Month: December 2016

5 Ways to Tell If Your Checking Account’s the Right Fit

Posted on by Spencer Tierney

Like the roof over your head, the state of your checking account is something you may take for granted. But if you’re seeing money drip from your account in the form of fees, it’s time to stop those leaks before things get any more costly.

“Even the smallest fee [can] burn through whatever you get from interest,” says Rob Rubin, a director at the banking analytics firm Novantas.

When you originally signed up for a checking account, you may have taken a quick glance at interest rates, fees, bank branch and ATM networks, and additional services like online and mobile banking. But now that you know what services you actually use and what fees you tend to pay, it’s time to evaluate whether you have the right account.

Here are the questions to ask yourself:

1. Did I pay monthly fees this year?

Keeping money at your bank doesn’t have to cost you anything, but monthly maintenance fees are all too common these days. Many banks have stopped offering free checking accounts to offset losses from fee income caused by new regulations in the wake of the 2008 financial crisis.

If you’re paying a monthly fee, ask if there’s a way to get it waived. Options may include setting up direct deposits, maintaining a minimum monthly balance or making a certain number — such as 10 — of debit card transactions per month.

If your bank doesn’t offer any way around the monthly fee, shop around for one that does. Alternatively, find a free checking account at an online-only bank, community bank or credit union.

2. Is my bank’s ATM network convenient?

Count how many times you needed cash recently, and how many of those times you had to pay an ATM fee. This may not be a pressing issue if you use a credit or debit card everywhere. However, some small businesses, such as local bars and coffee shops, may require cash as payment. That’s when having a bank with a free local network of ATMs pays off: You avoid any out-of-network or ATM operator fees.

The biggest banks aren’t the only ones that make cash withdrawals convenient. Many credit unions and community banks take part in shared ATM networks such as Allpoint and the Co-Op network, which have tens of thousands of ATMs nationwide.

Some financial institutions take it a step further.

“Small banks can compete [against national banks] by refunding customers their ATM surcharges,” says David Albertazzi, senior analyst at the research and consulting firm Aite Group.

3. Do I pay any overdraft fees?

Paying even one overdraft fee is expensive — the median cost is $34, according to the Consumer Finance Protection Bureau. Overdraft coverage gives your bank permission to pay any debit card purchases, ATM withdrawals or checks whenever your checking account lacks enough money. And once you’re in the red, any new purchases lead to more overdraft fees.

To cut the cost of those fees, you can try an overdraft protection transfer service, which automatically transfers money from your savings account to complete a purchase, or opt out of overdraft coverage.

Take a hard look at your spending habits when deciding on your overdraft program or lack of one. These are meant to be used rarely.

» MORE: How to avoid overdraft fees

4. What services do I actually use?

Look at your bank statements for the past months to see what types of transactions you’ve made. Take note of whether you’ve had any wire transfers, cashier’s checks, money orders, ACH transfers or bill payments. Fees for these services vary by bank, so if you use them often, look at banks that have the lowest prices.

5. What am I missing out on?

First, see what your bank has. Many banks offer free online and mobile banking services, like remote check deposits and text alerts when your balance is below a certain amount. Explore your bank’s website to make sure you’re aware of all the benefits that come with your account.

Next, see what your bank doesn’t have. The interest rate on your checking account may be next to nothing, but it doesn’t have to be. Many online banks raise the bar with 1% annual percentage yield accounts. Outside of interest, some accounts have rewards.

If you’re already thinking of switching banks, there may be opportunities there, too. Promotions for opening a checking account exist, although they should be the icing on the cake. Your needs, which may range from real-time customer service to mobile app functionality, should come first.

» MORE: How to switch banks

“Ultimately, it’s about feeling confident about where my money is, where my money is going and knowing that I’m on the right track,” says Mark Schwanhausser, a director at Javelin Strategy & Research.

Once your money’s in good order, maybe it’s time to check on your roof.

 

Spencer Tierney is a staff writer at NerdWallet, a personal finance website. Email: spencer@nerdwallet.com. Twitter: @SpencerNerd.

The article 5 Ways to Tell If Your Checking Account’s the Right Fit originally appeared on NerdWallet.

5 Steps to a New Financial You in 2017

Posted on by Tammy G. Bruzon

Holiday shoppers have been careful each season to make their lists and check them twice. Budgets have become more discerning and savers have become better planners for their holiday spending, prioritizing savings along the way. According to a September 2016 report, two out of five millennial shoppers got a head start this year and had started buying gifts for the season before summer had even come to a close.

 

These successful financial habits don’t have to stop there. With the New Year comes an opportunity to make some improvements to your financial health. Don’t make just another resolution that disappears by Valentine’s Day. Take your financial wellness to a whole new level: a New Year, a new financial you.

