More College Musings

First, if you haven’t read and commented on my post “Paying for College“, please do so. I want your opinion.

As you can guess by that post, college has been on my mind of late. Over lunch, I’d like to share with you a few articles and observations as to why that is:

A lot of articles of late have been talking about the impact that student loans are having on students. The Wall Street Journal has a good article on this. The article notes how the high level of student debt is affecting student credit ratings, preventing students from buying houses, getting married, and moving on with life. The article notes “Most students get little help from colleges in choosing loans or calculating payments. Most pre-loan counseling for government loans is done online, and many students pay only fleeting attention to documents from private lenders. Many borrowers “are very confused, and don’t have a good sense of what they’ve taken on,” says Deanne Loonin, an attorney for the National Consumer Law Center in Boston and head of its Student Loan Borrower Assistance Project. ” This was one of the reasons I asked my questions: I’m trying to figure out what is managable in terms of student (and parent) debt, and of the various debt instruments out there, how best to structure them. Thinking this out ahead of time should help in the long run.

Part of this problem, of course, occurs because of the “College Tax”. Huffington Post has a nice commentary on this. The “College Tax” is the amount of money the government decides you will be expected to pay for college based on your reported financial information. The more you earn and save for college, the higher your college tax will be.  That’s partially why I’m so focused on finances right now. Here’s a telling quote from the article: “If you had a good income the year before your student enters college, then the FAFSA form is going to assess you a higher college tax, even if you were unemployed the two previous years. If you scrimped and saved to set aside money to prepare to pay for college, the FAFSA raises the price and raids your assets, which might make you wonder why you didn’t just spend that money, since you’re going to lose it anyway. […] When it comes to college costs, the more a family saves, the more the college tax system will charge. In other words, it penalizes savings. This makes college tuition a fast-moving conveyer belt for those in the middle class, who cannot comfortably afford the listed tuition prices at most schools. Low-income families have a low college tax, and will receive financial assistance. High-income families have a high college tax, with the means to pay it. Those in the middle classes will find, however, that the more they hustle to meet the high price — by working more hours or saving more money — the higher the price goes, always out of reach. The financial aid system treats them like Tantalus, hopelessly trying to reach for a piece of fruit above or a drink of water below. These are the people who, ironically, sometimes earn too much to afford to send their child to the college of their choice, because they are considered too affluent to qualify for aid but do not make enough to pay the full price without taking a huge hit to their standard of living. ” The article is very good — but doesn’t make clear the one place where money isn’t seen by the FAFSA: retirement money that you can’t get too. The FAFSA algorithms are another reason for my post last night: I’m trying to figure out the best way to pull out the money to reduce the “College Tax” for next year (as I presume they reassess every year).

One last observation: I’ve noticed that since Erin decided on UC Berkeley, my emotional tie to my alma mater, UCLA, has gotten stronger. I am going to be on campus tomorrow judging an IEEE Student Ethics competition, and I plan to pick up a “UCLA Alumni” sticker for my car. Watching Erin get ready to go off to college brings back memories of my college years.

Music: My Tennessee Mountain Home (Dolly Parton): The Wrong Direction Home