The Campus Credit Card Trap

Inside Higher Ed reports that a new survey is out from the US Public Interest Research Group (PIRG), called The Campus Credit Card Trap. This study is just the latest of many examples that illustrate that credit card companies aggressively target college students, often with the assistance of the colleges themselves. For example, colleges sell their students' contact information to these groups, work out deals that allow them to obtain commission payments and profit from their students' debt, and allow the companies to solicit students on campus and at off-campus school events.

Shame on the colleges for not doing more to protect their students from these dangers.

How the 2008 Tax Rebate Penalizes Student Loan Borrowers

In May 2008, many Americans will receive tax rebates of $600 each...unless their "adjusted gross income" is higher than $75,000.

How this cutoff income level was determined is anyone's guess. It seems very arbitrary - especially since it does not take student loans into account.

Many people who earn a bit more than $75,000 are also drowning in student loan debt. In fact, it can be common for doctors, lawyers, and businesspeople who earn $75,000 - $100,000 to have total student loan debt of $100,000 - $200,000, including debt from both college and graduate school (requiring payments of over $1,000 per month). But none of these people will be eligible for the tax rebate.

The student loan borrowers get screwed again...

Update: Learn what kinds of college tax benefits you're eligible for at:
http://www.finaid.org/otheraid/tax.phtml

Update #2: Students whose parents still claim them as dependents are unfortunately not eligible for the 2008 Economic Stimulus Reabte of $600 (although these students may be eligible for a tax refund if they paid too much tax in 2007). For more information about dependent students and the Stimulus Rebate, see: http://vcuinsight.wordpress.com/2008/03/24/tax-rebate-unfair-to-students/

If you're still confused by all of this (and who could blame you), write your question below in the Comments box, and I or someone else will respond.

Business School News

Some interesting information from the January 2008 issue of The Economist:

a) Some graduate business schools now allow applicants to take either the GMAT or the GRE, when in the past only the GMAT had been allowed. This is good news for students who are more comfortable taking the GRE...or those who like it's cheaper price tag ($140 for the GRE vs. $250 for the GMAT).

b) The Economist has complied a ranking of distance learning MBA programs, which can be helpful for students who are interested in attending one of those kinds of programs. Students also need to understand that these programs can take longer than regular MBA programs, they should check that potential employers would accept the degrees, and, as usual, they should look for the best combination of low costs and high value.

Misleading Claims From Upromise?

I was surfing the web this week when I noticed a banner ad for Upromise that implied that it could help students "Attend College Debt-Free." See a larger version of the offending ad by clicking on the image above.

For those who don't know, Upromise is a service that (basically) allows its members to get cash back when they buy things, and they can then use this refund to pay for college.

However, I've been suspicious of Upromise for awhile, and I devote a page to them in my book. Based on everything I know about them, their banner ad appears extremely misleading. As far as I can tell, none of their members come anywhere close to paying for college just with the refunds they receive from Upromise. Far from it. For example, this Upromise member, named Amanda, says that after being a member for three years, she's only received $21 from Upromise. In fact, Upromise encourages its members to sign up for credit cards!

I would like to see Upromise clarify their claims, and publish actual data about how much money their members truly receive, on average. As I explain in my book, my fear is that Upromise is benefitting more than its members are. For example, Upromise can encourage its members to spend too much, or to sign up for credit cards and investments that may cost them more than others. After all, Upromise is a business. They have to make their money somehow.

Read more about my new "paying for college" book here.

March Marketing Madness

“March Madness” is upon us once again. Arguably one of the most exciting events in all of sports, the NCAA tournament takes 65 of the country’s best college basketball teams and whittles them down to a national champion in only three weekends. The tournament also brings people together across the entire country, as friends and co-workers compete in betting pools where picking the correct winners can lead to bragging rights, fortune, and fame. And these games can foster strong positive morale among the students whose schools are competing. But do the winning colleges offer better value for students? It’s an important question, especially since many impressionable high school seniors decide which colleges to attend at the same time that the tournament plays out.

Do students actually pick their colleges based on something as frivolous as basketball games? Maybe not entirely, but sports play a prominent role in many students’ decisions. Consider the case of Gonzaga University. Its basketball team significantly improved its performance from 1998 to 2004, and the school’s enrollment leapt by 27%, while applications doubled. Even Gonzaga’s president admitted that most of the rise in student applications was “attributable in great part to basketball.” A similar game plan unfolded at George Mason University: after reaching the “Final Four” in 2006, the school blasted email messages to 300,000 prospective students, explicitly stating, “If you remain interested in attending a world-class university with one HECK of a basketball team, we urge you to complete your application.”

