Tagged: graduate

Beyond Loan Repayment- “Big Picture” Financial Planning

Any of you who have ever been in my office may have noticed that I have two watercolor prints on my walls both of which are beach scenes. Why? It keeps me focused everyday on “the” goal…the little beach house in South (or North) Carolina that someday in retirement will be mine. It’s a tangible motivation and my continual reminder that I need to stick to a financial plan to get to that goal (because I won’t be transported down to Myrtle Beach by magic).

And to that point if you think post graduate money management involves only your loan repayment…it doesn’t. Certainly loan repayment is paramount to your immediate finances but it also needs to be coordinated and put in context with other more futuristic financial decisions. Because as you enter the “working world” you are going to be bombarded with a gazillion (yes that many!) financial choices particularly when you are faced with electing your employee benefits for health insurance, retirement, and life insurance, to name a few. And most likely you will be under pressure to make those choices and complete new employee paperwork asap so that you can begin your actual job. But the reality is that those short term decisions you are making now have significant long term consequences. So while you might be saying “retirement…but I just started this job”…the fact is that financial planning for the future needs to be on your radar now. (Need proof? A simple test is to use any of the 401K and 403B retirement calculators on the American Institute of CPA’s 360% of Financial Literacy site to compare what happens if you begin saving at age 25 vs. 35 vs. 45 etc.).

So it’s in your best interest to learn as much as you can about financial planning so that when you are faced with these choices, you can make the best ones. Financial planner John Caserta is a longtime friend Yale Law School who has presented workshops and has offered one-on-one counseling to YLS students to help them get their financial house in order post graduation. Check out John’s article on “Why some people may never find financial freedom“ for some key do’s and don’ts of beginning the financial planning process as a young professional.

As an extra bonus…John Caserta will be visiting YLS on April 11th and April 17th (12:00-5:00 p.m.) to offer complimentary individual counseling sessions to our students. These are meant as basic introductions to planning and students at all levels of “financial expertise” are encouraged to attend. You can sign up for your session with John by emailing financialaid.law@yale.edu – space is limited. Take advantage of this opportunity because when it comes to financial planning…the future really does start now.

The Means To Live Within Your Means

I could give a million and one euphemistic quotes on saving money. My personal favorite: “if saving money is wrong, I don’t want to be right” from that wise sage William Shatner (presumably as the Priceline Negotiator and not Captain Kirk).

The bottom line is that as a YLS student we expect you to live within a budget and,as such, assume that you will need to modify spending and make financial sacrifices along the way. The same budget or Cost of Attendance must be applied to all students within the same degree program. Why do we do this? Because the Department of Education Title IV federal regulations which allow us to disburse federal loans dictate that we must do this… “students must be awarded on the basis of a Cost of Attendance comprised of allowable costs assessed all students carrying the same academic workload”.

What the regulations do allow is that every school can develop their own budgets based on estimate “allowable” costs specific to their institution and their student populations. In the case of YLS we do something that not every school does… each year we survey our current students on their primary “living” costs to ensure that what we are allotting for this expense is (again as defined by the federal regulations) “reasonable”.

This year 44% of our current enrollment (including both JD and Graduate students) responded to the “Cost of Living” survey (up from 38% last year). That’s a very good response rate and as such probably gives us a pretty accurate sampling. Aside from the obvious data on “rent” or housing we individually poll on a variety of other expense types including utilities, phone, cable/internet, food and local transportation. We average those individual expenses by type and then add them together to determine a typical inclusive “monthly” expense which we can then project for the nine month academic year to determine an average “cost of living” . The result for 2012-2013 is:

COL Table Black White

The survey also yields other interesting facts on how YLS students live which we factor into our decision on the cost of living allotment:

  • The majority of our students (35.6%) make the decision to live alone and, as such, are most likely incurring higher monthly costs (Although we did see a slight increase (18% to 22%) in the number of students living with two or more roommates from last year to this year’s survey).Col Living arrangement Chart 3
  • Most students are paying rents in either the $600-$800 range (31%) or $800-$1000 range (25%) Though we did see an increase (from last year) in the number of students at the extreme low end $400-$600 of the rent scale. Again in the survey rent was defined as the portion of the monthly payment that you personally are responsible for.
  • Surprising (to me at least) …our 1L students have the lowest total living costs per academic year ($14,031) while our 3Ls have the highest ($16,074). I would welcome feedback on the blog from 3Ls as to why that occurs.COL by class color version

The survey also monitors some additional expenses including books/class supplies where the average of $849 per year is within the $1,000 allotment already included in the student budget as a separate allowance. Average childcare costs in the survey were $10,377 per year and YLS presently allows an additional $17,500 in childcare costs to be covered by non COAP eligible loans.

