5 credit tips for college students

3:30 PM college, Credit, students No Comments

| By A.J. Smith, Credit.com

There's a lot to do when you go off to college, and managing credit is usually far down the to-do list. It's important to learn how to use credit cards, though.

There’s a lot to think about when you’re in college. There are classes, friends, internships and parties to worry about. But what many of us probably should have been thinking about a lot more was our credit. In fact, now that we’re older and wiser, there are a lot of things we wish we would have done differently when it comes to our credit.

Unfortunately, there’s no freshman orientation on building credit. So a lot of students fail to grasp the reality of responsibly using a credit card until it’s too late. They might even graduate with a pile of credit card debt on top of their student loan debt. But instead of trying to prevent college students from getting their hands on credit cards, it’s important to teach them about proper use.

Here are five credit tips that every college student should know.

Staying away from credit cards completely won’t help build a strong credit profile. Since a large portion of your credit score is determined by your credit history, the earlier you establish lines of credit, the better.

Whether you like it or not, credit is becoming more and more important in aspects of every day life. Things like mortgages and car loans require good credit, so if you ever plan on buying either of those items you’ll need a good score.

It’s nearly impossible to get approved for a regular credit card if a college student has no income. But it’s easy to be added to a parent’s credit cards as an authorized user. All it takes is a phone call.

This is one of the best ways to establish credit without having to apply for your own card since there’s no credit inquiry and your credit report will reflect the same credit utilization rate as your parent’s card. (Just be sure your parent has good credit.)

Since it’s difficult to get approved for a regular credit card while you’re in school, consider applying for a student credit card. The limits on these cards are low, but they are a great way to establish credit.

Having a student card will also give you an opportunity to learn how to manage your money, pay monthly bills and spend responsibly.

It’s important to realize that your credit card bill should be paid off in full every month. If you can’t pay your balance in full, you’ll start to accumulate interest and fees and that’s what the credit card companies thrive on. Treat your credit card like you would your bank account and don’t ever spend more than you can afford to pay back immediately.

If you want to understand how credit card companies and banks view your credit it’s important that you understand your credit report. You should check your report for accuracy at least once a year in order to ensure that all of the information listed is correct, and dispute it if it is not.

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10 tips to pay for college in 2014

12:30 PM 2014, college, pay, tips No Comments

| By Christina Couch, Bankrate.com

College is still expensive and financial aid is still tricky to land, but help is available.

From crowdsourced student loans to tuition freezes, here are 10 ways to pay for college, reduce college costs, boost your savings and score more financial aid in 2014.

As the White House pushes higher education institutions to control their expenses, more colleges are seeking ways to help families understand and minimize their costs, says Daniel Reed, vice president of federal issues for the California Association of Student Financial Aid Administrators and senior financial aid officer for Point Loma Nazarene University in San Diego.

"I think the trend is going that way towards freezing tuition or at least reducing the amount of tuition that increases by year," he says.

Several public school systems, including the University of California and Iowa State systems, have already proposed tuition freezes for the upcoming year. Antioch College in Yellow Springs, Ohio, is even going so far as to offer a full four-year scholarship to all admitted 2014 students.

One financial aid change in 2014 will impact dependent children of unmarried and same-sex parents. Under 2013 law, the Free Application for Federal Student Aid -- the document that the federal government uses to assess financial need -- has based a family's financial aid package primarily on the income and assets held by the student and, if unmarried, the parent or legal guardian who claims them as a dependent. This means that in cases of unmarried parents and same-sex marriages that aren't federally recognized, financial information on only one parent has been assessed.

Starting with the 2014-2015 school year, the FAFSA will collect information on both legal parents, regardless of marital status or gender. Though the Department of Education states that "most students will be unaffected," the change could dramatically impact federal aid packages for some students to pay for college, says Barmak Nassirian, director of federal policy analysis for the American Association of State Colleges and Universities, a research and advocacy nonprofit for approximately 420 public four-year institutions.

"When you factor in more aid resources, resources that have historically been excluded, you actually drive down the amount of aid eligibility that the applicant is entitled to," he says.

Federal aid may be harder to get for some students, but aid that isn't based on financial need is increasing. The National Center for Education Statistics reports that the proportion of undergraduates receiving merit-based aid more than doubled from 1996 to 2008 and the average merit award rose from $4,000 to $4,700. Some research and advocacy organizations like the Education Trust and the New America Foundation criticize the shift in merit awards as primarily benefiting wealthier students who have greater access to resources that can make them more academically competitive.

"There used to be twice as much need-based aid as non-need-based aid at public colleges and universities, and now they're about even," says Michael Dannenberg, director of higher education and education finance policy for The Education Trust.

