As graduating college seniors no doubt know, early May is the time for the checking off a long list of to-dos. Pick up cap and gown? Check. Submit senior thesis? Check. Take stock of student loans?
While a six-month grace period means that organizing a pile of loans doesn’t seem as pressing as say, turning in that final Classics paper before graduation, it’s something that should happen sooner rather than later. That’s the advice of Brendon McQueen, creator of a new student loan organizing site called Tuition.IO.
“I would have everyone out there immediately figure out who you owe and if you’re able to pay for it,” McQueen said.
He’s speaking from experience: after graduating from Columbia in 2009, he knew he had student loans — about $120,000 worth — but had know idea who he owed, if he had any power to negotiate the interest rates or the ability consolidate the individual loan amounts.
“We’re talking about incredibly fundamental questions,” he said. “I thought, ‘If I’m having this problem, there must be a ton of other people out there having a similar problem.’”
It was the effort to fix that problem that led to the creation of Tuition.IO. The site (which is a pun: “Tuition I Owe”) is free to use, and works like this: after signing up, you’re taken to an “organize your loans” page. To figure out how many federal loans you have, you’ll need to enter your social security number (the site uses VeriSign, the same type of encryption that banks use for online transactions), and your National Student Loan Data System PIN. (You or a parent received the pin when completing the FAFSA, so check your records or request a duplicate pin through the Federal Student Aid website.)
Once you add any private loan information, Tuition.IO takes you to an account overview, which, using a graph, shows you how much you owe, when the balance will be paid off, and, through a slider, how much faster you could pay off the balance if you added an extra $50, $100, or even $500 per month. There are also tabs where you can learn the pros and cons involved with consolidation, deferment, forbearance, and even loan forgiveness for public service.
McQueen says that it’s that last subject — loan forgiveness for public service — that has piqued the interest of many users. Many teachers and soldiers with student loans don’t seem to realize they can take advantage of some of these forgiveness programs, he says. “The crazy part is people aren’t even [getting] enough information to ask the important questions.”
If the numbers are any indication, people are, at the very least, learning that Tuition.IO can help manage their debt load. In September of last year, when Tuition.IO did a demo at the technology conference Finovate, they had roughly $60 million in aggregate user debt; now, they have $500 million in aggregate user debt. “We get a ton of emails from people just saying, ‘Thank you thank you thank you for creating this!’” he said. “And of course, that always feels pretty good.”
As for McQueen’s own hefty loan balance — is it down to zero?
“I have not paid off my loans, but I just consolidated, and I’m about to jump into income-based repayment. So I’m improving my situation,” he said. “Slowly.”
As March winds to a close, high school seniors across the country will receive letters from colleges that will decide their next four years. Shortly thereafter, a second letter will come — and it’s even more important than the one saying “accepted” or “rejected.” This letter is the one from the financial aid office, the one that determines the expected family contribution. And according to new research out of the University of California, Merced, it can also play a role in determining the student’s GPA.
In “More Is More or More Is Less? Parent Financial Investments During College,” sociology professor Laura Hamilton found that financial help from parents is linked to lower GPAs. In studying a group of roughly 12,000 students, Hamilton found that the students whose parents give the most money wind up with an average GPA of 2.95 — a number that will not help post-graduation job prospects or admission into graduate programs.
“Employers throw out anything below a 3.0,” Hamilton said.
Lest parents take this as a sign they can put away their checkbooks and start applying for loans, Hamilton clarified that she’s not just talking about parents who can afford to bankroll the full cost of tuition — “parental financial aid” can mean Parent Plus loans and even loans taken out with the student as a cosigner.
It’s an interesting take – particularly with the words “student loans” and “crisis” appearing in more headlines on what seems like a weekly basis. Are parents to take from this that they’re actually better off not trying to save as much for college as they possibly can?
Not quite. But what they do need to do is talk to their kids about what it means to be paying this tuition, and what it means if loans are part of that payment package.
“A lot of times, students don’t worry about [paying back loans] until after college,” Hamilton said. “As tuition rises, parents either have to pay, or they have to pull out loans. Neither of these things are helpful for grades… you can kind of put them off.” In other words: if a student doesn’t understand the cost of attending college, he or she won’t try as hard to justify that cost with a stellar academic performance.
In an interesting twist, Hamilton’s study also found a positive correlation between parental financial aid and graduation rates — that is, money or loans coming from a parent makes a student more likely to complete their degree.
The connection: Social life. “A lot of the money parents give end up getting sliced into the social experience,” Hamilton said. In other words, pizza and beer — not to mention extracurriculars that can take up more hours than all classes combined. And the more fun your child is having, the more he or she is going to want to stay. “No student wants to drop out of college. College is really fun, right? If you invest the money in your kids, they’re going to be motivated to stay.”
So what’s a confused parent to do? Hamilton suggests modeling funding off of scholarships or merit-based grants. “If you say, ‘this is your job, I expect you to get a 3.0; if you don’t I’m withholding your money,’ you would probably get a positive effect on students’ grades, and they stay in school,” Hamilton said. “I saw this in my other study. Parents that gave a lot of money but set standards, their kids did really well. Parents that didn’t hold them accountable, their kids got in trouble.”
