This is the final post in a series that examines the history of student loans and the disconnect between the cost of education and how it is rewarded. This post proposes measures we can take to improve how we serve and price higher education.

Lowering the financial barriers to education requires a rebalancing of the cost and reward of higher education with adjustments to each layer of the system. These are our recommendations:

1. Share the burden
2. Service better
3. Lend less

We focus on changes driving immediate impact for the person burdened by student debt. Certainly, the way we price and deliver higher education requires long term efforts. We have to begin by reducing the burden on the debt holder.

Share the burden

Student loan repayment benefits are the most sought after benefits following medical and paid time off. The number of businesses offering some form of student loan repayment assistance has doubled since 2017. This is the market speaking and demanding a solution to a very real pain. The unfortunate truth is that most of the small to medium businesses that are the lifeblood of our economy, hiring more than 52% of the workforce, cannot afford to offer repayment assistance. These businesses already struggle to attract and retain talent and should be empowered to participate in repayment assistance programs.

Student loan repayment assistance offers employers an avenue to reduce financial stress among their employees, improve engagement, improve talent acquisition, and improve talent retention. 86 percent of employees ages 22 to 33 would commit five years to a company in exchange for student loan repayment assistance. These outcomes make a measurable impact on employers’ bottom lines.

Since taxpayer money funds federally guaranteed student loans it would only make sense to give the taxpayers a break and allow businesses to participate in tax incentivized student loan repayment assistance programs. We recommend two ways to do this.

1. Permanently include student loan repayment as a qualified deduction and increase the incentive to be current with inflation

Recently, the Coronavirus Aid, Relief, and Economic Security (CARES) Act expanded the definition of “educational assistance” in Section 127(c) of the Internal Revenue Code (IRC) to include payments made towards employees’ student loans as tax deductible for the employer and not part of adjustable gross income (AGI) for the employee. The $5,250 cap that applies to education assistance programs holds true for student loan repayments made by employers, but the provision will sunset on December 31, 2025 if supplemental bills are not passed. To build on this progress, legislators should permanently consider student loan repayment as part of education assistance and increase the cap on contributions from $5,250 to bring the incentive current with inflation. The cap on contributions was last evaluated in 1986, which adjusts to $12,348.85 after inflation (as of June 2020). Tax incentives should be provided in real dollars and provisions should be considered for automatic increases of caps every 5 years. Educational assistance deductions are one of the most underutilized deductions. It’s time the government took action to create better incentives for employers to activate these deductions.

This simple extension could have a massive impact for borrowers. The average graduate owes $33,000 and makes a monthly payment of $357. An additional $5,250 annually from their employer, disbursed monthly, would get them out of debt 5 years earlier and save $2,748 in interest. At $12,348 a year, they’re out of debt 8 years earlier and save $3,465 in interest.

Given the current default rate is 12%, extending and expanding incentives for employer participation in student loan repayment would result in savings for the federal government from improved collection rates:

• Estimating this incentive reduces the default rate to 8% in five years
• Assuming the loan portfolio maintains an average annual growth rate of 5.33% (AAGR of federal portfolio from 1970 to 2019) over that time
• The federal government would save $71 billion in uncollected loan balances.
• That is equivalent to the total federally backed loans issued in 2019.
• It would take over 17 million Americans at $5,250 (or 7 million at $12,348) receiving this benefit from their employers to nullify these savings from loss of employer income tax due to the incentive

2. Expand the contingent benefits restrictions on 401K plans

In 2018, the IRS issued a private letter ruling (PLR) to allow an employer to provide 401(k) matching contributions when their employees make payments towards their student loans. Previously, the primary source of contention was whether such an arrangement would violate the provision for restrictions on contingent benefits described in section 401(k)(4)(A) and section 1.401 (k)-1 (e)(6) mandated for 401K plan design. These restrictions exist to deter employers from creating unfair incentives for employees to participate in company sponsored programs. The IRS concluded that the mechanism by which the employer was proposing to implement the student loan benefit program would, in fact, not violate the restrictions. In doing so, the IRS opened a floodgate of similar requests. Inundated with requests for PLRs and recognizing the popularity of the innovation, the IRS promised to provide general guidance by June 2020. That date has come and gone by leaving many hopeful businesses stalled.

How much additional 401K saving would such an incentive influence?

• 25% of millennials with access to a 401K are not making contributions.
• On average, those that do contribute, put away about 7.3% and earn an average employer matching contribution of 4.1%. That totals to an 11.4% savings rate.
• The median income for households headed by millenials with at least a Bachelor’s degree was $105,000 in 2018.
• If 90% of those millennials currently not contributing to their retirement as the result of student debt (13.5 million people) start earning a 401(k) match from their employer when they pay their student loans, they’d be getting $4,317 in annual matches.
• That’s an additional $70 billion in tax deductible 401(k) contributions by employers and increases in retirement savings per year by over $70 billion.

Given the Center for Retirement Research has projected student loan debt to increase the number of households at risk at time of retirement by 4.6%, how would this extra $70 billion impact retirement savings (and risk) for the recipients? A quick example:

• A 30 year old, retiring at 67
• Earning a 5% average real rate of return
• Yields an extra $438,759 at retirement.

Across the group, using 30 as the median age of millennials, that compounds to over $7.1 trillion in real dollars by 2057.

What does this tax incentive cost the government?

• Note the estimated $70 billion in tax deductible 401(k) contributions by employers when employees can earn a 401k match when they pay their student loans
• At a 20% corporate tax rate, that is a potential loss of $14 billion in tax revenue for the government.
• Over 37 years, that adds up to almost $1 trillion if corporate incomes grow at 3% in line with inflation.
• However, the net gain in savings on social security payouts would still sit at almost $6.1 trillion. By passing these incentives the government can address both the student debt and social security crises.

Service better

The repayment experience loan servicers give borrowers is a major source of pain for the borrowers. We need to address deficiencies in servicing and open up the space to allow financial companies to innovate and evolve the legacy processes borrowers struggle with today.

1. Address deficiencies in loan servicing

Given the many barriers to student loan repayment, there is simply no room for an ineffective collection (loan servicing) process for those that are able to make payments. It’s clear that repaying student loans can be made a more effective and joyful experience.

A 2015 Consumer Financial Protection Bureau (CFPB) report assessed that current servicing practices may not meet the needs of borrowers or loan holders. The report calls out deficiencies in access to borrower benefits, the servicing of transfers, customer service, error resolution, and payment processing.

2. Mandate support for 3rd party payments companies

Outside of correcting deficiencies in loan servicing experiences, there is immense room for innovation in how borrowers experience repaying a student loan. Growth in financial technologies has led to advances in how consumers manage and interact with their finances digitally. Financial products, like Dolr, are now being tailored to fit users’ lifestyles to incentivize consistent, positive behavior in a way that brings delight to maintaining a healthy financial life.

For example, at Dolr we are:

• Allowing daily, weekly, and bi-weekly payment schedules to help borrowers align repayment with the timing of income and expense events within their month.
• Providing simple tools for borrowers to better understand their debt picture and see how decisions regarding payment plan selection, increased payments, and interest capitalization impact their specific repayment journey in terms of time and money saved.

Understanding the current deficiencies in loan servicing come from a historic lack of innovation in these areas, it may not be feasible or practical to expect loan servicers to independently spend resources developing innovative and user-friendly loan repayment experiences. For this reason, the government must mandate support for 3rd party payments companies that are innovating on behalf of loan services.

Loan servicers should provide an Open Data style access to borrowers loans by providing standardized API access that third parties can build innovative products on top of to maximize the borrower experience.

Lend less

In general, college dropouts bear the heavy burden of having all the risk but none of the returns associated with earning a degree. Pressured by society, lenders seeking to expand their serviceable addressable market, and institutions focused more on profits than education, the qualifications required to attend a 4 year public college have significantly diminished. Couple this with an increase in one or two year diploma programs being rebranded as 4 year college majors and the quality of a college education has also diminished. College is not for everyone and that is ok.

Short Term

Ban interest capitalization on future loans and forgive as much accumulated debt that is a result of capitalization as possible. This is a grossly unfair practice and must be abolished.

Medium/Long Term

The government should create incentives for lenders and educational institutions to raise their bars. First, students qualifying below a threshold should be directed to the local community colleges for a minimum of 1 year so they have a chance to cheaply explore both the degree and vocational career options available. Secondly, the profitability should be diminished for private lenders. Rates should be the yield rate for 10 year treasury bonds + 0.25% maximum. That’s it. Nothing more. Lending to college goers should be the safest investment available to funds looking for consistent long term returns. We should turn to investment trusts and retirement funds to fund the loans.

For loans not funded by such vehicles we need to create capped schedules on the loan amounts guaranteed by the government and tie these to the year of college. Year 1 having the lowest guarantee – year 4 fully guaranteed. When lenders have to assess their own risks and returns are capped we can start restoring balance. No, this does not diminish the opportunity – community colleges are a cheap alternative to wasting 2 years of hands on experience and the 10+ years required to pay that back. Many people are realizing they don’t need to take the college risk to be able to build and enjoy their lives. Yes, college goers are rewarded with higher mean earnings. As a society we have to be honest with ourselves and accept that college is not for everyone.

Conclusion

We examined the historical context for the student loan crisis we are faced with today, presented the issues both with how education is priced and how society rewards it, then presented clear and attainable recommendations to start the process for recovery. Our combined recommendations would save the borrower both time and money while creating a more sustainable federally funded student loan program.

Our recommendations are focused on shorter term horizon that impact the borrower the most. This should represent just the beginning of a wider reform of how we price and reward higher education. We cannot continue to put our future generations at risk. Instead, let us invest in our future and create the ongoing culture of learning that has made this great country what it is today.

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A top-rated VA lender, Veterans United Home Loans offers potential employees a unique work environment where they can directly contribute to the success and well-being of military families. The company culture is one of service, teamwork, and continual improvement, and employees are expected to uphold these values in their daily work. Those interested in joining the team should have a strong desire to help others, excellent communication skills, and a willingness to learn and grow.

Veterans United Home Loans Employment Opportunities

Veterans United Home Loans offers a variety of careers for job seekers. You can search for what positions they currently have open from the Veterans United Home Loans Careers Page. Here are the descriptions of the three most common jobs Veterans United Home Loans hires for.

Loan Specialist

Loan specialists work in the mortgage industry and are responsible for helping veterans obtain home loans. They work with veterans to gather the necessary documentation and then work with underwriters to get the loan approved. Loan specialists need to have a strong understanding of the loan process and be able to effectively communicate with both veterans and underwriters. A bachelor’s degree is preferred, but not required, and loan specialists must be licensed by the National Mortgage Licensing System (NMLS).

Loan Officer

Loan officers work with individuals and businesses to assess their financial needs and determine the best way to meet those needs through loans. Loan officers typically work for banks or other financial institutions, but may also work for themselves.

