College Financial Aid: The Future Is Now!

It’s Time to Fill Out a College Financial Aid Form for Fall 2015

The new Free Application for Federal Student Aid, known as the Fafsa, became available online on Jan. 1. This is the starting point for students and families seeking federal aid. It is used by most states and colleges as part of the student aid process. The form collects financial and personal information about students, and their parents if they are dependents, to determine eligibility for scholarships, grants, work-study awards and loans. It must be completed every school year for students seeking aid.

Ann Carrns wrote an article recently in the New York Times that offered several good pieces of advice and information.

Filing the Fafsa as soon as possible after Jan. 1 increases applicants’ chances of getting the best financial aid packages for which they are eligible. Those who file the form from January through March receive, on average, twice the amount of grant money as those who file later, said Mark Kantrowitz, publisher of the financial aid website

Managing Someone Else’s Money

Millions of Americans are managing money or property for a loved one who is unable to pay bills or make financial decisions. This can be very overwhelming. But, it’s also a great opportunity to help someone you care about, and protect them from scams and fraud.
Naomi Karp – CFPB

Indeed, many of us at sometime must manage the financial affairs of a parent, another relative or close friend. It’s challenging enough to manage one’s own finances. Taking care of someone else’s financial assets and managing expenses can be downright daunting.

The Consumer Financial Protection Bureau (CFPB) provides four easy-to-understand booklets to help financial caregivers. The Managing Someone Else’s Money guides are for agents under one of four different circumstances. These are available as PDF documents or print copies can be ordered.

  1. Powers of Attorney
  2. Court-appointed Guardians
  3. Trustees
  4. Government Fiduciaries (Social Security representative payees and VA fiduciaries.)

These Guides are to help someone who has this responsibility now, or may in the future. They are not for legal advice. More information is available on the CFPB web site Financial Protection for Older Americans, including the print copy ordering.

The guides are written for the “everyday” person and are easy to read and understand. A portion of the “Powers of Attorney” is reprinted below to provide a sense of what to expect. Continue reading

Federal Student Aid

 There Is No Getting Around It – College Is Expensive!

We did a post last May that reported here, in Connecticut, yearly college costs varied from twelve thousand dollars at Charter Oak State College to over 61 thousand dollars at Yale. Very few families have the financial resources to cover those kind of expenses without help.

According to USA Today:

More college students are receiving loans, grants and other financial aid than at any time since the debut of the GI bill after World War II, new data show.

Seventy-one percent of all undergraduate students received some type of financial aid in the 2011-12 academic year… Most of the increase in student aid is coming from federal sources.

So, since most of the financial aid is coming from the U.S. Government, let’s take a quick look at Federal Student Aid:

According to the Federal Student Aid web site, Office of the U.S. Department of Education:

The U.S. Department of Education awards about $150 billion a year in grants, work-study funds, and low-interest loans to more than 15 million students. Federal student aid covers such expenses as tuition and fees, room and board, books and supplies, and transportation. Aid also can help pay for other related expenses, such as a computer and dependent care. Thousands of schools across the country participate in the federal student aid programs; ask the schools you’re interested in whether they do!

Financial aid is available from a variety of sources for college, career school, graduate school, and professional school.

Financial aid is money to help pay for college or career school. Aid can come from

Besides financial aid, you also should think about what you can do to lower your costs when you go to college.

Here’s a short video  from Federal Student Aid Office that offers a quick overview (2:14 minutes).

The Federal Student Aid web site provides a wealth of information and advice. There are links to many other sources of useful and valuable information. Visiting this web site is a must for anyone who will be facing college bills in the next few years.

And don’t forget, the Tri-Town Teachers FCU offers scholarships to members and their families. Admittedly, this won’t cover your expenses at Yale, but hey, every little bit  helps.

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Thoughts on 403(b) Plans

Helpful Information For Our Teacher Members:

Investment Options and Important Advice About 403(b) Plans From the Securities and Exchange Commission.

As an employee of a public school, you likely have access to both a pension and a retirement savings plan called a “403(b)” plan.  Let’s examine what a 403(b) plan is, and then go through the choices you’ll likely need to make if you decide to invest in a 403(b) plan.

What Is a 403(b) Plan?

