This time, Michelle Singletary gets it right.

I've given Michelle Singletary some grief in the past over her stance on student loan debt.

But her most recent article is a clear-eyed look at the struggle students face in trying to pay for an education, particularly in the loan market.

(As Free Money Finance points out, most parents aren't saving enough for college. And outside scholarships generally reduce need-based aid dollar for dollar. So loans are probably going to be part of all but the most well-off students' aid packages.)

She makes the VERY salient point that with static Stafford loan caps (although some year-by-year limits are increasing for dependent undergraduates, the overall limit is $23K, the same as in 1992), and increasing tuition, students are frequently turning to private lenders to make up the gap. And private lending obviously doesn't have the same rates or subsidies for in-school interest that federal loans do.

The only quibble that I have is that her quote of 7 to 9 percent on private loans still sounds lower than what I've seen. With LIBOR at 5.37% and PRIME at 8.25%, plenty of private loans are going for 10 to 12 percent, or more.

Other than that, the only change I'd make to this article would involve parents of potential college students to start this conversation FAR before senior year.

Educational Finance Roundup

This is a little late, but I had a lot going on over the weekend with my father's visit.

As always, this is my subjective recounting of my favorite posts relating to educational finance over the past two weeks (as of Friday). Feel free to email me if you would like your posts considered for a future roundup.

We start off with a bang as Jason shares Savvy Ways to Invest for College as part of the Bogleheads October Project. This touches seven different options for investing in a child's future education, including a look at 529 plans. Highly recommended, if only as an introduction.

100 by 30 asks if she should move some of her private student loan debt to a credit card. The responses are pretty thoughtful.

Jeremie Beaudry and Flexo are working on repaying their student loans. Suggestions: Use auto-debit to your advantage, and don't use tuition reimbursement checks for other expenses.

Susan reminds us that there are TONS of perks for students if they want to take advantage of them.

One Lucky Girl doesn't directly speak to educational finance, but her idea to give younger relatives bonds instead of toys could certainly help a student pay for college. Just remember, assets in a child's name are weighted much more heavily in financial aid calculations.

Banking at about.com tells us that the Department of Education has gotten into podcasting. Yes, podcasting. So if you've given your child an mp3 player, you should suggest that he or she listen up.

Wanda is looking into income-maintaining 529 plans for grad school in a few years. If you know of one, add a comment, because a lot of readers were interested too.

And finally, Blunt Money makes the post we all hope to make someday. The direct loan is paid off! Congratulations.

How often do you spend almost $1500 in a day?

Hopefully, the answer is "not too."

I picked my car back up from the body shop this morning. I paid another $120 over my deductible because some brackets were missing from the bumper after the last repair. (I'm going to call my old insurance company and let them know that the repair shop didn't perform to standards. If you're asking why I'm not calling my current insurance company, please reread the last paragraph of the second link above.) But on the bright side, my car looks FANTASTIC. It's driving well, the headlight is bright, and you'd not know it had been in an accident unless I told you. Money well spent.

Once I got into work, I made my first full payment on my
no-longer-student loan. Technically, I was given a 90-day grace period to repay it and could have waited until next month, but I didn't want to accrue any more interest. (Last month, I was paying off my old loan, so I made a much smaller partial payment.) I still paid a decent chunk of interest on this first installment, but it was nothing like the frustration of putting an extra $20 towards the $220+ payment and still finding that your principal balance decreased by...$26.

I've taken some lumps, and I'll undoubtedly take some more, but I feel like I'm moving ahead and that's a good way to start the weekend.

The FOMC holds, but I don't have to care.

The target for the federal funds rate remains at 5.25 percent.

When I consolidated my private loans in November 2004, I was offered prime + 2.9 %, for a seemingly reasonable 7.9 percent. However, the end of 2004 was the beginning of the FOMC push. Every month or two, the Fed would hold a meeting, annouce a quarter-rate point hike, which would translate through to the prime rate, and then into my loan rate. It didn't matter much at first, but by August of this year, my rate was at 11.15 percent and my loan payment had increased by $40 per month.

