MONEY retirement planning

Retiring? Redefine Yourself

senior golfing
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The happiest retirees say, “I’m so busy now, I don’t know how I ever had time to work.”

Far more than merely an economic event, retirement is a life redefining milestone. Leaving work and transitioning to a different way to spend your time and money can change your identity. One trick: an open mind regarding leisure, learning, family and, believe it or not, even more work.

Many unhappy retirees have enough money. They simply failed to come up with a new idea of who they are and what they do after the working years ended. Planning finances to understand how you can afford to live — and how long you can support the lifestyle you want — looms large. You needn’t retire just because you reach a certain age or a certain dollar amount of savings.

Retire because preparation for the next phase of life leaves you eager for new pursuits.

Such reinventing takes many forms. Children and grandkids can fill more of your calendar. You may become a nearly full-time volunteer. The golf course may call you or you may further develop a long-lost hobby.

Maybe you’ll return to formal learning, a great way to keep your mind active and expand your knowledge or skills. Especially given the mushrooming of online education, you can audit classes, watch the lectures via the Web or participate in research, homework and earn credits. You may even qualify for financial aid.

Couples face special considerations about retiring. Do you each intend to retire at the same time? Do your individual visions of retirement include the same or very different pastimes?

Frankly, don’t rely on your spouse to share all your interests — or to want to spend all day every day with you. I once heard a colleague, talking about retirement plans, share this perspective from his wife: “I married you for better or worse, but not for lunch.” Get out of the house and find something to occupy your time.

Planning remains as important in retirement as before it. You can travel, depending on your financial situation, yet even heavy travelers wind up filling a lot of at-home days. Catching up on that stack of books on your nightstand or your long-overdue garden project may initially occupy your golden years. Beware eventual bouts of boredom.

One option: Don’t fully retire. Simply cutting back on work may be in order, more vacation, part-time hours and a slow transition rather than you on the job one day and retired the next. Try a month of vacation, living as if retired to see how it suits you.

Of course, you might not get to pick your retirement date: Job loss, health problems or other unexpected troubles can end your career before you expect. If this happens to you, a ready plan in place can help give you a sense of your options financially and occupationally.

Plan for different stages of retirement; your first retired decade may differ a lot from the following 10 years. In general, I find that the happiest retirees say, “I’m so busy now, I don’t know how I ever had time to work.”

Staying engaged in life and socially connected can help keep you from worrying about finances – suddenly the least interesting topic in your newly defined life.

Gary Brooks is a certified financial planner and the president of Brooks, Hughes & Jones, a registered investment adviser in Tacoma, Wash. Read more at his blog The Money Architects.

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MONEY college savings

Six Misconceptions That Are Costing You Free Money for College

college students listening to professor in lecture hall
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In honor of 5/29 College Savings Day, MONEY answers parents' most common questions and concerns about 529 accounts.

Despite being promoted for more than a decade as the best way to save for college, 529 plans are a mystery to almost two-thirds of American families. Which means they’re losing out on what is essentially free money for college.

Part of the problem, of course, is that many Americans feel they don’t have any extra money to save for any reason, college included, one recent survey found.

But today—5/29 (get it?)—is a great day to take a closer look at how these college savings plans work. For one thing, so-called “529 Day” comes with cash bonuses. Many hospitals, for example, will give babies born on this day $529 toward college savings. The state of California will kick in $50 in matching contributions made to its 529 accounts today. And Virginia is giving anyone who opens a new college savings account this month a chance to win $10,000.

These short-term promotions are designed to draw attention to the more permanent advantages of the 529 plan. Thirty-four states offer state tax breaks or scholarships to residents who invest in college savings accounts that add, on average, the equivalent of 8.7% to your contributions. And earnings on any 529 investment can be used tax-free to pay for your child’s college expenses, which boosts the net value of your college savings over what you would earn in a regular investment account.

Unfortunately, many parents who can afford to save don’t do so, often because they have misconceptions about the costs and benefits of 529 plans. Here’s the truth behind six of the most common false assumptions that experts say they hear.

It will impact financial aid. Some parents who have saved for college fear that their nest egg could turn into a financial hand grenade when their student applies for financial aid, says Lynn O’Shaughnessy, author of The College Solution. And, in fact, every $1,000 you’ve saved in a college savings account can reduce need-based aid offers by up to $56. But many families don’t see that much of a reduction. And even those who do are still wealthier and far more able to pay for college than they would have been without saving, O’Shaughnessy says.

I can’t afford the contribution minimums: A lot of families get paralyzed by the idea that they can’t put a large sum aside, and so they don’t save anything at all, says Betty Lochner, Director of the Guaranteed Education Tuition plan in the state of Washington. “They think it’s too steep a hill to climb, and it’s not,” she says. At least 33 states allow you to open accounts with deposits of $25 or less, according to the College Savings Plans Network’s tool to compare plans.

The investments are too risky. Many parents are naturally afraid to put money in investments they don’t understand or trust. But most states offer low-cost, professionally managed plans specifically designed for parents who don’t want to have to worry about the ups and downs of the market, says Joe Hurley, an expert on 529 plans and founder of Savingforcollege.com. For example, the increasingly popular age-based portfolios, many of which are managed by well-respected firms such as Vanguard, Fidelity, or T. Rowe Price, will manage the risk of stock markets by moving money to more conservative portfolios as students get closer to college age.

