"GOLDEN VALLEY, Minn. -- Chances are, you, or someone you know, have some amount of student debt.
If you do, you have plenty of company, seeing that the U.S. is seeing the highest amount of student debt, ever. Outstanding student loans are estimated to reach one trillion dollars by year's end.
Dan Ament, Senior Vice President and Financial Advisor with Morgan Stanley Smith Barney in Wayzata spoke on KARE 11 Sunrise about the growing dilemma, what can be done about it, and has some pointers.
67% of grads had debt - According to Project on Student Debt, 67% of graduates had debt - averaging $24,000 per student.
Defaults double - Student loan defaults have doubled since 2005, according to the U.S. Department of Education.
No bankruptcy relief - Unlike mortgage and other debts, student debts are not forgiven in the bankruptcy process.
New proposal to aid borrowers - The Obama administration has proposed additional measures intended to aid those burdened by student debt. Set to take effect in 2012, the enhanced student debt forgiveness plan includes provisions that allow the consolidation of federal loans, income based repayments and loan forgiveness after 20 years. Of course there is always a catch ... there are qualifications to be eligible for the new benefits; therefore some homework on your part will be required to determine if this will benefit you.
Don't do happy hour on your student loan - You have secured your student loan, that is the good news. Now make sure you live within your means while earning your degree. Some schools have provided students the option of accessing their student loan dollars with a debit card. Critics wonder if this easy access to cash is a beneficial convenience or an enabler of further debt issues for struggling students.
College still pays but be realistic when selecting schools.
"MINNEAPOLIS (WCCO) — If a deal is not reached over raising the federal debt ceiling, the real estate market would be put in an especially tough position.
WCCO-TV met with a mortgage consultant to see how Minnesotans pocket books’ could potentially be affected.
According to Ben Coulter, mortgage consultant with Metropolitan Financial Mortgage Company in Edina, both first time home buyers and those who have an adjustable mortgage rate could take a real hit.
Coulter said it comes down to the purchasing power of the buyer. Bottom line, with a big hike in interest rates, buyers are forced to cut back.
Think Economics 101: Bad credit means high interest rates, while good credit gets you the best rates.
"So, essentially, the U.S. right now has great credit, gets the best rates in the world. But if we default, or if the debt ceiling isn’t raised, then we’re going to go back down,” said Coulter. “We’re going to be paying more on credit cards and auto loans and you name it.”
Topping that list is your mortgage rate. Right now, Americans are paying around a 4.25 percent mortgage rate, but if America defaults on debt for the first time in history, things could change overnight.
"Going forward, worst case scenario, a lot of the things that we’ve been seeing and reading are anywhere from a half percent to three percent [interest hikes]," Coulter said.
Perhaps it’s easier to understand with a hypothetical:
In Minnesota’s Sixth District, where the median home value is around $240,000, a 3 percent hike in interest would ultimately mean a $400 increase per year in loan payments. That adds up to $20,000 over a lifetime.
Coulter said the fear of skyrocketing interest rates is very real to several of his clients.
"I’ve got a few people right now refinancing and want to get locked, want to make sure they get this taken care of before anything that happens with debt ceiling," Coulter said.
He said he assures his clients, however, that he’s confident a deal will be reached.
"I expect that Congress is going to get this thing passed and we’re not going to have to deal with this nightmare that could happen,” Coulter said.
The easiest way the expert says he can explain it: If the U.S. credit rating is downgraded, then people don’t want to purchase our debt. As a result, the U.S. has no choice but to increase interest rates.
The impact of no deal reached would go beyond just mortgages. Americans could also see a dipping dollar, delayed social security payments and potentially sharp drops in the stock market."
"..One financial expert told 5 EYEWITNESS NEWS the best thing is not to panic. Darin Pilacinski of the Mutual Fund Store told us there are some things you can do to protect your money during this time of uncertainty, but the best thing is to not make emotional decisions. Pilacinski says if you are close to retirement you might consider moving some of your money out of the stock market and into bonds. And, if you are young, you should probably stay the course because the market fluctuates. But, if you do anything as a young investor you should also look at bonds and certificates of deposit. Pilacinski told 5 EYEWITNESS NEWS there is one thing to stay away from right now and that's commodities. He says those are on a five-year upturn and that means commodities are likely to see a downturn correction in the near future...
Consolidate Your College Debt
Once you graduate from college and you go through about a six-month grace period, you will need to start making payments on your loans, whether they are federal or private. However, with a private loan, you may have signed the paperwork while you had a really bad credit score, making it so your interest rate was sky high.
