If you’ve got a newly minted graduate in the family (or you’re one yourself), congratulations! Launching, whether you’re doing it from high school into a college or university, or from college into a new apartment and career, is exciting. Unfortunately, when it comes to your identity and personal information, it’s also a process that exposes you to more risk than usual.
According to research conducted by LifeLock, nearly two-thirds of students reported that they were not very concerned about fraud (one probable reason that fewer than one-quarter even detect fraud when it happens to them). Yet, when it does hit, 15% say the impact is moderate or severe—that’s higher than among other age groups.
More worrisome, colleges and universities—among them U.C. Berkeley—have been victimized fairly steadily by data thieves in recent years. As the head of information security for the school told reporters, it’s difficult to protect an academic institution because you can’t just shut it down in the face of a major breach.
Bottom line: The best way to keep yourself safe during times of life transition (graduation, as well as many others) is to take several steps to protect yourself ahead of time. Here’s what you need to do:
- Lock up your personal information—and password-protect your computer and phone. Students are four times more likely than other computer users to be victims of “familiar fraud,” in other words, to have their information stolen by people they know. Living in a dorm with a person you don’t know (or don’t know well) and other students frequently popping in and out puts you at risk. Any documents with identifying details, from passports to bills, should be put (or even better locked) away. This is the same reason your mailbox should have a key.
- Watch the sharing. It’s tempting to broadcast details and photos of this fabulous new life of yours on social media. Be careful. The more you share, the more you’re open to having your identity stolen. Why? Because by providing details like your pet’s name, birthday, mother’s maiden name, and location, you’re giving a smart thief all the information necessary to create a faux you and apply for credit in your name. Be selective about what you share and who you allow to see it.
- Pay attention to your credit (or, parents, do this for your children). If you’re sending kids off to college or out into the world as an authorized user on your credit card, chances are you’re doing so to help them build a credit history. If you’re not doing this—and your kids haven’t applied for credit themselves—then the mere existence of a credit history is a sign of trouble. You can check your credit report (or your child’s) for free at AnnualCreditReport.com.
Finally, have the talk with your kids. Not that talk, the one about how important their identity is as they enter the adult world—and how taking steps to secure it is up to them.
Should you refinance your student loan? The answer has changed in recent months. In this week’s Fortune column I highlight the recent deals from both bank and non-bank lenders that can save both students (who hold Stafford loans with fixed rates ranging from 3.86% to 6.8%) and their parents (who hold PLUS loans with fixed rates between 6.41% and 8.5%) some decent money.
Read on here.
We’ve seen the research in the headlines for weeks now: Over half of all college graduates are still funded by the bank of mom and dad. Well, this morning on TODAY, I offered a lesson on financial independence to two graduates who make up that statistic. If you missed it, check it out below.
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As parents we know there is no greater gift (and expense) than having a child. Don’t get me wrong, parenthood is worth every penny, but as we age, does it become easier financially or more difficult? I ask, because a recent Bloomberg article on how older parents are rewriting their financial plans after having children caught my eye. For example, when 37-year-old Barrow Barre (who by the way is fairly young by the standards you’ll read about in the next paragraph) quit her job to tend to her newborn twins, she asked her husband to increase his retirement contributions. Barre’s husband joked that retirement was irrelevant – he’ll be working until he’s dead. He has a point. If you’re having children in your late thirties, early forties, does retirement get pushed to the backburner? What about life insurance, estate planning, and oh yeah, saving for college?
You can attribute this to modern medicine, actively going against the grain, and probably a number of other factors, but the birth rate for women between ages 40-44 has risen 2% annually since 2000, according to the Centers for Disease Control and Prevention. If you’re among them, there are a few guidelines to follow.
“First, you need your safety net in place,” said Stuart Ritter, a senior financial planner at T. Rowe Price. “All the things that you as a parent want to make available for the rest of your family wouldn’t be able to happen if something happened to you – so you have to get life insurance.”
Chances are you probably need more than you think, but it probably costs a lot less than you feared, Ritter added. Ahem, how much are you spending on cable? This is where prioritization comes in.
Ritter is quick to suggest term insurance over more permanent options like whole life and universal, but as for how much you’ll need – that requires you to do the math…and thankfully calculators do exist. Unlike younger parents (i.e. twenties, earlier thirties), whose families would be missing out on more years of income (if the breadwinner were to die), older parents have fewer years to account for. The logic: Retirement savings should come into play for income replacement. That is, if you’ve been saving adequately for retirement.
