we at risk of another banking crisis?

Oh, yes. Definitely. We continue to have a system that’s way more prone to crisis than it needs to be.

Why are we still vulnerable?

Banks continue to be much too highly indebted and interconnected. That means they all tend to get in trouble at the same time, and the failure of one can take down others. It creates a contagion that spreads through the economy.

As with speeding, everything is fine as long as you don’t have an accident. When you have an accident, others can get harmed.

In your new book, The Bankers’ New Clothes, you and co-author Martin Hellwig say one simple, radical move can help. What is it?

You need to reduce dramatically banks’ indebtedness and increase dramatically the reliance on equity funding. This would make it less likely that the banks get into trouble, need bailouts, or drag down the economy.

So what’s equity funding, in practical terms?

It’s like the equity in your home, which is what you would have after selling the house and paying your mortgage. In accounting, it is the value of assets minus debts or liabilities.

For banks, one kind of debt is your deposits: A bank borrows your money to make loans or other investments. Its equity funding is money that is not borrowed from depositors or other sources, but instead comes from stock sales or retained earnings.

Why do banks borrow so much money instead of selling stock?

Banks, like all corporations, get a tax break on their interest payments, just like your mortgage deduction. But that’s not the only way that we subsidize and encourage banks’ borrowing and risk taking.

What do you mean?

People lend to banks at low rates because the banks have Uncle Sam or the FDIC to catch them if they fail. Large banks are not paying for the implicit guarantee to their creditors that the government will bail them out if something goes wrong.

How do you propose banks go about increasing their equity?

The easiest and most straightforward way is to avoid paying cash out to shareholders in dividends. Banks should retain their earnings just like Warren Buffett does. Publicly traded companies can raise more equity by selling more shares.

Wouldn’t shareholders object? Our readers love dividends.

The people who really benefit from bank dividends are bankers or people whose wealth is concentrated in banks. You and I are diversified shareholders. Any happiness you feel when banks pay dividends is shortsighted, because the payments harm the economy by making banks more fragile. And in a financial crisis, a diversified portfolio suffers.

Once banks build up enough equity, they can resume paying dividends.

Banks have rejected calls for increased equity. They say these higher capital requirements will reduce the amount of money they can lend. True?

No! Equity is just like debt: a source of funds for banks’ loans and other investments. If banks retain their earnings or sell more stock, they can use the money to make more loans.

They’ve also argued that it will hurt shareholders by cutting their return on equity — a bank’s profits as a percentage of its equity.

The focus on ROE may have more to do with bankers’ compensation than with shareholders’ wishes, since ROE is often used to calculate bonuses. ROE may fall if a bank uses more equity, but risks will be lower too, so shareholders would require less of a return.

How much equity are banks required to have now?

U.S. rules let banks have as little as 3% to 4% of their total assets as equity. The rest they can borrow.

How much equity do you think banks should have to be safe?

I think 20% to 30% of total assets is appropriate.

That’s quite a jump. Why so high?

Having more equity makes for better lending decisions. Highly indebted banks avoid making boring but productive business loans, because there is not enough upside. It is similar to how a homeowner who has little or no equity left in a house doesn’t put in new windows, because any investment in the house benefits the lender, especially if the homeowner owes more on the mortgage than the house is worth.

Banks funded with more equity will be able to make loans more consistently and they will make better lending decisions that would help the economy.

What do you think, realistically, can actually get done to improve the banking system?

A bipartisan partnership, Sen. Sherrod Brown (D-Ohio) and Sen. David Vitter (R-La.), is pushing a proposal similar to mine: It would require 15% equity for the six largest U.S. banks. This is a sensible, cost-effective measure that would correct enormous distortions. The politics of it are very daunting, and there will be a lot of lobbying. The battle has not seriously begun.

Would it help to make banks keep more money in their vaults?

I’m talking about how banks get their money, whether it’s through borrowing or other means. What you’re talking about are reserve requirements, which limit how banks can use their money. Unless reserve requirements are very high, they don’t reduce banks’ fragility.

Let’s say a bank has $100 in assets, and $10 of that is sitting in the form of cash reserves, earning little or no interest. If the bank invests the other $90 in risky derivatives and loses $20, the bank may not be able to pay its creditors, and will go underwater. Having that $10 on hand won’t keep it solvent.

How is your proposal different from the Dodd-Frank reforms that, for example, give the FDIC the right to take over institutions if their troubles threaten the financial system, as Lehman Brothers did?

