Category Archives: financial aid

college costs, financial aid, student loans

Taking on student loans the smart way

 

Student loansThe May 1st college deadline is quickly approaching and parents and students are making decisions about financial aid packages. Most likely, those packages will include some form of student loans–either Stafford or Perkins. Colleges also provide parents and students with private loan options to supplement the government aid when necessary.

No one wants to graduate from college loaded with debt, yet 60 percent of college students and their families borrow money each year to cover ever-rising tuition and fees, according to American Student Assistance. That’s because the average private college charges close to $40,000 a year for tuition, fees, room and board, while state universities average just over $17,000 a year. Out-of-state students at public four-year schools fall halfway between those costs, averaging just under $30,000 for the 2011-2012 school year, cited US News & World Report.

Financial aid — merit-based and need-based scholarships, grants, work-study programs and loans — has become a reality for the majority of college students.

A New Way of Life

The process of finding aid begins with completing the Free Application for Federal Student Aid (FAFSA) to determine expected family contribution (EFC) based on family income and expenses. There are 63 universities in the U.S. that claim to meet 100 percent of students’ financial need, as determined by the FAFSA. The cold hard truth is that the majority of students don’t attend these colleges and will need some form of financial aid.

Protect Yourself

While working through the process of acquiring funding for college, remain mindful of identity protection. Your soon-to-be college student can be especially vulnerable to identity theft because his or her personal data is easily accessible through grade postings, credit card applications and online transactions, according to the Dept. of Education.

Here are some ways to protect the identity of your student:

  • After completing the FAFSA, log off the page and close your browser.
  • Don’t use paid financial aid services that operate over the Internet or by telephone. The Department of Education offers its services for free and pages containing your private information are password-protected.
  • Do not reveal the FAFSA personal identification number (PIN) to anyone, even if that person is helping you fill out the form. The only time you should use your PIN is on secure websites.
  • Shred receipts and copies of documents with student identity information if they are no longer needed.
  • Review financial aid award documents and keep track of the amount of student aid applied for and awarded.
  • Make sure your student reports all lost or stolen identification (such as your student ID card) immediately.

Forgiveness

When your child graduates, the payoff amount on the loan may seem crushing. But your child has options: student loans, especially those connected to postgraduate professional education, sometimes can be paid off through public service. In 2007, Congress created the Public Service Loan Forgiveness Program to encourage individuals to work full-time in public service jobs. Borrowers who have made at least 120 payments on eligible federal student loans may qualify for forgiveness of the remaining balance while employed full-time by certain public service employers, according to StudentAid.gov.

If public service isn’t an option, loan repayments can be accomplished more easily by paying off private student loans before paying off federal loans.

Be Smart

Only borrow what you can afford to repay. There are numerous sites that provide student loan repayment calculators. Know your options before you borrow and educate yourself on student loan repayment. Research salaries for your career choice and always estimate using entry-level figures.

 

college costs, college guidance, financial aid

Tax deductions for college students

 

college tax deductionsCollege students that don’t work probably don’t need to file taxes, especially since most student loans are considered to be non-taxable (provided they are used for qualified education expenses) rather than income. And yet, there are a few reasons why college students may want to file an income tax return, mainly as a way to see some money back thanks to deductions. Of course, students that have a job (part- or full-time) will certainly want to file. But either way it’s important that they know which deductions may be used without raising red flags. And as a parent you can not only help to ensure that your students receive all the money they’re due, but you may also want to look into deductions that you can take in relation to college expenses for your kids. Both students and parents can save when college is a household expense. And here are a few helpful tips to help parents determine tax deductions for college students.

The first deduction that students should know about is the American Opportunity Tax Credit. It is available only to students that have less than four years of school under their belt, that enroll in one or more semesters of school within a tax year, and that maintain half-time status or better in a degree or credential program. It is available to eligible students for each year that they meet the criteria of the credit, and students may claim up to the first $2,000 of applicable expenses (tuition, books, equipment, etc.), as well as 25% of additional expenses (up to a total claim of $2,500 for a tax year). Similar to this is the Lifetime Learning Tax Credit, which allows students to claim 20% of qualified college expenses, up to $10,000, leading to a credit of $2,000. However, these two credits may not be claimed in the same year, so any students eligible for the American Opportunity Tax Credit should use it since the deductible amount is higher.

