Students face some tough challenges in college, but Money management is perhaps the toughest. Sure, the coursework is more intense and the social scene is completely new – but you’ve made friends and passed tests before. Money management is the one thing that most students never experienced living under mom and dad’s roof. Money management can make or break you in your first few years of college. If you flunk out of Sociology 103, you can take it again next semester. If you bomb on money management, you may packing your bags and heading home. In fact, just as many students drop out of college because of debt as they do for grades.

With ample opportunities to eat out, party and spend freely without the glares and spending lectures from your parents, you need to keep your spending in check. Or else in your sophomore year you will realize you don’t have enough money for books, beer or rent.

Too many college students wait until the well runs dry to start thinking about money management. At this point, most likely it’s too late. Instead of struggling to make ends meet when times are desperate, begin now.

MORE >>>> http://globaleducationsearch.com/online-degree-articles/college-students-and-money-management/

Students today are getting an increasingly raw deal. The recession has affected young people across the board. Graduating students must contend with serious job shortages across almost all industries, while younger students are being shaken down for even more cash.

Yahoo news reports that the average cost of tuition at a public four year college has risen 6.5% this fall. Their findings are conveyed in the College Board’s “Trends in College Pricing” report, released on Tuesday. The cost of a year at a private college, already notoriously expensive, has risen 4.4% to $26,273.

These prices, while average, are variable. Some students attending schools in California, Florida and New York have seen increases that double the average. However, more positive effects of the recession have been felt; the University of Maryland has frozen their tuition costs and some students found they paid considerably less when factoring in financial aid. When including financial aid, the costs of an average year at college remain higher than last year, but lower than five years ago, proving that the recession may have scared some colleges into cheaper costs, encouraged more students to apply for financial aid or raised the financial aid available. A companion report shows that there were increases in financial aid from the government and after financial aid; community college is virtually free to the 40% of the college popular who attend.

MORE >>>> http://www.top-colleges.com/blog/2009/10/20/up-up-and-away-college-tuition-rising-to-unreachable-heights/

Amid worries about job losses and problems paying the mortgage, many American families are facing another financial crisis: How to pay for college.

There’s no doubt a college education will be a necessity in the economy that emerges from the current recession. Even though a college degree can’t prevent a layoff, it will give an edge for the jobs of the future.

But what if American families can’t afford college? After all, in spite of the economy, college costs continue to rise. It’s now estimated that the four-year cost of college will be $124,000 for today’s high school seniors, with many private schools costing much more.

The College Board, which tracks average college costs, won’t release its report for the 2009-2010 school years until late October. But in 2008-2009, public college costs increased an average of 6.4 percent, and private school costs rose 5.9 percent. For years, these costs have risen far more than the most traditional measures of inflation.

A new survey by Fidelity Investments finds more parents have started saving for college. Even so, families can cover only 11 percent of the total cost of their children’s college education this year, down from 15 percent in 2008.

Families are resorting to drastic measures, according to the survey. Seventeen percent plan to have a nonworking spouse return to work, while an equal number hope to take on a second job. Half plan to have their child live at home and commute. And 43 percent of parents say they will have to delay retirement to help pay for a child’s education.

Even students are changing their tune, with 90 percent saying they believe they should help pay for at least some college costs, either out of their own savings (42 percent) or by working while in school (76 percent).

The good news, according to the survey, is that parents and students are more aware of the need to save, many taking advantage of tax-free 529 college savings plans. (A reminder here that if you want to invest outside your state’s savings plan, you can go to Fidelity or Vanguard and open an account there. You simply forgo any deduction on your state income tax for your contribution if you invest in an out-of-state plan.)

What are colleges doing?

If families are doing their best to save for college, it’s only fair to ask what colleges and universities are doing. State university tuition increases have been rising faster than those for private colleges. And the outlook is gloomy. Every state is facing budget nightmares because of the recession. The big allocations to public universities are a tempting target. In fact, many parents complain that their rising tuition bills are just being used to make up for cuts in state support.

Private schools rely on income from their endowment funds, many of which have shrunk dramatically in the market decline. They’re usually loathe to dig into principal — especially when they’re hoping for more of a stock rebound.

Colleges have not traditionally been run as a business. Few businesses offer job security like “tenure” — except for federal bureaucrats and the U.S. Postal Service (two “businesses” that continually lose money).

