How to Get a College Degree without the massive, crushing debt inflicted on us by the “Student Loan Industrial Complex.”

Testing Out: How to “Moneyball” Your Way to a Debt-Free College Degree

I don’t know about you, but I’m fed up with the ancient “college savings tips” so-called experts keep force-feeding us:

“Fill out the FAFSA before senior year to maximize aid eligibility!”
“Buy used textbooks, you’ll save hundreds!”
“Apply for scholarships. Try FastWeb.com!”

If you follow this advice, you will be thoroughly and totally prepared for college…in 1995. (You know, just in case that year ever comes back.) But in 2013, these strategies will get you slaughtered by the “Student Loan Industrial Complex.”

[...]

Why You Should Look at College Like an Investment

If this post makes it sound like you’re “Frankensteining” your education, cobbling various exams and credit sources together to form a degree…you’re right. That’s exactly what I’m advocating.

This might seem strange at first, but I encourage you to look at it differently.

Why do we see college as this magical guarantee of financial success? It’s because of these oft-cited studies on how much more graduates earn over their lifetimes than non-grads. We hear sweeping statements (“people with bachelor’s degrees earn $1 million more!”) and assume that it MUST be a great investment, no matter what it costs.

Actually, we don’t just assume it — we’re explicitly told that it’s true:

“Over a lifetime, the gap in earning potential between a high-school diploma and a bachelor of arts is more than $800,000. In other words, whatever sacrifices you and your child make for [a] college education in the short term are more than repaid in the long term.”

That’s from CollegeBoard, the organization that makes the SATs. They’re basically telling you to just pay whatever a degree costs.

It’s horrible advice.

You don’t make huge financial decisions with simplistic rules like “whatever sacrifices you make are worth it in the long-term.” How is that any different than telling you to shoot first and ask questions later? No — you make huge financial decisions is by running the numbers.

Which brings us back to these studies on college graduate earnings. They aren’t “wrong,” but they are misleading.

Here’s why: earning a higher income doesn’t automatically mean you’re getting ahead. You can earn $20,000/year before college, get a $60,000/year job afterwards, and still be no better off. If you spend $100,000 for a degree (and take four years off of work to do it) you have incurred a huge financial and opportunity cost.

You took out a loan against your future earnings which must now be repaid over five, ten, maybe even fifteen or twenty years. Even then, once all the loans are repaid and you’ve earned back all the income you lost by not working, guess what? All you have done is break even!

You’re back at square one. Finally, after years of repaying loans and interest, you can start actually benefiting from the higher income you earned your degree for. Most college students don’t realize that this is what they’ve agreed to until after they graduate. They just see college as a magical guarantee of financial success. Yet whether they realize it or not, their student loans often chain them to a life of indentured servitude.

The return on an investment is inversely proportional to the time and money invested. In plain English: the longer it takes you to graduate, and the more you pay, the less valuable your degree ultimately is. [...]

This is a fascinating article, not only for pointing out the pitfalls of going into debt for an education, but also for the heaps of practical advice for avoiding that debt and still getting your degree.

The comments after the article are just as interesting. The author is criticized for his advice, and he answers his critics. A very lively, informative discussion.

And this isn't theoretical; people are actually doing it:

The DIY Degree: Using Self-Education to Earn a Bachelor’s Degree in 1 Year

“What’s the point of learning, if you don’t get a degree after?”

This has been the biggest criticism of my MIT Challenge, and honestly, it’s not an easy one to avoid. Even if weirdos like me are willing to learn a degree outside of school, the truth is the world still values that piece of paper. Unfortunately, until recently I’ve had little answer to this complaint–it seems if you want the degree, you have to suffer through an often slow and expensive process.

That was before I met Jay Cross. Jay in many ways did a project similar to mine–he completed a bachelor’s degree in less time, mostly through self-study. The only difference? Jay got a real degree for his efforts.

