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


Paying for College

As you can guess by the picture, the decision has been made regarding which university for Erin. The intent to register goes in this week, followed shortly by the housing application (she likes the mini-suites in Units 1 or 2 best). The next question is: “How do we pay for this?”

Now, I’m not asking “Where do we come up with the money?” That’s a more private question. My question here is: Given the variety of funding sources available, how should we prioritize them and what should we take from where. Here are the funding sources as I see them, excluding any merit scholarship money we might get:

  • Student Savings. Savings accounts of the student, set aside in the student’s name for college.
  • Subsidized Federal Direct Student Loans. Loans where the government pays the interest while the student is in school; student begins repayment of accrued interest and principle six months after graduation. Current rate: 6.8%
  • Unsubsidized Federal Direct Student Loans. Similar to the above, except the student is responsible for all interest.
  • Savings Bonds. Mostly issued in the parents name, payable on death to the student, but can be gifted to the student.
  • California Scholarshare. Money accumulated in a 125(b) 529 account.
  • Parent Savings. Money the parents have in, essentially, cash or near cash accounts.
  • Parent Loans. Usually the Federal Direct Parent Plus Loans. Repayment starts 60 days after final loan disbursement for the year, although payments can be deferred while the student is in school. Interest accrues. Current rate: 7.9%.

Other factors to consider: Interest makes the overall cost of education more expensive, so a loan with a rate of 6.8% means that the school costs are 6.8% more than if you paid cash. If you can’t earn enough to cover that, you may be better off paying cash, if you have it. Further, there are origination fees of 1% for all Federal Direct Loans to students, and 4% for Direct Parent Plus loans. This makes loaned money more expensive.

Some additional factors: I know there is a tax write-off for tuition expenses, but I’m not sure how you get it. I know that student funds are “taxed” at a higher rate in the FAFSA form, so spending those down faster might mean more money in subsequent years. Savings bonds, if gifted, will probably be taxed at a lower rate; if they haven’t maxed out on interest, they are still earning good interest. Doing some level of student loans is a good thing — especially if you pay them off early — for it does wonders for the student’s credit rating. Also, if you pay them off quickly, the overall interest expense is lower (at least I believe student loans are simple interest and not amortized, like home loans). On the other hand, you don’t want to come out of the process saddling the student — or the parent — with excessive loans.

Here’s the ultimate question: given all these factors, what is the best approach to take in terms of what amounts to draw from what accounts. For example, the answer might be: The parent pays the maximum deductable tuition credit, and then turns to subsidized loans, paying them off that year. Scholarshare is used next, followed by Savings Bonds. Next is cash on hand from both parties, followed by unsubsidized loans. Now, that’s just a guess. I’m going to be asking my tax adviser on this, as well as the college planning folks, but I thought I would get your opinion as well. Those who have been recent students: What is the best approach?




In Which A Decision Is Confirmed…

Looks like I’m going to have to make a Cal (UC Berkeley) userpic.

Yup. Today we did our whirlwind visit of Berkeley. Left Northridge around 3am, going up US 101 because I-5 was closed due to snow. Arrived at Berkeley around 11am. A friend of Karen’s from HS Science Camp days, Professor Alex Filippenko of the Astronomy Dept (who’s brother also works at the Ranch) arranged for Bianna Mullen to give us a tour of campus. We walked around campus. We saw wonderful buildings, learned about even more wonderful programs, saw students covered in paint (it was evidently some Hindu holiday where you throw paint at each other) and saw dormitories. More importantly, Erin fell in love with the campus and its programs, even more so than she did with Reed. So I’m going to be a Cal Dad, and she’s going to Berkeley!

We left campus around 3pm, had dinner in Santa Nella, and arrived home around 10am via I-5, which showed no trace of snow.



