For those that have been successful finding scholarships (“free money”) to assist in funding their education, the overriding theme mentioned is persistence. When searching for scholarships, use all of the resources at your disposal: the Internet, family and friends, the library, your school/potential school, as well as basing your search on different “levels.” Your search should be done at the national, state and local level, as well as by school.
NATIONAL
There are LOTS of FREE national scholarship search tools – no need to pay the $50+ that many agencies charge. FastWeb (http://fastweb.com) is one of the most popular (it is the largest, most frequently updated database) scholarship searches – other free search sites/tools are listed at:
http://sfa.missouri.edu/sch-free.php
http://www.finaid.org/scholarships/other.phtml
http://www.mapping-your-future.org/features/schrlshp.htm
STATE
Your State Department of Higher Education is a great place to start (State of Missouri = http://www.dhe.mo.gov) as is your State Loan Guarantee Agency (MOHELA in Missouri - http://www.mohela.com/). There are likely others [depending on your State's educational resources], but these are two offices I’d suggest starting with to find money regardless of where you reside …
LOCAL
Numerous scholarship opportunities are available within the community in which you reside. Kiwanis, Elks, Church Groups, and Rotary Clubs are common examples.
SPECIFIC SCHOOL
The notion of conducting ‘levels of searches’ also holds true at Universities/Colleges. There will normally be school-wide options (i.e., http://sfa.missouri.edu/sch-index.php). In addition to applying at the University level, seek out money offered by your college and department of interest. For example, if you were interested in Personal Financial Planning (great idea!), talk to the PFP department about scholarship possibilities, I’d also look at scholarship opportunities within the College of Human Environmental Sciences [in that example]. I’d approach things similarly with any department/college I was applying to. Something else to consider is if you’re interested in a specific field of study. Many “special programs” (loan forgiveness, scholarships, etc.) are available for particular fields of study such as teaching, nursing, social work, etc.
SCHOLARSHIP SUGGESTIONS.
- Start early!
- Pay close attention to deadlines
- Read [and follow] the directions closely
Look outside the box. Everyone knows about scholarships awarded on academic performance or financial need, but don't overlook scholarships offered by professional or trade organizations. Healthcare, engineering, education, computer science, and social work are all examples. The military offers scholarships if you’re willing to serve …
There are also plenty of “oddball” scholarships – awards for left-handed students; graduates of specific high schools. Heck, you and your prom date can enter the scholarship fray if you’re willing to wear outfits or accessories made out of duct tape to the prom! Don’t believe me? Check it out - http://www.stuckatprom.com/contests/prom.
When searching for scholarships, be cautious, NUMEROUS scams abound.
COMMON SCHOLARSHIP SCAMS.
(1) Guaranteed scholarship or your money back …
(2) This information isn’t available anywhere else …
(3) “You’re a finalist” but never entered the competition …
(4) I’ll need a card/bank information to hold the scholarship for you …
(5) A scholarship search service will do the work for you [hefty fee] …
September 27, 2007
September 20, 2007
PAYDAY LENDING
Tuesday of this week, the Council of the District of Columbia voted to bring Washington DC payday lenders back under the 24% annual interest rate cap. 24% is a far cry from the 350% to 550% that consumers had been charged since an exemption granted to DC payday lenders in 1998 allowed them to ignore the usury cap. Reading the comments of the council members was rather telling: “It’s like an alien species let loose in our midst.” “They steal money; they steal futures with their practices.”
Payday lending is the practice of using a post-dated check or electronic account information as collateral for a short-term loan. The industry sells themselves as a “short term financial solution” … the research, however, suggests that the payday lending business model is designed to keep borrowers in debt, not to provide one-time assistance during a time of financial need.
Consider the following:
Payday lending is the practice of using a post-dated check or electronic account information as collateral for a short-term loan. The industry sells themselves as a “short term financial solution” … the research, however, suggests that the payday lending business model is designed to keep borrowers in debt, not to provide one-time assistance during a time of financial need.
Consider the following:
- 91% of payday loans are made to borrowers who use 5+ payday loans/year.
- 99% of payday loans go to repeat borrowers.
- The average payday borrower pays $800 to borrow $325.
- Average APR charged nationally – 680%.
These numbers support those found in Washington DC where the 60,000 residents using payday loans last year had over 700,000 transactions (an average of nearly 12 per borrower per year). That sounds more like a long-term problem than a short-term solution …
Congress recently passed legislation capping annual rates of 36% for loans to military families. While this is set to take effect on October 1st, there are many consumer advocates that are worried that predatory products will still be sold because of the narrow definitions that are established in the law. It is estimated that over ¼ of military households have been caught up in payday lending (NY Times). In many college towns, students are a primary target – be careful!
(Source – Center for Responsible Lending).
ADDITIONAL RESOURCES.
- Alternatives to Payday Loans
- Consumer Federation of America Resources
- Get Help
- Inside the Payday Lending Industry (video)
- What is the cost of a Payday Loan (calculator)
- What are your States Regulations
September 13, 2007
PURCHASING A TEXTBOOK?
If you haven’t had to shop for a college textbook for yourself or your college student recently, consider yourself lucky! The costs can be enormous [that’s not even delving into the issue of what you get back at the end of the semester during sell-back]. Do I have a choice??
Aside from attempting to check textbooks out from the library, I’ve met students that don’t buy books because they view the cost as greater than the benefit. I don’t know that I’d go that far in advocating saving money. I do know, however, that more and more online outlets are selling college textbooks (both new and used), often for significantly less. While I don’t make personal recommendations/ endorsements, I think it is definitely worth the look to understand what alternatives are available to you.
Buy it Used.
