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10 Ways to Save Money After Graduation

November 5, 2019

If you’re just graduating from college, the job market is an unfriendly one. It seems like every job post wants 5 years of experience, a Master’s degree, and pays just $28,000/year. As if you don’t have enough to worry about, you can’t seem to get away from the advice about saving for retirement and the value of buying a house over renting. How are you supposed to do either on a $28,000 salary and a bucket of student loans that coast at least that much? You have to get creative with your savings. To kickstart your thinking, here is ELFI’s list of 10 creative ways to save money after graduation.

 

When it comes to saving money after graduation, there are two methods: save more of what you make and decrease spending. Find what works for you based on your bills and habits. Also, don’t feel like you have to follow all 10 tips. Implementing even one of these tricks for saving money after graduation can help you be more financially savvy. 

 

1. Use Direct Deposit to Save 10%

Direct deposit isn’t just for eliminating a paper paycheck. It can also be your best friend for saving money after graduation if you request to have your employer automatically send 10% of every paycheck to a separate savings account. On that $28,000 salary, you could save $2,800 a year, which is only about $110 per paycheck. If you set this up as soon as you start that first job, you will never miss the extra money. If you already have a job, it’s never too late to set up a “rainy day” fund. 

 

2. Install “Round-Up” Apps

The same way your grocery store clerk asks you to round up to the nearest dollar for charity, you can use round-up platforms like Acorns to set aside leftover change from purchases you make. With the Acorns debit card, the spare change from each purchase is placed in an investment account of your choosing. And when you shop via the Acorns app or Chrome Extension at 350+ retail partners, a percentage of your total purchase is contributed toward your investment accounts.

 

3. Negotiate Bills & Eliminate Unused Subscriptions

You likely have a dozen or more automatic monthly payments coming out of your checking account or linked to a credit card. Some banks or apps like Truebill and Trim can help you find and cancel subscriptions that are unused or that you forgot you signed up for in the first place. These apps can also help you negotiate some services like your cable and internet or even your cell phone bill to help you get lower monthly rates.

 

4. Make New Rules for Eating Out

From coffee runs and grab-and-go lunches to happy hours and GrubHub deliveries, millennials eat out an average of five times a week. If you can eliminate just one of these outings, you can save a minimum of $5/week (that’s $260/year). Try setting unwritten rules for yourself—or if you’re a “write down your goals” person, use a dry erase marker and your bathroom mirror. Try rules like only eating out only on Fridays and Saturdays. Or only eating out only with friends. You can even make weekly cash-only envelopes, and when you’ve run out of dollars, you have to eat in for the rest of the week.

 

5. Make New Rules for Eating In

Sometimes, splurging on fancy groceries makes eating at home feel more fun. But you have to be careful at the grocery store or your bill can end up just as expensive as all those meals out. Consider rules for eating in, like Meatless Mondays. By eliminating costly animal-based proteins just one day a week, you can help save the planet and save money after graduation.

 

6. Keep Impulse Buys Out of Your Cart

Do you always find yourself tossing extra items into your cart at the store? There are several tricks to avoid impulse buys to save money. The first, and easiest, is to never shop hungry. This keeps those extra tasty, and rarely healthy, items out of your shopping cart. Also, consider only shopping online. This helps you keep to your list. You can clearly review your cart before checkout, and you don’t have to feel guilty for making employees restock your regret items.

 

7. Wait 24 – 48 hours Before Hitting the Checkout Button

Shopping online has many perks. The excitement of variety and good deals can hook even the savviest of shoppers, but practicing restraint and making yourself wait 24 to 48 hours before finalizing online orders can do wonders for your money-saving efforts. After a day or two, you can really think about if you “want it” or if you “need it.”

 

8. Don’t Buy Anything New

Our eighth way to save money after graduating from college is to go retro and buy everything used. Buying second-hand isn’t what it used to be. In the past, shoppers had to roll the dice at garage sales or Goodwill stores, but in the days of Craigslist, Next Door, and Facebook Marketplace, you can be picky about your second-hand items. If you have patience, you can find everything practical like dishes and clothes, as well as everything unpractical like skis and AirPods. 

 

9. Freeze Your Credit Cards, Literally

Another “old school” method of saving is to freeze your credit cards…in a block of ice. You might not literally need to freeze your cards, but putting them in an inaccessible place or by simply not having credit cards, you keep yourself from racking up debt that comes with costly interest rates. Keeping yourself on a cash-only system will limit you to using money that’s truly yours. In case of emergencies, there’s always hot water.

