College Planning

Default rates up again according to the Department of education.

One in ten borrowers across the country, 475,000 people, who entered repayment during the fiscal year ending in September 2011 had defaulted by the following September, the data showed. That’s up from 9.1 percent of a similar cohort of borrowers last year.

Even more borrowers are struggling in delinquency when the period of measurement is extended to three years. The percentage of borrowers defaulting within three years after beginning repayment has also risen from 13.4 percent to 14.7 percent for the most recent cohort of borrowers available (those who entered repayment from October 1, 2009 to September 30, 2010 and had defaulted by September 2012). The 14.7 percent default rate represents 600,000 borrowers.

It is a fact that a college education is expensive, very expensive. Even at lower-priced, state-supported colleges a four-year degree can still cost in excess of $50,000. College tuition and fees continue to increase at an alarming rate. These increases have made "paying for college" practically impossible.

In a recent survey conducted by the American Council on Education it was found that financing their children’s college education is one of the top five concerns facing American parents today. Although parents generally have good intentions, there are many unforeseen circumstances along the way that prevent them from saving a sufficient amount of money to pay for their children’s college education.

With today’s economy, and the inflation we have experienced over the past twenty years, this problem is far more evident now than it ever has been in the past. It most often takes two incomes just to meet the family’s budget. Unfortunately, after paying the family’s monthly expenses, there is usually not much left over for the student’s college education.

Fortunately, you do have options! Contact us for additional information.

College Tuition Solutions of Florida

Getting Employed - What Employers

Are Looking For In Hiring New Employees

From the time our kids are in middle school, we as parents, school officials, and federal government are telling our kids that the only way to climb the ladder of success and get a good paying job, is to get a college degree. A college degree is becoming the new high school diploma. Many (but not all) employers across the country will only hire people with a bachelor’s degree, even if the job doesn't require college-level skills.

Students and their parents are accumulated trillions of dollars in debt in order to get a college degree and colleges continue raising the cost of obtaining an advanced degree due partly to the easy accessibility of financial aid (mostly loans).

Most parents and students feel, attending college will open the doors to employment and attending college will teach the student the needed skills to perform the duties that employers are looking for.

However, many students that obtain a college degree have never held a full time job, let alone know what employers are looking for in a new hire. Many students (even as young as students in middle school) are not being told how to get employment and what employers are looking for in a potential new employee, (with or without a college degree).

High school and college students are not being told how to actively pursue job opportunities and what it takes to get employed. Many students feel by obtaining a college degree is a guarantee of employment. However, obtaining a college degree is NOT a guarantee of employment. Getting employed is more than just having a degree.

As I have mentioned earlier, many employers are requiring a college degree before they hire and individual. However, a new paper from Paul Beaudry, David Green, and Benjamin Sand find, “Skilled workers with higher degrees are increasingly ending up in lower-skilled jobs that don't really require a degree--and in the process, they're pushing unskilled workers out of the labor force altogether.”

Due to the present economy conditions, it’s a buyer’s market for employers.

Middle and high school students, (let alone college grads) need to understand why getting some form of advanced education after high school is very important to employers. The skills and techniques in this e-book can be learned in middle, high school and college.

So What Do Employers Look For Before Hiring An Employee?

Let’s look at several key things most employers are looking for during the interview process before they hire an employee. Below are a several important factors for job hunters, regardless of the educational level of the individual:

First and foremost, employers are look for a track record of success (experience) in the skills that the position requires. In other words, do you have the experience and skills to do the job duties? Employers are looking for concrete evidence in the potential employee’s past that shows they can do the job. Now this does not mean that you have done the particular job, but it does mean that you need to have the skills to perform the job duties, with or without a college degree.

Employers are looking for employees who care about their company and the work that is to be done. It's not enough to just show up at work every day and just do the minimum required. Employers are looking for candidates who care about helping the company meet its overall goals and help increase the company’s bottom line.

Employers are looking for potential employees who will be excited to come to work and not just look at the position as just another job.

Employers are looking for individuals that have a positive and productive attitude. Many of my business contact told me they don’t care how skilled you are; they will not hire employees that portray rudeness, overly sensitive, cocky, or shows a negative attitude.

