During College: Help Your Student Avoid Overspending on Holiday Gifts

On average, Americans will spend $983 for holiday gifts this year. For those pressed for funds, even a fraction of this amount can create a new year filled with the stress of buyer’s remorse, exorbitant credit card bills, and insufficient funds for necessities.

IMG_0205Such problems overwhelm many college students just as a new term begins. Stress is the number one impediment to academic success in college. And the top two reasons why college students drop out are their need to work and earn money, and their inability to pay tuition and fees.

But you, as a parent, can help your student avoid overspending on holiday gifts.

First, manage expectations before the gift exchange. Thoughtful gifts don’t need to cost a lot. Tell your student he need not buy expensive presents. Quietly remind family members he can’t afford to spend a ton and, if your family members share holiday wish lists, lobby for some low-cost items he can afford.

Second, coach you student to establish a realistic gift budget fitting his limited finances, omitting gifts to casual friends, and dedicating a certain amount for each person on his list.

Retail businesses are exceptionally good at separating consumers from their money. IMG_0206So help your student avoid getting hoodwinked by marketing strategies designed to entice more spending than he can afford — constant sales, decoy pricing, loss leaders, loyalty cards, retail credit, etc.

Counsel your student to minimize extra fees — convenience fees, credit card fees, service charges, shipping costs, etc. Paying with cash or a debit card can avoid some of these fees. Comparative shopping can help avoid or diminish others, especially if shopping online.

Encourage him to limit self-gifting — i.e. treating himself to something while shopping for others. Whatever he’d buy can probably go on his holiday wish list.

Urge him to pick up some seasonal work to earn a few bucks that’ll help cover gifts and other holiday expenses.

Advise your student to track holiday spending. It’s helpful to establish a gift budget, but only if he stays within it. Tracking his expenditures, which simply requires a pencil and paper, helps him do this.

Finally, remind your student that spending restraint is critical to a truly happy new year!

College Affordability Solutions can provide other strategies for helping to keep your student’s costs low. Feel free to call (512) 366-5354 or email collegeafford@gmail.com for a no-cost consultation.

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Before College: New Baby? Start Investing for College Now!

When your family assembles for dinner next Thursday, will a newborn be among the blessings for which you give thanks? If so, congratulations!

IMG_0042Of course you want that baby to lead a life of achievement, fulfillment, and prosperity. To do that it’ll need, as President Lyndon B. Johnson said, all the education it can take. For as he observed, “education is no longer a luxury. Education in this day and age is a necessity.”

Mr. Johnson was referring to postsecondary education. It’s costly now and it’ll be even more expensive when your baby is 18. If current trends continue, freshman year at a public 4-year college or university in 2034-35 will average $59,111 — 71% of what’s projected to then be median household income.

So if you’re like most Americans, you’ll not be able to cover all these costs from what you earn while your child’s in college. Therefore, you need to begin investing for college now.

Consider this: if you can only afford is to deposit $100 a month in a regular 1% IMG_0044interest-bearing savings account through your newborn’s 22nd year, you’ll generate $29,500 for college. If, on the other hand, your baby borrows $29,500, even at today’s student loan interest rates, repaying that debt could cost as much as $48,472.

Also, research shows that low and moderate-income students are three time more likely to enroll in and 4.5 time more likely to graduate from college if they have college savings accounts.

There are investment opportunities that generate much higher returns than a regular savings account. However, your unique needs and circumstances should guide your college investment strategies, and rules regarding these opportunities constantly fluctuate. So if you can afford it, you may want to consult a qualified investment professional before making this choice. Another good source of information is the Financial Industry Regulatory Authority’s Saving for College website and its related links.

You’ll want to employ various strategies to help make the rising price of postsecondary education more affordable, but Investing should always be among them. And the longer your money is invested, the more it’ll generate for your child’s education. So start putting aside as much as you can afford now!

If you have questions about other ways to help make your child’s college education more affordable, College Affordability Solutions provides free consultations. Seek these by calling (512) 366-5354 emailing collegeafford@gmail.com.

Special Bulletin: Stop Congress from Eliminating Your College Tax Breaks!

IMG_9916The Ways and Means Committee of the U.S. House of Representatives is finalizing HR 1 and the full House will soon vote on it. It’s called the “Tax Cut and Jobs Act,” but as currently written this bill would eliminate federal tax breaks now available to you if you’re a current, former, or future college parent or student.

