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Posts tagged ‘student loans’

Nova Scotia Throws Out Student Loan Interest

500px-Flag_of_Nova_Scotia

In a move that mirrors the proposal in Oregon we talked about a few months back, Canadian province Nova Scotia has voted to eliminate interest on college student loans. The legislation is a deliberate and explicit move to remove the crippling financial burden of debt from new students as they start their careers.

Other provinces (and states) should take note. This is a no-brainer. Investing in your college graduates is how you build toward a prosperous future. In an era where the rapidly rising cost of a college education makes more and more people question if the degree is worth the investment, it is in the government’s best interest to reassure people about the value of higher education.

The only lesson to take away from the huge recession a few years back is that searching for short-term gains at the expense of long-term growth is never worth the cost. Let’s be more cautious about who we give loans to and more forgiving about paying them back. The purpose of a loan is an investment in a person or an idea, not a bait and switch to rake in interest and penalties. It’s true with houses, and it’s just as true with students’ futures.

5 Ways to Save Money During Spring Break

iStock_000011798346SmallThe following is a guest post written by Carl Berry. Berry is a financial writer who covers tips and tricks for saving money on travel, college expenses, and everyday items.

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This winter has brought some of the worst weather in recent memory. If you’ve been bombarded with snow, ice, and sub-zero winds — or even if you’re just tired of hearing about them — you can find some much-needed mental respite by sitting down and planning your spring break. However, before you start booking your tickets and packing your bags, be sure to start off on the right foot financially. You’re more than likely to graduate with a hefty student loan balance, which means that the better you manage your money during your college years, the easier it’s going to be to establish yourself after you don the cap and gown. Here are five ways to save money during your spring break.

1. Start Researching Airfares Now

Whether you’re going to Cancun, Daytona Beach, or somewhere in between, start researching airfares now. Use travel aggregator websites such as Kayak or BookingBuddy where you can receive updates on sales and discounted prices. To truly maximize your savings, book through Priceline’s Name Your Own Price program. You won’t necessarily know your carrier or flight time until you book, and you may have to deal with a layover, but you can save a lot of money by going this route.

2. Book Your Hotel Room Strategically

Snagging a beachfront hotel room in Ft. Lauderdale sounds great, but it’s also expensive. Instead, book a room at a hotel a few blocks away from the water. A short walk is a small price to pay for significant savings. If you’re traveling with friends, split a room. Often you can add an additional cot for a small fee. Lots of hotels offer beach-view rooms at a premium. Don’t take the bait. Book a cheaper room and save your cash. You’re not there to look at the sand, you’re there to walk on it.

3. Couch Surf

You could score free digs by checking out a website like Couchsurfing. Create a profile, enter the city you’re visiting, and search the free places to stay. You may not have total privacy and, again, the location may not be ideal, but you can’t argue with free lodging. If that’s a bit extreme for you, try Airbnb, which allows you to book shared rooms, rooms within an apartment or home, or an entirely private home. Depending on the properties available, you could score a pretty good deal.

4. Consider a Non-Traditional Destination

Cancun, Ft. Lauderdale, and South Beach are all classic, go-to spring break destinations - and because of that, they’re pricey. A beach is a beach, though, and by going with a non-traditional option, you can still get all the perks of a vacation with less of a drain on your finances. Plenty of college students travel to Tampa, Clearwater, and Charleston or Myrtle Beach in South Carolina to enjoy Spring Break. Costs across the board are generally cheaper at these destinations, so you save on transportation, food, drink, and accommodation.

5. Eat and Commute on the Cheap

Once you decide on your destination, get creative with your travels. Pack your own lunches and drinks for the beach and either walk or rent a bike for an inexpensive way to get around. Cab rides and rental cars, not to mention beachfront seafood restaurants, go a long way toward making your getaway more expensive.

