The realities of paying off student loans

College graduates in Ohio are entering the workforce with high hopes, bright futures, and years’ worth of student loan debt.

The average annual cost of tuition in Ohio was $14,804 for the 2016-2017 academic year, according to CollegeCalc. That’s $1,218 higher than the U.S. average and ranks Ohio as the 20th most-expensive state or district in which to attend college.

With the cost of college continually growing, student loans have become essential for attendance. According to an Ohio Credit Union League Consumer Survey, 43 percent of Ohioans who went to college used student loans to help pay for their degree. Another 26 percent have children who leveraged student loans.

Of those surveyed, 23 percent say they plan to pay off their loans in one to five years following graduation. Another 38 percent expect to have their loans paid off within 10 years, and 39 percent of respondents said they felt their loan payments were going on “forever” and wondered “if they’ll ever be paid off.”

This response isn’t surprising considering the average 2016 college graduate has $37,172 in student loans, according to Student Loan Hero. All that money can take a decade or more to pay off. The Consumer Financial Protection Bureau considers a standard payment term on a student loan to be roughly 10 years, although borrowers with more than $30,000 in federal student debt could be eligible for payment plans of up to 25 years.

A NerdWallet study suggested student loan debt will hamper most new grads into their 60s and 70s, contributing to a longer working life. Most won’t be able to retire until age 75.

To circumvent this fate, here are some tips to help you pay down student loan debt:

  • Start paying as soon as possible. Use the six-month grace period, meant to give recent graduates time to look for a job before repayment begins, to get a jump start on payments. The sooner you can begin repaying student loans, the more money you’ll save.
  • Pay above and beyond. Paying more than the monthly minimum balance will save you money in interest over the life of your loan. Even rounding up to the next whole or even number takes money directly off the principal.
  • Allocate extra money. Your tax refund check is an easy place to start finding extra cash. You may also consider bonuses, an inheritance, settlement, or even birthday checks.
  • Set achievable milestones. Set-up a payment plan with achievable milestones throughout and reward yourself when you reach each milestone. Begin by paying off the highest-interest loan. When that’s paid off, celebrate with a small “splurge.”
  • Consolidating and refinancing your loans can help pay off loans faster. Credit unions typically offer lower interest rates on loans.

 

To learn more about credit unions in your community and what financial assistance they offer, visit www.aSmarterChoice.org and find a credit union in your area.

 

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The Best Ways to Use a Few Hundred Dollars

Sometimes it can feel like you need thousands of dollars to move the needle on your finances even a little bit.

So if you find yourself with a few hundred dollars–say from a tax refund or an unexpected windfall–the temptation to spend it can be great. After all, how much difference can $500 make? But used wisely, even a few hundred dollars can put you on the road to a more financially secure future.

Here are some ways to make even a small amount of money count.

    • Start an emergency fund. Ideally you want six months of living expenses stashed to cover unforeseen expenses, but $500 is a good start. And once you have a good start, it can spur you to keep contributing.
    • Take advantage of compound growth. Before spending that money, consider putting it into your IRA (individual retirement account). Not only will compounding increase your balance over time, but increasing your pretax contributions can cut your tax bill.
    • Save for a bigger-ticket expense. Whether it’s for a major house renovation or a dream vacation, put the money in a credit union savings account; whenever you have a little extra money come in, set it aside as well. You could end up with a gift the whole family will cherish for years.
    • Donate to charity. If you itemize deductions on your tax return, consider helping an organization whose works you admire. Not only can you deduct the gift, but it might ultimately mean more to you than spending the money on yourself.

Copyright 2018 Credit Union National Association Inc. Information subject to change without notice. For use with members of a single credit union. All other rights reserved.

The Smartest Way to Use Gift Cards

If you received a gift card over the holidays, chances are you’re happy about it. After all, what’s not to like? Gift cards allow recipients to buy stuff without taking money out of their pocket — at least in theory.

But gift cards can be a mixed blessing. Forget you have one and it can sit in your drawer, unused, for ages. Receive one for a store you don’t care for and you may find yourself buying things you’d really rather not. Or maybe you’ll overspend and find yourself using that $20 Pottery Barn gift card for a $50 lampshade you don’t really need.

Here are ways to make sure your gift cards stay a blessing — not a curse.

Spend it sooner rather than later

If you intend to use your gift card, it’s better to act fast. Stores may go out of business, may not honor outstanding gift cards after filing for bankruptcy or may close their only location near you.

That’s especially true as consumer shopping patterns continue to shift and brick-and-mortar retailers shut their doors — 2017 saw retail giants including J.C. Penney and Macy’s announce the closure of stores nationwide.

And the quicker you use a gift card, the less likely you are to forget about it. Nearly $1 billion in gift cards went unused in 2015, according to consulting company CEB Tower. That’s a significant sum of money left on the table.

Don’t want to spend? Regift, resell or donate

If you receive a gift card for a store with no nearby location, or one that you simply have no interest in visiting, you can get rid of the card by regifting, reselling or donating.

“It’s important to do an honest assessment right from the beginning and think, ‘Am I really going to use this or is this a stretch?’” says Shelley Hunter, spokeswoman for Giftcards.com, a website that sells gift cards.

Find a friend or family member who will appreciate your unwanted present. And if you can’t, sell it to somebody else. Sites like Raise.com or Cardpool.com allow users to resell gift cards online. Though you likely won’t get the full value of the card back — the cash you get can range from 60% to more than 90% of the original amount — Hunter says it’ll be worth it if you weren’t going to spend it anyway. You’re likely to get closer to the full value for stores that have nationwide footprints and sell a wide variety of merchandise, such as Target or Walmart, Hunter says.

Or consider donating your gift card to a local school, after-school program or homeless shelter.

Donations may be eligible to use as a tax deduction.

Avoid overspending — and underspending

A study by payments technology company First Data found that 75% of consumers overspend the value of their gift card by an average of $38. That’s not necessarily a bad thing — a gift card can bring down the amount you spend on something you wanted but couldn’t afford otherwise.

Beware of “gift card creep,” however — spending excessively on something you didn’t really want, just because the card makes it relatively affordable. Plan ahead of time, and ask yourself whether you truly value the item. To get the best deal, you should also look around for coupons and shop when the retailer is having a promotion.

What if you’ve come close to your gift card limit and have a small amount left on your card? Certain states require retailers to exchange the value of the card for cash if it falls below a threshold. Though the threshold is $5 for many states that follow this policy, it ranges from $1 in Vermont and Rhode Island to $10 in California. Some stores may also have policies in place to refund low values for cash, regardless of which state they’re in.

» READ:  6 ways to get free money from the government

Try new things

Gift cards can be a burden if you feel forced to spend money on things you won’t ever use. But they can also push you to try new things.

“You’re not giving a gift, you’re giving the gift of an experience,” Hunter says of presenting somebody with the store vouchers. So go out on a limb — try that new local restaurant, take the cooking class or browse through that clothing store you’ve been meaning to check out. You might find that your gift card brings more value to you than its worth in dollars and cents.

The article The Smartest Way to Use Gift Cards originally appeared on NerdWallet.