MONEY Out of the Red

Have You Conquered Debt? Tell Us Your Story

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With patience, you can pay off large amounts of debt and improve your credit. MONEY wants to hear how you're doing it.

Have you gotten rid of a big IOU on your balance sheet, or at least made significant progress toward that end? MONEY wants to hear your digging-out-of-debt stories, to share with and inspire our readers who might be in similar situations.

Use the confidential form below to tell us about it. What kind of debt did you have, and how much? How did you erase it—or what are you currently doing? What advice do you have for other people in your situation? We’re interested in stories about all kinds of debt, from student loans to credit cards to car loans to mortgages.

Read the first story in our series, about a Marine and mother of three who paid off more than $158,169 in debt:

My kids have been understanding. Now I teach them about needs and wants. The other day, I was coming home from work, and I said, “Do you need anything from the store?” My son said, “We don’t need anything, but we’d like some candy.” If they want a video game, they know they need to save their money to get that video game—and that means there’s something else they won’t be able to get. They understand if you have a big house, that means you have to pay big electricity and water bills. I’m teaching them to live within their means and not just get, get, get to try to impress people.

Do you have a story about conquering debt? Share it with us. Please also let us know where you’re from, what you do for a living, and how old you are. We won’t use your story unless we speak with you first.

MONEY Out of the Red

How I Paid Off $158,169 in Debt

G. McDowell Photography

Think there's no way to get out from under your obligations? This first in a series of profiles of people getting "Out of the Red" proves that it's possible.

Rachel Gause just wanted to give her three kids more than she had growing up. So, though she was receiving a secure income along with child support, she found herself living beyond her means every month—eventually racking up six figures in debt. With a whole lot of determination and almost a decade’s worth of belt-tightening, she’s climbed most of the way out. This is her story, as told to MONEY reporter Kara Brandeisky.

Rachel Gause
Jacksonville, N.C.
Occupation: Master Sergeant, United States Marine Corps
Initial debt: $179,625
Amount left: $21,456
When she started paying it down: 2006
When she hopes to be debt-free: November 2015

How I got into trouble

“I was just trying to keep up with everybody else. I’m a single parent to three kids, ages 10, 14, and 16. I was always spending extra on Christmas and on birthdays. Also, growing up, I didn’t have new clothes and new shoes at the start of every school year. But I wanted to make sure my kids always did.

Looking back, I wish I would have known not to rely on credit cards. I wish I would have known that it’s okay to keep your car for four or more years, as long as you maintain it.

I started going into debt when my first daughter was born, 16 years ago. I remember I had to get a furniture loan. By 2006, I had $55,848 in credit card debt and $76,711 in car loans. Then there were the personal loans. I had a consolidation loan that I used to pay off my credit cards. Altogether, it came out to $179,625.”

My “uh-oh” moment

“I wasn’t aware of how much debt I was in. The turning point for me was when I hit the 10-year point in the Marines, and I saw other people around me retiring. I wanted to sit down and see where I was at. And that’s when I realized I didn’t want to retire in debt. I didn’t want to be that person.

At the time, I had a Toyota Sequoia, and I couldn’t make payments on it. I knew I was in way over my head.

Even though I had three kids, we didn’t need that big truck. It was going to put my family at a financial challenge. So I spoke to a lady at my church, and I said, ‘I have this truck, and I’m going to trade it in for something smaller.’ And she said, ‘I always wanted a Toyota Sequoia.’ I sold it to her and got into a Corolla instead.

I realized buying that truck was a bad choice, and I knew I needed to develop better habits from there. That was my first step forward.

How I’m getting out from under

Now I put roughly $2,100 a month toward my debt.

For the rest of my income, I use the envelope system. Before I get paid, I do my budget. Then I have 13 envelopes—one for groceries, one for clothes and shoes, one for charity, one for dining out, one for gas, and so on. I go to the bank, take the money out, and divide it between the envelopes.

