Parent’s Corner: 6 Steps to Help Your Student’s Finances

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Freshman year is the first time many college students are forced into independence. This includes managing money, planning budgets, monitoring student loans, and setting up a solid financial foundation. Here are several steps parents can take to ensure their students’ financial success and prepare them for life without mom and dad.

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1. Have Them Fill Out Yearly Paperwork

Many parents of college students take it upon themselves to fill out important paperwork like FAFSA applications, taxes, and scholarship forms. While this ensures it gets done, it doesn’t show the student how or even why they need to process these forms.

If you’re not ready to let go of control completely, set up a time for both of you to do the paperwork together. Go through each question and explain your answer. You can even do this with an accountant. Let the student ask questions and encourage them to take over when they start to figure it out.

2. Help Formulate a Budget

Helping your student formulate a budget opens the door for a teachable moment. There are some very simple budgets out there that can be managed online (Mint.com) or via a spreadsheet.

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Another option is to show them how to do the envelope method. The student cashes out their paycheck (or allowance check) each pay period, then divides their money into envelopes for each of their expenses. For example, a $500 paycheck may be divided into 5 envelopes: $80 for gas, $100 for car insurance, $50 for school supplies, $100 in entertainment, and $170 in savings. This way, they can see just how important it is to pay off necessary bills first before “paying” themselves.

3. Set Up Independent Bank Accounts

A bank account is only worth it if the student can access it easily and maintain it on their own. If your student is studying away from their hometown, be sure to set up a bank account as soon as they reach their new school. Many medium and large size colleges now have banks that operate inside the campus making them an attractive and convenient choice. They also typically provide student bank accounts which are low on fees and easy to understand.

4. Make Savings a Priority

And don’t forget to set up a savings account as well! Teaching students about savings now will help them understand the importance down the road. Many times, college students are so focused on what comes next that they don’t process the cost of retirement or even small emergencies like replacing a car or going to the hospital.

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The savings account should be the first step, as well as budgeting for savings as another. You can also consider gifting them books on saving in college that breaks down small steps they can take now. If you’re knowledgeable, help them understand the difference between retirement accounts as well as investment options. It is never too early to instill financial literacy.

5. Check In Regularly On Student Loans

Finally, don’t forget about student loans. If your student needed them to pay for college, they most likely have forgotten about them (or pushed it out of their mind). When they are home from break, take a night to log in to their online account and show them how much interest has accurred. Encourage putting some of that money from savings into the student loan account or to set aside a part of their personal budget to pay down the debt despite them being a student.

 

These are just a few of the steps you can take when talking money in college. By understanding the basics of financial management and having honest and open discussions about the future, your student will be on the road to financial success.

 

College Loans 101: Types of Student Loans

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Taking out student loans to pay for tuition, books, room and board, etc. is never an easy decision. However, by understanding the debt you are taking on and how best to manage it, you can be assured that the choice is a good one for you and your future. Here’s a simple breakdown of loan lingo and five of the most common types of loans.

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Student Loan Lingo

When you look into loans, here’s the definitions you need to know:

  • Principal: The amount of money borrowed before any fees or interest.
  • Interest Rate: The cost of borrowing. It’s a tacked on charge added to what you borrow over time. The smaller the interest rate, the better. You can get a fixed interest loan where the interest does not change over time or a variable interest loan where the interest may change periodically.
  • Lender: The provider of the loan. When you repay, your checks will be made out to them.
  • Loan Limits: The maximum you can take out over a period of time (usually an academic period)
  • Grace Period: A time in which you have between graduation and repayment. It may range from a few short weeks to up to a year depending on your loan terms.
  • FAFSA: An application that shows your eligibility for federal financial aid and student loans. You must reapply for every year you plan to need student loans.
  • Entrance Interview / Exit Interview: Informational and educational “training” you must do to receive a loan.
  • Discharge: Elimination of a debt.
  • Deferment: Temporary period in which you may not be required to pay for your loan because of a hardship or a change in finances.
  • Default/Delinquency: Failure to make payments on a loan.
  • Co-Signer: Person who agrees to sign a promissory note with a borrower. The co-signer is under the same obligations as the person borrowing should they not make payments.

