As a Sallie Mae employee, I had the chance last year to test the company’s Education Investment Planner (EIP) and pretend my then 10-year-old was ready to head out the door for college. I got to see the current estimated costs of several colleges that my son might one day attend.

Sallie Mae has rolled out a College Savings Module of the EIP. This time it is made for people like me — a parent of a younger child. Now you have choices to really understand what your saving-and-paying-for-college plan should be. If your kids are not yet picking their high school courses or touring campuses, then the new savings section is for you. And if you are almost ready to send the kids off to school, our original EIP paying tool will get you ready.

I thought I would help you understand the process you are all hopefully about to take. This week we will walk through the EIP savings tool and next we will visit the EIP paying tool. So let’s get started.

Be prepared

I am a big fan of starting something new in a very prepared way, and this is no exception. Forms like the Free Application for Federal Student Aid (FAFSA) (in your student’s senior year) require you to have everything with you before you begin. And before you begin the EIP, you should also grab everything you need.

I pulled out the following things before I started: the latest copy of an investment account for my son’s college expenses, a copy of my latest 529 account statement, a copy of my son’s latest savings statement (one we set for college and where we deposit checks he gets from his grandparents), and the balance in my Upromise account.

Even if you don’t feel like you have enough investment accounts or statements, please don’t despair. This is important. Even if it’s scary to see the results and eye-opening to read these pages, you need to ensure that college may be affordable for your children.

It’s time to start

The first thing you need to enter is the number of children you are setting up plans for. You may do individual plans for each child or combine them into one, but each child should have their own plan.

The first page of the tool asks for the following: name, state of residence, birth month, birth year, school type, attendance type (in state or out of state), education savings to date, future savings (monthly), estimated savings return (%), money contributed during school (monthly).

I loved how easy it was to complete this page. It starts with seeing your child’s name at the top; the importance of who you are doing this for comes into play. After you select the birth year, the tool shows you the year when your child will graduate (just shake your head and think, “Wow, I am getting old”) and the number of years until graduation. That may be a number that scares some of you but continue. For my plan, I chose a state school as I feel there are lots of great state choices for my child, but you might want to run this with both state and out-of-state choices.

Once you hit the button to generate your plan, you sort of wonder what it is cooking up behind the scenes, as it takes a few seconds to show the results. But there it is.

Getting your results

Seeing an estimated cost like $95,340 for four years of college seven years from now is tough to swallow for anyone. Add to that the price of a private school and many of you may be struggling to imagine it happening. I was glad to see my plan with 45% covered by my own savings and investments, because it was certainly better than nothing. But, as I look at the amount I would need to borrow to make it happen, it was definitely daunting.

Compare plans and consider changes

Now I needed to see other plans and how they compared. If you select the link at the upper left side to compare your plan to others, you are shown a new chart next to your own that breaks down how average families pay. The chart shows the amounts as student savings and income, parent savings and income, other savings and income, scholarships and grants, student loans and parent loans. I was glad to see that the savings amount for average families was a couple thousand under what I hope to have saved.

The chart also allows you to see the average school-based scholarships and grant amounts for your school type. Although I know that this is an average and my child may not qualify for this amount of aid, it is nice to have those within your plan.

So now my amount to borrow has decreased by $18,500. That leaves me with a bit less daunting price to pay. If you select the “Savings vs. Borrowing” button on the right side you will see the potential monthly loan payment that you would be expected to make to cover this amount. Would I prefer to have less than a $500 monthly payment for student loans? Sure, so that’s what we need to try to fix. And one way the plan suggests you do this is by saving more. The plan notes that if I save $50 more per month I can cut $6,248 from my “to be borrowed” amount. Definitely something I hope to try.

The tool makes it very easy to change the plan by allowing you to increase future savings, estimated savings return rates, and money contributed during school. By doing this you can easily see how the amounts in your current plan change for the better.

Save your work

After all that work, please don’t forget to save your plan. Because you know things will change in investments and other accounts and because you are now motivated to make things better for your plan, it’s easy to save your plan now and come back at any time to update it. Just enter a few basic bits of info and you are set. If you click “Get a personalized report,” it’s immediately sent to your email.

Even though the tool sort of shocks you in to understanding what is ahead, I was glad I took the time to seeing it. Now I have a great place to start and can actively work on my investment and saving strategies to make an even stronger plan to pay for college.

Good luck!

