the Free Application for Federal Student Aid (FAFSA). Grants available through state government programs may require a separate application. Specific colleges and other private organizations (including employers, banks, credit unions, and community groups) also offer grants and scholarships.
One of the most important aspects of getting financial aid is choosing to apply, even if you’re not sure whether you qualify. Many scholarships and grants don’t require any extra work on your part — simply apply for financial aid through colleges. Other aid programs need seeking out — check directories and databases at your local library, your high-school counseling department, and college financial-aid offices. You can also contact local organizations, churches, employers, and so on. You have a better chance of getting scholarship money through these avenues.
Benefits for military people
Special student-loan benefits are available to those who serve in the U.S. military. If you have student loans and then join a branch of the U.S. military (except the Marines), up to one-third of the amount you borrowed or $1,500 per year of service, whichever is greater, may be forgiven. There’s a reimbursement limit of up to $10,000 for the Air Force and $65,000 for the Army and Navy.
Numerous educational assistance programs are available for those who serve while in college or go to college after serving. See www.military.com/education/money-for-school for details by branch of the military, as there are many programs and they vary by branch.
Paying Off Consumer Debt
Assuming you aren’t saving money, you accumulate consumer debt (credit-card debt, auto loan debts, and so on) when your expenses exceed your income. Therefore, it stands to reason that to pay off consumer debt, you need to decrease your spending (see Chapter 5) and/or increase your income. Slowing down the growth of your debt can also assist. The following sections help you jump-start the elimination of your consumer debt.
Kicking the credit-card habit
It’s fine to use your credit cards as a convenient payment method — and possibly to earn benefits and rewards — if you pay your bill in full each month and don’t spend more due to having the cards. I’ve used them my entire adult life and also have reward cards that provide me with free and discounted airline tickets and hotel stays.
However, with their wide acceptance by merchants and their ease of use, having credit cards can foster living beyond your means by extending credit. That’s why I recommend that you cut up all your credit cards and call the card issuers to cancel your accounts if you have a habit of accumulating debt on credit cards.
You can manage your finances and expenditures without having a credit card. Now, if you can trust yourself to be responsible, keep one credit card only for new purchases that you know you can absolutely pay in full each month. But if you decide to keep one widely accepted credit card instead of getting rid of them all, be careful. You may be tempted to let debt accumulate and roll over for a month or two, starting up the whole horrible process of running up your consumer debt again. Even better than keeping one credit card is getting a debit card (see the next section).
Discovering debit cards: Convenience without credit temptation
Just because you get rid of your credit cards doesn’t mean you have to always pay by check or cash. Enter the debit card, which offers you the convenience of making purchases with a piece of plastic without the temptation or ability to run up credit-card debt. A debit card looks just like a credit card with either the Visa or Mastercard logo. Debit cards have the following characteristics, which are different from credit cards:
Deduction from your checking account: As with checks, debit-card purchase amounts are deducted electronically from your checking account typically within one or two business days. By contrast, if you pay your credit-card bill in full and on time each month, your credit card gives you free use of the money you owe until it’s time to pay the bill.
Potential for overdrawing your checking account: If you switch to a debit card and you keep your checking-account balance low and don’t consistently track your account balance, you may need to start doing so. Otherwise, you may incur an overdraft (an attempt to withdraw more money than is available in your checking account) and unnecessary overdraft fees (fees charged when you overdraw your account). Overdraft protection may be worth considering, but beware of the temptation to use that as an ongoing, high-interest credit line on balances borrowed, similar to a credit card.
Shorter window of time for making disputes: Credit cards make it easier for you to dispute charges for problematic merchandise through the issuing bank. Most banks allow you to dispute charges for up to 60 days after purchase and will credit the disputed amount to your account, pending resolution. (Longer exceptions are allowed in some circumstances, for example when a contractor is doing work for you over a period of time.) Most debit cards offer a much shorter window, typically less than one week, for making disputes. (Despite widespread misperception, personal debit cards have identical fraud protection to personal credit cards.)
Also check out getting a Visa or Mastercard debit card with the asset-management accounts offered by investment firms. Asset-management accounts basically are accounts that combine your investments, such as stocks, bonds, and mutual funds, with a transaction account. Check out the investment firms that I recommend in Chapter 12 for brokerage services with competitive investment offerings and prices and asset management accounts. (Note: Unfortunately, Vanguard discontinued offering their asset management account but may reintroduce it in the future, so stay tuned.)
Lowering the interest rate on consumer debt
If you do have credit-card debt, you can slow its growth until you get it paid off by reducing the interest rate you’re paying. Here are some strategies for doing that:
Stop
