During College: Your Undergraduate Needs a Spending Plan!

Last week’s post discussed how every $100 prepaid within 120 days after her fall Federal Direct Unsubsidized Loan funds are disbursed can reduce an undergraduate’s repayment amount by an additional $175. Urge your student to make such a prepayment. But remember, she shouldn’t prepay loan funds she’ll need.

IMG_9872How can she know what she’ll need? The best way is for you, as a loving parent, to use your real world experience to help her create an effective spending plan (also known as a budget, though many students consider that a dirty word, right up there with terms like diet and pop quiz!).

A great time to do this is when she’s home for Thanksgiving in a few weeks. Here are key components:

  • Time Period: Make the plan for the right time period. That’s at least each academic term but, if your student depends heavily on financial aid, it should probably stretch to when she’ll receive such aid for the next term.
  • Time Increments: Split the plan into weekly or monthly increments and use it to anticipate each increment’s income and expenses, which may vary by week or month.
  • Income: Plug in funds your student will receive — financial aid, take-home pay, money from you or other family members, savings withdrawals, etc.
  • Expenses: Help your student break down what she needs to spend in each increment. The U.S Education Department offers great guidance on what to include in a student’s spending plan and on building a spending plan.
  • Needs versus Wants: It’s hard, but help her separate needs (crucial necessities) from wants (spending on goods and services your student could get through college without).
  • Savings: Coach your student to stash away some money for emergencies; also for predictable future spending — travel between school and home, holiday and other gifts, maybe even spring break.
  • Review and Adjust: Your student’s actual income and outlays since leaving for IMG_9873college can help predict income and expenses for upcoming time increments. Review her fall pay stubs, credit/debit card records, and even paper notes on cash outlays. At the end of each of the next few months, help her compare such records to her plan, then refine her plan as necessary.

An effective spending plan will benefit your student during and after college. Help her learn how to build and execute one. It’ll be some of the best parental support you’ll ever provide.

College Affordability Solutions will help you tailor various strategies for making higher education more affordable. And to make sure the price of our services doesn’t become an impediment to them, they’re all provided at no charge. Call (512) 366-5354 or email collegeafford@gmail.com to access these services.

Before and During College: Help Your Student Avoid Credit Card Traps

There’s nothing inherently wrong with college students having credit cards. In fact, 56% of them posses at least one. But help your student beware of all those offers from banks and other credit card providers at this time of year.

After all, a credit card is an opportunity to rapidly amass high interest debt, and only predatory lenders would push such an opportunity at a naive 18-24 year-old with no regular income. In the words of Bernie Sanders:

What the . . . credit card companies are doing is not really much different from what gangsters and loan sharks do. . . . While bankers . . . don’t break the knee caps of those who can’t pay back, they still are destroying peoples’ lives.

IMG_8287So advise your student to ignore those unsolicited offers. Just the act of applying for multiple cards within a short period can cause her credit rating to take a dive. Instead, advise her to carefully search for and start with a single credit card — one without annual fees and, if study-abroad is in her future, without foreign transaction fees. Adding another credit card later is an option that can actually help build up her credit rating, but only after she’s learned the ropes.

There’s more danger, of course, once your student obtains a credit card. It poses an almost irresistible temptation to a young person facing the pressures of keeping up with more affluent peers in an environment full of spending opportunities.

In short, a credit card makes it far too easy to shell out too much. The credit card IMG_8288provider hopes she’ll do this, because then it gets to add interest and fees that may exceed 20% of whatever’s unpaid by the monthly due date. Her credit rating gets damaged, too. To keep this from happening, the provider figures you’ll cover the unpaid balance for her.

Still, when properly managed, a credit card offers certain benefits — funding for emergencies, small savings if it’s a reward card, a record of purchases. Moreover, if paid in full every month, your student will establish a strong credit score that’ll help her borrow for a car, home, and other big post-college purchases.

Help protect your student from the dangers and reap the benefits described above! Be assertive in coaching her about credit card management both before and after she goes to campus. Make sure her college credit experience is a good one!

Contact College Affordability Solutions at (512) 366-5354 or collegeafford.gmail.com for more information about how students and families can manage college-related expenses well.

A Year of College Affordability Solutions

College Affordability Solutions is dedicated to helping families keep higher education spending within their means. It uses this website to highlight postsecondary educational cost-management strategies at the times of the year when you and/or your student are most likely to need them.

