Posted on 08/22/2012 3:49:59 AM PDT by Kaslin
Dear Dave,
I’ve been working the Baby Steps and doing a budget most months. But how does someone who is single stay motivated and focused with something like this? It feels sometimes like it would be easier if I had someone holding me accountable.
Rick
Dear Rick,
The first thing is to make sure you do a written budget each month. Not once in a while, not most months—every single month. If you don’t draw the out-of-bounds markers, there’s no way to know when you’ve stepped over the line, right? A monthly, written budget becomes your self-accountability tool, especially when you’re single.
Still, there’s nothing wrong with introducing a little accountability into your life. You don’t have to be married to be accountable to someone other than yourself. Ask a good friend or maybe even your pastor to have a look at your plan and see what they think. Just make sure this person is someone who knows a little something about money and finances.
Honestly though, Rick. I think doing the Baby Steps and following my plan can be easier for single people. Think about it this way: You don’t have to talk someone else into coming along for the ride. You also don’t have to come to an agreement with someone else on everything financial. All you have to do is get serious, look in the mirror, and say, “Quit being stupid with money!” In other words, you just have to do it.
Admittedly, you don’t have the built-in accountability in a singles situation. But on the other hand, you don’t have someone calling you a doofus when you mess up!
—Dave
Dear Dave,
My brother was killed earlier this year, and my mom is finalizing his estate. He had a couple of federally insured student loans through Sallie Mae totaling $8,000 at the time of his death, and the attorney probating the estate says mom now has to pay off those loans. Is that correct?
Callie
Dear Callie,
I’m so sorry to hear about your brother. But no, your lawyer is not correct. Payment for federally insured student loans is not due upon the borrower’s death. They are waived.
I’m going to give you two pieces of advice. The first is to fire your attorney. We’re talking about basic knowledge when it comes to probating an estate here. If he got that wrong there’s no telling what else he’s told you that’s off the mark.
Second, you can take care of this by sending a copy of the death certificate to Sallie Mae. I’ll warn you ahead of time that it may take a while to jump through all their hoops. I mean, you’re dealing with the federal government. They’re not exactly known for getting things right the first time. But once you’re declared permanently disabled or you pass away, federally insured student loans are discharged and not held against the estate. Don’t pay it!
—Dave
“You can’t afford a 200K private school.”
Who said that? I didn't say that.
What I said is, I can't afford to pay $200K each for my sons’ college.
The problem is that you're looking at the listed tuition, room, board and other expenses of a given college or university and saying “that's what it costs.”
And, if THAT'S what it costs, then I can't afford it, and I'm not going to borrow $200K to be able to pay for it.
But that's rarely what the school actually costs. It will cost that much if you have a lot of income. It will cost that much if you have a lot of money in the bank (not in retirement accounts). And it will cost that much if you actually used one of those tax-deferred college savings plans and saved up $200K.
The price of the school depends on the income and assets you bring to the table. The more assets you bring to the table specially-dedicated to college costs, the higher will be your price.
“When your child starts visiting colleges, in that summer before their junior year, or during their junior year of high school, don’t visit the private schools.”
Good idea. If you can't afford the final price that will be offered to you, strike the school from your list. Every school that takes financial aid now has a “net price calculator” that will estimate YOUR family's price to send a child to that school. Before getting all involved with a school, check its net price calculator to see how much the school will cost YOU if you send your kid there.
But by your child's junior year, a lot of stuff is already “baked into the cake.” If you have a tax-deferred college account, well, it's there, just waiting to be devoured by every school to which your son or daughter applies! If you haven't saved up anything for retirement, well forget about it for the next few years, because when you see the EFC from the net price calculator, you're going to quickly realize that you won't be able to afford anything more than community college AND contribute any significant part of your income to retirement accounts. Unless you have very little income and your kid gets into a top school or unless you have scads and scads of income.
For those that are interested, go to the financial aid web page of a college and find the net price calculator and try it out. Here's the calculator for Harvard. I'm providing it as an example because it's the single easiest to use that I've found:
“Visit the schools that are affordable in your own situation.”
Certainly! But don't be put off by the published “price” of a school when determining whether or not you can afford it.
Like it or not, nearly all four-year colleges and universities engage in wealth redistribution. The published prices are not what the school needs to run itself. The published prices are what they think the upper end of the market will bear, based on the school's reputation for excellence, general exclusivity, and a few other factors. The published prices of nearly all of these schools are not calculated on a “cost plus” basis. It's on a “what the [top end of] market will bear,” with discounts from there, as needed, to attract the students they want to attract.
It's like the progressive income tax. The more you make, the higher percentage you pay.
If you want to debate the fundamental morality of that, you've got the wrong guy. I think there are moral arguments for and against. But I don't think I care very much.
