My Family's Track Record with College

My generation is the first generation in my family to really go to college.  We've had mixed levels of success.

In my parents generation only one person went to college.  My mother got a two year degree from a bible college.  My mother was mostly a stay at home mom but she did work later when my sister and I left the nest.  I'm not sure if that degree helped my mom in her jobs or not.  Nobody on my fathers side went to college at all so my mother was the lone exception.

In my generation myself and four others went to college.  Here's our history with college success or non-success (I won't label them with names, but just refer to them by numbers) :


#1. Did not do well in high school and did not go to college.   = high school diploma
#2. Went to college on a merit scholarship for maybe a year but she did not apply herself and then dropped out. = maybe 1/2 to 1 year of college

#3. Went to college full or part time over one or three years and eventually dropped out to work full time and get married. = probably 2-3 years of college
#4. Obtained a professional degree in the health care field and has had a good job ever since then = professional degree

#5.  Got a bachelors in a very competitive field and then realized there were zero job opportunities out there and then later got a masters. She is marginally self employed in her field. = graduate degree

#6 Then for myself, I have two bachelors degrees in STEM majors and I'm employed with a good job. = bachelors degree

5 out of 6 of us went to college.
Among the 5 who did go to college : 
2 out of 5 who went to college dropped out
2 out of 5 of us who went to college benefited with good paying jobs
1 out of 5 went to grad school but hasn't substantially benefited financially from college

Thats not a very good track record.


HALF of my generation in my family made a financial mistake in going to college and either dropping out or picking a major with far too much competition and too few jobs.

Of course this is just a very small group of six people and its entirely anecdotal.  However I think the experience of my family is relatively common.

What lessons are there here?

First for #5 they did not pick a good major.   They ended up in college for around 6 years total and are not making a great income after the fact.  Overall college has not helped them financially and they'd have been better off picking a career that didn't require college or a trade that only requires a two year degree.

The #2 example was someone who simply screwed around too much and did not apply themselves.   I'm not sure what the lesson to learn from there is other than don't screw around too much in college.

For #3, I'm not sure what the solution there was either.   I think the solution may have been not to go to college in the first place.   It was not however that they weren't qualified, but it just didn't work out for them due to a combination of factors.   Sometimes things just don't work out as you planned them.  

Of course anecdotal data like this doesn't really mean all that much.   But I think theres good examples of how college may be a poor choice.  Whether you're not mature enough to work hard, or if you pick a bad major choice or if life simply takes you another direction.    WE also have examples of where college has been a great choice for myself and one other.  WE obtained high demand degrees and have had gainful employment with good incomes ever since.

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How A Highway Spending Act Magically Made Private Pensions Healthier

My wife has a pension from a previous employer. Its not much of a benefit because the length of employment wasn't very long and she's many years away from retirement age.  But because she is vested in this small pension benefit she gets the pension plans annual funding notice.    The notice came in the mail recently.   In 2011 the plan was only funded about 80% and then in 2012 the funding went up to 100%.  

You'd think thats awesome right?   I assumed that the company must have done a great job with the plan assets or added funding to the plan to beef up its funding level.   Its now 'fully funded' and can pay its liabilities.  Great job.   Wait a second.   Reading past the funding liability table I see the statement said something about law changes and implementing changes from something called 'MAP-21'... yadda yadda... todays low interest rates... blah blah... allows the plan to use average interest rates over the past 25 year period... etc.    Hmmmm...   So whats that all mean?

First, what is MAP-21?

MAP-21 is the short hand name for the 'Moving Ahead for Progress in 21st Century Act'.   And that name really tells us nothing.  At least it beat out the marginally less popular 'Moving Back to the 18th Century Act'    The MAP-21 act is a transportation spending bill.   So whats that got to do with our pensions?    Well to pay for the highway bill they had to balance the books so they threw in a couple pension changes that actually raise tax revenues.  Bear with me...    The changes made it so that employers would have to put less money into their pensions and because the pension contributions are tax deductible that would result in higher tax revenues.   So naturally your pension is now better funded... If you aren't confused yet then you may have a career ahead of you in the D.C. area.  

OK So WHY is the Pension BETTER Funded?

The key provision in MAP-21 related to pension funding was a rule change that allows pension plans to use an average interest rate over the past 25 years instead of using current interest rates.

