College decisions impact financial future

This was originally published on Monday, September 11, 2017, in the Pacific Daily News.  Click here to subscribe to the PDN.

Many college students do not realize that their financial performance in college will impact them long after they graduate. Decisions they make on using their credit cards, financial aid, and over spending can impact their job search, their credit score, and their ability to payback what they borrowed.

Getting a good financial start out of college will ease the stress of the transition and open many more opportunities.

Failing classes. For many years your child has had a structured learning environment. They go to school and follow a strict schedule. After school, parents enforce homework and studying times.

College is very different from what they have been accustomed. Many professors don’t expect students to be in class every session and depending on their course load they may have a lot of time that they may consider free. Socializing is also a big part of the college experience. This new freedom could lead to academic troubles and financial troubles.

Retaking a class is expensive and could prolong their time in college. If it becomes a trend, they may be put on academic probation or worse, expelled. There may be fees associated with failing a class and loss of scholarships and/or grants. Being accepted by another college will become difficult. Student loans still must be paid off even though they are not in college.

Scholarship and grants. Being a student in college doesn’t mean they cannot continue to look for other scholarships and grants. Most believe that scholarships and grants are just for high school seniors going into college. In fact, there are many scholarship and grants that are targeted to students who are currently in college.

Have them speak with their academic adviser or counselor about these opportunities. They can also do some research online. Even if the amount is small or pays for certain expenses such as books, these opportunities can be a huge help. There is no rule to how many scholarships or grants you receive.

The more assistance you get the less you will have to pay or borrow.

Inappropriate use of assistance. Most scholarships or grants are paid directly to the school. But some are not and many student loans are paid directly to the student. This is very tempting to use unwisely. This money should not be used to fund a spring break trip.

Many students do not understand that paying for these loans right out of college is difficult. Most college students won’t be earning six-figure salaries at their first job; many of us don’t reach that level of income during our careers.

Large student loans. College tuition has been on the rise for years and it does not look like it will be leveling off any time soon. Many parents can no longer afford college tuition, living expenses, books and other incurred financial education related expenses.

Student loans are becoming a more popular way to fund higher education with the students being solely responsible. With that in mind, students should consider the cost of their education. Choosing a more affordable college in an area with lower living costs will certainly lower their debt. Be sure to understand the terms of the loan be for accepting it.

Even though your child is still in college, advise them to make monthly payments to keep the accrued interest from growing too large. The sooner they pay on the loan the better.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.

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After death, who pays for student loans?

This was originally published on Monday, July 31 2017, in the Pacific Daily News.  Click here to subscribe to the PDN.

When a loved one passes, it is a very emotional and trying time. Having to deal with your loved one’s affairs after they pass can be a long and drawn out process.

If they have a student loan that isn’t fully paid off, the loan can be passed on to someone else, depending on the type of loan.

  • Federal loan. If your loved one had a federal student loan, it won’t be passed on to anyone; the loan ceases. The survivors will have to present an official death certificate to the loan provider.
  • Parent PLUS loan. A federal Direct Parent PLUS Loan is a credit-based loan that the parent or parents of a dependent, undergraduate student may borrow to help pay for educational expenses. Since it is a federal loan, it can be discharged when either the parent or the student dies. The estate and the heirs won’t be responsible to pay the loan.  Unfortunately, there are tax consequences associated with the death discharge of a Parent PLUS loan due to the student’s death. Parents will receive a 1099-C form from the Internal Revenue Service after the debt is canceled. The remaining debt canceled is treated as taxable income. Parents in this situation could be hit with a large tax bill.
  • Private student loan. Some private student loan lenders do offer a death discharge, but not all of them. This loan is more like a traditional personal loan. Private lenders may request the estate to pay off the loan. However, if the deceased is the sole signer the heirs or other relatives aren’t generally considered liable.  If there is a co-signer, the co-signer is legally responsible for the debt. In some cases, the death can cause the loan to go into default and accelerate the debt repayment. In other words, the lender can demand the entire loan is due immediately.  The co-signer may request a co-signer release. To obtain the release, the lender will require the co-signer to make on-time payments for a specified period of time, to illustrate they are financially capable of handling payments on their own.  If the deceased is married, depending on local laws, the spouse may be liable for the loan. If the loan was obtained before the marriage, the loan may be forgiven.

Be prepared

To ensure your loved ones are not responsible for your debts, the best thing you can do is to make sure you and your family are protected by understanding your lender’s policy regarding death discharge and reviewing it in depth. A life insurance policy can help with any outstanding debts and protect your family from aggressive loan providers.

Preparing now can save your family from financial trouble in the future.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.

Help graduates be financially responsible

This was originally published on Monday, July 11 ,2016 in the Pacific Daily News.  Click here to subscribe to the PDN.