Dodd-Frank gave regulators much greater authority. Unfortunately, it was regulators who allowed risks to grow before the crisis, and they still are not protecting us. The Federal Reserve, for example, lets banks pay dividends based on flawed stress tests.

The investigation of J.P. Morgan Chase’s $6 billion derivative loss in 2012 reveals poor risk controls. And Attorney General Eric Holder has said some banks are still too big to prosecute. These are clear indications that something is really wrong.


College is Free! (But Sometimes You’ll Get What You Paid For.)

You can take college courses online for free -- but can you get credit for them? Illustration: Justin Wood

A guide to the frequently awesome, frequently buggy world of massively open online courses.

Two things about higher education have become clear. First, your children need it more than ever to stay competitive — and so might you, if you need to upgrade for a fast-changing job market. Second, the model colleges use to deliver that education is broken. Rising tuition, high student debt, and stingier funding for public colleges are making it more difficult for families to keep up.

So it’s hard not to get excited about this: Right now, for the unbeatable price of $0, Massachusetts Institute of Technology professor Anant Agarwal is teaching a class on circuits and electronics to thousands of people online — no MIT application required. Harvard, Princeton, Michigan, and other top schools have also started open courses for everyone.

The academic world is buzzing with the notion that this could change, well, everything. “We are at a pivotal moment,” says former Princeton president William Bowen. “Two forces are combining: extraordinary technological progress with economic need.”

True, it’s a long way (and many spinning “video loading” icons) from here to a day when students can put together respected degrees with Ivy simulations.

While logging in is free and easy, getting official credit for what you learn still isn’t. Online courses have bugs, including raucous student discussion boards and clumsy grading systems, and for many they are an inferior substitute for real classrooms. Yet there’s promise here for adults who want a new career skill, for traditional students looking for learning aids, and for anyone hoping to speed the path to a degree. More change is coming.

Here’s what you and your kids should know to make the most of it.

You can really sit in on courses with MIT profs

Agarwal’s course is known in education jargon as a MOOC, or massive open online course. Web courses and online degrees have been around for years. As the name implies, MOOCs are different for their size (with tens of thousands of students at a time), their free price tag, and, frankly, the cachet of the schools that started them.

A typical massive online class includes several short recorded lecture modules each week and reading assignments. You’ll chat with other students online, and there’s homework, which may be graded by a computer or by peers. Some classes offer a few online meetings in which professors address questions posed by students. Although there may be a weekly schedule, it’s flexible.

“I completed the first three weeks of classes while patrolling the Bering Sea,” says Coast Guard Lt. Cmdr. Greg Tozzi, who took a finance course taught by a Georgia Tech professor.

Tozzi’s class wasn’t delivered by Georgia Tech, but through a website called, which offers more than 300 classes from 62 schools. Two Stanford professors kicked off the for-profit venture with more than $22 million raised from colleges and Silicon Valley venture capitalists. (Where profits will come from, as with lots of tech startups, is hazy.)

Harvard and MIT have started a similar nonprofit hub at, where you can learn Greek classics from a Harvard prof or quantum mechanics via Berkeley.

Don’t want to wait for a course to start? Carnegie Mellon has free self-paced courses that you can try anytime at, and so does the nonprofit

Another for-profit site,, mostly offers classes without a university’s stamp, but it features star teachers like founder Sebastian Thrun, a co-inventor of Google’s experimental self-driving car, who teaches artificial intelligence for robotics. It was Thrun who sparked the frenzy for MOOCs in 2011, when he opened his 300-student Stanford class to web auditors, and 160,000 signed up.

No, it’s not the same as going to MIT

About 23,000 online students passed Thrun’s computerized exams. Here’s what they got: a sense of accomplishment and a PDF from Thrun suitable for printing and framing.

While Stanford, Harvard, MIT and the like may be building massive classes, they are not interested in letting you get Stanford, Harvard, or MIT credit.

The MIT-built MOOCs offer a chance to earn an”MITx” — not MIT — credential that won’t on its own help you toward a degree but might look nice at the bottom of a résumé next to other continuing-ed classes.

Coursera classes developed by Princeton, on the other hand, don’t even offer a certificate. And while a Duke MOOC on Coursera may earn you a “statement of accomplishment” from the instructor, Duke won’t award its own paying students credit hours for taking one.

Schools are guarding their prestige carefully. One of the valuable things about an MIT diploma, after all, is that it tells people you are one of the brilliant few who got into MIT. But there are also real quality differences between MOOCs and the classroom.

