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 reminder will alert you to put out your mental antennae and to carefully read the small and often confusing print before agreeing to sign a supplementary private student loan.

It is one thing for lenders to use these practices (and not all do) but it is even worse that the inadequate college financial aid system drives ordinary citizens into this largely unregulated swamp.

During this extraordinary time as we evaluate the causes of the greater worldwide financial collapse, it wouldn’t be a bad idea to include the domestic private student loan market when we construct the new regulatory system to replace the old one which, to put it gently, was largely missing in action during the buildup to the financial meltdown. The private student loan market is in dire need of a comprehensive, enforceable laundry list of regulations. Of course, the best and in the long run, probably the cheapest solution would be to make the financial aid system so strong and so reliable and so tightly mandated that there will be no need for the supplementary private student loan market. But nobody ever accused the government of practicing wise preventive medicine.

First, each of us is feeling the pressure of falling investments. Colleges and their endowments are also being affected. More than a few colleges are heavily invested in hedge funds and other assets filled with bad “paper”. For families, the impact will be manifested in the colleges’ ability and/or willingness to provide adequate campus-based aid to needy students. The same is true in states that have programs to help colleges meet the financial need of low and middle-income students. Those state-based programs are funded by tax revenue but with the tax base shrinking as a byproduct of falling property values and the general tightening of state budgets, a gap in financial aid packages is the likely outcome. “Gap” means if a family has $10,000 of aid eligibility, the college may only be able to fund $5,000 of that need leaving a gap of $5,000.

Second, the typical way to cope with both gapping in financial aid awards and calculated family contributions that are already too high is to take out private loans. In the absence of any targeted programs, that resource will either dry up or become so selective and expensive that they will only be available to families who don’t need them or whose credit scores are extraordinarily high.

Private loans are expensive because they are created to attract third party investors and as such they are designed for someone other than the actual borrower. Instead, they tack on high processing costs and initially high interest rates that are likely to increase substantially with every late payment or if the borrower’s credit rating diminishes because of some other occurrence in the borrower’s credit history which may have no direct relationship with the private student loan.

So, for all of us in the college market, while the basic forms of federal aid are not likely to change much, the sources of aid below the federal level will show the effects of the meltdown. This grim prognosis would suggest that consumers who want to survive must know as much as possible about ways to qualify for financial aid and just as important, strategies to deal with what are likely to be high costs not covered by need-based financial aid. Following is a time-tested recipe for success.

Like any recipe, you must begin with the menu. For college, there are really two courses: managing college costs and protecting retirement. Add to this, an overriding outlook that will determine how you will approach the preparation of the meal. In this case it is simple: “You can always borrow for college but you can never borrow for retirement”. The current climate may affect the front end (borrowing) of this advice.

Here is how it should all work:

• Calculate the predicted “bottom line” costs for the year of college. Use the personalized tools on TuitionCoach to learn how to increase your aid eligibility and minimize those costs. The “bottom line” is the total student budget or cost of attendance (COA) for a year at the college minus financial aid (if any).
• Take the remaining costs and spread them out over 10 or 12 months to see what they would look like as a monthly bill.
• Decide whether the monthly amount can be comfortably accommodated out of the family’s normal monthly cash flow. If not….
• If it hasn’t been used up in the financial aid award, borrow any remaining eligibility for an unsubsidized and/or subsidized federal student loan. The below chart outlines loan limits for dependent students:
  
  

  Year	Base Limit (subsidized and unsub)	Extra limit for unsubsidized loans	Total
  Fr.	$3,500	$2,000	$5,500
  So.	$4,500	$2,000	$6,500
  Jr.	$5,500	$2,000	$7,500
  Sr.	$5,500	$2,000	$7,500
  5th	$5,500	$2,000	$7,500

  
  The aggregate total each year includes both subsidized and unsubsidized loans. For instance, if the student has been awarded a $2,700 subsidized loan in the freshman year, total eligibility for an unsubsidized loan is limited to the total eligibility for that year or, in this case, $2,800.
  
  If the family has to borrow to make monthly costs affordable, public student loans are always the cheapest college options. Moreover, students with loans seem to take college more seriously and because of that, they tend to graduate in four years, a clear, money-saving outcome for parents.
  
  
• If that still fails to make the now-reduced monthly payments possible, consider borrowing enough federal PLUS loan money (Parent Loan for Undergraduate Students) to bridge the gap between the amount you can afford monthly and the actual monthly cost of college. Remember, both PLUS loans and unsubsidized student loans will become due and payable about 60 days following the full disbursement of the loan each year, about March or April of that academic year. Both loans are 10 year notes. Servicing these loans will have an impact on the amount you will be able to pay out-of-pocket to the college in future years.
• Sign up for a monthly payment plan at the student’s college and pay the remaining, affordable, out-of-pocket amount over 10 or 12 months. If the college does not have a monthly payment plan, just create one using a PLUS loan or private loan with no pre-payment penalty or other creative borrowing solutions like a home equity line of credit. It will require some personal discipline to maintain those payments in light of the many other claims on your resources.
• Repeat until graduation. After graduation, it is not the worst idea to pretend the student is still in college but instead of sending your monthly money to the college, send it to the PLUS loan or other lender to get the loan off the books as soon as possible while you are still healthy and working.

This recipe has been successfully used by literally tens of thousands of Americans and by doing so, they have upgraded college choices while securing the family’s long-term financial security and the promise of a fulfilling retirement for the parents.

If there are several college-bound students in the family, the recipe becomes somewhat more challenging as it does when cooking a fine meal for many, many guests but with imagination and patience, it is doable. A good rule of thumb is to stretch your out-of-pocket contributions on the front end of the college years while you are more active and productive as an employee so that you won’t be burdened with old debt as new students enter college. That old debt must be serviced which may reduce the amount you can afford to send to the college every month thus forcing the family to take out larger loans to make ends meet. So maybe a good “spice” for our meal would be to “sacrifice early so you can relax later”.

Entering the college funding arena with a philosophical game plan and some tools to help lower the bottom line is a perfect setting for those years that we at TuitionCoach have always characterized as a “celebration of the family”.

In his “Lord of the Rings” trilogy, J.R.R. Tolkien created a place called Middle-earth where a battle for control of the world was waged between the good guys and the bad, featuring creatures called Orcs and an assortment of other miscreants. Tolkien first told us that Middle-earth occurred some 6000 years ago but he later recanted and suggested it existed in a different stage of our imagination. In my view, it exists today in an altered but very real form.

In the “Lord of the Rings” they key to world dominance was control of certain magic objects. In the “Middle-earth” of today, the magic stuff is money.

Our nation is blessed with innovative and energetic people, hard working creators of products and hands-on technicians who keep those products running. In addition, we have armies of skilled practitioners, teachers, doctors, lawyers and so many others. But in between, there are legions of Americans who spend their time and our dollars simply manipulating the space between production and delivery by shuffling money which makes them wealthy and for the rest of us just adds to the cost of goods and services.

Witness an experience with Medicare. I needed a simple accessory for a minor medical issue. I went directly to the distributor and watched in astonishment as they billed Medicare an amount that exceeded $200. I then went online and found that I could order the exact product for $79. The approved Medicare distributor increased the cost to the nation by over 100%. That transaction is replicated every day by a factor of millions and it illustrates one of the costly flaws in the way we do things. No system of health care can exist very long when there are layers of non-medical people skimming money from health care goods and services in that “Middle-earth” between the patient and the providers of actual medical services.

