Education &amp; Training https://www.wisebread.com/taxonomy/term/12010/all en-US How Student Loan Debt Can Derail Your Future https://www.wisebread.com/how-student-loan-debt-can-derail-your-future <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-student-loan-debt-can-derail-your-future" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/imagecache/250w/blog-images/recent_college_graduate_with_tuition_debt.jpg" alt="Recent college graduate with tuition debt" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Mike Meru thought he was making a good investment when he borrowed $600,000 to train as an orthodontist. But at age 37, he now owes $1 million &mdash; and despite making regular payments, he owes more every single month. In 25 years, his debt will total $2 million.</p> <p>While seven-figure student debts are still not something you see every day (in a story about Meru, The Wall Street Journal reported that about 100 people are in this boat nationwide), hefty loans are more and more common. Five percent of student loan borrowers now owe more than $100,000, and 170,000 students nationwide owe more than a quarter million in federal loans alone, according to The Brookings Institution.</p> <p>Student loan consultant Travis Hornsby, whose average client owes $280,000, says he has worked with several grads with debts around the million-dollar mark &mdash; almost exclusively specialist doctors and dentists.</p> <p>&quot;They make a lot of money, but not enough to cover that level of debt service,&quot; Hornsby wrote in an article for Business Insider.</p> <p>If you are contemplating borrowing heavily for college, keep in mind these cautionary tales of how student loan debt can totally derail your life. (See also: <a href="http://www.wisebread.com/6-questions-to-ask-before-taking-out-student-loans?ref=seealso" target="_blank">6 Questions to Ask Before Taking Out Student Loans</a>)</p> <h2>1. You may not have the freedom to follow your passion</h2> <p>After getting her bachelor's degree and spending a year teaching English abroad, Amber Williamson was applying to graduate schools. At 24, she hadn't yet decided on a career, but she knew her $60,000 in student loan debt limited her choices to only fields that could offer adequate income to make the payments.</p> <p>&quot;I'm doing everything right, but still being penalized for something I've been told to do,&quot; she told MarketWatch.</p> <p>Williamson is not alone. American Student Assistance found that 53 percent of survey respondents named student loan debt as a top factor in their career choices. Borrowers are often left with little choice but to pursue careers they have no real interest in, purely in search of a paycheck that can help offset their student loan payments. (See also: <a href="http://www.wisebread.com/15-ways-to-pay-back-student-loans-faster?ref=seealso" target="_blank">15 Ways to Pay Back Student Loans Faster</a>)</p> <h2>2. You may have to move back in with your parents</h2> <p>More than one in three millennials live with Mom and Dad, a phenomenon that's increased markedly in recent years. The Federal Reserve found that 30 percent of that increase was due to the changing debt loads of young adults, including student loan debt. (See also: <a href="http://www.wisebread.com/6-money-moves-to-make-when-you-move-back-home-with-your-parents?ref=seealso" target="_blank">6 Money Moves to Make When You Move Back Home With Your Parents</a>)</p> <h2>3. If you hate your career, you might not be able to escape</h2> <p>Natalie Bacon and Liz Stapleton don't know each other, but they have one big thing in common: They borrowed buckets of money to get law degrees, only to find out that they hated practicing law. After graduation, Bacon was shocked to realize that interest accruing while she was in school had already ballooned her debt to $200,000.</p> <p>&quot;I was really irritated and frustrated with the amount of debt I had. I felt like someone should've told me what it really meant, or I should've had a class on it, or something,&quot; she <a href="https://nataliebacon.com/make-money-blogging-pay-off-debt/" target="_blank">wrote on her blog</a>.</p> <p>Stapleton found herself in a similar boat. According to her blog, <a href="https://www.lessdebtmorewine.com/" target="_blank">Less Debt More Wine</a>, Stapleton currently owes $258,000.</p> <p>Both women took the bold step of quitting their law careers, managing, perhaps ironically, to build careers instead in financial advising and writing about managing their debt. But many other lawyers and doctors remain trapped by their debt in careers that they hate.</p> <h2>4. You will end up paying much more than what you borrowed</h2> <p>During her undergraduate and graduate studies, Becca of <a href="https://www.survivingstudentloans.com/" target="_blank">Surviving Student Loans</a> knew she was going to have at least $90,000 in debt &mdash; but she didn't think through how the constantly accruing interest would affect that total. For the first three years after graduate school, she made her minimum payments every month. Now, she owes $124,000; about a quarter of that is interest.</p> <p>&quot;In my head, the debt I took out was going to be my total debt. Boy was I wrong,&quot; she wrote on her blog.</p> <p>Looking back, Becca doesn't regret getting her degrees, but she does regret that she lost paid credits several times when she transferred schools. She also wishes she'd put some of the money she'd earned working part-time in school toward her debt, even though it wasn't required. She's currently budgeting aggressively and trying to earn money on the side so she can put as much of her $50,000 salary toward debt repayment as possible. (See also: <a href="http://www.wisebread.com/this-is-how-student-loan-interest-works?ref=seealso" target="_blank">This Is How Student Loan Interest Works</a>)</p> <h2>5. You might not be able to buy a home</h2> <p>Federal Reserve researchers noticed that as homeownership in the United States declined during the financial crisis, young people were especially impacted.</p> <p>&quot;... Increases in student loan debt might be a key factor pushing homeownership rates down in recent years through effects on borrowers' ability to qualify for a mortgage and their desire to take on more debt. Corroborating this claim, recent surveys have found that many young individuals view student loan debt as a major impediment to home buying,&quot; the researchers wrote.</p> <p>They crunched the numbers and found that there is something to this: Every 10 percent increase in student loan debt is correlated with a 1 to 2 percentage point drop in homeownership in the first five years after school.</p> <p>A joint study by American Student Assistance and the National Association of Realtors found that 83 percent of millennials who don't own homes blame student debt for their inability to buy. These millennials expected their debt to delay their first home purchase by an average of seven years.</p> <h2>6. It could prevent you from getting married or starting a family</h2> <p>One in five former students puts off marriage due to student loan debt, and nearly one in three postpones starting a family for that reason, American Student Assistance reports.</p> <p>Some who go ahead and marry a person with a huge student debt load later admit regretting it. One respondent to a BuzzFeed query complained that his wife's student loan debt was ruining their lives. (See also: <a href="http://www.wisebread.com/how-a-new-marriage-can-survive-student-loan-debt?ref=seealso" target="_blank">How a New Marriage Can Survive Student Loan Debt</a>)</p> <h2>7. It might delay your retirement</h2> <p>Another American Student Assistance survey found that 62 percent of respondents put off saving for retirement due to student loan debt. Worse, the same report says that the number of people over age 65 who have student debt &mdash; some for their children's education, but mostly for their own &mdash; increased by a whopping 977 percent between 2005 and 2015.</p> <p>One scary thing about owing student loan debt in retirement years: It can lead you to lose your Social Security check. According to the ASA report, more than 173,000 Social Security recipients had their Social Security payments garnished in 2015 for this reason. (See also: <a href="http://www.wisebread.com/how-to-keep-student-loans-from-wrecking-your-retirement?ref=seealso" target="_blank">How to Keep Student Loans From Wrecking Your Retirement</a>)</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=https%3A%2F%2Fwww.wisebread.com%2Fhow-student-loan-debt-can-derail-your-future&amp;media=https%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FHow%2520Student%2520Loan%2520Debt%2520Can%2520Derail%2520Your%2520Future.jpg&amp;description=How%20Student%20Loan%20Debt%20Can%20Derail%20Your%20Future"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/u5180/How%20Student%20Loan%20Debt%20Can%20Derail%20Your%20Future.jpg" alt="How Student Loan Debt Can Derail Your Future" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="https://www.wisebread.com/carrie-kirby">Carrie Kirby</a> of <a href="https://www.wisebread.com/how-student-loan-debt-can-derail-your-future">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-6"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/my-kid-got-accepted-to-an-expensive-private-college-now-what">My Kid Got Accepted to an Expensive Private College — Now What?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/7-unique-ways-millennials-are-dealing-with-student-loan-debt">7 Unique Ways Millennials Are Dealing With Student Loan Debt</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/the-5-worst-money-mistakes-new-grads-make">The 5 Worst Money Mistakes New Grads Make</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/6-questions-to-ask-before-taking-out-student-loans">6 Questions to Ask Before Taking Out Student Loans</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/5-money-moves-to-make-the-moment-you-graduate">5 Money Moves to Make the Moment You Graduate</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Education & Training borrowing career homeownership income job you hate millennials retirement student debt student loans Wed, 25 Jul 2018 08:00:10 +0000 Carrie Kirby 2153222 at https://www.wisebread.com Someone Took Out a Loan in Your Name. Now What? https://www.wisebread.com/someone-took-out-a-loan-in-your-name-now-what <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/someone-took-out-a-loan-in-your-name-now-what" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/imagecache/250w/blog-images/distraught_woman_paying_her_bills_at_home.jpg" alt="Distraught woman paying her bills at home" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Identity theft wears many different faces. From credit cards to student loans, thieves can open different forms of credit in your name and just like that, destroy your credit history and financial standing.</p> <p>If this happens to you, getting the situation fixed can be difficult and time-consuming. But you can set things right.</p> <p>If someone took out a loan in your name, it's important to take action right away to prevent further damage to your credit. Follow these steps to protect yourself and get rid of the fraudulent accounts.</p> <h2>1. File a police report</h2> <p>The first thing you should do is file a police report with your local police department. You might be able to do this online. In many cases, you will be required to submit a police report documenting the theft in order for lenders to remove the fraudulent loans from your account. (See also: <a href="http://www.wisebread.com/9-signs-your-identity-was-stolen?ref=seealso" target="_blank">9 Signs Your Identity Was Stolen</a>)</p> <h2>2. Contact the lender</h2> <p>If someone took out a loan or opened a credit card in your name, contact the lender or credit card company directly to notify them of the fraudulent account and to have it removed from your credit report. For credit cards and even personal loans, the problem can usually be resolved quickly.</p> <p>When it comes to student loans, identity theft can have huge consequences for the victim. Failure to pay a student loan can result in wage garnishment, a suspended license, or the government seizing your tax refund &mdash; so it's critical that you cut any fraudulent activity off at the pass and get the loans discharged quickly.</p> <p>In general, you'll need to contact the lender who issued the student loan and provide them with a police report. The lender will also ask you to complete an identity theft report. While your application for discharge is under review, you aren't held responsible for payments.</p> <p>If you have private student loans, the process is similar. Each lender has their own process for handling student loan identity theft. However, you typically will be asked to submit a police report as proof, and the lender will do an investigation.</p> <h2>4. Notify the school, if necessary</h2> <p>If someone took out student loans in your name, contact the school the thief used to take out the loans. Call their financial aid or registrar's office and explain that a student there took out loans under your name. They can flag the account in their system and prevent someone from taking out any more loans with your information. (See also: <a href="http://www.wisebread.com/how-to-protect-your-child-from-identity-theft?ref=seealso" target="_blank">How to Protect Your Child From Identity Theft</a>)</p> <h2>5. Dispute the errors with the credit bureaus</h2> <p>When you find evidence of fraudulent activity, you need to dispute the errors with each of the three credit reporting agencies: Experian, Equifax, and TransUnion. You should contact each one and submit evidence, such as your police report or a letter from the lender acknowledging the occurrence of identity theft. Once the credit reporting bureau has that information, they can remove the accounts from your credit history.</p> <p>If your credit score took a hit due to thieves defaulting on your loans, getting them removed can help improve your score. It can take weeks or even months for your score to fully recover, but it will eventually be restored to its previous level. (See also: <a href="http://www.wisebread.com/dont-panic-do-this-if-your-identity-gets-stolen?ref=seealso" target="_blank">Don't Panic: Do This If Your Identity Gets Stolen</a>)</p> <h2>6. Place a fraud alert or freeze on your credit report</h2> <p>As soon as you find out you're the victim of a fraudulent loan, place a fraud alert on your credit report with one of the three credit reporting agencies. You can do so online:</p> <ul> <li> <p><a href="https://www.experian.com/fraud/center.html" target="_blank">Experian</a></p> </li> <li> <p><a href="https://www.alerts.equifax.com/AutoFraud_Online/jsp/fraudAlert.jsp" target="_blank">Equifax</a></p> </li> <li> <p><a href="https://www.transunion.com/fraud-victim-resource/place-fraud-alert" target="_blank">TransUnion</a></p> </li> </ul> <p>When you place a fraud alert on your account, potential creditors or lenders will receive a notification when they run your credit. The alert prompts them to take additional steps to verify your identity before issuing a loan or form of credit in your name. (See also: <a href="http://www.wisebread.com/how-to-get-a-free-fraud-alert-on-your-credit-report?ref=seealso" target="_blank">How to Get a Free Fraud Alert on Your Credit Report</a>)</p> <p>In some cases, it might be a good idea to <a href="http://www.wisebread.com/how-to-freeze-your-credit" target="_blank">freeze your credit</a>. With a credit freeze, creditors cannot view your credit report or issue you new credit unless you remove the freeze.</p> <h2>7. Check your credit report regularly</h2> <p>Finally, check your credit report regularly to ensure no new accounts are opened in your name. You can request a free report from each of the three credit reporting agencies once a year at <a href="https://www.annualcreditreport.com/" target="_blank">AnnualCreditReport.com</a>. You can stagger the reports so you take out one every four months, helping you keep a close eye on account activity throughout the year. (See also: <a href="http://www.wisebread.com/how-to-read-a-credit-report?ref=seealso" target="_blank">How to Read a Credit Report</a>)</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=https%3A%2F%2Fwww.wisebread.com%2Fsomeone-took-out-a-loan-in-your-name-now-what&amp;media=https%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FSomeone%2520Took%2520Out%2520a%2520Loan%2520in%2520Your%2520Name.%2520Now%2520What_.jpg&amp;description=Someone%20Took%20Out%20a%20Loan%20in%20Your%20Name.%20Now%20What%3F"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/u5180/Someone%20Took%20Out%20a%20Loan%20in%20Your%20Name.%20Now%20What_.jpg" alt="Someone Took Out a Loan in Your Name. Now What?" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="https://www.wisebread.com/kat-tretina">Kat Tretina</a> of <a href="https://www.wisebread.com/someone-took-out-a-loan-in-your-name-now-what">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/how-to-freeze-your-credit">How to Freeze Your Credit</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/5-reasons-building-credit-in-college-helps-you-win-at-life">5 Reasons Building Credit in College Helps You Win at Life</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/5-times-you-must-freeze-your-credit-report">5 Times You Must Freeze Your Credit Report</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/how-to-protect-your-credit-after-the-equifax-breach">How to Protect Your Credit After the Equifax Breach</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/heres-why-credit-scores-and-reports-are-not-the-same">Here&#039;s Why Credit Scores and Reports Are Not the Same</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Education & Training college credit freeze credit report credit score fraud identity theft loans police report Wed, 11 Jul 2018 08:00:10 +0000 Kat Tretina 2154559 at https://www.wisebread.com The 5 Worst Money Mistakes New Grads Make https://www.wisebread.com/the-5-worst-money-mistakes-new-grads-make <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-5-worst-money-mistakes-new-grads-make" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/imagecache/250w/blog-images/graduating_student_worrying_about_career_path.jpg" alt="Graduating Student Worrying About Career Path" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>It's no secret that personal finance education is lacking at every level throughout our school system. And this is nowhere more evident than when you graduate from college and are thrown into a new reality you've spent little to no time preparing for. In fact, you've probably spent years taking classes on just about everything<em> but</em> how to manage your money.</p> <p>Now, you're tasked with making decisions that can affect the rest of your life. How do you know what to avoid? Here are a few of the most common financial mistakes new grads make, and how they can steer clear of them.</p> <h2>1. Ignoring your personal finances altogether</h2> <p>Your life is dictated by your financial situation. The sooner you realize that, the better. The first step is recognizing that you need to take an active role in learning about money management. You need to begin building a financial plan. Understanding financial concepts and forming strong financial habits now will have lifelong benefits.</p> <p>Your financial plan is flexible and can change often, especially early on in your career and life. But now is the time to begin thinking about short-term, medium-term, and long-term financial obligations and goals. Take time to learn about important financial building blocks, like starting an emergency fund, beginning retirement contributions, and paying back student loans.</p> <p>Make personal finance part of your everyday life now, and do one thing every month to increase your financial knowledge. (See also: <a href="http://www.wisebread.com/the-financial-basics-every-new-grad-should-know?ref=seealso" target="_blank">The Financial Basics Every New Grad Should Know</a>)</p> <h2>2. Overspending on your current lifestyle</h2> <p>Most likely, you'll be earning more money at your first post-college job than you ever have before. And it's OK to adjust your lifestyle from college student status to adult. But be realistic about the lifestyle you can really afford.</p> <p>When you get your first paycheck, look it over to understand exactly what taxes you're paying and how much you have deducted for benefits like health insurance and retirement savings. Next, build a budget to cover your essential monthly expenses, savings, and debt repayment. Consider how much you have left in your budget to allocate toward your lifestyle expenses. If you'd like more money in this area, either cut back on your living expenses, perhaps by looking for a cheaper place to live, or find a way to bring in more income.</p> <p>As you'll soon learn, every year you get older, your financial priorities will increase &mdash; often significantly. Time is one component of your financial plan that you can't get more of, so take advantage of these early years to focus on saving as much as you can. (See also: <a href="http://www.wisebread.com/4-smart-things-you-should-do-with-your-first-real-paycheck?ref=seealso" target="_blank">4 Smart Things You Should Do With Your First Real Paycheck</a>)</p> <h2>3. Delaying saving for your retirement</h2> <p>Besides paying for your current lifestyle, the number-one priority of your working years is saving for a time when you'll no longer be working. You are never too young to start saving for retirement &mdash; but at some point, you may be too old. Oddly, we're never taught in school about what retirement means or about how to save for it.</p> <p>The biggest determinant of retirement security is your personal savings. Whether you contribute to a workplace retirement plan like a 401(k), your own IRA, or both, make a contribution count for every single year beginning with your first job. (See also: <a href="http://www.wisebread.com/5-retirement-accounts-you-dont-need-a-ton-of-money-to-open?ref=seealso" target="_blank">5 Retirement Accounts You Don't Need a Ton of Money to Open</a>)</p> <p>When you first start out, it's OK to set small savings goals and work on them throughout your career. For example, use every increase in salary as a time to increase your saving rate by at least half of your salary raise. And every time you change jobs, never decrease your saving rate &mdash; either stay at the same rate or take the opportunity to increase it. It's not unrealistic to think that you may spend 30 years or more in retirement &mdash; and it can take you just as long to save up for that goal. (See also: <a href="http://www.wisebread.com/5-biggest-ways-millennials-risk-their-retirements?ref=seealso" target="_blank">5 Biggest Ways Millennials Risk Their Retirements</a>)</p> <h2>4. Neglecting your student loans</h2> <p>If you're a recent college graduate, there's a good chance your loans make up part of the $1.5 trillion student loan debt owed in this country. While you may be tempted to ignore your loans until repayment is set to begin, or because you're overwhelmed by how much you owe, you need to take an active role in understanding everything you can about your loans.</p> <p>First, determine what type of loans you have: federal or private. Next, if your payments haven't already begun, find out when you will need to start repaying. You'll also want to know the total amount owed and the interest rate on each of your loans. Then, begin researching different payment and consolidation options. (See also: <a href="http://www.wisebread.com/what-s-the-difference-between-student-loan-refinancing-and-consolidation?ref=seealso" target="_blank">What's the Difference Between Student Loan Refinancing and Consolidation?</a>)</p> <p>Finally, build your loan payment into your budget early on and take strides to pay it off as quickly as you can, perhaps even using bonuses and tax refunds to pay down your principal balance. Gone are the days of thinking of your student loans as &quot;good debt&quot; and letting them hang over your head for your entire career. Many people are now finding out what a burden they are in retirement. (See also: <a href="http://www.wisebread.com/how-to-keep-student-loans-from-wrecking-your-retirement?ref=seealso" target="_blank">How to Keep Student Loans From Wrecking Your Retirement</a>)</p> <h2>5. Taking on credit card debt</h2> <p>A good credit history is an important part of your overall financial health. And credit card use is a viable way to establish that history and demonstrate your credit worthiness to lenders. But responsible credit use is charging only what you know you can pay off at the end of every month &mdash; not buying items that you can't afford in the first place and financing them at very high interest rates over several years. (See also: <a href="http://www.wisebread.com/the-millennials-guide-to-avoiding-credit-card-debt?ref=seealso" target="_blank">The Millennials Guide to Avoiding Credit Card Debt</a>)</p> <p>Entering the world of adult finances is tricky. Between learning about your budget and cash flow, building your emergency savings and retirement accounts, and figuring out how to manage your loans and debt, consider the above advice Personal Finance 101 &mdash; a mandatory course for everyone.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=https%3A%2F%2Fwww.wisebread.com%2Fthe-5-worst-money-mistakes-new-grads-make&amp;media=https%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FThe%25205%2520Worst%2520Money%2520Mistakes%2520New%2520Grads%2520Make.jpg&amp;description=The%205%20Worst%20Money%20Mistakes%20New%20Grads%20Make"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/u5180/The%205%20Worst%20Money%20Mistakes%20New%20Grads%20Make.jpg" alt="The 5 Worst Money Mistakes New Grads Make" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="https://www.wisebread.com/alicia-rose-hudnett">Alicia Rose Hudnett</a> of <a href="https://www.wisebread.com/the-5-worst-money-mistakes-new-grads-make">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/5-money-moves-to-make-the-moment-you-graduate">5 Money Moves to Make the Moment You Graduate</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/how-student-loan-debt-can-derail-your-future">How Student Loan Debt Can Derail Your Future</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/the-financial-basics-every-new-grad-should-know">The Financial Basics Every New Grad Should Know</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/how-new-grads-can-protect-their-credit">How New Grads Can Protect Their Credit</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/heres-how-late-starters-can-save-for-their-kids-education">Here&#039;s How Late Starters Can Save for Their Kids&#039; Education</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Education & Training college graduates credit card debt life skills money skills retirement saving money student loans young adults Wed, 27 Jun 2018 08:00:11 +0000 Alicia Rose Hudnett 2152195 at https://www.wisebread.com Everything New Parents Need to Know About College Savings https://www.wisebread.com/everything-new-parents-need-to-know-about-college-savings <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/everything-new-parents-need-to-know-about-college-savings" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/imagecache/250w/blog-images/mother_cuddling_baby_daughter_at_home.jpg" alt="Mother cuddling baby daughter at home" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You've just ushered a new baby into the world, and are working to get your brain around all that you need to pay for. Diapers. Food. Child care. College.</p> <p>College?</p> <p>It may be nearly two decades away, but thinking about your child's college education now can help you save lots of money for when it's finally time to foot the higher education bill.</p> <p>Saving for college will require a lot of discipline and patience, but you can make it happen with the right tools and knowledge. Let's take a look at some key things you need to know to send junior off to college without going broke.</p> <h2>Understand the cost of college</h2> <p>Let's start with an understanding that college is costly. The College Board says the budget for a moderately priced public college now is over $25,000 annually, and more than $50,000 for a private college. Prices have nearly doubled in the past decade and costs are expected to continue to rise. It's obviously impossible to know what college will cost in 18 years, but you can make reasonable projections based on current costs and the rate of inflation. Estimating the cost of college is obviously the one piece of information you need when determining how much to save.</p> <h2>Understand value vs. cost</h2> <p>You may have dreams of sending your child to whatever school they wish to attend, regardless of cost. That's fine, but you should also educate yourself on the schools with great reputations at a reasonable cost. The bottom line is that the most expensive schools aren't automatically the best. There are many ways for a student to get an excellent education without going into debt or wiping out your savings. (See also: <a href="http://www.wisebread.com/why-saving-too-much-money-for-a-college-fund-is-a-bad-idea?ref=seealso" target="_blank">Why Saving Too Much Money for a College Fund Is a Bad Idea</a>)</p> <h2>Explore community colleges</h2> <p>Some people dismiss community college, but that's a mistake. Community colleges are perhaps the most underrated components of the academic system. There are thousands of these great colleges that offer solid education experiences for a fraction of the price of four-year institutions. They are excellent for students who aren't quite sure what they want to study or are perhaps wary of going away to school.</p> <p>At community colleges, a student can often take care of many of the core requirements of a major, then transfer to a four-year institution where they can get the rest of the key coursework they need. This can ultimately save families tens of thousands of dollars. Consider community colleges when exploring future education options for your young one.</p> <h2>Open a 529 plan</h2> <p>Most states offer special savings plans that allow you to invest money for the purpose of saving for educational expenses. In most cases, you can withdraw the money tax-free when it's time to pay for college or qualified educational expenses. In a sense, they work like a Roth IRA, only for education.</p> <p>Some plans also let you deduct contributions from your taxable income. These savings plans can be powerful because you can sign up for them as soon as your child is born. And if you save aggressively over the course of 18 years, you can end up with a sizable fund, perhaps even enough to cover the cost of tuition entirely.</p> <p>If your child ends up getting a scholarship, you can use the funds for other educational expenses, such as a computer or other similar needs. If they don't attend college, funds can be used for vocational schools as well. You can also assign the benefits to someone else, such as a sibling or even a nephew, and there is no time limit on when you need to spend 529 funds, so you could even hold onto them and pay for your grandkids. (See also: <a href="http://www.wisebread.com/the-9-best-state-529-college-savings-plans?ref=seealso" target="_blank">The 9 Best State 529 College Savings Plans</a>)</p> <p>As a last resort, you can just keep the money for yourself &mdash; but you will have to pay taxes on gains as well as a 10 percent penalty. You won't pay the penalty if the beneficiary passes away, gets a scholarship, becomes disabled, or attends a U.S. Military Academy. If a child is disabled and can't attend college, it's also possible to roll 529 funds over to a 529 ABLE plan, which is designed to help disabled people with living expenses and other needs. (See also: <a href="http://www.wisebread.com/heres-what-you-need-to-know-about-529-able-accounts?ref=seealso" target="_blank">Here's What You Need to Know About 529 ABLE Accounts</a>)</p> <h2>Consider a prepaid tuition option</h2> <p>Depending on where you live, you may be able to take advantage of a type of 529 plan that allows you to lock in rates of college tuition now, potentially saving you tens of thousands of dollars. This can be especially powerful given that tuition continues to rise. Note that there may be some restrictions on what colleges the student can ultimately attend. (See also: <a href="http://www.wisebread.com/should-you-save-for-college-using-a-529-prepaid-tuition-plan?ref=seealso" target="_blank">Should You Save for College Using a 529 Prepaid Tuition Plan?</a>)</p> <h2>Don't cheat your own retirement</h2> <p>You may wish to selflessly pump as much money as you can into your child's college savings account, choosing to worry about your retirement savings at a later time. But this is a dangerous strategy. If you choose to postpone retirement saving, you run the risk of not having enough saved to make ends meet when you stop working. And unlike college, you can't borrow money to pay for your retirement.</p> <p>With smart planning and frugal living, you may be able to aggressively save for both college and retirement &mdash; but if you have to choose which to put money into, pick the retirement fund. If it helps, remind yourself that it's a way to ensure that your children don't have to help you financially in your later years. (See also: <a href="http://www.wisebread.com/how-to-keep-student-loans-from-wrecking-your-retirement?ref=seealso" target="_blank">How to Keep Student Loans From Wrecking Your Retirement</a>)</p> <h2>Let family members know how they can help</h2> <p>Your child's grandparents may be eager to help with future college costs, and you may have other relatives willing to pitch in as well. You can help guide them as to the smartest way to help.</p> <p>In many cases, relatives may also receive immediate tax breaks by contributing to college savings plans, and they may even be able to gift money for college as a way to avoid future estate taxes.</p> <h2>Understand how financial aid works</h2> <p>It's important to learn how your income and savings can impact the type of financial assistance that your child may receive to pay for college. To qualify for grants or federal loans when it's time for your child to attend college, you will have to fill out a Free Application for Student Aid (FAFSA) form.