Don't Spend Your Inheritance

"We're spending our children's inheritance."
~ bumper sticker

Your parents might joke that they are spending your inheritance. They might very well be spending it -- on you.  According to Sallie Mae, 24% of college savers use retirement accounts as college savings vehicles. 

Parents shouldn't tap their retirement savings to put you through school.  Why?  Because your parents will need that money to live on and they are going to need a lot of it. They could live a long, long time. Every dollar they take out for your college education is a dollar they don't have accruing interest to cushion their old age -- and your middle age as a caregiver.

Retirement savings is built on the miracle of compound interest. Compound interest needs time to work, and tapping savings mucks it all up. It reduces interest, which reduces interest, which reduces interest. See the Motley Fool's explanation and illustrations of compound interest.

Prudent scholars don't drain their parents' retirement accounts. 

Further Reading:
"Don't raid an IRA to pay for college" at Investment News
"An Introduction to 529 plans" by the U.S. Securities and Exchange Commission

Retaking the SAT: Should you?

When I took the GRE a dozen or so years ago, I freaked out – for lack of a better term – during the last test, which happened to be the now-defunct multiple-choice logic section. I suspect low-blood sugar spiked my anxiety during the last leg of the four-hour test and deep-sixed my efforts. My scores were strangely lopsided.  There seemed little choice but to retake the expensive test.

I did. This time I was prepared. I don't mean I studied more. I mean that I had a healthy, balanced lunch and took an extra sweater for the uncomfortably cold room waiting for me. All of my scores improved slightly, but the results of the second logic test jumped by several hundred points. Yes, I really do mean that I freaked out.

If you are ill during the test or having a bad day and think you can raise your score significantly, then take the test again. But, most people aren't improving that much.

According to the College Board, a little over half of junior test-takes improve during a retake their senior year, 35% of test-takers go down and 10% had no change. That's just a little better than 50/50 odds.

The blog Education Research Report tells us about a study in the journal Psychological Science that  finds students are more likely to retake the SAT if their scores end in 90 (say 1290 instead of 1300, 1390 instead of 1400). The difference is miminal, but it feels significant. This must be the same psychology behind 99-cent pricing. The price $13.99 feels much cheaper than $14.  It's isn't.  The researchers found that students who scored 1390 were just as likely to be accepted as those who scored 1400.

“The SAT doesn’t matter nearly as much for admission as people think, so 10 points probably don’t make a difference,” the author of the study said. 

That's a relief because there is lots of debate about just how good a test the SAT is. In 2008 a commission he National Association for College Admission Counseling suggested that colleges and universities move away from relying on standardized tests for admissions.  In 2009, two professors took the test for the Chronicle of Higher Education.  One was happy with what he found. The other was not impressed. So, if you take the SAT and find some of the questions convoluted or banal, know that at least one journalism professor agrees with you.

A New York Times blog, The Choice, taps also offers some arguments against retaking the SAT or taking both ACT and SAT. Should you take both tests?  Some students, the guest blogger notes, do better at one test than the other and vice versa, but colleges who accept both don't prefer one over the other (if you doubt this advice, you can always ask your particular school). If you take one and do as well as you expected (in line with your practice tests), you might think about the time and money that could be saved if you don't take the other.

Trade-offs: Oxford vs. the Local Regional

Oxford University. Photo by Tejvan Pettinger. 

My counterpart at the blog Frugal Scholar, a university professor who practices frugality, has an interesting thread looking at one young woman's very difficult decision: Go to Oxford and pursue what she loves (at Oxford!) or go the more local, more affordable route, as her parents would like, and graduate debt-free.  And is there an in-between option?

Lots of people have weighed in and it points to the various opinions and tactics -- even among the frugal. Look, learn or even join the discussion at http://frugalscholar.blogspot.com/2011/03/college-debt-once-more-worth-it.html.

DePaul Drops SAT requirement



DePaul University.  Photo: Richie Diesterheft

 College costs start as early as your sophomore year of high school if you take the PSAT and your high school doesn't pick up the tab.  SAT and ACT testing fees can add up to hundreds of dollars very quickly.

The Chronicle of Higher Education reports this week that DePaul University will drop standardized tests as a requirement in a new "student-centered strategy."  It is now the largest private college to go test optional. Students who choose not to send scores will submit answers to essay questions instead.

"DePaul's announcement is a reminder that the test-optional label now applies to a diverse mix of colleges," writes Chronicle reporter Eric Hoover.  Test-optional policies are "not only for nonselective institutions or small liberal-arts colleges."

The SAT costs $47 this year, with extra for subject-area tests and special services. The lower-priced ACT costs start at $33. If you need the ACT Plus Writing the cost is $48.00. Each has a  menu of costs depending on if you want your scores sent to more than four schools, if you need to change your test date or center, etc.

It's common for students to retake the SAT or ACT, or to take them both. You could save an easy hundred if more schools drop the requirement. We'll explore the reasons -- good and bad -- for retaking in an upcoming post. 

In the meantime, I leave you with the words of Jon Boeckenstedt, associate vice president for enrollment management at DePaul. "Test scores are valuable for some things," he says, "but the focus and obsession we have about them as a country is a little bit misplaced, if not a lot misplaced."