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It’s late May, and a new crop of students is preparing to go on to college. One of my less pleasant memories was the agonizing process of securing financing so I could pursue my degree. Though it’s many years later, I’d like to share what I learned that can make paying student loans more manageable and less onerous.

Of course, it was much easier when I went to college than it is now. Even adjusted for inflation, college education was much less expensive then and student loans were a better deal.

The interest rates were actually fairly similar to today’s; but I attended college back when mortgage rates were around 15 percent, so low, single-digit student loan rates represented much more of a discount.

Because student loan debt was less burdensome when I graduated, despite the fact that I took on the debt in a desperate and disorganized way, I was able to pay my loans off early, within five years. These days, the financial stakes are higher, and it takes more planning to make student loan debt manageable.

How to reduce student loan debt

Here are some things students and their parents should consider to reduce student loan debt in the first place:

  1. Consider value for your education dollar. Education is a wildly inefficient market. By that, I don’t mean that the schools themselves are disorganized. What I mean is that if you think of education as a consumer market with heavy competition for student dollars, it is amazing how wide the cost differences are. Even if you excuse the cost of elite colleges as the price you have to pay for a premium product, looking at more run-of-the-mill colleges one finds huge cost differences — sometimes representing tens of thousands of dollars a year — which do not seem generally to correlate with differences in quality. The nice thing about inefficient markets is that they make bargains available, but only to discerning consumers who take the time to shop around. Cheap should not be your primary criterion for choosing a school, but value for money should be high up on your list.
  2. Understand the qualifications needed for what you plan to do. One reason it is not out of place to think of education as a consumer market is that there is so much hard selling of degree programs these days. Often times, colleges heavily advertise degree programs that relate to a trendy career choice, but those degrees do not represent the full qualifications necessary to compete in that field. Don’t just choose a degree program because it sounds like something you’d like to study; think ahead to what you would like to do for a living, and then work backward to identify the degrees necessary to get hired in that field.
  3. Know what the market is for your planned career. Speaking of thinking ahead, research what demand there is for your planned career. The Bureau of Labor Statistics is a good source for information on hiring trends by occupation. I’m not saying you can’t choose more of a niche field because it is something you love, but you should know what your odds of making a living in that field are before you spend time and money preparing for it.
  4. Explore all your financial aid options. The federal government has a program called Free Application for Federal Student Aid, or FAFSA. This is a good clearing house for information and application materials for several types of student financial aid, so you can find the resources you need and choose the best ones for your situation.
  5. Prioritize your financial aid types. If there are grants or scholarships available — sources of aid that don’t require repayment — make the most of those before you borrow money. Then, choose federally-backed student loans first, because these offer good loan terms and some repayment flexibility. Private student loans should be your last priority.
  6. Use savings resources wisely. If you have saved money for college, put it in vehicles that will make it available when you need it and yet earn you the most interest in the meantime. You’ll find that if you are able to plan six months or more ahead, you can find CD rates that will do better for you than what you could earn in a savings account.
  7. Check how your repayment schedules add up before you borrow. Every loan you sign up for will probably provide a repayment schedule, but the reality check is to see how those repayment schedules add up as you take on multiple loans. Graduating students are often shocked by the burden they are facing, but there is no excuse for taking on obligations you won’t be able to meet.
  8. This time is too expensive to waste. Don’t be intimidated by the financial responsibility facing you, but respect it and use it for motivation. Blowing off classes and prolonging your time in school is an awfully expensive luxury. Getting your degree on time can save you a great deal of money.
  9. Remember the bigger picture cost of failing to pay. There is a lot of resentment among recent graduates about the financial burden they’ve taken on with student loans, and this is often expressed as talk about not paying back those loans — either by taking advantage of government forgiveness programs, lobbying for student loan relief, or simply defaulting. Just remember that every student who fails to pay back a loan makes it harder for subsequent students to get those loans. If you approach taking on and paying back loans responsibly, you can make the system work for you and future generations of students.

When you think about it, financing college represents a sort of hand-off of responsibility from the parent’s generation to the student’s. The parent often helps pay for college and guides the student in finding and organizing financing. In the long run though, it is the student left making the student loan payments for years to come — often until he or she has kids and has to start thinking for their college education.

That passing down of financial responsibilities between generations makes this an ideal time to work together to find and plan educational financing, so the older generation can share what they’ve learned and the younger generation can step up and make informed decisions about the process rather than just going along for the ride. Given the nature of the challenge involved, both an older person’s knowledge and a younger person’s eye to the future can bring valuable perspective to the process.

