NEW YORK, April 7 (Reuters) - Debt may be a drag for millennials, but apparently not as much as cooking their own dinner.
A
survey from Citizens Bank found that fewer than half (47 percent) of
millennials, those in the 18-35 age group, who are college graduates,
would be willing to limit their online food delivery in return for
reducing their student loans.
Other priorities? Concerts, sporting events and lattes, as well as travel and vacations.
The
prospect of limiting any of these luxuries got the “no thanks” from the
majority of millennials who were asked if they would cut back to lower
their student loans. The same holds true for cutting Internet service.
Despite
being so unwilling to give up life’s little pleasures, more than half
(57 percent) said they regret taking out as many student loans as they
did, and about a third said they would not have even gone to college if
they knew how much it was going to cost them.
That is a big conflict, says Brendan Coughlin, president of consumer lending at Citizens Bank.
“They
are very committed to living their life the way they want to live their
life, and as frustrated as they are by student loans, they are not
willing to make those lifestyle tradeoffs,” he said.
Part of the
problem may be one of denial and math. The same survey found that nearly
half of millennials (45 percent) with student loans do not even know
how much of their annual salary they spend on them. It is 18 percent on
average, for the record.
On the upside, the vast majority do at
least know what they owe - over $40,000 for most. But more than a third
(37 percent) are clueless on the interest rate they pay.
Some suggestions for getting that number down:
KNOW WHAT YOU OWE
The National Student Loan Data System tracks federal loans (www.nslds.ed.gov or 1-800-4-FED-AID). For private student loans, borrowers should check out their annual credit reports
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REFINANCE
Three-quarters of millennial graduates told
Citizens Bank that refinancing is not part of their plan to pay off
their student loans. Millennials who have graduated and have jobs often
qualify for better rates than they did when they had no income at the
start of school.
In addition to Citizens Bank, SoFi, CommonBond,
Wells Fargo, Earnest and other institutions offer refinancing programs.
There is also an opportunity for students to move from variable-rate
loans to fixed-rate ones as a hedge against rising interest rates.
At
Citizens, a regular undergraduate loan ranges from 5.25 percent to
11.75 percent. Refinancing loans start as low as 4.74 percent. Variable
rates range from 2.44 percent to 9.44 percent. On average, a customer
will save 1.5 percent APR when refinancing, or $147 a month, according
to Citizens.
GET HELP AT WORK
A number of companies,
including Fidelity and PwC, are offering help to pay down student debt.
This is becoming a more mainstream perk and is worth looking into with
your current employer, and keeping in mind if you are looking for a job.
While
only about 3 percent of employers are offering this perk, according to
the Society for Human Resource Management, it is gaining steam as
companies work to attract and retain millennial workers.
SEEK FORGIVENESS
Some
professions, such as public service jobs, offer student loan
forgiveness. They include public defenders, law enforcement officers,
doctors, nurses and some teachers.
For
example, teachers who work in low-income school districts and teach
certain needed subjects may qualify for even full cancellation of some
types of loans.
Volunteering
can also pay off. Many organizations like the Peace Corps and
AmeriCorps offer eligibility for student loan payments through Public
Service Loan Forgiveness (PSLF) or other options.
In this Sunday, March 13, 2016,
photo people walk near Memorial Church, behind, on the campus of
Harvard University, in Cambridge, Mass. Amid scrutiny from Congress and
campus activists, colleges across the country are under growing pressure
to reveal the financial investments made using their endowments. (AP
Photo/Steven Senne)
The most elusive yet revealing stat about a
business school is the size of its endowment. Few schools disclose this
number in any public way, though it’s fair to say that B-school deans
put more focus on this one number than any other. After all, it’s the
ultimate measure of a school’s true “wealth.”
And a wealthy school
is more likely to attract and retain the best faculty and staff. It’s
no surprise that business schools with the largest budgets devote at
least half of their expenses to salaries and benefits. A wealthier
school is also more likely to have better facilities, in the form of new
state-of-the-art buildings or well-maintained historic buildings with
the latest technology. Wealthy schools typically have more flexibility
to fight for the best students in the form of scholarship money, which
in turn improves the overall profile of an incoming class and ultimately
the career outcomes of its graduates.
