Debt Free Baby!

I graduated from college with $0 in debt.

Let that sink in a little.

Powerful isn’t it?  

With Occupy Wall-Street protests, college graduates moving back home, and complaint after complaint about college tuition, it seems like graduating college debt free is something of the past.

I’m here to let you know that it’s not only possible but highly attainable!

I don’t know what life situation you may be in right now but I want to share with you some steps that I took to achieve my goal of zero dollars in debt after college.  Yes, blood and sweat was involved, but at the end of the day, it was so worth it to walk off with my diploma knowing that I worked for my education without the help of banks or government aid.

So let’s get started!

Suck it up, stay at home

When I speak of “tools” I’m talking about things that are around you during college.  My first tool I used was my family.  Thankfully, my parents lived close by to my University and I was able to live at home for the majority of my college career.  I will never forget the day I turned 18 and headed off to college.  My Dad brought me into his office and said

“Son, you’re on your own now, all financial help is being cut off.”

Talk about a wake-up call!  

With friends joining fraternities or moving into houses on campus, it could have been easy for me to give in and shell out the big bucks (or debt) to live nearby campus.  Unfortunately, like my Dad said, all my financial funds were cut off and it was up to me to pay for my living situation.  Instead of paying for rent, utilities, and food, I stayed home most of college and saved big time because of it.  I attribute this to the biggest reason I stayed debt free during school.

In-state colleges are goldmines

Although living at home is great and wonderful, it’s just not reality for a lot of students out there.  Thankfully, there is another big dollar tool that I used: in-state college.  I remember comparing the costs of out of state college and it was typically double or even triple the tuition cost of the in-state schools.  Yes, you may be going to a less prestigious University, but guess what, most employers could care less where you went to school.

To be honest, most companies care more about your internships and work experience.  I think our media has done a great job of brainwashing our youth and making us think that a prestigious University is our only option.  Trust me; it’s not worth it to have hundreds of thousands in debt just to say you went to an Ivy League school.  Go to an in-state school and focus on work experience instead!

Work your butt off, then work some more

If you ain’t sweating, you ain’t trying!  Man, if you asked me what I did during college, I would tell you I worked.  No, not studying, but worked.  I swear, it felt like every weekend was work and I was always leaving social events early because I had work the next morning.  Doesn’t sound so glamorous does it?  Well, it isn’t, but I had a long term goal and that’s what mattered.  I remembered being so focused, other people’s behavior never phased me.

So working double shifts on the weekend and taking on side jobs on top of my part time jobs was easy for me.  I can safely say that if I didn’t have such a passion for paying my way through school, I wouldn’t have been able to work so much.  I guess it comes down to inspiration for something.  Once you find what that something is, anything is possible, including graduating college debt free.

Are you up for the challenge?

Even if it’s not college related, maybe you just want to pay off those pesky credit cards.  Or how about the home mortgage that never seems to go away.  Make it your passion in 2012 to crush your long term goals.  No more whining, no more waiting around for someone to help you.  Take life by the horns and just do it.

(Jon the Saver is a Christian personal finance blogger who founded Free Money Wisdom.  He is passionate about helping average Americans reach their financial goals and live a life free of debt.  During his down time, Jon loves a mean game of scrabble and lifting iron at the gym.)

Many people who are saving money for a child’s college education are familiar with 529 Savings Plans. But what if you want to send a younger child to private school? A 529 Plan only covers expenses for higher education. In this article I’ll tell you about a lesser-known tax-advantaged vehicle that you can use for any level of education—from kindergarten through graduate school—called a Coverdell Education Saving Account.

Who Can Have a Coverdell Education Savings Account?

When you open a Coverdell, the account must be for a designated beneficiary who’s under the age of 18. After the student’s 18^th birthday, no more contributions can be made unless the account is for a special-needs beneficiary. The funds must generally be used by the time the student reaches age 30 in order to avoid taxes and penalties.

What Expenses Can You Pay Using a Coverdell Education Savings Account?

With a Coverdell, your contributions and earnings always grow tax-free as long as distributions are used to pay for qualified expenses at eligible schools. Coverdell funds can be used to pay for the student’s tuition and all associated fees, books, equipment, and supplies for their attendance at an eligible institution. That could be any postsecondary school such as a university or college that’s eligible to participate in federal student aid. Coverdell funds can also be used for reasonable room and board for those who are considered at least half-time students.

