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Student Debt Remains Part of Economic Instability

After four years of university study and several more for a second or third degree, students are left with tremendous debt and a big hole in their pockets. Despite attempts to stay within a budget, find secure employment and start a payback plan, graduates find themselves stuck in the mire of financial obligations and bank loans.

Not all graduates face the same fate and the type of degree can determine the ease of finding proper employment as well as the salary associated with it. For example, many educators today view a humanities degree as practically useless when it comes to procuring a job with any semblance of sufficient income and specialty degrees such as those in the medical, dental or engineering fields require extra years of study and hence additional loans.

According to an article published in The Atlantic in March 2014, even those who continue on with their studies and obtain humanities Ph.D.s have job prospects no better than those who end their studies earlier. In the Atlantic article, English professor William Pannapacker suggested that a humanities Ph.D. “will place you at a disadvantage competing against 22-year-olds for entry-level jobs that barely require a high-school diploma.” Pannapacker went on to advise would-be graduate students to recognize that a humanities Ph.D is now a worthless degree and they should avoid going into further debt in order to acquire one.

Andrew Green, associate director at the Career Center at the University of California, Berkeley has a different take on the situation. He admits that there is no doubt that humanities doctorates have struggled with their employment prospects, but he points to less widely known data showing that between a fifth and a quarter of these doctorates go on to work in well-paying jobs in media, corporate America, non-profits, and government.
Paula Chambers, founder of Versatile Ph.D., a service that prepares graduate students for the non-academic job market, takes a positive view of the employment situation for humanities graduates. Chambers points to humanities Ph.D.s in many industries far removed from academia such as a Ph.D. in Greek and Roman history who landed a marketing job at a wine estate, a Ph.D. in British history who is now a branch chief at the National Parks Service or a Ph.D. in Classics exerting influence as a director at a hedge fund.
But were these the goals set by humanity students when they started their graduate education? How long will it take them to repay the loans they incurred in order to reach the academic level they did?

When it comes to graduates in other disciplines, the numbers aren’t much better. According to a research study conducted by UK specialist insurer, Endsleigh and reported in England’s Guardian in August 2014, only 34% of the then recent graduates had found full-time work in the career of their choice.

The vast majority of graduates do, eventually, find work, but often it is in a different field to their degree. According to Higher Education Statistical Agency figures for 2012-2013, only 8% of the students surveyed were unemployed six months after leaving university. But how much were they earning? The Endsleigh survey found that almost half (48%) of them said their current wage was lower than expected, with 57% currently earning £15,999 or less with the average salary around £20,000. Certainly not enough to pay back all the debts accrued over the years of study.

One of the solutions to the debt-study dilemma that has proven successful but which may not be appropriate for everyone is to work while attending school. Both small and large corporations are eager to employ students who will agree to a lower salary while attending classes towards their degree. On some levels it is a win-win situation. The student gains work experience and has some income towards his/her studies while the hiring firm pays less for a worker who, at the end the tenure, may well prove appropriate to the position and be taken on as a permanent member of the staff without the need of retraining for the job.

In the above situation, although there no guarantee of employment upon completion of the student’s degree, at least an accumulated debt of untold proportions has been avoided.
The most obvious direction to choose for avoiding education loans is simply to postpone studies altogether until the money is there. But this is a catch-22. No education, no job. No job, no money. What is a student to do?

The problem of student debt is growing. Here are the statistics according to a report posted on CNBC in June, 2015, and the numbers are staggering: There is more than $1.2 trillion in outstanding student loan debt, 40 million borrowers and an average balance of $29,000. The high levels are serving to perpetuate or even worsen economic inequality and are undercutting the opportunity and social mobility that higher education should provide.

Perhaps one way to avoid the debt altogether would be for students to plan to put away a small amount of money on a steady basis as soon as they are able and to learn how to invest their money early on in their lives. Opening an investment account with a good broker can be done at any age with the approval of an adult and as an individual from the age of 18. Investing can also be fun but learning to do it properly requires at least the minimum of training and education.

With today’s precarious global financial situation accelerating, it appears that the question of student debt and its repercussions remains a large part of the economic equation.

This article by Cina Coren first appeared on DailyForex.com and was distributed by the Personal Finance Syndication Network.

New signs of trouble for student loan borrowers

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25 Worst Financial Mistakes Anyone Can Make

Anyone can make a mistake. They’re part of everyday life. Financial mistakes, however, can lead to problems for years to come if not corrected soon.

After talking to financial experts and others who have either experienced or seen other people make the worst financial mistakes of their lives, we compiled the following list of 25 of them. Many are common after graduating from college and starting a financial life on your own, but they can still happen to anyone at any age.

We should also note that these worst financial mistakes aren’t listed in any order. We’ll leave measuring their importance to you:

25 Worst Financial Mistakes

1. Not going to college

The average starting salary for a high school graduate is about $28,000. That figure almost doubles to $48,127 for college graduates in the class of 2014 with bachelor’s degrees, according to a salary survey by National Association of Colleges and Employers. Starting your working life by being that far behind in pay is one of the worst financial mistakes you can make.

2. Not paying off student loans fast

The average student loan debt for a college graduate is $28,400, according to the Institute for College Access and Success.

For a college grad who is earning some real money after four or more years of living like a student, it can be tempting to spend much of their new income before paying off debt. That’s one of the worst financial mistakes a graduate can make, says Alfred Poor, a college speaker and author of books about problems young people are having in the workplace.

“If college graduates tighten their belts and lower their expectations, and live like they only have the high school diploma, they will rapidly pay off their average $27,000 in student loans,” Poor says. “If they spend their whole salary on a more comfortable lifestyle, they could be struggling to pay off that debt for decades, and end up paying much more in interest.”

3. Paying off student loans too quickly

Paying off student loans quickly can also have a downside, says Steven Fox, a financial planner in San Diego with NextGenFinancialPlanning.com. If they use all of their extra income paying off student loans, they could be in financial trouble if they don’t put some in an emergency fund and lose their job or get in a car accident and have unexpected medical expenses, Fox says.

“They should really think about whether they should pay off their student loans as fast as they possibly can once they get their first job if it means that they’re doing so at the expense of not saving or investing anything,” he says. “Ending up with zero debt is good, but ending up with zero savings is very bad.”

An emergency could lead to borrowing money at a higher rate than what they were paying on student loans, says Fox, who reminds graduates that student loan interest is tax deductible for up to $2,500 for individuals making $80,000 or less without having to itemize.

4. Using max credit card limit

“Just because a bank offers you a credit card that allows you to spend money doesn’t mean you should,” Fox says.

This goes for all debt, he says. Being approved for a $20,000 auto loan doesn’t mean your budget for a car is $20,000.

“That money needs to be repaid,” Fox says, “and you are paying a very high cost to borrow it at this stage in life. Spending should be determined by a well thought out budget, not by the size of the line of credit.”

5. Living beyond your means with credit

Building an expensive lifestyle for yourself early in life is possible with credit cards, and is one of the worst financial mistakes anyone can make, says Matt Becker, a fee-only financial planner and founder of Mom and Dad Money.

“That debt will make it a lot harder to pursue exciting opportunities later on, and may even force you to stay in a job you hate just so you can make the payments,” Becker says.

6. Not having health insurance

Young people may think they’re invincible, but unexpected tragedies like a car accident can happen, causing a large financial setback early in life and leading to financial mistakes, Fox says.

Health insurance options for college-age students include staying on their parents’ health insurance until age 26, signing up for their school’s health program, or buying low-cost catastrophic coverage from commercial carriers.

7. Choosing money over mission

We all want to make money, and it’s hard to tell someone to turn down a bigger paycheck, Becker says.

“But you will find much more fulfillment from a job with a mission you believe in than one that simply pays a lot,” he says. “Make sure you’re paid what you’re worth, but don’t forget to make your work meaningful.”

8. Waiting to invest

After spending your first paycheck on something fun, set aside part of your next paycheck for investing, Becker recommends.

“The sooner you start investing, the sooner you’ll be able to say goodbye to that job forever,” he says. “And if your employer offers a 401(k) match, contribute at least enough to get that full match. That’s free money!”

9. Paying credit card bill late

Not making credit card payments on time can be one of the worst financial mistakes anyone can make, says Peter Creedon, chief executive officer at Crystal Brook Advisors.