Every day we make decisions that have good or bad consequences for our future. It is important to teach your new high school graduate about finances before starting off in the real world. Doing so helps them make smarter choices in the future. Becoming financially responsible is a big step into the real world and will become one of the largest challenges they will face.

  • Student loans. The cost of university is becoming more and more expensive. Due to the increase in price, many more college students are taking on student loans. Many students think that because the payment is deferred until they graduate it gives them leeway to use it for other purposes than just for school needs. Take only what you will need for tuition, books, supplies and housing. With a tough job market, it can take some time to find a job which will allow you to start paying off your loans. You will be happy to have taken the bare minimum.
  • Taxes. If you are going right into the job market or working while in school, it is imperative that you start paying taxes. Just because you don’t make much does not exempt you from paying your taxes. Nonpayment can hurt you in the long run. It could cause your wages to be garnished or it could prevent you from being hired for a job.
  • Emergency fund. Start saving for an emergency. You will be thankful that you have an emergency fund if your car breaks down or you lose your job. The best time to start is when you have fewer responsibilities. Once you get a mortgage, children and insurance, it will be harder to put money aside.
  • Think about your credit. Your credit history will pretty much follow you around for the rest of your life. Ensure you make your payments on time.  Even though right now you are not in need of a mortgage, some day you will be and you will be thankful that you have a good score. Most utility agencies, jobs and landlords now run credit checks on their customers to see how credit worthy they are.
  • Health. Continue to take care of yourself. Get annual checkups for your dental, health and vision. One of the largest expenses most people pay is for medical attention. Eat healthy, get lots of exercise, and stay away from drugs and alcohol. Be sure you are insured, it will help tremendously when it comes to paying for doctor’s visits, medication and treatments.
  • Invest. Retirement may seem a long way off. Eventually you will want to retire. How old do you want to be when you retire? Your decision should decide how aggressively you invest. If you want to retire at 50 years old and travel the world, put more money aside. Open an IRA, invest in stocks, bonds or even real-estate. Social Security is no longer enough to retire on.

There is a lot to think of as a young adult. If you plan and stick to your plan, your financial future is a bright one. Take care of yourself and your finances. Your future self will thank you.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him atmoneymattersguam@yahoo.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com

Resources exist for adults to go back to school

This was originally published on Monday, February 23, 2015, in the Pacific Daily News.  Click here to subscribe to the PDN.

Question: I am a 43-year old single mom of two. I have worked hard to send my children through private school and my oldest through college. My youngest child will graduate this year and wants to start college in the fall. I have put my college dreams on hold to raise my children, but now I would like to go back and get my degree. Are there financial aid programs for adults wanting to go back to school?

Answer: I want to start off by applauding you. You certainly have worked hard to make your kids’ futures brighter. There are resources out there that are available to assist you.

Free Job Training

The Department of Labor operates the One Stop Career Center. Depending on your current job status and the industry you work, you may be able to receive free job training. The One Stop Career Center offers low-cost and some free courses in various studies. To learn more, go to the One Stop Career Center website athttp://www.careeronestop.org.

Tax Breaks

Although a tax break does not directly pay for college, it could help students that qualify by lowering the student’s taxes. There are two tax breaks that are available.

• The Lifetime Learning Credit is available for students who go to school part-time and are not necessarily enrolled in a degree-granting program.

• The American Opportunity Credit is for students enrolled full time in a program that leads to a degree or a certificate.

To verify if you qualify and the amount you can claim, go to the Internal Revenue Service’s web site at www.irs.gov.

Employer’s Assistance

Check with your human resources department if your employer offers programs that can help offset the cost of tuition. Some employers will cover the cost of tuition and require pay back in service over a specific period of time. Be sure to understand the policy. Depending on the program, you may have to consider the money as extra income.

GI Bill

If you have served on active duty for at least ninety days since September 10, 2001, you may be eligible for tuition assistance, books and supply costs, and possibly a housing stipend. In some cases, your GI Bill benefits can be transferred to your dependents.

Grants

As with recent graduates, adults, too, can qualify for federal grants. The federal government offers two grants for adults who wish to return to school:

• Federal Pell Grant is determined by financial need and can be used for part-time and full-time students.

• The Federal Supplemental Educational Opportunity Grant (FSEOG) is for adult students who are returning to school to further their education. It can be used in conjunction with the Pell Grant to help pay for the total of tuition.

Applicants must fill out and submit the Free Application for Federal Student Aid (FAFSA).

Student Loans

Adult students have some of the same resources when it comes to getting loans for their education. Loans can be secured by private or federal agencies. The Direct PLUS Loan is a federal loan that graduate students and parents of children under the age of 24 can use to assist paying for college. Go to https://studentaid.ed.gov/types/loans/plus for information about the loan program.

Financial aid for adults who are returning to school are out there, it just takes some digging. Go online.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.