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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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.

Special Bulletin: Proposed Federal Budget Would Reportedly Makes Big Cuts in Programs for College Students and Graduates

The Washington Post reports it has received what a U.S. Education Department staff member described as “near final” documents showing the administration will IMG_6510recommend a 13.6% reduction in federal education spending next week. The budget proposal would reportedly affect federal financial assistance for college students as follows:

  • Child Care for Enrolled Parents: End a $15 million program helping to make child care affordable for low-income parents attending college.
  • Federal Direct Subsidized Loans: Make as yet unannounced cuts that could end this program, which currently serves financially needy students. If this happens, all federal loans for such students would be unsubsidized and begin compiling interest the day they are made — significantly increasing student borrowing costs.
  • Federal Pell Grants: Hold Pell Grants for the nation’s neediest undergraduates at their current levels ($606 to $5,920 for fall and spring combined). Due to inflation, this would decrease Pell’s future “purchasing power.” Some good news is that the budget would fund an extension of 2017’s summer Pell Grants in future years.
  • Federal Work-Study (FWS): Cut FWS funding by $490 million (almost half), significantly reducing federally subsidized on and off-campus jobs that financially needy students use to pay for college.
  • Income-Driven Repayment: Close down all current income-driven repayment plans available to federal college loan borrowers. These plans offer loan forgiveness for balances remaining after borrowers pay 10% to 20% of their incomes over 20 to 25 year periods. They would be replaced with a new income-driven option requiring payments equal to 12.5% of income and limiting loan forgiveness to balances still outstanding after 30 years of such payments.
  • Public Service Loan Forgiveness (PSLF): Eliminate PSLF, which offers tax-free debt cancellation on federal student loan balances owed by ex-students in public service jobs after 10 years of on-time payment. Over 550,000 federal, state, local, and nonprofit employees are already registered for PSLF. It’s not yet clear whether they or public servants not yet registered would be cut off from It.IMG_6511

Presidents propose federal budgets, but Congress ultimately decides them. So if you support or oppose any of these proposed cuts, call or write your U.S. representative and senators to tell them how you feel.

College Affordability Solutions will post more bulletins on this website as additional information becomes available.

Before and During College: Summer Can Be Used To Reduce College Costs

Spring semester ends soon. After finals, many students will use the summer to cut their college costs. The payoff for doing so can be huge!

Lot’s of employers need student employees to help manage increased summer activity levels. Others look to student workers to fill in for regular employees on summer vacation.

Over the last 4 years — from the summer after high school graduation through the summer before his senior year — Jack banked about $2,000 a year from his summer IMG_6029jobs. This allowed him to forgo the $2,000 per year in Federal Direct Unsubsidized Loan he would otherwise have needed to borrow for the costs of attending his university. It cut the principal and interest he’ll pay each month on his student loans by a third. It’ll also reduce the total amount he repays on those loans under the “standard” 10-year repayment plan by a whopping $11,200. That’s a darned healthy bite out of Jack’s borrowing costs.

IMG_6030Another cost saver is attending summer school at a community college close to home so the student doesn’t incur expenses for room and board. This is particularly effective during the summers after student’s freshman and sophomore years, when they’re likely to pick up courses that’ll count toward degree requirements at their universities.

Jill took this approach. Over two summers, she completed a total of 15 credit hours at her local community college. Tuition and required fees there were $117 per credit hour, versus $321 per credit hour at the university Jill attended fall through spring.

In doing this, Jill reduced the number of semesters it took to fulfill her university degree requirements from eight to seven. This cut her costs at that institution by $4,825 in tuition and fees and by $5,220 in room and board. So for $1,760, Jill cut her costs by $10,045 — a net savings of $8,285.

And the good news is that this isn’t an either/or proposition. Summer work? Summer community college classes? Many students do both!

Jack and Jill still get lots of summer “down time.” They still get to see friends they missed while away at school. And they still get to eat that good home cooking and to be with family. But their summers are also highly productive, because they significantly reduce the cost of their degrees — and what’s not to like about that?

Looking for strategies to keep college more affordable? Feel free to contact College Affordability Solutions at collegeafford@gmail.com or (512) 366-5354.

Before College: It’s Good to Work as a Freshman, Just Not Too Much

 

Your daughter’s freshman year financial aid offer includes a work-study award which’ll provide her a part-time job while she’s enrolled. Should she or shouldn’t she accept this award?

Many parents don’t want their children to work at school, especially during their first year. Moms and dads worry about their children adjusting to totally new environments and rigorous, college-level course loads. They reason that the pressure of jobs will be too much.

Such concerns are sometimes legitimate. But research shows they’re often wrong. In fact, studies have long shown that freshmen who work while taking classes earn higher GPAs and persist at higher rates than freshmen who don’t. The key is to control the student’s work hours. Ten to 14 hours a week seems to be optimal for most freshmen.

On the other hand, GPAs fall and dropout rates rise as students work more and more hours beyond 14 per week. These “over-workers” report that they find it difficult to attend classes, meet with professors, and get to the library. Think about that last point — no other on-campus service is open longer each day than the library so, if your student can’t get there, she probably can’t access other academic support services.