Aaron Krolik is one of 450 Duke students paying about $4,200 in tuition to take an on-campus course on genetics and evolution this semester; Duke has a free online course using the same lectures. Krolik doesn’t feel ripped off.

“I think there is a lot more that you get out of going to a university than the information,” Krolik says. And he does not mean Blue Devils basketball. He and his classmates see professor Mohamed Noor three times a week, and Noor uses extra class time to answer questions and help students with additional exercises.

Noor says five of his Duke students have dropped out or are in danger of failing. By comparison, roughly 10,000 of 12,000 online students who watched the first lecture either are failing or have given up.

Soon, Ivy classes may be part of a State U. degree

If massive classes were nothing but an elaborate new adult-enrichment program, the story would end here. But the growth of free online courses is happening at a time when the link between where you learn something and where you get the credit is breaking down.

Even if there’s no cheap and easy back-door into an Ivy like the University of Pennsylvania, a student may soon be able to take what she learns from the Penn-taught calculus class on Coursera and have another college award the credit.

Here is how it might work. In February the American Council on Education, the leading association of colleges, said it would recommend that colleges accept credit for some massive online courses.

Coursera’s Penn calculus class is one of four college-level MOOCs — all on Coursera — with an ACE recommendation as of early April. To get credit, you first must pay Coursera a fee, currently $128, for verifying your identity and proctoring the exams. (This could be one way Coursera someday makes money.) This doesn’t, however, guarantee a college will follow the ACE recommendation and award credit. It’s up to you to persuade your school.

That may get easier soon, and the result could be more-flexible or lower cost degrees. In California, legislators are considering a bill that would push state colleges toward accepting ACE-recommended online courses for credit.

In an experiment, San Jose State is offering credit for three Udacity courses it created, for $150 each. And more colleges are allowing students to study on their own — perhaps with a MOOC — and then pass exams that have been preapproved for credit. The University of Wisconsin system is launching a degree-completion program that will allow people to test their way into a BA.

Most people who try a class don’t finish it

The Duke genetics class’s low pass rate isn’t unusual. Katy Jordan, a Ph.D. student in education technology at Britain’s Open University, says that in 27 massive online courses for which she’s found completion data, some 93% of students drop out or fail.

Those numbers need some context: A free class will draw people who just want to try it out, and it’s easy to walk away when you’ve never written a check. Even so, Jordan, who has finished eight MOOCs herself, says the classes also have some features that turn many students off.

With thousands of students to evaluate, grading can be buggy or just plain wrong. Humanities courses rely a lot on peer grading, which can be tedious to do — and Jordan says some students report “quite rude” graders. In general, today’s MOOCs seem to work best in the sciences and other quantitative fields.

Course providers say they’re working to address such problems. But the track record of the earlier generation of online courses — the for-credit classes offered for years by traditional schools — suggests many students will struggle with them. Researchers at Columbia University have found that community college online students got lower grades and dropped out more often than those in regular classes.

“If we know community college students don’t do as well in online education, does it really make sense to be funneling [more] students into online classes?” asks Shanna Smith Jaggars, one of the Columbia researchers.

Jaggars says younger and struggling students are the least suited to online classes; they need the structure and time-management discipline of a classroom.

Traditional colleges will mix in MOOCs

Even if you aren’t interested in having your kids work toward a degree with online-only classes, what’s happening with MOOCs could nonetheless change their education.

MIT computer science professor Agarwal, who is currently president of edX, says he now assigns his short MOOC lectures to his class in Cambridge, Mass. In building his edX course, he learned that most students’ attention flags 15 minutes into a lecture anyway. Using online tools allowed him to create a “flipped” classroom — lectures are the homework, while class time is for collaborative work.

The flipped model also means that star teachers are now virtually exportable to lower-cost or less exclusive schools. Two Massachusetts community colleges, for example, are blending one of MIT’s free computer programming courses with their own.

The MOOC delivers lectures and sophisticated tutoring programs, but students also attend classroom meetings with instructors they know. “In two weeks we did what it would normally take a semester to do here,” says Mass Bay Community College sophomore Julian Kuk.

Free courses might boost your career

Free massive classes may hold the most appeal for adults looking to reboot their careers or just stay intellectually sharp. Tozzi, the Coast Guard officer, already holds traditional academic degrees, so, like a lot of people in midcareer or later, he’s not as worried about collecting credentials as he is about being able to hone specific skills.

