Monthly Archives: November 2011

Understanding Your Financial Aid Package, plus a sweet video!

There is a lot of information floating around the internet about how a school constructs your financial aid package. In fact, this might be one of the most misunderstood parts of the financial aid process and something we have talked a lot about here at Money for College Project. There seems to be a large disconnect between submitting a FAFSA and receiving your financial aid package back in the mail.

By working in a financial aid office for many years, I have become a little jaded to the fact that these letters are difficult to understand. However, every time I meet with a student who is lost about the entire process, it become clear to me all over again, that this is really confusing!

I am always trying to find better ways to explain this process to students and parents, and I ran across a video recently that I think does an excellent job of explaining how the process works. The video is created by Brown University, so there are a few Brown specific statements made, but overall 98% of the information presented will work at all colleges across the U.S. The information is so universal because virtually all colleges accept federal financial aid, and the U.S. Government regulates how their funds are awarded.

A few notes on the video:

Not all schools meet 100% of demonstrated need when creating their financial aid packages (most Ivy League and top tier schools do).
Often times loans are included in your financial aid package
If your parents are divorced or separated, you will use the parent income for the parent you live with (Brown’s non-custodial parent application is not required at most schools)
The FAFSA can be submitted on January 1st, in preparation for the upcoming Fall semester in August.

Do you have any questions about how a financial aid award package is created? Please discuss in the comments!

My Carnival Cruise: A Lesson in Wealth Distribution

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Wow!

Finally back in town after our 7 day cruise to the Western Caribbean. It feels very strange to have missed Thanksgiving, and to suddenly be thrown full force into the holidays without having any lead up time. Also, it is a bummer to come back to cold rainy weather here on the east coast, after being in perfect 80 degree and sunny weather for the past week.

However, I am glad to be home. As crazy as it sounds, I have missed writing on Money for College Project, and I have missed interacting with you all. A lot has happened in the last week that I need to catch up on!

As I am transitioning back into the American way of life I have become even more aware of how wealthy we are as a nation. On our cruise we visited Grand Cayman, Cozumel Mexico, Belize City in Belize, and Isla Roatan in Honduras. Grand Cayman and Cozumel have long been cruise and tourist destinations and have adapted to the influx of tourist money quite well. You can’t go 100 feet without running into a duty free shop or a jewelry shop.

Belize City and Roatan are a different matter however. Carnival Cruise lines literally created the ports in both of these locations. When you get off of the cruise ship you are greeted by very American looking shops with pearly white floors, fluorescent lights, and credit card machines. You can walk the streets of the port and feel as if you are in any beach town U.S.A.

However, when you walk through the back gate of the port to book a taxi to go on an excursion or see more of the country, you are greeted by the real country, and real third world poverty.

My wife and I already knew this to be the case. My wife had visited Belize twice before on mission trips and stayed in the villages of the country. I have not been to any of these countries before, but I have been to many central and south American countries, and well as spending 6 months in Malawi, which taught me a great deal about what real poverty is.

So we were not shocked by the poverty of the country, but I could tell by the reaction of many of the American cruisers, that they did not expect this at all. In fact, many of them never left the port because they did not want to leave the utopia created by Carnival.

I felt bad for many of the local craftsman as I could hear them being berated by Americans for charging high prices for their custom wood carvings, or for charging a high taxi fare (in a country where gas is over $6 per gallon!). It seems that we as Americans easily forget that we are truly a financially blessed nation, even with the downturn in our economy, and the financial crisis that so many of us are struggling with. In comparison with the poverty in these tourist destinations, we are still fabulously wealthy.

I don’t mean to hop on a soap box or anything, I just think that it is very important to always have a new perspective and a broad world view. It is so easy to get caught up in our narrow minded focus and lament the problems facing us, but when confronted with the broader problems and struggles of this world, it often makes our own problems pale in comparison.

