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.

Financial Aid February: Choosing a Loan Repayment Plan

28 Feb

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

America Saves Week: Make Your Savings Automatic

27 Feb

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Saving money can be hard to do after taking care of bills, groceries, and general living expenses. This is even harder when your idea of saving money is by counting what’s left over in your checking account after paying those monthly expenses. It’s likely you will probably just spend what’s left on a treat for yourself the next month.

ASW Automatic Savings txt.jpgWhile this saving method might work for the rare individual, for most of us we really don’t think about our spending as long as our account stays above a certain number we’ve arbitrarily designated.

The easiest way to create savings and counter our instinct to spend without worry? Save your money automatically.

Saving your money automatically, or as some call it “Pay Yourself First”, is a way to siphon off part of your paycheck every time you’re paid and put it into a savings account before you do anything else. The concept is simple and doing it is quite simple too depending on if you are paid via direct deposit or paycheck. Note: Both of these methods require opening a second bank account if you don’t already have one!

  • Direct Deposit: Let whoever is in charge of your payroll know you want to add an account for direct deposit. You will need your savings account’s routing number and account number to do this.
  • Paycheck: When you go to deposit your check, you will have to let the bank teller know you would like to deposit some into your savings and the rest into checking. It may not be “saving automatically” this way, but it’ll work better than the old method.

Now that you have started saving you’ll soon join the less-than-50% of Americans who can survive for more than one month off their savings. The key to this is not only putting money into savings, but not pulling it out right away. A savings account does no good if you can use an app on your phone and be 3 clicks away from having it right back in your checking account.

Don’t make it easy to steal from your savings!

If your savings are just a few clicks on an app from being transferred and spent, consider either making it more difficult to access or making yourself wait three days between any plan to withdraw and actually doing it. This should help limit knee-jerk reactions to withdraw and give you time to properly plan how to use your funds.

While saving money isn’t the most intrinsically rewarding thing you can do, you’ll be glad one day that you put away a small portion of your pay rather than making a couple of extra fast food runs a week.

Financial Aid February: Answering your Work Study Questions

23 Feb

Work study is a unique form of financial aid that doesn’t act like other the other types of aid that might see on your Financial Aid Award Notice. Questions about work study are one of the most common ones that students contact the Financial Aid office about, so we took some of the most common work study questions and provided answers right here!

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So what is work study?

Federal Work Study is a federally funded form of self-help aid that allows students to earn money for school by working part-time jobs.

How is work study different than other aid?

While your grants, scholarships, and loans will credit your account balance and pay your bill, work study will not. You have to earn your work study funds during the school year by working in a job that can utilize your work study funds (on-campus & off-campus non profits typically). It is paid to you via bi-weekly paychecks similar to most other jobs.

What are the advantages of work study?

Having work study provides some notable positives for students who utilize it. The biggest is that it opens up a large pool of employers who would not otherwise be able to hire you. These are mostly on-campus departments who typically have the most flexible hours and are near where students live. The other positive is that the funds you earn through work study do not count as income when you file your FAFSA, which can help keep your expected family contribution (EFC) low.

How do I use my work study?

You will need to find a job that can utilize work study. These can either be on-campus or off-campus at non-profits that have work study agreements with Purdue. You then need to provide your employer with a Payroll Authorization Form (PAF). You can print one from your myPurdue portal, but only one. If you have more than one work study job or need another one for some reason you’ll need to stop by the Financial Aid office in Schleman Hall to have another printed for you.

How do I find work study jobs?

Both the Division of Financial Aid and Student Life host job posting boards for Purdue students. You can use these boards to find jobs on and around campus. Keep in mind that not all off-campus employers can use your work study funds. You can still work off-campus, but the money you earn won’t be from your work study fund.

Can anybody get work study?

No, Federal Work Study is for students who demonstrate a high level of financial need as determined by the results from the FAFSA. If you did not receive work study and would like it, you can contact the Division of Financial Aid and ask to be put on a wait list.

How do I receive my work study funds?

Even though work study is a form of financial aid, you have to earn it by working. After finding a job and working there, you will be paid bi-weekly depending on how many hours you work and what your wage is.

Do all work study jobs pay the same?

