Senior Surprise: Student loans dragging down retirement

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credit.com

via Senior Surprise: student loans dragging down retirement

Most people like to think of their senior years as when they’ll finally be able to take a break after decades of hard work, maybe do some of the things they’d always dreamed about, unfettered by the daily demands of the workplace. Many seniors have worked hard and sacrificed to build a nest egg so they can achieve these dreams.

But increasingly, older Americans are finding themselves worrying about something they might not have factored into the carefully laid plans they made decades ago: student loans. In a report released recently by the Consumer Financial Protection Bureau, the agency announced some startling numbers regarding the number of seniors (defined as those 60 or older) who are trying to pay off student loans. In the decade from 2005 to 2015, the number of seniors carrying student loans more than quadrupled (from 700,000 to 2.8 million), with a combined debt load of $60 billion. On average, this works out to about $23,500 per senior carrying student loan debt. And it’s having a profound impact on their ability to handle their finances.

What’s going on here? The most obvious answer would be that it’s the result of people going back to college in middle age, or paying off their own old college loans. While both of those things are true, most of that debt is actually from parents shouldering the debt for their children and grandchildren. In some cases, those kids and grandkids have defaulted, placing the burden on the shoulders of the previous generation (who had co-signed). In other cases, parents or grandparents have offered or agreed to take on the responsibility of paying for their descendants’ college educations.

Most seniors live on fixed incomes and finance their lifestyles through a combination of Social Security, pension plans, annuities, cash they stashed away for the future and, in some cases, employment. But the added pressure of student loans is, in some cases, making seniors work longer, stress about handling the debt and facing an uncertain financial future.

“It is alarming that older Americans are the fastest-growing segment of student loan borrowers,” said Richard Cordray, director of the Consumer Financial Protection Bureau. “Many of these older Americans are helping to finance their children’s or grandchildren’s education while living on a fixed income. We are concerned that student loans are contributing to financial insecurity for many older Americans and that student loan servicing problems can add to their distress.”

 Let’s face it: Most of us would do just about anything for our kids. We want to see them succeed, and many parents wouldn’t hesitate to co-sign or authorize a loan if it were the only option for getting a child or grandchild through college. But seniors with limited means may find this added burden comes at a time when their income has decreased, and when they may face challenging issues related to their declining health. What’s making the situation worse for some is they may also be carrying debt of their own, forcing them in some cases to curtail necessary expenses, such as medications.
In its report, the the bureau focused on the increasing problems caused by companies responsible for servicing those debts. The agency charged that some companies aren’t doing a good job of informing borrowers of their obligations, making critical mistakes in handling the accounts, and in some cases, even engaging in illegal practices.
It’s a big problem, and one that’s growing. Investopedia’s Mark Cussen reported this week that the student-loan default rates are more than 50 percent for borrowers age 75 and above. And, like many, he warns it’s imperiling a generation’s financial stability. “Student loan debt is turning into a runaway financial train in America,” Cussen noted. “… it is also seriously damaging the ability of many taxpayers to save for retirement.”
If you’re holding a student loan but are unable to make the payments, Investopedia’s Ashley Eneriz has some good advice at  http://bit.ly/2jvIRk9.

Debt collection complaints top list

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USA Today

via Some debt collection is downright nasty, clarionledger.com

I’ve often wondered if telemarketers have some kind of device that lets them know when it’s the most inopportune time to call. Most of us have experienced the interruption caused by having the phone ring during dinner, in the most critical scene of your favorite movie or during family activities.

Of course, while most American households use their caller ID to screen calls from unfamiliar numbers or have their numbers placed on Do-Not-Call lists, some calls still get through. Many of those are from companies looking to collect on debts.

Of course, few would argue debt collection — at least as a general principle — is unnecessary. An astounding number of people are behind on their debts (Creditcards.com reported in 2015 that Mississippians topped that list). According to the Urban Institute, about 77 million Americans have at least one collection event in their files (about 35 percent of the population).

People have lots of reasons for being in debt and for being delinquent. Some are just overextended, while others are behind because of unfortunate circumstances or life-changing events. Some just don’t care, or lack the resources to manage it. But companies loaning money have a right to expect payment according to the terms of the lending agreement, and consumers have to uphold their side of the contract.

Companies vary in when they report the debt as delinquent, but it usually starts when you’re 30 days past the due date. If they’re unsuccessful in collecting the debt, many companies sell it to private debt collection companies.

But in the past few years, a lot of consumers have gotten fed up with illegal, inaccurate, unethical and downright nasty debt collection activities. Unscrupulous debt collectors have been reported as harassing and threatening consumers — even when the person doesn’t actually owe the debt; using illegal tactics such as calling after allowed hours or calling people at their workplaces; even threatening people with lawsuits or ruined reputations.

