College Archives - Lazy Man and Money

This is How Bad the Student Loan Epidemic Is

July 13, 2017 by Lazy Man 11 Comments

Every few months I feel the need to share another story about how bad student loans have gotten. I find it interesting because for the first 5-7 years of writing this blog, the topic didn’t even occur to me. A few other personal finance writers would write an article or two, but I don’t remember reading much before 2010. Some advertisers asked me to write about student loans and I’d pass.

I didn’t feel qualified to write about student loans. I was blessed with a full scholarship. I didn’t have any clue how the system worked.

Fast forward to 2017 and it’s hard to stay away from the student loan news. Today, I wanted to share one instance of silver-lining to the student loan dark cloud.

“The system is broke and makes no sense!!”

A few weeks ago, NFL cornerback Logan Ryan announced something unusual on his Instagram. He paid off $82,000 of his brother’s student loans. Here’s what he wrote:

“Surprised my big bro and paid off his student loans for his 29th Bday!! My man got accepted to college, graduated with honors, and now works as an engineer. He did everything the right way and still lives with a ridiculous amount of student loan debt. The system is broke and makes no sense!!”

That’s a very nice thing that Mr. Ryan did for his brother. Of course Mr. Ryan signed a $30 million dollar contract for 3 seasons. On the surface, this isn’t too dissimilar than an athlete making millions and buying a new house for his parents.

However, let’s breakdown what we know (or at least what we are lead to believe):

His brother graduated with honors.
His brother graduated with a STEM degree.
His brother is 29 years old. (We’ll presume he’s been out of school for 5+ years).
His brother had $82,000 in loans (the check amount).

That’s a lot of student loans to have left after that long with what would seem to be a distinguished, high-paying degree/career. Logan Ryan is right, the system is broken and it doesn’t make any sense. It doesn’t take a financial expert to see it.

I wish there were a way to get some politicians elected who could help make things better. Just a few days ago, the LA Times wrote that “It’s Betsy DeVos’ job to protect students from predatory for-profit colleges. She should do it”. It’s so bad that nearly 20 states had to sue her andn the Department of Education over what she’s doing to prevent students from getting helped by what the times says is, “the worst fraud in the higher education.”

It is hard for me to wrap my head around so many states suing a government agency because the agency wants to protect companies committing alleged fraud. It makes as much sense as fire trucks going around burning down houses.

Sorry for the rant, let me reel myself in and close with a few words about Logan Ryan. He played for the New England Patriots until he was signed by the Tennessee Titans as a free agent. As a fan of the Patriots, I came to appreciate the stuff he did off the field. He’s been extremely active in rescuing dogs, which regular readers know is a cause near and dear to me. I hope Titans appreciate his performance on and off of the field as much as I did.

Past, Present, and Future

May 29, 2017 by Lazy Man 2 Comments

I’ve never liked click-bait titles. You know, those kind of titles that end with, “… and you won’t believe what happened!” I am almost always disappointed because the “unbelievable thing”, wasn’t so unbelievable.

So today, I’m going to do the opposite and start with the most boring title I can think of. By setting the expectation low, I can’t help but surpass it, right?

We’ll start with:

The Past

It’s Memorial Day in the United States. For many it is a time to reflect on the people who gave their lives for our country. For some it is an excuse to drink beer and eat burgers. If you are in the later group, I hope you spend some time reflecting on why we have the holiday. Having an appreciation might make your beer and burger taste a little better.

It’s tempting to write a whole blog post about Memorial Day, but this site is about personal finance. There are some great military blogs and news sites that will do a far better job than I will

The Present

Long weekends are great for my dog sitting business. It was looking bleak for most of the month, but in the last week, we booked up completely. I even had to turn away a couple of dogs. (That’s always a heart-breaker.)

We’ve had a lot of rain this weekend, so I haven’t gotten out much. I’m a long ways away from The Shining territory, but I am starting to feel a little trapped. My 4-year old suggested that we play memory for Memorial Day. I liked his logic. The four of us played and my wife cheated by using her photographic memory. She got twice the matches I did. I got twice the matches my 4-year old did. And the 4-year old got twice the matches my 3-year old did. Sounds like an SAT problem.