This can be shocking when you receive your first bill in the mail, especially with all of that interest tacked on that built up over your four years in school. Ouch! But you did what you had to do to pay for school and now that you?re graduated, you?re older, wiser and ready to take on this bill.
If your credit score has improved while you were in school, you should seriously consider consolidating your loan. This will make it so you can basically get a reevaluation of your loan, get that interest rate lowered and have your payments lowered as well! Consolidating student loans is probably one of the best ways to deal with bad credit while you are a student. Go ahead and accept that high interest rate, generally crummy loan and get through college. When you come out on the other side with a degree in hand, you can consolidate the loan and save money.
Of course, this method of dealing with bad credit is only beneficial or even worthwhile if you have made efforts to improve your credit. If your credit is just as bad four years later as it was the day you signed the loan, you will have some very nasty payments on your hands. Make sure when you sign the loan you are committed to changing your credit for the better. "
"Sallie Mae not - Catherine Tumber, The Boston Phoenix
As federally sponsored student-loan giant Sallie Mae prepares to go private, it?s squeezing every last penny from student borrowers while opening up scads of new businesses. How can you protect yourself? read more
...Sallie Mae Pays $3.4 Million to Settle Civil False Claims Act Allegations - Press Release
Boston, MA - United States Attorney Donald K. Stern today announced that Sallie Mae Servicing Corporation of Reston, Virginia ("Sallie Mae") has agreed to pay $3.4 million to the United States to settle civil False Claims Act allegations. The settlement stems from Sallie Mae's submission of claims for federal payments on hundreds of federally insured student loans, before Sallie Mae had taken the legally required steps to collect the loans.read more"
"Monica of Merritt Island FL (12/19/07)
My college uses Sallie Mae for all financial help, so I signed up with them and got approved. Yay me! They said that I could pay $114 a month, which I thought was kinda high, but worth it. After graduation, the payments DOUBLED. I called them to ask what had happened, and got the run around. I was transferred to at least 3 different people before I finally got someone to explain to me some crack about payment increases. I regretfully paid the hiked fees.
A few months later, I moved from Los Angeles to Florida. I called them to let them know that I was in the middle of a move, and that I was unable to make such high payments. I told them that I could only afford about $50 a month. The person on the line said that I should pay what I could pay and that it would be fine. Great! I thought. I made these payments for a few months, before I got my first late notice in the mail. The person on the line had misinformed me. I was told that $50 was fine, and here I see huge late fees being tacked onto my payments! I called back, got the run around (as per usual) and was eventually told that I had to submit a request in writing. I did as they asked, and called back a few weeks later. They didn't know what I was talking about, until I insisted about it enough times. Then I get the oh, that! We denied that because there was already a payment change in September of 05!
This was just the beginning of the financial problems. I tried to file for a forbearance, and they said that I had to get caught up. I didn't have the money, but I begrudgingly used my (now) husband's credit card. They never filed my forbearance request. This was one of THREE times that they have done this to me. I've since had a child, and they finally files a forbearance for 6 months. Near the end of this period, I called them to inform them of an address change. The guy answered with The reason I've called you today was to inform you that you're over 60 days late on your payment. I informed him that A) I had called him and B) my next payment was due two months from that day. He said that he had no record of my forbearance on file (even though I had initially called the automated machine to get the date of my next payment, and that machine had confirmed the date for two months from the day in question). After my baby was born, I had to quit my job. I have to move in with my parents and rely on a single income. The financial hardship is so bad that I have to choose between groceries and Sallie Mae. I've informed them of this hardship and they refuse to offer me any slack whatsoever, and continue to not only attempt to extort money from me, but they harass me on a daily basis. I've had to cancel my land line (for the most part due to harassment, and secondarily due to financial hardship), and they've somehow managed to find my cell phone number and have started to harass me on my cell phone, now! Today alone (so far), they've called me at 8:34, 9:57, 10:08, 10:32, 10:46, 11:08, 11:25 and 12:26 (it's now 1:00PM as I file this), and refuse to stop calling me, as per my request. When my son goes to college, I would rather sell my own kidneys on the black market (both of them, and DIE because of it!) to help him pay for school than go through Sallie Mae. I would not wish this mental anguish on my worst enemies...."
Jan Craig dreaded picking up her phone.
A computer mix-up mistakenly showed she owed a $1,040 credit card debt, and for nine months a collections company allegedly harassed the Florida homemaker with automated voice messages or rude telephone representatives who demanded she pay up. One threatened to call her at all hours of the night...
