Student Loan Pro Tip: First Year Salary (Video)

Borrowing more than you can comfortably afford to pay back is setting yourself up for a difficult financial future. A simple rule to follow is not to borrow more to pay for college than your expected first year salary.

To learn more about student loans and avoiding debt, check out our Smart Borrowing resources: http://www.iowastudentloan.org/smartborrowing.

By: Iowa Student Loan

Find a Budgeting System that Works

When someone says budgeting some people find themselves cringing a little at the thought.

For many, the idea of a budget means less freedom and less fun. But the truth is that having a budget provides a lot more freedom in the long run.

To make things easier, you can use the word “plan” instead of “budget.” Everyone has made a plan at one time or another, whether it’s a small list of things to do, a get-together with friends, or a trip.

Making a budget is simply another form of making a plan. It’s figuring out how much you have coming in (income) and what expenses you have to cover (bills/spending). Your budget is a plan to have enough income to cover all your expenses while ensuring there’s enough left over to do what you really want to do.

Understanding how much money you have enables you to plan ahead for bigger things and provides you more freedom because you’ve already determined what you can afford and how you want to spend your money.

Budgeting can seem overwhelming but there are a lot of great tools and resources to help you get started.

Mint.com is free and does all the work for you. This online tool links to all of your accounts over a secure site and tracks income, spending and overall debt. There’s lot of features, including setting spending limits, email alerts, goal setting, and a mobile app.

Other ways of tracking your spending include resources such as Dave Ramsey’s EveryDollar, Feedthepig.org, your bank or credit union’s online system, or a simple spreadsheet. Some people even use the envelope system where cash is added to envelopes each month and bills and expenses are paid directly from there.

No matter what system you find is right for you, it’s important to track your spending and know where your money goes. The more financially responsible you are, the more freedom you will find when it comes time to do the things you really want to do.

Note: some systems, including Aspire Servicing Center’s,  do not support automated integration with sites like Mint.com and may require you to manually input your info.

Contributed by: Iowa College Access Network

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.

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

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

A Monthly Budget Can Help You Repay Loans

Low on cash and wondering how you will start repaying your student loans?

Make and stick to a budget to make your monthly payments. Check out our budget calculator for more help.

If you are not out of school and in repayment, we have other calculators to help you succeed:

If you have trouble balancing your budget, check out these tips to reduce your spending:

By: Iowa Student Loan

Decision-Making Tips for Student Loan Debt

When available financial aid and federal student loans are not enough to cover the total college costs, many families turn to private student loans. These loans can be a useful way to cover the gap, but they are not all created equal.

When you are considering private student loan debt, use these decision-making tips.

Understand how student loan interest accrues.

  • Student loans accrue interest on a daily basis. Even if the borrower is not required to make payments while in school or for a period of time after leaving school, interest is accruing, so the repayment amount is more than the original loan amount.
  • Capitalization, or the addition of accrued interest to the principal balance, occurs in specific circumstances. According to the terms outlined by the loan’s credit agreement or promissory note, any unpaid interest will be added to the principal balance at specific times. When unpaid interest is added to the principal, interest begins to accrue on new balance, meaning that interest will be paid on interest.
  • Generally, payments are applied to any unpaid, outstanding interest with any remaining payment amount going toward principal. If a payment is not enough to cover all outstanding interest, the unpaid portion of interest is carried over to be paid by the next payment.
  • Increases to the loan balance may be prevented by payments that at least cover interest any time they are not required, such as while the borrower is in school. Most lenders allow prepayment of any amount without penalty.

Know your comfort level with interest rates.

  • Would you prefer a fixed or variable rate? A fixed rate is set for the life of the loan regardless of market conditions, helping ensure payment amounts remain constant. A variable rate may go up or down, sometimes dramatically, during the life of a loan, causing corresponding changes to payment amounts.
  • Is it important to know the interest rate before submitting the application? Some lenders provide only a range of available rates before the loan application is processed; others specify the criteria to receive specific rates. In either case, the borrower is able to decline a loan and reapply elsewhere if not satisfied with the rate received.

Be aware of fees and underwriting and credit criteria.

  • Read any information about what types of fees are assessed and when. Will an origination fee be charged when the loan is received? When do late fees kick in?
  • These fees are separate from the interest rate. An origination fee is a one-time expense; late fees are only assessed for payments made after the due date. Interest is charged on the balance of the loan until it is paid off. Compare the annual percentage rate (APR) between loans for a more accurate picture.
  • Some lenders publish more information about their underwriting and credit criteria than others do. If you are unable to find details about the types of borrowers who qualify for loans or specific rates, contact the lender for more information.

Some loans carry benefits for the borrower or cosigner.

  • Borrower benefits, such as a reduction in interest rate or the ability to release a cosigner from payment obligation, are sometimes earned by making a certain number of on-time payments, setting up automatic payments or another qualification.
  • Make sure you understand all eligibility requirements for benefits, including reasons for losing them. A payment received even a day late could be enough to end benefits.

Consider the broader picture.

  • Beyond the specifics of a particular loan, think about the lender. You or your student will likely be working with this lender for many years after leaving college while repaying the debt. Does the lender service its own loans, and does it have a good reputation for customer service?
  • Other considerations might be whether the lender is focused solely on student loans or is likely to try to market other items like credit cards to you or your student in the future, as well as whether the lender reinvests in the community through employment, nonprofit endeavors and education about student loan debt and products.

By: Iowa Student Loan

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