If any of the four pieces of information listed above are missing from your award letter, you should contact the college immediately and request that it be supplied.

If you need help on this, subscribers should use the TuitionCoach tool called “Evaluate and Negotiate Financial Aid Awards”. Others should subscribe while there is still time. TuitionCoach will instantly evaluate the award and provide you with useful advice on ways to work with your college financial aid office to improve it. For parents of 2010 college freshmen, you should understand that assuming your family’s financial situation doesn’t change dramatically in the next few years, the offer to a college freshman is likely to establish a template for all four years. That is why this initial award merits your special attention.

A note of caution and advice: When dealing with your financial aid administrator, you should be mindful of their world. It is a very stressful life where colleges are telling them to be very frugal on one hand with families imploring them for fully justifiable aid on the other hand. They are caught in between and what makes it so difficult is that there is simply not enough money in the system to satisfy everyone. So the best advice we can give you is to be patient and be civil in your interaction with your financial aid administrator. Try to establish a collegial, working relationship with that person and if they respond to your wishes, you should ALWAYS send them a “thank you” note. No matter what, when working with any financial aid administrator, leave the testosterone at the door. Never, ever pick a fight with them because you will lose. And, as a general rule, it is best to make contact with them in the morning before they have become depressed by the enormous work load they face every day. Those people are heroes and they deserve our respect regardless of the outcome of your dealings with them.

Ours is the only “enlightened” society that forces its citizens to make the Draconian choice between providing a college education for their children or creating a large enough nest egg to ensure an economically viable retirement. In these days of escalating college costs and ever-rising prices on nearly everything else, it is virtually impossible for most of us to do both. So we are left with a choice and both options are bad.

If we choose retirement, our children tend to cheap out on education often beginning with community college and a few courses here, a few there so that it takes forever and forever also has a price, opportunity costs. College should take four years and not a minute longer so for every year beyond the usual four there is not only the out-of-pocket costs created by college overtime but also the money the student will not be making as a college graduate for the duration of the overtime period. Moreover, most of us who have been to college know that college is not merely the attainment of a piece of paper called a degree. It is much more, things like social development, establishing life-long contacts with other young, ambitious people, absorbing different worlds of culture and thought and learning to communicate in writing and speech in order to compete successfully in a competitive and often judgmental world. College is not so much a place to be trained to pursue a career frequently decided upon by a before-the-fact judgment call of an undereducated and naïve teenager but, rather, it is a place to learn all sorts of new things some of which will drive the student to make an informed choice about a career. So the parents’ option to secure a retirement may have an unhappy price in terms of their children’s life possibilities.

If we choose our children’s college over our retirement, the kids will do fine but many of us will be forever condemned to economic twilight where we live a marginal existence from social security check to social security check unable to do the things we worked for, things like travel and comfort and the ability to buy stuff that makes us happy and contented. No society should force this on its citizens but we do every day, month after month, year after year. So how do we cope? Remember the mantra!

If you can’t afford college, pay what you can out of income, not assets. Pay that amount every month. If there is a shortfall, have the student borrow as much federal money as possible every year. If that still isn’t enough, then borrow the rest from the PLUS loan (Parent Loan for Undergraduate Students) program through the student’s college. Do that every year and then, after the student graduates, pretend he is still in college but this time, don’t send your monthly checks to the college but, rather, send them to the holders of the PLUS loans to get them off the books as fast as possible given your ability to do so out of your cash flow at that time. Stay with it and eventually you will have paid for college without invading your precious, irreplaceable retirement assets.

Even if you have large amounts of money set aside for college, you should follow this model based upon our mantra. Pay what you can out of monthly income and finance the rest. Then use the income from that big college fund to help retire the debt over time and when you are all done what was once a college fund can be repurposed into a retirement windfall. This isn’t rocket science but it is a very smart game plan.

Say it over and over until you actually believe it: “I can always borrow for college, but I can never borrow for retirement.” “I can always borrow for college but I can never borrow for retirement.” “I can always borrow for college but I can never……………” “I can always borrow…………” “I can………….”

At the bottom of page 50 in the current issue of the magazine there were some “Financial Aid Fast Facts”. Fact number one stated that only three percent of U.S. colleges and universities admit students on a need-blind basis and that Middlebury College was a part of that group. Three percent!

When I began in this business about thirty years ago, it seemed like every college was pretty much need blind. If you were admitted on your merit and you needed money, the college or surely the vast majority of colleges would deliver the goods. But now, according to the Middlebury publication, 97% of colleges may take the students’ financial need into account as a factor in admissions. But it is even worse than that.

“Need blind” has taken on a new and even more sinister meaning, one that has nothing to do with admission and it is this. When students and their families play by the rules and show a demonstrated need (the difference between the families’ calculated Expected Family Contributions and the cost of the colleges), the colleges are “blind” to that need as well. Almost every college in the nation fails to satisfy a family’s demonstrated need by either gapping the family (providing less aid than their demonstrated need would require) or by substituting non-need based aid like a PLUS loan (Parent Loan for Undergraduate Student) for need-based aid. It happens every day everywhere. Thus families who make $65,000 a year and have a few dollars in the bank find themselves paying for college as though they made $90,000 and had a much higher Expected Family Contribution. Since there are no penalties of any kind for failure of a college to provide adequate financial aid, I don’t blame cash-strapped colleges for doing this but the damage to the nation is profound and getting worse with every passing day. Our college-bound body politic is being shamelessly violated and we simply watch and do nothing.

A massive public, per pupil investment in higher education over limited college attendance time frames will not only create an economic engine of enormous power but it will also obviate the need to take care of parents who have been so economically eviscerated by their children’s college costs that they become largely dependent on society during their 30 or so years of retirement. It’s like that old ad for Fram oil and air filters, “You can pay me now or you can pay me later.” In the case of the college funding challenge, the short term payment will be tiny compared to the huge bill that is sure to come when those parents enter the retirement years with little or no resources with which to be a viable part of the American economy. Is it possible that they don’t teach stuff like this in economics? Is it possible that members of Congress are so blinded by silly, childish partisan issues that they don’t see this as an economic Katrina churning in the open seas and gathering strength to devastate this nation’s economy?

I lament the demise of need blind admissions. The “need” part is already a goner but “blind” is alive and well in the halls of Congress and in the U.S. Department of Education. And that blindness is completely bipartisan. The system can be fixed but it can only be fixed by smart people who understand the relationship between education and the nation’s economic well being and international competitiveness. We need people who can craft a college funding system as an integral part of the larger economy, not as a four year, gimmicky, bureaucracy-laden, utterly irrational concoction by policy wonks who don’t understand the realities of Main Street, College Street or even Wall Street and the relationship between them. In short, in order to fix the system we must be willing to exclude from the triage team anyone who had a hand in creating the financial aid mess we have today and anyone who may benefit in any way from maintenance of the status quo.

Our President ran on the promise of change. Here is one that screams out to him for help. If it is done with some imagination, it won’t cost anything. In fact, it will create wealth in the long run and in doing so, it will stimulate the economy in the short run, strengthen our colleges and enhance America’s place in the increasingly competitive global economy. It would be nice if Congress would pay attention and not insult us with meaningless, faux-patriotic slogans and incendiary cameo appearances on partisan cable TV shows. More and more our once-respected members of Congress remind us of a legislative version of the old Keystone Kops….lots of aimless activity creating the illusion of purpose but they never, ever get their man. This nation is better than that but if it isn’t we’re all in trouble, big trouble.

Day after day we are confronted with yet another announcement about ways to simplify the financial aid forms but that has little to do with whether the system works. That is about process, not outcomes. What good does it do to gain easy access to the theater if the play stinks? It matters little if it is easy to qualify for financial aid if the aid doesn’t happen. All the clever calculations and formulae mean nothing if nobody in the financial aid delivery system is required to adhere to its dictates. The fact is they can’t because they simply do not have adequate financial resources to do so. I am not making this up---It is true. Ask any college controller or treasurer.

Day after day, the issue of student loans makes the headlines. The debate is hot and passionate. Should we use private banks or provide loans from the government? The question begs the real issue which is, “Has anybody ever considered the actual impact of loans on the lives of kids and the economy as a whole?” That’s the crux of the matter and the answer to anyone who cares to look is that loans should be eliminated as a form of college financial aid for our children. Give them a reason to go to college and let them enjoy the rewards of a degree instead of saddling them with thousands of dollars of loan payback as they enter the adult world, money that should go into the consumer marketplace and not to some bank or government stash that doesn’t educate anyone. That’s the issue that everyone seems to avoid, not whether there should be public or private loans but, rather, whether there should any loans at all. The answer, of course, is no. It is obvious but it would also require some imagination to retool an entire financial aid system in the absence of student loans. For us educators who spend much of our lives stating the obvious with a sense of discovery, this is a daunting task.

Day after day, parents are faced with the Draconian choice of either saving for college or saving for retirement but they cannot do both unless they are the recipients of an unwarranted bonus from one of our nation’s corporate giants. Most opt for the former and in doing so condemn themselves and the nation to an aged population with little or no earning power and an increased dependence on the public dole. For those who choose the latter, the nation is faced with an undereducated, shiftless and underachieving young adult population who will not only require public assistance but will lower this nation’s competitive edge in the global economy. Ours is the only developed nation in the world that forces its citizens to make this choice made necessary by an utterly dysfunctional college financial aid system.

Day after day, the financial safety net under our colleges becomes more frayed because our institutions of higher education are required to underwrite a greater share of the student financial aid burden. It is the offspring created by the federal government’s glacial pace to increase the federal contribution to financial aid in a way that even begins to keep up with the rate of inflation or the consumer price index. Colleges, like people and businesses, are inching toward bankruptcy and closure because of our failure to pay attention or to value education beyond the easy, largely hollow rhetoric that we hear every day.

Notwithstanding the chirpy, glowing report from the College Board (Trends in College Pricing and Trends in Student Aid) about how things are getting better (or maybe getting worse more slowly) in the financial aid arena, those of us in the real world of struggling families and financially at-risk colleges, see something different, something much more alarming. Just because we have bureaucracies and an alphabet soup of programs in place, it is no guarantee that we have a financial aid system that works. By any standard, it doesn’t and the sooner we respond to that fading emergency beacon, the greater chance we will have of breathing new life into a patient that is hanging on by a rapidly failing life support system. But that will require imagination and creativity both of which are in short supply in Washington and beyond, a deficit made much worse by the toxicity of our politics and our lack of political courage to rise above partisanship and act upon issues in a way that reveals an overriding, visceral loyalty to our nation and its people.

Is anyone paying attention? Does anyone care?

That theme reappeared in this week’s, Chronicle of Higher Education. An important and perceptive article by E.D Hirsch, Jr., an emeritus professor at the University of Virginia, caught my attention. In his article, aptly entitled, “How Schools Fail democracy”, Professor Hirsch noted that just teaching kids how to do things is not enough and our failure in the earliest years of education to impart certain common, shared precepts about our democracy in a way that teaches us to honor fellow citizens who may hold views that differ from our own, may lead to our collective downfall.

Professor Hirsch cites the writings of our founding fathers and others to demonstrate that in addition to teaching fundamentals of language, there must also be a teaching of principles common to every American, one that creates a sense of community and oneness while also encouraging a tolerance of opinions with which we may not agree. Through that common understanding, democracy can thrive because even though we may differ, we do so in a way that also honors our commonality. It is this component that is missing in our system of education and is slowly undoing this fragile thing we call democracy. But the cure is not throwing out the baby with the bathwater. It is making public education more effective, not making it weaker or eliminating it.

The rhetoric we see every day on TV, in the halls of government and surely in public gatherings validate Professor Hirsch’s observations. Arguments are typically thought-free. Civil discourse is replaced by a strident, now famous, “You lie!” comment in Congress. No true scholar of the American system would have ever contemplated that display of rude ignorance if the perpetrator really understood how our system of government was supposed to work. It may not have been his fault that he didn’t understand; it may have been his schooling or it may have been his constituent who also had no clue about how our government works and its reliance upon immutable aspects of commonality among us as citizens. We see this behavior repeated over and over. For instance, we are seeing larger numbers of Americans who rage against the whole notion of public schools as being un-American and a “brain-washing” process. If those supposed true Americans had spent one hour looking at what our founding fathers had said about the importance of public education, they would have discovered that those genuinely great Americans held public education as one of the non-negotiable pillars of our democratic system. And yet, they raged on in their state of irreversible authoritative ignorance as their equally clueless camp followers cheered them on.

Professor Hirsch heaps the blame on our schools, particularly our elementary schools for failing to pass on substantive and fundamental education about our common values. We may be different but we are still equal in the eyes of our system of government and it is that equality that unites us, all of us. This is a simple precept but one that is hard to turn into a reality unless we are equipped with the substantive knowledge to do so. Because we adults don’t seem to possess that insight, our democracy is in peril.

In my 1982 article, I left the conclusion open-ended. I said, “If we continue to be satisfied with the marginally functional and intellectually impoverished young adults that we turn loose on society every spring, then it will be the unhappy fate of future generations to live out their lives in a world languishing in a perilous twilight where the creative energies of this nation will be diverted toward dealing with the whirlwind that is sure to come.” If you believe this is an overstatement, stop, listen and look around you.

For many years, proprietary schools have qualified for the usual federal financial aid programs, particularly low-cost student loans and certain grant programs for low-income families. For profit schools have used this federal money to prop up their often shaky financial underpinnings frequently with little regard for their responsibility to deliver on their promises of providing an array of marketable skills.

Recently, I looked at the post high school institutions that qualified for federal aid. I discovered in California alone there were about 80 beauty schools qualified to dispense student loans and other federally-backed forms of financial aid. In addition, across the nation there were barber colleges, funeral home management programs, aviation schools, and a host of mechanical repair schools from air conditioners to light vehicles and 747 airplanes. The clear message was that if you went to these places, you would be in an excellent position to start a well-paying career. All one needed was a beating heart and cash and you were in. Upon entry, when it became clear that there was serious academic work to be done or no work at all, patrons dropped out leaving behind the non-refundable federal aid and more importantly the proceeds of student loans that had to be paid back after the student dropped out.

It is astonishing that only now is the government aware of the extent of fraud and deception and its effect on undermining an already leaky system of student financial aid. Sure, many of the schools were disqualified from continued eligibility for federal aid most often because of their loan default rate and some simply disappeared but with that disappearance went hundreds of millions of taxpayers’ and bank dollars. Did anybody see this coming? Apparently not. Did anybody care enough to look? Probably not.

Beside the general public, the real victims were most often low income, minority students and their families who in many cases co-signed supplementary, private student loans. Students, many of whom began the proprietary program but were either unable to complete it or found that the course was a waste of time and money, dropped out and with it came another line of failure on their résumés and, worse yet, a significant debt with no visible means to pay it back.

It is past time to investigate this debacle called proprietary schools. Some are actually very reputable and do deliver on their promises although they rarely provide the financial aid levels of support of more traditional public and private non-profit colleges and universities. But the record is clear and stands as a yardstick to make a judgment about the reliability of services delivered by private firms compared with non-profit, public institutions and systems. Or, if one feels that is too close to the issues at the heart of the current health care struggle, the example of public vs. proprietary higher education is a warning that in the world of commerce with private anything, there must be public oversight. Without it, greed always carries the day. Don’t take my word for this. Ask any family with an upside-down mortgage; ask any family who is staring at a $200-300,000 hospital bill after their health insurance was cancelled, sometimes in mid-treatment; ask the victims of private companies like Bear Stearns or PG&E or any one of the hundreds of failed banks and financial institutions who have disappeared along with the life savings of hard-working Americans.

There is a lesson in all of this for anyone who cares to find one. In the final analysis, it is the cast of characters in the private sector itself that has sadly created the need for big government. If they behaved themselves and conducted business with a sense of social responsibility and even an iota of ethical behavior, the size of government would slowly diminish. The need for an investigation of proprietary schools is fueled by the same catalyst as the failure of Enron, unbridled greed. And it is safe to suggest that this is one trait that is truly bipartisan with experienced, imaginative practitioners and devotees across the political, religious or social spectrum.

Find the best teachers. Ask upper class students and others to identify them and try to take their classes if they fit your broad areas of interest.

Take courses that emphasize writing. For innumerable reasons, the ability to communicate in writing is one of the most valuable life skills one can master.

Learn to summarize all of what you hear or read at college and turn it into coherent arguments by injecting the assumptions that led to the position. Then form your own opinions and don’t be afraid to say them. Don’t prematurely take a position unless you are prepared to summarize the basis of the opposing stance. You can’t effectively advance your own views without a profound appreciation of a contrary opinion. It is a fundamental of a truly liberal (small "L") education.

Get Lost. In Books. Read and reread great books by great authors until you actually understand them. Focus on authors who transcend the current world and modern thought, authors who present more timeless ideas. Among them are Plato, Homer, Cervantes, and, of course, Shakespeare. Just reading them to pass a test isn’t enough. Read them in a way that makes them part of who you are and then you will become a more formidable, educated human being.

1. Make sure you are actually in the right class. Some students don’t figure it out until they’ve wasted a few weeks in the wrong place.
2. Do not:

beat out a cadence on your desk while the teacher is lecturing;
sigh audibly more than three or four times during a lecture;
check your watch more than twice during the hour;
ask any of the following….

Will this be on the test?
Does grammar count?
Do we have to read the whole chapter?
Can I turn in my paper late?

Do:

practice a look of genuine interest; nod in agreement frequently; laugh at all the professor’s jokes. ask questions of the professor if you are confused AND...

remind yourself that next year you will not be a freshman and people will no longer sneer at you.

Take courses that interest you. You will find that as you go deeper into a subject, it will open up other areas of interest. Read, read, read and write, write, write. The absence of the former will make the latter nearly impossible. Hang out with smart people. They will do more for the future of your life than the often thought-free, popular campus jocks and other beautiful people. And don’t be afraid to be a political activist regardless of your politics. Martha Nussbaum, professor of philosophy, law and divinity at the University of Chicago: Take courses because they broaden your mind, not just the ones that may prepare you for a career. It will enrich your life and give you the tools to change careers and enjoy more than just the eight hours on the job every day.

Read a respected newspaper every day. It will be “your path to the world”. Get to know your professors away from the classroom and ask them about things not connected with their class. In fact, get to know everyone on campus, people who work in the cafeteria, security staff, janitors and housekeepers. They all have something of value to tell you and it reminds you that college also includes the real world beyond the classroom.

Fall in love not with some hunk or ravishing beauty but with some form of intellectual challenge. Professor Hopkins fell in love with DNA and has spent a lifetime getting to know it in a way that will impact the future of medicine and related fields. Current knowledge creatively studied will always lead to something new and uncharted. Find that love. It is life-altering and it is divorce-free!

Be prepared to change course. College is rarely what you think it is. There are worlds to discover and ideas you never knew. Be open to it all and pay attention to those things that truly interest you and things that you seem to be good at. Be sensitive to the signals and be prepared to take a life path that you never expected.

I would add that you are only 17 or 18 and you still don’t know very much so absorb as many things as you can and follow your heart. Your future is out there waiting to be discovered. The less certain freshmen are about a career path, the more likely they are to become a truly educated college graduate as they search for their true calling.

