Personal Finance Blog

Tips And Stories To Help You With Managing Money

Debt May Outlive A Student. What Then?

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Who is responsible for a student's school loan debt if the pass away?
Who is responsible for a student’s school loan debt if the pass away?
Young people are expected to live long enough to pay off student debt, but it happens sometimes that they don’t. Parents or other survivors may find themselves assuming debt for which they are not prepared.

Federal students loans are automatically cancelled upon the death of the recipient, but private lenders are not required to forgive such debt. Seeking relief through bankruptcy is not an option in most cases.

Consider the case of a California couple whose daughter died of liver failure before her education debt was paid. The parents took on the care of three grandchildren and because they cosigned on the private student loan they had to assume the daughter’s debt, which she had acquired to attend nursing school. Over the next five years, the balance ballooned to $200,000 and the lender would not forgive the debt, news outlets reported.

The odds of a 27-year-old dying are less than 1 percent, according to the Commissioners Standard Ordinary Mortality Table, but that is small comfort to the California parents whose loss has been complicated by their daughter’s residual debt.

Outstanding student loan debt in the United States has reached an all-time high of $1.3 trillion. Just to earn a bachelor’s degree, the total in loans is likely to reach almost $30,000, the Project on Student Debt at the Institute for College Access & Success, Oakland, Calif., reported.

Most private student loans require a co-signer. About 90 percent of such loans issued in 2011 had co-signers, the Consumer Financial Protection Bureau reported.

Sallie Mae, the country’s largest private lender, offers a Smart Option Student Loan that automatically forgives the debt if the primary signer dies. This lender also has a provision that lowers the interest rate on a regular loan if the parents or some other credit-worthy co-signer must assume the debt. Loans made before 2009 are not covered by the provision, but Sallie Mae may choose to forgive the debt under particular circumstances.

Attorneys with the National Consumer Law Center, Boston, believe there are too few safeguards for students and co-signers who take out student loans. “Ideally, there should be some kind of relief for borrowers in that situation,” said Persis Yu, a staff attorney with the center. The double-whammy of losing a young person pursuing higher education and then being required to repay student loans is “salt in the wound,” he said.

Yu suggests a life insurance policy on the student is the best option to protect co-signers from the financial pain. A policy covering the amount of the loan would pay the debt in full. That provision would spare people already suffering the loss of a family member the additional burden of financial stress related to student loans. Or you could go the safe route and go for the federal loans. Whichever route you choose, wise planning will help in the long run.

Businesses Shore Up Health Campaigns

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October is the month designated as Breast Cancer Awareness month.
October is the month designated as Breast Cancer Awareness month.
They are calling it “shared interest”- combining a well-known health campaign with the interests of companies and organizations who support the cause and stand to share in the attention they create.

A notable “for instance.” The city of Chicago has “gone pink,” for October, including lights, banners and flags along its skyline, to help publicize the goals of the annual Breast Cancer Awareness campaign. Those goals include early diagnosis, treatment and research into the devastating woman’s disease. More than 200 of Chicago’s buildings, landmarks and businesses were encouraged to join the effort. The city’s contribution to the Pink Ribbon campaign will be prolonged with a 5K run in November.

Chicago isn’t the only entity doing extraordinary things to share in an effort well known to the American public. On the list are Times Square, ABC News, Blue Cross-Blue Shield, Lexus, Kroger, Macy’s, Go Daddy, the NFL and who knows how many others whose presence in American life is easily identified.

Shared Interest allows these entities to participate in a “higher order purpose” and to align itself with others around a mutual cause, proponents say. They enjoy a “human equity” fallout, proving that sometimes-aloof organizations do have a heart.

The movement has its critics. Some say that the early intervention message gets lost in the hype, that it offsets the important goal of getting more money into research that might find cures for breast cancer. Some of the companies that have rallied to the pink cause even have products and policies that counter the effort – for instance, those that pour carcinogens into the ecosystem.

Breast cancer is not the only campaign that spawns Shared Interest. The ALS Ice Bucket Challenge raised more than $100 million to fight that debilitating disease. It stood out as the poster child for awareness that leads to action.

Last month was Hunger Action Month, with the focus on one in six Americans who go to bed at night hungry. That effort raised millions in money and resources and considerably improved awareness.

The proof of the overall positive result of Shared Interest lies in the increased knowledge the public gains of the very real needs for help in combating some of the most serious problems Americans face. For instance, ask the family of one woman who took the pink ribbon campaign seriously – whatever the source of her information – and got into treatment for her own disease early. Those family members most certainly would support the joint effort to get out the word.

Where Does The Job Market Stand?

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Unemployment figures are lower than they have been, but what exactly do they reflect?
Unemployment figures are lower than they have been, but do they mean?
You hear all kinds of things: Either the job market is looking rosy after the devastation of the recession, or things are still rocky. What should you believe?

