Archive for June, 2014

June 30, 2014

Advice for getting your first credit card after graduating from college

by Grace

A new college graduate has some questions about getting a credit card.

How do I get a credit card? You can’t qualify for a card unless you can prove you’re worthy by having a credit history, but how can you have a credit history when you don’t have a credit card?

Kerry Hannon, personal finance and work blogger, offers some answers.

First, some advice to pay off your balance each month.

Sure, you typically need a credit card to pay for big expenses from hotels to airline tickets. I get it. But repeat after me: “I will always pay my credit card bill each month when it’s due — and in full.” If you only make the minimum monthly payment, you’ll likely be slammed with a high interest rate.

Twentysomethings these days often pay credit card rates of 22% or higher (!) because they lack a credit history and may have a low credit score. The average credit score for Millennials, according to the Experian credit bureau, is 628; for boomers, it’s 700.

So when you do get a card, pay your balance each month and be happy that you get about 30 days to make the payment (that’s called the “float”).

Do your homework before applying for a credit card.

… if you don’t have a credit history to speak of, you might want to hold off applying for a card until two months or so after you start working. Card issuers want to see an income stream before they’ll approve you, so by waiting a bit you’ll boost your chances of getting plastic.

Before applying for a credit card, get your latest credit report (free from Annualcreditreport.com) and credit score (free from sites like Credit.com, CreditKarma.com, CreditSesame.com and Quizzle.com). These will let you see what a card issuer would find out about your credit history and prepare you for your chances of being approved. If you see a mistake in your credit report, fix it by following the advice in Next Avenue’s article, Why You Must Check Your Credit Reports for Errors.

Piggyback on your parent’s reputation.

An easy way to build a credit history is to ask your parents to add you as an authorized user on one of their cards. The card will then show up on your credit report, and it’ll have your name on it. Your parents must make on-time payments to the account to protect your credit record and theirs. After about six months as an authorized user, you can then apply for a card on your own.

Or check out secured credit cards that do not depend on a credit history, but require a security deposit.

… With a secured card, you’ll get a credit line of generally one to three times the amount of your deposit. Manage your card responsibly and you may earn credit limit increases. After several months, you can apply for a regular card from the same issuer or from another one.

Once you obtain an unsecured credit card, close your secured card account and your deposit will be returned.

Some recommended sites:

… CardHub.com, which just published its 2014 list of the Best Credit Cards for High School and College Graduates … also has a list of cards for people with no credit history.

…Visit Lowcards.com to find the best deal. In general, look for cards with no annual fees.

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Caitlin Bonney, “What New College Grads Need To Know About Money”, Forbes, 6/04/2014.

June 27, 2014

Even in affluent areas, many high school graduates are not ready for college

by Grace

Even in one of the most prosperous and highly educated counties in the United States, less than half of high school graduates are ready for college.

Only 48% of Westchester County high school graduates are prepared to do college-level work.  This measure is based on students scoring “at least 75 on their English Regents exam and at least 80 on a math Regents exam”.

For my local high school, located in Westchester County, 64% of graduates are considered college ready.  This is a school district that spends about $25,000 per student each year and enjoys a student/teacher ratio of 14:1.

Using AP participation figures, US News determined that my local high school has a College Readiness Index of 44.5

On a national basis “SAT scores indicate ‘most freshmen aren’t academically prepared for college'”, so it appears this problem is not limited to high schools near me.

Are these college readiness numbers surprising?  Should they be higher, given the resources being devoted to education?  Or is it unrealistic to expect higher percentages of college-ready high school graduates, even in some of the most affluent areas of the country?

Some possible reasons for the low number of high school graduates who are prepared to do college-level work:

  1. The measures are flawed and do not give an accurate representation.
  2. Teaching and/or curriculum is mediocre, or worse.
  3. Schools do no place sufficient focus on academic goals, specifically on preparing students for college.
  4. We’re not spending enough on education.
  5. The money we spend on education is used inefficiently.
  6. No matter the demographics and despite how much a school tries, a certain percentage of high school graduates will never be ready for college work.
  7. “Kids these days.”
  8. Parents are not doing enough to support their children’s education.

I dismiss the first reason listed, having some familiarity with the New York State tests used to measure college readiness.  A high school student on the college-prep track should definitely be able to meet the scores required.  These tests are notoriously easy and/or graded on a very forgiving curve.

Achievement levels do not correlate closely with money spent on education, so I cannot see #4 being an important reason.