I looked on new meetings with dread.

But fixed rates were freedom. Switching to the fixed- (and much lower) rate loan at my credit union meant that Greenspan/Bernanke was no longer the big bag wolf, huffing and puffing and blowing my budget down.

I gladly accepted a higher monthly payment and shorter repayment term for that.

Public and Private Tuition and Fees Increase While Pell Grants Decrease

The AP and Bloomberg report on The College Board's 2006 Trends in Higher Education Series.

The good news:

• Tuition increases are slowing.
  
• Two-thirds of students are receiving some form of grant aid.
  
• College graduates continue to earn 60-70 percent more than workers with high school diplomas.
  

The not-so-good news:

• Prices at public schools are still up 35 percent in five years.
  
• Pell Grant aid has dropped $120 per recipient.
  
• Colleges and universities face reductions in non-tuition revenue (from state and local appropriations) and increases in costs (for health benefits and utilities). This has helped boost tuition.
  
• Students are increasingly turning to more expensive private loans to meet the cost of their education.
  

I'm definitely going to spend some more time going through this report.

To the U.S. Department of Education--"We're drowning in debt."

Secretary Spellings has sent out staff across the country to discuss proposed rulemaking for the amended Higher Education Act. Unsurprisingly, this has attracted a LOT of attention from educators and loan-holding students. Articles about the Berkeley and Chicago hearings cover some of the highlights.

However, the official Department of Education page includes the most information. I found the PDF of the Berkeley transcript particularly enlightening.

Some of the most requested policy changes seem to be:

• Clarify and expand articulation agreements. If students attend career-focused or community colleges to save money, their transcripts should not be rejected out of hand by four-year colleges. At the very least, all schools should be required to make their articulation agreements and transfer credit standards publicly available.
  
• Simplify the aid form process. The ability to navigate bureaucracy is still economically privileged, and for lower-income students, most of the necessary information could probably fit on a postcard. It was also suggested that students and parents be able to request that financial aid offices receive tax records at the time they file their returns with the IRS. (I'm not sure how I feel about that from a privacy perspective, but it would certainly make things simpler.)
  
• Relax the restrictions on Income Contingent Repayment, and end the term at 20 years. Students who go into fields like social work and education make the argument that their service is more valuable than salaries reflect, and that if they pay X percent of their income for 20 years, they should be forgiven the remaining balance.
  

Obviously, most of these proposals would be costly, and would have to be justified in the budget process. But I think many of them would go a long way towards making education more attainable for everyone.

There are also upcoming hearings in Orlando and DC for anyone who is interested. Again, the Dept. of Ed. page has the details.

Don't let them tell you that it doesn't hurt.

Or, The Most Redacted Blog Entry Ever.*

This Friday, my father will be flying into [Local Airport], because he will be participating in [Well-Known Competitive Event] in the area. (He'll be staying at my aunt's place, because I have a one-bedroom and my sofa is not a sleeper.)

Since he'll be staying for about a week, I asked if he wanted to attend any events in particular. He mentioned that [Famous Performing Troupe] was setting up a production of one of their shows here.

I agreed to coordinate dates with various family members and take care of ordering the tickets.

Now, despite the fact that I was paying with a credit card, and despite the fact that I know my dad will reimburse me when he gets here...

When I saw the grand total for the ticket prices, I still went "oof."

Buying things on a card still stings.

But I trust that the show will be really, really good.

*I may be paranoid, but at least I won't ever be Dooced.

The Employee Benefit Nobody Ever Talks About.

The communications/web publishing team informed me that the article which I co-wrote is now publicly available, and will be printed soon. This officially makes me a published writer. (By which I mean "print published", not "web self-published.")

Without going into too much detail, this article will be read by a number of people who have an interest in our data. And they take that interest in part because it is a product of my organization.

I know it's fashionable in certain quarters to knock being an employee. But I work for an organization that is known for carefully combining and analyzing data. So I'm going to have hundreds and possibly thousands of people reading my work because my reputation is entwined with my employer's.

There's something to be said for institutional legitimacy.