Conclusion

Now that we’ve talked about ways to save money during spring break, here are a few ways you shouldn’t. Never throw a beach towel over your shoulder or slip a pair of shades on and walk out of a retail store. Similarly, when eating at restaurants during busy times, it’s neither funny nor cool to jet on your tab. Plus, it’s illegal. These businesses wait all year long for high-season, and you’re doing serious damage to their bottom line by stealing. And, if you get caught, you could end up in jail and have to pay for an attorney to straighten out the mess. Do the right research and planning before your trip, and you won’t be tempted to save money by doing anything immoral.

What plans do you have for spring break?

Oregon Considers Offering Free Tuition. You Can Pay Them Back Later.

800px-UofOsign

Back in the summer, the Oregon State Legislature agreed to a plan that would allow students to attend public universities and community colleges for free. In return, the student agrees to pay a small percent of his or her income after graduation.

It’s more or less an interest-free loan. After all, from the government’s perspective, the biggest problem with student loans is that they cripple graduating students with debt right as they become fully functional members of the economy. While the terms of individual loans vary, they also all work more or less on the principle that getting a degree means you’ll soon be making money. Recent grads know that’s not always the case.

The consequences of these painful interest rates are far-reaching. The higher interest rates get, the longer it takes graduates to move out of their parents’ house, to buy cars, and to buy homes instead of rent them. Nobody but the lenders benefit.

That’s the reasoning for Oregon’s plan. As the number of students needing to take out loans increases, there’s greater incentive for the government to make sure these future members of society aren’t economically handicapped right out of the gate.

The proposal isn’t without its flaws. The length of the percentage payout is a whopping 25 years, and since it’s based on a fixed (though small) percentage, graduates will presumably pay more as they go along. Even if, statistically speaking, this plan saves you money in the long run, those savings are based on the assumption that you’ll only be making so much money over the next two and a half decades. That’s a hard concept for a lot of people to accept. We all want to be millionaires at some undisclosed point in the future.

There’s the additional problem of enforcement. The state government will have to track the income of every student as they move to different states and different countries. And there are actually restrictions on what data educational institutions can collect on students. More restrictions in education than for credit companies, believe it or not.

But Oregon is moving forward with the pilot regardless, and hopefully they’ll figure out better solutions to these problems as they go along. A number of other states — Pennsylvania, New Jersey, and Ohio — have filed similar proposals with their legislations. So who knows? This weird idea might become the new normal.

Scholarships Replace Parents As the #1 Payment Source for College

The amount of money parents contribute to their kids’ college education is dropping. Or, more accurately, it’s struggling to keep up. As recently as 2010, parents paid for 37% of the total money spent on college education around the country from their own income. Three years later, that amount has dropped 10%, with grants and scholarships now taking over a greater percentage of the heavy lifting.

Student Borrowing 18%, Parent Borrowing 9%, Parent Income & Savings 27%, Grants & Scholarships 30%, Relatives & Friends 5%, Student Income & Savings 11%

How college was paid for in the 2012-2013 academic year. Source: Sallie Mae

Simply put, the cost of college is increasing faster than parents can afford to keep up with it.

To fill the gap, more students need to take out loans (14% in 2010 has become 18% in 2013) or simply fit the bill for their education from their own income and savings (9% in 2010, 11% in 2013). It’s to the credit of colleges and universities that these numbers aren’t much higher than they could be. They’ve upped how much they spend on scholarships and grants, as well as simply offering more full-rides and other financial support, in order to keep the burden on students from getting too overwhelming.

Keep in mind that these numbers are percentages of total money, not of students. In other words, 18% of total amount spent on education last year came from student loans. It’s not that 18% of students took out loans. The actual total number of students graduating with some sort of  debt? Nearly two-thirds.

