Education Archives - Financial Samurai

Perhaps Bribing For Admissions Starts In Preschool

Perhaps Admissions Bribing Starts As Early As Preschool

March 12, 2019 is a day I’ll never forget. Not only did the college admissions bribery scandal break that morning, we found out our boy got waitlisted by two preschools. Waitlisted is really just a euphemism for rejected.

The first preschool was a Mandarin immersion preschool I’ll call PooPoo about 20-25 minutes away. We had to go for an initial one hour tour, then a 30 minute parent interview with the admissions director who was hacking up a lung that day, and then a final play date interview along with 11 other kids and parents.

It was an arduous process that we found unappealing, especially given the commute. During our application process, the school canceled its 4-day a week part-time program in favor of only 5 full days a week. We found this to be too much for a 2.5 year old.

The school seemed like it was being run more like a business first, and a school second with its massive $1 million fund raising banner in the entrance and its decision to go 5 days a week in order to charge their full $31,240 a year in tuition.

Given these issues, we were not disappointed when PooPoo waitlisted our boy. We had already decided he wouldn’t attend. Spending $31,240 a year on tuition for a 2.5 year old felt extremely unnecessary. I speak Mandarin and we could use the money to live in Taiwan for a summer instead.

The second school we applied to I’ll call PeePee; it’s about a 15-18 minute drive away. We liked the school because it had a two day a week program that runs from 9:30am – 12:30pm for $8,500 a year. We thought this was a more appropriate transition for a young toddler first experiencing a school setting.

The only problem with the school is that it’s not very racially or socioeconomically diverse. Further, 11 of the 12 available spots for this upcoming preschool year for 2-3-year-olds were already preassigned for siblings. This ensured further homogeneity.

The Executive Director personally reached out over e-mail and told me that 80 people applied for the one open non-sibling position, which meant that they only had a 1.25% acceptance rate.

Given we had no connections to the school, don’t look like the majority of parents, don’t have any status since we didn’t tell them we run this site, didn’t donate any money, and learned the application numbers, we weren’t surprised about the rejection, just a little disappointed.

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The Wide Implications Of The College Admissions Bribery Scandal

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The Implications Of The College Admissions Bribery Scandal

Thanks to the fantastic work by the Department Of Justice and the FBI we have learned the average bribe it takes to buy your kid’s way into an elite private university is between $250,000 – $400,000. Although, some bribe amounts went as high as $6 million.

The 10-month-long investigation, code-named “Operation Varsity Blues,” uncovered large bribes nationwide across various stages of the college admissions process. So far, two SAT and ACT exam administrators, one exam proctor, a college administrator and 33 parents, including actresses Felicity Huffman and Lori Loughlin were arrested.

The private universities spanned across the nation, including Yale, Stanford, Georgetown, USC and Wake Forest. A couple of public schools such as UCLA and the University of Texas were also involved in the scam.

In one alleged incident, the Yale women’s soccer coach received $400,000 to accept one student on her team, even though the applicant did not play soccer.

In another alleged incident, Lori Loughlin, aka “Aunt Becky” on Full House, allegedly paid $500,000 in bribes and fabricated photos depicting her daughters as competitive crew rowers in order to get them accepted into USC.

In another alleged incident, the Stanford University sailing coach agreed to also accept $500,000 in bribes in order for two students to gain admissions.

What’s up with crew by the way? It’s not a money-making sport for the university. Perhaps crew is a sport where a potential admit can be more easily manipulated into looking like a high caliber athlete through photoshop and other means.

Bribe-willing parents take note!

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Navigating The Preschool Admissions Process: Getting In And $1,000 Application Fees

Posted by Financial Samurai 109 Comments

When my wife was pregnant in late 2016, a friend told me, “You need to apply to preschool within the first three months after he’s born.“

He had one kid in private elementary school and two kids in private middle school. He is also a centimillionaire.

“Absurd!” I responded.

“Hey, it’s up to you buddy. Getting into preschool in San Francisco is harder than getting into Princeton. Don’t let your lack of preparedness hurt your son’s chances for a bright future.“

Damn it. Guilt sets in.

“Well since you put it that way. I guess I’ll get on it. Want to give us a recommendation when he goes in 2019 or 2020?“

“Of course I will,” my friend replied as we resumed our tennis match.

This post is an introduction into how daunting it is for families living in big cities to get their kids into preschool. It should also give some sense as to why there’s so much anxiety among parents and children early on.