 

These five steps will help you to establish your best financial path for 2017, and you can have all the heavy lifting done before the clock strikes twelve:

 

  1. Take stock of your finances. Take account of all your income, expenses, and existing savings/investment accounts. And no matter how nice you were, don’t forget to include any naughty debts you may have incurred in the spirit of the season.
  2. Sketch out a budget “template” for the year to come. Think big picture. Plan your holiday spending for 2016 with this handy worksheet from America Saves and find the method for budgeting that you’re going to use in 2017, and rough out what you’d like it to look like from month to month. Be pragmatic about your needs and be honest about where your money is going. Plan to make adjustments and really dig into your spending habits when you check back in on a regular basis.
  3. Check your credit report. It is your legal right to get a free copy of your credit report every 12 months from each of the three major credit reporting bureaus. Add a visit to com to the calendar as an annual “holiday” or divvy up the bureaus to get a free report from a different bureau every four months.
  4. Set up bank and credit alerts, and financial reminders. Whether you’re at your computer or on your mobile device, you are in an ideal position to receive notifications about upcoming payments, suspicious activities on an account, transactions over a certain dollar amount, low balances, and more. Find out what online services your financial institution(s) offer, and supplement what they don’t with an app or calendar reminder. It’s all right there at your fingertips.
  5. Make a Commitment to Yourself to Save. Those who make a commitment to themselves and their family to save usually save more than those who don’t. Think of this as your New Year’s Resolution. Make your commitment today by taking the America Saves Pledge and get regular advice and support from America Saves while you save money.

 

A new financial you is an achievable goal for 2017. Join those savers who have successfully opted to reduce holiday spending and prioritize savings throughout the season. To learn more about spending and saving during the holidays and take the America Saves pledge, visit AmericaSaves.org.

 

Bonus Content: Hear from two economists about holiday saving and spending in this video that is full of tips and advice from America Saves.

                        

Tammy G. Bruzon works for America Saves, managed by the nonprofit Consumer Federation of America (CFA), which seeks to motivate, encourage, and support low- to moderate-income households to save money, reduce debt, and build wealth. Learn more at AmericaSaves.org.

The article 5 Steps to a New Financial You in 2017 originally appeared on AmericaSavesWeek.org.

Banking on an Athletic Scholarship? You May Want to Think Again

Posted on by College Factual

It’s not hard to get caught up in the glamour and excitement of big-time college athletics. And when top athletes are being recruited as early as junior high, many parents see athletics as a way for their child to get college paid for.

The reality, however, is that the odds of earning a fully-paid athletic scholarship are extremely slim. For one, consider that over a third of all colleges with sports teams aren’t allowed to offer athletic scholarships. Here’s a closer look at that reality of college athletic scholarships, and why your best bet as a high school student is to strive for far-more-prevalent academic scholarships.

Long Odds

While there are over 1 million boys playing high school football, there are only about 19,500 college football scholarships.

Take another example: of the over 535,000 boys playing high school basketball, only 3.3% will play NCAA basketball. For girls, it’s only slightly higher – 3.7%.

See more here.

Athletic Scholarships Aren’t What You Think

Full-ride Division I athletic scholarships are offered in only four sports – football, men’s and women’s basketball, and volleyball. That leaves the average athletic scholarship (for all athletes) at about $10,400. If you exclude men’s and women’s basketball, the average falls by nearly another $2,000.

Scholarships Are Divided Up

College coaches routinely split up the scholarships the NCAA allows them to offer. A Division 1 soccer or wrestling coach may be given 10 scholarships of a certain amount, but they have the freedom to further divide those amounts into as many scholarships as they want.

Apply for hundreds of scholarships by filling out one simple form.

Even Division I baseball, which can be a steppingstone for elite players to make it to the professional level, can only offer partial scholarships equaling 11.7 full scholarships. And those needed to be divided among 27 players.

Apply for hundreds of applicable scholarships with one simple form. START HERE

Scholarships Aren’t Guaranteed

Even if you receive a college athletic scholarship, there’s no guarantee that you’ll have it for four years. That’s because college scholarships must be renewed each year and it’s at the coach’s discretion. That puts extra pressure on students to maintain their scholarship while still trying to earn their college degree.

Athletics Won’t Make Up For Poor Grades

The focus on earning a college athletic scholarship can be all-consuming – and at the expense of high school academics. Many parents, in fact, see the possibility of a college scholarship as a legitimate fall-back when their child’s high school GPA drops.

You will rarely receive an athletic scholarship that will overcome poor grades. Students will generally do much better by earning a competitive financial aid package with merit aid.

You Need to Promote Yourself

Unless you’re a superstar high school athlete, college coaches may not even know that you’re out there. Students need to be proactive by emailing coaches at schools you’d like to attend. Forward all of your relevant contact information (including your coach’s contact info), statistics, and anything else you think is relevant about your high school athletic career. Better yet, put together several minutes of YouTube highlights and send coaches that link.

