Breaking the Small Business Code

College Housing is Unpredictable

      There is a great article in the Boston Globe (Boston.com) on the impact of the turmoil in college admissions and its domino affect on dorms and class size.  This article focuses on how Brown had to scramble to find dorm space for incoming freshman when more students accepted admissions offers than they planned.

     There are great descriptions of how Brown was forced to convert lounge areas and kitchens were converted into dorm space.  Because it is Brown's policy to only put two students in a room, some lucky students featured in the article had huge living spaces, some with kitchens!

     Believe me, this isn't the only college where overcrowding from more students than expected is happening.  Students at other colleges are being housed 3 to a room in 2-person rooms, being housed in local hotels, and many at schools without guaranteed housing are on waiting lists and sleeping on friend's floors.

    Technically, this really ISN'T news.  Something like this happens every year at just about every college at some level or another.  But what makes this so noteworthy is it is happening to such a wide extent and in larger than ever numbers! So how what has changed?

      First, the "echo boom" or the bulge made up of children of the baby boom are entering college and will through 2012 through 2015 depending on whose numbers you use.  Second, colleges know students are applying to more colleges than ever to ensure they get into a college.  Colleges felt they had to admit more students than previous years to make sure the number they needed actually enrolled. And finally, because the echo boom will be followed by the "echo bust", the colleges do not want to build new facilities to house more students who won't be coming in 3 to 7 years from now.

      What do you do if you have a High School senior, spring admit or maybe a freshman being housed in one of these "creative" locations? 

      If you have a senior, make sure you look at the housing options and guarantees at the colleges on your list if living on-campus is important to you.  If you have a spring admit (senior who was admitted to the spring semester), make sure you have your housing deposit in on time.  Discuss your options NOW with the college housing staff to know what housing will be guaranteed for your student.   If your student is being housed off-campus or in "unusual" spaces, be patient.  Students drop out beginning almost immediately all the way through the end of the semester. 

    Is your student facing housing challenges?  Let me know and I'll see if we can get you some suggestions and solutions!

Unsettling Grandparent Question on 529 Plans

   Anyone who follows my blogs and my career as a college funding advisor knows that I am not a fan of 529 Plans as a way to save for college. In my opinion, tax-free growth of your funds is not a good enough reason to use 529s when you discover all the "gotcha's" and gray areas surrounding them!

      One of the big gotcha's used to be 529 plans would impact the Financial Aid of the beneficiary. This was changed  by the 2007 College Cost Reduction Act (CCRA). The Act specifically states that qualified distributions to a student from student- and parent-owned 529s would not be included as student income on the FAFSA and would not reduce financial aid from a college to the student.  However, there is a "gray" area involving grandparent-owned 529s that was brought to my attention today.

     Financial and tax professionals often recommend 529 plans to grandparents like me as a way to move taxable assets out of an estate but still be able to maintain control over the gifted money should the beneficiary grandchildren not go to college. There are generous gifting limits and the growth would be untaxed as long as the distributions were used for qualified college expenses outlined by the IRS.  But the distributions from a grandparent-owned 529 account were NOT specifically mentioned or exempted for financial aid in the CCRA! 

      Some financial aid experts now worry that distributions from a grandparent-owned 529 are student income.  That means they must be included in the FAFSA according to the rules that clearly state  ". . . money received, or paid on your behalf (e.g. bills), not reported elsewhere on this form must be reported."  Financial aid expert Mark Kantrowitz argues that distributions are exempt regardless of ownership based on the intent of all the regulations even if it grandparents are not specifically named.  But Joe Hurley, the CPA who is considered "THE" expert on 529s, feels the situation is ambiguous. 

       So what do you do?

  There may ways to avoid financial aid impacts by changing ownership to the student or parent. HOWEVER, you MUST work with a VERY experienced college financial and/or tax planner famiiar with 529 rules. The process for gifting and changing owners between generations for 529s can be very confusing and complex.

      Grandparent-owned 529s are now firmly in the gray area and that makes me uncomfortable recommending them.  Students applying for federal financial aid face potential legal and tax consequences if they receive disributions from a grandparent-owned 529!  If a student does not include distributions on the FAFSA and it is later found they should have been counted, there could be taxes and the requirement that aid be refunded!  If a student does include the distribution and it is later found to be exempt,  they will have potentially lost financial aid including grants and scholarships for no reason!

