Author: Brianna McGurran

Spend Money Guilt-Free — Even With Student Loans

Posted on by Brianna McGurran

“Ask Brianna” is a column from NerdWallet 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.

Earlier this year, total outstanding student loan debt surpassed $1.5 trillion.

For those with loans they can’t afford, the news was a large-scale confirmation of a small-scale truth: Student loans have gotten out of control, and they leave a smoking crater in the place where a thoughtful budget should be. Seemingly endless and urgent new priorities compete for your attention and limited income after graduation: housing, an emergency fund, paying off those loans.

Here’s one more you shouldn’t ignore: yourself.

“If you’ve got a financial plan that includes no money for fun, it’s unrealistic. It’s not going to happen,” says Matthew Angel, advice director of personal finance at USAA, a financial institution for members of the military and their families.

Managing your money well is about creating balance, which you’ll have to do over and over as the shape of life changes: You may change jobs, get married, have kids or go back to school. Learn how to keep your big expenses low, get serious about setting aside “fun” money and pick activities that will bring you lasting joy, and you’ll be able to repeat the process when new priorities edge their way in.

When you lead a life that’s more than the sum of your financial stresses, you might even feel motivated to pay off your student loans faster.

Compartmentalize your cash

Budgeting meticulously isn’t for everyone. But no matter your personality, you should have a general idea of where your money goes.

Start with this method:

  • Add up monthly fixed expenses, like your rent, transportation, utility bills, student loan payment and average grocery bill.
  • Decide how much to save per month to build a solid emergency fund, which will eventually include at least three months of expenses (it’s OK if it takes time to get there).
  • Use a retirement calculator to see how much you should save per month now to get a head start on retirement, even if it’s just a little.
  • Take a look at your high-interest debt, like credit card balances, and come up with a plan to pay it down. Put even $10 more than the minimum toward your debt each month.

The money left over is where fun money will come from.

All these expenses might seem overwhelming, and I wouldn’t recommend putting off saving for retirement or letting credit card balances linger. But you can chip away at them slowly rather than throwing all your cash at one goal, giving you the freedom to set aside cash for nonessentials.

You can also save money by making smart decisions about the big stuff. Buy a used car, or sign up for a federal income-driven student loan repayment plan, which keeps your payments from exceeding 10 percent of income.

Pick the right ‘fun’

It’s worth making the effort to earn a little extra if that’s a quicker path to building discretionary cash than cutting expenses, Angel says. You can easily sell unwanted items online, he says; you can also tutor, freelance or open a shop on Etsy.

Once you set aside the cash, spend it well. You’ll likely feel more fulfilled gaining experiences, pouring money into hobbies and socializing with friends than buying new clothes or technology. Money should make you feel freer and more like yourself. If you’re spending in a way that feels empty or hasty, pause and consider whether you’re getting the most out of the money you’ve worked so hard for.

Go in with a goal

To stick to spending only the fun money you’ve decided you can spare, make a plan beforehand, Angel says. Say, “I’m going to spend $100 at most with my friends tonight,” not, “I have $500 in my bank account, and we’ll see how much is left tomorrow.” If you have access to credit cards, setting that limit internally is even more important.

Especially when you’re with friends, it’s easy to apply a “you only live once” mentality. But think of controlling your spending as an investment in going out with them again and again. You won’t accrue so much debt that eventually you’ll have to go on an even harsher spending fast to fix it.

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

Photo From: 123rf.com

Photo ID: 68416070

Ask Brianna: I’m 18. Should I Worry About My Credit Yet?

Posted on by Brianna McGurran

“Ask Brianna” is 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.

Good credit opens up a world you may not have known existed, like Platform 9 3/4 did for Harry Potter.

If you jump on the credit-building train at 18, you’ll have an easier time renting an apartment, getting a car loan and setting up your own cell phone plan when you graduate (though I can’t promise you’ll find butterbeer, like Harry did, at your final destination).

But credit also makes it disturbingly easy to cover the eight pizzas your roommates decide to order.

