Month: February 2022

How Much You’ll Really Pay for That Student Loan

Posted on by Ryan Lane

Those who graduate college with student loans owe close to $30,000 on average, according to the most recent data from the Institute for College Access & Success.

But they’ll likely repay thousands more than that because of interest. One key to limiting interest cost is choosing the right repayment plan. The bottom line? Opting for lower payments will cost you more overall.

Using a tool like the Education Department’s Repayment Estimator can help you better understand potential costs. Here’s how much $30,000 in unsubsidized federal student loans would cost under different plans at the 2019-2020 undergraduate rate of 4.53%.

Standard repayment

  • Total repaid: $37,311
  • Monthly payment: $311
  • Repayment term: 120 months

The standard plan splits loans into 120 equal payments over 10 years. Federal borrowers automatically start repayment under this plan, unless they choose a different option.

Standard repayment adds more than $7,000 to the loan’s balance in this example, but that’s less than most other options.

Barry Coleman, vice president of counseling and education programs for the National Foundation for Credit Counseling, says to stick with the standard plan if payments aren’t more than 10% to 15% of your monthly income.

“The monthly payment would be higher, but in the long run [you] would save more in interest charges,” Coleman says.

Graduated repayment

  • Total repaid: $39,161
  • Monthly payment: $175 to $525
  • Repayment term: 120 months

Graduated plans start with low payments that increase every two years to complete repayment in 10 years. Despite having the same repayment term as the standard plan, graduated repayment costs $1,850 more overall due to additional interest costs.

Cathy Mueller, executive director of Mapping Your Future, a nonprofit located in Sugar Land, Texas, that helps college students manage debt, says graduated repayment may be a good option for those who expect their earnings to increase in the future.

However, those doing well careerwise should try to make the standard plan work because of its lower interest costs.

“It’s not going to be a huge difference, but every penny counts,” she says.

Extended repayment

  • Total repaid: $50,027
  • Monthly payment: $167
  • Repayment term: 300 months

The extended plan stretches repayment to 25 years, with payments either fixed or graduated. Fixed payments add more than $20,000 to the example $30,000 balance; graduated payments would inflate your balance even more.

“[Extended repayment] is not going to be best for a lot of people,” Mueller says. “But it is an option.”

You must owe more than $30,000 in federal student loans to use extended repayment.

Income-driven repayment

  • Total repaid: $37,356
  • Monthly payment: $261 to $454
  • Repayment term: 110 months

The government offers four income-driven repayment plans that base payments on your income and family size.

This example uses the Revised Pay As You Earn plan, a family size of zero and an income of $50,004, based on starting salary estimates from the National Association of Colleges and Employers. It also assumes annual income growth of 5%.

Income-driven repayment costs about the same as standard repayment under these circumstances. But these plans are typically a safeguard for borrowers who can’t afford their loans, as payments can be as small as $0 and balances are forgiven after 20 or 25 years of payments.

Lindsay Ahlman, senior policy analyst for the Institute of College Access & Success, says to think long-term before choosing an income-driven plan, and know you can always switch to income-driven repayment if you hit a rough patch.

“A lot of things are going to happen over the course of repayment — your earnings trajectory, your life decisions like marriage and children — that affect your income-driven payment,” Ahlman says. And while an income-driven plan can reduce monthly payments, you may pay more overall because the repayment period is longer than the standard plan, she says.

Ways to save

Even the least expensive repayment plan could add $7,000 to your loans. If you just graduated and want to shave down that amount, you have options.

Coleman suggests making payments during the six-month grace period and paying off interest before it’s added to your balance when loans enter repayment, if possible.

Other ways to cut costs include letting your servicer automatically deduct payments from your bank account, which can reduce your interest rate, and paying loans twice a month instead of once. You can always prepay student loans without penalty.

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

Ryan Lane is a writer at NerdWallet. Email: rlane@nerdwallet.com.

The article How Much You’ll Really Pay for That Student Loan originally appeared on NerdWallet.

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Student Loan Pause is Extended, With Payments Resuming May 2

Posted on by Anna Helhoski

The Biden administration just hit the snooze button again on the restart of student loan payments.

Now, millions of federal student loan borrowers have 90 extra days to figure out how to pay a bill they’ve gone nearly two years without.

“We are really relieved that the president changed course and that student loan borrowers don’t have to spend the holidays worried about how to make ends meet because of an unforced decision to send them student loan bills,” says Mike Pierce, executive director and co-founder of the Student Borrower Protection Center, a nonprofit advocacy organization.

