The past few years have been very attention-grabbing at this time of year; with students and grads awaiting word of where student loan rates would go on July 1st. Things this year are much less eventful for three reasons:
1. Last year’s law change prohibits students now from consolidating until graduation.
2. The new legislation changed the nature of Federal [Stafford and PLUS] loans borrowed after 7/1/06. Loans borrowed after that date are a fixed 6.8% for Stafford (7.9% or 8.5% for PLUS). You should have already ‘locked’ the rates on all of your variable rate federal loans during the low rate environment of the past three years, making this rate change moot - hopefully that is the case.
3. Lastly, the rate change is very minimal. Rates will go up on July 1st to 6.62% from it’s current 6.54% level (that is in-school/in-grace rate; rates are .6% higher for out of grace); variable rates on PLUS loans will go from 7.94% to 8.02%. Not a very dramatic move considering the nearly 2% jump each of the past two years … Loans affected by the new rate are those taken out between 7/1/98 and 6/30/06 that have not been consolidated.
The Department of Education’s press release on the new variable interest rate is available at: http://ifap.ed.gov/eannouncements/0530FFELDLInterestRate.html.
New Hampshire.
Several consolidation programs have been mentioned in the past because of their borrower benefits: Educational Loan Company, The Loanster, and North Carolina are often discussed because of their deep interest rate benefits (preferable for those using extended repayment options). Key Bank and FinanSure provide the most competitive principal balance credits (beneficial to those planning to pay loans off promptly). Now entering the arena ... New Hampshire. A state program that no longer has residency requirements. They are the first program in the country to offer substantial rate reduction benefits immediately (rather than the typical reductions after 3-4 years of on-time payments).
The New Hampshire program offers the following:
- ½% rate reduction for setting up auto pay
- 1% rate reduction when repayment starts
- $250 principal balance reduction after 12 on-time payments
It is unlikely this program will be able to save more time and interest payments for those with large student loan debts opting for extended repayments; it will likely best serve those looking at repaying their student loans off in 10 years or less … another good option available nonetheless. Also, NH has a small required loan minimum (only $5,000); many programs require $20K+ … You can learn more about New Hampshire’s program at: http://www.nhheaf.org/ln_cons.asp ... information about all of the consolidation programs is available at the OFS website (http://financialsuccess.missouri.edu).
June 07, 2007
May 30, 2007
OFFICE FOR FINANCIAL SUCCESS
For many of you, aside from receiving the Financial Tip of the Week, you may not know a lot (anything?) about what other educational efforts we’re involved in. Let me share more with you about our Office for Financial Success (OFS).
History.
About two years ago, several ingredients came together (an open faculty position in the Personal Financial Planning Department/ College of Human Environmental Sciences; generous funding from State Farm Insurance to remodel office space; and me [Dr. Mark Oleson]. I had been at Iowa State for the prior 6 years running their Financial Counseling Clinic when the opportunity came knocking). The OFS officially opened its doors in fall of 2005 with two primary missions in mind: (1) Provide training opportunities for undergraduate and graduate students in the Personal Financial Planning Department; and (2) Provide educational services and resources to the University and University Community. The OFS is in place to provide unbiased information to individuals at all stages of life [with the obvious primary target being college students]. We provide resources in all aspects of personal finance: remedial issues (debt management, bankruptcy, credit card, student loan problems, etc.); productive issues (investing, insurance, homeownership, etc.) and all areas in between. This service function is the one that I will outline in this weeks tip …
Financial Tip of the Week.
The weekly blog, our most visible service [tens of thousands of subscribers nationwide], has received national recognition for its educational efforts. I’ve been sending a “Financial Tip of the Week” for over seven years (about 10 months in the blog format). The weekly tip is the primary springboard directing people to OFS services (classes, workshops, etc.). You can view current/ past tips and in a ‘topical’ format.
Individual Counseling Services.
The OFS offers personalized financial counseling services [free to students]. We offer counseling face-to-face, over the phone, and via e-mail. We try to make our services as accessible to as many as possible. The OFS houses one of the MoTAX (Missouri Volunteer Tax Assistance) offices that assisted over 1,000 people [in the OFS – more were served in other parts of the State] with taxes this past season. We are also the only University-run program in the country approved by the US Dept of Justice to provide the pre-filing financial counseling required for those seeking bankruptcy.
Group Workshops/Seminars.
We regularly provide information [on a myriad of topics] to different groups: residence halls, fraternities/sororities, professional student groups, classes, summer/new student orientation, community groups, etc. Workshops can be requested via the OFS website.
Personal Finance Courses (Financial Survival/Financial Success).
The Personal Financial Planning Department offers many valuable classes on a wide range of personal finance topics. Since arriving at MU, I have added two 1-credit courses to that curriculum (designed for non-majors). Financial Survival is written as a ‘front end’/underclassmen course: understanding student loans, credit/ credit cards, financial pitfalls, etc. Financial Success is designed to be a class taken on the back end [as one approaches graduation] to address issues such as managing debt after graduation, 401(k)/IRA plans, general investing, insurance, homeownership, and other post-graduation financial issues. Both courses [currently] are available fall and spring semesters; Financial Survival is also available this summer.
Web Resources.
Most people today use the Internet to gather information. The OFS website was created to provide a resource that could direct consumers to useful financial information. Information about budgeting, debt management, credit/credit cards, investing, taxes, insurance, student loans, and a lot of other issues are all available on the OFS website.
I am pleased with the great things the OFS has done in such a short period of time. The Personal Financial Planning Department, the financial backing for the OFS, deserves much of the credit for its early successes since their support is the reason we exist!
OFS CONTACT/RESOURCE INFORMATION.
Director – Dr. Mark Oleson
Student Assistant – Sam Miller (2006-07)
Website – http://financialsuccess.missouri.edu
Blogsite – http://financialtip.blogspot.com
E-mail – financialsuccess@missouri.edu
Phone – (573) 882-2173
May 24, 2007
STUDENT LOAN CONSOLIDATION - "What if my loan is sold?"
I almost feel apologetic in writing on this topic since it seems I do it so frequently; it is, however, one of the most commonly queried topics (student loan consolidation) as well as one of the least understood/most confusing issues. When consolidating federal loans (after graduating), seek out the program that will save you the most money: Educational Loan Company, North Carolina, The Loanster, FinanSure, and Key Bank are examples of programs that offer the best borrower benefits (depending on your selected repayment strategy – see 4/25/2007 tip).
Many students become confused thinking they need to consolidate with their existing lender or the Dept of Ed (in the event that’s not their lender) in order to get the benefits of “federal consolidation” – neither case is true. You can consolidate wherever you want; and regardless of the federal consolidation program you use, the loan will always be regulated by the federal government (meaning your ability to defer the loan, and the other benefits associated with a federal loan will apply regardless of who you choose for your lender to be) … Many students have been asking the question “What if the lender sells my loan?” The obvious concern is that I don’t want to find a program with good financial benefits that I will lose when/if they sell my loan to someone else (an obvious [and common] bait and switch tactic). Asking the question of whether a lender will sell your loan is the wrong question to ask, however – the question you need to ask is whether or not the lender will offer something in writing that will enable you to keep the advertised benefits in the event that the loan gets sold to a different lender. Ultimately, does it really matter who you’re paying if you’re receiving the best benefits? I don’t think so. I share the example regularly of moving to Columbia about two years ago. When shopping for a mortgage, my only real interest was in getting “the best deal” (lowest interest rate; lowest loan fees). About two or three months later, our loan was sold. Did that bother me? No. The rate that we’d contracted earlier was established, so the only change was who payments were made to. This is what you want to ensure with your federal consolidation – don’t be concerned about whether or not the lender will sell your loan; rather, find out whether or not they will guarantee your benefits in the event that it does get sold.
NOTE. I'm sure several of you have already consolidated your loans, not fully understanding the issues I just outlined (the primary irrelevance of who your lender is [from the standpoint of deferment and other general 'federal loan' benefits], or the vast difference in benefits that companies may offer). Understand that if you're in your grace period and the loan has not yet been consolidated [it is scheduled to be done at the end of your grace period], you can likely "get out" of the loan and reconsolidate elsewhere ...
May 16, 2007
SELECTING AN INSURANCE COMPANY
For most, the selection of an insurance company is based upon one issue – price. Price obviously plays a very critical role in shopping for insurance. Let me suggest some other things to consider when selecting an insurance company (Source: Insurance Information Institute) …
Licensing. Not every company is licensed to operate in each state. As a general rule, it is good to work with a company licensed in your state because if you have a problem, you can rely on your state insurance department to help out. Go here to find a listing of companies licensed in your state.
Financial Stability. Insurance is purchased to protect you and your family financially and provide peace of mind. You should purchase insurance through a company that is solidly ranked in terms of credit (financial standing; likelihood of payout). It would be unfortunate to have the company be unable to pay because they’ve gone out of business. A.M. Best, Moodys, and Standard & Poors are three of the most common agencies that rate the financial strength of insurance companies.
