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Setting FIRE to your Retirement

3 Jul

Although the term may bring back memories of losing your first job or an unfortunate incident as a child learning what “hot” means, FIRE is not just a good thing – it’s a great thing. FIRE stands for “Financially Independent, Retiring Early”.

Retiring early doesn’t just mean ducking out of the workforce at 62, it’s usually your 30s or early 40s.

A recent survey showed that a stunning 83% of those aged 18-34 (the “millennial” age group) said they will never retire in the traditional sense. By contrast, 83% of today’s retirees don’t plan to work in retirement as opposed to 15% of the millennials surveyed.FIRE retirement.jpg

Young grads today are just hoping that they will be able to retire at all, so the idea of retiring early is almost mythical. While achieving FIRE does require careful planning and plenty of things to go your way, it is by no means impossible for the younger portion of today’s workforce.

The idea behind FIRE is that you will no longer need income from work to afford to live.

The issue that many people run into isn’t that they don’t make enough, rather they spend too much. This gets into the very common issue of needs versus wants when it comes to spending. What if those little luxuries you’ve become accustomed to are the barrier between you and retiring young?

A big key to this is eliminating debt. It’s difficult, or even impossible, to save a large percent of your income when you’re paying down a mortgage, student loans and car payments.

We all need a place to live, but what do those extra bedrooms do other than hold stuff that rarely gets used? And yes eating is a must, but you can avoid eating out almost entirely with just a little bit of planning and preparation.

In turn, you start putting this money you were spending elsewhere into accounts that will get a return. Remember, a traditional savings account won’t earn enough interest to keep up with inflation so once it’s up to a comfortable emergency amount it’s time to start putting your money to work.

graph showing the amount needed to be saved compared to how many years to retirement
While putting 45% or more of your income into savings may sound impossible, the trade-off to working 20 less years is incredibly enticing.

So if the idea of working only because you want to sounds like your cup of tea, there’s a whole community out there of people who have attempted FIRE and succeeded.

 

Who Owns Your Student Loans?

6 Jun

Carrie L. Johnson, Ph.D. | North Dakota State University

When leaving college, whether you are graduating or taking some time off, it is important to know how much you owe in student loans and who you will be paying back. You may have kept track over the years, or maybe you didn’t. There are two types of student loans: federal and private. This fact sheet will show you how to determine the amount of student loans you owe and who you need to pay.

Federal Student Loans

The National Student Loan Data System (NSLDS) website is the best place to start when looking for history on your federal student loans (Direct Loans and Perkins Loans). To access your student loan information, you need your FSA ID to log in.

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The main page is broken down into four sections:

  1. Summary information for borrower; this includes your enrollment status and the date that status became effective.

  2. The next section will have any “warnings” that may be on your account such as nearing your aggregate borrowing limit or if you are in default on your loans.

  3. The Loans section lists every federal loan you have ever had and totals for your federal loans.

  4. Section 4 shows your Pell Grants.

To identify your loan holders and repayment amounts, focus on the third section shown below.
nslds4

By clicking on the blue button with the number in the first column you can see even more details about your loan. You will be shown the type of loan, what school you were attending when the loan was obtained, various important dates, amounts, disbursements and statuses, and your servicer information. The servicer is who you contact about repayment.

There are currently ten servicers the Department of Education uses for Direct Loans; you can find a list here. The servicer on a Perkins Loan is typically the school that extended the loan. However, some schools do have outside servicers or assign your loan to Department of Education. The example below shows what the servicer section on NSLDS looks like.

nslds3

Private Student Loans

The best way to determine information about the status of private student loans is to obtain a copy of your credit report. The credit report will include will total amount owed and the name of your lender. A free copy of your credit report can be requested by mail, telephone, or online every 12 months from each of the three credit reporting agencies (Equifax, Experian, and TransUnion).