Payments were supposed to restart beginning Feb. 1.

The interest-free pause has been in effect since March 13, 2020, the onset of the COVID-19 pandemic. It allowed federal student loan borrowers with an amassed $1.61 trillion in debt to prioritize other financial needs like paying rent or padding emergency savings.

Payments now restart beginning May 2. Borrowers should use the additional time to ensure they have a plan to resume payments or arrange a payment plan they can afford.

What led to the extension?

The pause has been extended four times. If payments restart in May, borrowers will have had a total of 25 payment-free months.

Betsy Mayotte, president and founder of The Institute of Student Loan Advisors, a nonprofit student loan help organization, welcomed news of another extension but worries about the potential to create a “cry wolf” phenomenon.

“[It] makes me worry a bit about when the repayment does start: Will folks be less likely to be prepared?” says Mayotte.

Notably, the Dec. 22 announcement from the Department of Education did not use the word “final” with this extension, as it did in August.

In the past few weeks, a long-standing campaign to deal with student debt won new urgency as the omicron coronavirus variant emerged and inflation surged. Survey after survey found many borrowers worried about their ability to pay.

“I think the pressure from advocates, borrowers, lawmakers and bipartisan voters was too overwhelming to ignore; I think that speaks to the severity of the crisis,” says Braxton Brewington, press secretary for the Debt Collective.

The added time offers borrowers another chance to make a plan for their loans. Barring further extension or en masse forgiveness, borrowers have the following options available.

Step 1: Call your servicer

Notifications about the restart had been hitting borrowers’ inboxes for weeks before the announcement.

Student loan servicers, the private companies that manage student loans, were in the midst of hiring and training staff in preparation, according to Scott Buchanan, executive director of the Student Loan Servicing Alliance.

The newest extension surprised servicers, Buchanan said, but they still face a big challenge even with the extra time: Getting their customer service workers up to date on a complicated student loan repayment system and providing accurate help to millions of people.

Borrowers can beat the rush. You’re likely to face high call volumes and long wait times with servicers closer to the start date.

Before payments restart, find out who your servicer is. Log in to the federal student aid site, contact your servicer about your options and compare any information you receive to the federal student aid site.

Your servicer can help you with any of the options below.

If you need a lower payment

If you expect to have trouble making payments due to your income, consider an income-driven repayment plan. These plans cap your payment at a portion of your income and extend your repayment term; at the end of that period your debt is forgiven. If you have zero income, your monthly payment amount will also be zero.

Temporarily, through July 31, you can self-certify your income, which means you won’t have to file the income-driven repayment plan paperwork usually needed to confirm your income until you recertify. Those already enrolled prior to the pause will need to recertify beginning in August 2022. But if your income is lower now than it was before the pause, recertify as soon as possible. It’s unclear if the pause will extend these temporary provisions.

If you want to keep paying

You can continue paying down your student loans, but you’ll have to contact your servicer to submit payment.

Mayotte says the extension will especially benefit those who take advantage of the 0% interest rate to pay down their loans or other debt.

If you expect you’ll need an additional break

You can apply for an additional pause if you need it: an unemployment deferment for up to 36 months or a hardship forbearance for up to 12 months at a time. But unlike the current pause, interest will accrue and be added to the total you owe when you do start paying again.

If your loans are in default

If your loans were in default prior to the payment pause, getting back into good standing immediately will require you to pay your entire student loan amount, in full, which is unrealistic for most borrowers.

A more practical plan is student loan rehabilitation, which requires making nine consecutive monthly loan payments in 10 months equaling 15% of your discretionary income, then entering into an income-driven repayment plan. If you start loan rehabilitation now, which you can do during the pause, you’ll be that much closer to being back in good standing.

If you think you might miss future payments

When you miss enough payments — 270 days — your loan goes into default, resulting in negative effects including collection activities and damaged credit.

To avoid this outcome, enroll in a repayment plan that’s affordable for you, and sign up for autopay so you never miss a payment. If you were enrolled in autopay prior to the payment pause, you must reaffirm you would like to reenter into autopay. As a bonus, autopay will save you 0.25 of a percentage point on your interest.

If you’re waiting on loan forgiveness

Student debt advocates like Pierce and Brewington say they welcome the pause but are hoping widespread forgiveness is on the way.

“This is a major win, but there’s so much to go from here,” says Brewington. “We need full cancellation. Our economy, families and communities need full cancellation.”

Biden has not committed to broadly forgiving student debt via executive order; he indicates he would sign any legislation that passes through Congress. Right now, there’s nothing imminent.

