Cornerstone: Creating Success through Positive Change 6th edition

(In class activity) What percentage of your income should you spend on must haves, wants, & savings/debt? How much credit card debt does the average household have? What percentage of American families spend more than they have each year? T/F Marrying someone with good credit will improve your credit score.

50/30/20% $8,000 43% No, but…

Practicing Fiscal Fitness Managing money is a challenge for many students Will you have to work to finance your education? Do you need to change your financial habits? Copyright © 2011 by Pearson Education, Robert M. Sherfield & Patricia G. Moody, Cornerstone: Creating Success Through Positive Change, 6th Edition, Chapter 11, Slide 2

Young Adults and Debt Nearly 50% have defaulted on a debt 30% worry frequently about debt 58% move in with parents after college 22% altered career plans due to debt Average credit card debt is now over $4,000 24 - 40% of income is spent on debt payments Bankruptcy is a major issue for young adults Copyright © 2011 by Pearson Education, Robert M. Sherfield & Patricia G. Moody, Cornerstone: Creating Success Through Positive Change, 6th Edition, Chapter 11, Slide 3

Preparing for the Future Practice delayed gratification Take a personal finance course Learn financial lingo Save your change daily Write down everything you spend Apply for all types of financial aid Copyright © 2011 by Pearson Education, Robert M. Sherfield & Patricia G. Moody, Cornerstone: Creating Success Through Positive Change, 6th Edition, Chapter 11, Slide 4

Match the word with the correct definition. Low-interest subsidized loan based on need. Must be half time. A need based grant awarded to undergraduates with no other degree. Low interest loan to qualified parents of students. Need based grant awarded to institutions to distribute accordingly. Unsubsidized low-interest loan-you don’t have to show need. Unsubsidized Stafford loan Federal Supplemental Educational Opportunity Grant PLUS Loan Pell Grant Stafford loan

Types of Financial Aid Loans – must be repaid with interest Grants – do not require repayment and are often need-based Scholarships – do not require repayment and are often merit-based Work study – money earned while working on campus Copyright © 2011 by Pearson Education, Robert M. Sherfield & Patricia G. Moody, Cornerstone: Creating Success Through Positive Change, 6th Edition, Chapter 11, Slide 5

Are you Eligible for Federal Aid? Demonstrate financial need? Have high school diploma or GED? Enrolled in an eligible degree program? Citizen of U.S. with a SS#? Making satisfactory academic progress? Male registered with Selective Service? Any drug convictions? Copyright © 2011 by Pearson Education, Robert M. Sherfield & Patricia G. Moody, Cornerstone: Creating Success Through Positive Change, 6th Edition, Chapter 11, Slide 6

Some Tips for Applying Complete your FAFSA/TAFSA in its entirety Read instructions carefully and attend to deadlines Be honest and supply any documentation required Keep tax returns and forms organized Work with Financial Aid Officers on campus Apply for all types of aid Copyright © 2011 by Pearson Education, Robert M. Sherfield & Patricia G. Moody, Cornerstone: Creating Success Through Positive Change, 6th Edition, Chapter 11, Slide 7

Student Loans Required for many college students Borrow only the minimum you need This debt will follow you for up to 30 years Bankruptcy does not relieve student loan debt Copyright © 2011 by Pearson Education, Robert M. Sherfield & Patricia G. Moody, Cornerstone: Creating Success Through Positive Change, 6th Edition, Chapter 11, Slide 8

Undergrad Debt Institution Level & Control Percent Borrowing Cumulative Debt Overall Total (4, 2 and < 2 year) 58.8% $18,625    Public 49.4% $16,369    Private Non-Profit 69.7% $26,683    Private For-Profit 93.1% $17,162 4-year Total 66.5% $22,656    4-year Public 61.1% $19,839    4-year Private Non-Profit 70.6% $27,349    4-year Private For-Profit 97.0% $24,635 2-year Total 44.8% $12,307    2-year Public 37.2% $10,444    2-year Private Non-Profit 64.0% $14,790    2-year Private For-Profit 97.6% $17,310 < 2-year Total 74.7% $10,172    < 2-year Public 36.1% $10,321    < 2-year Private Non-Profit 45.0% $10,990    < 2-year Private For-Profit 86.0% $10,123

Institution Control and Degree Program Percent Borrowing Average Cumulative Debt Median Cumulative Debt (Just Borrowers) Median Cumulative Debt (All Students) Bachelor's Degree 65.2% $23,118 $19,999 $10,500    Public 61.2% $20,040 $17,500 $6,998    Private Non-Profit 70.5% $27,535 $22,374 $16,115    Private For-Profit 96.0% $32,909 $32,625 $31,186 Associate's Degree 47.1% $13,289 $10,000 $0 38.9% $10,574 $7,668 71.1% $19,294 $16,130 97.8% $19,681 $18,783 $18,415 Certificate 63.2% $11,302 $9,000 $4,804 32.0% $9,754 $6,625 49.5% $15,071 89.9% $11,573 $9,858 $8,797

Useful Links http://www.finaid.org/loans/- Fin Aid Data http://www.hccs.edu/portal/site/hccs/menuitem.5fc1e5d66248062f3227a2ced07401ca/?vgnextoid=678cf8a147b6f110VgnVCM100000054710acRCRD&vgnextfmt=default- Fin Aid

