Should You Pay Off Student Loans Before Investing?

Millennials who have been out of college for a few years are starting to wonder if they should start investing before they’ve paid off their student loans. There is no one-size-fits-all answer to this question, but each person should be able find the best path forward.

Investment and debt-repayment are two sides of the same coin. Most people with student loan debt pay interest and annual fees totalling 4-6% of the balance of their loans. This is in addition to the premium payments made every month. This percentage is a loan’s APR, and it is an immovable object. Unless you look into student loan refinancing, this APR represents the annual cost of the money you borrowed for your graduation. This rate will stay the same for the entire term of your loan.

Investment portfolios bring in returns that vary year by year. If the economy is active and healthy, you could see returns of 7-9% or even more. Some years see investors receiving enormous returns that far exceed 10%. The thing is, these returns are unpredictable. Unlike your student loan APR which never changes, investment returns go all over the place. Some years, your portfolio may even lose money.

In years where your investment return percentage exceeds your loan APR, you will make more money than you lose, making investment a worthy pursuit, even if you haven’t paid off your student loans yet. But on years where your portfolio brings in less money than you lose in student loan interest payments, your investments won’t be “worth it” in a way that is easy to appreciate.

However, investing has one advantage that makes this decision a little more complicated than subtracting interest payments from investment returns. When people start investing at an early age, compound interest kicks in earlier, greatly amplifying the overall growth potential of your investments over your lifetime.

Most readers will already be familiar with this concept, but it’s worth a review. If you make regular payments into an investment account for your whole life without withdrawing funds, the dividends that your portfolio earns will also be added to the pot. In this way, a successful investment pays into itself. This creates a snowball effect. As time goes on, you’ve got more money, so it grows faster, so it gives off higher returns, which makes your money, which can then grow faster, etc.

With compound interest, the sooner you begin the better. Therefore, a lot of advisors consider it prudent to start investing as soon as possible, even if the return you expect from your investment is nearly equal to your student loan APR.

However, you shouldn’t begin investing if you don’t have certain financial details worked out. If you have no savings to cover you if you lost your job or experienced a personal emergency, you shouldn’t put aside money to invest. Instead, create an emergency fund. You may also have personal preferences that motivate you to pay off your student loans as soon as possible. Some people find a lot of personal comfort in being debt free, and may invest with more fervor once the debt is cancelled. Finally, explore investment acceleration options, like employer matched 401(k)s.

Hopefully this has given you a clear way of figuring out how to prioritize your investments and student loan repayment. Simply giving these concepts clever consideration indicates that you are careful about your money, a trait which will serve you well for life, long after your student loans are paid off.

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source: modestmoney.com

Yale opens liberal arts college in conservative Singapore

SINGAPORE - Yale University formally opened a controversial liberal arts college in tightly governed Singapore on Tuesday, saying there was demand for "critical thinking" in the city-state and other Asian nations.

The Yale-NUS College, a joint project with the National University of Singapore, had been criticised by faculty members of the leading US university due to Singapore's restrictions on protests and on student political activity.

"Singaporeans, and Asians more broadly, have a greater hunger for pedagogy that truly encourages critical thinking and a model of liberal arts and science education adapted for the 21st century," Pericles Lewis, president of the college, said in a speech.

He told AFP that "we're not setting out to change any political discourse, but we're giving students the tools to be active in citizenship, to think about the issues".

"We think that a well-educated citizenry is the most important thing for any country, especially in Singapore."

The pioneer batch of 157 students from 26 countries - 97 of them Singaporeans - was selected from a pool of over 10,000 applicants and began lessons this month in temporary facilities.

The college's own purpose-built campus with residential facilities will open in 2015 and is designed to have a full capacity of 1,000 students.

The college is the first established by Yale outside its campus in New Haven, Connecticut.

"We believe that the college has the potential to serve as a model for others, particularly in Asia," said NUS president Tan Chorh Chuan.

