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Tag: debt

  • Student Loans? Get a Life Insurance Policy

    When Steve and Darnelle Mason co-signed their daughter’s student loans to help her pay for nursing school, the couple never thought the decision would come back to haunt them. After all, that was what all parents did for their children – help them pay their way through college to receive a degree and hopefully obtain the career of their dreams.

    And that most likely would have been the case for Lisa Mason, had she not succumbed to liver failure five years ago, leaving behind three children and $100,000 of loan debt.

    Over the past five years, Mason’s parents have been responsible for trying to pay off their daughter’s student loan debts. Due to late payment fees and high interest rates, though, the initial $100,000 has ballooned into $200,000 in debt – a figure insurmountable on Steve’s $75,000 per year salary for being a pastor and Darnelle’s even smaller figure for being director of the church.

    In desperate attempts to deal with their newly-found, crushing debt, the Masons have contacted the holders of their daughter’s student loans. Unfortunately, all of Lisa’s loans were held by private businesses instead of the federal government. If Lisa’s loans would have been granted by the government, her death would have resulted in loan forgiveness or at least refinancing options. Private lenders are not beholden to the same policies, however.

    While one private lender has reduced interest rates and the overall payment for the Masons, the others have not been helpful at all, stating their hands are tied when it comes to the laws on loan forgiveness.

    The Masons story lends great credence as to why students and parents should obtain a life insurance policy on the borrower when signing for student loans. A basic $250,000 policy can cost as little as $15 per month, and in the case of Lisa Mason, would allow for the repayment of almost all student debts if the borrower was to suddenly pass away.

    “I absolutely wish we had [a life insurance] policy. We would not have struggled financially for the past four years with these private student loans, and our credit would not have been ruined,” stated Steve Mason.

    Until Congress get its act together and passes comprehensive student loan reforms (such as the plans put for by Elizabeth Warren), one should be certain to take all precautions to ensure the least amount of hardship in the future.

    Image via Wikimedia Commons

  • Student Loan Debt Is $1.1 Trillion; Obama Tries To Do Something About It

    Since President Barack Obama was elected in 2009, the federal student loan debt increased to 517 percent. The Federal Reserve Bank of New York estimated the student loan debt at $1.1 trillion with $650 billion in credit card debt.

    Although students who have loans have a grace period of six months after graduation before their first payment, this does not erase the fact that the debt is there and it will not go away soon. For this reason, new graduates must get some sort of employment, even if it is not their dream job, just to start paying off bills.

    Just last week, Obama stated new executive actions to enable five million student loan-borrowers to limit their monthly payments at 10 percent of their income. The President also stated that any remaining loan debt after 20 years should be forgiven.

    These executive actions are only applicable to borrowers who took out their first loan after September 30, 2007 and continued to borrow money after September 30, 2011. It will also be an option for those who will start borrowing on July 1.

    In a statement, Obama said, “We’re still seeing too big a debt load on too many young people. The outrage here is that they’re just doing what they’ve been told they’re supposed to do. I can’t tell you how many letters I get from people who say, ‘I did everything I was supposed to, and now I’m finding myself in a situation where I’ve got debts I can’t pay off.’”

    In addition to the new executive actions, Obama also urged the U.S. Department of Education to improve publicity on income-based repayment programs that are available to borrowers. He also stated that the government will be renegotiating their terms with loan servicing companies in order to aid borrowers, especially those who are struggling with their debts.

    According to Cecilia Muñoz, Obama’s top domestic policy adviser, the new proposals on student loans will ultimately save taxpayers money through reducing the defaults on student loans. The Obama administration has been proposing to expand the income-based repayment program for the past two years, and they are aiming to target all borrowers, regardless of when they took out a loan.

    Obama also said that loan companies are “in the business of helping out students” and they are not there just to collect payments. “They owe young people the customer service, and support, and financial flexibility that they deserve.”

    Officials will begin negotiating new terms on loan servicing contracts when they expire this summer.

    Image via YouTube

  • Debt Consolidation Can Help Those Burdened By Student Loans

    Debt consolidation isn’t a term you hear all that often outside of financial circles. After all, why would a young student have to worry about lumping their debt together? For the student with thousands of dollars in debt across different loans, debt consolidation may just be the way to go.

