9 Myths About the FSA ID

As a graduate student, I‘m no stranger to filing the Free Application for Federal Student Aid(FAFSA®), and when I filed my 2016-17 FAFSA, I was prompted to create an FSA ID—the username and password you need to log in to the FAFSA. I followed the step-by-step instructions, and voila! I easily created my very own FSA ID in no time!

2016-17 FAFSA Login with FSA ID

The FSA ID replaced the Federal Student Aid PIN (check out this blog post explaining why). Students, parents, and borrowers must use an FSA ID to log on to certain Department of Education (ED) websites like fafsa.gov, StudentAid.gov, andStudentLoans.gov. The FSA ID is a more secure way to access and sign important documents without using personally identifiable information (PII).

More than 30 million FSA IDs have been created, and people, like me, have used their FSA ID more than 146 million* times. With any new process, there are some myths floating around about creating and using an FSA ID. Let’s tackle some of those right now…

Myth #1:
It’ll take a long time to create my FSA ID.

On average, it takes about seven minutes to create an FSA ID. If you previously had a Federal Student Aid PIN, you can link it to your FSA ID; this will help eliminate a few steps in the process. Federal Student Aid (FSA) has a variety of resources, like this helpful video, that walks you through each step of creating an FSA ID.

Myth #2:
Only students need to create an FSA ID.

If you are a dependent student, then your parent will need an FSA ID, too (if he or she will sign the FAFSA electronically). That’s because you will need to provide your parent’s information on your FAFSA and your parent, will need to sign the FAFSA, as well. But here is something very important—your parent must create his or her own, separate FSA ID. Your parent shouldn’t use your FSA ID, and you shouldn’t create an FSA ID for your parent.

If you’re not sure if you’re a dependent student, visit StudentAid.gov/dependency.

Myth #3:
It’s okay to let someone else create or use my FSA ID.

Not okay. Each individual person needs to create his or her own FSA ID. A Parent should NOT be creating an FSA ID for their child, and a student should NOT be creating an FSA ID for his or her parent. For example, if a parent tries to create both the parent’s and child’s FSA ID, it’s easy to mix up information like Social Security numbers, dates of birth, and usernames and passwords. Because we verify your information with the Social Security Administration (SSA), it’s crucial that this information be correct. Also, if someone else creates your FSA ID, how will you know the answers to your challenge questions if you need to retrieve a lost username or password?

Also, FSA IDs are used to sign legally binding documents, so giving someone access to your FSA ID is like allowing them to forge your signature. Be sure to create your own FSA ID, and save yourself the trouble.

Myth #4:
I need an e-mail address to create an FSA ID

You do NOT need an e-mail address to create an FSA ID. If you don’t have an e-mail address, you can leave this field blank. Adding your e-mail address is strongly recommended, though, because once your e-mail address is verified, you can enter it instead of your username when you log in. You can also use your e-mail address to retrieve your forgotten username or password or to unlock your account. It’s easy to update and verify your e-mail address by clicking “Edit My FSA ID.”

Edit My FSA ID Tab

Myth #5:
As a parent, I can use the same e-mail address for both my FSA ID and my child’s.

An e-mail address cannot be used with more than one FSA ID. If you choose to provide an e-mail address when creating your FSA ID, the student will need to include his or her e-mail own address, and the parent will need to include his or her own e-mail address. If you don’t have an e-mail address, you can leave the field blank.

Myth #6:
I need an FSA ID to fill out the FAFSA.

The fastest way to sign and submit your FAFSA is to use an FSA ID. That said, if you or your parent don’t have an FSA ID, you can still submit the FAFSA. If you fill out the FAFSA online, but don’t have an FSA ID, you can choose the option to submit your FAFSA without signatures, and print and mail a signature page. If you can’t fill out the FAFSA online, you have other options.

Students without access to a computer can receive assistance from a wide range of college access organizations, like the National College Access Network (NCAN); a student can also visit a local library, use a computer at school, as well as get help from school counselors.

Myth #7:  The Social Security Administration has to verify my information before I can use my FSA ID.

If you’re filling out a FAFSA for the first time, you can use your newly created FSA ID to sign and submit your FAFSA right away. But, if you need to submit a renewal FAFSA or make corrections after you’ve submitted your FAFSA—and you did NOT link your PIN when you created your FSA ID—you first have to wait for the SSA to verify your identity. The verification process takes one to three days.

Make sure to enter your information exactly as it appears on your Social Security card to avoid delays. Once your information is verified, you can use your FSA ID to submit your renewal FAFSA, make corrections, access your loan history, and a host of other things.

If you’re a parent, you never have to wait for the SSA match to sign your child’s FAFSA. However, if you sign the FAFSA when your SSA match status is listed as “pending” and it later returns “no match,” we will remove your signature from your child’s FAFSA. If that happens, you will either need to resolve the conflict with the SSA and sign electronically again, or print and mail a signature page.

Myth #8:
Confirming my e-mail address can take up to 24 hours.

You should receive your e-mail confirmation within three minutes. Although, your e-mail account’s spam filter could delay your confirmation. It’s a good idea to add the FSA ID e-mail address—FSA-ID@ed.gov—to your address book to make sure you get your confirmation.

Myth #9:
I forgot my password, and it’s going to take 30 minutes to reset it.

You only have to wait 30 minutes if you reset your password using your challenge questions.

But, the easiest way to reset your password is to enter your verified e-mail address. Once you do, you can use your FSA ID immediately.

There are lots of resources online to help you create and use your FSA ID; visit StudentAid.gov/fsaid for more information! In no time, you’ll have your very own FSA ID, too!

* These figures are accurate as of April 11, 2016.


