Senior Surprise: Student loans dragging down retirement

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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.
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Miss. student loan forgiveness reveals a mess

via Moak: Mississippi student loan forgiveness, clarionledger.com, 12/3/2015

PDF: EDMC Student Loans

There’s a lot of money to be made in the business of for-profit education. This fast-growing industry has found the increasing demand for college degrees can be lucrative, garnering billions from students looking to enhance their resumes in an increasingly-competitive environment. Many of those students receive financial assistance, including federal student loans. But with the rapid growth of the industry have come increasing concerns about some for-profit institutions. Regulators have cited concerns about recruitment practices, sketchy quality and lack of accountability, among other issues.

In mid-November, a company named Education Management Corp. (EDMC) reached an agreement with 40 attorneys general to significantly reform its recruiting and enrollment practices and forgive more than $102 million in student loan debt from about 80,000 students nationwide. That amount will include $1,229,321 in loan forgiveness for about 1,358 Mississippi former students, Mississippi Attorney General Jim Hood revealed in a recent news release.

Pennsylvania-based EDMC operates 110 schools in 32 states and Canada through four education systems, including Argosy University, The Art Institutes, Brown Mackie College and South University.

The agreement will require EDMC to significantly revise its recruiting and enrollment practices. It mandates added disclosures to students, including a new interactive online financial disclosure tool; bars misrepresentations to prospective students; prohibits enrollment in unaccredited programs; and institutes an extended period when new students can withdraw with no financial obligation. EDMC also settled a $95 million civil suit brought by the U.S. Department of Justice. (It should be noted that EDMC did not agree with the findings of the extensive investigations.)

“This civil enforcement action holds EDMC accountable for what we allege were unfair and deceptive recruitment and enrollment practices,” Hood noted. “EDMC’s practices were unfair to our state’s students, and they were also unfair to our nation’s taxpayers who backed many of these federal student loans that were destined to fail. This is a rigorous agreement that not only provides some relief to a large number of former students through loan forgiveness, but helps ensure that the company will make substantial changes to its business practices for future students.”

“This case not only highlights the abuses in EDMC’s recruitment system; it also highlights the brave actions of EDMC employees who refused to go along with the institution’s deceptive practices,” U.S. Attorney General Loretta Lynch said at a news conference announcing the settlement of the federal “whistleblower” lawsuit. That investigation stems from 2007, when a recruiter and the EDMC employee who trained her came forward with allegations the school recruited students who were unlikely to succeed, using recruiters who were promised illegal enrollment-based incentives.

The state investigations, begun in January 2014, followed numerous complaints from current and former EDMC students, and provided a window into a disturbing pattern of alleged behavior.

“Our investigation gave us a pretty clear picture of how EDMC lured prospective students into its programs, and how many students left the program with unfulfilled promises and oftentimes tremendous debt,” Hood said. “We think this agreement addresses our biggest concerns about the company’s business practices and puts in place new transparency and accountability.”

Under the agreement, EDMC must abide by a number of provisions, including:

  • Not make misrepresentations concerning accreditation, selectivity, graduation rates, placement rates, transferability of credit, financial aid, veterans’ benefits and licensure requirements. EDMC shall not engage in deceptive or abusive recruiting practices and shall record online chats and telephone calls with prospective students.
  • Provide a single-page disclosure to each prospective student that includes the student’s anticipated total cost, median debt for those who complete the program, the default rate for those enrolled in the same program, warning about the unlikelihood that credits from some EDMC schools will transfer to other institutions, the median earnings for those who complete the program, and the job placement rate.
  • Require every prospective student utilizing federal student loans or financial aid to submit information to the interactive Electronic Financial Impact Platform in order to obtain a personalized picture of the student’s projected education program costs, estimated debt burden and expected post-graduate income.
  • Reform its job placement rate calculations and disclosures to provide more accurate information about students’ likelihood of obtaining sustainable employment in their chosen career.
  • Not enroll students in programs that do not lead to state licensure when required for employment or that, due to lack of accreditation, will not prepare graduates for jobs in their field.
  • Require incoming undergraduate students with fewer than 24 credits to complete an orientation program prior to their first class.
  • Permit incoming undergraduate students at ground campuses to withdraw within seven days of the beginning of the term or first day of class (whichever is later) without incurring any cost.
  • Permit incoming undergraduate students in online programs with fewer than 24 online credits to withdraw within 21 days of the beginning of the term without incurring any cost.
  • Require that its lead vendors, which are companies that place website or pop-up ads urging consumers to consider new educational or career opportunities, agree to certain compliance standards. Lead vendors shall be prohibited from making misrepresentations about federal financing, including describing loans as grants or “free money;” sharing student information without their consent; or implying that educational opportunities are, in fact, employment opportunities.

