TIME Innovation

Five Best Ideas of the Day: February 25

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

1. The U.S. wants to hack your phone because it doesn’t have the real spies it needs.

By Patrick G. Eddington at Reuters

2. Eight universities account for half of all history professors in the U.S. How did that happen?

By Joel Warner and Aaron Clauset in Slate

3. Bill Gates is investing in low-tech impact entrepreneurs in India.

By David Bank in Entrepreneur

4. “Liquid biopsy” can detect cancer from a few drops of blood.

By Michael Standaert in MIT Technology Review

5. Let’s build the infrastructure to make microfinance institutions into true innovation hubs.

By Jessica Collier in Medium

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.

TIME Education

You Can Now Get College Credit Without Ever Taking a Class

Students being evaluated for competency-based credit at Lipscomb University in Tennessee
Lipscomb University Students being evaluated for competency-based credit at Lipscomb University in Tennessee

At 56, Linda McCampbell discovered she could get the college degree she always wanted.

A Nashville paralegal for 30 years, McCampbell last year attended an eight-hour workshop to judge how her life experience might be cashed in for academic credits at Lipscomb University. The promise was alluring: the possibility of knocking months off a college education McCampbell had long abandoned as out of reach.

It turns out she qualified for an entire academic year’s worth of credits, and at a fraction of what two semesters of tuition would have cost.

“It wiped out my freshman year,” says McCampbell, who earned those credits by proving she could deal with a full inbox of tasks and solve problems with a group. The boost was enough to cure her of the longtime belief a degree was out of reach.

This sort of result that has led hundreds of colleges and universities to develop similar so-called competency-based programs, which let older students get academic credit by demonstrating proficiency in such things as leadership and organization.

That means those students can earn degrees more quickly and at a lower cost — even lower now that the U.S. Department of Education has begun a pilot program under which students at 40 institutions will be able to use federal financial aid to pay for it, which was not previously allowed.

But critics fear that in the rush to compete for students by promising them credits for experience, some colleges and universities will make getting competency-based credits too easy. Accreditors are still scrambling to set up standards for the practice. And a new study by the American Enterprise Institute raises other questions that remain unresolved, including how students will earn credit in this way, how much they will be charged for it and whether they will really save money over the long term.

Competency-based programs “could very easily devolve into diploma mills,” says Amy Laitinen, a former White House and Department of Education advisor who is now deputy director for higher education at the New America Foundation and an advocate of the concept. “It could go south very quickly.”

Designers of competency-based programs say they measure whether what people have already learned in life is enough for them to forgo academic courses typically required as prerequisites toward a degree.

Nineteen early adopters of the competency model — including Lipscomb, Southern New Hampshire University, Capella University and the University of Wisconsin — are working together to design standards for such programs in a collaboration called the Competency-Based Education Network, or C-BEN. (C-BEN is supported by the Lumina Foundation, a funder of the Hechinger Report, which produced this story.)

But many of the institutions being allowed to use financial aid for competency-based education are not associated with the effort to establish standards.

“My worry is that you’re going to see schools that don’t do the hard work,” says Michael Offerman, an Arizona-based consultant who helps universities and colleges develop competency-based programs. “If you don’t do it right, you could threaten not only your own institution, but also the movement as a whole.”

The nation’s six regional accreditors, whose job it is to ensure the quality of colleges and universities, have also joined together to figure out how to judge competency programs. It hasn’t been easy, says Kevin Sightler, a member of the task force who represents the Georgia-based Southern Association of Colleges and Schools Commission on Colleges.

“There’s a lot of confusion, even among the accreditors,” he says. “Everyone’s just trying to get their hands around it right now. It’s completely different from historical approaches.”

There’s little question accreditors will have their hands full soon. Competency-based programs are cropping up rapidly nationwide, from community colleges and small liberal arts colleges to the largest universities. Nine of the most active institutions alone collectively enroll more than 140,000 undergraduate and 57,000 graduate students in competency programs, according to the American Enterprise Institute report.

At least 200 schools are developing or considering competency-based programs, says Brian Fleming, an analyst with the higher-education consulting firm Eduventures.

“We think it’s only going to get bigger,” he said. “It is quite a Wild West.”

Lipscomb’s program has assessed more than 120 students, including McCampbell, since it started last year. In October, California’s Brandman University launched a fully online, competency-based bachelor’s degree with 44 students.