Alexis Anderson is an intern at Federal Student Aid’s office of communications. She is a graduate student at The George Washington University studying Strategic Public Relations.

How I Paid Off My $90,000 MBA 736 Days After Graduation

On March 10, 2010, I went to the academic hooding ceremony recognizing the completion of my MBA at the University of Denver.

Getting an MBA from a private university is an expensive undertaking. When I started working on my degree, the estimated cost of attendance for the entire program was $91,994. Tuition alone was $67,000.

Even so, a little over two years after graduation – 736 days to be exact – I made my final student loan payment. Here’s how I made it happen and how you can follow in my footsteps to pay off your student loans in just a few years.

Get started on the right footing

I come from a very academically focused family. I always knew I wanted to follow in my grandfather’s footsteps and get an MBA at an early age. My grandpa managed to graduate from Georgia Tech with an undergraduate degree at 19 and got his MBA a few years later, so I had some tough shoes to fill.

I completed my undergraduate program at the University of Colorado debt-free thanks to a full scholarship from the Boy Scouts. I then went on to began my career in banking a couple of months later.

Like many millennials looking to save money after graduation, I moved back in with my parents and started saving thousands of dollars each month. After all, my only expenses at that point were my car, a new grown-up wardrobe, andnights out on the town with friends.

It didn’t take long to realize that I was not in the right job for me, so left the company after about six months to work on something new. At that point, I had saved the majority of my salary for half a year, which left me with the biggest bank balance of my life.

Working during school

When I left the bank, I started looking for finance jobs in different industries. I also decided it was time to start working on that MBA.

I studied hard and rocked the GMAT, gathered my transcripts, and started applying for MBA programs at the same time I was applying for jobs. I also worked as a restaurant waiter for a few months to keep the cash coming in while looking for something new.

I decided at that point that I was going to work full-time while getting my MBA full-time. Crazy? Maybe. Hard work ahead? Definitely.

Shortly after getting accepting to my top choice MBA program, I got a call back from a big telecommunications company I had applied to. A week later, I had a job offer as a financial analyst.

I made it very clear during my interview that I was going to get the MBA, and wanted to work out a way to get the MBA full-time while working full-time. There were no surprises when I showed up on day one with an MBA start date just six months away.

I worked out a deal with my boss that I would get all of my work done – putting in time from home on evenings and weekends if necessary – and in exchange could leave early when needed for my evening class schedule.

When I started working on my MBA that September, it hit me how hard this was really going to be. However, I knew I could do it if I put my mind to it. I started the journey ahead and made my first MBA tuition payment from a combination of student loans, savings, and income from the day job.

Making student loan payments during school

I received a combination of subsidized and unsubsidized Stafford loans to help pay for my MBA program, which added up to about $40,000 in total. The subsidized loans didn’t accrue any interest while I was still in school, but the unsubsidized portion started accruing interest right away. I did not want to see those balances grow while I was still in school.

I moved into off-campus housing a month before school started, but knew I had a huge expense in my near future. I found a place with a roommate for $400 per month and kept myself on a strict budget while in school, using anonline expense tracker to keep me focused.

I started making student loan payments the month my first loan was issued. Even though no payments were due for over a year and a half, I started making payments around $250 per month to chip away at the loan balances during school.

Laser focus on debt repayment

When I graduated with my MBA, I had a big number in front of me and my subsidy period was ending for the subsidized portion of my loans. With a 6.8% fixed interest rate, I wanted to get my loans paid off as quickly as I could to save thousands of dollars in interest.

I stayed in an inexpensive apartment, with rent just under $700 per month, and held other expenses as low as I could. I increased my payments as well. Rather than making the minimum payment each month, I paid it each payday for double the minimum payment each month.

In addition, every time I had a cash windfall, such as a tax refund or bonus at work, I put 100 percent of that into my loans. In my case, that led to an extra $5,000-$10,000 per year.

With a payoff strategy like that, I was destined to be debt-free in under five years. But that wasn’t good enough for me. Did I mention I hate paying interest?

While keeping my budget low, I watched my checking account balance slowly climb each month. After putting away a modest emergency fund, I started putting everything left over each month into the student loans as an extra payment. Even after rent, utilities, car expenses, and bar tabs, I had at least a few hundred dollars left over each month, which all went into the loans.

The final payoff

Two years later, I found my balance was sitting around $3,700. If I dipped a little bit into my emergency fund (maybe not the best idea in hindsight) and put all of my next paycheck to my loans, I could pay it all off on my next payday.

So I did.

pay off student loans

There is one big downside to this story: if my pay day had been a week earlier, I could have called this article, “How I Paid Off My Student Loans in Less Than Two Years.” However, two years and six days is what it took.

Wherever you are on your student loan journey, do not look at this as something “I can’t do.” Yes, I do have a couple of fancy finance degrees, but there is no reason you can’t do the same thing I did.

Work on growing your income, managing your budget, and putting every cent into extra student loans payments that you can. If you do, you may just find yourself looking at a balance that you can pay off on your next pay day.

Every dollar counts and paying off your loans all starts with the next dollar. Don’t believe me? Enter your information into this student loan payoff calculator to see how soon you can be debt-free.


“This article, How I Paid Off My $90,000 MBA 736 Days After Graduation, was originally published on studentloanhero.com.”

Multi-Generational Advice for College Graduates, Part Two

Don’t miss part one of this article – lots of great advice from Cathy and Morgan!

In thinking about my best advice for students getting ready to graduate, I wanted to make sure my words of wisdom are applicable to millennials. Thankfully, my niece, Morgan, is a recent college graduate and the perfect co-author to assist me. Together, we can see that students today are not so different from the graduates of my era (the late 70’s), and that we all graduate with big dreams and small wallets. We’re happy to share our combined experiences to give our advice to you, the Class of 2016.

