Senior Issue: Focus Page 2015

FOCUS

THE MATADOR

Understanding Financial Aid, Loans A nni e H uang With the trouble of enrollment decisions fading into the past and high school graduation slowly looming nearer every day, many seniors thought May would be a stress-free month. Then, reality hit them hard in the face with the terror of student loans and the possibility of a lifetime’s worth of debt the moment after they click the “Accept Admission” button. Lovely.

According to U.S. News, about 70 percent of 2013 college graduates left college with an average of $28,400 in debt. Between a variety of colleges, both private and public, average debt amounts ranged from $2,500 to $71,000.

The reason for that is that not all students are fortunate enough to receive a financial package big enough to allow them to go to college debtfree. As a result, many students take out student loans for reasons such as covering the rest of their tuition or paying for school supplies. However, the process of acquiring loans is not easy, not to mention the difficulty in understanding the many different kinds of loans available.

First of all, students need to distinguish the difference between federal and private loans. Federal loans are funded by the government and therefore, are less expensive and have lower interest rates than those of private loans; certain federal loans have advantages such as fixed interest rates, income-based repayment plans, and loan forgiveness programs. Private loans are non-federal loans that are made by a lender such as a bank, credit union, state agency, or school.

Most students are familiar with subsidized and unsubsidized loans; these two types of loans usually appear as a part of the student’s financial package on his/her student portal. However, students should keep in mind that these two types are loans are not grants, and therefore have to be paid back.

Both subsidized and unsubsidized loans are loans with a fixed interest rate of 4.66 percent. However, in subsidized loans, the federal government pays the interest that accumulates over the years in which the student is enrolled at a university until six months after the student graduates. On the other hand, the federal government does not pay for the interest of unsubsidized loans that accumulates while the student is still in college.

Only colleges can determine the amount of subsidized and unsubsidized loans a student is eligible for.

THURSDAY, MAY 14, 2015

Another type of loan that typically appears on a student’s financial package is the Perkins Loan; Perkins Loans are federal loans with an interest rate of five percent and are lent by certain colleges that participate in the Federal Perkins Loan Program. Like unsubsidized loans, the federal government does not pay for the interest.

Finally, the Parent PLUS loans are federal loans with a reduced interest rate of 7.21 percent and can only be borrowed by the dependent student’s parent. In addition, PLUS loans can be borrowed up to the student’s tuition that is not covered by financial aid. Unlike other federal loans, PLUS loans are under the parent’s name. As a result, the parent is responsible for making payments. However, he/she has the option to defer the payments of their PLUS Loans until the student drops out or graduates from his/her university. As the federal loan with the highest interest rate, PLUS Loans should be among the last types of federal loans students look into.

To find out if they are eligible for PLUS Loans, students should first call the colleges that they are enrolled in to find out what types of lenders there are and which process of acquiring PLUS Loans their college prefers. In most cases, students can apply for PLUS Loans on federal websites such as <direct.ed.gov>, <studentaid.ed.gov>, or <studentloans.gov>. Before they apply for loans, students should check the payment deadlines set by their colleges. After they receive their tuition bills and are informed of the amount they will be paying minus their financial packages, they should begin the process of applying for PLUS Loans.

The application for PLUS Loans requires a credit check using a parent’s social security number, which will inform the student if their parents are eligible for PLUS Loans. Then, the student will fill out an application and be given a loan servicer; the loan servicer will inform the student of everything they need to know about their loans such as repayment plans.

Lastly, students are not encouraged to take out private loans due to high interest rates. However, if the student is not eligible for any type of federal aid or loans, private loans are still an option.

Students should not wait until the last minute to begin researching for financial aids or loans. Instead, they should ask their counselors or conduct research on the Internet. Maybe it is not fair that students, most at the age of 18 and do not yet have jobs, are forced to think about the unfathomable world of loans and debt. However, one of the many aspects of growing up is having to take responsibility for oneself, even if one is not ready for it.