In the private student loan market (and to a degree in the public student loan market), loans are created not for benefit the consumer but, rather, the investor. Private loans are designed to be packaged and sold sometimes several times by firms and people you never see or know so that some faceless investor can make money from you simply by shifting his assets or the assets of others he controls to invest in your loan. Those investors educate no one; they produce nothing; they benefit themselves and in doing so they raise the private and public ante for whatever service or product the original loan was intended. This practice is what disproportionally drives our economy and the nether world of “Middle-earth”. We have become a high-risk, high-cost economy made so by endless layers of anonymous middle men who finance their often lavish life styles by manipulating your money while producing zero products and services. The entire credit card and indeed the larger credit industry was built on the easy (and dangerously untrue) proposition that anyone can and should be able to afford anything by simply borrowing the money. It is a risky and cynical approach that creates a false sense of wealth and in doing so, may ease the urgency of quests for higher salaries by working Americans. If there were no lures of easy credit to fill the income shortfall, the union movement and the power of working America would increase exponentially. The big winners in this dangerous, high-stakes game, of course, are the creditors themselves who are paid by the both buyers and sellers. The other winners that typically escape notice are the captains of industry who preside over a debt-ridden workforce who cannot afford to ruffle their employers’ feathers for fear of being terminated and becoming easy prey for their own creditors. The more an employee depends upon his employer to merely survive, the less likely the employee will make demands on that employer because of the omnipresent specter of being laid off or providing an incentive for the employer to move his manufacturing facility to some emerging country that still pays third-world salaries.

I have many friends in the financial services industry. I ask them “What do you do?” “I am a broker”; “I sell insurance”; “I manage funds”. “Yes, but what do you do?” What they do is manipulate money in order to make money as an end in itself. There’s something vapid about that. Living one’s life moving money around to acquire personal wealth without a clear social purpose seems like a life-long dance marathon with greed as one’s sole partner.

Colleges and universities, often the beneficiaries of the inhabitants of “Middle-earth”, typically fail to pass on the gains of such money manipulation. For instance, why do colleges who enjoy huge endowments charge anything to attend? While some wealthy colleges are beginning to share their bounty with students, many others do not and that is troublesome. If education is a right of all Americans, why is there a rider on that right that says, “…if you can afford it?”

Our “Middle-earth” is a dark place. Too often, little of any lasting social value is produced; greed and manipulation are its life force; there is little or no sunshine and the air is foul. Sadness and suspicion are everywhere. As a society, we would be well-advised to do some excavation to expose it to the light of day and if we don’t like what we see, to clean up that part of our environment so that our democracy can grow and reclaim our role as the beacon of freedom and the planet’s most prolific incubator of ideas and technology while also serving as the world’s gold standard of social responsibility, the truest measure of a nation’s greatness.

Loren Pope wrote two of the most thoughtful books on college ever written. In “Looking Beyond the Ivy League”, he reminded us that colleges should be chosen for the student fit and not the ratings of third parties more interested in selling magazines and books than they are about the stewardship of a student’s college selection process. It was Pope who first challenged the college ratings game in any meaningful way. In “Looking Beyond…”, Pope explored not only the essence of the college experience but how a student can approach college with a taxonomy of attributes so that the student can compare colleges against a known, personally-driven suite of standards that will form the basis of college selection. It was Pope’s notion that if a student applied to multiple colleges, they should be very similar in certain key characteristics. In that way, if the student was admitted to any or all of the choices, the student would likely be happy because the college reflected the academic and social environment that addressed the student’s personally-defined comfort level.

In the event the reader failed to grasp the full message of Pope’s book, he wrote a companion volume, “Colleges that Change Lives”, in which he explored colleges around the nation that provided certain attributes that many “prestige” colleges can only dream about. My daughter attended one, The College of Wooster. She emerged an educated, confident, poised, and competent adult, the raw materials of a productive, meaningful life.

Pope’s books are required reading for any college counselor and any parent facing the challenges of college for their kids. His words are sensible and are likely to change many of the college selection parameters for students and their families. He challenges the notion that the “prestige” of a college attended is somehow the singular hallmark of successful parenting. It isn’t but it makes for nice cocktail party conversation.

I once lived and taught high school in the Connecticut community where Paul Newman lived. As a varsity soccer coach, I would hang out from time to time at Tip Schaefer’s sports shop. Tip provided our teams with equipment and uniforms. Every now and then Paul Newman would drop by the store usually clad in something bordering grubby. He was an avid jogger and liked to be just a regular guy. He completely succeeded in that role. He was just another, normal person doing normal business in the town he so loved.

Paul Newman’s acting career is well-known and seldom, if ever, equaled. I loved his work. My personal favorite was “The Verdict”, directed by Sidney Lumet. His stunning portrayal of Frank Galvin, a lawyer beaten down by life and faced with a high-risk, career-rescuing, “Hail-Mary” case involving medical malpractice is one for the ages. He conveyed the burden of life as no other actor can. His patient, intense and ultimately riveting example of the actor’s craft approached perfection. Through “The Verdict” and Paul Newman, we gained greater insight on that often moving target we call justice.

Much of my professional life has been directed at work in the non-profit world. Over the years I have founded two non-profits and I have helped hundreds of talented, deserving young people to go to college. Typically, the students were from low income, first generation, single parent families. Time and again, those efforts were funded by generous grants from Newman’s Own. Paul Newman’s sense of public responsibility changed lives just as surely as those wonderful colleges mentioned in Loren Pope’s book. I am confident that his work will be carried on by his daughter, Nell, and Peter Meehan who will continue to manage Newman’s Own and its social mission in the years ahead.

The world of acting, the world of philanthropy and indeed the larger world of humanity will miss Paul Newman. In his last role as the stage manager in Thornton Wilder’s “Own Town”, his last words at the end of the play are entirely appropriate as our last word to him, “Hm…Eleven o’clock in Grover’s Corners. – You get a good rest, too. Good night.”

First, colleges are major stake holders in the financial arena. Their endowments and financial health are closely linked to the investment marketplace. As the market continues to tank, colleges are also victims. They too invested in risky paper in an effort to maximize their endowments. Many colleges are mired in hedge fund investments and others have spent real money on securities that resemble illusory beachfront property in Arizona. This will no doubt impact the colleges’ ability to provide sufficient campus-based aid to needy students. And that is only in the private college marketplace. With budgets at the state and federal levels also victimized by the financial crisis created in part by lower property values and the subsequent impact on the tax base, there will be less public money available to address the demonstrated need of students in public colleges and universities. That effect is already evident in California, where the practice of “gapping” financial aid offers is the rule rather than the exception in the University of California and the California State University systems. As always, the big losers in the short run are lower and middle income Americans. In the long run, the nation will suffer collateral damage as an entire generation of American potential may go untapped because a college education, so vital to developing that potential, will remain merely an elusive dream. To compound the problem, the money committed to the “bailout” will divert funds from the public services that will surely be needed as an under-educated generation of Americans drifts aimlessly though their lives.

The college financial aid system is easily the best public investment the nation can make. Tied to it are a higher tax base, a greater competitive edge in the global game of influence, and a much lower need for expensive publicly-funded services. But, it will fall victim to the headlong rush to bail out the investment marketplace as a puzzling reward for malfeasance and greed. When will we learn that “deregulation” is simply a code word for unfettered avarice and irresponsible behavior by people who know they are behaving badly? Even more importantly, they don’t seem to care because they live in big houses and wield great influence in the halls of Washington and are thus unlikely to pay the piper for their misdeeds. Witness the current bailout scheme. We throw people in jail every day for stealing a loaf of bread from a convenience market but we give a pass to overpaid executives who steal millions from ordinary, unsuspecting, hard-working Americans. It is the stuff of Lewis Carroll who introduced us to this world on the other side of the looking glass.

