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College can be a hectic way of life with many ups and downs and unexpected challenges. However, for many young adults, the biggest shock comes after graduation, when you’re confronted with thousands of dollars in student loans that must be repaid.

Record low interest rates have made payments more manageable, but that is all changing. Federal student loan rates are adjusted every July 1st, based on rates for short-term Treasury bills, which have been rising.

If you are out of school and pay your student loans, you can shield yourself from higher rates by consolidating. You lock in the weighted average of all your loans up to the nearest one-eighth of 1 percent.

If you are not financially able to start paying off, or keep paying on, your loans, you are eligible for financial hardship deferments. If you consolidate your loans, you lose your ability to defer payments so make sure you are ready to make your monthly payment for 10 or more years before you consolidate.

How To Consolidate School Loans to Lower Your Interest

The general rule of thumb is that you should consolidate any Stafford loans that were disbursed before July 6, 2006. Graduates that consolidate during their grace period are eligible for a 0.6 percent interest rate reduction.

If you consolidate Perkins loans, you lose repayment benefits like loan forgiveness and a nine-month grace period, as well as subsidized interest during any deferment period. They also have a 5 percent fixed rate, so there is not an advantage to consolidating them.

When you consolidate, you can also stretch out the payment period for up to 30 years. By extending the term of the loan, you reduce your monthly payments, a useful feature for recent grads with little cash; but should consider paying it off way before then due to all of the extra interest you would be paying.

You can always increase your payments. There are no penalties for paying off your loan early. Not everyone can consolidate. Most lenders require a minimum of $7,500 in loans, and some set the minimum balance at $10,000.

Federal law prevents most borrowers who have already consolidated from doing so a second time, even if they locked in at a higher rate. And if all of your loans are with one lender, you’re required to consolidate with them unless they do not offer the service.

Shopping For A Loan Consolidator

Many lenders offer a quarter-point reduction for borrowers who agree to have payments automatically debited from their bank accounts. And some offer a reduction after you make 36 on-time payments.

You need to talk with several companies before making up your mind which company to go with. When discussing the terms of the loan, your research will pay off and you will be able to negotiate additional lower interest discounts if you have similar offers from other companies to compare.

Another good idea is to narrow down your choice by using a loan analyzer at Finaid.org. which will break down the discount rates in real dollars. This will help you to get a good idea of what each lender’s discount is worth over the long term.

This may seem like a lot of time and effort by doing all of this research, but it will pay off in the end. You will be paying this debt for many years and will want to know you have made the best decision.

Should Parents Have College Tuition Ready For Their Children?

Conventional wisdom tells us college is very, very expensive, and we’d better start saving as parents if we want our kids to get an education and a good job. Private colleges currently cost more than $25,000 per year, and even in state cost more than $12,000.

Are we really in deep trouble if we do not have a college fund set up for our children when they are all ready to head off for college? Or, are we bad parents?

Currently there are parents that barely get by, but no matter how tough it gets, they always manage to put money in the kid’s college funds, even though they can’t afford to purchase a house or contribute to their own 401(k) plans at work.

Helping your kids through college is wonderful and demonstrates that you value their education. Give enough to help, however, not enough to lessen their own investment in the outcome.

Should Parents Withdraw Their Retirement For College Tuition?

If you have to choose between putting money in the kid’s college funds and buying a house, buy the house. You may be able to pay tuition with a home-equity loan when the time comes.

The best education is not always the most expensive. Students can start at a community college at a relatively low cost. And after two years, they can transfer to a four-year college to graduate with the same degree.

You may find it easier to pay for college when that time comes. There’s a high probability the family will have more disposable income when the kids are older, especially if both parents plan to work full time until then.

It’s great if you can start saving for your kid’s college tuition 10 or 15 years before they need it. But early years of raising children can be the most financially challenging. Parents’ careers are just starting, perhaps just getting into a home and just starting investing.

