College Students and Debt

There is a story on CNN about the debt problems of college students today. While I don’t think the advice is strong enough from the experts, there is some good information, especially for parents of teens.

My favorite part was an example of outstanding parenting …

Ashley Shaw, a freshman broadcast journalism major at Howard University, says she shops with cash, not credit, so she’s aware of how much she can spend. But even without the credit card, she occasionally runs into trouble. She recently overdrew her checking account during a shopping trip.

Right now, Shaw isn’t in any credit or student loan debt. However, she expects to take out student loans in the near future to cover her college expenses.

“As a younger teen, I actually received a credit card and didn’t know my spending limit and that kind of thing, so I maxed out the credit card and was penalized for it, and that’s why I don’t have one now,” Shaw said, explaining her previous troubles with credit.

This is the kind of parenting I want to to for my own children. Ashley sounds like a young woman with an excellent head on her shoulders, who continues to learn the right way to handle money through personal experience. She was lucky to be a teen who had parents who were both engaged and forgiving, and it looks like she is definitely heading in the right direction.

Personally, I hope that she can stay out of the student-loan trap, but it sounds like she has a good enough head on her shoulders to be resonsible and take care of business.

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Quote for the Week of 01/03/2007

First secure an independent income, then practice virtue

— Greek Proverb

A First Rate Education at a Cut-Rate Price

I found some food for thought about education costs on the PRI show Marketplace. Did you know that an education at a top British university might cost less than a third of its American counterpart?

The Skinny

What a difference a continent makes … A year at Oxford costs about $10K a year while Princeton recently made headlines because it decided not to increase its $33K tuition for the 2007-2008 school year. Not suprisingly, Oxford reported that applications from Americans are up 48% this year. Top students can get the same great education, a lot more individual attention (Oxford uses the tutorial system, which has a 1-1 relationship between students and instructors), plus a global experience at 1/3 the price.

WOW!

The Result

A savvy student can get a top-flight education for less than it might cost for a good public school education! An education is the foundation for a young person to build their life upon. Financially speaking, there is no better way to guarantee a bright future than to start life debt free in your mid-20’s, and having the full power of compound interest working for you instead of against you.

The Real Problem

A lot of students and parents feel resigned to student loans, although I would strongly disagree. This seems especially true for top performers, who qualify for the most elite (and often the most expensive) institutions. There seems to be an implication that a child’s full potential is wasted if they don’t attend the most prestigious schools, regardless of cost. Don’t fall into this trap! This story goes to show that with some ingenuity and creativity you can find an answer that doesn’t involve burying yourself (or your children) in debt!

Links

Marketplace is very internet savvy, and there are a number of different ways to get to them, so I will just include them all:

Opting Out of Debt Marketing

Debt is the most heavily marketed product in the US today, to the detriment of American consumers. It is difficult to avoid the huge number of sales pitches that are seen and heard on TV, Radio, Internet, and through sponsorship of the arts and sporting events.

However, there are some things that you can do to keep these ‘offers’ away from you …

Opting Out

Opting out is like adding your name to the ‘do not call‘ list for telemarketing, except for credit card offers. It won’t stop everything coming your way, but it will slow the flood.

The Opt-Out Prescreen website will allow you to remove your name(s) from the lists provided by the major credit agencies. These lists are used mostly for direct marketing from credit cards and insurance companies and are the source of a lot of the dead trees that arrive in your mailbox.
There are a couple of things to know …

  1. When processing your request online, the opt-out is for 5 years.
  2. You can opt-out permanently through paper mail.
  3. You will need to provide your Social Security Number.

BTW, I heard about this through 50 Fun Facts About Credit Cards.

Stopping Direct Marketing

Also, you can remove your name from lists used by the Direct Marketing Association here. These lists are also used to generate offers as well, although they are used less for financial services.

A couple things to understand here …

  1. There is a $1 fee to use this service (online or through US Mail) which I don’t agree with.
  2. Irresponsible or unethical marketers simply won’t use this mail.

Let me know if there is anything to add ….

Week 1 Homework

This lesson is titled, ‘Super Savers’ and discusses the importance of saving money and how to get the best return on your money.  This is the cornerstone of the FPU course.

The homework assigned for Week 1 is:

  1. Go home and decide exactly what you consider to be an emergency, so that you will know exactly when to use your emergency fund. Also, consider what is not an emergency but might have been considered one in the past. Write both of these lists down for your own reference.
  2. Fill out and be prepared to show your Basic Quickie Budget (from page 19) at the meeting for week 2. The easiest way to do this is with the tools at the FPU Member Resource Center. It will cut the time to finish this step about in half and let you focus on your budget and not crunching numbers.
  3. Read Chapters 1, 2, 3, 10 in Financial Peace Revisited (it came in the kit with your materials, no need to purchase again). This is a fast and easy read, and reinforces the concepts that we are going to be using for the entire course.

Lastly, we have some additional reading on this subject, if you are interested.

01-2007 Class Schedule

Folks,

The final schedule for the Financial Peace Class is:

01/21/2007 — Super Savers

01/28/2007 — Cash Flow Planning

02/04/2007 — Relating With Money

02/11/2007 — Buying Only Big, Big Bargains

02/18/2007 — Dumping Debt

02/25/2007 — Understanding Investments

03/04/2007 — Understanding Insurance

03/11/2007 — Retirement and College Planning

03/18/2007 — Buyer Beware

03/25/2007 — Real Estate and Mortgages

04/01/2007 — Careers and Extra Jobs

No class on 04/08/2007 for Easter.

04/15/2007 — Collection Practices and Credit Bureaus

04/22/2007 — The Great Misunderstanding

The Definition of Finance

Money is a good servant, but a poor master

— Unknown