Continuing Education

One of the many aspects I love about my profession is that I'm required to do continuing education on an ongoing basis. As a Certified Financial Planner, I need to do a minimum of 30 hours every two years and as a NAPFA member I'm required to do 60 hours. These two groups each require a 2-hr ethics course as well. I typically go well beyond these requirements because there's so much to learn and stay engaged with.

While some of this education could be completed online in my jammies, I prefer to go to conferences, hear speakers, and participate in my local study groups. The information I gain is invaluable and, in this rapidly changing industry and economic environment, critical to your success and, by extension, my success as your advisor.

Along these lines, last week I attended a two-day conference in San Francisco put on by the Financial Planning Association's NorCal region. The well-attended conference was packed with interesting speakers covering a range of topics. There were sessions on financial planning, economics, stock and bond markets, the latest industry tech trends, and college planning, to name just a few. These were definitely two days when I wished I could have cloned myself and attended multiple sessions at once.

Along these lines, two of the sessions were extremely interesting and I wanted to share some of the concepts with you.

Paying for college and how to deal with student loan debt are huge issues for parents and college grads alike. With tuition expenses expected to rise faster than average in the coming years, and the incredible complexity associated with student loans, getting through college without a mountain of expensive debt is challenging and will likely grow more so in years to come.

Total student loan debt in the U.S. is roughly $1.3 trillion this year. This is likely to rise along with a projected 14% increase in undergrad students in the coming years, according to the National Center for Education Statistics. With roughly 12% of student loan borrowers in some form of default, and more borrowers choosing income-based repayment plans, understanding the nuts and bolts of the college savings and student loan process is incredibly important.

The first session was taught by Deborah Fox, a nationally-recognized college funding expert, and covered "late stage" college funding strategies. This was all about reducing out-of-pocket costs for parents and students, while "early stage" focuses primarily on saving as much as possible. Here are some of my takeaways:

• The average cost of a 4-year public school in the U.S. is $24,610. A 4-year private school comes in at $49,320 per year. This includes tuition and fees, room & board, transportation, books, supplies, and personal expenses.
• UC Berkeley's cost for tuition, fees, room & board was one of the most expensive for a public school at $28,410 in 2015/16. This was for an in-state student. Out-of-staters pay $51,288.
• The most expensive private school in California is Harvey Mudd College in Claremont. The 2016/17 schoolyear will cost a cool $67,155.
• 46% is the average discount for first-time full-time freshman at a private non-profit school in 2015/16. Almost nobody pays "full sticker" for college tuition. Know your options and negotiate.
• Focus not only on tuition expenses, but on the school's total cost of attendance and your family's "net cost", which includes loans and work study programs. This could make a more expensive school less so after factoring in grants and scholarships.
• Sort of a Kelley Blue Book for Higher Ed, the U.S. Department of Education runs a website where you can search for schools and see average costs, graduation rates, and average salaries upon graduation. https://collegescorecard.ed.gov/
• Only 0.4% of undergrads attend one of the eight Ivy League schools. 72% attend public universities. Be realistic with your planning and help your student have reasonable goals.
• Parents can save a lot by planning as their student enters high school. Don't wait until junior year. Planning includes prepping the student's academics and building out their resume based on the type of school they (realistically) hope to attend.

A following session, taught by lawyer and student loan expert, Heather Jarvis, was dedicated to repayment strategies for graduates. In Heather's words, this topic is "thorny and complicated", and I wholeheartedly agree. After spending time reviewing the variety of Federal and private loan options available, and the various repayment options, I would add "dizzying" to her description. I'm a financial planner and found it hard to get a firm grasp on all the complexity.

Time was spent on income-driven repayment plans and how some loans can be forgiven, either through public service following graduation, or by paying long enough and making little enough that the government finally lets you cry uncle. Here are some takeaways:

• Don't refinance old student loans until you understand your current loan(s). There are some good private lenders out there, but most could do more long-term harm than good.
• If planning for loan forgiveness, often a good strategy is to choose the option that gives you the lowest possible monthly payment.
• Avoid unnecessary interest accrual since interest must be repaid prior to being able to reduce principal.
• If you're working in public service you should avoid making lump sum payments because the rules for loan forgiveness in this area are incredibly complicated.
• Future loan forgiveness is taxable to the borrower.
• The VIN Foundation has a student loan simulator that is very good: http://www.vinfoundation.org/demoloansim/

Have questions? Ask me. I can help.