As a college admissions advisor, I review many college admissions essays in my practice. They create one of the thorniest ethical dilemmas imaginable. To what extent do I critique the essay and still maintain the essence of the student’s writing skills? The ethical tug between my immense respect for our colleges and the interests of a fee-paying client looms large and it comes with no easy answer.

As grades in our nation’s high schools continue their inflation trend and as the quality of the growing number of college applicants appears to be getting more competitive, incremental differences among applications become even more important. Nowhere in the application dance is that more highlighted than in the application essay. Schworm pointed out that the application essay has ascended to “considerable importance scale behind grades, strength of classes, and standardized test scores according to the National Association for College Admission Counseling”.

Despite even the most eloquent rationalization veneer, the college admissions essay is a third-person- “doctored” product for an increasing number of applicants and as such it is an uncertain reflection of an applicant’s ability to write a coherent, well-structured essay.

Schworm’s article points out that colleges tend to give the applicant the benefit of the doubt when the essay exceeds an expected “polished” standard unless plagiarism is suspected and can be verified. But signs of crossing the ethical line while pretty easy to detect are nearly impossible to prove.

Schworm included some responses from college admissions people that may shed some light on their sensitivities. Sarah McGinty, a Boston admissions consultant and author of “The College Application Essay”, noted, “A shimmering essay from a so-so English student…clashes like red stilettos and sweats”.

Eric Kaplan, the interim dean of admissions at Penn, noted in Schworm’s article that when the college compared the student’s response to the main application essay with the often less-edited short answer that did not receive the attention of an outside expert, the difference in quality is sometimes remarkable and revealing…” In the shorter essays, “….there will be no subject-verb agreement” but “the main essay would be something a magazine would be eager to print”.

One approach used by many colleges that might reveal authorship would be to compare admissions essays with the SAT writing sample or a sample of a graded essay from a high school English class. With the latter, it is hard to tell whether the graded paper is the first draft or a later re-write of an often- edited effort that began as a second rate essay. But despite this shortcoming, it may be better than no standard at all.

There is an old saying suggesting that any system that makes good people do bad things is, on its face, a bad system. But this is a tough one. It is a clear and simple proposition that a writing sample is an important dimension in the admissions process but how to do it in a manner where the playing field remains level is anything but simple. Using the SAT writing sample as a comparative tool to determine the probability of extra help on the college admission essay is a useful approach. The submission of a certified, first-draft, corrected English-class essay is another (I can live with this one provided the teachers play it straight). Other special, nationwide, time-specific, standardized approaches would quickly fall victim to time zone differences and the internet. Essays would likely improve as the test locations move west unless the essay subject changed with each time zone.

So we will have to muddle through with an imperfect system and rely upon the ethical awareness of pre-college admissions counselors and others along with the perceptions of college admissions personnel to keep it all above-board and fair. Based upon my many years’ experience, I have a low expectation that self policing will have much impact particularly when the stakes are so high…large fees to private counselors, reputations of high schools and high school English departments and, of course, and surely not least, often unrealistic parental expectations.

According to the College Board there are essentially 6 options:

1. Highest Section Scores Across Test Dates: The college will allow you to submit the highest section (Math, Critical Reading, Writing) scores from any number of test attempts that you choose to submit to the college but you can send more scores if you wish. So, for instance, if you took the SAT three times, you can choose to submit the results of only the last two of the three attempts because the highest section scores are found in those two attempts. You can send in any additional scores you wish.
2. Version 2 of Option 1: This is very similar to option one except that you can send in additional test results and the college will automatically update your records if there are new high scores on any or all sections. You are urged but not required to send in any additional scores as you take the test more times.
3. Single Highest Test Date: The college requires that you submit the test results from the single highest cumulative score (the sum of Math, Critical Reading and Writing). You can send in additional results if you like.
4. Version 2 of Option 3: You are encouraged to send in any new test results if the cumulative score is higher than the one you submitted earlier. Only your highest cumulative test date score will be considered and the college will update your records to reflect the highest total from any single testing period.
5. All SAT scores are required: The college will require that you send in all SAT results regardless of the outcome on the test attempt.
6. Some colleges will provide a URL that will inform you of that college’s current approach to SAT reporting. As the unpredictable winds of change are blowing, I would urge everyone to check with the college before assuming anything unless there is a very specific and unambiguous outline of how they treat SAT scores in the application materials on their website.

For those of you who would like a preview of how the colleges in your crosshairs treat SAT reporting, you can go to the College Board website and navigate to the SAT section. There you will find an index. Click on “Scores” and then click on “Score Choice”. That should provide you with what you need to know about how your colleges treat SAT scoring. It is interesting how we educators tend to make things more complex with every move we make in the name of simplification. Recognizing that Americans have enormous and weighty things they have to deal with just to stay in a home and to put food on the table, why can’t colleges respect that and say, “Send in all scores and we will consider them in context.” That might free up some time for families to spend some quality time together or for a parent to sip a nice wine or take a walk or simply do nothing, all of which are far more rewarding than dancing to the tune of an educator who has nothing better to do than ruin someone else’s nice day with yet another oddly shaped hoop for applicants and their families to deal with.

At any rate, we at TuitionCoach hope this overview has been helpful but we urge you to always assume that whatever you read here in September may be different in October. That having been said, we call your attention to option 6 which suggests that you should check with the individual colleges before you do anything. Or you can call the college provided that anyone answers the phone. People in California know what this means. A call to a California public college or university feels more like an ipod than a phone call. Lots of free music and not a whole lot of anything else! But let’s be fair…It isn’t the fault of the college. It’s the system itself and the staff-eviscerating economy.

The most unsettling outcome created by this ill-wind is that it fuels the fires of false choices. There are many Americans who want their kids to go to “top” colleges as though a college was some sort of status indicator like a luxury car. The ratings create a feeding frenzy among this crowd, a sense of competition and urgency that has more about parental competition and little to do with the student. And to get there, the student often mortgages his adolescence.

The other victims of this mindless ratings game are the colleges. They are forced to get in the game because they want to impress their alums and other sources of financial support. Sadly, that game requires odd decision-making and capital expenses that may have nothing to do with education but, rather, extra “bells and whistles” and certain admissions practices intended to increase the pool of applicants and create a higher yield rate from those burgeoning numbers.

Several years ago, I attended a conference which included a break out session featuring representatives from the usual college rating suspects as members of the panel. In the audience were college admissions people and a few college presidents. It only took about ten minutes for the meeting to dissolve into a shouting contest with the college personnel uniformly railing against what they perceived to be a form of cultural arrogance by these print outlets that had arbitrarily set themselves up as ad hoc arbiters of college standards across our nation. You know what? The college people were right.

Ironically, by playing along with the rating nonsense, the colleges are unwitting codependents in a fool’s game. Colleges should simply refuse to play. If these publishers and news outlets had no hard numbers, there would be nothing to print.

I am a fierce advocate of free press and free speech in this nation. But this is not about free speech; it is about social responsibility and good judgment and the national interest. Colleges have enough to think about without having to deal with predators who use colleges to increase magazine circulation and who abuse their special place in our society to make an already tension-filled admissions process even more perverse.

It is one thing to report about what a college does and what it feels like for prospective students. It is quite another for a bunch of suits to conjure up a rating system that makes both families and the colleges victims of unbridled capitalism. I, for one, long for the day when students and families can select colleges based solely upon fit and not an arbitrary and irrelevant ranking number. If I were in an administrative office of a college and received a call from a college rating source, I like to think it would be a call I would most assuredly not return.

Here’s why:

• Once a family understands how much they are likely to pay for college, any college, and they have a strategy to meet that cost, the student is more likely to choose colleges based upon their fit rather than their cost. The secret lies in calculating the EFC or Expected Family Contribution BEFORE even considering colleges. The EFC is a number created by a federal formula that estimates the amount the college financial aid system will require a family to pay out of pocket for one year of college. It is closely reflective of each family’s unique financial situation. Once calculated, it does not change regardless of the cost of the college. For example, if you know that your EFC is $9,600 a year whether the sticker price of the college is $12,000 or $50,000, the college search is very likely to take on a different look. The shortfall between the EFC and the actual cost of college should be filled with what is called need-based financial aid. Knowing this basic information well in advance of college will have an effect on college choices, high school curricula and maybe even career goals. The sooner you know this, the greater the likely impact on lifetime outcomes.
• The EFC is calculated using a number of factors related to a family’s income, assets and other demographics. The major factors in determining the EFC are closely tied to the IRS tax return which reveals things like salaries, investment income, business income and other variables. For the first year of college, the “operative” IRS form covers the calendar year spanning the second half of the student’s junior year and the first half of the senior year in high school. Prudent college planning should include strategies geared to produce a 1040 that will maximize eligibility for financial aid at best and one that will do no harm at least. This requires both an early understanding to how the EFC is calculated and the lead time needed to implement strategies that will help to maximize financial aid. Thus, the optimal time frame for this should begin as early as the student’s freshman year in high school and the second semester of the sophomore year at the latest. Later starting dates are better than none but you will have to do some smart, fast planning to make up for the time lost. Shorter time frames often result in the financial aid system driving more important, long-range financial decisions to the detriment of the family’s financial security. Implementing cost saving strategies after the college has already received the initial snapshot of the family’s financials through the first FAFSA (financial aid form) is going to make later “improvements” a tougher sell.

To consider each student in a family as standalone factor in the family’s college planning is a serious mistake. Before the first student of a multi-child family enters college, the parents should have a comprehensive college funding game plan that includes every student AND a clear bottom line for the parents. That bottom line MUST include a parental retirement plan. Families should avoid at all costs the short-sighted, misguided strategy of sacrificing everything on behalf of their kids. There is no place in heaven for parents who do that; there is just sadness and a dependent, marginal existence, the stepchild of unrealistic college planning. The way to avoid this is to understand the college financial aid system and strategies geared to cover costs not funded by financial aid and to have that in place early in the pre-college process.

Finally, when students attend colleges because they address their academic and social needs, the research suggests that the road to a college degree typically takes less time and, as we all know, time and money are closely linked. An early understanding of how to pay for college often results in better college fits and upgraded college choices. We remember that old saying, “Ignorance is bliss” but when it comes to planning for college funding, I can assure you there is utterly no upside to ignorance. But just as important in college planning is the timing of when the cloud of ignorance is lifted….the earlier, the better!

Ours is a two-party democracy and as such it is essential that both parties are viable, active incubators for ideas on ways to deliver the extraordinary promise of our Constitution. When one of the parties becomes overly weak or has lost its way, we all suffer. Such is the case of the Republican Party.

I now fondly remember the “good old days” when on prime-time news we watched things like the “Ev and Jerry Show” featuring Everett Dirksen of Illinois, the Republican leader of the Senate, and Jerry Ford, the GOP leader of the House and future President of the United States. They seemed to be everywhere nipping at the Democrats’ heels at almost every turn. They were for the most part, thoughtful and respectful and they always seemed to keep the interest of the nation ahead of their party’s more parochial agenda. I rarely agreed with them but I always respected them for their willingness to engage in a substantive debate, one that focused on the message and not the messenger. They were important and clearly patriotic Americans who did what they could to make us a better nation. As Republicans, they were joined by other creative GOP leaders who understood their roles in helping to forge a better world for all of us.

But sadly that has changed. The party of ideas and thoughtful grownups has lost its way and is running on fumes that just don’t smell right. The once vibrant lodestone of interesting policies has become an olio of silly lightweights who apparently think that opposing Democrats and moderates in their own party is actually a policy. It isn’t. For example, while their spokespeople have announced that although they are viscerally against Mr. Obama’s health care reform efforts, they will not be proposing a plan of their own. While this issue of national importance faces mindless obstruction, the party offers us childish, playground issues like the validity of the President’s birth certificate or catchy, fear-based slogans geared to ratchet up anxiety and obscure the actual issue, things like “Federal takeover of medicine” or “the first step in governmental control of our lives” or “It secretly represents the path to assisted suicide and the death of our senior citizens”. They have even gone so far as to tacitly condone and/or hire a firm to teach opponents of the bill on ways to disrupt peaceful town hall meetings held so that people of all views can better understand the plan and debate it on its merits. These flag-waving, Bible-thumping zealots who purport to support democracy, can’t accept it even in its purest form. It is hard to make progress when one of our great parties fails to join in the effort by using known, rational, time-tested behaviors geared to advance substantive debate, the source of life for any democratic republic.

What this nation needs is an opposition party that offers new ideas that are so compelling and worth considering that the party in power is forced to pay attention and maybe even convinced to put some of those ideas into law. A good example is the work, “Putting Our House in Order: A Guide to Social Security and Health Care Reform”, co-authored by George Shultz and John Shoven. It is a thoughtful, serious discussion of a different approach to critical problems. Even though I have issues with their conclusions, it did offer important thoughts for consideration, ideas that might be useful to the Obama administration in its efforts to craft a policy that would appeal to the broadest spectrum of Americans. The Shultz and Shoven work, however, has been largely drowned out by the shallow, vapid noise of the Republican naysayers. That once constructive spirit of the Republican Party is no longer evident. It has been replaced by the foolish and undemocratic mantra that says, “You’re either for us or against us!” It is this all-or-nothing craziness that is, at its roots, utterly anathema to any democracy, particularly a representative one whose functional well-being is so dependent upon ideas, compromise and comity.

Much of the party’s dysfunction can be traced directly to its short-sighted and wrong-headed embrace of religion. Our wise founding fathers got it right when they warned about the dangers of linking religion and government. After all, it was this very issue that triggered the search for a new life and the settling of New England by some pretty brave people in the first decades of the 17th century. The understanding of the founding fathers was simple and unambiguous. Religions vary and religions have their own non-negotiable dogmas and thus they are incompatible with the overriding spirit of pragmatic relativism that is central to all functioning democracies. As such, issues tied to religious dogma don’t belong in the public legislative domain because they can’t be debated or compromised. Extending that thinking to the 21st century, matters like abortion or same-sex marriage so steeped in certain religious orthodoxies, are best left alone so that those who feel one way or another can simply practice their beliefs without the intrusion of the government or someone else’s pulpit. But the present-day Republican Party has leveraged and hijacked religion and placed it in the public domain in a manner not entirely unlike a profoundly undemocratic Moslem fundamentalist government. Anyone interested in observing the outcomes of a close alliance between religious dogma and government has lots of examples in the Middle East and elsewhere. In the absence of any overriding policy or platform, the current core of the GOP simply waves the Bible as its pillar, a strategy that for some elevates their authenticity as leaders of a free nation. But for others who have actually read things like “The Federalist” and other writings by our “Founding Fathers”, it is profoundly stomach-churning. You know the old saw, “God is on our side!” There’s not much “wiggle room” for honest negotiation in that stance. The moment the Republicans can let go of religion as a cornerstone of their party is the moment they will once again have a chance at becoming a viable, important part of the nation’s political landscape.

This is not a condemnation of the Republican Party. Quite the contrary….It is a plea for it to rethink its purpose in the context of the American democratic system and to reemerge as a true partner on our collective road to a brighter tomorrow. In doing so, it may lose a few elections in the short run but eventually it will find a rebirth as a party even Democrats can honor. My hope is that the Republican Party can rise above the shallowness and largely idea-free leadership of the party’s usual suspects and once again embrace the thoughtful and respected examples of their forebears, people like Lincoln, Teddy Roosevelt, Tom Dewey, Bob Taft, Wendell Wilkie, Eisenhower, Rockefeller, Reagan and so many more all of whom brought important ideas to the American table and in doing so helped us all in our efforts to create that elusive "...more perfect union”.

History has a funny way of recording achievements not obstructionists. In our present world, win or lose, the citizens and lawmakers who are truly proactive and collaborative in the vigorous retooling of the nation’s Neanderthal health care system will be remembered for that effort. Those who fail to be a part of that undertaking and to help make it a reality for all Americans will join the legions of other congenital naysayers in that invisible, forgotten pantheon of Americans whose hierarchy of priorities had something called “social responsibility” well down the list.

Lynn O’Shaughnessy crafted an interesting piece on the "Test Optional" admissions issue and its fallout. Test Optional refers to those colleges who do not require SAT or ACT scores to be submitted with the application. It stems largely from the notion that the tests are biased in favor of higher socio-economic groups which, of course, is true and as such, by making test scores optional, it was thought that the doors to colleges will open wider for a broader and more diverse applicant pool. But in this era of keen college competition in the ridiculous and harmful college rating systems of The US News and World Report and others, the test-optional approach is being gamed by certain colleges to move up the rating charts.

The Times reprinted a comparison chart (before and after Test Optional) based upon earlier data from the US News rankings:

	BEFORE (Fall 2005)		AFTER (Fall 2007)
	Admittance Rate	ACT/SAT Middle 50%*	Admittance Rate	ACT/SAT middle 50%
Lawrence U. (WI)	68%	25-30	56%	27-31
Holy Cross (MA)	48%	1200-1320	33%	1210-1380
St. Lawrence (NY)	59%	1050-1250	44%	1120-1280
Knox College (IL)	76%	25-30	61%	27-31

*Lowest/Highest Scores of Middle 50 Percent of Admitted Freshmen

The chart illustrates the impact of the new reality on some important indicators of college selectivity, always a factor in the ratings game.

>> Because the ACT/SATs are no longer required, more students will want to apply which increases the applicant pool (total number of applicants) in some cases dramatically. Since the space for entering freshmen at a college is pretty static from year to year, the colleges will admit the same number of applicants but the admit group represents a smaller percentage of the entire applicant pool, making it appear that it is harder to get in after test optional than before. Or put another way, colleges in the illustration appear to be more selective as a result of a test optional policy. The percentage of students admitted from the entire applicant pool is related to something called "yield". The larger percentage of admits who actually attend, the higher the yield. For instance, since Harvard is pretty certain that an accepted applicant is likely to attend they can afford the luxury of admitting only a tiny portion of their applicants. Other colleges may have to admit 5 or more applicants to enroll a student. The latter has a lower yield than Harvard and is thus looked upon as less selective. For some, it is yield that is the prime indicator of a college’s selectivity. The thinking out there is the higher the yield, the better the college.

>> Since it is an option and not a requirement that tests should be reported there is a high likelihood that only kids who feel OK about their SAT/ACT scores are willing to submit them. This tends to upwardly skew the reported middle 50% on the chart above, again making the college appear to have higher admissions standards. While it is not a huge variable in the college ratings game, it does give test optional colleges a leg up when comparing their middle 50% with colleges who require test scores. In the Times article, the Dean of Admissions at Illinois Wesleyan reported that peer schools were showing dramatic increases in test scores of admitted freshmen because they did not include scores from admitted students who chose not to share them with the college. In fact, the article goes on to estimate that students who do not report scores "...generally score 100 to 150 points lower than a typical submitter." One college, Muhlenberg, went so far as to track down the scores of admitted students who had not submitted them with the application and ultimately included the scores in the reported SAT range of the middle 50%. They took a hit because had they simply reported the average score of those who chose to submit them, it would have been about 1250. With the scores of those who chose not to report factored in, the average SAT verbal/math score was 1220. It was the latter result that Muhlenberg bravely reported out to the larger community. Similar disparities were privately noted in other colleges who, unlike Muhlenberg, did not factor in the scores of students who opted out of the reporting process.