Obviously people on a Carnival Cruise were there for a vacation and we all paid good money to enjoy ourselves. For many people, enjoyment does not mean subjecting themselves to the poverty of a third world country. For me, it is refreshing and motivating. I can look back on my week outside of the United States and approach this holiday season with a fresh perspective.

Last week I posted a top 20 best christmas gifts for college students list. It has been far and away my most popular article I have ever written, and I think that tells us a lot about our culture (and that I sold out a wee bit to appease the Google monster…it worked!) Christmas time in America, is no longer just about celebrating with family and enjoying quality time while exchanging meaningful presents. It has become a celebration of materialism. The fact that the majority of the gifts on the list I made were over $200 also says a lot. We spend a fortune on Christmas ever year! (Well, the majority of Americans do anyway).

My wife and I had a lot of fun buying all of our Christmas gifts from the local artisans we found in the ports, for a fraction of the price we could have here in the U.S. We were also able to meet the craftsmen and women who made our gifts, and support them directly. No middle men. It was a lot of fun, and even more rewarding for us.

This cruise came at a very good time for me. Going into the Christmas holiday I have a different perspective on things that I think I ever have before. It’s easy to get wrapped up in materialism and commercialism around the holidays, but I strongly believe that we are much better off without it.

Top 20 Christmas Gifts for College Students 2011

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It is that time of year again, and one of the busiest shopping weekends of the year is just over a week away. The older I have gotten the more difficult I am to buy for. My parents have constantly reminded me of this. My tastes have varied, become more sophisticated (debatable), and do not follow any strict pattern.

This same thing happens with college students, and also because these students all live away from home for 9 months (maybe more) out of the year, parents are rarely in touch with what their students need.

In this list, I tried to compile the top 20 gifts that college students really want this year. These are all gifts that I can vouch for, and that I have seen many times over on the college campus I work on.

You college student will thank you with any of these gifts, as they are all much better than gift cards! Scroll down to the end for a surprise bonus!

No. 1 – Amazon Kindle Fire – $199

The Amazon Kindle Fire has been tagged as the iPad killer. It does allow you to browse the internet with Amazon’s Silk browser, you can download and watch movies, read books, download apps, and even connect to the Amazon Cloud storage. I’d buy one!

No .2 – Timex Ironman Road Trainer Heart Rate Monitor Watch – $71.60

If your college student is a runner, an athlete, or just wants to avoid the Freshman fifteen, then this heart rate monitor will do the trick. You can even view calories burned!

No 3 – Osprey Daylite Pack – $41.89

Having a quality pack to carry around campus is one of the best ways to promote back health, and foot health. For students who do a lot of walking, they are prone to back and foot strain because of the weight they carry. The Osprey Daylite pack prevents both of those with an ergonomic light design. And, it is super stylish!

No 4. – Camelback Stainless Steel Bottle – $10.95

Staying hydrated, and always having water, coffee, tea, or your other beverage of choice on hand, can be a life saver. You gift can promote health, and is virtually indestructible!

No 5. – NorthFace TriClimate Jacket – $278.00

In most places around the country, winter time on a college campus can be dreary. The skies are gray, exams are right around the corner, and it is just downright depressing at some times. To top it all off, it is cold, windy, rainy, and possibly snowy. That is where the North Face TriClimate jacket comes in. It is a 3 piece jacket that can be a fleece, a rain jacket shell, or a combined fleece/shell for the ultimate protection. Guaranteed to keep your college student safe from the elements on their college campus.

No. 6 – Bose QuietComfort 15 Acoustic Noise Cancelling Headphones – $299.95

Studying can be tough. A rowdy library, or busy college campus can distract even the most diligent of students. With the Bose noise cancelling headphones, your student can shut out their surroundings and focus on their studies. This fact alone could justify the investment in their future!

No. 7 – iRobot Roomba 532 – $296.99

This gift will save you the peace of mind in knowing that your student’s apartment is clean. What is easier than turning on the Roomba and letting it vacuum? Another gift that has dual benefits!

