Education Archives - Page 2 of 3

Paying for Education: How to Understand Financial Aid Letters

It's been more than 15 years since I began looking through financial aid letters. At the time, I organized my school choices by scholarships I received, and only thought about student loans after looking over the scholarship awards.

However, it's not always that cut and dry when it comes to reading financial aid letters these days. Often all of the information is lumped together, and it's hard to separate the scholarships and grants from the loans, according to an article on Yahoo! Finance.

According to the article, here are some of the items that trip up parents and students as they attempt to make informed decisions about where to attend school based on cost:

understand-financial-aid-letters

Missing Costs

Sometimes, you don't end up with information about the total cost of attending the school. Anyone who has attended college knows that it's not just about the tuition and fees. There are living costs associated with college. From food and board, to books and other costs, the cost can really get out of hand.

Don't rely on financial aid letters to help you nail down total cost. The Consumer Financial Protection Bureau can help, as can the College Board. Get the total picture so that you know how much you will be short on total costs after financial aid is applied.

Is It a Loan, or a Scholarship?

Many aid letters don't make it clear how much being offered is the result of a federal student loan, or a parent loan (PLUS). In some cases, a letter might list the total aid at $20,000 a year, but it's not clear that only $5,000 of that is in scholarships and another $5,000 in grants, leaving the remaining $10,000 as student loans each year. Additionally, the Yahoo! Finance article points out that sometimes the financial aid letters only use designations like “LN” to let you know that something is a loan. You might not be clear on these designations, and think that you are completely covered from non-loan sources when you aren't.

It's important to carefully examine financial aid letters and separate out the gifts and grants from the loans. You should also look carefully for terms and conditions. One of the “full ride” offers I received from one school specified that I had to live in a specific dorm and that I had couldn't change my major from physics. If I had accepted that offer, I'd be on a completely different career path — or saddled with even more student loan debt than I have now due to a change of plan during college.

If you have questions, call the school and talk with a financial aid counselor who can provide you with specific information about what's what.

Watch Out for Front Loading

Finally, the Yahoo! Finance article warns that you could be looking at front loading. This is a practice in which schools offers more grants for the first year (and maybe the second year), and then switches to loans later. It looks like you are going to school for free — and you are for a year or two. But then your aid changes to something that has to be paid back. Be on the watch for this sneaky trick to make you choose a school that might cost more in the long run, even though you are going for free initially.

You always have to pay careful attention if you want to avoid costly surprises down the road.

On vs. Off Campus Living: The Pros And Cons

By Contributor 2 Comments

The first year of college is a milestone for many things, including individual freedoms, self-reliance, and personal development. It’s also a period of increase in frequent decision-making; suddenly, life comes with an abundance of choices – many of which don’t have black-or-white answers. Your course of study, your classes, your social circles, how you're going to pay for college and your extracurricular activities are of your own choosing. For many, so too is the decision of where to live: on or off campus.

Whether this choice arises your first or subsequent years (some schools have required on-campus living for freshmen), it’s an issue that deserves careful thought and consideration.

College Costs

Money

The first critical factor in your decision is cost. How much does it cost to live on campus, and how does that compare to living elsewhere in your city? While the price of campus housing may look expensive, many universities include meal plans and utilities in the overall cost. It’s important to calculate an off-campus budget that includes monthly bills and projected food expenses, and then to compare it your university’s housing packages.

You must also keep in mind that, if living off campus, you need to factor in commuting costs. Will you be driving a car to campus each day? Do you currently own a car, or do you need to purchase one? Make sure to calculate an estimated gas total for each month and determine if this amount fits in your budget for college.

Socialization & Community

One of the biggest pros to living on campus is the built-in social network around you at all times. Activities will regularly occur on or very near campus, and involvement is always easier when it’s at your fingertips. In fact, ease of access overall is a large advantage to living on campus. Classes will be closer, travel time will be shorter, and amenities (libraries, gyms, etc.) will be nearby.

On the other hand, living elsewhere in your city gives you the opportunity to become more involved with the community at large. Living on campus can keep you confined to a smaller microcosm within larger social networks. Especially for individuals who have chosen universities outside their home states, off-campus living might be the best way to take advantage of the whole city and gain more independence.

Opportunity

Your lifestyle and personality will act as strong determining forces when deciding on where to live. Do you see college life as incomplete if you don’t live on campus? Will you be missing out on a crucial collegiate experience? Would you rather live in a smaller, private apartment away from the chaos of student life, or do you like to be in the center of it all? Do you have specific living requirements, like a kitchen, or a specific roommate setup? Will you be working off campus or have a work-study on campus? The most important thing to consider is how your living situation will affect your ability to pursue opportunities and benefit your lifestyle. Considering all of these questions and weighing the pros and cons will lead you to the decision that’s right for you.

