Student Loans Menace, But Grads Can Learn to Deal

It’s a topic described by some analysts as yet another bubble, ready to burst and further complicate the already complicated-enough personal finance picture. We’re talking about student loan debt, and in a world of exploding college tuition costs and a job market that isn’t exactly keeping pace, the issue has recently morphed from a latent financial dilemma to an immediate political flash-fire. With the average student saddled with existent loan obligations approaching $25,000 and interest rates on undergraduate loans set to balloon to 6.8 percent this July, everyone acknowledge something must be done before that bubble turns into a full-blown economic embolism for 7 million Americans—nearly all of voting age.

Naturally, as with any problem of national significance, both political parties are engaged in the standard practices of gamesmanship and public relations wrangling, but for those facing the increasingly daunting challenge of paying down these debts and moving on with life, the question arises: What can I do about it myself?

There was a time, of course, when the answer to ‘how should I pay off my student loan obligations?’ was relatively cut and dry: use the education you’ve borrowed money to fund to land a decent-paying job, then apportion some reasonable amount of your income to the cause of ridding yourself of the debt over time. In fact, it wasn’t even so long ago that student loan debt was rosily considered “good” debt. But in economic times such as these, it’s increasingly difficult to view any debt as “good”. That said, good or bad, the debt exists and while paying them off may have become more difficult, there are strategies for doing so. Besides the more obvious remedies for a cash crunch (reducing spending on big ticket items, doing away with creature comforts and smart budgeting), here are a few handy tips:

Mind Your Credit: On this front, we at Quizzle are happy to help. Credit scores can be crucial in determining whether or not you’re able to finance that car payment or home mortgage…or even get that job. Maintain older lines of credit to help enrich your credit history and try not to use more than 30 to 50 percent of any one particular line of credit at a given time. Know your credit score, obtain a credit report card, and don’t let what’s out of sight become out of mind.

Utilize Retirement Accounts: Stay positive—you will find work! It may take longer than you anticipated or pay less than you had hoped, but when (not if) you find a job, be sure to contribute a healthy amount to your retirement account. Many companies will offer you matching funds at a certain level of investment; take full advantage of this as it amounts to “free” money. Also, look into Roth IRAs; they’re particularly helpful both for savings and in the event of an emergency. The sum of your contributions can be withdrawn tax/penalty-free for any reason at any time, while earnings can be withdrawn without penalty after five years and after you’ve reached age 59.5.

Prioritize Debt Payments: All debts were not created equal. While you’re worrying about paying off that student loan behemoth, you may really be getting slammed by credit card debt. A recent Sallie Mae study found 9-in-10 college students toting around at least one credit card and by the time those students graduated, cardholders held, on average, $4,000 in debt, paying interest rates upwards of 17 percent. Pay these down early and often; don’t turn your back on the credit card ocean.

Know All Your Options: You may not be as tightly bound to your loan debt as you think. For instance, federal student loans, guaranteed or direct, can often qualify for graduated, extended, or income-adjusted payment plans. This can provide some necessary breathing room if your cash flow isn’t meeting the bill at the moment.

Consider Loan Consolidation: Alert: This is time sensitive! You have until the end of June to sign up for a program offered through the U.S. Department of Education, which allows you to consolidate your loans at a 0.25 percent lower interest rate (and another -0.25 percent if you enroll in automatic payments). Now, if you’re eligible, you probably should’ve heard from an Education Department loan servicer, but if they missed you somehow in the bureaucracy, contact current lenders or call the Department of Education at 800-433-3243 for details.

Do Good. Pay Less: If you’re entering a particular field devoted to public service, such as the Peace Corps or Americorps and you make 120 on-time payments over 10 years, your outstanding balance, including interest payments, may be forgiven outright via the Public Service Loan Forgiveness Program (PSLF). Also, Perkins’ loan balances can be reduced by 70 percent for 2 years in the Peace Corps and a full 100 percent for service in the United States military.

Don’t Default: You can’t fight City Hall, which in this case has been federalized. Unlike certain debt that you may be able to evade or escape, government loans follow you. The Feds can confiscate tax refunds, benefits like Social Security and disability payments, even garnish wages up to 15 percent of disposable income. There’s also no time limit for them to sue. With student loans, you can run but you can’t hide.

