Navigating the Confusing World of Student Loans

In today’s post-secondary education climate, student loans are becoming a necessity for a large number of students. While scholarships and money from jobs are enough for some, the cost of four or more years of college education continues to rise.

Luckily, student loans are available through both government-subsidized programs and from private lenders. Of the two, government loans are much more attractive than private loans. Because they are funded by the government, these loans accrue interest at much lower rates than private (for-profit) loans.

It is generally advised that an individual only uses government loans to pay for school and that private loans only be taken after all other avenues have been exhausted. Government-backed loans are taken much more often than private loans due to the better terms, and this post will be focusing on the types of government loans.

Subsidized Stafford Loans

Stafford loans are loans that are funded directly by the Federal Direct Student Loan Program but can vary significantly depending on whether they are subsidized or unsubsidized. Subsidized loans are preferable because they do not begin accruing interest (that you are responsible for) until after you graduate. However, the subsidy is not available to everyone. Generally, it is reserved for those that demonstrate financial need (reported via the required FAFSA form) and not available to those coming from incomes in excess of the $50,000-60,000 range.

While your school is ultimately responsible for determining the amount you are awarded, the program caps freshmen at $3,500 for the year, sophomores at $4,500, and each year of undergraduate studies after that at $5,500. The total amount that a borrower can take in Subsidized Stafford Loans is capped at $23,000. Interest rates on Stafford Loans are subject to change, but those loans issued between July 1,

While your school is ultimately responsible for determining the amount you are awarded, the program caps freshmen at $3,500 for the year, sophomores at $4,500, and each year of undergraduate studies after that at $5,500. The total amount that a borrower can take in Subsidized Stafford Loans is capped at $23,000. Interest rates on Stafford Loans are subject to change, but those loans issued between July 1, 2016, and July 1, 2017, typically carry a rate of 3.76%.

Unsubsidized Stafford Loans

Unsubsidized Stafford Loans are much like their subsidized counterparts, except that the borrower is responsible for paying interest that accrues while they are still in school. However, the payments are usually deferred until the student graduates. Additionally, all students are eligible for the unsubsidized Stafford, regardless of income. The loan availability amount ranges between $5,500 and $20,500 depending on income status, dependent status, student grade classification, and whether or not the student is a graduate student. Graduate students and financially independent students are eligible for larger dollar amounts per year, usually increasing slightly as their grade classification progresses. While these usually loans carry the same stated rate of 3.76% for undergraduate students, the actual amount owed will often be higher than subsidized due to the accrual of interest during the student’s tenure in school.

Stafford Loans – Grace Period

One of the most important features of federal (public) loans is the grace period. For Stafford loans, this period is six months after graduation, dropping out, or after going below half-time enrollment. Institutions may vary widely on what they consider half-time, so it is best to check at your individual institution to see what restrictions may apply. During this six-month grace period, a borrower is not required to make payments on their student loans. This allows students to find a source of income before becoming swamped with debt.

Perkins Loans

Although the Perkins Loan program will come to its end on October 1, 2017, it is still possible for a student to be awarded a Perkins loan before that date, though unlikely. Perkins Loans offered fixed interest at 5% and, like Subsidized Stafford Loans, deferred interest until leaving school. Another major feature of Perkins loans is the 9 month grace period usually attached to them.

Parent PLUS Loans

PLUS loans are loans to graduate students or to parents helping their children pay for college. The most noteworthy feature of PLUS loans is that there is no hard cap to the amount a borrower can take. Instead the cap is effectively the cost of attendance at the student’s school, if no others factors are present. PLUS loans are less preferable than Stafford loans because they have a higher interest rate. For 2017, the rate is 6.31%.

In summary, public loans are far less predatory and costly than private loans. Along these lines, the more subsidized, the better. Subsidized Stafford loans offer the lowest interest, rates and deferred interest, but have income restrictions on eligibility. Unsubsidized Stafford loans have the same low rate, but do not defer interest and have no income restrictions. Perkins loans, though on the brink of extinction, offer the next lowest interest rate and a grace period of nine months (three months longer than Stafford). PLUS loans are only available to assisting parents and graduate students and are effectively capped at the cost of attendance for a given school, however they carry the highest interest rate of public loans.

How to Make Your Case and Win Scholarships

With the ever-rising costs of college tuition, many students are reliant on scholarships to be able to go to college. This has led to increased competition for the limited number of scholarships and other financial aid. However, there are a few tricks that you can use when writing scholarship essays or responses that can substantially improve your odds for success when writing scholarship essays or responses.

Unfortunately, the prompts for scholarships can vary widely, but some of the most common are a variation of the following:

  • Where do you see yourself in 5 (10) years?
  • Explain why you are a good candidate for this scholarship.
  • How will your collegiate studies contribute to your life goals?
  • How have you demonstrated leadership (or another ability) in your life?

