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4 Reasons College Students Should Be Relieved By The New Spending Bill

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Congress passed a $1.3 trillion spending bill in the wee hours Friday to avoid another government shutdown and fund the federal government through the end of September. President Donald Trump signed the bill Friday afternoon after threatening to veto it.

It’s no wonder the President isn’t a fan of the budget — it completely goes against his own education agenda, which included calls to either defund or decrease funding for several education programs targeted at college students.

Instead, Congress’s spending bill includes measures to boost funding for these programs.

Overall, the 2,232-page bill includes about $2 billion in additional spending on higher education across a wide range of programs.

Student advocates call this a win for students.

“While they don’t help current borrowers, [they] will go a long way to help primarily low-income students afford college in the future and hopefully would reduce the amount of borrowing they may need to do,” said Antoinette Flores, a senior policy analyst of Postsecondary Education Policy at American Progress.

Public Service Loan Forgiveness lives on. Notably, the budget provides an additional $350 million in funding to the Public Service Loan Forgiveness program (PSLF). It’s an unexpected boon for the popular program, especially since President Trump’s first two education budget proposals have called on Congress to phase the program out.

3% bump for Pell Grant recipients. In addition to the funding bump for PSLF, Congress also raised the maximum Pell Grant for low-income students by 3% to a total of $6,095 for the 2018-19 academic year. Trump and Education Secretary Betsy DeVos had sought to freeze the program last month in a budget proposal.

Campus-based aid programs get a boost. In addition, appropriators provided modest increases in funding for Campus-Based Aid Programs, including the Supplemental Educational Opportunity Grant ($840 million, a $107 million increase) and Federal Work Study programs ($1.1 billion, a $140 million increase).

Aid for college student parents triples. Funding for the Child Care Access program that helps student parents pay for child care more than tripled, from $15 million to $50 million, experts say.

“These are peanuts in terms of the federal government’s budget, but that’s a big, big thing for that program,” said Jessica Thompson, policy and research director at The Institute for College Access and Success, a nonprofit organization dedicated to making higher education more available and affordable for Americans.

Public Service Loan Forgiveness lives on (for now)

Although the spending bill gives an extra $350 million to fund PSLF for qualified borrowers, it isn’t a permanent change (the entire spending bill is only good through September).

“It’s just a short one-time funding. And it will be on a first-come, first-serve basis,” Flores said.

Already, there has been much confusion among student loan borrowers who thought they were eligible for PSLF but later found out they did not qualify. A couple of high-profile cases have been reported last year where borrowers thought they were going to receive PSLF, signed up to get forgiveness but found out they weren’t eligible because of their employer or because they did not have the right types of loans needed to qualify. In some cases, their loans did not qualify because they were put into the incorrect repayment plan due to issues with their loan servicers.

The $350 million one-time funding is potentially one way to address this issue, Thompson says.

“[Congress is] attempting to set aside some money to help solve that problem for borrowers who are in that kind of devastating situation where they really did everything right, but for reasons outside of their control, turns out didn’t meet the technical specification of the program,” she said.

The scope of this issue is unknown because the program was implemented in 2007, and the first borrowers became eligible just a few months ago in October 2017.

Pell Grant recipients get a small but significant boost

Currently, about 7.5 million lower-income students are eligible for Pell Grants.

Thompson explained that over the last six years, Pell Grants had an automatic annual inflation adjustment but that expires after this year, and Congress has not moved to continue that. The grant’s purchasing power is relatively low because it’s been around for more than 40 years, and it has not risen to keep up with college cost hikes, Thompson said, but any increase to the Pell Grant helps borrowers.

“The No.1 way that we reduce student loan borrowing is increasing grants,” Thompson said.

In the new budget bill, Congress increased the annual Pell Grant cap by $175 for the 2018-19 academic year, pushing the maximum award up to over $6,000 for the first time.

“It’s a 3% increase, which is modest, but it’s really important,” Thompson said. “The increase will more than offset the loss of the inflation adjustment next year.”

What’s next?

Congress last month passed a budget deal that raised spending caps over the course of the next two years, including $4 billion in funding for higher education.

Experts say the current spending bill is part of that two-year package, and students can assume that the current increase spending levels would be carried forward for at least two years.

But Thompson said she is ultimately concerned about the ongoing Higher Education Act reauthorization process, where the president, education secretary and House Republicans have made proposals to make massive cuts to the federal student loan program, which would affect student loan borrowers in a much bigger way.