Employers are looking for a long term commitment from the potential new hire. Most employers want to hire people who will stick around for a solid block of time (usually at least two years, and more for senior-level positions). They also want to hire people who will be happy with the job, because unhappy people tend to be less productive and a drain on other employees' morale.

Employers want potential employees to be comfortable or be able to adapt in the work environment. Every job has downsides. It could be due to a demanding boss, a long commute from your home, or an office culture that makes it hard for you to perform you job duties. Employers are looking for potential employees that can adjust to the negatives of the job.

Employers are looking for individuals that can work with other employees. Potential employees need to show that they are a team player and are willing to work with everyone to accomplish important job goals and duties.

Employers are looking for potential employees that have good communication and writing skills. A report by the Pew Foundation found, out of 375 companies that they interviewed, 75% of new hires where lacking in communication and writing skills. Being able to express your ideas and thoughts are very important to employers.

Employers are looking for employees who require little supervision and direction to get the work done in a timely and professional manner. Employers like to hire self-motivated employees because they require very little direction from their supervisors. A self-motivated employee performs work duties without any prodding from others.

Students that are in middle school, high school, and college need to do several things before interviewing for a job, (regardless if the job is mowing lawns, cleaning an office or applying at a major corporation). Here is a list of Dos:

Before beginning your search you have to understand why all companies or individuals hire. It’s to solve problems and your challenge is to position yourself as the solution. In other words, hiring you allows the company or individual to solve problems faster, better and cheaper than they could without you.

You need to identify your skills and expertise in order to see if you can meet the skills the employer or individual is looking for.

If you are interested in working for a company do some research on the company to see if you can help them solve their problems. You can do this by going on the Internet, through Google alerts, by read press releases and speak with current and former employees.

Your ability to uncover your target employers’ problems and position yourself as the solution is what will get you hired.

Conclusion

The most effective way to get a job is to think like an employer. Sounds simple but many people don’t appreciate the importance or know how to do it. All companies want to hire individuals that can help solve problems in order to increase the company’s financial bottom line or work for an individual that wants to hire someone to do a job that they do not want to do.

College Tuition Solutions of Florida

Call Us at: (904) 614-5305

RETIREMENT AND PAYING FOR COLLEGE

AN $80,000 COLLEGE EDUCATION

COULD COST YOU $246,980

Last year college tuition increased on the average of 6.65%, (public universities). According to the federal government, the combined Social Security trust funds will be exhausted in 2036 and at that point there will only be enough income to cover 77% of scheduled benefits.

Our colleges and universities seem reluctant to address the increasing cost of educating our students and they seem to never have enough money. However, they continue added new dorms, spas, climbing wall, basketball and football stadiums, and other amenities that have NOTHING to do with educating our students.

Our elected officials are afraid to tackle our national debt, social security, and other entitlement programs that are driving our national debt to a point that will never be able to be paid back unless, taxes are increased and spending is drastically cut. They would rather kick the can down the road in order to assure or enhance their bid to be re-elected.

Michael Falcon, head of retirement at J.P. Morgan Asset Management says, “America is facing an unprecedented retirement challenge as the U.S. population undergoes a radical demographic shift. Twenty percent of the population will be over 65 years old by 2020 and, despite impressive aggregate asset growth, many Americans are still significantly short of the savings they will need for a dignified retirement and are unprepared for the complex financial choices they will need to make.”

The Employee Benefit Research Institute (EBRI), reported in its 22nd annual Retirement Confidence Survey, most Americans are not very confident about having enough money for retirement. In 2011, just 13% were very confident.

For many families, paying for college cost and saving for retirement has put many parents in a major financial pinch. When confronted with paying for college, many folks that have not saved for college are giving up and are forced to borrow college funds in order to continue savings for retirement.

However, most of these families do not realize the financial dilemma they are creating if they borrow too much. Borrowing too much in order to help pay for their children’s’ college education, WILL have a direct effect on accumulating enough money for retirement.

College Expenses And Retirement Dollars

The dollar amount spent on college expenses can dramatically affect the parents’ ability to fund retirement.

