We’re thrilled to announce we are reopening our office for in-person appointments. We thank you for your patience and flexibility as we have worked with you virtually this past year. While meeting on zoom was new for some of you, it was nothing new for us; we’ve been using it since 2013. We certainly understand if meeting virtually remains a better option for your family. No matter your option, we truly love meeting with our clients and look forward to welcoming you back.
Also this month, North Star is celebrating eight years since we opened our doors! We thank you for your support of our small business from the start and have loved evolving to best meet all our clients’ needs.
Each month we ask clients to spend a few minutes to read through our newsletter with the goal of raising their investor IQ. May is college planning month in recognition of 529 plans. This month we are focusing our attention on various changes to college planning and additional free resources that North Star is rolling out to assist clients. This month’s topics include:
- College planning in a post-COVID world
- Will your college tuition or loans go down?
- FAFSA Calculations & reductions starting in 2023
- Don’t sell in May and go away, just go away!
- NSAG unveils new website & Timely Topics
- Where will the equity markets go next?
College planning in a post-COVID world
The dynamics of a new administration and a post-COVID world is going to make college planning even more important than ever. North Star is developing complimentary new planning strategies that go beyond the initial savings for college to include analysis on the spending and post college debt reduction. Starting in June 2021, NSAG is rolling out the capability to do a detailed analysis on each student and their potential financial aid from various college institutions. The analysis takes into consideration grades, test scores, family’s financial situation and each school’s various financial aid packages to meet merit and need. Each family can even search institutions based on name, geography, school ranking, specialization or even those who would likely provide the greatest financial aid.
Many families may be surprised to learn that actual cost of private institutions are not significantly higher than the costs for traditional in-state institutions. Our goal is to help reduce the cost of college tuition, reduce student loan debt and increase student’s awareness of institutions they may not have previously considered.
Based on the data needed, the analysis works best for high school ages students. Please let us know if you or somebody you know would like a complimentary analysis.
Will your college tuition or loans go down?
President Biden is looking to reduce the cost of college in two ways. First, he is looking into forgiving $10,000-$50,000 of outstanding federal student loans. While the country is awaiting details of the plans, NSAG continues to recommend that families with $50,000 or less in federal loans continue to hold off on making payments until more is known about eligibility for the new programs. It is currently unclear if forgiveness will be limited to borrowers in lower income tax brackets. Interest and payments on all federal student loans are currently on pause through September 2021.
Secondly, Biden is proposing that tuition is waived for all community colleges. Waiving tuition will increase demand for these institutions and likely create the need to further expand the physical and technology infrastructure, as well as increase the amount of professors required to support these institutions.
Ultimately, the combination of additional students with an increased focus on a hybrid learning of a community college paired with a four-year university may lead to lower overall higher education costs. However, anytime the federal government has gotten directly involved in a marketplace, they have driven costs up and not down. It will be interesting to see if this time is different.
FAFSA Calculations & reductions starting in 2023
According to a 2018 Gallop poll, 73% of parents’ number one financial concern is paying for college.
The Free Application for Federal Student Aid (FAFSA) form should be filled out by all college students. The FAFSA determines a student’s eligibility for federal aid like the Pell Grant, work-study and federal student loans if he or she attend most colleges that participate in the Title IV federal financial aid program. The application is also often required by states and schools for their own scholarship and grant programs.
In July 2023, the federal government is rolling out significant changes to the FAFSA form and calculations. The new provisions will show up on the 2022 FAFSA and take effect for the 2023-2024 academic year. While the simplified and shorter form is an attempt to curb the 10% year-over-year reduction in completed forms, the new calculations behind the form will likely result in many families having a higher expected contribution amount towards college (i.e. lower aid). The new calculations should have an increased benefit for single parents, but with an elimination of the multiple children in college discount, many families with more than one kid in college will see further reduced benefits. This higher contribution rate is a main reason why North Star is providing an additional free service to help families expand their college search to compare institutions and weigh additional educational options.
Don’t sell in May and go away, just go away!
The market saying of “Sell in May and go away" is an investment adage warning investors to sell their stock holdings in May and wait to rebuy in November. Historically, these six months produce a lower average rate of return and lower trading volume than the other six months of the year. However, there have been summers like 2020 where the bulk of return was comprised in May through October. It is important to remember that past performance is not indicative of future summers and we discourage our clients from taking such a simplistic approach.
Everyone is overdue for a well-earned vacation and maybe the best approach is to hold onto a well-positioned portfolio and just go away on vacation for a bit. We are very comfortable in the positions that our managers own and in general, the portfolios have been isolated from the extreme popping bubbles that we referenced in February 2020, and we are starting to see the extreme areas of price inflation starting to subside. While there is plenty of progress to be made, things will likely look much better as we enter the fall of 2021.
NSAG unveils new website & Timely Topics
We have a new website, including a new URL! It’s nsag.com. Mark actually spent the better part of the past nine years pursuing this domain name. Our prior website ns-ag.com was always the temporary online home for North Star. Going forward, our website and our emails will follow the nsag.com URL. Our former URL and email addresses will automatically redirect you to the new locations.
We also redesigned the website for a better user experience and with more resources, most importantly, our client education.
Timely Topics is also getting a facelift. We have redesigned our monthly email to be a quicker snapshot in your inbox, with much more detail if you click on a topic of interest. In addition to being available via nsag.com, we also have it on its own page at timelytopics.com. The archival at both these locations is much improved over our prior design. Over the next few months, all prior Timely Topics will be loaded.
We will continue to provide this market commentary each month. Remember to continue to submit your questions and see if yours gets featured.
Where will the equity markets go next?
In December 2020, we were seeing a growing probability of the S&P 500 hitting 4,200 by the end of the year 2021. The breadth of the recovery we are seeing for the balance of 2021 along with some technical analysis, may see the S&P 500 exceed these numbers. We are now slowly seeing analysts raising their forecast over 4,200. While the path forward will not be a straight line, we expect any pullbacks to be modest and focused on areas of bubbles. The continued rotation from growth to value is likely to continue for at least the next year.
It’s now clear that there is virtually zero risk of a double-dip recession. We still believe we are in a secular bull market, which started in 2010 and typically lasts around 15-20 years.
We are passionately devoted to our clients' families and portfolios. Let us know if you know somebody who would benefit from discovering the North Star difference, or if you just need a few minutes to talk.
As a small business, our staff appreciates your continued trust and support as we all work through these stressful and trying times for our country and world.
Please continue to send in your questions and see if yours gets featured in next month’s Timely Topics.
Mark Kangas, CFP®
CEO, Investment Advisor Representative