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How to Prepare Your Child for the Financial Realities of Freshman Year

By U.S. News & World Report

Each year, roughly two-thirds of high school graduates matriculate to colleges and universities in the fall following commencement, according to the National Center for Education Statistics. And though a rite of passage enjoyed by an increasing number American families each year, having children leave the nest can be a difficult experience for all involved.

Perhaps that’s why 41 percent of 2014 college freshmen chose schools within 50 miles of their homes, according to a UCLA study, while only 16 percent picked institutions over 500 miles away. College students, it seems, need their parents more than they’d like to let on.

Financial support is one of the biggest areas of need. With the cost of higher education at historical levels, the appeal of free laundry service and home-cooked meals is perhaps clearer than ever. Helping out this way is great, but there are additional steps you can take to truly prepare your child for the financial realities of both college life and the real world in ways his or her chosen school likely won’t.

Here’s a breakdown of the most important personal finance bases to cover over the next few weeks to help students avoid falling flat when they begin their journey from the nest to campus.

1. Make sure your child gets a student credit card. Not only will the right plastic help students save on books, food and entertainment, but credit cards are also the most effective credit building tools available to young people. All credit cards report information to the major credit bureaus every month, and as long as students pay their bills on time and avoid maxing out their accounts, this regular reporting will help them build a track record of financial responsibility. This will, in turn, leave them well positioned to save on car insurance premiums, qualify for security- or finance-related jobs and have the ability to rent an apartment or lease a car after graduation.

When it comes time to choose a student credit card, the most important thing to look for is no annual fee. Cost-effective credit building should be a student’s top priority at this point in their credit career, and the fact that credit card companies offer better-than-average rates and rewards to college students due to their relatively high earning potential means that students will be able to get a great deal without paying extra.

The best college student credit cards* on the market right now, according to a recent CardHub report, are the Journey Student Rewards from Capital One and the BankAmericard Cash Rewards for Students. Journey offers 1 percent cash back across all purchases as well as an additional 0.25 percent cash back when you pay your bill. BankAmericard offers 3 percent cash back on gas and 2 percent on groceries (for the first $1,500 in net spending in the two categories) as well as 1 percent cash back on all other purchases and a $100 initial bonus for spending at least $500 in the first 90 days (if you apply online). Neither charges an annual fee.

2. Enroll them in Budgeting 101. In addition to giving your child a much-needed means of accessing cash, helping them open a student checking account and providing regular deposits for basic living expenses will also force them to become better budgeters. The key is for you not to cave and replenish their coffers ahead of schedule. If you don’t, they’ll learn pretty quickly that they must prioritize expenses and save for the future — not to mention the importance of minimizing account fees and avoiding overdrafts.

Coaching them through the process of choosing a checking account should also provide a lesson in comparison shopping, as each card comes with different interest rates and fees. The best options for incoming college freshmen are AmericaNet Rewards Checking and Bank of Internet Rewards Checking. Both offer APYs up to 1.5 percent and neither charges monthly or ATM withdrawal fees.

3. Figure out how much each class costs. It’s important to make sure your child internalizes the value and financial ramifications of their college education. Otherwise, peer pressure and the non-educational allures of college could lead to common freshman year pitfalls such as skipping class and falling way behind in the first few weeks.

Knowing exactly how much that 8 a.m. seminar is costing you per class might not ensure that your child attends every one, but it may help them get out of bed often enough to prevent irreparable harm to their GPA and avoid forcing you to pay for the same course twice.

4. Establish expectations. Before a young person leaves for college, it’s important for the family to have a conversation about exactly what the student will be expected to pay and how much financial support the parents will provide. This will give the student the context needed to budget effectively, make informed purchase decisions and strategically determine whether unpaid internships or paid part-time positions are a better career move at this point in time.

This may sound like obvious advice, but it’s not uncommon for students to think they have more in their education account than they really do or for them to get saddled with student loan bills they thought their parents were going to cover.

5. Pique their curiosity in investing. Young people have an invaluable asset on their side: time. Perhaps most importantly, as far as personal finance is concerned, students have time to let compound interest work wonders. Consistently investing from an early age will help your child to retire far earlier than they would otherwise, and exploring the process may even spark their curiosity in a certain type of major or job.

So, in addition to giving your child a regular allowance for basic needs, deposit a small amount each month into a brokerage account in their name and set a no-withdrawals rule so they can’t use the money for something else. Or, if you don’t want live bullets flying quite yet, sign up for a stock market simulator with your child. You can also encourage them to check out various investing-related resources that many colleges and universities offer.

Hopefully, this advice will help make the transition from high school to college easier for both parents and students alike. With a topic as crucial as personal finance covered, there should be less stress and uncertainty clouding the occasion.

*Editor’s note: U.S. News also ranks the Best Student Credit Cards.

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How to Prepare Your Child for the Financial Realities of Freshman Year originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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