Student LoanDown readers, you’ve been back at school for a few months now. So far, what’s the most stressful thing about college?
Moms and dads, what are you hearing from your kids?
What’s the most stressful thing about college?
Any ideas to share on how you manage your college stress level? Tell us about them!
PSAT, ACT, SAT...those acronyms can be pretty intimidating when you know that they're a factor to college admission and, in some cases, scholarship opportunities. With so much on the line, it's important to know the basics of each test and how you can prepare for them.
PSAT 
— the Preliminary Scholastic Aptitude Test is a mini version of the Scholastic Aptitude Test (SAT). Many schools administer this test for juniors in the fall, so you can check with your guidance counselor for information specific to your school. The PSAT is a great way to practice for the SAT. Plus, top scores can qualify you for National Merit Scholarships.
SAT — the Scholastic Aptitude Test includes Math, Critical Reading, and Writing sections. SAT scores are reported on a scale from 200 to 800, with additional subscores reported for the essay (ranging from 2-12) and for multiple-choice writing questions (on a 20-to-80 scale).
ACT — the American College Test includes four skill areas: English, Math, Reading and Science. Composite scores range from 1-36. There is also an optional writing test which some colleges require.
As you gear up for these standardized tests, here are some to-dos to get you started:
you could take practice tests online or grab a book designed to help you prepare.How did you prepare or are you preparing for these standardized tests? Please share any tips you have for success with us and the SLD community!
Editor's note: This is part three of our three-part series on 529 plans — Caroline's interview with Sarah Henriksen, a vice president with Wells Fargo Funds Management. You can read part one here and part two right here.
CH: How much money do you need to start a 529 plan?
Sarah Henriksen: Typically you can open an account with as little as $250. And, many 529 plans waive this minimum if you set up an automatic investment into the account of as little as $15 per month. A program of regular investment cannot assure a profit or protect against a loss in a declining market.
CH: How much can an individual contribute to a 529 plan per year?
SH: We talked about the low limits for starting a 529 plan. On the other end, 529 plans have very high contribution limits. There is not a specific annual limit as long as you don't exceed the 529 plan maximum, which can be over $300,000 depending on the plan. One thing to keep in mind is 529 contributions are considered completed gifts to the beneficiary, subject to the annual gift limits. For 2009, the annual exclusion amount is $13,000 (or $26,000 for married couples), which means any contribution over that amount may be subject to gift tax. If you are looking to make a larger contribution in one year, you can contribute up to five times the annual limit without incurring gift tax by prorating that contribution over the next five years. This is a unique benefit of 529s, which is not available through any other investment vehicles.
CH: Is there a total contribution limit?
SH: Most 529 plans set their contribution limit with the goal of allowing families to invest enough for five years of college, plus graduate school. As you can imagine, this means the total contribution limit for most 529 plans is quite high. Depending on the plan, the limits can be $300,000 or more.
CH: How is the money withdrawn to make college payments?
SH: Another benefit of 529 plans is that the account owner controls when and how a payment is made. This means you can ensure your funds are used for school expenses and not concert tickets or the latest video game. And, most 529 plans offer a lot of flexibility for withdrawing the funds. You can choose to have funds sent directly to the school, to the beneficiary or even to yourself if you want to get reimbursed for expenses paid out of pocket.
CH: Can participants continue to contribute to the plan while the student (beneficiary) is in college and making withdrawals?
SH: Absolutely! A recent study from the American Enterprise Institute found that fewer than 60% of new students graduate from college in less than 6 years!* Chances are, your student will be attending school for years, and if he or she decides to attend graduate school, that can increase even more. 529 plans provide the benefit of being able to contribute while students are still in college in order to take advantage of the benefits the plan offers while they are attending.
CH: What is a good source to learn more about 529 plans?
SH: A great place to start would be on the Wells Fargo website at www.wellsfargo.com/investing/education/529.
*Diplomas and Dropouts Which Colleges Actually Graduate Their Students (and Which Don't) by Frederick M. Hess, Mark Schneider, Kevin Carey, Andrew P. Kelly. AEI Online, June 03, 2009.
Remember: 529 plans involve risks, including the possible loss of principal. Consult a program description for additional information on risks.
Wells Fargo Funds Management, LLC, a wholly owned subsidiary of Wells Fargo & Company, provides investment management and administrative services to certain 529 college savings plans. Shares in these programs are distributed by Wells Fargo Funds Distributor, LLC, Member FINRA/SIPC, an affiliate of Wells Fargo & Company.
INVESTMENT PRODUCTS * NOT FDIC INSURED * NO BANK GUARANTEE * MAY LOSE VALUE
Editor's note: This is part two in our three-part series on 529 plans — Caroline's interview with Sarah Henriksen, a vice president with Wells Fargo Funds Management. You can read part one here.
CH: What are the tax advantages involved?