Finally, the survey asks an open ended question regarding “what other ongoing expenses do you have not captured elsewhere on the survey”? There is always a great diversity in the answers to this question – my personal favorites this year being the response of “Gym, Tan, Laundry” (did you seriously think you could slip a Jersey Shore reference in there and I would not get it?) .

Of these “ongoing expenses” the most common response was Travel- particularly as cited for the holidays and to visit significant others. YLS specifically budgets an equitable travel allowance into all student budgets based on home state (as reported on the Need Access application or FAFSA.) The allotment is based on making two roundtrips- getting to YLS in the Fall, going home for the holiday break in December, returning to YLS in January and going home at the end of the academic year in May. Any other travel beyond that schedule is a personal budget choice. However always be aware that if emergency travel or if a personal crisis arises which necessitates travel, we can exercise professional judgment based on a justifiable expense to increase the travel allotment. As much of a romantic as I am, visiting a love sick significant other does not constitute “emergency” travel.

I also want to address a survey comment that YLS cost of living is less than other Yale Graduate and Professional Schools. The reality is that we have one of the highest cost of living allowances because on top of the basic living expense we build travel and books/supplies as separate budget items. Most of the other G&P schools are incorporating those costs in their general living allowance.

So… the reality is that the current $17,000 allowance well surpasses the average costs of $15,003 per academic year as documented in survey and provides a buffer of almost $2,000 to support those other “ongoing expenses”- however you may prioritize them. As such, we feel the $17,000 living allotment, in addition to the travel allowance by state and with the book/supplies allowance of $1,000, meets the federal guidelines as “reasonable” expenses for the 2013-2014 student budget.

Does it meet your own personal needs? Maybe not. Does it allow you to maintain a standard of living to which you are accustomed? Maybe not. But it’s still an equitable allowance to live “like a student” for the short time that you are here in New Haven. Will you need to make some sacrifices or make priorities? Probably. Is it going to be a challenge to live on what is essentially “fixed income&rdqurdquo;? Most likely yes. It is going to be a difficult to receive an influx of funds at the start of a term (no more weekly paychecks) that then has to stretch for several months? Of course. Ultimately will you need to carefully budget your funds? Absolutely yes.

And that’s also where the Financial Aid Office comes in… to support you as you face the potential challenge of living within that allowance and to assist you in that budgeting process. Our office has many budgeting tools and web resources that we can share with you. We can also sit down with you through one on one counseling to actually develop a personal budget based on your own financial aid, your expected refund and your monthly expenses. We also offer workshops throughout the year which provide basic budgeting how tos, manageable spending tips and credit dos and don’ts .

Because despite the preconceived notion that the budget in some way “hinders” you, the reality is that the budget parameters actually “help” you minimize your overall loan borrowing and , ultimately, ensures that 25-30 years from now you are still not paying off the lifestyle “choices” you made in law school .

The “Execution” of YLS Financial Aid- A Welcome Message for the Class of 2016

With our Class of 2016 beginning to take shape, I thought it was appropriate to reach out and extend a welcome on behalf of the YLS Financial Aid Office. You’ll find our office tucked in the York St./Grove St. corner of the Law School in M13. In order to get here, you’ll have to pass through one of the Law School’s carved stone archways. But this one has a very vivid depiction of a man with a head in the guillotine and the executioner above (with a big smile on his face no less). Will that be symbolic of your financial aid experiences at YLS? Is there a little foreshadowing going on?
executionLet me give you all assurances that it will not be. Here is my solemn promise of no beheadings. I do, however, reserve the right to fill the moat outside my office with small alligators. (Yes, there is an actual moat outside our office windows).