Loan officers need at least a bachelor’s degree, although a master’s degree in business administration (MBA) or a related field is often preferred. Loan officers must also be licensed by the National Mortgage Licensing System (NMLS).

Closing Specialist

Closing specialists are responsible for ensuring that all of the necessary paperwork is completed and filed correctly in order to close on a home loan. This includes working with the buyer, seller, real estate agents, and title companies to make sure that everything is in order and that all deadlines are met. A closing specialist must have excellent attention to detail and be able to handle a large volume of paperwork. A bachelor’s degree is preferred, and some experience in the mortgage industry is helpful.

Veterans United Home Loans Hiring Process

The hiring process at Veterans United Home Loans is thorough and designed to ensure that they are making the right selections. The process begins with an interview, followed by an assessment, and then a final in-person interview. The interviewers are experienced and knowledgeable, and they ask tough questions to test your skills and qualifications. The process can be lengthy, but it is worth it to work for such a great company.

Is Veterans United Home Loans a Good Company to Work For?

The company is said to have a great culture, supportive managers, and good pay. There are some complaints about the work being stressful and fast-paced, but overall employees seem to be happy with their experience at Veterans United.

Veterans United Home Loans Employee Benefits

Veterans United Home Loans offers a great benefits package that includes 401k matching, health and dental insurance, and paid time off. They also offer a variety of other perks, such as gym memberships, discounts to local businesses, and annual bonuses.

Tips for Getting Hired

1. Showcase your customer service skills
Customer service is one of the most important values at Veterans United Home Loans. If you have experience working in customer service, be sure to highlight this on your resume and in your cover letter.

2. Communicate effectively
Veterans United Home Loans emphasizes the importance of effective communication. In your interview, be sure to demonstrate your ability to communicate clearly and concisely.

3. Be a team player
Teamwork is another important value at Veterans United Home Loans. Be sure to emphasize your ability to work well with others in your cover letter and during your interview.

4. Have a positive attitude
The company is looking for individuals who are positive and upbeat. In your cover letter and during your interview, focus on your ability to stay positive even in challenging situations.

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It has been nearly two years since the coronavirus pandemic first brought the world to a standstill. To reduce the financial hardships caused by the pandemic the government paused federal student loan payments and set interest rates to 0% back in March of 2020. After many extensions to the nationwide pause, the latest and final student loan freeze will expire on April 30, 2022.

As of November 2021, student loan debt in the U.S. reached $1.8 trillion. Many borrowers hoped that President Biden would cancel student loan debt on a widespread level, bringing immediate financial relief to millions of Americans. However, the federal government recently passed a $2 trillion spending budget that did not include widespread student loan forgiveness in its plans.

People with student loan debt should not rely on universal student loan forgiveness to erase or lower their debt. Instead, borrowers should begin preparing to restart payments if they have not done so already. In this article, we share five things borrowers need to know to prepare for federal student loan payments.

See if Your Student Loans Qualify For Forgiveness

In October 2021, the U.S. Department of Education (ED) made changes to the Public Service Loan Forgiveness (PSLF) program. These changes will affect about 30,000 borrowers who work in public service, forgiving about $2 billion in student loan debt. Under the PSLF program, public service workers who made 120 monthly payments toward their federal student loan debt can apply for forgiveness. For example, teachers, nurses, and active-duty service members may qualify.

In addition, borrowers with a total and permanent disability (TPD) may qualify for an automatic discharge of their student loans. The ED announced in August 2021 that 323,000 borrowers with a TPB would receive over $5.8 billion in student loan forgiveness. These borrowers must be identifiable through data matching systems with the U.S. Social Security Administration or the U.S. Department of Veteran Affairs. They do not need to fill out an application to receive automatic loan cancellation.

Check if you qualify for student debt cancellation under these new regulations. If you do not, read on for tips to prepare for student loan payments to restart.

Revise Your Budget

Unless further action is taken, federal student loan payments and interest accrual will resume in May 2022. As the new year begins, borrowers should consider revising their budget to include their projected monthly payments.

As you create a new budget, think about the following questions. What have your expenses been like since the pandemic started? How have they changed, and how might adding student loans affect your overall budget? A new job, living arrangement, or salary can influence your budget. You should also know how much you owe and what type of repayment plan you've selected.

With this knowledge, borrowers can plan ahead and adjust their budgets accordingly. Using online budgeting apps can make the process easier. Keeping a budget may reduce the stress of readjusting to paying monthly student loan bills.

Review Your Selected Repayment Plan

Before federal student loan payments resume, borrowers should review their selected repayment plan. They should also consider whether their chosen plan is still the best option for them. According to the Federal Student Aid website, borrowers may change their student loan repayment plan at any time for no cost. They can do so through their loan servicer.

Borrowers can choose from many student loan repayment plans. For example, a graduated repayment plan offers one of the fastest tracks to pay off student debt, with a repayment period of up to 10 years. In graduated repayment plans, monthly payments increase every two years from a low starting point.

Borrowers may also consider an income-based repayment plan, which changes with a borrower's income level. Typically, monthly payments amount to a maximum of 10-15% of the borrower's discretionary income. This repayment plan can take up to 25 years.

The Federal Student Aid website offers a Loan Simulator tool. Borrowers can use this resource to browse eligible repayment plans and see monthly payment estimates to choose the best option for them.

Know if Your Service Loan Provider Has Changed

Currently, eight service loan providers manage borrowers' federal and private student loan debt in the U.S. However, with that number decreasing to six at year's end, about 10 million borrowers will get a new service loan provider in 2022.

The Pennsylvania Higher Education Assistance Agency ​​(FedLoan) and Granite State Management & Resources' (GSMR) contracts with the ED expire on Dec. 31. Navient, another student loan servicer, has requested to transfer their borrowers to Maximus once their contract ends in December 2023. But for now, borrowers under Navient management do not need to worry about their loan service changing.

If FedLoan or GSMR manages your loans, check to see where your loans will be transferred to. Servicers should notify their borrowers of this information by email. But borrowers can easily check for themselves by logging in to the federal student aid dashboard with their FSA ID username.

Finally, make sure your new loan servicer has your correct contact information so that you send payments to the right place. You may also consider downloading your payment history from your old service loan provider and keeping it for your records.

Verify Your Contact Information With Loan Servicers

Loan servicers need borrowers' contact information to send their monthly bills and share important updates with them. If your address, phone number, or email address has changed during the pandemic, update your service loan provider. Verify online that they have the correct information on file, especially if your servicer changed. Doing so will ensure a smooth transition to resuming payments come May.

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Financial independence is a term that was first popularized by Robert T. Kiyosaki, a financial expert from the United States.

This term means a condition where a person is no longer worried about his financial condition and is free from debt bondage or installments.

For many people, this condition is certainly a dream and hopes to be achieved as soon as possible. However, do you really understand what true financial independence is? Let's find out more in the following description.

What is Financial Freedom?

Literally, the word freedom has the meaning of freedom and not being bound by anything. While the word finance has a financial meaning. If the two are combined, we can conclude that financial independence is freedom from financial demands.

Financial independence or financial freedom is a situation where a person succeeds in achieving a decent life, free from debt, and can fulfill all his needs without worrying about financial conditions.

Apart from being free from the burden of the economy, financial independence also has another meaning where the person is happy with a fulfilled life and grateful for what he currently has.

We can achieve financial independence due to various factors. One of them is through our lifestyle or habits in using money. The earlier we process finances well, the sooner we will get financial freedom.

Characteristics of Someone Who is Financially Independent

After knowing what financial independence is, you may start to wonder what characteristics someone who is financially independent has. You could be one of them too! Let's take a look at its features below.

One well-known financial planner named Prita Ghozie Hapsari defines the characteristics of people who are financially independent as follows.

Image Source: Freepik

1. Healthy Monthly Cash Flow, No Monthly Spending Problems

The first characteristic is characterized by a healthy monthly cash flow. Cash flow or cash flow is a financial record that contains your income and expenses.

Those who are included in financial freedom have a healthy cash flow where the monthly expenses are not more than the income.

2. Free from Consumptive Debt

The second characteristic of being financially independent is being free from consumer debt. Consumptive debt is a type of debt that is used to fulfill a lifestyle.

For example, in debt to be able to have the latest branded goods so as not to miss the latest trends. Such as bags, cellphones, cars, motorcycles, and much more.

Those who are free from consumer debt will think twice before applying for a loan to buy something that is depreciating in price or even prefer to save until they are finally able to buy the item.

3. Have an Emergency Fund

The third characteristic is having an emergency fund. Someone who is financially independent must have ensured all the bad possibilities that will happen. Therefore they will always make sure to prepare an emergency fund.

We have an emergency fund, ideally 3X the amount we need each month. However, since the pandemic has hit and the job market has become increasingly difficult, it's a good idea to prepare an emergency fund 6X the number of your monthly needs.

For example, your monthly needs range from 5 million – 6 million. In this way, you can prepare funds with the following calculations.

Monthly Fee X 6 Months = Emergency Fund

So, an emergency fund that you have to prepare if your monthly needs are 5 million by 30 million. Pretty much isn't it? Even so, these funds will later save you if something bad happens. For example, loss of work or termination of the employment contract.

4. Have a Place to Live

The third characteristic is having a place to live. The residence is a fixed asset that is included in the fulfillment of primary needs, namely the need for housing.

Having a place to live means you don't have to spend a lot of money to pay for rent. This has an impact on the health of your monthly cash flow, so the funds you have can be allocated to other things.

5. Have Savings and Investments, Whether It's For Living or Enjoying Life

The last characteristic of financial independence is having savings and investments. These savings and investments can later become a source of funds both for living in terms of future savings, as well as for enjoying life (fulfilling the need for a lifestyle).

Tips for Financial Independence A la BFI Finance

You can achieve financial independence quickly if you start managing your finances well early on. What do you need to do to achieve financial freedom? Here are the tips.

Image Source: Pexels/Olya Kobruseva

1. Have Life and Health Insurance

One of the important things you must do to achieve financial independence is to prepare yourself for protection.

Without adequate protection in terms of health and life, you will have difficulty achieving financial independence because without insurance, the risks that may occur to you will have a major impact on your financial stability.

From insurance, you will be lighter to bear a number of funds from the risks that occur due to an incident.

2. Invest

Investment is one of the financial activities that is as important as saving in a conventional bank. The difference is that through investment you will get a number of benefits.

So, the money you have will not be affected by inflation and instead give you a number of benefits for the future. With a note, the return or profit given must exceed the inflation rate prevailing in that year.

Investment has a variety of instruments. Among them are deposits, bonds, mutual funds, precious metals, stocks, and property. Make sure to choose an instrument that has guaranteed safety!

3. Have Passive Income

As with investing, passive income is one of the factors that support someone to achieve financial independence.

Literally, passive income is passive income which has the meaning of additional income obtained without the need to bother spending a lot of time to get it.

