Best of blog posts for week of May 18th

Every Friday afternoon I share some of the more interesting or notable posts that I have seen in the personal finance blogs and other sources for the past week.

Doughroller discusses Credit Scores and Fannie Mae–What You Need to Know

MyMoneyBlog talks about the SmartMoney Magazine Top Online Broker Rankings 2012
My 401k provider at work made #1 on the ranking and my personal IRA is #2.

DQYDJ asks Who Will Rate the Raters? The Analyst Crisis on Wall Street.

--

Entertainment books $12 and 26% back with Ebates

Right now you can an Entertainment coupon book for $12 with free shipping plus get 26% cash back from  Ebates.   After the rebate (26% X $12 = $3.12) you'll end up paying $8.88.

The Ebates website says that the discount expires 5/21 so you've got a few days to act if you're interested.

Make sure to check out the Entertainment website to make sure the coupons are really a good deal for your area and your shopping needs.  A lot of the coupons are buy-one-get-one-free type offers for restaurants I'm not interested in, but there can be some great deals mixed in.

I pointed out late last year that the books go on sale in the summer.  Back in April the books were on sale it was for $10.63.   Now its down to $8.88.    So far I'm being proven right about the prices dropping in the summer months.


To get the cash back you need to be signed up with Ebates.  Then simply go to Ebates to get the referral to the the store before you do your shopping.  I also get a referral bonus if you use my links to sign up with Ebates.

--This article may contain referral links which pay this site a commission for purchases made at the sites.

Financial Aid versus College Costs over Time

You probably know by now that the cost of college has been going up faster than inflation for a while.   When I went to college my tuition was about 1/4 of what you'd have to pay today for that school.    Thats about 7% annual increase and close to 2.5 times the rate of inflation in the same period.  OK.. but I didn't pay full tuition then and I probably wouldn't pay full tuition today either because of financial aid.  

How has financial aid trended over time versus the cost of college?  

I got all the data I'm using today from the College Board Trends in College Pricing with data from their Excel sheet and their Trends in Student Aid along with the data in Excel.

I'm going to look at all the figures in current 2010 dollars.   So this is all inflation adjusted.   I think that makes more sense than looking at the actual dollar figures since $1000 in 1980 was a lot more money than it is in 2012.   But you can still see from the charts below that college costs are rising even after accounting for inflation. 

I'm also only looking at public four year universities.   Costs and aid for private or 2 year schools are different.
Financial aid is mostly need based so the amount of aid available to you will depend on your income level and family assets.   I'm looking at just the average financial aid amount for all students, but this will differ greatly if you're low income versus high income.  If you're in the higher income levels then the amount of financial aid won't really impact you, but most families do get some financial aid so I think it makes sense to consider it in general.


First lets compare the cost of tuition, tuition + room and board and the average financial aid per student :

The green line is the total tuition and room and board cost so thats the full sticker price for college.   Purple line is just the tuition cost.   The blue line is the average financial aid per student.  

As you can see the financial aid at public universities is keeping pace with the cost of college after adjusting both for inflation.

After figuring in the average financial aid given to students we can figure out the actual net cost of college.   An individual student doesn't typically pay the full tuition rate but they instead pay the difference of the tuition less their aid award.   I think this net cost of college is a better indicator of college affordability in general.  

Here we can see that the net cost of college after aid is not gone up in the same way as college costs have over the years.    In fact today after taking account of inflation the net cost at a public university is actually lower for an average student than it was when I went to college.

Of course theres a major 'gotcha' in that last statement because a lot of the financial aid given to students is in the form of student loans.   So are we just shifting more of the cost of college into student loans?

Lets look at the average amount of loan aid versus grant aid over time :

You can see there that back in the 70's the grant awards were quite a bit larger than the student loan averages.   But since the early 1980's the loans and grants have been pretty equal and both grown at equal pace.    If we look at the % of total aid that is from student loans then we can see that portion of aid in form of loans is not changing drastically :

Since the early 80's the financial aid has been made of 40-50% loans.  

Students of course have to repay the loans.   I certainly wouldn't consider that 'free' money so we should account for the cost of the loans when looking at the students real costs.  I'll figure the 'real' cost of college by taking the tuition plus room and board then subtracting the average financial aid to get the net cost then adding back the average loan award.   The real cost is then equivalent to the full retail tuition and room and board minus the free forms of financial aid such as grants and tax benefits.

The purple line is the 'real cost' of college.    This is what an average student actually ends up paying either out of pocket or via loans.    As you can see in the chart the real cost was fairly flat from the mid 80's up until about 2000 when it went from $6033 to $6269 (in inflation adjusted numbers).   But in the past 12 years the real cost has risen considerably.  From 2000 to 2011 the real cost of college has gone up 3.8% a year even after figuring in inflation.

Again, as a reminder theres several details about this analysis:  I'm looking at inflation adjusted dollars, this is only for public 4 year universities and of course the amount of financial aid varies considerably based on your income and financial situation.  Furthermore the situation varies 50 different ways based on how the 50 individual states fund their universities and how generous they are with state based financial aid.

--

Almost Half of College Grads Wished They'd Picked a Different Major

Unfortunately lately the recent college grads are having a real tough time finding a job or at least a job in their field.  I think part of that is due to many grads having chosen majors that are not in high demand or in fields with keen competition.   It appears in hindsight that nearly half, 48%, of the college grads realize after the fact that they made a poor choice of major.   At least that was the findings in the report Unfulfilled Expectations: Recent College Graduates Struggle in a Troubled Economy   I assume a lot of that second guessing about choice of major is due to being shocked when the 'real world' doesn't fill their email inboxes with job offers.


Here's the full list of 'regrets' and what % of grads wished they'd done it differently : 

Been more careful about selecting major or chosen a different major	48%
Done more internships or worked part time	47%
Would have started looking for work much sooner while  still in college	38%
Would have taken more classes to prepare for college	27%
Would have gone to a different college	14%
Something else	9%
Would not have gone to college	4%

Notice that the 2nd item on the list at 47% is related to internships or more part time work.   I had that regret myself when I first graduated from college without any useful work experience.   The same study's data also shows that graduates with internships have 24% higher starting wages on average.  

I'm a little surprised that students didn't regret not having studied harder and partying less, but maybe they enjoyed the partying too much to regret it or maybe those regrets were filed into the 'something else' category.

Choice of major is huge and has a massive impact on your future career and employment prospects.   If you're going to college or know someone who's doing so then make sure to carefully research and consider the employment prospects of the field in question.


--