While independence is your reward for having good credit, not everyone is ready to build it responsibly in college. Know yourself, and choose a method that won’t torpedo your goal as soon as you start.

Why you need credit

A quick primer: Your credit score shows lenders, landlords and financial institutions how likely you are to repay a debt or follow through on your commitments. After you start using credit, you’ll receive a score on an 850-point scale. In general, a good score is 690 or above, but know that it will take time to get there. A score of 650 to 699 “could be considered a win” if you’re in college and you’ve been building credit for a year, says Beverly Harzog, author of “The Debt Escape Plan.”

Having good or excellent credit means:

  • Lower interest rates on credit cards, car loans, mortgages and private student loans
  • Eligibility for premium credit cards with fancy rewards
  • More easily qualifying to rent an apartment
  • Access to utilities without a deposit
  • Cheaper car insurance in most states

It can take six months after opening credit accounts to see your score. Many banks, credit cards and personal finance websites show their members free credit scores.

How credit works

The factors that most influence your score are whether you’ve paid bills on time, how much credit you’re using and how long your credit history is. When you’re in the process of building credit, avoiding negative marks — like late payments — is your first priority.

Rent payments generally won’t affect your credit — unless you don’t make them, which could hurt it. But making student loan or car payments on time will elevate your score. Keep credit card balances low, and don’t carry a balance from month to month, even if it’s small. Consider using the card to make one recurring payment, like your cell phone bill, says Billy Hensley, incoming president and CEO of the National Endowment for Financial Education. Set up autopay from your checking account to cover it.

How to build it

Credit cards probably come to mind first when you think of credit, but they’re just one way to show you can pay your bills on time. And they’re not for everyone.

There are some credit cards out there just for students, but they can be hard to get approved for. Instead, you can become an authorized user on your parents’ card, which means they’ll still be responsible for paying the debt, or get a secured card, which has a low credit limit and requires a deposit upfront.

Before you get a credit card, Harzog says to ask yourself these questions:

  • Do you have a checking account now, or when you were in high school?
  • Are you able to use a debit card without overdrawing your account?
  • Do you save at least some money from each paycheck?
  • Do you keep track of how you spend any income you earn?

If the answers are no, consider building credit another way.

I am a big fan of credit-builder loans. You get a small loan — usually through a credit union or community bank — and the money sits in a bank account while you make on-time payments, building a credit score. Once it’s paid off, the money is yours.

In the end, managing your money sensibly will naturally lead to a strong score.

“It’s far more important to focus on paying bills on time (and paying the credit card bill in full every month),” Harzog says, “than it is to focus on attaining a specific number by graduation.”

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

Photo From: Courtesy of Nerd Wallet

The article Ask Brianna: I’m 18. Should I Worry About My Credit Yet? originally appeared on NerdWallet.

To Make College Cost Even More, Pay by Credit Card

Posted on by Brianna McGurran

Sure, your college may allow students to pay for tuition and fees with a credit card. But, like partying the night before a midterm, it’s probably not a good idea.

Paying for anything with plastic requires a plan to get rid of your balance fast. That keeps interest charges from piling up. Plus, many schools charge “convenience fees” that could cost more than the value of any rewards points or cash-back bonuses you’re hoping to get on your card.

Here’s what to weigh before using one type of credit to pursue another.

Convenience fees

Before brandishing your card, check if the school tacks on an extra charge, called a convenience fee, to accept payments made with plastic.

Colleges with convenience fees charge 2.75% of the total payment, on average, according to a survey of 410 institutions by the National Association of College and University Business Officers. That means if you pay $2,000 for tuition, your card will be charged $2,055. The bigger the payment, the more expensive that fee will be.

Eroding rewards

If your credit card offers cash back or travel rewards based on the amount you spend, the idea of charging your tuition bill might make “Free plane ticket” flash in front of your eyes. But do the math first.

On a 1.5% cash-back credit card, you’ll earn $30 in rewards on a $2,000 charge. A 2.75% convenience fee of $55 will more than cancel that out.

