Latest news with #studentLoans
Forbes
2 days ago
- Business
- Forbes
As Harvard Struggles, For-Profit Colleges Are Poised To Flourish Under Trump
Most trade schools in the United States are for-profit. Amid his ongoing assault on elite 'woke' colleges, President Donald Trump mused Monday that he might redirect some of Harvard University's now suspended federal funding to trade schools—institutions he championed through both campaigns and in his previous term. 'I am considering taking Three Billion Dollars of Grant Money away from a very antisemitic Harvard, and giving it to TRADE SCHOOLS all across our land,' Trump wrote on Truth Social. 'What a great investment that would be for the USA, and so badly needed!!!' Trump doesn't appear to have the legal power to reroute the $3 billion on his own—these are dollars appropriated by Congress for research and it would presumably be up to Congress to redirect them to trade schools. But if there were ever a time he'd get GOP support for such a move, it could be now. Most trade schools are for-profit. And both trade schools and the broader for-profit higher education sector—which has a history marred by fraud, abuse and controversy—seem poised to thrive under Trump and a Republican Congress. The House-passed 'big, beautiful bill' includes several wins for for-profit education, including the repeal of regulations that limited student loans for some for-profits and a new workforce Pell grant option that opens up this federal aid for lower income students to shorter duration workforce training programs. Trump has plans to overhaul the accreditation process, which could make it faster and easier for for-profit schools to gain access to federal aid for their students. And the for-profits will also have a sympathetic ear at the Department of Education: Nicholas Kent, Trump's nominee as under secretary of education, the government official overseeing higher education, is the former chief policy officer and a lobbyist for Career Education Colleges and Universities, the for-profit trade association. (His nomination is awaiting a Senate floor vote after Republicans pushed it through the Committee on Health, Education, Labor and Pensions last week by a party line 12-11 vote.) Investors certainly believe Trump will be good for the for-profit schools. After he was elected in November, the sector's stocks rallied, says Jeffrey Silber, a senior analyst in BMO Capital Markets Equity Research. For example, Adtalem Global Education (which runs colleges, medical schools and a veterinary school) has seen its stock rise 61% since Trump was elected, including a 9% jump the day after. The stock of Perdoceo Education Corporation, which owns for-profit universities and technical schools, is up 46%, including an 11% jump the day after the election. In a statement, the CECU (nominee Kent's old organization) applauded Trump's suggestion to reroute Harvard dollars and his 'continued focus on career education.' It added: 'The best way to support trade schools is to reduce the regulatory burden facing private career schools while increasing funding that allows students interested in the trades to choose the highest quality school.' Congress appears to be doing just that. As it stands, in the House-passed tax and budget bill (H.B. 1, now formally named the One Big Beautiful Bill Act), the new workforce Pell grants would be available for students without graduate degrees who are enrolled in 8-week to 15-week workforce training programs. There would be some limits—correspondence courses which require students to mail in assignments are excluded, and eligible programs must be state-approved, though, notably, they don't need to be accredited. Previous versions of the legislation included quality assurance benchmarks, but H.B. 1 includes only watered-down versions of those, says Michelle Dimino, director of the education program at the public policy think tank Third Way. Eligible programs must show a 70% completion rate—a low bar for short-term programs—and a 70% job placement rate for graduates. Both metrics are easily gamed, Dimino says. 'We've seen instances where predatory colleges would employ their own former students to make sure that they showed up in a job at the time when the job placement rate was going to be calculated,' she says. 