Archive | December, 2016

10 Steps to Prepare for Next Semester Now!

29 Dec

Okay, so it’s about time to make our schedules and pick out classes for next semester. As we move closer and closer to the spring here is a list of things to keep in mind while picking classes:

Is the work load realistic? It’s awesome you want to take 20 credit hours! Is it really that realistic to successfully complete 20 credit hours though? Be honest with yourself and only take what you can handle. Your financial aid, degree, and future job depend on you doing well so don’t set yourself up for a disaster.

What classes do you need? If you know you can only successfully complete 15 credit hours which classes are really important and get you closer to your goal, graduation? I know your best friend is in that class and you really want to be with her, but maybe that’s not the best option for you. And make sure you stay on track. Are you going to graduate on time? It can cost a lot of money if not. Make sure you are taking care of what you need to first.

What time is class? Some of us are morning people, and some of us are definitely not. No one knows you better than… you! Keep in mind part of your financial aid is contingent on participation, which for some that means attending class. If you know you’re going to sleep through a 7:30 am class, perhaps there is a better option during a later time. You just might be able to substitute the 7:30 am class for another credit altogether.  Check with your advisor for any class switches you could make.

When is lunch? When some of us make a schedule, we pack it as tightly as we can, to be done with the day as soon as we can. Others purposely leave room for a lunch. So look at what works best for you. If you have time for a lunch, packing a lunch is always cheaper. If you don’t have time for a lunch, maybe you don’t need such a large meal plan, see about switching it out for what meal plan works best for you and your needs.

feet walking upstairs with text overlay: 10 Steps to Prepare for Next Semester

How are you getting to class? Are you taking the bus? Make sure you check out the bus schedule to see when it starts, stops, if it is on-time, and plan accordingly. Difficult to tell when a bus is on time, there is an app for that. If you’re driving, are you sharing that car? Make sure you work it out with all the necessary parties.

Do you have scholarships? What are the GPA requirements for those? Most Purdue scholarships check your grades in the spring, and only in the spring. Make sure you’re on track to keep your scholarships! If you know you’re not where you need to be, consider taking some GPA booster classes or cutting your work load to get your GPA were it needs to be. Also don’t stop now! If you have a good GPA keep up the good work and don’t lose momentum.

What other financial aid do you have? State and federal aid have minimum credit hour requirements to receive those funds. Make sure you continue to meet those credit hour minimums. You can always see the requirements needed for all types of aid by going to your MyPurdue, look under the financial tab. On the left hand side there is a link that says “Award for Aid Year”. After you click the link you will want to select the 2016-2017 school year. On the award overview tab, all of your aid will be listed with links to the award requirements.

Is your enrollment changing? Typically, financial aid is based on the assumption you will be 12 credit hours or more. If you’re not, let the financial aid office know, before classes start! Re-awarding financial aid is a manual process and can take some time. Letting the Financial Aid Office know about your schedule changes in advance will save you from headaches.

What are the additional costs? Some courses come with special course fees, like chemistry labs. Can you handle that other cost? All books are not created equal. Keep in mind some textbooks will always cost more. So make sure you consider if the additional financial costs outside of the tuition will be covered. And plan ahead. Often times there are cheaper options for buying books.

Do you have a job? Most employers, especially the ones on campus, are good about working around your class schedule. They are here at Purdue and realize you are a student. That being said, they need to know your schedule. Make sure you give them your schedule and do so well in advance. The early bird gets the worm and the sooner they have your schedule, the sooner they can work around it and give you the hours you need.

What steps do you take to prepare for a new semester?

What to do over Winter Break?

27 Dec

Hannah Stewart, Purdue University Student and Peer Counselor
www.purdue.edu/mymoney

Santa GIF

Oh thank heaven finals are over! Let the holidays begin! The presents, the food, family, it’s a great time of celebration and enjoyment, for a while at least. I know it’s hard to believe, but there is a lot of downtime over the holidays and some of us, dare I even say it, get bored. Even if you don’t bore easily, there are plenty of actions you can take that just might make your break a little better.

The spring semester is coming. I know the fall semester just ended and no one wants to think about school over a holiday break, but you can at least prepare.

Grandmother giving stock of money for college savingsLook for books in advance; it can often be cheaper since you can order from Amazon, rent online, etc. Write out your Christmas list, you could always ask for books as a Christmas gift! Money usually is given as a gift too and it might be beneficial to save for rent or other college related expenses.  During the downtime of the holidays, it’s a good time to set and make a budget. It’s also a good time to make next semester’s schedule.