It’s more likely you’ll see savings if you recently got a credit card with a sign-up bonus — say, if your card offers $200 back after spending $1,000 in the first three months. But even then, if a convenience fee were applied, it would eat away at those rewards.

Interest charges

Community colleges are the type of school most likely to accept payment by credit card — and the least likely to charge a convenience fee — according to the National Association of College and University Business Officers survey. They’re also the least expensive, according to the College Board.

But even then, it’s not a good idea to pay with a credit card if you plan to carry that balance from month to month. Unless you have a card that doesn’t charge interest for an introductory period, carrying a balance could mean paying loads in interest charges. For instance, leaving a $2,055 balance on a card with an annual percentage rate of 17% will accrue about $29 in interest in the first month alone.

Other financial aid options

Know that you don’t have to pay for school out of pocket.

Fill out the Free Application for Federal Student Aid, known as the FAFSA, to qualify for federal grants you don’t have to pay back. Students with financial need can get a Pell Grant, for instance, of up to $6,095 for the year. The amount you’ll receive depends on your income, school costs and whether you’ll attend full- or part-time.

The FAFSA also makes you eligible for federal student loans, whose interest rates — 5.05% for undergrads in 2018-19 — are generally lower than the rates on credit cards. Check into scholarships, too, and ask about getting tuition reimbursement from your company if you’ll work while studying.

Unless you have a plan to get rid of your balance fast — and you’ve already exhausted every other financial aid option — paying for college on credit doesn’t make the grade.

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Brianna McGurran is a writer at NerdWallet. Email: bmcgurran@nerdwallet.com. Twitter: @briannamcscribe.
Image by Anna Bizoń via 123RF
Image ID: 40313792

Are You Afraid of Your College Debt?

Posted on by Brianna McGurran

Student loans aren’t scary the way roller coasters are — a quick hit of adrenaline and a silly souvenir photo to capture the moment. No, student loans are scary because they alter the way you see your future. They fill you with dread that you’ll never have a house, a vacation to remember or a secure retirement.

It’s understandable that you would avoid looking at something that gives you nightmares.

But just like exposure therapy can help people who are afraid of snakes, for example, you must face your student loans if you want to free yourself from their grasp. That dread will dissolve once you make a plan to lower your bills and say goodbye to debt.

Step 1: Find out where you stand

A fifth of those with student debt were behind on their payments in 2017, according to the Federal Reserve. You’re far from alone if you’re overwhelmed. To move beyond your fears, come face to face with what you owe, to whom you owe it and when it’s due.

Go to the National Student Loan Data System, click “Financial Aid Review” and create or enter your Federal Student Aid username and password. On the next screen, you’ll see a list of the federal student loans under your name. Click on the number of the loan in the left-most column to bring up details about it. You’ll see the total amount left to repay and the name and website of the company that collects your bill, known as your servicer.

Next, check your credit report for private student loans. You can access one report from each of the three major credit bureaus annually at annualcreditreport.com, or you can use a free online credit reporting service. In the accounts section, student loans will likely be listed as installment loans. Take note of the company that owns the loan and what the balance is.

That’s the hard part. And now it’s over.

Step 2: Get control of your bills

While you must know your overall student loan balance to make a strategic repayment plan, your total monthly bill is the more important number. Not sure how much you’ve been paying to each bank or servicer? Log in to their online portals to find out. While you’re there, note the interest rate on your loans, too.

At this point, make a list of loans that includes the company you pay, whether the loan is federal or private, the amount you owe per month, the amount you owe overall, and the interest rate. Rank the loans by interest rate, with the highest at the top.

This is what you’re working with. Now, compare your total monthly payment with your take-home pay. Are you earning enough to cover not only your loans, but also the essentials like your housing costs and food? Do you have anything left for retirement or emergency savings?

If the answer is “no” to either or both, cutting your loan bill is your priority now.