And few businesses can survive without reacting to market forces by cutting less-profitable product lines. Yet universities continue to offer marginal courses in the name of a “broad and diverse” education. Take a look at your child’s course catalog, and you’ll see what I mean.

Certainly, universities have rising costs of maintaining their buildings, classrooms and libraries. But university “management” and board supervision may be more focused on the profitability of the football team than the kind of prudent cost-cutting every other business faces these days.

In an era when “everyday low prices” or discount stores are the only places consumers will shop, why don’t colleges get the message that their customers cannot afford their rising prices?

How long will it take until universities recognize that their “customers” are no longer willing, or able, to go into debt to buy their educational product?

Only when market forces teach the lesson of responsible pricing will college become more affordable. Let’s hope that will not be too late for a generation of students who will be sidelined because they simply can’t afford college now.

Losing today’s students would have a terrible impact on America’s future economic growth. And that’s The Savage Truth.

source: http://www.speroforum.com/site/article.asp?idCategory=34&idsub=127&id=20612&t=Colleges+Must+Cut+Costs

The most galling thing about the state of Texas rescinding its refund policy on its oldest prepaid college tuition plan is not the broken promise.
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It’s not even the use of fine print to change the terms of signed contracts more than six years after the deals were struck.
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No, the most appalling aspect of this administrative sleight of hand is that the state wants to be paid for not doing what it said it would do.
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When the Texas Tomorrow Fund was started, it promised parents if they had to cancel a prepaid tuition contract, possibly because a child didn’t go to a state school or received a full scholarship, the fund would provide a payout based on current tuition and fees at public universities.
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That incentive made investing in the fund a no-lose proposition for parents with young children and the means to prepay college tuition. Everything families put into the fund, plus more, would be returned even if they canceled the contract.
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But now the managing board for the fund, which has been closed to new participants since 2003, has voted to renege on the refund rules.
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No word on interest
Starting Nov. 1, parents who signed up for the fund between 1996 and 2003 and who cancel contracts will only be reimbursed what they paid into the fund, minus about $36 in administrative fees for every year the money was invested in the fund.
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Texas, which has had the use of these people’s money for as long as 13 years in some cases, wants to charge them a fee for using their money. Notice, the state is not saying a word about paying them any interest.
So basically, anyone who cancels one of these contracts after Nov. 1 would have done better putting the cash they “invested” in the prepaid fund into an empty jar instead.
Upset families
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“I would not be surprised if some upset families file an action about this,” said Mark Kantrowitz, publisher of FinAid.org, a Web site on student financial aid. “They should start writing letters to their state representatives now to get this changed.”
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Joe Hurley, founder of SavingforCollege.com, said the Texas action besmirches the reputation of all state-sponsored college savings and investing vehicles, commonly called 529 plans.
What you can do
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Folks with these contracts do have some other options:
• Stay in the fund and insist your child attend a Texas public university.
Even if the fund runs out of money, which it is predicted to do in the next decade, the plan is backed by the full faith and credit of the state as written in the Texas Constitution.
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The prepaid fund that was created to replace Texas Tomorrow does not have that same guarantee.
“If your kids get scholarships, try to hold on and use the money for graduate school,” said state Sen. Rodney Ellis of Houston, who bought prepaid tuition contracts for his children.
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• Cancel the contract before Nov. 1 and invest the payout in a 529 college savings account.
Unlike the prepaid plans, the savings accounts are similar to retirement funds that give you control over how the money is invested. And those who do not want to think too much about investment strategies can place the money in funds that change the asset mix as a child ages so it becomes less risky over time.
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“The rule of thumb on shopping for 529 savings plans is you look at both your own state’s and any other state that has fees of less than 1 percent,” Kantrowitz said.
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No state income tax
You look at your own state’s plan so you can take full advantage of any state income tax breaks that may be available. Since Texas does not have a state income tax, feel free to search the country for the best plan for you.
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The refund policy was too generous to begin with, and the change in the policy, maddening as it may be to participants, will fix only a small part of the college fund deficit going forward.
Texas is still grappling with how it’s going to get the program out of this deep hole.
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source: http://www.chron.com/disp/story.mpl/business/buggs/6616921.html

John and Michelle Kazanjian, small-business owners in Ann Arbor, Michigan, and parents of five girls, are lucky their daughters are as industrious as they are. But the couple still needs to find ways to pay for college — and soon.