A 403(b) plan is a type of tax-deferred retirement savings program that is available to employees of public schools, employees of certain non-profit entities, and some members of the clergy.  Because you do not have to pay taxes on the amount you contribute to a 403(b) plan for the year in which you contributed to the plan, investing in a 403(b) plan can lower your overall tax burden — at least in the present.  You can defer the income tax on your contributions until you begin making withdrawals from your account — typically after you retire.  The earnings on your account also grow tax-free until withdrawal.

Investment Options

If you are eligible to participate in a 403(b) plan, you may have to choose among different types of investments, depending on how your employer structures the plan. It will be up to you to choose investments that will best meet your financial objectives. 403(b) plans typically offer fixed annuities, variable annuities, and mutual funds. Here is a brief description of each:

Continue for information on investment options, key questions to ask, and where to go for additional information:  Continue reading

Should You Buy Instead of Rent? Maybe Yes, Maybe No

Once upon a time, it was a no-brainer, as soon as you had the down payment in hand, buying a house was perhaps the wisest financial decision you could make. The recent Great Recession changed that paradigm. We know now that home prices can go up, and they can go down. Any decision to go from being a renter to a buyer should include a careful financial analysis that weighs the choice of renting and home purchase.   According to a recent New York Times article, home prices in many areas have experienced rapid increases recently which changes the financial arithmetic of the buy vs. rent decision.

The New York Times finds that in the country’s most expensive places, including New York, the San Francisco Bay Area and Los Angeles, buying a home again looks like a perilous investment, based on the relationship between their prices and rents or incomes. And in a longer list of areas, including Boston, Miami and Washington, prices have risen enough that buying is no longer the bargain it looked to be a few years ago. (Rent or Buy? The Math Is Changing – NYT May 21, 2014)

In the “Good Old Days”, it was OK to plunge into a home purchase. Even though your out-of-pocket expenses were  greater than renting, the gain in the value of the property would more than offset the increase cost of owning. And one could assume increased earnings driven by higher inflation rates as well.

Sharpen Your Pencil
Well, things are different now. We know it’s not a given that a home’s worth will increase enough to justify the increased cost over renting. While it’s still a sound decision to purchase a home for many, it is prudent to examine the all the costs involved on both sides of the equation, owning & renting. And there are many to consider! Most of those associated with being an owner.

Maybe It’s Time to Sell
The analysis of buy vs. rent also works in the opposite direction. That is, maybe as a home owner, it’s a good time to sell and move into a rental home. The same NYT article above described a family in California that purchased home in the Los Angeles area four years ago and sold it recently at a tidy profit.

Billy Gasparino and Jenna Dillon-Gasparino were savvy enough to wait out the housing boom of a decade ago as renters. Not until 2010, well into the bust, did they buy a house in the Venice neighborhood of Los Angeles, less than a mile from the beach, for $810,000.

Only four years later, the couple see new signs of excess in the housing market and have decided to go back to renting. They are close to a deal to sell their house – for $1.35 million, a cool 67 percent gain.  (Rent or Buy? The Math Is Changing – NYT May 21, 2014)

So the Question of Owning or Renting is Worth Taking a Look At, for Owners and Renters
Ah, but you say that’s too hard to do, too much math! The NYT has your back!

The choice between buying a home and renting one is among the biggest financial decisions that many adults make. But the costs of buying are more varied and complicated than for renting, making it hard to tell which is a better deal. To help you answer this question, our calculator takes the most important costs associated with buying a house and computes the equivalent monthly rent. (Is It Better to Rent or Buy? – NYT)

Easy to Use
The NYT calcualtor Is It Better to Rent or Buy? is not hard to understand,  or use. It includes the important factors that affect the financial equation of the rent vs. buy decision. You select the value of a factor like, say mortgage interest rate by using a slider. As you move the slider across a range of interest rates, the  break-even monthly rental is constantly changing to reflect the changing interest rates you are positioning the slider on.

To illustrate the comprehensive coverage that the NYT calculator includes in its computations, here is a list of the factors that go into the calculations, and that you can change to checkout any number of cases for your own consideration.

  • Home Price
  • How Long Do You Plan to Stay?
  • Mortgage rate
  • Down payment
  • Length of loan
  • Home price growth rate
  • Rent growth rate
  • Investment return rate
  • Inflation rate
  • Property tax rate
  • Marginal tax rate
  • Closing costs of buying
  • Closing costs of selling
  • Maintenance & renovation costs
  • Homeowners insurance
  • Utilities
  • Common fees
  • Rental security deposit
  • Brokers fee
  • Renter’s insurance

Don’t know all these values, that’s OK
You are probably saying, “I don’t know all those figures”. That’s okay, the calculator starts with a number that’s a reasonable estimate for each factor. You can change it if you have a more accurate value for you case, or leave it as is.