A1Books
AbeBooks.com
Alibris
AllBookstores.com
Amazon.com
Biblio.com
Bigwords.com
Bookbyte.com
BookFinder.com
Campus Book Swap
CheapestBookPrice.com
CollegeBooksDirect.com
eCampus.com
Textbook411
TextbookX.com
Valore Books
Swap it.
I’ve also read of students that have used resources like Facebook, Craigslist, and MySpace to swap books with other students, sell books the bookstore won’t buy back, and find used book groups to chat with students to get personal insights. Websites like CollegeSwapShop focus specifically on linking students up that would like to swap books. Buying college textbooks will always be an expensive proposition, but perhaps there are options available to you that could lighten the pinch on your wallet a little.
Aside from attempting to check textbooks out from the library, I’ve met students that don’t buy books because they view the cost as greater than the benefit. I don’t know that I’d go that far in advocating saving money. I do know, however, that more and more online outlets are selling college textbooks (both new and used), often for significantly less. While I don’t make personal recommendations/ endorsements, I think it is definitely worth the look to understand what alternatives are available to you.
Buy it Used.
A1Books
AbeBooks.com
Alibris
AllBookstores.com
Amazon.com
Biblio.com
Bigwords.com
Bookbyte.com
BookFinder.com
Campus Book Swap
CheapestBookPrice.com
CollegeBooksDirect.com
eCampus.com
Textbook411
TextbookX.com
Valore Books
Swap it.
I’ve also read of students that have used resources like Facebook, Craigslist, and MySpace to swap books with other students, sell books the bookstore won’t buy back, and find used book groups to chat with students to get personal insights. Websites like CollegeSwapShop focus specifically on linking students up that would like to swap books. Buying college textbooks will always be an expensive proposition, but perhaps there are options available to you that could lighten the pinch on your wallet a little.
September 06, 2007
"CREDIT PIGGYBACKING"
“Credit piggybacking” is a term that describes an authorized user ‘piggybacking’ off the strong credit of another (normally a parent or spouse). Lately, credit repair companies/scams have started selling this ‘privilege’ to individuals with poor or marginal credit, having them piggyback off an individual with good credit (the company would pay someone with good credit a fee per account to ‘rent’ their credit). When the individual is added as an authorized user, their credit history with that account is automatically updated – presto, an overnight improvement to one’s credit score. Obviously this practice has a lot of negative implications for lenders who largely base their loan criteria upon this score. Regulators haven’t stepped in because they say that technically it isn’t illegal. Credit card companies are reticent to change their policies to limit authorized users – too profitable for them. So Fair Isaac, the behemoth of the credit scoring industry (company that developed the FICO credit score), has decided to change their scoring formula to ignore references to authorized-user accounts. So even if companies continue to report the information to the credit bureaus, it won’t impact the bottom line (your credit score).
What You Need to Know:
- TIMELINE. No one [that’s talking] knows exactly how or when this change will occur. This month, the ‘new’ scoring formula will be introduced at one of the bureaus, followed by the other two during the next year. Even then, the benefit of the authorized user won’t likely diminish overnight, as not every lender will immediately switch to the latest FICO version.
- WON'T IMPACT JOINT ACCOUNTS. The change will only impact authorized users – joint account holders will continue to both be reported.
- REACH. While this doesn’t impact the majority of people, 41 million consumers are currently listed as authorized users on accounts - pretty dramatic. Obviously the greatest impact will be the 2 million who only have information as an authorized user in their credit file – typically young people (often college students), and spouses that don’t have credit in their own names.
- BOTTOM LINE. Although it may take time for lenders to adopt the new scoring model, authorized-user accounts are no longer a reliable way to boost someone’s credit score.
Related Resources:
· Credit Issues
· Credit Scoring
· Order your Free Credit Report
August 30, 2007
CC BALANCE TRANSFERS
Transferring debt using low-rate balance transfer offers provided by credit card companies is commonplace. As with any financial decision, there are pros and cons to consider in this matter. I don’t want to focus on weighing the merits of balance transfers. Rather, I want to address what you should look [look out] for if you’re considering this strategy as a method to get out of debt more quickly …
CONSIDERATIONS:
Look past the 0% offers. This may sound counterintuitive, but the best offers [for long-term transfers] typically are not at 0%. The 0% offers that come in abundance are typically for 6-12 months with a 16% or 18% rate to follow. Knowing the duration is normally limited, is it any surprise to hear that 86% of offers between January 2005 and September 2006 were 0% offers? Obviously this is a problem if the balance isn’t paid off by then. Most “fixed for life” transfer offers are in the 2.9% to 5.9% range. 0% fixed for life offers are out there, but are few and far between; 7.5% of the 0% offers, many of which have other catches, keep reading ...
Look at the costs. In the “good old days” finding a 0% no fee balance transfer was a piece of cake. Those days are long gone. No fee transfers are nearly extinct – in addition, many companies that traditionally charged a fee (commonly a 3% fee with a $50 or $75 maximum) have removed the maximum so that if you’re transferring $10,000 – that 3% fee would tack on $300 to the transaction (in other words, a year worth of interest in the no fee/2.9% offer).
Look at the facts. It should come as no surprise that these types of offers are marketing ploys to play with our human psychology. Obviously the company is making money or they wouldn’t do it. Smart Money has a tool on their website that will enable you to plug in the numbers related to the balance transfer to determine what it will really cost.
Talk to your current creditor. Before diving into the murky water, a suggested first step is to call your current creditor [with the offer you’re considering in hand] and ask for something comparable. Obviously they want to keep your business. This will also be much better for your credit than continually opening new accounts to ‘hop’ between.
Use only for transfer. If you decide to transfer a balance, make sure you don’t use the card for anything else (i.e., everyday purchases). According to Mintel Comperemedia (a company that monitors direct-mail solicitations), nearly ½ of balance transfer offers also include promotional rates for new purchases. Enticing? Keep in mind that any payment you make on the card will go to the smaller interest rate and the promotional rate will eventually go up. Some companies will require a certain number of purchases (often 2 or more) or a minimum dollar amount of monthly purchases (often $35+) in order to receive the special balance rate. Be cautious!