 Last week, the Consumer Financial Protection Bureau released its monthly report breaking down the complaints it receives each month. The agency noted that, of the more than 1 million complaints it had received since it began accepting them five years ago, the largest chunk of those complaints (about 27 percent) is about debt collection practices. Three debt-collection companies — Portfolio Recovery Associates Inc., Encore Capital Group and ERC — were singled out as generating the most complaints.
Specifically, these practices raised consumers’ ire the most:
  • Calls about debts not owed. Nearly four in 10 consumers filing debt-collection complaints reported being contacted repeatedly about debts they either had paid off — or never owed in the first place. “Many consumers complained they were never provided documentation to verify the debt, even after submitting requests for verification,” the bureau noted in its report.
  • Accounts forwarded to third-party collectors without notice. Many companies routinely work with private debt-collection companies to recover the debts, but the original creditor should contact the debtor before doing so. In some cases, consumers reported their accounts were not even delinquent before they were contacted by the third-party debt collectors.
  • Harassment. Many complainants reported getting repeated calls from collectors, including getting calls at work when they previously told the collector it was prohibited by the employer.

“Today’s report shows that consumers continue to report being harassed about debts they already repaid or debts they do not owe,” said Richard Cordray, director of Consumer Financial Protection Bureau. “The Bureau will continue to work to ensure that consumers are not being wrongly pursued by debt collectors.”

If you find yourself on the unpleasant end of a debt collection call, here are a few things to remember:

  • Think. Collectors know that many people are ashamed of their delinquent debt and will use that to their advantage. While you should be expected to pay all your debts, no one should pressure you into paying. Calmly ask for information on exactly what you owe, when you incurred the debt and to whom, then say you will call back later to discuss it. Many experts suggest you ask the caller for a debt validation letter, which should contain details about the debt. In any case, if you feel pressured, don’t give in at that moment; by paying even a small amount, you are validating its legitimacy and it may even “restart” debts that had reached their statutes of limitations.
  • Make sure it’s yours. Since debt can linger for many years after going delinquent, it’s possible you may not even remember it. Of course, that doesn’t mean you don’t owe it, but you should be sure that it’s yours before you pay. Debt collection isn’t an exact science, and errors can occur. Often, uncollected debts are sold multiple times, increasing the possibility of errors. Consumers frequently complain about getting calls about people with similar names or addresses as theirs.
  • Know your rights. The Fair Debt Collection Practices Act is a federal law that prohibits debt collectors from using abusive, unfair, or deceptive practices. It’s a good idea to know those rights. Visit http://bit.ly/1njIbLP for more information.
  • Face the music. If you legitimately owe money to a company, you’re obligated to pay unless you discharge the debt through bankruptcy or through some program. Ignoring debt will not make it go away; it can make your life difficult for years to come and affect your ability to buy things you need, get a job or stay healthy. According to Webmd.com, paying off a debt can boost your self-esteem, leading to a wide range of benefits in your life and relationships. So, once you’ve had a chance to gather your thoughts and information, contact the collection agency to work out a payment plan that works for you, and stick with it.

Black Friday can leave behind a lot of red ink

via Black Friday can leave behind a lot of red ink

Although it may not have felt much like November, the holiday shopping season is here. While really wise shoppers may have already finished checking off their Christmas lists (feel free to gloat; it’s really awesome), the rest of us are going to dive headlong into the fray soon enough. It doesn’t help that the whole thing has blurred into one long spending spree, in which what was once just “Black Friday” has overflowed into Thanksgiving Day itself, spurring legions of turkey-sated celebrants to pile into their SUVs to seek early deals at the mall.

But while retailers may beckon bargain-hunters with their hypnotic promises of 40 percent off and two-for-one deals, wise shoppers know you can easily get too greedy with the deals, only to have to pay the piper when January’s credit-card statement rolls around. So, to help stop the madness before it begins, the American Bankers Association Foundation this week cautioned Americans to formulate a plan before diving in.

“It’s incredibly easy to go overboard buying gifts for loved ones during the holidays, but spending within your means will help keep your holidays merry and your finances bright,” said Corey Carlisle, executive director of the foundation. “There are simple things you can do to avoid a holiday spending hangover, like setting a budget in advance and avoiding impulse buys.”