In these ways, colleges often use sports as a major form of advertising and publicity, just like any other aggressive business trying to lure in customers. In fact, despite the (admittedly small) risk of being punished, many colleges allow their sports programs to engage in significant rules violations, because they know that an edge in sports performance can translate into significant financial winnings off the field. It seems that Groucho Marx was on the right track when he once jokingly implied that, if given the choice, universities would probably tear down their classrooms before tearing down their sports stadiums.

Some people may think that college sports marketing is not that big a deal, especially if it helps students learn about promising schools they may never have heard of otherwise. After all, Gonzaga and George Mason (and their competitors) are not necessarily bad schools. However, the problem is that students can make serious mistakes by choosing colleges based primarily on sports and other “marketing madness.” For example, this kind of decision-making can lead students to overlook risky college features like high costs, high debt, or educational weaknesses in the specific subjects each student wants to study.

Unfortunately, these are exactly the kinds of financial problems that hamper too many of today’s students. Although students pursue college degrees as a ticket to success, many of them graduate with $23,000 or more in student loans (plus grad school debt), and then earn much lower salaries than they expect, leading to significant delays in personal milestones like getting married and having kids. Therefore, about half of student loan borrowers regret borrowing as much money for college as they did, and one out of five borrowers give up their career dreams and obtain higher paying jobs in order to afford their loan bills. Therefore, applicants need to approach their college decisions with appropriate thoughtfulness and caution.

And it’s not just new college students that can be misled by college sports; current enrollees can be similarly affected. Professor Murray Sperber of Indiana University has suggested that many colleges support their sports programs in an effort to distract students from the fact that they are paying too much for their education, or receiving too little for their money. He has called this diversion a system of “Beer and Circus.”

These are important ideas for applicants, students, and their families to remember as they watch the NCAA tournament and decide which colleges to attend. College consumers would be wise to ignore sports, and focus instead on the costs, debt, and academic quality represented by each college they consider. In that way, students may be able to make good college decisions…regardless of which school wins the tournament.

College Debit Card Scandal

First, we had the student loan scandal that the Attorney General of New York, Andrew Cuomo, uncovered. Then, he pledged to take a look at colleges' deals with insurance companies, textbook companies, food services, and credit card companies. Now he's taking a look at college debit cards.

As USA Today reports today, a number of colleges encourage their students to sign up for debit cards -- and then profit from the arrangement, as their students are hit with high costs and fees.

Let's hope that AG Cuomo, and his assistant Benjamin Lawsky, get on this case fast...until then, students should watch out for bad debit card deals and expensive overdraft fees...

UPDATE 4-22-08: Check out this revealing article about college debit cards from Higher Ed Watch and the New America Foundation.

Recession Update

Once in awhile, I'll post some information about the general economy, and this seems like a good day to do so. Unfortunately, the past week was not a good one for the U.S. economy. Inflation is up, the dollar is down, and unemployment is up for I believe the third straight month. In addition, the major investment bank Bear Stearns almost went out of business and had to be rescued.

What are the main lessons for college students?

a) Many of the problems in the economy were caused by unmanageable debt. This has been especially true with mortgages, as many people were allowed to buy homes that they really couldn't afford. Just as people shouldn't buy homes they can't afford, students and families should not pursue college degrees they can't afford, especially if they need to borrow unmanageable loans to do so.

b) In addition, if the U.S. is headed toward recession, then it may be especially important for students and families to: limit their college spending; attend affordable colleges; and then have money left over for other expenses. This may be especially true because new college grads may face lower starting salaries and a tougher job market during the next few years, as an economic downturn plays out across the country. If grads receive lower salaries, then they will be glad that they lowered their costs and attended less expensive schools.

March Madness 2008

Just a brief note to say "stay tuned" for my March Madness post later this week, probably on Wednesday or Thursday. It will flesh out my belief that students should pay more attention to academics and costs when they decide which colleges and universities to apply to and attend, rather than whether the schools have good sports teams. The decision to pick a college should be guided by much different factors than how you pick your NCAA 2008 bracket. More in a couple of days....

College Blood Money?