Service. Your insurance company and its representatives should answer your questions and handle your claims fairly, efficiently and promptly. You can get a feel for whether this is the case by talking to other customers who have used a particular company or agent. You may also want to check a national claims database to see what complaint information it has on a company (state insurance departments provide this information on their website – see resources below). You have a right to quality customer service.
Comfort. Ultimately, you should feel comfortable with your insurance purchase, whether you buy it from a local agent, directly from the company over the phone, or over the Internet. Make sure that the agent or company will be easy to reach if you have a question or need to file a claim. You should never feel pressure to buy certain products – your agent should serve as an ‘educator.’
Complaint Index. If you find that after reviewing these items that companies are tied, a complaint index could serve as a good tiebreaker. A complaint index measures how many complaints are received over a period of time relative to the amount of money brought in through premiums. View Missouri’s complaint index. A national complaint database is also available.
Cost. Initially, I mentioned the importance of examining other issues, but there’s no denying the fact that price should be part of your “shopping equation.” Policies and prices will vary dramatically from company to company; as a result, most consumer advocates suggest pricing 3-4 policies before making a decision [use the Internet as well as agents]. Many state insurance departments publish guides to assist with your ‘insurance journey.’ See resources below for a link to all state insurance departments.
So whether your priority is to find a good neighbor; feel inclined to be in good hands; or have an affinity for lizards, shop around. Make sure you’re comparing apples with apples (similar types and levels of coverage). Lastly, review your insurance at least once a year to ensure that the company you’ve selected and the product you’re utilizing continues to meet your constantly changing needs.
INSURANCE RESOURCES.
- Information on insurance for various life stages
- NAIC “Insure U” – Get Smart About Insurance
- Shopping for insurance online:
---> Insurance Finder
---> Insure.com
---> Insurance Web
- State Insurance Department Websites
- What companies offer what insurance products in your state?
May 10, 2007
CONSUMER ACTION HANDBOOK
Many of you have e-mailed your concerns regarding the recent hack into an MU database where the personal information of 22,000 people was recently compromised. I don’t want to focus a lot of time/attention on this since I dealt with the issue about 6 weeks ago in a tip, but I wanted to remind you of what you should be doing if you find yourself in the middle of this …
- Review the information from the financial tip dated 3/22.
- Think twice before buying the theft protection services that are sold.
- Review your credit reports. Even if you’ve already received your free report(s) for this year, as a potential fraud victim, you are entitled to free credit reports [for fraud]. Contact the three credit reporting agencies (Experian.com, Equifax.com, TransUnion.com) to order the free reports.
- Place fraud alerts on your reports (https://www.annualcreditreport.com) click on ‘fraud alert.’
- If you live outside of Missouri, you may be eligible for a credit freeze [Missouri has considered a bill but has not acted upon one yet]; read the tip mentioned above and you can find out if your state has a law in place.
- I would review my credit report monthly for the next 3-6 months. In most instances, activity that occurs will not show up immediately.
- Go to StolenIDSearch.com. You can enter your SSN and it searches a database of nearly 2.5 million compromised numbers. It will tell you if yours has been compromised or not. Secure site.
The Consumer Action Handbook, first published in 1979, is one of the most helpful and popular consumer resources. The free guide is designed to help consumers find the best and most direct source for assistance with their consumer problems and questions. Tips are offered on such topics as banking, making purchases (buying and leasing cars, housing), protecting against fraud, insurance, and resolving marketplace problems (includes sample complaint letters). Thousands of contacts for Better Business Bureaus; federal, state, county, and city government consumer protection offices are also provided.
Ordering Information.
- The booklet can be viewed online
- Order by phone: 1-888-878-3256
- Order online
- View contents in pdf format
- Review the information from the financial tip dated 3/22.
- Think twice before buying the theft protection services that are sold.
- Review your credit reports. Even if you’ve already received your free report(s) for this year, as a potential fraud victim, you are entitled to free credit reports [for fraud]. Contact the three credit reporting agencies (Experian.com, Equifax.com, TransUnion.com) to order the free reports.
- Place fraud alerts on your reports (https://www.annualcreditreport.com) click on ‘fraud alert.’
- If you live outside of Missouri, you may be eligible for a credit freeze [Missouri has considered a bill but has not acted upon one yet]; read the tip mentioned above and you can find out if your state has a law in place.
- I would review my credit report monthly for the next 3-6 months. In most instances, activity that occurs will not show up immediately.
- Go to StolenIDSearch.com. You can enter your SSN and it searches a database of nearly 2.5 million compromised numbers. It will tell you if yours has been compromised or not. Secure site.
The Consumer Action Handbook, first published in 1979, is one of the most helpful and popular consumer resources. The free guide is designed to help consumers find the best and most direct source for assistance with their consumer problems and questions. Tips are offered on such topics as banking, making purchases (buying and leasing cars, housing), protecting against fraud, insurance, and resolving marketplace problems (includes sample complaint letters). Thousands of contacts for Better Business Bureaus; federal, state, county, and city government consumer protection offices are also provided.
Ordering Information.
- The booklet can be viewed online
- Order by phone: 1-888-878-3256
- Order online
- View contents in pdf format
May 03, 2007
PRIVATE LOAN CONSOLIDATION
Last week I addressed consolidation issues/strategies for federal loans. As promised, this week I will discuss consolidation of private loans (PL). Contrary to popular belief, you can consolidate private loans – the primary question you will need to answer is whether or not doing so is in your best interest. In most cases, it’s not …
Private Loan Consolidation Considerations.
Private Loan Consolidation Considerations.
- Cannot consolidate PLs until you’re out of school and beginning repayment.
- Cannot consolidate PLs with federal loans.
- Unlike federal consolidation – in the vast majority of instances, consolidating PLs will leave you with a variable rate loan – NOT a fixed interest rate.
- Keep in mind that the best option/choice is often to leave them alone.
How do I know if consolidation makes sense for me?
- Look at the benefits of your current lender. There are very few companies (about 10) that will consolidate any private loans [regardless of lender]. Most companies will offer some type of consolidation or “refinancing” of private loans, but will require that you have loans with them to be eligible. That requirement will differ by lender; some will require at least one loan be with them, some may require that at least 50% of the consolidated amount be with them. Regardless, researching your current lender(s) is a good place to start.
- Shop around. As mentioned, there are a few companies that don’t have stipulations in order to use their consolidation/ refinance program. Here is the best list I’ve come across (http://finaid.org/loans/privateconsolidation.phtml). You want to shop closely the loan rates/terms because the lender, not the government sets the interest rates (most are linked to the Prime Rate or LIBOR Index).
- How does your credit look? Perhaps the most important question to ask is ‘How is your credit now’? and what did it look like when you first took out the loan(s). Private loans are credit-based – if you had poor credit with no co-signer, your current rate is inevitably high. You are the best candidate for PL consolidation. Your rate with good credit should never be worse than the prime rate (currently 8.25%), but could be 6% or more than that with poor credit. You possibly paid fees to take the loans out initially; most companies will assess more fees (not all) to consolidate the loans (1% - 3% is common, but I’ve seen fees that approach 10%) … these fees [along with maintaining a variable rate loan] are the biggest reasons why often you’re best not to consolidate private loans. If you had good credit all along, your loan situation is not likely to improve by consolidating. If you decide that PL consolidation does make sense for you, you may want to review my article on PL shopping – the criteria used to shop for the loan initially is the same for shopping for a consolidation company.
April 25, 2007
FEDERAL STUDENT LOAN CONSOLIDATION
As the end of the semester nears, it seems timely to review the issue of student loan consolidation. This week I’ll address consolidation of federal loans and will address consolidation of private loans in a separate/future tip.
A reminder about recent legislative changes (7/1/06):
- In-school consolidation is no longer an option. You will need to be out of school to be eligible to consolidate.
- You are no longer required to have multiple lenders. You can consolidate with whomever you choose even if you only have one lender. Shop for the best deal for you!
- You are no longer able to consolidate your loans with your spouses’ loans. Not a smart idea anyway, but is no longer an option.
Important consolidation considerations:
- If you have specific loans (i.e., Perkins) that may be forgiven or repaid by your employer, state, etc. Find out if they will repay/forgive federal loans in general (ok to consolidate if that is the case) or if they will repay/forgive that specific loan (in which case you don’t want to consolidate it).
- If a potential lender offers to combine your federal loans with private loans, credit cards, or any other non-federal student loan debt, RUN!
- You can AND SHOULD reconsolidate even if you have already consolidated to lock in the low rates in prior years (4.7% last year; 2.77% prior year, 2.82% before that). It will be necessary in order to “move” the loans to a lender that will offer you the best borrower benefits. Since your rate is a calculated “weighted average,” doing so will not have a negative impact on your rate.