No. 8 – Subscription to Netflix – $7.99 per Month

This might not sound like the best idea for a college student, but it is one that they will thank you for. There is nothing more thrilling than watching a great movie after a hard exam, or catching the latest thriller with your friends. Your student will thank you.

No. 9 – Western Digital My Passport Portable Hard Drive – $149.99

This handy device has replaced the thumb drive. It allows a student to store up to 1TB of data (that is a lot), and they can plug and play anywhere they go on campus.

No. 10 – Southern Tide Apparel – Varied

Some of the trendiest clothing on college campuses, this is sure to impress.

No. 10 – TOMS Shoes – $39.90

Some of the trendiest shoes on a college campus. Plus every pair you purchase, means that a little kid will get a pair of shoes. A gift and a donation…the best of both worlds!

No. 12 – Apple iPhone 4s – $669

Hopefully this does not surprise anyone that this made the list. It’s only the latest version of the most popular phone in history! Might be cheaper to go through your cell phone provider, but it’s a sweet phone regardless!

No. 13 – Keurig Coffee Machine Signature Brewer – $169

Coffee is an essential part of every college student’s morning, afternoon, evening, and night. The Keurig makes it simple to brew, and low maintenance. Both qualities a college student can appreciate. Oh, and it makes great coffee too!

No. 14 – Canon EOS Rebel T3 – $488

It shoots amazing pictures, it shoots 1080p video, and it is simple to use, yet packed with features. If your college student is a budding photographer or wants quality pics, then this is the camera to buy them.

No. 15 – Apple MacBook Pro – $1099

The ultimate laptop for your college student. Whether they are a fine arts major, or a math major, their world will be revolutionized with this machine. Make them the coolest kid on the block this year!

No. 16 – Xbox 360 – $199

Give the gamer in your life, the ultimate gaming machine. Time management skills sold separately.

No. 17 – Vupoint Magic Wand Portable Scanner – $94

College students can scan important documents on the fly, and even connect to their laptops via bluetooth wireless.

No. 18 – Magellan Roadmate GPS – $92

Your college student will never get lost, and they can even find there way home once or twice a semester. It’s another win- win for all involved.

No. 19 – Livescribe Smartpen – $99

This ingenious gadget is an actual pen, but it is also a voice recorder. So you can take notes and record a lecture at the same time, with the same device!

No. 20 – Sony Dash Personal Internet Viewer – $99

Get information and entertainment in your bedroom, kitchen, or office, without being tethered to your PC. It’s also an alarm clock, which is an essential for every college student. Once missed exam can cause a lot of grief.

Drumroll please……..Here is your surprise……..one final, amazing gift idea for your college student Enjoy!

Surprise – Moleskine Leather Notebook – $11

The classic leather notebook, for a classy college student. Perfect match with their Livescribe Smartpen!

Money for College Project Roundup: Leaving for a Cruise Edition

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Well, starting tomorrow its anchors away for my wife and I. We are heading out on our first ever cruise! We’ll be heading for 7 days around the Western Caribbean, and stopping in 4 different countries and territories. This Fall has been so busy that I have barely had a moment to sit back and breathe, so this vacation is much needed.

Since neither one of us have ever been on a cruise, so any advice all of your pro cruisers have would be welcome.

I do have some posts planned for next week, and as I will be gone for Thanksgiving, I want to wish you all a Happy Thanksgiving as well!

As always, here are the best articles from the Money for College Project, around the web, and my fellow Yakezie friends. Enjoy!

Money for College Project

[button link=”http://www.moneyforcollegeproject.com/2011/11/14/ditch-your-college-meal-plan-to-save-money/” color=”red”] Ditch your College Meal Plan[/button] There are many different ways to get healthy meals as a college student. You can be much smarter than eating sodium laced Ramen noodles every night, and also avoid the high price of the college meal plans.