What does all of this mean? For one, it points to an ongoing effort by most colleges to do whatever is necessary to stay in the ratings game. Once again, the tail is wagging the dog. It is perfectly understandable why some form of standardized testing may be useful for colleges. It is, after all, one of the few if flawed barometers of student potential and performance. But the way colleges and a few peddlers of annual ratings use the test scores for other purposes is shameful. All it does besides selling millions of dollars worth of magazines and ad space, is to ratchet up the frenzy that is the world of pre-college families and to chum the waters already filled with sharks who feed upon that anxiety. One simple step in the right direction would be to publish whatever information one chooses to write about colleges but simply leave out the numerical ratings. Anyone who has actually had kids go through the college process will tell you that if the student is happy about the college and emerges from it an educated, well-adjusted young adult who is comfortable in his or her own skin, for that student the college was the number one school in the nation, the US News and its rating "system" notwithstanding.

Here are the issues:

First, for many, by the time they get their taxes done and submitted to the IRS, many state and campus-based financial aid program deadlines will have passed making the simplified process a non-starter for thousands of needy families.

Second, I have often used the analogy questioning the value of easy entrance to a theater if the play is bad. What is the bottom-line benefit for families to easily complete a FAFSA if the aid money is not there? Colleges are already under enormous pressure to come up with the funds to deal with a family’s eligibility for financial aid. With the need likely to be more dramatic if family assets are no longer a factor, colleges will be even more impoverished or even worse, the aid simply won’t be there for the family making the ease of application largely irrelevant.

Third, the entire financial aid system is broken, not just the application component. Failure to replace the whole system will blunt any incremental reforms. In this case, it is the colleges that are most at risk because of the failure of the federal and state governments to financially keep pace with the ever-spiraling costs of higher education. As the cost of college has risen slightly above the cost of living index over the last twenty or thirty years, federal support has not begun to respond to that reality particularly on a per-pupil basis. This leaves the colleges to essentially fend for themselves and since they don’t have the resources to do it, the ultimate burden falls upon the parents and students. Entrance to the theater is now easier but the play is bad and getting worse every year.

Fourth, the failure to treat college and higher education in general as a part of the larger economy is a failure of vision. Colleges need to receive adequate governmental financial support; parents need to be able to invest in their own retirement; students need to face a college career without the fear of crippling debt. These are a few of the components required to craft a more vibrant, economy- supportive system.

It is one thing to simply criticize others but quite another to suggest a better way. Here are a few ideas that I have shared with members of Congress and others for years. Some of the ideas have been considered but most have not and until they are, the system of higher education will be at risk along with the long-term financial security of hundreds of thousands of middle class Americans. If you like what you see here, contact your representatives in Congress. It is time for Main Street to make some noise!

College Financial Aid in the 21st Century

The college financial aid system is broken. Even when a family’s need is validated by the daunting forms and its arcane formula, there is no guarantee that sufficient aid will follow. The system has been reduced to an exercise that focuses on process, not results. What matters is doing the paperwork correctly, not the financial and educational outcomes which are becoming more uncertain with every passing year. It is a model created in another age with different challenges and a very different demographic. What was spawned in good faith over 30 years ago has become a dysfunctional and often cruel anachronism in the 21st century.

The casualty list under the present system is nearly endless. Americans at every income are excluded from college because the financial aid paperwork alone serves as the 21st century’s version of the old literacy test once used to exclude former slaves from the voting booth. More important, the failure of the federal government to adequately support its own system results in financial aid shortfalls across the college spectrum. Over the last 30 years, the federal infusion of funds has not kept pace with either the rising cost of college or the rate of inflation. As a result, families routinely discover that they can’t afford college even when their need is validated by the financial aid formula. This compels families at every income to make hard choices between mostly bad options. The government’s failure to adjust to a changing landscape and to adequately support our colleges in the financial aid arena, is forcing American citizens to divert money from retirement and the economy in general in order to send their kids to college. The financial aid system’s inadequacy is going to come back and haunt this nation in the form of having to support millions of retired families economically marginalized by unexpected college costs. You can do the math. Is it smarter to massively invest in a four-year college experience that is likely to return the investment with interest in the form of a more productive work force and a higher tax base or a 30-year handout to retired people financially neutered by college costs?

What is needed is a system that is rational, transparent, relatively paper-free and 100% reliable, one that promises college or any post-secondary training as a non-negotiable part of the American birthright where the primary currency required to enter those programs are things like character, talent and vision, not dollars. In addition, we need to create a system that includes not only a funding strategy for our public and private colleges and universities but also proprietary schools and graduate programs. Only then will we have the kind of comprehensive approach to putting the American dream within the grasp of any citizen and only then with we have the logistics in place to ensure that our nation’s arsenal of talent and brain power will always remain strong.

In very broad strokes, the new model should work like this. Anyone can apply to any college and if the student is accepted, the college will require a validation of the parents or student’s adjusted gross income as reported on their 1040. The adjusted gross income will determine the percentage of the cost of attendance (tuition, room and board and fees) the family will be expected to pay. That percentage scale should be published every year by the Department of Education in the form of a very public document. Then, the colleges will get the appropriate adjusted gross incomes for all of its returning students and in that way, the college can determine how much they will receive in cash payments from all attendees.

Another table or index will be created annually as well. This will be a scale relating to the expected percent that colleges will be required to contribute to campus-based aid depending upon a known set of variables like endowment and other factors. Care should be taken to create a formula that encourages colleges to continue and expand upon what they do best, educate and innovate. Annually, the college will complete an Institutional Contribution Index form (ICI), that will determine the percentage of financial need that the college will be required to fill with campus-based aid. In this way, the number of forms headed to the U.S. Department of Education every year will be reduced from 7 or 8 million to fewer than 20 thousand. Once the colleges add their aid driven by the requirements of the ICI, the college will submit to the Department of Education a pro forma document that has calculated the total need for all students minus the college contribution. The federal government will then provide to the college the funds needed to take care of any remaining unfunded need. That amount is guaranteed provided the college’s numbers can be verified. Proprietary schools and grad schools should have a somewhat different approach with student loans forming the primary support system but with a plan that will encourage future employers to help with the payback of those loans, a plan that takes advantage of tax rules already in place for both the employee and the employer.

One of the benefits of a smarter system is that because there are no loans involved for non-proprietary school undergraduates, students are more likely to choose career paths that are personally fulfilling rather than ones geared to helping pay back student loans. The absence of student loans will allow graduates to put their money into the active economy rather than to live a financially marginal life created by a large student loan burden. Because parents’ assets will no longer be a part of a financial aid formula nor the primary tool to pay for college, parents will be free to put their savings where they belong, in retirement funds. Moreover, with the specter of college costs being so dramatically mitigated, parents are more likely to spend money more freely in support of the general economy, an important stimulus in today’s world.

A new, more rational approach to paying for college, one that is an integral part of the nation’s larger economic strategy is clearly in the public interest. If it is true that a college graduate is likely to make at least a million dollars more over a lifetime than a person without a degree, the increased taxes a college grad is likely to pay will more than reimburse the nation no matter what it costs to educate the person. Moreover, the productivity and creativity of the college-educated citizen will add important dimensions to the nation’s security and its competitive edge in an interconnected world economy. Part of the payback includes a lower demand for expensive public services that college graduates rarely require; things like prisons and rehab programs, food stamps and a host of other programs and services most of which are the step children of an inadequate education and the despair and hopelessness that often follow.

The plan suggested here may contain the seeds of a powerful way to help families, strengthen the entire higher education system and the economy at large. It is an approach for a great nation whose best days are yet to come.

The “umbrella” organization for these often unappreciated professionals, is called NAFSAA or the National Association of Student Financial Aid Administrators. Having been a member of that organization and a member of its regional and state affiliates for many years, I can report without hesitation that it is, in my opinion, one of the most effective organizations I have seen in over 40 years in education. NASFAA provides unparalleled support for its members in the form of daily bulletins, workshops, training programs, legislative alerts, and oversight activities rarely seen these days.

Literally millions of successful Americans are now in every conceivable corner of our professional and creative workforce because of the selfless and thoroughly professional efforts of thousands of dedicated, skilled financial aid administrators in colleges across the nation. These are genuine, card-carrying heroes and as such, they should be so acknowledged in your dealings with them. They are constrained on many fronts but they will do what they can to help you and your children realize their college dreams. If they can’t provide you with the perfect financial aid package, it isn’t that they don’t want to but, rather, they are unable to because of their own budget constraints. No matter what the outcome or the issues, always try to work with them in a positive frame of mind and always try to acknowledge their professionalism when warranted.

Over the years, I have gotten to know a number of college financial aid officers and I for one, don’t know how they do it. It has to be one of the most stressful and difficult jobs on the planet and still they show up for work every day. Those, my friends, are real heroes; they are doing what they do not just for themselves but for you.

At TuitionCoach, we are providing you with certain tools and special insights that will give you an edge when you deal with college financial aid officers. But knowledge alone may not be enough. Just as important, is the way in which we treat those with whom we work. We urge every one of you to recognize the service financial aid administrators provide and, in the end, to honor them with the respect and appreciation they so fully deserve.

All preexisting loans that have been or will be consolidated are covered by a somewhat arcane formula based upon the date of consolidation and the average rate of the original loan. For purposes of space and simplicity, the consolidated loan rate is between 8.5% and 9.0%.

Private education loans often come with much higher interest rates with the sharks clearly in a feeding frenzy at the consumers’ expense.

Nearly every day over the last four or five years, the world of student loans has been making headlines with lender scandals and sweetheart deals between colleges and lenders garnering the boldest headlines. The financial services “industry” circles above the fray 24/7 looking for ways to pick the bones of the dysfunctional college funding system and the outdated and woefully inadequate financial aid process. In fact, recently our tax dollars have been used to bail out some of these institutions who bundled already risky student loans with even more risky, upside-down mortgage paper.

Even more recently, the combatants in the student loan space have waged a debate about the rates for student loans and the proper lenders (private or public). These issues still linger and eventually the deck chairs will be properly arranged to everyone’s satisfaction as the waters continue their inexorable climb up the sides of the slowly descending vessel.

Where is it written that student and family debt is a proper price to pay to become an educated citizen? That education, the gateway to the American dream, should be part of the birthright of all qualified Americans and not dependent on the willingness of the student and the family to go into needless and numbing debt. That debt is the offspring of a financial aid system created by well-meaning citizens who were and are sufficiently blinded by the status quo so that any really creative, loan-free option is simply outside their mental operating systems.

When you get right down to it, student loans are a stain on this democracy. They serve as a disincentive to go on to higher education, not the great opportunity-creating vestment in which some choose to cloak them. Student loans serve as a depressant on our economy not only because they discourage some of our best and brightest kids to pursue careers that are personally fulfilling but they also divert billions of post-college dollars from the larger economy in order to reimburse the holders of student loan notes. Student loans are a growing cancer on this society and like any lesion they could and should be eliminated from the anatomy of our undergraduate college system before they metastasize any further.

Most other economic issues affect our life styles or comfort levels or even our palates. But this one, college access and college affordability, affects our society’s brain, this nation’s most vital organ. When the brain dies or becomes less functional, the entire body is affected forever. It is in the national interest to make higher education affordable and accessible for all qualified Americans to help our country compete in an increasingly competitive global economy and a world filled to overflowing with complex environmental, social, political, security and health concerns. It will take some visionary people to make the changes that are urgently needed to create that enabling structure. To turn to people in government and the private sector who have a financial and emotional stake and attachment to the way things are, is a mistake. They stand to lose too much to make the bold leap to a new system.

What we need are new voices and new vision and an attitude like the one expressed by President Andrew Shepherd in the movie, The American President. For weeks President Shepherd was silent as his opponent, Senator Bob Rumson, made charge after charge as he completely dictated the substance of the one-sided debate. Finally, Shepherd had seen enough and decided to step up to the plate. His first counter thrust contained the words, “Senator Rumson, your fifteen minutes are up….” And so it is with this moment for change in our history. It is time for us to rekindle our innovative fire to create the kind of open access to our system of higher education; one that celebrates our nation’s intellect, not one that undermines it.

Since that time, a great nation has taken root and stands more than ever as a beacon of hope for so much of humanity that longs for our gift. Through the Internet and mass communication the world watches our nation every minute of every day and many around the globe are likely to emulate us in their quest for a different life. The world bears witness as we continue our efforts to deliver on that sweeping mandate "to form a more perfect union".

None of what we have comes with a guarantee or an iron-clad, eternal-life expectancy. The sole guardian of this heritage is us, we the people. But in this new age of instant communication where handsomely-paid opinion makers can reach millions at any given moment to influence and drive the course of events, the great legacy begun in 1776 is more than ever at risk. With every passing day, it becomes more difficult to know what is true and what is not. Many of us get our news from sources who have doctored the news for political, religious, economic or other purposes. We can watch an event live in real time and then be confronted by any number of people who will try through their own personal interest lenses to tell us what we just saw in order to color in the backdrop, meaning and intent of the event in any way the analyst chooses. In doing so, even the most trivial events emerge as partisan, controversial issues that not only blur the barometer of what is important and what is not but also makes agreement or reasonable discourse far more difficult. Democracy is hard enough as it is without adding partisan and character issues to an already challenging system whose life blood is compromise, accommodation and comity.

At one time or another we must all feel like the emotionally-drained Frank Galvin in David Mamet’s screenplay, The Verdict. The trial had drawn to an end and critical, case-altering testimony from Galvin’s key witness had been disallowed by a lethal combination of a legal loophole and a judge on the wrong side of impartiality. The disallowed evidence most assuredly would have won the case for Galvin and the plaintiff but now the judge had ruled it inadmissible. In his summation, Galvin, played brilliantly by Paul Newman, reduced his comments to something resembling a free-form, audible thought process. His tortured, soulful plea to that jury mirrors what we might all want to consider with respect to our country on this, the birthday of our nation.

"You know, so much of the time we're lost. We say, 'Please, God, tell us what is right. Tell us what's true’. There is no justice. The rich win, the poor are powerless... We become tired of hearing people lie. After a time we become dead. A little dead. We start thinking of ourselves as victims... And we become victims... And we become weak... and doubt ourselves, and doubt our institutions... and doubt our beliefs... we say for example, `The law is a sham... there is no law... I was a fool for having believed there was.' But today you are the law. You are the law... And not some book and not the lawyers, or the marble statues and the trappings of the court...all that they are is symbols'. Of our desire to be just... All that they are, in effect, is a prayer... a fervent, and a frightened prayer. In my religion we say, `Act as if you had faith, and faith will be given to you.’ If we would have faith in justice, we must only believe in ourselves. And act with justice'. And I believe that there is justice in our hearts... "

The jury ruled in favor of the plaintiff. In doing so, the jury, in a solemn act of faith in truth and justice, subordinated its symbols, the trappings of the court, to the real thing.

Frank Galvin’s speech reminds us that on this day and always, we, each of us, is the law, not our politicians, not the ever-present commentators or the media and not our political parties but each one of us. And thus it is forever our solemn duty to seek justice and demand truth. Then and only then will we keep faith with those brave and visionary men who on another July 4th risked everything to begin a perilous struggle that led to the creation of this nation we call the United States of America.

NASFAA, a responsible and effective professional organization, is merely the messenger in this and not the perpetrator. NASFAA divided the substance for this update into three categories. For symmetry, I will do the same:

Loans: The interest rate on student loans will drop to 5.6% on its way to a downstream low of 3.4% by 2011. Included will be a lowering of origination fees to a half percent or a maximum of 1.5%. The feds also created a payback plan tied to the borrower’s income. The general standard governing the amount of payback at any given time will be capped at 15% of the borrower’s discretionary income. Discretionary income is that income 150% above the poverty level which varies according to family size. (Where did that standard come from and who concocted it?) Then, after 25 years in the payback program---Twenty-Five Years!---the borrower, now in his forties, can walk away from any remaining debt. Parent loans are, of course, ineligible for any such forgiveness schemes. Parent borrowers can look forward to a sometimes marginal existence in their sunset years while the taxpayers will be forced to provide extra support for these debt-ridden senior citizens whose only “crime” was their determination to be responsible, worthy parents for their once college-bound children.

Grants: The maximum Pell Grant will be increased by a bit more than $600 to $5,350 which does little for a low income family staring at a $40,000+ college bill. Moreover, once again, the people whose taxes pay for the Pell Grant Program, the middle class, will be ineligible for a nickel of the money. There are some other minor tweaks of the Pell Grant program that raises the minimum Pell Grant, extends the Pell Grant program to include year-round post-secondary programs and assures that children of soldiers who died in Iraq or Afghanistan who are eligible for a Pell Grant receive the maximum grant. As a former officer in the armed forces, I am saddened by the failure of our government to do more for the families of our servicemen and women who gave us so much.

Other Military Benefits: Appropriately, there are some further changes that affect our military families. Up to now, eligibility for campus-based financial aid took into consideration the veteran’s military educational benefits. The more the veteran got in federal benefits, the less eligibility he or she had for campus-based money. In effect, the federal benefits were wiped out by reduced eligibility for campus aid. It became a zero-sum game. Now, under the new provisions (currently in the process of moving through Congress) federal veterans’ benefits will no longer lower eligibility for campus-based aid. Another provision involves the granting of in-state tuition to any service family who is posted in that state even though their permanent home of record may be in some other state.

The changes in 2009-10 involve a minor upward adjustment for low income families and members of the military and little or no difference for middle income and most civilian Americans. Nor do they include any benefits for the colleges who are being squeezed financially by the federal government’s failure to provide a level of institutional support that begins to reflect the rate of inflation or any other standard relating to rising costs and stagnant family incomes. While we are lamenting the absence of funds to help the average family, there is a new and growing list of patients whose health is deteriorating even faster, our colleges. An appropriate label for the 2009-10 legislation might be, “Every College Left Behind”.

Our nation has to stop paying lip service to its purported support for education and actually act on that commitment. When one needs to create a solution to any broken system, the last people likely to find the answers are the people or organizations who created the mess in the first place. The reason is simple and obvious. People, even good, well-meaning people who have been a party to any system for a long time, think of reform within the context of that system which creates a distortion of reality and a narrowing of vision making any real fixes less likely. Congress and the US Department of Education have been the master architects of the financial aid system for a half century. It is their invention but it is our money and our kids and our nation. There are answers and new models out there and it is time for us and our government to finally break our stifling loyalty to the past and start taking new directions more seriously. Let’s begin our journey toward a better tomorrow by considering the content and merit of new ideas and not merely the pedigree or affiliation of the messenger.

Note: Visitors to Paul’s Corner have been invited to review a comprehensive model for the future, one that marks a dramatic departure from the current mold and one that addresses the failures of the current system while injecting a needed stimulus to our tired economy. If you are interested in looking at the proposal, click this link.

A college degree should be attainable in four years or less but across the board it is taking longer. Depending upon where you enroll, the latest figures from the College Board suggest that it will take an average of 6.2 years at a public college and 5.3 years at private colleges. Too often as we assess the increased cost that accompanies extended college, we simply tack on the out-of-pocket costs to the extra years needed to obtain a degree but there is more, much more to consider.

In a recent survey, colleges were asked about the percentage of students who graduated within 6 years. Six years! Averages in the high eighty percent bracket or above were considered to be solid colleges but few in number. But wait! What is so laudable about taking six years to complete a four-year program? Whatever happened to the four-year standard?

