Changes in marriage patterns have affected poverty and income inequality

Florida Senator Marco Rubio’s recent comments on the benefits of marriage in reducing poverty were soundly criticized by some left-leaning voices.  Rubio had offered up “a very old idea”:

Social factors also play a major role in denying opportunity. The truth is that the greatest tool to lift people, to lift children and families from poverty, is one that decreases the probability of child poverty by 82 percent. But it isn’t a government program. It’s called marriage.

National Review Online clarified that “cajoling impoverished single mothers into marrying men who don’t have particularly bright labor market prospects” is not the solution proposed by Rubio or other conservatives.  Rather, the idea is to encourage marriage before having children.

Even amid strong resistance to this idea among liberals, the New York Times has reported about the effect of marriage on poverty.

… changes in marriage patterns — as opposed to changes in individual earnings — may account for as much as 40% of the growth in certain measures of inequality.

…
Another notable trend is how the rise of assortative mating has increased income inequality.

… Income inequality has gotten worse in past decades in part because college-educated, high-earning men and women are more likely to marry each other, rather than get hitched to partners with divergent education or wage levels.

This is the finding of a research paper, “Marry Your Like: Assortative Mating and Income Inequality”  authored by economists Jeremy Greenwood, Nezih Guner, Georgi Kocharkov, and Cezar Santos.

No “solution” is proposed.

The rich, married, and educated get richer while the poor, single, and uneducated fall further behind.

… College-educated households are more likely to be married and thus more likely to have secondary earners contributing to household income.

… “assortative mating” … married college-educated persons are more likely to have a college-educated spouse. Thus, they are more likely to have a spouse with high earnings.

Related:  Lack of college-educated men may be a reason for declining marriage numbers (Cost of College)

Support for school choice unites strange political bedfellows

Support for school choice unites Rep. Sheila Jackson Lee, who is about as liberal as it gets, and Sen. Ted Cruz, who’s about as conservative, reports Reason.

74% of Americans favor school choice, and this popularity may be pushed even higher by the growing dissatisfaction with Common Core Standards, newly adopted by most public schools.

. . .

Two senators have proposed redirecting $35 billion in federal funds to supplement school choice

Sen. Lamar Alexander, R-Tenn., and Sen. Tim Scott, R-S.C., proposed plans Tuesday to redirect nearly $35 billion in existing federal education funds to supplement school choice programs in different states. Under Alexander’s Scholarships for Kids Act, students in eligible states would receive $2,100 scholarships that would follow those children from families in poverty to the school of their choice. Alexander said the legislation would reach about 11 million American students….

Piggybacking off Alexander’s proposal, Scott said he plans to introduce legislation, known as the CHOICE Act, which would also redirect federal funds to three areas in education: students with disabilities, students from military families and students in the District of Columbia’s Opportunity Scholarship program (DC OSP).

The CHOICE Act would direct federal IDEA funds to offer school choice for special education students.

National School Choice Week is January 26 — February1.

Related:  Confidence in public schools at historic low (Cost of College)

Is your income too high to qualify for college financial aid?

Mark Kantrowitz answers the recurring question about how much is too much income to qualify for college financial aid.

Question:

Is there a certain level of income and assets at which it doesn’t even make sense to apply for aid? I know this is not cut and dried, but before going through all the forms and submission expense, is there a formula where you can absolutely say that if your income is above x (say for a family of four) and your assets (outside of your primary home and retirement fund) are y, don’t even bother? – Stephanie

Answer:

The need analysis formulas are complicated enough that there is no simple answer to this question. The number of children in college can have a dramatic impact on eligibility for need-based financial aid. For example, a family with $100,000 in income and $250,000 in assets might have an expected family contribution (EFC) of about $29,000 with one child in college, but an EFC of $15,000 with two children in college. That won’t qualify for a Pell Grant since the EFC is more than $4,995, but it might qualify for subsidized Stafford loans or even institutional grants depending on the cost of the college. Financial need is defined as the difference between the cost of attendance (COA) and the EFC, so even a wealthy family might demonstrate financial need at a higher-cost college.