But HR 1 hasn’t become law yet. You can still influence it by telling your IMG_9919Representative you want these tax breaks left intact. So find your Congressperson’s contact information here and call or write immediately!

The higher education tax breaks you’ll lose if HR 1 becomes law as currently written include:

  • Tuition and Fee Deduction: HR 1 would end your right to deduct up to $4,000 per year for what you pay in postsecondary tuition and fees.
  • Scholarship and Fellowship Exclusion: Under HR 1 the government would IMG_9917tax scholarship and fellowship amounts that pay for your tuition, fees, books, and class supplies.
  • Lifetime Learning and American Opportunity Tax Credits: HR 1 would eliminate the Lifetime Learning Tax Credit. For an unlimited number of years, this credit allows you to reduce your federal income taxes by up to $2,000 per student for what you pay toward tuition, required fees, books, and supplies for courses leading to a degree or to acquiring or improving job skills. To partially offset this loss, the American Opportunity Tax Credit of up to $2,500 per student would be expanded to cover five, instead of four years of these expenses — but only for at least a half-time degree or certificate-seeking student.
  • Student Loan Interest Deduction: HR 1 would end your tax deduction of up to $2,500 per year on student and parent loan interest you pay.
  • Employer-Provided Educational Assistance: Today the first $5,250 your employer pays on tuition, fees, books, and supplies for courses you take is excluded from what determines your federal income taxes. HR 1 would end this, and you’ll be taxed on such assistance.
  • Coverdell Education Savings Accounts: HR 1 would make 2017 the last year to make new deposits into Coverdell accounts.
  • College Savings Bonds: HR 1 would tax students on money they use from federal college savings bonds to pay for college.

The House votes on HR 1 soon. So if these or any of its other provisions would affect you, hurry up and exercise your rights as a citizen!

Got questions? Feel free to contact College Affordability Solutions at (512) 366-5354 or collegeafford@gmail.com.

During College: Save by Prepaying Unneeded Loan Funds Within 120 Days of Disbursement

So your student’s currently in college? And he borrowed a Federal Direct Unsubsidized Loan for this fall? He can save a lot on that loan by prepaying during the next 6 weeks. This is worth considering, because only 38.6% of college seniors look back and feel all they borrowed was essential to continuing their education.

Federal regulations say any prepayment received within 120 days of disbursement must be used to reduce that disbursement’s principal — and interest and loan fees on the prepaid principal must be automatically cancelled, too.

IMG_9849For example, a college freshman prepays $100 of his fall 2017 Federal Direct Unsubsidized Loan within this 120 day period. This’ll reduce the total amount he must repay by an additional $175. Actual savings will depend on his choice of the federal repayment plans he’ll be offered — a choice he’ll make after leaving school.

These regulations also apply to upperclassmen. Their savings may be a bit less, but they’re still significant.

How to do this? First, your student should check with his financial aid office to see if it’ll submit his prepayment for film. If so, he should follow its directions. Otherwise:

  • Do Some Research: The National Student Loan Data System has his most recent Federal Direct Unsubsidized Loan disbursement date (i.e. “Loan Date”). It’ll also identify his federal student loan servicer and its mailing address.
  • Meet the 120-Day Deadline: He’ll write a check to his loan servicer for the amount IMG_9854he wants to prepay and mail it 7-10 days (for delivery and processing) before the 120th day after disbursement.
  • Direct the Prepayment’s Application: To make sure his prepayment goes 100% to his most expensive federal loan — that Federal Direct Unsubsidized Loan — he should write “Apply to [INSERT LOAN DATE] Unsubsidized Loan” on his check’s memo line before mailing it.

But be careful. You student should only prepay funds he doesn’t need to finish the current term. So if he doesn’t already have a spending plan, help him build one when he’s home for Thanksgiving. More about this next Wednesday.

The right to prepay at any time without penalty helps make federal loans superior to most other forms of credit available to America’s college students. And prepaying within 120 days of disbursement saves extra money, making them even better!

College Affordability Solutions offers 40 years of experience in a wide variety of student finance issues, including student loan debt management. Contact us at (512) 417-7660 or collegeafford@gmail.com for cost-free consultations.

After College: Strategies for Your College Finance Plan

We’ve discussed why students and their families need College Finance Plans (CFPs) and IMG_9739summarized strategies to use in your CFP’s “Before College” and “During College” phases. Let’s review some “After College” strategies.