I asked Jay to write a guest post to share his method with you. Not only does it work, but it gets results in the real world as well. Jay has already had career opportunities that would be the envy of a lot of college grads, having staff writing positions for major publications and entrepreneurial ventures. Jay demonstrates that not only can self-education work, it can be a true alternative for many students hesitant about college.

The DIY Degree, by Jay Cross

Today, I’m going to show you a totally new twist on self-education.

We’ve long been told that learning is an “either/or” decision. You can either spend four years in college and earn a degree…OR study on your own with no degree to show for it. But what if you could have the best of both: the credential employers crave, with the speed, personalization and low cost of self-study?

You can.

Using the “degree-by-examination” approach, you can earn a bachelor’s degree by taking tests instead of classes. It works no matter where you live, lets you graduate in one year instead of four, and costs roughly 1/20th the price of a regular degree…with the exact same legitimacy and earning power.

The problem: society DOES still value degrees

Some jobs require degrees no matter how smart you are. Even in more flexible professions (like programming) there’s always one or two “By-The-Book Bob” types who reject non-grads on principle.

This concerned me, even with all I had accomplished already. If there was any way to graduate for minimal time and cost—and eliminate this potential obstacle—it seemed worthwhile to try. Of all the different approaches I researched and read about, degree-by-examination was the college shortcut that actually worked.

Before I explain, allow me to share the struggles that led me to this discovery in the first place. [...]

See how he did it. This is must reading for anyone who is considering going into deep debt for a college education. There ARE alternatives. I wish I had known this back in the day, when I dropped out of college because it was so enormously expensive. These are alternatives that can really work.


Also see:

Graduate faster and spend less money with DIY Degree’s “Cost-Per-Credit” Calculator
     

What's ahead for 2014 tax season

Ask Claudia:

Claudia's Crystal Ball: Tax Filing Season 2014

Each December as many begin to enjoy of the giddiness of the holiday season, I take the time to predict what the coming tax filing season will hold in store for tax advisors and their clients. These are my predictions for filing season 2014:

2014 filing season will not be as bad as 2013. Congress waited until the first week of January 2013 to tell us what the rules were for 2012. For 2013 there will be no retro-active changes, and the biennial list of expiring tax benefits will simply expire and be addressed mid-2014. For many, delayed tax forms meant filing season 2013 didn’t start until the first of March. IRS expects to be ready by the end of January 2014.

Higher income taxpayers with primarily investment income will be blindsided by additional taxes, and wonder why their tax advisors didn’t prepare them for the additional money they owe.

Higher income taxpayers with primarily earned income (in excess of $200,000 for singles and $250,000 for marrieds) will be blindsided by higher taxes this year, and wonder why their tax advisors didn’t prepare them for the additional money they owe.

The Supreme Court’s Windsor decision on the Defense of Marriage Act (DOMA) will create a need for time-consuming discussions with same-sex couple clients who recently married and find they owe additional taxes.

DOMA creates a need for time-consuming discussions with same-sex couple clients who want to discuss whether they should get married and how to avoid the higher taxes they will face. [...]

And that's just half her list. Follow the link to read the other five predictions.

     

The Affordable Care Act. IS it? What IS it?

It's an honest question. Nancy Pelosi said we'd have to pass the Act, to find out what was in it. Now we find out:

Deep Inside The Hot Mess Called Obamacare: It's Time For Honesty.

“Oh what a tangled web we weave when first we practice to deceive,” wrote Walter Scott in Marmion. It begins to appear that the Obama White House, right up to the president, cut class the day that Marmion was being taught. The ensuing breakdown in America’s health insurance system, and the political backlash, shows what happens when integrity is drained from politics.

[...]

“[P]oliticians made a series of short-term fixes that all but guaranteed long-term problems.” Politicians, elected officials, and career civil servants are guided by different incentives than businesses. And follow them. And then are, or act, incredulous when this time officious meddling yet again degrades the quality of goods and services in whose markets they have intervened.

Who would have guessed that tampering with the free market will end, as it always seems to, in tears. Who would have guessed? Not Pyongyang. Not Nation For Change. And, apparently, not freshman Senator turned president Barack Obama. As Abraham Lincoln noted, you can fool all of the people some of the time….