Because for us, financial aid at YLS is a very personal process. Our small class size allows us to not only carefully review all the application forms and documents you submit , but also reach out to you directly if we see something that perhaps was done in error or doesn’t make sense. We also recognize that applications and forms may not truly capture unique personal circumstances and as such, encourage you to contact our staff and share those situations that may impact your aid award. And because managing financial aid may be a whole new world for you, don’t ever hesitate to ask the most basic questions related to the application process or the aid award itself.

Our office believes we have an obligation to ensure that our students are “saavy financial aid consumers” – we want you to understand the financial decisions you are making while in Law School, know the options and choices you have, and also leave here with a plan for how those financial decisions you made will then impact your life going forward. That’s why we counsel students not only as they enter YLS but all through their enrollment (and beyond because of our loan repayment assistance program COAP).

All Financial Aid Offices have their own “culture” and ours is to have an open door policy – literally the door in M13 is always open. You don’t have to make an appointment (although it helps), you can drop by and you won’t have to go through a “gatekeeper” to reach either myself or our Assistant Director, if we are available, we will welcome you in and try to help in any way that we can.

Because the real secret is this…I have the open door policy for a very selfish reason. The best part of my day is actually when I get the chance to sit down with a student and chat. Far better than preparing aid estimates on Excel charts or running statistical analysis. It’s those counseling sessions where I get to know our wonderful (and they are) students on a different level than just a paper financial aid application or a tax return. And FYI- we always have a full candy bowl in the Financial Aid Office as another temptation to drop by…just to say hello and grab a handful of chocolate. (Trust me, you may need that sugar rush some days here).

So by way of further introduction, (yes we are indeed real people and not robots processing aid applications) … here are the folks you will come to know in YLS Financial Aid… …Roselyn, our Senior Administrative Assistant, is our office historian having been at YLS for 14 years (she has truly seen it all!) and, more importantly, is the undisputed “Queen of COAP”– our loan repayment assistance program. Kellie, our Assistant Director, came to YLS after spending 18 years at Yale Student Financial Services (so she is a great resource for dealing with that office on billing and loan issues) and now, in addition to making aid awards, also coordinates our Summer Public Interest Fellowship program. Fun fact about Kellie…she is an avid gardener and baker- two indispensable skill sets for the workplace! And myself, Jill, the Director, a relative newbie to YLS having joined the staff in 2011- returning to financial aid after a few years away in the student services field because I actually (gasp!) missed financial aid. Want to strike up a conversation with me (aside from talking about financial aid)- bring up college basketball (I live for March Madness!), cats (my husband fears I am well on my way to being the “crazy cat lady” of the neighborhood) or yoga (Om!) .

So now that you know us, it’s time for us to get to know you. We look forward to the opportunity to email, talk and meet as you begin and move through the financial aid process.

Just a reminder that we have a new website “ How to Apply for Financial Aid- New Admits” which will hopefully walk you through the aid award process. And this is the time when you should be submitting your FAFSA and Need Access application if you wish to receive a provisional financial aid award letter.

Pay Attention to the “Pay As You Earn” Loan Repayment Option

Hot off the press from the Department of Education is a new addition to your loan repayment plan options. And pleasantly this plan has a much more descriptive and understandable name that the other plans (i.e. Standard, Extended, Graduate Extended etc.) – it is quite simply “Pay As You Earn”.

“Pay As You Earn” is a new income based payment plan akin to the existing Income Based Repayment (IBR) or Income Contingent Repayment (ICR) plans. “Pay As You Earn” is generally considered the most “generous” of the repayment programs and was announced by President Obama last October acting as one of the cornerstones of his student loan relief efforts. Final regulations on the program were issued by the U.S. Department of Education last week and the specifics of the plan are already up on the DOE student loan website.

“Pay As You Earn” is really an accelerated version of the existing Income Based Repayment program. Whereas IBR was based on making loan payments equivalent to 15% of your discretionary income (as calculated by the DOE) Pay as You Earn drops that payment to 10% of your discretionary income. Also whereas IBR forgave any existing loan balances after 25 years of consistent payments, Pay As You Earn will forgive significantly earlier at the 20 year mark.

