Financing Education Articles

Article / Updated 07-26-2023

Student loans to help you pay for college may seem simple. Unfortunately, appearances can be deceiving. Numerous types of federal student loans and repayment plan options and lots of private loans exist. Repayment options and forgiveness of some loan balances are not widely or well understood. How to keep track of your loans During the years of college, you’ll get bombarded with various financial aid forms and financial aid award letters and notices. If you take out student loans, you should also begin to receive various notices about those. Students, of course, are likely to be changing addresses, especially post-graduation. Parents and families may move as well when residency for local schooling options is no longer required or retirement beckons. So, be sure that you keep all of your student lenders (and servicers) informed and updated regarding your correct mailing addresses. Especially if you’ve taken loans from numerous sources (for example, federal government–sponsored and private), total up the amount of debt accumulated. Debt surprises are rarely good! And be sure you are tracking all of your student loans as they may well be represented by multiple lenders and/or servicers by the time that college degree is earned. What cosigners means for responsibility If parents have cosigned student loans with their son or daughter, everyone who has cosigned is legally responsible for the repayment of those loans. Of course, different families will have different expectations as to who actually will make the repayments. In many families, it’s a joint effort and project whereas in other families, the parents elect to carry the full burden. And, in some families, the son or daughter is expected to make all payments. At a minimum, families should have candid discussions about expectations and plans for repaying the student loans they’ve taken out. And, putting an agreement in writing is a fine idea to ensure that everyone is clear on the plan and so that there’s some accountability. That’s not to say that a written plan can never change; with discussion and agreement, your plan can be modified. Know the loan terms Whenever you take out a federal government student loan, you will sign a federal student loan promissory note that spells out all the terms and conditions of the loan. During the years of college, you should have received in the mail periodic updates on the outstanding student loans to which you have committed. For federal student loans, there are nonprofit processing companies (see the following list) that will keep you updated on your loans. Here's a list of the loan processors that the U.S. Department of Education uses: Loan Processors Loan Servicer Contact CornerStone 1-800-663-1662 FedLoan Servicing (PHEAA) 1-800-699-2908 Granite State – GSMR 1-888-556-0022 Great Lakes Educational Loan Services, Inc. 1-800-236-4300 HESC/Edfinancial 1-855-337-6884 MOHELA 1-888-866-4352 Navient 1-800-722-1300 Nelnet 1-888-486-4722 Aidvantage 1-866-264-9762 ECSI 1-866-313-3797 Generally, six months after graduation, federal student loan payments begin. You will definitely be hearing from the loan processor(s) for your loans around and continuously after that time. Private loans work differently and have different terms and conditions, which hopefully you took the time to understand before you took those out. How to use the auto-pay feature to save money When your student loan repayments begin, I recommend that you set them up for automatic payment. This feature drafts the money from your bank account monthly on or before the payment due date. In addition to ensuring that you don’t have late payments or missed payments, most loan servicers or lenders will knock 0.25 percent or so off of the effective interest rate you’re paying for using auto payment. Some private lenders may reduce the rate a tad more than that. One potential downside to putting your student loan repayments on auto-payment would be if it ever leads to your bank checking account being overdrawn. So, be sure you’re keeping a close eye on your account balance so that nasty surprise doesn’t occur. Loan forgiveness conditions There are a number of conditions under which a portion or all of government student loans can be discharged or forgiven. Most commonly this occurs because the student-borrower is working in a field of public service. However, this may also occur when the student-borrower suffers adverse health conditions. Borrowers who are working in education, government, military, certain nonprofit organizations (not labor unions or partisan political organizations), law enforcement, or public health may be eligible for the Public Service Loan Forgiveness program. To be eligible, borrowers must have completed 120 monthly (that’s 10 years’ worth) on-time payments. Borrowers must also be working full-time in public service and be paying their loans back under an income-driven repayment plan. Unfortunately, the other conditions under which student loan balances can be discharged are less pleasant to consider. This can happen if the student-borrower suffers a long-term disability or passes away. Your federal loan repayment options Believe it or not, there are currently eight different repayment plans/options for your federal student loans. I give you a brief overview here so that you’re aware of the range of what’s currently available and what may benefit and work for you. A number of the repayment plans are sensitive to and based upon the student’s income relative to the amount of student loans he has outstanding. The repayment schedule, however, is not tailored to the local cost of living (strangely, there’s only an adjustment for students in Alaska and Hawaii). So, students turned workers who are living in high-cost urban areas like New York City, Chicago, Boston, Washington, San Francisco, and so on don’t get any special breaks. Your salary may be a bit higher working for employers in those high-cost areas, which actually undermines your chances and ability to qualify for income-based repayment plans. Here, then, is a quick overview of the repayment plan options for so-called direct and federal family education student loans: Standard repayment: Your payment amount is fixed and allows the loans to be repaid in up to ten years. This plan works well for students who have a modest debt outstanding relative to their incomes and for whom the monthly payment amount fits within their budgets from the beginning of their working years after college. Graduated repayment: All borrowers may use this plan, which begins your payments at a reduced level compared with the standard repayment plan and then bumps them up every two years or so. This plan, which leads to somewhat higher total interest charges compared with the ten-year plan, still ensures the loans are paid off within ten years. Extended repayment: Students who have more than $30,000 in eligible loans outstanding may repay them on a fixed payment or graduated repayment basis over a period of up to 25 years. Thus, total interest paid will be significantly higher than under the ten-year repayment plans. Revised pay as you earn repayment (REPAYE): Under this plan, your monthly payments are annually set at 10 percent of your discretionary income, which is the difference between your annual income and 150 percent of the poverty guideline for your family size and state of residence. Payments are recalculated each year and based upon your updated income and family size (if you’re married, your spouse’s income and student loans are considered as well). Any undergraduate outstanding student loan balance will be forgiven if you haven't repaid your loan in full after 20 years. Pay as you earn repayment (PAYE): For this plan, you must have a high debt relative to your income. Your monthly payment will never be more than the ten-year standard plan amount. The details of the annual payment reset are the same as under the REPAYE option. Income-based repayment (IBR): This option is similar to PAYE except for the following differences. Your monthly payments will be either 10 or 15 percent of discretionary income, depending on when you received your first loans, but never more than you would have paid under the ten-year standard repayment plan. Any outstanding balance on