Beware the bait and switch. Beware the offers for rates “as low as” … essentially that means that if you have excellent credit we will offer you X, but if you don’t, you’ll get a much less desirable Y. Some suggest responding to transfer offers over the phone so that you can cancel the application if the terms don’t meet your liking.
Universal default. You don’t have to read far to see that doing balance transfers isn’t for the faint of heart – it’s also not for the individual that has a tendency to miss payments. Many creditors employ a ‘universal default’ strategy, meaning that a missed payment to any creditor (doesn’t have to be the card with the deal) will immediately result in the interest rate being set to the default rate – some companies will jump the rate to 30% for a single infraction … ouch!
Make sure you look before you leap. Review the Financial Tip archive as well as the credit card section of the OFS website to aid in learning about other credit card-related issues …
CONSIDERATIONS:
Look past the 0% offers. This may sound counterintuitive, but the best offers [for long-term transfers] typically are not at 0%. The 0% offers that come in abundance are typically for 6-12 months with a 16% or 18% rate to follow. Knowing the duration is normally limited, is it any surprise to hear that 86% of offers between January 2005 and September 2006 were 0% offers? Obviously this is a problem if the balance isn’t paid off by then. Most “fixed for life” transfer offers are in the 2.9% to 5.9% range. 0% fixed for life offers are out there, but are few and far between; 7.5% of the 0% offers, many of which have other catches, keep reading ...
Look at the costs. In the “good old days” finding a 0% no fee balance transfer was a piece of cake. Those days are long gone. No fee transfers are nearly extinct – in addition, many companies that traditionally charged a fee (commonly a 3% fee with a $50 or $75 maximum) have removed the maximum so that if you’re transferring $10,000 – that 3% fee would tack on $300 to the transaction (in other words, a year worth of interest in the no fee/2.9% offer).
Look at the facts. It should come as no surprise that these types of offers are marketing ploys to play with our human psychology. Obviously the company is making money or they wouldn’t do it. Smart Money has a tool on their website that will enable you to plug in the numbers related to the balance transfer to determine what it will really cost.
Talk to your current creditor. Before diving into the murky water, a suggested first step is to call your current creditor [with the offer you’re considering in hand] and ask for something comparable. Obviously they want to keep your business. This will also be much better for your credit than continually opening new accounts to ‘hop’ between.
Use only for transfer. If you decide to transfer a balance, make sure you don’t use the card for anything else (i.e., everyday purchases). According to Mintel Comperemedia (a company that monitors direct-mail solicitations), nearly ½ of balance transfer offers also include promotional rates for new purchases. Enticing? Keep in mind that any payment you make on the card will go to the smaller interest rate and the promotional rate will eventually go up. Some companies will require a certain number of purchases (often 2 or more) or a minimum dollar amount of monthly purchases (often $35+) in order to receive the special balance rate. Be cautious!
Beware the bait and switch. Beware the offers for rates “as low as” … essentially that means that if you have excellent credit we will offer you X, but if you don’t, you’ll get a much less desirable Y. Some suggest responding to transfer offers over the phone so that you can cancel the application if the terms don’t meet your liking.
Universal default. You don’t have to read far to see that doing balance transfers isn’t for the faint of heart – it’s also not for the individual that has a tendency to miss payments. Many creditors employ a ‘universal default’ strategy, meaning that a missed payment to any creditor (doesn’t have to be the card with the deal) will immediately result in the interest rate being set to the default rate – some companies will jump the rate to 30% for a single infraction … ouch!
Make sure you look before you leap. Review the Financial Tip archive as well as the credit card section of the OFS website to aid in learning about other credit card-related issues …
August 23, 2007
HIGH YIELD SAVINGS ACCOUNTS
As people become more technologically savvy, more and more financial products are being offered online. There have been many resulting benefits: faster processing times, broader access to financial products, convenience, and cost (often competitive interest rates and lower fees than traditional brick-and-mortar financial institutions). If you haven’t yet taken the “e-banking” plunge, perhaps you should consider.
The Federal Reserve Bank of New York provides useful instruction regarding online banking. A brochure on “Tips for Safe Banking Over the Internet” is also provided to benefit consumers.
While the Internet offers the potential for safe, convenient ways to conduct business 24/7, safe online banking involves making good choices to avoid costly mistakes and scams. Is XYZ bank legitimate? Are my deposits insured? Is my personal information private/secured? What are my rights? All of these questions are addressed in the Tips for Safe Banking, free New York Fed brochure.
Where to begin looking.
If you’re trying to find the best rates for savings accounts, CDs, and other financial products, a great place to start is the Bankrate website. Bankrate offers information that is free, objective, and as comprehensive as any site I’m familiar with. A couple of other resources I’ve come across recently are Banking My Way, and a blog that is dedicated to these issues.
Several online banks are currently paying 5%+ on FDIC insured savings accounts – some of the prominent ones [which have no minimums to open the account and have no fees]:
- Amboy Direct
- AmTrust Direct
- Capital One
- Emigrant Direct
- E-Trade
- First National Bank of Omaha
- Flushing Savings Bank
- HSBC Direct
- Savings Square
- UFB Direct
- Univest Direct
- ING Direct, the pioneer of online banking, currently offers a rate of 4.5% on savings – they also offer a high yield checking account (4%). They have a promo offering $25 to individuals opening a savings account – you can e-mail me if you want promo code info …
The Federal Reserve Bank of New York provides useful instruction regarding online banking. A brochure on “Tips for Safe Banking Over the Internet” is also provided to benefit consumers.
