Coming up, a special edition of NBR on one of the major investment decisions confronting
American families today, college education.
How to Find the Right College and Pay for It, an NBR video guide featuring Paul Kangas
and the NBR team, and produced in association with Reuters, the world's largest electronic
publisher.
Now, here's your host, Paul Kangas.
One of the biggest investments Americans make these days isn't in stocks or bonds, but in
their children's higher education.
That's because college isn't just four years after high school.
It's become a virtual prerequisite to a successful career, with college graduates earning an
average of 40% more than their less educated counterparts.
That can add up to a half a million dollars over the course of a lifetime.
And with that kind of money at stake, finding the right college is a lot more important
than, say, buying the right car.
But identifying the right college often isn't enough.
The other part is being able to pay for it.
And as correspondent Rodney Ward reports, the high cost of college education is likely
to go even higher.
Carrie Young is working her way through college at R.J. Bentley's restaurant down the road
from the University of Maryland at College Park.
She's been hard hit by the financial difficulties the university is experiencing.
The money that I had planned for my rent this semester got all put towards my tuition.
They said it was going to be an X amount, and then it ended up being three times that
amount.
Over the past 18 months, we have had to return to the state, cut our budget, $44 million.
That's 20 percent of the general fund appropriation that we receive from the state.
The University of Maryland is not alone.
Throughout the country, public universities and colleges have had their funding cut, and
the financial pinch is also being felt at private institutions.
Even before the recession started, we saw the lowest increases in state funding for
higher education that we had seen in 30 years during the two-year period before the recession
began.
I think the four years altogether, it really has been very damaging for public higher education
and in many states for independent higher education.
What this means for students and their parents are further increases in college education
costs.
According to the College Board, public and private school tuitions increase in or near
the double digits for much of the 1980s, bringing the school year tuition at private universities
to an average of $8,300, and while tuition costs at public universities average only
about a quarter of that level, they are now increasing at a faster rate than private universities.
They should plan on tuition increases annually that would range between 5 and 10 percent.
I can't imagine that they would run above 10 percent consistently for several years.
Also, I cannot imagine that they would fall much below 5 percent given the need for resources
and the uncertainty of state funding.
On the other hand, tuition increases at private universities may be slowing.
At Johns Hopkins, where tuition currently runs $16,000, University President Richardson
says they've decided to hold the line.
Even though our costs continue to go up, there is a very strong awareness on the part of
private universities that we simply cannot continue to increase tuition at the rate of
the 1980s and expect families to be able to have access to private higher education.
Hopkins has adopted a policy that will not allow tuition to go up more than a fixed amount
each year, currently about $1,000, and with financial constraints limiting how much money
colleges can raise, many are simply limiting the number of students they accept.
That means that there's going to be an increasing number, larger proportion of our population
who want to have access to a public college university, they simply can't get there.
So one thing that those planning on going to college can count on is that the costs
are going up.
Whether those yearly cost increases are in the single digits or double digits, no one
knows for certain.
But one thing is certain, it's never too soon to begin financial planning for paying for
a college education.
Rodney Ward, NBR, Baltimore.
When it comes to financial planning for college, there's a lot to consider.
A good starting place might be to figure out how much you'll need to have on hand when
it comes time to pay that tuition bill.
The problem is that it's virtually impossible to know exactly what that amount will be.
The big question mark is inflation, particularly over the long term.
There is one rule of thumb.
For the past century, college costs have been rising at a rate about double that of general
prices, and at an inflation rate of 6% a year, the tuition bill for a child who's now one
year old will be three times today's levels.
For that reason, parents shouldn't delay in starting a college fund, as correspondent
Scott Gurvey reports.
In getting ready for that momentous day when your baby heads to college, when should you
begin putting money away?
The obvious answer is as soon as the child is born, because it's a simple concept of
the compounding effect, really.
So the sooner you can get going, the better it is.
And it's also the easier it is for the parents, because they don't have to put away as much
on a monthly basis.
But where should you put the money?
Treasury would like you to put it in savings bonds, and because interest on certain bonds
can be excluded from federal taxes, that makes them especially attractive.
But at present, the tax break applies only to middle and lower income taxpayers.
Many mutual fund companies have special programs for college saving.
They provide a wide range of risk return options.
