Pain on the collegiate front November 21, 2011
Posted by forwardfinancialplanning1 in Credit Cards, Education Planning.add a comment
While some unemployed college graduates are voicing their frustrations by joining the Occupy Wall Street protests around the country, the financial challenge of funding a college education continues to be formidable. Recently released statistics quantify the difficulty.
According to a College Board report, tuition and fees at US public universities rose 8.3% in 2010, more than doubling the general rate of inflation. Non-profit private colleges held their increase to 4.5% which appears reassuring until you consider that private university tuiton and fees now average $28,500 annually. The College Board further reports that the average public university student who graduates with debt (of course, not all students utilize loans) owes an average of $22,000, up from $15,000 a decade ago. Debt holding private college graduates fare even worse with $28,000 of loans, an increase of $11,000 in the past ten years.
According to Mark Kantrowitz, publisher of FinAid.org, federal and private student loans outstanding now approach $1 trillion and now exceed our nations’ collective credit card debts. And much like credit card debt, holders are defaulting on student loans at a substantial rate. Defaults during the first two years of the payback period reached 8.8% as of September 30, 2010. This represents the highest default rate since 1997 and is particularly problematic as student lenders (in particular, the federal government) have much greater recourse than credit card lenders when pursuing student loan repayment.
Despite these ominous statistics, the percentage of people who feel they are saving enough to cover their children’s college costs is only 16%, down from 24% in 2007 (source: Fidelity Investments Annual College Savings Indicator Study).
However, there is some encouraging news among the gloom and doom. A full 67% of parents have begun saving for college compared to only 58% five years ago. Financial advisors are having a positive impact here as 50% of those families who are saving and also use an advisor are utilizing 529 plans. Only 28% of families who have commenced savings, but without an advisor are participating in 529 plans. Section 529 plans allow for tax free account growth when proceeds are used to cover qualified secondary education expenses. Many states also provide residents with tax breaks on contributions to their 529 plans.
Now, if only the equities markets would cause these 529 accounts to grow, rather than stagnate!! Perhaps then we could have a fighting chance of keeping up with ever increasing education expenses…….
My state is smarter than your state December 20, 2010
Posted by forwardfinancialplanning1 in Credit Cards, Financial Planning, Investing-General, Personal Budgets.add a comment
The FINRA Foundation has been conducting survey research into the financial literacy and fitness of our country. The results, while somewhat discouraging, are nonetheless interesting. The website, www.usfinancialcapability.org contains state-by-state comparisons on topics such as “spending vs saving”, having a “rainy day” fund, non-bank borrowing (such as payday loans), and comparison shopping for most favorable credit card terms. The site also attempts to measure and compare financial literacy with a five question quiz on some basic financial concepts. Unfortunately, the nationwide average score is only three correct answers which suggests that the general public could clearly benefit from the advice available from a competent financial planner. Take the quiz and see how you stack up!!
Credit becoming more available December 11, 2010
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Washington’s budget busting stimulus efforts have been stymied by the growth suppressing contraction of available credit. Banks have been unusually conservative in light of their enormous write offs of credit card debt and defaulted mortgage loans. But banks, of course, realize that they are in the business of loaning money, so one would not expect these conditions to persist forever.
There may be some signs that credit availability is improving. Research firm Synovate estimates that US households will receive 2.3 billion (yes, that’s “billion”, with a ‘b’) credit card offers in 2010. That represents a 62% increase over 2009. Synovate’s estimate for 2011 is for 2.8 billion additional solicitations. Credit reporting agency Experian revealed that the percentage of auto loans going to subprime borrowers increased 8% in the third quarter compared to 2009. This was the first year over year increase since 2007. The majority (63%) of car loans are still going to prime borrowers (credit score of 680 or higher) but loan delinquencies are decreasing as well. So it appears that lenders are starting to become less risk averse, which should be a positive for the economy going forward.
“I owe my soul to the company store”-2010 version September 17, 2010
Posted by forwardfinancialplanning1 in Credit Cards, Personal Budgets.add a comment
Several recent posts on this site have lamented the woeful state of household balance sheets in the United States, as well as that of the federal government. An article in the Harvard Business Review entitled, “Consumer Credit: The Next Crisis” makes the following observation. It states, “The degree to which consumer’s have come to depend on easy, inexpensive credit is a far greater threat to the economy than most realize. To pay it off, the average U.S. consumer would have to hand over every penny of his take-home pay for 16 months.” Well, maybe not being able to afford to eat will solve our national obesity problem……………………depressing!!
It’s still debt……… August 15, 2010
Posted by forwardfinancialplanning1 in Credit Cards, Education Planning, Personal Budgets.add a comment
Much has been written about the enormous revolving debt load of the American people. Of course, most of this outstanding financial obligation stems from credit cards. Much less heralded, however, has been a similar run-up of student loan debt. According to Mark Kantrowitz, publisher of Fin Aid.org, outstanding student loan debt reached $829.8 billion in June 2010—-a figure which exceeds even the comparable total of $826.5 billion for revolving credit. Mr. Kantrowitz also estimates that $300 billion of this debt has been accumulated in just the past four years.
Some might argue that student loan debt is “good” debt, in that it is purportedly used to improve one’s earning power. Further, they might argue that student loan interest is often tax deductible. Nonetheless, it is debt just the same and in most cases cannot be discharged in a bankruptcy proceeding. While it’s long been known that college graduates earn more than individuals lacking degrees, a diploma comes with no guarantee. Students and parents should weigh the pro’s and con’s thoroughly before over-indulging!!
Job creation via increased regulation? April 6, 2010
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The political winds in Washington are clearly blowing in the direction of increased government regulation. The credit card providers are adjusting to a myriad of new rules and of course, the health insurers are facing a vastly different future from a regulatory standpoint. Financing a home purchase will “kill a few more trees” due to the numerous disclosures and documents that have been added to a process that many individuals already felt was very intimidating. And, the Senate is working on increased regulation of the commercial banking system to address the “too big to fail” dilemma.
Yet, the administration has stated that its principal focus is job creation in order to alleviate the 9.7% current US unemployment rate. It has further stated that small business is critical to these efforts. However, according to a survey by SmartBrief on Entrereneurs, “30% of business owners state that complying with government regulations is the facet of running a business that causes them the most stress.” No wonder that the term “government intelligence” is often cited as an oxymoron!!
Good News and Bad News in the Mail February 2, 2010
Posted by forwardfinancialplanning1 in Credit Cards.add a comment
MarketWatch reported that the number of credit card solicitations sent via the US mail in the third quarter of 2009 dropped by 71 % versus the third quarter of 2008. The bad news is that these mailings still equalled 272, 500, 000 credit card solicitations in Q3 2009 . No wonder we get so much junk mail!!!
