Public School vs Private School?


Recently I was getting together with some buddies of mine to catch up over a few beers. Funny how much our conversations have changed over the years, considering I am expecting my first child, my other friend is expecting his second daughter, and another already has two kids. So now family and kids dominant the conversation these days, which is great actually, because previously is was more trivial issues like sports, weekend events, golf, and boys’ trips. Boy has life changed for us over the last few years!

I previously wrote about saving for college and deciding between a 529 plan or a Coverdell Education Savings Account (ESA). Well, my friends and I spoke about this a bit as well and the 529 won out across the board, solely because of the contribution limits, which was my conclusion as well.

Public School or Private School?

The talk of saving for college brought up a more philosophical education question for your child; public school or private school? And now that conversation includes not just college but high school and even earlier “private” education. When I looked up the cost of private schooling the results just floored me.

To give you some background and my group of friends and me, we’re all obviously Millennials and we all grew up together in middle to slightly upper-middle class city. We all went to public high school and a state university. The one caveat is one of my really good friends did go out of state for college and went to an Ivy League school, which is a phenomenal feat and probably most parents’ dream. So good for him and his family on accomplishing that. He is the one outlier in the group though as we’re all “public school” educated and doing fairly well in life, both personally and professionally for now being out of college for 10+ years. All of our careers are moving in the right direction.

Now back to our philosophical question of public versus private schooling. My one friend said they are 100% planning on sending their two daughters to private school, and by private school I mean early childhood education. Not just private high school. The yearly tuition rates at the school he will send his two daughters to is astounding. See for yourself.

2016-2017 TUITION

Pre-Kindergarten (full day): $18,820
Kindergarten (full day)-grade 5: $23,510
Grades 6-12: $25,430

I fully understand tuition is different for every child because of grants, financial aid, etc. But either way, those numbers are jaw dropping in my eyes when you consider public schooling, kindergarten throughout high school is free (except for a few minimal annual schooling fees).

Is Private School Really Better Than Public?

I have three “sibling” in-laws, two sisters and one brother, all of which are public educators. My two sister in-laws teach young elementary aged children, while my brother in law teaches high school students. All of them are very passionate and one has a master degree in childhood education. I’ve talked to each of them multiple times about the difference in public versus private and a lot of the variance is purely on curriculum (and funding, obviously). A public school has a set teaching curriculum to follow, whereas a private school can change to emphasize some subjects over others (like science and math).

I think the main misnomer about private school is that the teachers aren’t exactly “more qualified” thank teachers at public schools. In reality, there are actually more requirements and standards for public schools then there are for private. I think people think most teachers at a private high school are equivalent to a professor at a university and their background in the field (formal education and research). That is simply not the case.

Public School is Just Fine

I will get off my soapbox now as being very anti-private schools, because it’s obviously ever families own personal decision to do this. If you have the funds to send your child to private school, by all means go for it. But don’t profess that your child is getting a substantially better education than those of us sending our kids to public school. Your child can still get into a great college when going to public high school (see my great friend who made it to an elite Ivy League school). And they can still be successfully when going to public school all the way through college. Me and my friends are all doing fine and I know tons of people who were “publicly” educated.

I just urge all Millennial parents to really research and think twice about private school. It feels way more of a status symbol than an educational play, in my opinion. At the end of the day, your child is as successful as you want them to be, regardless of public or private. If you are highly involved in your child’s schooling, homework, and lives in general, I think they will be just fine.

Being Involved As a Parent is What Matters Most

That is my humble advice from a soon-to-be parent. I will be sending my child to public school, but I will be as involved as humanly possible with their schooling. I want to push my child to work as hard as possible in their schooling and studying. I know that will guarantee more success in life than which particular school they attend.


What if you had $300,000 of student loan debt?



I was recently listening to a Dave Ramsey Show podcast where a young couple called in with a debt problem. If you’ve ever listened to Dave Ramsey, and I encourage you to do so, you know he affectionately refers to himself as “get-out-of-debt-Dave”. Well, he certainly had his hands full with one couple from the South…

A young woman called in to Ramsey’s show and explained their mountain of debt. They had, wait for it, $300,000 in student loan debt! That’s obviously an exorbitant amount of debt for any college graduate. Dave immediately asked who the doctor or lawyer was because you would assume the only way to accumulate that much debt is with 8+ years of schooling. The caller quickly replied with “neither of us”. It was all accumulated getting their undergraduate degrees!