As colleges and universities see competitors bringing in new students with such programs, they’ll be tempted to cut corners, says Laurie Dodge, a Brandman vice chancellor and vice provost.

“Competency-based education is popular, and everybody wants a piece of it,” Dodge says. “There may be shortcuts or window-dressing.”

At its best, the competency model could help colleges turn out graduates who are prepared for the working world rather than just adept at cramming for tests. It could also bring in students at a time when enrollment is flat or declining, and when higher education is trying to tap into the growing market of students who are older than traditional college age. In the American Enterprise Institute study, 90% of the people who cashed in life experience for credit were 25 and older.

“I think it’s being seen as something that can help institutions sustain themselves,” says Charla Long, Lipscomb’s dean of professional studies. “This might eventually be seen as the new face of higher education.”

Lipscomb’s eight-hour assessment — the one that let McCampbell skip her freshman year — starts by giving students various tasks to complete within 90 minutes. Later, the students participate in leaderless workplace discussions about, for example, hiring policies.

Evaluators want to see students prove their critical thinking and problem-solving skills, Long says — something employers want, and complain that too few traditional college graduates have.

About 1 million people in Tennessee have earned some college credits but no degree, Long says, and competency-based programs could make it easier for them to get one.

For McCampbell, who started looking at schools once her two children graduated from college themselves, the Lipscomb program opened doors that were closed when she was younger.

“I didn’t grow up in money. They even laughed at you if you brought up college,” says McCampbell, who is pursuing a bachelor’s degree in integrated studies. “Something was always missing.”

This story was produced by The Hechinger Report, a nonprofit, independent news organization focused on inequality and innovation in education

MONEY Ask the Expert

This Formula Can Help You Figure Out How Much to Save for College

Ask the Expert - Family Finance illustration
Robert A. Di Ieso, Jr.

Q: “My husband and I have been saving for our kids’ college since they were born. They are now 4 and 6. Our initial plan was to just throw what we could into a savings account, then we moved that money to a 529. We make small monthly contributions, and also contribute some money whenever we get a bonus or they get a birthday gift from grandparents. However, we still don’t have a number in mind for what we actually need by the time they start school. How much should we be saving for them each month?” —Ryan Phelan

A: Congratulations for starting the saving process early and taking full advantage of compounding in that 529 account. That’s less money you’ll have to borrow later.

Now for the bad news: By the time your eldest child enters college, four years at an in-state public school will cost an average $130,000 and a private-school education will run $235,000 if prices continue rising at the rate they have for the last five years.

Footing the full freight will be unrealistic for most folks, especially those like you who have more than one child to put through school. Besides, you should also be saving for your own retirement—since you can’t fund that stage of life with loans as you can your kid’s education.

Mark Kantrowitz, author of Filing the FAFSA and senior vice president of the Edvisors Network, offers a more reasonable goal: Try to save a third of your kids’ expected college costs by the time they’re on campus. The next third can come from income (plus grants and scholarships) at the time tuition needs to be paid, and the final third you or your kid can borrow.

The idea is to spread the cost out over time to make that staggering price tag more manageable, says Kantrowitz. You’re putting together past income (what you’ve saved), current income (while the child is in school), and future income (yours or your child’s to pay back the loans).

So in your situation, a good goal would be to put away at least $43,000 or $78,000 for your eldest child, depending on whether you’re aiming to pay for public or private school.

You can estimate a savings number for your younger child—and anyone else can figure it out for their own kid—by figuring out the full cost of an average college education the year the child was born, since college costs increase by about a factor of three over any 17-year period, says Kantrowitz.

For help translating the big number into what you need to save each month—based on your state, income, children’s ages, and current 529 savings—use this 529 college savings planner tool from Savingforcollege.com.

More from Money 101:

Where should I save for college?

How much should I save for college vs. retirement?

What’s the best 529 plan for me?

TIME Innovation

Five Best Ideas of the Day: February 20

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

1. Hollywood’s diversity problem goes beyond “Selma.” Asian and Latino stories and faces are missing.

By Jose Antonio Vargas and Janet Yang in the Los Angeles Times

2. Shifting the narrative away from religion is key to defeating ISIS.

By Dean Obeidallah in the Daily Beast

3. Innovation alone won’t fix social problems.

By Amanda Moore McBride and Eric Mlyn in the Chronicle of Higher Education

4. When the Ebola epidemic closed schools in Sierra Leone, radio stepped in to fill the void.

By Linda Poon at National Public Radio

5. The racial wealth gap we hardly talk about? Retirement.

By Jonnelle Marte in the Washington Post

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.