Your second priority: retirement savings. And, yes, it trumps college. On an airplane, you’re instructed to put your oxygen mask on first, then your child’s – the same goes for retirement versus college savings. If you don’t have enough to save yourself during retirement, your kids will likely have to bail you out just as they are saving for college for their own children. Yes, it goes against every natural instinct we have as parents to tend to our children first, but as Ritter puts it: “Sacrificing your retirement may feel right in the short term, but it will have a high probability of causing problems in the long term.”
Once you’ve filled your retirement buckets, moving onto college savings makes sense. In this arena, 529 plans are the ultimate allies for both younger and older parents according to Mark Kantrowitz, senior vice president at Edvisors Network and author of “Filing the FAFSA.”
On the topic of FAFSA, don’t fail to fill out the form. CNNMoney recently reported on Kantrowitz’s analysis of government data that shows millions of students missing out on financial aid for college education. To see more from Kantrowitz, head over to the article.
This week’s column is the second part to my two-part series on credit scores. If you missed last week’s on the murky waters of credit scores (i.e. FICO vs. Vantage), you can catch up here. As for this week’s piece, I tackle the misconceptions surrounding millennials and credit, and how both parents and twentysomethings can get started on building (and maintaining) solid scores.
You can see the full column on Fortune.
Today’s guest poster is financial planner Neal Frankle, who writes about how his daughter got a great college education — and a wide network of contacts — for a fraction of the cost of an Ivy League school. If you’ve got your eyes set on a pricey school for your kids, this may help change your mind.
Are you concerned about the astronomical cost of a college education? If so, I have some very good news. My daughter just finished her degree in Finance and received a world-class education for a fraction of what it would have cost had she attended an Ivy League school. Oh and by the way, she had a far better educational experience at the same time.
Before she started college we learned that graduates of high-priced schools don’t necessarily earn more than state school grads. Still, we were concerned about the social scene at the state school. We knew that it was important for her to be around other high achieving students in order to keep her motivated and working hard.
Fortunately, our daughter solved the problem herself. She got an expensive college education without the price tag. How? By becoming immersed in student government and an honors business fraternity (yes, the fraternity accepted both men and women). She learned that the students involved in these groups were highly motivated, uber-achievers, super responsible and strong role models.
In order to excel in these organizations she had to be:
- Results focused.
- Work well in a team.
What more could any parent want? Most of what I learned in college wasn’t taught in class. My guess is that was your experience as well. My daughter flourished in college . And she had that successful experience because she set herself up to succeed from day one.
My daughter told me that she never would have had the chutzpah to undertake student body politics and honors business organizations had she gone to an Ivy League school. That’s because she felt intimidated. The state school gave her more opportunity to do well than the pricier schools.
Sometimes being a medium size fish in a small pond works out great. My daughter had to deliver even though she had great demands placed on her. She spent time with and learned from the best students on campus. She also has fantastic networking opportunities that will help her for years to come. As a result, she’s highly equipped to succeed in her professional life . And best of all, she doesn’t have any college debt to worry about. Neither do we.
Before you decide on which school to send your children, take a look at the extra-curricular activities. Look for academic opportunities that your kid will feel comfortable getting involved in yet pushed at the same time. I am convinced that dollar-for-dollar, this is a far better way to go.
About Neal: Neal Frankle is a Certified Financial Planner in Los Angeles. He helps clients make smart financial decisions so they don’t have to worry about their future. He also is the editor for WealthPilgrim.com and MCMHA.org. He is a regular contributor to Forbes, Huffington Post and other mainstream media publications.
I have two children in college (and one in high school). We have exhausted their 529 accounts. I have already taken out Parent Plus loans to the extent I can afford at this point due to other financial setbacks. After financial aid, we still need to borrow to cover all the tuition/room and board costs. What are the best options, or what should we look for in obtaining loans for our children? Anything you can provide would be appreciated. I’m overwhelmed at this point.
Hi Nicolette. I get where you’re coming from – it is overwhelming. And you’re smart to recognize when you’ve come to your own limit in terms of borrowing. At this point, the borrowing will fall to your children and the rule to stick to is to make sure they’ve exhausted their ability to take out federal loans before even considering private ones.
I also want you to take another look at your financial aid situation and call the financial aid offices at the schools your children are attending. Talk to a financial aid officer about the financial setbacks you’ve faced – particularly if they occurred after you originally applied for aid – and ask if there’s anything the school can do to help. Then have a very frank talk with your children about borrowing and how much they will have to repay when they graduate from school. Break it down for them so they can see what their monthly loan payments will look like. And if they’re overwhelmed by the thought, talk to them about the fact that they have options. They may want to consider transferring to schools that will offer them more in aid or working while they’re in school (and perhaps taking a lighter course load) to minimize borrowing.