Passive income is also widely interpreted as side income outside of the main source of income.

Quoted from Kompas.Com, passive income is divided into 3 types. The first type is paper assets, which consist of deposits, mutual funds, and stocks. These three types can provide returns or profits without bothering to do something.

The second type is business. In this second type, you only invest without participating directly in the various daily activities that exist. For example, supermarkets, mini markets, and laundry businesses.

The third type is property. What this means is that the property you own is rented out to someone else for profit.

4. Preparing Education Funds for Children's Future

Financial independence means that you are free from all economic demands that interfere with your financial condition. This includes education funds.

Considering that every year the cost of education continues to increase significantly, it's a good idea to prepare your child's education fund early on. So that later children can receive a proper education and live more prosperously.

There are various ways to prepare funds for children's education from an early age. These include:

1. Plan each level

2. Looking for school information

3. Taking into account children's education funds

4. Planning a child's education fund savings

5. Become a child education insurance customer

6. Make investments

7. Joint financial evaluation

5. Have a Pension Fund

This one tip is very important to do so that finances in old age will always be safe. Surely we don't want to retire later to live mediocre or just keep working, right?

Ways that you can do to have a pension fund include saving in a Financial Institution Pension Fund (DLPK), investing, or relying on fixed assets such as rental properties.

6. Already Prepared Emergency Fund

The next tip for financial independence is to prepare an emergency fund. These funds will later be very useful to cover large amounts of needs.

How to set up an emergency fund:

1. Have a strong will to have an emergency fund

2. Set aside some money from the salary

3. Consistently save every month

7. Productive Debt

Debt is not always bad or has a negative connotation. If managed properly, debt can actually make us richer and help us become financially independent.

One way is through productive debt. For example, existing borrowed funds are used for something that makes money again. Such as venture capital and business development.

Why can it be called productive debt? This is because the operating profit obtained from your business can be allocated to pay off or repay the loan. So, when the loan is paid off, you will have a number of advantages without being burdened by debt.

If you need a fast liquid loan, don't hesitate to choose BFI Finance products as your financial solution. Starting from business capital, education funds, to lifestyle, we can help with everything.

Not only that, in order to welcome independence day in August 2022, BFI Finance has a #PastiMerdeka promo where debtors have the opportunity to get cashback of up to Rp. 77 Million Rupiah! The full terms and conditions can be accessed via the following link.

The post Easy To Follow, Here Are 7 Tips for Financial Independence in 2022 appeared first on Example.

"Student debt crisis" is a phrase we hear all too frequently in the media, and the most recent statistics are staggering, with the total amount of debt having leapt to $1.4 trillion in America.

This newest numbers break down roughly to more than 44 million Americans with student debt, seven million of which are also in student loan default.

The student debt crisis is very real, but what is its true impact?

It’s no secret that student loans are out of control. According to Forbes, as of February 2017, we reached $1.3 trillion in student debt. The average graduate of the class of 2016 has $37,172 in debt, while the average entry-level position for the class of 2017 pays $47,785. If it sounds like that’s improved, it has. Still, starting post-college life with the need to pay student loans and seek student loan help hurts new grads at the start of their careers. Many graduates struggle to balance student loan payments with major purchases, including homes and cars, and some even move back in with their parents or delay marriage and children.

These struggles affect not just new grads, but the entire economy. In more recent years, financial resource specialists have noted the impact of delinquent student loan debts–a negative indicator for credit and the ongoing ability to make large purchases or even start new businesses. Further, student loan debt disproportionately affects women of color, as they often end up taking out more loans and stay in repayment longer. Make no mistake: student loans are not problems that go on for just a few years. Student loan debts often take about 21 years to pay off.

Clearly, student debt is a real problem. So who’s responsible? While it’s easy to point to schools with rising tuition as the root of the student debt problem, it’s not fair to say that all colleges are irresponsible participants. There are many colleges working to offer student loan help and creativity to reduce, or even eliminate, student debt.

The Impact of Student Loan Debt on Students

Recent studies show an alarming seventy percent of students in the U.S. graduate from college with student debt, and that the average debt carried by the class of 2016 is $37,172 worth of student loan debt, up 6% from 2015.

Statistics show that paying off student loans takes an average of 21 years—a very heavy burden for students to bear as make their way into the workforce.

However, there are many in the education system working hard to help students enter – and exit – the world of education student debt free, through a variety of methods.

Options include financial programs that fight student debt, such as no-loan policy schools and and those that educate heavily on financial education, as well as institutions that focus on student loan help through alternative methods to student loans, such as grants or special resources for low-income families.

These options are often led by universities and leaders championing to close the gap when it comes to financial need for an education and the burden of graduating college with crippling debt.

Not only are these programs designed to provide educational access to students that might otherwise find it out of reach, but they also offer unique options to develop financial planning skills invaluable to students after graduation, including financial management and work experience.

Penn University is a school leading the charge for change when it comes to financial aid. They announced a whopping financial aid budget for 2017-2018 of $224 million – the largest in the university’s history – while increasing undergraduate charges by 3.9%.

Since Amy Gutmann became president in 2004, Penn’s financial aid budget has grown by 171%, and the University has awarded $2 billion in undergraduate aid to a total of 17,253 students.

One Penn student, Michael Keramidas, had to say, "Never in my wildest dreams would I have thought that I’d be able to go to Penn. Because of the generous financial aid Penn offered me, I now have had the opportunity to study here, learn so many new things, and meet many great people."

Tactics for Fighting Student Loan Debt

Graduating from college debt-free isn’t a feat for a select few: it’s something that any student can do. Granted, it’s not easy, but it is possible. Making a commitment to avoid debt and taking advantage of every financial opportunity available to you can really pay off. Here’s how you can make it work:

Just say no to debt.

Yes, it is possible. It may sound glib to say, "The best way to pay off student loans is to avoid them," but it is possible. Simply commit to avoiding student debt, and explore every available resource for funding that doesn’t require a loan. There are a growing number of educational options that do not require student debt, and we no longer live in a world where loans are the primary financial option for students. We’ve profiled some of the best educational programs with alternative resources, but they’re not the only ones. Many top schools have endowments and alumni donations that make generous grants possible, and smaller schools are often lean and resourceful enough to make financial programs work, whatever it takes. Popular schools without student debt include: Davidson College, University of Pennsylvania, College of the Ozarks, and Cooper Union. Build a strong educational resume.

Debt-free college options are available, but don’t assume it will be easy to get in. Top programs like Penn are highly competitive. College of the Ozarks denies 3,650 of its 4,000 annual applicants. It is difficult to get accepted to one of these schools, but don’t let that deter you from pursuing what they have to offer. Instead, rise to meet the challenge by working hard to create an educational resume that makes schools want to invest in you. Boost your GPA and become a well-rounded student with extracurriculars and volunteering projects. Take part in independent learning resources like massive open online courses (MOOCs) to show your initiative and commitment to education. Seek out every option available.

We’ve discussed several school-based grants, but there’s so much more out there. A seemingly endless array of scholarships are available for every student imaginable. Whether you’re great making clothes from duct tape or demonstrate strong academic potential or financial need, there’s a scholarship for you. Plan to spend a significant portion of your junior and senior year of high school searching for and applying to scholarships. Be relentless in your pursuit. The money is out there, and often, all you have to do is ask for it. Scholarships, while sometimes inconvenient to apply for, are a lot more fun than an eventual trip to a student loans repayment seminar. Don’t assume any school is out of reach.

A 2008 study by the American Council on Education found that there was a drop in low-income students applying to college over a two-year period, likely due to the perceived cost of college. But the truth is that top colleges and programs are often more than willing to make an investment in bright students’ education, especially those that come from a low-income background. For many top universities, if you can get in, they’ll find a way to make it work for you financially, often without debt. Don’t be shy. Apply, and discuss your options with the financial aid office of each school you’re accepted to. You may be pleasantly surprised to find generous grants, scholarship options, and work-study programs that do not require student loans. Create your own work-study program.

Many schools replace student loans with work-study requirements, but if your school of choice doesn’t have this type of program, there’s nothing stopping you from doing it on your own. A part-time job or paid internship can help you gain experience, learn valuable time management skills, and of course, allow you to pay for school, in full or in part.

Seventy percent of students in the U.S. graduate from college with debt, and on average, they carry about $37,000 in student loans, most of which will take up to 21 years to pay off. Student loan help is something many of them need, but you don’t have to suffer the same fate. The options are out there: you, too, can say no to student debt.

How Schools Get Hurt

Paying off student loans hurts more than just graduates—it hurts schools, too. A survey from the National Association of Independent Colleges and Universities indicates student loan troubles are coming between students and higher education. Most colleges said they had more than 10 students who had been unable to secure a private loan for the current academic year, and 49 colleges said they had at least 50 students who had been unable to secure loans. Some students find a way to make it work with institutional repayment plans, parent PLUS loans, or troublesome credit cards, but for others, solutions don’t come easily. Almost half of private colleges reported that students are dropping out or switching to part-time status. Further, 17.7% of independent colleges are enrolling fewer returning students than expected.

Schools are feeling the crunch internally as students struggle to find money to enroll and graduate, but there are external pressures as well. Colleges and universities are increasingly being judged on loan debt and default rates. Let these numbers slip, and a college can lose funding or drop in rankings. Additionally, President Obama put colleges and universities on notice, urging schools to "do their fair share to keep tuition affordable, provide good value, and serve needy students well." Indeed, colleges across the country feel the pressure to change their tuition structures to more transparent and sustainable numbers.

There’s a clear correlation between rising student debt and the drop in nationwide student enrollment. Enrollment in the United States peaked in 2010 at 21 million, but by the fall of 2014 (the most recent year government data is available) there were 812,069 fewer students walking around college campuses. "Too many students and families feel that college is out of reach," says Mitchell, U.S. Under Secretary for Education. "Never in our history has the opportunity to complete college mattered so much to Americans' life outcomes."

While students from lower-income families are inevitably at risk of suffering in this climate, the National Student Clearinghouse Research Center report also states that the impact can be seen across colleges with a steadily dropping enrollment rate, down for the fifth straight year. The numbers have been steadily declining, with overall higher education enrollment down 1.4% in the fall of 2016 from the previous fall. For-profit institutions saw a nearly 15% decline, and community colleges declined by 2.6%.

What Colleges are Doing to Fight Student Loan Debt

In order to combat student debt and its debilitating effects on students, families, and the economy as a whole, many states and colleges are taking drastic measures.There are a growing number of "no loans" colleges and even colleges that offer free tuition. Other schools provide students with extensive financial literacy education and management programs to keep them on a smart financial path in college and beyond.

Schools that have implemented programs that combat student debt typically attract a more diverse socioeconomic student body. "We’re seeing a wider socioeconomic range in our applicant pool than we used to," reports Davidson College representative David Gelinas.

