Ask the Expert, College Planning, Finances

ASK THE EXPERT: College Financial Planning, Part 2

For the second installment of “Ask the Expert:  College Financial Planning” series, we wanted to know what types of loans are available to students, and what are the distinctions between each of these types.  To find out more, we once again spoke with Mark Kantrowitz, an expert on paying for college, to give us the lowdown on loans.

Kantrowitz explains that there are two major types of student loans:  federal education loans and private student loans.  According to Kantrowitz, the federal loan has greater availability, better repayment plans, and is generally cheaper than a private loan.  He advises that the federal loan should be a student’s first choice when applying.  They will also be much easier to obtain in that they are offered through the Direct Loan program where students obtain federal loans through their college or university.

There are several different types of federal loans that are available to students.  The most common is the Stafford loan, in which there are two versions:  the subsidized and the unsubsidized.  According to Kantrowitz, there are a few main distinctions students should note when applying for subsidized and unsubsidized federal loans.  The first is that the subsidized version is based on financial need, while the unsubsidized version is not.  Even wealthy students can qualify for the unsubsidized Stafford loan.  Second, with the subsidized version, the government will pay the interest on the loan while the student is in school, and with the unsubsidized version, the government will not.  Thirdly, the interest rates for subsidized loans will be half of the rate (3.4%) as the rate for unsubsidized loans (6.8%) until tomorrow, in fact.  While there was a great deal of debate over how the government could afford to keep the rate the same, Senate majority and minority leaders  established an agreement that would enable the rate to remain at 3.4%.   According to Kantrowitz, this agreement will modify pension insurance premiums and drop eligibility for subsidized Stafford loans from students who are taking too long to graduate.

The other major distinction between subsidized Stafford loans and unsubsidized Stafford loans is the limit to which a student can borrow.  For the subsidized Stafford loan, a student may borrow up to $3,500 for their freshman year, $4,500 for their sophomore year, and $5,500 each for their junior and senior year.  Should the student require more aid, they may apply for unsubsidized loans.  However, there are limits as to how much one can borrow, either with a combination of subsidized and unsubsidized, or just from unsubsidized alone.  Overall, the limits are $5,500 for dependent freshmen students, $6,500 for dependent sophomore students, and $7,500 each for dependent junior and senior students.  If the student is filing as an independent, or their parents have been denied a loan, the borrowing rate is increased to $9,500 for their freshman year, $10,500 for their sophomore year, and $12,500 each for their junior and senior years.

The second type of federal loan available to students is the Perkins loan, which is given to students with exceptional financial need.  However, Kantrowitz explains that this is a very small loan program, and most students will not receive this type of loan.  Those students who do receive this type of loan will obtain between $1,000 and $2,000, on average.

The last type of federal loan Kantrowitz identifies is the PLUS loan, which is granted to the parents of undergraduates and to graduate students.  In either case, there is a 7.9% fixed interest rate, and eligibility is dependent on the borrower’s credit history. The PLUS loan also has a limit up to the full cost of education, minus any other aid received.  The Plus loan program is very popular, and only about one-fifth of those who apply will be denied due to bad credit.

While Kantrowitz explains that federal loans should be a student’s first choice, he also explains that a student may take out private loans should they require more funding.  However, Kantrowitz warns against some of the major pitfalls with private loans and denotes the differences between the federal and the private loans that should play into a student’s decision.    The first is that private loans are determined by individual lenders (not by the government), therefore these loans will vary significantly and will often have variable interest rates.  While some are introducing fixed interest rate options, this is something that students should consider when applying for private loans.

The second major consideration is that eligibility for these loans depends on one’s credit history and credit score.  In fact, Kantrowitz explains, more than 90% of these loans require a creditworthy cosigner as many students do not have any credit history or if they do, it is oftentimes very poor.  The higher of the two scores will then determine eligibility and the cost of the loan.  Kantrowitz gives us the example that if the loan has a variable rate, the interest on the loan would be a combination of a variable index plus a fixed margin, which depends on one’s credit score.  This means that the higher one’s credit score is, the less they will have to pay in interest on the loan.