Finally, the website fastweb.org has a terrific database of scholarships and grants and you’ll want to pore through it together. And when your next child goes through the process of selecting a college, make sure a good value is one of the criteria on your list.
This week we’re happy to have Nancy Berk as our guest poster — Nancy is a pro at college planning, and author of the book College Bound and Gagged: How to Help Your Kid Get into a Great College Without Losing Your Savings, Your Relationship, or Your Mind. Here, she addresses college expenses that aren’t often considered — preparation courses, campus visits, and application fees.
While many parents worry about the cost of their children’s college education, it’s not unusual for college admission anxiety to override financial sensibility even before a tuition bill surfaces. I highlighted plenty of these money drains in my book, and they’re everywhere. While this is just a small piece of the fiscal puzzle, college search and prep costs and school selection mistakes don’t help the college fund. If you’re the parent of a college-bound teen, consider these cost-cutting suggestions to save a chunk of change before dorm drop-off.
Analyze Your Family Situation. When it comes to the college admissions process, it’s easy for parents and teens to become starry-eyed and make emotional choices with bad economic repercussions.
Before the wish list gets drafted, communicate and explore family concerns and limitations including tuition, transportation costs, and special needs. Applying to a school that is incompatible with the budget isn’t a wise move. However, always investigate the financial aid and scholarship data of schools before ruling one out.
Identify Great College Prep Bargains. Never dive into a test prep spending spree, until your teen’s strengths and weaknesses are identified. Is preparation required? If so, what areas should be addressed (i.e., content vs. process)? Math deficits and test anxiety don’t typically involve the same approach. Save money on test prep by asking friends with college students for those unused or gently used SAT, AP, and ACT prep books, CDs, and flashcards. Online study and tutoring options like those offered by the College Board and InstaEdu can also be more cost-effective than “live” options.
Create A College Visit Strategic Plan. Before you gas up and head off for a little collegiate bonding, do some virtual legwork and tour online. Explore college-specific websites and comprehensive sites like CollegeProwler.com and Unigo.com. Then tour local colleges and universities in order to identify your teen’s general preferences (e.g., big school vs. small school). Narrow down the list or increase exposure to options by building college visits into other, already paid for family activities like vacations, business trips, reunions, weddings, and bar mitzvahs.
About Nancy: Nancy Berk, Ph.D. is a clinical psychologist, author, comic, professor and entertainment analyst. Her book College Bound and Gagged: How to Help Your Kid Get into a Great College Without Losing Your Savings, Your Relationship, or Your Mind can be seen in the feature film Admission starring Tina Fey. Nancy co-hosts The College-Bound Chronicles podcast with broadcaster Lian Dolan and writes about higher education and entertainment for sites including Parade Magazine, USA TODAY College and The Huffington Post. The host of the showbiz podcast Whine At 9, Nancy digs a little deeper as she chats with fascinating celebrities and industry insiders. Sometimes they even talk about college.
We’ve long cited a rule of thumb, on this blog and elsewhere, about the amount of money you should borrow for college. It comes from Mark Kantrowitz, the publisher of Edvisors, and it is this: Don’t borrow more for college than you expect to earn in your first year out of school.
The trouble with this rule is that it can be hard to do the math. How do you know what your future salary will be? Many students enter college unsure of their major, let alone their career path. But making an educated decision about where you go to school — which largely determines how much debt you’ll be taking on — means making some assumptions and running through a few scenarios.
Luckily, Junior Achievement USA and Pricewaterhouse Coopers have partnered to develop a (free) app that can help you run the calculations. It’s call JA Build Your Future, and using average cost of college figures from The College Board, and salary information from the Bureau of Labor statistics, it can tell you how your future plans stack up.
Here’s how it works, says Stephanie Bell, the director marketing and media relations at Junior Achievement USA: You start by entering your career, using a drop-down menu of many options. The app will tell you the median salary of that career, as well as the educational requirements and the potential for growth. Once you add your career to the calculator, you can select the level of education you plan to complete, where you plan to complete it — in state or out, public or private — and whether you want to include room and board. You then include payment options, including how much your parents will contribute, any amount you might receive from scholarships and grants, your own wages that you plan to contribute, and student loans. You can ask the calculator to auto-adjust student loans based on the other figures.