</p> <p>Not all families receive financial aid automatically. A student's eligibility is determined by a formula that takes into account the total cost of college and the expected family contribution, or EFC. The EFC is somewhat complicated, because it takes into account family income, assets, and household size, among other factors. (See also: <a href="http://www.wisebread.com/the-10-most-common-financial-aid-mistakes-and-how-to-avoid-them?ref=seealso" target="_blank">The 10 Most Common Financial Aid Mistakes &mdash; And How To Avoid Them</a>)</p> <h2>Learn about loans and their impact</h2> <p>It may be your plan to save for college and avoid loans entirely, but there's no guarantee you won't need them, especially if costs continue to rise. Navigating the ins and outs and pros and cons of both federal and private student loans will require some research and patience. You should seek to understand the typical interest rates on college loans, and how quickly loans must be paid back. Know that student loans can't be discharged in bankruptcy and that defaulting on loans can hurt a graduate's credit score.</p> <p>It's also important to understand how student loan debt may impact a graduating student. Many recent graduates are struggling with student loan payments &mdash; the average 2017 graduate has more than $39,000 in debt &mdash; and that has an impact on everything from the jobs a graduate can afford to take, the city they can afford to live in, and the amount of other debt they end up accumulating. (See also: <a href="http://www.wisebread.com/what-to-do-when-you-cant-afford-your-childs-college-education?ref=seealso" target="_blank">What to Do When You Can't Afford Your Child's College Education</a>)</p> <h2>Live within your means</h2> <p>This may seem like such a basic piece of advice it's not worth mentioning, but it's crucial when you are trying to save for your own future as well as the college costs of a child. In an ideal world, you can save aggressively for both a child's college tuition and your own retirement, but that requires a hefty sum of cash. To achieve both goals, you must be laser-focused on keeping your spending levels low, avoiding debt, and managing budgets smartly. It may require sacrifices.</p> <p>For many people, those sacrifices are worthwhile, but just be sure you know what they entail as you embark on this journey. Being prepared mentally and emotionally will help you stay on course.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Feverything-new-parents-need-to-know-about-college-savings&amp;media=https%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FEverything%2520New%2520Parents%2520Need%2520to%2520Know%2520About%2520College%2520Savings.jpg&amp;description=Everything%20New%20Parents%20Need%20to%20Know%20About%20College%20Savings"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/u5180/Everything%20New%20Parents%20Need%20to%20Know%20About%20College%20Savings.jpg" alt="Everything New Parents Need to Know About College Savings" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="https://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="https://www.wisebread.com/everything-new-parents-need-to-know-about-college-savings">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/4-ways-to-make-the-most-of-your-student-loan-grace-period">4 Ways to Make the Most of Your Student Loan Grace Period</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/someone-took-out-a-loan-in-your-name-now-what">Someone Took Out a Loan in Your Name. Now What?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/5-reasons-building-credit-in-college-helps-you-win-at-life">5 Reasons Building Credit in College Helps You Win at Life</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/what-every-parent-should-know-about-the-new-college-financial-aid-rules">What Every Parent Should Know About the New College Financial Aid Rules</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/7-money-moves-every-new-college-student-should-make">7 Money Moves Every New College Student Should Make</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Education & Training 529 account college grants loans savings university Tue, 26 Jun 2018 12:40:58 +0000 Tim Lemke 2150087 at https://www.wisebread.com How These 6 Assets Might Affect Student Financial Aid Eligibility https://www.wisebread.com/how-these-6-assets-might-affect-student-financial-aid-eligibility <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-these-6-assets-might-affect-student-financial-aid-eligibility" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/imagecache/250w/blog-images/woman_saving_for_education_0.jpg" alt="Woman saving for education" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Once your child reaches high school, figuring out how to pay for college starts to loom large in your mind. An important step in getting ready for the costs of college is filling out the FAFSA (Free Application for Federal Student Aid). This paperwork helps determine how much need-based financial aid your student qualifies for. And before you assume that you make too much money to get any such assistance, remember that families earning as much as $180,000 per year can qualify for some form of financial aid.</p> <p>Whether you have been diligently saving money in a 529 account since your (now 6-foot tall) baby was born, or you have only just now started thinking about college costs, you do need to understand exactly how your various assets might affect your student's financial aid eligibility. (See also: <a href="http://www.wisebread.com/5-reasons-why-every-student-should-fill-out-the-fafsa?ref=seealso" target="_blank">5 Reasons Why Every Student Should Fill Out the FAFSA</a>)</p> <p>Here's what you need to know about the asset and income calculations for need-based financial aid.</p> <h2>Understanding the expected family contribution (EFC)</h2> <p>To determine your student's financial aid package, the college financial aid office starts by determining the cost of attendance and the expected family contribution, or EFC. The EFC amount is calculated based upon the information you provide on the FAFSA.</p> <p>In general, assets and income held by the dependent college student count for more in the EFC formula, while parents' assets and income count for less &mdash; and some parental assets are not included in the calculation whatsoever.</p> <p>The formula for calculating EFC specifically counts the following assets and resources:</p> <ul> <li> <p>20 percent of the student's assets, which includes savings, investments, business interests, and real estate.</p> </li> <li> <p>2.6 to 5.64 percent of the parents' same types of assets (based on a sliding income scale).</p> </li> <li> <p>50 percent of student income above $6,570.</p> </li> <li> <p>22 to 47 percent of parent income above $25,040 (also based on the sliding scale).</p> </li> </ul> <p>The more money that is included in the EFC calculation, the lower the need-based financial aid offer will be. (See also: <a href="http://www.wisebread.com/the-10-most-common-financial-aid-mistakes-and-how-to-avoid-them?ref=seealso" target="_blank">The 10 Most Common Financial Aid Mistakes &mdash; And How To Avoid Them</a>)</p> <h2>How your assets are counted</h2> <p>Depending on what kind of assets you have, you may or may not have that money included in your student's EFC calculation. The following assets can affect financial aid offers:</p> <h3>1. Income</h3> <p>As of 2017, the FAFSA began requesting the <em>prior-prior</em> year's tax return from filers. This is called the &quot;base year.&quot;</p> <p>Before the change, families had to provide the prior year's tax return (that is, the immediate previous year) as their base year information. For instance, for the 2011&ndash;2012 school year, FAFSA filers had to provide their 2010 tax return, but filers filling out the FAFSA for the 2018&ndash;2019 school year will provide their 2016 tax return.</p> <p>There are a couple of reasons why this is an important change. First, it means that families are less crunched to complete their previous year's taxes and a FAFSA form in the same year. Secondly, it also means that families who are actively trying to make income-related plans to lower their EFC need to do such things no later than their child's freshman spring/sophomore fall year.</p> <p>What kinds of income-related plans? For instance, you might max out your retirement savings in the years leading up to the base year, because you are not asked to declare the value of tax-deferred retirement accounts (such as 401(k), 403(b), or IRA accounts) on the FAFSA. However, money that you contribute to your retirement account during the base year is still considered part of your income for the EFC calculation, even though it is pretax income that you have invested.</p> <p>Another important thing to remember about income is how your child's income is counted on the FAFSA. Fifty percent of the dependent student's income over $6,570 is counted in the EFC calculation, and financial gifts are also considered income. For example, if Grandma and Grandpa give your child $10,000 toward college in 2018, 50 percent of the amount over the threshold ($3,430) would have to be counted as income on the FAFSA filed for the 2020&ndash;2021 school year, and it could increase the EFC amount (and reduce the aid) by about $1,715.</p> <h3>2. 529 accounts and Coverdell ESAs</h3> <p>The good news about these accounts is that whether they are in your name or your child's, they are considered parental assets. That means no more than 5.64 percent of the assets in a 529 account or Coverdell ESA will be included in the EFC calculation. So if you have saved $25,000 in your daughter's 529 account, her aid would only be reduced by roughly $1,400.</p> <p>If other relatives &mdash; such as grandparents &mdash; have been saving money for your child in a 529 or Coverdell account under their own names, their gift can come with some expensive (and unanticipated) strings attached. That's because such assets are not counted at all on the FAFSA form, but when the money is withdrawn to pay for educational expenses, you must claim the amount withdrawn as untaxed income to the student. Since 50 percent of student income is counted in the EFC calculations, this situation can reduce aid by half the amount of the withdrawal. (See also: <a href="http://www.wisebread.com/5-smart-places-to-stash-your-kids-college-savings?ref=seealso" target="_blank">5 Smart Places to Stash Your Kid's College Savings</a>)</p> <h3>3. Retirement accounts</h3> <p>As mentioned above, the value of parental retirement accounts are not included in EFC calculations. However, the money that you contribute to your retirement account during years you fill out the FAFSA is included as parental income, even though you don't actually get to bring that money home with you. Some parents front load their retirement contributions in the years leading up to their child's base year just in case they need to reduce their retirement savings during the college years.</p> <p>In addition, parents need to know that withdrawals from Roth IRA accounts are penalty-free if they are used for qualified college expenses. However, this distribution will count as parental income on the FAFSA for the year of the distribution and potentially reduce financial aid by as much as 47 percent of the amount withdrawn.</p> <p>One way to circumvent this problem is to wait to take a Roth IRA distribution until your child has reached at least the spring semester of his or her sophomore year, since it will be after the final year of income you will need to report on a FAFSA. (Remember, since the FAFSA is based upon the prior-prior year's tax returns, you will not need to provide income information for the last two years of your child's four years in college.)</p> <h3>4. Home equity</h3> <p>The FAFSA does not consider the amount of equity in your home when calculating the EFC &mdash; although the CSS PROFILE, which is the form required by many private colleges and universities for determining financial aid eligibility, does request this information. This means that federal financial aid does not need to know how much equity you have in your home, but many private institutions will consider it when evaluating your financial aid needs.</p> <p>Since home equity is not part of the EFC calculation, some families with large non-retirement savings may consider paying down (or paying off) their mortgage in the years before the base year. This will reduce your expected family contribution, but it could hurt you if Junior or Sis decide to go to a private college or university instead of InState U.</p> <h3>5. UGMA or UTMA accounts</h3> <p>These sorts of custodial accounts are in your child's name, which means that 20 percent of any assets in these accounts are counted toward the EFC. In addition, any interest, dividends, or capital gains earned from these types of accounts (or any accounts in your child's name) are counted as income for your child &mdash; which means that 50 percent of that money is counted toward the EFC.</p> <p>Parents who opened a UGMA (Uniform Gift to Minors Act) or UTMA (Uniform Transfer to Minors Act) account for their child's education would probably be better served by rolling the assets over into a 529 account so that less of the money will be considered part of the EFC.</p> <h3>6. Taxable investment accounts</h3> <p>If you have additional investments on top of your tax-advantaged retirement accounts, these will also need to be claimed on the FAFSA form. These accounts are counted as assets, meaning up to 5.64 percent of their value will be counted in the EFC calculation. However, any dividends and capital gains earned are counted as income, and any distributions you take from these sorts of accounts are also counted as income.</p> <p>If you need to take distributions from taxable investment accounts to help pay for your child's education, you will also want to wait to do this until at least the spring semester of his or her sophomore year, to keep the distribution from dinging you on the FAFSA.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fhow-these-6-assets-might-affect-student-financial-aid-eligibility&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FHow%2520These%25206%2520Assets%2520Might%2520Affect%2520Student%2520Financial%2520Aid%2520Eligibility.jpg&amp;description=How%20These%206%20Assets%20Might%20Affect%20Student%20Financial%20Aid%20Eligibility"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/u5180/How%20These%206%20Assets%20Might%20Affect%20Student%20Financial%20Aid%20Eligibility.jpg" alt="How These 6 Assets Might Affect Student Financial Aid Eligibility" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="https://www.wisebread.com/emily-guy-birken">Emily Guy Birken</a> of <a href="https://www.wisebread.com/how-these-6-assets-might-affect-student-financial-aid-eligibility">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/the-10-most-common-financial-aid-mistakes-and-how-to-avoid-them">The 10 Most Common Financial Aid Mistakes — And How To Avoid Them</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/css-is-one-source-of-college-financial-aid-you-cant-afford-to-overlook">CSS Is One Source of College Financial Aid You Can&#039;t Afford to Overlook</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/does-your-net-worth-even-matter">Does Your Net Worth Even Matter?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/how-student-loan-debt-can-derail-your-future">How Student Loan Debt Can Derail Your Future</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/my-kid-got-accepted-to-an-expensive-private-college-now-what">My Kid Got Accepted to an Expensive Private College — Now What?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Education & Training 529 plans application assets college savings colleges Coverdell ESA FAFSA financial aid income investments retirement accounts Thu, 14 Jun 2018 08:30:36 +0000 Emily Guy Birken 2147656 at https://www.wisebread.com 6 Ways New College Grads Can Build Credit https://www.wisebread.com/6-ways-new-college-grads-can-build-credit <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-ways-new-college-grads-can-build-credit" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/imagecache/250w/blog-images/cheerful_graduates_are_posing_for_selfie_shot.jpg" alt="Cheerful graduates are posing for selfie shot" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Your credit might be the last thing on your mind after you graduate. After all, there's so much excitement going on with finding a new job and a new place to live, and launching yourself into the full-fledged adult world.</p> <p>With all of this going on, it's no wonder that 46 percent of soon-to-be college graduates have never even seen their credit report, according to a 2016 Experian survey. But if you can take a second to plan ahead, you can help unlock your future financial goals more easily by building your credit now.