Conference nyoss1::market_investing

    Do not open UGMA account! 
    When the kids will be college age, this money will be counted towards
    their personal assets and they will not be eligible for any college
    financial aid. As a rule, almost 40% of kid's funds goes in account
    when colleges calculate financial aid. Only appr. 15% of your assets
    are used in this calculations.
    
    This is a formula for this calculations. Call any college financial aid 
    company and request information about this.
    
    To save for kid's education, open any college saving account but in
    YOUR name.
    
    My kid goes to collge this year, so believe me I've learned the lesson.
    
    Simon
    

    
    	Re: .1
    
    	Besides, there is another big problem with UGMA: If the kids don't
    want to go to college but rather spend the big_bucks on a couple of
    years of lounging on a beach somewhere or on buying a fancy car, there
    is nothing you can do to stop them since, under UGMA, its _their_ money
    to do with as they wish.
    
    							-craig

Since the .0's kids are fairly young, with the proper financial
plan, all debts such as mortgages, etc could be paid off by the 
time the girls enter college.  

Having zero debt would make financing  college expenses a lot
easier.

Of course, whether you have a mortgage or not is a subject that
can be debated endlessly. Those whose opinions I value tend not
to have mortgages.

Gim

    re: .1
    
    But doesn't your income stream from a DEC salary guarantee that you're
    not much of a candidate for financial aid? And if so, you and your kid 
    have to come up with the $ for college yourselves. And if so, you might 
    as well have saved some taxes via a UGMA, since your family has to pay
    the college tab.
    
    When I checked into it, it wasn't so much your assets that nixed the
    possibility of needs-based aid as it was your income.
    
    Nick (no kids in college yet, but I've looked up the aid formulas)
                                                         

    re .3
    
    Being debt-free may feel good, but it almost guarantees that the
    college funding calculations will work out so that you must borrow
    to pay for college.
    
    A parent with the same income and assets as a debt-free one who
    has a large mortgage (and so cannot borrow much) might well wind
    up with grants or scholarships instead.
    
    There are many perversities in the college-funding calculation: this
    is only one of them.  Other assistance often penalizes the thrifty and
    rewards the debt-burdened--I have two friends who had about the same
    income.  There was a buyer-assistance program which both applied to:
    one of them got a super-low-interest loan on a house _because_ he had
    no cash and had other debts (like credit cards), while the other who 
    had carefully saved over years (living in a rented room in someone's 
    house, for example) was refused the loan because he was "rich".
    
    Whether you wish to go along with "the system" in violation of your
    standards is your private matter--but be warned that there might be
    a substantial cost in following your own path.
    
    If, on the other hand, you wish to engineer your assets so that your
    family will be least burdened by college costs, the overall plan is
    clear: borrow big for a big house and buy a Mercedes and all new 
    furniture and fixtures a year or two before.  Then you'll be unable
    to borrow the college costs and unable to spend capital: they must
    either reject you for inability to pay or pay for you.  In the current
    climate of academic political opinion, option one is incorrect.
    
    		-John Bishop

.5 has really summed it up quite elogquently:

>     There are many perversities in the college-funding calculation:
...
>     Whether you wish to go along with "the system" in violation of your
>     standards is your private matter--but be warned that there might be
>     a substantial cost in following your own path.

I had a recent discussion with the associate dean of financial 
aid at MIT. Here's what MIT does:

1.  Assets do matter.  A family with no assets (because it has chosen to
    spend everything) will end up receiving more aid than a family that
    has frugally saved for college.  MIT and other colleges have for
    years tried addressed this problem and have yet to come up with a
    "fair" methodology.

2.  Mortgage payments and other debt payments do not matter.  It's the
    size of the equity that counts.  Having a $1M house and a 900K mortgage
    would be treated the same as owing a 100K house outright for
    a given income level.

3.  The income threshold for no financial is $80K/year level for a family
    of four. (Tuition + room and board at MIT is $24K/year).

So - your choices are:

1.  spend like mad and have no assets when the kids go to college,
2.  save like mad and become a dual income household when the kids
    go to college,
3.  do financial planning that may be legal but morally repugnant.


