My niece is already getting ready for college next fall—her test scores are in, the acceptance letter is taped to the mirror in her bedroom, and now we are working our way through student loans. As we were discussing her options, I asked her to make sure she considered loans that had the best interest rate in addition to loan terms.

She looked at me like I was speaking another language. "What do you mean interest rate?" she asked. "The only interest I know about is what my bank pays me on my savings account and a CD I have."

Whoops—I realized we had an information gap here on interest! This called for a quick "interest" conversation.

OK, let me make this easy. When you deposit your money in a savings account or CD(Certificate of Deposit), the bank or credit union pays you for having that account. They use your money and other depositors' savings to lend money to their other customers, so they pay you interest to use it. Think of it as rent—the bank is renting your money. The more money you put in and the longer you keep the money in your account, the more interest you'll get paid over time.

Now the flip side is this: When you borrow money for something you want, like an education, a car, a home, etc., the bank or credit union charges you interest. Here, you're renting the money from the bank, so you pay the interest. The interest a financial institution charges for loans is not only how they make money but also how they have money to pay you interest on your savings. And the interest rate you pay will vary depending on how much—and for how long—you borrow.

After a couple of minutes, my niece looked at me and said, "Wouldn't be easier just to say when I deposit money I earn interest, and when I borrow money I pay interest?"

She's right—fewer words and right to the point.

Anything about earning or paying interest you find perplexing?

Posted by Pam at 09:41 AM |  Permalink |  Comments (0)
Found in Financial education, Parents, Paying, Post-college, Preparing, Student loans, Wells Fargo Bank

It’s that time of year. I'm not talking about the holiday season . No, what I'm speaking of is likely the antithesis of this light-decorated, tree-trimmed, cheerful season that is upon us.

It's the time of the year when May graduates come to the end of their grace period on their student loans and begin the daunting task of repayment. Not the kids "jingle belling " and "much mistletoeing " you were expecting, huh?

The first payment on Federal Stafford Loans  is due within 60 days of your six-month grace period's end. So, what should you do when that "welcome to repayment" letter arrives?

First, don't freak out. In a perfect world, you'd be settled into your first job and have saved money during your grace period in anticipation of your first payment. Well, the real world's not perfect. You may not have your life in a neat and tidy bow  quite yet, but it's OK.

Second, remember that your lender is there for you. Now is not the time to hide under a cozy comforter and expect your student loan obligations to go away, so ask your lender for help. Your lender understands that you might be having a tough time as you begin repayment—and will talk you through your options.

For example, you may be able to take advantage of other repayment schedules that start out smaller and increase over time or those that are based on your income. Another option is to talk to your lender about requesting to temporarily postpone payments because of financial hardship. Just remember that this option may cost you more over the life of the loan because interest continues to accrue and will get capitalized (added to the balance of your loan) once you resume making payments.

You can also ask your lender about consolidating your student loans. For some borrowers, this is an excellent option tosimplify repayment. We're planning on delving deeper into consolidation soon—so keep reading.

And remember, you can talk to us and other readers, too. When it comes to repayment, what's on your mind?

Posted by Barbara at 09:19 AM |  Permalink |  Comments (0)
Found in Financial education, Paying, Post-college, Preparing, Student loans, Wells Fargo Bank

Earlier this month I had an extremely hectic travel schedule and—gasp!—failed to respond to this post’s two comments:

Hi, I am a prospective student looking to return to school to get my degree. My situation is this: I am married with two small children. We rent but would like to soon buy a home. I'm concerned with how taking out student loans would effect my husband's and my chance of buying a house. I need some advice as to whether or not it would be smarter to buy a house first and put off my education, or go ahead and return to school.

Posted by: Karen | November 4, 2006 03:48 AM

Hi

wanted to confirm what is the maximum duration of loan can i get for education abroad?

Posted by: manishb74 | November 5, 2006 09:23 PM

Karen and manishb74, please don’t give up on me! Both of these are smart questions—ones the entire Student LoanDown audience can benefit from. I am in the process of doing some research with our Wells Fargo Home Mortgage group and with other financial aid professionals. I hope to have answers for you soon.

Posted by Staci at 10:44 AM |  Permalink |  Comments (0)
Found in Financial education, Paying, Preparing, Student loans, Wells Fargo Bank

Since I moved back to South Dakota six years ago, I no longer have to travel at Thanksgiving. But I clearly remember the times that I did brave the airlines or the roads for turkey, green bean casserole , pumpkin pie (with Cool Whip® ), and a huge helping of family dysfunction. Usually the trips were chock full of adventures—although to be fair, nothing can compare to Steve Martin’s experience in "Planes, Trains & Automobiles." 

