MONEY Ask the Expert

Why It Pays to Spend Down Your College Savings Plan Quickly

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Robert A. Di Ieso, Jr.

Q. I have enough in my daughter’s 529 to pay her full tuition for freshman year. Should I? — Andrea B., Location withheld

A. Yes, it’s best to use the savings sooner rather than later, says Raymond Loewe, an adviser with United Planners Financial Services. Given that your time horizon is short and the stock market has had a good run, it’s best to realize those tax-free gains now. Plus, spending down the 529 early could improve your odds for financial aid in future years, albeit slightly. Every $100 used can be worth $6 in aid, says Loewe. One caveat: The IRS won’t let you snag an education tax credit and take the 529 tax break for the same expenses. So to get the full $2,500 American Opportunity credit, for example, you’ll want to pay at least $4,000 with other money, says Joe Hurley of Savingforcollege.com.

More on college savings:

TIME Innovation

Five Best Ideas of the Day: July 15

1. With the $3 billion annual cost of fighting piracy at sea, we could invest in economic and infrastructure development on the Somali coast to take down piracy’s root causes.

By Anja Shortland and Federico Varese in The Conversation

2. Simply by letting students understand their financial aid picture earlier, we can improve college access and post-secondary options for low-income students.

By Fawn Johnson in National Journal

3. The story of ISIS, which has seemed to be all about religion and military developments, is actually mostly about politics: access to government revenue and services, a say in decision-making, and a modicum of social justice.

By Jessica Tuchman Mathews in the New York Review of Books

4. Giving a supercomputer “life after retirement” means investing in the future of technology in Africa.

By Jorge Salazar at the Texas Advanced Computing Center, UT-Austin

5. Europe has a role – and a responsibility – to stay engaged as the U.S. ‘rebalances’ toward China.

By Joseph S. Nye in Project Syndicate

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

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People on the streets of New York talk about how their college's career office helped them — or didn't.

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Two New Proposals Would Make College Free Nationwide

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Michael Burrell / Alamy

With student loan debt crippling students, education advocates are suggesting ways to change how federal financial aid money is distributed.

Adele Williams often hears her friends from high school talking about their struggles to afford college.

But she can’t relate—she doesn’t pay any tuition at all. At the school she attends, Alice Lloyd College in Kentucky, students attend for free in exchange for working.

Her friends at other schools, she says, “are mostly jealous.”

At a time when the cost of attending many private colleges exceeds the national median household income, the idea of paying no tuition at all seems so unrealistic that one higher-education economist refers to it as “la-la land.” But there are a handful of schools—such as Alice Lloyd and others—that don’t charge students a penny. Meanwhile, Tennessee will make all of its community colleges free for state residents beginning next year, and Oregon is moving forward with a study considering the same thing.

Now two new proposals go even farther, both aiming to make no-cost college a nationwide standard. A report from the Lumina Foundation recommends that the first two years of public universities and colleges be free, and a new nonprofit called Redeeming America’s Promise has come out with a proposal to give every lower- and middle-class student a full ride.

“The rising millennial generation has been so deeply affected by student debt that they’re driving a conversation about this challenge,” says Morley Winograd, the president of Redeeming America’s Promise, who worked as an advisor to Vice President Al Gore during the Clinton Administration. She added that “well-meaning but what I would call Band-Aid solutions” aren’t enough to fix the problem.

Existing financial aid was created to help the lowest-income students at a time when middle-class and wealthier families had little trouble paying for college on their own, notes University of Wisconsin-Madison sociologist and higher-education policy expert Sara Goldrick-Rab, who co-authored the other proposal. “But the people who are struggling to pay for college today go way beyond poor people,” she says. “There’s a need for a universal program.”

The Full Ride Proposal

Redeeming America’s Promise proposes redirecting existing federal and state financial aid and tuition tax breaks to give full tuition scholarships in specified amounts. It says the amount of money the government already spends for those purposes is enough to provide $2,500 per academic year for community college and $8,500 for four-year universities to every student from a family earning $180,000 a year or less.