Kantrowitz advises that “Your debt at graduation should be less than your expected annual starting salary.”  He explains that ideally, students should not be borrowing more than $10,000 each year for college.  If total student loan debt is less than annual income, the borrower will be able to repay their loan in 10 years or less.  Kantrowitz explains that “If your debt exceeds your annual income, you’ll struggle to repay the loan, and you’ll have to alter your repayment plan by income-based repayment or extended repayment in order to afford the monthly loan payments.”  This means that students will not only be stretching out their repayment, and therefore the amount of time they are in debt, but they will also be increasing the cost of the loan.  This means that they may still be repaying their own student loans when their children are looking to attend college.

For more information on financial aid and scholarships, visit www.finaid.org and www.fastweb.com.

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Ask the Expert, College Planning, Finances

ASK THE EXPERT: College Financial Planning, Part 1

For our newest blog series, we wanted to look at college planning and financial aid, as the student debt crisis has most certainly been a hot topic in the media recently.  For this series, we wanted to know exactly what students need to understand when it comes to financial aid, college financial planning, loan repayment, and student debt.  It just seems so complicated!

For the first installment in the “Ask the Expert:  College Financial Planning” series, we wanted to know what students should be concerned about when it comes to finances and applying for college.  To find out more, we spoke with Mark Kantrowitz, a noted financial aid and college planning author and publisher of FinAid and FastWeb, two resources for students looking to find out more about financial aid options available to them.

Kantrowitz tells us that students should ideally start looking at financial aid options as early as possible.  Often many students start looking their senior year, however, many of the deadlines have already passed.  Kantrowitz says that students looking to get scholarships should be planning for deadlines as early as junior year (if not earlier), so that they can get their applications in for those scholarships with deadlines in the fall of the their senior year.  He explains students should start considering financial aid as early as possible, as this increases the number of scholarships available to them, including those that they may earn in earlier grades.

According to Kantrowitz, when it comes to examining their options, they should weigh the cost of financial aid.  For students, he says, saving is always the better option.  “Every dollar you save is a dollar less that you’re going to have to borrow and every dollar you borrow, will cost you about $2 by the time you pay back the debt.”  It is simply the more affordable options, because when you save, you earn interest and when you borrow, you will pay interest. He gives us the example that, “If you were to save $200 per month for 10 years at 6.8% interest, you’d accumulate about $34,400.  If instead you were to borrow and pay back over 10 years at 6.8% interest, you’d pay $396/month.”  That would roughly double what one would pay if they were to save money instead.

Kantrowitz explains that students should also be aware of the actual cost of college.  He says that students should utilize a net price for college, which is the difference between the cost of attendance and just grants and scholarships.  “Think of it as a discounted sticker price.”  He explains that using this figure is a better basis for evaluating the cost of college rather than utilizing other cost evaluations.  Especially when it comes to the net price figures that schools will often provide on their websites.  Kantrowitz explains that these numbers will often include financial aid packages and loans, that do not actually lower the cost, but will rather increase the cost.

Kantrowitz also urges students to use caution with net price calculators that universities are now required to provide on their websites.  He explains that since October 2011 schools have mandated to host a calculator, however, he says that they really should only be used to determine a ballpark figure for net price.

According to Kantrowitz, there are a couple of major issues with these calculators.  The first major concern with these calculators is the number of questions the calculator has.  He says that much of the accuracy of these calculators is dependent upon the number of questions that they ask; while the standard calculator provided by the National Center for Education Statistics (NCES) contains approximately 10 questions, other calculators such as the one provided by the College Board, contain more questions.  The more questions a calculator has, the more accurate the calculator will be, he explains.  While these calculators are will mean more work for the user, they will produce much more accurate results.

The second concern Kantrowitz points out is that the age of data will play into the accuracy of the calculator.  He explains that calculators like those provided by NCES contain data that is approximately 2 years old, while those like the one provided by the College Board are current, and are more up-to-date.  In either case, Kantrowitz explains, one should use caution with these calculators and should not exclude any colleges on the sole basis of the figures provided by a net price calculator.

The last major concern Kantrowitz points to relates to the financial aid award letter.  He explains that students should be careful when they receive their financial award letter that they understand the characterization of the different awards and understand which award they were given.  “I’ve had families come to me thinking that they’re getting a free ride from a college, and when I look at the financial aid award letter I see $5,000 in student loans and $20,000 in parent loans.  That’s far from a free ride.”  Students should really do their homework when it comes to the different classifications of financial aid, so they know that when they receive a grant, they know which grant they have received and what this implies.