Choose Your Digs Wisely

Living on your own or where all the action is may sound appealing, but it can also be expensive. Money-smart students are the ones who realize there is no shame in living at home with their parents, in a shared apartment with roomies, or in the suburbs where housing is affordable. Renting or living with family, especially, can provide you with the flexibility to pack up and go whenever your next career move comes along (besides, we all know mom’s cooking is better than our own). Take advantage of this time to learn the budgeting skills to live simply so that as your career improves, you’ll know exactly how to handle your increasing income.

Cathy:  “I moved home after graduation. Substitute teaching and part time jobs did not allow me to have my own apartment and make my used car payment every month; I look back at that time and I remember barely having $25 a week to spare for myself.  I reconnected with my family and began to build new contacts in my hometown.”

Morgan: “Even more important than creating a budget is sticking to it. If you don’t feel comfortable doing that, ask for help from a financial planner.”

Pay Yourself

You’ve probably heard it a hundred times, but that doesn’t make it any less important: pay yourself first.  Paying yourself simply means that you will always budget savings as your number one expense, even if it’s only a few dollars every paycheck. And you have to stick to it – that movie night and dinner with friends should only happen after you have met your commitment to your savings. An easy way to automate this process is by enrolling in direct deposit and setting up an automatic transfer of some of that cash into your savings account or 401K plan. You will not even miss that money if you never see it in your checking account.

Additionally, many companies and organizations may contribute to your retirement plan if you also contribute a minimum percentage. We’re talking free money here! You should always take advantage of offers like that.  Saving for tomorrow when tomorrow might be 40 years away may not seem like a high priority, especially if you are having financial difficulty. But it’s an investment with a valuable payoff, and every little bit counts.

Cathy: “I knew this was my weakness, so when I cash my checks I immediately put money in my savings account. And because my college has a great retirement program, I never passed up an opportunity to have my dollars matched by my employer.”

Morgan: “My current company matches my retirement contributions up to 4percent. It’s free money -why wouldn’t I invest at least the 4percent?”

Establish Your Credit & Get Ready for Loan Repayment

The easiest way to boost your credit is to pay your bills on time, including student loans. If you have student loans, explore all the loan repayment options available to you so that you’re on a repayment plan you can afford.  Another great reason to get your credit in good shape is that your job may depend on it. Many organizations run credit checks on interviewees as part of the hiring process, and if you’re not making your payments on time, it could cost you your dream job.  Plus, having good credit can open the door for so many additional financial benefits, from getting a cell phone, to better insurance rates, to getting approved for auto or home loans – it’s the gift that keeps on giving.

Cathy:  “I remember the day I made my last student loan payment: I went out and celebrated with my friends! I chose to pay a fixed monthly payment over 10 years, so I was still young by the time they were repaid and free of student debt when I purchased my first home.”

Morgan: “I have consolidated my loans and am making affordable payments. Most student loan servicers will work with you to reduce or postpone your payments for a time. If your payments are postponed, paying AT LEAST the interest each month is a good strategy to keep your debt from ballooning.”

Have a Strong Work Ethic

Finally, whatever your job, strive to be the best at it and treat others well. Be on time, give it your all, and be supportive to others. These three characteristics will be the traits by which others remember you. And when you’re an employee that is remembered for all the right things, you will be in high demand when professional opportunities arise.

Cathy:  “I was very dedicated to my position as a Resident Assistant in my senior year. I loved my campus job!  Little did I know that my performance in this one position would change my life. I graduated in May and was contacted by my supervisor in June to return to my college for a position as a Residence Hall Director. This position came with the opportunity for me to earn my Master’s Degree tuition-free and eventually led to my current positon in financial aid.”

Morgan: “When I am asked about my work ethic, I think about aligning my goals with my company’s mission and vision statement. Employees will work harder for a company if they believe in their mission and vision.”.”

Between an aunt and her niece, attending college roughly forty years apart, we hope that our experiences and advice prove to be beneficial to you as you leave college. Working together, we realized that the good advice from 40 years ago isn’t all that different from the advice given today; proof that the same basic principles still apply: build a strong work ethic, value every opportunity to learn, live simply, and treat people well.

Congratulations to the Class of 2016!


Cathleen Patella is the Director of Financial Aid at Cayuga Community College in Auburn, NY.

Morgan Festa is the Director of Human Resources at Johnston Paper Company, also in Auburn, NY. She is a 2010 graduate of LeMoyne College with a BA in Business Administration, and a 2015 graduate of Nazareth College with an MS in Human Resources.

Multi-Generational Advice for College Graduates, Part One

In thinking about my best advice for students getting ready to graduate, I wanted to make sure my words of wisdom are applicable to millennials. Thankfully, my niece, Morgan, is a recent college graduate and the perfect co-author to assist me. Together, we can see that students today are not so different from the graduates of my era (the late 70’s), and that we all graduate with big dreams and small wallets. We’re happy to share our combined experiences to give our advice to you, the Class of 2016.

Utilize your College’s Career Development Office

Advisors and campus leaders have probably told you to visit the Career Development Office since the day you started classes. They say this because they know that writing a sparkling resume without the glitter is an art that needs help to master. A standout resume and cover letter will open doors so don’t leave your first impression to chance. Make sure your resume is the best that it can be by taking advantage of the services your college may provide, even after you graduate

Remember: There is No “Small” Job

Whether you’re just starting your career or putting that degree to use to find a better one, you’ll likely face a number of entry-level opportunities. Don’t let that get you down; entry-level is a great place to build your skills and make connections to get to the next level:

Cathy: “I remember my first job in college was in the mailroom but by senior year I was selected as a Resident Assistant. My resume reflected consistency and increased responsibilities in my positions – all traits any employer would want on their team.”