Credit card companies can bump up interest rates to as high as 36 percent to late-paying customers, Creedon says. Pay your credit card bills in full each month to avoid interest charges.

10. Consolidating credit card balances

Know how your credit card company is going to categorize how your credit card balance consolidation is rolled over, otherwise you might be in for one of the worst financial mistakes ever, Creedon recommends.

“Some companies consider it a cash advance and assessed a slightly higher interest rate and put the amount behind the cards’ balance so the amount takes longer to pay off,” he says.

Develop a cash reserve of at least three months so you won’t have to take on more credit card debt, he says. “Become the bank and pay yourself instead of paying everyone else,” Creedon says.

11. Not asking your parents to cosign a loan

Many young people don’t have a long enough credit history to qualify for a car loan or first home purchase on their own, leading to one of the bigger financial mistakes, says Danna Jacobs, founding partner at Legacy Care Wealth.

Financially strong, mature young professionals with good relationships with their parents should avoid one of the worst financial mistakes in life by not asking their parents to cosign a loan because they want to maintain their independence, Jacobs says. Without their parents as cosigners, they’re missing out on an opportunity, she says, noting that only “financially strong, mature, young professionals” should do this.

12. Not asking for a raise early

Not asking for a raise, promotion or increased responsibility because you only have a short tenure at a firm is one of the worst financial mistakes you can make, Jacobs says.

“You may not get it this time, but when coupled with strong performance, it can increase the rate at which you would be bumped up to the next level,” she says.

13. Not recognizing investment bubbles

Figuring out when to enter and exit the stock market is something even experts have difficulty doing. Guy Smith, a marketing consultant in San Jose, Calif., says among the worst financial mistakes to make, his was not recognizing investment bubbles and therefore cheating himself out of an early retirement.

“I remember the Christmas before the (tech) bubble burst, my Uncle Bob said he had sold all his stock,” Smith says. “He being a savvy businessman, I wanted to know why he bailed. His advice was simple: ‘When you see a lot of people doing a stupid thing, run the other way.’ Had I exited when Uncle Bob did, I would have had $100,000 in cash in my pocket.”

Smith also didn’t act on the housing bubble. He bought a rental home in Florida for $100,000 that doubled in value seven years later. His long-term strategy for the house was to own a home paid for by someone else, so he held on to it. The value dropped and he didn’t sell at the peak for a $100,000 profit.

14. Buying new

Everything depreciates, especially cars, says Rick Sellano, owner of the writing service My Ink Shines. Buying new is one of the worst financial mistakes anyone can make, Sellano says.

He recommends buying used cars with low mileage, gently used furniture and other used items to save money throughout your life.

15. Focusing only on the present

Among the worst financial mistakes to make in life, focusing exclusively on the present is the worst, says John Vespasian, the author of seven books about rational living.

“If you fail to think long-term, you will render yourself blind to the best opportunities,” Vespasian says. “You will waste your money on foolish purchases. You will destroy your motivation to learn complex subjects. And you will surround yourself with the kind of people who are also incapable of thinking long-term.”

“People who focus exclusively on the short term tend to make incredibly stupid financial decisions,” he says. “In doing so, they subject themselves to high stress and anxiety that could have been easily avoided. A man who lacks a long-term perspective in his life will never be able to save money consistently, nor to spend it wisely.”

“Our society places a disproportionate emphasis on purchase that delivery little or zero long-term value. Few people take the trouble to acquire the discipline to think in terms of a lifetime. If you can see yourself living to become 100 years old, and realize what that means in terms of financial foresight, you will avoid making foolish financial mistakes.”

16. Focusing on monthly car payment

A common sales tactic at car dealerships is to get buyers to a monthly payment they’re comfortable with. Many buyers go in with a set amount they’d like to pay every month, and are happy to share that figure with the salesperson, says Jeannine Fallon, executive director of corporate communications at Edmunds.com. That can lead to one of the worst financial mistakes they can make as a car shopper, according to Edmunds.com.

“When you do that, you’re not actually talking about the total price of the car,” says Edmunds.com senior consumer advice editor Phil Reed. “You also need to take into consideration the interest rate, as well as the length of the loan.”

The dealer may suggest a longer loan so the car fits in your budget, but a longer loan also means you pay more in interest.

17. Not having renter’s insurance

Focusing on the present, however, can be important. Not having renter’s insurance was one of the worst financial mistakes that Eric Narcisco, CEO of EffectiveCoverage.com, made when he was young.

“After college, when I was living in an apartment in Jersey City, I came home from work one day to find everything I owned lost to a fire that my neighbor had started,” Narcisco says. “I didn’t have much at the time, but since I was just out of college I didn’t have much money to replace those things, either.

“I had convinced myself that I didn’t need renters insurance because I didn’t own anything to speak of. If a policy had been in force, I would have been able to replace all of those things quickly and move on with my life instead of spending years in the process just to get back to where I had already been.”

18. Not saving for retirement early

Layton Cox, a financial advisor at My Pathway in Tucson, AZ, says one of the worst financial mistakes someone can make is not saving for retirement earlier in life. It’s the top regret and one of the many financial mistakes Cox says he hears from people over age 45.

Saving $2,400 annually at age 25 with an 8 percent return will result in more than $52,000 saved at age 65 — 20 times what was originally saved, he says.

Waiting just 10 years longer to “get your life together” will grow that same $2,400 to a little more than $24,000 at age 65. That’s half of what you would’ve saved at age 25, but still 10 times what was originally saved.

“The problem is, most people don’t save for retirement until they are in their late 30s to early 40s,” Cox says. “In their 20s, they save for a downpayment, vacation, or they are too busy paying off student loan debt. In their early 30s, they are saving for a bigger house or children’s education.

“It’s not until the kids are about to leave the house that most Americans save for retirement. This ruins their chance of benefiting from compounding interest.”

19. Taking on more risk than you can afford

As Bernard Kliban once wrote, “Never Eat Anything Bigger Than Your Head,” which is good advice for investors in terms of risk, says Jim Pearce, CIO of Baton Investing in Falls Church, VA.

Don’t trade options, buy penny stocks, or speculate in commodities unless you really can afford to lose every penny, Pearce says of financial mistakes to make when investing.

“Too many investors try to play ‘catch up ball’ by engaging in reckless investing that usually ends up in a wreck, putting them even further behind the eight ball,” he says.

20. Mimic other investors

This is partly in contrast to #13, but mimicking someone else’s investment strategy can be one of the biggest financial mistakes of your life, Pearce says.

“For some reason most people seem to think that anyone else’s judgment is better than their own, so there is a tendency to blindly duplicate what another person tells you they are doing in the market,” he says.

That leads to two problems: (1) they may be lying and only telling you that to impress you, and (2) even if they really are doing that, they may have no idea why they are doing it, either (or doing the same thing you are, and copying someone else).

21. Investing with a friend

Investing in a friend’s or family member’s business opportunity is one of the worst financial mistakes anyone can make, Pearce says. “It’s human nature to want to help the people you care about, but giving them your hard-earned money to capitalize their high-risk business venture isn’t the best way to do it,” he says.

Instead, offer to provide them with a low/no-rent housing situation (if you have the space) so they can live on very little income until their business gets going, or hook them up with someone else who really is in the business of in investing in high risk ventures, Pearce recommends.

22. Pyramiding profits

When an investment is going good we tend to think it will go on forever, so we sink even more money into it, Pearce says. This is sort of like betting double or nothing until you inevitably lose. Instead, set a limit on how much money you are willing to risk on any one thing and stick to it, which could help avoid this and other financial mistakes.

23. Allowing money drains

It’s OK to reward yourself with the occasional night out on the town or well-earned vacation, Pearce says. Those sorts of things don’t help your balance sheet, but provide psychic wealth.

“However, engaging in potentially costly behaviors such as gambling, substance abuse, or simply buying things you don’t really need create ‘money drains’ that rob you of the opportunity cost of putting that cash to better use in something that has value and can sustain you later in life when you really need it,” he says of financial mistakes.

24. Not paying taxes

One of the worst financial mistakes someone can make is not paying income taxes, says Nicole Erwin, a licensed tax professional at Tax Defense Network.

