The Student LoanDown

Barbara

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Does your current (or future) federal student loan payment seem a bit daunting? As of July 1, there's a new repayment option for federal student loans that may help.

Income Based Repayment  (IBR) is designed to help borrowers who find that their current income makes the required payments with a standard repayment term difficult to afford.

Here's how it works:

Loan eligibility: IBR is available for the Federal Stafford Loans, Federal PLUS Loans for graduate and professional students, and Federal Consolidation Loans, either with Direct Loans or a private lender like Wells Fargo through the Federal Family Education Loan Program (FFELP). However, there are a couple of exceptions: The loan cannot be in default, and IBR is not available for Federal PLUS Loans for parents or Federal Consolidation Loans that repaid a Federal PLUS Loan for parents.

Payment calculation: Through IBR, borrowers' monthly payments are calculated by taking into consideration their adjusted gross income , family size, and the state where they reside. If the IBR payment is less than the payment under a 10-year standard repayment plan, then the borrower is eligible for IBR. To see if you may qualify, calculate the payment with Income Based Repayment  and compare the payment with Standard Repayment.

How to apply: If you find that your payment with IBR may be lower than with a standard repayment period, you can apply for IBR directly through your lender. If your loan is with Wells Fargo, you can call 1-800-658-3567.

Now that you know how it works, here are some considerations for you:

Added benefits: A more manageable student loan payment is a big deal, but there are a couple other benefits of IBR. If you make qualifying payments on your loan under Income Based Repayment for 25 years, you may be able to have any remaining balance discharged. Also, if you have a subsidized loan and your IBR payment doesn't cover the monthly interest your loan accrues, that unpaid interest will be subsidized by the government for up to three consecutive years from when you first enter IBR repayment.

Possible drawbacks: Remember to consider the cons of IBR as well. A reduced payment through IBR usually means you're taking more time to pay off your loan, which can mean paying more interest over the life of the loan. Borrowers must also submit necessary paperwork each year to continue with IBR. And if you are no longer eligible for IBR, any unpaid interest that has accrued on your loan is capitalized (added to the principal balance) and will be charged interest.

Anyone have additional questions on Income Based Repayment? Leave them here!

Caroline

Garage sales are one of the things I love about summer — right up there with swimming, sweet corn and sandals.

If you're in the process of collecting supplies for your dorm room, or you're a recent college grad looking to outfit your first apartment, be sure to check out your local garage sales. While they may seem quaint in the days of eBay , Craigslist  and Freecycle , I still think hunting for bargains at garage sales is tons of fun, if you do it right.

So, allow me to illuminate for you the Art of the Garage Sale in five simple steps:

1. Keep a list of what you need. Know exactly what you're looking for at garage sales. Don't go shopping willy-nilly or you might be lulled into buying random stuff just because of its cheapness.
2. Check out garage sale listings in your local paper's online classifieds. Plan to visit only those sales that list a category of stuff you need (like "household items"). My newspaper's website  lets me automatically map the sale locations as well. Easy!
3. Look over the merchandise carefully. Once you find something you want to buy, check it out carefully: plug it in, make sure it works, etc. I once bought a brand new little bike for my son at a garage sale. Still in the box! Cool, right? Well, I didn't take it out of the box until I got it home, and realized there were no handlebars. What a birthday bust that was!
4. Don't overlook potential. Particularly if you're buying furniture, like dressers and tables, don't underestimate what a simple coat of paint or new hardware can do. If you need some inspiration, check out this DIY website.  What this woman can do with spray paint completely blows me away.
5. Bargain? Up to you. I usually pay the asking price for whatever I'm buying. Sometimes if I'm buying a whole bunch of stuff (like back when I would buy lots of baby gear) I might ask them to knock $5 off the total. I've definitely had people offer me a lower price without my even asking, but maybe that's just Iowans being nice. If you're good at bargaining, by all means, go for it.

Are you a secondhand bargain-hunter? Let us in on your strategy!

Delenie

After another long year of hard work, I've finished my junior year at UC Berkeley!  Yay senior year!