As someone who has questioned the necessity of paying for private grade school tuition, yet who also wants the best for his son, this post serves as a type of mental penance for going through this process. I’ve spent the last seven years trying to escape the grind, but somehow, I’m always getting pulled back in.

I also hope this post brings joy to families who live in lower cost areas of the country who don’t have to worry about hyper competition due to a lack of supply. Living in a big city has its perks, but helping your child get a quality education is not one of them.

It’s only until kindergarten where all families are eligible for a free public education.

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The Cost Of A Top MBA Program Is Now Absurdly High

Posted by Financial Samurai 67 Comments

As an MBA holder from UC Berkeley, I should be very pro-business school. But after seeing the latest tuition figures compiled by US News & World Report, I cannot in good conscience recommend getting an MBA full-time today if you are paying full price.

Only if you are already rich, screwed up massively in college, want to take a long vacation (and rich), or despise your job and want a career change should you consider an MBA.

Take a look at the details yourself.

US News & World Report MBA Rankings 2018 – 2019

The first thing that stands out clearly is how wrong the rankings are. UC Berkeley Haas should be #1 since the school is located in the booming SF Bay Area and has the “cheapest” tuition. But besides the egregious rankings, the second most eye-opening part in this chart is the tuition.

Who in their right mind spends more than $65,000 a year on tuition alone?! Once you add food and shelter, we’re easily talking $100,000+ a year. Students are not only giving up two years of experience, but they’re also giving up another $150,000 – $300,000 in median lost income.

Yes, getting an MBA full-time is like taking a long work vacation for many people. But unless you are already rich, or are willing to work for decades after graduating, I’d much rather have the $300,000 – $450,000 in paid tuition and lost wages instead. Taking 4-6 weeks off a year in my late 20s and early 30s was good enough for me. How about you?

Some of you might think that given the MBA is a graduate degree, many schools provide grants to attract the highest caliber of people. Unfortunately, MBA programs are not like graduate programs in the sciences or humanities, where scholarships are readily available. MBA programs are businesses that seldom give out free money to students.

The Better MBA Solution: Get Your Employer To Pay

When I went to Berkeley Haas between 2003 – 2006, tuition was around $28,000 a year. I felt that was a steep price to pay back then as well. As a result, I applied to the part-time program because my employer was willing to pay 100% of the tuition if I stayed on for at least two years after graduating.

The program took me three years to complete. Every Saturday for nine months a year, I would go to class from 8:30am – 5pm and then spend another 10 hours a week doing homework and group projects. The first year was brutal due to the adjustment and all the core classes I had to take. But by the second year, the program was a lot of fun due to the electives I selected.

I could have finished the program in 2.5 years if I took two summers of classes, but I needed a break. I was regularly working 60+ hours a week in finance and was doing a lot of traveling.

Although the three years were tough, they went by quick. I worked for six more years before I finally left my employer in 2012. It was a good trade for both parties.

If you are considering getting an MBA, please first check with your employer to see if they have a tuition reimbursement program. It’s a business expense for them as well as a recruiting and retaining tool for their top employees.

If you plan on paying the entire bill yourself, then do research on how you can deduct the tuition of an MBA on your taxes. For example, if you earn under $80,000 the year you go to school or $160,000 if you are married, you can deduct all tuition and school-related fees. See more tuition deduction info from the IRS here and check with an accountant.

The Main Things I Learned From My MBA

Here are some of the things I learned in business school:

* How to create an income, balance sheet, and cash flow statement

* How to be a better negotiator

* How to be a better communicator

* How to properly analyze real estate transactions

* How to lead more effectively

* How to play nice with eager beavers

But the main thing I learned in business school was confidence. The more information I knew, the more confident I became. With an added diploma and three more years of work experience, I started to finally feel like I belonged in the finance world.

The problem with MBA programs right now is demand. Applications were down 5% – 10% for the top 25 schools last year and will likely decline even further this year once the data comes out.

The schools blame the decline of international applicants scared off by anti-immigration talk in the US, hurricanes in Texas, and white supremacist protests in Virginia for their declining demand.

But one variable they do not discuss is the extraordinary cost of tuition, which is just too obvious to me and any rational person working in a strong economy today. If business schools want to increase demand, they simply must lower price. You don’t have to go to business school to understand this concept!

Check out this chart highlighting the year-over-year change in MBA applications.