To be eligible for loan relief, you must have been enrolled in an EDMC program with fewer than 24 transfer credits; have withdrawn within 45 days of the first day of your first term; and your final day of attendance must have been between Jan. 1, 2006, and Dec. 31, 2014.

The agreement is expected to provide an average of $1,370 per person in loan forgiveness.

Students fall for fake Internet merchants, check scams

via Students fall for fake Internet merchants, check scams, clarionledger.com, 9/16/2015

PDF: The_Clarion-Ledger_State_20150917_B001_1

With the halls of our schools filled with eager young minds ready to absorb all that knowledge (I’m an optimist, OK?), they are also likely to fall victim to scammers.

According to some statistics recently released by fraud.org (operated by the National Consumers League or NCL), students are falling for promises of nonexistent or subpar online merchandise, schemes sending them checks to cash (which turn out to be forged) and other devious schemes.

The NCL statistics covered complaints filed the past 12 months. Almost three-quarters (71.9 percent) of complaints focused on dubious Internet merchandise schemes (48.7 percent) and fake check scams (23.2 percent). Among the most common complaints was that e-commerce sites advertised the availability of popular items — such as trendy athletic apparel — only to take money and never deliver (or worse yet, to serve as an entry point for identity theft).

The Internet merchandise scam category covers a wide variety of schemes designed to separate young people from their money, particularly for iPhones and game consoles. “Many complaints also focus on scams involving the sale of clothing, particular dubious online sneaker sales websites,” fraud.org advises. “Vehicle and pet sales were also popular sources of complaints. Craigslist was frequently mentioned as the venue where younger consumers first spotted “deals” that turned out to be fraud.”

The site cautions young people to be careful on Craigslist, which has proven to be fertile ground for all types of scammers. Chief among these were fake check scams or phony job listings, including “mystery shopper” jobs. Also mentioned was care.com, a popular site which links parents or caregivers to potential sitters for kids or the elderly, but can also harbor scammers waiting to pounce on young people eager to earn some baby-sitting money.

Here are some of fraud.org’s recommendations:

Do a price-check for similar merchandise before trusting an unknown online retailer, especially one advertising on Craigslist. If the price listed is far below traditional online retailers (think Amazon, Best Buy, Zappos) for a piece of popular merchandise (such as wireless phones, game consoles, sneakers, or designer clothing), the “deal” could easily be a scam.

When looking for a job, a request to cash a check in a personal account is a huge red flag. Legitimate employers will want you to go through an interview process and check your references before entrusting you with a check worth hundreds or thousands of dollars. If your “boss” wants you to deposit a check and wire a portion back to her or someone else, it’s almost certainly a scam.

If you’re a parent of a teenager, experts say the best time to have “the talk” with your teen (no, not that one; the other one, about being safe on the Internet) is before they are actually exposed to it; the second best time is today. E-commerce is a virtual “wild, wild West,” a world in which borders are meaningless and thieves can lurk around every corner. Every day, Mississippians lose their hard-earned dollars to scammers. Our kids need to know the risks, and how to conduct themselves safely.

Onguardonline.gov is a great resource, which will educate you about what you need to know to have that talk with them.

Back-to-school shoppers taking their time

Published in the Clarion-Ledger print edition on 8/27/2015. 

PDF: Back-to-school shoppers taking their time

Where did the summer go? While many Mississippi adults wax nostalgic for the “good old days” when we didn’t go back to school until after Labor Day and point out to today’s “coddled” generation that we managed to make it to adulthood without having air-condi­tioned buses — or even air-conditioned classrooms — the reality is that today’s back-to-school experience is a far cry from what it was back then.

Today’s parents must navigate a maze of required supply lists, lab and workbook fees, back-to-school meetings and endless fundraisers.

