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Credit history & credit reports Credit cards Debt counseling Student loan consolidation

Credit History and Credit Reports

Student Loans Apartment Leases Utility Bills (Cable, Phone, etc.) Credit Cards Car Loans Do You Have Credit Now?

Employers can and do check your credit history You can leverage your purchasing power Car Furniture Home Your credit history reflects in your credit report (much like a college transcript) Why build good credit history?

Your credit report includes employment information and previous addresses More than 60% of credit reports have negative information Bad credit could prevent you from receiving future loans Review your credit report periodically Make corrections when needed Be wary of stolen identities Credit Reports

Too much open credit High credit limits on credit cards Late payments Accounts being transferred to credit agencies Bouncing checks Bank could close your account What lowers your credit rating?

Advantages and Disadvantages of Credit Cards

Credit Cards Advantages – –Provide credit record – –Available for emergencies – –Rent a car – –Pay for purchases over time – –Allows you to use someone else’s money (float) – –Immediate cash availability – –Limited liability – –Convenience checks – –Frequent flyer miles or points

Credit Cards Disadvantages – –Can create excessive debt – –Interest can be high – –Repayment could take many years – –Repayment could be 3 to 5 times the original amount – –Too many cards increase default risk – –Card number can be stolen by different means; i.e., physically, over the internet, over phone, mail orders, etc. – –Immediate cash availability – –Convenience checks

Credit Cards Keep the number of accounts small Reduce credit limits if not needed Close unneeded accounts Beware of low introductory rates – –Bait and switch rates Carefully read your statement – –Make payments on-time – –Thoroughly research erroneous charges

Credit Cards Know how the interest rate is calculated – –Variable vs. Fixed – –Interest charged on average daily balance with or without new purchases – –Cash advances vs. purchases Be wary of those who bear gifts When making online purchases pay attention to websites’ security Read the small print

Did you know? 40% - 90% of credit card payments pay fees/interest/finance charges Merchants pay a discount fee for accepting credit cards Fees: – –Annual Fees – –Late Payments – –Going over the limit – –Cash Advances

What can you do to avoid the credit card blues? Use CASH Get a debit card & use it Limit your limit Pay on time, every time Have one or less credit cards Transfer any high interest balances to cards Ask for a lower interest rate Get a realistic budget and stick to it

Let’s test your credit card knowledge We’ll look at two scenarios, the only difference is the monthly payment

Credit Card Scenario #1 You charge $2,500 You pay $50 a month Yearly interest rate is 20% How long will it take to pay the $2,500?

Answer: 9 Years 1 Month!!!!!

Recap Scenario #1 You charged $2,500 You paid $2,920 in interest over the 9 years You paid 116% interest

Credit Card Scenario #2 You charge $2,500 You pay $100 a month Yearly interest rate is 20% How long will it take to pay the $2,500?

Answer: 2 Years 9 Months!!!!!

Recap Scenario #2 You charged $2,500 You paid $761 in interest over the 2 years You paid 30.4% interest

Life After Graduation

Planning For Life After Graduation Start now Research expected salary Before taking on debt, make sure you can meet your financial obligations after you graduate

Student Loan Repayment $14,000 $7,100 $4,100 $4,760 Total Interest Paid $200 $185 $160 $123 Monthly Payment20%20% 8.25%8.25% 5%5% 8.25%8.25% Interest Rate 10 For How Many Years? $10,000 $15,000 $10,000 You Borrow

Budgeting Scenario You take a $30,000/year position You purchase a new car for $20,000 You have $17,000 in student loans You rent an apartment for $650/mo You have $3,000 of credit card debt

Budgeting Post Graduation Budget Monthly Basis Gross income/$30,000 yr$2,500 Less 18% for income taxes($450) Less 7.65% for social security/medicare ($191) Less health insurance($75) Take Home Pay$1,784

Monthly Expenses Expense Monthly Amount Rent$650 Utilities$170 Phone$30 Cable$30 Car payment$400 Car insurance/gas$175 Student loan$170 Food$300 Entertainment$100 Credit card payment$80 Total Expenses$2,105

Budget Reality Net Income$1,784 Monthly Expenses($2,105) End of Month Cash($321)

Reality Check Where’s the ($321) coming from each month?