Business school demand is way down. Source: PoetsandQuants

Getting A Graduate Degree Is Contrary To FIRE

If your goal is to retire early, then getting a graduate degree doesn’t make sense unless you can go part-time or get your graduate degree in your early 20s.

The goal of FIRE is to break free from the grind as young as comfortably possible. By spending 1 – 4 years in graduate school, you are sacrificing precious time and money in order to hopefully leverage your degree for as long as possible.

Originally, I had thought that once I got my MBA at 29, I would work full-time until age 40. But I couldn’t take six more years of indentured servitude so I engineered my layoff at age 34. Not all was lost though as my MBA gave me some tools to figure out how to make money with my own two hands.

The only person I know who had a lower return on their MBA than me is a friend who went to Harvard Business School full-time. When she graduated at 29, she proudly told me, “I never plan to stop working Sam!”

But after she had a baby girl three years later, she never went back to work. Despite only working one year longer than the time she went to school, she met her husband in business school, who ended up making multiple millions at a hardware device startup. They live in a $4M+ house and life is good, so perhaps her return was stellar after all.

Still No MBA Regrets

Despite the ridiculously high cost of getting an MBA, you will likely not regret going. You’ll meet a lot of interesting people, go on amazing school trips, and be forever part of a fraternity that will always believe their MBA was worth it.

Just make sure you either work for at least 10 years after graduating or make at least 10X the total cost of getting an MBA before you stop working, whichever comes first. After all, getting an MBA is all about maxing your return on investment.

Further, an MBA is a great way to reset your career if you screwed up in high school or slacked off in college or work at a terrible job you absolutely hate. If this is the case, go for it and figure out how to deduct the cost on your taxes.

As for me, of course I don’t regret getting my MBA because it was largely free. It was painful to be working 80 hours a week for three years, but once I was done, working only 60 hours a week felt like a breeze. Hard work should never be an excuse for regret.

Staying in San Francisco for more than 12 years after graduating has proven to be a wise decision given a Berkeley MBA carries more weight here than in other parts of the country.

Finally, now that you know I got an MBA from Berkeley, doesn’t it seem like you’re getting even better value for what you’re reading on Financial Samurai? If not, I’ll gladly give you your money back. Go Bears!

Would You Accept $1,000,000 To Go To Public School Are Your Life?

Is An MBA A Big Waste Of Time And Money?

Readers, do you think getting an MBA is still worth it today? What types of people are willing to pay so much to get an MBA nowadays? Do you know anybody who went to graduate school and ended up becoming a stay at home parent or retiring shortly after?

Note: Some people really dislike folks with MBAs, especially those who didn’t get an MBA. There’s also tension sometimes between the engineer “creators” and the business development, sales, and marketing types (MBAs). The reality is, you need all types of people to make a business run well. Know the culture of the firm you want to work for before getting an MBA or applying to that firm.

The Rapid Depreciation Of A Harvard Education: How Private School Grads Can Still Save Themselves

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When I was applying to colleges in 1994, I thought only extremely smart or talented people attended Harvard. I had heard stories about the rich buying their kids’ ways into Harvard, but I was unaware of the details.

As a public school kid with an OK SAT score, a 3.6 GPA, and unspectacular extracurricular activities (tennis team captain vs. eradicating malaria in a small village in West Africa), I decided to save myself hundreds of dollars in application fees and apply to mostly local state schools like UVA, Mary Washington, and William & Mary instead. Paying less than $3,000 a year in in-state tuition even back then felt like a steal.

After graduating from William & Mary, I got a job in the international equities department at Goldman Sachs in NYC. That’s where I got to interview hundreds of Ivy League and other elite private institution graduates as part of Goldman’s consensus-driven interview process where even grunts get to interview candidates.

We ended up rejecting over 95% of the candidates due to poor fit. It wasn’t that they were not smart, because they were. We only wanted people we could sit next to for 12-14 hours a day. It obviously helped if they had an international background, spoke multiple languages, and had a passion for equities. But we were mostly looking for great teammates.

Rejecting the majority of elite private college graduates made me realize they are no different from you and me. For the next 13 years, I’d compete with these folks on the ruthless battlegrounds of finance and smash them to bits most of the time because of my hunger. Coming from a non-target public school background with middle-class parents, I wasn’t going to squander my opportunity for financial independence.