Fortunately for their parents, the older Kazanjian girls have won generous grants: Ani, a senior at Johns Hopkins University, has an ROTC scholarship. Mary Beth, who just graduated from Hillsdale College, had a scholarship covering 50 percent of expenses and entered as a sophomore, thanks to Advanced Placement courses and college credits she had accumulated in high school. And Gina, a high-school junior, just qualified for a National Merit Scholarship. (The younger girls are 15 and 11.)

That said, most parents overestimate their children’s ability to win these financial awards, according to Mark Kantrowitz, publisher of FinAid.org and director of advanced projects at FastWeb.com, a scholarship search service. Only one in 10 full-time students at four-year schools gets private scholarships, and their average total is $2,815. And even the most generous scholarships are unlikely to cover college costs completely.

MORE >> http://moneywatch.bnet.com/retirement-planning/article/catch-up-on-college-savings/339425/

Saving for college is always difficult and is even more so during the current economic downturn. One of the most popular college savings plans are so called “529 plans.” The IRS recently announced that participants in 529 plans will be able to change their investments more often in 2009 than in past years. The IRS will allow a change in investment strategy twice in 2009. This is good news for 529 plan participants, especially those who may otherwise be locked into a mix of investments that has turned out to be more speculative than initially contemplated.

Tax-Free Distribution A 529 plan is qualified tuition program. By contributing to a 529 plan, taxpayers contribute to an account established for paying a student’s educational expenses. Eligible educational expenses may include the costs of tuition, books, and fees at eligible institutions, such as colleges, vocational schools, and other ostsecondary institutions.

Contributions to 529 plans are not tax-deductible, however, although earnings are tax-free, and distributions used to pay the beneficiary’s qualified education xpenses are tax-free.

A 529 plan should not be mistaken with a Coverdell Educational Savings Account (Coverdell ESA). The latter is also a savings account for education expenses that offers tax-free distributions, but funds saved in a Coverdell ESA can be used for elementary and secondary school expenses as well as college costs.

Investment Choices Generally, participants in 529 plans must select only from among broadbased investment strategies designed exclusively for the program. Now, the IRS has traditionally permitted a change in investment strategy only once a year.

Because of the economic slowdown and the turmoil in the financial markets, the IRS will allow investments in a 529 plan to be changed during 2009 on a more frequent basis. A 529 plan won’t violate the investment restriction if it permits a change in the investment strategy twice in calendar year 2009, as well as upon a change in the designated beneficiary of the account.

source: http://www.supremearticles.com/irs-eases-investment-rules-for-529-college-savings-plans

The government’s new student loan reform plan gets good grades from graduates with low-paying jobs struggling under a lot of debt. But it’s on probation from some borrowers, including married couples and those who will be subject to a new tax liability.

The Department of Education’s income-based repayment program, which went into effect July 1, is designed to make to make repaying student loans more manageable and could even result in debts being forgiven for some borrowers.

Under the program, a borrower’s monthly student loan payment is tailored to their income, debt load and family size. The aim is to make loan payments less of a strain on cash-strapped households.

An unfortunate dilemma: For married couples who file taxes jointly, the program compares the couple’s combined income with the individual student loan debts of each spouse. In some cases, this means one or both spouses could be ineligible for the program, since their combined income looks high relative to their individual debts.

“Married borrowers who file jointly have an unfortunate dilemma,” said Lauren Asher, president of the Institute for College Access & Success, a non-profit advocacy group that seeks to make higher education more affordable. “They could face payment caps twice as high as couples that files taxes separately or (someone who) is not married.”

For example, a family of four in which both spouses earn $30,000 would not qualify for the program if they each had $25,000 in student loans. That’s because their individual debts are smaller compared to their combined $60,000 income.

However, an individual with $25,000 in student loans and an adjusted gross income of $30,000 could see his or her monthly payments reduced by 40% under the program.

But if a couple files taxes separately, they could miss out on other benefits meant for married couples, Asher said.

The Department of Education said it has agreed to revisit the rules for married couples and could amend the program in July 2010.

Forgive and forget?: In some cases, the program makes it possible for borrowers to have their loans forgiven after 25 years, and graduates working in public services fields could see their debts canceled after 10 years.

The potential for loan forgiveness is one of the program’s main attractions. But a borrower who meets the requirements for loan forgiveness after 25 years could get hit with a bill from the IRS.

Under current tax laws, the amount of student loan debt discharged after 25 years in program is considered taxable income. For those working in public service, however, forgiven student loan debt is not taxable.