your loan will be forgiven if you haven’t repaid your loan in full after 20 years or 25 years, depending on when you received your first loans. Income-contingent repayment (ICR): Your monthly payment will be the lesser of 20 percent of discretionary income or the amount you would pay on a repayment plan with a fixed payment over 12 years, adjusted according to your income. For this plan, discretionary income is the difference between your annual income and 100 percent of the poverty guideline for your family size and state of residence. Any outstanding balance will be forgiven if you haven’t repaid your loan in full after 25 years. Income-sensitive repayment: Your monthly payment is based on your annual income, but your loan will be paid in full within 15 years. One more important detail: You aren’t locked into a payment plan once you choose it. You can switch among the various repayment plan options as you are qualified to do so. It is possible but harder to negotiate a different repayment plan for private student loans. There may be additional requirements to qualify for some of the repayment plans discussed here. Cautiously consider refinance possibilities The interest on each student loan, both federal and private, varies based upon when it is originated. Therefore, it is possible that by the time a student graduates and begins repayment, interest rates on newer, comparable loans may be lower. When that situation occurs, it may be possible to refinance some of your student loans with a private lender (see my short list later in this section) at a lower interest rate than you are currently paying on those loans. When contemplating a refinance, always compare the interest rate being offered on a new loan to the rate you are paying on your existing student loans. If the rate is lower on a new loan that would provide you with funds to pay off some of your existing student loans, then you should consider refinancing. You also need to weigh and factor in any additional fees and charges — loan application fees, credit report fee, and so on — for a new loan you’re considering. There’s a simple way any lender can make a refinance appear attractive that you should never fall for. They will show you how a refinance can lower your monthly payments — but that can always be done by offering you longer-term loans. Your total payments and total interest paid will be higher if you fall for this trick. Beware the hucksters out there pitching you to refinance your student loans or rub out problems like your late payments if you fork over a hefty up-front fee to them. As I explain in the next section, if you’re behind in your payments, there are no-cost steps that you can take to address that with lenders and possibly get some relief. You need excellent credit to be able to refinance student loans and do so at an attractive interest rate. One way to boost the creditworthiness of a young borrower with a limited credit history is to have parents cosign the loans. This, of course, puts the parents in a place of responsibility for the loans. If you’d like to look around, start with some of the proven players in this space, like CommonBond, Credible, Earnest, and SoFi. How to ask for relief Hard times can happen, often without warning. Employers sometimes have to lay off workers. Or perhaps you have some significant unexpected expenses and you’re having a hard time making your required monthly loan payments. There is some good news herein: You may qualify for some relief from making your federal student loan payments until you can afford to do so again. There are two ways in which you may qualify for what is called “forbearance” of your federal student loans. There are two types of forbearance: general and mandatory. With general forbearance, your federal student loan servicer decides whether to grant a request for forbearance. For this reason, a general forbearance is sometimes called a discretionary forbearance. You can request a general forbearance if you are temporarily unable to make your scheduled monthly loan payments for the following reasons: Financial difficulties Medical expenses Change in employment Other reasons acceptable to your loan servicer General forbearances are available for Direct Loans, Federal Family Education (FFEL) Program loans, and Perkins Loans. For loans made under all three programs, a general forbearance may be granted for no more than 12 months at a time. If you’re still experiencing a hardship when your current forbearance expires, you may request another general forbearance. However, there is a cumulative limit on general forbearances of three years. If you meet the eligibility requirements for a mandatory forbearance, your loan servicer is required to grant the forbearance. (Note: The mandatory forbearances discussed in the following list apply only to Direct Loans and FFEL Program loans unless otherwise noted.) You may be eligible for a mandatory forbearance in the following circumstances: AmeriCorps: You are serving in an AmeriCorps position for which you received a national service award. Department of Defense Student Loan Repayment Program: You qualify for partial repayment of your loans under the U.S. Department of Defense Student Loan Repayment Program. Medical or dental internship or residency: You are serving in a medical or dental internship or residency program, and you meet specific requirements. National Guard duty: You are a member of the National Guard and have been activated by a governor, but you are not eligible for a military deferment. Student loan debt burden: The total amount you owe each month for all the federal student loans you received is 20 percent or more of your total monthly gross income, for up to three years. (Note: This mandatory forbearance type applies to Direct Loans, FFEL Program loans, and Perkins Loans.) Teacher loan forgiveness: You are performing teaching service that would qualify you for teacher loan forgiveness. Mandatory forbearances may be granted for no more than 12 months at a time. If you continue to meet the eligibility requirements for the forbearance when your current forbearance period expires, you may request another mandatory forbearance. You must continue making payments on your student loan(s) until you have been notified that your request for forbearance has been granted. If you stop paying and your forbearance is not approved, your loan(s) will become delinquent and you may go into default. How to make use of the student loan interest deduction You may take up to a $2,500 federal income tax deduction for each tax (calendar) year for student loan interest that you pay on IRS Form 1040 for college costs as long as your modified adjusted gross income (AGI) is less than or equal to $70,000 for single taxpayers and $140,000 for married couples filing jointly. This tax deduction is phased out if your AGI is between $70,000 and $85,000 for single taxpayers and between $140,000 and $170,000 for married couples filing jointly. (These AGI amounts are for tax year 2020.) This deduction is not an itemized deduction, so anyone can take it on her Form 1040 as an “adjustment to income.” Each of your lenders should be able to provide you with a yearly summary that shows how much you paid in interest for the tax year. If you paid $600 or more in interest to a single lender, that lender is required to provide you with Form 1098-E, which documents the interest you paid for the year. Otherwise, ask your lender or loan servicer what you paid in interest for the year in question. Pause your loans with a return to higher education Getting a college degree may not be the end of a person’s higher education. Returning to school at least half-time enables those who have subsidized federal government student loans to hit the pause button on those loans. Remember that with subsidized federal student loans, interest does not accumulate, and no loan payments are due while the student is in school (again, at least half-time). Private student loans and nonsubsidized federal student loans are, of course, a different matter. The interest keeps accumulating on those even if a former college graduate returns to school at least half-time. And, with some private student loans, you won’t be able to defer making payments and will need to make payments regardless of your student status.