Morgan: “It’s important to remember everyone has to start somewhere in their career. I started working in a major grocery store chain every summer during college and obtained an entry-level job with the store after graduation. These experiences led to my present job as the Director of Human Resources of a small, privately owned company. It takes time to be in the ideal position and it certainly doesn’t happen overnight.”

Monitor Your Social Media

Potential supervisors will use Facebook or other social media tools to learn about their prospective employees.  This means those “night-out-on-the-town” pictures with friends may influence your interview process, so it’s smart to take proactive steps to prevent that scenario. The easiest option is to update your privacy settings to control who sees what. Otherwise, you should review all of your pictures and videos and delete everything that you do not want potential employers to view (hint: if you have to ask yourself if it’s “bad,” you should probably delete it). It’s okay to let your social media activity reflect your values and interests, but do so with consideration as to how it may affect you personally. And if you haven’t done so already, you should expand your avenues of social media to include professional sites like LinkedIn, too.

Cathy:  “Create a LinkedIn account and begin building your contacts and mentors. Your social media contacts will grow with your professional career and eventually others will be seeking you out for your next job opportunity.”

Morgan: “It’s so important to remember that once a picture is on the internet, it’s never gone. People can save it, view it, or send a copy to anyone. On the other hand, social media can be a huge benefit; if you maintain professionalism and utilize websites such as LinkedIn, it can be great for getting noticed by recruiters and headhunters.”

Stay Positive

Olympic athletes were not born the best; it takes a lot of time and dedication to reach lofty goals, and the same is true for your career. Don’t get discouraged if you aren’t doing exactly what you want in your first job after graduation. Successful people become successful through years of experience. Most importantly, realize that each opportunity you take will open another door and give you a unique perspective for your future. The most important lesson you can learn is that life is a journey and everything you do professionally will help define who you will be tomorrow. .

Cathy: “I must have sent out 100 resumes when I graduated college looking for a Social Studies teaching position. To make ends meet, I ended up taking a part-time job in a college financial aid office; today, I am celebrating my 33rd year in financial aid with no regrets.”

Morgan: “I once took a job just because it paid more than my present job and I thought that it would make me happier – it didn’t. I learned that, for me, the most important thing is that you do what you love. And success is not always defined by income.”

There’s more good advice from Cathy and Morgan in next week’s post! Check out  part two of this article here.


Cathleen Patella is the Director of Financial Aid at Cayuga Community College in Auburn, NY.

Morgan Festa is the Director of Human Resources at Johnston Paper Company, also in Auburn, NY. She is a 2010 graduate of LeMoyne College with a BA in Business Administration, and a 2015 graduate of Nazareth College with an MS in Human Resources.

Great Advice for Great Students

Way to go, Class of 2016!

You’ve reached a big milestone — and it’s only just the beginning. Now it’s time to make some plans to see where life can take you (and how some smart money strategies can help you along the way).

Inceptia is here to help you get started on your journey. That’s why we’ve put together our free “Great Advice for Grads 2016” eGuide.

Consider it a really cool playlist to take along on your ride. You’ll find practical information that you’re going to need sooner than later, along with career advice from people who ought to know.

Here’s a sneak peek at just some of what you’ll find in the eGuide:

• Tips for becoming financially ready for the real world

• The top five things to do about your student loans after graduation


• Three things every college grad should know

• Lessons learned in corporate America

Get your copy of “Great Advice for Grads 2016“! Scan the QR code or go to https://www.inceptia.org/PDF/Inceptia_Eguide_Summer2016.pdf to download it. Like your diploma, it’s going to come in handy on your road to success.


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Will Refinancing Student Loans Hurt My Credit Score?

So you want to refinance your student loans – congratulations! You can potentially save thousands of dollars in interest and shave years off of your repayment term.

However, you may be wondering: how will applying to refinance student loans affect my credit score?

Fortunately, the impact of refinancing on your credit score should be minimal – but it does have an impact. And depending on other life plans you might have where your credit score needs to be as high as possible, it’s a good idea to approach refinance strategically so you’re not put in a tough spot.

How student loan refinancing works

Refinancing means that you are taking out a new loan that pays off your old student loan(s). The old loans will show as paid off on your credit report and the accounts will be closed. The only open account will be your new loan with the refinancing company.

The terms and conditions of your old loans, including interest rate, repayment term, deferment and forbearance eligibility, etc., do not apply to the new loan, which will have its own conditions and terms that vary depending on which refinancing company you choose.

How does refinancing affect credit?

There are a couple of ways that refinancing can impact your credit.

Hard credit inquiries

The first is via a “hard” credit inquiry. This is when you formally apply for credit with a lender and they check your credit report.

Generally speaking, hard credit pulls have a minor impact on your credit score. However, if you have a short credit history, few accounts, or many hard pulls within a short period of time, they can have an outsized effect.

According to myfico.com, “people with six inquiries or more on their credit reports are eight times more likely to declare bankruptcy than people with no inquiries on their reports.” Essentially, many inquiries are a sign you’re desperately trying to get your hands on a line of credit – a red flag to lenders.

The only time this is not the case is when you’re clearly “rate shopping” before getting an installment loan such as an auto loan or mortgage. Multiple hard credit pulls for the same type of loan are usually counted as a single inquiry if they occur within a 45-day period. That’s because credit bureaus understand you are likely trying to find the best deal before committing to a loan.

Fortunately, the best private student loan refinancing companies will allow you to find out what rate you qualify for through a “soft” inquiry instead, anyway, which doesn’t show up on your credit profile.