TIME Education

Princeton Receives $300M Rare Book Collection, University’s Largest Gift Ever

Blair Hall on the campus of Princeton University
John Greim—Getty Images Blair Hall on the campus of Princeton University on Aug. 5, 2012

Donation includes the earliest Bible prints, the original print of the Declaration of Independence and Beethoven's signed music sketchbook

Princeton University declared Monday that it received a donation of books and manuscripts worth approximately $300 million, amounting to the most generous gift in its history.

Class of 1936 alumnus William Scheide died last year at age 100, bequeathing a 2,500-volume rare book and manuscript collection to the Ivy League university. The haul includes historic treasures like the six earliest prints of the Bible and the original printing of the Declaration of Independence. He also gifted the 1746-founded seat of learning with Beethoven’s music sketchbook, signed by the composer himself.

It is “one of the greatest collections of rare books and manuscripts in the world today,” said Princeton President Christopher Eisgruber in a statement. “I cannot imagine a more marvelous collection to serve as the heart of our library.”

The collection will be fully digitized to increase its accessibility to the public, which can view it upon request. It will remain in Princeton’s Firestone Library.

MONEY College

The Most Important Thing to Know Before Applying to Grad School

two diplomas two graduation caps stacked
Wendell and Carolyn—Getty Images/iStockphoto

A record number of college students think they'll need a master's to land a job. They'd be smart to weigh the costs against the benefits before applying.

Four years of college is no longer enough to give you an edge in the job market—at least that’s what most of the nation’s college students seem to believe.

More than three-fourths of freshmen at four-year colleges plan to go to graduate school, according the latest in a 49-year long UCLA survey of the attitudes of college first-years. (More than 150,000 full-time students at 227 universities were polled.)

That’s up from 51% in 1974, and only slightly below the record sent in the depths of the recent recession, says Kevin Eagan, interim managing director of UCLA’s Higher Education Research Institute.

Usually, interest in grad school spikes during economic downturns. But with the economy healthy, there’s clearly something else going on.

“The percentage of freshmen who think it is important to be well-off financially is at its highest point ever—more than 82%,” explains Eagan, “and during the recession these students were hearing of all of these folks with bachelors’ degrees who were unemployed. So they are recognizing that in order to achieve their objective they need additional credentials.”

Higher Degrees = Higher Pay

Indeed, recent evidence indicates that those with more education have better job prospects. The unemployment rate for those with professional degrees is almost half of the 4% rate for those with just a bachelor’s, for example.

And an analysis by the Georgetown Center on Education and the Workforce found that while the average bachelor’s-degree holder earns about $2.3 million over a lifetime, a master’s degree holder typically earns about $2.7 million and a professional degree earner typically takes home $3.6 million.

Higher Pay ≠ Fast Payoff

But Eagan and other analysts who’ve crunched the numbers say that graduate degrees are also an expensive gamble—and in some cases, have low odds of a financial payoff.

Tuition and fees for a two-year master’s program exceed $20,000 at the average public college, and $45,000 at the average private school. The tuition and fees for a degree from an elite graduate program such as Harvard Business School totals more than $120,000. Living costs can another $12,000 to $24,000 per year, depending on location. All together, you’re looking at a considerable expense on top of the more than $28,000 in undergrad debt new grads who borrow are carrying.

Plus, many graduate programs don’t result in big salaries.

Besides, in some fields, those with advanced degrees aren’t immune to the challenges of finding a job: For example, Eagan says he cautions students pursuing PhDs in humanities about the low odds of finding full-time jobs as professors, as more colleges are replacing tenured instructors with part-time adjuncts.