</p> <p>Starting early is important because a good credit record takes some time to build. You'll want good credit when you go to apply for a credit card, car loan, or mortgage later on. And these days, it's not just lenders who look at your credit record, but also landlords, car insurance companies, and even some employers. (See also: <a href="http://www.wisebread.com/6-ways-life-is-better-with-good-credit?ref=seealso" target="_blank">6 Ways Life Is Better With Good Credit</a>)</p> <p>Luckily, building your credit isn't as hard as it sounds. Here are the six best things you can do now to start.</p> <h2>1. Apply for a credit card</h2> <p>This might sound counterintuitive, but using credit cards wisely is the fastest way to <a href="http://www.wisebread.com/how-to-get-your-first-credit-card-and-build-credit?ref=internal" target="_blank">start building credit</a>. FICO, the credit scoring model that most lenders use, weighs revolving credit such as credit cards heavier than installment loans such as your student loans.</p> <p>Perhaps you already have a student credit card that you've handled responsibly &mdash; if so, you're off to a good start. But if you have no credit history, you may need to become an <a href="http://www.wisebread.com/what-you-need-to-know-about-adding-another-user-to-your-credit-card?ref=internal" target="_blank">authorized user</a> on a parent's credit card. As long as your parent pays their bill on time and keeps their balances low, you'll benefit from their good habits. At the same time, you won't be contractually responsible for the debt on the credit card (your parent may have other ideas, though).</p> <p>Another option is to apply for a <a href="http://www.wisebread.com/the-5-best-secured-credit-cards?ref=internal" target="_blank">secured credit card</a>. A secured card charges you an upfront deposit, which is often about the same amount as your credit limit. That makes the card very low risk to lenders, and therefore fairly easy for credit newbies to qualify for. Keep your balances low and pay every bill on time, and you should be able to upgrade to a regular credit card in about six months.</p> <h2>2. Never miss a bill payment</h2> <p>Your payment history makes up a whopping 35 percent of your credit score. It's the single biggest factor that makes up your score. Even one late payment can <a href="http://www.wisebread.com/how-late-payments-affect-your-credit?ref=internal" target="_blank">drop your credit score</a>, and once it's on your report, it takes a full seven years to fall off. A late payment on your credit card made when you're 23 can haunt you until you're 30.</p> <p>That's why it's so important to not miss payments. One of the best ways to combat this is by putting all of your bills and credit cards on autopay. Once you do that, you don't even have to think about paying them. (See also: <a href="http://www.wisebread.com/the-5-things-with-the-biggest-impact-on-your-credit-score?ref=seealso" target="_blank">The 5 Things With the Biggest Impact on Your Credit Score</a>)</p> <h2>3. Pay down your student loans</h2> <p>The average college student graduated with over $39,000 of student loan debt in 2017. That's a tough pill to swallow, especially since you may not even have a job yet, and if you do, you may not be earning very much.</p> <p>But once you start earning money, <a href="http://www.wisebread.com/15-ways-to-pay-back-student-loans-faster?ref=internal" target="_blank">paying down your student loans</a> can boost your credit score. The more you pay off, the more of a benefit you'll see.</p> <p>Bonus: If you pay extra on your student loans, you'll pay less interest overall and be free of the debt sooner. Then you can start funneling that student loan payment money to other things.</p> <h2>4. Avoid racking up credit card debt</h2> <p>Credit cards are useful tools for building credit &mdash; with one big caveat: Do <em>not</em> rack up a large amount of credit card debt if you can help it. Doing so can hurt your credit score. Your <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score?ref=internal" target="_blank">credit utilization ratio</a> &mdash; the amount you owe versus the amount of available credit you have &mdash; makes up 30 percent of your FICO score. It's the second-most important factor in your score.</p> <p>This can be especially difficult, because again, you're facing a lot of demands on your money after you leave college and you may be earning the least amount you'll make during your entire career.</p> <p>One trick that can help is, before you make a purchase, ask yourself: &quot;Do I really need this thing?&quot; If you're tempted too often by your credit card, another solution is to <a href="http://www.wisebread.com/a-guaranteed-way-to-avoid-impulse-credit-card-purchases?ref=internal" target="_blank">freeze it in an ice block</a> in your freezer. That way you still have access to it if you really need it, but it'll take time (during which you can think) to unthaw the card to use. (See also: <a href="http://www.wisebread.com/7-effortless-ways-to-prevent-budget-busting-impulse-buys?ref=seealso" target="_blank">7 Effortless Ways to Prevent Budget-Busting Impulse Buys</a>)</p> <p>When you do use your credit card, aim to pay your credit card bill in full every month if you can. You'll avoid paying any interest that way, and it will keep your credit utilization ratio low. But that raises the question: If you already have the money to pay off all your purchases, why use a credit card at all?</p> <p>As stated above, using a credit card builds credit. In addition, <a href="http://www.wisebread.com/4-reasons-credit-is-safer-than-debit?ref=internal" target="_blank">credit cards give you protections</a> that debit cards don't provide. What's more, by using a rewards credit card &mdash; and paying it off promptly &mdash; you can also earn <a href="http://www.wisebread.com/5-best-cash-back-credit-cards?ref=internal" target="_blank">cash back</a> or <a href="http://www.wisebread.com/top-5-travel-reward-credit-cards?ref=internal" target="_blank">travel rewards</a>.</p> <h2>5. Check your credit report for mistakes</h2> <p>The Federal Trade Commission in 2012 released a study that said 25 percent of people identified errors on their credit report that might affect their credit scores. Today, with the never-ending wave of data breaches, it's especially important to stay on top of <a href="http://www.wisebread.com/how-to-read-a-credit-report?ref=internal" target="_blank">checking your credit report</a>.</p> <p>To make matters a little more confusing, you actually have <em>three</em> credit reports &mdash; one from each of the three credit bureaus: Equifax, Experian, and TransUnion.</p> <p>You can get a free copy of your credit report from each of the three agencies by visiting <a href="http://www.annualcreditreport.com" target="_blank">AnnualCreditReport.com</a>. You can only check each agency for free once per year, so one way to approach the task is check one agency every four months.</p> <h2>6. Avoid closing any student credit cards you may have</h2> <p>Once you leave your school, you might think it's time to cancel your student credit card if you have one. After all, you're not a student anymore, right?</p> <p>Surprisingly, it might be a better idea to <a href="http://www.wisebread.com/what-happens-to-a-student-credit-card-after-you-graduate?ref=internal" target="_blank">hang onto the student credit card</a>, or speak with your credit card company about having it converted into a non-student version. That way, you can keep your credit history open and growing with this particular card.</p> <p>The length of your credit history makes up 15 percent of your credit score. It's also one of the most difficult factors to change because all you can do is sit and wait while the average history on all of your accounts grows with each passing year.</p> <p>That's why it's a good idea to keep your student credit card open if possible. It'll give you a leap forward in growing this part of your credit profile.</p> <h2>You can do this</h2> <p>Building up your credit can seem like an intimidating topic at first. But trust us: If you've gone through college, you have the skills needed to learn how building your credit works. Now all you have to do is put these factors into practice and you'll be well on your way toward a healthy credit score.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F6-ways-new-college-grads-can-build-credit&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F6%2520Ways%2520New%2520College%2520Grads%2520Can%2520Build%2520Credit.jpg&amp;description=6%20Ways%20New%20College%20Grads%20Can%20Build%20Credit"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/u5180/6%20Ways%20New%20College%20Grads%20Can%20Build%20Credit.jpg" alt="6 Ways New College Grads Can Build Credit" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="https://www.wisebread.com/lindsay-vansomeren">Lindsay VanSomeren</a> of <a href="https://www.wisebread.com/6-ways-new-college-grads-can-build-credit">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/the-5-best-credit-cards-for-college-students">The Best Credit Cards for College Students</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/this-is-how-student-loan-interest-works">This Is How Student Loan Interest Works</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/what-happens-to-a-student-credit-card-after-you-graduate">What Happens to a Student Credit Card After You Graduate?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/youre-denied-a-credit-card-due-to-too-many-hard-inquiries-now-what">You&#039;re Denied a Credit Card Due to Too Many Hard Inquiries. Now What?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/how-to-get-your-first-credit-card-and-build-credit">How to Get Your First Credit Card and Build Credit</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Banking Education & Training applying for a credit card building credit college grad college graduation credit card tips Thu, 31 May 2018 08:30:22 +0000 Lindsay VanSomeren 2144233 at https://www.wisebread.com Why Your IRA Shouldn't Double as an Education Savings Plan https://www.wisebread.com/why-your-ira-shouldnt-double-as-an-education-savings-plan <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/why-your-ira-shouldnt-double-as-an-education-savings-plan" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/imagecache/250w/blog-images/woman_education_coins_concept.jpg" alt="Woman Education coins concept" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>College and other education expenses can be some of the most burdensome costs you will ever face. Families may find themselves shelling out tens or even hundreds of thousands of dollars to universities, and many will spend even more on private elementary and secondary schools.</p> <p>Saving for these education expenses is increasingly crucial, with some people even turning to their individual retirement accounts to help. IRAs have nice tax advantages and have long been used as a possible vehicle for college savings. But is it a smart idea to use an IRA to pay for college?</p> <p>Using a retirement account for this purpose could be helpful, but has a number of drawbacks. Consider these reasons to avoid using an IRA for education expenses, if possible.</p> <h2>You can't borrow for retirement</h2> <p>Ideally, you want to save for both retirement and your child's education. But you should try to avoid letting education savings cannibalize your retirement savings. The last thing you want is to aggressively fund education accounts, only to find yourself unable to retire when you want to.</p> <p>Any money you spend on education now won't be available when you are older, and you are costing yourself potentially tens of thousands of dollars in future savings. Remember that your kids can always get loans to help pay for college, if necessary. But there's no way to borrow your way to a comfortable retirement. This is especially important these days when people have been known to live 20, 30, or even 40 years past retirement age. (See also: <a href="http://www.wisebread.com/how-to-keep-student-loans-from-wrecking-your-retirement?ref=seealso" target="_blank">How to Keep Student Loans From Wrecking Your Retirement</a>)</p> <h2>Retirement and college funds should be kept separate</h2> <p>You can save for retirement or you can save for college. But it's a bad idea to try and save for both in the same account. That's because you are operating with different time horizons in mind. If you are saving for your child's college tuition, you will likely need that money in about 18 years, at most. Retirement, on the other hand, might be 30 or 40 years away.</p> <p>This difference in timelines means that you will ideally be invested in different things. The college savings plan should contain more conservative investments than a retirement plan because you will likely need the money sooner.</p> <h2>There are other mechanisms to save for college</h2> <p>Using an IRA to save for college would be more acceptable if there weren't better options. Most states offer 529 college savings plans, which are designed to specifically save for education costs, and offer some great tax benefits to account holders.</p> <p>These plans allow you to place money in mutual funds and other investments, and money grows tax-free as long as it's used for educational purposes. In many cases, the contributions are also tax-deductible. Many states also offer the ability to lock in current college tuition costs today if you are willing to commit to specific universities. (See also: <a href="http://www.wisebread.com/5-smart-places-to-stash-your-kids-college-savings?ref=seealso" target="_blank">5 Smart Places to Stash Your Kid's College Savings</a>)</p> <h2>It's harder to get help from family and friends</h2> <p>With an IRA, the only person who can contribute to the account is you. But a 529 plan allows any person to open an account and name virtually anyone as the beneficiary. This means that grandparents can set up 529 plans for their grandchildren. Individuals can set up plans for the children of close friends. You can even set up a plan and name a complete stranger as a beneficiary. Using a 529 plan instead of an IRA allows a broader set of people to help out with a young person's education expenses if they choose to.</p> <h2>IRA distributions count as income for financial aid purposes</h2> <p>If you choose to make withdrawals from an IRA to pay for college, that money will be counted as income for financial aid purposes. This is not the case for 529 plans. Money in a 529 plan is generally considered an asset (but only about 5.6 percent of the total account balance), and assets don't count as much as income.</p> <p>Withdrawals from 529 plans are not recorded in the Free Application for Student Aid (FAFSA), so having money in these plans won't severely hurt your beneficiary's chance of receiving financial aid. Using an IRA to pay for college, however, could reduce the amount of financial aid your child receives.</p> <h2>Earnings from an IRA can't be withdrawn tax-free</h2> <p>Yes, you can withdraw money from an IRA to pay for qualified educational expenses. But it's only the contributions, not the gains, that can be taken out without being taxed before age 59&frac12;.</p> <p>For example, let's say you have placed $40,000 into a Roth IRA, and that money has grown to $100,000 over time. Only $40,000 can be removed without paying taxes. Any additional funds will be taxed as normal income.</p> <p>With 529 plans, there are no taxes on any withdrawals as long as funds are used to pay for education expenses.</p> <h2>IRAs have contribution limits</h2> <p>You are permitted to contribute $5,500 per year into an IRA, or $6,500 if you are over age 50. But 529 plans have no real contribution limit. At a certain point, you may have to report federal gift taxes if your contribution tops $15,000 in a year (and which will count against the giver's lifetime estate tax exclusion of $11.2 million). But you can avoid this by contributing up to $75,000 in a single year and spreading out the contributions over five years on your disclosure forms. (Many grandparents find this to be a great way to avoid estate taxes.)</p> <p>Some 529 plans do have limits on the total amount you can have in an account at one time. Read the fine print of each plan to determine how that might impact you.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fwhy-your-ira-shouldnt-double-as-an-education-savings-plan&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FWhy%2520Your%2520IRA%2520Shouldn%2527t%2520Double%2520as%2520an%2520Education%2520Savings%2520Plan.jpg&amp;description=Why%20Your%20IRA%20Shouldn't%20Double%20as%20an%20Education%20Savings%20Plan"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/u5180/Why%20Your%20IRA%20Shouldn%27t%20Double%20as%20an%20Education%20Savings%20Plan.jpg" alt="Why Your IRA Shouldn't Double as an Education Savings Plan" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="https://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="https://www.wisebread.com/why-your-ira-shouldnt-double-as-an-education-savings-plan">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/heres-how-late-starters-can-save-for-their-kids-education">Here&#039;s How Late Starters Can Save for Their Kids&#039; Education</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/6-questions-to-ask-before-taking-out-student-loans">6 Questions to Ask Before Taking Out Student Loans</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/7-unique-ways-millennials-are-dealing-with-student-loan-debt">7 Unique Ways Millennials Are Dealing With Student Loan Debt</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/5-money-moves-to-make-the-moment-you-graduate">5 Money Moves to Make the Moment You Graduate</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/should-you-save-for-college-using-a-529-prepaid-tuition-plan">Should You Save for College Using a 529 Prepaid Tuition Plan?