3 Student Loan Resolutions for 2017

Posted on January 5, 2017December 22, 2016 by Devon Delfino

People make New Year’s resolutions with the best of intentions, but odds are slim that they’ll pan out. Only 8% of people report accomplishing these goals, according to a study conducted by the University of Scranton.

You can buck that trend by creating resolutions that are both specific and attainable. If you’re trying to accomplish something big, such as getting out of student loan debt, these factors are even more important.

“The clients that have the most success are the ones who don’t ignore the problem. They come up with an aggressive, but doable, plan,” says Mark Struthers, a Minnesota-based certified financial planner.

Whether you need motivation to tackle your loans, are sick of structuring your budget around your payments or want to save money, resolutions can move you one step closer to your goal. Consider these three attainable student loan resolutions for 2017.

1. Calculate your payoff date

Figuring out the exact month and year when you’ll be free of your student loan debt is a strong motivator to keep paying it off. The typical 10-year loan term can feel pretty abstract, but knowing you’ll be debt-free in, say, March 2027, might inspire you to reach that goal even more quickly.

To find your payoff date, log into your loan accounts with your student loan servicer. Note the amount you owe, as well as your interest rates and monthly payments. Then plug those numbers into a payoff calculator to find out how many years of payments you have left and how much interest you’ll owe.

Once you know the exact month and year you’ll finish paying off your loans, create a loan paydown plan. You might choose to pay more than the minimum each month to get out of debt faster; if so, specify how the extra funds should be added to your account by sending your servicer a letter or email. You can make those extra dollars work even harder by targeting your highest-interest loans first — that will cut down on the interest you’ll pay overall.

2. Switch up your debt management strategy

Make 2017 the year you stop staring down your student loan balance at the exclusion of other financial goals.

To save the most money, prioritize your debts by interest rate. Credit cards and personal loans, for example, usually carry higher rates than student loans, so they cost more long term. It might be tempting to throw any extra cash at your student loans, but it might not make the most financial sense. And your financial plan needs to look beyond debt if you want to successfully manage your money.

“None of your finances should be looked at in a vacuum,” says Scott Hanson, a Sacramento-based certified financial planner.

Carve out room for emergency fund savings, as well as retirement contributions, when creating your budget. Thanks to the power of compound interest, you don’t have to build any of these savings overnight. But that’s also why it’s important to start saving for retirement as soon as you can and why you should max out a 401(k) match if one is available to you. You’ll be thankful for the free money later on.

3. Make your loans fit your budget

Having trouble affording your loans? Want to free up money for long-term savings? Lowering your payments can help keep your student debt from overwhelming all else.

If you can’t afford payments on your federal loans, look into income-driven repayment plans. If you qualify, your payments will be capped at a percentage of your income and your loan term will be extended to 20 to 25 years; you’ll be forgiven any leftover balance after that time and it will be taxed as income. Deferment and forbearance can both provide a temporary reprieve from private loan payments. Explain your situation to your lender to find the best option.

If you can afford your payments but want to save money on your loans, look into student loan refinancing. If you qualify, you’ll trade your existing loan for a new one with different terms, such as a lower interest rate and payment amount. You’ll need a steady income, a low debt-to-income ratio and a credit score at or above 690.

If you don’t know your score, use NerdWallet’s credit score tool.

Devon Delfino is a staff writer at NerdWallet, a personal finance website. Email: ddelfino@nerdwallet.com. Twitter: @devondelfino.

The article 3 Student Loan Resolutions for 2017 originally appeared on NerdWallet.

What to Do If You Lose Your Financial Aid

Posted on July 26, 2016June 22, 2016 by Devon Delfino

When you first started college, you might have assumed that your financial aid package would be solid for the next four years. But now spring has rolled around and you’ve been blindsided: You’ve learned you’ll be getting less money next year.

There are five major reasons you could lose financial aid:

Your parents are making more money. If they’ve been pushed into another tax bracket, it’s especially likely to affect your financial aid.
Your grades didn’t requalify you for scholarships or grants.
You didn’t take enough credits to requalify for federal aid.
Your school’s tuition and fees increased.
Your school’s financial aid offers more scholarships during freshman year and more loans during later years.