Doing so may even help relieve some of the stress many of us feel during the holidays. Here are some tips from the foundation (list may be found here):

  • First, plan ahead. Before you start shopping, develop a realistic budget for holiday expenses. Figure out your bottom-line number and set aside holiday cash in increments throughout the year. If you need to use your credit card, think about what you can afford to pay back in January.
  • Keep track of other costs. Don’t forget costs beyond gifts, like postage, gift wrap, decorations, greeting cards, food, travel and charitable contributions. Keep in mind the end of the year is a time when large annual or semi-annual costs like car insurance, life insurance and property taxes arise.
  • Make a list and check it twice. Keep your gift list limited to family and close friends, noting how much you want to spend on each. If you’re donating to charities, factor in the total amount you plan to donate and how much each charity will receive.
  • Shop early and space out purchases. Avoid shopping while rushed or under pressure, which can lead to overspending.  Make sure to comparison shop online first, or download an app that lets you compare prices before you buy anything in a store. Before you head to the cashier (or online checkout), make sure your purchase is within the budget you set.
  • Avoid impulsive spending decisions. Finding a spectacular sale on something you’ve been wanting can easily throw you off course. Stay strong and stick to your budget. Don’t be blinded by limited-time incentives geared toward getting you to spend more.
  • Use credit wisely. Limit the use of credit for holiday spending. If you must use credit, use only one card — preferably the one with the lowest interest rate — and leave the rest at home. Pick a date when you can pay off your holiday credit card bills and commit to paying off the balance by that time. Be sure to check statements for unauthorized charges and report them immediately.
  • Save your receipts. Not only will you need them for possible returns, you’ll need them to keep track of what you’ve spent and to compare with your credit card statement. Knowing how much you spent will help you plan for next year, too.  Keeping receipts for charitable donations will help you receive tax deductions in the spring.

To this list, I’d only add one suggestion: Don’t be a target for thieves. Police departments around the country will be on the lookout for crooks looking to make off with your freshly acquired purchases, but they’ll have a lot of activity to monitor. Thieves have been known to follow shoppers, waiting for them to set down their bags for easy snatching, or even following shoppers to the parking lot. There are lots of people in crowded stores, so opportunities for purse snatching and pickpocketing will abound. Be aware of your surroundings, and don’t shop alone if you can help it.

Curbing credit scores would give consumers power

Credit Report written in search bar on virtual screenvia Moak: Curbing credit scores would give consumers power, clarionledger.com

PDF: The_Clarion-Ledger_State_20160528_A002_0

Credit bureaus have long memories. As any consumer who’s tried to get a home loan with a less-than-stellar credit record knows, mistakes you made in the past can hang around like a ghost that never seems to go away. If you missed a credit card payment, racked up too much in debt compared to your income, or had garnishments, divorce, bankruptcies, liens or just made some questionable financial decisions, they can affect you for a decade or more. The credit score, used just about everywhere, takes all this into account and reduces you to a simple number.

For those deciding whether to grant someone credit, that number indicates just how good (or bad) a customer you’re likely to be, and they make decisions — unfairly or not — based on this simple, computer-generated number. And making it worse is the fact the credit rating is now used in a variety of situations far-removed from lending. Your credit score can keep you from getting a job, an apartment or good rates on insurance.

And, even though credit-scoring models take into account the passage of time, many consumer advocates say they are looking back too far. Credit bureaus have come under fire in the last couple of years for failing to correct erroneous information, making it difficult for people to remove negative information and even trying to upsell them with costly new products and services when they’re trying to dispute those errors.

MOAK: Survey ranks Miss. credit scores

The problem is that things change; the person you are today is usually very different than the person who let his or her payments lapse way back before you knew better.

Recently, U.S. Rep. Maxine Waters, D-Calif., (a ranking member of the U.S. House Committee on Financial Services), announced she’s about to introduce a bill that would attempt to tame some of the power wielded by credit bureaus. Among them would be a reduction in the amount of time negative information can hurt you.

“I recognize that credit information is necessary for lending decisions,” Waters said in a press call announcing the bill last week. “But the growing reliance on credit information for noncredit decisions means that credit reporting and credit scoring have a significant impact on many aspects of consumers’ lives.”

Waters’ bill would, if enacted, constitute the biggest overhaul to the credit-reporting system since the Fair Credit Reporting Act was enacted 46 years ago. Among her proposals:

Taking three years off the clock. Waters’ bill would shorten by three years the amount of time consumers could be affected by negative information. For example, an item that would normally stay on your report for seven years would now roll off in four.

Medical debt grace period. A 180-day grace period would allow you to clear up your medical-bill delinquencies before they could appear on the report.

Predatory lender provisions. If you were victimized by a predatory mortgage lender, negative information about you resulting from that loan would have to be removed.

Cutting back credit report use in hiring. It would be illegal for employers to use credit history in hiring decisions except under a narrow set of exemptions, such as obtaining national security clearances.

Student loan protection. Those who used private student loans to finance their educations could have delinquent or default information removed after making nine monthly payments in a row. (This protection is already in place for federal student loan borrowers.)

More notice. Companies that send negative information about you to a credit bureau would have to alert you within five business days.

