6 Things to Know About Student Loans Before You Start School

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

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

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

1. Opt for federal loans before private ones

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

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

Take a private loan only after maxing out federal aid.

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

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

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

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

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

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

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

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

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

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

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

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

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

5. You can use loan money only for certain things

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

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

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

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

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

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

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

Photo From: 123rf.com

Photo ID: 38260166

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

Dorm Costs Have Soared, but Many Freshmen Have No Choice

Living in the dorms is a rite of passage for millions of first-year college students. But like the rest of the college experience, it’s costly. And in many cases it’s mandatory.

Moving my only daughter into the dorms of scenic Appalachian State University her freshman year was tough on us both, but an exciting time. She received an academic scholarship for tuition and fees, so room and board were among our only financial obligations. Well, the only official ones — college kids have many “needs.”

As with many four-year colleges and universities, App State requires freshmen to live on campus. They’re the only ones guaranteed housing. Students beyond their first year interested in staying in the dorms enter a lottery system to battle for the remaining rooms. By early spring of her freshman year (2019-20), she got word she had “won” a room for sophomore year. But then COVID-19 hit, and like many other college students, she finished her 2020 spring semester at home.

As summer 2020 passed, the thought of living in tight dorm quarters looked less and less appealing, so we began apartment hunting. We found that although the rental market in the small college town of Boone, North Carolina, is competitive, she could get into an apartment for less than the cost of a dorm.

Student housing is a boon to universities and colleges across the country, and dorm costs have skyrocketed 111% at public four-year institutions over the past 30 years, far faster than rents. In many markets, first-year students could rent apartments nearby for less than they pay on campus, particularly if they’re sharing the costs with roommates. But they’re not always given that option.

It isn’t clear how many colleges and universities currently require most freshmen to live on campus. The Department of Education does not collect this data, though 74 schools report requiring all first-time degree-seeking students — no matter their year — to live on campus, no exceptions. Whatever the exact figure, many schools do this, often under the justification that on-campus living is a good transition into adulthood. But if we allow 18-year-olds (or their parents, by proxy) to incur the costs of college and, in many cases, take on student loan debt to cover them, isn’t the better transition into adulthood allowing them to determine just how that money is best spent?

Housing is a considerable source of college revenue

As COVID-19 spread and dorms shuttered in 2020, colleges’ reliance on student housing as a source of revenue became apparent. Indeed, auxiliary revenue (which includes housing, dining, athletics and other sources), was one of the hardest-hit categories of revenue loss, especially among larger institutions, according to data obtained from 107 schools by the Chronicle of Higher Education. In an effort to minimize this loss early on, some schools debated whether to provide refunds for the remainder of the semester when students were sent home and dorm rooms sat empty, and added language to 2020-21 housing contracts protecting them against potential future refunds. This is because institutes of higher learning make considerable money on student housing, though pinpointing exact figures is difficult.

Four-year institutions made $28 billion on “ancillary enterprises” in the 2018-19 school year, roughly 8% of all revenue, according to the National Center on Education Statistics. This figure lumps housing and dining in with parking, on-campus stores and other sources of revenue. New York University’s 2021 fiscal budget, one of few publicly available online, reveals 10% of its revenue comes from student housing and dining.

This isn’t to say on-campus living requirements are rooted in money alone. Some of the arguments colleges make for policies are sound: Living in a dorm can be enjoyable, convenient, good for grades and retention, and a more gradual segue into adulthood. However, this doesn’t make it the right fit for everyone.

Making on-campus housing optional and at the discretion of students (and their parents, no doubt) could lead to an increased supply of available dorm rooms for upperclassmen. In other words, the housing would more likely be available to students for whom it’s a good fit, no matter their academic year.

Most schools with on-campus freshman housing requirements have ways to bypass those mandates, but what passes as proper justification for living off-campus is often very narrow, if it’s clear at all. At my daughter’s college, for example, only some nontraditional students, those living at a parent’s home within 30 miles of campus, or those taking only online courses while living with a parent are eligible for an exemption. That last option was added only during the pandemic. Unfortunately not eligible for an exemption: those who have made a sound and thoughtful decision that living off-campus is a better fit, whether for financial or other reasons.