Don’t panic: You might be able to negotiate your financial aid offer, and if you can’t, there are steps you can take to fill the gaps.

Talk to your financial aid office

Your first step should be starting a dialogue with your financial aid office. The staff there can help you find out what happened and how to respond. If your grades slipped, ask what you can do to get back on track.

“I like when they call in and say, ‘I understand that my grades didn’t meet the requirements. Is there anything I can do?’ That shows some initiative,” says Brad Yeckley, assistant manager of financial literacy at the Penn State Financial Literacy Center.

Apply for private scholarships

It’s a good idea to apply for scholarships throughout your college years, even if you aren’t worried about losing financial aid. Maximize your chances by playing up your accomplishments — such as a high grade point average, awards, leadership roles and volunteer activities — showing that you align with the organization’s mission in your application, and focusing on lower-competition scholarships, such as local scholarships or scholarships for non-freshmen.

Take advantage of tutoring programs and office hours

It’s not uncommon for students to lose scholarships because their have grades slipped. And your financial aid award letter might not have even mentioned the minimum GPA required to keep those funds, says Marguerite Dennis, who spent 40 years working in college admissions and financial aid and is the author of “The New College Guide: How to Get In, Get Out, and Get a Job.”

If that’s your situation, prove that you’re actively trying to raise your grades to regain your aid by signing up for tutoring programs and visiting your professors during their office hours.

Appeal your award

Appealing your award works best if you’ve had a recent change in your financial circumstances — such as a birth or death in the family or a parental job loss — that wasn’t reflected on your most recent Free Application for Federal Student Aid (FAFSA).

If you’ve lost eligibility for federal aid because you’re not making satisfactory academic progress, tell your school’s financial aid office about any extenuating circumstances that affected your grades.

Max out your federal aid

If you must take out loans to make up the difference, start with federal loans. They’ll most likely offer the lowest interest rates, they come with flexible repayment plans and, in some circumstances, they can be forgiven. Plus, they don’t depend on your credit.

These are the current federal loan options for undergrads:

Direct subsidized and unsubsidized loans: 4.29% annual percentage rate; you can borrow between $5,500 and $12,500 per year.
Perkins loans: 5% APR; you can borrow up to $5,500 per year.
Parent PLUS loans: 6.84% APR; you can borrow up to the cost of attendance, minus any other aid.

Consider taking out a private loan

Private loans should be a last resort, but they can be a useful tool for some — particularly borrowers who have good credit or who have a co-signer with a great credit score. Look for a private loan that offers incentives, such as cash back for good grades, and make interest-only payments while in school, if possible. That way, your accrued interest won’t be added to your principal balance after you graduate.

But be cautious: Private loans don’t come with the same borrower protections as federal loans.

Transfer to a cheaper school

If you can’t afford to take out more loans, consider continuing your education elsewhere. You might be able to take general education courses at your local community college, says Deborah Fox, CEO and founder of Fox College Funding. Weigh your budget and potential postgrad earnings against your potential loan payments to see if transferring is a good option.

If you decide to change schools, make sure that enough of your credits will transfer to make the switch worth it. Taking more than four years to graduate is another added expense.

Devon Delfino is a staff writer at NerdWallet, a personal finance website. Email: ddelfino@nerdwallet.com. Twitter: @devondelfino.

This article was written by NerdWallet and was originally published by USA Today College.

Tips for Filling Out the FAFSA as a First-Generation College Student

Posted on June 16, 2016May 31, 2016 by Devon Delfino

Being a first-generation college student is a big deal and a huge opportunity. You’ll be the first person in your family to experience the lighter side of college — like experimenting with ill-advised late-night dining options — as well as the more serious ultimate goal: getting a degree.