When a Grad Degree Makes Sense

Wondering if continuing your education pay off for you? There are three situations in which going back to school will put you ahead, according to several recent studies:

  1. You are aiming for a job in a field that either requires a graduate degree or in which employers use graduate degrees as a hiring screen. Besides the traditional graduate-degree-requisite jobs of doctor, lawyer and professor, a growing number of jobs require graduate study, including as librarian, social worker and physical therapist.And, in a study of 19 major employers, Sean Gallagher, an administrator at Northeastern University, found that a growing number of human resources administrators are giving preference to job applicants with masters’ degrees, and that masters’ often helped in competitions for promotions.
  2. You need the degree to get the public service career you want anyway. Students who use the federal direct Stafford and PLUS loan programs to borrow the full cost (including living expenses) of their graduate study and then spend 10 years working for a government agency or a non-profit can have much of their graduate school expenses forgiven under the government’s Public Service Loan Forgiveness program.According to research by Jason Deslisle, director of the federal education budget project at the New America Foundation, a new veterinarian with the typical education debt load of $132,000 who gets a government job and signs up for Income-Based Repayment (which caps payments at 10% of disposable income) will likely pay a total of only $36,000 in debt payments over 10 years. After the 120th on-time payment, the government would forgive a total of $147,000, which is all of the original debt, plus some unpaid interest. But beware: if you don’t end up making 120 on-time payments while working at public service, you will likely either have to pay off your debt in full, or have to keep making on-time income-based payments for at least 20 years, after which you may be eligible to have any remaining debt forgiven.
  3. You are in a field in which graduate degrees tend to lead to higher earnings. The Georgetown study found that graduate degrees typically add about $1 million to the lifetime earnings of, for example, chemists and financial professionals. But graduate degrees appear to have little overall impact on the average earnings of writers, editors, architects and many kinds of health-related therapists, such as audiologists. You can see the affects of advanced degrees on other occupations by viewing the full report.

Related:

TIME Education

Colleges Pit Music Against Math as Funding Dries Up

Music Class Students
Getty Images

Limited money is causing state schools to choose among subjects with the most demand

Bob Marley once sang that when music hits you, you feel no pain. But the music department at the University of Alaska at Anchorage could soon end up bruised, bloodied and down for the count.

That’s because music is being pitted against other subjects with stronger demand, such as business and engineering, as the public university cuts its budget in response to lower oil prices that have resulted in a drop in state tax revenue.

This is not happening only in Alaska. Colleges and universities across the country are going through the same painful process of winnowing their offerings to show students, lawmakers, and taxpayers they are serious about saving money. And what was once a theoretical conversation about the value of the humanities versus the sciences or business is now a very real debate over which academic programs will survive and what jobs will be lost.

Advocates welcome the chance to weed out costly programs with hardly any students, or force them to attract more and do a better job of graduating them. Critics say the budget-minded process threatens to preserve more popular departments that churn out employable graduates, such as biotechnology and nursing, at the expense of less pre-professional degrees like philosophy and history.

“That could be a very dangerous, unintended outcome,” says Sandra Elman, president of the Northwest Commission on Colleges and Universities, the accreditor for Alaska and other northwestern states. “If this is going to be looked at in terms of a financial bottom line, you don’t have to be the head of Microsoft or Nike to know that the programs that graduate the most students might end up on top,” she says. “Faculty have the right to be concerned.”

Indiana State University was among the first schools to undertake a comprehensive review of its offerings, from 2006 to 2008, which resulted in the elimination or suspension of 48 academic programs, including art history, German, and journalism as it sought to trim a bloat of offerings that had led to 8,000 empty seats in classes.

The process was painful, says Robert Guell, an Indiana State economics professor and chairman of the campus academic senate, but it was a way of “culling the walking dead. Your perspective on this depends on whether you’re the organ donor or the organ recipient,” Guell says. “The body may be healthier overall, but it still doesn’t feel good for the donor.”

To save $6 million, the University of Southern Maine is cutting French, geosciences and applied medical sciences, and consolidating six other majors: English, philosophy, and history will be combined into one department, and music, art and theater will be grouped into another. Though French is still widely spoken in Maine, the French Department had graduated an average of 4.8 majors per year for the last five years.

Other institutions have adopted a model that ranks departments according to productivity and divides them into five groups, with the bottom 20% eliminated or reorganized.

Boise State University, for instance, over the summer instructed programs in the bottom one-fifth to plan for “significant change,” says Provost Martin Schimpf. Among those slated to be cut are bachelor’s degrees in bilingual education and geophysics and a master’s degree in physical education pedagogy.

Schrimp says the process, ordered by Idaho Gov. Butch Otter, will help the public university consolidate programs that were teaching the same subjects and save $2 million a year.

“We create and eliminate programs all the time,” he says. “There’s a lot of overlap and interdependence. By having a universitywide conversation, these things pop out. That’s the value of the process itself.”

But prioritization can create its share of problems, especially at schools where faculty members have been cut out of the process. Critics point to the University of Northern Iowa, which in 2012 announced it would eliminate one-fifth of its academic departments.