What I DO care about is taking care of my sons, as best I can. That includes trying to send them to the college that is right for them, and trying to be able to afford that college.
And “affording” means that I have to operate within the system that is established. Whether I think it's right or wrong, a good idea or a bad idea, or needs work, or tweaking, or whatever, it doesn't matter. None of these schools is going to change the way they operate just for me. They're attitude is take it or leave it. I know this personally, as my son didn't get to go to his No. 1 choice school because, well, they didn't give us enough financial aid, and I'd have had to take $25K - $35K in loans over the course of four years, and he had three other choices - all excellent - that were less expensive and for which I would have needed less in loans, or in the case of two of the schools, no loans at all.
Since it was my son's first pick, I spoke to the financial folks to try to wheedle a few more dollars in aid. They didn't budge a penny. Their game. Their rules. Take it or leave it. We left it.
My son DID pick from one of the schools that was most affordable to us.
“Tell your child to *gasp* work during college,...”
Most financial aid packages include a work/study component. My son's does. He's expected to contribute about $5K per year from part-time work. That doesn't amount to 10% of the published price of the school, but it's a reasonable contribution to ask him to make.
“...attend part time,...”
Increasingly, the better four-year schools don't permit folks to attend part-time. Part-time is for community college and what we used to call “night school.” My son's university doesn't permit folks to attend part-time, unless it's to finish up a course or two or three at the end of the process of getting a degree.
“...or get a job after high school to save a little for college.”
Even a public university will be out of reach on even the full-time earnings of the typical high school graduate. In my own state, tuition, room and board exceed $20K per year for in-state students pretty much at all the four-year public universities. Even just tuition, books and incidental expenditures amount to $10K per year, for folks inclined to live at home.
Without financial aid, few folks would be able to afford four-year universities and colleges, and only wealthy folks would be able to afford the top-tier private schools.
“There’s also absolutely nothing wrong with community colleges.”
That depends on the student. Community colleges are designed nowadays as gateways, stepping stones to four-year universities. They're appropriate for high school grads who might not be quite ready for a four-year school, or for high school grads who are “middle of the pack.” But they're not oriented toward very bright, high-achieving students. The research I've read suggests that really bright kids are less likely to complete college if they go to schools that are insufficiently challenging. Folks should try to go to schools that are well-matched to their maturity, talents and achievements. Kids who are Ivy material aren't well-served going to the local community college.
“I still have little sympathy for parents who claim to have no savings for their children’s education, yet are running around with the latest iphone, acrylic nails and brand new cars in the driveway.”
I have much sympathy for people who have saved large amounts of money in tax-deferred college accounts, as they have wasted their resources. The money would have been much better saved in retirement accounts, and beyond that, in a regular savings account, or an ordinary investment account.
Here's the thing. Johns Hopkins, as an example, publishes prices for tuition, room, board, books, etc., that add up to nearly $60K per year. But you're not obligated to do whatever you can to arrange your finances so that you can pay the published price for a Hopkins education, or as near to it as humanly-possible. You have no moral or legal obligation to give them $60K per year if you can arrange your finances in such a way that they will offer admittance to your child for less (obviously, as long as you're doing nothing illegal or intrinsically evil). If you save $240K over the course of many years in your retirement accounts, rather than in a tax-deferred college account, Hopkins will charge you A LOT LESS than if you put that money into the college account. In fact, if you put all that money in the college account, Hopkins will charge you THE FULL PUBLISHED PRICE.
If your kid gets into Hopkins, the aid they give you may fall short of what you need to pay for it without taking out loans. But here's the thing, if they give you $40K in aid, and ask you to pay $20K, and you can only afford $10K, if you don't want to borrow the extra $10K per year, YOU CAN TAKE IT OUT OF YOUR RETIREMENT ACCOUNTS! LOL! And much better to take $10K per year (plus taxes and penalties) out of a $240K account than SIXTY GRAND per year out of the college account!
Folks should be careful about taking out large amounts of loans to finance education. But most folks can go to pricey four-year universities and incur little or no debt, if they're smart about arranging their own finances, and if they're smart about fitting the college to the student, and looking for the deals that are out there.
sitetest
I meant to courtesy ping you to the above post.
Let me know when you start a college finance blog!
Thanks again.
Just ran the calculator at my alma mater. I need to go back to running my own business again!
The real problem is that there are many people going to college that would never had qualified for college in the past.
College educations are merely indoctrination for the masses.
How many businesses are going to hire people that majored in mickey mouse courses like “women’s studies” or “bowling management”?
Libs have made college a scam just like they have every education program.
Many of the people that owe now, should have, and never would have, been qualified for college.
College is now the equivalent of an expensive high school education.
Everything about this is wrong.
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