For example:

Let’s assume a student was to attend a public university that cost $20,000 a year and the parents are in the 15% effective Federal income tax bracket, 5.5% effective State tax bracket, 1.5% local tax and pays 7.65% toward Social Security. The total tax percent is 29.65%. These tax percentages will play a very important role as we continue.

The parents can afford to pay $5,000 toward the student’s education and the student will receive $5,500 in student loans the freshman year ($6,500 for sophomore year and $7,500 for the junior and senior year), and the parents will qualify for the American Opportunity tax credit of $2,500.

After deducting the parents’ contribution of $5,000, the Federal loans to the student and the American Opportunity tax credit, the remaining cost per year will be $7,000. Since the parents only can afford $5,000 from ordinary income, they decide to borrow the $7,000 through the Federal PLUS loan program and defer any loan payments until the student graduates.

The reason the parents did not make payments on the PLUS while the student was in college is because the loan payment on the PLUS loan would almost equal the $5,000 they could afford while the student was attending college ($5,000 compared to $4,394 annual loan payment).

Since the parents will borrow $7,000 each year for four-years they would accumulate $32,382 in debt plus unpaid interest at 6.41% on the unpaid balance. Total monthly payment on $32,382 is $366.21 a month over a ten year period (see chart below).

As you can see from the chart the total amount the parents will pay back over the ten year period is $43,945.19.

In order for the parents to make the monthly payments on their PLUS loan they will have to make payments with after tax dollars.

Since the parents must pay taxes on the 366.20 monthly payments at a 29.65% they would have to make approximately $520 (before taxes) to clear the $366.20 monthly payment. The difference is $153.80 a month ($520 - $366.20 = $153.80).

Let’s look at how much the parents actually paid to cover their part of the student’s $80,000 public college education (over a four-year period after student loans and educational tax credits).

The parents paid $20,000 over four years while the student attended college. Since they did not make payments on the PLUS loan while the student was attending college it will cost the parents $28,000 in PLUS loan principal, $4,382 in unpaid interest on PLUS while student attended college and $11,563 in interest on the PLUS loans during the repayment period.

Therefore, the parents total cost is $63,945.

If we were to add what the student paid (student loans + interest) and what it actually cost the parents, the total cost of the $80,000 education is actually $102,212 which is $22,212 difference.

Now let’s turn the clock back and see what the parents could have done with proper planning.

Let’s assume the parents shifted some of the expense they were paying for the student while they were living at home, adjusted how they were being taxed and adjusted some of their spending habits (without changing their lifestyle) in order for them NOT to take out a PLUS loan and to cover their $5,000 a year contribution.

This would save the parents $15,945 in PLUS loan interest payments.

If the oldest parent was 49 when the student graduated from college they could use what they were paying for college $5,000 + $7,000 = $12,000 and invested this money (5.5%) in a qualified retirement plan until age 65 (instead of paying this amount toward paying the PLUS loan off), they would have accumulated approximately $295,693.

Since the parents did not do any planning the $80,000 college education cost the family (parent and student) $102,212 (cost of college + interest on students loans and parents PLUS loans). If they were to have planned ahead and made just a few adjustments, (without changing their lifestyle), the education would have only cost the family $86,267, ($80,000 cost of college + $6,267 interest on student’s Federal loans).

If the parents were to have invested the $15,945 that they would have saved in PLUS loan interest and invested this savings at 5.5% in a qualified retirement plan, they would have accumulated and additional $37,554 at age 65. See chart below.

IF the family were to have planned ahead they could have accumulated and additional $333,247 for retirement.

Therefore, you can look at what the college education ACTUALLY cost the family. If they were to have paid the $80,000 education in the tradition way the education would have cost $102,212.

However, if they were to have planned ahead and made just a few adjustments (without changing their lifestyle), the education would have cost the family $86,267, however the parents could have increased their retirement savings by $333,247. This is a net gain of $246,980.