I am not a business school graduate and I am certainly not qualified to deal with the small print of the bailout deal or to do complex financial projections but intuitively, I don’t understand why the American taxpayer has to pay anything for a bailout. Why not simply allow financial organizations to unbundle their shaky deals and walk away from the dead-end loans by giving the bad paper to the federal government at no cost? That is the very thing these banks and financial institutions require homeowners to do in foreclosure. Why not have the financial companies face the same horrible choice facing their debtors? Then the feds can deal with the borrowers and, where possible, work out reasonable settlements that can be used to fund other important government programs and to make up for the tax write-off the financial entities will enjoy when they dump the bad investments. In that way, the government (taxpayers) might actually make some money while the financial behemoths can move forward on the strength of cleansed portfolios that consist only of preferred loans and other profitable ventures. Sure, they may lose some money in the short run but they will start anew with a clean slate of solid, lower-risk investments. Meanwhile, the government can make it possible for people to keep their homes with renegotiated low-cost mortgages that should be preceded with a substantial period of forbearance to allow the homeowners to catch their financial breath and to have the cash needed to relocate and to restart their financial lives. If the financial services companies need more money to help with their liquidity, the feds, who will not have spent that $700 billion, can provide very low-cost, low-risk loans that should be secured by the remaining good paper in the company’s portfolio. It is exactly the same model the companies used when they gave out loans to homeowners. Sounds like a much more rational solution that benefits everyone. Just paying top dollar to financial giants and overpaid executives for bad decisions is counter intuitive, maybe even stupid.

A cynic might suggest that the hidden agenda behind the bailout is to so impoverish the nation, any new occupants of the White House and Congress will be unable to implement any grand social programs including a critically-needed massive upgrade of our K-12 and college systems or the national health care system. Relying on Congress to work things out also makes me a little nervous. After all, we are depending on the same body whose immediate response to the horrific events of 9/11 was to sing patriotic songs on the steps of the Capitol and to rename a vegetable.

If there is any upside to the current financial crisis, it is the sight of democrats and republicans breaking with the rigid confines of party loyalty and actually joining together to find a solution that benefits the greater whole of American society. To see our publicly-elected officials actually thinking about us rather than the strategic positioning of their political parties is refreshing and uplifting because one of the unspoken reasons why we are in this mess was the myopic, self-serving, partisan approach of legislators and members of the executive branch. These people sold their souls to the narrow interests of party loyalty at the expense of their primary mission to serve all Americans and to “…secure the blessings of liberty to ourselves and our posterity…”. Those imperatives articulated in the Preamble to our Constitution, are too often violated, too often twisted and, sadly, all too often completely ignored.

Someone once said, “All of us is better than any of us.” When it comes to college admissions, nothing could be more accurate. It is neither college admissions staff nor high school counselors who alone create the college magic for our students; it is all of us working in concert that craft unimaginable life opportunities for generations of talented young people. And it is very hard work!

Few “outsiders” understand nor appreciate the real world of a college admissions staff member. For many, it means weeks on the road giving presentations at schools and countless auditoriums and conducting interviews in hotel lobbies and some less-desirable venues. It means working a full day at the admissions office and then reading dozens of college essays at home before you can finally rest. It means making life-altering decisions on the fate of young people knowing that you might be wrong both in terms of those you accept and those you reject. It means gingerly walking the fine line between competition and collegiality with your professional counterparts from other colleges. All of this is done with little fanfare and little appreciation and often comparatively little compensation. All of this requires an unshakeable work ethic, a firm commitment to the social good, a deep appreciation of the human condition, more than a fair amount of intelligence and some would suggest, a touch of insanity. But, in the end, their hard work pays off and their colleges and this nation are all the better for their efforts.

Then there are the counselors at the secondary public, private and parochial school level. As a former principal and vice principal at comprehensive public high schools, I can report without hesitation that the world of a school counselor is on its face a nearly impossible task with student loads of 200 to over 500 per year. That’s just the number of kids but what doesn’t get noticed are all the things counselors have to do that are not explicitly outlined in their job descriptions. School counselors are faced with increasing burdens imposed by programs like special ed and the requirements in many states that mandate creating and implementing Individual Education Plans for each student which involves endless paperwork and meetings with families, administrators and teachers. Additionally, there’s the responsibility for executing state-mandated testing programs and other functions loosely associated with simply being a counselor. There’s creating master schedules, dealing with never-ending class assignments and changes, serving as an emergency substitute for teachers who might fail to show up at the last minute or who have a mid-day emergency. Their days include dealing with angry teachers who often have a justifiable reason for rejecting yet another student the counselor has been forced to put in a class for reasons beyond the control of the counselor; coping with parents who have an issue with the school or a teacher and who only take calls in the evening or on weekends; dealing with the ongoing, year-long, steady stream of new students who need to be placed in classes and who may or may not be fluent in English; hosting evening informational programs for parents and students and serving as a last school-level resort for students who are disruptive or who have substance-abuse issues or eating disorders or who may be pregnant. And then, of course, there’s the Herculean task of writing all of those school reports for college applications and the list goes on.

Next, are the many selfless workers and volunteers who serve the hundreds of thousands of disadvantaged and under-served students and families of this nation. Such programs blossom in every state and every day, young people are given a chance for a real life through the efforts of these compassionate professionals. Examples include but are certainly not limited to Upward Bound, Talent Search, QuestBridge, Posse, CollegeWorks and others across the nation, along with private and charter schools created specifically to serve this demographic . The programs may be varied but for the vast majority, the primary goal is the same, to create fair and equal access to post-secondary education.

Finally, there are members of the private sector pledged to serve the pre-college world as counselors, funding resources and creators of new tools to supplement the work of the over-burdened human resources already in the trenches. Entities like Naviance, the College Board, Kaplan, the Princeton Review and Simple Tuition just to name a few, help to make college a reality for so many. Their work along with a host of others, despite some recent events, has been one that uniformly supports the college world by increasing college readiness and by creating an awareness of college venues often over-looked by under-manned and sometimes non-existent school counseling services. Still other companies and individuals work with parents to help them deal with the increasingly daunting issue of college funding and in doing so, they complete the work of college counselors and increase the applicant pool for large numbers of colleges.

These are the many and varied faces that one encounters in the family of NACAC members. On the occasion of the NACAC conference, it is altogether fitting that we acknowledge not only the work of NACAC and its regional and state-level affiliates but that we also celebrate and salute their members, professionals in the best sense of the word, people who perform nothing short of small miracles every day and in doing so, forever alter the futures of the students and families they serve and the destiny of this great nation.

John Stuart Mill reminded us that an enlightened people should be engaged in an unrelenting search for truth and that every opinion great or small may contain some elements of that elusive commodity. But more to the point, Mill said, “We can never be sure that the opinion we are endeavoring to stifle is a false opinion; and if we were sure, stifling it would still be evil.” Using Mill’s advice as a standard, our nation is becoming more evil with every passing day as minds become more closed and ideas from our fellow citizens are met with scorn and ridicule as a function of their affiliations rather than the content of their messages.

Fueled by the lions of the left and right along with an out-of-place sprinkle of religious dogma, this nation is becoming a less fertile breeding ground for ideas particularly in the political realm. If you need to understand how much vitriol and intolerance is out there, just turn on your radio after 10 pm and surf the dial. The hatred one hears has no bounds. It is the stuff of banana republic dictatorships because the talking heads label anyone who may disagree with their ranting as “maggots” and “sub-human morons”. Rhetoric like that permeated the speeches of the Nazis in the thirties and other dictatorships throughout the ages. It is intolerance and demagoguery at its worst and it is the toxin that can destroy any vibrant democracy as it stifles the healthy search for truth.

Mill also said, “If all mankind minus one were of one opinion, and only one person were of the contrary opinion, mankind would be no more justified in silencing that one person than he, if he had the power, would be justified in silencing mankind.” This includes the right of the strident on-air voices in the night to express their opinions but what it doesn’t include is the character assassination by them and others intent in raising their image through indiscriminate personal attacks on the character and intelligence of those with whom they differ.

Dictatorships are built on personalities while democracies are forged by ideas. To reject ideas and to mock those with whom we may disagree is not only foolish but it is anathema to the whole idea of democracy. Those who make a living by deliberately and maliciously pitting neighbor against neighbor may be doing more harm to our democracy than an armed uprising. Our history is marked by a tradition where ideas have almost always trumped raw force. When they haven’t, things like the Civil War occur where all the casualties were Americans.