Navigating the college experience is hard enough as it is, but many first-gen students face an even steeper uphill battle: English may not be spoken at home, parents may be working long hours, or affordable tutoring programs may not have been available. Those who do attend college may face higher dropout rates and take longer to graduate. According to the Pell Institute, about 11% of low-income, first-generation students who entered college in 2003 received a bachelor’s degree within six years, compared with 54% of non-low-income, non-first generation students who did.

But before students can even register for classes, they need to fill out the Free Application for Federal Student Aid, or FAFSA, which gives access to federal grants, scholarships, loans and work-study. The FAFSA can be challenging for all families filling it out for the first time, but for first-gen students it may be even more overwhelming and intimidating — and that can have a major impact on their financial aid. In fact, in the 2007-08 school year, dependent students whose parents had a high school diploma or below received an average of $2,000 less in total aid than students whose parents had earned a bachelor’s degree or higher, according to a study by the National Center for Education Statistics.

Going into the FAFSA without any background knowledge can put you at a disadvantage, but filling it out is not an impossible task — and you don’t have to go it alone.

Here are our top FAFSA tips for first-generation college students and, for that matter, everyone filling it out for the first time:

Use the IRS data retrieval tool

With 108 questions on the FAFSA, the hardest part will probably be figuring out what each question is asking for, especially when it comes to questions related to taxes.

“It was incredibly intimidating, because at that point nobody had ever covered taxes with me,” says Rhina Lara, a first-generation student at the University of Florida and director of H1G, a mentoring program for first-generation honors students.

However, if you’re eligible to use the IRS data retrieval tool, the FAFSA gets a lot less complicated. It pulls information from your tax returns directly to your application. The FAFSA opens on Oct. 1, 2016, for the 2017-18 school year, so you’ll be using tax information from the year before to fill it out initially. This will result in just an estimate of your aid, but you can update it after you file your tax return. Your updated information will be available within three weeks if you filed electronically or within 11 weeks if you filed on paper. Ask your parents to file electronically to speed up the process.

Another tip: Get your FSA ID before you start filling out the FAFSA.

Your FSA ID is the username and password you’ll be using if you complete the FAFSA online, and it follows you from the Federal Student Aid site and National Student Loan Data System to StudentLoans.gov. You’ll need your Social Security number, and it takes the Social Security Administration one to three days to process your info if you’re new to the system, so creating an ID before you start your application will help cut down on processing time.

Start your FAFSA ASAP

Since many first-generation college students don’t have access to the same resources as other students, it’s vital to give yourself enough time to complete the FAFSA. Sarah Place, National Access Program director at Bottom Line, a nonprofit company that focuses on helping first-generation and low-income students get into and succeed in college, says: “There’s a knowledge gap. … [They] just don’t know what the college application process is like.”

That means it can take first-gen students longer to complete the FAFSA than those with more experience with it, as Khalil Johnson, a junior at Pitzer College and blogger at I’m First, an online community for first-gen students, found when he filled out his first FAFSA.

“It was about a month-and-a-half-long process to fill it out; it did not go quickly at all,” says Johnson, who noted that he spent most of that time clarifying what each question asked for.

The FAFSA also has varying state and school deadlines. For example, your state deadline might fall after an institution’s deadline.

“Make sure that you’re keeping track of each school and each deadline,” Place says, “because when it comes to financial aid and missing a deadline, there can be major consequences, even missing the deadline by one day.”

Gather your documents

Use this FAFSA checklist to keep track of all the documents and information you’ll need before you start. This includes:

Your FSA ID.
Your SSN.
- If you’re not a U.S. citizen and you don’t have an SSN, be sure to include your alien registration number along with your application.
Your driver’s license number.
Federal tax information or returns from the previous year. (Be sure to mark “will file” on your application. You can correct the information once you get your latest tax returns.)
- For a U.S. tax return, this will be an IRS 1040, 1040A or 1040EZ form (include all W-2s as well).
- For a foreign tax return (or for a tax return from one of the U.S. territories), include everything.
Records of your current bank account balances.
Records of untaxed income (such as child support, interest income and veterans noneducation benefits).