Todays interest rates are really really really low.  (If you hadn't noticed).    Pension plans have to figure out their future liability based on various assumptions and several variables and one of the major variables is the prevailing interest rate.     Say for example that you want to go buy an annuity from an insurance company today.   It will cost you more because interest rates are low.   For the same reason liabilities from pensions are higher when interest is lower.   (at least thats one way to explain it.)    In low interest rate environment the pensions look like they have higher liabilities because of the impact that interest has on the projections.   When interest rates are low the liabilities are higher and when interest rates are higher the liabilities are lower.  

Up until the MAP-21 rule change pensions were having to use todays very low prevailing interest rates (2 year average) and that made their projections worse.   With the MAP21 rule change they can now use an average interest rate from the past 25 years which is a higher interest rate.  Because the rule change makes liabilities lower the funding level goes up based on the same starting asset value.   Plugging in a higher interest rate into the actuary calculations for the pensions can result in the pension having a much higher funding level.

And don't forget that the federal government makes more money in taxes.   Its a win for everyone!  Your pension is better funded, the business has to put less money into the pension and the government makes more tax money.  Yay!  

Cynicism aside, I don't think this is a bad thing really.   In fact I think the change is pretty reasonable and makes more sense.   Its a little silly to base pension projections on the most recent 2 year average interest rate to begin with.  Pension liabilities last 20-30 years into the future and clearly the variables involve will fluctuate over 2-3 decades.  It makes a lot more sense to plan for a number that is a 25 year average if you're planning for a 25 year time horizon.

The Pension Rights Center covers the topic with their discussion of Pension Provisions in H.R. 4348 – Moving Ahead for Progress in the 21st Century (MAP-21) Act

The Society for Human Resource Management also explains it in their President Signs Pension Funding Relief Measure

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Best of Blogs for Week of May 17th

The Big Picture discusses the impact that 'to big to fail' has on the credit ratings for the big banks with Advantage: TBTF

MyMoneyBlog lists the Top 10 Frugal Fruits: Which Fruits Offer the Most Nutritional Value Per Dollar?


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4 Reasons You Shouldn't Move Home After College

This guest post was written by Jon Haver at PayMyStudentLoans.com who writes about how to get out of student loan debt quickly.

College is expensive. Graduating from college prepares you for job opportunities, but the trade off is that it also leaves you in a great deal of debt. Paying off those student loans is no easy task. The millions of people who are behind on their student loan payments will agree. If you are one of those people who struggles with making ends meet and pay off those student loans, you might be considering all of your options when it comes to saving money. One option you might be considering is moving back in with Mom and Dad.

Home is supposed to be where the heart is. Unfortunately, heart is not enough to save money and pay off student loans. Here is why moving back home after college may not be such a good idea.

ONE - Home might not be where the best job market is

You paid a lot of money to gain skills in college, and now it is time to put them to use. Finding a good job based on those skills should be a top priority. Do some research, and you’ll find that some areas of the country do have booming job markets. If your parents do not live in one of these areas, then moving back home limits your opportunities to land your dream job.

TWO - Income-based repayment options

The standard repayment plan for federal student loans is not the only option. If you need to save money, talk to your lender about ways to manage your monthly student loan payments. Graduated plans and income-based plans are available. While it may take you longer to pay your student loans off with these other plans, it is something to consider if you need to save some money. Before applying for any forgiveness program it is always a good idea to check your credit score, Jim writes about how to check you credit score for free – here.

THREE - Other money saving options

There are other things you can do before you decide to move back into your parents’ house. Take a close look at your monthly budget and decide if there are any ways to trim down excess expenses. Once you have that budget, be sure you stick to it. Avoiding consumer debt such as credit cards will make the monthly bills manageable. If you have spare time on the weekend or during the evenings, pick up a second job to bring in a little extra income.

FOUR - Moving home can be a psychological strain

The psychological effects can do more harm than good if you decide to move back home. Your parents raised you in anticipation that someday you will have the ability to strike out on your own. Just because they are older in life and have paid off the house doesn’t mean its free for you to live there – The True Cost of Home Maintenance. If you make the decision to move back home, both you and your parents will be wondering if you can make it at all. Reaching adulthood should be a time when you’re exploring all of your new freedoms independently. Living with parents will set restrictions on that independence. Just being in your old bedroom is enough to make you feel like a child all over again. How can you become financially independent if you still feel like a child?

They might not be able to fully support you. Remember that your parents have their own financial goals and needs. Supporting you for a few more years might not have been in their plans and it could put a strain on them.

Being on your own after college is certainly difficult. You can eventually become independent with a well-planned budget, some frugality, and time. Other people have managed, and so can you.

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