A December 2012 report by the American Association of University Professors derided Northern Iowa’s eliminations as “created solely as a device for laying off members of the faculty whom the administration no longer wished to retain.”

In addition to music instruction, the proposals in Alaska could doom several other programs, including the respected Alaska Quarterly Review, a literary journal.

“It’s very difficult,” says Bill Spindle, a University of Alaska Anchorage vice chancellor who has helped lead the process, which aims to save about $7 million per year. “We want to prune, we don’t want to break off branches.”

The university has ranked its programs into categories including one that calls for “further review” of departments about which questions remain and that may not have long to live. A final decision is expected to be released this week, and Spindle says cuts will be even deeper than originally expected because of a state budget shortfall.

Among those most at risk include Chinese (“[T]his program should stop creating new courses and contemplating new programs when it has only part of one faculty position,” according to the university prioritization report) and two music programs (“This is a very expensive and relatively non-productive program, and there are serious opportunity costs with putting so many resources into something that produces only four graduates in three years”).

Music Department chairman Christopher Sweeney says the actual number of graduates over those three years was closer to seven for each of the two at-risk music degrees, but he acknowledged that even this number was lower than he’d prefer.

“As much of a nightmare as it was,” said Sweeney, “it was a good wake-up call on how to serve our population better.” But he added: “We are not going down without a very, very severe fight.”

The at-risk list also includes some surprises. Chemistry is on it (“The number of graduates is very troubling”) and a graduate certificate in nursing (“This program has weak student demand”).

Also surprising are the subjects that were rated as successful—art, for instance (“an impressive level of student-centric discussion”), and medical laboratory science (“Alumni survey data indicates grads are finding employment, mostly in Alaska”).

The university urged departments to explain their value by demonstrating proof of learning, but some didn’t take the hint, says Diane Hirshberg, a professor of education policy who helped lead the prioritization study. “We had programs provide evidence,” she says. “Then we had others that said, ‘Our students know this and this,’ without providing any evidence. It’s frustrating.”

Even professors who hate the thought of universities cutting programs acknowledge it needs to happen occasionally. Schools tend to grow more than they shrink, and some departments outlive their usefulness as employment trends change.

The key to avoiding problems is transparency and communication, says Jack Maynard, the Indiana State provost who led his campus’s prioritization.

“By doing that, you take away a lot of the weapons people would use: speculation and rumor,” says Maynard, who came out of retirement recently to return as the school’s interim provost. He says Indiana State used the process to transform its identity into a stronger campus focusing on rural health care.

At other schools, however, some fret that a change in identity would be the wrong outcome. New York City’s Lehman College, for example, is undergoing a prioritization process some professors worry could shift the school away from the humanities and toward science and engineering.

“A college needs to have a philosophy department,” says Duane Tananbaum, a Lehman history professor, “even if it’s not overflowing with students.”

This story was produced by The Hechinger Report, a nonprofit, independent news website focused on inequality and innovation in education.

TIME Education

What College Professors Can Learn From Alan Alda

Alan Alda Teaching Cornell
Cornell University Alan Alda talks to scientists about effective communication during a workshop at Cornell University on May 22, 2014.

The actor has long sought to make scholars better communicators, and more schools are starting to get on board

It may not be entirely surprising, in the rarefied confines of the Harvard Graduate School of Education, to hear a member of the faculty let terms like “randomized controls” and “self efficacy” slip into casual conversation.

But the point of this exchange is to teach professors how to avoid them. Here in a windowless office in the basement of a red brick classroom building near Harvard Square, the faculty member, Mandy Savitz-Romer, has teamed up with the consultant Mary Tamer to translate academic jargon into comprehensible English.

“So what does work?” Tamer asks Savitz-Romer about her research into encouraging more high school graduates to go to college, prodding her for a few key, easy-to-understand takeaways. “If we wanted four or five things, what would they be?”

The result of the exercise will be a concise, bullet-pointed breakdown of Savitz-Romer’s work that could be read and understood by people who don’t speak the same complex academic language of education researchers. And it will be repeated with other faculty members as part of an ongoing initiative.

Tamer was brought on board to run a project at the graduate school called Usable Knowledge, one of many such efforts to help scholars and prospective scholars make their work accessible to everybody else—including, not coincidentally, the legislators and taxpayers who pay for it—and to teach students the clear communication skills employers are demanding.

