When most parents offer to fund their childâs tuition, itâs with the expectation that their financial circumstances will remain relatively unchanged. Even with minor dips in income or temporary periods of unemployment, a solid plan will likely see the child through to graduation.
Unfortunately, what these plans donât tend to account for is a global pandemic wreaking havoc on the economy and job market.
Now, many parents of college-age children are finding themselves struggling to stay afloat – much less afford college tuition. This leaves their children who were previously planning to graduate college with little or no debt in an uncomfortable position.
So if youâre a student suddenly stuck with the bill for your college expenses, what can you do? Read below for some strategies to help you stay on track.
Contact the University
Your first step is to contact the university and let them know that your financial situation has changed. You may have to write something that explains how your parentâs income has decreased.
Many students think the federal government is responsible for doling out aid to students, but federal aid is actually distributed directly by the schools themselves. In other words, your university is the only institution with the authority to provide additional help. If they decide not to extend any more loans or grants, youâre out of luck.
Ask your advisor if there are any scholarships you can apply for. Make sure to ask both about general university scholarships and department-specific scholarships if youâve already declared a major. If you have a good relationship with a professor, contact them for suggestions on where to find more scholarship opportunities.
Some colleges also have emergency grants they provide to students. Contact the financial aid office and ask how to apply for these.
Try to Graduate Early
Graduating early can save you thousands or even tens of thousands in tuition and room and board expenses. Plus, the sooner you graduate, the sooner you can get a job and start repaying your student loans.
Ask your advisor if graduating early is possible for you. It may require taking more classes per semester than you planned on and being strategic about the courses you sign up for.
Fill out the FAFSA
If your parents have never filled out the Free Application for Federal Student Aid (FAFSA) because they paid for your college in full, now is the time for them to complete it. The FAFSA is what colleges use to determine eligibility for both need-based and merit-based aid. Most schools require the FAFSA to hand out scholarships and work-study assignments.
Because the FAFSA uses income information from a previous tax return, it wonât show if your parents have recently lost their jobs or been furloughed. However, once you file the FAFSA, you can send a note to your university explaining your current situation.
Make sure to explain this to your parents if they think filing the FAFSA is a waste of time. Some schools wonât even provide merit-based scholarships to students who havenât filled out the FAFSA.
Get a Job
If you donât already have a job, now is the time to get one. Look at online bulletin boards to see what opportunities are available around campus. Check on job listing sites like Monster, Indeed and LinkedIn. Make sure you have a well-crafted resume and cover letter.
Try to think outside the box. If youâre a talented graphic designer, start a freelance business and look for clients on sites like Upwork or Fiverr. If youâre a fluent Spanish speaker, start tutoring other students. Look for jobs where you can study when things are slow or that provide food while youâre working.
Ask anyone you know for suggestions, including former and current professors, older students and advisors. If you had a job back home, contact your old boss. Because so many people are working remotely these days, they may be willing to hire you even if youâre in a different city.
It may be too late to apply for a Resident Advisor (RA) position now but consider it as an option for next year. An RA lives in the dorms and receives free or discounted room and board in exchange for monitoring the students, answering their questions, conducting regular inspections and other duties.
Take Out Private Loans
If you still need more money after youâve maxed out your federal student loans and applied for more scholarships, private student loans may be the next best option.
Private student loans usually have higher interest rates and fewer repayment and forgiveness options than federal loans. In 2020, the interest rate for federal undergraduate student loans was 2.75% while the rate for private student loans varied from 3.53% to 14.50%.
Private lenders have higher loan limits than the federal government and will usually lend the cost of tuition minus any financial aid. For example, if your tuition costs $35,000 a year and federal loans and scholarships cover $10,000 a year, a private lender will offer you $25,000 annually.
Taking out private loans should be a last resort because the rates are so high, and thereâs little recourse if you graduate and canât find a job. Using private loans may be fine if you only have a semester or two left before you graduate, but freshmen should be hesitant about using this strategy.
Consider Transferring to a Less Expensive School
Before resorting to private student loans to fund your education, consider transferring to a less expensive university. The average tuition cost at a public in-state university was $10,440 for the 2019-2020 school year. The cost at an out-of-state public university was $26,820, and the cost at a private college was $36,880.
If you can transfer to a public college and move back home, you can save on both tuition and housing.
