These days, the price of education is moving higher and higher. But how do you decide if it's worth the investment? How do you pay for the costs? Beyond the numbers we hear -- that student debt has exceeded $1 trillion, that the cost of college has risen faster than inflation -- there's an emotional part of this equation. Education isn't like any other commodity. Many families face a balancing act: You want to give your child the best option, but you don't know how to talk about what you can afford. We've asked Michelle Singletary, a personal finance columnist for the Washington Post, to provide some guidance on how to cope with the costs of college.
Singletary has some real-world experience with the issue. Her daughter recently started her freshman year in college. And Singletary is determined to make sure that her daughter graduates debt free. Singletary says she started talking about paying for college with her children when they were young, sacrificing things to save for their college funds. For her family, talking about paying for college has been a life-long conversation.
"We have a zero debt policy as far as education when it comes to my family. Now people are out there [saying], 'This woman has lost her everlasting mind.' But if you have that going into it, then you do the things that it takes to make sure that happens. Now here's what we recognize: that that might mean that she's not going to the top school that she wants to go to if we didn't save enough."
Singletary says her policy limited her daughter's choices. But, she says too many parents give their kids a blank check and allow them to apply to any schools they want -- only figuring out how to pay for it later and causing debt to pile up.
"Life is about limits," she says. "I see far too many families [taking on debt]. And then the kids can't handle the debt. The parents can't handle the debt because not only are they taking on the student loan debt, but they're not saving for their retirement because of this debt. And then just everyday life expenses. You need to put limits. You say, 'I want you to have the best in life, but I want to have the best in life that you can afford.' That is an awesome lesson to teach your child going forward."
There are some people who say that taking on debt for education is OK -- good even -- because you're investing in your future. Singletary disagrees.
"There is no such thing as good debt and bad debt. There is only debt," says Singletary. "What we're finding is, particularly now, people are taking on too much debt. And the jobs that they're getting, the income that they're getting, in this economy is not enough to service a lot of that debt. Because we've given people a blank check and said go, this is good debt, they've taken on too much. What we're finding is a lot of kids coming out of college, they can't get the jobs that they think they were going to get for the amount of debt that they've taken on."
Singletary shared some advice with two parents trying to figure out how to pay for college.
Catherine from Cleveland, Miss., has a daughter who is a senior at Tulane University. She and her daughter have both taken out loans to pay for her college. But, she has a 16-year-old daughter, Rebecca, who has aspirations of her own that could possibly take her beyond the Mississippi Delta. She's wondering how she will pay for her younger daughter's college education and what she should be thinking about in the next few years to prepare.
Antonio from St. Paul, Minn., works as a restaurant manager. He attended a private art school and now has to pay back thousands of dollars in loans. He has been helping to raise his son, a junior in high school. He wants to make more money to help pay for his son's upcoming expenses, but wonders whether he should pursue another degree in the next few years or stay in his current field.
Click play on the audio player above to hear the conversations.
For the victims and witnesses who came from Afghanistan to testify, the U.S. and its justice system were very strange. But seeing Staff Sgt. Robert Bales be sentenced to life in prison for killing 16 civilians brought them some peace. So too does their belief that he will suffer in the afterlife.
The most important thing you can do to get ready for college costs is to save -- early and often.
But saving for college can be bit of a maze. Like retirement, there are several different types of plans, like a pre-paid plan which lets you buy a percentage of tuition in advance, or a 529 plan, which lets you invest money and let it grow without a big tax bill when you start using the money.
Kimberly Lankford, contributor to Kiplinger Personal Finance, says 529 savings plans are one of the best ways to save for college. "The money you put in may be tax-deductible, the key thing is the money grows tax-deferred for years and years, and when you finally use it for college expenses, it's tax-free."
And how much should you start with? "Nothing is too early. As soon as you have a baby born, even if you got just a little bit, [saving] that would be great. A lot of these plans let you invest just $25 or $50," Lankford says. She also notes that many plans can automatically take investments from your savings account. This type of 'set-it-and-forget-it' approach is an easy way to start saving.
Lankford notes that you should check to see if your own state offers a tax deduction for investing in its 529 plan. SavingForCollege.com can be a good resource to compare the 529 plans available.
Not all 529 plans are great. Since the money is invested in mutual funds, it's important to look out for fees and the holdings of each fund. "Especially after 2008 [and the financial crisis], there's been criticism of some of these age-weighted funds where they start out of more aggressively and gradually get more conservative," Lankford says. "Some of these didn't get conservative fast enough."
One alternative to a 529 plan is a pre-paid tuition plan. "With a 529 plan, your money is invested in mutual fund and grows through the years. A prepaid plan on the other side has you using today's dollars to buy [a future share of] tuition. You can set aside a certain amount of money now, and that will guarantee you get a certain share of tuition down the road."
But prepaid plans also have drawbacks. Unlike a 529 savings plan, you're usually locked into only using your savings in the same state you invested in. A 529 plan lets you use that money for any college.
Lankford says, "the key thing is for the person with a newborn or a child in elementary school, they still have many years until the child starts college. Don't get freaked out about the short term blips."
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Capital flowed into emerging markets when interest rates dropped in the U.S. and Europe during the 2008 financial crisis, but as those economies rebound, investors are turning the other way.
"Investors are seeing the prospect of reduced Federal Reserve intervention in the U.S. -- which will tend to raise long-term interest rates in the markets -- and they want to get some of those better returns," says Andrew Walker, the BBC's economics correspondent. "In the process, they are selling money in emerging financial markets, and that has been driving the currencies down and the interest rates up."
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