“Those who are involved in funding academic research are really keen to see that it’s going to lead to something practical,” says James Ryan, the education school’s dean, who was trained not as an academic but as a lawyer. “If faculty are interested in their work having influence, paying attention to the language that they use is really important.”

As an example, he cites research about the benefits of pre-kindergarten education that someone thought to explain in the simplest possible way: by calculating that providing it would save more money than it would cost.

“That was genius,” Ryan says. “It’s a brilliant way of making the research not only accessible, but compelling.” And compared to a dense treatise advocating for pre-kindergarten using terms such as cognitive development and holistic instruction, “which one is going to make a better case?”

Many other schools are starting to see the value of simple language. The Global Communication Center at Carnegie Mellon University helps not only faculty but also graduate and undergraduate students in all fields make sure their research makes the best case. In a competition at Villanova University, engineering students are required to explain their work to a retiree or a 12-year-old, who, in turn, explains it to a judge. The University of Delaware pairs students in engineering and journalism classes: the journalists to learn about engineering, and the engineers about communicating.

Stony Brook University has established an entire center for communicating science, named for the actor and director Alan Alda, who inspired it out of frustration with the scientists he met as host for 13 years of the public-television series Scientific American Frontiers.

“I must have interviewed about 700 scientists,” says Alda. “I just listened and tried to understand what they were saying. But they were in lecture mode most of the time.”

The actor remains involved in the center—there he’s called Professor Alda—and uses improv and other techniques to teach graduate students how to better convey their findings.

“The improvising games and exercises we do force you to pay attention to the person you’re communicating with,” he says. “That contact, that intensified observation, and being forced to play by a set of rules forces you to concentrate on the other person and forget about yourself.”

Among other things, Stony Brook runs a contest in which scientists have to explain a complex concept to 11-year-olds. Last year’s topic: What is time?

Duke University last year launched a program it calls the Forum for Scholars and Publics, which promotes plain speaking in not only science but all academic disciplines by bringing faculty members together to discuss their work with everybody else.

“Given how much the public supports these institutions, there’s a sense of a need for advocacy on the part of the university toward the public,” says Laurent Dubois, the Forum’s director and a professor of romance studies and history. “Universities as institutions need to think about this and find ways to speak to that broader public.”

And there’s a need for experts to share what they know in a way that can resonate with the public. A study by the National Science Foundation found that fewer than half of American adults surveyed understood that the earth orbits the sun once a year, that antibiotics do not kill viruses, and that humans did not live at the same time as dinosaurs.

“There’s a growing realization that a lot of the biggest issues in science require us to talk to each other,” says Elizabeth Bass, director of the Alda Center at Stony Brook, where two Ph.D. programs now require students to take a course called Communicating Science. “But communication doesn’t actually occur until somebody understands it.”

Meanwhile, she says, “There’s a growing realization that virtually all university research in this country is publicly supported. And academics owe it to the public to explain what it is they’re doing, and why it’s important to do.”

Harvard’s Savitz-Romer thinks so, too. Making her research widely understandable could hasten its progression from theory into practice.

“I love doing this, and getting the message out,” she says, back in the basement of the education school. “And as we all do more of this we’ll get better at it.”

This story was produced by The Hechinger Report, a nonprofit, independent news website focused on inequality and innovation in education.

MONEY Ask the Expert

Why You Might Want to Take Student Loans Before Using Up College Savings

Ask the Expert - Family Finance illustration
Robert A. Di Ieso, Jr.

Q: “My daughter will be starting college this fall. I’m estimating the tuition will be about $25,000 each year. I’ve got about $45,000 put aside in a 529 for her. When should I tap that money?” —Henry Winkler, Colorado

A: The first thing you and your daughter should do is fill out a FAFSA, the federal financial aid application. Even if you think your household income will be too great to qualify for aid, it’s worth applying just to be certain, says Mark Kantrowitz, publisher of Edvisors.com, a website that helps people plan and pay for college. “I have seen many cases where families assume they won’t receive any aid, but actually do qualify based on the number of children they have currently attending college or because the high costs of the tuition resulted in a lower than expected family contribution amount.”

Don’t worry that the savings you currently have in your 529 will hurt her chances for aid either. Federal aid will be reduced by no more than 5.64% of the value of the account and account distributions are not considered income, Kantrowitz says.