If you’re shopping around for the best student loan rates, be sure to find out if the lender does a soft or hard pull to estimate your rate first.

New credit

The second way refinancing can affect your credit score is by adding a new credit account to your profile. FICO credit scores (the most common type) are determined by the following factors:

  • Payment history (35 percent)
  • Amounts owed (30 percent)
  • Length of credit history (15 percent)
  • New credit (10 percent)
  • Credit mix (10 percent)

While refinancing doesn’t impact most of these, you are closing an old account and obtaining new credit. This can affect your credit score.

Factoring credit into the refinancing decision

If all you’re doing (and all you’re planning on doing) in the near future is refinancing your student loans, then you probably don’t have much to worry about in terms of an impact on your credit.

However, if you also plan on making other major financial moves in the near future – like buying a house or car, or applying for a new credit card – you may want to slow your roll.

Undertaking that many major money endeavors in a short period of time will result in more hard pulls and flag you as a financial risk in the eyes of the majority of lenders. It takes about two years for hard inquiries to “fall off” your credit report.

Pacing yourself accordingly gives your credit time to recover between hard pulls and will give you the best chance to be approved for new credit at favorable rates.

Of course, even if you wait the requisite amount of time, the odds of you being offered a great rate on future credit also depends on being responsible with all your open credit in the meantime. That means making all payments on time and in full, every time.

Don’t be afraid, but do be responsible

While refinancing student loans can impact your credit score, it’s not a reason not to seek out the opportunity to improve your financial life tremendously. Just make sure you only apply for loans and lines of credit you’re serious about obtaining, spread out major financial moves as much as you can, and always be responsible with all your credit accounts.

“This article, Will Refinancing Student Loans Hurt My Credit Score?, was originally published on studentloanhero.com.”

Smart Money Moves for April

With the season’s signs of renewal and growth all around, you might be inspired to spend this month renewing good money habits and growing your bank balances. Consider these four tips for springing forward with your finances.

1. Stash money in a retirement account

If you put cash in a Roth or traditional individual retirement account each year, you could be well on your way to having a cozy retirement fund. You may even become a millionaire if you start saving early enough.

IRAs offer major tax advantages because your money can grow tax-free (Roth) or tax-deferred (traditional). But there are limits to how much you can save each year: generally $5,500 if you’re under age 50, $6,500 if you’re 50 or older.

If you haven’t saved the maximum for 2015, it’s not too late. You have until the federal tax deadline (this year, that’s April 18) to contribute.

“Don’t miss out on the opportunity to fully fund your IRA. You’ll want to make it a priority to contribute as much as possible each year,” says Brittney Knies, a certified public accountant in Indianapolis.

2. Spend your tax refund wisely

Last year, the average taxpayer received a refund of nearly $3,000. That can pay for a lot of smart money moves. If you’re expecting a check from the IRS, here are some ways to make the most of it:

Pay down credit card bills to save money in interest. And you’ll be one step closer to becoming debt-free.

Build an emergency fund. It’s a good idea to have three to six months’ worth of living expenses in a high-yield savings account, so you can be prepared for a financial emergency. If you’re not quite there, depositing your tax refund can give your fund a boost.

Upgrade your car the right way. Dealerships suggest using your tax refund as a down payment on a new car. But there may be better options to improve your ride that won’t put you in debt. Consider using your tax refund to fix your current car instead. Maybe it’s time for a new set of tires?

You could also use your tax refund to pay down your auto loan, putting you in a better position to buy a car a few months from now.

If you’re already car shopping, try to get preapproved for an auto loan from a bank or credit union. You’ll be in a better position to bargain with a dealership if you have an acceptance letter in hand. Ask the dealership’s financing department if it can offer a better interest rate, then calculate which offer is better — the dealership’s financing or your preapproved loan.

After you’ve checked off the major items on your tax refund to-do list, you may want to splurge a little. See these ideas for other smart, fun ways to spend your cash.

3. Spring-clean your finances

With nicer weather, many people focus on projects to improve their homes. You could also do the same with your personal finances. Think about reviewing your 401(k) plan or other investment portfolios to make sure they reflect your goals. If not, you may want to spruce up your portfolio byrebalancing your assets.

Browse your bank statements to see whether your bank is charging fees that you could avoid. If so, consider looking for a free checking account.

It’s also a good idea to declutter by tossing old bank statements and receipts. Shred the documents instead of just throwing them in the trash to make sure they don’t fall into the hands of an identity thief.

But hold on to any documents that support your tax filings. The IRS recommends keeping copies of tax returns and related paperwork for at least three years.

4. Make a plan to become debt-free

Start by creating a budget that cuts out unnecessary expenses. That can make it easier to free up cash to pay down debts. Next, focus on paying debts that charge the highest interest rates. To step up your plan, look for ways to bring in additional income to go toward your bills. And finally, it might be possible to consolidate your loans into one with a lower interest rate.

By paying off debt and putting your money to work for you, you’ll be placing yourself in a position to reap the benefits of financial freedom.


Margarette Burnette is a staff writer at NerdWallet, a personal finance website. Email:mburnette@nerdwallet.com. Twitter: @margaretteThis article originally appeared on NerdWallet.

How 4 People Paid Off a Collective $1 Million in Debt

Thirty-eight percent of American households carry credit card debt from month to month, and that total debt adds up to $918 billion. The Federal Reserve estimates the average household balance is more than $16,000. And the average U.S. household is paying $6,658 a year in interest alone, or 9% of its income.

This news is discouraging, but there is reason for optimism. People can still emerge from debt, as long as they take action — and understand the behaviors and impulses that can lead to debt problems.