Students that find they are not eligible for the credits listed above (due to the number of years in school, the amount of money they or their parents earn, or felony convictions, just for example) may instead choose to deduct any tuition and fees they pay out of pocket, up to $4,000. Since this tax break is slated for termination at the end of 2013, now is the time to use it. In addition, any students that have started to pay back their college loans may deduct up to $2,500 in interest payments. Again, these types of deductions cannot be combined with others of the same type, so students need to consider each carefully before deciding which will be most beneficial.

As for parents, they may also claim any of the deductions listed above provided they are making applicable payments on behalf of dependent students. This, of course, can get a little complicated when it comes to the interest payments on student loans. In general, parents should expect that they will not be able to claim this last one for loans that are in the student’s name, even if they’re paying off the debt. It’s no surprise that federal income tax forms are complicated, and any time finances are co-mingled, as with parents paying for student expenses, claiming deductions can be tricky. You need only call the IRS or contact your tax prep specialist to ensure that you and your student get all the deductions you’re due.

college costs, financial aid

5 Creative ways to finance a college education

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financing collegeAs a parent, you are probably willing to go to great lengths to ensure that your kids make it to (and through) college. You have no doubt tried hard to instill in them an understanding of the different options available to them should they complete a degree. And if you’re like most parents, you’ve likely been contributing to a college fund and you plan to help support your kids during their time in college. But even so, you simply might not have the money on hand to cover all the bills. Between tuition, books, a dorm, and other living expenses, you’re basically supporting two households–a tall order for any parent. So your children might have to take out loans, get a job, and find a few other creative ways to get the money required to pay for their education.

Here are five creative ways to finance a college education:

1. Crowdsourcing.

Random strangers probably aren’t going to help your kids pay for tuition and books. But their loved ones might be willing to kick in, especially if they stand to see a return on their investment. The way crowdsourcing generally works is that a business presents an idea to the public, which then decides if it will move forward via their donations (talk about putting your money where your mouth is). In return, those that donate may get free product, swag, or even cash back with interest (like a loan) when the idea comes to fruition (and to market). Your kids could make the same deal with aunts and uncles, grandparents, and so on. The real upside is that they’ll likely get better interest rates and more lenient terms all around than banks might offer.

2. Grant money.

Many kids apply for scholarships offered by their school and by outside organizations, but many forget that they can also apply for grant money (like the Pell grant) as a way to get additional funds for their schooling. These offerings are generally need-based, so your earnings could play a role in whether or not kids are able to get grants. But it’s definitely worth a try since they do not require repayment.

3. Scholarships.

Most families don’t realize that millions of dollars in scholarship money goes unused every year simply because students aren’t doing their homework to find available funds that they qualify for. Although your kids may be busy with their studies, they won’t be for long if they can’t pay their tuition. So encourage them to sign up for sites like Fastweb, Zinch, and Scholarships.com. If they apply for just one scholarship each week their odds of winning greatly improve.

4. Save everywhere.

There are so many ways for students to save money that they have no one to blame but themselves if they’re paying full price for anything. Textbooks, for example, can be purchased at a discount online (on sites like Chegg, PhatCampus, and so on) or even rented for a semester at a fraction of the cost of new (at BookRenter, eCampus, etc.). They can get numerous discounts using their student I.D., as well; all they have to do is ask to get deals on travel, entertainment, and food. This won’t exactly allow them to earn more money, but it can definitely help them to save some and put it towards college expenses.

5. Consider using other funds.

Suppose you have received structured settlements. You might want to consider selling the structured settlement for a lump sum (there are companies that buy them) as a way to send your kids to college. Yes, you will lose some money in the long run, but if you’re able to avoid student loan payments (and the interest that comes with them) it may just even out.

Get creative with college funding, especially with money that won’t have to be paid back. Don’t, however, use 401K money to finance college. It’s a poor financial decision and compromises plans for your future.

 

college costs, financial aid, scholarships

The True Cost of College

 

How much is the average American spending on higher education? More than you might expect. This infographic goes beyond tuition and offers a comprehensive breakdown of the real costs of college, as well as what goes into financing a degree, including the realities of student loan debt. What is the true cost of college?