Tolerance for a six-year college experience is in part the result of a faulty and incomplete accounting of costs. When projecting the costs of college, add to the cost mix not just the cash outlay of another year or two but include “opportunity costs” as well. Opportunity costs refer to the income the student would have been earning as a college graduate if he or she were not languishing an extra year or two at college. Using this math, the cost of year five or six dramatically escalates. Thus, as you look into various colleges, it makes sense to ask, “What percentage of the students graduate in FOUR years?” If they respond by saying they don’t know, they do know but they just prefer not to tell you.

So when you are planning to deal with college costs, you would be well-advised to always consider opportunity costs. That may make some low-cost, “knee-jerk” choices like community college or a local public, four-year college within commuting distance, actually more expensive in the long haul than colleges that may have higher sticker prices but a more predictable, four-year path to a degree. Remember too, things are not always what they seem. For instance, in California, with one of the nation’s largest community college systems (110 institutions serving over 2.5 million students), a report published widely in early November 2006, revealed that among those who entered community college with the intent of transferring to a 4-year college, only 1 in 4 ever actually did that and for those who did transfer, the total time spent on the road to a college degree was in excess of six years or, put a different way, another $70-100 thousand dollars lost in opportunity costs alone. This does not include the actual out-of-pocket cost of college in years five and six. Even more sadly, fewer than 1 in 10 who went to community college in search of an associates degree ever got one. In fact, the report noted that about 25% of the new students entering community colleges each year drop out before the second year. Where’s the bargain in all of that? Despite the generally gloomy picture, there may be some downstream benefit. Several studies have shown that a little college, even if it does not include a degree, seems to have some lasting social and personal benefits.

The relatively painless remedy for such woes is to understand how you will pay for college before you even look at colleges. With that knowledge, college selection is more likely to be based upon fit and not cost and those of us with long experience will bear witness to the fact that students who are happy and well-adjusted in a public or private college setting typically get a degree in four years.

In an age where college costs are spiraling upward and where the raging bulls in the china shop are increasing student debt and the very real threat to parental retirement security, timing becomes more important. College should take four years. Students and parents electing to enroll in colleges that take longer should do so with their eyes and pocket books wide open. Before you sign on any college’s enrollment dotted line, be certain that you are prepared to pay a premium for any extra semesters needed to attain your degree. According to the Project on Student Debt, nationally, student indebtedness is averaging about $22,000 with an alarming number of students carrying much higher debt in the range of up to $100,000 or more and because that high-end debt undoubtedly includes private student loans, some are paying interest rates “as high as 19%”. Escalating student and/or parent college debt and opportunity costs share the same parentage, time.

As a state and as a nation, we have become lazy when it comes to ensuring effective stewardship of our democracy. Instead of simply voting ineffective legislators out of office, some of us have opted for term limits, the easy way to get rid of them, all of them, automatically, regardless of whether they were effective or not. It is sad and tragic that there are so many highly qualified, experienced former legislators of both major parties sitting at home or doing something else, talented, experienced people who hold the keys to creating the kinds of legislation that might ensure a healthy financial future for citizens of every political stripe. Term limits are a perfect embodiment of the old expression, “…throwing out the baby with the bathwater.” In purging the legislative barrel of a few bad apples through the use of term limits where time, an utterly neutral, value-free standard is the sole judge, we lost many, many first-rate public servants.

Political veterans know that creating legislation in a democracy is an art form and that a profound understanding of what is possible forms the hallmark of the process. A declarative statement like “No new taxes!” is not a policy; it is a slogan useful mainly by people who are unwilling or unable to look into ways to compromise and accommodate the various public interests in order to create meaningful legislation. Inexperienced legislators rarely get beyond the slogan because in the absence of any real understanding of the issues or the tools needed to create consensus, they typically respond only to the messenger and not the substance of the message.

The consequences of term limitations are becoming clear. Mastery of the legislative process is, in part, a function of time and front-line experience. It often takes a great deal of time to become an effective legislator. Just an understanding of the sheer scope of legislation is no small accomplishment. Separating objective reality from smooth, well-practiced lobbying is not for a rookie. Developing collegial, trusting relationships with legislative friends and foes is not a “quick study” activity. It often takes years. Moreover, having a sizable number of legislators in a soon-to-be-termed-out mode leaves the legislature with a large contingent of more experienced but lame-duck members who are no longer answerable to the electorate or to their job descriptions.

The solution to legislative ineptitude is not cured by term limits; it is addressed by more seminal issues like campaign financing and gerrymandering reform. By removing money and “loyalty” to campaign contributors, legislators may become more sensitive to the real needs and interests of the ordinary voter. And by creating districts that are more competitive, legislators will have to be productive or lose their seats for cause and not because the clock ran out on their tenure eligibility.

When we look at the venerated legislators of our past whether at the state or national level, there are few if any one or even two-term office holders who have reached that level of respect. The roster is long and impressive: Ted Kennedy, Robert La Follette, Sr., Lyndon Johnson, George Norris, Hubert Humphrey, Bob Taft, Jacob Javits, Everett Dirksen, John Sherman, Sam Rayburn, and the list goes on and on. In every instance, their reputation was tied in part to their longevity in office, experience that taught them how to build consensus out of discord and comity out of competition.

In nearly every avenue of human endeavor, we learn from watching those who came before not to copy them but to learn from them so that over time, we might become more effective by understanding the ways of the system and using that insight to create a better tomorrow. Term limitations remove that on-the-job faculty so that new legislators are forced to learn through trial and error or not learn at all. Either way, it is the electorate that suffers and rightfully so. After all, it was us ordinary citizens who were unwilling to assume the normal responsibilities of citizenship, to vote out the bad guys and vote in the good guys for the duration of their period of good behavior even if it spans many years and many terms.

So let’s revisit term limits so that we can provide our nation and states with experienced leadership over the long haul. We don’t have to tolerate bad office holders for longer than we wish. The cure is simple. It is called voting. I don’t know about you, but if I am in a plane traveling at 570 miles per hour at an altitude of 39,000 feet, I want a steady, veteran hand at the controls, not a switch that says “auto pilot”. The same is true in our legislatures. As auto pilots rarely are able to navigate through unexpected emergencies and have to be manually overridden, so it is with our law-making bodies. Let’s return the controls to the electorate and experienced office holders to help us through troubled times so that we, all of us, can land safely to face a new day.

Note: For those of you who may want to review Paul’s plan to reinvent the financial aid system, click on this link. If you like it, be sure to send it to your Congressional representative and/or the US Department of Education. You can make a difference!

Let’s stop playing these sorts of games. Let’s get rid of the CSS Profile and have every college use the same system. We should pull the plug on the College Board’s money-making monopoly of the CSS Profile and make everyone adhere to the free federal system whatever it may be. If you are an expensive college and you want federal funding, then stop using the Profile. If you want to charge very high tuition, then you, the college has some substantial responsibility to deal with the resulting financial aid eligibility. If you created the expense, it is not fair to assume that it is the taxpayers’ responsibility to completely underwrite your failure to more prudently manage your institution’s operating budget.

Under the current system, no one knows what the financial aid eligibility for any CSS Profile college will be. MIT and others have come up with their own estimators but many haven’t. It is instructive to note that if one uses the individual college’s calculators and enters largely the same data in each, the family contribution varies considerably and no one really knows why. The fact is that any college can just make it up as it goes along by adding local variations to the Institutional Methodology. For families, it’s like going down a highway devoid of posted speed limits. There may be an expensive ticket lurking behind every billboard or bush but you are essentially flying blind. When you get the ticket, then and only then will the speed limit be fully revealed.

For applicants and continuing students at CSS Profile colleges, there is double jeopardy in the financial aid system. The first issue is in how financial need is calculated, a number that is at best unpredictable given the lack of a clear, reliable formula. The second, something we have talked about repeatedly, is that colleges are not required to offer financial aid in an amount that would fully meet the need regardless of how it is calculated. So in the CSS Profile arena, particularly for middle income families, it is very hard to predict what college will actually cost and even when that number is determined by the financial aid forms, there is no guarantee of its relevance. In the end, the family could be and often is treated as one making many thousands of dollars more. No standards, no enforcement and for an increasing number of students, no college, at least not the one they wanted to attend. And for the lion’s share of those families who manage to deal with the flawed system…no standards, no enforcement, no retirement.

For years we have advocated for change and since the fall of 2008, we have suggested in this space a complete retooling of the system. We have sent copies of the model to the Obama administration, to news outlets, to NASFAA (National Association of Student Financial Aid Administrators) and to members of Congress. The US Department of Education has a few copies of it as well. Blueprints for creative change have been sent to Columbia, Harvard and Stanford schools of education. The silence from the government agencies and NASFAA has been deafening. This piece highlights just one dimension of the problem. The entire system of post-secondary education financial aid is broken and cannot be fixed. It has to be replaced which is a tall order because the agents of change are the very people who created the mess in the first place.

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If you are interested in reviewing the new model in its entirety, click on this link. It is essentially a somewhat updated reprint from an earlier series written in the late fall of 2008 and posted in this space beginning on January 3, 2009. If you think it has merit, contact your local member of Congress or anyone you know in the media or the U.S. Department of Education. You may have to include the downloaded text of the plan. Most people in “high places” don’t want to be bothered with downloading. But this is our country too. It is clearly time for Main Street and College Street to finally make some noise!

Let’s start with a normal, 24 hour day and a typical job. Most jobs occupy about 8 hours a day so that leaves 16 hours. We’ll optimistically add a solid 8 hour sleep which leaves about 8 hours of unassigned time. So that’s about 40 hours during the week for you to do non work-related stuff. Now let’s add the weekend of no work, a few vacation days and holidays and 20-30 years of retirement. This would suggest that most of our adult life is not spent on the job so why should we spend our college years solely focused on the smallest part of our adult life? The answer is simple…we shouldn’t. Here’s why.

If all you know is job related, that may not increase your lifetime earnings but it will reduce the quality of your life in unimaginable ways. For starters, what you may love at age 25, you may loathe at 45. What is a job when you are 25, may vanish by age 45 for lots of reasons, not the least of which may be technology. College should also provide you with the tools to switch careers and to free you from the possibility of being trapped for all time in a job you dislike or with a skill that the economy and technology have relegated to the category labeled “irrelevant”. But there is more. Even if you do like your job, people who only know how to do one thing, usually wind up spending more time in their comfort zone. The work day extends beyond the norm and increases to 12 or 15 hours or more and often slides into weekends and vacation time. As the assault on unassigned time continues, social life and family cohesion suffer as collateral damage. People who only know one thing or who are immersed 24/7 in their jobs are usually the least able to create change and innovation because they are so deep into the system. Those people unwittingly become part of the problem, not viable messengers of change and innovation. Moreover, maintenance of the status quo and the certainty of a regular paycheck have a way of stifling innovation.

Remember that 8 hours a day of unassigned time during the week and that special two days we call the weekend? Why shouldn’t your education be directed at enriching that time? There are lots of other roles awaiting you out there; school board member, volunteer work, art, travel, concerts and parenting. The list is endless and all are geared to enriching the lives of the participants. College should prepare you for this as well. Whatever you choose to do for a living, if you also pay attention to your comprehensive education needs in college, I would hope that when 5 pm rolls around, you start getting “nudgy” because you have tickets to a play or concert or a social event sponsored by your school or youth group. This is the stuff of a real life, a meaningful and truly rich life. And when your own young son or daughter asks, “Mom, why is the sky blue?”….the last thing you should want to say is, “Go ask your father!” Become an educated person with some answers and an endless array of interests.

Well-educated people are more likely to do as they wish throughout life. They understand the forces that influence their lives and they are in a better position to do something about it when things don’t go well. Set as one of your long-term goals, the possibility of becoming a life-long, animated, “Letter to the Editor”; an adult with lots of knowledge and interests along with a flexible storehouse of well-considered opinions and the ability to share those insights with anyone who cares to listen. It makes every new day an adventure. So when you consider your post-secondary education, first check the time sheet of life and act accordingly. Life is surely more, much more than a fat paycheck, and the runway to that enriched, fulfilling future often begins at a place called college.

The article began with a family’s dilemma created by the primary wage earner’s layoff. With the looming possibility of the loss of family medical benefits, the out-of-job parent was forced to do some research and do it quickly. He had one student in college and another about to enter.

Like the person in the story, the most overriding issue is to make certain your student is covered in the event of a major injury or long-term illness. Just because your student appears to be healthy, is no guarantee of immunity from accidents or a medical condition lurking among the millions of cells in the student’s anatomy. According to the Times story, about 20% of college students have no health insurance, an invitation to medical and financial disaster.

Parents should always keep abreast of their own health plans to make certain that their kids are also covered. Companies are quietly cutting back on family benefits and they often do so in the small print of a lengthy insurance disclosure document. Dependent medical coverage in employee benefit plans should always be considered to be a moving target that should be monitored and recalibrated as needed. For instance, some policies may not cover a full time college student.

There are network health plans that may or may not cover your student when he or she is away from home and outside the approved network physicians. You must check to see what the out-of-network provisions are in those plans. Some plans cover emergencies while others only cover partial payment for out-of-network doctors and health care charges. Deductibles and co-payments also need to be reviewed. Since colleges usually have provisions and facilities to take care of routine medical issues, those rarely create problems. The real focus should be on major medical occurrences and chronic conditions that accompany the student anywhere in the world.

In the Times article, Konrad featured a “major loophole”. In policies that cover full-time students, there may be a provision that terminates coverage if the full-time student status changes. Thus, if the student becomes ill or disabled and has to reduce the class load making them less than a full-time student, the medical coverage ceases. That phenomenon led to the passage of Michelle’s Law which was enacted when a student in New Hampshire (Michelle Morse) contracted colon cancer and had to maintain her full-time student status in order for her medical coverage to continue until she died of the disease. Michelle’s Law will guarantee coverage for a year even if the student is on medical leave from the college. Always ask your insurance provider whether there are any restrictions about the full-time status of the student as it relates to the medical coverage in the policy. If they request an extra fee for such less than full-time student coverage, check to see if Michelle’s Law covers the part-time student. The experts seem to think it does.

If you are not covered by any group policies, you should shop for individual coverage. Many colleges have their own plans and should be explored first. Because we are dealing with young, healthy kids, the premiums are often very reasonable. The main problem with some college plans is that tend to be pretty restrictive with limits of doctor visits and hospital stays. Moreover, many college plans have pretty low maximum coverage ceilings so that if the student in that sort of plan does need medical coverage, it had better be an illness of short duration or face the threat of impoverishment, an unwelcome bedfellow of lingering illnesses or conditions.

The mantra here is “caveat emptor” or “buyer beware”, but the more overriding advice is to “buy”. Be certain your student has at least some medical plan in operation while at college. If you are lamenting the extraordinary cost of college, it is nothing compared to the cost of medical care or a hospital stay. One relatively simple operation or a two or three week stay in the hospital will easily eclipse the cost of a year at college. So protect yourself and your family while you get your children educated and through college. Then as a college graduate and an informed citizen, they can help us create a system of health care that makes sense. This one clearly doesn’t.

First, review your financial aid award to determine whether there is a gap. Gap means that the award doesn’t fill the entire need (the difference between the EFC and the one-year cost of college). Remember, things like unsubsidized loans and PLUS (parent) loans are NOT need-based aid and their inclusion in a need-based award package would suggest a gap represented by whatever the total value of those two loans are. You should review some of the material in TuitionCoach to better understand this. For starters, use the online video workshop section, “Evaluating Financial Aid Awards”.

Second, call the financial aid office at the college of choice and request to speak to a financial aid administrator. Calls in the morning before 10am are recommended while the financial aid officer is still in a pretty good mood. Start your conversation on a positive note…..“We are excited about going to Ajax University and I know your job is a very difficult one but I need your help.” Then outline your concerns about any gap. Ask, “How can we work together to close the gap?” If you say “Can we improve the award?” the simple answer is “No!”…end of discussion. When the magic word “How” is the lead word, the implication is that there is a way and you are merely asking an expert for the protocol on how to proceed.

Third, include any new information about unexpected expenses or conditions that were not revealed on the FAFSA or CSS Profile. Be very specific and report only those issues that are non-negotiable. Discretionary expenses carry very little weight with financial aid officials. Do not complain about the cost of living in your area or a house that was more than you could reasonably afford because no financial aid person is willing to underwrite your life style choices.

Fourth, financial aid people sometimes bristle when you say “College X offered us more.” They may say, “Then you should go to College X.” Pitting one college against another may not yield anything positive. In fact, it might offend the financial aid officer.

Fifth, if you make any headway with the administrator, before you hang up, repeat the advice or strategy suggested and get the person’s email or mailing address. Follow the phone conversation with a “Thank You” note in which you express not only your appreciation for their help but a detailed litany of their advice. Always establish an “audit trail” on helpful advice because of the likelihood that the financial aid administrator will forget what he or she told you. Thank you notes are not only useful but they are also a sign of good manners. Over-worked and often underpaid financial aid people seem to like families who acknowledge their work and who act like appreciative, thoughtful adults.

Once you settle on an award, and if it is a good one, before you sign on the dotted line ask whether you can expect a similar award in the future assuming your finances do not change significantly. If the answer is “yes”, another thank you note is in order to create that helpful-advice audit trail. Keep copies of all communications with the college financial aid people.

It is always a good idea that if a decent award is achieved, the student should drop by the financial aid office every once in a while during the academic year to thank the administrator and to give that person an update on the student’s progress at the college. Even better…If work/study is offered in the financial aid package, see if there is an opening in the college financial aid office and have your student work there. That typically works out well for both the college and the family provided the student is a good person with some well-tuned social skills and work habits.

In today’s world, the financial aid system already well-entrenched in unpredictability teeters on the edge of lawlessness. No one is really at fault; everyone is a victim. It is a sad confluence of a bad economy and a financial aid system that is woefully under-funded and largely devoid of any enforcement standards in terms of meeting the calculated demonstrated needs of families.

The best advice is to stay calm. Never lose your temper with a financial aid administrator and be willing to spend some time on the issue. Colleges will frequently test your patience in the hope that you will give up and simply cut them a check or borrow the money. For those of you doing this for the first time, you should know that whatever you settle for in year one of college is likely to be the template for the remaining three years. The stakes are very high and because you are new at this, you are perhaps least prepared to enter the field of battle. Knowledge is your primary weapon and the substantial, “boots-on-the-ground” resources found in TuitionCoach are likely to be your best arsenal.

The President has suggested that we eliminate federally guaranteed student loans involving private lenders. He is correct when he notes that it is absurd for the taxpayer to guarantee a college loan for the benefit of a private lending institution. Billions of dollars have been wasted in the guaranteed student loan system and most of the private lenders have still managed to go belly up because the safe, guaranteed loans had been bundled with a potpourri of high-risk ventures by the financial entities in the student loan pipeline. Instead, the federal government will expand its direct loan program and drive private lenders out of the need-based student loan program. From now on, all need-based loans and the bulk of unsubsidized supplementary loans will come directly from the federal government removing altogether the sketchy cast of non-governmental middlemen. In the absence of any alternative approach to financial aid, that is a good idea, one that we have been advocating for a long time.

Another part of the President’s plan is to raise the Pell Grant program by another few hundred dollars a year. The benefit is mostly illusory but it feels good. It does substantially impact the community college system by almost eliminating the cost of college for low income students and that is a good outcome. It is pretty much a yawner for four-year colleges where annual costs run from about $10,000 to $55,000.

