Education

Help Children Avoid Student Debt

February 5, 2018 By Twila Van Leer

Where does the time go? All of a sudden, the playground phase is past and your child (children) are getting serious about college. If you are lucky, you will have started preparing while they were still small, but it’s never too late to take steps that hopefully will see them through higher education without an unmanageable amount of debt.

Share these tips with your college-bound kids:

Start savings accounts that will give a better return than regular savings. If you don’t have a large amount of cash to begin, open a term deposit account with whatever you can afford. Many financial institutions offer perks such as low (as little as $5) initial deposits; allow you to continue making deposits through the term; set the term from 12 months to five years.

If your child has money from gifts or from early jobs, teach him or her wise money habits, putting a set percentage of personal money into savings. The best gift you can give your child as he or she sets out to undertake adult activities is to arm them with sound financial management skills.

Encourage high school students to work hard, taking high school concurrent enrollment and Advanced Placement courses that will minimize the number of college courses they will need to get a degree. Advise that they look at scholarship opportunities and maintain the grades needed to take advantage of them.

The Internal Revenue Service has authorized two types of education plans: prepaid tuition and college savings. Paying tuition ahead of time avoids the increases that are tacked onto tuitions nearly every year. You can purchase credits at current prices for attending in-state colleges and universities. (Helping the student to make a choice of a higher education institution well ahead of time can ease the issues at enrollment time.)

College savings plans, money set aside in investment accounts, can cover tuition, fees and room and board. Make a careful study of these “529 plans” and get an early start on savings.

Bottom line: Start your planning as far ahead of high school graduation as feasible. If possible, be as specific as you can about your higher education goals so you don’t waste time by too-frequent course adjustments.

Have Student Loans Forgiven

September 16, 2017 By Twila Van Leer

Student Loan Forgiveness — Take care to remain cognizant of the eligibility rules if you want to stay in the running for loan forgiveness.

The U.S. government provides some opportunities for having student debt erased, but there are specific guidelines and some traps to avoid.

The Public Service Loan Forgiveness Program (PSLF) specifies that it is available only to those who have paid regularly for 10 years and who are working for a government agency or a nonprofit.

This fall marks the first time the program kicks in and there are only a few hundred used-to-be students who have signed up so far. Failure to understand the rules has led many graduates to make decisions that now make them ineligible.

Four of the most common mistakes include:

Having the wrong type of loans. The student must have borrowed from the federal Direct Loan Program to qualify. Some 19 million people – 44 percent of the borrowers got their loans in other federal programs, according to current Department of Education statistics. They can get around the provision by consolidating debt under the direct loan program. However, past payments won’t count toward PSLF until the consolidation takes place.

Misunderstanding of “qualifying payments.” Eligibility is based on making 120 payments. They must have begun after Oct. 1, 2007 through a qualifying repayment plan (generally an income-driven plan.) Payments must be in full and made within 15 days of the due date. The borrower must be a full-time employee of a qualifying federal employer. Making extra payments won’t help with eligibility as only one per payment period is eligible. At least some payments must have been made under an income-driven plan that caps payments at a certain percentage of income. Payments don’t count if the borrower was still in school, during a loan grace period or while the loan was in deferment or forbearance. (If a borrower has stayed with the standard 10-year plan, he or she will have paid off the loan before consideration of PSLF is considered.)

Working for the wrong employer. To avail oneself of PSLF, he or she must work for the government, a 501(c) (3) nonprofit or an organization providing a qualifying public service. A full-time public school janitor could qualify. Before accepting a job, an individual hoping to take advantage of PSLF should see that the prospective employer qualifies.

Falling for fraudulent promises of forgiveness. A NerdWallet investigation showed that many companies use false claims and promises to reduce or eliminate loans and they charge high fees to enroll people in the free federal program. An Obama “free loan forgiveness” program, for instance, is one such scam. The term receives more than 18,000 online searches per month, even though no such program exists. Be wary of companies that charge a high up-front fee or add monthly amounts. What they are offering is likely to be too good to be true.

The PSLF program is not set in concrete yet. The Department of Education is considering cutting funding, arguing that it is too expensive and that it tends to benefit graduate and professional school students, many of whom acquire debt in six figures before they are ready for careers. Keep posted for changes, but take care to remain cognizant of the eligibility rules if you want to stay in the running for loan forgiveness.

Financial Basics You Should Know As An Adult

September 12, 2017 By Twila Van Leer

Graduation is a milestone in the understanding of personal finances, as well as the basic underpinnings of the education that will take you through the rest of your life.

Advice from the experts on the basics of personal finances includes these gems:

There is always something new that the advertisers will tell you you can’t do without. Ignore them. You don’t need the “best” phone, computer, etc. etc. Obsolescence is the name of the game today. Find something that satisfies your needs and stick with it. You can pay less for the “not best” and find yourself well provided for.

Don’t get into the mindset that debt is the way to have what you need (or want) unless it is really necessary. Debt is not kind. Consider carefully when you are thinking of getting something new. When you overuse your credit, you are giving up the ability to create a margin for your living. Save up and pay up front for the things you merely want and keep the credit capacity for things that really matter. Watch out for lifestyle creep. It can bury you.