Did you know?

  • The total annual expense of attending an in-state public four-year institution averages $22,261 (only $8,655 of which is tuition and fees, the rest is room and board, books and supplies, transportation and other expenses)
  • Attending an out-of-state four-year public institution averages $35,312 and a private non-profit college or university averages $43,289 each year
  •  $237 billion in financial aid was given during the 2012-13 school year; the average student received $13,218 in financial aid
  • 67 percent of 2009 college graduates are in debt with student loans
  • Total student loan debt exceeds $1 trillion and increases nearly $3K every second

These are just a few statistics that emphasize how important it is to understand all the expenses of college and identify potential funding opportunities while budgeting for higher education. The full infographic can be seen at VarsityTutors.com.

college costs

 

financial aid, parenting, student loans

How co-signing can get your children lower student loan rates

 

co-signingWhen it’s time for your children to start looking at colleges, you may be wondering how you are going to pay for tuition and other expenses. Private student loans for college may have lower interest rates than some federal loans and flexible repayment options which can help your student get the funding needed in a way that’s simpler to manage. However, your child may not have the income or credit score to qualify for student loans or lower student loan rates that are available.

Benefits of co-signing a student loan for college

Co-signing your student’s loan may open up private student loan options that would not have been available to him if he was applying on his own. Since income and credit score are important factors when banks approve private loans, and your student may not have a steady source of income or any credit score to speak of, co-signing may be the only way he can obtain a student loan for college. By co-signing, not only will you help his chances of loan approval, but your credit score could also contribute to lower student loan rates.  Plus, getting your student started with a loan that has his name on it can possibly help improve his credit score for future lending opportunities.

Information to consider before co-signing student loans for college

While lower student loan rates mean lower monthly payments for your student, you should understand the responsibility of co-signing before you make a commitment. Your child will be the primary borrower, but by co-signing you are responsible for loan payments if he defaults. Late payments could also negatively affect your credit score. Be sure your child fully understands the responsibility this puts on you, and the importance of making payments on time before you decide to co-sign. You may also want to draw up an agreement, stating he will eventually reimburse you for any loan payments you need to make on his behalf.

Look for private student loans with a release option

Since there are some cautions surrounding co-signing student loans for college, you may want to look into a private student loan that offers a co-signer release option. This allows you to co-sign, helping your child get approved and obtain lower student loan rates, but it also releases you of payment obligation after the student has made a certain amount of consecutive, timely payments. This shows the bank enough confidence in the borrower that you (as co-signer) no longer need to be included for security purposes. Make sure your child understands that once the co-signer is released from obligation, they will be solely responsible for the loan payments. Speak to a lender at your local bank today to learn more about private student loan options and how co-signing could help your child obtain financing for college.

Sponsored content was created and provided by RBS Citizens Financial Group.

college guidance, college planning, financial aid

4 Often Overlooked Ways to Afford Higher Education

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piggy bankThese days, the cost of higher education can be close to the cost of a new house, so if you’re planning to send your child or if you intend to go back yourself, you’ll need to do plenty of saving and lots of planning. Keeping spending in check is a good strategy to help save money for school, but there are several other ideas for financing education. This post will cover four sometimes-forgotten ways to afford higher education, including scholarships for military dependents, getting certification in lieu of or before getting a degree, attending classes online so you can still work while in school and going for shorter programs, like those that take a year.

