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E-Newsletter - December

In this edition of the Parents Association E-Newsletter:

This edition features two articles related to financial topics that affect students. I have also included the important dates and deadlines for December and January. I hope that you find the information in these articles useful. Happy Holidays!

There is No Credit Card 101

What Should I Know About Alternative Student Loans?

Important Dates and Deadlines

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There is No Credit Card 101

By: Mike Cherry, CCCE President/CEO Consumer Credit Counseling Service

How nice it would be if you could just attend a class, take an exam and get an “A” in the use of a credit card.  It just does not happen.  Today’s society and economic engine runs on credit cards, and sweeps everyone along with it.  The problem is that there is no training, classes or even an explanation of the use and consequences of credit card use.  Everyone gets involved in using credit cards but one segment of society that seems to get chewed up more than others is the college student.  Most college age kids (and I am old enough to use the term “kids”) have their first experience with credit cards after they move out from their secure environment of home.  Until that point mom and dad have at least had a chance to help mentor their child in the use of credit.  But the security of mom and dad soon falls by the wayside.

A 2004 study by Nellie Mae, a wholly owned affiliate of Sallie Mae, the largest provider of education funding, shows some less than gratifying statistics.  Of the undergraduates interviewed most said their freshman year was the time they obtained their first credit card, around 18 years of age.  Undergraduates listed direct mail solicitation as the primary source for selecting a credit card.  The average undergraduate carries a balance over $2200 and normally graduates with a balance in excess of $3,400.  Nellie May also reports that the average undergraduate also carries a student loan balance of $21,200 at the time of graduation.  Nothing like starting out saddled with $24,600 in debt. According to United College Marketing Services (UCMS) students who drop out of college due to academic failure is 6% compared to 8.5% that drop out due to debt/financial pressure.  UCMS also reports there are over 4,700 college credit card affinity programs in America and only 1,280 colleges ban credit card marketing on campus.  Here is a figure that will knock your socks off, UCMS states that the average college student will receive 25 to 50 credit card solicitations per semester.

It is interesting to note that Nellie Mae reports that students from the Midwest tend to have the greatest debt levels with an average debt of $2,498 and 50% of those responding from the Midwest report carrying 4 or more credit cards.

There are many pressures for a young person to obtain a credit card at this time in their life.  Probably the number one reason is “I want to fit in, everyone else has one.”  Probably a good answer to respond to this is “If America had a debtor’s prison and everyone else was going because of credit card debt, would you want to go to?”  This may be a little harsh, but in reality most college students who incur credit card debt are in a financial prison.  There are many other reasons.  Getting a free hat or t-shirt, or being able to buy for the group and receiving immediate satisfaction when they buy something.  Remember most of these young students have not had the opportunity to buy whatever they wanted whenever they wanted.  One reason I have not heard mentioned here is for emergencies, which is the reason they should have one. 

United College Marketing Services also reported that the average student has 2.8 credit cards and that 83% of all students reported having at least one card.  The good news is 55% of students claim they carry a zero balance and pay their bill in full at the end of each month, kudos to them.  The remaining 45% are not so lucky.  Of the 45% about 34% pay the minimum balance and 11% pay less than the minimum balance or no payment at all.

After all the above doom and gloom, am I against students having a credit card or using one?  No, definitely not.  I think at this stage of their lives they have a golden opportunity to establish themselves for their entire credit future.  In today’s economic society so much emphasis is placed on an individual’s credit bureau report and their credit score.  These young individuals have a clean slate that they are drawing their credit future on, and they have no past credit experiences that they need to clean up.  The largest contributing factor to building a credit score is making timely payments, every month.  On the other hand the largest negative factor on a credit score is late payments.  There are a number of young people that think what they do in college with their credit will not affect their long range credit scores.  That is simply not true and if not careful they will graduate college with $3,400 in credit card debt, an additional $21,200 dollars in student loans, a diploma and a low punishing credit score to build their future on.

Credit cards are essential for today’s college student.  They should be used for the emergencies such as car repairs, illness or a sudden trip home.  They are necessary to rent a car or fly on a plane.  They have their place in college life.  However, they should be taught how to use and not abuse them.  It is like giving a guitar to a student and not showing them how to use it and they sound terrible.  This could have been avoided if they knew what they were doing and it was shown to them how to play and make beautiful music.  It is the same principle with a credit card, show them the proper way to use it or they may end up sounding like that terrible music.  Take an interest in the financial well being of your student.  Ask them about their financial health and chances are they will say it is fine.  Explore a little deeper and make sure it is not another stress factor that is haunting them.

