College Students and Recent Grads Study: College Students Face High Interest Rates on Student Credit Cards

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It is that time of year: millions of students will be heading to college. For many students, this will be the first time that they will be the targets of banks’ marketing departments.

While the CARD Act changed how lenders can offer college students credit cards, young adults are still able to acquire these potentially expensive products. A study of college student credit cards by shows that a student new to credit is likely to pay an average APR of 21.4%. And taking out cash is even more expensive, with an average APR of 24.1%.

  • We reviewed the Top 50 banks in the US by deposits
  • We reviewed credit cards specifically targeting students and actively marketed on the banks’ websites
  • All credit cards, with the exception of Capital One Journey, offer a range of Purchase APRs. CapitalOne offers a single, flat APR of 19.8%
  • For credit cards that offer a range of APRs, the average range is nine percentage points
  • The lowest possible APR is 10.99%, offered by Bank of America on the BankAmericard Credit Card for Students

Note: Bank of America charges higher APRs on student products that earn rewards. A no rewards card has a range of 10.99% – 20.99%. The cash rewards card has a range of 12.99% – 22.99%. The travel rewards card has a range of 14.99% – 22.99%. Remember: rewards can be very expensive!

  • The highest possible APR is 23.99%, offered by Citi (both the ThankYou Preferred for College Students and Dividend Platinum Select Visa for College Students)
  • If your student credit card is your first credit product, then you will likely have no score. No score means you are the highest risk, and it is highly likely that you will receive the highest price point. The average of the highest price points is 21.4%

If a student charges $1,000 on a credit card and only pays the minimum due at the average rate of 21.4%, it will take 7.6 years to pay back the debt. And the total amount repaid would be $1,941.

Noticeably absent from the list of banks offering credit cards that target students are American Express and Chase. Chase recently exited the business, recognizing that earning interest rates more than 20% on students still in college didn’t feel right.

The CARD Act restricted, but certainly did not eliminate, credit cards that target students. In 2012, applications for student credit cards were at 43.5% of 2007 levels. The CARD Act put the following restrictions into place:

  • No pre-approved offers to people under 21, without consent
  • If you are under 21, you need to prove that you have income (a part-time job, for example), or have a cosigner older than 21
  • Credit card companies can no longer give out free gifts on campus to induce people into signing up for a credit card. No more frisbees or beer mugs

However, there are still plenty of student credit card offers out there. While they don’t give out frisbees, they do offer sign-on bonuses. Citi, for example, gives you 2,500 Thank You points if you spend $500 within 3 months of opening the card. We find that worse than the free frisbee. Before, they would incent you to open a card. Now they are incenting you to spend on the card!

While credit cards can be a great way to build your credit while in college, they can turn into expensive traps that send you down a dangerous path.

The only reason you should apply for a student credit card is to build your credit score. And follow these three tips:

1.Your statement balance should never be more than 30% of your limit. High utilization, early in your credit history, can have a meaningful negative impact. So, just make one to two purchases a month on the card.

2.Pay your balance in full. Credit cards are expensive, and you should not use them to borrow.

3.Never use a credit card for a cash advance. It may seem like easy money, but you will be paying for it.

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College Students and Recent Grads, Consumer Watchdog

Consumer Watchdog: Student Loan Repayment Scams


Student loans are one of the most frustrating and often confusing payments to handle. 22-year-old recent graduates who might barely know how to balance a checkbook are expected to suddenly know how to find all the federal programs geared towards helping with repayment (like income-Based repayment and forgiveness) and how to keep track of multiple loans across different vendors that could be handed off to another owner at any time. Does your head hurt yet? Filing your own taxes is often much simpler than getting the hang of student loans.

So, it’s no surprise that people are more than happy to pay someone else to handle the stress of student loans, which is why student loan repayment scams exist.

But you don’t have to pay anyone for help getting your student loan situation in order. In fact, you shouldn’t be wasting the money you could be putting towards getting debt free.

You should also be wary of any phone calls offering to help you gain access to a new federal program focused on student loan forgiveness. These are often predatory scam calls.

Get Help for Free

It’s important to note that most of the free help is centered on federal student loans. We’ll discuss private student loans later in this article.

There are several ways you can receive assistance on your federal student loans.

  • Use income-based plans to lower your monthly payments

These repayment plans include Income-Based Repayment (IBR), Pay As You Earn (PAYE) and Income-Contingent Repayment (ICR). Each plan works a little differently and not everyone will be eligible based on when you took out loans and how much you make. The programs all help reduce payments in accordance with your current income. As you earn more, you pay more on your loans. The programs all allow for remaining federal student loans to be discharged after 20 – 25 years of consistent payments.

  • Consolidate your loans

Consolidating your loans into one easy payment could help remove some of the stress from your repayment process. You can consolidate federal loans into a Direct Consolidation Loan. There is no fee for this process. Just be aware you could lose out on potential benefits on your existing loans if you consolidate.

  • See if you’re eligible for forgiveness programs

There are a myriad of forgiveness programs for federal student loans. Most are focused on your career. For example, teachers may be eligible for the Teacher Loan Forgiveness program by working at a designated elementary or secondary school for five consecutive years. You could earn between $5,000 and $17,500 depending on your subject. Doctors, lawyers and other specialized professions can be eligible for certain forgiveness programs. There are also volunteer programs and forgiveness for military personnel.

  • Rehabilitate yourself by getting out of default

If your loan ends up in default, you’re far more likely to be on the receiving end of scam calls about fixing your student loans or being eligible for a phony forgiveness program. Your loans need to be in good standing in order to be eligible for any forgiveness programs or refinancing. Work with your student loan servicer to get out of default. You can reach out to student loan counseling services, but look for non-profit organizations offering free consultations.

You can track your federal loans via the National Student Loan Data System .

[Miss a Student Loan Payment? Where to Find Help and What Happens Next]

Need Help with Private Loans?

Unfortunately, private loans are not as flexible as federal loans. You will not have the same options for Income-based repayment programs nor forgiveness programs.

However, you should always communicate with your loan provider if you feel you’ll have difficulty making a payment. There is no discharging student loans in bankruptcy, so burying your head in the sand and letting the situation build up will just create more pain. You should also see if you’re eligible for student loan modification.

You could consider refinancing your private student loans to another lender that may offer better interest rates and perks like forbearance in case you lose your job and can’t afford to make payments for a few months.

SoFi* offers unemployment protection for up to 12 months with fixed refinance rates as low as 3.50% and variable rates as low as 1.90% (with autopay).

Earnest offers the ability to skip one payment a year without penalty (you make up for it over time), which certainly isn’t a long-term fix but could give you a little breathing room to figure out your financial situation.

[Sample Goodwill Letter to Remove a Late Student Loan Payment from Your Credit Report]

Already the Victim of a Scam?

You may have already become a victim of a student loan scam. If this is the case, you should report your situation to the Consumer Financial Protection Bureau.

Issues with Federal student loan servicers can be reported to the Federal Student Aid Ombudsman Group.

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Best of, College Students and Recent Grads, Pay Down My Debt

6 Lowest Fixed Student Loan Refinance Rates

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Do you want to refinance your student loans? You’re in luck.

The student loan refinance market has expanded to include many solutions for graduates who are stuck with high interest rates. (We’ve even found 19 lenders and counting that currently offer refinancing, take a look at the entire list here!)

When you shop around for a lender you’ll notice that most offer variable and fixed interest rates. There’s a big difference between the two. Variable interest fluctuates over time while fixed interest stays the same throughout the life of your loan.

We suggest you choose a fixed interest rate unless you can pay off your debt very quickly. Otherwise, you risk an increase in interest while you rebarpay the loan. Thankfully, there are lenders that offer very competitive fixed rates. Here are the lowest rates available.


SoFi offers refinancing and consolidation for both Federal and private loans with fixed rates from 3.50% to 7.24% APR. In order to get these low rates, you must sign up for autopay. Loan terms are available up to 20 years. The minimum loan amount is $10,000, but may be higher in some states due to legal requirements. The maximum loan amount you can obtain from SoFi is the balance of your qualifying student loans.

You must have graduated from an eligible Title IV accredited university or graduate program to be eligible for SoFi refinancing. Co-signers are accepted on a case-by-case basis. Both you and your co-signer must be U.S. citizens or permanent residents to apply. However, it does not offer co-signer release. SoFi has no application or origination fees plus no penalties for prepayment.

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*referral link


Earnest will refinance private and Federal loans with fixed rates from 3.50% to 7.25% APR if you sign up for auto-pay. Terms are available for 5, 10, 15 and 20 years. The minimum loan amount you can refinance is $5,000 and the maximum is $400,000. Earnest will accept co-signers to improve your chances of securing a low rate, but it’s not required.

In order to qualify, you must be a U.S. citizen or permanent resident. Your debt also has to be from a Title IV accredited school. You must live in CA, CO, CT, FL, GA, IL, MD, MA, MI, MN, NJ, NY, NC, OH, OR, PA, TN, TX, UT, WA, Washington D.C., or WI. If you don’t live in one of these states (or district), Earnest suggests you still apply so you can receive a notification once loans become available in your area. This refinance has no origination fees or prepayment penalties.


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Darien Rowayton Bank

Darien Rowayton Bank offers fixed interest at 3.50% to 6.25% APR if you sign up to make automatic payments from a Darien Rowayton Bank checking account. According to the website, you can easily open a checking account to receive the interest discount during the loan closing process. Loan terms are available up to 20 years. The minimum loan amount is $5,000 and Darien Rowayton Bank will fund up to 100% of outstanding private and Federal student loans.

You must be a working professional with a bachelor’s or graduate degree to be eligible. You must also be a U.S. citizen or permanent resident. A co-signer isn’t required, but you’ll likely need a co-signer to get approved if your gross annual income is less than $50,000. This refinance has no origination fee nor penalty for prepayment.


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CommonBond offers fixed interest from 3.74% to 6.14% on student loan refinances if you sign up for autopay. Terms are available for 5, 10, 15 and 20 years. With CommonBond you can refinance up to $220,000.

You must have obtained a degree from one of the graduate programs on the CommonBond eligibility list to qualify. Find out if your school is in the network on the CommonBond refinance FAQs page. Applicants must be U.S. citizens or permanent residents. A cosigner isn’t required, but if you don’t meet the underwriting requirements you can reapply with one. CommonBond charges no fees for application or origination. There’s also no penalty for prepayment of the loan.


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*referral link

Citizens Bank

Citizens Bank will refinance both undergraduate and graduate loans. APR ranges from 4.74% to 8.90%. Loans are available from $10,000 to $170,000 depending on your education. Citizens Bank offers up to 0.50% in interest rate reductions if you sign up for autopay or have a qualifying account with Citizens Bank before applying. Terms are available for 5, 10, 15 and 20 years.

You must be a U.S. citizen, permanent resident or resident alien to qualify. A co-signer isn’t required but if you don’t have a strong credit history a co-signer may increase your chances of getting a low rate. Co-signers can apply for release if 36 on-time, consecutive payments are made. However, the borrower must meet certain credit eligibility requirements on their own at the time of release. Citizens Bank doesn’t charge application, disbursement or origination fees. There’s also no prepayment penalty.


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iHELP offers discounted fixed rates at 6.22% to 7.99% APR if you have a co-signer. Both private and Federal loans are eligible for refinance. The minimum loan amount is $25,000. The maximum loan amount is $100,000 for an undergraduate degree and $150,000 for a graduate degree.

Both you and your co-signer must be U.S. citizens or permanent residents to apply. Your co-signer may be eligible for release after 24 months of on-time payments if you meet credit requirements when he or she is released. You must have graduated from one of the iHELP eligible schools to receive a loan. iHELP charges a 2% supplemental fee upon loan disbursement. This is the only refinance to make the roundup that charges this type of fee.


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Education Success

Until recently, Education Success also offered a student loan refinance. It’s not available at this time because the original lender could no longer provide funding. Fixed rates were available as low as 4.99% APR for the first 1 to 10 years and variable interest thereafter from 5.24% to 8.24%. The minimum amount you could refinance was $15,000 depending on state requirements.

A loan with fixed and variable interest like this one is worth considering if you can pay off your debt within the fixed interest period. We’ll update this post if and when the refinance at Education Success becomes available.

education success


Is a refinance the right choice for you?

A refinance can give you a better interest rate and save you money in the long run, but there’s one factor you must keep in mind. A refinanced Federal loan may no longer qualify for Federal loan benefits like loan forgiveness, income-based repayment, forbearance or deferment. These are invaluable benefits to fall back on if you run into financial trouble in the future, so make the decision to refinance carefully.


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College Students and Recent Grads, Consumer Watchdog, Life Events, Pay Down My Debt

The Dangers of Co-Signing a Loan

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By contributor Steven of EvenStevenMoney

When you first step out into the real world it is hard to ignore the marketing of what you need or want in your new life. You’ll find advertisements for colleges, credit cards and which car to buy are about as normal as a McDonald’s advertisement. Because money is currently not growing on trees, you may need to borrow some to make life happen. If you have ever applied for a loan before you received your first job or while in college, the application may have asked for a co-applicant or co-signer. The two terms may sound similar, but the obligations of a co-signer and co-applicant are different.

In a co-applicant the individual is attempting to get a joint loan with someone else, an example would be obtaining a mortgage. In most cases when buying a home, both incomes will be needed to obtain the loan and will feature both names on the mortgage loan and deed.

A co-signer is usually brought on if the applicant lacks income or good credit or for that matter any credit at all. Assuming the co-signer’s credit history meets the lender’s requirements, the co-signer will act as a default if the borrower or individual receiving the loan does not make payments per the loan agreement. A co-signer is required if the bank is worried you may not pay back the loan. To reduce the risk it requires someone who has a good credit history, income, and demonstrated they have paid their bills on time. So that doesn’t sound so bad, where’s the danger?

Who’s Responsible?

Co-signers are common with student loans as an 18 year old rarely has built a strong credit report with a history of good behavior. Both the student borrower and the cosigner are equally responsible for paying back the loan. Some private student loans offer the student loan borrower the option to release the cosigner, but this is usually at the financial institutions discretion after a certain amount of consecutive monthly payments are made on time and the borrower/student has meet certain credit requirements.

Even in the event the borrower has reached the consecutive monthly payments made on time the Consumer Financial Protection Bureau (CFPB) has received complaints that borrowers have experienced a challenge getting the co-signer released from a loan. One particular complaint noted that even after making the required 28-on time payments, and then finding out it was 36 on-time payments, to only be met with a policy change from the lender that requires 48 on-time payments before applying to release the co-signer.

Remember that co-signing a loan means the obligation is shown on your credit report and thus affects your credit score. So if little Johnny forgets a payment because he failed to set up automatic payments or is having trouble making the payments on time, then this also can negatively affect your credit score as the co-signer.

It’s also important to remember, if you co-sign for a $20,000 student loan during little Johnny’s freshman year in college, this loan has 4 years to grow and accumulate interest. If the borrower defaults on the payments, then you are responsible for paying back your new student loan.

What’s the Worst That Could Happen?

Any time you co-sign for a loan, it is in your best interest to consider that you are fully responsible for paying back the full amount of the loan, because in the eyes of the law and the financial institution you are. It could even be the case if the borrower passes away before repaying the debt.

In the unfortunate case the borrower passes away, Federal student loans are discharged after the death of the borrower.

Under the same circumstances with private loans, in many cases the co-signer is now fully responsible for the balance of the loan; this also works the other way as well if the co-signer passes away.

According to a April 2014 mid-year student loan update from the Consumer Financial Protection Bureau, from 2008 to 2011 there was a more than a 20% uptick in private loans being co-signed. In 2008 67% of private loans were co-signed often by a parent or grandparent, but by 2011, over 90% of loans were co-signed.

One scary highlight from the CFPB report found that borrowers  are discovering when a co-signer passes away, like a parent or grandparent, an automatic default occurs. This default can occur even if the borrower is in good standing and current on the loan. I’m sure you can imagine the confusion when borrowers received notices to pay the loan in full.

It never really occurred to me when I received my private student loan that if the borrower or co-signer of the loan were to pass away it could result in financial distress. If you are already in a private student loan with a co-signer, then it may be a good time to consider having life insurance on one another as a source of funds to pay off the loan in the event of a death.

Private Student Loans: My Story

I was accepted to study in Rome, Italy, but unfortunately I did not attempt to obtain anything more than Federal student loan funding for my study abroad trip, so I was forced to cancel. I told myself I would pursue my dream of studying in another country at any cost. I found a study abroad program in London and I was accepted. However I needed extra finances and more than the Federal government could spare. I started applying for private student loans, the university I planned to attend was a private university, which cost four times more than current in-state tuition. Because I did not have much of a credit score or any income to report, I asked my parents if they would co-sign to receive the funding I needed to study abroad.

After a short online application process with my parents, we were approved and the loan did exactly what I needed at the time; it helped pay for my tuition, room and board, and whatever other shenanigans London and the surrounding European countries had to offer. At that exact moment I could not have been happier, I was going to London and studying abroad in another country. But I didn’t focus on the fact my lender expected me to pay the loan back in full plus interest.

While I enjoyed my time in London, my private student loan put financial stress on myself and my parents. I never defaulted but I remember the pressure I felt to make sure it was never the financial responsibility of my parents. I couldn’t imagine putting my parents through a financial hardship all because I wanted to study abroad while I was in college. I made a commitment to pay off my private student loan first for a number of reasons, but most of all it was to make sure my family was not a story in the news that resulted in a son defaulting on a loan to only hurt my family’s financial situation.




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College Students and Recent Grads, Pay Down My Debt

7 Things You Need to Know About Private Student Loans

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When you realize you will have to take out loans to finance your college education, your best bet is to take out Federal loans because you are afforded protections that you are not otherwise granted with private loans. But the best case scenario is not what always happens. If you do end up taking out private student loans, there are seven things you need to know to handle your student loan debt.

1. “Private Student Loans” Defined

Private institutions such as a bank, credit union or other type of lender are responsibly for funding private loans. This is different than Federal student loans, which are backed by the Federal Government of the United States. With private loans, the lender (the entity that extended you the loan) sets the terms of the loans, including the interest rate (based on your credit), loan limit, repayment options, etc.

Whatever you can do to learn about your repayment options and restrictions (including a prepayment penalty) prior to taking out your student loans, the better off you will be because you can plan accordingly.

2. How Do You Know if You Have Private Student Loans?

If there are any gaps in funding after you receive your financial aid package from your university or college, you will have to fill them in with private loans. If you do not remember whether you did this during college, you can simply log into your student loan account and look at the loans. The loans will either be categorized as federal or private. Alternatively, you can call your loan servicer (Navient or Sallie Mae, for example) and ask the provider whether you have any private loans in your account. A final way to know whether you have any private loans in your name is to get your credit report (which is a good idea to do annually, anyways). All of your loans will appear on your credit report, and you will be able to identify which are private based on the name of the loan and service provider.

You can get copies of your credit report from all three credit bureaus by going to

3. Get Life Insurance If You Have a Cosigner

It is not uncommon to need a cosigner in order to get a private student loan because the lender is looking at your credit to determine whether you qualify. If this is the case for you, then you should consider life insurance that covers the loan amount. Here’s why: if you die, your private loans are not forgiven. This means that if you die, the cosigner on your private loans will still have to pay off your debt. There is no hardship requirement or loan forgiveness with private loans like there is with federal loans. (Often these stories make headlines – remember the story of the 27-year-old nurse who died and whose father was on the hook for a whopping $200,000 in student loan debt after he could not keep up with the payments? These stories are horrible, yet not uncommon.) If you have a cosigner on your private loans, be sure to read the fine print of your loan agreement. If the loans are not forgivable upon death, then you need to get life insurance in order to protect your cosigner if you die before the loans are repaid.

4. Repayment Options for Private Loans are More Restrictive than Federal Loans

Federal loans come with mandatory protections, including income-based plans and forbearance and deferment options, based on your circumstances. This is not the case for private loans. All repayment options are up to the lender, and private student loan lenders usually do not offer these flexible repayment options. That means you will be stuck with whatever the provider offers – possibly a standard, ten-year repayment plan or a longer, twenty-five year repayment plan. The point is that you are stuck with what they offer.

5. Pay Off Private Loans First Because of the Inherent Risk

If you have private student loans and Federal loans, you may be tempted to repay the loans by the highest interest rate first. This makes sense, mathematically speaking. However, it ignores the inherent risk of private student loans. If you have private student loans and something happens to you where you can no longer afford the payments, you may not be able to do anything about it if the lender is not willing to work with you. Conversely, with Federal loans, you have options based on your circumstances. This means your private loans are inherently riskier than your Federal loans. Because of the greater risk, you should prioritize repaying your private student loans, even if the private loans have a lower interest rate. This will reduce the risk you have associated with your student loan debt and put you in a better position financially.

6. Refinancing Your Federal Loans Turns Them into Private Loans

There is a lot of chatter lately about refinancing Federal student loans to get lower interest rates. This is especially the case for people who took out high interest rate loans for graduate programs, law school, and medical school. If you have Federal student loans with a 6.5%-8.5% interest rate, you can go through a company like SoFi*, Earnest or CommonBond* and refinance these loans to get a lower interest rate (just like you would if you were refinancing a mortgage on a house). What you need to know about refinancing Federal student loans is that you are turning your federal loans (with lots of protections) into private loans (with little protections). This may not be a good move because it increases your risk, even if it does lower your interest rate. 

7. Private student loans are not dischargeable in bankruptcy 

Private loans are generally not dischargeable in bankruptcy. This is not different than Federal loans, but it is worth noting because of the inherent risk associated with student loans in general. This means that if you have to claim bankruptcy, you will still owe your student loan debt afterwards. The only exception to this rule is a finding of undue hardship that is so great that you have no chance of ever increasing your income. But barring extreme circumstances, this means that you are stuck repaying your student loans, no matter what.


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College Students and Recent Grads, Life Events

The Danger in Outsourcing Your Finances

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Miles Teller, the 28-year-old star of the 2014 hit movie “Whiplash”, has a net worth estimated around $2 million. With two major franchise films in the works for 2015, there doesn’t appear to be any imminent threat to the young star’s cash flow. And yet, in a recent interview with Vulture, Teller admits to not having paid off his NYU student loans. His reasoning- “My business manager says the interest is so low, there’s no sense in paying them off.”

While investing in place of debt payoff may make sense when investment returns beat out interest payments, I wonder whether Teller has seen the statements verifying such returns. According to the U.S. Department of Education, a direct unsubsidized loan taken out between 2006-2013 runs at 6.8 percent interest. With the market performance of the last few years, a return greater than 6.8 percent is actually quite feasible, but is it sustainable and perhaps, more importantly- is Teller asking himself these questions?

The people we trust with our money, “business managers” or otherwise, may not necessarily have our best interests at heart. In the case of Teller, his manager may get a commission on investments, making them a more attractive option for him personally than debt pay off, regardless of the relative costs and returns for Teller.

Money managers, advisors, websites, banks, etc., all stand to benefit from the choices we make with our finances. While we’ll ultimately choose someone to store, grow and help manage our funds- never should we surrender complete control of our finances or agree to a strategy with blind trust.

How to Use and Choose a Financial Planner

Not only should you look for a financial planner whose expertise align with your unique needs and goals, you should also look into their background, know their standards of compliance and understand their fee structure.

Background Check. Verify the credentials of your advisor and check for a clean compliance background with the Financial Industry Regulatory Authority (FINRA) or the Securities and Exchange Commission (SEC).

Standard. Ask what standard of compliance your prospective financial professional adheres to- fiduciary or suitability? Advisors under the fiduciary standard are legally bound to do what’s best for you, putting you first in their planning and selection of strategy. Planners who use the suitability standard are required to provide “suitable” financial solutions, but not necessarily those that are best.

Fee Structure. Know which fee structure your planner is using. Commission-based advisors get paid when buying or selling a stock or other form of investment on behalf of a client. These advisors may have a bias as they profit from advising you to choose particular products. Fee-based planners only make money when you pay them for their counsel- they don’t get a cut from fund companies or insurers.

Ultimately, your financial advisor should be a tool in your money management arsenal- a source of information and sounding board for insight, not the sole, unchecked manager of all your assets.

How to Choose Financial Products 

Like financial advisors, not all financial products are created equally. Take the time to shop around before handing all your valuable personal information over to any financial services company. According to the FINRA Investor Education Foundation’s National Survey, nearly two-thirds of all credit card holders reported that they did not compare offers to find the best rates or conditions. This kind of comparison and examination of the fine print however is essential to finding the best financial products to fulfill your needs.

Where to Compare. Marketing material, even third party websites often have a bias when recommending products as they stand to benefit from you choosing one product or service over another. Use tools like those at MagnifyMoney that aggregate information- yields, terms, costs, etc.- on various financial products without bias.

How to Read Fine Print. Neutral review sites can help distill the most important fine print points into an easily digestible format. It also helps to know what fine print you should be looking for- fees, conditions, flexibility, risks, etc.

Beef Up Your Own Knowledge 

Finally, don’t forget to foster your own financial education. By understanding the basics of financial fundamentals- credit, debt, savings, and investments- you’ll know which questions are important to ask when making financial decisions.

If you find yourself making justifications or explanations of your financial strategy along the lines of , “My business manager (or advisor or banker) says….”, it’s probably a sign that you’ve outsourced too many of your financial interests.

At the end of the day, you and you alone have the most to gain or lose from your personal finances. While seeking the help of a professional may seem like the responsible thing to do, having a basic understanding of personal finance and wealth management principles can help you better choose the people and products with your best interests at heart and oversee their performance.



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College Students and Recent Grads, Pay Down My Debt, Reviews

Eastman Credit Union Student Loan Consolidation Review

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Eastman Credit Union (ECU) is based in Tennessee and Texas. Unfortunately, its website offers little to no information about its student loan consolidation product. This review aims to shed some light on the details so you can make a smarter decision regarding your student loans.

Refinancing Details

The maximum amount you can consolidate with ECU is $125,000 – that’s for undergraduate and graduate loans. You can consolidate both federal and private loans as well.

You can get a 10, 12, 14, or 15 year term. All terms are offered on a fixed rate that currently range from 6.50% – 8.00% APR. You can see current rates here.

If you were to borrow $20,000 on a 6.50% APR on a 10 year term, your monthly payment would be $227.10.

Pros and Cons of Eastman Credit Union Student Loan Consolidation

As with any loan offered on a longer term, be aware it will cost you more. This is due to paying more in interest over the life of the loan.

Longer loan terms aren’t necessarily a bad thing, as they can drastically lower your payments, making them more affordable. Just try and pay extra whenever possible.

While consolidating your student loans makes it easier to manage payments, you need to know the benefits you may sacrifice in order to consolidate.

Federal student loans come with many perks that disappear once you refinance or consolidate them. These benefits include deferment, forbearance, forgiveness, discharge, and income-based repayment plans.

Essentially, the flexibility you get with Federal student loans is taken away when you consolidate. Calculate exactly how much you’re saving by consolidating, and take into account your current and possible future job situation. You don’t want to end up in a rough spot where you’re struggling to afford your payments.

ECU has an asset recovery group that evaluates loans on a case-by-case basis in case borrowers are experiencing difficulty in making payments, but you don’t want to rely on a service like this just in case you’re not eligible.

The Fine Print

ECU has no prepayment penalty, origination fee, nor application fee. There are fees to pay if you’re late on a payment or your payment doesn’t go through, but the fee depends on the amount you owe. ECU was not particularly forthcoming with this information in a phone call.

Eligibility Requirements

Who’s eligible to consolidate student loans with ECU? As with any credit union, you must be a member to be eligible. Those that reside within a community on ECU’s coverage map can apply for membership, and there are additional sponsor and contractor companies they service as well.

Considering it only has locations within two states, not many people will be eligible to apply. If you don’t live within the area of coverage, scroll down a few sections to take a look at alternative lenders.

If you are within the area of coverage, you need to be 18 years or older and have a valid social security number. While your credit score mostly determines your interest rate, ECU also looks at your debt-to-income ratio in comparison to the amount you want to borrow.

Documents Needed to Apply

Before you start filling out the application (which can be completed online), get the necessary documents together so applying goes smoothly. Note that when you fill out an application with ECU, it uses a hard credit pull, which can lower your credit score.

You should have the following:

  • Driver’s License
  • Your salary and employment information
  • You’ll need loan statements for each of the loans you wish you consolidate
  • If you’re paid bi-weekly, you’ll need your last two pay stubs; if you’re paid weekly, you’ll need your last 4 pay stubs (they need a month’s worth)
  • Are you applying with a co-applicant? Their pay stubs will also be needed

When you begin the application process, you’ll be asked how much you want to borrow. Terms will be given to you on the following page based on the amount requested.

ECU also lets you save any progress you make on your application. You just have to create a password to access your application – it’s only saved in the system for 7 days.

The entire application process can be completed fairly quickly. The sooner you submit the documents needed, the sooner your funds can be received.

Who Benefits the Most from Consolidating With Eastman Credit Union?

It makes sense for those that are already members of ECU to check with the credit union first when consolidating their student loans. If you’re wary of online lenders and have an established relationship with representatives at ECU already, you might find peace of mind in being able to make an appointment at a local branch.


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What About Other Alternatives?

While ECU doesn’t have bad rates, you can still do better with other online lenders.

SoFi is the first online lender we recommend because of its low rates and benefits. Fixed rates range from 3.50% – 7.24% APR and variable rates range from 1.90% – 5.19% APR. There’s no maximum set amount you can borrow, and it offers terms up to 20 years instead of 15 years.

The added bonus with SoFi is that it offers unemployment protection. If you’re laid off from your job, SoFi can temporarily pause your payments and coach you on how to secure another job. There are no prepayment penalties or origination fees.

The only downside is there’s a list of eligible schools and programs SoFi services, so if your school or program isn’t on there, you’re not able to refinance. SoFi has been working to expand its reach, so call to see if your school is eligible.

SoFi logo

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*referral link

Another option specific for graduates is CommonBond*. It offers a maximum loan amount of $220,000 with a term of up to 20 years. Its fixed rate APR ranges from 3.74% – 6.49%, and its variable rate APR ranges from 1.93% – 4.98%. These terms are very close to what SoFi offers, and both lenders initially use a soft pull of your credit to give you your rates. A hard pull will only be used once you agree to move forward with the loan.


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*referral link

Lastly, if your school or program isn’t on either CommonBond or SoFi’s list, check out Citizens Bank. Undergraduates can refinance up to $90,000, graduates can refinance up to $130,000, and professionals can refinance up to $170,000. It offers the same 20 year term as the others. Its fixed rates range from 4.74% – 8.90% APR, and its variable rates range from 2.33% – 6.97% APR. Citizens Bank uses a hard credit inquiry.

citizens-bank (1)

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Aim to Get the Best Rates Possible

ECU doesn’t offer variable rates, and while variable rates are unstable, they do start off fairly low. If you know you can pay your student loans off quickly, you might want to look into the alternative lenders that offer a variable rate option.

ECU’s lowest rate – 6.50% – might be lower than what your current private and federal student loans are at (especially if you graduated several years ago), but most of these lenders start in the 3% or 4% range.

If you want to shop around, find lenders willing to use soft credit pulls initially, such as SoFi and CommonBond. You can get a feel for the kind of rates you’ll be offered, and you’re never under any obligation to accept a loan. Not satisfied with what they’re offering? Shop around within a 30-day window and your credit score won’t decrease as much.



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College Students and Recent Grads, Pay Down My Debt

Is Credit Card Debt Really That Bad?

Very Upset Woman Holding Her Many Credit Cards.

I recently had a tough time with a question that would seem to have an incredibly obvious answer.

“Is credit card debt really that bad?”

My client asked me this question a couple of weeks ago, and even though my brain immediately screamed “YES!!!!!” at full volume inside my head, I actually stumbled over the answer a little bit.

See, she’s 26. She has no husband or kids or anyone else who is financially dependent on her. She has no student loans or mortgage. All of her friends have at least a little bit of credit card debt. She wants to be able to enjoy herself now while she has relatively few obligations.

And she has a habit of enjoying herself to the tune of about $5,000 worth of credit card debt at a time. She has been finding ways to pay it off before it gets bigger than that, but I’ve been working with her to stop it from happening at all.

It’s been tough, and she finally just asked me outright whether all this work was really necessary? How bad is credit card debt anyways? Was it really that bad if it was just $5,000?

I didn’t answer her well right away, and the reason I stumbled is because I was focused on the wrong thing.

Yes, credit card is bad. But not for the reason I immediately gave and not for the reason you probably think either.

It’s Not about the Interest Rate

Let me get this out of the way first: paying interest on credit card debt is bad for your financial health. Even if the interest rate is low, you probably used the money to buy something that decreases in value as soon as you bought it.

Paying extra interest on top of the purchase price for something that loses value is a good way to lose money fast.

“But what about 0% credit cards?”

“But can’t I just do it for a little while and then stop once I have real financial responsibilities?”

“I’ll pay it off soon. It won’t actually cost me all that much.”

So yes, the interest rates are harmful. But there are plenty of ways to minimize them in both real and perceived ways if you really want to spend the money.

So no, it’s not just about the interest rate.

Here’s the REAL Problem with Credit Card Debt

The real problem with credit card debt isn’t the debt itself. The real problem is the habit of getting into credit card debt.

See, there’s only one path to financial independence. Just one. Every single person who has ever gotten there has done the exact same thing.

It looks like this:

  1. Spend less than you earn.
  2. Put the difference into savings accounts.

That’s it. That’s the only way. You simply have to take those two steps again and again, month after month, year after year.

There is no other path.

And if you have the habit of getting into credit card debt, you are acting in direct opposition to that two-step path.

In order to get into credit card debt you have to spend more than you earn. That violates Step 1 above. It makes Step 2 impossible.

All of which leads to this one simple truth: the habit of getting into credit card debt makes it impossible to ever be financially independent.

Your Life. Your Freedom.

Looking back at what my client was asking, one of the key things that stands out is the idea that because she’s young and single she doesn’t have anyone who is financially dependent on her.

Maybe you’re in the same boat and kind of feel the same way. Like this is your one chance to be a little bit free.

To some extent that’s absolutely true. And I would encourage you to take advantage of some things that may be a little more difficult if you have a family down the line.

But I would also encourage you to think about the one person to whom you owe a tremendous amount of responsibility.


You have your own goals and dreams. Things you would like to be able to do down the road. Things like quitting your job and traveling the world for a year. Things like eventually having enough money to never need another paycheck.

Whatever they are, these are the things that define your financial independence. They’re the things that are actually most important to you.

And the only way you can reach them is if you start building the habits today that will make them possible:

  1. Spend less than you earn.
  2. Put the difference into savings accounts.

That doesn’t mean you can’t enjoy yourself now too. There’s always a balance to be struck between saving for tomorrow and spending on today, and I’m personally a huge proponent of making room for both.

But that balance has to fit within the boundaries defined by your income.

It’s the only path to financial freedom.

Dealing with debt? Download our free guide to help you dig out of debt!




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College Students and Recent Grads, Life Events

The Millennial Insurance and Protection Planning Checklist

Geeting advice on future investments

Cue the yawns, because today we’re talking about insurance, various policies and coverage, and estate plans. While many young professionals justifiably tune out when these kinds of personal finance topics surface, it’s important that you hang in there for at least one conversation about how to properly protect yourself and your stuff.

Your insurance shouldn’t start and end with health insurance, and if it currently does, it’s time to sit up and take notice. There are a number of other areas of your life that you’ll likely want to protect — and it doesn’t necessarily cost you much out of pocket every month to do that.

Here’s what you need to know about protection planning if you’re a member of Gen Y.

Protect Yourself and Your Possessions

Car insurance is a no-brainer if you own a car and drive it, as it’s illegal to operate your vehicle without some sort of coverage. But take the time to actually understand your policy and what it covers. Do you only carry liability insurance? If so, do you need comprehensive coverage or uninsured motorist protection?

When it comes to going above and beyond to protect your stuff, most Gen Yers can start with renter’s insurance. The owner of the property does carry insurance to cover damage to the building itself, but that policy won’t cover your possessions. Renter’s insurance costs most people very little — from $5 to $30 a month — but it will offer coverage again the loss or damage of your personal property.

Insurance considerations remain if you own instead of rent. If you take out a mortgage on a home, you’ll need to purchase a certain amount of insurance on the property you own. There may be exemptions listed under your policy, so review those and ensure the coverage you have is sufficient. Depending on the area you live in, you may need to purchase additional types of policies (like flood insurance) to protect the investment you’ve made in your home.

Finally, you have the ability to protect what’s arguably your greatest asset when you’re young: your ability to earn an income. Disability insurance — specifically long-term disability — can help replace your income if you’re injured and unable to return to work. Long-term policies can replace up to about 66% of your income and can last for a period of years or even until retirement age.

Other Kinds of Insurance You May Want to Consider

While those options commonly apply to members of Gen Y, you have even more choices when it comes to insurance. Before getting overwhelmed by the amount of ground we’re covering, bear in mind that you don’t need a policy for each kind of insurance listed here. Everyone’s situation is different and your insurance needs likely won’t be exactly the same as your neighbor’s.

