College Board: States' money strains = higher public college costs

Students at public colleges and universities are bearing a higher increase in tuition and fees this school year than students at other types of institutions, the College Board reported today. 

In its report, Trends in College Pricing 2009, the not-for-profit organization reports that overall costs for in-state students in four-year public colleges average $7,020 in the 2009-2010 school year, an increase of $429. Total charges, including tuition, fees, room and board, are up 5.9 percent, to $15,213. 

Out-of-state tuition and fees for four-year public colleges and universities average $18,548, a rise of 6.2 percent over the prior school year. Average total charges are $26,741, up 6 percent. And tuition and fees at public two-year schools are up 7.3 percent, to $2,544 a year. 

The increases in public college costs, the Board notes, occur against a backdrop of lower state education appropriations and higher enrollment. State appropriations for the 2008-09, the last school year for which data are available, did not keep up with inflation has they had done in prior years. Per student, the average $7,953 appropriation was $1,100 less in constant dollars than a decade earlier. 

Private, not-for-profit, four-year colleges increased their tuition and fees the least, 4.4 percent, to an average, $26,273. With room and board, these schools charge the most, on average: $35,636. 

The good news and the bad

On the positive side, students rarely pay the published prices, the report says. About two-thirds of all students receive grants; among students in public institutions, the average grant was $5,400, leaving a net cost of around $1,600. Students in private colleges received, on average, $14,400 in grant aid and tax benefits, reducing their out-of-pocket bill to about $11,900. More students are taking advantage of federal Pell grants, Hope tax credits and other forms of financial aid that increase affordability. They're also moving away from higher-interest private loans, which generally offer less generous repayment options than government loans.

Have tough times prompted colleges to ease application fees?

As the parent of a newly minted high-school senior, our mailbox has been flooded with brochures, catalogs, and open-house invitations from colleges across America.  That goes for our e-mail inbox as well. The pitches just keep on coming. Don't get me wrong. I welcome the information and, in fact, wish I'd been courted so tenaciously when it was my time to consider schools.

Within the last few weeks, however, the pace of the mailings has picked up. Within the past couple of days alone, my daughter has gotten e-mails from Siena College, outside Albany, N.Y., Wells College, also in upstate New York, and Fordham University in the Bronx, saying that if she applies online within the next month or so, they'd waive the $50 application fee. Mind you, these were unsolicited pitches.

To sweeten the offer, Siena promised an admission decision in "just one week" and told her not to worry about writing a "brand new essay." Instead, they said, "send us a graded paper you've already written." By applying before the Nov. 15 deadline, the school said, my daughter would also be considered for $28,000 over the next four years. Wells' pitch was fairly similar. 

I've encouraged my daughter to investigate the application process, whether or not the schools are at the top of her wish list, because it's good experience. She's got nothing to lose and everything to gain.

According to Collegeconfidential.com, a site that offers advice on how to choose, apply, and pay for higher education, there are several ways to get a fee waiver when applying to college. As in my daughter's case, a growing number of schools are willing to waive their fees to those who apply online. Also, if you come from a low-income family and feel that paying an application fee would be a hardship, then you can get your application fee waived by most colleges. You need to include with each application a signed statement from your guidance counselor which confirms that you and your family cannot afford to pay application fees. Some colleges include fee-waiver forms with their applications; some high schools have their own forms or use those provided by the National Association for College Admission Counseling or by the College Board. However, it doesn’t really matter how or where the request is written. Your counselor can simply jot a note on school stationery if he or she doesn’t have an official fee-waiver document. Check the colleges on your list to see what fee-waiver options exist.

Ways to improve college 529 plans

The Treasury Department's analysis of Section 529 plans, published this week, offers some useful recommendations for improving these state-based college savings plans, which have become increasingly popular financing vehicles for the middle class.