[button link=”http://www.moneyforcollegeproject.com/2011/11/15/the-student-debt-project-first-look/” color=”red”] Student Debt Project[/button] The Student Debt Project is a fascinating study into the nature of student debt in America. It looks behind the scenes and addresses the root of the problem, and provides some fascinating insights along the way.

Awesome Articles You Need to Read

[button link=”http://www.thehobbitblog.com/?p=3933″] The Hobbit Blog: 3D production Video[/button] Not sure if I have revealed this here at Money for COllege project or not, but I am a huge Lord of the Rings fan. So it goes without saying that I am pretty stoked about the upcoming Hobbit film. Here is the latest installment in their series of production videos, and this one focuses in on the 3D aspect of the film. Fascinating stuff!

[button link=”http://www.smartpassiveincome.com/how-to-be-everywhere/”] SPI: How to be Everywhere[/button] Pat Flynn talks about how bloggers can take their content off of the internet and off of their blogs, and reach an entirely new segment and audience.

[button link=”http://www.commonsensemarketing.net/amazon-affiliate-product-reviews/”] How to Write Killer Amazon Affiliate Reviews[/button] Sarah walks you through how to write killer amazon product reviews that will actually generate leads and produce sales for you. This can be a very profitable niche if you approach it correctly.

[button link=”http://artofmanliness.com/2011/11/16/from-idea-to-reality-a-one-year-case-study-on-launching-a-successful-business/”] How to Launch a Business: Case Study[/button] Art of Manliness follows the boys from Moonshine, as they dish about the last year as they have taken their business idea from just that, an idea, and turned it into a sustainable business. Very inspirational!

Yakezie Friends

[button link=”http://sustainablelifeblog.com/2011/11/16/how-i-saved-over-3500-on-my-honeymoon/” color=”green”] Sustainable Life – How to Save on a Honeymoon[/button]

[button link=”http://blog.themillionairenurse.com/2011/11/15/management-are-you-afraid-to-take-that-step/” color=”green”] The Millionaire Nurse – Afraid of Management?[/button]

[button link=”http://dailymoneyshot.net/sometimes-other-peoples-words-are-better-than-mine/” color=”green”] Daily Money Shot – Quotable Quote[/button]

[button link=”http://www.moneybeagle.com/2011/11/make-sure-your-groupon-doesnt-expire.html” color=”green”]Money Beagle – Expiring Groupons[/button]

[button link=”http://knsfinancial.com/macys-black-friday-2011-ad-deals/” color=”green”] KNS FInancial – Black Friday Ads[/button]

[button link=”http://www.bucksomeboomer.com/do-you-have-a-plan-for-charitable-giving/” color=”green”] Bucksome Boomer – Charitable Giving Plan[/button]

[button link=”http://www.investinthemarkets.com/learn-to-invest/how-to-choose-a-discount-broker/” color=”green”] Invest in the Markets – Discount Brokers[/button]

[button link=”http://erinshanendoah.com/dogatemywallet/?p=135″ color=”green”] Dog Ate my Wallet – Working from Home[/button]

[button link=”http://www.20sfinances.com/2011/11/15/does-cheap-perfume-exist/” color=”green”] 20’s Finance – Cheap Perfume[/button]

The Student Debt Project — First Look

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This is relatively breaking news, so I wanted to share it with you here first. The Project on Student Debt, which is funded by the Institute for College Access and Success, just released it’s annual report on Student Debt in 2010.

The Project on Student Debt helps American families understand how the student loan borrowing process works, and also what the implications are during repayment and even further down the road. This project is a non-profit, dedicated to spreading the word about the negative impact that student loan debt can have on your future. They are also committed to teaching students and parents about how to be responsible with their student loans and how to properly manage their money for college. Basically, these folks are after my own heart!

Please go ahead and check out the Student Debt report for 2010. There is some fascinating data collected in this report.

I have just recently received the report, and I want to put some research into the report before I respond here on Money for College Project. So in the mean time, please feel free to check it out, and let me know what questions you would like to see answered in my breakdown of the Student Debt in 2010 Report.

