krogias

The numbers are out for the class of 2011 and two-thirds of the graduating class graduated in debt. If you are an average borrower, you owe $26,600, exceeding the class of 2010 by 5%, Was it worth it? In 2011, the unemployment for college graduates was 8.8% while unemployment of high school graduates was at 19.1% so the employment number would say yes. So you decide to go to college. How do you reduce the amount of money you will borrow, have a good time, and graduate? Here are a few ideas. 1. Graduate on time or early. An extra year of college can cost you can $50,000 or more. To calculate the cost of that extra year, add your tuition, fees and books to your potential starting salary. Say that your tuition, book, and fees are $20,000 and your starting salary is $30,000; that extra year cost you $50,000. This number could be higher or lower depending on where you attend college and your career. Just for fun, calculate your own cost of an extra year of college. If you were to graduate ...

Sallie Mae just released a study conducted by Ipsos Public Affairs titled “ How America Pays for College 2012” . The burden is shifting to the student, up from 25% in 2009 to now 34% in 2012.  As a student, after you complete the free application for Federal Student Aid (FAFSA) form and send it to your school, the school will send you an award letter, stating scholarships, grantos, work study, and amount available through federal subsidized and unsubsidized student loans. As you start the fall semester, it is a good time to start paying on your student loans. How are you going to pay? If you borrow money for college, you should take advantage of subsidized federal student loans before unsubsidized federal and tap private student loans as a last resort. The difference between these options is that the interest of a subsidized student loan does not accumulate until you are done with school while the interest in an unsubsidized student loan starts to accumulate while yo...

Congress is getting the idea....maybe.   The Wall Street Journal’s article “Trying to Shed Student Debt” inspired this blog.   The article states that Senator Dick Durban is proposing a bill that would allow forgiveness of "private" student loans in bankruptcy so that private lenders will become more cautious about making student loans. Federal student loans would not be forgiven. I have two problems with this legislation: 1) it is an uneven playing field. Why should private lenders have different standards than government lenders? 2: this is treating the symptoms, not the cause. The causes, as I see them, are many and complicated but the top three are the high cost of education, lack of financial literacy, and lack of personal responsibility. 1. The high cost of education. Reduced government support and increased college cost, along with a recession has left college more expensive and students with less in savings. We also need to ask if a college education is a benef...

Can you believe that both agree!?! Yes, it might be really cold and someplace is freezing over, but President Barack Obama and Mitt Romney both agree that student loan interest rates should not be increased.   This would keep current interest rates at 3.4%, not raising them to 6.8% on July 1 st .    By not increasing the rate on student loan interest rates, the government is stating that it will “cost” $5.9 billion. Woo, wait just a minute-- did anyone question that figure?   Being an old banker, we tried to have a 3%-4% spread on money; the cost of deposits verses the cost of loans to make money.   The government can borrow money (cost of deposits ) at almost zero percent, yet they are charging 3.4%.   Even the ten-year treasury is at 2%. Not a bad positive spread.   I also just financed a new car for 60 months at 1.9% at my local credit union.   Why is the government charging so much on student loan interest and want to raise it even higher? I k...

I was talking with a colleague the other day about student loan debt. She shared back "Perhaps we are thinking about student loan debt in the wrong way. We will go into debt $20,000 - $40,000 or more for a new car and not think twice. But we start to panic when a student graduates with $20,000 - $40,000 in debt. The car will last 6-10 years, but your education will last a lifetime." Now I don’t want you to go into debt to finance your college education if you don’t have to, but I want you to think of your college debt as an investment that will last a lifetime. In Chris Farrell’s article “College Degree Still Worth the Cost Despite the Risk ”, he quotes a study at the Booking's Institute that shows the return on investment for a college degree has been about 15% a year for the past 60 years. Not a bad return if I do say so myself, given the stock market has only shown a 6.8% return on investment over the same time period. However with college, like any investment, there i...

Higher tuition, more student loans, and greater access to higher education…what do we do? The Occupy Wall Streeters (OWS) say they are not going to repay student loans and are demonstrating on college and university campuses.   In today’s Inside Higher Ed daily updates, there is an article about how their energy might be misplaced.   This article argues that college and university administrator’s hands are tied because states are cutting funding to higher education and students are demanding quality student services and education.   They are feeling that their only or best choice is to raise tuition and fees, which ultimately increases the debt burden for college graduates. According to DiplomaGuide.com there are 10 colleges and university with $0 tuition .  Yes that is right, $0.00 in tuition.  Perhaps we should look at these institutions to see if we can apply some best practices to reduce the cost of higher education.  Many require students to work on c...

Occupy Wall Street (OWS) protesters have decided not to pay back students loans as a way to protest the high cost of higher education.   Is this a good idea?   Check out what Prof Bob has to say.

Black Friday is less than a week away and there is no place I would rather NOT be than shopping at 4:00 a.m. when the stores open.   I will be in my bed sleeping off a good Thanksgiving meal of smoked turkey and ham with all the fixings.    But as we get into the season of spending, shopping and giving; here are some ideas to keep in mind. When shopping for gifts make a list and check it twice.   Find out where you can get the best deal and make a budget for your gift giving. This may be a tougher holiday season financially so it is even more important than ever to keep both hands on your purse strings as you walk into stores playing holiday music and seeing displays that say “buy me!”   Using cash and the envelope system of budgeting keeps you within your budget. Using credit cards provide some protection, however you may be tempted to spend beyond your budget. Credit cards are governed by the Fair Credit Billing Act which provides you specific rights to dispu...

President Obama announced changes to the “Pay As You Earn” plan on Wednesday, October 26, 2011 that would/could ease the repayment of student loans. According to the College Board, the average public in-state tuition rates are increasing 8.3 percent for the 2011-12 year. President Obama pointed out that the average college graduate owes $24,000 in student loans and that the 2011 graduates have an average debt load of $27,300. USA Today reported that outstanding student loans will reach $1 trillion ($1,000,000,000,000) before the end of the year. Currently, student loan debt in America has surpassed credit card debt. Is this our next financial crisis? The highlights of the “Pay As You Earn” plans or income-based repayment plans are to: ·         Start this option is 2012 (vs. 2014) ·         Cap student loan payments to 10% of discretionary income (vs. 15% ) ·         Forgive an...

If you're having serious trouble paying back your student loan debt, bankruptcy is not a likely alternative for you. Student loans are usually not eligible for discharge from bankruptcy. If you're having trouble making any of your payments, the first step is always to contact your lender, be honest and try to work toward a realistic payment plan. The lender would much rather be paid over a longer period of time then for you to default on repayment of your debt. If your student loans are the largest part of your debt, you are better off to contact your student loan lenders and see if you can arrange an easier repayment plan or deferment of payments, over bankruptcy. Bankruptcy filings stay on your credit report for 10 years and will likely limit your ability to get a mortgage, borrow money, or get a job.  

Is the education worth the debt?   Is it worth going an extra year so you can work while going to college and not take on debt? First, a college education is worth the cost , but you have to look at the potential ROI (Return on Investment).   Different careers pay varying wages. With higher earnings, you are able to pay back a larger student loan debt with fewer sacrifices.   The U.S. Bureau of Labor Statistics (BLS) publishes an OccupationalOutlook that lists occupations, the education required, and the potential salary range.   According to the BLS, the high your education, the more money you will make and the less chance you will be unemployed.   Choose your education, career and debt load carefully. The cost of an extra year of college could be more costly than taking out a loan and finishing on time. To calculate this cost, add together the cost of tuition and books for one additional year of college plus your potential future salary, and then subtract you...