When You Can’t Pay, Defer: If you’ve suffered from poor health or other unforeseen personal problems, you may qualify for forbearance accommodations even if you’re already in some stage of default. This means you make no payments to your lender for up to one year at a time. However, interest continues to accrue, so consider this more a stay of execution than a full pardon.

With national student loan debt eclipsing credit card debt, Washington has taken notice of the problem, rhetorically pledged to address it, and promptly commenced to partisan fisticuffs. For college graduates, however, the problem isn’t political but intensely personal. While politicians bicker over how best to help you, help yourself by knowing the facts, making a plan, and taking control of your situation. If you have questions, leave them here and we will answer.

A WEALTH OF KNOWLEDGE? was originally featured on Quizzle Wire

Quizzle.com is the easiest way to get a complete understanding of your credit. Visit Quizzle.com to get your free credit report and score. No credit card or social security number necessary!

The Associated Press reports U.S. borrowers held an average credit card debt of $4,962 in the period spanning from January to March of this year, down 4.7 percent from the previous quarter. The decrease is attributable to payments made on holiday season purchases, part of a natural credit cycle that analysts say don’t indicate real trend. Looking back a year ago at the same time, credit card balances are actually up 6.1 percent.

The general consensus amongst some experts is that rising credit card purchases reflect growing consumer confidence, but the Quizzologists aren’t convinced quite yet. The European debt crisis still looms, storm clouds gather over the Iranian nuclear program, and U.S. growth rates and jobs numbers remain anemic. We’re not out of the woods yet. This week, the Quizzle blog took an in-depth look at the state of America’s plastic. Here are some choice cuts:

• Does Canceling My Credit Cards Boost My Credit Score?
• Warning! Close Your Credit Card Accounts with Care
• 10 Credit Score Facts and Fictions
• Are You Getting Caught by these Balance Transfer Traps?
• Five Things to Know If You’ve Missed a Credit Card Payment
• Don’t let Decreasing Gas Prices Increase Your Spending

Quizzle Weekly Money Tips: Credit Cards was originally featured on Quizzle Wire

Quizzle.com is the easiest way to get a complete understanding of your credit. Visit Quizzle.com to get your free credit report and score. No credit card or social security number necessary!

Happy to relate, this full-contact lifelong sport, while tough, also has rules. One of the cardinal rules, if you want to build your credit, is to avoid credit card debt. Here are five important things to know if one (or more) of your credit card payments somehow gets “intercepted” on the way to its intended target:

Made a mistake? Keep playing—it’s a long game. Any good personal finance blog will tell you it’s important to get your free credit score, but it’s also important not to fixate on the day-to-day number or beat yourself up for being human. In fact, unless your payment comes in a full 30 days behind, it cannot be reported to the credit bureaus and thus won’t appear on your credit score. If you’re one or two months late, one time, then the damage should be minimal. When striving for credit improvement, the most important thing is establishing solid fundamentals. If you’ve missed a payment don’t panic but make a point not to repeat the mistake. Building credit is about demonstrating your payment discipline to lenders over time. If possible, setting up automatic payments is a good way to avoid human error. If not, find an effective means of reminding yourself what’s due to whom and when.

Once my payment is officially late, what happens? After 30 days, your creditor will do the following: First, likely charge a late fee (often in the $15-35 range). These fees continue each month payment is overdue. Second, they’ll report your late payment(s) to the three credit bureaus which record that fact on your credit report where it stays for seven years. This then results in a lowering of your credit score. Third, after a full 60 days delinquency, your interest rate can be raised, which increases the burden of your balance. With your balances growing and with payment history accounting for 35% of your credit score, you can see the dangers posed by missing payments.

The collateral damage isn’t quite as bad as it used to be. The Credit Card Accountability, Responsibility and Disclosure Act of 2009 (CARD Act) banned what’s known as “universal default”. Before 2009, Credit Card ‘X’ could hike your interest rate if you were late in paying Credit Card ‘Y’. To return to the metaphor, universal default was similar to a coach making the whole team run wind-sprints to punish them collectively for the mistakes of a single guy. Thankfully, this is no longer allowed, which helps mitigate the consequences of a good-faith error or a lapse in payment.

If you’ve made a mistake or two, you may be forgiven. If you’re a repeat-offender, this tip probably won’t be of much utility. However, if you’ve legitimately missed just one or two deadlines over a long business relationship, politely asking for some understanding from your creditor may result in the waiving of fees or other penalties. It’s certainly worth a try. Remember: you’re still the customer even if you’re not always right.