If you’re a dependent student, you’ll need to gather these documents from your parents as well. If a parent doesn’t have an SSN, input 000-00-0000. The FAFSA does not ask about your parents’ citizenship status.

You’ll also have to include at least one targeted school when you first fill out the FAFSA; you can send it to more schools later on. If you go that route, though, you might miss out on first-come-first-served aid, so it’s best to include all schools you’re interested in attending (up to 10). Use the federal school code search tool to add schools to your application.

Talk to your parents about their finances

First-generation students and their parents may lack experience with the financial aid process, but that doesn’t mean you should go it alone if you can help it. Get on the same page with your parents and get a realistic idea of your finances. It can be a touchy subject, but the result (aka your estimated family contribution, the amount the government estimates your family can afford to pay out-of-pocket) affects them too, especially if they end up taking out a Parent PLUS loan to finance your education. Johnson found the support from his mother to be especially comforting.

“My mom was really hands-on. She had no idea what she was doing, but she was not afraid to ask,” he says.

You should ask for basic information you’ll need to fill out the FAFSA such as, “What’s your gross annual income?” and “Do you receive any external income like child support or government assistance?” But you should also ask questions about how you’ll pay for school. For example:

How much do you think we can afford to pay out-of-pocket per year?
Who is responsible for financing my education? What is a good ratio of financial responsibility? For some, it’s a 50-50 split between the parent and student. For others, it’s necessary to leave it up to the student to pay for college.
Do I have a 529 savings account? Do we have other savings that we will be using to finance my education?
Do you expect our financial situation to change over the next four years? This includes changes such as getting a raise (especially if it pushes your parents into another federal tax bracket), having a child or changing jobs. If your parents’ income isn’t reliable, for example if they freelance or they’re looking to switch careers, you should be aware that your FAFSA results (and, by extension, your financial aid package) may vary greatly from year to year.

Your parents may have no frame of reference for talking about financial aid, the FAFSA or student loans, but involving them in the process will help you take control of your financial future.

Ask for help

The questions on the FAFSA aren’t always clear-cut, so reaching out for guidance and support is extremely important for first-gen students. Where can you go for help? Place suggests calling the Federal Student Aid information center at 800-4FED-AID (800-433-3243).

“They’re actually pretty helpful, and they usually pick up the phone pretty quickly,” she says, adding that students shouldn’t be afraid to ask questions that may seem obvious.

There are other places first-gen students can go for help, too. College Goal Sunday, for example, offers an extensive list of resources for filling out the FAFSA. Your high school guidance counselor can also offer assistance with navigating your financial aid applications. And this FAFSA Guide also has information for filling it out, particularly for students who have nontraditional family circumstances, like students who don’t depend on their parents or who have an unusual immigration status.

Lara, the first-gen student from the University of Florida, suggests leaning on local students and families who’ve already filled out the FAFSA as another source of support.

“Reaching out to other students, especially those who have done it already, that’s really your best bet. Living in Miami, a lot of my friends were also first-gen, but talking to students who’d already done it was really helpful. They were the ones who knew exactly what to tell me,” she says.

Next steps

Once you’ve submitted your FAFSA, you’re in the homestretch, but you’re not over the finish line yet.

Follow up with each school to make sure it has received your documents. If you don’t see confirmation within the first two weeks, send the financial aid office an email.

If you get your Student Aid Report back and your estimated family contribution seems too high, you can submit additional documents to have it adjusted for your circumstances.

Remember, the federal student aid process doesn’t end after you click “submit.” The FAFSA needs to be filled out every year you’re in school.

Devon Delfino is a staff writer at NerdWallet, a personal finance website. Email: ddelfino@nerdwallet.com. Twitter: @devondelfino.

This article was updated May 18, 2016. It was originally published April 1, 2013.

The article Tips for Filling Out the FAFSA as a First-Generation College Student originally appeared on NerdWallet.

When and How to Appeal a Financial Aid Award

Posted on May 11, 2016May 3, 2016 by Devon Delfino

Your latest financial aid award letter arrives, and you tear it open, eager to find out how much money you’re getting — but you’re met with disappointment.