Those who wish to make the coming election about personalities and not issues, represent the embodiment of an approach that denies an eternal truth about our form of government. Democracies were founded to create societies where ideas can flourish and to decide among those ideas, free and open elections are held. To categorically attack those with whom we may disagree as “maggots” and “morons” says more about the speaker and his utter lack of understanding about the true meaning of democracy than it does about the person he attacks. An unfettered, respectful exchange of ideas is the life blood of this democracy and anything or anyone obstructing that flow of ideas or downgrading the importance of policy discourses among free people is a toxin that can only be cured in unimaginable ways.

College is not about names or ratings...It is about fit. The way the deal works is that parents have to write the checks, something that TuitionCoach can make less painful, but it is a student’s responsibility to ensure that those checks make them happy. This suggests that students should try to create substance and form to the generic word, college.

In an active college day, with the exception of science and engineering majors, students are in class for about three hours. During the other 21 hours, they are either sleeping, studying or part of the larger college social community. Once a student enters a class, it is difficult to tell whether he or she is in a public state college or an Ivy League institution. Great classes are more often than not a function of the skill of the teacher and skilled teachers abound in colleges across the nation. It is safe to mention that a class at a highly selective college does not necessarily provide a guarantee of great teaching. It is when the student leaves class and joins the larger college community that environmental differences become evident. The setting, the social life, the climate, the facilities can differ markedly from college to college which would imply that college choice should be predicated on those factors as much or even more than others. Students who feel they are a part of a comfortable college community seem to do better than students who feel alienated from a social setting that fails to address the non-academic requirements of the student.

One shortcut to finding a fit is to create an inventory of the student’s needs. In the absence of another approach, Ed Fiske’s “Sizing-Yourself-Up Survey” in his Fiske Guide is a good place to start. Simply answer the easy questions and a self-scoring guide will provide you with and decent overview of the kinds of attributes you may want in a college.

Then, after you design a college environment, go to any number of college guides to find colleges that seem to address those needs. Here are some hints about ways to expand your number of college possibilities:

• Try to take location out of the mix as a very important factor. See what’s out there first in terms of your college description and then choose one that most closely satisfies your geographic needs. Even if your ideal college is far away or in a cold climate, you would be foolish not to seriously consider it. Colleges have central heating and changes in seasons are a great excuse to get new clothes!
• Try to avoid choosing a major before attending college. Parents get a little nervous when kids depart for college without a sense of a possible career choice. The truth is that when most high school students think they know what they want to do in the workplace, they are often wrong and they may waste valuable college class time getting ready for a career they won’t ever pursue. College is a place to become an educated young adult. Remember, most of your adult life is not spent on the job. When you consider weekends, holidays and 20 or 30 years in retirement, it would be a shame to devote all of your college education to the smallest segment of your adult life. Moreover, a great, broad-based education will serve as valuable resource if you change careers or if you get down-sized by technology or inept management.
• Never allow your college choice to be driven by college ratings. If you love a college, any college, for you that is the best college in the land.

Be sure to create a list of prospective colleges that is realistic in terms of admissions. It is fine to apply to a very selective college but always try to create a list based upon statistical realism. Check the admissions profile of each college by looking at things like the SAT score range of the middle 50% of last year’s accepted applicants to that college. Also look at the yield or the percentage of students the college accepted from the entire list of applicants. The colleges with higher yields (lower percentage of admits from the total applicants) tend to be the more selective colleges.

The litmus test of whether your college selection list is on the right track lies in the similarity of the colleges on your list. If they all seem to fit your descriptive profile, then you will dramatically skew the odds in favor of a happy college landing because whatever college you finally select will mirror your requirements.

In my view, college selection is by far the most important part of the college process. When a student winds up at an inappropriate college, any college savings created by TuitionCoach is largely irrelevant. There is no upside to spending money on a college that makes a student unhappy. To avoid this, parents should monitor their student’s initiative and energy level through this and other college admissions components. A passive approach by a student may indicate that he or she is not college-ready or that there may be a self-esteem or confidence issue that should be addressed prior to moving forward on the college path.

College can be an intellectual and social feast but not unlike the restaurant experience…If you aren’t hungry and/or if you don’t like the food, it is a bad investment at any price.

Across the nation, colleges of every type are playing fast and loose with the outcomes of the FAFSA (Free Application for Federal Student Aid). What good is the expensive FAFSA processing system if the colleges are not duty-bound to respond fully to its imperatives? Here is what is happening:

When families complete the FAFSA, the data are used to calculate a dollar amount that the family will be expected to pay for one year of college, the EFC or Expected Family Contribution. Let’s say, for instance, that a family has an EFC of $5,000 and the student is admitted to a college that costs $25,000. According to the long-established formula (the Federal Methodology), the student in this example has a demonstrated need of $20,000 (the difference between the EFC of $5,000 and the actual cost of college, $25,000). The demonstrated need is the amount that the college is expected to provide with a combination of need-based subsidized loans, work/study, and grants in whatever combination the college deems appropriate. For years, colleges have responded rather well to that standard. But now, things have changed, often dramatically.

For many reasons, colleges and universities across this nation are displaying a callous disregard for the formula by “gapping” families. In the above case, it would not be unusual for the family with a demonstrated need of $20,000 to receive only half or less in the form of need-based aid. Instead, the “award” would contain financial aid totaling, say, $10,000 or maybe $10,000 in need-based help and a non need-based PLUS loan (Parent Loan for Undergraduate Student) for about $10,000. In the latter instance, the college offering the PLUS loan in its award will usually claim that 100% of the demonstrated need of $20,000 was filled when, in fact, only about half of the need was addressed with real need-based aid. So, as a practical matter in this example, a family making about $50,000 a year would be treated as one making nearly twice that much in terms of the actual financial aid it received. Remember, anyone can get a PLUS loan. The richest families on the planet can easily borrow as much as they want every year to pay for college using a PLUS loan. PLUS loans were put in place to help families pay the EFC not to masquerade as need-based financial aid.

What is happening is dangerous. With colleges gapping families at will in the absence of penalties of any kind, there is a growing trend by colleges to accept and dole out federal money (Pell Grants, Student Loans, Work/Study and other programs) while ignoring the college’s responsibility to contribute an appropriate amount to the process after the public money is exhausted. When this practice carries with it no penalties for the colleges that do business this way, there is an implied incentive to merely increase the cost of the college to make even more families eligible for federal aid with no tangible effects on the college except that they are likely to increase their income. What is most alarming is that public colleges and universities are some of the most active practitioners of the gapping betrayal. These are institutions whose life blood is the tax money from the very people they are gapping! In California, the extent of the practice is stunning and disheartening.

The effect of this growing specter is enormous. As the need-based financial aid system unravels because of its unreliability and the unwillingness or inability of the lead players to adhere to the original script, families at any income level can no longer plan for college. All the counseling from schools and the private sector mean nothing if the system continues to be a moving target. College and universities, the gateways to opportunity, will simply become agencies that reinforce the establishment of a society of the haves and have-nots as the financial aid system continues its drift toward becoming a cruel hoax.

What is needed is more federal oversight. Yes, it’s that “big government” issue again. When will we all recognize that the size of government is nothing more than the stepchild of bad behavior by the private sector? If people and institutions would play by the rules, government at every level could shrink dramatically. If you don’t like big government, simply act more responsibly. When a college, for whatever reason, refuses to fund the entire demonstrated need of a family by failing to allocate campus-based money to supplement limited public funds, the institution should run the risk of becoming ineligible to participate in the federally-sponsored financial aid system. By the government’s failure to hold colleges accountable for undermining the reliability of the financial aid system, it makes the federal government a codependent in an act of bad behavior. If the college can’t contribute its own funds (a discounted student would work), then it should close its doors or do a better job tapping alums and others to upgrade their endowments. The public sector should also consider increasing its financial commitment to the federal financial aid system that has not come close to keeping up with the effects of inflation since its inception. That would help to take some of the pressure off colleges by narrowing the funding gaps.