Targeted debt relief worth $13 billion via existing forgiveness programs has reached more than 640,000 borrowers, the White House says.

For those seeking Public Service Loan Forgiveness, the additional three months of nonpayment will count toward the 120 needed for forgiveness so long as you’re still working full time for an eligible employer.

Anna Helhoski writes for NerdWallet. Email: anna@nerdwallet.com. Twitter: @AnnaHelhoski.

The article Student Loan Pause is Extended, With Payments Resuming May 2 originally appeared on NerdWallet.

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Don’t Skip These Steps When Borrowing Parent Student Loans

Posted on by Ryan Lane

In more than one-third of U.S. families, parents decide how to pay for college, according to a July 2020 report from private lender Sallie Mae.

Half of those parents don’t inform the child of their decision.

Joe Allen, 51, of Frederick, Maryland, did talk about college costs with his daughter, a freshman at the University of Dayton in Ohio. But he understands why some families avoid the topic.

“As a parent, you want to protect your children,” Allen says. “You want to do what’s best for them.”

But what seems best for children may be bad for mom or dad — especially if it means taking out hefty parent student loans without discussing them. Here’s how to avoid that misstep and others when borrowing parent loans.

Assess your situation

Students should exhaust free money and federal loans in their names to pay for college. Parents can then cover the remaining costs with federal parent PLUS loans or private loans.

But first, review your current financial situation with your child.

“Have a realistic sit-down with yourself and your family in terms of what (your) finances look like and what’s the best decision for you,” says Rick Castellano, spokesperson for Sallie Mae.

Don’t borrow parent student loans if they’ll put your retirement at risk, you’re deep in debt or you can’t afford the payments. For example, the nonprofit Trellis Company surveyed more than 59,000 parents whose children attended school in Texas and found that most said they struggled with loan repayment at some point.

Have a conversation

Kathleen Burns Kingsbury, a wealth psychology expert and host of the Breaking Money Silence podcast, says talking about big expenses like college tuition can make people uncomfortable and emotional.

That doesn’t mean you should avoid the conversation.

“It’s OK if people get upset,” Kingsbury says. “The pitfall is if people get upset and don’t get back to it.”

Instead, use this opportunity to talk about how much you’ll borrow and to teach your child how to analyze the value of a large purchase.

Allen says he went through a sample budget with his daughter to illustrate the cost of her loans and how they might limit her flexibility in the future.

He liked that the exercise made things more concrete than “just saying don’t take out debt.”

Figure out who’s responsible

A conversation is also necessary to determine who’ll repay the parent’s loans.

If your child will — and 45% of families expect the parent and child to at least share this responsibility, according to the Sallie Mae report — that can affect your decisions.

Angela Colatriano, chief marketing officer for College Ave Student Loans, says some families want the child’s name on the loan because he or she will repay it.

“They don’t want a handshake agreement,” she says.

But only the parent is legally responsible for a parent PLUS loan. You’ll need to weigh that when considering borrowing options.

PLUS loans have less stringent credit requirements than private loans and offer everyone the same fixed interest rate. However, PLUS loans also have large origination fees and are available only to parents — guardians and grandparents aren’t eligible, for example.

Your ultimate goal should be getting the least expensive loan you qualify for. If that’s a PLUS loan, make sure everyone is on the same page for repayment.

Kingsbury suggests writing a simple, one-page agreement that “would spell out what the expectation is and what happens if there’s a conflict.”

Consider co-signing

Parents who prefer private loans can borrow in their name or co-sign with their child. Either option means you’ll be responsible for the loan.

“It comes down to a family decision,” Castellano says. “Families should explore both options.”

But he says that co-signing can benefit students in ways that borrowing on your own can’t, such as helping them build credit.

Also, because a co-signed loan has two applicants, you may get a better interest rate. However, lender underwriting policies differ.

For example, Allen initially got a much higher rate on a co-signed loan than he expected. The lender told him that was because it combined his credit score with his daughter’s.

“I didn’t understand that,” Allen says. “I thought if I’m co-signing and bringing good credit to the equation it should be a better rate.”

He applied with a different lender and got what he called a “much better” rate. Allen plans to take out that loan once his family can no longer fund the education on their own.

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

Ryan Lane is a writer at NerdWallet. Email: rlane@nerdwallet.com.

The article Don’t Skip These Steps When Borrowing Parent Student Loans originally appeared on NerdWallet.