Although there are indications of steady hiring and falling unemployment, experts are still baffled by some of the relevant data. At the core of the debate is whether the current 6.1 percent unemployment figure, while it is far below the 10 percent rate registered at the beginning of the recession, really give a true picture, or does it overstate the improvement?

The question of whether the feds will raise interest rates depends on how things sort themselves out. “We’ve never seen a labor market quite like this,” said Peter Cappelli, an economist with the Wharton School of Business.

Despite the improvement of the unemployment part of the puzzle, there are many companies that aren’t filling their job openings and many individuals who were jobless during the height of the recession apparently are waiting for further signs of stability before they start job searches.

The National political campaigns, soon to end in the Nov. 4 balloting, have kept the focus on the labor situation. Polling among voters indicates that behind the overall economy and terrorism, the unemployment statistics are much on the minds of Americans.

Five “mysteries” points related to the labor quandary include:

1. How many people are in the pool of those who didn’t look for jobs when the economy slumped or stopped looking when the recession went on? Will they re-enter the job search when it is clear that the economy is improving? Since the recession began in 2007, the number of adults either working or seeking work has dipped from 66 percent to 62.8 percent. That’s a 35-year low, equal to about 7.5 million people. Retirements among the Baby Boom generation have contributed to those data, probably accounting for at least half of the exodus from the workforce. Young adults are staying in school longer. Some who aren’t job-hunting are receiving disability aid. The economists look at the figures and conclude that many of the dropouts are not likely to come back into the ranks of job-seekers. For the employer, that could mean a demand for higher pay for the jobs that are available.

2.Where are the 3.8 million who were unemployed for more than six months, but no longer are counted in the unemployment data? Have they got jobs or have they quit looking, changing their status in the figures? Labor Department data indicate that about 12 percent of the long-term unemployed are finding jobs each month. Federal economists who sifted data over a whole year, however, found that nearly 40 percent of the long-term unemployed found jobs during that period.

3. Why is it that 7.3 million people looking for full-time jobs can find only part-time work? The figure for this category before the recession was only 4.6 million. Economists think it indicates that there are more wanting work then the unemployment rate suggests. He thinks this situation justifies another percentage point on the unemployment rate. The situation may affect wages, portending they won’t go up any time soon. In general, wages start rising when unemployment hits its current level. A rapid rise in wages could trigger faster inflation.

4. Companies are advertising more jobs, but not filling all of them. That makes an imbalance between the jobs available and the workers seeking them out. It seems companies are not as aggressively filling jobs as they did pre-recession, taking an average of 25 days to fill a job, compared with fewer than 22 before the economy tanked. Some economists suggest the changes related more to new technologies that allow employers to post jobs. They may post the jobs before they actually are ready to hire, just because they can do so easily.

5. Why has job growth declined for women? The growth rate for females dropped more than 14 percent this year. Although more jobs are being added – an average of 215,000 per month this year – women have taken fewer than 40 percent of those jobs. Women’s participation in the labor force was nearly 63 percent after the 1981-82 recession; 51 percent following a 1990-91 downturn in the economy and 47 percent after a similar dip in 2001. Government studies indicate that men are taking jobs in sectors traditionally dominated by women, including hotel, restaurant and financial services. Women are having less success in the manufacturing sector as well. The recession hit traditionally men’s jobs harder, accounting for 71 percent of the losses.

Experts expect that the job market will continue to return to more normal trends over time.

What’s The Price of Speaking Out?

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Malala Yousafzai is an example to "the millions of children who brave daunting odds to go to school each day in Pakistan."
Malala Yousafzai is an example to “the millions of children who brave daunting odds to go to school each day in Pakistan.”
In recent years, the world has been made aware of some high-profile instances of women who had the courage to speak up when they believed injustices were being done. And the price they paid for doing so. The incidents have raised the question, how many of us would do the same?

Malala Yousafzai, a Pakistani, was only 11 when she began blogging for the BBC about what she saw as unconscionable repression of women in the matter of education. The daughter of a school principal, she documented the Taliban’s tightening bans on female education, the destruction of some schools and closure of others in her hometown of Swat in northern Pakistan.

Her blatant protests resulted in an attack by a Taliban gunman. He stormed onto the school bus in which she was a passenger and shot her in the head. She survived and her family relocated to England. On her 16th birthday, she gave a speech at the United Nations in New York and she has continued her campaign for education for all children, publishing a book, “I Am Malala,” and establishing the Malala Fund to promote female education around the globe. Recently, she learned she would share a Nobel Peace Prize with Indian activist Kailash Satyarthi. Malala put off celebrating, going instead to her chemistry class in a Birmingham high school. She joked that the money that goes along with the prestigious prize “is not going to help in exams.” She will continue to advocate for the 57 million children who are barred from education.