  • Scholarships are available for military dependents. If one or both parents served in the military, if your spouse serves or served, or if you are a military parent looking for ways to send your child to school, don’t overlook military dependent scholarships. Ranging from a few thousand dollars to full scholarships, these aid packages aim to assist families of servicemen and women in their pursuit of higher education. There may be additional requirements for eligibility; for example, some scholarships are for students attending specific colleges or universities. Others limit eligibility to certain branches of the military or to specific ranks. 
  • Will a certification course help you reach your goals? The way to your dream career might not be via university after all. Do some research into your chosen field and you may find that, depending on the profession you plan to pursue, a certificate is the only requirement to get an entry-level job in your area of expertise, and you’ll be able to work your way up from there. Even if you know you’ll need a bachelor degree or more at some point, perhaps a certificate now would allow you to earn more money at your current job and save up for your college tuition. Certification courses are much shorter than degree programs, can often be completed after working hours or on weekends, and generally cost much less than you’d pay for a semester at a university. Also, military veteran’s scholarships will apply to many certification courses, just as they will to university tuition and fees.
  • Attend classes online so you can work at the same time. Online learning is here to stay. Advanced e-learning software and methodology makes studying for your certificate or degree over the Internet a hassle-free, timesaving option for higher education. The nature of online classes allows you to fit learning into your schedule on your own terms. While you’ll still have to pay for a quality online course, the money you’ll save by being able to earn money while you study will help offset the total cost, and you’ll also save on transportation and student housing costs. If the courses you wish to take are relatable to your current job, have a discussion with your manager or human resources department to see if your employer will be able to offset (or even, pay for) your online studies. Even if your company’s budget doesn’t extend to helping fund your courses, your manager may be able to help you arrange your schedule so you have more time to complete course work for assignment deadlines, for example.
  • Choose a series of shorter programs. Slow and steady wins the race. If financial or time constraints make pursuing a degree unattractive or impractical at this time, talk to an academic counselor about following a series of shorter programs that would eventually lead you to the degree, or the level of demonstrated experience, that you’ll need to land your dream job and embark on the career you want. Depending on your individual goals, it could be wise to first complete some certification courses and then take a series of online or night classes that will count toward a two-year degree. From there you can go on to pursue a four-year degree.

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About the Author: Kelly Novack is committed to educating individuals about the accessibility of education in the digital era. She is especially interested in distance learning tools and the growth and development of online courses in adult education.

college planning, financial aid, organization, parenting

Basic accounting for your student

 

basic accountingMany students graduate high school and head off to college with no real experience with money. Sure, your child may have worked a part-time job to pay for the movies and to put gas in the car, but that doesn’t mean he has any understanding of accounting. Basic accounting for students is easy enough to master, as long as you take the time to sit down and truly understand the meaning. As a parent, it’s up to you to make sure this happens. You might not see the point, as most accounting details are automated these days. But perhaps your child plans on studying accounting as a major? Additionally, if your high school student has any plans to get involved in the world of business, accounting skills will always serve him well. Here are some of the basic accounting concepts for students.

Affirm the basic concepts

At its heart, accounting is all about tracking numbers. The concepts are big, but you’re basically monitoring how money and resources move from one place to another.

Start off by discussing some simple definitions. You can begin the process by discussing assets. Most parents know that an asset is anything that a company or an individual has at their disposal. This could be products, people or cash, but the value of a business (and an individual) usually boils down to the assets on the books. Then you have liabilities. A liability is anything that belongs to other parties. That could be a debt or it could mean a contract that hasn’t yet been fulfilled. College students will most often experience liabilities when it comes to credit cards. And the more liabilities on the books, the more difficult your financial situation. Finally, there’s equity. Equity could be a financial investment put towards goods or services, or it could be money paid towards a debt, such as when you repay a mortgage.

Good debt versus bad debt

There’s such a thing as good debt versus bad debt, and that’s a difficult concept for the beginning accounting student. For example, a student loan is looked at as good debt, because it is stable, usually has a low interest rate, and was accrued in order to better the student. A credit card issued by a retail store is bad debt, because it often comes with a high interest rate and will lower your credit score.

Moving on to the balance sheet

The balance sheet is quite similar to the budget your student should begin to use now that he’s joining the adult world. It tracks those three elements, the assets, equity and liability, to give you an overall snap shot from one moment in time. The first real lesson of accounting is to bring the balance sheet to a state of equality. That means in an ideal world the assets and equity would either equal or outweigh the liability. Otherwise you’re operating at a debt, and that’s bad news for all involved.

Ask a CPA and accounting firm how they handle balance sheets, and they’ll probably laugh. That’s a core of their business. Just because it’s a basic of accounting doesn’t mean you understand it and then move on. The opposite is actually true. Learning to trust the valuations determined by a balance sheet is crucial, to running a business or running your personal expenses.

You can easily explain basic accounting to your student

Don’t spend more money than you take in. Don’t borrow more money than you can afford to repay. Once they have these basic concepts down, they can carry them to college and use them the rest of their lives.Put in the work now to help your young student comprehend these basics, and they’ll be much better off in the long run.