Article / Updated 07-26-2023

At the traditional length of four years, completing a bachelor's degree is both time consuming and costly. Too many students don’t complete their college degrees or take a longer time to do so. Private nonprofit colleges have an overall six-year graduation rate of just 66 percent; public colleges graduate about 59 percent, and for-profit colleges graduate only 21 percent of their first-time, full-time students within six years. So, if you or your kid plans to pursue a four-year college degree, it’s imperative that you and they have a clear and well-thought-out plan for getting the job done efficiently and cost effectively. This article highlights ten tips for doing just that. Communicating is key These are big decisions. College is tremendously expensive and takes a good deal of time. And, it’s hard to really know what you’re getting into until well into the experience. Of course, parents and aspiring college students aren’t going to think the same thoughts or have the same concerns and priorities when it comes to selecting colleges. Take your time and be open to a variety of possibilities. If you and your child are looking into options, be open their thoughts, ideas, and concerns. And be patient explaining your thoughts, ideas, and concerns. If you're the parent, be candid with your kids about your financial constraints but also be careful in using those concerns to push them too much toward what you want for them. Yes, you should lead and guide. You’re the parent and have decades of experience as an adult in the real world, which your teenagers lack. And, yes, you should sometimes say "no" because sometimes kids get goofy and unrealistic ideas in their heads. Remember to continue the dialogue with them to find some common ground. Keep all your options open Be sure you, or you and your children, explore all the reasonable post–high-school options that help prepare one for work and career. A four-year college degree isn’t the only way to do that. Among families and students that end up the most unhappy with college are those who too quickly zeroed in on that option without having good reasons or having considered alternatives. Pay attention to the warning signs in the early semesters of attendance at college. Students who are feeling unmotivated, uninspired, and having a hard time staying focused on school, may need to evaluate and consider other options. Plan ahead financially A common mistake some families make when addressing the cost of college is only thinking about paying for the first year of expenses. It’s imperative, however, that you consider the whole four-year cost and how those expenses will be paid. Students who stop out for a semester, a year, or more are at far greater risk of failing to complete their college degrees. Often, these breaks in attendance are caused by strained family finances and the student feeling pressured to work and earn money to meet current living costs and potential future college costs. By coming up with a strong financial plan, you can minimize these issues from arising. Pick colleges with high graduation rates Colleges calculate and report their graduation rates, typically over four and six years. Colleges with higher graduation rates are generally better choices. For starters, high graduation rates show that the college is doing the necessary things to ensure that students can complete their degrees in a reasonable amount of time. Higher graduation rates also indicate a motivated student population that is demonstrating they can complete the degree requirements in a timely fashion. I’m not suggesting that you immediately rule out colleges with graduation rates that are merely good but not exceptional. A school that takes more risks on accepting a more financially diverse student body, for example, will tend to have a somewhat lower graduation rate. If a particular college seems to check all the right boxes but has a lower graduation rate, inquire as to why that is. Select colleges that offer your desired courses and majors Especially at larger colleges and universities, and those that are public, it may take longer to complete all required courses for the simple reason that there are so many students competing for limited spaces in some courses. So, be sure to ask lots of questions when you’re considering such schools so that you have an informed perspective on the realities of getting into and completing certain courses and majors. Also, be aware that changing majors can lead to problems graduating within four years at some colleges, again with more issues at the larger public schools. Choose schools with affordable housing Besides having trouble getting their desired courses in a timely fashion, another challenge for some college students is being able to find and retain affordable housing. This can be especially problematic in high cost-of-living areas where there aren’t a lot of rentals available at reasonable prices. Not having affordable housing can lead to stopping college. I can tell you from the personal experience of having toured dozens of college and university campuses that too many schools gloss over and fail to disclose their lack of housing. At numerous schools, housing may only be guaranteed, for example, for the first two years. If you look at the attendance numbers for a college and then compare them with the number of students living on campus, you can get to the bottom of the campus housing situation. Get college credit in high school Some colleges will give you course credits for college-level classes — for example, advanced placement (AP) courses — that you have completed and done well on the AP exam taken at your high school. At most colleges, on the AP exam grading scale of 1 to 5, with 5 being the highest and best score possible, scores from 3 to 5 are considered passing grades. More selective colleges, however, may only consider a 4 or 5 score acceptable. Especially at the most selective colleges, the credits won’t typically help you to graduate earlier or sooner. For example, if a student did well in AP calculus or statistics, such colleges will then place that student into a higher-level introductory course so that, at a minimum, they aren’t taking the same course in college that they recently took in high school. Some colleges do offer credits for high school AP and equivalent courses that may be used toward meeting graduation requirements. So, investigate that option as you survey colleges, because knocking a semester or full year off your college attendance plans can save you and your family quite a bit of money. Make use of advisors and deans Many college administrators enjoy working with students — that’s part of the reason they were attracted to a job on a college campus. (The flip side, unfortunately, as you may experience, is they are, generally, less enthusiastic about hearing from parents, despite the fact that they're the ones paying the bills!) Part of what students (and their families) are paying for are all the advisors and deans who can help in many situations. So, when it comes to issues with course scheduling, planning for majors, graduating in a timely fashion, and not breaking the bank, administrators often can help, and they enjoy doing so. So, ask for help! Work during college Upperclassmen can earn up to about $7,000 per calendar (tax) year without impacting their financial aid awards. (For freshman, the income limit at some private schools that utilize an institutional methodology is about $5,200.) So, during the summer and while working part-time during some of the school year, students can help pitch in and earn some money toward their college costs and living expenses. Ideally, they would earn up to the levels allowed without affecting financial aid awards. Avoid stopping school to work Taking a break from school for a semester or going to college part-time may sound financially appealing when you consider all the income a student can earn. However, that doesn’t consider the entire picture. What about the impact that the higher income will have on the pricing/financial aid package the college offers? Also, working more and going to college less will inevitably lead to a four-year college experience stretching out to five, six, or even seven years. Part-time jobs during college generally pay much less than full-time, post-college jobs.

Cheat Sheet / Updated 04-11-2023

When you're ready to start saving for college, check out the different savings plans available so you pick the one best for you. Find out how you can cut wasteful spending from the budget to contribute more to your college saving plans, and be aware of provisions affecting the conditions of the 529 and Coverdell accounts.

Cheat Sheet / Updated 04-08-2022

If you’re thinking of sending your child to college one day (or attending college yourself), you have a lot of decisions to make: how to save money for college, which colleges may be a good fit, whether an alternative to a four-year college may be a better option, plus seeking financial aid, scholarships, and grants. Paying For College For Dummies can help you make the most of your money and guide you through the decisions of choosing which post-high school path is right for your child.

