MONEY College

Good News: There’s a New Way to Get Out from Under Student Debt

Wells Fargo signage
Peter Foley—Bloomberg via Getty Images

Wells Fargo and Discover plan to offer new loan modification programs to help borrowers who are suffering temporary financial hardship.

Two of the biggest private student loan providers have welcome news for struggling grads: Soon, some distressed borrowers will be eligible for lower interest rates and lower monthly payments.

Wells Fargo announced on Wednesday that it would launch a private student loan modification program for customers who are experiencing financial distress, like a job loss.

“Through the program, Wells Fargo private student loan customers experiencing a hardship will have their financial situation reviewed on an individual case-by-case basis to determine eligibility for a short- or long-term loan modification, as appropriate,” Wells Fargo says. “If eligible, Wells Fargo will lower the customer’s interest rate to achieve a student loan payment that is determined to be affordable based on the customer’s income level.”

For eligible borrowers, Wells Fargo plans to decrease interest rates to as low as 1% and lower monthly payments to be about 10% to 15% of each borrower’s income, the Wall Street Journal reports.

Likewise, Discover plans to offer a “repayment assistance program” early next year, though the details have not been finalized, public relations manager Robert Weiss says.

Today, the average college student graduates with $28,400 in debt. Only about 20% of that debt is comprised of private loans, according to The Institute for College Access & Success. The rest is comprised of federal loans. But private student loans are a lot more expensive. The Department of Education found that private student loans have variable interest rates of up to 18%. And private loan providers aren’t required to offer the same relief as federal loans — so private loan borrowers and co-signers who face unexpected hardships are often out of luck.

“With federal loans, you have built-in insurance in case of job loss or disability or death,” says Justin Draeger, president of the National Association of Financial Aid Administrators. “These are protections provided to every borrower. Those protections don’t always exist in the private student loan market.”

That’s why these new initiatives are good news, Draeger says. “The fact that they’re willing to look at loan modification is a good thing,” Drager says. “You just have to see the whole picture before you see whether this is good news or if it’s great news.”

Deanne Loonin, director of the National Consumer Law Center’s Student Loan Borrower Assistance Project, says she is also cautiously optimistic. Other student loan providers, like Sallie Mae, have offered similar relief, and the devil is always in the details, Loonin says.

“It’s a good first step, but as with many things, I want to know more details,” Loonin says. “Which loan you have, how delinquent you are, what your income status is — those kinds of things can end up limiting who can benefit quite a bit.”

Wells Fargo’s head of education financial services, John Rasmussen, told the Washington Post that 600 to 1,000 borrowers should be able to get loan modifications by the end of this year. He said Wells Fargo will also offer help to people who are not yet late on their payments but foresee financial problems that may limit their ability to pay in the near future.

Struggling to repay private student loans? First, read your loan agreement. Private loan providers are not required by law to offer relief, but some do, Loonin says. Your loan agreement should explain if you have any recourse.

If not, call your loan provider, whether it’s Wells Fargo, Discover, or someone else. “It’s definitely worth contacting your creditor and finding out what they offer,” Loonin says. “It may not be totally obvious. Some make modifications on a case-by-case basis.”

Otherwise, consider bankruptcy. Borrowers have been told that it’s nearly impossible to discharge student loan debt in bankruptcy, but that’s not quite true. In fact, 39% of people who tried to get their student debt discharged in bankruptcy received at least partial relief, according to research by Jason Iuliano, Ph.D. candidate in the Politics Department at Princeton University.

But almost no one bothers: Only 0.1% of student loan borrowers in bankruptcy even tried to discharge their student debt. Iuliano estimates that an additional 69,000 debtors would have been eligible for student debt relief. At the very least, if you file bankruptcy, you can wipe out credit card, car loans, and other kinds of debt, which should free up money for you to pay off your student loans.

Finally, know that you’re not alone. “This is still a widespread problem,” Draeger says. “This is a lagging indicator from the recession. People are still having trouble making ends meet.”