'Sometimes colleges might look for students who are already employed right as a target audience because they know that they'll do good on a job placement measure.' A gold-standard measure for program outcomes is the post-graduate earnings boost. In other words, how much more money graduates with the credential earn than a typical high school graduate. On this measure, for-profits largely fail, says Michael Itzkowitz, founder and president of The HEA Group, a college access consultancy. According to his research, which uses federal education data, 59% of certificate-granting institutions leave graduates earning less than $32,000 a year—a typical high school graduate salary—even 10 years after they enroll. 'Throwing money at these schools blindly is really a poor bet, nor is it an effective or efficient use of taxpayer dollars,' says Itzkowitz, who in 2015, while at the Department of Education, rolled out The College Scorecard, the largest-ever release of federal education data. New money will likely bring new programs, Dimino predicts. 'There's a lot of incentive then for [short-term credential] providers to come into the space to try to capture some of those dollars,' she says. 'So you could have a random private bootcamp company that can just prop up a lot of very short-term credentials and tap into Pell funding even if they haven't gone through the accreditation process.' Accreditation has long been used as a third-party check on college quality, and currently associate's, bachelor's and graduate-degree granting colleges, as well as certificate granting trade schools, must be accredited in order for their students to receive federal financial aid. The workforce Pell would side-step this requirement. Americans need more options for short-term credentials—few education experts would argue against that. But so far, filling that need has primarily fallen to for-profit colleges, many of which offer students poor returns on investment and leave them with crippling debt. While bachelor's and graduate degree-seekers are more likely to take on debt to finance their education, students who completed only some college or a less-than-two-year credential are more likely to be behind on their debt payments (30%) compared with higher degree seekers (11%), according to the Economic Well-Being of U.S. Households in 2024 study just released by the Federal Reserve. 'Every time for-profit colleges have been given access to more federal aid, abuses have followed,' says Dimino. 'It's hard to ignore this trendline and yet we're giving them free reign to do that again.' Previous administrations have put in place guardrails to prevent schools from misleading or defrauding students. After the for-profit chain Corinthian Colleges, investigated for predatory and fraudulent practices, collapsed in 2015, the Obama administration implemented the Borrower Defense to Repayment rule, which entitles students to loan cancellation if they're defrauded by their school. Another check on for-profits, the gainful employment rule, requires schools to pass debt-to-earnings and earnings premium thresholds to be eligible for federal funds. The sector is also subject to the 90/10 rule, which requires schools get at least 10% of the revenue from sources outside federal student aid. The House-passed budget bill would restrict the use of borrower defense to repayment and repeal the gainful employment and 90/10 rules. For-profit colleges and advocates have called these regulations burdensome and unfair, since private non-profit colleges are not held to the same standards. Even the Trump-catalyzed economic uncertainty could benefit for-profit colleges, Silber notes. 'Hopefully we're not going into any kind of recession, but if we are, that's another way that at least the stocks of these companies could benefit because they're seen as being defensive,' he says.
Washington Post
5 days ago
- Business
- Washington Post
Trump is right: Those student loans need to be repaid
Covid is over. It's no longer a mass social phenomenon that can justify emergency measures. We've acted on that logic in almost every area of American life. It's time that the covid era ends for student loans, too. That's what the Trump administration is doing by resuming efforts to collect from delinquent borrowers. On May 5, over Democratic objections, it began a process that will lead to garnishing wages and redirecting tax refunds to loan service.