Be reasonable about college costs. If you haven’t saved up enough for a full-blown university, try a community college for the first couple of years. To avoid having to make the choice, begin saving early and consistently for the type of higher education you want. And four years of college is not the answer for everyone. Lesser degrees, such as associate or certificate, can lead to good jobs at less cost. At the very least, a shorter-term education plan might provide the earning capacity to finance more extended college training. Working during the first couple of years so you can stay debt-free will be helpful when you get into the final stretch and borrowing seems inevitable.

Breaking away from home post-high school may be an objective, but it also is very expensive. You may accumulate the sheets and towels, etc., for living away from home, but cash quickly becomes a problem in most cases. If you are looking at rooming with friends or living independently, be sure you have the means to make it work. Have a budget and stick with it, and include some savings in that budget. Even college students have emergencies.

High school graduation is a hallmark, but it can lead to financial stress if you haven’t addressed issues beforehand. Think about it.

Budgets Should Include Savings

June 21, 2016 By Twila Van Leer

Recording every penny you spend lets you know how much goes to non-essentials. — Recording every penny you spend lets you know how much goes towards non-essentials.

Personal financial security almost always is built upon a foundation of creating and sticking to a budget. And a budget line dedicated to savings is extra insurance that you are on solid ground, no matter how much you make.

Tracking your spending is a necessary preliminary to creating that budget. Start by recording every penny you spend. And be prepared to be surprised at how much of your money is going into such things as movies, potato chips and other non-essentials.

Sticking To Your True Needs Leaves More For Savings

Once you have a true picture of how you are spending what you earn, the next step is to set a realistic budget that covers all your needs. That is needs, not wants. Needs vary from family to family, but for almost everyone, they include housing, food, water, shelter, clothing and education. The list of “wants” is long and variable, but often includes fast foods, meals out, expensive clothing, over-expensive cars, fancy cell phones and electronic gadgetry.

Engage Your Family In Setting The Budget

Let them help make up the shopping lists and then go through them to see what you can realistically do without. An occasional “fling” can be accommodated, but be sure they stay occasional and don’t become embedded in the budget by default.

Start A Savings Plan

Through your employment you may have access to a 401(k) account. Or set up an IRA (Individual Retirement Account), which is another way to enjoy tax benefits while you save. Keep retirement in mind. It comes sooner than you’d think. Save as much as you can and increase the amount as children grow up and leave home or as your earnings increase.

Consider What Is Practical In The Way Of Education

Too many Americans face retirement with student loans still weighing them down. It may be that you can achieve career goals without a four-year university degree. If you have to borrow to pay for higher education, keep these figures in mind: The typical monthly payment for loans escalates with the type of training you desire, from $54 for vocational school; $60 for an associate degree; $184 for a bachelor’s degree; $220 for a master’s degree; $280 for a college professor; $530 for a professional degree; and $840 for a physician.

Certainly don’t settle for less than you desire, but approach higher education with your eyes open. Start planning early, warn children they may have to work while they go to school, do your best to encourage them to perform well in high school as a springboard to scholarships and other support.

More Young Adults Live With Parents

June 11, 2016 By Twila Van Leer

More millennials are choosing to still live with their parents. — More millennials are choosing to continue living with their parents.

For the past century and more, young adults were prone to leave the nest and set up housekeeping for themselves. Now, they are more likely to be residents in the family home, either as singles or with a spouse, according to the Pew Research Center.

Young Adults Waiting To Get Married

The phenomenon, statistically changing the 130-year trend, is as result primarily of young people who delay marriage until into their 30s, the Pew study concluded. In 2014, the percentage of young adults living in their parent’s home was 32.1. It is the largest percentage since 1940, when some 40 percent were living at home.

Young Adults With Less Education

Choosing a spouse or living partner is the most likely condition to prompt living with a parent when the young couple is not prepared financially to be independent. Status of education is also an important factor. Young people with less education may be more likely to remain at home, the study found. The statistical breakdown showed that in 2014, 19 percent of young adults with a bachelor’s degree were living at home; 36 percent of those who had some college but not a degree; and 40 percent of those who had failed to complete high school.

Since 1980, the level of education has been more telling, with college education being a definite benefit in the job market and more of those without a high school diploma dropping into less well-paying jobs.

The trend not to marry as early has had a definite effect, a Gallup Poll shows. In a survey, 60 percent of Millennials said they had never married, compared with 16 percent of Generation Xers and 10 percent of Baby Boomers. The increasing trend for women to succeed in the job market, while more males are floundering is one of the reasons, experts say. The Great Recession had a greater impact for men than for women.

Attitudes also have been in play. Marriage formerly was considered a step to help young couples to reach employment and financial goals. Now, marriage is seen to be the final step to reaching such goals, the researchers report. They delay commitment to marriage until they feel their education and career goals are stable.

The rising costs of education, with a larger percentage of young adults saddled with overwhelming education debt, also enters into the equation. Expectations for “living high” in marriage, which most of their parents did not harbor, have an effect on marriage decisions as well.

Unemployment

Relatively high unemployment rates over the past decade also have been a factor. The number of young men who are unemployed and living at home far outstrips the number who are employed and living independently.

The effect on the parental household of having young adults still in residence is the flip side of the new trends, with some parents delaying retirement and other decisions to accommodate the extra persons they are helping to support.