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6 Things to Know About Student Loans Before You Start School

Posted on by Anna Helhoski

The summer before your freshman year in college means choosing classes, checking out your future roommate’s Instagram and figuring out how you’re going to pay the bills.

Chances are you will need a loan: 2 out of 3 students have debt when they leave school, according to 2017 graduate data from the Institute for College Access and Success. But consider a loan after you’ve accepted grants, scholarships and work-study. You can get these by submitting the Free Application for Federal Student Aid, or FAFSA.

Here are six things you need to know about getting your first student loan.

1. Opt for federal loans before private ones

There are two main loan types: federal and private. Get federal loans first by completing the FAFSA. They’re preferable because you don’t need credit history to qualify, and federal loans have income-driven repayment plans and forgiveness that private loans don’t.

You may be offered two types of federal loans: unsubsidized and subsidized. Subsidized loans — for students with financial need — don’t build interest while you’re in school. Unsubsidized loans do.

Take a private loan only after maxing out federal aid.

2. Borrow only what you need — and can reasonably repay

Undergraduate students can borrow up to $12,500 annually and $57,500 total in federal student loans. Private loan borrowers are limited to the cost of attendance — tuition, fees, room, board, books, transportation and personal expenses — minus financial aid that you don’t have to pay back.

Aim to borrow an amount that will keep your payments at around 10% of your projected after-tax monthly income. If you expect to earn an annual salary of $50,000, your student loan payments shouldn’t be over $279 a month, which means you can borrow about $26,000 at current rates.

To find future earnings, look up average salaries in the U.S. Department of Labor’s Occupation Outlook Handbook. Then, use a student loan affordability calculator to estimate payments.

Your school should provide instruction on accepting and rejecting financial aid in your award letter. If you’re not sure how to do it, contact your financial aid office.

“We’re not scary people,” says Jill Rayner, director of financial aid at the University of North Georgia in Dahlonega, Georgia. “We really do want students and families to come in and talk with us so we can help strategize with them.”

3. You’ll pay fees and interest on the loan

You’re going to owe more than the amount you borrowed due to loan fees and interest.

Federal loans all require that you pay a loan fee, or a percentage of the total loan amount. The current loan fee for direct student loans for undergraduates is 1.062%.

You’ll also pay interest that accrues daily on your loan and will be added to the total amount you owe when repayment begins. Federal undergraduate loans currently have a 5.05% fixed rate, but it changes each year. Private lenders will use your or your co-signer’s credit history to determine your rate.

4. After you agree to the loan, your school will handle the rest

Your loan will be paid out to the school after you sign a master promissory note agreeing to repay.

“All the money is going to be sent through and processed through the financial aid office — whether it’s a federal loan or a private loan — and applied to the student’s account,” says Joseph Cooper, director of the Student Financial Services Center at Michigan Technical University in Houghton, Michigan. Then, students are refunded leftover money to use for other expenses.

5. You can use loan money only for certain things

Loan money can be used for education-related expenses only.

“You cannot use it to buy a car,” says Robert Muhammad, director of the office of scholarships and financial aid at Winston-Salem State University in North Carolina. “It’s specifically for educational purposes: books, clothing, anything that is specifically tied to the pursuit of their education.”

You can’t use your loan for entertainment, takeout or vacations, but you should use it for transportation, groceries, study abroad costs, personal supplies or off-campus housing.

6. Find out who your servicer is and when payments begin

If you take federal loans, your debt will be turned over to a student loan servicer contracted by the federal government to manage loan payments. If you have private loans, your lender may be your servicer or it may similarly transfer you to another company.

Find your servicer while you’re still in school and ask any questions before your first bill arrives, says John Falleroni, senior associate director of financial aid at Duquesne University in Pittsburgh. They’re also whom you’ll talk to if you have trouble making payments in the future.

When you leave school, you have a six-month grace period before the first bill arrives.

Anna Helhoski is a writer at NerdWallet. Email: anna@nerdwallet.com. Twitter: @AnnaHelhoski.

The article 6 Things to Know About Student Loans Before You Start School originally appeared on NerdWallet.

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You Can Get Free Money for College — and Help Finding It

Posted on by Colin Beresford

If you’re considering going to college this fall — or next — there is one way to ensure you’re considered for as much free money as possible: by submitting the Free Application for Federal Student Aid, or FAFSA.

Completing the FAFSA makes you eligible for federal, state and some school-based aid, including loans, scholarships and grants. But for many students and families, it can be challenging and time-consuming to fill out the application, and the pandemic only added to that burden.