I've joined the Dream Book Club.

Now I have a copy too.

I met with the Ameriprise representative today. I was expecting to steel myself against a hard sell, but I didn't have to.

She looked over most of my statements (benefits, tax returns, loan documents and the like) and said that I was covering all my bases, "which I don't say to everyone."

And then she said that since I want to get into a condo in the next year (or possibly two), that I should really spend some time with a mortgage lender and figure out my qualifications relative to my downpayment and cash flow. Until I have that firmed up, she wouldn't have much more to offer than cranking some target numbers.

So I guess I'll be talking to a lender after the new year.

In the mean time, I'll be doodling in the dream book.

Almost free music. Whee!

My coworker and I have gotten into the habit of discussing music. We both love going to shows, hearing new songs, and reminiscing about familiar favorites. He's been suggesting that I check out Paste Magazine for awhile now, but at around $8 an issue, I couldn't justify it even WITH each included CD sampler.

Well, today he waltzed in and told me that he could offer two bonus subscriptions for about $18 a year each. So I'm getting one for me, and one as a gift for my dad. For me, getting 15-20 track CDs and having access to the download vault should keep me in new music for quite a long time. So hopefully it will help forestall too many CD purchases, and thereby pay for itself.

And it's one more already purchased item on my Christmas list. Hooray for less holiday shopping stress. (I'm not exactly a Buy Nothing Day person, but I do love avoiding crowded malls.)

Mastercard Adding Upromise Debit Rewards Program

Four financial institutions will allow cardholders to receive bonus contributions for Upromise Accounts.

This is still in the press release stage, but for people who use debit cards a lot, it sounds worth investigating. If you have an account with one of the four banks (BancorpSouth, BankAtlantic, BECU, and Provident Bank), you could earn 1-3 percent back on transactions, which seems pretty standard for Upromise. I think the main advantage is that you don't have to register store cards or sign up for additional credit cards.

It's not enough to make me switch from my credit union, but I might feel differently if I actually had a kid. (My loans aren't managed through one of the providers who accepts Upromise, so that's out as well.)

Mastercard is here.
Upromise is here.

Student Life=Crazy Stunts for Pocket Change

I had work study when I attended school. I had summer jobs that brought extra cash in. I had a number of advantages that insured I wouldn't starve my way through school.

But if I wanted any extra spending money, I needed to stretch. Fortunately, there were several ways that I could earn money without spending too much time away from my studies.

In undergrad, [Small Liberal Arts University] was conveniently located a few miles away from a blood and plasma research center. To entice new volunteers (I use the word loosely), they offered a two week plan: $20 for the first donation, $15 each for the second and third and $30 for the fourth. After that, you were considered a "regular donor" and got $10 for the first donation in a week and $15 for the second. I donated blood at regular drives as well, because plasma gets replaced regularly enough that I could do both. It was my prime source of extra income during junior year, but was brought to an abrupt halt when one of the other donors hit on my friend. (During senior year, I worked for a professor above and beyond my work study so I didn't make the effort to go on my own.)

In graduate school, however, I hit the motherlode. [Big 10 University] has both large business and medical schools (not to mention a decent psychology program), so research volunteers were requested year-round.

In the business school, I participated in a market-clearing experiment and got $10. I could have earned a lot more, but it was an early morning experiment and my sleep-deprived brain didn't comprehend some of the instructions until the second round. After that, I just decided to sleep in.

I periodically checked with the psychology department, but most of their studies seemed to ask for really specific traits. Not being albino, or a twin, or equipped with perfect pitch, I never managed to find one for which I qualified.

The engineering school performed an interesting study on driver distraction. I had to "drive" a half-car while looking out the windshield to the CGI road. I actually did slightly better with one distraction, but with two or three my reaction time was notably lengthened. That earned me about $20.