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Illustration of a woman confronting different paths forward

iStockphoto illustration

Saving for retirement is a long game, but the idea of preparing for something decades away is counterintuitive for many of us.

However, consistent saving is crucial for retirement planning. Here’s expert advice for how to prepare in your 30s, 40s and 50s.

Your 30s

Saving for retirement really should begin in earnest during your 20s. But with the average college debt now soaring to more than $35,000, saving money early is out of reach for many recent graduates.

In your 30s, your career and income likely will grow but so will your financial responsibilities, which makes this a critical time to kick-start your retirement savings. If you didn’t begin in the previous decade, ramp up your savings and put away at least 10 percent of your earnings each pay period into a company-sponsored 401(k), traditional IRA or a Roth IRA that you open on your own. Also take advantage of any company match to maximize your retirement savings.

“The younger you start, the better,” says Bruce Elfenbein, a retirement planning expert and president of SecuRetirement Incorporated in South Florida. “There’s no substitute for compound interest and the effect it has. It’s incredible how a small contribution can turn into a great deal of money down the road.”

Elfenbein says you also should sign up for a permanent life insurance policy, establish an emergency fund and save four to six months worth of expenses. He recommends a money market account for this purpose, because it often pays a higher interest rate than a typical savings account.

Your 40s

In your 40s, it’s crucial to focus on increasing your contributions and the best way to do this is to pay off any debt.

Student loan and mortgage debt is one thing, but high-interest credit card debt can cripple your long-term financial plans. Pay off as much of it as you can and reallocate these funds to retirement. Also spend more time managing your portfolio. Talk to a financial planner and review your investments and savings to ensure your money is in the right vehicles and aligns with a level of risk you’re comfortable with.

Elfenbein says it’s important to put money in vehicles, like a fixed-index annuity, that will give you secure and guaranteed income. A fixed-index annuity provides tax-deferred growth and can protect you from downturns in the market. Anything left over should be invested to combat taxes and inflation, Elfenbein adds.

In your 40s, also consider how much you need to cover your health care expenses in retirement. If you haven’t already, open a Health Savings Account (HSA) to save for this cost. HSAs are a great option (link to previous article here) because any contributions you make are tax deductible and roll over from year-to-year.

Your 50s

In your 50s, your retirement strategy should “shift from accumulation to preservation,” Elfenbein says. People tend to become more risk-averse as they age, and this is no different as you approach retirement. In this decade, stay away from variable products and shift more of your money away from stocks and into secure vehicles like high-quality bonds or annuities.

Also use the savings options the government provides — like a 401(k) or IRA — to make catch-up contributions that will maximize your retirement income. In 2016, you can contribute $6,000 above IRS limits for 401(k) plans.

If you’ve already started funding an HSA, look into insurance plans for long-term care, which can help cover your ongoing health care, assisted living or nursing home costs later in life.

When it comes to retirement planning, the main question you need to ask is what kind of lifestyle do you want to live in your later years? If you expect to maintain or exceed your current standard of living, you need to save more — and start early. Being consistent and actively managing your portfolio will pave the way for a secure retirement.

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If travel is in your plans, you may want to know about this offer from American Express. It’s the Starwood Preferred Guest Credit Card, and it offers 25,000 bonus points when you make $3,000 in purchases in the first three months after opening your account.

You can redeem those points for free nights when it works for you because there are no blackout dates at over 1,200 Starwood hotels and resorts in almost 100 countries. (Some hotels may have mandatory service charges and resort charges.) For international travelers, though, it’s a big plus that there are no foreign transaction fees. You can stay connected with free in-room premium Internet access, but booking requirements apply. Other perks give you access to discounts and presale tickets for live events as well.

After the introductory period, your travel and everyday purchases continue to help you earn travel rewards too. You can get up to 5 points for every dollar you spend at Starwood hotels and 1 point on all other purchases. The offer includes a $0 introductory annual fee for the first year and goes to $95 per year after that. Terms and conditions apply.

This card was voted one of the best travel credit cards in CardRating’s Editor’s Choice Awards: Best Credit Cards for 2016 article. (CardRatings.com is one of our partner sites. Here is CardRating’s full review.)