"Approaching the tenth anniversary of establishing grant-based financial aid among the highest of our priorities, Penn’s Ivy League education is more accessible and affordable to students with the greatest promise from all backgrounds than ever before," said Penn president Amy Gutmann. "Doubling the number of first-generation college students is just one among the many educational and societal benefits that flow from Penn’s doubling of financial aid and our outreach efforts, which we continually strengthen. As the first in my family to attend college, I understand the transformative impact that affordable access to high quality higher education can have. It is the single greatest gateway to economic opportunity and has an indelible impact on society. This is the enduring value fueling Penn’s grant-based financial aid program."

According to Gutmann, "Penn’s grant-based financial aid program has ensured educational access to a Penn education for the brightest students regardless of socioeconomic background." At Penn, one out of eight freshmen will be the first in their families to graduate college—up from one in 20 in 2004—and a quarter are under-represented minorities.

Schools without Loans

According to U.S. News & World Report, more than 50 colleges across the U.S. have pledged to eliminate or reduce the need for student loans. For anyone interested in lowering or avoiding student loan payments, colleges without loans are a great option.

Since 2007, Davidson College has offered need-blind admissions, and it meets 100% of demonstrated need for accepted students. Students do not receive loans as part of their financial aid package. Davidson determines an expected family contribution and then provides grant money and work opportunities to meet the students’ needs.

"The impetus was the desire to allow students to come and make a major decision without feeling like that decision had to be dictated by the ability to pay back that loan," explains senior associate dean and director of financial aid David Gelinas. For a student with a $40,000 need, $2,000 of that need might be made up with work, which is typically study- or community service-based, and the remaining $38,000 provided by grants. Davidson is ranked No. 12 among national liberal arts colleges by U.S. News & World Report. University of Pennsylvania

To help mitigate student loan debt, even high-profile universities including The University of Pennsylvania have a no-loans policy, which has been in place since 2008. Penn president Amy Gutmann has made increasing access one of her priorities, and the no-loan program is a big part of that. Like Davidson, Penn combines work-study with grants, meeting 100% of students’ needs without loans.

"It is our firm belief, from President Amy Gutmann and the Board of Trustees, that our no-loan program is the right thing to do nationally and the right thing to do for Penn," says Joel Carstens, University of Pennsylvania director of financial aid. "We’ve simply allocated the resources necessary because it’s the right thing to do." Those resources include an undergraduate financial aid budget of $188 million, one that’s grown by 129% since President Gutmann took office in 2004. This growing budget is made possible with the university’s Making History campaign, which includes a $673 million goal for student aid.

"We want to enable students to make career and life decisions based on their interests, talents, and passion, not on whether they’ll make enough money to pay off their student debt," says Penn president Amy Gutmann. "Especially in these challenging economic times, we want prospective students and their families to know that Penn is affordable."
College of the Ozarks

While Davidson and Penn allow students to take out loans to meet the expected family contribution or pay for necessities like health insurance, College of the Ozarks has taken a tougher stance with a true no-loans policy. Beginning in the fall 2013 semester, the college will no longer certify private loans for students. For more than 20 years, the college has not participated in federal or state loan programs, but this step completely wipes out the college’s already small debt load. Previously, 10% of graduates left with an average of less than $8,000 in student debt.

Students can pay for tuition with the college’s Work Education Program, which requires students to work 15 hours per week, plus two 40-hour work weeks at a campus job each year. Room and board, books, and the technology fee are the only student costs, but the optional Summer Work Education Program covers the cost of room and board. This program has been very popular; every fall, an average of 4,000 applicants compete for only 350 spots.

Tuition-Free Programs

In 2017, recognizing the difficulty many people have paying off student loans, New York announced a plan to create a tuition-free degree program, known as the Excelsior Scholarship. California has about 50 tuition-free community college programs.

On a more granular level, some colleges simply do not charge tuition. There are, of course, qualifying conditions, but U.S. News & World Report has an excellent list of these colleges and their terms. For instance, if you elect to go to Barclay College and live in the dorms, you can qualify for free tuition and avoid student loan debt. If ranching is of interest to you, you may want to look into the free tuition program at Deep Springs College, where working on the ranch is how you "pay off" your tuition, room, and board.

Effective Financial Management and Education

Restricting loans is useful for preventing student debt, but helping students create sound financial foundations and student loan payment plans is even smarter. Most colleges offer some sort of financial education resource to students, often aimed at incoming freshmen, but some schools take it a step further with money management courses, personal budget and repayment plans, and special assistance for financially at-risk students.

Alternately, due to the looming student loan crisis, many notable publications have released their own how-tos regarding paying off student loans and financial responsibility. "Seven Ways to Prepare for Student Loan Repayment" from U.S. News & World Report is one such resource, and it includes both common sense-based and financially-based advice. Even the Federal Student Aid website now offers an educational and financial checklist to help students and parents alike navigate the potential pitfalls of too many loans.

Special Programs for Low-Income Students

Assistance programs for low-income students are another popular approach for keeping student loans to a minimum. At the University of Florida, ranked by The New York Times as #6 at helping low-income college students earn a college education, 48% of students receive some kind of need-based financial aid. The average granted is $6,910. In-state tuition and fees are slightly less than the average financial aid package at $6,389. This is made possible by a combination of factors, including below-average tuition, Florida’s state-run Bright Futures scholarship program, and the university’s low-income Florida Opportunity Scholars program.

Florida Opportunity Scholars provides a full ride to students who are the first in their families to go to college and whose family income is less than $40,000 a year. University of Florida senior director of media relations Steve Orlando explains, "If money is standing in the way of students going to school, we want to remove that problem for them." In six years, this program has helped more than 2,600 students.

Tufts University also offers special resources for low-income undergrads, replacing student loans with scholarship grants. All undergraduates whose family income is below $40,000 are eligible.

The policy "enable[s] some of the neediest families in America to send their children to Tufts. It reflects Tufts’ enduring mission to provide access to students from diverse economic backgrounds," says dean of undergraduate admissions Lee Coffin. The 2011 class, the first to benefit from this policy, was the most socio-economically diverse class in Tufts history.

Leveraging Work-Study

While Davidson and Penn still allow students to take out loans to meet the expected family contribution or pay for necessities like health insurance, College of the Ozarks has taken a tougher stance with a true no-loans policy. Beginning in the fall 2013 semester, the college no longer certified private loans for students. For more than 20 years, the college has not participated in federal or state loan programs, but this step completely wiped out the college’s already small debt load. Previously, 10% of graduates left with an average of less than $8,000 in student loan debt.

Students can pay for tuition with the college’s "Hard Work U" work education program, which requires students to work 15 hours per week, plus two 40-hour work weeks at a campus job each year. Room and board, books, and the technology fee are the only student costs, but the optional Summer Work Education Program covers the cost of room and board.

"We are an official work college, so our students work rather than pay for their education. In a time when many students leave college saddled with debt, our students are able to graduate debt free. This does not go unnoticed by potential students, parents, and anyone closely examining the state of higher education in this country!" shares Valorie Coleman, public relations director for College of the Ozarks.

The value of the program has certainly not gone unnoticed by the Princeton Review, one the many media that have praised the program, recently including the school on their list of " Colleges That Pay You Back: 2017 Edition."

When speaking to just how the school made his list, Robert Frank, Senior VP/Publisher of the Princeton Review touts that "they stand out not only for their outstanding academics but also for their affordability via comparatively low sticker prices and/or generous financial aid to students with need—or both."

Frank went on to add that students who attended colleges with programs like Work Hard U "have access to extraordinary career services programs from their freshman year on, plus a lifetime of alumni connections and post-grad support."
Colleges with work-study programs like College of the Ozarks, Penn and Davidson present more than just a great financial opportunity: they offer valuable work experience as well. This is more useful now than ever, as employers are increasingly seeking out candidates with both education and real life experience within the future of job growth.

As College of the Ozarks president Jerry Davis says proudly, "We’re a work college, not a debt college."

Effective Financial Management and Education

Restricting loans is useful for preventing student debt, but helping students create sound financial foundations is even smarter. Most colleges offer some sort of financial education resource to students, often aimed at incoming freshmen, but some schools take it a step further with money management courses, personal budget and debt repayment or student loan payment plans, and special assistance for financially at-risk students.

Syracuse University has one of the best-ranked financial literacy programs in the country – not just due to their offering assistance to students who are demonstrating financial trouble, but because they also place a primary focus on educating students in financial literacy through a number of workshops and resources available, one-on-one financial consulting, and helping students identify if they are overborrowing from private lenders.

While students are given generous direct grants for future semesters, it doesn’t come for free; in return, they are required to attend money management courses until graduation. Students are also encouraged to find alternative sources of funding, including scholarships. This approach allows Syracuse to identify the students that are most at risk for serious financial trouble after graduation, stopping overborrowing before it becomes a real problem.

"The work done by Financial Literacy Coordinator Derek Brainard and the financial literacy team reflects our ongoing commitment to students and their success, both during and after college," says Ryan Williams, Interim Senior Associate Vice President of Enrollment and the Student Experience.

At Tidewater Community College, students must complete personal budget worksheets before the college will certify any loans, in addition to creating financial outlook that requires the students to create a realistic budget as well as a post-graduation repayment plan that fits within their projected salary. Requiring students to see the full financial picture helps to ease that disconnect and makes students understand that the financial decisions they make in college can have a lifelong impact.

The post Fighting Student Loan Debt appeared first on Example.

Fast business loans that the owner of a small company can count on to be approved in short order can be integral to keeping a business afloat and minimizing the trepidation of cash flow difficulties.

How can you get a quick business loan? A lot will depend on the funding provider and their particular application process, but there are a few key factors that you can look for before you decide to apply.

Top Ways to Get Fast Business Financing

These loans and financing options are among the best ways to get quick funding for your business:

Business Line of Credit

Sometimes a business line of credit can be approved in as little as 24 hours or less. Depending on the lender, you might only need a credit score of 500 to qualify for a business line of credit.

When a lender provides pre-approved funding with a maximum credit limit, that is known as a business line of credit. If the borrower is approved for this line of credit, funds can be accessed whenever they are needed until the established credit limit has been reached.

Because the borrower is only paying interest on the amount that he or she withdraws, a business line of credit can be advantageous for business owners who are uncertain of the amount of funding they will actually require, or when they might need it.

The drawback to a business line of credit is that the loan will be at a rate that might be considerably higher than other types of loans. How costly that would be is heavily dependent on the amount of funds the entrepreneur ends up using.

If a business owner needs to establish a favorable credit history, a business line of credit could help him or her do that.

Like a credit card, the borrower is not required to make any payments until and unless there is an amount due.

In one case, a business owner is approved for a $50,000 business line of credit with a 12% interest rate. Then the owner waits three months prior to making a withdrawal. If he owes no monthly payments during that time, once he decides to make a $20,000 withdrawal, payments are then due for a monthly percentage of the amount borrowed as well as interest. Although repayment terms aren’t always the same, one year is a frequently established amount of time. In this case, the $20,000 must be repaid over that time period plus interest. Lines of credit have more flexibility than a small business loan because funds are not disbursed in a lump sum. Also, until you borrow a certain amount, payments are not required.