How to Use a Coverdell Education Savings Account for Young Students

The unique feature of a Coverdell is that it can also be used to pay for the expenses of younger students. This includes children in kindergarten through grade 12 who attend any eligible public, private, or religious school. There are more qualified expenses for younger students than for those getting post-secondary education. They include tuition, fees, books, supplies, computer equipment, Internet access, academic tutoring, uniforms, transportation, and room and board. Any school you’re interested in can tell you if they’re eligible to accept Coverdell funds.

How Much Can You Contribute to a Coverdell Education Savings Account?

You can contribute to a Coverdell savings account only if your adjusted gross income is less than $110,000 or less than $220,000 if you file a joint tax return. Companies and trusts are even allowed to make contributions to Coverdells, no matter how much income they earn.

Here’s a tip if you earn too much to contribute to a Coverdell: simply gift the money to the student, and help them open up the account for themselves. This assumes you don’t have the next Bill Gates on your hands already earning over the allowable limit before his 18^th birthday!

There’s an annual contribution limit of $2,000 per student. This limit applies even if more than one Coverdell account has been opened or more than one person makes contributions for the same beneficiary. Consider this scenario: after a lucky child is born, her parents decide to set up a Coverdell for her and her grandparents also decide to set one up. This is fine as long as the total contributions for the child to all her Coverdell accounts don’t exceed $2,000 per year.

If the parents were to contribute $500 and the grandparents $1500, together they have maxed out the allowable yearly limit for the child.

How to Open a Coverdell Education Savings Account?

Coverdells can be opened with traditional or online brokerages as well as with many banks and mutual fund companies. The deadline for making Coverdell contributions is the due date for filing your tax return for the prior year. So if you want to contribute to a Coverdell for the 2011 tax year, you have until April 15 of 2012 to do it.

Coverdells are great if you’re saving for a younger child’s elementary or high school education. But when you’re saving only for college expenses, consider the advantages of the 529 plan because they have no limit for annual contributions and offer more flexibility than Coverdells when saving for higher education.

How to Handle Excess Contributions to a Coverdell Education Savings Account

What if you can’t use all the Coverdell funds for the beneficiary’s qualified expenses? Maybe the student graduates with all her education bills paid, but there’s still $1,000 left in the account. If the left over money is withdrawn, this will generally be considered a taxable distribution, also subject to an additional 10% tax penalty.

Here’s a tip for dealing with excess Coverdell funds: instead of closing the account and taking a taxable distribution, change the designated beneficiary to a member of the student’s family who’s a potential student. This can include siblings, step-relatives, and cousins of the student, for example. See IRS Publication 970 for complete details on Coverdell accounts and a list of qualified family members for making a beneficiary change.

For more tips about how to plan and pay for the rising cost of education, be sure to pick up a copy of my award-winning book, Money Girl’s Smart Moves to Grow Rich. You can download 2 free chapters at SmartMovesToGrowRich.com.

A 529 College Savings Plan is one that allows parents to put aside money for the future higher education expenses of their children. This plan is one of the best ways to save because, unlike most other savings plans, education-related withdrawals are free from federal income tax. Many states have chosen to adopt the same policy and also allow tax-free withdrawals for qualified expenses.

When we had our first son, it was a no brainer to open a 529 plan to save for his college.  We have followed suit opening a new plan with each child.  Well….almost.  Our now two month old doesn’t have one yet, but soon will.

Note:  Not sure how much to save?  If not, check out my post that addresses how much you should save for college.

Performance of 529 Plans

Earnings from 529 Savings Plans are based on the performance of its investments, usually mutual funds. These plans are only administered by states. An interesting fact about 529 Plans is that you can choose to invest in one from any state. And almost every state has one. State plans are often different from each other in one or more of the following ways:

• Structure of the plan
• Type of investments offered
• Benefits for out-of-state/in-state investing

Check Your State First

If you are interested in starting a 529 College Savings Plan, you should first look at the plan your state offers. Although most states allow non-residents to invest, there are usually advantages to investing in your own state’s plan including:

• State tax advantages and deductions – some states give tax-free status only to residents
• Matching grants
• Opportunities for scholarships
• State financial aid exemptions
• Creditor protection

Definitely go with your state if it gives deductions and/or credits on your tax return. This state tax break will most likely be a bigger asset than the possible lower fees from another state. The state of Illinois just increased the state tax rate from 3 to 5%, to give me even more incentive to use our state plan. New York, Minnesota, Missouri, and Michigan offer exceptional plans for their residents. Some states are so forward-thinking that they give their residents a state tax break no matter what state plan they invest in. Pennsylvania was the first state to do this.