Another travel reward card offer

The Chase Sapphire Preferred Card was also honored in the CardRating.com Editor’s Choice Awards article for its introductory offer – 50,000 bonus points when you spend $4,000 on purchases within the first three months of opening your account. (That translates to $625 in travel rewards.)

With the Chase Sapphire Preferred Card, you earn two times the points on travel and dining. You earn one point for each dollar spent on all other purchases.

It seems that turning your everyday purchases into better travel experiences is getting easier – and there are a number of options to choose from to boot. Happy trails!

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Tax Day 2016 for IRS Tax Year 2015, also known as your return filing deadline, is April 18.

If you haven’t yet filed, here are the IRS tax rates for your 2015 earnings with background and commentary. These change from year to year to protect against something the Tax Foundation calls “bracket creep” or when you get bumped up based on inflation not because you got a nice raise or found a higher-earning job.

Curious who will pay the most for tax year 2015? The top marginal rate is 39.6%.

Looking for your federal refund status? If you’ve already filed you can use this part of the IRS website to check.

What are the 2015 marginal tax rates?

The following was written by Luke Landes and edited by Consumerism Commentary for length and clarity.

There’s a big misconception about taxes. People are afraid to earn more if it means they’re going to be “bumped into the next tax bracket.” It is not true that being in a higher tax bracket will cause all of your income to be taxed at a higher rate. The only income tax at the highest rate is the income you earn above and beyond the lower threshold for that rate.

Make sure that sinks in. You will always owe the lowest tax rate, 10 percent, on your first $9,225 of earned income if you file as a single individual (not filing jointly). You could be a CEO earning $5 million this year, but even still, your first $9,225 is taxed at 10 percent. That’s how the brackets work.

So if your total taxable income is $9,000, you owe 10 percent of that, or $900. In this case, your marginal tax rate, 10 percent, is exactly the same as your effective tax rate. You get your effective tax rate by dividing the amount of total tax you owe over your total income. This is what Warren Buffett has famously referred to when explaining how his secretary pays more tax than he does. Buffett earns a lot of income from investments which are taxed at a lower rate than earned income, and that smaller percentage affects the average — the effective tax rate for all his income.

One more thing to keep in mind is that if you are employed and your employer takes tax payments from your paycheck automatically, you pay your 2015 tax bill throughout the year. The total tax you owe when you file your tax return takes that into account. If your total tax bill is less than what you’ve paid to the federal government throughout the year, you’ll get a refund. If you haven’t covered your entire bill through paycheck withholding, you owe the government.

The 2015 federal income marginal tax rates and brackets by filing status.

Read the full article →

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The best cash back credit cards for June 2016

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Cash back credit cards can help consumers practice responsible spending while earning a little extra for their efforts when used properly. The days of earning 5 percent cash back for all credit card purchases may be just a memory, but the smart use of credit cards can still be profitable for diligent consumers. You may ... Continue reading this article…

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Best Time to Buy a House

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In chemistry, a catalyst is something that triggers a reaction — but the nature of the reaction itself depends on having the right elements in place to respond to the catalyst. What brought to mind that tattered remnant of high school chemistry was thinking back on buying my first house. I’ll explain how I got ... Continue reading this article…

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Why Lending Rates Can’t Stay Low Forever

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The Federal Reserve sure gets a lot of media attention. And yes, the discussion of when and if the Fed is going to raise interest rates can get a little tedious, but it still probably deserves some of your attention because interest rates are woven so deeply into the fabric of household finances. The Fed ... Continue reading this article…

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Balance Transfer Cards for Fair, Average or Excellent Credit

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[Editorial note: This offer was last updated on July 13, 2016.] Are you still wrestling down holiday debt? Zero-interest balance transfer credit card offers can help you meet this challenge, but only if you know what to look for. Otherwise, you will end up paying interest anyway, which is exactly what the credit card companies ... Continue reading this article…

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Financial Upgrades You Need After Becoming Parents

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New baby? No doubt this new arrival has turned every aspect of your life upside down in the best possible way. Now is the time to make sure your financial house is in order. Here’s a 10-step account and financial checklist to lay the groundwork for your little one’s successful future. New account checklist for ... Continue reading this article…

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Best Online Savings Accounts March 2016

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The best high-yield online savings accounts offer strong interest rates and great customer service, making them a popular option for savers. Studies also show online savings accounts often come with lower fees. “High-yield” is unfortunately a bit of a misnomer these days; a decade ago, interest rates were 4 percent and 5 percent among select savings accounts ... Continue reading this article…

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