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Tag: Student finances

  • “Not free money”: What students should know before getting their first credit card – MoneySense

    “Not free money”: What students should know before getting their first credit card – MoneySense

    Tips on building a credit score

    Paying your full balance each month shows you’re using credit correctly—you’re budgeting—your spending doesn’t exceed your earnings. Young consumers are still getting into trouble during this life phase, said Thuy Lam, a certified financial planner at Objective Financial Partners.

    “I see so many students—even when I was a student, my own friends—get into $20,000, $30,000, and $40,000 of credit card debt during school years because they don’t realize that, ‘Oh, it’s not free money,’” she said.

    Get a low limit and resist any offers to increase it until you’ve established good spending habits, Lam added. For students with minimal cash flow—not working part-time during school, little savings—this credit card barely needs to be used at all. 

    You can drop one recurring bill on your card, like a phone plan. A small amount is easy to pay completely and having it show up every month establishes a good history of timely payments.

    “I think the key is keeping in mind: what is the purpose of a credit card?” Lam said. “And for students, that’s No. 1: facilitating small bill payments and, No. 2: building and establishing credit.

    “The purpose of a credit card is not so we can spend freely, it’s because we live in a credit system,” she added. “It’s just important to establish credit and keep it healthy.” 

    Are rewards credit cards good for students?

    As for rewards, Taub pointed out that some students may have support from their parents, savings, RESPs, or scholarships—and with those resources, they might find value in travel, concerts or other lifestyle perks. 

    But she also noted most students are struggling financially; a recent TD survey found 65% of students said they were financially unstable. There may be more value in a simple cash-back card.

    The Canadian Press

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  • “I’m interested in visiting Europe”: How this student can build a credit score while earning valuable travel rewards – MoneySense

    “I’m interested in visiting Europe”: How this student can build a credit score while earning valuable travel rewards – MoneySense

    Before heading to school, Kinsey acquired her first credit card, an Alterna Savings Cash Back Visa. Although she also banks with EQ Bank, her primary bank card was with Alterna Savings and Credit Union. “So it was kind of natural and the easiest way for me to get a credit card,” she explains.

    Still new to credit cards, Kinsey doesn’t have a credit score—a number between 300 and 900 that shows lenders how creditworthy you are (the higher the score, the better). She’s looking to build one while also earning rewards—be it cash back (to “make the most of my spending”) or travel points (she’s an Aeroplan member). 

    Kinsey is an avid traveller—she recently visited Greece and Japan, where she has family. “I’ve been down south to Cuba and Florida. I went to Halifax, because I have some friends out there. I’ll travel within Canada, but I’m definitely more interested in visiting places in Europe,” she says. 

    Photo courtesy of Aya Kinsey

    What credit card features does she need? 

    Like many university students, Kinsey’s ambitious, eager to travel and just wants to find her financial footing. Given her existing ties to Alterna, it’s no surprise she ended up with an Alterna Savings Cash Back Visa—most Canadians stick with the same financial institutions for a good part of their lives. But, Kinsey can find a credit card better suited to her needs by expanding her horizons. 

    With Alterna, she gets 1 Collabria reward point per $1 spent on groceries, gas, public transit, select recurring bills and digital streaming purchases, and 0.5 points on all other purchases. The value of those points maybe an issue. The value of a Collabria point fluctuates based on what you’re redeeming for: cash back offers the best value, at $0.01 per point, but you must redeem in increments of 3,000 points (for $30), 5,000 points ($50) and 10,000 points (for $100), depending on the Collabria card you have. And when redeeming for travel, merchandise or gift cards, a point can be worth anywhere from $0.002 and $0.008. This means cardholders earn a maximum return of 1% in rewards ($0.01) for every dollar they spend. Often, the return is less than that. 

    For Kinsdey, it’s clear travelling is a priority. She needs a credit card that can cheapen the costs of flying to visit family and friends. At the same time, she’s just getting familiar with paying for life on her own, tuition being her biggest expense, and her income this year will be modest at best—she hopes to freelance as a content marketer. 

    So, right now, Kinsey’s primary goals should be building a credit score and increasing her income potential by completing her studies. Later in life, she will likely have access to plenty of premium travel credit cards to match her desired lifestyle—for example, she’ll need a personal annual income of $60,000 for Visa Infinite cards and $80,000 for World Elite Mastercards. 

    Which credit card should she get?

    Credit card pick #1: CIBC Aeroplan Visa Card for Students

    For her current situation, the CIBC Aeroplan Visa Card for Students would tick a lot of boxes. It’s a no-fee, no-income-required card. Kinsey’s already an Aeroplan points collector, and the CIBC Aeroplan Visa would add 1 Aeroplan point to her account per $1 spent on Air Canada purchases (such as future flights) and on groceries—she has a campus meal plan but expects it won’t cover all her food expenses. That’s in addition to points already earned as an Aeroplan member, through the “earn points twice” feature of Aeroplan credit cards. 

    Justin Dallaire

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  • “I’m interested in visiting Europe”: How this student can build a credit score while earning valuable travel rewards – MoneySense

    “I’m interested in visiting Europe”: How this student can build a credit score while earning valuable travel rewards – MoneySense

    Before heading to school, Kinsey acquired her first credit card, an Alterna Savings Cash Back Visa. Although she also banks with EQ Bank, her primary bank card was with Alterna Savings and Credit Union. “So it was kind of natural and the easiest way for me to get a credit card,” she explains.

    Still new to credit cards, Kinsey doesn’t have a credit score—a number between 300 and 900 that shows lenders how creditworthy you are (the higher the score, the better). She’s looking to build one while also earning rewards—be it cash back (“to make the most of my spending”) or travel points (she’s an Aeroplan member). 

    Kinsey is an avid traveller—she recently visited Greece and Japan, where she has family. “I’ve been down south to Cuba and Florida. I went to Halifax, because I have some friends out there. I’ll travel within Canada, but I’m definitely more interested in visiting places in Europe,” she says. 