You now have a decision to make, pay for college the traditional way or Contact Us at (904) 614-5305
and let us save you thousands of dollars! College Tuition Solutions of Florida

New Savings Account for College Proposal

U.S. Congressman Jose Serrano (D-NY) and a number of his colleagues in the U.S. House of Representatives agree. On August 1st, they introduced the Financial Security Credit Act of 2013 (H.R. 2917).

If passed into law, eligible families who contributed to a range of saving products, including those traditionally associated with retirement, such as 401ks and IRAs, as well as more flexible vehicles, such as savings bonds and short-term savings accounts or certificates of deposit, would see a meaningful match delivered to their account. Families that didn't have their own accounts would be able to open them directly on their tax return.

As Congressman Serrano put it in his statement to the press, "We know that many American households are unprepared to meet short-term and long-term financial needs, and many more feel as though they cannot save for their long term goals. This legislation will address these problems by offering an incentive for taxpayers from low- and moderate- income brackets to save their tax refunds by making deposits into any of a number of savings options."

The Financial Security Credit Act of 2013 is unique in several significant respects. It offers a simple and easily understood incentive through a direct 50% match to qualifying contributions, up to $500 a year. It also makes clear that increasing personal savings is a policy priority, including savings that can be accessed when needed. Under the proposal, families are empowered to choose whether they want to save for higher education, build up a savings cushion to handle an unexpected emergency, or plan ahead for retirement many years down the road.

College Tuition Solutions of Florida

(904) 614-5305

Senators Reach Loan Deal - The compromise would be retroactive, so students taking out loans after July 1 would get the new interest rate. Based on Wednesday's Treasury yield, undergraduate loans issued today would have an interest rate of 4.5 percent; graduate loans, 6.5 percent; and PLUS loans, 7.2 percent. All are lower than the rates for those loans under current law.

Final details on the interest rate are awaiting a score from the Congressional Budget Office, expected midday today. But late Wednesday night, the group agreed that all undergraduate loans would be set at the 10-year Treasury yield plus 1.8 percentage points. For graduate loans, the rate would be the 10-year yield plus 3.8 percent; for Parent PLUS loans, the 10-year yield plus 4.5 percent.

Setting a single rate for all undergraduate loans means that subsidized loans, which go to students determined to have financial need, would no longer have lower rates than unsubsidized loans, which are available to all undergraduates regardless of need. From 2007 until last week, subsidized loans had lower interest rates. The rate for unsubsidized loans has been 6.8 percent.

If the plan passes the Senate, the House of Representatives is likely to follow suit, said a senior Republican aide familiar with the negotiations. A vote on the measure has not yet been scheduled.

STEP FIVE

Evaluating Assets and Liabilities

It is now time to open the information you have accumulated in your files. We asked you to write down your assets. Look over the list of assets and find assets that can be used to help pay for college. Some of these assets can be liquidated or borrowed (leveraged) against.

Examples:

Fixed Income Investments
CD’s
Bond Accounts
Stock Mutual Funds
Rental Real Estate
Undeveloped Land
Cash Value Life Insurance
Personal Residence
Second/Vacation Home

Try to find assets that are not productive (income wise) or instead of having income producing assets reinvest its earnings, take the income in cash to help pay for college. If you will not qualify for financial aid (no scholarships or grants) and you want to liquidate an asset that has a capital gain think about gifting the asset to the student and let them sell the asset and pay lower capital gains taxes (check with your CPA on the Kiddy Tax Rules).

If you sell an asset that has a capital gain you may pay a capital gains tax of 15%. If you gift the asset to the student and they sell the asset they may only pay 5%. Make sure to consult with their professional tax planner before selling or gifting any assets (Ask About The Kiddy Tax Rules).

If you decide to borrow against these assets you can use the borrowed money to pay for educational costs and could deduct the interest on the borrowed funds as a student loan interest deduction on your taxes.

You can deduct up to $2,500 a year as long as their income is with in a certain limit (check with their tax professional).

The following pages will give you an idea on how to use the equity in your home to pay for college and benefit in THREE ways.

Ideas On How To Use Equity In A Home

A personal residence loan is one of the few investment vehicles whose interest charges are tax deductible. Families in middle and high income tax brackets can take maximum advantage of this tax write-off.