There are also several independent guides to help you pick a good plan. Savingforcollege.com compiles a quarterly list of the top performing plans, and Morningstar publishes an annual research analysis.

It limits college choices: Although most 529 plans are sponsored by a state, the funds can be used at any accredited college in any state, says Lochner, who is also chairwoman of the College Savings Plans Network, a consortium of state plan administrators.

But my kid’s going to get a full ride! Time for a reality check: The idea that bright students can easily earn full-ride scholarships is a myth, says O’Shaughnessy. Only .3% — that’s less than one third of 1% — of college students receive true full rides, according to research by Mark Kantrowitz, publisher of Edvisors and author of “Secrets to Winning a Scholarship.” Even if your child gets a scholarship to cover tuition, there’s still room and board and books to pay for, both of which qualify as educational expenses for 529 accounts. (Congress is considering a proposal that would expand what qualifies to include computers, software, and internet access.)

Any additional money left over in a 529 can be easily transferred to a college savings account for yourself, or for a sibling, cousin, or future grandchild. Alternatively, you can withdraw 529 money from an account and spend it on anything you want—you’ll just have to pay taxes on the gains (as you would have done for funds from a regular investment account), and there will be a 10% additional tax penalty on those gains. If you are spending money left over in a 529 because your child won scholarships, however, the tax penalty is waived, Lochner says.

My kid will blow the money on video games. Having a nightmare about your daughter going through a rebellious teenage phase and cashing out the college savings plan to finance a backpacking trip across Europe? Not going to happen. Parents remain in control of the account even after a child turns 18.

To learn more about 529 plans and get help figuring out which 529 plan is right for you, check out MONEY’s guide.

MONEY College

Why an Out-of-Stater May Be Taking Your Kid’s Seat at State U.

Getty Images/David McNew UCLA, like many state schools, has been increasing the number of out-of-state students to make up for reductions in funding.

Study says public universities' need for revenue and desire for reputation means they’re increasingly giving grants to wealthy, smart, out-of-staters.

State universities historically served the public good, offering a college degree to a broad swath of residents and paving a path to the middle class for low-income families.

But a paper out today from New America says the nature of state universities is changing—for the worse.

Driven by a desire for dollars and higher rankings, public colleges are increasingly using their financial awards to recruit affluent out-of-staters instead of helping needy state residents attend college, the report charges.

As a result, writes author Stephen Burd, public colleges are losing sight of their public mission.

An analysis of non-need-based aid at 424 public four-year colleges found that schools that provide large amounts of merit aid have seen a greater drop in enrollment of in-state freshmen since 2000 than colleges that don’t award much merit aid.

Those colleges also tend to enroll fewer students with Pell Grants and charge low-income students a higher average net price. (In this case, merit aid is defined as any aid that’s awarded to students who don’t meet federal guidelines for need-based financial aid.)

Burd identifies several factors driving the trend. Some colleges, especially after seeing their state allocations cut during the economic recession, need the higher tuition that out-of-state students provide to meet their bottom line.

At the University of South Carolina, for example, the state has cut its annual funding to the university by 50% since 2007. This year, out-of-state students had a sticker tuition price of $29,372, compared with $11,128 for in-state students. Offering an out-of-state student a $10,000 tuition discount still generates more tuition revenue for the university than it would get by giving that seat to a state resident.

“Now we’re becoming more like the private schools in the way we approach admissions,” said Scott Verzyl, an associate vice president for enrollment management, who was quoted in the report. “We’re more in the mode of hustling for business and trying to find new markets.”

Nonresidents now compose 45% the University of South Carolina’s freshman class—more than double what it was in 2000.

Other universities use institutional aid to recruit high-achieving students to help it climb up college rankings lists, or to offset the decline in the number of high school graduates in some parts of the country. In some states, such as Missouri, colleges started directing their aid money to high-achieving in-state students to keep them from being poached by other states, the report notes.

Competition has grown so aggressive that even small, regional universities that once filled their seats with students from a limited geographic area are feeling the pressure. “Everyone’s territory appears to be becoming everyone else’s territory, to the point that we don’t have a territory, really,” said Thomas J. Calhoun Jr., a vice president for enrollment management at the University of North Alabama, in the report. “It has created the need for us to redefine what our region is.”

Almost one in five public colleges gives merit aid to at least 20% of freshmen, and nearly half provide merit aid to at least 10% of freshmen, the analysis found.

The idea of an “aid arms race” isn’t new to higher education insiders, and the paper cites other media reports and policy studies that have examined the issue at the university level.

The problem is there’s little incentive for any one institution to unilaterally stop the practice. And so colleges have continued increasing the dollar value of their awards to meet their goals, creating a self-perpetuating cycle.

An Inside Higher Ed report on a recent analysis from Moody’s captures the pressure public universities are under: “Universities that have greater flexibility to adjust revenue, such as through tuition increases and growth in out-of-state enrollment” stand the best chance of outperforming their peers in a particularly tough higher education market.

One could argue that filling up seats with nonresidents who still pay a significant amount of tuition produces revenue that could then help subsidize the cost for low-income students.