- Some people are afraid to consolidate because their repayment will be extended (obviously resulting in more interest paid over the life of the loan). Keep in mind that you can select a short repayment time when you consolidate – you can also choose to pay whatever monthly amount you want (NO LEGITIMATE PROGRAM will assess a penalty for you paying off the loan early).
With all of the offers I get, how do I decide where to consolidate?
The first point I want to make here is that a federal consolidation loan is a federal consolidation loan – in other words, your ability to defer your loans [or other governmentally ‘set’ terms of the loan] will be the same regardless of who your lender is. Many people consolidate with the government because they assume they will have more ‘benefits’ than other programs. The reality is that the benefits of the loan will be the same regardless of who the loan is through. What then is the difference? The financial benefits companies offer – ultimately, that is the “bottom line” and the only meaningful difference between consolidation programs.
My experience with student loan consolidation over the past several years has drawn me to one primary conclusion – the “financially smart” option is not going to be the same for each student. It is largely a factor of how you plan to repay your debt. Let me offer up some examples. An average consolidation program will offer interest rate reductions for automatic payment and for paying on time (typically for 3 or 4 years) – for most, these will total 1.25% (.25% for auto payments; 1% for 36-48 on-time payments). Interest rate reduction benefits are great if I’m in a situation (because of the low rate I’ve consolidated at and/or my financial goals, my starting salary, or other potential factors) where I am interested in extending the repayment of my debt (more than 8 years in the scenario I will illustrate below). My ability to extend my debt will be based upon the amount I borrow, but I can potentially extend the debt anywhere from 12 years to as many as 30. Obviously if I plan to pay the debt back in a couple years, this type of program isn’t very beneficial because the only benefit I will get is the .25% for auto pay. Thus, if this is my objective, I should seek out a company that instead of an interest rate incentive, their benefits are ‘principal balance’ credits. These are normally advertised as “consolidate with us and receive as much as $2,000 cash back!” I’ve seen more than one professional student where they would save over $100,000 in interest over the life of the loan repayment because of the interest rate reductions. This offer obviously wouldn’t make much sense for them to get excited to consolidate to receive a paltry $2,000 benefit …
Below, I have provided examples of the best borrower benefit programs I have currently seen for each different repayment scenario. There are some points, however that I want to emphasize as you evaluate personal considerations:
(1) These are general guidelines/rules of thumb – run the numbers to see what makes the most sense for you. Do your own homework – use these resources as guidelines as you try to find better options [which if you do, make sure to let me know].
(2) Read the applications for any caveats. For example, the Key Bank credit (quick repayment example below) is foregone if you defer or forebear the loans during the first 3 months of repayment. The Educational Loan Company programs require you to have a minimum loan amount ($30,000 in the extended repayment program; $15,000 in the intermediate program example). So read through the details to make sure the program will fit with your situation.
(3) Be smart. Take a few minutes to figure things out. There’s a lot of dollars on the table for most students. It’s worth your time to talk to someone about things. Consider all options – most states offer consolidation programs. I list North Carolina because it has the best benefits with limited restrictions (you can create a 'connection' to NC in about 5 minutes with $5 by opening a 529 account). Some states have more restrictions, some have none. If you went to school or lived somewhere else, take a look at their program to see what type of benefits their program offers.
QUICK REPAYMENT (1-3 years)
Key Bank
* .25% interest rate reduction for auto pay
* 5% principal balance credit
FinanSure
* .25% interest rate reduction for auto pay
* 4.5% principal balance credit
EXTENDED REPAYMENT (8+ years)
Educational Loan Co.
* .25% reduction for auto pay
* 2.25% reduction after 48 on-time payments
The Loanster
* .25% reduction for auto pay
* 2% reduction after 36 on-time payments
North Carolina
* .25% reduction for auto pay
* 2% reduction after 48 on-time payments
INTERMEDIATE REPAYMENT (3-8 years)
Educational Loan Co.
* .50% reduction for auto pay
* 1.25% reduction after 48 on-time payments
* FYI – The Department of Ed (Direct Loan consolidation program) offers a .25% reduction for auto pay. The MOHELA consolidation program offers similar benefits (.25%).
SimpleTuition.com.
While at a conference last month in Illinois, I ran across a great resource for evaluating consolidation offers that I’d like to share. It provides an unbiased way to compare consolidation options from any lender. All you need to do is enter your federal student loan information, then compare and sort the options that are customized for you. If the program you’re considering isn’t listed, you can enter the details of the program and it will help you evaluate it. You can sort by such items as monthly payment, total loan cost, loan term, APR. You can then conduct side-by-side comparisons with the companies that you narrow your decision down to … pretty nifty [and free].
I’m currently working with Simple Tuition to get a Mizzou-tailored resource – it’s currently in a demo stage, but I’ve requested that they provide information about North Carolina, Educational Loan, and other companies that provide better benefits than others but [currently] aren’t available on their main site. The demo site is: http://demo.simpletuition.com/missouri. As it is a work in progress, I would be interested in your feedback about the site, usability, other consolidation programs that should be included, etc.
Consolidation Resources.
The OFS website offers numerous consolidation resources. Calculating your weighted rate average [if you have consolidated in the past or have loans (i.e., Perkins) with various rates]; calculating your loan payment; consolidation strategies; repayment options; information about state consolidation programs, etc. Simply click on the ‘student issues’ button.
A reminder about recent legislative changes (7/1/06):
- In-school consolidation is no longer an option. You will need to be out of school to be eligible to consolidate.
- You are no longer required to have multiple lenders. You can consolidate with whomever you choose even if you only have one lender. Shop for the best deal for you!
- You are no longer able to consolidate your loans with your spouses’ loans. Not a smart idea anyway, but is no longer an option.
Important consolidation considerations:
- If you have specific loans (i.e., Perkins) that may be forgiven or repaid by your employer, state, etc. Find out if they will repay/forgive federal loans in general (ok to consolidate if that is the case) or if they will repay/forgive that specific loan (in which case you don’t want to consolidate it).
- If a potential lender offers to combine your federal loans with private loans, credit cards, or any other non-federal student loan debt, RUN!
- You can AND SHOULD reconsolidate even if you have already consolidated to lock in the low rates in prior years (4.7% last year; 2.77% prior year, 2.82% before that). It will be necessary in order to “move” the loans to a lender that will offer you the best borrower benefits. Since your rate is a calculated “weighted average,” doing so will not have a negative impact on your rate.
- Some people are afraid to consolidate because their repayment will be extended (obviously resulting in more interest paid over the life of the loan). Keep in mind that you can select a short repayment time when you consolidate – you can also choose to pay whatever monthly amount you want (NO LEGITIMATE PROGRAM will assess a penalty for you paying off the loan early).
With all of the offers I get, how do I decide where to consolidate?
The first point I want to make here is that a federal consolidation loan is a federal consolidation loan – in other words, your ability to defer your loans [or other governmentally ‘set’ terms of the loan] will be the same regardless of who your lender is. Many people consolidate with the government because they assume they will have more ‘benefits’ than other programs. The reality is that the benefits of the loan will be the same regardless of who the loan is through. What then is the difference? The financial benefits companies offer – ultimately, that is the “bottom line” and the only meaningful difference between consolidation programs.
My experience with student loan consolidation over the past several years has drawn me to one primary conclusion – the “financially smart” option is not going to be the same for each student. It is largely a factor of how you plan to repay your debt. Let me offer up some examples. An average consolidation program will offer interest rate reductions for automatic payment and for paying on time (typically for 3 or 4 years) – for most, these will total 1.25% (.25% for auto payments; 1% for 36-48 on-time payments). Interest rate reduction benefits are great if I’m in a situation (because of the low rate I’ve consolidated at and/or my financial goals, my starting salary, or other potential factors) where I am interested in extending the repayment of my debt (more than 8 years in the scenario I will illustrate below). My ability to extend my debt will be based upon the amount I borrow, but I can potentially extend the debt anywhere from 12 years to as many as 30. Obviously if I plan to pay the debt back in a couple years, this type of program isn’t very beneficial because the only benefit I will get is the .25% for auto pay. Thus, if this is my objective, I should seek out a company that instead of an interest rate incentive, their benefits are ‘principal balance’ credits. These are normally advertised as “consolidate with us and receive as much as $2,000 cash back!” I’ve seen more than one professional student where they would save over $100,000 in interest over the life of the loan repayment because of the interest rate reductions. This offer obviously wouldn’t make much sense for them to get excited to consolidate to receive a paltry $2,000 benefit …
Below, I have provided examples of the best borrower benefit programs I have currently seen for each different repayment scenario. There are some points, however that I want to emphasize as you evaluate personal considerations:
(1) These are general guidelines/rules of thumb – run the numbers to see what makes the most sense for you. Do your own homework – use these resources as guidelines as you try to find better options [which if you do, make sure to let me know].
