New Option on the Advance Child Tax Credit Portal

Families can now easily update their mailing address in the IRS Child Tax Credit portal. This is very important for families who choose to receive their payments in the mail, rather than by direct deposit.

To use the portal, go to the IRS Child Tax Credit page and select “Manage Payments.” The portal now allows users to:

  • Change their mailing address;
  • Switch from receiving a paper check to direct deposit;
  • Change the account where their payment is direct deposited; or
  • Stop monthly payments for the rest of 2021.

If you run into challenges using the portal, our July 12 post offers a few tips. An earlier post explains what is different about the Child Tax Credit in 2021, including who is eligible for the expanded credit. If you previously were eligible, based on your income in prior years, but are no longer eligible now, you might consider opting out of the advance payments, which are being sent monthly on the 15th of each month through the end of 2021.

Log into the portal by midnight (Eastern Time) on August 30 if you want the changes to kick in for the September 15 payment. The IRS expects to add a few more functions to the Child Tax Credit portal in coming months, including the ability to:

  • Add or remove children in most situations;
  • Report a change in marital status; or
  • Report a significant change in income.

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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College Students and Money: Discretionary spending adds up

This is the fourth in a series this week about financial issues faced by students in college and trade schools. Yesterday’s post discussed discretionary spending. Today we share an example that can help students as they consider how much they will spend on discretionary items.

Suppose Student A and Student B are financially identical, except Student A spends $450 a month on discretionary spending and Student B spends $150 a month. Student A spends $300/month more on discretionary expenses through four years of college (I’m including summers too, since most students continue having discretionary spending through the summer). When four years are over, suppose Student B has total student loan balance of $20,000. Since they were identical except for discretionary spending, that means Student A’s total student loan debt will be $34,400, or $14,400 more than Student B.

The current interest rate on federal student loans is 3.73% per year. Let’s suppose they repay their loans using the standard 10-year repayment plan, although there are other plans available with longer repayment terms and lower monthly payments. On the 10-year plan, Student B will pay $200/month. Student A, on the other hand, will pay $345/month. 

As fresh college graduates, will Student A be ready to deal with a monthly loan payment of $345, instead of a payment of $200? That extra $145 student loan payment is the consequence of their extra college spending; extra spending during college limits their options in the future. Understanding the consequences of their actions helps students make informed decisions they can live with in the long run.

What’s the “right” decision on discretionary spending? Only the student can decide. I have heard of college juniors and seniors who look back on their spending in their first one or two years of school and regret it. Of course there may be others who look back at how little they spent and wish they had let themselves have a little more fun.

When considering how much total educational debt you are willing to accumulate, consider two rules:

  • Borrow as little as you can. This is in bold, because I think of this as the “golden rule” about student debt. This rule applies in virtually every situation, and is above any other rules.
  • Avoid borrowing more (total) than your expected first year’s salary. This is a commonly accepted “rule of thumb.” Example: if you hope to start out as a civil engineer making $60,000, then $60,000 should be the MAXIMUM you are willing to borrow for your education.
    Notice: this doesn’t mean you should go ahead and spend extra because “you can afford” to borrow $60,000. The golden rule is above all other rules – no matter what, it is wise to borrow as little as you can.

Tomorrow – the last in our series “College Students and Money.” Do you think the subject of credit cards will come up?

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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College Students and Money: It’s only a pizza…

This is the third in a series this week about financial decisions during the student years. Yesterday’s post focused on student loans. Today we’ll take a look at one factor that affects how much students end up borrowing.

As mentioned yesterday, one of the best things you can do to minimize the pain of paying back your student loans is to borrow as little as possible. When planning for college expenses, many students logically focus on room and board, tuition, and books. It’s important to also plan for another group of expenses I’ll call “discretionary spending.” As the name indicates, these are expenses that the student can choose, but are not essential to their education. This category includes clothes and non-essential transportation, but probably the biggest components are food and fun — from spring break, to a fraternity dance, to ordering Chinese food, and more.

Note: food (whether eating out or ordering in) is often a big component of a typical student’s budget — even students who have a meal plan. Ordering pizza to share with roommates doesn’t seem like a big deal. Not surprisingly, though, expenses that on their own “aren’t a big deal” can become a big deal when they happen frequently. Paying for 1/3 of a pizza one time is only a few dollars; if pizza night is twice a week for the whole school year, that can really add up.