Sarah Henriksen: 529s offer a number of tax advantages. For the average investor, they can typically be broken down in three categories: when the money goes in, while it is invested, and when it comes out. For money that is invested in a 529 plan, many states offer an upfront state tax deduction or credit. This will depend on whether your state offers this benefit and often time requires investing in your own state's plan. Because of this, it's important to consider any benefits your state's 529 plan might offer when deciding where to invest. While the money is in the plan, it grows tax-free. This means any earnings or growth in the account will not be taxed while it is invested. Finally, when the money comes out, as long as it is used for a qualified expense, it will be completely federal tax-free. Most states also offer state tax-free withdrawals as well. This can be an extremely valuable benefit especially if your account has increased in value over a number of years.
529 plans also offer unique tax advantages for families with estate planning needs, such as the ability to move assets out of your taxable estate, while still retaining control of the account. As always, it is important to consult your tax advisor to determine how these various benefits might apply to your situation.
CH: What can the funds be used for? Tuition? Books? Living expenses?
SH: The funds from a 529 plan must be used for higher education expense, but beyond that there is really a lot of flexibility. Qualified expenses include tuition, fees, books, and any supplies or equipment required for enrollment or attendance. Room and board is also considered a qualified expense for students enrolled at least half time. In addition, for tax years 2009 and 2010, computer expenses are also qualified, regardless of whether they are formally required by the school. I should also point out that if you need to take money out to pay for some other type of expense, this is possible. However, the earnings on any "non-qualified" withdrawal will be subject to income tax and an additional 10% federal tax.
CH: What type of schools can 529 funds be used for?
SH: 529 funds can be used for almost any post-secondary school across the country and even a number abroad. This includes technical, vocational, two- and four-year colleges, universities, and graduate schools.
Remember: 529 plans involve risks, including the possible loss of principal. Consult a program description for additional information on risks.
Wells Fargo Funds Management, LLC, a wholly owned subsidiary of Wells Fargo & Company, provides investment management and administrative services to certain 529 college savings plans. Shares in these programs are distributed by Wells Fargo Funds Distributor, LLC, Member FINRA/SIPC, an affiliate of Wells Fargo & Company.
INVESTMENT PRODUCTS * NOT FDIC INSURED * NO BANK GUARANTEE * MAY LOSE VALUE
Editor's note: This week we're featuring a three-part series on 529 plans. To bring you details about how 529 plans work, we interviewed Sarah Henriksen, a vice president with Wells Fargo Funds Management.
First, let me give some background. A 529 plan is a tax-advantaged investment plan for parents or others who wish to invest money for higher education expenses. They are state-sponsored programs, usually managed by a financial services firm. Tax advantages and a surprising degree of flexibility are just a few of many benefits that families derive from 529 plans.
CH: So Sarah, who can start a 529 plan? Does it have to be a parent?
Sarah Henriksen: 529 plans offer a lot of flexibility as far as who can start a plan. Generally, anyone of legal age can open an account for someone else. This can include parents, grandparents, aunts, uncles, even your neighbor.
CH: Can multiple individuals contribute to the same plan? (Parents and grandparents, for example?)
SH: Most 529 plans strive to offer a lot of flexibility by allowing anyone to contribute to the same plan. However, rules vary by plan so it is important to consider different plan features before opening an account. Note that most plans also allow flexibility to open multiple accounts for the same beneficiary; for example, if both the parents and grandparents want to maintain control over their own contributions.
CH: Who can utilize funds from a 529 plan (in other words, who can be the beneficiary)?
SH: Although some state pre-paid tuition programs impose age and residency requirements, with 529 savings plans there are no restrictions or age limits on who can use the funds. The beneficiary can be a newborn through adult. In addition to investing for a child's future education expenses, an adult looking to go back to school can open an account for his/her own higher education expenses.
CH: Can there be more than one beneficiary per plan? (In other words, can you have a single 529 plan for multiple children?)
SH: Only one beneficiary can be listed per account. However, it is possible to open an account for one student, and then later change the beneficiary on that account to a new student. The only requirement is that the new student must be a "member of the family" of the previous beneficiary. And of course, you can always open more than one account for each student. This may make particular sense if your students will be starting college at different times, which might make different investment options more suitable for their respective accounts.
CH: What if the named beneficiary decides not to attend college — what happens to the funds? Could another beneficiary use them?
SH: This is a common question parents have when investing for college, especially if their kids are young. Since you can never know for certain whether your child will attend college in the future, a nice feature of 529 plans is the ability to change beneficiaries to another family member. If your child decides to take a break from school or has funds left over, the money can also be kept in the account in case he or she returns to school. If it looks like the money will never be needed for higher education expenses, the money still belongs to the account owner and can be withdrawn at any time. At that point, however, the earnings on the account would be subject to tax and a 10% penalty.
CH: If the beneficiary is already in high school, is it "too late" to start a 529 plan?
SH: It's never "too late" to start a 529 plan. Any amount you are able to put away ahead of time is going to help when it comes time to pay for college. You will still enjoy the tax-free growth of the plan as well as potential state tax benefits, depending on where you reside. Most plans offer conservative investment options for families that have a shorter timeframe until they need to access their funds.
