71% of Recent College Grads Still Receiving Financial Help From Parents

New research suggests, once again, that many parents across the country are not getting their money's worth when it comes to sending their kids to college.

When Professors Richard Arum from New York University and Josipa Roksa from the University of Virginia surveyed the Class of 2009, they found some distressing results.

Take a look at these numbers from the class of ‘09:

- 71% were still receiving financial help from their parents, two years after graduating.

- 24% were living back home.

- 23% were unemployed or underemployed.

- Only 47% of grads in the labor market had full-time jobs paying $40,000 or more a year.

If there isn’t a clear goal in mind when sending children to college, why are families spending $20,000+ per year? This is setting up the “family corporation” to fail. Why go to college for 4+ years just to graduate and work the same job they did during their summers in high school?

The reality is that many students are embarking on their college journeys without doing the proper planning. Students are applying to schools somewhat aimlessly, not knowing which ones are truly the right fit for their career goals.

These are just some of the reasons why we at Ensphere put an emphasis on career identification and college choice. The right kind of planning can go a long way toward setting up your student for success after graduation. Take the time to find the career path that best fits your student's skills, interests, and goals, and let us help you make the right college decision for your family. It could make the difference of your student becoming one of the statistics shown above.

Students with a clear understanding of what their future plans entail and where they are headed are in the 47%. Our evaluations and assessments make this happen.

Remember, college is not simply a four-year choice; it's a forty-year choice.

Chris Horan, College Planning Specialist

Should I take the SAT or the ACT?

The SAT or the ACT? It’s actually a trick question!

Instead of taking either the SAT or the ACT, students should be taking both the SAT and the ACT.

As the ACT continues to rise in popularity, more and more students are registering for both tests. It’s a great idea! Most colleges accept both SAT and ACT scores, so it’s in your best interest to take both tests and submit your higher scores.

There’s no downside to taking both tests at least once. Some students will score similarly on both tests. Some students, however, will score noticeably higher on one or the other. While the SAT and ACT are very similar in content, they provide different testing experiences. Many students will find that one of the tests is better suited to their individual strengths. By taking both tests, you have the opportunity to see which test better shows off your strengths.

So what’s the difference between the tests? One key difference is that the SAT is broken up into more sections. On the ACT, you’ll tackle the 75 grammar questions all at once, 60 math questions all at once, and so on. The SAT breaks up each subject area into three smaller sections. Some students like the smaller chunks of questions on the SAT. Others prefer the ACT because they want to get the math questions out of the way earlier. You won’t know what works better for you until you try both!

The other major difference has to do with timing. Although both tests last roughly 4 hours (including breaks), the testing experience is not the same. ACT questions will be simpler and more straightforward, but students are given very little time to work through each question. Many students find it difficult to get to every question on the ACT. You’ll see more “trick” questions on the SAT, but you’re given more time per question to work through them. Again, depending on your test-taking style, you may find that one test is simply a better fit for you.

Sophomores, this year is a great time to begin reviewing our free SAT/ACT resources on Career Cruising. Juniors should plan to take the tests for the first time in the fall or winter, so that you can retake the SAT or ACT in the spring if needed. Seniors, if you need to retake the tests one more time, make sure to register now!

Register for the ACT here.

Register for the SAT here.

Best of luck studying!

Erin, Director of Student Services

Demand a College Cash-Flow Plan

As I interview most, actually all, of our clients and prospective clients, I am amazed that their current financial advisors do not provide them with a financial plan. It does not make sense that advisors do not do at least a College Cash-Flow Analysis. Maybe it’s because they don’t know where to start, how to calculate the cost of college, how to incorporate risk management into their investment recommendations, what effect taxes will have on a college cash-flow plan, or how the plan will affect your retirement plans.

Do they actually know where a client’s SAFE money should fit into the client’s overall portfolio? Are the current advisors schooled or educated in proper risk management? Is the plan prepared for an extended flat or down market? Is the portfolio all in mutual funds, individual stocks and bonds?

It is also hard to figure out WHY the client doesn’t demand a College Cash-Flow Plan, identifying how much college will cost, how paying for college will affect our family financial plan, and how it will affect our retirement plans. What will happen to my financial plan in a protracted, flat, or down market? Have we made plans for an extended disability of the breadwinner or winners, and what happens in the event of an untimely death? Are we secure with adequate savings in case one or both breadwinners lose their jobs? Are we overcommitting to retirement plans and not putting enough into our emergency funds?

One vastly underrated consideration is, “What will my tax bracket be in retirement? Do I really want to cut back in my retirement years?” After all, what successful client is in a lower tax bracket in retirement?

For most of you, if you read this blog, you will not demand the resolutions to your family’s college cash-flow, financial and retirement plans that a family head should. Don’t wimp out; we can help you put together a real sustainable, operational, family financial plan.

What are you waiting for?

More family financial considerations to follow. Keep an open mind. 

