Vital Financial Updates Credit – Is it good or bad?

SPAIN: Research is key in planning for college

Q. My neighbor’s daughter has a master’s degree. She has been unable to find a job in her field and is a clerk. My co-worker’s son has a degree in physics and is working in the oil fields. Our son will be a high school senior this year. We have always had the expectation that he will go to college. Due to a variety of financial mishaps we will not be able to help our son financially if he chooses to go to college. We want to help him make the best choice regarding his education so he doesn’t end up with a lot of debt and no job. Based on all the people that you see, can you offer any guidance?

A. That’s an excellent question and one that many parents are currently struggling with. College is an investment in your son’s future. Any investment needs to be evaluated to make sure that it is a good investment. The goal should be to get the best education possible, with the lowest amount of student loans, with the highest possibility of a job in the field he chooses upon graduation. This takes research.

Anyone considering continuing their education should research the fields they are interested in. Are there available jobs in this field and if so are the demand for these jobs increasing or decreasing? What kind and level of degree does this kind of job require and prefer? What is the average pay for a college graduate entering the work force with this type of degree? Where are available jobs located, and is the young graduate willing to move to where the jobs are located?

The cost of college varies greatly. Is going to an out-of-state college worth the investment versus an in-state college for the degree the student is seeking? Can the student live at home to save on expenses? Are scholarships and work study available to keep loans to a minimum? Can the student would part-time in the school year and full time in the summer?

Whether you attend vocational school or college, keeping college loans reasonable is important and our state supported vocational schools and colleges offer a great value to students and parents. In a recent article in the Gallup Business Journal they state:

“For students, here’s the bottom line: We found that it really doesn’t matter what type of college you go to – whether it’s public or private, large or small, very selective or not selective. The type of institution has little to no bearing on your long-term life well-being and engagement at work. But how you go to college makes all the difference to your future. Finding a college that provides you with the support and experiential and deep learning should be your top goal.”

The reality is the cost of college is high and the student with student loans will need a job to repay the student loans. Since you are going to pay for a college education, you will want a job when you graduate.

Students need to be reminded that money borrowed has to be repaid. Even if a student would later find him or herself in bankruptcy, in many cases students loans still have to be repaid. Defaulting on a student loan can also bar you from certain professions.

Students don’t want to invest two, four, or more years advancing their education and incurring school loans to find out there are very few jobs in their career choice. With research an advanced education is still a good investment in your son’s future.

Your Money Matters: Student loans and 529 savings plans

Kathy Roesser

Kathys Tips:

At the current rate of inflation, the cost of college in 18 years could be $442K total or $110K per year.

If you dont start saving now, your kid may have to take on more debt than they would have had to and you are missing out on the tax advantages of certain education savings accounts. For example, With any 529 savings plan, the money that you invest will grow without being subject to federal income tax. And you’ll also avoid paying federal income taxes on any money that you take out of the plan–as long as you use it to pay for qualified educational expenses, such as room and board, tuition and books.

Don’t let signing up for a 529 paralyze you. You can always change if the one you pick doesn’t end up working for you. Don’t put off savings because you think that your child will score a full ride on a scholarship as an athlete or a merit scholar. You may be right, but full rides are rare — and you don’t want your kid to suffer the consequences of your misplaced optimism. If your child does get a scholarship, you can transfer a 529 savings plan to a sibling or another beneficiary — even yourself– to be used tax-free for qualified education expenses

The President signed a new law that makes it easier for students to pay back their federal college loans. Starting in 2014, new borrowers will pay no more than 10 percent of their disposable income, and the President recently proposed accelerating this benefit for current students. The law also allows any remaining debt to be forgiven after 20 years. Those engaged in public-service professions–such as teachers, nurses, or members of the armed forces–will have any remaining debt forgiven after 10 years if they make their payments on time.

The 529 plan really makes a difference. If you can afford to only put away $50 a month it is worth it. You will be amazed on how it can grow over time and might mean less loans and debt in the future.

