Comparing Salary to Debt

How do you know if you can afford a particular college or how much is too much to take out in student loans? One key indicator recommended by experts is a monthly student loan debt-to-income ratio of 8%–12%. An easier way to think of this is that total student loan debt, for all years of college, should be no more than the expected first-year salary.

Iowa Student Loan’s Student Loan Game Plan is an interactive online tutorial that walks students through this concept, as well as several other important points about borrowing for college, including:

  • Stories about the issues faced by real-life borrowers when they took on too much student loan debt.
  • Common choices students make that can affect their overall student loan debt level, including how long it takes to graduate, working during college, living arrangements and monthly spending.
  • A realistic starting salary and yearly borrowing level for specific college majors.
  • The ability to see how making voluntary interest payments during college affects total estimated loan repayment and monthly payment amounts.
  • A sample monthly budget for after college that includes income based on the user’s choice of major, student loan payments and national average expenses.
  • Tips for reducing expenses and the need to borrow to pay for college costs.
  • An action plan to commit to actions students can take before and during college to reduce overall debt levels.

Make your Student Loan Game Plan now.

By: Iowa Student Loan

Five Ways to Prepare for College Financing in Middle School

College may seem a long way off when your student is in middle school, but it’s time to start preparing to pay for education after high school. Use these tips to help you.

1. Know the goal. Although the cost of attendance tends to increase yearly, it’s important to have a realistic idea of the actual expenses your student will face. Discuss the possible types of institutions your student may consider in a few years, and then explore the current costs. A college website generally provides set figures for tuition, fees, housing and meals and average numbers for transportation, books, materials and personal expenses.

The cost of housing and meals can be as much or more than annual tuition and fees. Be sure to understand if the types of institutions your student may attend require students to live on campus or purchase a meal plan for a year or more.

2. Understand—and discuss—your financial situation. Help your student consider and apply to schools your family can afford by being honest about your current and future situation. Know how your assets will be considered when your student applies for financial aid and how much you are able to help your student financially. A college’s net cost calculator will provide an idea of actual costs for your student for the current year, but be aware that certain circumstances, like a family-owned business, may skew results.

3. Evaluate your savings options. Whether or not you’ve already put aside money for your child’s college expenses, learn about the potential savings options and the benefits and advantages of each. The most popular options include:

  • 529 plans, also called college saving accounts.
  • Education Savings Accounts (ESAs), such as Coverdell.
  • Saving accounts.
  • Savings bonds.
  • Certificates of Deposit.
  • Stock, mutual fund and other investment accounts.
  • Employer-sponsored education plans.
  • Trust funds and other inheritance or gift options.

4. Plan to minimize or avoid borrowing. The cost of a college education has risen to a point that it’s often not feasible for a student to finance it completely with student loans. Become familiar with these points:

  • Federal student loans carry an annual limit, with dependent students currently limited to $5,500 in total Direct Loans for the first year.
  • Most private student loans require a creditworthy cosigner, who will be responsible for the debt if the student fails to repay it.
  • Student loans are generally not dismissed through bankruptcy and remain the borrower’s and cosigner’s responsibility even if the student doesn’t complete a degree or obtain a job that pays well.
  • Student loans accrue interest every day, and any unpaid accrued interest may be capitalized, or added to the principal balance, at certain times. The new balance will then accrue interest daily.
  • The total amount to be repaid is usually more than the total amount borrowed, due to the daily accrual of interest and any origination, late or other fees.
  • Experts recommend total borrowing for a student’s education be limited to no more than the expected first-year salary.

5. Prepare for student contributions. Your student can help pay for college in several ways, beginning now. Discuss these with your student to get started.

  • Earning money before college. Will your student be able to work during high school? Consider transportation issues, available time outside of school and activities, and the student’s abilities.
  • Earning money during college. Again, your student’s ability to earn money during college will depend on several factors.
  • Earning scholarships and grants. These sources of college funding don’t need to be repaid. You can help by investigating scholarships that are currently available and reviewing the eligibility requirements. Your student can then take any steps needed during high school to ensure consideration.

By: Iowa Student Loan

Reading for Success

Even with modern technology and the changing pace of the world, reading — and understanding the text — still plays an integral role in success in college and career. But, more than half of the 2016 high school graduates who took the ACT standardized test didn’t meet ACT’s college readiness standards for reading.

These tips can help ensure students are ready to read for success.

Have books and reading material handy. This is easier than ever with e-books, online blogs and magazines, and apps for handheld devices. Whether you prefer electronic or print materials, keep them close to you at home and away to pick up whenever you have a free moment.

Make reading a family activity. Seeing others read for pleasure and information encourages students to do the same. In addition, family members who read can discuss what they’ve been reading and connect ideas and themes to what’s happening in their own lives, an important skill.

Spend time around books. Although it may be handy to shop for new reading material or reserve a book through the local library online, many lifelong readers spend time browsing through physical books at libraries and bookstores. This activity can raise awareness of unknown authors, different genres and new releases.

Get the most from your reading. Interact with reading material by posing questions as you read, making connections to your own life and the world, and rereading any passages that leave you confused. Other tips for reading textbooks or other research material include:

  • Check for comprehension by testing yourself and discussing with others.
  • Learn to properly take notes or highlight text to call out the important points.
  • Look up words you don’t know to increase vocabulary and understanding.
  • Try the SQ3R method of survey, question, read, recite and review.
  • Tutors are available to help improve reading comprehension for testing and schoolwork.

Read a variety. No matter your reading goals, one of the best ways to become a better reader is to read a lot of different types of material. Choose some easy reading and some challenging reading for fun, knowledge and discussion. Several different lists of books to read before college are available online, and fiction and nonfiction bestseller lists can also be a good guide. But don’t be afraid to pick up anything that piques interest.

Know how to find what you want. Library and research skills are important to discern reputable sources for research or studying, locating enjoyable materials and expanding horizons. A librarian or media specialist can help students, and classes that require independent reading, writing and research is a good way to continue to build on these skills.

By: Iowa Student Loan

Getting Involved: Nine Reasons Why

Opportunities to become involved in extracurricular, athletic and work activities abound. Here are nine reasons you should take advantage of at least a few of those opportunities.

1. Discovering new possibilities. Involvement in an activity could spur a lifelong passion, introduce career options and help define identity. For example, many students first find a love for debate or technology through school activities

2. Easing transitions. Moving from elementary to middle school, or from middle to high school, can be a big change in routine, relationships and environment. Continuing or discovering activities can help make the change go more smoothly.

3. Relieving boredom. Being involved in an activity often means hours of practice, preparation and, sometimes, travel, which leaves less time for boredom or less-desirable activities.

4. Relieving academic pressure. As the school work load increases, it may seem counterintuitive to spend more time on other activities, but the outlet is often a needed break from homework and studying.

5. Increasing academic performance. Research indicates that being involved in activities outside the classroom may play a role in improving grades and standardized test scores.

6. Building important skills. No matter what the future brings, skills like teamwork, cooperation, creative problem-solving, decision-making and leadership will always be important. Many extracurricular activities allow the development of these skills that are transferrable to school, family and future life.

7. Making connections. Whether it’s a coach, a teammate, a parent or a judge, involvement in many extracurriculars brings students into contact with others who may become valuable connections later.

8. Improving college applications. If college is the next step after high school, a record of involvement over several years can demonstrate a continued interest in a particular cause, activity or event. Colleges and universities appreciate seeing applicants who demonstrate that they are successful outside the classroom and will become active members of their academic communities.

9. Finding something for everyone. A variety of activities are available for students of all backgrounds and circumstances, including:

  • School, club or community sports teams
  • Special interest clubs like card or chess clubs
  • Academic-related activities such as competitive math or science teams
  • Fine arts groups, like newspaper or social media, drama, dance or music
  • Student government
  • Volunteering for nonprofit and service organizations
  • Career-related internships and jobs
  • Other jobs such as retail, babysitting and tutoring

By: Iowa Student Loan

Understanding Family Contributions

An integral part of the college financial aid process is an expected family contribution, or EFC. This number is the basis for the amount of financial aid made available to a student. The following Q & A addresses many of the common concerns about EFC.

Q: What is an EFC?

A: The expected family contribution, or EFC, is calculated according to a formula set by law. Each college or university a student applies to uses this formula and the information you provide to determine financial aid, including federal, state and institutional grants, scholarships, work-study and loans.

The EFC is not necessarily any of the following:

  • The overall cost of attendance for any specific college.
  • The amount your family will pay to any specific college.
  • The amount your family feels comfortable or is able to contribute to college.
  • The same for multiple institutions.
  • The same as another student’s EFC, even if it seems the other student is in a similar financial situation.

Q: How is the EFC determined?

A: The expected family contribution, or EFC, takes into account your family’s taxed and untaxed income, assets, benefits (such as unemployment or Social Security benefits), family size and number of students in college at the same time.

Q: When will the EFC be determined?

A: Each year, the U.S. Department of Education opens the Free Application for Federal Student Aid (FAFSA) for new and returning students who will attend college the following academic year. After submitting a completed FAFSA and required financial information, families receive a student aid report showing EFC.

Some private colleges require that incoming students complete a separate financial aid process that generates an EFC.

Both of these may be completed as early as the fall before the next academic year and usually are available into the beginning of the applicable school year.

Q: How can I estimate the EFC?

A: Federal Student Aid offers the FAFSA4caster to help families estimate eligibility for federal student aid. Families using the FAFSA4caster use a specific college’s official cost of attendance, family information and expected state, institutional and private aid (such as scholarships) to create an EFC. You can compare EFCs for different colleges or with different aid scenarios.

Colleges also provide a net price calculator to help families estimate the amount of aid they might receive. To find a calculator for any specific college, browse the financial aid section of the school website or visit the U.S. Department of Education’s net price calculator site.

Q: When should I estimate the EFC?

A: Families may begin estimating EFC as early as the student’s middle school years to get an accurate idea of current costs, available aid and expected family contribution. Each college’s available funding and costs of attendance may change on a yearly basis, and revisiting EFCs over several years can help families create a more accurate expectation of net cost.

High school juniors and seniors may use the calculators described above to help determine whether they can afford particular colleges before applying.

Q: Where do I find the official EFC for a specific college?

A: Colleges provide a financial aid packet to accepted students in the spring before the beginning of the next school year. The financial aid packet lists the amount the college expects the family to contribute toward the cost of attendance, as well as the financial aid available to the student.

Q: Why is the EFC different than the amount my family can really afford?

A: The tax information supplied on the FAFSA, which is used to calculate EFC, is from the “prior prior” tax year. A student entering college in 2019 would provide the family’s 2017 tax information, in addition to other, current financial information. If a family’s financial situation has changed significantly since the applicable tax year, the EFC may not reflect that.

In addition, the EFC may consider assets such as family-owned businesses, real estate, investments or retirement funds that the family is not able or unwilling to free up for college expenses.

Q: Can I appeal the EFC?

A: If your family’s financial situation has changed since the applicable tax year or since completing the financial aid process, you may wish to contact the financial aid office at any college(s) under consideration to determine next steps.

By: Iowa Student Loan

Getting Back in the Habit

After a summer break, the first few days of a new school year can be a big adjustment. Help yourself by preparing now with these tips.

Get back into the routine. Start waking up at the time you need to get up to get ready for school or activities. Set your alarm and go through your school morning routine to be sure you’re adjusted. Work on getting to bed at a reasonable time as well.

Notify your employer. If you’ve been working over the summer, now is the time to speak to a manager about adjusting your shift times or to put in your notice. Give your employer plenty of time to rearrange schedules.

Organize your space. Get ready for homework by cleaning your accustomed study area. Make sure you have the space and materials you’ll need to be successful this year.

Gather supplies. Take the time to inventory your school supplies, from paper and notebooks to binder clips and calculators. Replace or purchase as needed.

Clean out your closet. Go through your clothes to see what you no longer need and what’s missing. Take advantage of any sales tax holidays and back-to-school sales to stock up.

Prepare for activities. Get ready for your extracurricular activities for the coming term by cleaning, repairing and replacing equipment as needed. Ensure you have the clothing and other items you’ll need.

Organize your schedule. If you haven’t previously done so, it’s not too late to find a homework and activity organizer that suits you. You may prefer a paper planner, a shared online calendar or an app for your phone or tablet. Whichever you choose, start off right by entering times and commitments you already know.

Prepack. Put all the items you’ll need the first day of school together. Put your supplies and materials in your bag and lay out the clothes you’ll wear. If you’ll take your lunch or other food, have the supplies on hand to reduce last-minute stress.

Make a dry run. If you will be taking a new route to school, driving to school for the first time or starting at a new building, make a practice trip to get the timing down and avoid any pitfalls.

By: Iowa Student Loan

The Final Countdown: Helping Your Student Prepare for College

As your student prepares to head off to college for the first time, take a break from building the dorm mountain. Spend some time in the last two or three weeks to be sure your student knows how to handle the following tasks.

1. Manage Money

  • Manage checking and savings accounts. Your student should know how to check the balance, calculate upcoming payments that haven’t yet cleared, make a deposit and take money out. Online features and smartphone apps are now widely available, meaning that your student may not ever need to step foot in the financial institution’s building. Although checks are increasingly rare among younger adults, your student may have the need to handle them occasionally. Demonstrate how to fill out checks to pay someone else and how to endorse any checks received.
  • Use a payment card. In most cases, consumers, instead of cashiers, now swipe or insert a credit, debit or student card when purchasing items. Your student should know how to use a card with chip technology, whether to select debit or credit, and what to do if a card is denied. Remember that many card companies will send a text or email to verify first usage and that anyone traveling or making large unexpected purchases should notify the card company beforehand.
  • Handle other types of payments. College students are generally tech-savvy and often rely on digital payment services, such as Venmo or PayPal. Work with your student to explore these services and understand how to protect him- or herself from fraud.

2. Get Where They’re Going

  • Maintain a vehicle. If your student will have a car at college, go over the owner’s manual and maintenance schedule to check for frequency of service for oil, tires, filters and more. Help your student locate a reputable service location near campus. Visit org and determine the car’s safety and maintenance features. If you have a service such as AAA or dealer-provided coverage, provide your student with contact information and discuss what to do if the car doesn’t run or needs to be towed. In addition, go over what to do in case of an accident or being stranded.
  • Use public transportation and ride share services. If your student hasn’t already experienced them, take a practice run on the types of public transportation used near the college. These could include buses, trains and subways, and taxis. Check out the types of ride share services available near campus and help your student download and try out appropriate apps. Besides ride services like Uber and Lyft, your student may be able to access other systems like bike shares, car shares or shuttles.
  • Negotiate flights and long-distance travel. If your student isn’t an experienced flier, help him or her understand how to book a ticket, check in online or at the airport, check or carry on luggage, clear security, and find gate and flight information. Students should know what to do if they miss a flight or a flight is delayed or canceled. In addition, students who will be traveling should know the types of documents and identification needed. Help your student understand how to reserve a hotel room, check in and out, use a card for incidentals, and find transportation services.

3. Visit the Doctor and Other Providers

  • Understand medical, dental and vision insurance. Go over the various cards and types of insurance your student will be using at college. Explain any co-pays or deductibles, and help your student find providers that are in the insurance company’s network to avoid extra costs.
  • Make and check in for appointments. Your student should know how to schedule an appointment or arrange care when needed. Talk about the information he or she will need to provide when seeing a health care provider, including insurance information, previous issues and treatment, Social Security number and emergency contacts.
  • Fill or refill a prescription. Work together to choose a local or online pharmacy and, if possible, explore the pharmacy’s online services and apps to help your student prepare to manage medical prescriptions. Discuss the advantages and disadvantages of generic medications, online providers for medicines and optical products, and any co-pays, deductibles and reimbursement process.

4. Clean Up

  • Do the laundry. Your student should know how to handle basic laundry tasks like treating stains, separating colors (or using special sheets to prevent bleeding dyes from ruining other items), adjusting wash temperature and time, and folding or hanging clothes. In addition, your student may need to know how to iron or steam certain items, which items should be dry-cleaned and where to take them, and how to make basic repairs like stitching a hem or replacing a button.
  • Clean living areas. Your student may be responsible for helping to clean shared living spaces in a suite-style dorm or in an off-campus apartment in addition to his or her own area. Explain the types of cleaning products and what each is suitable for, as well as a good cleaning schedule to prevent issues like allergic reactions or spreading illness. Set up a trial run of cleaning the living area, bedroom, bathroom and kitchen at home.
  • Washing bedding. Talk about the importance of clean bedding and towels for students living in close quarters and for your student’s own personal hygiene. Decide together on the number of towels, sheets and other items your student should take to minimize needed storage while having enough clean items between laundry days. Share your own tips on how to wash large bedding items like comforters and how to hang towels for drying between uses.

See more about college prep for parents and students.

By: Iowa Student Loan

Factors to Consider When Choosing a College

Header image: Factors to Consider When Choosing a College

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.

Choosing the college you want to attend is a big decision and there are many factors that you should consider when making the decision.

Future Career
What do you want to do when you finish college; what’s your ultimate goal? You should answer this question and then find colleges that will help you reach the answer. Your career path is something that you will spend 30-40+ years developing and the best training and foundation for that career comes in the form of the right college or training program. You want to make sure the one you pick has everything you need to be successful in your future career.

Campus Programs/Majors
Having everything you need to be successful in your future career boils down to the right program or major to get you into your field. A mistake that many students make is selecting a college for campus amenities or connections with family or friends, and then finding out that the college doesn’t have the program or major they really want. This can cause a lot of stress and anxiety due to picking a different major or transferring to a different school. Transfers can cost more as well because you may add on an extra year or two to complete your degree. Make sure that the colleges you consider have the program or major that is right for you, and that the program is in line with your career goals.

Campus Visit
Try and visit every campus you are considering. While websites and guidebooks give you an idea of what campus will be like, only an in-person visit will give you the full picture. Schedule a visit with the admissions office and personalize your visit by:

  • Attending a lecture in your chosen major
  • Meeting with faculty or students in your chosen department
  • Do an overnight visit and experience campus life
  • Sit down with a financial aid advisor and discuss cost and scholarship opportunities
  • Try the food in the cafeteria and check out the career center, student life, and the dorm
  • Ask lots of questions (download a Campus Visit Guide at icansucceed.org/materials)

Financial Aid
Make sure you are picking a college that is within your means and allows you to graduate with an affordable degree. Your basic college budget formula is this:

Starting Salary = Overall Borrowing Limit

This means that if you will make an average starting salary of $25,000, your total student loans for the full time you are in school should not exceed $25,000. This keeps your student loan payments at a reasonable level for repayment once you graduate. Make sure you are picking a school that is affordable for the life and career you plan to have after graduation.

Choosing a college can seem overwhelming but breaking down the decision into these categories and asking questions will help you make the best decision based on your future goals and set you up for future success.

Contributed by: Iowa College Access Network