The report offers several ways states can improve their plans. Here are two we like a lot:

•Offer more age-based index funds. Funds that provide stock and bond allocations tied to a child's age are popular and well-suited for many middle-class families. That's because the proportion of stock gradually decreases over time, reducing risk of serious financial loss as the child approaches college age. But 5 of 48 state-based programs don't offer such funds. And while index funds have proved to be a cost-effective way to achieve good returns over the long run, only 23 of the 43 states with age-based funds offer them in index versions.

•Dump the home-state bias. Only Arizona, Kansas, Maine, Missouri, and Pennsylvania give a state income tax break to residents who put their money in the 529 plans of other states. If all states would do this, more parents could shop around for the least-costly plan that suited their needs.

Click here to read more of the Treasury's recommendations. Recently, Consumer Reports Money Adviser's Money Lab analyzed 529 plans, and found 5 that earned A's.  Click here for the report.

College students and personal finance, Part 4: Financial independence

Editor's note: As the new college year revs up, Consumer Reports Money Blog devotes several days to the personal finance issues of college students. Here, Nicole Willis, one of our college-age summer interns, muses on what she's learned–and has yet to learn–about financial independence:

My four-and-a-half year ride through college, financially, consisted of both my dad’s hand gripping the back of my bicycle seat and my mom holding onto one of my handlebars. While I moved out of my family’s suburban Orlando house and onto my large university’s campus, I was only seven miles away and visited home at least weekly for my dad’s asparagus and pine nut pasta. While I did my own laundry, I did it at home in a twenty-first century front-loading machine without quarters. And when it came to my finances, I was very laissez-faire: my parents not only funded everything (except my car’s gas and the occasional night out, for your information) but they kept track of everything that needed to be paid for: my tuition, my sorority bills, car insurance, cell phone bill, etc. My tuition and textbooks were taken care of, however, by the Florida Prepaid College Program and by a scholarship I received in high school.

The only time I interacted with money-related acronyms in high school and college was when I was recently hired for a new job, which occurred about once a year since I was 16. When eagerly filling out the preliminary paperwork, any and all forms with a bold W or I on the top instantly turned my eagerness into a bowl of mashed potatoes. But I luckily recalled my dad telling me upon getting my first job to put a “1” at the bottom, and I was OK.

Needless to say, I still have much to learn about being financially independent. I need to be tutored in all that’s involved in paying for grad school, finding my own health insurance, saving for my retirement…the mashed potatoes feeling is coming on again. I currently have a part-time job to return to in Orlando in the fall, and am actively seeking that first full-time job for when I’ll be an alumna in January. I just have to remember “1” for when that next first day comes.

Nicole Willis is a fifth-year, "super senior" at the University of Central Florida, majoring in journalism and psychology.

College students and personal finance, Part 2: Saving on campus

Editor's note: As the new college year revs up, Consumer Reports Money Blog devotes several days to the personal finance issues of college students. Here, Michael Ng, one of our college-age summer interns, muses on what he's learned about saving money on campus:

Instead of buying all your textbooks...make friends! Every subsequent year I spend less and less on books when in fact, the books get more and more expensive. Textbooks are definitely not cheap, and oftentimes courses won't even need you to use the entire book, and sometimes, not at all! A mistake that some students tend to make is that they buy books before a class actually starts. DO NOT buy textbooks before attending the first class! Professors usually have a grace period for textbooks, since the first few courses are generally introductions and will not need the use of a textbook. Also, kinder professors have grace periods for students who cannot obtain textbooks–such as during shortages–or for those who bought the books online.

It is a good idea to not buy the books beforehand because in some cases, the professors will tell you not to buy the books on the book list; that happened to me in my first class at college. So, a good alternative would be to get to know the people who are in the same class and offer to pay for a part of the book in order to share it. It is definitely the easiest way to save money, and a great way to make friends and meet new people as well.