Step 3: Take action

To give yourself more breathing room, you have a few options:

  • Sign up for an income-driven repayment plan. For federal loans, this limits your loan bill to a percentage of your income, and will free up the money you need in other parts of your life.
  • Call your lender. Your ability to pay less toward private loans depends on individual lenders’ policies. Ask for lower or interest-only payments for a period of time.
  • Avoid extended forbearance. While postponing your payments might sound like a good idea, reserve this for short-term stints — like a month when you have a big medical bill to pay. If you can’t afford your loans for the foreseeable future, choose a more permanent strategy.

If you have a month of expenses or more saved for emergencies and you’re able to contribute up to the employer match on your 401(k), you can tear into those loans. Pay off the highest-interest loans first to save the most money. Or refinance, if you have good credit or a co-signer; you may be able to get a lower interest rate, especially on higher-interest private loans, which will help you pay off loans faster.

__________________________________________________________________________________

Brianna McGurran is a writer at NerdWallet. Email: bmcgurran@nerdwallet.com. Twitter: @briannamcscribe.
Image by Anna Bizoń via 123RF
Image ID: 40313792

 

When a Little Student Debt Becomes a Lot of Trouble

Posted on by Brianna McGurran

“Ask Brianna” is a column from NerdWallet 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.

Stories about student loan borrowers with six-figure debt loads might shock us, intrigue us or appeal to our deep-seated sense of financial schadenfreude. But borrowers with very high balances, for the most part, are not the ones to worry about.

Those who owe less than $5,000 are.

That’s because they’re most likely to fall behind. Almost a third of them who began repayment between August 2011 and August 2012 defaulted within four years, according to an analysis by the Urban Institute, a nonprofit research organization. Just 15 percent of borrowers who owed $35,000 or more defaulted on the same timeline.

Borrowers with a small amount of student debt are more likely to have left school without degrees, affecting their employment options, earnings and ability to repay. Attending for-profit schools with poor job placement rates and having other, non-student debt to manage also put borrowers at risk.

Simply keeping your student loan balance low isn’t a defense against default. All your education-related choices — what school you go to, what you study, what you do after graduation — affect whether you’ll get those loans off your back. Here’s how to keep a little debt from turning into a lot of trouble.

Choose a school carefully

Defaulting on student debt means you’ve missed nine months of payments on federal loans — often fewer than that for private loans.

Avoid default at all costs.

It can wreck your credit and, for federal loans, lead to withheld paychecks, Social Security checks and tax refunds. With poor credit, you’ll have a harder time qualifying for a mortgage or auto loan; you may even have to pay a deposit to set up utilities in your home.

One of the biggest steps in achieving the financial stability needed to avoid default is simply to graduate — and your chances of graduating are much worse if you go to a for-profit school. Compared with students at two- and four-year public and private colleges, those at for-profits are the least likely to get a degree within six years, and they earn the least 10 years after starting school, according to an analysis by the now-closed Center for Analysis of Postsecondary Education and Employment.

Almost half of students who started attending for-profits in 2004 defaulted on their student loans within 12 years, according to a report from the Brookings Institution, a nonprofit public policy organization.

When researching colleges, use resources like the U.S. Department of Education’s College Scorecard to view graduation rates and average salary after attending. Steer clear of schools that aren’t forthcoming about whether they’re accredited or licensed to operate, pressure you to enroll, or advise you to take out private student loans or borrow up to the full cost of attendance without sharing other options.

Tie your debt load to your major

Your chosen major will also affect how much money you earn. Make sure the school and the specific program of study will prepare you for a well-paying job in your industry. Ask students and alumni at the schools you’re considering how much job-search support they received.

Finally, borrow the least amount you can manage while still covering your expenses while in school. Dropping out due to financial stress can also hurt your chances of getting a stable job.

The Bureau of Labor Statistics’ Occupational Outlook Handbook is a good place to start researching your likely salary after graduation. Use that expected salary to determine how much to borrow. An affordable monthly loan payment is 10 percent or less of your after-tax income once you start working.

Payments you can handle will keep your bills on track — and won’t leave you asking whether college is worth it.

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

The article When a Little Student Debt Becomes a Lot of Trouble originally appeared on NerdWallet.