On-campus housing costs rise more steeply than off-campus

From 1989-90 to 2019-20, the average room rate among public four-year institutions rose 111% after accounting for inflation, to $6,655 per academic year, generally 30 weeks, according to data from the Department of Education. Incidentally, public four-year institutions are some of the most affordable. Compare this to the national median gross rent — the Census measure that includes both the contracted rent amount plus utilities — which grew just 24% during that same period.

At that average room rate, the student’s weekly housing cost is $222. Median gross rent works out to about $253 per week. So, dorms are cheaper? Hang tight. Lest you think I’m undercutting my own argument here, let’s not forget the costs incurred moving into and out of the dorms at least once per academic year, if not per semester, along with the costs of finding other housing during the remaining 22 weeks of the year, and the fact that very few college students are paying the entire rent of an apartment or house on their own.

If that national median rent was shared with a roomie, you’d be looking at $127 per week. But the national median is just a ballpark estimate.

Is it always cheaper off campus? No

New York City is one of the priciest and most competitive rental markets, so students attending college at highly competitive and expensive institutions such as New York University or Columbia University may breathe a sigh of relief knowing they have on-campus living options. In fact, the weekly room rate at Columbia’s freshman dorms is a couple of hundred dollars cheaper than one person’s share of rent on a median-priced two-person, two-bedroom apartment in Manhattan, according to the June 2021 Elliman Report, a monthly rental market report. However, the difference is negligible between several of NYU’s freshman dorms and that same median rent.

The COVID pandemic brought with it slowed rent growth and even declines in many urban centers, according to data from Realtor.com. As of May, some pricey metro areas including New York City, San Francisco and San Jose are still seeing rents lower than last year. Students able to freely participate in local rental markets may have been able to lock in rents lower than what they’d pay in the dorms, even in big cities.

These big cities often have extreme housing prices, and students in more representative college towns across the country would likely find more comparable prices when weighing dorm costs against local rentals.

App State is a public four-year college nestled in the mountains of Western North Carolina. It’s a gorgeous place and a welcoming institution. The mascot is a Mountaineer named Yosef wearing a flannel shirt and a beard, for crying out loud. And their football is some of the best. Go ‘Neers! The freshman dorm my daughter was assigned to in 2019-20 opened to students in 1970 and doesn’t have air conditioning. The weekly rate there is roughly $50 more than that of one person’s share of a two-bedroom rental, according to Census data. Her sophomore year, she managed to find a shared four-bedroom home, where her portion of the rent is about $140 per week, and includes parking and all utilities.

Navigating limited options

It doesn’t always make sense — financial or otherwise — to rent an apartment as a college student. However, when it does make sense, students should be able to elect that option, or any other option that fits their budget, long-term goals and any other personal factors. We allow, even encourage, 18-year-olds to take on student loan debt — debt that they’ll typically carry for at least the first decade of their career, if not longer. On-campus housing requirements add insult to the mounting costs of higher education by not giving students latitude to decide how their money — and first year away from home — are best spent.

Students opting for a college that requires on-campus housing have little to no say in the matter. In that case, the best advice is to look into possible exemptions from the requirement if staying in the dorms would cause considerable hardship, and always be strategic with your use of student loans.

For those with a choice, a careful comparison of your options will help ensure you’re making the right choice for your budget and your long-term educational goals. Make sure to include:

  • Direct costs such as rent and utilities versus on-campus housing rates and the costs of living when school isn’t in session.
  • Transportation and parking.
  • Convenience and time considerations.
  • Possible social trade-offs like being farther away from college social clubs but perhaps having the luxury to choose roommates.
  • Academic preferences such as how a living arrangement may affect study location or quality.

Elizabeth Renter writes for NerdWallet. Email: elizabeth@nerdwallet.com. Twitter: @elizabethrenter.

Image from: 123rf.com

Image ID: 95567652

Distance Learning Can Fit Into Your Back-to-School Budget

For many students, “going back to school” this fall could be just a figure of speech.

As the pandemic persists, the decision about whether to allow in-person learning or keep classrooms closed is coming down to the wire. The possibilities of distance learning are influencing how much families anticipate spending on back-to-school purchases.

Parents with children in elementary school through high school plan to spend a record $789.49 on average this year, according to an annual survey conducted in early July by the National Retail Federation. This is up from last year’s $696.70.

“As consumers get more information on how their specific school is operating and how classes will take place, they might adjust those budgets a little bit,” says Katherine Cullen, senior director of industry and consumer insights at the NRF.