But the New America report notes that there are concerning trends linking merit aid and low-income enrollment, even if there isn’t enough data to prove an increase in merit aid is directly responsible for freezing out low-income students.

For example, Pell Grant recipients made up about 32% of the student body at schools that provide a lot of merit aid, compared with 42% of the student body at low merit aid schools.

Likewise, at schools where merit aid is given to at least a quarter of incoming students, the freshman class is made up of about 28% out-of-state students. But at schools that don’t award much merit aid, nonresidents comprise just 10% of the freshman class.

 

MONEY College

One Easy Fix That Could Make College Financial Aid Simpler and Better

students on Yale campus
Mark Daffey—Getty Images/Lonely Planet Image

Allowing families to use older tax information when applying for financial aid would give them an earlier idea of how much they'll have to pay for college.

Everybody knows you don’t tell the salesman you’ll take the car before you negotiate the price. Now the nation’s college financial aid officers are saying it’s just as dumb for high school seniors to have to pick the colleges they want to apply to before they know how much aid they’ll get.

In a new paper, the National Association of Student Financial Aid Administrators says students and families would be much better off if the federal government allowed them to fill out the Free Application for Federal Student Aid (FAFSA) the September their child starts senior year in high school instead of having to wait until January.

Applying for aid earlier would dramatically reduce the anxiety families face during college application season, because they would know how much aid they qualify for—and therefore have a better idea of what schools they could afford—earlier in the application process, NASFAA said. Current students would have more time to plan for the next school year too.

Moving up the deadline would also make filling out the FAFSA form much easier, since most families have filed their taxes by September and thus could use the FAFSA’s IRS Data Retrieval Tool to automatically fill in many fields with financial information from their tax returns. As it stands now, when families start the FAFSA in January they often haven’t even begun preparing their taxes for the prior year, which is the year on which the financial aid forms are based.

The change “stands to revolutionize the FAFSA application process and along with it the effectiveness of financial aid and admissions processes for institutions,” according to the administrators’ association.

The report is significant in that it represents the views of not only financial aid professionals, but also admissions officers, state grant agencies, and college access programs. Even before this paper, the proposal had widespread support. Forty-five organizations, ranging from student associations to major university lobbying groups, signed a memo in December lobbying for it.

So what’s stopping this great idea?

The two usual suspects: politics and money.

Only Congress can move the date that the FAFSA is released from January to September. And Congress hasn’t embraced the idea because lawmakers are afraid it will a lot of cost money, in part because making things easier for students will mean that more students apply for aid.

In a paper earlier this year, Robert Kelchen, an assistant professor of higher education at Seton Hall University, estimated costs ranging from $6 billion to $13 billion over 10 years. Kelchen said his estimates are based on financial aid data from nine colleges.

Currently lawmakers are working to reauthorize the Higher Education Act, and proposals to simplify the FAFSA have been a major part of that discussion.

But NASFAA doesn’t think there’s a need to wait. The Department of Education has the authority to change the FAFSA process to let families use older tax information. That wouldn’t change the timeline to apply—applications would still become available in January—but it would make filling them out simpler, since families could use completed tax information. Education Department officials have indicated they support the idea generally but need more information about the cost.

Some experts have expressed concern about basing a student’s financial aid for each fall on their family income of two years prior. For example, a rising high school senior would fill out the FAFSA with information about his family’s income from 2014 in order to qualify for financial aid when he starts college in the fall of 2016. (Washington, D.C., wonks have dubbed the idea “prior-prior year” or PPY).

A layoff or an economic downturn can cause significant and sudden changes in a family’s need for aid that would be missed if the aid application only looks at two-year-old financial circumstances, says Barmak Nassirian, director of federal relations and policy analysis at the American Association of State Colleges and Universities.

“What would have happened if we had PPY in 2008?” Nassirian asks.

“I’m not against it,” Nassirian adds, “I’m just pointing out that it’s not a no-brainer. It has a predictable down side that we should at least talk about.”

NASFAA officials, however, say aid offices can handle appeals based on sudden changes, known as “professional judgment reviews,” especially if the timeline is moved up to give offices more time to process applications.

Megan McClean, director of policy and federal relations at NASFAA, notes that in a previous study, the organization looked at financial information of Pell Grant recipients between 2007 and 2012, and even with the recession, it found minimal fluctuations in income over two-year periods.

Even then, Nassirian describes it as an “operational failure” to use old data instead of current income information. The amount a family should be able to contribute to college costs is determined by income, assets, household size and number of children in college. Most of that information is already collected every year by the federal government, and can be easily accessed and transferred with today’s technology.

A real solution, Nassirian says, would be eliminating the FAFSA altogether. Instead, he says, people could use their tax return as their financial aid application.

Read next: 7 Legal Ways to Squeeze More College Aid From the FAFSA

TIME Nepal

International Aid to Nepal Ramps Up

Supplies, medics, rescue teams and millions of dollars are pouring in

As the death toll from Saturday’s 7.8-magnitude earthquake surpasses 4,350, international aid agencies and foreign governments are scrambling to deliver much-needed financial assistance and supplies to Nepal.

Since Saturday, supplies, search-and-rescue and medical teams have been sent from around the world to Nepal’s only international airport, located in the capital, Kathmandu.