 

10. Refinance Your Student Loans

We can’t end this list about saving money after college without advocating for recent grads to consolidate or refinance their student loans. Student loan refinancing is the process of consolidating your loans (you can consolidate federal loans, private loans, or both) and obtaining a new loan at a new interest rate. People typically refinance with the goal of obtaining a lower interest rate or lowering their monthly payments to make paying their loan more manageable. Keep in mind that when you consolidate federal loans, you’ll lose access to certain benefits and protections such as income-driven payment plans.

 


 

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Woman thinking about using credit card to pay down student loans
2020-11-30
Should I Pay Student Loans with a Credit Card?

Paying off student loans can be a challenging process, so it’s natural to look for creative ways to accomplish your goal. One question some student loan borrowers have asked is whether they can use a credit card to pay student loans.    Technically, it is possible, but it’s generally not a good idea. Here’s what you should know before you try it.  

Can You Use a Credit Card to Pay Student Loans?

Unfortunately, making monthly student loan payments with your credit card isn't an option. The U.S. Department of the Treasury does not allow federal student loan servicers to accept credit cards as a payment method for monthly loan payments.   While that restriction doesn’t extend to private student loan companies, you’ll be hard-pressed to find one that will offer it.   That said, paying off student loans with a credit card is technically possible through a balance transfer. Many
credit cards offer this feature primarily as a way to transfer one credit card balance to another, and if you’re submitting a request directly to your card issuer, that’s typically the only option.   However, some card issuers will send customers blank balance transfer checks, which gives you some more flexibility. For example, you can simply write a check to your student loan servicer or lender and send it as payment. Alternatively, you can write a check to yourself, deposit it into your checking account, and make a payment from there.   Balance transfer checks often come with introductory 0% APR promotions, which give you some time to pay off the debt interest-free. That said, here are some reasons why you should generally avoid this option:  
  • Once the promotional period ends, your interest rate will jump to your card’s regular APR. The full APR will likely be higher than what your student loans charge.
  • Balance transfers come with a fee, typically up to 5% of the transfer amount, which eats into your savings.
  • Credit cards don’t have a set repayment schedule, so it’s easy to get complacent. You may end up paying back that balance at a higher interest rate for years to come.
  • Credit cards have low minimum payments to encourage customers to carry a balance, which could cause more problems. 
  • You won’t earn credit card rewards on a balance transfer, so you can’t count on that feature to help mitigate the costs.
  So if you’re wondering how to pay student loans with a credit card, it is possible. But you’re better off considering other options to pay down your debt faster.  

Can You Use a Student Loan to Pay Credit Cards?

If you’re still in school, you may be wondering if it’s possible to use your student loans to pay your credit card bill. Again, technically, yes, it is possible. But there are some things to keep in mind.    The Office of Federal Student Aid lists acceptable uses for federal student loans, and private student lenders typically follow the same guidelines. Your loans must be used for the following:  
  • Tuition and fees
  • Room and board
  • Textbooks
  • Supplies and equipment necessary for study
  • Transportation to and from school
  • Child care expenses
  If you incur any of these expenses with your credit card, you can use student loan money to pay your bill. However, if you’re also using your credit card for expenses that aren’t eligible for student loan use, it’s important to separate those so you aren’t using your loans inappropriately.   Also, the Office of Federal Student Aid doesn’t list credit card interest as an eligible expense. So if you’re not paying your bill on time every month and incurring interest, be careful to avoid using your student loan money for those expenses.  

How to Pay Down Your Student Loans More Effectively

If you’re looking for a way to potentially save money while paying down your student loans, consider student loan refinancing   This process involves replacing one or more existing student loans with a new one through a private lender like ELFI. Depending on your credit score, income, and other factors, you may be able to qualify for a lower interest rate than what you’re paying on your loans right now.    If that happens, you’d not only save money on interest charges, but you could also get a lower monthly payment.    Refinancing also gives you some flexibility with your monthly payments and repayment goal. For example, if you can afford to pay more and want to eliminate your debt faster, you can opt for a shorter repayment schedule than the standard 10-year repayment plan.    Alternatively, if you’re struggling to keep up with your payments or want to reduce your debt-to-income ratio, you could extend your repayment term to up to 20 or even 25 years, depending on the lender.    Keep in mind, though, that different refinance lenders have varying eligibility requirements. Also, just because you qualify, it doesn’t necessarily mean you can get more favorable terms than what you have now.   However, if you’re having a hard time getting approved for qualifying for better terms, most lenders will allow you to apply with a creditworthy cosigner to improve your odds of getting what you’re looking for.   Before you start the process, however, note that if you have federal loans, refinancing will cause you to lose access to certain programs, including student loan forgiveness and income-driven repayment plans. But if you don’t anticipate needing either of those benefits, it won’t be an issue.  