Check your grades early. I know you don’t want to think about it, because the past is past, right? However, there are timelines to contest grades. If you have any questionable grades this is the time when you should be reconciling with your professor. Double check to make sure all you grades have been entered correctly and send emails early and often if needed. Also, double check you’re making Satisfactory Academic Progress (SAP), it is one element to keeping your federal financial aid eligibility. You can always check your SAP status on your myPurdue or contact the Division of Financial Aid as well. Just log in, and under the “financial” tab, click on academic progress on the left, and choose the current academic year. The last tab, Academic Progress, shows your current SAP status.

I cannot stress this enough: the FAFSA (Free Application for Federal Student Aid) openend up October 1st and must be filed every year that you’re in school in order to receive financial aid. TheFAFSA home screen on-time filer deadline for Purdue University is March 1st every year, DON’T MISS OUT! It’s not just grants and scholarships that depend on the FAFSA; if you have Stafford loans they also require filed a FAFSA. Recent FAFSA changes have you using the taxes from 2 years before you file, so if you’re filing for the 2017-18 school year you’ll use 2015 tax information. It also tends to be easier to file the FAFSA when both parents and students can work together, and the holidays usually provide a perfect opportunity. Although filing FAFSA is not as fun as opening presents on Christmas morning, it’s fast and super important, so make sure to pencil in sometime for it.

Another really important thing about this time of year is that it’s when scholarship applications open up for the next academic year. That’s right, free money is up for grabs, so go apply! Academic advisors typically email students letting them know, but you can also check out this list of Purdue departmental scholarship information.  The Division of Financial Aid also has a General Purdue Scholarship Application that is available now and is due (along with a completed FAFSA) by January 1st. Private scholarship applications typically start opening up this time of year too. Two resources for private scholarships are FinAid and FastWeb. So research and apply for scholarships. After all, who doesn’t like free money?

So yes the holidays are here, relax and enjoy yourself! Go have fun and refresh! Just keep these things in mind as they can help for a less stressful spring semester.

4 Financial Goals You Can Actually Achieve in 2017

21 Dec

Did you know that January 17th is known as “Ditch New Year’s Resolutions Day?” Most people start the new year with big, lofty goals and they quickly come to realize they bit off more than they can chew. According to the University of Scranton, around 40% of Americans usually make new year’s resolutions. Of that 40%, only 8% say they actually meet their goals.

The key to having successful resolutions is to make sure they are simple and achievable. Rather than setting a goal, such as “lose 10 pounds”, try to set a smaller resolution that you can control like, “go to the gym at least 3 days a week”.
Financial New Years Goals.jpg
In 2016, over 30% of Americans had a resolution to save more and spend less. In order to move closer to that goal, it’s important to set simple, achievable resolutions that will improve your finances. If you’re unsure where to start, try making any of these attainable goals your resolutions for 2017.

Saving Your Coffee Money
Coffee is a morning staple for so many people. However, those daily visits to your favorite shop can add up quickly. An average transaction at Starbucks this past year was nearly $9, that adds up to a whopping $2,340 a year! In 2017, set a goal to make your coffee at home. A new automatic coffee maker can be a great investment to ensure you get your coffee without having to spend the extra time and money every morning.

Cut One Service You Don’t Use
That $20 charge for a music-streaming service may not seem that expensive, but if you’re not using it, then you’re just wasting money you could actually be saving. Try laying out all of the expenses you have for services like these, in order of most used to least. For next year, cancel the service you least used this past year. Even if it’s only $20, it can lead up to $240 per year in savings! With technology improving more and more for streaming TV shows and movies, it may be time to finally cancel that cable subscription.

Understand Your Debt
Nearly every American will deal with debt at some point in their lives. From student loan debt to mortgages, it’s important to understand not only how much debt you have, but where it is and how it’s affecting your life. With the rising student loan debt each year, it’s important for graduates to understand each loan and how much their payments will be. To get ready for 2017, make a spreadsheet with all of the loan payments you have (education, car, home, etc.) and how much you can contribute each month to pay them off as quickly as possible. The sooner you pay them off, the more money you will save over the life of the loan. Also, the faster those loans are paid off, the quicker you can spend that money on something like retirement or that vacation you’ve always wanted. There are now even more services for graduates that allow to you refinance your loans, for a lower rate and even the ability to adjust or skip your monthly payment.

Brown Bag It
Grabbing that delicious salad from your favorite cafe may seem like a great idea in the moment, but doing that throughout the week can lead to a big chunk taken out of your bank account. The average lunch in the United States is around $10, so if you eat out every day of the week, excluding weekends, you will be spending around $2,600 a year just on lunch. For 2017, start bringing your lunch to work or school, rather than eating out, and watch just how much you save. Also, by making your lunch at home, you have the ability to control the portions and health benefits of your food.

Ultimately, whatever goals you hope to meet in 2017, just be sure that you make simple resolutions that you can actually achieve. Just like the fable The Tortoise and the Hare says, “slow and steady wins the race!”