Athletes Can Often Do Better by Earning Merit Aid

If you’re serious about continuing your athletic career after high school, Division III offers the best opportunities. It’s the largest division of schools and players in the country, but its schools don’t offer anything when it comes to athletic scholarships. They can, however, offer merit aid to academically-accomplished student athletes, which places a far greater emphasis on grades and test scores than athletic prowess.

Tips for Athletes

Some students do receive full-ride athletic scholarships and then go on to play professional sports. This is just not a common trajectory for most student athletes. Make a realistic assessment of your strengths and decide what it is you are ultimately going for.

Enjoy your experience as a high school athlete, but don’t let pressure on achieving an athletic scholarship overwhelm you. Keep up your grades, and be proactive in your search by contacting coaches.

Playing sports has many benefits for students and is often considered favorably when applying for internships and jobs (as long as your grades don’t slip). Learning how to balance your athletic commitmentswith studying and a social life can teach you excellent time management skills.

Make sure you’re getting an education at a school where academics are prioritized as well as athletics. Visit our sports rankings to immediately begin discovering colleges sports programs of all divisions where the athletes succeed in the classroom as well as on the field.

The College Recruiting Formula

Looking to learn how to get recruited, play college sports and save money in the process?

GET THE COLLEGE RECRUITING FORMULA

The article Banking on an Athletic Scholarship? You May Want to Think Again originally appeared on College Factual.

College Factual’s mission is to help every student find their best-fit college for the best price for them. Get matched to the right college and major for you! 

Ask Brianna: How Can I Tackle My Finances?

Posted on by Brianna McGurran

“Ask Brianna” is a Q&A column for 20-somethings or anyone else starting out. I’m here to help you manage your money, find a job and pay off student loans — all the real-world stuff no one taught us how to do in college. Send your questions about postgrad life to askbrianna@nerdwallet.com.

This week’s question:

“I feel overwhelmed by my student loan and credit card debt, and I have nothing saved. I don’t want to even look at my accounts. How can I get past my fear and tackle my finances?”

Repeat after me: It’s not too late.

You are not a bad person. You don’t have to fix everything at once. Asking this question means you’ve already taken a huge step. Plus, nearly everyone has felt anxious about money — they probably just didn’t tell you.

“It’s something that everyone has to deal with, but nobody really talks about,” says Kristy Archuleta, a program director and associate professor of personal financial planning at Kansas State University.

Money is so tied to emotion that Archuleta, a licensed marriage and family therapist, is part of a movement to develop the new field of financial therapy. She says financial therapists “help people think, feel and behave differently with money as a way to improve overall well-being.”

If you’re totally overwhelmed by your financial situation, taking the first step to look at your finances can be the hardest part. Start small and ask for help. When you set goals and use them to guide you, you’ll start a positive cycle of progress.

Picture financial freedom

To start, focus on what you want your life to look like, Archuleta says — the big, nebulous, existential stuff, not what’s possible with the money you have in the bank right now. How do you want to feel when you wake up in the morning? What activities and interests do you want to pursue? What kind of environment do you want to live in?

You may find it hard to imagine yourself sitting on the porch of your dream house in the country without the credit card debt that’s keeping you up at night now. But let the future motivate you to address your money concerns, instead of focusing on mistakes you made in the past.

Break big goals into small steps

When you consider your credit card debt, student loans and lack of emergency or retirement savings all at once, they seem like big, scary, insurmountable problems.

Break them down into separate, small tasks, says Sophia Bera, a financial planner and founder of Gen Y Planning in Austin, Texas. She asks her clients to list all of their money worries alongside the steps that would address them, then to check off one task a week.

First, stop or reduce your credit card use and set up a monthly automatic transfer to a savings account so you can build an emergency fund for unexpected costs. The classic advice, to save six months’ worth of expenses for emergencies, isn’t realistic right away. But you can transfer just $5 to your savings account each month, says Erik Kroll, a financial planner at Hilltop Financial Advisors in Milwaukee. (Beware of minimum balance requirements, though.) When you realize you don’t miss that $5, you’re likely to bump up those savings deposits.

Ask a pro for advice

Experts can step in when you’re not sure how to take the next steps to pay off your credit card debt, lower your student loan payments or save for retirement.

Set up a consultation with a certified credit counselor to get an overview of your financial situation. All agencies affiliated with the National Foundation for Credit Counseling offer free, general budgeting and debt payoff advice. They can also tell you if a debt management plan is right for you. On a debt management plan, you’ll pay the agency a monthly fee, and in exchange it will work with your creditors to lower your interest rates and monthly payments.