Overall, Kantrowitz urges students to start considering college financial aid early and often, and to do their homework when it comes to understanding the different options available to them.  He explains that students and their families should always exercise caution when it comes to financial aid and to make financial aid decisions that work best for them.

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Housing Advice

Apartment Move In Checklist

Apartment-Move-In-Essentials-Checklist-Screengrab

Whether this is the first time you’re moving off campus, or you’ve been living off campus, it always seems like you’re forgetting something when it comes to packing everything you’ll need.  Trust us:  We’ve been there.  That’s why we’ve come up with a checklist of things you’ll need when you start packing up.  We know, it looks like one heck of a list, but you just never know what you’ll forget.

Click here to download a PDF copy.

BEDROOM

  • Bed
  • Night stand(s)
  • Bookcase/shelves
  • Lamps
  • Desk lamp
  • Trash can
  • Bureau
  • Desk chair
  • Rug(s)
  • Curtains
  • Curtain rod
  • Bed spread
  • Sheets
  • Plastic bins
  • Shoe rack
  • Full-length mirror
  • Alarm clock

KITCHEN

  • Silverware (at least 8 sets)
  • Plates (at least 4)
  • Bowls (at least 2)
  • Cups (at least 4)
  • Wine glasses (for those 21+)
  • Dish soap
  • Pots and pans (at least 1 skillet, 1 large pot, and 1 smaller pot)
  • Flat metal spatula
  • Large mixing spoon
  • Tupperware
  • Scissors
  • Paper towel holder
  • Microwave (if the apartment doesn’t come with one already)
  • Knife set
  • Dish rack (for next to the sink when you’ve finished washing them)
  • Table
  • Chairs (at least 2)
  • Sandwich bags (you may want gallon size and smaller sizes)
  • Aluminum foil
  • Plastic wrap
  • Pot holders
  • Oven mits
  • Strainer
  • Can opener
  • Cutting board
  • Large mixing bowl
  • Toaster or toaster oven

BATHROOM

  • Toilet brush
  • Toilet bowl cleaner
  • Plunger
  • Garbage can
  • Shower cleaner
  • Cleaning brush to clean shower
  • Shower shelves (optional)
  • Toilet paper
  • Shower curtain
  • Shower curtain rod

LIVING ROOM

  • Couch/chairs (depending on how much space you have)
  • TV (optional)
  • TV stand (also optional)
  • Lamps
  • Side tables/coffee table
  • Desk (you may want to include one in case you want to work in the living room)

MISCELLANEOUS

  • Hand soap (for both bathroom and kitchen)
  • Sponges
  • Paper towels
  • Tissues
  • Garbage bags
  • Broom and dust pan
  • Vacuum
  • Carpet cleaner (for those nasty spills)
  • Disinfectant wipes
  • Window cleaner
  • Light bulbs
  • Batteries
  • Extension cords
  • Flashlight
  • Fan(s)
  • Laundry detergent
  • Hamper/laundry basket
  • Clothes hangers
  • Basic hygiene products
  • First aid kit
  • Sewing kit
  • Basic tool kit
  • Fire extinguisher (if your apartment doesn’t already have one)
  • Smoke detector (your landlord should provide one, but you should make sure it works properly when you first move in)
  • Carbon monoxide detector (your landlord should also provide one of these, but you should make sure it works properly when you first move in)
  • Décor (i.e. picture frames, posters, decorative pillows, etc.)
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Roommates

7 Topics You Want to Discuss With Your Roommate(s)

Whether you’re subletting this summer or looking to move into a new place in the fall, you are bound to run into some issues with your roommate(s).  However, there are some things you can discuss with them beforehand that will help you nip some of these potential issues in the bud.

Music/TV

According to an article we read on ApartmentTherapy.com, if you’re sharing a room, you will want to discuss your tendencies when it comes to listening to music and watching TV.   Some people would prefer listening to music or watching TV with speakers, and other people would be fine with headphones.  You’ll want to see what each other’s preferences are and maybe come to a decision as to what times the speakers can be used.

Even if you aren’t sharing a room you want to be sure that you establish the use of the TV and/or stereo.  How will time be divided up amongst the roommates?  Will you have quiet hours?