Is it too harsh to imply that unmanageable student loans and credit debt built up in college are "blood money"? What about after you hear that the two have been linked to several suicides?

In the first chapter of my book, I talk about Sean Moyer and Mitzi Pool, two students who committed suicide after racking up thousands of dollars in debt on credit cards they obtained on their college campuses. Their stories are one of the main reasons I started writing my book in the first place, to bring their stories to a wider audience and try to prevent other students and families from similar fates.

Now I've heard the story of Jason Yoder, a 35-year old who took his own life in August 2007, after racking up over $100,000 in student loans. You can read more of Jason's story here.

Some people may say that these suicides are due to more than just debt, that these students must have had more going on and the debt can't be blamed. And these critics may be correct. But Sean often talked about being overwhelmed by his debt. And Mitzi's debt bills were spread out on her bed when she was found. And Jason had high debt and took his life in the very same laboratory where he studied to obtain his Master's degree! You don't have to be Sherlock Holmes or a psychoanalyst to see a connection here.

In fact, many research studies also support a connection. For example, several studies have found a link between unemployment and suicide. And another recent study concluded that "Suicide Risk May Increase When Debts Pile Up," whether people have a history of depression or not.

Yet many colleges continue to encourage unaffordable loan and credit debt, and the U.S. government continues to try to find new ways to get students to borrow more money. It's time for colleges and government to put these actions to an end, and strve to reduce student debt.

The Danger of Career Colleges, Trade Schools, and Private Loans

I like the idea behind career colleges and trade schools, but too many of their students get scammed.

Let's take a step back for a second: what's potentially good about these schools? In theory, they can help students learn practical information to prepare them for jobs, without going to a 4-year college. In addition, they may offer classes on flexible schedules, and their instructors may have a sincere interest in teaching, as opposed to the professors at most schools who are mostly interested in conducting research.

However, too many students at career colleges and trade schools are getting exploited. There are articles printed almost everyday illustrating that many of these schools recruit students improperly, or encourage students to borrow unmanagable loans, including dangerous private loans. And one recent article even speculated that these schools purposely run advertisements on TV during the day, to rope in unsuspecting suckers. Worst of all, many students can't get jobs after graduating from these programs.

As usual, the main point for new students is to understand what you're signing up for, and do your homework to make sure that your costs will be affordable and that employers will want to hire you after you finish.

Few Athletic Scholarships at Colleges

On the heels of my post yesterday wondering if college atheletes should be paid, The New York Times reveals today that few college athletes even get scholarships (The Scholarship Divide: Athletic Scholarships, Expectations Lose to Reality).

This is often very disappointing for the students and parents that have spent many years training and hoping to receive full scholarships. And they often don't find out until they apply to the colleges; their expectations are way out of line. In addition, the colleges can withdraw the scholarships after one or two years; they're not guaranteed for all 4 years.

So, what's the solution here? On one hand, it seems exploitive to not compensate the athletes with rewards like scholarships and salaries, especially in the sports that allow the schools to receive publicity. On the other hand, it seems unfair to fill up student spots with athletes when the spots could go to students who are more academically talented instead. It's a tough call.

At the very least, schools should probably be required to allow their students enough time and rest and support to perform adequately in their classes and graduate (if they have the academic ability to do so).

Should College Athletes Be Paid?

March Madness is upon us, and I'll have more to say about it next week. But this new article, Should College Athletes Be Paid?, raises some interesting questions.

Most college athletes receive admissions advantages (even at the Lvy League) and scholarships that allow them to attend college for free. But that's about it (although some schools give extra payments to their superstar players). [UPDATE: Most athletes DO NOT receive scholarships or special financial aid]

Colleges benefit tremendously from sports, either from tickets, TV broadcasting, advertising, sponsorships, food and drink, merchandise, or publicity that attracts students and donations. But the schools usually don't provide any of the following things to their athletes: health insurance (or other employment benefits), salaries or stipends, the ability to seek out endorsement opportunities for extra money, or even enough time to attend all their classes or study for their exams.

In my opinion, it seems unethical and exploitive for schools to deny these things from their athletes - especially since many college athletes never graduate! The controversy continues....

How "Truth in Tuition" Hides (and Increases) Students' Costs

There are several efforts around the country to convince colleges to create "truth in tuition" or "fixed tuition" plans that will allow students to pay the exact same price during all 4 years of college. See one report here. On its face value, it sounds like a godsend: the end of (some) college price increases! And it's been reported that 77% of Maryland residents support the idea. But these kinds of plans can actually hide - and increase - students' costs.

