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5 Cardinal Rules of Lending Money to Friends and Family

By U.S. News & World Report

It’s a touchy subject, and discussing money matters with friends and family is usually in poor taste. However, there may come a time when somebody close to you needs financial assistance and asks for your help. Whether that someone needs to take care of this month’s bills or pay off a creditor quickly, you may end playing the role of bank to someone you care about.

But when it comes to lending money, it pays to make sure you set healthy boundaries and are prepared for a potential shift in the dynamics of your relationship.

Here are five cardinal rules to stick by when lending money to friends and family.

1. Set Clear Terms

It’s easy to be less formal when dealing with friends and family members but create some type of written agreement that explains all details of the loan — the complete loan amount, date the loan will be paid back in full and interest you wish to collect (if any). Make it clear that this arrangement comes with some rules and that you expect to be paid back without any hassles. You need the other person to take it seriously so that you aren’t going to be taken for a ride. Setting clear expectations will also help you stay on good terms with your loved one during the course of the loan repayment plan and after the loan is paid in full.

2. Keep It Private

Offering to help someone dealing with a financial crisis is kind and generous. Still, playing lender doesn’t give you license to share your good deed with the world. Respect the other person and the situation she’s in by keeping the entire conversation and the amount you are giving confidential. Don’t inform other family members without the person’s permission and don’t advertise your generosity on social media. If you are genuinely helping this person out, the reward is in the giving and not what other people will think about it. Keeping things private also establishes trust between you and the person in need as she gets back on her feet.

3. Don’t Expect to Get Your Money Back

When you are in a position to share the wealth with friends and family members, you may not end up getting your money back — no matter how close they are to you and what terms they have agreed to. Expectations change when somebody owes you money, and when that someone is a family member or a close friend, that debt can create tension in the relationship. Unless you really aren’t that close to the other person or are prepared to take the other person to court, consider that you may have to walk away from the loan at some point. Review your budget carefully to make sure you won’t be stretching yourself too thin if the loan isn’t repaid. If you can afford it, treat the gesture as a gift. This way, you won’t end up turning from friend or family to foe over a money dispute.

4. Set Boundaries

Lending money to someone close to you can make you feel good and help someone in distress get a better handle on his financial life. However, you will want to avoid being the go-to person every time the person needs money. Set clear boundaries by devising reasonable monthly payment terms and an expectation that he will follow through on his promise. When you do agree to lend the other person money, make sure this is a one-time arrangement so he understands you won’t always be there to bail him out at a moment’s notice. You’re still helping him, but also making appropriate financial decisions for yourself in the process.

5. Simply Say ‘No’

If you have a hard time setting boundaries or always find yourself in a position to keep giving, you may struggle with simply saying “no” without feeling guilty. You have the right to deny the request and can do it politely. Simply state that you have a personal rule not to lend money to friends and family members, or mention that you don’t have the budget right now. You don’t have to explain yourself in any great detail but you do need to be firm about your stance on the subject so the other party is free to explore additional options.

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5 Cardinal Rules of Lending Money to Friends and Family 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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