In fact, the size of a
school’s endowment is far more important an indicator of a school’s
power and impact than an individual ranking, location, facilities,
acceptance rate, career prospects, network strength, or industry
placement. Because a business school’s wealth typically comes from gifts
and other donations from its alumni network, a school’s wealth is a
good indication of the strength of its alumni base. So which schools
lead and which institutions have some catching up to do? THE GAP BETWEEN HARVARD & STANFORD: $2 BILLION
With
painstaking research, Poets&Quants has produced the most complete
and up-to-date list of business school endowments ever published, with
more than 50 top schools sharing their latest data. (Only two top U.S.
schools declined to provide this information: Notre Dame University’s
Mendoza School of Business and the University of Pittsburgh’s Katz
School). Not surprisingly, you’ll find a strong correlation between
endowment and the rankings, the quality of a class profile, and career
statistics. But the numbers pull back the curtain on overvalued and
undervalued programs and provide a potential explanation as to why
certain schools are climbing the rankings every year while others stay
put or lose ground.
It won’t
shock anyone to know that Harvard Business School is at the top of the
endowment heap. More surprising is its lead over all its rivals. As of
fiscal 2015, ended June 30th, 2015, HBS’ treasure chest totaled a
whopping $3.3 billion, the size of many university and college
endowments. The gap between Harvard and Stanford University’s Graduate
School of Business is now $2 billion, given the GSB’s current $1.3
billion endowment. In the past four years alone, HBS has increased its
endowment by 24.5%, or $658 million, from $2.7 million in fiscal 2012,
when the Great Recession walloped all endowments.
After
the big two, you’ll find a predictable set of schools at the top: the
University of Pennsylvania’s Wharton School at $1.289 billion,
Northwestern University’s Kellogg School of Management at $866.0
million, and MIT’s Sloan School of Management at $812.9 million. A big
surprise is the endowment size of Yale University’s School of Management
at $743.0 million, placing it sixth among the top business schools. And
an equal surprise, in the other direction, might well be the University
of Chicago’s Booth School of Business which has an endowment of $734.0
million.
The Chicago Booth
number, however, does not include investment manager David Booth’s $300
million naming gift in 2008 which can yield more annual income than the
cash thrown off by the Booth endowment. If the grant from Dimensional
Fund Advisors’ Co-Founder David Booth were included, the Booth endowment
could be double its actual size, putting it behind only Harvard (see table for complete list).
Explains Joe Buck, associate dean for the office of advancement, “The
Booth gift is not part of our endowment because there was no transfer of
assets. The gift is structured so that the school receives a cash flow
each year based on the stock dividends of Dimensional Fund Advisors.”
It’s
also fascinating to examine U.S. business school endowments compared to
the funds raised by non-U.S. schools. INSEAD has the largest endowment
of any of the top European schools, but at $206.6 million the size of
that fund puts the institution just above the University of Wisconsin’s
Business School and just behind Cornell University’s Johnson School.
London Business School’s $65.2 million endowment places the school just
above the University of Arizona’s business school.
By
and large, the spirit of university giving in Europe and other parts of
the world lags far behind that of the U.S. At one business school after
another, the endowments are significantly lower for schools that have
risen to prominence in global rankings by The Financial Times and The
Economist. IESE Business School in Spain has an endowment of $56
million, while IMD in Switzerland boasts just $24.6 million and ESADE in
Spain of $4.7 million. ANOTHER WAY TO LOOK AT THE DATA: ENDOWMENT PER STUDENT
While
the overall size of a school’s endowment is important, the size of the
institution also matters. Larger programs have larger networks but they
also require higher expenses and greater investments to stay on par with
smaller rivals. That’s why we are examining the numbers not merely by
overall endowment but also by endowment per student. We are ranking them
by endowment and by endowment per student.