Parents, whose income is too high to take advantage of the student loan interest deduction, could use the interest on a mortgage loan to provide an itemized tax deduction. There are a wide variety of personal residence loans that can be used to fund college expenses. The family can use any combination of mortgage loans with fixed or adjustable rates to meet their intentions, including those with minimum monthly payments while the student is in college.

Many families find themselves with a shortfall of funds to pay the entire cost of college and end up with a cash flow problem.

To increase cash flow the family can either do one of two things:

· Increase their assets, or

· Decrease their liabilities (debt).

Here Is A Planning Tip:

Families can use the same method used by many corporations to decrease liabilities and increase cash flow called DEBT RESTRUCTURE or DEBT CONSOLIDATION.

Hundreds of Companies do this by refinancing their assets and consolidating all their debts into one smaller payment extended over a longer period of time.

This allows the company to make their assets more productive and establishes a new budget for expenditures.

Families can significantly increase their cash flow by applying the same debt consolidation methodology to their liabilities, such as home mortgage, car loans and credit card debt.

By consolidating your debt payments into one lower payment, you can increase cash flow to pay college expenses, fund your retirement and even pay your home mortgage off earlier than anticipated once the student is out of college.

The theory behind debt consolidation is simple.

Home equity is one of the family’s main assets, yet home equity is a very unproductive asset. Home Equity DOES NOT earn interest. You can increase home equity by one of two ways,

· Increasing the value of your home by making improvements

Decreasing the debt owed on it

If you leave equity in your home, the home equity asset remains dormant (earning no interest) and unproductive until you sell your home.

The only way to make home equity productive, during the time you own the home, is to borrow the excess equity and wisely use the increased cash flow for productive purposes such as using the equity for investment purpose, pay off BAD high interest installment and car loans or credit cards.

By refinancing the family’s personal residence, the old mortgage and all other high interest/high cost debt can be paid off with a new, lower cost mortgage or using the equity to invest into tools that are designed to accumulate wealth.

The result is a lower monthly payment that creates extra cash flow that can be used to pay college expenses or retirement.

There may also be additional tax deductions available with the new mortgage that can further increase your cash flow availability.

Let’s Look At An Example:

The Smith family would like to send their children (Johnny – a senior and Sally – a sophomore) to college. Mr. and Mrs. Smith earn a total of $75,000 per year in income, but have saved absolutely no money to cover Johnny and Sally’s educational expenses. Mr. Smith is 47 years old.

Johnny and Sally plan to contribute to their own education by taking out student loans, but the Smith’s will still need around $80,000 to fund the balance of both educations.

The Smith’s have few assets and considerable debt and estimate that they can only contribute $400 per month ($4,800 per year) from their current income towards educational expenses, without dramatically changing their present lifestyle (they developed a Strategic Cash Flow Plan).

The Smith’s decide to refinance their current $120,000 in debt (mortgage and high cost consumer debt) into a new, $134,400, 30-year mortgage.

Prior to consolidating their mortgage they were making monthly payments of - $665 on their home - $420 on car loans – $220 on credit card debt - $150 on a personal loan they used to buy furniture.

All their debt totaled $120,000 at a monthly payment of $1,455.

They decided to refinance their home for $134,400 and pay off all their other debt with $14,400 left over that they would use to help pay for the students college education. Using the Debt Consolidation, the Smith’s will achieve a considerably lower monthly payment ($1,455 vs. $894) and increase their cash flow by $561 per month.

They will also receive a lump sum cash amount of $14,400 from the new mortgage. This additional cash flow, combined with the student loans and the Smith’s $400 per month contribution from current income, will allow the Smiths to do the following:

Fund Johnny and Sally’s educational expenses. The $14,400 reserve funds can be used when the Sally starts college in the third year because of the shortage of income from the cash flow. Once Johnny graduates from college, the reserve fund would be reduced to $8,206 and will no longer be needed to draw from.
Once Johnny and Sally are no longer in college the Smiths can take the $961 of monthly payments they were paying toward college expenses and start to pay toward their 30-year mortgage. By prepaying their mortgage they will have the house paid off in 13 years. By this time Mr. Smith is age 60 and the reserve account has grown to a value of $13,451 (based on a 7% return after taxes).