What you find, at the end of the exercise, is what percentage of your future monthly salary could end up going to student loans. The calculator will then evaluate the information you plugged in and return an ROI (return on investment) score of between one and five.
In the example I ran, in which I was planning to be a public relations specialist (which, according to JA Build Your Future, has a median salary of $57,550), if I were to attend a public, in-state college for a bachelor’s degree, my four-year total costs, including room and board, would be $71,440. With a few contributions from my parents and scholarships, I could bring my borrowing down to around $10,000 per year, making my student loan payments about 9% of my future monthly salary. The calculator gave my hypothetical scenario a ROI score of four, the second highest. A one would mean my eventual student loan payments would take up 21% or more of my future salary; two is equal to 16 to 20%; three is 11 to 15%; four is 6 to 10% and five — the best possible outcome — means the app predicts your student loan payments will take up between 0 and 5% of your future monthly salary.
Bell suggests using the calculator early — once your student is a high school senior, it’s largely too late. “When you’re having conversations about what your kids want to do when they grow up, they can have this information at their fingertips and that will help them make decisions as they progress through middle and high school.” Should you encourage your kids to give up a life-long dream if the calculator spits out a 1? No. But you might encourage them to spend two years at a community college to lower costs, or aggressively apply to scholarships, or set their sights on an in-state school rather than a pricey private option. “Once you get around a three, you might want to rethink some of your options,” says Bell. “Anything that says your loan payments are 10% of your monthly income or less is probably going to be okay, but families should make these decisions based on their own circumstances and how much debt they feel comfortable taking on.”
It’s no secret that the cost of college is getting pricier and pricier; near-daily headlines about the increased burden of student loan debt and skyrocketing tuition clutter our news feeds and invade dinnertime conversations. What is more of a mystery to most Americans is what to do about this cost: recent surveys reveal that just 17 percent of families used a 529 plan to pay for college in 2013, and less than one-third even know what a 529 plan is. However, a growing number of people believe these tax-advantaged investment accounts — offered by each state and specifically designated for higher education costs — should not just be less of a secret, but open to the kind of crowdfunding that helps pay for things like Hollywood movies and new technology ventures.
“Don’t shortchange what $50 to $60 per month from a handful of people can do [for your college savings],” said Marcos Cordero, founder of Gradsave.com. It’s a site that lets friends and relatives make contributions to a child’s college savings account. “If you save $100 per month, it’s $42,000 when the kid is 18. A grandma to put in $25, an uncle to put in $50, [plus] your own $100, that makes a big difference.”
Cordero founded Gradsave in January of 2012, after being asked to be a godfather and realizing that there was no easy way to donate to his new goddaughter’s fledgling college savings account. Through Gradsave, he’s trying to simplify the process: after choosing a 529 plan, parents can go to Gradsave, create a profile, and link it to that 529 plan. Then, they can share the link with their friends and relatives, and all the interested donors need to do is follow the link. They don’t need the newborn’s social security number or any sensitive information, and there is no fee to contribute money to a child’s account — in the interest of building his user base, Cordero said Gradsave went fee-free about a month ago.
Gradsave is not the only site of its kind; sites like FiPath, GiveCollege, Gift of College and SallieMae’s Ugift program all allow interested friends and relatives to donate to a child’s college savings plan on either a one-time or recurring basis. Some, however, come with a fee, so it’s important to read the fine print on each site to determine which one is right for you.
“Know the cost,” cautioned Mike Fitzgerald, chair of the College Savings Plan Network. “What are they taking out for their services?”
Fitzgerald said that if using a third-party crowdfunding service like GiveCollege (which does have a fee depending on the size of the gift) gives you pause, there’s nothing wrong with contributing to a newborn’s college savings account the old-fashioned way.
“Contact the 529 plan itself,” he said. “It will be the identity protected, and it will be no cost. I know of no state that charges anything for it.”
Regardless of the means of distribution — old fashioned checks, contacting the 529 plan itself, or using an online college registry like Gradsave — what Cordero and Fitzgerald both agree on is the importance of letting friends and relatives help save for the cost of college, and that if you have a newborn (or even not so newborn), to not be shy about asking for college savings donations rather than teddy bears and onesies.
“Parents should be completely comfortable in letting their friends and family know that there is a college savings register for their kids. People gave savings bonds [years ago]… it’s always been there,” Cordero said. “It takes a village to raise a child. Now, it takes a village from a financial perspective.”