He’s completed three classes on computing and investing and says the content is strong and the price is right. “The courses offered the chance to explore without having to deploy resources beyond time,” says Tozzi.

That may make MOOCs a real competitive threat to pricey professional education. David Seruyange, a software engineer in Sioux Falls, S.D., says he was considering a $32,000 master’s when he decided to try MOOCs instead.

“For-profit education and existing online-only degrees, such as MBA programs, will be most at risk,” says Karen Kedem, manager of the higher education team at Moody’s Investor Service.

Certainly it’s easy to see how a one-time liberal arts major who ended up in a numbers-driven business career might benefit from Carnegie Mellon’s open courses on statistics, or Udacity’s class on building an entrepreneurial startup.

Udacity and Coursera are trying to make MOOCs even more attractive to job seekers by getting into the recruiting business — flagging top students who opt in to employers.

David Luebke, senior director of research for Nvidia, who is co-teaching an Udacity class on programming, says he is watching student performance as well as interaction on discussion boards. “I see students who not only know exactly what is going on, but are being super-helpful,” he says. “That is exactly the kind of employee you want.”

This might wreck college — or save it

Massive courses open up higher ed to the price-slashing economics of the web. Building an online class isn’t cheap: A good one can cost $100,000, college leaders say. Yet once a school has a class for 1,000 students, the cost of letting in the next 100,000 is small. It’s the same effect that’s put free news on your computer — and is putting newspapers out of business.

George Mason University economist Alex Tabarrok, who has launched a MOOC platform called Marginal Revolution University with colleague Tyler Cowen, warns that some less prestigious but still expensive colleges may not survive. “I can go to the local university and take a class from an adjunct, or I can go online and get something from one of the best teachers in the world,” he says.

A bigger worry is that colleges that are desperate to hold down costs, especially state schools, may try to shunt students into cheap, low-quality online courses that will do more harm than good.

“A more expensive course might be a better value in the long run,” says Jaggars, if it helps more people pass and go on to graduate. She adds that the students who most need lower-cost options often don’t have reliable computers or broadband Internet access.

On the other side, the new technology could help universities hold down some teaching costs, keeping high-quality, brick-and-mortar college affordable for more people. (For example, a professor might leave lecturing to a MOOC to free up more time with students.) Or it could cut students’ costs by letting them pare frills or finish a degree faster.

“In the medieval period, the university was a citadel, walled off and separate,” says Jeremy Adelman, the Princeton professor who taught history’s first history MOOC. “We are post-citadel. It is wires, not spires, that define a university now.”

MONEY College

Taking Five Years to Earn a B.A. is Common—And Costly. Here’s How To Get Out in Four

Stressing out about how you’ll pay for four years of college? You should be so lucky. Most students take five to six years to earn an undergraduate degree, the Department of Education reports. That adds about $35,000 to the sticker price of attending a typical in-state public university and much more to the cost of most private colleges.

These moves will help your child get to the finish line in four years.

Pick a Supportive School

Colleges with much-better-than-average graduation rates—look for 50% and up at public colleges, 70% at private schools—often have adopted strategies to help students finish in four years, says Tom Sugar of Complete College America, which works to boost the number of Americans with degrees. Among them: capping graduation requirements for most majors at 120 credit hours; making sure students aren’t crowded out of required courses; and identifying kids in danger of falling behind early on and assigning advisers to help them. Still unproved are the graduation “guarantees” that a growing number of schools offer—essentially, if your kid doesn’t earn a degree in four years, the remaining tuition is on us. Be skeptical, Sugar says.

To identify schools with superior track records, search for your target college’s four-year grad rate at Then hit the “similar colleges” tab to find competitors with better outcomes. (A list of graduation rates at the country’s largest schools is at right.)

Don’t Lighten the Load

Your student’s first college math lesson: Divide the 120 credits typically required for graduation into eight academic semesters, and he’ll see that he needs to take at least 15 credits per semester, not the minimum 12 usually allowed. To make sure Junior has plenty of time for academics, have him limit jobs to 12 hours or less a week. Changing majors, which can involve a new set of required courses, may also set a student back. A possible solution: Go with a related major that will accept many of his existing credits.

Get Back on Track Cheaply

If a change of major or overcrowded courses threaten to delay graduation, your child may be able to fulfill requirements by taking summer or community college classes or a growing number of accredited online tests and courses. Hundreds of colleges give credit for passing grades on the College Board’s 33 College Level Examination Program (CLEP) tests or the competing DSST’s 38 exams. Cost: $80 per test. Traditional colleges have been slow to grant credit for online or alternative tests or courses, so students should check with their registrar and department head before committing time or money to an off-campus class.


