Wednesday’s need-to-know money news

Student-LoansToday’s top story: A 3-step plan for new grads with student debt. Also in the news: Answers to money questions from college students, student loan mythbusting, and how to cut the costs of raising a baby.

A 3-Step Plan for New Grads With Student Debt
Congratulations! Now, pay up.

Money Talk: How to Go From 😱 to 😎
Answers to money questions from college students.

4 Student Loan Myths You Might Believe
Mythbusting.

Old school vs. new school: How to cut the costs of raising a baby
Keeping costs down.

Tuesday’s need-to-know money news

hidden-fees1Today’s top story; How a Trump win could impact college students. Also in the news: Tips on caring for aging parents, what you need to know about online lending services, and financial apps that will save you money this summer.

4 Ways a Trump Win Could Impact College Students
Looking ahead to a possible Trump presidency.

Caring for Aging Parents: Tips for the Sandwich Generation
Finding time to take care of yourself.

What You Should Know About Online Lending Services
Fast money could come at a very steep price.

7 Financial Apps to Save You Money This Summer
Savings at your fingertips.

Wednesday’s need-to-know money news

smartphones_financeToday’s top story: Apps to help you manage your household finances. Also in the news: Why not saving enough for retirement in your 20’s could spell doom, what college students need to know about money, and the pros and cons of using balance transfers to pay down credit card debt.

The Best Tools for Managing Household Finances
New apps to help keep your household finances running smoothly.

Why Saving Too Little For Retirement In Your 20s Is A Bet You’ll Die Young And Broke
A little straight talk.

What College Students Need to Know About Money
So that they don’t die young and broke.

The pros and cons of using a balance transfer to pay off debt.
Beware accumulated interest.

How Often Can I Apply for New Credit Cards Without Hurting My Credit Scores?
The cost of a hard inquiry.

Should you send your kid to college with a credit card?

teen-creditSavvy parents know the importance of building a good credit history. They also know that paying with a credit card can be more convenient and secure than other methods.

But personal finance expert Janet Bodnar has one word of advice for parents thinking of providing their college-bound children with a credit card: don’t.

“It’s dangerous and it’s not necessary,” said Bodnar, editor of Kiplinger’s Personal Finance and mother of three college graduates.

On the other hand, personal finance columnist Kathy Kristof—who also writes for Kiplingers and who has sent two children to college—says students who have been taught how to handle money can be responsible credit card users. She added her kids as authorized users to one of her credit cards, and said it’s worked out well.

You can read more in my Reuters column this week, “Start college kids with bank accounts, not credit cards.” Bodnar has more tips for parents at “Rules for raising money-smart kids.”

 

 

 

 

 

Don’t think college is worth it? Read this.

Zemanta Related Posts ThumbnailThe earnings gap between young people with and without college degrees is the widest in half a century. Recent college graduates are more likely to be employed full time and far less likely to be unemployed than high school grads.

And all that debt college grads had to incur? The vast majority of college grads aged 25 to 32–72 percent–say their education has already paid off. Another 17 percent believe it will in the future.

Those are just a few of the fascinating statistics from the latest Pew Research survey, aptly titled “The Rising Cost of Not Going to College.” Read, learn, and use the statistics to combat those who say a college education isn’t a good value.

Lowering college costs: What you need to know

Zemanta Related Posts ThumbnailMy latest Reuters columns focus on financial aid and new opportunities for borrowers with private student loans to get some relief.

One of the big complaints about private student loans is how hard it’s been to consolidate or refinance these often high-rate, variable loans. Many big lenders fled this market and those that still offered the loans weren’t much interested in reducing rates for borrowers.

That’s starting to change as smaller lenders see the opportunities to cherry pick the most credit-worthy borrowers and offer them better rates. A new entrant into the market, RBS Citizens, is even offering fixed-rate refinancing. (RBS operates as Citizens Bank in the northeast and Charter One elsewhere.) For more, read “Student loan borrowers get relief from small lenders.”

Meanwhile, the financial aid season is in full swing as families submit their FAFSA forms and hope for the best. My column “How asking for aid could hurt your college chances” warns that most schools aren’t truly need blind, which is why you need a strategy for getting admitted.

Since most families need some help in cutting college costs, going without financial aid isn’t a smart option. In “Seven ways to help your child get more money for college,” I review the best ways to lower your expected family contribution. “Four financial aid strategies that can backfire” covers the strategies that won’t work.

In addition to those four, here are two other approaches doomed to fail:

Making kids “independent.” A father with a hefty income said that he didn’t plan to help any of his kids pay for college. He rationalized that without his support they could be considered “independent” for financial aid purposes and get help based on their own meager income and assets.

Sorry, Dad, but colleges closed that loophole decades ago. The Higher Education Amendments of 1992 tightened the definition of who qualified as independent for federal financial aid purposes to people who are:

  • 24 years of age or older
  • orphans or wards of the court and those who were wards of the court until age 18
  • veterans of the U.S. armed forces
  • graduate or professional students
  • married
  • parents or who have legal dependents other than a spouse
  • students for whom a financial aid administrator makes a documented determination of independence by reason of other unusual circumstances.

A parent who simply refuses to help isn’t typically considered one of those “unusual circumstances.” Financial aid will be based on his resources, which can effectively cut off grants, scholarships and loans for the children he won’t help.

Faking in-state residency. College consultant Lynn O’Shaughnessy of San Diego heard from a family who thought they would only have to pay out-of-state tuition rates for their daughter for the first year, believing that after spending her freshman year at the school she would qualify for in-state tuition.