Angie Picardo is a staff writer for NerdWallet, a website dedicated to helping students find the best scholarships.

Student Loans: Federal Vs. Private

By Miranda Marquit Leave a Comment

One of the realities of attending college right now is that it costs quite a bit. Most students need to borrow money in order to pay for the rising tuition costs. It's not just tuition, either. There are costs associated with housing, food, student fees, and books.

With the cost of college rising, student loans are more and more prominent. However, not all student loans are the same. You generally have two different options when it comes to student loans: federal and private.

Federal Student Loans

student loan federal vs private You can borrow money directly from the federal government to help you pay for school. Direct Loans provide you with low-interest loans to qualifying schools. You might receive one of two types of loans:

Subsidized: If you meet the income requirements, you might qualify for a subsidized loan. With this type of loan, your interest is paid on your behalf while you are in school. You don't start paying interest until you are done with school and you start making payments on your loan.
Unsubsidized: You might qualify for a federal student loan, but make too much to be considered for a subsidized loan. In these cases, you have an unsubsidized loan. You are charged interest as soon as the loan is issued. You can choose to pay the interest while you attend school (but you don't have to make principal payments), or you can choose to defer paying interest. The interest is still charged, and added to the loan total, but you can wait to pay it.

Federal student loans generally have competitive interest rates. The payment terms are usually easier as well. When you are finished, you can participate in a program that bases your payment on your income level, and there are other programs that can ease the burden of paying off your student loan debt.

Private Student Loans

Some students find that they don't have enough from federal aid to cover the cost of an education. In order to close that funding gap, they turn to private student loans. Some private lenders will allow you to wait to begin repaying your loan until after you graduate, but some require payments sooner.

Additionally, private student loans often have higher interest rates than federal loans. Private loans also don't come with the same pay off programs. You have to work something out with your lender in a way that works for the lender, similarly to how you would handle any other loan.

Interestingly, P2P lending is becoming an increasingly popular choice for school loans. There are web sites like Tuition U that match up students with lenders, and in some cases students are finding that even more traditional P2P sites can help close the college funding gap.

It is best to try for scholarships and grants, and save up money with a 529 Plan, before deciding to borrow for college. After all, borrowing — no matter where you get the money — means that you have to pay interest as well, and that can be quite expensive over time.

3 Helpful Tips For Choosing A 529 College Savings Plan

By Miranda Marquit 5 Comments

One of the best ways to build wealth over time is to invest. Investing can help you amass wealth at a faster rate than you would likely be able to otherwise. This holds true whether you are saving for retirement, or whether you are saving up for college.

If you are looking for a way to increase your chances of helping your child pay for college, you can use a 529 college savings plan to set money aside. While there is the risk of loss, there is also the potential to build up some wealth — especially if you start relatively early.

Five years ago, I opened a 529 account for my 10-year-old son. I contribute monthly, and it has been gratifying to watch the account grow over time. By the time he uses the account, when he is 20, there will be 15 years worth of savings and growing with the power of compound interest.

As you consider your 529 plan options, here are three things to keep in mind:

tips 529 college savings

1. Choose a Plan that is Versatile

Look for a plan that is fairly versatile in terms of where you can use the money. Most 529 plans are set up by states. However, just because a 529 college savings plan is set up by a particular state, it doesn't meant that you have to attend school in that state. Many plans allow you to contribute if you live out of state, and you can also use the money to pay expenses at thousands of educational institutions across the country.

Make sure that the plan you choose is versatile, so that your child has more options when it comes to deciding which school to attend. Look for a versatile plan, with fewer restrictions.

2. Look for a Variety of Investment Options

One of the reasons I like the 529 plan I use for my son is that there were a number of investment options to choose from. The plan offered a number of index funds and ETFs. Some plans only offer a few investment options, so you are limited. This can be very disappointing, especially if there is a particular fund that you are interested in. Choose a 529 plan with a variety of investment options that fit your needs. Simple investments, like index funds and ETFs, can give you a big advantage, while offering a degree of diversity, and a lower risk. Don't choose a plan that limits you to investments that you aren't thrilled about.

3. Avoid Plans with High Fees

Just as costs are coming down for various funds, it's also possible to find 529 plans with low fees. Compare the fees charged by different plans. The higher the fees, the lower your real returns. While you can't completely avoid fees, you can reduce what you pay in fees. You can save on fees when you choose low-cost ETFs and index funds for your 529 plan. Before you commit, look at the fee schedule so that you understand what you will pay for the privilege of investing.

Chances are that you can find a 529 plan that offers you versatility, various investment options, and low fees. Many states are trying to make their plans attractive to investors, and that is to your advantage. Do your homework, and you will be more likely to find a solid 529 for your child's college education money.

Are You Raising Your Kids To Be Financially Independent?