That would just about cover the entire average advertised full cost of public college and university tuitions for everyone, the organization says.

Under the plan, which is backed by several Republican and Democratic former governors, Cabinet members, and members of Congress, the students could take out loans to cover their living expenses and repay them based on their incomes after graduation.

The scholarships would be limited to two years for an associate’s degree and four years for a bachelor’s degree to encourage students to graduate on time—which only a fifth of those at four-year institutions currently do and 4% at two-year schools.

Colleges and universities generally wouldn’t be allowed to raise their prices higher than the scholarship amounts, forcing them to control their costs.

The 50% Plan

Goldrick-Rab and her colleague, Nancy Kendall urge in their report that the billions of dollars in federal financial aid money and some state money be redirected to make tuition, fees, books, and supplies free for the first two years of any two- or four-year public university or college and that students be given stipends and jobs to help them pay their living expenses.

Goldrick-Rab and Kendall call this the free two-year college option, or F2CO.

The Reality Check

The Redeeming America’s Promise scholarships would cover the full cost of tuition at public universities and colleges not private ones, the influential lobbies of which are likely to oppose the idea on the grounds that it would divert students from them.

But public institutions might oppose as well, on the basis that the plan would be a form of price control or that they wouldn’t be able to handle, at the amount they are allowed to charge, the flood of students projected to descend on them. Tennessee universities opposed making community colleges free in that state, for example, until lawmakers agreed to make some changes in funding for them.

“We had four-year schools that were going, ‘Wow, it’s going to be hard for us to compete with free,’” said Tennessee Governor Bill Haslam.

And the sweeping, dramatic changes suggested in either proposal would face an uphill battle in a divided government that has been challenged to make even marginal policy decisions.

“It’s very difficult to separate the politics from the economics,” said David Breneman, a professor in the economics of education at the University of Virginia.

Breneman pronounced both free-college proposals “not realistic,” especially at four-year institutions (“That’s just La-La Land”), though he said they might stir up a helpful conversation about untangling the way the government helps students pay for college.

“When you look at what a mess we’ve made of student aid and how complicated it’s gotten and the loan craziness, it’s not surprising that people look back at those days when we just had low tuition,” he said.

Even the free-college crusaders are not optimistic about these plans being adopted in the immediate future.

“No way is it happening today,” said Goldrick Rab. “To me the question is, will enough groundwork be laid today that it becomes something groups are working on for the next 10 to 12 years, and that eventually becomes a litmus test for people we elect.”

Winograd said more states could make public colleges and universities free sooner than that, mostly without federal involvement. Advocates in some already have proposed it, and many states are watching the free-college experiment in Tennessee, where the $34 million-a-year cost is to be underwritten by a $300 million endowment paid for from lottery proceeds. (In Oregon, the annual cost is estimated at $100 million to $200 million.)

“The political will to do it does exist, not necessarily in Washington, but throughout the country,” Winograd said.

__________

This story was produced by The Hechinger Report, a nonprofit, nonpartisan education-news outlet based at Teachers College, Columbia University.

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MONEY Student Loans

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MONEY College

The Worst Dropout Factories and Diploma Mills: Is Your School on the List?

Paul Quinn College, Texas.
Among students who matriculated as freshmen, Paul Quinn College in Texas had a 2012 graduation rate of 0.6%, according to the Education Trust report. Ashley Daly

A new report identifies underperforming institutions and suggests that the government withhold funding to those that chronically lag their peers.

Every year, the federal government spends more than $150 billion on federal financial aid in the form of student loans, grants and tax benefits—and according to a new report, $15 billion of that is funneled to underperforming schools.

The report, Tough Love: Bottom-Line Quality Standards for Colleges, was released today by the Education Trust, a nonprofit advocacy organization. The report highlights 300 underperforming colleges among for-profit, non-profit, public and private institutions. These underachieving schools include what Education Trust calls “college dropout factories” with six-year graduation rates below 15%, “diploma mills” where roughly three out of 10 student borrowers default on their loans, and “engines of inequality” that fail to enroll at least 17% of low-income students. Scroll down for a list of the 40 schools with the lowest grad rates; you can find the schools with the highest defaults and lowest low-income enrollment on pages 30 and 24 of the study, respectively.

