Don’t Save For Retirement

by College Advisor of New York on October 12, 2017

By Dr. Dean Skarlis, President

 “You can take out loans for college, but there are no loans for retirement.”  It’s a familiar refrain among those in the financial services community and has been sound advice for many families for years.  But in 2017, it may be the worst advice a financial advisor can give to his clients.  Here’s why.

Cumulative student loan debt in the United States has surpassed $1.4 Trillion.  It now exceeds all consumer credit card debt.  Approximately 71% of students who attend 4-year colleges have taken on student loans…and that’s just student loan debt.  Add to that parental debt which is approaching $100 Million, and the fact that many parents have added home equity loans to their debt service (which is not counted in the above figures), and you have a crisis – a big one with lasting effects as this Money Magazine article describes.

The reason loans have exploded is of course, the rising cost of college.  Tuition, room, board and fees have increased by more than 1200% over the past 30 years.  When I first began my business 13 years ago, there were a couple of dozen colleges whose total costs had eclipsed $40,000/year.  Today, those same schools – and many others – have now crossed the $70,000/year mark – that’s more than $280,000 to educate one child.  Compare these numbers with most private schools back in 1986 when I began college.  Tuition, room and board at my private college was $11,000/year.  That same school now charges more than $55,000/year.  Even public institutions now exceed $100,000 over 4 years in California, New York and many other states.

As a result, most middle and upper middle class families have few options other than to take out huge loans or attend a community college.  But the problem with the “old school” advice is that families who take out loans in today’s world, must seek hundreds of thousands more than I did in 1986.  Back then, it was more reasonable for my peers and I to borrow $5,000 per year and pay back the $20,000 in a realistic time frame.  That covered almost half our total cost.  Today, this is next to impossible.  If a student takes federal student loans each year of college, he would have to repay $27,000.  If he adds an extra $15,000/year in private student loans, you now have $87,000 over four years.  This is a significant burden for just about any family.  This scenario also assumes that mom and dad, student, or someone else will cover almost $200,000 for an expensive private college or about $15,000 at a SUNY school from a mix of savings and cash flow.  That’s a tall order.

Most of the clients with whom we work are in their mid to late 40s.  On average, they have saved $300,000-$500,000 in their 401(k), IRA or other qualified plan.  Some teachers or public employees have pensions.  It is for these families that I have begun to give what some would call radical advice.  Others deem it bad advice.  But here it is:  Rather than save the maximum of $18,000/year (or $24,000 for people over 50) in your qualified retirement plan, divert some of those dollars into the college savings vehicle of your choice.  If a family lives in New York State, the New York 529 plan offers a state tax deduction of up to $10,000 for married parents filing jointly ($5,000 for single parents).  While the tax math still favors your full 401(k) contribution, the amount of loans parents and students need will be significantly reduced.

A 47 year old with $400,000 in his 401(k) or IRA has plenty of time to continue saving for retirement, and most models indicate that his nest egg will turn into $1.6 Million even if he stopped contributing completely (assuming he retires at age 65 and realizes an 8% annual rate of return) – which I never recommend.  On the other hand, a family with two children, may have to pay in excess of $600,000 for college over a much shorter time horizon – often within 6 or 7 years.  I have found that most parents have tried to save for college, but just don’t have the time or resources to set aside enough money, given the ridiculous rise of college costs.  Most of our families have amassed less than $60,000 for college.  So their only remaining option is to take out huge loans.

Moreover, because assets are counted at only 5.64% of their value in the financial aid formulas, saving more will have only a minimal effect on a family’s Expected Family Contribution (EFC), and if the family’s other income and assets are too high to garner more aid, then there will be no financial aid lost.  We teach our clients these and other strategies to help them maximize financial aid, enhance tax savings and increase merit scholarships.

The bottom line is that college costs have skyrocketed at a pace much faster than any other expense, including health care, over the past 20 years.  And the traditional advice of taking more in student and parent loans does not cut it anymore.  It’s time for a paradigm shift.

 

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Stand out! Why your college application should be anything but ordinary.

by College Advisor of New York on September 12, 2017

By Deb Coco 
College Admissions Coach
The College Advisor of New York, Inc.

Fall is in the air.  School is back in session, the days are a bit cooler and the pumpkin spice obsession is back.  And, at The College Advisor of New York, our seniors are hard at work selling themselves.

It may seem strange to look at your college application process as a marketing campaign, but indeed it is.  For most students, this is probably the first time you’ve ever launched such an important sales pitch. “You never get a second chance to make a first impression” and at no time is this more true than when you hit the submit button on your college applications.

This is not the time to be shy about your achievements; you are now in the company of some stiff competition for spots at colleges and universities all over the country.  How do you make yourself stand out?  Here are a few tips on to make sure your application is noticed.