Unless or until there is aggressive oversight by governmental agencies that provide financial aid programs to colleges, the system will continue to unravel and in doing so, this nation’s greatest resource, the ingenuity, energy and vision of its young people will be forever squandered. Remember, colleges are cheaper to build and maintain than prisons and welfare programs, the hallmark products of ignorance and despair. Massive support of colleges and students is also less expensive than the effects of a dysfunctional college financial aid system that needlessly impoverishes parents who may face their retirement solely dependent upon a publicly funded, financially at-risk social security system. That nightmare is yet to come.

• 32% of the family contribution to paying for college comes from income and savings; student borrowing contributes 23% while parent borrowing contributes 16%; money from grants and scholarships constitutes about 15% to the college funding mix; student income contributes another 10% and help from friends and relatives makes up about 3% of college-funding resources.
• About one half of the families surveyed borrowed to pay for college with public student and parent loans comprising the lion’s share of those loans. Of the 8% of the student and the 4% of parents who used private education loans, the amounts borrowed were very significant (Sallie Mae should know this well).
• While a small percent (3%) of the sample used home equity to pay for college, the amounts borrowed were significant (over $10,000 per year). Incredibly, a similar percent used credit cards to help pay for college.
• Interestingly, 9 out of 10 families with incomes lower than $35,000 applied for financial aid via the FAFSA. One wonders what the other thousands of low-income families in the remaining 10% did to pay for college. Sadly, however, only 76% of families with incomes between $35,000 and $50,000 submitted a FAFSA and even fewer (73%) completed the FAFSA with incomes from $50,000 to $100,000 resulting in a very significant number of college-bound families leaving federal and other kinds of aid on the table.

None of the survey questions cover cost issues like the timing of FAFSA submission, sources of college funding advice, the correctness of the data submitted on the FAFSA and the effects of college financial aid practices on the college-cost burden at all incomes. We don’t know from this survey how the system itself needlessly adds to the cost of college. I conclude from my personal experience with a much larger sample of American families across the nation spanning more than two decades of work, that it is the system itself that typically fails to deliver on its promise. It is the system that places needless financial burdens on nearly every family at incomes under $150,000.

What the Sallie Mae/Gallup study does highlight is that use of the FAFSA is mixed and parent’s response to paying for college is equally mixed. The one constant, regardless of the method used to pay for college, is that a generation of American parents is risking retirement security because of the absence of a reliable and rational college funding system. With every dollar put into a family’s college savings plan, there is a dollar less for a parent to use for retirement along with immediate reduced eligibility for need-based aid, realities that will come home to roost for American taxpayers in the years ahead. When will this nation understand that it is far less expensive to massively underwrite the comparatively closed-end costs of a four-year college career than a more open-ended 30 year retirement for families whose personal retirement funds have been dangerously depleted by college costs?

The upside of the Report is that some serious work is being done to better understand the effects of college costs. More needs to be done and at some point when we all finally agree on the obvious, that the system does not work and that there is a need to rethink society’s approach to the college funding issue within the context of our nation’s future, then we will be able to dismiss the researchers who are consumed with a study of the “what is” and focus on developing a system that will better address our nation’s needs and the future of this democracy, a focus on the “what can and should be”. After all of the studies, after all of these years of reflection and research, the college financial aid system remains largely intact, preserving an approach created by well-meaning people who drove to work listening to Patti Page and Perry Como on their automobiles’ monaural sound systems.

• There is substantial reform in promoting transparency in the college cost arena. Colleges will be required to provide a rationale behind their rising costs to not only justify costs but to combat what for many looks like some price collusion by colleges. The Act requires the U.S. Department of Education to publish reports on college pricing practices.
• Textbook pricing policies will also be required to share some sunlight. The law mandates that textbooks should be “unbundled” so that students will only have to purchase those textbook materials that are relevant to their courses. Many students are required to buy very expensive textbooks even though only a small portion of the text is actually assigned and used in the course.
• There is a provision for a new, simple version of the FAFSA. The new EZ-FAFSA is only 2 pages long and it is a precursor to the eventual phase out of the 7-page FAFSA and the emergence of the simpler, shorter form for everyone. It essentially creates easier access to a very flawed system.
• The law also provides for a pilot project that enables juniors in high school to receive an estimated Expected Family Contribution which anyone can already do in a couple of minutes on TuitionCoach.
• The new law provides greater transparency in the student loan marketplace, the subject of much deserved criticism in the last year or two.
• There are a number of provisions for members of the military that enhance access to college along with certain monetary benefits. It is not nearly as powerful as the original GI Bill that helped me get three advanced degrees but it is a step in the right direction.
• The Pell Grant will increase by about a third and continue to increase to $8,000 by 2014. That increase is not very dramatic given the increases in the cost of college and the rate of inflation. It does create incentives for low-income students to complete their degrees in less time by funding students year-round.
• The federal TRIO and GEAR UP programs will be strengthened to provide more chances for low-income, first-generation college kids to access and graduate from college, a good public investment given the cost of publicly-funded services for under-educated and under-employed citizens.
• The Act addresses issues that provide college support for students with disabilities and is clearly an important advance for that group. Provisions supporting future teachers and nurses are also included in the new law.

For those of you who are gluttons for punishment or who have nothing better to do, you can read the entire bill once it becomes law. It is called the Higher Education Opportunity Act and it is more than 1,100 pages in length. To save you that agony, from time to time we will discuss various provisions of the Act in the months to come.

When the day arrives that we are able to put smart, reform-minded people in a room, people who are required to check their political labels and loyalties at the door, that day will signal the dawn of a new age for higher education in the United States. It will trumpet in an era where ability, initiative, ambition and vision are the only operative college admission standards and where the money issue is left pretty much to the “green eye shade” people who will enable the system to function in a paper-free environment for American families across the financial spectrum.

First, the amounts of borrowing have been increased in an effort to keep pace with rising post-secondary education costs. Both subsidized and unsubsidized student loans are affected.

Subsidized loans are those loans offered as a part of a need-based financial aid award. They do not require payback until after the student leaves college or grad school and while in college, interest does not accrue. For undergraduates, the new interest rate beginning with loans disbursed after July 1, 2008 is 6.0% and 6.8% for graduate students and unsubsidized loans at both undergraduate and graduate levels.

New this year for dependent students is the eligibility to borrow an additional $2,000 unsubsidized loan annually. The new total amounts for student loans looks like this:

The aggregate total each year includes both subsidized and unsubsidized loans. For instance, if the student has been awarded a $2,700 subsidized loan in the freshman year, total eligibility for an unsubsidized loan is limited to the total eligibility for that year or, in this case, $2,800. Unsubsidized loans have a fixed rate of 6.8% and become due and payable while the student is in school. However, the student can elect to defer payment until after college but the interest will accrue during the deferment period.

Aggregate Dependent Student Loan limits:
Base: $23,000
Extra: $8,000
Total: $31,000

Interest rates on undergraduate subsidized student loans are slated to decrease over the next four years to 3.4%.

Rates in unsubsidized loans will remain at the current 6.8%.

In some instances, a dependent student may borrow more than the standard limits on unsubsidized loans. If the parent has been turned down for a PLUS (Parent Loan for Undergraduate Student) loan, a federal loan program that allows parents to borrow whatever amount they need to pay college costs not covered by financial aid, the student becomes eligible for additional unsubsidized student loans dollars every year the parent is rejected for a PLUS loan.

For Independent undergraduate students and dependent students whose parents were denied a PLUS loan have higher loan eligibility.

The amount of unsubsidized loan eligibility each year is reduced by any subsidized loans awarded. Regardless, the total amount that can be borrowed cannot exceed the total maximum eligibility each year.

Aggregate Independent Totals (including those dependent students whose parents were denied PLUS loans:
Base: $23,000
Extra: $34,500
Total: $57,500

For graduate school students, each year you can borrow:

In addition to the FFELP and Direct Loan programs, colleges still use Perkins loans in financial aid award packages. They are ten year notes with a fixed interest rate of 5%. The amounts are up to $4,000 per year for undergraduates and $6,000 for graduate students. Undergraduates have a cumulative limit of $20,000 and a $40,000 aggregate limit for undergraduate and graduate Perkins Loans.