By going to AnnualCreditReport.com you can get access to information about your credit history, including student loan payments. You will need your personal information to log on and you will also be asked a series of security questions based on your report. You can also request your credit report by calling 1-877-322-8228 or by mail using this form.

Resources

AnnualCreditReport.com 

National Student Loan Database System

Saving for College

 

The Impact of the Potential Cut to Subsidized Student Loans

24 May

Casey Doten, Financial Aid Administrator – Purdue University

The newest federal budget proposal has proposed reductions to several federal student aid programs including cuts to Pell Grants, Work Study, and ending the Perkins loan program, Federal Supplemental Education Opportunity Grant (FSEOG), Public Service Loan Forgiveness, and subsidized federal loans to students. This budget proposal in its current state would have a direct financial impact upon any student with financial need, not just those in the lowest income brackets.
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Ending subsidized federal loans would likely have the widest impact of the proposed cuts as there are currently over 29 million borrowers of these loans.

Subsidized loans are one of the most common forms of financial aid available to students who demonstrate financial need. They differ from unsubsidized federal loans because interest does not accrue on them while the student is still in school. If a student takes out a $3,500 subsidized loan their freshman year, it will still be $3,500 when they leave school while an unsubsidized loan would have accrued an extra $612 of interest in that time.

The difference becomes more stark when you compare subsidized versus unsubsidized over four years. A student taking out the maximum in federal loans each year for four years would borrow $27,000, of which $19,000 is subsidized. That student would have $27,785 of debt when leaving college versus a student who only had unsubsidized loan (which is what the budget proposal would lead to) would owe $29,353 when entering their grace period on the exact same amount borrowed, with the exact same interest rate.

Once a student begins repayment, all of that accrued interest gets added on to their loan balance and further gathers interest. For a student using the most aggressive payment plan, they will pay $2,081 more over the life of the loan because their loans were not subsidized.

Keep in mind these figures use interest rates from the past several years. Since student loan interest rates are keyed off treasury bonds rates, if the economy were to increase at the rate projected in the budget then student loan interest rates raise even higher as treasury bonds interest increases. This would further exacerbate the difference between subsidized and unsubsidized loans.

While graduating in four years is considered the norm, only 36% of students pursuing bachelor’s degrees do so. If a student takes even one more year to get their degree, the time for their interest to accrue becomes even greater. Loans for these students who can receive subsidized loans totals $32,341 on graduation, while unsubsidized-only adds up to $35,305. These two groups have a $3,513 difference in the life of the loan.

All told, subsidized loans would collectively save the 29.5 million current borrowers $45.5 billion assuming they all graduated in four years. That number only grows higher when realizing that many students take more than four years to graduate.

Which Student Loan Repayment Plan is Right For You?

12 May

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

Congratulations on your graduation! It’s an exciting time as you move into new jobs and new places! However, something from your past will be coming back soon – your student loans. Six months after leaving school most student loans are due for repayment. By default you are put into the the Standard Repayment Plan (which is also the most aggressive repayment option), but you have more options! Choose which Federal Loan repayment plan is the best one for your life.

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 what is forgiven 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

Dear Class of 2017, About Your Loans

10 May

From WiseBread New Graduate Help Center: Reyna Gobel, Student Loans Expert

girl surprised by letter

 

Dear Not-Yet-In-Trouble Federal Student Loan Borrower,

You might have heard that the Department of Education will be sending out letters to millions of student loans borrowers. The letters target borrowers whose grace periods are ending, as well as borrowers who exhibit signs of trouble that could lead to defaulting on their loans. If you haven’t started repayment yet but are fretting about how you’re going to possibly repay all that money — stop worrying.

I’m writing you this letter to not only give you important details about student loan repayment, but also to help you be aware of potential issues well before trouble starts.