You may have noticed that the common theme is a probing question asking you, in one way or another, how you stand out from other candidates. The prompt is usually quite straightforward, but it is important to avoid sounding bland and falling into the same traps as other candidates. An ideal essay will highlight a candidates academic achievements, extracurricular activities, financial need (if applicable), and personal drive.

Know Your Audience

Before diving into your essay, it is critical to know to whom you are writing. If you are writing to an individual or a family, it may be beneficial to Google them and find out what they do in an attempt to relate to their experiences and it is likely that hard work or financial need are some of the most important factors to them. If they are alumni of your school, be sure to mention the school.

If you are writing to someone unnamed, it is probable that it will be a committee in the scholarship office or someone from the department that houses your major. In that case, it is usually more beneficial to talk about the school and the department, invoking the school’s motto or creed if possible (without seeming forced).

The most important rule for knowing your audience is knowing how formal or informal to be. Generally stay as formal as you can, but if the addressee is an individual that you can relate to personally, it is usually worth the risk of going informal. Remember, you have to stand out.

Avoid Typos and Unimaginative Descriptors

One of the most common mistakes that disqualify a candidate for a scholarship is poor grammar or sloppiness.

This makes sense.

Why would a committee award a scholarship to someone who didn’t take the time to proofread an essay?

It doesn’t exactly scream academic excellence. Additionally, it is generally a good rule to avoid any contractions (hence, you should replace “don’t” with “do not” and can’t with “cannot”), as they are seen as a more informal form of writing. The same holds true for weak adjectives and adverbs. Avoid using bland words like “great” and “very”, opting instead for “tremendous” or “incredibly”. Readers will feel more sincerity and stay more interested in essays that avoid weak descriptors.

At the very least, it is a good idea to write your essay in Microsoft Word or a similar program. This allows you to catch more typographical and grammatical mistakes. Additionally, if you find you have used a weak descriptor, you can right-click and select synonyms for an idea on some potentially stronger alternatives. Finally, you should have someone you know read your essay for suggestions. It can never hurt to have a fresh set of eyes look at your work.

Explain What Winning the Scholarship Would Mean to You

At the end of the day, those in charge of giving scholarships want their decisions to have positive impacts. It is usually a good idea to mention the impact that scholarship money will have on you. If a scholarship means less you have to take in student loans or relieving hardship on your parents, who are helping you pay for school, be sure to emphasize that.

Your essay should clearly demonstrate your need and gratitude to the reader. Sincere flattery can go a long way, but insincere flattery could backfire, so be sure to mean what you say and clearly articulate when telling your audience what the scholarship would mean to you.

While these steps might not apply to all prompts, they can be broadly used in almost all cases. Showing awareness, drive, and sincerity can be as important as anything else you might say in a scholarship essay and will certainly help your chances of being selected for the award.

Having Trouble Qualifying for Credit Cards? Try Applying for a Secured Credit Card

Credit cards have become the backbone of many people’s lives.

They allow you to spend up to a certain limit and give you a ‘free’ period before you need to pay that balance back and before your balance starts accruing interest.

They also allow you to do things like hold a deposit against a rental car which can be trickier (or impossible) with debit cards, depending on your banking institution.

To be eligible for a credit card you need a good credit history. You can build one up by paying all your bills on time, having long term credit cards and meeting all your payments for a loan. If you miss a payment on any of these items, you get a negative mark on your credit history that can take years to disappear.

For anyone with a poor credit history, or simply no credit history at all, it can be difficult to qualify for a credit card. In this case, you can opt for a secured credit card which will allow you all the benefits of a credit card, and build up your credit score at the same time.

Secured vs. Unsecured

Most credit cards are unsecured, meaning there is no asset listed against the card and you can draw down any amount the bank deems appropriate during your initial application.

Secured credit cards, on the other hand, require you to put down a cash deposit, and in most (but not all) cases the amount you put as a deposit will be set as your credit limit. Some institutions will offer a higher limit, and some will offer interest on your deposit, so check the fine print to see what suits you.

Credit Reporting

The number one draw of a secured credit card is to rebuild your credit score so you can get better financial products. There are three major credit bureaus in the United States. A card that reports to all three credit bureaus will increase your score quicker, while a card that doesn’t report to anyone won’t increase your score at all.

The Downsides

As mentioned, all secured credit cards require you to pay a deposit. When you’re in a financially tricky situation, it can be hard to find the funds for this. Search for a card with a lower starting deposit, and keep in mind that many institutions will let you add to this amount moving forward.

As with all banking products, there are fees to watch out for. If you aren’t careful in choosing your company you can end up paying fees that wipe out you deposit within a few short months. Steer clear of application fees wherever possible, and if you do choose to pay them make sure the benefits of the card outweigh the initial buy in costs.

Lastly, most secured cards will charge higher interest rates and offer minimal rewards. This means that secured cards aren’t a long-time financial product, but something that can be highly useful in the right circumstances.