Many consumer advocates have expressed their doubts about whether such sweeping reforms can make it through Congress and into law; however, the proposal (and others like it) could help get the ball rolling on fixing a system that most agree is overdue for an overhaul.

Mississippians say debt collection is top gripe

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consumerreports.org

via Moak: Mississippians put debt collection as top gripe, clarionledger.com, 3/8/2016

PDF: Collection leads complaint lists

In 2015, many Americans got fed up with being harassed by debt collectors, having their identities stolen by identity thieves and being impersonated by crooks. Those three topics formed the bulk of complaints made last year to a host of federal, state and local law enforcement and regulatory agencies and private groups.

Each year around this time, the Federal Trade Commission issues its annual Data Book using data collected by Consumer Sentinel, which serves as a clearinghouse and database of complaint activity nationwide. The 2015 report listed a record 3.08 million complaints, of which nearly a third were filed about various debt collection issues. It’s worth noting that a large number of identity theft cases concerned the fraudulent filing of tax returns, in which many consumers found their taxes had already been filed (and refunds collected) by the time they went to file their tax paperwork.

Here in the Magnolia State, our consumers filed more than 18,400 complaints during 2015, with about a quarter of those dealing with debt collection practices. Second place was imposter scams, followed by prize/sweepstakes/lottery scams, telephone and mobile services issues and banks and lenders. Rounding out the top 10 Mississippi complaint categories were complaints about phone and mobile services; banks and lenders; shop-at-home and catalog sales; auto-related issues; TV and electronic media; credit bureaus, information furnishers and report users; and investment-related issues. (These numbers don’t count complaints collected by the Mississippi attorney general’s office, which handles a large number of consumer complaints filed each year by Mississippians.)

While debt collection complaints rose to the top spot among complaint categories, the report notes that this was attributable in large part to a surge in complaints “contributed by a data contributor who collects complaints via a mobile app,” but didn’t immediately disclose which one. This change caused a spike in complaints related to debt collection via mobile phones, and marked the first time debt collection overtook identity theft as the top complaint generator in 15 years.

“We recognize that identity theft and unlawful debt collection practices continue to cause significant harm to many consumers,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “Steps like the recent upgrade to IdentityTheft.gov and our leadership of a nationwide initiative to combat unlawful debt collection practices are critical to our ongoing work to protect consumers from these harms.”

Debt collection looms large on the radar of the FTC and other regulatory agencies, and the agency noted “ramped-up” enforcement of illegal debt collection practices during 2015. A massive sweep called Operation Collection Protection resulted in more than 130 actions being brought against companies engaging in illegal collection practices.

Consumer Sentinel pulls complaint data together to use as a resource for law enforcement, using a host of partners from government regulatory agencies, law enforcement agencies and private organizations. Agencies use the data to “research cases, identify victims and track possible targets.” The data book lists a lot of statistics of the complaints reported, but more specific information is only made available to law enforcement.

To access the data book, visit http://1.usa.gov/1TOY61g.

Survey ranks Miss. credit scores

 

Credit report with score

blog.mint.com

via Moak:Survey ranks Miss. credit scores, clarionledger.com, 1/12/2016

In 1978, Bob Seger’s everyman anthem “Feel Like a Number” complained about how our lives are reduced to numbers. “To workers, I’m just another drone; to Ma Bell I’m just another phone; I’m just another statistic on a sheet,” he sang.

Thirty-eight years later, that claim has only become more accurate. Today’s consumers (at least in the eyes of potential lenders) are reduced to a three-digit number called a credit score.

Your score gives lenders a picture of how big of a credit risk you might be. This little number has a lot of power, and can either help or hurt you borrow money, buy a house, or even rent an apartment or get affordable insurance.

Most businesses that use credit scores use the FICO (Fair Isaac & Company) score, which looks at many different data points and assigns the consumer a number ranging from 300 to 850. The idea is the higher the number, the less likely you are to be a credit risk. Someone with a score of 300 is unlikely to get any credit from reputable lenders; someone with 850 can pretty much get whatever they want.

The personal finance site Wallethub.com keeps an eye on the American credit landscape. Recently, they released an interesting survey in which they analyzed data from TransUnion (one of the “Big 3” credit bureaus) for 2,570 cities across the U.S. In general, higher scores track with high personal income, although they’re heavily influenced by the amount of debt measured against household income and other factors. Ultimately, financial experts believe that the higher the score, the better your and my financial habits.

According to Wallethub, the best credit scores in the nation were in The Villages, a planned retirement community in Central Florida, with an average credit score of 779.51 on the 300-850 scale.  The worst was Camden, New Jersey, with an average score of 565.62.

