FAFSA

In the financial world ROI, or Return on Investment, is an important term. It estimates the expected future value of a current investment so comparisons can be made between opportunities. In the financial aid world, it is also helpful to determine the expected future benefit of investing in a college education. Clearly projecting how much income a certain education will afford can figure into decisions about which college to attend or what major to pursue. It can also help determine whether the future graduate will earn enough to be able to repay any college student loans which are taken out now. I previously reported on an analysis of Labor Department statistics by the Economic Policy Institute in Washington, which demonstrated that a four-year degree has probably never been more valuable. But that information is general; where can you find specific information about the college degree your child is pursuing? Fortunately Discover® Student Loans has just introduced a helpful Return on Investment Tool. This ROI Tool helps to compare the value, or future payoff, of various college degrees. The first page takes the site visitor to a kind of billboard which lists a variety of degrees, along with anticipated yearly earnings. From there you can easily select and compare various college degrees. Clicking on a specific major will provide further insights into the average salary, industry and more. For example, a business major can anticipate earning an average of $60,000 per year upon graduation with a BS degree. But, clicking on the major brings up another screen which gets more specific within that particular major. This reveals that, while “General Business” might generate an income of $60,000 per year, pursuing Business Economics could yield $75,000 per year. The same BS degree from the same college or university might yield different salaries, depending on the major field of study. Click again on “General Business” and you will find more information about the percent of graduates who end up with a full-time job with this degree. There is also a listing of potential industries and job types where this degree can be valuable, along with a percentage breakdown by male and female. If you want to compare a number of industries, look for the icon at the upper left corner of these boxes. Click there and the tool automatically adds that major to a comparison area. Once you are ready to compare possibilities, they are automatically gathered together so you can easily compare outcomes. Don’t wait until graduation to think about how much you will be able to earn, and whether you will be able to repay your federal and private student loans. Utilize the tools at your disposal now to estimate your return on college investment and you will already be making smarter decisions! If you need more information about the college financial aid process, or would like to discuss more about federal and private student loans, contact College Financial Aid Advisors (CFAA).

The Wall Street Journal’s MarketWatch site just posted the results of the third annual survey from Discover Student Loans. In May of this year Discover asked independent research firm, Rasmussen Reports, to conduct a survey of 1000 adults with children who are planning to attend college. While these parents strongly agree about the value of a college education, they are also concerned about the question of how to pay for it. Here are some financial aid lessons that other parents can take away from this survey: • 85% are worried that student loan debt will affect their child’s ability to buy a home, car, or other large purchase after college: The question of how much student loan debt to take on is an important one which parents should clearly discuss with their students. Children who are just graduating from high school may not realize the long-term impact of interest accrual, and are probably not even thinking about what they will do after college. Parents need to explain these financial implications now so their children understand exactly what is involved in the decision to borrow money in any form. Although many students plan to use student loans to cover some of their costs Discover Student Loans president, Danny Ray, encourages students to always use “free money” first when financing a college education and then to determine what lending options work best to meet their needs. • 77% of parents said they plan to help their child pay for college: While this is a nice thought, the survey revealed that about 75% of the parents are also worried about having enough money themselves to accomplish this goal. Parents of college students can sit down with their children and explain the financial impact on the family. The child should be aware of any sacrifices the family is making, and should be encouraged to limit spending and earn money whenever possible. Investigate the potential for work-study programs at your child’s school and always be on the lookout for any scholarship opportunities. • Parents are beginning to shift some of the costs to their students: 15% of parents now believe their children should pay for the entire cost of their college education, while another 32% believe that their child should pay for most of it. This is an important discussion for parents to have with their students. Make sure they fully understand how much of the financial responsibility will be on their shoulders, and how much you will be willing to assist in repaying student loans. Don’t wait until your child graduates and is surprised by your expectations. Making plans for college can be both an exciting and confusing time. According to the survey, parents often turn to college financial aid officers and personal financial aid advisors for advice and information. If you need more information about the college financial aid process, or would like to discuss the option of federal and private student loans, contact College Financial Aid Advisors (CFAA).