When obtaining a credit card always shop for the best rates.  Look at the grace period between the billing and the payment due date. Know when a late fee established.  If you go over your credit limit you want to know the over limit fee.  Is there an annual fee?  Interest rates are not the only factor to consider.  If you pay off the credit card every month, as you should, the interest rate will not matter.  Parents should encourage their student son or daughter to get the same card they use because the parents know how the terms and conditions of their card. Most credit cards charge a $35 fee for late payments and an additional fee of $35 if you are over your credit limit.  You could be charged $70 per month on top of your interest rate on a monthly basis.  Most delinquent card balances carry an interest rate of up to 37%.

     Example:  If you have a $1000 balance on your card and you pay the minimum monthly payment of 2% or $20 with an interest rate of 22% it would take you over 10 years to pay off the balance if you paid on time every month and never charged anything else on the card.  If you were late a $35 fee would be added for each month you were late adding years to the repayment of the original $1,000 balance.   Adding these late fees every month could easily put your balance over your credit limit and another $35 per month would be added to your balance.  It can become a debt prison.  

Dos and Don’ts of having a credit card: 

Do: remember you are signing a loan agreement and are obligated for all of the provisions of that agreement.  Know those provisions. Do: know your interest rate and fee schedule
Do: use it only for an emergencies or charges you can pay off at the end of every 30 days. Do: keep it in a secure place and protect yourself from identity theft.Do: think twice about every purchase and decide if it is something you really need, not just want. Do: look at your statements every month to make sure your bill is correct and your interest rate is right.
Do: monitor your credit report at least annually to see that payments are reported correctly to the bureau. This can be done by going to www.annualcreditreport.com where you will receive a free credit report once a year from each of the three major credit reporting agencies. Do: know the difference between a credit card and a debit card.  A credit card is “buy now pay later” and a debit card is “buy now pay now” and the money is immediately taken from your checking account. Do: ask your parents or advisor for help if you have a problem with your debt.Do: shred all credit card offers received in the mail and don’t just throw them away as someone may send it back in your name and open a credit card under your name.

Don’t: pay payments late, always pay on time.Don’t: purchase wants (pizza, side trips and parties) and not needs (car repairs, medicine, etc).Don’t: Buy a round of beverages or food for a group thinking they will pay you back before the bill comes.               Don’t: pay payments late, always pay on time.Don’t: let anyone else use or have access to your credit card.Don’t: be afraid to call your creditor and question a charge on your monthly statement.
Don’t: be afraid to ask your parents or advisor for advice and help. Don’t: pay payments late, always pay on time (see a pattern developing here).

Obtaining a credit card, establishing credit patterns, paying on time and showing responsibility is a major task for anyone, especially for a college student that is going through all the other pressures of their life at that time.  Make sure you know what your student is doing financially.  There are a lot of cases where the parent ends up paying the bill to “bail out” their child.  This could be from co-signing the card or just to relieve the pressure of debt from their son or daughter.  There have been a number of suicides by college students due to the pressures of credit card debt.  Pay attention, ask questions and recommend help with a qualified counseling agency.

Qualified not-for-profit credit counseling agencies not only offer assistance in repaying credit card debt, but also offer budgeting and personal financial management classes.  You may find a legitimate agency by going to www.nfcc.org which is the website of The National Foundation For Credit Counseling.  Consumer Credit Counseling Service in Springfield works with Missouri State University in offering financial education through freshmen orientation classes.

Any questions you may have about this subject or any other financial related questions that affect your college age student may be addressed to Mike Cherry at mike@cccsoftheozarks.org.

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What Should I Know About Alternative Student Loans?

by: Jenifer Kautzman, Financial Aid Counselor and Chelsey Clark, Assistant Director of Financial Aid

You’ve taught your child to make responsible choices in life and that lesson continues when they begin to explore options to pay for their higher education. With more and more alternative loan lenders, like ASTRIVE and My Rich Uncle, marketing directly to consumers via television, magazines, and mail solicitations across the nation, offering seemingly amazing opportunities, you may be wondering whether an alternative loan is right for you or your student.   Here are some helpful hints from your local Financial Aid Professionals: 

  • Complete the FAFSA

      It is not uncommon for lenders to communicate to students and parents through direct to consumer marketing campaigns that it is not necessary to fill out the Free Application for Federal Student Aid otherwise known as the FAFSA.  Federal Stafford loans are federally guaranteed loans that your student may be eligible for; however, a completed FAFSA is required.  Stafford loans have better interest rates as well as repayment benefits in comparison to alternative student loans. 