When my Mom went to the local dollar store with her back-to-school shopping list for elementary-school me, it was indeed a lot simpler. The list consisted mostly of nonspecific essentials such as “loose-leaf paper,” “lunch box” and “Elmer’s glue.” It was also a far shorter list; much of a student’s supplies were provided at the school (often by the teacher out of her own pocket).

By contrast, the required supply list for a second-grader at one of our Jackson- area schools has 19 separate items, many specific — i.e., “8 folders with pockets and brads 2 (1 plastic, 1 paper) each color — red, blue, yellow, green.” And a note at the bottom reads: “Note: Additional supplies may be requested by your child’s teacher when school begins.”

If you’ve gone to the local big-box retailer recently, the school-supply area can be a zoo. Shopping for your kids has become a stressful event, and it seems at least some people are taking their time to finish. A recent study commissioned by the National Retail Federation bears that out. According to the NRF’s Back-to-School Spending Survey, the average family with children in grades K-12 has completed just half of their shopping at this point.

“As expected, families are carefully measuring where, when and how they should spend on fall apparel items, school supplies, electronics and other necessities,” said NRF President and CEO Matthew Shay. “Late summer promotions and sales tax holidays around the country are likely contributing to the delay in back-to-school shopping this year, which means the next few weeks could be exceptionally busy for retailers large and small.”

Mississippi held its sales tax holiday on July 31 and Aug. 1, with many families taking advantage of the opportunity to buy certain items without having to pay sales tax.

And if you look around, many retailers are still holding sales and promotions to get you into the stores. “Retailers, hoping to strike a chord with both budgetconscious and valuefocused parents, will roll out hard to pass up promotions designed to capture the attention of those last-minute shoppers,” Shay noted.

The survey found about one in five parents admit to not having even started their shopping, but that’s down a bit from last year’s 23.6 percent. A few families (about 13 percent) say they’re done.

Here are a few more findings from the survey:

  • Coupons and promotions continue to resonate; those who have already started shopping indicate about half of their purchases (51.3 percent) were influenced by coupons, sales and promotions, down from 58 percent last year.
  • When it comes to classroom needs, the survey found parents are on the hook to contribute several items. On average, parents say 64.4 percent of their purchases of pencils, folders and other school supplies are influenced by classroom lists or school requirements. In addition, 45.9 percent of their electronics purchases for back to school are influenced by the lists and requirements of their family’s schools.
  • As for where consumers will finish their shopping, discount stores will see the most traffic (53.4 percent), while 46.8 percent will shop at department stores, 36.6 percent at clothing stores and 12.8 percent will wrap up at electronics stores; 27.2 percent will check out retailers’ best online deals, up from 24.8 per­this time last year.

But before we complain about the anarchy in the school-supply aisles or gripe about having to write that check for the lab fee, it’s a good idea to keep in mind that most teachers still pay for at least some supplies out of their own funds and school administrators are trying to stay ahead of a bewildering array of laws and regulations, while they’re all simultaneously trying to help our kids grow and succeed. (In the interest of full disclosure, I must confess some bias here; I was raised by a teacher, herself the daughter of educators.)

As parents, while it might be hard to navigate the back-to-school maze, it’s part of holding up our end of the partnership to help prepare our children for the day they’ll be the ones doing the back-to-school shopping. So, take some comfort in that truth as you search frantically for that last box of “Crayola fine-tip classic colored washable markers.”

Drivers must use caution around schoolkids

via Moak: Drivers must use caution around schoolkids, published 8/19/2015 on Clarionledger.com.

If you take the same route to work every day, you have probably enjoyed your morning commute the past couple of months. Less traffic on the roads means that you can get to work with less hassle. But it’s over now; with kids back in school, there are a lot more vehicles on the roads, leading to crowded streets, buses picking up and dropping off kids, frustration…and the potential for tragedy.

According to the National Highway Traffic Safety Administration, about 100 children are killed in the U.S. each year while walking or biking to school, and about 500 kids 5 to 15 years old die each year in vehicle crashes during school hours. August is National Back to School Safety Month, and the Mississippi Department of Transportation is warning drivers to be careful.

MDOT sent out a news release earlier this week about the issue, citing statistics from the National Safe Routes to School program that point out that more children are hit by cars near schools than any other location. School zones are in place around our schools, with measures such as lower speed limits and crossing guards, but they can only be effective if drivers respect them.

