Author: Colin Beresford

Don’t Let Your First Car Be a $30K Mistake

Posted on by Colin Beresford

Buying your first car is already an intimidating experience; in the midst of historic supply shortages, it’s easy to feel overwhelmed.

In March of this year, the average price of a used car was $27,246, according to Cox Automotive — an automotive marketplace and data company — or 28% higher than it was a year ago. With those price increases, monthly payments have also swelled. Average payments for used cars reached $488 in the last quarter of 2021, according to Experian. On top of that, the average loan term for used vehicles was just over 67 months, or more than five years.

For many, cars are a necessity. If you have little or no credit, no co-signer or just a limited budget, it can be easy to accept a loan that pushes your budget or binds you to a car for six, even seven years.

Not being ready before stepping onto a car lot can open the door to making a purchase you’ll later regret. Set your limits before you ever stop at a dealership; with the right preparation, you can keep your purchase from becoming a burden.

Secure a loan

Your first step is calculating what loan payments you can afford and the total loan amount that’s within your budget.

Aim to keep your monthly loan payment below 10% of your take-home pay, and if you’re buying a used car, keep your loan term under 36 months. If you’re looking for a new vehicle, keep the term under 60 months. Limiting your loan term will save you money on interest and will lower the risk of your loan becoming upside-down — owing more than the car is worth.

Numbers in hand, start looking for a lender that will give you a loan. Getting preapproved for a loan before visiting dealer lots can give you a better negotiating position, keep you from going over budget and reduce what you pay in interest.

With little or no credit history — especially since you have not had a car loan before — your best shot at being approved for a loan at the lowest interest rate possible is to apply with a co-signer. But if that’s not a possibility for you, there are still financing alternatives available:

  • One of the first places to look are banks and credit unions, particularly institutions that you have an established relationship with.
  • Search your area for lenders with first-time buyer programs, which put conditions on the amount you can borrow and the vehicles you can buy but dispense with some of the credit requirements.
  • You can also look for loans from online lenders that offer bad-credit auto loans, since they will often have low or no minimum credit scores. These loans can carry interest rates of over 25%, so a year after taking one on, you can try to refinance for lower rates.

Pick the right car

Finding a cheap car used to be easy — or at least easier than it is now. If you have a $10,000 budget, your options are limited, but that doesn’t mean there aren’t options.

With a limited budget, most choices will be older, used cars, and that increases the annual cost to maintain your car. A 2021 Consumer Reports study found that 2016 model year vehicles cost $205 to maintain over the previous 12 months, while 2011 model year vehicles cost $430.

In addition to maintenance costs, there’s also fuel, insurance, registration and taxes that all add to the cost of owning a vehicle. As you search for a car, look into the cost of ownership, since it will differ from car to car.

The total cost of owning your vehicle, including your loan payment, shouldn’t exceed 20% of your take-home pay. Although some costs can’t be significantly reduced, you can minimize others — such as future maintenance, repairs and fuel — with the right car.

“The most important thing to look for is a car with good maintenance history,” Joey Capparella, a senior editor at Car and Driver, said in an email. “If the previous owner has taken good care of the car and can provide service receipts, that trumps other attributes such as the number of miles or the brand. One-owner cars are desirable for this same reason.”

Service and ownership history can sometimes be found through a service such as Carfax. Use this information, along with total mileage and the car’s age, to narrow down your search. When looking at vehicles for less than $10,000, the car with fewer miles will often be the better choice, if all else is equal.

Once you’ve settled on a car, take it for an extensive test drive, Capparella added, and pay attention to “the seating position, the visibility out of the windows, and the sound of the engine.”

If something about the car isn’t right for you, a different vehicle is likely a better choice, and don’t be afraid to be picky. You may not be buying the car of your dreams, but you could be living with your choice — and making payments on it — for years to come.

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The article Don’t Let Your First Car Be a $30K Mistake originally appeared on NerdWallet.

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Interest Rates on New Federal Student Loans Going Up for 2022-23

Posted on by Colin Beresford

Two years ago, federal student loan borrowers enjoyed the lowest interest rates ever on their loans. This fall, rates for undergraduate borrowers will be nearly double what they were in 2020-21.