Now neither the caller nor Dave Ramsey went into their schooling and just how two undergrads could rack up that much debt. They were more focused and the game plan of getting rid of it as soon as possible. I checked and the average cost of a private college education is $33,480 (for 2016/2017). And that is only tuition and fees and does not include room and board. This means to get a degree from a private university it would cost you $133,920 if you complete your undergraduate in four years. Let’s double that tuition number for this couple since there are obviously two of them, which brings their grand total for tuition to $267,840. That final bill is still a bit shy of $300K. But let’s assume the remaining $33,000 was used on room and board.

On top of their student loan debt they also had a $300,000 mortgage and approximately $40,000 in car loans. Their joint income was rather solid though coming in at $140,000. Either way, they have a really, really long way to go. Their scenario is very daunting. I would assume their putting out about $4,500/month toward their debts (student loans, mortgage, and car). That’s remarkable.

All of us Millennials are dealing with the current student loan crisis with our own piles of debt. But this is just ridiculous to have $150,000 of student loan debt coming out of college. No college degree is worth that. This couple will be paying back their student loans for 20+ years more than likely. I believe they have no one to blame but themselves. Well, maybe their parents too for allowing them to make this college decision. As noted above, the average cost of private college is $33,480. The average cost of a state university is $9,650, which is less than one-third of the cost of private. A business degree is a business degree. An engineering degree is an engineering degree. Your degree is what you make of it. You personally are your biggest professional asset, not necessarily your degree and where you went to school.

I hope this story and your own personally story opens up your eyes for the future. I am a soon-to-be parent and I will open a 529 college savings plan for my child. This is something my parents did not do for me. I did however go to an in-state public university and my child will as well (or perhaps a trade school if they so choose). Millennials, I urge you to help curb this student debt issue. Save for your child’s education now via an ESA or 529 account and make them choose an in-state, public university.

Most Millennials Say They Won’t Ever Accumulate $1 Million

Below is a list of some of my favorite money/personal finance articles from this past week. I’ve sifted through boat loads of articles on money, retirement, personal fiance, budgeting, paying off debt, and buying a home.

All of the below articles are highly relevant to the Millennial generation (Gen Y) and their money. Knowledge is power, and you are your single greatest investment, so continue to educate yourself on money and personal finances right here on this very blog so you can one day become financially independent.

This week’s best articles on money and personal finances, specifically for Millennials



Majority of Millennials Say They Won’t Ever Accumulate $1 Million

Despite an impressive head start, millennials overwhelmingly say they will not be able to put away as much as $1 million in their lifetime, new research shows. Yet with three or four decades to save, that mark should actually be fairly easy to hit. (Wells Fargo)

The 50/20/30 Rule for Minimalist Budgeting

Budgets are more than just paying your bills on time—a budget is also about determining how much you should be spending, and on what. The 50/20/30 rule, also called the 50/30/20 budget, is a proportional guideline that can help you keep your spending in alignment with your savings goals. (Mint.com)

The index fund: A monster of efficiency

When the first index mutual fund began operations on August 31, 1976, Jack Bogle’s brainchild was a curiosity, a provocation in a largely academic debate about whether professionals could consistently outperform the market. It wasn’t even all that cheap, with a sales load and expenses equal to 0.43% of assets at the end of its first fiscal year. (Vanguard Blog)

3 ways to more than double your retirement savings

The majority of the investments I own I’ve had for over 40 years. When I look back, they have had incredible performance — largely as a consequence of three principles that my financial advisor taught me in a number of early consultations. All three principles were the enemies of compounding’s power. The average long-term investor got only a fraction of the growth I have achieved. (MarketWatch)

20 Signs You’re Destined to Become a Millionaire

Becoming a millionaire may seem like an unobtainable dream. I’ve been there and felt like it was unattainable and something that would never happen to me. Then I started reading, studying and mimicking countless different successful millionaires. Here are 20 signs based on observations from several millionaire friends of mine, that you’re destined to become successful. (Entrepreneur)

The Worst ETFs You Can Own

Bloomberg’s resident ETF expert, Eric Balchunas, shared some interesting stats today on the habits of millennial investors. Their use of ETFs has exploded in recent years, up nearly 60% over the last year. Also, a greater percentage of millennials use ETFs than older generations: Millennials=41%, Gen X=25%, Baby Boomers=17%. (A Wealth of Common Sense)

Tax-Free Savings for College

The two most popular college savings programs are the Qualified Tuition Programs (QTPs, aka 529 plans) or Coverdell Education Savings Accounts (ESAs). Whichever one you choose, try to start when your child is young. The sooner you begin saving, the less money you will have to put away each year. (Warrior Accounting)

How to Grow Your 401(k) in a Flat Market

The average 401(k) account balance stood at $88,900 at the end of June, according to an analysis of Fidelity accounts. That was up from $87,300 at the end of March but down from $91,100 a year earlier, Fidelity says. IRA accounts showed a similar pattern: The average balance stood at $89,700 on June 30, up from $89,300 at the end of March but down from $96,300 a year earlier. (Money)

Happy reading, my fellow Millennials.