However, the collections work has also made Sallie Mae the target of several inquiries from officials concerned its practices amount to bullying. In a letter to Sallie Mae's chief executive on April 26, for instance, Senator Edward M. Kennedy, Democrat of Massachusetts, wrote that he was concerned the company and other lenders "may be engaging in harsh and inappropriate tactics" against borrowers.
Kennedy spokeswoman Melissa Wagoner said the note was prompted by complaints from current and former students that collections agents used profane language, at tempted to collect debts that didn't exist, or harassed neighbors or co-workers.
Sallie Mae's practices have also drawn the attention of Illinois Attorney General Lisa Madigan, who filed a suit in January against Arrow Financial Services LLC of Illinois -- which is part of SLM's debt management operations unit.
In the suit, filed in Cook County Circuit Court, Madigan claims Arrow "engages in a variety of abusive practices in its contacts with consumers," citing 669 complaints filed with her office. In Massachusetts, a spokeswoman for Attorney General Martha Coakley said her office has received 32 complaints about Arrow."
Neglecting Your Student Loans
"Neglecting your student loans can hurt your credit rating. This video explains what lenders can do to collect student loan payments from you."
"Many in the next generation of workers will be so debt-burdened they will have to delay home purchases, limit vacations, even eat out less to pay loans off on time.
Kristin Cole, 30, who graduated from Michigan State University's law school and lives in Grand Rapids, Mich., owes $150,000 in private and government-backed student loans. Her monthly payment of $660, which consumes a quarter of her take-home pay, is scheduled to jump to $800 in a year or so, confronting her with stark financial choices.
"I could never buy a house. I can't travel; I can't do anything," she said. "I feel like a prisoner."...
Sallie Mae, formally known as SLM Corp., has been on the winning side of the loan bonanza. Its portfolio of 10 million customers includes $25 billion in private and $128 billion in government-backed education loans. However, private-equity investors who had offered $25 billion to buy the company backed out last week, citing credit market weakness and a new law cutting billions of dollars in subsidies to student lenders...
"Lenders take 100% of the repayment risk on flexible private-education loans made to people with limited credit histories, on which they will not get repaid for several years," Barry Goulding, a Sallie Mae official, told Congress last spring.
"Three friends band together in a quest to find the best student loan consolidator that can alleviate their pain from student loan debt. Episode I is the start of their unplanned journey."
The Debt Ceiling
"Uploaded by ReutersVideo on Apr 1, 2011
Presentation explaining the U.S. government debt ceiling
"Uploaded by USnationaldebt on Mar 10, 2011
With Congress about to vote on whether to raise the current $14.3 trillion national debt ceiling, Mothers Against Debt thought it helpful to put this fiscal child abuse into perspective. We've updated our original "Baby Ball-and-Chain" video. Be sure to watch to the end, the new numbers are sobering. For more information visit www.MothersAgainstDebt.com.
"Uploaded by RTAmerica on May 16, 2011
Drama has been developing over raising the debt ceiling, but Dean Baker from the Center for Economic and Policy Research says that what has become "pretty much protocol" isn't that big of a deal. In a worse case scenario, says Baker, the most damaging result would be the destruction of Wall Street, and that, he says, is not going to happen.
Follow Lauren on Twitter at http://twitter.com/laurenlyster
" 3 Reasons Why The Debt-Ceiling Debate is Full of Malarkey , from youtube.com "1. August 2 is a phony deadline. Treasury Secretary Timothy Geithner has pushed back the drop-dead date when the U.S. finally reaches its limit a bunch of times already: March 31, April 15, May 31 were all cited as deadlines before August 2 was inked in as Armageddon. But this time, he means it, man, really.
2. Reaching the debt limit is not the same as defaulting on our debt -- which would indeed be catastrophic.
Think about it: You can max out your credit cards but as long as you keep paying the minimum amount due each month, your creditors don't go crazy. Interest on the debt is a small fraction of total outlays and the government has a series of tools -- from using cash on hand to selling assets to scrimping on nonessential payments -- to make sure interest payments are made and seniors aren't put on an all cat-food diet.
3. Legislating-by-Panic is no way to run a country. The reason we're in this mess is because government can't stop spending. And the government can't even pass a budget on a year's notice. But we're expecting them to come up with a good plan for the country's borrowing in a couple of weeks? Trying to force through an expansion of the country's credit line by promising cuts in spending down the road is exactly why we're in this situation to begin with.