I don’t spend anything that doesn’t come out of those envelopes. Debit cards are nice, but swiping is less emotional. Cash makes me more aware of what I’m spending my money on. If I run out of money for something that month, I don’t buy it. But I’ve never run out of money for something important—now I’m more aware of how much I’m spending.

That’s because I also got a small composition book from Dollar General to track my spending. Every time I spend money, I write it in that book. Then I compare that to what I’m supposed to be spending, according to my budget.

I also do a quarterly audit on myself to make sure I’m not spending too much more on my cable or cell phone bills.

But it’s not all deprivation. We have a chart that we color in every time we reach a milestone, and we treat ourselves to something nice. For example, recently I went on a trip with my high school classmates to Atlanta—funded totally in cash.

My kids have been understanding about our debt-free journey. They know that mommy has made some bad financial decisions in the past. Now I teach them about needs and wants.

The other day, I was coming home from work, and I said, “Do you need anything from the store?” My son said, “We don’t need anything, but we’d like some candy.”

If they want a video game, they know they need to save their money to get that video game—and that means there’s something else they won’t be able to get. They understand if you have a big house, that means you have to pay big electricity and water bills. I’m teaching them to live within their means and not just get, get, get to try to impress people.

What I’ve learned that could help someone else

My advice would be to sit down, see where you’re at—first, you have to know how much debt you’re in—and then create a spending plan. (Some people are scared of the word “budget.”) You have to tell your money where to go, or it’s going to tell you where to go.

The numbers may scare you in the beginning. It takes two or three months before you can get the budget right.

And you have to be consistent. If you don’t put 100% into it, it’s not going to work. You can’t be half, ‘I’m trying to get out of debt,’ and half, ‘I still want to spend money.’ You have to sacrifice.

My hopes for the future

Once I become debt-free, I plan to build up my emergency fund and then start actively investing and saving for retirement.

Then I hope to get my kids off to a better start.

My daughter will go to college soon. We’ve talked about student loans.

The main reason I joined the military was to obtain my college degree for free. I earned my degree in business administration from the University of North Carolina-Wilmington last year. But while I was there, I saw so many kids taking courses for a second and third time because they were failing and they weren’t going to class.

So I told my daughter, you’ll pay for that first year, and we’ll see how you manage. Then I’ll assist you with your second, third and fourth years. But first, I need to make sure you’re dedicated.

After I retire from the military, I want to become a certified financial counselor so I can help people break the vicious cycle of being in debt and dying in debt. My passion is to put together financial classes for non-profit organizations like women’s shelters, churches, and organizations for military service members. There aren’t that many in this area, and I see a real need. I see so many people struggling to survive, living paycheck to paycheck.

I’ve already started counseling some people who ask for help.

Every now and then, I get a message on Facebook from someone I helped that says, ‘I just paid off another credit card’ or ‘I paid off my car.’ That’s my motivation now. I don’t want to stop – the need is out there.

Are you climbing out of debt? Share your story of getting Out of the Red.

Check out Money 101 for more resources:

TIME Education

Why Ph.D.s Shouldn’t Teach College Students

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jacomstephens—Getty Images

Marty Nemko is a career coach, writer, speaker and public radio host specializing in career/workplace issues and education reform.

Professors, the campus and even the university as an institution need to be replaced

Despite a college degree’s enormous cost, almost half of college freshmen (43%) don’t graduate even if given six years. If they graduate, a 2011 national study found, 36% of the 1,600 students tested “did not demonstrate any significant improvement in learning” in four years. And in the just-published follow-up, which tracked those students since their graduation in 2009, one-quarter were living at home two years after graduation and more than half said their lives lacked direction. Twenty percent were earning less than $30,000 a year, half of those less than $20,000.

Hidebound higher education

College hasn’t changed much in centuries. For the most part, there’s still a research-oriented Ph.D. sage on the stage lecturing on the liberal arts to a student body too often ill-prepared and uninterested in that. That occurs on a plush campus with a porcine administration, which results in a four-year sticker price at a brand-name private college of more than $200,000. (And those are 2012 figures. They’re higher now. Plus, those figures exclude tens of thousands of dollars in books, travel, living expenses and miscellany.)