I Defaulted — Here’s How to Avoid My Mistakes

I defaulted on a federal student loan simply because I didn’t know it existed. I had over a dozen student loans from different lenders; I forgot about one loan and went into default. It’s easy to do, but it’s also easy to avoid. Just log in to the National Student Loan Data System. You’ll see all your federal student loans on this site, along with contact information. Either arrange to pay each individually, or consolidate them into one loan. This is also a great time to get a free credit report – it can alert you to any problems you might have, like having missed a loan or bill payment.

Then, know yourself. If you can’t keep track of each individual loan, you really need to consolidate them into one loan to streamline payments (ask your loan servicer about consolidation options). Once consolidated, you can still choose a plan where payments are based on income, such as Pay as You Earn. And if you’re interested in the public service loan forgiveness program, know that it’s only available through loans originated by or consolidated with Federal Direct Loans.

Realize That Even With the Pay as You Earn Plan, You Might Have Payment Problems

The income-based Pay as You Earn repayment plan bases payments on your income and family size, but it doesn’t fully consider your expenses if your circumstances change. For example, at some point, you may have to help support a sick parent or child. You could also have bought a home when your income was higher. After a pay cut, a majority of your income could go towards your mortgage.

If you experience a financial setback, you have three options:

  • Call your servicer and see if your Pay as You Earn payment amount can be adjusted. You have to supply your income annually, and you may have forgotten to do so this year, causing your payments to set based a higher income level.
  • Ask for a deferment or forbearance, which are temporary payment breaks. Taking a break should only be done if the situation isn’t permanent. Always take a deferment when possible over a forbearance when any of your student loans are subsidized. The government pays the interest on subsidized student loans during periods of deferment.
  • If your income is lower because you took family leave for six months, you may not want to change your plan. However, for long-term pay cuts where your income-based repayment is too high for your budget, you should ask your servicer to also calculate payment options and see which payment option offers the lowest monthly payment.

Don’t Feel Embarrassed If You Don’t Know Something About Student Loans

I wrote two editions of a 240-page book on student loans, and I still don’t know everything about them. I read articles and play with the student loan repayment calculators every day. There’s always something new to learn. For instance, the public service loan forgiveness employer verification form wasn’t created until after the first edition was released. Now, thanks to that form, you can find out if you qualify for the public service loan forgiveness program right away and register for it right after you start working or after you’ve already started repayment — the choice is up to you. Never be afraid to ask your servicer questions about any of these programs.

Talk to Your Friends Who Are or Will Be in Repayment Soon

I’m not the only person who has experience with and advice about student loans. Talking to your friends can help you figure out repayment options and possibly pick better ones based on their choices and experiences. Just remember, they might have different circumstances than you, such as income level, children, or other debt that impacted their choices. Therefore, you shouldn’t copy their decisions. But you’ll be more informed and learn questions to ask your servicer. Plus, they may have missed payments, recovered, and now have advice about that. Learn from others’ student loan mistakes and victories.

The Most Important Part of This Letter?

The help you get doesn’t end here. You can tweet me anytime — @ReynaGobel— and ask questions. My articles will be posted here every week. You can ask me questions in my CollegeWeekLive web chats or get more helpful advice in my book CliffsNotes Graduation Debt.

Finally, remember you never want to receive a “dear troubled borrower” letter. The second you think you might miss a payment, talk to your loan servicer about options for a payment break or new repayment plan. With federal student loans, that one call will likely save your credit.

Reyna Gobel is a writer, author, public speaker, and student loans expert.  Her financial advice appears on Wise Bread’s New Graduates Help Center, in her video course How to Repay Federal Student Loans, in CollegeWeekLive newsletters and keynotes speeches, and in her audiobook How Smart Students Pay for School, now in its second edition. Be sure to check out her website for more helpful information on repaying your student loans.

So You’ve Graduated College: Now What?

3 May

Congratulations! You did it!

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As you’re taking your last finals, you can finally relax for a day before you start worrying about what comes next. You may have your future planned out perfectly, or maybe you were so focused on finishing you have no idea what comes next. Either way, that’s okay!