The Pell Grant program never reaches the middle class, the people who actually fund the financial aid system. Nor do most of the other alphabet soup of state and federal grant programs. Has anyone ever considered getting rid of the multiplicity of grants and their burgeoning bureaucracies and just settling for a simple system where everyone is treated equally by having every family’s calculated needs fully satisfied? Money is money; it doesn’t need a name or a title to honor someone at the cost of yet another expensive program-generating bureaucracy. But this is too rational for us non-teaching, bureaucrat-friendly educators who spend a great deal of time and energy trying to justify our existence at the taxpayers’ expense.

If student loans have been such a problem (and they will continue to be so except there will be fewer players in the system) then let us do something that makes real sense, eliminate them as a part of the student financial aid system. They only breed bad things. If college results in crushing debt for most kids, doesn’t that serve as a disincentive to even go to college? You bet it does and even when it doesn’t, it often drives kids into careers that will provide enough income to repay the loans so that many young people turn their backs on their real life passions to elect an expedient, one that will make them financially more secure but emotionally hollow. Except for the fact that student loans have no real value other than possibly serving as an incentive to get through college as soon as possible to minimize debt, the downside far outweighs that benefit which hasn’t shown much real impact on graduation rates and shorter college careers. Student loans are not a law of nature; they are the creation of people who have the power, if not the imagination, to eliminate them from the lives of future generations of young and yet unborn Americans.

Consider what might happen if student loans were not a part of the college system. Kids would not only follow their hearts when choosing a life path but when they get out of college, all of the money that would have been sent to a lender as in the current system, would be injected into the general economy to buy goods and services. Sounds like a stimulus to me. They might even have enough left over to begin a retirement fund. What a concept!

But here is where the President misses the point entirely. It doesn’t matter how the need-based financial aid system is concocted if there is no enforcement beyond procedural issues. Unless colleges are obligated to contribute campus-based funds to help with financial aid, the system becomes an illusion. Colleges are always delighted to take money whether it comes from the government or through private banks or anywhere else. But there is not enough money in federal coffers for the government to take care of 100% of students’ financial need. Colleges who are part of the cost escalation problem are not required to contribute one dime of their own money in the form of need-based aid. Many don’t and they still get their full complement of federal funds.

Any new approach that does not include a hard, enforceable requirement for colleges to ante up an appropriate amount of campus-based funds relative to their ability to do so is an ethical and economic non-starter. If such a mandate is missing, even under Mr. Obama’s brave hand, the system will fail for students, their parents and the nation. A family expected to contribute a certain amount to college as dictated by the FAFSA’s federal formula, will continue to be treated as a family making many thousands of dollars more. It happens every day to quite literally millions of Americans who play by the rules and are disappointed and impoverished by a government and a higher education establishment who seem to have unwritten rules of their own.

Our President is a very smart, savvy guy but he is being hampered by looking for fixes within the context of the current system. The nation’s college financial aid system doesn’t work and it probably can’t work but more importantly, it probably shouldn’t work. By any standard, it is an unreliable, bloated, irrational mess. Mr. Obama would be better served if he asked a simple question, “If I could design a smart, reliable and cost effective model that would efficiently and equitably deliver need-based financial aid, would it look like this?” If the answer is “no”, then it is time to do some more thinking and invent a better way beginning with a blank canvas. I’d love to be a part of that effort! Then, and only then, will this nation begin to fully harvest its very substantial reservoir of brain power in the years ahead. Go ahead, Mr. President, ask that question. The answer will be the another step toward the delivery of the kinds of change that created long lines at polling booths across this nation last November.

I have spoken and written about college admissions for many years, often in this space. I have tried to talk about college selection, the importance of finding a great college fit and the need to look beyond the name of a college in order to find a place that students can also call “home”. I have railed endlessly against the folly of college rankings and rating systems noting that they merely add to the tension inherent in an already stressful process. I have admonished parents who seem to think that college rankings and college admissions is somehow the signature validation of their effectiveness as a parent. But in this time of joy and sorrow for our kids and their families it might be appropriate to hear another voice, one that is a part of the gate-keeping community to our colleges. It is a reminder of the forces at play and the existence of sadness in the admissions offices across the nation, a reminder that writing the word “no” can be as painful as reading it.

Angel Perez, Director of Admission at California’s Pitzer College said in a recent piece published in the Los Angeles Times, “…I am truly inspired by young people today. They are much more motivated and qualified for college than I was when I was applying. Each day, I read stories of young people who are working hard to change the world and create new experiences that require them to take risks, have courage and overcome obstacles. We can’t admit all the students we love, and that’s because we love many more students than there will ever be room for.

To all these students, I say that where you get into college is not a representation of your worth, and please remind your parents that your college acceptance letter is not their final grade on the parental report card of life. If a school did not admit you, it’s not a personal rejection.

In fact, most kids we turn away have done absolutely everything right, but given the seats we have available and the conflicting institutional needs that we have to balance, many kids are turned away because of the needs of the college, not because of a lack of achievement on their part.

We want an even representation of women and men, in-state, out-of-state and international students. We try to create a strong balance of socioeconomic and ethnic diversity as well. We need to make sure some kids can staff our athletic teams while others man our orchestra and theater productions. The list of needs is endless and seems to grow longer every year.

So for all of you getting the thick envelopes, the thin envelopes and everything in between this week, thank you for sharing the details of your lives and your aspirations. It’s what keeps admissions officers in this business – knowing that young people are doing amazing things and creating transformative experiences that will affect our world tomorrow.

Regardless of the decision letters you received, you have worked hard and have earned the right to brag about your accomplishments. You are indeed the hope we have been looking for."

Amen.

For their troubles, the promised outcomes rarely if ever occurred. Financial aid awards across the nation reflected a different reality with different rules. Families at any income and a few dollars left in the bank, were routinely short-sheeted by the colleges’ aid awards. If a family reporting an income of $65,000 were judged by their financial aid award, you might guess that the family had an income of $90,000 or even more. For millions of American families the college financial aid system is a cruel hoax.

For years, I have led the chorus to simplify the FAFSA so that families can more readily apply for need-based aid but with every passing year, it is clear that would merely add to the growing chorus of disillusioned Americans. What real benefit is there to be admitted to a theatre for free if the play is bad? Simplification of the financial aid paperwork would merely add to the audience of disappointed and increasingly angry college-bound students and their families. The illusion runs much deeper than paperwork.

Just this week, I spoke with a family who had submitted precisely the same financial and demographic information to three private colleges, two in Massachusetts and one in Oregon. Each college received exactly the same numbers. Two colleges responded with offers that suggested a family contribution of $19,000 and $32,000 while a third proclaimed that the family did not qualify for one cent of aid making their family contribution a whopping $52,000+. Same numbers, same formula, different outcomes. Why?

The mechanics of the system aside, the issue is money. Colleges can’t offer aid if they don’t have the money. The primary reason for this fiscal deficit is that the federal government and in some cases the state government who may have had a hand in creating the system, have failed to contribute sufficient funds to ensure its ongoing viability. Federal and state contributions in support of need-based financial aid haven’t begun to keep pace with the realities of inflation or any accepted cost of living adjustments. While college costs for families have risen by over 100% over the last couple of decades, during that same period the per-pupil influx of public aid has been about 20-30%. Family incomes may have increased by an even smaller increment in that time frame. The outcome of this scenario leaves the colleges holding the financial aid bag and they simply don’t have the resources to deal with it. So families try their best to fill in the gap and they usually do so by cashing in their retirement funds or refinancing homes and/or using a home equity line of credit or taking on more work if they can get it. All of this, of course, will come back and haunt this nation when it has to come to grips with the long-term fallout, an impoverished generation of senior citizens financially neutered by unexpected college costs, a large and growing population that will be on the retirement public dole for thirty or more years because we as a society failed to adequately support their kids during a mere four years of college.

There is a solution, of course, but it will likely have to come from people who are not stakeholders in the current mess. It won’t come from the bureaucrats who have jobs because of the complexity and the Wizard-of-Oz nature of the current system; it won’t come from Congress because they may have to admit that they had created a monster and Congress never admits to fallibility; it probably won’t come from colleges because under the present system there are no rules beyond procedural issues and not a scintilla of enforcement standards relating to meeting the calculated needs of families so they are free to do whatever they want; it won’t come from the usual think-tank suspects who tend to reform embedded systems rather than create new models based upon new paradigms reflecting the lives and realities of actual people; and it won’t come through prayer. It will be the creation of a group of really smart, focused people who can rise above toxicity of politics and their own self-interest, people who care deeply about and understand the value of education and people who have a visceral appreciation of the pressures on families, on colleges and on public fiscal resources and policies.

Whatever we do we had better do it quickly. Time is not our ally in this matter. Colleges will begin to close, talent waiting to be developed and refined tends to have a short shelf life, and families will continue to be impoverished by college costs every minute of every single day. The meter is running and the fate of this great democracy may be at stake.

When we surf the subscription TV channels, the first thing we see as a movie is about to be introduced is a declaration that…“The following contains adult themes and adult language”. This ushers in a feature film laced with an endless stream of “F-bombs” in the form of just about every part of speech in the English language. The “script” typically surrounds messages of mayhem and physical abuse of every description and it is all labeled “adult”.

Frankly, I don’t care what people say or what they see but I am merely calling attention to the way we label it and the implications of that labeling.

Has anyone stopped long enough to think that maybe we are inadvertently teaching our kids that adult speech and behavior is full of street slang and cruel, violent behavior patterns? Is that what we want our kids to think? We call it “adult”. It should be called “adolescent”. “This film contains adolescent language and adolescent themes”. Then we know what to expect…lots of tough language by people with under-developed vocabulary skills and the acting out of fantasies for viewers who are not sufficiently experienced to know about real pain and sorrow and what it means to family members who have lost a loved one through senseless and often random acts of violence.

At the very least, we would be better off just saying what is contained in the movie. “This movie contains profanity and gratuitous violence.” Or “This movie contains nudity and graphic sex”. Leave it at that and omit any implications that what you are about to see is standard behavior for adults because it isn’t. Maybe a better label (which is now seen from time to time) would be, “This movie may not be suitable for viewers under the age of (fill in the blank)”. At least it does not imply that the language and content might be acceptable behavior for those over the designated age limit.

Creating a morality police force is dangerous and odious in any free society but we should be smart enough to devise a clear warning system free of implications that the material is the purview of any demographic or age group because in doing so, we validate the behavior as mainstream activities for those demographics. If I were a curious kid (and I was) and I saw a movie labeled “adult” with adult themes and sexual content, I’d be all over that the minute my parents were out of the house. Many if not most kids will be drawn to any movie labeled “adult”. It’s a sort of “Brer Rabbit and the Briar Patch” mentality. The current rating system may actually increase the number of under-age viewers rather than keep them away. With no rating system at all, finding the “good stuff” (at least on TV…the Internet is another matter entirely) becomes far more difficult and time consuming. The ratings take all of the guess work out of the search for lascivious material because it makes it much easier to find.

So maybe it is time to look at the way we try to protect our kids from material we don’t want them to watch. I am pretty certain that what we do now makes the cure worse than the disease. One way to do it, of course, would be to use more judgment in making the films in the first place by not pandering to the darkest corners of the human psyche. But that is not likely to happen. It would require adult behavior.

Rotary Clubs in the San Francisco Bay Area provide TuitionCoach to members of their high school based Interact Clubs. It is both a reward and a recruiting incentive that elevates college choices and the career possibilities that follow. The Rotary model is an outgrowth of a project our staff designed and implemented with a single club north of San Francisco. When the club members learned that their scholarship money was likely to simply replace financial aid already offered to the students, they tried a new model marked by earlier, more timely and persistent counseling primarily on college funding matters. One “class” of 12 students (4 times the number of their typical, one-time scholarship recipients) all attended four-year colleges and if one takes the financial aid awarded in year one and multiplied it by the normal 4-year college tenure, the small Rotary “investment” produced $844,000+ in direct college financial aid to the students and their families. The program model addressed the old adage of whether it is better to give a hungry person a loaf of bread or the means to make bread. The Rotary model is expanding and can be easily transplanted anywhere in the world with Rotary or any other service club or group that chooses to provide a cutting- edge support system for pre-college kids and their families.

The San Mateo County (California) employees receive TuitionCoach as an employee benefit. Lots of research shows unambiguously that family-centered employee benefits lead to greater productivity and organizational loyalty. Both, in turn, reduce employee turnover which has significant “bottom line” outcomes for the employer. The County recognized that in these perilous economic times, it is important for their employees to understand the many ways families can deal with college costs regardless of their financial condition. As the program becomes a staple in the benefit arena, more and more employees are requesting to be included in the plan. It is one of the most powerful benefits and easily one of the least expensive for the employer.

Several non-profits take advantage of group rates by providing TuitionCoach for the population the non-profit serves. Examples are the San Mateo County Gifted and Talented Education Program (GATE) that serves six comprehensive high schools, the San Francisco Bureau of Jewish Education and smaller programs like CollegeWorks, a community-based program that helps low-income, inner city kids in Oakland, California. We should also note with a sense of appreciation that it was the GATE parents who helped us as we developed and beta-tested TuitionCoach which now serves families around the world.

A new and terrific wrinkle has surfaced. Some scholarship organizations are considering providing TuitionCoach to all "losers" who were not awarded their scholarship. For the same reasons the Rotary Clubs have moved to a different model, test cases have demonstrated very clearly that the unsuccessful scholarship applicants armed with TuitionCoach did far better with college funding issues than the actual recipients of the scholarships in the absence of TuitionCoach. There’s some compelling “food for thought!”

Many other organizations have featured TuitionCoach at a partnership-generated, volume-related reduced rate to their clients. Our recent partnerships with ConnectEDU and others have not only brought TuitionCoach to a wider audience but has also enabled us to deliver on-site, live workshops in areas served by ConnectEDU. Most recently, we spoke to packed houses at sessions in Osceola County, Florida and Houston, Texas.

We have worked with financial professionals and other firms who manage money. For them, college represents a real threat to their "life blood" of keeping money under management. By showing their clients the many ways they can deal with college costs without depleting their investments and retirement savings, we serve both their clients and the financial services firm. Because we at TuitionCoach do not sell financial products of any kind, we can serve as an unbiased, fair broker to all concerned. We get referrals every day from members of the financial services community.

Private and public college counselors routinely provide TuitionCoach in their array of services. They have discovered that it does little good to recommend a perfect college "fit" if the parents have no idea of how to pay for the cost of higher education. By working with TuitionCoach, the college cost issue is minimized or often completely removed as a barrier to determining and recommending the most appropriate college for the student. And, as we all know, a student attending a college that addresses the student’s academic and social needs usually results in a college degree in a “regulation” four years time frame. Moreover, college counselors like the idea that families who elect to use TuitionCoach can enjoy its benefits throughout college, long after the counselor has moved on to other clients.

We continue to work with organizations and schools to do what we can to help them help families master the college funding hurdle. We are still very nimble and flexible and are able to tailor our platform to take on the "look and feel" of any organization if the project size justifies the expense. The Rotary program, for instance, has a landing page that carries the Rotary logo and other reminders that it is a Rotary project. If you are interested in finding out more about ways we can help your group or school, contact us at: info@collegecompany.com.

We are always eager to work with groups to strengthen their messages and to assist them as they continue to provide expanded life opportunities for the people they serve. We like to think our efforts benefit their organizations, their client families and the nation we all love.

Coverdell Education Savings Account (ESA): These are savings accounts one can establish to put aside money to pay for education expenses. The account can grow tax-free and the beneficiary will not have to pay tax on the distribution if they are applied to qualified education expenses.

• Limitations: Can only contribute to plan at the rate of $2,000 per year per beneficiary. You can have as many ESAs as you wish but only one per beneficiary.

  If there are more than one Coverdell naming the same beneficiary, the total aggregate contribution to all those Coverdell ESAs may not exceed $2,000 a year.

• Conditions: These plans while not likely to be huge advantages in terms of paying for college are very flexible.

  The account must be established through a bank or entity approved by IRS.

  Coverdell ESAs can be used for a very wide range of educational expenses K-12 and college.

  ESAs can be used to fund a 529 plan for the designated beneficiary.

  The ESA must be distributed to the beneficiary by age 30 unless used for a special needs beneficiary.

• Phase Out: MAGI (Modified Adjusted Gross Income) for single taxpayers $95,000-$110,000 and joint filers $190,000-$220,000.
• IRS Form: The relevant line on the tax form (to determine eligibility for the tax advantages of a Coverdell) is the MAGI. On the 1040, it is line 38, 1040A, line 22, 1040NR/EZ, line 10

Educational Savings Bond Program: There are a limited number of savings bonds that provide for tax-free interest if used for qualified educational expenses and contributions to 529 plans and Coverdell ESAs.

• Limitations: The expenses must be used for certain education expenses such as tuition and fees other than room and board and contributions to Coverdells and 529 plans.

  The funds can be used for the taxpayer, a spouse or an exemption claimed on the tax form.

  The amount of qualifying expenses may be reduced by any grants, employer contributions to help with the education expenses and other factors that reduce the amount of qualified education expenses.

• Conditions: Only series EE bonds purchased after 1989 or series I bonds can be used to qualify for this tax benefit.

  The owner must be 24 years or older when the bond is purchased.

  The program can be used for expenses at any post-secondary institution that qualifies for participation in the student aid program administered by the U.S. Department of Education (a very large number of institutions and programs).

• Phase Out: For single taxpayers, the plan starts to phase out at $67,100 and completely phases out at $82,100. For joint filers, the phase-out parameters are $100,650 and $130,650.
• IRS Form: To calculate your eligibility, use IRS Form 8815. Enter the exclusion on line 3 of Schedule B (Form 1040) or Schedule 1 (Form 1040A).

Employer-Provided Educational Assistance: These are sometimes programs where employers assist employees with education expenses. They vary widely. But under normal conditions the employer contributions could be considered taxable income to the employee. The tax code provides some relief.

• Limitations: The employee assistance plan must be a formal, written program consistent with certain elements that makes it a qualified program under this part of the IRS code.

  The plan provides that up to $5,250 of employer contributions to the education expenses of the employee can be excluded as income for tax purposes and will not be included in box 1 on your W-2.

• Conditions: The usual education expenses qualify such as tuition, books, fees, etc. Cannot be used for room and board or any courses that are not directly related to the business or to the degree or certificate program.

  Expenses that are used for equipment or supplies that can be used after the education program are normally excluded.

  Employer-provided funds in excess of $5,250 will be taxable UNLESS the benefit is also a working condition fringe benefit which is any education expense that you could otherwise deduct as an employee business expense. In that case, the employer can omit that excess expense on the W-2.

• Phase Out: None
• IRS Form: The relevant one is the W-2.

Business Deductions for Work-Related Education: This deduction can be used to deduct certain out-of-pocket education expenses related to your job.

• Limitations: The education must be required by your employer or the law in order to keep your present salary or job or the education must improve skills needed in your present work. The education does not qualify it is used to meet the minimum requirements of the job or to prepare you for another job. Also, deductions may be limited if your adjusted gross income is more than $156,400 for joint filers or $78,200 if filing separately.
• Conditions: You must be working.