Stay in touch with creditors and pay them ASAP. When you miss a payment or fall further behind on your balance, don’t compound your errors by running from the problem. As stated before, the credit score game goes on, whether or not you’re playing. Ignoring the problem won’t make it go away. You may be able to minimize damage and harassment by turning the tables and calling creditors first. Explain your situation to them and resolve to make the payment as fast as you can.

Don’t throw good money after bad simply because you feel overwhelmed or intimidated by answering your phone. Instead, proactively work on building credit, checking your credit score regularly, and dealing with problems you encounter along the way. Do those simple things and you can focus on a much more enjoyable game: the one on TV.

Five Things to Know If You Miss a Credit Card Payment was originally featured on Quizzle Wire

Quizzle.com is the easiest way to get a complete understanding of your credit. Visit Quizzle.com to get your free credit report and score. No credit card or social security number necessary!

This week’s blogger extraordinaire takes this into account when he doles out the financial advise. Jeremy Vohwinkle, creator of Generation X Finance, www.genxfinance.com for short, understands the digital age and tailors his financial advice to the new and improved, digital human. Because, let’s face it, for anyone under the age of 55 social security isn’t a social welfare program, it’s an oxymoron. Vohwinkle’s perspective is unmatched and his experience extensive, it is my advice that you read and take his.

Personal Finance Blog of the Week was originally featured on Quizzle Wire

Quizzle.com is the easiest way to get a complete understanding of your credit. Visit Quizzle.com to get your free credit report and score. No credit card or social security number necessary!

It’s not entirely crazy. Once you’ve taken care of the debt, eliminate the possibility of getting into more debt by closing cards. Unfortunately, that’s not how it works in the credit world.

In fact, canceling cards can actually have the opposite effect and dramatically lower your score, making you less likely to qualify for loans when you need them. How is this possible?

It’s because your credit rating is based on the amount of money you have to spend weighed against the amount of money you already owe. Canceling cards may seem like a bright idea to simplify your life and keep you from spending, but it also removes a valuable line of potential money you could tap if you needed to.

Think about it like this. Right now you owe $20,000 in student loans and $100,000 on a mortgage. Luckily, you’re not underwater and your house is worth $120,000, but that essentially brings you back to zero. Your five credit cards give you a $50,000 combined limit, of which you use $5,000 on a monthly basis.

That leaves you with $45,000 potential dollars. Close your credit cards and you lose this money. Never mind that you didn’t actually have it in the first place and it would end up costing you an arm and a leg if you did have to use all of it – the point is (as stated above) it’s money that you could tap if you needed to.

Now, this isn’t the end-all be-all. Ultimately, you have to decide what’s best for you, and simplifying your life might take precedence over the need to keep your credit score hovering around 740.

Plus, there are ways that you can compromise and still achieve much of the same effect. Canceling that $2,000 Sears card and increasing your Visa by the same amount removes clutter and keeps you from losing any of that potential money.

Just think carefully about what you’ll lose and what you’ll gain – whichever way you decide to go. And think long and hard about your future needs. Starting and canceling a lot of accounts is not something you want to be doing if you plan on taking out a mortgage – or a loan to pay for your kid’s college education – any time in the near future.

Does Canceling My Credit Cards Boost My Credit Score? was originally featured on Quizzle Wire

Quizzle.com is the easiest way to get a complete understanding of your credit. Visit Quizzle.com to get your free credit report and score. No credit card or social security number necessary!

According to a survey conducted by travel and leisure group AAA, 30.7 million Americans will hit the open road over Memorial Day weekend, a 1.2 percent bump from a year ago. While thicker traffic might mean longer car rides, drivers have to be feeling a little less pain as fuel prices hover around $3.74 per gallon, down nearly 20 cents from last year at the same time.

A Bigger Picture
Energy is everything. It sounds trite, but there is no shame in avoiding calming euphemisms when we talk about the causes and effects of the very thing that moves our world. Like an economic singularity the position of the energy market, most importantly the price of gas, reverberates through our economic universe. The recent decline in gas prices have contributed to a modest increase in consumer spending and a critical stabilization of inflation rates. It’s a little more complicated than that, but the fact of the matter is Americans have a little bit more money in their pockets and essentials like gas, food and shelter are costing the same, or a little less. If you like numbers, the Associated Press breaks it down for you.