The key to Pay As You Earn is not just determining if you can meet the “partial financial hardship” qualification (based on loan debt to income) but also have specific eligibility based on your loan portfolio. To qualify you must have taken out your first federal loan after September 30, 2007 and you must have also received a loan after September 30, 2011. As such, if you are a current YLS student with just law debt you more than likely meet that standard.

But just like Income Based Repayment there a couple of things to be wary of with Pay As You Earn. First if you r payments based on income are calculated so low, you may not be keeping up with the interest building on your loan and may have negative amortization. Second, the forgiven amount at the 20 year mark can be a taxable occurrence in the calendar year when the forgiveness occurs (increasing your tax liability significantly). Finally, if you have any FFEL loans (federal student loans provided through private lenders) those cannot be repaid using Pay As You Earn (although they will be counted in your total loan debt to determine the financial eligibility hardship). If you are not sure if you have FFEL loans- check your loan history at the National Student Loan Database.

And Pay As You Earn is already stirring up some controversy among critics who feel it is primarily benefitting those graduate and professional students with high loan debt (with some specific references to Law students) more so than undergraduates.

Very high hopes have been placed on Pay As You Earn to revolutionize student loans repayment and significantly impact the student debt crisis. Referencing the Pay As You Earn initiative, former President Clinton himself stated that “this will change the future for young America”.

Right now the DOE readily admits that its biggest challenge is simply getting the word out there that this new repayment option exists for both current and new borrowers amongst the myriad of other loan repayment programs they offer.

For more information – view the DOE Pay As You Earn information sheet or use the Pay As You Earn calculator to estimate eligibility and loan repayment. If you have questions on your eligibility, use of the calculator or how this program may work for your personal law debt, stop by the Financial Aid Office for one on one loan counseling.

“Upgrade” With Help from A YLS Technology Loan

In April, I made the big leap and ditched my dinosaur of a home PC for an IPad (such are the dangers of working a block away from the allure of the Apple Store). But for all of us there comes a time when no matter how trusty the old computer has been or what fond memories you may have of it … it’s just time to let it go quietly into the night.

So this is reminder that if you are at that point you can avail yourself of the YLS Technology Loan to make that new purchase. The loan is made on a reimbursement basis meaning that you will need to make and fund the purchase yourself (not just “ordered” but actually purchased). After doing so bring the receipts to the Financial Aid Office and complete a budget revision form.

Reimbursement is made by adding an additional loan to your financial aid award package. In most cases this will be an additional Graduate PLUS loan or Yale Graduate and Professional Loan (for international students). If you already have a Grad Plus or Yale G&P loan in place adding the extra loan requires no additional loan paperwork or promissory notes. There is one tricky thing in terms of cash flow… because student loans must disburse 50% for Fall term and 50% for Spring if you purchase a computer in the summer or at any time in the Fall term you won’t have the full reimbursement until the beginning of the spring term when the second installment of the loan comes in. Some students have waited to purchase until the very end of the Fall term or even into the Spring term itself so that the full reimbursement comes in all at once.

The reimbursement amount is based on your year at YLS. 1Ls are reimbursed at $3,000, 2Ls at $2,000 and 3Ls at $1,000. As such, if you are planning on taking advantage of this buying the computer in the 1L year will allow the maximum reimbursement. Any computer purchases made in the summer are reimbursable but only at the next academic year level (because the loans will not be put into place until that academic year). So if you are a rising 3L and purchase a computer in July- you will be set up with a $1,000 technology loan for the 2012-2013 academic year.

What constitutes “technology” for the sake of this loan? Well we are making the loan on the basis that the technology purchased is essential and necessary to your studies at YLS. That being said we maintain a fairly liberal definition of what we will allow under this reimbursement. In addition to a core computer we would allow accessories and or ancillary devices (printer, scanner etc.) up to the reimbursement level if all purchased at the same time. If you feel a tablet or IPad serves your needs better than a PC or Macbook that’s fine as well. But keep in mind it is a one time only reimbursement so whatever you purchase you will need to live with for the balance of your YLS life.