So what can a student do? Not much, unfortunately. Basically, you can be very grateful to your parents for what they’ve done and go out of your way to find scholarship opportunities. Obviously it’s going to vary greatly from individual situation to situation, but here are a few general pointers:

  • Even if your parents are paying for college, apply for some scholarships. There are tons of them out there, and your parents will certainly appreciate any money you save them.
  • Weigh your options with student loans carefully. While often necessary, they can be very tough to pay off for young professionals. On the other hand, taking the income hit you’ll get from not getting your ideal degree might leave you just as strapped for cash through your 20s.
  • There are a lot of great scholarship resources out there, but no single, completely comprehensive search engine, so don’t limit yourself to Google. Ask around. If there’s some sort of local community group, church, synagogue, mosque, sports team, etc. that you’re a part of, your odds of getting their scholarship are definitely higher.
  • Don’t just look during the summer. Most scholarships are offered year-round, and the earlier you look the more likely you won’t miss an application deadline.

“As Much Education As They Can Afford” — Gaffe or the Plain Truth?

Presidential candidate Mitt Romney (R)

At a rally in Virginia, Mitt Romney said that he wanted to make sure that America remains “a place of opportunity,” where “everyone has a fair shot” and “get[s] as much education as they can afford.”

Now, we’re not a political blog. And we really, really don’t want to be one. A political blog latches on to every bit of phrasing and twists and turns it around to try to reveal some hidden truth or underlying theme about a candidate, a party, an organization, whatever. The knee-jerk reaction to Romney’s phrasing is easy: “What do you mean as much as they can afford? Are you saying the financially privileged deserve better educations than other Americans?”

That’s a boring conversation. Is Romney’s phrasing a subtle hint at an underlying bias toward the wealthy? Who cares? The last thing I want to do is contribute to the always petty conversation around election season.

But we are (or at least we’d like to think we are) a blog about ideas. And at the root of over-analyzing Romney’s statement is an interesting discussion: How much education should be free, and how much should you have to pay for?

First of all, education is never free. It can’t be. Even if, in the future, our current concepts of classrooms, degrees, and homework are completely unrecognizable, students will always need two things: equipment (books, computers, art supplies, etc.) and teachers (professors, coaches, etc.). Even if the students of the future consume all of their education through all-purpose interactive tablets, someone needs to buy the tablets. Even if the students of the future are all taught by very life-like robots, someone needs to pay the programmers and engineers making robots. Because teachers will always need salaries and equipment will always need to be purchased, someone always needs to pay for education, whether parents, taxpayers, grant donors, or the students themselves.

So when we say “free” what we really need to be saying is “accessible.” Should everyone have the same access to education? Well, sure. That should be an easy answer. That’s only what’s fair, right? No sane person would claim that the very poor don’t deserve to be just as informed as anybody else. That’s the reason why it’s important to make sure resources like libraries and public schools allow anyone to access them freely. We can’t claim to be a democratic society and prevent accessibility of information.

But at the same time, we can’t really claim that all education is created equal. Obviously, some schools are going to be better than other schools. A lot of that depends on the quality of the teachers. A lot of that depends on the quality of the administrators. But most of it, unfortunately, has to do with money. Schools with more money will be able to pay teachers better, provide better tools for their students, fund more extracurricular activities, and provide more out-of-the-classroom experiences. So while we should certainly always strive to make education be as universally accessible as possible, the sad fact is that it won’t be.

Let’s take it back to Romney’s words, specifically, the word “afford.” Naturally, when we think about affording something, we think about money, but that’s actually a secondary definition. The primary, according to Merriam-Webster anyway, is “to manage [or] to bear without serious detriment.” So “affording” education means more than just paying for it. It means being able to dedicate the time and energy necessary to achieve your goals.

Again, I’m not here to nitpick word choice of a person who’s on camera 24/7, I’m just making a point. An education is always going to be an investment. Even if you didn’t have to pay for four years of undergraduate studies, you still were dedicating four years of your life toward making your future opportunities better. That’s a cost in itself. And that’s a cost that not everyone will be able to handle.

Getting a good education is achieved through hard work and good resources. That’s always going to take money and energy. The more we can help one another have access to quality education, the better. But there will always be a personal cost to a student: long-term, like loans, or short-term, like choosing to be a full-time student instead of having a job. We can (and should) keep the cost as low as possible, but a student needs to be willing to make that personal investment.

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