“[Congress] has set a really nice example here by prioritizing education spending and saying, ‘You know what? When we have extra resources like this, this is a place where we should be investing, not cutting, not freezing, not gutting,’” Thompson said. “But in the grand scheme of things, we are very focused on the ongoing threat to the federal loan program and to federal loan repayment.”

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How to Save on Back-to-School Shopping

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Parents often revel in the calm and quiet that comes when kids head back to school, but they aren’t likely to enjoy the excess spending that also accompanies the back-to-school season. According to the National Retail Federation, parents will set a record in 2019, spending an average of $696.70 per household on children in elementary school through high school.

 

“It was interesting to see the across-the-board increases in spending levels,” said Mark Mathews, vice president for research development and industry analysis with the NRF. “Elevated levels of consumer sentiment, healthy household balance sheets, low inflation and recent wage gains all seem to be contributing to a confident consumer who is willing to spend money on back-to-school supplies.”

If you’re planning a trip to the store before classes start, there are a few ways to curb the spending and save some bucks.

Plan ahead

No parent should set foot out the door for back-to-school shopping without first taking stock of what they already have. Plenty of old supplies from previous years might still be usable, especially arts and crafts items like crayons, pencils and pens, as well as more expensive things like backpacks, lunch boxes and calculators.

Crossing a few items off your list is a good first step when it comes to saving, but learning how to budget is also important. It’s tempting to run down the back-to-school aisle and grab every colorful notebook and snazzy pencil case in sight, but it doesn’t make a lot of financial sense. Create a realistic budget based on the items you actually need, and try your best to stick to it. If possible, do most of your shopping online, since it’s easier to keep a running tally of how much you’re spending as you shop.

Be smart about sales

Although you’re bound to run into many back-to-school sales this time of year, you don’t need to buy 12 notebooks just because they’re cheaper right now. In fact, you shouldn’t assume the sales price is the best price at all, said consumer savings expert Andrea Woroch. Instead, always comparison shop.

“Run a quick Google search online or on your phone to see if another store is selling the same or a similar item for less,” she said. “Most big box stores will price match, so you won’t even have to drive to another store to get the better deal.” For example, Target, Staples and Walmart all have price matching policies.

Clip coupons and shop discount stores

Coupons have definitely made a digital comeback, with countless apps and websites dedicated to listing all your options in one place. “Spending a few minutes looking for coupons can help you get a better discount,” Woroch said. “Use apps like CouponSherpa, for instance. Or, use the Honey browser tool, which automatically searches and applies relevant coupons to your online order.”

Many stores also offer discounts to valued customers who sign up for their rewards program, like Walgreens and CVS, while craft stores like Michaels regularly offer discounts. Don’t knock purchasing basics like paper and writing supplies from the Dollar Tree, either — you might be surprised by what you find, and those types of items are often the same quality wherever you buy them.

Tax advantage of tax-free holidays

On select dates throughout the year, different states offer state sales tax holidays, or days where you can purchase items without having to pay sales tax on them. You can find a full list of the 2019 state sales tax holidays here, but some upcoming ones include:

  • August 18-24: Connecticut, clothing and footwear
  • August 17-18: Massachusetts, specific items costing less than $2,500 per item

Split bulk purchases

You can usually save money by buying certain items — like construction paper, pens, pencils and folders — in bulk, but you can save even more by splitting those bulk items with other families. Not only is this a great way to share savings, Woroch said, but you can earn rewards faster by charging everything on your card and then having the families pay you back.

Redeem your rewards

If you have a cash back credit card, now’s the time to use it. “Most credit cards give you the best redemption value when you opt for statement credit or have the cash rewards deposited into your bank,” Woroch said. “You can set this money aside for back-to-school shopping.”

Alternatively, Woroch suggested checking to see if your particular card allows you to redeem points for gift cards to retailers where you plan to shop.

Use discounted gift cards

Besides redeeming credit card points for retailer gift cards, you can also scour the web for cheap gift cards online. Planning a trip to Target? Scan websites like Raise, Cardpool and CardCash first. These sites buy and sell unused gift cards at a discount, meaning you can save on purchases you were planning to make anyway.

Consider having your kids contribute

Depending on your child’s age, back-to-school shopping might be the perfect time to start having them contribute to their own goods, especially if they earn an allowance or have a job. Talking to your kids about money at a young age — whether about budgeting, saving or spending — will help them develop solid money habits that will pay off in the future.

Parents already seem to be catching on to this idea. “It was surprising to see how much of their own money kids are contributing towards the back-to-school bills,” Mathews said. “Teens and pre-teens will be spending $63 of their own money, which works out to $1.5 billion overall. This is significantly higher than the levels we saw a decade ago.”