      If you are a grandparent with a 529 Plans, meet with the advisor who sold them to you and get a written opinion on their impact on financial aid including IRS and Department of Education citations. If you do not yet have a 529 plan, discuss other tax-advantaged ways to save for college such as trusts and insurance products like cash value life insurance and annuities.

Wall Street Meltdown Affecting Student Jobs

There is a great blog by Alison Go at the U.S. News blog site about the impact of the failure of Lehmann Brothers on student jobs.  Not only are college seniors and graduate students with offers being impacted, alumni from the elite Ivies like Yale are calling career centers for help.

     What I found the most interesting is a quote in the blog that was taken from the Michigan Daily by Al Cotrone, director of career development at the Business School:

"With fewer positions available and more veteran bankers looking for jobs, every student who's interested in banking will need to take a real serious look at the career they want and the life they want and the risks they take with that choice," said Michigan's business school career development director. "

    

 

             THE MAJOR YOU CHOOSE CAN IMPACT YOUR JOB PROSPECTS!

     Why is this such a big deal to me?  It's because over and over again I hear counselors tell students to pick majors in topics that interest them.  I like to call it the "follow your bliss" mantra from the 1960's.  Do something you love and success will follow.

     I agree with a Yes, BUT!  There is no guarantee that you will be able to find a JOB in what it is you like to do.  You may LOVE and be very good at English Romance Literature but I don't know about very many jobs in that field. 

    So the answer is BALANCE, RESEARCH and FLEXIBILITY.  It's okay to major in something you like but DO THE RESEARCH to understand the potential for jobs.  Have a balanced approach about picking a major you like with an education that lets you get a job.  And should you not be able to find a job in your major because the market has changed like it has just done, you need to be FLEXIBLE and learn new skills or maybe even look into a major or job you don't like as well!

    College is a great place for an education.  The problem is the real world will want to hire you to do something.  The question is whether or not your major in which you have an education can get you a job that allows you to live the life you want!

529 Plans and the Market!

The market hit extends deep into the pockets of college-bound and college families!  The market melt-down has impacted many 529 Plans!

If your 529 plan uses mutual funds, you probably took a hit.  Mutual funds are "buying clubs" that invest in stocks, bonds and real estate products.  So where these financial vehicles go (up or down) is where your mutual funds go.  And where your mutual funds go (up or down), there goes your college money.  And depending on your combination of mutual fund subaccounts - that hit could be anywhere from 1 to over 10% in losses.  Here is a printout from today for Vanguard which  I randomly selected to show you what may have happened to your 529 Plans.  Click on the page to link to the original.

Depending on who runs your 529 and what mutual funds they use, you may find yourself with much less than you had last Friday! 

I would recommend you call the financial professional who sold you the 529 Plan to see what makes up your investment and where you stand.  Discuss your options with someone knowledgeable.  BUT PLEASE DO NOT do anything rash!  There are potential tax consequences to changing or liquidating accounts.

HOWEVER, if you no longer have any gains inside your account, this may be an opportunity to move your funds to a non-529 location.  If you wanted to access your 529 for non-college reasons but were hesitating because of the tax hit, this may be a good time.  Again, discuss this with your financial advisor! 

I would also recommend you talk with an experienced COLLEGE financial professional to review all your options for college savings.  There are vehicles that are not as susceptible as mutual funds to market forces.

If you own or sell 529 Plans, let me know what you think . . .

Special Admits - Part 2

        The U.S. Commission on civil rights is being presented with information on a new version of "special admits" and what it means when you admit ANY group of students that is less qualified than the typical students at that institution.  The specific issue is minorities admissions in what are called the critically important STEM (science, technology, engineering, and math) curriculum.

      I blogged about this last week when I cautioned parents against using their student's special gifts like athletics to get into a college where their academics don't fit at LEAST the mid-pack of students.  Athletes are admitted at 25 times or more the numbers of their non-athletic peers under special admits which means their grades and test scores are not equal to that of their fellow students.  This puts them on a track for failure because they are not equipped to compete outside the athletic field.

