7 Problems with Overborrowing

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Borrowing more money than you need to for college or for non-education expenses can jeopardize your financial future and bring you stress and disappointment. Make smart decisions when it comes to borrowing for college to avoid future pitfalls. Keep these overborrowing problems in mind:

1. You have to pay interest too. Most students delay loan repayment until after college, meaning that interest builds up during school and increases the amount that must be paid back. If you use student loan money for unnecessary things, interest will accrue on that money too before you even start repayment.

2. Repayment can take longer. If your monthly payment is more than you can afford after college, you may have to look at alternative repayment plans. These plans may reduce your monthly payment but extend over more months, which will lead to you paying more interest over time.

3. Missed payments will have consequences. The more you borrow, the more you will have to pay back every month. If you are unable to pay your bills and miss payments, your credit history will be impacted negatively, which may lead to higher interest for future loans and credit of all types.

4. You may have to limit entertainment expenses. The more money you have to pay back on your student loans each month, the less you will have for entertainment. When you look back, will you think using student loan funds for one spring break was worth it when it seems like you can never afford to go out to dinner or a ballgame with friends?

5. You may need a second job. To pay your student loans after college, you may have to find a second part- or full-time job. A second job may help with your bills, but it can impact your personal life, the attention you pay to your primary job and your overall health.

6. You might delay buying a house or starting a family. Numerous reports show that adults with high levels of student loan debt put off traditional adult milestones, such as purchasing a home, getting married or starting a family due to economic distress.

7. You may be unable to save for your future. Saving for your future, especially your retirement years, will be essential once you start your career. But if you’re unable to contribute money to a 401(k) or other retirement fund because you are repaying student loans, you may miss out on a decade’s worth of saving and have to work longer than you would like during your lifetime.

By: Iowa Student Loan

How Making Interest Payments Can Save You Big Money Later

If you’re funding part of your college education with student loans, you may occasionally receive statements, even though no payments are due. Ever wonder why?

Those statements are important, and understanding why can save you money in the long run.

They notify you that, even though you don’t have to make payments while you’re in school, interest is adding up on your loans — every single day. If this interest is not paid as it accrues or before your loans enter repayment (usually six months after you leave school), it will be added to your principal balance. If it is added to your principal balance (a process called capitalization), you will then owe more than you originally borrowed. And, the now larger principal balance starts to accrue interest on a daily basis, so you will be paying interest on the accrued interest.

How can you minimize this increase to your loan balance? If you manage to earn or save some money while you’re in school, you can make monthly payments that pay down the interest as it accrues.

Here’s an example of how making small payments every month could save you more than $1,500 over the full life of student loans.

Note: The information below is an example only. Your payment amounts will depend on the types of loans you receive and the interest rates and the repayment terms on those loans.

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Download a PDF of this infographic.

Establishing Financial Habits

Making everyday spending decisions—like whether to order pizza or go to the Caribbean for Spring Break—in college, helps you establish the financial habits you’ll use in the future.

Although eating out every Friday night sounds like a good thing, it may be worth it to give up that treat in exchange for savings of thousands on your future student loan payments.

By: Iowa Student Loan

5 Reasons to Start a 529 Plan

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Saving for your child’s college education can be stressful, but it can also be one the best things you can do to help ensure he or she has a solid financial start in life. If you’re considering different savings options, check out these benefits of a 529 plan.

1. Plans are good nationwide.

Most states, including Iowa, and a number of institutions offer 529 plans, and the plans are not restrictive to the state you live in or where the student attends college. That means parents can take out a College Savings Iowa 529 Plan and the student can use the funds at any eligible school in the country and even some colleges or universities outside the United States.

2. Anyone can open a 529 plan account.

Parents, grandparents and even friends can open a 529 plan for a potential college student. You can even start a 529 plan for your own education.

Parents: Enter to win a $1,500 contribution to a 529 plan.