In the report, Education Trust argues that too much taxpayer money is spent on underperforming institutions that fail to meet the most basic standards of graduating students and granting them meaningful degrees.

“Some institutions out there are not improving socioeconomic mobility as they should be,” says Michael Dannenberg, director of higher education and finance policy and a co-author of the report. “Instead of improving socioeconomic differences, they’re calcifying them.”

Of course, certain schools simply serve more students who arrive underprepared for college. Even so, among peer institutions with similar student demographics, some lag behind in graduation rates, the researchers found. Truett-McConnell College, a small private Southern Baptist college in Georgia, is an example. With 14% of students graduating within six years of enrollment, Truett-McConnell has one of the lowest rates in its peer group. But schools with similar student bodies, including Averett University in Virginia and Cazenovia College in New York graduate 41% and 50%, respectively.

“We think what colleges do matters,” says Dannenberg. “Demographics aren’t destiny when it comes to higher education.”

Currently, schools that enroll students on any form of federal financial aid must meet three criteria: they must be accredited by a Department of Education-approved agency, they must be licensed to operate in their state, and they must be judged eligible by the Department of Education. After these three hurdles, however, the government gives minimal consideration to an institution’s performance.

What Dannenberg and co-author Mary Nguyen Barry propose: stricter standards for schools, enforced by the federal government. Their report outlines a plan in which schools with graduation rates of less than 15% for those who matriculate as freshmen, student loan repayment rates ranking in the bottom 5%, or Pell Grant-eligible full-time freshman enrollment of less than 17% would face consequences if they did not improve within a set number of years. Institutional tax benefits would be cut, and in the cases of the so-called dropout factories and diploma mills, the authors suggest that the government should reduce or eliminate students’ eligibility for financial aid at those schools.

But some in the industry say that it would be difficult to effectively implement such a strategy. The six-year graduation rate metric, for instance, isn’t as tidy as it seems. The federal formula for calculating these does not include transfer students, even though more than one-third of college students transfer. And the six-year graduation rate figure also discounts students who take more than six years to earn their diplomas.

“Many students are non-traditional,” says Terry Hartle, senior vice president of the American Council on Education. “To actually have a good idea of what a graduation rate would be, you’d need a national database with individual identifiers for each student so you could track them across postsecondary institutions. But that has been a very controversial proposal for privacy reasons.”

Student default is another messy calculation. The federal government currently measures cohort default rates (CDRs) without accounting for the percentage of any given student body that took out loans. For instance, if two students out of a hundred defaulted on their loans, it may disproportionately skew the default rates. (A different student debt default measure, called the Student Default Risk Index, has been proposed to correct for the percentage of a student population that borrowed.)

Despite some of these data intricacies, Dannenberg says that ultimately it’s in the government’s best interest to identify the “worst of the worst” in higher education and hold institutions accountable for their results.

“At some point we have to ask ourselves, how low is too low to be entitled to government support?” he says.

Colleges Graduating the Lowest Percentages of Those Who Matriculated as Freshman (Based on 2012 Data)