When I was in college , there was a "ride share" board in our student union, and students used it to find transportation home for breaks and holidays. Drivers would post where they were going (i.e., metro Twin Cities; Lincoln, Neb.) and when they were leaving (i.e., Tuesday at 3 p.m.; after the last Bio lab). Students needing rides could contact the drivers or post their own requests.

I didn’t need a ride—my family lived across town —but I often marveled at the effectiveness of this simple system: Share a little, get a little. Those needing rides got where they needed to go, and the drivers got funds for gas and additional people power for digging the car out of a snowbank (typical for Midwestern Thanksgivings).

No matter how—or even if—you travel for Thanksgiving, here's wishing you and yours a bountiful holiday!

Editor’s note: The Student LoanDown team is taking the rest of the week off to cook, eat, and contribute to the economy. We’ll be back the week of November 27.

Posted by Staci at 09:08 AM |  Permalink |  Comments (1)
Found in Financial education, Paying, Student loans, Wells Fargo Bank

In a previous post, I told you I was going to try to save for my unexpected expenses. A goal everyone should have. Update time!

In my quest for that cushion of savings, there was a change in my plans—a 46% pay increase. Exciting, huh? I've been bumped up from being an Intern with Wells Fargo to Communications Associate. My business cards are on their way!

Obviously this helps my savings goals ... a lot. Living on my previous salary, I did just fine paying my living expenses—rent, utilities, food, etc. So I don't really need the extra money to support my standard of living. That means we're talking about 46% of my previous salary that is mine to save—or spend. But I know better! :)

With all that extra money coming in, I'm thinking even further into savings. I have two savings goals: one for my unexpected emergencies and (big breath before my big girl goal) one for my future home . Yes, I'm opening a second savings account to save money for purchasing a house.

To help me set, plan for and monitor my goals I used a free online tool. First, I checked out the different considerations for my savings goals. For my emergency money savings, my goal is $5,000. And for my home purchase savings, I'm settling on $30,000 to start (based on the average home price  in Sioux Falls, S.D.).

I set up my plan, and now, I can automatically track my progress each time I sign on to view my accounts (BTW, I'm 4% of the way there on my emergency money!). And to make it even easier, I'm going to use direct deposit of my paycheck and automatic transfers from my checking account, to make sure that 46% doesn't beg to be spent on shoes.

What goals do you want to save for?

Posted by Barbara at 09:45 AM |  Permalink |  Comments (1)
Found in Financial education, Paying, Post-college, Preparing, Student loans, Wells Fargo Bank

No, I'm not wondering if you prepared your audition tape for MTV.

The real "real world" is lurking just around the corner for you December graduates. I'm wondering—do you feel confident that you'll be able to land a job in your field after graduation?

During my senior year in college, I definitely did not. The job market was lukewarm, and I had thousands of dollars in student loan debt hanging over my head. I knew I wasn't going to be able to wait around for my dream writing job at an ad agency. Or my dream office. (In college, a lot of my job daydreams revolved around working in one of those cool offices straight out of a TV sitcom—you know, with exposed brick walls, a funky spiral staircase, and tons of hip, young co-workers.)

Turns out, I was right. The dream job (and office) would have to wait. My first job out of college was at a tiny newspaper office with a tiny salary to match. I wasn't dreaming up cool ad campaigns. I was hustling to city council meetings, snapping pictures of 7th grade football teams, and at the end of the day, unloading piles of freshly printed newspapers at the post office.

But even non-dream jobs have their perks—mine came with a rent-free apartment right above the newspaper office, which allowed me to survive on the roughly $1,000 per month that was my take-home pay. And the commute was a breeze.

But what about your job outlook? According to some recent research, the job market in 2005-06 is the best it's been in the past four years, and things continue to look good for the class of 2007. Employers expect to hire 17.4 percent more new college graduates in 2006-07 than they hired in 2005-06, according to the National Association of Colleges and Employers' Job Outlook 2007 Fall Preview survey .

It also appears that your starting salary may not need to include a free apartment to sweeten the deal. Starting salary offers have increased for many disciplines at the bachelor's degree level, according to the Fall 2006 Salary Survey  report from the National Association of Colleges and Employers(NACE).

Do these positive-sounding statistics ring true for you? Are you confident about finding a good job after graduation? Is your student loan debt adding pressure to your job search?

Posted by Caroline at 10:34 AM |  Permalink |  Comments (0)
Found in Financial education, Paying, Post-college, Preparing, Student loans, Wells Fargo Bank

There is a period in your life when you are bombarded with poofy white dresses and tuxedos. It's called your mid-20s. I'm there. I went to seven weddings this year, and a throng of my friends are getting engaged.

Weddings are fabulous (albeit right now they are getting a little tiresome). They are some of the best celebrations to attend. The declaration of love, nice dinner, and shakin' your groove thing—I'd go for some of that action anytime. But the party comes after much planning—unless you go to Vegas , that is!