College is over and you are rightfully proud of your graduate for putting in the effort required to earn that coveted diploma. The odds are that it will help your child get a better job and earn higher income. You have already provided the educational head-start, but now it’s time to give your graduate a financial head-start on life, too. Here are some tips for having the “money talk” with your graduate: • Calculate monthly student loan payments: Sit down together before the student loan bills start coming in and map out a plan of action. Learn about loan servicers, interest rates, repayment options, loan consolidation, and determine the monthly payment amount. It may be possible to forgive some or all of the federal student loans if your child decides to become a  teacher or public servant. This information will help quantify the amount of income needed to meet monthly payment amounts, and may help guide your child’s choice of career. • Student loans are a serious business: Not making prompt payments could lead to student loan default, which can have serious consequences. President Obama will work with financial institutions to increase education about loan defaults, but you can give your child a head start. The school, the financial institution that made or owns the loan, the loan guarantor, and the federal government can all take action to recover outstanding amounts. This could involve wage garnishment, attachment of federal income tax refunds, or assignment of the debt to any co-signers. Defaulting on a student loan could also affect your child’s ability to obtain other types of credit for a car, home, utilities, or cell phones. • Be careful of credit card debt: Many young adults are surprised by how quickly credit card debt builds. They think they are only borrowing a little money to tide them over until they get a job, and suddenly find themselves paying hundreds of dollars a month in interest. Make sure your child understands that a credit card should only be used when there is already enough money available to make the payment. • Start saving now: Most graduates think it is too early to worry about buying a home, paying for their own children’s education, or their retirement. But the best time to start saving is now, so that interest compounds over the long-term to build a nice nest egg or emergency fund. Even a small amount on a regular basis makes a big difference over a long period of time. • Have health insurance: Your child will be required to have health insurance under the Affordable Care Act. He or she may be eligible to stay on your coverage until the age of 26, could qualify as part of a compensation package, or can shop in one of the health insurance marketplaces. If you need more information about repaying student loans, or want insights regarding the college financial aid process, contact College Financial Aid Advisors (CFAA).

While recent college grads are putting away their caps and gowns and starting on their job search, one thing looming in their minds is student loans. Most graduates will start making payments on those loans very soon. To assist you with that process, here are some strategies for smart repayment: • Get to know your loan servicer(s): Most repayments are handled by a loan servicer. If you have several loans you may have several loan servicers, each of which may have its own procedures for payment. You are responsible for making prompt payments to each servicer, even if you do not receive a bill. • Choose a repayment plan for federal student loans: Federal student loans have different repayment options such as the standard repayment plan, where you repay your loan in up to ten years, or an extended plan, where you have up to 25 years. A graduated plan gradually increases payments. There are also several income-based options. You can choose whichever plan is right for your present income situation, but you have the right to change repayment plans at any time. • Consolidation may help: If you do have loans from several servicers, it may be helpful to consolidate them into one and make only one payment per month. Federal student loans may be consolidated with other federal loans, and private student loans may also be consolidated. • Let your servicer know about any special situations: You may be eligible for deferment or forbearance, which allows you to temporarily postpone or lower your loan payments. This could occur if you decide to go back to school, serve in the military, or experience financial hardship. • Check if you’re eligible for loan forgiveness: With federal student loans only, there are a few circumstances where you may not have to repay some or all of your loan. This includes certain kinds of teaching or public service, total and permanent disability, or the closure of the school where you were studying. Negative Consequences of Not Repaying Your Student Loans You must repay your loans even if you did not complete your education or cannot find a job related to your major. If you go into default, it could affect your ability to borrow money for a car, to rent an apartment, or buy a home. You might be surprised to find that you could have trouble signing up for utilities, homeowner’s and auto insurance rates could be higher, or you might not be eligible for a cellphone plan. The federal government may garnish your pay check, or it could attach your federal income tax refund. If there is a co-signer on your student loan, that person may become responsible for your debt. It is very important that you contact your loan servicer immediately if you are unable to make payments on time. If you need more information about repaying student loans, or want insights regarding the college financial aid process, contact College Financial Aid Advisors (CFAA).

