Thinking if getting a college degree is worth it? Read on as Julie Jason explains to us why a college degree is a good investment.
A College Degree is a Good Investment
If you have a junior in high school in your family, you may be planning to visit some college campuses over spring break. As college education is still one of the best investments you can make, it’s not too soon to think about paying for it.
College graduates earn almost twice as much as those who end their formal education at high school, and the gap between high school dropouts and those who earn advanced degrees is even greater.
Based on the most recent Bureau of Labor Statistics data (third quarter 2017), the median income was only $27,144 for those who did not graduate from high school. Contrast that with a median income of $76,440 for those who earned an advanced degree.
The median income of graduates with bachelor’s degrees (but no advanced degree) was $60,528, compared with $37,128 for high school graduates.
Finding the money to make the investment in a college education can be a challenge, but that should not stop you for two reasons.
First, there are new ways to save for college that are completely tax-free. The 529 college savings plan offers tax-free savings opportunities to students and gifting opportunities for parents and grandparents.
Second, the true cost of college may be lower than you think. Before abandoning hope of a college education, look beyond the published “sticker” price.
If you are like many people, you may think that you need more than $200,000 to pay for a college education. You may be surprised to learn that this does not have to be the case.
Based on data from the National Center for Education Statistics, about 17.5 million students are enrolled in undergraduate college programs in the U.S. About seven out of 10 high school graduates went on to college (two- or four-year programs) after graduation, according to NCES’s most recent data (2016).
Most pay less than $12,090 a year for a college education — that’s the published price for tuition and fees for the 2017-18 school year at four-year colleges, according to the College Board’s “Trends in College Pricing“.
If you carve out private colleges, the cost is even less: For the 2017-18 school year, the national average published cost of tuition and fees at four-year in-state public colleges was $9,970 a year, according to the College Board. For the same school year, room and board averaged $10,800 at public colleges.
There are regional differences. For example, in New England, four-year public college tuition and fees were higher, averaging $12,990.
It also is very important to understand that very few students actually pay the full cost of going to college. More than 90 percent of students are enrolled in private four-year colleges full time, and more than 84 percent of public college students receive some form of financial aid, according to the most recent NCES study (2014-2015 school year). While a new study is expected in early 2018, financial aid has been and continues to be a significant source of college funding.
Students enrolled in the 2016-2017 school year received $125.4 billion in grant aid (undergraduate and graduate), according to a study commissioned by the College Board titled “Trends in Student Aid.”
In addition, students took advantage of $106.5 billion that was made available to them through various types of loans, according to the College Board. Work-study programs accounted for an additional $803 million of the funding.
For further information on college costs and financial aid, you’ll find College Board to be an excellent resource. You can call (212-713-8000) or visit the website (CollegeBoard.org).
Let me add that I’ve updated a series of columns that I wrote over the years on the subject of college funding. They will be published in my next book, “Retire Secure,” in a section on how important it is to start early with a child’s financial literacy education. The book will be available this spring. In the meantime, if you are interested in the subject, I will be happy to send you a sample chapter if you email me at readers(at)juliejason.com.
One last point: If you are traveling through my home state of Connecticut, on Feb. 1, 2018, take advantage of the investor forum sponsored by the FINRA Foundation. For details, go online to www.finra.org/investorforum/stamford. The presentation will focus on “Smart Investing in Today’s Environment,” and you are all invited. FINRA regulates the securities industry, and the foundation promotes “universal financial literacy.”
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Julie Jason, JD, LLM, a personal money manager (Jackson, Grant of Stamford, Conn.) and award-winning author, welcomes your questions/comments (readers(at)juliejason.com). To hear Julie speak, visit www.juliejason.com/events.
(c) 2018 Julie Jason.
Distributed by King Features Syndicate Inc.
Warren Buffett Dumps All Airline Stocks, Berkshire Takes $50M Loss
At Berkshire Hathaway’s annual meeting, held virtually for the first time ever due to the coronavirus pandemic, Warren Buffett announced that the company had sold all of its investments in the airline industry.