Similar to credit cards, business lines of credit are considered to be revolving debt. That classification enables the borrower to dip into these funds more than once, as long as he or she has paid back what they originally borrowed.

Lenders’ policies vary, but the ability to withdraw funds from a business line of credit is usually relatively painless and fast. Some lenders with stricter policies in place may require the borrower to reapply for financing each time they draw from the business line of credit, to ensure that their creditworthiness has not changed.

Short Term Loan

A loan with a fairly short repayment period, a short term loan is one in which the borrower receives his cash in a lump sum up front, then repays the loan, often with some pretty sizable financing rates. Some short term loans allow the borrower to make extra payments to pay it off sooner. However, some short term loans actually come with penalties for early repayment. Short-term loans generally have a term of 12 months or less.

Payments on short-term loans are required frequently — sometimes once a week, or, in some cases, every day.

Although the credit requirements are not as strict for short-term loans as they are for regular term loans, the frequent payment schedule may be burdensome for someone in a new business without a lot of cash flow at that moment. But a businessperson who needs a loan in a hurry still might opt for a short-term loan because it may be easier to secure than other forms of financing.

Although the business credit requirements are not as strict for short-term loans as they are for regular term loans, the frequent payment schedule may be burdensome for someone in a new business without a lot of cash flow at that moment. With fewer requirements than longer-term loans, short-term loans from online lenders may be easier to get approval than some other types of loans.

Choosing to apply for a short-term loan comes with the expectation that you might have to repay it over just a couple of weeks. If you have an installment loan, you have up to six months to pay it off. A short-term loan application is completed online and normally takes a matter of minutes to be approved.

Rapid processing is one of the main attractions of a short-term online loan. Sometimes approval could even come the same day the application is placed. In addition to fast approval, other advantages of short-term online loans for working capital include paying less interest, the chance to improve a bad credit rating, and flexibility.

Invoice Factoring

For companies that have unpaid invoices. Invoice factoring is a financing method where you sell your accounts receivable at a discount for a lump sum cash amount.

A method of securing working capital that is a little different than applying for a loan, invoice factoring is the process of selling invoices at a discounted rate to a factoring company and receiving in return a lump sum of cash that can be used as working capital.

After assessing the risk of financing the business owner’s invoice, the factoring company collects payments from the business’ customers over a span of between one and three months. If a company sells something to a customer, but that customer cannot pay off the invoice right away, there’s a gap of time that could create a shortfall for the business owner. The lump sum that the business would receive by undertaking the process of invoice factoring would cover the shortfall and solve the problem of cash on hand.

The business will sell the invoice to the factoring company at a 3 percent discount, to account for the factoring fee. This method of securing working capital enables a business to work around the obstacle of a slow-paying customer. Some factoring companies will supply the cash needed for working capital in as little as 24 hours.

Some of the drawbacks to invoice financing for business funding include surrendering control, taking on the potential stigma associated with factoring (which some observers could interpret as a sign that one’s business is struggling), and the cost (when factoring companies manage the process of collections and the control of credit, it is more costly and the business’ profit margin takes a hit as a result).

SBA Loan

The U.S. Small Business Administration (SBA) offers commercial financing backed by the SBA through its SBA 7(a) loan program. The most common type of SBA loans, an SBA 7(a) loan assists businesses in the purchase or refinance of owner-occupied commercial properties up to $5 million. This loan also gives the business owner a chance to borrow funds for working capital.

These loans are suited to assist businesses that are unable to secure credit anywhere else. With an SBA (7a) loan, the borrower can purchase land or buildings, build on new property or renovate existing property as long as the real estate will be occupied by the owner. Through an SBA (7a) loan, an entrepreneur can borrow up to $5 million through an SBA-affiliated lender. The maximum allowed interest rates for the program are based on the Wall Street Journal Prime Rate plus a margin of a few percentage points. Interest rates can be fixed, variable or a combination of the two. Loan terms for 7(a) loans that are used for commercial real estate may be as long as 25 years for repayment. Each monthly payment would be the same until the loan is fully repaid.

Backed by the U.S. Small Business Administration, this type of financing can assist in the purchase or refinance of an owner-occupied commercial property. These 504 loans actually are a hybrid form of financing: One loan coming from a Certified Development Company (CDC) for up to 40 percent of the loan amount, and one loan from a bank for half the loan amount or greater. Low down payment requirements make CDC/SBA 504 loans ideal for growing companies that might not have more than 10 percent to use as a down payment.

A CDC/504 loan is for either 10 years or 20 years. Borrowers get a fixed rate rather than the prime lending rate. Applicants will be required to show the lender a business plan, exhibit proof that they’re capable of managing a business and present projected cash flow data–all to assure the lender that the loan is likely to be repaid without complications.

Merchant Cash Advance (not a Loan)

Another way to facilitate access to money needed to finance one’s business expenses is a merchant cash advance. In this instance, a company grants the borrower access to cash. The borrower is then required to pay a portion of his or her sales made with credit and debit cards, as well as an additional fee.

A merchant cash advance does not require collateral or a minimum credit score. A merchant cash advance can be an expedient way for a business owner to get his hands on capital when the need for cash becomes extremely pressing. A business owner might be slammed with a bill he or she did not expect, or the owner might need the cash fast in order to consummate a time-sensitive deal that must be decided upon sooner rather than later.

With a merchant cash advance, a business owner can potentially get hold of a large sum of funding in a hurry. The turnaround actually could be realized in as little as 24 to 48 hours in some cases. A merchant cash advance could be for a sum of a few thousand dollars up to as much as $200,000 with a minimal of paperwork. The “heavy lifting” in a merchant cash advance is usually handled virtually.

Repayment of a merchant cash advance is based on the credit card receipts of a business. If the company has had a slow day, the repayment amount for that day is reduced. Funders of merchant cash advances can take 20 percent of credit card receipts on a daily basis. How much a funder takes is tied to a company’s success more than it is to the calendar.

Companies that provide merchant cash advances do not stress credit scores if the borrower comes into the deal burdened with a less than stellar credit history. Lenders instead will make their decisions based on current operations and sales projections. For a business that endured a rough start financially but which still anticipates a rosier financial future, a merchant cash advance might be the best option for a fast business loan.

The ease and expediency of merchant cash advances is not free, however. The factor rate, which is a percentage – often expressed as a decimal ranging from 1.1 to 1.9 – that shows how much extra a borrower owes on a loan, carries a high effective annual percentage rate (APR), and repaying it can be a genuine burden on a company’s cash flow.

Crowdfunding

Tapping into the combined resources and contributions of friends, customers, family and possibly individual investors by using social media and online platforms set up for this specific purpose is called crowdfunding.

The process of crowdfunding—a financing option that is open to anyone–entails collecting small amounts of capital from a large base of contributors, accessing a sizable potential pool of resources. The business owner who seeks to raise capital through crowdfunding essentially is delegating the process of an application to a large group of people instead of relying on the decision of an individual lender. Crowdfunding sites generate revenue from a percentage of the funds raised.

The advantages of a crowdfunding approach to raising working capital include its broad reach, the ability to present one’s business in a positive light to potential investors, the attention to one’s business derived from public relations and marketing on a crowdfunding platform and efficiency. Crowdfunding helps a business to streamline its fundraising efforts with a single profile that is comprehensive and into which the entrepreneur can funnel all prospects and potential investors. Presenting one’s business to a large audience at one time eliminates the inefficiencies associated with printing documents, putting together binders manually entering every update.

Crowdfunding can be based on donations, rewards or equity. A funding effort that is based on donations comes with the understanding that there is no financial reward to the donor to a crowdfunding campaign. A campaign based on rewards would give something back to the contributor, such as a product or a service provided by the business that is seeking the funding. Equity-based funding campaigns invite contributors to become part-owners of the business by exchanging capital for equity shares. As equity owners, the company’s contributors get back a financial return on their investment as well as receiving a share of the profits in the form of a dividend or distribution.

Other options

In addition to the possibilities already covered for achieving financing in a hurry for small businesses, these companies may also consider peer-to-peer loans or micro-loans.

Business owners with good credit who need a small amount of working capital quickly may be able to meet small, short-term working capital needs with a peer-to-peer loan. This type of loan must be repaid with interest in a period of one to five years. If your credit is good enough to command better rates than you’d get with a short-term loan online, but is not quite good enough to qualify for an SBA loan, a peer-to-peer loan might be a suitable choice.

Peer to peer personal loans are offered directly to individuals without the intermediation of a bank or traditional financial institution. Online lending platforms fund borrowers via institutional lending partners.Also referred to as marketplace lending, peer-to-peer (p2p) lending is an increasingly popular alternative to traditional lending. Borrowers and lenders can both benefit from this more-direct lending system.

In p2p lending, one party lends money to a business, with the promise of receiving a sizable return for doing so. When a business seeks a p2p loan, it accesses a website, requests a loan, and then investors are permitted to fund the loan and also share in the interest payments. Rates ranging between 6 percent for the best credit and 25 percent for the lesser credit ratings. A p2p loan could be used for the purchase of inventory or equipment. Peer2Peer loans cap out at about $35,000.

Microloans are small loans that come from individual lenders, not from a bank or a credit union. Microloans can be issued by a single individual or they can be assembled from several lenders each contributing a given amount until the necessary funding total is achieved.

With a microloan, the lender gets interest on the loan and repayment of principal after the loan has reached its full term. Microloans come with interest rates that are above market, so some investors may be attracted by that aspect of them.

Fast Funding and Your Business Needs

At the end of the day, speed is one of the most important factors that business owners should look for when deciding how to get financing for their next project or ongoing operations. If you have a funding provider that can help you get money quickly when you need it, you have an ace up your sleeve. Remember that many different loan options or business financing products will have different requirements attached to them, and some may take longer to get than others. But if you keep the tips we covered in this article in mind, you should be on your way to faster funding so you can get back to business.

The post The Definitive Guide to Fast Business Loans appeared first on Example.

It’s no secret that one of the biggest challenges in getting approved for a home mortgage loan is coming up with a hefty down payment. Traditional down payments of 5%, 10% and even 20% cost would-be homebuyers A LOT of money and therefore are among the biggest reason people don’t end up entering the housing market.

But what if there was a way to buy a new home that didn’t involve forking over thousands of dollars? Fannie Mae and Freddie Mac both have programs for a 3% down home mortgage payment.