If your state does not fall into this category and does not offer enough incentives to its residents, there are a number of states with a proven track record. Year after year, these states have had some of the best 529 College Savings Plans:

Some of Best College Savings Plans By State

• Alaska – T. Rower Price College Savings Plan
• Alaska – University of Alaska College Savings Plan
• Michigan – Michigan Education Savings Program
• New York – New York’s 529 College Savings Program (Direct Plan)
• Vermont – Vermont Higher Education Investment Plan
• Maryland – College Savings Plan of Maryland (College Investment Plan)

Some of these plans are direct sold, meaning you purchase the plan directly from the state. This is the way to go as broker-sold plans usually include sales charges, although they offer slightly more investment possibilities. Many of the best plans are managed by Tiaa-Cref, Fidelity, or Vanguard. In fact, those plans generally charge the lowest fees.

Other Factors to Consider

There are multiple factors that will affect return on your investment including:

• How much time do you have? Are you starting a plan when your child is an infant or a junior in high school?
• What sort of fees and other charges will you have to pay?
• What is the tax bracket of your family?
• How much money are you investing?
• Is there a possibility of state tax deductions?

It is amazing that you can choose to invest in a 529 College Savings Plan from almost any state in the country. With such selection, you are sure to find the perfect investment opportunity for you and your college-bound child.

photo credit: OldOnliner

A major goal for most parents is to see their children graduate from college and receive a good job so that they can live a long and fruitful life. The recent financial fiascos of the United States have put a strain on the ability of government to contribute to the ever increasing costs of college.

Historically college costs have inflated at around 5-8 percent annually, with some long periods of inflation over 8 percent. This could pose a major problem when your average investment return will be in the range of 7% annually based off the historical returns of the S&P 500.  This sounds overwhelming at first, but starting to save early is crucial to your success. From the day your child is born you will have approximately 18 years to be ready for the day your son or daughter is ready for college, but the question is, how much should you save?

This whole question become even more apparent in my life as we just welcome our third son into the world.   Can you say, “college tuition x 3 = Big Bucks?”…..Yikes!  I know many other parents are in that same situation so I thought it would be best to help them figure out how much to really save for college.

Do you really have to pay the whole bill? That’s a discussion that you’ll have to have with you and your spouse.  Both my wife and I have different college funding experiences.   My tuition was self funded with the GI Bill that I received for joining the National Guard and the difference was paid for by me working 30 hours a week.   Here’s was also funded, except it was done by her parents.   We both turned out good students with good careers, but I’m sure you can imagine that we have conflicting views on how much we should pay for our kids college.

There isn’t a right answer.  You’ll have to figure that out on your own.  What the numbers below will help you figure out is a ballpark figure on how much damage you’ll be looking at.   If you’re not sitting down yet, maybe you should…..

College Costs How Much?  Gulp.

To estimate the cost of college there is a great website that you can use to figure out how much you will need to save based off the type of University, as well as the years planning to attend. The website is apps.collegeboard.com/fincalc/college_cost.jsp. This website gives you the ability to pick the inflation rate of college costs, the years anticipated on attending, the percent of the total cost you would like to cover, as well as the years until your child has to enter the University.

For our example, I will be using four-year public (in-state) tuition to figure out how much you need to be saving per month to pay for your child’s complete college bill. These inputs are pictured below.

College is cheap.....You wish!

According to the college cost calculator, the average cost of four-year (in-state) tuition is $19,388 dollars per year.

With the five percent inflation figure, planned attendance of four years, and 18 years until college,the total cost of your child’s complete education will be $201,108.

Start Saving When Your Child is Born

This figure seems scary, but you have to consider the fact your wages will also likely increase at a constant rate to differ some of the excess costs. If you were to start saving the day your child was born, and were planning on paying the $201,108 with an 8% average return on your investments you would need to save $418.90/ month to be able to pay for your child’s total college expense. If you were to only receive a 6% return on your investments, you would need to save $519.19/ month for the next 18 years to pay for your child’s total college expense.