There is also the private loan marketplace. As a general rule, private loans are more expensive than public loans (the current national average is about 11%) since they are created to satisfy the needs of the investors who fund the loan. In the absence of any wide-spread, coherent plan to ensure the likelihood that the loan will be repaid, those rates will continue to be high as an offset to the risk associated with student loans. Private loans should always be used as a last resort when all other options have been exhausted. Before turning to private loans, every family should carefully review financial aid applications and awards to be certain all other avenues of support have been fully explored. The many resources in TuitionCoach can be very helpful in that process.

Regardless of which loans one uses, it should be part of an approach to paying for college that practices our ongoing mantra: “You can always borrow for college but you can never borrow for retirement!” Look for loans that are low cost with flexible payback options. And ALWAYS be aware of any tax benefits associated with both student and parent loans. This can be checked by downloading the IRS Publication 970 and/or visiting “Paul’s Corner” in the late winter every year when we will publish an annual update and overview of all education tax benefits relevant to families and students dealing with the monetary challenges inherent in the higher education process.

As we near the twilight of the first decade of the new century, it is fitting to assess the contract to see how it is working. If freedom is a centerpiece of the deal, let’s look at it. How well is the government, that child of the people’s will, doing?

How free are we, the people, to determine the activities of the government when money drives elections and the creation of legislation?

How truly free are the people who have to work two or three jobs to meet their mortgage or rental obligations?

How free are the people who can’t pay for the fuel needed to get to work or to heat their homes?

How free are citizens who can’t afford medical care because of a health system bloated by legions of bureaucrats who never cured anybody?

How free are people whose quality of life is often dictated by credit bureaus and credit card companies who collude to arbitrarily raise rates on debt at any time for reasons only they know?

How free are people who because they can’t afford higher education, are excluded from equal access to the “American Dream”?

How free are Americans who go to bed hungry every night in this land of plenty?

How truly free are people who feel the need to triple latch their homes for fear of criminal activity?

How free are our kids who can’t walk to school or to a friend’s house without the fear of predators and how free are the parents who worry about those kids?

How free are we as a people as thousands of our fellow citizens die at the hands of gun-toting Americans in every city and town across the nation?

How free are American citizens when our highest courts demonstrate a greater allegiance to political parties and politically motivated positions than to the law?

How free are Americans who routinely lose their jobs at the hands of our business leaders who either ship our jobs overseas or simply lay off workers because of their own failed leadership or their need to reap personal fortunes at the expense of their workers who created that wealth?

How free are we when we pay taxes to better this nation only to see that revenue shipped to foreign capitals to allegedly improve the lives of citizens of other nations?

How free are we when our elected officials violate their solemn responsibility to protect and defend the Constitution of the United States by tolerating and sometimes abetting violations of that document every day?

How free are we when our elected officials appear to have more loyalty to political parties than to the people of this nation?

How truly free are we as a people when we are angry all the time and consumed with vilifying neighbors and public officials who may harbor political or religious views that differ from our own?

You can answer these questions and others as you choose. But if you find that our freedoms are not enhanced by our government and that something else is afoot, then we as citizens, the sole arbiters of our common fate, need to do something about it. That is the job of each of us. You see, as the descendents of the Founding Fathers and those who came before us, we are also signers of that Declaration. If we don’t insist on adhering to the terms of that original contract we so readily honor, who will?

So during this time of celebration, it is also a time of reflection. In fact, it is always time to assess whether the original contact signed on July 4, 1776 still holds. It is time for us all to return to those marching orders found in that document, things that include phrases like, “But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such government and to provide new Guards for their future security.”

Just because our leaders of every political stripe extol our freedoms and parade about with flag pins on their lapels, it is our task as citizens to look beyond that easy rhetoric and behavior to determine whether the contract, ratified on July 4, 1776, has been violated in a manner described by Thomas Jefferson. If it has, we as the American people and as custodians of that extraordinary legacy, have some work to do.

As most of you know, the Common Application was developed a few years ago to lighten the paperwork burden for college applicants and to lend some standardization to the application process. Each year, more and more colleges and universities have signed on to accept it. In general, it has been a huge benefit to all the players in the college admissions world. The one unintended consequence is because it makes applying to college more efficient, it is easier for students to apply to more colleges. The resulting flood of applications has made an already over-burdened system even more unwieldy.

Two areas of some concern are on page one of the Common Application. There are questions about the student’s intent relating to early decision and plans about financial aid. Answers to both issues could have an admissions effect regardless of the actual talent of the student. Since both issues are sometimes flash points in the admissions process, care must be taken when addressing them.

Colleges want to know not only whether the student is talented but they also are very interested in the likelihood of attending their college if the student is accepted. Many elite colleges, for instance, don’t want to be anyone’s second choice and an answer to an early action or early decision question on the Common Application may provide a college preference hint. Moreover, the whole issue of early decision is problematic. It is fairly well acknowledged that early decision enhances one’s chances of admission to a college. That advantage is countered by another reality; what a student loves in November, he/she may hate in May. Adolescents are clearly works in progress. They are changing almost daily so as a general rule, the longer one delays the final choice of college, the greater the probability of a more appropriate fit.

Colleges are also businesses. At some point most colleges treat application decisions as business decisions. For example, if there are a limited number of available spaces and there is an array of applicants who are similarly qualified but not extraordinary except for financial capabilities…and if there are no affirmative action/minority issues at stake, the college is likely to choose the wealthier students as a wise business choice. Surely, not all colleges do this but just as surely, some do and in the current economy, it is understandable.

Later on the revised Common Application, the colleges are requesting lots of information about any parent or guardian even if that adult is deceased, divorced or no longer has any legal obligation of any kind toward the student. It seems to be adding information that is likely to open all sorts of issues when the student files a subsequent financial aid form that doesn’t ask for that data. College personnel have told me that the information submitted about non-custodial parents or adults on the Common Application is not relevant. To that I ask, “If it isn’t relevant, why do you ask the question in the first place?” Truth be told, it IS relevant in ways to be determined by each college.

As an old government teacher, I have always been uneasy about the self-incrimination requirement in the Common Application. By asking about disciplinary actions at the school or even criminal convictions, colleges set themselves up for equivocation or simply lying on the part of the applicant. I believe those issues should be the sole responsibility of the high school or the staff of whatever secondary institution the student attends and that it should be the institution’s judgment as to whether the disciplinary action was serious enough to be reported to the college. I believe strongly that when there is a possibility for the student to expunge a violation through good works and improved behavior, the secondary school and indeed the student’s community are the likely co-beneficiaries. To have a foolish act done as an impulsive teenager, affect the remainder of one’s life seems to be overkill and a penalty far in excess of the “crime”. And by denying a college education to the presumably flawed student, the public is likely to pay a much higher price in the future as the angry, denied young person acts out that aggression in anti-social ways over the remainder of his/her lifetime.

So the Common Application is almost ready for distribution. Despite its possible flaws, it is still the best game in town and I heartily recommend that where possible, students should use it. With that said, students should also be tracking down great teachers to serve as references being sure to get teachers who will add some new information about the student rather than merely confirming things already revealed on the application or the high school transcript. In addition, students should be thinking about the college essay, one that will shed some light on the student’s soul and his/her ability to put words together in a coherent and artful way.

Finally and most important, the student should define the kind of college environment that seems to address the student’s academic and social needs and match that up with appropriate colleges so that those Common Applications are directed to an array of colleges that have many attributes in common.