Here are some of those efforts:

The U.S. announced Monday it would donate an additional $9 million in assistance for Nepal, bringing the total to $10 million through the U.S. Agency for International Development (USAID). In addition, search-and-rescue teams have been dispatched to Nepal as part of USAID’s disaster-assistance response team and 45 tons of supplies have been dispatched.

“This emergency assistance builds on our years of support for risk-reduction partnerships in Nepal,” said Jeremy Konyndyk, director of USAID’s Office of U.S. Foreign Disaster Assistance.

India has been heavily involved in the aid operation to Nepal since Saturday, sending 1,000 National Disaster Response Force personnel to help with search-and-rescue efforts. In addition, India has deployed 13 aircraft, six Mi-17 helicopters and two Advanced Light Helicopters. On Sunday, 10 tons of blankets, 50 tons of water, 22 tons of food items and 2 tons of medicine were dispatched to Kathmandu. As well as aid, India has sent three army field hospitals, an engineering task force and medical units of civilian doctors, according to the Indian Express.

The U.K. is giving $7.6 million in aid, of which slightly more than half will address immediate needs in Nepal, with the rest to be donated to the Red Cross, which is helping with rescue and recovery efforts in Nepal. An eight-member team of disaster-response specialists has been working in Nepal since Sunday. Experts from a number of U.K.-based charities including the British Red Cross and Oxfam are operational in Nepal. A Royal Air Force plane carrying 1,100 shelter kits and more than 1,700 solar lanterns departed for Nepal on Monday.

“I have now activated the Rapid Response Facility. This means we can fast-track funding to aid workers on the ground so they can provide desperately needed supplies including clean water, shelter, household items and blankets,” International Development Secretary Justine Greening said in a statement on Sunday.

China sent a 62-member search-and-rescue team on Sunday and has promised $3.3 million in aid, including emergency shelters, clothing, blankets and power generators.

Israel has sent a 260-member team to Nepal to assist with rescue and relief operations along with 95 tons of aid and medical supplies. On Monday, a plane carrying a medical team of 200 doctors, nurses, paramedics, rescue teams and other personnel landed in Kathmandu and began to set up field hospitals.

Australia’s Foreign Minister Julie Bishop pledged Sunday $3.9 million in assistance that will be split between Australian NGOs, supporting U.N. partners and the Australian Red Cross.

Malaysia said Sunday it will deploy 30 members from the Special Malaysia Disaster Assistance and Rescue Team (SMART) and is sending 20 doctors to help with operations on the ground in Nepal.

Pakistan deployed four Pakistan Air Force aircraft carrying rescue and relief assistance, including a 30-bed hospital and a medical team of doctors and paramedics, to Nepal on Sunday.

The E.U. is making available $3 million in its response to the Nepal earthquake. This is in addition to assistance from member states and the deployment of the European Commission’s humanitarian aid and civil-protection experts to the worst-affected areas. Emergency aid includes clean water, medicine, emergency shelter and telecommunications.

“What is needed most are medical teams and relief supplies. I call on all E.U. member states to join the coordinated European response,” E.U. Commissioner for Humanitarian Aid and Crisis Management Christos Stylianides said in a statement on Sunday.

The U.N. has released $15 million from its central emergency-response fund for earthquake victims in Nepal. Valerie Amos, the under secretary general for humanitarian affairs, said U.N. agencies were coordinating international efforts and were working with partners in Nepal, including the government, to get aid to those affected.

The World Food Programme is also providing food and supplies as well as logistical support on the ground, and UNICEF has mobilized two cargo flights carrying 120 tons of humanitarian aid, including medical supplies, tents and blankets.

Other countries involved in donating financial aid or sending in personnel to help with rescue and relief operations include Canada, Bhutan, France, Italy, Japan, New Zealand, Norway, Singapore, South Korea, Sri Lanka, Switzerland and the United Arab Emirates.

But with so many cargo and civilian planes flying in to help, Kathmandu’s tiny airport is struggling to cope under the strain. Agencies warn that if you want to help, donate money not stuff and avoid hopping on a plane to Nepal to help with relief efforts in person.

“More than your plane ticket or your collection of old T-shirts, what is most needed in Nepal right now is money,” writes Claire Bennett in the Guardian.

Read this next: 6 Ways You Can Give to Nepal Earthquake Relief

MONEY Viewpoint

Taxpayers Should Stop Subsidizing “Country Club” Colleges

An education policy expert argues that it's time for more elite colleges to open their doors to low-income students.

For years, Washington University in St. Louis has held the dubious distinction of being the least socioeconomically diverse college in the country.

Just 85 members of its freshmen class entering in the fall of 2012 (5%) came from families with incomes low enough (typically below $50,000 a year) to qualify for a federal Pell Grant. (That’s the most recent year with federal data available.)

Washington University’s proportion of low-income students is remarkably tiny, considering more than a third of all full-time undergraduates qualify for the need-based Pell Grants. It’s also low for schools with tough academic standards. Other elite colleges maintain top reputations while providing many more opportunities to the non-rich: About a third of the students at the University of California-Berkeley—generally considered one of the top universities in the world—qualify for Pell Grants, for example. And more than 20% of students at elite schools like Amherst College and Columbia University come from low-income families.