The rest of the listed reasons probably play some role in creating the disappointingly low college-readiness figures.  In theory, schools have the most control over remedying reasons 2, 3, and 5.  In practice, most experiments innovations that schools implement only seem to make things worse.

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Gary Stern and Dwight Worley, “Local high school grads not up to more ambitious state goals”, The Journal News, June 23, 2014.

Graduation Rate Data – June 23, 2014, New York State Education Department

June 26, 2014

More students are receiving special accommodations for SAT and ACT tests

by Grace

Some recent numbers show the increase in students receiving special accommodations for SAT and ACT testing.

During the 2010-11 school year, 5 percent of all test takers were provided with some feature that was intended to adapt the test to their needs, ACT spokesman Ed Colby said, compared with 3.5 percent of test takers in the 2007-08 school year.

The numbers of requests have been rising among SAT takers, too, along with an increase in test takers overall. Once students are approved for an accommodation, they don’t have to reapply. Of new requests—almost 80,000 during the 2010-11 school year, compared with 10,000 fewer five years earlier—about 85 percent are approved, said Kathleen Steinberg, the spokeswoman for the College Board. The ACT said roughly 90 percent of requests made are granted.

Rich kids are more likely to receive accommodations.

Controversy has swirled for years about which students deserve special help. A 2000 California audit concluded that those getting college entrance testing accommodations “were disproportionately white, or were more likely to come from an affluent family or to attend a private school.”

More than a decade later, the Tribune’s review of data obtained under open records laws indicates that’s true in Illinois, where the percentage of test takers with accommodations doubled the national average.

Schools in wealthy enclaves with predominantly white students were at the top of the list when it comes to students getting ACT testing accommodations in Illinois, the 2011 data show.

A recent report from the General Accountability Office found that testing for qualifying disabilities “can cost from $500 to $9,000”.  Wealthy families can afford to pay these costs when the schools will not.  They also tend to have the expertise and money to force schools to pay for legally required testing.

One local affluent school district recently had a long list of applications for accommodations that was waiting to be submitted, probably typical for high-income locales.

The most commonly requested accommodation is extended time, but some others include “a quiet testing room, a reader or a scribe, enlarged print test booklets and/or answer keys, the use of a computer, additional or extended breaks, and multiple-day testing on the ACT”

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Nirvi Shah, “More Students Receiving Accommodations During ACT, SAT”, Education Week, May 14, 2012.

 Diane Rado, “Many Illinois high school students get special testing accommodations for ACT”, Chicago Tribune,  April 29, 2012.

Jed Applerouth, “SAT and ACT Accommodations”, Independent Educational Consultants Association, April 9, 2014.

June 25, 2014

Some college majors offer ‘more shelter from economic storms than others’

by Grace

Picking the “right” college major shields graduates from some of the bad luck of graduating during a recession.

… Those who major in subjects that command higher salaries, like engineering and finance, increase their earnings advantage when they graduate into a recession. And those who major in subjects that lead to lower-paying jobs, like philosophy and music, are even more disadvantaged than in normal economic times.

A philosophy major takes a harder hit than a finance major during a recession.

Take finance majors. In normal economic times, they earn 24 percent more than the average college major when they are one year out of college. But in a recession, they earn 32 percent more than the average. At the other end of the earnings spectrum, religion and philosophy majors earn 42 percent less than the average major their first year out of college, and 55 percent less during a recession.

But the latest recession hit all graduates more than previous ones did.

In the Great Recession, though, the benefits to high-earning majors were muted, according to the most recent data collected by the Yale economists Lisa Kahn, Joseph Altonji and Jamin Speer. They were less sheltered because the recession affected the economy so broadly, Ms. Kahn said.

Should this news affect the selection of a college major?  Yes.

… yet another variable for students to keep in mind as they weigh which career to pursue.

Related:  “Recent college graduates suffering worst unemployment rates in 50 years” (Cost of College)

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Claire Cain Miller, “A College Major Matters Even More in a Recession”, New York Times, June 20, 2014.

June 24, 2014

Only about 55% of the college wage premium comes from actually attending college

by Grace

The Cato Institute recently hosted a forum on the question, “Is College Worth It”?

Featuring Bryan Caplan, Professor of Economics, George Mason University, and Adjunct Scholar, Cato Institute; Beth Akers, Fellow, Brown Center on Education Policy, Brookings Institution; and Neal McCluskey, Associate Director, Center For Educational Freedom, Cato Institute; moderated by Chip Bishop, Director of Student Programs, Cato Institute.

