4 Student Debt Sins You Must Avoid!

, ,

Spooked by current or potential student loan debt???

According to Gail Marks Jarvis of the Chicago Tribune,

“Assuming you haven’t already committed a big student loan borrowing mistake, like piling up loans without finishing college or borrowing extensively from private lenders rather than the federal government, there’s no rush to pay off your loans. What’s more important is paying them off wisely, and avoiding one of these four deadly college debt sins.”

 Hanging on to Private Loans.

If you have Stafford Loans, Perkins Loans, and/or private loans, pay off the private loans first.  The Stafford and Perkins loans are the most lenient and least costly.

Rule of Thumb: Your total student debt should not exceed your starting salary following graduation.

As many graduates don’t have jobs or have a job with a salary below the average ($47,000), if jobs are lost or repayment is tough due to a below-average salary, the federal government will work with you.  Private lenders may not be so willing.

Remember, student loans must be repaid. They are not eliminated through bankruptcy.

 

2.  Utilizing a long repayment plan.

Don’t be tempted to utilize a long-term repayment plan because the monthly payment seems so easy to make.

Doing so will likely double the amount of interest paid on the borrowed amount, making the loan much more costly to your long-term financial situation.

Stay on the 10-year repayment plan whenever possible.

 

3.  Not paying a little extra when you can.

Once you’ve landed post-college employment, as your career progresses your pay should increase.

Pay more than the minimum monthly amount, thereby paying the loan off quicker and reducing the interest paid over the life of the loan.

 

4.   Paying off student debt too quickly.

While paying extra each month is good strategy, don’t go crazy!

Make sure if you have emergency funds in place to cover unexpected expenses (e.g., car repair, dental bill, etc.).

Without these funds, you’ll likely resort to high interest credit cards, damaging your ability to “get ahead.”

 

Start early and take the time to develop a proper college funding strategy.  For assistance, contact the Professional College Planners at College Planning Strategies.

 

6 Myths Families Believe about Paying for College

, , ,

Insanely high college tuition…

Mountains and mountains of debt…

Don’t hit the panic button just yet!

These common myths influence lead to mistakes by both parents and students…

  1. Parent savings harms financial aid offers.

Most schools credit only about 6% of parent savings toward the annual cost-of-attendance. In fact, each family has an “asset allowance” the schools ignore.

  1. Chances of admission increase if I don’t apply for aid.

Unless you’re a borderline student, chances for admission and awarding of financial aid are separate and distinct situations. The highest chances for both are best at schools where you would be considered a desirable candidate.

  1. Financial aid covers all need.

Schools aren’t required to meet a student’s full financial need. Most students do not have need fully met. In fact, each school meets its own specific percentage of need, meeting need both with FREE money (grants, awards, scholarships) and self-help (student loans). The amount not met by either is left to the parents to cover.

  1. I’ll have mountains and mountains of debt by graduation.

The average debt of graduates with a 4-year degree is around $37,000. Take precautions, know what you want to study, choose a school with a favorable gifting formula and the budget to provide all aid for which you qualify, and have a strategy on how to cover the cost-of-attendance as well as a strategy on how to pay off student debt.

  1. Ignore private schools, as the cost-of-attendance is much too high.

While the “sticker price” may be intimidating, most private schools offer enough merit aid and tuition discounts that the actual cost of attending is near the cost of a public university. Let the process play out before discounting possible choice based on price and before deciding on a school.

Don’t be one of the more-than-80% of families that believe the myths and pay too much for a 4-year degree.  Start your college planning campaign with the aid of a Professional College Planner at College Planning Strategies!

Private Scholarships = More Student Debt

, ,

While winning a private scholarship can be a dream come true, a little known requirement can render that dream a nightmare!

In order to meet cover the annual cost-of-attendance, most families use a combination of savings, loans, grants, awards, and private scholarships.  Private scholarships can be an vital, sometimes making the difference between attending a dream school or a safety school, or even attending at all.

Unfortunately, a fact known to few, if any, parents is that students legally are obligated to inform their school of choice when they receive a private scholarship.

The upside – at some schools, these awards reduce self-help aid, such as student loans or work-study.  The downside – at some schools, private scholarship awards can end up reducing the aid awarded.