3. There are tax benefits.

While contributions are not deductible at the federal level, Iowa taxpayers may deduct some contributions from their adjusted gross income. When the plan owners deduct funds to pay eligible college costs, that money is not taxed. For the beneficiary, all earnings on the 529 plan grow tax free.

4. Plans are flexible.

You can choose to change the investment options up to twice per calendar year. Plan owners can make regular contributions, open an account with an initial deposit and never make another contribution, or make deposits whenever it’s convenient. You can even change the beneficiary if the person the account was opened for decides not to attend college.

5. You stay in control of the account.

When you open a 529 account for your child, or anyone else, you maintain control of the account and how the funds are spent. The money is not automatically transferred to the student to spend.

By: Iowa Student Loan

Celebrate College Savings Month with College Savings Iowa

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With back-to-school in full swing, I know it can be a busy time of year for parents and children alike. It also is a busy time of year for College Savings Iowa!

Since the program’s inception in 1998, our message has always been the same: by starting early, saving regularly and making smart investment choices, families can make their savings work for them. To celebrate College Savings Month this September, we introduced a new financial literacy initiative, College Savings Iowa InFocus, to help families learn how they can make their savings work for them.

This interactive learning experience introduces parents, grandparents and others to the benefits of saving for the higher education of a loved one. It offers savers the chance to understand the ins-and-outs of 529 plans. So join us in celebrating College Savings Month by completing College Savings Iowa InFocus! As a bonus for taking the extra step and learning about saving for your loved ones’ futures, families who complete the 10 minute tutorial are automatically registered to win a $1,000 College Savings Iowa account. Visit Iowa529InFocus.com to complete the tutorial and see the official rules.

College Savings Iowa is offering an additional $10 contribution to the first 500 people who complete the tutorial and open a College Savings Iowa account as another way to encourage families to take the first step towards saving. The newly established accounts must have a minimum $25 contribution and be opened within the first seven days of tutorial completion to be eligible for the $10 contribution.

By investing in your children’s education, you are investing in their future. I encourage you to make time and evaluate your college savings strategies. I know families are already busy juggling the demands of work and home, which means college planning may be the last thing on their minds. But with the cost of a higher education rising faster than inflation, nearly every family will face the question of how to pay for it when the time comes. Thankfully, the answer is quite simple – start saving today.

To learn more about College Savings Iowa, visit CollegeSavingsIowa.com or call 888-672-9116. Also, be sure to join the college savings conversation by following us on Facebook and Twitter (@Iowa529Plan) to learn about future giveaways, college savings tips and events!

Help make college a reality for the children in your life by starting to save today – you’ll be glad you did!

By: Michael L. Fitzgerald, Treasurer of State

Contributed by: College Savings Iowa

This is Contributed Content. Any opinions, advice, statements, services, offers, or other information contained in Contributed Content are solely those of the respective author(s) or contributor(s) and do not necessarily state or reflect the opinion of Iowa Student Loan and/or this blog. See the “About” page for additional important information about Contributed Content.

4 Ways Dropping Classes Can Cost You

It happens to a lot of college students sooner or later: You enroll for a class, without realizing until after the semester starts that it’s just not for you. Colleges and universities plan for this by building in policies that allow dropping or withdrawing from classes, but doing so can cost you more than you realize.

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1. You may not graduate on time.

  • More tuition and fees to attend for extra semesters.
  • Increased loan balances.

2. Depending on your school’s policies and how far into the semester you are, you:

  • May or may not be eligible for full or partial refunds of tuition for dropped courses.
  • Likely will not be reimbursed for related costs like registration and payment plan fees.

3. If you enroll late in a replacement class, you may end up spending more for new books and materials instead of being able to rent or buy used.

4. Your financial aid might be affected.

  • A “withdrawn” or “F” on your transcript can lower your GPA, and you may lose financial aid if you don’t meet minimum requirements.
  • If you drop below half time, you will lose aid and benefits:
    • You will no longer be eligible for federal work-study programs.
    • You may lose all or part of federal and state grants.
    • Loans may enter a grace period or repayment immediately.