Soaring tuition and student debt, the rise of high-tech alternatives, and a persistently sluggish economy have provoked a startling question: “Is college worth it?” It’s a question that raises many others: Must I go to college to learn skills I’ll need for my career? Is just getting a degree — any degree — the key to my future prosperity? Should higher education be about marketable skills, or is it about personal fulfillment and expanding human knowledge? These questions disconcert students, parents, and taxpayers alike….

According to Caplan, who took the podium first, approximately 55% of the college wage premium is attributable to the college degree.  The individual student is actually responsible for a significant percentage of the higher wages attributed to college graduates.

College grads typically arrive on campus with big labor market advantages. The typical college grad was unusually employable even before they started college.

The choice of major and the probability of graduation are two important factors that influence the college premium.

20140620.COCIsCollegeWorthItB1


The ‘concert effect’

Caplan also discusses the “concert effect” caused by the growing rate of college completion.  Similar to what happens at a concert when some members of the audience stand up, everyone else has to follow in order to enjoy the performance.  Can you see better when you stand up?  Not really, but you are forced to stand because everyone else is doing the same.  Does a college degree make you a better employee?  Not really, but we feel compelled to go to college because “everyone” else is doing it.

The forum podcast is available at the Cato site.  More topics are covered, including the sheepskin effect, why college professors never have to check IDs, and how college is a four-year party for most students.

 Related:  “Let’s be clear, going to college is not always ‘worth it’” (Cost of College)

June 23, 2014

How is home equity treated for college financial aid?

by Grace

The short answer:

Your home equity will count on the CSS Profile, but not the FAFSA.

Michelle Kretzschmar of Do It Yourself College Rankings explains more.

Since each school decides if they use home equity in their methodology and how much to consider, how much home equity will affect financial aid will vary by institution. Mark Kantrowitz of  Fastweb, estimates that colleges cap the amount of equity (value of home-mortgage) considered at between two to three times annual income. Troy Onink in Forbes reports that  “home equity counts under the Institutional Methodology, but only up to 1.2 times the parent’s adjusted gross income (AGI) under the Consensus.”

When in doubt, ask the school directly.

If you want to know the actual figure, you’re best bet is to ask the college. According to Money Watch.com

If your home has appreciated a lot, ask private colleges how they factor in home equity when determining aid, advises Paula Bishop, a financial aid consultant in Bellevue, Wash. Their answers may differ dramatically. Some schools, such as Princeton University, ignore home equity. Others, such as Boston College and American University, include 100 percent of it as an asset.

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Troy Onink, “How Assets Hurt College Aid Eligibility On FAFSA And CSS Profile”, Forbes, 2/14/2014.

Michelle Kretzschmar, “Does home equity affect financial aid?”, Do It Yourself College Rankings, 11/11/2013.

June 20, 2014

Go online to check the accuracy of your Social Security account

by Grace

Although most millennials “believe they will receive no Social Security money by the time they retire”, it is still a good idea to understand the basics of how this retirement system works.

Social Security benefits are based on your past earnings

First a summary of the earnings you had throughout your career is calculated. This measure is called the Average Indexed Monthly Earnings (AIME). Your wages for prior years are typically indexed, meaning they are adjusted to reflect inflation over the course of your career. For example, if Peggy earned $20,653 in 1990 this figure would be reflected as $43,531 in her calculation today. The higher your AIME is, the larger your benefit.

Second, a benefit formula is applied to the AIME to determine your Primary Insurance Amount (PIA). In 2014 you receive 90% of the first $816 in AIME, and 32% of AIME between $816 and $4,917, and finally 15% of AIME over $4,917.

Third, an adjustment may be made to the amount you are entitled to depending on the age at which you start benefits, the Social Security earnings test, or other factors.

Fourth, benefits for dependents and survivors are based on the worker’s PIA. For example, a spouse may get a spousal benefit of 50 % of the worker’s PIA, and a widow might get 100% of the worker’s PIA generated benefit.

More basic Social Security information is provided by Ken Tacchino at MarketWatch, including this bit that was news to me.

You can monitor your Social Security account online

From 1999 to 2011 the Social Security Administration mailed Social Security Statements to anyone who was 25 or older. In May of 2012 they stopped these automatic mailings and went online to save money. They will resume mailings every five years (ages 25, 30, 35, etc.) starting in September. However, the online statement that’s created by you in the “my Social Security” section of their website might be your best option to track retirement.

One benefit of the online Social Security Statement is that it can determine whether your earnings are accurately posted each year. Assessing this is crucial because the Social Security benefit is based on the amount you earn each year of your career. If there’s an error in posting your annual earnings, the amount of benefits you receive may be compromised. Regardless of whether your statement is online or not, the statement contains an estimate of the monthly retirement benefit you will receive at age 62, full retirement age, and age 70. Keep an eye on it and factor it into your planning.