Although it's exciting to reflect back on the last three years and see where they've taken me, it's also nerve-racking knowing that in just another year, I will be working full time, living in San Francisco  or in an unfamiliar city, and managing my own finances.

As a college student, I have been living a pretty hectic but well-balanced lifestyle, trying to "live it up" as they say. However, as that experience nears a bittersweet end, I am starting to realize just how much busier — and more expensive — my life will be in just a year.

This summer, I am transitioning into the corporate world as a marketing intern for Wells Fargo's Education Financial Services team, where I will get the opportunity to provide a student voice and feedback to improve its outreach relationship with both college and high school students. My goal is to understand which channels of communication work most effectively in reaching out to the right target audience, with one source of the online channel being the StudentLoanDown blog.

Although I haven't personally experienced the process of taking out student loans (Bill Gates  is paying my way through college...LUCKILY!), I do have numerous friends who say they often feel as though they didn't have enough information or the tools to feel comfortable about their student loan decisions.

That's why I'm interested in learning more about the student lending industry: As a student loan expert in training, I hope to allay students' fears and help them make wiser decisions!

Editor's note: Delenie (no relation to Cheryl) will be part of The StudentLoanDown team through the summer. It's the first time we've had a real, live undergraduate student as a blogger, so we're excited!

Barbara

Chances are I will not utter those words again until I can order off the senior menu at local restaurants. However, today I'm happy to be twenty-five.

I had heard about magical auto insurance savings after hitting the big two-five, and now it's mine!

Most drivers with a clean driving record can see some pretty significant savings once they turn 25. So as the time came to renew my policy, I checked with my insurance agent to see what kind of savings I had coming my way (mostly so I could budget for the upcoming payment). It turned out to be a savings...just about $50. But my insurance agent thought I could find a better rate.

A few days of crunching the numbers later, I made the switch to a new insurance company and will be saving $150 on my auto insurance. That's over 20% of what I was paying! Happy dance!

For those of you who've recently turned 25 and have a good driving record, it may be worthwhile to investigate your insurance options to see if you can lower your premium. Even if you saw a slight decrease in your rates, you might be able to find an even better deal.

And if you haven't yet hit 25, first, congratulations and enjoy your youth. Second, know that there might be saving options you could reap as well. Check out these tips on lowering your auto insurance premium and finding other discounts.

Has anyone out there had a similar experience with auto insurance? Share your story with us!

Staci

This week Wells Fargo announced the results of a recent survey, which shows that parents and their 18 to 22-year-old children don't always see eye to eye when it comes to managing personal finances.

I'm not surprised by this. When I was between the ages of 18 and 22, I didn't agree with my parents about personal finances, either. They wanted me to save more and to be less reliant on them for funds. I liked my allowance and wanted to spend it on ridiculous 90s fashion trends. 

According to the survey, here are parents' top three personal finance priorities for their children:

1. Find a job
2. Pay off student loans
3. Pay off credit cards and debt

Sounds pretty sensible to me, but the young adults surveyed had other ideas. Here are their personal finance priorities:

1. Buy a car
2. Find a job
3. Buy a home

Well, at least "find a job" was on both lists.

Tell me: When it comes to money, are you and your parents on the same page?

Caroline

If you're heading to college orientation  this summer, you'll want to make the most of your visit. You'll probably be registering for your classes  and possibly taking your placement tests during orientation, but there is a lot more you can accomplish as well, if you're prepared.

Here are a few thoughts of things you might want to do:

• Prepare ahead for class registration. Before you get to orientation, browse your school's course catalogue and have a list of classes you want to take. Then make a list of backup classes. Chances are some of the courses you want will already be full. If you're ready with alternative courses, you won't panic and take some random class that you don't need or want, just to fill out your schedule.
• Visit with key people. If you have any questions or concerns about your financing, be sure to visit the financial aid office. Questions or concerns about your major or coursework? Try to schedule a visit with your academic advisor or the department head in your major.
• Visit with other students. Upperclassmen are there to help at orientation, so take advantage of their experience and ask questions. Find out about extracurricular activities that interest you and ask any other questions you have about campus life.
• Check out a dorm room. See if you can check out a dorm in your building. It's a great chance to take measurements and see how the room is arranged  (most dorms have some built-in shelving and such). This will no doubt save you some scrambling on move-in day. Also if you need to rent a loft bed, this may be the time to do it.
• Tour the town. No doubt you'll check out the campus closely while you're at orientation. Don't forget to see the town as well—learn what fun things there are to do in the area for those times when you want to take a break from campus life, or for when you have visitors.
• Parents, let go a little. These days, college orientations offer activities for parents as well as students. Parents, try your best to stick to your own sessions , and give your student plenty of breathing room. Don't be offended if your kid wants to explore his or her new world without you.