Name State Sector Overall Grad Rate (2011) Overall Grad Rate (2012)
Paul Quinn College TX Non-Profit, HBCU 5% 1%
Oglala Lakota College SD Public, Tribal 5% 1%
University of Phoenix-Wichita KS For-Profit 12.8% 1.5%
ITT Technical Institute-Norfolk VA For-Profit 10% 2%
Yeshiva Toras Chaim NJ Non-Profit 2.9% 2.2%
Western International University AZ For-Profit 2.4% 2.6%
Rabbinical College of Long Island NY Non-Profit 3% 3%
Torah Temimah Talmudical Seminary NY Non-Profit 5% 3%
University of Phoenix-Cincinnati OH For-Profit 9% 3%
Talmudical Seminary Oholei Torah NY Non-Profit 2% 4%
University of Phoenix-Richmond VA For-Profit 3% 4%
University of Phoenix-Online AZ For-Profit 6.2% 4.3%
University of Maryland-University College MD Public 10.3% 4.3%
Chancellor University OH For-Profit 5% 5%
Arkansas Baptist College AR Non-Profit, HBCU 4.2% 4.8%
ITT Technical Institute-Greenfield WI For-Profit 14% 5%
Concordia College-Selma AL Non-Profit, HBCU 3.4% 5.5%
National University College-Bayamon PR For-Profit 9% 6%
Boston Architectural College MA Non-Profit 9.1% 6.8%
University of Phoenix-Milwaukee WI For-Profit 10% 7%
Le Moyne-Owen College TN Non-Profit, HBCU 15% 8%
Harris-Stowe State University MO Public, HBCU 8.5% 8.2%
East-West University IL Non-Profit 7.7% 8.7%
University of Phoenix-Idaho ID For-Profit 9.1% 8.8%
Hebrew Theological College IL Non-Profit 5.7% 8.8%
University of Phoenix-Philadelphia PA For-Profit 11% 9%
Truett-McConnell College GA Non-Profit 13.6% 9.4%
Colorado Technical University-Online CO For-Profit 9.4% 9.5%
Bacone College OK Non-Profit 4% 10%
ITT Technical Institute-Knoxville TN For-Profit 12% 10%
University of Phoenix-Nashville TN For-Profit 14% 10%
University of Phoenix-Springfield MO For-Profit 10.9% 9.7%
University of Phoenix-St Louis MO For-Profit 7.6% 10.2%
ITT Technical Institute-Indianapolis IN For-Profit 8.3% 10.5%
University of Phoenix-Metro Detroit MI For-Profit 11.4% 10.5%
Baker College of Owosso MI Non-Profit 13% 11.1%
ITT Technical Institute-Earth City MO For-Profit 10.7% 11.1%
Salem International University WV For-Profit 14% 11%
University of Phoenix-Oklahoma City OK For-Profit 14% 12%
University of Houston-Downtown TX Public, HSI 15% 12%
Texas Southern University TX Public, HBCU 12% 12%


Notes: HBCU stands for historically black colleges and universities; HSI is Hispanic-serving institutions

MONEY College

Scholarship Judges’ Secrets Revealed: Three Essay Topics Likely To Win Money

...And one topic that will definitely get your application forwarded to the circular file.

Every year, companies, non-profits, charities, churches and clubs award about $6 billion in private scholarships to undergraduates.

But many students fail to apply because they get stumped by the essay requirements, while those that do decide to submit often recycle a familiar theme—”here’s why I need the money.” But everybody who’s applying needs money.

The more likely path to reward, judges say, is to demonstrate why you’ll be a good investment of their scholarship dollars. Three topics that can give you that edge:

1. What you love and why. Do you love your dog? Your church? Basketball? Your shoes? Great! There’s your topic! But scholarship providers want to know why you love something, not just that you do. An ability to analyze the whys and wherefores of your own likes and dislikes is an indication that you’ll do well in life. There’s nothing too mundane, as long as you’re passionate about it. Says Amy Murphy, who oversees 35 different scholarship programs worth more than $1.3 million through the Greater St. Louis Community Foundation: “One of the best essays that crossed my desk was about a student’s shoes—where they had been, what messes they had gotten into and out of, how they supported the student as troubles were averted and successes achieved.”

2. How you recovered from a mistake, challenge or disappointment. “We’re looking for qualities like persistence, determination, optimism and a maturity of decision making,” explains Oscar Sweeten-Lopez who runs the Dell Scholars Program, which awards 300 scholarships of up to $20,000 each year. “Since college life brings new challenges and adversities, students need to demonstrate self-determination to succeed.” So tell them about a time when you faced a challenge and carried on. Did you make a mistake? Write about what you did, how you took responsibility for your actions, and what you learned. Did you fail at something? What happened, and how did you recover from that? Were problems at home hurting your ability to succeed in school? What were they, and how did you handle them?