Under the rapidly unraveling deceit what’s really going on?

Is Obamacare really stealth capitalism? Or is it really stealth socialism?

Or is it really something far older and more pitiful? The one thing all seem to agree upon is that it, whatever it is, is stealthy. Is Obamacare simply a badly designed system tangled in a web of lies woven to mask the hubris and the incompetence of those who are, as former U.S. Treasurer Ivy Baker Priest once wittily described herself, “often wrong, but never in doubt”?

In this case progressives have given the American people the hot mess called Obamacare. Who — other than the Republicans, libertarians, conservatives, supply siders, and Tea Partiers vilified by the mainstream media — as well as most Forbes.com columnists — could have guessed that the Affordable Care Act might actually serve to make health care less available and less affordable?

At a certain point spin becomes deception. The promotion of Obamacare crossed that line.

The American people do not appreciate being hoodwinked.

Stealth capitalism? Stealth socialism?

Nobody knows which.

But we mere voters know stealth. And don’t like it. [...]

A shit brick, by any other name...

It's such a mess, I have to wonder if it was ever intended to work, or if it was intended to merely destroy the healthcare system we had, so the government could then try to fix the problem they created by shoving a single payer system down our throats, which is what so many of them wanted right from the start?

I don't think every element of the Affordable Care Act is bad. But as a whole, it is a mess. Republicans should have taken the initiative for healthcare reform when they had the chance. They didn't, so the Democrats did, they did it all THEIR way, and now we have The Shit Brick.

We are just a few days away from January 1st, and I still don't know if we will have insurance by then. Our group policy was cancelled. We were steered toward the state health exchange. We made a choice from there. Half of it went through, half was botched up, and we're still trying to sort it out.

Meanwhile, our old insurance policy was suddenly resurrected for another year and offered to us, with only six days to decide, but by then we'd already committed to the new plan, yet headlines are NOW screaming that the State Exchange is on the verge of running out of money, and our registration with the new plan seems in limbo at the moment.

And what will it do to our taxes? The cost of our previous health insurance was a deduction. The new plan comes with tax credits. Deductions are subtracted from what you owe. Credits are subtracted from what you pay. So our income tax is going to go up as well. So then, how much will we actually save? I guess it's the Nancy Pelosi method: "You have to pay more taxes before you can see how much you will get back".

I want to be optimistic and believe it will all come right in the end. And perhaps it will. But this sure is not encouraging. And it is NOT the way to do business.
     

Interesting Links about Aging, Working, Retirement or not Retiring

An 8.3 Percent Return for Life, Guaranteed: Real or Imagined?

[...] In finance, the word "annuity" refers to a series of payments made to a person (called the "annuitant") for life or for a set number of periods. In this post we refer to a fixed, life annuity, a plain vanilla annuity that will guarantee a set income each month for the rest of your life, no matter how long you live or what dumb mistakes you make along the way. If this guarantee looks familiar, it should, since it is pretty much what we get from Social Security as well as from a traditional "defined benefit" pension -- if we are lucky enough to have one. Both are forms of life annuities because both pay until you die. [...]

I've been curious about annuities. This article has a large question and answer section, which explains a lot.

New Adventures for Older Workers
Has lots of facts, figures and links about the subject matter; retirement, coming out of retirement, working indefinitely, making it in rural areas, all sorts of things. Videos, with interviews of various people in various situations.

How Social Security Pays You to Work Forever

[...] How long do I intend to "work"? Hopefully, right up to my last day on earth. And, as if I didn't have enough good reasons to work, Social Security, it turns out, adds a significant incentive for doing so. The longer you work, the larger your Social Security benefits. This is due to Social Security's "Recomputation of Benefits" provision. Here's how it works -- for all of us older cowpokes who remain in the saddle indefinitely.

Each year you work, you add to your earnings record, leading Social Security to automatically recalculate your benefits. If you are interested, here are the gory details.