The most important components to a stellar application are still (and always have been) a strong GPA and high standardized test scores.  At this point in your high school career, your critically scrutinized junior year has passed, but it is very important to not “slack off” during your senior year either.  Colleges will want to see that you’ve kept up your work standards and they may even accept you with the provision that they review your spring transcript as well.  Gone are the days of senior year being all play.  Be sure your teacher recommendations are ready to go; at The College Advisor, we recommend our students connect with teachers before leaving for their senior summer so as to avoid the “glut” the best teachers experience in the fall.  If you already did that, then great!  If not, make sure you don’t let September slip away before you’ve met with two core course teachers and verify that they are willing to write a letter for you.

In my last blog I discussed the importance of the main essay.  This is an extremely unique piece of writing;  it is YOUR chance to tell the admission committee who you are outside of the facts.  All of your accolades will be well represented on your Common Application; the essay wants you to dig deeper so please do not regurgitate information from your Activities section.  Be authentic and give the reader a glimpse of who you are when no one else is looking.  What makes you tick?  What brings you joy? What do you want them to know about you that your application does NOT show?  If you ask yourself these questions, you’ll be surprised how words begin to flow.

The Activity section of the Common Application is your chance to share what you’ve done outside the classroom — be sure it is complete and list activities in order of importance to YOU.  Tell the reader what you’ve done and why it mattered.   Did you hold a leadership role?  List it!  Were you the youngest member ever elected to the Latin Honor Society?  Let them know!  And remember, list only activities from freshman year forward . . . colleges do not care (nor do they have time to review) what you did in 8th grade.  If you want to add a resume to your application, many colleges will allow you to do so.  We still do not recommend you go back to junior high school even on the resume, but if you are so compelled, that is the only place anything beyond high school should be mentioned in your application.

Last but not least, proofread!  Your application is a representation of you – is it sloppy?  Did you remember to capitalize letters in your Activity section?  Do not use acronyms when describing anything on your application – your reader cannot decipher them.  So, if you are a member of the New York State Student Musical Association, do not list NYSSMA – that will not mean a thing to the admission committee.

Finally, use the Common Application’s print preview option before you actually submit!  Reviewing on a computer screen is still no substitute for seeing the application on paper – you will catch “typos” you might have otherwise missed.

Good luck and congratulate yourself that you’ve come so far!  This process is a journey and you are just about at the finish line.

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Need a cure for the summertime blues?  Write your college essay!

July 30, 2017

  By Deb Coco The lazy, hazy days of summer are slipping by quickly.   At The College of Advisor of New York, one of our goals for our rising seniors is to complete their main college essay by Labor Day.  By Labor Day you say?  Your friends aren’t even thinking about college applications yet! There […]

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It Does Not Take A Village . . .

June 17, 2017

By Deb Coco, College Admissions Coach, The College Advisor of New York If you’ve watched a newscast within the last few years, you’ve probably heard some depressing news about the future of the next generation:  they are categorized as “lazy,” “out of touch with reality,” or “unfocused.” As college admission coaches, each of us spends […]

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Free Tuition? The Fine Print on New York’s Excelsior Scholarship

May 31, 2017

By Deb Coco, College Admissions Coach, The College Advisor of New York Free is an enticing word and it grabs our attention.  So when New York unveiled its Excelsior Scholarship or “free” tuition program, the buzz began in earnest.  And with good reason.  Parents of prospective college students are especially vulnerable right now as the […]

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Tune In To Life Happens Radio this Saturday

May 28, 2017

Set Your Graduates Up For Success Upcoming Show – Saturday, June 3 Lou Pierro and Dean Skarlis   As we celebrate the achievements of our high school graduates in June, families should also be laying the groundwork for their child’s legal transition to adulthood. Tune into Life Happens Radio on June 3, when Lou Pierro […]

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The Campus Visit: According To The Experts

April 28, 2017

By Erin Wheeler, College Admissions Coach, The College Advisor  of New York I love a good road trip!  Sunny weather, loud music, junk food and good company.  It’s always fun to hit the open road and see new places, meet new people and enjoy new experiences.  Taking those trips with family or friends to visit […]

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Decisions, Decisions!

April 12, 2017

By Deb Coco It’s finally that time of year.  Our students have visited, visited again, applied and of course, WAITED.  May 1 is just a few weeks away. If you are like most students, you’ve received offers from several schools and now it’s time to buckle down and weigh your options.  It’s more difficult than […]

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How Do You Survive Junior Year? Start The Process In Your Sophomore Year

April 5, 2017

By Deb Coco Parents – do you remember your junior year of high school?  My recollections revolve around a pack of girlfriends, Friday night football games, dances and the dreaded curfew.  I have to think hard to recall SAT prep (I’m not even sure I did any, and the ACT was virtually unknown in Boston). […]

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The College Admissions Interview

March 10, 2017

By Erin Callahan Wheeler The interview outfit. I remember it well. Blue flowered jumper, pink shirt and pink sweater. Simple brown flats and a simple brown bag. That was my uniform. But that doesn’t mean I left the house looking that put together! I would crawl into my parents’ mini-van in a hoodie and mesh shorts, […]

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