· After the mortgage is paid off, the Smith’s can take the $961 a month and apply it toward their retirement. By the time Mr. Smith reaches age 65 they would have accumulated $155,838 into their retirement, base on a 7% after tax return on the investment (this also includes the money reserve they started with at the beginning of the planning process).

You maybe asking, what if the Smiths need a new car while the kids are in school, want this throw their plan out of balance?

NO, not really, because the new car payments can be made by the increase in income that Mr. and Mrs. Smith would receive from their employment if they receive wage increase of 3 to 4 percent yearly.

By knowing how to borrow correctly the Smith’s will not have to change their current financial lifestyle or tap into their retirement fund in order to pay for their children’s college educations.

The Chart on the next page will illustrate how this idea is incorporated.

The Cash Flow Analysis Table below demonstrates the Smith’s Personal Residence loan strategy.

STEP FIVE

Evaluating Assets and Liabilities

It is now time to open the information you have accumulated in your files. We asked you to write down your assets. Look over the list of assets and find assets that can be used to help pay for college. Some of these assets can be liquidated or borrowed (leveraged) against.

Examples:

Fixed Income Investments
CD’s
Bond Accounts
Stock Mutual Funds
Rental Real Estate
Undeveloped Land
Cash Value Life Insurance
Personal Residence
Second/Vacation Home

Try to find assets that are not productive (income wise) or instead of having income producing assets reinvest its earnings, take the income in cash to help pay for college. If you will not qualify for financial aid (no scholarships or grants) and you want to liquidate an asset that has a capital gain think about gifting the asset to the student and let them sell the asset and pay lower capital gains taxes (check with your CPA on the Kiddy Tax Rules).

If you sell an asset that has a capital gain you may pay a capital gains tax of 15%. If you gift the asset to the student and they sell the asset they may only pay 5%. Make sure to consult with their professional tax planner before selling or gifting any assets (Ask About The Kiddy Tax Rules).

If you decide to borrow against these assets you can use the borrowed money to pay for educational costs and could deduct the interest on the borrowed funds as a student loan interest deduction on your taxes.

You can deduct up to $2,500 a year as long as their income is with in a certain limit (check with their tax professional).

The following pages will give you an idea on how to use the equity in your home to pay for college and benefit in THREE ways.

Ideas On How To Use Equity In A Home

A personal residence loan is one of the few investment vehicles whose interest charges are tax deductible. Families in middle and high income tax brackets can take maximum advantage of this tax write-off.

Parents, whose income is too high to take advantage of the student loan interest deduction, could use the interest on a mortgage loan to provide an itemized tax deduction. There are a wide variety of personal residence loans that can be used to fund college expenses. The family can use any combination of mortgage loans with fixed or adjustable rates to meet their intentions, including those with minimum monthly payments while the student is in college.

Many families find themselves with a shortfall of funds to pay the entire cost of college and end up with a cash flow problem.

To increase cash flow the family can either do one of two things:

· Increase their assets, or

· Decrease their liabilities (debt).

Here Is A Planning Tip:

Families can use the same method used by many corporations to decrease liabilities and increase cash flow called DEBT RESTRUCTURE or DEBT CONSOLIDATION.

Hundreds of Companies do this by refinancing their assets and consolidating all their debts into one smaller payment extended over a longer period of time.

This allows the company to make their assets more productive and establishes a new budget for expenditures.

Families can significantly increase their cash flow by applying the same debt consolidation methodology to their liabilities, such as home mortgage, car loans and credit card debt.

By consolidating your debt payments into one lower payment, you can increase cash flow to pay college expenses, fund your retirement and even pay your home mortgage off earlier than anticipated once the student is out of college.

The theory behind debt consolidation is simple.

Home equity is one of the family’s main assets, yet home equity is a very unproductive asset. Home Equity DOES NOT earn interest. You can increase home equity by one of two ways,

· Increasing the value of your home by making improvements

Decreasing the debt owed on it