But working 10-14 hours a week can have several positive effects. It helps reduceXBD201407-00853-03.TIF reliance on loans. It allows students to pay some of their own costs, giving them the motivation that comes from “investing” their blood, sweat, and tears to “earn” an education. And working students typically become better time managers.

On-campus work can provide students with a “home base” at colleges that sometimes seem overwhelmingly large. And on-campus supervisors know their employees are students first, then workers. This tends to make them more tolerant of schedules that work around exams and tests.

IMG_5891Finally, working while enrolled usually helps with job and graduate school searches. Many ex-supervisors — including faculty members — are willing to provide references, and college employment demonstrates “real world” experience, strengthening the student’s resume even if the work she did wasn’t related to her career choice.

So you may want to advise your student to accept work-study. Absent such an offer, point her toward the student employment office when she gets to campus to seek other part-time positions. Don’t let unfounded fears stop her from taking advantage of the many positive outcomes associated with working a controlled number of hours per week.

College Affordability Solutions brings 40 years experience to advising families and students on higher education funding strategies. Feel free to contact us if we can assist you.

Before College: Make Decisions Now That Will Minimize College Debt

Soon after the upcoming college commencement season you’ll begin hearing it. “Who got me into all this debt?” or “My school made me take out all those loans!”

There’s truth in this. College costs keep rising. Grants and scholarships aren’t keeping up. But two other parties also contribute to rising collegiate debt — the student and, often, his parents.

Is your student spending conservatively — e.g. buying used textbooks from an online discount bookstore, not buying all his textbooks but accessing some through the campus library’s ebook collection?

Many off-campus residences sell themselves as “high amenity” facilities. But they’re IMG_5814also high rent. Is living in a new high-rise with a rooftop pool and granite countertops really necessary? Can your student survive someplace that’s older, plainer, and less costly? Can he split rent with one or more roommates, eat out less often, put a brown bag lunch in his backpack and cook more meals at home?

Does he absolutely need an automobile at school? He’ll likely pay hundreds to put it in some remote, vandalism-prone parking lot. Instead, can he use campus shuttle buses and municipal transit lines? Can he share rides home?

Can he work part-time? Contrary to popular belief, students who work 10-14 hours per week while enrolled perform better academically than students who don’t work at all.

Parents? You probably think your Expected Family Contribution (EFC) is too high. But EFC is based on a reasonable assumption — that you’ll max out your own financial 20091030family5049resources before asking your neighbors to pay for financial aid to send your student to college.

So can you downsize your vacations; maybe even turn some into “staycations?” Can you get another few years out of your car? Do you really need to hire out the house cleaning or yard work? Or can you redirect such discretionary spending to support your student?

Most colleges offer the maximum loan amounts for which students are eligible. But your student need not accept all that debt. Minimize his costs and maximize your EFC, then reject any loan amount you don’t expect to need. If you miscalculate, what you turn down can be reinstated later.

Remember, students who borrow to live like professionals while in college often live like students while paying off their debts after college! Keep this from happening to your student by downsizing or rejecting loan offers now.

College Affordability Solutions helps families identify strategies for minimizing higher education debt. Contact us at collegeafford@gmail.com or (512) 366-5354 to learn more,

During College: Spring Break, Not Spring Bankruptcy

Soon it’ll be spring break, an opportunity for fun, travel, and memories. Many college students consider it a right of passage, and many families want them to enjoy it.

But spring break can be expensive. College students spend well over $1 billion on it every year. But using government loans to pay for it will, even at today’s record low interest rates, cost at least $19.78 in interest for every $100 spent.

There’s still a lot of school left after spring break. So help your spring breaker be tough-minded and disciplined about spending decisions. For example:

  • Travel: The farther away the destination, the costlier the travel — especially img_5569if it involves high March air fares. For example, one major airline’s coach fares show a mid-March round trip Denver to Cancun (2,693 miles) costing $2,333 while its airfare from Denver to San Diego (1,078 miles) is $859.
  • Lodging: The more friends your student bunks with, the lower the cost for shelter, especially if they’re splitting the cost of a short-term rental house instead of hotel rooms.
  • Food and Beverages: Renters can prepare some of their own meals instead of eating out. And caution your student not leave an open tab anywhere. It’s also important to scrutinize meal and bar bills to avoid accidental or “moocher” charges.
  • Purchases: Clothing, swimsuits, footwear, etc. — urge your student to pack it, not buy it there at inflated prices. He or she should also take that student ID because it may generate some discounts.

More and more students are also saving by skipping those stereotypical beech and ski trips. Satisfying but much less expensive activities are out there. For example:

  • Your student can get some friends together for camping or an amusement park visit.
  • img_5570Volunteering can create lifelong memories while helping make the world a better place.
  • Spoil your student with his or her own comfortable bed and favorite meals while he or she comes home to enhance career prospects through job shadowing, searching out summer internships, or applying for post-graduation employment.

Spring break can be a great time — if your student can avoid overspending that generates a self-inflicted wound leading to a ramen noodle diet until finals end.

You can contact College Affordability Solutions at (512) 366-5354 or collegeafford@gmail.com.