Choosing a Federal Student Loan Repayment Plan

14 Dec

All information on repayment plans is from this article by David Evans, Ph.D.
Additional info added by Casey Doten, Purdue Financial Aid Administrator

There are two main types of repayment plans you can choose from: traditional and income-driven. For borrowers that will qualify for Public Service Loan Forgiveness (PSLF), income-driven plans may be the better option. Income-driven plans will require an annual verification of income. This fact sheet describes each of the repayment plans as well as pros and cons of each. For more information about each of the repayment plans visit the Federal Student Aid website.

Traditional Plansstudent-loan-repayment-plans

Standard Repayment Plan

The Standard Repayment plan consist of equal monthly payments over a 10-year period of time. This repayment plan is good for those who can handle making their monthly payments and make enough money to afford them. This payment plan is best for those who have minimal other debts and start working right out of school.

The Pros: You’ll pay off your loan faster compared to other plans, and pay less interest as a result.

The Cons: Your monthly payments will be higher than those made through other plans.

Graduated Repayment Plan

The Graduated and Extended Repayment plans could be an option for you if your income is low when you graduate but will increase quickly. Under a graduated plan, payments start out low and increase during the repayment period, usually every two years. This is a good plan if you can’t afford your current payments but know you will make more money in the years to come.

The Pros: Your loan is still paid off within 10 years.

The Cons: You’ll pay more interest over the lifetime of your loan compared to the Standard Plan.

Extended Repayment Plan

An Extended Repayment Plan is an option if your loan amount is more than $30,000 and you want to stretch your repayment to 25 years.

The Pros: Smaller monthly payments (since they’re spread out over as many as 25 years) and more time to pay off your loan.

The Cons: You’ll be saddled with payments for a longer period of time as well as pay more interest.

Income-Driven Plans

If you qualify for an Income-Driven plan, these are often the most attractive options if you’re willing to recertify your payment each year (it’s not very difficult). However, some of these are contingent on when you took out loans! If you’re interested in student loan forgiveness*, you’ll need to be enrolled in any one of these plans.

Income Based Repayment Plan

If you’re not making enough money to cover all of your monthly expenses the Income Based Repayment (IBR) Plan would be a good option. There are two separate calculations for IBR which are dependent upon when you took out your student loans.

The Pros: The IBR plan takes into account your annual income as well as your family size. Your payment will be 10% of your discretionary income** if you were a new borrower on or after July 1, 2014. Otherwise it will be 15%. Any outstanding balance on your loan will be forgiven after 20 (for undergraduate loans) or 25 (for graduate loans) years.

The Cons: You will have to pay income taxes on any forgiven debt unless you qualify for PSLF (this is true for all loan forgiveness).

Income Contingent Repayment Plan

If you have a federal Direct Loan (other than a PLUS loan), you could opt for the Income Contingent Repayment (ICR) Plan. Your payments could be as low $5 or even $0.

The Pros: Your monthly payment will be the lesser of 20% of your discretionary income or on a repayment plan with a fixed payment over 12 years. You can have your remaining loan balance forgiven after 25 years of regular payments.

The Cons: You’ll pay more over the lifetime of your loan than you would with a 10-year plan, your payment could be lower than the monthly accrued interest and your loan principal will grow. You will have to pay income taxes on any forgiven debt unless you qualify for PSLF.

Income Sensitive Repayment (ISR) Plan

The Income Sensitive Repayment (ISR) Plan is only available for those with Federal Family Education Loan (FFEL) Program. Payments are based on your annual income, family size, and total loan amount. You would pay the loan off in fifteen years.

The Pros: Each lender has their own calculation, but generally it is between 4% and 25% of your monthly gross income, although your payment must be greater than or equal to the interest that accrues.

The Cons: It’s only available for up to five years. After that time, you must switch to another repayment plan. You must reapply annually, and there’s no guarantee that you’ll have continued enrollment in the plan.

Pay as You Earn Repayment Plan

The Pay as You Earn Repayment (PAYE) Plan is another option for those not able to afford their current monthly payments.

The Pros: The PAYE plan takes into account your annual income as well as your family size. Your payment will be 10% of your discretionary income. Any outstanding balance on your loan will be forgiven after 20 years.

The Cons: PAYE is only eligible to those who were new borrowers on or after October 1, 2007 and must have received a disbursement of a Direct Loan on or after October 1, 2011. You will have to pay income taxes on any forgiven debt unless you qualify for PSLF.

Revised Pay as You Earn Repayment Plan

The Revised Pay as You Earn Repayment (REPAYE) Plan is very similar to PAYE. This plan was created to allow more borrowers the opportunity to have their payments lowered to 10% of discretionary income.