“Fannie and Freddie’s new 3% down payment programs are an additional tool to make homeownership affordable. But even though these programs lower the required down payment, it’s still important to work with your broker to understand your debt to income ratio, your monthly payments and ensure that this is a sound decision.” – Jason Caruso, Director of Operations, Blue Water

3% down payment mortgage options

In December of 2014, mortgage giant Freddie Mac reduced the minimum down payment on certain mortgages payment on certain mortgages from 5% to 3% through a program called Home Possible Advantage(SM). This affordable conforming, conventional mortgage program was designed to “make responsible homeownership accessible to more first-time buyers and other qualified borrowers.”

For instance, someone buying a $300,000 home would only have to come up with a down payment of $9,000 as compared to $15,000. That $6,000 difference can mean a lot to a first time homebuyer.

Freddie Mac’s HomePossible Program

• This program is open to anyone who meets certain requirements, but first-time homebuyers must participate in a home ownership education and counseling program.
• All participants will have to pay for private mortgage insurance.
• Minimum credit score of 660.
• Income limit is 80% of the Area Median Income (AMI).

Fannie Mae’s Home Ready Mortgage Program

• This program is available to anyone who has not owned a primary residence for three years. Participants will not need to participate in an education and counseling program.
• All participants will have to pay for private mortgage insurance.
• Minimum credit score of 620.
• Income limit is 80% of the Area Median Income (AMI).

The move to create a low down payment home loan by both Fannie Mae and Freddie Mac are considered by many mortgage industry experts to “broaden the pool of home buyers and boost the real estate market.” They are also expected to help first time homebuyers who have good credit, but little cash, and have otherwise sat on the sidelines throughout the housing recovery up until this point.

Home Ready vs Home Possible

The HomeReady and Home Possible loans are similar but have a few key differences. With the HomeReady loan, borrowers need a credit score of at least 620. Depending on the lender, Home Possible borrowers need a credit score of at least 660.

One of the most notable is the requirements for multi-family homes. The HomeReady mortgage requires a 15% down payment for 2- to 4- unit homes and 25% for a 3- or 4-unit property. With the Home Possible loan, borrowers must 5% for all 2- to 4-unit homes. Like the single-family home mortgages, the borrower must use the property as their primary residence.

Other Freddie Mac and Fannie Mae Loan Options

Freddie Mac

The HomeOne® program is another 3% down payment mortgage option. Unlike the HomePossible loan, there is no income limit, and private mortgage insurance is not required.

Fannie Mae

The 3% Down-Payment program is very similar to the HomeReady mortgage but is only available to first-time buyers and must be used for a one-unit primary residence.

Conventional 97 Loan Options

Fannie Mae and Freddie Mac introduced the Conventional 97 program back in 2014 to compete with the FHA loan’s 3.5% down payment requirement. The 97 loan is called such because its loan-to-value ratio is as high as 97%. In order to qualify for a Conventional 97 loan, a borrower cannot have owned a property within the past three years and must have a minimum credit score of 620.

Is a 3% Down Mortgage the right option for me?

A 3% down payment mortgage is available to everyone, but may be particularly beneficial for:

• First time homebuyers
• Recently graduated students with high loans but a steady income
• Lower-income individuals who can’t put 20% down on a mortgage
• Homebuyers looking at real estate as part of a bigger investment portfolio

• Great for first time homeowners
• You can buy a house earlier
• Don’t need to save up for a large down payment

• Middle- to -high-income borrowers may not qualify
• Can’t be used for investment property
• High credit score is required
• Private mortgage insurance is required

How to take advantage of these new low down payment home loan programs

Getting mortgage terms with such a low down payment is not without its own set of stipulations. Both mortgage programs include the following terms:

• Loans are for fixed-rate mortgages on single-family homes.
• Home must be the borrower’s primary residence.
• Borrower must provide full documentation of the ability to repay the mortgage.
• At least one co-borrower is a first-time buyer.

Other options for cash-strapped homebuyers

There’s always a low government down payment loan option—which allows for homebuyers to have less than stellar credit and still get a loan with a down payment of at least 3.5%. Only approved lenders can offer this loan. This program also comes with its own set of terms, the most important of which includes:

• The borrower needs a credit score of 580 or higher.
• Borrower must pay upfront mortgage insurance premium and annual mortgage insurance premium.

At Blue Water Mortgage, we’re always looking out for homebuyers or homeowners with a questionable credit history.

Our team of experienced mortgage professionals has helped numerous clients secure the loan they need— even if they have a few red marks on their credit report. Contact us today to find out how we can help you.

The post How to Score a 3% Low Down Payment Mortgage appeared first on Example.

When it’s an emergency, a car loan is a great way to get money fast, especially if you have bad credit. Once everything settles down, it’s a matter of paying your debts on time. If you have problems paying off your car title loans or you’re looking for lower interest rates, you may want to refinance your car loan to get a better deal.

An auto refinance is a tool that every borrower needs to know. Even then, it’s important for everyone to understand that not every refinancing is made equal. You need to consider the right time to get better car loan rates.

So, when is it a good idea to refinance your car loan? This guide will help you figure out when that option is a right move for you.

What is Refinancing?

Before we teach you how to refinance, you need to understand some refinancing 101 terms to make everything easier. Refinancing loans allows you to pay and close whatever existing loan you have while you replace it with a new loan with better payment terms. Lowering a massive interest rate, for example, can be helpful for your daily needs, helping you save money in the long run.

In your case, you may want to refinance car loans for several reasons. These include:

• Lower car loan rates
• Shorten payment term
• Prevent defaulting on a car loan
• Borrow extra cash on top

You can do refinancing with the same lender or you can pick a different lending company to pay off your original loan.

The key to successful refinancing is communication with the lender, preferably starting with your original lender. If you are happy with your current lending team, it’s best to stay with them.

How To Refinance Your Car Title Loans

In order to refinance your car loan, you would need to follow a few steps, starting with an inquiry. Communicate with your loan provider that you are looking to refinance the deal. Those who don’t want to refinance with their current lenders can go to a different loan service provider altogether.

You would then need to collect all pertinent documents, which may include:

• Copy of the original loan certificate
• Certificate of vehicle inspection detailing if there are material repairs/changes to the vehicle since the original date of the loan
• Title of the vehicle, including VIN number
• Proof of identification

You would also need to know at what point you are within the current payoff so you will know how much more you need to pay to close the debt. Unlike title loans, refinancing car loan rates will request your credit score and your ability to pay for it. You can get a paid service to do credit checks for you, otherwise, you can authorize your potential lender to do the check.

Once everything is cleared, you can check with your lender on the loan repayment plans they have available for you. Consider the duration and interest of the new plan. New car loan rates would need to work within your existing budget. You don’t want to overextend yourself, putting into consideration your current financial situation.

When Should You Refinance Your Car Loan?

Refinancing car loans will almost always make sense if you save money at the end of the payment cycle. Auto refinance can save you around 20% of the original loan you have in interest rates and other fees. Here are some situations where a refinance might make sense for you.

If you have a better credit score now compared to when you requested a car loan, a refinance should work for you. Improvements in credit scores mean you are now more trustworthy in the eyes of lenders.

Refinancing also makes sense if you can get lower interest rates, a shorter loan payment term, or both. When interest rates drop, it’s best to refinance your loan to get out of payments quicker. For those who increased their income, refinancing for shorter car title loans can reduce the amount of interest you have to pay.

If your income has lowered due to loss of a job or a reduced income, it’s also critical that you opt to refinance for lower car loan rates. In this case, you would likely want to stretch your loan for a longer loan repayment schedule. It will not save you money but it will ease the burden of payment for you.

Pros and Cons of Auto Refinancing

Refinanced car title loans have several advantages that make them an attractive option for those who want better financial flexibility. Depending on your goals, you can get a wide array of benefits like lower interest rates and lower total cost for your loan.

As we noted, the primary reason most people try to refinance is to get lower interest rates. In many loans, interest rates can be debilitating, especially once you need to start paying it off. Refinancing should save you good money, which can range somewhere between 5% to 20% of your total loan.

Opting for higher monthly payments will also result in a shorter term, which frees up your finances as soon as possible. On the other side, you can also make your payments more manageable if you’re having difficulty paying off your title loan.

Refinancing offers a level of stability. As car title loans have generally shorter payment periods with a sizable interest rate, refinancing can help convert your title loan to something easy to manage. Some even refinance from car title loans to personal loans , allowing them to get additional money and a fixed APR.

Even with all the benefits, not everyone should get their auto loan refinanced. There are a variety of drawbacks that you need to consider, especially on a case-to-case basis. Not all car title loans will have these issues but it’s best to ask for financial advice first.

For starters, some lenders will have extra fees and penalties, especially if you’re getting a personal loan to pay off your title loan. Extra fees can cut into the savings that you are trying to get. Extending a loan may even create higher interest rates over time and impact your credit score , as it counts as a new loan.

The Bottom Line

Refinancing your car loan requires research and sound financial understanding. Ask yourself why you want to refinance and what you’re trying to get out of it. Do you want lower payments? Shorter or longer payment terms? Lower interest rates?

Once you know what to do, find the right lender for you. Talk to a lender that you can trust, with easy-to-understand loan structures designed so you have easier payments.

The post When Is It a Good Idea to Refinance Your Car Loan? appeared first on Example.

Do you have a leaky roof, broken garage door, or a run-down kitchen? Owning your home means you’ll inevitably need to fix something while you live there – whether it’s a small patch or redoing an entire floor. It can seem like a lot, but here are tips for how to get a home renovation loan or financing

While some renovations are exciting (like a new kitchen), others are must-fix maintenance issues (like a leaky roof) that pop up at inopportune times. Regardless of the timing, you have to address these maintenance issues quickly to prevent further damage – or a decrease in your home value.

However, it can be hard to pay for renovations (especially unexpected ones). While paying in cash is great, it’s not always feasible. Luckily, there are a variety of financing options to make paying for your renovation doable.

Your options are:

• Refinancing Your Mortgage
• Renovation Loan
• Credit Card
• Home Equity Investment

Wondering what these options entail and which one would be best for you? Read on to learn about financing options that simplify paying for your renovation.

Refinancing Your Mortgage

One option that can help you pay for your renovation is refinancing your mortgage. When you refinance, you get a new loan in place of your original mortgage. There are two main types of refinancing – traditional refinancing and cash-out refinancing.

Traditional Refinancing

With traditional refinancing, you take out a new loan on your home for the amount you have left to pay off.

If interest rates are low and you have good credit, you can potentially get a better interest rate. This saves you money in the long run – because you’ll pay less interest over time. Plus, it can make your monthly payments lower.

You have the option to get a new 30-year mortgage or a shorter mortgage term (like 15 years) when you refinance. While a 30-year term will lower your monthly payments more, you’ll pay more over the lifetime of your home in interest. If you can make the 15-year monthly payments, that’s the best option to avoid paying more with a refinanced mortgage.

A traditional refinance can help you lower your monthly payments, which provides more opportunity to save up for a renovation. This option works well if your renovation needs aren’t urgent. If they are, you should consider other financing methods.