    Photo courtesy of Aya Kinsey

    What credit card features does she need? 

    Like many university students, Kinsey’s ambitious, eager to travel and just wants to find her financial footing. Given her existing ties to Alterna, it’s no surprise she ended up with an Alterna Savings Cash Back Visa—most Canadians stick with the same financial institutions for a good part of their lives. But, Kinsey can find a credit card better suited to her needs by expanding her horizons. 

    Her Alterna card is associated with Collabria rewards, a loyalty program that works with some Canadian credit unions. She gets 1 Collabria reward point per $1 spent on groceries, gas, public transit, select recurring bills and digital streaming purchases, and 0.5 points on all other purchases. The value of a Collabria point fluctuates based on what you’re redeeming for: cash back offers the best value, at $0.01 per point, but you must redeem in increments of 3,000 points (for $30), 5,000 points ($50) and 10,000 points (for $100), depending on the Collabria card you have. And when redeeming for travel, merchandise or gift cards, a point can be worth anywhere from $0.002 and $0.008. This means cardholders earn a maximum return of 1% in rewards ($0.01) for every dollar they spend. Often, the return is less than that. 

    For Kinsdey, it’s clear travelling is a priority. She needs a credit card that can cheapen the costs of flying to visit family and friends. At the same time, she’s just getting familiar with paying for life on her own, tuition being her biggest expense, and her income this year will be modest at best—she hopes to freelance as a content marketer. 

    So, right now, Kinsey’s primary goals should be building a credit score and increasing her income potential by completing her studies. Later in life, she will likely have access to plenty of premium travel credit cards to match her desired lifestyle—for example, she’ll need a personal annual income of $60,000 for Visa Infinite cards and $80,000 for World Elite Mastercards. 

    Which credit card should she get?

    Credit card pick #1: CIBC Aeroplan Visa Card for Students

    For her current situation, the CIBC Aeroplan Visa Card for Students would tick a lot of boxes. It’s a no-fee, no-income-required card. Kinsey’s already an Aeroplan points collector, and the CIBC Aeroplan Visa would add 1 Aeroplan point to her account per $1 spent on Air Canada purchases (such as future flights) and on groceries—she has a campus meal plan but expects it won’t cover all her food expenses. That’s in addition to points already earned as an Aeroplan member, through the “earn points twice” feature of Aeroplan credit cards. 

    Justin Dallaire

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  • Is an RESP worth it? Yes, even if only for the government grants – MoneySense

    Is an RESP worth it? Yes, even if only for the government grants – MoneySense


    Why open an RESP? Grants and tax-deferred growth

    The federal government introduced the RESP nearly 50 years ago to help families save for their kids’ post-secondary education. The big draw for parents: Investment growth inside an RESP was (and still is) tax-sheltered. You can contribute up to $50,000 per child into an RESP, and the account can stay open for up to 35 years.

    In the years since the RESP was launched, the government has added grant programs to further encourage families to save.

    RESP grants

    • Canada Education Savings Grant: The CESG is a matching grant. For the “Basic CESG,” the government will match 20% of your contributions, up to $500 per year. To get the full $500, you would need to contribute $2,500 in a year. If your family’s adjusted income is below a certain amount, you can also receive the “Additional CESG,” which is an extra 10% or 20% on your first $500 per year. The CESG’s lifetime maximum, including any Additional CESG, is $7,200 per child.
    • Canada Learning Bond (CLB): Kids born in 2004 or later whose family’s adjusted income is below a certain threshold could get $500 the first year they’re eligible, plus another $100 each year until they reach age 15, if they continue to qualify (based on income). To apply for the CLB, you don’t need to make a personal contribution. The CLB’s lifetime limit is $2,000 per child. This grant is retroactive and kids can still be eligible up to the day before they turn 21.
    • British Columbia Training and Education Savings Grant (BCTESG): For B.C. residents only, this grant adds $1,200 to an RESP. You must apply between a child’s sixth and ninth birthdays.
    • Quebec Education Savings Incentive (QESI): For Quebec residents only, this grant matches 10% of your annual RESP contribution, up to $250. The QESI’s lifetime maximum is $3,600.

    Use an RESP calculator

    The RESP is a powerful savings tool because of the CESG and other government grants. To see how they can boost the growth of your savings, try out different scenarios using an RESP calculator. You can change the variables—including the child’s age, initial deposit, monthly contributions and projected rate of return—and see how your savings might stack up against the cost of post-secondary school.

    How to open an RESP account

    To start saving for your child’s college or university expenses and take advantage of government grants, you can open a plan with an “RESP promoter”—the government’s term for a financial institution that offers RESPs. You can open an individual plan or a family RESP, for multiple kids.

    Embark, a Canadian fintech focused on education savings and planning, helps families maximize their savings and government RESP grants. It also manages RESP investments, using a “glide path” approach tailored to your child’s age. So, the closer they get to starting college or university, the more conservative the approach for managing the investments.

    More about RESPs:

    This article is sponsored.

    This is a paid post that is informative but also may feature a client’s product or service. These posts are written, edited and produced by MoneySense with assigned freelancers and approved by the client.




    About Jaclyn Law

    Jaclyn Law is MoneySense’s managing editor. She has worked in Canadian media for over 20 years, including editor roles at Chatelaine and Abilities. Jaclyn completed the Canadian Securities Course in 2022.



    Jaclyn Law

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  • ETFs and RESPs: It’s always a good time to invest in education – MoneySense

    ETFs and RESPs: It’s always a good time to invest in education – MoneySense

    With that in mind, here’s a key date to circle on your calendar: Dec. 31. That’s the deadline for making RESP contributions to maximize government RESP grants each year. The Canada Education Savings Grant (CESG) matches 20% of what you put in, up to a limit of $500 annually. To receive the full $500, your contributions must total at least $2,500 by the end of December. The lifetime CESG maximum per beneficiary (child) is $7,200, and you can only catch up one year at a time—so, you can see why that annual deadline merits attention. That’s especially true if you only have a few years to save before your child heads off to school.