Ditch your College Meal Plan to Save Money

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According to a survey by the College Board, the average per meal price with a college meal plan is anywhere from $7 – $11. I don’t know about you, but that does not exactly scream “living on a college budget” to me.

I guarantee you that I could eat quite well for a lot less than $11, or even $7 per meal.

When you make the decision to go to college, you will be confronted with many extra costs that are often not included in the base price for your tuition and fees. These fees can include housing, a meal plan, books and supplies, transportation expenses, a parking permit, application fees, student organization fees, dorm furniture and accessories. microwave and fridge rentals for your dorm room, and a laptop.

These fees are included in the Cost of Attendance that is used by your Financial Aid office for financial aid purposes, but the true cost of college is often veiled by the Admissions folks.

Because of all these extra fees, it is even more important to save any money where you can. One of the best ways to save money in these “extra” categories, is to ditch your meal plan for much cheaper alternatives.

But My College Requires me to have a Meal Plan!?

When you arrive on your college campus as a freshman, your options for saving money on a meal plan are limited. Many colleges require you to live in on-campus housing, and also to purchase a certain level of a meal plan. This makes sense in theory, as colleges want to ensure that you have a roof over your head, and adequate food when you need it. This also takes stress off of you to find an apartment and restaurants, while you make the transition into college.

The money savings will come in when you evaluate the various levels and options within your college meal plan. Most colleges have multiple plans to choose from, ranging from a commuter option, all the way up to an unlimited meals option.

A very quick calculation will tell you the answer of which options will be best for you. If you think you will eat breakfast, then you can count on eating at least 15 meals per week. If you plan to eat on campus over the weekend, then you may bump that up to 18 meals per week. A typical college semester is 18 weeks. This would mean an average of 324 meals eaten per semester. You can then divide the cost of your unlimited meal plan by 324, and you will find your average cost per meal.

The average cost of an unlimited meal plan is $1600 for one semester. The simple math reveals that eating 324 meals on campus with the unlimited plan equals about $4.94 per meal. That seems like a fair price to me. I could eat much cheaper if I cooked my own food or bought food at restaurants with coupons, but that is a very fair price per meal. This meal plan also makes the least amount of money for the dining halls.

Once you drop below the unlimited plan, you find that the cost per meal can rise dramatically. For example, a meal plan option that is very popular on college campuses is a flex plan. This plan gives you 75 meals to be used in a dining hall at any point during the semester, and it also gives you $100 in points. These points can be used to buy snacks at the library, vending machines items, quick stop food items, and even items in the college bookstore. However, the price per meal for this plan, even including the $100 in points, easily reaches over $10 per meal.

The bottom line, college food costs are expensive, and are required for your first year on campus. It is important to factor in the stress of a college freshman, in addition to the extra cost of food. It might make sense to spend more money on an unlimited meal plan with a much lower cost per meal, for the peace of mind that you or your college student will be well fed over the course of the semester.

The freshman fifteen is completely up to the student!

Meal Plan Alternatives

Once you have gotten past your obligatory first year housing and meal plan requirement, many college students find that it makes financial sense to move off campus and buy your own food at your discretion.

Here is where you can explore some excellent food alternatives, and potentially save a lot of money.

If you live in an apartment, then there is no reason why you cannot begin shopping at the local grocery store, and preparing many of your own meals. This will take more planning, as you will likely need to pack a lunch and snacks for those long days on campus. You will also need to coordinate with your roommates to see who uses the kitchen when. A great way to save some money is to share meals among your roommates. You could all divide up the week and each roommate will cook a dinner for the others each night. This will almost guarantee you a hot meal 3 or 4 days out of the week. It also takes the stress off of finding something to eat every night.

Living in a college town is also one of the best ways to save money on food. College town restaurants make their living off of college students, and therefore offer excellent incentives to entice college students to eat at their restaurants.