Many students separate their discretionary spending from their school spending – I’ve heard students explain that the only money they spend for fun is the money they earn at their job. They believe their fun spending is completely separate from their student loans. In most cases, however, the truth is that every dollar they spend increases the amount they borrow. If they spend $50 (of their wages) on weekend fun, that means that in the long run they end up borrowing $50 more than they would have otherwise. If they hadn’t spent that money, they could have borrowed $50 less. 

I am definitely not suggesting that students shouldn’t have fun. It is perfectly okay – even important – to spend some money on fun activities with friends – that’s a wonderful part of the college experience. I do suggest, however, that students who decide on a limit for their discretionary spending (and stick within that limit) will benefit in two ways: 

  • They will accumulate less total college debt; and 
  • They will learn valuable “adulting” skills: planning ahead, deciding on priorities, and recognizing trade-offs (e.g. if I spend this money today, then I won’t have it for homecoming next weekend). 

How much should students’ discretionary spending be? I can’t answer that. Parents can’t (and shouldn’t try to) answer that. At the beginning, even the student may not know what to plan for. I’d encourage students to keep track of their spending for the first several weeks, then look that over. Based on that information, they can make an informed decision about how much they will allow for discretionary spending. Deciding on a limit also helps us resist peer pressure. Many students spend more than they want to spend, simply because they are pulled into their friends’ or roommates’ plans. Those activities are fun, but if there are no limits, the financial toll is substantial.

Realistic projection of discretionary spending will give more realistic projections when you use the Your Financial Path to Graduation tool from the Consumer Financial Protection Bureau. Tomorrow, we’ll share an example of how discretionary spending plays out over time. For today, I leave you with these reflections that relate not only to college life but to all phases of life:

  • Having fun and having a healthy social life is a very important part of life. It is not, however, necessary to spend a lot of money to enjoy social activities.
  • Friends who push you to spend more than you feel comfortable with may not be the ideal friends.
  • You may find that if you stick to a limit on your discretionary spending, your friends will be grateful too!

This is the third in a series on planning for financial decision-making in college or trade school. Tomorrow – an example. Friday – a quick look at three other important topics.

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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College Students and Money: Be Smart about Student Loans

This is the second in a series. Yesterday’s post offered guidance on effective ways for parents to talk to their young adult children about school-related financial issues.

Most college students use student loans to help pay for their education. There are still some families (including moderate-income families) whose children complete college without any loans — through a combination of money saved up over the years, plus scholarships and earnings from a job — but that is not the norm. So if you are expecting to rely on student loans, you are pretty typical.

While student loans create valuable opportunities, they can contribute to problems if they feel like “easy money.” It seems easy to some students: just sign the paper, and the money is yours. It is years later (or even decades later), as they repay the loans, when some students understand that loans are far from “easy money.” Students start out a step ahead if they recognize that reality from the get-go.

Two key strategies exist for reducing the “payback pain” of student loans:

  • borrow less – as little as you can
  • Choose your loans wisely. (Yes, you have choices — shop around!)
    Here are some tips to get you started with that.

In general, Federal Student Loans are the most desirable type – low fixed interest rates, and a range of repayment options. Best of all are Federal subsidized student loans, available to some students based on need. Subsidized means the government pays the interest for you for as long as you are a student (more than half time); that’s a huge bonus. Example: a student who borrows $5,000/year for 4 years with a subsidized loan will have a starting loan balance of $20,000 when they graduate. By contrast, if that was an unsubsidized loan, interest would accrue even while they are still in school. If the interest rate is 4%, their starting loan balance when they graduate would be $22,081, because of the interest charged for those four years of borrowing.

A student’s eligibility for Federal Student Loans, and the maximum amount they can borrow, is determined by their financial aid application (FAFSA), and is part of their financial aid offer from the school, which may also include scholarships and grants. When students need to borrow more than they are eligible for in Federal loans, that is where the shopping around comes in.