The interest rates for new undergraduate direct federal student loans are set to increase to 4.99% for the 2022-23 academic year, up from 3.73% last year and 2.75% in 2020-21. The interest rates on graduate direct loans are also set to increase to 6.54%; parent and grad PLUS loans will rise to 7.54%.

Since the new interest rates go into effect beginning July 1, any new loans taken out before then will carry the interest rates from the 2021-22 academic year.

2021-22 interest rates

2022-23 interest rates

Undergraduate direct loan

3.73%.

4.99%.

Graduate direct loan

5.28%.

6.54%.

PLUS loan

6.28%.

7.54%.

Rising rates make college more expensive

Higher interest rates mean paying off loans will be more costly. For a dependent first-year undergraduate student, a $5,500 loan — the maximum this student could borrow — will cost $6,997 over the standard 10-year repayment term with an interest rate of 4.99%. At the 2020-21 rate of 2.75%, this loan would cost $6,297.

Those taking on graduate direct and PLUS loans will see the cost of borrowing swell even more. On top of higher interest rates, PLUS loans carry an origination fee of 4.23% and don’t have any borrowing limits.

According to the Hechinger Report, a nonprofit focused on education issues, the average PLUS loan in 2019 was around $14,000. That loan amount, taken on with the standard 10-year term and next year’s interest rate of 7.54%, will cost $19,977 over the life of the loan, including $5,977 in interest.

Interest rates for federal student loans are set by the Treasury Department’s May auction of 10-year notes. The interest rate on the May 10-year notes, 2.94%, is added to margins set by Congress, and those margins differ between types of federal student loans.

For undergraduate direct loans, 2.05 percentage points are added to the interest rate; graduate student loans have 3.6 points added and 4.6 points for PLUS loans.

Submit the FAFSA and consider the payoff

Increases to the federal student loan interest rates make it even more important to consider the payoff of college and whether any debt you take on is worth it.

Nonetheless, even with increased interest rates, federal student loans are the best option to finance your education if you need loans. Submit the Free Application for Federal Student Aid, or FAFSA, to be eligible for federal, state and school-based aid.

Submitting the FAFSA also allows you to be considered for grants and other aid you don’t have to repay, such as the Pell Grant. Once you’ve taken advantage of any aid you don’t have to repay, exhaust all of the federal student loans offered to you before opting for private student loans. Federal student loans offer more borrower protections.

The payoff of attending college will vary based on your major, the cost of attendance and the amount of debt that you have to take on to finance your education. If the payoff isn’t clear for you, consider alternatives to college or starting at a community college before transferring to a four-year school to attain your bachelor’s degree.

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

The article Interest Rates on New Federal Student Loans Going Up for 2022-23 originally appeared on NerdWallet.

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Another $400 in Free College Aid Could Be Coming Your Way

Posted on by Colin Beresford

College students could see their Pell Grant award go up by as much as $400 for the coming academic year, thanks to the federal spending bill signed into law March 15.

Congress raised the annual Pell Grant limit to $6,895 for the 2022-23 academic year as a part of the 2022 federal budget. That’s the largest increase to the Pell Grant since 2009.

“The $400 increase to the maximum Pell Grant — the largest increase in 10 years — is a pivotal and much-needed investment in making college affordable for today’s students,” Mamie Voight, CEO and president of the Institute for Higher Education Policy, said in a statement. Nearly 7 million students receive Pell Grants each year, Voight said, and many are minority students.

Pell-eligible students who have already received financial aid award letters for the 2022-23 academic year will likely be sent revised letters, according to Karen McCarthy, the vice president of public policy and federal relations for the National Association of Student Financial Aid Administrators, or NASFAA. The increase will be reflected in any financial aid award letters that haven’t been sent yet.

More for Pell Grants, work-study and PSLF

The boost in funding will affect more than just the students receiving the maximum Pell Grant. The law expands eligibility and increases award amounts, according to McCarthy.