This means that you will likely find “college student special” nights, and “free taco Tuesday” or “Buy one get one free Pizza Mondays”.

The alternatives are virtually endless on how you can save money on your food costs while in college. The more creative and ingenious you can be, the better.

The Bottom Line

It pays to be smart with your college meal plan choices. You can save money in the meal plans you are required to buy, and then save even more money by realizing when to cut the cord, ditch your meal plan, and find your own food.

Happy eating!

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Money for College Project Roundup: Asbestos and Mold Edition

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The suite of offices where I work is currently being renovated. Our suite is in the basement of a 100+ year old building, and the mold, mildew, and asbestos that live under the walls has always been disgusting.

The powers that be have finally made the decision to renovate our office space. I am really excited about the remodel, but during the demolition phase, all of those mold, mildew, and asbestos particles have been released into the air. So now everyone who works in the entire building is coughing, and many have upper respiratory infections. I was fine until yesterday, when I cam home wit a violent cough and a raging swollen throat.

Fortunately, I don’t feel sick, just not able to talk. Thankfully, I get to type on this blog instead of talking, so the Money for College project weekly Roundup will go on!

Money for College Project

[button link=”http://www.moneyforcollegeproject.com/2011/11/09/can-you-invest-student-loans-follow-up/” color=”red”] Can you Invest Student Loans[/button] This article is a follow-up to the original posted back in September. I wanted to take a more in-depth approach to the question, because I believe there are some valuable lessons to be learned.

[button link=”http://www.moneyforcollegeproject.com/2011/11/07/understanding-student-loan-deferments/” color=”red”] Student Loan Deferments[/button] All of the basics for every different type of student loan deferment that you could possibly want. It’s important to note the regulations regarding each type of deferment, as these could drastically impact your ability to receive one.

Awesome Articles You Need to Read

[button link=”http://www.adventure-journal.com/2011/11/what-its-like-my-career-as-a-fire-spotter/”] My Career as a Fire Spotter[/button] When I took one of those personality assessment tests back in high school, this is exactly what it said I should become. A park ranger was another option. Turns out, it might not have been such a bad gig…

[button link=”http://www.smartpassiveincome.com/unexpected/”] Pat Flynn at Blog Expo[/button] Pat Flynn talks about his experience at the World Blog Expo, and how he recovered after a potential disaster dring his presentation. Top notch as usual.

[button link=”http://www.iwillteachyoutoberich.com/”] How to Make Long Term Decision[/button] Ramit walks you through his method for making difficult long term decisions, and sticking to them. His use of psychology is effective, as usual.

[button link=”http://artofmanliness.com/2011/11/09/should-a-man-be-inspired-by-history/”] Inspired by History?[/button] Art of Manliness writes an excellent article on why we should be inspired by History, and what we can learn from the lessons, mistkes, and great men in our past.

Yakezie Friends

[button link=”http://sustainablelifeblog.com/2011/11/09/saving-money-tip-manual-upgrades/” color=”green”] Sustainable Life – Manual Upgrades[/button]

[button link=”http://blog.themillionairenurse.com/2011/11/07/banks-changing-over-charges/” color=”green”] The Millionaire Nurse – Bank Fees[/button]

[button link=”http://dailymoneyshot.net/its-my-116th-post-and-im-giving-something-away/” color=”green”] Daily Money Shot – 116th post Giveaway[/button]

[button link=”http://www.moneybeagle.com/2011/11/5-reasons-to-be-optimistic-about.html” color=”green”]Money Beagle – Be Optimistic about Student Loan Debt[/button]

[button link=”http://knsfinancial.com/why-do-we-often-fail-to-push-ourselves-to-meet-goals/” color=”green”] KNS FInancial – Failure to Meet Goals[/button]

[button link=”http://www.bucksomeboomer.com/get-stinkin-rich/” color=”green”] Bucksome Boomer – Get Stinkin Rich[/button]

[button link=”http://www.investinthemarkets.com/markets/the-fattened-piigs/” color=”green”] Invest in the Markets – The Fatted PIIGS[/button]