While the Internet offers the potential for safe, convenient ways to conduct business 24/7, safe online banking involves making good choices to avoid costly mistakes and scams. Is XYZ bank legitimate? Are my deposits insured? Is my personal information private/secured? What are my rights? All of these questions are addressed in the Tips for Safe Banking, free New York Fed brochure.
Where to begin looking.
If you’re trying to find the best rates for savings accounts, CDs, and other financial products, a great place to start is the Bankrate website. Bankrate offers information that is free, objective, and as comprehensive as any site I’m familiar with. A couple of other resources I’ve come across recently are Banking My Way, and a blog that is dedicated to these issues.
Several online banks are currently paying 5%+ on FDIC insured savings accounts – some of the prominent ones [which have no minimums to open the account and have no fees]:
- Amboy Direct
- AmTrust Direct
- Capital One
- Emigrant Direct
- E-Trade
- First National Bank of Omaha
- Flushing Savings Bank
- HSBC Direct
- Savings Square
- UFB Direct
- Univest Direct
- ING Direct, the pioneer of online banking, currently offers a rate of 4.5% on savings – they also offer a high yield checking account (4%). They have a promo offering $25 to individuals opening a savings account – you can e-mail me if you want promo code info …
August 16, 2007
THE ROAD TO ELIMINATING DEBT
* For individuals that will graduate this summer or graduated this past May, see note below on potential law changes that may have a dramatic impact on your loan repayment.
It seems like everything in the news these days is debt-related – housing concerns, sub-prime loans, unethical student loan practices, predatory lending, credit card issues, credit problems – more so than ever, we’ve become a society that is driven by debt. On the other end of the spectrum, it seems that more and more individuals are fighting this trend and have started down the road to reducing personal debt.
University of Nebraska-Lincoln Extension has created a nice resource to assist people in this journey. Their website identifies 10 ‘road signs’ to follow while walking down the path to “debt freedom” …
- Don’t wait to act. It’s no secret that getting started is the hardest part of everything! The sooner you begin, the sooner you’ll arrive.
- Stop using credit. The recommendation offered is to cut up cards and stop using them altogether. This may be advisable for some. Regardless, this plan should have you keep from taking on new debt. Avoid taking one step forward and two back.
- Make getting out of debt a family affair. Differing attitudes/values about money are a large potential source of conflict – communicating about your plan will enhance its likelihood of success. If you’re single? Talk with your family; talk with roommates and others that can offer support.
- Organize financial records. A workable budget is critical. I talked about several different resources in a recent blog; UNL also talks about common budgeting methods.
- Learn about your debt. Winning financially requires that you have an understanding of financial concepts. Do you know what your interest rate is? What does APR mean? What is a grace period? …
- Create a written debt plan. Who should I pay first? Am I in a position to negotiate lower rates? UNL provides links to worksheets and other information to assist in one’s plan development. You may remember my blog that addressed different perspectives for developing a debt reduction plan.
- Find ways to cut expenses. All of us spend money on things we don’t need. 66 ways to save money is a popular resource for considering ways to cut expenses.
- Find ways to increase income. Obviously finding additional resources is a great way to get out of debt sooner. 2nd job? Seek a raise? …
- Make sacrifices. I’ve always liked the sentiment commonly shared with students: ‘You can live like a student now and a professional later or you can live like a professional now and live like a student later’ … anything worthwhile will require sacrifice.
- Once you get there, stay there and begin a savings plan. Once you arrive, staying out of debt is one part of the challenge; the other is to begin saving and investing money to continue moving forward. Mutual fund companies like T. Rowe Price, TIAA-CREF, Ariel Funds, and Homestead Funds are all examples of institutions that cater to beginning investors [by waiving a large required initial investment for individuals willing to make monthly automatic investments ($50 in most cases)].
* This past month while I was on vacation, the government was busy talking about changing existing student loan legislation. I’m not going to take the time now to outline all of the potential changes for you because changes have yet to occur. You can view the pending legislation at NASFAA, the professional organization for financial aid administrators. Many of the changes seem smart (increasing funds in Pell Grant program, increasing transparency in the private loan industry, etc.). As is usually the case, some of the changes leave you scratching your head …
There is one potential change that would dramatically impact individuals that have yet to begin repayment on their student loans; individuals that graduated this summer and past May have the opportunity to get around the possible roadblock by taking action (this change WOULD NOT impact individuals that are currently in repayment on their student loans). Without going into unnecessary detail, one of the proposed law changes would severely cut the subsidies [money provided by the government] that are given to lenders. In many cases, these subsidies are passed along to students in the form of borrower benefits (the rate reductions given for automatic and on-time payments). In conversation with lenders, it is clear that if this law is passed [which seems likely based on its overwhelming support by the Senate], borrower benefit packages as we currently know them will be dramatically altered. It will likely push many of the smaller players out of business. It would also change things based on the date the loan is disbursed … this is a critical distinction because typically, things related to student loans are based upon the date of signature (for example, in the past, if you signed a consolidation application before July 1st, you received the pre-July 1 interest rate). With this change, it would impact the date the loan is disbursed (i.e., for those who graduated in May and are planning to keep their grace period until November, November X will be the disbursement date and if the law is passed before then, you will not receive the borrower benefits that you anticipated getting when you signed up for them in May)! If the law is passed, it will take effect [as currently drafted] on October 1 which means if you have not consolidated, you will want to consider consolidating immediately as the process normally takes 4-6 weeks. By having the loan disbursed prior to October 1st, you will lose a bit of your grace period, but it seems like a small price to pay in order to maintain your borrower benefits. If you still don’t have a job and can’t afford to begin repayment, don’t worry – after the consolidation is completed, if you are unemployed, you will still be eligible to defer your loan payment until you find a job.