The rainy Memorial Day weekend is significant for our local economy. We get a ton of tourism and Memorial Day is the unofficial start of summer. (Shop owners can in some ways say, “Happy Memorial Day!” and not have it sound weird. This is when they make most of their money.) With the rain, people didn’t come and didn’t spend money. I’ve seen restaurants gut their staff after such a hit.

The Future

Today is also 5/29. For personal finance blogs like this one, it is a significant date. It’s an annual reminder to those of us who have kids that we might want to contribute to their 529 Plan.

If you are new to 529 Plans they are tax-advantaged way to save for college. They almost work like Roth IRAs where the money grows and comes out tax-free. That’s a decent tax perk. In my state, Rhode Island, we can also deduct up to $1000 from our taxes per year. Since we are saving for our kids college anyway, it makes sense to do it this way.

It seems that Rhode Island has another tax perk that could prove very interesting. It seems that a couple is allowed unlimited carry over of this deduction. I understand this to mean that if we put in $40,000 today we could deduct $1000 off our taxes for the next 40 years. I need to consult my tax advisor on this to make sure I understand it correctly.

If that’s true, it is not too shabby to have that tax deduction hanging around. Of course, who knows if we’ll live in Rhode Island or be alive in 40 years. The only downside is that a $1000 state tax deduction may only amount to a $40-60 savings each year at Rhode Island’s correct tax rates. Hmmm, that’s not too exciting after all.

It is a little dated now, but 10 years ago, I wrote a brief guide to choosing a 529 plan. The main ideas are still helpful, but the specific numbers for the states probably have changed.

I found that if your state offers one with some tax deduction (like Rhode Island), usually that’s the way to go. If your state doesn’t (California didn’t when I lived there), it may be best to explore another state’s plan. Back in 2007, I decided that Ohio’s was the best fit for us. I still have a couple of accounts with them today.

However, you choose to spend today, I hope it is meaningful to you.

Rhode Island Promises Free College – Let’s Discuss

January 17, 2017 by Lazy Man 2 Comments

I live in Rhode Island. It’s no secret that it’s the smallest state. The population isn’t much bigger at around a million people. Compared to Massachusetts and California where I’ve lived before, not much happens here.

Last night the local news mentioned that Rhode Island would be eligible for free tuition at all of its state schools. The tuition is regardless of family’s income level. The student, for the most part, has to be stay in good standing and be on track to graduate on time with the school.

One more thing… only two years of college would be covered. If a student wants to pursue an associate’s degree at CCRI, tuition is straight-up free. If the student is going to a 4-year school like University of Rhode Island, he/she would get the 3rd and 4th years tuition-free. The idea is to make sure students have some “skin in the game.”

There’s an official page about Rhode Island’s Promise Program with all the details if you are interested. It may be easier to read this news report of some common questions.

This is potentially BIG news for us. While I jokingly like to say that Harvard and Stanford are “safety schools” for our boys, state college may end being a great option for them. It’s perhaps possible to combine it with my wife’s GI bill that gives 4 years of free tuition. Since that can be divided between both boys, it would cover their first two years.

The end result would be completely free bachelor degrees for our two boys. One of our biggest expenses would disappear.

It’s another reminder that college planning is impossible.

Rhode Island Promise Program Isn’t Without Controversy

From my reading Rhode Island’s Promise program is extremely likely to pass as it has strong government support.

I was following some of the Facebook chatter and people had very strong opinions against the plan.

Most viewed it as a hand-out funded by taxpayers. I would ask that everyone read this article on subsidies. I think it would be hard to find someone who hasn’t taken advantage of a hand-outs/subsidies.

Still, those people aren’t wrong, taxpayers would pay for this plan just like they pay for many, many things. Governor Gina Raimondo makes the point that the $30 million estimated cost is a drop in the bucket for the state’s $9 billion budget. If you think about it, it’s Clayton Kershaw’s salary for throwing a baseball each year. It is an estimated $30 for each person in Rhode Island a year.

Other people simply didn’t think it was a fair plan. They were upset that they had to pay their own way. I can understand this, but at the same time, things change. My first mortgage was nearly 6% and people in recent years got them around 3%. I’d caution these envious people to try to look at it as a change for the better.