The Bottom Line

If you’re looking for ways to pay off your student loans more effectively, you may have wondered whether you can use your credit cards. While it’s possible, it’s generally not a good idea. Also, if you’re still in school, it’s important to be mindful of how you’re allowed to use your student loan funds, especially when it comes to making credit card payments.   A better approach to paying down your student loan debt is through refinancing. Take some time to consider whether refinancing your student loans is right for you, and consider getting prequalified to see whether you can get better terms than what you have on your current loans.
Woman learning how to start investing with student loans
2020-11-27
Should You Save, Invest or Pay Off Student Loans?

One of the questions many students grapple with as they begin life post-college is whether to invest or aggressively pay off their student loans. Figuring out when to start investing can be a complicated issue, especially if you’re worried about how much student loan debt you ended up with after college.   The good news is that it’s possible to start investing while paying student loans. However, everyone needs to make a decision based on their own situation and preferences. As you consider your own choices, here’s what to consider when deciding whether to start investing with student loans.  

Should I Invest When I Have Student Loan Debt?

When you have student loan debt, it’s tempting to focus on paying that down—just so it isn’t hanging over your head. However, there are some good reasons to invest, even if you’re paying off student loans.    The benefits of investing include:  

Compounding Returns

The earlier you invest, the longer your portfolio has time to grow. When you invest, you receive compounding returns over time. Even small amounts invested consistently can add up down the road. If you decide to wait until your student loans are paid off before you invest, you could miss out on several years of potential returns.  

Tax-Deductible Interest

If you meet the requirements, a portion of your student loan interest might be tax-deductible. If you can get a tax deduction for a portion of your interest to reduce its cost to you, that could be a long-term benefit. It’s not the same as not paying interest at all, but you reduce the negative impact of the interest. For more information about this option, speak with your financial advisor.  

Returns on Investment May Exceed What You Pay in Interest

The long-term average return of the S&P 500 is 9.24%. If you qualify for a tax deduction on your student loan interest, you can figure out your effective interest rate using the following formula:   Student loan interest rate x [1 - your marginal tax rate]   If you fall into the 22% marginal tax bracket and your average student loan interest rate is 6%, you could figure out your rate as follows:   6 x [1 - 0.22] = 4.68%   Long-term, the potential return you receive on your investments are likely to offset the interest you pay on your student loans.   Don’t forget, too, that if you decide to refinance your student loans, you might be able to get an even lower rate, making the math work out even more in your favor if you decide to invest.  

Student Loan Forgiveness

Another reason for investing with student loans is if you plan to apply for forgiveness. If you know that you’re going to have your loans forgiven, rushing to pay them off might not make sense. Whether you’re getting partial student loan forgiveness through a state program for teachers or healthcare workers, or whether you plan to apply for Public Service Loan Forgiveness, you might be better off getting a jump on investing, rather than aggressively tackling your student debt.  

A Word of Caution About Investing

While investing can be a great way to build wealth over time, it does come with risk. When paying off student loan debt, you have a guaranteed return—you get rid of that interest. With investing, you aren’t guaranteed that return. However, over time, the stock market has yet to lose. As a result, even though there are some down years, the overall market trends upward.    If you don’t have the risk tolerance for investing while you have student loans, or if you want the peace of mind that comes with paying off your debt, you might decide to tackle the student loans first and then invest later.  

How to Start Investing

If you decide to start investing while paying student loans, there are some tips to keep in mind as you move forward.  

Make at Least Your Minimum Payment

No matter your situation, you need to at least make your minimum payment. You don’t want your student loans to go into default. Depending on your income and situation, you might be able to use income-driven repayment to have a lower payment and then free up more money to invest. Carefully weigh the options to make sure that makes sense for your situation since income-driven repayment can result in paying interest on student loans for a longer period of time.  

Decide How Much You Can Invest

Next, figure out how much you can invest. Maybe you would like to pay down your student loan debt while investing. One way to do that is to determine how much extra money you have (on top of your minimum student loan payment) each month to put toward goals like investing and paying down debt. Maybe you decide to put 70% of that toward investing and the other 30% toward paying down your student loans a little faster. There are different ways to divide it up if you still want to make progress on your student loans while investing.  

Consider Retirement Accounts

If your job offers a retirement account, that can be a good place to start investing. Your investment comes with tax benefits, so it grows more efficiently over time. Plus, you can have your contributions made automatically from your paycheck, so you don’t have to think about investing each month.  