At one of the oldest and largest nonprofit credit counseling agencies in the U.S., we have studied internal data and interviewed agency staff and clients to better understand the people behind the statistics. We have determined that clients with high debt tend to fit into four financial money personalities: Spenders, Gamblers, Bohemians and Careful Planners.

Here is a description of each personality based on our observations, illustrated by a real-life credit counseling client who has managed to overcome debt problems. Names and locations of the clients have been changed to protect their identities.

The Spender

Jake: $290,000 in debt

What’s the largest group of consumers who seek financial counseling? Those who do not keep a budget. They often do not know their account balances or even how much they receive in take-home pay. They are the Spenders.

THE BEHAVIOR: Spenders purchase items that are beyond their means. They trade in vehicles frequently, rolling negative equity from the last car into the new one, and often overspend on everyday living expenses, such as housing and groceries. They also tend to spend heavily on wardrobe and personal stylists, and they shower their loved ones with gifts, almost always charging to credit cards.

When money gets tight, Spenders tend to rely on windfalls such as bonuses and tax returns to save the day, all while barely making their credit card minimum payments. Their mantra is “money is meant for spending,” and thus they have no trouble parting with it. They sometimes rationalize their lavish lifestyles by giving to charity, often using credit to do so.

CASE STUDY: Jake, an attorney from Texas, found himself watching “The Suze Orman Show” late one night and quickly realized that Orman would use her catchphrase — “denied!” — in response to most of his money choices. The next morning, he sat down to look over his finances. About an hour later, he had listed 34 creditors and a balance totaling $290,000.

Feeling stunned and overwhelmed, he turned to credit counseling and developed a working budget with his counselor, who suggested thousands of dollars in spending cuts. After reviewing Jake’s creditors, the counselor determined he could reduce the average interest rate on his cards from 23% to 11% and save more than $1,200 per month by enrolling in a debt management program. Jake began his repayment and sent his counselor a celebratory email each time a credit card was paid off. His counselor encouraged him along the way, helping him repay all his unsecured debt in just 42 months.

BOTTOM LINE FOR SPENDERS: Although often resistant to change, Spenders who are buried in debt must accept the reality of a complete financial overhaul. This usually includes adopting a cash-only model, tracking every dollar they spend and cutting up all their credit cards to curtail spending. Spenders must wean themselves off using credit as an extension of their income in order to realize their goal of becoming debt-free.

>> LEARN MORE: How does debt management work?

The Gambler

Sharon: $298,000 in debt

Life often feels like a game of chance to people who fit this financial archetype. They tend to be driven by optimism and often make choices based on instinct rather than on critical research. Gamblers thrive on big risks, motivated by the chance for even bigger returns. The Gamblers who seek financial counseling often have lost it all.

THE BEHAVIOR: Gamblers are bold and confident in their thinking, and they often see significant success at first — for example, starting companies, selling them at a handsome profit and using the proceeds to fund another business. When they falter, they are confident they can reproduce their prior success, although they tend to skip over careful analysis and go directly for the bold moves.

When hard times hit and revenue becomes lean, however, they often have difficulty adjusting their lifestyles. Gamblers closely associate their images with professional success, so in order to maintain status they finance their high standards of living.

CASE STUDY: Sharon, an entrepreneur from Chicago, felt like she had hit rock bottom and was ashamed to admit to her best friend that she had amassed $298,000 in unsecured debt in addition to a mortgage, auto loans and student loans. Working with a counselor, she consolidated her 10 credit cards, which had an average interest rate of 27%, into one monthly payment that was a whopping $2,000 per month lower than what she’d been paying on the individual cards, with an interest rate of 8%. After beginning her repayment plan in the fall of 2009, she finished it exactly five years later and now lives without credit card debt.

BOTTOM LINE FOR GAMBLERS: While they are creative and hardworking, their egos can land them in financial ruin. Gamblers take losses personally and often blame themselves, but they must pick themselves up and learn from the experience. Gamblers should minimize risk by discussing their plans with objective third parties in order to gather perspectives.

>> LEARN MORE: Four ways to find debt relief

The Bohemian

Kevin: $265,000 in debt

Like the Spenders, Bohemians almost never budget and often live paycheck to paycheck. They want to live life to the fullest and are impetuous regarding their money because they are not interested in details that keep them from enjoying life.

THE BEHAVIOR: Bohemians may be artists, writers, musicians or simply free-thinkers who like to engage in expensive pastimes, such as extreme sports or extensive travel. Where Bohemians differ from Spenders and Careful Planners is that they don’t view money as a tool to create social status or financial stability. Some of them may even feel that those who think too hard about money are neurotic.

CASE STUDY: Kevin, a Gen X musician from California, is a prime example. Engaged and with a baby on the way, Kevin had $265,000 spread across 20 unsecured creditors, and he feared he might have to consider bankruptcy. His fiancee persuaded him to take a hard look at his finances. After contacting his credit union, Kevin was referred to a credit counselor who helped him balance his budget, including a mortgage and two auto loans, and helped him establish a debt management plan. He was able to reduce his monthly payment by $1,300 and cut the average interest rate on his cards from 25% to 10%. This, combined with with $2,500 in monthly budget reductions and a personalized action plan, allowed Kevin to pay off his credit card debt in 54 months.

BOTTOM LINE FOR BOHEMIANS: The hedonistic ways of Bohemians are important to acknowledge in order for debt repayment to be successful. They must realize that a spending plan does not mean deprivation from everything they enjoy. It is helpful to create a special savings fund for affordable incentives to celebrate milestones along the way, such as when a creditor is paid off. Bohemians should find ways to automate their savings and seamlessly build budgeting and money-saving tactics into their routine. If they can manage their finances in a convenient and streamlined way, they can continue their carefree lifestyle while also being financially secure.