      "Special admits" are not so obvious when applied to academics.  Most colleges are trying to build more diverse classes in all their program including critical programs like STEM.  What is inferred by the testimony is the elite or "highly selective" colleges are admitting minority students under special admits, affirmative action, "holistic" review, or any other program they can use to increase minority numbers on their campuses including programs like STEM .  The problem is these "special admits" are not graduating at the same rates as their regular admit peers at the "highly selective" or elite colleges.  According to some studies, the drop-out rate can be as much as 50% higher.

    As I stated in my previous blog, this is TOTALLY understandable.  The SAT, ACT and GPA based on AP classes are used to measure college success at elites.  Is it 100% accurate?  No, but a lower score indicates the high probability you will not be able to keep up with peers who DO have higher scores than you do.  As in my previous special admits blog, I revealed that 25% of the freshman class at Stanford had perfect SAT math and verbal scores and the lowest 25% had scores lower than 1340!  If you grade on a curve, the lower 25% is in the C and potentially D category!  So if you admit students who are lower ranges for SAT and GPA, you are potentially setting them up for disaster!

     Special admits for academics creates two problems.  First, it is devastating for ANY student regardless of minority status to drop out because of inability to compete academically. But the second problem is that "unqualified" student took the seat of a "traditionally" qualified student who had a higher chance of graduating in the critically needed STEM fields. 

     Sadly, the discussion gets all mucked up in the emotions of "fairness" and need to have a diverse college campus and work force.   Sadly, everyone is right but the end goals are in conflict. Everyone takes a "hit" regardless of which way you fall on the issue:   

• It is not fair to students who were "replaced" by less qualified minority students at these colleges. 
• It is not fair to minority students who did not have the same preparation in K-12 to be competitive. 
• It is not fair to truly qualified minority students who are often "tainted" with suspicion that they are less qualified than their peers because they may have been a special (i.e., a less qualified) admit. 
• It is not fair to us, the taxpayer, to have whole groups of people not being able to rise to their highest potential.

(NOTE -  One of the things not being addressed in much of the dialog I am seeing on the web is the assumption that graduating from a "less elite" college is a problem!  These special admit students graduate at higher numbers at the "less elite" STEM colleges.  Well, duh!  They are competing with peers with similar qualifications - a more level playing field!  There is  an inference that graduating from an ELITE is more important than graduating from a state or lower tier college.  Something for another day's blog!)

   What do you think about this problem?  Do you think it is fair to admit less qualified students no matter how important the reason?  How do you feel about the process if your student needs special admits?  How do you feel if your student is competing for those seats and is not probably qualified for a special admit? 

Let your voice be heard as the politicians and bureaucrats discuss the future of your college-bound students!

Warning about HIDDEN Scholarship Traps

WARNING, what you are about to read is what I call the second "dirty little secret" about scholarships (the first dirty little secret is Resourcing).   What I am talking about is the sale of  the information you provide for a scholarship application or search!

With fewer and fewer exceptions, almost ALL the scholarships on the web are simply fronts for marketing and list-building companies.  Once you finish this posting you may never want to apply for an on-line scholarship again!

I spend most Sundays watching auto racing while surfing the web for tidbits and to find "safe" websites for my clients like the College Leadership Foundation's College eCoaching Program.  Well, I just found another one of those HIDDEN relationships between a marketing company and a scholarship that make me so angry! 

I don't mind a company using a scholarships as a marketing tool as long as it is absolutely clear ON THE SAME WEB PAGE as the scholarship offer that they will be sending you information from their sponsors and partners.  A "good guy" example is Financial Aid Podcast with Chris Penn which makes no secret that its $10,000 scholarship is directly related StudentLoan Network.

What I call the "bad guy"  sites are ones where the only thing you see is information about  scholarships and maybe some window dressing about financial aid.  Their relationship with marketing and list companies is buried in 7 point font on page 15 of micro-mini pages under Terms & Conditions or Privacy which is usually at the bottom of the page, again in micro print but in such a light color that it is almost invisible!  Oh they cover themselves legally by asking you to opt-out by unchecking an already completed box.  But unchecking the box make it look like you might miss out on another scholarship or special offer!

These people attract MILLIONS of students by offering one scholarship worth as little as $500 all the way up to $10,000. Your email and any other information you include to "qualify" for the scholarship is then used, sold and re-sold for years.

What is insidious about these marketing scholarships is they get "filtered" and passed along in ways that make them seem safe.  Aggregators like FastWeb are full of  marketing scholarships like BrickFish.  These not-so-nice sites also get passed along by high school counselors and groups like NACAC who are just trying to help students.  But others are affiliates who get paid to send you to these scholarship sites! Now social media is passing them along and it's pissing me off!