That being said, make sure you’re not missing out on any kind of policy that you may need because of a special circumstance or because your situation is simply different:

  • Umbrella insurance: this type of policy serves as a kind of insurance safety net, and can cover the difference in actual damages when you make a claim and the limits of your other insurance policies.
  • Valuables insurance: this is usually an additional insurance to something like homeowner’s or renter’s insurance, as those policies won’t always cover items that are difficult to replace (think jewelry and art).
  • Short-term disability insurance: this kind of disability will protect you for a very brief period of time if you’re out of work. For many people, saving up an emergency fund consisting of a few months’ worth of expenses will be sufficient protection here.

And of course, depending on your situation, you also need to think about life insurance.

The Big Question: Do You Really Need Life Insurance?

If anyone has ever attempted to sweet-talk you into buying a life insurance policy, there’s a good chance that person acted as a broker, worked on commission, and pushed whole life insurance. While whole life policies make sense for a very small segment of the population (usually those who are extremely wealthy), the rest of us are better off considering term life insurance.

Term life insurance will cover, as the name suggests, a set term. That could be 10 years or it could be 30. You can choose a term that works best for you. If you pick up a policy while you’re young, your monthly payments will be extremely affordable and easy to manage.

But that doesn’t mean you need to go find a term life policy today. Depending on your situation, you may be just fine without. Here’s a quick list of questions to ask yourself to determine if you should look into purchasing protection:

  • Do you have any debt that would not be forgiven at the time of your death?
  • Are you married or with a serious, long-term partner?
  • Does anyone financially rely on your income?
  • Do you have children?

If you answered “yes” to any of these questions, you need to look further into term life insurance. You need protection if you have anyone dependent on your income — that most certainly counts children and it could count a spouse, partner, or other loved ones if they too need your income in order to get by.

On the other hand, if you’re single with no debt and no other individuals rely on your income, life insurance might not be necessary. The same can be said even if you have a spouse or partner, but that person does not need your income to handle expenses or any needs.

Yes, You’re Young — and Yes, You Need an Estate Plan

In your 20s and 30s? A will is probably the second-farthest thing from your mind. And a full estate plan is the absolute farthest. But that’s a big financial mistake, especially if you have assets, dependents, or children.

You don’t need to amass millions of dollars to benefit from an estate plan. Any amount of assets you hold in your name warrants consideration, so don’t skip over this issue because you don’t think you have enough money to worry about it. Estate planning becomes even more important when you have people who financially depend on you. And if you have children, it’s critical.

Although it’s unpleasant to think about, take a moment to ask yourself what would happen if you were to pass away. What would happen to your financial assets? Your possessions? Who would take guardianship of your children?

Without a will and estate plan that clearly covers the answers you want to these questions, the decisions are made by a judge in probate court. A stranger will decide what happens to your assets and your children. This process is public and it can be long and arduous for your loved ones that you may leave behind.

Even though you’re young, it’s smart to set up a will and consider an estate plan as soon as you’re able to do so. Seek out an attorney in your area who can help — relying on virtual lawyers via online businesses may cause trouble down the road if their documents don’t hold up and court. (Remember that every state has different laws, so you’d be wise to work with an attorney who understands the issues relevant to your location.)

If you need help finding an attorney to help with this, ask a CPA or CFP® if they can provide recommendations.

You may not be interested in any of these issues with protection planning, or you may prefer to avoid them altogether. But the reality is that you are accumulating assets (and that includes yourself).

If you’re still struggling to give protection planning the thought and consideration it deserves, consider this: setting up proper insurance and documents for your assets isn’t just for you. It also provides protection and peace of mind for your family and loved ones, too.



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College Students and Recent Grads, Pay Down My Debt

19 Options to Refinance Student Loans – Get Your Lowest Rate

Mixed Race Young Female Agonizing Over Financial Calculations in Her Kitchen.

Updated: May 12, 2015

Are you tired of paying a high interest rate on your student loan debt? Are you looking for ways to refinance student loans at a lower interest rate, but don’t know where to turn?

Below, you’ll find the most complete list of lenders currently willing to refinance student loans. You can also go directly to our comparison tool, which lets you see student loan terms all at once, with no need to give up personal information.

But before you do that read on to see if you are ready to refinance your student loans.

There is good news: in recent years, the student loan refinancing market has started to come back. Not just with traditional banks, credit unions and finance companies, but even the addition of new businesses that specialize in refinancing student loan debt.

Loan approval rules vary by lender. However, all of the lenders will want:

  • Proof that you can afford your payments. That means you have a job with income that is sufficient to cover your student loan and all of your other expenses.
  • Proof that you are a responsible borrower, with a demonstrated record of on-time payments. For some lenders, that means that they use the traditional FICO, requiring a good score. For other lenders, they may just have some basic rules, like no missed payments, or a certain number of on-time payments required to prove that you are responsible.

If you are in financial difficulty and can’t afford your monthly payments, than a refinance is not the solution. Instead, you should look at options to avoid a default on student loan debt.

This is particularly important if you have Federal loans.

Don’t refinance Federal loans unless you are very comfortable with your ability to repay. Think hard about the chances you won’t be able to make payments for a few months. Once you refinance, you may lose flexible Federal payment options that can help you if you genuinely can’t afford the payments you have today. Check the Federal loan repayment estimator to make sure you see all the Federal options you have right now.

If you can afford your monthly payment, but you have been a sloppy payer, than you will likely need to demonstrate responsibility before applying for a refinance.

But, if you can afford your current monthly payment and have been responsible with those payments, then a refinance could be possible and help you pay the debt off sooner.

Is it worth it? 

Like any form of debt, your goal with a student loan should be to pay as low an interest rate as possible. Other than a mortgage, you will likely never have a debt as large as your student loan.

If you are able to reduce the interest rate by re-financing, then you should consider the transaction. However, make sure you include the following in any decision:

Is there an origination fee?

Many lenders have no fee, which is great news. If there is an origination fee, you need to make sure that it is worth paying. If you plan on paying off your loan very quickly, then you may not want to pay a fee. But, if you are going to be paying your loan for a long time, a fee may be worth paying.

Is the interest rate fixed or variable?

Variable interest rates will almost always be lower than fixed interest rates. But there is a reason: you end up taking all of the interest rate risk. We are currently at all-time low interest rates. So, we know that interest rates will go up, we just don’t know when.

This is a judgment call. Just remember, when rates go up, so do your payments. And, in a higher rate environment, you will not be able to refinance to a better option (because all rates will be going up).

We typically recommend fixing the rate as much as possible, unless you know that you can pay off your debt during a short time period. If you think it will take you 20 years to pay off your loan, you don’t want to bet on the next 20 years of interest rates. But, if you think you will pay it off in five years, you may want to take the bet. Some providers with variable rates will cap them, which can help temper some of the risk.

Places to Consider a Refinance

If you go to other sites they may claim to compare several student loan offers in one step. Just beware that they might only show you deals that pay them a referral fee, so you could miss out on lenders ready to give you better terms. Below is what we believe is the most comprehensive list of current student loan refinancing lenders.

You should take the time to shop around. FICO says there is little to no impact on your credit score for rate shopping as many providers as you’d like in a 30 day period. So set aside a day and apply to as many as you feel comfortable with to get a sense of who is ready to give you the best terms.

Below we highlight the student loan refinance companies that offer the lowest interest rates.

  • SoFi*: Fixed interest rates start as low as 3.50%, and variable rates start as low as 1.90%. SoFi offers student loans to borrowers who graduated from a selection of Title IV accredited colleges and universities. You need to be employed, or have a job offer with a start date in 90 days. You also must be able to demonstrate a strong cash flow.
  • CommonBond*: CommonBond offers fixed rates from 3.74% and variable rates from 1.93%. You need a degree, a job and a stable cash flow. They will also review your payment history with other lenders. CommonBond focuses on people with graduate degrees, and can offer up to $220,000. They will not refinance undergraduate degrees.
  • Earnest: Just like SoFi, Earnest offers fixed interest rates starting at 3.50% and variable rates starting at 1.90%. You need to have a job or an employment offer. You need an emergency fund of at least one month. You also must have a positive bank account balance and a budget that makes sense. If you have had credit in the past, you need a history of on time payments.
  • Darien Rowayton Bank: Just like the other market leaders, Darien offers fixed rates from 3.50% and variable rates from 1.90%. You will need to have a degree and a full time job. Darien will review your credit history and your cash flow.

Below is an alphabetical listing of all providers we have found so far. This list includes credit unions that may have limited membership. We will continue to update this list as we find more lenders.

  • Alliant Credit Union: In order to qualify, you need to have a bachelor’s degree. The minimum credit score is 700, and you need two years of employment and a minimum income of $40,000. They offer variable interest rates, starting at 6%. Anyone can join this credit union by making a $10 donation to Foster Care for Success.
  • Citizens One (Citizens Bank): To get the best deal, you should have at least a bachelor’s degree. They will look at your credit history, and want to make sure that at least the last three payments on your student loans have been made on time. If you don’t have your degree, you need to have made the last 12 payments (principal and interest) on time. You must make at least $24,000 per year. They offer fixed rates starting at 4.74% and variable rates from 2.33%.
  • CommonBond*: CommonBond was highlighted earlier in this post, with fixed and variable rates available. This is only for graduate degrees.  Fixed rates start at 1.93% and variable rates start at 3.74%.
  • CommonWealth One Federal Credit Union: Variable interest rates start at 3.25%. You can borrow up to $75,000 and need to be a member of the credit union in order to qualify.
  • Credit Union Student Choice: This is a tool offered by credit unions. The criteria and pricing vary by credit union. The credit unions have limited membership, but you can find out if you qualify on this site.
  • CU Student Loans: You will need to have graduated from an eligible school in order to qualify. You need to make at least $2,000 per month, and they will review your credit history. Variable rates are available, starting at 2.92%. You will be matched with a credit union that anyone can join.
  • Darien / Rowayton: They will refinance undergraduate, Parent PLUS and graduate loans including MBA, Law, Medical/Dental (Post Residency), Physician Assistant, Advanced Degree Nursing, Anesthetist, Pharmacist, Engineering, Computer Science and more degrees. Variable rates as low as 1.92% with a rate cap and 3.50% fixed.
  • Earnest. They will look at alternative criteria to try and approve you for a lower rate, like your employment history or bank account balances. Variable rates as low as 1.92%.
  • Eastman Credit Union: They don’t share much of their criteria publicly. Fixed rates start at 6.5% and you must be a member of the credit union. Credit union membership is not available to everyone.
  • EdVest: They offer refinancing options for private loans used to finance attendance at a Title IV, degree-granting institution. If the loan balance is below $100,000 you need to make at least $30,000 a year. If your balance is above $100,000 you need to make at least $50,000. Variable rates start at 3.580%, and fixed rates start at 4.40%.
  • Education Success Loans: You must be out of school for at least 30 months, and you must have a degree. You also need a good credit score, with on-time payment behavior. Variable and fixed loan options are available, with rates starting at 4.99%.
  • IHelp: This service will find a community bank. Community banks can actually be expensive. You need to have 2 years of good credit history, with a DTI (debt-to-income) of less than 45% and annual income of at least $24,000. Fixed rates are available, starting at 6.22%.
  • Mayo Employees Credit Union: You need at least $2,000 of monthly income and a good credit history. Variable rates are available, starting at 4.75% and you would need to join the credit union.
  • Navy Federal Credit Union: This credit union offers limited membership. For men and women who serve, the credit union can offer excellent rates and specialized underwriting. Variable interest rates start at 3.51%.
  • RISLA: You need at least a 680 credit score, and can find fixed interest rates starting at 3.99%. This is only available to residents of Rhode Island.
  • SoFi*: You must have a bachelor’s or graduate degree in order to apply, and you must have demonstrated on-time payment behavior. Both fixed and variable rates are available, with rates starting at 1.90% and fixed rates starting at 3.5%.
  • Upstart*: You need to have a degree (or be graduating within 6 months). A minimum FICO of 640 is required. Fixed interest rates starting at 5.7%. This is more of a traditional personal loan than a long term student loan refinance.
  • UW Credit Union: $25,000 minimum income required, with at least 5 years of credit history and a good repayment record. Fixed and variable interest rates are available, with variable rates starting at 3.51% and fixed rates starting at 7.49%. You need to join the credit union in order to refinance your loans.
  • Wells Fargo: As a traditional lender, Wells Fargo will look at credit score and debt burden. They offer both fixed and variable loans, with variable rates starting at 3.49% and fixed rates starting at 6.74%. Wells Fargo does not have a tradition of being a low cost lender.

You can also compare all of these loan options in one chart with our comparison tool. It lists the rates, loan amounts, and kinds of loans each lender is willing to refinance.

Don’t forget to follow us on Twitter @Magnify_Money and on Facebook.

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College Students and Recent Grads, Pay Down My Debt, Reviews

UW Credit Union Student Loan Refinance Review

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Looking to refinance your student loans, and live in Wisconsin? You may have already heard that UW Credit Union can refinance your student loans for you. If simplifying your payments and possibly lowering your interest rates is what you’re looking for, read on to find out what UW Credit Union can offer you.

Refinancing Details

When you refinance with UW Credit Union, you can consolidate $5,000 to $45,000 of student loan debt – both federal and private. The repayment term is 15 years, and you have the option to make interest-only payments during the first 2 years of your loan.

There are two loan options: variable and fixed rate. The variable rate is as low as 3.51% APR and as high as 10.26% APR, though rates can change quarterly. UW Credit Union specifies the cap is 15%.

The fixed rate ranges from 7.49% – 13.24% APR.

If you borrow $20,000 at a fixed rate of 7.49% APR for 15 years, your monthly payment will be $185.29.

You can receive the typical 0.25% interest rate deduction if you enroll in automatic payments as well.

Your interest rate is determined by your credit score, credit history, and type of school you attended. You can have a cosigner if your credit isn’t up to par. There is a cosigner release after 36 consecutive timely payments.

Longer Repayment Terms

Keep in mind that while a longer repayment term lessens your monthly payment, it increases the amount you’ll ultimately pay over the life of the loan.

In our above example, borrowing $20,000 at 7.49% APR for 15 years gives you a monthly payment of $185.29. You’ll make 180 payments, which equals $33,352.20. That means you’re paying $13,352.20 in interest!

Of course, you can always pay extra on your loans – there’s no prepayment penalty associated with UW Credit Union’s student loan refinance program. Just keep that in mind before you fall for the lower monthly payment and are content to stick with it.

If you’re in a rough spot right now and need that lower monthly payment, that’s fine, but do your best to pay extra when your situation improves.

A Word on Refinancing Federal Student Loans

If you’re refinancing Federal student loans, you need to be aware you’ll lose some important benefits associated with federal loans. For example, deferment, forbearance, forgiveness, and any income based repayment plans typically go out the door when you refinance.

If you’re in the military, you also lose out on an interest rate deduction under the Servicemembers Civil Relief Act for both Federal and private student loans taken out prior to enlisting.

In addition, most Federal student loans are fixed rate loans. While lower interest rates on variable rate options look attractive, know it means your payment could increase at any time. Fixed rates mean stability, even if they’re a tad higher.

Make sure refinancing your federal loans is worth the tradeoff. You can use UW Credit Union’s refinance savings calculator here to see what rates you’re eligible for, and how much you’ll save.

The Fine Print

As mentioned, there are no prepayment penalties with this loan, and there is also no origination fee.

If you’re late on a payment, you’ll have to pay 5% of the amount past due, or $10 – whichever is less.

If your payment fails to go through for any reason, you’ll have to pay a $15 fee.

UW Credit Union does receive an F for it’s lack of transparency and no soft pull to view rates before applying.


UW Credit Union has a list of eligibility requirements to look over before you apply to refinance with them:

  • You have to be a member of UW Credit Union to get your student loans refinanced
  • You must be age of majority in your state of resident when you apply (usually 18)
  • You must be a U.S. citizen or permanent resident with a Social Security number
  • You need a yearly salary of $25,000 (variable rate only)
  • Your debt-to-income ratio should be “reasonable” (likely around 35%)
  • You should have built up at least 5 years of credit history (student loans excluded)

Wondering what’s needed to become a member? You have to be associated with the University of Wisconsin System (any of the 26 branches) or Madison College in some way, whether you’re a student, faculty, staff, or alumni. You can also live or work within 5 miles of a branch.

Documents Needed to Apply

Before you begin the application process with UW Credit Union, you’ll want to have the following documents and information handy:

  • Personal Information: You’ll need your Social Security number, the address of your school, your address, and driver’s license number.
  • Employment Information: You’ll be required to list your current employer, so have the address and phone number ready. You should also know your annual salary.
  • Contact Information for Nearest Relative: This relative can’t be your cosigner (if you apply with one), and he or she can’t live at the same address as you. Have his or her phone number and address ready.
  • Student Loan Information: You should have your most recent student loan statement scanned in (or have a PDF copy).
  • Cosigner Information: If you’re applying with a cosigner, you’ll need the same information for him or her as you need for yourself.

The application process takes place with Cology, a company partnered with UW Credit Union to process the student loan applications.

Be aware Cology uses a hard credit inquiry when you apply, so your credit score may be affected.

Additionally, UW Credit Union states it may take 2 – 4 weeks to complete the application process. It has an entire timeline you can view so you know what to expect.

Who Benefits the Most from Refinancing With UW Credit Union?

Unless you’re a member of UW Credit Union already, you’ll likely receive better rates elsewhere (and with less stringent eligibility requirements).

There are other online lenders who don’t require 5 years of credit history, and you won’t need a cosigner to apply with them, either.


Apply Now


These lenders are worth taking a look at even if you’re a member of UW Credit Union.

What Are the Other Alternatives?

SoFi can be a great option for eligible applicants – it has a specific list of schools and programs it services. The maximum repayment term is 20 years instead of 15, and there is no origination fee. Fixed rates range from 3.50% – 7.24% APR (UW’s starting rate is higher), and variable rates range from 1.90% – 5.18% APR. If you have more than $45,000 in student loan debt, you’ll be happy to know SoFi has no maximum loan amount.

SoFi logo

Apply Now

*referral link

Is your college not on SoFi’s list? Citizens Bank can be a good option for those not eligible for SoFi. It also has a maximum repayment term of 20 years, and its fixed rates range from 4.99% – 9.14% APR. Its variable rates range from 2.58% – 7.22% APR. The maximum loan amount is $90,000 for undergraduates and $170,000 for graduates. There’s no origination or prepayment penalty with Citizens Bank, either.


Apply Now

Look Out For Yourself

The number one thing to keep in mind when refinancing your student loans is to look out for yourself. You want to ensure you get the best rates available. As you can see, other lenders clearly have better terms than UW Credit Union, so don’t assume the first approval you get is the best (even if it’s from a credit union).

You should shop around to get the best rates available. Shopping around in the span of 30 days or less, or looking for lenders that initially use a soft pull of your credit, will do the least amount of damage to your score.



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College Students and Recent Grads, Life Events

One Page Guide to Financial Success After College Graduation

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College Students and Recent Grads, Life Events

The College Graduate’s Financial Checklist

Students throwing graduation hats

A recent national survey of over 1,000 millennials who graduated college between 2011 and 2014 revealed their biggest financial regrets:

  • Not saving enough: 31%
  • Not learning personal finance in school: 26%
  • Not being more careful about loans and debt: 23%
  • Not establishing credit sooner: 19%
  • Getting hit with fees: 12%
  • Missing payments: 10%
  • Other: 5%

[Find full survey results here]

We’ve used the top four regrets to create a financial checklist tailored to current college graduates. Hopefully, the mistakes of your older peers can help provide a guide towards financial health starting right now!

MagnifyMoney’s Financial Checklist for College Graduates

We encourage you to keep this calculation and goal in mind when making your early money choices right out of school:

Calculation: [How much are you making per month] – [student loan payment] = what you have to spend on other expenses (ie: rent, car, saving for retirement)

Goal: Keep your fixed expenses (student loan payment, rent, cost of transportation) under 50% of your monthly take home pay

1. Not Saving Enough

  • Establish a savings account (preferably one with at least 1.00% APY)
  • Automate a portion of each paycheck to go right into savings
  • Do you have an employer matched retirement account [401(k) or 403(b)]?
    • Contribute at least enough each paycheck to get the match
    • If you can afford more, go up to 15%
  • No employer sponsored retirement account or self-employed?
    • Contribute to an IRA or SEP-IRA for self-employed (either traditional or Roth) each year

2. Not Handling Student Loans Carefully

Step 1: Find and list all loans (Federal and Private) which lenders own them

  • Tip: Use NSLDS to keep track of Federal loans. A credit report can be a good starting place to track private lenders.

Step 2: Determine how much are your monthly payments?

Step 3: When will your first payment be due

Step 4: If you have a Federal loan see if you are eligible for loan forgiveness and/or income-based repayment programs

  • Sign up for programs based on your eligibility

Step 5: Look into refinance options if you’re willing to give up the federal protections (forgiveness and income-based repayment plans) or Federal loan consolidation options (tip: be sure to check if you’d still be giving up protections)

Step 6: Automate payments on loans once grace period ends

Goal: Use student loan monthly payment to determine how much you can afford to pay on the rest of your monthly expenses (ie: rent and car payment).

3. Not Learning About Personal Finance in School

Understand these basics

  • Set financial goals
  • A strong credit score will help keep the rest of your financial life less expensive
  • Budgeting is an important tool. Understand the inflow and outflow of your cash and only spend what you can afford
  • Compound interest will be your best friend or worst enemy.
  • Don’t be afraid to invest, but avoid being emotional and yanking money out when the market takes a downturn
  • Credit card debt is never financially healthy nor necessary
  • Develop the saving habit early and practice it monthly

Read these books and websites:

Listen to these podcasts:

Not all these styles of delivering money knowledge will appeal to you. The trick is to find one that stimulates your desire to learn more about finance, take control of debt and feel empowered by money. 

4. Not Establishing Credit

Step 1: Get a credit card
Step 2: Make monthly purchases of no more than 20% of your total available credit limit
Step 3: Pay off your card on time and in full each month

Can’t get a regular credit card?

  • Get a secured card, which will require you put down a deposit (between $50 – $200 depending on the card).
  • Repeat the same steps as with a regular credit card and you’ll build your score to 680+ and be eligible for an unsecured credit card.

[Search for a secured card here]

Deal with any negative information

  • Bring any outstanding accounts current
  • Deal with items in collections [Go here for more information]
  • Continue pumping positive information on to your credit report by using your credit card responsibly

Understanding your credit report

  • A credit score is based off information on your credit report, so it’s important to ensure your report is accurate
  • Once a year, you can download your credit report from each of the 3 credit bureaus (Experian, Equifax, TransUnion) by going to
  • You can track your credit score for free by using on of these sites or credit cards

Don’t Be Afraid to Ask for Help

Money may still be a taboo topic for many, but the only way to get reliable help is to just ask! Don’t let fear or shame keep you in debt. You can always reach out to us by emailing

Find our simple, visual checklist here.


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College Students and Recent Grads, News

Poll: Despite debt, 58% of recent grads say they’re better off than their parents

Students throwing graduation hats

While over 60% of recent college grads report the burden of student loan debt, 58% believe their finances are in better shape than their parents were at their age, according to a new national survey.

The survey asked 1,000 adults under age 35 who graduated with a new college degree in the last 4 years (2011 or later) about their finances and student loans.

Biggest regrets of recent college grads

Savings, a lack of practical personal finance education, and not being more careful about debt are among the biggest regrets of those surveyed:

  • Not contributing enough to savings / retirement: 31%
  • Not learning practical finance / credit skills in school: 26%
  • Not being more careful about debt and loans: 23%
  • Not establishing credit sooner: 19%
  • Getting hit with fees: 12%
  • Missing payments: 10%
  • Other: 5%

A divide among those with and without loans

Among those with loans, only 54% say they are better off than their parents were at their age. But among those without loans 66% believe they are better off now. 40 million borrowers face an average of $30,000 in student loan debt according to the Consumer Financial Protection Bureau.

And in the survey, 23% of borrowers reported over $50,000 in student loan debt. Approximately one third of those borrowers reported Graduate or higher degrees. 50% reported receiving a Bachelor’s as their highest degree.

Among those with a student loan debt balance, the priorities of regrets change, with significantly more regrets about debt:

  • Not being more careful about debt and loans: 32%
  • Not contributing enough to savings / retirement: 29%
  • Not learning practical finance / credit skills in school: 24%
  • Not establishing credit sooner: 13%
  • Getting hit with fees: 12%
  • Missing payments: 11%
  • Other: 4%

No divide in confidence in the future

Having student loans doesn’t appear to temper expectations about future financial well being.

  • 64% of grads without student loans feel they will be better off than their parents in the future.
  • 63% of those with student loan debt also feel they will be better off than their parents.

Even among recent graduates with the burden of $50,000 or more in debt, 61% believe they will be better off financially than their parents in the future.


Those with Associate degrees are most confident, with 66% saying they will be better off than their parents, versus 60% of Graduate degree and 63% of Bachelor’s degree recipients.

“This is the first wave of Millennials that graduated into a growing job market, and their measured optimism reflects growing opportunities for those on the right side of the education divide, whether or not they have debt,” says Nick Clements, CEO of

Payoff under control

Despite debt burdens, most grads have repayment well under control.

  • 60% of recent grads with loans believe they will be able to pay them off in 10 years or less, the standard repayment period for Federal loans.
  • Among the 15% of grads who report more than $50,000 in debt, that percentage falls to just 33%. Within this group, 38% believe they will take more than 20 years, or never pay off their student loan debt.
  • Among all student loan borrowers, 5% said they will ‘never’ be able to pay off all the debt.

Low awareness of generous Federal help

Among grads with student loan debt, just 40% are aware of the Federal government’s Pay As You Earn or Income Based Repayment programs.

These programs allow borrowers to cap payments at 10-15% of discretionary income, and forgive loans which are not paid off after 20-25 years.

All student borrowers of Federal loans are eligible to participate in at least one of these programs if it will bring their payments below the standard 10 year repayment plan’s payments.

“While there is a growing number of private lenders ready to refinance student loans and offer lower rates, every Federal borrower should first look at these income based repayment options. They are incredibly generous, and offer a means to avoid a lifetime of debt for many borrowers,” says Clements.

The current rate for newly disbursed Federal Undergraduate loans is 4.66%, but for Graduate level loans it is 7.21%. From 2006 – 2013, when the Bipartisan Student Loan Certainty Act went into effect, some Federal Undergraduate loans were disbursed with rates as high as 6.8%.

Many student loan refinance lenders currently offer rates below 5% to qualified borrowers.

Steering clear of credit card debt

Just 32% of recent grads report carrying credit card debt. Though among those with student loans it rises to 39%, versus 21% among those with no student loans outstanding.

8% of those with student loan debt of $50,000 or more report credit card debt of $20,000 or more.

“The incidence of credit card debt among recent grads is significantly lower than among the broader population, which is closer to 40%, and illustrates the impact of the 2009 CARD Act on campus credit card marketing, but also a reveals a healthier approach to debt by this post financial crisis cohort. We still don’t know if avoiding credit card debt is the new normal for this generation. Credit card marketers will certainly be sending them offers in the mail regularly, and their discipline may not last a lifetime,” says Clements.

The poll was conducted online from April 19 – 24, 2015 by Survata using a nationally representative sample of 1,000 adults under the age of 35 who reported completing a new college degree within the last 4 years (Associate’s, Bachelor’s, or Graduate / Post Doctoral).



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College Students and Recent Grads, Eliminating Fees, Life Events

When to Avoid a Company 401k

Man Paying Bills With Laptop

Gone are the days of workers depending upon pensions when they retire. Today, instead of offering defined benefit pensions guaranteeing an employee a monthly payment for the rest of his or her life, employers are moving to more employee-managed retirement savings plans.

Today, more employers offer a 401k plan – if they have an employer-based plan at all. With a 401k, employees make a defined contribution from their income each year. With a pension plan, employees knew exactly how much income they could depend on each month during retirement. Now, it is up to the employees to determine how much they need to save in order to reach their retirement savings goals.

A 401k allows employees to make defined contributions, pre-tax (or post-tax), towards retirement. If you contribute to a traditional 401k, contributions are automatically deducted from your paychecks each pay period, pre-tax. As a result, you don’t pay taxes until money is withdrawn from the account and you cannot withdraw money before 58 ½ without penalties. Some employees offer the option to contribute post-tax in a Roth IRA, so money withdrawn in retirement will not be taxed.

With this change toward employee-directed retirement, rather than retirement guaranteed by the employer, it is up to you to make the best decisions regarding your retirement savings. This could mean it’s best to avoid a company 401k.

Take a look at these situations in which you should not pay into your employer’s 401K, and see if any of them apply to you.

No Employer Match

Many employers provide a match to their employees’ 401k contributions. Employer matches vary greatly by employer, but a common example of this is $0.50 per $1.00, up to 6% of employees’ pay.

Let’s say you earn 40,000 per year at your current job, and your employer provides a $0.50 per $1.00 match, up to 6% of your pay. If you were to contribute the full 6% of your pay annually, you would contribute a total of $2,400 to your 401K over the course of a year. Your employer would then contribute $0.50 for every dollar you contributed, for a total of $1,200 for the year.

In total, over the course of the year your 401K would contain $3,600, and you only would have contributed $2,400 of the balance.

But if your employer does not provide a match, it may be time to reconsider contributing to its 401K plan. Never walk away from an employer match, as it is basically free money, but if your employer does not provide a contribution match, it may be time to consider other options like saving for retirement in a traditional or Roth IRA.

You Have Reached The Contribution Limit

Effective January 1, 2015, the 401k contribution limits are $18,000 if you are age 49 and under. If you are 50 or older, you can contribute an additional $6,000 above and beyond the $18,000 regular contribution, for a total of $24,000. Of course, you are free to contribute less to a 401K, but saving as much as possible for retirement is always best.

Once you have reached the contribution limit on your 401k, you cannot make any more contributions pre-tax, and it is time to consider alternative investments.

One good alternative is a Traditional IRA. Contributions are made to a traditional IRA after tax, meaning that you pay taxes, and then make contributions out of your paycheck. For 2015, individuals can contribute up to $5,500 per year to a traditional IRA if they are 49 and under. You can contribute up to $6,500 per year if you are 50 or older.

Another solution for aggressive savers is a taxable account such as stock index funds or tax-free municipal bonds. When using taxable accounts such as these, you can expect to pay 15% on long-term gains and qualified dividends. Additionally, contributions to these plans are made after-tax. However, the benefits of using accounts such as these include being able to withdraw from them for things such as children’s college expenses before age 59 ½ without additional penalties and fees.

You Qualify For a Roth IRA

If you employer does not offer a 401k match – or a 401k plan at all – and you meet income thresholds, then a Roth IRA may be an excellent option for your retirement savings.

A Roth IRA allows individuals whose modified adjusted gross income, which you can calculate at the IRS website, is less than $135,000, or married couples whose income does not exceed $195,000 to contribute to their retirement.

A Roth IRA is different from other accounts, though, because of the way taxes are handled. Contributions are made after tax. However, once the initial contribution is made, you enjoy tax-free growth as long as you follow the rules:

  • 49 and under can contribute a maximum of $5,500
  • 50 and over can contribute up to $6,500
  • You can withdraw your contributions (not growth) at any time without penalty

How much can a Roth IRA save in taxes? If you contribute $5,500 per year to a Roth IRA for 40 years (and increase your contributions to $6,500 per year once your age allows), and your marginal rate is 15%, this is what your account’s growth could look like over the course of 40 years:


In this scenario, you would have only paid in $230,000 during the entire 40 years you worked. You would have paid $34,500 in taxes from your paychecks.

However, your relatively small investment could grow to $1,189,636 – and you will not have to pay taxes on any of that balance when you withdraw it. If your marginal tax rate stayed at 15% when withdrawing money from your Roth IRA, you could save more than $143,000 in taxes alone.

See how much money you can save with a Roth IRA, and how much money it can save you in taxes here, with Bankrate’s Roth IRA calculator.

High Fees

If your employer offers a 401k without a match, a good way to gauge whether it is a good investment vehicle for your retirement savings is to take a look at the fees. Many times both employees and employers are unaware of just how much fees are costing them. After all, 3% seems like such a small number, doesn’t it?

3% may feel like a very small amount to pay in fees, but this example will show you just how much a small percentage can affect your retirement savings.


In this example, the investor is a 29 year old, contributing $18,000 per year to her company’s 401k, and her retirement age will be 65. The current balance of their 401K is $100,000, and fees are 3%.

Just by switching to a plan that cuts fees in half, 1.5%, she could save $801,819.03. Instead of having $1.8 million upon retirement, she could have more than $2.6 million – making for a much better retirement.

You can check out a fee calculator here and find out just how much your fees are costing you!

Even if your 401k has high fees, be sure to consider the employer match. Many times the match will more than cover the fees, making the 401k a good investment vehicle in spite of the high fees.

If You Need Flexibility

401k’s, while they offer tax advantages, and often free money through the form of an employer match, do not offer any sort of flexibility. Contributions are automatically deducted pre-tax from an employee’s paycheck in pre-set amounts, and cannot be withdrawn without serious penalties until age 59 ½.

For many families, saving and investing money is not just about retirement. It is about college, medical expenses, large purchase, and even vacations. Always contribute to your 401k up to the maximum amount that your employer will match, but if no match is available and you need flexibility for other savings priorities, check out some of these options:

A 529 Plan: An education savings plan operated through your state or an educational institution to help families set aside income for education costs. Although contributions are not deductible on your federal income tax return, the investment grows tax-deferred, and distributions used to pay the beneficiary’s college costs come out tax-free. Some states offer tax breaks for 529 contributions, you can find yours here. In addition, there are very few income and contribution limitations, making the 529 plan a great, flexible way to save for college.

A Health Savings Account: An HSA offers individuals and families the opportunity to save money exclusively for medical expenses, and contributions are 100% tax deductible from gross income. For 2015, individuals can contribute up to $3,350, and families are allowed to contribute up to $6,650. HSA accounts holders age 55 and older can contribute an extra $1,000. If using savings for medical expenses if a priority, talk to your employer about an HSA. Not all insurance plans are eligible.

Taxable Investment Accounts: When saving for large purchases or vacations, more flexible accounts are better. As explained above, index funds, mutual funds, or even traditional savings accounts leave the account holder with more of a tax burden, but far greater flexibility for withdrawals. These accounts do not need to be opened through your employer, but can be opened and managed on your own, or with the help of a financial planner.

If your employer offers a contribution match, they are essentially offering you free money, so go ahead a take advantage of the 401k, regardless of high fees or a low income. However, if your employer offers no match, high fees, or you have reached the yearly contribution limit, then it is a good idea to avoid that 401k plan and look into other retirement savings options.

At the end of the day, saving for retirement or other goals is all about you. How much flexibility you need, how much you need to save, and your tax situation. Be sure to weigh all of your options to guarantee that you are making the best decision for you and your family.



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College Students and Recent Grads, Pay Down My Debt, Reviews

iHELP Student Loan Refinance Review

Students throwing graduation hats

Do you have multiple student loans with high interest? Do you believe your credit is strong enough to get you a better rate?

A consolidation and refinance is something you should consider. Consolidation combines your student loans into one convenient payment. And refinancing can reduce your interest rate or even lower your monthly payment depending on the terms.

There are several lenders in the market that now offer refinancing and consolidation for student loans. Here we’ll give you an in-depth look at the iHELP Loan Consolidation Program which offers both.

iHELP Consolidation Fixed Rate Program Qualifications

You must have graduated from an eligible school to apply for this program. (Click here to find out if your school’s on the list). A cosigner isn’t required for the application, however iHELP suggests that you have one because a cosigner may help you get a lower interest rate. One of the other program requirements is that both you and your cosigner are U.S. citizens or permanent residents.

In terms of creditworthiness, iHELP doesn’t disclose its credit score minimum, but you must meet the following standards:

  • No open collections or charge offs in the past 2 years.
  • No bankruptcies, foreclosures or repossessions in the past 5 years.
  • No defaults on a Federal or private student loan.
  • At least 2 years of positive credit history.
  • An annual income of at least $24,000 for the past 2 years.
  • A debt-to-income ratio less than 45%.

Loan Refinancing Details

iHELP offers loan terms up to 15 years and consolidation of both Federal and private loans.

The interest rate you receive for the refinance depends on whether your loan is cosigned or not cosigned. The APR range for cosigned loans is 6.22% to 7.99%. APR for non-cosigned loans is 7.21% to 9.04%. The minimum iHELP loan amount is $25,000. The maximum loan amount is $100,000 for an undergraduate degree and $150,000 for a graduate degree.

There are a few great benefits that come with this program. You can request 24 months of interest only repayments. And you may qualify for graduated repayments where your scheduled payment amounts increase over time. Your cosigner is also eligible for release after 24 months of on-time payments if you can meet credit requirements.

iHELP offers three forbearance options including:

  • Hardship Forbearance – Postponed payments for financial difficulty for up to 24 months.
  • Partial Payment Forbearance – Reduced payments for up to 24 months.
  • Administrative Forbearance – Postponed payments for situations like military service or natural disaster.