More on Financial Independence

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MONEY College

College Aid: Don’t Take the Bait

If you’re facing a $100,000 to $250,000 four-year college bill in the not too distant future, you probably see yourself not just as an anxious parent but as a pauper-in-waiting.

When some life insurance agents look at you, on the other hand, they see an ELF. As in “easy, lucrative, and fun.”

At least that’s how Tim Austin, founder of the National Association of College Funding Advisors, characterized parents of college-bound kids in a conference call last year to recruit new members to join his group — which, despite its name, is actually an insurance marketing organization. (MONEY signed up for and attended the session.)

In a follow-up e-mail, Austin’s NACFA associate Brian Kay urged prospective members not to miss out on “this obscenely profitable niche.” And they aren’t the only insurance pros positively giddy about the potential of the college market.

Hyperbole abounds on the websites of groups soliciting insurance agents and financial planners to join their forces and sell a combination of policies and advice to anxious parents: “Astounding results!” “A gold mine!” “Today’s hottest market!”

For fees typically ranging from $800 to $4,000, these advisers — who represent a niche within the college planning universe — promise to help families save for college, pick good schools, and maximize aid.

The product many are promoting: life insurance. They tout guaranteed returns and point out that a loophole makes life insurance one of the few savings options that won’t hurt a student’s chances for need-based aid. That’s mighty attractive to parents disappointed in 529 returns and frustrated by colleges’ miserly aid packages.

Yet a four-month investigation by MONEY has found that, in reality, the people most likely to profit from this strategy are the planners themselves — most of them insurance agents with flimsy college-planning credentials and, often, little understanding of financial aid.

Related: Saving for College

Their insurance strategies, while attractive in theory, turn out to help relatively few families pay for school. And in too many cases, they do real harm by jeopardizing some kids’ chances of getting into good schools, possibly lowering aid awards, and locking away or even losing family savings — money parents may need to pay tuition bills.

What’s more, while some of these sales practices violate the spirit and perhaps the letter of state insurance laws, regulators are largely unaware of them; a review of disciplinary action by federal and state authorities over the past five years found fewer than a dozen related cases.

“There are good college planners out there, but also too many who think the solution to every family’s college funding problem is to buy an annuity or life insurance policy,” says Lynn O’Shaughnessy, author of The College Solution. “They are snake-oil salesmen, and no one is policing them.”

Contributing to the lack of enforcement action: Parents often don’t realize they’ve been sold an inappropriate investment.

“It can take years to become obvious you’re stuck with what’s essentially a worthless policy” for college savings, says Massachusetts Attorney General Martha Coakley. She adds that sharp increases in college costs, combined with the tough economy, make parents especially vulnerable to hard-sell tactics: “More financial pressure and more anxiety create more opportunity for scammers to take advantage.”

Understand this: Not every college financial planner is just out to sell you insurance, and some of those who recommend a policy may genuinely have your interests at heart. Many also provide other valuable services, such as assistance picking colleges for your child and applying for aid.

The challenge for parents is to separate the genuinely helpful advisers from those who are merely looking to nab an ELF. The key is to recognize the bait they’re dangling, then take the steps to avoid the trap.


The titles carry a ring of authority: College funding adviser. Certified college adviser. Certified college planning specialist. Certified college planning relief specialist.

At least 1,300 college financial planners boast of these professional labels; the vast majority — more than 90%, according to the heads of the various associations they belong to — are also insurance agents. The problem is, to earn these titles, planners get a lot of instruction in marketing to parents but little mandatory training in college savings strategies and financial aid.

Consider, for instance, what’s involved in earning membership in the National Association of College Funding Advisors: Only two of the initial 12 hours of training are about financial aid; the rest focus on marketing techniques, such as scripts and presentations to deliver at college funding workshops designed to recruit new clients, says NACFA president Austin.

This instruction is sufficient, he adds, because members are supposed to focus on insurance and outsource parents’ college-related questions about admissions and financial aid to the College Planning Network, a sister company that employs former admissions officers and other college experts.

Some other groups grant certifications after a few more hours of initial study, then passing an online — and, so, open book — test. (All of the groups also have some continuing education requirements.) By contrast, to become a certified financial planner, candidates must pass a two-day, 10-hour proctored exam covering many financial topics.

