Smart Choices Can School Students in Financial Planning
Bills.com suggests 8 ways to get straight As in student borrowing
SAN MATEO, Calif., Sept. 10, 2008 - As the nation's economy continues its crunch, millions of college and university students across the United States are enrolling in school and borrowing thousands of dollars. Bills.com president Ethan Ewing has eight suggestions for how students can maximize those loans.
Two-thirds of college students graduate with some student loan debt, averaging $19,237 in 2003-2004, the most recent year with full data available. About 10 percent of parents also borrow money for their student's education, adding up to a cumulative parent loan debt of $16,317.
Ewing suggests students remember these eight points to make the most of their financial well-being, with loans or without:
1.Keep tabs on credit. Credit scores determine interest rates on private loans. Parents and students should check their credit ratings - for free - once a year (available at www.annualcreditreport.com or by calling the three credit reporting bureaus). Paying bills on time, building a steady employment history and being alert to possible identity theft will help support a good credit rating.
2.Borrow only what you need. Some students automatically borrow as much as they can qualify for. Instead, calculate needs and borrow only to cover them. If the lender sends a check for more than is needed, ask for a corrected check. "All loans must be repaid, and spending the money now on a vacation, furniture or clothing will only hurt in the future," Ewing said.
3.Do not charge. The average college student has thousands of dollars in credit card debt. With extremely high interest rates (typically 15 percent to 30 percent), accumulated credit card debt is difficult to pay off. While in school, use discipline to live within your means. It is also wise to use loan funds, rather than credit cards, to pay for school-related expenses such as textbooks. The interest will be lower, as well as tax-deductible.
4.Pay on time.Paying all bills -- including loans -- on time is the No. 1 way to protect a credit rating and save money. It is more important than ever today, when a late payment on one account can send interest rates and payments skyrocketing on other accounts.
5.Use resources. Some employers and professions have perks that include student loan repayment. After graduation, working adults can check into these programs, which can include monthly assistance, one-time payoffs and matching funds. "Those who qualify for one of these programs and do not take advantage of it are effectively turning down free money," Ewing cautioned.
6.Take tax benefits. Most new graduates can deduct up to $2,500 per year in student loan interest payments. The deduction phases out for taxpayers with annual incomes between $55,000 and $70,000 ($115,000 to $145,000 for those filing joint returns). Ask a tax advisor to check your tax return to be sure you get all the education-related deductions and credits for which you qualify.
7.Pay more if possible.Additional payments are permitted on most student loans. The more you pay, the faster you will be free of the loan. If you have credit card debt, be sure to weigh early repayment on your student loans against the benefits of early repayment on your card balance. The interest rate on the student loan will most likely be lower than on a credit card.
8.If you cannot pay. If you absolutely cannot make your loan payment, immediately call the lender. "Lenders would rather work with you than risk a defaulted loan," Ewing said. Your credit rating will hold up better if you postpone payments for a while than if you default. Damage from defaulting could prevent you from buying a home or car or getting a job, apartment or insurance for years to come. If total debt is insurmountable, seek help from a reputable debt resolution advisor.
"By making the right decisions on student loan borrowing, today's students can more quickly get on the road to financial freedom," Ewing said. "Just as important as academic history, a good financial history paves the way for future success."
About Bills.com (www.bills.com)
Based in San Mateo, Calif., Bills.com is a free one-stop portal where consumers can educate themselves about complex personal finance issues and comparison shop for products and services including credit cards, debt relief assistance, insurance, mortgages and other loans. As the online portal to Freedom Financial Network, LLC, the company has served more than 40,000 customers nationwide since 2002 while managing more than $1 billion in consumer debt. Its RSS feed is available at http://www.bills.com/news_releases/.
Bills.com holds the No. 257 spot on the Inc. 500 list for 2008, and the No. 3 spot on Entrepreneur Magazine’s Hot 100 list of the fastest-growing U.S. companies. Bills.com also was named a finalist as "most innovative company" in the American Business Awards in 2008. Company co-founders and co-CEOs Andrew Housser and Brad Stroh were named to the Silicon Valley/San Jose Business Journal's "40 Under 40" list in 2008, and are recipients of the Northern California Ernst & Young 2008 Entrepreneur of the Year Award.