As of mid-August, 57% of the 2021 high school class had completed the FAFSA, a 4.3% decline compared with this time last year, according to estimates from the National College Attainment Network. Including both the class of 2020 and 2021, NCAN estimates that through the pandemic, over a quarter-million fewer students completed the FAFSA.

“We’ve seen disproportionate declines in high schools that are educating more students of color and more students from low-income backgrounds,” says Bill DeBaun, director of data and evaluation at NCAN. “For those students, the pathway to college has never been easy … and these students often need assistance.”

Various circumstances played into the decline in FAFSA applications, some of which were a result of students not wanting to go to college during the pandemic. Those factors include:

  • Students became disconnected from support networks: Support from community organizations and high school counselors went virtual, limiting its reach.
  • FAFSA completion became less of a priority: Filling out the FAFSA and enrolling in college were put on the back burner during the pandemic, particularly due to the increase in economic, job and food insecurity, says DeBaun.
  • Interest in going to college decreased while classes were online: Knowing that college classes were completely online kept some students from filling out the FAFSA and enrolling.

Where to find help to fill out the FAFSA

Completing the FAFSA can be a confusing process, particularly if you’re the first in your family to do so. But for students who have questions or want help filling out the FAFSA, there are resources — and often, they’re free.

» MORE: FAFSA checklist

“For high school seniors, there’s help out there. You have to ask for it and sometimes look for it, but there are organizations in communities that want to help students get this money for college,” says Traci Lanier, vice president of external affairs at 10,000 Degrees, a college access organization that supports students before and after enrolling in college. “Just get [the FAFSA] in because it’s free money and you don’t want to leave money on the table.”

College access community-based organizations

College access community-based organizations work to help students reach college, and that process includes filling out the FAFSA. Support is often offered at FAFSA completion events, where you can ask questions and make sure you’re filling out the application correctly, or through individual advising.

If there isn’t a college access organization hosting in-person events in your community, many offer online resources to help guide you.

Financial aid offices

Besides a community-based organization, “the best place for students to go is the higher education institution they want to enroll at,” says Maggie McGrath, director at College Now Greater Cleveland. “The financial aid office has people on staff that are ready to help walk them through [completing the FAFSA]. They know all of the ins and outs.”

In some cases, the financial aid office can point you to a local college access organization if you can’t find one, says Lanier. And although the FAFSA is best submitted early, it can be completed up to the time classes start, and sometimes after that, depending on the institution.

The Federal Student Aid Information Center

The Department of Education offers help completing the FAFSA through the Federal Student Aid Information Center. The Center offers live chats as well as phone support if you have questions on any part of the application.

Why you should fill out the FAFSA

The FAFSA is your ticket to being considered for federal financial aid, including aid you don’t have to repay, like scholarships and grants. And although fall classes have begun or are set to begin soon, it’s not too late for eligible applicants to receive aid such as the Pell Grant — need-based federal financial aid — for the 2021-22 academic year, says DeBaun.

For those looking to enroll in college in 2022, it’s important to submit the FAFSA as soon as possible because many colleges award aid on a first-come, first-served basis. For the 2022-23 award year, the FAFSA filing period opens on Oct. 1.

When deciding how to pay for college, first exhaust all free money offered to you before accepting loans. If you need to take out loans, use any federal loans that are offered to you before taking out private student loans.

Colin Beresford writes for NerdWallet. Email: cberesford@nerdwallet.com.

The article You Can Get Free Money for College — and Help Finding It originally appeared on NerdWallet.

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6 Things to Know About Student Loans Before You Start School

Posted on by Anna Helhoski

The summer before your freshman year in college means choosing classes, checking out your future roommate’s Instagram and figuring out how you’re going to pay the bills.

Chances are you will need a loan: 2 out of 3 students have debt when they leave school, according to 2017 graduate data from the Institute for College Access and Success. But consider a loan after you’ve accepted grants, scholarships and work-study. You can get these by submitting the Free Application for Federal Student Aid, or FAFSA.

Here are six things you need to know about getting your first student loan.

1. Opt for federal loans before private ones

There are two main loan types: federal and private. Get federal loans first by completing the FAFSA. They’re preferable because you don’t need credit history to qualify, and federal loans have income-driven repayment plans and forgiveness that private loans don’t.

You may be offered two types of federal loans: unsubsidized and subsidized. Subsidized loans — for students with financial need — don’t build interest while you’re in school. Unsubsidized loans do.

Take a private loan only after maxing out federal aid.