Time, not for reform, but for reinvention

The meteoric rise in Massive Open Online Courses (MOOCs), which see an average enrollment of 43,000 students per course, is an early sign that the public wants change. But MOOCs aren’t the answer. Sure, they’re free and available to all, but because they’re still taught largely by those professor types to often unprepared students, the completion and learning rates are low. MOOCs have a completion rate of only 10%.

Undergraduate courses should not be taught mainly by Ph.D.s. The gap between their and their students’ intellectual capabilities and interests is too great. The instructors should be mainly bachelor’s-level graduates who themselves had to work hard to get an A. Just as you’d probably learn computer basics better if taught by someone who had to work to acquire mastery rather than by a born computer whiz, the same is true of most undergraduate courses. To be licensed to teach, prospective instructors should have to complete a pedagogy boot camp, a one-weekend to one-semester intensive, which ironically, in most colleges, is required of teaching assistants but not of professors.

Most courses would be taught via online interactive video, which would both save much money—no campus required—and allow a dream team of the world’s most transformational instructors to teach. That way, everyone—from the poorest, weakest student to the most brilliant—would have access to the best in interactive instruction. In addition, the online format allows for individualized pacing and exciting simulations impossible to provide in a nation’s worth of live classes.

Extracurriculars would occur at local gyms, swimming pools, theaters and athletic fields. Where those were insufficient, facilities on existing campuses would be used, but much of campuses could be sold off.

Importantly, courses would not be attached to any institution. Anyone could submit his or her course for approval to the U.S. Department of Education. Screening would be done only for quality and rigor, not for censorship of content. If approved, the instructor, when posting availability of the course on one of the existing MOOC sites (Coursera, edX or Udemy), could include a badge saying the course is U.S. government–approved for X units of undergraduate credit. When a student has completed the specified number and type of courses to comprise a bachelor’s degree, the student would submit proof of completion to the Department of Education, plus the results of a proctored exam that would assess if the student had acquired bachelor’s-level skills in reading, writing, critical thinking and mathematical reasoning. If so, they would be granted a U.S. bachelor’s degree.

The result would be a far better college education at far lower cost.

A high-quality pathway for academically weak students

Today, we push nearly everyone to college, even those who did poorly in high school, for whom college is unlikely to be the best way to spend their years and money. America needs a major apprenticeship initiative like those in Germany and England: a partnership between schools and employers that creates a high-quality experience for high schoolers whose track record indicates they’re more likely to succeed in a practical curriculum than by deriving geometric theorems, deciphering the intricacies of Milton or applying quantum mechanics.

In the meantime, what to do?

Higher education’s glacial pace of change, despite years of withering criticism, does not portend major improvement in the offing. So what’s the current crop of would-be college attendees to do?

Attending college should not be a fait accompli. If you did poorly in high school or are burned out on academics, you’re likely to join the almost half of college freshmen who don’t graduate even if given six years. So you might want to consider a noncollege path. For example, while not ideal, America does have a system of apprenticeships. Or try to work at the elbow of a successful, ethical business owner or nonprofit executive. Or consider the military: It offers training in a wide range of career fields. Or take just a gap semester or year to refresh and edify yourself in the real world before starting college. Try some focused traveling—for example, visit elementary schools in different areas and keep a blog. Or start a simple business. Even if it fails, you will have learned much about entrepreneurship, organization, people and life.

A College Report Card

If you are planning to attend college, you’ll make a wiser choice if you ask each prospective school’s admissions office for the following information, which collectively make up what I call the College Report Card:

  • Results of the most recent student-satisfaction survey.
  • The most recent report by a visiting accreditation team (for a college to retain accreditation, a team of experts periodically visits for a few days and writes a report listing the identified strengths, weaknesses and recommendations).
  • The four-year graduation rate.
  • The average four-year student’s growth in writing, analytic reasoning and mathematical reasoning (many institutions use a standardized exam like the Collegiate Learning Assessment).
  • The percentage of students who graduate with their intended major who are professionally employed or in graduate school within six months of graduation.