  • Ask Questions!

You’ve probably heard the old adage “No question is a bad question.” and that couldn’t be truer when you are investing in education. It is a student’s right as a borrower to get all of the information needed to make a wise financial decision. Depending on the type of loan you are applying for, there are several things to consider, including: 

    • Is the interest rate fixed, floating, or variable?
    • When do payments begin?
    • Are the payments deferred while I, or my child, are in school at least half-time?
    • Can I consolidate this loan with other private loans I, or my child, have taken out and how is the interest rate determined?
    • Are there any penalties for early repayment?
    • At what point during the application process is my interest rate disclosed?
    • Does the lender offer services in order to assist students with monitoring borrowing and managing loan debt?
    • What are the front end and/or back end fees associated with the loan?
    • What repayment options are available as well as forbearance or deferment options? 
  • Compare, Compare, Compare

As thrifty consumers we all know it’s a good idea to shop around for the best deals; whether you’re looking for a new home, car, or student loan the same basic rules apply. 

    • Compare interest rates; borrow benefits and terms on a variety of loan offers before you decide what will be best for you or your student. 

Now is the time for your student to begin to take on responsibilities that they are unfamiliar with. Since you, as parents, have years of experience in dealing with financial matters, you can be a huge help to your students as they work through this process. Keep in mind that, in most cases, the loan will be the student’s responsibility to pay back to the lenders. It is important that they understand all of the repercussions of the loan and repayment options so students should read every line of all communication from the lender. 

For more information regarding different types of loans available check out our website at http://www.missouristate.edu/FinancialAid/loans.htm

Respectfully,

Office of Student Financial Aid

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  Important Dates and Deadlines for December and January

 

 You and your student may want to be aware of the following list of dates and deadlines, which include holidays, registration deadlines, and more. For a complete list of Important Dates and Deadlines, please visit www.missouristate.edu/registrar/acad_cal.html.
  

Dec 8 – 13

Final Exams Period

Dec 14

Commencement: Hammons Student Center

Dec 17

Final Grade Rosters must be submitted on the Faculty/Advisor Resource Center by 10:00 a.m.

Dec 18

Grade Reports Available on the Web My Information System

Dec 18 – 19

Deans Review Student Grades and Determine Students’ Academic Status

Dec 20

Transcripts with Fall 2007 Grades Available Beginning Today

Dec 24 –Jan 1

Holiday Break (No Classes/Offices Closed)

Jan 7

Intersession Classes Begin/Last Day to Register or Add Intersession Classes

Jan 10

Transcripts with Fall 2007 Degrees Earned Available Beginning Today

Jan 10-11

Registration Period for Late Applicants (Students Who Applied for Spring After December 20)

Jan 11

Intersession Classes End; Last Day to Register for Spring Semester Classes to Avoid Late Fee

Jan 14

Spring Semester Classes Begin

Jan 14

Intersession Grade Rosters Available on the Faculty/Advisor Resource Center; Must be Submitted by 10:00 a.m. Jan 22

Jan 14-18

Late Registration/Change of Schedule Period

Jan 15

Deferred Payment Plan Installment Due

Jan 15

Last Day to Drop or Withdraw From Full Semester or First Block Classes and Receive a Credit of 100% (Less $60 for Withdrawals)

Jan 18

Last Day to Register for Full Semester or First Block Classes; Last Day to Change Sections Without Financial Penalty

Jan 18

Diplomas for Fall 2007 Graduates Mailed Beginning Today

Jan 21

Martin Luther King, Jr. Holiday (No Classes/Offices Closed)

Jan 22

Intersession Grade Rosters must be submitted on the Faculty/Advisor Resource Center by 10:00 a.m.

Jan 23

Intersession Grades Available on the Web

Jan 25

Last Day to submit an instructor drop (to drop a student for non-attendance)

 

 Parents Association - E-Newsletter Ideas

Have ideas for future Parents Association E-Newsletter articles? We'd love to hear them! Please send your article ideas to us at ParentsAssociation@MissouriState.edu.

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