In a resolution passed in April 2012, the Yale faculty expressed "concern regarding the history of lack of respect for civil and political rights in the state of Singapore".

It called on Yale-NUS to uphold civil liberties and political freedom on campus and in broader society.

Campaign group Human Rights Watch accused Yale of "betraying the spirit of the university as a centre of open debate and protest by giving away the rights of its students" at the new campus.

"Instead of defending these rights, Yale buckled when faced with Singapore's draconian laws on demonstrations and policies restricting student groups."

Singapore's education ministry said at the height of the controversy that student demonstrations on campus would require approval from the Yale-NUS administration.

source: interaksyon.com

Insurance for College Students

College kids show up at school with a lot more than a big bag full of T-shirts and jeans. They also bring a slew of electronics—computers, printers, smart phones, iPads—that can be expensive to replace. Your homeowners insurance will generally cover students’ possessions if they live in a dorm, and it may provide coverage if they’re in an off-campus apartment, as long as their primary residence is still your home. The rules vary a lot by insurer; most require your child to be a full-time student and under age 24.

Some insurers cap the coverage at college at 10% of the possessions limit on your homeowners policy. So if you have a $200,000 policy on your home with 50% of that amount, or $100,000, for contents, your kid’s coverage at college may be limited to $10,000. The liability limits are usually the same as for you (see Check Up on Your Home Insurance).

If your insurer doesn’t cover your child’s off-campus apartment, or if you’d like higher coverage limits, consider a renters insurance policy. That generally costs just $150 to $200 per year, says Melanie Loiselle-Mongeon, an independent agent in Pawtucket, R.I. If your kid has roommates (who aren’t related), each person needs to get a separate renters policy.

Car insurance. Contact your insurer if your kid goes to a college more than 100 miles away and doesn’t take a car. Your premiums can drop significantly (20% on average at Safeco, for example), but he or she will still have coverage when home for the summer or vacations. If your child takes a car to school, your insurance costs will rise or fall depending on the location.

Health coverage. Student health plans, which often cost hundreds of dollars each semester, may have exclusions and low coverage caps, or they may require you to get most health care through the student medical center. Children can usually be covered under their parents’ health insurance policy until age 26, so most families can rely on that insurance when their kid goes to college. (You may have to decline the college’s student coverage to avoid being charged.)

However, if you have insurance through a regional HMO with a small network of doctors and hospitals, coverage may be limited to emergency services if your student goes to college in another state. And even if your plan allows for out-of-network care, you’ll probably have to make much larger co-payments if the network doesn’t extend to the area where the college is located. Insurers with national plans, such as Cigna, typically have plenty of doctors and hospitals in-network around the country. “The best course of action is to request a summary of benefits for the new location,” says Kelly Brooke, of Cigna.

If no in-network providers are nearby, consider an individual health insurance policy. In most states, a healthy person in his or her early twenties can get coverage for $150 or less per month. You can get price quotes at eHealthInsurance.com or find out about local policies at HealthCare.gov.

By buying a high-deductible policy, you can keep premiums low and still have coverage for major emergencies (most plans must also provide some preventive-care benefits without co-payments or deductibles). If your child has a policy with a deductible of at least $1,200 and isn’t claimed as a dependent on your tax return, then he or she can make tax-deductible contributions to a health savings account that can grow tax-free for future medical expenses.

source: kiplinger.com

The Lows of Higher Ed

Welcome back, college students! Always nice to see you.

Although we are sort of worried by those bleak stories about student debt, which suggest a lot of you may graduate owing a ton of money and unqualified to do anything more remunerative than selling socks.

This year, Newsweek cheerfully welcomed the Class of 2016 by asking, “Is College a Lousy Investment?” And in The Times, Andrew Martin reported that the Department of Education is paying more than $1.4 billion per annum to folks whose job it is to collect on $76 billion in defaulted student loans. “If you wait long enough, you catch people when their guard’s down,” one debt collector told Martin after garnishing the savings of a disabled carpenter.