Start Saving When Your Child is 5 Years Old

Keeping all the same variables in place except for changing the time to college to 13 years (now assuming you start saving when your child is 5 years old), how much would you need per month? Due to the shortened time frame until college, the estimated total cost of college is now $157,574. This is a counterintuitive figure because it is less than the numbers above; this is not actually the case. It is just the case because the total cost had less time to inflate, but you also have less time to save! Earning a 8% return on your investment for the next 13 years would leave you to save $577.36/ month. If you were only able to earn 6% on your investment, you would need to save $669.25/ month. For those of us working on a tight budget as it is, the extra hundred dollars a month more of savings by waiting the extra five years may not be attainable.

Late to the Game: Your Kid is Ten

The final figure we will investigate is if you did not start saving until your child was ten, therefore leaving only 8 years until they will need to enter into college. According to the college cost calculator, you would need to have saved up $123,463 to pay for the entire bill. If you were to earn 8% on your investments you would need to save approximately $922.27/ month. This is a huge increase in savings per month compared to the amount needed if you were to start saving for your child’s education earlier in their life. If you were to earn 6% on your investments, you would need to save $1,005.17/month to pay for all of your child’s tuition.

As you can see, just because your late doesn’t mean it’s over.   It is just a long road ahead.

Paying Your Kids Tuition Bill

When you look at the examples above, the only thing that you can control is the year which you start saving. You will most likely not be able to determine a higher return for your portfolio, and should not be relying on this to pay for your child’s education. Of course the simulations above also have the expectation that you will be paying for 100% of your child’s tuition, when in reality the majority of students graduate with some type of college loans. If you were to only pay for say 78% of your child’s college costs, you would need to save significantly less than the figures above. The key takeaway from this information is that the earlier you start saving for your child’s education, the better off they will be in their adult lives, and the more debt free they will be.

Recently we just welcomed our third son, Sloane Jeffrey Rose into the world, weighing a respectable 6 pounds 15 ounces. Not quite the bruiser as our second son, but it’s a good weight. He had a good solid cry when he came out so I’m sure he is going to have a good and strong voice, and we are expecting many sleepless nights to come.  We are very excited. 

This is our third go-around at doing this, but we still had to remind ourselves of the items that we had to check off the list upon Sloane’s arrival. For those first time parents or maybe even second, third, fourth, or fifth (God bless you if you are this ambitious), here is a quick checklist of the items that you need to do once your child arrives.

Request Your Kids Important Documents

First and foremost, you’re going to need to request their social security card and birth certificate. Typically,  the hospital where you deliver will help you with this.  We know that we signed a bunch of forms to request them.  6 weeks later we finally received his Social Security card but still waiting on his birth certificate.  It just depends on your hospital and your state, but I think we had to pay for ours – a very small fee.

Adjust Your Taxes

If you’re going back to work you may want to adjust your W4. You may need to have some more taxes taken out or maybe not as much now that you have another dependant to take care of. Eventually, going with the tax theme, you’ll want to notify your accountant or CPA. If you’ve met with them than most likely they know that you’re expecting a child so therefore you’ll know to have that tax deduction for the current year or the next year, whenever that may happen.

School Days

If you haven’t started thinking about college, now is the time. Check out another video post I did that talked about the rising cost of college. If you haven’t started a college savings plan, now is the time. You’re going to need a social security number to get that open. Technically, you don’t need it to get it open, but it makes it much simpler.

What College Plan to Use?

Typically you’d stick with your state plan as you should get a state tax deduction for whatever money you put into that college savings plan. Illinois, for example, just raised the state tax deduction to 5% from 3% making it more attractive for parents to save for their kids college.  Be sure to do your research before you invest. I also have some resources on the blog that will help you out too.

Although it is not very exciting to do and I know you didn’t really want to do it, but you do have to notify your health insurance provider letting them know that you now have another dependant, another individual covered on that plan. Plus, I’m sure soon you’ll be getting the tons and tons of bills from your hospital from all the delivery. I know it seems like they come in every single day. We actually have good insurance, but they still send all the notifications of all the different procedures, all the different things that happen. Make sure to notify your health insurance provider letting them know that your new child has arrived.

Beneficiary Updates

Another thing that goes overlooked time and time again is updating your beneficiaries on not only your retirement accounts; that could be your IRAs and if you have multiple IRAs in a brokerage firm or a bank make sure you get all of them updated.

Also, make sure that you have your beneficiaries updated on your 401K plan if your employer offers one or if you have a pension plan. I see so many times that a family’s parents forget to do that, always putting it off thinking they’ll get around to it, but they never do.

Don’t procrastinate. Get it updated as soon as possible.