5 Types of Student Loans

Once you have decided upon your school, you will receive a financial award letter that shows you how much money in scholarships and grants you have received. This money is a gift and is not part of your repayment obligation. After you subtract your gift money from your cost of attendance, you have the amount you will need to fund.

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Filling out your FAFSA will help you determine if you qualify for any federal, private, or specialty loan. Here are the five most common types you may receive:

1.   Stafford Loans

Stafford loans are the most common type of government-provided student loans. They come in two types: subsidized and unsubsidized. If they are subsidized, you are not required to pay back the loan until you have graduated or left school. The interest rate is higher, but the government will pay the interest while you are in school. With an unsubsidized loan, the interest rate is lower, but it is charged while you are enrolled. The payments, however, are deferred.

2.   Perkins Loans

Perkins loans are another type of federal student loans, but are usually only given to the neediest of students. They have a fixed interest rate and are subsidized (so you don’t have to pay until you graduate). While the Stafford loans are awarded by the federal office, the Perkins loans are given to the school who makes the decision on who will get the money.

3.   Parent Loans

Parent loans, more commonly referred to as PLUS loans, may be taken out by parents or guardians of undergraduate or graduate students. PLUS loans have a higher fixed interest rate and are usually unsubsidized.

4.   Private Loans

If federal funding does not cover the entire amount of your education, another option is private loans through independent lenders such as banks. Your application will be assessed by your ability to repay (usually by looking at your work history, bank account, and credit score). Most freshmen will require a cosigner. The interest rate is significantly higher, but some private loans offer the same repayment plans as subsidized or unsubsidized federal loans.

5.   Specialty Loans

Depending on your major, you may be qualified for federal or private loans designated for a specialty. Medical students who need to take out hundreds of thousands of dollars in debt qualify for medical loans and therefore need terms that are more flexible.

Will you be taking out any loans this year? How do you deal with the financial responsibility? Let us know!

Drop Your Debt in 5 Years!

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Drop Your Debt

 

 

What student doesn’t worry about paying off their student loans? With tuition rates rising every year and the beginning of loan paybacks rapidly approaching (or even already here, for some of us), there seems to be no light at the end of the tunnel. Whether you have federal loans, private loans or even any other kind of debt to be repaid, here are 3 ways from The Daily Positive that you can begin strong and challenge yourself.

1. Sacrifice is key! If you choose to live the way you have always lived, chances are that you will not be saving enough for normal cost of living expenses and loan payments. Little purchases gone unmonitored can really add up and take resources away from your repayment schedule. This is an intentional step that forces you to buckle down and will prove to be instrumental in keeping you focused.

2. Talk to your employer. Many employers will work with you if you explain to them that you would be willing to take a lower salary in exchange for help paying off your student loans through a compensation package. More and more companies who are looking for new hires straight out of school have loan assistance written into the initial compensation package. If they want your skills, talents, and education, most likely they are willing to provide you with education-related help.

3. Turn your love for something into a side business. Have a passion for interior design? Take a class on staging and make some side money staging homes for sale. Can you speak another language? See if a local school or a group in your community teaches English as a Second Language courses. Do you love making treasure out of trash? Pick up a DIY project from a local flea market or yard sale and breathe new life into it with new paint and funky designs to sell online. You never know how much revenue you could make on the side by simply turning a hobby into a job.

Don’t get so overwhelmed when looking at the big picture that you are idle in taking small steps towards freedom. Being diligent and aggressive in your approach will help you to stay focused on the end goal.

Check out The Daily Positive by Dale Partridge and read more about How To Pay Off Student Loans in 5 Years. Don’t forget to check out the awesome infographic he has as well!