Next, she should apply for the most available in federal direct student loans. In her first year, she can borrow $5,500. In her second year, $6,500, and any of the years following up to $7,500. Because you only get to borrow a certain amount in these direct federal student loans—which have much lower interest rates than Parent PLUS loans or private loans—it’s worth borrowing the max each year and accruing that interest rather than waiting and trying to borrow the full cost of college her third or fourth year, says Kantrowitz.

If you have other savings accounts you can draw from, Kantrowitz recommends setting aside $4,000 a year from such an account for your daughter’s college education so that you can take advantage of the American Opportunity Tax Credit.

With this credit, you get 100% of the first $2,000 you spend on tuition, fees and course materials paid during the year, plus 25% of the next $2,000. The credit is worth $2,500 off your tax bill. Also, 40% of the credit (up to $1,000) is refundable, which means you can get it even if you owe no tax.

The caveat: You will need to have a modified adjusted gross income of $80,000 or less, or $160,000 or less for married couples, a year to get the full benefit. If you earn more than $90,000 or $180,000 for joint filers, you cannot claim the credit.

You cannot use any of the funds from your 529 to qualify for the tax credit since that plan is already a form of tax-free educational assistance. If you do not have an additional $4,000 a year to put toward her education, you can also qualify for the credit by using the student loan amount she received—but just know that you may not be also able to claim the student loan deduction on that amount since you’ve already received a tax break on it, says Kantrowitz. (Right now you can claim both, but Kantrowitz says that could change in the future.)

After deducting any grant aid, her student loan sum, and the $4,000 from another savings account, pay the remaining education expenses with funds from the 529 plan.

“Under this plan it is likely your 529 will be exhausted after her third year of college, or sooner if you don’t put aside that additional $4,000 for the tax credit each year,” says Kantrowitz.

To make up the difference you’ll need to secure another loan. If you own a home, consider home equity financing before PLUS loans, since the latter currently carry a 7.21% interest rate and come with an “origination” fee of about 4.3% of the principal amount you borrow.

If you must take the PLUS, you might be tempted to try to lock in current interest rates by borrowing to cover the first two years’ worth of expenses. But you’d end up having to borrow more since she’ll be getting less federal loan money those first two years, and you’d have to pay two more year’s worth of interest. Even with possible rate increases, you’re still better off taking the PLUS loans in her last two years.

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Catholic Colleges Tell Poor Kids to Go Elsewhere

The Catholic University of America campus with National
John Greim—Getty Images The Catholic University of America campus with National Shrine Basilica in Washington, DC.

Church-affiliated schools are among the nation's most expensive for low-income students

At Catholic University of America in Washington, D.C., officials sometimes bring in low-income applicants and their families for counseling. The point of the sessions is not to encourage the students to attend, but to suggest they consider going somewhere cheaper.

The university needs to spend its financial aid to attract “higher-end students,” says W. Michael Hendricks, vice president for enrollment management — the kind of high-achieving, wealthy students that can improve a school’s prestige and bolster its bottom line. And he says the school has another, seemingly paradoxical rationale for dissuading low-income students: its Catholic identity makes the university hesitant to burden low-income families with debt. “It totally flies in the face of our mission,” Hendricks says.

Despite such sentiment, Catholic University charges the highest net price in America for low-income students — the cost once discounts and financial aid are taken into account — according to a study by the New America Foundation based on information reported to the U.S. Department of Education by the institutions themselves. And they have plenty of company among peer institutions.

At a time of escalating worry over access to higher education, Catholic institutions are in the uncomfortable position of comprising five of the 10 most expensive private universities for low-income students, and 10 of the top 28, the study found.

Some Catholic colleges “seem to have departed from what you would assume the principles of their faith would have compelled them to do,” says Kati Haycock, president of the Education Trust, a nonprofit organization that advocates for low-income students.

“It’s disturbing that institutions give money in these very difficult times to students who don’t need it,” Haycock said, and “don’t focus their resources on those who absolutely need it the most.”

Colleges that charge the most to poor families, the New America Foundation researchers said, are giving increasing proportions of their financial aid to wealthier students, whose families can afford to pay the rest of the tuition. These kids often come from well-funded suburban high schools and have comparatively higher entrance examination scores and high-school grades that improve the colleges’ standings in rankings.

Officials at some Catholic colleges and universities say that, as a matter of survival, they feel compelled to spread small amounts of financial aid to a large number of these higher-income students, rather than give more of it to the poor. By making many small grants, they say, they can attract the number of tuition-paying students needed to keep the colleges in business.