Washington Post
6 days ago
- Automotive
- Washington Post
Millions of Americans hit with bad credit after missed student loan payments
Millions of Americans are suddenly facing dramatically lower credit scores from delinquent student loans, making it tougher for them to secure housing, insurance, car loans, even employment at a vulnerable time for the U.S. economy. Credit scores dipped by more than 100 points for 2.2 million delinquent student loan borrowers, and 150 points or more for more than 1 million in the first three months of 2025, according to an analysis by the Federal Reserve Bank of New York. It's the kind of credit score drop that follows a personal bankruptcy filing. Roughly 2.4 million of those Americans previously had favorable credit scores and would have qualified for cars loans, mortgages or credit cards before these delinquencies were reported, researchers said. The slide in credit scores could lead to pricier loans for millions as borrowing costs are near 20-year highs. The Federal Reserve has signaled that it doesn't plan to cut interest rates right away. Already there are signs that lower credit scores are making it harder for more Americans to get loans, with rejection rates for auto loans, credit cards and mortgage refinancing all ticking up in February, compared to a year earlier. Tina Johnson was two days away from finalizing the purchase of a used Nissan Pathfinder when she got notice that her preapproved loan was no longer valid. Her credit score had fallen from 650 to 418 after she missed $440 worth of student loan payments that she didn't realize were required again. Although the Department of Education said lenders would send borrowers a bill at least three weeks before it was due, Johnson said she was never notified that payments needed to resume. 'Nothing, no email, no phone call, no letter — I could've avoided all this if I had known,' said Johnson, 44, who lives in Fleming County, Kentucky. Johnson's expected car payment of $350 a month nearly doubled overnight, making it unaffordable for the DoorDash delivery driver. She's stuck with her 12-year-old Nissan Altima for now. Johnson says she's also putting off other plans, including borrowing against her home to repair her roof and going back to school for a bachelor's degree, because of the sudden hit to her credit score. 'I took care of the accounts, but there's nothing else I can do,' she said. 'It'll take me years to get those 200 points back.' Federal student loan payments were paused early in the coronavirus pandemic in March 2020, offering millions of Americans relief at a time of economic upheaval and high unemployment. Although payments started back up in late 2023, the Biden administration offered a year-long grace period. That ended on Sept. 30, but millions of borrowers have yet to make a payment on their student loans. This month the federal government restarted collection efforts for defaulted student loans and said it plans to resume seizing wages, tax returns and Social Security payments this summer, making the stakes even higher. Nearly 1 in 4 borrowers required to make loan repayments were more than 90 days behind at the end of March, according to the Federal Reserve Bank of New York analysis. And although younger Americans tend to hold the most student debt, borrowers ages 40 and older are most likely to be behind on their loans, suggesting that years of inflation are making it harder for middle-aged Americans to keep up with payments. 'This is the beginning of something big, and we need to be paying attention,' said Dominik Mjartan, chief executive of American Pride Bank in Macon, Georgia. 'There's a very high cost to having a low credit score in America. Your cost of living goes up — your cellphone bill, your utilities, your insurance payments, everything. And that trickles down through the economy.' Credit scores, which generally range from 300 to 850, offer a snapshot of a person's financial history that takes into account debt levels, bill-paying record and length of credit background. They're used by lenders of all types, as well as landlords, employers, insurance firms, cellphone providers and utility companies to gauge how likely someone is to make loan payments on time. A good credit score, generally 670 or higher, can translate to lower interest rates and higher credit limits, while a subprime score, under 620, can disqualify borrowers from most conventional loans. 'It's been a major hit to credit scores, and for a lot of people, has been enough to put them in subprime territory, making it very difficult to get loans at decent interest rates,' said Stefania Albanesi, an economics professor at the University of Miami and a former researcher at the New York Fed. 