The Inside Scoop on Fees

The main fee you’ll encounter with iHELP is the supplemental fee which is 2% and is charged when the loan is disbursed.

Transparency Score

iHELP gets a transparency score of “A” because it allows cosigners to be released after 24 months if payments are made on-time. Plus it offers fixed rates, clear terms, borrower benefits and solutions if you face financial trouble while repaying the loan.

Pros & Cons

We’ve covered the important details of iHELP, so now we can dig into the pros and cons of choosing it to consolidate and refinance your student loan debt.


  • iHELP consolidates both Federal and private loans.
  • It offers competitive and fixed rates especially if you have a cosigner.
  • Options are available for forbearance.
  • There are borrower payment benefits including interest only payments or graduated payments.
  • Cosigners may be released if payments are made on-time for the first 24 months.


  • iHELP performs a hard pull to check rates which will impact your credit score.
  • The iHELP loan is only offered to graduates of specific schools.
  • iHELP has higher APR than other lenders that offer student loan refinance


Apply Now

iHELP Against the Competitors

iHELP has some tough competition from SoFi and Citizens Bank when it comes to interest and fees.

First off, SoFi offers lower interest. Its fixed rates range from 3.50% to 7.24% and variable rates from 1.90% to 5.17% (if you sign up for auto pay). There’s no origination fee at SoFi. iHELP charges a supplemental fee of 2%.

SoFi logo

Apply Now

*referral link

Citizens Bank has longer loan terms and allows you to borrow more than iHELP. The maximum loan term at Citizens Bank is 20 years and you can borrow up to $170,000. Citizens Bank offers fixed rates starting at 4.74% APR and variable interest rates at 2.32% APR. There’s also no origination fee, disbursement fee or prepayment fee.


Apply Now

Who will benefit the most from this loan refinance?

iHELP is an ideal solution if you have many student loans and you think you can secure better interest on them, but it’s not right for everyone. SoFi and Citizens Bank offer comparable benefits and lower interest, so it’s wise to check many lenders before making any decisions.

You should also weigh the benefits of your current loan against the advantages of refinancing prior to making any moves. Keep in mind, if you refinance Federal loans you may lose out on access to the rebates, forgiveness programs, rate discounts or cancellation benefits that come with them.


*We’ll receive a referral fee if you click on offers with this symbol. This does not impact our rankings or recommendations. You can learn more about how our site is financed here.

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College Students and Recent Grads

Financial Resources for College Students

Students throwing graduation hats

The purpose of this blog post is to provide links to the resources discussed during the Financial Literacy Seminar held at Brooklyn College on April 23rd.

During the seminar, the following topics were discussed:

  1. Credit Scores
  2. How to “Compare, Ditch and Switch” – including Bank Accounts and Student Loans
  3. How to Complain

We will provide links for all of these topics below.

Credit Scores

Every year, you should download a copy of your credit report from all three credit-reporting agencies. There is only one place that you can do that for free: Credit scores are built based upon the information in the credit bureaus, and you need to make sure that all of the information is accurate.

If you find information that is not accurate, you can dispute online. You should make your dispute directly with the credit bureau that has the incorrect information. Here are the links to where you can dispute:

There are a number of ways to see your credit score for free.

If you want to see your FICO score, a number of banks offer the score on your statement. We have written a guide to show which banks offer free FICO scores. If you want to purchase your FICO score, you can do so at MyFICO.

There are also websites that offer free credit scores. These websites do not offer the official FICO score. Instead, they offer the “VantageScore.” It is often referred to as the “FAKO” score, because it is so similar to FICO. Here are the places where you can get your free VantageScore:

Remember: your goal is to have a score above 700. Ideally, your score should be above 750.

To have the best credit score, you should do these two things:

1. Make sure your balance is never more than 20% of your available credit.

2. Make your payments on time, every month.

Don’t stress out about a small movement in your score. Your score range is what matters the most.

Compare, Ditch and Switch

We talked about how expensive it can be to bank if you make the wrong choice. If you want to be a savvy consumer, you should be ready to look for the best deal and avoid obscene overdraft charges and fees.

Branch-free, Internet banks are offering some of the best deals. You can find a list of the Internet-only banks here.

We also discussed student loans. When you graduate from college, remember to do the following:

1. For federal student loans, you should remember that you may have the ability to take advantage of “income-based repayment.” This is a program that caps your student loan payments to a fixed percent of your monthly income. You can learn more about it here.

2. For private loans, you can consider refinancing your debt to a lower interest rate. You typically need to be employed, have made at least 6 months of payments and have a good credit score. But the interest rates can be much lower than your existing rates. We have compiled a list of student loan refinance options here.

How To Complain

If you have difficulty with a financial services company, you can get help. You can make a complaint directly to the Consumer Financial Protection Bureau. Complaints can be made online.

Complaining online with the CFPB can be a great tool. The agency will reach out to the company on your behalf. Just make sure you keep excellent written records of your account, so that you can share all of the details with your complaint.

A Few Remaining Thoughts

Just remember the following tips from the session:

  • Start saving for retirement with your first job. The earlier you start, the easier it will be. If your employer offers a 401(k) match, make sure you sign up and take advantage of it.
  • The best way to build credit and avoid temptation is to keep your credit card at home. Just set up a monthly bill (like Netflix, for example). And then set up automatic monthly payments. That way your score will go up and you will not end up in debt.

If you have any questions, please do not hesitate to reach out. The team at MagnifyMoney is happy to help. You can reach us at

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College Students and Recent Grads, Pay Down My Debt, Reviews

Education Success Loans Review

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The Student Loan Finance Corporation offers Education Success Loans for borrowers looking to refinance their student loans.

If you’ve been struggling to make payments according to the current terms of your student loans, or can’t keep up with how many lenders you’re paying, then refinancing could be a good option for you.

Education Success Loans sets itself apart by offering a different type of loan – a hybrid that starts with a fixed interest rate, and ends with a variable interest rate. Let’s take a look at all the details to see if this is a good option for you.

Refinance Terms Offered

With the Education Success Loan, you can refinance both federal and private student loans. The minimum is $5,000 ($15,001 in KY), and the maximum is $125,000 for undergraduates, and $200,000 for graduates and above.

Fixed rates begin at 4.99% and go up to 7.99% APR – this is with a 0.25% auto-payment deduction.

Education Success Loans offer a hybrid option of an initial fixed rate, and a variable rate after a certain amount of time has passed. All of its loans are offered on a repayment term of 25 years.

There are three loan options available. You can have a fixed rate for 1, 5, or 10 years, with variable rates going forward. That means you’re looking at paying a variable rate for 24, 20, or 15 years.

An example payment looks like this: If you borrowed $10,000 at a 5.24% APR on a 25 year repayment term, your monthly payment will be $59.87.

The Pros and Cons

The pro is the repayment period – 25 years is on par with what income-based repayment plans offer. Extending your repayment term is an easy way of lowering your monthly payment.

However, be aware it also causes you to pay more over the life of the loan due to how much in interest you’ll be paying.

The other negative that goes along with that is all three loan options switch over to a variable rate at some point. This means your payments will likely increase. You need to make sure you can either 1) pay off your loans before the variable rate kicks in, or 2) are earning more money at that point in time to cover the increased payment.

According to its FAQ, “Limited deferment options may be available,” but, “There is no repayment forbearance option available with this loan.” If you have federal loans, be aware that refinancing with private lenders will eliminate the benefits that federal loans offer (forbearance, income-based repayment options, forgiveness, etc.).

Another positive to consolidating your student loans means owing less money to lenders. Consolidating and owing one lender will simplify your student loans.

What You Need to Qualify

Education Success Loans list the following requirements:

  • You must be the legal age of majority of the state you reside in
  • You must be a U.S. citizen or permanent resident
  • You need a Bachelor’s degree or higher from an eligible Title IV school
  • Your debt-to-income ratio (including housing) should be between 40%-43%
  • You must earn $24,000 annually
  • You have to have been out of college for at least 30 months before applying.

Refinancing is not offered to those that reside in AZ, IA, IL, or WI.

If you need to have a co-borrower apply with you, they are accepted.

There’s a minimum credit score needed to apply, but it’s not available to the public. Education Success Loans will look at other factors such as your credit history and DTI. You shouldn’t have any minor issues with your credit (late payments) within the last two years.

Additionally, you may be able to consolidate loans that are currently in forbearance or deferment. However, Education Success Loans will go into repayment immediately, though, so if you can’t afford to pay right now, you should wait.

Application Process and Documents Needed to Apply

The application process is straightforward, and after applying, you can expect to hear back within 3-7 days.

While you can apply online, you can also apply via fax or by mail. The application is available for download here.

When you apply to refinance, Education Success Loans will conduct a hard inquiry on your credit.

It’s likely you’ll need to provide pay stubs or tax returns to verify your income, and if any additional documentation is needed, the customer care team will notify you.

Who Benefits the Most from Refinancing Student Loans with Education Success Loans?

Considering the standard repayment for student loans is 10 years, and the max you can have a fixed rate for is 10 years, those that can pay off their student loans within that time will benefit the most.

If your APR is greater than 7.99% (the starting point for the 10 year fixed rate option), then you’ll be able to save money by refinancing as well. Just make sure you can pay back your loans before the variable rate kicks in.

If you’re having difficulty making payments right now, and have federal loans, try looking into the income-based repayment options available. You can extend your repayment term and still keep benefits such as forbearance and deferment.

The Fine Print

There’s no prepayment penalty or origination fee with the Education Success Loans.

If your payment is 10 days past due, you’ll be charged a late fee of 5% of the unpaid amount or $25, whichever is less.

If your payment doesn’t go through and it’s returned, you’ll be charged a $30 returned check fee.

Should you default on your loan, up to 25% of the principal balance can be assessed for collection efforts depending on where you live.

Remember that rates are variable after 1, 5, or 10 years, depending on the loan option you choose. Education Success Loans states that variable rates can be adjusted quarterly on the first day of January, April, July, and October. The interest rate is capped at 15%..

For this reason, and no cosigner release option, Education Success Loans earned an F transparency score.

education success

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Alternatives for Student Loan Refinancing

Not thrilled with the half fixed rate, half variable rate option? It’s not a common model when looking at student loan refinancing. It’s understandable to want a stable fixed rate so you can budget your payments accordingly.

SoFi* offers both fixed and variable rates. Its fixed rate APR range is 3.50% – 7.24%, and its variable rate APR range is 1.90% – 5.18%, both favorable and currently the best for student loan refinancing. It also offers a repayment term of 20 years.

If you need to refinance a larger amount, SoFi doesn’t have a cap on how much you can borrow, and it conducts a soft credit inquiry when you apply.

SoFi also offers Unemployment Protection, so if you fall on hard times and can’t make a payment, you might be eligible for forbearance. SoFi also helps borrowers with job placement.

SoFi logo

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*referral link

Another good option is CommonBond*. It offers a hybrid loan option, but also offers fixed and variable rate loans. Its fixed rate APR range is 3.74% – 6.49%, its variable rate APR range is 1.93% – 4.98%, and its hybrid rate APR range is 3.99% – 5.64%. These rates are close to what SoFi offers, though the maximum you can refinance with CommonBond is $220,000.


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*referral link

The repayment terms offered are the same as SoFi, though the hybrid option is only available on a 10 year repayment term. CommonBond also does a soft credit pull. The downside: only certain schools and programs are eligible under its refinancing program, though it is expanding.

Beware the Hybrid Loan Option

Take care when considering if a hybrid loan is going to improve your student loan situation. The low fixed interest rates look great, but keep in mind they can, and will, increase. We all hope to be more successful later on in life, but losing your job or changing careers and taking a pay cut can happen. Don’t put yourself in a situation you might regret a few years down the line.

There are other lenders who offer lower fixed rates if you have great credit, and it doesn’t hurt to apply, especially when those lenders are only conducting a soft credit pull. For lenders who conduct hard credit inquiries, be sure to shop around within a period of 30 days, as this won’t have as much of a negative impact on your credit score.


*We’ll receive a referral fee if you click on offers with this symbol. This does not impact our rankings or recommendations. You can learn more about how our site is financed here.




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College Students and Recent Grads, Pay Down My Debt, Reviews

CommonBond Grad Student Loan Refinance Loan Review

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CommonBond was founded by three Wharton MBAs who felt the sting of student loans after they graduated. The founders decided to provide a better solution for graduates, as they thought the student loan system was broken and in need of reform. As a result, they strive to make the refinance (and borrowing) process as simple and straightforward for graduates as possible.

CommonBond* began by servicing students from just one school, and has since expanded to service other schools and graduate programs. It continues to grow today.

As you might be able to tell by the name, CommonBond thinks of its community as family. There is a network of alumni and professionals within the community that want to help borrowers. This alone sets it apart from other lenders, as members often meet for events.

While these are all great things, we know you’re more interested in how CommonBond might be able to help you make your student loans more affordable. Let’s take a look at what terms and rates they offer, eligibility requirements, and how they compare against other lenders.

Refinance Terms Offered

CommonBond offers low variable and fixed rate loans. Variable rates range from 1.93% – 4.98% APR, and fixed rates range from 3.74% – 6.49% APR.

It even offers a hybrid loan option, with APRs ranging from 3.99% – 5.64%. Note that these rates take a 0.25% auto pay discount into consideration.

You can refinance up to $220,000, and variable and fixed rates have terms of 5, 10, 15, and 20 years.

The hybrid loan is only offered on a 10 year term – the first 5 years will have a fixed rate, and the 5 years after that will have a variable rate.

CommonBond has a great chart listing repayment examples based off of borrowing $10,000, which can be found on its rates and terms page.

To pull an example from that, if you borrow $10,000 at a fixed 4.74% APR on a 10 year term, your monthly payment will be $104.80. The total amount you will pay over the 10 year period will be $12,575.90.

The Pros and Cons

CommonBond offers competitive interest rates, but the downside is that its loans are fairly niche. As you’ll see below, CommonBond is currently only lending to graduates from specific schools and programs.

To be clear, “graduates” means students who hold a Masters degree or higher in the following fields: Accounting, Dental, Law, Nursing, Healthcare Administration, Finance, Engineering, Business, Medicine, Optometry, Pharmacy, Physician Assistant, Public Policy, Real Estate, and Veterinarian.

If you graduated with a Bachelors degree, then you’re not eligible for a loan with CommonBond.

One pro to consider is the hybrid loan option available. It might seem a little confusing at first – why would someone want a variable rate down the road?

If you’re confident you’ll be able to make extra payments on your loan and pay it off before the 5 years are up, you might be better off going with the hybrid option (if you can get a better interest rate on it).

This is because you’ll end up paying less over the life of the loan with a lower interest rate. If you were offered a 10 year loan with a fixed rate of 6.49% APR, and a hybrid loan with a beginning rate of 5.64%, the hybrid option would be the better deal if you’re intent on paying it off quickly.

What You Need to Qualify

CommonBond doesn’t list many eligibility requirements on its website, aside from the following:

  • You must be a U.S. citizen or permanent resident
  • You must have graduated from a graduate school degree program in its eligible network

If your school is not listed, CommonBond encourages potential borrowers to reach out via email. It recently received another round of funding, so schools and programs are expected to expand soon.

CommonBond doesn’t specify a minimum credit score needed, but based on the requirements of other lenders, we recommend having a score of 660+, though you should be aiming for 700+. The good news is CommonBond lets you apply with a cosigner in case your credit isn’t good enough.

Documents and Information Needed to Apply

CommonBond’s application process is very simple – it says it takes as little as 7 minutes to complete. Initially, you’ll be asked for basic information such as your name, address, and school.

Once you complete this part, CommonBond will perform a soft credit pull to estimate your rates and terms.

If you want to move forward with the rates and terms offered, you’ll be required to submit documentation and a hard credit inquiry will be conducted. CommonBond lists the following as required:

  • Pay stubs or tax returns (proof of employment)
  • Diploma or transcript (proof of graduation)
  • Student loan bank statement
  • ID, utility bills, lease agreement (proof of residency)

CommonBond also notes it can take up to 5 business days to verify documents submitted, so the loan doesn’t happen instantaneously.

Once your documents are approved, you electronically sign for the loan, and CommonBond will begin the process of paying off your previous lenders. It notes this can take up to two weeks from the time the loan is accepted.

Who Benefits the Most from Refinancing Student Loans with CommonBond?

Borrowers who are looking to refinance a large amount of student loan debt and who have graduated from the list of schools and programs CommonBond serves will benefit the most from refinancing with them.


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*referral link

Keeping an Eye on the Fine Print

CommonBond does not have a prepayment penalty, and there are no origination fees nor application fees associated with refinancing.

As with other lenders, there is a late payment fee. This is 5% of the unpaid amount of the payment due, or $10, whichever is less.

If a payment fails to go through, you’ll be charged a $15 fee.

It’s also noted that failure to make payments may result in the loss of the 0.25% interest rate deduction from auto pay.

Transparency Score

Getting in touch with a representative is simple and there is a chat and call option right on the homepage. Some lenders have this hidden at the bottom, or they don’t offer a chat option at all.

CommonBond also lets borrowers know they can shop around within a 30 day period to lessen the impact on their credit.

It does not list its late fees on its website, unlike other lenders. However, after making a chat inquiry, the question was answered promptly.

CommonBond does offer a cosigner release and is ranked with a B transparency score.

Alternative Student Loan Refinancing Lenders

Most student loan refinance lenders aren’t as niche as CommonBond. If you hold a Bachelors degree or your school isn’t on its list, there are other options to explore.

One such option is SoFi. While it also has a list of approved schools, its loans are available to those without a Masters degree. It’s always worth taking a look to see if SoFi* has your school on its list even if CommonBond doesn’t.

The two lenders are very similar – CommonBond offers “CommonBridge,” a service that helps you find a new job in the event you lose yours. SoFi offers a similar service called Unemployment Protection.

SoFi’s variable rates are currently 1.90% – 5.18% APR, and its fixed rates are currently 3.50% – 7.24% APR, which is in line with what CommonBond is offering.

SoFi also doesn’t have a limit on how much you can refinance with them.

SoFi logo

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 *referral link

Another lender to consider if you have less student loan debt (or a Bachelors degree) is Citizens Bank. You can refinance up to $90,000 with them ($130,000 with a graduate degree, or $170,000 with a professional degree).

Its variable rates are currently 2.82% – 7.46% APR, and its fixed rates are currently 5.24% – 9.39%, slightly higher, but still competitive.


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Lastly, you could check out cuStudentLoans. It offers student loan refinancing through credit unions, but only offers variable rates. The maximum amount to refinance with an undergraduate degree is $125,000, and the maximum amount to refinance with a graduate degree is $175,000.

All three of these options provide forbearance in case of economic hardship and offer similar loan options (5, 10, 15 year terms).

CUStudentLoans (1)

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Don’t Forget to Shop Around

As CommonBond initially conducts a soft pull on your credit, you’re free to continue to shop around for the best rates if you’re not happy with the rates it can provide. As the lender states on its website, if you apply for loans within a 30 day period, your credit won’t be affected as much.

Since CommonBond does service a certain section of student loan borrowers, check out other options if you’re not eligible for a loan with them. There are many lenders out there who aren’t as strict with their eligibility requirements.



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College Students and Recent Grads, Pay Down My Debt, Reviews

cuStudentLoans Consolidation Review

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cuStudentLoans is a service provided by LendKey. The service allows you to consolidate your student loans through a network of credit unions. Credit unions are member-owned institutions that typically provide higher rates for saving and lower rates for lending. You will likely also be able to find better credit card interest rates, fewer fees, and accounts that require lower minimum balances.

CUStudentLoans (1)Because credit unions are member owned, the service provided directly benefits the members. However, in order to join a credit union and profit from the perks, you must be eligible to join. For example, the Credit Union of Georgia accepts members that reside in Cobb or Cherokee county, students or employees at educational institutions in those counties, or immediate family members of those primarily eligible. They also accept those associated with Cobb County realtors, a church in Cherokee county, and retired educators in Cobb County. If they had the best rates for loan but you were not eligible to become a member, then you are just out of luck.

However, cuStudentLoans aims to match credit union lenders with borrowers through the network of more than 150 not-for-profit credit unions.

In this review, we will share:

  • The pros of consolidating through cuStudent Loans
  • The cons of consolidating through cuStudent Loans
  • Who should consider consolidating
  • The potential LIBOR (London Interbank Offered Rate) surprise
  • Alternatives that you should consider

The Pros

cuStudentLoans offers a low rate of 2.92% APR for a max term of 15 years. This provides the borrower more time to repay the loans than the standard 10-year repayment offered on federal student loans.

There are no origination fees and you can consolidate a maximum of $175,000. cuStudentLoans does offer forbearance/hardship programs and interest only repayment as well. A forbearance program allows you to halt student loan payments for a period of time if you are experiencing a financial hardship. However, interest continues to accrue and once the forbearance ends, the interest is capitalized, or added to the principal balance.

Borrowers can choose two products, the cuScholar Private Student Loan and cuGrad Student Loan Refinancing. cuScholar allows you to borrow through not-for-profit credit unions with the Private Student Loan product with rates as low as 3.22% APR. The cuGrad Student Loan Refinancing product allows you to refinance or consolidate undergraduate and graduate private and federal student loans into one loan with one interest rate. Rates start as low as 2.92%.

The Cons

Choosing to consolidate federal loans with private loans will result in a loss of options provided with federal loans. For example, a loan consolidation with any outside lender prevents you from applying for an income based repayment and other repayment options.

Not all applicants will qualify for the lowest rate. Applicants with excellent credit scores will qualify for the lowest rates. The rate is variable and is calculated by adding a margin ranging from 2.99% to 7.9% to one month LIBOR. LIBOR is the London Interbank Offered Rate and is a benchmark rate that some of the world’s banks use to charge each other for short-term loans. Because LIBOR changes as the cost of borrowing changes for banks, it is often used in the calculation of floating rate loans. However, the rate is ultimately capped at 18%.

[How to Get a Student Loan Forgiven]

For Whom is cuStudent Loans Best?

If you have private student loan that you would like to consolidate and the loans have high interest rates, then this product may be for you. Assuming you owe $30,000 in student loans with a monthly payment of $324, and excellent credit, you could save an estimated $1,009 per year. This savings is simply the difference in monthly payments. The new payment of $239.90 will allow you to save $84.10 each month totaling $1,009 by the end of the year. With an added reduction in interest, you could potentially save even more over the life of the loan.

The ideal candidate for Student Loan Refinance has:

  • $7,500 – $125,000 in undergraduate student loan debt ($7,500 – $175,000 in graduate debt)
  • Applicants must have reliable gross monthly income of $2,000 to apply alone. To apply with a cosigner, applicants must have reliable gross monthly income and cosigners must have reliable gross monthly income of $2,000.
  • US Citizen or Permanent Resident

[The Consequences of Refinancing Federal Student Loans]

The Potential LIBOR Surprise

With LIBOR at record lows for the last few years, there is much speculation on when we can expect an increase. A loan with an interest rate based on LIBOR could present a nasty surprise if the rate jumps unexpectedly. A monthly payment that was previously manageable could double or triple with a rate jump. With the same $30,000 balance, a low 2.9% interest rate would mean a $288 monthly payment. However, if one month LIBOR increases and the loan rate jumps to the maximum 18%, the monthly estimated payment increases to $541; more than double the original payment.

CUStudentLoans (1)

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[Miss a Student Loan Payment? Where to Find Help and What Happens]

How cuStudentLoans Compares to Competitors

Both SoFi and Citizens Bank offer fixed rate loan products. cuStudentLoans only offers variable rate products. The lowest rate for both SoFi and Citizens Bank products are higher than the lowest rate offered by cuStudentLoans; however, the fixed rate is not subject to change.

SoFi* is an option for student loan refinancing and offers fixed rate options with low rates ranging from 3.5% to 7.24%. SoFi also offers 20-year terms with no maximum on the total loan amount. However, SoFi cannot provide loans to residents of certain states so you must check eligibility before applying. No application, origination or prepayment penalty fees.

SoFi logo

Apply Now*referral link

Citizens Bank offers a fixed rate education refinance loan with low rates ranging from 4.74% to 8.9%. However, the maximum loan is capped at $170k for graduate and $90k for undergraduate refinance. Citizens Bank offers 20-year terms and there are no prepayment penalties.

citizens-bank (1)

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So, Should You Consolidate?

If you want to consolidate your student loans and you have excellent credit, then consider cuStudentLoans as an option. However, the variable interest rate is a concern and could cause your monthly payment to jump at any time. And consolidating federal student loans could cause you to lose some of the benefits offered with federal loans. But keep in mind; consolidating your student loans can help you streamline your finances as you make one payment each month. Evaluate your loan type, federal or private, and determine if a loan consolidation with cuStudentLoans is right for your situation.


*We’ll receive a referral fee if you click on offers with this symbol. This does not impact our rankings or recommendations. You can learn more about how our site is financed here.

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College Students and Recent Grads, Pay Down My Debt

Can You Discharge Student Loans in Bankruptcy?

Students throwing graduation hats

Student loans have been a hot topic in recent news and for good reason. The level of student loan debt in the United States has grown substantially over the past several decades. As of 2014, the balance of student loan debt reached $1.2 trillion. Students burdened with debt have one option when it comes to repayment: pay the debt. However, in extreme circumstances, it may be possible to completely discharge student loan debt in bankruptcy.

How to Discharge Student Loans in Bankruptcy

The U.S. Department of Education website provides four cases in which federal student loans may be discharged. Those include:

  1. Closed school discharge
  2. Total and permanent disability discharge
  3. Death discharge
  4. Bankruptcy discharge

There are a few more options for partial discharge with qualifications. The website lists bankruptcy as an option in rare cases.

“If you file Chapter 7 or Chapter 13 bankruptcy, you may have your loan discharged in bankruptcy only if the bankruptcy court finds that repayment would impose undue hardship on you and your dependents. This must be decided in an adversary proceeding in bankruptcy court. Your creditors may be present to challenge the request.”

The U.S. bankruptcy court will use the three-part Brunner test to determine if the student loans are eligible for discharge in bankruptcy. To show hardship you must show that:

  1. If you were forced to repay the loan, you would not be able to maintain a minimal standard of living.
  2. There is evidence that this hardship will continue for a significant portion of the loan repayment period.
  3. You made good-faith efforts to repay the loan before filing bankruptcy (usually this means you have been in repayment for a minimum of five years).

If you are unable to satisfy any of the three requirements, the loan will not be discharged. However in a study published in the American Bankruptcy Law Journal by Jason Iuliano, 39% of those who applied were granted at least some discharge.

For example, if you are 30 and your student loan payments make up a significant portion of your total income, and you can prove that this hardship will continue for many years you might be able to have your student loans included in your bankruptcy.

But if you just started making payments and have not attempted to use available programs such as income-based repayment, then you may have a harder time discharging your student loans.

If you feel that bankruptcy is for you, consult a lawyer and consider including your student loans.

[Struggling to pay back private student loans? Learn about loan modification here.]

Ramifications of Bankruptcy

Choosing to eliminate your student loans using bankruptcy is a difficult path. Moreover, you will mark your credit report for 7 or 10 years with a bankruptcy filing. This could prevent you from purchasing a home, opening new lines of credit, and benefiting from the best rates to borrow money. It could also prevent you from getting a job with credit pre-screening.

Options So You Can Avoid Bankruptcy

If you would rather avoid bankruptcy, here are more ways to eliminate your student loan debt.

Reduce or Halt Your Current Payment

Determine if you are eligible for deferment or forbearance. A deferment is a period during which repayment of the principal and interest of your loan is temporarily delayed. Depending on the type of loan you have, the federal government may pay the interest on your loan during this period.

If you can’t make your scheduled student loan payments, but don’t qualify for deferment, a forbearance may allow you to stop making payments or reduce your monthly payment for up to 12 months.

[Miss a student loan payment? Learn how to find help here.]

Choose a Reduced Payment Plan

For federal loans, there are a few repayment plans that can help you manage your student loan repayment. Choose one of the following:

  • Income Based Repayment Plan – Payments are calculated based on your discretionary income and can extend up to 25 years of repayment.
  • Graduated Repayment Plan – Payments start off small then increase every two years for a maximum of 10 years of repayment.
  • Extended Repayment Plan – Payments can extend up to 25 years of repayment.
  • Pay as You Earn Repayment Plan – Payments are calculated based on your discretionary income and can extend up to 20 years of repayment.
  • Income-Contingent Repayment Plan – Payments are based on your adjusted gross income and can extend up to 25 years of repayment.
  • Income Sensitive Repayment Plan – Payments are based on your annual income and last for a maximum of 10 years; however, you will pay more over time versus the standard 10-year repayment plan.

[Read about Student Loan Forgiveness Programs Here.]

Career Based Discharged

You can also have your student loans discharged if you take a certain career path and your loans are: Direct, FFEL Program, or Federal Perkins loans. Private loans are often not eligible for forgiveness programs. As an eligible public service employee you can have 100% of your loan balance forgiven after 120 consecutive payments; this assumes that you maintain your status as an eligible public service employee while making those payments. If combined with one of the reduced payment plan options that could mean a substantial reduction in total repayment balance.

Check out our Student Loan Refinance table to compare your options.




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Best of, College Students and Recent Grads, Pay Down My Debt

5 Best Student Loan Refinancing Options

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It’s no secret students are becoming more reliant on student loans to fund the ever increasing cost of a college education. As of 2013, 69% of borrowers who graduated from a public school had an average of $28,400 in debt. You can bet that number is significantly higher for students attending pricey private schools.

But it isn’t just the increasing debt loads that should concern borrowers. They are dealing with (relatively) high interest rates as well. For example, graduate students taking out PLUS loans are currently saddled with a 7.21% fixed interest rate.

Historically, no matter if you had a federal or private loan, you were either locked into a fixed rate or at the mercy of your lender with a variable rate. But that’s all changing now with student loan refinancing.

Student loan refinancing serves to help borrowers consolidate their loans and refinance to lower interest rates. It’s a great option for those looking to combine loans, lower their interest rates and make managing payments a bit easier. However, it’s important to note that through refinancing you may be giving up some of your federal loan protections, so make sure refinancing is right for you.

Here at MagnifyMoney, we award products transparency scores of A+, A, B, C, or F. Student loan refinancing transparency scores are based on whether or not a lender gives you the option for a co-signer, a co-signer release and caps variable interest rates.

If you do decide that refinancing is the right option for you, check out the best student loan refinancing providers:


SoFi, which is short for Social Finance, offers student loan refinancing with competitive interest rates. Borrowers can consolidate and refinance both their federal and private student loans and get a fixed rate between 3.50 to 7.24% or a variable rate between 1.92 to 5.18%. According to SoFi’s website, borrowers save an average of $11,783 when they refinance with SoFi. There are no application or origination fees, nor are there any pre-payment penalties.

Transparency Score: A+

  • No origination fees
  • No pre-payment penalty fees
  • Co-signer option available
  • Capped variable rates
  • Ability to see rates with a soft pull

SoFi also offers some unique perks for its borrowers. It offers Unemployment Protection, which allows you to put your payments on pause for 6 months. In addition, SoFi will actually help you find a job. SoFi also has an Entrepreneur Program, which helps foster entrepreneurship for borrowers by allowing you to defer your loans for 6 months and connecting you with investors and mentors within the SoFi community.

So, who is eligible to refinance with SoFi?

  • You must be the age of majority in your state (likely 18)
  • A US citizen or permanent resident
  • Employed or have an offer of employment to start within 90 days
  • Graduated from one of a selected number of Title IV accredited universities or graduate programs
  • A strong credit score (700 is the minimum for personal loans)
  • A strong monthly cash flow

SoFi is geared towards young professionals with high incomes and strong credit.

Currently, the minimum loan amount is $10,000 and the maximum term of a loan is 20 years. Odd fact: Refinancing is available in all states except Nevada. However, variable rate loans are not available in Minnesota or Tennessee.

SoFi logo

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Citizens Bank Education Refinance Loan

Another option for borrowers looking to refinance is the Citizens Bank Education Refinance Loan. This loan offers a fixed rate between 4.74 to 8.90% and a variable rate between 2.3 to 6.97% with a maximum loan term of 20 years. Currently, the minimum loan amount is $10,000, but the maximum amount varies depend on your degree. For example, borrowers with bachelor’s degrees can borrow up to $90,000, graduate degree holders up to $130,000 and those with professional degrees, such as medical or law degrees can borrow up to $170,000.

Transparency Score: A+

  • No origination fees
  • Co-signer option
  • Co-singer release available
  • Capped variable rates

There are no application or origination fees and you can refinance even if you didn’t graduate, however you are not eligible to refinance if you are still in school. You can refinance both your federal and private student loans.

According to its eligibility requirements, to qualify for a loan you need a “reasonably strong” credit history as well as a minimum household income of $24,000. If you are wondering if refinancing with them is right for you, Citizens Bank has a helpful chart on how refinancing can help you.


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cuGrad Student Loan Refinancing

This next refinancing option varies from the others — instead of refinancing through a private company, cuGrad Student Loan Refinancing works in partnership with over 150 not-for-profit credit unions to help you refinance your loans and offer the best rate possible.

Currently this refinancing option does not offer fixed interest rates and has variable interest rates between 2.77 to 8.02% with a maximum term of 15 years. The interest rates are competitive, but because variable interest rates means the rate is at the discretion of the lender and could change at any time.

Transparency Score: A+

  • Co-signer option
  • Co-singer release available
  • Capped variable rates – but these are subject to increase at lender’s discretion

cuGrad Student Loan Refinancing lets borrowers refinance both federal and private student loans and allows you to borrow between $125,000 to $175,000 depending on whether you have an undergraduate or graduate degree. Compared to other lenders, cuGrad Student Loan Refinancing has a lower minimum loan amount of $7,500.

To be eligible, you must have a “reliable gross monthly income of $2,000” and be able to provide proof of income. This refinancing option may be a good fit for recent graduates who are just starting out and are looking to refinance with a community-based institution like a credit union.


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iHelp Consolidation Loan

If you are looking for a fixed rate, iHelp might be your best bet. They currently do not offer variable rates, but have fixed rates between 6.22 to 7.99%. Admittedly, these rates are quite a bit higher than the other lenders. It’s important to note that iHelp offers two different rates, depending on whether or not you have a cosigner. In addition, there is a 2% fee that is added to the loan at the time of disbursement.

Transparency Score: A

  • Co-signer option – rates vary depending on if you have a co-signer
  • Co-singer release available
  • Capped variable rates
  • Does have an disbursement fee

In order to qualify for a loan, you need to have graduated from an eligible school. The maximum amount you can borrow is $100,000 for undergraduate degrees, and $150,000 for graduate degrees, with a minimum loan of $25,000. The maximum term for a loan with iHelp is 15 years.

iHelp’s income requirements are a bit lower than other lenders and requires borrowers or cosigner’s to have an annual income of $24,000 for at least two years. In addition, borrowers must have two years of positive credit history and a debt to income ratio of 45% or less.


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CommonBond’s Grad Refinance Loan*

Looking a value driven refinancing option? CommonBond may be the right fit for you. It has a Social Promise to give back to community. According to its website, “For every degree fully funded on the company’s platform, CommonBond funds the education of a student in need abroad for a full year. As the first company to bring the 1-for-1 model to education, we are proud to partner with education non-profit, Pencils of Promise, to fulfill our Social Promise.”

CommonBond offers loans with a fixed rate between 3.74 to 6.49% and variable rates between 1.92 to 5.64%, with a maximum term of 20 years. It also offers hybrid rates, where you have a low fixed rate for the first five years and a variable rate for the last five years. There are neither pre-payment penalties nor origination fees.

Transparency Score: B

  • Co-signer option
  • Co-singer release available
  • Capped variable rates
  • Must have a graduated school degree within CommonBond’s network
  • Only available to degrees in professional service

Out of all the refinancing options, you can borrow the most with CommonBond at $220,000. To qualify for a loan, you must have graduated from one of the graduate school degree programs in its network — many of the degree programs that are eligible are professional service degrees in medicine, health, accounting and more. So if you have an arts or humanities degree, this option isn’t for you.

CommonBond also offers Unemployment Protection, so if you lose your job you can temporarily postpone your payments and CommonBond will help you find a job, a concept is similar to SoFi’s offering.


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*referral link

Be Selective About Refinancing

As you can see, the loan requirements, terms and conditions all vary depending on lender. If you are looking for a better rate on your student loan and currently have good credit and a stable income, refinancing may be right for you. Refinancing can potentially save you thousands of dollars in interest and make repayment easier through consolidation. Just be careful, refinancing a federal loan does mean you give up certain protections and eligibility student loan forgiveness programs.

Check out our Student Loan Refinance table to compare even more options.

*We’ll receive a referral fee if you click on offers with this symbol. This does not impact our rankings or recommendations. You can learn more about how our site is financed here.



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College Students and Recent Grads, Consumer Watchdog, Pay Down My Debt

Consumer Watchdog: Consequences of Refinancing Federal Student Loans


A majority of today’s college graduates exit college with a diploma and a significant chunk of student loan debt. It’s become an assumption that everyone under the age of 30 carries (or carried) debt at some point. While this isn’t true, the vast number of graduates struggling with student loans are looking for every chance to offload the burden. Lowering interest rates and digging out of debt sooner is exactly what makes consolidating and refinancing so appealing. While refinancing federal student loans may seem tempting, this action could carry irreversible consequences. 