The federal budget also includes an increase in funding for the federal work-study program. Students could see higher award amounts, and more students could become eligible for work-study, but these changes are not guaranteed, according to McCarthy.

Although the final budget doesn’t contain as much support for students as the original proposal, it does increase higher education funding beyond Pell and work-study. Minority-serving institutions, or MSIs, will receive increased funding compared with last year’s budget, and programs intended to help disadvantaged students attain a higher education also will see a boost to funding.

Money is also being allocated to the Department of Education to further expand eligibility for Public Service Loan Forgiveness, or PSLF. The Department expanded eligibility for PSLF with a temporary waiver, which goes through October of this year; this funding will allow the program to include more borrowers whose previous payments had been ruled ineligible.

Submit the FAFSA to be eligible for aid

In order to be considered for any federal student aid, including the Pell Grant and work-study, you need to submit the Free Application for Federal Student Aid, or FAFSA. Submitting the FAFSA makes you eligible to receive grants, scholarships, loans, and other state-based aid.

Submit the FAFSA even if you’re just considering attaining a higher education. Doing so will give you an idea of how much aid you’ll receive if you end up enrolling; you’re not obligated to accept the aid if you decide not to go to college.

The Pell Grant, like scholarships and work-study, is a form of aid that you don’t have to repay. Eligibility for the grant is determined by your expected family contribution as well as the cost of attending the school you’re considering.

Take advantage of aid you don’t have to repay before accepting any federal loans or aid that you have to pay back. If you must use loans to pay for your education, exhaust all federal loans available to you before applying for private student loans.

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

The article Another $400 in Free College Aid Could Be Coming Your Way originally appeared on NerdWallet.

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Ready to Spend Like a College Graduate?

Posted on by Colin Beresford

In just a couple of months, a new cohort of college graduates will leave behind their careers as students and start new ones as entry-level workers. And for many — regardless of age — that change brings a whole new financial landscape to navigate.

Gabby DelMonaco, a financial planning assistant in Silver Spring, Maryland, is set to graduate from college this spring. She began budgeting and covering her own living costs when she started college and feels financially prepared to leave school. But she’s not sure her classmates are all in the same position.

“I think a lot of people are just unaware of the reality of how much it really costs to live on your own,” says DelMonaco.

College graduation might mean you land a job and have more money to spend. It also might mean you now have to use that income to pay for living expenses like rent and groceries. And six months after school is over, you can also expect to start repaying any student loans you have.

As you think through how much your post-college lifestyle will cost, consider all of your expectations. Many expenses — from food and gas to rent and your first living room couch — are getting more costly due to inflation, making it a little bit more challenging to be a new graduate with limited income, says Andrea Clark, a certified financial planner in Fountain Hills, Arizona.

“You just have a better chance for financial success if you start out with a plan instead of starting out haphazardly,” Clark says. Most importantly, making a plan will keep you from living beyond what you can afford, Clark adds.

To do this, you can start by estimating the fixed costs you’ll need to cover and getting a handle on the money you have to work with.

Uncover your fixed costs

The first step in preparing your post-graduation budget is laying out your fixed costs, says Marcio Silveira, a CFP at the same firm as DelMonaco. These are expenses that you can’t forgo, such as housing and transportation costs, as well as any monthly debt repayments.

Pay attention to these costs because you can’t reduce them once you commit, says Silveira. If you have a job lined up with an employer that offers a 401(k) match — a benefit where your employer matches a set amount of your contributions to your retirement fund — try to build this into your fixed costs, Silveira adds.

Student loans are another fixed cost that you likely need to consider. Currently, 65% of college students graduate with student debt, according to the Education Data Initiative. If this is you, add your student loan payments into your monthly expenses if you can afford it, but if this won’t fit into your current budget, take advantage of any grace period offered to you.

Grace periods begin after you graduate, and during this time, you don’t have to pay your loans but interest will continue to accrue. A grace period may allow you to do other things with your money — move, pay off a credit card or buy cheap furniture — but you’ll always need to plan for its end.

