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Zemanta Related Posts ThumbnailOne way to save money on college, families are frequently told, is to start at a two-year school and then transfer to a four-year institution.

The problem with such advice is that a lot of students never make it to the four-year college.

Even when researchers control for family background, achievement and ambition, those who start at two-year schools are far less likely to complete a bachelors degree.

One of the reasons may be that credits earned in community college often don’t transfer to the four-year school. Students who aren’t savvy about the transfer process may not realize how picky four-year institutions can be.

That’s leading a lot of otherwise capable students to drop out, according to two researchers from the City University of New York who reviewed 13,000 students’ records. My Reuters column this week, “For students who transfer, lost credits can doom college hopes,” has details about their study.

Community college students are more likely to be first generation, which means they can’t turn to their parents for advice about navigating the college transfer process. They’re trying to figure this out on their own, often without much help from the schools.

Some states have tried to ease the way by creating pathways between community college and their public four-year institutions. These pathways guarantee admission and credit if the students take recommended courses and maintain a minimum grade point average.

But students have to know such pathways exist and how to follow them. In states where these pathways haven’t been created, students must try to determine which courses are most likely to transfer and which aren’t.

To do that, kids need help. College consultant Todd Weaver recommends that community college students make a point of getting to know their academic adviser. The advisors’ caseloads may be huge–hundreds of students–but seeing them once every four to six weeks can help create the kind of relationship these students need to get specific advice on navigating this complicated process, Weaver said.

At the macro level, the researchers believe more needs to be done to smooth the transfer process. Most new jobs in the 21st century will require a four-year degree, and a more educated population is necessary if we want to compete in the global economy and have a viable middle class.

Given what’s at stake, students need all the help they can get.

 

 

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Investing Made Easy

Mar 24, 2014 | | Comments (2)

Dear Liz: This is going to sound like a stupid question but here goes: I keep hearing different percentages for amounts I should invest for retirement and other goals, such as “put X% in stocks and Y% in bonds.” But which stocks and which bonds? Is it as simple as a purchasing a broad market stock index fund and a broad market bond index fund? There are so many choices for funds, stocks and bonds that I can’t get my head around it all. Also, what should you do with money needed in the near-ish term, say, less than five years?

Answer: Your questions aren’t stupid, and the answers are simple: “Yes,” and “keep it in cash.”

You can make investing complicated if that’s what you want, but a simple, effective solution for most investors is to simply buy inexpensive mutual funds or exchange traded funds (ETFs) that mimic a market index, such as the Wilshire 5000. The investments provide great diversification at low cost, and keeping fees down is essential to getting good long-term returns from your money.

Index funds attempt to match the market’s returns, rather than trying to beat the market with a lot of costly buying and selling. The annual expenses on index funds tend to be a fraction of what you’d pay for an actively managed fund.

Any investment in stocks or bonds requires some patience, however, since short-term fluctuations can cause you to lose money. If you’ll need that money in a few years, you shouldn’t take the risk of losing your principle. An FDIC-insured savings account will keep it safe. Online banks typically offer better yields than their bricks-and-mortar versions.

Categories : Investing, Q&A
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Triggering the Gift Tax

Mar 24, 2014 | | Comments (0)

Dear Liz: In 2007, my parents signed over their house deed to my name. Does this trigger the gift tax? They never filled out a gift tax form. Is it too late? Dad has passed on but Mom is still with us. She has Alzheimer’s disease, and I have her power of attorney. Are there no taxes due because of the lifetime exclusion?

Answer: Yes, a gift tax return should have been filed, but no, the gift tax itself almost certainly wasn’t triggered. In 2007, each of your parents would have had to give away more than $1 million in their lifetimes before gift tax would be owed. The gift tax exemption limit has since been raised to more than $5 million.

A tax professional can help you file the overdue return. Then you should consult an attorney about what to do next.

If your parents’ intent was to avoid taxes by transferring the home to you, they probably made a mistake. By giving the house to you, they also gave their tax basis. That means that when you sell the house, you would have to pay capital gains taxes on the difference between the sale price and what they paid for it, perhaps many years ago. The capital gains would be decreased by any improvements made in the subsequent years and by selling costs, but you still could face a substantial tax bill.

If you’d inherited the home after their deaths, on the other hand, you would get a new tax basis that essentially makes those gains tax-free.
You could undo the gift by transferring the deed back to your mother and filing another gift tax return. (Again, no tax probably would be owed.) But that’s probably not something you’d want to do if your mother will qualify for Medicaid, the government program that pays nursing home expenses for the poor, said Howard Krooks, an attorney with Elder Law Associates in Boca Raton, Fla., and president of the National Academy of Elder Law Attorneys.

Medicaid looks back at the previous five years to see if the family transferred assets for less than fair-market value and delays eligibility if such transfers are found. Since you’re outside the five-year mark, you may want to leave things the way they are if Medicaid is in your mom’s future, Krooks said.

An elder law attorney can help you sort through the options. You can get referrals from the National Academy of Elder Law Attorneys at http://www.naela.org.

Categories : Q&A, Real Estate
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