(2) Read the applications for any caveats. For example, the Key Bank credit (quick repayment example below) is foregone if you defer or forebear the loans during the first 3 months of repayment. The Educational Loan Company programs require you to have a minimum loan amount ($30,000 in the extended repayment program; $15,000 in the intermediate program example). So read through the details to make sure the program will fit with your situation.
(3) Be smart. Take a few minutes to figure things out. There’s a lot of dollars on the table for most students. It’s worth your time to talk to someone about things. Consider all options – most states offer consolidation programs. I list North Carolina because it has the best benefits with limited restrictions (you can create a 'connection' to NC in about 5 minutes with $5 by opening a 529 account). Some states have more restrictions, some have none. If you went to school or lived somewhere else, take a look at their program to see what type of benefits their program offers.
QUICK REPAYMENT (1-3 years)
Key Bank
* .25% interest rate reduction for auto pay
* 5% principal balance credit
FinanSure
* .25% interest rate reduction for auto pay
* 4.5% principal balance credit
EXTENDED REPAYMENT (8+ years)
Educational Loan Co.
* .25% reduction for auto pay
* 2.25% reduction after 48 on-time payments
The Loanster
* .25% reduction for auto pay
* 2% reduction after 36 on-time payments
North Carolina
* .25% reduction for auto pay
* 2% reduction after 48 on-time payments
INTERMEDIATE REPAYMENT (3-8 years)
Educational Loan Co.
* .50% reduction for auto pay
* 1.25% reduction after 48 on-time payments
* FYI – The Department of Ed (Direct Loan consolidation program) offers a .25% reduction for auto pay. The MOHELA consolidation program offers similar benefits (.25%).
SimpleTuition.com.
While at a conference last month in Illinois, I ran across a great resource for evaluating consolidation offers that I’d like to share. It provides an unbiased way to compare consolidation options from any lender. All you need to do is enter your federal student loan information, then compare and sort the options that are customized for you. If the program you’re considering isn’t listed, you can enter the details of the program and it will help you evaluate it. You can sort by such items as monthly payment, total loan cost, loan term, APR. You can then conduct side-by-side comparisons with the companies that you narrow your decision down to … pretty nifty [and free].
I’m currently working with Simple Tuition to get a Mizzou-tailored resource – it’s currently in a demo stage, but I’ve requested that they provide information about North Carolina, Educational Loan, and other companies that provide better benefits than others but [currently] aren’t available on their main site. The demo site is: http://demo.simpletuition.com/missouri. As it is a work in progress, I would be interested in your feedback about the site, usability, other consolidation programs that should be included, etc.
Consolidation Resources.
The OFS website offers numerous consolidation resources. Calculating your weighted rate average [if you have consolidated in the past or have loans (i.e., Perkins) with various rates]; calculating your loan payment; consolidation strategies; repayment options; information about state consolidation programs, etc. Simply click on the ‘student issues’ button.
April 19, 2007
MOVING? RELOCATION RESOURCES ...
With the end of the semester nearing, we are now approaching the 'moving season' – graduation, new jobs, disgruntled roommates – all necessitate a change in scenery. Moving ranks as one of the most stressful events in a person’s life; planning ahead can help reduce some of this stress. Regardless of the reason for your move, there are many valuable resources to assist you every step of the way [all free].
- Moving Checklist
- Relocation Guide
The most comprehensive relocation resource is HOMEFAIR. Free resources include:
- City Reports (Demographics, Cost of Living, and other quality of life info)
- Community Calculator (What cities share factors similar to your community …)
- Crime Statistics (How does your potential city compare with where you live now?)
- Find a Storage Facility (Storage unit quotes)
- Mortgage Qualification (How much of a house can you afford in your new city?)
- Moving Calculator (Estimate what the costs of the move will be)
- Rent vs. Buy Calculator (Given our situation, what makes more $ sense?)
- Salary Calculator (How would a salary of $X compare in cities A and B?)
- School Reports (Information on schools as well as personnel contacts)
April 12, 2007
BE A SMARTER INVESTOR
Greed and fear – commonly characterized as the most prevalent factors that drive investment activities … I recently read material published by the FPA (Financial Planning Association) offering 20 keys/steps to rein in greed and ease investing fears. It is not offered to turn you into an investment pro, or enable you to accurately predict the future of the stock market. It will provide information to help you use time-tested principles and techniques [helping you learn from the failures as well as successes of the past] so that despite the inevitable ups and downs of the markets, you can realistically achieve your financial goals.
- Understand the difference between saving and investing. Saving is for short-term goals/needs (family vacation, emergencies, car, etc.); investing is for goals that are 5+ years away. Savings can be met with CDs, high yield savings accounts, etc. Although investing carries more risk (losing your principal, not earning as much as you’d planned, etc.), wise investing will also provide a greater opportunity for earning significantly higher returns in the long run [relative to savings vehicles].
- Put the rest of your financial house in order first. Before investing, you may want to tackle other financial issues: creating a budget to enable you to invest more on a regular basis, developing an emergency fund, make sure you have adequate insurance in place, and paying off high interest rate debt to name a few.
- Clarify your goals. Invest with a specific purpose. Doing so will make it easier for you to stick to your plan. Goals should be realistic, specific, and provide a timeline for accomplishing them.
- Don’t just grab for the highest return. With reasonable, specific goals, you can make informed, realistic investment decisions to accomplish your financial goals without taking unnecessary risk. The tortoise wins the race every time I read the book.
- Understand your own tolerance risk. Risk tolerance is a function of several factors – your investment goals, how much time you have to invest, other resources you have, and your “personal fear factor.” Investments that keep you up at night [although they may make the most sense ‘financially’ may not be right for you]. Gauging that can be tricky – people obviously tend to feel more risk tolerant when the market is doing well …
- Educate yourself about investments and investing. Even if you work with a financial planner or advisor, you should understand how investments work, their risks, and how they fit into your financial plan. Many people understand the risks associated with stocks or real estate, but fail to realize that bonds and other investments also carry risk.
- Hold realistic market expectations. One downfall of the market boom of the late ‘90s was the belief that high double digit returns for stocks were normal. Historical information reveals otherwise. I have a chart on my wall (Ibbotson chart) that shows that between 1926 and 2001, small company stocks returned an average of 12.5% per year; large company stocks 10.7%; and long-term government bonds 5.3%. These historical returns don’t guarantee anything (I can earn more or less than that any given year), but they allow me a benchmark/ perspective for comparison when things are going very well [or very poorly].
- Follow a detailed written plan. Use this like a road map to keep you focused and on-track; it is easy to lose focus when things don’t go as planned. Obviously, this plan should change as “life happens” – marriage, job/career changes, family, as well as changes in objectives.
- Allocate investments according to goals and needs. The shorter the timeline, the more conservative your allocation should be. Will you have other resources at retirement? Depending on your circumstances, you may feel more [or less] comfortable with an aggressive portfolio.
- Diversify your investments. Spread your dollars across several investment classes (stocks, bonds, large/small companies, international, etc.). Research has shown that diversification will reduce risk while at the same time maintaining [or even improving] portfolio performance.
- Don’t overload on company stock. Financial planners typically recommend limiting company stock to no more than 10-15% of the account value. One word speaks volumes … Enron!
- Don’t chase ‘hot’ performance. Today’s hot investments are often tomorrow’s cold turkeys. Technology stocks, represented by the Nasdaq 100 Index returned an amazing 85.6% in 1999, but fell nearly 40% the next year and another 21% the next …
- Don’t ignore ‘cool’ performance. The opposite of chasing ‘hot’ performance. The easiest way to avoid these two problems is to stay diversified and stick to the game plan that you spelled out in your investment plan.
- Stay in the market. Don’t try to “time” when to get in and get out of the market. Nervous investors often want to wait on the sideline until a downturn in the market is over … a study by SEI Investments reviewed 12 bear markets (market downturns) since World War II. Those who stayed in the market saw the S&P 500 gain an average of 32.5% (not counting dividends) during the first year of the market recovery. Those who missed the first week of that recovery earned 24.3%; those who waited three months to get in gained only 14.8%.
- Start investing early. The most powerful weapon on your side is time. The earlier start, the more financial leverage you gain.
- Invest regularly and automatically. Those issues of greed and fear tempt us to try to time the market. Financial professionals commonly recommend instead investing on a regular basis regardless of what the market is doing. This will help you keep your eyes on your long-term objectives. Funding investments not only makes this easier to do, but in many instances will allow you to start without having a large initial investment.
- Pay attention to investment expenses. You can’t control the market – you can control your expenses. Investing with an eye toward lowering your investment costs can significantly improve your returns over many years.
- Don’t let taxes dictate. Yes, it is smart to invest with an eye on tax-saving strategies. Taxes shouldn’t be the ultimate deciding factor, however. If it makes sense for you to sell an investment, you should sell the investment.