No, the hourly wage can be very different from one job to the next depending on the level of skill required and many other factors. It is worth searching available jobs to find one that pays well while also being a good fit in terms of duties, flexibility and location.

Do I need work study to find a job?

No, but work study makes it much easier to find a job around campus. Many academic departments and off-campus employers will only hire work study eligible students. Having work study opens up a pool of employers who might not be available otherwise.

What if I don’t plan on working right away?

You should still accept your work study if you think you might want it. Students who do not accept their work study risk having it cancelled so that it can be distributed to students who requested to be on the work study wait list.

Can I use work study to pay my tuition?

Sort of. Your tuition bill for the semester is due on the first day of class, you cannot start utilizing your work study funds until the semester starts. This means you won’t get paid until after the tuition bill is due. Work study is typically a good way to give students money for pay as you go expenses like rent, food, or other miscellaneous costs but it isn’t great at paying tuition. The best way to apply your work study earnings toward tuition is if you save it in your own account and use it to pay the next semester’s tuition.

What if I run out of work study?

Depending on your situation, you may have a couple of options. You may be able to talk with your supervisor and see if your employer can pay you from their normal funds. If not, you can contact the Financial Aid office and see what options you might have including adjusting your budget.

Have questions that didn’t get answered? Be sure to comment and we’ll let you know the answer!

 

Video

The Real Truth About Financial Aid-Adam Ruins College

21 Feb


Reminder, Purdue’s priority deadline to file the FAFSA is March 1st! To receive maximum consideration for financial aid, you need to file before the deadline. Not sure where to start? Check out our Financial Aid February blogs for information on everything financial aid from start to finish.

Financial Aid February: Aid for the Summer

17 Feb

Taking summer courses is a great way to get ahead on credits and graduate earlier. Not to mention utilizing your rent to the fullest if you have a 12 month lease. However, summer aid is not automatically created for your account when you file the FAFSA. With a few extra steps you can get summer financial aid lined up and have you ready for summer!

How to Apply for Summer Aid for Summer 2017:

Complete the 2016-17 Free Application for Federal Student Aid (FAFSA) no later than June 30, 2017 and satisfy all additional financial aid requirements listed on your myPurdue account. Note: although you can file the FAFSA as late as June 30, you should file it much earlier in order to have your aid ready for the summer term.

Complete the 2017 Summer Aid Application under the Financial Tab of your myPurdue account. Once your application has been successfully submitted, it could take two to three weeks to receive a Financial Aid award. Please monitor myPurdue for updates. Initial summer financial aid notifications will begin approximately March 6th.Financial aid february think summer.jpg

Quick Info:

Eligibility for your Federal Loans is on an annual basis, with the summer term being part of the aid year for the semesters before it. If you used all of your federal loan eligibility up, you will need to utilize other sources of aid for your summer bill.

If you drop hours or do not initiate course participation at any time during the summer sessions, your aid may be adjusted and you may receive a bill.

If this will be your first time taking summer courses, check out the ThinkSummer scholarships!

You can also check out the Bursar’s Office site for current tuition and fee rates. Did you know that, in the summer, you pay the same amount for 6-9 credit hours?

Be sure to notify the Division of Financial Aid if you decide to cancel your summer aid application.

Choose the location you plan to attend for summer 2017 to obtain additional information about how to apply and aid eligibility.

Want more info about summer courses, internships, housing and more? Check out Think Summer.

Financial Aid February: Securing Your Aid

16 Feb

As the semester approaches, you will need to finalize your financial aid to guarantee your Purdue bill gets paid on time. If you haven’t already, you’ll need to go into your myPurdue account and accept your financial aid.

What are my responsibilities to keep my financial aid?

Double-check that all requirements are complete.

Check for any red flags on your myPurdue account and check that all expected aid is crediting to your Purdue invoice.

Confirm your enrollment.

On your myPurdue account, under the “Financial” tab, click on “Confirm your enrollment for the coming semester.”

You need to do this before each semester. By confirming your enrollment and accepting fees you are acknowledging your financial obligation to pay — by the due date — any tuition, fees, and housing charges assessed and billed to your student account.

Check the following if you are unable to confirm your enrollment:

  • Are there holds on your account?
  • Did you apply for and accept financial aid?
  • Are you enrolled in enough credit hours? E.g. You are enrolled in 9 hours, but your financial aid is set up for 12 or more.
  • Do you have outstanding Financial Aid requirements on myPurdue?

