Consolidation Workshop

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Managing Debt

• You can achieve your dreams
• make it happen
• get some answers
• find direction

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(No Transcript)
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• Credit history credit reports
• Credit cards
• Debt counseling
• Student loan consolidation

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Credit History and Credit Reports
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Do You Have Credit Now?

• Student Loans
• Apartment Leases
• Utility Bills (Cable, Phone, etc.)
• Credit Cards
• Car Loans

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Why build good credit history?

• Employers can and do check your credit history
• You can leverage your purchasing power
• Car
• Furniture
• Home
• Your credit history reflects in your credit
  report (much like a college transcript)

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Credit Reports

• Your credit report includes employment
  information and previous addresses
• More than 60 of credit reports have negative
  information
• Bad credit could prevent you from receiving
  future loans
• Review your credit report periodically
• Make corrections when needed
• Be wary of stolen identities

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What lowers your credit rating?

• Too much open credit
• High credit limits on credit cards
• Late payments
• Accounts being transferred to credit agencies
• Bouncing checks
• Bank could close your account

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Advantages and Disadvantages of Credit Cards
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Credit Cards

• Advantages
• Provide credit record
• Available for emergencies
• Rent a car
• Pay for purchases over time
• Allows you to use someone elses money (float)
• Immediate cash availability
• Limited liability
• Convenience checks
• Frequent flyer miles or points

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Credit Cards

• Disadvantages
• Can create excessive debt
• Interest can be high
• Repayment could take many years
• Repayment could be 3 to 5 times the original
  amount
• Too many cards increase default risk
• Card number can be stolen by different means
  i.e., physically, over the internet, over phone,
  mail orders, etc.
• Immediate cash availability
• Convenience checks

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Credit Cards

• Keep the number of accounts small
• Reduce credit limits if not needed
• Close unneeded accounts
• Beware of low introductory rates
• Bait and switch rates
• Carefully read your statement
• Make payments on-time
• Thoroughly research erroneous charges

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Credit Cards

• Know how the interest rate is calculated
• Variable vs. Fixed
• Interest charged on average daily balance with or
  without new purchases
• Cash advances vs. purchases
• Be wary of those who bear gifts
• When making online purchases pay attention to
  websites security
• Read the small print

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Did you know?

• 40 - 90 of credit card payments pay
  fees/interest/finance charges
• Merchants pay a discount fee for accepting credit
  cards
• Fees
• Annual Fees
• Late Payments
• Going over the limit
• Cash Advances

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What can you do to avoid the credit card blues?

• Use CASH
• Get a debit card use it
• Limit your limit
• Pay on time, every time
• Have one or less credit cards
• Transfer any high interest balances to cards
• Ask for a lower interest rate
• Get a realistic budget and stick to it

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Lets test your credit card knowledgeWell look
at two scenarios, the only difference is the
monthly payment
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Credit Card Scenario 1

• You charge 2,500
• You pay 50 a month
• Yearly interest rate is 20
• How long will it take
• to pay the 2,500?

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Answer
9 Years 1 Month!!!!!
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Recap Scenario 1

• You charged 2,500
• You paid 2,920 in interest over the 9 years
• You paid 116 interest

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Credit Card Scenario 2

• You charge 2,500
• You pay 100 a month
• Yearly interest rate is 20
• How long will it take
• to pay the 2,500?

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Answer
2 Years 9 Months!!!!!
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Recap Scenario 2

• You charged 2,500
• You paid 761 in interest over the 2 years
• You paid 30.4 interest

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Life AfterGraduation
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Planning For Life After Graduation

• Start now
• Research expected salary
• Before taking on debt, make sure you can meet
  your financial obligations after you graduate

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Student Loan Repayment
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Budgeting Scenario

• You take a 30,000/year position
• You purchase a new car for 20,000
• You have 17,000 in student loans
• You rent an apartment for 650/mo
• You have 3,000 of credit card debt

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Budgeting
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Monthly Expenses
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Budget Reality
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Reality Check
Wheres the (321) coming from each month?
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All is Not Lost

• There are things that you can do now to avoid
  this situation
• Dont increase your debt as your salary increases
• Use credit cards wisely
• Contact your creditors and set up a workable plan
  for repayment, even if it is 5 a month
• Student loan consolidation
• Can greatly reduce your monthly payment

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Debt Counseling
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You and your peers

• 78 of undergraduates have credit cards
• 32 have 4 or more cards
• Average number of credit cards 3
• Average credit card debt 2,748
• 13 have credit card debt between 3,000 -
  7,000
• 9 have credit card debt greater than 7,000
• This does not count student loans!

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Need Help?

• Find out your credit score and history free or
  cheap
• Go to the credit reporting agency source
• www.experian.com
• www.transunion.com
• www.equifax.com
• With debt management or credit consolidation,
  help is available
• Credit Bureau
• Consumer credit counseling
• National Foundation of Credit Counseling
• IRS and FTC warn to be cautious
• Dont be in a rush read the contract
• Find out about your student loan debt
• www.nslds.ed.gov

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Consumer Credit Counseling

• Associated fees or voluntary contributions
  charged
• Cant remove legitimate negative information from
  credit report
• Check that creditors are being paid
• Do your homework
• Better Business Bureau
• National Association of State Charities
  (nasconet.org)

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Student Loan Consolidation
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Average student loan debt for Undergraduate
Student

• 45,000

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How will this debt affect me when I graduate?

• Monthly payment on a balance of 45,000 is 467
• Average starting salary for a graduate is
  30,000
• That payment will make up about 42 of after-tax
  income

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What are my repayment options?
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Repayment Options(Federally regulated)

• Consolidation Repayment
• Fixed interest rate is determined by the weighted
  average of eligible loans
• Maximum 30-year repayment schedule based on total
  loan balance
• Borrower can select any repayment term less than
  the max
• Borrowers consolidating while in school or during
  grace period receive 0.6 reduction in interest
  rate

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What Happens Every July 1st?
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Department of Education Sets New Rates

• July 1, 2005 - student loan interest rates
  increased 1.93
• Rates WERE at a 37-Year LOW
• Current rates are the 3rd lowest in history
• Rates WILL INCREASE AGAIN July 1, 2006

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Reauthorization
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Reauthorization

• Occurs periodically in the student loan industry
• Eliminates spousal consolidation
• Eliminates in school consolidation
• Rates will increase to 6.80

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Reauthorization

• Existing loans will continue to have variable
  interest rates
• Changing every July 1st
• Newly originated loans will have a fixed 6.80
  interest rate

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What benefits me the most?
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Edconsolidation Benefits

• Additional interest rate reduction of up to 1.25
  
• 0.25 reduction
• Auto-debit program must be used
• 1 reduction
• 10,000 loan balance and 36 consecutive payments
  on time and electronically

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Edconsolidation Benefits

• Non-profit company
• One low monthly payment
• No prepayment penalty
• Will hold application until the end of your grace
  period

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Edconsolidation Benefits

• Easy consolidation process
• No credit check
• We will NEVER sell your loan
• Personal counseling and service

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Consolidate Before Rates Increase AGAIN
6.80 interest rate
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Edconsolidation Savings Table
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Submit your consolidation application AFTER
graduation AND BEFORE June 30!
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Climbing A Mountain of

• Student Loan Debt?

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Edconsolidation makes that

• Mountain into a Molehill

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Edconsolidation
One loan. One lender. One low monthly
payment.Call 800-331-5626or
visitwww.edconsolidation.com