Fee-only financial planners can be another source of insight and support. They typically charge an hourly or monthly fee and don’t earn commissions on financial products they sell. Some do pro bono work through their local chapters of the Financial Planning Association. You can find your local chapter on the association’s website.

“Many people feel like they should be able to ‘do all this money stuff themselves,’ but it can be really intimidating to get started on your own,” Bera says. “Even financial planners have financial planners.”

 

Brianna McGurran is a staff writer at NerdWallet, a personal finance website. Email: bmcgurran@nerdwallet.com. Twitter: @briannamcscribe.

This article was written by NerdWallet and was originally published by The Associated Press.

The article Ask Brianna: How Can I Tackle My Finances? originally appeared on NerdWallet.

5 Frugality Pros Help You Rein In Holiday Spending

Posted on by Bev O'Shea

The overflowing expectations around the holidays can entice us to spend more than we can afford. Not only do we have bills to face once the decorations are put away, but 43% of respondents to an Experian survey say extra expenses also make the holidays hard to enjoy.

Now’s the time to plan so your December spirit doesn’t lead to January bills. We asked five experts on frugality what they do to avoid holiday overspending.

Recognize your triggers

Donna Freedman, author of “Your Playbook for Tough Times,” says you need to recognize your spending triggers. Are you trying to make the holidays more magical for your family? Can you resist anything but a great a deal? Knowing what drives your spending can help you stop. Here’s what she recommends:

  • Carry your list with you even after you’ve finished shopping. When you see a killer deal or a gift that’s “more perfect” than the one you’ve wrapped up, use the list to remind yourself you’re done.
  • Make a game out of spending little or nothing for a gift. Freedman likes things that represent “a stirring tale of thrift.” She uses one such gift, a vase with a hole in it, to keep money she finds — on the ground, in vending machines, wherever — for giving to charity each holiday season.
  • Consider limiting children to four gifts, asking them to choose “something you want, something you need, something to wear, something to read.”  It helps children set realistic expectations.

Work with a list

For Tiffany Aliche, aka “The Budgetnista,” step one is making a list of whom you plan to give to and how much you plan to spend. Make sure your gift budget fits into an overall holiday budget that accounts for shipping, decorations, food, travel and entertainment. Her top tips:

  • Check that list twice. It’s easy to forget thank-you gifts for coaches, teachers, the letter carrier, party hosts. Decide what you want to give each person. Once the list is set, adjust it as you go to keep planned gifts and your budget in sync.
  • Use technology. “Price-check online before you buy or go in a store,” Aliche says. Know your price range for every gift on your list and set up price alerts. One of Aliche’s new favorites is the Chrome extension Wikibuy, which looks for better offers as you shop online and applies the best coupon when you check out.
  • Consider making an experience the gift. If you’re already planning a holiday outing with a group of friends, can you agree it will be a gift to one another?

Match your approach to your values

The blogger who writes under the pseudonym Mrs. Frugalwoods says her family’s frugality is “larger than the holidays.” She notes that while the season is “wonderful and it’s fun, it’s not an excuse to dip into your emergency fund.” Her tips:

  • Decide what’s most important and spend accordingly. For her, it’s a family gathering. She hosts Thanksgiving and cooks from scratch rather than buying pre-made or going to a restaurant.
  • Shop with gift cards or cash-back rewards. She prefers giving an item rather than a gift card but occasionally passes along gift cards that were given to her. It’s regifting at its finest.
  • Let your values be your guide. She favors “small, reasonable gifts” and shopping locally.

Know the difference between cost and value

Mary Hunt, the author of “Debt-Proof Living,” blogs at Everyday Cheapskate. She says it’s important to understand that your credit limit is not a license to spend. Try these instead:

  • Shop with cash only; leave your checkbook and credit and debit cards at home. Need more cash? See if you can cut your grocery bill temporarily by using up items in your freezer or pantry, or track down unused gift cards to fund holiday shopping.
  • Know the difference between a gift’s value and its cost. A $20 toaster that you found on sale for $8 is still a $20 gift. If you budgeted $20 but paid less, that doesn’t mean you owe the recipient $12 more in gifts.
  • Define “gift” more broadly. Can you give your expertise, such as setting up a website for a tech-challenged friend? Do you have a treasured possession to pass on? One of Hunt’s favorite gifts was vintage crystal that belonged to her mother-in-law: “She wrapped it up for me for Christmas and got to see me enjoying it, rather than just leaving it to me in her will.”