Searching for Jobs

The number one thing on most people’s mind post-college is the job search. The most common question during the job search: Which Jobs Should I Be Applying For? Between those tips and our Job Searching Pinterest board you should be good to go for all of your resume, cover letter and interviewing needs!

Where you live may be determined by your job search, or it might be the other way around! If you’re not sure where you’ll be laying your head, we help you weigh your options.

Student Loan Repayment & Forgiveness

Six months after graduation, your student loan repayment will come knocking. Even if you paid attention during your exit counseling, it’s likely you’ll run into questions you aren’t sure how to answer. Our first recommendation is not to panic, you’ll be okay!

You may be curious as to what your options are for student loan repayment and what might be best for you, but some inspiration from someone who is going through repayment might help your confidence.

If repayment starts to get away from you then you might have to deal with a default, which isn’t ideal but it’s not the end of the world.

If you became a teacher, you’ll probably want to check out the 4 loan forgiveness programs for teachers.

Grad School

Maybe instead of going into the working world, you’ve decided on grad school? Other than knowing your loans are going to stay in deferment (but gathering interest if not subsidized), you’ll want to stay on track of the graduate school application checklist.

Taxes & Credit

Nothing will make you feel more adult than having to pay taxes. But luckily your time in school has some tax advantages. Your school should provide a 1098-T form to use as an educational credit on your taxes for tuition you’ve paid, but once you start paying down interest on student loans you’ll also be able to use a 1098-E form!

Last, but not least, in the adult realm is credit! Luckily your student loan payments can help you build your credit. Understanding your credit score is going to be very important if you look into car loans or a mortgage for a house!

All in all, being in the adult world is pretty nice. You don’t have to worry about tests and homework, it’s a lot easier to find a nice life routine, and it’s a lot easier to have quality time with pets (or other humans). So use these resources well and make your transition into post-college as easy as possible!

Job Searching: Which Jobs to Apply For?

5 Apr

Searching for your first job out of college can be a daunting task. While it may seem like graduation is forever away, it’s actually right around the corner. Not only do you have to learn how to apply for your first real job, you have to figure out which jobs you even want to apply for. Between tweaking your resume and creating cover letters, you’ll quickly realize you can’t apply for every opening. With your limited time, you have to choose which jobs to apply for and what jobs end up being passed over. So here are five tips on figuring out which jobs you should be applying for.first job search post college advice.jpg

#1. Pick your priority

Figure out what your priority is when job searching. Many people won’t even consider job searching outside of the area in which they live, while others are looking for an escape. There are a lot of factors that go into figuring out which job you’ll want, and if you know what your #1 priority is, deciding whether or not to apply for a job makes it that much easier. Here are some different factors to help you find your priority:

  • Location – Many people are tied to one area due to family or their significant others. To them, relocating isn’t an option. Others would like nothing more than a change of scenery; therefore, relocating isn’t a problem.
  • Pay/ Salary – We all need money, but for some people the desire for high pay trumps all other potential priorities.
  • Opportunity for Advancement – Especially if it’s your first job, potential advancement opportunities can make a big difference, as you don’t have to switch employers for upward mobility.
  • Specific Job Field – This may seem like a given for your search, but if you found a job outside of your field that meet all your other requirements, would the field matter?
  • Benefits Package – Typically not the #1 priority, but flexibility, vacation time, healthcare, dental, daycare, or even student loan repayment vary greatly from one employer to the next.
  • Making a Difference – Not all jobs pay well monetarily, but instead rely more on the feeling of making a positive difference in the world.
  • Employer Size – Working at a major company has a lot of exciting benefits to some people. Or maybe you’d feel more comfortable in a smaller, more intimate type of setting?
  • Job Security – Getting that first job is no good if you are laid off right away. If this is your priority, you may be willing to compromise for a job with decent security.