Student Loan Debt: What Every Borrower Should Know

By Brian Schiess, CFP® / Investopedia

Know Your Debt

It is important for graduates to know and understand the types of student loans they have. There are two broad categories of student loans: federal loans and private loans. Recent or near-graduates can start by obtaining an inventory of their loans to learn what they have outstanding.

Federal loan inventories with details on balances and interest rates are available at the National Student Loan Data System. A credit report—available for free once per year at annualcreditreport.com—may have details about private loans. If you know what company is servicing the loans, you may be able to request the actual promissory notes from them.

Federal loans may have some favorable characteristics compared with private loans. Federal student loans have had fixed interest rates since 2006, and they may have lower interest rates than private student loans. Additionally, some federal loans may be eligible for income-driven repayment plans, which can provide flexibility and reduce some of the stress associated with traditional payment plans.

Graduates with federal student loans should be wary when presented with refinancing offers from private student loan providers, even ones that would initially reduce their monthly payments or interest rates. Bottom line: graduates who find themselves with only federal loans may be able to begin breathing a little easier.

Read more: Student Loan Debt: What Every Borrower Should Know | Investopedia

Education Tax Credits Help You Pay for College

By Warrior Accounting and Consulting Services

Are you planning to pay for college in 2016? If so, money you paid for higher education can mean tax savings on your tax return when you file next year. If you, your spouse or your dependent took post-high school coursework last year, you may be able to take advantage of education credits that can help you with the cost of higher education. Taking advantage of these education tax credits can mean tax savings on your federal tax return by reducing the amount of tax you owe. Here are some important facts you should know about education tax credits.

American Opportunity Tax Credit:

  • You may be able to claim up to $2,500 per eligible student.
  • The credit applies to the first four years at an eligible college or vocational school.
  • It reduces the amount of tax you owe. If the credit reduces your tax to less than zero, you may receive up to $1,000 as a refund.
  • It is available for students earning a degree or other recognized credential.
  • The credit applies to students going to school at least half-time for at least one academic period that started during the tax year.
  • Costs that apply to the credit include the cost of tuition, books and required fees and supplies.

Lifetime Learning Credit:

  • The credit is limited to $2,000 per tax return, per year.
  • The credit applies to all years of higher education. This includes classes for learning or improving job skills.
  • The credit is limited to the amount of your taxes.
  • Costs that apply to the credit include the cost of tuition, required fees, books, supplies and equipment that you must buy from the school.

The Tuition and Fees Deduction is:

  • Claimed as an adjustment to income.
  • Claimed whether or not you itemize.
  • Limited to tuition and certain related expenses required for enrollment or attendance at eligible schools.
  • Worth up to $4,000.

The following applies to all three credits and deductions as well:

  • The credits apply to an eligible student. Eligible students include you, your spouse or a dependent that you list on your tax return.
  • You must file Form 1040A or Form 1040 and complete Form 8863, Education Credits, to claim these credits on your tax return.
  • Your school should give you a Form 1098-T, Tuition Statement, by February 1, 2017, showing expenses for the year. This form contains helpful information needed to complete Form 8863. The amounts shown in Boxes 1 and 2 of the form may be different than what you actually paid. For example, the form may not include the cost of books that qualify for the credit.
  • You can’t claim either credit if someone else claims you as a dependent.
  • You can’t claim either AOTC or LLC and the Tuition and Fees Deduction for the same student or for the same expense, in the same year.
  • The credits are subject to income limits that could reduce the amount you can claim on your return.
  • Use the Interactive Tax Assistant tool at IRS.gov to see if you’re eligible to claim these education tax credits.

Even if you can’t take advantage of any of these tax credits, there could be other education-related tax benefits that you can claim.

By Warrior Accounting and Consulting Services

Millennials: best tips for paying off student loan debt

By Lisa Kiplinger / USA Today Money

The graduation party is barely over for the class of 2016, but for many the bills are already coming due. On average, this year’s crop of grads has just over $37,000 in student debt each, according to Mark Kantrowitz, publisher of Cappex.com. How they manage that daunting debt load will have long-term consequences on their financial well-being.

