Financial Wellness

Understanding Student Loans For Graduate Students

| Jennifer Forsberg

Applying for student loans is much the same at the undergraduate level as it is at the graduate level.  Students still need to complete the Free Application for Federal Student Aid (FAFSA).  For most undergraduate students this process involves entering their personal and parent’s financial information.  At the graduate level, by nature of the student already completing a bachelor’s degree, students only need to include their own financial information. Commonly, graduate students are offered two types of loans: 

  1. Graduate direct student loans up to $20,500 annually at a 4.30% (these numbers change annually in the summer) annual interest rate.  
  2. Graduate PLUS loans up to the Cost of Attendance (COA) minus other aid at a 5.30% interest rate.  Unlike direct loans, PLUS loans require a credit check.  

Depending on your program and college you may be offered other types of loans. Like loans at the undergraduate, you do not need to make any payments until after you graduate.   

Alternatively, students can apply for private student loans.  This process involves finding a lender to borrow money from and with factors such as your debt to income ratio (DTI) and credit score determining your credit score.  As every lender is different private student loans may not have the same benefits as federal students.  That means you might have to make payments before you graduate.  Generally, private student loans have higher interest rates. 

When it comes to repayment time, federal student loans have a great deal of flexibility. The standard repayment plan is 120 months of equal payments but you can pay less monthly if you qualify for any of the Income-Based Repayment (IBR) or Income-Contingent Repayment (IDR) plans.  Though these plans will save you money in the short run, it will result in a longer repayment period and possibly more interest paid in the long run.  If you have a little extra money in your budget paying more than the required amount monthly can save you thousands of dollars in interest and a shorter repayment time.  The repayment options for private student loans varies by each loan and may not have the same options as federal student loans.    

If you’d like to talk to someone about loans or your finances more generally consider setting up an appointment with Scarlet and Gray Financial, a free coaching program through the Student Wellness Center that can help you get the answers to questions you may have. 

-Graduate Professional with Scarlet and Gray Financial

Credit Scores

| Jennifer Forsberg

What is a credit score?  

Your credit score shows up in your life in a number of ways.  It influences your interest rates when borrowing for a car or house and  a good credit score can save you tens of thousands of dollars over your lifetime. Some employers will check the credit scores of applicants and landlords may also use it to judge the quality of potential tenants.  A credit score is an expression of the risk associated with lending money to a person.  FICO, the most commonly used score, ranges from 300 at the low end and 850 as the best possible score.  For those students considering refinancing their student loans, their credit score will be a major factor in that process.  

 How is a credit score determined?  

Once someone starts borrowing money from a financial institution, be it a student loan or credit card, all of the payment and account information is aggregated into a credit report.  Based on the information on this report a credit score is determined. It is a good practice to check your credit report on a regular basis to ensure there aren’t any errors or other issues.  Consumers are able to check all three credit reports once a year for free at AnnualCreditReport.com.  The actual formula for determining someone’s credit score is a trade secrete but FICO provides an idea of how the algorithm weights several factors:  

  • Payment history: 35% of your credit score.  In short, make your payments on time.  In the case of an installment loan, like a student loan, the borrower simply needs to make the entire payment in full but with credit cards just the minimum payment is needed.  Keep in mind, that anything less than payment in full will result in interest being charged to the account.   
  • Utilization rate: 30% of your credit score.  Utilization rate is the ratio of spending on credit cards to overall credit limit.  Under 30% is a good practice though under 10% is ideal.  
  • Length of credit history: 15%.  Having a longer credit history is better.  It’s not possible make your credit history longer expect by getting older so starting earlier is better.   
  • New credit: 10%. Each new formal application for an account will appear on your credit report and hurt your credit score for a short period of time.  Be sure open new accounts strategically and avoid it all together prior to a large purchase like mortgage or car loan.  
  • Credit mix: 10%.  Having a mix of credit cards and other revolving lines of credit and installment loans like student loans is helpful.  

 How to get started  

Anyone with who has borrowed for undergraduate or graduate school has already established a credit score. For everyone else opening a credit card is an option.  Since 2009 first time borrowers need to be at least age 21 to open the first credit card.  Secured or student credit cards are a good fit for first time credit card users.  

 -Scarlet and Gray Financial Services

Secure Your Credit Score with a Secured Credit Card

| Jennifer Forsberg

In my sophomore year of college, I was a volunteer financial coach teaching fellow Buckeyes about the importance of building credit early without having a credit card myself. The hypocrisy! So I decided to change that, but how could I get a credit card without a credit history or a steady income?  

If you said, “Get a secured card!” you would be correct! Secured cards are a great option for college students who do not currently have a credit history and are looking to build their credit score (which can affect things down the road like approval of loans, interest rates on those loans, employment, and more!).  