Almost 70% of college graduates borrow. They leave averaging more than $34,000 in student loan debt. Hence, most strive to keep their initial monthly payments as low as possible. Toward this end:

Ex-students also strive to reduce the overall amount they repay to free up money for other uses. To IMG_9744do this:

  • Prepay: Cut the total interest you repay by prepaying – i.e. paying early or paying extra — whenever possible.
  • Reassess Your Repayment Plan: Annually compare monthly payment amounts under your current plan to such amounts under other repayment plans. Switch plans if you can afford to pay more each month. This’ll create big savings.
  • No Negative Amortization: Some federal repayment plans allow you to pay less than the monthly interest charged on your debt. It’s better than defaulting, but you’ll pay more in the long run.
  • Use Loan Forgiveness: Washington offers some generous forgiveness plans on its loans. Pursue them if you qualify.

Being late or delinquent on your student loan payments generates extra fees and penalties. To avoidIMG_9747 this:

  • Call Your Servicer: Ask to change your repayment plan or due date or to explore repayment deferments and forbearances if you have problems making your whole payment on time.
  • Dispute Servicer Errors: There are steps you can take if your loan servicer causes you repayment or other problems.

It’s your debt. Manage it aggressively to avoid problems and save money.

Look here next Wednesday morning for a more extended review of a strategy for your CFP. Need some personalized guidance on one or more of these strategies. Contact College Affordability Solutions at (512) 366-5354 or collegeafford@gmail.com for a no-charge consultation.

During College: Strategies for Your College Finance Plan

Your College Finance Plan (CFP) needs strategies for you and you student toIMG_9592 implement before, during, and after college. Let’s look at the “During College” phase.

Research at a major university indicates that, looking back, almost 4 out of every 10 seniors conclude part or all of their student loans weren’t essential for their educations. Therefore, some of these strategies focus on personal money management so students can spend and borrow less of the interest-bearing educational debt that, over time, increases college costs. These include:

IMG_9555Also, the faster your student gets her degree, the less cost and debt she’ll incur. Still, the latest national data show that only 39.8% of undergraduates earn their bachelor’s degrees within 4 years. Here are some strategies that’ll help your student graduate on-time, if not before:

 

Look here for why you need a CFP. You can find summaries of strategies for your plan’s “Before College” phase here. And next Wednesday there’ll be samples of “After College” strategies for your CFP here.
Beginning October 16, check this website every Wednesday for a more detailed account of a strategy you may want to use in your CFP’s before, during, or after college phase.

Before, During, and After College: You Need a Plan!

About 4 million babies will be born in the U.S. this year. Naturally, their parents want each of them to enjoy the American dream. Now, more than ever, that dream includes, even depends on a good education beyond high school.

But the dream is unraveling. It’s coming undone as the rising cost of college outpaces all but the wealthiest families’ ability to pay for it.

In 1998, the total cost of a year at a state college or university averaged $10,458. That was 27% of IMG_9377U.S. median household income. Eighteen years later this cost was $24,610, or 42% of median household income. At this rate, freshman year public college expenses for 2017’s newborns will average $33,224 — an astounding 56% of median household income.

Small wonder educational debt for recent college graduates averaged $34,000, or that 44 million Americans owe $1.4 trillion in such debt. Nor is it surprising that, in 2015, there were a million fewer students in college than in 2010; the first ever 5-year drop in our nation’s college enrollment.

How to ensure your child can afford college when he or she is ready to attend? It won’t be simple, and it won’t be easy. But a College Finance Plan (CFP) can help.

A CFP is like a mortgage — a decades-long undertaking. You (the parent) and your student (son or daughter) are its key players. It involves nothing exotic or fancy; just strategies to be adopted before, during, and after actual college enrollment. You’ll want to start implementing these strategies as early as you can, and stick to them.

A CFP won’t make college free, or even inexpensive. But collectively, its strategies can help make college costs more manageable so your student can access the best possible postsecondary education.

Want a quick look at strategies you should consider for the “Before College” phase? See Before College: Strategies for Your College Finance Plan. A review of “During College” strategies will be posted on this website October 2, and “After College” strategies will be outlined here October 9. IMG_9373You’ll also find more in-depth discussions of individual strategies here through the end of academic year 2017-18.

No matter where you and your student are in the college-going process, itake concrete steps to keep the cost of a postsecondary degree within your means. Start building your CFP now!

Got questions about college costs and how to deal with them? Contact College Affordability Solutions at (512) 366-5354 or collegeafford@gmail.com for help at no charge.