Mark Kantrowitz: College Financing Ace —The 2016 IA 25

He ran the site while working full-time as a research scientist for a software company until he found he didn’t have the time to do both and do them well. The website “took on a life of its own,” says Kantrowitz, so he quit his day job in mid-1999 and devoted himself full-time to FinAid. “I could do more good for society than building a better web search engine,” Kantrowitz explains.

FinAid became the No. 1 site for students and parents trying to figure out how to finance a college education. Kantrowitz was its publisher through 2013, staying on well after Monster Worldwide, the career web site, acquired it in 2001. During that time, Kantrowitz continued to innovate, at one point arranging for FinAid to link to FastWeb, a free scholarship matching service.

Kantrowitz left FinAid in 2013 to build up Edvisors, another financial aid website, but one with more concise content, and took on a new challenge early this year when he became the publisher and vice president of strategy at Cappex, yet another college financial aid site.

When asked how Cappex is different from the other college aid sites he’s worked for, Kantrowitz replies that Cappex combines the attributes of FinAid and FastWeb with information about college admissions and “within a year or two will start making waves.” He gave no details about those plans except to say that the website has “very interesting ideas about how to do things differently that will benefit both colleges and students.”

In the meantime, Kantrowitz has some useful advice about financing a college education in addition to not borrowing more than an expected first year salary:

• Live like a student while in school so you don’t have to after you graduate.
• Start saving for college as soon as possible. “Every dollar saved is a dollar less you have to borrow,“ but the benefit is even greater than that. “Every dollar borrowed costs about $2 given repayment terms and interest rates, “ says Kantrowitz. “Before you borrow ask yourself, ‘Is it worth twice the price?’”
• Parents should save $250 per month to finance a public college education and $500 a month to pay for private college.
• They should not forgo college savings in favor of retirement savings. “So long as the interest rate on the [college] loan is higher than the rate paid on [retirement] savings, you’re better off saving for college AND retirement,” says Kantrowitz. “You’ll end up with more money for retirement than if you had just borrowed for college and repaid those loans.”
• College students who graduate should sign up for automatic payments on their loans and should keep lenders up to date on any address changes. If unable to make their full loan payments, for whatever reason, they should at least pay interest.

The rising level of student debt is an “increasing problem, but not yet a crisis,” says Kantrowitz. “Most people graduate with the amount of debt they can afford.” Those who don’t have made a choice to attend a more expensive college or go into a lower paying field, or both, says Kantrowitz. “They should make smarter choices and go to a school that’s a good financial fit, not just an academic fit.”

One development that can help some student loan borrowers now and probably many more in the future is employer-paid loan assistance, which is currently offered by PwC, Fidelity and some other companies. Bills are circulating in Congress to make those payments, like 401(k) matches, tax-free for employers and employees. “This is a development that might start changing the face of employee benefits, like 401(k) plans did,” says Kantrowitz, recalling the early 1980s.

— See the full 2016 IA 25 in the May issue of Investment Advisor, and find ongoing coverage of the honorees, including extended profiles, all month on the IA 25 homepage.