[button link=”http://erinshanendoah.com/dogatemywallet/?p=117″ color=”green”] Dog Ate my Wallet – Average Joe[/button]

[button link=”http://www.20sfinances.com/2011/11/08/how-i-got-4-movie-tickets-for-9/” color=”green”] 20’s Finance – 4 Movie Tickets for $9[/button]

Can You Invest Student Loans? Follow Up

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invest student loan refund

Back on September 12th, I posted an article titled Can You Invest Student Loan Refunds?. This has become one of my most popular articles, and I wanted to write a follow-up post to give another perspective that arose out of your comments.

I did my best to make a convincing argument against taking your student loans and investing them. I still believe that this is simply a moral barrier that should not be crossed, but it is also a Federal law.

The main question that was raised in the comments, and which is quite valid, is how will the government ever track these student loan refunds if they are invested?

Government Black Hole?

Moral high ground aside, I think it is very interesting to see exactly how someone can take the student loan refund that they receive and invest it for a profit (or a potential loss). The fact that this is possible brings to light a large need in our government for more student loan oversight and tighter restrictions on who, and how much, students can borrow. If it were publicized that investing student loans is a great way to make money (which ok, I am doing here on this blog, but please forgive that for a moment) then I could forsee this practice becoming much more common.

Many commenters asked the question in the original article of how the government enforces their rule that student loan refund can only be used for “educational expenses”. From all of my work in higher education, the only answer I could come up with is that unfortunately, they do not. I see their reasoning behind this. Can you imagine how difficult it would be to track the refunds of millions of student loans across the country? You would need to hire hundreds of auditors to work full-time on enforcing this rule.

So as it stands, the government really does not have an adequate way of enforcing their rule that you cannot invest student loan refunds.

The Gray Area…

As with many federal regulations, there is a large gray area that is left open to interpretation. If you receive a student loan refund, and you want to do something proactive with that money, what are your options?

Strictly investing that money in the stock market is out. That would mean that you are using the funds to directly incur a profit (or a loss). What about investing the student loan refunds in a Roth IRA? This is still based on the whims of the stock market, but arguably more safe

What about stuffing your student loan refund into a high yield savings account? You are incurring no risk, and it is also gaining a small amount of income as time passes.

I would say that this decision is left up to you.

There are positives and negatives to every financial decision that you make regarding your student loan refunds. If you invest in a ROTH IRA, then you have to pay a penalty if you withdraw the funds to pay off your student loan before you reach retirement age.

If you invest your loan refund in the stock market, then you run the risk of losing all of that money, and having no funds to repay your student loan.

Parking your student loan refund in a high yield savings account seems like a very safe option, but the yield is so small these days, is it really worth it?

All questions that you will need to think through.

I know there are some strong arguments on both sides of this topic, and I know you all would love to share them. So please let me have it in the comments.

Would you invest your student loan refund? How would you do it?

Money for College Roundup: Time Flies Edition

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When you post the same type and style of post on the same day every week, it always serves as a brilliant reminder of just how quickly time flies by. It seems like just yesterday I was sitting down at my computer to create the latest Roundup, and here I am again.

It’s alright though, because I love blogging, and I especially enjoy these roundup posts. I get to showcase some of the best articles I ran across over the previous week, and also to give a shout out to my other friends who are killing it in the Blogosphere.

Here are the tasty morsels I have for you for this week!

Money for College Project

[button link=”http://www.moneyforcollegeproject.com/2011/10/31/planning-for-retirement-at-age-26/” color=”red”] Retirement at Age 26[/button] My experience in dealing with a retirement/financial counselor and his take on what retirement looks like for a 26 year old working adult. Very insightful.

[button link=”http://www.moneyforcollegeproject.com/2011/11/03/president-obamas-student-loan-debt-plan-is-worthless/” color=”red”] Obama’s Worthless Student Loan Plan[/button] Not a political debate. Just a critique of Obama’s new plan to help students repay their student loans.