It would be a consumer boon if the government mandated that all colleges post the College Report Card on their home page.

We claim that American higher education is the world’s best. Like many claims, it deserves closer examination.

Marty Nemko is an award-winning career coach, writer, speaker and public radio host specializing in career/workplace issues and education reform. His writings and radio programs are archived on www.martynemko.com.

TIME Ideas hosts the world's leading voices, providing commentary and expertise on the most compelling events in news, society, and culture. We welcome outside contributions. To submit a piece, email ideas@time.com.

TIME Education

How Did the University of Pennsylvania Become a Party School?

Students walk through the University of Pennsylvania campus on December 16, 2013 in Philadelphia, Pennsylvania.
Students walk through the University of Pennsylvania campus on December 16, 2013 in Philadelphia, Pennsylvania. Christian Science Monitor—Christian Science Monitor/Getty

The environment at Penn does not seem to have changed so radically that it would reach the Playboy pinnacle

I have no idea why I am so devoted to the University of Pennsylvania. What I do know is that I was a much better person when I graduated in 1972 than when I entered four years earlier. Which is why I am currently serving my third year as president of my class, as a longtime alumni interviewer of high school applicants for admission, and a mentor to different on-campus groups.

Like alumni of colleges around the country, I check out the US News and World Report rankings of universities and colleges and have been gratified when Penn rises in the poll and somewhat dismayed when we fall. Last month, one publication selected Penn as the top research university in the world; another proclaimed that more Penn graduates are billionaires than those of any other college. Neither of these two titles came as a surprise to me.

However, Playboy’s selection of my alma mater as the top party college in the nation came as a total shock to this undergraduate from the late 1960s and early 1970s. Although over 50 percent of my class joined either fraternities or sororities, the popularity of the Greek system at Penn diminished significantly during my four years there as the peace movement and feminism gained traction. At that time, the legal drinking age in Pennsylvania was 21, and fake IDs were relatively hard to obtain. Unless you were friends with the hockey players who served as bouncers at the legendary campus bar, Smokey Joe’s, an underage male student had no chance of entering. And as recreational drugs got more popular on campus, the taste of the cheesesteaks improved, but the parties did not.

I went to memorable parties in my time at Penn—including one that ended with my dining room table broken in half and two women waking up in my bed—but they were few and far between. I spent most of my nights either working until deadline in the newspaper offices or writing papers due the next day.

The environment at Penn does not seem to have changed so radically that it would reach the Playboy pinnacle. In conjunction with my alumni activities, I visit the campus a minimum of five times per year. At nearby bars, I’m just as likely to see students from Drexel as Penn. As I stroll down Locust Walk through the center of campus after a football or basketball game, the fraternities that line the east side of the walk seem more subdued than they were 40 years ago. The students are better dressed and better-looking, but it always seems like the undergrads are in a rush—to the library, to the gym, to a music organization, or to a part-time job. With these types of pressures, it is difficult for me to understand when Penn students have time to party enough to draw Playboy’s attention.

The student body seemed as surprised as I was by this latest distinction. In an online survey conducted by the campus newspaper, 76 percent of respondents said that Penn does not deserve the Playboy ranking. One of the students I mentor, Cha Cha, wholeheartedly agrees. As she explained to me in an e-mail, “I don’t think anyone was not surprised by this ranking. … If you aren’t into parties, you definitely won’t really come in touch with any—which is probably more unavoidable at an actual party school.”

Cha Cha—who is going to graduate with degrees from both the Wharton School and the College of Arts and Sciences—chose Penn because she believed it would give her the tools she needed to become a force in the medical industry. While she might be an atypical student, even for Penn (she studies on big party weekends like Homecoming), she is closer to the norm on campus than a regular binge drinker is.

As a high school senior when I applied to Penn, I had no ambitions to be a force in the medical industry, or any other industry. I was thinking every weekend there would be an alcohol-induced orgy. I was infrequently right. Cha Cha clearly has a better grip on the value of a Penn education than I did—or that Playboy does, for that matter.

