Educating our way to a better economy

Andrew Zumwalt, State Extension Specialist
Robert O. Weagley, Ph.D., CFP®

“We have to educate our way to a better economy”
- Arne Duncan, United States Secretary of Education

Mr. Duncan’s quote comes from a statement he made in reference to imminent changes with how students complete the information on the Department of Education’s Free Application for Federal Student Aid (FAFSA). The goal is to increase the number of students from low- and middle-income households that attend college by making the FAFSA more “user friendly”. In the process, it is likely that some criteria, that limited families’ eligibility, might be relaxed.

The key elements of the changes:

• Available summer 2009, a shortened and streamlined application. (Enhanced skip-logic is used, if that means anything to you). This new, web-based FAFSA will reduce user navigation for many applicants by about two-thirds.


• Starting in January 2010, students applying for financial aid for the spring semester will be able to seamlessly retrieve their relevant tax information from the IRS for easy completion of the online FAFSA. The Department of Education and the IRS will be working together to examine the possibility of expanding this option to all students in the future. This will make it much easier to complete the FAFSA and should increase applications. The American Council on Education estimates that close to twice as many Pell grants will be awarded if the process is easier.


• The Administration will also introduce legislation seeking statutory authority from Congress to eliminate financial information from the aid calculation formula that is not available from the Internal Revenue Service (IRS). (Note: This is only proposed. It is not yet the law.) This may have implications for those with assets, as twenty-six financial questions will be removed from the FAFSA form that have little impact on aid awards but that make the form difficult to complete. Only questions that rely upon information that applicants must already provide to the IRS would remain. The answer to these questions are often difficult to verify and they add very little to the rest of the aid formulas. The six questions related to assets, for example, only have an effect on the awards of 3 percent of Pell grant recipients. In the process the questions penalize families who have saved for college, while opening up loopholes for sophisticated applicants to attempt to game the formula.

These changes join the rest of the Obama-Biden agenda for making education more affordable for Americans. Their agenda includes:

• The goal of America being the nation with the largest proportion of the population with a college education.


• Expanding Pell grants and college tax credits.


• Expanding the Perkins loan program, to an additional 2,600 schools and an estimated 2.7 million students.


• Asking the Treasury Department to look for ways to make 529 savings plans more efficient and effective.


• Provide incentives to increase college enrollment and graduation rates.

We have previously written about the importance of education, as a means to achieve financial success. It appears that the current administration is acting on the same premise and, for that, we are grateful. (Why shouldn’t we be, education is our industry!) One word of speculative caution, however, is in order. If the education industry has more money headed its way, the demand for education will increase. As the demand for education increases, institutions will admit more and more students and, perhaps, admission and performance standards will be lowered. This, combined with the fact that a larger numbers of college graduates could create a situation where a college degree may cease to be an effective signal of the productivity of potential employees. Could it be that the jobs that now require a bachelor’s degree will soon require a master’s degree, in order to support an efficient labor market? The answer to this question will be known soon enough but, for today, we agree with Secretary Duncan. Education continues to be the best equalizer and means to achieve financial success, as well as a better economy. (Bottom line: If you are a college student and have not completed a FAFSA, do so. Many institutions require a FAFSA prior the receipt of a scholarship or fellowship, particularly if the donor even so much as hinted that financial need was to be a criteria.)

The Department of Education news release is located at: https://webmail.um.umsystem.edu/exchweb/bin/redir.asp?URL=http://www.ed.gov/news/pressreleases/2009/06/06242009.html and more information may be found at: https://webmail.um.umsystem.edu/exchweb/bin/redir.asp?URL=http://www.ed.gov/finaid/info/apply/simplification.html .

- Robert O. Weagley, Ph.D., CFP(r)
Chair, Personal Financial Planning
University of Missouri
Columbia, MO 65211

Energy Entrepreneur

By Jeff Barber1 and

Robert O. Weagley, Ph.D., CFP®

In these economic times, finding a safe and productive place to save or invest our money is challenging. However, while this is a little dated, research done at the Lawrence Berkley National Laboratory in 2001 demonstrated that 10 common home energy efficiency improvements (investments), including appliances, can result in a 16 percent average annual return. To put a 16% return in perspective - it is better than the Dow Jones Industrial Average performance of 14% for the “go-go” years of 1990 to 1997. Importantly, by investing in the efficiency of our home and home appliances, we can realize returns that are safe, tax free, totally in our control, as well as being profitable. Besides, the money we save is able to be added to our retirement plan, our educational plan, used to reduce indebtedness, or to realize any one of our many goals.

So, what is the Energy Entrepreneur Top-10 List?

1. Changing lights to new fluorescent lamps and fixtures averages a return of 41 percent. (Consumers have been slow to adopt to these lamps, although the evidence in their favor is overwhelming. Watch for sales or a special promotion by your local utility company.)

2. Sealing heating and cooling ducts averages a return of 41 percent. (Air leaks are everywhere in your home. While some ventilation is a must for protection from molds and radon, focusing on the most common problem areas for lost air will cause no ill effects.)

3. Upgrading to Energy Star when replacing a clothes washer averages a 37 percent return. (Consider the new energy and water efficient upright Energy Star washers and dryers.)

4. Upgrading to an programmable thermostat has an average return of 30 percent. (Raising the temperature a few degrees in the summer and lowering it a few degrees in the winter can add considerably to these savings. If you’ve a sweater, wear it. If you’re sweating, take a break and have a nice glass of ice water.)

5. Installing an R-12 water heater insulation jacket averages a 28 percent return. (You wouldn’t want your water heater to be improperly attired, would you?)

6. Upgrading to Energy Star when replacing a refrigerator averages a 37 percent return, assuming the old one is no longer used. (If you keep the old one for storing that extra case of soda, the moldy meatloaf, or the egg-salad that smells like a sulfur spring, forget the savings and remember to buy some baking soda.)

7. Upgrading to an Energy Star heat pump when replacing the furnace and air-conditioning system, averages a return of 19 percent. (Make sure you plan to live in the house long enough to reap the savings or that your market prices for homes reward the installation of a heat-pump.)

8. Upgrading to Energy Star when replacing a dishwasher results in an average return of 18 percent. (Using fewer dishes or running the dishwasher without the heat element can save even more money.)

9. Weatherizing and sealing the home to limit air changes to less than 0.5 per hour has an average return of 9 percent. (Be careful to not overly seal your home and add the problem of excessive condensation to your list of issues.)

10. Increasing wall and attic insulation to 1997 Department of Energy recommended levels has an average return of only eight percent. It does, however, represent the greatest dollar savings – but insulation is also the most costly change. (As energy prices rise, so will the return on insulation. Of course, buying home improvement items during a housing market slow-down is like buying your new lawnmower in October – it will cost much less.)

It is important to remember that the Lawrence Berkley study used 1997 costs. In the twelve years since that study, fuel costs have increased and the cost of many technologies have dropped, as well as new and better technologies have been introduced. That means a person can realize an even greater return on wise energy saving investments. Other opportunities can be realized by taking energy efficiency tax credits and utility rebates. For a list of the current energy tax credits look here.

The conclusion is very simple. An investment ranging from several hundred to several thousand dollars can have a very good return. While your return may vary from those found by the Berkley Lab, the return will be positive and it comes with no risk. Sounds like an opportunity for financial success…and it only comes in one color, “green”.
- Robert O. Weagley, Ph.D., CFP(r)

Chair, Personal Financial Planning

University of Missouri

Columbia, MO 65211