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Education & Training 529 accounts college education savings IRA qualified educational expenses retirement tuition Wed, 30 May 2018 08:30:24 +0000 Tim Lemke 2144052 at https://www.wisebread.com Is It Smart to Pay College Tuition With a Credit Card? https://www.wisebread.com/is-it-smart-to-pay-college-tuition-with-a-credit-card <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/is-it-smart-to-pay-college-tuition-with-a-credit-card" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/imagecache/250w/blog-images/college_for_me_is_the_time_to_save.jpg" alt="College for me is the time to save" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>At first, the answer seems obvious: Using a credit card to pay your college tuition is a terrible idea. With the high rates that come with plastic, you could rack up thousands of dollars in interest by charging your tuition.</p> <p>But, there's another way to look at it: If you can pay off your credit card bill in full each month, using a card to pay your tuition could generate significant cash back rewards, airline miles, or free hotel stays.</p> <p>It all comes down to your discipline, the type of credit card, and what you can afford to charge. Here are a few things to consider before charging your tuition. (See also: <a href="http://www.wisebread.com/the-5-best-credit-cards-for-college-students?ref=seealso" target="_blank">The 5 Best Credit Cards for College Students</a>)</p> <h2>College isn't cheap</h2> <p>The cost of college isn't shrinking any time soon. CollegeBoard reports that the average yearly tuition for a public, four-year in-state college stood at $9,970 for 2017&ndash;2018, up 3.1 percent from the previous year. Private colleges averaged $25,620 for the same school year, an increase of 3.2 percent. Neither of those figures include the average $10,800 cost for room and board.</p> <p>If you're going to be charging tuition or room and board to a credit card, you should have the cash on hand to pay it off in a timely fashion &mdash; ideally, the first billing cycle. And that won't be a small amount. Otherwise, you put yourself at risk of falling deeply into credit card debt.</p> <h2>Very few people go this route</h2> <p>According to the 2017 edition of Sallie Mae's <em>How America Pays for College </em>report, just 3 percent of families used credit cards to help cover college tuition for their kids, while 4 percent of students used plastic to pay for some or all of their tuition. Parents charged an average $4,450 for tuition in 2017, while students charged an average $1,626.</p> <p>It's evident that paying for college with plastic is not the popular route. Why do so few students or parents turn to their credit cards? Most probably don't have the cash they'd need to pay off these cards in full each month in order to avoid interest charges. Others might not have a high enough credit limit on their cards to charge any more than a few thousand dollars at a time. Students may not have enough of a credit history yet to even be approved for a credit card. (See also: <a href="http://www.wisebread.com/4-important-ways-college-students-should-use-credit-cards?ref=seealso" target="_blank">4 Important Ways College Students Should Use Credit Cards</a>)</p> <h2>Don't chase rewards without a repayment plan</h2> <p>If you can afford to charge tuition and pay off your credit card bill each month, it might make sense to do so, especially if you have a credit card that provides cash back bonuses, rewards, or miles. Charging $10,000 in tuition, for example, could be a great way to earn fast cash or travel credit.</p> <p>Other cards might provide bonuses if you spend a certain amount of money during a set number of months. For instance, if you spend $5,000 during a three-month period, you might get a $200 cash back bonus. Charging your tuition can easily get you to that spending threshold. (See also: <a href="http://www.wisebread.com/5-smart-ways-to-meet-a-rewards-card-minimum-spending-requirement?ref=seealso" target="_blank">5 Smart Ways to Meet a Rewards Card Minimum Spending Requirement</a>)</p> <p>The key, again, is that you pay off your card's balance in full when the bill comes due. It's not unusual for credit cards to come with interest rates of 18 percent or higher. If you carry a balance, that interest rate will cause your debt to grow quickly, and no amount of cash back, bonuses, or miles is worth that financial pain.</p> <h2>Watch out for fees</h2> <p>There is another potential pitfall with credit cards depending on the school you attend. If your college or university allows you to charge tuition (some don't), many will charge an additional fee for credit card processing. You'll have to determine if the rewards, miles, or cash back bonuses you're after are enough to make up for the fee your university or college charges.</p> <p>According to a 2016 survey from CreditCards.com, 85 percent of the country's largest colleges allow credit cards for tuition payments. The survey found that 57 percent of schools charge fees for credit card payments, with the average fee being 2.62 percent.</p> <p>Say you charge $4,500 in tuition for your upcoming semester. If your school charged a fee of 2.62 percent, you'd pay about $118 extra for the privilege of using your card. If that $118 is higher than the cash back bonus or rewards points you'd generate from charging it, you're better off paying for your tuition in another way.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fis-it-smart-to-pay-college-tuition-with-a-credit-card&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FIs%2520It%2520Smart%2520to%2520Pay%2520College%2520Tuition%2520With%2520a%2520Credit%2520Card_.jpg&amp;description=Is%20It%20Smart%20to%20Pay%20College%20Tuition%20With%20a%20Credit%20Card%3F"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/u5180/Is%20It%20Smart%20to%20Pay%20College%20Tuition%20With%20a%20Credit%20Card_.jpg" alt="Is It Smart to Pay College Tuition With a Credit Card?" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="https://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="https://www.wisebread.com/is-it-smart-to-pay-college-tuition-with-a-credit-card">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/my-kid-got-accepted-to-an-expensive-private-college-now-what">My Kid Got Accepted to an Expensive Private College — Now What?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/the-millennials-guide-to-avoiding-credit-card-debt">The Millennials Guide to Avoiding Credit Card Debt</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/the-encouraging-truth-about-how-americans-are-covering-the-cost-of-college">The Encouraging Truth About How Americans Are Covering the Cost of College</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/this-is-how-student-loan-interest-works">This Is How Student Loan Interest Works</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/heres-what-you-need-to-know-before-buying-a-college-meal-plan">Here&#039;s What You Need to Know Before Buying a College Meal Plan</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Education & Training cash back charging college costs interest rates pros and cons rewards students tuition Tue, 29 May 2018 08:30:46 +0000 Dan Rafter 2143780 at https://www.wisebread.com 5 Questions to Ask Before Sending Your Child to Private School https://www.wisebread.com/5-questions-to-ask-before-sending-your-child-to-private-school <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-questions-to-ask-before-sending-your-child-to-private-school" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/imagecache/250w/blog-images/pupils_in_science_lesson_studying_robotics.jpg" alt="Pupils In Science Lesson Studying Robotics" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Parents consider sending their children to private school over public school for several reasons, and while a private school setting might be best for your child's learning style, you need to evaluate the decision carefully before signing up. Here are five questions to ask yourself before deciding on private school for your child. (See also: <a href="http://www.wisebread.com/7-times-you-should-choose-private-school-over-public?ref=seealso" target="_blank">7 Times You Should Choose Private School Over Public</a>)</p> <h2>1. Can I afford it?</h2> <p>Before you even consider how great a certain school is, you have to know whether you can afford it or not. Will you have to get another job? Will sending your child to this school put unnecessary financial stress on your family? What will you sacrifice to send your child to private school?</p> <p>The national average private school tuition is about $10,302 per year, according to Private School Review, but of course this cost varies drastically depending on the area. For example, the average price of a private school in Iowa is almost $5,000, but over $16,000 in New York. Most private high schools cost more than private elementary schools, as well, so your cost will go up if you keep your child enrolled throughout their school life.</p> <p>Yes, this school might be an amazing opportunity for your child, but is the cost truly worth it? I'm not talking about just the sticker price of the school. You also have to weigh the cost of working longer hours and spending less time with your family in order to make it work. Really consider if you can afford the school and the sacrifices you might have to make along with it. (See also: <a href="http://www.wisebread.com/heres-how-late-starters-can-save-for-their-kids-education?ref=seealso" target="_blank">Here's How Late Starters Can Save for Their Kids' Education</a>)</p> <h2>2. What are the hidden costs?</h2> <p>Unfortunately, the costs of sending your child to a private school don't stop at the monthly tuition bill. There could be several other hidden costs as well, such as the cost of uniforms, expensive textbooks, fundraising fees, field trips, and other special events. Of course, don't forget about sports, elective classes, or after school activities. If the tuition bill is already tipping your budget into the negative, then the extra fees might be too much for your family to handle. (See also: <a href="http://www.wisebread.com/how-to-save-money-on-kids-activities?ref=seealso" target="_blank">How to Save Money on Kids' Activities</a>)</p> <h2>3. How does it compare to the other schools nearby?</h2> <p>There must be a reason why you're considering a private school rather than a public one, so make a list of those reasons. Is it because of safety? A particular sport your child plays? Is it because of your religion? Or perhaps because private schools tend to look better on college applications?</p> <p>Once you have those written down, find out all you can about the private school versus the public schools in your area. For example, if safety is a main priority for you, find out how the private school maintains a safer campus than the other schools. What safety protocols do they have in place? How many incidents have there been in the past five years?</p> <p>It's important to dig deeper into these issues because you might discover that behind the high price tag and fancy test scores, the private school you had your eye on isn't much safer or better at getting students accepted to top colleges than you thought. On the other hand, the private school you're interested in might have a huge lead over other schools in athletics or academics, which makes the tuition easier to justify.</p> <h2>4. What will this school do for my child?</h2> <p>No one knows your child better than you do, so evaluate potential schools for what they will offer your child. Don't get distracted by impressive stats the school might advertise, like having an unbeatable mathletes team or having the highest number of full college scholarships for basketball players. Make a list of your child's strengths and weaknesses and discover how the school can support both. For example, if your child is naturally talented in theater arts but struggles in math, will this school give him or her unique opportunities to act and learn more about theater? Does the school offer special classes or tutoring to strengthen math skills, or will they be thrown into an advanced math class and expected to stay afloat?</p> <h2>5. What is student life like?</h2> <p>School is more than just academics; it's the place where students learn to socialize and create strong friendships. A school that boasts high test scores, but has miserable students is not a healthy environment for anyone. When evaluating the school, ask how the school gets the students involved in their local community. Are the students encouraged to partake in activities that help others outside of the school?</p> <p>You also want to learn how much time is given for breaks and socializing and how often the teachers encourage group projects and working together in the classroom. Most importantly, how does the school deal with bullying and other social behavior issues?</p> <p>There is truly no right or wrong answer when it comes to choosing a private school or a public school for your child. You know your kid best, and you know what's the best for your family.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F5-questions-to-ask-before-sending-your-child-to-private-school&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F5%2520Questions%2520to%2520Ask%2520Before%2520Sending%2520Your%2520Child%2520to%2520Private%2520School.jpg&amp;description=5%20Questions%20to%20Ask%20Before%20Sending%20Your%20Child%20to%20Private%20School"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/u5180/5%20Questions%20to%20Ask%20Before%20Sending%20Your%20Child%20to%20Private%20School.jpg" alt="5 Questions to Ask Before Sending Your Child to Private School" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="https://www.wisebread.com/ashley-eneriz">Ashley Eneriz</a> of <a href="https://www.wisebread.com/5-questions-to-ask-before-sending-your-child-to-private-school">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/are-private-schools-worth-the-money-they-demand">Are Private Schools Worth the Money They Demand?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/28-free-ways-to-entertain-your-kids-this-summer">28 Free Ways to Entertain Your Kids This Summer</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/10-money-lessons-your-kids-can-learn-while-they-travel">10 Money Lessons Your Kids Can Learn While They Travel</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/7-essential-money-moves-for-new-parents">7 Essential Money Moves for New Parents</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/7-frugal-living-skills-you-should-be-teaching-your-children">7 Frugal Living Skills You Should Be Teaching Your Children</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Education & Training Family affordable education costs of raising a child parenting tips private school school costs school tuition Thu, 24 May 2018 08:30:47 +0000 Ashley Eneriz 2142705 at https://www.wisebread.com What Happens to a Student Credit Card After You Graduate? https://www.wisebread.com/what-happens-to-a-student-credit-card-after-you-graduate <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/what-happens-to-a-student-credit-card-after-you-graduate" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/imagecache/250w/blog-images/woman_new_grad_925480576.jpg" alt="Woman smiling on graduation day" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Getting a <a href="http://www.wisebread.com/the-5-best-credit-cards-for-college-students?ref=internal" target="_blank">student credit card</a> while you're in college is a smart move. It can be a great tool to learn how to handle credit cards correctly without accidentally drowning yourself in tens of thousands of dollars' worth of debt.</p> <p>Moreover, credit cards allow you to get ahead of the curve by building your credit history before you even graduate. This single factor alone makes up about 15% of your entire credit score. It's also one of the hardest factors to manipulate, because if you want to increase your credit history, about all you can do is literally sit and wait for your score to improve.</p> <p>But what happens when you graduate, and you're no longer a student? You have a few options in this case. You may be able to upgrade your card to its non-student version, keep it open as-is, or close it. We'll walk you through each of the options to help you decide which is right for you.</p> <h2>Contact your credit card company</h2> <p>Each credit card issuer has different policies with these cards when you graduate. They may hide the language about what happens after you graduate in their terms and conditions, or, more commonly, they don't even publicize it at all. That's why the most important thing you can do is to call up your credit card issuer and let them know about how your situation has changed.