Plan for thrift

Having a plan is central to being thrifty, says Gary Foreman, founder of The Dollar Stretcher. “If you don’t have a plan, you’ll overspend,” he says, noting that some people don’t finish paying for Christmas until April or May. His tips:

  • Subscribe to online price alerts so you’ll know about price drops for a specific item or for travel. (And unsubscribe later so continual alerts don’t tempt you to spend.)
  • Regifting is OK, especially when you know someone will love something you can’t or won’t use.
  • The thought really does count, and thoughtful gifts can be inexpensive. One of his favorite gifts came when his daughter tracked down an ethnic bakery to get him some kolaches, Bohemian pastries his grandmother used to make. “Once you have needs met, the gifts that make a difference are the ones that say the giver knows who we are. Those are the best and most memorable gifts,” he says.

 

Bev O’Shea is a staff writer at NerdWallet, a personal finance website. Email: boshea@nerdwallet.com. Twitter: @BeverlyOShea.

The article 5 Frugality Pros Help You Rein In Holiday Spending originally appeared on NerdWallet.

Our Answers to the 20 Most-Googled Student Loan Questions May Save You Money

Posted on by Elyssa Kirkham

If you have questions about student loans, you’re not the only one. And like most people, you probably went to Google to search for the answers.

There are plenty of people that have student loan questions, as proven by our survey of Google tools. Through Google autocomplete and Google Trends, we identified 20 student loan questions that people search for the most.

Here are the student loan questions and answers everyone’s searching for.

1. How much does college cost?

Ultimately, your cost of college ultimately depends on what school you choose.

If you want to get a better sense of the average cost of college in 2015-2016 for various educational institution types, check out this list we put together:

  • 4-year public institutions for students enrolled in-state: $9,410
  • 4-year public institutions for students enrolled out-of-state: $23,893
  • 2-year public institutions for students enrolled in-state: $3,435
  • 4-year private institutions: $32,405
  • For-profit institutions: $15,610

2. Is college free?

Unfortunately, college isn’t free. However, college students might be able to get a portion of their college costs paid for through financial aid, scholarships, and other programs.

3. Is college worth it?

Since going to college is such a big expense, it’s no wonder many people question the benefits of it. Yet, the data does seem to point to a college degree as a worthy investment.

Holding a bachelor’s degree can boost an individual’s average earnings to $64,500 a year, according to the Federal Reserve Bank of New York.

That’s $23,500 more than the average salary for a high school education ($41,000) and $14,500 more than the average for those with an associate’s degree ($50,000).

Ultimately, the formula for whether college is worth it is similar to any investment. What are your initial costs and what’s the payoff later?

You can make sure college is a smart investment by keeping college costs under control. And, making sure you’re maximizing your opportunities and earnings after graduating.

4. Is college for everyone?

After facing years of public schooling, it can seem daunting to sign on for more classes in college. Especially now that you’ll bear the responsibility for paying for them.

That’s why it’s a smart idea to check in with yourself and ask, “Is college right for me?”

While a college degree might come with higher earnings, there are still many Americans with only a high school diploma making decent livings at enjoyable jobs.

There are opportunities outside of college for you to gain marketable skills and experience, from vocational school to online tutorials.

5. How can I pay for college?

There are several resources students should look at when trying to figure out how to pay for college. Here are the most common ones:

6. How do student loans work?

Student loans are an important tool many students use to cover college costs. But it’s important to understand how student loans work.

The large majority of student loans in the U.S. are federal loans. However, private student loans can also be an option.

You can take out student loans for each semester in school, and funds are typically disbursed through your college’s financial aid office.

Some student loans charge interest. And, your loans will accrue interest as soon as your borrow them. Even if you’re still in school.

You usually won’t have to make any payments on your loans until six months after your last semester. Then student loans payments will begin. A standard repayment schedule is 10 years or more.

7. How do I get federal student loans?

Direct loans are federal student loans that the U.S. Department of Education funds directly to those enrolled in school. Students can get access to these student loans by completing a Free Application for Federal Student Aid (FAFSA).

Once your FAFSA is processed, you’ll get a summary of what types of federal student loans you qualify for and how much you can borrow.

You can then claim the student loans you need. Funds are disbursed to your student account with your educational institution.

8. How do I fill out FAFSA?

It can take some time and persistence to figure out how to fill out FAFSA and submit it.

The first step is to visit FAFSA.ed.gov. Then, sign up for an account and get a federal student aid (FSA) ID number. Next, log in with your FSA ID number to start your FAFSA and complete it.

To complete the FAFSA, you’ll need your recent tax returns on hand, as well as your parents’ if you’re a dependent. The electronic system will walk you through each question and ask for information required to complete it.

Make sure you file all of your info by the FAFSA deadline.

9. What is a Stafford Loan?

A Federal Stafford Loan is a Direct Loan funded by the Department of Education. Students can qualify to borrow through a Stafford loan by submitting their FAFSA.

These loans typically carry low-interest rates, which are currently set at 3.76% for undergraduate borrowers.

Stafford loans might be subsidized, meaning the Department of Education pays interest while you’re in school. Borrowers with unsubsidized Stafford loans, however, will be responsible for paying all of their student loan interest.