If you've been to college orientation, what did you think? Any helpful suggestions to share?

Barbara

Last week, my mail included one of my favorite things that travels to me via the postal service: a DSW reward certificate.  Yes, $10 off the next pair of pumps, wedges or sandals I purchase at the discount shoe store.

Rewards are my favorite. Seriously, if a store offers a rewards program, there's a good chance that I: 1) have the keychain barcode, etc. needed to participate and 2) patronize the store. Particularly, I enjoy:

• ACE® Rewards card , for points on purchases
• The PetSmart® PetPerks card , for in-store savings
• The RecycleBank®  offered by my garbage service for discounts and coupons
• Ebates , for cash back at select online stores

Now, rewards can be a double-edged sword. Yes, they're helpful to the consumer, but if you don't think about how you're using them, you may end up getting yourself into trouble.

To help you through the fabulous world of rewards, here are a few guidelines to make sure you reap the most benefit:

1. If you don't actually need something, don't buy it just for a reward. Notice that my favorite rewards are for things that I need/do anyway. For home improvement needs, I already go to my local ACE. Litter for Bill the cat is something I purchase at PetSmart. Buying unnecessary items to get a reward is not very sensible.
2. Don't charge what you can't pay off that month, just to get a reward. This is one thing you should consider when thinking about credit card rewards. While it's nice to get points or a discount for purchases you make on a credit card, if you can't pay off the purchase before it starts being charged interest, you may be paying more than the reward is worth.
3. Watch reward expiration dates. If you get a reward you obviously want to redeem it, so make sure you know if/when it expires. But remember my first tip: Don't buy something you may not really need just because the reward is going to expire.
4. If the reward is something you pay for, like a store membership, make sure it saves you what it costs. Back in the day, I became a Barnes & Noble member.  But at the end of my year-long membership I hadn't really purchased enough to make the membership worthwhile. Sigh. Everyone got books for Christmas that year!

Do you have any tips for making the most out of rewards programs? What are your favorites?

Oh, and it just so happens I will be venturing to Omaha this weekend and may have to swing by a DSW store. (Sioux Falls doesn't have one...DSW executives, if you're reading this, I can help you scout locations!)

Now, to find a shoe I actually need...hmmm, my rules might not apply to DSW rewards! Well, for the sake of shoe lovers everywhere, I hereby declare DSW an exception. Just try to make sure the shoes you do buy are on sale!

Rachel

After my last post, one of our readers correctly noted that it’s not super obvious how to set up a text alert. In addition to replying to his question, I thought I would share it with all of you too.

Here’s how you can set up a Wells Fargo account alert to be sent to a mobile device:

1. Sign on to Wells Fargo online banking.
2. Click on Account Services tab.
3. Under ‘My Profile’ click on Update Contact Information.
4. Enter a number for your mobile device. Your mobile device’s email address is your ten-digit cell phone number @ your provider’s address. Below are a few examples. If your provider is not listed, you should contact them directly.

5. Click on the Messages & Alerts tab.
6. Click Set Up/Modify Alerts.
7. Select the account you want to establish alerts for.
8. Then set up or modify your account alerts.

There are a number of alert options available. You can be notified when your account balance drops below a certain amount, which is helpful in avoiding a sticky overdraft situation. You can also receive your account balance each day or week, find out when a specific check has posted to your account, be notified when a direct deposit is posted to your account, get payment due date reminders for credit accounts and more.

Have any of you already set up text alerts for your accounts? If so, tell us how they work for you.