Article / Updated 05-05-2020

The U.S. tax laws are unnecessarily complicated and extensive. But it’s worth taking the time to understand how to make them work for you, because paying for a college education is an expensive undertaking. The tax rules and regulations include numerous breaks for parents of college students and some for young adults as well who have previously incurred college costs and taken out some college loans. Those who are knowledgeable about the tax laws and associated strategies can save themselves a lot of tax dollars. This article highlights ten things you should know related to educational expenses that can legally and permanently reduce the income taxes that you pay. Contributing to Retirement Accounts As a parent working and earning money, one of the financially smartest things you can generally do (unless you pay low federal income taxes), is to contribute to a retirement savings plan. Besides reducing your current and future federal (and state) income taxes, funding retirement plans helps you build up a nest egg, so you don’t have to work for the rest of your life. Also, for purposes of the financial aid system, your retirement accounts are generally the best places your assets to reside. As you’re earning it, you can exclude money from your taxable income by tucking it away in employer-based retirement plans, such as 401(k) or 403(b) accounts, or self-employed retirement plans, such as SEP-IRAs. If your combined federal and state marginal tax rate is, say, 30 percent and you contribute $1,000 to one of these plans, you reduce your federal and state taxes by $300. Also, some employer plans provide free matching money. And when your money is inside a retirement account, it can compound and grow without taxation. Many people miss this great opportunity to reduce their income taxes because they spend all (or too much) of their current employment income and, therefore, have nothing (or little) left to put into a retirement account. If you’re in this predicament, you first need to reduce your spending before you can contribute money to a retirement plan. If your employer doesn’t offer the option of saving money through a retirement plan, lobby the benefits and human resources departments. If they resist, you may want to add this to your list of reasons for considering another employer. Many employers offer this valuable benefit, but some don’t. Some company decision-makers either don’t understand the value of these accounts or feel that they’re too costly to set up and administer. If your employer doesn’t offer a retirement savings plan, individual retirement account (IRA) contributions may or may not be tax-deductible, depending on your circumstances. Do you qualify for the saver’s tax credit? Married couples filing jointly with adjusted gross incomes (AGIs) of less than $65,000 and single taxpayers with an adjusted gross income of less than $32,500 can earn a federal income tax credit (claimed on Form 8880) for retirement account contributions. Unlike a deduction, a tax credit directly reduces your income tax bill by the amount of the credit. This saver’s income tax credit, which is detailed in this table, is a percentage of the first $2,000 contributed (or $4,000 on a joint return). The credit is not available to those under the age of 18, full-time students, or people who are claimed as dependents on someone else’s tax return. Special Tax Credit for Retirement Plan Contributions Singles Adjusted Gross Income Married-Filing-Jointly Adjusted Gross Income Tax Credit for Retirement Account Contributions $0–$19,500 $0–$39,000 50% $19,500–$21,250 $39,000–$42,500 20% $21,250–$32,500 $42,500–$65,000 10% The tax benefits of 529 plans Money invested in section 529 plans is sheltered from taxation and is not taxed upon withdrawal as long as the money is used to pay for eligible education expenses. Some states also provide small tax incentives to fund these accounts. Subject to eligibility requirements, 529 plans allow you to sock away upwards of $200,000. Please be aware, however, that funding such accounts may reduce your potential financial aid. Coverdell Education Savings Accounts (ESAs) Coverdell Education Savings Accounts (ESAs) are similar to 529 plan accounts. The contribution limits, however, are dramatically lower — up to just $2,000 per year per child. Money in ESAs grows without taxation and isn’t taxed when withdrawn if used for qualified educational expenses, which includes college as well as K–12 education. Higher income earners lose the ability to fund these accounts. The single taxpayers’ phase-out range is from $95,000 to $110,000 of income. The range is $190,000 to $220,000 for all other taxpayers. The American Opportunity tax credit The American Opportunity (AO) tax credit provides up to $2,500 per student per year of college that families incur at least $4,000 of educational expenses. Up to $1,000 of this credit is refundable. Use of this credit is limited for each child for up to four years of undergraduate expenses. There are income limitations for using this credit. Single taxpayers’ phase out of being able to take this credit at modified adjusted gross incomes (MAGIs) of $80,000 to $90,000. Other taxpayers’ phase-out is from $160,000 to $180,000. When parents claim this credit for one of their children for a particular tax year, they may not claim the next credit — the Lifetime Learning credit. Each tax year, for a particular child, you may only take one or the other of these credits. The Lifetime Learning credit Like the American Opportunity tax credit, the Lifetime Learning (LL) credit also was designed to provide tax relief to low- and moderate-income earners facing higher education costs. The LL credit may be up to 20 percent of the first $10,000 of qualified educational expenses — up to $2,000 per taxpayer. For parents filing tax returns, only one of these credits may be claimed for each child per tax year, and parents are subject to the same income limitations. Single taxpayers’ phase-out being able to take this credit at modified adjusted gross incomes (MAGIs) of $59,000 to $69,000. Other taxpayers’ phase-out is from $118,000 to $138,000. The retirement account withdrawal penalty waiver Normally, when you withdraw money from a retirement account early (the year in which you turn 59-1/2), you pay a 10 percent federal income tax penalty and whatever penalty your state assesses. You also owe current federal and state income tax on the taxable amount withdrawn. If withdrawn retirement account money is used to pay for higher education expenses, the penalty is waived. That’s a good thing and perhaps worth considering. However, taking money from retirement accounts to pay for college costs is generally not advised. For starters, you’re tapping money you’ve earmarked for your nonworking future years. Second, despite the penalty for early withdrawal being waived, the taxable amount withdrawn will show up on your federal and state income tax returns and you will owe federal and state income tax. Your higher reported income will harm your financial aid chances. Finish on time without high income earning years When students continually take breaks from college, especially due to the financial stress of full-time attendance and the associated costs, the likelihood of not finishing rises. Also, when a student is working enough to be making $10,000, $15,000, $20,000 or more in a tax year, that really begins to affect the financial aid/pricing that the school assesses the family. If a student’s interest in college courses has noticeably dropped in the first or second year, it’s worth examining why and doing so with an open mind. Given the high cost of attendance and the fact that increasing numbers of lower cost and potentially more effective alternatives exist, consider the alternatives to high-cost colleges. The student loan interest deduction You may take up to a $2,500 deduction for student loan interest that you pay on IRS Form 1040 for college costs as long as your modified adjusted gross income (AGI) is less than or equal to $70,000 for single taxpayers and $140,000 for married couples filing jointly. Your deduction is phased out if your AGI is between $70,000 and $85,000 for single taxpayers and between $140,000 and $170,000 for married couples filing jointly. This deduction is not an itemized deduction, so anyone can take it on Form 1040 as a so-called “adjustment to income.” Each of your lenders should be able to provide you with a yearly summary that shows how much you paid in interest for the tax year. If you paid $600 or more in interest to a single lender, that lender is required to provide you with Form 1098-E, which documents the interest you paid for the year.