Cash-Out Refinancing

Like traditional refinancing, cash-out refinancing involves replacing your original mortgage with a new one. However, with cash-out refinancing, you take out a new mortgage for more than you owe on your home.

After closing, you get money for the difference between the amount you owe on your home and the amount of the new loan. You might also be able to get a lower interest rate on your mortgage with cash-out refinancing – saving you money on monthly payments.

The largest downside of cash-out refinancing is that you’re taking out a loan that negates the progress you’ve made towards paying off your home. In effect, you’re selling the equity you have in your home back to the bank.

For example, if your home is worth $300,000 and you’ve paid off $150,000 of your mortgage, you’re halfway to paying off your home. With a cash-out refinance, you can take out a loan for 80-90% of your home’s value – so at most $270,000. If you do a cash-out refinance for that amount, you receive $120,000 in cash.

While that money can be incredibly helpful, you’re taking on an additional $120,000 in debt in your home – meaning you’ve only paid off $30,000 of your mortgage. Whereas you had paid down 50% of your mortgage, after a cash-out refinance, you’ve only paid down 10%. Plus, you’ll end up paying more interest on your home than you would have with your first mortgage.

A cash-out refinance is a good way to access some of the equity you’ve built in your home. However, it will increase the amount you have to pay on your home, so it’s an option you should consider carefully before doing.

Pros of Refinancing

• Lower interest rate
• Option for cash from equity
• Can decrease monthly payment amount

Cons of Refinancing

• Closing costs
• Need good credit
• Could owe more on your home than it’s worth in a market downturn

Renovation Loan

Another option for financing your renovation is to take out a loan to fund your home improvement. There are 4 main types of renovation loans:

• Home Equity Loans
• Home Equity Lines of Credit
• Government Loans
• Personal Loans

Home Equity Loans

Home equity loans are a type of second mortgage on your home that allows you to borrow against the equity you’ve built in your home. With a home equity loan, you’ll receive a lump sum for the amount you borrowed to use as you see fit (such as renovating your home).

Similar to cash-out refinancing, home equity loans allow you to use your home’s equity to fund your renovation. However, home equity loans are a separate loan for up to 90% of your home’s value. Your home is used as collateral for the loan – meaning your lender can foreclose on your home if you default on your loan.

Home equity loans tend to have higher interest rates than your first mortgage. You can have a loan term up to 30 years with a home equity loan. If you have built up a lot of equity in your home and have good credit (most home equity loans require at least 680 credit score), then this loan could be an option.

Home Equity Line of Credit

A home equity line of credit (HELOC) is another loan option that uses the equity you have in your home as collateral. HELOCs are also a type of second mortgage and do carry the risk of foreclosure if you default on them.

Unlike home equity loans, with a HELOC, you don’t get a lump sum. Instead, you get a revolving credit line with a maximum borrowing limit that’s established upfront. It works like a credit card. You can borrow from this credit line as many times as you want until you hit the maximum borrowing amount. You also don’t have to use all the available credit.

HELOCs have two periods – draw and repayment. During the draw period (usually the first 10 years), you can take as much money as you want from your credit line without needing to pay it back until the repayment period. During the repayment period (usually 10-15 years), you have a monthly payment for the amount you borrowed plus a variable interest rate.

HELOCs offer flexibility and the option to forego your monthly payment initially. They can be a good choice if you aren’t sure how much you need, you have good credit (at least 680), and plenty of equity in your home.

Government Loans

Government loans are another option to finance your renovation. Instead of a specific loan, government loans are a category of loans that are usually insured by the government. This makes them easier to qualify for if you have poor credit.

One of the most popular government loans for renovations is a Title I loan insured by the Federal Housing Administration (FHA). This loan can only be used for renovations that are necessary or improve the function of your home.

Another common government loan option is the Property Assessed Clean Energy Programs (PACE) loan, which can only be used for energy-efficient updates.

This loan can make it hard to sell your home because it’s attached to the property – instead of the borrower. As such, you repay it through property taxes instead of a lender. This means that you’ll have very high property tax bills, which can be a challenge to pay if you’re struggling financially.

Government loans are an option if you have poor credit and are making qualifying improvements.

Personal Loans

Personal loans are an unsecured loan that can be used for anything – including home renovations. Because they aren’t secured (unlike loans that use your home as collateral), your eligibility depends almost entirely on your credit score.

While you can be approved for a personal loan with a credit score as low as 580, you’ll likely have a very high interest rate – meaning you’ll pay back more over the lifetime of the loan.

Personal loans also generally have a shorter loan term (2-5 years), so you’ll have higher monthly payments than with other loan options. However, this will allow you to pay less interest.

If you have good credit, don’t want to risk your home, and can make higher monthly payments, a personal loan is an option.

Pros of Renovation Loans

• Variety of borrowing options
• Option to get a lump sum or credit line
• Some are easier to qualify for

Cons of Renovation Loans

• Most have strict credit requirements
• Added monthly expense
• Risk of foreclosure

Credit Card

Paying for your home improvement project with a credit card is another option to finance your renovation.

Nearly everyone has a credit card, so they offer an easy source of financing. If you have a very high limit on one card, you can entirely finance your renovation with one credit card. You can also spread the renovation cost between several lower limit cards.

While credit cards are an easy way to pay for your renovation, they should be used with a lot of caution. Credit cards generally have very high interest rates – with the average rate being 21.21%. This means that you’ll end up paying much more for your renovation if you can’t pay it off right away.

The high interest rates also make it easy to get into a payment hole you can’t get out of. Often, the payments you make on your project monthly will be less than the interest you accrue each month – making it nearly impossible to pay off your project.

Credit cards offer an easy way to finance your home improvement. However, high interest rates can make it nearly impossible to pay off your project. Carefully consider your options before deciding to finance your project with a credit card.

Pros of Credit Cards

• Easy to obtain
• Potentially able to finance entire renovation
• Only required to make a minimum monthly payment

Cons of Credit Cards

• Very high interest rates
• Likely to pay more over the lifetime of your project
• Easy to become overwhelmed with paying for your project

Home Equity Investment

While refinancing, loans, and credit cards are traditional methods for financing your renovation without cash, a Home Equity Investment from Point offers an alternative. With a Home Equity Investment from point, you can get up to $350,000 for financing your renovation.

Unlike a loan, you won’t have a monthly payment. Instead, you can repay Point’s investment any time in the 30-year term or when you sell your home. This allows you to pay for necessary renovations now without worrying about another monthly expense.

Point also considers a much wider range of homeowners than traditional lenders. Like, those with lower credit scores (as low as 500), or homeowners with higher debt to income ratios. If you’re unable to qualify for other financing options due to your financial situation, you still have a good chance to qualify with Point.

Plus, with Point, you don’t have to pay traditional interest on the money you receive. Instead, at the end of the agreement, you pay back the lump sum plus a portion of your home’s future appreciation. This appreciation amount is determined at the beginning of the process.

If you need to renovate your home but don’t qualify (or want) to refinance your mortgage, take out a loan, or use a credit card, Point provides a great option for financing your renovation.

Pros of Home Equity Investment

• Not a loan
• Don’t need great credit to qualify
• No monthly payments

Cons of Home Equity Investment

• Minimum funding amount of $35,000
• Point may need to pay off some of your creditors with part of your funds
• Not yet available nationwide

Wrapping It Up

Renovating your home can be an exciting time. You get to update your home and make sure everything is in working order.

However, it can be challenging to find a way to pay for your renovation. If you have necessary repairs, it can seem easier to live with a leaking roof, drafty home, or periodically flooded basement than to pay to fix those – especially if you’re already dealing with financial hardship.

While not fixing issues will save you money in the short term, deferring maintenance can cost you much more in the long run. Neglecting necessary fixes can cause more costly problems down the road – like foundation damage from a flooded basement. It can also dramatically decrease your home value because buyers want a fully functioning and move-in ready home.

The good news is that cash isn’t the only way to finance renovation projects. Your financing options include:

• Refinancing Your Mortgage
• Renovation Loan
• Credit Card
• Home Equity Investment

All of these options allow you to get the money you need for your renovation project. A Home Equity Investment from Point offers an alternative to traditional financing methods, and it isn’t a loan. Plus, you don’t have to worry about monthly payments, high interest rates, or strict eligibility requirements.

When you partner with Point, you simply get the cash you need. You can repay Point’s investment (plus a percent of your home’s future appreciation) any time in the 30-year term (or when you sell your home). If you want an alternative to traditional loans, see how much you can get with a quick quote from Point.

The post Tips for How to get a Renovation Loan or Financing appeared first on Example.

When you are nearing the end of your Bachelor’s degree programme, you are faced with an important question: Should you get a Master’s degree? And if yes, should you start with a Master’s programme directly, or should you first get a few years of work experience?

This guide is written by Gerrit Bruno Bloss, Founder and CEO of Study.eu. Between finishing his Bachelor’s degree and starting his Master’s programme in another country, he did an internship that also led him abroad.

Should you work, or should you study?

Career decisions are rarely easy. A big one is whether you should continue studying right after your Bachelors, or whether you should start working and do a Masters later on.

Both options have a lot of good reasons going for them. Let’s have a look at them:

Reasons to do a Masters instead of working:

• A Master’s degree makes it much easier to qualify for the jobs you want and increases job security in the long run. That’s especially true in an economic downturn; first, it’s easier to compete against applicants without a Masters, and second, those with only Bachelors might be among the first to be let go when times are tough.
• You’ll earn more money with a Master’s degree. With the additional qualification and the added responsibilities, you can expect a higher salary than with only an undergraduate degree.
• After a longer break from university, it will be more difficult to get back into the “groove” of learning. Some more selective universities, particularly in continental Europe (as opposed to the UK or Ireland), therefore prefer students with not too much work experience. (Yes, this sounds counterintuitive – because more is always better, right? The reasoning is this: Academic learning is very different from most typical jobs, and if you’ve been away from campus for too long, you may find it difficult to get back into the “rhythm” of attending lectures, writing essays, and studying.)
• If you don’t want to take a 2-year break, consider 1-year Masters! These are sometimes not enough to get into PhD programmes, but employers usually don’t see a big difference and value them just as highly.
• Some scholarships are only available to students who have no work experience, or are under a certain age. Postponing your Masters in favour of work may disqualify you.
• Some careers will de facto require professionals to have a Master’s degree to advance beyond a certain stage.
• If your goal is to do a PhD later on, a Masters is the right (and often necessary) next step after an undergraduate degree. Even if you could do a PhD without a Masters, it will be much more difficult.