Shared Items

In an article we read by Missy Slink in Yahoo! Voices, she explains that you will want to determine what items will be for community use and what items will not.  Will you share food?  If so, what foods will you be sharing?  Will you be sharing things like a vacuum?

You’ll also want to determine how and if you will be sharing things like toilet paper, paper towels, and cleaning products.  Will you each buy your own?  Will you be splitting this, and if you do decide to split this, how will you divide the cost amongst the roommates?

Sleeping Habits

If you’re sharing a room, this is especially important to discuss beforehand.  If you’re roommate goes to bed at 10 pm and you go to bed around 3 am, you’ll want to establish how you will manage this.  Does this mean you’ll switch to a desk lamp to study?  Can you watch television when they go to bed?

If you each have your own room, you will still want to discuss this so that you can properly set quiet hours.  This way you won’t be disturbing someone while they are trying to sleep.

Guest Habits

When you’re sharing a space, you’ll want to figure out what the guest policy will be for your room/apartment.  If you plan on having a lot of friends over, or you have a significant other, you will want to figure out when they can come over, when they can’t, and when guests should go home.  You may also want to determine what the ground rules will be for guests in terms of using shared items.

Security

As someone who has had roommates who leave all the doors unlocked, this is definitely something you want to discuss beforehand.  If you are someone who likes to make sure everything is locked up when you run to get coffee, or when you go to bed at night, you will want to talk about that beforehand with your roommate.

Decorating

If you’re sharing a room, you’ll want to determine if you want to share room decorations, or you want to set up your own spaces.  If each have your own separate bedrooms, you will still want to establish decorations for the common areas.

Concerns

You want to establish beforehand how and when you will raise concerns with one another should they arise.  It may be a little awkward to establish this beforehand, but you don’t want to be that roommate who leaves passive aggressive notes around when they get frustrated.  That won’t end well.

By establishing some ground rules beforehand and making sure you can live comfortably together, this will help you have a better roommate experience.  Just remember:  the space belongs to both of you.

For tips more tips on how to ensure fairness between you and your roommate(s), check out Splitwise and their blog at http://blog.splitwise.com/

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Housing Advice, Renting

Subletting Your Apartment for the Summer

If you are going home for the summer or taking that internship in New York, you may want to consider subletting your apartment.  That way you won’t be paying for an empty apartment you’re not staying in.  However, there are some things you may want to consider before you do.

1.    Check with your landlord to see if you can sublet.  Not all landlords like people subletting their units, and if you sublet without their permission both you and your tenant could be evicted.  However, if they do allow subletting and/or you have a good relationship with them, they may let you.  In an article we read on eHow.com, they explain that you should only be subletting what you have the right to sublet.  This means that, for example, if you have a month-to-month agreement with your landlord, you want to make sure that your are subletting on a month-to-month basis.

2.    Talk to your friends to see if they would be interested.  It will be significantly easier for you to sublet for a few months to a friend rather than a stranger.  That way you can leave some of your personal belongings behind and you don’t have to worry about it.  It may also be easier for you to address your concerns with them, and for them to address their concerns with you.

3.    If you can’t find a friend, you may want to post up your sublet.  At JumpOffCampus we post sublets for anyone looking to sublet their apartment.  You can also post up your sublet around your campus to see if anyone at your school would be interested.  There may be someone taking summer classes that needs a place to stay for a few months.

4.    Set a reasonable rental price.  In a blog post we read by Kathleen Corlett on HerCampus.com, you want to set a price that won’t scare off any potential renters.  You have to be aware that you probably won’t get the full rent, so you want to take that into consideration.  You will most likely get about 75% of the actual rental cost.

5.    Whether your roommates are staying for the summer or they aren’t, you want to be sure in considering their opinions.  If they are staying for the summer, you want to be sure that they have a hand in deciding whom you will sublet to.  As they are the one(s) who will be staying with this person, you want them to be just as happy with your decision as you are.  If they aren’t staying for the summer, you want to be sure that you set ground rules togehter for the renter that both of you will be happy with.

6.     Meet the prospective tenants.  This way you can see who you will be renting to.  According to Corlett, there are a lot of rental scams out there.  You want to be sure that the person who you are renting to is legitimate and someone you feel comfortable with.  You can think of this process as kind of like a job interview.

