Archive | April, 2012

Should I Buy Those Shoes?

27 Apr

Amy Ledman, Financial Aid Administrator and Purdue Alumni
www.purdue.edu/mymoney

A common statement you hear people say is “live like a college student.”   To most, this means live cheaply or live within your means.  Trying to live within your means might be difficult when it’s your first time living on your own.  When you’re out with friends and shopping here are a few questions to ask yourself.

Do I need this or do I want this?  Keep in mind that it’s insanely easy to convince yourself a want is a need if your want is strong enough.  If you need something it means you cannot survive without it.  That means water, food, and preferably shoes without holes.  So if you’re on the fence of buying your 5th pair of sandals it’s time to step back and think if you really need a rainbow choice.  Or just maybe you should save this money for a weeks worth of groceries.

Will this be practical?  A good way to save money is by spending it wisely.  Say your professor states you need to dress up for a day and you only own flip-flops.  Clearly nice pair of shoes is needed.   This would be classified as something you should own, but be practical.  Look for a pair that is versatile enough that they can be used for different situations.  While the jazzy hot pink shoes might look fun a less expensive black pair would work and be more useful in the end…which will also cause you to not have to go buy another pair later.

sparkly high heeled shoe

sparkly high heeled shoe

Is this crazy or a good buy?  Even while you are being a cheap college student you also need to be not overly crazy cheap…or frugal if that sounds nicer.  There will be times when being cheap won’t pay off in the long run.  An example would be buying shoes that are $15 but end up giving you 20 blisters.  Finding something that’s low in price doesn’t always make you thrifty.  This comes back to being practical.  If you get 20 blisters you’re going to need to go buy another pair of shoes causing that $15 to sit in your closet.

These are just some quick questions to consider the next time you are out spending your hard-earned money.  If these questions don’t help solve your shoe dilemma then you should go walk around.  Leave your possible purchase behind and around the mall.  If the wish to buy your new shoes is gone then clearly the purchase wasn’t meant to be.

Downside of Student Loan Default

24 Apr

Brandon Endsley, Financial Aid Administrator and Purdue Alumni
www.purdue.edu/mymoney

student loan debt loan

thinking about debt

Before I discuss the downsides of student loan default, you probably need to know what the term student loan default means.  A student loan default occurs when a student accepts a loan to cover their higher education costs and fails to fulfill the payment obligations they agreed upon once the loan has entered repayment. If your loans enter default status do not feel embarrassed.  Many other student loan borrowers can relate to your situation.  According to the Federal Reserve Bank of New York in 2011, 27% of the 37 million student loan borrowers could not meet the repayment obligations and have defaulted on their student loans.  That means approximately 10 million Americans could not make their student loan payments.

Problems for the 10 million Americans in student loan default go above and beyond the ability to make payments.  There are 6 common consequences that can occur from a student loan being placed in default status.

1.)   A loan default in any category (mortgage, car, or credit card), would result in a negative effect on your credit score.

When entering into student loan default, all three credit reporting agencies are notified, causing your credit score to drop up to 150 points.    The maximum credit score is 850.  What is considered poor credit starts below 700 points.  If your credit score started at 850 points, a credit reduction of 150 points will have a negative effect on your ability to receive additional loans in the future.  A poor credit score can result in a denial of a future mortgage, car loan, or even the opportunity to obtain a credit card.  A loan default can also affect your ability to attend higher education institutions.

 2.) While your student loans are in default status, you cannot receive additional financial aid.

If you want to return to college and receive your associates, bachelors, masters, or even Ph.D., and your loans are in default, you will have to fund the complete cost of your education without federal aid.  This means, you will also not be eligible for federal, state, or institutional grants, scholarships, or loans, regardless of where you previously attended.

3.) The federal government can garnish your wages.

One avenue the government can use to receive payment on your defaulted loans is through wage garnishment.  Wage garnishment is where the federal government takes a percentage of your paycheck until the student loan debt has been paid off.  The federal government may take up to 15% of your wages, but the amount they take cannot exceed 30 times the federal minimum wage.

4.)  You will not receive a refund from your tax return until you are out of student loan default.

Along the same avenue, the federal government can also withhold tax refunds from the federal or state tax returns, and apply the funds to the overall student loan debt.  In addition to the garnishments listed above, the government can garnish federal benefits you receive to pay towards your debt.  An example of this would be, garnishing your Social Security Disability benefits (SSD).

5.)  You can be sued for debt owed.

Another way the government can receive funds owed is through the court system.  The federal government can sue for defaulted student loan debt.  Also, provisions for a statute of limitations do not exist. This means the federal government does not have a time frame limitation to sue and can bring a case against you to at any time.

The last two consequences include bankruptcy and additional fees.

6.) You cannot discharge your student loans in bankruptcy and you will be charged additional fees.

Bankruptcy is a reallocation of your assets to resolve your debt issues.  In previous years, student borrowers could include student loan debt in bankruptcy.  Now that policies have changed, student loan debt can only be included if approved by the court. 

Additional fees, charges, and collection cost involved in the defaulted student loan process mark the last consequences to consider.  Each debt retrieval avenue listed above costs either the federal government or collection agencies money.  The costs are then passed down to you, as the owner of the loan.  These fees will only increase the amount owed on the loan, and increase the repayment period.