For those with a long time frame before tuition bills are due, stock funds offer the best
potential returns.
But the risks are higher than they are for fixed income funds.
There are even more creative options available.
College Savings Bank is aggressively marketing a certificate of deposit that promises to
meet rising college costs.
It's based on an index that's tied to expenses at 500 colleges.
You could attempt to do what we do yourself, but the college your CD eliminates the maybe.
It guarantees the future cost of college.
It eliminates the contingent liability of funding the college education.
And several local governments have gotten into the act, offering bonds with special
tax benefits if they are used to fund education.
Whatever investment vehicle you choose, the tax implications must be considered.
Taxes may be lower if the funds are put into a trust account in your child's name.
Most states have a UGMA, Uniform Gifts to Minors Act.
That's just for that purpose.
The beauty about a UGMA account is that there are no legal fees involved and there's very
little paperwork.
So it's a very easy vehicle to set up.
And also the real beauty about UGMA is that it gives someone a systematic savings plan.
And a lot of people are just looking for a disciplined approach to saving for college
and UGMAs are perfect vehicles for that.
One downside to the use of a trust account is that when your child is of age, the account
becomes his or her property and you cannot require that the proceeds be used for college.
Scott Gervais, NBR, New York.
Joining me now for a further discussion of issues relating to saving and investing for
a college education are two guests.
In Boston, Jonathan Pond, president of Financial Planning Information, Inc., and the author
of eight books on personal financial planning.
Here in Miami, we have Dina Katz, a certified financial planner and the president of the
firm of Uwenski and Brown, and I welcome you both to NBR.
Dina, let's start with you.
How do you try to effectively impress parents that the earlier they start saving for college,
the better?
Let's put it this way.
If you wait until your child is halfway to college, say age nine, and you start saving,
you will have to save twice as much money as you would if you started when that child
was newborn.
And remember, every dollar you invest today will make money for you, but every dollar
you have to borrow in the future to put that child to college will cost you money.
Effective points to ponder.
Anything to add to that, Jonathan?
Well, I think one thing that people should realize, parents, is that it's not necessary
to save all of the child's education costs.
Often parents of young children are discouraged at the outset because they look at having
to save maybe several hundred dollars a month in order to afford what is perceived to be
the college costs when they reach college age.
Maybe they ought to make a plan to save a third to a half of the costs and a more manageable
amount.
And I would think that if they can accomplish that, that eventually funding the child's
college education will not be that difficult.
Good point.
You know, it's said that one's strategy on where to put college savings depends on how
much time you have before your first tuition.
Well, Dena, assuming that you have more than 10 years before your child enters college,
what course or procedure would you recommend?
You know, with 10 years or more, you can choose investments with more growth potential and
very little risk considering the time horizon involved.
I recommend a diversified stock fund, mutual fund.
Probably an index fund would be very good in this case.
All right.
Jonathan, any further point there?
Well, I think that's important to invest for growth.
Don't be too conservative, as Dena suggests, because you've got a long investment horizon
and over the long run with that kind of investment horizon, stocks are certainly the place to
be.
Well, let's continue with that.
But as the child gets closer to attending college, is it a good idea to shift out of
stocks and into a less volatile investment?
Jonathan?
I think when a child reaches the teen years, it's probably important to lower the exposure
to stocks, although you still may want to continue some exposure to stocks.
But in those instances, you probably want to get into something a little more conservative
because you can't afford to make up for a possible down market, and down markets are
inevitable as we all know.
I see you nodding in agreement, Dena.
I think I like to look about five years out from being in college, and that gives you
a good five-year window to think about liquidating.
By the time the child goes to college, you should be effectively be in cash equivalence.
Is there anything a parent can do to raise money for college if they've waited until
the last minute, Dena?
Well, let's see, you could take in laundry or perhaps wash cars.
No, seriously, you have some recourse.
If you have some significant equity in your home, you might consider a home equity loan.
You might consider refinancing.
It's also possible to borrow from your retirement program, or maybe possible for educational
purposes.
You may also look for cash value in your life insurance.
One of the things that you really want to be sure is, is this what you want to do?
Do you want to jeopardize your retirement to send your child to college?
Maybe you need to be a little more realistic on your goals, maybe not go for the private
college but maybe the public one.
Jonathan, what about tax considerations?