Article / Updated 05-05-2020

Your kids should strive to do their best in school. Their grades do matter. Now, that’s not to say they should stay up past midnight, hole up in their rooms, and toil away to get every point possible on that next test or try to write the perfect paper. Perfection isn’t possible, and kids (and adults) can make themselves miserable trying to attain the impossible. Balance matters, and there’s more to life than high grades, making more money, and so on. While an imperfect measure, grades and test scores indicate mastery and achievement. Unless a student is taking easy courses or is a naturally gifted whiz at something, getting better grades and higher test scores usually takes more effort and work. Want your kids to get more out of their pre-college education and improve their chances of getting into a desired college and other post–high school options? Here’s what they can do leading up to and during high school: Strive for better grades. All other things being equal, colleges are going to admit students with better grades (higher GPAs) and also give more merit scholarship money to students with better grades. This doesn’t mean that your kids should take easier courses that enable them to get higher grades. High schools today use a weighted GPA, which gives a higher point value to grades earned in harder courses. And, more selective colleges also expect students to challenge themselves with higher level courses. Take advanced placement (AP) courses. Not only do AP courses demonstrate that your children are taking challenging courses, but some colleges also offer credits to students who earn a good score (typically four or five on a scale of five) on AP tests, which are typically administered in May. These credits may allow your child to accelerate his college experience by a semester or even a full year, saving you some serious money. Some colleges simply use mastery of AP subjects to place a student out of a comparable introductory course in that area. Prepare for taking the SAT (Scholastic Aptitude Test) or ACT (American College Testing). The first step for students in preparing is for them to study and do their best throughout middle school and high school. Many high schools administer a practice test in 10th or 11th grade. On their website, the College Board offers ten free practice SAT tests for students to download. Once completed, the test is scored through your phone by simply taking a picture of your answer sheet. Or through the same link on that College Board webpage, you can take entire SAT practice tests through Khan Academy. The ACT folks charge $39.95 for their six-month online prep course with practice tests. Some colleges offer a lower price (through grants and scholarships) referred to as “preferential packaging.” This simply means that the college or university can choose to offer a better mix of aid (pricing) to academically stronger candidates they are trying to attract to their school. A bonus for those students who worked hard in school! The table shows a list compiled by U.S. News & World Report of the colleges that offer merit scholarships to the greatest percentage of their students. (Note: This list excludes athletic awards.) The list includes a real mix of schools in terms of quality. The colleges that are consistently ranked as the top colleges are absent from this list for good reason — they don’t have any trouble attracting plenty of qualified applicants. To help your kids’ chances of getting merit money offers from colleges, in addition to being sure to apply to numerous colleges that make such offers, they should also apply to schools that are likely to accept (and therefore want) them. To really maximize their chances of getting merit money, your child should apply not just to colleges that are likely to accept them, but to schools for which they are somewhat overqualified and where they’ll stand out from the crowd of applicants. (Of course, you don’t want to take this to an extreme and have your offspring be the absolute biggest fish in a little pond and not have peers who are like them.) Merit Scholarship Percentages by School School Location Percent of Students Receiving Merit-Based Aid Hellenic College Brookline, MA 100% Fort Valley State University Fort Valley, GA 94% Oklahoma Baptist University Shawnee, OK 94% Vanguard University of Southern California Costa Mesa, CA 94% Webb Institute Glen Cove, NY 81% Keiser University Ft. Lauderdale, FL 73% Indiana Wesleyan University Marion, IN 60% Franklin W. Olin College of Engineering Needham, MA 56% New England Conservatory of Music Boston, MA 53% Fairfield University Fairfield, CT 52% Trinity University San Antonio, TX 50% Oberlin College Oberlin, OH 49% Samford University Birmingham, AL 49% Denison University Granville, OH 48% The New School New York, NY 47% Cooper Union New York, NY 46% Furman University Greenville, SC 46% Hillsdale College Hillsdale, MI 46% Gonzaga University Spokane, WA 45% San Francisco Art Institute San Francisco, CA 45% University of Puget Sound Tacoma, WA 45% Rhodes College Memphis, TN 44% The University of the South Sewanee, TN 44% Rose-Hulman Institute of Technology Terre Haute, IN 43% Savannah College of Art and Design Savannah, GA 43% University of Dayton Dayton, OH 42% University of Denver Denver, CO 42% Alcorn State University Lorman, MS 41% Andrews University Berrien Springs, MI 41% Creighton University Omaha, NE 41% Golden Gate University San Francisco, CA 41% Centre College Danville, KY 40% Eckerd College St. Petersburg, FL 40% Southern Methodist University Dallas, TX 40% Tulane University New Orleans, LA 40% Augustana University Sioux Falls, SD 39% DePauw University Greencastle, IN 39% Truman State University Kirksville, MO 39% Beloit College Beloit, WI 38% Birmingham-Southern College Birmingham, AL 38% Calvin University Grand Rapids, MI 38% Marquette University Milwaukee, WI 38% University of Portland Portland, OR 38% Worcester Polytechnic Institute Worcester, MA 38% Baylor University Waco, TX 37% Butler University Indianapolis, IN 37% Landmark College Putney, VT 37% New College of Florida Sarasota, FL 37% Ave Maria University Ave Maria, FL 36% College of Idaho Caldwell, ID 36% Lawrence University Appleton, WI 36% University of Findlay Findlay, OH 36% Case Western Reserve University Cleveland, OH 35% Guilford College Greensboro, NC 35% Holy Cross College Notre Dame, IN 35% Mississippi College Clinton, MS 35% Pratt Institute Brooklyn, NY 35% Southwestern University Georgetown, TX 35% University of Texas of the Permian Basin Odessa, TX 35% Abilene Christian University Abilene, TX 34% Benedictine College Atchison, KS 34% The Catholic University of America Washington, DC 34% High Point University High Point, NC 34% Whitman College Walla Walla, WA 34% Willamette University Salem, OR 34% College of Wooster Wooster, OH 33% Colorado School of Mines Golden, CO 33% Illinois Institute of Technology Chicago, IL 33% Iowa State University Ames, IA 33% Lewis & Clark College Portland, OR 33% Saint Louis University St. Louis, MO 33% St. Lawrence University Canton, NY 33% St. Michael’s College Colchester, VT 33% Stonehill College Easton, MA 33% University of South Carolina Columbia, SC 33% Carroll College Helena, MT 32% Drake University Des Moines, IA 32% Florida Polytechnic University Lakeland, FL 32% Florida Southern College Lakeland, FL 32% Gordon College Wenham, MA 32% Hobart and William Smith Colleges Geneva, NY 32% John Brown University Siloam Springs, AR 32% Miami University—Oxford Oxford, OH 32% New Mexico Institute of Mining and Technology Socorro, NM 32% Sacred Heart University Fairfield, CT 32% Suffolk University Boston, MA 32% Biola University La Mirada, CA 31% California College of the Arts San Francisco, CA 31% Covenant College Lookout Mountain, GA 31% Drexel University Philadelphia, PA 31% Drury University Springfield, MO 31% Harding University Searcy, AR 31% Loyola University Chicago Chicago, IL 31% Marist College Poughkeepsie, NY 31% Pepperdine University Malibu, CA 31% Ringling College of Art and Design Sarasota, FL 31% Rollins College Winter Park, FL 31% Union College Schenectady, NY 31% University of North Alabama Florence, AL 31% University of Tampa Tampa, FL 31% Source: U.S. News & World Report

Article / Updated 05-05-2020

Although high school is a terrific time to teach kids key personal financial concepts before they’re nudged out of the family nest and go to college, you can and should begin to teach kids about money much sooner. The latter preschool and elementary school years, when kids are learning math concepts and getting comfortable with numbers, are an excellent time to lay a solid knowledge base. According to a survey conducted by the National Bureau for Economic Research, children who get personal-finance education in high school save 5 percent more of their future employment incomes than kids who aren’t exposed to such education. Five percent may not sound like a lot, but when you consider that most adults should be saving about 10 percent annually to accomplish their financial goals and actually save less, saving 5 percent more is a huge difference. When you welcome a new baby into your family, he needs you to do everything for him. You must feed him, clothe him, change his diaper, and so on. Slowly and gradually over time, your baby learns to do some simple things like beginning to crawl and then walk. That creates a whole new set of hazards as the more he is able to move on his own, the more trouble he can get into! In the early years, you will need to make all the choices for your children with regard to spending money. Eventually, as they go through the preschool years, they will begin to understand that you buy them things and they can have some influence over those purchases and decisions. Educate when shopping One of your child’s first money lessons is likely to come by accompanying you shopping. Take her grocery shopping so she can see all the items available for purchase and the price on each of them. You can explain to your child how you pay for food and how the money is earned in the first place. She can also learn how to comparison shop and live within a budget. (Note: I don’t generally think you should share personal financial information like your salary with your children. This is highly personal information, and kids don’t have a context for understanding it nor can you be sure that they won’t share it with others.) Kids obviously get much more out of shopping when they’ve been introduced to counting and basic math. This typically happens late in the preschool years and early in elementary school. Of course, you don’t have to visit a physical store to teach your kids these concepts. You can plop them down at your side while you shop online, but when you do that, you lose something, I think. But online shopping is certainly more convenient, especially for time-pressed families. Being a smart consumer requires doing your homework, especially when buying more costly products. Teach your kids the value of product research (including using sources like Consumer Reports for product reviews) and comparison shopping. Demonstrate how to identify overpriced and shoddy merchandise. Finally, show them how to voice a complaint when returning defective products and go to bat for better treatment in service environments, two additional tasks that are part of being a savvy consumer. Take your kid to work Even better, I think, than taking your kid shopping and focusing on the consumer and spending side of money, how about talking to them about your work? After all, this is the reality that most people deal with for most of their adult years. I’m not suggesting that you need to tell your kids everything about work, but when your children are young, you can certainly explain the basics of your work and job. You can begin by describing what your job entails and who your employer is and what, broadly speaking, your employer does. Importantly, you can explain how you get paid money to perform your job and that money helps provide and pay for the things that your family needs and wants like your home, food, clothing, car, medical and dental care, vacations, and so on.