The medical school had the best options. I still have a copy of my brain scan. They were examining activity in the different layers and hemispheres of the brain, and I pretty much just had to lie still for awhile. That was over $100. However, the single best project was in the elder care research unit. The team was investigating the impact of weight training on muscle and bone mass (in the hopes that this would help reduce injuries from falling). So I gave a small sample of my leg tissue to begin with, and then did some cardio and weight training for twelve weeks, at which time my tissue was examined again. Yes, I was PAID to have a personal trainer. I got into pretty decent shape, although it didn't last much beyond the program. But getting up to 240 pounds on each leg from under 40 was a great feeling.

What is the craziest thing any of you have done to earn money in school?

Paperwork: 1. HC: 0.

I've spent much of this past weekend dealing with arrangements for my poor car. And part of that is due to my own incompetence.


You see, I managed to have an accident in a similar place on my car 3 1/2 years ago. My insurance company, logically enough, wanted documentation that the repairs were made then so that they didn't end up paying for a prior accident. I figured that I would go home on Friday night, find the documents, fax them in this morning, and then get going right away.

However, I went home and looked through my car file. And looked. And looked. I had records for pretty much every service and repair done in [town containing Big 10 University] EXCEPT for this particular repair. (I DID find the rental car slip, which contained my claim number, but I didn't think that that would be sufficient.) So I called my old company, explained the situation, and was told "your records have been archived. Call back on Monday when they'll be active in the system again."

So, after dropping off my car at the repair shop this morning, I asked them to wait on it until I got the records to my agent. I called the old company, had them fax the check statements to me, faxed them back out of my new company, and tracked my agent down. He agreed that he had what he needed, so I was able to call the body shop and tell them to get started.

But if I'd kept better records to begin with, this would have been started hours earlier.

I'm still hoping I'll have it back on Friday.

And on a related note? My agent informed me that if my deductible had been lower, they'd probably have just totaled the car. So if your car is older and less valuable, consider whether you'd prefer paying $1K and having a car at the end, or having $500 shaved off the value of the car and being presented a check for that amount. I know what I chose.

Education Finance Roundup

This is a look at my favorite educational finance posts of the last two weeks.

Kira is is paying off her own loans with Upromise (sort of).

Also on the Upromise front, HeJustLaughs is paying in for a kid he doesn't even have yet!

TiredbutHappy has some decisions to make about her son's UGMAs.

No Credit Needed warns us that credit card companies are getting exclusive marketing privileges on college campuses.

Five Cent Nickel and Free The Drones show us a vicious circle; parents need to focus on retirement rather than saving for their children's education, but those children then don't save for retirement partly because they are paying off their student loans!

If you want to be included in a future roundup, please email me at onebigmortarboardAT_thisisextraspamfighting_hotmailDOTcom.

If you were thinking about buying some CDs or DVDs...

this is the weekend to do it.

Tower Records is going out of business; all inventory will be liquidated.

I liked Tower, but I can only remember actually making a purchase there once or twice.

And, depending on my insurance situation, I may still not make another one. [sigh]

But you kids go have discounted fun.

MyFSA continues the "one-stop financial aid shop" theme.

As I mentioned last week, several state university systems are providing students with one site for applications and financial aid forms.

The same login used for these Xap powered sites will work on the Department of Education's MyFSA, which has convenient links to The Guide to Federal Student Aid.

I'll be examining each section of the guide in the upcoming weeks.

Michelle Singletary uses improbable assumptions to "prove" she's right.

As I mentioned a few weeks ago, Michelle Singletary advised a student with $30,000 to pay down her $39,000 debt loan rather than parking it in savings.

Well, I wasn't the only one who thought she was skimming over the assumptions. So her new article attempted to refute the saving advocates' point of view.

She did some basic rate calculations for the loan interest, trimmed 28 percent off that to account for the tax deduction, and compared it to parking the funds in a savings account for one year and paying the same tax rate on the interest. And lo and behold, she found that you'd pay more in interest on the $39,000 loan than you would receive on the $30,000 deposit.

Which is fine, except her assumption was that a savings account would only earn 4 percent.

As I said, and she should know, there are any number of accounts that beat that 4 percent. Even if this student didn't go with E-Loan, there are still tons of accounts besting 5 percent.