The other thing you want to get updated would be any type of legal documents, wills, trusts, anything of that sort. I know we just had our wills drafted. I remember talking to my attorney and saying, “Hey, I know we have #3 on the way. What are the steps that we need to do?” He said, “When #3 arrives just gives us a call. Make sure you have the social, and we will get everything updated and make an amendment to the existing will.”

Make sure you get that taken care of too, because you don’t want to leave #3 or whatever number child it is in the dark. If you don’t have a will, this is another opportunity to address that. Now that you have children it is something that you want to think about. I have another video that talks about the importance of having a will. Be sure to check that out.

We begin by stating what is probably an obvious truth: a recession year leads to a huge spike in graduate school attendance. Test-taking reached all-time highs in 2009 for admittance this year (the amount of Law School Admissions Test-takers rose 20% in October 2009, and 13% more applicants took the Graduate Record Examination). Actual application rates have risen, too — Cornell University’s Law School applications rose by 44%, the University of San Francisco’s rose by 35%, and the University of Iowa’s College of Law applications were up 39%. In general, all-around enrollment increased by 4.7 percent in the 2008-2009 school year.

When jobs are scarce, people panic — and oftentimes, applying to schools can soothe or at least delay the fear of unemployment for a while. But is going back to school actually a good investment, in and of itself? We weigh the factors below.

The Cost

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It’s no secret that grad school expenses can be astronomically expensive. The government’s financial aid website, finaid.gov, estimates that the average grad school debt was about $79,836 for a professional degree (law, medicine, business) and $52,000 for a doctoral degree. That number, unfortunately, doesn’t include extraneous “living costs” like dining, laundry, and social activities — and, as a part-time or full-time student, you’ll most likely lose the opportunity for normal work hours and pay. However, the U.S. Census Bureau estimates that, while Bachelor’s degree holders earn an average of $52,200 in their lifetimes, those with Master’s degrees or higher earn almost $10,000 more. But you’ll be paying back that higher education for at least ten years post-grad, too.

Your Career Goals

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For those pursuing certain careers, graduate school just makes sense. You can’t, after all, be a lawyer or doctor without advanced credentials. Master’s degrees in Computer Science and Electrical and Mechanical Engineering also come with major pay increases. (And some employers pay for such degrees.) But degrees in other fields — namely, the humanities and arts — usually come with increased risk. Many people hope that more education will shield them against layoffs, but even that is not often the case when jobs are plainly scarce. For example: An advanced degree in social studies at a cost of $40,000 a year when the average social studies teacher makes only $40,000 a year might be worth reconsidering.

You’ll need to play psychic — or better yet, do some deep investigating into your job market — to be able to conduct a proper cost/benefit analysis of your potential graduate degree.

Your Reasons Why

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Graduate school is more than just a huge investment of money — it’s time, too, and tons of it. Most people need to evaluate their reasons for months, or years, before ultimately deciding whether grad school is the path for them. Wanting to make more money alone is not a good enough reason in an economy that’s uncertain enough as it is (neither is boredom). You need to make sure that the education you seek — whether or not it’s for personal fulfillment — complements your larger life goals; after all, a second (or third) degree is a huge sacrifice that will almost certainly affect your relationships with spouses and other family members, as well as significantly alter your social activities and other hobbies. Always have a clear goal!

Sacrifices

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Speaking of “your reasons why,” let’s go into some detail about the sacrifices you may have to face during this period. First of all, there’ll be no living like a lawyer or businessman, even if you are in law or business school. Most graduate students are dirt poor. Chances are you’ll have to work some of the time, share a room with one (or two, or three) roommates that you may or may not get along with, go to thrift stores, use public transportation, cut back on entertainment outings, etc. And even if you are a trust fund baby with cash to spare, your time is precious and you’ll probably be using most of it studying than jet-setting. Trust us.

If you can’t imagine not having loads of free time, lush apartments, and tri-weekly restaurant dinners, then graduate school won’t be fun OR a good investment for you.

Post-Grad Woes

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Consider the worst: what happens if you graduate and still can’t find a job? After all, with a national unemployment rate of 9.7%, there are thousands of unemployed J.D.’s and PH.D.’s out there. If you can’t find the perfect job right after college, will you be tremendously upset, or grateful for the education? Is increased knowledge without increased opportunities too big a pill to swallow? Remember to look beyond your experience at school and project into the future — you’ll still be paying off loans, paying rent/utilities, and raising families. Is that possible on your average salary prospects? If you don’t know that you’ll still be happy to have attended grad school after all of this, then graduate school might not be a worthwhile investment for you. If you’ll still be happy, then it might be time to break out that stash of application money and those glowing recommendation letters right now.