Jeffrey M. Rothbard is a partner in the law firm of Rothbard, Rothbard, Kohn & Kellar in Newark, New Jersey. He wrote this for Zocalo Public Square.

TIME Ideas hosts the world's leading voices, providing commentary and expertise on the most compelling events in news, society, and culture. We welcome outside contributions. To submit a piece, email ideas@time.com.

MONEY Student Loans

6 Ways for New Grads to Tackle Their Student Loans

clock about to strike
Jamie Grill&;mdash;Getty Images

You have to start repaying your college debts six months after you graduate. For the class of 2014, that deadline is approaching fast. Here's how to get ready.

The six-month grace period for many student loans is about to expire for new college graduates. If the past is any guide, many people will miss their first payment and some will end up defaulting on their loans—even though there’s usually no good reason for that to happen.

The stakes are high: even a single missed payment on a credit account can damage an individual’s credit scores, although many loan servicers don’t report delinquencies until borrowers are 90 days or more overdue. Borrowers who default—failing to pay for nine months or more—face having some of their wages and all of their tax refunds seized by the government.

Yet many borrowers may have already lost track of what they owe, and their lenders may have lost track of them because of address or email changes.

That’s still no excuse for not paying.

Borrowers shouldn’t wait to get a bill before making plans to repay the debt. Instead, here’s how new graduates should tackle their student loans:

1. Know what you owe

The typical borrower with student loan debt has four loans, according to a recent Experian study, and it’s not unusual to accumulate far more.

A borrower’s first task is to make a list of every loan, including the balance owed, the type of loan (federal or private), the date the first payment is due and the servicer, or the company designated to take your payments.

Borrowers should check the National Student Loan Data System for any federal loans they may have forgotten or for which they need more information. To uncover private loans, borrowers should get copies of their credit reports from AnnualCreditReport.com.

Recent federal loans have names that include Direct, Perkins, Stafford, PLUS, or Grad PLUS. Older loans include Federal Family Education Loan (FFEL). Private loans are typically issued by banks, credit unions, colleges, or non-profits.

2. Reach out for help

Borrowers typically can get access to their loan accounts online, and doing so can make managing multiple loans easier. Graduates should take the time to update their addresses and emails with the loan servicers so that they don’t miss critical communications.

3. Explore payment options

Income-based repayment plans, along with generous deferral and forbearance options that offer payment relief for up to three years, can keep the vast majority of federal student loan borrowers from defaulting, says Reyna Gobel, author of the book CliffsNotes Graduation Debt.

Private student loans offer fewer options for strapped borrowers. But some forbearance or deferral is typically available for those who are unemployed or facing other economic setbacks.

Even graduates who can manage their first payments should investigate alternatives.

Pay as You Earn, a federal income-based program, could lower payments to less than 10% of the borrower’s income—and those who work in public service jobs could be eligible for forgiveness of any remaining balances after 10 years of payments. (Those who work in non-public service jobs can get forgiveness after 20 to 25 years, depending on when the debt was incurred.)

If you’re unemployed or not earning much, Pay as You Earn can lower your payment to zero—while still keeping you out of default. Extended and graduated payment programs also can make payments more manageable. For more information, check the Department of Education’s student aid site and the Consumer Financial Protection Bureau’s Repay Student Debt tool.

4. Research consolidation

Consolidation used to be a way to lower interest rates on federal debt and make one payment instead of several. Today, federal student loans offer fixed rates, and consolidation merely offers a weighted average of those rates.

Plus, many borrowers now have just one servicer even if they have several federal loans, so they may already have the convenience of a single payment. The best reason to consolidate may be to opt for lower payments by choosing a longer payback period—15, 20, or 30 years instead of the typical 10 years, for example. But that increases the total cost of the loan.

The Student Loan Borrowers Assistance site has information about the pros and cons of consolidation.

One good reason for taking longer to pay back federal loans is to free up more money to pay off private loans, which typically have variable interest rates and few consumer protections.