Switching to a different college may sound like a drastic step, but it might be necessary if the alternative is borrowing $100,000 in student loans. Remember, no one knows how long this pandemic and recession will last, so itâs better to be conservative.
The post My Parents Can’t Afford College Anymore – What Should I Do? appeared first on MintLife Blog.
Some of my fondest college memories arenât from going to homecoming games, attending my first college party or walking around campus when no one else was going to class.Â Some of my favorite memories are going home for winter break and seeing all my high school friends. Seeing old friends was always so fun, especially since we had all matured during the previous semester.Â Â
But getting home was another story. I went to college in Bloomington, Ind., a small college town where the university was the main attraction. That meant getting a flight back to my hometown of Memphis, Tenn. was always a struggle. I hated having to coordinate buses and flights while in the middle of finals.Â
Hereâs what I learned about booking flights home, so you donât have to struggle like I did.Â Â
The first step to saving on holiday travel is planning ahead. If you wait until the last minute to buy plane tickets, youâll probably pay more. You may even be completely out of luck and not find any flights that work for you.Â
You can sign up for travel alerts through Hipmunk.com, which aggregates flights from most major airlines. You can also look at Google flight alerts or sign up for emails for your favorite airline.Â Â
Learn about what airlines fly out of your hometownâs airport and what alternative routes there are. For example, if youâre struggling to find cheap flights coming out of Louisville, look at Cincinnati’s airport. You might have to get creative and look at airports you never consider.Â
According to the travel website Skyscanner, the best month to buy plane tickets for Christmas is in October. Yes, it might seem crazy to book tickets for winter break when the leaves are barely falling off the trees, but you could save lots of money.Â
Carpool with Other StudentsÂ
If youâre at a big university, you might find someone whoâs also traveling to your destination for the holidays. If you carpool with them, youâll save money on transportation while also dividing the driving time.Â
I did this a lot in college because I didnât have a car, but I only needed to travel a couple hours for Thanksgiving break. It was easy finding someone who was also going that way.Â Â
If youâre not traveling to a popular city, you should put out feelers ASAP. Make a shareable post on Facebook, put a physical notice in your dormâs common area or ask your college advisor if there are any official student carshare groups.Â
Look at BusesÂ
Even though the US isnât known for its public transportation system, buses can be a decent way to save money on travel if youâre going somewhere close. For example, you can find MegaBus tickets as little as $5 if you book way in advance. Some of these buses include WiFi and let you pick your seat beforehand.Â
Buses almost always take longer than driving, but are a good option if youâre on a budget and have time to kill. If youâre lucky, you can find a fellow student whoâs also traveling by bus and book your tickets together.Â Â
Compare Alternative DatesÂ
If youâre flying home for winter break, you probably have some leeway on when you arrive and when you need to leave. Being flexible on travel dates can save you a lot of money, especially during the holidays.Â
When you look at flights, you can often look at dates with one to three days of flexibility. Flights that leave or arrive on Tuesdays and Wednesdays are often less expensive than weekends. You should also use an incognito browser when you book tickets.Â
If you find an especially good deal that coincides with class, ask your professor if you can get an excused absence. Some may be ok with you taking a final early or if you miss the first day of classes for the new semester.Â
Again, ask your professors about this ahead of time. They may be more lenient if youâre asking in early November instead of the week before finals.Â
Use Credit Card PointsÂ
If you or your parents have a travel rewards credit card, see if they have enough points to book a flight. This works best if you book early, because flights often increase in price as the dates get closer.Â
Travel rewards programs all work differently so itâs good to compare offers before you book a flight. Your parents can book your flights using their account, or they can transfer points to your personal account. This doesnât work for every credit card, so call and ask if thereâs a way to do it for free. It may be easier to do if youâre an authorized user on the account.Â
Read the Fine PrintÂ
Nowadays airlines are trying to cut corners everywhere, by trimming seats and charging more for basic amenities. When you buy your flight, read through the ticket agreement to understand whatâs included and whatâs extra. In some cases, a carry-on bag costs extra just like a checked bag. But a checked bag may be cheaper than a carry-on.Â
If snacks arenât provided, bring your own beforehand. Also, try not to pack your bags completely full. If youâre like me, youâll have Christmas presents and new clothes to take back with you. And who wants to pay a $30 carry-on fee?Â Â
Understand What Your University ProvidesÂ
If youâre lucky, your college may have some free transportation options. For example, my university was in Bloomington, Ind., an hour away from Indianapolis. There was a free shuttle to the Indianapolis airport that left every two hours.Â
Thereâs also a student-only bus that goes from Indy to Chicago and Chicago-area suburbs. This is only available during the holidays and is very affordable.Â Â
The key to saving on holiday travel is to plan ahead, ask other people and do lots of research. You may discover someone in your dorm whoâs driving through your city on their home or someone who also takes the bus home.Â Â
The post How to Plan and Save on Holiday Travel appeared first on MintLife Blog.