    As students graduate from college, they’re more than likely to be looking for ways to reduce their debt or their payments. One way to do that is debt consolidation. Instead of paying on multiple loans, the student only has to pay for one loan. This means lower monthly payments, but it’s not all sunshine and rainbows. Here’s a breakdown of the pros and cons from American Education Services.

    Pros:

  • Lower monthly payments
  • One bill, one lender
  • No prepayment penalties
  • A fixed interest rate
  • No limit to the number of loans that may be consolidated
  • No required minimum balance per federal rules

    • Cons:

  • A longer repayment period
  • More interest to pay back (calculated as the weighted average of all loans and rounded up to the nearest 1/8 of 1%)
  • Possible loss of current loan incentives
  • Loss of deferment subsidy on Perkins loans

    • In essence, debt consolidation is all about looking at your current situation and deciding whether or not more interest is worth lower monthly payments. It shouldn’t be that big of a deal, however, as federal loans are still forgiven after 10 to 15 years of repayment. If lower payments will help you out now, debt consolidation may just be the way to go.

    Here’s a better look at some benefits to consolidation:

    Whether or not you consolidate your debt is up to you. It might just be worth a shot, however, if it can net you lower payments.

    Image via Thinkstock

  • Student Loans: 3 Ways to Avoid That Mess

    For many young people about to head off to college (in the U.S.), the necessity of student loans is a foregone conclusion. You have to get them, right? Your parents had them. The only way to avoid it was to get on the G.I. Bill or some other program that got you your degree without signing your future income away.

    Seventy-one percent of college grads in the U.S. walk out with a degree that doubles as an IOU for almost $30,000. And one in eight students leaves owing $50,000 or more.

    Nowadays, some financial advisors say that sending your kids off to college with the presumption that they will just “get loans like I did” is irresponsible, if it can be avoided. It sends the wrong message to someone starting out in the world. It tells kids that the lifestyle of deferred payment is acceptable. Then, when your kid gets on campus and is assailed with credit card offers, what lesson will they draw from?

    Forbes Magazine recently published an article that outlined a few ways one could go about avoiding student loans, including working while in college to help with tuition, maximizing grants and scholarships, and starting your college credit accumulation early — and free — by taking AP classes in high school.

    Their suggestions were helpful. But if you really want to get out of college without being saddled with debt the day you walk out, you’ll want to go deeper.

    Here are a few other tips for getting out without the $30K monkey on your back.

    1) Look Deeper Into Straight-Up Grants from Companies, Not Loans

    Everybody already does the FAFSA route, which includes checks on federal grant eligibility (e.g. Pell grants). Far too many people presume that they will not qualify for other private grants or that they will already be scooped up by someone else. Don’t give up so soon. And start early.

    Aim for particular grant opportunities. Call and write to organizations while in high school, and ask what they are looking to support. Put yourself in their line of fire, perhaps even cultivating tacit relationships with people in those organizations, asking for their advice and guidance.

    Some good places to look: local banks and businesses that set money aside for such purposes. Tell them you don’t want the money now, to avoid being put in the queue with everyone else. Instead, ask about what their ideal candidate looks like, and also ask about other volunteer and charitable events and efforts they have. Get involved in those to get your foot in the door with the organization as a whole.

    If you are a parent, rather than get your kid a summer job, look into unpaid internships with companies that can help them with college in the future.

    2) Start at a Community College and Transfer your Credits

    This is an old Dave Ramsey standby recommendation. Community colleges are far cheaper than big name schools.

    But once upon a time, this was hardly worth looking at for many people, because some of the classes you took were non-transferrable. Give this another look now. Some community college organizations even have partnership arrangements with bigger universities, allowing you to not only transfer 100% of your credits at some future point, but to keep the tuition rate of the community college even after you move on up to the big school.

    Your best move: call the community college admissions itself, not the big school. The little guy will use this as a selling point to get you in.

    3) Get Creative, With the Aim of Walking Away Debt-Free

    This is kind of an over-arcing determination that will help open you to opportunities and methods that may come along. It is important that you be hard set that you are not getting loans. Don’t let counselors and well-meaning adults tell you that it is all par for the course. Nothing is par for the course anymore. And there are ways to do it differently.