Maybe the offer’s less generous than the ones you’ve received from other colleges. Maybe it has way too many loans and not enough grants and scholarships. Maybe it prevents you from attending that particular school. But what if that school is your first choice, or your FAFSA no longer tells your whole financial story? Then the appeals process comes into play.

That’s right: You can ask for more “gift aid” — that’s money that doesn’t have to be paid back, unlike student loans.

The process varies from school to school, and there’s no guarantee that your appeal will be approved, but there are steps you can take to improve your chances.

Here’s what you should know about appealing your financial aid award:

When to appeal your financial aid award

The appeals process isn’t for everyone. “Saying, ‘We didn’t save enough money, can you please give us more’ just isn’t a compelling enough reason,” notes Zena Taylor, founder of College Select, a service that helps students find and apply to schools.

Here are the main reasons to appeal your award:

Your financial circumstances have changed. If your family has experienced a life event that impacts its finances and isn’t reflected on your FAFSA, you’re probably a good candidate for an appeal. These changes can include a birth or death, unemployment, disability, divorce, lowered income, moving, selling a house, or having another child enter college.

Most colleges will help you find additional need-based aid — but you have to back up your claims. Supplying supporting documents, such as medical bills, helps.

Your top school offered less aid than another. Some schools will work with you to match or beat another school’s offer if it means locking in your acceptance — especially if you’re an exceptional candidate.

“At many schools, it’s a buyer’s market,” explains Lynn O’Shaughnessy, author of “The College Solution,” a book aimed at helping students find the right school at the right price. “You’re going to be more likely to succeed [in getting more financial aid] if you’re looking at a private school than at a public school. They’re more eager to fill their spots.”

Stephanie Goldberg-Mauro, founder of consulting company College Planning 101, suggests researching the SAT and ACT score ranges of the college’s previous freshman class using the National Center for Education Statistics’ College Navigator tool. If your scores are in the 75th percentile or higher, you may be able to leverage them to secure more merit-based aid.

You can also use the College Board’s search tool to learn about the average financial aid package awarded by each school you’re considering. This will help you decide if appealing is the right move.

How to appeal your financial aid award

Email — don’t call — the school’s financial aid office to find out its appeals guidelines.

“Have you tried calling a college lately?” Goldberg-Mauro asks. “You can’t get through. You can call and call and call; they are so slammed with requests — but they’re going to check their email.”

The response you receive should tell you whom to contact, how to get in touch with him or her, and any special requirements you must meet.

Once you have this information, figure out exactly how much you want, why you want it, and how to put it in writing. The more specific you are, the more likely it is that the school will approve your appeal.

Another useful tip: Speak their language.

“I wouldn’t use the word ‘negotiate’; they don’t like that. And don’t just appeal to a school emotionally. They’re not going to relate to that,” O’Shaughnessy says.

Instead, Taylor suggests saying, “You’re my first choice,” or asking if there’s anything the school can do to enable you to attend.

If you document your situation, ask for a specific sum, show that you’re willing to work for the extra aid and sprinkle in a bit of flattery, you’ll have a good shot at approval. But it’s important to go in with realistic expectations, Goldberg-Mauro says. She advises students to expect nothing, but hope for the best.

“We might get another $500, or we’ve had one offer go from $8,000 into a $30,000 award. So there’s a huge range,” she says.

If your financial aid award appeal is rejected

If your appeal isn’t successful, you might still be able to close the gap. For example, you can ask to have the cost of attendance adjusted for your circumstances, covering your commuting costs, for example, or the costs of required items, such as a laptop or textbooks. This might qualify you for more aid. If that doesn’t work, it might be time to consider a less expensive alternative.

“Don’t go to a school that costs too much money,” O’Shaughnessy says. “Do not go into huge debt because you think this degree is going to be magical.”

Devon Delfino is a staff writer at NerdWallet, a personal finance website. Email:ddelfino@nerdwallet.com. Twitter: @devondelfino.

This article originally appeared on NerdWallet.