Summer Before College Series 31: Where Is My Aid?!

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Happy Wednesday, bloggers!

Today’s blog was inspired by some unfortunate events that happened to me this past week. Now, I have told you over and over again to double check every important document that you send into your school, and I am definitely one to practice what I preach. My mother and I double-check all of the paperwork and call my university’s financial aid office for reassurance every year. However, when it came time for aid disbursement this year, I did not receive my package. I gave a two-day grace period until I started to panic. Why had I not received my financial aid package when everyone else had? This question repeatedly ran through my mind. I quickly called my mother after the two-day period was over and began to freak out. What if I was not chosen for aid? What if there is no record of me on file? How am I going to pay off my bill? These were all questions that a veteran like me should never have thought of.

Today, I want to give you some tips on how to fix the unexpected problems that may arise just before you leave for college in the fall.

  1. Stay calm. I cannot tell you this piece of advice enough! Make sure that you stay calm as much as you can. Do not panic or ask the same questions that I did because there may not be anything wrong. Relax and remember that you have done everything that you were supposed to do!
  2. Allow a two-week grace period. There are thousands of students enrolled at your university, so it is nearly impossible for your school to send all of the packages out at the same time. Give it time and if you do not hear anything for two weeks after the set date/other people received theirs, then…
  3. Call your university’s financial aid office. Do this immediately after your two-week grace period. The financial aid employees will help to fix the problem by telling you the error that occurred. More often than not, your package is either in the mail or still being completed by the university. So, calling to ensure this information will ease your nerves.

Being the two-year veteran that I am, I should have known better and followed these tips. Especially because after calling the university, I discovered that my package was still in progress. There was no need to fret. The financial aid officer also informed me of when I should expect my package, easing my nerves.

I hope that my real-life scare acts as a good lesson for you to learn from. Make sure to follow my tips in blogs #22 and #16 so that you complete everything that you need to in a timely fashion. After that, remember to keep calm and know that time frames differ. You will receive the aid that you deserve! I promise!

Did you have something similar happen to you? Tell us about it!

Summer Before College Series 22: Important Document Organization

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Hello again, blogging world!

Now that you have really settled into summer and probably have gotten a big chunk of your college shopping done, you should really make sure that you have completed all of the forms and paperwork necessary for the 2013-2014 school year. Missing any forms could have serious consequences. It could cause you to lose aid, housing, meal plans, and even your place at school!

Believe me, I know that keeping track of the different documents is extremely stressful. Your family probably receives paperwork every week. Below, I will give you my secrets on how to not only keep your paperwork organized, but to also keep track of the deadlines.

Keeping your life organized is hard in and of itself, so adding more than what you are used to can be unbearable. One way that I keep everything organized is with a filing system. These systems come in many different forms. You can use a filing cabinet, a filing binder, or a bag with filing separators attached. I personally like to use the bag filing system because it allows me to carry the important documents from room to room without losing them. But as I said above, any system will work!

My original organization process:

After choosing the perfect filing system, I labeled each folder or separator, and I would recommend that you do the same. Some of my labels included: housing, dining, FAFSA, PHEAA, bank loans, school schedule, etc. After labeling the separators, I placed the corresponding forms/paperwork into the slots. This process helped me to keep each section’s contents together so as not to lose any important information. It also helped me to create a great filing system that I continue to use each semester!

The next thing that I do each semester, regarding paperwork, is to check all of the deadlines. I highlight them on the paperwork and then write them down in my planner. That way, I can double check the dates as they approach.

Next, after I followed all of the deadlines, I call any companies/loan services that may have not given a due date just to make sure that I am on top of things.

The final step that I do each semester is to call the office of each and every section of my filing system to make sure that I have completed every document necessary. This not only keeps me on track and finalizes everything, but also ensure that the office received everything that I sent them.

If you follow the tips above, you are sure to keep your documents organized! Remember: keeping your paperwork together and turning it in on time will save you from losing money later!