Spend Money Guilt-Free — Even With Student Loans

Posted on by Brianna McGurran

“Ask Brianna” is a column from NerdWallet 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.

Earlier this year, total outstanding student loan debt surpassed $1.5 trillion.

For those with loans they can’t afford, the news was a large-scale confirmation of a small-scale truth: Student loans have gotten out of control, and they leave a smoking crater in the place where a thoughtful budget should be. Seemingly endless and urgent new priorities compete for your attention and limited income after graduation: housing, an emergency fund, paying off those loans.

Here’s one more you shouldn’t ignore: yourself.

“If you’ve got a financial plan that includes no money for fun, it’s unrealistic. It’s not going to happen,” says Matthew Angel, advice director of personal finance at USAA, a financial institution for members of the military and their families.

Managing your money well is about creating balance, which you’ll have to do over and over as the shape of life changes: You may change jobs, get married, have kids or go back to school. Learn how to keep your big expenses low, get serious about setting aside “fun” money and pick activities that will bring you lasting joy, and you’ll be able to repeat the process when new priorities edge their way in.

When you lead a life that’s more than the sum of your financial stresses, you might even feel motivated to pay off your student loans faster.

Compartmentalize your cash

Budgeting meticulously isn’t for everyone. But no matter your personality, you should have a general idea of where your money goes.

Start with this method:

  • Add up monthly fixed expenses, like your rent, transportation, utility bills, student loan payment and average grocery bill.
  • Decide how much to save per month to build a solid emergency fund, which will eventually include at least three months of expenses (it’s OK if it takes time to get there).
  • Use a retirement calculator to see how much you should save per month now to get a head start on retirement, even if it’s just a little.
  • Take a look at your high-interest debt, like credit card balances, and come up with a plan to pay it down. Put even $10 more than the minimum toward your debt each month.

The money left over is where fun money will come from.

All these expenses might seem overwhelming, and I wouldn’t recommend putting off saving for retirement or letting credit card balances linger. But you can chip away at them slowly rather than throwing all your cash at one goal, giving you the freedom to set aside cash for nonessentials.

You can also save money by making smart decisions about the big stuff. Buy a used car, or sign up for a federal income-driven student loan repayment plan, which keeps your payments from exceeding 10 percent of income.

Pick the right ‘fun’

It’s worth making the effort to earn a little extra if that’s a quicker path to building discretionary cash than cutting expenses, Angel says. You can easily sell unwanted items online, he says; you can also tutor, freelance or open a shop on Etsy.

Once you set aside the cash, spend it well. You’ll likely feel more fulfilled gaining experiences, pouring money into hobbies and socializing with friends than buying new clothes or technology. Money should make you feel freer and more like yourself. If you’re spending in a way that feels empty or hasty, pause and consider whether you’re getting the most out of the money you’ve worked so hard for.

Go in with a goal

To stick to spending only the fun money you’ve decided you can spare, make a plan beforehand, Angel says. Say, “I’m going to spend $100 at most with my friends tonight,” not, “I have $500 in my bank account, and we’ll see how much is left tomorrow.” If you have access to credit cards, setting that limit internally is even more important.

Especially when you’re with friends, it’s easy to apply a “you only live once” mentality. But think of controlling your spending as an investment in going out with them again and again. You won’t accrue so much debt that eventually you’ll have to go on an even harsher spending fast to fix it.

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

The article Spend Money Guilt-Free — Even With Student Loans originally appeared on NerdWallet.

Skip Student Loan Forbearance — Do This Instead

Posted on by Brianna McGurran

“Ask Brianna” is a column from NerdWallet 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.

Forbearance is a way to stop making student loan payments temporarily. It is not a long-term affordability strategy, or a way to put off repayment indefinitely.

And that means very few people should use it — probably far fewer than are doing so right now.

In the second quarter of this year, 2.8 million federal student loan borrowers had loans in forbearance, according to the U.S. Department of Education. Almost 70% of borrowers who started repaying loans in 2013 used forbearance at some point in the next three years, according to the U.S. Government Accountability Office; a fifth had loans in forbearance for 18 months or longer.

