Gen Z wants to Save $: Lessons from #AmericaSavesWeek

Times are changing! It was an exciting #AmericaSavesWeek Feb 27-March 4 and much was learned. Check your socials for #ASW17 or #ASW2017 for loads of financial wisdom and motivation from a variety of institutions. If you ever wonder if it’s making an impact, remember a new generation “Gen-Z” grew up in the “Financial Crises” era with a different view  of money not seen since the Great Depression, so get ready to roll out even more financial literacy content to support their goals and share prosperity!

A study from the Gild featured on Marcomm.com explains:

“Yet Gen Z were shown to be a generation of savers having grown up post-financial crash, with 25% saying they would rather save for the future than spend money they don’t have and 22% saying they never spend on “unnecessary, frivolous things” because saving is so important. These attitudes were shared with the Silent Generation, with 43% and 25% of respectively.”

The study also notes that this is a generation that grew up with the internet and is accustomed to information being made available quickly on any modern device. It’s a long way from the dial-up modem days!

Feel old yet? THINK AGAIN! Traditional institutions like banks, credit unions, educational non-profits and 529 providers are in position to grow using a combination of new technology and time tested wisdom already present in your culture.  Technology is more socialized with Gen Z to where expectations for simple online tools has grown. They have goals and want to move forward. Will your organization help or hinder this process? Here’s a few ideas:

What is your narrative? Even if you think your organization doesn’t have one, or maybe it’s to “maximize shareholder value” (No small feat), your group’s goals are a piece of the greater story Gen-Z is living through.  Are you helping them get where they want to be? If the answer is a resounding “YES” then stick to it and continue to empower Gen-Z with your traditions adapted up to new technology.  Yes, you can promote financial literacy to a new generation of savvy savers and they want to engage your organization to do so!

Your content can provide both sides of the story: Let’s face it, it’s a noisy environment on social media. There appears to be a storm in every news cycle, and the cycles are happening faster than ever!   The good news is your organization does not need to pick sides on hot media topics (Education, Healthcare, Government are astoundingly media driven at times), it just needs to know both sides of the story.  If you are sticking with a principled narrative, you help people guide themselves through any situation using your concepts and ideas. Gen Z is very aware that a single story may be interpreted in many different ways, so instead of pushing an agenda, keep it simple and show both sides of the story while promoting honest dialogue.  Keep your comments section open to allow different views to participate and communicate perspective on your content.

Help with decision making first: There’s a lot of options! We’ve learned this first hand at Invite Education with software covering the financial variables related to college attendance. With over 4,000 institutions of higher learning plus a huge scholarship database, the best thing we can do is provide transparency and financial literacy fundamentals to help families make smart decisions.  We realize there is no perfect “one way” for everyone, so we take a “Consumer Reports” approach to the question of college choice.  This way anyone can use the resources and find what they need.  Just let people make their own personal decisions with your organization’s assistance.  This is far removed from the days of pushing product first on radio or tv.  It’s about targeting the goals of your audience first and providing value with products/services supporting those goals featured second.  Gen-Z is ready to move their life forward, are you ready to help?

Learn more about Invite Education; Subscribe to the Youtube Page for great interviews, college planning advice and more.

‘Tis the season for College Savings: 3 Painless Holiday Tips

The year-end affords the opportunity to reflect and optimistically plan ahead. Use these three holiday hints to get started and by this time next year, you’ll be proud of your accomplishments. (…and don’t forget to clue in grandparents and other relatives to get a bigger bang for your buck!):

  • Check the couch for loose change – 2017 style:   I was riding the elevator with a woman who was reading Plan and Finance Your Family’s College Dreams and she offered one of the best tips I’ve heard:
    couch-money
    …find more than loose change in your checking account

    Check the automatic payments connected to your checking account and cancel those you don’t regularly use or need.   She found more than $75 per month – loose change in the couch, 2017 style.  Next year, her re-allocated spending will fill up a 529 college savings plan with nearly $1,000. It’s repurposed “found money” that has no impact on her current spending or life style. Brilliant. How much can you find?