Your kids may choose not to go to college. Will it be OK with you if they decide to pursue a career that doesn’t involve college, instead start a business? Don’t put so much emphasis on saving for college that it creates a conflict between you and your children.

Is It Fiscally Wise To Use Your Retirement Money For Your Kid’s Education?

Your retirement plans are more important than your children’s college funds. Your kids can get through college somehow, and you will probably find a way to help them.

However, it is more important to plan for our retirement. Remember, your kids can get student loans, but there’s no such thing as a retirement loan.

Your 401(k) plan should be dedicated primarily to your retirement, with the secondary possibility that you might need to tap into it for college expenses. There are two primary drawbacks to using your 401(k) funding.

First, if you withdraw funds before you are 59 ½, you owe a 10 percent premature distribution penalty on the withdrawal. This penalty is in addition to income taxes you will owe on the withdrawal.

Second, dips into your 401(k) reduce the amount of money you ultimately have available to reap the benefits of compounding and tax deferral. This, in turn, reduces the overall funds for your retirement.

Your retirement savings plans are not like any other investment. It is much wiser to go the traditional way for student aid, grants, scholarships, federal and state assistance and then look into private loans. A good word of advice is to have your child as a co-signer so he is aware he has a part of this investment in the long run.

Saving For College As A Youth

Don’t take on “impossibly huge” saving goals. Instead, plan on saving one-third of the college cost beforehand, advises Robert Franck, chief college expert at the Princeton Review, the well-known college advisory service.

Author Mark Kantrowitz, creator of the widely acclaimed FinAid.org Web site, interprets the one third rule this way: “You should expect to save one-third of the anticipated college costs, pay one-third from current income and financial aid during the college years.

And then you should borrow one-third using a combination of parent and student loans.” Financial advisers also suggest that kids contribute, saving large monetary gifts or a portion of their earnings from part-time jobs.

When your child is in the ninth or 10th grade, sit down for a talk about college and the financial picture. Students need to understand what it takes to get them through college.

Seek financial aid, scholarships, grants or other assistance, but don’t over estimate what you’ll get. The good news is that more than half of all students receive some kind of financial aid according to the College Board.

All aid and scholarship options should be researched and pursued if appropriate, the experts say, but parents should not assume that this aid will be easily available.

To sum it up: one third saved before college, one third from current income and financial aid, and one third from parent and student loans.

Saving For College Now You Are There

The best way to budget money is to try and figure out how much money you have for the school year (estimate), and divide it by the number of weeks you will be in school for the year, or you could even divide it by semester or quarters.

This is the more precise way to budget money. Then make a list of everything you spend money on for the first month. From there you will have more of a blueprint of how you want to develop and set aside monthly funds.

The biggest tip to earn money to be able to work with and budget is to work, work, work, during summer vacation and breaks from school! Save most of the money you make, and then when the school year starts you will know where the monthly money goes with your previous made budget.

You may not even need to have a job during the school year if you make enough money in the summer to budget out and support all of your monetary needs.

Overall, figure out where you will be getting money from each month, or in some cases every semester or quarter, and disburse it accordingly. For example, some students get money from financial aid, parents, jobs and loans. The first year is the most challenging.

Think of everything you will need to pay for, from insurance and school bills, to cell phone bills and groceries. Once you can see everything on paper, you will be able to figure out if the money you have to work with every month will be enough for you to survive on.

Each month becomes easier for you to know exactly how much money is needed to set aside due to the draft or budget you have kept prior.

Think Beyond College

Smart use of your money and your credit in college will enable you to spend the money you earn when you graduate on things you really want like a new car, a nice apartment or house instead of all of your income going towards debt repayment.

A short story from a graduate that experienced the journey follows. If I knew at 18 what I know at 28, I could have prevented so much disaster from happening.

Instead, I owe $150,000 to student loan companies with no escape. I hope that you will read this before you fall into this trap. Don’t say I didn’t warn you.

At 18 college was a dream come true. I could study real-world topics without parents to monitor my class attendance, my coffee intake, or my late-night slurpy runs to 7-11 with friends.