Selecting a College

We just received the college financial analysis from our college planning folks. Their two “cheapest” colleges were:

  • Occidental. CPA has the cost of attendance as $58,432, but the college claims it as $60,633. The college is offering $15,500 in grants and scholarships, $12,500 in an Occidental “no interest” loan, and $5,500 in a Federal unsubsidized loan, bringing the costs for the parents supposedly to around $24,900 (perhaps a bit more). But note that a large portion of this is loans.
  • UC Berkeley. They aren’t offering anything. They have an estimated cost of $31,868 per year, and “offer” that same $5,500 in student unsubsidized loans, leaving the parents with $26,336.

In other words, the parents costs for both are about the same; in fact, Oxy is more expensive for the parents if you use their total estimated expense number of $60,633. Plus, Oxy would leave Erin (a) saddled with more loans, for (b) attending a less prestigious institution. I think the decision is clear; she’s going to Cal.

To that end… this weekend is a roadtrip to Berkeley. If any of my friends reading this could offer some crash space for short naps in Oakland or Berkeley, please contact me.


Making the Hard Decision

Back when Erin was in 10th grade, we contracted with a local company that specialized in college planning to help us with the process. Our hope was that they could work the financial side of the equation to our best advantage to make college somewhat affordable without loans. Our goal would be to have it in the $18K to $20K range, after aid. We had confidence that our daughter would be able to get into the schools she wanted to get into. Merit scholarships were a possibility, but not guaranteed.

Over the years, her focus changed. First, she was interested in lighting design. Then US History … especially Andrew Jackson. Now it is US History, Political Science, and possibly Anthropology… with an interest in incorporating more pre-Columbian American culture in the school system. She selected her schools, and we did some school trips. Over the summer, we visited Tulane, Emory, Bellarmine, Wash U. St. Louis (WUSTL), Reed, and Portland University. Through her research, she identified other schools of interest: American, George Washington, Georgetown, Bard, Occidental. As backups, we included UC Santa Cruz, UC Santa Barbara… and one school that the college planning folks told us we didn’t have a lot of chances with: UC Berkeley.

On the financial side, I had some money that was tied up in an investment come up for reinvestment, I talked to the college planning folks, and they tried to convince me to put it into a particular annuity so that it would be retirement funds, and thus not subject to FAFSA issues. I researched it heavily, and it made me nervous. After months of examination, I finally decided not to.

We went into application season. Erin did her applications, and applied for a few scholarships. I did my taxes. The college planning folks filed the FAFSA and all the CSS profiles. We waited.

Results came back. Acceptances from UC Santa Cruz (with a $4K merit scholarship), UC Santa Barbara, American (with I think $15.5K), Occidental (again, about $15K), Bard (no merit, no financial info yet), George Washington ($15 K + Womens Leadership Program). Waitlists at WUSTL and Reed. Rejected from Georgetown. Lastly, we got an acceptance from UC Berkeley, and discovered that her HS F-ed up and didn’t get the transcript to Tulane. Erin’s favorites were George Washington and UC Berkeley (the one they told us not to apply to), with Bard in the next tier. None of these were schools we visited. So far, the strategy of going after private schools because they give more money really didn’t pay out in the long run.

The aid letters came next. From GWU…. no additional aid other than $5K loan. Berkeley was bubkis, but we expected that. So now we decide: a $60K private university with $15K in merit funds or UC Berkeley at $32K. GWU is a great school where she would make wonderful political connections, but potentially unaffordable. UC Berkeley is no UCLA, but it’s a great school nevertheless, has a wonderful reputation, and does work in pre-Columbian cultures. We got no need-based aid because we only have one kid and we make too much for the aid but not enough to really pay for things because we live in Southern California.

We are going to apply for some scholarships that are still open.We’re also going to contact the financial aid office at GWU and see if we can get some more aid freed up. We might also hear something remarkable from Bard.

If you have read this far, a few questions:

  • Presumably, one can still apply for the major merit based school scholarships as a sophomore?
  • I’ve heard rumors that the amount of aid a student might get increases after the first year (on the theory that they are more likely to then finish at the institution). Does anyone know if this is true?
  • I know I count a number of history majors amongst my friends, many coming out of UC Santa Cruz or UC Davis. Does anyone know how the history department is at UC Berkeley, and how marketable a Cal degree is for History or Anthro? Might anyone be willing to “show us around” if we could figure out a day to fly up and back?
  • What are your thoughts on this process?