'And while credit scores can drop quickly, they recover very slowly. Even if you've gotten back on track with your payments, it can take years to get back to where you were before.' Recent student loan delinquencies have helped drag down the average credit score for all Americans, to 715 in February — the lowest level since early in the pandemic, according to FICO, a data firm used by lenders. Journey Butler graduated with a degree in political science from Florida A&M University a couple of years ago and had planned to start law school next year. But that is up in the air after she found out last week that her credit score had dropped 168 points, to 521. Butler thought her student loans were still on hold, since she had obtained an extension due to a local natural disaster last year. She'd missed a couple of voicemails and emails from her loan provider, and she didn't realize anything was wrong until she got an alert about her dinged credit. The 21-year-old quickly paid off her $500 balance but was told it could take years for her credit to recover. Now Butler says it will be next to impossible to secure a new apartment, much less more student loans. 'I got that message and everything kind of went crashing down,' said Butler, who works for a health insurance company in Tallahassee. 'You need a background check to get a job, to buy a house, to get car insurance. It literally affects every area of my life.' There are signs that Americans are already having trouble accessing credit. Nearly 42 percent of mortgage refinance applications were turned down in February, up from 27 percent a year earlier, according to a New York Fed survey. Rejection rates for car loans jumped from 2 percent to 14 percent in the same period, while credit card denials grew five percentage points to 22 percent. Meanwhile, the share of discouraged borrowers — who needed credit but did not apply for it because they didn't think they would be approved — rose to a record high of 8.5 percent, according to the survey, which dates back to 2013. 'Of course there are ripple effects: People's financial margin for error was already pretty tiny, and when you add in student loan payments for the first time in several years, that makes a big difference,' said Matt Schulz, chief consumer finance analyst at LendingTree, an online loan marketplace. 'There's no way rising student loan delinquencies won't have some sort of effect on people's ability to repay other types of debt as well.' Destiny, a 30-year-old in Georgia, is set to start a tech job in the Midwest next month. But first she has to find a place to live, which she says has become unfeasible since her credit score plunged seemingly overnight from the high 700s to the low 400s. Destiny, who spoke on the condition that she be identified by only her first name because she fears losing her job offer, was between jobs and trying to get $44,000 in student loans deferred when payments started back up late last year. 'Every property manager looks at me and says, 'Your credit score is too low,'' she said. 'I had worked so hard to get my credit score up, but then this hit and I can't get the bare minimum of a roof over my head.' Economists expect another decrease in credit scores in the coming months, as more student loans get flagged as overdue. Although 2.7 million borrowers were reported newly delinquent in February, twice as many — 5.4 million — had not been marked delinquent even though they haven't made any student loan payments since October, according to FICO. The rise in student loan delinquencies and subsequent drop in credit scores, economists say, is an early sign that Americans are under increasing financial strain. In interviews, borrowers said their household budgets had changed since 2020, when many of them last made regular payments toward their student loans. Higher costs for groceries, utilities, gas and other necessities have stretched them thin, making it tougher to shoulder new loan payments. The restart of student loan payments and the impact of delinquent borrowers' lower credit scores is expected to reduce overall economic growth this year by about 0.13 percent, according to estimates from Moody's Analytics. That drag comes at a tenuous time for the economy, which shrank in early 2025 mostly because of a rush of imports that counted against GDP. 'The fact that student debt can be garnished from your wages — that becomes a very different risk,' said Mjartan of American Pride Bank. 'It's a downward spiral: If you can't keep up with your student loans and your wages get garnished, then you can't pay your other debts, either, and you can't spend.' Kayla Moore found out in March that her credit score — a 'good' 730 — had fallen by more than 100 points to become subprime after three missed student loan payments of $30 apiece. Moore, who had already paid off $5,500 in loans, said her father had offered to cover the last $1,000. She didn't realize those payments had slipped through the cracks until she got emails from Credit Karma and Experian. She immediately paid the balance in full but says her credit score has barely budged, to the mid-600s. 'I basically lost my mind when I saw what had happened,' said Moore, 24, who works at a bank in Chicago. 'I really wanted to move to a nicer apartment this year, and now I'm worried they're going to see my credit score and immediately deny me.' Danielle Douglas-Gabriel contributed to this report.