Here’s how to tailor your spending for distance learning amid the uncertainty.

Expect extra purchases

This year’s back-to-school list may feature items you haven’t had to shop for in the past. Students attending school virtually — whether part-time or full-time — will likely need laptops, tablets or desktops, plus headphones and other tech accessories to access and engage with their classes.

If multiple people will be learning and working simultaneously in your household, you may have to shell out to get everyone their own device. Consider whether you’ll also need to buy any furniture or materials, like a dry-erase board, to create a functional workspace. Working parents who need support might also incorporate child care costs, tutoring or other arrangements in their budgets.

Students starting school at home could return to the classroom. Your budget should still include staples like school supplies and clothes to cover different scenarios.

“Kids grow regardless of whether or not they’re in school,” Cullen says.

Hold off on others

To offset the cost of new supplies, find out which purchases you can skip while remote learning takes place. Pens and pencils will come in handy at home, but a new backpack or lunchbox probably won’t get much use.

“Once you get that list from your teacher, ask them, ‘What are the necessary items and what are those nice-to-haves?’” says consumer savings expert Andrea Woroch.

Before you shop for necessities, take inventory of what you already have, Woroch says. You could save money by scrounging up leftover office supplies from last school year.

“Things like half-filled notebooks can still be used. Pull out the pages that have already been written on and save the rest,” Woroch says. “See what you can make do with, even if you’re just making do for the next two to three months.”

Tap into resources

Next, research ways to get help acquiring the items you don’t have. This can reduce or eliminate additional expenses from your budget.

Some schools will lend devices like laptops and mobile hotspots to students without adequate internet access. If that isn’t the case at your school, Woroch recommends checking out organizations that connect people to low-cost internet and computers. Examples include EveryoneOn and PCs for People.
Many local libraries provide free education resources such as books, tutoring services and test-prep materials. You can also use social media groups or other online forums to find free or affordable clothing and supplies from families in your community.

Shop smart

Ultimately, you’ll likely have to purchase several items this back-to-school season. Strategic shopping can stretch your dollars further.

Establishing a digital relationship with retailers can help you navigate the process, especially if you’re unable to physically shop in stores or aren’t comfortable doing so. Follow retailers on social media or subscribe to their emails to receive news and sale information.

“Many brands and retailers are trying to be very upfront with what’s in stock, what to expect if you do decide to go to the store and what you can order online,” Cullen says.

Make sure to compare prices from different sellers. Do a quick internet search and use a price-comparison tool, such as the browser extension InvisibleHand, to track down the best deals.

“Retailers are constantly fluctuating prices, and with so many people shopping online right now, they’re really trying to maximize their profits,” Woroch says.

Another savings tip? Look for open-box or refurbished tech (ideally with a warranty) instead of buying new.

Give standard shopping advice a try, too: Ask about retailer price matching and price adjustment policies, seek out coupons and loyalty program discounts, and maximize your credit card rewards.

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

Lauren Schwahn is a writer at NerdWallet. Email: lschwahn@nerdwallet.com. Twitter: @lauren_schwahn.

The article Distance Learning Can Fit Into Your Back-to-School Budget originally appeared on NerdWallet.

Image provided by 123rf.com

Image ID: 82359824

Will You Get a Refund If COVID-19 Closes Your Campus?

Many colleges are welcoming students back for in-person learning and dormitory living this fall semester. Looming over everything: Campuses could shut back down at any time.

With COVID-19 cases still high, many colleges are developing shutdown contingency plans alongside their reopening arrangements.

At the same time, the pandemic is fueling new debate about whether colleges should charge the same tuition for online and in-person classes. Tuition typically covers the cost of instruction — salaries, software, labs and such — and that cost at many schools may have increased.

The University of North Carolina Wilmington, as an exception, has a different cost structure for online, hybrid and in-person classes. Still, it announced that students won’t receive a tuition refund if in-person classes move online this fall. And, after the pivot from its sister school at Chapel Hill, it told students to prepare for a similar transition if cases rise.

That leaves freshman Owen Palmer weighing the possibility that the education he is paying for may not be the one he gets. “I’m taking a risk because (the university) mentioned they can’t do refunds,” says Palmer. For him, the risk is worth it, but he does wonder what he’ll do if the campus has to close.