Private loans cannot be included in a federal student loan consolidation. A few lenders offer private consolidation or refinancing that can include federal student loans, but borrowers could lose critical protections if they turn federal debt into private debt.

5. Rethink aggressive payment plans

Borrowers with decent incomes may be tempted to throw every available dollar at their debt. While this may decrease the interest they pay, they could be poorer in the long run if they don’t take advantage of opportunities to save.

Another problem with rapid debt repayment is a potential loss of financial flexibility. Money paid to student lenders is gone for good, unlike money accumulated in savings. A layoff or other economic setback could leave the borrower scrambling for cash.

6. Know where to find help

Borrowers should first contact their loan servicers to try to resolve any disputes. If that doesn’t work, borrowers can contact the Federal Student Aid Ombudsman for help with federal loans. For private loans or problems with servicers, complaints can be lodged with the Consumer Financial Protection Bureau.

MONEY College

Don’t Bother Appealing a Financial Aid Award if…

Rich woman crying
Crying poor doesn't always work wonders with the financial aid office. iStock

Sometimes it doesn't make any sense to ask a college for more money. An expert explains what those times are.

I’m often approached by families who want me to help them request more money from a particular college. About a third of the time, I turn them down.

So what is it about these families that has me refusing to take their business — and their money?

It’s their unrealistic hopes. These families want a strategy. They’ve read that if you show a college a competing award, the college will match it. Or they’ve heard that you can negotiate a better award by telling the college how much the student wants to attend the school.

If these are the only reasons they want more money, I tell them they can appeal themselves. These parents will probably be unsuccessful if the award they want a college to match is in a different category of selectivity. A highly competitive college that does not give merit awards will not match a school that has awarded a student an academic scholarship. That selective college will award only need-based aid, based on the family’s income and assets; the other college uses merit awards to entice students to attend, regardless of their financial situation.

Financial-aid appeal letters are difficult for colleges to respond positively to, since a decision to change an award is limited by a college’s policies and requires consensus of the financial aid committee. There are no cut-and-dry rules of what will be accepted and what won’t. The committee can use what they term “professional judgment” and override entries on financial aid forms.

I try to put myself in the college’s shoes. I will assist a family, for example, whose primary wage earner is out of work because of an incapacitating illness that struck after the student submitted his or her financial aid forms. I’ll help a family forced to maintain two households because the family can’t move and the only job a family member can get is too far away for a commute. I’m also sympathetic to families forced to draw upon retirement funds to pay for medical bills.

In these cases, I will calculate the decrease in income available for college expenses and ask the college to lower the family’s income by this amount in their financial-aid calculation.

On the other hand, what if the parents want to appeal due to high living expenses, such as a $7,000-a-month mortgage, three $600 monthly car payments on their new SUVs, and private basketball coaching for their children? In such a case — and I really did hear from such a family — I pull out my “World’s Smallest Violin” and play a tune. I tell them their letter will be posted on the bulletin board in the financial aid office’s lunchroom, so that the financial aid officers get a quick laugh from it each time they take a break from their demanding jobs.

I get no pleasure out of helping with these types of appeals. For me to work with them, they need to pass my personal litmus test: They have to make me shed a tear after hearing what’s going on with the family — not make me run for my World’s Smallest Violin.

———

Paula Bishop is a Certified Public Accountant and an adviser on financial aid for college. She holds a BS in economics with a major in finance from the Wharton School and an MBA from the University of California at Berkeley. She is a member of the National College Advocacy Group, whose mission is to provide education and resources for college planning professionals, students and families. Her website is www.paulabishop.com.

MONEY retirement planning

Millennials Feel Guilty About This Common Financial Decision—But They Shouldn’t

Sad millennials leaning on desks
Paul Burns—Getty Images

Young adults aren't saving as much as they think they should for retirement. But paying off debts is just as important.

Millennials are pretty stressed out about their long-term finances, according to Bank of America’s latest Merrill Edge Report. Some 80% of millennials say they think about their future whenever they pay bills. Almost two-thirds contemplate their financial security while making daily purchases. And almost a third report that they often ponder their long-term finances even while showering.