    Now is a great time to plan your contributions for this year. Here are some things to consider.

    Despite its name, an RESP is much more than just a cash savings account. In fact, just holding cash in an RESP may not always be the best strategy, as inflation can erode its value over time. It’s worth looking into different ways to grow that money.

    There’s no one-size-fits-all answer for the best RESP investment options. The right mix for your family will depend on several factors, including your financial circumstances, how much time you have, and how comfortable you are with risk. To help you make the most of your RESP, the Canada Revenue Agency (CRA) provides a list of “qualified investments” for this account, including the following:

    • Bonds: These can be either government-issued or corporate-issued. Bonds are generally seen as a safer investment compared to stocks, offering fixed interest payments over time.
    • Guaranteed investment certificates: GICs are issued by financial institutions, and you can choose terms such as one, two, three or five years. At the end of the term, you’ll receive a guaranteed amount of interest. Generally, you must wait until then to access your money.
    • Stocks: Investing in individual stocks can offer high returns, but they generally come with higher volatility than bonds and GICs. It’s essential to thoroughly research the companies you’re thinking about investing in—and remember, picking stocks can be risky!
    • Mutual funds: These funds can hold a mix of stocks, bonds and other assets. They offer diversification and are managed by financial professionals. Investors pay a percentage of the value of their investment towards annual management fees.
    • Exchange-traded funds: ETFs are similar to mutual funds in that they can hold a mix of assets like stocks and bonds. However, ETF shares trade on stock exchanges, just like individual stocks. Most ETFs are passively managed, but more active ETFs are coming onto the market.

    ETFs are a fast-growing asset class in Canada. They offer investors numerous benefits, including:

    • Built-in diversification: ETFs may bundle various assets, providing wide exposure across different sectors, asset classes and geographies, which helps in reducing investment risk.
    • Professional management: With ETFs, a fund manager oversees the selection and rebalancing of holdings, often trying to replicate specific stock market indices (such as the S&P 500), thus reducing the complexity of managing individual stocks and bonds.
    • Ease of transactions: ETFs are traded on stock exchanges and are accessible through financial advisors and online brokers.
    • Flexible asset allocation: ETFs offer a spectrum of asset allocation options, so they may be suitable for investors with different risk tolerances and investment timelines.

    Choosing the best ETF for your RESP largely depends on two variables: your time horizon (how long until your child needs the funds) and your risk tolerance (how much market fluctuation and potential losses you can comfortably handle).

    To simplify this decision-making process, one option to consider is an all-in-one ETF, such as those offered by Fidelity. These ETFs offer different asset allocations and risk classifications. Fidelity’s All-in-One ETFs have the following target asset allocations and risk classifications (as at Oct. 31, 2023):

    Fidelity All-in-One ETFs Conservative Balanced Growth Equity
    Risk classification Low to medium Low to medium Medium   Medium
    Ticker FCNS FBAL FGRO FEQT
    Equity 40% 59% 82% 97%
    Fixed income 59% 39% 15% 0%
    Crypto 1% 2% 3% 3%
    Source: Fidelity Investments Canada ULC

    Fidelity’s suite of All-in-One ETFs offers strategic diversification, with most of them giving you exposure to global bonds and stocks from all market sectors. Interestingly, they even include a small exposure to cryptocurrency (1% to 3% depending on the fund), adding a modern twist to traditional investment portfolios. (Read more about crypto in Fidelity ETFs.)

    Tony Dong

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  • Is studying in Quebec still worth it for out-of-province university students? – MoneySense

    Is studying in Quebec still worth it for out-of-province university students? – MoneySense

    But starting next fall, prospective students from outside the province may face a steep increase in tuition fees at schools like McGill University, Concordia University and Bishop’s University, thanks to new rule imposed by the Quebec provincial government, designed to promote and protect the French language. If implemented, the change could prompt many out-of-province students to reconsider their education plans. Here’s what’s being proposed and what it means for students.

    Current tuition fees for out-of-province and international students studying in Quebec

    Out-of-province students who study in Quebec already pay a lot more in tuition fees than Quebec residents. The table below shows the tuition fees for undergraduate students enrolled in a business program for the 2023-24 academic year. (Note that fees may vary by program of study, and the numbers listed exclude administrative, compulsory and other fees.) 

    University Language of instruction Quebec students Out-of-province students International students
    McGill University English $2,881 $8,992 $65,604
    Concordia University English $2,881 $8,992 $33,300
    Bishop’s University English $2,881 $8,992 $27,006
    UQAM French $3,640 $9,750 $24,600
    Université Laval French $2,881 $8,992 $23,668
    Université de Sherbrooke French $2,881 $8,992 $28,830

    As you can see, many out-of-province students currently pay more than three times more than Quebec residents. International students pay the highest fees of all. In general, French-language universities seem to charge international students less than English-language universities. 

    Proposed Quebec tuition fee changes

    In October 2023, the Quebec government outlined plans to raise tuition fees for out-of-province undergraduate students from $8,992 to $17,000 per year. The province is now reportedly reconsidering its initial plan, and it may instead only raise tuition for out-of-province students to $12,000 per year. Either way, students who are currently in the system would be exempt from the tuition hikes (except those who change programs), as would PhD students. 

    While the new rules would apply to all universities, the province’s three English-language universities—Bishop’s University, Concordia University and McGill University—have been in the news because they would be most directly impacted. Most of Quebec’s out-of-province students study in English. 

    International students may also be affected, though less than out-of-province students. Keeping with the province’s original plan, international students would pay a minimum of $20,000 per year in tuition. Universities would continue to have the right to impose additional discretionary fees. 

    There’s no doubt that these changes would impact incoming out-of-province and international students. On top of needing to come up with more money for tuition, the changes could influence the quality of education, particularly at Quebec’s English-language universities. McGill University, for example, says it could lose 60% of its out-of-province students. It projects that this would contribute to a drop of around $42 million in annual revenue, which would have a domino effect on staffing and resources available for students. 