Although the news about increased spending on back-to-school supplies may be alarming, these days there are more ways than ever to save. A little ingenuity, resourcefulness and research can go a long way.

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Survey: Most Americans Have Raided Their Retirement Savings

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Successfully saving for retirement requires dedication and self-restraint, but more than half the country admits to robbing their future selves in order to satisfy today’s spending needs, according to a new survey by MagnifyMoney. While the economic pressures bearing down on workers today make their actions understandable, the hard truth is that many Americans are turning an already-difficult task that much harder by tapping into their retirement savings early.

Key Findings

  • Approximately 52% of respondents admit to tapping their retirement savings account early for a purpose other than retiring: 23% have done so to pay off debt, 17% for a down payment on a home, 11% for college tuition, 9% for medical expenses, and 3% for some other reason.
  • About 29% say there are some scenarios where it is a good idea to withdraw money early from a retirement savings account.
  • Around 60% of respondents do not know exactly how much they have saved for retirement. Just 40% know the exact amount, while 45% have a rough idea, and 15% have no clue.
  • Almost 25% are unhappy with their retirement savings. 47% are happy with the amount saved, and about 28% are neither happy nor unhappy.
  • Finally, 27% have never thought about how much money they’ll need in retirement.

Why are Americans tapping their retirement savings early?

The two main reasons respondents cited for withdrawing money from their retirement savings are as American as apple pie: home ownership and personal debt. According to the survey, 23% of those making an early withdrawal did so to help pay down non-medical debt, while 17% needed the money for a down payment on a home.

Although the housing market appears to be cooling off compared to just a few years ago, a down payment on a home still requires a significant chunk of change — experts recommend a down payment equaling 20% of the total mortgage to optimize your mortgage payments.

Personal debt, from credit cards to student loans, remains a fixture of everyday economic reality for millions of Americans. In other words, the stressors that cause workers to raid their retirement funds don’t look like they will decrease appreciably in the foreseeable future.

Which Americans are withdrawing money the most?

Breaking down the demographics, older savers are less likely to withdraw money from their retirement fund than younger savers. 54% of millennial savers say they’ve taken an early withdrawal from a retirement savings account, compared with 50% of Gen Xers and 43% of baby boomers. This stands to reason considering that many millennials have now entered the stage of life where they are getting mortgages, starting families and taking on bigger financial obligations while also being decades away from the traditional retirement age. Millennials are also more likely to say that raiding your retirement fund is justified under certain circumstances, as seen in the chart below:

Just one of many bad retirement savings habits

Tapping into retirement funds — whether an employer-sponsored 401(k) or a traditional IRA — before the appropriate age almost always comes with a financial penalty in the form of additional taxes and fees. What is more, you’re diminishing the principle that fuels the compound interest you need to meet your retirement savings goals.

Unfortunately the survey reveals early withdrawals are just one of the many bad habits Americans engage in when it comes to retirement savings. This list of less-than-ideal practices includes:

  • 35% of Americans are not currently saving for retirement. Of those who are, 37% started saving at age 30 or above, and 12% started saving when they were older than 40.
  • 60% of Americans do not know exactly how much they have saved for retirement. Just 40% know the exact amount, while 45% have a rough idea and 15% have no clue.
  • Nearly 1 in 5 Americans don’t contribute enough to their employer-sponsored retirement account to get the maximum company match. Maximizing a company match is one of  your best ways to maximize your retirement savings. Among those with an employer-sponsored retirement savings plan, just 17% of respondents contribute 10% or more of their take-home pay. Almost 5% contribute nothing at all, and nearly 6% are unclear about how much they contribute.

  • Approximately 42% of respondents have made the mistake of withdrawing their entire balance from an employer-sponsored retirement plan when changing jobs without rolling it over – and nearly 15% have done so more than once. A little more than 47% of millennials admit to this faux pas.

The most damning finding of all is that 27% of those surveyed have never thought about how much they’ll need in retirement. And while “ignorance is bliss” may hold true when it comes to some things in life, this expression should not apply to your retirement plans.

Methodology

MagnifyMoney by LendingTree commissioned Qualtrics to conduct an online survey of 1,029 Americans, with the sample base proportioned to represent the general population. The survey was fielded June 24-27, 2019.

Generations are defined as:

  • Millennials are ages 22-37
  • Generation Xers are ages 38-53
  • Baby boomers are ages 54-72

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.

James Ellis
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James Ellis is a writer at MagnifyMoney. You can email James here