Last week we discussed Four Money Mistakes You Can’t Afford. Here are four more:

Mistake #5: Not recognizing…or acting on!...ways to cut costs when money is tight.
Spend less or make more! Let’s say you’ve completed your spending plan, and it looks like you’re going to be short each month. You’ve only two options: You need to either reduce your spending or increase your income. Let’s start with…spend less. Since it can be difficult to increase your work hours while maintaining the focus on your schoolwork, let’s concentrate on the first alternative: reducing your spending. Just a little bit of creativity, and the list of possibilities are endless!

Mistake #6: Thinking of your credit card as “easy money.” “Charge!!!” General George Custer would have remained lots healthier if he didn’t race into the Battle of Little Big Horn with such an abundance of confidence and self-assurance. 

Although it’s not exactly the same thing, charging your way carelessly through life (the weapon of choice: a credit card) can result in big problems, too. (And in this case, you WILL live to regret it!) That’s why it’s important to select a credit card wisely and, once you have it in hand, to use it responsibly.

Mistake #7: Not appreciating the value that time has on money. What, in a nutshell, is “compound interest"? Basically it’s a method of computing interest payments that enables your money to grow exponentially (that means, like…it snowballs) over time.

That’s because not only does your principal (the actual deposit) earn interest, but the interest itself earns interest. And as the years pass — wow! — this “interest on interest” method of earning can amount to an incredibly large sum of money.

Mistake #8: Overlooking financial aid. A Q&A section for parents. It’s time to call your parents into the room. This is more for them than for you. That’s because many parents make a big mistake when figuring out how to pay for — or help their kids pay for — a college education: They figure they make too much money for financial aid and fail to apply. Parents, read on: 

Do I make too much money for federal financial aid? While it’s true that some federal programs are available only to low-income families, there are programs open to everyone, regardless of financial status. They offer below-market interest rates, delayed repayment, and other advantages. Even Donald Trump would qualify. All you (and he!) need to do is apply: File the FAFSA!

Which programs are available regardless of financial status? Even if your family doesn’t qualify for need-based aid, you’ve still got two excellent federal government programs available to you. They are:

• Stafford loans. These loans are the most common source of education loan funds, and for good reason. Payment does not begin until six months after the student leaves school and the interest rate is low.
• PLUS loans. A Stafford loan probably won’t cover all of your child’s expenses (since the limit is currently $5,500 for freshman year for subsidized and unsubsidized Stafford loans). A federal PLUS loan can make up the balance of the costs.

There is always a great deal of publicity given to the millions of dollars in scholarships that are available for college. While this is true and worth pursuing, the more attainable and larger scholarships usually come from the colleges themselves. One of the best ways to obtain optimal financial aid awards is to integrate finances into your college search.

At many colleges, merit scholarships are available. They are a powerful way for colleges to recruit desirable students; however, “desirable” will vary in definition from school to school. Typically, grades and standardized test scores are the most critical components, but this doesn’t mean a student needs to have perfect SATs or straight As to qualify for merit scholarships. Instead, scholarship recipients are usually at the top of the applicant pool at a particular college in a particular year. Additionally, colleges have been known to offer more appealing need-based financial aid packages to students who have strong profiles.

So what can a student do to be awarded these scholarships? It starts when the student creates their list of target colleges.

• Gain a strong understanding of how you compare to other applicants at that school.
• Ask the school if they have certain criteria (e.g., GPA or SAT scores) to qualify for merit scholarships.
• Determine if any additional forms are required to secure these scholarships and complete the necessary items on time.
• Appreciate that there may be a trade off between the most selective school you are accepted to and the one that is more affordable.

Give yourself options so you can make a choice based on academic, non-academic, and financial criteria when the time comes. The good news is that because of merit and need-based aid, financially conscious students can expand their college searches beyond schools with the lowest price tags.

Mistake #1: Not realizing that you’ll have a life-long “report card” called a credit report. You know the drill: Your performance in school is evaluated and graded. No secret there.

But did you know that throughout your adult life you’ll be graded in another area altogether, one that has nothing to do with exams, term papers, and homework assignments? It has to do with how well you manage money or, more specifically, how well you manage money that you borrow. Three major credit reporting agencies compile data on you and maintain it in a credit report. And you get evaluated. Just like in school. 

Your Money Management “Grade”
Your money management grade is called a credit score. It’s often referred to as a FICO^® score (since many credit bureaus calculate scores using the software developed by Fair Isaac and Company), although each of the credit bureaus has its own name for it. The scale ranges from 300 to 850, and the higher your score…the better.

Mistake #2: Being clueless about why a good credit score matters…and the ways you can earn “top marks.” Good grades in school can open doors (like to the college of your choice). A good credit score opens up possibilities, too.