    If you need to, take single-semester breaks occasionally to work and save money. Even start a business in college. Don’t eat out as a habit. Keep a good schedule during college, getting plenty of sleep, studying effectively, and working if you can to pay out of pocket for tuition.

    There are still schools that offer not only work-study programs, but tuition replacement for work done around campus. Combine some time spent at an institution like that with the tactic of community college first and a couple of grants, and you can save a ton of money.

    If your child is a prodigy within a certain field, and you simply have no other way to avoid loans to get them into their field as soon as possible, do what you have to do. Just don’t take it as a foregone conclusion that student loans are inevitable.

    Image via Thinkstock

  • Félix Trinidad Makes Debt Deal After Millions Lost

    The story of Félix “Tito” Trinidad Jr. and his lost millions may be sad to fans and onlookers, but the situation is unfortunately so common in sports it’s almost predictable.

    It’s not at all uncommon for mega-wealthy athletes to lose their millions after their sports careers are over. The culprits are typically shady hanger-on types who turn out to have no common sense whatsoever when it comes to money and investments.

    According to the El Nuevo Dia newspaper, the boxer is thought to have lost no less than $63 million thanks to someone close to him and his father, Trinidad Sr.

    The 41-year-old former boxing champion is claiming that Jose “Pepe” Ramos was responsible for losing his money through bad investments. Ramos was something of an aide to Trinidad. There are reports that Ramos even acted as his English translator.

    The family friend was hired to help out with managing the boxer’s millions. Ramos allegedly made the decision to gamble on Puerto Rican government bonds.

    The economic situation in Puerto Rico is dire, and recently the country’s government bonds were downgraded to junk bond status. This rendered the millions invested virtually worthless.

    Following the catastrophic loss of fortune, Trinidad reportedly has 9 million in assets. Unfortunately for the boxer, he also has $30 million worth of debt.

    Trinidad is thought to have made close to $90 million over a boxing career that spanned roughly 18 years. He featured in 21 title fights and holds the record as the longest reigning welterweight title holder at 6 years and 4 months.

    The biggest purse in Trinidad’s career came after his “fight of the century” against famed boxer Oscar de la Hoya. He made over $10 million on the fight.

    That money and the majority of what he earned is now gone, leaving the boxer scrambling to pay off his bills.

    On April 10th, Trinidad and his legal team asked that the Financial Industry Regulatory Authority intercede in the matter. They complained that Ramos spent the money without the boxer’s knowledge or permission. Ramos claims that the accusations against him are false.

    On Tuesday the boxer managed to reach a temporary debt deal with a local bank. The agreement with Banco Popular halts a payment of $2.9 million that had been sought by the institution.

    Trinidad is to be inducted into the International Boxing Hall of Fame on June 8th.

    Image via Wikimedia Commons

  • Household Wealth Reached New High in 2013

    Household Wealth Reached New High in 2013

    A report released by the Federal Reserve last Thursday revealed that household wealth in the United States rose 14 percent from 2012 to 2013, topping off at $80.7 trillion – a record high.

    Household wealth is figured by assessing the value of homes, stocks, bank accounts, and other financial assets minus any debts accrued from mortgages, credit cards, and elsewhere. Overall, household wealth increased by $9.8 trillion from 2012.

    The majority of this rise in household income can be attributed to increases in stock share prices, which accounted for $5.6 trillion of the $9.8 trillion increase. The other major contributor to the increased wealth was real estate value, which increased by $2.3 trillion.

    2013 makes the first year in which household wealth has recorded a net-profit after the market finally recovered from the $10.6 trillion lost in the Great Recession which began in 2008.

    While household wealth increased during 2013, it did so unequally. Stocks represented the greatest percentage of the overall increase in household wealth, yet only 15 percent of all Americans own stock shares, with the wealthiest 10 percent owning 80 percent of the total stocks.

    Last month, a study conducted by researchers at Ohio State University showed that American wealth is still down 14 percent since pre-recession levels in 2006. So while overall household wealth may be increasing, it has yet to recover from the Great Recession caused by the crash of the housing market.