" Obama Purposely Creating Panic Over Debt Ceiling , from youtube.com '..Uploaded by countryboy1949 on Jul 12, 2011
"We are not going to default, we have enough tax revenue to pay our bills. It certainly will be disruptive if we continue going on the track we're going on right now. We have enough asserts, Social Security, Medicare trust fund to pay those benefits if necessary. It's not ideal but we don't need to panic and rush into a deal and the President has actually been burning the clock with these secret negotiations pushing us against a deadline so he can create this panic. We need to keep calm and if the President would work with us on some reasonable cuts, we'll work with him on giving him an increase on the debt limit. Now is not the time to panic and do something else that is going to make our economy worse and cost us most jobs," Sen. Jim DeMint (R-SC)
Raising the debt "ceiling"?
"Budget and debt problems are once again racking America. Barack Obama has failed to persuade the Republican majority in Congress to raise the national debt ceiling. That much is nothing new, and similar attempts will be unlikely to succeed in the future. Since July 10, the White House has been holding daily consultations on raising the ceiling. The current ceiling of $14.3 trillion must be raised by several hundred billion, or the Department of the Treasury will run out of money by August 2.
The Americans raise their debt ceiling on a regular basis. Since 1993, they have come close to defaulting 16 times. In 1995, the government even shut down for a week. In the past, the world perceived these exercises as a matter of course, whereas now the unwritten rule of the U.S. budget is increasingly becoming a sore subject.
Should You Refinance Your Mortgage? "
You might want to refinance to lower your mortgage payment or to access equity you have in your home for an important expense. When you’re considering refinancing a mortgage, you look at many of the same issues that you initially looked at when checking out your loan options, including the following:
How long do you plan to stay in the home?
What is your current interest rate?
What interest rate could you obtain on a new mortgage?
Will you be refinancing your mortgage and pulling out additional cash to use for other purposes, such as paying off credit-card debt?
If you have significant equity in your home, and you need to tap that equity to pay off high-interest, nondeductible debt, finance a child’s college education, pay for necessary home renovations, or any other purpose you deem worthwhile, refinancing may be your best option. However, refinancing isn’t the only option for tapping into home equity.
Be careful not to use any money that you obtain through refinancing as a quick fix for a systemic problem. If you're going to put your home at risk to pay off your credit cards, do yourself a big favor and don’t let it happen again.
With refinancing, you need to keep in mind that closing costs will be levied against you. It's safe to assume that somewhere between $1,200 and $1,500 is the typical cost to refinance.
The Should I Refinance Worksheet provided here helps you determine whether refinancing is a good idea.
Click here to download and print the Should I Refinance Worksheet.
If you plan to stay in the house for at least a few years beyond your break-even point, you should probably refinance at this time. The process of shopping for a new home mortgage to refinance an existing mortgage is exactly the same as the process you went through to obtain your first mortgage.
Refinancing your home mortgage? Learn how to refinance your home with these
"Uploaded on Jun 24, 2011
Are you considering refinancing your home mortgate to lower your interest rates and monthly payments? This could be a great financial decision and TransUnion wants to help guide you toward a successful refinance. Follow these refinancing tips for the best experience.
For more information on your credit score, visit http://www.transunion.com"
"Q: How much does refinancing cost?
A: It can cost several thousand dollars, but there are ways to make upfront charges invisible to the borrower.
Typically there is a fee that goes to the mortgage broker or lender, plus fees for title insurance, a new appraisal, document processing and other charges. Often, mortgage brokers or lenders can create the appearance of a "no fee" mortgage by adding the costs to a total loan amount or charging a higher interest rate.
Tips for Refinancing Your Home Loan
"Uploaded on Apr 28, 2011
Refinancing loans can be a difficult task. In this video guide Lisa Montgomery, CEO of resi takes a look into refinancing home loans and focuses on reasons to refinance, saving and debt consolidation.
Points discussed include: exit fees; improved loan features; making your repayments more affordable.
Pay Off Mortgage Early
"It sounds good when you hear you're left with $29k after paying off the mortgage. But you'd still save more with the 15 year. His method: First 15 years you've paid $898 x 180 = $161,640 Then pay off the remainder for $105,837 So total paid for the house is $267,477 Subtract the $29,000 that you "saved" Total paid $238,477 Thanks to alexremix down below 15 years: Total paid $213,513.47 You save about $25,000 just doing 15yr instead of his method. "
*see FMS Bonds, tax free bonds
Dave Ramsey, "Pay Off Mortgage" Money Makeover - 7/10
"Refinancing can be expensive. But it does not have to be.