“What many people of all ages fail to realize is the significance of creating or ignoring issues with the IRS,” Erwin says. “If you choose not to file your returns, for instance, a series of undesirable events are sure to follow.”

First, the IRS may file a Substitute for Return (SFR). This allows them to use whatever previous tax information they have on you (no matter how inaccurate) coupled with information provided by your employers to file your return.. This substitute can work to your disadvantage by creating a tax liability that could have been avoided if you’d simply filed accurately, on time, she says..

“If you do wind up with a tax debt and you don’t pay it, you’re really asking for trouble, Erwin says. The IRS can place a lien against you, destroying your credit, or garnish your wages or bank account. If the debt persists, the IRS can even seize your property and assets. And while these are all serious actions, the worst is yet to come.”

“The problem with unpaid tax debts is they tend to become inflated in a short period of time,” she says. “The amount you originally owed quickly mutates with the addition of penalties and interest. What you end up with is a staggering tax bill which has destroyed your credit and haunts you for years.

“By the time you realize just how big of a mistake you made, you’re not young anymore — and you’re in a conceivably worse position to do anything about it. None of this has to happen, of course. If you have a tax debt, consult with a licensed tax professional who can ensure your youth is spent on more entertaining pursuits.”

25. Not having a personal financial advisor

Just as everyone needs a family physician, a financial practitioner is needed every bit as much, recommends Rob Drury, executive director of the Association of Christian Financial Advisors. Without one, you could be headed to other financial mistakes.

“A financial advisor’s job is absolutely identical to the doctor’s; he assesses wellness, diagnoses illness, prescribes cures, and designs wellness programs,” Drury says. “He simply performs these functions in the financial realm rather than the medical.

“Employing a qualified advisor and being accountable will prevent one from committing most financial mistakes. Most basic planning functions can be performed at little or no cost.”

That’s our list of the worst financial mistakes to make at any age. What are some of the worst financial mistakes you’ve made?

This article by Aaron Crowe first appeared on Add-Vodka.com and was distributed by the Personal Finance Syndication Network.

My Daughter Lives in the UK Now and Can’t Afford Her U.S. Private Student Loans

Question:

Dear Steve,

My daughter has about $100k in private student debt (and another $100k in federal). She did her undergrad in CA and her grad in NY. Federal debt is manageable because they adjust for her income.

She can no longer afford to pay her private loans and they are unwilling to work with her and she has no more deferments.

She has been living in London for the past year and has no plans to return to the US. Wells Fargo has found her place of work in the UK. The only asset she has is her bank account. Of course we’ve been told she cannot be helped in Ch 7.

I just read one of your articles. Did I understand correctly that if/when she returns to the US after the SOL, she can release her loans in bankruptcy?

Can (or do you think they will) her private lenders sue her in the UK or garnish her wages from her UK employer?

Denise

Answer:

Dear Denise,

Dealing with student loan debt is full of a terrible amount of misinformation. It’s still an evolving topic and most everyone gets it wrong. From student loan servicers to bankruptcy attorneys, the right information is not getting out.

I have not heard of an international suit being filed in the UK over U.S. based student loan debt. It is unlikely that would happen anytime soon since it would require a number of legal efforts. It’s just not that common, yet.

Relying on the statute of limitations is problematic and would require a legal opinion from a U.S. based attorney. The problem is the statute of limitations can be put on hold while she is out of the country.

The big advantage is a private student loan outside the statute of limitations would no longer be eligible for collection through any lawsuit.

But I think you’ve laid out the real situation, her private student loans are just not affordable. It doesn’t matter what all the legal maneuvering in the world can do if she simply does not have the income to make any agreeable payment.

However, it seems that more and more private student loans are being settled through either lump-sum payments or payment programs before or after being sued by the lender.

I think you should read Top 10 Reasons You Should Stop Paying Your Unaffordable Private Student Loan to understand why defaulting on the unmanageable debt isn’t the end of the world and can lead to an eventual solution.

And before you ask, she will have no problems returning home for a visit. Defaulting on her debt will not stop her at the border.

By the way, it sounds like your daughter may be on some sort of income based program for her federal student loan debt. Just keep in mind, those programs can be a terrible trap. You should click here to learn why.

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This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.

New proposal to ban companies from using arbitration clauses as a free pass to avoid accountability

Ask The Expert: Which Is Better? Bank Or Credit Union?

Question: My boyfriend and I are talking about marriage. We’ve taken your advice and had several very honest conversations about money, since we know finances are a big cause of fights. We’ve settled a lot of things, but we have this weird sticking point: My boyfriend insists I get rid of my Bank of America account and sign up with his credit union.

My boyfriend really really hate “big banks,” although it’s not like any of these banks did anything to him — he’s been with his credit union forever. (His dad was in the Army, so he’s with PenFed.) I don’t mind opening another account, but I like that Bank of America has ATMs and branches everywhere. While this won’t break us up, it really is the biggest fight we’ve ever had. What do I do?

— Katey in Arizona

Howard Dvorkin CPA answers…

In my 20-plus years as a CPA and financial counselor, I’ve met with many couples whose relationships were stretched thin by money fights. I must admit, however, I’ve never seen a couple argue over Bank of America.

First, let me acknowledge you both make some excellent points…

• PenFed is an excellent credit union. In fact, it offers one of the nation’s best credit cards. Earlier this year, Debt.com called it “the credit card for people who hate credit cards,” since it imposes no fees whatsoever.
• Bank of America isn’t an evil empire. I know many people who are quite happy with big banks. Debt.com editor Michael Koretzky has his mortgage there, because it actually worked out to be the best deal at that moment.

With that said, your boyfriend needs to learn how to compromise. In matters of love and money, I’ve learned this from counseling more couples than I can even count: It’s not about complete agreement on the details, it’s about philosophical agreement on how to save and spend.

Your boyfriend is doing you a favor by encouraging you to join his excellent credit union. Just the other day, I was reading a new study called the Credit Union Satisfaction Index 2015. The biggest finding: 90 percent of credit union customers are satisfied with the overall service. That’s high for any industry, but it’s actually up one point from 2014.

Meanwhile, banks rated only a 782 out of 1,000, according to JD Power. That translates into just over 78 percent.

Still, pressuring you to leave Bank of America isn’t a sound decision financially or emotionally. If you’re in the 78 percent, and if you’re not paying fees to Bank of America to keep your account there, this episode is a good lesson in more than money. It reveals how your relationship will proceed on all kinds of issues where you two differ.

You’re offering a healthy compromise by moving some of your money into PenFed. If your boyfriend wants to convince you to move the rest, the best way to do that is to put your money where his mouth is: Prove over the course of a year just how much money you saved and made by making the switch. If that adds up, you sound like a smart enough women, Katy, to make an objective decision.

This article by Howard Dvorkin first appeared on www.debt.com and was distributed by the Personal Finance Syndication Network.

Ask The Expert: Student Loans Or Health Insurance?

Question: My mother is mad at me because I don’t have health insurance. Instead, I paid the Obamacare penalty last year and this year. In 2014, that was $95. This year, it was $285. 

My mom keeps asking me, What happens if you get sick?” But I’m 28 and I’ve never been seriously ill. The problem is, the insurance where I work is terrible — I’m a teacher at a private nonprofit school for underprivileged children. It’s like auto insurance: It only covers really serious problems after a ridiculously high deductible.

I keep telling my mom I need all my money to pay down my student loans. Coincidentally, that payment is almost what I’d have to pay for health insurance. What do you think, Mr. Dvorkin? If my mom is right, I don’t see what I can do except not eat.

— Julie in Kansas

Howard Dvorkin CPA answers…

You have options, Julie, and none of them require dieting.

First of all, listen to your mother: You can be healthy today and in a car accident tomorrow.

While my expertise is on the student loan side of your problem, I’m also a business owner with hundreds of employees throughout North America. I’ve hired an entire Human Resources department to help those employees get the best benefits.

You don’t say if your school is big or small, but I imagine there’s at least one HR person you can consult. I urge you to do so. Your HR department or director has surely heard stories like yours, and they may have solutions you don’t yet know about.

That’s certainly the case for your student loans.

One of my personal missions is to tell every college graduate about the seven solutions to solve your problems with student debt. Five of them are programs from the federal government, each designed to ease your monthly payments so you could lead a productive life.