A secured card acts like a security deposit that you may have already placed on your off-campus housing. You know, that one-month’s rent that your landlord holds onto “just in case” you wreck the place? And they always take at least some, or all, of your deposit for a hole in the wall that was there when you moved in? Trust me, this works much better in a credit scenario! 

I schedule an appointment with my bank and asked if I could get a secured card, so they told me to put $300 down as a “security deposit” that they would take from if I ended up missing a payment. That $300 also became my credit limit, or how much I could spend on that card per month (keep in mind that you should only spend up to 30% of your credit limit, so $90 in my case!). They told me that if I kept up good habits for a year, I could get my $300 back and then exchange the secured card for a credit card with a higher limit. 

So that’s what I did! I made sure to only put a few purchases on my secured card per month to stay below that $90 and used my debit card for my other purchases. I paid everything off in full at the end of the month and ended up with a credit score in the “very good” range, even though I had only had it for a year! Because of this, I was able to go back to my bank, get my $300 back, and exchange my secured card for a credit card with a $1500 limit. 

This is a great way for college students to start building credit while building good spending habits as well! I recommend checking out the options at your bank of choice or going to Nerdwallet.com, where they can break down all of the secured card options out there for you. I am available by email (moriarty.67@osu.edu) if you have any questions as well. Go build that credit! 

–Bryan Moriarity, Scarlet and Gray Financial Coach

Lessons Learned in 2020 for a Better 2021

| Michaela Martin

There is no doubt that this past year has challenged many people across the globe in many different ways.  One of the biggest struggles people faced in the past year was financial instability.  Many Americans live paycheck to paycheck, and do not have an emergency fund set aside for when unexpected events happen, like unemployment.  We can take some of these hard lessons that many have lived through and change our habits to create a better future. 

In Spring of 2020, COVID19 hit United States and the employment rate reached 14.8%. To add to this sudden financial stress, CNBC reported that only 39% of Americans have at least $1,000 set aside for unexpected expenses.  The pandemic escalated a lot of the financial issues that many Americans face. The good thing is we can learn from the past and change our actions in the future. 

There is no doubt that 2020 was a hard year for the world, but I believe there are many lessons that can be learned that we will take into the coming years.  Here are some simple practices that everyone can engage in to ensure financial security for the future. 

  • Create an emergency fund with six months of living expenses for unexpected events
  • Use split direct deposit to save money from every paycheck in a savings or retirement account
  • If possible, spend less than you make. Use a monthly budget to track your spending and income.

The Student Wellness Center’s free Financial Coaching service can provide education and assistance in planning for the future. Schedule a 1on1 appointment today!

Avalanche Versus Snowball Debt Repayment

| Michaela Martin

As winter comes to Ohio State, students are nestled in their homes protected from the snowfall. During this quiet time while we are surrounded by snow, students will find it is the perfect time to start attacking their debt! If you think debt and snow have no relationship, then maybe you have never heard of the snowball or avalanche method! Both are fantastic ways of attacking those student loans, car loans, or balances on your credit cards. 

The snowball method works by the paying off your smallest debts regardless of any of the balances interest rates first before prioritizing the debts with the larger balances. To be more precise, you should arrange your debts from smallest to largest, make the minimum payments on each of the balances besides the smallest, and pay as much on your smallest debt as possible. Repeat the process until each debt is paid in full. The advantages of the snowball method are it allows you to modify your behavior and you can visibly see the progress of paying off your debts because you started with the most attainable balance! 

The avalanche method, on the other hand, is a way of paying off debt by having you pay off the balance with the highest interest rate first. Like the snowball method, you will make minimum payments on all your balances, however any extra cash will be put towards the balance with the highest interest rate. You will continue to the debt with the next highest interest rate until all the debt has been paid off. The advantages of the avalanche method are that, compared to all the of the rest of the repayment methods, it allows you to save the most money by attacking the most expensive debt first! 

So, although the cold and snow brought on by winter might not be your favorite season, it gives you a great opportunity to start addressing your debt and the earlier you pay it off, the better! 

Creating SMART Financial Goals

| Michaela Martin

The first step to creating a budget is to outline your financial goals.  Students often think the goal of a budget is to cut out all spending and eliminate their weekly latte habit, but budgeting is ultimately aligning someone’s spending with their values and goals.   