Mike Giffin, President

Educational Planning + Financial Planning = College Planning

Families that work with us normally have a good idea of what keeps them up at night when it comes to sending their children to college. For some families, it may be the grades and standardized test scores. Some parents are scared they will have to borrow $100,000 to give just one of their children an education. Some parents worry that their children don't know enough about the world to choose what they want to do with their lives.

These worries sometimes lead families to ask whether we can provide à la carte services for only one or two components of the college planning process. But at Ensphere, we don't believe in choosing between educational planning OR financial planning. Successful college planning involves educational planning AND financial planning. The two go hand in hand when a family defines a well thought-out plan for sending their children to college. 

When we define the "family corporation" at Ensphere, we think of the family as a tripod: if one leg fails, it all falls down. The first leg of the tripod is the student's. What can the student do to maximize his or her chances of getting into the best college that fits his or her needs and provides the best shot at a successful future? The second leg is the parents' leg, part of the financial side of the process. The third leg is both the parents' and students' responsibility: how are we going to pay for college?

1) The student's responsibility is to study hard, receive the best grades possible in high school, and prepare for standardized tests such as the SAT and ACT. Although parents can encourage their children to strive for the best, it is ultimately up to the student to decide whether he or she wants to put in the effort to get the results needed. Picking a career path that will direct the student toward the correct college major at the right school is the pinnacle of the educational planning side.

2) Many parents are under informed about the financial process that their family will go through when sending their children to college. They may not understand why the FAFSA is asking them certain questions, and they don't realize that filling out just one question wrong can significantly reduce their chance at financial aid. Parents need to know how their income and assets drive the amount that colleges expect to come out of their pockets each year. Telling their children that they must pay 100% of the cost of college may not be fair when the parents' income is ultimately determining the cost. 

3) The third leg, how are we going to pay for this, is a combination of the first two. Every family has a philosophy on the best way for the college bill to get paid. There isn't necessarily a right or wrong philosophy because every family is different. But this is really where the educational planning and financial planning come together. All the hard work that students put into their grades and standardized test scores will determine the schools that will accept them and the merit scholarships they will be offered. The work the parents have done to understand the financial aid process and how their wealth will affect the price of college will determine the college the family can responsibly afford. The ultimate "right-fit" school will be the school that offers the student the best chance at a successful college and work-force career, and the school that offers the best financial package to fit their family's needs. College isn't a four-year choice, it's a forty-year choice.

Educational planning and financial planning for college isn't a matter of one or the other. They go hand in hand to ensure the family has a rock-solid plan in place to send their children to the right college without blowing up their retirement plan. You can't lose weight without eating healthy AND working out, you can't get to a new area without a road map AND a vehicle, and you can't successfully send your children to college without an educational plan AND a funding plan.

Chris Horan, College Planning Specialist

Parents Struggling with Student Loan Debt

In early August, I ran across a very sad excerpt on the Fox News website and it got me thinking about our Ensphere clients. This article talked about a California couple who cosigned about $100,000 in student loan debt for their daughter, Lisa. Lisa, who was 27 years old and had three children of her own, died unexpectedly from liver disease.

Lisa was making payments on her student loans until her death. Unfortunately, the parents soon discovered that as cosigner, they were responsible for repayment of the student loan debt, as they would be in any other loan situation as cosigners. Lisa’s father states that the debt payments exceed $2,000 a month and has destroyed his credit. One of the loans was forgiven by the creditor, and some lenders have lowered the interest rate.

What can you learn from this tragic scenario? Let’s take a closer look at the facts: 

1) Buyer beware! There are many private student loan programs available in the marketplace. Almost every major bank and credit card company offers student loans which will allow you to defer loan payments until the student graduates. However, each program will treat cosigners and the death of a student differently. Some lenders will forgive the debt if the student dies, and some do not. Some lenders will remove the cosigners from the loan if the loan payments are paid on time by the student after 24 to 36 months, and some lenders do not. 

2) Understand what you are getting yourself into! Parents and students do not fully understand what the loan payments will be after college. Remember, you are borrowing money every semester for at least eight semesters. Payments are usually deferred until the student graduates; however, interest is being charged and added to the loan during the time the student is in college. If you’re not keeping track of what you’re borrowing and how much it costs, you can easily end up with $100,000 to $200,000 in debt after a four-year college education. The payment terms are usually 120 to 180 months. Do the math. The payment will easily be in excess of $1,000 to $2,000 a month! Ask yourself, what will your student have to earn after taxes to be able to handle a four figure loan payment? 

3) Understand how the interest rate is calculated. Some loan rates are variable, and some are fixed for the life of the loan. Some loans charge fees in addition to interest. You need to understand how interest is calculated and how often the variable rate changes. Fixed interest rates are usually higher than variable rates. Interest rates are currently at a historical 30-year low. Where do you think interest rates will be four years from now? If you choose a variable rate, understand how high and how fast interest rates have to increase before the loan will cost you more than the fixed rate option.  