    Despite wealth increases going disproportionately to the wealthy and still being lower than pre-recession levels, economists see positive signs for the economy.

    Total debt for those outside the financial sector grew 4.3 percent in 2013, with household debt increasing 0.4 percent in the fourth quarter. Surprisingly, this is good news according to most economists. Rising household debt means that Americans are borrowing and spending more money: “While in recent years we have certainly seen that household debt can carry serious negative consequences, overall an increasing level of borrowing indicates that the economy is returning to normal patterns,” reported James McAndrews, director of research at the New York Fed.

    As the old adage goes, “You must spend money to make money.” – a quotation FDR put to great use to get America out of the Great Depression.

    Image via YouTube

  • Jodie Sweetin Starts 2014 On a Good Note

    Jodie Sweetin Starts 2014 On a Good Note

    Jodie Sweetin, best known for her role as Stephanie Tanner on ABC’s Full House, has had her fair share of bad news and downfalls over the years. Not only was she essentially a one-hit-wonder with her 90’s sitcom, but Sweetin has also spent years battling drug addictions – an issue which has affected both her acting career and her three marriages.

    Despite her past difficulties, however, Sweetin has decided to start 2014 on the right foot. According to TMZ, Sweetin has finally paid off a debt she has owed the IRS since 2009. During that year, Sweetin apparently “forgot” to pay her income taxes, resulting in her owing the IRS $53,626.29.

    This news is the first positive news to come from the Sweetin camp in quite some time. In fall of 2013, rumors abounded once again concerning Sweetin’s relapse and re-entry into a rehab facility. The reports stated that Sweetin had checked into a facility which cost $50,000 per month following her divorce from her third husband, Morty Coyle.

    Fortunately for Sweetin and her fans, the rumors were not true. Instead, Sweetin reported that she was actually working at the facility, stating that rumors of her relapse were “such bulls**t.”

    Sweetin was employed as a clinical logistics coordinator at the Los Angeles-based rehab center. Rumors of her staying at the rehab center proved to be true, but in a different light then most people imagined: “I work for the center and they have been really generous in helping me with a place to stay as Morty wanted me out by the end of the month. The owners of the facility said I could stay here as I got things figured out,” stated Sweetin.

    Sweetin’s divorce from Morty Coyle marked the end of her third marriage. The couple had one child together, 2 year old Beatrix.

    Image via Twitter

  • Occupy Wall Street Buys Debt at 50-1, Abolishes It

    Reuters and the Guardian both report one of Occupy Wall Street’s spinoff groups, the Rolling Jubilee Project, announcing this week that they have successfully bought $14.7 million in healthcare debt accumulated by Americans for roughly $400,000.

    Rolling Jubilee was set up by the OWS debt group Strike Debt! after the widespread financial protests in 2011. Andrew Ross, a member of Strike Debt! and a sociocultural analysis professor at New York University, said “We thought that the ratio would be about 20 to 1. In fact we’ve been able to buy debt a lot more cheaply than that.”

    Bigger lenders that deal with failed bills from loans, insurance, or credit cards often sell the debt at a loss to a third party for a fraction of the debt’s actual value. Debt-buying companies will pay pennies per dollar, then try to collect from the debtors for a profit. Strike Debt! has managed to relieve 2693 people of debts they owed for medical services that OWS believes should be universal. The remainder of their funds will likely go to relieving some student loan debt.

    Ross acknowledged the seemingly futile objectives of Strike Debt! when he said, “We’re under no illusions that $15m is just a tiny drop in the secondary debt market. It doesn’t make a dent in the amount of debt. Our purpose in doing this, aside from helping some people along the way – there’s certainly many, many people who are very thankful that their debts are abolished – our primary purpose was to spread information about the workings of this secondary debt market.”

    When the OWS offshoots purchase debt, they receive no information about the person who’s debt they are abolishing other than an address. They mail a letter to explain how the person’s debt was cancelled; that letter is the group’s only direct contact with debtors. However, Ross noted that “one person wrote back and said that he had gone through periods of being homeless and he was trying to get back on his feet.”