7.    You want to be sure to draw up a written and binding agreement between the renter and yourself.  You want to be sure that the tenant agrees to pay the agreed amount each month and that they abide by the terms of your lease that you and your landlord had agreed upon.  In this agreement you may want to consider including any ground rules that you have established for the tenant.  Be sure to check with your landlord to see if they too have any additions to this agreement, or any additional paperwork they may need you or the tenant to fill out.

8.    Get a security deposit from the tenant.  This will ensure that you’ll be covered if there is any damage done to your apartment while your tenant is there.  you’re not left with a hefty bill or lose out on your own security deposit.

9.    Arrange for the tenant to send you money.  This way you will make sure the rent is paid directly to your landlord.

10. Make sure to clean up your place before you leave.  Cleaning before you leave is considerate, and is a great way to make sure none of your possessions get damaged or lost.

11.  Take photos before you leave.  That way you can verify what the apartment looked like when you left before the subtenant moved in.  You want to be sure to date this photo if it is not already time-stamped.  This is just in case any problems arise with damages or other incidents.

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Apartment Hunting, Housing Advice, Renting

Finding A Sublet For the Summer

If you are looking to sublet a place for the summer, there are some important things you need to consider.

1.    Know what you’re looking for.  When you start your search, you want to have an idea of what you would want in a sublet.  In a blog post we read by Kathleen Corlett at HerCampus.com, there are some important questions you want to ask yourself.  Is your ideal sublet furnished or unfurnished?  Is it in walking distance to your work or near a bus stop?  Do you have roommates?  Do you have your own bedroom?  Corlett even suggests putting together a checklist to compare them side-by-side.

2.    Be flexible.  In a blog post we read by Juliet O’Reilly on GradGuard.com, she suggests keeping an open mind when looking at sublets, as a place may not be exactly what you had envisioned, but it may offer you more opportunities than you had expected.

3.    Cover all ground.  O’Reilly advises that while you don’t want to get overwhelmed in your search, you want to be sure that you are looking at all of the opportunities and not limiting yourself.

4.    When you find an ad you like, make sure to get all the info.  Ask for more photos and more information on the rental first before you go to see it.  That way you won’t waste your time viewing a place that won’t fit your needs.

5.    Review crime statistics for the area.  If you don’t know the area very well, you want to be sure that you look at the crime rates for an area.  You want to be sure that the place you live is safe.

6.    Narrow it down.  Narrow your search down to a few places your like the most.  These will be the places that you want to tour.  You may also want to be sure to have a few backups just in case the places you see don’t work out or aren’t what you are looking for.

7.    Check out your top picks.  You don’t want to sign a lease before you’ve seen the place for yourself.

8.    Choosing a place.  Make sure you choose the place that fits your needs best and is somewhere you can see yourself living.

9.    Make sure you read the sublease carefully before signing.  You want to know what you are committing to, if there are any special rules, or if you need clarification on something.

10. When you move in, make sure to take time-stamped photos of the place.  This will prevent you from getting stuck with the bill if there are any damages.

11. Collect all the contact information for the person you are subletting from.  You want to be sure to get all this information before they leave so that you have some way of contacting them.


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Housing Advice, Renting

How to protect yourself when you rent

Renting an off-campus property can be an overwhelming task, to say the least.  We try to help, but how do you know you’re making the right choice when you rent?

In a recent article by Jessica Hickok (http://www.foxbusiness.com/personal-finance/2012/05/15/how-to-protect-yourself-as-renter/), she identified some very specific things renters can do to protect themselves when renting a property.  Here is the breakdown of that list:

  • Checking the state’s landlord/tenant laws
  • Watching for red flags on a lease, including changes to monthly charges within the time of the agreement, can you make repairs yourself if the landlord does not respond to repair requests, will you get reimbursed for making those repairs, how will your security deposit be settled once you leave, and are there any eviction procedures that could take place
  • Make sure the owner isn’t in the foreclosure process with the property
  • Be sure to have an exit plan just in case

A lot of the time students may often forget they too have rights as renters.  This is why it is so important to point out some things you can do to protect yourself when signing an agreement because you just never know.

To find your state’s Tenant Rights Handbook, go to http://portal.hud.gov/hudportal/HUD?src=/topics/rental_assistance/tenantrights.

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