Adding financial injury to this insult: “country club” private colleges that bar the door to the poor—thus reinforcing socioeconomic inequality—are receiving large tax subsidies from you and me, in part because of their tax-exempt status.

But there finally may be a little good college opportunity news on the horizon. Perhaps in response to the growing criticism of taxpayer subsidies of such country club colleges, some schools like Washington University are starting to at least inch towards providing more opportunities.

This January, Washington University announced a plan to double the proportion of Pell Grant recipients that it enrolls by 2020. Under the plan, Wash U. will spend at least $25 million a year for five years to increase the share of students who qualify for Pell Grants.

“Improving the socioeconomic diversity of our student body is not just important; it’s critical to our success as a university,” Holden Thorp, the university’s provost and executive vice chancellor for academic affairs, said in a news release.

Four other private colleges that currently have low-income populations of only about 10% tell me they are also now working to recruit more low-income students.

Some of the colleges say the problem—and solution—boils down to money.

Officials at Whitman College in Walla Walla, Wash., for example, say one key reason their student body is currently only 10% low-income is that the financial crisis of 2008 reduced their endowment, which is used to fund financial aid. They are now trying to raise more money for scholarships so a more diverse group of students can afford to attend the school. “We have a responsibility to increase access wherever we can,” says school president George Bridges, who is leaving Whitman at the end of the school year to become president of The Evergreen State College in Olympia, Wash.

Likewise, Elon University, in North Carolina, is in the middle of a 10-year campaign to double the amount of need-based institutional aid that it awards. “Elon must not become a gated community open only to those of privilege,” the college states on its website, “and our classrooms and campus life will be much richer when we recruit more students from diverse backgrounds who challenge and lead us by sharing their own life stories…” Because of the difficulty of raising the large sums needed, however, Elon is making “slow progress” in increasing the proportion of Pell students it enrolls, says President Leo Lambert. “We are digging hard into this issue of access, because it makes a big difference in the quality of the kind of community we aspire to be,” he says.

Other colleges are combining fundraising with new recruiting efforts. Colorado College is raising more money for financial aid and partnering with nonprofits such as QuestBridge to recruit low-income historically underrepresented students. “We are really diversifying the pool of highly qualified low-income students that we enroll,” says president Jill Tiefenthaler.

And Kenyon College, in Gambier, Ohio, is increasing its diversity in part by changing its application. In 2013, Kenyon simplified its admissions application, removing extra essays that the school found discouraged first-generation students. It seems to be working: For next year’s incoming class, Kenyon admitted 408 minority students, up 9% from last year, and 128 first-generation college students, the second most the college has admitted in the last decade. “It’s clear to us that we can do better than where we are and where we’ve been in recent years,” says Sean Decatur, Kenyon’s president.

But this battle is far from won. There are still plenty of other colleges that aren’t making an effort to provide opportunities to more than a handful of lucky low-income students. “Just trying to increase the number of Pell Grant recipients might be good for PR, but may be bad policy for our college,” says Randy Helm, the outgoing president of Muhlenberg College, a private college in Pennsylvania where only 8% of the students come from low income families.

Part of the reason is financial. Washington University can afford to spend more on financial aid, since its endowment equates to about $500,000 per student. Muhlenberg’s endowment equates to one-tenth of that: $50,000 per student.

Helm, who is retiring in June, doesn’t think it would be healthy for Muhlenberg to make a concerted effort to recruit and finance substantially more Pell-eligible applicants. If it did, the school would have to spend its entire $36 million financial aid budget supporting them, and wouldn’t have any aid left for middle-income students who are also struggling to pay the school’s $55,000 annual cost of attendance.

“We’re not going to be a school that serves the very, very rich and the very, very poor,” he says. “I don’t think that would be fair to middle-income students, the college, or the country.”

Another reason for the lack of college opportunities may be the pursuit of prestige. Muhlenberg, for example, devotes a significant share of its institutional aid to the pursuit of high-achieving students, who often come from well-to-do families.

A page on Muhlenberg’s website, entitled “The Real Deal on Financial Aid,” acknowledges that the college and many of its competitors often use institutional aid as a “recruiting tool.” “It used to be that you could try for that reach school and if you got in, you didn’t have to worry because everybody who got in, who needed money, got money,” the college’s financial aid office states. “Today, however, as colleges are asked to fund more and more of their own operation with less and less assistance from government, foundations, and families, they are increasingly reluctant to part with their money to enroll students who don’t raise their academic profile.”

Muhlenberg provides “merit aid”—which is not based on financial need—to about 32% of its freshmen, with an average award of nearly $12,500 per student, according to data the college reports to magazines that publish college rankings.

Higher education researchers, the news media, and even the White House have been putting colleges on notice that they must do a better job serving low-income students. It’s encouraging to see that this pressure has been pushing some of the biggest laggards to make progress in this area. Those colleges that continue to hold out, however, deserve additional scrutiny. At a time of growing inequality, we can no longer afford to subsidize colleges that cater to the rich at the expense of the poor.

(Here are Money’s lists of the Most Generous Colleges and the 25 Best Colleges You Can Actually Get Into.)