For students of all income levels, increased funds for talented students to pay for college means an increase in the value of top-notch grades and academically challenging courses. To increase merit aid eligibility, students should keep their grades up, start the search for aid awards early and work with their academic advisers to build a rigorous high school curriculum.

With college costs increasing, it's no shock that many borrowers can't pay their student loans. The Department of Education reports that almost 15 percent of all federal loan borrowers default on their student loans within three years of beginning repayment. That's why the government is increasing its outreach to inform qualified borrowers of their income-driven repayment options.

"If you're going to miss payments and this program that exists is sitting there for you that could literally make the difference between you defaulting or staying current, I think that's a huge benefit for a family," says William Wozniak, director of marketing for ISM College Planning in Indiana.

Under the income-driven repayment plans, eligible federal loan borrowers can have their monthly student loan payments capped at 10 percent or 15 percent of their discretionary income and forgiven after 20 or 25 years of consecutive payments, though they'll have to pay taxes on the amount forgiven. Borrowers who work in public service professions will have their debt dismissed after 10 years of repayment without tax consequences. Borrowers can estimate their monthly income-based payments at StudentAid.ed.gov.

Changes also are afoot for some 529 plans. Regulated by individual states, the popular college savings vehicles all provide financial aid advantages and federal tax-free growth on funds, but each has its own fee structure and state tax incentives.

In 2014, some plans will undergo significant changes. For example, North Carolina will end the up to $5,000 state tax deduction it historically has offered to residents who hold in-state plans. Pennsylvania is lowering fees in its 529 plans while Wisconsin is considering a move to increase its state tax incentives.

If you're considering opening a 529 plan, read the terms carefully and do some comparison shopping, says The Education Trust's Dannenberg.

"(A family's) own state's 529 may not be the best choice for a family because of the different fees associated with different plans," he says.

Federal student loans almost always provide better interest rates and borrower protections, but if you need a private loan supplement, new crowdsourced funding sites could potentially provide lending alternatives or better loan terms than traditional financial institutions. While sites like PigIt.com provide a platform that allow "dreamer" college students to raise educational funds by offering incentives like work or gifts in return, Upstart.com offers crowdfunded loans in exchange for a percentage of the borrower's income over the next five to 10 years. The catch with crowdfunded finance is that not everyone gets their campaign fully funded.

"When people put out there that they want to be a doctor or they want to do this or they want to do that and they're at a strong school and they're going to do wonderful things and they have high GPAs, I think those students probably fare better in who's going to get money," says ISM College Planning's Wozniak.

Before starting a campaign, students should make sure to read the site's fine print and compare online financing options to loans offered through the federal government, banks and credit unions.

"A big part of what your price will be is the college you choose, and right now college selection choices are too often underinformed if not irrational," Dannenberg says. "People would be well advised to not simply associate price tag with quality ... That's not true when it comes to higher education."

One of the easiest ways to score financial aid is to apply to schools that offer lots of it to students like you. The National Center for Education Statistics' College Navigator tool can help you find institutions that offer substantial aid packages to families in your income bracket while The Education Trust's College Results Online database can identify colleges that are similar to your dream school in net price and academic competitiveness.

With higher tuition prices and more student debt on the line, Point Loma Nazarene's Reed says that it's even more important for families to financially plan ahead. That means not only creating a college savings strategy early and taking advantage of compound interest, but also having a serious chat about how much debt the family can handle.

"A lot of people tend to think 'someday I'll pay this back,' but really should be thinking about 'should I take out this much money,' and seeing in my chosen career path what my starting salary is," Reed says. "I know that's a hard conversation to have with an 18-year-old traditionally coming into a college experience, but the more we can encourage students and families to think ahead, the better off they'll be on the repayment side."

According to the National Association of Colleges and Employers, the average 2013 college graduate had a starting salary of $45,327, with humanities and social science majors ranking lowest with average salaries of $37,791 per year, while engineers bring home more than $62,000 annually. Students can find starting salary information for their majors at NACEweb.org.

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6 questions to boost college aid

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| By Michael Estrin, Bankrate.com

Paying for college can be a complex business. Here are 6 things to know to get the best student loans.

Paying for college isn't as simple as it used to be. To meet myriad costs, including tuition, student fees and room and board, college-bound freshmen and their families increasingly have turned to financial aid in the form of grants, scholarships and loans that have become more and more complex in recent years.

Between the 2006-2007 and 2010-2011 academic years, the percentage of students receiving some form of financial aid at four-year colleges grew from 75% to 85%, according to the National Center for Education Statistics. But while parents and students may think an offer of financial aid is the ticket to an affordable higher education, experts caution that such letters often can be confusing and misleading.