All is Not Lost There are things that you can do now to avoid this situation: – –Don’t increase your debt as your salary increases – –Use credit cards wisely – –Contact your creditors and set up a workable plan for repayment, even if it is $5 a month – –Student loan consolidation Can greatly reduce your monthly payment

Debt Counseling

You and your peers 78% of undergraduates have credit cards 32% have 4 or more cards Average number of credit cards = 3 Average credit card debt = $2,748 13% have credit card debt between $3,000 - $7,000 9% have credit card debt greater than $7,000 This does not count student loans!

Need Help? Find out your credit score and history free or cheap: – –Go to the credit reporting agency source With debt management or credit consolidation, help is available: – –Credit Bureau – –Consumer credit counseling National Foundation of Credit Counseling IRS and FTC warn to be cautious Don’t be in a rush – read the contract Find out about your student loan debt – –

Consumer Credit Counseling Associated fees or “voluntary contributions” charged Can’t remove legitimate negative information from credit report Check that creditors are being paid Do your homework – –Better Business Bureau – –National Association of State Charities (nasconet.org)

Student Loan Consolidation

$45,000 Average student loan debt for Undergraduate Student

How will this debt affect me when I graduate? Monthly payment on a balance of $45,000 is $467 Average starting salary for a graduate is $30,000 That payment will make up about 42% of after-tax income

What are my repayment options?

Consolidation Repayment Fixed interest rate is determined by the weighted average of eligible loans Maximum 30-year repayment schedule based on total loan balance Borrower can select any repayment term less than the max Borrowers consolidating while in school or during grace period receive 0.6% reduction in interest rate Repayment Options (Federally regulated)

What Happens Every July 1 st ?

Department of Education Sets New Rates July 1, student loan interest rates increased 1.93% Rates WERE at a 37-Year LOW Current rates are the 3 rd lowest in history Rates WILL INCREASE AGAIN July 1, 2006

Reauthorization

Reauthorization Occurs periodically in the student loan industry Eliminates spousal consolidation Eliminates in school consolidation Rates will increase to 6.80%

Reauthorization Existing loans will continue to have variable interest rates – –Changing every July 1st Newly originated loans will have a fixed 6.80% interest rate

What benefits me the most?

Edconsolidation Benefits Additional interest rate reduction of up to 1.25% – –0.25% reduction: Auto-debit program must be used – –1% reduction: $10,000+ loan balance and 36 consecutive payments on time and electronically

Edconsolidation Benefits Non-profit company One low monthly payment No prepayment penalty Will hold application until the end of your grace period

Edconsolidation Benefits Easy consolidation process No credit check We will NEVER sell your loan Personal counseling and service

Consolidate Before Rates Increase AGAIN $87,792 $35,517 $13,773 $4,001 Total Interest Paid 30 years 25 years 20 years 15 years Loan Term$522$522 $285$285 $162$162 $78$78 Edconsolidation Loan Monthly Payment $1048 $524 $262 $105 Standard Monthly Payment $100,000 $50,000 $25,000 $10,000 Initial Balance $115$115 $289$289 $577$577 $1,155$1,155 $89$89 $192$192 $350$350 $657$657 $6,053$6,053 $21,070$21,070 $136,493$136,493 $54,824$54, % interest rate

Edconsolidation Savings Table $34,697 $12,524 $4,226 $1,024 Savings with Edconsolidation Incentives 30 years 25 years 20 years 15 years Loan Term$522$522 $285$285 $162$162 $78$78 Edconsolidation Loan Monthly Payment $1048 $524 $262 $105 Standard Monthly Payment (4.75% Interest Rate) $100,000 $50,000 $25,000 $10,000 Initial Balance

Submit your consolidation application AFTER graduation AND BEFORE June 30!

Climbing A Mountain of Student Loan Debt?

Edconsolidation makes that Mountain into a Molehill

Edconsolidation One loan. One lender. One low monthly payment. Call or visit