Reasons to work and postpone your Master’s degree:

• Work experience can help figure out what to study: If you are unsure what subject to get a Masters in, get a relevant job, or try finding an internship. The experience you gain will help you make the right decision later on. This is especially true of versatile entry-level jobs like graduate/trainee programmes where you cycle through multiple departments, or a job in consulting where you would work with multiple clients across different industries.
• You can save money, and rely on your savings when you do a Masters later. Financing studies with your own money is much smarter than taking a student loan. That’s usually smarter than taking a student loan.
• Initial work experience in a relevant field adds value to your learning experience during a Masters. This can be in a full entry-level position, but also one or two internships can be very insightful. (For example, when I started my own Masters in Finance, I had already done internships where I learnt a lot about topics I would then explore further at university.) Even better: Try doing an internship abroad!
• If you didn’t finish your undergraduate degree with a good grade, or if you lack formal education in a certain subject, relevant work experience will help you get into a good university later.

How long should you work before you do a Masters?

If you plan to get work experience before you pursue a Master’s degree, there is the question of timing: When is the right time to leave your job and go back to university? While this is highly individual, consider working between 18 months and 3 years before you go back to university. Here are a few points to take into account:

• If you work longer, you can save more money. That’s a good argument to work longer. The only risk is that, with a good income, over time you’ll get used to comforts that you might not be able to afford while you are back at university.
• After your Bachelors, if you start in an “open-ended” entry-level job, then stay at that company for at least 18 to 24 months.
• On the other hand, if you only have 12 months before your desired Master starts, consider doing two internships (and maybe taking some time off). Less than 18 months is only advisable if it’s a fixed-term scheme, like a graduate trainee programme that runs for a set amount of time. Here’s why: Employers prefer to be able to plan ahead, because recruiting is an expensive and time-consuming process. If your CV contains too many signals that you change jobs often – and leaving your first job after 12 months can be such a signal -, your chances at being hired will decrease.
• Don’t wait too long: If you plan to go back to university, do not work longer than 3 to 4 years. There are two main reasons for this: First, it will become more difficult to readjust to university life and studying for courses. Second, because of that, some universities actually prefer MA/MSc applicants with a maximum of 3 to 4 years work experience. Also, you may find it a bit harder to make friends on campus if you are significantly older than your classmates.

If you have already worked longer than that and plan to go back to university, contact the admissions offices at the universities or business schools you are interested in. They will be able to answer how well their programmes suit you, and how successful other mature students have been before you.

Is a Master’s degree worth the cost?

Getting a postgraduate degree can be expensive, especially when pursuing it full time. You do not earn a salary for the one or two years you are at university; you may have to pay high tuition fees; and perhaps you study abroad in a country that’s more expensive than your home country. You may try to find a scholarship, but those are not available to all students. You could also get a student loan, but debt is never advisable if you can avoid it.

These factors add up, so you need to ask yourself if you can (or want to) afford it. The good news: Generally, getting a Masters is worth the money! While you may find it difficult to finance your studies, over time, the financial benefits will outweigh the initial costs. You will earn a higher salary and be much more flexible in your career.

The salary increase with a Master’s degree

With a Master’s degree, you will earn more money. That’s an undeniable fact. The question is: How much more money will it be? And that’s difficult to generalise. The added value of the degree depends a lot on your industry, your country and region, the shape of the economy, and your individual experience, skills and circumstances.

To get a rough idea of the potential salary increase, it pays off to look at labour market statistics. The European Statistical Office (Eurostat) reports that – among the whole workforce, i.e. at every age and level of experience – those employees with a Masters (or higher) earn on average 24% more than those workers with only a Bachelors, with differences in some countries as high as +53%:

Now, keep in mind that these numbers refer to the whole workforce, across all industries. Having a Masters will not automatically net you a 24% higher salary in your first job.

But your starting salary will be higher, you will be more likely to get promoted, and eventually earn substantially more, all the while enjoying higher job security. (And for you Americans considering grad school: The U.S. Bureau of Labor Statistics reports similarly promising numbers, with wage premiums of 14 to 89% for those with a Masters.)

This way, while getting a Masters may be an expensive investment, it generally pays off over time.

Do you need a Master’s to do a PhD?

A PhD (Doctorate) is the highest academic qualification a student can achieve, and requires substantial research work. To be accepted into a PhD programme, universities usually require students to have a Masters in a relevant field.

However, and especially in the UK, it is often theoretically possible to progress directly from a Bachelor’s degree to a PhD programme (“fast track”). The explicit minimum requirement for admission is then usually an “upper second class” Bachelors (2:1), or the equivalent from your country. (What a UK institution considers equivalent to a 2:1 differs from university to university.)

In other European countries, the eligibility criterion for acceptance into a PhD programme is often a certain number of ECTS credits that you are unlikely to have obtained after just a Bachelor’s programme.

In any case, doing a PhD directly after a Bachelors is more common in the “hard” sciences (STEM subjects) than it is with the humanities.

But before you apply to PhD programmes with only a Bachelor’s degree, ask yourself why you want to skip the Masters. If you’re already fed up with studying and doing academic work, then the research-heavy path of a PhD – and the career in academia that may follow – is most certainly not the right option for you, anyway.

Should you even get a Masters degree at all?

If you can, then get a Masters degree, and do it abroad. You will learn a lot, make friends from all over the world, grow as a person, and open up many new opportunities for yourself. And you can expect to earn more money, as well.

Don’t feel bad if you decide against a Masters: There are many reasons that can make it difficult, like family or finances. If the time just is not right, it is always possible to go back to uni or graduate school later in life.

If you dislike the idea of going back to college for two years, don’t forget about shorter Master programmes: You will find plenty of options that are 18 months, 1 year or even 9 months. 1-year Masters are particularly common in the UK and Ireland, and also available in the Netherlands, Belgium, Sweden, and elsewhere.

Should you get a second Master’s degree?

If you already have a Master’s degree, there are a few scenarios where a second Master’s degree may be worthwhile, and a few where it’s not a good idea. Let’s look at it in detail:

• Getting a second Masters in the same discipline is often not a smart decision – even if the subject is slightly different. That’s because course curricula will overlap and you’re investing time and money into “learning” things you should already know. And the new things you could learn by other means much more efficiently. In such a case, consult the curriculum to be sure it contains enough new things for you to learn.
• Some students with an MA or MSc in a Business subject plan to do an MBA later on, short for Master of Business Administration. This only makes sense in very few cases. At the very least, you should have relevant work experience before enrolling in an MBA, and you should make sure that the curriculum contains new topics. (Find MBA programmes in Europe)
• Regardless of the subjects, from an employer’s perspective it will look especially weird if you’re doing the second Masters directly after the first one. It may look like you failed to find a job or were afraid of even looking for one. All else being equal, an applicant with two Master’s degrees and zero work experience is usually less attractive than an applicant with one Master’s degree and one or two years of work experience.
• If you want to stay in academia, consider going for a PhD instead.

A second Master’s degree can facilitate a career change. Just make sure you have explored other options, too: See if you can change positions at your current employer, or find a different job elsewhere. And keep in mind that – depending on how different your new desired career is – your previous work experience may not be relevant, and you may be forced to start in a junior position again.

Some universities, especially in France and Belgium, offer Advanced Masters in addition to their “normal” Masters. Such programmes are specifically targeted at applicants who already have an previous Master’s degree – it’s an admissions requirement. They usually last 1 year, with usually 60 ECTS credits.

Here is another very good reason to get a second Masters, and maybe even in a similar discipline to what you studied before: If you will attend university in another country – in which you then plan to stay and work after graduation. Such a move will substantially increase your chances with local employers. You are already on location (and perhaps enjoy the benefits of a post-study work visa), and it will be easier for companies to judge the contents and quality of the degree you obtained in that country.

Also, don’t forget that a university degree is not the only way to learn and qualify yourself for new endeavours. Consider flexible alternatives like short courses, professional certificates or others.

What about doing a gap year?

When you cannot decide between a Master’s degree or working, doing a gap year might be another viable alternative.

There are no fixed rules for what a gap year is, or what you can spend your time doing. It’s a chance to travel, gain new experiences and make up your mind about what you want to do later in life. It’s also something you will likely not do later in life – so if it appeals to you and you have the chance, go for it!

Here are just a few ideas of what you could be doing during a gap year:

• “Work and travel” programmes
• Volunteering abroad for a cause you believe in
• Summer schools abroad
• Short classes (and maybe part-time online while you travel)
• Internships
• Just travel and enjoy some time off

Checklist: Is a Masters right for you?

A Master’s is not the right choice for everyone, and there is no shame in admitting it. If you are unsure, go through the lists below, and see which of the statements apply to you and your situation. And if you’re still unsure, don’t feel rushed: You can postpone this decision for a while and check again where you stand in 6 or 12 months.

Pursue a Master’s degree.

• . if you are passionate about the subject and excited at the perspective of attaining more expert knowledge.
• . if you are aware of the effort it takes to successfully finish a Masters, and willing to take it on.
• . if you can afford the tuition fees and cost of living while earning no salary, or earning less, depending on the study mode you choose.
• . if you are certain that the degree will positively impact your career.
• . if you can find suitable study options that match what you’re looking for.

Do not pursue a Master’s degree (yet).

• . if you are not certain what you want to do with your career.
• . if you struggled too much with coursework during your Bachelors – because a Masters will be more difficult.
• . if you cannot afford it even with scholarships, financial help from your family, wages from part-time work, or a small loan.

What are alternatives to getting a Master’s degree?

A Masters may not be the best way forward for you. Depending on the goals you want to achieve, the following options are worth exploring:

• Postgraduate diplomas (PgDip) and postgraduate certificates (PgCert): Postgraduate diplomas and certificates are credentials you will find offered especially at British universities. In many cases, their course syllabi are similar or equivalent to the respective Master’s programmes, but with a few courses removed, and usually they also do not require a thesis at the end. This makes these courses an attractive option if you are looking for Masters-level education but have less time and money to invest.
• Massive Open Online Courses (MOOCs) and micro-credentials: The internet has made education much more accessible, and online learning is easier than ever. There are a number of platforms where you can enrol in courses – some shorter, some longer – to learn about any topic you can imagine. Some offer exams or other ways leading to credentials.
• Try a different job at your current employer: If you are already working and your goal is a career change, perhaps that is possible at the company you work for – without going back to university. You might transfer to another department, try a completely new role or move to another office location where you would have different or more responsibilities.
• Professional qualifications and industry certifications: In many professional fields, you will find qualifications or certifications awarded to skilled professionals who undergo some exam. For example, in the financial industry, many professionals strive for the CFA qualification, which is considered somewhat comparable to an MSc in Finance. Such professional qualifications exist in nearly every field; note that they are usually not easy and require solid subject knowledge.

If none of these alternative options seem attractive to you, don’t give up: There are many ways to obtain a Master’s degree and you will find one that suits you best!

Gerrit is the founder and CEO of Study.eu. He holds a BSc in Informatics from Technische Universitat Munchen (Germany) and an MSc in Finance & Investment Management from the University of Aberdeen (UK). Gerrit started the company after many years working for a global corporate finance company, on three continents and advising clients in multiple industries. Over the past years, he has also volunteered as a career mentor to students who partake in his alma mater Aberdeen’s alumni mentoring programme.

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