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MONEY Health Care

You Won’t Believe Your Employer Can Ask You These Personal Health Questions

Office lamps pointed at pill bottle interrogation-style
Sarina Finkelstein (photo illustration); OsakaWayne Studios (pill bottle); David Malan/Getty Images (office lamps)

When you sign up for health coverage this year, your employer might ask you for a lot of details about your health and your habits. The goal: Cut the cost of your care.

This year, one third of employers will ask workers who enroll in the company health plan to complete a questionnaire about their health, according to the Kaiser Family Foundation. That’s up from 24% of firms last year. The questionnaires, often called a “health risk assessment,” are even more common at big companies; more than half of employers with 200-plus employees offer them.

And as more companies look to control health-care costs with programs aimed at making workers healthier, the stakes for sharing personal details about your health are getting higher.

Last year, Penn State faced a backlash for a questionnaire that, among other things, asked female employees about their pregnancy plans. Workers who refused to fill it out had to pay an extra $100 a month. Penn State later suspended the program.

If you’ve never seen one of these assessments before, here’s what to expect, what happens to the information you provide, and what your rights are.

What kinds of questions can my employer ask?

The questionnaires are crafted to identify current behaviors that may cause costly health problems in the future, says Jillian Fagan of Wellsource, a technology company that creates health risk assessments. Wellsource’s questionnaires cover a long list of topics, including weight and height, chronic illnesses, treatments you’re getting, your willingness to make lifestyle changes, tobacco use, physical activity, diet, alcohol consumption, cancer screenings, hearing and vision impairment, flu vaccinations, stress levels, and depressive symptoms.

Questionnaire writers have leeway about how to pose the questions. For example, Fagan says employers usually don’t want to explicitly ask if you’re depressed. Instead, you might be asked questions like, do you have a social group? Are you married? Do you feel like you’re getting the support you need? How many alcoholic drinks do you consume every week?

You may also be asked about your outlook for the future, how much time you have to relax, your energy level, and whether you’re satisfied with your work-life balance, Fagan says. Wellsource develops its questions based on scientific research and includes links its the underlying medical literature.

Is there anything my employer can’t ask?

Inquiring about your parents’ health would probably violate the Genetic Information Nondiscrimination Act, which prohibits employers from collecting genetic information, says Maureen Maly, employee benefits and executive compensation attorney at Faegre Baker Daniels. A family history of breast cancer, say, could indicate a genetic predisposition.

“Once upon a time, it would get into some questions about family medical history,” says Maly. “Most of these questionnaires will not ask that—and they will usually have a warning saying, ‘Don’t volunteer any information.’”

Can my boss see my answers?

Generally, no. Under HIPAA, the Americans with Disabilities Act, and state privacy laws, employers are prohibited from using health risk assessments for any reason other than for wellness programs, says employee benefits attorney Todd Martin.

Keep in mind that often your employer already has information on your health. If your health plan is self-funded and self-administered—meaning your employer pays the claims directly rather than contracting with an insurer or third party—someone in your office gets your health claims. Your employer is legally bound to maintain a firewall, secure your private information, segregate it from other employment files, and limit staff access, Martin says. Health risk assessments aren’t much different.

And besides, seeing that information could expose the company to a lawsuit if you’re fired or disciplined. “Most employers don’t want to see that information as much as employees don’t want to give it to them,” says Fagan of Wellsource.

So employers usually hire a third party to administer the questionnaires. If that’s a medical provider, that firm is subject to additional privacy rules, says Martin.

That’s really personal! Why is my employer asking me all that?

The goal is to give you a picture of your health and suggest how to do better, Fagan says. “Health risk assessments show you where you’re going to be in five years,” Fagan says. “If we notice that you don’t work out, you’re eating lots of sugar, and your diet is not so great, if you continue down this road, you’re going to have tons of health problems in the years to come.”

Of course, there’s something in it for your employer too—potential cost savings if you stay healthy.

How can knowing more about my health save my boss money?

More than half of large firms surveyed say that they see wellness initiatives as one of the most effective tactics for controlling health-care costs, according to the National Business Group on Health. Such programs can include weight-loss and smoking cessation classes, nutritional counseling, gym discounts, and lifestyle coaching.