#2 Remember, it’s your first job, not your dream job

If your first job happens to end up being your dream job, congratulations! For the rest of us who make an average of seven career changes in our working lives, the key to a successful first job is using it as a launching pad. Look for jobs that have advancement opportunities or marketable skills to help you propel yourself throughout your career.

You don’t want to end up in a job you hate, but it’s important to remember that this job can be a valuable experience to help land you your dream job down the road. This is especially true if you are leaving college without a lot of experience in your field.

Keep in mind that the salary will be entry-level, as well. Don’t be surprised if you’re not offered the median salary in your industry since you don’t have much, if any, field experience. If you do well, you can earn your advancement in pay or position by moving up within the company or with another employer.

#3 Know yourself

Before you accept a job, be sure that it’s a job you want and not one that parents, counselors, or friends want for you. Hopefully you have had enough life experience to know not only what your priorities are, but what equates to a deal-breaker for you. Does a typical 9-5 sound ideal or does working varied hours sound more appealing? Do you prefer to travel for work or would you prefer to be in the same location every day? Be sure it’s what you actually want or you could be back to job searching again before you know it. This job needs to fit your current lifestyle, not only the “what-if” scenarios you’ve considered for your future.

#4 It takes time (and it might be your job for a while)

Unemployment is not much fun after the first couple weeks, as concerns about being able to pay your bills—and eventually student loans—become reality. It takes time to fill out applications and tweak your resume for each job. Remember that until you find your full-time job, your job is to job search. It is exhausting applying for various jobs for eight hours a day, but it’s better than not being able to make your ends meet.

#5 Utilize your network

If you’re still in school, you’re going to want to take advantage of all those free lunches and other events put on to meet your professors and other staff. Not only do these people have connections outside of your college, they can also be great resources for the future. Talk to them and find out how they got their foot in the door! Don’t be shy about asking for an informational interview from these people. Many have a vested interest in seeing you succeed and will go out of their way to help you. Just be sure to make a good impression while you still can!

America Saves Week: Pay Off High Interest Debt

3 Mar

In 2012, 71 percent of students who graduated 4-year colleges took out student loans. Debt isn’t fun, but education is one of the better reasons to take on debt. While you may not enjoy paying back student loans there are some steps you can take to save yourself some money and make your payments hurt a little bit less.

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  1. Prioritize high-interest debt: While Federal Direct student loans are capped at 6.8%, private loans are not. Even worse interest rates? Credit cards. If you have credit card debt, prioritize paying it off before your student loans. 6.8% interest is no fun, but credit card interest rates 20% and higher can be crippling.
  2. Income based repayment: If you qualify for an income-based repayment (IBR) plan, do yourself a favor and apply for one. Generally if your debt is higher than your income you will probably qualify. Even if you are able to make your payments without much issue, an IBR can still save you money. How you may ask? If you keep paying the same amount you did before, you can target your payments toward either your highest interest or smallest loans depending on which repayment style fits you. Not to mention, if you are one of the approximately 50% of people who work in public service, you can qualify for loan forgiveness after 10 years.

Pick your payoff: There are two main methods for paying off debt when you have multiple balances to pay. The snowball and the avalanche method.

The snowball method entails taking the extra money you have and paying off your smallest debts first while paying the minimum on the rest. Then once that is taken care of, you roll that payment into the next smallest and knock off your obligations one-by-one. This is best for those who like the reward of seeing their different loans disappear the quickest and can help you stay on track easier.

The avalanche method is similar to the snowball where you make minimum payments on all loans but one. The difference is that you target the highest interest rates first. While you may not experience the visual rewards of seeing the small debts disappear quicker, you will save the most amount of money in the long run this way.

One way to not repay is by spreading out the extra you pay to all debts and pay a little bit additional on everything each month. This provides neither of the advantages that the avalanche and snowball method have while still costing you the same amount. You get less savings than the avalanche, and less of the reward that the snowball offers.