10. What is a Perkins Loan?

A Perkins loan is different than other loans offered through FAFSA. That’s because the school you attend is the lender, rather than the Department of Education. 

Perkins loans are only offered to students with “exceptional financial need.” They carry an interest rate of 5.00%.

Students also have a longer grace period after their last semester. They get nine months before their Perkins loan repayment begins, instead of the usual six months.

11. What is a PLUS loan?

A PLUS loan is another type of direct loan offered by the Department of Education.

Typically this loan is used by graduate students to fund a postsecondary degree. Or, by parents to help cover their child’s educational costs.

Unlike other federal student loans, a PLUS loan requires a credit check for approval. It also carries a higher interest rate (6.31%) than other federal student loans and has an additional fee of 4.27%.

12. How can I pay student loans?

When student loans come due, repayment is automatically set to a standard 10-year schedule.

Hopefully, the minimum monthly payments are affordable and you can keep up with them. Or, perhaps you can afford to pay larger amounts to get out of student debt faster.

If you’re struggling, however, there are some student loan repayment options and strategies that can help you manage.

  • Student loan deferment or forbearance, which will “pause” student loan repayment.
  • Income-based repayment plans, which can help lower unaffordable monthly payments.
  • Student loan forgiveness, which can be an option for some borrowers.
  • Spending less and earning more, which will generate extra money to put toward student loans.
  • Refinancing or consolidating student loans, which can help lower interest rates and make them more affordable.

13. How do I defer student loans?

Student loans can be deferred, which means repayment will be officially suspended for a period of up to three years in some cases.

If you want to defer student loans, you’ll need to submit a request to your loan servicer to defer payment.

Keep in mind that it’s likely you will need to prove financial hardship or other eligibility requirements to get a deferment.

14. What does forbearance mean?

Forbearance of student loans is offered for borrowers who are unable to make student loan payments but don’t meet requirements for deferment.

Under forbearance, payments might be temporarily suspended or reduced for up to 12 months.

15. Should I consolidate student loans?

Through student loan consolidation, you take out a new loan and use it to pay off other student loans. If you’re wondering if you should consolidate student loans, there are some pros and cons to weigh.

Consolidating student loans can be a way to simplify student debt, get a lower interest rate, reduce monthly payments, or release a cosigner of responsibility for the existing loan.

However, depending on the terms of your new loan, consolidating student debt can cost more over time. Be sure to do the math before making your decision on consolidation.

16. How do I consolidate student loans?

Once you decide, the next step is figuring out how to consolidate student loans.

There are two main options for refinancing student debt: getting a new federal loan through a Direct Consolidation loan or refinancing through a private lender.

The Direct Consolidation loan can only be used to consolidate federal student loans. It uses an average interest rate, so you’re unlikely to save on that.

However, you can set a longer repayment period to lower monthly payments. To use this method, apply through StudentLoans.gov.

With private student loan consolidation, you will need to apply directly with the private lender. Approval will be based on your credit, income, and other factors.

Make sure you pick a reputable private lender to refinance student loans. Many offer lower student loan interest rates that can save you money in the long-run.

17. Can student loans be forgiven?

In some cases, borrowers might be able to get student loan forgiveness. The federal government grants forgiveness for some student debt, depending on the type of loan and situation of the borrower.

Some circumstances that might make you eligible for student loan forgiveness include:

18. How can I get student loans out of default?

Student loan default happens when more than 270 days past without you making your student loan payments. Those wondering how to get student loans out of default can pursue a few options.

One option is full repayment of the loan. You can also rehabilitate your student loans or consolidate them, which will begin the process of getting the loan out of default.

19. Can student loans be garnished?

Student loans can’t be garnished since they aren’t considered wages. However, people asking this question might actually be wondering if their wages can be garnished because of student loan issues.

Unfortunately, student loans servicers do have the authority to garnish your wages if you miss payments or go into default. Private lenders will need to take you to court and get a judgment before doing so.

For federal loans, however, the government doesn’t need to get a judgment to garnish wages and only needs to give you 30 days notice.

20. Can I deduct student loan interest?

Student loan interest is a tax-deductible expense. Under current tax laws, you can write off student loan interest to reduce your taxable income by up to $2,500. This can lower your tax liability by up to $625.

There are other requirements for claiming a student loan tax deduction. You will have to have a qualified student loan used only for educational expenses, and meet income and other criteria.

As you try to figure out all of your student loan questions, make sure you get the answers you need to make the best financial decisions possible. Your bank account will thank you in the future.

The article Our Answers to the 20 Most-Googled Student Loan Questions May Save You Money originally appeared on Student Loan Hero.

The Dark Side of Job-Sponsored Student Loan Payments

Posted on by Paul Sisolak

Picture graduating from college and landing a job that offers a good salary, health benefits, retirement package — and your employer will help pay off your student loans.