Scholarship Searches Assignment #3 http://acinet.org/scholarshipsearch/ScholarshipCategory.asp?searchtype=category&nodeid=22 http://apps.collegeboard.com/cbsearch_ss/welcome.jsp http://www.hccs.edu/portal/site/hccs/menuitem.5fc1e5d66248062f3227a2ced07401ca/?vgnextoid=6f89daf3ba07f110VgnVCM100000054710acRCRD&appInstanceName=default- HCC Scholarships

Scholarship Search Assignment # 2 1. Scholarship Search (choose either option) Search for scholarships on any of the provided websites and choose either assignment. A- 2 Applied scholarships (proof) B- 3 Possible Scholarships & HCCS Foundation Essay (http://hccsfoundation.org )

HCCS Foundation Essay Requirements No longer than two double-spaced, typed pages in 12-point font with one-inch margins. Essays that are not formatted correctly will not be accepted. No exceptions will be made. Your essay must discuss all of the following: Your background, including any struggles or successes; Educational and career goals; How a scholarship will help you achieve your goals; Why you deserve a scholarship; and Any personal information that you want to be considered.

Pay off your debt quickly! Amount Borrowed Your Interest Rate Total Years to Repay Monthly Payment Total Interest Paid $5,000 7% 10 $58.05 $1,966.00 20 $38.76 $4,302.40 30 $33.27 $6,977.20

Protect Your FICO Score Monitor your credit report regularly Keep credit card balances low Ask card companies for lower credit rates Do not open multiple accounts at once Keep accounts in good standing open Use automated payment systems for bills Keep balance transfers to a minimum Copyright © 2011 by Pearson Education, Robert M. Sherfield & Patricia G. Moody, Cornerstone: Creating Success Through Positive Change, 6th Edition, Chapter 11, Slide 9

Impact of FICO Score on Home Buying Interest Rate Payment 30 Years of Interest 500 9.3% $1651 $394,362 560 8.5% $1542 $355,200 620 7.3% $1373 $294,247 675 6.1% $1220 $239,250 700 5.6% $1151 $214,518

How Can you Budget in each Area? Household expenditures? Utilities? Phone/email costs? Transportation costs? Food? Copyright © 2011 by Pearson Education, Robert M. Sherfield & Patricia G. Moody, Cornerstone: Creating Success Through Positive Change, 6th Edition, Chapter 11, Slide 10

Credit Card Debt One of worst kinds of debt Majority of college students have this debt Credit card issuers love college students! Paying with plastic results in more spending High interest and fees add up quickly Can you pay off what you spent each month? Copyright © 2011 by Pearson Education, Robert M. Sherfield & Patricia G. Moody, Cornerstone: Creating Success Through Positive Change, 6th Edition, Chapter 11, Slide 11

Tips for Managing Credit Cards Only use one card Watch for changes in fees and interest rates Your credit score can affect your rates Avoid cards with annual fees Know grace periods and payment due dates Protect your card with signature and “see ID” Make more than just minimum payments Try debit cards instead Seek reputable counseling if in trouble Copyright © 2011 by Pearson Education, Robert M. Sherfield & Patricia G. Moody, Cornerstone: Creating Success Through Positive Change, 6th Edition, Chapter 11, Slide 12

Analyze Credit Assignment #2

3. Minimum monthly payment amount or percentage 4. Late fee amount 1. Interest rate (including promotional lower rates for the first X number of months, regular rate, varying rate) 2. If there is a grace period for 100% monthly payoff if paid in full with no interest 3. Minimum monthly payment amount or percentage 4. Late fee amount 5. Annual credit card fee 6. Promotional bonuses (e.g. cash back percentage, airline miles, etc.) 7. 2 Other positive features 8. 2 Other negative features 9. Fees and special interest rates for cash advances 10. Is this a good card, why or why not?

Personal Loan Pitfalls Watch out for high-interest: Payday loans Car title loans Rent-to-own contracts Worse than credit cart debt –read carefully! Copyright © 2011 by Pearson Education, Robert M. Sherfield & Patricia G. Moody, Cornerstone: Creating Success Through Positive Change, 6th Edition, Chapter 11, Slide 13

Watch Small Item Money Drain Gum? Bottled water? Eating out daily? Junk food/vending machines? Unused memberships? Expensive salon visits/treatments? Cigarettes? Copyright © 2011 by Pearson Education, Robert M. Sherfield & Patricia G. Moody, Cornerstone: Creating Success Through Positive Change, 6th Edition, Chapter 11, Slide 14

Identity Theft Widespread concern for college students Actual or virtual information may be stolen People you know or strangers may commit it Very expensive and time-consuming to fix Copyright © 2011 by Pearson Education, Robert M. Sherfield & Patricia G. Moody, Cornerstone: Creating Success Through Positive Change, 6th Edition, Chapter 11, Slide 15

Tips to Minimize Your Risk Carry only necessary personal information Buy online from secured sites only Don’t use obvious passwords Memorize PIN numbers and passwords Shred personal documents Monitor your credit report Protect personal information online Use a permanent mailing address Copyright © 2011 by Pearson Education, Robert M. Sherfield & Patricia G. Moody, Cornerstone: Creating Success Through Positive Change, 6th Edition, Chapter 11, Slide 16

Chapter Review What is the maximum amount of your income should be spent on debt? How do subsidized and unsubsidized student loans differ? What is a credit score and how does it affect you? How often should you view your credit report? How many credit cards should you possess? Copyright © 2011 by Pearson Education, Robert M. Sherfield & Patricia G. Moody, Cornerstone: Creating Success Through Positive Change, 6th Edition, Chapter 11, Slide 18