• A really bad score can keep you from getting the loan you want. You’ll probably need to borrow money for a car or, eventually, a home. You’ll need an acceptable score for that to happen.
• If your score is mediocre (so-so, like a “C”), you’ll probably be able to borrow money but will have to pay more in interest. That’s because you’re more of a “risk” (meaning you might not pay them back!), so lenders will charge you more to make up for it.
• And finally, just like poor grades can keep you from getting into your first-choice college, a poor credit score can hurt your chances of landing a job or even getting an apartment. Because, yes, employers and landlords can (and often do) check your credit score.

Mistake #3: Not understanding the difference between what you NEED and what you WANT. It’s never too early to learn to first buy the things you need and then, and only then (and only if can you afford it), you buy the things you’d love to have. 

Becoming aware.
Before you’re able to change any bad habits, you have to be aware of them. As you fill in your budget info, ask yourself whether the item was something you really needed (e.g., lunch at the cafeteria) or wanted (a new digital camera). A pattern should emerge, and you’ll see how much money you spend on “optional” items. If you have the money to afford them, fine. If not, you’ve got to make smart choices: Needs first. Then wants. Do that, and you’ll be ahead of some 40-year-olds we know…and well on the way to solid financial footing!

Mistake #4: Not knowing how much money you have to spend…or how you spend it. It sounds simple enough, doesn’t it? Don’t spend more than you can afford, and you won’t run into money problems. End of story. But it’s often easier said than done. That’s why, especially during your college years when your income will be modest, you need to develop…and stick with…a budget. 

Budget: It’s not a dirty word.
Think of your budget as a personal spending plan. It’s simply a way for you to understand where your money goes and to make sure you don’t absent-mindedly buy things you don’t really need. That way, you will have the money for a concert or club or a restaurant. It’s all in the planning.

Although the emphasis on college interviews has decreased over the last few years, most students should take advantage of an interview if one is offered. More often than not, a college interview helps a student rather than damaging his or her candidacy.

Here are some hints to help you ace your next college interview:

• Consider interviewing first at a school that is not a top choice. Just like anything else, the more you practice, the more comfortable you become.

• The interview is an opportunity for you to learn firsthand about the school’s academic philosophy and admissions policy. Make certain that you have done your research about the school. When asked if you have any questions for them, ask about meaningful information. Here are some examples:
o “Why do students leave this college?”
o “How would you describe the relationship between your college and the local community?”
o “What percentage of students support the school financially after graduation?”

• Be prepared to answer questions related to your academics, extra-curricular activities, and personal qualities. Admissions officers are trying to figure out “Who are you?” and — perhaps more importantly — “Are you a good match for our school?" and "Will you be successful here?” The more you’re able to reveal about yourself and the more you’re able to demonstrate why you’re a good fit for that school, the more of an impact your interview will have.

When all is said and done, students rarely return from an interview and say, “It was tough.” Instead, they almost always say, “The interview went well and I actually enjoyed it.” It's the interviewer’s job to put you at ease and get you to speak: Be prepared to talk about your yourself and ask about the school.

As students leave college and transition into the workplace, now is an opportune time to assess personal finances and weigh repayment options. Here are seven helpful tips for Sallie Mae customers:

1. Stay in touch: Immediately notify your student loan servicer(s) of any change to your name, address, telephone number, employer, or Social Security number. This will ensure that you receive all communication from your lender and that you are aware of when your grace period ends, the payment amount, payment due date, and repayment options.
2. Use automatic debit: Set up monthly loan payments with automatic debit as an easy way to make on-time payments. Your monthly student loan payments are electronically deducted from your checking or savings account, saving you time and stamps and helping you avoid late fees.
3. Know how much you owe: Get a clear view of your existing debt, including student loans, credit card balances, and car loans. Sallie Mae provides an easy-to-use worksheet available at www.SallieMae.com/bedebtsavvy that will give you a snapshot of how much you owe. Apply extra funds to your highest interest rate debt first.
4. Make a budget and stick to it: Track your monthly income and expenses to create a budget and then stick to it. Sallie Mae recommends that you periodically re-evaluate the budget as your income grows and your expenses change.
5. Get a copy of your credit report: Get a free copy of your credit report now and each year, and review it carefully for inaccuracies. Adverse information on your credit report may result in higher interest rates when you buy a car or house or make any other purchase on credit.
6. Link your loan to Upromise: Join Upromise, then link your Sallie Mae loan account to your Upromise account and use your Upromise rewards to transfer earnings automatically to help pay down your eligible Sallie Mae student loans. Upromise helps students and families save money for education expenses by earning rewards on everyday purchases from participating companies. Visit www.SallieMae.com/upromise to learn more.
7. Prepay or pay extra when possible: You may prepay Sallie Mae student loans in part or in full at any time without penalty. The faster you pay off the lower the overall cost of the loan. Adding a little extra to each monthly payment can help.