Stephen Burd is a senior policy analyst with New America’s Education Policy Program. This story was produced by The Hechinger Report, a nonprofit, independent news website focused on inequality and innovation in education.

MONEY College

What to Make of the Government’s College Watch List

Everest Institute in Silver Spring, Md. Corinthian Colleges, which owns Everest, Heald College and WyoTech schools, is being sued by the federal Consumer Financial Protection Bureau for what it calls a “predatory lending scheme,” the agency said Tuesday, Sept. 16, 2014.
Jose Luis Magana—AP Everest Institute was part of the troubled Corinthian Colleges.

A list of schools that are under the microscope for financial reasons was recently made public. How risky is it to attend a troubled school?

Regulators recently made public a once secret watch list of around 550 colleges under scrutiny for financial irregularities. But inclusion on the list doesn’t automatically mean the schools are about to fail, according to Department of Education regulators, college officials and even the reporter who triggered the release of the list with his Freedom of Information Act requests.

The list gained attention because of the Corinthian Colleges collapse last year. The education department placed Corinthian on the “heightened cash monitoring” watch list over concerns about the for-profit chain’s practices and finances, and then last summer restricted its access to federal financial aid, including loans, grants and work study. Within weeks the already weakened chain ran short of money and agreed to sell or close most of its 107 campuses.


Some of the chain’s 72,000 students are eligible for student loan forgiveness because their campuses closed. Those whose campuses were sold, however, are typically stuck with their debt even if their programs are no longer offered.

So the risks of attending a troubled school are significant. Until last week, though, the education department kept the list a secret, citing concerns that revealing a school’s regulatory status could cause it “competitive injury,” said Michael Stratford, the reporter with trade publication Inside Higher Ed who filed repeated FOIA requests over several months for the information to be made public.

In a blog post that accompanied the watch list’s release, department Under Secretary Ted Mitchell said publicizing it was “another step to increase transparency and accountability,” but said inclusion on the list “is not necessarily a red flag to students and taxpayers, but it can serve as a caution light.”

Mitchell wrote, “It means we are watching these institutions more closely to ensure that institutions are using federal student aid in a way that is accountable to both students and taxpayers.”

Stratford agreed that being on the list “is not an obvious indication of a problem” but is “certainly not a badge of honor.”

“A college can land on this list for any number of reasons, ranging from the really mundane things like not filing paperwork with the department on time to serious things such as the department having concerns about the financial viability of the college on a short-term, immediate basis,” Stratford said.

More than half of the institutions on the list are for-profit programs, including beauty, trade and healthcare training institutes. The list also includes small religious colleges and other private non-profit schools, a few public colleges, and several foreign institutions, including The Hebrew University of Jerusalem and Middlesex University in London.

The majority of the institutions are subjected to the less stringent of two levels of monitoring. Instead of the federal government advancing them money for financial aid, which is normally the case, they must finance themselves and apply for reimbursement. Colleges subject to this “level 1″ scrutiny include several Le Cordon Blue campuses, which are owned by Career Education Corp, and the Art Institutes, part of Education Management Corp, which has said inclusion on the list has not harmed students’ ability to access financial aid or its financial standing.

But 69 institutions are subjected to the higher level of review, which requires they submit detailed documentation for each aid recipient. Education department employees must review and approve the documentation before the financial aid is reimbursed.

The education department initially redacted the names of several of the 69, citing ongoing investigations, before releasing the names Monday. Most of them are flagged as having “severe findings” after audits.

Six public institutions also are under increased review, including Roxbury Community College in Boston; Fort Berthold Community College in New Town, North Dakota; VEEB Nassau County School of Practical Nursing in Uniondale, New York; Taylor Technical Institute, Perry, Florida; Pike Lincoln Technical Center in Eolia, Missouri; and Eastern Oklahoma State College, a community college in Wilburton.

Although the list can give families a heads-up that a college is facing extra regulatory scrutiny, it’s not really “a consumer information tool,” Stratford cautioned.

“It might be a good jumping-off point for students and families that want to do more in-depth research,” he said.

MONEY College

Principal: Colleges’ Chintzy Financial Aid Offers Betray the American Dream

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Colleges and states are expecting students to take on an insane amount of debt.

Editor’s note: One of the nation’s leading public high school principals, a 2014 winner of the prestigious Harold W. McGraw Jr. Prize in Education, wrote this after viewing the financial aid awards sent by colleges to the seniors at his Philadelphia magnet high school. Two-thirds of his students at the Science Leadership Academy are minorities, and one-third are considered economically disadvantaged.

This year has been a fantastic year for Science Leadership Academy college acceptances. We’ve seen our kids get into some of the most well-respected schools in record numbers—and many of our kids are the first SLA-ers to ever get accepted into these schools.

Whether or not they are able to go to is another question.

Today, I was sitting with one of our SLA seniors. She’s gotten into a wonderful college—her top choice. The school costs $54,000 a year. Her mother makes less than the federal deep poverty level. She only received the federal financial aid package with no aid from the school, which means that, should she go to this school, she would graduate with approximately $200,000 of debt.

She would graduate with approximately $200,000 of debt—for a bachelor’s degree.

Now, how in good conscience could a college do that? I’ve sat with kids as they’ve opened the emails from their top choice schools. Watching the excitement of getting into a dream school is one of the real joys of being a principal. It’s just the best feeling to see a student have that moment where a goal is reached.