</p> <p>Make sure to tell them when you graduated, along with any change of address. If you have a job already lined up with a definite salary, this also may give you more options.</p> <p>Generally, credit card issuers will give you two choices to continue using the card: You can keep the student credit card as-is, or upgrade the student credit card to its full-fledged, non-student version.</p> <h2>If your credit card is upgraded</h2> <p>If you are already earning a higher salary than you did as a student (even if it does seem small at first) and paid your bills on-time as a student, credit card companies might be more likely to upgrade you to the full-fledged credit card, along with a <a href="http://www.wisebread.com/4-questions-to-ask-before-getting-a-credit-increase?ref=internal" target="_blank">credit limit increase</a>.</p> <p>This can be a double-edged sword. On one hand, a credit limit increase may decrease your <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score?ref=internal" target="_blank">credit utilization ratio</a>, a measure of what portion of your available credit you're using. This single factor alone has an even bigger effect on your credit score than credit history. It accounts for 30% of your score. (See also: <a href="http://www.wisebread.com/the-5-things-with-the-biggest-impact-on-your-credit-score?ref=seealso" target="_blank">5 Factors With the Biggest Impact on Your Credit Score</a>)</p> <p>But people are often tempted to max out their credit card with their newfound credit line, and this can hurt your score. Don't let this happen to you; instead, it's still best to pay off your entire credit balance each month.</p> <p>You may also be eligible for better rewards or lower interest rates if you're upgraded to the non-student version. But again, don't let this tempt you to run up a balance on your credit card. If earning rewards is your goal, it's best to only <a href="http://www.wisebread.com/top-seven-reasons-why-i-use-my-credit-card-for-everything?ref=internal" target="_blank">put your normal daily spending on your card</a> that you can afford to pay off in full at the end of each month.</p> <h2>If your credit card isn't upgraded</h2> <p>In this case, the credit card issuer might not close your card, but they may not upgrade it. Basically, you're stuck with your old college credit card.</p> <p>If you want a higher credit limit or want to earn better credit card rewards, you always have the option of applying for a full-fledged credit card.</p> <p>If you decide to go ahead and keep your student credit card open (a wise decision, which we'll discuss below), remember to make a purchase with it at least a couple of times per year and pay off the charge. Otherwise, your credit card may be <a href="http://www.wisebread.com/how-to-avoid-getting-your-credit-card-canceled?ref=internal" target="_blank">closed automatically for inactivity</a> without any input from you.</p> <p>Another way to automate this is by putting a recurring small charge on your student credit card &mdash; say, your Netflix or Spotify subscription &mdash; and setting it up on autopay so you don't even have to think about it.</p> <h2>A word about closing your student credit card</h2> <p>Regardless of what happens to your student credit card after you graduate, you always have the option of closing it. However, in most cases, this isn't the best option. Doing so will expunge at least part of the credit history you've worked so hard to create. Unless you have other credit cards, you'll basically be starting over from scratch during the exact period of your life when credit is most important to build.</p> <p>For example, if you plan on renting an apartment, getting an auto loan for a car to get to your new job, or even applying for some jobs, you'll need the best credit score possible. Lenders, landlords, and some employers check credit reports. Keeping your student credit card open &mdash; in whatever form that might be after you graduate &mdash; is often the best option unless you truly do want to simplify your life and are prepared to take a likely hit to your credit score.</p> <h2>Bottom line</h2> <p>Graduating from college is one of the most exciting &mdash; and terrifying &mdash; times in your life. Figuring out what to do with your student credit card after you graduate doesn't need to add to that stress.</p> <p>All you have to do is make a quick phone call to your credit card issuer and explain the situation. Then spend a few minutes thinking about your strategy &mdash; Do you want to close the card? Keep it? Apply for a new credit card? Make a decision and stick with it so you can move on with your life. After all, you've got more important and exciting things to focus on now.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fwhat-happens-to-a-student-credit-card-after-you-graduate&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FWhat%2520Happens%2520to%2520a%2520Student%2520Credit%2520Card%2520After%2520You%2520Graduate_.jpg&amp;description=What%20Happens%20to%20a%20Student%20Credit%20Card%20After%20You%20Graduate%3F"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/u5180/What%20Happens%20to%20a%20Student%20Credit%20Card%20After%20You%20Graduate_.jpg" alt="What Happens to a Student Credit Card After You Graduate?" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="https://www.wisebread.com/lindsay-vansomeren">Lindsay VanSomeren</a> of <a href="https://www.wisebread.com/what-happens-to-a-student-credit-card-after-you-graduate">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/6-things-to-consider-before-making-a-big-purchase-for-rewards-points">6 Things to Consider Before Making a Big Purchase for Rewards Points</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/step-by-step-guide-to-doing-a-balance-transfer-on-credit-cards">Step-by-Step Guide to Doing a Balance Transfer on Credit Cards</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/2-minute-guide-how-to-use-balance-transfers-to-pay-off-credit-card-debt">2-Minute Guide: How to Use Balance Transfers to Pay Off Credit Card Debt</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/the-best-0-balance-transfer-credit-cards">The Best 0% Balance Transfer Credit Cards</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/how-student-loan-debt-can-derail-your-future">How Student Loan Debt Can Derail Your Future</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards Education & Training college graduate credit card debt credit card tips new grads student credit card student debt Wed, 23 May 2018 08:30:32 +0000 Lindsay VanSomeren 2141191 at https://www.wisebread.com 8 Questions to Ask on a College Tour https://www.wisebread.com/8-questions-to-ask-on-a-college-tour <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-questions-to-ask-on-a-college-tour" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/imagecache/250w/blog-images/happy_young_man_with_books.jpg" alt="Happy young man with books" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>For three years as an undergraduate, I worked as a campus tour guide for prospective students interested in attending my college. It was one of my favorite jobs during my college career because it gave me a chance to show off what I loved about my school and field questions about the school itself and the college experience in general.</p> <p>However, it often seemed as if prospective college students and their parents didn't know what questions to ask. They would ask about what they could expect from financial aid or the possibility of landing a job post-graduation &mdash; but they often missed out on truly understanding how the school would fit with their college and career plans because they didn't think to ask follow-up questions.</p> <p>When you go on a campus visit, make sure you follow up on the typical questions with further ones that really dig deep into what costs, value, and experiences you can expect from any particular school.</p> <h2>The typical question: What is the employment rate post-graduation?</h2> <p>This common question is certainly a reasonable metric. You want to know if the school and its programs prepare a student for the working world after college. But this question assumes that everyone is going to school just to get a job.</p> <p>What if you are interested in majoring in music, or philosophy, or fine arts, or history, or &mdash; horror of horrors &mdash; English? Asking about the employment rate post-graduation for these sorts of programs is never going to sound as promising as the rates for nursing, engineering, and accounting programs.</p> <h3>The follow up: What is the student loan default rate?</h3> <p>The answer to this question can be far more illuminating than the employment rate question, because it can help you to see if the school is truly preparing you for a life of economic security. For instance, the Maryland Institute College of Art (MICA) boasts an incredibly low 2.2 percent default rate for undergraduates &mdash; whereas the national average default rate for student loan borrowers is 11.3 percent.</p> <p>There's a good reason why MICA brags about this rate. It tells prospective students that though they will be studying fine arts &mdash; which is a major that's not known for its high employment rates &mdash; they will learn plenty of applicable skills that will help them to land a job, even if it's in a different field.</p> <p>Many liberal arts schools like to say that they are teaching their students how to think critically, research, and write, which will be useful in any field post-graduation. Asking about the default rate can give you a better sense of whether or not the school in question really follows through on those promises. (See also: <a href="http://www.wisebread.com/what-really-happens-when-you-dont-pay-your-student-loans?ref=seealso" target="_blank">What Really Happens When You Don't Pay Your Student Loans</a>)</p> <h2>The typical question: How many students receive financial aid?</h2> <p>Prospective students want to know that there may be aid available to them if they choose a particular school. Many schools will tout just how large a percentage of students receive financial aid, which can help to alleviate fears that a particular school might be economically out of reach.</p> <p>But not all financial aid is created equal, and knowing that 70 percent of students at a particular school receive aid does not tell you everything you need to know.</p> <h3>The follow up: What is the ratio of outright aid to loans?</h3> <p>When you ask how many students receive financial aid, the school representative will tell you a number that includes any students who are taking loans from the school. What students and parents really need to know is how much financial aid is made up of scholarships and grants as compared to loans.</p> <p>If the ratio is tilted toward loans over outright aid, that can help you make a better financial comparison of the costs of different schools. The answer to this question can also help you to know which schools are truly committed to (and put money behind) the idea of helping students afford their education. (See also: <a href="http://www.wisebread.com/how-to-pay-for-college-when-you-didnt-get-a-scholarship?ref=seealso" target="_blank">How to Pay for College When You Didn't Get a Scholarship</a>)</p> <h2>The typical question: What is the average student loan debt of graduating students?</h2> <p>After hearing all of the horror stories of graduates with six-figure student loans, it's natural that prospective students would want to learn the average debt load of graduates from each school. This figure can help you to determine if the school appears to be within your financial reach. However, it doesn't necessarily tell the whole story.</p> <h3>The follow up: What kinds of financial literacy support are available to alumni?</h3> <p>Some schools have an unofficial, &quot;Here's your diploma, now get outta here&quot; vibe when it comes to helping their young alumni get on their feet. At these schools, all you can really expect in terms of financial literacy support is the federally-mandated student loan exit interview.</p> <p>However, many schools offer a great deal of support for recent graduates &mdash; particularly schools that know they are a little more expensive and do not have the endowment necessary to offer more outright aid.</p> <p>If the school you have your heart set on has a high average student loan debt amount, it is possible that the alumni office works extra hard to help new grads learn how to navigate their finances. Even if the school does not have a high average debt burden, it's worth asking about what kinds of financial literacy support a graduate can expect from the alumni office. It's important to remember that your relationship with the school does not end when you walk across the stage. (See also: <a href="http://www.wisebread.com/the-financial-basics-every-new-grad-should-know?ref=seealso" target="_blank">The Financial Basics Every New Grad Should Know</a>)</p> <h2>The typical question: Do I make too much to receive financial aid?</h2> <p>A common concern among families is the possibility that their income will disqualify their prospective student from need-based financial aid. It's a reasonable concern, and asking this question can help you to better understand the income requirements for financial aid eligibility &mdash; since income is the largest factor in receiving financial aid. However, income is not the only consideration for financial aid eligibility, and just asking this question might not give you all the answers you need.</p> <h3>The follow up: What other factors do you consider for financial aid eligibility?</h3> <p>It's important to remember that schools also consider a number of other factors, in addition to income, when determining who is eligible for need-based financial aid. These factors can include family size, whether or not other members of the family are also in school, number of assets, and even the parents' ages. Asking this question can help you figure out if there may be some financial aid available, even if your family income is relatively high. (See also: <a href="http://www.wisebread.com/12-surprising-ways-to-get-more-college-financial-aid?ref=seealso" target="_blank">12 Surprising Ways to Get More College Financial Aid</a>)</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F8-questions-to-ask-on-a-college-tour&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F8%2520Questions%2520to%2520Ask%2520on%2520a%2520College%2520Tour.jpg&amp;description=8%20Questions%20to%20Ask%20on%20a%20College%20Tour"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/u5180/8%20Questions%20to%20Ask%20on%20a%20College%20Tour.jpg" alt="8 Questions to Ask on a College Tour" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="https://www.wisebread.com/emily-guy-birken">Emily Guy Birken</a> of <a href="https://www.wisebread.com/8-questions-to-ask-on-a-college-tour">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/what-to-do-when-you-cant-afford-your-childs-college-education">What to Do When You Can&#039;t Afford Your Child&#039;s College Education</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/the-10-most-common-financial-aid-mistakes-and-how-to-avoid-them">The 10 Most Common Financial Aid Mistakes — And How To Avoid Them</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/4-things-you-need-to-know-about-deferring-student-loans">4 Things You Need to Know About Deferring Student Loans</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/7-money-moves-every-new-college-student-should-make">7 Money Moves Every New College Student Should Make</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/css-is-one-source-of-college-financial-aid-you-cant-afford-to-overlook">CSS Is One Source of College Financial Aid You Can&#039;t Afford to Overlook</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Education & Training campus visits college tour employment rates financial aid financial literacy graduation questions student loans Tue, 22 May 2018 08:30:41 +0000 Emily Guy Birken 2131424 at https://www.wisebread.com This Is How Student Loan Interest Works https://www.wisebread.com/this-is-how-student-loan-interest-works <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/this-is-how-student-loan-interest-works" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/imagecache/250w/blog-images/student_loan_debt.jpg" alt="Student Loan debt" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Student loans are a heavy financial burden for most borrowers, but the loan balance isn't the only major financial blow; the interest that accumulates is also difficult to stay on top of.</p> <p>Interest on a student loan is a major contributor to how big your monthly payment will be and how much your loan will <em>really </em>cost by the time you pay it off. Let's look at how student loan interest works and what you can do to get your loans paid off faster and for less money.</p> <h2>Factors that determine interest on your student loan</h2> <p>There are a few factors that determine how much you will pay in interest on your student loan: the interest rate, the amount you borrow, the loan term, and your payment plan.