Forbes
23-05-2025
- Business
- Forbes
Court Blocks Trump From Transferring Student Loan Portfolio — What It Means For Borrowers
A federal court in Massachusetts issued a major order on Thursday blocking President Donald Trump and Education Secretary Linda McMahon from dismantling the Department of Education and transferring the federal student loan portfolio to another agency. The court concluded that the administration's unilateral actions without approval by Congress were unlawful. The ruling also instructs the department to reinstate scores of fired employees, which could have implications for thousands of federal student loan borrowers. 'The Department's role in education across the nation cannot be understated: it administers the federal student loan portfolio, provides research and technological assistance to states and their educational institutions, disburses federal education funds, and monitors and enforces compliance with numerous federal laws,' reads the decision. 'Congress enacted these laws to promote equality and anti-discrimination in schools, assist students with special needs and disabilities, ensure student privacy, and much more.' Here's what the ruling does, and what it might mean for millions of federal student loan borrowers. The ruling was issued after a group of Democratic-led states, school districts, and labor unions filed legal challenges against the Trump administration over efforts to dismantle the U.S. Department of Education and transfer the federal student loan portfolio to another federal agency. The groups had argued that such actions were illegal without approval by Congress, as Congress established the department and its mandatory functions through legislation. In March, President Trump issued an executive order calling for the Department of Education to be dismantled. 'Closing the Department of Education would provide children and their families the opportunity to escape a system that is failing them,' said Trump in the order. 'Closure of the Department of Education would drastically improve program implementation in higher education. The Department of Education currently manages a student loan debt portfolio of more than $1.6 trillion. This means the Federal student aid program is roughly the size of one of the Nation's largest banks, Wells Fargo. But although Wells Fargo has more than 200,000 employees, the Department of Education has fewer than 1,500 in its Office of Federal Student Aid.' Some student loan borrower advocacy groups noted that it was odd that, shortly following this statement about the relatively small number of department staff, the Trump administration announced massive layoffs and staff buyouts at the Department of Education to further shrink its workforce. As a result, the Office of Federal Student Aid was effectively cut in half. 'Today's reduction in force reflects the Department of Education's commitment to efficiency, accountability, and ensuring that resources are directed where they matter most: to students, parents, and teachers,' said Secretary of Education Linda McMahon in a statement at the time. 'This is a significant step toward restoring the greatness of the United States education system.' Critics argued that the layoffs essentially amounted to a dismantling of the Department of Education from within. Shortly thereafter, President Trump unexpectedly announced that the administration would transfer the department's federal student loan portfolio to the Small Business Administration. 'I've decided that the SBA, the Small Business Administration, headed by Kelly Loeffler, will handle will all of the student loan portfolio,' Trump said to reporters at the White House in March. The transfer will happen 'immediately,' he said, although it would be impossible for such a significant administrative change to happen instantly. As of May, the federal student loan portfolio remains at the Department of Education. In the decision issued on Thursday by a federal district court judge in Massachusetts, the court ordered the Trump administration to halt all efforts at shutting down the Department of Education or transferring the federal student loan portfolio to other agencies. 'The Agency Defendants are enjoined from carrying out the reduction-in-force announced on March 11, 2025; from implementing President Trump's March 20, 2025 Executive Order; and from carrying out the President's March 21, 2025 Directive to transfer management of federal student loans and special education functions out of the Department,' said the court in the ruling. 'The Agency Defendants are enjoined from implementing, giving effect to, or reinstating the March 11, 2025, the President's March 20, 2025 Executive Order, or the President's March 21, 2025 Directive under a different name.' The court also ordered the department to reinstate all staff who had been fired pursuant to the March 'reduction in force' directive. 'The Agency Defendants shall reinstate federal employees whose employment was terminated or otherwise eliminated on or after January 20, 2025, as part of the reduction in-force announced on March 11, 2025 to restore the Department to the status quo such that it is able to carry out its statutory functions,' said the court. 'The dramatic cuts to FSA will undermine FSA's ability to monitor and fix existing and new servicing issues,' reasoned the court, noting that student loan servicing problems are no longer being actively monitored by the department. 'And in the longer term, 'FSA is now like a house of cards' incapable of withstanding 'any coming shocks to the federal student loan system,' wrote the judge. Indeed, the Department revealed in a court filing last week that there is backlog of nearly two million applications for income-driven repayment plans, a type of federal student loan program that offers borrowers affordable student loan payments and a path to eventual student loan forgiveness. And department officials have barely put a dent in a separate backlog of nearly 50,000 PSLF Buyback applications, a new component of the Public Service Loan Forgiveness program. 'It is outrageous and unacceptable that at a time when the Department of Education is being gutted, with its main energy and focus on acting as a debt collection agency, millions of borrowers are being denied their legal right to an affordable repayment option,' said Randi Weingarten, President of the American Federation of Teachers, which sued the Trump administration in March over stalled IDR applications. The new court ruling may be welcome news for many federal student loan borrowers. The court ordered the Trump administration to 'file a status report with this Court within 72 hours of the entry of this Order, describing all steps the Agency Defendants have taken to comply with this Order, and every week thereafter until the Department is restored to the status quo prior to January 20, 2025,' suggesting there will be rigorous court oversight of the administration's compliance. However, the administration is almost certain to appeal the ruling. In the meantime, House Republicans on Thursday passed sweeping reconciliation legislation that would fundamentally reshape the federal student loan system. Among other provisions, the bill would repeal several popular student loan forgiveness and repayment programs. Advocacy groups have argued that if the legislation is enacted, it could have devastating consequences and increase the monthly payments for millions of student loan borrowers as they forced to change repayment plans. It is unclear whether the Department of Education could successfully implement such massive systemwide changes effectively with a severely diminished staff.