The Pros: Not dependent upon when you took out your student loan, the payment will be 10% of your discretionary income. Any outstanding balance on your loan will be forgiven after 20 (for undergraduate loans) or 25 (for graduate loans) years.

The Cons: If you are married, your spouse’s income will be considered whether taxes are filed jointly or separately. You will have to pay income taxes on any forgiven debt unless you qualify for PSLF.

Summary

Federal student loans offer various ways for repayment. If you are in a situation (like so many others who have taken out student loans) that is not ideal for standard repayment of your loan, consider these options. There is a lot to consider when you are trying to decide which repayment plan to choose. Using the Federal Student Loan Repayment Estimator can help you make your decision by showing you what your payments would be under each of the plans described above.

*A note about loan forgiveness: There are two different kinds of loan forgiveness, Public Service Loan Forgiveness (PSLF) and loan forgiveness from your income-driven repayment plan ending. While both plans require you to be enrolled in an income-driven plan to reap the benefits there are some key differences:
-PSLF requires being employed at a qualifying employer in public service (non-profits, government, etc.) for 10 years/ 120 qualifying payments before forgiveness takes place. Standard forgiveness is after 20 or 25 years depending on your repayment plan.

-Any loan amounts forgiven under PSLF are tax-free, but not under standard forgiveness! So if you still have a balance on your loans after 20 (or 25) years, you will owe taxes on it as if it is income. While it’s still better than paying the amount back, it’s important to know it will have ramifications.

**Discretionary income = Your income – 150% of the poverty level in your state for your family size

Inexpensive Ways to Enjoy the Holidays

8 Dec

Wanting to celebrate and spread some holiday cheer but don’t want to break the bank doing it? Holidays are all about spending time with family and giving back, so there’s really no reason to have to spend a lot! So here is a list of free/inexpensive holiday activities.

Christmas Tree: text overlay An Inexpensive Holiday

Send Cards to Soldiers

Holiday Mail for Soldiers is a program run every year by the Red Cross in an effort to send some holiday cheer to those serving and protecting our country. What a great way to send holiday spirit to someone separated from their family at such a special time of the year! You can do this individually, with your family, or even with a club/organization on campus.

Scout Out the Best Lights

Some people go crazy with their Christmas lights! Pile your friends and family into a car and drive around enjoying the lights and try to find the house with the most dramatic lightshow production.

Help Decorate for the Holidays

Whether you buy a tiny fake tree with your roommates or help your parents pull down the menorah from the attic one weekend, that act of helping set up decorations is a great holiday memory. You don’t have to buy new decorations; you can pull out the old and go over your memories from holidays past or have a crafting session with your roommates to make new decorations and new memories.

Spend Time, Not Money

What if you don’t buy presents this holiday season? What if instead, you do something special with each family member and friends you would normally buy a present for? These can be free or low-cost experiences. Maybe you’re back in town for the holidays and you have a friend who is obsessed with Starbucks seasonal peppermint mochas…why not take her out for one and catch up on your lives for a couple hours? The experience of the holiday season is what matters, not what you buy someone.

Go Caroling

So what if you don’t have the best voice? Any nursing home in town would love to see a bunch of new, young and/or cheery faces caroling down their halls. Get in the spirit! Gather friends, family, your sorority sisters, congregation, etc. It’s an experience you’ll never forget.

BAKE

Baking delicious treats is probably one of the most exciting things about the holidays. You can bake some for your family, friends, neighbors, the mailman, your favorite teachers from grade school,  or anyone really. Everyone enjoys a few good treats in the winter! It’s the perfect time to try out those recipes you saw on Pinterest or someone shared on Facebook.

Renewing Your Trustees or Presidential Scholarship at Purdue

7 Dec

Trustees Presidential Scholarships.jpg

If you’re one of the lucky Purdue students to receive a Trustees or Presidential Scholarship, the thought of what you need to do to keep your scholarship may have come up. While these awards do renew automatically, there are some criteria you should know to keep your eligibility.

For starters, you need to complete at least one full academic year in the program (major) that you were originally admitted to. If you decide that you want to change majors, you will have to wait until after the spring semester of your first year or your scholarship will be lost

In addition, you need to maintain continuous full-time enrollment each semester (excluding the summer) with 12 or more credits or you will lose your eligibility. If you are taking 12 credits and drop a class to go below, this will put your scholarship in jeopardy.

While taking 12 credits keeps you full time, there is another credit completion mark you must hit. You must have completed a total of 30 credits at the end of your first year, 60 by the end of your second year and 90 by the end of your third year. Important to note is that transfer and AP credits both apply to this 30/60/90 goal as well as the courses you take at Purdue. This can give you a bit of a cushion, especially in your first year, to hit your 30/60/90 benchmarks. If you started at Purdue before Fall 2014, the 30/60/90 rule does not apply to you.