I had worked part-time as a teen, but had no savings or significant sense of financial responsibility. Nor did my parents, which led me to finance a private school liberal arts education in my native Southern California with student loans.

I qualified for some federal money. The rest of it would come from private loans. I paid for room and board, books and gas for dad’s car that got me around. A few thousand lattes later and some new clothes each semester, the bills started to add up.

So it was impeccable timing when the credit card solicitors hit me. Finance charges and interest rates, what’s that? These concepts did not matter at the time to me. I graduated four years later with $150,000 student loans and $11,000 in credit card debt.

Avoiding Loan And Other Financial Mistakes

Use your student loan money to finance your education, not your lifestyle. Tuition, room and board, and textbooks are smart ways to spend your student loan money. You’ll be paying these loans off for the next ten to 20 years, so use the money wisely.

In addition to student loans, the average college student has four credit cards. In the first year of college the average debt was $2,169 on these cards. At interest rates of 15 to 18 percent, you may be paying off this credit card debt into your 30s and 40s.

The way you handle your credit card debt will follow you for many years. If you max out your credit line, don’t pay your bills on time and keep collecting credit cards to add ways to obtain money, you’ll have a very poor credit score after you graduate. This will affect everything you do when trying to purchase what you want.

A budget helps you plan ahead by knowing how much money you have coming in and going out. It gives you the power you need and the peace of mind of knowing where your money is going.

It’s really not important where you spend your first two years in college. Attend a community college while getting your general education requirements out of the way, and then transfer to the school of your choice. This way you can work and not take out any loans.

You’ll save tens of thousands of dollars, which you’ll appreciate when you are trying to pay off your student loans after you graduate and find that money is stretched.

Welcome To College Life

When teens live at home there are so many financial decisions that they never have to make. How much to spend money on food, essential bills, like rent and electricity, and clothes and entertainment often never cross the teenage mind.

As the school year begins, recent high school graduates prepare themselves for a new life as college students. Along with academics, college is full of life lessons and the biggest lesson involves handling money.

Managing a college budget marks the first time, for the majority of college students that they have to be responsible for handling their own finances. It can be stressful and challenging. However, if you have a solid plan and stay with it, all things are possible.

In college, teens suddenly have to consider these things. If you spend and spend you will quickly find yourself trapped. Smart money saving tactics can make a major impact in your finances and your future.

How To Reduce Stress And Save Money

You should first start by developing a budget. To be fiscally fit you need to know how much goes in and out of your account. Keep monthly records of your spending. You need to get organized so you know exactly what you can spend on everything.

The main goal of a budget is to see where the money is going and where you can cut back on. Right now you are taking care of only you (usually) and it is the time to live on the least amount in life that you can.

Smart spending equals savings. Find inexpensive ways to entertain yourself. Visit museums, parks, or read at coffeehouses, check out sale racks, consignment shops, and the library. You will be able to make many new friends that will be doing similar things to save money.

Keep your car at home. Parking, insurance, gas, repairs, oil changes, etc. are additional worries that most students could live without. Walking and the bus are transportation modes that work well with a budget.

Purchase used books. Used books are usually in good condition and cost about half the price. Also, check out the message boards and the Internet for additional information on book sales.

Food can be one of your largest expenses while in college. Some students opt to work in the college cafeteria where food is either free or sold at a very inexpensive cost. You can reduce your food expenses greatly by buying food at the grocery store rather than eating out.

Also, if you purchase food in bulk whenever possible you can save. Coupon cutting is another great way to save. There are days where coupons are accepted for double their value and you can use coupons on sale items also.

Live within your means. Don’t buy what you can’t afford. Pay cash for what ever you buy. Credit card debt once it piles up, can take a huge chunk of your income in interest alone. And when going out on the evening take only what you can afford to spend.

Pay attention and protect yourself. Read your bills and statements each month. Keep track of your receipts, account numbers, spending and alerts. And purchase a shredder to dispose of all personal material with private accounts and information.