So, is going back to school a worthwhile investment? It all depends on your perspective.

About the Author: Chase Jenkins is a freelance writer for MyCollegesandCareers.com. MyCollegesandCareers.com helps people determine if an online education is right for them and helps them understand which online college and online courses they can choose from to reach their goals.

http://www.nytimes.com/2010/01/10/education/10grad.html

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While students might be at school for an education, this doesn’t mean they learn everything the real world has to teach them. And while educational institutions employ some of the brightest minds out there, the focus on university curriculum often misses the mark when it comes to teaching students about personal finance. Even those majoring in accounting, finance or economics might not have a good grasp upon their own personal finances and how to avoid mistakes that can cause them to accumulate debt. But there are ways to avoid or at least reduce the chance of encountering the more common mistakes students make that keep them in debt.

1. Overuse of Credit Cards

It’s easy for students who are suddenly out of their parents’ house and on their own to find credit cards as a common means of making purchases. As they begin to swipe for everything from food and entertainment to books and tuition, the totals being accumulated on credit cards as well as the future consequences can be obsequious. It may be too late before students realize the hole into which they’ve dug themselves with credit card debt, and hefty interest rates can make this a burden that keeps them in debt for years, even decades to come.

2. Overindulging In Debt

Easy to obtain student loans is another way that students might find themselves getting in over their head when it comes to debt. Just because the loans are there, doesn’t necessarily mean a student must take advantage of them. Low interest rates and the temptation of easy money means students might be taking out more money than they need, ignoring the fact that one day it must be repaid.

3. Budgeting Ignorance

Some students just haven’t had the practice or the need for budgeting in the past. Therefore, when they get to school, there may be few guidelines laid out for restricting their spending. Without a proper idea of income and expenses, a student can begin to live outside his or her means without realizing it until it’s too late and debt has already piled up.

4. Cost Ignorance

It may not be the inaptitude or inability of the student to budget, but rather the ignorance at what the cost of schooling may be. It might come as a shock as a student realizes the costs of books, tuition, room and board, transportation, and all the other items that might accompany the obtaining of a college degree. Being unprepared for such costs might cause the student to get in over his head when it comes to the assumption of debt.

5. Overspending

photo credit: punk_drizzle

The experience itself can be one of the most educational aspects of college. However, this experience can lead to overspending if students aren’t responsible regarding their purchases. Heading out to campus bars, eating out regularly, and making poor spending decisions can have a student adding significant debt to his education.

6. Not Making Use of College Cost Cutters

There are a variety of ways to reduce expenses at college, in turn possibly reducing required debt as well. It can be a costly mistake if students don’t make use of such opportunities. Things like a part-time job, work study, student discounts on insurance, movies, etc., textbook trading or resale, having a roommate, campus freebies, and similar items can help a student keep costs down.

7. Extended-Stay Schooling

While most parents and possibly many students hope or expect a college degree program to last no longer than four years, anymore, this might not be the case. Going to school longer than expected, even by one year, may increase the costs of an education as well as the coinciding debt dramatically. And if further schooling such as a master’s degree or some sort of certification or internship is required, the costs may expand even more.

8. Wasted Summers

Summer breaks can be a significant opportunity of which students may take advantage. Taking extra classes to shorten the duration of a degree program or working to earn extra money may allow a student to reduce the debt load they might have to take on for their schooling. Whiling away the summer days lounging about can waste this opportunity and be a costly mistake.

9. Splurging After School

The feelings of freedom and adulthood that a student might experience after graduation might be accompanied by a spending spree that hinders the ability to reduce debt and may even have the student taking on more debt. Being out on their own, students might find that items such as rent, new furnishings for their apartment, a new car, and similar big ticket items are beckoning. Restricting these purchases until they have an idea of the cost of living on their own and the amount of education-related debt they must assume may help students in paying off their debt quicker.

10. Not Having a Debt Payoff Plan

Having a plan to help guide a student in the payment of debt may make it easier to stay on track in making payments. Without such a plan, debt can linger for decades, accumulating large amounts of interest and costing the student much more over the long run than it might have if they had made extra payments toward such debt.