4) Are there alternatives to cosigning student loans? Parents usually have a better credit rating and have access to less expensive credit. If you have equity in your home, you may be able to refinance your mortgage or get a home equity line of credit. Interest rates are usually significantly lower than student loan rates with longer terms to pay back the debt making payments more manageable. Also, for most people, the mortgage interest is tax deductible. Student loan interest deductions have more restrictive limits and phase out with income. If you have cash value in your life insurance policies, you may be able to borrow from your policies at more favorable interest rates. Most life insurance loans also let you decide if and when you want to pay the loan back. 

5) Protect your assets and credit! Consider a life insurance policy on your student that will cover any medical, debt, or other outstanding expenses that will need to be paid in the event of an untimely death. I know that most people do not even want to consider the thought that their child may die before them. But bad things happen to good people every day. Parents can own the policy and make payments on behalf of the student. When the student is of age and has the means to handle the payments, ownership can be transferred to the student. Many insurance companies have programs that allow the student to increase their coverage during the term of the policy without proof of insurability. So, you are protecting their insurability in the event that health problems occur in later years. 

6) And above all, accept responsibility. It is not the government’s job, the college’s job, or the tax payer’s job to pay for college or bail out students and parents who get in over their heads. Every individual should plan ahead and educate themselves about the college funding process and the tools that are available to help pay for college expenses. Know what your payments and borrowing costs will be for your student’s education before you and your student commit to any loan. Determine how much you will borrow and how much the student will borrow for the next four years. 

We can help!


The Ensphere Team

Here's the link to the news story!

Lessons from Greg Norman and Robin Williams: Don't Build Your Financial World on a Dream

This past week has caused me to reflect upon the vastly different ways the seemingly very wealthy, at the top of their game, handle financial stress and difficult decisions. About ten years ago, Greg Norman, a professional golfer who changed the course of worldwide professional golf, was in the throes of an extremely expensive divorce and had to make some hard financial decisions. How would he handle a $100 million dollar divorce? Greg, a seasoned financial veteran with a team of financial advisors, decided he would sell his dream yacht “Aussie Rules”, an initial investment of over $70 million. This decision would help finance his divorce, rumored to be $100 million +, so he could settle his commitment and get on with his life. The boat was a 5-year exercise in love, coming from a man who spends his swashbuckling life enjoying the fruits of the ocean, but he knew toys could be replaced.

On the other side of the coin, Robin Williams, a man of similar age, maybe slightly past his prime but certainly with marketable skills, faced financial stress of his own. Robin purchased a very expensive second home in Napa Valley, rumored to cost $35 million. Robin faced similar expensive divorces, costing many millions, but chose to keep his dream home. The financial team he employed, but didn’t listen to, had it correct. His celebrity very well could have been used to sell his dream home in Napa, but the lack of financial need or stubbornness delayed the sale. This financial tragedy might have been avoided, but we will never know.

My take from these tales is simple: if you build your financial future on a toy, a huge first or second home, or the insane stock market, beware of the risk you are taking with you and your family’s financial future. Great financial plans are built on a solid foundation first, and then it may be prudent to invest in risky financial plays in real estate or the stock market.

If you want to see what a prudent financial pyramid looks like, send me or Erin a quick email, and we will forward a realistic, solid, well grounded look at a diagram that has worked for centuries. Good financial choices are a learned art form. We can help.

Mike Giffin, President

SAT Subject Tests

Registration for the October 11th SAT and SAT Subject Tests is only a month away!

Many of you have been asking about Subject Tests: what they are, how many you should take, and which colleges require them.

The SAT Subject Tests are hour-long, multiple-choice tests that assess your knowledge in particular subject areas. On a single testing date, you can sit for one, two, or three tests. Each test is structured differently, so it’s important to look at practice questions before showing up for the test. As a starting point, you can download a free practice booklet from the College Board website.

Some colleges will ask for one, two, or three Subject Test scores as part of the admissions process. Other colleges may let you choose between submitting Subject Test scores and AP Exam scores. And many colleges do not require Subject Test scores at all! Make sure to look at schools’ admissions requirements in advance so that you have enough time to plan accordingly.

The good news is, with the SAT’s Score Choice option, you can select which Subject Test scores you’d like to send to colleges. If you sit for three tests and a school asks for only one or two scores, you can send just your best ones.

Typically, schools will let you choose which Subject Tests you want to take, unless they state otherwise. You can sit for the tests that best suit your strengths!

Here’s a list of the Subject Tests offered:
- Literature
- U. S. History
- World History
- Math Level 1
- Math Level 2
- Biology
- Chemistry
- Physics
- Various foreign language tests (French, Spanish, Latin, etc.)

You are not able to sit for both the SAT and SAT Subject Tests on the same testing date, so plan ahead! We recommend taking the SAT before you take any Subject Tests.

If you're planning to take the SAT or SAT Subject Tests on October 11th, remember to register by September 12th.

Happy studying!

Erin, Director of Student Services