Remember: 529 plans involve risks, including the possible loss of principal. Consult a program description for additional information on risks.
Wells Fargo Funds Management, LLC, a wholly owned subsidiary of Wells Fargo & Company, provides investment management and administrative services to certain 529 college savings plans. Shares in these programs are distributed by Wells Fargo Funds Distributor, LLC, Member FINRA/SIPC, an affiliate of Wells Fargo & Company.
INVESTMENT PRODUCTS * NOT FDIC INSURED * NO BANK GUARANTEE * MAY LOSE VALUE
Student LoanDown readers, we’re taking a quick pulse check using our new poll feature. We hope you like it, and you should be seeing more of it!
So, our very first question is: How are you paying — or did you pay — for college?
How are you paying for college?
If you have other thoughts to share about paying for college, let us know!
With the semester in full swing, students may be looking for a little something extra to add to their schedule. What better way than joining a club or organization on campus?
Not sold on the idea of becoming a joiner? Think about these big two benefits to joining club or organization on your campus:
Both of those gave me a leg up at internship time.When you're looking into options, remember not to overextend yourself. While joining organizations on campus have their benefits, they will take up a chunk of your time. Don't let them interfere with your college studies. After all, that's why you're there.
So while you may be very passionate about numerous groups try to choose your involvement wisely. To narrow down your options, ask yourself questions like:
How much time will it require?
What are the benefits to my personal and professional development?
Does it work with my class schedule?
If you don't find something that interests you, consider starting your own club!
What clubs and organizations are you interested in? If you've already found an extra curricular activity, tell us about it!
If you're a high school senior, the cost of college probably isn't your top concern right now. Usually during that first semester of senior year, you're more worried about getting into the school you want — not how you'll pay for it.
For a lot of students, saving money for college doesn't feel like an urgent matter until the summer before you leave — when all the "busy-ness" of senior year and excitement of graduation are past. By that time, you know where you're headed for school and how much financial aid you're getting and it all finally feels real.
Unfortunately, June is a little late in the game to start a real savings plan for fall. You'll be better off if you start concentrating on saving right now.
So how can you get motivated? Try to make it real for yourself. Forget about the vague, fuzzy "saving for college" idea — start thinking more specifically about what things you'll need to pay for next year. No matter where you go to college, you're going to have some of the same expenses , so list them out and use them as goals to save for. Here are some ideas:
These are just a few of the basics you'll need a stash of cash to cover during your first year of school. Try saving for just one of these items to make it a really achievable goal. It feels good to know exactly what you're saving for — and what it takes to get there.
Are you saving money for college? Tell us how it's going!
Last week, our friends at the Guided By History blog recounted some of their stories about the 1989 Loma Prieta earthquake. The 20th anniversary of this disaster just passed, on Saturday, October 17.
I didn't live in San Francisco in 1989, but I did from 1998-2000, where I experienced my share of small quakes. One fall morning in my tiny Noe Valley studio, I was attempting to open a stuck dresser drawer. Just as I yanked it open, I noticed that my glass closet doors were shaking. I thought to myself, "I didn't pull it THAT hard!" Then I turned around and saw that the rest of my apartment also was moving — and realized I was in the middle of my first earthquake.
At that point in my life, I wasn't prepared for an earthquake. I didn't know that I should move into a doorway or underneath a sturdy piece of furniture. I hadn't assembled an earthquake kit. I'm a Midwesterner! Give me a tornado or a severe thunderstorm, no problem, but an earthquake? No idea what to do.
If you're in the same boat as I was back then, the Bay Area Chapter of the American Red Cross has put together a series of preparedness webisodes for young adults that can help you make a communication plan with friends and family, put together a disaster survival kit, and more. It's good stuff.
Check it out and be prepared!
True story time.
Last week I got an email from a friend and former Wells Fargo colleague, who'd had an interesting experience at her local drugstore:
I had my Wells Fargo jacket on in Walgreens today and this kid asked me, out of the blue, "How do I get credit, if I don't have any?" I was kind of taken aback for a moment — do I look like a lady who knows about credit? And then he said, "Well, don't you work at Wells Fargo?"
So we started this strange conversation about how he was going to school and needed to get a loan, and couldn't build up his credit because he didn't have any, and because he didn't have any history they wouldn't give him any credit. I didn't know what to say. I kind of wanted to run out of the store. But I told him I would check into it for him.
Gotta give this kid props for walking up to a total stranger and asking for credit advice!
And at the same time, I'm thinking, this poor kid — he clearly hasn't received any credit education at home or at school, so he has to ask a total stranger!
What makes this story particularly timely is that today is Get Smart About Credit Day. Every October, the American Bankers Association hosts this initiative to educate consumers and students about credit. Given the current economic environment — where credit is harder to come by — these efforts are more important than ever.
Fortunately, if you want to get smart about credit, you don't have to go to the drugstore. Stay put and check out some of these resources Wells Fargo offers:
And don't forget: By law, you're entitled to one free credit report every year.
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