  You must itemize your deductions (schedule A or complete a schedule C if self employed)

  The expenses must meet the test for qualifying expenses. This category can include travel and associated costs if they are directly related to the education. Typically, teachers may not take the deduction for travel associated with enrichment.

  The total education expenses must exceed 2% of your adjusted gross income to claim the deduction.

  You can claim this deduction along with other education deductions as long as you use different expenses to claim each tax benefit.

  You may not claim this deduction if you used tax-free funds to pay for the education (529 plan, Coverdell, tax-exempt savings bonds).

• Phase Out: None other than some upper AGI limits; $79,975 if single filer and $159,950 for joint returns. Incomes above these numbers can sometimes limit your itemized deductions.
• IRS Form: Schedule A, Schedule C, and sometimes IRS Form 2106 and 2106EZ.

Special Note: The allowance for travel to and from schools has increased to 58½ cents a mile for 2008.

I hesitate to include this last benefit because it undermines our mantra of protecting retirement assets at all costs. Nonetheless, here it is:

Educational Exception to Additional Tax on Early IRA Distributions: Under certain conditions, if you use your IRA to pay educational expenses, you won’t have to pay the 10% additional tax on early-withdrawal.

• Limitations: You can use the benefit up to the cost of qualified educational expenses. In this case room and board is a qualifying expense in addition to tuition and fees.
• Conditions: Can be used for both undergraduate and graduate programs

  Student must be at least half time to qualify for use in paying room and board.

  The exception can be used for any family member attending an institution eligible to participate in the U.S. Department of Education’s student aid program.

  The exception is determined after you have applied any other tax-free funds used to pay educational expenses. The remaining costs covered by the IRA withdrawal will represent your benefit.

• Phase Out: None
• IRS Forms: Distributions are reported to you by IRS Form 1099-R, should be reported on IRS Form 1040, line 15b, Form 1040NR, line 16b. You may also have to use IRS Form 5329 to show how much, if any, of your early distribution is subject to the 10% additional tax.

This is the last installment of our annual series on education tax benefits. If any apply to you and your family, we urge you “not to try this at home”. Rather, we suggest that you seek the assistance of a tax professional or recognized tax preparation software. The stakes can be significant and the cost and inconvenience of a tax audit are annoying at best. If you insist on going it alone, don’t do so without a copy of IRS Publication 970 at your elbow.

Student Loan Interest Deduction: Students and their parents can lower taxable income.

• Limitations: Can take the deduction for the length of the loan payback period.

  Under certain conditions, you can reduce your taxable income by a maximum of $2,500 annually.

  Parents can deduct qualified education loans used for their student dependent if the parent is in any way legally obligated to pay for the loan.

• Conditions:

  The Loan: The loans must be used to pay for qualified education expenses. It cannot be for a loan from a related person or an employer plan.

  The Student: Can be you, your spouse or a dependent enrolled at least half-time in a degree program.

• Phase out: Begins to phase out between $55,000 and $70,000 MAGI (Modified Adjusted Gross Income) for a single taxpayer and $115,000 to $145,000. Taxpayers above the limits are not eligible to claim the deduction.
• IRS Form: I040 line 33 and 1040A line 18, 1040NR, line 32 or line 9, 1040NR-EZ. (Evidence of interest paid should be found on IRS Form 1098-E.)

Tuition and Fees Deduction: This allows the taxpayer to lower the taxable income by up to $4,000 annually through an adjustment (before the MAGI is calculated). There are some special rules for students in Midwestern disaster areas.

• Limitations: You cannot claim this deduction if you are also claiming the Hope or Lifetime learning credits for the same student.
• Conditions: For payments to higher education for an eligible student only. The eligible student can be you, your spouse or a dependent that you claim as an exemption on your income tax.

  You cannot be claimed by another person as a dependent.

  Funds must be used for tuition and fees and other expenses directly related to enrollment at a post-secondary school. In most cases, funds used for living expenses (room & board, etc.) cannot be deducted.

  Can be used for both undergraduate and graduate programs

  You may claim the deduction even if the payment was made with borrowed funds and you can claim he deduction even if the student withdraws from the school if the fee was not reimbursed.

  There are various other conditions that disallow the deduction when paid by certain financial tools such as Coverdell Educational Savings Accounts, savings bonds and tax-free instruments.

• Phase out: For single taxpayers with a MAGI beginning $65,000 and joint filers with MAGI’s above $130,000. Complete phase out is $80,000 for single taxpayers and $160,000 for joint returns.
• IRS Form: IRS Form 8917, Form 1040, line 34 omestic production activities deduction), 1040A, line 19.

Qualified Tuition Program QTP: These are programs (called 529 Plans) that allow people to contribute to an account that can be used to pay college expenses for college. The plans grow tax-free and when they are spent on qualified undergraduate and graduate educational expenses, the proceeds are not taxed at the federal level although some states have not extended that benefit to the state tax system.

• Limitations: You can contribute as much as you would like to a 529 plan and you can switch plans fairly easily without penalty. You can also change the beneficiaries with relative ease. You may also contribute to both a 529 plan and a Coverdell ESA (covered in the next installment) during the same tax year.
• Conditions: Funds from QTPs must be spent on qualified, post-secondary educational costs at any educational institution that also qualifies to participate in the US Department of Education’s student aid program, Put more simply, QTPs can be used for a very wide array of institutions.

  You may not spend more on educational expenses than the actual allowable expenses at a given institution. Over payments (on non-qualifying expenses) will result in a taxable event.

  You can use the benefits of a QTP while also claiming the Hope Tax credit and/or the Lifetime Learning Credit as long as they are not used to cover the same expenses.

  As stated above, you can also use the benefits of a QTP and a Coverdell during the same year but you should consult your tax professional or IRS Publication 970.

  If you use the QTP in a way that creates a taxable event (excess education expenses or on non-qualifying expenses), there is a 10% additional tax on such earnings. See IRS Publication 970 for exceptions to this rule. There are many.

• Phase out: None
• IRS Forms: Earnings in any given year are normally reported to you on IRS Form 1099-Q and for overages (taxable use of 529 plans), use Part II of IRS Form 5329. That amount will be reported on line 59 of the 1040 or line 54 of a 1040NR along with any other taxes on qualified plans such as IRAs.

Remember, this three-part overview is intended to make you aware of certain educational tax benefits available to families. We urge you to work with your tax professional or to explore them if you use tax preparation software. As you know, the tax code like the college financial aid system is filled with conditions, special rules and strange calculations. To try to navigate the system without a pilot may result in a feeling of triumph that is likely to be short-lived.

Next Installment: Coverdell Educational Savings Accounts (ESA); Educational Savings Bond Programs; Employer-provided Educational Assistance; Business Deduction for Work-related Education.

The Hope Scholarship Tax Credit: This is a Clinton administration tax credit that provides tax relief for certain qualifying expenses for yourself or your student. Remember, a tax credit will reduce the amount of taxes you must pay!

• Up to $1,800 credit per eligible student. (100% of the first 1,200 and 50% of the next $1,200.) The amount is increased to $3,600 if a student is in a Midwestern disaster area.
• May be used for the first two years of college (or any post-secondary education that offers a degree).
• Limitation: Two years only per eligible student.
• Conditions: The student must be pursuing an undergraduate degree or educational credential.

  The credit can be used for qualifying expenses only such as tuition and certain required fees. (Room and board and other living expenses do not normally qualify.) This may be expanded for students in a Midwestern disaster area.

  The student must be enrolled at least half time for at least one academic period (semester, trimester, quarter) during the year.

  There may be no felony drug conviction on the student’s record.

  You may not use the Hope Credit if you are claiming other educational tax credits or deductions for the same student.

• Phase out: The credit begins to phase out with adjusted gross incomes (now called MAGI, Modified Adjusted Gross Income) of $48,000-$58,000 for single taxpayers and $96,000-$116,000 for joint tax filers. Taxpayers with amounts above these limits cannot claim the credit.
• IRS form: 8863, Parts I and II with a1098-T expense verification from the college and IRS Form 1040, line 50 or Form 1040A, line 31.

Lifetime Learning Credit: Another Clinton era tax credit:

• Up to $2,000 tax credit per family and up to $4,000 if a student is in a Midwestern disaster area. (20% of the first $10,000 of qualified education expenses.)
• Limitations: Can be used for any number of years but may not exceed $2,000 per year per family except for the Midwestern disaster area condition.

  The credit can be used for all post-secondary qualified education expenses paid for all students enrolled in an eligible educational institution.

  The student does not have to be enrolled in a degree or certificate (credentialing) program.

  The Credit can be used for a very wide array of courses.

  Drug felony condition does not apply.

  You may not use the credit if you are also claiming the Hope Credit or any other education tax benefit for the same student.

• Phase out: $48,000 to $58,000 or more as a single taxpayer and $96,000 to $116,000 or more as a joint filer.
• IRS form: 8863

Tax Free Scholarships and Fellowships and Grants including Pell Grants and other Qualified Tuition Reductions

Conditions: Must be a candidate for a degree at any educational institution that has a regular faculty or in attendance at an accredited institution that is authorized to award a bachelor’s degree or higher or that provides training for gainful employment in a recognized occupation.

Limitations: Must not exceed the value of qualified educational expenses. If it does, you may have to pay taxes on the overage only.

• Must use the grant/scholarship to pay qualified education expenses.

Phase out: None

IRS forms: None, but all scholarships, grants and other monetary education benefits in excess of the amount of qualifying expenses should be reported on:

• Form 1040EZ: line 1
• Form 1040A: line 7
• Form 1040: line 7 and Schedule SE (funds received as an independent contractor such as a fellowship)

Remember: Refer to IRS Publication 970 and/or your tax professional or tax completion software.

Part II will discuss Student Loan Interest Deduction, Tuition and Fees Deduction, and Qualified Tuition Programs (529 Plans). Stay tuned!

Here are 10 tips (referenced to the FAFSA question) to increase your eligibility to receive need-based aid:

1. Be sure to indicate that you will attend college full time rather than part time (Q30). This will increase the cost of attendance to its maximum which will, in turn, increase the demonstrated need. [Need = the cost of one year at the college minus the EFC (Expected Family Contribution)].
2. Indicate that you are willing to take self-help aid (both loans and work/study) in your aid package. Colleges are more inclined to fill your need with campus-based aid if you are willing to help yourself as part of the package. (Q31)
3. In the “highest level of parent education completed” item, only list “College or beyond” if the parent has a 4-year degree. If the parent has an Associate Degree and even 4 years of college but has not received a Bachelor’s Degree, list the highest education as “high school”. If neither parent has a college degree, the student becomes a first-generation college student which carries with it some extra financial aid dollars. (Q24-25)
4. If the parents are on the verge of a separation or divorce, now is the time to make it happen because when there is a divorce, only the custodial parent’s financial information will be listed on the FAFSA. That having been said, this is not an encouragement to attempt a pre-emptive move to achieve the “widowed” status. (Q61)
5. If you pay attention to the dislocated worker definition (Q85) and if either parent can qualify as a dislocated worker, there may be some serious financial aid advantages that could follow. The definition is pretty broad and includes many somewhat common situations in today’s world.
6. If you make less than $50,000 adjusted gross income and you are eligible to file a 1040A or EZ, you may qualify for a simplified need analysis which will not include your assets when determining your EFC. (Q84)
7. If possible, have your kids overlap in college as much as possible. By having an older child take a gap year, you may save an entire year’s EFC payment. When you have 2 students in college at the same time, your total EFC will be about the same but it will be split between the two kids making you eligible for a much greater amount of need-based aid. (Q76).
8. While it may be hard to add exemptions in (Q88), it may be much easier to increase the size of your household. (Q75). If there is a grandparent living with you or an uncle or friend and you essentially pay the lion’s share of that person’s living expenses, you can add that as a household member even if you don’t claim the person as an exemption on your taxes. If that extra person also attends college, you may able to add him/her as another household member in college, reducing your EFC substantially. But be prepared to validate this if the college requires proof. Also, there are some aid programs whose eligibility threshold is predicated in part on household size. For instance, large families can earn more money and still qualify for a Cal Grant (in California) because the income threshold to qualify increases with family size.
9. Never over-value anything when listing assets. Always reduce the market value by the cost of liquidation (taxes, early withdrawal fees, brokers’ fees, etc.) (Q92) When you list the current balance of cash, savings and checking, use the amount that is typically left at the end of the month AFTER your normal monthly bills have been paid. Colleges are not interested in removing the roof over your heads or taking food off your plate. They want to know how much of you is left for them each month. (Q91)
10. If you want to be really smart, you should subscribe to TuitionCoach and use the “Minimize College Cost” tool to do any number of “what if” scenarios in order to maximize your eligibility for need-based aid. You should do this BEFORE you complete the FAFSA so that colleges see you at your financial-aid-eligible best. Just a few minutes on TuitionCoach is likely to save you an amount equal to many multiples of the subscription price and since college is normally a four-year process, it is a gift that keeps on giving.

Coming in February: Education Tax Benefits for the 2008 Tax year.

In my view, it would be improper for taxpayers to massively enhance the profit margin of private, for-profit (proprietary) institutions. Nonetheless, they have an important role to play and in order to create a global plan for higher education funding we should include a rational approach to helping them as they help students. Graduate schools of all types need to be served as well. But unlike, undergraduate education, grad schools are far more elective in nature and typically have more clearly-defined paths to employment and higher salaries. So, it follows that the educational funding plan for these segments of the higher education system should involve more “self-help” components than under- graduate programs.

• I suggest that proprietary schools and grad programs should use the same proposed measure of financial need as undergraduate non-profit institutions, the student’s or family’s 1040 adjusted gross income (AGI). For more detail, see Part 2. That number will dictate the amount of out-of-pocket costs the student and/or the family will have to pay.
• Then, instead of using publicly-funded grants to help bridge the gap between what the students must pay and the actual cost of the program, the students should be able to qualify for direct loans from the federal government in whatever amount is needed. The individual institution will simply determine that eligibility using the basic formula: Percent of the cost of attendance assumed by the student as determined by the AGI scale subtracted from the cost of attendance, equals the total eligibility for federal loans. Part or all of the loans should be subsidized as in the current system and the rest unsubsidized but at very low rates so that the interest on the loans do not compound too abruptly while the student is still in the proprietary program or grad school.
• Any proprietary program, of course, is free to offer institutional grants at any time on their own “dime” which would further lower the student’s need and subsequent eligibility for loans while creating an incentive to enroll in that institution’s program. The same is true of graduate programs that can provide institutional grants and paid assistantships to help students contain their education costs. None of these non-loan practices involves or should involve the federal government or the public sector. But the “secret sauce” to smartly deal with the loan issue is found in the strategy to mitigate the effects of substantial education loans for the student.

To that end, let me suggest an approach that may appeal to a very broad segment of the political spectrum. We should immediately “tweak” the tax code and provide associated enabling legislation to institutionalize the following:

If a firm (for-profit and non-profit) hires a graduate with student loan debt from a proprietary or grad school, the firm should help the new hire repay the debt as a condition of employment.

It should work like this:

• The former student will be responsible for monthly payment of the interest only and will do so through a payroll deduction for as long as it takes to retire the debt. Provisions should be made to consolidate the loans and, if necessary, extend the payback period to up to 30 years in the event of a very large debt that would impoverish the student if it were repaid over a shorter period. While the former student’s take-home pay may be modestly affected, it will be offset, in part, by being able to deduct 100% of the student loan interest paid on his/her income tax.
• The employer will pay the monthly principal on the debt. Depending upon the way it is structured, that employee benefit may have some significant, positive tax implications for the firm. Remember too, the firm is one of the chief beneficiaries of the new hire’s college and professional education. Organizationally, the firm’s participation in repaying the student loans is likely to engender greater employee loyalty which, in turn, is often manifested in greater productivity and lower rates of employee turnover, both significant, bottom-line outcomes for the employer. A somewhat different arrangement that may include some federal reimbursement is in order for a non-profit entity that elects to adopt the plan for its organization. Because the non-profit will not receive the same tax-related benefits as a for-profit business, a governmental grant offset seems to be reasonable even in the case of graduates from proprietary programs. (A nice end-of-the year bonus from an employer could take the form of an accelerated pay down of the employee’s education loan.)
• To make it a sensible public “investment”, the interest rate on the government- issued loans should be high enough to cover whatever costs are involved and to partially offset any tax advantages realized by both the former student and his/her employer. At the end of the day, for the government, it should be a short-term “zero-sum” deal. The real payoff for the government and the nation is contained in the obvious long-term benefits of a highly-trained, well-paid professional and the taxes paid over a lifetime by that individual.

The incentives to complete the degree or program and find employment are real and compelling since no help with reimbursement will occur until the completion of the program and the attainment of a job. Moreover, there is a built-in reason to complete programs in “regulation time” (depending upon the program) in order to minimize the total student debt. To a firm participating in the plan, a potential new hire with an unusually large student debt becomes less attractive because of that debt. The model has this built-in safeguard against irresponsible and careless student borrowing.

The plan also carries with it some important quality-control dimensions. Because the key to the payback model is an employer-shared component, the education institution will have to become more involved in helping their graduates find employment. If they fail to do so and/or if there is a significant drop-out rate of students in the program, the institution risks the likelihood of losing its reputation and credibility with the public and possibly its certification to use federal loans in support of its program, a certain kiss of death in a shaky economy and the competitive world of proprietary education. No institution of any kind is likely to survive very long when its patrons are thrown to the private-loan-sector “wolf pack”.

• Additionally, for a proprietary school to qualify for this federal partnership, it will have to adhere to some clear budgetary and accounting guidelines so that taxpayer money is not used to unreasonably enrich the management of the school or program. Failure to adhere to the guidelines will result in penalties ranging from fines to suspension or even exclusion from the federal partnership. Any participating proprietary school should be subject to a federal audit without notice at any time.

Unlike the current student loan quagmire, this plan removes much of the risk for the federal government as the lender since the loans are far more likely to be paid by a highly-trained former student who now enjoys the backing of a commercial entity (the employer) in addition to the student’s own resources as a fully-employed, fully-paid worker who pays his share in the form of an automatic payroll deduction.

• At no point should parents of the student be required to co-sign anything. Parents should be entirely risk-free so they can have a life of their own and use their income as consumers and better yet, as builders of an adequate retirement nest egg.
• As a protection for the former student, any company using the plan ought to be able to protect the employee’s interests in the event of the failure of the business. The tax code should require that the remainder of the student debt should be paid out ahead of the firm’s other creditors in bankruptcy proceedings creating an added measure of security for both the borrower and the government (the taxpayers of the nation). Moreover, the plan should automatically transfer in the case of a business sale or consolidation with another business. There are no doubt other protections that need to be considered given the many possibilities in the often mysterious world of commerce.

When students can see a reasonable system in place that will help them pay back their student loans, students will once again be free to choose a career they may love rather than one that will enable them to afford to repay their student loans. When loan repayment is shared, the pressure on any one party is mitigated. Moreover, I suggest that this program should be entirely voluntary. Businesses and non-profit entities are not required to offer this benefit but it makes good business sense to do so.