Crunching the Numbers

Refinancing can make a lot of sense, especially if it results in a significant drop in your interest rate(s). Federal student loans disbursed before July 1, 2014 ranged in fixed interest rates from 3.86% to 5.41% to 6.41% depending on the type of loan.

One loan with an interest rate of 3.86% may not be worth refinancing because the most competitive fixed refinancing rates are at 3.50%. Revoking your federal loan status for 0.36% probably isn’t worth the cost.

However, refinancing loans at 5.41% (or higher) could drop as low as 3.50% with SoFi* or 3.74% with CommonBond* or 4.74% with Citizens Bank.

For the sake of argument, let’s say you’re paying $270 a month on $25,000 worth of federally funded direct unsubsidized student loans on a 10-year term at 5.41%. In that time, you’d pay $7,409 in interest.

Pay the same amount on $25,000 of refinanced loans at 3.50% and you’ll only fork over $4,183.56 in interest.

$3,225.44 is a pretty significant difference.

Who Should Consider Refinancing Federal Student Loans?

You should only be refinancing federal student loans if you have the following:

  • A high credit score – so you can get the most competitive interest rates
  • A stable job
  • Money stashed away in case an emergency or job loss occurs
  • Wouldn’t qualify for forgiveness programs anyway

Here Are Perks You’ll Be Giving Up 

By consolidating debt and refinancing federal student loans to a private loan, you’ll be walking away from certain benefits the government offers. 

Income-Based Repayment, Income-Contingent Repayment and Pay As You Earn Plans

Income-Based Repayment Plans allow you to prorate your student loan payments based on your income. After 20 (for PAYE) to 25 (IBR and ICR) years of qualifying payments, depending on the plan, any remaining balance on your loan will be forgiven. There is also an interest subsidy if your monthly payment is less than the interest accruing on your loan. The government will pay the difference for the first three years.

Fine Print Alert: The loans discharged after 20-25 years could count as income and require you to declare it to the IRS and pay taxes.

Student Loan Forgiveness 

The government backs a variety of student loan forgiveness programs for professionals. These include:

  • Equal Justice Works (Lawyers)
    This forgiveness program is offered at select law schools and is used to provide financial aid to law school graduates working in low-paying legal fields such as government or the public interest sector.
  • Teacher Loan Forgiveness (Teachers)
    You need to teach at specifically designated elementary and secondary schools for five consecutive years to be eligible. If you began teaching after 2004, you’re eligible for up to $5,000 in loan forgiveness if you were a “highly qualified” teacher, and you can receive up to $17,500 if you’re a “highly qualified” math or science teacher in a secondary school, or special education teacher.
  • Public Service Loan Forgiveness (PSLF)
    Employees of the government, non-profit organizations, and other public workers may qualify for the Public Service Loan Forgiveness program. You need to be employed full-time by a public service organization. You also are required to make 120 payments on your loans before being eligible for forgiveness.

[Read more about Student Loan Forgiveness here]

These programs are not eligible to those with private loans, so by refinancing federal student loans you’d be forsaking eligibility for forgiveness programs. If you have a handle on your debt and feel it can be paid off in less than 10 years, go ahead and refinance. But this could be hard to pass up if you’re drowning in debt and eligible for a forgiveness program. 

Discharge Benefits in Case of Disability or Death

Federal loans are discharged in the case of death and in certain instances of disability.

If you’re the borrower and die, your federal student loans will be discharged. If you’re a parent PLUS loan borrower – the loan may be discharged if you die or the student whose behalf you obtained the loan passes away.

Disability discharge occurs if you can prove that you are totally and permanently disabled through one of three methods:

  1. You are a veteran and have documentation from the U.S. Department of Veterans Affairs stating you are unemployable due to a service-connected disability.
  2. You’re on Social Security Disability Insurance or Supplemental Security Income and submit documentation stating your next scheduled disability review is within five to seven years from the date of your most recent SSA disability determination.
  3. You have a certification from a physician that you’re totally and permanently disabled.

Read the fine print when you consider refinancing student loans. If you need a co-signer on the loan, he or she may be liable for the loans in the case of your death or disability, which is why you should have life insurance if your debt could be transferred to someone else. Be 100% sure of what will happen to your repayments in the case of disability or death.

Deferring Payments 

Federal loans are eligible for deferment or forbearance, meaning you can delay or make a temporary stop to student loan payments based on circumstances. These circumstances may include enrollment in college or career school, a period of unemployment, economic hardship, participation in an approved graduate fellowship program.

Private loans are notoriously less lax about deferment or forbearance.

There are student loan refinance options that offer unemployment protection (like SoFi* and CommonBond*. You need to explore the options for handling hardships before refinancing federal student loans.

Doesn’t Hurt to Check Your Options

Certain student loan refinancing providers like SoFi* offer the ability to check your rate without hurting your credit score (the provider performs a “soft pull” of your credit report). It won’t hurt to check your rates and then do the math to see if refinancing federal student loans makes financial sense for you.

Find our list of top student loan refinancing options here.

* We’ll receive a referral fee if you click on offers with this symbol. This does not impact our rankings or recommendations. You can learn more about how our site is financed here.

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College Students and Recent Grads, Pay Down My Debt

Skipping a Student Loan Payment

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Have you hit a temporary rough patch with your finances? Are you worried you won’t be able to afford to make your student loan payment this month?

Instead of putting yourself at risk for being late, it might be worth it to look into skipping a student loan payment.

Yes, you read that right – this is a legitimate option that some private lenders provide, but there are a few things you need to consider. Skipping a payment still comes with consequences, though they’re not as bad as being late and falling behind on a payment.

Here are the circumstances under which it makes sense to skip a student loan payment, and the various programs lenders have.

When Should You Skip a Student Loan Payment?

The first thing to know: most of these “skips” are one or two time deals for the year. You shouldn’t considering skipping a student loan payment if you don’t think your financial situation will improve within the next month. Instead, you should contact your lender and ask them if there are other payment options available to you.

Skipping a student loan payment is for those who are temporarily unable to afford the payment. Perhaps your car needed a major repair, and you don’t have enough money in your bank to cover your payment until later in the month. Or maybe you’re in-between pay periods if you just started a new job.

Whatever the case may be, you don’t want to make a habit out of this. You can’t take advantage of these programs, so it’s important not to become dependent on the option.

Skipping a payment isn’t completely free, either. Some lenders require you to pay a fee to do it. The fee is much less than what your student loan payment is (most are around $25), but it’s still something to be aware of.

Additionally, some lenders have strict requirements. In most cases, if you’re not in good standing (or if you’ve been late on payments before), you’re not going to be eligible for this option. Some lenders require that a number of payments have been made previously, so if you just started paying your loan back, this option might not work.

Skipping a payment is mainly for those who have had their payments under control and are experiencing a temporary financial setback.

Are There Consequences to Skipping a Student Loan Payment?

If you’re wondering whether or not your credit will be affected, you should call your lender and find out. Some applications let you know that your credit won’t be affected, and others don’t mention it. The main thing they’re looking for is being current and in good standing on your loan.

Keep in mind interest will continue to accrue on your loan during this time. You should calculate whether it’s worth the fee + the interest that will accrue. If the difference between your payment and that calculation isn’t much, try to come up with the money any way you can.

In addition, some of the following lenders try to entice borrowers to skip a payment because they have “better things to do with their money,” such as spend it on gifts or a vacation. That’s not financially sound. You should be responsible for your student loan payments. If you have the money, use it toward your loans, not something outside of your budget. It’s not worth the interest that will accrue.

Lenders Who Let You Skip a Payment

Not all lenders have this option available, but we’re highlighting a few that do. In most cases, credit unions are leading the way by providing this option to their customers, but this isn’t an exhaustive list by any means.

Earnest: You’re eligible to skip a student loan payment with Earnest if you’ve made 6 months of on-time payments. You can only skip one payment every 12 months. They do warn that the principal and interest from the payment you skip will be spread out across your remaining payments, and will result in increased monthly payments. They don’t mention any fees associated with skipping a payment.

Maryland Credit Union: There is a $25 processing fee if you apply to skip a payment. You must have made 3 consecutive months of payments to be eligible, and your loan must be in good standing, with payments current. Ultimately, the credit union must approve you, so you’re not guaranteed to be able to skip. You can only skip one payment per calendar year.

Education Credit Union: There’s a $25 participation fee when you skip a payment, and you must have made one full payment on your loan to be eligible. You have to plan ahead here, as you need to send in the form 10 days before your payment is due. They note that the skip request is not guaranteed as the underwriting department has to review it. They do allow 2 payments to be skipped per year, but not in consecutive months.

Eastman Credit Union: A $25 processing fee is charged to skip a payment. For student loans in particular, you must be making principal and interest payments, not just interest-only payments. Your loan must also be current and in good standing, and must also have been current in the past 6 months. You can only skip one payment per year. They warn that interest will continue to accrue, which will extend the term of the loan.

As you can see, all of these lenders have different guidelines and eligibility requirements. It’s a good reminder to always read the fine print on any forms you’re signing. Don’t assume anything is guaranteed, and have a contingency plan in place in case your request is denied.

What If I Have a Different Lender?

The option to skip a payment is very popular with credit unions and other types of loans, so more lenders may start offering it in the future.

It’s always worth giving your lender a call and asking if this is something they can do for you. Many lenders know how much of a burden student loan debt is, and they’re willing to work with borrowers under the right circumstances.

Always be honest and polite when calling, and explain your situation. If you’ve had a good record with them thus far, that will work in your favor. At the very least, your lender may be able to change your due date, or offer you another course of action.

After Skipping a Payment

Once you get your financial footing back, we strongly recommend paying extra on your student loans, if you can. You want to make up for the interest that accrued. In many cases, the term of your loan may have been extended. You should do what you can to reverse the impact skipping a payment had on your loans.

If it wasn’t clear before – this is a one-time deal, and your payments will resume the following month. Be prepared!

Proceed With Caution

The option to skip one student loan payment is a good one to use in an emergency situation. Remember, this option is only available to you, at most, for 2 months out of the year. Make sure you really need to use it before paying a fee or having your loan term extended. This should be considered a last resort if you truly don’t have the money to pay, not because you have the money and want to use it on something else.

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College Students and Recent Grads, Life Events, Strategies to Save

Why You Shouldn’t Buy a House By the Time You’re 30


I am 27, and my husband is 31. Although we have been married for five years and have two children, we have absolutely no plans to buy a house before I turn 30 or any time even remotely soon.

I know it seems odd, especially because many of our friends and family members who are in their 20’s are anxious to buy a home because they want to invest in real estate or they want to set down roots.

While that’s admirable, I strongly believe there are many reasons why you should consider waiting to be a first time homeowner and rent instead.

1. The Freedom to Pursue Your Passions

One of the big reasons I am not a homeowner today is because my husband and I pursued our passions. We were actually looking at houses in the Richmond, VA area where we lived until my husband got accepted to medical school in the Caribbean.

We were so lucky that we didn’t buy a house before choosing to move to the Caribbean, as it was a down market and would have been very difficult to sell. Because we were not homeowners, we were able to sell our things, buy one-way tickets, and leave for a great adventure.

When you are in your 20’s, remember that you are still early in your career. Your preferences could change. Your goals could change. Even your luck could change! You could get incredible job offers or several other opportunities that you might not get when you are older.

So, for example, if you were a renter instead of a homeowner you could easily enroll in cooking school in Paris without too much hassle. You can accept the internship at that awesome winery in Napa. You can join the start-up that your college friend founded in Manhattan. You can do all of these things when you’re a homeowner, sure, but it makes things a lot more complicated because you’ll have a major asset you have to decide what to do with if you need to move.

Even now, I’m glad I’m not tied down to a home because my husband is finally applying to residency this year. For all I know, he could be accepted to the hospital down the street or a hospital in Alaska. It’s really up in the air, and not having to worry about a home to sell is a huge perk. We’re not even sure we’re going to be buying a home until my husband is almost 40! And you know what? That’s completely fine with us. We’d rather do what’s best for our finances and for our career paths than be saddled with debt.

2. The Ability to Focus on Early Investing

Again, you can do this when you own a home, but many people don’t. Homeowners tend to be very concerned with improving their home, creating additions, updating the wood floors, and finally getting that granite countertop.

When you rent, even if you pay a little extra for a nice place, you don’t have to stash away $10,000 or more for that kitchen remodel. You can use it to invest for retirement instead. I know in my area of New Jersey, it’s very difficult to become a homeowner because housing prices are extremely high as are property takes. My neighbors have million-dollar houses that are small, and their property taxes are as much as $1,000 a month and sometimes more. Even though my rent is high, I’m glad I’m not paying property taxes or paying to fix the hot water heater. At this stage in my life, renting is perfect and allows us to put some money in investment accounts that we wouldn’t be able to otherwise.

3. The Trend Towards Starting Families Later in Life

Many, many people are getting married in their late 20s and starting families in their 30s. In fact, only 26% of the millennial generation (18-32) are even married.

If you buy a smaller home for yourself in your 20’s you’ll quickly find that when you get married and have kids, your home might not meet your needs anymore. Once you find your partner in life and you decide whether or not you want a family that will help you determine the size home you need.

Sure, you can make money buying and selling a smaller starter home, but it’s also beneficial to purchase what your family needs from the outset instead of risking a downturned market again.

I got married young at 22 and had my twins at age 26, so I definitely don’t match up to the majority of millennials. However, I know I would not be comfortable in the 300 sq. ft. apartment I had in the Caribbean right now or the 500 sq. ft. studio my husband had during his bachelor days. Each stage of your life is different, and home ownership in America is really synonymous with putting down roots and starting a family. For these reasons, it’s important not to be impulsive and buy a home when you’re in those early stages so that you have the financial wherewithal to get one you do want when it’s time.

Of course, once I find out where my “forever” location will be, likely where my husband gets his first job offer, I’ll start saving to pay for a large portion of my home in cash. Until then, I’ll happily pay my landlord rent. Sure, it’s a lot, but I’ve also maintained my right to freedom, to picking up and going whenever I need to, and that, my friends, is a luxury.

For the counter-argument, read about the benefits of buying a home in your 20s.



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College Students and Recent Grads, News

5 most tangible 2015 student loan changes from the President

Student loans are part of a complex system, made so in part by the high cost of education, which requires multiple layers of financing, but also by a patchwork of options that often overlap, a result of Federal intervention. The result is more defaults than necessary with financial hardship made even harder by making it difficult for borrowers to know exactly what options are on the table, and how to resolve them.

President Obama and his administration have unveiled a flurry of new proposals this week, aimed at simplifying the system. You can read the full statement from the President here.

None of the proposals is groundbreaking in itself – most involve administrative changes at the Department of Education – but some of the more under-reported and tangible proposals include the following:

A new website. The headline proposal by the President is probably the one that offers the least change for informed borrowers today. It wants to create a more effective system for lodging complaints against servicers and collections agencies, so students having trouble making payments are treated more fairly. The tactic will be for the Department of Education to create a new online portal to process complaints. However, there are already federal avenues to get help today, which we discuss below.

One new element was a request by the President to offer a way to complain about colleges themselves, such as poor quality instruction, though no specifics were offered.

Repaying higher interest loans first. The proposal includes forcing student loan servicers to apply pre payments to higher rate loans rather than lower rate loans first. As intuitive as it sounds, today servicers don’t guarantee any extra payment you make will go to the highest interest rate loan first. But you can get around this yourself by specifying which loan you want your pre-payment to cover. The proposal would make this process automatic.

Competition for U.S. News rankings. The Department of Education will attempt to develop a quantitative college ranking system by this fall that takes into account the value offered by each college’s degree. In theory this would incent colleges to control the cost of attendance in order to rank higher, an outcome that could benefit students. But such change requires 1) broad consumer acceptance of the rankings, and 2) other incentives that inflate college costs to be altered. Such change could have the greatest impact at middle tier schools, where costs of attendance vary widely, but the career income of students is in a more narrow range.

Current rankings from are an interim alternative for parents and students to assess before choosing a college. PayScale’s ROI calculations factor real salaries earned by alumni as well as the cost of attendance via federal data.

A single place to get Federal account information. This might be the most practical of the plans. Today, students with multiple loans often need to login to multiple service providers to handle basic tasks like checking balances and managing payments. And every separate login and password is yet another hurdle to staying on top of debt and paying on time.

While the White House did not provide concrete details, in principle it wants a ‘centralized point of access’ for all federal borrowers to be able to check account and payment information.

Re-balancing federal repayment assistance. While the President introduced a Pay as You earn repayment option that caps repayments at 10% of income last year, the federal budget has not yet been finalized to handle the additional cost of delivering this program. Central to that is the fact that repayment assistance programs tend to disproportionately help graduate students, who under Federal rules are allowed to borrow higher amounts than undergraduate student. As such, they tend to be more likely to qualify for repayment assistance under Federal guidelines.

U.S. News thinks this will result in tightening of qualification for assistance for graduate students, as a way to keep the program sustainable for undergraduate students who may be in more acute financial distress. The President’s proposal this week mentions reforms to ‘streamline’ and ‘better target’ income driven repayment plans, which we interpret as finding ways to reallocate the assistance, potentially at the expense of graduate students.

So if you are considering starting grad school in a couple of years, don’t count on today’s repayment assistance when making your plans.

Where can you get help today?

You don’t have to wait until 2016 to get help if you’re being mistreated by your student loan servicer or a collection agency.

If your servicer is handling a Federal loan, you can go directly to the Department of Education, and its website lets you file a complaint with the Ombudsman Group of the Department of Education.

If you have a problem with a Private loan, which may be issued by your school, a bank, or credit union, you can go to the Consumer Financial Protection Bureau (CFPB). Its website has a form that lets you file a complaint, and the company you’re complaining about will be asked to respond to both you and the CFPB within 15 days.

The CFPB gets attention at financial institutions because it has the power to fine and file lawsuits for practices it feels are misleading or in violation of laws. And it requires that companies close out complaints in full within 60 days.

We also have a discussion on exactly what you should do if you miss a student loan payment.




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College Students and Recent Grads, Life Events, Pay Down My Debt

Do You Need to Buy a Home by 30?

Purchase agreement for house

About once a month, someone walks up my driveway and rings the doorbell. Sometimes it’s a representative from some sort of home repair company that’s fixing up the house down the street, telling all the neighbors that they might also want to consider updating this or that. Other times it’s a realtor passing out business cards. Occasionally it’s kids from local schools selling stuff for a fundraiser.

No matter who it is, though — from fellow Gen Yer installing the neighbor’s new windows to some sort of salesperson blatantly ignoring the community’s “no soliciting sign” — when I open the door I’m usually greeted with the same question:

“Hi there! Is there a parent at home I can speak with?”

I’m 25. I’ve held a college degree and maintained an actual, grown-up career for four years now. I run a business. I’ve opened multiple retirement accounts. I do all sorts of grown-up stuff. And still: are your parents at home?

Annoying, although I get it. I do look young — especially considering that I also happen to own the door that people knock on.

Jumping into Home Ownership as Soon as Possible

I was 22 and one year out of college when I bought my first house. Yes, I was in a hurry and for good reason: the housing market finally found the bottom but was slowly recovering.

Buying early meant the potential to get in at the bottom – and then selling at the top (or at least, considerably higher than what it cost me to get into the market). In other words, I was looking at making an investment. That’s the biggest reason I bought a home and why I encourage other millennials to think about doing the same before they enter their 30s.

As it turns out, buying my house ended up as a good investment. Three years after closing on that first home I’m about to close on it again, but as the seller this time. It was on the market for about 10 days and sold for $40,000 more than the price I paid.

In my experience, home ownership has been a positive thing. It enabled me to leverage my assets in order to grow wealth.

Buying a house won’t be right for everyone. But I urge you to consider home ownership, in some form or fashion, by age 30. Real estate can be an amazing tool to boost your wealth when you’re young if the right situation presents itself.

Advantages of Home Ownership

One of the biggest current advantages of home ownership: crazy-low interest rates. Our parents paid 10% in interest on their home loans when they bought their first houses back in the 70s and 80s. Today, millennials with good credit scores can secure interest rates as low as 3.5%.

This is a wonderful opportunity if you know you want to stay in a particular area for the next few years. This allows you to leverage your assets – in this case, cash for a down payment – to finance a larger asset for an extremely low fee. (The interest rate on the mortgage is the fee you pay for borrowing the money.)

This allows you to maintain a place to live while freeing up the rest of the cash you earn each month for investments that will more than make up for the cost of the interest on the loan. Here’s what taking out a mortgage to finance a home purchase allowed me to do in my early twenties, with my low income:

  • Provided me with a place to live for less than the cost of renting a home or an apartment in the same area.
  • Allowed me to possess a large asset for a relatively low cost.
  • Freed up cash flow: I could take money left over after living expenses were paid each month and invest it in the market to continue to grow wealth. (The interest rate on my first mortgage was 3.7%. I earned about 18% on the cash I invested in the stock market over the last year.)
  • Gave me an opportunity to continue leveraging assets to grow wealth: I put $16,500 cash down on my first home and I’m walking away from the sale of that house with about $45,000 in cash. That’s what’s left from the sale after paying off the mortgage and paying the realtor’s commissions.

There are other major benefits of homeownership. Homeowners who sell their properties and make a profit get an enormous tax break; if you’ve owned and lived in a house for at least two out of the last five years you receive a capital gains tax exemption. You can also write off mortgage interest on your taxes each year.

Under the right circumstances, buying a home can allow millennials to accelerate the rate at which they build wealth. Of course, there are cons to buying a house too. It’s important that you think about these and understand how they can impact you before starting a home search. Here are some of the most common cons for Gen Y:

  • More debt may be the last thing someone with tens of thousands of dollars worth of student debt wants to take on. A mortgage becomes an added financial obligation that may just be too much.
  • Real estate is costly to buy and sell. Closing costs and realtor commissions alone can be tens of thousands of dollars when all is said and done. Understand what the costs will be before you look into buying a home or securing a mortgage.
  • In normal markets, you need to hold on to your property for 5 to 7 years before seeing a return on your investment. There are exceptions to this, but it’s a good general rule of thumb to keep in mind.
  • You’re the only person responsible for maintaining your home and making repairs.
  • Property taxes can increase, making cost of ownership more expensive than you planned on when you bought.

When It Makes Sense to Buy a Home

I believe buying a home in your 20s can pay off if the conditions are right. It helps to start in a low cost-of-living area, where both real estate prices and annual property taxes are relatively inexpensive when compared to other regions. The South and Midwest may provide 20-somethings with the best financial shot at home ownership.

Before buying, you should check out the local rental market. Selling real estate isn’t always easy, it’s never cheap, and it might be a long process. If the rental market in the area is strong, becoming a landlord is a smart backup plan should you ever want to relocate to a new city, travel full-time, or ease the financial burden of carrying a mortgage. There’s also the option of buying a home with the sole purpose of renting it out to tenants.

And of course, you want to consider the housing market in general. If you’re local to the area, it will be easier for you to spot and correctly identify trends and changes. You may see potential in a nearby neighborhood before real estate prices reflect increasing popularity.

Do your research and due diligence. It makes sense to consider buying a home if you can reasonably assume the value of the home will steadily rise over the next few years. And it only makes sense if you can actually afford the home you want to purchase.

Your housing expenses should not exceed about 30% of your income. Ideally, they should be less. Think long and hard about getting into a house generating monthly expenses that will cost you more than 30% of what you make monthly.

Do You Need to Buy a Home?

Let’s face it: you need someplace to live and call home. Does it need to be a home you own? No, it’s not necessary.

But it is an option that more Gen Yers should consider as they pay down student loan debts and start investing money to build wealth. If you’re interested in homeownership at a young age, approach the situation from a purely financial standpoint and leave your emotions at the door.

Most people can’t afford their dream home in their 20s, and that’s okay. Consider resale value and rental opportunities when you consider buying a home before 30 to make sure it’s a smart choice. If the numbers don’t work out in your favor, keep looking.

The only time you “need” to buy a home by 30 if it fits within your financial game plan. Do your research, ensure your costs are manageable, and have a backup plan.

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College Students and Recent Grads, Pay Down My Debt

10 Financial Moves to Make Before Paying Off Your Student Loans


If you’re like a lot of college graduates, you probably left school with at least a little bit of student loan debt. Starting life shackled to debt can feel overwhelming, so you might be chomping at the bit to pay it off as soon as possible.

And while paying off your debt is a fantastic goal, there are some other financial moves that will do more to help you build a secure financial foundation and work towards financial independence.

Before you start throwing all your extra money at your student loans, here are 10 financial moves you should make first.

1. Pay your minimums

The very first priority is paying all your bills on time, including the minimum payments on your student loans and other debts. However, it’s best for your wallet to pay your credit card bills in full each month.

This will not only keep the lights on and a roof over your head, but it will ensure that you build up a positive credit history, which will make it easier and less expensive to do things like buy a house and even find a job later on.

2. Get health insurance

You may feel young and indestructible, but the last thing you want is an enormous medical bill that ends up adding to your debt and making it even harder to reach those long-term goals.

Health insurance will protect you from that worst-case scenario. Hopefully you can get it through work, but if not the new insurance exchanges make this coverage available to everyone.

If you’re starting a family, check out these health insurance lessons learned from our contributor Cat, a new mom of twins.

3. Build some savings

Even if you have high-interest credit card debt, I think it’s a good idea to keep $1,000-2,000 in savings to help you handle all the little (and sometimes big) unexpected things life throws your way.

Car maintenance. Home repairs. Traveling to your best friend’s wedding. These are the kinds of expenses that can pop up unexpectedly and force you to resort to a credit card if you’re not ready for them.

The last thing you want to do is take on even more debt, and having a little bit of cash in a savings account will prevent that.

4. Write your wills (and other estate planning)

If you’re single, you can probably skip this step. But if you’re married, and DEFINITELY if you have kids, getting some basic estate planning in place is a good idea.

The biggest reason to have a will is to name the guardians for your children, which is a decision that would otherwise be left up to the state.

But even if you don’t have kids, a simple will allows you to make sure that your spouse would get your assets if you died, assuming that’s what you want. A lot of states would otherwise default to giving at least some of your assets to your parents.

Other basic documents to get done here are a durable power of attorney, healthcare proxy and living will. All of these things are fairly simple and can be done for a low cost.

5. Get term life insurance

Term life insurance is a great way to make sure that your family would always have the financial resources it needs, no matter what.

For working parents, life insurance would serve to replace your income while your family adjusts. And for stay-at-home parents, life insurance would help your family pay to replace all of the things you do, like childcare, cooking, cleaning, etc.

If you don’t have kids, you probably don’t need life insurance unless you’re married and have joint debt. For example, a couple with a mortgage that would be difficult for either spouse to afford on their own might want enough life insurance to pay off the mortgage or at least help with the payments.

For more detail on who needs life insurance and how to get it, here’s a good resource: Does the Average Millennial Need Life Insurance?

6. Get long-term disability insurance

Long-term disability insurance is one of the best protections you can buy, but for some reason it’s also one of the least talked about.

Basically, long-term disability insurance would provide a payment that replaced some portion of your income if health issues keep you out of work for an extended period of time. And since your future income is your single biggest financial asset as a young professional, protecting it is really a must.

7. Secure your 401(k) employer match

Paying off your student loans, or any other debt for that matter, earns a rate of return equal to the interest rate of the loan. For example, putting extra money towards a 6.8% would net you a 6.8% return on investment.

In most cases, that guaranteed return is a pretty good deal. But there’s one place where you can find an even better guaranteed return, and that’s your employer match.

Many employers offer a dollar-for-dollar match of your 401(k) contributions up to a certain point, which is a guaranteed 100% return on investment. But even if your employer only matches half of your contribution, that’s still a guaranteed 50% return.

Either way, it’s better than what you’ll get from even the highest interest rate debts.

8. Get liability insurance

Liability insurance protects you financially in case you accidentally injure someone or damage their property. It’s part of both your auto policy and your homeowners or renters policy, and you can also look into getting an umbrella policy for a little extra protection.

9. Pay off high-interest debt

If you have credit card debt or other loans with higher interest rates than your student loans, simple math again says that it’s a better idea to pay those off before putting extra money towards your lower-interest student loans. You will save more money by paying off those higher-interest loans first.

10. Find a balance

If you’ve handled everything above, first off give yourself a big pat on the back! You’ve built an incredibly strong financial foundation for yourself that gives you a lot of freedom to make some exciting choices going forward.

At this point, I would encourage you to find some balance between your financial goals. Paying off your student loans is a fantastic goal, but so are things like investing more for your future, building up a bigger emergency fund, and increasing your side income.

As you find yourself with extra money, think about spreading it around towards multiple goals. That will leave you with a well-rounded financial plan that gives you the best of all worlds.



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College Students and Recent Grads, Pay Down My Debt

A 529 Plan Help Parents (and Grandparents) Save for College

Students throwing graduation hats

You may have heard talk recently about 529 plans and how they may no longer be a good place to put your college savings.

In the State of the Union address on January 20, Obama proposed eliminating some of the tax benefits associated with 529 plans. But he has since backtracked, and 529 plans are as alive and well as they have ever been.

It may still make a lot of sense for you to use a 529 plan, but first you need to understand how 529 plans work and how they can make it easier for you to save for your child’s college education.

How do 529 plans work?

529 plans are special investment accounts that make it easier to save for college by giving you some pretty big tax breaks. In fact, 529 plans work a lot like Roth IRAs, just for college instead of retirement.

Just like a Roth IRA, there’s no Federal tax deduction on the money you contribute (we’ll talk about state taxes in just a second). But the money grows tax-free while it’s inside the account, and if it’s withdrawn for qualified higher education expenses (read: college and beyond), it also comes out tax-free. Just like a Roth IRA!

But 529 plans have one more big potential tax benefit that Roth IRAs don’t have. Some states allow you to deduct your contributions for state income tax purposes if those contributions are to your home state’s plan. That deduction can make it even easier to save.

The benefits of 529 plans

The big benefit of using a 529 plan is the tax breaks. Other than a Coverdell ESA, which is also a great option, there’s no other account where you can get this kind of tax benefit for your college savings.

But there are some other benefits as well.

When you open a 529 plan, you’ll have to name a beneficiary, which is simply the child for whom you’re saving. But if that child doesn’t end up needing all of the money you’ve saved for college, you have the option of changing the beneficiary to another child, or even to yourself, your spouse, or eventually to a grandchild. That gives you some flexibility to use the money where it’s needed instead of having it go to waste.

There are also very few contribution limits with 529 plans. There are no income restrictions, so anyone can contribute and still get the same benefits. And you’re generally allowed to contribute up to $14,000 per child per year, with married couples allowed to contribute $28,000 per child per year. There are even special cases where you could contribute up to 5x that amount in a given year. A benefit the Obamas actually took advantage of in 2007 when the couple contributed $240,000 to a 529 plan for their daughter’s educations.

Finally, it’s worth noting that 529 plans are run by states, with each state having one or more plans. But you’re under no obligation to use your state’s plan. So if your state’s 529 plan comes with high fees and/or poor investment choices, you can simply choose another plan. The only time you would be obligated to go with your state’s plan is if you’re looking to get that state income tax deduction. Otherwise, you’re free to go with the best option.

The downsides of 529 plans

While there are some great reasons to use a 529 plan for your college savings, there are some downsides to be aware of too.

The biggest downside is the penalty you would face if you wanted to use the money inside your 529 plan for something other than education expenses. Withdrawing it for any other purpose would not only cause that money to be taxed, but to be hit with a 10% penalty.

There are some exceptions to that 10% penalty. If your child receives a scholarship, you can withdraw up to the amount of the scholarship without penalty. And there are exceptions for death or disability as well, but beyond that, your flexibility is limited.

And unlike a Coverdell ESA, money within a 529 plan can’t be used for K-12 expenses (without facing that withdrawal penalty). Only higher education expenses qualify for tax-free withdrawals.

Finally, your investment options within a 529 plan are limited, though that’s not always a bad thing. It’s kind of like a 401(k), but it’s the state choosing your investment options instead of your employer. And just like with 401(k)’s, some states make good choices and others make bad ones. The good news is that you’re not locked into any one state’s plan, so you can certainly shop around.

How do 529 plans affect financial aid?

Some parents are afraid to use a 529 plan because they’ve heard that it will hurt their eligibility for financial aid. And I’m here to tell you NOT to worry about that.

Here’s the deal: 5.64% of the money you have inside a 529 plan will be counted as part of your financial aid eligibility. Which means that 94.36% of it WON’T count. At all. And the truth is that any money you have outside of your house or retirement accounts will be counted in exactly the same way.

In other words, it’s much better to save ahead and have the money available than to not save and avoid that small ding towards financial aid. Especially when you consider that most financial aid comes in the form of loans anyways, which we all know isn’t exactly free money.

There is one catch to worry about with 529 plans and financial aid though, and it involves grandparents.

Grandparents can open a 529 for their grandchildren, but if they actually withdraw money to pay for that child’s college expenses that withdrawal will count as the child’s income for financial aid purposes. And since the child’s income is the factor that counts the most against financial aid eligibility, this can be a big issue.

There are a couple of ways for a grandparent to contribute to a 529 plan and avoid this issue:

  • Grandparents can contribute directly to a parent-owned 529 plan, instead of opening their own. The big downside with this tactic is that the money is then controlled by the parents, not the grandparents, which may or may not cause a family conflict.
  • Grandparents could simply wait until the child’s last year of school before they help with expenses. Without another financial aid application on the horizon, the consequences won’t make a difference.

Bottom line: 529 plans are still a great tool

If you’re ready to save money specifically for college, a 529 plan is still a great option.

The tax advantages make it easier to save without busting your budget, especially if your state gives you an income tax deduction.

And with the flexibility to choose any state’s plan, contribute almost as much as you want, and change beneficiaries at any time, you can make it work for you no matter what your situation.

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College Students and Recent Grads, Strategies to Save

Three Financial Risks Worth Taking

Male hand putting coin into a piggy bank

You may be more of a financial risk taker than you think. I know I am. I majored in theatre after all and spent the first five years of my professional career pursuing a life of full-time performing. I followed that risk with another- starting my own business- followed by my most recent risk of reinvesting in myself for a greater career payoff.

As is true for anyone, some risks have returned more than others (I both spent more and made more than ever on my business this month); some were a total flop (that personal trainer certification I never utilized); and others I’ve never even entertained because the level of risk seems far too daunting (real estate, rental and investment properties).

So, after all this trial and error, which financial risks are really worth taking?

Higher Education

Risk: Time and money spent. Debt.
Reward: Higher earning potential. Increased career prospects.

Whether you’re looking to go back to school to improve your skill set, obtain an advanced degree, or pondering college choices, higher education can provide a sweet return on investment.

Last year, The New York Times reported that the pay gap between college graduates and those without a degree reached a record high, with degree holders making, on average, 98 percent more an hour than those without a degree.

The average debt among college graduates with loans however, is a whopping $28,400. Though a seemingly high number to a broke, young professional, that temporary debt is just a small fraction of the long-term economic benefits of higher education.

The statistics aside, a degree doesn’t guarantee career success- hence the risk; but risk can be mitigated by researching fields of study that historically provide a good return on investment and programs that fall within the scope of your budget, supplemented with scholarships and other cost cutting techniques.

All in all, higher education is a risk worth taking.

Big City Living 

Risk: Higher cost of living.
Reward: More opportunity, higher salary.

Obviously big city living is not for everyone, but the risk of high living costs should not be the sole deterrent in the pursuit of big city dreams.

While major cities typically come with a higher cost of living they also have many more career opportunities, accompanied with significantly higher salaries. Research by Arizona State University’s Jose Lobo goes so far as to say that highly compensated, metropolitan areas actually provide a better overall bang for your buck.

For example, if pay twice as much for rent in New York City than in Oklahoma City and you make twice as much in NYC – it’s a wash; but when you factor in other cost of living expenses, New York comes out ahead. Things like groceries, home appliances, etc. will undoubtedly be higher in New York, but they won’t be double. So while income is double, only a few living costs are inflated as much, the rest are inflated, but less so, and as such, big city living provides a better value.

Of course this isn’t a hard and fast rule that applies to every person in every big city, hence the risk. To mitigate that risk, individuals can identify companies they’d like to work for and available positions for which they are qualified and compare projected compensation to projected cost of living. By making a well-informed assessment, big city living can become a financial risk with a big benefit.


Risk: Losing money.
Reward: Growing money.

Investing is by definition a risk, but most, if not all, experts would argue that failing to invest is far more risky. If you leave all your money in a savings account earning 1 percent interest, or worse, under your mattress earning nothing, you are certain to lose money courtesy of good old fashioned inflation. If you invest wisely however, you will, hopefully, watch your money grow at a rate that far outpaces the rate of inflation.

Watching the Baby Boomers lose their retirement savings to the 2008 recession was a sobering lesson in the very real risks of investing. So what’s the solution for mitigating that investment risk while cashing in on maximum growth potential? A long-term strategy.