Look on the bright side, students. Perhaps when you graduate, some of you will be able to qualify for a good job in the booming accounts receivable management industry.

Higher education is still the key to most good jobs, but the nation is starting to ask some questions about the way we finance it. Shouldn’t there be more of a match between the cost of school and the potential earning power of the graduates? Who speaks for the art history majors? And why is tuition so high, anyway? (Parents, if your kid is planning to take out student loans, you might want to avoid any college where the dorm rooms are nicer than your house.)

“People don’t believe much any more about the altruistic motives of colleges and universities,” sadly noted Pat Callan of the Higher Education Policy Institute.

Not without some reason. In his reporting, Martin uncovered a newsletter aimed at college admissions officers that advised them to avoid using “bad words” such as “cost” or “pay” in their admissions materials. Instead, it suggested: “And you get all this for ...”

In Washington, Congress is holding hearings! The Senate Health, Education, Labor and Pensions Committee is considering a bill — co-sponsored by Democrat Al Franken and Republican Charles Grassley — that would require all schools to fill out the same form telling the student loan applicants useful facts like exactly how much per month they’ll be forking over when they start paying.

That would be the superminimum, right? How amazed are you that this isn’t happening already?

“Some of the packages don’t delineate what’s a grant, what’s a scholarship, what’s a loan,” said Franken. “And the information all comes in an award letter, so you’re thinking: Award!”

The Obama administration, which can’t do much about this without Congress, has been working to get the schools to voluntarily adopt a “shopping sheet” that would provide clear basic information so students could compare different schools’ financing before making a choice. “We’ve been encouraged by the feedback from the higher-ed sector,” one of the experts working on the program said. “I think we have 100 individual colleges and universities.”

The good news is that controlling college costs really does seem to be an administration priority. The bad news is that there are more than 4,000 colleges and universities.

People, don’t you think young adults should get the clearest, most easy-to-compare information conceivable before they sign a huge, life-changing loan deal? Don’t you think there should be somebody in charge of calling them up once a week and yelling: “Eight hundred dollars a month until you’re 51 years old!”

Maybe I’m underestimating the ability of teenagers to make serious, well-thought-out decisions about their higher education. All I can tell you is that when I was 21 years old, I signed up to go to graduate school at the University of Massachusetts because I had always wanted to live in Boston. I had no idea the main campus was on the other side of the state until I got there.

Franken is hoping the Senate might take up his proposal next year. I presume you weren’t expecting anything sooner. Congress can’t even get it together to keep the Postal Service from defaulting. And the Senate leaders admitted the other day that they’re not going to be able to pass a bipartisan bill to legalize Internet gambling on poker, which seems to be a really high priority for some important people. If they can’t do poker, they are not going to get to student loan transparency.

The House is planning hearings on student loans, too. The chairwoman of the subcommittee assigned to this task is Representative Virginia Foxx, a North Carolina Republican who once said that she worked her own way through college and had “little tolerance” for people who complain about their huge student loan debts.

“New ideas to advocate for financial aid transparency are always welcome in this discussion,” Foxx said in an e-mail on Friday. “But we have to question whether the federal government’s dictating the terms of every college and university’s financial aid communications will actually achieve the desired results.”

So maybe a little less sense of urgency there.

source: nytimes.com

Cut college tuition by getting 4-year degree in 3 years

A 25% tuition break first offered three years ago by Hartwick College in Oneonta, N.Y., paid off this spring for a dozen new graduates. All they had to do was squeeze four years of study into three.

Hartwick, a small private liberal arts college, is at the forefront of a recent upswing in colleges that, spurred by the recession and concerns over crushing college debt, are encouraging students to save money by shortening the time it takes to earn a degree. This fall, three-year degrees will be an option at Wesleyan University in Middletown, Conn. Minnesota State University in Mankato plans to make them available in 2013. Missouri's Office of Economic Development is reviewing applications for grants to offer three-year bachelor's degrees this fall in high-demand fields such as health care and information technology.