2. Borrow only what you need — and can reasonably repay

Undergraduate students can borrow up to $12,500 annually and $57,500 total in federal student loans. Private loan borrowers are limited to the cost of attendance — tuition, fees, room, board, books, transportation and personal expenses — minus financial aid that you don’t have to pay back.

Aim to borrow an amount that will keep your payments at around 10% of your projected after-tax monthly income. If you expect to earn an annual salary of $50,000, your student loan payments shouldn’t be over $279 a month, which means you can borrow about $26,000 at current rates.

To find future earnings, look up average salaries in the U.S. Department of Labor’s Occupation Outlook Handbook. Then, use a student loan affordability calculator to estimate payments.

Your school should provide instruction on accepting and rejecting financial aid in your award letter. If you’re not sure how to do it, contact your financial aid office.

“We’re not scary people,” says Jill Rayner, director of financial aid at the University of North Georgia in Dahlonega, Georgia. “We really do want students and families to come in and talk with us so we can help strategize with them.”

3. You’ll pay fees and interest on the loan

You’re going to owe more than the amount you borrowed due to loan fees and interest.

Federal loans all require that you pay a loan fee, or a percentage of the total loan amount. The current loan fee for direct student loans for undergraduates is 1.062%.

You’ll also pay interest that accrues daily on your loan and will be added to the total amount you owe when repayment begins. Federal undergraduate loans currently have a 5.05% fixed rate, but it changes each year. Private lenders will use your or your co-signer’s credit history to determine your rate.

4. After you agree to the loan, your school will handle the rest

Your loan will be paid out to the school after you sign a master promissory note agreeing to repay.

“All the money is going to be sent through and processed through the financial aid office — whether it’s a federal loan or a private loan — and applied to the student’s account,” says Joseph Cooper, director of the Student Financial Services Center at Michigan Technical University in Houghton, Michigan. Then, students are refunded leftover money to use for other expenses.

5. You can use loan money only for certain things

Loan money can be used for education-related expenses only.

“You cannot use it to buy a car,” says Robert Muhammad, director of the office of scholarships and financial aid at Winston-Salem State University in North Carolina. “It’s specifically for educational purposes: books, clothing, anything that is specifically tied to the pursuit of their education.”

You can’t use your loan for entertainment, takeout or vacations, but you should use it for transportation, groceries, study abroad costs, personal supplies or off-campus housing.

6. Find out who your servicer is and when payments begin

If you take federal loans, your debt will be turned over to a student loan servicer contracted by the federal government to manage loan payments. If you have private loans, your lender may be your servicer or it may similarly transfer you to another company.

Find your servicer while you’re still in school and ask any questions before your first bill arrives, says John Falleroni, senior associate director of financial aid at Duquesne University in Pittsburgh. They’re also whom you’ll talk to if you have trouble making payments in the future.

When you leave school, you have a six-month grace period before the first bill arrives.

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The article 6 Things to Know About Student Loans Before You Start School originally appeared on NerdWallet.

10 Easy Tricks for Saving Money on Travel

Posted on by Sally French

Travel can be expensive, whether it’s high gas prices during your road trip or increasing travel demand causing hotel and airline costs to rise. But it doesn’t have to be as costly as you might think with these tips for saving money on travel.

How to save money while traveling

1. Pack light

Packing light is undoubtedly beneficial for avoiding checked bag fees, but there are a few other incentives to do so. For starters, packing light means you can get around a lot easier. With a light suitcase or backpack, you’re more agile, enabling you to navigate public transit rather than feel like you need to pay for a taxi.

So how do you pack light? Bring clothes that you can wash easily in a sink. Look for items that dry quickly, and pick clothes that you can mix and match. Default to basic items that go with pretty much any outfit, so you don’t need to cram four pairs of shoes into your bag.

Plus, packing light means you won’t be tempted to pay for souvenirs — because limited capacity in your suitcase or backpack will deter your urges.

2. Shop at local grocery stores

Head to outdoor markets in Asia for fruits and vegetables that you might not find in your supermarket back at home.

Visiting local markets can be an adventure on its own. You’ll find different types of foods that you wouldn’t necessarily come across at home. Plus, having food on hand means you’ll likely save money, as you’ll be less tempted to buy the stale, overpriced muffin from the hotel cafe just because you were hungry.

3. Pack snacks

If you can’t visit a local market, packing snacks from home is the next best thing. Look for protein-heavy items like jerky and protein bars, which can make you feel full and not take up too much space in your luggage.

Reusable water bottles don’t take up much space and can save you from buying tons of plastic bottles.