And as amazing as that moment is … that’s how horrible it is to sit with a student when they get the financial aid package and counsel them that the school just isn’t worth that much debt.

I sat with my student today and pulled up a student loan calculator. I showed her that $200,000 of debt would mean payments of $1,500 a month until she was 52 years old—and then we pulled up a budgeting tool so she saw how much she would have to make just to be able to barely get by.

(Are you in the same situation? Here’s how to negotiate for more aid.)

Then we looked at the state schools she’s gotten into, and we talked about what it would mean to be $60,000 in debt after four years, because Pennsylvania has had so much cut from higher education that Penn State is now $27,000 / year—in state, and we’ve noticed that their financial aid packages have dropped by quite a bit.

So we have to tell the kids to apply to the private schools because the aid packages the kids get from private colleges are sometimes significantly better than what the public schools are offering. Kids have to apply to a wide range of schools and hope. And then we sit down with kids and help them make sane choices, as the $60K a year schools send amazing brochures and promises of semesters abroad and pictures of brand new multi-million dollar campuses, all while promising that there are plenty of ways to finance their tuition.

(Check out Money’s lists of the 100 Best Private Colleges For Students Who Don’t Want To Borrow, 25 Most Affordable Colleges and the 10 Colleges With The Most Generous Financial Aid.)

Dear colleges—you are doing this wrong.

It doesn’t have to be this way. When I was a teacher in New York City even as recently as ten years ago, I felt that kids could go to amazing and affordable CUNY and SUNY schools if the private schools didn’t give the aid the kids needed. But Pennsylvania ranks 47th out of 50 in higher ed spending by state, and as a result, seven of the top 14 state colleges are in Pennsylvania.

And as private colleges hit times of financial crisis and public colleges become more tuition dependent, students are being asked to take out more and more loans, which is putting a generation of working class and middle class students tens—if not hundreds—of thousands of dollars in debt to start their adult lives.

The thing is—I still powerfully agree with those who say that a college education is a worthwhile investment. And on the aggregate, it is true – especially because the union manufacturing jobs of the last century have been lost. But when we look at the individual child, and the choices that kids and families are being asked to make, we have to ask how we can ask kids to take that kind of risk and take on that kind of debt.

Of course, all of this is exacerbated for kids from economically challenged families and for kids who are the first in their families to go to college. And if you are thinking about leaving a comment about kids getting jobs in college to help make it affordable, you show me the job market for college kids to make $30,000 a year while in school full-time. I must have missed those listings in the morning paper.

A college education can—and should—be a pathway to the middle class.

Colleges should have a moral responsibility to offer sane packages that don’t saddle students with unimaginable debt to start their adult lives.

Work hard, go to college, live a meaningful life. That is what we hear promised to children all the time from President Obama to parents across America.

Colleges and universities have to be honest and fair agents in that dream. Asking students to take out $30,000 and $40,000 of debt a year for access to that dream is a betrayal of the educational values so many of us hold dear.

Chris Lehmann is the founding principal of the Science Leadership Academy, a Philadelphia public high school. This story first appeared on his blog, Practical Theory.

MONEY College

Yes, College Costs Are Eating Up More of Your Income

A year of public college costs low-income families 40% of their annual salary now, up from 29% in 2007.

It’s not your imagination, parents: Your kids’ college costs are indeed eating up a higher percentage of your income, a new federal report shows.

The report, which looked at the costs of college in the 2011-2012 academic year (the last year for which data is available) also documents a shocking increase in net costs for America’s lowest earners. That’s raising worries that the poor are increasingly being priced out of college, one of the main paths to a berth in the middle class.

The study found that families with incomes of up to about $31,000—who were the lowest-earning 25% of all American families with kids in college at that time—paid, on average, $12,300 to send a child to a public university, after grants and scholarships were subtracted. That was the equivalent of 40% of that group’s top annual income. In the fall of 2007, that same group would have paid only 29% of their income, a full 11 percentage points less.

For the families in the lower- to- middle- quarter—$69,000 was the midpoint for families with kids in college—net public college costs ate up 23% of the group’s top income, a 2 percentage point hike from the share of income needed by similar families in 2007.

Upper middle class families also saw their net costs rise. Families with incomes of about $111,000 earned more than 75% of all families in the study with children in college. The group with incomes between $69,000 and $111,000 paid about $20,400 (or 18% of top earners’ income) to send their kids to in-state public college, up 2 percentage points from 2007. Families in the top quarter, earning $111,000 a year and up, paid an average of $22,800 for their kids to attend in-state public college.

The data show that when it comes to funding college, “it pays to be rich,” says Margaret Cahalan, director of the Pell Institute for the Study of Opportunity in Higher Education, a Washington, D.C., think tank. The findings, she says, are further evidence that claims the poor are getting more or better financial aid than the middle or upper classes “are simply not true.”

In fact, Cahalan says, the numbers show that financial aid has lagged so far behind rising living and tuition costs that many low-income students are being priced out of college. “Low-income students have to work too many hours to survive, and that is depressing their ability to compete and be successful,” she says. “Many of them end up leaving school because they can’t juggle work and school.”

