College Students and Debt - Debt Management Information You Need To Know Before You Graduate From College
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College Students and
Debt
Debt Management
Information You Need To
Know Before You Graduate
From College
Dr. Cassandra Wells
Rm 126 Leadership Center
cwells@morehouse.eduCollege Students and
Debt
• Sources of Student Debt
• The Credit Report and its
Importance to Students
• Identity Theft
• Debit Cards
• Student Finance Sites of InterestSources of Student Debt • Student loans for college • Credit cards • Installment loans • Living expenses
Sources of Student Debt
Student Loans
• A good use of debt but, must but
keep in mind how much debt will
have to be repaid at the end of
matriculation
• Total indebtedness for 4 years, full-
time at a private college averages
between $8,500 and $17,900
(SOURCE: U.S. Department of Education, National
Center for Education Statistics, National
Postsecondary Student Aid Study: 1995-96)Total indebtedness among final-
year full-time students at
different types of colleges
Type of Percent Typical
College with range
Debt of debt
From -
To
Public 2- 31% $1,000 -
year $5000
Public 4- 51% $5,000 -
year $14,500
Private 55% $8,500-
4-year $17,900
SOURCE: U.S. Department of Education, National Center for Education Statistics, National
Postsecondary Student Aid Study: 1995-96.Sources of Student Debt
Credit Cards
• A loan to be repaid monthly
• Designed for people w/income
– Issuers more lenient on income
• Variable or fixed interest rates
• Marketed on college campusesSources of Student Debt
Credit Cards
How Is Interest Calculated?
• Usually calculated daily
– So, pay bill as soon as you receive it
• Your payment is credited on the date
received not, on the postmark date
• If you have a balance, interest is
charged during the 25-day grace
period offered by the card company
– The grace period is the time you have to
pay off your balance without incurring
additional interest
– Only applicable if you start a billing
cycle with a $0 balanceSources of Student Debt
Credit Cards
Do Students Need A Credit Card?
• Use for transportation, books, and
tuition if other sources aren’t
available
• Use for emergency funds
• Use as protection on a repair
(automobile) or on a purchase (mail-
order, appliances, etc)
• Use to establish credit historySources of Student Debt
Credit Cards
• Look for low fixed interest rates
less than 10%
• Use for large purchases and for
warranty protection
– Not for everyday purchases where
you should pay cashAmount borrowed, projected
monthly payment, and sufficient
annual income
SOURCE: Tabulations by the American Institutes for Research
Amount Projected Sufficient
Borrowed Monthly Annual
Payment Income
$5,000 ($61) $9,200
$7,500 ($92) $13,800
$10,000 ($123) $18,400
$12,500 ($153) $23,000
$15,000 ($184) $27,600
$17,500 ($215) $32,200
$20,000 ($245) $36,800Debit Cards
The Relation to Credit Cards
• DCs deduct purchases directly from
a designated bank account
• No interest is charged on DC
purchases
• DCs are accepted where CCs are
accepted
• Both cards have PINs for use in
ATM machines or at retailers
• Both cards should be guarded to
avoid identity theft
• Unauthorized use of a debit card
results in loss of cash which may be
difficult to recover from your bank
unlike a credit given to your cc
account if unauthorized use occursSources of Student Debt Living Expenses & Installment Loans • Rent or Mortgage • Utilities –phone, power bills • Food and entertainment • Car loans • Computer or appliance loans • Other
About Your Credit Report •A credit report (credit file or profile) -is a resumé of your credit history which includes information about your personal credit worthiness and debt repayment history. •Why is it important? -used to determine: if you should receive credit; if you should be hired (character assessment); if you should be allowed to rent an apartment; for many more business decisions
About Your Credit Report A credit report (credit file or profile) - is a written report, comprised of the following information about your personal credit worthiness and debt repayment history: • Identification info – name, address, DOB, SSN, telephone number, spouse’s name, place of employment, mother’s maiden name, etc. •Credit inquiries made by credit providers are retained for 1 to 2 years •Information on collection accounts, judgments, lawsuits, criminal history , courthouse records, bankruptcies, etc.