Alex Chediak, author of  Beating the College Debt Trap: Getting a Degree Without Going Broke, offers today’s grads his three top tips to start out on the right foot.

1. Have a budget, stick to it, and make or exceed your loan repayments.

When you’re cash-strapped, it’s easy to neglect student debt repayment because other obligations seem to carry more immediate consequences — i.e., if you don’t pay your rent, you’ll get evicted; i.e., if you don’t make your car payment, they’ll start the repossession process. But the consequences of not making your student loan payments are just as real. If your budget allows, exceed your loan payments: The extra money you throw at your loans goes against the principal, diminishing the accumulated interest you end up paying.

2. To the extent possible, avoid extending the repayment term in order to lower your monthly payment obligation.

Most student loans can be consolidated in such a way that the repayment term is lengthened from 10 to as many as 30 years. The carrot? Lower monthly payments — often much lower. The stick? Because you’re making payments for a longer period of time, you end up paying a lot more! Now if your salary is low, but you hope or expect it to rise dramatically over the first or second decade of your career, this can work well, and it’s certainly better than being delinquent or in default. But if you can, make larger monthly payments in the early years and get out of debt sooner (and for less money). Which brings us to #3:

3. Don’t be ashamed to live rent-free (or rent cheap) with parents or relatives for a couple of years.

Yes, there’s some stigma with living in “your mom’s basement” but many recent graduates are needing to save money in their early years. And your largest expense tends to be housing (rent or mortgage plus utilities). By cutting the cost of housing by, say, $700-$1,000/month, you can get out of debt much faster (imagine throwing an extra $10K per year at your loans). Do extra chores around the house or yard to show your gratitude and to avoid slipping back into childhood mode. Treat your host with the same respect you’d show to a landlord.

Bonus tip: Avoid debt in the first place

Prioritize value in choosing a college — academic quality as a function of price. Ultimately, that you go to college (and succeed) will matter more than where you go to college. So don’t pay a fortune for prestige or extreme comfort. Live within your means and, over time, you’ll have the means to live.

If you do borrow, do so in a way that’s proportional to your earning prospects. Since how much you’ll be earning, and when, is less clear in your early college years, try to minimize borrowing in your early years. The subsidized federal (Direct) student loan limits are good annual maximums which rise as you proceed through college ($3,500 freshman year, $4,500 sophomore year and $5,500/year thereafter). And on subsidized federal loans, Uncle Sam pays the interest for you while you’re in school.

Rich Dad Poor Dad author Robert Kiyosaki takes a different tack with his get-out-of-debt advice to grads.

1. Cash flow is key.

With regard to debt, graduates should be thinking about two words — cash flow, and the assets that generate it. Cash flow from assets can cover their expenses, liabilities (including debt accrued during college) and help graduates continue to grow their asset portfolio. Assets could include a real estate rental property, stocks that pay dividends, or a business venture that delivers positive cash flow each month.

2. Invest in yourself.

Since a lot of graduates are just starting out, they can start small by investing in their most important asset — themselves. Our minds are our greatest assets, and I recommend that in addition to paying down debt they set aside some money for books or classes on topics that interest them such as investing, real estate, the economy and business. These small investments now will pay dividends for years to come and can deliver a better long-term return than aggressively paying down debt.

3. Some debt is worth having.

Graduates should also recognize that not all debt is bad debt. I’m a debtor because I use debt to acquire real estate assets that generate cash flow. Remember, the rich don’t work for money, they learn about money and investing so that their money works for them.

By Lisa Kiplinger / USA Today Money

Get 3 steps closer to reaching your college savings goal

By Vanguard

How do you eat an elephant? One bite at a time.

The same sentiment applies to tackling a big goal such as saving for college—break it down into manageable steps, then put one foot in front of the other.

Following the three steps below can help you move closer to your college savings goal.

Open an account
The best time to start saving for college is right now. Start by choosing the best type of account to hold your college savings. For many investors, a 529 college savings plan provides the best mix of benefits—such as tax breaks, high contribution limits, and flexibility—to help you save.

After you’ve chosen an account, you can select your investments. Choose your investments based on your risk tolerance (how you feel about market fluctuations) and how much time you have to save.

Many 529 investors choose an age-based option, which is a complete portfolio that automatically adjusts over time so your investments become more conservative as your child gets closer to college. Age-based options make it easy to maintain a balanced portfolio with minimal effort.