3. Your family history. “Many students limit their scholarship essays to what they want to study, their income level or their ethnicity, completely missing out on other opportunities,” says Kim Stezala, a scholarship coach. Instead, she suggests students ask relatives about military service, clubs they belong to, or causes they have been active in. What you learn can serve as a winning essay topic. Students who can show that they can think broadly, and see themselves as a part of a bigger history, are demonstrating critical thinking skills needed to succeed.

Amy Weinstein is an expert on private scholarships and directs the National Scholarship Providers Association (NSPA).

MONEY Related Stories

Busting the 5 Myths of College Costs

Much of the playbook for taking on the $40,000 average stick price of a private school is out-of-date or just plain wrong. Learn the right moves now.

You’ve pored through financial aid forms, knocked the priciest schools off your list, reviewed borrowing options, and nudged your kid to think more about engineering and less about English lit.

So you figure you’ve got this college thing under control. Not quite. Those expensive schools you ruled out? They might actually cost you less in the long run than some cheaper private or public institutions.

The federal loans for parents you’re looking at so your kid doesn’t graduate with debt? They may not be a better choice after all. As for thinking a technical major will be more helpful to Junior than a liberal arts degree … sorry, it doesn’t always turn out that way.

Even among savvy parents, myths and misinformation abound. Yet with the average four-year tab ranging from $71,500 at in-state public colleges to $240,000 at elite private schools, the last thing you need is to pay more than necessary, borrow more than you can handle, or pass up a college that can provide a great education at an affordable price.

What follow are the straight facts you need to make smart college choices.

MYTH NO. 1

The myth: Saving for college will hurt your chances of getting financial aid.

The reality: Any money you’re able to save probably won’t appreciably affect your chances for aid. Here’s why: Under the federal financial aid formula, what matters most is your income, which is assessed up to 47%.

By contrast, a maximum of just 5.64% of savings in your name will be counted — after excluding retirement accounts, any small business you own, and your home equity. A savings allowance based on your age and marital status ($30,700 for a married parent age 45 for 2014-15) will also be deducted.

As a result, parental savings typically have little impact in the government calculation of expected family contribution, says financial aid expert Mark Kantrowitz of Edvisor.com. Those savings will come in handy, though, to help pay that high expected contribution from your income.

True, nearly 400 private schools additionally use their own aid formula, which may factor in home and business equity. A high earner with substantial assets might qualify for less or no need-based aid at those schools as a result. Chances are, though, any aid you’d get would be in the form of loans, not grants, so you’re still better off saving. Research from T. Rowe Price shows that each dollar you sock away could save you twice that amount in future borrowing costs.

What to do

Make friends with a 529. Only about one in four parents who save for college uses a 529 plan, says student lender Sallie Mae. Big mistake. You get more bang for your buck in a 529, since the money grows tax-free and withdrawals are tax-free, too, as long as the cash is used for school.

Look first to your state’s plan; more than half offer a tax break to residents. Other low-fee options include New York’s 529, Ohio College Advantage, and Wisconsin Edvest.

Shelter your shelter. “All schools will assess real estate that isn’t your primary residence,” says financial aid expert Kal Chany at Campus Consultants in New York City. If you own a second home or investment property, taking out a home-equity line of credit and using the money to pay down consumer debt (to avoid having loan proceeds count as assets) will temporarily reduce your equity — just make sure you can repay the loan.

Play the name game. Have assets in a taxable account in your kid’s name? Uh-oh. They’ll be assessed at a 20% rate. Fix: Use the account over time to buy stuff for your child that you’d get anyway, such as a new laptop or SAT tutoring. Then put an equivalent amount into a 529 in your name, where it will be counted at the lower parent rate, says Joe Hurley, head of Savingforcollege.com.