Learn how to shop around. Oftentimes, for things such as food and essentials, larger stores have coupons, sales, or specials that can save you quite a bit of money in exchange for some research once in a while. Keeping track of prices can save you money, and although fifty cents here or a dollar there may not seem like much, it adds up. Continuing that thought...

Learn how to cook your own meals. It may not be immediately apparent, but cooking your own food can be cheaper. Not only can you eat what you like, you could make more and store the leftovers for another time. Raw ingredients are usually cheaper for more, when compared to prepared food. Though it may not store as long, food is usually tastier fresh anyway. Plus, school plans are often overpriced. However...

Don't rule out a small meal plan. Personally, I do cook my own meals, but sometimes it may be inconvenient for me to cook a meal from scratch. At those times, I use the money in my meal plan to buy prepared food. My particular plan is non-mandatory, and significantly cheaper than the alternatives to eat exclusively at the dining halls. So, I can save money by not having to eat at the dining halls every day, yet I don't sacrifice the convenience of eating whenever I want without having to cook.

Invest in a water filter and a water boiler. Depending on the institution and dorm rules, water heaters may not be allowed. But regardless of living situation, whether it is on- or off-campus, definitely buy a water filter. Unless you particularly enjoy spending money on bottled water all the time, a water filter saves money as well as the environment. Just using water from the tap to get drinkable water saves money in the long run, and buying a durable water bottle yourself saves buying lots of plastic.

Know which banks are on campus. Instead of opening an account at a bank that is close to home, know what is more convenient on campus. More often than not there will be multiple choices instead of a monopoly, but it will still be good to know. Bank visits at school tend to be more dire–such as when you're low on cash–so it may be good to think about convenience at school in those situations, rather than thinking about the home situation.

Consider wholesale club memberships. If there are warehouse or wholesale stores near campus, such as Sam's Club or Costco, consider getting a membership at those stores if you don't already have one. Wholesale prices are generally better than retail, and for essentials like tissues, toilet paper, and paper towels, it would be good to buy those in bulk anyway.

Good Things To Have: Exacto knife, Tape (heavy duty, masking, all kinds), Can opener, Surge protector (since extension cords are usually not allowed),and a Microwave oven.

Michael Ng is a senior at Binghamton University, majoring in computer science.

College students and personal finance, Part 1: Credit-card debt

Editor's note: As the new college year revs up, Consumer Reports Money Blog devotes several days to the personal finance issues of college students. Today, we address some aspects of credit-card debt. In the days that follow, we'll feature the musings of several of our college-age summer interns on what they've learned about personal finance since leaving the nest.

Among the new credit card reform rules that kick in as of February 2010 are two provisions designed to help keep the under-21 crowd from getting themselves in over their head with credit card debt. 

It’s a growing problem,  especially on college campuses. Currently, 84 percent of college undergraduates have at least one credit card,  while  more than half carry four or more, according to the most recent survey by Sallie Mae, a leading originator of federally-insured student loans.

The average balance students carry is $3,173–higher than in any previous studies. Only 17 percent of students pay off balances each month, with the majority paying interest rates averaging 14 percent on their mounting debt load.

The new credit card reform rules will regulate aggressive marketing of credit cards to college students,  which have included offers of free T-shirts or I-Pods to lure them to sign up.  And as of February, under-21 consumers won’t be able to get a card unless they either have a co-signer or can document their ability to repay card debt.           

While building a good credit history is a smart move for students, the best way to do that is to shop for a credit card with no annual fee and use it to charge a recurring expense,  paying off the card bill on time and in full each month.

But be wary of pre-paid cards that may be marketed to students and others with a skimpy or poor credit history because this kind of plastic is likely to only get them in more hot water,  according to a new report from Consumers Union (click here to link). 