Part of the problem relates to the teacher’s professional commitment and part is created by the quality of the training and credentialing process in the field of education. Traditional education courses, to put it kindly, are pretty much irrelevant in terms of enhancing classroom performance. They serve merely as an attempt at trying to validate teaching as a profession by creating a series of requirements that somehow suggest that there is a body of knowledge unique to teachers and teaching. Like medicine, these essential prerequisites purport to screen out ne’er-do-wells and produce credentialed, quality professionals. All of this, of course, is nonsense and in the end may produce just the opposite.

Of all the programs I participated in during my pre-teaching years, only one had it right. Sadly, it no longer exists but while it did, the Wesleyan Master of Arts in Teaching Program for secondary school education teachers was the hands-down, gold standard.

The best variation of Wesleyan’s programs was its two-year plan. It enrolled smart, creative and passionate young people and honored them by providing an academically challenging experience. The first year involved a required “tip of the hat” to the basic credentialing education courses and it was done so in an atmosphere that included discussion groups and projects that provided some signs of intellectual life in a largely moribund body of knowledge. Part of that credentialing process included a stint of practice teaching at a local high school usually involving teachers at the high school whom had been well “vetted” by Wesleyan as appropriately qualified to serve as an on-site mentor. The rest of the year-one curriculum focused on graduate level classes in the teacher’s planned field of teaching. They were rigorous courses steeped in substantive challenges and populated by serous students many of whom were on their way to a Ph.D. in that field of study.

In year two, the students paired up and were assigned a high school in a wide neighboring area around Wesleyan. In the first semester, one of the paired students served as a full-time teacher at the school and was paid according to the school’s regular salary schedule. The other student spent the semester at Wesleyan to continue courses in the major. At regular intervals the students assembled at Wesleyan to discuss issues relating to their teaching experiences and other program-generated issues and assignments. Before the semester ended the second student in the pair could observe classes at the high school and even teach a few sessions so that the changeover for the second semester could be as seamless as possible. In semester two, the Wesleyan pair simply switched places.

The net result was the production of two experienced, academically prepared teachers who could move into a full-time teaching job with relative ease. Moreover, the salary each gained from the full-time teaching at the local high school helped to pay for the Wesleyan MAT degree. It was the best, most appropriate education I ever received given the objectives of the program. Recruiters lined up at Wesleyan’s door every year and placed the participants of the Wesleyan program in whatever school the student wanted. Across the board, the schools that recruited the Wesleyan students generally raved about the quality of the program and the effectiveness of its graduates.

Colleges across the nation have an obligation to create a cadre of teachers for our schools. With leadership, imagination and a will to do so, the Wesleyan program could be recreated on any campus anywhere. For secondary schools, it is by far the best model I have ever seen and for so many of its graduates, it was the gateway to a rewarding career as a leader in what may be the nation’s most important profession.

In moments like this, I often return to one of my favorite Thomas Jefferson quotes. In a letter to Colonel Yancey, he said “If a nation expects to be ignorant and free…it expects what never was and never will be.” If you need to understand the import of this quote in today’s world, just open your eyes, look around and listen.

It happened during an intercollegiate softball game between Central Washington and Western Oregon. Western Oregon’s Sara Tucholsky hit a home run with two teammates on base. It was the first in the senior’s career. As Mr. Vecsey pointed out, she had not developed the traditional home run trot. She had never needed it. Because she was watching the flight of the ball, Sara had missed first base and had to turn quickly to make certain she touched it. In doing so she twisted her knee and fell to the ground writhing in pain. Under the rules, if any of Sara’s teammates came out to physically help her, she would not have been able to take another base and the home run would be nullified and Sara would only be credited with a single.

And then, a remarkable thing happened. Central Washington’s first baseman, Mallory Holtman, asked the umpire whether it would be OK if she and a teammate carried Sara around the bases. The umpires huddled and determined it would be legal. So Mallory and her teammate, Liz Wallace, gently carried Sara around the diamond making certain she touched every base. The extraordinary display of sportsmanship and character brought the crowd to its feet as the three circled the bases. Applause and cheers were liberally mingled with tears from players and fans. Character does that to people who exhibit it and to those who bear witness to it. Character is always the most satisfying and uplifting human trait and Mr. Vecsey helped to remind us.

I am not a huge fan of equating sports to life but in this instance, I cannot resist the temptation. Imagine what a better world it would be if we, all of us, seized every opportunity to help our neighbors who may not have the opportunity nor the tools to circle the bases on the way to a better life? In the college arena so central to my life, how satisfying it would be for those of us who have already hit a home run which, in this instance, is a college degree, to help others to do the same. In this game, if we all raised our character to the level of Mallory Holtman and Liz Wallace and their coaches, so that we had a hand in helping talented young people achieve their vision of a college education and a slice of the American dream, we as a nation and a people would be forever richer in every imaginable dimension.

But it takes character. It means demanding the best from our schools and reforming the college funding system and providing the tools for our kids to even begin their journey around the academic baseball diamond. It means that we as a people have to reorder our priorities to put the welfare and opportunities of our neighbors at the top of the list. The “we” may have to replace the “me” from time to time. It means that we must understand that it will cost money to do this. It means that we may have to rearrange our public budgeting agenda to make that happen. It means that we may have to avoid the safety of political pandering and do some character-driven heavy lifting.

The story quickly caught the public’s imagination. The predicted appearances on TV followed and the nation rejoiced in this moment of light in a largely dark world landscape. But unlike so many other stories, the reporters and the media personalities were never able to transcend the event and become the story. What those selfless young women did that afternoon was all that mattered and it endured on its merits, a nice change from most other events of the day.

The moments on that softball diamond remind us that we are all in this together. When we stand by and watch our fellow man suffer, unable to continue, we, as a people are diminished. But when we reach out and carry our fellow man around the bases, we as a people are elevated. When we show the character that this demands then and only then will the first three word’s to the Preamble of the United States Constitution take real meaning. You know them well. Remember “We the people…”?

The great “Gordian Knot” in any democracy is that the gatekeepers to reform are often the very people who created the need for reform in the first place. In the world of college financial aid, that gate is manned by Congress, a largely dysfunctional body during the first decade of the twenty-first century.

Let me suggest a partial solution that has a little Democratic slant and a smattering of Republican philosophy. It addresses the issue of student debt.

We should immediately build into the tax code the following possibility:

If a firm (for-profit and non-profit) hires a college grad with student loan debt, the firm has a sensible option of helping the new hire repay the debt as a condition of employment. It should work like this:

• The 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. While the former student’s take-home pay may be negatively affected, it will be offset, in part, by being able to deduct the student loan interest paid on his/her income tax.
• The firm 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 college education of the new hire. 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 of which carry significant, positive bottom-line effects. 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. While a student loan principal from the government could simply be forgiven, a public reimbursement will be needed to ensure that a private lender is fully reimbursed.

The upside of this approach is that unlike up-front financial aid grants, college students receive this benefit after the fact, not before it. The incentives to complete the degree are real and compelling and there is a built-in incentive to do so in regulation time (4 years) in order to minimize the total student debt. To a firm offering the plan, a potential new hire with an unusually large student debt becomes less attractive because of that debt. The plan has this inherent, built-in safeguard against irresponsible student borrowing.

“Paul’s Plan” removes much of the risk for lenders since they are likely to be paid by a fully employed former student who now enjoys the backing of a commercial entity in addition to the student’s own resources as a gainfully employed worker. And because of the reduced risk, private lenders are more likely to provide favorable rates during the payback phase of the loan. In fact, it would not be a terrible idea to require an automatic reduction in the interest rate when the student loan is backed by an employer who participates in the repayment phase of the student loan.

Another benefit is that because currently, the ultimate burden for payback in the instance of the private student loan could fall to the co-signing parents, they are pretty much off the hook when the student is employed by a firm that uses the plan. For co-signing parents, this approach could be the best stress reducer since Valium.

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 a bankruptcy situation creating an added measure of security for both the borrower and the lender. Moreover, the plan should automatically transfer in the event 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 world of commerce.