MYTH NO. 2

The myth: You can’t afford a private college.

The reality: Don’t confuse the eye-popping sticker prices at private schools — $39,500 a year on average vs. $18,000 for the typical public college — with the price you’d actually pay. Discounting by private colleges, especially for good students, has become the norm.

These discounts are typically awarded as merit aid and are given regardless of financial need. As the college-age population drops, schools are increasingly competing for students, sparking an awards arms race. In fact, today more students receive merit grants (44%) than get need-based aid (42%). Last year the average discount hit 45%, a record high, says the National Association of College and University Business Officers.

To be sure, Ivy League universities and some other top private schools still offer mainly need-based aid, but their definition of need often extends to higher-income families. And merit aid is available at many other high-quality colleges. For instance, Rice University offers academic grants averaging $15,000 to 22% of students; at Denison, about 46% of students get merit awards, which average $16,300.

What to do

Look for largesse. As your child begins to evaluate colleges, you’ll want to assess how generous each is with handouts. To find the percentage of students who get merit money, go to collegedata.com. For details about a specific college’s grants, check MeritAid.com.

Run a price check. Get a sense of what a certain private college will cost your family in particular, factoring in aid, by using the school’s net price calculator. (Colleges are now required to offer this tool on their websites.)

Some schools load in merit awards based on your student’s academic profile, while others give only a rough estimate. Either way, the results will be a good starting point for a discussion with the school’s aid officer. Also compare the results with net prices at any state colleges your child is interested in; merit awards are on the rise at public schools too.

Improve your odds. Most private colleges are secretive about the formulas used to award merit aid. In general, your child has a better shot if her grades and SAT scores rank higher than the averages for a particular school, says Lynn O’Shaughnessy, head of Thecollegesolution.com.

Other factors that may provide an edge: intended major (a less popular one can help), community service, and musical talent. Some colleges even rate your child’s interest in attending — has yours taken a campus tour?

MYTH NO. 3

The myth: A liberal arts degree won’t pay the bills.

The reality: Sure, grads with business or STEM (science, technology, engineering, and math) degrees tend to earn above-average salaries. But many liberal arts majors do as well or better.

Case in point: The top-earning 25% of history majors earned a median annual lifetime income of $85,000 vs. $82,000 for computer-programming majors, per a recent analysis by the Georgetown Center on Education and the Workforce.

And in some careers, lower salaries are offset by better job security. The typical education major earns $42,000, but only 4% are out of work. Biomedical engineers pull in $68,000, but 11% are unemployed.

Major isn’t the only determinant of pay, either, notes Anthony Carnevale, the Georgetown Center’s director: “Whether your child attends grad school, changes careers, gets promoted, or loses a job has a big impact on lifetime earnings.”

Besides, many people end up in fields unrelated to their major — an analysis of alumni by Williams College math professor Satyan Devadoss found that some arts majors went into banking, engineering, and tech, while some chem majors ended up in government and education. Also, a Chronicle of Higher Education survey of employers found that previous work experience was more important than one’s major in hiring recent grads.

What to do

Focus on practical help. When comparing colleges, see what each offers to assist your child in developing work skills, says Andy Chan, VP of career development at Wake Forest University. Find out if the career office reaches out to freshmen, offers courses in résumé building, and helps students land paid internships. Some 60% of 2012 grads who held a paid internship got a job offer, according to the National Association of Colleges and Employers.

MYTH NO. 4

The myth: Student loans will cripple your child financially.

The reality: You’ve heard the horror stories about college grads hobbled by debt, and the facts can indeed be scary: The typical student at schools such as American University and NYU leaves with over $35,000 in loans; 2% of all student borrowers owe more than $50,000.

Rising costs are one reason for those hefty debt loads, but a less obvious problem is the increasing time young people are taking to get their degrees. Just 32% of public college students and 52% who attend a typical private school get out in four years — taking six years is more common.

At more selective schools like Davidson and Lafayette, on the other hand, 85% or more of students finish in four years. Plus, such schools tend to offer strong alumni networks that can help with job leads.