Needless to say, I've thought a lot about the wedding hoopla this year. And I think students might be able to learn something from the meticulous planning of the bride and groom—well, mostly the bride :)

Loans and weddings, they're kind of alike. Yeah, yeah I know, but hear me out.

The road to both starts with an exciting event—an engagement and high school graduation. You celebrate for a little bit, but then the hard work starts. Just like the bride-to-be searches for the perfect cake, perfect dress, and perfect favors, the student-to-be should be searching for the perfect lender, perfect interest rate, and perfect repayment benefits.

Why, you ask? Because just like a wedding—and for that matter, a marriage—a loan is a big commitment. When you consider the 4-5 years in school and around 10 years to repay , that student is entering a long-term relationship with his or her loan.

Tell me: Are you searching around for the perfect butter-cream frosted loan, or are you choosing your loan Vegas style?

Posted by Barbara at 10:05 AM |  Permalink |  Comments (2)
Found in Financial education, Paying, Post-college, Preparing, Student loans, Wells Fargo Bank

Getting care packages is one of the primary perks of being a college student. I know that.

It's supposed to help make up for the fact that you live in a 10' x 10' dorm room with only a microwave and a mini-fridge. That you have no money. And that you're up to your ears in papers, projects, study groups, and ultimately, a week's worth of grueling final exams .

I know all that. So, I was planning to be the perfect college mom, sending fun and festive care packages to my stepdaughter on a monthly basis.

OK, so I didn't exactly send a care package every month.

I sent exactly one care package—at finals time. But it was pretty good: packages of cocoa, a new pair of gloves, Christmas candy, and a picture of her little brother holding a sign that said "Good Luck On Finals Steph!!"

It was during second semester that I really dropped the ball. The one and only "care package" I sent was when she asked me to mail her the winter scarf she had left behind. I couldn't just send the scarf. How disappointing would that be?

I searched the cupboards and added some leftover packages of cocoa, a can of soup, and a half-used bottle of vitamins . Wow. It looked more like a box of junk than a care package.

Clearly, I've got to redeem myself this semester. But I'm at a loss. What's really fun to get in a care package? Candy? Cash? A stress ball ?

What would you most like to get in a care package?

Posted by Caroline at 01:34 PM |  Permalink |  Comments (2)
Found in Parents, Preparing, Student loans, Wells Fargo Bank

I don't know about you, but I am often in a shopping dilemma—do I use my credit card to buy this, or do I use my debit card? Do I want to pay for this over time (plus interest), or do I have the money in my checking account to cover the cost of what I am buying? Both cards are such an easy, convenient way to shop without having to carry any cash. So I try and keep these simple points in mind:

• Use my credit card—essentially I am borrowing money I have to pay back!
• Use my debit card—the funds come right out of my checking account, so do I have the money in my checking account to cover this purchase?

I find that I do need to use both cards—each has a benefit for me:

• Credit card—when I use within my spending limit and pay on time, it helps me build a solid credit rating. So very important!!
• Debit card—since I know I have a limited amount in my checking account, it helps me stick to my monthly budget. It is so nice not to have monthly credit card bills in my mailbox!!

Compare the two payment types for yourself:

How do you determine when you are going to use your credit card or debit card?

Posted by Pam at 09:27 AM |  Permalink |  Comments (1)
Found in Financial education, Parents, Paying, Preparing, Student loans, Wells Fargo Bank

I was a college student for Halloween this year.

And not just any student—my former college roommate and I actually went to a costume party this year dressed as ourselves as freshmen, circa 1989.

"Why?" You may ask. Is there something particularly scary about a college student from the late '80s?

Frankly, I think the picture speaks for itself.

And really, poodle-perm wigs and gigantic earrings aside, being a college student IS kinda scary. The unknown is often scary, and in college so much about your future is a question mark—especially when it comes to finances. You probably don’t know where you’ll work, how much money you'll make, what your expenses will be, or how much debt you’ll be in when you get out. It can be pretty unnerving.

But there is a way to start getting a handle on it. A few quick calculations can help you figure out if you're taking on a manageable amount of debt. The experts recommend that your monthly loan payments should be no more than 10% of your net monthly income.

So what will your monthly student loan payments be? Time to do some math. Here's a calculator to help you figure out what your monthly payments will be on your Federal Stafford Loans . And if you have private student loans, use this calculator to help you get an idea what those payments will be.

Now that you have an idea of what you might owe per month, does it match up with your salary expectations?

If you haven't already begun researching starting salaries in your field, your academic adviser might be able to help, or check out this salary calculator . Once you've got a ballpark idea of your starting salary, subtract about 20% for taxes (I know—ouch!), and you'll have a rough estimate of your net annual income.

Don't panic if it looks like your loan payments are going to be higher than 10% of your monthly income. When it comes to repaying federal loans, there are many options available to help you manage your payments. However, it might be time to keep an eye on your spending—borrow only what you really need in student loans, and try not to run up your credit card balance .

