NYT's The Choice series on college financial aid questions

NYT's The Choice blog recently ran a series of posts answering readers' questions about college financial aid.  Here are the links.

http://thechoice.blogs.nytimes.com/2011/01/11/fafsaq-and-a/
http://thechoice.blogs.nytimes.com/2011/01/12/fafsaq-and-a-part-2/
http://thechoice.blogs.nytimes.com/2011/01/13/fafsaq-and-a-part-3-2/
http://thechoice.blogs.nytimes.com/2011/01/14/fafsaq-and-a-part-4/
http://thechoice.blogs.nytimes.com/2011/01/15/fafsaq-and-a-part-5-2/
http://thechoice.blogs.nytimes.com/2011/01/16/fafsaq-and-a-part-6/
http://thechoice.blogs.nytimes.com/2011/01/17/fafsaq-and-a-part-7-2/?ref=education

A rule of thumb for knowing if you do not qualify for college need-based aid

In answering a reader's question in the NYT's The Choice blog, Mark Kantrowitz gave this very rough rule of thumb to determine if you will qualify for any need-based aid when attending college.

[I]f you earn more than $350,000 a year, have more than $1 million in cash and non-retirement investments (not counting your home or any small businesses you own and control), have only one child and no unusual circumstances, and aren’t interested in student loans, your son probably won’t qualify for need-based financial aid.

http://thechoice.blogs.nytimes.com/2011/01/13/fafsaq-and-a-part-3-2/

Teacher pay trend - "unsustainable" and "antiquated"

In Rye Brook, New York, taxpayers met to discuss the soon to expire teacher contract.

Critics at Monday night's "collective bargaining forum" questioned automatic pay increases for longevity and educational degrees, and stipends for extracurricular activities. Some called for a merit-based system, though it was unclear how that would work. . . .
The contract expiring June 30 covers about 140 teachers and accounts for 55 percent of the schools budget. Teachers' base pay rose about 4 percent annually during the four-year contract. But with added rewards for experience and education, teachers received an average 34.4 percent increase over the past four years, according to handouts circulated at the meeting.
Due to a provision in state law, the "steps and lanes" — pay raises for longevity and academic milestones — generally continue even under an expired contract. The so-called Triborough amendment to the state Taylor Law keeps old terms in effect if no new deal is reached. That did not go over well with the crowd.
Members of Diamond's group differed on pay caps and other tactics but agreed on two words to describe the trend in teacher pay: "unsustainable" and "antiquated."

Blind Brook bargaining forum scrutinizes teacher pay - JN 1/26/11

Qualifying for high school honors classes

Many Most* high schools establish some criteria for students to qualify for honors and/or AP classes.  One local high school determines eligibility for 9th grade honors English and social studies classes using a ten-point scoring rubric based on the following:  

Writing Sample	50%
Behavior and Work Habits	30%
Current Average Course Grade	20%

Interested students are required to complete a writing sample during a proctored session.  They are asked to analyze a piece of literature (English) or write a thematic essay based on a time period/event in U.S. History (social studies). No additional details about the rubrics used in the evaluation process have been provided.

I appreciate that writing skills are crucial to success in these types of classes, but I have some reservations about this overall process.

• Writing skills are given great weight, especially in light of what I consider to be the inconsistent quality of this school's writing instruction.  I've seen too many classes where students are routinely given the choice to opt out of writing assignments by creating songs, board games or comic strips instead.
• "Behavior and Work Habits" are weighted heavily, so I am curious how they are measured.  This has the potential to be highly subjective.
• Grades are a relatively small consideration.  Aren't grades supposed to be the best overall measure of a student's academic achievement level?

* UPDATE:  I've corrected this because I don't have data to back up my statement that "most" schools have admission criteria. 

Chappaqua school board resolution calls for mandate relief

I came across this copy of the January 11, 2011 Chappaqua school board resolution calling for mandate relief, and I suspect most Westchester school districts are taking similar action in response to Governor Cuomo's push to impose a 2% property tax cap.  An interesting side note is that Chappaqua is the home of Bill and Hillary Clinton.

Resolution adopted by Chappaqua Central School District BOE -
Re: NY STATE Property Tax Cap Proposal