Before dropping a class, speak to your academic adviser and, if necessary, the financial aid office, about your options and how to avoid financial consequences.

By: Iowa Student Loan

5 Small Changes to Save Big

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It’s easy to spend a couple of dollars here and there without realizing how they add up. Before you know it, finances can be pretty tight.

Use these tips to help you make small changes that can save big money over time.

1. Make your own coffee.
Day-to-day caffeine runs can add up quick. Instead of $3 or $4 dollars for a large gourmet takeout coffee, spend less than a dollar per cup to make your own. Your favorite coffee chain might even have a brew-at-home version available at the grocery store.

2. Skip the fast food.
An average fast food meal costs $5 or more. Eating at home or on your meal plan instead for four meals a month saves at least $20 a month and $240 a year outright. If you tend to order a bacon cheeseburger and fries, your health may benefit from more nutritious meals as well.

3. Stay home on date night.
Renting an inexpensive movie instead of going to the theater can save between $7 and $10 for each of you. If you and your significant other see a movie every other week, that’s about $200 a year in savings.

4. Drop the Wi-Fi subscription.
If your campus and local gathering spots offer free Wi-Fi, you may not need to pay for a separate Internet service. Even less expensive plans run around $40 a month. Drop it and save nearly $500 over a year.

5. Work part-time.
Working just 10 hours a week at minimum wage lets you bring in more than $2,400 a year. Plus, you gain valuable experience to improve your chances of landing a great job after college.

See more tips (PDF) on how to save money in college.

By: Iowa Student Loan

How Much Should You Save for College?

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At the start of your senior year in high school, how you’ll pay for college may not be a high priority yet. It’s something you should be thinking about, though, as you consider different colleges and the costs associated with attending each one.

A national study, How America Pays for College 2015, shows that the average student contributes 11% to the total cost of his or her college education. That is money from the student’s income and savings, not student loans.

So, how much should you plan to save for college this year?

That answer depends on a multitude of different factors, but the easiest response is “as much as possible.”

If you want a more precise number, though, there are things you can do now to determine how much you want to save during the next 12 months.

Create a Budget

Use an in-school budget tool to start forming an idea of how much money you’ll need to live on each month. It’s OK to guess right now and try out different calculations. How much will you cover with grants, scholarship and student loans, and how much will you need to have on hand each month for your extra costs?

If you live on campus in a dorm during your freshman year at college, many of your expenses will be set and you’ll be left with a smaller number of variable categories. But if you’ll be living off campus, you will have to calculate additional costs like your portion of the monthly rent, gas and car maintenance, and how you will fill a refrigerator.

Figuring out how much you will need each month can help you set a goal for the amount you definitely want to save during your senior year.

Compare Costs

While you’re creating different in-school budget scenarios, be sure to consider the costs needed for different schools you’re considering. Less-expensive schools might seem like the way to save money, but many times those institutions also have less money to offer in terms of scholarships and grants compared to more-expensive colleges or universities.

Anticipate that you will need more spending money than you think to ensure you don’t greatly underestimate how much you will need to save.

Reduce Expenses

Is your budget a lot higher than you expected? Check out these ideas for ways to save on supplies. Will any of those options help reduce your monthly budget?

You can also consider options such as:

  • Living at home and attending a community college for your first year or two to meet your general education requirements.
  • Planning to work part-time during college to help you cover some monthly expenses.
  • Cutting back on entertainment or other non-necessities to reduce the amount needed for spending money each month.

It may seem like a daunting task, but the more you’re able to save for college today means less that you will have to borrow in the future.

By: Iowa Student Loan

6 Ways to Help Your Student Save

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If you’re not independently wealthy, chances are you’ll be relying on a variety of sources to help your child pay for college: scholarships, loans, your own savings and earnings, and your student’s savings and earnings. How can you help your student maximize savings so you don’t end up draining your retirement resources to help them out?