This week we welcome guest blogger Leah Ingram, founder of The Suddenly Frugal Blog and author of two books: Suddenly Frugal: How to Live Happier and Healthier for Less and Toss, Keep, Sell!: The Suddenly Frugal Guide to Cleaning Out the Clutter and Cashing In. She’s writing about how her family is living on one salary so they can foot the bill for their oldest child’s college tuition.
I imagine my family is like many American families facing college tuition payments: we make too much to qualify for significant financial aid, yet earlier in our careers we didn’t earn enough to fully fund a college savings account. This fall we will send our oldest off to college, and one way or another, we will have to find a way to pay for her education.
We’ve been thinking a lot about saving money overall ever since 2007 when, thanks to the economy, we found ourselves needing to be suddenly frugal in every aspect of our life. That was the year I started my Suddenly Frugal blog, as a way to hold myself accountable for the changes we were making in our spending and to share what I learned with others.
Clearly, I was on to something as I ended up selling two frugal-living books off my blog’s concept, and becoming a go-to frugal-living expert for local TV stations in Philadelphia where I live.
After six years of frugal living, I’ve learned that changing how you spend and save isn’t a one-and-done deal. It’s an organic, holistic process. Every three to six months my husband and I revisit where our money is going and reconsider what we can cut.
For example, we realized that TiVo has become obsolete in our house, especially since we have a digital DVR that came with our cable subscription. However, with the $20 a month TiVo fee on auto-pay, we’d forgotten about it. While I’m a strong advocate for automatic online bill pay — so you never miss a payment or incur late charges — it is important to continue to review those auto payments to make sure that you aren’t paying for services you no longer use, want or need, like our TiVo.
That said, finding $240 a year to cut won’t pay for college. We had to make bigger changes. That’s why a few years ago we started banking my salary. I’m lucky enough to earn close to the equivalent of one year of college. I’ve prided myself on being able to save my family money by using coupons when I grocery shop, being smart with our energy bills, and finding ways to bring in extra cash by consigning my clothes. I was even more determined to use all those tricks to pinch our pennies once we started living on one salary. For example, we continue to look for frugal ways to get dinner on the table, such as making homemade pizza dough in my bread machine so we can have DIY pizza for pennies a serving versus $20 for a pie at a restaurant. Do that once a week, and that’s more than $1,000 you haven’t spent on dinner. And that’s only once a week. Imagine how much you can save if you are cooking frugally seven nights a week.
Banking my salary and leaving it alone was easier for us because we set up a money market savings account, without a debit card attached to it. Thanks to our discipline, we were able to save just enough for one year of college.
Now that my daughter is a senior in high school and college is right around the corner, we are continuing to bank my salary and live on my husband’s. It hasn’t been easy. Some months we’ll pay all our bills and have just a few hundred dollars left to cover groceries and other extraneous expenses that might occur. But at least the stress of wondering how to pay for college that would keep us up at night — literally — has abated now that we have a viable solution.
About Leah: Leah Ingram is founder of The Suddenly Frugal Blog and Philly on the Cheap, as well as the author of Suddenly Frugal: How to Live Happier and Healthier for Less, and Toss, Keep, Sell!: The Suddenly Frugal Guide to Cleaning Out the Clutter and Cashing In. Find her on Facebook and Twitter.
I had to co-sign for my son to secure student loans for going to college. Now he is two years out of college and has a full time job and meeting his payments completely on his own. My question is: Will I always have to be listed as a co-signer on these loans?
Hi James, thanks for writing. The answer is not necessarily, and that’s because it largely depends on the lender. Many, like Sallie Mae, offer a cosigner release after the borrower has met certain obligations – under Sallie Mae’s program, the borrower must have completed school, made 12 to 24 consecutive on-time payments, and met underwriting requirements. Wells Fargo allows a cosigner release if the borrower meets credit requirements and has made all of the first 24 payments on time. Contact your lender for specifics about your loan – with two years of payments under his belt, you may qualify to be removed. If you don’t yet, you can at least find out the qualifications and then have your son work to meet them. Once he does, you should get off that loan.
In the latest installment of Issue #1 (our new series examining the economic issues facing the country), I set out to answer a burning question: is a college degree worth it? To see what we found, check out the video clip below.
Yesterday morning on Money 911, I fielded a question from a woman who is getting ready to pay back her student loans. Should she pay down the interest or the principal balance first? And how would deferment affect her credit score? To see the answers to these questions, plus tips on saving for college, check out the video clip below.
Tuition. Room and board. A meal plan. Think you know exactly where your money is going when your kid goes to college? Think again. In my latest Daily Finance article, I uncovered the five money secrets your college student doesn’t want you to know. Take a look!
This morning, I went on the Today show (in purple and white, the colors of my son’s new school!) to talk about the ways kids blow their budgets when they’re at college. To see why it’s good to budget dining dollars and open a bank account with a local bank, check out the video clip below.
Everyone knows that college tuition is getting pricier and pricier. But would you believe that there are some ways you can save money when your kids go off to school? In my latest Daily Finance piece, I give you 5 ways to save, plus one way not to. Take a look — you might be surprised at what you can save!
This morning on Money 911, we heard from a woman who is considering consolidating her student loans, and was also wondering whether or not she should take out a personal loan to pay them off. To see what I told her, plus for information on exactly what a 529 account can be used for, check out the video clip below.