Not the Time for Spending
Trust me, everyone wants you to spend that extra bit of money you have. Business leaders, politicians, unemployed people, your mailman, etc… Spending equals growth, of that there is no question, but this is an opportunity to finally start getting ahead financially without having to make so much personal sacrifice. Use the extra cash in your wallet to build a rainy day fund, pay down your credit cards, double-pay on your student loans, or check your credit report and pay off that lingering collection; anything except springing for that 54 inch flat screen.

And now that I am officially the economic party-pooper… Enjoy the relief and the holiday weekend, but remember this is still a time for saving, not spending.

Memorial Day Weekend Offers Americans a Gas Holiday was originally featured on Quizzle Wire

Quizzle.com is the easiest way to get a complete understanding of your credit. Visit Quizzle.com to get your free credit report and score. No credit card or social security number necessary!

If your friends are struggling financially, here are some ideas for how you can help:

Don’t give them money: If one of your friends comes to you asking for financial help, it can be tempting to give them money. But as “Eat, Pray, Love” author Elizabeth Gilbert discovered, sometimes too much financial generosity between friends can be a bad thing. Friendships can all too often be damaged when money comes into the picture. Giving money to friends can create uncomfortable feelings of obligation, resentment, or an unwelcome power imbalance in the relationship.

Don’t co-sign on a loan: Many people might be tempted to help their friends by co-signing on a loan, making it possible for the friend to borrow money to buy a car or pay off debt. This is a well meaning but all-too-common money mistake. If you co-sign on a loan, no matter how much you trust your friend and no matter how sincere they are in wanting to repay the loan, the truth is that you are taking a big risk. As a co-signer on the loan, you are responsible for paying it back if your friend cannot make the payments. You might find that co-signing on a loan leads to a lot of lost money as well as a lost friendship.

Do give them your time: Instead of giving money to your friends, give them your time, attention and support. Have your friends over for dinner. Offer ideas and encouragement. Help them find supportive resources like Consumer Credit Counseling. If your friend needs to find a new job, offer to introduce them to helpful new connections from your professional network. Help them get ideas for helpful tools to set a budget, improve their credit and create a stronger financial foundation.

Do encourage them to look for the root cause: Have a conversation with your friend about what might be causing their financial problems. Of course, if someone has lost a job, the answer is easy – but often when people have financial problems there is a deeper, underlying cause that is limiting their ability to manage their personal finances. Do they have a lack of motivation? Are they depressed? Are they spending too much because they’re trying to “keep up with the Joneses” and live a lifestyle that they can’t afford and don’t even want? Can they simplify their life and drastically cut their spending? Do they need career counseling to find a new career path that is more fulfilling and more lucrative? What is holding them back from financial success?

Often when people are having financial problems they feel isolated and ashamed. Make it clear to your friend that you care about them and you want to help. But make sure you help in the right way. When people are in financial trouble, getting a loan from friends might do more harm than good. Friends can often help most by helping get their friends connected to supportive resources, new ideas, and helping their friends come out of the financial difficulties feeling stronger and more empowered than ever.

How to Help a Friend with Financial Problems was originally featured on Quizzle Wire

Quizzle.com is the easiest way to get a complete understanding of your credit. Visit Quizzle.com to get your free credit report and score. No credit card or social security number necessary!

According to a report released by the National Association of Realtors today, median home prices in 74 of 146 metropolitan areas measured for the survey. That’s a considerable increase from the increases seen in only 29 areas last quarter. This price stabilization is owed to a 22 percent decrease in the number of available, pre-owned, homes on the market from a year ago. That, and record low mortgage rates have helped the market discover its bottom.

Good News for Buyers and Sellers
Potential buyers haven’t missed a friendly market just yet, but the window for scooping up a great house at an incredible price is quickly closing. The good news is the balancing of the market might encourage more sellers to list their property, increasing the supply and keeping prices steady, but still rising. Furthermore, mortgage rates remain historically low. If you’re looking to buy a house, now’s the time. If you’re serious you should start by checking your credit for free – no social security or credit card information needed – at Quizzle.com Not be a shameless self promoter, but in addition to the free credit report and score you’ll receive, the Quizzologists track mortgage rates, provide advice on how you may be able to improve your credit score with an easy to follow action plan tailored to your needs, and recommendations on the types of mortgages for which you are eligible.