 

college guidance, college planning, financial aid, parenting

Should you co-sign on a student loan?

 

student loans

As a parent, you probably want to do anything within your power to make your child’s dream of college come true. Hopefully you’ve saved up enough money to help them afford tuition, but that college fund may not stretch nearly as far as you once thought it would. Tuition rates continue to rise and finding grants and scholarships take some work on the part of your college-bound teen. For the vast majority of students and families, taking out loans is the only recourse. But some private loans will require you to co-sign on your child’s behalf. This complicates things, and could cause a host of problems. But, should you co-sign on a student loan?

It’s important to remember that any loan offered by the federal government will never require you to co-sign.

Those loans make up the bulk of the borrowed money for any student, and they come with low interest rates and controlled payback periods. In addition, some federal loans won’t accrue interest or require any payments to be made until after the student graduates. Federal subsidized Stafford loans do not charge interest until graduation. Unsubsidized Stafford loans begin charging interest on the day they are disbursed.

If you’re being asked to co-sign, that means it’s a private loan.

You must make sure that your child has looked for all government loans first before going this route.Repaying a private, co-signed loan is also far less flexible. You may have to start paying it off immediately, and the lenders don’t always offer the same deferment and forbearance options as the government. This makes it much harder to manage repayment, which also greatly increases the chance of a loan default. If your child does need some sort of deferment, they’ll often be charged a fee to do so. Overall, this option is far less favorable.

Co-signers are held responsible.

Keep in mind that as the co-signer you will be held responsible if your son or daughter fails to make payments. In fact, the lending institution will consider you 100% liable for this money, just as if you personally borrowed it. You don’t ever want to think about your child running into these sorts of problems, but it happens all too often to be ignored. Not only will they hold you responsible, but just as with those title loans in Arizona that went into default they will hit you with legal action if you fail to pay. That means action from the IRS, penalty payments and a massive dent in your credit score. This can bring about a whole host of emotional issues within the family, and the financial strain just isn’t worth it. All in all, consider co-signing to be an absolute last resort move.

Parents can co-sign on a student loan.

There are some positives to be found going this route. First of all, your student will be able to secure a lower interest rate, thanks to your involvement. Even if your college-bound child has been saving diligently, chances are he or she has not built up much credit to date, if any at all. If you have a solid credit history, you should be able to help your child secure a far lower interest rate by co-signing. And that means the cost of the loan will be lower over the life of the repayment period. In addition, by co-signing you are helping your child establish his or her own credit history. This process is crucial, as it will help them get future loans. Building credit often starts by opening up credit cards, and that comes with all sorts of other issues. By going this route you’ll work together to build your child’s credit.

Parents do have another option-PLUS loans (Parent Loans for Undergraduate Students).

To qualify for PLUS Loans, parents must have children who are enrolled at least half-time at an approved educational institution. The maximum allowable amount that can be borrowed for a PLUS Loan is the difference between the cost of the student’s attendance and any other financial aid the student receives (a number set by the school’s financial aid office).Unlike Stafford Loans, PLUS Loans feature neither a grace period during which no payments are due nor any period during which interest doesn’t accrue. The upside of this choice is that you control the repayment and do not have to rely on your student’s job procurement after graduation, or their ability to repay their loans.

college guidance, college majors, college planning, financial aid

Why engineering degrees are still worth the resources

engineering degrees

 

There is a great deal of cynicism about the value of a collegiate degree these days, as unemployment soars and many people, even those with higher-level education, find themselves unable to find meaningful work.  While an English or Theater degree may be less valuable than the student would have hoped for, the good news is that an engineering degree can be worth every penny put into a person’s education.  The number of engineers in today’s society are far lower than the current demand for their services, making it not only easy for job placement, but also for picking and choosing where you would like to work.

The Money Talks

The National Association of Colleges and Employers suggests that there are few degrees that are more valuable to a student than engineering itself.  Four out of the five highest paid majors go to engineers, with petroleum engineering topping the scales at an average paycheck of one hundred thousand dollars for an entry-level position!

While a degree in computer engineering does not pay six figures, it is still possible to earn over fifty thousand dollars per year upon graduation.  What’s more, this value is sure to increase over the course of an entire career.  For a person who works for forty years, an engineering degree will provide half a million dollars more in salary than a person with just a high school education.