</p> <h3>Interest rate</h3> <p>When you take out a student loan, you'll need to pay back the amount you borrow, plus interest on the loan. Interest is charged as a percentage of the amount you owe. For example, a $10,000 loan at a 10 percent annual interest rate (compounded daily) will cost you $1,049 after a year. So after one year, you would need to pay back the $10,000 that you borrowed, plus $1,049 for interest.</p> <h3>Amount borrowed</h3> <p>We have seen that a $10,000 loan at a 10 percent annual interest rate costs $1,049 in interest after a year. Of course, most student loans are much bigger than $10,000 &mdash; what if you borrow more? If you borrow $20,000, the interest cost to carry this loan for a year would be $2,097. If you borrow $50,000, the interest after a year would be $5,243. The more you borrow, the more interest the loan carries.</p> <h3>Loan term</h3> <p>The loan term is how long it will take you to pay back the loan. For example, you could borrow $50,000 and pay it back over 10 years. In this case, the term of the loan is 10 years. You can reduce your monthly payments by choosing a longer loan term, but you will end up paying more in interest.</p> <p>If you borrow $50,000 at a 10 percent annual interest rate, you would pay $660.75 per month and your total cost for interest over the life of the loan would be $29,290.44. Now, let's say you want lower monthly payments, so you go with a 20-year term instead of 10 years. Your monthly payment would be $482.51, but over the life of the loan you would pay a whopping $65,802.60 in interest &mdash; about $35,000 more!</p> <h3>Payment plan</h3> <p>Student loans have more flexibility in their payment schedules than other installment loans. The simplest plan is to make the same monthly payments over the entire term of the loan. However, since new college grads typically have a lower income just after graduation and earn a higher salary over time, you can select repayment plans that start off with smaller monthly payments that increase as your income increases.</p> <p>Variable repayment plans do make it easier to make payments on student loans, but the price to be paid for this flexibility is interest. Any payment plan that has smaller payments in the early years will cost more in interest over all. (See also: <a href="http://www.wisebread.com/6-questions-to-ask-before-taking-out-student-loans?ref=seealso" target="_blank">6 Questions to Ask Before Taking Out Student Loans</a>)</p> <h2>How much of your student loan payment goes to interest?</h2> <p>When you make your monthly student loan payment, at first, most of your payment will go toward paying interest. Only a small amount will go toward paying down the principal. Over time, eventually more of your payment will chip away at the principal until your loan is paid off in full.</p> <p>Here's an example of how a payment of $660.75 per month on a $50,000 student loan at 10 percent interest would be applied to interest and principal during a 10-year term.</p> <p><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/u5170/amortization.jpg" alt="" /></p> <p>At first, you can see how the majority of the payment goes toward interest. But over time, as you continue to make payments, the balance of the loan decreases, thereby reducing the interest that accumulates and allowing more of your monthly payment to go to paying down the principal of the loan.</p> <p>Most student loans give you the option to apply extra payments toward the principal. If you can pay a little extra each month, you'll bring your balance down faster and save money on interest payments over the life of your loan. For example, if you could pay $40 more per month, your loan would be paid off in nine years instead of 10, and your total interest cost would be about $3,000 less. (See also: <a href="http://www.wisebread.com/what-really-happens-when-you-dont-pay-your-student-loans?ref=seealso" target="_blank">What Really Happens When You Don't Pay Your Student Loans</a>)</p> <h2>How to reduce your student loan interest</h2> <p>Once you understand how student loan interest works, you can put that knowledge to work. There are a few ways you can reduce the overall cost of your student loans.</p> <ul> <li> <p>Paying your loan off faster will reduce the cost of interest. Choose the shortest term you can afford, and make extra payments if possible.</p> </li> <li> <p>Borrowing more will increase your interest cost. Try to minimize living expenses while in school to keep your student loan balance as low as possible.</p> </li> </ul> <p>Select the student loan option with the lowest interest rate available. If your rate is still higher than you'd like, consider refinancing your student loan later to a lower interest rate. (See also: <a href="http://www.wisebread.com/15-ways-to-pay-back-student-loans-faster?ref=seealso" target="_blank">15 Ways to Pay Back Student Loans Faster</a>)</p> <p style="text-align: center;">&nbsp;</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fthis-is-how-student-loan-interest-works&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FThis%2520Is%2520How%2520Student%2520Loan%2520Interest%2520Works.jpg&amp;description=This%20Is%20How%20Student%20Loan%20Interest%20Works"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/u5180/This%20Is%20How%20Student%20Loan%20Interest%20Works.jpg" alt="This Is How Student Loan Interest Works" width="250" height="374" /></p> <p>&nbsp;</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="https://www.wisebread.com/dr-penny-pincher">Dr Penny Pincher</a> of <a href="https://www.wisebread.com/this-is-how-student-loan-interest-works">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/8-valuable-rights-you-might-lose-when-you-refinance-student-loans">8 Valuable Rights You Might Lose When You Refinance Student Loans</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/dont-ignore-these-4-things-before-refinancing-your-student-loans">Don&#039;t Ignore These 4 Things Before Refinancing Your Student Loans</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/7-unique-ways-millennials-are-dealing-with-student-loan-debt">7 Unique Ways Millennials Are Dealing With Student Loan Debt</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/12-easy-ways-to-avoid-student-loan-debt">12 Easy Ways to Avoid Student Loan Debt</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/what-s-the-difference-between-student-loan-refinancing-and-consolidation">What’s the Difference Between Student Loan Refinancing and Consolidation?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Banking Debt Management Education & Training amortization college extra payments interest rates loan terms principal refinancing repayment plans student loans tuition Wed, 09 May 2018 08:30:19 +0000 Dr Penny Pincher 2138310 at https://www.wisebread.com My Kid Got Accepted to an Expensive Private College — Now What? https://www.wisebread.com/my-kid-got-accepted-to-an-expensive-private-college-now-what <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/my-kid-got-accepted-to-an-expensive-private-college-now-what" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/imagecache/250w/blog-images/coins_in_glass_jar_with_education_label.jpg" alt="Coins in glass jar with education label" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>My son recently got accepted into a college program that would cost about $45,000 per year for tuition, room, and board. This is exciting news &mdash; but also potentially expensive news. At what point does the cost of college outweigh the likely economic benefits?</p> <p>Of course, the value of college goes far beyond simply allowing someone to prepare for a higher paying job. College can help you discover your path in life, develop your mind, and open doors to experiences that are not available to most people. But how much is too much to pay for college, from a purely financial perspective?</p> <h2>College's cost in dollars and opportunity</h2> <p>The main costs of college are tuition, room, and board. The average total cost of attending an in-state public university is over $20,000 per year, and the average cost of private college is over $40,000 per year, according to the College Board.</p> <p>Opportunity cost is another cost of college that is easily overlooked. If you spend four years attending college full-time, you miss out on four years of full-time income that you could have earned instead. You also potentially delay starting to build investments and reaching financial independence.</p> <p>The most insidious cost of going to college is probably lifestyle inflation. Almost everyone tends to spend more as they make more. Even though college graduates will likely make more money than those who don't go to college, college grads will probably also <em>spend </em>a lot more on a more expensive lifestyle. Just because you make more money doesn't mean you'll end up having more money in your bank account or a higher net worth. (See also: <a href="http://www.wisebread.com/what-to-do-when-you-cant-afford-your-childs-college-education?ref=seealso" target="_blank">What to Do When You Can't Afford Your Child's College Education</a>)</p> <h2>College will boost future earnings by a lot</h2> <p>Even though the costs of attending college can be prohibitive, the benefits in terms of increased salary can easily add up to millions of dollars over a career. Let's say you are 18 years old and decide to start working full-time at an entry-level job that pays $20,000 per year. Your earnings over your career until age 65, with a 3 percent raise every year, would be $2,007,930.</p> <p>Now let's say instead of starting to work full-time at age 18, you attend college for four years. You start working full-time at age 22 with a starting salary of $45,000 per year, which is a reasonable expectation for a wide range of college majors. If you work until age 65, assuming a 3 percent raise each year, the earnings over your career would be $3,846,775.</p> <p>Taking into consideration that you delayed starting your career for five years to attend college, you would still earn over $1.8 million more over the course of your career from the benefit of your college education.</p> <p>Of course, expected starting salaries vary with college major. According to the National Association of Colleges and Employers, engineering majors are at the top of the pay scale and can expect to start at an average salary of around $65,000. Education majors have average starting salaries of around $35,000, and almost all other majors are somewhere between $35K and $65K. But no matter what you major in, your salary earnings potential over your career will likely get a big boost by going to college. (See also: <a href="http://www.wisebread.com/5-jobs-that-pay-over-50k-and-dont-require-a-bachelors-degree?ref=seealso" target="_blank">5 Jobs That Pay Over $50K and Don't Require a Bachelor's Degree</a>)</p> <h2>How much should you pay to go to college?</h2> <p>The return on investment of going to college can be quite favorable in terms of increased lifetime salary potential. As we saw in the example above, earning over $1.5 million more from a higher salary after going to college is a realistic expectation.</p> <p>The limit on how much you should pay for college is not constrained by the value of your higher salary with a college degree, since your increased earnings would probably far exceed the cost of going to college. Instead, the limit on college cost for most people is driven by how big of a student loan they can afford to pay back after graduating.</p> <p>Even though a college degree could boost your income by millions of dollars over your career, you'll need to start making student loan payments shortly after graduating. By estimating how much income you expect to earn after you graduate, you can figure out a ballpark figure for the maximum size student loan you can afford. (See also: <a href="http://www.wisebread.com/6-questions-to-ask-before-taking-out-student-loans?ref=seealso" target="_blank">6 Questions to Ask Before Taking Out Student Loans</a>)</p> <p>Here's how to calculate your maximum affordable student loan balance.</p> <ul> <li> <p>Estimate your starting salary based on your major. For example, $45,000.</p> </li> <li> <p>Divide your anticipated starting salary by 12 to get monthly pretax income. For example, $45,000 / 12 = $3,750.</p> </li> </ul> <ul> <li> <p>As a rule of thumb, use 10 percent of your pretax monthly income as your maximum affordable student loan payment. For example, $3,750 x 0.10 = $375 per month.</p> </li> </ul> <ul> <li> <p>Calculate the loan amount that a payment of $375 would support. For example, using the <a href="https://www.calcxml.com/calculators/loan-balance?skn=#results" target="_blank">loan balance calculator</a> from CalcXML, $375 per month would support a 10-year loan of $32,586 with 6.8 percent interest.</p> </li> <li> <p>Divide the loan amount by the number of years of college. For example, $32,586 / 4 = $8,146.50 per year.</p> </li> </ul> <p>The second to last step gives you an idea of the biggest student loan balance that you could afford to make payments on. The very last step gives you the biggest student loan amount that you should take each year.</p> <p>If you want a quicker way to estimate the maximum affordable student loan balance, take 75 percent of your anticipated starting salary. Using the same salary as in the previous example, $45,000 x 0.75 = $33,750. That would be your maximum affordable student loan balance.</p> <h2>But what if the numbers don't add up?</h2> <p>I started off by saying that my son was accepted into a program that costs $45,000 per year. Over four years, this would add up to $180,000. This greatly exceeds the maximum affordable student loan amount for a new college graduate. For an expected starting salary of $45,000, we calculated that the maximum affordable student loan balance is around $33,000. This wouldn't even cover one year of my son's program.</p> <p>Fortunately, there are some ways to reduce college expenses and bring the cost into an affordable range. My son was offered a big scholarship, which makes the sticker price a lot lower. Here are some other possibilities your child can pursue to help keep college costs affordable. (See also: <a href="http://www.wisebread.com/how-to-pay-for-college-when-you-didnt-get-a-scholarship?ref=seealso" target="_blank">How to Pay for College When You Didn't Get a Scholarship</a>)</p> <ul> <li> <p>Choose an in-state public university instead of more expensive private schools.</p> </li> <li> <p>Consider starting at community college for two years and transferring credits to a four-year institution later.</p> </li> <li> <p>Work summers or part-time to help pay some college expenses and reduce the burden of student loan debt.</p> </li> <li> <p>Consider going into a major that pays well to be able to afford a more expensive college program.</p> </li> <li> <p>Consider financing student loans for a longer repayment period to reduce the monthly payments. (You will be in debt longer, but could still come out ahead in the long run.)</p> </li> <li> <p>Consider military service before college, or an ROTC program at college. Benefits can cover college expenses.</p> </li> </ul> <p style="text-align: center;"> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fmy-kid-got-accepted-to-an-expensive-private-college-now-what&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FMy%2520Kid%2520Got%2520Accepted%2520to%2520an%2520Expensive%2520Private%2520College%2520%25E2%2580%2594%2520Now%2520What_.jpg&amp;description=My%20Kid%20Got%20Accepted%20to%20an%20Expensive%20Private%20College%20%E2%80%94%20Now%20What%3F"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/u5180/My%20Kid%20Got%20Accepted%20to%20an%20Expensive%20Private%20College%20%E2%80%94%20Now%20What_.jpg" alt="My Kid Got Accepted to an Expensive Private College &mdash; Now What?" width="250" height="374" /></p> <p>&nbsp;</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="https://www.wisebread.com/dr-penny-pincher">Dr Penny Pincher</a> of <a href="https://www.wisebread.com/my-kid-got-accepted-to-an-expensive-private-college-now-what">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/how-student-loan-debt-can-derail-your-future">How Student Loan Debt Can Derail Your Future</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/the-encouraging-truth-about-how-americans-are-covering-the-cost-of-college">The Encouraging Truth About How Americans Are Covering the Cost of College</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/is-it-smart-to-pay-college-tuition-with-a-credit-card">Is It Smart to Pay College Tuition With a Credit Card?