The problem is that these plans simply allow colleges to spread out (and hide) their increases over all 4 years. For example, let's say a college usually charges its students $8,000 during the first year, $9,000 during the second year, $11,000 during the third year, and $12,000 during the fourth year. Under a fixed tuition plan, the college would simply charge students $10,000 over each of the 4 years. As you can see, the student ends up paying a total of $40,000 either way.

However, the first-year and second-year students end up paying more per year than they would under a regular plan. In addition, some of them may drop-out or transfer to other schools, and therefore not gain any benefit from paying these extra costs early.

Therefore, instead of pursuing fixed tuition plans, colleges should simply commit to telling all of its applicants exactly what kinds of price increases to expect during each of their three remaining years. That way, families can save up for the extra costs, and possibly gain some interest on their savings, rather than paying extra costs prematurely.

College Safety Rankings

Last month, Reader's Digest released a report that rates safety at 135 college campuses. This report should be of interest to anyone applying to college - and their parents.

The report is called "Safe at School?" The Reader's Digest Campus Safety Survey and Campus Crime Rankings, and it's available for free here. One of the most interesting findings is that several urban schools, such as Johns Hopkins University and New York University, got safer ratings than many schools in suburban areas or smaller cities, including Bryn Mawr College and Wesleyan University.

Check it out.

Harvard Goes to the Dark Side

Et tu, Harvard?

The New York Times published a scathing article about Harvard University yesterday. The article, called, "In a New Era At Harvard, New Questions of Standards," exposes the fact that Harvard has lowered its academic standards for the athletes it accepts, in an effort to win more games. The article also suggests that Harvard has broken some athletic rules in its recuitment of athletes.

This is just one more example that the search for profit tends to trump education and ethics these days, even at our most prestigious colleges and universities...

Valuing Undergraduate Business Schools

The trend I'm about to describe tends to appear across many different kinds of higher ed programs, so every student should consider these issues as they try to get good deals.

BW just released its annual ranking of the Top 50 Undergraduate Business Schools. In looking at their list, I notice that, although each of the top 25 schools lead to median starting salaries of $45,0000 - $60,0000, 14 of these programs cost about $35,000 per year, while 9 of these programs cost much less, between $3,840 and $12,585 (and one costs $19,291).

The point here is that when it comes to higher education, students can often spend less but get roughly the same financial benefits. This is an important idea to consider as students choose college and graduate programs to attend.

Colleges With No Application Fees

A number of people have recently asked me how they can avoid the high cost of college application fees, which can be as high as $100 at some schools. That's a lot to pay, especially if you don't even have a guarantee of being accepted. In my opinion, colleges should refund the fees of students they reject, or at least students they reject that have a minimum SAT score, but that's a post for another day.

Today, let's talk about how to avoid college application fees. First, I'd recommend that all applicants write to or call the colleges and ask if the application fee can be "waived." Many colleges will waive the fee, especially for low-income students.

There's also a "fee waiver" form online, at this site. With your high school guidance counselor's help, you may be able to use this form, or modify it, and then submit it to the college.

Finally, there are (thankfully) a number of colleges that do not require application fees. A full list of these colleges can be found at this Free College Applications site.

For more about my book on college admissions and financial aid, click here.
Good luck!

The Big Give

Watching TV tonight, including Oprah's Big Give, I was reminded how many people are in dire need of financial help...and that colleges generally don't fall into this category. At least, the 136 colleges that have at least $500 million don't really need the donations they keep begging for (especially considering the high tuition prices and loans that many of them require of their students).

Some alumni feel pressure to give back to their colleges, because they appreciate the financial aid they received and want to return the favor. However, any ethicist will tell you that there's no obligation to donate to a billion-dollar organization, especially when there are so many impoverished people in this country (and the world) that desperately need the money instead.

With that in mind, I'll point you to the superb story that 60 Minutes ran tonight, about Remote Area Medical. This organization, completely sponsored by donors and volunteers, drops into towns for a weekend at a time to deliver free medical care to as many people as they can. On a recent weekend in Tennessee, they delivered free medical care, including dental work and mammograms, to more than 1,300 people.

I'd like to see one of the presidents at the 136 richest colleges explain why his or her school needs a $100 donation check more than Remote Area Medical does.