We intend to continue looking for small scholarships, as they won’t hurt us for need-based aid, and shouldn’t hurt the merit aid at this point (as continuation of that is based on grades). As for my attitude regarding the college planning folks: on the plus side, they did help us file the financial forms, which was a big help. They didn’t help on the need-based aid side, and we really wish that if they thought we would get little need-based aid, they would have helped steer us to the most likely other scholarships.

Music: … between recording albums … next up Live Concert at the Forum (Barbra Streisand)



Decisions, Decisions

It’s that time of year. Seniors need to decide on their college. Erin too. For her applications, she thought she wanted to go away to school. But now she’s having second thoughts, and has decided to go to a local community college for a year while she figures things out. Perhaps she’ll be a CSUN alum like her mom.




OK, the part about community college was just April foolin’. But it is college decision time. We’ve heard from all of the school we’re gonna hear from. She’s accepted at UC Santa Cruz, UC Santa Barbara, UC Berkeley, American University (DC), Bard (NY), George Washington (DC), and Occidental. She’s waitlisted at Wash University St. Louis and Reed. She was rejected by Georgetown. Tulane, it turns out, never got her transcript :-(, and there’s nothing we can do about that now.

The leading candidates (depending, of course, on the financial packages offered) are: George Washington, UC Berkeley, and Bard. All are very different than each other. Remember: Erin’s current inclination is History and Political Science, perhaps with some anthropology thrown in. Bard is a small liberal arts campus in the middle of nowhere (90 min NW of New York), much like Reed. UC Berkely is a state-school, a commuter campus with a great reputation and excellent academics… but large classes. George Washington is in the heart of DC, next to the White House and the State Department, in an urban setting with non-urban facility about 30 minutes away on 26 wooded acres. GWU is the current favorite, but it all depends if we can swing the finances (as an aside, I’ve heard a rumor that you get more financial aid the 2nd year on, as you are more likely to finish with that college’s degree and give them a better return on investment… that might make it reasonable to spend more year 1).

As a dad, independent of the financial issues, I’d prefer GWU or Berkeley. For GWU, I have numerous friends and colleagues in the DC, Virginia, and Maryland areas that I know with strong confidence would be my local parental (or grandparental) representatives if she needed something. Berkeley is similar: we have so many friends in the Bay Area that would watch out for her. In terms of a future career with a history degree, GWU wins out here because of the internships she could get and the connections she could make. Berkeley is a close second. Bard is unknown.

The financial packages come out in the next two weeks, so here is hoping we get something that makes this all work, demonstrating the universe is behind a particular choice. It is interesting how this all worked: she has been accepted into none of the schools we visited on our college trips this summer, and other schools she thought would be right have turned out not to be ideal, on second thought. The whole college selection and application process seems to different than how I remember it to be in the 1970s. Back then, I think I just applied to the UC System (UCLA, Berkeley, and San Diego) and to USC, and didn’t think about the rest. Perhaps I applied to Wash U as well to make my mother happy… I don’t remember. Nowadays, there are just so many choices to investigate and so many financial considerations. It’s just a hard decision.

As always, thoughts are welcome.

Music: Color Me Barbra (Barbra Streisand): One Kiss



That Phase is Done

All of Erin’s college applications are in. Now the onus (and the good folks at College Planning) is on me to finish to financial aid application side of things. In case you’re curious, here’s the list of schools, in no particular order: American University (DC), Bard College (NY), George Washington University (DC), Georgetown University (DC), Washington University St. Louis (MO), Tulane University (LA), Occidental University (CA), Reed College (OR), UC Santa Barbara (CA), UC Santa Cruz (CA), and (oops) UC Berkeley (CA). The waiting begins…


College Sticker Shock and Other Notes

A late lunch today; I’ve been busy. Still, I’ve collected quite a few articles related to college stuff: