Financial Know-How for New College Students

If you are a prospective college student or already in college, you should know that there is a whole industry out there waiting to take your money. As a new college student, it is important that you pay close attention to how your money is being spent.

It can be very easy to lose track of your money, especially with the stress of being on your own for the first time. Here are some tips for gaining financial know-how if you are a new college student.

New College Students – Know that You Are a Target

If you are a new college student, you should know that there are a lot of people out there who think you are an easy target. Credit card companies, private lenders, cell phone companies, and yes, even booksellers, all roll out promotions and advertisements in the hopes of catching the attention of young college students.

Walk through any college or university during the first week of classes and you are bound to come across dozens of tables set out to get college students attention. Know that these companies are relying on your financial inexperience. Watch out for promotions that seem too good to be true. They probably are.

High Interest Credit Cards – The Bane of the New College Student’s Existence

What is perhaps the most important thing to remember if you are a new college student when it comes to taking charge of your finances? Credit cards, or perhaps more specifically, high interest credit cards.

Did you know that credit card companies will specifically target college populations? Credit card companies are well known for drawing in college populations with promotions, maybe a college sweater or gift card, and with their promotional annual percentage rates. Note the word ‘promotional’.

That means that what seems like a very good interest rate may only last you for a few months, and then the credit card takes on much higher interest rates. Be very wary of so-called student credit cards with promotional low interest rates. Read the fine print very carefully, and never sign up for a credit card just because of the cool promotional gift. It could end up costing you hundreds of dollars!

Making Sense of Your Financial Aid Package

Financial aid packages can definitely be confusing. There are subsidized student loans, unsubsidized student loans, work-study funds, grants, and scholarships. When it comes to understanding your financial aid package, it can be tough to crack the jargon that usually accompanies most of these packages.

Let’s tackle one of the most confusing aspects: the difference between subsidized and unsubsidized student loans. On the whole, subsidized federal student loans are the most desirable. These allow you to lock in low interest rates, and do not begin to calculate interest until after you graduate.

Visit Your College’s Financial Aid Office

It happens to almost every college student. Inevitably, there will be a problem with your financial aid package, there will be a problem with your financial aid funds, you will be asked to turn in supplemental forms, or you will simply not understand part of your package and you will want to ask a question.

By all means, try to ask any questions you may have about your financial aid package before school starts. You don’t want to have to stand in the mile long line that trails out of the financial aid office on the first few days of school across every college campus in the United States.

If you have to stand in line, try to get there first thing in the morning, even if it means dragging yourself out of bed. Also, make sure you bring every piece of information you may need, including any forms, correspondence, and tax forms that you may be asked for.

Wading Through the Financial Aid Options for College Students

The world of financial aid is often one of the most dreaded parts of getting ready to go off to college. Unless you have been offered a full tuition scholarship well ahead of graduation, chances are you will have to do the work of getting financial aid to fund your college years.

Financial aid can definitely be one of the more confusing aspects of going to college. Here are some tips to help you wade through the financial aid options for college students.

Your First Stop – Fill out the FAFSA Form

What is the FAFAS form? As most college students know, the FAFSA should be your first stop on the road to securing financing for your college years. The FAFSA form is the Free Application for Federal Student Aid. It is a federal form that you should fill out roughly a year before you plan to attend college or university.

The FAFSA form will ask you for personal information and information about your family’s income. By filling out the FAFSA in a timely manner, you automatically become eligible for federal student aid, which may include Pell Grants (aka, free money), subsidized student loans, unsubsidized student loans, and financial aid in the form of work-study funds. Pick up the FAFSA form at your local library or college financial aid office. You can even fill out the FAFSA form online.

Seeking Out Private Funding Sources

Another very popular option is to seek out financial aid in the form of private funding sources. Private funding may mean seeking out scholarship assistance from private companies, which can range from the local supermarket chain to a major bank corporation.

Most of these private funding sources require that apply with them directly for a scholarship contest of some kind, which may include an essay competition or simply an application with reference letters. Make sure to follow directions carefully, as each company has different rules and regulations.

Work Your Way to a College Degree – Taking Advantage of Employer Tuition Assistance

Many employers offer tuition assistance as part of your benefits package. Every employer is different, so ask your human resources representative if you think that they may be able to help you with tuition. If you are unemployed and looking for a job, consider seeking out employers who offer tuition assistance as part of their benefits package.

Seek Out Specialty Scholarships

Before you go the route of private lending, make sure to put your best effort forth when it comes to finding suitable scholarship opportunities. Just because you didn’t make straight A’s in high school does not mean that you are not scholarship material.

There are many specialty scholarships out there that target specific majors and industry. Consult the thickest scholarship finding guide you can find for opportunities that suit your situation.

Your Last Stop – The Private Loan Industry

Finding money for your college years is always difficult if you or your parents do not happen to be independently wealthy. However, there are many options available for those who can’t get their hands on a full tuition scholarship, federal, private, or otherwise.

There is a growing private loan industry that is now making many loans available for families and college students. However, if like many college students, you find yourself having to take out a large loan to pay for your studies, you will need to do some serious interest rate shopping.

Always opt for a federal subsidized student loan if possible, as these usually lock in a low interest rate and offer the best rates. However, if this is not possible, shop around with different lenders to find the one with the lowest interest rate and with the most flexibility. Make sure to read all the fine print.

Funding Options for College Bound Students

With so many funding options for college bound students, which one is best for you? Paying for college may be the largest expense a family can have, especially for families with multiple children. There are so many funding options to assist you. Here are some brief descriptions of your options.

A Coverdell educational savings account is a popular plan for college funding. You can contribute up to $2000 per year per child. If you use these funds for qualified education expenses, the earnings are tax deferred and free of federal tax. You select the investments for optimal flexibility.

Section 529 plans are state-sponsored plans that can be used to pay college expenses. This is a tax-advantage plan for approved education-related expenses such as tuition, room and board, supplies and fees. The state generally hires an investment firm as a program manager who provides various investment choices.

You invest in the appropriate portfolios that match your investment time-line and risk tolerance. The two types of 529 plans are prepaid and savings. Prepaid plans (independent) let you purchase tuition credits at member colleges, at today’s rates, for future usage. Savings plans have growth based on the market performance of your investments.

UGMA/UTMA accounts are custodial accounts opened on behalf of a minor. This gift is considered irrevocable with all withdrawals required to be for the minors benefit. The balance of the account is turned over to the minor at the age of majority.

Grants and scholarships are “free money” options that don’t have to be paid back. This is a debt-free way to fund an education. Financial need typically must be demonstrated to receive a grant. Scholarships are usually based on merit.

Work-study programs provide part-time employment from the federal government to earn money for college. This program is not only in place to help to fund college, but a work-study job can provide essential work experience.

Federal student loans are low interest, long-term loans for students. These loans offer attractive repayment options including being able to post-pone payments while attending college and in times during repayment of financial difficulty. There are federal loans for both parents and students. The best know ones are Stafford Loans for students and PLUS for parents.

A lot of people turn to these programs for their funding needs. You can also often find private loans that have low interest rates for college students. Be sure to choose a reputable lender who in knowledgeable on loan choices if using a private lender.

Tuition payment plans are an interest and debt-free way to spread payments over several months. Not all colleges offer this plan. Typically used by families who have income that will cover the gap between the amount they are billed for college and the amount of financial aid received.

Assets of a family are often used to fund college. IRA’s, savings accounts, 401k plans and stocks offer a debt-free way to fund an education. As a word of caution, before you liquidate one of these accounts, consider the earnings you may be missing out on. Use this number as a comparison to the amount of interest you would incur from a student loan plan.

Credit cards are often a popular but poor choice for funding a college bound student. This is for the simple fact that interest rates can be high. Use this funding choice with caution.

It’s important to think about your own situation as you plan to fund your education. Establishing a savings plan at an early age will make a huge difference. There are lots of funding options for college bound students. Which one makes the most sense for you?