Here are some tips MDOT suggests:

When Dropping Off:

  • Don’t double park; it blocks visibility for other children and vehicles.
  • Don’t load or unload children across the street from the school.
  • Carpool, if possible, to reduce the number of vehicles at the school.

Watching for kids in the road:

  • Don’t block the crosswalk when stopped at a red light or waiting to make a turn, this often forces pedestrians to walk around the vehicle and enter the path of traffic.
  • Stop and yield to pedestrians when flashers are blinking and always stop for a school patrol officer or crossing guard.
  • Never pass a vehicle stopped for pedestrians.

Sharing the road with school buses:

  • Never pass a bus from behind — or from either direction, if it is stopped to load or unload children.
  • If the yellow or red lights on the bus are flashing and the stop arm is extended, traffic must stop.
  • The 10 feet around a school bus is the most dangerous for children; stop far enough back to allow them space to safely enter and exit the bus.

Sharing the road with bicyclists:

  • When passing a bicyclist, proceed in the same direction slowly and leave 3 feet between your car and the cyclist.
  • Watch for bike riders turning in front of you without looking or signaling; children especially have a tendency to do this.
  • Watch for bikes coming from driveways or behind parked cars.
  • Check side mirrors before opening your door.

NHTSA has a brochure about this topic at http://1.usa.gov/1MsxiSm.

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.

How old should you be before you get a credit card?

Originally published in the Clarion-Ledger print edition on 4/30/15.

PDF: How old should you be before you get a credit card

I remember the feeling of opening the mail that day as a 19-year-old college student. The letter from Shell Oil Company was addressed to me (for the first time, not my parents), and enclosed was a credit card. “Congratulations!” went the letter. “Based on your good credit history, you have earned the enclosed credit card.” I remember the feeling of power that was in my hands that day; in a way, it was a coming of age of sorts.

I used that card for years to buy gas, paying meticulously on time and rarely incurring finance charges. There were no rewards programs back then for that particular card; just the convenience and prestige that little bit of plastic gave me. I took little thought at the time as to whether I was actually ready to handle credit. In years to come, I would find credit cards to be a blessing and a curse (now my opinion is weighted more toward the “curse” side of the equation).

That was, of course, decades before the CARD Act of 2009, which placed strict limits on how companies can market and issue credit cards to young adults; a 19-year-old would today have to demonstrate they can repay balances, or have their parents sign off on their having their own account. But a recent study has raised an important issue once again: how old should people be before they get a credit card?

According to a study commissioned by Creditcards.com, more than one in three 18-29 year-olds have never had a credit card. (The study only discusses credit cards, not debit or prepaid cards.) The survey also asked when Americans believe someone should get their first credit card in their own name; the average response was age 22 and the median was 21. Some people believe credit cards should never be used, while others believe they are a part of learning responsible financial stewardship.

Generally, those opposed to credit cards point to the potential for misuse, and the public’s lack of education on financial literacy. Indeed, that feeling of “buy now, pay later” power I mentioned can encourage people to throw caution to the wind; many young people have found themselves in financial trouble when they finally got the bill for that TV they bought on a whim. Advocates of using credit cards point to the importance of skills like budgeting, learning lessons about interest compounding and the power of delayed gratification. And in fact, credit cards can provide greater purchase protections and sometimes-useful rewards. Regardless, young people learn from their parents, peers and cold reality; our generation has not always modeled good habits for them.

“Millennials’ financial views were forged during the Great Recession and in the apocalyptic job market that they and their friends have faced. That skittishness has pushed them away from credit cards towards debit and prepaid cards,” said Matt Schulz, CreditCards.com’s senior analyst. “As their careers advance and the economy continues to improve, I expect millennials to transition to credit cards in search of greater rewards and consumer protections.”

Here are some other findings from the study (which can be found at creditcards.com/credit-card-news/poll-millennials-card-age):

  • A third of Americans say 18-20 year-olds should have their own credit cards, and a small minority (3%) think it’s OK for people under age 18 to have their own cards. Hispanics are the most likely to favor credit cards for people under age 21.
  • Nearly half of credit card holders got their first card before age 21 (many of these people — like me — did so prior to the CARD Act) and 68% signed up before age 25.
  • Rural residents appear to be a lot more cautious about credit cards. About half of people living in rural areas think someone should get their first credit card before age 25, compared to 70% of urban/suburban residents who would say that’s a good idea. And nine percent of rural residents say people should never sign up for a credit card at all.