Assess your financial situation and build healthy habits

Maybe you built a budget in college and didn’t always stick to it, or you made it through college with no budget at all. Either way, starting a budget now and tracking your spending can help build healthy habits so you’re ready once you start your post-college career.

“Start tracking, start knowing where you spend the money,” says Silveira, and if you commit to it, it can only take three months of spending within your budget to make it a habit.

If you have a job lined up for after you graduate, build a budget around your monthly take-home pay. And if you don’t yet have a job, consider how long you can continue covering your expenses. Doing so can give you an idea of what next step to take; this might be taking the first job offered to you or moving back in with relatives or roommates where you can minimize your expenses.

“I’ve heard so many people say … the best time to find a job is when you already have one, and I think that’s true,” says Clark. “You’re just a little bit more organized, you’re managing your time, you just look more employable if you’re already in a job. But having some sort of money coming in is just important.”

Clark adds that if your parents or guardians are still covering any of your expenses, such as insurance or a phone bill, ask them how much longer they plan on doing that. If you can avoid any surprises in your budget, it’ll help you keep your spending on track.

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

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

The article Ready to Spend Like a College Graduate? 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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Grads Left Behind $3.75B in Free College Aid in 2021, Study Says

Posted on by Colin Beresford

High school graduates are forgoing free money for college by not submitting financial aid applications, according to a new analysis by the nonprofit National College Attainment Network.

The Class of 2021 left behind $3.75 billion in Pell Grant aid by not completing the Free Application for Federal Student Aid, or FAFSA. An estimated 813,000 students were eligible for the Pell Grant — the largest federal grant program offered to undergraduates — but didn’t submit an application for federal student aid, according to NCAN.

“This quantifies exactly how much opportunity, in the form of forgone Pell Grants, students are leaving on the table,” says Bill DeBaun, director of data and evaluation at NCAN. “It’s another component of showing how dire the college-going situation is in the U.S. right now.”

The findings of the analysis are estimates only; it assumes all high school grads who are eligible for financial aid would submit an application and attend college directly after high school. Nonetheless, the analysis does show that a large number of students aren’t submitting the FAFSA, and if students aren’t submitting it, it’s unlikely they’re enrolling in college, DeBaun says. That can have countless long-term impacts, he added.

FAFSA completion rates are declining

The pandemic’s impact on FAFSA completion is one of the reasons $3.75 billion went unclaimed.

“A huge part of it is the FAFSA is complicated, and students from all walks of life really need support to get through the process,” says Traci Lanier, vice president of external affairs at 10,000 Degrees, a nonprofit college access organization that supports students before and after enrolling in college.

The pandemic forced much of that support to go virtual, Lanier added, and assisting students over one-on-one video conferencing proved to be a challenge compared with large groups that could gather and learn before the pandemic.

In 2019, 61% of high school graduates submitted the FAFSA, while in 2021, an estimated 53% had submitted the application by June 30, according to NCAN. College enrollment has dropped during the pandemic, along with FAFSA completion.

Since fall 2019, there has been a 5.1% drop in enrollment, which translates to nearly 1 million fewer students enrolled in college now than before the pandemic, according to estimates from the National Student Clearinghouse Research Center.

“This is not a hiccup, this is not a blip in college-going,” DeBaun says. “This is a real trend, and it is something that has and is going to keep having real implications on students’ individual finances, on their family’s finances, community’s finances, and then of course, local, state, and national revenue.”

Some state policies have increased FAFSA completion rates

The states with the highest FAFSA completion rates include Louisiana and Tennessee. In 2021, Louisiana had a completion rate of 68%, and Tennessee saw a rate of 71%, according to NCAN’s estimates. Both states have policies that incentivize students to complete the FAFSA.

On the other hand, there are 16 states that have completion rates below 50%, and in the two states with the lowest completion rates, Utah and Alaska, just 37% of high school graduates in 2021 submitted the FAFSA.

Louisiana made submitting the FAFSA a requirement for graduating high school in 2016, and completion rates jumped 10 percentage points in the first year the policy was implemented, says Peter Granville, a senior policy associate at The Century Foundation, a progressive, independent think tank. In Tennessee, students complete the FAFSA at such high rates due to incentives including free community college, Granville says.