>> LEARN MORE: An eight-point plan to pay off debt

The Careful Planner

Donna: $147,000 in debt

Even Careful Planners, the most frugal of money personalities, can fall upon hard times. Dramatic increases in the cost of education and health care mixed with difficult employment and housing situations are often to blame.

THE BEHAVIOR: Careful Planners learn from a young age how to manage their money wisely, always budgeting and looking for the best value. Their parents teach them about delayed gratification, and they grow up taking conservative vacations and driving well-used cars.

When finances begin to slip, Careful Planners can sometimes panic. Job losses, relocations and unsuccessful attempts to sell homes are common crisis points, exacerbated by bills for their children’s private universities or student loans. They cut back on expenses and deplete emergency savings in an attempt to cover their shortfall, but it’s not always enough.

CASE STUDY: Donna, a professor from upstate New York, accumulated $147,000 in unsecured debt among nine creditors after a series of events beyond her control. She and her husband considered withdrawing from their retirement savings, but Donna eventually found her way to a counselor, who told her she could save $1,000 per month in credit card payments and decrease the interest rates on her cards from an average of 15% to just 4%. Thankfully, Donna’s husband found employment, and her counselor helped arrange a loan modification with their mortgage company. With all these changes, the couple maintained their monthly payments, restored their good credit and became debt-free in 58 months.

BOTTOM LINE FOR CAREFUL PLANNERS: Financial diligence can be an Achilles’ heel for Careful Planners. Their sense of personal responsibility can be so strong that they refuse to seek help from their creditors, a credit counselor or legal counsel when they face difficult times. Instead, they turn to their assets to bail them out — in some cases doing more harm than good. Careful Planners should be aware of this tendency and understand that there is no shame in seeking advice and assistance. Conversely, some are so opposed to touching long-term savings that they ultimately suffer greater financial losses by not using assets in cases where that is the best option.

As you can see, there are many ways consumers end up in six-figure credit card debt. Sometimes, it’s the result of a subconscious financial personality, and other times it’s the result of a collection of difficult circumstances. Whatever the case, there’s always a light at the end of the tunnel, and the repayment often happens much more quickly than you might expect.


This article originally appeared on NerdWallet.

Investing: It’s Not Just For Rich Old People Anymore


When you think of investors, what do you see? Men in suits strolling down Wall Street? The Sad Guys on Trading Floors blog? Your parents chatting on the phone with their financial advisor?

A lot of Millennials don’t picture themselves as investors, and that’s a problem. According to a Facebook study on Millennials and money, our generation is 1.6 times more likely than Gen X and Baby Boomers to have no investments whatsoever.

A common theory  is that Millennials don’t trust banks, brokers, and other financial institutions, but the study shows that isn’t the case. While 12% of Gen Y lacks faith in financial institutions and the economy, far more don’t invest because they don’t think they have enough money (54%) or don’t know enough about investing (24%).

It’s Not As Complicated As It Seems

Any movie about stock trading will have you believe that investing is something done by stressed-out dudes who yell a lot, draw charts on white boards, and speak only in confusing jargon. The reality is that investing is, and should be, pretty boring.

The internet has democratized investing, making trading as easy as online banking. Contrary to what many Millennials think, investing is not just for the rich, well-established, and knowledgeable. It’s through investing over a long time that you gain that wealth and experience.

While there are mutual funds that have high minimum investments, and stocks with share prices in the thousands, there are lots of affordable options — and they’re not just for beginners! Many experienced investors are looking for the same things you are: low fees, easy diversification, and set-it-and-forget-it investing accounts.

Contribute to Your Retirement Accounts

Let’s not forget one of the best ways to get started as an investor: retirement savings. Before you begin any other investing, contribute enough to your 401(k) to get your employer match. Don’t miss out on that free money! That means if your company will match 50% of what you contribute up 6%, you need to contribute 6% in order to receive the full 3% match.

Next, max out your Roth IRA with a $5,500 annual contribution (you can divide this up into smaller contributions throughout the year).

Important Info: Note that there are income restrictions on Roth IRAs. If you make too much money, you’ll no longer be eligible to make a contribution. Make sure that you qualify first!

Once you’re fully funding your Roth IRA, then increase your contributions to your 401(k) until you’re maxing it out ($18,000 per year).

Start Investing for Mid-Range Goals

If you’re already on track for retirement, you might want to open a brokerage account so that you can save for those mid-range goals that are more than five years away but happening sooner than retirement. There are many high-quality discount brokerage firms, but a few of my favorites are: Betterment (ease of use and no account minimums), Vanguard (the lowest fees on index funds), and Schwab and Fidelity (both have commission-free ETFs).

I often recommend exchange-traded funds (ETFs). Index funds are great for new and long-time investors alike, but they have have investment minimums (usually around $3,000 and up) that might make them cost-prohibitive. ETFs offer the instant diversification of a fund, but they operate like shares of stock. You can buy as little as one share of an ETF!

There are lots of ETFs to choose from at under $200 a share, so you can invest smaller amounts of money on a regular basis, rather than waiting years until you’ve saved up thousands to invest all at once.

Whenever you’re considering an ETF or index fund, pay attention to the expense ratio, which is the percentage of a fund’s assets that go toward the cost of managing the fund. It’s also important to find out the trade fee, which is cost to buy or sell the fund.

Time is On Your Side!

You become a rich old person because you started investing as a not-so-rich young person. Waiting until you’ve “made it” means you’ll never begin, and that could mean you’ll head into your retirement years without enough saved up to support yourself.