Along with maintaining full-time enrollment, you need to maintain a cumulative 3.0 GPA. These grades are checked at the end of each spring semester and if your cumulative GPA is below 3.0 at that time, you will lose it. However, if you have lost it for one year you can regain it at the end of the next spring semester if your cumulative GPA rises above 3.0 again (assuming you meet all the other renewal criteria).

If you made it through your freshman year without transferring and you’re hitting your 30/60/90 goal while keeping your 3.0 cumulative GPA you’re probably well on your way to graduating in four years. Which is good, because the scholarships are good for up to four years (8 semesters) of eligibility. If you take an extra year or semester past that, you won’t have the scholarship to help out.

If you are participating in a Purdue approved co-op or internship that takes you away from Purdue, that semester will not count against your semester usage, credit hour completion totals, or 12+ credit rules. Due to your different pattern of enrollment, you may appeal to use a semester of your award during the summer. Summer appeals should only be used when you will not be on campus a total of eight fall and spring semesters.

Now, if you have been doing your best but fell short of one or more of these requirements, there is the option to appeal if you have extenuating circumstances. Keep in mind that high school was easy and college wasn’t so you got really into Netflix and sleeping instead is not considered an extenuating circumstance.

Looking for renewal information about other Purdue scholarships including the Emerging Leaders, Marquis, Purdue Achievement, Purdue Hispanic, or Purdue Merit Scholarships? Check out this link with details on maintaining those scholarships. You can also find more information on the Trustees and Presidential Scholarships as well as other Freshman Scholarships here.

Becoming Credit-Wise: What Students (and You!) Should Know

5 Dec

Note: The following article was written for Financial Aid administrators, but has information that is useful to anyone looking to learn about credit.

By Jeff Hanson, Director of Borrower Education Services, Access Group Published by the National Association of Student Financial Aid Administrators (NASFAA)

becoming credit wise.jpg
As a financial aid administrator, you know your students need to understand their student loans and manage their spending well. Understanding how credit works is an essential part of that, especially for students who must supplement their federal loans with private, credit-based loans.But do your students— and you—really know enough to be truly “credit-wise”? Students may know the basics, such as having the highest credit score possible will help them get credit at an affordable price. But do they know what it takes to get a high credit score (say 800 or more)? And that most students probably score far below this number? Do they know that their credit score can impact the cost of credit, their ability to obtain other financial products such as auto insurance, or their employability? And what happens when they miss a payment or start accumulating credit card debt—how much can this lower their score? Students should never underestimate the value of good credit. Those who need private education loans, as increasing numbers of students do, will find that their credit history is likely to affect their ability to obtain the needed funds, and can even affect the cost of their loans. The better the student’s credit, the greater the probability that he or she will get the loan, and the lower the cost of that loan. Good credit does count! Building up a good credit history comes from understanding how credit reporting and credit scoring work, and from practicing sound financial habits.

Credit Reports

A credit report is a summary of the information contained in an individual’s credit history, which creditors use to evaluate the likelihood that the individual will repay future loans. A credit history is generated from credit account information and payment records that creditors have reported to authorized credit reporting agencies, so anyone who has at least one credit card, a consumer loan (such as a car loan), student loans, or any other form of personal credit should have a credit history with an authorized credit reporting agency (see the list at the end of the article). In essence, credit reports provide a sense of an individual’s willingness to repay a loan, based on his or her past credit performance. Students can think of their credit report as their “credit transcript.” Whether students think they have credit problems or not, it’s a good practice for them to review their credit reports from each of the three national credit reporting agencies at least once a year to be certain that all reported information is accurate. In fact, the Fair and Accurate Credit Transactions Act of 2003, Pub. L. 108-159, 117 Stat. 1952 (FACT Act) entitles all consumers to obtain a free copy of their credit report upon request from each of the three agencies once every 12 months. More information about obtaining these free reports is available from the Annual Credit Report Request Service at www.annualcreditreport.com or by calling 887-322-8228.

Credit Scores

If the credit report is the credit transcript, the credit score is the “credit GPA,” and just as with grades, the higher the better. The credit score is a numerical value based on credit account information in a person’s credit report that focuses on individual borrower behavior. Unlike the credit history, which consists of raw data, credit scores are measures of future credit risk based on an assessment of that raw data. Credit scoring is a quick, accurate, consistent, and objective method that helps lenders’ quantify how well individuals have managed their credit. The higher the credit score, the greater the statistical likelihood that an individual will repay a future loan on time. Credit scoring was first developed by Fair Isaac Corporation, which created the credit scores used most widely by the credit industry and are often referred to as FICO® scores. Credit scores are calculated using a statistically derived mathematical formula that provides a numeric prediction of credit risk. The formula itself, which is proprietary, was developed by examining the credit reports of millions of people at two points in time (typically 24 months apart).