Today, I am a small business owner with business owning friends. Recently, some of us have noted a growing negativity towards alumni of elite private schools. This is a problem (or a solution) for parents who plan to spend lots of money starting in grade school in the hopes their kid will attend a school like Harvard. This is also a potential problem for private university alumni who might unfairly be judged by the masses.

If you are one of these alumni, don’t be upset about the trend against the 1%. Instead, read with an open mind and pay attention as your future or your kids’ future might depend on it.

This article will address:

1) Why there is a growing negative perception about private university graduates

2) What we’ve learned from the Harvard / Asian-American discrimination lawsuit

3) What you can do to fight back against the negative perception

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Would You Accept $1,000,000 To Endure Going To Public School Over Private School?

Posted by Financial Samurai 151 Comments

This article is for:

* Students who want to understand the true cost of their education and the sacrifices their parents make in order to make better choices with their careers.

* Parents who make too much to get financial aid, but not enough to feel like they can comfortably afford private school.

* Students and parents who feel bad for attending or sending their kids to public school or have a tinge of envy for those kids who do go to private school.

Congratulations for getting accepted to your grade school or college of choice! You’ve now got to make a decision on how to spend what will likely be your parent’s money if you aren’t getting a scholarship.

I’ve been a big proponent of attending public schools over private schools because I’m biased. I attended international private schools when I lived in Asia, attended a public high school, and went to a public college. I found very little difference in education between my private middle school and public high school. Upon graduating from William & Mary, I got a good enough job that helped me reach financial independence a little sooner than normal.

We all know there’s no guarantee of doing anything special or being anything special just because you went to a private school. With the internet making education free, it’s hard to justify paying record high tuition for a private education unless you’re rich (make 10X the private school tuition per kid). Yet, many parents pay for religious reasons, fear of missing out, the desire for smaller class sizes and more attention for their kids, and the need for a more customized program if their child has special needs.

These reasons all make sense, and I respect them.

However, if you send your child to private school and pay full tuition, there is one guarantee. It is that you will spend a fortune. A lot of parents who advocate for private school got grants for their children to attend. That’s wonderful. But I’m talking about the parents whose children don’t get need based grants because they make a little too much, but not enough to feel wealthy. You know, those families making around $150,000 – $350,000 a year, depending on where they live and how many children they have.

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What If You Go To Harvard And End Up A Nobody?

Posted by Financial Samurai 141 Comments

A happy life is all about managing expectations. If you matriculate at Harvard, great things are expected of you. And if you don’t do great things, are you a disappointment?

Education has been on my mind a lot lately because of my new jobs as a high school tennis coach and as a stay at home dad who is worried about not providing proper guidance. I’ve seen first hand the grind my student athletes go through and I sometimes wonder whether it’s all worth it. Supposedly my high school is one of the best in the city, yet not every graduate goes to a university like Harvard.

I pick on Harvard because it’s the most well known university in the world and also costs about $63,025 annually in tuition, room, and board if you receive no aid. I’m assuming if you went to Harvard, you won’t be offended by this article because you’ve got the golden carpet rolled out for you compared to a field littered with land mines for the rest of us. But you can substitute any elite private university in the title, and the point is the same.

Using the word “nobody” is admittedly harsh, but I come from the viewpoint that for at least 13 years after college, I was a nobody, busy working in banking. Yes, banking is an integral part of making an economy work, much like oil is to a car engine. However, at the end of the day, all I was doing was helping institutions get wealthier. Sad, but I’m trying my best to improve. Yet, still, I am a nobody.

If you attend a school like Harvard, you must go on to do great things. With an acceptance rate of only 5.4%, you aren’t allowed to retire early and waste your potential, be a stay at home parent before age 32, work the same job as someone who went to State U, or morph into some highly opinionated personal finance blogger who enjoys stoking the fire. Now that you can learn everything online for free, the stakes for achieving greatness have never been higher!

The purpose of this article is to:

1) Challenge our unhealthy desire for prestige and money

2) Reassess the pressure cooker environment we put our kids through

3) Discover what actual Harvard graduates do for a living

4) Encourage our smartest people to do more productive things with their lives

5) Give folks who’ve been rejected from elite universities and coveted jobs hope that anything is possible

6) Go beyond the act of giving money by spending more time helping people directly

7) Encourage schools to encourage their graduates to broaden their career prospects

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How To Get Financial Aid Making Multiple Six Figures A Year

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Despite earning a six figure household income, many parents struggle to pay for their children’s education without going into debt. This post highlights how you can qualify for tuition assistance despite making $300,000, $400,000, or even $500,000 a year.