There’s another key difference:

Unlike the CFP designation, which is recognized by most state insurance departments, none of the college financial planning organizations have registered with regulatory authorities to make their certifications official. Rick Darvis, head of the National Institute of Certified College Planners, the oldest group, says it is up to individual members to worry about obeying state laws.

The National Association of Insurance Commissioners and other regulators contacted by MONEY were largely unaware of the college planning certifications. According to Sharon P. Clark, head of the NAIC’s committee on life insurance, the seemingly scant training of college funding specialists could violate rules in most states that bar agents from presenting themselves as advisers when their real goal is to sell insurance. Certification from an unapproved organization, she says, could also cross the legal line into false advertising.

For now, the lack of oversight leaves parents to mostly fend for themselves against advisers who may be dispensing incorrect information and bad advice — something Donald Wisdom, president of an IT integration company in Santa Clarita, Calif., knows firsthand.

In 2010, Wisdom paid $3,500 to Brian Safdari, a certified college planning specialist with College Planning Experts for advice about aid and help in selecting colleges for his son, then 17. He says, “I just wanted my kid to be able to go to the college he wanted to go to.”

Wisdom says that Safdari warned him that a rental property he owned could raise the amount he was expected to pay by 12% of his equity in the place.

He says Safdari then urged him to take out a bigger mortgage to reduce his equity and put the proceeds into an insurance policy that wouldn’t be counted in the financial aid formula. When Wisdom’s own research showed the maximum hit on the rental would be just 5.64%, he demanded and got a refund.

He then paid another counselor a few hundred dollars to suggest colleges and filled out the financial aid forms himself. His son ended up getting $32,000 in annual scholarships to the University of San Diego, a private school.

Safdari stands by his comment that certain assets can reduce need-based aid up to 12%, although when asked, he could not provide any examples. He also notes that private schools can use whatever calculation they want when awarding their own scholarships, and that “there is a lot of confusion” over the complicated federal formula.

How to avoid the trap

Pay only for what you need. An admissions consultant can help you zero in on affordable schools by developing a list of appropriate state universities and a few private colleges likely to award scholarships to your child. Expect to pay $135 an hour, on average.

Find a consultant through the National Association for College Admission Counseling, the Independent Educational Consultants Association, or the Association of Independent Certified Education Planners.

More interested in help saving for college expenses? Your best bet is to work with a fee-only financial planner, who won’t be tempted to sell you a big-commission policy (find one with college expertise at

Trust but verify. Before committing big bucks to a college funding adviser, make sure he or she knows the facts.

Double-check any recommendations you get on authoritative websites such as and Or you can check the basics at College 101.


“Without the proper guidance, practically all of the student’s and parents’ assets are there for the taking and are eventually absorbed by the college,” warns, the website run by College Funding Solutions to recruit planners.

College funding specialist Ron English of Greenville, S.C., last year’s top-selling general agent for MTL, an insurer that is targeting the college market, says he advises wealthy parents to move assets into life insurance because “bringing your EFC down from $200,000 to $100,000 [over four years] … increases merit awards.”

There is one problem with these kinds of pitches: The claims often have big holes in them.

Take merit aid. These awards are usually determined by the admissions office, not the financial aid office, based on a student’s grades, scores, or talents, says Peter Van Buskirk, former head of admissions and financial aid at Franklin & Marshall College, and author of The Admissions Game.

In the rare cases when household finances are taken into account, students from families with substantial savings have a good chance of getting larger scholarships, says Glendi Gaddis, director of financial aid at Trinity University in San Antonio. Although Trinity doesn’t use this strategy, she explains, “a college might hope to entice a student from a family with significant resources, hoping that family might later donate to the school.”

For need-based assistance, it’s true that 99% of colleges exclude life insurance from consideration. Shifting assets into insurance to shield them from being “taken” by a college, however, usually doesn’t help much, because parent savings aren’t counted heavily in federal aid calculations.

At most, your contribution could rise by 5.64% of your nonretirement assets, after an exclusion of at least $30,000 a couple, says Mark Kantrowitz, publisher of

Income, though, is dunned heavily: up to 47% of parental earnings, after a typical exclusion of about $50,000 for a family of four earning $100,000.

Generally, says Kantrowitz, if you have large enough assets to make a big difference in your expected contribution, your income is too big to get a need-based grant. “These insurance strategies usually backfire on the family,” he says. “But by the time parents realize that, the adviser who told them to invest in life insurance has already gotten his money.”