Offsetting the Cost of College

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College can be expensive. Sounds like a no-brainer, doesn’t it? Fact is, there are many alternatives out there for college students that they don’t consider until after the fact. Worry no more. This post is about the ways you can save during college so you have money left over after graduation.

  1. Skim on tuition. No, I’m not talking about ripping off the government. Many high schools offer students a chance to receive college credits for their high school courses. Think they have nothing to do with your major and you won’t need them? Think again. Many universities require students to take general studies courses to make them a well-rounded student, and these include classes you took in high school like your social sciences and your sciences. If you can get the credits in high school, you can focus more on the courses you need for your major, or even graduate early and jump into your field? Sounds good, huh?
    In addition, you should look into the alternatives to a major university. Branch campuses, more often than not, are cheaper than a main campus. Community colleges are also things to look into. You can get your general studies there and head to a bigger university, receiving your final diploma with a major school attached to that. The price? Much less than going straight into a big name university.
  2. Look at book-buying alternatives.There are many websites out there now where you can buy your books for much less than a university’s asking price. You can rent your textbooks, or even get online editions. Amazon is a great website to use, and so is Boundless and Textbooks.com.
  3. Make a budget.You’re living away from Mom and Dad and are completely independent, aside from the occasional crazy roommate. There’s no one to tell you what to do or how to spend your money, right? Wrong, because eventually you’re going to get a bill or have an emergency and need money, but you spent all of it going out to the local hang-out every night. Set a budget for yourself. Some banks have an online application that allows you to budget your money, or you can do it yourself. Get an envelope and every chance you get, slip in a couple dollars or a larger bill and save it for a rainy day. You’d be surprised how much you can save and how handy that will be in the long run!

Got anymore money saving tips? Let us know in the comments section, send in asks, or send in an e-mail! We want to hear from you!

Summer Before College Series 15: Work Study Facts

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Hello again!

Were you planning on working at school in the fall? Were you awarded work study? I am here to give you the five must-know work study facts. For those of you who do not already know, work study is granted by FAFSA and “provides part-time jobs for undergraduate and graduate students with financial need, allowing them to earn money to help pay educational expenses” (http://studentaid.ed.gov/types/work-study). I have been awarded work study each year and have worked the same on-campus job throughout my career. If you were not awarded work study, do not fret! You can still work to earn some extra cash to help you pay for college! In fact, most work study jobs are just regular on/off-campus jobs.

Below are the five must-know work study facts. They were all based on my personal experiences!

  1. Federal work study is awarded after completing the FAFSA application. If you and your family meet the financial criteria, then you will be granted federal work study. The dollar amount you are awarded will vary on different factors, such as your income, your parent’s income, when you apply, etc.
  2. Like I said above, work study jobs are usually just on/off-campus jobs. Therefore, you could work for any department of your school or any local business that participates in the federal work study program. I work with an on-campus organization where I give tours of the university to prospective students. I work with other work study students as well as regular students, which is very typical of many jobs you will find. If your school’s tour organization involves students, I would definitely recommend asking for a job application. It is a great way to get involved on campus and to gain some extra cash and resume experience.
  3. In your FAFSA reward letter, you are given a dollar amount for the federal work study you are awarded. For example, your letter may say $1,000.00 or $2,000.00. This dollar amount is the most that you can earn in your job for the year. Your boss and your financial aid office will make sure that you do not go over. If you have questions on how to exceed the amount you are awarded (make more money), talk to your financial aid office. They will let you know what you can do to earn some extra money in a way that will not violate your federal work study.
  4. Finding a job at school can be difficult, but if you use the right resources, then you will make it easier for yourself. Two good resources for you are your financial aid office and any career fairs that your school offers at the beginning of the year. The financial aid office will lead you to the correct locations that offer work study, and your school’s career fair will show you how many different jobs you can choose from. Most businesses/departments that go to the fair will advertise for work study so that you know which table to go to.
  5. Once you find a work study job, you are able to keep the same job throughout your entire college career, so it is not necessary to do the job search each year. With that being said, you can also have a different work study job each year. It is really up to you and what you like.