- Rebalance your portfolio. It is inevitable that over time the asset mix you originally assign to your portfolio will become unbalanced over time as different asset classes perform differently. If, for example, the stock market does very well this year, the stock portion of your allocation will become ‘heavier’ than your desired allocation. This means that you will now have more risk in your portfolio because you have a heavier weighting in stocks. How often you rebalance is a personal question – many suggest doing it about once a year.
- Monitor and revise your investment plan. As with any financial plan, you’ll want to review your investment plan at least once a year to make sure you’re still on target, that it is still accommodating your needs, etc. Whether you turn your investments over to a professional or manage them yourselves, ultimately, it is you that is responsible for the results!
April 05, 2007
CREDIT SCORING
When you apply for credit, lenders want to understand the risks associated with loaning money to you. Credit scores are what most lenders use to determine your credit risk. The most commonly used credit scoring model was created by Fair Isaac Corp. (the FICO Score). Credit bureaus often use different names, such as the Beacon Score or Empirica Score. Each, however, uses the same underlining methods as Fair Isaac. Consumers have three credit scores – one for each of the three credit bureaus (TransUnion, Experian, Equifax). Each is based upon the information that particular agency keeps on file about you. Your score will determine loan terms (interest rates, fees, etc.) as well as how much a lender will offer you. The higher the consumer’s credit score, the less risk for a lender (FICO Scores range from 300 to 850). It is possible to have no credit … Many individuals don’t realize that many of the monthly bills paid (i.e., rent, phone, gas, utilities, insurance, etc.) are not reported to credit reporting agencies [unless you miss payments of course!]. Payment history for mortgages, student loans, credit cards, store cards, auto, and other loan and revolving credit accounts are typically reported to credit bureaus on a monthly basis. For a FICO score to be calculated, your credit report must contain at least one of these types of accounts [which has been open for at least six months; also must contain at least one account that has been updated in the past six months]. This ensures there is enough information [and recent information] on which to base a score.
How is the score calculated?
The FICO score is calculated from a lot of data contained in your credit report. The data is most commonly grouped into five categories: payment history (35%), amount owed (30%), length of credit history (15%), new credit (10%), and types of credit used (10%). The percentages indicate the relative weighting of each area to the overall score. The following site will allow you to see what specific items constitute each of the five areas.
While most lenders use credit scoring to make credit granting decisions, each lender is likely to use a ‘personalized’ strategy to determine how they are going to define a “creditworthy” customer or what an acceptable level of risk is for a given product. There is no universally defined “cut off” where if you’re below a certain point you will be denied credit regardless of where you go. The following MyFICO resource nicely illustrates the financial benefits of having a strong credit score. In addition, more and more people are using credit scoring as a way of evaluating risk in other areas of life – employers, landlords, insurers, utility companies – and the list is growing rapidly.
* It is important to understand that a credit score is a measure of how well you manage debt. Many people are debt-averse [or haven’t relied on debt to date] – there is nothing wrong with this; I would never suggest going into debt merely to have a credit score. You will want to ensure that when applying for insurance, a future mortgage, etc. that your lender uses manual underwriting if you have 'no credit.'
Getting your score …
I mentioned last week that the legislation (FACTA) that provides consumers the opportunity to receive a free annual credit report does not provide a free credit score. You have some choices – a simple score estimator; also, the e-loan resource I mentioned last week. If you’re interested in purchasing your score [I also have included some other types of scores to give you an idea of the types of information available], you can go to the following sites – current prices (as of 4/4/07) are listed. Read through the information provided – all of the sites offer additional products beyond credit scores (monthly credit monitoring, other ‘packaged’ services to go with the credit score, etc.)…
- FICO Score (you choose report score is based on) - $15.95
- Equifax FICO Score and Equifax Credit Report - $15.95
- Experian VantageScore - $5.95
- TransUnion Insurance Score - $9.95
Additional Credit Resources.
- Credit issues
- Credit myths
- Credit scores by state
- Credit statistics
- Improving your score
- MyFICO
- Ordering free credit report(s)
- Specialty credit reports
- Vantage Scoring
- What is not in your score?
How is the score calculated?
The FICO score is calculated from a lot of data contained in your credit report. The data is most commonly grouped into five categories: payment history (35%), amount owed (30%), length of credit history (15%), new credit (10%), and types of credit used (10%). The percentages indicate the relative weighting of each area to the overall score. The following site will allow you to see what specific items constitute each of the five areas.
While most lenders use credit scoring to make credit granting decisions, each lender is likely to use a ‘personalized’ strategy to determine how they are going to define a “creditworthy” customer or what an acceptable level of risk is for a given product. There is no universally defined “cut off” where if you’re below a certain point you will be denied credit regardless of where you go. The following MyFICO resource nicely illustrates the financial benefits of having a strong credit score. In addition, more and more people are using credit scoring as a way of evaluating risk in other areas of life – employers, landlords, insurers, utility companies – and the list is growing rapidly.
* It is important to understand that a credit score is a measure of how well you manage debt. Many people are debt-averse [or haven’t relied on debt to date] – there is nothing wrong with this; I would never suggest going into debt merely to have a credit score. You will want to ensure that when applying for insurance, a future mortgage, etc. that your lender uses manual underwriting if you have 'no credit.'
Getting your score …
I mentioned last week that the legislation (FACTA) that provides consumers the opportunity to receive a free annual credit report does not provide a free credit score. You have some choices – a simple score estimator; also, the e-loan resource I mentioned last week. If you’re interested in purchasing your score [I also have included some other types of scores to give you an idea of the types of information available], you can go to the following sites – current prices (as of 4/4/07) are listed. Read through the information provided – all of the sites offer additional products beyond credit scores (monthly credit monitoring, other ‘packaged’ services to go with the credit score, etc.)…
- FICO Score (you choose report score is based on) - $15.95
- Equifax FICO Score and Equifax Credit Report - $15.95
- Experian VantageScore - $5.95
- TransUnion Insurance Score - $9.95
Additional Credit Resources.
- Credit issues
- Credit myths
- Credit scores by state
- Credit statistics
- Improving your score
- MyFICO
- Ordering free credit report(s)
- Specialty credit reports
- Vantage Scoring
- What is not in your score?
April 04, 2007
PERSONAL FINANCE COURSE OFFERINGS (FALL 2007)
Have you considered taking a Personal Finance course this fall? A one-credit course through the Personal Financial Planning Department may be just what you're looking for ...
FINPLN 1183 (Financial Survival).
A one-credit course geared to underclassmen; class focus is on "student-specific" financial issues: credit cards, student loans, debt management, avoiding common financial pitfalls, credit issues, etc. Offered pass/fail.
- Reference #79997
- Fridays -- 2:00-2:50
- Meets once/week for full semester
- Instructor - Dr. Mark Oleson
A one-credit course geared to upperclassmen [nearing graduation]; class focuses on common post-graduation financial issues: Investing (stocks, mutual funds, bonds, etc.), Retirement Planning (401(k)s, IRAs), Managing loan and other debt after graduation, Insurance, Purchasing a home, etc. Offered pass/fail.
- Reference #97665
- Thursdays -- 3:00-3:50
- Meets once/week for full semester
- Instructor - Dr. Mark Oleson
March 29, 2007
FREE CREDIT SCORE
A few years ago, FACTA (Fair and Accurate Credit Transactions Act) was passed offering free access to one’s credit report [once per year per agency]. Unfortunately, free credit scores have not followed. A credit score is viewed by many in the financial world in the same light that a GPA is viewed by many in the academic world (the usefulness of both those numbers are widely debated, but we’ll save that debate for another day).
Yesterday (3/28/07), VISA launched a new website targeted to college students and young adults called What’s my Score (http://www.whatsmyscore.org). The financial resource is designed to help individuals understand credit reports and scores, and take control of their financial futures. “Money Guides” are available, covering topics from saving for college, student loans, renting an apartment, and buying a car. You may find their information helpful (others may be a little cynical due to the source); regardless, part of the site launch was a deal struck with Fair Isaac (the company that created the most widely used credit score – the FICO score) to provide free credit scores to the first 5,000 students wanting to check their credit score. To receive the free score, go to the site above, or click to walk through a 15 minute tutorial/quiz on credit basics, credit cards, and building credit. Once that is completed, you’ll be given a code and link to myfico.com which you can use to order the score [that will be free by using the code]. The following link will walk you through the process of ordering your score after getting your code.
After getting your score, you can “break the code” at: http://www.whatsmyscore.org/break. In addition, past financial tips as well as the OFS website provide additional credit resources. MyFico is one of the best resources on the web for credit scoring. E-loan was the first site to offer access to your credit score for free, but it does require that you create a log-in [provide some personal info] to get it [and you can only do it once]. A free score estimator is also available at the What's my Score site.
The truth is, credit scores are no longer the big mystery many make them out to be [although it wasn’t long ago that they were]. I’ll write next week more about what credit scoring is in a follow up to this tip … after all, here at MU, we’re on spring break!