    So, is studying in Quebec still worthwhile? 

    Canadian students outside of Quebec who want to study in the province could see tuition costs jump by $3,000 to $8,000 more per year starting in 2024. That would be a financial shock for anyone, let alone students, who often don’t have a consistent or reliable source of income. So, how can you decide if studying in Quebec is still worth it? Start by answering the following questions. 

    Sandy Yong

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  • Top 5 questions about family RESPs – MoneySense

    Top 5 questions about family RESPs – MoneySense

    What is a family RESP? 

    Canadians can choose from two types of RESPs: individual and family. Both are registered accounts, meaning that they’re registered with the federal government, and they allow your savings and investments to grow on a tax-sheltered basis. 

    Here are the key features you should know about for both types of RESPs:

    • The lifetime RESP contribution limit per beneficiary (child) is $50,000. 
    • A beneficiary can have more than one RESP (for example, if a parent opens one and a grandparent opens one), however, the maximum contribution is still $50,000. 
    • The Canada Education Savings Grant (CESG) matches 20% of the first $2,500 in RESP contributions per year. That’s $500 in free money per year! 
    • If your family’s adjusted income is below a certain amount (for 2023, it was $106,717), you can also receive the “Additional CESG,” which adds up to $100 more, after you contribute your first $500 per year. 
    • The CESG’s lifetime maximum, including Additional CESG, is $7,200 per child. 
    • Low-income families also receive the Canada Learning Bond (CLB), with no personal contribution required, to a lifetime maximum of $2,000 per child.
    • Families in British Columbia and Quebec have access to additional grants: $1,200 in British Columbia and up to $3,600 in Quebec. (Read more about these provincial RESP grants.)
    • You won’t get a tax deduction for contributing to an RESP like you would with a registered retirement savings plan (RRSP), but your contributions won’t be taxed when withdrawn.
    • Government grants and growth inside an RESP are taxed when withdrawn, but they’ll be taxed at the child’s marginal tax rate—which will likely be very low. 
    • You can turn an individual RESP into a family RESP anytime, as well as add and remove beneficiaries from the plan. 

    Now that we’ve covered RESP basics, let’s tackle five of the most common questions about family RESPs we get at Embark. 

    1. How are funds in a family RESP divided among beneficiaries? 

    Here’s where the flexibility of a family RESP comes into play. Outside of the CLB, government grants and the growth on the investments can be shared among the plan’s beneficiaries—and the amounts don’t have to be equal. So, if one child’s education costs more than another’s, you can divide the funds accordingly. You can also start using RESP funds for one child’s post-secondary education while another is still in grade school and collecting grant money. It’s nice to have that flexibility.

    2. What if one or more beneficiaries do not use their RESP funds?

    In a family RESP, one child’s unused funds can be allocated to another child’s education. If none of the beneficiaries attend school, you could keep the plan open in case they change their mind. 

    You could also transfer any unused income in the RESP to your or your partner’s RRSP as an Accumulated Income Payment (AIP). The transfer limit is $50,000, and you would have to return any government grants. Three other requirements to be aware of: You must have enough RRSP contribution room to make the transfer; the RESP must have been open for a minimum of 10 years; and the beneficiaries must be age 21 or older and not pursuing further education.

    If you don’t intend to add any more beneficiaries to the plan, and you don’t need the RESP any longer, you could close it. If eligible, your original contributions will be withdrawn tax-free, but you will pay taxes on any investment gains—unless they’re transferred to your RRSP as an AIP.

    3. Can you add another generation of beneficiaries to an existing family RESP?

    The short answer is no. Within a family RESP, all beneficiaries must be related by blood or adoption, meaning only siblings can be added to a family RESP. This would prohibit a grandparent from adding their grandchildren to a family RESP that was previously opened for their children. Additionally, since an RESP can only be open for 35 years, adding a younger sibling to a plan initially opened for someone close to or at withdrawal age would significantly cut down the time the younger beneficiary has to accumulate savings before the RESP would be closed.

    Andrew Lo

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  • Rent or buy? Here’s how to make that decision in the current real estate market

    Rent or buy? Here’s how to make that decision in the current real estate market

    Choosing whether to rent or buy has never been a simple decision — and this ever-changing housing market isn’t making it any easier. With surging mortgage rates, record rents and home prices, a potential economic downturn and other lifestyle considerations, there’s so much to factor in.

    “This is an extraordinarily unique market because of the pandemic and because there was such a run on housing so you have home prices very high, you also have rent prices very high,” said Diana Olick, senior climate and real estate correspondent for CNBC.

    By the numbers, renting is often cheaper. On average across the 50 largest metro areas in the U.S., a typical renter pays about 40% less per month than a first-time homeowner, based on asking rents and monthly mortgage payments, according to Realtor.com.

    In December 2022, it was more cost-effective to rent than buy in 45 of those metros, the real estate site found. That’s up from 30 markets the prior year.

    How does that work out in terms of monthly costs? In the top 10 metro regions that favored renting, monthly starter homeownership costs were an average of $1,920 higher than rents.

    But that has not proven to be the case for everyone.

    Leland and Stephanie Jernigan recently purchased their first home in Cleveland for $285,000 — or about $100 per square foot. The family of seven will also have Leland’s mother, who has been fighting breast cancer, moving in with them.

    By their calculations, this move — which expands their space threefold and allowing them to take care of Leland’s mother — will be saving them more than $700 per month.

    ‘You don’t buy a house based on the price of the house’

    “You don’t buy a house based on the price of the house,” Olick said. “You buy it based on the monthly payment that’s going to be principal and interest and insurance and property taxes. If that calculation works for you and it’s not that much of your income, perhaps a third of your income, then it’s probably a good bet for you, especially if you expect to stay in that home for more than 10 years. You will build equity in the home over the long term, and renting a house is really just throwing money out.”