About Your Credit Report
Explanation of A credit report
(continued)
•Credit history – name and ID number
of all credit holders, your repayment
history and date the account was
opened. Credit limits, co-maker of
account, disputes, secured accounts,
unpaid balances reported as a loss
•Consumer statements – up to 100-
word statements you may wish to use to
more accurately explain any account
(helpful in credit decisions)
(Excerpted from the Do-It-Yourself Credit File Correction Guide
Written by Paul S. Richard, RFC, and published by the Institute
of Consumer Financial Education)About Your Credit Report When is a credit file created? when you make application for a loan or credit card; when lender makes a report to their credit reporting service on your debt repayment. Who can legally look at my credit report? Those you give authorization to. This authorization is standard procedure when you sign credit and loan applications, life insurance applications, employment applications, security clearance requests , etc. Read the fine print on the applications for more details.
About Your Credit Report When is a credit file created? when you make application for a loan or credit card; when lender makes a report to their credit reporting service on your debt repayment. Who can legally look at my credit report? Those you give authorization to. This authorization is standard procedure when you sign credit and loan applications, life insurance applications, employment applications, security clearance requests , etc. Read the fine print on the applications for more details.
About Your Credit Report How often should I look at my credit report? If you are actively using a credit card(s) with monthly or bimonthly charge activity, have installment loan(s), vehicle lease, etc. review your credit file every 9 to 12 months, otherwise once every 15 months is adequate. What if you need help? Avoid any type of credit doctor, credit repair firm or service. Do-it-yourself instead. It is easy and inexpensive. Don't pay more than $10 which is the cost of the Institute of Consumer Financial Education's Do-It- Yourself Credit File Correction Guide.
About Your Credit Report
For More Information contact:
Institute of Consumer Financial
Education's Executive Director
Paul S. Richard, RFC at: (619) 239-1401
"Do-It-Yourself Credit File Correction Guide",
Copyright 2003.
All Rights Reserved by Paul S. Richard, RFC
PO Box 34070. San Diego, CA. 92163-4070
To Order Financial Education Books, Videos & Tapes:
http://www.icfe.info/storefront/default.asp, call 619-
239-1401 OR or send check or money order to:
Institute of Consumer Financial Education
P.O. Box WWW-34070
San Diego, CA 92163-4070
California residents add 7.75% sales tax Visa,
MasterCard or American Express AcceptedCredit File Agencies Contact
Information
Experian (formerly TRW)
http://www.experian.com
PO Box 2002
Allen, TX 75013-2002
888-397-3742
Fees: $8-$9 or may be stipulated by state law
Equifax Credit Information Services
http://www.equifax.com
PO Box 105873
Atlanta, GA 30348
800-685-1111
Fees: $8-$9 or may be stipulated by state law
Trans Union
http://www.transunion.com
Consumer Relations Center
PO Box 1000
Chester, PA 19022
800-888-4213 OR 440-779-7200
Fees: $8-$9 or may be stipulated by state law
Toll-free number enabling consumers to "opt
out" of pre approved credit offers. 1-888-5-
OPTOUT (888-567-8688).Check Approval Systems Use the telephone numbers below to report the fraudulent use of your checks, or to request your file, IF you have been the victim of check forgery or have had non sufficient funds activity on your checking account(s). ChexSystems 1-800-428-9623 CheckRite 1-800-766-2748 SCAN 1-800-262-7771 TeleCheck 1-800-710-9898 Equifax 1-800-437-5120 Processing 1-800-526-5380
Student Finance Sites of
Interest
• Managing the Price of College
http://www.ed.gov/pubs/collegecosts/index
.html
• Young Spender's Profile
http://www.icfe.info/children_and_money/
young_spenders_profile.asp
• Acceptable Uses of Credit Cards
http://www.icfe.info/credit_card_spending
_tips/acceptable_uses_of_credit.asp#When
%20Credit%20Cards%20Are%20Bad
• Identity Theft
http://www.ed.gov/about/offices/list/oig/mi
sused/idtheft.html
• Educating Undergraduates on Using Credit
Cards
http://www.nelliemae.com/library/cc_use.h
tmlStudent Finance Sites of
Interest
• Credit Cards and College Students
http://www.ncsl.org/programs/lis/credcar
d.htm
• Common Questions of College Students
www.creditalk.com
• UMCS Education Materials Request
www.collegevisa.com
• Debit Card Basics
http://usa.visa.com/personal/student/debit
_card_basics.html
• Credit Calculator
http://www.creditalk.com/budget101/cre
ditcalc.html
• The Power of Credit Scores
http://www.bankrate.com/brm/news/credi
t-scoring/20031104a1.aspStudent Finance Sites of
Interest
• www.practicalmoneyskills.com or, call
(888) 847-2606. Short course on money
skills.
• http://www.practicalmoneyskills.com/en
glish/at_school/trainingcamp/ff/index.ph
p
(a football game that tests your
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