Keep up on requirements for merit scholarships.

The Trustees and Presidential scholarships do renew automatically, but have criteria required in order to do so:

  • Continuous full-time enrollment (12+ credits each fall and spring semester)
  • Having at least 30 credits completed at the end of each year (30 for freshmen, 60 for sophomores, 90 for juniors), transferred credits count toward this amount
  • Maintain a 3.0+ GPA

Direct where to send your refund.

You can sign up to have a Direct Deposit for your financial aid refund via myPurdue. Otherwise, refund paper checks will go to your local address listed on your myPurdue account. Parent PLUS refunds can be sent to you or your parent, depending on what is indicated on the Parent PLUS Loan application.

Expect to receive your refund no earlier than one week before the first day of each semester. Plan your textbook purchases and rent payments/deposits accordingly.

Waiting on your refund? Check out some factors that may be delaying its arrival.

Sign up for the Bursar installment plan or make one payment up-front.

If there is a remaining balance on your Purdue invoice that you plan on paying out-of-pocket, you will need to sign up for an installment plan or make a full payment before the first day of the semester.

We have some suggestions if you need assistance covering remaining costs.

Financial Aid February: How to Accept Your Aid

13 Feb

After reviewing your award notice, all that’s left to do is to accept or reject your offers for the award year. The majority of grants — free money that does not need to be paid back — are automatically accepted on your behalf. However any loans offered will require your decision, and at this point you will need to report any private scholarships you received.

While no official deadline for accepting aid exists, keep in mind that financial aid will not credit to your Purdue invoice until aid is accepted. The Division of Financial Aid recommends you accept aid no less than four weeks before the start of the semester. Each type of aid has unique requirements for acceptance.

 

Federal Loans, Purdue Loans, and Work-Study

  1. Accept the offered aid on myPurdue under the “Financial” tab > “Award for Aid Year” > “Accept Award Offer.”
  2. Follow the directions based on type of aid below.

Subsidized/Unsubsidized Stafford Loans

You will need to complete a Master Promissory Note (MPN) and Loan Entrance Counseling at www.StudentLoans.gov. Sign into the website with the student information and click “Complete MPN” or “Complete Counseling.”

Purdue Loans

Complete a promissory note at ECSI — a third-party servicer Purdue uses for this loan. This is done each year you borrow a Purdue loan.

Federal Work-Study

  • Find a Work-Study job by searching through job postings for student life or other on-campus departments and contacting listed employers for the application process.
  • Once you have secured a Work-Study job, visit the Financial Aid office on campus for a Payroll Authorization Form (PAF). Give this form to your employer when you begin your job. Remember you can only work during the semesters you are enrolled and can pick up the PAF no earlier than the first day of the semester.

Parent PLUS Loans

  1. One parent needs to submit a Parent PLUS Loan application at www.StudentLoans.gov. Sign into the website with the parent information and click “Request PLUS Loan.”
  2. Once credit approved, the same parent, if a first-time Parent PLUS borrower, will complete a Master Promissory Note (MPN) at www.StudentLoans.gov. Sign into the website with the same parent information and click “Complete MPN.”
  3. If credit denied, the parent has several options: replace the Parent PLUS loan with $4,000-$5,000 Unsubsidized Stafford Loan and/or private loan up to the remaining cost, reapply for the Parent PLUS Loan with a co-signer, or reapply with a different parent borrower.

Graduate PLUS Loans

You will need to complete a PLUS Loan application at www.StudentLoans.gov. Sign into the website with the student information and click “Request PLUS Loan.”

Once credit approved, the student, if a first-time Grad PLUS borrower, will complete a Master Promissory Note (MPN) at www.StudentLoans.gov. Sign into the website with the student information and click “Complete MPN.”

Private Loans

  • Research your private loan options. Review our private loan information and search online for lenders. Complete a loan application with your lender. Most lenders have applications available on their website.
  • Once credit approved, contact your lender for the next steps necessary.
  • Your lender will contact the Division of Financial Aid for certification of your loan. Once certified, the loan will appear in your financial aid package on your myPurdue account.