Give It a Try
If you already own your home, check out what you would have to pay in rent to have what you have now.

And It’s on Our Tool Page
Just in case you can’t check it out right now, simply remember that the Rent or Buy Calculator is listed on our Tool Page. Come back anytime to the Tri-Town Apple and select “Tools” from the menu at the top of the Home Page. You’ll find this calculator under “Online Calculators“.

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When Should I Start Social Security Payments?

Q: At what age should I start my Social Security retirement benefits?

A: Decisions, decisions, decisions. For many people, when to claim Social Security is one of the most significant choices they will ever make. The timing of the first check affects how much they’ll get from Social Security and what benefits will be available for spouses, children and, eventually, survivors(source: AARP)

Bottom Line: There isn’t a simple, “one size fits all” answer to the question.

It’s an individual decision that, like so many life choices, deserves to be carefully researched and the implications given careful consideration.

If you live to the average life expectancy for someone your age, you will receive about the same amount in lifetime benefits no matter whether you choose to start receiving benefits at age 62, full retirement age, age 70 or any age in between.

That said, there are a few basic questions that can assist in the decision of when to begin payments.

  • How much do you need the income from a Social Security?
    • If you have adequate other income to maintain your current life style, then think very hard about starting Social Security payments. The longer you delay, the more you will receive when you do start.
    • If your circumstances are such that the Social Security income is critical to getting along, then by all means,beginning the payment may very well be the correct course of action.
  • Generally speaking, what’s your life expectancy?
    • If you have reason to believe you will exceed the average life expectancy for someone your age, and do not need the income now, then delaying the start of payments may be in your financial best interests.
    • But if you have a serious health condition now, or had parents that died early, then beginning your payments earlier, may be your best choice.
  • Are you really that good at saving and investing?
    • We all have good intentions about setting aside a certain portion of our income and investing it wisely. And many people do. But many also give in to the siren call of the nicer things in life and/or aren’t the “second coming” of Warren Buffett when it comes to successful investing.
    • If you can hold off beginning Social Security payments until age 70, for instance, your payment amount will grow at 8% per year from your Full Retirement Age (currently 66) to age 70. Think about it, that’s a compound growth rate of 8%, guaranteed by the government for four years! Can you really do better? We’re talking about retirement income here!

These are a few basic considerations about the question of when to begin Social Security payments. There are many sources of good information and advice you can visit on the internet.

Begin with the Social Security  Administration

And here are a few more:

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Federal Educational Financial Aid

To say the cost of higher education is daunting is an understatement. Here in Connecticut, the yearly sticker prices for a sample of schools range from $12,535 at Charter Oak State College, to $61,333 at Yale (source: CNNMoney). Help is available and since the Federal Government is responsible for much of the financial assistance, a good place to start looking is the U.S. Dept. of Education.

The material below is reprinted from the U.S. Dept. of Education, Federal Student Aid web site. Read it for a quick overview and links to a number of  web sites and documents to assist your search for financial aid. But be sure to visit the source web site for the complete story on what financial aid might be available to help YOU.


Aid and Other Resources From the Federal Government

The federal government offers a number of financial aid programs. Besides aid from the U.S. Department of Education (discussed below), you also might get

The U.S. Department of Education awards about $150 billion a year in grants, work-study funds, and low-interest loans to more than 15 million students. Federal student aid covers such expenses as tuition and fees,room and board, books and supplies, and transportation. Aid also can help pay for other related expenses, such as a computer and dependent care. Thousands of schools across the country participate in the federal student aid programs; ask the schools you’re interested in whether they do!

Federal student aid includes:

  • Grants—financial aid that doesn’t have to be repaid (unless, for example, you withdraw from school and owe a refund)
  • Loans— borrowed money for college or career school; you must repay your loans, with interest
  • Work-Study—a work program through which you earn money to help you pay for school

Use FAFSA4caster to get an estimate of how much aid you might receive from the U.S. Department of Education.

Apply for federal student aid using the Free Application for Federal Student Aid (FAFSASM). And remember, the first F in “FAFSA” stands for “free”—you shouldn’t pay to fill out the FAFSA!

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