Article / Updated 05-05-2020

Hopefully you will soon complete your college degree or other desired training. And, even better, you will find a job and become financially independent. Make sure that you set out into the real world with important knowledge regarding managing your money and making the most of the money that you earn. This article highlights ten important things that you should know. Get financially fit, now! Moving to a full-time (first) job is a big deal and a big change for most young adults. Embrace getting your feet on the ground financially speaking! Probably the most important thing you can do is to keep your living expenses down and subdued so that you can live within your paycheck and hopefully save some money regularly (more on that in a moment). Some say to live like a college student! Most people are happy during college despite living in small living quarters and not wasting a lot of money on clothing, furniture, and so on. Maybe you even saved money then by taking care of your own food preparation. But, if you got most or all of your meals in a dining hall, know that having someone else make all your meals is usually pretty costly! Don’t procrastinate getting on top of your personal finances. You may overspend and accumulate high-cost debts, fail to save toward goals and things you care about, lack proper insurance coverage, or take other unnecessary risks. Early preparation can save you from these pitfalls. Learn as soon as possible how to live within your means, save and invest regularly, legally minimize your taxes, and so forth. Adapt and adjust along the way Changes require change. Over the years, your life will inevitably evolve and change. Even once your financial house is in order, a life change — such as moving to a new area, switching careers, getting married, buying a home, starting a business, and so forth — should prompt you to review your personal financial strategies. Life changes affect your income, spending, insurance needs, and ability to take financial risk. Making the most of changes and transitions requires managing stress and your emotions. Life changes often are accompanied by stress and other emotional upheavals. Don’t make snap decisions during these changes. Take the time to become fully informed and recognize and acknowledge your feelings and financial considerations. Educating yourself is key. Cancel consumer credit The use and abuse of consumer credit can cause long-term financial pain and hardship. To get off on the right financial foot, young workers need to shun the habit of making purchases on credit cards that they can’t pay for in full when the monthly bill is due. If you keep a credit card, be certain that you can pay each month’s bill in full and on time. Setting up for automatic electronic payment from your bank/investment account can help you accomplish that. I have no problem with your using “reward cards” to earn benefits from your credit card transactions. Just be sure that you’re not spending/buying more to get more rewards! Here’s the simple solution to not run up outstanding credit card balances if you have had or may have that tendency: Don’t carry a credit card. If you need the convenience of making purchases with a piece of plastic, get a debit card. Just be aware that debit cards quickly deduct transacted amounts within a day or two from the connected bank checking account in contrast with a credit card, which sends you a monthly statement and has you pay once per month. Review your budget and spending plans Even before getting your first full-time job and moving into your apartment, how about putting together a preliminary budget/spending plan? This will take some research, especially with regards to apartment rental costs. Go out and look at actual apartments. And take one of your parents with you. You may not always agree with them, but they have decades of experience in the real world including making housing decisions. They can help you avoid common mistakes. Your parents, who have been paying bills for decades, can clue you into the cost of the other things in your prospective budget. You could also speak with older siblings and friends. In addition to housing costs, here are some other important expenses to consider and understand: Income and other taxes: Employers quote you the gross (before-tax) salary or wage they will pay you. What matters, though, is your take-home pay after taxes. Social security taxes will lop 7.65 percent right off the top, and you will pay federal income taxes as well as state income taxes in most but not all states. The IRS website and your state’s website have tools that enable you to estimate the tax withholding that you will face. Transportation: If you expect to have a car, you can figure your insurance costs by contacting insurers and getting quotes for a car you may be considering. Gasoline and maintenance costs will add to those expenses – your folks can help you estimate those too. If you’re going to take public transit or use taxis/ride-share services on occasion, be realistic when you estimate those costs. Personal insurance: You need to have health insurance and should also have long-term disability insurance. Your employer may offer them both and can tell you what your cost for these will be. That’s another reason you should always take the time to understand your employer’s benefits. You don’t need life insurance unless others are financially dependent upon you. Food: Some employers offer subsidized meals so that may help. Estimate what you will spend for food that you buy in grocery stores and for meals out or delivered. If you’re a bar hopper with your friends — which is a costly habit — include those expected expenses as well. Clothing: Again, be realistic here! Entertainment: This can include cable and streaming services, sporting events, concerts, comedy clubs, or whatever else you enjoy that costs money. Cell phone and internet service: Be sure to shop around as prices vary quite a bit and there’s lots of competition these days. Also, if you have student loans, you should understand when you will be required to begin repayment and what those monthly payments will be. Strive to regularly save and invest Ideally, you should start saving and investing money from your first paycheck. Try saving 5 percent of every paycheck and then eventually increase your saving to 10 percent. If you’re having trouble saving money, track your spending and make cutbacks as needed. You may want to first accumulate an emergency/rainy day fund and then direct some savings into a retirement account that offers you some tax benefits. Some employers even match a portion of contributions. You may not want to save in a retirement account if you have some other shorter-term goal in mind, like accumulating down-payment money for a home purchase or saving money to someday start your own small business. Thinking about a home purchase or retirement is usually not in the active thought patterns of first-time job seekers. Regardless, saving money as you’re earning is a great habit and widens your options over time! Ensure that you’re properly insured When you’re young and healthy, imagining yourself feeling otherwise is hard for most people to do. Many twenty-somethings give little thought to the potential for healthcare expenses. But because accidents and unexpected illnesses can strike at any age, forgoing coverage can be financially devastating. You don’t want to again become financially dependent upon your folks, do you? Check your employer’s benefit package to see whether it includes long-term disability insurance coverage. Smaller employers are more likely not to offer it. When you’re in your first full-time job with more-limited benefits, buying disability coverage, which replaces income lost due to a long-term disability, is wise if you’re not covered through your employer. Continue your education After you get out in the workforce, you (like many other people) may realize how little you learned in formal higher education that can actually be used in the real world and, conversely, how much you need to learn that school never taught you. Lucky for you that some companies provide training and make entry-level hires often for “aptitude and attitude,” not specific skills. Read, learn, and continue to grow. Continuing education, and the increasing numbers of alternatives to college, can help you advance in your career and enjoy the world around you. Always be prepared for a job change During your adult life, you’ll almost surely change jobs — perhaps several times a decade. I hope that most of the time you’ll be changing by your own choice. But let’s face it: Job security is not what it used to be. Downsizing has impacted even the most talented workers, and more industries are subjected to global competition. No matter how happy you are in your current job, knowing that your world won’t fall apart if you’re not working tomorrow can give you an added sense of security and encourage openness to possibility. So, structure your finances to afford an income dip. Spending less than you earn always makes good financial sense, but if you’re approaching a possible job change, spending less is even more important, particularly if you’re entering a new field or starting your own company and you expect a short-term income dip. Many people view a lifestyle of thriftiness as restrictive, but ultimately those thrifty habits can give you more freedom to do what you want to do. Be sure to keep an emergency reserve fund – three month’s worth of living expenses is a good start. Evaluate the total cost of relocating At some point in your career, you may have the option of relocating. But don’t call the moving company until you understand the financial consequences of such a move. You shouldn’t simply compare salaries between the two jobs. Benefits matter too, and benefits can be worth quite a bit. You also need to compare the cost of living between the two areas: housing, commuting, state income taxes and other taxes, food, utilities, and all the other major expenditure categories. Ensure compatibility when picking a partner Think you’re ready to tie the knot with the one you love? In addition to the emotional and moral commitments that you and your spouse will make to one another, you’re probably going to be merging many of your financial decisions and resources. Even if you’re largely in agreement about your financial goals and strategies, managing your finances in partnership with another person is far different than managing your money on your own. Many couples never talk about their goals and plans before marriage and failing to do so breaks up some marriages. Finances are just one of numerous issues you should discuss. Ensuring that you know what you’re getting yourself into is a good way to minimize your chances for heartache. Ministers, priests, and rabbis sometimes offer premarital counseling to help bring issues and differences to the surface.