    Mortgage rates dropped slightly in early March, due to the stress on the banking system from the recent bank failures. They are moving up again, although they are currently not as high as they were last fall. The average rate on a 30-year fixed-rate mortgage is 6.59% as of April — up from 3.3% around the same time in 2021.

    But that hasn’t significantly dampened demand.

    “As the markets kind of bubbled in certain parts of the country and other parts of the country priced out, we’ve seen a lot of investors coming in looking for affordable homes that they can buy and rent,” said Michael Azzam, a real estate agent and founder of The Azzam Group in Cleveland.

    “We’re still seeing relatively high demand” he added. “Prices have still continued to appreciate even with interest rates where they’re at. And so we’re still seeing a pretty active market here.”

    Buying a home is part of the American Dream

    The Jernigans are achieving a big part of the American Dream. Buying a home is a life event that 74% of respondents in a 2022 Bankrate survey ranked as the highest gauge of prosperity — eclipsing even having a career, children or a college degree.

    The purchase is also a full-circle moment for Leland, who grew up in East Cleveland, where his family was on government assistance.

    “I came from a single-mother home who struggled to put food on the table and always wanted better for her children … it was more criminals than there were police … It is not the type of neighborhood that I wanted my children to grow up in,” said Jernigan.

    The new homeowner also has his eye on building a brighter future for more children than just his own. Jernigan plans to purchase homes in his old neighborhood, renovate them and create a safe space for those growing up like he did.

    “I’m here because someone saw me and saw the potential in me and gave me advice that helped me. … and I just want to pay it forward to someone else” Jernigan said.

    Watch the video above to learn more.

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  • What to know if you’ve applied for student loan forgiveness

    What to know if you’ve applied for student loan forgiveness

    NEW YORK — President Joe Biden’s plan to provide up to $20,000 in federal student loan forgiveness has been blocked by two federal courts, leaving millions of borrowers wondering what happens next. The administration plans to appeal. Here’s what to know if you’ve applied for relief:

    WHAT HAPPENS NOW?

    While the application for relief has been taken down from the Federal Student Aid website, applications that have already been filed are on hold while the appeal works its way through the courts.

    “Courts have issued orders blocking our student debt relief program,” the Education Department said on its site. “As a result, at this time, we are not accepting applications. We are seeking to overturn those orders.”

    A federal judge in Texas ruled that the plan overstepped the White House’s authority. Before that, a federal appeals court in St. Louis put the plan on temporary hold while it considers a challenge from six Republican-led states.

    Still, advocates believe the administration will succeed in court.

    “We’re really confident they’re going to find a way forward to cancel people’s debt,” said Katherine Welbeck at the Student Borrower Protection Center.

    Experts say student loan forgiveness has the potential to end up before the Supreme Court, meaning this could be a lengthy process.

    WHEN DO PAYMENTS RESUME?

    Most people with student loan debt have not been required to make payments during the coronavirus pandemic, but payments are set to resume, along with the accrual of interest, in January.

    Biden previously said the payment pause will not be extended again, but that was before the courts halted his plan. He’s now facing mounting pressure to continue the pause while the legal challenges to the program play out.

    WHAT IF I ALREADY APPLIED FOR RELIEF?

    More than 26 million people applied for cancellation over the course of less than a month, according to the Education Department. If you’re one of them, there’s nothing more you need to do right now.

    About 16 million people already had their applications approved, according to the Biden administration. Yet because of court actions, none of the relief has actually been delivered.

    The Education Department will “quickly process their relief once we prevail in court,” White House Press Secretary Karine Jean-Pierre said.

    WHAT IF I HAVEN’T YET APPLIED FOR RELIEF?

    For those who have not yet applied, the application for debt cancellation is no longer online. But there are still steps people can take to make sure their debt is canceled, should the appeal be successful, according to Welbeck.

    “People should still check their eligibility,” she said. “As news changes, people should look out for updates from the Department of Education.”

    You can sign up to receive the latest from the Federal Student Aid website here.

    WHO QUALIFIES, SHOULD THE APPEAL SUCCEED?

    The debt forgiveness plan announced in August would cancel $10,000 in student loan debt for those making less than $125,000 or households with less than $250,000 in income. Pell Grant recipients, who typically demonstrate more financial need, would get an additional $10,000 in debt forgiven, for a total of $20,000.

    Borrowers qualify if their loans were disbursed before July 1.

    About 43 million student loan borrowers are eligible for some debt forgiveness, with 20 million who could have their debt erased entirely, according to the administration.

    ARE THERE OTHER PATHWAYS TO CANCELLATION?

    For those who have worked for a government agency or a nonprofit organization, the Public Service Loan Forgiveness program offers cancellation after 10 years of regular payments, and some income-driven repayment plans cancel the remainder of a borrower’s debt after 20 to 25 years, according to Welbeck.

    “Borrowers should make sure they’re signed up for the best income-driven repayment plan possible,” Welbeck said. In July, the administration will be reviewing and adjusting some of the accounts enrolled in these plans. You can find out more about those plans here.

    Borrowers who have been defrauded by for-profit schools may also apply for borrower defense and receive relief on that account, Welbeck said.

    SHOULD I RESUME PAYMENTS WHEN THE PAYMENT PAUSE IS LIFTED?

    Advocates, including the Student Borrower Protection Center, are still urging the president to extend the pandemic-era payment freeze, arguing that students are entitled to the promised cancellation before the January repayment date arrives.

    That said, Welbeck recommends logging on to your account, making sure you know who your servicer is, your due date, and whether you’re enrolled in the best income-driven repayment plan, as you resume making payments.

    The Student Borrower Protection Center is holding regular webinars on how to follow the changing policy in the coming months. You can sign up for those here.

    If your budget doesn’t allow you to resume payments, it’s important to know how to navigate the possibility of default and delinquency on a student loan. You can read more about those here. Both can hurt your credit rating, which would make you ineligible for additional aid.

    If you’re in a short-term financial bind, you may qualify for a deferment or a forbearance. With either of these options, you can talk to your servicer about ways to temporarily suspend your payments. You can learn more about those options here.