In a nutshell, Social Security averages your highest 35 years of earnings to calculate your Average Indexed Monthly Earnings or AIME. Then it plugs your AIME into a formula that figures out your full retirement benefit, called your Primary Insurance Amount (PIA). What benefits you can get for yourself and your spouse (including your ex-spouse(s) and your children, if they are young enough or are disabled) is all pegged to your PIA.

From age 16 on, Social Security considers all your earnings, up to a ceiling that rises from year to year. It then indexes, based on historic wage growth, all earnings through the year you turn 60.

In other words, Social Security adjusts past earnings upward to account for the growth in the economy. But after age 60, you get credit for your earnings without any adjustment at all. So imagine that there's a sudden surge in inflation and wages after age 60 skyrocket. They're going to look spectacular compared to your wages of the past, even though they've been indexed. And here's the kicker. Social Security bases your benefits on your highest 35 years of earnings.

So now imagine that age 30 was the lowest of those 35 years and you made, say, $40,000, even after indexing. But now inflation takes off and you're suddenly making $200,000, even though $200,000 ain't what it used to be.

But for your Social Security benefits, this is a bonanza. You're suddenly being treated as if you were really earning a lot more, and thus deserving of much higher benefits. So, for every year that your post-60 earnings exceed the lowest of the previous 35 years, bingo! You'll raise your Social Security check (or checks, if your dependents are also collecting). [...]

He continues on, using himself and his earnings as an example. Wow.

Recommendation No. 1 for a Secure Retirement: "Age in Place"

[...] Owning an accessible home in which we can age in place is important to keeping our future core expenses down for many reasons. First, and most obvious, owning a home outright in retirement greatly reduces our need for income since we no longer have to pay the mortgage.

In the United States, paying as much as 40 percent of your income for housing has been considered normal. Many of us did this when we were young with growing families and growing incomes. Think of how much better we could have done if we had owned our homes, outright, through our adult lives. In many cases, by not making mortgage payments, our housing-related expenses could have been cut by 75 percent or more.

Contrary to what others may have told us, our standard of living in retirement is not based on what we make or what we spend. Rather, it is based on what we spend and the benefits we get from the things that we own outright such as housing, cars, appliances, furniture and clothing. Economists call the income that we get from owning our homes and other possessions outright, and not having to pay rent on them, "implicit income." Since we already own so much of what we use in retirement (home, car, furniture, appliances, clothes), the income that we will need to comfortably support ourselves in retirement may be far, far less than the income we earned while we were working and paying for all of these things. So much for fear-mongers who insist that we must have cash retirement income equal to 70 percent of our pre-retirement income! That is just not true.

A second major benefit of owning, outright, an age-in-place home is that it is a wonderful hedge against inflation. Some of our older readers will remember the double-digit inflation of the late 1970s and early 1980s, where costs (including the costs of renting a home) could double in six or seven years. If we own our retirement home outright, or have a fixed-rate mortgage, which I will deal with below, most of our housing costs are protected against inflation and the value of the home is also likely to increase. While there are other ways of protecting against inflation (see my last column on inflation-protected annuities), the cost of inflation-protection is high. Rather than pay for inflation protection, we can save money by reducing our core expenses that are subject to inflation. Much of this can be done by owning a paid-up, low-maintenance, energy-efficient age-in-place home.

Aside from the financial benefits of reducing cash flow needs and hedging against inflation, another huge saving from having an age-in-place home is likely to be the reduction or elimination of very expensive nursing home costs in the future. With an age-in-place home, an incapacitated spouse or single person may be able to live in a comfortable, familiar environment with some outside help for a long period of time at a fraction of the cost of a nursing home. Staying at home can also reduce the need for increasingly expensive long-term care insurance whose maximum daily benefits are often just $150 or so, a fraction of nursing home costs, leaving patients and their families to make up the huge difference. [...]

The article also goes into reverse mortgages and many other things. A good resource to read.

I'll probably be referring back to many of these links. Good stuff to know.