21-of-the-most-beautiful-college-campuses-in-amer-2-20243-1428837186-9_dblbigDespite those who’ll try to talk your student out of college, postsecondary education is still worthwhile even if he or she has to borrow to pay for it. But student loans increase the cost of college, so do everything possible to minimize their use.

Over the last year, we’ve covered several approaches to keeping college and college-related debt affordable. Click on any of the links below to learn more . . .

Before College

Various investment and savings programs can help you prepare for college bills. Among these are 529 plans and college savings bonds, but you should explore them all – the sooner the better.

And be sure to apply for financial for every year of college. Complete the Free Application for Federal Student Aid (FAFSA) as soon as possible after October 1 but, by all means, before your FAFSA priority deadline arrives.

Student dependency status plays a big role in who completes the FAFSA. Other family factors do, too. But it isn’t as hard to complete as you’ve heard, especially if you fulfill 5 key steps, gather all the documents you need, and get answers to your last-minute FAFSA questions before doing so.

Long before the FAFSA, your student needs to begin aggressively searching for scholarships. It’s critical to know about the when and where and the how of doing this.

Pay close attention after you file your FAFSA to make sure you handle what happens next. Then carefully assess your financial aid offers as they arrive from colleges.

But it’s not all about financial aid and scholarships. A critical factor in college affordability is for your student to enroll in a college and major that fits him or her well.

During College

Once college begins, you can help your student keep his or her expenses within reason.140815_FF_BestCollegeCard Limited spending and indebtedness is important even with today’s low college loan interest rates.

Some of the most effective strategies for minimizing student borrowing include your student getting through college in 4 years or less while carefully managing money and avoiding rip offs such as the recent “student tax” scam. A little-known but highly-effective cost-saver involves returning unneeded federal loan dollars with 4 months of disbursement.

Help your student keep college more affordable by giving him or her some holiday gifts that’ll lower his or her reduce expenses upon returning to school and by recommending he or she generate funds through seasonal employment instead of borrowing.

After College

Seven out of 10 students borrow before earning their degrees, and over 90% of their loans come from federal loan programs. Fortunately, the government has designed  post-graduation strategies to help keep educational debt manageable.

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Your student needs to understand what happens to college loans after graduation. It’s worthwhile to consider the pros and cons of student loan consolidation, an often-used tactic for reducing monthly debt payments. Equally important is knowing how your student might qualify for forgiveness on all or part of what he or she owes.

Coming in 2017

We’re taking a few weeks off for the holidays, but beginning January 4 we’ll start publishing again about plans for keeping college affordable. Here’s hoping you have the happiest of holiday seasons, and that you’ll rejoin us then!

 Find out more about College Affordability Solutions and its services at https://collegeafford.com, or by calling (512) 366-5354.

Give Your Student Money-Saving Holiday Gifts

Some call it the “latte factor” — small, regular purchases that add up over time. This holiday season, give your student gifts that’ll offset such expenses. Here are just a few ideas:

529 Plan Contribution: Got a college-bound relative of friend? Do the latte factor in reverse. Contribute to their 529 college savings plan. If they lack such a plan, start one for them. No federal income taxes on 529 earnings, and 529 contributions are exempt from federal gift taxes while many states offer contributors tax breaks.

Auto Club Membership: If your student drives to college and your insurance doesn’t cover his or her emergency roadside assistance, various auto clubs will. They can save lots of money in case the student’s car breaks down.

Backpack-Sized Thermos: Help your student minimize those expensive campus coffeeshop trips, especially when you match this with a home coffee maker.

Filtered Water Bottle: Your student can avoid expensive bottled water. Fill one of these from any tap and it’s internal filter will remove bacteria and other impurities.img_4559

Cash, Gas, or Gift Card: Help your student cover purchases at his or her book store, grocery, movie theater, favorite restaurant, etc.

Home Cookbook: Students, especially those who live off-campus, spend huge amounts eating out — partly because they don’t know how to fix their own meals. So create a cookbook with their favorite recipes, especially the fast and easy ones.img_4560

Non-Perishable Bulk Items: Save your off-campus student on weeks or months of necessities — canned goods, spices, cleaning and laundry supplies, toiletries.

Piggy Bank: Encourage your to put leftover pocket change in it at the end of each day and see how much builds up over a week, a month, or a semester!

Pizza Dish: Making pizza can be fun and cheaper than eating out.