Since 1937, the market has been up 67 out 74 ten-year periods. In his book, “A Random Walk Down Wall Street” Burton Malkiel illustrates the power of a long-term investment strategy using the following example – an investor who put $10,000 into an S&P 500 index fund at the start of 1969 saw her investment increase 31 times to $311,000 by June of 1998.

Though past performance is certainly not a guarantee future returns, historically speaking, a long-term, passive investment strategy, like an index fund that tracks total market performance, keeps the odds in your favor.

I may not have the nerve to be buying up a bunch of investment properties or partake in any venture capital, but there are some financial risks that are simply too good and too easy not to take.

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College Students and Recent Grads, Strategies to Save

The Most Important Insurance You Don’t Have

Couple Reading Letter In Respect Of Husband's Neck Injury

Quick quiz: as a young professional, what’s your biggest financial asset?

Here’s a hint: it’s not your 401(k). And it’s not your house. Or your car. Or your prized collection of 90s-era slap bracelets.

It’s your future income.

All that money you have left to earn. This year. Next year. And every year after.

That income is what you’ll use to pay your bills. It’s what you’ll use to save for the future, raise kids, and travel the world.

With it, you can do just about anything. Without it, those things would be a lot more difficult.

What are you doing to protect it?

What’s the biggest risk to your income?

There are three big reasons why your current income might go away or decrease:

  1. Your employer needs to let people go, through no fault of your own.
  2. Your performance slips and your employer decides to let you go.
  3. Your health prevents you from working.

The first reason may well be out of your control. The second reason is certainly something you can and should work to prevent. It’s that third reason, the potential for your health to keep you from working, that we’re going to focus on here.

According to WebMD, you have about a 33% chance of being disabled for some period of time at some point before you retire. And the cause of disability often isn’t what you might think. Again according to WebMD, the most common health conditions that cause people to miss work are:

  • Arthritis
  • Back pain
  • Heart disease
  • Cancer
  • Depression
  • Diabetes

These are the kinds of things that could happen to anyone, and could potentially keep you out of work, and without an income, for an extended period of time.

How to protect your income

How can you protect yourself from losing your income for health reasons? Disability insurance.

Here’s a quick rundown of how disability insurance works:

  • You buy a policy and pay premiums.
  • If you get injured or sick and are out of work for an extended period of time, your coverage will kick in.
  • You will receive a monthly benefit until you’re healthy enough to go back to work.
  • Many policies will continue to pay you a partial benefit if you’re able to work, but can’t make as much as you were before.

In other words, disability insurance protects your ability to earn an income even if you’re not healthy enough to work.

If you already have enough money to live on for the rest of your life, you probably don’t need disability insurance. If not, it’s probably a good thing to look into.

What type of disability insurance should you get?

When you’re ready to start shopping around for a policy, there are some important questions to consider. The first is what type of disability insurance you want to get.

Here are some of the main distinctions:

Short vs. long-term

Short-term disability insurance is often offered by employers and will typically cover the first 3-6 months of missed time, at which point your payments will stop.

Long-term disability insurance typically won’t kick in until AFTER you’ve already been disabled for 3-6 months, but it will continue to pay out for as long as you’re disabled, typically until age 65.

Both can be valuable benefits, but the coverage offered by short-term disability insurance can often eventually be replaced by an emergency fund or other savings.

Long-term disability insurance is where you can find the real value. If something happened where you weren’t able to work for an extended period of time, perhaps even years, long-term disability insurance would ensure that you still had money coming in.

Group vs. individual

You might be able to get disability insurance as an employee benefit, in which case you would have what’s called group coverage. Group disability insurance has two big benefits:

  • It’s often cheaper than coverage you might get elsewhere, and
  • There’s no medical exam, so you can get affordable coverage even if you have health issues.

Individual disability insurance is coverage you would buy on your own, outside of your employer. It might cost you more than group coverage, but it also has some big advantages:

  • As long as you pay your premiums, the coverage will stay with you even if you change jobs. On the other hand, group coverage is only good as long as you stay with the same company and that company keeps offering the benefit.
  • If you actually have a claim, the payments would be tax-free. Payments through your group coverage would often be taxed, which would leave you with less actual income.

There’s no one right answer here, but it often makes sense to see what you can get through your employer at a low cost, and then look to supplement that with your own individual policy.

What does good disability insurance look like?

Disability insurance is pretty complicated, and it often makes sense to get the help of a professional to find the policy that’s right for you.

But there are a few key variables you can look at to determine how good your coverage actually is. Here’s a quick rundown of some of the most important parts of a disability insurance policy and what you should look for.

Definition of disability

Your insurance policy will actually define what’s meant by “disability”, which will then determine when it does and doesn’t pay out.

There are three main ways they might define it:

  • Own occupation: You are unable to work at your current job.
  • Modified own occupation: You are unable to work at any job for which you are reasonably suited based on your experience, education and training.
  • Any occupation: You are unable to work at any job. This is the definition that Social Security uses for their disability coverage.

The own occupation definition is the strongest coverage, but it will also likely cost the most. Some policies also may use the own occupation definition for a couple of years, and then switch to modified own occupation for all years after that.

Also keep in mind that within these general definitions, the specific language will vary from policy to policy. So it always makes sense to read the policy carefully to understand exactly what is and isn’t covered.

Monthly benefit

This is the maximum monthly payment that your policy will provide if you meet the definition of disability. It’s typically expressed either as a percentage of your salary or as a flat dollar amount.

The important thing to understand here is not just the dollar amount you would receive, but whether it would be taxed. That could make a big difference in whether your benefit would be enough to cover all of your bills.

Premium guarantee

If your policy is non-cancelable, then your premium payment is fixed for the life of your policy. It will never go up as long as you continue to pay on time.

If your policy is guaranteed renewable, the insurance company can increase your premium payment, but only if they increase the premium across all of their policies for people with a similar occupation to yours. They can’t just decide to increase the premium on your policy alone.


Some policies may exclude certain things from their coverage. Pre-existing conditions are a common exclusion, as are mental health issues. The fewer exclusions your policy has, the better the coverage is.

Elimination period

This is the amount of time you have to wait until your coverage kicks in. For long-term disability insurance, an elimination period of one to six months is common.

This is similar to the deductible on other insurance policies, where a longer elimination period will result in smaller premium payments. If you have an emergency fund, you may want to opt for a longer elimination period and save yourself some money.

Are you covered?

If you’re in the market for disability insurance, here are some steps you can take to make sure you get the coverage you need:

  1. Figure out what monthly amount you would need to cover all your bills and your regular savings goals.
  2. If you already have some kind of disability insurance, check whether the after-tax monthly benefit is enough to cover #1.
  3. If not, check whether you have the option to increase your coverage through your employer.
  4. If you still need more coverage, or if you don’t feel like your employer coverage is strong enough, you can shop around for individual coverage.
  5. In all scenarios, check your policy against the variables discussed above to make sure you have the protection you need.

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College Students and Recent Grads, Pay Down My Debt

It’s Possible to Pay Back Student Loans on a Low Salary

Depressed man slumped on the desk with his hands holding credit card and currency

Many recent college graduates are facing enormous student loan debt, and a salary that can barely begin to chip away at paying it all down. While great options to refinance are surfacing, sometimes all it takes is a bit of determination and prioritizing.

This isn’t just wishful thinking. Since graduating college in January 2012, I’ve prioritized paying off my student loans on a low salary, while still being content with my lifestyle and eating more than instant ramen. In fact, I’ve even squeezed in some extra payments out of my meager income.

Student loans are the only type of debt I have, so I’m able to focus on it 100%. These strategies might not work for everyone as we are all in different situations, but I hope you can learn something from my experience.

Debt is NOT Normal

The first step in paying back my student loans was realizing that student loan debt isn’t necessarily normal.

This realization didn’t hit me until about a year after I graduated, mostly because many of my friends and coworkers had student loan debt. It’s almost rare to meet someone who had the luxury of a debt-free college education.

As a result, I thought along the same lines as everyone else – student loan debt is normal, what’s the rush in paying it back?

It wasn’t until I was out on a walk one night that I had an epiphany. I would be spending the next 10 years of my life with this cloud of debt hanging over me. Ten years. That seemed like an awful long time, and my student loan payments were already holding me back in many ways.

When I returned from my walk, I calculated the total amount my loans would cost if I kept paying the minimum amount due. I couldn’t believe how much interest I was going to end up paying – $5,500! If I paid an extra $60 per month, I could shave $1,649 off of that.

I started searching for information on accelerating student loan payments, and stumbled across a few fantastic blogs where others were sharing their stories. Inspired, I decided I wanted to get rid of my student loan debt as soon as possible, and would pay extra on them every month until they were gone.

Lessons Learned: Student loan debt shouldn’t be dragged out. The longer you take to pay back your loans, the more you’ll end up paying, as interest is working against you. Pay more than the minimum amount owed whenever possible – even if it’s just a few more dollars. It’s important to get into the habit of paying more.

Adjust Your Lifestyle

When I graduated from college, the first job I had paid $12 an hour. Not the most amazing salary, but we all know how that story goes. It was a salaried position, meaning I had no opportunity for overtime.

Thankfully, I had the foresight to be somewhat smart about my college expenses, and in the end, I amassed $18,000 of student loan debt, with a minimum payment of $200 per month. That’s peanuts compared to the six-figures some have to face, but it still felt like a heavy burden on a smaller salary.

What did I do to afford making extra payments? I simply continued living frugally after graduating. “Keep living like a broke college student” is good advice. It might not be glamorous, but I preferred being able to save money every month.

I was also extremely thankful that my parents only wanted $100 a month for rent, and for the most part, I was able to keep my expenses extremely low.

I was mindful of any spending I did – I went through every transaction and asked myself if a purchase was necessary. I waited days, if not weeks, on making bigger purchases. Instant gratification wasn’t in my vocabulary.

I grew up knowing that money is precious and shouldn’t be spent frivolously. That mentality greatly helped me keep my spending in control. Realize that whenever you spend on something else, you’re distancing yourself from getting rid of your loans.

Lessons Learned: Keep your expenses low whenever possible. Choose the cheapest living situation you can safely live in, as rent is often one of the biggest expenses we face after graduating. Live frugally and question the necessity of your expenses.

Ruthlessly Prioritize Your Student Loans

I wanted to maximize my spending to be sure I was only purchasing things that truly mattered to me. By making my student loans a priority, everything else took a backseat, and I was forced to take a critical look at how much I was spending elsewhere.

I had been paying $92 a month for my cellphone. When I realized that amounted to $1,100 a year, I switched to a $25 a month plan with Republic Wireless. My phone was not worth that much to me. I wanted my debt to be gone worse than I wanted my iPhone. I ended up getting a Moto X, and it works perfectly fine.

I relocated to city with a lower cost of living area with my fiancé with the hope that our expenses would be even less than they were before. We saw a dramatic decrease in rent, car insurance, and gas.

Any time I go grocery shopping, I bring a list. I leaf through circulars for sales and I know the best prices for the items I routinely buy. I also know the difference between a “sale” and a good deal. This helps keep our food budget low.

As for hobbies, mine are simple. I enjoy reading, writing, and spending time with family and friends by playing board games or enjoying a home-cooked meal with them. There is tons of free entertainment around if you just look for it.

The important thing to note is that none of this feels like a sacrifice. I know my efforts have helped me save and pay down my student loan debt, and I never worry or stress about making payments. To me, that beats living paycheck-to-paycheck, constantly concerned with where I’m going to get the money to pay my bills.

While my student loan debt is on the lower end, my fiancé graduated with about $30,000 in student loans. He was still working a $9 an hour retail job when his grace period ended.

He made his payments work by taking the same actions I did. Our support system for each other helped keep us motivated. Anyway taking action to quickly pay down student loans should find a buddy or support system because your peers won’t always bee encouraging. It’s hard to stay focused when your friends want you to hang out at the bar every night, or go shopping, and don’t understand why you decline.

Choosing to pay off your student loan debt early can make you the odd one out, but I’d argue it’s worth being out of the red early on in life. Make sure the company you keep is supportive of your efforts.

Lastly, my fiancé and I both eventually received raises. Instead of succumbing to lifestyle inflation, we were excited to increase our student loan payments. We took advantage of working overtime, and any extra money goes straight toward our debt. That’s the power of prioritizing.

Lessons Learned: Time to get serious. How much do you want your student loan debt gone? If you truly want to become debt free, you’ll ruthlessly prioritize your loans so your financial decisions are based around your goal.

Have a Positive Attitude

The right attitude and mentality goes a long way with paying off debt. I don’t view my college education as a mistake. I know it can be difficult not to, especially when you graduate with a degree you’re not using the way you expected to, but there’s no sense in dwelling on the past.

Having a bad attitude can be dangerous: I’ve seen friends flat out ignore their student loan debt situation. They think if they stop paying, it will magically go away. This is not the case! Turn your unhappiness or dissatisfaction into motivation to rid yourself of the debt. Don’t ignore it, as that solves nothing.

Lessons Learned: There’s nothing to be gained from having a pessimistic outlook on your debt. Figure out what you can do today to ease the burden instead.

Alternative Solutions

As I mentioned in the beginning, refinancing options for student loans are on the rise, and there are other income-based repayment options available. If you find you truly can’t afford to pay back your student loans, there’s no shame in considering these options.

Be aware that some of them will extend the term of your loans, meaning you’ll be paying longer than 10 years, and subsequently, paying more overall.

I also need to mention the importance of earning more. Just because your primary job doesn’t pay well, doesn’t mean you have to be stuck with just that income. You can add onto your primary income in the form of a part-time job or online gig. Lots of millennials are freelancing on the side as a way to earn more, and if you find that easier than living on less, go for it!

Paying Off Student Loans on a Lower Salary is Possible

Overall, having a lower salary helped me to stay frugal after college. Even though student loan debt is still a thorn in my side, I’m grateful for the discipline and financial lessons that it has taught me. I don’t think I’d be managing my money as effectively if I had graduated debt free.

If you optimize your finances and ruthlessly prioritize paying off your student loans, you can succeed, even on a lower salary. Do what you can to better your financial situation, and remember that paying off your student loan debt will make a huge difference in your budget down the road.

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College Students and Recent Grads, Pay Down My Debt

You Need to Understand How Interest Impacts Your Student Loan Payments

mortar board cash

If you’re a recent college graduate who has never had any debt besides the student loans you graduated with, you might not fully understand how interest works when it comes to your loans.

How payments are applied can be a little confusing to someone who has never had to deal with it before.

If that’s the case for you, then you should read on, as we’re looking at how payments go toward the interest of your loans first, and explaining how you can reduce the interest you’re paying on your student loans.

This information can save you thousands of dollars over the life of your loan if you apply it correctly.

How Are Payments Applied to my Loans?

For most student loans, your payment is going to be applied to interest first, and then to principal. If you have any fees associated with your loans (such as a late fee), then your payment will go toward paying your fees first, then interest, and then principal.

If you’re repaying your loans under an Income-Based Repayment Plan, then your payment will be applied to interest first, then fees, and then the principal.

How Is Interest Calculated?

Interest accrues daily on your student loans, so if you check on your balance a few times throughout the week, you’ll see the amount owed increasing. Student loans use a formula of simplified daily interest, which means interest is only accrued on the principal balance.

Let’s take a look at this in action using an example. Feel free to follow along by plugging in your specific loan numbers.

This is the example we’ll be using: student loan balance of $8,000 at a 6% interest rate on a 10-year term, with a minimum payment of $88.82.

Forumla 1

To calculate your daily interest amount, use this formula: (Current Principal Balance x Interest Rate) / 365.25

Using our example: (8,000 x .06) / 365.25 = $1.314168377823409 in interest accrues daily.

Forumla 2

If you want the monthly interest amount, use this formula: (Daily Interest Amount x Number of Days in Month)

Using our example: $1.3141 x 30 = $39.42 in interest accrues monthly.

Forumla 3

Some student loan providers use the “interest rate factor” instead, which is essentially the same thing – the amount of interest that accrues on your loan.

To calculate the interest rate factor, divide the interest rate of your loan by 365.25.

Using our example: .06 / 365.25 = .0001642710472279261.

The formula for the monthly interest rate using the interest rate factor will yield the same results – (Number of Days Since Last Payment) x (Principal Outstanding Balance) x (Interest Rate Factor).

Using our example: 30 x 8,000 x .0001642710472279261= $39.42 in interest accruing monthly.


What you should take away from this is that of your $88.82 monthly payment, $39.42 is going toward interest. Ouch!

[Read more about how to handle student loans here.]

What Can I Do To Lower How Much Interest I’m Paying?

Seeing how much of your payments go toward interest can be painful. By paying extra toward your student loans, you can accelerate your debt payoff date and pay less overall.

This is because every time you make a payment over the minimum amount due, more of your payment is applied toward the principal balance. Remember, when the principal balance goes down, the amount of interest accrued does as well.

We know that a 6% interest rate on our $8,000 loan means $39.42 of interest accrues monthly. However, 6% interest on a $6,000 loan is $29.57. It makes quite a difference!

Let’s take our original example from above. If you simply pay $88.82 for the entire 10 years, you’ll have your loan paid off on time, but you’ll actually end up paying $10,657.97. That’s $2,657.97 more than you signed up for, due to interest!

If you add just $100 more onto your monthly payment so that you’re paying $188.82/month, your loan will be paid off in 4 years, and you’ll have saved $1,619 off your total bill (paying a total of $9,038.97).

Alternatively, if you can’t afford to pay more in one chunk, you can make extra payments when possible, such as paying $20/week, every week, toward your loans.

What Does It Mean When Interest Capitalizes?

It’s important to know what this term means – this is something you only have to be concerned about once, and only if you have unsubsidized loans.

Let’s quickly cover the difference between federally subsidized loans and unsubsidized loans. With federally subsidized loans, the government pays the interest for you while you’re in college. With federally unsubsidized loans, the interest starts accruing as soon as the loan is disbursed to you.

If you don’t make any payments to your unsubsidized loan while you’re in college, then all of the interest accrued while you attended will capitalize when your loan enters repayment status (right after your grace period ends).

If you’re still in college, it’s recommended that you at least try to cover the monthly interest payments while in school. It will save you more money down the road! If you’re in your grace period, there’s no harm in starting to pay early. Take advantage of being able to pay down your interest while you can.

Look At Your Payment Schedule

Most student loan servicers provide you with a payment schedule so that you can see how your loan will be paid off. This might help you visualize and understand exactly where your payments are going.

If you don’t see an option for this, try using a loan calculator.

Continue Paying, Even If You’re Paid Ahead

If you do start paying extra toward your student loans, you might notice that the status of your loans says “paid ahead”.

While that means you’re making great progress, it doesn’t mean you need to stop paying your loans. Interest is still accruing! If you take a break and don’t pay, your hard work will be eaten away by interest.

Read the Fine Print

When it comes to paying any loan back, you should be fully aware of the terms of the loan and how it functions. You’re responsible for paying your loans back according to the terms you agreed to.

It’s extremely important to know how your payments are being applied to your student loans. If you have a different type of student loan and aren’t sure how interest is being calculated (or how your payments are being applied) then call your student loan servicer. Many of them have helpful resources on their website that will help you understand how payments are applied, but it’s always worth giving them a call for clarification.

If you only take away two points, let it be these: when you make a payment toward your student loans, your money is going toward the interest on your loan first, and then on the principal. To reduce the amount of interest you pay over the life of your loan, make extra payments when possible.

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College Students and Recent Grads, Life Events, Strategies to Save

How to Have a Million Dollars in Retirement with a $50k Annual Salary

Geeting advice on future investments

If you’re just starting out, saving for retirement can feel like an impossible goal. It’s not only decades away, but the thought of having hundreds of thousands (or even millions) of dollars in savings can seem a little ridiculous, especially when it’s still a struggle just to manage your day-to-day bills and keep a little money on hand for some fun.

But the truth is that you can build up some significant savings, even to have a million dollars in retirement, and you don’t have to make a lot of money or start saving a ton right away.

In this post we’ll go through a few examples of people who are just starting out like you and can’t afford to save a lot for retirement yet. But with a little planning and a long-term view, each of them can reach $1 million in savings.

Example 1: Steve, age 25

Steve is 25 years old and makes $50,000 per year. He’s living on his own for the first time and his budget is pretty tight due to student loans he needs to pay off, so he doesn’t have a lot of room to save for retirement.

Steve might not be able to save much right now, but he has one big advantage: he’s starting early. Because he has so much time, he can actually start pretty small and still get to $1 million.

Here’s how Steve does it:

  1. He sets up an automatic $50 monthly contribution to a retirement account (this is 1.2% of his annual salary).
  2. His employer doesn’t offer a match on 401(k) contributions (come on employer!) so he has some flexibility about where to put that money. He could choose to contribute to a 401(k) or Traditional IRA, which would give him a tax deduction today in exchange for paying taxes on the money he withdraws in retirement. Or he could choose to contribute to a Roth IRA, which wouldn’t offer any current tax break but would give him tax-free withdrawals in retirement. He chooses to go with a Roth IRA because he likes that the money will eventually be tax-free, but you can click here for a more detailed review of the two options.
  3. Every year he increases that monthly contribution by $50. He sets up a calendar reminder that sends him an email each December so that he remembers to do this.
  4. He caps out his contributions at 10% of his salary ($417 per month). If he decided to contribute more, he could either reach his goal sooner or have more money in retirement, but for now he’s decided that 10% is all he can afford. He will be making this max contribution by age 33.

If Steve follows this plan and gets an 8% annual return on his investments, he will hit $1,008,575 in retirement savings by age 64. Not bad!

Example 2: Jen and Dave, age 25

Jen and Dave are also 25 and have a combined income of $75,000 per year.

If they follow the exact same plan as Steve, they will actually end up saving a little more because that 10% cap on contributions will be based on a higher income. That little bit of extra savings will allow them to reach $1 million a few years sooner.

Starting with a $50 monthly contribution that increases by $50 each year, Jen and Dave will hit $1,002,410 in retirement savings by age 61.

Example 3: Tiffany, age 35

Like Jen and Dave, Tiffany is making $75,000 per year. But she’s starting 10 years later, at age 35, so she’s going to have to save a little more aggressively if she wants to get to $1 million.

Still, the path isn’t quite as difficult as you might think. Tiffany can still start pretty small and work her way up.

Here’s how she does it:

  1. She starts with $100 monthly contributions, automated of course (this is 1.6% of her annual salary).
  2. She chooses to contribute to her company’s 401(k) instead of a Roth IRA because she likes the current tax break and it offers plenty of good, low-cost index funds.
  3. She increases those monthly contributions by $100 each year.
  4. She caps her contributions at 15% of her annual salary ($938 per month, which she will hit at age 44).

If she sticks to this plan, she will reach $1,000,508 in savings at age 65. If she starts with $200 monthly contributions instead, she can get there about 1 year sooner.

Three Warnings

While saving $1 million for retirement is certainly a big accomplishment, there are three big reasons why it may not necessarily be enough for you.

First, your personal spending patterns will determine your personal retirement need and $1 million is just an example. You can use one of the many retirement calculators online to get a sense of your personal needs.

Second, $1 million will be worth a lot less in 30-40 years than it is today simply because of inflation. If your Grandma has ever told you how much a loaf of bread cost back in the day, you know what I’m talking about.

And finally, if your retirement money is inside a 401(k) or Traditional IRA, it’s important to remember that your withdrawals will be taxable and therefore you may have less available to spend than you think. As an example, a married couple withdrawing $54,000 per year from a 401(k) may only have about $50,000 to actually spend (assuming they have no other income and tax rates are the same as they are today).

What does this mean for you?

If you simply start now and give yourself time, you CAN build up a sizable amount of retirement savings even without a huge salary.

None of these examples even accounted for the fact that you might get raises or that your employer might offer a match on your 401(k) contributions. Either of those would help your savings grow even faster.

So, if you’d like your own million dollar retirement fund, simply follow these steps and watch your money grow:

  1. Start contributing what you can right now, even if it’s small.
  2. Automate those contributions to a dedicated retirement account like a 401(k) or Roth IRA.
  3. Create a regular schedule for increasing those contributions by small amounts each time.
  4. Stick to your plan. Consistent progress over long periods of time is the key to the whole thing.




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College Students and Recent Grads, Pay Down My Debt

Sample Goodwill Letter to Remove a Late Student Loan Payment from Your Credit Report

Businessman Holding Document At Desk

If you’ve pulled your credit report recently and discovered that there’s been a late payment reported concerning your student loans, you might be wondering what you can do to recover.

Late payments can be damaging to your credit, especially if you stop paying your loans for an extended period of time. We’ve already gone over the repercussions of delinquency and defaulting, but today, we’re going to take a look at another method of repairing your credit report.

What is a Goodwill Letter?

A “goodwill letter” is a simple way to repair your credit report and it can be used for both federal and private loans. The purpose of a goodwill letter is to restore your credit to good standing by having a lender or servicer erase a lateness on your credit report.

Typically, those that have experienced financial hardship due to unexpected circumstances have the most success with goodwill letters. They allow you to take responsibility for your actions and to ask (in a very nice way) if your student loan servicer can empathize with the situation that caused the lateness, and erase it from your report.

It can also be used when you think the late payment is an error – for example, if you were in deferment or forbearance during the time of the late payment, and weren’t required to make any payments during that time, or if you know you’ve never been late on a payment before.

What Makes a Convincing Goodwill Letter?

If you’ve been looking for a goodwill letter that will actually work, we have some tips on what you should include in your letter.

  1. An appreciative tone

It’s important that the entire tone of your letter read as thankful and conscientious. If you were actually late on your payments due to extenuating circumstances, you shouldn’t take an angry tone in your letter, since you were in the wrong.

  1. Take responsibility

You want to be convincing and honest. Take responsibility for the late payment, and explain why it happened. They need to be able to sympathize with you. Saying you just forgot isn’t going to win you any points.

  1. A good recent payment history

Besides sympathy, you want to gain their trust as far as continuing to make payments goes. If your lender sees payments being made on time before and after the period of financial hardship, they might be more willing to give you a break. When you have a pattern of late payments, it’s more difficult to convince them that you’re taking this seriously.

  1. Proof of any errors and relevant documents

If you’re writing about a mistake that occurred, still be friendly in tone, but back up the errors with documentation. You’ll need proof that what you’re saying is true. Unfortunately, errors are often made on credit reports, and it may have been a clerical error on behalf of your servicer. If you have any written correspondence with them, you’ll want to include it.

  1. Simple and to the point

The last thing to keep in mind is to craft a short and simple letter. Get straight to the point while telling your story. The people reviewing your letter don’t want to read an essay, and the easier you make their lives, the better.

A Sample Goodwill Letter

Below is a sample Goodwill Letter template for student loans:

To Whom It May Concern,

Thank you for taking the time out of your day to read this letter. I just pulled my credit report, and discovered that a late payment was reported on [date] for my account [loan account number].

During that time, my mother fell terminally ill, and I was the only one left to care for her. As such, I had to leave my job, and my savings went toward her healthcare expenses. I fell on very rough times after she passed away, and was unable to make my student loan payments.

I realize I made a mistake in falling behind, but up until that point, my payment history with you had been spotless. When I was able to gain employment once again, I quickly resumed paying my student loans, making them a priority.

I’m not proud of this black mark on my record, but it’s the only one I have, and I would be extremely grateful if you could honor this request to remove the lateness from my credit report. It would help me immensely in securing other lines of credit so that I can further improve my credit score.

If the lateness cannot be removed entirely, I would still be appreciative if you could make a goodwill adjustment.

Thank You.

If you’re writing a letter because the lateness on your credit report is inaccurate, then try this letter:

To Whom It May Concern,

Thank you for taking the time to read this letter. I recently pulled my credit report and found that [Loan servicer] reported a late payment regarding my account [loan account number].

I am requesting that this late payment be assessed for accuracy.

I believe this reporting is incorrect because [list the supporting facts you have]. I have included the documentation to prove that I made payments during this time / that my loans were in forbearance/deferment and didn’t require any payments.

Please investigate this matter, and if it is found to be inaccurate, remove the lateness from my credit report.

Thank You.

Make sure you delete the scenarios that don’t apply to you; you want to provide as many personal details as possible. You should also include your name, address, and phone number at the top of the letter, in case your loan servicer needs to reach you immediately.

Where to Send Your Goodwill Letter

Now that your letter is written, you have to send it! This can be done either by fax or by mail. Most student loan servicers have their contact information on their website, but you can also look on your billing statements to see if they specify a different address.

Additionally, you can try calling the credit bureau the lateness was reported to, and see if they can give you the contact information you need.

It’s important to mention that goodwill letters are not a means to immediate success. It often takes several attempts to correspond with servicers and lenders to get them to acknowledge that they received a letter from you.

Your best bet is to get a personal contact at the company that has the power to erase the late payment from your credit report.

If all else fails, try as many different communication methods as possible. Call, mail, fax, live chat (if your servicer offers it), and email them. Several people who have tried this method report that it’s possible to wear your servicer down with a decent amount of requests.

Addresses and Fax Numbers to Try

These addresses and fax numbers were found on the servicer websites directly. Again, it’s worth it to try and call your servicer to get the name of someone there that can help you.


Documents related to deferment, forbearance, repayment plans, or enrollment status changes:

Attn: Enrollment Processing

P.O. Box 82565

Lincoln, NE 68501-2565

Fax: 866-545-9196

My Great Lakes

Great Lakes

P.O. Box 7860

Madison, WI 53707-7860

Fax: 800-375-5288

Sallie Mae

Correspondence Address

Sallie Mae

P.O. Box 3319

Wilmington, DE 19804-4319

Fax: 855-756-0011

Documents to Include With Goodwill Letter

Don’t let your efforts go to waste by forgetting to include documentation with your letter. Here’s a quick checklist of what you should include:

  • The account number for your loan
  • Your name, address, phone number, and email
  • Statements showing proof that you paid (if you’re disputing a late payment)
  • Documentation showing that you’ve paid on time at all other points aside from when you experienced financial hardship
  • Identifying documentation so your servicer knows you sent the request
  • Not necessarily something to “include”, but if you’re mailing anything, you should send it by certified mail with a receipt requested, this way you’ll know if your letter made it.


If you’re interested in exploring goodwill letters further, and the results that others have had, check out these websites:

  • They cover disputes, what to do about them, and how to go about rectifying them here.
  • gov: If you have loans with a private lender, and your lender has reported you as late when you weren’t, you can file a complaint with the CFPB to see if they can help you.
  • myFico Forums: The forums on myFico are populated with helpful individuals that might be able to give you contact information for certain servicers. There are some people reporting success with goodwill letters, and they are willing to share the letter with others upon request.

It’s worth the time to write a goodwill letter

If you’ve discovered that a late payment has been reported on your credit, and it’s because you fell on hard times, or is inaccurate, it’s worth trying to get it erased. These dings on your credit are there to stay for 7-10 years. That’s a long time, especially if you’re young and hoping to buy a house or a car in the near future. It’s a battle worth fighting.

Get in touch with us on Twitter @Magnify_Money

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College Students and Recent Grads, Pay Down My Debt

How to Get Student Loan Modification and What Qualifies

Student Loan Mod_lg

If you’re one of the many people finding it difficult to pay back your private student loans, Wells Fargo recently released the promising news that they are moving forward on the private student loan modification pilot program they rolled out earlier this year.

What does this mean for borrowers? Two things:

First, it’s fantastic news for the industry in general. Private student loans have lagged behind, offering a limited number of options that are greatly dependent on your lender. In contrast, federal loans offer many benefits for borrowers such as deferment, forbearance, and a large selection of income-based repayment options.

The Consumer Financial Protection Bureau has been critical of bigger banks that haven’t been willing to extend repayment options to borrowers, and the banks have finally listened.

Second, this means that student loan payments are about to become more affordable for a select group of people. Let’s look at what loan modification programs can mean for borrowers.

Which Lenders Are Offering Student Loan Modifications?

Four big lenders are offering more flexible repayment options than they have before to lessen the burden on student loan borrowers.

Wells Fargo

Let’s look at Wells Fargo first. The bank’s recent announcement highlighted some significant changes they’re hoping to make.

The Wall Street Journal has reported that Wells Fargo is offering reduced interest rates as low as 1% to borrowers facing financial hardships. These reductions are temporary or permanent, depending on the situation you’re in (more on that below).

They’re also going to be offering extended repayment terms (by 5 years) come February 2015.

Wells Fargo wants to lower borrower payments to 10%-15% of their total income, and according to the bank, individuals in the pilot program lowered their monthly payment by as much as 31%.

This reduction in interest rate is extremely good news for those with private student loan debt, as the average interest rate on private loans is 10%-12%, much higher than federal loans. By slashing the interest rate, borrowers will pay less over the life of the loan as well. This is a better option as opposed to extending the repayment period, as that typically amounts to more paid with interest accounted for.


Discover also announced it plans on introducing a similar loan modification program early next year. The details have yet to be disclosed to the public, but they did start offering interest only payments earlier this year to borrowers who were less than 60 days late on their loans.

Discover has mentioned that they are planning on lowering interest rates, and will possibly waive balances for some borrowers that have been hit the hardest.

Discover has also already been making headway in offering more options for borrowers, which include reduced payments, deferment, forbearance, and payment extensions. Offering private student loan borrowers similar benefits that federal borrowers get to enjoy is a step in the right direction.

The great thing about this announcement is that other private lenders who offer flexible repayment options are being mentioned. If these lenders have been offering more repayment options, your lender might be as well.

Sallie Mae

Since 2009, Sallie Mae has been offering 1% interest rates, for sometimes up to two years, to borrowers that were delinquent on their loans.


Similarly, PNC lowered the interest rates of select borrowers to 0.6%, for as long as 18 months, earlier this year.

This goes to show that private lenders are becoming more and more willing to work with borrowers to give them some breathing room where student loans are concerned. But who can really benefit?

What Are the Qualifying Situations for Loan Modifications?

At this point, these loan modification programs are being targeted to two groups:

  • Those that are behind on payments by 30-119 days
  • Those that are anticipating a loss of income in the future, thereby making it difficult for them to afford the monthly payments

Borrowers who have defaulted on their loans will not qualify for a loan modification. A loan is typically considered to be in default after 120 days have passed with no payments made.

Borrowers in the second group that are anticipating loss of income due to medical reasons, a job loss, or a pay cut, may also apply for consideration. If your income can’t keep up with your payments, and you’ve done all you can to cut your expenses, it’s worth applying.

Wells Fargo currently requires proof of income to assess your situation. As the press release states, they are evaluating borrowers on a case-by-case basis, so don’t be deterred if someone you know has tried to apply and was turned down.

For now, the exact parameters of qualification aren’t available to the public, which is why calling your lender and speaking with them regarding your individual situation is important.

Credit checks are likely to be ordered, but this is mostly for the purpose of seeing what your overall financial situation looks like, including any other debts you may have. Lenders take more than just your score into consideration.

Based on your situation, you’ll either be given a temporary loan modification or a permanent one (if it doesn’t look like your situation will improve).

For other repayment options, such as Discover’s interest-only payments, proof of income typically isn’t required.

Bottom line: you need to be able to show that you’re experiencing financial hardship, and cannot afford your payments on the term you have now.

How is a Loan Modification Different from Forgiveness, Consolidation, or Refinancing?

It’s worth noting that loan modifications are different than forgiveness, consolidation, and refinancing.

Student loan forgiveness means that the entirety of your student loan balance is forgiven, or waived. It’s widely only available to those with federal student loans. Forgiveness is usually granted to those under special circumstances, such as volunteer work, working for a non-profit, working in the medical or law field, or being a teacher in the public sector.

[Read more about repayment plans and student loan forgiveness here.]

There are very few private lenders that offer forgiveness, and if they do offer it, it’s only under dire circumstances. For example, if a borrower dies, or is completely disabled, then their loan balance may be forgiven. For Discover to announce that they’re thinking of waiving loan balances is a huge step as far as private lenders go, but we don’t yet know what it will take to qualify.

A loan modification will not wipe out your student loans completely like forgiveness will.

Loan consolidation is useful for borrowers who are making payments to a number of different lenders, and are having trouble keeping track of it all. You can consolidate both federal and private student loans separately, but you can’t apply for a Direct Consolidation Loan with just private loans. You’d have to consolidate private loans through a private lender. When consolidating, you may be eligible for a longer repayment term, and a lower interest rate, but it’s dependent upon the loans you’re consolidating.

A loan modification means you’re adjusting the repayment terms on one of your loans. It doesn’t mean you’re combining all of your loans into one big loan, like consolidating your loans will do.

When refinancing a student loan, you’re hoping to get a lower interest rate, or a longer repayment term, to make your payments more affordable. Refinancing sounds similar to getting a loan modification, but the difference is that most lenders won’t refinance loans that are delinquent or default. The qualifications for refinancing are also much stricter.

With a loan modification, lenders are looking to work with you. If your credit isn’t the best, or if you’re delinquent (but not in default!), you still have a chance at working something out.

The Takeaway and What to Do

If you’re a borrower struggling to make payments and just squeaking by, or are already a little behind, you should reach out to your lender and ask them what options are available to you.