And, unfortunately, at many schools, institutional aid – the free money that need not be repaid – is reduced.  Thus, students typically will need to take out student loans to cover the aid the private scholarship replaced.

The moral of the story – winning a private scholarship may be detrimental to your student’s long-term financial health!

For assistance with designing and implementing a proper college planning campaign, contact our professional college planners to schedule your family’s free, no-obligation evaluation.

 

Pay for College, Save for Retirement – How Can I Possibly do Both?

,

Most parents want to help their children cover the expense of a college education (unfortunately, not all feel this way!) AND they also want to experience a comfortable, affordable retirement.  With the incredibly high cost associated with earning an undergraduate degree, how can a parent do both – balance personal financial goals against the educational aspirations of a child?

We offer these tips to help guide you in this seemingly impossible task…

Tip 1: Make the goal of funding your retirement equal to or greater than funding your child’s education.

While funding a college education is important, retirement savings is equally important, if not more so.  Strive to save 10%-15% of your income for retirement.  College is 4 years, while retirement can be 30+.

Tip 2: Discuss the expense of an education with your children.

Be sure your children understand the overall cost of an education and what you are willing and able to contribute.  Help them research funding opportunities, whether through financial aid or scholarships.  Remember – the goal is the “best fit” for your child for the greatest value.  Don’t let “sticker price” scare you or prevent your child from applying.  Some private schools offer quite a bit of free money.  Don’t assume.  And. keep all options open.

Tip 3: Don’t take on more than you an afford.

Be sure you’re not setting your child up for failure when they graduate.  While researching loan possibilities, ensure they will be able to cover payments after graduation.  A good rule of thumb for your child – don’t assume debt in excess of the projected annual salary upon graduation.

Tip 4: Consider the college savings plan that is best for you.

Some advisors suggest 529 plans, others a Roth IRA.  While each has some advantages, each has a serious disadvantage.  While one or the other may benefit a specific family, there is a third option rarely discussed that offers many, if not all, of the same advantages, with none of the disadvantages.  You’ll need to schedule a free, no-obligation evaluation with us to learn about that third option!

Tip 5: Don’t become the “Bank of Mom & Dad.”

While you want to help your kids, be sure not to set the precedent that it’s ok to ask mom and dad for money.  Doing so may make it easier for them to approach you later in life for funds.  Help them become independent of you financially so you can happily enjoy the golden years of retirement!

Our family-specific college planning campaigns account for not only the expense of a college education, they also consider satisfaction of mortgages and income in retirement.  Contact our Professional College Planners today to begin your college planning campaign!

 

Why Senior Year Grades Truly Matter…

,

As incoming seniors contemplate and prepare for their final year of high school, they may be tempted to coast, crossing the finish line without a worry in the world.

If they’re college-bound, you may want to “ride herd” as their academic performance during senior year can negatively impact offers of financial aid.

Leadership experience, an improved GPA, increase in standardized test results can all positively impact financial aid.

Likewise, performing poorly can lead to drastic consequences, as a school has every right to reduce its financial aid award if academic performance suffers.

Doing well can make a difference!

In fact, students may be able to increase offers of aid by sharing their senior year accomplishments

While need-based aid is somewhat “set in stone,” merit-based aid may be reviewable. Not all schools offer merit-based aid; but, of those that do, private school typically have greater flexibility to adjust financial aid awards.

For assistance with your college planning campaign, contact our Professional College Planners to schedule your free, no-obligation evaluation.

Parents: Pay for a College Degree or Retire Comfortably?

, ,

So…  Do you help your children cover the expense of a obtaining an undergraduate education?  Or, do you focus on ensuring an affordable, comfortable retirement for yourselves?

At some point, every parent will face this dilemma, as more than 70% of families haven’t saved nearly enough to help cover the cost of a 4-year degree, let alone the time they will spend in retirement.

In fact, when surveyed, more than 57% of parents indicated they would raid their retirement plans to ensure their children obtained a college degree with as little school debt as possible.  Then, they’re left wondering how they’ll ever be able to save for, let alone, enjoy retirement.

Many financial professionals insist parents focus on themselves first, saving for retirement (they typically mean “investing” – there is a very distinct difference between the two).