Awesome Articles You Need to Read

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President Obama’s Student Loan Debt Plan is Worthless

5 Replies

Last week, President Obama unveiled a new plan to help combat the rapidly growing amounts of student loan debt in our country. He made his speech in front of a group of 4,000 protesters, mainly students, who had gathered as part of the “occupy” protests springing up around the country.

I won’t get into a political debate here at all, but I do want to point out what I believe are significant flaws in the President’s proposed student loan debt plan. If you are a student, or anyone else who is repaying student loans, then this is important information that could directly affect your financial future.

Student Loan Proposal #1

Last year Congress passed a law that would allow a borrower on the Income Based Repayment Plan to cap their maximum student loan payment at 10% of their discretionary income, rather than the 15% it had been previously. This law had been scheduled to take effect in 2014, and the President’s new proposal will simply speed that process up. My problem with this proposal is that it is not actually helping students pay off their loans any faster. Lowering the maximum required payment? All that does is drag out the length of repayment, and increase the amount of interest that is being paid on a student loan.

Student Loan Proposal #2

Under the Income Based Repayment Plan the Department of Education will allow the remaining debt to be forgiven after 20 years instead of 25 years. This sounds like a great benefit, but does anyone really want to pay on their student loan for 20 years? Or even 15 years? I think that we need to stop treating student loan debt like mortgages (although I will concede that some people have as much student loan debt as the average mortgage amount, or more…). We should look to cap the maximum repayment period at 10 years. This will force students to deal with their student loan problems quickly, rather than stringing it out until their kids are ready to go off to college, and they are still paying on their own student loans!

Student Loan Proposal #3

The President’s new student loan debt plan will also allow borrowers who have a student loan under the Federal Family Education Loan Program (which was disbanded in 2010) and a loan under the currently mandatory Federal Direct Loan program, to be able to consolidate these loans for up to one half percentage point less in interest rate.

I actually think that this is a good proposal because it will go a long ways towards preventing default and confusion among student borrowers. It is much more difficult to manage 2, 3, or 4 different student loan payments than it is to manage one payment. This proposal allows you to streamline your monthly payments, and even get a small reduction in your student loan interest rate.

However, the problem lies in the fact that when you consolidate these loans, you almost always lose your student loan deferment and forbearance privileges. That is how the policy currently works, and I have not read anywhere where this is proposed to change. This means that if you consolidate these loans into one Direct Loan, then you will not be eligible to apply for a medical deferment, or a forbearance due to a financial hardship or loss of employment.

Consolidating your loans may sound like the smart move to make, but be sure you read all of the red tape before signing the loan consolidation papers. You may be signing some very important rights away.

What Needs to Happen

I don’t have to answer for fixing the student loan program. Unfortunately, I don’t know the one trick that will help borrowers repay their loans easier (except for 0% interest on student loans of course).

What needs to happen is a more focused effort by the Federal Government and all colleges around the nation in helping students avoid taking out student loans in the first place! Students will always have a difficulty repaying a debt. We cannot change that, but what we can change is the amount of debt they have to repay in the first place.

We need to implement financial literacy programs that teach students basic money management principles and teach them how to budget their money while in college, and once they graduate. Colleges need to put more emphasis on the entrance loan counseling that is required before loan disbursement. This is the perfect time to explain to your student borrowers exactly what they can expect when they repay their loans. There is a large chunk of time between entrance counseling when a student is a freshman, and exit counseling when they have already racked up over $100,000 in student loans. We need to be proactive in this middle period. I would advocate annual required loan counseling sessions.

I would also strongly advocate for more conscious effort on promoting scholarships and grants. We need to help our students find the “free money” that is available to them, rather than relying so heavily on student loans. If we don’t, then we may begin to lose students in the future who simply decide not to take out so much in student loans.

Do you have any ideas on what can be done to combat the rising student loan debt problem?

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