Article / Updated 05-05-2020

Plenty of studies and analyses show that those who have more education generally enjoy lower rates of unemployment and higher employment income. The graphic in the following figure clearly shows that those with higher levels of education reap considerably higher wages from work and lower unemployment rates. There’s no question that education is a good thing and can develop your brain, critical thinking skills, interpersonal skills, etc. What jumps out at me from the graphic is that it looks like there’s value in completing high school, completing college if you’re going to attend and possibly considering an advanced degree. But that doesn’t mean that all education, or formal education is worthwhile regardless of the cost. You should always consider the expected cost versus benefit or the return on the investment since attaining a college degree takes a good deal of time and money. Another important point about the figure: the “income premium” associated with college (compared with a high school degree) peaked in the year 2000 and declined about 10 percent over the next 15 years. College costs of course continued rising rapidly over this period further undermining the potential value of a college degree. Parents and families should also be aware of the research report titled, “Is College Still Worth It? The New Calculus of Falling Returns” by William R. Emmons, Ana H. Kent, and Lowell R. Ricketts published by the Federal Reserve Bank of St. Louis Review, Fourth Quarter 2019. That report found: “The college income premium is the extra income earned by a family whose head has a college degree over the income earned by an otherwise similar family whose head does not have a college degree. This premium remains positive but has declined for recent graduates. The college wealth premium (extra net worth) has declined more noticeably among all cohorts born after 1940. Among families whose head is White and born in the 1980s, the college wealth premium of a terminal four-year bachelor’s degree is at a historic low; among families whose head is any other race and ethnicity born in that decade, the premium is statistically indistinguishable from zero. Among families whose head is of any race or ethnicity born in the 1980s and holding a postgraduate degree, the wealth premium is also indistinguishable from zero. Our results suggest that college and postgraduate education may be failing some recent graduates as a financial investment.” Clearly, there’s likely to be value in completing a college degree and getting a degree from a program with a good reputation and track record for graduates with that type of degree. Conversely, those who don’t complete their degree or who get a degree from a program with a subpar or mediocre track record will probably get a poor return on their invested education dollars. Successful people who never got a college degree You’ve surely heard of a number of “successful” people who accomplished significantly without a college degree. This would include folks like Michael Dell founder of Dell Computers, Steve Jobs founder of Apple, Bill Gates founder of Microsoft, John Mackey founder of Whole Foods Markets, Travis Kalanick founder of Uber, Larry Ellison founder of Oracle, performers Russell Simmons and Ellen DeGeneres, fashion designer Anna Wintour, and food guru Rachel Ray to name a few. These folks obviously are outliers in terms of their high level of professional success and associated financial earnings. And there are plenty of lower profile people who have done quite well for themselves without a college degree including some plumbers, landscapers, dental hygienists, MRI technologists, commercial pilots, physical therapist assistants, respiratory therapists, air traffic controllers, transportation inspectors, diagnostic medical sonographers, electricians, construction managers, licensed practical nurses, web developers, elevator installers, radiation therapists, massage therapists, medical assistants, firemen and police officers. I chose to highlight some of these occupations because they are populated with relatively high numbers of people without a college degree. Now, this is not in any way to suggest that the majority of people or your kids should bypass college! Each person’s situation is unique and different. But the point is that there are many paths to career success and some of those paths include going to college whereas others do not.