The work study process may seem scary and extremely difficult, but in reality, if you use the right resources, it will be a piece of cake!

Remember: if you were not awarded work study, you can still get a job to help you to pay for college! Also, if you have ANY questions on the work study process whatsoever, ask you financial aid office!

When I was researching for this blog, I used the website: http://studentaid.ed.gov/types/work-study. If you want to learn a little bit more about the process, check it out!

FAFSA Fiesta

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For those of us already in college, it’s that wonderful time of year once again. For those of you who aren’t, you have this wonderful time to look forward to. It’s FAFSA time.

FAFSA stands for the Free Application for Federal Student Aid. What it is is exactly what it sounds like. It’s an application for students enrolled in college to determine what they can receive as far as financial aid goes. How it works is you use your financial information and your parents’ information from the last tax year, plug it in on the official FAFSA website, and submit it for processing. From there, your expected family contribution (EFC) is determined. This is NOT the amount of money you and/or your family actually has to pay to your selected university, so don’t freak out. Your EFC is subtracted from the cost of attendance (COA), and that total determines your financial need.

Maybe it’s better if I use an example. Let’s say my EFC score is 18000. The COA score for my university is roughly 24000. My financial need would then be $6,000, just enough to receive Stafford loans. In some cases, you may be eligible to receive different kinds of grants, or nothing at all. It all depends on the EFC and COA factors.

Now, let’s talk deadlines. I was always raised to believe the early bird catches the worm. Why do you think so many stores and restaurants have early bird specials? You want to fill this out as soon as possible. The earlier you fill out your FAFSA, the more financial aid you may be available for. You don’t want your folks or legal guardians to yell because you procrastinated, do you? I’ve been there, and I cringed every single time. Anyway, you want to find out what your state’s deadline is for the FAFSA so you can fill it out as soon as possible.

This can all seem overwhelming. I’ve been there, too. I was one of the people to procrastinate filing my FAFSA. However, I have a couple tips that will definitely help you along the way.

  1. File your income taxes as soon as possible. This is crucial to make filing a FAFSA easier. You don’t want to have several different W2s in front of you while trying to fill this out. It just gets confusing. Filing your taxes puts most of the crucial information on one form, making filing the FAFSA much simpler. This goes for your parents and guardians as well.
  2. Don’t procrastinate. You never know what state aid you’re missing on, what’s already been snatched up from those who filed their FAFSA as soon as they possibly could.
  3. Get a second opinion. I screwed up my FAFSA my first time, and my mother had to go back in and actually saved us money. Asking for a second opinion isn’t a bad thing, neither is asking for help.

What are you waiting for? Get to filing! You never know what you’re going to get unless you try. Good luck!

Cutting the Costs of College Expenses: Loans, FAFSA, and You.

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It’s no secret that student loan debts are on everyone’s mind in today’s economy. Students and parents struggle with the decision of attending affordable, in state schools and limiting college experiences versus going to that prestigious school out of state and with sky rocketing fees. Naturally, parents want the best for their children and many believe the college experience is worth the debt, as once you gain that degree you can start chipping away at those loans and get a return on investment. In fact, a study by PewResearchStudy notes that “86% of the population believe that college is a good investment” (See: “Is College Worth it?“, 2011). This 86% of the population also includes parents, who encourage their children in college to study high-paying degrees to maximize their potential income upon 4 year degree completion.