As usual, doing the "right thing" will really cost dearly.

Gim

    

Having gone the college financial aid route the last couple of years, I can 
echo the comments that the best approach to receive college financial aid is 
to be or appear either poor and/or heavily into debt.  Any and all reported 
savings and assets, including the equity in those assets (i.e., property) is 
considered by our higher educational institutions as a source for college 
payment.  It is my feeling that those of us who work hard to pay off our debts, 
save for children's college expenses, salt away for retirement, and build-up 
our home equity are penalized over someone who may not have chosen to be as
financially responsible.  Of course, in this case, it may be debatable as to 
who is really the most financially responsible.  

Private college education is not cheap.  You should see the expressions of the
people after I tell them what the college is charging us.  Most people think 
it is a four-year figure.  Wrong!  

Seems to me there is probably some moral debate as to whether college financial
planning should result in "appearing" to need financial aid.  There are books
written as to how to "hide your assets" and "max-out your debt".  I guess how
you approach these opportunities ends up being a personal choice that is made 
based on how much you feel being screwed by having to pay the staggering costs
of higher education.  

Everyone that applies for college financial aid uses the standard Financial 
Aid Form (FAF).  It is my opinion, based on past experience, that "cheating" 
is expected, and the system has a built in fudge factor.  You are penalized 
for being totally honest!  You are required to send a copy of your most recent
tax return.  If I recall, the first time you apply, you may be required to 
send in the previous two years tax returns.  

All the numbers go to Princeton, NJ to get munged, but each college has the
final say, and each colleges has its own policy/quirks about financial aid.  
Colleges require a separate financial aid form to be completed (including a 
copy of your most recent tax return), but unusual financial circumstances may 
be individually weighed, i.e., my home heating system just went south and I 
need a new boiler.  The FAF calculates how much a family is expected to 
contribute toward paying for college, but individual colleges may increase or 
reduce financial aid figures at their own discretion, for whatever reason they 
choose....without indicating why!  The financial aid packages from two separate 
but like colleges may be very different.  

If your family contribution is calculated at $10K, then going to a state school
that costs $10K may result in no college financial aid for that year.  Taking
the same $10K family contribution against a private institution that charges
$20K a year may result in a financial aid package of $10K.  That financial aid 
package may be made up of Work Study, (most colleges we have visited limit the
work study to 10 hours per/week), Stafford Loan ($2625 max. the 1st & 2nd yr.),
a grant from the college (free money - no repayment), and a host of other 
scholarship and loan opportunities that usually are particular to that college.
Policies are different from school to school.  Throughout the whole college
financial process you are led to believe that it is all standardized between
collegess.  From our experience, nothing could be farther from the truth.  

Some colleges deduct high school and other scholarships from the grant amount 
and some deduct it from the Stafford Loan amount.  Also, just because the 
Stafford Loan may be offered as part of the college financial aid package, 
the AMOUNT that may be exercised is DETERMINED by the college as part of the 
financial aid package.  The best type of high school scholarship to receive is 
the one paid directly to the student without the college's knowledge. From the 
perspective of the total college financial aid package, a scholarship is 
absolutely useless when the college deducts scholarships from grant portion of 
the package - and many do it this way.  Associations that send their 
scholarship checks directly to the college are doing a big disservice to the 
financially aided college student.   
 
A FAF must be filled out every year that you apply for college financial aid.  
In the case of more than one student, a FAF is required for each student.  

Having two in college at the same time makes a BIG difference.  Have the oldest
take a couple of years off while the youngest catches up :^)  The financial aid
package is much more attractive with two in college.

If you have enough bucks, than affording a college education for your children 
is a moot point and then none of this should really apply.  But if you foresee 
that you may find yourself seeking college financial aid, then the investment 
strategy you choose to maximize your financial position will depend greatly on
your decision to "expose" your assets and manage your debt.  

Ken

re: .7

Work study is limited to 10 hours/week by the program. I believe it's a federal
program, not subject to change by the institution.   One does better finding a
part time job, on- or off-campus, where one can work more hours to earn more
money, and get the chance to earn more than the minimum wage.