Bottled water can also shape up to be a considerable expense when you’re on the go. Assuming you have access to a clean water source, pack your canteen, and consider a portable water bottle that can collapse to fit in your pocket.

4. Get yourself into the airport lounge

The Centurion Lounge at Dallas-Fort Worth International Airport has a full buffet and access for certain American Express cardholders. (Photo courtesy of American Express)

One of the best ways to get food while traveling is at an airport lounge. Many premium travel credit cards offer lounge access as perks, generally through the Priority Pass lounge membership program. Food quality ranges by lounge, but you can usually expect light snacks like fruit, chips, cookies and coffee. The fancier lounges sometimes provide entire buffet meals.

Beyond food, lounges can provide Wi-Fi speeds typically faster than what’s offered in the airport. In addition, some lounges offer showers, exercise rooms or massages. Get to the airport early to maximize the amenities.

5. Arrive early

Leave plenty of time to get to the airport early. If you’re running late, you might hail an overpriced cab in a panic instead of taking public transportation at typically a fraction of the cost. You may also find that rideshare prices could be higher for routes to the airport at certain times. Having more time allows you to avoid the surge pricing.

Don’t risk having to rebook a flight last minute because you arrived late.

6. Get TSA PreCheck or Global Entry membership fees reimbursed

You can speed through airport crowds by applying for either TSA PreCheck or Global Entry. Both are types of Trusted Traveler programs offered by the U.S. Department of Homeland Security.

If approved, you’ll be able to use expedited lanes, which typically have shorter, quicker lines because travelers aren’t forced to remove their shoes, laptops, belts or jackets. According to TSA’s data, 94% of TSA PreCheck passengers waited less than five minutes in December 2021.

Certain credit cards will reimburse your application fee, typically $85 for TSA PreCheck or $100 for Global Entry.

7. Take advantage of credit card free night certificates

Some hotel credit cards — even those with sub-$100 annual fees — offer free hotel night certificates. Assuming the value of your hotel room is more than the credit card’s annual fee (which it very easily can be), it could be a smart move to get one of these cards to save some money with a free night stay.

Plus, these cards typically offer extra benefits like elite status, making your stay more enjoyable, and bonus points, which can make future stays free — or at least cheaper.

8. Book hotel rooms on points

Speaking of bonus points, it’s almost always a good idea to spend your hotel points rather than save them. Booking rooms on points versus cash is certainly a smart way to avoid dipping into your cash savings for a vacation, but there are a few other benefits:

You may avoid resort fees: Resort fees (those extra charges that hotels impose to cover extra amenity usages like pools and Wi-Fi) are irritating, and they can sometimes run north of $50 per night. Thankfully, some hotel loyalty programs, including Hilton Honors and World of Hyatt, don’t charge them for rooms booked on points.

You might get extra discounts: For stays booked on points, you might unlock additional discounts for staying longer. For example, you receive the lowest point-value night free for every five consecutive nights stayed at a Marriott property funded with Marriott Bonvoy points. Hilton has a similar policy where members with at least Silver Elite membership receive the fifth night free when booking on points.

9. Travel during the offseason

If you can travel during the offseason, that’s not only a way to avoid crowds and the headaches that come with them, but you’ll usually be able to get a better deal. A NerdWallet analysis conducted in spring 2021 of over 1,110 airfares found that airfares averaged more expensive for holiday travel than any other booking window.

Booking window

Average economy class cash airfare

15 days out

$576.51.

180 days out

$464.77.

During the holiday season (Dec. 22-29)

$655.32.

Airfares for flight routes during the holiday season average 41% more expensive than other flights booked roughly six months out during non-holiday seasons.

10. Explore tourist attractions that don’t cost you any money

The Hamon Observation Tower at San Francisco’s de Young Museum in Golden Gate Park is free to visit.

Even trips to notoriously expensive spots like San Francisco, New York City or Walt Disney World don’t have to break the bank.

For example, there are tons of no-cost things to do at Disney World. Ride around the monorail, or watch fireworks from the beach at Disney’s Polynesian Village Resort. In addition, you can find free walking tours in most major cities (though tour guides typically rely on gratuity, so tip accordingly).

Prioritize the free tourist attractions over the ones that have a fee. For example, tickets to San Francisco’s de Young Museum cost about $15, but you can go to one of its coolest rooms, the Hamon Observation Tower, for free panoramic views of the city.

And while there are dozens of excellent cultural institutions in St. Louis, start at the ones that have free admission, including the Saint Louis Art Museum, Saint Louis Science Center and Saint Louis Zoo. If time permits, then turn to the attractions with a fee.