When students can see a reasonable system in place across the economy that will help them pay back their student loans, students will once again be free to choose a career that they may love rather than one that will enable them to afford to repay their student loans

The point is that a new approach is needed in light of the failure of the public sector to provide adequate assistance to families overly challenged by college costs. When responsibility is shared by many, the pressure on any one party is mitigated. This proposal is entirely voluntary. Businesses and non-profit entities are not required to offer this benefit but it makes sense to do so.

This proposal is not a cure but it is a sort of red tag triage for a critically ill system of need-based and supplemental college financial aid. It may buy some time to provide a window for some smart people to do some zero-based thinking about ways to take cost out of the college choice equation. What we are doing now is not working; it does not make much sense; and it discriminates against the great middle class, the bulwark of any viable democracy.

The greatest risk inherent in this approach may come from an unlikely source. Some colleges may decide that since there is a possibility that some commercial entity is likely to repay student loans, they are no longer obligated to do everything necessary to fully fund the demonstrated need of students and/or to try to minimize the amount of student borrowing. To deal with this, it is time for the Department of Education to monitor the performance of colleges and other entities offering federal student aid to ensure reasonable campus-based contributions to address the demonstrated need of students. Failure to do so should affect the college’s continued eligibility to provide federal aid to its students.

Students should help to pay for their college education. After all, they are the ultimate beneficiaries of that education. If the statistics are at all believable, a college grad is likely to increase his lifetime earnings by $1 or $2 million over a person who did not get a degree. Just a tiny part of the taxes paid by this newly-educated member of our society will pay the public cost of this plan several times over. Don’t forget that college graduates typically need fewer public services like prisons and welfare programs which might be translated into lower public expenditures on those programs thus increasing the return on a public/private investment like this. And, to use a line coined by one of our credit card firms, the societal value of a highly-educated citizenry is, in the final analysis, priceless.

I remember well when my father was upset with me, the most devastating thing he could say was, “Son, I’m disappointed in you!” Because I loved and respected him so much, he could not have said anything worse. I sometimes feel that way about our colleges. They feel like a part of my own family but when it comes to providing financial aid to needy families, I often have the urge to say, “I am disappointed in you!”

The financial aid system was created with the intent of providing a level playing field so that any qualified student could attend college regardless of the family’s economic circumstances. If the numbers justify it, the federal and state programs such as they are, are fully activated on behalf of the family but when the need exceeds the limits of publicly-funded help and the college is faced with making up the difference, the record of support changes, often dramatically.

Across the higher education spectrum, the practice of “gapping” is on the increase with colleges routinely short-falling families in the financial aid arena. Of course, our colleges happily offer the full complement of public funding; subsidized student loans, work/study, Pell Grants and state-sponsored support programs. But all too often, when there is still further demonstrated need, colleges fill that by masquerading PLUS loans as legitimate need-based financial aid. These are public loans that are not and never were considered to be a need-based loan.

Yet in the absence of incentives to do otherwise, colleges continue to escalate tuition and fees creating even greater financial need and even wider gaps which all too often force families to enter the costly and uncertain world of private student and parent loans. It is a system out of control because the agencies that can control it have chosen not to use their considerable leverage on behalf of the people who elected them and/or whose taxes help to put food on their tables. Those agencies are our elected officials at the federal and state levels along with the US Department of Education and their counterparts at the state level.

The “hammer” is a simple one. We need to create a condition of continued public support for a college’s financial aid program that requires colleges to provide enough campus-based aid to bring the financial aid package up to at least 90% of the demonstrated need. Failure to do so will result in forfeiture of further public financial aid support for those colleges. Currently, without such a condition, public resources amount to a reliable “cash cow” for our colleges. They simply use whatever public money is available and feel no urgency to contribute campus-based money to address any remaining demonstrated need not covered by public money. Since the colleges themselves, by raising their rates, have created much of the demonstrated need, they should be required to take an active role in addressing that need. There is a nearly endless array of colleges who simply opt out and leave families twisting slowly in the troubling winds of high debt or no college.

Currently, there is little incentive for colleges to both stem their ever-rising costs or to adequately supplement public funds in the need-based financial aid arena. As a college advocate, I have been a constant voice on behalf of a far greater public investment in financial aid resources. While costs and inflation have taken a toll on the affordability of college, public funding to match that reality has remained relatively stagnant for over two decades. And whatever growth there has been in the total public contribution is used to address the greater number of college-bound students, not the quantity of the award per student. That must be corrected if the nation is to compete in the global economy in the 21st century.

But at the same time, the colleges must be required to get off the free-ride, public “gravy train” and provide their fair share of resources to help financially challenged families. That incentive should be in the form of a mandated basic standard that will qualify colleges to receive continued federal and state support for their financial aid operations. In fact, I would recommend that any college exceeding that standard should be eligible for extra public money reflect of the degree to which the college exceeds the minimum benchmark.

Across the board, objective oversight of the use of public money is often lacking. In the financial aid arena what oversight there is demands close adherence to how the financial aid funds are disbursed rather than the way those funds are integrated into a more comprehensive program of creating full access to higher education for families of all incomes. Unless or until the colleges reliably contribute their fair share to the financial aid system, college for an increasing segment of the American citizenry, will remain an unfulfilled vision, victims of near-sighted politicians and an unregulated college community that feels no particular pressure to play by the rules and to do what they can to make that increasingly elusive dream of a college degree a reality.

Since 1980, the value of the dollar has shrunk by about 271%. That is, it will take about $2.71 to buy what one dollar bought in 1980. Thus, if college costs kept up with inflation, a private college costing $35,000 in 1980 could cost about $94,000 in 2008. Public colleges with student budgets of about $10,000 in 1980 should cost about $27,100 today. The fact is that if colleges kept pace with the dropping value of the dollar, they are priced about right or maybe even less than the shrinking dollar might justify. So why are we struggling? Who is the bad guy?

Not surprisingly, it is us. Across the board, salaries have not been upwardly adjusted to adequately compensate for the rate of inflation. That aside, the real culprit in the college world is the failure of the usual support systems to reflect the lower buying power of the dollar. For instance, the normal total amount of subsidized loans for a four-year college student in 1980 was about $16,125. If those loan amounts had kept pace with the falling dollar, that total should be about $43,700 today, an amount that without loan forgiveness provisions is admittedly too high. Currently, private lenders are called upon to fill the student loan gap. In the 2008 marketplace where securitization for loans is extremely difficult, these loan companies struggle to provide a necessary resource as the public support systems continue to underachieve. While the interest rates for private loans are sometimes very high and should always be considered as a last resort, for some they mark the difference between attaining a college degree and unmet dreams and potential for young adults. The private loan industry is the stepchild of the failure of publicly-funded programs like Stafford and Direct Loans, federal work/study, the Pell Grant and other federal grant programs along with state-sponsored grants to keep pace with the effects of the lower purchasing power of the dollar. And last, but surely not least, the need for a privately-funded support system is made more compelling by the increasing practice of “gapping”, the failure of colleges to provide sufficient financial aid to families to fully cover their calculated demonstrated need…. Good people and institutions behaving badly.

The victims in all of this are tax-paying parents, their mortgages and retirement funds along with students who simply have nowhere to turn except the private student loan market which may save them but in doing so will surely extend the cost of college over many years beyond graduation. This grim reality even now forces some students to pick careers that will help them deal with the lingering cost of their college degrees rather than the quality-of-life dimensions of a more appropriate career path.

Many enlightened nations have come to realize that providing free or massively supported college education for its youth enhances the nation’s future for all the citizens. It isn’t socialism; it is simply good economics. Those words in the Preamble to the Constitution of the United States…phrases like “…promote the general welfare and secure the blessings of liberty to ourselves and our posterity…” are closely and irrevocably tied to the quality and availability of our system of higher education. Those eloquent yet simply-stated goals of our society are non-negotiable. They are written in the sweat and blood of our forebears and as such, they should be honored above all else by our politicians and by all of us. Real patriots are in the business of delivering on those promises ratified by the required majority of states in 1788. For Americans, all Americans, everything else should pale by comparison.