For you, Julie, there may be something even better: student loan forgiveness.

Depending on how long you’ve taught, the type of loans you have, and what you earn, you might be able to have your loans wiped out. Why? Because the federal government wants to encourage certain professions such as nurses, teachers, and firefighters.

Just like with healthcare, the rules on student loan forgiveness can get complicated. So just as I suggested you consult your HR department for the best possible insurance, I’ll also suggest you consult a student loan expert. Debt.com has many of those just waiting for your call — which is free. So is their analysis of your student loans and the programs you qualify for. Call them today at 1-888-472-0365.

 

This article by Howard Dvorkin first appeared on http://www.debt.com/ and was distributed by the Personal Finance Syndication Network.

Dvorkin On Debt: Is Your Retirement Automatically In Trouble?

Sometimes a poll can reveal an amazing trend you’ve never contemplated before. Other times, it simply confirms a long-held belief.

A recent retirement survey falls squarely into the latter for me.

New York Life polled nearly 1,000 “pre-retirees,” which it defines as workers between the ages of 50 and 62. Many had some sort of “automated vehicle” to save for their upcoming retirement.  Typically, that was a 401(k). So what did pollsters announce as the major finding?

Nearly half of pre-retirement Americans find it difficult to save anything beyond what they’re automatically putting away.

I’ve spent the past two decades counseling Americans to save — in person as clients, on network TV, and in newspapers like The Wall Street Journal. Like my peers, I’ve encouraged automatic deductions for everything from retirement to college savings. However, I long ago realized the downside to this major upside. Namely, once most people start saving this way, they’ll convince themselves that’s all they need to do.

I call it Set it, forget it, and regret it.

Most employees who take advantage of a 401(k) contribute around 6 percent, while most experts say you need to save and invest  around 10 percent of your income to retire comfortably. Automatic deductions are a great way to force you to save, because you don’t miss the money you don’t see in your paycheck. It’s not enough, however.

Even worse, I’ve often seen otherwise intelligent adults setting aside 4-6 percent in a 401(k) while charging thousands on their credit cards — and carrying huge balances month to month. Whatever they’re earning in that 401(k) is being wiped out — and then some — by massive interest fees.

In a way, both the 401(k) and the credit card balances are out-of-sight, out-of-mind. You don’t notice the 401(k) savings, but you don’t notice the credit card balances until the issuers cut you off. You simply keep charging and making minimum payments until it’s too late.

Don’t let Set it, forget it, and regret it get to you. Debt.com is here to turn regret into success. You can call one of our certified credit counselors for a free debt analysis. Please don’t forget to do it!

 

This article by Howard Dvorkin first appeared on http://www.debt.com and was distributed by the Personal Finance Syndication Network.

Dvorkin On Debt: Do You Have “Deficit Attention Disorder”?

Attention Deficit Disorder is a common enough affliction that most of us know the initials ADD. However, just this past week, I’ve discovered a new, financially based version of the same thing: “Deficit Attention Disorder.”

DAD results in otherwise responsible adults running up big deficits because they can only think about money in the here and now. They have no ability to make financial decisions that will help them immensely later on. Here’s one recent example.

Our No.1  “daily thought”

If I were to ask you what most Americans think about every day, what would you guess? Sex? Food? Politics?

No, it’s money.

GoBankingRates cleverly asked about our top “daily thought,” and money came in at 18 percent. Work was second at 17 percent. “Love life” was only third, at 11 percent.

As a follow-up question, GoBankingRates asked about our “biggest financial fears.” Topping the list at 20 percent was “not being able to afford a home.” Sadly, “never being able to retire” was second at 16 percent, followed closely by “losing my job” at 15 percent.

If you notice, retirement is the most far-from-now category, so it’s not too surprising it didn’t rank higher. Still, it’s also the most serious fear with the most catastrophic ramifications — because you can always rent if you can’t buy a house, and you can always get a job (even if it’s lower paying), but if you retire broke, there’s no option that late in the game.

Tired of retirement talk

Sometimes, when a problem seems intractable, we simply give up trying to solve it. I’m fearful that retirement has become just such a problem for most Americans.

Earlier this month, insurance firm Aon Hewitt released a thoroughly depressing study. The company analyzed 77 large U.S. employers with a combined 2.1 million employees — and found “only one-in-five are on track to meet or exceed their needs in retirement at age 65.”

Worse still, three in five workers will need to keep working past 65 just to survive. Even with this bleak news, “many workers are not planning enough for their long-term financial goals,” researchers conclude.

Of course, it’s hard to plan when you’re swamped with credit card debt,  which many Americans are. The average U.S. household owes more than $15,000 on their credit cards. If those households had that $15,000 to invest for retirement over the next 20-30 years, they could easily turn that into a solid nest egg.

If you want to learn more about retirement, here’s a video I made for a curious Debt.com reader. If you’re drowning in debt and can’t even begin to think about retirement, call a certified credit counselor for a free debt analysis at 1-800-810-0989. Do it now. Don’t let Deficit Attention Disorder become an even worse condition: Debt Death.

Howard Dvorkin is a CPA and chairman of Debt.com, an educational resource for those who want to conquer all forms of debt in their lives.

 

This article by Howard Dvorkin first appeared on http://www.debt.com/ and was distributed by the Personal Finance Syndication Network.

Father Forged Kids Names on Student Loans. Do They Owe Them?

Question:

Dear Steve,

My ex husband left 2 of my children with over $100,000 each with student loan debt. He signed loans with their names without their knowledge, he missed months of payments which incurred high interest rates and now these kids both under 30 are saddled with these debts.

They are beyond upset and see no end to paying off this debt. Neither myself or my children were ever made aware of this situation until recently when the debt collectors started calling.

I would like to know if there are any new laws to help in these situations and/or what if anything can be done to alleviate this burden for them

Paula

Answer:

Dear Paula,

As you can imagine, this is a complex problem. On one hand you have the issue that the kids were clearly victims of identity theft. On the other hand it appears they received the benefit from the loans.

So here is how I see the problem, and I’m assuming these are federal student loans since they constitute the largest group of loans.

The first and most immediate step would be for the kids to file a police report with your local authorities about the alleged identity theft. This is critical. The kids will need the police report number to move forward. The children may be asked and must be willing to participate in legal charges against their father and pursue a conviction that might include jail time. If they are not, stop here and start working out a payment arrangement.

Next, the kids should report the fraud and the police report number to the U.S. Department of Education, Office of Inspector General. Click here. There is an online form to file the complaint.

The biggest hurdle I see is if the Department of Education can convinced and satisfied it was fraud and they then relieve the kids from the liability of the loans, the loans will probably be clawed back from the schools. In that case the schools will probably go after the kids to repay the education they received. The agreement to attend is between the kids and the school.

If this was a situation of identity theft where the kids didn’t get the benefit, then it would be an easier matter to deal with.

If these were private loans the process would be similar but the ability to convince the private lender of the fraud without a successful conviction will be very tough.

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This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.

Know Before You Owe: New Mortgage Disclosures, New Rule

The Complete Guide To Making More Money

My frugality has served me well. It’s allowed me to live on a budget in one of the most expensive cities in the word. It’s afforded me the opportunity to follow my dreams of professional acting. It’s taught me the importance of conscious consumption and a strong financial foundation.

But a couple of years ago, it hit me that my frugal hacks alone were not enough. My wealth wasn’t growing, and despite my stellar savings strategies, money remained a constant struggle. I had adopted the limiting belief that I was doing everything I could, when in fact, I had been neglecting the other half of the wealth equation – making more money.

Saving money is finite. Even if you were to reduce your monthly expenses to zero, you’d only be saving as much as you were once spending. But money earned has no such limits. You can increase your income well past the point of any potential savings because there is no cap on how much you can make.

As much as I love and live by my frugal tips and tricks, learning how to make more money has been one of the most transformative skills and experiences of my 20s. Frugality by choice rather than necessity is hugely liberating – as is the flexibility of greater resources with which to live life.

But how do you do it? How do you actually make more money?

Start With Knowing

I had been writing about personal finance for nearly two years before internalizing this message of making more. Sure, I’d read stories of other individuals who had successfully increased their earnings, but I continued to feel that my own income pursuits were inherently limited by my lack of experience and relevant education.