“It is implicit in the [mandatory FAFSA] policy that everyone should have a chance to go to college,” says Granville. “I think it has the potential to do a great job starting conversations between students and their schools and their families about going to college and paying for college.”

Submitting the FAFSA is key to paying for college

Each Pell-eligible student in the Class of 2021 who didn’t submit the FAFSA missed out on an average of $4,477 nationally, NCAN estimates.

The Pell Grant is awarded based on demonstrated need, most often to lower-income students, but there is no income limit. The total award depends on details shared in the FAFSA as well as the cost of attendance of the school you plan on applying to.

For students in the Class of 2021 who didn’t submit the FAFSA, 44% said they didn’t do so because they didn’t think they’d qualify for aid, according to student loan lender Sallie Mae’s 2021 “How America Pays for College” study.

If you’re considering pursuing higher education this fall:

  • Even if you’re unsure whether you’d qualify for financial aid, you should still complete the application, as not all aid is based on demonstrated need.
  • You don’t need to know where you’re going to school before completing the application; rather, you just need to provide the names of the institutions you’re considering.
  • It’s best to submit the FAFSA sooner rather than later as some aid is disbursed on a first-come, first-served basis.

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

The article Grads Left Behind $3.75B in Free College Aid in 2021, Study Says originally appeared on NerdWallet.

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For Young Adults, Building Credit Starts Now

Posted on by Colin Beresford

Sooner than you may realize, your credit score will start to matter.

A solid credit score can be the difference between qualifying for an apartment or a low-interest car loan or missing out. So to have credit ready when you need it, the time to start building a good and lengthy credit history is now.

There’s more than one way to build credit, and it could be as simple as reporting your ongoing bill payments to the major credit bureaus. But keep in mind: Building credit takes diligence, particularly since missing payments can hurt your score for years to come.

What is credit and why does it matter?

Your credit score is a number that typically ranges between 300 and 850 and is calculated based on how reliably you’ve paid past debts, such as credit card bills. Lenders use your credit score to predict how likely you will repay debt.

Your credit score helps determine the loans you can receive, the interest you’ll be charged, the credit cards you can qualify for and the properties you can rent. An employer can even check your credit history. Having a good credit score can save you money later on, mainly through lower interest rates when you secure a loan.

If you’re starting with no credit history, you aren’t alone. In the U.S., nearly 40% of people between the ages of 20 and 24 have little to no credit history to generate a score, according to the Consumer Financial Protection Bureau. Unfortunately, the same is true for roughly 20% of the population.

Building your credit might seem overwhelming if you haven’t thought about it before, but there are many strategies to employ, even if you’re just beginning. Start by establishing good habits with managing debt, such as not taking on more debt than you can afford, says Brittany Mollica, a certified financial planner based in Chapel Hill, North Carolina. Missing payments will damage your score and can become a burden when you need to borrow money in the future.

“Getting in good habits of always paying your bills is really important,” Mollica says. “You don’t want to have to be climbing out of a hole of all sorts of credit card debt that you’ve piled up, especially starting out early on.”

Credit cards — and alternative cards

Credit cards can be a great tool to establish credit, but they can also damage your score if you take on more debt than you can handle.

If a parent or another trusted person in your life has a high credit limit and a long history of making timely payments, you could become an authorized user on their account and benefit from their good credit. This is one of the easiest ways to lengthen your credit history, says Blaine Thiederman, a certified financial planner in Arvada, Colorado.

Becoming an authorized user will also impact your credit utilization rate, or  the amount of money you owe to lenders divided by the total credit available to you, which can help your credit score.

If you have your own income, you can apply for a credit card when you’re 18 years old; otherwise, you have to wait until you are 21. A secured credit card is typically the best credit card to start with. A cash deposit backs these cards, and since the credit card company can take that deposit if you miss payments, people with short or poor credit histories can qualify.