One of the biggest advantage Millennials have is time. A nice, long time horizon will help decrease the effect market volatility has on your investments. It’ll also allow your money to grow thanks to the magic of compound interest.

What’s compound interest? Let’s say you invest $1,000 in ETFs that average a 5% return. After a year, you’ve earned $50 in interest. For the second year, you’ll earn 5% not just on your original $1,000, but on that $50 too, for a total of $1,102.50! You’re earning interest on interest! Compound interest is the secret to making your money work harder for you.

No Time Like the Present

While the gloom-and-doom reports on the news make investing sound like a scary risk, the reality is that with some smart choices, you can set yourself up to build wealth over the years. Just remember the basics:

  1. Start by saving for retirement, and then pick low-fee investments that lead to a diversified portfolio. Diversification will help make that portfolio less risky.
  2. Hold on to and contribute to, your investments on a regular basis for a long time. (I’m talking decades! Just ask Warren Buffett.)
  3. Stop watching gloom-and-doom reports on the news. That’s just general life advice.


“This article, Investing: It’s Not Just For Rich Old People Anymore, was originally published on genyplanning.com.”

How to Choose a Student Checking Account

Choosing a student checking account can be as difficult as choosing a major, especially if you’ve never had a bank account before. And even if you have, you’re likely to be so bombarded during orientation with promotions and sales pitches that it’s hard to know which option is best for you.

Banks and credit unions offer accounts geared toward students — often with simpler terms and freer access — so if you need a safe place to keep your money, there are some good options out there.

Here are some things to think about as you choose a student checking account. (A major? That’s up to you.)

Understand and avoid fees

A free student checking account, or one with low fees, provides more financial freedom for students who have to stretch their dollars.

Overdraft fees

Many banks automatically enroll you in an overdraft program when you sign up, which will cover you if you spend more than what’s in your checking account. But it’ll cost you in fees. That $3 cup of coffee during finals week could cost you 10 times as much if you’re not careful.

Generally, a bank responds to overdrafts by:

  • Covering your purchase, but charging an overdraft fee; the national average amount is $34 each time.
  • Drawing from a linked savings account to cover the purchase and charging an overdraft transfer fee — usually around $10.
  • Declining the purchase if you opted out of any sort of overdraft coverage or protection; all it costs you is a small bit of pride at the register.

Just because a checking account has your school’s name on it, that doesn’t mean it’s good. In fact, it might be a very bad choice.

If you opt out of overdraft coverage, still watch for other fees associated with insufficient funds. Let’s say you bounce a check. You could be charged a non-sufficient funds fee and a returned item fee.

Banks make tens of billions of dollars every year off of overdraft fees. The best and smartest option is to buy stuff only when you know your funds can cover it.

ATM fees

You want your checking account at a bank with plenty of ATMs conveniently located on campus, because ATM withdrawals at your bank’s machines are usually free. It’s a plus if the bank also reimburses out-of-network ATM fees or has a large ATM network, so you’ll have free access when you go on spring break or head home for the holidays.

Maintenance fees

Some banks or credit unions waive monthly maintenance fees and minimum balance requirements if you enroll in electronic statements, set up a direct deposit, or make a certain amount of debit card purchases each month.

Fees for paper checks

Checks might seem old-fashioned, but your landlord may accept rent payments only that way. If so, a student checking account that offers free or discounted checks would be nice.

» MORE: How to choose a bank

Consider convenience

Technology can help you stay on top of your budget and simplify banking if you can’t easily drive to a branch or if you keep a full schedule. Or if you’d rather bank from your couch.

Mobile & text banking

You do most everything else on your phone. Banking can be no different. Most banks and credit unions offer an app for your phone from which you can check your balances, pay bills, move money between accounts, and even deposit checks by taking and uploading a photo.

With some banks, you can send a text message to fetch nearby ATM locations, payment due dates, recent account activity, or balance information. And text alerts sent to your phone can help prevent overdraft charges.


When you’re out and a friend picks up the tab, you want to pay him or her back quickly. Most checking accounts can be linked to popular person-to-person payment apps. But some banks have their own P2P service, and it might come with fewer fees.

Customer service

How you prefer to communicate will determine the type of service you need. A feature allowing you to instantly message a representative on a bank or credit union’s website or mobile app could be useful.

If you like knowing you can speak to someone face to face, whether it’s an emergency or you’re just confused about something, then a branch location near campus or your apartment is more important.

Think twice about …

College-sponsored ACCOUNTS

Just because a checking account has your school’s name or logo on it, that doesn’t mean it’s good. In fact, it might be a very bad choice.

In many cases, your school has a business relationship with the bank, which is providing services in exchange for access to potential student customers. And although it’s possible the deal you can get on campus is great, more likely it’s no better — or is indeed worse — than what you could get elsewhere.

Shop around, and always read the fine print before opening any account.

Ask questions

What do you need to open an account?

Many banks and credit unions offer accounts for students ages 17 to 24; students under 18 may need to open an account with a parent or legal guardian.

Requirements vary, but usually accounts can be opened at a branch location, online or by phone with a valid ID, address, Social Security number and proof of student status.

You can usually fund an account at a branch with cash, a check or a money order. Online accounts may be funded by checks or linked debit or credit cards.

What happens after graduation?

Each bank or credit union has its own policies. When you graduate, your student checking account might roll over to a standard checking account, with new fees and requirements. These should be weighed against checking accounts at other places.

Enjoy it while it lasts

Once you become a working adult, you’ll have plenty of financial responsibilities. Find the best student checking account for you and take advantage of the low fees while you can.


Melissa Lambarena is a staff writer at NerdWallet, a personal finance website. Email:mlambarena@nerdwallet.com. Twitter: @LissaLambarena.

This article originally appeared on NerdWallet.