The good news for sellers is clear. The market is stabilizing and the value of your largest investment is hopefully on its way to its former glory. Depending on the market your in, if you’re looking to sell and move, you can now get a more appropriate price on your home and find a great deal on your prospective new home. All in all a real estate market stabilization is good for everyone involved. The Quizzle Wire offers articles and advice on all aspects of home buying and selling. Take a look around and see what you can see. If you have actual questions, the Quizzologists are on hand ready to find you answers. Leave a question here and we’ll respond.

Home Prices Stabilizing, Rising was originally featured on Quizzle Wire

Quizzle.com is the easiest way to get a complete understanding of your credit. Visit Quizzle.com to get your free credit report and score. No credit card or social security number necessary!

Financial adaptability is critical to the personal finance master. You need to accrue savings, understand your cash flow, debt to income ratio, general costs of living and other unforeseen costs that crop up when navigating this life. Like a manatee, you don’t have to move quickly, but be willing to adapt your lifestyle to your current fiscal reality. While you won’t need 45 million years to perfect the art of personal finance, understanding the difference between what is necessary and what is desired, then being able to make a lifestyle change to manage those differences will put you on the right path to personal finance sustainability.

There is no greater ‘go with flow’ type mammal than the Florida manatee. Unlike their brethren they have the greatest tolerance for salinity extremes. In other words, they can move freely between the saltiest and freshest of water sources.  Forced to migrate to warmer waters in cooler months, some of the Florida manatees have taken to congregating at the mouths of power plants, soaking up the warmer water and keeping drainage pipes free of unwanted vegetation. They are highly adaptable.

Personal financial health begins with two things – the first, as discussed is adaptability. The second is understanding credit. Credit, good or bad, effects where and how you live, what kind of car you may buy, if you can start a business, affording your child’s college education and much more. Credit permeates almost every area of personal finance. The Quizzologists have developed an easy to use system to help identify potential areas of improvement for your credit score. With the only truly free credit report and score on the web, Quizzle.com wants to help you evolve into the personal financial master we know you can be.

In a Quizzlewire Wildlife metaphor Tuesday, we give you manatees mingling with Florida swimmers with nary a care in the world: a moment of Zen, if you will.

Manatees – Personal Finance Experts of the Sea was originally featured on Quizzle Wire

Quizzle.com is the easiest way to get a complete understanding of your credit. Visit Quizzle.com to get your free credit report and score. No credit card or social security number necessary!

Markets React
The Euro hit a three month low against the dollar Monday, a definite reaction to anti-austerity sentiment permeating elections in both France and Greece. With Spain and the UK, according to many economists, slipping back into recession, financial institutions see the Eurozone’s debt management efforts in serious jeopardy after Greek voters backed politicians who oppose the recent bailout package that pulled Greece back from the brink of economic collapse.

Why Does this Matter…
Weathering tough times in the States, Americans may find it hard to rationalize worrying over economies and governments in which we have no say. Despite our appropriately provincial attitude, we do recognize that in a global economy the efforts and policies pushed to curb over-zealous spending in other countries does have an effect on the American economy. Unstable European markets have serious effects on financial markets and subsequent effects on the American economy. From multinational companies to big U.S. exporters and our banks, all are tethered to interests in the European economy. Like our financial crisis swept across Europe in 2008, the reverse is as likely to happen if our Continental friends can’t get their debt in order.

Not Out of the Woods Yet
From a personal finance perspective, it is still a good time to be saving, not spending. While American consumer confidence is on the rise and was at the heart of a spending increase during the first quarter of this year, rough seas still lie ahead and the Quizzologists are still recommending protecting yourself against the volatility of global markets. The first step toward protecting yourself is getting a clearer understanding of your own debt to income ratio, the quality of your credit and an honest estimate of your cash flow. Quizzle.com is the only place on the web that offers a totally free credit report and score, giving you the information you need to master your finances for free, then offering you tools and suggestions on how you may be able to improve your credit. Optimism is always good and spending grows our economy, but in uncertain times it is best to protect yourself, your family and your finances from unforeseen challenges.

Austerity – The New Dirty Word was originally featured on Quizzle Wire

Quizzle.com is the easiest way to get a complete understanding of your credit. Visit Quizzle.com to get your free credit report and score. No credit card or social security number necessary!