To me, making more money could only be achieved in one way- a Broadway contract. With a degree in drama and seven years of professional stage experience, it was the only six-figure future I could envision. It didn’t occur to me that I could be the primary driver of my income endeavors, rather than my experience or my degree or my employer – and that the path to achieving elevated earning potential could take any form.

Eventually, my voracious consumption of entrepreneurial books, blogs, documentaries and podcasts pushed me past the tipping point, helping me take responsibility for my earnings future and transforming my approach to earning more.

The lesson learned?

To truly maximize the opportunity for income growth, take ownership of your income potential. Outside factors are undoubtedly influential, but none are more powerful than your own resolve and follow through.

Ask For More Money 

Whether you’re traditionally employed or working freelance, knowing how to ask for more money is a critical component to making more. Don’t limit how much you can earn by falling into these common negotiation traps.

• Making It About You. The house you want to buy, the baby you’re expecting or the medical bills you’re struggling to pay off may be compelling reasons for you to seek out a pay increase, but they are no way to ask for one. Your personal circumstances have no bearing how much you should be paid – at least from your employers’ or clients’ perspective.

• Making It About Time Served. Just because you’ve worked for an employer or client for a certain period of time, doesn’t mean you deserve a raise. Don’t walk into a negotiation with the passage of time as your only reference point for why you should make more money. On the flip side, don’t let limited time served keep you from asking for more when you deserve it. Proven performance is far more compelling than a set period of time.

How do you successfully negotiate when you do deserve more?

• Make It About Them. What value are you offering your client or employer that extends above and beyond your current compensation? Come with a list of added responsibilities or tasks you’re willing to take on or have already taken on. The conversation should be about how you’re fulfilling the employers’ or client’s needs, not about how a pay increase will fulfill your own.

• Make It About The Numbers. It’s nearly impossible to argue with the bottom line. The more you can distill your contributions down to concrete numbers and metrics, the more compelling your case.

Tonya Rapley, founder of MyFabFinance, negotiated a $20,000 salary increase over two years at her former community outreach position by leveraging her impressive performance record. “I exceeded expected revenues by $11,000 and made mention of it [during a performance review]. How can you resist someone who makes money for you?” she told GoBankingRates.

Asking for more money doesn’t have to be limited to established relationships either. Even first-time job seekers can and should get in the mindset of asking for more.

How to Make More Money From the Start

According to a NerdWallet survey of 8,000 college graduates entering the job market between 2012 and 2015, only 38% of new grads tried to negotiate their pay upon receiving their first job offer. The study also surveyed employers, finding that three-quarters of hiring managers had room to increase their offers by five to ten percent.

Make more money in the long run by positioning your earnings well from the start. More often than not, there is room for negotiation.

According to NerdWallet, “an employee who successfully asks for a 5 % salary bump on a $40,000 job offer when she is 22 […], will make an extra $170,000 by the time she retires at 65.” (Based on an annual 3% salary growth.) Though today’s high school and college graduates probably won’t be at the same job for forty plus years, learning to negotiate from day one is still good practice and helps kickstart earnings growth ASAP.

Rather than making specific salary demands with no previous experience or past performance to reference, grads entering the workforce can approach negotiations professionally by posing questions like, “Is there any flexibility?” when the money conversation is initiated.

Researching comparable salaries for the position, location and organization on sites like Glassdoor and Payscale can also give first-time (and long-time) negotiators helpful context for appropriate income ranges and targets.

How to Ask For More Money – With Confidence

Whether you’re negotiating with your boss of ten years or a brand new employer, asking for more money can be nerve wracking; but executing your negotiation well can be the easiest money you ever make. Let that prospect motivate you to follow through in spite of your nerves.

To keep your negotiation anxiety at bay, follow these guidelines for asking for more money with confidence.

• Be Prepared. Don’t walk in and ask for more money without having spent some time thinking about how much you’d like to earn and what you can do to get it. Do your research, identify your contributions, know what value you provide and be able to articulate all those things clearly.

• Practice asking for more money with a period – no question mark, no ellipses, no apologies.

Even if you plan to open the door to negotiation with a question, practice it in such a way that you command the answer you’re hoping to get.

• Let the Silence Lie. Once you’ve posed the question or confidently stated your desired salary, let the silence lie. Don’t undercut your ask by trying to justify it.

In an article for The Atlantic, Katty Kay and Claire Shipman write, “Success, it turns out, correlates just as closely with confidence as it does with competence.”

Find The Right Employer (or Client)

If all of your negotiation prowess leaves you short of your desired earnings, it might be time to consider a new employer (or client). According to Forbes, “staying employed at the same company for over two years on average is going to make you earn less over your lifetime by about 50% or more.”

A new job gives you the opportunity to re-anchor your salary at a level that’s in line with your desired income. Rather than being relegated to a traditional two or three percent raise, you can ask for a 20 percent income increase or even 100 percent – they won’t know. As long as you have good reason and can back it up, you can ask for just about anything you want.

I went through this process rather recently in my freelance career. I had started writing for other bloggers for around $30 per post – asking for the occasional $10 or $20 pay increase every so often. When a potential corporate client reached out, I decided to be bold and ask for a full $50. They came back to me with a contract offering $1 per word. For those of you unfamiliar with the blogging space, most posts fall between 500-1,000 words.

That experience shifted my perspective entirely. I knew my fellow personal finance bloggers probably couldn’t afford to offer me a thousand percent plus pay increase, but somebody could. I spent the following year slowly seeking out those “somebodies” and in the process, grew my earnings in ways I never even considered possible.

Sometimes, the key to making more money isn’t to steadily continue along on your current path, but to completely disrupt your current status quo by seeking out greater opportunities elsewhere.

Rethink Your Offering

Knowing how to ask for more money and find the clients and employers willing and able to pay you what you want, are critically important skills, but if you still find yourself coming up against an income ceiling in spite of all that, it may be worth rethinking your offering.

As a professional artist, this was something I personally struggled with. Rather than simply giving up or abandoning the work I loved and the skills I’d developed, I spent some time reconsidering where my talents and passions overlapped with market demand.

Walk into an audition for a Broadway show or tune into an episode of American Idol and you’ll find there’s more than enough supply. What I had failed to realize though, was that there was a largely unmet demand for my skill set in other industries and settings.

Sure, no Fortune 500 company would be too pleased if I walked into their lobby and started performing a one woman rendition of West Side Story (though they might be amused) – but they would and do value my ability to connect with an audience, tell a story, think creatively and speak confidently.

If and when you hit an income ceiling, rethinking your approach and leveraging your skill set to meet a more profitable market demand can provide the diversity of income that enables greater earnings, which in turn enables the flexibility to pursue your passion driven and personal endeavors on your own terms.

In Summary… 

Making more money provides freedom and flexibility that even the most disciplined savings techniques struggle to match.

Keep spending smart, but don’t forget that making more money is the only pathway to financial freedom with unlimited growth potential. By negotiating confidently, finding the right audience for your work and discovering the best medium for your skill set, you can bust through any perceived constraints on your income and command the salary that serves your goals and dreams best.

This article by Stefanie O’Connell first appeared on The Broke and Beautiful Life and was distributed by the Personal Finance Syndication Network.

My School Misled Me, is Closing, and Leaving Me in Debt

Question:

Dear Steve,

I started going to International Academy of Design and Technology in 2008 and was really excited to go for my Bachelors degree. I wanted a better life for my son and me. I asked all the usual questions; what’s the program like, how are the courses taught, is it like going to a traditional college?

They assured me they were a legit school and they had a high graduation rate, they were accredited and it would be just like a regular school, except it was online. I was working full time and raising a little boy, I needed something I could do after work.

After I started the school, I felt like the teachers just gave out A’s, like we were paying for A’s. I intentionally submitted some really bad work, and I still got an A. I called up the student support line and asked about their accreditation, their grading system, their teachers, etc. They assured me they were a legit school and they had accreditation and they had to be a real school in order for them to be able to have their students use FASFA.

After I graduated, I got a job working with other graphic designers, all of whom went to actual colleges. They all had a bad opinion of me because they had heard about online schools. I asked them about their classes; classes in human drawing, developing their artist styles, typography and creating it, learning from the masters, etc. I didn’t have classes like that at all. In fact, I had very basic classes, that I wanted to test out of because I had the skills but I had to pay $300 to do that and I didn’t have that kind of money.