There are a few types of families that might benefit: those with moderate incomes but sizable nonretirement assets from, say, an inheritance or a second home or whose college-age children have significant savings of their own.

Colleges reduce need-based aid by at least 20% of student assets (excluding anything in 529 plans). You might also gain an advantage if your child applies to any of the 200 or so private schools that ask parents to fill out a second financial form called the CSS/ Profile.

The form asks about items that are excluded from the federal equation, such as homes, small businesses, and retirement accounts. That creates a larger pool of assets the school may count in figuring your contribution. The form, however, usually does not explicitly ask about life insurance.

Even under these circumstances, though, repositioning assets is no guarantee of increased aid.

For one thing, since most colleges are short on grant dollars, they first try to fill a freshman’s need with government aid, including student loans, says Kalman Chany, author of Paying for College Without Going Broke.

Related: The College Savings Cheat Sheet; It’s As Easy As 5-2-9

Moreover, each school that uses the CSS/Profile has its own secret-sauce formula for how it will use the information, so, at best, you can get only a rough projection of what, if any, impact asset-shifting will have. All you can know for sure is that at the handful of schools that specifically ask about life insurance — including Amherst and Boston College — you can’t move the needle.

Worse still, shifting assets could harm your child’s chances for admission at some schools. About 20% of private colleges give preference to some students who can pay full price, NACAC has found.

Shifting assets certainly backfired for Catherine Bryant, a swim instructor, and her husband, Luis Aguilar, a municipal equipment operator. In 2009, the Ventura, Calif., couple hired local college funding adviser Linda Taylor, who suggested they raise $100,000 to pay tuition at the University of California at Berkeley for their son Nico with a cash-out refinancing of their home.

If they parked the money in an annuity, Taylor said, they’d earn a guaranteed return and wouldn’t have to report the increase in their savings on their federal aid application. The couple took Taylor’s advice, but the maneuvering didn’t work; Nico didn’t get a grant.

It isn’t unusual for repositioning to fail to achieve the desired results, but Bryant’s story took a particularly sordid turn. When she and Aguilar tried to tap the annuity to pay college bills in 2010, they discovered the investment was fraudulent — and they’d lost all their money.

Nico had to accelerate his studies to finish college in three years and put off law school; his parents are still paying off the home loan.

As for Taylor, she pleaded guilty last year to wire fraud and is serving a 54-month sentence at a medium-security facility in Victorville, Calif.

How to avoid the trap

Play “before and after.” To see if shifting assets might help you, fill out the College Board’s EFC calculator and net price calculators posted by the schools your child is targeting, suggests Chany.

First, fill them out correctly; then redo the forms, reducing your nonretirement assets by the amount you might move into insurance. If moving assets won’t bring your expected contribution down to at least $7,000 below the cost of attendance, says Chany, don’t bother.

Get those grades up. Improving your child’s test scores, grades, or special skills could do more to increase grants from private colleges than moving assets, says Chany. Research shows two-thirds of private colleges award bigger need-based grants to students with great academics. A growing number of colleges are including merit scholarship information in their web calculators.


As some agents tell it, cash value insurance does sound like an ideal investment for college savers. Combining a death benefit and a savings account, the policies offer guaranteed returns, recently around 4% for whole life and at least 2% for indexed universal life policies that can reap additional gains in the stock market.

Investing via monthly premiums (recommended for parents of younger children) or one lump sum (among the few options for parents facing imminent college bills), you build cash value over time. Then you can borrow tax-free against the standard policy later, or withdraw money from a single-premium policy to pay college costs. An annuity offers similar advantages but no death benefit.

The trouble is, it takes years for these policies to build to their guaranteed return; in the early years, high commissions (often 8%) and the cost of the death benefit eat into cash value.

The half dozen college-oriented life insurance policies analyzed by MONEY generally took at least seven years to earn their promised returns. Yet about 25% of whole life policies lapse within five years because people can’t keep up the premiums. A policy with an initial cash value of $4,000 that builds to $140,000 in 10 years and a $300,000 death benefit might run you $1,000 a month.

Single-premium policies have other wrinkles. To come up with the lump sum to invest, agents often urge parents to move money out of other assets, such as a 529 savings plan.

That can be costly; if you take profits out of a 529 and don’t immediately use the money for college, you’ll pay taxes and a 10% penalty. You also can’t borrow from single-premium policies or take money out tax-free; plus, parents under age 59½ will pay a 10% penalty on any gains they withdraw.

