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College Students and Recent Grads, Life Events

Crowdfunding Your Student Loan Debt

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While the standard repayment plan for federal student loans puts borrowers on a 10-year timeline to pay off their debt, research shows a far more drawn out repayment reality – with the average bachelor’s degree holder needing 21 years to pay off his or her loans.

Meanwhile, actor/director Zach Braff, who raked in enough per episode of the hit series “Scrubs” to cover the entire cost of tuition at a four-year private college, raised two million dollars in a mere 48 hours for his passion project, “Wish I Was Here” using Kickstarter, a crowdfunding platform.

College grads struggling to pay their way out of debt, deferring their own passion projects just to keep up with payments, are now turning to similar platforms. With the rate of student loan delinquencies rising to 11.3 percent in the final quarter of 2014, the number of borrowers rising 92 percent in the last ten years, and the average student loan balance up 74 percent, relief, in whatever form it takes, is welcome.

While policy makers argue over the sustainability of the current model of higher education, graduates are taking matters into their own hands, implementing new strategies to avoid default and the negative consequences that follow.

Understanding Crowdfunding

Crowdfunding is the practice of financing a project or cause through contributions, often small, from a large number of people. Typically, funds are raised through online platforms, giving individuals the opportunity to reach a wide audience and connect with those beyond their immediate network. While crowdfunding initially gained popularity funding entrepreneurial and artistic endeavors, offshoots have come to specialize in backing everything from charitable causes to personal goals to education.

Crowdfunding platforms specific to student loan debt are still fairly new, but the practice of asking for outside assistance in reducing personal education costs is on the rise. GoFundMe, a crowdfunding site that allows individuals to fundraise for various personal causes, reports the number of campaigns specifically mentioning “tuition”, rising 4,547 percent from 2011 to 2014.

It should be noted however, that not all crowdfunding platforms operate using the same model. Just like choosing an investment platform or a bank account, it’s important to fully understand the fine print before signing up.

Popular Crowdfunding Platforms for Student Loan Debt

 

GoFundMe, founded in 2010, is a general crowdfunding site, but immensely popular in funding personal education costs. The site reports that in 2014, it hosted almost 107,000 education-related campaigns grossing more than $13 million.

Fees: GoFundMe charges a fee of 7.9 percent and 0.30 per donation.

Successfully Crowdfunding Student Loan Debt

After choosing a platform and launching a campaign, grads should be prepared to follow up with marketing and outreach efforts to build interest and circulate their campaign page beyond their immediate circles of friends and family.

Only 44 percent of all campaigns created through Kickstarter, one of the top crowdfunding sites, get fully funded. To enjoy the benefit of a successful campaign, grads can implement the following strategies.

Develop a Platform

Create an online presence beyond your campaign page. A blog, videos or hashtag associated with your fundraising efforts can draw increased interest, engaging the community and increasing your chances of getting funded.

Set a Realistic Goal

It might seem counterintuitive, but if you’re goal seems too far out of reach, people may be less inclined to contribute. Having a strong support group of core donors ready to give in the first week of the campaign can illustrate early success, breeding subsequent success.

Follow Up

Consistency is key. Track progress of the campaign and share updates often. The more reason you give people to return to your page, the more chances you get to have them contribute while they’re there.

Create a Sense of Urgency

Too long a timeline will give people an excuse to hold off on contributing, which too often results in not contributing at all. Limit your campaign to four to six weeks.

Crowdfunding for Good

Whatever your opinions on crowdfunding, it is an attractive alternative to twenty years of interest bearing student loan payments. Not only does crowdfunding student loan debt give grads the opportunity to start their careers in a better place, it gives community members a chance to give back to the causes and individuals they believe in too.

Not everyone may be on board with crowdfunding just yet, but using generosity and community support to help grads escape student debt certainly seems more practical than other gifting traditions… like bridal registries.

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Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Stefanie O
Stefanie O'Connell |

Stefanie O'Connell is a writer at MagnifyMoney. You can email Stefanie at [email protected]

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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.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Stefanie O
Stefanie O'Connell |

Stefanie O'Connell is a writer at MagnifyMoney. You can email Stefanie at [email protected]

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Balance Transfer, Pay Down My Debt, Reviews

Santander Bravo® Credit Card Balance Transfer Review

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Santander Bank, N.A. is not accepting credit card applications at this time.

Enjoy a long introductory rate of zero percent APR on balance transfers for the first 18 months with the Santander Bravo® Credit Card. If you’re looking to buy some time to pay off your high interest debt, transferring the balance to the Santander Bravo® Credit Card can give you an extra year and a half to pay it off without accruing interest- all for a nominal 3 percent (or $10 minimum) fee. Be aware this card is only available to people who live in: CT, DC, DE, ME, MD, MA, NH, NJ, NY, PA, RI, or VT.

