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  • Archive for the ‘student loans’ Category

    The Kids Are All Right. But How Are You?

    Monday, August 25th, 2014
    Summer is winding down, and it’s often a time of change. Each year, many of us watch as our children go off to school and college. This change is big, not only for the kids, but also for the parents.  In addition to the emotional aspects and changes to the daily family routine, it can also mean a big change for your family finances as well.


    For the past several years, Sallie Mae has put out a study, “How America Pays for College,” to examine the decisions and funding sources that go into paying for a child’s college education in the United States. The 2013 report  found that average costs of college in 2012-2013 was $21,178. Parents paid 27% of that cost, close to $6,000.


    The difference between what you have saved for your kid’s college, and what it actually costs, can be large. This gap can lead parents to make some poor financial decisions. For example, this year’s Sallie Mae report found that one out of 10 parents said they are planning to tap into their retirement funds to help pay for the cost of college. While this may solve the immediate problem, it could lead to many more problems down the road if you have to turn to your kids to help support you in retirement.


    If your child has just graduated from high school or college, you may be sighing with relief because she has found a job, and you can start putting the money you were giving to her directly into your savings and retirement accounts. But, if your child is like 36% of 18 to 31 year olds in the US, she is still living at home, and likely unemployed.


    With these realities, it can be tough to continue to save for retirement.  But it is important to keep saving.  Start by keeping the basics in mind, set moderate goals, and work to achieve them.  Here are three steps and ideas:


    1. Saving a little is a big step! Start saving today, with whatever amount you can. Putting small amounts away for many years will add up.  Work on putting 10-15% of your income into your retirement account every month. That is a large goal, and one you can build up to. You can also help yourself by helping your children. Get them started on saving now, so they will ask less from you later. WISER has 5 saving tips for young people that can get you started.


    2. Find creative ways to reduce everyday expenses. Get a small notebook and Piggy Banktrack everything you spend money on for 3 months. Then identify patterns that you can change. For example, if you see that you buy two cups of coffee every day, only buy one, and put the money you were using for the second up into your retirement savings. Other ways to reduce your expenses might include driving less and walking more, or taking more public transportation. Remember to utilize public resources, such as your local library, where you can check out movies, tools, and books for free, and your local recreation center, where you can often swim or exercise much more cheaply than at private, membership facilities. Take a look at some of our previous blogs on budgeting to help you find ways to cut expenses.


    3. Plan to work longer. Retirement age isn’t what it used to be; people now live longer and are healthier longer. Put off retirement a little longer so that you can continue to save money for an extra few years. If you can, wait to start collecting Social Security after age 65, not before, in order to maximize your Social Security benefits. Learn more about how your benefits can increase.


    Wanting to help your kids financially is noble, but it comes with trade-offs.  You don’t want to support them financially to the detriment of your own retirement savings. The 2013 Sallie Mae report found that the largest source of college funding actually came from grants and scholarships. So make sure to look into all the different funding sources that are available for college, and make your retirement account off limits.  If you want more information about how much money different colleges will cost, check out the Consumer Financial Protection Bureau’s Paying for College  website, which has lots of information and handy guides to help you better understand your options.

    WISER’s Commencement Speech: Real Finances in the Real World

    Wednesday, May 22nd, 2013

    It’s graduation season and soon it will be time for many new graduates to start paying back student loans. Loan repayment can be a stressful part of post-graduation life, but there are ways to make repayment easier and quicker. Here are some tips to help gain control over student loan repayment plans. (And If you are not a recent graduate, share this important information with your children, grandchildren, or friends.)

    Make informed decisions

    If you are still in the process of applying to schools and are worried about student loans, the Consumer Financial Protection Bureau (CFPB), a government-run consumer watch-dog group, has a great new Paying for College web application that will help you assess the financial costs of different educational options available to you. You can use this web application to find out about different types of educational financing options, as well as use the cost comparison tool to analyze the financial consequences of different schools side-by-side.

    Be in the know

    Once you take out loans to finance your education, it is important to understand those loans and your repayment responsibilities. Make sure that you know the amounts of the different loans you have, the interest rates on those loans, and who your loan servicer is.

    A loan servicer is a company that handles the billing and other services related to your loan. It is important to know who is in charge of your loans so that if you have questions or run into any problems you know exactly who to call. If you have a federal loan, click  here to access the U.S. Department of Education’s website for information on your loan servicer. If you took out a private loan, call the company that issued your loan to find out who your loan servicer is.

    Next, find out exactly how many loans you have, what you owe on each one, and what the interest rate is on each one. Often, students take out multiple loans with differing interest rates. You want to know the breakdown of exactly how much you owe and how much interest is accruing every day.

    Create an online account

    To help you keep track of your loan information, create an online account with your loan servicer. Creating an online account allows you to clearly see what outstanding loans you have, what their interest rates are, how much interest you have accrued on each loan, and how much your payments are and when they are due. An online account will also provide you with contact information for your loan servicer. You can use your online account to set up automatic payments and also to go in and make additional payments whenever you have some extra cash. Setting up automatic payments is crucial. If you forget to make a payment, you will accrue late payment charges. Setting up automatic payments insures your payments are made on time.

    Pay down your interest

    This is important advice for anyone in the loan process, whether still taking out loans or already paying them back. Even if you are still in school, you can make payments to your loans. Set a reminder every week to pay off the interest that has accrued on your loans. This will keep down the amount you owe once you graduate. If you have already graduated, work towards paying off the loan with the highest interest rate first. This loan will likely cost you the most over time, so the sooner you pay it off, the less you will have to pay overall. Remember, every payment you make usually goes to paying off the interest you have accrued first and then goes to paying down your loan’s principle balance.

    If anything happens, get in touch with your loan servicer

    If you have a problem making your payments or miss a payment by accident, contact your loan servicer immediately in order to prevent late penalty charges and to work out a repayment option that works for you.

    Pay down your loans faster

    Try to put any extra money you can towards paying down your loans faster. The quicker you pay them off, the less money you will pay overall. Try putting any work bonuses you receive towards your loans. Another trick it so take your tax return and put the refund you receive exclusively towards your student loans.

    Graduating with debt is not easy, but with tips like these you can reduce the overall cost and the amount of time it takes you to become debt free.

    And remember parents (and grandparents), don’t dip into your retirement savings to help pay for your kid’s loans. As a parent or grandparent, you may feel compelled to help your kids pay off their loans. But remember, they have a lifetime ahead to work, save, plan and re-pay. You do not have that same kind of time to re-build your nest egg. Instead, help them learn how to manage their loans and make smart financial decisions.


    About Us

    WISER is a nonprofit organization that works to help women, educators and policymakers understand the important issues surrounding women's retirement income. WISER creates a variety of consumer publications including fact sheets, booklets and a quarterly newsletter that explain in easy-to-understand language the complex issues surrounding Social Security, divorce, pay equity, pensions, savings and investments, banking, home-ownership, long-term care and disability insurance.

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