Bigger lenders such as the four that we mentioned aren’t going to reach out to you and tell you that you’re eligible for a loan modification. They don’t have time to sort through the millions of borrowers that have loans with them.

If you want your student loan payment situation to change, you must take action. The worst that can happen is your lender says no, and you’re back where you started. Don’t wait before it’s too late – as you should already know, having your loans default is the worst thing that you can let happen. Take advantage of the fact that private lenders are opening up their doors to struggling borrowers.

Don’t forget to follow us on Twitter @Magnify_Money and on Facebook.

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College Students and Recent Grads, Pay Down My Debt

Student Loans: Private, Federal, and Alternative Funding

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Student loans have become the bane of existence for millions of young professionals. According to Experian, 40 million Americans now have at least one outstanding student loan, up from 29 million in 2008. The average total balance on those loans has risen from $23,000 to $29,000.

Unfortunately, age 18, when high schoolers blindly excited by the prospect of attending their dream school start taking on those major financial commitments, is not the ideal time to be making life-altering financial decisions. These young adults have little understanding of basic personal finance, let alone the implications of the massive debt loads they’re signing on for. Even parents and professionals going back to school for advanced degrees are getting burned through the often-confusing process.

The Free Application For Federal Student Aid, or FAFSA as it’s better known, has more than 100 questions to determine aid eligibility, and a small error or accidental omission can result in being denied Federal funding altogether.

Private Student Loans vs. Federal Student Loans: What to Take Out

Despite the confusing application process however, Federal loans are the best resource for students looking to receive financial aid that they can actually manage. 

Federal student loans are those funded by the government. The interest rates on Federal loans are fixed, making it simple to anticipate and plan for payments come graduation. Private loans on the other hand are offered by banks and have variable interest rates that, generally speaking, far exceed the levels of Federal loans.

Interest rates on Stafford Federal loans are currently 4.66 percent for undergraduates and 6.21 percent for graduate students. Interest rates on student loans from private lender Wells Fargo, however, can range from 3.75-12.29. While paying 3.75 percent interest may sound tempting when compared to 6.21 percent, the private lender’s variable rate can just as soon rise to 12.29, well above the fixed Federal loan rate.

For the most part, private loans require cosigners and credit checks, whereas Federal loans typically don’t subscribe to either of those requirements.

Private students loans also require payments while students are still in school, whereas federal loans generally don’t require repayment until students graduate, leave school, or change their enrollment status to less than half-time.

Finally, Federal student loans are eligible for various programs like loan forgiveness and income based repayment. They can also be postponed in certain situations or retired if a student dies or becomes disabled. Private student loans offer much less flexibility, going so far as to go after the cosigner for the remaining balance if the student succumbs to a tragedy.

Suffice it to say that Federal student loans are by far the better option when funding education and should be maxed out before ever considering a private lender. Federal aid is awarded on a first-come, first-serve basis, so it’s imperative for students to fill out and submit their properly completed FAFSA as soon as possible. If Federal aid alone isn’t enough to cover the cost of education, switching to a more affordable school or program, or researching alternative funding options may be a better choice than resorting to private loans.

Alternative and Supplemental Funding

Too many students discount scholarships when figuring out their educational funding. Unlike loans, scholarships are financial gifts towards education that don’t carry interest and never need to be repaid. Students don’t have to have the best grades or the most need or the most unique talent to qualify either.

While National scholarships, like those awarded by the National Merit Scholarship Corporation and the Coca-Cola Scholars Foundation provide major funding, they also have extremely large competition pools. Looking for state, local, and college specific scholarships are great ways for students to increase their chances of being awarded free funding.

Students should make the most of their varied resources- from their college counselor to the local library to various websites that aggregate available scholarships based on background, interests, abilities, financial need, field of study, and other pertinent information- to see what scholarships best suit them.,, and are all great starting points for researching and pursuing supplemental scholarship funding.

Loan Repayment: Federal vs. Private

Late and missed payments on student loans can result in credit catastrophe. While Federal student loans aren’t considered in default until the borrower has missed payments for nine months, private loans have varying default windows, some kicking in after just one missed payment. Once default happens, the entire loan amount comes due and the collection agencies come calling. Ignoring either is bad news as student loans are almost impossible to discharge- even in bankruptcy.

If your required monthly payments are more than you can afford to pay, there are plenty of options to look into with your Federal loans- income based repayment, extended repayment plans, even temporary deferment of payment- to name a few. While private loans don’t offer the same flexibility in repayment, the consequences of defaulting are arguably less severe. When you default on a Federal student loan, the government can garnish your wages, social security benefits, and tax refunds. When you default on private student loans however, the lender can go after anyone who co-signed your loan, destroying their credit as well as yours.   If you can’t afford all of your payments, be they private and/or Federal, it’s much better to review your various consolidation and repayment options than to simply default and accept financial ruin.

Before deciding on or signing anything, students must understand the financial implications of their higher education decisions. If not, they may resort to drowning under the crushing weight of student loan debt for the rest of their lives.

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College Students and Recent Grads, Pay Down My Debt

Miss A Student Loan Payment? Where To Find Help And What Happens

Mixed Race Young Female Agonizing Over Financial Calculations in Her Kitchen.

If you’ve missed a student loan payment or are struggling to make payments, you’re not alone. According to the Department of Education, millions of loans are currently delinquent, with many more being sent to collections every day.

What happens when you can’t afford to make a payment, and subsequently miss the due date? If you have federal student loans, at first, you’ll be delinquent. Nine months after you miss a student loan payment, your loans will then enter into default status.

If you have private loans, there’s no “grace period” of delinquency; your loans are immediately in default the day after your payment was due.

While this might sound like bad news, there are ways to recover from delinquency and default. We’re covering what the consequences are, and what options you have to get your loans current again.

What Does Being Delinquent Mean and What Are the Consequences?

Do you remember that promissory note you had to sign every semester when taking out student loans? That note was a binding contract in which you promised to make timely payments on your student loans (among other things). By missing a payment, you are in direct violation of that contract.

The day after your payment is due, you are considered delinquent on your student loans. During your delinquency, your student loan servicer will attempt to get in touch with you in the first 15 days following a missed student loan payment.

Your credit score can also suffer if you don’t make any payments within a certain time. For example, My Great Lakes will report a lateness to the 3 major credit bureaus (Experian, Equifax and TransUnion) once an account is 60 days past due, but Nelnet will wait 90 days. Different servicers have different guidelines for this, so it’s best to call yours directly to ask them for the specifics.

Even if you become current on your loans, the delinquency can remain on your credit report for up to 7 years.

Additionally, you might incur late fees if you don’t make an effort to pay within a set time frame. Late fees vary by lender, and the amount of time passed before getting hit with a late fee also depends on the lender.

While being delinquent isn’t great, it’s not the end of the world. Simply making a payment will bring your loan into repayment again.

But what if you can’t afford that payment?

After nine months of missed payments, your loan will go into default. Nine months is a considerable amount of time to work with your student loan servicer in an attempt to lower your payments, and that’s exactly what you should do.

Steps You Can Take To Get Out of Delinquency

If you’re delinquent on your student loans, the absolute best thing you can do is to get on the phone with your student loan servicer and explain your situation to them. You want them on your side in this process, and most are willing to help you out. Many servicers have information and options on lowering payments directly on their website.

If you can afford to make any sort of payment, do so. This will show your loan servicer that you’re concerned and making every effort to rectify your delinquent status.

The worst thing you can do in this situation is to ignore what’s going on. You have 9 months in which to make things right before going into default, and you want to do everything in your power to make sure you don’t get reach that point.

When speaking with your loan servicer, ask them to review your payment options. Under certain circumstances, you may be eligible for deferment or forbearance. Both will excuse you from having to make any payments for a set amount of time. Interest doesn’t continue to accrue if your loans are in deferment, but it will accrue in forbearance. Typically, forbearance is easier to qualify for than deferment.

If you’re not eligible for either of these options, don’t lose hope. There are several different income-based repayment options out there, including Pay as You Earn, Income-Based Repayment and Income-Contingent Repayment, and your student loan servicer will point you toward the one that makes the most sense for you.

Your number one priority when your student loans are delinquent is to get them current as soon as possible so that they don’t go into default.

What Consequences Does Defaulting On Your Student Loans Have?

If you haven’t been able to make any payments toward your student loans in 9 months, and haven’t reached out to your servicer, then you will end up defaulting on your student loans.

There are serious consequences to defaulting:

  • Some loan holders will require your entire balance to be paid in full. This includes the principal and the interest.
  • You become ineligible for deferment, forbearance, or any repayment programs.
  • You become ineligible for further federal student aid.
  • Your wages can be garnished, plus your tax return can be held to repay your loans.
  • Your credit score will be damaged.
  • You might end up responsible for more than just your loan balance if there are late fees, collection fees, or court fees involved.

These all sound a little scary, don’t they? While defaulting on federal student loans shouldn’t be taken casually, there are ways to improve your situation.

Options for Getting Your Loans Out of Default

In order to get your loans out of default status, you have to make a plan. The unfortunate part is that you have significantly less options than you would in delinquency, and the options you do have require you to be able to make payments. is a great resource for those looking for more information on getting their loans out of default. The site is run by the Department of Education and highlights its Rehabilitation Program as an option for getting loans out of default.


Going through a rehabilitation program is your best chance at redemption. Upon successfully completing the program, all the negative consequences of defaulting will be reversed. That even includes the damage to your credit score (the default will be erased).

Successful completion involves making 9 monthly payments out of 10 months, so it’s important that you can make the payments according to the plan you’re given. You have to make the payments monthly; lump-sum payments or extra payments will not speed up the process.

A debt collector creates your repayment plan during rehabilitation. They’re supposed to work with you to create a manageable repayment plan, though some of them have wrongfully tried to get borrowers to pay back more than they can afford.

[3 Steps to Handle Being Mistreated by a Student Loan Servicer] has highlighted the importance of paying back only what you can reasonably afford, as a new system was put into place this past July. Under this system, the amount you must pay should coincide with what you would be paying under the Income Based Repayment formula. For “not new borrowers” this is generally 15 percent of your discretionary income, but never more than the 10-year Standard Repayment Plan amount. For “new borrowers”, it’s 10 percent of discretionary income.

New borrowers are defined by:

“… (1) no outstanding balance on a Direct Loan or FFEL program loan as of October 1, 2007 or has no outstanding balance on a Direct Loan or FFEL program loan when you obtain a new loan on or after October 1, 2007, and (2) received a disbursement of a Direct Subsidized Loan, Direct Unsubsidized Loan, or student Direct PLUS Loan on or after October 1, 2011, or received a Direct Consolidation Loan based on an application received on or after October 1, 2011. However, you are not considered a new borrower if the Direct Consolidation Loan you receive repays loans that would make you ineligible under part (1) of this definition.”

[Read more about repayment plans and student loan forgiveness here.]

Once you’ve gone through the rehabilitation program, a lender must purchase your loans in order for them to enter back into standard repayment status. Likewise, only after a lender has purchased your loans will the collection agency ask the credit bureaus to clear your credit report of the default.

Just note that you may only go through the rehabilitation program once. If your loans fall back into default, then you won’t be eligible for the program.

What About Defaulting on Private Student Loans?

Private student loans are a different beast. There’s no delinquency period associated with private loans; as soon as you miss a payment, your loans have defaulted.

Unfortunately, private loans don’t offer the same protection as federal loans do. Therefore, the repayment options associated with federal loans don’t apply for private loans.

Even worse, there aren’t any rehabilitation programs to go through for private loans, unless your lender offers such a program. It’s worth it to ask!

For instance, Discover will report your loan as late to credit bureaus during its monthly account audit, so there isn’t necessarily a time frame to consider. If you missed a payment that was due on the 10th, and their audit is on the 20th, it might take some time to be reported as late. At that time, your loan is also considered to be in default. The good news is that there are no fees associated with their loans, even late fees, which is reflected on their student loans page.

Wells Fargo reports a loan as late after 30 days have passed, and their standard late fee is $28, though this largely depends on the type of loan you have.

For Citizen’s Bank, private student loans are serviced through Firstmark. Their loans are reported as late after being 30 days past due (from the last business day of the month). The loan is considered defaulted after 120 days past due, and late fees (5% of the borrowed amount) are incurred after the loan is 15 days past due.

According to Sallie Mae, depending on the type of loan you have, you’re considered to have defaulted after 6 to 9 months of no payments.

Fortunately, there are some private lenders coming around to the fact that borrowers need help. Wells Fargo is one private lender willing to lend a hand. If you’re having trouble making payments, they offer additional repayment options, and they also have a new loan modification program which can lower your payments temporarily or permanently.

Sallie Mae offers borrowers interest-only payments on certain loans, and they also offer a graduated repayment option on their Smart Option Student Loan.

Discover also offers deferment options to those serving in the military, in public service jobs, or in a residency program.

All lenders encourage borrowers to call if they’re having trouble making payments under their current repayment terms. But you should work under the assumption that once you’re 30 days late it will show up on your credit report, which can stay there for seven years.

The Consumer Financial Protection Bureau has attempted to strip away some of the uncertainty and confusion surrounding student loans, but according to a recent report, the industry remains unchanged. More and more complaints are being received concerning private loans, as borrowers claim they don’t have enough information about the options they have.

The CFPB is encouraging borrowers to use a template that they have available for download to try and negotiate a repayment plan with their lenders. This should be done as soon as you miss a payment, as your private lender will sell your loan to a collection agency after enough time has passed without a payment. They will be more willing to help you than a collection agency will.

As a last resort, you may be able to get your private student loans discharged in bankruptcy. Private loans are slightly easier to get discharged than federal loans. If you’d like to read more about that process, has a comprehensive write-up on it.

Final Recap

You want to avoid defaulting on your student loans at all costs, so if you’re delinquent on your loans, get in touch with your loan servicer to figure out the best way to bring your account current. If you’ve already defaulted, check with your loan holder to see if you can enter into a rehabilitation program. If you have private student loans, contact your lender immediately to find out if you can negotiate more manageable repayment terms. These options are available to help you, and there is no shame in taking advantage of them.

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College Students and Recent Grads, Pay Down My Debt

How to Get a Student Loan Forgiven

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According to a recent CNBC article, 24% of millennials expect to receive forgiveness for their outstanding student loan debt balances. It’s a good thing, then, that the Consumer Financial Protection Bureau estimates that 25 percent of American workers could be eligible for student loan repayment forgiveness programs.

Here’s more good news: there are many ways of taking action to get a student loan forgiven. You can seek out programs that are career-based, meaning they provide aid for those in certain professions. Or you can look into plans based on your income level. Most of these are sponsored by the Federal government in one way or another (though some colleges do assist a select few of the students they graduate).

Those suffering the burden of student loans may qualify for one (or more) of the nine types of forgiveness programs listed below.

Public Service Student Loan Forgiveness

There are many programs available to help mitigate Federal student loan burdens — especially if you’re working in a public service position.

Specifically, employees of the government, non-profit organizations, and other public workers may qualify for the Public Service Loan Forgiveness (PSLF) program. You need to be employed full-time by a public service organization. You also are required to make 120 payments on your loans before being eligible for forgiveness.

Head to the bottom of page 8 of the program’s FAQ to find a detailed list of job descriptions that qualify. Note that as long as you’re employed by an eligible public service organization, you’re covered. In other words, you probably qualify as a teacher — and you may also qualify if you work in a public school as an administrative staff member.

Getting a Loan Forgiven Based on Income

Another way to get Federal student loans forgiven is to see if you qualify for an income-based program.

According to Sophia Bera, CFP and founder of Gen Y Planning, there are three income-driven programs:

  • Pay As You Earn Repayment Plan (PAYE Plan) – This plan is the newest option for those with student loan debt. It’s designed to help recent students entering the job market for the first time during the recession years, and provides an alternative to the Income-Based Repayment Plan and lower payments. The remaining balances will be forgiven after 20 years of qualifying payments and an interest subsidy. PAYE is only available for federal Direct Loans. Eligibility is often a result of student loans that are higher than a person’s annual discretionary income or makes up a significant portion of his or her annual income. So, $10,000 in student loans with a $60,000 annual salary would like make an individual ineligible for the plan. In addition, individuals are only eligible for the PAYE plan if:
    • He or she is new borrower as of Oct. 1, 2007,
    • Received a disbursement of a Direct Loan on or after Oct. 1, 2011.
  • Income-Based Repayment Plan (IBR Plan) – This is the original plan that was designed to help those who held student loan debt that equaled more than their annual income, or a “significant portion” of annual income. Eligibility includes demonstrating a partial financial hardship. Loans will be forgiven after 25 years of qualifying payments, five years longer than the PAYE plan. Like the PAYE plan, this IBR also offers an interest subsidy.

Keep in mind: for both IBR and PAYE, your payments are based on your adjust gross income (AGI). If you file joint taxes with a spouse, then your AGI will include your spouse’s income and impact your payments. Read more about taxes and student loans here.

  • Income-Contingent Repayment Plan (ICR Plan) – This plan intends to help those who purposely chose low-income jobs but graduated with high levels of student loan debt. It provides another option for those who can’t qualify for either the Pay As You Earn Plan or the IBR Plan and is open to anyone with eligible federal student loans. Like with the IBR, the monthly payments are based on income and family size, however, the payments will likely be higher than those with IBR or PAYE. The ICR plan also forgives an outstanding balance after 25 years of qualifying payments. The debt discharged is treated as taxable income, so borrowers need to be prepared to pay taxes to the IRS.

While each of these programs has various stipulations, requirements, and limits, they all have one thing in common: they’re designed to help those with low incomes and excessive amounts of student loan debt.

They’re also a little different from the public service programs. While those in public service positions can have student loan debt forgiven after 10 years, these programs forgive loans after 20 or 25 years.

However, like the public service loan forgiveness program, these income-driven programs do require you to pay every payment on time – or you’ll be disqualified from the program. You also may need to pay taxes on the portion of your loans that are forgiven.

Use this calculator to see exactly what will happen with your payments and how much of your student loans may be forgiven.

Student Loan Forgiveness Programs for Professionals

Many student loan forgiveness programs are based on the career you choose after graduation. For those with professional degrees – think doctors, lawyers, and teachers – you have several options when it comes to shedding that student loan debt without paying it out-of-pocket and in full.

Doctors can look into the NIH Loan Repayment Program. This can help repay 25% of a doctor’s student loan balance per year with a $35,000 maximum. That’s limited to doctors conducting research and who meet certain eligibility requirements.

Lawyers can look into Equal Justice Works. This provides a list of law schools that offer loan repayment assistance programs. Afam Onyema graduated from Harvard University and Stanford Law School, and was able to decline corporate law job offers in order to establish a charitable organization thanks to repayment programs.

“I can afford to do this work only because of Stanford Law School’s uniquely generous Loan Repayment Assistance Program (LRAP),” explains Onyema. “The school is systematically paying off and forgiving 85% of my $150,000+ debt.”

Teachers can qualify for PSFL programs, they might also want to look into Teacher Loan Forgiveness. To get into this program, you need to teach at specifically designated elementary and secondary schools for five consecutive years to be eligible.

If you began teaching after 2004, you’re eligible for up to $5,000 in loan forgiveness if you were a “highly qualified” teacher, and you can receive up to $17,500 if you’re a “highly qualified” math or science teacher in a secondary school, or special education teacher.

Other Options

Don’t qualify for any of the above? Don’t despair yet. You have a few more options:

Volunteer programs: These qualify under public service student loan forgiveness: Options include working with AmeriCorps and serving 12 months or volunteering as part of their VISTA program, or joining the Peace Corps.

Enrolling in the military: Some branches of the US military offer student loan forgiveness programs. Stafford and Perkins loans are eligible (among others), and the Army and Navy will “repay the maximum allowed by law for non-prior service active duty enlistments.”

The Army will pay up to $20,000 for Reserve enlistments, and that includes the Army National Guard. If you’re interested in joining the Air Force, that branch can repay up to $10,000 for non-prior service, active duty enlistments.

Both the Air Force and the Navy require a minimum of four years of service. With the Army, the minimum service is three years, and the Army and Navy Reserves and Army and National Guard require six years.

The Pitfalls Associated with Getting a Student Loan Forgiven

If you’re having trouble making your student loan payments on time and in full, it’s worth your time to do some homework and research your options. Getting a student loan forgiven isn’t always the best answer or the only solution, and you need to proceed with caution.

Let’s be clear. “Forgiveness” doesn’t mean you sit back and let someone else take care of 100% of your loan. Nor does it mean getting to completely walk away from the financial responsibilities of borrowing that money in the first place.

You’ll first need to make sure you meet all the qualifications listed out in the fine print. As we’ve seen, that can mean fitting into very specific circumstances and stipulations. And short of drastic action like declaring bankruptcy – which is not the ideal solution – you may not qualify for any of the programs on student loan forgiveness out there.

In fact, even declaring bankruptcy doesn’t always work. According to Leslie Tayne, Esq. of Tayne Law Group, P.C., “Student loans are rarely dischargeable in bankruptcy and getting a student loan forgiven is a very particular process.”

“For Federal student loans, there is a way to get your loan forgiven,” she explains. “The public service forgiveness program may forgive the balance of your loans after 10 years working in a qualified public service job.

“Once your forgiveness is approved, you will not be required to make any more payments on the loan; however it is important to note that you may be subject to a 1099 by the IRS and thus have to pay taxes on the amount forgiven.” As Tayne notes, that could have an even worse affect on your finances.

Bera provided this example: “If you had $100,000 in Federal student loans and [use a forgiveness program], after 25 years of on-time payments the balance on your student loans might be $50,000. If the government forgives this amount, you’ll have to pay the tax on $50,000 of income in addition to your normal salary or wages for that year.”

If someone only makes $40,000 annually and suddenly his or her income increases to $90,000 in a given tax year, they’ll likely owe thousands of dollars to the government.

All this isn’t said to discourage you, but to make sure you’re in tune with the realities of the situation. If you have student loans and want to look into getting involved with a student loan forgiveness program, start by familiarizing yourself with what’s available to you and your situation. Once you’ve done a bit of research you can contact your loan provider to start taking action.

Interested in Refinancing Your Student Loans? Look at our Student Loan ReFi Marketplace.

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College Students and Recent Grads, Pay Down My Debt

How to Handle Student Loans in 4 Easy Steps


When I was 18, I was so excited to start college. I carefully packed my clothes into a few different suitcases. I bought a mini fridge. I made sure I had a couple sets of extra long sheets. I contacted my roommate ahead of time. We found out we were in a really unique loft room in an all-girls dorm. It looked so cool, and I was really, really excited.

I was a complete and utter nerd in high school, and it paid off. I received a full-tuition scholarship to Tulane, in New Orleans. All my parents had to do was write a check for $5,000 or so, which covered room and board for the semester. Comparatively, a student who lives in the dorm at Tulane without a tuition scholarship will pay almost $50,000 a year for the privilege today. My parents were thrilled, and they wrote the check right when we arrived on campus and did orientation. 

Of course, a few hours later, my life changed forever.

Move in day at Tulane in 2005 was also the same day the city began evacuating for Hurricane Katrina. I was buying my first semester books in the bookstore with my dad when an announcement came over the loudspeaker. It was time for everyone to get out – really out. As in, leave the city.

Because I am from just outside of New Orleans, having my college plans messed up was actually the least of my family’s worries. A few days later, I found myself in a hotel room just outside of Baton Rouge. My childhood home had 8 feet of water. Tulane closed for the semester. But, most importantly, my parents’ business was completely disrupted, and they had major income losses in addition to the losses in our home.

My First Student Loan

I went to L.S.U. because Tulane closed, and I had to take out my first set of student loans. Everything so was incredibly uncertain at the time that my mom encouraged me to go take out loans.

My parents were busy dealing with the aftermath of the storm, and I had to figure the whole college/loans/new campus logistics out on my own. I don’t remember completing entrance counseling for my loans, although I know I did because they were subsidized federal loans.

I transferred schools again two years later to William and Mary. I never went back to Tulane, and I was still craving that small school atmosphere after two years at a large university that I never meant to go to in the first place.

In order to go to William and Mary as an out-of-state student, though, I had to come up with the cash. I received a generous grant due to our financial circumstances from the storm, my parents helped a little, and I took out the rest in federal loans. Again, I don’t remember doing entrance counseling.

Cat graduationIt wasn’t until I graduated that I learned how to check my credit score and find out how much I had taken out in loans in total. Luckily all my loans were federal loans and the majority was subsidized, which meant that I did not have to pay interest while I was in school.

You would think, though, that as someone who graduated early from one of the best colleges in the country (after transferring twice and experiencing a huge natural disaster) I would know how much money I took out. But I didn’t. Unfortunately, many other students and recent graduates are like me and unaware exactly how their student loans are structured and how repayment works.

Ultimately, I’m not upset that I took out student loans.

They were necessary in order to make my dreams come true. They were necessary to help me escape what had become a very sad situation in my home state. They were there for me when I needed to take one really expensive summer school class so that I could graduate a semester early. And, when I got a grant to do a fully paid for study abroad program, a student loan helped me buy plane tickets so I could see more of Europe while I was there. I don’t regret these decisions or experiences, but what I do regret is not understanding interest rates or the impact of student loans in general.

Learn From My Mistakes

If I had any advice to students going to college today and their parents, it would be as follows:

Step 1: Shop Around For Your Loan

Do not take the first loan that you’re offered. Please shop around. Just like any big investment, going to college deserves your full attention. If you have to fund it with loans, make sure you’re getting the best rates.

Private loans are historically worse for students because may of them require immediate payments, higher interest rates, more fees, and less flexible repayment terms.

Federal loans are the route most students take since those are the most widely accessible through colleges and universities. Although it seems like federal loans are the answer, don’t discount your local banks. If your parents have a good reputation with their local bank, they might be able to secure a lower interest rate than the federal government, but those instances are rare. It’s important to remember, though, that local banks will likely not be able to offer you deferred interest, so you will need to compare interest rates between these private loans and federal loans and weigh the pros and cons to find out the best plan of action for you.

In sum, shop around and know the difference between private and federal loans like the back of your hand. 

Step 2: Pay Attention to the Entrance Counseling

Entrance counseling is there for a reason. It’s typically automated with a quiz that you need to take online and pass to get your loans. The quiz asks questions to make sure you understand terms like deferment, repayment, interest accrual, and forbearance. Could it be better? Yes. Could it be more effective in helping students understand the risks? Yes. However, at a minimum it will explain the benefits and consequences of loans and what’s expected of you during your repayment. Remember, don’t complete entrance counseling until you fully understand everything about your loans. If you get to a section of entrance counseling that does not make sense, put in a call to your school’s financial aid office and ask them to explain the concept. If you don’t understand your interest rate, know your repayment period, or know what to do if you cannot make your payment in the future, ask your student loan counselor these questions.

Step 3: Take Out As Little As Possible

You might think that you’re going to college for engineering but most college students change their majors. In fact, the New York Times reported in 2012 that 80 percent of freshmen at Penn State were unsure about their major.

Maybe you’ll fall in love with acting even though you thought you wanted to go to medical school. Or, perhaps you’ll enjoy psychology and want to pursue being a social worker instead of becoming a business owner.

Either way, it’s important you only take out as much money as you need and work to subsidize other living costs of college, because you won’t know your ability to repay the loans until you start your career.

Just to give you an example, if you take out $26,000 in student loans, (which is about the national average for a four-year public university) at 6.8%, you would pay around $300.00 a month for 10 years to pay it off. You would also pay nearly $10,000 in interest! That $300 a month could be an incredible investment opportunity or a car payment. That $10,000 in interest could go towards a down payment on a house or a great emergency fund. So, before you take out anything extra, put your information in a loan calculator and find out how much money you’ll actually pay in the long run in interest charges. That should inspire you to take out as little as possible.

If all of this sounds daunting, don’t forget to regularly look for scholarships and find unique ones that apply to you. There are scholarships for just about everything whether you were a preemie as a baby or have German ancestry. To find unusual scholarships, click here.

Also, remember it’s okay to feel a little uncomfortable. College students are notorious for living on ramen noodles. Essentially, do whatever you can to take out the least amount of money possible. Your older self will thank you.

Step 4: Research Repayment Options

There are many careers that will offer you loan repayment assistance including teaching in underserved areas and joining the military. Make sure to take the time during your senior year to find places to work that will help you pay back you loans and know if they apply to private loans as well as federal. Sometimes you only have to sign a two or five-year contract to receive that benefit, and trust me, that seems like a long time but it will fly by.

Take Responsibility

Really, the most important takeaway is that you and only you can become educated about your student loans. The financial education system that is currently in place with respect to disseminating information to college students about the loan process is not as effective as it could be. Thus, it is up to you, the college student, to become an adult and start making adult decisions about your money.

Good luck. Remember, student loans can definitely help you follow your dreams like they did for me, but be wise about how much you take out.

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College Students and Recent Grads, Pay Down My Debt

3 Steps to Handle Being Mistreated by a Student Loan Servicer

mortar board cash

A college diploma no longer promises a guaranteed path to success. A harsh reality that hits after the excitement of finally completing college dwindles down and the pressure to find a good paying job sets in. Deciding on whether or not you should embark on an extended vacation after four grueling years of study should be a no brainer, but the reality of student loan repayment quickly extinguishes any thoughts of lying on a beach.

Borrowers know that time is of the essence. The six-month grace period post-graduation is crucial in building a solid financial future. However, some borrowers aren’t able to find a job within that six-month time span, and if they do, their entry-level pay may barely cover living expenses. The last thing borrowers need in times of financial hardship is maltreatment by their student loan servicer. In fact, servicers are required by law to work with struggling borrowers, yet some do the complete opposite.

The alarming part of all this is that a majority of borrowers aren’t even aware of the fact that they’re being mistreated. In fact, in the midst of supervising for compliance with federal consumer financial laws, the Consumer Financial Protection Bureau (CFPB) found that one or more student loan servicers were:

  • Allocating payments to maximize late fees
  • Misrepresenting minimum payments
  • Charging illegal late fees
  • Failing to provide accurate tax information
  • Misleading consumers about bankruptcy protections
  • And abusing the ever-popular debt collection calls to consumers at illegal times.

If you believe that you’re a victim of mistreatment by your student loan servicer then you’ve already started the three-step process.

Step 1: Identify problems

You have successfully identified your issue and are ready to start the resolution process.

Step 2: Gather relevant evidence

Just saying that you have an issue isn’t enough; you need relevant proof to support your claims. Relevant evidence includes:

  • Promissory Notes that outline the any agreements made between you and your loan servicer
  • Bills
  • Canceled checks
  • Correspondence between you on your loan servicer via phone, email or snail mail

Step 3: Make Contact

Now that you’ve identified your problem and gathered relevant evidence to support your case, you can now contact your loan servicer. If you’re not sure who your loan servicer is, you can find out at Prior to making contact with your servicer keep the following tips in mind:

  • Take detailed notes of all conversations and be sure to follow up in writing so there is a physical record of what has been said and done.
  • Request a copy of your customer service history. Some loan servicers make available copies of the notes that customer service representatives make on their accounts.
  • When you speak with someone on the phone, take down the representative’s name, when the call took place, and what was said.
  • Save the originals of all receipts, bills, letters, and e-mails regarding your account. Be sure to provide copies of the originals if you are asked for them. Send letters via certified mail, with return receipt requested.
  • No matter how frustrating the situation, always be polite and courteous.
  • Request for a response at a reasonable times, and be sure to tell the customer service representative how you can be reached.

Problem not solved?

To be sure that you’ve done everything in your power to resolve your student loan problem take this self-resolution test.

For Federal Student loans: If after completing the self-resolution test you find that you are in need of further assistance, contact the Federal Student Aid Ombudsman Group to request a consultation. They will collect information about your case and offer assistance in identifying a suitable resolution.

For Private Student Loans: The Consumer Financial Protection Bureau recently started accepting student loan complaints. They will forward your issue to the company, provide you with a tracking number and keep you updated on the status of your complaint.

Need more help?

Although there is little recourse for private student loan issues, you can still get help with federal student loans through the Federal Student Aid’s Through this portal, you can get information on how much you owe on your defaulted federal student loans, your payment history, and options for resolving your issues. You can also access forms to request a hearing, review, or discharge of your debt, as well as forms to submit a complaint.

Ignoring your own debt won’t make it go away, so do yourself a favor and seek help as soon as possible.

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College Students and Recent Grads, Life Events

Trade School or College: Which Should You Choose?

Students throwing graduation hats

Despite being inundated with news about student loans and the seemingly insane cost of college, high-school students are often still set on attending a four-year institution to receive a diploma. But perhaps it’s time we start evaluating if the traditional college route should be the path to success we continue preaching to America’s youth.

Trade schools (often known as vocational, technical, career or correspondence schools) provide students with career opportunities at a much lower price tag.

Differences between trade school and college

Cost and time are two of the biggest differences between trade school and college. Trade school typically takes less than four years, the average length for a bachelor’s degree. The cost of trade school is often significantly lower than that of a college. However, some may be close to the cost of four-years at a low-cost state school (if a student lives at home).

Other than cost and time, trade school prepares students to graduate and enter the workforce with a practical skill. College may prepare you to write 3,000 words on Aristotle’s Appeals (ethos, pathos and logos in case you forgot) – but that probably won’t come up in a job interview.

Trade schools include programs such as:

  • Electrician
  • Commercial pilot
  • Hair stylist/ cosmetologist
  • Dental hygienist
  • Computer specialist
  • Fashion design

An associate’s degree from a community college is another way to maximize employment opportunities while minimizing cost of tuition. 

Career opportunities

A 2013 report concluded only 27 percent of college graduates work in jobs directly related to their majors. The report also noted the odds of finding a position related to a college major did increase in major cities with larger job markets.

A report from early 2014 found nearly 44 percent of young college graduates, ages 22 to 27, with a bachelor’s degree or higher worked in jobs that didn’t actually demand a B.A.

Suffice to say, college by no means equals employment or employment related to four years of study and the cost of tuition.

However, it cannot be overlooked that many jobs in today’s world require a bachelor’s degree or higher. Even jobs that may not have demanded the same education level just a generation ago.

Alternatively, trade school takes less time and gives a student a practical skill, which often makes it easier to:

  • Find employment, and probably in most places around the country
  • Reduces the likelihood of losing a job to recession or outsourcing

Given the turbulent economy and job market most millennials have experienced their entire careers, a recession-proof job (like electrician or even hair stylist) may sound like an ideal alternative.

A lot can change for a college student between the time he or she picks a major at 18 or 19 and enters the workforce at 22. A graduate may try out a career in the field she majored in and realizes it isn’t actually well-suited for her, so she either switches to a job unrelated to her major, but still requiring a college degree, or perhaps she spends tens-of-thousands of dollars to return to graduate school. 

[Saving for college? Be sure it’s in a high-yield savings account. Compare them here.]

Price point difference

To compare the cost of trade school and college, the following is a break down of attending trade school, state school and private school in New York State.

Empire Beauty School [Queens, NY]

Tuition – $12,100
Room and board – $5,536
Books and supplies – $1,688
Estimated other expenses (transportation, personal etc) – $5,992
Estimated grant aid: $3,433
Estimated price tag for program (8 months to complete as a full-time student): $21,883

*Estimate taken from the school’s online net price calculator, which accounts for tuition and fees, living expenses, books, tools and grand aid. Estimated cost was based on the following information:

Empire beauty school

SUNY Fredonia

Tuition & Fees: One semester (12 credits) for in-state students: $3870.25
Tuition & Fees: One semester (12 credits) for out-of-state students: $8695.25
Cheapest (non-commuter) meal plan: One semester: $2,260
On-campus housing: One semester: $3,600 (standard dorm with roommate)
Estimate for books: $500

Total cost for instate: $10,230.25 (One semester)
Total cost for out-of-state: $15,055.25 (One semester)
Total cost for in-state 4 years*: $81,842
Total cost for out-of-state 4 years*: $120,442

*Excluding the annual rise of tuition and increased cost of books.

New York University

College of Arts and Science

Full-time student, one semester, 12 to 18 credits: $21,873
Service fee: $461 (per semester)
Registration fee per unit after first unit: $65 ($715 for 11 credits)

School of Business

Full-time student, one semester, 12 to 18 credits: $22,130

Registration fee (per semester): $1,212
School of Business academic support fee (per semester): $495

Registration and service fee for NYU (per semester): $461
Registration fee per unit after first unit: $65 ($715 for 11 credits)

Room and board estimated by to be $18,692 per year

Total cost for College of Arts and Science student: $184,392 before cost of room & board and books and excluding tuition inflation. $259,160 with room and board.

Total cost for School of Business student: $200,104 before cost of room & board and books and excluding tuition inflation. $274,872 with room and board.

These figures are low as they don’t account for inflation and increase cost of books and board.  

The $21,883 trade school option may seem steep for a program that usually takes eight months, but a student will be ready for the job market and employable. He or she will also start working three years before the college students. The next cheapest option would be instate at $81,842 and in last position, private school students in New York City paying over a quarter-of-a-million dollars for a degree.

How to find the right trade school or college

Unfortunately, there are plenty of scammers and con artists hoping to take money from hopeful youngsters looking to further their educations and improve their hiring potential.