That’s because, with a little bit of creative thinking, or if you are working with a lender that knows what they are doing (and probably does not work under the thumb of a major national bank,) your lender will pay your costs for you.
This means: No closing costs. Zero. Nothing added to the loan or paid outright.
Sounds like the best deal ever, right?
Why doesn’t everyone refinance this way?
To understand why, and how this works, we need to wade – briefly - into the topic of how mortgage interest rates are offered, or priced.
Stay with me here.
Repeat After Me: There’s No Such thing as “Today’s Rate”
“What’s the 30 year rate today?”
Whether I am at a cocktail party (confession: I don’t think I have ever been to a “cocktail party”) or picking up the phone, it is a question I hear all the time.
It echoes in my head, and will probably be engraved on my tombstone.
And it is the wrong question.
That’s because there simply is no "rate" issued each day by the powers that be. There is a schedule, or “stack” of rates – each with a corresponding price.
Here’s a grossly (laughably) oversimplified version of what lenders see every day when rates are released:...
Ameri Save, closing cost for my quote was $3,181.32
Friday, October 22, 2010 financiallyfit.yahoo.com
"Strategy: Go on a spending fast for a year
Advice: Get creative. There are endless ways to save.
I had been spending over my means for a while. Every month I was spending at least $300, overdrafting my account and feeling horrible about it....
I decided to start a spending fast for the new year, which meant no spending on anything except absolute necessities -- like my mortgage, utilities, car payments -- oh, and hair dyeing. That was one "want" that I turned into a necessity as I started to see my roots grow in.
I can't buy clothes, no coffee out, no eating out. To save money, I've done the normal budgeting things like buying generic brands of groceries. But I've also started wearing all black and dyeing my clothes to extend the color. I've been re-gifting, growing my hair long to avoid haircuts, stuffing two loads of laundry into one and eating a lot of old canned food I've found in my cupboard. I also make random stuff to sell in my spare time. I have a store at Etsy.com where I sell zombie portraits of people, super cute baby onesies and banners, tags and shipping labels....
Strategy: Live without the little things
Advice: Don't go too far -- like trying cloth diapers to save $60
My year-long spending fast began on January 1, and so far, I have saved $5,772.25. $4,800 of that went to credit cards and the rest will go to paying my parents back the $3,247.97 I owe them and my $10,000 in student loans....
In three years we had six months of living expenses and threw that into a high interest CD at 5%. That really got us going, seeing the money grow -- and we became obsessed with eliminating debt....
We just really took a look at what we need and only spending money on those things. I used to eat out a lot and that cost me $200 a month. Now we invite friends to "eat-in" at our house. We have a garden and purchase produce from co-op programs. Before we became debt-obsessed we would also get nice Christmas gifts for each other, but now we limit each other to $50...
Strategy: Track your expenses
Advice: Don't limit yourself too much, or you will give up.
..I readjusted my allowance until it worked with my lifestyle. I started to bring my lunch to work four days a week, I shopped for groceries for one week and would then eat only leftovers during the weekend. I learned how to cook and found foods -- like broccoli -- that I can use in multiple meals so I don't have to waste anything.
To make sure my money goes where I need it to go, I set up two checking accounts and two savings accounts...
Advice: Save, save, save before you quit your day job...
Craigslist and eBay became our best friends, and we sold everything from a kayak to a weight bench and a computer monitor.
My husband did some website design jobs on the side to make some extra money, and we printed out a budget each month so we knew exactly how much we could spend and what we would be spending it on.
We saved on gas costs by limiting the amount of driving we did, and we put ourselves on a grocery budget of $300 a month. On top of that, we cut out cable, lowered our phone bill as much as humanly possible and switched our car insurance twice in one year to find lower rates...
Why Get Federal Loans, Financial Aid, Private Student Loans?
"Determine the best way to finance your college education, you should consider the full range of student financial aid options available. Free money for college is available from a variety of sources and can come in the form of scholarships and grants.
" What exactly is deferment and forbearance?
A deferment is a period of time during repayment in which the borrower, upon meeting certain conditions, is not required to make regular monthly payments. Deferment types include: in school, unemployment, economic hardship, graduate fellowship and rehabilitation training.
A forbearance is a period of time during repayment in which the borrower is permitted to temporarily postpone making regular monthly payments. For example, a forbearance may be granted if the borrower does not qualify for a deferment or is experiencing financial difficulty. "