Factors Affecting Credit Scores

Paying your credit card bills on time each month has the greatest affect on your credit score. However, contrary to popular belief, a flawless payment history is not sufficient for good credit. A number of factors impact your credit score, including:

  • promptness in paying bills;
  • total debt;
  • amount owed on all credit card accounts;
  • age of credit accounts;
  • number of credit card accounts including number of credit inquiries;
  • the proportion of credit card balances to total available credit card limit;
  • number of credit card accounts opened in past 12 months;
  • number of finance accounts; and
  • occurrence of negative factors such as serious delinquency, derogatory public records, past due accounts that have been turned over to collection agencies, bankruptcies, student loan defaults, and foreclosures.

FICO® scores assess all such negative factors in three ways by evaluating:

  • how recently they occurred,
  • their severity, and
  • their frequency.

The more recent the occurrence, the farther the score will drop. The larger the balance affected (severity), the farther the score will drop. And the more frequently such negatives appear on one’s credit history, the farther the score will drop. Two factors that warrant further review are credit inquiries and student loan debt:

Credit Inquiries

Requests for your credit record can also affect your credit score. Only “hard” inquiries made during the past 12 months, however, have a potential negative affect on your score. Hard inquiries are those made by creditors when you apply for a loan or a new credit card. In such cases, you must give permission for your report to be “pulled” (provided to the creditor). All other credit inquiries are “soft” inquiries and are not a factor in scoring. Soft inquiries include:

  • Self inquiries—your requests for a copy of your own credit report or credit score;
  • Promotional inquiries—those made by companies wanting to offer you an opportunity to apply for credit;
  • Administrative inquiries — inquiries made by your current creditors who want to monitor your credit activities, as well as inquiries from the credit-reporting agency that’s maintaining your credit history (this typically occurs when you have disputed an item that’s contained on your credit report); and
  • Inquiries from prospective employers— although they have the right to obtain your credit report with your permission, these inquiries are not for the purpose of obtaining new credit and so do not impact your score.

Student Loan Debt

Student loan debt affects credit scores, but it does not necessarily result in a low credit score unless the borrower has a “thin” credit file. A “thin” file is one that contains three or fewer “trade lines” (credit cards, car loans, etc.). These files are more susceptible to lower scores because they contain less positive information to offset any negative impact of increases in student loan debt. (Note that the majority of Access Group private loan borrowers have more than three trade lines.) As installment debt, student loans typically are viewed more favorably than revolving debt (credit card debt) in credit scoring. However, although increasing installment balances (for example, because of additional student loans) can have a negative impact on credit score, as students advance from year to year in their program of study, payment delinquencies and increasing credit card debt appear to have the greatest negative impact.

Weighing the Factors

The factors affecting credit scores are not equally weighted in the scoring process. As Fair Isaac reports at www.myFICO.com, payment history has more impact—about 35% of the score—than the other factors. Thus, making payments by the due date is very important. Missed payments, one or more delinquent accounts, and serious derogatory items such as student loan defaults, bankruptcy, charge-offs of accounts, etc., can have a significant negative impact on the score. The amount of debt, especially credit card debt, is the next most significant factor, typically accounting for about 30% of the score. Total debt is important, particularly the percentage of revolving credit (credit cards) being used. Utilization is the amount of credit card debt you have as a percentage of your total available credit card limit. The smaller a person’s credit utilization rate, the less likely it is to have a negative affect on the person’s FICO® score. Thus, it is important to keep credit card balances low, since lower is better. But this does not mean credit cards should not be used once in a while. In fact, some minimal use of credit cards can be beneficial to establish a positive payment history. This does not require the accumulation of credit card debt, however. Rather, simply using a credit card occasionally each month for small purchases and paying the credit card bill in full each time will achieve this goal. The other three factors—length of history as measured by the age of your oldest credit account, new credit as measured by the number of new accounts opened and the number of “hard” inquiries made within the past 12 months, and account mix (relative proportion of installment accounts, revolving accounts, finance accounts, etc.) generally have a lesser impact on scoring, but cannot be ignored when managing your credit.

What’s the Score?

Although there are no well-established statistics regarding the average credit scores of college students, 60% of all consumers with established credit histories have FICO® scores above 700 (using a scale of 300 to 850) according to Fair Isaac. Scores above 700 generally are considered to be “good,” and scores above 775 are viewed as “very good” to “excellent” by most lenders. It is possible to estimate what the credit score might be for a typical student. Fair Isaac Corporation and www.Bankrate.com have joined forces to offer an online FICO® Score Estimator, which provides a credit score range, rather than a specific score, at no cost to consumers at www.bankrate.com/finance/credit/what-is-a-fico-score.aspx. Using the basic Fair Isaac methodology, it provides an estimate based on the answers to a brief series of questions about credit use and payment behavior. We used the FICO® Score Estimator to predict likely credit scores for a typical third-year undergraduate, who has both education loans and credit cards, using four scenarios. For the first scenario, this hypothetical student’s credit characteristics are as shown in the table at left.