It’s a sensitive issue for the nation’s 200-plus Catholic colleges, given that church teaching calls for a “preferential option for the poor,” which the U.S. Catholic Conference of Catholic Bishops has interpreted to mean that “poor people have the first claim on limited resources.”

Some Catholic institutions do succeed at keeping down costs for students with family earnings low enough to qualify for federal Pell grants — generally, $30,000 a year or less. But others are charging those students a net price that is equal to two-thirds or more of their families’ entire annual incomes.

At Catholic University, for example, the poorest students pay an average annual net price of $30,770. Philadelphia-based Saint Joseph’s University charges its poorest students $30,503; Saint Louis University, $23,882; the University of Dayton, $21,520; and Loyola University Maryland, $20,672.

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These schools also enroll low percentages of poor students. Only between 13% and 15% of the students they enroll come from families with incomes low enough to qualify for Pell grants.

Five other Catholic colleges and universities, however, are among the 10 private colleges at the other end of the spectrum, providing a lower-cost education to comparatively high proportions of Pell students.

Saint Thomas University in Miami, for example, has an average net price of $8,072 for its lowest-income students, who make up more than half of its enrollment. Others with high proportions of low-income students and low net prices are Saint Mary-of-the-Woods College and Calumet College of Saint Joseph in Indiana, Holy Names University in Oakland, Calif., and Saint Francis College in Brooklyn.

“Some Catholic colleges are able to place a high priority on meeting the needs of very low-income families. Others have limited resources, making it more difficult to address those financial needs,” says Michael Galligan-Stierle, president of the Association of Catholic Colleges and Universities. “While embracing their faith tradition, our institutions still must contend with the realities of education costs that are true of any college or university in the United States.”

In fact, some of the Catholic colleges that charge the most have robust wealth in the form of their endowments. Saint Louis University has a $956 million endowment; the University of Dayton, $442 million; Catholic University, $264 million; Saint Joseph’s, $193 million; and Loyola of Maryland, $177 million, according to the National Association of College and University Business Officers. Among the other Catholic universities with high net prices for low-income students, Villanova University has an endowment of $419 million, while Notre Dame has a towering $6.9 billion in the bank.

Gerald Beyer, a theology professor at Villanova, thinks high-cost Catholic colleges should try harder to move away from the “preferential option for the rich” adopted by many on-Catholic private private universities in the U.S. “By the very nature of their mission, Catholic universities must fight against this trend,” Beyer says.

He points to an overlooked passage from Pope John Paul II’s 1990 document Ex Corde Ecclesiae, which says that Catholic universities should seek “to make university education accessible to all those who are able to benefit from it, especially the poor or members of minority groups who customarily have been deprived of it.”

Jesuit Catholic colleges and universities in particular stress principles of social justice, but three of the order’s universities rank high on the list of colleges that accept few Pell students and leave them with high net costs: Saint Joseph’s University, Saint Louis University, and Loyola University Maryland.

Saint Joseph’s spokesman Joseph Lunardi says the school takes the issue seriously. At an October meeting, he says trustees discussed its comparatively low proportion of Pell students, asking whether the university is “losing ground in their mission.”

Lunardi added that the proportion of Pell students would be higher if 1,000 part-time students were included, since 40% to 50% of them are low-income, and that the net-price figures collected by the federal government and used in the report include only students who receive federal financial aid, not all students.

Saint Louis University and Loyola-Maryland declined to comment.

The University of Dayton, which is affiliated with the Marianist order, said that, since the 2011-12 academic year covered by the New America study, it has instituted a four-year guarantee that students’ net price won’t increase and has taken other steps that are beginning to result in the admission of more Pell students and less student debt.

Of all the nation’s colleges, Catholic University is most closely identified with the institutional church. Its bylaws require that 18 of its 48 trustees be bishops. An annual collection in parishes across the country raises about $5 million for the university, which goes for scholarships issued through participating parishes.

Hendricks, the enrollment manager, says the school is “always struggling” with the moral implications of admission practices. “At Catholic schools in particular, we like to stay need-blind,” he says, referring to a waning practice under which universities accept applicants regardless of their ability to pay. “That’s our mission. It’s getting more and more expensive to do that.”

This story was produced by The Hechinger Report, a nonprofit, independent news website focused on inequality and innovation in education.

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