Based on her assumptions, in fact, the deposit would really only need to earn 4.6 percent to break even. That leaves the former student in question with almost 30 accounts from which to choose.

She makes the point that we might be in a declining interest rate environment, but even that doesn't hold that much water. If the questioner went to E-Loan (and why wouldn't she?), and E-Loan began drawing back their rate by 0.1% every month starting in November, she'd STILL be earning above 4.6 percent for at least another year.

She cheated to get that answer that she wanted. And I've lost some respect for her because of it.

Well, that's why I keep an emergency fund.

I was in a fender bender yesterday. Of course this WOULD happen right before my renewal.

On the bright side:

The other driver was really calm and patient. I decided to call my insurance company to make sure that all the claim procedures were followed, and she sat and waited to give all her information even though she seemed ready to drive off and forget about it.

The police didn't have to get involved. I did call the police, explained the situation, and was told "if no one is injured and the damage isn't extensive, we'll just be there to help you exchange information." Since we'd already spent about 20 minutes on the phone with my company, that wasn't necessary.

I have the money to fully cover my deductible and more, in case it makes more sense to pay a few hundred more now rather than get it in premiums later. And it made me go back and realize that I'd been overwitholding, so I'll have a few extra dollars to start refilling the emergency fund.

Most importantly, we were both unhurt and both cars were driveable.

That's way more important than the shock to my net worth.

I'd been meaning to get around to this.

The post I'd planned to make today is requiring a bit more digging than I thought it would (some government agencies seriously need to work on search and mapping).

But I saw that NCN was commenting on tons of entries today, and it reminded me that I'd never done my best money saving tip.

Given the focus of the blog, it might reasonably be expected that I'd suggest something about getting scholarships and carefully managing loans. These can certainly make a huge difference in one's financial life.

But to me, a truly good money saving tip should apply to everyone, whether they've gone on to higher education or not.

And so, my very best money saving tip is:

Volunteer.

Why?

• You get out of the house and out of the mall. If you're cleaning out a field, doing crafts with small children, or organizing donations in a food bank, you aren't running up the electrical bill with the TV or PC, or buying that new blouse on sale. (Sure, you might spend a bit on gas if you drive to the volunteer site, but on balance, I suspect most people come out ahead.)
  
• You often get free stuff. Volunteer organizations like to keep up morale. A free pen, water bottle, or T-shirt goes a long way towards making people feel valued, and it's one less thing you have to buy. This doesn't even begin to cover meals and event tickets, both of which are often offered for big fundraisers.
  
• Most importantly, helping others helps you value what you have already. Gratitude goes a long way towards limiting the need to spend on "more things."
  

And on that note, I'm grateful that it's Friday. Everyone have a good weekend.

New Criteria for Ranking Schools Turns U.S. News List on Its Head

The Washington Monthly Offers New Ways to Pick America's Colleges.

Everyone knows about U.S. News' national rankings and Kiplinger's private and public rankings. And nearly everyone can predict which schools are going to be at the top 10 of those lists.

Washington Monthly decided to shake up those assumptions. They built a new model to predict school excellence that asks what the school is doing for the country.

To determine this, they asked:

• How well a school performs as an engine of social mobility. Schools scored based on outreach to lower-income students, measured by exceeding expected percentages of students with Pell Grants given SAT scores and by exceeding expected graduation rates for those Pell Grant students. (Please read the methodology for a better explanation.)
  
• How well it does in fostering scientific and humanistic research. Schools scored based on the total amount of an institution's research spending, the number of PhDs awarded by the university in the sciences and engineering, and the percentage of undergraduate alumni who have gone on to receive a PhD in any subject.
  
• How well it promotes an ethic of service to country. Schools scored based on the percentage of students enrolled in the Army and Navy Reserve Officer Training Corps, the percentage of alumni who are currently serving in the Peace Corps, and the percentage of federal work-study grants devoted to community service projects.
  

Please check out the full ranking. Some of these results might surprise you. If nothing else, applying to less well-known but still competitive schools often means a better aid offer. And applying to these schools might inspire public service, as well.

And if you want still more rankings, visit here.