Looking
at the numbers per student, Harvard may still rule the roost but things
get switched up fast when accounting for the size of a school’s
enrollment including undergraduate, graduate and doctoral programs.
Harvard has nearly $1.7 million in endowment funds for each enrollment
student, compared with No. 2 Stanford which sits at $1.0 million. Yale
SOM is third with $968,709 per student, while Dartmouth Tuck is fourth
with $585,538 per student, and Vanderbilt University’s Owen School is
fifth with $527,915 per student. The highest public university is
Virginia’s Darden School which has an endowment per student of $526,291,
placing it sixth overall (see table here).
HOW MUCH CASH DOES A TYPICAL ENDOWMENT THROW OFF?
How
does an endowment work? It’s like a treasure chest that throws off cash
each year to cover part of a school’s operating costs. No school uses
its endowment as a checking account, but rather as savings that throw
off some cash each year while preserving the base capital of the fund.
At Harvard Business School, for example, the targeted annual payout goal
is between 5% and 5.5% of the total $3.3 billion endowment. So in 2015,
when the payout was 5.1% of the endowment, this treasure chest produced
$127 million, accounting for 18% of the school’s total revenues. The
year-over-year increase in Harvard’s endowment from $3.2 billion a year
earlier reflects a 5.8% net appreciation in the endowment’s market
value, the subtraction of the year’s distribution of $127 million,
offset by $69 million in endowment gifts received by HBS during the
year.
How much a school taps
into its endowment for cash is dependent on university guidelines, the
market appreciation or depreciation of the funds, as well as a school’s
needs. In 2015, HBS’ endowment took a hit on the appreciation side, with
the market value of the fund increasing by only 5.8%, versus the 15.4%
rise of a year earlier. But the $69 million increase in endowment gifts
also was just part of the $166 million in gifts and pledges to Harvard
Business School last year.
Ultimately, the size of a school’s
endowment amplifies its ability to carry out its mission and to enable
and support growth and development for the school and its community. Daniel
J. Bonsoms, a CFA, is undecided on which MBA offer he will ultimately
accept. He’s worked in private equity for the past four years and
currently lives in Los Angeles. America's Wealthiest Business Schools
It's
no surprise that Harvard Business School tops this newest list compiled
by Poets&Quants. Among the big surprises is the lead HBS now has
over its rivals, Yale's School of Management having the sixth largest
endowment, as well as Babson College’s sizable treasure chest that
places it ahead of such schools as Dartmouth, USC and Berkeley
View gallery
.
View gallery
.
Poets & Quants
All
numbers are fiscal 2015, ending 6/30/15, for endowment as defined by
the National Association of College and University Business Officers. *
The Chicago Booth number does not include David Booth's $300 million
naming gift in 2008 which can yield more annual income in some years
than the Booth endowment. If it were included, the Booth endowment could
be double its actual size. A spokesperson for Booth, however, says that
the annual outlays from the grant can vary considerable from year to
year.
Source: Business schools reporting to Poets&QuantsGet the data
How stricter rules for brokers will likely affect retirement savers
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WASHINGTON (AP) -- High fees. Conflicts of interest. Inappropriate investments.
The
Obama administration is going after a host of perceived rip-offs with
the new rules it's unveiling Wednesday for brokers who recommend
investments for retirement savers.
No longer
will brokers who sell stocks, bonds, annuities and other products be
required just to recommend investments that are "suitable" for a client.
They'll now have to meet a stricter standard that has long applied to
registered advisers: They will be considered "fiduciaries" — trustees
who must put their clients' best interests above all.
The
new rules, to be phased in starting a year from now, follow intense
lobbying by both consumer advocates and the financial industry. Full
compliance will be required by January 2018.
At
stake are about $4.5 trillion in 401(k) retirement accounts, plus $2
trillion in other defined-contribution plans such as federal employees'
plans and $7.3 trillion in IRAs, according to the Investment Company
Institute.