Included were 32 Mississippi cities. The only Magnolia State city included in the top 500 was Madison, which ranked at No. 447 nationally, with an average FICO score of 705.65. A distant second was Brandon (1,069th), with an average score of 680.33. Rounding out the top 10 Mississippi cities were Hernando (1,182nd); Oxford (1,495th); Olive Branch (1,515th); Ocean Springs (1,574th); Clinton (1,652nd); Starkville (1,814th); Ridgeland (1,897th); and Corinth (2,014th).

At the bottom of the list were Horn Lake (2,493rd); McComb (2,494th); Greenwood (2,527th); Greenville (2,534th); and Jackson, which ranked just 31 slots from the bottom.

“With this report we wanted to find out consumers’ financial habits and how well they manage their debts based on their credit score,” noted Wallethub Analyst Jill Gonzalez. “The cities with excellent average credit scores are places where people are taking their finances seriously and successfully managing their debts. Cities with low credit scores are still struggling from an economic point of view, thus the residents have a hard time keeping up with their debt and making payments on time.”

Wallethub pointed out that the term “city” was applied to only to the boundaries of the actual city, not metro areas or surrounding rural areas. Not all Mississippi cities appeared on the list, and some smaller-population cities (such as Lucedale) appeared, while larger cities (such as Clarksdale and Cleveland) did not. Wallethub’s rep Diana Popa told me, “Some cities were not included due to data limitations.”

It’s not surprising the higher scores are generally in communities with higher personal income; however, many financial experts allege the credit scoring system is flawed because it represents a “snapshot” in time (which might reflect temporary conditions), and is prone to errors made during data entry. In some cases, the credit bureaus responsible for the data have been challenged in court, such as when Mississippi Attorney General Jim Hood sued “Big-3” credit bureau Experian in 2014 because of alleged mistakes and inclusion of erroneous information in credit reports, and failing to adequately investigate and address challenges by consumers of erroneous information.

And, of course, these are just averages, and from one source. If you happen to live in a city with a low average score, you could have top-drawer credit; and if you happen to live in a city higher on the list, your score could be scraping the bottom of the credit-score barrel. After all, credit scores cannot reveal the “true” you, and are certainly not an indicator of the worth of a person — or even whether it would be a good choice to lend you money. They are just one of several indicators to be considered in making a decision.

To see how your city fared, visit https://wallethub.com/free-credit-score/#methodology.

Retail credit card may cost more

via Moak: Retail credit card may cost more, clarionledger.com, 9/19/2015

If there’s a store brand on credit cards in your wallet or purse, using them could be costly. According to the website Creditcards.com, store-branded credit cards can often bear extravagant interest rates if you carry a balance. While merchants may encourage consumers to open and use store credit card accounts – in some case, with inducements such as store discounts – consumers should be aware that they can be costly.

According to a survey commissioned by Creditcards.com, the average store-branded card carries a 23.43 percent interest rate (APR), significantly higher than the national average for all credit cards of 15.00 percent. The survey — which covered 100 retailers by sales volume — found the highest APRs are carried on cards issued by jewelry chain Zales (28.99 percent) and office supply chain Staples (27.99 percent). In addition, the survey noted that fully two-thirds of retail-branded cards charge APRs of 19.99 percent or higher.

It’s not all bad news, however; better deals can be had if you have good credit. For example, Dillard’s American Express card could charge as low as 9.99 percent APR, but could be as high as 24.99 percent if your credit’s not so good. Williams-Sonoma’s Visa Signature card ranges from 13.74 to 21.74 percent. For military families, the Army/Air Force Exchange’s Military Star card program carries a 10.24 percent APR.

There are three types of store cards (not including prepaid cards):

  • Co-Branded: Many store cards carry both the store logo and that of a card network, such as Visa, MasterCard, Discover or American Express. These cards can be used at any merchant that accepts the card.
  • Private Label: Some merchants are using “private-label” cards, working with a private company to process the cards. These cards can only be used at the merchant whose logo appears on the card.
  • Debit: Finally, some merchants are using actual debit cards, which are tied directly to your checking account. They work just like a normal debit card, but allow you to access benefits and perks offered by the retailer.

The problem for consumers (and the source of profit for credit card companies): most credit card users carry a balance from month to month. “If you regularly carry a balance, retail credit cards just aren’t for you,” said Matt Schulz, CreditCards.com’s senior industry analyst. “Even with potential rewards and discounts, the math just doesn’t work in your favor when interest rates are that high, so your best move is to shop around for lower-cost options.”

While terms like “APR” and “compounding” still mystify many consumers, they make a real bottom-line impact on the average consumer who racks up more credit card debt than they can pay off in a month. Here’s a simple illustration: If you had a credit card with an APR of 23.43 percent, used it to buy $1,000 worth of merchandise and made only the minimum payments on time, it would take you six years to pay it off. You would also pay $838 in interest payments, making that $1,000 worth of merchandise cost you $1,838. But if you did the same thing (this time with a 15-percent-APR card), you would be out of debt 18 months sooner and pay $468 less.