While there are many downsides and your credit line is limited by the amount you can deposit, secured credit cards are an excellent tool for getting back on your feet, or taking your first steps into building a credit score.

What You Need to Do After Graduating College and Moving into the Real World

So you just got that diploma and are making your way into the ever-so-deeply-feared “real world.”

You might be excited. You might be terrified. You might be depressed. Or, you might be a weird combination of all three and a bunch of other emotions.

I was there once.

I had a mixed bag of emotions. I was pretty upset that I was leaving my “glory days” of college. You might know what I mean. Probably (okay, definitely) a little too much drinking, the freedom to do whatever you want most of the day, and unlimited entertainment all over campus.

Though I missed these things, there’s always a time to grow up and move on. Though I was able to make new friends as I moved and found plenty of things to do, there was one thing that I wasn’t too sure about – money.

I did a decent job at managing my money in college, but never really had a budget or watched it too closely.

Now I had to pay way-too-expensive rent, figure out how to start saving my money instead of blindly spending it at the bar, and learn the ins and outs of money.

I decided to put this article together to go over some basic first steps you should take to help you as you make the transition from college to the “real world.”

Step 1 – Make a Budget

As I mentioned, I never used a budget in college. I simply looked at how much money I had and tried not to blow it all too quick.

Now that I had less support from my parents and a lot more expenses, I knew it was time that I needed to start budgeting.

Though I won’t go too in-depth about budgeting here, you should at least start by writing out all of your sources of income and all of your expenses. Start out by subtracting your necessities from your income (rent, food, utilities, student loan payments, etc.), then see how much you have left for the nonessential things such as drinks on the weekend, cable, etc.

I have found that the 80/20 budget works really well for me. To learn more about this, check out my last post.

Step 2 – Start Paying Down Student Loan Debt

After you graduate you typically have 6 months before you have to start making payments on your student loans. if you have private student loans, this may not be true, and you may actually be already making payments.

Regardless of what kind of loans you have, if any, it is imperative to figure out how you are going to repay your loans. There are all kinds of repayment plans and options for those with student debt – both those doing well and those struggling.

Figure out what kind of loans you have, their balances and interest rates, and minimum monthly payments. Next, research some of the different student loan repayment options that you have.

If you have a great job and good credit score, you might want to consider refinancing your student loans to a lower interest rate.

If you are struggling to afford your payments, consider going onto an income-driven repayment plan that limits your payments to a proportion of your income.

Step 3 – Start Saving & Investing

Most people leave college with high amounts of debt and no savings. If you were somehow able to save money in college, props to you. I know I wasn’t and it wasn’t until I had a real job that I was able to start saving some money.

When you create your budget, see if you can make some room to set money aside for savings. At first, just building up some money in your bank account should be sufficient.

Once you have built up a decent amount of money, you might want to consider looking into a retirement plan such as a 401k or Roth IRA. Many employers offer these plans to employees and some even match contributions.

Final Thoughts

There are tons of things that will change after graduating college. You will make new friends, possibly lose some friends, and will experience so many new things. The one thing you shouldn’t have to stress about, though, is your money.

Do your research, make a plan, execute it, and you’ll be just fine. There are always options if you are struggling and tons of technology out there to help you along the way.

You may not know exactly what lies ahead, but that’s okay. You are still young and have time to make mistakes and learn, so go out there and start living!


The Easiest Budget Known to Man: the 80/20 Budget

Budgeting can suck.

I have tried budget and budget and end up just abandoning most of them. Usually, they are just too damn complicated.

This is why I moved onto the 80/20 Budget – what I believe is the simplest budget known to man (aside from no budget, of course).

How the 80/20 Budget Works

The 80/20 Budget is almost too simple. It only includes 2 categories. Here is how it works:


The 20 part of the budget is what put towards savings. You should automatically take this money out of your paycheck and other forms of income so you know that this money is hitting savings. 20% really isn’t that much but if you don’t make absolutely sure that you are putting this money aside, there is a good chance you might end up dipping into it when you’re not supposed to.

Note: 20% is only a guideline. You don’t have to only save 20%. Feel free to save as much as you want – this is just a general recommendation.


So what’s left for the remaining 80%?

Well…everything else!

That’s what makes the 80/20 Budget so great – you only have 2 categories that are both very simple.

The 80% includes rent, food, clothes, utilities, and everything else you can spend that hard earned money on.

If you aren’t too big on tracking where every dollar goes, you may find that this budget works for you. As long as you aren’t late on rent, miss your credit card payments, or anything like that, then you should be fine.

Just take out the amount you have designated as savings from your checking account and leave the rest. If you can keep it positive, then you are doing alright! If not, you may want to set up a few more categories (such as necessities and luxuries) to track your spending a bit better.

Last Word

I really love the 80/20 Budget. It is the first budget that I have been able to stick to and don’t feel restricted by.

How about you? What kind of budget do you like to use?