Money Matters Improving Financial Literacy

1. Money MattersImproving Financial Literacy Student Financial Assistance, Debt Management & USA Funds Services, Inc. Carla A. Lord-Hardy (Coordinator)

2. $20,000.00 $30,000.00 $5,000.00 $4,000.00 ??? $59,000.00 + Subsidized Stafford Loans Unsubsidized Stafford Loans Private Loans Perkins Aid Your Undergraduate Debt Total Potential Debt You tell me

3. Keys to being a wise borrower • Good day-to-day decision making. • Rudimentary budgeting skills & strategies. • Borrow only what you need. • Appropriate credit card usage. • Understanding the realities of student loan repayment.

4. Day-to-day decisions • Needs: Necessities for everyday living and goal attainment. • What are your everyday needs (not wants)? • What are your educational needs?

5. Day-to-day decisions • Wants: Things that are nice to have, things that gratify some desire or urge. • What things do you want (not need)? • What do you need to survive while in school versus what might you merely want or desire?

6. Make a budget and stick to it • How much money do I have to spend? • Wages and tips • Savings • Financial Aid • Scholarships • Parents & Relatives • Other

7. Make a budget and stick to it • What do I spend money on? Where does my money go? • Find out by preparing a budget. • Identify general spending categories • Housing • Identify specific spending categories • Utilities, phone, rent

8. Make a budget and stick to it • Compare your total income against your estimated monthly expenses. • Where do you come up short?

9. Make a budget and stick to it • “Cents-able” strategies for cutting down on spending • What expenses can you cut? • Distinguish between expenses that are real needs versus those that are merely wants.

10. Only borrow what you need for school and no more • How much do you think you’ll need to pay for school? • Tuition and fees …. • Room and board…. • Books and supplies …. • Health insurance …. • Computer and related expenses …. • Monthly memberships and dues …. • Miscellaneous expenses (travel, etc.)….

11. Only borrow what you need for school and no more • Financial Fact 1: Getting an education is expensive.

12. Only borrow what you need for school and no more • Financial Fact 2: Know what you’re financing. Anticipate your income.

13. Only borrow what you need for school and no more • Average Salary School Principal $56,038.00 per annum $4,669.83 per month • Average Salary High School Teacher $37,442.00 per annum $3,120.16 per month

14. Only borrow what you need for school and no more • Financial Fact 3: Your credit history stays with you for life.

15. Credit cards are a form of borrowing • College student credit card debt Q1: What percentage of college students have their own credit cards? 83% a 24% increase since 1998! Q2: How many credit cards does the average college student have today? 3 Q3: What is their average credit card debt? $2,327!!! Source: Undergraduate Students and Credit Cards: An Analysis of Usage Rates and Trends-Nellie Mae April 2002

16. Don’t get one. Don’t use them for cash advances. Don’t charge more than you can pay off in a month. Don’t let banks increase your credit limit. Don’t use it for groceries or rent. If you must have one, limit how many you get. Look for a card with a low interest rate. Look for a card with no annual fee. Always pay more than the minimum required. Only charge what you must. Credit cards are a form of borrowing

17. How do I establish good credit? • Pay off your credit balances in full. • If you can't pay your balance in full, make at least the minimum payment. • Pay your bills on time. • Undercharge. Don't charge as much as your limit allows.

18. How do I lose good credit? • Making late payments • Exceeding the credit limit on your credit card • Writing bad checks • Filing for bankruptcy

19. How do I access my credit report? • Check out these on-line addresses to seek your credit report from one of the three largest credit bureaus. http://www.equifax.com http://www.transunion.com http://www.experian.com http://www.myfico.com

20. What happens when I have a bad credit report? • You may not be able to qualify for further education loans. • You may not be able to rent an apartment. • You won't be able to buy a house. • You may not be able to purchase or lease or rent a car.

21. What happens when I have a bad credit report? • You may not be able to obtain other forms of credit. • You may never be able to pay off your debt. • You can be turned down for a job (i.e., poor risk). • It's like getting a bad grade – it stays on your permanent record.

22. Only borrow what you need for school and no more • Financial Fact 4: Whatever you borrow, you have to pay it back.

23. Prepare to live within your means after you finish school • Revise your student budget to fit your new income and lifestyle. • Determine first of all, how much you have to spend (net income). • Re-examine your budget categories and revise. • Estimate your “start-up” costs and fees associated with your new job. • Estimate your expenses associated with your new lifestyle.