  • Make the Gift of College a Holiday Present: 2016 was a breakthrough year for innovation to make savings in 529 Plans easier. According to the College Savings Foundation, 90% of parents said that online and other gifting options would make college savings easier – and their holiday wish has been fulfilled. These innovations come in many variations so finding options that work well for your family should be easy. The College Savings Foundation outlines the various opportunities, which include:
    • Online gifting and/or gift certificates and coupons that can be printed and presented as gifts – with the gifted amount automatically deposited into a 529 account.
    • Emailed invitations offering gift givers access to make a gift directly into a 529 account.
    • Customized web pages with family or beneficiary (student) specific information.
    • GiftofCollege cards available at Toys’R’Us and Babies’R”Us or from some employers allows gifts to be made into any 529 Plan offered in the country.
  • Use Credit Card “Cash-Back” Rewards to Fill up 529 Plans. Find a credit card linked directly to 529 Plans or be disciplined about depositing Cash Back Rewards from other cards into a college savings account. The great things about these programs is that they allow you to fill your 529 coffers as you go through your normal day: no behavioral changes are necessary. Just be sure to not roll-up big credit card bills that you can’t pay in full each month to avoid paying big interest that will easily wipe-out the amount you can save.
    • Credit Cards linked to College Savings. There are several credit cards that permit users to accumulate cash back rewards to be deposited into 529 account. Some of these programs include:
    • CollegeCounts 529 Rewards Visa Card offers 1.529% back for those with a 529 Account offered by Union Bank in Alabama’s 529 Program and the Illinois Bright Horizons.
    • Fidelity Rewards Visa Signature Card offers 2% cash back to certain Fidelity accounts including Fidelity managed 529 Plans.
    • The Upromise MasterCard offers a range of cash-back benefits depending on the products purchased and the merchant from which they were purchased.
    • Other Cash Back Cards. Even if your credit card is not directly linked to a 529 Plan, you could easily take some or all of those cash rewards and deposit them into a 529 Plan. Every bit helps!
    • Learn more: “Using a credit card to save for college” from New York Times Money Adviser.

Each of these will allow you to increase savings without changing any of your current spending or giving habits. Find one or more that work well for your family. Recruit grandparents, relatives and friends to help and you’ll accumulate a nice nest egg that will no doubt reduce the amount that might need to be borrowed for college later. A dollar saved today is better than one borrowed tomorrow!

Send your success stories and other tips to info@Inviteeducation.com as you plan, save and succeed in 2017.

Happy Holidays!

John Hupalo is the Founder of Invite Education and co-author of the recently released book: Plan and Finance Your Family’s College Dreams: A Parent’s Step-by-Step Guide from Pre-K to Senior Year

What you need to know about the 2016-2017 Parent Plus Loan

Summer is student lending season, as many are preparing to handle bill payment leading up to the new fall semester.  This can be a stressful time for parents managing an outstanding balance for college, especially if it’s a larger bill than hoped for.

July Parent Plus
Few more weeks, then back to school!

Even after scholarships and financial aid are made available, it’s not uncommon for families to rely on a Parent Plus loan to supplement the remainder of the bill.  Here are a few key things to consider when applying.

Interest Rate: For the 2016-2017 year, Parent Plus carries a 6.31%.  This is actually a lower rate when compared to prior years in this federal program.  It’s also a fixed rate loan meaning that the rate will not go up or down.  There has been ongoing discussion about the pros and cons of fixed rate loans given the very low interest rate environment of the past several years.  While locking in a fixed rate provides the security of a very predictable repayment process, if the fixed rate is rather high, it also guarantees the interest costs during repayment. It’s a matter of personal preference, but Parent Plus is only using a fixed rate.

Origination Fee: 4.276% This is an area of concern as a 4.276% origination fee seems pretty high for most consumers, especially when compared to other financial products. (Imagine if a mortgage had a similar fee…) The fee is taken out of the gross loan amount, actually reducing the loan disbursement to the school.  So if you apply for a $10,000 disbursement in the Fall semester, $427.60 is deducted from the amount, leaving $9,572.40 to pay the account.

Credit Criteria: The only requirement is that the parent borrower not have “adverse credit history.” This is defined as not having any 90+ day delinquencies on more than $2,085 in debt and not having any loan defaults, bankruptcy discharges, foreclosures, repossessions, tax liens, wage garnishments or had a federal student loan write-off during the past five years.  This allows for many to gain approval for the Parent Plus loan, as the application approval does not depend on the borrowers actual credit score or debt-to-income ratio.

Who is the lender? The lender is the Department of Education through the Direct Loans Program.  This is a government based student loan program.

What happens if denied?   When a parent is denied for Parent Plus, the student becomes eligible for an increase in Direct Unsubsidized Loans in the amount of $4,000 for freshman and sophomores and $5,000 for juniors and seniors.  Immediately inform the office of financial aid of the circumstances to coordinate the increased direct loan in the student’s name.  This has been an especially helpful way for some students to gain additional funding to cover a small balance when necessary.

More Parent Plus Tips:

Run a loan repayment calculation to estimate costs: It’s always a good idea to be aware of of future loan payments to make sure they fit in the budget. For example a $10,000 Parent Plus loan at 6.31% would require monthly payments $112 and cost about $3,509 in interest. If your a parent of a new freshman, take those figures and project them over the next 4 years.  You can quickly estimate about $40,000 in total loan disbursements, about $450 per month in payments and about $14,000 in total interest over total repayment, and that’s if the interest rate stays at 6.31%.  Remember to always look at the big picture of debt and consider what’s needed for the whole education, not just one year.