Are they important in deciding where to put college saving funds?
Well, certainly, tax considerations can influence an investment policy.
I think many parents, though, make a mistake in transferring a lot of money to their children's
name in order to take advantage of their lower tax bracket because you never know what's
going to happen with the child when he or she reaches 18.
I mean, what happens if the daughter joins a cult, for example, and falls in love with
the cult guru and the guru needs another Rolls-Royce?
These things have happened.
So I wouldn't let tax considerations dominate my thinking in the saving for college vein.
But on the other hand, there may be tax advantaged investments you'd want to get into, such
as U.S. Savings Bond, the plain old U.S. Savings Bond has tax deferral features.
We'll get to that in a moment.
And I just want to ask Dina if she has any follow-up on that.
Basically, I look at it this way.
It's not how much you pay in taxes, it's how much you get to keep after you pay them.
So don't let your investment strategy depend on tax reduction.
That's lousy planning.
Isn't it also true that putting too many assets in the hand of a child could actually hurt
his or her chances of getting financial aid for college?
Absolutely.
That's one of the considerations.
The financial aid applications will very much weight the child's assets heavier than they
will the parent's assets.
So you want to keep those assets away from the child.
Well, we'd like the two of you to evaluate several popular methods of saving for college.
Let's both start with brief answers.
First, Jonathan, zero-coupon bonds.
What do you think?
Well, zero-coupon municipal bonds may make sense for young children.
On the other hand, that tax advantage is offset to a certain extent with a relatively mediocre
return on those, and as Dena mentioned earlier, stocks, I think, are the place to be with
young children.
I think we've covered that.
How about series EE savings bonds, Dena?
Well, obviously, there's a lot of press on that.
There are some problems with them.
One of them is there are some limitations which may or may not be around.
Income limitations for the parents.
They have to be owned by the parents and not the children, so grandma can't give you a
series EE bond that you can use to go to college.
More importantly, they can only be used for qualified education funds.
That does not mean room and board, so don't depend on using those for your room and board
purchases.
Interesting point.
Jonathan, how about single premium annuities?
Well, single premium annuities have, again, a tax deferral feature, but I don't find
them to be very useful for college savings.
Maybe Dena has a different opinion of them.
I really don't.
I think they're much too complicated for tax purposes.
I also think there's a lot of load on them.
You're paying for things that you don't necessarily use and need, and I don't think they're really
worth the trouble.
There are much better categories.
I think we were getting into CDs tied to college inflation costs earlier.
What do you think on that, Dena?
Well, it sounds good, but remember, they're based on this college 500 index, which is
a very broad-based index.
It also includes not just tuition, but room and board and other fees that a freshman might
get, and you only get the interest credited that will be a percentage or a percentage
and a half less than this index.
In the long run, over a long period of time, that can really negatively affect the performance
of that.
So I wouldn't put all of my money in that if you were considering them.
Last and not least, how about the college prepayment plans?
Well, the college prepayment plans that are offered by the states are now running into
some problems.
There's been some recent publicity that they may have been too optimistic in their projections.
And the other thing I don't like about them is that it restricts the child's choice of
college too much.
I think most parents would prefer that their child would be able to go to whatever college
they can choose and want to go and afford.
And this may, in addition to the potential problems that these programs are running into,
I think it's also too restrictive on the child.
Agreed?
I have to agree with that one.
Okay.
Some financial advisors say that if a parent or he should, they advise a parent to purchase
real estate near the college as an investment so that the child can also live right there
on the grounds.
In your opinion, is that a good idea?
If the parent can't afford it, of course.
I'm not thrilled with that.
First of all, you're buying real estate in an area you don't know anything about.
And you're managing it from a distance.
Unless you've been to that school, maybe.
You still don't know the neighborhood that well.
Well, that's true.
And the other problem is, especially if you're buying a duplex and you want your child to
manage a part of it, you're putting a lot of faith in that child being able to handle
those responsibilities and college.
You've seen this happen.
Absolutely.
I think it's probably not a good idea.
Agreed on that, Jonathan?
Who wants to rent to students in the first place?
You're placing a bet on capital appreciation.
And in most areas of the country right now, investing in real estate for capital appreciation
purposes is fraught with peril.
Very good.
Many, many interesting points.