"It's really a case of buyer beware for both parents and students," says Andy Lockwood, a Plainview, N.Y., college finance consultant.

At the end of the day, colleges are businesses, whether they're public or private, for profit or not. "They want to get you to come for the most money they can get out of you," Lockwood says.

The key to keeping your education costs down is to do your homework after receiving the financial aid offer letter and not get carried away by the acceptance letter. Asking these six questions can help:

A typical offer letter includes a dollar amount and some description of how that money will be distributed. Unfortunately, colleges sometimes obscure the fact that the money will come in the form of loans, Lockwood says.

"If the offer is described as anything other than a scholarship or a grant, it's not free, and that money will need to be repaid," Lockwood says.

But those two words -- whether or not they appear in your letter -- shouldn't end your inquiry. In fact, Lockwood says most students and parents should take the time to ask questions about the offer letter and clarify anything they don't understand.

If possible, Lockwood advises following up with a phone call or by visiting in person. But some financial aid offices may not be responsive. Getting answers may be frustrating, but students and parents shouldn't accept an offer they don't understand.

The type of loan your student takes out can have a huge impact on his finances after graduation. Unfortunately, the terminology surrounding student loan products can be incredibly confusing.

"The irritating thing is that two different financial aid offices can refer to the same loan product differently," Lockwood says. "For example, 'direct loans' is the new term for Stafford loans, but not all colleges have adopted the new nomenclature."

While it's important to get a handle on the lingo, parents and students also need to understand the terms of each loan product. That means understanding the interest rate, when repayment should start and whether the rate is fixed or adjustable, Lockwood says. It's also a good idea to ask what happens if the student is unable to make payments.

While most parents are likely to be involved in their student's financial aid process, they'll want to specify whether they'll be asked to co-sign for a student loan. If the parents do co-sign, they should ask about how they can remove themselves from their co-signing obligation, Lockwood says.

We tend to fixate on the tuition number, but the fact is that college students incur many other costs, including room and board, books and lab fees. Most students need some spending money, too. But if you're looking to compare prices based on an award letter, you might find it difficult.

"Every college publishes a cost-of-attendance figure that includes hard costs like tuition, fees, and room and board, (as well as) soft costs like books, transportation and living expenses," says Joseph Orsolini, the president of College Aid Planners in Glen Ellyn, Ill. "Some colleges will use the hard cost only in their award letters, while others show the full cost-of-attendance figure."

To get an apples-to-apples comparison, Orsolini suggests comparing only hard costs, because every school provides those figures. Still, parents and students shouldn't ignore soft costs.

"Some students look past the other costs, but you will still spend money on books and personal expenses," says Steve Booker, the director of financial aid at Rollins College in Winter Park, Fla. "Knowing what these estimated costs are and what options are available may help you minimize these costs."

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Help your kid cut college debt

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| By Richard Satran, U.S. News & World Report

Here are some cost-cutting tips from students and college financial aid people.

Financial planners will give you a quick list of the things you must absolutely do to pay for your child's college (529s, Stafford loans, Coverdell savings accounts, savings bonds, home equity loans) but sometimes their advice is hard to follow in the time frame you have—and often they involve piling on more debt.

Students already are choking on $1 trillion in loan repayments for college. Parents spend and borrow huge amounts beyond that. But what can you do in the near-term to make the funds you have go further?

With help from students and college financial aid officers, we've compiled 11 tips to cut college costs and avoid borrowing more:

When shopping for a school, get past the sticker price. "It really is like buying a car," says Chanel Greene, manager of the office of financial aid for Peirce College in Philadelphia. "People look at the sticker price and get shocked and say I am not going there. But like cars there are lots of option." There are rebates and scholarships nearly every school offers or knows about. Saving on college costs requires that you "look beyond fees and tuition. It's really never as simple as comparing apples to apples," Green says. Cost-effective education plans are even more complicated than car deals. Consider all of the options.

Live off campus. This might rank lowest on parent's cost-saving lists. But it's more than an off-campus party pad and potentially the biggest moneysaver on the list. The College Board says the amount colleges charge for room and board has jumped 65 percent over the past decade—about twice as fast as inflation. Boomer parents who opted for dorm life when they went to school a generation ago often paid below-market rates. Not true anymore. "You can share a place and really cut down on rental costs, and you also pay less for things like food if you share with roommates," says David Ellman, a Brown University student now taking time off to work on a social media startup.