Then, once retirement has been addressed, focus on how much assistance can be provided for the expense of education.

Is this smart?  Focusing on one at the expense of the other.

I guess it depends on your family’s specific circumstances.

But, why not do both?  Why not save for both college expenses and retirement?

It need not be one or the other…

Why not develop a strategic, family-specific plan designed to help your family cover the expenses associated with a 4-year undergraduate education for each of your children while protecting and preserving an affordable, comfortable retirement for yourselves?

Contact our Professional College planners to schedule your family’s FREE evaluation.  We can help you develop, implement, and follow the right plan for your family.

Teen Brains Unable to Handle Career and College Decisions…

Have you seen this image?

These are neuro images of the human brain from ages 5, 10, 15, and 20.

What’s most interesting is the teen brain (2nd from the right).

While it shows a good percentage of deep blue/purple matter (a mature brain), there are still chunks of less mature matter (yellow).

What does this tell us?

It helps explain a MASSIVE challenge to the college process nearly every family has.

Which is…

We’re asking teenage kids “what do you want to do with the rest of your life?” (which is essentially what we do when we ask them what they want to major in and what type of career path they want to purse).

That’s a tough question…at any age.

Let alone, a teenager who’s working with half a brain. (Haha – I’ll be here all week!)

That’s why the student services we offer are so valuable to families.

If kids don’t have any direction on their career path going into college, the chances of them graduating in 4 years of less goes down.  Which also means the cost of college goes up.  Ugh.

Let us help your sin or daughter identify the avenue(s) of study to pursue, while helping you reduce the costs you might face.  Contact our Professional College Planners today.

Juggling Finances During the College Years…

From a student perspective…

It’s not the amount you have that counts; it’s how you use it.  Now and, perhaps, throughout your lifetime, you’ll be called upon to stretch a dollar or juggle your finances.  Here are a few money-saving tips to consider:

Control your spending.  Prepare a budget, then follow it.

Ditch the car, if you can.  Car payments, upkeep, and insurance will take a huge chunk out of available funds.

Use credit wisely.  Obtain a low-limit card, using it only for planned purchase and/or emergencies.

Buy used books, rent them if it’s an option.  Keep them unmarked and in good condition, then resell them.  If rented, return them.

Pay bills timely.  Late fees are ridiculous.  On-time payments create a good credit history.

Set aside money for fun.  There’s nothing wrong with enjoying yourself!

Save 10% of any income.  You have a very long life ahead of you (though it does go faster as you age!).  Build the resources you’ll need for a comfortable, affordable retirement.

Parents – our Professional College Planners are here to assist you with your college planning campaign.  Call or email to schedule an appointment.

529 Plans May Not Be the Proper Savings Vehicle for Low-to-Middle Income Families…

,

Although the value of a college degree has been questioned, it’s well-settled that those with 4-year degrees earn an average of $1 Million more during their lives than those without.  Today, a degree is “a must,” taking the place of a high school diploma.

At the same time, the expense associated with obtaining that degree has increased 2%-3% per year above the rate of inflation.  Unfortunately, more than 70% of families haven’t saved enough to cover these costs; more than 50% have saved almost nothing.

In fact, quite a few families have no idea how they’ll cover those expenses.  At least some have attempted to save and started 529 Plans.  But, are these plans the proper savings vehicle for low-to-middle income families?

Statistics show that half the families saving for college don’t know these plans exist; those that do find the investment options much too complex.  These families should be savings, yet they’re investing.  Savings and investing aren’t the same; they’re two very different practices.

529 Plans are poorly designed – the focus is on tax savings, a factor having little impact on families without large tax liabilities.  Contributing to a 529 also counts against families (at different rates, depending on the schools) when they apply for financial aid.  Moreover, the account balance is subject to market forces, as well as restrictions governing when and how the funds can be used.

While these plans, in practice, have failed to help low-to-middle income families cover their portion of the cost of a degree, they definitely have benefited the financial industry (via administrative and transaction fees) and higher income families that don’t need the help.

Learn when, where, and how to save for college.  Contact our Professional College Planners to schedule an appointment and begin your family’s college planning campaign.