I did use FASFA to go to that college. They maxed me out year after year and I didn’t know until my Junior year when I caught on and took out the minimum. Then m senior year, they told me I wasn’t going to be able to borrow enough to cover all the costs because they had over-borrowed by first 2 years. I have $60K in student loans, I don’t have a job now. My degree is a useless piece of paper. I can’t afford payments and take care of my son so I’m on an income repayment plan.

And to make matters worse, IADT is CLOSING due to low profits and low enrollment. They were sold to Sanford-Brown Colleges and now they are closing next year (2016). I will not have alumni support or any resources from that school. I also learned they were NOT nationally accredited like they said they were. They were self-accredited. This was a scam school. I want to be able to go to a real school and get a real degree. One that’s worth something. I’ve contacted lawyers and no one will help me. I don’t know what to do.

PLEASE HELP ME!

Stephanie

Answer:

Dear Stephanie,

I’m sorry to hear you are in this situation. But all is not lost.

According to public data, it looks like International Academy of Design and Technology may have lied and misled you to encourage you to enroll. Government data doesn’t show fantastic graduation rates. In fact only 26% of students graduated within six years. Those that did only had a median salary of $27,800, six years after graduation. And of those that did attend, about 61% have defaulted on their federal loans. – Source

Recently I wrote Millions of Federal Student Loans Lining Up to Be Eliminated and Borrowers Repaid and that article seems to directly apply to your situation.

While this is going to be a new defense for federal student loan borrowers and it might take a little bit to work out the kinks, you seem to have a good story to support the fact you were sold a bill of goods by the school about what their success rate and education performance was really like.

If the school was not Title IV eligible for federal funding then your student loans would be able to be discharged in bankruptcy without much fuss. Those loans would not be protected in bankruptcy. But because they assisted you with federal loans they must have been approved at some point. I’m not exactly sure which campus you attended but according to the latest 2015-2016 list of schools who were Title IV student loan eligible, many of the campuses are on the list. – Source

If you recently left the school you may be eligible for closed school loan forgiveness. You can click here for details on how that works.

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If you have a credit or debt question you’d like to ask, just click here and ask away.

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This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.

Finding a Bank That Treats You Fairly

I think it’s fair to say that most readers are looking to get better results with their finances.

One of biggest changes you can make with your money is optimizing your banking system.

Staying with a Big Bank Just Because

If you ask people about their banks I think many would either be apathetic about the no frills of their accounts or upset about being nickeled and dimed with fees.

I understand that banks are a business. They need to make money. On the hand, they are handling our money and we will act accordingly.

When we first got married we opened a joint account at one of the big banks. It was convenient and while the we were going to earning much money, we had a way to pay the bills.

If you read some of my earlier posts you know that we had a horrible time with their customer service and we were getting fees left and right. Nothing huge, but they were eating away at our balance.

The couple of pennies we got every quarter for interest wasn’t doing anything to make us feel better; in fact it felt like a slap in the face. After dealing with it for so long, we decided to switch. However the other big bank wasn’t really an appealing option.

I had read some personal finance sites and heard about online banking. They offered much higher rates and met most of our needs. However it felt like a risk. This bank was completely online.

We worried what we could do if something went wrong. We decided to test the waters and signed up for ING Direct’s Orange Savings account for a few months. After being satisfied with everything we then switched our checking account to them.

It’s been a great decision for us as we have a hassle free banking and bill paying system with them.

Knowing that other couples are looking at making a switch, I wanted to share some tips on how you two can find the right bank or credit union for your needs.

Finding a Bank That Treats You Fairly and Earns You Money

What should you look for in a bank or credit union? That depends on what important to the two of you.

Whatever you choose, please make sure that it’s FDIC insured bank or a NCUA insured credit union.

We wanted the following for our joint checking and savings:

• No monthly maintenance fee: I understand banks have the right to charge what they want, but I expect something in return. With most banks, the fees offer no extra services or benefits for us, so why even get an account with them. We wanted no fees for our checking account.
• $0 required minimum balance: I understand that if one gets a basic savings account, you’re not going to get a great rate. But then if the interest rate is pathetic, why would we want to keep a larger balance with our checking account?
• Free online BillPay service: This is a must-have on our list as we prefer to handle our bills online due to its convenience and control. Late payments are a thing of the past as we can easily adjust dates and amounts as our budget allows.
• Conveniently located ATMs: Whether we went with a bank or credit union we needed a way to access our money after bank hours. Having ATMs nearby is important as we’re trying to avoid fees from out of network ATMs.
• Earn some interest rate if possible: I know that the high interest rates of years ago is gone, but that doesn’t mean we shouldn’t get anything. For our savings we’d like to get a competitive rates. Earning interest with our checking account is not necessary, but it’s nice that we bonus.

For some couples have ATMs close by is more important than interest rates or vice versa.

Make sure that you and your hard earned money get the service you deserve from whatever bank or credit union you choose.

Ally Bank

Ally Bank is a fast becoming a popular bank among financial bloggers for a few reasons.

They offer both online checking and savings accounts and their interest rates have been a bit higher than some of their biggest competitors. They offer everything on our wishlist, including:

• No minimum balance to open an account
• Competitive rates
• Make deposits with Ally eCheck Deposit^SM , online transfers or free postage-paid envelopes
• Real help 24/7 from customer care associates
• Simple online transfers
• Free Online Banking with Bill Pay
• Free Account Alerts and Notifications
• Free Sleeping Money Alerts

If you’re interested in opening a savings account with Ally bank, click here to get started.

Capital 360

We’ve been using Capital 360 (formally ING Direct) for our joint checking and some of our savings for several years now and have been really happy with their service.

Their online 360 Checking account has been a great fit for our budgeting needs and we haven’t had problems with it.

With the addition of paper checks awhile ago, this makes the account practically perfect for us.

Like Ally, ING Direct also has all of the features that we look for in checking and savings accounts.No minimum balance to open an account

• Competitive rates
• Free Online Bill Pay
• Free access at over 35,000 ATMs
• Make deposits with CheckMate^SM , online transfers
• Free Account Alerts and Notifications

You can open a checking account with Capital 360, simply click here to get started and get a $50 bonus!

Local Banks and Credit Unions

I realize that online banking isn’t for everybody. In fact, for those looking at great customer service may not to look far.

Smaller, local credit unions and banks can be a perfect solution.

My mother made the switch from one of the big banks to a credit union and she has loved it! She feels like she has a partner with her finances.

Saving has become much easier and the competitive rates they offer has her paying down debts faster and investing for her future.

Not sure what credit unions are in your area? Please visit the National Credit Union Administration (NCUA) to see your local options.

If you live in North Carolina, check out Coastal Federal Credit Union and State Employees’ Credit Union.

Thoughts on Working Smart for Your Money

Whatever your banking choice, please make sure it suits YOUR needs.

Have your money to grow hassle free while you two take on other financial goals together.

I’d love to hear how you have taken some action and improved your finances. Have you made adjustments with your banking, budgeting, or investing?

Just a heads up, this post does contain affiliate links for Ally and Capital 360.We use both banks ourselves for our banking needs.

In the spirit of full disclosure, I also have a small savings account with a credit union  

This article by Elle Martinez first appeared on Couple Money and was distributed by the Personal Finance Syndication Network.

Millions of Federal Student Loans Lining Up to Be Eliminated and Borrowers Repaid

As a consumer debt expert for decades I’ve developed a pretty good sense of reading the tea leaves of debt. Sometimes this means making some sense out of puzzle pieces well in advance of assembly.

I’m getting that same strong sense that student loan debtors are on the verge of a bold new ability to discharge massive amounts of federal student loan debt for some very good reasons. The primary reason is they’ve been duped.

Student loan debt has typically been very, very problematic. Young people, their parents, and grandparents have been placed on the hook for massive amounts of debt that for some will burden them the rest of their lives and actually leave them broke in future retirement.

This level of debt, which most incorrectly assume can’t be discharged in bankruptcy, is retarding household formation and robbing people of the ability to save early for retirement.

In the student loan debt situation it isn’t so easy to point a finger at a single bad guy. All cogs of the system have blame to bear in the current student loan crisis. From well intentioned parents who push their kids to go to college that probably shouldn’t, to people who think student loan debt is good debt, to colleges that charge higher and higher tuition and facilitate the loans, to incompetent servicers who give borrowers bad advice on how to deal with loan problems.