Here’s what he and other students can expect as the fall shapes up.

Don’t expect a break on tuition

Some schools have cut tuition. Hampton University is offering students a 15% discount, bringing undergraduate tuition to $12,519. Other schools are offering additional scholarships and grants.

But tuition decreases and additional aid aren’t the norm.

“If I had to make bets, I would say a lot of colleges will be (freezing tuition) until they get a better sense of the economy,” says Arun Ponnusamy, chief academic officer at the college admissions and application counseling company Collegewise. “But there will be other colleges that say, ‘We need money to run this school.’”

That may be happening already. George Mason University in Virginia approved a tuition increase of $450. The University of Michigan approved a 1.9% tuition increase. Both schools are planning a mix of online and in-person instruction.

Meals and housing refunds likely

Many colleges aren’t publicizing their shutdown contingency plans — or how refunds will work. But students can look to how their school handled refunds in the spring to gauge how fall might play out.

Florida Agricultural and Mechanical University gave refunds for on-campus housing and meal plans, says William Hudson Jr., the school’s vice president for student affairs. If the campus has to shut down this fall, Hudson says the refund structure “would probably be the same.”

Other colleges also offered direct refunds for students. For example, Temple University automatically deposited partial refunds for room and board in students’ bank accounts. The University of North Carolina Wilmington gave prorated refunds for room and board.

But some colleges opted for account credit instead.

  • The University of Arkansas refunded about 20% of room and board costs to student accounts. They haven’t announced an official plan in case of a fall shutdown, but staff members expect it’ll be the same.
  • The University of Alabama offered a prorated refund for room and board, and parking. Students could take a cash refund immediately or apply that amount and an extra 10% as an account credit for the fall.

How can you prepare?

If you’re planning to return to campus housing, contact your school and ask about its shutdown contingency plans. You’ll want to know what factors would cause it to shut down again. This could be a campus COVID-19 outbreak of a certain size, an increase in local cases or other factors.

You can’t stop a campus shutdown, but if you know the metrics your school is looking at, you can anticipate it and react more confidently.

  • Make backup plans for housing if your campus closes. Determine if you’ll go home, stay with a friend, get your own apartment or something else. Communicate your intentions with those you plan to stay with or scope out affordable apartments in advance. That way, if the campus shuts down suddenly, you know exactly where you’ll go.
  • Ask your college about emergency funds and grants if a campus closure will cause you financial hardship. Many colleges have funds available for students.
  • Plan how you’d use a refund. If your school offers a direct refund, consider whether you’ll need that money for living expenses. If you don’t need the money for living expenses, send the refund back to your student loan servicer. Doing so will keep your overall loan balance down and save you money in the long run.

The article Will You Get a Refund If COVID-19 Closes Your Campus? originally appeared on NerdWallet.

Image provided by 123rf.com

Image ID: 38970275

Back-to-School Shopping: Kids Influenced by Social Media Push Parents to Overspend

Kids pushing their parents for the coolest in back-to-school gear is a late-summer tradition, and today, youngsters have some backup: social media influencers.

Peer and social media influences on children are not news unto themselves, but it turns out these factors are affecting how parents spend their back-to-school dollars, according to a new NerdWallet survey conducted online by The Harris Poll.

The online survey included 2,010 U.S. adults, among whom 595 are parents of kids in kindergarten through college. Of those parents, at least 6 in 10 say their children are influenced by peers or social media when making their back-to-school wish list. And about half of these parents (51%) say they typically end up buying back-to-school products their kids want because of these influences.

“The whole notion of ‘Keeping up with the Joneses’ is amplified on social media, with an entire army of influencers telling your child what they ‘need’ to have this year. That can make back-to-school shopping a real headache,” says NerdWallet personal finance expert, Kelsey Sheehy. “Ease the pressure by having a plan in place before you get started. You can even turn it into a learning opportunity and involve your child in the process so they can learn to prioritize and work within a budget.”

Here’s how parents are thinking about their back-to-school shopping lists, along with some tips on how to manage the costs and potential frustrations.