With a summary of the answers employees gave on the questionnaires in hand, a company can see, for example, that a lot of workers are struggling to quit smoking (but not who those employees are), which can help it decide whether or not to offer a smoking cessation class (a common perk). To date, however, the research on the effectiveness of wellness programs is mixed.

What’s more, Jennifer Bard, professor at the Texas Tech University School of Law, says she has serious concerns about the privacy risks associated with wellness initiatives.

“It’s not clear how those risks translate into future health,” Bard says. “There isn’t enough information to say that somebody with a particular blood pressure or cholesterol reading or weight is going to have a specific problem. It’s one thing to diagnose someone who is sick, but the science of risk is not as well-developed.”

What else can come of sharing health information?

Your employer can set health-related goals for you. For example, if you’re overweight, your employer can offer a financial incentive for you to lower your BMI. As part of the Affordable Care Act, those financial incentives can be worth 30% of the total cost of plan costs, up from 20% before health reform.

That kind of outcomes-based wellness program is subject to a strict set of rules, Martin says. If your doctor says that you are unable to achieve the goal, your employer has to offer another way for you to earn the incentive.

Outcomes-based wellness programs are growing but not yet widespread. And only 7% of employers say that employees with health risks must complete some kind of wellness program or face a penalty, according to Kaiser.

“The restrictions have made a number of employers want to stay away from outcomes-based programs and focus on the participation-based programs like the health risk assessment,” says Martin.

Can my employer force me to fill out a questionnaire?

Probably not. Only 3% of large firms that offer questionnaires require employees to fill them out, according to Kaiser.

But health assessments, medical screenings, and wellness programs are still a legal gray area.

The Department of Labor says employers can require workers complete a health risk assessment before enrolling in a company health plan, so long as the employer doesn’t deny benefits or change premiums based on the information.

But the Equal Employment Opportunity Commission recently sued three employers on the grounds that their mandatory wellness programs violated anti-discrimination statutes. The EEOC has sued Honeywell over its wellness program, even though the company says it’s voluntary. But employees and spouses who refuse to participate in health screenings face up to $4,000 in financial penalties, which, the EEOC contends, effectively makes the program mandatory.

“It’s helpful for people to know that this is unresolved,” says Bard, the Texas Tech University law professor. “These kinds of wellness programs with a bite, with a financial consequence, are relatively new. Everyone is watching the EEOC lawsuits very carefully.”

That said, if the wellness program is mandatory, you might have little choice. “In my opinion, anyone who chooses not to comply puts themselves at risk for being a test case,” Bard says.

My employer says it’s voluntary. Why should I fill it out?

Health risk assessments are a benefit, says Fiona Gathright, president of Wellness Corporate Solutions, a third-party vendor that administers wellness programs for employers. “We’re trying to help people manage their health, and we’re trying to help people live longer,” Gathright says. “Answer the questions as honestly as you can. If we uncover that you have a risk, we’re going to you help you a manage that risk.”

Still not convinced? More than half of large firms sweeten the deal with some kind of financial incentive, according to Kaiser; 36% of those firms offer a financial incentive worth more than $500.

I’m still uncomfortable with this. What should I do?

Carefully read the disclosures, which usually contain information about who will see your answers and in what form, says Fagan. And ask your own questions

First, who is doing the assessment? An outside vendor, especially one that’s also a medical provider, is best. How is sensitive personal information protected from data breaches?

Second, what information gets back to the employer? Only you should see your individual results. If your employer will see aggregated responses, how big is the sample size? Is there any way you could be identified—say, if you’re the only obese employee at a small firm? There may be rules against reporting results from small groups.

Finally, ask how your employer intends to use the questionnaire. Know ahead of time if you’re just getting information about your health risks—or if you’re laying the groundwork for an outcomes-based wellness program that will ask you to make big changes.

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MONEY credit cards

This Is Why Prepaid Cards Are Still Risky

swiping card
Erik Isakson—Getty Images

You might not be able to recover your money if your card is lost or stolen. The Consumer Financial Protection Bureau wants to change that.