Private student loans are offered by private lenders. In general, interest rates are likely to be higher than Federal loans, and the rates are usually variable. You might start out with a low interest rate, but if prevailing interest rates rise, the rate on your loan will probably go up, as well. In some cases, borrowers with excellent credit histories and ability to repay may be offered lower interest rates. A typical student, with little to no credit history, will likely need a co-signer. All of these variables point to the reasons why it is valuable to shop around for student loans. Checking a minimum of three lenders is always recommended.

A third option for families to consider is the Parent PLUS Loan. These are available only to biological or adoptive parents of dependent students; students must be enrolled in school at least half-time. The parents must be credit eligible, although there is a process through the Department of Education by which parents can be approved even with poor credit histories, depending on the reasons or extenuating circumstances contributing to that poor credit score. Parents are responsible for repayment; that means parents must consider their entire financial picture, including their age and retirement plans, the needs of other children, and their ability to maintain satisfactory lifestyle while repaying a loan. These are Federal Loans, administered through the Dept of Education.

As with any important consumer decision, it is critical to use reliable information. Many of the best sources of information are provided by the United States government, beginning with the umbrella website www.studentaid.gov. The Consumer Financial Protection Bureau (CFPB) also offers numerous resources to help with decision-making, including a simple one-page guide to student loans and a very helpful student loan web page. Additionally, another one-page tool helps students make informed choices about bank accounts.

The CFPB offers another comprehensive planning tool titled: Your Financial Path to Graduation. The tool is easy to use, and takes a student step by step through a fairly complete look at the sources of money they have available to cover their college expenses, AND a personalized look at what they can expect those expenses to be. It helps students and families consider various options, and gives them a forecast of what their situation might be by the time they graduate, including what their total debt levels might be and what starting salary they might reasonably expect. I tested it out with a hypothetical student situation, and I thought it could be very helpful – I encourage you to try it!

This is the second in a series this week on student financial readiness for college. Next up: discretionary expenses.

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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Rising Food Prices – Yikes!

Food prices are rising – it’s more noticeable this year than in other recent years. On top of that, many households who receive food assistance (formerly known as Food Stamps) will very soon stop receiving extra benefits that have been available due to COVID. All this makes it more important than ever to be smart with your food dollars.

Spend Smart. Eat Smart.®” from ISU Extension and Outreach can help! This website and app offers information, tools, recipes, how-to videos, a blog and more, all designed to help people eat healthy while not spending a fortune. It’s very practical, with tools and videos focused on planning your meals so you can plan your shopping, ways to save time and money when shopping, organizing your kitchen to make cooking easier, and so much more.

One of the things I like about the website is that all of their recipes have been tested by average home cooks, to make sure the instructions are easy to understand. Recipes also avoid obscure ingredients that you might buy and never use again, or that you might even have trouble finding in a Midwest grocery store.

An added bonus is a focus on health, including tips and tools for building exercise and activity into your life and even some basic workout and stretching videos for use at home. It’s all very practical for the average individual.

When money is tight, often the first place people look to cut costs is with food. Spend Smart. Eat Smart® can help you cut costs without sacrificing nutrition or flavor, and can make your life easier, as well.  Check it out today!

P.S. Find the Spend Smart. Eat Smart app by searching “spend smart eat smart” in your app store.

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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Get Help Paying the Internet Bill

In a new program from the Federal Communications Commission, qualifying households are eligible for a temporary monthly discount on their broadband internet service; in most cases, the discount is $50/month. The income guidelines are low, so only a fraction of Americans will qualify, but if someone you know is eligible, that $50/month could make a huge difference to their family.

You may qualify if any one of the following applies to you:

  • People with incomes below 135% of the poverty level. That’s about $17,000/year for a single person, or $35,000/year for a family of four.
  • You are eligible for Food Assistance, Medicaid, Free or Reduced School Lunch, or Lifeline benefits.
  • You participate in certain tribal programs, including BIA General Assistance, Tribal Head Start, Tribal TANF, or emergency food distribution.
  • You are a student receiving a Pell Grant.
  • Your household has lost significant amount of income due to pandemic-related job loss. NOTE: this qualification includes people with incomes well above the 135% poverty threshold.