    If you want learn more about economic inequality in the United States, check out these enlightening charts from Business Insider.

    [Image via RollingJubilee.org]

  • Student Loan Forgiveness Options Need More Exposure

    Obtaining a college degree is essentially a necessity in the United States today. If one wants a job that is not flipping burgers or waiting tables, then one must pursue some form of higher education – whether it be a four-year public college, a private liberal arts college, a trade school, or a certification program.

    Unfortunately, students in the US cannot attend college for free (unlike many students in Europe). In fact, student loan debt in the United States reached the staggering figure of $1.2 trillion this year.

    Students are not going to stop going to college due to the costs, and costs do not show signs of decreasing anytime soon (The cost of a four-year, public institution has raised 357% over the past 30 years…). So, what is the best way to combat the rising cost of education and student loan debt?

    Those at American Student Assistance (ASA), a non-profit organization whose goal is to educate students about their debts and help them manage their repayments, believe that the best way to combat the problem, with current means, is to educate students about student loan forgiveness programs: “There needs to be more awareness about these programs,” stated Betsy Mayotte, director of regulatory compliance at ASA.

    These student loan forgiveness programs are not meant miracle programs that eliminate all debt magically, but rather programs designed to aid those who have made consistent payments for a number of years and receive a paltry salary for their work. Most of the people who qualify for the programs are those who work in the public sector, for non-profits, as teachers, and other low-paying professions.

    For those who work in a public service job, their student loan debt from the federal government will be forgiven after 120 consecutive payments and a proven history of low-pay. Teachers who work in low-income areas for a period of 5 years can also have their remaining government debt forgiven, as long as they have maintained a good payment history.

    For those who receive little to no money from their jobs, but do not work for the public sector, there are two options which will aid in repaying government loans. The first is to set-up an IBR (Income Based Repayment) schedule for one’s loans. In this repayment scheme, a person makes the largest payments they can for 25 years, after which the remaining amount will be forgiven.

    A second route toward loan forgiveness for low-income earners who first accumulated loans after October of 2007 is the Pay as You Earn program. This program works very similar to the IBR program, but one’s loans are forgiven after 20 years.

    These methods only work for those students who have borrowed money through the federal government, though. For those students who have had to borrow privately, there are yet to be any similar solutions. The Consumer Financial Protection Bureau recently released a report, however, in which they proposed an option to allow those with private loans to transfer the outstanding amount to a federal loan. Through this method, the federal government would essentially buy the loan from the private companies, which would allow the borrower to take advantage of one of the forgiveness plans mentioned above.

    The best solution would be to lower the cost of college, of course. Certain states, such as Georgia, already offer free tuition for in-state students. Other colleges, such as Adrian College (a private, liberal arts college in Michigan), have offered to help students repay their loan debts if they graduated and are unemployed or underemployed.

    Whatever the solution, one needs to be found soon. One of the many reasons the US faces a struggling economy at the current moment is due to the lack of investment and business from recent college graduates. Those who have $30,000 in college debt cannot afford to invest their money in the stock market or be entrepreneurs. Until the federal government finds a way in which to make higher education more affordable, the market of the US will become more and more stagnant.

    Image via Facebook

  • Video Contest Lets Students Vent About Costs of College

    Video Contest Lets Students Vent About Costs of College

    The idyllic college experience: meeting new people with shared eccentricities and fun hair, figuring out how to work a pick-up line at the School of Americas protest, making yourself shower at least four times a week, developing strategic ways to covertly gratify yourself when you share a cramped dorm room with another human being. Those lovely days, unfortunately, are long gone (well, people probably still do that last one). Now, paying for college goes way, way beyond the simple price tag of the tuition. The astronomical cost of actually staying alive while in college is absurdly high. Even a steady diet of instant ramen noodles and drinking water out of puddles in your driveway isn’t really enough frugality to offset the crippling financial demand of attending college.

    To help calculate the lifetime of unpayable debt students can look forward to, the U.S. Department of Education implemented a new policy for all college and universities to include a “net price calculator” on their websites so prospective students can get an idea of how many lifetimes they’ll spend paying off their debt loans. Perhaps realizing that this wasn’t quite enough to really get that message to sink in, the Department of Ed has created a challenge for high school and college students to help spread the word about how terribly expensive college is.