Be it Resolved by the Chappaqua Central School District Board of Education that Legislative and Unfunded Mandate Relief Must be Included in any NY State Property Tax Cap Proposal.
WHEREAS, New York State leads the nation in local property taxes, in large part because New York leads the nation in imposing unfunded state mandates upon our local municipalities and school districts; and
WHEREAS, state mandated pension fund contributions are one of the largest components of every school district and municipal budget over which local officials have little control, and are increasing at exorbitant rates annually such that bills from the State Retirement System (ERS) will increase 40% and bills from the Teachers Retirement System (TRS) will increase 33% in the 2011-12 school year; and
WHEREAS, state laws such as the Triborough Amendment, pertaining to the collective bargaining of contracts between school districts and employee unions, impede the ability of local officials to reasonably control the costs that such contracts impose upon local property taxpayers; and
WHEREAS, as a solution to New York's property tax crisis, the Governor of New York and members of the New York State Legislature have pledged to consider enactment of legislation imposing a cap on the annual growth in local property taxes; and
WHEREAS, any property tax cap must be accompanied simultaneously (1) by ending the practice of pushing State costs onto local school districts and municipalities, and (2) by a repeal of current underfunded or unfunded state mandates that require local municipalities and school districts to significantly increase spending and therefore local property taxes; and
WHEREAS, a property tax cap without repeal of costly underfunded and unfunded state mandates will inescapably lead to drastic cuts in essential local school district programs and services, as well as significant layoffs of school district employees;
NOW, THEREFORE, BE IT RESOLVED by the Chappaqua Central School District, that the Governor of the State of New York and the members of the New York State Senate and New York State Assembly must reform the cost drivers that lead to high property taxes in New York - including mandate relief, pension benefits and the collective bargaining process - as the central element of any effort to provide property tax relief to the residents and businesses of New York State.
BE IT FURTHER RESOLVED that a copy of this resolution be forwarded to the Governor, Senate Majority and Minority Leaders, Assembly Speaker and Minority Leader, and the members of the State Senate and Assembly representing residents of the Chappaqua Central School District.

The foregoing resolution was offered by Jeffrey Mester, seconded by Janet Benton and passed unanimously by a vote of all members present. It was adopted on January 11, 2011 at the regular public meeting of the Chappaqua Board of Education.

Related posts:

http://educationquicktakes.blogspot.com/2011/01/putting-brakes-on-school-spending-in.html
http://educationquicktakes.blogspot.com/2011/01/teacher-pension-costs-are-skyrocketing.html

College savings options as outlined in the WSJ

Where to Save

Wary of market volatility and in search of more flexibility, more families and advisers are expanding their college-savings repertoire. Here are some options to consider:

529 Savings Plans 

Qualified distributions are taxfree, and many states offer tax deductions or credits for contributions.

• Pros: Can result in big tax savings for families able to sock away substantial sums.
• Cons: Some plans may have limited investment choices and charge high fees, and savers can face taxes and penalties if the funds are pulled out for other purposes.
• Financial-Aid Impact: Minimal, if treated as parental asset.

529 Prepaid Plans

Families make an upfront payment in exchange for future tuition contracts or credits.

• Pros: Prepaid plans aim to cover tuition no matter how much it increases.
• Cons: Some states, facing budget woes and rising tuition, have had to close their plans to new participants, raise prices or impose fees.
• Financial-Aid Impact: Minimal, if treated as parental asset.

Coverdell Education Savings Accounts 

Offer tax-free growth for education expenses.

• Pros: Cover a broad range of expenses, including college and K-12 expenses, while offering more investment choices.
• Cons: Impose income restrictions and a low $2,000 contribution limit. Current tax benefits extended only for two years.
• Financial-Aid Impact: Minimal, if treated as parental asset.

UGMA and UTMA Custodial Accounts

Accounts in which the parent acts as trustee. Offer some tax benefits where the first $950 of investment income is tax-free. Any income between $950 and $1,900 is taxed at the child's rate, and income above $1,900 is taxed at the parents' rate.

• Pros: Can be used for most anything as long as the proceeds benefit the child.
• Cons: Students gain control of the accounts when they come of age.
• Financial-Aid Impact: Since the accounts are in the child's name, they are counted more heavily in financial-aid formulas.

Taxable Brokerage Accounts

Families can save for college in a standard taxable portfolio.

• Pros: Investors have complete control over their investment decisions; accounts can be used for any purpose.
• Cons: Investors are likely to face a tax bill on growth and withdrawals.
• Financial-Aid Impact: Federal aid formulas count the value of the assets in the account (minus any margin loans) at the time the federal financial aid application is filled out.

Roth IRAs

Investors can generally withdraw their original contributions without taxes or penalties not only for college, but any reason.

• Pros: Offers more flexibility and investment options.
• Cons: If the parent is relying on the account for retirement, any withdrawals will chip away at the nest egg.
• Financial-Aid Impact: Assets aren't counted in aid formulas, although withdrawals of a contribution are treated as income under aid formulas.

Savings Bonds

Interest earned on the Series EE or I bonds is free from taxes if used for qualified higher-education expenses.

• Pros: Among the safest investments.
• Cons: Currently, bonds pay a relatively low rate of return while the tax break is limited.
• Financial-Aid Impact: Income from the bonds is considered income under aid formulas.

Sources: WSJ Research; FinAid.org

 College Saving Gets Trickier - WSJ 1/22/11

529 plan basics and updates

A recent WSJ article highlighted limitations of 529 college-savings plans and recent changes offered by some plan providers.  As with all their financial planning, investors should make sure their strategies aer suitable for their own individual situations..

A couple of basic 529 tips:

• Invest more conservatively as the college years approach.  In 2008 the average 529 lost 28%, reflecting the stock market's plunge that year (compared to -37% for the S&P 500).  A strong argument can be made to shift 529 assets to cash completely in the two to four years before college.
• Shop carefully for low fees and competitive performance.  Average 529 fees and performance tend to be less attractive than their retail mutual fund counterparts.