  1. Financial goals can be lumped into three broad categories: accumulation, debt reduction, and consumption.  Accumulation goals involve saving a certain amount of money.  This might include saving money for an emergency or a down payment on a large purchase.  Debt reduction includes reducing or eliminating debt.  Consumption goals are related to purchasing an item or experience.  
  2. Financial goals are best when expressed in the SMART formation.  Specific, Measurable, Attainable, Relevant, and Timely. In short, you should set realistic financial goals with a specific time-frame and dollar amount.  
  3. Once your goals are in this format it’s very easy to add them to your budget simply by dividing the amount needed by the number of months you have and establish a monthly savings amount.  If someone wanted to save $1,000 a year from now they’d need to save around $83 a month.  A second year student saving to buy a car after graduation would need to $111 a month to have $4000 at graduation.  
  4. Consider automating your savings by splitting your direct deposit between a savings and checking account.  Another option is to step automatic transfers between checking and savings on a monthly or weekly basis.  

 

Examples of goals from each type 

  • I will set aside an additional $100 monthly on my student loan payment to be debt free by 5 years after college. 
  • I will save $5,000 for an emergency by October 1, 2023 by putting $139 per month in my savings account.  
  • I will have $700 for a summer road trip by May 1, 2021 by saving $100 per month.  

Breaking the Seal and Breaking the Bank

| Michaela Martin

Many of the conversations around alcohol use revolve around either your physical and mental health, and physical safety while drinking. It makes sense why that might be, they are some of the most obvious and tangible negative consequences that come with use. However, it made me think: What are some of the other unintended consequences of drinking that we don’t think about so quickly? And better yet, what are some of the positive things that could come from refraining from drinking? Being a broke college student, I’ve been aware of my finances for a few years now. That begs the question: How much do college students spend on alcohol? 

According to the Huffington Post, even if you limit your drinking to the weekends, the average American can expect to spend $2,500 annually on alcohol alone. This does not include extra expenses that are often associated with drinking (think tips for the bartender, Uber/Lyft, food). This number assumes that a person is drinking only two (2) drinks per outing! This phenomenon can be described as “the latte factor.” This means that seemingly small purchases (an $8 drink) purchased frequently can add up over time to a large number ($2,500).  

While spending $2,500 on anything may make you cringe the way it makes me cringe, I wanted to take a look at some of the things that I would buy if I had that extra cash laying around. Of course I could invest it or pay down student loans, and I’m sure Ben, our Financial Wellness Coordinator, would advocate for that, but this is hypothetical! Feel free to think about what you may spend your extra money on! Here are the things I plan to acquire with the extra money from one year: 

$2,500  

  • The iPad Pro ($999) 
    • I enjoy staying up on gadgets as much as the next person. This iPad is INSANE! Plus, I came to Ohio State just before the incoming classes got iPads, touchy topic. I need one to take notes on like a cool person. Moving on! 

$2,500 – $999 = $1,501 

  • New TaylorMade golf clubs ($699)
    • New clubs means a better golfer, right? I’m really bad at golf, so I hope so! I would want to buy golf clubs because it would assist in my self-care activity. The better I play the more successful my self-care. 

$1,501 – $699 = $802 

  • A few pair of new shoes of course! ($600 – I would buy four pairs. Don’t judge me)
    • What can I say? I love a good pair of shoes! Ultraboosts, Jordans, Nikes, and more. This money will go to good use in the style department. 

$802 – $600 = $202 

I just upped my golf game, my shoe game, and became as cool as the class of 2022, and still have a good chunk of money left over! It blew my mind how much the average person spends on alcohol in a given year and made me realize there are some pretty cool things I could spend it on instead (or invest in, of course). 

 

 

 

 

1 Black Mask DIYed 4 Ways for SPOOKY SZN!

| Michaela Martin

Ah autumn is upon us again, with cool air brings pumpkin patches, hot cocoa, bonfires, football, and fall themed face masks. If you are like me and aspire to have a face mask collection that rivals Nancy Pelosi’s (regardless of your political beliefs you have to admit her mask game is on point), then I imagine that you are already scouring the internet for a Halloween themed mask that matches your costume perfectly. Not to fear, the SWC is here to give you a quick, easy tutorial on how to DIY a simple black mask into 4 cheap Halloween themed masks.

First off supplies:

  

To make your masks, begin by planning out what you would like it to look like; look to Instagram, Pinterest, or at the photos below for inspiration. Really any costume can benefit from a mask accessory, it is all about flexing your creative wellness muscle! Below are examples of a jack-o-lantern, black cat, vampire, and a basic witch.

  

Once you have a pattern decided on, draw the design on your felt sheet. Keep in mind that to avoid pen marks on the front of your mask, you will cut out your pattern and then flip it over to glue onto your mask; this means that your pattern will be backwards so plan accordingly when drawing out.

Next, cut out your pattern and place on your mask prior to gluing to verify sizing and spacing; make adjustments as necessary. Carefully glue down design with fabric glue – remember you do not need to be excessive with the glue. Follow the instructions on the glue bottle; the brand I used said to let sit for 2 hours prior to using and 48 before washing. I would recommend purchasing glue that dries clear to avoid any unsightly glue marks on the front of your mask.