CNET
22-05-2025
- Business
- CNET
We Learned These 6 Money Lessons the Hard Way. You Don't Have To
Most school curriculums don't dive into money learn a lot in school, but how to manage your money is rarely one of those things. Which is unfortunate, because let's be honest, how often are you likely to use the quadratic formula in your day-to-day life? We have more than 60 years of combined personal finance experience on the CNET Money Team, but we gained most of our knowledge the hard way. We've made money missteps and let opportunities pass us by, and we want to save you from the same stumbling blocks. So we asked our team members to share some of the key things they wish they'd known sooner. Read more: Money Anxiety? Here's the Expert Advice I Followed to Get Smart With My Finances How student loans work "I had no idea what I was signing on for at the time. To me, taking out $10,000 in loans might as well have been $100,000. Sure, I knew the second number was bigger, but they were both abstract figures I couldn't wrap my head around." This one's for the high school graduates specifically. The average student loan balance is almost $40,000. That's a massive debt to shoulder so early in life. Student loans can help make college more affordable, but many of us don't fully grasp what we're getting ourselves into. Before applying for a student loan, make sure you fill out the FASFA -- Free Application for Student Aid -- to learn which federal grants, loans and other financial help you're eligible for. Also, apply for any and all private scholarships and grants you qualify for. The more free funding you can get, the less you'll need to take out in student loans. Next, you should know the difference between federal and private loans. Federal loans, funded by the US government, can be: Direct subsidized loans: The US Department of Education pays the interest on the loan while you're in school at least part time, during the six-month grace period after graduation or if your loans are in deferment. The US Department of Education pays the interest on the loan while you're in school at least part time, during the six-month grace period after graduation or if your loans are in deferment. Direct unsubsidized loans: Loan interest accumulates during all periods, even when you don't have to make loan payments (like while you're in school or during deferment or forbearance). You can choose to pay this interest at any time. Loan interest accumulates during all periods, even when you don't have to make loan payments (like while you're in school or during deferment or forbearance). You can choose to pay this interest at any time. Direct PLUS loans: Your parents (adoptive, biological or stepparents) can apply for these loans to cover your education expenses. They're responsible for repaying them. Private student loans are offered by banks, credit unions and other funding sources. They can help cover any remaining shortfalls, but beware that the terms are often less favorable than federal loans. They may have higher interest rates, and they don't offer repayment assistance like forgiveness or income-based payment plans. If a loan is your best option to pay for college, do your research before applying for one. Look into the degree you want and compare tuition costs at multiple colleges. And don't overlook community college programs. Many of them now offer paths to four-year degrees through partnerships with state schools -- a path CNET Senior Editor Courtney Johnston wishes she'd taken. You should also know the average starting salary for the job you want in your area. Use that figure and your estimated loan amount to determine how much you'll likely pay each month when your student loans come due. Johnston recommends the student loan calculators on Note: Many features of the current student loan program are in limbo. Student loan forgiveness options are tightening, and a GOP proposal to overhaul federal student aid could increase eligibility requirements for Pell Grants, set a limit on how much students can borrow and further change student loan repayment programs. If you're just starting college, these proposals could affect you before you earn your degree. Experts recommend going into college thinking about the total cost, not just the first year. The importance of building a savings habit "When I graduated from high school, I received a decent pot of gifted cash. Had I put all that money in a one-year CD or high-yield savings account, I could have added a few hundred dollars to my savings -- I was saving for a car. By the time I bought a car, I could have paid off a year's worth of car insurance with the earned interest alone. But I wasn't ever educated on these options at that time." Establishing a savings habit -- even if you don't have a ton to put away -- can help you build an emergency fund and cover unexpected expenses without going into debt. Knowing where to keep your savings is equally important. Two great options to start with are: High-yield savings account: HYSAs can offer