The deposit you have to make for a secured credit card could be a burden, and if that’s the case, an alternative card might be better for you. These cards use income and bank account information to determine your creditworthiness rather than your credit score.

Monthly bills

If you live independently, payments for rent, utilities and phone bills can all be reported to credit bureaus. So paying those bills can build your credit if they’re on time and you have them reported.

Unlike credit card payments, these payments aren’t reported automatically and can require a third-party service, such as Experian Boost, to make the credit bureaus aware of your payments.

Remember, these services sometimes require a fee and reporting your bill payments may not always impact your credit score; instead, they may just appear on your credit report.

Loans

Making regular payments on loans can also help you build your credit. And even if you don’t have any credit history, some loans are available.

Credit-builder loans rely on income rather than credit for approval. If you’re approved, the loan sits in a bank account and becomes available once you pay it off. Your monthly payments are reported to the major credit bureaus.

Student loans are another loan you can use to build your credit when you’re just starting. Federal student loans don’t require credit to qualify, while most private student loans do. Paying off your loans will help you grow your credit history, and you can get started while you’re still in school by making interest-only payments.

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

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

The article For Young Adults, Building Credit Starts Now originally appeared on NerdWallet.

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Free Community College Is Dead — and Still Possible

Posted on by Colin Beresford

Until late October, community college in the U.S. was the closest it’s ever been to becoming free for everyone nationwide.

A $45.5 billion proposal for two years of free community college, part of the Biden administration’s “Build Back Better” agenda, promised students a path to attain a college degree without student loans — a transformative pledge in a country that collectively holds over $1.7 trillion in student loan debt. The proposal would’ve covered all tuition and fees associated with attending community college.

But after surviving several revisions to the forthcoming, scaled-back $1.75 trillion domestic investment proposal — also known as the “Build Back Better” bill — two years of free community college was cut. Other proposals aimed at higher education are expected to make it into the budget, including an increase to the Pell Grant and funding for historically Black colleges and universities and other minority-serving institutions.

Had the proposal made it into law, it would’ve soon paid for itself, according to an analysis from Bloomberg News and Georgetown University’s Center on Education and the Workforce.

If every state had implemented free community college, the study projected, higher wages for those who earned bachelor’s and associate degrees would boost GDP by $170 billion and tax revenues by $66 billion every year for the next decade. The analysis found that the increase in GDP would’ve resulted from more workers receiving higher wages after attaining bachelor’s or associate degrees.

Community colleges are already a crucial part of job training in the U.S; in 2019, roughly 49% of all employed college-educated Americans attended a community college. Moreover, community colleges educate a higher proportion of minority students compared with traditional four-year colleges.

Martha Parham, senior vice president of public relations at the American Association of Community Colleges, said via email that the AACC is disappointed the proposal for free community college was dropped. Still, she was “also proud that community colleges are being discussed at the highest policy levels as solution providers for increasing the number of skilled workers in America.”

Free community college proponents say they’re not giving up

Two years of free community college won’t make it into the federal budget for 2022, but those who have fought for it say they aren’t finished pushing to get the proposal into law.

“I’m going to get it done,” President Joe Biden said in an October CNN town hall. He added that first lady Jill Biden, who currently teaches at a community college, wouldn’t be happy with him if he didn’t. More recently, Education Secretary Miguel Cardona told the Detroit Free Press in November that he would continue to advocate nationwide for free community college.

Some members of Congress have echoed the sentiments, including some of the original sponsors of the free community college proposal. Since 2015, when the proposal was first introduced, lawmakers such as Sen. Tammy Baldwin, D-Wis., have pushed to make community college free nationwide.

Sen. Patty Murray, D-Wash., said in an email that the widespread support for free community college, from Congress to the White House, has created momentum behind the proposal. That momentum, she said, motivates her to continue pushing for free community college.

“We must build on the progress we make to get students and workers the support they need to succeed,” said Murray, a co-sponsor of the proposal. “Just like President Biden — and community college champions like Senator Baldwin — I won’t stop fighting until we finally make community college tuition-free.”

Free or not, community college has much to offer

In most parts of the country, community college still carries a price tag, but that doesn’t mean it’s not a good option for higher education.