The Reason For the Pay

Why are engineering degrees and educational paths so much more valuable than other professions?  The answer is simple; it is a case of supply and demand.  Fewer and fewer students are going into engineering in all forms, with only five percent of all graduates holding these golden degrees.

In the United States, this imbalance is especially profound.  Other industrialized nations like Germany and Japan suffer from far more competition, with as many as one third of all students graduating with engineering degrees, but in the United States this particular career path is much more rarely taken. Engineering jobs are continually becoming available worldwide, such as the number of jobs that went into engineering at the Olympics every four years.

How Much Should You Pay For a Degree?

If you go to a major, well-respected technological university, you could realistically expect to pay about two hundred thousand dollars for a five-year engineering degree.  This kind of debt can keep a person in tuition bills for much of their life, even if their highly regarded degree gives them favorable job placement for a firm.  For a state school, however, you may pay only about ten thousand dollars per year for tuition (that figure is about double for out-of-state tuition).  This figure, however, does not include books, housing, fees, or other sums like parking.

How to Pay For the Education

Student loans have now eclipsed credit card debt as the number one source of owed money in the United States.  For those who want to pursue a degree in engineering, it may be necessary to take on significant debt in order to pursue a high-profile career.  For those who want to start a career, move to a new city, or purchase a house, it may be extremely difficult if they have several figures worth of student loan debt.

It is far better to get a type of aid for your education and reduce the payments as much as you are able to over the course of your schooling.  Since nearly all engineering degrees require five years of study, the financial commitment is even greater.  The good news is that the final year is usually spent in a co-op program where the student will earn money, so that it is not always necessary to take out loans for the final year of schooling.

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Author Bio

William Stevens is a blogger who creates informative articles relating to engineering. In this article, he explains the financial situation around a degree in this field and aims to encourage continued study with a  master of engineering in civil engineering.

college guidance, college planning, financial aid, parenting

The best tax breaks for college students

images-3As a parent, you have a lot of knowledge and experience that your kids in college still lack. And when it comes to taxes you are light years ahead of them. Even if you’re not a tax expert of some sort, chances are good that you know the basics, such as when taxes must be filed in order to avoid penalty, how to file an extension (or just that you CAN file an extension), and how to ensure that you get the most money back by maximizing deductions. However, the college students in your family likely have no way of knowing even these simple facts related to their annual income tax filings. So it may fall to you to do your research when it comes to tax breaks for college students so that you can inform them and ensure that they’re getting all the breaks they’re due.

So what are some of the best tax breaks for students? The vast majority won’t be able to take advantage of mortgage interest payments on their side, and many won’t enjoy the advantages that fall under the “married filing jointly” banner. And while some students work freelance during their time on campus to make ends meet, thus earning them the right to deduct business expenses, this situation might not apply to most students. However, there are a few write-offs related to education that could greatly benefit the college students in your family; but they may need to take advantage of some of them quickly in order to ensure that they aren’t over-taxed.

The Lifetime Learning Credit is a good place to begin because it allows students (and/or parents) to claim as much as $2,000 in expenses related to education (on the stipulation that eligible students earn less than $60,000 annually for singles or less than $120,000 for married couples). However, there are a couple of options that may serve them better. For example, the American Opportunity Credit allows students earning a single income of $80,000 or less per year (or $120,000 for married) to claim up to $2,500 a year for the first four years of an undergrad degree, with a maximum refund of $1,000. Qualifying expenses could include tuition, fees, books, and more. Students may also be eligible for tuition and fees deductions of up to $4,000 per year, although this particular credit is slated to expire at the end of 2013, so students should make sure to use it this year if possible.

Finally, students that begin paying off their loans can deduct any interest payments made throughout the course of the tax year. Since most students don’t start paying this bill until they graduate, it may not apply. But for those students willing to put a windfall towards their student loan debt, up to $2,500 in interest payments may be deducted. Students that take a gap year and work abroad may be able to claim a tax rebate when leaving the country. But if they travel abroad through a school-run program they will likely continue to pay tuition to their institution of higher learning stateside, making them eligible for the tax breaks that will give them the best chance to come out ahead financially.