What’s eating millennials? Student loan debt. Even the very affluent millennials surveyed by Bank of America feel held back by student debt—and these are 18-to-34 year-olds with $50,000 to $250,000 in assets, or $20,000 to $50,000 in assets and salaries over $50,000. Three-quarters of these financially successful Millennials say they are still paying off their college loans.

Among investors carrying student debt, 65% say they won’t ramp up their retirement savings until they’ve paid off all their loans. But with that choice comes a lot of guilt: 45% say they regret not investing more in 2014.

Contrary to popular wisdom, millennials are committed to investing for retirement. Bank of America found that the millennials surveyed were actually more focused on investing than their elders. More than half of millennials plan to invest more for retirement in 2015. But 73% of millennials define financial success as not having any debt—and by that measure, even relatively wealthy millennials are feeling uneasy.

Fear not, millennial investors. You’re doing just fine. First off, you’re saving more — and earlier — than your parents’ generation did. A recent Transamerica study found that 70% of millennials started saving for retirement at age 22, while the average Baby Boomer didn’t start until age 35. On average, millennials with 401(k)s are contributing 8% of their salaries, and 27% of millennials say they’ve increased their contribution amount in the past year. Even if you can only put away a small amount at first, you can expect to ramp up your savings rate during your peak earning years.

For now, here are your priorities:

Save enough to build up an emergency fund. You could be the biggest threat to your retirement savings. A recent Fidelity survey found that 44% of 20-somethings who change jobs pull money out of their 401(k)s. (That’s partly because some employers require former workers with low 401(k) balances to move their money.) Fidelity estimates that a 30-year-old who withdraws $16,000 from a 401(k) could lose $471 a month in retirement income—and that’s not even considering the taxes and penalties you’d owe for cashing out early. If you have to make the choice between saving and paying off debt, at least save enough to get through several months of unexpected unemployment without draining your retirement accounts.

Pay off any high-interest debt first. When you pay off debt, think of it this way: You’re making an investment with a guaranteed return. Over the long term, you might expect a 8% return in the stock market. But if you have a loan with an interest rate of 10%, you know for certain that you’ll earn 10% by paying it off early.

Save enough to get your employer’s full 401(k) match. The 401(k) match is another investment with a guaranteed return. Invest at least as much as you need to get the match—typically 6%—with the goal of increasing your savings rate once you’ve paid off the rest of your debt.

Related:

TIME Innovation

Five Best Ideas of the Day: October 23

The Aspen Institute is an educational and policy studies organization based in Washington, D.C.

1. A “13th year” of public education combines the supportive environment of high school with the first year of community college — and more students are staying enrolled.

By Rebecca Schuman in Slate

2. Imagine drones as solar-powered and mobile cell towers delivering connectivity to underserved areas.

By Adele Peters in Co.Exist

3. Large employers offering employees at-home solar power at a deep discount could help scale and create demand for this critical renewable resource.

By Diane Cardwell in the New York Times

4. If “democracy” is intended to work for everyone, not just the political class in America, it’s clearly failing.

By Clive Crook in Bloomberg View

5. With each success, new community partnerships exercise greater strength, building civic confidence to solve persistent regional problems.

By Monique Miles in the Aspen Journal of Ideas

The Aspen Institute is an educational and policy studies organization based in Washington, D.C.

TIME Ideas hosts the world's leading voices, providing commentary and expertise on the most compelling events in news, society, and culture. We welcome outside contributions. To submit a piece, email ideas@time.com.

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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TIME Education

More of America’s Foreign College Students Should Come From Mexico

Graduates throwing caps in air
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Andrés Martinez is editorial director of Zócalo Public Square, for which he writes the Trade Winds column.