    WHAT ELSE SHOULD I KNOW?

    Watch out for scams and get information only from trusted sources such as the Federal Student Aid site of the Department of Education.

    IS IT POSSIBLE THE DEBT WON’T BE CANCELLED?

    Yes. The issue of debt forgiveness is now before the courts.

    The administration is not saying whether or not it’s exploring other options for canceling debt if it loses its appeals. But advocates point to other ways the debt might be forgiven, including through the Higher Education Act.

    HOW DO I PREPARE FOR STUDENT LOAN PAYMENTS TO RESTART?

    Betsy Mayotte, President of the Institute of Student Loan Advisors, encourages people not to make any payments until the pause has ended.

    “I’ve been telling people to pretend they’re paying their student loan, but to put it into an interest-bearing account for now if you’re able,” she said. “Then you’ve maintained the habit of making the payment, but earning a little bit of interest as well. There’s no reason to send that money to the student loans until the last minute of the zero percent interest rate.”

    Mayotte recommends that borrowers use the loan simulator tool at StudentAid.gov or the one on TISLA’s website to find the repayment course that best fits their needs. Once you plug in your information, it tells you what your monthly payment would be under each available plan, as well as what the long-term costs amount to.

    “I really want to emphasize the long-term,” Mayotte said. “Oftentimes I see people who might be having a financial struggle. They’ll find a lower monthly repayment option, and then, ‘Set it and forget it.’”

    Mayotte encourages people to switch to higher payments if their financial situation stabilizes, so the loan doesn’t end up costing more in the long run.

    Other useful tips that can shave costs for borrowers:

    — If you sign up for automatic payments, the servicer takes a quarter of a percent off your interest rate, according to Mayotte.

    — Income-driven repayment plans aren’t right for everyone. That said, if you know you will eventually qualify for forgiveness under the Public Service Loan Forgiveness Program, it makes sense to make the lowest monthly payments possible, as the remainder of your debt will be cancelled once that decade of payments is complete.

    — Re-evaluate your monthly student loan repayment at tax time, when you already have all your financial information in front of you. “Can you afford to increase it? Or do you need to decrease it?” Mayotte said. “Always look at your long-term student loan management strategy.”

    — Break up payments into whatever ways work best for you, whether that means two installments during the month, so it’s not a large lump sum at the end or the beginning, or setting aside cash in envelopes for designated purposes.

    “Even if it’s an extra $5 or $20 a month, that’s a good strategy,” Mayotte said. “If they can afford to pay a little more per month — the more you pay and faster you pay, the less you’ll pay in the long run.”

    Mayotte gave one example of a borrower with debt from higher education in the six figures. She was recently married, and she and her husband and kids decided to save every five dollar bill in a cookie jar to go towards the loans.

    “That added up to a few more hundred dollars each quarter,” Mayotte said. “Everybody has a different financial personality. There are those who are really good at budgets. There are people who need to play games and trick themselves. And people shouldn’t judge each other people’s financial personalities.”

    —-

    The Associated Press receives support from Charles Schwab Foundation for educational and explanatory reporting to improve financial literacy. The independent foundation is separate from Charles Schwab and Co. Inc. The AP is solely responsible for its journalism.

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  • Companies lure hourly workers with college tuition perks

    Companies lure hourly workers with college tuition perks

    NEW YORK — When Daniella Malave started working for Chipotle at 17, the main benefit she was seeking was free food. As it turned out, she also got a free college education.

    While working full time for the chain, Malave completed two years of community college with annual stipends of $5,250 from Chipotle. After that, she enrolled in the company’s free online college program, through which she earned a bachelor’s degree in business management from Wilmington University in 2020.

    “I didn’t have to pay for my education,” said Malave, 24, who now works as a recruiting analyst for Chipotle in New Jersey. “Every time I say it out loud, I’m like, ‘Is this real?’”

    Chipotle is one of more than a dozen companies that have launched free or almost-free college programs for their front-line workers over the last decade. Since 2021 alone, Walmart, Amazon, Target, Macy’s, Citi and Lowe’s have made free college available to more than 3 million U.S. workers.

    Companies see the programs as a way to recruit and retain workers in a tight labor market or train them for management positions. For hourly employees, the programs remove the financial barriers of obtaining a degree.

    Thousands of people are now taking advantage of the benefits. Starbucks, which operates an online college program through Arizona State University, says 22,000 workers are currently enrolled in its program. Guild Education, which administers programs for Walmart, Hilton, Disney and others and offers online programs at more than 140 schools, says it worked with 130,000 students over the last year.

    But some critics question whether the programs are papering over deeper problems, like pay so low that workers can’t afford college without them or hours so erratic that it’s too hard to go to school in person.

    “I do think they are providing these programs to skirt around the issue of just paying people more, giving people more certainty, improving their quality of life,” said Stephanie Hall, a senior fellow at The Century Foundation, a nonpartisan think tank.

    Hall said a lack of data also makes it difficult to judge the programs’ effectiveness. Chipotle, Walmart, Amazon and Starbucks, for example, don’t share graduation rates, in part because they’re hard to calculate because students often take a semester off or take more than four years to earn a degree. Rachel Carlson, CEO for Guild Education, which also doesn’t reveal graduation rates, says the more relevant data is whether college classes help employees get promotions or wage increases.

    Others question the quality of the online programs and whether students’ degrees will be marketable or help them pursue other careers, especially since many companies limit what employees can study. Discover only fully funds 18 bachelor’s degrees at eight universities through Guild, for example.

    “My sense is that most of these programs are hoping that employees would stay with the company,” said Katharine Meyer, a fellow in the governance studies program for the Brown Center on Education Policy at the Brookings Institution.

    Amazon for its part touts college programs that offer opportunities outside the company, like nursing. But Walmart pared down the number of programs it offers to 60 from 100 because it wanted to focus on skills that would align with careers at the company.