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THE MATADOR

THURSDAY, MAY 14, 2015

FOCUS Debit Cards vs. Credit Cards Amy Yee Debit cards are essentially digital checkbooks; they are linked to your bank account (usually a checking account), and money is withdrawn from the account as soon as business transactions occur. Any time you use a debit card to buy something, money is deducted from your own personal account. Most debit cards are free with a checking account at a bank or credit union.

Credit cards are different; they offer loans that are interest-free if the monthly credit card bill is paid on time.

Instead of being connected to a personal bank account like debit cards, a credit card is connected to the bank or financial institution that issued the card (e.g., Chase Bank), so when you use a credit card, the issuer pays the merchant and you are now indebted to the card issuer.

This is a loan that you are expected to pay back usually in 30 days. Interest will be charged if you fail to do so; depending on the creditor, interest rates may change.

Both credit and debit cards have a spending limit, or a daily transaction limit in addition to having points and rewards.

Q&A: Creative ways to pay for college Interview with Edgar Perez ‘09

Judy Tang

Steps to buying a home demystified Q ui N guy Buying a home can be a complicated and exhausting process. For those who are well-prepared, it will save a lot of time, headaches, and money. The first step is to get prepared and have your finances in order. Income, debt, amount of down payment for your house, credit history, and credit scores all play major factors in qualifying for a home loan.

If the home down payment is less than 20 percent of the purchase price, obtaining “PMI” or Private Mortgage Insurance is required (a $300,000 house would need a $60,000 down payment to avoid PMI). PMI is an extra charge of insurance which protects the lender in case you default on your loan. Once you’ve paid the mortgage down 20 percent, the PMI can be removed.

After obtaining a pre-approval from a Mortgage Lender, you are now ready to search for your dream home! Real Estate Agents can assist you in your home search and guide you through the entire process. When your offer on the house does get accepted, the seller will open escrow (escrows are neutral third party companies that assists in holding deposits/signing documents). During this time, you will get the chance to do your due diligence in getting disclosures, home inspection, appraisal, and loan finalized.

Hiring professional home inspectors, termite inspectors, and plumbers for thorough inspections is highly recommended.

As a typical senior year of high school comes to a near end, many college freshmen are faced with the confusing future of “adult life”-for example, navigating aid and loans and paying for college. San Gabriel alumnus from the class of 2009, Edgar Perez, hustled to pay for college and learned many important life skills along the way.

When did you start working in high school and why?

“I [lived in] an unstable household, so I started working [during] my sophomore year of high school. I worked part-time [for] the first month and immediately after, began working full-time at my local Jack-in-the-Box until my senior year. I was [going to] school full time and working full time to help the household since my mother was a single mother of three.”

Where did you decide to go to college and did you work there as well?

“I decided to move to Berkeley for college and that’s when I started living on my own. I managed to get a job at a local fast food restaurant and attended Berkeley City College full-time. I began to network in downtown Berkeley with some of the upscale restaurant workers and managed to get employed by “La Note,” a French restaurant, and its sister chain “Café Clem.” Once I started working at these places, my doors opened and the opportunity to live a little better arose. Since I worked at an upscale restaurant where everything was organic, I stopped spending money on groceries because I could eat for free in any of the venues. After three months of working at La Note, I met a dishwasher who worked at an Italian Restaurant and he referred me to the manager to get another [job]. I had three jobs and was saving a lot of money.

One way I would make some extra money by was trading food from restaurants I worked at, with other businesses. For example, I worked at Chipotle for a while, so I would exchange burrito discounts at retail stores to save money for clothes. This not only saved me money, but also taught me how to network in getting to know the people you work with in business.”

What do you feel you have learned from doing all these jobs and do you have any advice for current students?

“The most important thing I learned from all of these jobs was definitely how to set up a resumé and how to become almost professional at interviewing.

This school has actually helped me a lot because many students are extremely shy in college and they should not be. I currently work at O’Reilly Auto Parts as a closing manager and because of my experience at other jobs, I can say that they have taught me well. I do have a checking account and have one credit card which I only use for gas. It’s an easy way to build credit and banks see that I use it often. Overall, I have learned [many] skills from each job that I can use in other jobs and in my life. The best thing I would advise students to do is network! It will come in handy over time.”

Graphics and illustrations by Jennifer Thai