And Jonathan Pond in Boston, we want to thank you very much for being with us.
And Dina Katz right here in Miami, some great points.
And I think that I'm a lot more knowledgeable for you two being with us.
Thanks a lot.
Thank you.
Of course, with college costs as high as they are, many families will be unable to put enough
money aside.
But if there isn't enough money to pay all of Johnny or Jane's college bills, there is
an option that's often available, financial aid.
And that aid can take many forms, as Jeff Reisman reports.
If you think you may not be able to afford college costs on your own, you're not alone.
Nearly half of all undergraduate students receive some type of financial aid.
To qualify, students must generally demonstrate financial need, meaning a shortfall in their
family's ability to pay.
Need is defined as the difference between the cost of education and what the family
can contribute.
And a student is eligible for aid up to the level of their need.
To become eligible for financial aid, the first step is to fill out a financial aid
form, which asks for detailed information about the finances of the student and his
or her family.
Looking for aid shouldn't hurt chances of getting into school.
People should not be concerned that their financial aid application is going to jeopardize
their admissions application.
Most schools require one of two aid documents, the financial aid form, or FAF, or the Family
Financial Statement, FFS.
The FAF is generally used by colleges requiring the Scholastic Aptitude Test, better known
as the SAT, while the FFS is the standard for schools using the American College Test,
or ACT.
In addition, some states and colleges have their own forms.
Each college is required to have what's called a consumer information piece, an information
piece about what's available at that college, how to apply, what forms are necessary, and
the deadlines.
The next step comes after the college has accepted the prospective student.
Using a standard formula, its financial aid office determines how much it thinks the prospective
student and his family can afford to pay, a number known as the family contribution.
The school then puts together a financial aid package to cover the rest.
One part of the package can be grants or scholarships, which the student does not pay back.
The federal government is the source for many of these, including the most common form of
grant for first-time undergraduates, the Pell Grant.
Undergraduates with great financial need may also be eligible for the federal Supplemental
Educational Opportunity Grant.
In addition, various grants and scholarships are awarded by colleges and universities themselves,
as well as by states, civic associations, and other outside sources.
Another part of a financial aid package is the student loan.
Among the most common are federal Stafford loans, providing up to $4,000 a year at 8
to 10 percent interest with a 10-year payback.
Federal Perkins loans offer more money at even lower rates, and other subsidized loans
are often provided by states and colleges.
Finally, another part of the aid package can be part-time employment through the federal
college work-study program.
For those who don't qualify for financial assistance on the basis of need, money is
sometimes available for exceptional students.
And then there is sports.
Top athletes can often get special financial aid packages.
We offer full scholarships for tuition fees, room, and board, and that package would pay
for 90 percent of the cost of attendance for what we might call a blue-chip athlete.
Financial aid is considered an essential part of higher education, but to get into one of
these classroom seats with a financial aid package takes planning well before getting
here.
And that planning must continue throughout a student's academic career, because the
aid package can be changed from year to year, increased or decreased.
Nothing is automatic.
When a student applies for financial aid in year one, they must reapply, and we must reassess
their eligibility in succeeding years.
So it's an annual event.
And if you are offered less financial aid than expected, ask for a review.
Recipients of financial aid have the right to appeal their package to the school to try
to get a better deal.
Jeff Reisman, NBR, Amherst, Massachusetts.
For more on financial aid, joining me now are Phyllis Basakas, application assistance
administrator for the Ronkin Educational Group, and Glenda Rose, a counselor with the College
Assistance Program of the Dade County Florida Public Schools.
Welcome, ladies.
Thank you.
First, as Jeff Reisman noted in his report, financial aid is provided on the basis of
an expected family contribution toward the student's costs.
How is this amount determined, and is there anything the student can do to boost his or
her chances of qualifying for aid under this formula?
Phyllis?
Well, the formula is called the congressional methodology, and it's based on a compilation
of your assets, the parents' assets and liabilities.
And that includes home equity and bank accounts and anything that would enhance a family's
income.
But the student's income counts for a big part of it.
And what happens is if they work or they put their money in the bank, that money is also
figured into the family contribution.
So it's better off if the student can volunteer and get some experience that way rather than
earn a lot of money.
Anything to add to that, Glenda?
No, I think that it's like doing a tax return, which you also must do in order to prepare
the financial aid form.