Both trade school and college scams exist, especially with the rise of Internet-based schools.

Savvy students can avoid these scam schools (often referred to as a diploma mill), by being aware of a few key traits to look out for.

  • No transcript needed to apply – If a school doesn’t want to see if you’re a quality addition to and eligible for their program, they probably just want your money.
  • Minimal requirements – There isn’t much work involved in completing the degree or certification. Why would a thief want to put more effort in than required?
  • Lack of interaction – It seems awfully hard to track down a professor, because he or she doesn’t actually exist!
  • Tuition per-degree or discounts for taking multiple programs – colleges and trade schools typically charge for a full semester or course not based on a degree.
  • Job Guaranteed – Schools shouldn’t make this claim. They aren’t job sourcing departments, but educational facilities. While you should check the employment statistics, don’t believe a job is ever a guarantee.

Prospective students can also check the accreditation of schools and programs they’re interested in by looking it up in The Database of Accredited Postsecondary Institutions. This database does include trade schools, such as aforementioned Empire Beauty School.

If you’re interested in learning more about which trade school to pick, be sure to explore the FTC consumer information here.

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College Students and Recent Grads

6 Ways to Protect Your Identity and Money While Banking Online

hacker with credit card

I always considered myself lucky to be a part of Generation Y or as I like to call it, the generation of convenience. Unlike my parents who were paid with cash and checks, payday for me is just a direct deposit away. When it comes to paying bills, I can easily link a monthly charge to my checking account and schedule a day for the money owed to be transferred to the payee with just a brush of a thumb through my bank’s handy mobile app.

Since I opted for direct deposit and conduct most of my banking online, I rarely ever carry cash. Like most Gen Y, I use my debit card (or credit card) for a majority of transactions, and when I say majority, I really mean all.

But my happy-go-lucky swiping resulted in a harsh reality check. Remember Target’s data breach in 2013? Over 40 million credit and debit card accounts were compromised.  Stolen information included customer names, credit or debit card numbers, the card’s expiration date and CVV (Card Verification Value). Basically everything needed to drain your account or rack up fraudulent charges.

At the time, I banked with Bank of America. I only had a couple hundred dollars in my checking, but to a broke college student, that’s a whole lot of money. So, you can pretty much guess my reaction when I woke up the morning after using my debit card at Target to an alert stating that my checking account had a negative balance. I was petrified.

Even though BofA was aware of the breach, and credited the money back into my account while they investigated, I was left a bit uneasy about the security of my personal information. Is the convenience of banking online compromising the security of my identity? Should I resort back to the primitive ways of my parents and just use cash to prevent this from ever happening again?

One thing is for certain, convenience definitely comes at a price, but that price doesn’t have to be your identify. To be extra safe, after BofA discovered fraudulent activity on my account and restored my funds fully, I switched banks. Only for the same exact thing to happen again, except this time, it was with the bank I switched to, JPMorgan Chase.

However, this time, I was prepared. That’s right hackers; I’m keeping my convenience, and my identity. Here’s what you can do to protect yourself in light of Chase’s Cyber breach:

1. Don’t switch banks

Though my first instinct post Target’s data breach was to switch, I advise you stay put. Switching does nothing, because in reality, all banks are under attack. No matter where you go, you’ll still be at risk. However, if you do decide to switch, switch to a bank that has the means to protect you with their top–notch security systems. Be sure to look out for security features that don’t hold you liable for unauthorized charges, or better yet, goes beyond liability and provides smart security features like debit card blocking, photo credit cards and two factor authentication.

2. If it feels too good to be true, it is.

Only your contact info has been compromised in Chase’s data breach, so be cautious of any communications that ask for your personal information. DO NOT click on links or download attachments in emails from unknown senders or other suspicious email. Always double check the domain name by double-checking the URL in the “from” field as well as in any embedded hyperlinks. If you ever happen to receive an overtly animated email that says; “CONGRADULATIONS, you’ve won a trillion dollars”, don’t click, no one’s that lucky.

3. Change your password regularly

Though Chase has stated this isn’t necessary in their most recent Customer Service Notice, I’d rather be safe than sorry. Do change your password on a regular basis, especially if you frequently access your account through multiple computers and devices. Most importantly, change your password to a ‘strong password’- one that is not easily guessed by a human or a computer and only access your financial information when you’re connected to secured WiFi.

4. Check your bank statement regularly

When it comes to your hard earned money, always be overprotective. Review your bank and credit card statements for any unexpected charges—especially tiny ones. To avoid catching your attention, hackers test a stolen debit or credit card by charging a few cents on the card in hopes to avoid catching your attention.

5. Timing is everything

Unlike Target’s data breach in 2013 where both banking and general contact info was compromised, according to Chase, there is no evidence that account numbers, passwords, user ID’s, date of birth or social security numbers were breached. However, Chase does admit that contact info was stolen (etc. name, address, phone number and email address), so you need not worry about your money mysteriously dwindling down. If you do happen to wake up in total and utter despair like I did, don’t wait, call the bank and file a report as soon as possible so that your funds can be quickly restored.

6. Overall, keep calm.

Be sure you only trust your money with an FDIC insured bank. FDIC insurance guarantees your money is protected up to $250,000.  Also be sure your bank abides by protection like this one from Chase:

“… You are not liable for any unauthorized transactions on your account that you promptly alert us to”

You can’t prevent these security breaches from happening. But, what you can do is protect yourself and take necessary precautions to ensure your money and identity remains secured and you can cyberbank with ease.

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College Students and Recent Grads

10 Questions Every Student Should Ask the Financial Aid Office

mortar board cash


Congratulations! You’ve been accepted into the college of your dreams, unfortunately, that acceptance letter didn’t state that you’ll be attending college tuition free. Perhaps your parents saved up for you to attend or maybe you plan on taking on a part-time job. Either way, tuition plus those extra expenses that come along with being a student are a bit too much to bear.

Luckily, you’ve got options. Colleges have financial aid offices, which may feel for some like a magical place you can go to receive free money. If you both qualify and uphold your end of the bargain, you can actually receive money to cover most, if not, all of your educational expenses. But, don’t just walk in there blindly and expect a handout.

To save yourself from an overwhelmingly long wait, schedule a formal interview with your financial aid officer. This way, you have ample time to ask all the necessary questions needed to be sure that your specific needs are met.

According to Patrick Wong, a financial aid representative at Brooklyn College, students should be prepared to ask the financial aid office at their school 10 important questions to maximize the odds of receiving financial aid or obtaining scholarships.

1) What is the total cost of the program including books, fees, tuition and housing?

“Once a student receives a financial aid offer, knowing the true cost can help the student compare the bottom line at any of the schools they’re considering,” Wong explained.

Don’t assume the sticker price on the college’s website is showing you the full picture of what it costs to attend the school. Wong insists that students inquire about student fees, room and board, average book costs per semester, and miscellaneous items that will appear on your student bill.

2) Does your college have a full-need financial aid policy?

The majority of U.S colleges and universities are committed to meeting the full amount of demonstrated financial need for all admitted students. This aid may be met through grants, scholarships, work-study, and loans (federal or institutional). However, if your college doesn’t offer a full-need policy, you may need to find alternate funding sources, such as private student loans to help cover left over expenses.

3) Is there one application for financial aid?

Many schools use one form to determine your eligibility for any and all financial aid available, but according to Wong, not all schools work this way.

“Some colleges require individual applications for separate awards, such as department grants or alumni scholarship programs. Ask the financial aid office to ensure that you aren’t missing any opportunities,” says Wong.

4) Is there a deadline to apply for financial aid?

You definitely don’t want to be the one that misses out on receiving free money for school because you were unaware of the deadline.

“There are many deadlines to meet during the college application process, so it’s easy to get confused or even miss a date if you’re not careful,” explains Wong.

Although the federal deadline for filling the Free Application for Federal Student Aid (FASA) is June 30th of each year, every state and college has its own deadline. Be sure to ask the college’s financial aid office for deadlines concerning the FASA and any scholarship applications you may be submitting.  It will be best to set reminders in your phone calendar or write down deadlines on a desk calendar to remind yourself of impending due dates.

5) How do I know if I qualify for financial aid?

There are a number of factors that determine whether or not you qualify for aid like: the number of people in your household, number of students in college, price of the college, parents’ income, income taxes paid and so forth. Wong suggests that students use the Expected Family Contribution (EFC) Calculator to determine their eligibility to receive aid.

6) What types of scholarships are available?

Depending on the college, grade point average, and other factors, you may be eligible for need-based, merit-based, or other types of scholarships.

“Some schools will offer generous scholarships based on your academic and athletic abilities, as well as participation in certain clubs, organizations, and societies,” says Wong.

Be sure to ask sure to ask if the awards are competitive or given to any admitted student who meets the criteria.

7) Are scholarships renewable?

If any one of the available scholarships is renewable, it’s important that you inquire about what you must do to keep the awards. Wong insists that students ask about required enrollment (full-time or part time), expected grade point average, and other stipulations that may result in the loss of the award.

8) How will outside scholarships affect my financial aid?

Some colleges offer a very attractive financial aid package the first year, only to reduce the aid offer the following year. Knowing this upfront will help you determine the long term costs of attending the school of your choice.

9) When will my financial aid offer be mailed to me?

“It’s good to know when to expect offer letters so that you can give yourself time to review and consider all possibilities,” says Wong.

All too often, students will accept admission to one college, only to receive a better financial aid offer from another later. Save yourself the regret by waiting for all prospective offers before making a decision. Remember, you can always change your mind after sending in your deposit – and sometimes even after decision deadlines depending on the school. You may have to sacrifice your deposit, but a few hundred dollars is likely worth changing your mind if it saves you thousands in the long run.

10) Will you match another college’s financial aid offer?

Hey, doesn’t hurt to ask right? If you find that you really love one college, but another is offering a better financial aid package, check to see if the financial aid department will match the offer.

“Depending on the type of year, the college may have access to additional funding and may be able to offer you more generous package, so go ahead and ask,” insists Wong.

Knowing how you’re going to finance your education is the most important part of your college career. By visiting the financial aid office and asking the right questions, you can attend the college of your dreams for a lot less than the advertised sticker price.

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College Students and Recent Grads

The 4 Worst Financial Mistakes to Make in College

miss one's mark

College is one of the most exciting, memorable times in a young person’s life. It allows you to gain an education, meet lifelong friends, and discover new passions. College can also heavily impact your financial future, because earning a degree can open doors to lucrative careers with rewarding salaries. But, money mistakes during college years can leave graduates dealing with debt and ruined credit scores for decades after getting a diploma. Insight into mistakes made by others can protect future and present college students from falling into the same traps.

Clueless about Financial Aid

Many students attend college oblivious to the amount of financial assistance that is just waiting to be claimed. Mushy Borisute, a senior majoring in psychology, regrets not educating herself about financial aid sooner.

“My parents paid for my tuition out of pocket, so I didn’t see the need to look into any of these financial aid programs,” Borisute explains.

It wasn’t until her senior year that Borisute ventured into the financial aid office to inquire about the tuition assistance program.

“After spending no more than 40 minutes in the financial aid office, I learned that I qualify for full tuition assistance!” Bourisute exclaims. “My parents worked so hard to pay off the first three years of my studies. If only I was a bit more inquisitive, I could have saved them the financial burden.”

Interestingly enough, Borisute is not the only one to ignore tuition assistance programs. According to a survey done by the Institute for College Access and Success, 65 percent of college students are unaware of their eligibility to receive financial aid, and 72 percent are clueless to the amount of scholarships and grants they may qualify for.

Credit Card Abuse

Jeet Singh, a junior majoring in geology, shared his run in’s with his new shiny piece of plastic.

“My mother actually signed me up for my first credit card,” Singh says. “She told me that it’s only for emergencies, nothing more. But, I figured a few small purchases here and there wouldn’t hurt.”

Singh’s small purchases quickly added up to a hefty $7,000. With no job, Singh was unable to keep up with payments, which landed him and his mother who cosigned with him, in a pit full of credit card debt.

“I’ve long since realized that I can’t be trusted with money, even if its borrowed money, I’ll spend it,” Singh explains.

Credit cards have high interest rates and multiple layers of hidden fees. The damage of irresponsibly using credit affects both your financial state and credit rating for years to come.

Misuse of Student Loans

Student loans are supposed to be used to pay off education-related expenses, but some students misuse their borrowed funds, which causes a lot of financial pain post-college.

Joseph Dewitt, a graduate student, recalls his irresponsible use of student loans.

“I guess my worst financial mistake post college was using some of my student loans to catch up on bills,” Dewitt says.

At the time, Dewitt was newly married with two young daughters. As an undergrad, he worked as a security guard making only $10 an hour. When his salary didn’t make ends meet, Dewitt used $2,000 in student loans each year to stock his fridge and catch up on delinquent bills.

“I took whatever I could for student loans each year and put it towards food and outstanding bills” Dwight explains, who owes $51,600 in federal loans.

What most students fail to realize, until it’s too late, is that the interest on these loans can add up fairly quickly, sometimes defeating the whole purpose of attending college to increase salary potential. By the time Dewitt finished his undergrad and landed his first job, he ended up making less than he expected after his student loans, miscellaneous bills, and graduate tuition was paid off each month. His undergrad loans ate away a huge chunk of his income.

“If I used my loans for tuition, and tuition only, I could be contributing more to my 401(k) and enjoying more of my take home pay,” Dewitt says.

Staying in college too long

Yes, college is a great investment, but before enrolling, it’s important that you plan out the next four years. Extra semesters due to poor planning can cost thousands of dollars. For Sangee Kumar, a senior majoring in accounting, the extra year was needed for him to become a CPA.

“I knew that I needed 150 credits to become a CPA, but I thought that I could do it in four years,” Kumar says.

The intense accounting classes became too much for Kumar to bare, so, for the sake of maintaining a GPA above a 3.5, Kumar decided to stay in school for an extra year to reduce his workload.

“Financially, I didn’t plan on it. I mean, tuition rises every year, now I have to find the extra money to pay for the remaining two semesters,” Kumar explains.

The extra tuition payments could have been avoided if Kumar, planned accordingly. Students should not only look into the return on investment when choosing a degree, but whether or not the intended workload can be completed within four years or less. Some degree’s, like accounting require five years to complete. Proper research can prevent unexpected expenses in the future.

The Bottom Line

It’s important that you learn from these four financial mistakes that are frequently made by college students. Save yourself a future of financial heartache and make the necessary adjustments to your spending habits to guarantee you use your money (borrowed or not), wisely.

Be sure to check out the MagnifyMoney tools to ensure you are getting the best deals on your financial products.

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College Students and Recent Grads, Life Events

Simple Guide to Setting Up Your 401(k)

Man Paying Bills With Laptop

A new job means one thing: lots of paperwork. Signing contracts, human resources papers, taking mind-numbing seminars about company policy and hidden in all those stacks of paper, often in the benefits package, is one piece of very important paper: the paper containing details of your retirement plan.

Why save for retirement now?

We often hear about young professionals entering the work place and forgoing the company retirement plan in order to pay down debt or have a little extra money to spend. In a majority of cases, this is a bad idea.

Two words sum up why you should starting saving for retirement now: compound interest.

Compound interest is the practical embodiment of the expression “money begets money.” When your money is introduced to compound interest, you will be earning interest on your interest. This is important, because the earlier you start investing, the longer you have to accumulate wealth.

Let’s say you invested $1000 in year one and earned $150 in interest. In the second year, you would be earning interest on $1150 instead of just your original $1000. It may not sound like much at first, but as you diligently contribute money to your fund and it continues to compound, it adds up quickly.

The earlier you begin saving for retirement, even in small amounts, the longer your money has to compound and grow. The difference between starting a 401(k) or similar retirement fund at age 22 and age 30 can be hundreds of thousands of dollars.

Using this calculator, you can see that if you start contributing $4,000 each year towards retirement at the age of 22, with an estimated 6% annual rate of return, you will have $750,030.31 by 65. If you wait until 30 to do the exact same thing you will only have $445,739.12 by 65.

What is a 401(k)?

There are several ways, which all depend on your employment status. One of the most common is a 401(k) – which is also known as a 403(b) for those working in the non-profit realm.

A 401(k) is often offered by employers to their employees as a way to save for retirement with the employer matching a certain percent. For example, an employer may offer to match up to four percent of the employee’s contribution. So, if an employee makes $30,000 a year and contributes six percent (or $1,800) into a 401(k) then the employer would match up to four percent (or $1,200). This means, the employee would only contribute $1,800 to her 401(k) but end up with $3,000 thanks to the match.

Some employers may vest your match immediately, while others may have a timeline over how long it takes for you to get the money your employer contributes.

A 401(k) is offered through providers like Fidelity, Charles Schwab or Vanguard. Employees then need to determine asset allocation, which is a fancy way of saying “where are you putting your money?”

How do I pick my investments?

First, see if your company offers the opportunity to speak with a financial professional. If you feel overwhelmed going through the process of starting your 401(k) he or she will be able to help.

Your 401(k) should offer a variety of investments to take you from conservative to aggressive. If you’re young, it’s best to be aggressive with your investments and modify that to moderate and conservative, as you get closer to retirement age.

Aggressive investors will focus more of their assets on stocks than bonds (the old rule of thumb is 100 – your age = the percent of your investment that should be in stocks, but feel free to take more risk if you’re young). If there is a dip in the market, there will still be ample time for young investors to see the market rise again, unlike investors closing in on retirement age.

Depending on your provider, there may be a “model portfolio” for you to follow. These portfolios are often based on risk tolerance; so younger investors are better served to follow the “aggressive” path. If you’re wary of selecting your own funds, then consider following the model portfolio.

When should I decide against investing in my employer’s 401(k)? 

If you have an employer contribution, you should at least contribute enough to receive the match. But if you feel there are too many fees or not a lot of options to maximize your investments, then there are other places to put your money.

Most personal finance experts advise to save at least 10 percent of your income for retirement. So, if you only get a four percent match from your employer, what should you do with the other six percent?

One of the easiest options is to open an IRA with Vanguard, Fidelity or Charles Schwab, among others. However, if six percent of your income is more than $5,500, you’ll have to invest the rest elsewhere. In 2014, you can only contribute $5,500 of your income to a traditional or Roth IRA.

401(k) Quick Tips:

  • Starting contributing to your retirement account as soon as you’re eligible
  • Understand if your employer-match vests immediately, or if you have to work a set number of years before you see the match
  • Contribute at least enough to get your full employer match!
  • Compound interest is your best friend when it works for you
  • Diversify your portfolio – never invest all (or even a majority) into your company stock.
  • If you’re young, be aggressive
  • Understand the fees associated with your 401(k), and if they’re too high then search for other ways to invest for retirement (likely an IRA)
  • Check in with your 401(k) – see how your funds are doing and if your portfolio is still appropriate for your retirement goals

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College Students and Recent Grads

Growing Up in a Family Without a Bank Account

Hiding money under mattress

This may sound ludicrous to most, but I spent a huge chunk of my life “unbanked”. Every transaction I made was with cash or money orders; and when it came to savings, let’s just say it wasn’t a frequently practiced habit of mine. Fast forward a couple years later, at 24 years old I finally opened up my very first bank account equipped with a checking account. I also have two credit cards that are great for everyday purchases, and even better for building credit. Not to mention, I’m already contributing to a 401(k).

To think, two years ago I didn’t even know what credit was or why it was so important. Now, I wouldn’t say that I’m a financial guru, but I know enough to live a financially healthy lifestyle. However, I my time living off the financial grid forced me take initiative and take control of my money.

The backstory

Growing up, my father never discussed money with me. I naturally assumed that it was something that I didn’t need to worry about, and would probably tackle in my later years. When I started college, I realized my peers seemed to have a different relationship with money than I did. While I paid for tuition, books, and miscellaneous college expenses with cash, my peers paid with credit cards and checks. I always felt very uncomfortable heading to school with three thousand dollars in my bag. But, at the time, it was the only way I knew how to pay off my tuition.

College made me aware that carrying thousands of dollars in cash isn’t how other parents teach their children to handle money.

During an economics class, a good friend of mine shared a financial lesson from his parents. He said they encouraged him to invest in mutual funds, and to make sure the benefits package from his first job after graduation would be up to par. My father never even mentioned a lick of financial gibberish to me. So, all that valuable financial information that my friend shared, pretty much went in one ear and out the other. If I needed money, my father would simply hand it to me in cash. And saving for him consisted of stashing money in a safe in his closet.

The turning point

Intimidated, yet curious about the mainstream financial community, I felt compelled to sit in on a financial literacy workshop hosted by the business department of my college. During this hour-long seminar, I was enlightened about the Do’s and Don’ts of consumer banking. Then, it hit me, my father an immigrant from Trinidad who’s accustomed to handling cash, and only wanted to stick with what he knew. He always cashed his checks at the cash-checking store for a fee, while the majority of people have their income directly deposited into their checking or savings accounts for free.

Little did I know, my father’s financial behavior was rubbing off on me. If I were never exposed to the vast amount of financial information available in college, I probably wouldn’t have transitioned to using mainstream financial products.

An immigrant myself, I understood my father’s inability to deal with banks but refused to be left behind.

My first bank account

After much deliberation and a pep talk, I finally found the courage to walk into a Bank of America branch. Undocumented at the time, my hopes of opening an account were very low, but to my surprise BofA didn’t require you to have certain documents to open up an account. With just my passport, college ID, and a recent tuition bill, I opened up my very first checking account, no hassle. I walked out of the bank with three complimentary checks, a temporary debit card to use until my permanent piece of plastic came in the mail, and a folder filled with information on how to manage my new checking account.

I used the overdraft horror stories from my peers to discipline myself. It felt great to enter this new world of banking, and to take full advantage of the range of financial products that were out there.

Today, I put my tuition money in the bank and pay from the comfort of my home, which is a lot safer than carrying a stash of cash to the Bursar office. Instead of traveling to stores, I now shop online. Every transaction has become a breeze, and living off the mainstream financial grid became a relic of my past.

Building my credit score

After spending close to a year with Bank of America, and with the new changes made to my immigration status, I decided to switch banks. Equipped with the necessary documents that made me eligible to open up accounts with a range of banks outside of BofA, I switched to Chase Bank and also signed up for the Chase Freedom credit card.

My new credit card enabled me to start building credit. My score at the time was in the 400 bracket. Apparently, I didn’t have a long enough credit history. After a year of paying off my balances in full every month, my credit limit was raised and my credit score slowly increased.

Overtime, the rewards program connected to my Chase Freedom card started to make more sense. I learned fairly quickly that if I purchased certain items I would be rewarded with one percent cash back. I realized that I should have a credit card with a cash-back program that maximizes rewards for my spending habits. After doing some research, I learned that American Express- Blue Cash Card was the right card for me. Now I was improving my credit score, earning cash back on daily purchases and being fiscally responsible.

Living off the financial grid gave me ample time to observe how those around me handled money and learn how to best move into using mainstream financial products. Though my father still uses cash for all of his transactions, I’m eager to introduce him to a more convenient, safe and rewarding way of handling money. By switching to a checking and savings account, my Dad can protect his money and earn interest. I also plan to find him a fee-free banking experience. While I teach my Dad how to change his banking habits, I’m going to continue expanding my financial knowledge and finding the best financial products for me.

Looking to see if your financial products are the best ones for you? Use MagnifyMoney to compare checking accounts, savings accounts and cash back rewards cards.



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College Students and Recent Grads

A Crucial Money Skill: Evaluating Return on Investment


The stuffed animal sat in a bin of with other oddball cuddly creatures that had yet to find a permanent home with a child. At eight years old, I already had a plethora of other animals to snuggle at night, but something about this gray and black lynx tugged at my heartstrings. I picked up the lynx and walked over to my mother asking if I could have him. She looked down at me and asked, “Are you willing to pay half?”

Far from shocking me, her comment made me check his price tag to see if I could indeed cover my fifty percent share. The lynx would cost me about seven of my hard-earned dollars. And they were indeed hard earned. By eight, I had already established my first business by pet sitting for some local animals, primarily, my next-door-neighbor’s vicious cat.

I spent the next thirty minutes carrying the lynx around while my mom continued her shopping. After much internal debate in my eight-year-old mind, I finally walked back to the bin and returned the lynx. I simply couldn’t justify spending seven dollars on him when I already had so many other stuffed animals to play with. (My mom actually ended up buying the lynx and surprising me with him a short while later).

The beauty in this lesson – that many often see as mean – is that I learned how to curb impulse spending and evaluate my return on investment at an incredibly young age.

My parents insisted my sister and I pay for fifty percent of toys we wanted (outside of Christmas and our birthdays). Later on, this same lesson applied to our college educations.

This simple lesson of evaluating the ROI of a purchase is a primary factor for me avoiding debt (both consumer and student loans) thus far in my 25 years of life.

But why do teenagers need to be concerned with ROI?

ROI applies to more than actual investments. Most college students aren’t stock picking, or even contributing to a retirement fund or any other type of investment. Instead, consider the ROI of other opportunities in your life. For example: Should I get a job in college? A job in college offers more than just a paycheck. You can develop a network, learn valuable skills and it can help build out your resume for future job opportunities.

How about, “should I take an unpaid internship?” It’s certainly important to evaluate the ROI of unpaid work. But there can actually be cases when working, even unpaid, will benefit you in the long run. Personally, I accepted an unpaid internship at CNN because I knew the connections I’d be making could pay off in great dividends in the future. It was worth saving up, penny pinching and preparing myself to live off ramen for the summer.

A big one for college students is, “should I buy [insert unnecessary item here]?” College is a time ripe for young adults to incur awful consumer debt. Droves of students are living on their own for the first time, have never had proper financial education and view credit cards as a magical tool to buy anything they want. If a student graduates with $2,500 in credit card debt at an interest rate of 21% (average for college credit cards) and can only afford to pay $100 a month, it will cost him $816 in interest and take just shy of three years to pay it off. Learning to curb impulse spending and evaluate the ROI of purchases can help recent graduates avoid a lot of financial pain.

But one of the most important moments to evaluate ROI at the tender age of 18 is with the simple question: where should I go to college? Year-after-year, the lure of a name brand school or the top ranked school a student can gain admission, lands young adults in tens-of-thousands of dollars of student loan debt. High school seniors need to seriously consider the financial ramifications of their college decisions. They must evaluate the earning potential of their intended career, how long it would take to pay off any student loans, if there are available scholarships or grants, if they will require a masters degree in order to even be eligible for a job in their field, and if they could get a similar caliber of education at a less expensive school.

But also learn when to let go

Don’t feel paralyzed with indecision because you are constantly evaluating the ROI of a simple choice. Debating whether or not to spend the extra $1.50 on organic spinach over the regular kind really shouldn’t leave you wandering around the store locked in a tumultuous inner debate.

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College Students and Recent Grads

Personal Finance 101 Should Be a Required Course for College Students


Debt among students has reached astronomical levels. While much of a young person’s debt stems from student loans, young adults are also plagued by car loans and overwhelming amounts of credit card debt. According to the Wall Street Journal and data compiled by analyst Mark Kantrowitz, the average 2014 graduate will carry a whopping $33,000 in student loans. Annual tuition increases will cause student loan debt to continue rising, making it difficult for students to lead a healthy financial life after college.

This high-debt burden has led students and researchers on a quest for a solution that’s all too obvious: financial literacy. The best way to curb debt later on in life is to learn basic financial lessons and debt management strategies before college. Understanding how to budget, the impact of compound interest, how credit cards work and how to save money on simple financial products could save young adults thousands of dollars. ?

It’s important now, more than ever for colleges to start incorporating financial literacy courses into the mandatory curriculum.

Recently, the MagnifyMoney team went to Brooklyn College to host a two-hour seminar covering the basics of personal finance. The workshop attracted nearly 45 inquiring minds, who were not required to attend by a professor or course requirement. Judging by the plethora of questions asked throughout, and even after, the presentation, today’s college students desperately need more information about personal finance.

Workshop attendee, Jamal Charles said that he was elated to take advantage of an opportunity to increase his financial literacy. His personal dilemma with finances occurred last semester when he was forced to pay for school out of pocket.

“I would usually get financial aid, but unfortunately I didn’t qualify that semester,” Charles explained.

This unexpected expense put restrictions on his day-to-day purchases, making it difficult for him to afford food and transportation. Like a majority of students, Charles earned a small salary from his job interning at a local tax preparation office. Even though he only brought in minimum wage, Charles tried to refrain from taking out additional loans.

?“I found myself stretching my budget while on a very limited income. If I knew better, I would have had an emergency fund, and use that to pay off that semester,” he said.

After attending MagnifyMoney’s Financial Literacy workshop, Charles says there are a number of things he’s going to start doing differently.

“The workshop introduced great budgeting strategies that I was never aware of. I also had no clue that the monthly maintenance fee on my checking account could be waived. I’m definitely going to look over MagnifyMoney’s list of fee-free checking accounts and switch as soon as I can.”

Liana Melendez, a Brooklyn College junior opened up about her credit card debt woes.

“Credit card debt was something that I’ve always carried with me, and I didn’t expect to get out of debt anytime soon, until now.”

After MagnifyMoney’s workshop, Melendez understands the effect of compounding interest and how to use balance transfers. Melendez now feels empowered to take control of her financial situation.

“It’s insane the difference that knowing can make. There was a time when I had to use my credit card in an emergency, and I’ve been paying for that emergency for months now. If only I knew more about compounding interest then, I probably would have never used my credit card. I’m glad I learned about balance transfers, now I can pay off my debt without having to worry about paying interest to the bank,” said Melendez.

Prior to the workshop, Melendez also didn’t know what her credit score was, how to find her score or why it was even important.

“You know, no one ever sat me down to explain the significance of a credit score. I do want to buy a home one day, and I may want to qualify for an auto loan pretty soon,” explained Melendez. “My credit score right now probably isn’t prime, but now I know how to get it there, and that’s what’s important.”

There’s no trick to leading a healthy financial life. The solution to preventing students from falling into a black hole of debt lies in educating the masses about basic financial literacy. The students at Brooklyn College proved even a two-hour seminar covering the basics can help get young adults on the right track.



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College Students and Recent Grads

4 Lessons We Learned From Hosting a Financial Literacy Workshop


The MagnifyMoney team took a field trip from our Manhattan office and traveled to Brooklyn College to present a workshop on how to handle money with confidence. Even though classes have yet to officially start, over 30 students joined us for nearly two hours. Barely 10 minutes into our presentation and suddenly hands started waving around in the air.

We spent our time overviewing what we considered the important financial basics: understanding credit scores and reports, grasping the importance of compound interest, how to budget, paying yourself first, saving for retirement, and picking the right financial products.

The team could barely get through a slide without stopping to answer questions.

We were thrilled to talk about money with such a group so engaged in the topic, but the experience also emphasized how imperative it is to integrate financial literacy into our education system.

All of the Brooklyn College students were there on their own initiative. They weren’t required to attend as part of a class, nor did they receive any type of extra credit. Everyone in the room was simply there to learn and fill in knowledge gaps they may have in their financial lives.

MagnifyMoney Team’s Takeaways

1. Students desperately need financial education

The simple fact that a bunch of college students gave up part of their afternoon during the final days of summer shows just how desperate they are for financial education.

We watched them furiously scribble down notes for two hours and had about half the students stayed back to ask more questions after we’d wrapped up our seminar.

They are undoubtedly interested in getting financial education, but unsure of where to turn. The world of personal finance can be incredibly intimidating without guidance and a way to turn potentially complex topics in laymen’s terms.

2. People need to know you don’t need to be rich to have a good credit score

We noticed this being a problem during our trip to the Chambliss Center, and it was reiterated during our presentation: people believe your financial assets factor into your credit score.


Your credit score doesn’t reflect how much you have in the bank, and people even have high credit scores with thousands of dollars of debt.

The credit score simply reflects your responsibility when handling money from your lenders.

We want everyone to understand this so they can proactively build better credit and therefore set themselves up for protection against high interest rates and predatory lending.

Emergencies will happen. We advocate people build healthy credit so they can acquire protection in the form of a line of credit with a low interest rate (ie: a credit card with a flat 9.99% interest rate). This way they have a place to turn when an emergency happens and won’t be subjected to painfully high interest rates from banks, payday lenders or title loans.

3. Credit can be difficult to understand without proper instruction 

Between the fine print, understanding credit scores and figuring out whether or not to pay just the minimum due or the bill in full (the latter) – people get quite perplexed about handling credit.

We empathize, but our biggest tips are:

  • Don’t close credit card accounts – length of credit history plays into your score and having no credit cards will mean you lose/never create a credit score.
  • Always pay your balance on time– failing to pay on time can be one of the biggest hits to your credit score.
  • Always pay in full – don’t believe the myth that paying just the minimum due can help your credit. It doesn’t boost your score and just leaves you paying money in interest to your lender.
  • Don’t spend more than you can afford to pay off – lenders want you trapped in a debt cycle. Don’t let them get you there!

4. People feel trapped with their banking products

It doesn’t take much for a bank to make you feel pretty helpless, especially when they’re housing your money. We want to make sure people feel empowered to make the switch from a bank that charges ridiculous fees (looking at you Bank of America) to a more consumer-friendly version like Ally or Simple.

It isn’t just us thinking all these things:

This kind comment on our Facebook page from an attendee really sums up the importance of financial literacy being taught in schools:

“Really enjoyed the workshop yesterday at Brooklyn College. Thank you guys for coming out and I hope the team over at the Magner Center invites you back. It was an invaluable experience for someone like me who didn’t grow up in a household where money matters were frequently discussed. I learned a lot and will continue you visit your site to improve and expand of my financial literacy! Thank you so much!…University’s make us take all of these other courses that make us well rounded academically but rarely are we required to take anything that could help us with the “real world” and a lot of students complain about that. So thanks again!”

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College Students and Recent Grads

Why It’s Important to Have a Job in College


For some students, working in college is a necessity; for others, it fulfills a major requirement while padding a resume. Whatever the reason, working in college provides both a financial and practical foundation for life after graduation.

I’ve managed to work a number of jobs and internships during my academic career, and found the experience to be challenging, yet extremely rewarding.

I started off as an Administrative Assistant for a local alarm company, then moved onto internships at CNN and NBC in positions closely related to my major. On top of getting compensated while attending college, I broadened my network and learned new skills while simultaneously keeping an arm’s length away from borrowing money for school.

Although it does take extra effort to hold down a job and keep grades up to par, the choice to work during college can be very beneficial.

Working in college can help avoid debt.

Many students struggle with student loan payments, and I was determined to graduate debt free.  I chose to attend a city college where tuition is affordable and scholarships were plentiful. So even if I made minimum wage, I could still afford to attend college full time and cover miscellaneous expenses such as books, travel and food. Unfortunately, this isn’t the norm for many college students today.

Student loans are a burden to pay back, and can slow down progress when it comes to buying a home or starting a family.  According to a recent survey conducted by American Student Assistance (ASA), 73% of students said they have put off saving for retirement or other investments. The vast majority of students—75%—indicated that student loan debt affected their decision or ability to purchase a home.

Even with jobs, it’s difficult for many students to pay today’s tuition costs without the assistance of loans. However, holding down a steady job through college will enable students to graduate with fewer financial obligations, by reducing the amount of money they need to borrow for tuition and living expenses.

Working in college can make your resume stand out.

Every time I go out on a job interview, employers are impressed by the amount of work experience and skills I possess. When I interviewed for a Production Assistant internship at CNN, the employer skimmed through my resume in amazement and even referred to me as an overachiever. Later on that day, I received an email stating I got the job.

CNN is a large and well-known network, so you can only imagine the amount of people I had to compete with for that position. Thankfully, the fact that I was able to work fulltime and attend school fulltime while maintaining a GPA above a 3.5 made me stand out. With that information alone, employers can automatically conclude that you’re hard working and focused and that’s often enough for you get hired.

Throughout your college career, you should find jobs or internships related to your major. Relevant job experience not only enables a college graduate to become competitive in the job market, it also provides a network to reach out to when searching for employment.

In fact, even if the job isn’t directly related to your specific field of study, the fact that you possess prior job experience will work in your favor. Just figure out how to make the skills you acquired at a previous position fit into the requirements of the job you’re interviewing for.

Working in college teaches time management skills.

I used to struggle with effective time management, but when I started working in high school, my window to study and get homework done became fairly small. It took a lot self-discipline to ensure I could get my studying done, and put in time at work after spending a full day at school. This new busy schedule took a lot of getting used to, but over the course of time it became second nature.

Learning to balance time with classes and work will help students adapt to post college life. It will also teach students how to deal with people at work. There is a difference between working with people at school and collaborating with colleagues. These skills will make adjusting to the real world, much easier.

Working in college can improve academics.

I must say, working through school definitely motivated me to stay diligent with my schoolwork and time management skills. I was surprised to see that my grades actually improved when I started working. This is a result of learning how to organize and plan study time effectively. The added focus made the difference between an A and B.

It’s up to you to find a point where it’s most effective. Some people can handle forty hours a week; some people can handle twenty hours a week. Stress levels should not be so great that it is a distraction, and you should still be able to stay on top of all projects.

Working in college can provide employee benefits.

When I worked as an administrative assistant during high school I had all the great benefits and perks. I was particularly excited about contributing to a 401(k) at such an early age.