    More than 89,000 workers have participated in Walmart’s college program and more than 15,000 have graduated, said Lorraine Stomski, Walmart’s senior vice president of associate learning and leadership.

    Tanner Humphreys is one of them. He started working at Walmart in 2016, bouncing around hourly jobs as he tried to accommodate his in-person class schedule at Idaho State University. But under the company’s online program, which it launched with Guild in 2018, he transferred his credits to Southern New Hampshire University and graduated in February with a bachelor’s degree in computer science. At 27, he now works at Walmart’s headquarters for its cybersecurity team as a salaried employee.

    “I was working paycheck to paycheck, living with a whole bunch of friends to pay my rent and stuff,” he said. “The change from an hourly to salary is truly life changing.”

    Companies paying for college or graduate school isn’t new. But for decades, the benefit was mostly offered to salaried professionals. In many cases, workers were required to spend thousands of dollars for tuition up front and then get reimbursed by their company.

    Starbucks’ program, which launched in 2014, was initially a tuition-reimbursement program, but in 2021, it began covering tuition costs upfront. Now, 85% of the company’s stores have at least one employee in the program, which will celebrate its 10,000th graduate in December.

    Carlson said companies see an average return of $2 to $3 for every dollar they put into education because it saves recruitment and retention costs. Walmart said participants leave the company at a rate four times lower than non-participants and are twice as likely to be promoted.

    “If I know it’s going to cost me $7,000 to have my cashier not show up tomorrow, I would rather spend our average of our partners today — $3,000 to $5000 — paying for her to go to college,” Carlson said.

    Companies say the programs also give opportunities to minorities. Macy’s, which started its program with Guild earlier this year, said that half of the women enrolling are women of color.

    Some companies, like Chipotle and JPMorgan Chase, offer online programs through Guild as well as stipends students can put toward in-person learning at local institutions. Amazon’s college programs offer a mixture of online and in-person learning at local community colleges or universities.

    Hall said she would like to see more companies offer that kind of flexibility, since online learning isn’t ideal for everyone.

    Zachary Hecker, 26, a Starbucks employee in New Braunfels, Texas, began working toward his bachelor’s in electrical engineering last summer through the company’s college program.

    Hecker appreciates the free tuition, but he often wishes he could attend classes in person or have more choices beyond Arizona State. His classes are challenging, he said, and professors aren’t always to meet and offer guidance.

    But Carlson said online classes are ideal for the average Guild enrollee, who is a 33-year-old woman with children. Carlson said students in its programs often lack consistent access to a car and need to be able to study anytime, like after kids are in bed.

    The chance to earn a free degree can be life-changing. Angela Batista was 16 and homeless when she started working for a Starbucks in New York.

    “College was never in my dream,” Batista said, now 38. “I didn’t even have the audacity to fantasize about it.”

    This December, she will graduate from Arizona State University with a degree in organizational leadership paid for by Starbucks. And now her son, who also works at Starbucks, is starting work toward his own degree.

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  • Companies lure hourly workers with college tuition perks

    Companies lure hourly workers with college tuition perks

    NEW YORK — When Daniella Malave started working for Chipotle at 17, the main benefit she was seeking was free food. As it turned out, she also got a free college education.

    While working full time for the chain, Malave completed two years of community college with annual stipends of $5,250 from Chipotle. After that, she enrolled in the company’s free online college program, through which she earned a bachelor’s degree in business management from Wilmington University in 2020.

    “I didn’t have to pay for my education,” said Malave, 24, who now works as a recruiting analyst for Chipotle in New Jersey. “Every time I say it out loud, I’m like, ‘Is this real?’”

    Chipotle is one of more than a dozen companies that have launched free or almost-free college programs for their front-line workers over the last decade. Since 2021 alone, Walmart, Amazon, Target, Macy’s, Citi and Lowe’s have made free college available to more than 3 million U.S. workers.

    Companies see the programs as a way to recruit and retain workers in a tight labor market or train them for management positions. For hourly employees, the programs remove the financial barriers of obtaining a degree.

    Thousands of people are now taking advantage of the benefits. Starbucks, which operates an online college program through Arizona State University, says 22,000 workers are currently enrolled in its program. Guild Education, which administers programs for Walmart, Hilton, Disney and others and offers online programs at more than 140 schools, says it worked with 130,000 students over the last year.

    But some critics question whether the programs are papering over deeper problems, like pay so low that workers can’t afford college without them or hours so erratic that it’s too hard to go to school in person.

    “I do think they are providing these programs to skirt around the issue of just paying people more, giving people more certainty, improving their quality of life,” said Stephanie Hall, a senior fellow at The Century Foundation, a nonpartisan think tank.

    Hall said a lack of data also makes it difficult to judge the programs’ effectiveness. Chipotle, Walmart, Amazon and Starbucks, for example, don’t share graduation rates, in part because they’re hard to calculate because students often take a semester off or take more than four years to earn a degree. Rachel Carlson, CEO for Guild Education, which also doesn’t reveal graduation rates, says the more relevant data is whether college classes help employees get promotions or wage increases.

    Others question the quality of the online programs and whether students’ degrees will be marketable or help them pursue other careers, especially since many companies limit what employees can study. Discover only fully funds 18 bachelor’s degrees at eight universities through Guild, for example.

    “My sense is that most of these programs are hoping that employees would stay with the company,” said Katharine Meyer, a fellow in the governance studies program for the Brown Center on Education Policy at the Brookings Institution.

    Amazon for its part touts college programs that offer opportunities outside the company, like nursing. But Walmart pared down the number of programs it offers to 60 from 100 because it wanted to focus on skills that would align with careers at the company.

    More than 89,000 workers have participated in Walmart’s college program and more than 15,000 have graduated, said Lorraine Stomski, Walmart’s senior vice president of associate learning and leadership.

    Tanner Humphreys is one of them. He started working at Walmart in 2016, bouncing around hourly jobs as he tried to accommodate his in-person class schedule at Idaho State University. But under the company’s online program, which it launched with Guild in 2018, he transferred his credits to Southern New Hampshire University and graduated in February with a bachelor’s degree in computer science. At 27, he now works at Walmart’s headquarters for its cybersecurity team as a salaried employee.

