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

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Speculating began a little more than 6 months ago with talk of the new film ‘Skyfall’ and the re-casting of Bond sensation Daniel Craig. However, in concert with the spy themed blockbuster, details on the film were scarce. Today, 007 enthusiasts rest a little easier as we can all enjoy the release of the film’s official trailer.

It is sad that I won’t be able to add this to my summer movie list, which, by the way, has absolutely no movies on it as of yet. Movies, in recent years, have dwindled on my own personal scale of valued entertainment (at least new movies in theatres) because of disappointment after disappointment. Movie-going is a Quizzologists approved entertainment activity, 2 hours of a good time at less than six dollars an hour is still a pretty good deal, if the movie is actually good. In tight times, I actually recommend taking advantage of the dollar, or in most cases the dollar fifty or two dollar theatres, to beat the summer heat and find some good, but cheap fun.

That being said, from a personal finance perspective, shelling out the 11 or 12 bucks for the new Bond movie this November is a sound investment. In the coming weeks the Quizzle Wire will be conducting a more extensive investigation into all forms of entertainment and ranking them according to their cost effectiveness. Stay tuned.

Bond is Back! 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!

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

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Spoiler alert… despite your enthusiasm, scooping up Facebook shares may not be so easy for the general public to acquire at the offer price. Associated Press writer Dave Carpenter sums it up best, but the gist is simple – it’s who you know or how much money you have. In other words, if you’re not friends with Mark Zuckerberg, one of his early investors or one of their preferred clients, you better have a brokerage account with anywhere from $100,000 to $250,000 already deposited and host of recent trades to go with that portfolio.

How an IPO works…
Bummer right? This kind of exclusivity seems to fly in the face of what is inherent in the phrase ‘initial public offering’. So how does it actually work? IPO’s are offered by private companies for a number of different reasons, the most popular of which are raising capital for expansion or resolving a poor cash flow issue. In Facebook’s case, they have neither of these problems. Instead Mr. Zuckerberg’s purported motivation is to bring about a long awaited payoff for many Facebook employees. After the IPO is finalized, many of them will become millionaires.

So before the actual first day of trading occurs for the newly dubbed FB stock, Facebook and its underwriters (the investment banks that have been hired and charged with evaluating, pricing and marketing the Facebook stock) go on a presentation roadshow to help attract big investors. This is why ‘Johnny Investor’ is rarely invited to this part of the initial sale of the stock, which is conducted via auction prior to the first day of actual trading.

Do I want Facebook shares and if so… how do I get them?
This is complicated so we will take the second part first. To buy shares of Facebook you have to open an account with a brokerage firm, wait for trading to begin and then instruct your account manager to buy the shares. You can do this yourself with popular self-made investor tools like ETrade.

The question of whether or not Facebook is a good investment is up for serious debate. Carpenter lays out some of the pros and cons in his piece and the video we included should shed a little light on the subject. At first glance you may think to yourself how could I go wrong buying stock in such a profitable company. However, the question isn’t about profit, it’s about growth potential. How much will Facebook grow after I buy my shares? This is a more challenging question. Facebook revenue is largely generated by Facebook ads, which recently have come under fire for not being as effective as advertised. Furthermore, while Facebook users account for nearly 15 percent of the global population, new user acquisition has slowed considerably.

It’s not all bad news. It is a safe bet to say that Facebook will continue growing. This writer has incredible faith in their ability to continue driving social media innovation and creativity – never a bad investment in any industry. Talk to a broker, a friend who is in investment banking and see what they think, but my final piece of advice would be to wait for the IPO to launch and the rollercoaster of initial expectations and frenzied trading to die down before jumping in feet first.

Facebook IPO – Not as Public as You Think 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!

Personal Finance Blog of the Week – Money Crashers 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!

I won’t burden you with some wild-eyed apocalyptic vision of world finance because it’s a Friday and the sun is shining. What I will do is give everyone a chance to watch the greatest explanation of what credit default swaps actually are, and how they really work.  By the way, the Quizzologists love Khan Academy.

JP Morgan Sends Investors to the Mattresses 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!

President Obama’s, until very recent, opposition to gay marriage is a blue ribbon example of emotions driving policy making decisions. The same goes for those voters in North Carolina. The word marriage is something wholly inseparable from our emotional constitutions. It involves the ephemeral and indescribable feeling of love, at least it should, and pragmatism gets tossed out the window when we discuss matters of the heart. The same holds true for opponents of the ban, their philosophical foundation rocked by the notion that any government policy would prevent someone from loving another person. And this is where the same-sex marriage debate gets mired in a quicksand pit of its own making.

To this writer, from a purely pragmatic perspective, the gay marriage issue is a financial issue. Were you to, forgive the pun, but divorce the word marriage from the debate and start passing pieces of legislation that allowed gay couples to file joint tax returns, make health care based decisions for one another, buy a house together, etc… I don’t believe the voting public would rally around an opposition to those things. Toss the word marriage in there and the situation goes nuclear, pushing everyone on either side of the debate to an emotional DEFCON 1.

The fact of the matter is, marriage is a religious, not public policy term. The government’s use of the term marriage is to define the financial situation of taxpayers, hence the term ‘common law marriage’ applied to live-in heterosexual couples who for all intents and purposes are ‘married’ but haven’t taken vows, knelt in a church or engaged in the chicken dance in front of family and friends over cooling plates of prime rib and empty cocktail glasses. Culture, not government defines marriage. We would all do well to remember this in an effort to tamp down the rhetoric. But, it’s an election year so who am I kidding.

In the world of your personal finances, cold hard rationalizations are what are going to keep you secure and financially safe. We don’t invest in company’s because we like the name, or give our friends $10,000 because they are our friends and they think they’ve invented the next Shamwow in their garage. You don’t buy a house you can’t afford because the window treatments are pretty and the tire swing reminds you of grandma’s farm. You may want to, but you don’t.

Now for the payoff as I graciously thank you for your attention during my diatribe. With a housing market still plump with quality, cost-friendly property’s, many people are seizing this moment to jump into the home owning game. But all this talk of marriage got me thinking, what if you’re not and you want to buy a house with someone, anyone, that you’re not joined to in financial government sanctioned matrimony. Can you get the same tax benefits, protections?

We say it over and over on the Quizzle Wire, but reality is repetition you’ve finally stopped ignoring. If you want to buy a house, are even casually thinking about it, check your credit. Too often first time, and second time for that matter, homebuyers realize all too late that their credit needs improvement to secure a sensible home loan. Credit scores can improve, but it takes time and discipline.

So if you want to buy a house with a partner, check your credit and then watch this video before you sit down to discuss this with you’re potential co-buyer. And remember, love and money – like emotions and public policy – never mix.

Mixed Emotions – Finance, Obama, Gay Marriage and Quicksand 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!