By Miranda Marquit 4 Comments

One of the things I remember growing up was that my parents tried to teach me financial independence. While they helped pay for extracurricular activities, and provided for my needs, I was also expected to save up for various items related to my own entertainment. If I wanted to go to a concert, or if I wanted to go out with my friends, I had to use my own money.

My parents also made it clear that I wouldn't get a free ride, should I decide to move back into the house after I left at age 18. When my sister moved back in with her family for a few months, the ground rules were clear: You need to have a job, or be attending school. You need to be trying to improve your situation, or you're out. They didn't charge rent, but they did expect financial progress to be made, and my sister's family moved out after getting back on their feet.

It's true that my parents have sacrificed for us, but they're not about to let us ruin their financial future, and the emphasis has always been on getting us to a point at which we could fend for ourselves financially. At some point, it makes sense to send your kids out there to provide for themselves. And, of course, those lessons start at home.

kids financial independence

Make Kids Responsible For Their Money Choices

While you can't expect a 10 year old to pay rent, or cover all of his or her clothing costs, you can help your child understand how to manage money. Let your child have money of his or her own to manage. This includes putting money away in a savings account (my son thinks it's fun to head to the bank and earn prizes for reaching certain milestones), donating to charity, and making spending decisions. My son has made mistakes, since we have, in the past, let him buy stupid things that he's regretted. Better he learn about making good decisions now, with the small stuff, than learning the hard way later. As a result of being allowed to make money mistakes, my son is already more thoughtful about what he does with the money he controls.

Teach More Complex Concepts As Kids Age

Starting out with an allowance, or with a way for children to earn their money, is a good way to begin teaching financial fundamentals. As kids age, you can teach more complex lessons. Consider helping them invest, and let them borrow from you — with interest. Requiring your children to pay you back with interest is a valuable lesson they can learn about finances, and borrowing. My son borrowed money not too long ago, and his repayment schedule meant that he saw all of his allowance for four weeks (after his tithing and savings were taken out), go to repaying the debt. He hasn't borrowed since, especially now that he knows that repaying debt means you have to give back more than borrowed.

Hopefully, these lessons will help my son learn financial independence. Later, we'll start a Roth IRA with him when he starts working a “real” job. It will be a good thing for him to get an early start on financial freedom.

What do you do to teach your kids financial independence?

Paying For Your Child’s College Tuition

By Contributor Leave a Comment

It should come as little surprise that college tuition costs are incredibly high and that, over the past couple decades, they have risen far faster than the rate of inflation. For the average family – and even for the more economically-secure one – paying for college is a tremendous and considerable investment, one that cannot be adequately done without years of planning and foresight. According to estimations, the cost of raising a child from the age of birth to 18 can be doubled in some cases when college costs are included.

Faced with these costs, most families choose not to pay for their child’s post-secondary education, instead working to provide assistance and support as their son or daughter amasses student debt and then works to pay off their loans. For many families this approach is the far more practical and feasible one. Others, however, take a stop-gap approach to college costs, meaning that they don’t plan adequately and must resort to selling the family jewels and amethyst rings to cover tuition when the time arrives.

College Costs

If you have college-bound kids, and if you are planning to be the primary contributor to their tuition costs, there are practical means for saving money towards college and for reducing the bill. Here, then, are some tips that every parent in this situation should keep in mind:

Start Saving At Birth

On a long-term basis, planning for college should be similar to saving for retirement. On that note, you’re going to want to have a college savings fund for your child into which you put regular contributions. This fund should be opened at birth and closely watched and maintained, just as you would a retirement account. Furthermore, by putting the money into an account specifically set aside for college, you can avoid paying taxes on much of the money and realize higher rates of interest.

Share The Responsibility With Your Child

Even if you plan to pay the majority of college costs, your child should still contribute towards the effort. During high school, perhaps, the money earned from your kid’s summer jobs could go into the fund. Once they arrive at college, you may want to have them explore a work study program that helps reduce their tuition. The actually approach is one that you should determine as a parent and discuss as a family, but the bottom line is that it’s important for your child to be involved in the process – and to contribute towards it.

Pick Cost-Cutting Payment Plans

Most colleges and universities offer several different payment plans for tuition, and most of these include plans where your overall costs are lower if you pre-pay for each semester in installments. There is no reason not to do such a plan; after all, if you have the ability to pay for your child’s college education, you have nothing to gain from postponing the payments and taking on debt.

Get The Tax Rebates

The federal government offers rebates and other tax incentives for costs relating to a college education. While these sometimes vary from year to year, the vast cost of college means that the tax savings can be considerable.

There are certainly other methods and tricks for saving for college and for reducing the costs once your child has enrolled. But the ones listed above should be some of the most helpful and important ones to use if you’re a parent. Saving and paying for college is a mammoth undertaking, so it’s always best to be prepared.

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