INFOGRAPHIC: The Tragedy of Student Loans

Here is an interesting infographic. People with student loans are more delinquent in paying back their loans than any other kind of consumer debt - even credit cards.While most of the other consumer loan delinquency rates have been falling since 2010, student loan defaults have risen sharply. Why is this? Perhaps that while all other consumer loans are granted based on the ability to repay, student loans are not. The government does not look at income (current or future) or available assets when granting student loans - it is purely granted based on the fact that you are attending school and have need. So what happens when you don't screen your debtors (especially when more people are taking out more loans)? You get more bad debt - eventually to be covered by the US taxpayer. Cheers!



Graphic by CollegeStats.org

How to Save $65 - Now!

I received an interesting letter in the mail today from the Student Financial Resource Center. I may have received them in years past and just tossed them out as a scam or a rip-off. But this year, I decided to open it and read it. It was pretty much what I expected, but a little research can go a long way.

They have a very official-looking letter and seal (see below). The letter is very professional. The only problem is, it doesn't really say anything. They are not offering to fill out your FAFSA, which is a common scam (remember, the first "F" in FAFSA stands for "Free" - don't ever pay anyone to fill it out or file it). That is because the letter says, "Students who did not qualify to receive federal student aid [...] should submit applications to other existing financial aid programs". Since you can only receive federal funds by filling out the FAFSA (as well as many other grants and loans), they must be targetting people who already filled out their FAFSA. They even warn me about people who charge to fill out your FAFSA on their website
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Student Loans are Big Business - and Nothing More

Student loans are often thought of as "good debt" in that you are investing in yourself (improving your skills and marketability) and possibly becoming qualified for a higher-paying job. This can be true, as long as you don't borrow too much and get a degree that the market values. Remember, the rule of thumb is to borrow no more than one years' salary for the job you expect after getting your degree, given that there are good employment prospects in that field.

But that all assumes that you get the degree - if you don't (or can't) finish school, due to academic challenges, financial hardship, medical disability, family obligations, or just plain life, you end up with few of the educational benefits and a debt obligation that is almost impossible to discharge.

So, are organizations preying on people with the promise of an education and promising future, only to pocket big profits?

Your Student Aid Report: Read it and Weep

After you submit the Free Application for Federal Student Aid (FAFSA) to the Department of Education (and put a paper copy in the school folder you have set up) and the FAFSA has been fully processed, your individual Expected Family Contribution (EFC) and other relevant financial information will appear on a Student Aid Report (SAR) that the Department of Education will issue to you and to the financial aid administrators of the colleges you listed on your FAFSA. This SAR essentially reiterates the information you supplied on the FAFSA (so you can verify that it is correct), and adds the calculated EFC and other information.

The financial aid offices of your chosen schools will use the information from your SAR to prepare a financial aid package tailored for your circumstances, based on the types and amount of aid for which you are eligible. They will then communicate that information to you in the form of a Financial Aid Award Notice. New for 2013 is the Financial Aid Shopping Sheet, a standard financial aid award notice developed by the US Department of Education (DoE), that allows for an easy comparison between schools in terms of graduation rate, loan default rate, and total student borrowing. While only 500 schools have opted-in to the Shopping Sheet so far (representing 13% of undergraduates), it is expected that most schools will eventually adopt it as well.

A Plan to Succeed: Your Financial Aid Calender

Here is what every high school senior (and others) needs to have for a financially successful college experience. You need a plan, and it needs to be realistic, and it doesn't get any more real than finances. It needs to be part of your family's plan as well - grants and loans are largely based on your families finances, if you are still a dependent.

Here you will find an outline for your plan - now go fill out your personal plan.

Don't Try Saving for College Gangnam Style

People who are actually from Gangnam never proclaim that they are—it's only the posers and wannabes that put on these airs and say that they are "Gangnam Style"—so this song is actually poking fun at those kinds of people who are trying so hard to be something that they're not.                                                                      —PSY


Saving and paying for college is no different than any other economic plan, so with the lack of widespread financial literacy (especially for high school students) it is not surprising that many students have no plan or no  realistic plan. And without a realistic plan, you are a poser or a wannabe.