A growing body of research shows that being priced out of college can have devastating lifetime effects. Workers without higher education are at a disadvantage in the job market and tend to get stuck in lower-paying jobs, according to several reports by the Georgetown Center for Education and the Workforce. A 2014 analysis of the job market, for example, found that just about 28% of all jobs in 1973 required at least an associate’s degree. By 2010, those requirements covered 42% of jobs. And by 2020, 47% of jobs are expected to require at least a two-year degree.

Income quartile
(annual income range)
1st
($0-$31,000)
2nd
($31-$69,000)
3rd
($69-$111,000)
% of top income needed to pay average net price (after grants are subtracted) for 2011-2 at a typical in-state public college 40% 23% 18%
% of top income needed to pay average net price (after grants subtracted) for 2011-2 at a typical private college 64% 34% 26%

Sources: U.S. Department of Education, Money calculations

Read next: How to Find a College That Won’t Drown You in Debt

MONEY College

The 50 Best Private Colleges for Earning Your Degree On Time

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There aren't many "super seniors" at these private schools, where almost every student earns a bachelor's degree in just four years—and avoids the high cost of a longer stay.

Paying four years’ worth of college tuition is hard enough. But too many parents and students don’t realize that there’s a good chance they’ll have to pay for five, since 45% of full-time students need at least an extra year of school to earn a bachelor’s degree, according to Judith Scott-Clayton, an economist at Teachers College, Columbia University.

That common miscalculation can be “devastating” to a family’s finances, says Jim Briggs, a founder of Reducing College Costs, a private financial aid consulting firm. Since an extra year at a private college can easily cost more than $50,000 these days, “we are talking about a lot of money,” Briggs adds.

Before committing to a college, you should check the four-year graduation rate with the U.S. Department of Education. If the rate is low, ask the college and some students why that is, Briggs advises.

While students themselves cause many delays—by flunking required courses or changing majors late in their college careers—some schools do an especially good job of helping students get the courses they need to finish up in four years, saving parents that unpleasant surprise of a fifth year’s worth of bills, Briggs says.

At these 50 private colleges, you’ll have the best chance of graduating on time. At all of them, the average student graduates in 4 to 4.1 years, and more than 80% of the student body earns a bachelor’s degree within those four years. This list, ranked by four-year graduation rate, also includes Money’s best college values ranking and our estimate of how much the degree will cost if you get the typical amount of financial aid.

Your net cost will be lower if you take advantage of, say, federal education tax credits, or if you receive scholarships from private organizations or federal, state, or local government agencies. It will be higher if you don’t receive any financial aid.

College State Money ranking % of freshmen who earn a bachelor’s in 4 years Estimated average net cost of a degree for class of 2019
1) Pomona College CA 50 93% $167,662
2) Haverford College PA 122 91% $187,297
3) Yale University CT 15 90% $188,279
4) University of Notre Dame IN 20 90% $190,073
5) Williams College MA 14 90% $173,630
6) Carleton College MN 79 90% $183,529
7) Davidson College NC 72 90% $170,095
8) Vassar College NY 129 90% $159,658
9) Hamilton College NY 101 90% $187,252
10) Amherst College MA 17 89% $161,350
11) Boston College MA 122 89% $207,603
12) College of the Holy Cross MA 101 89% $191,814
13) Colby College ME 86 89% $195,668
14) Swarthmore College PA 32 89% $180,033
15) Georgetown University DC 37 88% $210,612
16) University of Chicago IL 101 88% $194,477
17) Bowdoin College ME 44 88% $185,213
18) Bates College ME 150 88% $199,275
19) Washington University in St Louis MO 62 88% $218,216
20) Princeton University NJ 4 88% $150,602
21) University of Pennsylvania PA 11 88% $207,659
22) Harvard University MA 6 87% $186,658
23) Tufts University MA 72 87% $207,047
24) Johns Hopkins University MD 107 87% $216,263
25) Duke University NC 32 87% $198,588
26) Dartmouth College NH 24 87% $194,752
27) Cornell University NY 24 87% $200,157
28) Colgate University NY 27 87% $192,119
29) Bucknell University PA 45 87% $204,082
30) Vanderbilt University TN 50 87% $165,615
31) Middlebury College VT 47 87% $208,897
32) Harvey Mudd College CA 7 86% $193,324
33) Wesleyan University CT 169 86% $199,874
34) Northwestern University IL 129 86% $206,162
35) Brandeis University MA 248 86% $197,555
36) Columbia University in the City of New York NY 22 86% $212,954
37) Kenyon College OH 94 86% $196,119
38) Villanova University PA 114 86% $202,283
39) Washington and Lee University VA 39 86% $153,859
40) Macalester College MN 214 85% $143,259
41) Lafayette College PA 28 85% $183,806
42) Claremont McKenna College CA 47 84% $202,642
43) Emory University GA 156 84% $217,059
44) Babson College MA 1 84% $204,884
45) Massachusetts Institute of Technology MA 3 84% $159,316
46) Wellesley College MA 95 84% $170,844
47) Franklin and Marshall College PA 248 84% $196,727
48) Brown University RI 19 84% $197,789
49) Occidental College CA 285 83% $191,630
50) St Olaf College MN 359 83% $139,836

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