Tom Becker writes about high interest savings accounts for Money Choices, an Australian finance comparison website. Tom is not endorsed or affiliated by LPL Financial.

photo credit: eric731

College is becoming increasingly expensive. As a result, it is likely that you will need to seek funds for paying for college from multiple sources. First of all, though, it is a good idea to be setting money aside in some sort of advantaged account. Whether this is a 529 plan or a Coverdell, it is a good idea to be in the habit of setting aside money for college. However, if you are concerned that what’s in a college account will not be enough to cover the costs of college, it is a good idea to consider additional sources of college financing.

Some types of college financing are more desirable than others, as you might imagine. Below you will find ideas for college financing — in the order you should seek them:

1. Free Money: Grants and Scholarships

Your first efforts should be geared toward getting free money to help you pay for college. The government offers grants based on your income. If you qualify, you can get government help paying for your schooling. On top of this, there are scholarships available for different accomplishments. Some of them are available because of certain qualities you might have (such as being tall, or being of a certain ethnicity). FastWeb is one site that can help you locate scholarships to apply for. Check with the school, and in your local community, for scholarships.

2. Federal Student Loans

Scholarships are harder to come by these days, so you might need additional loans. Your first stop for student loans should be the federal government loan program. You can get loans at a lower interest rate. You should first get as much as your federal financing in subsidized loans. With these loans, the government pays your interest until you are done with school. If you don’t qualify for subsidized loans, you can get unsubsidized loans. With these loans, you can pay the interest as you go, or wait until you are done with school and the accrued interest is capitalized.

3. Private Student Loans

You can also get student loans from private sources. Banks offer student loans, but their interest rates and terms are often not as favorable as those offered by the government. You can go to web sites like TERI.org to find sources for private student loans. Another possibility is to go through a site like Tuition U, which offers P2P lending as well as access to banks and credit unions across the country. Before you go to a bank, it might be worth it to check the terms you can get with peer to peer lending. In some cases, you can get better deals. Additionally, you can ask friends and relatives to help you with your education by loaning you a portion of the sum through a P2P site.

Bottom line: Finding financing for college isn’t always easy — and it can be expensive. However, there are a number of options that can help you find some of the help you need to pay for college. Start out by working toward funding yourself through savings and scholarships, and then explore other options if needed.

photo credit: catd_mitchell

Staci Fagal writes for Teaching Money to Kids, a site devoted to Growing Money Savvy Kids. Staci’s other super powers are keeping other people busy, building intricate wooden railways, and raising a family of six on less than 30k a year.

College is expensive, but just because you may qualify for the loan, or grant, doesn’t mean you have to use every penny. Besides shopping around for a good college, and a good loan, there are a number of other things that you can do to bring down the cost of college.

Figure out Food.

Even in normal homes, food is one of the most controllable variables. Investigate the cost of eating on campus versus eating out or cooking on your own. If you live in the dorm, cooking in your own room may not be an option. And investing money into a variety of ingredients may not be cost effective either.

If your school requires you to purchase a meal plan (many do), figure out how to get the biggest bang for your buck (avoid prepackaged food & drinks), so you don’t find your self short on credit at the end of the semester.

My roommate my junior year and I decided to share food. Our system worked like this: We would alternate shopping, and figured on spending about $40 each time. The problem? She had very expensive tastes, so her shopping trip would only last us a couple of days or even just one meal! So in order to make things work we had to renegotiate and came up with a new plan. I would shop and cook for one whole week, and then the next week she could shop and cook for the whole week.

Don’t forget transportation costs.

Carpooling, taking the bus, riding a bike, living closer to campus, etc. are all ways to cut down expenses. My first 3 years of college I didn’t have a car. Inconvenient? Yes, but it was also a great excuse to get a ride from that cute guy in Algebra.

Figure out Housing. Some times it is cheaper to share rent off campus. Some times it isn’t. Do a real cost analysis before making a decision. Figure in everything from cost of transportation (including gas, insurance, even vehicle); food; utilities; and furnishings.

I was able to share a furnished house with 2 other people my senior year. Not only was it close to campus, but there were already spices in the cabinet for our use.

Shopping for textbooks.

photo credit: staticjana

The campus store may not be the only place that sells your texts. Many books can be found on Amazon.com and other book sites. Some campuses even have “underground” used textbook stores. Just make sure that you are getting the correct edition, or are familiar with the updates.

Shop for books as early as you can, since the cheap, used books are usually the first to go. Or you can do what my hubby did and wait until all the books are gone, and then ask a certain girl if he can “study” with you. (I want to state for the record that we both ended up with the highest 2 grades in the class, thank you very much)

Know your health care options.