Too often, regulators say, brokers
steer clients toward questionable investments for which the broker
receives a fee, thereby acting in their own financial interest instead
of the client's.
The problems often arise when
people who are retiring "roll over" their employer-based 401(k) assets
into individual retirement accounts. Brokers may persuade them to put
those assets into variable annuities, real estate investment trusts or
other investments that can be risky or otherwise not in the client's
best interest.
The administration has said
investors will save about $4 billion annually under the new rules. The
industry has countered that investment firms will have to shell out more
than that just to comply with the rules. Financial firms also argue
that the stricter rules will likely shrink Americans' investment options
and could cause brokers to abandon retirement savers with smaller
accounts.
Americans increasingly seek guidance
in navigating their options for retirement savings. Many professionals
provide advice. But not all are required to disclose potential conflicts
of interest.
"This is a huge win for the middle
class," Labor Secretary Thomas Perez said Tuesday in a conference call
with reporters. "We are putting in place a fundamental principle of
consumer protection."
Here are some questions and answers:
___
BROKERS? FINANCIAL ADVISERS? WHAT'S THE DIFFERENCE?
It's
significant. Brokers buy and sell securities and other financial
products on behalf of their clients. They also can provide financial
advice, with one key stipulation: They must recommend only investments
that are "suitable" for a client based on his or her age, finances and
risk tolerance.
So they can't, for example,
pitch penny stocks or real estate investment trusts to an 85-year-old
woman living on a pension. But brokers can nudge clients toward a mutual
fund or variable annuity that pays the broker a higher commission —
even without disclosing that conflict of interest to the client.
Registered
investment advisers, on the other hand, are "fiduciaries." In that way,
they're more like doctors or lawyers — obligated to put their clients'
interests even ahead of their own. That means disclosing fees,
commissions, potential conflicts and any disciplinary actions they have
faced.
Advisers must tell a client if they or
their firm receive money from a mutual fund company to promote a
product. And they must register with the Securities and Exchange
Commission, thereby opening themselves to inspections and supervision.
__
WHAT DO THE NEW LABOR DEPARTMENT RULES DO?
They
put brokers under the stricter requirements when they handle clients'
retirement accounts. The Labor Department has grappled with the issue
for years. The department withdrew an earlier proposal in 2010 amid an
outcry from the financial industry, which warned that it would hurt
investors by limiting choices.
The rules update
the Employee Retirement Income Security Act, known as ERISA, enacted in
1975. That was a far different time. Traditional company pension plans
were still the dominant source of retirement income. Now, traditional
pensions are increasingly gone. In their place are 401(k)-type plans,
which require workers to set aside pre-tax money but also add a new
layer of risk: Employees themselves must decide how to invest their
retirement money, and many seek professional advice.
__
WHAT ARE THE ARGUMENTS FOR AND AGAINST?
Consumer,
labor and civil rights groups have pushed for the new rules. They say
the current system provides a loophole that lets brokers drain money
from retirement accounts in fees they receive that can tilt the
investment advice they give clients.
Ordinary
investors with relatively small balances in their retirement accounts
could especially benefit from the changes, according to Barbara Roper,
director of investor protection for the Consumer Federation of America.
These are the people who are now most likely to get "a sales pitch
dressed up as advice" from brokers, Roper says.
__
AND THE OTHER SIDE?
Wall
Street lobbying groups, mutual fund companies, life insurance firms and
other industry interests have opposed the rules as proposed last year
and pushed the Labor Department to revise them.
They
say the stricter requirements could limit many people's access to
financial guidance and retirement planning and their choice of
investment products. They warn that that would fall especially hard on
mid- and low-income employees with smaller retirement balances — say,
less than $50,000 — who could be abandoned by brokers.
The
new requirement to act in a client's best interest means, in many
cases, that the practice of charging commissions on every trade would be
replaced by a set fee for a broker as a proportion of a customer's
assets. Some brokers may decide that the smaller fees aren't worth their
trouble, opponents say.
Some financial companies and groups may take the government to court over the new rules.