You want to present your family situation in the best possible light, of course, being
honest, you are dealing with the IRS, but you do want to present it in the best possible
light.
And, as you said, starting early is the way to go to plan ahead on that.
Now, we're told that colleges are increasingly using financial aid packages to attract desirable
students.
Is there any way good students can get into colleges, get colleges into sort of a bidding
war when it comes to financial aid?
Phyllis?
Well, they need to know all their packages, and they need to have a little patience and
wait for their packages to be delivered.
And each package comes in four different parts.
There's scholarships, there's grants, there's loans, and there's work study.
And the desirability of the package is how they're put together and whether their needs
are met.
If they have some special attributes, such as athletics or music or academics, they need
to make the college aware of those attributes.
They need to contact the heads of the departments of their particular skill areas.
How do you go about finding if you're eligible for one of those scholarships, as you say,
or if you have some particular talent?
Well, let's say you're an oboe player, and the oboe player in the school band is graduating
that year, and maybe your qualifications may not be quite as up to snuff as maybe someone
else who has applied, but that might be an edge for you.
But knowing that there's going to be a position to fill in the orchestra or something like
that, a little inside investigation.
That's right.
And many people do that.
They are out making contacts, finding out what schools need certain people.
Very clever.
Go ahead, Phillip.
Well, you know, and in other prime areas in academics are debate and those kinds of subjects
where if you're a debate person and you're nationally known, colleges look for you.
The nationally known athletes, the colleges know.
They scout them out.
The question there is how do you get yourself and how do you determine which kinds of colleges
you want to go to?
Do you want to be a big fish in a little pond or a little fish in a big pond and those kinds
of things?
So it's all subjective.
It's all subjective, but academics generally, you know, sing loud and clear.
What about scholarships from organizations and companies and so on?
How do you go about finding if you're eligible for one of these, particularly if you have
an unusual talent or ability?
Many people think that the search for financial aid is the same as the search for scholarships.
And if we're talking about private scholarships from fraternal organizations, corporations,
et cetera, it's not as easy as people think.
It's a very small amount of money, about 1% of the total aid that comes from private scholarships.
So rather than take that route, everyone should go through the regular need analysis process,
which will then qualify them for every part of the aid package and then the private scholarships
they can look for on their own.
But don't make that your only route for paying for college because it just won't work that
way.
It's very easy to find out about private scholarships.
The guidance office has them delivered daily to them and you can go check with your guidance
counselor almost daily and find out about new ones.
The other thing is the public library has a printout of scholarships.
So they're readily accessible.
Now we've noted that a big part of the financial aid package is student loans, but with college
bills at some private colleges now well into the five-digit territory, isn't there a danger
that the student can end up taking on too much debt?
Let's say you, Phyllis.
Too much debt.
Well, you're talking to somebody who has a daughter in law school who may never get away
with it.
She may never climb out.
But on the undergraduate level, there's just so much that they allow you to borrow.
And they keep a close tab on it.
Education is expensive.
And if you have somebody who really needs to take out the loans, they're going to come
out of school in debt.
But they give you six months on the guaranteed student loans.
They give you six months before you have to pay back so that you get a chance to be situated.
And the interest remains low for the first five years and then increases to 10% as after
five years.
So it's great.
Glenda, you look like you had something.
You wanted to jump in there.
No.
I feel that it's almost impossible to get a good education now without going into debt.
And in thinking about the earning power of a college graduate as opposed to a high school
graduate, right now it's about double in terms of salary.
So whatever it might be, many times because of that earning power, it will be worth it.
What about students who have been in the workforce and want to go back to school, either graduate
or undergraduate?
Are there places they can go for financial aid, Phyllis?
Yes, there are.
They can fill out financial aid forms with the colleges, even if you're an older student.
The catch-22 there is if you're coming back for a second bachelor's degree.
Financial aid is very skimpy for a second bachelor's degree.
But if you're going on for the master's programs, there's always ways of gaining financial aid,
whether they be assistantships or teaching assistantships or just loans.
What general advice can you give a student if the family's fortunes take a turn for
the worse?
Glenda?
Definitely, contact your financial aid administrator at the school.
They need to know these situations.
Even when you fill out your financial aid form originally, there is a section in there
for special circumstances.