Key findings

  • Nearly all (97%) of parents with children in kindergarten through college plan on back-to-school shopping this year.
  • Half (50%) of parents planning to do back-to-school shopping this year say they’ll likely splurge, compared with 93% of those who shopped last year who say they splurged.
  • Six in 10 parents (60%) with kids in school say their children are influenced by social media and 67% say their children are influenced by friends on what they want to buy for back-to-school.
  • More than half (52%) of these parents say they feel pressured by their children to buy back-to-school items they want, even if they cost more than they’d normally want to spend.

Note: Throughout this report, unless otherwise noted, “parents” refers to parents with children in kindergarten through college.

Preparing for peer, social media pressure

At least 6 in 10 parents say their children are influenced by social media (60%) and friends (67%) on what to buy for back-to-school. In turn, the kids pass the pressure on to parents. Just over half (52%) of parents with children in school say they feel pressured by their kids to purchase supplies and/or apparel, even if they cost more than they’d normally want to spend, and 51% say they usually end up buying the products their kids want because of influence from others.

Back-to-school shopping tip 1: Share the list and a budget with your child. You have a list of things your child needs and likely can’t indulge every whim on brand names and costly designs. Helping your child understand this upfront can save you from an argument in the store and can impart a useful lesson in personal finance. By setting a dollar limit before the shopping begins, you can avoid the exasperation of being pressured into a pair of sneakers that eats into the money for notebooks and pencils.

Handling splurges

Parents can’t blame all of their overspending on pressure from their children, however. Nearly all of those who shopped likely overspent last year, and they may be setting themselves up for failure again this year.

Over 9 in 10 parents (93%) who did back-to-school shopping last year splurged, but only 50% who plan to shop this year say they’ll likely splurge, suggesting either many have cleaned up their act or they’re not being realistic about how much they’ll be tempted to overspend.

Back-to-school shopping tip 2: Make a realistic budget and plan. If you know you “always” splurge this time of year (42% of parents say they do), or believe it’s likely, set a budget that accounts for this. Give yourself wiggle room to buy a few splurge items, but rein in spending on things you can get at a bargain price. If you’re completely honest with yourself, and you know you’ll spend more than you have, begin saving for back-to-school shopping like you do for holiday shopping or any big purchase.

“It’s better to set a slightly higher budget than it is to feel guilty about overspending, or worse, to have to rearrange your finances to account for unplanned splurges,” says Sheehy.

Comparing and matching prices

Price-matching, or asking retailers to beat competitor prices, is an underused practice that can pay off big. Within the past year, 28% of Americans say they haven’t price-matched at all. Parents with children under age 18 are more likely to have price-matched (83%) vs. those without (66%).

“Price-matching takes comparison shopping to the next level,” Sheehy says. “It does involve a little more work, but the potential reward is savings above and beyond what you’ll find in sales flyers or emails.”

Back-to-school shopping tip 3: Make comparing and matching prices a habit. Apps such as ShopSavvy or ScanLife make it easy to compare prices while you’re in the store. Compare prices on exact products across retailers; then ask a clerk or check store websites for price-matching policies. These policies vary widely from retailer to retailer. For example, Target and Staples have generous price-matching policies, but Amazon doesn’t price-match at all.

Paying for purchases

Of those parents planning to do back-to-school shopping this year, about half (52%) will put their purchases on a debit card and 38% will use cash. These methods are far preferable to racking up debt you can’t immediately pay off, but if shoppers can pay cash, they could likely earn rewards on their purchases just as easily.

Just under half (45%) of parents planning to shop will use a credit card.

Back-to-school shopping tip 4: Get paid for your spending. Use a credit card that earns rewards, such as points or cash back, to make your back-to-school spending work for you. But don’t let interest eat into your benefits.

“You can use a rewards credit card to maximize your back-to-school shopping and earn points or cash back to put toward next year’s summer vacation,” says Sheehy. “Just make sure you can pay the balance off each month. If you don’t, interest charges will quickly eat away at any benefits the card offers.”

Timing your shopping

Summer ultimately leads into the school year, but that doesn’t make it the best time to do all of your back-to-school shopping.

Two in five parents (40%) who do back-to-school shopping say they wait until July to start, and 36% wait until August. Just 8% say they purchase school items for the upcoming school year throughout the year.

You may capture some sales by waiting for summer to buy items for the school year — especially if you wait until just before school begins — but you could also overspend by purchasing everything in the same month.