I was talking to a parent of four who used to send his kids to a private grade school K-8 about the makeup of families who pay $30,000+/year in tuition per child. I cherished my time growing up in Africa and Asia up until middle school and enjoyed my experience attending a public high school in Virginia. To have my son attend a homogenous school where everybody looks the same and comes from similar economic backgrounds would be a shame.

The dad mentioned the school tried to diversify its student body through financial aid. When I asked how the school determined which families got financial aid, he said something surprising.

“Households qualify for financial aid if they don’t make at least $100,000 a year per child.”

In other words, if you have four children, you qualify for financial aid if you make $390,000 a year. Financial aid consists of low interest rate loans, but mostly free grant money. I thought this was a high threshold because $390,000 is right around the top 1% income level in the country.

Nobody needs to send their kids to private school given every child can go to public school for free. Further, I’m not sure if too many folks decide to have four children if they can’t afford to raise them. Sure, one or two children may be unplanned. But having four is definitely intentional.

Because the dad and mom could not afford to continue paying $120,000+ a year in after-tax tuition for their kids, they moved their family to the suburbs to attend free public school. Ah hah, at least they decided to take action instead of complain why life was so hard making $500,000 a year!

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An Inexpensive And Easy Solution To Improving America’s Financial Health

Posted by Financial Samurai 109 Comments

Knowledge brings about wealth and power. If this wasn’t the case, you wouldn’t have families spending $20,000+ a year for their children to attend kindergarten through the 12th grade. If knowledge wasn’t so important, there wouldn’t be any private tutoring or a test prep industry. If education was no big thing, there wouldn’t be a tremendous amount of pressure for kids to go to the best universities that cost even more.

The very fact that people spend so much time and money learning is the main reason why I love to write about personal finance. Achieving financial freedom while doing something purposeful along the way is often the end game for those who focus on education. Yet, not everybody has the money, time, or connections to get the best education possible. Therefore, to be able to democratize access to knowledge is quite fulfilling.

If you learn nothing else from Financial Samurai about the stock market, real estate investing, asset allocation, early retirement, entrepreneurship, tax minimization, behavioral economics, or debt management, at least come away motivated to improve your finances based on the target income and net worth charts I’ve created.

Given Financial Samurai gets roughly 1 million organic pageviews a month, I’m able to test new hypotheses that may help different types of people in various situations. The latest problem I want to tackle is figuring out an inexpensive, easy way to fix the financial crisis in America. I’m thinking simple policy changes that will strengthen our country for generations to come.

Hypothesis: Those who read more about personal finance topics tend to earn more, be wealthier, and lead happier lives than those who do not.

To test this hypothesis we will first compare overall American income and wealth numbers by race with the income and wealth numbers of American personal finance readers.

We will then see if the racial makeup of American personal finance readers reflects the racial makeup of the overall population. Finally, we’ll then assess whether an overrepresentation by one race correlates with higher income and wealth and vice versa.

Key Assumptions:

* More education is better than less eduction.

* More reading is better than less reading.

* Access to the internet is available, low cost or free.

* Intelligence across races/ethnicities is more or less equal if you control for environment

* The larger the sample set, the more significant the data.

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Everything To Know About The 529 College Savings Plan

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Everything you need to know about the 529 college savings plan

The College of William & Mary

Update for 2019: Under the latest tax plan, up to $10,000 of 529 savings plans can be used per student for public, private and religious elementary and secondary schools, as well as home school students. In other words, a 529 plan isn’t just for college tuition anymore. This is HUGE!

The best gift any parent can give a child besides unconditional love is a great education. A 529 college savings account is a solution that is designed to help families tax-efficiently save for future college costs.

You contribute after tax money with the benefit of paying zero federal and state income taxes on the profits when it’s time to use the funds to pay for college. If your child does not end up going to college, you can either name a new beneficiary (different kid) or just pay the taxes on profits.

My goal is to max out my son’s 529 plan before he turns 18 so he can focus on his studies and graduate with zero student debt. The various complaints I read today about student debt holding young adults back from saving for a house, saving for retirement, accepting a job they like that might not pay as well, or starting a family are disheartening.

Below are the most important pieces of information you need to know about making the best 529 plan decision. Feel free to provide feedback at the end on anything that I may have missed. I’ve tried to cover all the questions I had before opening up an account.

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