Article / Updated 05-05-2020

Parents and their offspring have all sorts of dreams and fantasies about their kids playing sports, getting scholarships, and perhaps even turning pro and making big money from their sport. There’s nothing inherently wrong with having dreams and aspirations, but it’s important that they be largely grounded in reality and tempered with solid, back-up plans. This article discusses some numbers showing the prevalence of different types of athletes at the college level and the realities surrounding athletic scholarships and being a recruited student-athlete. Few people are fortunate enough to have the talent, drive, and luck that is often required to actually make decent money playing a sport. And even if that does happen years down the road, I can guarantee you that the money-making period won’t last long, and your son or daughter will have many more years of adult working life remaining. Try to stay focused on the long-term benefits that sports can provide, including: Physical fitness and wellness: This can also include understanding the value of good nutrition and not putting bad stuff (drugs, alcohol, and so on) into your body because of how it makes you feel and the damage it can do. Understanding the value of effort and focus: To master a sport and excel at it, a student-athlete has to put in a good deal of practice. Of course, this should be done in moderation and not infringe upon having enough time to do well in school. Experiencing the value of teamwork and having a role: I think this is one of the greatest benefits of playing sports, especially team sports. Think about it — when your son or daughter enters the workforce, those teamwork skills will come into play and be quite useful. Mastering time-management and juggling different responsibilities: You can’t take challenging courses and have a significant outside commitment like a varsity sport if you aren’t good at managing your time. To that I would also add that it’s an activity to keep teenagers out of trouble. It sops up free time and leads participants to be tired! The probability of competing in college athletics The NCAA has compiled some useful statistics that show what portion of high school athletes go on to make teams at the collegiate level for different men and women’s sports. The data also show how the collegiate sports opportunities break out by the division of play. Overall, the NCAA calculates that there are approximately 8 million high school athletes, and of those, about 480,000 of them (or 6 percent) go on to compete at the college level. Please keep in mind as you review the data in the following figure that just because someone makes a college team, doesn’t mean that they get much — if any — playing time or even a roster spot on a team over four years. The likelihood of competing in professional sports Another reason that some are attracted to sports and college athletics is the hope or dream of making it professionally. This is, of course, limited to a handful of sports. The following figure shows what portion of eligible collegiate athletes are drafted in a given year. Please keep in mind that getting drafted doesn’t in any way mean that these athletes are able to make a good living for any length of time on the pro circuit. The vast majority of drafted athletes never make it to the “Big Show” or equivalent and end up moving on to something else after one or a few years in the minor leagues (at low pay) for their chosen sport. The numbers in the following table show a decent number of college baseball players get drafted. However, only about 17 percent of players who were drafted and signed a minor league contract ultimately made it to Major League Baseball, and many of those for a short period of time. Here’s how the odds of making it to the MLB vary by the round drafted (note that there are 40 rounds in the MLB draft). Drafted Baseball Players Who Make it to Major Leagues Draft Round Played in MLB Played 3+ yrs in MLB 1st round 67% 47% 2nd round 49% 31% 3rd round 40% 21% 4th round 35% 18% 5th round 33% 18% 6th round 24% 10% 10th round 17% 8% 12th–20th rounds 10% 4% How college athletic scholarships work There are plenty of misperceptions and misunderstandings regarding collegiate sport scholarships. And, there’s ample opportunity to be taken advantage of and end up without good college options for those who pursue being recruited as a student-athlete, whether or not a scholarship is involved. Being an educated customer is key to making sound decisions. Full versus partial scholarships The vast majority of athletic scholarships (99 percent in fact) are partial scholarships and are for so-called equivalency sports. Division 1 men equivalency sports are baseball, cross-country, fencing, golf, gymnastics, ice hockey, lacrosse, rifle, skiing, soccer, swimming, tennis, track and field, volleyball, water polo, and wrestling. For Division 1 women, equivalency sports are bowling, cross-country, fencing, field hockey, golf, ice hockey, lacrosse, rowing, skiing, track and field, soccer, softball, swimming, and water polo. Additionally, all DII sports and National Association of Intercollegiate Athletics (NAIA) sports are equivalency sports. The NAIA is a competitor to the NCAA and is comprised primarily of smaller colleges. (NCAA Division III sports do not offer athletic scholarships.) Some full scholarships are awarded for equivalency sport athletes for the most coveted and valued recruits. This is more likely to happen for athletes who have offers from multiple colleges to consider and/or who could play a division higher. Some student-athletes choose to play in a lower division for a better collegiate/academic fit or because of lower cost of attendance. In contrast to equivalency sports, there are so-called head count sports, and scholarships from those teams are always full scholarships (in other words, 100 percent). Just one percent of all collegiate student-athletes enjoy full scholarships. With men’s sports, such teams can include DI basketball and DI-A football (now known as Football Bowl Subdivision). For women’s sports, the head count full scholarships come from DI basketball, gymnastics, tennis, and volleyball. As you may imagine, it’s the bigger name sports colleges you may have heard of that fit the bill here. These include the following collegiate athletic conferences: American Athletic Conference, Atlantic Coast Conference, Big 12 Conference, Big Ten Conference, Conference USA, Division I FBS Independents, Mid-American Conference, Mountain West Conference, Pac-12 Conference, Southeastern Conference, and Sun Belt Conference. Dealing with recruited athlete offers Most recruited athletes don’t receive athletic scholarships. Being “recruited” means the following typically happens. College coaches try to identify promising high school student athletes during their high school tenure. When they find a good fit (which includes academically) for their program, they may make an offer or extend an invitation for that student-athlete to visit their campus and program. Most coaches in most programs are given a certain number of recruiting slots by the admission’s office. What this typically means is that with the coach’s support, most of these recruited student-athletes are admitted, typically through the early action/decision period. Coaches, in conjunction with the admission’s office, will do a preliminary screening of a possible recruit early in the process to ensure that the student-athlete meets academic and other requirements important to the college. While a student-athlete can rack up multiple offers from various schools, he needs to select just one school to which to commit and apply early. This potentially puts the student-athlete in a vulnerable spot because if the coach changes his mind or doesn’t offer enthusiastic support in the admissions process or the admission’s office chooses not to admit the student, the student-athlete will likely have lost the other recruited athlete offers he had at other institutions. Coaches can’t wait around and will move on to other candidates when it is clear they aren’t an athlete’s first choice. Do your homework and be sure you understand what the offer and support a given coach is making to your student-athlete means and the likelihood of getting an offer of admission. Ask around to find out what the coach’s and school’s track records are with prior recruiting overtures. At some colleges, nearly all student-athletes who are offered a coach’s support may gain admission whereas at other schools, half or less may eventually succeed. Of course, your student-athlete should do some soul searching and be sure that the college she seeks to apply to early as a recruited athlete is really the one that she desires. A good question to ponder: If your child isn’t able to play at some point due to injury, the coach cutting the player, or the player becoming disenchanted with and choosing to leave a team, how is your student going to feel about being at that college without playing her chosen sport? The worst that can happen, in my observation and opinion, is that chasing after playing a collegiate sport can distort the process of college applications and selection for some student-athletes. It’s all about priorities and focus. Finding the right academic schools should take precedence over finding a particular sports program. A good student-athlete should be able to do both. At a small speaking event for talented high school baseball players wanting to learn more about playing college baseball, MLB manager and player Joe Girardi advised student-athletes getting the best education that they can and said to the players that they will be found if they have talent to play beyond college. In his own case, he turned down a baseball offer from a small school with weak academics in the south and ended up getting an engineering degree and playing baseball at Northwestern and was drafted into the MLB. Make sure your student fully understands what he is signing up for when it comes to a college sport. Some coaches put the sport ahead of academics and everything else. Be sure to explore alternatives, including playing in a lower division where you may get a better financial aid offer or have more free time to pursue academics or other interests. With baseball, for example, plenty of pitchers get drafted out of Division III play and end up making it to play Major League Baseball. Club sports are worth considering at some schools and can be quite good, especially at larger or big sports schools. Finally, don’t rule out the possibility of your son or daughter getting into a school that fits them well and then trying out (walking on) for their desired sport. The realities of athletic scholarship offers When a scholarship is involved, be sure that you understand the process. The first step typically is for the coach to extend what is called a verbal scholarship offer. As you may imagine, a verbal offer is not a legally binding offer on either party. The next step is for the school to offer the student-athlete a national letter of intent. If the student-athlete accepts and signs this, the school is committing to offer an athletic scholarship for one year and the student is accepting the offer and is committing to come to that school and program. See the NCAA’s website on this topic. Many folks don’t understand that athletic scholarships are not four-year commitments on the school’s part. It’s a year-to-year proposition and can be discontinued for a variety of reasons, including but not limited to breaking of program behavior or academic rules or guidelines, change of coaches, inadequate performance (judged solely by the coach), injuries, low grades, and so on. Don’t be shy about inquiring about what has happened with prior student-athlete scholarship recipients and what portion of them received that money all four years. For those who didn’t last that long, find out why.