Gerri Detweiler, director of consumer education for Credit.com said, “Student loans can be incredibly confusing. Most students have a hard time keeping track of the loans they have, much less figuring out which ones are eligible for what type of relief. Add to that servicers who sometimes give flat out bad advice and it’s no surprise consumers give up or end up making bad choices.”

Curtis Arnold of CardRatings.com said, “I have three kids in college and grad school and, even though I’ve been a nationally recognized expert for 20+ yrs, I have found the student loan industry to be perplexing. There are so many types of student loans and so many changes that have occurred in the last few years, that it’s downright confusing.” The lack of clarity over student loans is why most students look to the school to facilitate the financing. Which they will gladly do.

Arnold went on to say, “I can not agree with the commonly held notion among many financial experts that student loan debt is “good debt”. In fact, I would argue in some respects, student loan debt is worse than credit card debt.” And he is right.

And the concern over student loan debt is not one for just the younger members of our population, but a growing concern for those over 50.

But a couple of recent events have made me believe a simple but easy answer to eliminate their student loan debt may exist for a vast number of federal student loan borrowers.

Recently the Department of Education brought a section of federal law to light that would allow federal loans to be eliminated if, “the borrower may assert as a defense against repayment, an act or omission of the school attended by the student that would give rise to a cause of action against the school under applicable State law.” For more information on this, click here.

And if this approach to eliminating student loan debt is successful the borrower would be eligible to receive any amount paid towards the loan and the school would have to repay the federal student loan back to the Department of Education.

In the past few weeks data on school performance has been made publicly available through two excellent websites; CollegeScoreCard.ed.gov and Propublica Debt by Degree.

The resulting set of data from those two sources is frightening.

Last week I traveled to Ball State University, after a very gracious invitation from Dan Boylan, where I spoke to a group of students about debt. As part of my presentation I took a quick look at the reported data about Ball State University and another school in the region, to compare results.

I think you would agree that the value for money Ball State University delivers is good. Their cost is below average while their graduation rates and salary after attending is higher than average.

But notice that the average national graduation rate is about 50%. That means half of students never earn the needed degree to receive the maximum benefit of enrolling in school. I’ve seen statistics that show up to 75% of people with student loan debt never graduate when you factor in all types of schools.

So the observation I think is most important from this data is it is quite possible an argument could be made that schools have unfairly misled students into federal student loans when they knew in advance they would never be able to deliver even average performance.

Let’s look at two examples that I spotted during my trip.

Ivy Tech Community College – Indianapolis, IN

Ivy Tech came to me because of some excellent advertising they were doing at the bottom of the TSA bins I had to use at the airport. The ads were bragging about the value of attending and how much it would help students towards future salaries and success. But the data reported paints a different picture.

While the average annual cost of attending Ivy Tech is much lower than average, so are the graduation rates and salary. The data reports only 9% of students graduate after six years.

But in the IVY Tech ads I saw, there certainly was not any claim that 91% of students sold into the school would not obtain the advertised benefit. – Source

Following attendance, 53% of students are not repaying their federal loans. The school made the money but the government is on the hook.

Martin University – Indianapolis, IN

Another Indianapolis area school I discovered on my travels is Martin University. Students who attend Martin University are more likely to come away with an even worse result. – Source

Martin University tells the public their mission is, “Martin University’s Vision is to be a Haven of Hope, a Community of Support, and a Premier Leader among Institutions of Higher Education.” – Source

But when it comes to the performance numbers, Martin costs much more per year than either Ball State University or Ivy Teach. According to ProPublica the total cost per year, including tuition, books, and living expenses is $22,038. Low income students paid on average $17,631.

The median level of federal student loan debt is $42,247 per student and the graduation rate is just 12%. The nonpayment rate on federal student loans is reported to be 85% and 57% of past students, six years after graduation, earn less than $25,000 per year.

The average median monthly student loan debt payment for Martin University students is reported to be $469.03 and most students pay the tuition with federal loans.

Arguments That Will be Made

Some low performing schools will make the argument that they serve a disadvantaged population that is less likely to graduate for a number of socioeconomic factors. I completely understand that position.

Other schools will say they have no control over the seriousness or ability of the students they enroll. I understand that as well.

But the reality is students and their parents are trying to make an investment in themselves and the future. Schools are encouraging students to enroll and will gladly suck in all the easy loans they can deposit from federal and private loans. Up till now, they have not been very accountable to the purchaser for delivering the product they sold.

But if a school is either not achieving the average performance of schools and does not disclose the odds are significantly not in the favor of the student, it seems boldly withholding that information is an unfair and deceptive practice. Fraud maybe?

Why would anyone enroll at the more expensive and lower performing school?

In Indiana, Martin University is not the only school facing poor performance data.

Schools like the Art Institute of Indianapolis have a much higher annual cost and average graduate salaries in the $25,200 range.

It’s not going to be long before attorneys start to see the massive patterns of performance and practices that could qualify for federal student loan discharge as explained here.

Attorney Carl E. Person seems to agree their is an issue to explore here. He said, “Students (and their guarantying parents) before starting to take the course have been defrauded by schools because they don’t tell the students and their parents that the course of instruction does not enable its graduates from the program to earn sufficient income to pay the tuition and maintain a minimum standard of living.”

Think about the situation like this, would you buy a car that only had an 11% chance of achieving the goal of getting you to work?

Some schools will say they are not selling degrees but education and a benefit is obtained by people who take any class. But that’s not what the vast majority of students hope to achieve. They don’t enroll to take a few classes and dropout. They enroll to earn a recognized degree and build a better future based on the degree. The schools should tell the students what the chance is of that actually happening before they sacrifice their financial future to some slick advertising.

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This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.

My Car is All Worn Out. What Should I Do?

Question:

Dear Steve,

I need two new cars(used cars) but I don’t know if I should fix these old cars or trade them in and buy 2 used ones. My 2007 Kia Optima has 165K miles on it and wont pass inspection-needs catalytic converter and new tires (maybe $1500?). My ex-wife has Kia Sedona with 100K miles and needs new transmission (Maybe over $3k).

These cars are paid off and we both desperate NEED cars, more so, me. With no car loans right now, I barely pay my bills every month. And I only have a little over $2k in savings.

I also just had a car accident that was 100% their fault and received a check for $1500 for damages.

My ex-wife does not do a lot of driving but I do a ton unfortunately. Do you have some financial advice of what my best option to do is for this very stressful situation?

Thanks so much!

George

Answer:

Dear George,

Well you gave me a couple of important clues. You said you currently do not have any car payment but you are barely getting by and have little in savings. I also get the impression you are not living lavishly and don’t have much to trim in the budget.

So we have to piece together a solution that does not increase your transportation costs and still allows you to have reliable transportation. I’m not sure that’s possible.

Both of your cars seem to be cared for but have worn out critical components. When vehicles reach the end of their affordable or useful life the options are to fix them up or ditch them. They reach a point where fixing them just gets you a free membership in the Repair of the Month club.

I could not help but notice that you are trying to come up with a solution for you and your ex-wife. You know I’m pretty good at what I do but figuring out an answer for two now separate and divided households is beyond my pay grade.

I’m a big fan of buying used, rather than new cars but your situation is a bit different. In your case, with limited additional resources, I like new cars with good value and awesome warranties.

New car financing from manufacturers can be obtained with really great rates and here is how to do that. A new car will give you the financial protection from a major auto repair over the next few years. Sometimes the advice you always hear about never buying a new car just doesn’t apply to every situation.

Not long ago I actually had a chance to borrow and drive one of the least expensive cars available today. Sure, it was laughingly small but all four of us adults fit in the car and it was a surprisingly brisk ride. In fact, I even took a picture of the Chevy Spark we borrowed because it was so unusual.

The car starts at $12,170 (I know, who ever pays the base price) and the U.S. Department of Energy reports the car gets 30 MPG city and 39 MPG highway. With your insurance check in hand and your beater to trade in there might be a deal to be had on this or a similarly inexpensive car like the Nissan Versa, Mitsubishi Mirage, or Ford Fiesta.