It is never too late to add to 529 plans, you just need to make sure you invest in the appropriate investment strategy/fund.

Morgan Stanley
www.morganstanley.com

Editorial: The heavy burden of college aid

Return on investment is a clear measure of what you get for your money. Incredibly, the federal government doesnt apply that simple concept to the $137 billion a year it spends on college financial aid.

It keeps writing checks for grants, loans and work-study with no consideration for how well the schools where that money is spent perform on important measures, such as how many of their students graduate and how many default on student loans. That needs to change. To get the best return for its massive spending on higher education, the federal government should focus on ensuring more students graduate.

American families are carrying $1.2 trillion in student debt, more than they owe on credit cards or auto loans. Thats a heavy burden for those who graduate, but it can be crushing for those who dont.

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The reason is simple; college pays. Graduates are more likely to be employed. Degrees in science, technology, engineering and math, pay better than others; $65,000 a year on average for 2008 graduates, according to the National Center for Education. But among millennials ages 25 to 32 with full-time jobs those with bachelors degrees, irrespective of the field of study, had a median income of $45,500, those with some college $30,000, and those with only a high school diploma $28,000, according to a recent Pew Research Center survey.

So its no surprise that borrowers who dropped out are more likely to default on their loans — four times more likely according to the Education Trust, a privately funded advocacy organization.

With a default rate of 10.2 percent for all borrowers, the federal government loses billions of dollars every year on bad debt. Washington has taken some important steps to make it easier for former students to repay their college loans. Congress recently reduced the interest rate on most new student loans, and the administration has capped monthly payments at 10 percent of income for millions of borrowers, with loan forgiveness after 20 years.

But to save taxpayer dollars, and spare more borrowers a crippling hit to their creditworthiness, federal policy should center on increasing the chances that borrowers will actually graduate from college.

President Barack Obama has taken a key step in that direction. His administration made a college scorecard available online that provides data on individual schools, such as the cost of attendance, the percentage of students who graduate within six years, the typical amount students borrowed for undergraduate study, and the loan default rate. Thats useful information for students and their families looking for the best return on college spending. But Congress should make it even more useful by tying the availability of federal financial aid to a schools graduation and loan default rates.

Right now federal dollars go indiscriminately to schools that graduate almost all their students, those that graduate almost none, and diploma mills where students take on huge debt only to leave with degrees that are all but worthless.

Congress should set minimum performance standards for graduation and default rates. Schools that dont meet them should be given a reasonable amount of time to improve. If they dont, Washington should shut off the financial aid spigot.

Credit card debt can lead to depression, researchers say

Older adults with a significant amount of unsecured debt are far more likely to exhibit symptoms of depression, according to researchers at Rutgers University. (Credit: iStock)

Sobered by the crisis, Americans keep their credit cards in check

Delinquencies for bank credit cards, coming in at 2.44 percent in the first quarter, were well below the 15-year average of 3.82 percent. The Federal Reserve Bank of New York reported that just 8.5 percent of credit card debt was seriously delinquent at least 90 days past due in the first three months of the year, the lowest since 2003.

In the run-up to the 2008 recession, Americans gorged on plastic. Credit card debt soared 87 percent in the decade preceding the crisis as real wages and the savings rate flat-lined, according to the Fed. People were spending beyond their means and fell behind on payments once the economy collapsed and unemployment climbed.

Americans spent the next several years paying down their credit cards, while banks pulled back on lines of credit, all of which drove debt levels down. Now, the reduction in credit availability is leveling off, with credit lines contracting at their slowest rate in a year. At the same time, the Fed said, revolving debt, which includes credit card balances, is growing, up $1.7 billion in May.

lsquo;lsquo;Consumers have a greater capacity to meet their financial obligations due to an improving economy, low interest rates, and the significant deleveraging theyve done in recent years, said the banking groups chief economist, James Chessen.