Back-to-school shopping tip 5: Time purchases throughout the year. Many states have sales tax holidays that coincide with back-to-school — check your state’s dates on the website of the Federation of Tax Administrators. Take advantage of the savings on these days, but don’t feel like you have to buy everything for the entire year in one go. Fall and winter clothes, for example, will likely be cheaper a few months after school begins.

»MORE: What to buy every month of the year


This survey was conducted online within the United States by The Harris Poll on behalf of NerdWallet from May 30-June 3, 2019, among 2,010 U.S. adults ages 18 and older, among whom 595 are parents with kids in kindergarten through 12th grade or college. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated. For complete survey methodology, including weighting variables and subgroup sample sizes, please contact Jessica Ayala at jessica@nerdwallet.com.

The article Back-to-School Shopping: Kids Influenced by Social Media Push Parents to Overspend originally appeared on NerdWallet.

Photo From: 123rf.com

Photo ID: 20130425

7 Things College Freshmen Don’t Need — and 10 They Do

Those ubiquitous checklists of “dorm room essentials” for college freshmen are filled with items that will be ditched by the end of first semester.

Some parents “go to the store and grab a list like they did when their kids were in elementary and high school and just go straight down the list,” says Lisa Heffernan, mother of three sons and a college-shopping veteran. Or they buy things they only wish their students will use (looking at you, cleaning products).

You can safely skip about 70% of things on those lists, estimates Asha Dornfest, the author of “Parent Hacks” and mother of a rising college sophomore who’s home for the summer.

What not to buy or bring

Freshmen really need just two things, says Heffernan, co-founder of the blog Grown and Flown: a good mattress topper and a laptop.

Here are seven items you can skip:

  1. Printer. Don’t waste desk space or, worse, store it under the bed; printers are plentiful on campus.
  2. TV. Students may watch on laptops or on TVs in common areas or in someone else’s room. Bonus: Your teen gets out and meets others.
  3. Speakers. Small spaces don’t require powerful speakers; earphones may be a good idea and respectful of roommates.
  4. Car. Some colleges bar freshmen from having cars on campus or limit their parking. You also may save on insurance by keeping the car at home.
  5. Luggage. If you bring it, you must store it. Heffernan suggests collapsible blue Ikea storage bags with zippers.
  6. Toiletries to last until May. Bulk buying may save money, but you need storage space.
  7. Duplicates of anything provided by the college, such as a lamp, wastebasket, desk chair or dresser.

Items left behind when students pack for the summer are telling. Luke Jones, director of housing and residence life at Boise State University, sees unopened food — a lot of ramen and candy — and stuffed animals and mirrors.

Jones says many students regret bringing high school T-shirts and memorabilia and some of their clothes (dorm closets typically are tiny).

What can you buy, then?

Before you shop, find out what the college forbids (candles, space heaters, electric blankets and halogen lights are common). Have your student check with assigned roommates about appliances (who’s bringing a fridge or microwave?) and color scheme if they want to set one. Know the dimensions of the room and the size of the bed. And most of all, know your budget. Not everything has to be brand new.

Ten things — besides the all-important mattress topper and laptop — that many students consider dorm room essentials include:

  1. One or two fitted sheets in the correct bed size, plus pillowcases. Heffernan says most students don’t use top sheets.
  2. Comforter or duvet with washable cover.
  3. Towels in a distinctive pattern or light enough for labeling with laundry marker, plus shower sandals.
  4. Power cord with surge protector and USB ports.
  5. Basic first aid kit.
  6. Easy-to-use storage. If it’s a lot of work to get something out, your student won’t, Heffernan says.
  7. Cleaning wipes. Students might not touch products that require multiple steps, but they might use wipes, according to Heffernan.
  8. Reading pillow with back support for studying in bed.
  9. Area rug. Floors are often hard and cold.
  10. Comfort items. Dornfest says it could be a blanket or a picture of the dog — something from home that will make the space a bit more personal.

Afraid you’ll forget something important? You might, Heffernan says. But chances are, you or your student can order it online and get it delivered. Consider doing this with some items simply to avoid the hassle of bringing them yourself, and remember that “dorm necessities” often go on sale once school starts.

Do a reality check

If you or your student still want to replicate the rooms you’ve seen on Instagram and Pinterest, think about how the room will actually be used.

Once your son or daughter moves in, the room will never look like that again. Opt for sturdy items and be realistic. Will throw pillows make the place look more homey and inviting, or will they be tossed on the floor until parents’ weekend?