If you’ve got a ‘good’ lender, they’ve likely already contacted you about these potential impacts to your situation. Hopefully they have – if they haven’t, you should contact them and talk to them more about this potential change and how it could affect you. If you have questions about this or other financial issues, visit our website (http://financialsuccess.missouri.edu) to schedule an appointment to visit with a financial counselor or planner.
Dr. Oleson
July 19, 2007
ELIMINATING CREDIT CARD DEBT
I’ve received a lot of questions recently related to credit card debt … What is the best strategy to repay it – loan consolidation? Balance transfer? Other? Obviously there are a lot of individual questions and factors involved in the decision. There are times when any of these options may be advisable. A few questions I would ask before proceeding:
- Is the reason I’m in debt behavioral (i.e., spending problem)? If so, I should address this problem before proceeding with anything else.
- What are the costs/fees associated with this decision?
- Is the interest rate offered temporary or permanent?
- How am I with making payments on time? [Most cards will bump your rate with one missed payment – even if it is a payment missed on another debt].
- Do I have good credit? If so, I should be able to find an alternative with a ‘respectable’ rate and cost …
An interesting tool I came across recently helps you compare offers from other credit cards to assist you in determining whether a different card or a balance transfer special would result in financial savings to you. This credit card “savings agent” gathers some basic information regarding your situation: what is your current card, how much do you owe, annual fee [if any], interest rate, whether or not you currently use the card, what you pay monthly on the card, if you know what your credit score is, and whether or not you’ve declared bankruptcy. From these questions, the tool examines about 200 different credit card offers and will rank the ten that will save you the most money (based upon its current ‘offer’ – includes any balance transfer fees, transfer rate or intro rate, etc.) … Looks like it could be helpful if you find yourself in credit card debt and are trying to find a viable financial alternative. The tool is free and doesn’t require any personal information [by personal, I am referring to your name, address, phone, e-mail, etc. – obviously it requires “personal information” such as how much you owe, etc.]. The site is located at: http://www.creditcardclients.com/savings-agent.
*FYI – The Financial Tip of the Week blog will join me on vacation until mid-August.
- Is the reason I’m in debt behavioral (i.e., spending problem)? If so, I should address this problem before proceeding with anything else.
- What are the costs/fees associated with this decision?
- Is the interest rate offered temporary or permanent?
- How am I with making payments on time? [Most cards will bump your rate with one missed payment – even if it is a payment missed on another debt].
- Do I have good credit? If so, I should be able to find an alternative with a ‘respectable’ rate and cost …
An interesting tool I came across recently helps you compare offers from other credit cards to assist you in determining whether a different card or a balance transfer special would result in financial savings to you. This credit card “savings agent” gathers some basic information regarding your situation: what is your current card, how much do you owe, annual fee [if any], interest rate, whether or not you currently use the card, what you pay monthly on the card, if you know what your credit score is, and whether or not you’ve declared bankruptcy. From these questions, the tool examines about 200 different credit card offers and will rank the ten that will save you the most money (based upon its current ‘offer’ – includes any balance transfer fees, transfer rate or intro rate, etc.) … Looks like it could be helpful if you find yourself in credit card debt and are trying to find a viable financial alternative. The tool is free and doesn’t require any personal information [by personal, I am referring to your name, address, phone, e-mail, etc. – obviously it requires “personal information” such as how much you owe, etc.]. The site is located at: http://www.creditcardclients.com/savings-agent.
*FYI – The Financial Tip of the Week blog will join me on vacation until mid-August.
July 12, 2007
COMPENSATION FOR FINANCIAL ADVICE
The idea of ‘you get what you pay for’ is as true today as it ever was. If you want objective advice, you’ll likely have to pay for it. How much you pay will vary according to the compensation method used by your financial professional. The value of this information will likely hinge to some extent upon the ‘fiduciary’ relationship; a fiduciary responsibility is one in which there is a requirement to place the needs of the client above that of the company/advisor. Many people assume this is always the case. There are, however, financial relationships where a fiduciary duty is not required.
It is important to understand [and be comfortable with] how your financial advisor gets paid. You need to make sure their compensation method is suited to your specific needs and situation. The International Association of Registered Financial Consultants provides a nice summary of these general compensation methods. Generally, financial advisors are compensated in one of four ways – solely by fees, a combination of fees and commissions, solely by commissions, or through a salary paid by an organization that receives fees. In some cases, you may be offered more than one payment option.
Fee Only.
Fee-only advisors charge an hourly rate (often $75 - $250/hour) for time spent in research, reviewing a plan with you, discussing implementation, etc. Some may charge a flat fee for a quoted service (such as developing a financial plan, drafting a will, etc.). More and more are moving into this category that don’t charge an hourly rate for services, but rather manage assets and charge a fee of 1% to 2% of total assets under management. They receive this classification because they make money from the management fee, not the sale/purchase of products. Obviously entirely different services, so categorizing them the same is confusing to many.
Fee & Asset Management.
Some financial advisors charge a planning fee and then will advise you on investments, insurance, and other financial vehicles; most will help with the implementation of recommendations using mutual funds and other investments. The fee for helping select and monitor these investments is usually a percentage of the assets assessed monthly or quarterly.
Fee + Commission.
Some advisors charge a fee for assessing your financial situation and making recommendations. The fee covers the data collection, analysis, recommendations and delivery of the plan. They may then help you implement their ideas by offering certain investment or insurance products. They typically earn a commission on the sale of those products. If so, that should be disclosed to you at that time. Commissions and other sales charges can vary dramatically from product to product. Don’t hesitate to ask your advisor for the amount of the commission and to explain how the commission will affect the return over the life of the investment.
Commission Only.
