As older student, keep eyes on prize
I’m going to college for the first time in my late 20s after working for several years. How do I pay for it while dealing with potentially less income in the meantime?
Making a big change like this requires weighing the benefits against the cost. While only you can decide whether college is the right move, in most cases a postsecondary degree is a straight path to more money and more job security. Median after-tax earnings of bachelor’s degree holders were 61 percent higher than high school graduates’ in 2015, according to a report by the College Board; median earnings of associate’s degree recipients were 23 percent higher.
But expecting that you’ll make more money someday won’t totally ameliorate the sticker shock now. Make college attainable by maximizing financial aid and re-evaluating your budget. Here’s how:
Lesser-known sources
As an older student going back to school, you have access to money for college that might not be available to younger students. If you’re in a labor union, ask about scholarships open to members. If you plan to keep working, many companies offer tuition reimbursement up to a certain amount each year. Chances are you don’t even know it’s available, says Ted Beck, president and CEO of the National Endowment for Financial Education.
“I’m surprised how often as a manager I’ve had to remind people that we have it,” Beck says.
Are you eager to change careers or learn a new skill that’s in high demand in your region? Look into nearby community colleges’ workforce development programs, Beck says. Local companies in need of specially trained workers might also help pay for your schooling and consider you for a job afterward.
Contact your nearest community college or state apprenticeship office, listed on the U.S. Department of Labor’s website, to learn about programs available near you.
Maximize grants
The Free Application for Federal Student Aid, known as the FAFSA, isn’t just for 18-yearolds. Everyone interested in higher education should fill it out to qualify for federal, state and school-based financial aid. On the FAFSA, students age 24 or older are considered independent students, so only your income and assets — not those of your parents — will be used to determine eligibility for aid.
One of the most valuable financial aid options is the federal Pell Grant, which doesn’t have to be paid back. For 201718, the maximum award is $5,920, but the amount you’ll receive depends on financial need and your course load. Go online and use the government’s FAFSA4Caster to determine if you qualify for a Pell Grant.
Spend, save with purpose
While in school, you’ll need to re-evaluate spending to address any lost income or to cover out-of-pocket education costs. Put money into an emergency fund.
Avoid thinking of it as budgeting; frame it as a spending plan that aligns your purchases to your values, says Megan Lathrop, lead money coach at Capital One in San Francisco. Remember your end goal: more earning potential and a better chance you’ll be able to ride out a tough labor market.
“When you’re doing this, you’re taking steps to improve your long-term situation,” Beck says. “Never lose sight of that.”
Home prices are rising across the country and mortgage rates, though still historically low, are up since the presidential election.
Simply put, buying a home isn’t easy, especially in high-cost metropolitan areas.
But changes in the mortgage industry are afoot, with the goal of loosening some of the strict standards established after the subprime crisis — rules some blame for impeding sales.
“The reality has sunk in that there are buyers out there who will be able to buy homes and make the mortgage payments,” said William E. Brown, president of the National Association of Realtors. The industry is “trying to give them more options to buy a house.”
Government-controlled mortgage giants Fannie Mae and Freddie Mac are paving the way by rolling out new programs to encourage home ownership.
The companies, with their congressional mandate to promote home ownership, don’t originate loans, but purchase mortgages from lenders to keep the market moving. And any changes they make in the underwriting standards for the loans they buy can have a big effect.
Also, lenders are moving to relax some standards partly because they fear losing business as home prices and mortgage rates rise, said Guy Cecala, publisher of Inside Mortgage Finance.
“If your business is going to drop 20 percent,” he said, “you need to come up with ways to offset that.”
The changes bring lending nowhere near the easy-money bonanza of last decade, which ended in financial crisis. But they have brought criticism from some corners that liberalizing rules for down payments and how much debt a borrower can have is a slippery slope that could eventually lead to another bubble.
“This is what happened last time,” said Edward Pinto, a fellow at the American Enterprise Institute, a conservative think tank.
During the bubble, borrowers could often put down nothing at all by financing the entire purchase. After the crash, standards tightened and federal regulators even floated a proposal to require 20 percent down for many mortgages.
For a low-down-payment option, borrowers usually had to turn to the Federal Housing Administration, which allows 3.5 percent down, but requires costly mortgage insurance for the life of the loan.
Now, borrowers increasingly have more options, though generally they need a good credit score.
The trend started in late 2014 when Fannie Mae and Freddie Mac announced new programs that allowed loans with as little as 3 percent down. At the time, many large banks still were reeling from the housing bust and were skeptical. Bank of America Chief Executive Brian Moynihan said his company was unlikely to participate.
But less than two years later, the bank started offering 3 percent down loans through a partnership with Freddie Mac. Wells Fargo, the nation’s largest mortgage lender, also jumped in last year, partnering with Fannie Mae. JPMorgan Chase now offers 3 percent down loans, as well.
The 3 percent down loans through Fannie or Freddie are capped at $424,100 in most of the country.
Bank of America launched its program with Freddie Mac after partnering with a nonprofit to provide financial counseling for the life of the loan, a spokesman said. After six months, BofA upped its annual origination cap from $500 million to $1 billion for the Affordable Loan Solution Program, which allows down payments as low as 3 percent. Some are going even lower. Pilot programs with Guild Mortgage of San Diego and United Wholesale Mortgage of Michigan require the borrower to put down 1 percent of their own money. A pilot through Movement Mortgage allows a borrower to put down nothing.
Guild Mortgage’s program was welcomed news for winery owner Mark Blanchard, 38, and his wife, Kalle, a nurse.
The couple estimated they would wipe out their savings if they put 20 percent down on a home in Healdsburg, Calif. So this year, they put only 1 percent down to purchase a more than $400,000, three-bedroom townhouse.
“This really was a dream come true for us, as locals, to buy within our own community,” Blanchard said.
“The response from my peers ... was how is that possible? How did you buy in this town?”