Worst of all, tapping the policy to pay college bills could hurt future aid because the withdrawals can be treated as taxable income.

The complications and gotchas can turn life insurance and annuities into an expensive mistake for some parents.

Ask Suzette Shilts, a school aide from Hingham, Mass., who in 2010 found herself “in a panic” about how to pay looming college bills for her high-school-age daughter and son. So she went to local planner Kirk Brown, owner of the College Advisors Group, for help. He suggested putting her savings in a guaranteed annuity, which Shilts did. But months later, when she needed the money for a family emergency, she discovered she would lose $1,700 to early-surrender charges. “I thought I was doing the right thing, and it turned around to bite me,” she says now.

Brown, who in 2009 agreed to a $245,000 fine to settle state civil charges that he placed several college families in inappropriate insurance policies, says Shilts told him the money was earmarked for retirement, not college — even though he prepared an eight-page college funding report for her that Shilts showed to MONEY. Brown also notes that Shilts “signed off on all the disclaimer sheets” and that an annuity is a good choice for long-term savings.

How to avoid the trap

Get a second opinion. Don’t make a big move like sinking your savings into life insurance without running it by an independent consultant. For $100, for instance,, headed by the former insurance commissioner of Vermont, will analyze any life insurance proposal.

Look at other providers. At MONEY’s request, insurance consultant Glenn Daily evaluated policies from many of the biggest players in the college market, including Lafayette, MTL, Aviva, and North American.

While the products provided higher-than-average cash values, Daily says, they were complicated and didn’t fully disclose true costs — a common problem. He says parents would do better with a no-commission policy from TIAA-CREF or ones from top-rated mutual insurance companies such as Mass Mutual or Northwestern.


Once your kid hits 11th grade, you’re likely to start getting invitations to free college funding workshops, often held at a local high school and sponsored by a nonprofit. Beware.

Like the free-lunch seminars that some retirement planners use to lure seniors to invest with them, these supposedly no-pressure informational gatherings often turn out to be a thin cover for insurance agents looking to drum up business.

Consider insurance agent Nancy Ziering, who runs a planning business called College and Retirement Solutions in Chatham, N.J. Last spring Ziering gave free college seminars at several high schools, claiming to represent the Education Funding Consultants Association, a nonprofit.

In a recent blog post on the website of Coastal Producers Group, another college financial planning company that she is affiliated with, Ziering encouraged agents to hold a “Free College Financial Aid Night,” at schools to win new clients. She wrote, “It would be in your best interest to be affiliated with our nonprofit, as many schools will not allow for-profit businesses access to parents and students.” What Ziering didn’t disclose was that EFCA had lost nonprofit status years before for failure to file tax forms.

Related: College is free!

Ziering also happens to be one of the few college planners who has been the subject of disciplinary action. In 2008 she was suspended for nine months and fined $60,000 by the Financial Industry Regulatory Authority after settling charges from at least six clients that she had sold them inappropriate variable universal life policies.

Ziering says she has since stopped recommending the questionable policies. Last fall, however, the New Jersey department of banking and insurance initiated proceedings to strip Ziering of her insurance license, contending that she put at least 15 clients into inappropriate insurance policies. Ziering, who denies any wrongdoing, is awaiting a hearing date.

Imprisoned planner Linda Taylor says she also used a nonprofit to gain access to schools and claims it is common practice. Many advisers follow a formula, she says: “They buy a list of names of families. They send out postcards offering free college funding seminars, they do the seminar, they scare the s— out of parents and then offer them hope.”

NACFA training videos obtained by MONEY seem to follow this approach. In them, session leaders suggest that advisers use questions and information to lead parents into what the late marketing guru David Sandler coined a “pain funnel” to increase their desire to pay for relief.

Sandler’s techniques are used by salespeople of all types. To sharpen the pain, some college funding advisers emphasize how complex the financial aid process is. Others warn that colleges can take all your savings, 529 plans have had big losses, or that Washington budget cutters will eliminate their tax breaks.

Says Taylor: “Parents come in, their kid is a year away from college, and they are panicked. They will believe anything.”

What to do

Resist the hard sell. Dire proclamations should set off alarm bells.

Despite a few rough years during the financial crisis, 529 plans usually work out better than life insurance for college savers. And tax breaks for 529s are not scheduled to lapse in the fiscal cliff. If you don’t waste effort on shortcuts that may not work out and instead just save steadily and, when the time comes, favor affordable schools, you can pay for college without turning into a pauper — or an ELF.

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