Some financial advisors charge no fee but rather are compensated solely by the commissions earned by selling investments and insurance plus services necessary to implement their recommendations. A commission-only advisor will develop recommendations for your situation and goals, review these with you and discuss ways to implement these recommendations. The only way they receive compensation is when you choose to buy the products and/or services being offered. The ultimate quality of any financial professional is independent of the method of compensation used. Competence and compensation are not necessarily correlated. No matter the method of compensation, the possibility of conflict of interest always exists. An advisor should be honest and straightforward about how they are compensated.
Helpful Resources.
- Checklist for interviewing a financial professional.
- Find a financial professional.
- Find a professional based on area of specialty.
- How a financial planner can help and choosing the right one.
- NAPFA – the National Association of Personal Financial Advisors – primary organization that represents fee-only financial planners. You can search for fee-only professionals in your area via their site.
- Your rights as a client.
It is important to understand [and be comfortable with] how your financial advisor gets paid. You need to make sure their compensation method is suited to your specific needs and situation. The International Association of Registered Financial Consultants provides a nice summary of these general compensation methods. Generally, financial advisors are compensated in one of four ways – solely by fees, a combination of fees and commissions, solely by commissions, or through a salary paid by an organization that receives fees. In some cases, you may be offered more than one payment option.
Fee Only.
Fee-only advisors charge an hourly rate (often $75 - $250/hour) for time spent in research, reviewing a plan with you, discussing implementation, etc. Some may charge a flat fee for a quoted service (such as developing a financial plan, drafting a will, etc.). More and more are moving into this category that don’t charge an hourly rate for services, but rather manage assets and charge a fee of 1% to 2% of total assets under management. They receive this classification because they make money from the management fee, not the sale/purchase of products. Obviously entirely different services, so categorizing them the same is confusing to many.
Fee & Asset Management.
Some financial advisors charge a planning fee and then will advise you on investments, insurance, and other financial vehicles; most will help with the implementation of recommendations using mutual funds and other investments. The fee for helping select and monitor these investments is usually a percentage of the assets assessed monthly or quarterly.
Fee + Commission.
Some advisors charge a fee for assessing your financial situation and making recommendations. The fee covers the data collection, analysis, recommendations and delivery of the plan. They may then help you implement their ideas by offering certain investment or insurance products. They typically earn a commission on the sale of those products. If so, that should be disclosed to you at that time. Commissions and other sales charges can vary dramatically from product to product. Don’t hesitate to ask your advisor for the amount of the commission and to explain how the commission will affect the return over the life of the investment.
Commission Only.
Some financial advisors charge no fee but rather are compensated solely by the commissions earned by selling investments and insurance plus services necessary to implement their recommendations. A commission-only advisor will develop recommendations for your situation and goals, review these with you and discuss ways to implement these recommendations. The only way they receive compensation is when you choose to buy the products and/or services being offered. The ultimate quality of any financial professional is independent of the method of compensation used. Competence and compensation are not necessarily correlated. No matter the method of compensation, the possibility of conflict of interest always exists. An advisor should be honest and straightforward about how they are compensated.
Helpful Resources.
- Checklist for interviewing a financial professional.
- Find a financial professional.
- Find a professional based on area of specialty.
- How a financial planner can help and choosing the right one.
- NAPFA – the National Association of Personal Financial Advisors – primary organization that represents fee-only financial planners. You can search for fee-only professionals in your area via their site.
- Your rights as a client.
July 05, 2007
PAYMENT MYOPIA
I was reading some articles this morning written by Dr. Jack Guttentag, Emeritus Professor of Finance at the Wharton School of the University of Pennsylvania. One of the issues he wrote about was ‘payment myopia’ – a phenomenon where people base decisions solely upon the affordability of monthly payments. Myopia is ‘near-sightedness,’ a defect in the eye where one can see close objects clearly but distant objects appear blurred (wikipedia, not an opthalmologists definition). What a great analogy for examining a very common mistake …
Unfortunately, many people are payment myopic when making major purchases. The questions are often “What will the monthly payment on that house be?” or “How much would my payment be if I want this car?” What is wrong with those questions? Loan products can easily be manipulated to provide almost whatever monthly payment you’d like (just take a closer look at some of the available products – 40 year [or 50 year] home loans, interest-only mortgages, negative amortization loans, etc.). Focusing on the payment is a short-term ("near-sighted") focus. Short-term decision making seldom results in long-term success. So what would be a long-term perspective in this example? Contact the lender after having already reviewed your budget to determine what YOU can afford based upon how quickly you would like to repay the debt. Ensure that YOU are comfortable with that payment relative to your other financial goals (savings, investment, and other objectives should be considered).
The “Mortgage Professor” (as Dr. Guttentag is referred) has a website with a lot of great housing resources. The site isn’t the prettiest, but the content is solid. Here are a few links to direct you to some of his resources:
- Homepage
- Mistakes in Buying, Financing, and Refinancing a Home
- Mortgage Calculators
- Mortgage Spreadsheets
- Table of Contents
Additional homeownership resources are available from the OFS website …
Unfortunately, many people are payment myopic when making major purchases. The questions are often “What will the monthly payment on that house be?” or “How much would my payment be if I want this car?” What is wrong with those questions? Loan products can easily be manipulated to provide almost whatever monthly payment you’d like (just take a closer look at some of the available products – 40 year [or 50 year] home loans, interest-only mortgages, negative amortization loans, etc.). Focusing on the payment is a short-term ("near-sighted") focus. Short-term decision making seldom results in long-term success. So what would be a long-term perspective in this example? Contact the lender after having already reviewed your budget to determine what YOU can afford based upon how quickly you would like to repay the debt. Ensure that YOU are comfortable with that payment relative to your other financial goals (savings, investment, and other objectives should be considered).