In addition to the attractive introductory APR, the Santander Bravo® Credit Card also comes with rewards- offering 3 percent cash back on gas, groceries, and restaurants on up to $5,000 worth of qualified purchases each quarter. Unlike other rewards cards, you don’t have to keep track of rotating cash back categories to enjoy the high reward rate. With gas, grocery, and restaurant spending always earning 3 points for every $1 spent (up to the $5,000 cap), and all other purchases rewarded with 1 point per dollar spent, this card offers a convenient way to leverage your day to day spending while also paying down your existing debt.

Santander Bravo® Credit Card Pros

  • Get 0% intro APR for 18 months on balance transfers.
  • Enjoy a top rewards rate on gas, groceries, and restaurants with simple redemption and no expiration dates.
  • Bonus offer: Earn $100 cash back via statement credit after you spend $1,000 on new net retail purchases in your first 90 days of opening your account.
  • World MasterCard perks: travel benefits and concierge services.
  • Price protection and extended warranty coverage.

However, we don’t encourage you to be spending on your balance transfer card. It’s best to transfer the balance and then lock it away until you’ve paid down as much of the debt as possible.

Santander Bravo® Credit Card Cons

  • $49 annual fee (waived for the first year).
  • Balance transfer fee: 3 percent (minimum of $10).
  • Foreign transaction fee: 3 percent.
  • Caps on bonus cash back- 15,000 points per quarter.

What Do I Need To Qualify?

  • Excellent credit required.

Who Is It Best For?

The Santander Bravo® Credit Card is best for those with a strong credit history looking to buy some extra time to fulfill their consumer debt obligations. While the zero percent intro APR period lasts for a full 18 months, the annual fee of $49 is only waived for the first year. If you can’t get your debt paid off before the 12-month mark, sticking with the card through the $49 fee may not be worthwhile.

Take a look at your balance and make an assessment of your estimated debt pay off timeline, the potential savings, and the potential costs. The rewards of the Santander Bravo® Credit Card can provide some additional allure, but staying focused on the primary objective of reducing amounts owed can help ensure that value assessments remain objective and grounded in the ultimate goal of getting to zero balance.

[Use our debt repayment calculator.]

Looking Out for the Fine Print

  • Balance transfers at Santander must be completed within the first 90 days to benefit from the 18 month zero percent APR offer.
  • The balance transfer fee is 3 percent (or a minimum of $10).
  • After the introductory 0 percent APR period, purchases are subject to a variable APR based on creditworthiness.
  • There is a penalty APR
  • There is no grace period on balance transfers, so if you take the balance transfer offer and fail to pay the balance in full by the payment due date, you will have to pay interest on new purchases from the date of purchase.
  • Cash advance fee: 5 percent ($10 minimum).
  • Foreign transaction fee: 3 percent.
  • Annual fee: $49 (waived for the first year). You can continue to waive the annual fee after the first year by maintaining a Santander Select Checking account. Note that this checking account comes with its own set of fine print fees.

How It Compares to the Competition

While 18 months to benefit from the intro 0 percent APR is a long time to enjoy interest free debt payoff, the annual fee that kicks in at the 12 month mark and a balance transfer fee of 3 percent are reason alone to consider fee free alternatives to the Santander Bravo® Credit Card.

Chase Slate® has an excellent balance transfer offer. You can save with a Intro $0 on transfers made within 60 days of account opening. After that: Either $5 or 5%, whichever is greater. You also get 0% Intro APR on Purchases for 15 months and 0% Intro APR on Balance Transfers for 15 months (16.74% - 25.49% Variable APR, afterwards), and $0 annual fee. Plus, see monthly updates to your FICO® Score and the reasons behind your score for free.

The information related to the Chase Slate® has been collected by MagnifyMoney and has not been reviewed or provided by the issuer of this card prior to publication.

If you want to stay with Santander or prefer the flexibility of a longer interest free debt payoff period, consider the Sphere® Credit Card from Santander. There is a $0 annual fee and a 0% intro APR on balance transfers for 18 billing cycles if taken within the first 90 days of account opening (after, 14.74% to 24.74% Variable).

An introductory balance transfer offer paired with a decent rewards program is admittedly hard to come by, but when trying to buy time to get to zero balance, your focus should remain on that top priority. Don’t get stuck paying for the privilege of additional spending rewards when what you really need is to be from debt. With that objective in mind, the Santander Bravo® Credit Card may not be your best option.

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Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Stefanie O
Stefanie O'Connell |

Stefanie O'Connell is a writer at MagnifyMoney. You can email Stefanie at [email protected]