The funding is temporary, and will end when the program runs out of money OR six months after the US Department of Health and Human Services declares an end to the COVID public health emergency. Apply now in order to take advantage of this opportunity.

To Apply: Go to https://getemergencybroadband.org/ where you will find all the details and the on-line application form.

Source: Consumer Action, which offers this information in Spanish.
The Federal Communications Commission offers pdf fact sheets in Arabic, Amharic, Burmese, Chinese-Traditional, Chinese-Simplified, French, Haitian Creole, Korean, Portuguese, Russian, Somali, Tagalog, and Vietnamese as part of their outreach toolkit.

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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Garden Season: Invest wisely

I had a garden last year like I have most of the past 20-plus years. I’ve never been a GREAT gardener, but I’ve enjoyed having some fresh produce that I grew myself. Last year was extremely disappointing, however — very little to harvest. Somewhere along the line I realized that I had skipped the step of adding fertilizer to the soil. I knew better too – I had learned that lesson early on.

I was disappointed to have so little produce, of course, but mostly I was disgusted with myself for investing the time, energy and money (for plants/seeds and for watering) without taking the simple extra step that would have made my efforts pay off. One careless oversight made most of my investment go to waste.

You can bet I’m going to be smarter this year. I will make sure to fertilize as recommended. For those of us who are not already gardening experts, good information is the key to having our investments pay off. There are many sources of information – some provide trustworthy information while others are just passing on rumors or trying to sell a product. Evaluate the source of any information you use as you plan, plant, and tend your garden this summer. One source of information you know you can trust is Iowa State University Extension and Outreach. Check out our Horticulture and Home Pest News site for a wealth of information to meet your needs. It includes an encyclopedia, with topics alphabetically, along with a “browse by topic” section, a search function and more.

Happy gardening!

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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Affordable Health Insurance: ARPA Expansions

The American Rescue Plan Act of 2021 (ARPA) has put into place several temporary expansions to the Affordable Care Act (ACA) provisions that can help Americans access health coverage at affordable prices. In general, these benefits apply to people who purchase health insurance in the Marketplace (created by the ACA) because they do not have an affordable option available through employment. The expansion has two dimensions: 1) more people are eligible for help paying the health insurance premiums for plans purchased in the Marketplace, AND 2) those who are eligible for help are now eligible for MORE help, so that their share of the monthly premium can be reduced.  People who are unemployed will especially benefit.

The Health Insurance Marketplace is now open for enrollment through August 15, so if this information makes you want to enroll in a plan OR change the plan you chose, you should be able to do so in the next few weeks. NOTE: The law took effect March 11. The agency in charge of the Health Insurance Marketplace expects to be ready to implement many of the changes on April 1. Suggestion: if you call or log in to the Marketplace in early April, ASK if the new rules are yet in place. It might be worth waiting a week or two in order to be sure the changes have been built into the system.

More Help. The ACA created a maximum cost people would have to pay for health insurance premiums, stated as a % of your income. The ARPA dramatically reduced that percentage of income for 2021 and 2022.  For example, suppose you are a 2-person household with income of $43,000/year (which is just under 250% of the poverty level); under the ACA your share of the premium for a benchmark silver plan would have been 8% of your income; under the new ARPA guidelines, your share of the premium cost for that same silver plan is just 4% of your income. Implications:

  • Some people who previously decided health insurance was too expensive will NOW decide it is affordable under the new rules.
  • People who chose a less-expensive bronze plan despite its higher deductible and copays may NOW decide a silver plan is worthwhile.
    This is of special value to those who are at or below 250% of the federal poverty mark, because these folks are eligible for plans that sell for a “silver” price but have smaller deductibles and copays so that they are more like a gold or platinum plan. In other words, folks under the 250% level can get a premiere plan for a budget price.
    It’s sort of like getting a brand-new luxury SUV for the price of a 2014 compact sedan!
  • If you are already enrolled in a Marketplace plan, there is a good chance that your share of the monthly premium is reduced under the new rules. Consider contacting the Marketplace (800-318-2596) sometime later in April.