Caroline

Summer is just beginning for you graduating seniors — time to relax and enjoy. But it's also time to start planning for college.

Here are a few tips to keep you organized so you’re ready for class when fall rolls around.

• Make sure you’re set for orientation. Most colleges hold orientation over a couple days during the summer. Be sure you’re registered and ready to go. This is probably when you’ll sign up for your fall classes, get your college ID and take your CLEP tests. 


• Save money from your summer job. You’ve probably heard about "saving for college" a million times, and it probably always seemed like an abstract concept. Well, it’s not abstract anymore. Think of everything you just might like to buy  in your first semester of college — a new sweatshirt, pizza, gas for your car. It’s going to add up quickly and you don’t want to put these things on a credit card. So think about these basics every time you’re tempted to spend this summer, and know that you’re going to need the cash soon enough.


• Set up a bank account. If you don’t have one already, be sure you’re set with an account and a debit card. Talk it over with your banker or your parents and make sure you understand the details of your account, how to bank online, etc. Don’t feel dumb asking questions — you’d be amazed at what people your age (and older) don’t understand about banking and money. By the way, we have resources that can help! 


• Make sure your financial aid is in order. If you have any doubts about your financing, call your school’s financial aid office. They’ll be happy to help you out. Better to iron things out now, rather than during the first week of school, when you have a million other things on your mind.


• Buy supplies slowly over the summer. Money is tight for almost everyone these days. And your parents may not want — or be able — to take you on a big-box store  run a week before classes start. Make a list of everything you’ll need for college. Go beyond the obvious sheets, towels and laundry detergent and try to think of even the most mundane items: basic tools , an electric power strip, a container for your bath supplies, etc. Once you’ve got a really detailed list, raid your parents’ garage and laundry room to figure out what you can repurpose from home and cross those things off your list. There are also things you can probably share with your roommate (an iron and one of those mini ironing boards, perhaps?). Now with your list more lean and mean, start to accumulate those items slowly over the summer. Maybe buy one or two things each week to spread out the expenses.

Follow these tips now, and you’ll probably be a lot more relaxed in those last weeks before you head off to college.

In the meantime, share your stories with us: What are you doing over the summer to prepare for school this fall?

Staci

Last week Barbara laid out a number of options for borrowers to extend or postpone student loan repayment — important information for new grads to have as they enter the real world. This is a topic that we get lots of questions on — probably second only to how to lower student loan interest rates.

But I'm going to play devil's advocate  here, because I think it's important for you to consider another perspective. I'm going to tell you not to take advantage of these options unless you absolutely have to.

Michelle Singletary, one of my most favorite and down-to-earth personal finance columnists with The Washington Post , had this to say about extended student loan repayment in a piece published on May 17, 2009:

But can I give you some hard but well-meaning advice if you're one of the many graduates saddled with student loans?

Instead of immediately opting for repayment plans that will stretch your payments out until you're in middle age, try to find other ways to handle this debt.

I know these are tough times. Nonetheless start your loan repayment as soon as possible, even if it means taking a second job, or a roommate (or two or three), or yes, dare I say, moving back home for several years.

You could handle this debt if you delay going on to graduate school, which would only pile on even more debt. If you are going to have trouble finding a job to make the monthly payments on your undergraduate debt, how in the world are you going to find employment to service tens of thousands more as a result of an advanced degree? Trust me, an advanced degree doesn't guarantee a big salary.

You don't get to buy a new car, an upgraded wardrobe, waste your money on liquor at happy hours, or take vacations until this debt is extinguished.

And don't look at me with that face. Only after you've exhaustively scanned your budget and cut every possible expense (such as deleting the texting option on your mobile phone) should you consider extended repayment options.

Tough love from Michelle, but her advice is spot-on. Here's how she ends her column:

I've met an incredible number of people -- too many -- who really could have paid their student loans under the standard payback period but because they didn't want to live frugally, saw their loan balances jump significantly over the years.

If you truly can't afford to fully pay what you owe, take advantage of the extra breathing room. But remember the more you delay, the more you may pay.

Something to think about.