Dornfest, a co-host of the Edit Your Life podcast, offers a compelling reason not to make things too comfortable. “A freshman needs to be encouraged to get out of the dorm room,” she says. “Anything that pulls you into campus life can be good.”

She’s not advocating a monk-like environment, but rather one that encourages breaking out of routines. College should be a time to try new things and meet people from different backgrounds. Dornfest advises making the bed as comfortable as possible and keeping a few reminders of home. The ideal dorm room is more launch pad than cocoon.

Photo From: 123rf.com

Photo ID: 101516286

The article 7 Things College Freshmen Don’t Need — and 10 They Do originally appeared on NerdWallet.

How Much You’ll Really Pay for That Student Loan

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

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

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

Standard repayment

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

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

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

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

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

Graduated repayment

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

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

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

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

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

Extended repayment

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

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

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

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

Income-driven repayment

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

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

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

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

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

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

Ways to save

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

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

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

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

Photo From: 123rf.com

Photo ID: 37314111

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

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

“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.

Accepted! How to Decipher Your College Aid

With college acceptances in hand, now comes the hard part: understanding your financial aidoffers.

These letters are notorious for being laden with jargon that differs from offer to offer, making comparison difficult. But you can learn how to interpret award letters to understand the costs and choose an affordable option.

What to expect from aid offers

Financial aid offers should include all of the federal, state and school aid you can access. That could mean free aid, such as grants, scholarships and work-study opportunities, that doesn’t need to be repaid, and unsubsidized and subsidized federal loans, which do. If these aid types are grouped together without explanation, they can be hard to distinguish.

Your offer also might include a parent PLUS loan as part of the award, but avoid using it if possible. These loans have higher interest rates than loans made directly to students. And unlike typical student loans, only parents can take them on, and they require credit history to qualify.

Schools also must provide the cost of attendance, but that’s not the amount you owe. It bundles indirect costs like books, supplies and transportation, with direct costs such as tuition, fees, housing and food.

The cost of attendance is usually an average, says Brenda Hicks, director of financial aid at Southwestern College in Winfield, Kansas. Things like room and board could be pricier if you opt for a more expensive package, like a single room.

Why offers are difficult for students to read

Schools use different names to refer to the same type of loan.

For instance, one college’s aid offer might list a “Federal Unsub Stafford Loan,” and another school’s might say “DL Unsubsidized Loan.” But they’re the same thing.

Unsubsidized federal student loans are the only type of federal loan every student can access, regardless of financial need. They’re different from subsidized loans, which don’t accrue interest while the student is in school. Subsidized loans ease costs for students, which is why they’re given to those who demonstrate need.

But among 455 college aid award letters, there were 136 different names used to describe the federal unsubsidized loan, according to a 2018 study by New America, a nonpartisan think tank, and uAspire, a Boston-based college affordability nonprofit.

“How can we expect families and students to navigate this process if even the aid that everyone qualifies for is called something different?” says Rachel Fishman, deputy director for research with the education policy program at New America.

There are two main obstacles for colleges in standardizing offers, according to Fishman: There’s no legal standard for language in award letters, and schools use different software to manage aid.

In a push for more consistency, the U.S. Department of Education recently issued guidance on what schools should avoid, such as presenting the cost of attendance without a breakdown. There’s also bipartisan support in Congress to make aid offers more uniform, including two current bills.

Some colleges have tried to address the problem, but others continue to use the same format they’ve used for years, says Brendan Williams, director of knowledge at uAspire.

The financial aid office at the University of Nebraska Kearney overhauled its award letter last year, including color coding each aid type and providing an estimated net cost. Net cost is the cost of attendance minus free aid. It represents the amount that borrowers will have to cover.

Despite the changes, families still often want a walk-through, says Mary Sommers, the school’s financial aid director. “That’s OK, that’s our job,” she adds.

How to compare financial aid award offers

To compare financial aid award offers, experts recommend these steps:

  • Create a spreadsheet with separate columns for each school.
  • Under each column, start with the total cost of attending each school.
  • List each award type and amount.
  • Add all free aid together first and subtract from the total cost to attend.

Since you want to take all free aid first, what you have left is the amount you would need to cover with savings, income or loans. Compare this bottom-line amount with other schools on the list.