If family members have unusual financial circumstances, they may be able to qualify for more financial aid by asking the college financial aid administrator for a professional judgment review, sometimes called a special circumstances review or financial aid appeal. Unusual circumstances include anything that changed from last year to this year or anything that sets the family apart from the typical family. The college won’t make an adjustment for boat payments, but adjustments for job loss, unreimbursed medical expenses and high dependent care expenses (for example, for a special needs child or elderly parent) might qualify. Job loss is the most common reason for an adjustment. According to the 2011 College Decision Impact Survey, about one in six (17.6 percent) high school seniors had at least one parent lose a job in the last year.

Many colleges and scholarship providers require families to file the Fafsa to ensure that the student receives all the federal and state aid to which he or she is entitled. Families often overestimate eligibility for merit-based aid and underestimate eligibility for need-based aid.

Filing the Fafsa is also a prerequisite for low-cost federal education loans, like the Stafford loan and Parent PLUS loan. Almost half of Bachelor’s degree recipients from families with adjusted gross income (AGI) of $100,000 or more graduated in 2007-8 with student loan debt. More than two-fifths of students from families with AGI of $250,000 or more graduate with a Bachelor’s degree and student loan debt. More than a quarter of students from the top 1 percent borrow to pay for their education, perhaps because their parents want to ensure that the student has skin in the game.

Should you fill out the FAFSA if you are a high-income family?  It’s complicated, but keep this information in mind:

• The FAFSA must be submitted to qualify for a federal loan.
• Some merit scholarships require a completed FAFSA.
• A family income that is higher than about $200,000 disqualifies most students for financial aid, but there are exceptions.

Related:

• Can rich families qualify for college financial aid? (Cost of College)
• ‘Rich’ families get a sweet financial aid deal at the most selective universities (Cost of College)

A streamlined FAFSA has made applying for college financial aid easier

The FAFSA form has been getting easier to complete.

In recent years, the U.S. Department of Education has simplified and streamlined the process. Nearly all applicants now complete the form online instead of filing out by hand a lengthy paper application. A feature that tailors questions to each applicant has reduced time. A tool used to retrieve Internal Revenue Service tax information online, rather than manually inputting the information, has shortened completion times as well.

The changes have led to a 50% increase in the number of students who completed the application over the last four years, Duncan said.

The form can usually be completed in about one hour.

The FAFSA “is required to tap the $150 billion in grants, loans and work-study funds doled out each year by the federal government, as well as other state and private funds”.

A reminder to complete the FAFSA as soon as possible after it becomes available on January 1:

“You do not want to wait until the last minute with financial aid — because when it’s gone, it’s gone,” she warned.

Related:  What forms do you need to complete the FAFSA? (Cost of College)

Simple financial advice that works for many investors

This 4×6 index card has all the financial advice you’ll ever need

…
This summarized financial advice is the result of University of Chicago social scientist Harold Pollack’s interview with personal finance expert Helaine Olen.

Keep it simple and be wary of financial advisors.

… the lesson here is that once you have an income that you can live off of and save a little bit besides, managing your finances shouldn’t be all that hard. The people making it complicated are often trying to make money off of you.

Sometimes it is a little more complicated.

I would agree that most of this card’s advice makes sense for most people.  But buying and selling individual securities can be completely appropriate for higher income investors.  And target funds have their downsides, so they’re not for everyone.  Many of them allocate most of their assets to bond funds during the retirement years, a strategy that could leave older investors with meager income and vulnerable to the volatility caused by shifting interest rates.

Related:  ‘passively managed index funds outperform almost all actively managed funds’ (Cost of College)

Some career advice is timeless, and some is only recently relevant

Successful entrepreneur Jason Nazar has some advice for 20-year-olds.

… Call me a curmudgeon, but at 34, how I came up seems so different from what this millennial generation expects.  I made a lot of mistakes along the way, and I see this generation making their own….

Some of Nazar’s suggestions have been around for many years, while others are new and relevant to the current business environment.  Here are a few from his list of “20 Things 20-Year-Olds Don’t Get“ .

When it comes to communication, young people seem to prefer texting and email over talking.  But sometimes a personal touch makes a difference, and the sound of your voice can be important.

Pick Up the Phone – Stop hiding behind your computer. Business gets done on the phone and in person.  It should be your first instinct, not last, to talk to a real person and source business opportunities.  And when the Internet goes down… stop looking so befuddled and don’t ask to go home.  Don’t be a pansy, pick up the phone.

When you’re new on the job, working hard is a must.  Maybe there will be time later on to coast, or maybe not.