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Saving and investing for college expenses may seem overwhelming, but setting aside even small amounts can give your child a head start. While many people are aware of tax-efficient investing accounts like 529 plans, you may not know about UGMA/UTMA accounts – another way to save for educational and other expenses.
In this article, weâll take a look at UGMA and UTMA custodial accounts, what they are, and how to determine the best way to save for your kidsâ future, while getting tax advantages.
What are UGMA and UTMA accounts?
UGMA stands for the Uniform Gifts to Minors Act and UTMA stands for Uniform Transfers to Minors Act. Account-holders are âcustodians,â and may transfer money into the account to benefit the minor, but the money is managed by the custodian. Typically the money is released to the minor at the age of majority (usually 21 but sometimes 18 or other ages).
How do UGMA and UTMA accounts differ from 529 plans?
529 plans differ from UGMA/UTMA account in a few key areas:
- 529 plans can only be used for educational expenses, while UGMA/UTMA accounts can be used for anything that benefits the child. .
- 529 plans are owned and controlled by the person who created the account – with UTMA/UGMA accounts, the funds are transferred to the beneficiary at the age of majority.
- Unlike 529 plans, custodial accounts are considered the property of the child, which means that it counts for a higher percentage in financial aid calculations.
The two types of plans share some similarities:
- Both types of accounts are considered custodial accounts that can be used for the benefit of a minor.
- Anyone can contribute to either type of account â there are no restrictions based on oneâs personal income
If you have a medium to long-term horizon, either a UGMA/UTMA account or a 529 account is usually better than just putting your money in a savings account at a low-interest rate. And donât forget that it is possible to have both a 529 plan AND a UGMA/UTMA account for the same child.
Why You Need to Open a UGMA/UTMA Account for Your Kids
Unlike with a 529 plan, the funds in a custodial account do not have to be used solely for higher-education expenses. The custodian can withdraw money in a UGMA/UTMA custodial account for any expense that benefits the child, like technology, transportation, housing, or any other expense for the child.
The biggest advantage of UGMA/UTMA custodial accounts is their flexibility. Because they can be used for a wide array of expenses, you can use the money in the account even if your child chooses not to go to college. While earnings do not grow completely tax-free like in a 529 plan, earnings in a UGMA/UTMA account are tax-advantaged, but in a different way.
Depending on how you file your tax return, a guardian can choose to include their childâs unearned income with their own tax return. Unearned income is money that doesnât come from employment, like from interest or investments. In 2020, the first $1,100 of a childâs unearned income can be claimed on the guardiansâ tax return tax-free, and the next $1,100 is taxed at the childâs tax rate, which is likely much lower than their parentâs.
Things to watch out for with UGMA or UTMA accounts
If youâre looking to save money or transfer assets to your kids for a variety of expenses beyond education, a UGMA/UTMA custodial account can make a lot of sense. One thing to watch out for is that a UGMA/UTMA account is tied specifically to one named beneficiary. Unlike a 529 plan, where you can transfer the money in an account to a sibling or other beneficiary, with a UGMA/UTMA account, any unused funds must be used or distributed by the time the child reaches their age of majority or their stateâs maximum age for custodial accounts.
Apps like Acorns are making it easy to start a UTMA/UGMA account with their new product, Acorns Early. You can start in under a few minutes and set Recurring Investments starting at $5 a day, week, or month. Fun fact: If you invest $5 a day from birth, considering a 7% average annual market return, you could have more than $70,000 by the time the child turns 18. To learn more, visit Acorns.com/Early.
The post Why You Need to Open a UGMA/UTMA Account for Your Kids appeared first on MintLife Blog.