Still more point out that it isn’t limited to people of low-income. If your family makes $200,000 a year, you can still get the program. I don’t have an answer as to why they wouldn’t limit it to people of economic need. Perhaps because it’s a drop in the budget, it isn’t worth it to have some left behind or create a complex phasing schedule.

Why Rhode Island Promise Program Is Great

Did you read the part above about my boys getting free bachelor degrees? Okay, seriously here are a few good things:

A College Degree is Necessary Nowadays
It used to be that a high-school degree was the norm and a college degree got you into the management positions. Nowadays, college degrees are much more common. It seems that a Master’s or higher is now needed to separate you from the pack of job applicants. We paid for the high school degree in the past for students to be competitive, doesn’t it make sense to pay for college now?

Students May Graduate on Time
Rhode Island has a bit of an education problem on its hands. Only 14% of students graduate from Rhode Island College on time. University of Rhode Island is at 49%. Since this program pushes students to be on-schedule with graduating on time, it is estimated it could help.

College Debt Suffocates Graduates
I previously wrote that college tuition seems to be in a bubble. Since a college degree is necessary, colleges can continue to raise prices and tell the students to just get more loans.

High student loans limit the ability of graduates to buy houses and cars, go out dinner and buy other things that help our economy.

Draws and Keeps People in Rhode Island
One of the things mentioned is that Rhode Island is heavily courting General Electric to have its headquarters here. It’s probably not going to be a key consideration for such a big company. However, a smaller company might find it easier to move their business to a state where their employees have the potential of some free tuition for their family.

Education Benefits Everyone
I was chatting with a friend about it on Facebook last night and he had a great thought, “I’m a fan of spending on education. A well-educated society benefits everyone.”

He pointed out that the people with degrees through this program may be less of a burden on welfare and other subsidies. I’m not a scholar on crime rates, but it took me 30 seconds to find this study, about how education reduces crime. Obviously crime costs taxpayer money in police, fire, and hospital resources.

I think it’s easy to see where I fall on the topic. Obviously, I’m quite biased on this particular topic because it greatly impacts me. Where would you stand if such a program were implemented in your state?

The Value of a Graduate Education

December 24, 2016 by Lazy Man 2 Comments

My wife was having a work meeting and they mentioned the value of The Yellow Ribbon program. That’s a military GI Bill benefit that can be used to pay for a child’s college education. Just when I think I understand most of the military benefits there’s something new. The Yellow Ribbon program deserves its own article, but that’s not what I wanted to get into.

As I was looking at schools that supported the Yellow Ribbon program, I saw that a number of them covered graduate and law schools. As a parent of a 3 and a 4 year old, the idea of affording college itself is entering our focus. I hadn’t even considered post-undergraduate studies. I like it that way, because… well I’m the parent of a 3 and a 4 year old. It feels like the time I presumed I would be able to teach them to speak Mandarin by age 2 despite the fact that I haven’t learned a word in 40 years.

It got me thinking…

What is the value of a graduate education?

My initial reaction is that it isn’t worth much. I don’t feel like I’m using my undergraduate degrees of Computer Science and Linguistics, even though they they are highly relevant to writing online. Also, IBM is happy to hire you without a college degree. However, as I look at my closest circle of friends, there are lawyers, doctors, director-level management and more. They all advanced degrees. I would also wager they make serious money… perhaps 6-figure number that starts with a crooked digit. Clearly, a post-undergraduate education meant a lot for them.

It seems that it all depends on what you are going to do with the degree afterward. Fortunately Business Insider has the the most useful graduate degrees and the the most useless graduate degrees (I noted lots of computer science in the later).

I think life’s twists and turns will lead the way… or as some like to call it, fate. There was a time when I looked into graduate school myself. I had my eye on a very select computational linguistics program at Carnegie Mellon. I flew there to meet with the staff and they were shocked that I made it through 3 feet of snow to see them… but not shocked enough to accept my application. It could have been that I wasn’t the best interviewer. It could have been that my GRE scores were disappointing. Unfortunately Preped didn’t exist back then when I needed it. I would have loved to have an app to help me with my GREs… I’m not a book/pen/paper person.

My biggest takeaway in thinking about this is that there’s a limit to how much advanced planning you can do. That’s a fundamental paradox of saving for very large education expenses. You never know how much you’ll need, if you need anything at all. It feels like the ultimate crap shoot. College is a big enough crap shoot without trying to figure out saving for graduate school at this point. I’ll settle for being mindful about whether it could potentially be a good idea when we get there.