Yesterday (3/28/07), VISA launched a new website targeted to college students and young adults called What’s my Score (http://www.whatsmyscore.org). The financial resource is designed to help individuals understand credit reports and scores, and take control of their financial futures. “Money Guides” are available, covering topics from saving for college, student loans, renting an apartment, and buying a car. You may find their information helpful (others may be a little cynical due to the source); regardless, part of the site launch was a deal struck with Fair Isaac (the company that created the most widely used credit score – the FICO score) to provide free credit scores to the first 5,000 students wanting to check their credit score. To receive the free score, go to the site above, or click to walk through a 15 minute tutorial/quiz on credit basics, credit cards, and building credit. Once that is completed, you’ll be given a code and link to myfico.com which you can use to order the score [that will be free by using the code]. The following link will walk you through the process of ordering your score after getting your code.
After getting your score, you can “break the code” at: http://www.whatsmyscore.org/break. In addition, past financial tips as well as the OFS website provide additional credit resources. MyFico is one of the best resources on the web for credit scoring. E-loan was the first site to offer access to your credit score for free, but it does require that you create a log-in [provide some personal info] to get it [and you can only do it once]. A free score estimator is also available at the What's my Score site.
The truth is, credit scores are no longer the big mystery many make them out to be [although it wasn’t long ago that they were]. I’ll write next week more about what credit scoring is in a follow up to this tip … after all, here at MU, we’re on spring break!
March 22, 2007
IDENTITY THEFT RESOURCES
Identity theft is an issue that is regularly in the news - over the past couple of years, I’ve written multiple financial tips on the potentially devastating effects of identity theft. It is frightening to think that 25,000 Americans are victimized daily [that equates to nearly 5% of all Americans last year alone!]. I’d like to review the general strategies available to consumers to help minimize ID theft that have been shared prior and then discuss a new FDIC resource I recently came across.
Personally viewing your credit report. Every 12 months you can order a credit report from each reporting agency for free. Most experts suggest staggering your reports (ordering one every four months). Use the gov't site: (http://www.annualcreditreport.com NOT www.freecreditreport.com).
Opt out. One way to reduce the risk of ID theft is to reduce the number of solicitations you receive. You can opt out of credit card solicitations and phone solicitations.
Fraud alert. This is a ‘flag’ you can place on your credit report after being victimized. Alerts potential creditors that you are a potential fraud victim. Unfortunately, creditors aren’t required to abide by [or even check] the alert.
Credit monitoring service. A service where an annual fee (average of $75) is assessed to tell you when people are viewing your file. Most services don’t add much of a benefit beyond what you can do for free [see above].
Credit freeze. This is a very intriguing option and the only viable option that allows you to ‘stop’ ID theft before it happens rather than reacting to issues that surface. Several problems exist – laws have been established in some states, but not others; some states require you to be a victim prior to being able to use the freeze. I was very pleased to learn that Missouri initiated a credit freeze law since my freeze tip last June. For a list of state freeze laws, click link.
FDIC – “Don’t Be an On-line Victim” (free CD-ROM).
Nice, free resource on guarding yourself against internet thieves and electronic scams. The free CD-Rom can be ordered at the FDIC website. There is also an online version. The ID theft resource has seven sections:
- Introduction to identity theft
- Introduction to electronic scams
- Protecting your information
- Protecting your computer
- What to do if you are a victim
- Help for identity theft victims
- Resources
ADDITIONAL ID THEFT RESOURCES.
– Deter, Detect, Defend
– Fighting Back
– FTC ID Theft Site
– Guard Against Internet Fraud
– National Data
– Publications
– Resolving Specific Problems
– State Data
– Steps to Take
– Test Your Knowledge
Personally viewing your credit report. Every 12 months you can order a credit report from each reporting agency for free. Most experts suggest staggering your reports (ordering one every four months). Use the gov't site: (http://www.annualcreditreport.com NOT www.freecreditreport.com).
Opt out. One way to reduce the risk of ID theft is to reduce the number of solicitations you receive. You can opt out of credit card solicitations and phone solicitations.
Fraud alert. This is a ‘flag’ you can place on your credit report after being victimized. Alerts potential creditors that you are a potential fraud victim. Unfortunately, creditors aren’t required to abide by [or even check] the alert.
Credit monitoring service. A service where an annual fee (average of $75) is assessed to tell you when people are viewing your file. Most services don’t add much of a benefit beyond what you can do for free [see above].
Credit freeze. This is a very intriguing option and the only viable option that allows you to ‘stop’ ID theft before it happens rather than reacting to issues that surface. Several problems exist – laws have been established in some states, but not others; some states require you to be a victim prior to being able to use the freeze. I was very pleased to learn that Missouri initiated a credit freeze law since my freeze tip last June. For a list of state freeze laws, click link.
FDIC – “Don’t Be an On-line Victim” (free CD-ROM).
Nice, free resource on guarding yourself against internet thieves and electronic scams. The free CD-Rom can be ordered at the FDIC website. There is also an online version. The ID theft resource has seven sections:
- Introduction to identity theft
- Introduction to electronic scams
- Protecting your information
- Protecting your computer
- What to do if you are a victim
- Help for identity theft victims
- Resources
ADDITIONAL ID THEFT RESOURCES.
– Deter, Detect, Defend
– Fighting Back
– FTC ID Theft Site
– Guard Against Internet Fraud
– National Data
– Publications
– Resolving Specific Problems
– State Data
– Steps to Take
– Test Your Knowledge
March 14, 2007
PERSONAL FINANCE COURSE OFFERINGS (SUMMER 2007)
Have you considered taking a Personal Finance course this summer??
FINPLN 1183 (Financial Survival).
A one-credit course geared toward underclassmen focusing on "student-specific" financial issues: credit cards, student loans, debt management, avoiding pitfalls, credit issues, etc. Offered pass/fail only.
Three credit course that focuses on introductory financial planning issues: savings, insurance, investments, taxes, use of credit, and financial aspects of housing. Meets math proficiency requirement.
FINPLN 1183 (Financial Survival).
A one-credit course geared toward underclassmen focusing on "student-specific" financial issues: credit cards, student loans, debt management, avoiding pitfalls, credit issues, etc. Offered pass/fail only.
- Reference #23005
- M/W/F -- 12:00-1:00
- June 11 - July 6 (first 4 week course)
- Instructor - Dr. Mark Oleson
Three credit course that focuses on introductory financial planning issues: savings, insurance, investments, taxes, use of credit, and financial aspects of housing. Meets math proficiency requirement.
- Reference #22985
- M/T/W/R/F -- 9:00 - 11:00
- June 11 - July 6 (first 4 week course)
- Instructor - Dr. Mark Oleson
* Both courses will also be available this fall [2183 by different instructor]; the one-credit Financial Success course (FINPLN 4483) that is being taught this spring will also be available in the fall. A notice will be sent when the final scheduling kinks get ironed out.
COOPERATIVE EXTENSION RESOURCES
I’m always looking for ways to stay ahead of the [financial] curve. I want the most up-to-date information possible. This is often difficult as information and policy is changing continually. A consistent source of current financial information is Extension. What I’ve encountered is that the notion of Extension is often a cloudy one. Did you know that personal/family finance is a prominent area of programming efforts in most states?
In 1914, Congress established the Cooperative Extension Service to deliver information from land-grant colleges to Americans. This ‘cooperative’ (educational partnership) helps people put research-based knowledge to work for businesses, communities, and individuals resulting in economic prosperity and an improved quality of life. Extension links the resources and expertise of nearly 3,150 county government offices, 104 State Universities, and the US Department of Agriculture Cooperative State Research, Education, and Extension Service, literally “taking the University to the people.” In other words, you have professionals that gather information and provide it to the public in an understandable way [often for no or minimal cost]. I would like to focus this week on the financial literacy resources that Extension provides … publications, web resources, classes and programs are simply a few of the ways that Extension is helping people put knowledge to work.
Debt Management, College Funding, Estate Planning, Investing, Insurance, Retirement Planning, Budgeting, Consumer Protection, Buying a House – these are just a sampling of the types of topics where Extension information is readily accessible. Rather than you needing to dig around, I’ve done the initial digging for you and have organized the information by state (see resources below). Links are provided to a general “financial management” homepage and a list of available publications. If no link is provided, it could be that the state doesn’t have a financial specialist; it could also be that their information was not organized in an ‘easy to find’ manner. If you find “better” links for a particular state’s program or pubs, let me know and I’ll change our links as necessary.
Links to Extension Financial Resources.
- Links to state resources
- Missouri Families
- MU extension resources
- National eXtension personal finance site
MU EXTENSION.