• The government should be empowered to designate any graduate or even proprietary school program as so vital to the national interest, that it qualifies the program to be included in the model outlined in Part 2 of this series. That designation should be at the sole discretion of the federal government and can be implemented at any time. So, for instance, if we needed to dramatically enlarge our pool of Farsi-speaking adults, the federal government could underwrite proprietary and grad schools in a way outlined in loan-free Part 2 that could instantly open special opportunities for students and institutions that could deliver such programs. Teaching and nursing programs and any other program in the national interest can be thus designated. The process will need to be carefully designed but it does not seem to be an insurmountable barrier for inclusion in a national, comprehensive approach to funding higher education. The national advantage is clear. Literally, with the stroke of a pen, the nation’s higher education system could be mobilized to address any emergency at any time.

A Further Recommendation as an Immediate Economic Stimulus: As this program outlined in Part 3 unfolds to the benefit of new students, we should empower and encourage businesses and employers across the nation to use the loan payback plan described here to help all students with education loans accrued under the current system. The benefits are obvious and immediate and the costs will be minimal since students receiving help with unpaid loans will be able to join the ranks of new consumers and use their enhanced discretionary funds to buy goods and services with cash and short-term credit.

The new college funding approach outlined in Parts 2 and 3 of this series could be operational for the 2010-11 academic year. The plan could be fully researched and refined by a relatively small task force of very smart, passionate people and then presented to Congress for its consideration in the late spring of 2009. There are endless details dealing with the data points in the Institutional Aid Formula and issues like multiple family members in college at the same time, undocumented students and a host of others but once those are dealt with, there is a sufficient time window to put the “front end” of the implementation components (mechanics and process) in place by the close of 2009. Federal dollars in the form of direct aid to the colleges under the terms of the plan will not be needed until the summer or early fall of 2010.

It is time for a real change; it is time to create a simple, transparent yet comprehensive college funding model that can alter the post-secondary education landscape in a way that ensures access for any qualified student while it strengthens the financial viability of colleges across the nation and in doing so, it supports many other important segments of our economy. Integrating the higher education funding reforms as a component of the larger management of the nation’s economy is the hallmark of this proposal. It is not a standalone solution but, rather, a dynamic component of an economic foundation for a nation that has yet to see its best days.

With the changing of the guard in Washington, DC, there is a precious, once-in-a-generation moment to recapture that spirit of working together for the common good. We, all of us, have a chance to become a generation of Americans who finally got it right, who created a legacy that will live on for as long as this democracy endures. It is time to stop working on behalf of political parties and to start working on behalf of America’s people. We are tired of the pettiness and the self-serving, myopic partisanship that marks the Washington scene and is immortalized every day by members of the media who make lots of money by pitting Americans against each other. That kind of rhetoric does more damage to this nation than any foreign power who wishes us ill. It weakens us and demoralizes us every single day and it illustrates in stark relief the wisdom of Walt Kelly’s Pogo, “We have met the enemy and he is us!” Imagine what we could do as a nation if we worked together. Sure, we can differ but that is the strength of our system. It is when we assault the character of those with whom we may disagree that we reveal a troubling lack of understanding about democracy, of what it means and how it should work.

I remember those words in the movie, Miracle, when the late Herb Brooks spoke to a team of college kids about to take on the Soviets, then the world’s best hockey team. “This is your time. Their time is done. It is over….” Our kids won the game in what may have been the most stunning upset of all time. Maybe if we capture the “can-do” spirit of Herb Brooks, we too can learn to work together for a common goal in an even more challenging time where the stakes are much higher. Maybe this is “our time”. Maybe we can rise to Lincoln’s vision on this occasion to “…think anew and act anew….” Maybe what we need is actually pretty simple, the power as Americans to “once again believe”, believe in the promise of our democracy and in each other.

© Paul R. Wrubel, 2009

I have frequently quoted Abraham Lincoln who said during another time of national trial, “The dogmas of the quiet past are inadequate to the stormy present. The occasion is piled high with difficulty, and we must rise – with the occasion. As our case is new, so we must think anew, and act anew. We must disenthrall ourselves, and then we shall save our country.” Up to now our response to the economic meltdown has been to line the pockets of the perpetrators, a few of whom have used our largesse to provide obscene bonuses for themselves and their co-conspirators. It is time…it is beyond time to heed Lincoln’s advice. So let’s stop putting lipstick on this college financial aid pig. Let’s just release the poor beast to some food bank and create something better, something that doesn’t require lipstick or any other enhancement.

In order to create a context for change, if you have not read Part 1 of this series, you would be well-advised to do so before proceeding with Part 2. The reforms that follow are intended not only to alter the face of college funding but also to provide the kinds of benefits that will serve as a needed stimulus to Main Street, College Street and even Wall Street. Everything contained in this proposal will have benefits that will transcend the limited world of higher education and spill over into our economy at large.

Reform One: Eliminate the FAFSA. Instead, have students simply apply to college without the college knowing anything about the student’s or their family’s financial condition. Now that is really need-blind admission. No longer will first-generation college students and families where the parents may have insufficient background and skills to deal with a form like the FAFSA be excluded from college because of the complexity of a financial aid form. College admission can then become the true meritocracy it should be.

Reform Two: Once the college has admitted the class and has also received a 1040 from each of the admitted and confirmed students and/or parents along with 1040s from continuing students/parents, the amount each family will be expected to pay will be predicated on one thing and one thing only, the adjusted gross income on page one of the 1040. College should be free for all families below a baseline AGI of $50,000 or $60,000 and then increased by a portion of 1% for each $1,000 above the base number. So for more expensive colleges, the percentage listed will result in a higher outlay of actual dollars because it is a percentage of a higher cost. For planning purposes, the master percentage schedule should be published every year so that there are no surprises. In uncertain economic times, only one number has to be changed, the baseline AGI where families will begin to have to pay for college. The rest of the scale simply falls into place. Full Tuition, room and board and fees will be paid only by families with AGIs of over a few hundred thousand dollars a year.

Reform Three: Family assets should not be considered when determining the ability to pay for college. If a family’s assets are not a component of the college affordability formula, parents will be encouraged to save for retirement and/or become more aggressive consumers in the general marketplace of the nation. This not only will serve as an economic stimulus but it may also create a population of senior citizens with enough discretionary income and savings to be an active, contributing demographic in our nation’s commercial landscape.

Reform Four: Once the college knows how much it will have to provide to make college affordable for 100% of the admitted and continuing students, THE COLLEGE will complete a very thorough and detailed Institutional Financial Aid Form asking the federal government for aid to supplement the college’s own funds. Eligibility for federal aid will be based in part on the endowment of each college and the ability of the college to provide aid from its institutional funds. Thus, very wealthy colleges will be expected to contribute more of its own funds than a less well-endowed college. It is a variation on the formula philosophy that is currently used to determine the need of an individual family. Care must be taken in crafting the formula so as not to discourage colleges from aggressively seeking to increase endowment funds and to prudently manage operating and other costs. The simpler, more rational and more transparent the formula, the better. Two constants will be the hallmark of the system: No family will be required to pay one dime over the amount determined by their AGI. Colleges will be required to fill 100% of every student’s need (the total cost of one year at the college minus the percent of the total cost the family will be required to pay equals the calculated need) to receive any federal money. Using this model, financial aid paperwork will be reduced from several million forms a year to under 10,000.

Reform Five: While public state colleges and universities will be expected to be a part of the plan through various state-level sources of student financial aid, public college needs will be included in the Institutional Financial Aid formula in the event of state-level shortfalls in support to that public institution. Such appeals will be governed by very clear, transparent rules that will reflect a realistic expectation that states will be required to provide substantial amounts of state funds to help pay for needy students at the state’s own public institutions.

Reform Six: Student Loans should be completely eliminated as a form of need-based aid although unsubsidized student and federally-back parent loans should continue to be available to help the family pay all or some of the out-of-pocket costs dictated by their 1040 AGI.

Reform Seven The federal government will train a core staff to assist colleges in the correct preparation of the Institutional Financial Aid Form to promote accuracy, to ease the reporting burden of the colleges and to assure that the colleges do not cut corners or violate the system’s rules which could result in financial penalties at best and exclusion from the system at worst.

There will be many, many related reforms and endless, pesky details like the length of eligibility for students, undocumented students, part-time students, independent students, etc., but if we preserve the main tenets, it will forever change the college-accessibility environment of this nation and a lot more.

The litany of benefits:

• Any academically qualified student from any background can attend and graduate from college.
• Under this reform plan, the vast majority of colleges will receive much greater amounts of federal aid because that aid, in the form of a check, will always be related to the college’s need as determined by the Institutional Aid Formula results for that academic year. No longer will colleges be left to fend for themselves as student needs increase ahead of the federal government’s willingness to provide financial aid to keep up with that demand. Colleges will be secure in the knowledge that the federal government is on their side as a partner, not as an adversary.
• Colleges will have the opportunity to attract more qualified students because of their enhanced ability to provide massive amounts of federally subsidized financial aid. It will make the college recruiting process a more level playing field from the colleges’ point of view. Moreover, by not having to tie up so much of their institutional funds in the form of campus-based aid, the colleges can invest in their own upgrades of faculty and facilities so that over time, the quality of many more financially marginal colleges will be improved. By having a transparent, dependable federal support system in place, colleges across the board will be able to plan their budgets including capital improvements with a greater degree of certainty. Under this system, for the first time in years, colleges will no longer be victims but, rather, beneficiaries of a federal program.
• By not including assets as a factor in the financial aid formula, parents will be free to put money aside for retirement or to purchase more consumer goods. The likelihood of an aged population made indigent by runaway college costs and an unreliable college financial aid system is greatly reduced. A timely and prudent national investment that increases the college attendance rate of each new generation, an investment of four years per student, it a much better use of our tax dollars than a 30-year support system for retired parents economically marginalized by a dysfunctional college financial aid system. The millions of parents of college students will be able to look forward to a retirement where they can also be active consumers by injecting their adequate retirement dollars into the economy at large – an important economic stimulus by any standard.
• Students will no longer have to begin their post-college lives with debt nor will their choice of career have to be based in part on whether the career will enable the student to pay back student loans. The fear of debt will no longer serve to deter qualified students from going to college. Nor will college graduates be forced to direct portions of their take home pay to some holder of their student loan. Instead, the money will be used for consumer goods to enhance the quality of post-college life and the economy as a whole.
• Financial institutions, college funding experts, financial aid administrators and sellers of college saving financial products like 529 plans and private student loans will be largely out of the college funding loop thus eliminating a whole layer of costs that have nothing to do with educating anyone. Short term expenditures like college costs will no longer negatively affect more important long-term investment outcomes.
• By making college possible for every qualified student, young people across the economic and social spectrum will be faced with a promising future. That promise is an enormous incentive to do well in school and as any educator can attest, kids who see school as a stepping stone to a better life are likely to be a contributing member of a school community. The halo effect of a fulfilling future life is likely to permeate the halls of any public or private secondary school. The promise of good things to come is sure to improve the educational climate of the school and most certainly will lower costs associated with a student body that attends the school with a sense of purpose and an American dream that values talent and character more than money as the primary currency required to achieve that dream.
• Under the present system, community-minded service clubs and others who offer scholarships find that their generosity is more often than not used to replace financial aid already offered to a recipient of their scholarship. Thus, their grant essentially makes little or no difference to the recipient. Under this new approach, private, “outside” scholarships can go directly to the recipient to help pay down whatever amount is required by the new AGI-based formula. This will further lower the cost of college for the student rather than replace aid already provided in the college’s financial aid award.
• By creating a clear path to college and delivering on that promise, the nation will finally take full advantage of its richest natural resource, the talent, creativity and vision of its citizens.
• A simple, transparent, form-free approach will eliminate any need or temptation to “game” the system. Americans will no longer spend their dollars on financial aid “experts” and advisors to walk them through the jagged shoals of an overly complex system. No longer will there be a need for “insider” ways to circumvent the intent of a largely counter-intuitive, formula-driven system that seemed to have been created by people who were dwelling in windowless cells like a cloistered religious order rather than in the daylight of the real world of real families, real colleges and a real economy. Nor will Americans fall victim to sellers of financial products that are excluded from the current financial aid formula or be tempted to reposition assets in an often costly effort to qualify for a few more dollars of financial aid. Any system that encourages good people to do bad things is on its face, a bad system.
• The nation will reap enormous profits from an unabashed investment that opens the doors of college to all qualified students. College-educated citizens will more than pay back the nation in the form of an enhanced tax base, productivity, buying power and global competitiveness. Moreover, as I pointed out in Part 1, educated citizens typically do not require expensive, publicly funded services like police and prisons, rehab and food stamp programs, unemployment benefits and many health care services. Those savings will be both in terms of real dollars and societal quality-of-life dimensions. Whatever the plan costs, the nation will be repaid in full with huge interest. Paul Krugman of Princeton and The New York Times was right when he suggested, if you really believe in reform, then don’t be afraid of what it costs. Cost becomes irrelevant if long-term profits, economic stability and an enhanced qualify of life are the likely outcomes. Around the globe, countries that make post-secondary education part of a national birthright, always reap impressive national dividends.
• Having a national college funding system in place, one that is reliable and transparent, may encourage the construction of new colleges and new post-secondary education models and/or the transition of community colleges into 4-year colleges all of which are very risky and probably impossible ventures under the current system of college funding and financial aid.

The right to self fulfillment is the hallmark of a great nation. It isn’t only a privilege of the rich. It should be an entitlement, part of what it means to be an American. So far, most of the recovery stimulus has been directed at companies and executives who created this mess in the first place. It’s as though the rest of us don’t exist. The vast majority of families across American have seen little benefit from the bailouts. They have watched in sadness as our tax money flows as a life preserver for the few selfish captains of industry, many of whom in a more rational time, would and should be headed for jail. The college support plan outlined here, will instantly reach Main Street and any other address where hard-working Americans and their smart, deserving children have the right to realize their potential by going to college or any post-secondary training program. At the same time, it will ensure a more viable retirement experience for families across the economic spectrum by forestalling the use of family assets to pay for college. By bypassing the rich to directly serve the needs of the average American, everyone wins, even the wealthy. When Americans are well-educated and well-paid, the opportunity for business growth expands exponentially, making the investment community more stable and profitable for all concerned.

By creating a simpler, more rational and more transparent approach to college funding and by framing it as a very profitable national investment, arguments for its adoption become less a matter of reason and justice and more a matter of simply wise use of our tax money. Most Americans can argue the philosophy of one idea or another but something that always seems to resonate across the political spectrum is the “bottom line”. Fair enough. So let’s make that analysis because it is pretty straightforward and the actual bottom line is likely to be stunning to the point of becoming a financial imperative. Unlike other approaches designed to deal with the current financial meltdown that focus solely on the more immediate issues, the plan outlined here addresses not only the current emergency but it also has tangible implications and ongoing payoffs for the nation in the decades to come.

In Part 3 of this series, I will address the needs of proprietary (for profit) institutions and programs along with an approach to graduate school funding. Some closing comments will also be included.

Someone once said that a camel is a horse made by a committee. There is no better example than the federal college financial aid system. It represents a herd of camels that carry all of us aimlessly into a desert wilderness with unintended consequences punctuating an already barren landscape.

Some of the more glaring imperfections in the current system are these:

• The complexity of the application. Over the next few months, Americans of every social and economic background will answer an estimated total of about 1 trillion questions on the FAFSA alone.
• The arcane formula that determines the amount a family can afford for college defies all attempts at reason.
• The absence of any penalties when a college using federal aid funds fails to provide its own funds to address the full demonstrated need of a family encourages endless abuse.
• The failure of the federal government to provide financial resources that keep pace with college costs and inflation makes too many good people behave badly.
• The system often drives students into careers geared to help them deal with college debt rather than ones that make their life work meaningful.
• The system profoundly weakens the economy and in doing so cancels many of the obvious benefits of college for the individual and the nation.

A Sampling from the “Casualty List”

Families: The baby is born and the proud parents silently promise that no matter what, the child will go to college some day so money is put aside for college in things like 529 plans and other college investments. Funds are transferred from the parents’ pockets and put in the coffers of financial institutions who promise to invest the money for college. In that way, hundreds of millions if not trillions of dollars that could and should go into the active economy are sequestered by banks and others to pay for future college careers. And we know painfully well how responsible some financial institutions are with money that is not theirs. But there is more. Too often the cycle of economic life is this. The family “goes without” many consumer goods as they save for college and then when college actually happens, they use the savings and probably some of their retirement funds which were partly depleted already because of the diversion of funds into college savings accounts. Then, after college has been paid for, the family again “goes without” because their retirement funds are so marginal that there is little discretionary money left over to be an economy-strengthening consumer in their later years. If there are multiple kids in the family, the problem becomes even worse. These and other considerations have huge and ongoing quality-of-life implications for ordinary families. The lesson for the government is that it would make far more sense for it to massively invest in the education of our next generation over a limited time of about 4 years than to needlessly impoverish families and then be forced to support millions of marginally secure senior citizens over a 30 year retirement cycle. No truly enlightened nation should force its citizens to choose between college for their kids and a secure retirement for themselves.

Minorities and the Disadvantaged: The financial aid system was put in place in a fully justified and “feel-good” effort to help those most in need, minorities and first-generation college students. But just the opposite is happening. After the Civil War, basic citizenship rights were conferred on former slaves through the 13th, 14th and 15th Amendments. The right to vote, enumerated in the 15th Amendment, was easily circumvented by literacy tests and the poll tax which were used to keep African-American voters out of the voting booth. In the current era, the FAFSA is our modern equivalent of the literacy test which because of its inherent and daunting complexity, keeps minorities out of everything. If by any chance, a needy family surmounts that hurdle, the probability of an insufficient financial aid award is likely to crush what remains of the dream. By the time this demographic masters the FAFSA and the financial aid system, it is too late. Life paths have already been chosen or have been pre-ordained by less-than-challenging high school courses, a direction often followed by students facing an uncertain, college-free future, where simply getting a high school diploma becomes an end in itself. Even more tragic is that the complexity of the doorway-opening college funding system serves as a hurdle high enough to create a high school dropout. Some would say this is a sad coincidence; others would suggest it is a deliberate public policy to deny the full benefits of our society to targeted groups. Either way, it is a national tragedy of mind-boggling proportions.

High Schools: When high schools are filled with students who see no college future or any post-secondary training, those students will understandably behave in ways often unsuited to an academic community. The cost of college and the “Rube Goldberg” nature of the financial aid system serve to increase the number of wayward students in our high schools. The looming cost of college in the absence of any understanding of ways to master the college funding maze, often drives many students to a community college, an important institution but one that accepts any student regardless of his or her past academic record. Thus, why sweat high school grades when it doesn’t matter? Veteran school administrators will report that the lion’s share of administrative time and costs are spent on the 10% of students who act out their fear of the marginal life ahead or their anger at being excluded from the mainstream high school community. It is not always the fault of the student; it might be the fault of the education model that forces kids to endure an education system that is completely out of touch with their needs and one that promises no future of any tangible value. Moreover, as a general proposition, it is always less expensive to deliver highly academic courses than remedial ones. The absence of a clear, dependable road to a meaningful job or post-secondary education makes the high school education challenge even greater. At the heart of the post-secondary education journey, the issue of money and perceived affordability looms as an insurmountable barrier for an increasing number of Americans.