Popcorn Popper: Popcorn’s an inexpensive snack, and machine-popped can be healthier than microwaved. The old fashioned (not air) poppers can also be used to heat soups and other light foods.

Space Heater: Does your student live off-campus in a northern climate? A small, efficient speed heater can save money by heating one room — e.g. the bathroom or bedroom — without paying to warm up the whole apartment.

Whether these or others, this year, give gifts that keep on giving by helping to reduce your student’s college expenses!

College Affordability Solutions offers expertise in strategies to help reduce what students spend to go to and attend college. Email collegeafford@gmail.com or call (512) 366-5354 for assistance.

Reduce the Need to Borrow With Seasonal Student Employment

With the holidays approaching, merchants and other businesses are looking for part-time employees to help them through their busiest time of year. For college students, img_4463such jobs can turn into a great opportunity to earn money that will help reduce their reliance on loans.

Consider Bob, a first-year marketing major. Bob just landed a job at a restaurant near campus. From mid-November through mid-December he’ll wait on tables — not very glamorous, but his 14-hour per week work schedule offers sufficient flexibility to study for and pass all his final exams.

Even after FICA taxes are withheld, Bob’s going to clear $500 in wages and tips. That’ll buy his spring semester book, so he can reduce the spring loan he would have needed by $500. This will save Bob as much as img_4480$880 in the principal and interest he’ll repay after college. Imagine how much Bob will save if he also does seasonal work during his three remaining years of college!

To be sure, part-time work is not for everyone. If your student can’t manage priorities or is having academic difficulties, the end of the semester may not be the right time for him or her to take on additional responsibilities.

On the other hand, research has shown that students who work a reasonable number of hours (10 – 14) per week while enrolled average higher GPAs and graduation rates than their non-working classmates.

Bob will also boost his resume by adding workplace experience. And he’ll line up an employer who’ll serve as a reference for future job opportunities — about his ability to deal with people, understand customer needs, and other qualities marketing firms seek. These, too, are advantages of “working your way through college,” at least in part.

So talk with your student about looking into seasonal work. This can be done by visiting the school’s student employment office, inquiring with employers near campus, or both. The results could help reduce indebtedness . . . and in other ways!

College Affordability Solutions offers a wide variety of suggestions designed to help lower college student borrowing costs. Call (512) 366-5353 or email collegeafford@gmail.com if such guidance might be helpful to you.

Student Money Management — The $10 Latte

The average amount borrowed by America’s 2015 graduating class was $31,100 — $12,600, or 68% more than for the Class of 2005. Depending on how he or she chooses to img_4155repay, a member of the Class of 2015 could spend up to $57,865 to pay off a $31,100 debt.

But there’s a surefire way to graduate with less debt. Believe it or not, it’s best illustrated in an old Saturday Night Live skit, “Don’t Buy Stuff You Cannot Afford!

Funny skit, though it’s message sounds like another old cliche from those who “nag” students about controlling their spending. Still, like many cliches, there’s much truth in this message.

You have to borrow, from student loans or credit card companies, to buy something you can’t afford. And in the future you’ll repay what you borrowed — essentially dedicating future earnings to pay today’s expense, plus interest that builds up on that expense.

Fortunately, there are simple, sensible things you can do to hold the line on how much college debt you’ll have to repay.

Take Annie, a freshman. Annie finds it difficult to get going in the morning so, on theimg_4154 way to class, she spends $4.95 of her federal loan funds on a latte grande from a well-known coffee shop. Annie’ll pay another 42 cents in the sales tax on that purchase. And although the current interest rate on her federal loan is the lowest in 10 years, Annie will pay back as much as $10.00 for the $5.37 she borrowed to buy today’s latte.

If student loans can almost double what Annie ultimately pays for one latte, imagine how they’ll multiply the extra costs you’ll incur to live for 9 months in an expensive, high-amenity apartment; or to pay a campus parking fee for a car you could leave at home; or to eat out four-five nights a week instead of cooking in your apartment or chowing down in your dorm’s dining hall! As for Annie, she could get her pick-me-up and save money by drinking homemade coffee or asking for a home latte machine for Christmas.

There’s an old saying — “Borrow to live like a professional while you’re a student and your loan payments will force you to live like a student when you’re a professional!” Don’t victimize yourself! Find ways to borrow only for absolutely necessary expenses!

College Affordability Solutions can help devise strategies to limit college debt. Call (512) 366-5354 or email collegeafford@gmail.com to request such help.