Create a savings goal
Families who have a plan to pay for college save 46% more than families without a plan, according to Sallie Mae’s “How America Saves for College 2015” study (conducted by Ipsos Public Affairs).

A plan can be as simple as identifying the total amount you want to save. Keep in mind that you may not be able to save enough to cover 100% of your child’s college expenses—in fact, most people don’t. The Sallie Mae/Ipsos study reports that families (parents and students) typically cover about 43% of total college costs through income and savings (529 college savings accounts and bank accounts).

Once you’ve decided on the percentage of expenses you can realistically cover, use Vanguard’s college savings planner—which factors in your child’s age, the type of school he or he might attend, and the amount you’ve already saved—to figure out how much you’ll need to save each month or year. (And remember that saving for college can be a family affair—relatives, friends, and even your future grad can contribute.)

Make regular contributions
Making small, regular contributions can help you reach your goal over time—no big, lump-sum investment needed. One of the simplest ways to stick to your plan is to set up recurring contributions (also known as an automatic investment plan). When you set up an automatic investment plan, the amount you choose to contribute will be deducted automatically—before you get a chance to spend it.

By Vanguard

Millennials face debt – and denial

By Bobbi Rebell / Reuters, MSN Money

Debt may be a drag for millennials, but apparently not as much as cooking their own dinner.

A survey from Citizens Bank found that fewer than half (47 percent) of millennials, those in the 18-35 age group, who are college graduates would be willing to limit their online food delivery in return for reducing their student loans.

Other priorities? Concerts, sporting events and lattes, as well as travel and vacations.

The prospect of limiting any of these luxuries got the “no thanks” from the majority of millennials who were asked if they would cut back to lower their student loans. The same holds true for cutting Internet service.

Despite being so unwilling to give up life’s little pleasures, more than half (57 percent) said they regret taking out as many student loans as they did, and about a third said they would not have even gone to college if they knew how much it was going to cost them.

That is a big conflict, says Brendan Coughlin, president of consumer lending at Citizens Bank. “They are very committed to living their life the way they want to live their life, and as frustrated as they are by student loans, they are not willing to make those lifestyle tradeoffs,” he said.

Part of the problem may be one of denial and math. The same survey found that nearly half of millennials (45 percent) with student loans do not even know how much of their annual salary they spend on them. It is 18 percent on average, for the record.

On the upside, the vast majority do at least know what they owe – over $40,000 for most. But more than a third (37 percent) are clueless on the interest rate they pay.

Some suggestions for getting that number down:

KNOW WHAT YOU OWE

The National Student Loan Data System tracks federal loans (www.nslds.ed.gov or 1-800-4-FED-AID). For private student loans, borrowers should check out their annual credit reports (www.annualcreditreport.com).

REFINANCE

Three-quarters of millennial graduates told Citizens Bank that refinancing is not part of their plan to pay off their student loans. Millennials who have graduated and have jobs often qualify for better rates than they did when they had no income at the start of school.

In addition to Citizens Bank, SoFi, CommonBond, Wells Fargo, Earnest and other institutions offer refinancing programs. There is also an opportunity for students to move from variable-rate loans to fixed-rate ones as a hedge against rising interest rates.

At Citizens, a regular undergraduate loan ranges from 5.25 percent to 11.75 percent. Refinancing loans start as low as 4.74 percent. Variable rates range from 2.44 percent to 9.44 percent. On average, a customer will save 1.5 percent APR when refinancing, or $147 a month, according to Citizens.

GET HELP AT WORK

A number of companies, including Fidelity and PwC, are offering help to pay down student debt. This is becoming a more mainstream perk and is worth looking into with your current employer – and keeping in mind if you are looking for a job.

While only about 3 percent of employers are offering this perk, according to the Society for Human Resource Management, it is gaining steam as companies work to attract and retain millennial workers.

SEEK FORGIVENESS

Some professions, such as public service jobs, offer student loan forgiveness. They include public defenders, law enforcement officers, doctors, nurses and some teachers.

For example, teachers who work in low-income school districts and teach certain needed subjects may qualify for even full cancellation of some types of loans.

Volunteering can also pay off. Many organizations like the Peace Corps and AmeriCorps offer eligibility for student loan payments through Public Service Loan Forgiveness (PSLF) or other options. (Editing by Beth Pinsker and Dan Grebler)

By Bobbi Rebell / Reuters, MSN Money