Similarly, many parents and students are getting scholarship-savvy, tapping into their local religious groups, local school alumni organizations, company benefits (scholarship options offered to employee’s children) high school, and applying colleges for scholarship opportunities. Many students are realizing that local organizations and public, in-state schools are a great way to search for low-candidate pooled scholarships and save some money on tuition. As a student, you want to apply for as many scholarships as you can. Your parents can help set up scholarship opportunities with you, but once those applications are in your hand, they are your responsibility to complete and follow through. Make sure that you keep your options open and apply for as many scholarship opportunities that you possibly can. Even if the amounts are smaller than you’d think would be beneficial, ie- $200 here and there, take them anyways. A few scholarships with lower budgets will add up over time and can help cover your books, supplies and some personal expenses.

The second thing to look into (and be proactive about from an early start) is the FAFSA application, which stands for Free Application for Federal Student Aid. Filling out the FAFSA is a normal part to many student’s college application processes and is convenient to fill out in whichever way you’d prefer. Many state that filling the FAFSA out online is the best choice as the online application will actually calculate your total applicable earnings and tax return amounts whereas on a printed form you’d have to calculate the numbers yourself, leaving room for error. By filling out the FAFSA, you can determine if you are applicable to receive federal student aid (including work-study, Pell Grants and Federal student loans) and if so, how much.

After you have worked with your parents to find a tuition option that both of you are comfortable with and you have scoured for as many scholarship opportunities as you could find, it’s time to decide if you want to take out loans or foot the bill in cold hard cash. You also have to decide (if applicable) if you want to take out private or student loans. If you aren’t sure, read this blog for a few tips. Also do your research, both options are different and can impact your future. This is a decision that takes a lot of financial planning and guidance, so make sure you explore every option with your parents and consider ALL factors before making a decision. If you find all of your scholarship options early and save efficiently, you may just have to end up borrowing a small amount that with careful budgeting and frugal spending could be more manageable to pay off.

If you aren’t applying for colleges just yet but the idea is on your radar, make sure you start learning how to budget your money and manage your finances as soon as you can. The earlier you learn to budget your money (try using easy, online services and smartphone apps such as Mint.com, Pocket Money, Ace Budget, Money Book and more) the better. To help your parents and cover your own personal expenses, you should look into getting a work study or part time job on campus. A great place to start would be a local coffee shop or retail store. While working and attending class, you’ll feel more persistent to get your tasks done while making money at the same time. This really helps take a little weight off your parent’s shoulders financially as you learn to budget your money on meals, clothes, supplies and maybe even part of your tuition.

The Difference between Private and Federal Student Loans

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Before you take out a student loan it’s important to know the difference between private and federal student loans. No matter how low the interest rate on a private loan may be you shouldn’t take one out until you’ve maxed out all your federal loan options, and even then you should think long and hard before you borrow money from a private lender.

-The Interest Rate might Rise

A private loan may start with a lower interest rate than a federal student loan, but it usually isn’t fixed. That means that the variable interest rate might start rising before you even begin paying of your debt. On the other hand, federal student loans, which are issued through the Department of Education Direct Loan Program, have a fixed interest rate that will not rise.

A Co-Signer is Almost Always Needed

Co-signing on a loan is a lot of responsibility. If something happens to you, the person who cosigned for your loan becomes responsible for paying back your debt. Federal loans do not require a cosigner, but in order to get the lowest interest you’re probably going to need a cosigner for a private loan.

-Strict Repayment Terms

The repayment process of a federal student loan is flexible. If you become unemployed or return to school you can temporarily suspend payments on your federal student loan. Private loans do not come with the same benefits. Some lenders will agree to suspend your payments if you dealing with economic hardship, but they’re not required to do so.

-No Late Payments Allowed

You can miss nine months of payments before your federal student loans will be placed in default. That’s plenty of time to seek forbearance or find a way to catch up. Private lenders don’t offer the same deal though. If you’re late on just one payment private lenders can place your loan in default immediately. That means your credit score will be destroyed, your interest rate could be raised, and your entire loan might become due.

Severe Disability and even Death may have no effect on your Loan

If you die or get severely injured your private student loan still has to be paid back. The debt isn’t just forgiven or forgotten. Instead it passes on to your cosigner or who will be forced to pay or face damaging consequences.