The financial aid officers must know if there are circumstances that would affect your family
contribution.
And they have a great amount of latitude.
They can use personal judgment in changing your family contribution and also in changing
your status from dependent to independent, which would in the long run help.
Final thoughts on that, Phyllis?
Yes.
I think that the main thing to do is everyone, regardless of your financial position, should
fill out a financial aid form because you never know what your circumstances are going
to be.
Ron, can we definitely recommend that?
And the other thing to remember is that the people who are doling out the financial aid
are people.
And they take special circumstances into account.
And if you write them and you let them know if you're a valid student, somehow they find
a way for you to go to school.
I found that to be true.
Very good.
Most excellent points, ladies, and thanks very much for being with us.
Thank you.
Of course, while dollars are a major factor in selecting a college, they're not the only
factor.
So what else should the prospective student consider in evaluating various schools?
One private university that Money Magazine recently cited as the best buy in higher education
was Rice University of Houston.
And among public universities, the California system has long enjoyed a reputation for excellence.
We sent reporter Jamie O'Rourke and Reuter correspondent John Defterios to check out
those schools, and they came back with very different reports.
The top ranking by Money Magazine was music to administrators at Rice University, but
not a surprise.
We think that Rice offers a model of what higher education at its best has always at
least aspired to be and what it can continue to be.
Even if it didn't have a tuition nearly half that of most Ivy League schools, there would
still be plenty of good reasons to attend this 100-year-old institution.
One is the rare academic balance in the student body, with half of the majors in science and
engineering, the other half in social sciences and the arts.
Another plus is that Rice's total student population is under 4,000, small by design.
Keeping it that way means that 14 out of every 15 applications are rejected.
If it sounds academically challenging, it is.
Competing with the caliber of students we have here is just unbelievable at times.
It isn't to say Rice students are all work and no play, but the school's academic reputation
is what brings most students here, and its keystone is the accessibility of its professors
to its students.
Notice the size of this class.
Rice University has on staff a professor for every nine students.
For that to the national average of one to 15.
And unlike many schools, where some big-name professors spend all of their time on research,
all professors at Rice are required to teach.
But many go even beyond that, acting alongside students in theatrical productions, eating
alongside students in dining halls.
The professors are not as intimidating as I would have thought, and you go out and you
play frisbee with them, and they're nice, normal people, who give you some really valuable
advice, and that is something that I found invaluable.
The main reason Rice is able to offer all of this is its strong financial base.
It enjoys one of the largest per-student endowments in the country, with a quarter million dollars
in the bank backing up every person who attends.
Jamie O'Rourke, NBR, Houston.
The setting may look ideal for Berkeley students, but appearance aside, the university is not
as affordable as it once was.
And undergrads are up in arms about big tuition increases.
We've suffered some very severe body blows the last two years, and it appears as though
we're going to suffer a third one next year.
And it will be calling into question the ability of this state to sustain the University of
California.
The nine-campus system was once a model for the nation.
It is part of the state's master plan for education that guarantees top-quality, accessible
schooling for residents.
But these days, students are forced into the aisles to take notes.
The Budget Act came down during the 1990-91 school year.
In the University of California system, student fees for classes went up 10 percent.
The next year, they went up 40 percent.
The back-to-back increase has led many to believe that the state's so-called master
plan for higher education may eventually have to be altered.
Anything to take the burden off of us right now is a welcome, welcome event.
Administrative salary cuts, putting off faculty merits, increasing the teaching load, any
of those things right now would be a great boon to students because we just can't afford
it.
The focus is shifting to undergraduate studies.
One cost-saving idea, backed by Governor Pete Wilson, is to have professors take on extra
classes.
But faculty members contend graduate studies and research are expected to suffer.
You're not asking people to add something.
What you have to be asking people is, what are you going to change in terms of your alignment,
and what are you going to give up in order to get that?
With fewer classes, some students are having to give up an extra two years to get a four-year
degree.
On Cal State and community college levels, undergrads are getting pushed out altogether.
Where I normally had 35 or 40 students, I take 45 and I have to turn away another 20,
you see, just because I don't have the space.
And with 700,000 students coming into the system by 2005, space is expected to be a
long-term problem on California campuses.
John Defterios of Reuters for NBR, Berkeley.