Note that the private loan application process typically takes at least 30 days. Apply as early as you can so that funds arrive in time for the bill due date.

Private Scholarships

Report your private scholarship to the DFA on your myPurdue:

  1. Log in to your myPurdue account.
  2. Under the “Financial” tab > “Award for Aid Year” select current aid year from the drop down box.
  3. Select the “Resources/Additional Information” tab and report your private scholarships.
  4. Don’t forget to give your donor the Bursar address to send a paper check.

My Student Loan Journey Pt. 2: Climbing the Mountain of Debt

10 Feb

Casey Doten, Financial Aid Administrator – Purdue University

I knew going into college that I’d have to take out student loans to help finance my degree. While getting myself $48,600 into student loan debt was less than ideal for me, I was able to earn my degree. However thanks to the miracle of interest, my student loan debt had increased from the $48,600 that I had borrowed to $54,800 by the time that I began repayment.

The scary part? That $54,000 could have been even higher. Thankfully I had a couple of things going in my favor that helped to prevent that. A good portion of my federal loans are subsidized and did not accrue interest during school. I also had a loan which required me to make quarterly payments to help keep the interest from adding up (unfortunately these payments always hit me at the worst times in college). Had I not had either of those two factors, my loan debt would have been $59,900 when I finally started repayment.

So how have I gone about tackling this $54,800 debt? Being honest, it hasn’t been perfectly approached at all times but after a few initial mistakes I’ve come up with a plan and am paying it off as quickly as I can.

my student loan journey 2.jpgMaking mistakes early on

During my grace period of six months between graduation and my first payments becoming due, I had saved up a little money working two part-time jobs, but I never put anything toward my loans. As my grace period ended, I was able to get a full-time job along with working ten or so hours a week on the side.

So in November my repayment officially began. I had always heard people say “If you can afford to pay a little extra on your student loans, you should do it”. Getting rid of my student loans was a priority for me, so even though I wasn’t exactly swimming in money I paid extra on my loans. If my payment was $115 for a loan, I’d pay $150. The problem is that my approach of paying a little extra on every loan per month was one of the least efficient ways possible.

Pay more on loans with higher interest rates

What I should have been doing was approaching my repayment with a real plan rather than just tossing a few extra bucks at it.

I learned about the avalanche and snowball debt payment methods from some friends and after some research realized I could take my loans head-on with a plan. I started paying the minimum on every one of my loans except the one with the highest interest rate where I put all that extra money I had previously spread out between the other loans.

Using this avalanche method, I paid on the highest interest loan and then when that was finished up I took that money and started paying it to the next highest interest loan. This approach helps me pay the least amount of total interest possible.

Understand options & repayment plans

Despite the fact that I’ve been able to meet my monthly loan payments, I realized decided to enroll in an income based repayment plan. This brought my monthly payments on my federal loans down from over $300 to around $70 each month. Why did I choose an income based repayment plan when I wasn’t having troubles making my repayment? I found out that having a lower amount due each month could both help my repayment plan and allow me to be more flexible in my finances.

For my repayment, it allowed me to pay less on several of my loans and kept interest from my subsidized loans from accruing (the interest can be covered for up to three years). I took the $230 I wasn’t obligated to pay to all of my loans and rolled it into the extra I had already been putting toward my highest interest loan.

The other perk was that it gave me a lot more financial flexibility, so if unexpected events popped up I could just pay the minimum on my loans and use the money I would have paid to cover whatever emergency happened.

Luckily I never ended up needing this and I have been able to double down on my avalanche repayment and target my highest interest loan with the money I would have been paying otherwise been spreading out to my other loans.

Make payments right away… or make them automatic

Before I started making my loan payments, I felt like I was making just enough money to get by. I didn’t believe I could find $600 per month just for student loans, let alone money to pay ahead. The secret that I found was to make my student loan payments right away once I got paid. Rather than having to worry about what is left to make my loan payments, I prioritized them and made the extra payments part of my mandatory bill paying routine at the beginning of each month. I also found out that one of my private loans and my federal loans offered a small interest rate reduction for enrolling in automatic payments, which I promptly enrolled in to reduce the total interest I would pay over the loans’ lifetimes.