Many companies, such as Starbucks, Home Depot., and Whole Foods offer full-time benefits to employees if they work a minimum of twenty-five hours a week. This means students can begin a 401(k), qualify for health insurance, or better yet, a tuition assistance program, all while still attending college.

Working in college allows students to save for an emergency.

During my sophomore year of college, my father, the primary bread winner of my family suffered severe injuries to his back while on the job. He stayed out of work for almost a month, and without his income my family was afraid that our home will fall apart. Luckily, my brother and I both had an emergency stash and was able to maintain some bills until my father’s recovery.

Regardless of how many expenses you’re facing, or how little you’re is able to put aside; it’s imperative that you have an emergency fund. In life, especially as a college student, you should always expect the unexpected. An emergency fund is one way to financially prepare for the unknown. Financial emergencies can come in the form of job loss, significant medical expenses, home or auto repairs or something you’d never even dream of.

Working in college will enhance networking skills.

There is truth in the saying:  “it’s not what you know, but who you know.” Working during college not only develops your networking skills, but expands your network of people to turn to for a job after graduation. All you have to do is connect with that person and ask to chat over a cup of coffee. It’s that simple.

Networking is exactly how I ended up in the office of CNN’s Director of Business News. I knew someone that knew someone who worked there, and was able get my resume on that director’s desk.

Networking isn’t just a job search strategy; it is a critical professional career development enrichment strategy. Working in college can enhance networking skills, and broaden your horizons well beyond the college campus. More importantly, networking with the right people in your industry can open doors and help your career flourish.

Moral of the story: get a job in college

It doesn’t matter if you’re bussing tables, bartending or fetching coffee for a network executive – working in college helps both financially and professionally. Okay, maybe fetching coffee for a network executive helps more for networking purposes, but working in college provides a foundation to build on post-graduation. From a monetary perspective, any paid job will help college students learn how to budget and pay for some of their lifestyle to prevent sinking (often deeper) into debt. The skills of communication, time management, collaboration and conflict resolution are useful in almost any job interview – even if you developed those talents cleaning plates or mixing drinks. Ultimately, it is always good to be self-sufficient, regardless of your present financial situation and future employment outlook.

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College Students and Recent Grads

A Beginner’s Guide to Using a Credit Card


So, you want to open a credit card? It’s a good idea – most of the time.

Opening and using a credit card provides a simple way to establish and build credit history. Yes, certain credit cards can earn users rewards for cash back, travel miles, and redemption points, but the road to reward chasing is littered with people who slipped into credit card debt. Beware of your budget and your personality if you elect to pursue the path of reward chasing.

If you have trouble paying bills on time, saying no to purchases you can’t afford or just sense a credit card may not be a good idea for you – then trust your gut. While a credit card is a great tool to build financial health, it can also lead to painful consumer debt when used improperly.

Still think you’re ready to take on the responsibility of owning a credit card? Then let’s walk through how to select, understand, apply and manage your credit card.

Step One: Select your type of credit card

Credit cards were not made equal and we’re not just talking in terms of interest rates and rewards. Your unique situation will determine which credit card you should (and could) apply for.

Student card

Lenders understand college students aren’t flushed with cash. In fact, college students’ debt-to-income ratios are commonly skewed in the wrong direction. But lenders still make it possible for young adults to acquire credit cards through student card programs.

(Yes – they’re hopefully you’ll fall into debt.)

College students with an established bank account or credit union can likely get a credit card from their current financial institution. Other options include:

Fine Print Alert: these cards often come with high interest rates – so be sure to read the tips in step four and mind your spending.

Secured card

The secured card offers an option for anyone looking to build (or rebuild) his or her credit history.

With a secured card, a potential borrower puts down a deposit in exchange for a credit card from a lender. Often the borrower’s credit limit is the same amount as the deposit, but this isn’t always the case. In the instance of CapitalOne’s Secured MasterCard, a borrower puts down approximately $50 for a $200 credit limit.

The deposit works as collateral for the lender. If the borrower cannot make payments, he or she will forfeit the deposit. If the borrower proves to be dependable over time, he or she will receive the deposit back after closing the secured card for a regular, unsecured credit card.

A secured card gives a lender a sense of assurance, while the borrower proves his or her responsibility. The borrower will see his or her credit score improving over six months to a year and can eventually leave behind the secured card for a traditional credit card.

Fine Print Alert: Be sure to take a secured card from an FDIC-insured organization, like your bank or local credit union. It’s important not to spend much on the card because your credit limit is likely to be quite low. Read more about secured cards here.

Store credit card

Odds are high you’ve been offered a store credit card at least once in your life. Store cashiers inquire if you’d like to open a store credit card, often in exchange for a certain percent off your purchases.

In general, a store card can be a trap into consumer debt. Just one round of missing a payment in full can lead to painful interest rates and leave consumers struggling to pay down their bill.

However, store cards often accept lower credit scores than traditional cards. Someone looking to rebuild credit, but carrying a score in the low 600s, could apply and feasibly get approved for a store card when they’d likely get rejected for a card from another lender.

Naturally, the bank hopes said person will have trouble paying off his bill – but the diligent borrower can use a store card to help rebuild a credit score.

Fine Print Alert: Store credit cards often have incredibly high APRs (annual percentage rate). For example, the Gap Visa starts at 23.99%. While a traditional card, like CapitalOne’s Quicksilver has an interest range of 12.9% – 22.9%. Read more about store credit cards here.

Traditional credit card

If you have a good to excellent credit score (often 680 or higher) then you’ll likely qualify for most credit cards. There is no need to deal with a store card and their monstrous APRs or secured cards with their low credit limits.

Do some research to see what type of credit card best suits your needs. You can use our cashback tool to input your spending habits and find a card to maximize your rewards.

Step Two: Understand the details of your card

Once you decide the type of card to apply for, it’s time to do your research.

You need to understand the details of your card, before signing on the dotted line.

Evaluate the APR (interest rate) on the card. It’s ideal to have a credit card with a low interest rate, like PenFed’s 9.99%. You want to avoid ever paying interest, but in the case you do end up not being able to pay your bill in full, you need to understand the rate you’ll be charged.

Is there an annual fee associated with your card? With the exception of needing to get a secured card, don’t bother spending money on an annual fee when you’re starting out with a credit card. There are plenty of great cards with no annual fee – so why spend the extra $50 to $100?

What’s your credit limit? You likely won’t find out until after you’ve applied and been approved for a credit card. It’s imperative you remember your credit limit to avoid maxing out your card. In fact, you will want to stay well below your limit, but we’ll get to that in step four.

While we don’t recommend beginners focus on credit card rewards, it is good to understand the perks (if any) associated with your card. Be careful not to increase or change your spending habits simply to churn points.

Step Three: Apply for your card (and read the fine print)

The simplest step, apply for your card.

You can often apply online, but if you’d prefer to go in person then head down to your local bank or credit union.

Be sure to give that fine print one last look while you’re in the application process.

Step Four: Properly handle your credit card

Now that you have a credit card at your disposal, it’s time to use it properly.

  • Understand the difference between borrowing and spending

Credit cards are structured to create debt. It’s a simple, not often discussed, truth. To avoid debt, it’s important you understand the difference between borrowing and spending. Do you set a strict budget and only spend what you can afford to pay off each month? Check for spending. If you eye a purchase you know you can’t afford and whip out your credit card, well that’s borrowing. Credit cards are often not the best route to go if you need to borrow money. However, if you are going to turn to a card for borrowing, then have the lowest interest rate you possibly can (ie: the PenFed 9.99%). Borrowing at a 15 to 23% interest rate (common on many cards) will do major harm to your bank account.

  • Ignore “minimum due” and pay your bill in full

Credit card companies like to offer a “minimum due” in hopes customers will just pay a fraction of their total bill, so interest will start accruing. For credit card rookies, this can be incredibly confusing when they see minimum due on the first billing statement. The simplest thing to do is act as if the minimum due doesn’t exist. Always pay your bill in full. Paying the minimum just means you’ll end up paying more to your lender in the form of interest.

  • Pay your bill on time

Paying your bill on time is possibly more important than paying your bill in full. Being just one day late on your credit card bill could crush your credit score. If the bill is due Tuesday, but you won’t have the money to pay in full until Wednesday, then pay as much as you can (at least the minimum) on Tuesday and pay off the remainder on Wednesday. In your mind, it might seem that paying it off in full a day later makes more sense than just paying part by the due date – but that isn’t how your lender will see the situation. They’ll see you as irresponsible for missing your payment deadline.

  • Keep your utilization rate low

Your utilization rate (or ratio) is the amount of your overall credit limit you spend. Ideally, you should try to keep your credit used below 30% of your available credit (ie: if your available credit is $1,000 then only spend $300). A low utilization rate will show responsibility to lenders and help improve your credit score.

  • Don’t do a cash advance

Don’t use your credit card like a debit card. Just don’t do it. You’ll be paying high interest rates (typically higher than store cards – around 25%) for withdrawing cash from an ATM.

  • Careful where you share your card information

In the end, you need to protect your credit card. Odds are high you’ll experience fraud at one point in your life, but it’s best to be proactive and be careful where you share your credit card information.

Don’t forget to use your card, because a lender can discontinue an inactive card. If you feel a little uncomfortable using your card, but need to build your credit then buy one small item a month (perhaps a cup of coffee) and set up an automatic payment, so you know you’ll never be tardy with your bill.

Still have questions? Explore our Building Credit section or get in touch with us via TwitterFacebook, email or in the comment section below!

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College Students and Recent Grads

College Students: Employers Check Your Credit Report, Not Credit Score

Female Woman Sitting At Interview

The summer after my college graduation I came face-to-face with the reality of needing a good credit report and strong credit score. As a naïve co-ed, I’d never truly pondered the consequences of using a credit card. All I knew is that utilizing it properly would help build something called credit history. A fact I became familiar with after my father insisted I get a credit card my freshman year of college.

Pushing a credit card on an 18-year-old college kid may sound like bad form to some, but my father’s strategy was sound.

I entered college with no student loans thanks to a combination of parental support and scholarships. With this in mind, my father suggested I get a credit card in order to start establishing credit history.

He took the time to walk me through the important points of credit card use:

  1. Don’t max it out
  2. Pay it off in full each month (aka only buy what you can afford)
  3. If you only pay the minimum then you’re just throwing away money in the form of interest to the banks

Thanks to his foresight, I graduated college with no debt and a 720 credit score from the responsible use of one credit card. At the time, I only recognized the no debt part; I never thought to check out my credit report and score (rookie mistake).

Fast-forward three weeks and my new roommate and I were pounding the streets of New York City looking for suitable housing. We hit up Craigslist, tried referrals from friends and ultimately succumbed to using a broker to help us find an apartment. When we finally found a roach-and-rodent-free apartment in our price range, we scurried back to the broker’s office to submit the paper work. She looked up at us and said, “And we’ll need $50 to run your credit check?”

“Huh?” I thought to myself while wondering how much an unexpected $50 would damage my budget.

“Your landlord will need to see your credit report and score to determine if you’re a responsible tenant,” she emphasized.

“What is she talking about?” I thought (probably aloud).

This is when I realized my Dad’s advice to get a credit card was some of the best he’d ever given me. Thanks to him, I had a 720 credit score (instead of no credit score) and was able to get my first apartment with minimal stress.

So, why does this matter for the average college kid?

Landlords aren’t the only ones using your credit report to see if you’re responsible: employers do too.

Note that a credit report is different than a credit score. The score is merely a gauge of what is reflected on the report. The credit report is a thorough history of your life as a borrower and includes details on things like: loans, credit cards, mortgages and if any of your bills went to collections.

Why do employers want to see your credit report?

There are a variety of reasons an employer may run your credit report.

  • To see if you’re responsible
  • To verify you are who you claim to be
  • To determine if you could handle a company credit card
  • To see if you’re financially stable – even though your bank account information is not reflected in this report, they can see your loans and how you utilize credit cards

In fact, the use of pulling a credit report is two decades old, according to Experian spokeswoman, Kristine Snyder. (Experian is one of the three credit bureaus.)

“Some companies have been using them for 20 years, mostly when they hire people who will be dealing with money.  Traditionally, the biggest users of credit reports for employment purposes are companies in the defense, chemical, pharmaceutical and financial services industries because of the sensitive positions many of their employees hold,” wrote Snyder in an email.

Will you know if they run a credit report?


“Federal law does prohibit anyone from accessing an employment report without first obtaining written permission from the consumer,” Synder emphasized.

What can employers see when they get a credit report?

Experian offers a report called Employment Insight, specifically for employers.

According to Synder, this report contains:

  • Consumer identification: including Social Security number
  • Address information: including length of time at current and previous addresses
  • Employment information: providing insight regarding an applicant’s previous work history
  • Up to two places of employments
  • Other names used: such as maiden names and aliases
  • Public record information on bankruptcies: liens and judgments against the applicant
  • Credit history providing an objective overview of how financial obligations are handled
  • Demographics Band (including driver’s license and phone number verifications)
  • Profile Summary (including payment patterns)

What will be kept private from an employer?

  • Your credit score – but they can probably make an educated guess based on the information in your report.
  • Your year of birth
  • Information about a spouse
  • Account number information

What if you don’t get hired?

The credit bureaus don’t offer any sort of recommendation about whether or not to hire you with your credit report. It’s simply supplemental to other portions of the interview process: skills tests, in-person interview, references, etc.

However, if you aren’t hired based on information in your credit report, then federal law does require your potential employer to give you both a copy of the report and a written description of the consumer’s rights.

Why it won’t impact your credit score

Don’t fret about this damaging your credit score. Your employer performs what is known as a soft pull (or soft inquiry), which doesn’t cause any sort of drop in your credit score nor is it reflected on your credit report moving forward.

Moral of the story

Bad credit history can impact more than just your ability to get a credit card or a lower interest rate on a loan. It could actually prevent you from getting a job. If you have questions about building credit start here and then check out our Fine Print Blog for plenty of articles on ways to build and improve your credit history.

Got questions? Get in touch via TwitterFacebook, email or let us know in the comment section below!

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College Students and Recent Grads

Switching from a Student to a Non-Student Bank Account

Black woman using credit card and laptop

This is our first post from our new contributor Kelly Harry. Kelly is joining us from Brooklyn College where she’s majoring in journalism and finance. 

When you’ve completed college, it is in your best interest to change your student bank account into a non-student account. Why you ask? For one, your bank will do it for you, whether you notice or not. And second: loyalty costs.

As a college student, you’re seen as a hot commodity to banks. To entice you they’ll offer exclusive deals, such as free banking during your college years. However, when you graduate, your account will graduate with you, and all those wonderful perks and savings will unfortunately come to an abrupt end.

Once you graduate to a non-student bank account, most banks have minimum deposit amounts, monthly fees (if you fall below that minimum) and expensive overdraft structures. Even worse, you can only use ATMs of that bank, and can pay pesky fees if you use an out-of-network ATM. While they’re trying to sneak money out of your account in fees, they pay almost nothing on your deposits. The typical interest rate on savings accounts is 0.01% at traditional and community banks. So why waste your money on unnecessary fees when you can switch banks and protect your cash?

I know what you’re thinking, and believe it or not, switching isn’t as complex as it seems. Post-graduation life is full of change, and miscellaneous inquiries anyway, so while you’re hunting for that new job, why not shop around for the best “non-student” banking deal.

Here are a few tips on how to avoid costly banking fees:

Never pay a monthly fee

When you first graduate from college, you may be living from paycheck to paycheck, with minimal money in your account. Monthly fees for bank accounts can add up quickly. You should find a bank that has no minimum deposit amount and no monthly fee. A minimum deposit is a set amount of money you must keep in checking or else the bank will slap you with a monthly charge. For Bank of America’s Core Checking Account, you need to either have a qualifying direct deposit of $250 each month or a daily minimum of $1500 in your account. Otherwise, BofA will charge you a maintenance fee of $12. These fees are waived for students, but college grads get the unhappy gift of a “real-world” account. Beware, if you’re searching for a job and don’t have a direct deposit going into your account each month (or a spare $1500 sitting in there each day) you’re going to get charged a monthly fee.

Never pay an overdraft fee

Big banks can charge you a fee per incident when you go overdraft. These fees can high as being $35, per overdraft charge. Those fees can add up quickly, and when you have a low balance in your checking account, it is easy to make a mistake.  You may have signed up for overdraft protection, but many of the big banks still charge a fee to transfer money from your savings account to cover the cost of overdraft. Make sure you choose an account that doesn’t punish your mistakes with massive fees or nonsense charges to move your money.

Make your ATM visits free

Many Internet-only banks offer a free ATM visits at any ATM in the country. In most cases, you’ll be charged initially, but your bank will reimburse you for the fee.

Returned deposit fee

If you deposit a check that bounces, some banks charge a fee. Big banks can charge up to $15 for returned deposit items, and $25 for an internationally returned deposit item. However, small banks and credit unions don’t. Hopefully you won’t encounter any bounced checks, but it’s better to be safe than sorry.

Lost debit card fee

If you misplaced your debit card, it’ll cost you up to $7.50 to replace. If you need it replaced ASAP, then it’ll cost you up to a hefty $25 expedited delivery fee for a new shiny piece of plastic. To lessen the blow, you don’t have to request expedited delivery on your new card—you can simply use cash you have on hand or your credit card for payments until the new debit card arrives.

Paper statement fee

Banks charge customers $2 a month for paper statements. To avoid this fee, search for a bank that waives this fee or look into an account that enables you to bank entirely electronically.

Returned mail fee

When you move, a mail-forwarding request with your post office may not be good enough for your bank. Many banks print “return service requested” on their envelopes, so your mail gets sent back to the bank if it can’t be delivered, upon which, a number of banks charge a fee. These fees can add up, so make sure you update your address with your bank upon moving.

Human teller fee

Some banks charge a fee for using a person to handle transactions. If you’d like the ability to consult a teller, seek out bank accounts that don’t levy this charge.

How to eliminate those fees

Don’t limit your banking options to banks with branches. Internet-only banks, like Ally, Bank of Internet USA and Charles Schwab’s online banking, don’t have monthly maintenance fees, ATM fees and offer higher interest rates. Credit unions also tend to offer fewer, and cheaper, fees than traditional banks.

In fact, if you’re interested in opening a savings account, credit unions and Internet-only banks often pay higher interest rates on savings accounts in opposed to brick-and-mortar banks. Luckily, you don’t have to do all of the work when searching for a fee-free checking account with perks because Magnify Money’s got you covered. Just fill out the simple tool here.

Now that you’re aware of these fees, you can take necessary steps to avoid the ones that may put a strain on your finances. After all, as a new graduate, these pesky fees should be the last of your worries.  When all else fails, just keep in mind, you’re not obligated to stay with your current bank. If you’re not too fond of the features they offer, revisit, it’s that easy. Chances are, you’ll find another convenient institution where you can bank without being charged any fees.

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College Students and Recent Grads

Reduce Money Stress: Learn How to Budget with 4 Easy Strategies

Depressed man slumped on the desk with his hands holding credit card and currency

Creating a budget has the same thrill level as getting an impacted a wisdom tooth removed. For some, the wisdom tooth might even be preferable. But a budget will prevent that “where did all my money go?” feeling and subsequently help you build wealth.

Fortunately, there are multiple ways to budget so you can find one that suits your personality. But first, you need to learn the building blocks of a budget.

What you need

  1. Figure out how much money is coming in each month
  2. Tally up your monthly expenses including: rent (or mortgage), groceries, transportation expenses, debt repayment (credit cards and/or student loans), cell phone bill, utilities and your “fun fund.”
  3. Set a percentage of money you save each month.
  4. Subtract your monthly expenses and set savings from your monthly income to determine how much wiggle room you have each month

These steps are the foundation of budgeting. Next, you need to figure out which style of budgeting is right for you.

Types of budgeting

The penny tracker

A budget extraordinaire subscribes to the penny tracking lifestyle. Every item he or she buys is meticulously tracked, totaled and compared against an allotted budget.

The penny tracker will create itemized lines of how much can be spent per month on specific categories, ie: food, rent, bills, and entertainment.

All the money a penny tracker spends is carefully written down (or monitored through an online service).

For example, if Tammy has $300 allocated for food each month, she’ll write down all the money she spends on groceries, morning lattes and going out to eat. Each time she spends money on food, Tammy writes it down and then subtracts it from her budget to see how much is left for her to spend.

The beauty of this method is the ability to see where all of your money is going. There is never a surprise about the sudden drop in a bank account or a particularly high credit card bill. It keeps accountability high and also helps plug leaks in a budget.

By tracking each penny you spend, you’ll be able to see if you’re consistently throwing cash at a non-essential purchase that could be put elsewhere, like debt repayment or saving up for a large purchase.

If you don’t want to be a penny tracker for life, you should still take a month to track all of your spending. This exercise will help illuminate any trouble areas you may have and keep you from wondering, “where did all my money go?”

The “leftovers” spender

A slightly more practical style of budgeting, the “leftovers” spender subscribes to the mentality of paying him or herself first, taking care of all the bills and then using the remaining money at his or her own discretion.

Save it, spend it, do what have you because it’s the “leftovers” in your budget.

It looks something like this:

Sam earns $2,200 a month (after taxes and a 401(k) contribution).

Each month he owes:

  • $800 for rent
  • Approximately $120 for utilities
  • $65 for his phone bill
  • $250 for student loans
  • $250 for car insurance and gas
  • $300 towards savings
  • $200 to groceries

$215 is leftover each month. This means Sam can use that $215 towards entertainment or pad a different area of his budget, perhaps food, or throw money towards debt repayment or savings.

This style of budgeting keeps people from feeling the need to constantly track every penny and keep rigid tabs on their spending, but it still can prevent overspending by simply being aware of how much you have to spend.

The 50/30/20 Rule or the Envelope Method

It’s a common rule of personal finance, but the 50/30/20 rule is similar to the leftover spender mentality. You allocate 50% of your budget towards fixed expenses (all those delightful bills), 30% towards saving or other financial goals and the spare 20% towards flexible categories (which might include groceries because the cost fluctuate).  Some experts might say 30% for “fun/flexible” spending with 20% towards savings and debt repayments.

Regardless, it’s a method which distributes your income towards various categories and it’s up to you to monitor your spending to ensure your 20% flexible spending doesn’t really turn into 50% of your monthly pay.

The envelope method uses a similar strategy and is not meant to be taken literally.

Instead, it’s a mentality similar to the 50/30/20 rule in which you allocate a specific amount of your budget to certain expenses (or saving goals).

If you do take the envelop method literally, keep your cash in a locked safe box in your home and recognize you’ll be losing money on interest by not keeping your funds in the bank.

Online resources

Tracking your money doesn’t have to mean whipping out pen and paper to jot down a note to yourself, nor does it mean tallying up all the receipts you have stored in your wallet.

Instead, you can use apps or online tools to help monitor your budget. Popular tools like, a free service which allows you to sync credit cards and bank accounts with your profile, help keep track of your spending automatically. Mint provides a weekly email update with an overview on your spending habits. If you spend cash, you’ll have to proactively add in what you spent.

You can also try your hand with apps like Level Money, Budget Ease or Billguard. Plenty more exist, so if one doesn’t appeal to you then move on to try something else.

Or, just kick it old school and track your money with pen, paper and a spreadsheet.

Budgeting saves you money

Without any sort of budget, it’s easy to let yourself slip into debt, rack up a large credit card bill or stop saving for the future. Budgets may not be the most enjoyable task, but they’re an important part of financial health — consider them the broccoli of personal finance.

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College Students and Recent Grads

7 Financial Must-Dos for College Students


MagnifyMoney’s financial back-to-school checklist for college students

1. Understand your student loans

Ensure you know if your loan is federal or private and understand the difference

Don’t take out loans for discretionary spending. Each $100 you take out can cost you $170+ over your lifetime.

2. Set up a budget

Spend a month tracking all your spending to understand how much money you have coming in vs going out.

Set up a budget outline to keep yourself from spending more than you have coming in.

3. Switch to an Internet-only bank

Avoid bank fees eating up your hard-earned money by switching to an Internet-only bank – many have no ATM or overdraft fees.

4. Have a little wiggle room? Pay yourself first

If you can put even $2 a month into a savings account, get into the habit now. Having the foundation of saving will serve you well in the future.

5. Build a strong credit history

Use your four years in college as preparation for your post-graduation financial health. Begin establishing your credit history so it’s easier to rent an apartment, buy a house or get a car loan after graduation.

6. Consider a credit card

A credit card is a simple way to build your credit history, but you must use it responsibly.

Make a small purchase or two each month and pay your bill on time and in full

7. Parents, send your student an allowance without any bank fees

If you’re kind enough to send your student an allowance, consider using an account that avoids overdraft fees and ATM fees.

Details for all these tips can be found below.

Handling Student Loans

We know that times have changed, and college is much more expensive now than before. You used to be able to get a side job to pay for your education. But we still think you should get a side job – to pay for your living expenses.

There is a big temptation to use loan proceeds to fund a lot of your discretionary spending, including nights out, vacations and some luxury items. But, be careful. Every $100 you spend could end up costing you almost $170 or more over your lifetime (3.86% interest rate over 30 years).

Although $100 may not seem like a lot, it will translate into hours of your working life to pay it back. So, take that side job and keep your debt load as low as possible. You will thank yourself later.

When deciding on loans, we recommend seeking federal loans and maxing out those options before taking on any private loans. Here’s why:

  • Federal loans are at fixed interest rates while private are variable (some up to 18%)
  • Some private loans can require repayment while you’re still in school
  • Federal loans could include income-based repayment plans or student loan forgiveness while private loans typically don’t.
  • Private loans are not subsidized
    • Undergraduate students who qualify for subsidized loans will have their interest paid by the government while they’re still in school

Find an extensive break down of federal vs. private student loans here.

Learn how to budget (seriously, just do it)

It’s a tale as old as time, and usually elicits eye rolls, but budgeting is essential to financial health.

There are various ways to budget your money. Some track each and every penny, while others focus on saving money, paying off bills and then evaluating how much is left to spend for the month.

Regardless of your preferred method, you need to have a solid grasp on how much money you have coming in each month and perhaps more importantly, how much is leaving your bank account.

There are various apps and online products you can use to track your spending including and Billguard.

If you seem to be constantly low on money – or heaven forbid a serial overdraft offender – then commit to spending a month tracking each penny you spend so you can spot the leaks in your budget and plug them up.

Consider automating your savings and at least some of your bills, so you don’t have to take the time to do it manually. Don’t forget that one missed credit card payment does major damage to your credit score.

Switch to an Internet-only bank

As a student, you most likely will have a low balance in your checking account. Your goal is to avoid monthly fees, ATM fees and the overdraft trap.

The best way to avoid all of these fees and traps is to open an account with a branch-free (Internet-only) bank. Most Internet banks charge no monthly fee and have no minimum deposit requirement.

Even better, some Internet banks (like Ally and Bank of the Internet USA’s Rewards Checking) give you free, unlimited use of any ATM in the country. They won’t charge you a fee for using an ATM, and will reimburse any fee charged by the other bank. Ally reimburses at the end of every month, and Bank of the Internet reimburses the next business day.

Overdrafts can become incredibly expensive very quickly.

Making mistakes at large banks (like Bank of America) can cost you up to $140 per day. Fortunately, online banks can drastically reduce the cost. Ally will charge a maximum of $9 per day. Bank of the Internet USA and Simple have no overdraft fees and no returned payment fees.

There are two limitations to Internet banks: depositing cash and check posting times. If you need to deposit a lot of cash, Internet banks are less convenient. You can buy a money order at a grocery store, post office, WalMart, or convenience store to deposit cash into an online account.

If you have a check to deposit, you can now use your mobile phone. At Ally Bank, you can deposit up to $25,000 per day. And at Bank of the Internet USA you can deposit $10,000 per day. However (and especially during the first month), the hold can be longer than depositing at a branch.

As a digital native, you probably get paid electronically, you use Venmo to pay friends and you rarely visit a bank branch. To make banking free, use an Internet bank and never think about fees again.

You can see our list of online fee free accounts here.

Pay yourself first and set up a savings account

From Ramsey to Orman to Chatzky, personal finance experts everywhere are unified in one piece of advice: save money.

The schools of thought on how to save may vary, but college students should get in the habit of embracing the mantra “pay yourself first.”

Instead of seeing how much money is left at the end of the month, you should always save a percentage of each paycheck. Even if that percentage is 0.5 and all you can afford to tuck away is two dollars a paycheck, it’s about developing the habit now.

Your savings should also be squirreled away in a savings account, not kept in your checking account. Setting up a savings account is simple. You can look into doing one with your current bank, but we recommend using an Internet-only bank. Why?

1) No minimum deposit with an Internet-only bank like Ally. You can open up a savings account with your two dollars a month. Bank of America would require you put down at least $25.

2) They have higher interest rates. Ally offers 0.87% while Bank of America will dish over a whopping 0.01%. It might not sound like much, but it can make a big difference in the long run.

If your job pays you in cash, then you may be stuck with a traditional bank. You can deposit a check with your smartphone (or a computer scanner) for Internet-only banks, but depositing cash with your smartphone…well, that’s not an app for that.

Read more here to learn about the steps of paying yourself first.

Build a strong credit score and report

Credit scores are part of your “real world report card.” The constant grading doesn’t stop once you’ve left school. Lenders determine if you’re a responsible borrower by viewing your credit scores and credit report. And it isn’t just credit card companies and loan officers checking them out.

Looking for an apartment? Your landlord will want to run a credit check. Applying for a new job? Your future employer could give your credit report a review.

It takes diligence, responsibility and the right tools to build a strong credit score, but first you have to establish credit history. Unfortunately, you do need a debt tool (ie: a loan or credit card) in order to begin establishing credit history. However, with a properly used credit card, you should never be in consumer debt.

Five factors determine your FICO score:

Payment history (35%): do you make payments on time? Missed payments can crush your credit score quickly.

Amounts owed (30%): the more debt you have, the lower your score. But even more important than the total amount you owe, is the amount you owe in relation to your total credit limit – which is called utilization. If you max out every card you have, you will get punished.

Length of credit history (15%): the longer you’ve had credit, the better. This is one reason to establish credit history in college instead of waiting until after graduation.

New credit (10%): this looks at how many new accounts you have opened, and many times you have applied for credit.

Types of credit used (10%): the more types of credit you have, the better. So, someone who has successfully managed a car loan, a mortgage and a credit card would score better than someone who just managed a credit card successfully.

If you’ve taken out a student loan, in your name, for school then you’ve already established one type of credit being used. Add a responsibly used credit card on top, and you’re easily improving your score.

Just remember: one missed payment can annihilate a great credit score.   

Get a credit card

College students are in a unique position to use credit cards to their advantage.

Yes, credit cards can be used to accumulate debt, but the savvy student will use swiping plastic as an opportunity to establish a healthy credit history.

However, part of owning a credit card is being responsible. Not everyone is ready to handle the adult task of only charging what he or she can afford and paying the bill on time and in full each month.

Know yourself. If credit card bills would get lost in a haze of class projects, thesis papers, keggers and football games, then don’t apply for one.

Avoiding credit card debt in college is one key to financial success post-graduation.

A student who incurs $4,000 of credit card debt at a 21% interest rate (low for a student card) and pays only the minimum due, will take 26.5 years to pay off the debt. Even worse, he or she will spend $10,554 in interest alone!

Use our calculator to see how much credit card debt could cost you.

How to send money to your student without incurring overdrafts

Are you a parent sending your child off to college and being nice enough to send them money? The last thing you want is for that money to be eaten up by monthly fees and overdraft expenses.

There are some great, new options out there to send money to your children at school.

If your son or daughter opens an Internet account (like Ally Bank or Bank of Internet USA), then you can send funds to them via PopMoney. If you are more comfortable with Venmo, then Simple is a great online banking option.

All of these accounts have no fees, including no overdraft fees and unlimited free ATM withdrawals.

Another interesting option, if you are not comfortable using PopMoney or Venmo is Bluebird, by American Express. You can find the Bluebird cards at Wal-Mart and get two cards on one account: one for you and one for your child. You can then put money onto the card at any Wal-Mart. And the account has no minimum balance requirements, no fees and no overdraft fees. Your child will be able to use the card anywhere American Express is available. The only cost is for a withdrawal at an ATM, which is $2 (when you use a MoneyPass ATM). ATM withdrawals are free if you have a direct deposit onto the account, which you child should do if they have a job. Bluebird is like any other bank account (you can write checks, pay bills online, etc), just without the fees.

We often hear from parents who are frustrated by the overdraft fees (typically $35 each) and monthly fees (could be $10 or more per month) that eat into allowances and hard-earned money. The good news: with a bit of forward planning, you can virtually eliminate all of those fees.

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College Students and Recent Grads

The Importance of Paying Yourself First

Male hand putting coin into a piggy bank

Payday: one of the best days of the month. It’s a day to pay the bills, throw money towards any debt and likely splurge on a recent purchase you’ve been eyeing. But before you put money towards your bills or hit purchase on your recent Amazon buy, consider a classic piece of personal finance advice: pay yourself first.

No matter which personal finance expert you look up to, they all have one unified message: save your money.

We aren’t ones to argue with the entire personal finance community, except we prefer you look at saving in a unique way. Instead of just tucking away the money leftover at the end of the month, you need to make saving a priority. It should be the first thing that happens with your paycheck. Here’s how:

Step One: Run the numbers

We can sense you want to argue, “I don’t have any money to save.”

Before you reach for that tired excuse, we want you to run the numbers.

Sit down and write list of your monthly expenses. Consider costs like your cell phone, rent, utilities, tuition (or student loans), any debt payments, groceries, and your “fun fund” for eating out, going to the movies or bar hopping.

After adding up your expenses, subtract your expenses from your monthly income.

Our hypothetical college student Lizzy earns $1000 a month and her expenses total to around $850 a month.

She only has wiggle room of $150 after each paycheck.

Step Two: Set a percentage

Using Lizzy as an example, she could save 15 percent of each paycheck and still have enough money left for expenses.

Except that some months are more expensive than others, so she may need some of that remaining $150 (even though she has fun activities built into her budget).

Lizzy is comfortable with contributing seven percent ($70) of her monthly income to her savings account.

This may sound like a small number, but if Lizzy diligently saves $70 a month, she’ll have $840 tucked away by the end of the year. If she continued with this practice through four years of college, she’d have $3,360 from just contributing a small amount of each paycheck (not including interest). She might even get a raise during the four years of college and be able to contribute and save more!

Step Three: Set up a savings account

Once you’ve set your percentage, you need a place to stash your cash. Your checking account doesn’t provide much of a safe haven because you may be tempted to spend the money earmarked for your nest egg. Plus, checking accounts won’t help you earn money in interest (unless you count a penny a year big bucks).

Setting up a savings account is simple. You can look into doing one with your current bank, but we recommend using an Internet-only bank. If you’re already using an Internet-only bank, color us impressed.

Internet-only banks offer higher interest rates on savings accounts than traditional brick-and-mortar banks because they save immense costs by eliminating the local bank branch. They’re FDIC insured and just safe as using your local bank.

For example, Ally has no minimum deposit to open a savings account and offers an interest rate of 0.87%. That may not sound like much, but Bank of America requires a $25 minimum to open an account and only offers 0.01% APY (annual percentage yield).

If Lizzy deposited her $840 savings with Bank of America, she’d only receive eight cents in interest after a year. If she puts the money in an Ally savings account, she’ll earn $7.34, according to Ally’s APY calculator. That’s easy money to earn just by picking one savings account over another.

A savings account will give you a location to allow your money to earn a higher interest rate than a checking account. Plus, it’s gratifying to watch your fund grow and know exactly how much you have saved.

Step Four: Pay yourself first

Once you settle on a percentage, even if it’s .05%, start to diligently save each time you get a paycheck. Before you pay off bills or go on a spending spree, you need to put that money into savings.

Even if you can only afford $1.50 each month, you need to start getting into the habit now. The younger you begin saving, the happy your older self will be.

Don’t roll your eyes and say, “Ha, $1.50 a month. That can’t even buy me a latte. Why would I bother putting that in a savings account?”

In the beginning, it isn’t about amassing a fortune in your savings account today. This is about building a foundation for your financial future. It’s a practical way to start saving instead of randomly throwing money into a savings account when you occasionally have leftovers.

Step Five: Adjust your percentage as your budget and income change

Hypothetical Lizzy earned $1,000 a month in college and could only save $70. Once she graduates, Lizzy lands a job earning $2,500 a month, after taxes. She needs to run a new budget to account for any increases in expenses.

If Lizzy sticks with her commitment to pay herself first with seven percent of each paycheck, she’ll be increasing her savings from $70 to $175. A simple habit developed in college will result in her saving $2,100 a year (before interest).

If Lizzy runs her numbers and determines she can save more, let’s say 15 percent, she can be saving $375 a month or $4500 a year (before interest).

It’s up to you

Like any habit that’s good for you (exercise, eating the right foods, not binge watching Netflix every night), it can take time to be dedicated to saving a portion of each paycheck.

It’s okay to screw up, but the sooner you start forming the habit, the faster you can accumulate wealth.