Bottom Line: Tracking what Social Security will provide will enable you to better prepare for retirement.

I created a “my Social Security” account, and I would advise everyone to do the same as a way of monitoring the details and accuracy of potential future benefits.

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Kenn Tacchino, “8 Social Security basics you need to know”, MarketWatch, June 16, 2014.

June 19, 2014

Quick ways to get training for a ‘livable wage’ job

by Grace

What are some relatively short (2-6 months) courses i can take to become certified in something that provides a livable wage?

A Reddit poster asked this question, and here are the top responses as of June 17.

  1. Welding.
  2. Hairstylist / Massage therapy, nail tech, aesthetician. / Culinary degree.
  3. CPR instructor
  4. forklift operator
  5. GCODE, etc
  6. TEFL certificate
  7. Phlebotomy
  8. deal table games like blackjack and roulette
  9. driving semi trucks
  10. HVAC-R

Not all these suggestions may sound appealing, but some of them do seem worthy of further exploration.  In looking at comments on the TEFL certificate idea, it appears that a college degree is almost always a prerequisite.

Related to suggestion #5 is the newly announced NanoDegree.

A Smart Way to Skip College in Pursuit of a Job

Udacity-AT&T ‘NanoDegree’ Offers an Entry-Level Approach to College

This week, AT&T and Udacity, the online education company founded by the Stanford professor and former Google engineering whiz Sebastian Thrun, announced something meant to be very small: the “NanoDegree.”

At first blush, it doesn’t appear like much. For $200 a month, it is intended to teach anyone with a mastery of high school math the kind of basic programming skills needed to qualify for an entry-level position at AT&T as a data analyst, iOS applications designer or the like.

This is another quick way to qualify for a “livable wage”.

… offering a narrow set of skills that can be clearly applied to a job, providing learners with a bite-size chunk of knowledge and an immediate motivation to acquire it.

It may not offer all the advantages of a liberal arts education, but it could offer a plausible path to young men and women who may not have the time, money or skill to make it through a four-year or even a two-year degree.

AT&T will accept the NanoDegree as a credential for entry-level jobs (and is hoping to persuade other companies to accept it, too) and has reserved 100 internship slots for its graduates. Udacity is also creating NanoDegrees with other companies.

The hardest part is finding the motivation and persistence to follow through.  All these options require a motivated person willing to put in the hours needed to obtain the skills and certification.  The short time span is an advantage here, certainly compared to the four-plus years needed for a bachelor’s degree.

Another challenge is to avoid taking on crippling student loan debt, so students must be careful about choosing schools that offer a good value.

Related:  “Should we go back to more vocational high school options?” (Cost of College)

———

Eduardo Porter, “A Smart Way to Skip College in Pursuit of a Job”, New York Times, June  17, 2014.

June 18, 2014

It’s not really a STEM gender gap, but a ‘TE’ gender gap

by Grace

Randy Olson graphed the percentage of bachelor’s degrees conferred to women by major.

20140617.COCSTEMDegreesWomen1

The only STEM gender gaps are in computer science and engineering.

Surprisingly to me, most of the STEM majors aren’t doing as bad gender disparity-wise as I expected. 40-45% of the degrees in Math, Statistics, and the Physical Sciences were conferred to women in 2012. Even better, a majority of Biology degrees in 2012 (58%) were earned by women. This data tells me that we don’t really have a STEM gender gap in the U.S.: we have an ET gender gap!

If we actually have a shortage in skilled engineering and technology employees, this gender gap matters.

This ET gender gap has severe consequences. Computer Science and Engineering majors have stagnated at less than 10% of all degrees conferred in the U.S. for the past decade, while the demand for employees with programming and engineering skills continue to outpace the supply every year…

Provided that far more women attend college than men, it seems the best way to meet the U.S.’s growing need for skilled programmers and engineers is to focus on recruiting more women — of any race or ethnicity — into Computer Science and Engineering majors. The big question, of course, is “How?” With the constant issues of subtle (and sometimes not-so-subtle) discrimination against women in these male-dominated majors, we have quite a tough task on our hands.

Looking at the historical trends, maybe we have something to learn from Architecture and the Physical Sciences, given that they were in our position only 40 years ago.

Geology, my field of study, has a similar story of declining gender imbalance.

… Between 1974 and 2000, geoscience degrees awarded to women rose from ~17% to 45% (AGI, 2001).