Today I found a GREAT example of how families are being duped through SOCIAL MEDIA!!  It started with a Twitter message I got that referred me to the blog "College Finance 101".  Inside the site was a blog entitled FREE COLLEGE MONEY.  Inside the blog was a link to ScholarshipExperts dot com site.  What made me mad was this was an affiliate tag so the blogger is either being paid per click or per applicant.  From there, I was asked to fill in my basic information on the squeeze ScholarshipExperts front page. 

So what's so bad about that process I just described? Several things.  First, I now don't know whether or not I can trust the content of College Finance 101.  There may be some fabulous information in that blog but it is now tainted because I have to worry what else is a hidden front for affiliate marketing.  I have no problem with ads or banners or stated affiliate relationships.  I do have a problem with a link that looks like an endorsement without revealing the relationship is financial!

Finally, here is what ScholarshipExperts says in its Terms & Conditions (I added color and bolding for emphasis): 

When You submit a profile or application, ScholarshipExperts.com may access, store, and use all information included therein for any purpose. Additionally, if You provide permission to do so, ScholarshipExperts.com may sell, share, distribute, or disclose to third parties all information You provide, including scholarship providers, educational institutions and others.

This is why I wrote my Insider Secrets to Scoring Scholarships.  It shows ALL the good, the bad and this ugly kind of stuff that everyone else leaves out!  I hate scholarship hyprocrisy.  I like my data straight and to the point.   If you are an affiliate, carry the ad or banner, don't bury it in your blog.  If you sell the information, say so.  If there is going to be someone calling you about the offer, say so.

To learn more about my crusade against scholarship abuses, visit www.LindaPTaylor.com

Website Makes Getting College Information Easy! (But Where's the COA?)

         I just finished reviewing the UCAN  website hosted by the National Association of Independent Colleges and Universities (NAICU).   Per their press materials and website  (I have bolded phrases for emphasis): 

       "More than ever, as tuition continues to grow, families are focused on getting the best value for their dollar. The first step is finding the right information to make the right college choice. To this meet this challenge, the National Association of Independent Colleges and Universities (NAICU) has developed U-CAN (the University and College Accountability Network), a free, consumer-informed college information Web site.  For the first time, institutions of higher education have come together to develop and deliver key college information directly to consumers. With U-CAN, we will take an important step toward better educating consumers, and fostering student satisfaction and success." 

       This is one of the EASIEST sites I have ever seen for getting key information! The summary pages are visually appealing and simple to use.  It is easy to see how many students come from where, how many graduate, how many return after the freshman year, etc.  This is the key information with the option to click through to details like the surrounding area resources!

But I have not yet gone through each listing to see how each college lists the Total Cost of Attendance (COA).  So far, almost each one I looked at played "fair" . . . . BUT some are still are playing "hide the COA"!!

       Sadly, one of my local colleges --  California Lutheran College (Cal Lu) -- did not list the COA.  It listed only percent of freshman receiving aid.   I hope this is an oversight and NOT a deliberate attempt to hide their COA from prospective families!

Again, I applaud NAIC for a GREAT website.  But I continue to CHASTISE and RANT at those colleges who do NOT simply state their COA clearly and simply.  To hide the COA, omit it, only provide tuition, or to provide after-aid averages is DECEPTIVE and beneath the dignity of an institution of higher learning! 

Please let me know what you think about this issue of hidden COAs.

Special Admissions = Athletic Free Pass?

      “Special admits” or “Special Admissions” is a phrase that describes a program that admits students that don’t meet regular admissions requirements. It allows colleges to overlook the standard measurements and look at the "whole student".  Most families assume it is for situations like one I had where a handicapped (blind) student didn't get the typical SAT scores for his #1 college choice (try doing math in your head) but he had great grades and attitude and was admitted to an elite ivy. But his story is the rare exception!

     Special Admit has become an athletic recruiting tool!

      The Indianapolis Star did a survey this year and found some eye-popping numbers on who actually gets special admits. Nearly EVERY player on the University of California at Berkeley football team (95% of freshmen) were special admits compared to 2% for the rest of the incoming students. But UCB is not alone, other results include:

· 76% of the freshman football class at Indiana University at Bloomington is made up of special admits but are only 2 percent of regular freshman.