Using science-based knowledge, University of Missouri Extension engages people to understand change, solve problems and make informed decisions. MU Extension makes University education and information accessible for:
- Economic viability
- Empowered individuals
- Strong families and communities
- Healthy environments
In 1914, Congress established the Cooperative Extension Service to deliver information from land-grant colleges to Americans. This ‘cooperative’ (educational partnership) helps people put research-based knowledge to work for businesses, communities, and individuals resulting in economic prosperity and an improved quality of life. Extension links the resources and expertise of nearly 3,150 county government offices, 104 State Universities, and the US Department of Agriculture Cooperative State Research, Education, and Extension Service, literally “taking the University to the people.” In other words, you have professionals that gather information and provide it to the public in an understandable way [often for no or minimal cost]. I would like to focus this week on the financial literacy resources that Extension provides … publications, web resources, classes and programs are simply a few of the ways that Extension is helping people put knowledge to work.
Debt Management, College Funding, Estate Planning, Investing, Insurance, Retirement Planning, Budgeting, Consumer Protection, Buying a House – these are just a sampling of the types of topics where Extension information is readily accessible. Rather than you needing to dig around, I’ve done the initial digging for you and have organized the information by state (see resources below). Links are provided to a general “financial management” homepage and a list of available publications. If no link is provided, it could be that the state doesn’t have a financial specialist; it could also be that their information was not organized in an ‘easy to find’ manner. If you find “better” links for a particular state’s program or pubs, let me know and I’ll change our links as necessary.
Links to Extension Financial Resources.
- Links to state resources
- Missouri Families
- MU extension resources
- National eXtension personal finance site
MU EXTENSION.
Using science-based knowledge, University of Missouri Extension engages people to understand change, solve problems and make informed decisions. MU Extension makes University education and information accessible for:
- Economic viability
- Empowered individuals
- Strong families and communities
- Healthy environments
March 08, 2007
WHAT IS YOUR MONEY PERSONALITY?
What are your attitudes/values about money? Do you tend to do things the way your parents did [or do you find yourself rebelling against their example?] … A lot of people [myself included] would argue that “understanding yourself” (i.e., what drives your spending and saving decisions) is critical to achieving financial success. It is very common for money personalities to get in the way of making good choices. A study published by the American Psychological Association found that the #1 source of stress for 73% of Americans was money. This to me emphasizes the importance of exploring our feelings and attitudes about money. The ultimate goal is not necessarily to change your current personality/values to different ones, it is to learn to prosper with the one you have.
Different experts have different names for these money personalities. Jordan Goodman, author of “Master Your Money Type: Using Your Financial Personality to Create a Life of Wealth and Freedom” summarizes money types as:
STRIVERS. You are all about achieving success and letting others know just how successful you are by buying lots of stuff. Money equals success. Ambition is the upside; overspending is the downside.
OSTRICHES. You are uncomfortable with money, even confused, intimidated or embarrassed by it. So you bury your [financial] head in the sand. The upside is you’re not consumed by money and you focus on more important things in life; the downside is eventually you’ll wind up regretting your avoidance of money problems and not setting financial goals.
DEBT DESPERADOS. You get a thrill from buying, which leads you to overspend. You quickly accumulate debt and may find yourself on the run from creditors. If there is an upside, it is that you likely understand the anguish debt can cause and that can be used to motivate and provide the resolve to get out of it. The downside is overspending is a weakness that is often bailed out through credit cards.
COASTERS. You may be coping or even thriving financially, but a lack of a money crisis has made you comfortable with the status quo. The upside is that you’re organized and responsible. But complacency means you’re missing out on opportunities and greater prosperity.
HIGH ROLLERS. You’re a thrill-seeker and gambler with money, thinking you’re smarter than others and are certain you’ll get a ‘big score.’ The upside is that you’re comfortable with risk, which can pay off with big rewards. The downside is that unbridled risk-taking can be dangerous and can land you in financial ruin.
SQUIRRELS. You hoard your money like a squirrel gathering nuts for the winter. You’re intensely afraid of losing money and exert a great deal of effort to spend less. The upside is you’re an excellent saver, but often at the expense of other things money is good for – spending, giving, etc.
A recent study by Putnam Investments outlined six financial beliefs and habits that they found to be most important in achieving financial security:
1. Realistic Expectations
2. Resisting temptation for quick rewards and fads
3. Patience in the face of adversity
4. Greater satisfaction from saving than spending
5. Ability to tolerate above-average risk
6. Receptivity to advice on how to save and invest
What’s your money personality? Are you interested in exploring your attitudes, values, and beliefs about money? If so, here are a few free resources to get you started …
- Color of Money
- Financial Compatibility Test
- Keirsey Temperament Sorter
- Money Psychology Tests
- Myvesta Money Personality Test
- Putnam Investor Profile
The following ISU Extension publication can also be a useful tool in beginning a dialogue about money and values …
Different experts have different names for these money personalities. Jordan Goodman, author of “Master Your Money Type: Using Your Financial Personality to Create a Life of Wealth and Freedom” summarizes money types as:
STRIVERS. You are all about achieving success and letting others know just how successful you are by buying lots of stuff. Money equals success. Ambition is the upside; overspending is the downside.
OSTRICHES. You are uncomfortable with money, even confused, intimidated or embarrassed by it. So you bury your [financial] head in the sand. The upside is you’re not consumed by money and you focus on more important things in life; the downside is eventually you’ll wind up regretting your avoidance of money problems and not setting financial goals.
DEBT DESPERADOS. You get a thrill from buying, which leads you to overspend. You quickly accumulate debt and may find yourself on the run from creditors. If there is an upside, it is that you likely understand the anguish debt can cause and that can be used to motivate and provide the resolve to get out of it. The downside is overspending is a weakness that is often bailed out through credit cards.
COASTERS. You may be coping or even thriving financially, but a lack of a money crisis has made you comfortable with the status quo. The upside is that you’re organized and responsible. But complacency means you’re missing out on opportunities and greater prosperity.
HIGH ROLLERS. You’re a thrill-seeker and gambler with money, thinking you’re smarter than others and are certain you’ll get a ‘big score.’ The upside is that you’re comfortable with risk, which can pay off with big rewards. The downside is that unbridled risk-taking can be dangerous and can land you in financial ruin.
SQUIRRELS. You hoard your money like a squirrel gathering nuts for the winter. You’re intensely afraid of losing money and exert a great deal of effort to spend less. The upside is you’re an excellent saver, but often at the expense of other things money is good for – spending, giving, etc.
A recent study by Putnam Investments outlined six financial beliefs and habits that they found to be most important in achieving financial security:
1. Realistic Expectations
2. Resisting temptation for quick rewards and fads
3. Patience in the face of adversity
4. Greater satisfaction from saving than spending
5. Ability to tolerate above-average risk
6. Receptivity to advice on how to save and invest
What’s your money personality? Are you interested in exploring your attitudes, values, and beliefs about money? If so, here are a few free resources to get you started …
- Color of Money
- Financial Compatibility Test
- Keirsey Temperament Sorter
- Money Psychology Tests
- Myvesta Money Personality Test
- Putnam Investor Profile
The following ISU Extension publication can also be a useful tool in beginning a dialogue about money and values …
March 01, 2007
AMERICA SAVES WEEK
“America Saves Week is an effort aimed at reaching more institutions and individuals to increase awareness that people need to save money, reduce debt and build wealth. The primary focus of America Saves Week is to encourage Financial Action – commitments to save, invest and build wealth” ...
Launched in 2001 and managed by the Consumer Federation of America, America Saves was initiated to focus greater attention on the need and opportunities for personal savings. To date, more than 67,000 Americans have enrolled as Savers by committing to implement a detailed plan to achieve a specific savings goal. This week (February 25 to March 4) has been set aside as the first America Saves Week. Several items included in accompanying press releases have stuck out to me as worthy of mention …
A recent Federal Reserve Board study identified successful saving strategies:
- Have a reason to save. Households with an identifiable goal for saving were more likely to have financial assets [and also have higher levels of assets]. Setting a goal is an important part of any saving strategy.
- Think ahead, plan ahead. Looking into the future can be an important motivational tool to help people anticipate and be prepared for future expenses. The most prominent goal of the Savers in the program is to develop an emergency fund.
- Develop a savings habit. It is no secret that getting started is the biggest challenge people face financially. Once the habit is developed, people comment on how ‘second nature’ saving becomes.
- Make savings automatic. Automatic savings via payroll deductions or automatic transfers from a checking or savings account is one strategy found to be very effective in “creating” Savers.
Two great ways to establish automatic savings:
(1) Online Savings Accounts – provide high yields; the following all currently pay 5% + with no minimums to establish [or maintain] an account, no fees, and are FDIC insured.
a. Emigrant Direct
b. FNBO Direct
c. HSBC Direct
(2) Mutual Funds – while many mutual fund companies require a large initial investment to open a mutual fund account, some companies will waive the initial investment if you establish an automatic investment (typically $50/month). T.Rowe Price and TIAA-CREF are a couple of notable ‘no load’ fund companies; AIM Funds and American Funds are examples of load fund companies that allow for automatic investments to open accounts. The Mutual Fund Investor Center provides a search tool to find companies that accommodate people looking for automatic investment opportunities.