Businesses with credit card programs use aggressive marketing tactics to get consumers to use those cards. For example, some consumers get regular coupons or gift cards in the mail, but they have to be used with the credit card. Often, such inducements can end up costing you, because you might be enticed to buy merchandise you otherwise wouldn’t have. But if you do make that purchase, paying it off in one month will help you avoid the extra costs of credit.

And most experts advise consumers to shop around. “Store cards can be a decent choice for people who are rebuilding their credit or just getting started with credit,” notes Creditcard.com. “People with good credit who are searching for a new card might be better served by a general-purpose rewards card, such as the Citi Double Cash card or the Capital One Venture Rewards card.”

You should also consider applying for a general credit card; besides APRs that are generally lower, they are used pretty much everywhere.

One more thing: adding to your minimum payment is always a good idea, and even a little extra can have a dramatic effect. In the example I gave earlier, if you added just $10.00 a month to your minimum payment, you would save 29 months and $361.

But whatever your situation, don’t let yourself be pressured into a quick decision. “When offered the card, ask for a brochure instead, then go home and read the details,” Creditcards.com advises. “If it still sounds like a good deal after reading the fine print, apply the next time you’re in that store. Chances are that all of those perks you liked will still be there, and most important, you’ll make a more informed decision.”
To read the survey results in their entirety, visit http://bit.ly/1LQd8CA.

Millennials delay milestones due to student loans

via Moak: Millennials delay milestones due to student loans.

If you’re a parent trying to help your college student navigate the choppy waters of financing college, it can be daunting. The Federal Financial Aid form, known as FAFSA, is itself tricky and often infuriating because of the maze of online security you must navigate. And if you happen to be selected for random “verification” of your FAFSA data (as we were this year), that can add even more gray hairs to your head.

Unless your student is among the lofty few who cries when she gets anything lower than an “A” or if you’re either independently wealthy or below the poverty line, you might not be stressing out over it. Scholarships, savings and grants will usually fill the bill in those cases.

Some of us were smart enough to start putting money aside when they got their little bundles of joy home from the hospital. But for most middle-class families, paying for college usually requires an eclectic mix of scholarships, mason-jar funds, largesse from family and friends — and loans. Today’s average college graduate will have barely had time to unpack boxes in their new apartment (or their parents’ house) before they get their first bill from their student loans.

Increasingly, that debt is putting a substantial crimp in their plans. While they may be young and idealistic, they may have to put off saving the world for a while because they have to pay back those loans.

A new study released by Bankrate.com shines some light on this disturbing trend. More than half of millennials with current debt from student loans are reporting they have “delayed major life events” because of that debt. Those milestones include rites of passage such as buying their first home or car, starting a retirement nest egg or even getting married and having children. The trend is not just present among millennials; older Americans are also likely to be carrying student debt well into middle age, where it can potentially crash into retirement.

Economists and policy makers should worry about this, because the longer new graduates wait to enter the economy, the longer it takes them to start contributing, investing in the economy on a larger scale and paying taxes.

“Student debt is often portrayed strictly as a millennial issue, but the truth is that Americans of all ages have put their lives on hold due to student debt,” said Steve Pounds, Bankrate.com analyst. “Delaying major life milestones such as buying a home or saving for retirement doesn’t only affect the individual and his or her family; it also has ill effects on the overall economy.”

A key finding about the study is that many people with student debt never really received good information about the risks and responsibilities of student loans in the first place. As with any credit, responsible borrowing also carries with it the necessity of understanding just what you’re getting into. Deferral, (which allows students to defer making any payments until after graduation) can provide a false sense of security, and is really just kicking the can down the road. But eventually, the bills will come.

More than half of student loan borrowers in the Bankrate.com survey say they didn’t receive enough information or advice about the financial risks of taking on education loans. Sixty-six percent of millennials, more than any other age group, have this complaint.

A lot of people are in this boat, and it is getting a lot of attention. Famously, one man named Lee Siegel decided earlier this year he’d had enough after being hounded by bill collectors trying to collect on 40-year-old student loans. He announced in a New York Times op-ed that he was not going to pay any more, and urged others to do the same.

His stance garnered him near-universal (and justified, in my view) outrage from nearly all quarters, but does point to an increasing frustration with a system that encourages people to finance skyrocketing education costs with loans against their future earning potential. And the aforementioned study details some of the implications of encouraging young people to begin their careers in a financial hole.

The fact is, though, there are alternatives to financing your college education with unmanageable debt:

Make sure you exhaust all alternatives. Many sources of funding, such as grants and scholarships, don’t have to be paid back. You don’t necessarily have to be in the top tier of your class to qualify, and some programs are specifically to help students from a particular geographic area, course of study or other criterion.