Roll over other debts

During my first year and a half of repayment, two things events had an effect on my debt: my college beater Jeep died on my commute to work forcing me to buy a different vehicle, and I got proposed to my then-girlfriend, now wife. This gave me another $450 per month in payments to make between the car and ring. This squeezed my personal budget to as thin as it could possibly get, but I still made sure to prioritize getting these payments in right away after getting paid. I realized I that I could make this new budget work, so after paying both off I took $350 of that and rolled it into my student loan payments helping me accelerate my impending pay-off even further.

Where I’m at Today

As of this moment, I still have $42,246.38 left to go. I’ve made great progress but I’m still paying over $200 every month on interest alone. It can be depressing to realize how much I’m losing every month to interest, but I know that my current life wouldn’t be possible without the degree I earned and the experiences I had. Rather than concentrating on how far I have to go, I prefer to reflect on how amazing it feels to know that I’ve paid my loans down more than $12,500 in student loan debt in 27 months in addition to over $9,000 between my car and wife’s engagement ring. The end might not be near but that doesn’t stop me from taking one step at a time toward being student debt free.

Financial Aid February: Understanding your Award Notice

9 Feb

If you — as a newly accepted student — applied for financial aid and submitted all verification information that was requested you should expect to receive an award notice from Purdue Division of Financial Aid (DFA) in late February.

This will be sent to your Purdue.edu email address, which you gain access to by activating your career account. The email notification directs students to view their financial aid offer online in their myPurdue system under the Financial tab. Notifications will also be sent to parents who supplied a parent email address on the FAFSA.

First-time students at Purdue will receive an award letter through postal mail. Families can review the recorded Paying for Purdue Award Notice Webinar online as an additional resource.

Award letter example

While the first place that your eyes will look is undoubtedly the Free Money section, a better place to start is by looking at the estimated Cost of Attendance (COA) on the right side. The COA is not your bill! Rather, it is an estimate of the costs of being a full-time student and living in West Lafayette for the school year. It also shows the maximum amount of aid you are allowed to receive for the year, not what you ought to be taking. Your actual bill will come later once you’ve signed up for courses. The only costs you will owe Purdue directly are for tuition/ fees, a meal plan (if you have one), and housing costs if you live on campus.

Now that you know that maximum amount of aid you can receive, the free money awaits. If you have any grants or scholarships, they will appear here. If you have an outside scholarship and have not reported it yet , you can do that via your myPurdue. Grants and scholarships are the ideal form of aid since you do not have to pay them back!

If you subtract your gift aid from the Cost of Attendance, you are left with your remaining “Net Cost”. You can look to cover this amount with the “self-help aid”, using money you already have, or a combination of the two. This is the amount you must cover with money you either have now or in the future.

The self-help aid section is where your offered loans and work study will show up. While these options aren’t as preferable as free money they are a better option for many than trying to pay out of pocket.Fin Aid Feb Award Notice.jpg

It’s important to know that while work study is a form of financial aid, it does not credit your account like the other forms of aid do! Having work study opens up many employers on and around campus who will only hire work study students. The student still needs to find a job and earn the money which is paid via a bi-weekly paycheck. If you don’t work enough hours to receive your entire work study amount, you don’t receive it. Work study is a good way to be able to supply yourself with spending money throughout the year, but it is not a reliable way to pay your Purdue bill since you receive it after the bill is already due.

The other type of self-help aid is the loan. Every loan is slightly different, both in interest and in the steps you need to take to receive it. Federal loans typically are preferable to private loans and often offer more flexible repayment options as well.

As you review the award notice and look up different Financial Aid Terms, keep in mind that grants and scholarships are types of gift aid that do not need to be repaid. Loans and work-study are types of self-help financial aid that must be repaid either in money or labor.fin_need.png

One question that often comes up is where the FAFSA fits into all of this? The FAFSA’s primary job is to create the Expected Family Contribution (EFC) number, which reflects a family’s anticipated financial strength. The formula for financial need is made by subtracting the EFC from the Cost of Attendance. The remaining amount is the maximum amount of need-based aid a student is eligible for. This can be scholarships/ grants with a need requirement, subsidized loans, or Federal Work Study. It is not guaranteed that your financial need will be filled with need-based aid.

Remember that even if you don’t think you will be eligible for need-based aid, you should still file the FAFSA as some scholarships have it as one of their requirements!

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