Briana Aguirre spoke up about the lack of proper protection while treating a patient with Ebola. She risks criticism and losing her job, which her family depends on.
Briana Aguirre spoke up about the lack of proper protection while treating a patient with Ebola. She risks criticism and losing her job, which her family depends on.
More recently, Briana Aguirre, a nurse in Texas Health Presbyterian Hospital, publicly denounced hospital leaders for failing to adequately prepare staff to care for patients with Ebola, the fatal disease that is ravaging areas of Africa and is now showing up in America. Those who were assigned to attend a patient who contracted the disease were not given adequate clothing to protect them from exposure, she said. Gowns had gaping holes at the neck. Other patients also were put at risk when they were not removed from the area, she said.

The hospital had presented optional seminars once or twice, but provided no hands-on training for those who would work with infected patients, Aguirre said.

Aguirre told Today reporters that hospital administrators did not mention Ebola to staff when the facility accepted Thomas Duncan, a victim of the disease, as a patient. Nina Pham, 26, a fellow nurse, contracted the disease after caring for Duncan. Aguirre then was assigned to care for Pham.

Aguirre, a typical middle class worker, faces financial devastation and possible ill effects to her career.

Congress has stepped in and will grill Texas Presbyterian’s chief executive, Daniel Varga, about the matter. Centers for Disease Control director Tom Frieden, will participate.

The world tends to stand in awe of people like Malala and Aguirre who have the courage to stand up and act on their convictions in spite of the hazards they face in doing so. Even the compensation of a Nobel Peace Prize, in Malala’s case, can hardly do justice to their acts in speaking truth that is unpopular with others.

Congratulations to both these women for filling the void of indifference by those of us who fail to act.

So, What Are Rich People REALLY Like?

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Having a lot of money doesn't mean you can ignore your finances. Money management skills are just as critical for the rich and famous as for you and I.
Having a lot of money doesn’t mean you will keep it. Money management skills are just as critical for the rich and famous as for you and I.
We identify them by their designer bags, expensive footwear and sunglasses and luxury vehicles and make all kinds of assumptions about them. How far off the reality are we?

In fact, according to those who know, they aren’t all big spenders and they don’t all have immaculate financial records. They don’t all live in palaces and throw non-stop parties. A fair number of them have money they don’t know how to manage.

Consider these facts and see if there is anything you can learn about managing your resources:

Some of the rich rent, don’t own, their residences. The renters include Diane Keaton, Meg Ryan and Jane Fonda. Queen Latifa rented 4,700-square foot digs in Atlanta for $10,000 a month. Probably not a reasonable example, but proof that people who change residence quite often could find renting a better option.

Just because people have money is no surety that they know how to manage it. Often they have accumulated their wealth through very hard work and expert use of innate talents. In most instances, they protect what they have amassed by hiring financial advisors to oversee the details. For instance, Mark Zuckerberg, who started Facebook while still in college, relies on Divesh Makan for financial advice.

Perfect credit? Naw. Having lots of money creates a terrible temptation to spend it. Not every celebrity has a credit rating that would make Mom proud. Lindsay Lohan, whose escapades with the law have been notorious, reportedly owed $600,000 in credit card debt at one time, a load that would required some $15,000 monthly in payments. Your credit rating will reflect your spending choices, so beware. On the other side of the scales are many rich folk – Zuckerberg, for instance – who practice frugality and dress like the masses. Warren Buffet, third richest man in the world, with income of some $37 million per day, lives in the home he purchased in 1958 for $31,500.

With all kinds of money to toss around, you would think the rich are never in debt. Not so. Sometimes the big paychecks and endorsement income is matched by the same level of debt. Boxer Mike Tyson once owed the IRS $18 million. A whole string of celebrities are in the same boat.

Since money seems to beget money, you’d guess that the rich all come from rich families. Again, wrong. Few of today’s wealthy came from “silver spoon” backgrounds. Though there are well-known names that have a happy-finance history, many of today’s rich are the self-made variety who made good use of the American dream. TV talk show diva Oprah Winfrey, for one, was born into a poor family in Mississippi. Starbucks CEO Howard Schultz grew up in a housing complex for the poor in Brooklyn. Inheritance is not the only road to success.

Bankruptcy is not a foreign term to the rich. Among those who have been through the process – and bounced back – are Henry Ford, Walt Disney, Milton Hershey and H.J. Heinz. Hotel mogul Donald Trump has been through bankruptcy four times, but today he’s worth $4 billion.

Many of the super-rich live on budgets. And though their budgets are inevitably fatter than the common man’s, they are under the same constraints to keep their spending within bounds. Actress Keira Knightley told a Glamour Magazine reporter that she has been limited to a $50,000 annual budget since 2012, although her net worth now is $50 million.

In short, though the differences are on a large scale, the multi-millionaires of the world must obey some basic economic rules just as others do or they find the easy-come, easy-go route in full effect.