Colleges: Everybody tends to blame the colleges for the cost of higher education. As a practical matter, in terms of the actual present value of the dollar, their costs have not gone up very much since 1980. In a sense, the colleges have been “sand-bagged” by the federal government who championed the notion of need-blind admissions but who has failed to do its part to make that dream a practical reality. The reason is that while college costs have risen to a level somewhat above the rate of inflation and the consumer price index, the federal financial commitment has failed to keep pace with either the rising cost of college or the falling value of the dollar. To be fair, some colleges have made it worse by playing fast and loose with their own budgets and priorities and by rolling the endowment dice on high risk investments. Using present dollar values, the federal contribution to the need-based financial aid system actually drops every year. For instance, in the area of student loans while the cost of college has risen around 200-300% over the last three decades, the maximum amount of need-based student loans has increased by only about 12-14% over that time frame. Similar numbers apply to things like Pell Grants and other federal programs. Because of this, colleges are left holding the need-based financial aid bag and the two easiest ways to deal with the federal shortfalls are to simply under fund the financial need of families (gapping) or raise the cost of college so that the more wealthy families can help to pay for the financial aid of less affluent families. It is clear that colleges are also victims of the failed system along with ordinary families. In the December 22nd issue of The New York Times, Tamar Lewin wrote that many independent colleges were reporting a drop in their admissions applications. Fear of college costs and the likelihood of insufficient financial aid were at the root of the decline. But the bottom-line big loser is our nation. If the slogan, “A mind is a terrible thing to waste” is true and it is, our nation is rapidly becoming a garbage disposal facility for an unconscionable amount of untapped human talent.

Financial Services: The financial services “industry” is both a beneficiary and a victim of the current system of college funding. On the “front end”, it benefits by selling various financial products to families to pay for college. There’s money to be made particularly when dealing with “solutions du jour” like the silly 529 plans with their high fee structures, low spending flexibility and financial-aid-lowering issues. And up to fairly recently, financial services made some money on high-interest private student loans and federally-underwritten college loan programs. But, as always, greed and self-interest carried the day and much of the upside was squandered by the financial services sector through irresponsible bundling of education loans with other, even more risky investment instruments. Because of the rapid rise of college costs, financial services have lost millions of dollars of the money under management because their client families were forced to invade their long-term investments to pay for short-term college costs. Typically, there were not enough funds in the college savings plans (the national average is somewhere under $10,000 per saving-plan family) to pay for college so their clients had to pull money from other assets like retirement accounts and stock portfolios. Other financial services entities lost their money in the private loan market simply through default on the risky loans to students who may have dropped out or failed to get a job with a salary high enough to manage orderly repayment of the loans. Many of those students were often forced to turn to private loans because of the shortfall in federally-sponsored, need-based financial aid. Then, as an aside, there’s the credit “industry”. By arbitrarily raising interest rates using mysterious and ever-changing standards, the costs of private college loans and every other kind of credit are increased. Credit bureaus always win no matter who loses. By any standard, they are a swiftly-moving target. Like scavengers circling above our society looking for ways to make our financial lives more tenuous, credit bureaus, producers of nothing, increase the cost of college and just about everything else. For most of us, the credit bureaus are our Guantanamo Bay. The less we have to rely on credit and credit bureaus, the better for anyone or any program that deals with ways to mitigate the specter of college costs.

The Economy at large: This one is a no-brainer. Whatever a “fix” would cost, it will be paid back many times over through enhanced productivity and innovation, a much higher tax base created by the holders of a college degree, greater consumption by a wealthier population with more discretionary money, and a diminished need for public investments in expensive services like prisons, rehab and welfare programs needed to serve an aimless and under-educated citizenry. Anyone with a calculator can do the math on this. The only public expenditure that always pays back the investor is education with higher education creating the greatest rate of return. A few years ago, The New York Times did a little piece that had giant implications. They tracked two couples who at the age of 25 started putting aside $1700 a month for retirement. In their 40’s, “couple one” stopped those contributions for 4 years to divert the money to help to pay for their child’s college education. They even used some of their retirement funds to cover the college costs. After 4 years, they again went back to the retirement contribution routine. At age 60, according to the Times article, they retired on a nest egg of just over $600,000. “Couple two” did the same thing except that instead of stopping contributions to retirement for 4 years or using retirement funds to help with college, they paid what they could out of income and borrowed the rest. At age 60, that couple retired on a tidy sum of just over $2 million. There are many implications here but for the economy, the best part is that “couple two” could look forward to a retirement where they could also be active consumers by injecting their adequate retirement dollars into the economy at large. Unlike the current system, a college funding approach that protects the assets of parents will further enhance the return on any government “investment” in higher education.

The Nation: I have often used a quote from Thomas Jefferson in my advocacy of education in general and higher education in particular. In a letter to Colonel Yancey, Jefferson said, “…If a nation expects to be ignorant and free,..it expects what never was and never will be.” Then we look at the recent survey of college students where a significant percentage of them could not name the three branches of our government. That’s the kind of self-created, national mental deficit that breeds woefully under-qualified candidates for higher office and one that trusts and tolerates twisted leadership both in and out of government. Smart, educated citizens demand smart, educated leaders. Smart, educated citizens with an active sense of social responsibility, have less tolerance for governments and captains of industry who play games with the public trust in an ongoing effort to acquire unlimited personal wealth. Moreover, in a century marked by a new level of intense world competition, while it is not a great idea to ship the means of production to an overseas competitor, it is even worse, much worse, to depend upon the brain power of off-shore nations though default because our nation has failed to produce enough high level thinkers in every field of modern endeavor. It is simply a matter of national survival. It is our smart people who make us safe and competitive, not smart bombs. A revamped, simple and transparent college funding approach lies at the heart of securing our future and “…the blessings of liberty to ourselves and our posterity”.

The present approach to recovery is backwards. It is a top-down plan that theorizes if a relative handful of banks and financial institutions are healthy, the benefits will eventually reach the average American. That is a fool’s game and one that is morally bankrupt. The right way is to first directly serve the average, hard-working American family and when they recover, the financial services world will also recover. It is time to “stop being stupid” as Bob Herbert so properly framed it in his December 27th column in The New York Times. The plan outlined in the Part 2 of this 3-part series will suggest a blueprint for that philosophy as it applies to the college funding dilemma.

This has been Part 1 of a 3-part series of ways to fix the broken college financial aid system.

Coming Next: Fixing the System

But wait. Life is not always smooth and Beaver Cleaver-like. It is full of challenges and we always seem to rise to the occasion. In cities across the land, in good times and bad, we Americans look at blighted communities and we typically engage in urban renewal projects to bring a fresh vibrancy to areas in our cities and other communities that seem to have been bypassed by life. If we can do that in communities across the land, we can do that as a nation. It is called national renewal. What we will need is the cast of leaders with a “can-do” spirit and the brains and courage to undertake the task. Santa and a lot of American voters gave us that present this Christmas. The remaining and ultimately the most important and missing piece is whether we as a nation have the same “can-do” attitude and the willingness to work as one America to get the job done.

If we can seize this moment, we can remake our nation and reorder its values to craft a place where character and hard work are the measures of success and the roots of personal fulfillment and where we will once again pay tribute to the singular overriding characteristic of successful nations, social responsibility. Any nation marked by a citizenry motivated by a strong sense of social responsibility is a nation that is healthy, happy, and secure enough so that its citizens can fully enjoy the important things in the lives of ordinary people, things like family, safety, freedom of expression and religion and, of course, freedom from fear. Fear is not just the fear of other nations and groups but fear of our neighbors and fellow citizens who may share political views or ethnic and racial backgrounds that differ from our own. Somehow, we have to get over our inability to celebrate different opinions and recognize that differences are the hallmark of any healthy democracy. We need each other and each other’s opinions. By closing our minds to ideas, we may be closing our minds to elements of truth. When truth is suppressed or when it dies, democracies are always part of the casualty list.

Maybe the example of our heartland is appropriate. How many times have we seen a community utterly devastated by a tornado? Misery and shattered lives are all that is left in its wake. But then, like a phoenix arising from the ashes, the people tighten their belts, put on their gloves and rebuild often an even better house and a stronger community. And in doing so, a special bond, one that easily transcends personal differences, is created among the local citizenry. It happens all the time because people seized the opportunity brought on by a horrendous accident of nature to be reborn as a better, closer community. This nation is in the throes of a crippling disaster. As it begins to subside or even as we adjust to it, we have a choice: we can hunker down and feel sorry for ourselves or we can do what so many others have done in bad times; we can rebuild a better nation and an even more viable democracy. It is a chance to do something together, all of us, something we can pass on to our kids, something that can stand as an example to the entire world, an example of what free people can do in the face of adversity. That kind of example will win more friends at home and around the globe than any program of coerced nation building.

So in this holiday season, let us use this moment in history to create the kind of nation all of us want. Let us learn to stop blaming others for our lot in life. Pointing fingers requires the use of one of our hands and in these challenging times we will have to become a nation of hard-working citizens who will need to use both hands to get the job done. Let us all commit ourselves to creating the ultimate present for our children, a gift that keeps on giving…a better world. This gift doesn’t require large personal bank accounts or rare-metal credit cards. It is simply a matter of some honest, selfless work and a generous supply of good will. Together, let us demonstrate that it is still possible even in the worst of times to create the economic and social setting that will usher in the best of times.

Have a meaningful holiday season and in the year ahead let us all join together to put a special, red, white and blue lining around the expected clouds that are likely to fill our skies in 2009.

Coming in January: A three-part series on how to fix the college funding system.

As you may know, most private and organizational scholarships are awarded late in the student’s senior year of high school. By that time, a student has already been accepted by a college and a financial aid package has been offered. Then suddenly, a new scholarship is received from a local Kiwanis or Rotary Club. Under the accepted protocol, the new scholarship should be reported to the college whose financial aid office will likely reduce its aid award on a dollar-for-dollar basis rendering the new money largely irrelevant. It happens every year in thousands of locales across the nation.

There are many better ways for scholarship sources to help needy students.

• First, before you release the money, be sure the recipient student has actually contacted the college to see how the college treats outside scholarships. The way to do to is to have the student call the financial aid office and ask, “I may get a scholarship from (your organization) but before I accept it, I want to know how the college treats outside scholarships.” If they say that they will replace financial aid on a dollar-for-dollar basis, the student should ask if he/she can use the scholarship to replace any self-help aid (loans and/or work-study). The college may say that it doesn’t negotiate such things or that it will split the new scholarship between self-help aid and free or grant money. Then it is up to the student and the scholarship provider to decide what to do. Depending upon the size of the scholarship, there are a couple of options. Whatever you decide in this limited scenario, it is not the best way to maximize the impact of an outside scholarship.
• If you insist on awarding scholarship so late in the game, one way to help is to first see if the student has been “gapped” in his financial aid award. Gapping means that if the student has a demonstrated need of, say, $25,000 but the college only offers $15,000, there is a financial aid gap of $10,000. In that case, the money can be sent to the college in order to fill the remaining gap. Don’t send the check to the financial aid office but, rather, to the college billing department in the name of the recipient student. Don’t label it as a scholarship…just a payment. Because it fills an already demonstrated need that has been gapped, it doesn’t have to be reported to the college financial aid office nor is it taxed because the amount does not exceed the cost of college.
• If there is no remaining gap and/or if the college refuses the option of using the scholarship money to replace any self-help aid (loans and work-study) in the student’s financial aid award, you should offer (to the student) to put the money in an escrow account and have the student show up the next May with his/her grades and a copy of the student loan promissory note containing the address of the lender. Simply cut a check for the amount of the scholarship and send it to the lender to pay off all or part of the student loan. Some scholarship entities appreciate this because of its inherent quality-control focus. If the student fails to do well or even complete the academic year, you can withhold the scholarship and direct it to a more successful student.

Another suggestion for any scholarship provider is to integrate a cost-effective tool like TuitionCoach into the program for two reasons:

• For many scholarship applicants, their need is profound and their level of hope is high and then, when the scholarship is denied as most are, it is just another “no” in a lifetime of rejection. If the scholarship provider made an arrangement with TuitionCoach so that they could make its content available to all of their deserving scholarship applicants, those students would still be winners by showing them and their families ways to increase their financial aid awards at any college they wish to attend. One example is a service club in the San Francisco Bay Area that decided to reallocate a portion of $7,500 scholarships normally awarded to three students ($2,500 each) to a program that included detailed, ongoing information on ways to fund college, TuitionCoach. Using that model, they assisted fourteen students not three. If one takes the total financial aid offered to the participating students in the first year and multiplied the number by the normal 4-year college career, the program helped to provide over $844,000 in direct college financial aid to 14 families. If scholarship purveyors use TuitionCoach for all or any qualified applicants, they will do almost as well as the actual scholarship recipients. They would most certainly do better if the actual scholarship winners did not also have access to TuitionCoach.
• Given the high cost of college, a small scholarship of a couple thousand dollars given on a one-time basis doesn’t make much of a difference in the lives of the recipient. But intelligently navigating the larger financial aid maze and knowing how to deal with all costs not covered by financial aid can make that scholarship much more meaningful by reducing the after-financial-aid costs to a bare minimum. A $2,500 scholarship to a family with a calculated expected family contribution of $3,000 means a lot more than if that family’s EFC were $8,000, made needlessly high as a product of simply bad planning and lack of timely and comprehensive financial aid knowledge.
• Scholarship vendors should consider requesting applicants earlier, certainly no later than the end of the high school junior year. In that way, by using TuitionCoach earlier in the game, college choices are likely to be upgraded so that the actual scholarship will be spent on a more appropriate college experience.

The philosophy here is a simple one: Is it better to give a hungry person a loaf of bread or the means to make bread? The answer is obvious and scholarship entities would do well to consider it.

If you or your organization has interest in exploring this approach in further depth, simply contact TuitionCoach by email at: partnerships@collegecompany.com.

Coming Soon: Beginning in January, 2009, “Paul’s Corner” will feature a series of articles that will suggest ways to overhaul the college and graduate school financial aid system. It will mark a dramatic departure from the current orthodoxy and outline a template to create simplicity and rationality while providing dramatically more equitable college access to those at all income levels who are yet to become victims and life-long collateral damage of the present system.

Over my first coffee of the day, the old images flooded my mind’s eye, still clearly etched in my memory. The visions of the police dogs attacking fellow citizens engaged in a peaceful march, the ashes of a church fire that had consumed innocent little girls, the seemingly endless parade of funerals for decent citizens like Medgar Evers and so many others engaged in trying to secure the full rights of citizenship for an entire race of Americans whose only “crime’ was being born with dark skin. Their world was one of lynchings and burning crosses, of unexplained and unsolved disappearances of loved ones, of denials of employment, of lives in sub-standard housing and of carefully orchestrated second-rate education. This book of memories has been with me for as long as I can remember. Included in my scrapbook of the past was that day at the Lincoln Memorial when the Reverend Martin Luther King Jr. raised his powerful voice in a plea to what seemed at the time an unhearing deity, the hope that one day our nation would learn to judge people not by the “color of their skin but by the content of their character”. We heard those moving words and we collectively sighed, “If only…!”

Then, on one November day, providence, politics and a nation’s long-repressed conscience intersected to create a moral critical mass that erupted into the miracle that we thought would never, ever come. In an historical instant, the work, vision and courage of leaders from Abraham Lincoln and Nat Turner, from Jackie Robinson and Roy Wilkins, from Rosa Parks and Thurgood Marshall and legions of anonymous people of all races were transformed into a new reality. In that moment in time, people of good will everywhere elevated our nation to a new, higher plateau of human possibilities. In doing so, we finally placed some soothing balm on the open wound of racism in our nation’s soul, a wound that had been left too often untreated for what seemed to be an eternity.

On that November day, the world paused, then caught its breath and finally shouted in both disbelief and triumph with faces often laced with tears of joy. That symbol of freedom, that beacon of democracy, that once reliable friend and incubator of everything possible had stirred from its slumber and was reigniting that special light for all to see. America, the last, best hope of humanity was stirring again to reclaim its role as a full partner in the global community and to lead by example and not by the threat of its arsenal. It was again time to be the custodian of its moral imperative to show the way to a better tomorrow for all humanity.

For those of us who have been saddened by the direction of the last eight years, it feels good to be home and to once again be a welcomed part of the endlessly interesting and challenging world. We rejoice in the prospect of putting the old Machiavellian playbook featuring fear and intrigue back in some obscure, dusty stack in the library where it belongs. We look forward to living in a nation that may have learned it is always a good idea to listen to our neighbors rather than ignore them or vilify them because of their political affiliation or ethnic roots. Maybe, at last, we have learned that we’re in this together and that all of us are better than any of us.

The meal that has been served to Barack Obama is not a happy one. On his plate are two dangerous wars, a wayward economy, a world environment at risk, and any number of global conflicts many spawned centuries ago and often fueled in the present age by economic hopelessness. Neither he nor anyone can cleanse the world of its current ills. But Mr. Obama did show us one thing. Collectively we, all of us, have the power to transform the world. There will be naysayers but they haven’t been paying attention. Our President-elect has already shown us that people regardless of political affiliation, religion, ethnicity or any other allegiance, people of good will working together can usher in a new era, one that demonstrates unambiguously the old idea that when we help each other and treat others as we would choose to be treated, we can change the world. Yes, we can!

The private student loan model was created and sustained largely by the failure of the college financial aid system to keep pace with rising college costs and changes in the larger economy. The resulting funding gaps and shortfalls are often bridged by private student loans, “paper” that is created primarily for the benefit of investors and not the needy, often desperate students and their families.

In March 0f 2008, the National Consumer Law Center issued a report that described the all-too-often predatory nature of this marketplace.

• Pricing: The average APR (annual percentage rate) of private student loans was found to be 11.5% and was tied to the student’s credit rating so the lower the credit score, the higher the interest rate. A reasonable person might have some trouble with the logic of this. But, as you know, good business and bad logic are common bedfellows.
• Origination Fees: These range from a low of 2.8% to around 9.9% and are supplemented by other fees (late charges, research, forbearances, etc.).
• Disclosures: Despite the TILA (Truth in Lending Act) requiring disclosure, lenders often provide them too late or in a format too confusing for the vast majority of borrowers.
• Flexible Payment Plans: There are no requirements for lenders to provide them so few do.
• Postponing Payments: Some lenders offer short-term plans but very few provide information about this in a before-the-fact disclosure in the promissory note.
• Workouts and Cancellations: Lenders rarely offer reasonable settlement or cancellation provisions even in the event of the death of the borrower.
• Mandatory Arbitration Provisions: Typically, the borrower MUST agree to binding arbitration by an arbitrator chosen by the LENDER.
• Default Triggers: This is a moving target. There are no standard time lines. Some are as soon as one missed payment.
• Holder Notice and Other Borrower Defenses: Typically, there are limitations on the borrower’s right to seek relief even when the school is unlicensed or fails to deliver on its promises. This is exacerbated when the school and lender have a “sweetheart” arrangement.
• Misleading and Default Information about the Student Borrower’s Bankruptcy Rights: These loans are often very difficult to discharge in bankruptcy. There are waiver clauses sometimes requiring the signee to repay even if under the age of 18. There are often venue restrictions requiring the borrower to sue only in the state of the lender and a requirement that compels the lender to sue only in its own state.

If you are forced to enter the financially risky world of private student loans, you should take heed to the old advice, “caveat emptor”, buyer beware! Hopefully, this short remind