In addition, the Credit Card Accountability, Responsibility and Disclosure (CARD) Act, signed into law five years ago, cut the volume of fees credit card companies could charge. No more multiple fees in a single billing period for being late on a payment or fees for not using the card. Before the law, credit card companies could hike up interest rates or change the payment due date without warning, saddling cardholders with more debt.

Sundaram BNP Paribas Home Finance to raise Rs 3800 crore

ICRA has also revised the outlook on Sundaram Home Finances fixed deposits to from MAA+ stable to MAA+ (positive). The upward revision in the long-term rating and the revision in the outlook on the fixed deposits follow the companys strategic decision to remove focus on non-housing loans.

Sundaram Home Finance received an equity infusion of Rs 80 crore from Sundaram Finance and BNP Paribas, following the earlier Rs 100 crore equity infusion received in FY13. The upward revision in rating also took into account the consistent equity support from the parent companies. The company net profit for the year ending March 31, 2014, increased by 19% to Rs 151 crore.

Department of Education to ease college loan rules

The Department of Education is trying to make it easier for students with troubled credit histories to get college loans.

New rules would ease restrictions on those seeking loans from the governments direct loan program. The change would let people get loans more easily even if they have about $2,000 in bad debt, and it would shorten the length of time their history of bad debt is scrutinized.

Students with that much “adverse debt” are automatically denied, though they can appeal.

The department said about 370,000 more borrowers would meet the new standards.

The department expects to make the rules final by November; they would take effect for fall 2015.

Credit Card Debt Growth Exceeds Wage Growth In The U.S.

Over the past three months, the year-over-year growth in credit card debt has exceeded wage growth in the United States. This is the first time weve seen this trend since the Great Recession. While it clearly indicates improved US consumer confidence (and all the spending helps boost Chinas trade surplus), in the long run, this is not going to be sustainable.

You’ll PAYE Even More For College

Note: This post was written by NCPPRs intern, Scott Alford.

When my father decided to pursue his college degree, mowing lawns and repairing circuit boards gave him more than enough to pay his own way. For a student attending college today, however, that would be a superhuman feat. The price of college has nearly doubled in just the last 15 years. While most American students look to Washington for the answer to affordable college education, few realize that government intervention is the major driver of sky-rocketing college costs. To deal with the student loan crisis, the Obama Administration has proposed extending a program known as Pay As You Earn (PAYE). However, this proposal is simply masking the symptoms of the bad policies Washington has perpetuated in the student loan market.

The PAYE proposal would work by allowing students to pledge a part of their post-graduation income for a set period of time as payment for their loans, regardless of how much they owe or for how many years they were in school. In other words, after the student makes payments for the fixed period of time, he no longer owes any money even if his student loan debt has not been paid in full. Sounds great, right?

Not quite. In the first place, students are often unable to make enough money to repay college loans. Government loans have saturated the market with college graduates, many of whom will never find a high-paying job in their field. PAYE does nothing to increase students post-college earning potential and thus improve their ability to pay back their loans.

Additionally, it perpetuates the problem of college costs and debt. Like student loan guarantees, PAYE gives colleges and universities increased incentive to increase tuition without any market discipline. Colleges have a greater incentive to charge more since students dont have to worry about how much they have to pay back since it will be fixed in the future. For millions of students and their families who dont have access to PAYE, college tuition will continue to straddle them with more debt as college costs keep rising. To top it all off, PAYE is a massive loss for the taxpayers who are often absorbing the poor decisions which the government incentivized.

PAYE is not the solution to make college more affordable or curb the growing student loan debt crisis. Rather, PAYE is fueling the fire of the status quo.

13 reasons to get your credit scores right now

Have you put off checking your credit score and credit reports? Maybe you figure that no news is good news. Or perhaps you think that you might as well not worry about credit until you actually need it.

In a recent survey about credit scores, Credit.com asked consumers if they had seen their credit scores, and if so, how they came to see them. More than one-third (36 percent) reported that they saw a credit score when they applied for a loan. While there#39;s certainly nothing wrong with that response, its also not the ideal time to find out whats going on with your credit. After all, under federal law you only get a disclosure of your score if you are turned down or charged more for credit.