The “Mortgage Professor” (as Dr. Guttentag is referred) has a website with a lot of great housing resources. The site isn’t the prettiest, but the content is solid. Here are a few links to direct you to some of his resources:
- Homepage
- Mistakes in Buying, Financing, and Refinancing a Home
- Mortgage Calculators
- Mortgage Spreadsheets
- Table of Contents
Additional homeownership resources are available from the OFS website …
June 28, 2007
SUNK COST EFFECT
Personal Finance – “the process of planning your spending, financing, and investing so as to optimize your financial situation.” Doesn’t sound so hard does it? Much of personal finance is rational and quantifiable. Why then do so many struggle with their finances? Obviously there are a lot of potential explanations. I want to focus on one common problem – the sunk-cost effect.
The sunk cost effect is the tendency to persist in an endeavor once an investment of effort, time, or money has been made. This is problematic because it often leads to emotional rather than rational decision-making. We know [rationally] that “sunk costs” (past investments that are now irrecoverable) are irrelevant to decision making. Sunk costs are the same regardless of the course of action that we choose next. If we are to evaluate alternatives based solely on their merits, we should ignore sunk costs. We’d be better off making the decision by weighing future gains and losses. Yet, the more we invest in something (financially, emotionally, etc.) the harder it becomes for us to give up on that investment. Much research has been done in this area with interesting results. For example, one study arranged to have similar tickets for a theater performance sold at different prices; people with more expensive tickets were less likely to miss the performance. A study of NBA [basketball] players found that the higher a player was selected in the draft, the more playing time he gets [and longer career], even after adjusting for differences in performance.
Why is it so difficult to free oneself from sunk cost reasoning? We feel obligated to keep investing because, otherwise, the sunk cost will have been ‘wasted.’ We would then need to admit that we made a mistake.
Techniques for countering sunk cost bias:
1. Seek opinions from people who were uninvolved in the original choice.
2. Be alert to sunk cost bias in the decisions and recommendations made by others. “We’ve invested so much already” …
3. Don’t be afraid to admit when you are wrong.
4. Sometimes even smart choices (taking into account what was known at the time the decision was made) can have bad outcomes. Cutting your losses doesn’t necessarily mean that you were foolish to make the original choice.
A guy who knows a thing or two about money (Warren Buffet) said it well: “When you find yourself in a hole, the best thing you can do is stop digging.” So if you’re hanging on to a bad relationship or a bad financial investment, consider if your decision-making is rational or emotional … You can read more about the sunk-cost effect in the July, 2007 edition of ‘Smart Money’ magazine in the ‘7 Money Mistakes to Avoid’ (Throwing good money after bad) section.
The sunk cost effect is the tendency to persist in an endeavor once an investment of effort, time, or money has been made. This is problematic because it often leads to emotional rather than rational decision-making. We know [rationally] that “sunk costs” (past investments that are now irrecoverable) are irrelevant to decision making. Sunk costs are the same regardless of the course of action that we choose next. If we are to evaluate alternatives based solely on their merits, we should ignore sunk costs. We’d be better off making the decision by weighing future gains and losses. Yet, the more we invest in something (financially, emotionally, etc.) the harder it becomes for us to give up on that investment. Much research has been done in this area with interesting results. For example, one study arranged to have similar tickets for a theater performance sold at different prices; people with more expensive tickets were less likely to miss the performance. A study of NBA [basketball] players found that the higher a player was selected in the draft, the more playing time he gets [and longer career], even after adjusting for differences in performance.
Why is it so difficult to free oneself from sunk cost reasoning? We feel obligated to keep investing because, otherwise, the sunk cost will have been ‘wasted.’ We would then need to admit that we made a mistake.
Techniques for countering sunk cost bias:
1. Seek opinions from people who were uninvolved in the original choice.
2. Be alert to sunk cost bias in the decisions and recommendations made by others. “We’ve invested so much already” …
3. Don’t be afraid to admit when you are wrong.
4. Sometimes even smart choices (taking into account what was known at the time the decision was made) can have bad outcomes. Cutting your losses doesn’t necessarily mean that you were foolish to make the original choice.
A guy who knows a thing or two about money (Warren Buffet) said it well: “When you find yourself in a hole, the best thing you can do is stop digging.” So if you’re hanging on to a bad relationship or a bad financial investment, consider if your decision-making is rational or emotional … You can read more about the sunk-cost effect in the July, 2007 edition of ‘Smart Money’ magazine in the ‘7 Money Mistakes to Avoid’ (Throwing good money after bad) section.
June 21, 2007
OPEN COURSEWARE
Nearly two years ago at a financial counseling conference, I learned about a newly established consortium of Universities around the world that had collaborated to provide free, open access to educational materials. It sounded like an interesting idea at the time; I hadn’t heard anything about it since until this past week when I was reading the most recent edition of Kiplinger’s Magazine. The article – “Audit a course for free at Online U” shares a little more about this consortium that is a literal ‘who’s who’ of Universities – Johns Hopkins, Notre Dame, Tufts, Michigan State, Harvard Law, and MIT (the pioneer of this ‘open courseware’ movement) who will have at least some teaching materials from all 1,800 of their undergraduate and graduate courses this fall. While access to the materials is free, you won’t get credit toward a degree or have the ability to interact with other students or a professor.
I was able to find a couple of the courses that were personal finance-related. One is offered through UC-Irvine and appears to offer some valuable information related to ‘Fundamentals of Financial Planning;' Utah State also shares information about their undergraduate Family Finance class. The general content available from each course will vary dramatically – some have little more than a syllabus/ reading list. Others provide full PowerPoint slides for lectures, audio podcasts, video webcasts, exams … the whole nine yards. The link below to the list of consortium members will allow you to visit Universities that provide resources associated with a myriad of course topics.
The current consortium consists of more than 100 institutions of higher education. Additional information is available at http://www.ocwconsortium.org/about/index.shtml.