You can also use tools like the Consumer Financial Protection Bureau’s Compare Schools tool or the National Association of Student Financial Aid Administrators’ Award Notification Comparison Worksheet.

“Bottom line: I would encourage people to take a long look at that letter, read it all, make sure they understand it and reach out when they don’t,” says Hicks.

If it’s unclear how to accept one type of aid or reject another, contact the school’s financial aid office.

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

Photo From: 123rf.com

Photo ID: 79321728

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

The article Accepted! How to Decipher Your College Aid originally appeared on NerdWallet.

Why College Students Take on Loans They Can’t Repay

Students take on college debt with the best of intentions. They’ve been told that a college degree is a ticket to success. That they should pursue their dreams. That student debt is good debt.

But how do smart students wind up with debt they can’t repay? Here are three reasons, plus ways to avoid these financial traps.

They’re told it’s ‘good debt’

In high school, students hear that they should earn a college degree to have a well-paying, successful career.

“We as a society kind of have this compulsory higher education,” says Daniel T. Kirsch, author of “Sold My Soul for a Student Loan.” “We’re encouraging everyone to take out debt and calling it ‘good debt’.”

But student debt isn’t good when your degree doesn’t lead to a job that earns enough to repay it.

This is the case for 36-year-old Jennifer Atkins of Jacksonville, Florida. A first-generation college student, she believed a university diploma would help her get ahead.

“I had the mentality back then that I was doing what I was supposed to do in life,” says Atkins, who earned three degrees, including a master of nonprofit management in 2014.

Now, Atkins has two kids, over $100,000 in student loan debt and is unemployed. She quit her job in 2017 due to complications with her second pregnancy and hasn’t found a job lucrative enough to justify paying for child care.

Avoid this trap: Limit borrowing so that future monthly payments don’t consume over 10% of take-home pay. By that standard, someone expecting to earn $50,000 a year could afford a monthly payment of about $279, according to NerdWallet’s student loan affordability calculator. At the current undergraduate federal student loan interest rate of 5.05%, that payment would support college debt of about $26,000.

The loans don’t feel real

Some students are willing to take on large amounts of college debt because they don’t connect with the reality that they’ll eventually have to repay it with interest. This aligns with what behavioral economists call “present bias,” the idea that people often make choices that benefit them in the short term and overlook future consequences.

Atkins remembers accepting student loans in small increments throughout 10 years of higher education — $3,000 here, $5,000 there. She worked throughout school, but the loans were crucial to making ends meet.

“None of it was real to me back then,” Atkins says. “I had no problem clicking ‘accept’ on those student loans.”

In hindsight, Atkins says she wishes she had had a mandatory career counseling session to walk her through the numbers and understand her debt in the context of her future earnings and expenses.

Such counseling may have helped. Imagining our future selves can help us overcome present bias, says Jeff Kreisler, co-author of the behavioral economics book, “Dollars and Sense.”

“If you make the future more specific, then you can connect to it,” he says.

Avoid this trap: Do the math as you go. Every dollar you borrow will have to be repaid with interest. But you can choose to borrow less than you’re offered. It may be tempting to accept the full amount, but you’ll have a lower monthly payment in the future if you borrow only enough to cover tuition and basic living costs.

They lack information

In many cases, students lack the financial education needed to make borrowing decisions.

Susan Dawson, 47, who has a Ph.D in history and works as a historian for a federal agency, can afford her student loan payments thanks to a second job teaching online classes and a federal repayment plan that caps her monthly payments at a percentage of her income. But she says if she had known the earning potential in her field, she would have chosen a different career.

“I feel stupid because I did not know what questions to ask,” says Dawson, who has a six-figure student loan balance, and lives and works in Washington, D.C.

Things she wishes she had asked about include:

  • Typical earnings in her field.
  • Her future monthly student loan payments.
  • How student loan interest works.

Avoid this trap: Check the Bureau of Labor Statistics’ Occupational Outlook Handbook to research wages and education requirements for various fields. Use a student loan calculator to estimate future monthly payments. Interest accrues while you’re in school — unless you have subsidized loans — but you can pay the interest during school to keep your balance from ballooning.

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

Photo From: 123rf.com

Photo ID: 38970275

The article Why College Students Take on Loans They Can’t Repay originally appeared on NerdWallet.