Now that you know what your student loan payments might be vs. your earning power, does your college debt seem manageable? Or too scary to think about?

Posted by Caroline at 10:17 AM |  Permalink |  Comments (0)
Found in Financial education, Paying, Post-college, Preparing, Student loans, Wells Fargo Bank

This week we've been concentrating on Todd's questions about financial aid eligibility(see my previous posts from Monday and Wednesday). And where better to get these answers than from financial aid directors?

This final bit of advice—and math—comes from Lynda McKendree, Executive Director of Student Financial Aid at the University of Houston—Clear Lake  in Houston:

"Hello, I just wanted to answer some of the questions from your post. First, although an EFC  of 9988 excludes you from grant eligibility, it does not exclude you from Federal Stafford Loan  eligibility. Once you decide on a school, and have applied for financial aid there, the financial aid office will create a student budget for you. The budget will include estimates for tuition, books, room and board (even if you live off campus), transportation expenses, etc. This is known as your 'Cost of Attendance.' Then, the school will deduct your EFC from their Cost of Attendance to determine whether or not you qualify for any need-based aid. If, for example, the school's Cost of Attendance is $15,000 and your EFC is $9,988, then your need would be $5,012 (15,000 minus 9,988). In this example, you would qualify for need-based aid up to $5,012.

"As far as student loan eligibility, the amount you can borrow depends on your grade level. As an independent borrower, you could borrow $6,625 as a freshman, $7,500 as a sophomore, and $10,500 as a junior and senior. Depending on your need at your school, some of the loans could even be subsidized (the maximum subsidized amounts are $2,625 as a freshman, $3,500 as a sophomore, and $5,500 as a junior and senior—the remainder would be unsubsidized).

"You also mention a 'financial crisis' in your past—fortunately, Federal Stafford Loans are not credit-based, so unless you have a prior student loan default or grant overpayment, you should have no problem qualifying for these loans."

So Todd, I'm seeing some pretty common threads from these experts:

• Start with the financial aid offices at your prospective schools.
• Don't be afraid to ask them the tough questions—their job is to help you!
• Grants are probably out of the picture, but Federal Stafford Loans look like a good option.

Anyone else in need of some financial aid advice from the pros? Ask your questions here.

Posted by Staci at 09:23 AM |  Permalink |  Comments (4)
Found in Financial education, Paying, Preparing, Student loans, Wells Fargo Bank

Today,we continue addressing Todd's questions about qualifying for financial aid—both grants and loans. He's considering returning to school and wants to know what his options are.

Dewey Knight, Associate Director of Financial Aid at the University of Mississippi  in Oxford, Miss., offers this advice:

"YourStudent Aid Report (SAR)  indicates that you will not qualify for any federal grants , but you do qualify for other types of federal student aid including theStafford Loan  program. The amount of loan money available will be based on your academic standing (freshman, sophomore, junior, or senior). The Stafford Loan program is a guaranteed loan program with no credit considerations involved. The interest rate is fixed at 6.8%, and many lenders offer low or no fees and attractive borrower benefits at repayment."

Interesting that Dewey mentions repayment benefits. Did you know that if you make your loan payments automatically and on time, you might be able to lower your interest rates? Think of it as a bonus for being a responsible borrower. Wells Fargo offers these, and many lenders have similar programs. We'll be discussing repayment benefits more in the future.

These recommendations come from Renee Leach, Associate Director of Financial Aid at the University of Sioux Falls  in Sioux Falls, S.D.:

"A great place to look for answers to your financial aid questions is the Financial Aid Office at the school you are planning to attend. Part of their job is to help you find funding to reach your educational goals.

"You mentioned that your SAR reported your EFC as 09988. That tells me that although you will not qualify for federal grants such as the Pell and SEOG , you will probably qualify for a Stafford Loan. Without going into a ton of detail, there are basically two categories of Stafford Loans. A 'subsidized' Stafford Loan is one in which the federal government pays the interest on the loan while you are enrolled at least half time in school. An 'unsubsidized' Stafford Loan is one in which you, the student, are responsible for the interest that accrues on the loan. The interest rate on unsubsidized Stafford Loans that were borrowed after July 1, 2006, is a fixed rate of 6.8%.

"As long as you have not defaulted on a federal loan or do not owe an overpayment on a Pell Grant, you are eligible to access these loans. There are annual maximum amounts that you can borrow through these programs depending on your grade level and your dependency status. The financial aid office at the school you plan to attend can help you identify a lender and guide you through their preferred application process."

More to come on Friday, so check back.

Posted by Staci at 10:25 AM |  Permalink |  Comments (0)
Found in Financial education, Paying, Preparing, Student loans, Wells Fargo Bank