Joining me now from Washington, D.C., is Dr. Joseph Duffy, president of the American University
and former president of the University of Massachusetts.
And in San Francisco, we have Dr. Martin Nemco, educational consultant and author of the Avon
book entitled, How to Get an Ivy League Education at a State University.
Gentlemen, welcome.
Good to be here.
Because of the price differential, we're seeing more students applying to public colleges
and universities and fewer to private schools.
Dr. Duffy, you've headed both public and private institutions.
Does it make sense for a student to pay an extra $10,000 a year to attend a private university
such as the American University?
Well, I think it makes a lot of sense.
I think the attention from members of the faculty, having courses taught by members
of the faculty, smaller classes, the opportunity for carefully guided internships and more
counseling makes it a tremendous opportunity for education.
It is the most important investment any family ever makes in the future.
Now turning to you, Dr. Nemco, despite the title of your book, How to Get an Ivy League
Education at a State University, I understand that you don't believe state universities
are for everyone.
Is that true?
That's exactly right.
The reality is that four years at a private college, if you're not getting financial
aid, and that's true of most upper middle class folks, is $110,000.
That's the sticker price.
Four years at a typical public is 40 to 50.
For some kids, there is enough value added to justify it.
In my mind, if you are an academic superstar and need to be in that environment, yes, the
elite privates may be worth the money for some people.
It may be worth it if you need remediation, but you need to ask yourself when you play
good, hard consumer and you visit the campuses and focus on those concerns that I point out,
are you getting $50,000 to $70,000 of value added to justify the cost of the private?
If you're a low income person and you can get big financial aid, it's not an issue.
But if you're a middle class, especially upper middle class person, who's going to get little
financial aid, the question really is one of value added.
We have seen how one private school, namely Rice University, is able to keep tuition costs
down and maintain high standards with the help of a large endowment fund.
Now this being the case, should prospective students seek out schools with large endowment
funds?
Dr. Duffy, what do you say?
Not necessarily.
Some of the schools in America that are having the largest deficits and the greatest problems
with cutbacks today are the schools with the largest endowments.
I would look for a school that's well managed.
I would certainly look for a school that understands that its principal mission is undergraduate
education that focuses there where the faculty teach.
But I don't think the size of the endowment is necessarily a guide to the value of the
college.
Dr. Nemco, we've seen how budget crunches are forcing both public and private institutions
to consider cutbacks in academic programs and financial aid.
Is there anything the student can do to avoid attending a school that may be forced by financial
pressures to cut out the courses he or she wants to take?
Well, in terms of choosing the college, not so much because the problem that may exist
in this six months can get solved by either an infusion of money from the government six
months later, I would probably not try to follow the news headlines here but really
still try to find the best fit college for you.
Do you want large versus small?
Do you want super selective or would you rather be the big fish in the less selective pond?
The key, more than even choosing the right school, is knowing how to make the most of
it.
Finding who are the best professors.
Look for a college, for example, that publishes a booklet with the student evaluations of
faculty so that they can easily find who the best professors are.
Get a list of the distinguished teaching award winners.
Pick those professors to take your classes from.
Fight your way into class.
Unfortunately, too often now we've got 90 people signed up for a class with 50 students
in it.
In order for a student to survive, they've got to, in a sense, be really dogged and stay
with it even if the professor says, leave the class, now we're all filled.
They've got to kind of sit in the front, participate, beg their way in.
That's not the way it should be, but I think that that's probably the key to surviving
this budget crunch.
All right, Dr. Duffy, in looking for a college, what factors do you advise the student consider?
Well, I think in terms of undergraduate schools, I've already mentioned it should be a school
which is focused on undergraduate education.
And then I think it's very wise for students and their parents to visit several campuses.
I believe that the advice that Dr. Nemco has suggested about a public university about
finding your courses and struggling to get into classes is not quite as true in a private
institution.
But these days, it is a consumer's market, and I think that's healthy for higher education.
I believe that students should look carefully at campuses.
The most important thing is the feeling the student has about the campus, urban or rural,
or some combination of both, and the particular strengths of the faculty.
Paul, I think there's something I'd like to say about this.
I have a little acronym, and I call it T-Cup.
I think good undergraduate education reduces to three things, teaching quality, the culture
on the campus, and personalization, and that kind of forms an acronym of T-Cup.