Most students are of the age that they still qualify under their parent’s insurance. But sometimes parents have to pay an additional fee for coverage of an older student. This fee may be higher than the student insurance offered by the school. Because insurance companies assume that college students are at the peak of their health, colleges are able to negotiate lower rates for their students.

If you do keep your own health insurance, beware that the campus health center is not likely in network. You may have to shop around for a good doc that is on the list, if something comes up.

Try Negotiating with the school.

Colleges are feeling the pinch in this economy, too, and they are willing to negotiate with certain parts of their program. Things many colleges can be flexible with:

• Registration Fees
• Scholarship Matching
• Cafeteria accountsHousing Costs
• Book Store accounts
• Accepting Pre-college credits

Compare all of these numbers with the different schools. If you have a first choice school, that is more expensive than your second choice school , you could send them a price comparison, and see if they are able to make you a deal.

Study Your bulletin.

Each year schools publish the degree requirements for each major. Some times there are big changes from year to year. You can petition which bulletin you wish to graduate from. Here are some things that you should look for:

• How many credits are required in each category of study
• If certain classes can qualify for more than one category
• How many credits can be transferred in from another school
• What is the maximum number of credits you can take each semester

Knowing this information can save you tons. If you are able to take summer classes at a cheaper community college and transfer them in, and take a maximum load each semester, you could potentially cut a whole year off of your schooling. It may not be as much fun, and you might not be able to work that extra job, but you could be saving $20,000 or so by cutting out that extra year.

Pinching your pennies may prove to be the greatest skill that you learn in college.

Staci Fagal writes for Teaching Money to Kids, a site devoted to Growing Money Savvy Kids. Staci’s other super powers are keeping other people busy, building intricate wooden railways, and raising a family of six on less than 30k a year.

photo credit: YuvalH

When it comes to finances, nearly everything you do offers teaching opportunities for your children. And, there are few teaching moments as obvious as back to school shopping. Money (sometimes large amounts of it) is involved, and this is the perfect opportunity to teach your children some basic financial principles — while getting them the school supplies and clothes that they need.

1. Plan Ahead

Financial planning requires, well, planning. Back to school shopping can teach your children the importance of planning ahead. Show them how to go through their things and figure out what they already have. Then, help them make a list of their intended purchases. Next, if they are old enough, go through sales fliers and look for coupons that match the items on the list. You want to teach them that, by planning ahead, they can help their money go a little further. You can also teach your children to comparison shop by checking prices around town, and even by shopping online.

2. Budgeting

Rather than just buy everything on the list, discuss budgeting with your children. Explain that your household runs on a budget, and that Mom and Dad have to stay within a budget as well. Then explain that back to school shopping comes with its own budget, and that getting everything on the list may not be possible. Let your children know what their back to school budget will be, and then help them go through the list and estimate whether or not everything will fit within that budget, and where they might need to cut back in order to save more money.

3. Financial Priorities

We don’t always get everything we want in life. A very important money lesson is that children can learn through back to school shopping is that there are needs and there are wants, and these need to be properly prioritized. Your child may need a new binder for school, but a $75 pair of jeans is a want (especially when there are perfectly good jeans available for $19.99). Help your child go through his or her list and determine which items are most important. Re-shuffle the list so that the most important items are at the top, with the less important items dropping off the bottom. If you explain to your child that the expensive top may mean that he or she can’t get the proper shoes for participation particular school sport, a less expensive shirt suddenly becomes acceptable, since the extracurricular activity may have higher priority.

4. Managing Your Own Money

Many parents like to provide some of the money for their children’s back to school purchases, and then expect their kids to take care of the rest. If your child has an allowance or a part time job, it might be a good idea to put some of the back to school shopping burden on their finances. Be clear in your expectations, and let them know what you are willing to pay for. Perhaps you tell them that you will pay for necessary extracurricular equipment, but your child must buy his or her own new clothes. Other parents say that they will provide a certain amount of money toward back to school shopping, but anything over that amount has to come from the child. Many kids (but not all) suddenly become much more financially responsible when they are spending money they have earned, as opposed to money you are giving them.

This is a guest post Miranda Marquit is a journalistically trained freelance writer and professional blogger working from home. She is a contributor for Mainstreet.com, Personal Dividends and several other sites. Miranda is not affiliated or endorsed by LPL Financial. The opinions voiced in this material are for general information and are not intended to provide specific advice and/or recommendations for any individual.

photo credit: Bloomington Salvation Army