A recent “Upshot” blog in The New York Times reported on an analysis of Labor Department statistics by the Economic Policy Institute in Washington, which demonstrated that a four-year degree has probably never been more valuable. The pay gap between college graduates and everyone else reached a record high when Americans with four-year college degrees made 98 percent more per hour on average than people without a degree. The National Association of Student Financial Aid Administrators (NASFAA) concluded that “The decision not to attend college for fear that it’s a bad deal is among the most economically irrational decisions anybody could make.” The question still remains of how to pay for this education. That’s where financial aid comes into the picture. The first piece of the financial aid puzzle is federal student aid. This may include a combination of grants, which do not have to be repaid, and federal student loans, which do have to be repaid. If that’s not enough, here are six additional steps you can take: 1. Federal Work-Study: This program provides part-time jobs for students with financial need, allowing them to earn money to help pay education expenses. It encourages community service work and work related to the student’s course of study. 2. Other Resources from the Federal Government: Besides aid from the Department of Education, other opportunities include aid for serving in the military or for being the spouse or child of a veteran; tax benefits for education; an Education Award for community service with AmeriCorps; Educational and Training Vouchers for current and former foster care youth, and/or scholarships and loan repayment through the Department of Health and Human Services’ Indian Health Service, National Institutes of Health, and National Health Service Corps. 3. State Financial Aid: Even if you’re not eligible for federal aid, you might be eligible for state financial aid. Contact your state grant agency for more information, since each state is different. 4. College Financial Aid: Your school will have many types of grants and programs available to help pay for your education. Ask the financial aid office for assistance. 5. Scholarships: Many organizations offer scholarships or grants which can make a real difference in how affordable your education is. Check out every possible resource to find scholarship money. Look online, ask friends and relatives, consider community groups, and ask your high school guidance counselor. Also inquire whether the department that offers your course of study has any scholarships for students in your major. 6. Private Student Loans: Many banks and lenders have private student loans available to cover any remaining difference between costs of attending and available funds. Be sure to ask about interest rates, interest deferment, and repayment options before signing for any loan. If you need more information about what to do when federal student aid is not enough, or want insights regarding the college financial aid process, contact College Financial Aid Advisors (CFAA).

As a recent college graduate, you will soon be faced with the prospect of repaying your college loans unless you qualify for some type of deferment. Instead of waiting under the payments start coming due, take charge of the process and make a plan now for repaying those loans. First, sit down and figure out exactly how many student loans you have. If you only took out one loan each semester, that would be eight loans, but it could be more or less depending on your specific situation. Determine if they are federal student loans or private student loans, and find out who the servicer is for each. A servicer is a bank or company that receives your payments and answers your questions. Now you can start estimating the monthly payments on each of your loans. • Repaying Federal Student Loans: You may be eligible for deferment if you return to school for additional courses or perform active duty military service. Your monthly payment will depend on the type of loan you received, how much money you borrowed, the interest rate on your loan, and the repayment plan you choose (standard, graduated, extended, income-based, pay as you earn, income-contingent, and income-sensitive). Use the Repayment Estimator to look at which plans you may be eligible for, and to see estimates for how much you would pay monthly and overall. • Repaying Private Loans: Your monthly payment is based on the terms of your individual student loan with each private lender. Most have some type of payment calculator that can help you estimate the amount of your payments. As an example, take a look at the payment calculator for Discover Student Loans. You will need to know your loan amount, interest rate and repayment term to estimate a payment amount. Similar to federal loans, they also offer several deferment options and repayment assistance options. Make sure you also take advantage of their Graduation Reward. This should give you a good idea of the total amount of student loan payments you will be making each month. This will help you in estimating how much money you will need to earn, and budgeting how much you will have available to spend on living expenses. If you have a large amount of money available you might benefit from early payment plans, like the one available at Discover Student Loans. Does It All Sound Too Confusing? It might seem overwhelming, but your lender, financial aid office, or a professional college financial aid advisor can be of assistance. If you have a lot of student loans, you could consider consolidation to make things a little easier on yourself. This combines several federal loans into one or several private student loans into one. Consolidation might also help you save some money on interest rates. If you need help making a plan to repay your college loans, or need more information on the college financial aid process, contact College Financial Aid Advisors (CFAA).