Many students didn’t truly grasp what they signed up for when they scrambled to afford an education they were told they needed to succeed. Forbearance is the quick fix they turn to when the bill overwhelms them.

But if forbearance isn’t a good idea, what are borrowers in trouble supposed to do? Follow these guidelines:

  • Use income-driven repayment to make your loan payments more affordable over the long term.
  • Choose forbearance only for short, one-off financial crises, like when you have a big auto repair or medical bill to pay.

Here’s why.

What forbearance is

Forbearance allows you to pause payments, generally for up to 12 months at a time for federal loans.

There are different types, but discretionary forbearance is the one that can creep up on you. It’s available to anyone with financial difficulties, and there’s no limit to how long you can get it for. Interest will keep adding up, meaning at the end of the forbearance period, you’ll owe more than you did before.

For instance, after putting $30,000 in loans on hold for 12 months at 6% interest, you’d owe about $31,800.

Think of forbearance as a last resort. It’s too easy to renew it and let your balance grow, while also spending each month without factoring in a student loan payment.

“Because forbearance can be applied for virtually any reason, you want to keep that for a potential emergency down the road, where you may not qualify for anything else,” says Betsy Mayotte, president of The Institute of Student Loan Advisors, a nonprofit that offers free student loan advice.

What forbearance isn’t

Forbearance is not the same as deferment, another way to stop making student loan payments.

Deferment is a better option, since you won’t pay interest on subsidized student loans when they’re in deferment. You’ll qualify for deferment in certain circumstances — when you’re unemployed, for instance — so ask your student loan servicer if that’s an option before going with forbearance.

Forbearance isn’t as easy to avoid when you have private loans. Private lenders generally offer few ways to lower payments unless you’ve already fallen behind, Mayotte says. But it’s worth asking for interest-only or interest-free payments as an alternative.

Smarter ways to get relief

Most people with student loans have federal loans, which means they’re eligible for income-driven repayment. These plans lower payments to a percentage of income; you can pay $0 if you have no earnings.

To qualify, some plans require you to show you can’t afford the standard 10-year schedule, but one plan — called Revised Pay As You Earn — is available to all federal borrowers. Sign up for free at studentloans.gov.

Depending on the plan and the type of loans you have, the government may pay part of the interest that accrues if your payments don’t cover it. Your loans will also be forgiven if there’s any balance after 20 or 25 years of payments.

Income-driven repayment will help get you through a crisis, but staying on it for decades will mean owing more in interest. Under current rules you’ll also be taxed on the balance forgiven.

Use income-driven repayment strategically by staying on it once you’ve found steadier financial footing. You can pay extra each month without penalty to get rid of your loans faster, and a lower payment is there as a safety net if you need it.

This is your chance to take back control of your loans, and to keep them from dictating the life you can afford.

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

The article Skip Student Loan Forbearance — Do This Instead originally appeared on NerdWallet.

To Make College Cost Even More, Pay by Credit Card

Posted on by Brianna McGurran

“Ask Brianna” is a column from NerdWallet 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.

Sure, your college may allow students to pay for tuition and fees with a credit card. But, like partying the night before a midterm, it’s probably not a good idea.

Paying for anything with plastic requires a plan to get rid of your balance fast. That keeps interest charges from piling up. Plus, many schools charge “convenience fees” that could cost more than the value of any rewards points or cash-back bonuses you’re hoping to get on your card.

Here’s what to weigh before using one type of credit to pursue another.

Convenience fees

Before brandishing your card, check if the school tacks on an extra charge, called a convenience fee, to accept payments made with plastic.

Colleges with convenience fees charge 2.75% of the total payment, on average, according to a survey of 410 institutions by the National Association of College and University Business Officers. That means if you pay $2,000 for tuition, your card will be charged $2,055. The bigger the payment, the more expensive that fee will be.

Eroding rewards

If your credit card offers cash back or travel rewards based on the amount you spend, the idea of charging your tuition bill might make “Free plane ticket” flash in front of your eyes. But do the math first.