    Oddly named the “College Net Price Calculator Student Video Challenge” (seriously, guys, you couldn’t name it in such a way that it’d have a cute acronymic name?), the contest is an effort to use students’ first-hand misery to help spread the word about just how costly it is to go to college these days. From the contest’s website:

    Net price provides very important consumer information to prospective students and their families, but few students and families know to ask colleges and universities about their net prices or to look for a net price calculator on an institution’s website. The Department of Education is announcing a prize challenge for the creation of a short (approximately 60-180 second) creative and informational video that tells viewers about what net price calculators are, why they are important, and where viewers will find them – both on college and university websites and also on the Department’s college search website, College Navigator (http://nces.ed.gov/collegenavigator/).

    Students have until January 31, 2012 submit their video that explains the deathly cost of enrolling in college. A panel of five independent judges will be selecting three winners, each of whom will be awarded a prize of $1,500. Wow, way to break the bank for kids, Department of Education. That sum wouldn’t even cover 6 hours of credit at my state-funded alma mater.

    In all honesty, they should reconfigure the marketing of this video contest and just use it as a platform to discourage people from going to college. How is a bachelor’s degree even worth it anymore?

  • Debt Ceiling Debate Nears Deadline, Obama Gets Busy On Twitter

    Debt Ceiling Debate Nears Deadline, Obama Gets Busy On Twitter

    As the deadline to raise the debt ceiling fast approaches, the White House is using Twitter to rally support for what the call the “balanced approach.” In the simplest terms, this means an approach to tackle the national debt that both cuts spending and raises revenues through tax increases and/or elimination of tax breaks.

    House Republicans and the President (with congressional Democrats) have been in negotiations for weeks, but a comprehensive plan has yet to emerge that analysts feel could pass the legislature and be signed by the President.

    While the White House’s Twitter account is livening up the mood by Rickrolling its followers during an open Twitter forum, President Barack Obama’s Twitter account is busy rallying support for his vision.

    In a continuation of Obama’s message from Monday night’s primetime speech on the debt situation (that resulted in the shutting down of dozens of congressional websites), his Twitter account is in the middle of a giant feed-swarming campaign to ask Twitter users to tweet their congressman.

    Ever since it was announced that tweets coming directly from the mouth of the President would all be signed “BO,” they have been elusive. But we got one a couple of hours ago –

    @BarackObama
    Barack Obama    The time for putting party first is over. If you want to see a bipartisan #compromise, let Congress know. Call. Email. Tweet. —BO 2 hours ago via web · powered by @socialditto

    After that, his team has been busy tweeting out messages to his near-10 million followers about how they can contact their congresspeople via Twitter to express their support for his plan.

    As of right now, the Barack Obama account has listed the Twitter handles of Republican members of Congress in Alabama, Arkansas, Alaska, Arizona, California, Colorado…are you sensing a pattern? As of the writing of this article, they are on Kentucky in the alphabetical listing of the states. Here’s what they are saying –

    @BarackObama
    Barack Obama    If you live in Arizona, ask @SenJonKyl and @SenJohnMcCain to support a bipartisan compromise to the debt crisis. 1 hour ago via web · powered by @socialditto

    @BarackObama
    Barack Obama    California Republican reps on Twitter: @RepJohnCampbell (CA-48),@DarrellIssa (CA-49), @BilbrayCA50 (CA-50), @repjeffdenham (CA-19) 1 hour ago via web · powered by @socialditto

    @BarackObama
    Barack Obama    Voters in Idaho: Tweet your Republican representative and ask them to support a bipartisan solution to the deficit crisis. #compromise 51 minutes ago via web · powered by @socialditto

    @BarackObama
    Barack Obama    Kentucky voters: Tweet @SenRandPaul and ask him to compromise on a balanced deficit solution. 7 minutes ago via web · powered by @socialditto

    Put this in the “aggressive social media politicking” folder, as the White House is in the middle of an impressive Twitter campaign.

    Is this type of Twitter interaction a good thing for either party? Should all politicians be using Twitter to this degree to spur debate? Let us know in the comments.