· Texas A&M University is 94% versus 8%

· University of Oklahoma is 81% versus 2%

      So what does this mean for the typical college-bound family? IF your student has a gift like athletics, a college that values that gift may admit your student despite their academic scores. BUT the big risk is whether or not your student can KEEP UP with the rest of the students who are academically superior. It’s not getting in but graduating that counts!

     I have met with lots of families who are fixated on using their student's skills (usually but not always sports) to get into a college that they would not normally qualify for based on GPA and/or  test scores on the SAT or ACT.  I explain that having a desirable skill does not qualify them to compete in the real place for college success => the classroom!  Unless their student is a "blue chip athlete" and planning to make the sport their life-long profession, EDUCATION should be the focus.

    This is why the NCAA has been tightening the GPA average for teams and graduation rates for teams.  (And that opens up another blog topic - how colleges are tempted to "shade" the grades and class choice for premier athletes.) 

    So what is the bottom line?  If you have a student-athlete, please focus on a good college EDUCATION and IF sports can help with admissions AT the college that fits their career potential and their academic skills, go for it!  But don't put your student into a college that they simply cannot handle. 

    My recommendation is to look at the GPA and admissions test scores from the previous year's freshman class at the colleges on your list.  Here is what I want you to SERIOUSLY consider:

      If your student's scores are not AT LEAST at the lower end of the mid-pack, I strongly recommend you do not accept admissions on special admit. Remember, colleges grade on the curve and you are competing with the people sitting next to you in class. Who sits next to you in class can be determined by the college's admissions history.  For example, 50% of freshman at Stanford in 2007 had SAT scores on math and verbal between 1340 and 1550 out of 1600!  That means the C and B students had AT LEAST 1340!  If you were lower than 1340 you are potentially a low C to D student.  And 25% of the freshman class had PERFECT SAT scores!!

         Remember, the goal is a tool kit for life, not simply 4-years of sports glory.  I think it is better to use a special admit for colleges that stretch your athlete but does NOT put them in the lower 25% of traditional students!

       

Branson's New Virgin Money Site

       Leave it to Sir Richard Branson to come up with a new idea! His website www.virginmoneyus.com is a new wrinkle in how families manage loans between each other -- including student loans.

       Why do you need a third party to manage loans?  Have you ever lent money to friends and family who felt it was okay to make a monthly payment to you last or maybe decided the loan was really a gift because you weren't really a lender?  Did you have a written agreement that a lawyer told you was invalid?  Have you been surprised to find that you could not deduct the interest you are paying on that loan to friends and family on your taxes?  Good news, there is now an answer.

       Sir Richard started his Virgin Record empire with a loan from his aunt Joyce and clearly understands the joy, the risks and the needs for managing the loans properly to stay friends with the lenders!  So both as a business opportunity and a recognition of the role that family and friends can play in starting out people on their dreams, Virgin offers loan "management" INCLUDING student loans!

       Many parents and grandparents prefer to lend their college students money instead of spending the money directly.  There can be many reasons for this approach such as concern over the dedication of the student to college or the need to recapture the money for the next student.  This can also be a business decision! By using a third party like Virgin, it becomes a "real" loan that can be serviced and deducted.

      For more information, go to the Virgin Money Student Loan page.

Internet Scam Revealed!

     As a consultant, I am on the Internet virtually 24/7 doing research for my college-bound small business owners to help them make their college and business dreams come true.  One of the options many families who want to start a business look at is using the Internet.  So that means I get requests to evaluate hundreds of  sites that promise "you can make thousands of dollars per day in your sleep selling information".

     Well today I found some incredible information everyone who is thinking about buying an Internet Business should know!  I just learned how simple  it is to modify the results of ClickBank and Adsense to reflect ANY income you want to show if you know some VERY basic programming.  That means you can FAKE the proof that you are selling millions through Clickbank.

      A tip of the hat to Dani and her "Make Free Money Blog" at http://wijoo.blogspot.com who wrote a GREAT article on how you can fake the financial results inside Clickbank and Adsense.   (BTW, she was trained as an engineer so maybe that explains the quality of her work!).

     So be careful believing that long format web sales letter when it includes this kind of data!  I know I will be doing much more research on the results of these "systems" to make sure they really deliver what they promise!