Previously, Berkshire Hathaway held 70 million shares of Delta, 54 million shares of Southwest Airlines, 22 million of United Airlines and 42.5 million shares of American Airlines. Each investment represented a roughly 10% ownership stake in each company. Also, the four airlines combined account for roughly 80% of the total passenger miles flown in the US.
Buffett said simply, “I was wrong about that business.”
“When we bought (the airlines), we were getting an attractive amount for our money when investing across the airlines,” he said. “It turned out I was wrong about that business because of something that was not in any way the fault of four excellent CEOs. Believe me. No joy of being a CEO of an airline.”
“I don’t know that three, four years from now people will fly as many passenger miles as they did last year,” he added.
Global Pandemic’s Impact on the Airline Industry
Passenger volume went down by 90% compared to a year ago. It’s impossible to tell when travellers will feel comfortable flying again, particularly if the pandemic lingers into the fall or winter months.
Shares of United Airlines are down 70% so far this year, American Airlines shares have fallen 63%, Delta has lost 59% of its value so far this year, and Southwest has fallen 46% this year.
During Berkshire’s meeting, Buffett added, “The world has changed for the airlines. And I don’t know how it’s changed and I hope it corrects itself in a reasonably prompt way. I don’t know if Americans have now changed their habits or will change their habits because of the extended period… I think there are certain industries, and unfortunately, I think that the airline industry, among others, that are really hurt by a forced shutdown by events that are far beyond our control.”
Interestingly, until 2016 Buffett made it clear that airlines weren’t an investment he was interested in. In a 2007 note to Berkshire shareholders, he said “if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down.”
The other major news coming out of the meeting was Berkshire Hathaway reporting a $49.7 billion loss. This came during the first quarter as the coronavirus pandemic caused the markets to plunge in late March. That’s a loss of $30,653 per Class A share in the first quarter, down from a profit of $21.66 billion, or $13,209 per Class A share a year ago.
The company also continues to grow its cash balance. They spent only $1.8 billion on stock purchases and $1.7 billion on buying back Berkshire stock last quarter. The cash balance increased from $127 billion in Q4 2019 to $137 billion in Q1 2020.
Many investors expected Buffett to put that cash to use during the selloff in March that drove markets down 30%. But it appears that Buffett didn’t see any attractive value plays and decided not to make any additional investments.
Senator Rand Paul: Pay Off Your Student Loans With Your 401k
Senator Rand Paul says you should pay for your student loans with your 401k. Paul’s new legislative proposal, the HELPER Act (Higher Education Loan Payment and Enhanced Retirement), would allow benefits like tax-free money for college, tax-free employer-sponsored plans, no cap on student loan interest deduction, and many others. Essentially, it would allow students and parents to withdraw retirement funds to settle expenses for college.
The act “would allow Americans to take out up to $5,250 from a 401(k) or IRA tax- and penalty-free each year to pay for college or make monthly student loan payments,” explained CNBC.
According to Forbes, “Paul seeks to reshape the way people save and pay for higher education, driven through tax and savings incentives.” He notes that “the current student loan interest rates can be as high as 7% for graduate students and parent borrowers.” Student loan refinancing rates, on the other hand, have dropped to below 2%.
Paul’s critics will likely note objections such as removing money from a retirement account for any purpose that is not related to retirement may not be a wise financial move; many students cannot both save for retirement and pay off student loans; and the annual amount may not be enough to help borrowers make a meaningful impact.
8 Tips on Going to College with No Debt
It’s not uncommon to hear news stories anymore about the millennial generation going thousands upon thousands of dollars into debt to receive a college education. This is a conundrum because most jobs that offer good pay require a college degree, but this also requires students to go into debt for a large portion of their lives in order to eventually make a profit from their education. However, this doesn’t have to be the case. There are ways of going to college without going into debt at all!
Is College for You?