Elaine

re:  .8

Getting a job off-campus is OK as long as the college does not find out about
it.  You reduce your financial aid package by earning more money!  Kinda takes
away the incentive.  Just another wonderful that college financial aid works.

Ken

Re: .9

Sorry.  I guess that part has changed since I was in school.  

Elaine

    RE: last couple
    
    1) when I was in college (6 years ago) the maximum amount of work/study
    was 20 hours/week
    
    2) I managed to make it through college without taking a penny from my
    parents.  The trick is to get yourself declared an independent student,
    which means they don't factor parents income/savings into the financial
    aid calculations.  In practice this means that you need to take a
    couple of years off after high school and live on your own.  While it
    may sound radical, it can easily save over $40,000 over the course of a
    4 year degree.
    
    Steve
    

re:  .11

The "independent student trick" is fast becoming history.  More and more
colleges are wising up to method and are holding parent(s) accountable for
their contributions are long as the parent(s) are living, regardless of
what the familiy living arrangements are.  I've heard that fake death
certificates were fast becoming very popular these days.

Ken

    
    When I was unemployed during 1985, I applied for state aid because
    Northeastern U. used to announce it almost every night at the beginning of
    class.
    
    All the form asked about was my assets. Since I owned a house and a
    late model car, I was initally refused. So I wrote to the state several
    times with my unemployment info and my *debts* and asked if they wanted
    me to sell my house to get the aid. They finally gave me (actually
    Northeastern) the money for one or two classes. 
    
    Guy
    

Thinking about college funding is a horrible reality, but it's more than a money
issue.  We've all had classmates whose educations were financed by Mom and Dad,
were so happy to be away from home and have "freedom", that their actual
education was the farthest thing from their minds.  Maybe by their senior year
they shaped up and graduated with a 2.0 average so they could slide into the job
market.

What if your kids actually did well in junior high and high school, graduated in
the top 2 or 3% of their class, got excited about the prospect of acquiring a
higher education, and were rewarded for their efforts with college scholarships
for academic achievement?

Such a prospect might be more rewarding for the parents and the child than the
joy of receiving 2 or 3 thousand bucks by prudent filing of an FAF.  

And I thought this would all be automatic with our "education president" :^)

- Chris

    
    	Hiding assets / lieing on the forms?
    
    	Spending lots of money (or, better yet, taking on lots of debt)?
    
    	Fake death certificates??!!??  (This one really astonishes me.)
    
    set mode/personal_view_so_don't_read_this_as_a_sermon
    
    	I'll say this quietly since this _is_ an investing notesfile, but
    there are some things in life far more important than money.  My kids
    will learn something, guaranteed, by how we approach college bills.
    That "something" can either be that saving to get what you want is
    goodness, or that "fudging" is ok to work the system to your advantage
    and, preferably, stick someone else with the bill.  My parents saved
    and had the ability to pay my college bills and that taught me a lesson
    that has certainly been a major part of shaping my financial views.  (I
    worked through college, so it turns out that most of what they put
    aside for my college bills wasn't needed anyway, but that's a different
    issue.  Actually, maybe it isn't a different issue but rather proves the
    lesson as having been learned.)  I'm going to pass that same message onto
    my kids by saving for their education and being willing to say "hey, if
    honesty doesn't get us any grants/loans/whatever, so be it."  Yeah, I'll
    pay through the nose this way, but the lesson/example to my kids is more
    important.
    
    set mode/off_soapbox
    
    							-craig

Excellent statement Craig.

I for one am following my own advice as state in .3.

Gim

Ahem.
Given that .1 - .16 offer no info on the specific question in .0, I got a copy
of the latest Morningstar qtrly summary and see that Fidelity Blue Chip, 
G&I and Asset Manager are all rated 5 stars... that's assuring.
	Interesting (though tangential) discussion thus far!

- George

re:  .15

Could not agree more with your views!  My major gripe is with, what I feel, are
problems with the quirks that colleges use to manage financial aid.  Based on
our experience during the last couple of years, the following has proven true:

	-  Financial aid information supplied is not treated as accurate.  It is
	   assumed that everyone mis-represents their assets, and the system
	   allows an automatic fudge-factor.  In other words, you are penalized
	   for telling the truth.  Believe me, we found this out the HARD WAY!