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/how-to-keep-student-loans-from-wrecking-your-retirement">How to Keep Student Loans From Wrecking Your Retirement</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/6-questions-to-ask-before-taking-out-student-loans">6 Questions to Ask Before Taking Out Student Loans</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Education & Training calculators career college costs income lifetime earnings student loans tuition Tue, 24 Apr 2018 08:30:10 +0000 Dr Penny Pincher 2130998 at https://www.wisebread.com How to Manage Student Loans On a Low Income https://www.wisebread.com/how-to-manage-student-loans-on-a-low-income <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-manage-student-loans-on-a-low-income" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/imagecache/250w/blog-images/woman_with_stack_pile_of_books_and_piggy_bank.jpg" alt="Woman with stack pile of books and piggy bank" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Student loans are a lifeline for college students without the means to foot the full bill for higher education. But the hardships begin when they graduate. For the Class of 2016, the average student loan borrower has more than $37,000 in student debt.</p> <p>Juggling student loan payments with other bills can sometimes seem impossible if you're making a low salary. Luckily, you do have options that can make your student loan payments easier to bear. Here's what you can do.</p> <h2>Federal vs. private student loans</h2> <p>There are two broad types of student loans: federal and private. Federal student loans are the easiest to deal with. That's because there are a number of programs designed to make your monthly payments more affordable.</p> <p>Private student loans are much less flexible because it's up to the individual lender to decide whether they want to help you or not. But as we'll see below, you still have options if you've got private student loans.</p> <h2>Repayment options for federal student loan borrowers</h2> <p>If you have federal student loans, you could be eligible for one of these <a href="https://studentloans.gov/myDirectLoan/ibrInstructions.action" target="_blank">income-driven repayment programs</a>:</p> <ul> <li> <p>Income-Based Repayment (IBR)</p> </li> <li> <p>Pay As You Earn (PAYE)</p> </li> <li> <p>Revised Pay As You Earn (REPAYE)</p> </li> <li> <p>Income-Contingent Repayment (ICR)</p> </li> </ul> <p>These programs all require some hassle to set up and maintain with your loan servicer. Once in place, however, your monthly student loan payments can be lowered to 10-20 percent of your discretionary income for 20-25 years, after which they are forgiven<strong>. </strong></p> <p>The difference is in how you qualify for them and the particular details of the program. Some programs have certain income requirements and loan type requirements (yep, they are limited to even certain types of federal loans). Each program works slightly differently as well, in terms of how much you have to pay and for how long.</p> <p>It sounds like a confusing web to navigate, and it is. But if you need your monthly student loan payment lowered for the long term and take the time to research the right <a href="http://www.wisebread.com/which-student-loan-repayment-plan-saves-you-the-most?ref=internal" target="_blank">federal student loan repayment program</a> for you, it can make a world of difference for your financial health.</p> <p>One important note: Refinancing is often touted as a cure-all for high student loan payments. While it can be beneficial in certain cases, you should think long and hard before you do this with federal loans. Refinancing the loans with private lenders (a different thing than <a href="http://www.wisebread.com/what-s-the-difference-between-student-loan-refinancing-and-consolidation?ref=internal" target="_blank">consolidating all of your federal loans</a> into one loan) means that you might get a lower payment, but you <a href="http://www.wisebread.com/8-valuable-rights-you-might-lose-when-you-refinance-student-loans?ref=internal" target="_blank">lose all the nice federal protections</a> outlined above.</p> <h2>Forbearance and deferment for federal student loan borrowers</h2> <p>If you're facing a temporary financial crisis such as a job loss, injury, or other economic hardship, it might make sense to ask for a temporary <a href="http://www.wisebread.com/what-is-student-loan-forbearance-anyway?ref=internal" target="_blank">forbearance</a> or <a href="http://www.wisebread.com/4-things-you-need-to-know-about-deferring-student-loans?ref=internal" target="_blank">deferment</a>. The programs can offer you up to a three-year break from making student loan payments.</p> <h2>Repayment options for private student loan borrowers</h2> <p>Unfortunately, private student loans are a bit like the Wild West. There are no federal rules requiring private lenders to work with you on a repayment plan. They're completely within their legal rights to continue charging you payments you can't afford, even if it puts you in financial jeopardy.</p> <p>Still, it doesn't hurt to call up your private student loan servicer to ask them for a break. &quot;If you're having a hard time making private loan payments, you can try reaching out and seeing if they'd agree to a modified payment schedule or forbearance, but the answer will probably be no,&quot; says Travis Hornsby, founder of Student Loan Planner, a financial coaching and consulting firm.</p> <p>After that, another option is to try to refinance your student loans with a different private lender for a lower rate. Keep in mind that many lenders require a minimum loan amount of $5,000 to refinance. You'll also need to prove that your income is high enough that you can make your new monthly payments, even though they're smaller than your current ones.</p> <p>In addition, you'll need a good credit score to qualify for interest rates that are low enough to make a refinance worthwhile. A FICO score below 640 is likely to disqualify you for a refinance.</p> <h2>Plan for what comes next</h2> <p>If you are granted student loan forbearance or deferment, use your time wisely. Plan on how to get your financial ship righted so that you <em>are</em> able to afford the monthly payments when they start back up.</p> <p>Refinancing can help lower your payments, but don't let that lull you into complacency. You should still make every effort you can to pay off the debt as soon as possible. <a href="http://www.wisebread.com/what-really-happens-when-you-dont-pay-your-student-loans?ref=internal" target="_blank">Defaulting on student loans</a> can do serious damage to your credit.</p> <p>Finally, if you sign up for an income-driven federal student loan repayment plan, make sure you know what the requirements are and that you follow them to a T. One filing slip-up can result in you being ineligible for the program.</p> <p>And if you expect a portion of your student loans to be forgiven at the end of the repayment term, remember this: The forgiven amount is considered <em>taxable income</em> by the IRS, meaning that you need to be saving for that bill, which could be considerable.</p> <h2>You can do this</h2> <p>Student loans are no fun to deal with. But you <em>can</em> get over them even if you have a low income by using the programs outlined above. It won't be easy, and it might not be quick, but thousands of people have done it before, and you can do it, too.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fhow-to-manage-student-loans-on-a-low-income&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FHow%2520to%2520Manage%2520Student%2520Loans%2520On%2520a%2520Low%2520Income.jpg&amp;description=How%20to%20Manage%20Student%20Loans%20On%20a%20Low%20Income"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/u5180/How%20to%20Manage%20Student%20Loans%20On%20a%20Low%20Income.jpg" alt="How to Manage Student Loans On a Low Income" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="https://www.wisebread.com/lindsay-vansomeren">Lindsay VanSomeren</a> of <a href="https://www.wisebread.com/how-to-manage-student-loans-on-a-low-income">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/7-unique-ways-millennials-are-dealing-with-student-loan-debt">7 Unique Ways Millennials Are Dealing With Student Loan Debt</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/how-student-loan-debt-can-derail-your-future">How Student Loan Debt Can Derail Your Future</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/this-is-how-student-loan-interest-works">This Is How Student Loan Interest Works</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/12-easy-ways-to-avoid-student-loan-debt">12 Easy Ways to Avoid Student Loan Debt</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/6-questions-to-ask-before-taking-out-student-loans">6 Questions to Ask Before Taking Out Student Loans</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management Education & Training college loans college students financial struggles low income student debt student loans Wed, 18 Apr 2018 08:30:06 +0000 Lindsay VanSomeren 2128966 at https://www.wisebread.com Here's How Late Starters Can Save for Their Kids' Education https://www.wisebread.com/heres-how-late-starters-can-save-for-their-kids-education <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/heres-how-late-starters-can-save-for-their-kids-education" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/imagecache/250w/blog-images/stick_with_word_saving_for_college_and_money_0.jpg" alt="Stick with word Saving for College and money" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You've always planned to help your children save for their college educations. There's just one problem: Those kids are already in high school and you've not even managed to save enough money for a single semester.</p> <p>Don't panic. Saving for college can sneak up on parents who already have many other financial challenges like making monthly mortgage payments, building an emergency fund, and saving for retirement &mdash; not to mention the daily costs that come with raising children.</p> <p>Fortunately, there are still steps you can take to boost your college saving efforts late in the game. You'll just have to be realistic: It's challenging to pay for a child's college education when you only have three or four years to do it. Setting more realistic goals can help ease your stress.</p> <p>And whatever you do, don't forget to have a long talk with your children. Explain to them exactly what kind of financial support they can expect. You don't want to blindside them if they think you're going to be their tuition piggy bank.</p> <h2>1. Don't get discouraged</h2> <p>The first rule is the simplest: Don't give up just because you've gotten off to a late start. Even if your child is starting high school, you can still open a 529 college savings account and contribute money to it each month. Every state in the country offers one of these plans.</p> <p>These plans come with tax benefits that make them ideal for saving for higher education. The money you save in a 529 plan will grow on a tax-deferred basis. You can withdraw the money without paying any taxes, too, as long as you use the dollars for qualified higher-education costs. The definition of &quot;qualified expense&quot; is broad here. They include tuition, of course, but also fees, books, and supplies.</p> <p>You might not have much money to deposit into these accounts each month, but even saving $100 a month can add up. Sure, you might not be able to save enough to cover all of your child's college costs. But you can certainly make a dent in tuition payments, fees, and expenses.</p> <p>Your children might have to borrow more money, or save up their own dollars, to help cover the shortfall. But if you start saving now, you'll at least reduce their financial burden. (See also: <a href="http://www.wisebread.com/the-9-best-state-529-college-savings-plans?ref=seealso" target="_blank">The 9 Best State 529 College Savings Plans</a>)</p> <h2>2. Tap into Upromise</h2> <p>You can provide an extra boost to your savings through Sallie Mae's <a href="https://www.upromise.com/" target="_blank">Upromise</a> program. Parents and students who sign up receive extra money toward college when they shop at participating retailers. These retailers deposit a percentage of what parents and students spend into a savings account designated for a future college student.</p> <p>The program is free. And you can invite your other family members and friends to register their credit and debit cards, too. Then, when they shop at participating retailers, a percentage of their sales will also be funneled into your child's savings account. (See also: <a href="http://www.wisebread.com/what-to-do-when-you-cant-afford-your-childs-college-education?ref=seealso" target="_blank">What to Do When You Can't Afford Your Child's College Education</a>)</p> <h2>3. Work with your children on a savings budget</h2> <p>It's important to keep your children informed as to how much you've saved for their college educations and how much you can reasonably expect to save before they head off to university. You don't want your children surprised that you've only saved enough to pay for two years of college when they expected you to pay for four.</p> <p>Have real financial conversations with your children. Work with them to create a household budget to determine how much money you can save each month for college. Doing this will give your children a more realistic look at your finances, the challenge of saving for college, and insight into how much they themselves might have to borrow.</p> <p>The budget might even include any money your children can add to their own college savings fund. Remind your sons and daughters that every little bit adds up, and that you expect them to help provide college savings, too.</p> <p>Once you and your children have created a budget, stick to it. Don't be tempted to save more than you can reasonably afford, and don't skimp on the savings to take a vacation or buy an expensive flat-screen TV. (See also: <a href="http://www.wisebread.com/how-to-help-your-kid-build-their-first-budget?ref=seealso" target="_blank">How to Help Your Kid Build Their First Budget</a>)</p> <h2>4. Protect your retirement savings</h2> <p>It can be tempting to save for your children's college education at the expense of putting money away for your retirement. Don't fall into this financial trap. Your number one priority should still be to stow away money for your retirement years, even if this means that you can't save as much as you'd like for your kids' education.</p> <p>The formula is simple: Retirement first, college savings second. Remember, your children have options to help fund the cost of a college education. You don't have nearly as many for building your retirement savings. (See also: <a href="http://www.wisebread.com/how-to-keep-student-loans-from-wrecking-your-retirement?ref=seealso" target="_blank">How to Keep Student Loans From Wrecking Your Retirement</a>)</p> <h2>5. Explore other college options</h2> <p>Speaking of those other options, your children need to start exploring them. Perhaps they could attend community college for two years and then transfer to a more expensive four-year college as a junior. Or maybe your children could attend a less expensive public state university instead of that private school three states away. Both strategies could dramatically reduce the expense of a college education.</p> <p>Encourage your children to also hunt for scholarship and grant opportunities. Even smaller scholarships can help reduce the cost of education. (See also: <a href="http://www.wisebread.com/how-to-pay-for-college-when-you-didnt-get-a-scholarship?ref=seealso" target="_blank">How to Pay for College When You Didn't Get a Scholarship</a>)</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fheres-how-late-starters-can-save-for-their-kids-education&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FHere%2527s%2520How%2520Late%2520Starters%2520Can%2520Save%2520for%2520Their%2520Kids%2527%2520Education.jpg&amp;description=Here's%20How%20Late%20Starters%20Can%20Save%20for%20Their%20Kids'%20Education"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/u5180/Here%27s%20How%20Late%20Starters%20Can%20Save%20for%20Their%20Kids%27%20Education.jpg" alt="Here's How Late Starters Can Save for Their Kids' Education" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="https://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="https://www.wisebread.com/heres-how-late-starters-can-save-for-their-kids-education">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/should-you-save-for-college-using-a-529-prepaid-tuition-plan">Should You Save for College Using a 529 Prepaid Tuition Plan?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/the-encouraging-truth-about-how-americans-are-covering-the-cost-of-college">The Encouraging Truth About How Americans Are Covering the Cost of College</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/why-saving-too-much-money-for-a-college-fund-is-a-bad-idea">Why Saving Too Much Money for a College Fund Is a Bad Idea</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/6-questions-to-ask-before-taking-out-student-loans">6 Questions to Ask Before Taking Out Student Loans</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/why-your-ira-shouldnt-double-as-an-education-savings-plan">Why Your IRA Shouldn&#039;t Double as an Education Savings Plan</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Education & Training 529 plans budgeting children college education late starters retirement saving money scholarships tuition Wed, 04 Apr 2018 08:30:10 +0000 Dan Rafter 2125056 at https://www.wisebread.com