“If you can attend a good school that helps you graduate on time with great skills and contacts, borrowing can be worth it,” says O’Shaughnessy. That’s especially true if taking on a manageable amount of debt will help your child attend a better school than your family could otherwise afford. “Manageable” is the operative word.

What to do

Get your kid’s stats. Check graduation rates for the schools your child is interested in at collegenavigator.gov. Find the likely salary of careers he might pursue and the typical income of students who graduate from schools on his list at PayScale.com.

Use the right benchmark. To ensure payments will be bearable, your child should borrow less than what she can expect to make in her first job, says Kantrowitz. The average grad’s $27,000 in loans would total $33,000 with interest over 10 years, if the 3.9% rate recently worked out by Congress goes into effect. (That rate is tied to 10-year Treasuries and is likely to rise in coming years for future borrowers.) If your child earns a typical starting salary of $45,000, she could afford that debt.

Don’t fight the feds. For student borrowers, government Stafford loans, which limit debt to $31,000 over four years, are the best bet. Unlike private loans, the federal program offers income-based payment and public-service debt forgiveness, says Lauren Asher, head of the Project on Student Debt.

See PLUS as a minus. Parent borrowers should just say no to federal loans. PLUS loans let you borrow the full cost of college regardless of income, at expected rates of about 7.21% (plus fees of at least 4%), which can rise to 10.5% for future borrowers under the new rate formula. “You can borrow more than you can afford at a high rate — what can possibly go wrong?” says policy analyst Rachel Fishman at the New American Foundation. A lower-rate option that limits how much you can borrow: a home-equity line of credit (4.5% to 5%).

MYTH NO. 5

The myth: Starting at community college, then transferring, is a great way to cut the cost of a BA.

The reality: Sure, community college is a lot cheaper than a four-year school, but students who start there are less likely to earn their bachelor’s degree..

Part of the problem: Many four-year colleges make transferring credits tough. While two-thirds of states have articulation agreements to ensure that community-college courses are accepted at specific four-year schools, loopholes abound — some allow discretion about which credits to accept, or a certain GPA may be required. And articulation agreements shouldn’t be confused with a guarantee that your child will get an open slot at a four-year college, says Stephen Handel, a College Board specialist in community colleges.

For many teens, the lack of a strong peer group also makes it hard to stay focused, says Tatiana Melguizo, a USC associate education professor; community college students tend to be older and attend part-time.

What to do

Go for ironclad. See if any community colleges in your area offer a guaranteed transfer to a four-year school. In Virginia, 23 community colleges guarantee admission for students with high GPAs into certain programs at 20 state four-year schools. Others, such as Portland Community and Portland State University in Oregon, offer co-enrollment programs that allow students to shift seamlessly into the four-year program after earning a two-year degree.

Talk to the target. Ask the admissions office at the four-year school your child wants to attend about the transfer requirements and how many two-year college students it accepts. The good news: “If your child does transfer, her odds of getting a BA are as good as those for four-year college students,” Melguizo says. Savings and a degree? Maybe you can afford grad school after all.

This story has been updated to reflect an increase in the PLUS loan rate.

MONEY

More Money Wednesday Roundup: Tax Credits & Hedge-Fund Flatulence

Personal finance from around the Web:

  • If you are sending a kid to college next year, this is the week financial aid offers should be arriving from colleges and universities. To help cushion the blow of what can sometimes seem a paltry sum, here’s advice on how to negotiate for more aid. [ABC News]
  • Rather than focus on the medical impact of not having health insurance, a new study looks at the financial impact. And guess what? It’s bad. If a member of an uninsured family is struck by illness, the household will lose 22% to 51% of assets within two years. [The Huffington Post]
  • There’s a financial-industry metaphor in here somewhere: A New York hedge fund manager has published a children’s book all about a Mrs. Buttkiss — a woman who has been holding in her, uh, flatulence, for a very, very long time. [City AM]

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