24. Prepare to live within your means after you finish school • Appreciate the difference between how much you earn (gross) and how much you actually take home (net). • What monies are withheld? • Social Security tax (Medicare and retirement, 7.65%) • Federal tax (ranges from 15% to 35+% depending on your gross income) • State tax (ranges from 0 to 12% depending on where you live) • Health Insurance (ranges from 3% to 10% depending on your income and family size)

25. Prepare to live within your means after you finish school • Suppose a gross income of $37,442. How much money will you have to live on realistically? • Social Security tax = approx. $2142.72 • Federal tax = approx. $4389.60 • Medicare tax = approx. $499.20 (Health Insurance costs not included in this calculation) • Net income = $30,410.48 • Approx. $2,534.21 monthly • Approx. $1,267.11 bi-weekly (tax estimates based on unmarried single status)

26. Prepare to live within your means after you finish school • Suppose a gross income of $56,038.00. How much money will you have to live on realistically? • Social Security tax = approx. $3,207.12 • Federal tax = approx. $8,681.00 • Medicare tax = $750.00 (Health Insurance costs not included in this calculation) • Net income = $43,399.88 • Approx. $3,616.66 monthly • Approx. $1808.33 bi-weekly (tax estimates based on unmarried single status)

27. Prepare to live within your means after you finish school • Revise your student budget to fit your new income and lifestyle. • Prioritize your budget. • Sustain good credit. • Save for the unexpected – and for your future.

28. Prepare to repay your student loans

29. Understand your loan responsibilities Q1: When do I have to start repaying my student loans? a. immediately upon graduation b. when I win the lottery c. after I receive my inheritance d. when my salary increases to $500,000 e. six months after I leave school

30. Understand your loan responsibilities Q2:What will my monthly payments be?

31. Private Loans $5,000.00 borrowed $50.00 per month 180 payments $9000.00 total paid $4000.00 total interest Stafford Loans $50,000.00 borrowed $483.00 per month 120 payments $57,960.00 total paid $7,960.00 total interest Monthly Payments $533.00 total monthly payment (estimates based on standard repayment)

32. Standard Repayment Minimum $50 a month 10 years Lowest total interest paid Income Sensitive Monthly payment calculated annually based on your income Requires you to authorize the IRS to release tax return to ED Payment must be large enough to cover accruing interest Monthly Payments

33. Graduated Repayment Ideal if your earnings start low, increase over time Payments increase over time, enough to cover interest Future payments no more than 3 x initial payment Limited to 10 years Monthly Payments

34. Consolidate when you: Are no longer in school at least half-time Enter your grace period or repayment Are struggling to make ends meet Have high credit card debt Have fluctuating income Have another worthwhile use for the money Consolidation Combine most federal education loans into one loan Interest rate recalculated to weighted average Up to 30 years to repay Generally result in higher interest payments Can only consolidate once Monthly Payments

35. Determine your repayment options and run “what if…” scenarios Go to: www.usafunds.org/Borrowers/Repayment_Options2.html Monthly Payments

36. Understand your loan responsibilities Q3: I have trouble keeping track of my finances. Is there a quick and easy way to make sure that I pay my loans and pay them on time?

37. Understand your loan responsibilities Q4: What if I have multiple student loans?

38. Understand your loan responsibilities Q5: What if I receive money from graduation and I choose to put it on my student loan? Can I do that? a windfall

39. Understand your loan responsibilities Q6: What if I make an effort to pay a little more each month on my student loan? How big of a difference will that make?

40. Understand your loan responsibilities Q7: What if I don’t earn enough money to make the full monthly payment, let alone pay extra on my loans?

41. Understand your loan responsibilities Q8: What if I miss my monthly payments or simply stop paying them at all?

42. Understand your loan responsibilities Q9: If I don’t have the money to make my monthly payments, what can I do to avoid delinquency or default?

43. Understand your loan responsibilities Q10: Why is it necessary to stay in touch with your school, lender or loan servicer?

44. Resources to Assist Students • www.usafunds.org • www.salliemae.com • www.wiredscholar.com • www.bankrate.com/brm/fico/calc.asp • www.nova.edu • www.paycheckcity.com

45. Money Matters Improving Financial Literacy Partnered with NSU, Student Financial Assistance, Debt Management & USA Funds Services, Inc.