States offer "one-stop" websites to help students apply to college and for financial aid.

Many of these sites allow students to apply to schools or for financial aid electronically from a single source--and their supporters credit them with helping to boost college enrollment.

Since in-state tuition is often a great value, this is especially helpful for students weighing several schools in their own state. However, each state's site generally lists both private and public schools.

Most of the sites referenced appear to be hosted on xap.com, with about 20 states hosting sites there. (California has three.) In addition, there are sites that aggregate historically black schools and Christian schools.

Each state's site differs somewhat, but all of them appear to have links to school selection, online applications, and financial aid forms and deadlines. A student can even allow his or her high school counselor to view personal "mentor" profiles.

This seems like a great way for students to become aware of application requirements and stay organized throughout a demanding process.

Ten Ways to Get A's in College

The Washington Post summarizes 10 tips to get A's in college starting with the first day of class.

Keeping a good GPA will both help a student maintain scholarships and qualify for upperclass ones. And that helps reduce loan debt.

As for the tips, some of these are intuitive, but 3, 4, and 9 aren't something that I've heard often. And 5 is something most people don't do, but should.

1. Show up the first day and pay attention, and if you don't like a course, drop it fast and pick another one. This can help you get out of a mismatch between expectations and reality.
   
2. Don't load up on easy courses to increase your supply of A's. Taking an occasional basket-weaver, however, is acceptable. I like to tell people that my school loved the liberal arts so much that we had both Slacker Physics AND Physics for Poets. ("Explain how the impending heat death of the universe makes you feel.")
   
3. Don't shy away from courses with lots of papers. It helps avoid "exam cram" at midterms. Besides, EVERYONE needs to learn how to write well.
   
4. Don't give up if they say the course you want is booked up . Appeal to the professor's vanity, if necessary.
   
5. Use office hours intelligently, and often . This is especially useful when developing a draft of one's paper. Also, the professors with whom you build a rapport are the best resort for recommendation letters later.
   
6. Go to lectures and take notes yourself. Anybody else's notes might leave out important details or even the entire structure of the lecture.
   
7. Use section meetings for more than identifying attractive classmates . In undergrad, I had almost none of these, since our classes were so small. But it can help to talk with a TA if you are confused.
   
8. Find some old exams in the course . A lot of these are simply put on course reserve.
   
9. Before you start work on your paper, do the analysis in your head. Fresh analysis comes from thought experiments, before note-taking and background research even start.
   
10. If you challenge a grade, be careful. Unless the grader really missed something, this is usually wasted effort and a quick way to burn bridges.
    

Happy studying.

Free Night of Theater 2006!

16 metro areas across the country are participating in October's Free Night of Theater.

Many, but certainly not all, of the shows are on October 19. Please check to see if your community is participating. Then reserve your FREE tickets and enjoy the arts without breaking the bank.

(I would recommend making a donation to the theater you attend if at all possible.)

The organizers would like to see this be a truly national program in 2007. If your area is not participating this year, please encourage your friends in other cities and states to attend a production. I'd love to see everyone be able to participate in this.

Department of Education Improperly Paid Lender $278 million in subsidies

Lender Nelnet received payments with a much higher return than lenders are normally entitled to receive on student loans.

I don't like the guaranteed interest rate provision for non-direct lenders to begin with. It costs the federal government a lot of money even when a lender doesn't "move loans through a series of transactions" to keep qualifying for the payout (of possibly another $882 million!).

One of the proposals that I really liked in Generation Debt comes in one of the later chapters. I don't have it to hand, and there's not the same citation in the blog, but I remember that the administrative costs of managing loans through the non-direct lenders were MUCH higher than administration through the Direct Loan program. Kamenetz argued that the non-direct programs should be scrapped and everything should be returned to the direct loan program. She suggested that the savings could pay for Pell Grant expansions, but that's not the only possible outcome.

At any rate, stories like this make me a lot more sympathetic to her view. (For full disclosure: I moved my loans to the Direct Loan program because everyone else promised me incentives after 24 months, when DL gave me one right away.)