Thursday, March 27, 2008

Would you co-sign for your child to buy a new car?

When a family evaluates the available options of paying for college, invariably college loans appear to be the only solution. Rhetorically, one might ask if it is prudent reasoning to co-sign a loan for a 17 or 18 year old----so they can purchase a BRAND NEW $25,000 car??

If this appears illogical, why is it that many families will co-sign for that amount FOUR YEARS in succession to finance a college education.

Is the entire decision motivated by the fact that a college graduates future earning’s potential can be $1,000,000 greater than a NON-college graduate?? The fallacy in that thinking is that the college graduate WILL DEFINITELY EARN that $1,000,000!!

What occurs in the college graduate’s life while she/he is attempting to PAY BACK the $100,000 in accumulated college debt----OR----does the student receive the $1,000,000 differential upon graduation??

Things that make you go hmmmmmmmmmmmmmmmm!!

Thursday, March 20, 2008

Sub-Prime Loan Disaster

Most people have not connected the dots, but the impact of “liar” mortgage loans on college debt will be SIGNIFICANT!!

Here is how I believe we will get there: the mortgage industry truly drives interest rates, and the current chaos in the housing market is generating HIGHER INTEREST RATES!!! In addition to this upward interest rate pressure, there is increasing pressure on lenders to cease “bundling” OR “packaging” loans for resale---------which the mortgage industry calls “securitization.”

Securitization is also becoming very scarce within the college loan industry. Banks are NO LONGER able to package loans and achieve economies-of-scale by bundling and selling college loans.

I believe it is very reasonable to expect college loan interest rates that are TWO PERCENTAGE POINTS HIGHER than what is available today (in some cases OVER 10%)------------prior to college openings in the Fall of 2008.

Just another reason to use strong consumer purchasing principles when choosing a college!!

Thursday, March 6, 2008

A huge consumer purchase

What is the NUMBER ONE mistake families make in considering a college education for their son or daughter? I believe it's not taking into consideration that this is NO different than any other large consumer purchase...such as a house or a car.

We must look at a variety of schools, with their “return-on-investment” in mind (starting salaries for college graduates---when adjusted for inflation--- have remained FLAT at $42,000 per year for the last thirty years!!).

Remember that over 40% of students NEVER receive a degree, and 30% of students transfer colleges in the first two years.

Some thoughts on how to make sure you don't get trapped by college debt: evaluate many schools (particularly outside your geographical area), be certain each school offers ALL your major areas of interest (most students change majors four times—prior to receiving a degree) and appeal any financial aid offer for more money.

An informed consumer receives the BEST college financial aid package!