So lets look at the costs and cost savings to see how buying you a new car might make sense and cents.

According to Fuelly.com, drivers with a 2007 Kia Optima like yours generally say their combined fuel milage is in the 28 MPG range. Real drivers in the 2015 Chevy Spark are reporting 36 MPG.

Now you say you drive a lot. In my book a lot would be 2,000 miles a month. Hey, I’ve got to use some number for the calculations. At 2,000 miles per month your Kia would burn about 71 gallons a month while a car like the Spark would burn 55 gallons. At current prices that would save you about $34 a month and if fuel prices go up the savings are even bigger.

Chevy is offering 0% financing and if you qualified your payment, based on $13,000 would be $180 a month. But really it would be $146 a month if you factored in fuel savings. You’d have to check on what your insurance cots would be.

According to Chevy, the Spark has a 2 year or 24,000 mile scheduled service program so you wouldn’t have to pay for any service for the next year or so based on your driving. It also has a 5 year or 100,000 of roadside assistance and powertrain warranty.

Look, I’m not suggesting you should blindly run out a buy a new car. But what I am suggesting is that we have to look at a solution where you are not pouring good money after bad and whatever you decide to do allows you a better chance of less transportation problems and costs moving forward.

And I’m also not saying you should buy the Chevy Spark. There are several cars to choose from in the entry level range.

While a new car does increase some of your costs it also reduces some and most importantly, gives you a better chance of having reliable transportation for a longer period of time with a manufacturer warranty to protect your financial risk of major repairs.

As far as your ex-wife goes, have her write to me and I’ll tackle her situation separately.

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This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.

Can I Save Money Losing Weight?

Too many visits to my doctor recently have convinced me it’s time to do something about a problem I’ve ignored for years: obesity.

I’m obese — according to BMI and the medical charts at my doctor’s office, and it’s a problem I haven’t wanted to come to terms with until now. Losing weight should help solve a lot of my medical problems, and as a personal finance writer, I’m wondering if losing weight will also help me save money.

My goal is to lose 50 pounds within the next 365 days — or about a pound a week. If I get there, I’ll still be overweight, but at least I won’t be as fat and will have a better starting point to hopefully someday get to a normal weight.

Unfortunately, I’m not alone. Nearly half of U.S. adults are expected to be obese by 2040, according to a report by the Center for Retirement Research at Boston College.

Saving money with weight loss isn’t my ultimate goal, of course, but it gives me a bit more incentive and another angle to write about that readers may learn from.

While I’ve just started this year-long quest, there are some things about trying to lose weight and saving money that I’ve quickly come across, and others that I’ve researched. Here are some ways I hope to save money by losing weight:

Fewer doctor’s visits

I’ve been going to a chiropractor for years for lower back pain. He used to charge $25 per visit years ago, but that’s now up to $40. Every time I make that payment I leave his office thinking of many other ways to spend or save that $40.

I recently started lap swimming, and that $40 would almost buy a monthly pass at my local pool.

Having extra money also opens up all kinds of investment options, including building up an emergency fund and funding retirement.

Along with the chiropractor bills, there are visits to my medical doctor and my healthcare plan co-pays that add up. Throw in a prescription drug that I hope to be off after losing some weight, and I’ve got maybe $100 a month on average to either save or spend elsewhere.

A report by the Centers for Disease Control and Prevention found that people who are obese incur $1,429 more in medical costs annually than people of normal weight.

Being overweight or obese increases the risks of other medical conditions, including:

• Coronary heart disease
• Type 2 diabetes
• Cancers
• High blood pressure
• High cholesterol
• Stroke
• Sleep apnea
• Osteoarthritis

Dining out less

In search of beignets.

It can be difficult to show restraint when dining out. Waiters are pushing alcohol, appetizers, desserts and other things to eat and drink throughout a meal, providing temptation to eat more. Even if you only order a main course and drink water, it can be difficult to cut calories, though you’ll save money.

I haven’t been to the Cheesecake Factory in years, partly because its portions are so huge and calorie counts so large that it seems like the last restaurant to go to if you’re trying to eat less.

Taking home half of a restaurant meal is one way to save calories — and money if you eat them in place of a meal at home. But how often does a take-home box of restaurant food taste even half as great as it did when it was fresh?

My solution is to simply eat out less and to make more meals at home. This often requires planning, or at least making do with whatever you have in the kitchen, but I think it will lead to less calories and less money being spent dining out.

I admit this is easier said than done. Going out to eat can be a worthwhile treat after a week of meal planning and cooking at home. Someone else can do the prep work, cooking and cleaning, and a restaurant can often offer better meals than I’m capable of making — or at least dishes I haven’t considered trying to cook.

But dining out less is a goal worth trying — for my health and for my wallet.

Insurance

Life insurance companies are looking for the least amount of risk when insuring someone, and obesity is a health issue that they prefer customers not have.

Only smoking is worse than obesity for the health effects and higher life insurance costs. Stop smoking, as I’ve written elsewhere, will add more years to your life — 1.5 years for men and 1 year for women — but obesity will take away most of that gain.

Obese people who stop smoking may live longer, but the quality of life in those extra years will likely drop because they’ll have related disabilities.

High body mass index, or BMI, can by itself be enough for even an overweight person to be denied life insurance if their height and weight aren’t in good proportion. Even a few extra pounds could be expensive.

Here’s an from example from Christopher Huntley, co-founder of JRC Insurance Group: a 50-year-old man who doesn’t smoke and loses just five pounds from his current 230 pounds at 6-feet-2-inches tall could save 37 percent on a $500,000, 20-year term life insurance policy.

His annual premium would drop from $1,560 to $985 by losing five pounds before a medical exam for a life insurance application.

Earning $100,000 less

I work at home as a freelance writer, and I rarely meet clients in person. Most of my work is done online or over the phone. But I wonder, from time to time, if my obesity is enough to put a potential employer or client off.

Bias against fat people is pervasive, and overweight people earn less, are considered for a promotion less, and are less likely to be hired in the first place than non-overweight people, according to Minnesota Department of Human Rights.

Over a 40-year career, a worker who is overweight is likely to earn $100,000 less than a thinner co-worker, the department found, with women penalized more than men.

The risk of future health care costs could be one reason why employers don’t want to hire obese workers. I go on job interviews from time to time, and this is one issue I don’t want a potential employer to even think about when they look at me.

It’s time to get moving.

This article by Aaron Crowe first appeared on Add-Vodka.com and was distributed by the Personal Finance Syndication Network.

Raising Money Smart and Generous Kids

Looking to raise money smart kids who are also giving? Aja from Principles of Increase shares her experience as a mother of two kids who are both generous and self starters when it comes to money.

More Than Numbers: Helping Kids with Finances

I’m excited to share this interview with Aja about how she and her husband are building up positive money habits with their daughters.  As a mom, I’m curious to see how other families work to get ideas on how we can do a better job with our kids.

Raising Generous and Money Smart Kids

As if she didn’t have enough on her plate as a parent, Aja is active in her community and can be found teaching about personal finance, wealth building, and entrepreneurship in church, high school and business settings. She’s also the author behind Debt Free in 24 Hours. 

Some highlights and takeaways from the interview include:

• Model the behavior you want to see: While it’s good to tell your kids to budget and watch their money, lessons stick when they see you do it.
• Make talks about finances a regular thing: As the family was working towards becoming debt free the girls were surrounded with positive money talk.
• Teach about money on their level: While her daughters may have been too small to understand all of the family budget, Aja and her husband did use opportunities like visiting friends and taking care of neighbors to impart important money lessons.
• Allow your kid to find their niche: Part of life is about exploration. Aja’s girls have an entrepreneurial streak that they encourage.

Resources on Kids and Money

If you’re looking at teaching your children to be smarter and more generous with their money, here are some articles and resources to check out:

• 5 Reasons I Don’t Buy Toys for My Kids
• 5 Ways to Teach Kids Money Principles
• Tips For Giving Kids an Allowance
• The Opposite of Spoiled: Teaching Kids about Money (and More)

Thoughts on Teaching Kids to Give and Make Money

I’d love to hear from you – what lessons are you passing on to your children? How are teaching them? What money habits did you pick up as a kid?

This article by Elle Martinez first appeared on Couple Money Podcast and was distributed by the Personal Finance Syndication Network.