Sunday, September 25, 2011

Renters Insurance Is Assurance for Students

This morning, firefighters from cities across Johnson County, Iowa battled a large fire affecting multiple buildings in downtown Iowa City. There were apartments on their upper floors of the impacted buildings.  In the TV interview, one of the displaced student tenants said ‘Thank God for renter’s insurance’. Hopefully, all the tenants were as wise as the student being interviewed.

College students renting an off-campus apartment or house should consider purchasing renters insurance to protect their personal property (i.e., computer, television, bicycle,  furniture, clothing) in the event that it is damaged, destroyed or stolen.

Even if a student is a dependent under the parent’s insurance, the student’s personal property, in many cases, is not covered if the student lives off campus.  Your landlord’s insurance doesn’t cover your personal property in the event that your propriety is stolen or damaged as a result of a fire, theft or other unexpected circumstance.

Premiums for renters insurance average between $15 and $30 per month depending on the location and size of the rental unit and the policyholder’s possessions. For the price of a few lattes, you could have thousands of dollars of insurance.  Unusually expensive items, such as fine jewelry or an art collection, may require the renter to purchase additional coverage, called a “rider” or “floater”. Your insurance agent can help you determine if additional coverage is necessary.

Another important factor to look for when shopping for renters insurance is “actual cash value” vs. “replacement cost” coverage. Actual cash-value coverage will reimburse you for the value of the personal property (it's garage-sale price) at the time of your claim. Replacement cost coverage, on the other hand, will reimburse the full value of the new item, after you purchase the new items and submit your receipts. While the up-front cost is greater, you are more likely to receive accurate compensation for your possessions.

Bankruptcy and Student Loans

If you're having serious trouble paying back your student loan debt, bankruptcy is not a likely alternative for you. Student loans are usually not eligible for discharge from bankruptcy.

If you're having trouble making any of your payments, the first step is always to contact your lender, be honest and try to work toward a realistic payment plan. The lender would much rather be paid over a longer period of time then for you to default on repayment of your debt.

If your student loans are the largest part of your debt, you are better off to contact your student loan lenders and see if you can arrange an easier repayment plan or deferment of payments, over bankruptcy.
Bankruptcy filings stay on your credit report for 10 years and will likely limit your ability to get a mortgage, borrow money, or get a job. 

Saturday, September 24, 2011

Student Loan Default Rate Increases

Is the education worth the debt?  Is it worth going an extra year so you can work while going to college and not take on debt? First, a college education is worth the cost, but you have to look at the potential ROI (Return on Investment).  Different careers pay varying wages. With higher earnings, you are able to pay back a larger student loan debt with fewer sacrifices. 

The U.S. Bureau of Labor Statistics (BLS) publishes an OccupationalOutlook that lists occupations, the education required, and the potential salary range.  According to the BLS, the high your education, the more money you will make and the less chance you will be unemployed.  Choose your education, career and debt load carefully.

The cost of an extra year of college could be more costly than taking out a loan and finishing on time. To calculate this cost, add together the cost of tuition and books for one additional year of college plus your potential future salary, and then subtract your current salary.  If tuition and books cost $30,000 and your future salary is $35,000 upon graduating, and you are making $15,000 now, that extra year cost you $50,000 ($30,000 + $35,000 - $15,000).  Can you better afford the fifth year of $50,000 or take out a loan to get done in four years?

Choose your institution carefully.  You may think that private 4-year colleges and universities are the most expensive but if you calculate the true cost (tuition, room and board minus any grants and scholarships) it might be close to the cost of a state school.  If adding in the cost of getting done in four years compared to five or six, and placement rates for their graduates, it may be less expensive to attend a private college or university.
You can also receive credits from your local community college and usually transfer the credit to a 4-year college or university.  If considering this option, talk to the college or university you are planning to transfer to make sure all of your community college credits count towards graduation.
Using the Federal data for the 2009 cohort, the highest default rate for colleges and universities offering baccalaureate or above degrees is for for-profit schools with a 15.4% default rate, followed by public colleges or universities at 5.2% and then private colleges and universities at 4.5%. Student loan defaults do not go away on your credit report.

Being a federal loan, the government has more power to garnish wages (up to 25% of your wages), keep your federal and state income tax refunds, take your future lottery winnings, and garnish part of your social security.  Student loans are rarely discharged in bankruptcy.  So once you borrow the money, you will have to pay it back! 

If you are having trouble making your student loan payments, check out for information on deferment of payments. You can also check out a Wall Street Journal video for more information on student loan defaults.

Monday, September 12, 2011

Goals and Lotteries

We know it is better to save our money than to buy a lottery ticket. The odds of winning the Powerball are 1:195,249,054. Yet, when the payout climbs above a $100 million, we start to dream of what we would do with a winning jackpot.

Lotteries give us an excuse to dream of what we would do if we had an abundance of funds at our finger tips. What would you do? What would you buy? Where would you travel? These dreams provide motivation to set goals and to work to achieve these goals. It also helps you to get in touch with your values and to ask the question of what your really want out of life.

We know that we probably will not win the Lottery jackpot, but we have big dreams and goals to achieve. An entrepreneurship professor once said "if you are going to dream, dream big." and "be careful of what you dream for, it just might come true." So go ahead and dream of winning the lottery and what you would do with all the winnings. Then set goals based on your values and work to achieve your dreams.