1. Understand how much your student will need.

Many free online calculators provide estimated college expenses for a variety of college types for the year your student will enter college. Try different scenarios to understand the range of expected college expense.

2. Foster an environment of saving.

What do you do with your paycheck? If you expect your child to save 50% of earnings in a savings account, set an example by building your own savings. The same goes for discount shopping, clipping coupons and so on.

3. Encourage your student to reduce expenses.

If your child tends to spend a large portion of earnings and gift money on clothes, for example, work with him or her to find ways to dress in the same manner for less. Think creatively—garage sales, thrift shops and discount store sales can provide a wealth of bargains.

4. Explore interest-bearing accounts with your child. 

Leverage savings by depositing the money in an interest-bearing account. Spend some time researching options and discussing the risks and advantages to different account types. Make an appointment with a specialist at your own financial institution and attend with your student so you both learn your options.

5. Know the options to reduce college costs.

If you realize you and your child will not be able to save enough for college by the time he or she will be ready to enroll, consider how to reduce the overall cost of college. Will your student be able to live at home? Attend a less-expensive school, at least for part of his or her education? Work while attending college? Apply for more scholarships and grants? Graduate early?

6. Set goals and monitor progress.

Use what you’ve learned about college costs and financial products to set goals. Then, periodically check that your student is working toward those goals. You may consider a matching contribution or other reward for progress.

By: Iowa Student Loan

Tips to Study Smarter

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You’ve probably heard how you have to study more and learn to manage your time better before heading to college. It’s easy to say “study smarter,” but how do you actually accomplish that? Try out some of these tips to up your studying game.

  • Use a daily planner and block off time each day for studying and homework. Whether you have a test or assignment due the next day or not, use that time every day to study. Setting a routine now will make it easier next year in college when you have to do more work outside the classroom.
  • Review your class notes daily and fill in missing details. You might want to compare notes with a friend to see what each of you picked up on for clues about what is most important or to look for differences to make sure you didn’t miss anything. Don’t wait until the night before a test to look at your notes, they might make no sense weeks after you’ve written them down.
  • Set goals. If you’re reading a novel for English, figure out how many chapters you need to read per day to finish on time and aim for that goal each day. Set a goal to memorize 25 new Spanish words a day for weekly tests. Or, plan to concentrate on one math formula so that you understand not only the “how” but the “why” and can complete the formula with several different figures.
  • Study for 35-45 minutes and then take a break, no more than 10 minutes. Giving your brain and yourself a short break will give you time to digest what you have just reviewed or worked on. Plus, it will help you concentrate better when get back to work.
  • Try studying in different places. If the weather is nice, think about doing some reading outdoors. Need to really concentrate? Head to the library. If you want to be comfortable, find a good spot in your room; just make sure there are no distractions while you review your class notes. Studying in different places can help reduce boredom.
  • Do more with the material. Try turning headings into questions and answering them after each section. Or write down answers to focus questions instead of just skimming the questions before reading the sections. You might connect the topic to your own experiences, such as connecting a family vacation at Yellowstone National Park to President Woodrow Wilson creating the National Park Service in 1916, and writing a few notes for yourself. By engaging other areas of your brain, you may remember the material longer than the 30 minutes it takes you to read a chapter.
  • After tests, compare your notes with what was included in the exam. If your notes included information about what was asked, you’re on the right track. If your notes were lacking details that were covered in a number of questions, don’t be afraid to ask for help or advice from the teacher or a friend who is doing well in the class.
  • Try different study methods to find the one that works best for you. Some students thrive on reviewing flash cards while others need to reread entire chapters of their textbooks. Seeing which method works best for you now, while your workload is lighter, will pay off when you have to do more work on your own as a college student.

By: Iowa Student Loan