Forest Park is approximately 1,300 acres of public parkland just west of downtown St. Louis, featuring numerous attractions, including museums, a planetarium, zoo and amphitheater, most of which are free to visit.

The bottom line

Travel costs can add up. Your vacation might not be as cheap as that slick airfare deal may have led you to believe when you factor in other expenses. Often, vacation spending can rocket past your initial budget once you’re out on the road.

Saving money on travel with these tricks can give you more freedom to spend where you need, whether that’s on this trip or your next one.

Sally French writes for NerdWallet. Email: sfrench@nerdwallet.com. Twitter: @SAFmedia.

The article 10 Easy Tricks for Saving Money on Travel originally appeared on NerdWallet.

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How to Score Points in the Credit Game

Posted on by Bev O'Shea

Credit scoring can feel like a frustrating game — falls can be sudden and swift, and climbing is a slow slog.

In reality, “all scoring models and lenders are aiming to do the same thing, which is to minimize risk,” says Jeff Richardson, senior vice president of marketing and communications for VantageScore, one of the two leading credit scoring companies. He says creditors see things like missing payments and high balances as indicators of risk.

The traditional advice of paying on time and keeping balances low will eventually result in decent credit. But you can speed it up.

Check your credit

To start, take a look at your credit reports by using AnnualCreditReport.com. Check to see that the information is accurate, especially for addresses you don’t recognize, since that can suggest fraudulent accounts or same-name mix-ups. Also make sure account numbers and activity are what you expect. You can dispute errors, and the change in score after a successful dispute could be significant.

Avoid costly missteps

Next, avoid doing things that work against building your credit. These include:

  • Paying late — the impact is large and lasting.
  • Closing credit cards — it can reduce your overall credit limit and the length of your credit history.
  • Applying for a lot of credit at once — credit checks can nick your score.
  • Letting card balances stay above 30% of the limit — credit utilization, or the portion of your limit you have in use, has a major impact on scores.

While paying down balances is a good idea, it’s not always realistic.

Be strategic

If you’re whittling down credit card balances, be strategic. The number of cards with balances influences credit scores, says credit expert John Ulzheimer. The “snowball method” of debt repayment focuses on wiping out your smallest balances first.

Relatedly, if you have only one credit card, Ulzheimer says adding a card or two could be useful. Assuming your spending stays about the same, the credit limits on the new cards will reduce your overall credit utilization. And if your card is lost or stolen, you still have access to credit.

You can move credit card debt to a personal loan or even a 401(k) loan, essentially making it disappear from credit utilization calculations. But if you have not addressed the circumstances that led to the high balances, a new loan could be a step deeper into debt.

Add positive information

Credit slip-ups can hurt, but adding positive information to your credit reports can help counteract the damage. There are at least five ways to get on the credit radar or to rehabilitate a damaged score.

Authorized user: If you have a friend or relative with a long credit history, a high score and relatively high credit limits, ask if they are willing to add you as an authorized user. Authorized user status allows additional good data to your credit history, such as on-time payments, credit age and low credit utilization. Authorized user status is most powerful for people who have no credit report or a thin file. Its impact can be felt as soon as it’s reported to the credit bureaus.

Store credit card: Retail credit cards typically have more flexibility in approving applications, says Max Axler, deputy chief credit officer of Synchrony, a consumer finance company that issues credit cards across a variety of industries. He says Synchrony uses VantageScore 4.0 as part of its decision making and may also consider other factors, such as banking activity, customer history and cell phone payments. Store credit cards tend to carry high interest rates, so try to pay in full every month or finish a 0% promotion plan well before it ends.

Secured credit cards: As their name implies, secured credit cards are secured by a deposit with the issuing bank. Your credit limit is typically equal to your deposit. As with any other credit card, it’s best to keep your balance well under 30% of the limit.

Credit-builder loans: These turn traditional loans upside down. Instead of getting a lump sum at the beginning and then paying it back, you make payments and get the lump sum at the end of the loan term.

Co-signed credit: Some lenders will approve you for a loan if someone with stronger credit co-signs the loan. It can help credit even if the primary borrower was never expected to pay (as with parents buying their child a car). However, both signers are fully on the hook for the loan, and the loan could limit the co-signer’s borrowing power. If the primary borrower doesn’t pay or pays late, the co-signer’s credit is on the line.

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

Bev O’Shea writes for NerdWallet. Email: boshea@nerdwallet.com. Twitter: @BeverlyOShea.

The article How to Score Points in the Credit Game originally appeared on NerdWallet.

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