	-  Scholarships ruduce the financial aid package. usually the grant
	   portion of the package.  In other words, you are penalized for
	   the work you put in to apply and receive a scholarship.  Therefore,
	   if you know that you may qualify for college financial aid, what
	   financial incentive is there for applying for scholarships?  We
 	   applied for, and received a few scholarships.  Felt great until we
	   found out it was all for naught! Pride and self-esteem...yes...help 
	   in paying the family college bill...absolutely not!   

	-  Having the student getting a well paying off-campus job is fine,
	   as long as the earnings do not get reported (this itself is not
           legal).  Therefore, the student on college financial aid is
           rewarded for the effort by being penalized with having the financial
	   aid package reduced.  It's a catch 22.  Get a better paying job and
	   lower your financial aid package is reduced.  Where is the incentive
           to work?

We have told the truth.  We have emphasized the value of education with our
children.  We have saved very hard to help pay for our children's education.
We have kept ourselves debt-free.  Yet, I feel totally screwed by a system that 
penalizes me for doing the "right thing".   Yes, I take comfort in the values I
have choosen to follow and pass down to my children. If I'm not debt-ridden now,
I certainly will be after they are through college.  

Ken

    
    	Re: .18
    
    	Yeah, I agree with you.  No system seems to work well for people
    who go against that system, and "playing it straight" definitely falls
    into this category when it comes to college bills.
    
    	But you raised the Catch-22 question of why working during college
    is worth it if it just lowers the financial aid.  Being in college is
    not the goal of going to college -- getting, presumably, a better job
    afterwards is the goal.  My working during college was in the computer
    field, so I graduated with 3 years of real-world work experience
    already on my resume.  Its fine with me if I lost some financial aid in
    doing this given the long-term benefits.
    
    							-craig

    My 2 cents: (It appears that is more than is left in the college aid
                 fund)
    
    
    I have a Step-daughter who finished undergraduate school with a 3.9+
    pre-med grade point average - one year she got a 4.0 (perfect!). I
    did not believe that was possible.  With help from her parents and
    working part-time and summers, she came out not owing too much money.
    She took a year off doing University research, published, and got
    top recommendations.  When she decided to go to Med school and we 
    filled out the paperwork, honestly, the reply we got was that if she
    had not lived at home and saved the money from the year of work she would 
    have been eligible for the LOANS.  Because she worked, stayed at home, and
    saved the money for some of the tuition, (we supplied room and board)
    she was NOT entitled to any assistance - even LOANS!
    
    Now take my son who went back to Graduate school 5 months later than
    my stepdaughter, after 1 1/2 years working and living on his own in Boston.
    The reply we got after doing the paperwork for him was he did not qualify 
    as he did not live at home and was not dependent on us.  This is a 180
    degrees opposite reason from that given to my stepdaughter.
    
       She was dependent, stayed at home, worked and saved her money.
       He was not dependent, lived on his own, worked, saved some money
       yet the resaons for being turned down were directly opposed.
      
    
    What this means to me is that after all the overhead cost of processing
    the paperwork, there are NO funds left to give to needy deserving
    students.  Does this sound familiar.  A lot of people are employed
    pushing the paper just to say "NO" because there is no money left after
    the review process due to this large payroll. 
    
    My son has finished his Masters and owes a lot of money.  My stepdaughter
    is still in Med school and just qualified for a Government grant as she 
    has agreed to work in a depressed/needy area for a number of years once 
    she completes her studies.   
      
    Until there is a National commitment to Education - not words but action,
    we are on our own.  
    
    Ed
    studies
    
    
    the paperwork for him was he did NOT qualify because he did NOT live at 
    home and was not dependent 

    
    Could somebody posty different options available for College Saving 
    and discuss the merits and demerits of each.
    
    eg: UGMA Vs Regular College Saving Program in parent's name
    
        Offerings by various mutual funds...
    
        (Gifttrust Vs College Saving Plan by 20th Century)
    
    Thanks
    
    === Raj