Sampling of other free online Personal Finance courses:
- Consumer Debit Resource – ‘Checkbook Basics’
- FDIC – ‘Money Smart’
- Florida State – ‘Fundamentals of Financial Planning’
- Freddie Mac – ‘Credit Smart’
- IRS – ‘Understanding Taxes’
- Money 4 Living
- Money SKILL
- NEFE – ‘High School Financial Planning Program’
- Rhode Island Center for Personal Financial Education – ‘Credit 101’
- Rutgers – ‘Investing for your Future’
- Smart Money – ‘Investing 101’
- Spend 2 Success
- Visa – ‘Practical Money Skills for Life’
This list should not be considered exhaustive by any means nor expected to represent an endorsement of any curriculum or program. The resources are merely informational. If you are aware of other good resources, please share them with me.
I was able to find a couple of the courses that were personal finance-related. One is offered through UC-Irvine and appears to offer some valuable information related to ‘Fundamentals of Financial Planning;' Utah State also shares information about their undergraduate Family Finance class. The general content available from each course will vary dramatically – some have little more than a syllabus/ reading list. Others provide full PowerPoint slides for lectures, audio podcasts, video webcasts, exams … the whole nine yards. The link below to the list of consortium members will allow you to visit Universities that provide resources associated with a myriad of course topics.
The current consortium consists of more than 100 institutions of higher education. Additional information is available at http://www.ocwconsortium.org/about/index.shtml.
Sampling of other free online Personal Finance courses:
- Consumer Debit Resource – ‘Checkbook Basics’
- FDIC – ‘Money Smart’
- Florida State – ‘Fundamentals of Financial Planning’
- Freddie Mac – ‘Credit Smart’
- IRS – ‘Understanding Taxes’
- Money 4 Living
- Money SKILL
- NEFE – ‘High School Financial Planning Program’
- Rhode Island Center for Personal Financial Education – ‘Credit 101’
- Rutgers – ‘Investing for your Future’
- Smart Money – ‘Investing 101’
- Spend 2 Success
- Visa – ‘Practical Money Skills for Life’
This list should not be considered exhaustive by any means nor expected to represent an endorsement of any curriculum or program. The resources are merely informational. If you are aware of other good resources, please share them with me.
June 14, 2007
YOUR CREDIT -- YOUR RIGHTS
Numerous agencies (lenders, insurers, employers, landlords, etc.) view your credit when making decisions about you – how familiar are you with your credit and your rights? The Fair Credit Reporting Act (FCRA) and the Fair and Accurate Credit Transactions Act (FACTA) are legislation designed to protect you and your credit.
FAIR CREDIT REPORTING ACT.
This act is designed to promote accuracy, fairness, and privacy of information in the files of every consumer’s credit report.
FCRA PROVISIONS:
- You must be told if information in your file has been used against you (denial of employment, credit, insurance, etc.)
- You have a right to know what is in your file.
- You are entitled to a free report at any time if: You are unemployed and plan to seek employment within 60 days; you are currently on welfare; you are a fraud victim or you are denied credit, employment, insurance, etc. based on report info.
- All consumers are entitled to one free report (per credit reporting agency) every 12 months upon request - http://annualcreditreport.com/
- You have the right to ask for a credit score (a numerical summary of your creditworthiness). You will have to pay for the score, but you now have access to it.
- You have a right to dispute inaccurate information.
- Inaccurate or unverifiable information must be corrected or deleted.
- Outdated information may not be reported (FCRA specifies duration). 2 years for inquiries; 7 years for 'most' negative information; 10 years for judgment liens and most bankruptcies; 10 years [or more] for 'positive' information.
- Access to your file is limited - may be used for consideration of applications such as employment, insurance, credit and landlords.
- Forces identification of individuals inspecting your file.
- Consent is required for reports provided to employers or reports containing medical information. An estimated 70% of employers examine credit reports prior to hiring.
- You have a right to file a lawsuit against collector if FCRA has been violated.
- You may limit 'pre-approved' offers for credit and insurance. You may opt-out by calling toll free (1-888-5-OPTOUT). Additional information is available at: http://financialsuccess.missouri.edu/tipoftheweek/optoutcc.pdf and http://financialsuccess.missouri.edu/tipoftheweek/optout.pdf.
Maintaining the accuracy of your credit report is YOUR responsibility. To read the entire FCRA, go to http://www.ftc.gov/os/statutes/fcra.htm.
FAIR AND ACCURATE CREDIT TRANSACTIONS ACT.
Signed into law by Pres. Bush in December of 2003, the Fact Act [as it’s often called] was designed to ensure that all citizens are treated fairly when applying for credit. Specifically, the bill was designed to significantly increase consumer protections against the growing problem of identity theft. FACTA also extends the current provisions (mentioned above) of the Fair Credit Reporting Act.
Some of the major provisions of FACTA:
- Provide consumers with a free credit report every year.
- Give consumers the right to see their credit scores (for a fee).
- Provide consumers with the ability to opt-out of information sharing between affiliated companies for marketing purposes.
- Ensure that consumers are notified if merchants are going to report negative information to the credit bureaus about them.
- Allow consumers to place "fraud alerts" in their credit reports to prevent identity thieves from opening accounts in their names (includes special provisions to active duty military).
- Allow consumers to block information from being given to a credit bureau and from being reported by a credit bureau if such information results from identity theft.
- Restrict access to consumers' sensitive health information.
- Provide consumers with one-call-for-all protection by requiring credit bureaus to share consumer calls on identity theft, including requested fraud alert blocking.
- Require creditors to take certain precautions before extending credit to consumers who have placed "fraud alerts" in their files.
- Stop merchants from printing more than the last five digits of a payment card on an electronic receipt.
Consumer credit is a vital thing for many – the ability to have protections in place to help consumers protect the credit they work so hard to build and develop is critical.
June 07, 2007
NEW LOAN RATES + NEW HAMPSHIRE
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).
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).
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.
Subscribe to:
Posts (Atom)