Do you really want to find out after the fact that your credit kept you from getting the best rate, or that it resulted in your application being rejected? The alternative is, of course, to be proactive and find out whats going on with your credit well before you try to get that loan you really want or need. In fact, there are quite a few times in your life when you#39;ll need credit, so it really makes sense to monitor your credit on an ongoing basis (which you can do for free using this tool at Credit.com). We#39;ve rounded up 13 of the most important reasons to check your credit scores.

1. You#39;re Moving.

If you plan to rent your next home or apartment, the prospective landlord will want to look at your credit. Check yours in advance so you don#39;t lose out on a place you love because of a problem you didn#39;t know about. (Read this for more information on how to rent a place with bad credit.)

2. You Plan to Buy or Refinance a Home.

With a loan for a few hundred grand on the line, a small difference in the interest rate you get can add up to tens of thousands of dollars over the life of your loan. And the interest rate you pay will depend in large part on your credit score. Ideally you want to check yours at least two months before you plan to apply to give yourself time to fix mistakes on your credit reports or address areas that are weak.

3. You Need a Loan.

Theres no sense in applying for loans or cards you can#39;t possibly qualify for, which will just create unnecessary inquiries on your credit reports. Knowing your credit score before you apply can help you avoid this.

4. You#39;re Getting Cable, a Cellphone or Utility Service.

You may have to agree to a credit check before you can get service. It is usually used to determine whether you will have to pay a deposit.

5. You#39;re Job Hunting.

Employers dont get credit scores. Instead they review credit reports. However, since your score can alert you to potential issues, its a good idea to review both before you start looking for a job.

6. You#39;re Getting Married.

Talking money and credit may not feel particularly romantic, but you#39;re going to have to talk about it at some point. So you might as well take the plunge before you#39;ve tied the knot and get your credit scores together so you know where your significant other stands.

7. You#39;re Splitting Up.

Separation or divorce can wreak havoc on your credit scores so this is one time when keeping tabs on your credit isn#39;t just a good idea its a necessity. Heres how to monitor your credit scores for free.

8. You#39;re Expecting a Child.

Few events in your life will have as significant impact on your financial life as having children. Financing braces or school tuition are just two examples of when having good credit will come in handy.

9. You#39;re Starting College.

You don#39;t have to have good credit to qualify for federal student loans. Still, building good credit will prove to be a big plus if you need to rent a place to live or get a car loan either before or after graduation. Plus, college students are at high risk for identity theft, and after school, your credit score will probably prove more important than your GPA.

10. You#39;ve Been to the ER or Hospital.

Medical billing problems are common, and some patients don#39;t even know a bill has slipped through the cracks until it shows up as a collection account on their credit.

11. You Were the Victim of a Data Breach.

If your personal information has been compromised, youll want to pay careful attention to whats going on with your credit, and youll need to do that in the long term. Don#39;t assume that just because nothing happens right after the breach that everything is fine. Hackers may just be biding their time.

12. You#39;re Worried About Identity Theft.

If you accidentally clicked on a suspicious link in an email, got a collection call for someone else, lost your wallet or purse, or have any other reason to suspect your personal information has been compromised, take the initiative to keep tabs on your credit.

13. You Care About Your Credit.

Fortunately only 16 percent of consumers in a recent survey by Credit.com said they have never seen their credit scores. If you are among that group, it may be time to change that. Even if you have reviewed your credit in the past, you may want to take another look. If you do discover a problem, you#39;ll want to fix it as soon as possible.

Each of us is entitled to three free credit reports a year, from each of the major credit bureaus. Heres how to get yours. In addition, because credit reports can be dense and hard to read, there are tools available that translate the information in your credit report into plain English. Credit.com#39;s free tool includes credit scores, and shows you where you are strong, where you are weak, and what you need to do to improve.

More From Credit.com:

How to Make Sense of Your Credit Score

How to Improve Your Credit Score

What#39;s the Best Credit Score?

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