Be the First In & Last to Leave ­– I give this advice to everyone starting a new job or still in the formative stages of their professional career.  You have more ground to make up than everyone else around you, and you do have something to prove.  There’s only one sure-fire way to get ahead, and that’s to work harder than all of your peers.

Nobody wants the challenge of managing an employee who lacks initiative and needs to be told what to do.

Don’t Wait to Be Told What to Do – You can’t have a sense of entitlement without a sense of responsibility.  You’ll never get ahead by waiting for someone to tell you what to do.  Saying “nobody asked me to do this” is a guaranteed recipe for failure.  Err on the side of doing too much, not too little.

This one caught me a little by surprise since I have sometimes found myself buying  into the idea that social media ranks highest in what makes a company successful.

Social Media is Not a Career – These job titles won’t exist in 5 years. Social media is simply a function of marketing; it helps support branding, ROI or both.  Social media is a means to get more awareness, more users or more revenue.  It’s not an end in itself.  I’d strongly caution against pegging your career trajectory solely to a social media job title.

If I thought they would take heed, I would send this list to some young people I know.  It’s mainly good advice.

Related:

• Career and money advice for new college graduates (Cost of College)
• Tips for jobless grads, with advice to see the upside of surviving the lean years (Cost of College)

Watching TV with our smartphones by our side

It appears I am not alone in keeping my smart phone handy while watching television.

About 44 percent of Americans utilize another device while watching television — but among that group, only 13 percent say that it makes the program-viewing experience “much more enjoyable.” A significant 67 percent report that it makes their TV viewing “somewhat more enjoyable.”

Hungry for more information

I would say it makes my viewing experience more enjoyable.  Most of the time I use my phone to look up information about a particular person appearing on a news or reality show, which is mostly what I watch on TV.  So if an expert is opining on a particular topic, I might look up his background to consider how credible I consider his views.  Or if a starlet is embroiled in some scandal, I might Google her to see how many times she’s been married.

… 67 percent of those using a second screen while watching TV are searching for program-related content. And the most commonly used second-screen device is a smart phone. Those most likely to use their phones in this way are millennials (ages 13 to 34). Women are also more likely to be second-screen users than men.

Millennials are more likely to access Twitter for shows they are watching (22 percent) and mostly go to social network sites where they can interact with or track a community of other viewers.

The use of what the study calls “synchronized content” is most often done during reality shows (29 percent) and for participating in contests to win prizes (24 percent). An overwhelming 72 percent said such content is only appropriate for certain shows.

Too distracting?
Does this use of “synchronized content” create a negative distraction as much multitasking does in other areas?  I usually check my smart phone while pausing the program or during commercials, so I don’t consider it multitasking as much as “data-enhanced” viewing.

Social or anti-social viewing?
Checking Twitter or similar social media sites can make TV watching more of a social event at times.  For example, if I’m home alone watching the Super Bowl, I might want to check in with Facebook friends during the game to make it a more exciting event.  Or would that just make me feel lonely for not being invited to a Super Bowl party?

Related:  Distracted by digital devices (Cost of College)

The risk of promising your child that “we’ll find a way to pay” for college

Don’t make promises you cannot keep.

In the college search and selection process, parents should think very carefully before assuring their child that “we’ll find a way to pay for it.”  That promise could be the cause of deep disappointment or crushing student debt.

In answering the question, “Should Students Apply to Reach Schools?“, Do It Yourself College Rankings discusses the pitfalls of applying to colleges that are financial reaches.

The simple answer is not to apply to any college that you can’t afford to attend.

The more detailed answer would be that it’s fine to apply to a financial reach school if everyone clearly understands that only significant financial aid would make matriculation possible should the student be accepted.  But to avoid unnecessary disappointment and stress in making the final decision where to attend, one recommendation is to get a sense about the likelihood of receiving financial aid by running the Net Price Calculator tool very early in the process.  Also consider the realistic chances of merit aid, which is often not included in the NPC estimate.

For more insight on what makes sense for your family when deciding whether to apply to a financial reach, check out the complete DIY Rankings answer.

Related:

• ‘Tips for Using Net Price Calculators’ (Cost of College)
• Net Price Calculator – a helpful first step in the college search (Cost of College)

Net Price Calculator can help guide your college search

Can we afford it?

That question has to be high on the list for a high school student creating a list of colleges she’d like to attend, and the Net Price Calculator can help in answering that question during the early stages of the college search.