More and more companies are jumping on the bandwagon, sponsoring benefit programs to repay their employees’ student loans. The benefits are clear on both ends: Employers get the leverage they need to attract and retain millennial talent, and new hires find professional advancement and help on their student debt.

But there is one drawback — job-sponsored student loan reimbursement is not tax-free. Like your paycheck, it’s counted as income and subject to income tax.

Does this mean that accepting student loan help isn’t worth it? Not necessarily. Offsetting the tax burden may be possible with smart student loan decisions, and some proposed Congressional legislation may eventually make employer-sponsored student loan payments tax-free.

How job-sponsored student loan payments work

Companies generally allocate a certain amount of money from their budgets for employees with student loans. We’ve previously mentioned some high-profile organizations who offer student loan payoff benefits. Here are other examples of companies that pay off student loans.

  • Fidelity Investments offers a $2,000 reimbursement package distributed over five years to employees who pass the 6-month mark at the firm.
  • Education-based Chegg disburses up to $1,000 in student loan repayment annually to all its employees.
  • PricewaterhouseCoopers’ student loan plan gives employees the chance to receive up to $10,000 over six years to pay off their debt, up from $7,200.
  • Global asset management company Natixis offers workers employed for more than five years $5,000 applied to their student loan debt, with an extra $1,000 annually for the following five years.
  • Aetna will start providing a $2,000 annual match for employee student loan payments, maxing out the benefit at $10,000.
  • LendEDU also offers employees $200 per month — $2,400 per year — towards their student loans.

Beware of the tax implications

Don’t confuse student loan reimbursement with tuition reimbursement. Under IRS rules, if your employer pays you up to $5,250 annually in educational assistance benefits (including tuition), it’s tax-deductible.

Student loan reimbursement is a different story. You’ll need to claim any amount on your tax return if your employer compensates you for your loans, no matter what the company policy or payout is. Considering that it qualifies as taxable, it would technically be closer to a salary bonus than a benefit.

All that may change if the Student Loan Repayment Assistance Act of 2015 passes muster through Congress.

The proposal would amend existing tax code to allow recipients of employer-sponsored student loan repayments to deduct up to $6,000 per taxable year, or $50,000 over a lifetime. To qualify, according to the pending bill, participants are required to pay at least $50 towards their student loans each month.

A second piece of legislation in the works, the Employer Participation in Student Loan Assistance Act, would liken job-endorsed student loan payment plans to educational assistance benefits, permitting employers to compensate employees up to the same $5,250 in student loan debt, tax-free.

Benefiting from employer-sponsored benefits

Don’t let tax fears discourage you from participating in an employer-backed student loan assistance program. If you’re concerned that you’ll end up paying more to the IRS compared to what you’d likely save in student loan payments each month, consider the following:

Tax rates and potential savings depend on your finances

Minimizing the tax hit will depend on several factors, like the interest rate and terms of your student loans, your salary, and the structure of your employer’s student loan assistance program.

According to The Wall Street Journal, if an employee carries the national average of $35,000 in student loan debt with a 10-year standard repayment plan and 5% APR, the worker could pay off their loans in just 7.5 years with a $100 monthly contribution from their employer.

If that same employee earns between $40,000 and $70,000 annually, they’ll owe $2,250 in taxes but earn $6,750 towards their loan repayments.

Crunch some numbers to see if you’ll come out ahead of the tax liabilities by receiving student loan benefits from your employer.

Some programs are already tax-free

Some public sector student loan repayment programs are tax-exempt, including the National Health Service Corps Loan Repayment Program, student loan repayment programs under the Public Service Health Act, and other similar loan repayment or forgiveness programs dedicated to providing health services in underserved areas.

Refinancing can save you even more

A student loan refinance can provide borrowers with a lower interest rate and more amenable repayment terms. Combine it with repayment assistance from your employer, and you could come out on top financially.

According to NerdWallet, an MBA holder with about $52,800 in student loan debt could potentially save up to $5,039 in interest payments if their employer paid them $167 monthly for five years — but they could potentially save an extra $2,142 by refinancing.

Research potential employers’ student loan repayment policies

Future employers who reimburse student loans may be ahead of the curve on the tax-savings front.

Some companies have begun partnering with startups like Student Loan Genius, whose student loan 401k contribution feature links retirement savings to student loans. With the feature, companies can contribute pretax dollars to an employee’s retirement account each time the employee completes a student loan payment.

Consider your retirement

There’s a less-obvious benefit of working with an employer who’ll contribute towards your student loans: The faster you pay off your student loans, the sooner you can really tackle your retirement contributions.

For now, prioritize your student loan payments and weigh the pros and cons between the benefits you’re likely to receive against the taxes you’ll need to pay.