More People Eligible.  Under the original ACA rules, if your income was over 4 times the poverty level, you were not eligible for help paying for health insurance. Under the ARPA expansion, people of any income level are eligible if the cost of the Marketplace plan would exceed 8.5% of their income. This will be especially valuable for those in their 50’s and 60’s, since health insurance premiums rise with age. This provision is also in effect for 2021 and 2022. 
Implication: some people with incomes above the 400% threshold may have compromised to save money by purchasing health coverage that was poorer quality (that is, it does not meet the ACA standards related to broad coverage and value). With the new cap of 8.5% of income regardless of income level, these folks might now be able to purchase a high-quality plan for an affordable price.

Huge Benefit for Those Unemployed at ANY time during 2021.  Note: this benefit is ONLY in effect in 2021.  If you receive(d) Unemployment Income at ANY time during the 2021 calendar year, special rules apply for your eligibility. With regard to eligibility for help paying for health insurance in the Marketplace, any income above 133% of the poverty level will be disregarded. That means these households will be eligible for the “platinum-like” silver plans for FREE – the premiums will be entirely covered by the subsidy.  Note: all other qualifications must also be met. For example, if you have workplace coverage available that is considered affordable, then you will not be eligible for the free silver plan.  However, if you are unemployed now, take advantage of the free silver plan. If you get a new job in a couple months that provides insurance, you can then drop the silver plan.
For those whose incomes are below 100-133% of poverty, they will be eligible for Medicaid coverage (also free), even in states where Medicaid was not expanded.

COBRA Subsidy. For people who lost health coverage due to being laid off or having their work hours reduced, the government will cover the cost of their COBRA premiums for up to six months, from April 1 – September 30, 2021. Check with your employer about how this might help you. Even if you lost your job months ago and did not sign up for COBRA at that time, you should now be able to sign up for COBRA.
Note: if you are in this group, you might also benefit from Marketplace insurance or Medicaid, so be sure to evaluate all your options.

Primary Source: Kaiser Health News Details for the % of income (paragraph 3) from Kitces.com
For more information see: https://www.healthcare.gov/more-savings/

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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Health Insurance Marketplace Reopens

Normally the health insurance marketplace is open just once a year in the fall (Nov 1 – Dec 15). This year, however, the government is opening the federally-run Marketplace today (February 15) for three months. Since Iowa uses the federal marketplace (www.healthcare.gov), this opportunity is available to Iowans. For readers in other states: many of the state-run health insurance marketplaces are also opening for the same three-month period.

Are you worried about choosing a health insurance policy? ISU Extension is offering a one-hour online workshop called “Smart Choice Basics” to help you understand key factors to consider when choosing a policy. The workshop is free, but pre-registration is required. Two options are available – choose the one that fits your schedule, and preregister today!

In the health insurance marketplace, Americans who do not have quality coverage available on the job can enroll in insurance plans that cover the ten essential benefits (including prescriptions, mental health care, rehabilitation, and more). In addition, you may qualify to get help paying the premiums, through the Premium Tax Credit. You may be eligible for a Premium Tax Credit if your income is below: $51,000 (single); $68,900 (couple); or $104,800 (family of four). Find out more at www.healthcare.gov. NOTE: if you are very near the income limit, you are eligible for only a small amount of help, but it does cap the percentage of your income you’ll need to pay for health insurance.

Keep in mind: You can always have a “special enrollment period” in the marketplace if you lose your insurance (e.g. leave your job, get divorced, or other reason). This new opportunity can be helpful for people who didn’t sign up when they could have, but have now decided that they need insurance after all.

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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Money Guidance via Podcast

graduates

Targeting those in college or planning for college, the U.S. Consumer Financial Protection Bureau recently launched a podcast called Financial inTuition. The six episodes currently available are divided into two categories: three episodes focused on student loans, and three on basic money management skills with a focus on issues faced by students.

Each episode includes an interview with either an expert or a consumer with first-hand experience. It’s always helpful to learn from other people’s experience!

The podcast is available free wherever you get your podcasts, OR directly from the CFPB website. It is part of a broader set of resources targeting students and young adults on topics like paying for college (including information about student loans and the GI Bill), and money management information for economically-vulnerable consumers (which includes most young adults just starting out) on topics like building credit access and finding money to save. They also provide materials for both youth educators and adult educators.

Check out these resources for yourself OR share them with someone you care about!

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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