Take that year abroad. The dream of jetting off to Paris for a cafe-society semester at the Sorbonne or zipping down Florence's narrow streets to get to class at the Academy of Arts was a luxury purchase then. Not any more. With American colleges the most expensive in the world, students can save by taking that year abroad, even with transportation costs included. Becoming more popular are Latin American destinations like Chile, Costa Rica, Brazil, and Argentina, and further-flung places like South Korea, India, and South Africa, as students seek out less expensive and more exotic study-abroad locations alongside with old favorites like Britain, France, Italy, and Spain, according to the Institute for International Education. In a global economy, the experience often pays dividends in the job world. But smart shopping is essential since fees vary widely. It's also a good thing to consider in your initial college search: Some U.S. schools assess fees while students study abroad.

Don't assume your income is too high for financial aid. "It's one of the most common mistakes. There is no real 'cutoff' for financial aid assistance," says Peirce's Greene . "Everyone should fill out the FAFSA (Free Application For Federal Student Aid) regardless of income level." "There are a lot of factors we take into account," she says. Sometimes they are not even part of FAFSA. The college where she works is a low-residency school where many adults attend and parents often don't know that their own school costs can be a factor in weighing their children's financial awards.

Return unused loan money. Students will sometimes qualify for loan refunds if they do not use the funds during a financial aid period. Some see it as a kind of tax refund to be treated as a bonus for travel, or to reinvest in costs not directly related to their degrees. Either way that loan adds to total debt. Greene recommends that students return them when they don't use them for school costs.

Don't be afraid to ask questions. It's the job of financial aid offices to provide information, says Greene. "A lot of people ask their neighbor or friend what they did to pay for college. If you do that you will only be getting part of the picture." Some parents are afraid to approach the financial aid office at the school where their child is applying for fear it will hurt their child's chances of getting in. But some schools will view it as a sign of serious interest, a positive in admissions. And the majority of students look for financial aid. Some schools admit their student admission policies are not entirely "needs blind." But talking with financial aid specialists are unlikely to be a factor. Once a student is admitted, financial aid officers want to see students graduate and usually are ready to help.

Let financial aid office know about a change in your situation. "I've come across students who are embarrassed to say that their parent has lost their job. But they really should share that information because sometimes we can help," says Greene. Many schools have emergency funds for just this situation. There are also federal programs that come into play when jobs losses hit parents.

Wrong numbers on forms can be costly. Incorrect information can be costly since it can lead to delays in processing forms. Incorrect Social Security numbers are one of the biggest errors that turn up, says Greene, and that mistake alone could be enough to delay aid for weeks or months.

Don't be embarrassed to start college trips early with your kids. Some early high school students will feel peer pressure not to do tours when they are far from graduation. They don't want to be uncool in high school. Adults, too, worry about being seen as pushy by taking younger students on college trips. But early visits are great chances to explore schools and fully understand the costs and benefits. What's more, an ambivalent high school freshman might find new inspiration in their visit to State College in springtime when things are in bloom. "The old junior-year visit is done partly because the dorm visits are more difficult with younger students," says Greene. "But most schools will be glad to arrange tours or visits with younger teens."

Share debt with your children. Many boomer parents don't want to stick their kids with huge debt. It's an admirable goal, but at least a small piece of borrowing on the student's part can be an incentive to manage and understand costs. Green says, "It's not bad if they have some skin in the game."

Set a realistic number. Before the college chase begins junior year, it pays to consider what you can afford to contribute and talk about it with your child. Try to be encouraging. Some kids will decide they don't want to pay the cost, or will not want to add to their parent's money burdens. Have the talk at the start of the application process before getting accepted at a too-expensive dream school turns into a family nightmare. Remember that you will probably want to be fair in giving equal opportunity to all of your children, so asses the overall costs and limits to family income.

Get a (reasonable) job. Over 50 percent of students work in college. But too much of a good thing can hurt the college experience and also hurt students' grades. A National Survey of Student Engagement study showed that if students work for 20 hours or less, it will not hurt grades. Over that level academic performance suffers, the study shows.

Every student has their own tips. A 2010 Cornell graduate, public relations executive David Brodnick of Weber Shandwick, found a way to stretch dollars at the deli counter.

"My own dollar stretching tactics in college surrounded holding down a deli job that allowed me to eat lunch for free at work (not to mention actual pay) and to go off the university's costly food plan. Living in a fraternity house for three years I saved probably $5,000 to $10,000, as all living expenses were included, and I didn't have to cook or clean, and could focus on studying."

Think small. In getting a degree that costs $100,000 to $200,000, nickel and dime savings might not seem so big. But even a relatively small cost can become larger if its paid out over the life of a student loan, with interest. As Greene says, "It really all adds up and it can be more painful later in life when you pay back those loans."

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