Accompanying the America Saves Week is the announcement by eXtension of its new personal finance interactive website.
Related Sites and Resources.
- America Saves
- American Saver Newsletter
- Find a local campaign
- Military Saves
- Money 2020
- Youth Saves
Launched in 2001 and managed by the Consumer Federation of America, America Saves was initiated to focus greater attention on the need and opportunities for personal savings. To date, more than 67,000 Americans have enrolled as Savers by committing to implement a detailed plan to achieve a specific savings goal. This week (February 25 to March 4) has been set aside as the first America Saves Week. Several items included in accompanying press releases have stuck out to me as worthy of mention …
A recent Federal Reserve Board study identified successful saving strategies:
- Have a reason to save. Households with an identifiable goal for saving were more likely to have financial assets [and also have higher levels of assets]. Setting a goal is an important part of any saving strategy.
- Think ahead, plan ahead. Looking into the future can be an important motivational tool to help people anticipate and be prepared for future expenses. The most prominent goal of the Savers in the program is to develop an emergency fund.
- Develop a savings habit. It is no secret that getting started is the biggest challenge people face financially. Once the habit is developed, people comment on how ‘second nature’ saving becomes.
- Make savings automatic. Automatic savings via payroll deductions or automatic transfers from a checking or savings account is one strategy found to be very effective in “creating” Savers.
Two great ways to establish automatic savings:
(1) Online Savings Accounts – provide high yields; the following all currently pay 5% + with no minimums to establish [or maintain] an account, no fees, and are FDIC insured.
a. Emigrant Direct
b. FNBO Direct
c. HSBC Direct
(2) Mutual Funds – while many mutual fund companies require a large initial investment to open a mutual fund account, some companies will waive the initial investment if you establish an automatic investment (typically $50/month). T.Rowe Price and TIAA-CREF are a couple of notable ‘no load’ fund companies; AIM Funds and American Funds are examples of load fund companies that allow for automatic investments to open accounts. The Mutual Fund Investor Center provides a search tool to find companies that accommodate people looking for automatic investment opportunities.
Accompanying the America Saves Week is the announcement by eXtension of its new personal finance interactive website.
Related Sites and Resources.
- America Saves
- American Saver Newsletter
- Find a local campaign
- Military Saves
- Money 2020
- Youth Saves
February 22, 2007
GETTING THE BEST DEALS
I’ve always been interested in obtaining the best deals [financially] possible – getting the lowest rates [and fees] associated with mortgages, car loans, credit cards, and other financial products. An article in this month’s (March 2007) Consumer Reports Magazine suggests that the source of these deals are commonly credit unions. Credit Union membership is no longer the exclusive group that it used to be. Almost anyone (everyone?) is eligible to belong to a credit union (8,700 credit unions in the U.S.) based upon some criteria (being a student, geography, employer, religion, family member of someone that meets criteria, etc.)…
Credit Unions are often able to offer superior rates [not always, but often the case] because their shareholders are the customers (referred to as “members”) of the credit union, commonly referred to as a “cooperative.” That means that instead of profits going “out” to stockholders; savings are distributed “within” to its membership through higher interest/dividend payouts and lower loan rates on financial products. This “not for profit” ownership structure means that credit unions also pay fewer taxes, giving them more opportunities to return value to their members. Datatrac is a market research firm that surveys nearly 20,000 financial institutions weekly to gather rate information. I mention this to give you an idea of “average” national rate differences between banks and credit unions. You can view the site to see more rate comparisons as well as up to date information. In addition to differences in rates, fees also often vary between banks and credit unions, so that should also obviously be part of the ‘shopping list.’
National Rate Averages as of 2/20/2007.
Money Market Accounts (CU = 1.93%) (Banks = 1.18%)
1 Year CD (CU = 4.73%) (Banks = 4.16%)
Regular Credit Card (CU = 12.25%) (Banks = 14.98%)
48 Month Used Car (CU = 6.48%) (Banks = 8.12%)
Let me share a local [local for me] example. Tigers Credit Union (http://tigerscu.org) is a small entity that serves students, alumni, and family members of the University of Missouri-Columbia, Columbia College, and Stephens College. The credit union has recently begun offering a student credit card with interest rates as low as 9.9% and offers a 0% rate for 6 months to individuals that meet with a financial counselor at the Office for Financial Success or complete one of our personal finance courses (such as Financial Survival and Financial Success) to encourage individuals to understand the costs/benefits of credit, potential pitfalls, etc. It’s also refreshing to see credit card terms that are advertised in a readable font size! They also offer a money market account that yields 5.35%, above average CD yields, competitive auto loans, free access to thousands of ATMs (not unique to them), and are working on an account that would allow a member to start an IRA for as little as $25.
At the University of Michigan, their Campus Information Centers have created a listing of local financial institutions that shares information about free accounts, fee structures, ATM access, and other information to help their students make more informed choices. We're planning to create something similar in the coming months that we can share with the MU community.
Click to locate credit unions near you.
Credit Unions are often able to offer superior rates [not always, but often the case] because their shareholders are the customers (referred to as “members”) of the credit union, commonly referred to as a “cooperative.” That means that instead of profits going “out” to stockholders; savings are distributed “within” to its membership through higher interest/dividend payouts and lower loan rates on financial products. This “not for profit” ownership structure means that credit unions also pay fewer taxes, giving them more opportunities to return value to their members. Datatrac is a market research firm that surveys nearly 20,000 financial institutions weekly to gather rate information. I mention this to give you an idea of “average” national rate differences between banks and credit unions. You can view the site to see more rate comparisons as well as up to date information. In addition to differences in rates, fees also often vary between banks and credit unions, so that should also obviously be part of the ‘shopping list.’
National Rate Averages as of 2/20/2007.
Money Market Accounts (CU = 1.93%) (Banks = 1.18%)
1 Year CD (CU = 4.73%) (Banks = 4.16%)
Regular Credit Card (CU = 12.25%) (Banks = 14.98%)
48 Month Used Car (CU = 6.48%) (Banks = 8.12%)
Let me share a local [local for me] example. Tigers Credit Union (http://tigerscu.org) is a small entity that serves students, alumni, and family members of the University of Missouri-Columbia, Columbia College, and Stephens College. The credit union has recently begun offering a student credit card with interest rates as low as 9.9% and offers a 0% rate for 6 months to individuals that meet with a financial counselor at the Office for Financial Success or complete one of our personal finance courses (such as Financial Survival and Financial Success) to encourage individuals to understand the costs/benefits of credit, potential pitfalls, etc. It’s also refreshing to see credit card terms that are advertised in a readable font size! They also offer a money market account that yields 5.35%, above average CD yields, competitive auto loans, free access to thousands of ATMs (not unique to them), and are working on an account that would allow a member to start an IRA for as little as $25.
At the University of Michigan, their Campus Information Centers have created a listing of local financial institutions that shares information about free accounts, fee structures, ATM access, and other information to help their students make more informed choices. We're planning to create something similar in the coming months that we can share with the MU community.
Click to locate credit unions near you.
FAFSA PRIORITY DEADLINE ...
Just a reminder that the priority deadline for the 2007-08 FAFSA (Free Application for Federal Student Aid) for Mizzou students is March 1st. Students who file by this date will receive priority consideration for need-based financial aid. You can complete it online at: http://www.fafsa.ed.gov. Workshops and other assistance is available at the Student Financial Aid Office (11 Jesse Hall).
Additional information is available in the January FAFSA tip ...
Additional information is available in the January FAFSA tip ...
February 15, 2007
FREE BUDGETING TOOLS
Prior to setting up the Financial Tip of the Week as a blog about 6 months ago, I’d never read a blog. I now find myself reading various personal finance blogs on a fairly regular basis. I have found some to be very useful sources of information. I came across this blog recently that provides links to several free budgeting tools. The vast array of options to me underlies the importance of evaluating different methods of budgeting before ‘giving up’ altogether simply because one didn’t work for you. Given that all are free, perhaps you can give them a whirl before dropping some money on the most talked about budgeting tools (i.e., Quicken and MS Money). You may find something that works for you; you may find something that will spark some creative juices within you to modify something you’re currently doing … [I’d begun typing explanations of the different programs, but it was getting too long. I’ll let you explore them on your own. All of the links have been verified]. If you find something of interest, I’d be interested in your feedback. Also, if you are aware of other online resources that are free that aren’t listed, let me know – I’ll add them. Take a few minutes to peruse these – lets face it, most people are YNAB (You Need A Budget).
FREE Budgeting [Download] Resources.
- AceMoney Lite
- Buddi
- Budget Ace
- BudgetOnWeb
- GnuCash
- Grisbi
- KMyMoney
- PearBudget
- Moneytrackin'
- MS Office Accounting Express
- MySpendingPlan
- SimpleD Budget
- StackBacks
- Yodlee MoneyCenter
- Zero-Based Budget
FREE Budgeting Spreadsheets.
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