A four-year college may not be necessary. Mississippi has one of the best community college systems in the country, many of which offer programs to qualify you for all types of careers — many of them lucrative. And community colleges can be more affordable than four-year institutions, and have exclusive financial aid offerings as well. Consider military programs as well — many of them will finance college for you in exchange for a specified commitment after graduation.

Shop wisely. If you are getting a loan, shop around. Some private lenders have programs that offer excellent interest rates and options.

Mississippians have an excellent program that helps link Mississippi families and students with information and advice about going to college. Get2college.org can be reached at (601) 321-5533, in central Mississippi; (228) 875-4441 in south Mississippi; and (662) 349-2789 in north Mississippi. It’s a must-visit for any family who is trying to navigate the college-financing maze, and is well worth your time.

Share your student-loan stress stories with feds

Student loans have helped millions of college students pay for their college educations. Opinions vary about whether student loans are always a good idea, but there’s little doubt they’ve helped many people afford the skyrocketing costs of attending college. To students incurring student loan debt, the issue seems far away; after all, you don’t have to start repaying most student loans until after you leave college.

But recently, a chorus of voices from around the nation has raised alarm bells about the growing amount of student debt, calling attention to the fact student loans are saddling new graduates with often-unsustainable levels of debt just as they are entering the workforce. And others have expressed concerns that student debt can linger for decades after students have turned in their caps and gowns, sometimes putting a dent in their (and their parents’) retirement plans and grocery money.

According to the Consumer Financial Protection Bureau, more than 40 million Americans are repaying more than $1.2 trillion in student debt. And here in Mississippi (according to the Project on Student Debt), students in four-year colleges graduate with an average of more than $25,000 in debt.

Perhaps surprisingly, a lot of that debt is being repaid not by people in their 20s, but by older people, often in their 60s or 70s. They might be still paying lingering loans from college they attended decades ago, are parents or grandparents who cosigned or took out loans on behalf of their children or grandchildren, or incurred student debt as a result of their own midcareer retooling.

Much of the attention and concern lately has centered on student loan servicers. Student loans may be backed by the government, but private companies are responsible for making sure you pay back the loan.

These are private companies, assigned by the U.S. Department of Education in the case of federal student loans.

The Consumer Financial Protection Bureau has recently gotten involved in the discussion about student loan servicing, citing these alarming statistics from the General Accounting Office:

Between 2005 and 2013, outstanding federal student loan debt owed by older borrowers grew from less than $3 billion to more than $18 billion, a more than a six-fold increase.

Delinquency rates for older borrowers doubled between 2005 and 2012, rising from 6 to 12.5 percent.

Older borrowers defaulted on federal loans at much higher rates than other borrowers. More than a quarter of federal loans owed by consumers ages 65-74 are in default. For borrowers 75 years or older, more than half of outstanding federal loans are in default.

And it’s affecting their day-to-day lives, as well. The number of older consumers whose Social Security benefits were offset for the collection of federal student loan debt quadrupled from 2002 through 2013. For consumers 65 or older, the increase was roughly 500 percent.

So now, the Consumer Financial Protection Bureau is trying to collect information from consumers who have been affected by “student- loan stress.” The agency reports that many complaints from older consumers include being billed for loans they never borrowed, receiving harassing and abusive debt collection calls, being wrongly charged fees because of the servicer’s accounting errors, and having their credit rating impacted.

If you want your story to be part of the discussion, visit http:// tinyurl.com/okp69rf and tell it, or send an email to FederalRegisterComments@ cfpb.gov. You might want to talk about options to discharge or reduce student loan debt if a co-signer dies, how your loan payments are processed and applied, charging and disclosure of late fees, the process of filing complaints, disclosure to credit reporting agencies and more. If you want your information included for the record, don’t enter any sensitive information like account numbers and Social Security numbers. The agency will be collecting input until July 13. To join the discussion on Social Media, use #StudentDebtStress.

And if you’re having trouble with your student loan servicer, you can submit a complaint to consumerfinance.gov/ complaint or call1-855411-2372. There are many options to help you get back on track with paying your student loans, but the worst thing you can do is try to ignore the problem.

Visit http://tinyurl.com/ kbqgndd to find out your options.

Originally published in the Clarion-Ledger on 6/12/2015.

Student loans may leave students, parents struggling to pay

via Student loans may leave students, parents struggling to pay, clarionledger.com, 2/18/2015.

Paying for college is tough. The high cost of tuition, coupled with rising costs of everything from on-campus parking to residency rates, can put a serious dent in parents’ financial portfolios and can hobble a recent graduate with crushing debt. You will probably find it much easier to handle if you were wise enough to start aggressively saving for college when your child was still in the cradle, if you are independently wealthy, if your kid is a genius or if you had a really generous family.