America Saves Week: Student Savings at Tax Time

2 Mar

As you’re filling out your taxes, there are a couple of tax deductions that being a college student may have made you eligible for. If you have received either a form 1098-E from a student loan lender or a form 1098-T from your school, be sure to have these on hand when you complete your taxes before April 15th (or hopefully sooner).asw-taxes-txt

1098-E: Given to you by your educational loan borrower, this Student Loan Interest Statement shows how much interest you paid on your student loans in the prior year. If you have been making student loan payments and paid over $600 in interest, you can expect to receive a 1098-E. You will receive one from each different borrower that you have educational loans through allowing you to deduct up to $2,500!

1098-T: This form is a tuition statement supplied by your university for your taxes. It will show qualified tuition and related expenses, scholarships and grants you have received, whether you have been enrolled at least half time, and if you are a graduate student or not. Entering this information into your taxes can allow you to claim the American Opportunity Credit or the Lifetime Learning Credit. You may not receive a 1098-T if all of your tuition and expenses were paid for via scholarships. To find your Purdue 1098-T, log into your myPurdue account! Full instructions are available here.

Once you file your taxes, be sure to file your FAFSA before March 1st for the Purdue priority filing deadline!

America Saves Week: Thinking About Retirement in College

1 Mar

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If you’re in college your retirement might seem like a long way off. And it probably is, assuming you aren’t one of the very few people who become a wildly successful professional athlete and strike it rich early.

Unless you are currently swimming in cash as a college student and free of taking out educational loans, it probably isn’t realistic to be saving for retirement until you get your first post-college job. While now may not be the time to start investing into your retirement, here are three tips to remember as you’re setting up your career, and the rest of your life.

asw-retirement-txtMinimize Debt:Saving for retirement is a lot harder if you’re paying several hundred per month against debt. So think twice (or three times) before accepting the full amount for educational loans that are offered to you and ask yourself if you really need all of it. Once you start working, make a plan to pay down your debt as soon as possible.

An increasingly popular choice for graduates today is to head back to the parents’ nest for a year or two to save money for life on your own. Keep in mind that living with your parents only helps if you use it as a springboard to save, not as an opportunity to free up more spending money.

Career and Employer Choices: When you’re looking into employers and eventually weighing (hopefully) several employment offers, consider more factors than just the dollar signs on the salary. Once you’re off your parents’ healthcare plan on, or before, your 26th birthday you’ll need your own plan, which can be costly if your employer doesn’t offer one.

Additional non-salary factors to consider are moving expenses, cost of living, vacation, and retirement options. Retirement plans where your employer matches your contribution guarantees you a 100% return on investment, not an easy feat investing your money elsewhere. Also keep in mind if you are part of the nearly 50% of Americans who think that Social Security payments will be important in your retirement that they currently average about $14,000 per year.

Start Saving Early: Within your first month of getting paid you might find yourself wondering how anyone can spend this much money, and then within a few weeks wonder where it all went.

A great strategy to start saving early on is to have money automatically deposited into a savings account. It is much easier to adjust to having less right from the start than to save what you have left.

To emphasize the importance of saving consider this scenario of two employees at the same company.

Alice is 25 and starts contributing $100 every month ($1,200 per year) toward retirement. Alice plans to retire at 65 so she has 40 years to save. Sheila also contributes $100 every month, but she waits until she is 30 because life was just too hectic to start saving earlier. What’s the difference in retirement savings at 65? Alice will have saved $310,000 compared to Sheila’s $206,000 – or a difference in over $100,000. Why does this happen? The miracle of compound interest that you once learned about in math class.

Five years is the difference between surviving and thriving in retirement. Your youth is an investing advantage you will never get back.

Remember that it is important to save up for both retirement AND a regular savings. The savings account is there for you when you need money for big purchases, to handle emergencies, etc. without having to use credit cards and lose money on the interest.

It is important to avoid a mindset of “I’ll start saving when…” It will never be a better time to start. So take the America Saves Week Pledge and start today.

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