college | Online Savings Blog

Savers, Have You Considered Junior College?
07.17.08 | Money | 1 Comment | by Fred Siegmund

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In the process of saving for college, families sometimes forget saving on college. There are few bargains left, but allow me to suggest the junior college. It could be the last of America's educational bargains.

In the year ending June 2006, there were 713,000 associates degrees granted in the United States. There were less than 500,000 a year until after 1990, when growth in the AA degree began to pick up. Associates degrees are now growing faster than Baccalaureate degrees, although the BA degree has almost 1.5 million degrees.

Less known are the many certificate programs at Junior colleges that run one year or less. There were 229,000 certificates awarded for the year ending June 2006. There another 183,600 awards granted in specialty programs that run between 1 up to 4 years.

Combined, there are well over a million people leaving junior colleges with degrees and certificates.

In addition to the many technical and allied health programs, junior colleges have a whole slate of English, math and social science courses that fulfill two full years of requirements at four-year colleges. A state's four-year college accepts their state's junior college credits.

Another advantage comes because junior colleges are usually sprinkled around a state at many locations and so they are convenient to attend without changes in address or work schedules.

There is also reason to believe the quality of instruction continues to rise because there is a growing surplus of qualified faculty with masters and doctorate degrees. Many of these people have work experience and want to get into teaching.

More and more junior colleges are hiring from the same pool of faculty as the four year colleges, and this is especially true in large metropolitan areas where the surplus is likely to be even bigger.

In Virginia in 2007, the average tuition and required fees for a full time student at the 4 year colleges was $7,083. At the many junior colleges, it was $2,524 — a savings of $4,559 a year with a full time course load.

Most states have similar or bigger disparities. If we figure a savings of $4,559 from the beginning of the first two years at 4 percent interest until the end of a four year degree, the savings is $10,853.36. Even at two percent interest is the savings is $9,771.91.

For savers who want a four year degree, think junior college.

Fred Siegmund covers America's jobs as part of work doing labor market analysis and projections for a client base of recruiters, trainers and counselors. Visit him at www.americanjobmarket.blogspot.com
Investing in Education: How Much It Pays
04.01.08 | Money, Work | 0 Comments | by Fred Siegmund

There are several ways to estimate returns on investments in education. One way is to compare wages between jobs using general workforce skills with jobs that need college degree skills.

Compare wages for a certified teacher with a college degree to wages for a teaching assistant, for example.

Another way converts college tuition and expenses into an estimate of a minimum wage or minimum salary increase that will make college a paying investment. The process requires interest calculations because money paid for college tuition and expenses could be used to buy stocks and bonds or other interest earning assets.

Tuition and expenses amounts to an investment in a higher paying job, even though college students may want to go to college for other reasons.

Suppose in-state tuition at public college is $6,000 per year each year for four years. In some states like North Carolina, the state tuition is reported as $3,886, while in others like Michigan it is $7,115. Some are above and some are below, but let's use $6,000 as a representative tuition for 2007.

In the first year, $6,000 invested in stocks and bonds would earn interest or dividends. Similarly in the second year, except $12,000 would be invested and the second year earns interest or dividends on $12,000.

At the end of four years at the time of graduation, the principal invested and the interest earned is a total amount, which will equal $27,230.82 at 5 percent interest.

The principal amount of $27,230.82 earning 5 percent interest over the next 10 years and compounding monthly will be equal to $44,849.42. Start at graduation and $288.82 of extra income each month over the next 10 years using 5 percent interest will also be the same $44,848.63.

The $288.82 equals the minimum extra monthly earnings necessary to pay for a college education at an interest rate of 5 percent. Using a forty-hour week and 160 hours a month, it is less than $2.00 an hour of extra wage and salary that pays for college.

Nothing is a guarantee — but expect college to pay.

Our thanks for these calculations go to the built-in spreadsheet functions on MS Excel. Experiment yourself.

Use the Excel help file under FV, which is the future value function. The spreadsheet entries above are =FV(.05/12,120,0,-27230.82,1) and =FV(.05/12,120,-288.82,0,0).

Fred Siegmund covers America's jobs as part of work doing labor market analysis and projections for a client base of recruiters, trainers and counselors. Visit him at www.americanjobmarket.blogspot.com
Are You Saving For the Right Reasons?
01.30.08 | Money | 0 Comments | by junger

One of the most basic questions anyone committed to saving money has to ask themselves isn't as easy to answer as you might think.

Are you saving for the right reasons?

I touched upon this briefly when talking about saving aggressively, but it deserves its own discussion.

When you say you're putting 10% of your salary into your 401(k), or you're pinching pennies to start a college fund, do you really know what you're saving for?

It's not enough to say "for retirement" or "for college." Sure, it's easy to say this when the goal is far off, but there's a deeper answer here.

For example, I'm saving for a house — not because I want to get into the real estate market, but because I want to provide for my family.

If you're saving to start your own business, chances are you're not doing it for the money — you're doing it for the challenge and the freedom to work for yourself.

The next time you put some money into your savings account or you decide not to make that big, unnecessary purchase, think about what you're really saving for.

Money is not the be all end all. Money is the fuel on the road to get to the be all end all.

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