Community colleges generally offer associate degrees, which can take at least two years to complete. Someone with an associate degree earns $938 a week on average, or $157 more than someone with a high school diploma and no college, according to 2020 data from the Bureau of Labor Statistics. Those with an associate degree are also less likely to be unemployed than someone with a high school diploma only.

​​» MORE: How to Pay for College

Although you’ll have to pay to attend community college in most states, the costs are still significantly lower than most public four-year colleges. For example, tuition for the 2021-22 academic year at an in-district two-year college was $3,800, while an in-state public four-year college cost $10,740, according to the College Board.

Eighteen states already offer free community college to at least some students, according to the Campaign for Free College Tuition, a nonprofit that aims to make college more affordable. In addition, there are states, such as Tennessee, that make two years of public community or technical college free for residents.

For those who want a bachelor’s degree from a traditional college, two years of community college, then transferring to a four-year school for completion is typically the least expensive path. However, if this is your intention, make sure the credits you earn from community college will transfer to the college you wish to attend.

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

The article Free Community College Is Dead — and Still Possible originally appeared on NerdWallet.

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The FAFSA, Your Ticket to Help Pay for College, Just Opened

Posted on by Colin Beresford

October marks the open date for the Free Application for Federal Student Aid or FAFSA — and college-bound students should submit the application as soon as possible.

Completing the FAFSA allows you to be considered for federal, state and school-based aid. In addition, submitting it soon after the Oct. 1 open date will increase your chances of receiving scholarships and grants that schools include in aid packages.

For the 2020-21 academic year, 56% of families used scholarships to help pay for college, according to Sallie Mae’s 2021 How America Pays for College study.

Even if you’re unsure you’d qualify for free aid, it’s still important to fill out the FAFSA. Most people are eligible for federal student loans. However, what varies is need-based aid, which is calculated based on your family’s finances. Since this aid comes from limited funds, applying early matters.

Here’s what you need to know about applying for aid sooner rather than later.

Get started on the FAFSA now

Submitting the FAFSA, particularly if you’re the first in your family to do so, can be complicated.

It helps to have all of the necessary information to complete the FAFSA before you start filling it out. And if you need additional assistance, there are online and in-person resources to help you complete the FAFSA.

“Some colleges and universities do select students for scholarships and grants based on a priority basis, and when your FAFSA was received could make a difference,” said Joe Cooper of Michigan Technological University in Houghton, Michigan, in an email. Cooper, the executive director of Student Financial Services, added, “If you are able to, completing your FAFSA within the first couple months it’s available is usually a best practice.”

You need to submit the FAFSA every year that you want to be eligible for federal aid. The FAFSA for this upcoming award year, or 2022-23, will remain open until June 30, 2023. If you haven’t yet submitted the FAFSA for the 2021-22 award year, it remains open until June 30, 2022. But deadlines can differ for individual institutions and states, so check which deadlines apply to you.

Give yourself more time to make a college decision

By submitting the FAFSA early, you also give yourself more time to consider your college choices.

If you haven’t enrolled in college yet, you can submit the FAFSA to the schools you’re considering and compare your award letters before you choose one. The aid you’re offered, including federal and school-based, can differ among colleges.

Completing the FAFSA early can also give you more time to appeal your financial aid award by submitting a financial aid appeal letter or requesting a professional judgment, regardless of whether you’re submitting it for the first time or not. During the 2020-21 academic year, 29% of families who received a financial aid offer appealed for more aid, according to Sallie Mae’s 2021 study.

You can submit an appeal letter if you’re unhappy with the amount of aid you received or if your economic circumstances have changed since you submitted the FAFSA. Nevertheless, submitting the FAFSA early will ensure financial aid is still available when your letter is processed.

Regardless, completing the FAFSA in the first place makes you eligible for the more than $120 billion in federal aid the Department of Education distributes each year. And getting it done early “maximizes your potential to be considered for all available financial aid,” Cooper said.

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

The article The FAFSA, Your Ticket to Help Pay for College, Just Opened 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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