The initiatives are aimed mostly at highly motivated students, such as 2012 Hartwick grad Samantha Hart, who earned 23 college credits while in high school and took heavier course loads while in college. "I saved a lot of money, and I got to do everything that I wanted to," says Hart, 21, who is about to start an internship that she has been told could lead to a job.

Yet for all its pocketbook appeal, the three-year concept hasn't taken off, particularly at public universities. Legislation in Rhode Island in 2009 and Washington last year encourages public universities to develop three-year options, but no programs have been proposed to date, officials in both states say. State budget challenges have pushed a University of California committee's recommendation to a back burner, says system spokesman Steve Montiel.

At Ohio State University, which must phase in three-year degrees beginning this fall, provost Joe Alutto says a three-year degree may be "misdirected for an institution such as ours." He told legislators last year that students who earned college credit in high school tend to add a minor or second major rather than graduate early.

Some skeptics worry about quality. "It's as if they put students on a conveyer belt and just speed them up and spray them with a fire hose and the students catch what they can," Southern New Hampshire University professor Marty Bradley says of models that compress four years into three. He pioneered a three-year degree on his campus in 1997 that required an overhaul of the curriculum.

Some education groups argue that resources, particularly at public institutions, should focus on students who are most at risk of dropping out. A study of 33 states by the non-profit Complete College America found that just 26% of students enrolled at public institutions earn a bachelor's in four years; 54.3% take six years. About 2% of students earning a bachelor's in 2007-08 did so in three years, federal data show. Hartwick's four-year graduation rate in recent years averages about 46%.

"Time is the enemy of college completion, but Getting more of our best students to finish their bachelor's degrees a year early won't be enough" to raise the nation's overall graduation rate, says Complete College America president Stan Jones. "We must ensure that more finish college on time: a four-year degree in four years, not five or six."

Wesleyan President Michael Roth says the three-year option ought to be available to students who want it. "Four years is just a habit," he says. "It isn't some magical number."

source: USA TODAY

Metro Manila hosts most number of colleges allowed to hike tuition

Metro Manila will have the most number of private universities and colleges to increase their tuition in June, the Commission on Higher Education (CHED) said, adding that it already approved fee hikes for 256 schools nationwide.

Higher tuition will be charged in 67 Higher Education Institutions (HEIs) in Metro Manila, followed by 41 in Region XI (Davao Region), and 36 in Region IV-A (Calabarzon), the Commission said.

The Commission added that 30 schools have been allowed to impose increased tuition in Region VI (Western Visayas), 28 in Region III (Central Luzon), and 16 in Region V (Bicol), 15 in Region X (Northern Mindanao), and 14 in Region IX (Zamboanga Peninsula).
Tuition fee increases have also been approved for 12 schools in both Region VII (Central Visayas) and Region XII (SOCCSKSARGEN), 7 in Region I (Ilocos), and six each in the Cordillera Administrative Region and CARAGA.

Five schools in Region IV-B (MIMAROPA) and two in Region VIII (Eastern Visayas) were also allowed to impose higher tuition, the body said.

Increase in tuition ranges from seven percent up to 15 percent.

Schools in Region II are reported to have the highest percent of increase at 15 percent, followed by CARAGA (13 percent); Region 1 (12 percent); Regions XI and V with 11 percent; Region 3 (10 percent); NCR, Regions VI, VII, VIII, and IX (9 percent); Regions IVA and CAR (8 percent) and Region XI (7 percent).

The number of schools that have sought--and eventually secured approval to hike fees--is lower, compared to last year’s 324 HEIs, CHED said.

These schools comprise "roughly only 10 percent" of the 2,247 HEIs nationwide, including in the Autonomous Region in Muslim Mindanao (ARMM).

source: interaksyon.com