Reader’s Perspective: Question and Answer with Michael Taylor, Author of “The Financial Rules for New College Graduates”

By Paul Curley, CFA | | October 5, 2018

How does this author view college financial planning and 529 plans in terms of helping recent graduates survive and thrive?

This article features an interview with Michael C. Taylor, Author of “The Financial rules for New College Graduates.” Based in San Antonio, Texas, Michael teaches personal finance at Trinity University. Additionally, he publishes the weekly finance column “The Smart Money” for the San Antonio Express News and the Houston Chronicle. Building upon his experience and a desire to take action in expanding financial literacy to more people, he wrote the newly released book titled, “The Financial Rules for New College Graduates.” Previously, he was a Vice President in bond sales at Goldman Sachs in New York, and graduated Magna Cum Laude from Harvard College. Currently, he lives in San Antonio with his wife and two daughters. You can learn more about Michael at the website of Last but not least, thank you Michael for your time, insight and support in working with me on the article. Please read the question and answers to learn about his perspective on college financial planning, and hope that the article provides you with an opportunity to learn more from your peers.

Question 1 (Paul Curley, Editor of the 529 Dash): Thank you so much your time. I received your book and I think that it is timely given the rise in student loan debt, and the multiple downstream impacts. What I thought was unique about your book was the perspective of the recent graduates, and stepping-stone of how to get back on track financially. The first question is why did you first got started with “The Financial Rules for New College Graduates?”

Answer 1 (Michael C. Taylor, Author of “The Financial Rules for New College Graduates”): So the long background or the 15-year story before this that I worked in financial services for 15 years at Goldman Sachs in selling bonds on Wall Street and then running my own fund. So that’s the background. The crisis of 2008 dealt a mortal wound to my actual investment business, and was also an eye-opener to the “wow people don’t really get how money works.” I mean not all bankers understand and the regulators may not understand and never mind mom-and-pop trying to save for college for the kid. Also, there is an entire gap in financial literacy. So that has been my mission. I have been addressing that mission in a variety of ways including writing online since 2012 and teaching a college course in a San Antonio at Trinity, a liberal arts undergraduate institution. Out of that course which I first taught in 2013, there is an extraordinary need for financial literacy. Even after a semesters worth of working with these students who were super bright, I felt like they needed a book to walk away with because there’s different ways of learning. One way of learning is through a book with practical and simple basic tools for those in their 20s, and even after they graduate from college is key. So having taught the course, I thought there needs to be a book so that was the original outline. As I spoke to more folks about my intention to write a book, everybody I met said wow, I wish I had a book like that in my 20s now that I am in my 40s. That was a big motivation for me. Even people in the fifties and sixties, said oh gosh I wish I had that when I was in my 20s. I would get that for my grandchildren.

Question 2: I worked previously at Loomis Sayles and worked in the bond world, and so I definitely understand the part of your book where someone is either ahead of the yield curve and earning interest or behind it and paying interest. As such, I definitely see the importance of financial literacy. How do you define college financial planning and how it has changed with the growth of student loan debt among graduates?

Answer 2: We have a convergence of two big factors which are both opportunities but really are also weighing on the country. First is college tuition inflation, which is far outpacing overall inflation. The second is the incredible availability of student loan debt within the low interest rates environment for 17 years now. It is extraordinarily easy to pile on student loan debt, and the combination of those two factors is very expensive. Also it’s really easy to get loans, or it’s really easy to get what appears to be affordable loans. Then we have the consequence of those convergences, then we have the natural reaction of wow people are in too much debt. You know it can be incredibly important to borrow money to go to college to get an edge for your children to build skills and probably raise their lifetime income stream and to become a more actualized human. But then again, there are those children that have either not completed their degree or were not strategic about thinking about the amount of debt that they get into and then the possible earnings potential of the degree afterwards. That combination is pretty powerful and powerfully dangerous, and when it comes to the accumulation of student loan debt, I’m not a chicken little who says the sky is falling and student loan debt is the next mortgage crisis. I just don’t think we’re good at predicting bubbles or crises, but the trend is bad and it’s federalized student loan debt and so it is everybody’s problem.

Question 3: It is a very good point with interest rates going up, and how the increasing interest rates will impact the growth rate of student loan debt. What do you see as the solution to college affordability and accessibility in addition to financial literacy?

Answer 3: If I have one mission in life, it’s that of financial literacy. If that is taken care of, then all I can do is fall back on people who are more expert in the field than me. That includes my mom who was a 30-year college guidance counselor for a private school. She was constantly urging parents to consider one of two options. One is if you have a very good student, it is often possible to get a free or much reduced education if you are willing to step down in college status.
Her second strategy is often, and it’s applies more to the top students but that more parents and more kids should consider, the two-year Community College at quite affordable rates. Get straight A’s and then transfer into the more expensive institution for your final two years. That is two ways of hacking the expense of the four-year college degree.

Question 4: Financial literacy in and of itself should pay dividends, and I also like how you took action on improving the issue of financial literacy by creating this book and so thank you. How can 529 product providers and the state agencies make it easier for families to save and save efficiently from your perspective?

Answer 4: Can I mention my own experience and the providers that I’ve been working with? Is that okay?

Question 5: The 529 Dash e-newsletter and 529 Insiders website is an open platform discussion.

Answer 5: Okay. So I have my own personal experience which I find informative. I was living in New York at the time my first child was born, and I found an excellent experience with the New York Saves Direct 529 Plan. In particular, just to name an excellent provider that they have on the investment menu is Vanguard. One of the things that Vanguard is famous for is its very low cost index funds, so it happens to jive with the way I think. But the fact that opportunity existed in the New York 529 plan was important to me as it kept the costs for me to save for my two children very low. I’ve spoken to other parents I’ve since moved, and I’m not a fan of many States plans which were approved by state legislators. They have a very limited menu and sometimes the menu is not what you would want. It’s much less open than you would expect. I have seen quite a wide variety of what I would consider good and bad options, and the fact that there are good options like the one I choose is great but I have not seen that to be true in many states.

Question 6: What can we do to get more information?

Answer 6: My whole mission is how we learn more about financial literacy, how do we get literacy in the hands of people in their 20s, or in the hand of parents who are thinking about college financial planning for their children? To me it seems that the basics of saving for college are not that broadly distributed.

Editor’s Final Note: Thank you Michael for your time and insight in working with me on the article, and much appreciated. Also, I would like to provide a special thank you to the readers of the article for learning from your peers, for your support and your engagement. Have the college financial planning discussion with your clients today.