On a 1.5% cash-back credit card, you’ll earn $30 in rewards on a $2,000 charge. A 2.75% convenience fee of $55 will more than cancel that out.

It’s more likely you’ll see savings if you recently got a credit card with a sign-up bonus — say, if your card offers $200 back after spending $1,000 in the first three months. But even then, if a convenience fee were applied, it would eat away at those rewards.

Interest charges

Community colleges are the type of school most likely to accept payment by credit card — and the least likely to charge a convenience fee — according to the National Association of College and University Business Officers survey. They’re also the least expensive, according to the College Board.

But even then, it’s not a good idea to pay with a credit card if you plan to carry that balance from month to month. Unless you have a card that doesn’t charge interest for an introductory period, carrying a balance could mean paying loads in interest charges. For instance, leaving a $2,055 balance on a card with an annual percentage rate of 17% will accrue about $29 in interest in the first month alone.

Other financial aid options

Know that you don’t have to pay for school out of pocket.

Fill out the Free Application for Federal Student Aid, known as the FAFSA, to qualify for federal grants you don’t have to pay back. Students with financial need can get a Pell Grant, for instance, of up to $6,095 for the year. The amount you’ll receive depends on your income, school costs and whether you’ll attend full- or part-time.

The FAFSA also makes you eligible for federal student loans, whose interest rates — 5.05% for undergrads in 2018-19 — are generally lower than the rates on credit cards. Check into scholarships, too, and ask about getting tuition reimbursement from your company if you’ll work while studying.

Unless you have a plan to get rid of your balance fast — and you’ve already exhausted every other financial aid option — paying for college on credit doesn’t make the grade.

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

The article To Make College Cost Even More, Pay by Credit Card originally appeared on NerdWallet.

Your Credit Score Means Everything — and Nothing

Posted on by Brianna McGurran

“Ask Brianna” is a column from NerdWallet 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.

Your credit score will nose its way into nearly every major milestone in your life.

At every turn — buying your first car, leaving your parents’ cell phone plan, moving to a new apartment with a partner — you’ll need good credit. Without scores of 690 or higher on an 850-point scale, you’ll generally pay more than you need to.

But people with bad credit are not bad people. Even the companies that dole out credit scores know this.

“The credit score is not a reflection of who you are as a person or how accomplished you are,” says Jeff Richardson, a spokesperson for VantageScore, one of the two main credit scoring models. “It is not passing any judgment.”

You might, however, be judging yourself for the choices that sunk your score, or the fact that you’ve been too overwhelmed to think about it. The best way to get your credit score back on track is to loosen its hold on your self-worth.

Don’t be afraid to look

You’ll need to know where you stand right now before you can put it into perspective. If you’ve been too ashamed to look at your credit score, do it today, repeating this mantra if necessary: “You don’t need perfect credit to be a successful human being.” Tons of apps and websites provide free scores.

Young people starting to build credit or repair a damaged score should first aim for a score of 620 to 640, Richardson says. Most young people are in this range anyway. Those born between 1982 and 1995 had an average credit score of 638 in 2017, according to Experian, a credit reporting agency.

A score like this gets you out of the bad-credit danger zone, where landlords and lenders will be reluctant to work with you. Do your best to improve from there. A score above 720 will get you the best deals, and a sustained period of healthy financial habits can send it even higher.

Focus on what matters

You can only devote so much energy to credit. Paying bills on time and keeping credit card balances low make the biggest difference — and doing so month after month, year after year, is what truly strengthens your score.

But you may feel the need to do something right now. There are actions to take, and though none of them will transform your score overnight, they’ll help it climb over time. Consider:

  • Putting one of your bills on autopay.
  • Pulling your free credit report from annualcreditreport.com and confirming all personal and account information is accurate.
  • Getting a secured credit card with a small deposit, and putting one regular purchase on it — Spotify, for instance, or gas — with the goal of paying it off each month.
  • Using a balance-transfer credit card to get a zero percent APR deal, which will keep your current credit card balance from accruing interest while you pay it off.