Good teaching.
What I want parents to do and kids to do is not just sit in on a class, but let them walk
down the halls of a busy undergraduate classroom and see to what extent are the faculty alive
and interactive, are they just lecturing, droning on on a monotone like a career bureaucrat
two days from retirement, or do a lot of them seem alive and interactive?
Are they doing not just lectures, but are they using case study methods?
Are they doing simulations?
Are they doing active learning?
You can't tell that from one class, because it's a random event, whether it's one teacher
is good or not.
But if you peek in the doors of a lot of classes, you can get a sense of that quality of teaching.
In terms of the personalization, freshmen are the ones that need the most personalization.
Do they have big brother programs?
Do they have required advising?
Do faculty get promoted and get tenure in part based on their advising?
Are there freshmen seminars?
Are there extended orientations that last a semester long?
Are there undergraduate research programs where students are encouraged to work under
a professor's wing one to one?
Those are the things that I kind of like to see.
Lastly, visit a dorm.
Next time, 10.30 at night on a weeknight.
What is it like?
Is it, you know, animal house?
What are the conversations like?
What are their views about drugs, about sex, about learning for learning's sake?
Those are the kind of things that I suggest.
All right.
Most interesting gentlemen, and I thank you both for being with us.
A real pleasure.
My guest, Dr. Joseph Duffy, president of the American University, and Dr. Martin Emko,
author of How to Get an Ivy League Education at a State University.
As we've seen, going to college is a big investment in both time and in money.
So your search for the right college should be a thorough one.
And if you're about to begin that process, it helps if you know the rules of the game,
as Karen Ryan reports.
There are more than 3,500 colleges and universities in the United States.
And when you first start looking for a school, it may seem like each one wants you to go
there.
We are scholarship at Northern University.
That's really what you can accomplish at a liberal arts college.
If you're interested in being a leader later on in life, it's an excellent place to go.
But getting beyond the sales pitches and marketing gimmicks doesn't have to be an overwhelming
process.
Your first move, if you're in high school, is to talk to your guidance counselor.
I'm not going to tell you exactly where I think you should go.
I'm going to give you the alternatives.
I'm going to tell you all the different options that you have.
That information should bring you to the next step.
It's knowing what tests, courses, and grades particular schools require.
But if your test scores don't meet the grade, don't worry.
It doesn't automatically count you out.
Sometimes schools look at more than just numbers.
We are looking more at the high school performance as the best indicator of what students can
do on campus.
And looking for the right campus is next.
Remember, college is four years of your life, so it's important to be in the place that
you like.
Washington, D.C. highly attracts students.
They see themselves as getting involved in Capitol Hill.
Austin is centrally located in Texas in the Hill Country.
It's probably one of the most beautiful areas in the whole state.
Once you've narrowed the field, you're ready to move on and write to some individual schools
for information.
Chances are, you'll get more than enough.
Some schools will send flashy videos, others glossy booklets, but experts warn not to choose
a college by its marketing tools alone.
We encourage you to come up and visit.
We can make the school look unreal and pictures of that type, but until you go visit a college,
meet the faculty, talk with the students, take a tour of the campus, eat in the cafeteria,
spend the night in the dorms, you can't get a good feel for what the school is like.
While you're there, it may be a good idea to try for a personal interview with the admissions
department, but check with the department first.
Finally, it's time to get serious and begin the application process.
Guidance counselors say you should apply to about five colleges, your top choice plus
a couple of backups or insurance schools.
With application fees generally running $35 to $40 a piece, any more than five can get
very expensive.
And then good luck, but whether or not you're accepted, congratulations are still in order.
That's because you've made it through the college selection game by making your choices
thoughtfully and carefully.
Karen Ryan, NBR, Miami.
So there you have it, all the information you need to get started on one of life's big
decisions.
Of course, since it never hurts to have more information, we encourage you to ask guidance
counselors, college admissions officers, and financial advisors for more help regarding
your individual situation.
Remember, college itself is a quest for knowledge, so know what you're getting into before you
go.
I'm Paul Kangas.
For all of us on NBR, thanks for watching.
check or money order for 1995 plus $4 for shipping to NBR College Video, Post
Office Box 2, Miami, Florida, 33261-0002.