APYs more than 10 times the national average interest rate. Look for accounts that require a low or no initial deposit and avoid banks that charge monthly fees. Certificates of deposit: A certificate of deposit is a special savings account that offers a fixed rate in exchange for keeping your money in the account for a set period, or term. CDs are best for money you can afford to lock up for a specific time, because if you withdraw your money before the term ends, you'll pay an early withdrawal penalty. How to use credit cards responsibly (and why you should) "Charging $10 here or $20 there didn't seem like much at the time. I didn't realize how compound interest -- and only making minimum payments -- would balloon this amount over time." Credit cards are an easy way to cover costs, especially when you're working with an entry-level income. But they're also an easy way to get locked into a never-ending cycle of high-interest payments that can hamper your finances for years to come. That said, there are ways to use credit cards responsibly. Check out these resources to learn more: How interest works: Only paying the minimum on your credit card will cost you several times over due to interest charges. Only paying the minimum on your credit card will cost you several times over due to interest charges. How your credit score works: Your credit score -- the three-digit number lenders use to determine your creditworthiness -- can affect everything from your ability to get a loan to the rate you pay on one. Your credit score -- the three-digit number lenders use to determine your creditworthiness -- can affect everything from your ability to get a loan to the rate you pay on one. How to boost your credit score: Whether your score is low or you're just starting out, these tips can help you improve it. Student credit cards are an ideal way for grads with limited credit history to establish credit and earn rewards. How much you should keep in your checking account "For a long time, I kept too much money in my checking account because I didn't really understand the purpose of a checking vs. savings account." A checking account is the best place to keep money you'll use for monthly bills and purchases. Look for an account with a competitive APY and no monthly fees, minimum balance requirements or overdraft charges. But even with the right checking account, you can lose out by keeping too much money in it. If you have considerably more money in your checking account than you need for everyday expenses, consider moving some of it to a high-yield savings account or CD. Most checking accounts pay little to no interest, but an HYSA or CD will allow you to maximize the amount of interest you can earn, growing your money faster. How to do your taxes "Figuring out how to file my taxes was scary. I was worried I'd make a mistake and the IRS would show up at my door. It's something we all have to do every year -- you'd think it would be more widely taught." If you're joining the workforce, be prepared to pay taxes on your income. Meeting with a tax professional can help you avoid mistakes and plan for the best outcome, but it also pays to know some basics, including: Why you should contribute to retirement savings now "Prioritize setting up your retirement contribution for each new job. It only takes a few minutes but can make a world of difference to your savings outcomes." Retirement may be in the distant future, but that doesn't mean you should ignore retirement planning. As a recent graduate, time is on your side. Thanks to the power of compound interest, saving even a small amount over time can add up significantly -- and the sooner you get started, the better off you'll be. Once you begin working, open a tax-advantaged retirement savings account to save a portion of your income before it's taxed, reducing your taxable income. Common tax-advantaged retirement savings plans include: 401(k): A retirement savings account established by employers to help employees save for retirement A retirement savings account established by employers to help employees save for retirement 403(b): A retirement account offered to employees of organizations such as schools, charitable organizations and other tax-exempt entities A retirement account offered to employees of organizations such as schools, charitable organizations and other tax-exempt entities Traditional IRA: An individual retirement account not connected to an employer, which you can establish through a bank, broker or robo-advisor Employer-sponsored retirement plans may also match your savings contribution up to a limit. For example, some companies match contributions up to 6% of your income. That's essentially free money. Go forth and prosper Now that you've prepared academically for the next part of your journey, it's time to focus on improving your financial literacy skills. Starting your next phase with a solid financial foundation will help you ease the transition and avoid unnecessary pitfalls. Congratulations on your accomplishment!