Why wait until the last minute to work on your college applications? Instead of juggling applications in the fall with school activities, homework, and other distractions, get started over the summer. You can save yourself sleepless nights, ease stress, and ensure better results by following these tips for beginning your applications early.

1. Create an activity resume specifically for college applications. Every college wants to know what activities you have participated in since your freshman year of high school. Create this list over the summer, include activities that you plan to participate in as a senior, and adapt and edit it if your activities change.
2. Complete the Common Application. Nearly 400 colleges participate in the Common Application, an organization that allows students to complete one application form and submit it to participating schools. The Common App can save you a lot of time. You will likely have supplemental applications and essays for each school, but the Common Application keeps you from repeatedly entering your basic data. The newest version of the Common App is usually released in early July, so summer is the perfect time to complete the application, proofread it, and make sure it is ready to go.
3. Draft your primary college essay — and others if you have time. These days, most students have at least 2–3 college essays to write as part of the application process, and sometimes many more depending on the schools they apply to. Regardless of which colleges end up on your final list, draft an essay (or two) over the summer and edit it until you are happy. Then, as your list becomes more refined and finalized, you will only need to complete the additional school-specific essays.

Much of the stress involved in the college process comes from waiting to the last minute, feeling pressured to meet deadlines, and being overwhelmed by applications and essays. Start your applications early so you can avoid unnecessary stress and you will have more time to do it right. College is an important investment — don’t make costly errors by procrastinating!

Do you have creative ways of saving for college? Tell us about it — in a 30-second video. From turning down the air conditioning to biking to work, show us your best and brightest ideas on how to spend less now to save more for future college costs. Sallie Mae^® wants to hear how you are saving to achieve the dream of higher education — whether it’s for yourself, your children, grandchildren, niece, nephew, or family friend.

With our Saving for College Video Contest, one grand prize winner will be awarded $5,000, one second place winner will be awarded $1,000, and eight semi-finalists will receive $250 each. Share your video with us and you could be one of them!

The public will help choose 10 finalists by voting up to once a day between now and the Aug. 1 deadline. Entries will also be judged on quality, creativity, and fit to theme. Once the finalists have been selected, America will again be invited to vote for the grand prize winner between Aug. 10 and 25. Winners will be announced in early September as part of National College Savings Month.

Enter your video between June 15 and August 1 at Tuition Tales and you could be a winner!

If you’ve ever been on a college campus during summer, you know that it just doesn’t have the same vibe as when it’s in session. The halls aren’t buzzing, bikes aren’t whizzing around and the dining halls aren’t brimming with hungry students. So why should you visit a college during the summer?

The short answer is, sometimes you don’t have a choice. For many families, summer is the only time when they can all take time off to do the college visit. So even if the campus will not be as energized as when it’s normally in session, let’s look at how to make the most of a summer college visit.

One advantage of visiting during summer is that you can combine your college visit with a family vacation for almost no extra cost. With the economy the way that it is, this can be a big plus. Most colleges are located in cities and towns that offer interesting sites and activities for the whole family. If you plan strategically, you can keep everyone happy by visiting the schools you’re interested in while the rest of the family has fun. We know of one student who wanted to visit Boston University and Emerson College and was able to convince her family to vacation in Boston once she pointed out to her little brother that he would be able to visit Fenway Park -- home of his beloved Red Sox.

Even if you don’t get to visit all of the colleges you are interested in attending, wherever you go you should take the time to walk on the local college campuses. The more you are exposed to colleges, even those that you don’t plan to attend, the more you’ll know what you want out of your college experience. One student told us that he and his family took a vacation to Hawaii. In between snorkeling and eating pineapple, he visited the University of Hawaii. He had never seriously considered the college before his visit, but after seeing the strength of its Asia Pacific studies program, he added the college to his short list. Had he not visited the college, he probably never would’ve considered it.

Maximize your time on campus by doing a little pre-visit planning. Arrange to take a tour. Be sure to grab a bite on campus. If you can, take a peek inside the dorms and check out the student center. Contact the admission office and department of your future major to see if you can meet with an admission officer or professor. Remember that many colleges track your interest level in them and meeting with an admission officer can help give you extra points for admission. Most importantly, introduce yourself to some students. You can learn a lot just by asking them questions about their life on campus. They may even have more time to speak with you precisely because they aren’t as busy.

While visiting colleges during the summer is not ideal, there are definitely benefits. No matter how empty the campus may seem, a summertime visit will still give you more of a feel for the college than a virtual tour or glossy brochure.