“Most people will be able to pay off their debts within the 25-year window,” Asher said. “But saddling those who can’t with a tax liability is unfair.”

A bill working its way through Congress would make forgiven student loan debt exempt from taxation.

An improvement: To be sure, many struggling graduates will benefit from the program.

“This is really good news for consumers,” Asher said. “With a simple process, a borrower can get their loan payments under control, stay in good standing and know that if they fall on hard times it won’t ruin them.”

Of course, making a smaller monthly payment means the life of the loan is extended, which could result in higher interest. Also, the program does not cover loans made to parents and those not subsidized by the government.

Still, the program will result in savings of $458 a month for one borrower. The 41- year-old Seattle resident, who asked not to be named, said the monthly payment on her $120,000 debt will be reduced to $451 from $909 under the new plan.

“This repayment option is making my student loan seem manageable for the first time ever,” the borrower said. “I was worried that I’d end up going into default over my student loans, now there’s a light at the end of the tunnel.”

What’s more, the program could help encourage students to pursue traditionally low-paying careers in public service, such as nursing, education and the military.

“Under this new program, students no longer have to choose between serving their nation and communities and tackling a mountain of college debt,” said Sen. Edward Kennedy, D-Mass., in a statement. “Our nation is better and stronger when the best and brightest young Americans choose careers in public service.”

Michelle To, who will borrow $260,000 to pay her way through medical school, said the program helped convince her to become a primary care physician.

“Every doctor I’ve shadowed talks about being in debt for the rest of their lives,” said the 24-year-old Los Angeles native. “I wasn’t sure I wanted to make that step.”

To, who starts medical school later this year, said she hopes to work for a non- profit organization after she graduates, and that she expects to earn about $170,000 a year. With her debt load, that means To would probably qualify for the program.

“If not for this program, I’m not sure what I would do,” she said. “It’s a huge weight off my shoulders.”

source: http://money.cnn.com/2009/07/14/news/economy/student_loans/index.htm?section=money_pf_college

Stock brokers and brokerage firms are being warned by the Financial Industry Regulatory Authority (FINRA) to rethink their selling strategies of 529 college savings plans. At a recent compliance meeting in Florida, FINRA reportedly urged the brokerage community to step up its due diligence of 529 plans, as well as assume responsibility to watch over money managers associated with the plans.

In recent months, 529 plans across the country have faced increased scrutiny from state and federal regulators. In April, Oregon sued OppenheimerFunds, charging the money manager of understating the risks it took with a fund in Oregon’s college-savings plan. The fund was the Oppenheimer Core Bond Fund, and Oregon is suing OppenheimerFunds for losses totaling $36 million.

The Oppenheimer Core Bond fund lost 36% in 2008, compared with the benchmark index, the Barclays Capital Aggregate Bond index, which rose 5.3%.

Five other states – Illinois, Maine, Nebraska, New Mexico and Texas – currently are investigating whether OppenheimerFunds breached its fiduciary duty to investors in state-sponsored 529 plans when it failed to disclose the fund’s exposure to risky mortgage-backed securities and derivatives. In June, the Illinois treasurer’s office announced a tentative agreement to recoup $77 million from OppenheimerFunds. All five states are in talks with the company, according to a July 9 story in Pensions & Investments

source: http://www.investorprotection.com/blog/2009/07/14/finra-tells-brokers-to-revisit-selling-tactics-of-529-college-savings-plans/

The economic stimulus plan that was passed earlier in 2009 increases the maximum Pell Grant, from $4,731 currently to $5,350 starting July 1 and $5,550 in 2010-2011. This Federal Financial Aid Grant is intended to help the lowest-income students attend colleges or universities. The maximum grant should cover about 75% of the average cost of a four-year college. The plan also increases the number of students who will be eligible. In fact, now, 800,000 more students, or about 7 million, may qualify for Pell Grants.

In addition, the 2009 economic stimulus package increases the tuition tax credit to $2,500 and makes it 40 percent refundable. Due to this boon, families and individuals who don’t make enough to have to pay income tax could still get as much as $1,000 in extra tuition help.

Better yet, computer expenses are now an allowable expense for 529 college savings plans – a big positive for online degree seekers!

The package spends an estimated $32 billion on higher education – so don’t get left behind. Take advantage of the benefits offered to help you get ahead.

Unemployed? Think you may be out of a job soon? It makes sense to start increasing your credentials now. When you have earned your college degree, you’ll be able to find better jobs with higher pay.