    “I was working paycheck to paycheck, living with a whole bunch of friends to pay my rent and stuff,” he said. “The change from an hourly to salary is truly life changing.”

    Companies paying for college or graduate school isn’t new. But for decades, the benefit was mostly offered to salaried professionals. In many cases, workers were required to spend thousands of dollars for tuition up front and then get reimbursed by their company.

    Starbucks’ program, which launched in 2014, was initially a tuition-reimbursement program, but in 2021, it began covering tuition costs upfront. Now, 85% of the company’s stores have at least one employee in the program, which will celebrate its 10,000th graduate in December.

    Carlson said companies see an average return of $2 to $3 for every dollar they put into education because it saves recruitment and retention costs. Walmart said participants leave the company at a rate four times lower than non-participants and are twice as likely to be promoted.

    “If I know it’s going to cost me $7,000 to have my cashier not show up tomorrow, I would rather spend our average of our partners today — $3,000 to $5000 — paying for her to go to college,” Carlson said.

    Companies say the programs also give opportunities to minorities. Macy’s, which started its program with Guild earlier this year, said that half of the women enrolling are women of color.

    Some companies, like Chipotle and JPMorgan Chase, offer online programs through Guild as well as stipends students can put toward in-person learning at local institutions. Amazon’s college programs offer a mixture of online and in-person learning at local community colleges or universities.

    Hall said she would like to see more companies offer that kind of flexibility, since online learning isn’t ideal for everyone.

    Zachary Hecker, 26, a Starbucks employee in New Braunfels, Texas, began working toward his bachelor’s in electrical engineering last summer through the company’s college program.

    Hecker appreciates the free tuition, but he often wishes he could attend classes in person or have more choices beyond Arizona State. His classes are challenging, he said, and professors aren’t always to meet and offer guidance.

    But Carlson said online classes are ideal for the average Guild enrollee, who is a 33-year-old woman with children. Carlson said students in its programs often lack consistent access to a car and need to be able to study anytime, like after kids are in bed.

    The chance to earn a free degree can be life-changing. Angela Batista was 16 and homeless when she started working for a Starbucks in New York.

    “College was never in my dream,” Batista said, now 38. “I didn’t even have the audacity to fantasize about it.”

    This December, she will graduate from Arizona State University with a degree in organizational leadership paid for by Starbucks. And now her son, who also works at Starbucks, is starting work toward his own degree.

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  • GOP-led states appealing dismissal of suit over loan relief

    GOP-led states appealing dismissal of suit over loan relief

    ST. LOUIS — Attorneys for six Republican-led states are asking a federal appeals court to reconsider their effort to block the Biden administration’s program to forgive hundreds of millions of dollars in student loan debt.

    A notice of appeal to the Eighth U.S. Circuit Court of Appeals was filed late Thursday, hours after U.S. District Judge Henry Autrey in St. Louis ruled that since the states of Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina failed to establish standing, “the Court lacks jurisdiction to hear this case.”

    Separately, the six states also asked the district court for an injunction prohibiting the administration from implementing the debt cancellation plan until the appeals process plays out.

    President Joe Biden on Monday officially launched the application process for the debt cancellation program and announced that 8 million borrowers had already applied for loan relief during the federal government’s soft launch period last weekend. Biden was scheduled to discuss the program Friday in a speech at Delaware State University.

    The plan, announced in August, would cancel $10,000 in student loan debt for those making less than $125,000 or households with less than $250,000 in income. Pell Grant recipients, who typically demonstrate more financial need, will get an additional $10,000 in debt forgiven.

    The Congressional Budget Office has said the program will cost about $400 billion over the next three decades. James Campbell, an attorney for the Nebraska attorney general’s office, told Autrey at an Oct. 12 hearing that the administration is acting outside its authorities in a way that will cost states millions of dollars.

    The cancellation applies to federal student loans used to attend undergraduate and graduate school, along with Parent Plus loans. Current college students qualify if their loans were disbursed before July 1. The plan makes 43 million borrowers eligible for some debt forgiveness, with 20 million who could get their debt erased entirely, according to the administration.

    The announcement immediately became a major political issue ahead of the November midterm elections.

    Conservative attorneys, Republican lawmakers and business-oriented groups have asserted that Biden overstepped his authority in taking such sweeping action without the assent of Congress. They called it an unfair government giveaway for relatively affluent people at the expense of taxpayers who didn’t pursue higher education.

    Many Democratic lawmakers facing tough reelection contests have distanced themselves from the plan.

    The six states sued in September. Lawyers for the administration countered that the Department of Education has “broad authority to manage the federal student financial aid programs.” A court filing stated that the 2003 Higher Education Relief Opportunities for Students Act, or HEROES Act, allows the secretary of education to waive or modify terms of federal student loans in times of war or national emergency.

    “COVID-19 is such an emergency,” the filing stated.

    The HEROES Act was enacted after the Sept. 11, 2001, terrorist attacks to help members of the military. The Justice Department says the law allows Biden to reduce or erase student loan debt during a national emergency. Republicans argue the administration is misinterpreting the law, in part because the pandemic no longer qualifies as a national emergency.

    Justice Department attorney Brian Netter told Autrey at the Oct. 12 hearing that fallout from the COVID-19 pandemic is still rippling. He said student loan defaults have skyrocketed over the past 2 1/2 years.

    Other lawsuits also have sought to stop the program. Earlier Thursday, Supreme Court Justice Amy Coney Barrett rejected an appeal from a Wisconsin taxpayers group seeking to stop the debt cancellation program.

    Barrett, who oversees emergency appeals from Wisconsin and neighboring states, did not comment in turning away the appeal from the Brown County Taxpayers Association. The group wrote in its Supreme Court filing that it needed an emergency order because the administration could begin canceling outstanding student debt as soon as Sunday.

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