Life happens, and situations can arise that make the repayment of a student loan difficult or even impossible.  Loss of a job, the inability to find employment after graduation, or just not earning enough money can all be reasons a loan may go into default.  The government understands these situations and has alternative repayment options for borrowers who fall into hard times.  Before your loans go into student loan default, be proactive. Call your lender and find out about the different options that may be available to you.  There are other options to help you through these tough times before causing further financial headaches.

Should I buy an iPhone?

23 Apr

Kim Youngblood, Purdue Report Writer/ Data Support Specialist
www.purdue.edu/mymoney

iphone

Iphone

flip phone

flip phone

What is an iPhone I ask myself?  I was part of the ‘in’ crowd back when Motorola had the market cornered and Cingular was the primary carrier.  In the mid 1990’s being a new graduate with a new level of income, a cell phone was one of the first items on my purchase list.  I didn’t think about wants vs. needs.  It was the latest and greatest technology and I wanted that phone.

Over the next nine years, I carried it with me everywhere I went.  I even upgraded through that time becoming a dedicated user.

I took myself out of the cell phone saga in 2007.  My saga ended when Cingular changed cell phone towers thus requiring me to upgrade my working phone and sign another two yearlong contract.  Since my contract had expired and I still had a home phone, I politely asked them to shut off my cell service.  The time had come to focus on the needs in life instead of.

At the time, I didn’t realize how easy the transition would be.  I thought giving up the cell phone would be a greater challenge.

I have to admit I like my current plan I’ve had for the past 5 years.  It has unlimited minutes, but no texting and no data.  Pure, clear, voice!  I’ve been asked how I can continue to live without a cell phone.  My usually response is I simply don’t miss the bill.  I don’t miss being available 24/7.  I enjoy my alone time.  Yes, I had to give up my cell phone to realize how much of my life I was giving to the item attached to my being.  I don’t miss the monthly fee, the worry about going over minutes, roaming charges, and burdensome two-year contract!

Money wise an iPhone would be a nice luxury only if you have no other debt.  Ask yourself, what interest rate you are paying on other bills to keep the debt afloat, while still paying for your iPhone instead.  A good example of what you could do with the extra funds not spent on an iPhone would be applying the “saved” money to the interest payment on a credit card instead.  You could be applying the “saved” funds to other principal balances on outstanding debt.  In other words, determine the true cost of the phone rather than the flat cost you pay each month to the cell phone provider?

There are other items to consider before purchasing and iPhone.  What is your action plan if you can’t pay your monthly bill or can no longer afford to pay the cell phone bill?  Do you have the hundreds of dollars to pay your way out of the required contract?

Have you considered a prepay phone with no contract?  Could you use your internet for data and live without texting?

These are just a few of the money wise questions you need to ask yourself before signing up for a luxury like the iPhone.

April’s Top Ten Group Date Ideas

15 Apr

Julie Slagle
www.purdue.edu/mymoney

Here are ten great date ideas that will help you stay frugal without looking cheap. Drumrrrrrrroll Please!

At number 10…

The Flour Game (pack flour into measuring cup, put plate on top, flip plate over, place a M&M on top, use knife to slice through flour, if you make candy fall, you have to fetch it out with teeth. HILARIOUS game. Bring baby wipes. And a camera!

At number 9…

Human pinball game (hold PVC pipes between every 2 people to make pinball rows, play soccer, but no one can let go to their row of teammates…. so fun.)

At number 8…

Marshmallow Shooters: we used yogurt cups, which are sturdier, but you can make them with your dates, and then have a crazy war.  You might want to plan something else too, because it might get old after a while, but its tons of fun:

At number 7…

The Iron Chef Game: assign everyone in the group to show up with an unusual food in a particular food group (dairy, vegetable, fruit, oil, meat….). If you are cooking in 2 groups, you want to have 2 cheeses, 2 fruits… then take turns letting each group pick first which food item they will use. They have to make main dish, side, and dessert. Have parents (or neighbors, if at college) judged the cook off (presentation, taste, originality…).   It helps to have 2 kitchens for this date for ease of cooking.

At number 6…

Slip n Slide baseball/kickball in the summer (kiddie pools are bases, Slip n Slide into home base)

At number 5…

Bonfire, hotdogs, marshmallows: (play “chubbie bunnies” in this dating game you add marshmallows to your mouth one a time and say “chubbie bunnies” after each one, see how many you can fit…) or play “Murder” around the campfire–you know, where the murderer winks at the guy he wants to kill, and everyone tries to catch him and figure out who is it.

At number 4…

Watch a scary or funny movie as a group outside, with a projector if you can rig it up, or a laptop if that’s easiest.

At number 3…

Have a zombie dinner–everyone dresses up like zombies, eat brains (peel a melon, and carve “brain grooves” into it, or cheese ball with grooves).

At number 2…

Spray your hand with hairspray and set it on fire. JUST KIDDING! That’s just nuts.

And the number 1 group date idea for April….

80’s party anyone? Costumes of course, watch Ferris Buehler’s Day Off, Back to the Future, Ghost Busters, Gremlins, Karate Kid, Footloose, Bill and Ted’s and dress like your favorite characters.

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