Find out more about what is available for you and get started earning your college degree.

source: http://www.toparticlesdir.com/reference-education/economic-stimulus-plan-increases-help-for-college-tuition/953

With higher education costs increasing at double digit percentages an effective college savings plan for your kid’s education is becoming much more critical. Most parents will find that their kid’s future college costs will be much more than they have planned. This leaves many kids to be faced with obtaining financial aid to compensate for a portion of their higher education costs. This article will explore the pros and cons of 4 common college savings options. This article will also seek to show which of these 4 options are a better option if part of your kid’s higher education costs are to be funded by financial aid.

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529 College Savings Plan: Since January 2002, 529 college savings plan have become a new option for achieving tax free college savings. These plans are state sponsored investment programs that offer special tax treatment. It allows just about everyone to save for their kid’s college education. While there are many benefits of a 529 college savings plan, perhaps the most important is that your investment eaings are tax deferred if you use the funds for qualified education expenses. Additionally, another big advantage is that the maximum amount you can contribute to a 529 savings plan can go as high as hundreds of thousand dollars but be aware these are based on your States specific guidelines. If for some reason you do not use the investment funds for college, you can still withdrawal your investment eaings, but you will have to pay a federal penalty of 10% and federal income taxes on your eaings. The penalty can be waived if your child receives a college scholarship, or in the event your child becomes disable or dies.

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A 529 plan can typically be easily purchased through an investment broker or mutual fund company like Vanguard or Fidelity. Please be aware that one of the biggest disadvantages of a 529 plan is that investment options can sometimes be limited. However, as 529 plans become more popular it is likely that more plan options will open. For instance, the State of Ohio just announced the option for bank CDs and saving accounts for 529 plans. One last main advantage of a 529 college savings plan is that the money in the plan is classified as a parents assets so less that 6% of the value counts against your kid’s eligibility for financial aid.

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Coverdell Education Savings Account (CESA) (formerly known as an Educational IRA): A Coverdell Education Savings Account is a savings account created as an incentive to help parents and students save for higher education expenses. A Coverdell Education Savings Account is easy to set up at most financial institutions and banks. A Coverdell Education Savings Account is similar to a 529 college savings plan, but different in the contribution limits. With a Coverdell Education Savings Account you can only contribute $2000 per child per year and to qualify your adjusted gross income must be less than $110,000 if you are single and less than $220,000 if you are married filing jointly. For financial aid eligibility a Coverdell Education Savings Account is classified as a parent’s asset so less that 6% of the value counts against your kid’s financial aid eligibility.

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UGMA/UTA Custodial Account (Uniform Gifts to Minors Act/Uniform Transfers to Minors Act): A UGMA/UTMA account allows someone to make gifts to a minor without setting up a trust. While there are benefits to a UGMA/UTMA account the first limitation is that these types of accounts offer very little federal tax advantage. Secondly if your child is 14 or under only the first $800 of income is tax free, the next $800 is taxed at your child’s tax rate and after that there is no tax benefit at all. The other big disadvantage is that an UGMA/UTA Custodial Account has to be set up in your child’s name. This can create a big problem if your child needs financial aid since all of the assets will be reviewed at a 35% rate. As a result, a UGMA/UTA Custodial Account is not advisable for those who may need to qualify for financial aid eligibility. The main advantage of a UGMA/UTA Custodial Account is that there is no limit on the investment contribution and it is very easy to set up at most major financial institutions including some insurance companies. However, as can be seen above the disadvantages of a UGMA/UTA Custodial Account far outweigh the benefits.

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Taxable Investment Accounts: Taxable investment accounts can be a broker account, a mutual fund, a certificate of deposit or just a regular savings account. Essentially it is just a regular account that eas taxable interest, or investment income. A benefit of a taxable investment account if set up in the parents name is that the assets are classified as a parent’s asset so they do not count as a negative in the financial aid formula. Additionally, taxable investment accounts offer lots of flexibility, and are easy to set up at any financial institution. However, the big limitation to taxable accounts in saving for college is that they offer no tax advantage for college savings.

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In summary, a solid savings plan for college is a very important undertaking for parents to consider. The above 4 education investment options can be highly useful in the college planning process. Furthermore since some of these investments offer substantial federal tax advantages and do not count against financial aid eligibility they can maximize parent’s investment resources.

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source: http://simplycreditmortgage.blogspot.com/2009/07/your-child-s-college-education-savings.html