How did it happen?

Interestingly, the rise in women pursuing geoscience degrees coincided with a sharp decline in oil prices that decimated high-paying oil industry opportunities for geologists.  At the same time, an increased interest in environmental issues pushed up the need for geologists to work in that area, often at jobs paid by government dollars either directly or indirectly.  I think more women are attracted to those types of jobs than to the more rough-and-tumble ones in the oil or mining industries.  I don’t see the possibility of a similar change in computer science or engineering where women would become newly attracted to those fields, thus shrinking the current gender gap.

Among the comments at Olson’s post was a suggestion that more female mentors were needed.   And there was this:

When computer science programs incorporate soft skill training into the course content, i.e. communication, inclusion in a group, importance of teamwork, sexual harassment etc, you will see a change. Women have to see what the possibilities are for them in a field long term. If what they are seeing is a male dominated field, with people who do not communicate well, and who do not welcome them to the table, I don’t blame them for not choosing computer science. Women want to work where they are welcomed, where they can use both right and left brain skills.

Extensive group work and writing about math are examples of “soft” skills recently introduced in K-12 education, at least partly implemented as a means of improving the achievement levels of girls in math.  I don’t believe the overall outcomes of this experimentation have been particularly positive, but perhaps it would work better at the college level.

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Randy Olson, “Percentage of Bachelor’s degrees conferred to women, by major (1970-2012)”, Randal S. Olson, June 14, 2014.

Dallas D. Rhodes, “Generational and Cyclical Demographic Change in The Geological Society of America”, GSA Today, November 2008.

June 17, 2014

Proliferation of master’s degrees produces wasteful ‘credential inflation’

by Grace

The master’s degree is the fastest-growing college credential in this country, but is that a good thing?

20140613.COCGrowthAllDegree1

Eight percent of the population now holds Master’s degrees, the same percentage that held bachelor’s degrees (or higher) in the 1960s, reports Vox. Master’s degrees in education were by far the most popular, holding at around a third to a quarter of all such degrees from 1971 to 2012, though MBAs had taken the top spot by 2010. In fact, the increase in the number of MBA degrees is astonishing: Only 11.2 percent of master’s degrees were in business in 1971, but in 2012, they were a whopping 25.4 percent.

This “credential inflation” is “in large part driving the student loan crisis”.

The rise of the master’s degree is likely a product of credential inflation. As more and more people acquire bachelor’s degrees, those who wish to make themselves stand out go on to get the MA. And as Vox points out, while a Master’s degree does have a positive impact on earnings, the overall debt of people with undergraduate and Master’s degrees has grown markedly in the past decade. In fact, as we recently noted, graduate student debt is in large part driving the student loan crisis.

The recently expanded loan forgiveness program is “tailor-made for graduate students”.

Students who took out big loans for graduate school and those with higher incomes stand the most to gain financially under President Obama’s expansion of the federal government’s loan forgiveness program.

Lawyers, doctors and other highly trained professionals who utilized federal loans throughout their post-high school education could walk away with most or all of their graduate school debt forgiven by the federal government under the program, say experts.

Is this good for our economy?

… But we shouldn’t want an economy that favors people with polished résumés over people with good ideas. This data is not a good sign for our economic health.

It seems to be another case where excessive government intervention has created inefficiencies resulting in unintended consequences

Public support for higher education helps to create unnecessary barriers in many fields where advanced degrees are now required credentials. … Neal McCluskey argues that “cheap college has almost certainly fueled credential inflation, not major increases in knowledge or skills.”

ADDED 6/17/14:

Advanced degrees don’t generally improve student achievement levels.

A number of studies have shown that teachers with advanced degrees don’t, necessarily, produce higher student achievement than teachers who hold only a bachelor’s….

One study from the Center for American Progress reported “that states waste money by giving salary increases to teachers as a reward for getting a master’s degree, spending nearly $15 billion annually on such pay hikes”.

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Randy Olson, “College degrees awarded per capita in the U.S.A.”, Randal S. Olson, June 12, 2014.

Walter Russell Mead, “The Rise of the Master’s Degree”, The American Interest, May 22, 2014.

Susan Ferrechio, “The surprising winners of Obama’s student-loan program”, Washington Examiner, June 12, 2014 .

Tyler Durden, “Unintended Consequences Of Obama’s Student Loan Policies”, Zero Hedge, June 13, 2014.

Ida Lieszkovszky, “Liberal Think Tank says Advanced Degrees Don’t Make Better Teachers”, StateImpact Ohio, July 18, 2012.

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