  1. “No payments missed” scenario. The estimated FICO® credit score range for this individual is 715-765. Lenders would probably consider this person to have a “good” history, and although they might not offer their best interest rate, they are unlikely to deny credit based solely on this credit score. Of course, before extending credit, the lender might also require the borrower to meet a minimum income threshold or provide loan collateral.
  2. “Missed payments” scenario. What happens if the hypothetical student’s credit characteristics change? In this second scenario, suppose the student suddenly becomes delinquent on an account and is 30 days late in making the payment. Assuming this is the only change, the estimated score range drops to 620-670. This would represent an average drop of 90 points, and the borrower’s credit would now be considered only “fair.” The individual would be more likely to have trouble getting some forms of credit, such as a private student loan, on his or her own signature. If credit were granted, it probably would be at a higher interest rate and have other restrictions and/or costs.
  3. Higher credit use scenario. By contrast, suppose the record showed greater utilization of credit cards. Starting from the original “no-payments- missed” scenario, suppose in this third scenario that the amount of credit card debt was at 50% of the available credit limit. The estimated score range drops to 645-695—a “fair” credit rating. This is better than the missed payment scenario, but would still cause an average drop of 70 points in the score from the original scenario. If credit card utilization increases to 90% (credit cards are nearly “maxed out”), the estimated score range drops to 620-670—the same impact as a 30-day delinquency.
  4. Both 30-day delinquency and 90% utilization scenario. If this hypothetical student had both a 30-day delinquency and was at 90% utilization of credit cards, the estimated score range falls to 565-615. This would create serious credit issues for the student and would make it very difficult to obtain most kinds of credit. Thus, two simple missteps— missing a payment and maxing out credit cards—could take our hypothetical student from having good credit to a situation where credit (particularly private education loans) might be very difficult to obtain and much more expensive.

Obtaining Your Credit Score

The easiest way to obtain your FICO® credit score is to go to the Fair Isaac consumer Web site at www.myFICO.com. From this site you can request your FICO® credit scores calculated by the three national credit reporting agencies—Equifax, Experian, and TransUnion—and can purchase your FICO® credit score from one, two, or all three of these agencies.

You will receive an explanation of the score, a copy of the credit report that was used to generate that score, and an explanation of the positive and negative factors that are affecting your score. Be aware that your credit score may vary from agency to agency, because the information on your credit report at each agency may differ. More information about credit scores and the scoring process can be found at www.myFICO.com. In addition, the Federal Trade Commission provides consumer information about credit scoring at www.ftc.gov.

Good Credit Really Counts!

To sum up, to get the credit needed, when it’s needed, at an affordable cost, it is essential to understand credit reporting and credit scoring. But knowledge alone is not enough. Being creditwise also requires practicing good habits. The credit tips listed below provide a framework for practicing those good habits and can help students avoid the types of pitfalls illustrated in the hypothetical credit score scenarios presented here. This will help them avoid the frustrations, anxieties, and fears associated with credit problems.

Tips for Maintaining Good Credit

You can use the following tips to help students develop and maintain a strong credit record; one that should allow them to borrow the funds they will need to fulfill their educational dreams and successfully achieve their other long-term goals. In fact, many of these tips probably are good ideas for everyone, not just for students.

  1. Develop and follow an affordable monthly budget.
    Live below your means while you’re a student; learn to stretch your dollars; be thrifty.
  2. Pay all your bills on time.
    Just one late or missed payment can have a noticeable negative impact on your credit score.
  3. Notify your creditors immediately whenever your address changes.
    Typically you can provide information updates by phone or via the creditor’s Web site. But remember, it’s your responsibility to keep them informed.
  4. Minimize your credit card debt.
    Keep credit card balances as low as possible. Do not exceed 30% of your available credit limit.
  5. Avoid charging more on your credit cards than you can afford to repay in full each month.
    Get in the habit of using cash, not credit cards, whenever possible. Credit card debt that carries over from month to month can be very costly and may lower your credit score.
  6. Record every credit card purchase you charge just as you record every check you write.
    Tracking your charges is important so that you always know exactly how much you must repay.
  7. Limit the number of credit card accounts you maintain.
    You probably don’t need more than three major credit card accounts. Avoid opening new department/retail store charge accounts; they typically can only be used at the store that issued the card and they tend to have the highest interest rates of any credit cards.
  8. Be careful about opening new credit card accounts and closing older ones.
    It’s beneficial to have the longest possible credit history to show that you’ve maintained your credit accounts responsibly over time.
  9. Maintain accurate records of your credit accounts. 
    Keep copies of all documents relating to your credit accounts. These documents should include the application, promissory note, account terms and conditions, disbursement and disclosure statements (if applicable), and lender correspondence.
  10. Obtain a copy of your credit report from each of the three national credit-reporting agencies at least once a year and review it for accuracy.