Use Indexing to Start

Many beginning investors worry about how to choose the “right” stocks. One way to get around this is to focus on using index funds and index exchange-traded funds (ETFs). With an index fund or ETF, you can get exposure to a wide swath of the stock market without worrying about picking stocks. This can be one way to get started and take advantage of market growth over time. As you become more comfortable with investing, you can use other strategies to manage your portfolio.  

Bottom Line

It’s possible to start investing while paying student loans. In fact, by starting early, you might be able to grow your portfolio for the future even while you work on reducing your student loan debt. Carefully consider your situation and research your options, and then proceed in a way that makes sense for you.
Graduate student sitting in class
2020-11-19
The Differences Between Undergraduate and Graduate Student Loans

If you are thinking about getting a graduate degree and you have undergraduate student loans, you probably have some familiarity with borrowing student loans for school. However, when you are deciding how to pay for graduate school, there are some key differences you should know that can help you save some money.   

Federal Graduate Student Loan Considerations

Interest Rates

Federal graduate student loans often have higher interest rates than federal undergraduate student loans. A higher interest rate results in more interest costs, meaning you are paying more money to borrow the loan. Interest rates can change annually, so it’s important to know the current rates when you’re considering taking out student loans.   The difference in interest rates can add up to thousands of dollars in interest over the life of the loan. When borrowing federal graduate student loans you want to be cognizant of only borrowing the amount you actually need since you will be paying a much higher interest rate on the loan.    

FAFSA

When applying for Federal Student Aid, you are required to fill out the FAFSA form, as you likely did for your undergraduate degree. The major difference is graduate students are considered independent students as opposed to dependent students, and therefore, your parent’s financial information is not needed. In addition, as an independent student, you may earn less than your parents, which could make additional financial aid available.   

Higher Borrowing Limits 

Federal graduate student loans have higher borrowing limits to cover the higher cost of tuition. For undergraduates, the maximum that can be borrowed depends on your year in school and whether you are a dependent or independent student, with limits ranging from $9,500 to $12,500 per year. Graduate students can borrow up to $20,500 per year in direct unsubsidized loans. There is no limit to how much can be borrowed in Grad PLUS loans, except for the cost of attendance.    These higher limits can be helpful when you need to cover all the expenses related to graduate school. However, this can lead to borrowing large loans at high interest rates that may be difficult to repay. Since graduate loans can be used to pay living expenses it is important to continue living on a budget and only borrowing the amount necessary.    

No Subsidized Loans 

With subsidized loans, interest does not accrue while you are in school. Unfortunately, that option is not available for federal graduate student loans. Your graduate student loan options include Direct Unsubsidized loans and Direct PLUS loans, which both begin accruing interest as soon as they are disbursed.   To avoid accruing more interest than necessary, be sure to minimize your graduate school expenses and loans. Also, if you are able to pay at least the interest costs while you are in school this will prevent you from having a larger total to pay back after graduation.   If you find yourself in need of greater financial flexibility, then consider student loan refinancing with a private lender after graduation. This option could decrease your interest rate and monthly student loan payment.  

Additional Graduate Student Loan Considerations

Financial Aid More Limited 

Undergraduates have several financial aid options based on need, such as the Federal Pell Grant, which in many cases does not have to be repaid.   Although grants and other forms of financial aid are sometimes available to graduate students, these options are more limited. Some financial aid options that may be available for graduate school include grants, scholarships, fellowships and federal and private student loans.  

Loan Fees

You may pay higher origination fees for federal graduate student loans versus undergraduate student loans. The origination fees are a percentage of the total loan amount you borrow. This fee will be taken out of your loan disbursement which lowers the actual amount you will receive, but the full amount of the loan is required to be paid back.    Some private lenders, like ELFI, do not charge an origination fee for loans, so be sure to consider that when comparing loan options.   

The Benefit of Private Graduate Student Loans

Private student loans may be more beneficial for graduate school than undergraduate student loans. That's because you may be able to score a lower interest rate on a private student loan if you have an excellent credit history. Private student loan interest rates are based on your income and credit history, so if you are looking to return to school while you are still employed, they may be a good option for you.  

Refinancing Your Graduate Student Loans

If you already have undergraduate and graduate student loans, student loan refinancing could help you to save money on your monthly payment and on interest costs. Refinancing is when you obtain a new loan to pay off previous student loans. You can refinance both federal and private undergraduate and graduate student loans.  

The Bottom Line

Understanding the differences between undergraduate and graduate student loans can help you make an informed decision about the best way to fund your education. If you have significant student debt, student loan refinancing could help you to save money and pay down your loans more quickly.