Once your glue is dry, accessorize accordingly to complete your Halloween look! You are now ready to have a stylish, spooky, and safe Halloween season.

   

Bonus DIY – Pumpkin Headband

Supplies – headband, hot glue, Halloween ribbon, and a plastic pumpkin

**The headband was an old one I had at the house, Halloween ribbon was on sale for $4.01 at Michaels and the plastic pumpkin is from the dollar section at Target. Overall the entire project cost less than $7.**

Wrap your headband with the Halloween ribbon, use your hot glue gun make a glue dot on the underside of your headband at the base (the spot that goes behind your ear) and secure the end of the ribbon to the headband. Continue to wrap adding a glue dot every few wraps to secure in place – wrap the entire length of the headband and secure the second end the same way you did the start. Once complete, add a big hot glue blob where you would like your pumpkin to land. Secure your pumpkin in place. Let dry and you are ready to go!

The ROI of College

| Michaela Martin

As the tuition deadline passes and the weight of a new semester of academic work looms, you may be wondering what you signed up for.   With the cost of education top of mind, avoid reducing college solely to a monetary transaction.  Students come to Ohio State with many goals in mind – be it an excellent job, a great social life, or a prestigious graduate school.  Aside from a boost in earnings, there are many long term tangible and intangible benefits to completing a college degree.  

  • College is a uniquely easy time to meet new people.  Your neighbor or the person sitting next to you in a lecture could be a lifetime friend or valuable member of your future professional network.  Making friends today can build a network for your career or even the people you start a business with.
  • Classes are not solely about developing specialized vocational skills.  Use your general education credits to develop as a well-rounded professional and person.  A finance professional or engineer with excellent written and oral communication skills will have a leg up in the interview process and will be more effective in articulating their ideas and selling themselves during their career.  You never know if the next GEC you take could spark a lifetime passion in a subject. 
  • Some majors certainly lend themselves to specific careers, accounting majors tend to be become accountants, but that does not mean less vocational careers do not have value.  Those students in less career-oriented majors may have to do a little more work to get to their ultimate objectives, but still have the opportunity to have a great career. 
  • No matter your major or goals, be sure to start planning for your future while in college.  Internships are an excellent way to start building career experience regardless of your field. Make sure to checkout the Career and Internship Fair happening virtually on September 15 and 16.

Intro. to Investing

| Michaela Martin

From, tulip bulbs in 17th century Holland to tech stocks in the 90s the temptation of investors to chase short term gains has led to innumerable financially ruinous moments in the course of human history.  2020’s combination of quarantine induced boredom, easy access to financial markets, and a renewed interest in day trading is no different.  Though day trading (short term buying and selling of financial products) can be a profitable endeavor it is more often not and in some occasions can be devastating financially.   One study of day trading activity found that a mere 13% of traders break even annually.  Luckily, young investors are better positioned than any other group to build a successful investment portfolio.  Before getting started investing it is important to consider a few thing:

  1. What are you goals and timeframe? The magic of compound interest, interest in earned in one year put to work in the second year and so on, allows investors to turn even a small amount of cash into a nice chunk of change given enough time.  If a 20-year-old student invested $1,000 in a retirement account and earned 7% annually, they would have $21,000 by the time they retired at age 65.  Compound interest is an incredible tool for building wealth over your lifetime.  Investing may not even be appropriate for short-term goals.  Investing some money for your fall tuition, for instance, could have resulted in a 30% loss alone in the month of March.
  2. What is your strategy? Buying individual stocks can be lucrative but presents a great deal of risk.   Are you buying this stock because of familiarity with its brands or because you understand and like the financial performance of the company?  Can you read a 10-k and balance sheet?  If not, there are financial products available that allow investors to easily and cheaply invest in many stocks simultaneously.  Though these might not perform as well as some individual stocks, historically few investors out perform the S&P 500 index in the long run.
  3. Are your finances in a place that investing makes sense? The average person can build wealth through a lifetime of financial discipline and most critically a budget that will allow them to find the cash to consistently invest.   Consider establishing emergency savings before investing.  What good is putting money in an investment account if you have to take money out to pay for new set of tires? Have high interest debt? No investment account is likely to outperform the return on investment of paying off the 20% interest on credit card debt. Learn more about personal finance in this video series:

Resources: 

iGrad course on investing : https://www.igrad.com/courses/investing-to-build-wealth

iGrad course on retirement planning: https://www.igrad.com/courses/planning-for-retirement

Scarlet and Gray Financial Coaching: go.osu.edu/yourfinances

-Ben Raines, Wellness Coordinator | Financial Wellness