Promptly notify the reporting agency of any errors; it can take several months to correct those errors.

Credit Resources

Credit Reporting Agencies
For more information on credit reporting or to obtain a copy of your credit report, you can contact a credit reporting agency. The three national credit reporting agencies are:

Annual Credit Report Request Service
This service was established by the three national credit reporting agencies in response to the requirements of the Fair and Accurate Credit Transactions (FACT) Act of 2003, which provides consumers with the right to obtain a free copy of their credit report from each of the three national credit reporting agencies once every 12 months. Visit www.annualcreditreport.com for more information.

Bankrate.com
For information on all aspects of credit and personal finance, visit www.bankrate.com.

Fair Isaac Corporation
For more information on credit scoring or to purchase your credit score and report, visit Fair Isaac’s consumer Web site at www.myfico.com.

Federal Trade Commission (FTC)
For help with credit reporting problems, call 877-382-4357, or visit www.ftc.gov for information and free publications about credit.

Consumer Credit Counseling Service (CCCS)
For help managing your budget or your debt, call 800-388-2227 for the CCCS office nearest you or visit the national Web site at www.nfcc.org.

Note: Contact information for the above resources is provided for information purposes only. This does not constitute an endorsement, by the author, Access Group, or NASFAA, of these entities or the information and services they provide.

Jeffrey E. Hanson is director of borrower education services for Access Group, Inc., in Wilmington, Delaware. Transcript wishes to thank Craig Watts, public affairs manager for Fair Isaac, for his assistance with this article.

Food, Perfect to Give AND Receive

1 Dec

Hannah Stewart, Purdue University Student and Peer Counselor

Yay for the Holidays! There is all the delicious food, holiday cheer, a break from classes, and of course presents! While it’s always awesome getting presents, giving presents can sometimes be a little more challenging; no one said finding the perfect gift was easy! There are always tons of cheap ideas on Pinterest if you want to make something hand-made. Goodwill and the Salvation Army always have really neat things too. On a more personal level though, one staple gift I always give is good food and a good time! We are college kids so money can be super tight. Personally, I never turn down free food. And you can always be sure it’s a gift people will actually use and enjoy.

Are you the most popular person on campus? While it’s wonderful having all of those friends, buying gifts for all of them could put a major strain on your budget. While some people choose to select only a few people to buy gifts for, others may want to be more inclusive. Cookies to the rescue! Cookies are great for several reasons. There are lots of different varieties, but most have the same basic ingredients so making a bunch of different types isn’t too difficult. Plus, you can make very large batches fairly quickly. Personally, I couldn’t shop for 10 people in 2 hours, but I can make enough cookies in that time frame. Depending on the recipe, you can make even more than that! Getting a lot done in a short amount of time is always a great thing.

2 cupcakes on a plate: text overlay  Food: the perfect gift to give...and receive!

Another option: Host a Christmas dinner party. A well-cooked ham or turkey can feed several people. While there is a bit more involved, a delicious entrée is just an oven and a couple hours away! People can get homesick and nothing quite compares to a well home cooked meal, especially after months of cafeteria food. You can also choose to have a potluck so others can get involved!  Plus, left overs are a major added bonus. So not only are you giving a great gift and having a good time with friends, now you have dinner or lunch made for a while.

Are you looking for something a little more personal and one-on-one? There is an old saying that a way to a person’s heart is through their stomach. Perhaps you can make a pie to start a conversation with that cute somebody, or a cake to go with that coffee date. Romantic dinner for two anyone? One of the great things about food is it’s versatile for large groups, or just a special someone.

If you’re still not sold, nothing gives parents the warm fuzzies quite like having a break. Offer to help with that big Christmas dinner, or even cook some dinners for them. There are several crock-pot recipes and dishes you can prepare the night before so that on Christmas morning, after all the gifts have been unwrapped there is a hot delicious breakfast waiting. After all that excitement, who wouldn’t be famished?

Not all of us are fantastic cooks ( guilty, but I can follow a recipe). For people out there who need some guidance, Pinterest, Google, and Food Network are great, free places to get recipes and ideas. So who knows, maybe you’ll even surprise yourself with a hidden gem. It could be a favorite family recipe that is about to be passed on to one more generation. Food is a great gift to give on the holidays. And nothing quite compares to seeing the happiness on another’s face when giving a gift.

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