States vary considerably in defining residency but typically require that at least one parent be a state resident for a full year before the student starts college. If the parents are divorced, residency is based on where the custodial parent lives. FinAid.org has a list of state residency requirements on its site.

Dropouts, addicts and teachers: must-read stories for this week

iStock_000016702801XSmallMy column for Reuters this week covers the perils facing community college students who “stop out” once too often. Reuters also posted an excellent piece on the financial toll addicts take on their families, plus a column on what teachers really want for the holidays (hint: it’s not another coffee mug!).

That break from college? Stopping out leads to dropping out
Taking a break from college isn’t unusual, but taking more than one can doom a student’s chances of getting a four-year degree.

More than 22 million Americans abused drugs or alcohol in a recent survey. What’s a family member to do? Experts offer some advice.

Holiday gifts teachers really want
Teachers share what gifts have meant the most to them over the years.

Finally, don’t forget to enter this week’s book giveaway. Time’s running out! Details here.

How to deal with your debt

Zemanta Related Posts ThumbnailDebt may be a four-letter word, but it’s not necessarily the enemy. Some debts are much, much worse than others, and knowing which to tackle first can leave you richer.

That’s the central idea of my book “Deal with Your Debt,” and I go into more detail in this interview with Experian’s Mike Delgado. (Also, you’ll get a great view of one of our bedrooms…I couldn’t get my laptop to cooperate with Google Hangout, so I had to resort to the desktop.)

We covered a bunch of topics, including:

  • What you need to know about getting, and paying off, student loans
  • Why retirement has to be your top financial goal (yes, even ahead of paying off debt)
  • What debts to tackle first and
  • When to consider filing for bankruptcy

…and much more.

Student loan rates: facts amid the fictions

Paid education. Graduate cap on bank notesStudent loan rates aren’t about to double, despite the headlines.

Only rates for newly-issued, subsidized federal student loans are set to rise July 1 from 3.4% to 6.8% because Congress couldn’t get its act together to prevent the increase.

Loans that have already been made won’t be affected. Neither will there be an impact on unsubsidized federal student loans, since those already carried a 6.8% rate, or on PLUS loans for graduate students and parents, which have a 7.9% rate.

Subsidized loans traditionally got lower rates because the borrowers have demonstrated financial need. But subsidized loans also charge no interest:

  • while the student is still in school at least half time
  • for the first six months after the student leaves school and
  • during an approved postponement of loan payments.

Those are powerful advantages not available on unsubsidized loans, which is what you get when you can’t demonstrate financial need.

College expert Lynn O’Shaughnessy points out in her MoneyWatch column that the doubling of subsidized loan rates actually won’t have an outsized impact:

The hike will mean that a borrower will spend less than $7 a month repaying that extra interest, according to Mark Kantrowitz, the publisher of Edvisors Network and a national financial-aid expert. Keeping the subsidized rate at 3.4 percent would cost the government $41 billion over 10 years, which is a high price to pay to save borrowers a few dollars a month.

Kantrowitz has said it’s unlikely that higher interest rates would dissuade many from attending college, and he would rather see the money go toward increasing Pell grants for the neediest students, which would do a lot more to encourage them to get a degree. Here’s what he had to say in a New York Times op-ed piece co-authored with O’Shaughnessy:

But the partisan posturing is a distraction from far more pressing issues that face students and parents who must borrow to cover their college costs. What’s lost is how Congress, in numerous ways, has been hurting the most vulnerable college students and dithering on the crisis of college affordability….Congress has starved the Pell grant program, an educational lifeline for low-income families.

He goes on to question why most student loan rates are so much higher than the government’s cost, something that’s turned education debt into a profit center for Uncle Sam. Congress also hasn’t done anything about the suffocating student loan debt many graduates have already taken on or the continuing (if somewhat moderated) increase in education costs. Private student loans remain especially problematic, since they lack the consumer protections of federal student loans and many lenders have been unwilling to work with borrowers to create affordable repayment plans. I’ve argued that we should give bankruptcy judges the power to modify private student loan terms as a way of forcing lenders to play ball.

Nobody wants to pay more interest, but there are bigger problems with the way we pay for higher education than a hike in the subsidized student loan rate.

It’s National 529 Day!

College studentWho doesn’t love obscure commemorative/promotional days? But this one is worthwhile since it brings attention to the state-run college savings plans that can help you pay for your children’s future education.

Here are the most important facts you need to know about college savings:

If you can save for college, you probably should. The higher your income, the more the financial aid formulas will expect you to have saved for college–even if you haven’t actually saved a dime. Even people who consider themselves middle class are often shocked by how much schools expect them to contribute toward the cost of education. (By the way, it’s the parents’ assets and income that determine financial aid, so if you don’t help your kid with college costs, he or she could be really screwed–no money for school and perhaps no hope of need-based financial aid.)

More savings=less debt. Most financial aid is in the form of loans these days, so your saving now will reduce your kid’s debt later. (A CFP once told me to substitute the words “massive debt” when I see “financial aid.” So when you say, “I want my child to get the most financial aid possible,” I hear: “I want my child to get the most massive debt possible.”

529 plans get favorable treatment in financial aid formulas. These accounts are presumed owned by the parent, so less you’re expected to spend less than 6% of the total each year–compared to 35% of student-owned assets.

Learn more by reading “The best and worst 529 plans” and this primer on Motley Fool.