Regardless of where you come down on the equation, it would be a good idea for parents to sit down with their kids and have a discussion about credit cards. Many studies have suggested that young people who are armed with the facts are less likely to make bad decisions about credit, which could have effects well into their financial futures.

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.

Teens may not be driving the safest cars

via Teens may not be driving the safest cars, clarionledger.com, 1/15/2015

It’s a tradition that’s as old as the automobile. When a teenager has gotten his or driver’s license, American families have either handed down one of their older vehicles or have bought a “beater” to provide transportation. This is the way we did it in our family; I started out driving the family’s ancient hand-me-down, and when it was time for our firstborn to take to the roads, his first vehicle was already well past its prime.

But recently, some consumer advocates have warned that this might not be the safest practice for our emerging drivers. Older vehicles aren’t equipped with some of the basic safety features which can spell the difference between having a crash or not, or surviving it or not. Of course, teens are notorious for their driving habits; as young drivers get behind the wheel for the first time and learn to navigate the roads, there’s a high probability of an accident. Thankfully, most are just fender-benders, but tragedy strikes far too often. If you have a teen driver, you’ve likely said a lot of prayers.

Consumer Reports recently wrote about findings by the Insurance Institute for Highway Safety (IIHS), which studied data from fatal crashes involving teenagers. IIHS statistics indicate that teens are three times more likely to die in a car crash than adults over 20. Those statistics are sobering, and strike fear into the hearts of parents.

“IIHS dug into statistics from the government’s Fatal Accident Reporting System (FARS) and compared the types of cars driven by teens who were killed in accidents between 2008 and 2012, with those piloted by middle-aged adults,” noted Consumer Reports’ article. “It found that fatally injured teens were more likely to be driving older cars that lacked the types of effective safety equipment that those the mature drivers had.”

One example: electronic stability control (ESC). This feature has saved more lives than anything else but seat belts, reducing fatal crashes – especially rollovers — by half. ESC senses the vehicle is veering from its path (such as a swerve or skid) and uses a variety of methods to keep the car from skidding out of control. It’s especially helpful on taller vehicles with high center-of-gravity, such as SUVs. ESC was largely nonexistent in 2003, and could be found only on higher-end cars. Now, it’s mandated for all new cars. The IIHS noted that half of the teen drivers killed in car accidents were driving cars that were more than 11 years old, and only about 12 percent of teen-driven vehicles in fatal accidents had ESC.

Another factor leading to teen vehicle deaths is that most drive smaller cars. “IIHS noted that the overall rate of driver deaths in vehicles that weigh less than 3,000 pounds is 75 percent higher than in vehicles that weigh more than 4,000 pounds,” Consumer Reports noted, “yet almost 30 percent of teens killed were driving small and mini cars, according to IIHS (versus just 20 percent of adults.)

Another lifesaving feature is side and side-curtain air bags, which were only beginning to be seen 10 years ago. These features have saved countless lives, but they have only become standard equipment in smaller vehicles the past few years.

So, it may be time for a change in how we parents think about our teen’s first vehicle. Both the IIHS and Consumer Reports recommend that parents shell out a little more, do some research and try to find the safest vehicle possible.

“Unfortunately, it’s very difficult to get a safe vehicle for a teenager at the prices most people are paying,” says Anne McCartt, IIHS senior vice president for research. “Our advice to parents would be to remember the risks teens take and consider paying a little more.”

Also, the IIHS recommends the following:

  • Stay away from high horsepower. Vehicles with more powerful engines can tempt teens to test the limits.
  • Bigger, heavier vehicles protect better in a crash. Smaller vehicles just can’t provide the safety envelope of larger ones.
  • ESC is a must.
  • Vehicles should have the best safety ratings possible. At a minimum, that means good ratings in the IIHS moderate overlap front test, acceptable ratings in the IIHS side crash test and four or five stars from the National Highway Traffic Safety Administration (NHTSA).

See the IIHS’ list of used vehicles recommended for teens.