Even though it is our neighbor, our second-largest trading partner, and home to almost 120 million people

My Mexican father applied to colleges in the United States in the late 1940s, and was offered scholarships by the University of Arizona and Western Reserve (now Case Western Reserve) in Cleveland. His father sat him down and drew a line from west to east across a map of the United States and said: “Below this line, they don’t like Mexicans.” It was a fateful moment, all but ensuring Dad would return to Mexico upon graduation. He did not like the cold. He would have loved Tucson.

Dad did enjoy his studies in Cleveland, and got a lot out of the experience, notwithstanding his nearly flunking music composition (not long ago I stumbled across a copy of his transcript). His was a classic liberal arts education, blending economics, history, and literature. Upon graduation, he returned to Mexico, got a job, and enrolled in an evening law school. He went on to have a successful business career, much of which involved connecting Mexico to the United States and (though not as a conscious matter) spreading American values to those who worked with him.

A fascinating new Brookings report on the foreign student population of the United States made me think of Dad’s experience, and what he and the United States got out of the deal. As Neil G. Ruiz, the author of the report, put it over the phone, migrant students build bridges between societies, and over time those bridges carry a lot of economic activity. This means that the United States is, in many cases, educating the future leaders of the world, particularly the future leaders of emerging nations. We currently take in about a fifth of all students worldwide who cross borders to study, though these students still make up less than 4 percent of the entire student population in the U.S.

Ruiz and his team looked not only at countries of origin for the 1,153,459 foreign students enrolled in higher education programs between 2008 and 2012, but their cities of origin and the metropolitan areas they cluster in within the U.S. So, for instance, the data compiled by Brookings shows there were 7,109 students (F-1 visa holders) from Seoul studying in the Los Angeles area during that four-year period. Looking into the future, it’s hard to imagine a more binding tie between the two cities than the presence of all those Korean students in Los Angeles, and their connection to the city long after they graduate.

It isn’t surprising that Asia dominates the census of foreign students in the United States, although I was stunned by just how much. China alone sent 284,173 students in that period. The top 20 hometowns of all foreign students in the United States are in Asia. Saudi Arabia and other oil-rich Gulf states boast the fastest-growing contingent of students. Shockingly, the city of Riyadh, Saudi Arabia, alone sent more students (17,361) than did the entire country of Mexico (17,171).

Mexico, ranked ninth among countries sending students here, is vastly underrepresented among foreign students when you consider that it is our neighbor, our second-largest trading partner, and home to almost 120 million people. The fact that the country lags behind cities like Riyadh and Taipei in the numbers of students it sends to American universities shows that Mexico and the United States remain “distant neighbors” in some ways, as Alan Riding termed the relationship in his book of that title three decades ago.

It also shows that money talks. In addition to having many families able to pay the high cost of tuition abroad, countries like China and Saudi Arabia offer lavish scholarships to promising kids. The U.S. has a strategic need to attract more students from Mexico and other countries who don’t have this kind of financial backing. But American universities prefer to see foreign students as a profit center. Texas has long been a welcome exception to the rule, offering Mexican nationals with financial need in-state tuition at public universities as a matter of policy. Meanwhile, the Obama administration and its Mexican counterpart have announced initiatives to increase the flow of students across the border to 100,000 in coming years, but the question of who pays for all those students remains an open one.

Our policy discussions about foreign students in this country also disproportionately focus on students focusing on science and technology. Lawmakers, analysts, and businesses are all advocating the creation of an easier path for those pursuing advanced STEM degrees to stay and work here once they obtain their degrees. There is widespread support, echoed by the Brookings report, for a law that would automatically grant these graduates a green card.

That makes a great deal of sense, but we shouldn’t take too utilitarian a view of foreign students in this country, writing off those incapable of writing code or finding their way around a lab. Yes, we want to be the world’s innovation hub, attracting the best and brightest to our great research universities. But we also benefit from having students come here from all over the world to learn our history, as well as our democratic and capitalist values.

And that’s true even—maybe especially so—if they go back home because it was too cold in Cleveland.

TIME Ideas hosts the world's leading voices, providing commentary and expertise on the most compelling events in news, society, and culture. We welcome outside contributions. To submit a piece, email ideas@time.com.

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