Unfortunately, however, most of us aren’t in that boat. The dream of college for many Americans is financed through a combination of scholarships, grants, loans and grocery money. Students from middle-class families may be carrying a hard-earned sheepskin after slogging through their coursework, but often find that they are carrying something else along with their diploma: a bill to pay back their student loans.

Even students who find themselves with a well-paying job may find it difficult to pay back the student loan debt which hits like an oncoming train after graduation. And many aren’t able to pay it at all. A couple of weeks ago,Forbes wrote about the increasing rate of student loan defaults. The article noted that the U.S. Department of Education’s budget documents project that more than a quarter of undergraduate Stafford Loan recipients will default at some point during the loan. This comes after overall student loan default rates actually went down last year, but like a storm gathering on the horizon, the numbers spell trouble.

So I consulted some experts to get some advice. “Despite what you may have heard, student loans are not all bad; after all, student loans are an investment in your own future!” notes Jennifer Rogers, Director of Student Financial Aid at the Mississippi Institutions of Higher Learning (IHL). “But knowing how much or how little to borrow can be tricky and the right amount of loans will vary by person.”

Rogers recommended The Project on Student Debt website, an initiative of the Institute for College Access and Success. This organization gathers information on student loans. According to their figures, nearly 70 percent of college seniors nationwide who graduated in 2013 had student loan debt, with an average of $28,400 per borrower. Mississippi’s rate was lower, with about 57 percent of Mississippi students graduating from 4-year institutions carrying some debt after graduation.

Nationally, Mississippi ranked 34th in the nation of 48 states ranked for the highest rate of debt (with 1 being the highest rate of debt and 48 being lowest). That’s not bad, except when you consider the actual average Mississippi graduate’s debt of $27,571 per borrower, making us 19th in the list. (To get a ranking of debt among Mississippi 4-year institutions, http://www.Collegeinsight.org has a sortable list of Mississippi institutions, but debt information is only included for nine institutions of 23 listed.)

According to the U.S. Department of Education, on average about 16.3 percent of Mississippi students default on their loans, with higher rates (23.3 percent) among those graduating from two-year public institutions. The rates for four-year public institutions is 12.3 percent, with 11.4 percent of private-institution graduates and 13.3 percent for proprietary schools.

Rogers gave some tips to consider when considering loan options:

  • All loans are not created equal. Look at interest rates and repayment options.
  • Students get into trouble with loans when they borrow more than they need. When a loan is offered, you don’t have to accept the entire amount. If you only need an extra $3,000 to cover the dorm, don’t take out a $5,000 loan just because that is what is offered. Borrow enough that you can focus on doing well in your classes and finishing on time rather than on working three jobs to cover your costs.
  • Stay the course and finish your degree. If you take out a loan for a degree you never finish, remember that you still have to repay the loan. That could help motivate you to go ahead and get your money’s worth.

And if you do find yourself unable to make your loan payments, the best advice is to not ignore the problem; it won’t go away. “Students who are in trouble absolutely have to talk with their lender first,” says Michael Gaer, creator of Collegefinancing.com and president of New Jersey-based Gaer Financial Group (quoted from Bankrate.com). “They can’t just walk away from it because it’s going to affect their credit score. It’s going to affect their entire lives.”

Rogers has similar advice. “Students should contact their loan servicer at the first sign of trouble,” she says. “Federal loan servicers have a number of tools available to help students repay their loans successfully. Students should contact their loan servicer immediately and consolidate their loans when possible. In many cases, students are also eligible for income-based repayment plans.”

Here are a few more tips, from http://www.Bankrate.com:

  • Being honest opens up a variety of options. As Rogers noted earlier, federally-backed loans come with some options that may not be available to borrowers with non-student-loan debt. For example, deferment orforbearance may be available for you, allowing you to delay payments or temporarily reduce them. In addition, lenders of federal student loans are required to allow you to change your payment plans once a year.
  • Ask about payment plans. Since most student loans carry a standard 10-year repayment plan, you have the option to change that. In some cases, you may be allowed to stretch payments up to 25 years (but that’s a really long time to be paying college debts.) Currently, the federal government offers five types of repayment plans, the most recent of which is the income-based repayment plan, which caps payments at 15 percent of your monthly “discretionary” income.

The bottom line is that you have a lot of options, and delinquency and default can cause serious damage to your credit. If you find you’re in over your head, the Consumer Financial Protection Bureau and the U.S. Department of Education have teamed up on a tool they call the Student Loan Debt Collection Assistant. The tool guides you through a simple interview, to show you your options. Visit http://1.usa.gov/1Ky96IN to get started.