Firstly, you need to determine if you need to go to college. There are individuals who are more skilled working with their hands, to which a vocational school would be a better (and much cheaper) option. There is a gap of laborer jobs because of the large emphasis put on people to go to college after high school. If you do not fit into this category and feel called to go to college to achieve your dreams and livelihood, then please read the tips below to help you go to college without a large debt to pay off afterward.
1. Scholarships and grants
This should be the first step to pursue after you receive your college admission letter. Complete the FAFSA, a form that will allow you to determine how much the government can help you, and you could also receive some money from the government for free if your family fits into a certain socioeconomic category.
However, if you complete the FAFSA and find that there isn’t much help the government can offer, look at the college’s financial aid. The scholarship and grants options are listed the university’s website and can help you determine which scholarship options would be best for you to apply. AS a general rule, always apply for scholarships even if you think you aren’t the perfect fit. It’s surprising how many people don’t apply for scholarships for this reason alone!
2. Negotiate with the financial aid office
This is not a common way to obtain some funds for college, but it can be done if handled tactfully and if the university policy allows it. This could be as simple as finding out how much you would spend each semester, proving that you are just shy of being able to pay it, and talking to a financial aid officer about your situation. You will need to go through a rigorous process of proving your income and expenses, but this may be an option worth considering if you need a little extra help.
3. Work study
This is an option typically offered through the university for students that are within a certain income bracket. The university will offer on-campus jobs that are an excellent choice for those wanting to focus on their schooling, but need some financial help as well. This does count as job experience, and most work studies are flexible with your school schedule and understand that your grades come first. Work studies may pay a portion of your tuition in exchange for some part-time work on campus.
4. Employer reimbursement
If you already have a job, look into whether or not they will pay for your college tuition. Some employers take a strong stance on bettering their employees, and if you are fortunate enough to work at one of these companies, they will offer to pay your tuition so long as you continue to work at that company for a specified period of time and can maintain a good grade point average. This also counts for military veterans: the military will pay for schooling after your time in the armed forces.
5. Choose an affordable college
As much as private universities tout their reputation, immaculate campuses, and benefits of attending their school, it is usually rarely a good idea to go into a large amount of debt to go to the top college of your choice. Public universities have their benefits as well, one of them including minimal to no debt upon graduation! Public colleges tend to have a wider range of degree options to choose from, have a wider range of classes that are offered, and can have just as accomplished faculty as those in private schools. Before going into debt for your dream college, really think about if it’s worth it to you to spend almost triple what it would cost to go to a public university.
6. Transfer credits
If you have (or had) the opportunity to take college-level courses in high school, then you are already off to a good start! These high school credits will usually transfer into college coursework and can save you money paying for more classes, meaning you may be able to graduate sooner. This also means that you get to focus on more major-related classes instead of having to take required courses in your first semester or two.
Coursework can also transfer from other universities. Going to community college for a year or two can save you a lot of money and once you find a college that will accept the credits you had already taken at the community college, you can move ahead in your degree program as if you were at that university the entire time. However, be aware that you may need to retake some courses if you feel that a course at the community college did not teach as much as you would need to successfully take higher-level courses.
7. Commute to college
If you live with parents or a roommate off campus, you will already be saving yourself a lot of money in the long run. You will still be able to have the college experience even if you don’t live on campus and you will be able to save a lot from not paying for meal passes and dorm room costs. Though you may need to cough up the cash for a parking permit and spend money on gas, it will pale in comparison to how much on-campus housing costs. That, and you will hopefully be able to have a much quieter living space.
8. Learn to budget
This is a skill that a lot of college students learn too late. They will spend money without thinking about the consequences of every purchase and then will need to take out loans. Budgeting gives you a birds-eye view of your finances and how you are spending your money. It can be uncomfortable to see how much you may find yourself spending on eating out or shopping, but learning your spending habits can drastically reduce how much money you will spend while you are in college and for the rest of your life.
Start Your College Journey
With these tools, you should be more equipped to tackle college and all the financial burdens that come with it. It will be a hassle to go to various people and research various things in order to make sure you go to college debt-free, but all that hard work will pay off in the end when you can enter the workforce and not have to spend years and years paying off your college debt.
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