Increase the Parent Plus loan amount to compensate for origination fee: As noted earlier, the origination fee is deducted from the gross loan amount, reducing the actual disbursement to the school.  If using Parent Plus, make sure to increase the loan amount so that it can still cover the bill even after the fee is removed.  This avoids an end of semester problem of having an unpaid balance that everyone thought would be covered by the Plus Loan.  Some families end up scrambling for an extra $500 in cash just to pay that bill and get cleared for next semesters registration.  Instead, make it easy and apply for a larger loan.  If the school receives more loan money than needed, they can send the excess in the form of a refund check to the parent, and they can then make a payment to Direct Loans to lower the loan balance.

Compare to private loans or home equity: You have options.  Private loans are provided by banks and financial institutions and may offer an appealing program for some families.  They do have more stringent credit standards using the student as a primary borrower with a parent as a cosigner to establish approval. Some families prefer the private loan because it allows the parent the opportunity to utilize a cosigner release from the application once the student borrower makes a certain number of on-time payments after graduation. Not all lenders offer cosigner release, so pay close attention and compare during your application process. This differs from Parent Plus, that remains only in the parent name until repayment is achieved.  Home equity is another option for some families, especially where low rates can be made available.  This should be handled with care, as putting up home equity comes with it’s own unique risks as well.  Additionally, the debt would only remain with the original parent borrower, there would be no easy way to transfer the total debt back to the student like in a private loan with cosigner release.

 

 

 

 

 

3 Tips for Smart Student Borrowing

When it comes to paying for college, the process can seem overwhelming. There are so many financing options out there and you might be feeling lost about how to choose the correct ones for your family. The key is to equip yourself with information so that you can have knowledge you need to make an informed decision.

One of the most common ways to pay for college is student loans. There are two primary sources of student loan funding: federal loans and private credit loans. The two programs differ in fundamental ways: the money for federal loans comes from the Department of Education whereas private loans come from places like banks, credit unions and other financial institutions.  Federal loans are much more standardized providing the same rates and fees to all borrowers. Most students tend to take advantage of federal loans before moving onto private loans if they still need extra money.

For some families, private loans are a good option because offer competitive rates and a cosigner option to help student-borrowers gain approval. Other families will choose federal loans, which can be easier to get and offer flexible repayment options, like income-based repayment.  Whichever type of loan you choose (and some families take out both private and federal loans), there are a few ways to borrow smart.

Don’t borrow more than you need. Many families get caught up in the availability of what may seem like free money and end up taking out a bigger loan than they need, just because the option is there. But a loan is not free money, even though it is labeled as “financial aid” on a student’s award letter. Every cent you borrow has to be paid back in the future, and often with interest, which can sometimes be up to a few thousand dollars on top of the loan principal. Don’t take out too much money from a student loan; it should be used for education costs only. Take a careful look at actual expenses and remember that interest will accrue on the total balance. You can use a Student Loan Payment Amount Estimator to get an idea of what your payments might look like once you’ve graduated. Be smart about the debt you’re taking on. Only borrow the amount you actually need, otherwise you could be quite literally paying for your mistake down the line.

Review federal loans first. They tend to have the most favorable terms and flexible repayment options, and you generally don’t need a co-signer. To receive federal loans, families must submit the FAFSA form, with the 2016 – 2017 version available beginning October 1. Even if you don’t think your family will qualify for need-based aid, you should submit the FAFSA anyway. Every family that files one, regardless of family income level, is eligible for some type of federal student loan. You never know what you might be eligible for or how your family’s needs will change before the fall. There are different types of Federal Direct Student Loans, including Direct Subsidized Loans, Direct Unsubsidized Loans, and Federal Direct PLUS, among others. We will cover the specific differences between these loans in an upcoming post, but all of them are managed by the federal government. Some can be covered by debt forgiveness programs, like the Public Service Loan Forgiveness Program, but when you’re taking out a loan it’s best practice to assume that you will be paying back the entirety of the balance.

If you need more money, look into private loans. Federal loans are limited year-to-year, and if facing a tuition shortfall, you may need to look into private education loans. One of the best known private loan lenders is the company Sallie Mae, but private loans also come from banks, credit unions, and other lenders. In most cases you’ll need a co-signer. All private loans differ, but their interest rates may be fixed or variable and some require a minimum payment while still enrolled in school. You can learn more about the differences between the two types of loans at Studentaid.ed.gov.

When taking out loans, make sure you understand the terms of the loan. How will interest be charged? What is the grace period on the loan, that is, how much time will pass between graduation and when payments are due? Who will be the co-signer on the loan, if you need one? There are many factors to consider and like most aspects of the college process, the answers will differ among families. But with some research, you’ll feel more equipped to make the right choices for you. Good student loan borrowing is about being smart, making the right decisions, and doing what’s best for you and your family.