What If Advanced Degrees Were a Tenth the Cost?

October 25, 2016 by Lazy Man 9 Comments

Everyone wants their children to have the best education possible, right? I saw an article about advanced degrees and it got me thinking about my 2 and 4 year old. (I look a lot further forward than most people.) The education of our 2 and 4 year old has been rolling around in my mind for the last several months. That’s why I’m writing about optimizing the FAFSA lately.

To get the best education, some people move to better school systems. Other people are crazy enough to consider private school. (Hello mirror, nice to see you!)

In the old days, the question was largely about if a child would go to college. Nowadays, that seems like a foregone conclusion (at least in my bubble). The biggest concern has turned to the cost of college. Again, since I look further ahead than most people, the idea of the potential cost of an advanced degree is rolling around in the back of my head.

This sounds the ultimate example of a first world problem, like a baseball team have 7 ace starting pitchers. We should be so lucky if our children (or ourselves) are in a situation where we can advance after college to get more education. And if you said, “Hey the cost of that advanced degree is up to the child”, I wouldn’t spend a second arguing with you.

I feel that many of us that don’t have master’s degrees probably could get them. I considered it for a long time, but it always failed my cost/benefit analysis. It amounted to losing a year of income earning, while paying a year of income… sometimes more.

So when I read this NY Times article about a $7,000 Master’s Degree, it really got my attention.

Yes, it’s an online degree. Stick with me because it is far from a typical one.

A $7,000 master’s degree flips the cost/benefit analysis. It is a fraction of a year of income. You might have the flexibility to work while you earn it. (I have to look into the details more.)

I know what you are thinking around now… online master’s programs are common and anti-prestigious. No one considers a masters at the University of Phoenix to be the same as one from Harvard Business School. One has to consider the value of the degree as well.

What if the $7,000 online degree was from a top school? That would change your mind, wouldn’t it? The $7,000 master’s degree is in Computer Science from Georgia Tech, a very good computer science school. You get prestige at a fraction of the price. Other universities make you pay full price (or near it) for the prestige.

According the NY Times article, the students are more engaged online. They ask more questions. They work together more. This makes a lot of sense to me. When I was in college, I didn’t take advantage of office hours very often, but whenever I tried to, the professor wasn’t around. It suppose it was because it was so rare of people to show up they just gave up.

Many of the students in Georgia Tech’s online program are Gen Xers who can’t uproot their family or income situation for a master’s degree. (Hmmmm… sounds like me.) It’s serving a very different audience. I’ve seen a lot of business school degrees, but I’m not sure they were nearly as reputable or as cheap.

What Does This Mean for the Future?

Back in 2006, Intel’s Andy Grove had a saying, “A fundamental rule in technology says that whatever can be done will be done.” Georgia Tech has paved the way and proven, “Yes! We can deliver great education online at a fraction of the cost.”

I think the cost could even go down from there. There’s no reason to think that Georgia Tech’s curriculum wouldn’t work elsewhere. Another fundamental rule of technology is “once the software is written, distribution is cheap (or free).” It costs a lot for Microsoft and Google to write the first version of their software, but very cheap to copy it or run the servers. A third rule of technology is that “You generally get more value and/or the cost goes down over time.” Think about the power of your cell phone over the years. I’d say that Amazon’s $50 tablet is at least as good Apple’s original $500 iPad. (Though that would be a fun debate.)

Meanwhile, the costs of on-campus universities will probably still go up. They may only go up with the costs of inflation to repair buildings. Still, I believe prices online go down while offline will go up.

This is why I think an advanced degree can be 1/10th the cost… it’s almost there. It can extend to all areas of education, including undergrad, but I went with advanced degrees in this article to fit with the proof of it working.

I wonder if it will be common to see Doogie Howsers enter the workforce. I’m envisioning people who completed high school level in middle school and who then went to compress online bachelor’s and master’s degrees during the high school years.

I’m not suggesting that’s ideal or the right path. There’s a lot more to life and growing up than education.

I simply think some students have the mental capacity, and perhaps more than ever, they’ll have the means. Maybe “whatever can be done, will be done” is a fundamental rule of people too.