What is a Net Price Calculator?
Net price calculators are available on a college’s or university’s website and allow prospective students to enter information about themselves to find out what students like them paid to attend the institution in the previous year, after taking grants and scholarship aid into account.

While it’s fine to stretch aspirations in considering a dream college that may be a financial reach, it’s important to be realistic in understanding practical budget limitations.

Let’s consider the hypothetical case of a New York high school senior, where an NPC calculation can show meaningful cost differences among various colleges.  Here are three possible college choices:

1. Harvard University:  It’s a reach for almost everyone because chances for admission at this Ivy League school are small at only 6%.
2. Syracuse University:  A private university with a 50% acceptance rate that is attainable for many students.
3. Binghamton University:  One of the top New York state universities, it comes with a 43% acceptance rate.

Here are simplified NPC scenarios showing Net Cost of Attendance (COA) based on earned income levels of $50,000 (low income), $80,000 (medium income), and $150,00 (high income).

Useful information, right?  This chart illustrates the oft-repeated advice that in some instances a private college may be as affordable as a state school.

Important points about this hypothetical NPC illustration:

• No merit aid is included in the estimates.  Some schools do attempt to include merit aid as part of their NPC estimate.
• These are simplified, streamlined financial scenarios.  Real-life financial data is typically more complex.
• These estimates are not guarantees by any stretch of the imagination, and may be considerably inaccurate for business owners and other relatively complex situations.

At what income level does a family’s chance of aid become zero?

At an income level of $250,000, the net price of attendance in all these scenarios equals the gross price.  In other words, somewhere between an income of $150,000 and $250,000 is the point where a family would not qualify for any need-based financial aid.

The advice?  Run a NPC early on in the process to get a general idea about a college’s affordability.

Related:

• Burned by college net price calculator estimates (Cost of College)
• ‘Tips for Using Net Price Calculators’ (Cost of College)

Early college high school may save money and improve graduation rates

Early college high schools are small schools designed so that students can earn both a high school diploma and an Associate’s degree or up to two years of credit toward a Bachelor’s degree. Early college high schools have the potential to improve high school graduation rates and better prepare all students for high-skill careers by engaging them in a rigorous, college preparatory curriculum and compressing the number of years to a college degree.

Intended to serve underrepresented groups; designed to “save time and money”

Since 2002, the partner organizations of the Early College High School Initiative have started or redesigned 240+ schools serving more than 75,000 students in 28 states and the District of Columbia. The schools are designed so that low-income youth, first-generation college goers, English language learners, students of color, and other young people underrepresented in higher education can simultaneously earn a high school diploma and an Associate’s degree or up to two years of credit toward a Bachelor’s degree—tuition free.

Distribution of early college high schools throughout the country

Are early college high schools working?

Data from early college high schools are promising. First, the schools are reaching their target populations. Nationally, roughly three-fourths of the young people attending early college high schools are students of color, while nearly 60 percent report eligibility for free or reduced-priced lunch (a conservative indication of the number of students from low-income families). Most students attending early college high schools will be the first in their families to go to college. …

In 2010, 5,414 students graduated from early college high schools around the country. Their achievements far surpass those of their peers from traditional high schools serving similar populations. Preliminary data show that:

• More than 250 early college high school graduates earned merit-based college scholarships. Four earned the prestigious Gates Millennium Scholarship, awarded to 1,000 high-achieving, low-income students each year.
• 23.3% of graduates earned an Associate’s degree or technical certificate.
• 77% of graduates went on to some form of postsecondary education: enrolled in four-year colleges (52%), two-year colleges (23%), and technical programs (2%).
• Of 109 schools reporting data on graduates, more than half (56%) said that students had earned two or more years of college credit.
• 80% of early college schools had a graduation rate equal to or higher than their school district (54 out of 68).
• The average graduation rate for early colleges was 84%, compared to 76% for their school district.

Early college students are “more likely to earn a college degree than students in traditional high schools”.

Burges High School in my hometown of El Paso has just been designated an early college high school.  Demographics must have changed considerably over the last 40 years, as my memory is that Burges used to serve higher-income families.  Today almost 90% of its students are Hispanic and about 60% of students qualify for free or reduced lunch.

AP and dual enrollment courses are a way for students in more affluent school districts to gain college credits in high school.