You’ll probably notice that taking one step will encourage you to take another, then another. But don’t overwhelm yourself with tasks. Balance every credit-building activity with one you love: a walk in the park after, or coffee with a friend.

Let it go

Good credit will give you options and save you money. You might feel embarrassed that your credit needs help — say, if you’re dreaming of homeownership. But buying a house next year instead of this year likely won’t make a material difference in your happiness.

Remember that a credit score has a specific purpose, Richardson says: “It is a statistical algorithm to help lenders determine how likely you might be 90 days or more late on a loan.”

Don’t give it any more power than that.

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

The article Your Credit Score Means Everything — and Nothing originally appeared on NerdWallet.

5 Ways Your Friendships Can Blossom on a Budget

Posted on by Brianna McGurran

“Ask Brianna” is a column from NerdWallet 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.

You do not have to spend your Saturday nights alone as penance for racking up debt or having paltry savings.

You have one life, and you don’t know how long it will be. Seeking joy should be a priority on par with paying off debt or buying a house. Research has shown that putting energy into your friendships — and simply appreciating your friends at all — improves your life. And you don’t have to spend a lot to do it.

Those who treasure their family and friends are happier and healthier than those who don’t, a 2017 study from Michigan State University found. Even more striking: Valuing friendships is a bigger indicator of health and happiness at older ages than valuing family relationships.

Set that foundation now, and what you do — and how much you spend — won’t matter. Who you’re with and whether you cherish that time together will. So don’t worry if you can’t shell out for a big group vacation, or even a friend’s fancy birthday dinner. Here’s how to cultivate long friendships when you’re short on cash.

1. Volunteer together

Pick something you both care about, like animal welfare, the environment or veterans’ issues, and research local organizations that focus on them. Sign up for an opportunity that takes place every week or month to keep you engaged in the organization, and to give you and your friends a hangout to look forward to. Bonus: It just feels nice to help people.

If you’re politically minded, you can also register voters together or attend local City Council meetings or town hall meetings for your congressional representatives. Find your representatives at GovTrack.us and check the schedule of events on their websites. Feeling engaged in your community is also a contributor to a long, happy life.

2. Join the club

You may not be in college anymore, rehearsing with your a cappella group or playing team sports. But you can start a monthly book club, wine club, hiking club, group playdate for your friends’ dogs — you name it. All it takes is a leader willing to send out a reminder email and gather everyone’s availability through a method like Doodle.

My book club has been going strong for almost four years, and the “club” part has turned out to be way more important to me than the “book” part.

3. Nab discounts for young people

Many cultural institutions want young people in the audience — they’re hoping you’ll buy tickets for years to come. Look into under-30 or under-35 discount ticket programs where you live, particularly at dance or theater performances. Some might require a small yearly membership fee, but if you like to see shows often, the fee will pay for itself.

4. Cook when solo

In a way, paying for a meal or drinks out with friends is an investment in your long-term happiness. But that doesn’t justify overspending. Budget for fun the way you would for groceries, and you can spend it without guilt.

If you simply must meet friends for dinner four times a week, look at your spending holistically — a budgeting app can help — and make cuts elsewhere. Bring lunch to work every day. Or, when you’re home alone, commit to making your own meals and avoiding takeout.

5. Get crafty

If you know how to knit or crochet, no one is stopping you from doing it with a friend while watching a film adaption of a Jane Austen novel (I have done this).

You can get a group together and sketch while listening to music, or spend a night repurposing old clothes you don’t wear so they’re summer-ready: a T-shirt into a tank top, or old jeans into cut-off shorts. There are tons of craft ideas on Pinterest. You can even schedule a clothing swap, which will let you freshen up your wardrobe for free.

Saving money usually requires forethought and ingenuity. The same goes for suggesting an activity beyond the easy, and pricey, “let’s get drinks.”

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

The article 5 Ways Your Friendships Can Blossom on a Budget originally appeared on NerdWallet.