By keeping abreast of emerging companies participating in student loan payment programs as well as pending legislation, paying off your balance and reducing debt are just a few ways to get your job to go to work for your loans.

 

The article The Dark Side of Job-Sponsored Student Loan Payments originally appeared on Student Loan Hero

Overspending on Clothes: My Budget Made Me Do It

Posted on by Allea Grummert

A budget can be a freeing thing. Sure, a budget sets limits on what you can spend your money on, but it also lets you buy or experience things you might otherwise not allow yourself to.

To be honest, unless I have my budget written out — and I know my mandatory expenses are covered by my income each month — I wouldn’t spend a dime on fun stuff. I’d be too concerned that I’d spend more than what was in my bank account!

Budgeting saves me all sorts of stress: I can be responsible (paying those bills!) and enjoy my 20’s (yes to brunch with friends!).

I like going to concerts and buying music. I like good food, nice boots, my gym membership and traveling. I budget $10 per month for music, anywhere from $40-80 on restaurants, plus $35 for entertainment. These budgets have been fairly consistent since I graduated from university over four years ago.

However, one category of my budget has changed significantly:

Clothing.

(Cue my face grimacing as I write this.)

 

The problem.

When I graduated from university in 2012, I was eager to build a new wardrobe — one for the young professional persona I was hired to be. I set a budget of $100 a month for clothes. And you know what? I spent $100 each month.

By the end of 2013, I looked at my expenses from the previous year, only to find that I had spent $1200 on clothes in the last year. Yikes, that’s a lot of money!

How in the world did I spend $1200 on clothes and still not have a wardrobe that I loved to show for it? (I’m getting mad just thinking about it.)

I never would have guessed that my budget would be to blame. My budget accidentally gave me too much room to spend money on what I really didn’t need.

I didn’t realize what I was doing: if I hadn’t spent all $100 one month, I’d make a trip to the mall. I didn’t have a game plan for what I’d buy, I’d just go because I had given myself an “allowance” to do so. I’d go, I’d buy and I’d add to the clutter of my closet.

I spent so much money on clothes because I had allocated that much in my budget.

Well, it all got out of hand. Clearly.

Looking back, I bought a lot of clothes I didn’t care for. I wasn’t intentional about my purchases. They were half-hearted, absentminded.

 

The solution.

Once I saw that “$1200” total on my computer screen, I stopped. Something would have to change. I wasn’t going to “accidentally” spend that much on clothes again.

Disclaimer: There’s nothing wrong with spending money on clothes, if you have the money. And even though I paid off my credit card each month, and the funds were allocated in my budget, I personally decided that there were better places for my money to go. Those funds would have been really great for paying down my student loans. But no: because, clothes.

I’ve decided to be more intentional with my clothing choices. I’d rather own clothes that I love wearing, plus I want them to coordinate well with other pieces already in my wardrobe. You could say I have a “capsule wardrobe.” I don’t need lots of trendy clothes to feel fashionable — a simple black dress, cognac leather booties and a grey knit scarf can be worn for almost any occasion!

Valuing quality over quantity means I own less, too (which is great because I have a tiny, tiny closet).

I use Pinterest to find those core items that’ll bump up my wardrobe but not go out of style in a few months or years. Instead of aimlessly perusing the mall, I now keep a “wish list” on my phone of items I’m looking for. I take my time finding these items, since I will plan to have them for a while.

It’s delayed gratification, but I think the gratification of owning pieces you really love pays off.

Lastly, I’ve decided to lower my budget for clothing each month.

Since my budget was to blame for my “overspending,” I wanted to close the gap in my budget to reflect what I actually feel comfortable spending on clothes. So now my $40-50 clothing budget rolls over from month to month.

I shop every few months, removing that “use it or lose it” feeling that I used to have. It’s way more fun to go shopping when I have money saved up and I know what I’m looking for!

Ultimately, my long-term view of my money has changed, along with some of my habits:

  • I no longer shop aimlessly.
  • I budget based on what makes me feel comfortable.
  • I choose quality over quantity.
  • I take my time with purchasing clothes. Goodbye, fast fashion.
  • I think less about shopping, since I go shopping less often. It’s rarely on my mind.
  • I’m paying more toward my student loans each month.

Have you taken a good look at your budget? Is your budget supporting any bad habits you’d like to curb?

P.S. Remember, mine was totally unintentional — so take a look at the big picture and see for yourself!

 

Author Bio

allea_grummert_ask_allea (002)Allea Grummert is a personal finance blogger and one-on-one budget coach.

Passionate about helping others get out of debt (and stay out of debt!) by planning ahead and setting goals, she claims, “Living within your means doesn’t have to suck.”

Follow her blog to learn more about how you can maximize life’s experiences through smart personal finance and simple living.

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