The report points out that consumers can end up paying a mountain of costly fees with pre-paid cards,  which are reloadable cards that usually carry Visa,  MasterCard or Discover logos and are marketed with slogans such as “The Checking Account alternative that lets you borrow money and builds credit.”–Andrea Rock 

            

            

Back-to-school economy II: The cost of a quiet place to study

In a recent post, I noted the trend of more college kids living at home because of the recession. Note to stay-at-home-students: Don't expect too many perks besides the break on living expenses and Mom’s cooking. Like, say, a quiet room where you can study. In a recent survey, our experts found that the average cost to remodel a 12-foot by 12-foot room into a home office, including custom cabinets and wiring for phones and electronics, is $27,193. That doesn’t include the computer.–Jean Pietrobono

Back-to-school economy: Fewer luxuries, more college kids at home

If you plan to spend less on back-to-school gear this fall, you’re not alone, according to a recent survey conducted by the National Retail Federation. The trade group’s recent survey showed more families are buying only necessities and searching for sales. The average family with students in kindergarten through 12th grade is expected to spend just less than $550 on supplies, clothing, and such, a drop of 7.7 percent from 2008.

But the economic downtown has resulted in more drastic changes for some college-bound kids: To save money, they’re forgoing the whole dorm room/cafeteria food/breaking away experience and living at home with Mom and Pop. Nearly three out of five college students (58.5 percent) will live at home this year, compared with 54.1 percent last year and 49.1 percent in 2007, the NRF says. 

College students and their parents will spend more on school supplies and clothes than younger students, about $620 in 2009. And the NRF survey did not include the cost of college textbooks in its estimate. Textbooks often cost more than all other college supplies combined.

On average, college students and their parents fork out about $700 a year for textbooks and course materials, according to a report in the August issue of the Consumer Reports Money Adviser. The report describes some new ways college students have found to save on textbooks, primarily by shopping online.

For more tips on everything from buying the right backpack to best cars for teen drivers, check out our special back-to-school section.–Jean Pietrobono

New student loan changes spell relief for many

Starting today, your monthly federal student loan payments can be linked to how much you can afford based on your salary and family size.

The major downside of this of course is that you’re pushing your payments further into the future, so you will ultimately pay more in interest over the long run. But for people facing an immediate financial hardship, it can be a real help. You can use this calculator to see how much your monthly payments might be lowered under the income-based repayment plan. The plan is most advantageous for people with high levels of student debt. If you have lower student debt, you may want to take a look at an extended repayment plan. 

Another feature of the plan is that after 25 years, whatever part of the loan that is unpaid is forgiven. Public servants can have their loans forgiven after 10 years of work in the field. Public service - as the U.S. Department of Education defines it - includes work in schools, government and many nonprofits. Mark Kantrowitz, publisher of FinAid.org, says that if you don’t plan on spending the full 10 years in public service required for loan forgiveness, you may want to look at some of the upfront loan forgiveness programs that are offered for civil servants.

Additionally, the interest rate on new undergrad subsidized Stafford student loans dropped today to 5.6 percent from 6 percent. It will continue to decline annually, reaching 3.4 percent by 2012–which may seem a little unfair to students taking out loans today.

With interest rates at rock bottom, now is also a great time to refinance existing Federal student loans if you have variable-rate loans originated before July 1, 2006 (student loans since have been fixed-rate loans). Former students in the 6-month grace period following graduation can now refinance to 2 percent, graduates already repaying loans can consolidate to 2.5 percent, and PLUS loans can be consolidated at 3.38 percent.–Chris Fichera

Madoff's 150-year sentence doesn't mean the end of financial scams

Unless you were among his many victims, you might think the 150-year sentence Bernie Madoff received today would put an end to big investment frauds on Wall Street.

But sadly Madoff is not the only swindler out there who would be happy to part you from your cash. One recent reminder: the indictment of R. Allen Stanford, the Texas financier who pleaded innocent last Thursday to federal criminal charges of stealing $7 billion in an international Ponzi scheme.

Check out who is likely to be taken by a scamster, and the details on investment schemes and how to avoid being ensnared by them.–Mandy Walker