Over the past five years, prepaid cards have become an increasingly popular alternative to debit and credit cards. Last year, 12% of households used the cards, which can be loaded with cash and used like debit cards.

They’re especially popular among millennials, whom surveys have found to be credit card averse and distrustful of financial institutions. More than 25% of people aged 25 to 34 years old used prepaid cards last year, according to a survey from the Federal Deposit Insurance Corporation. And among people without bank accounts—who are typically lower income—27% used them, up from 12% in 2009.

People without bank accounts are also more likely to rely on the cards for critical financial transactions. Almost 80% of unbanked households with prepaid cards used them to make everyday purchases, pay bills, or receive payments. Some even say the main reason they use prepaid cards is to “put money in a safe place” or “save money for the future.”

What these people might not know is they’re taking a risk, since prepaid cards don’t have the same legal protections as other kinds of plastic. Right now, if you lose your prepaid card, or if someone steals your card and uses it, you might not be able to recover all of your money, depending on the terms of your contract.

The Consumer Financial Protection Bureau wants to change that. On Thursday, the agency proposed new rules that would require prepaid cards to offer the same kind of fraud and lost-card protections that credit cards have, along with other kinds of protections.

“Consumers are increasingly relying on prepaid products to make purchases and access funds, but they are not guaranteed the same protections or disclosures as traditional bank accounts,” CFPB Director Richard Cordray said in a statement. “Our proposal would close the loopholes in this market and ensure prepaid consumers are protected whether they are swiping a card, scanning their smartphone, or sending a payment.”

The biggest deal of the new proposal is that it would limit your liability for fraudulent charges. Under the new rule, if your prepaid card were lost or stolen, the most you would pay for unauthorized charges would be $50, as is the case with credit cards.

The new rules would also require that financial institutions send you statements about your balance, offer you opportunities to resolve errors like double charges, and disclose more information about fees, on a form that looks like this. That’s important because prepaid cards sometimes charge high fees for activation, balance inquiries, and inactivity.

The proposal would also add protections to prepaid cards that allow users to overdraw into a negative balance, such as imposing limits on late fees.

The CFPB hasn’t implemented the changes yet. The proposed rule will be open for public comment for 90 days before the CFPB decides whether to issue a final rule.

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MONEY Banking

Why the Right Bank for You Might Not Be a Bank

Postage stamp printed in USA, dedicated to the 50th Anniversary of Credit Union Act.
Sergey Komarov-Kohl—Alamy

The best place to park your cash might be a credit union—a nonprofit financial cooperative that serves a select population.

MONEY recently released the results of its 2014 Best Banks survey, which awarded 11 banks honors for low fees, high interest rates and other customer-friendly policies. But it’s possible the best place for you to park your cash might not be on that list.

Rather than a bank, you may be better off with credit union—a nonprofit financial cooperative that serves a select population, like workers at a specific company or residents of a certain county.

Credit unions tend to offer better terms than banks. According to WalletHub, they pay an average 0.23% on $10,000 in savings—twice the average of banks in our study—and 73% offer free checking.

Also, credit unions are known for having more personal customer service, owing to the fact that they are owned by members and are often small (some have just one branch).

Because of their size and membership requirements, credit unions weren’t included in MONEY’s survey, but you can use these steps to find yourself a winner:

Look under rocks.

“We’re pretty sure everybody in the country is eligible to join at least one credit union—and probably several,” says Bill Hampel of the Credit Union National Association.

Start at asmarterchoice.org and nerdwallet.com/credit-union. Also check with your town, employer, alma mater, and religious institution. And ask family which ones they belong to.

Do a smell test.

Compare the yields to the averages at MONEY’s best midsize banks—at least 0.15% on checking and 0.56% on savings. (Online banks pay more but don’t offer the comparable personal attention.)

Also find out if the credit union has fee-free accounts, and if not, check the minimum-balance requirements to make sure you’d avoid a maintenance fee.

Get out the ruler.

Small credit unions often have just one branch. But about half belong to the CO-OP network, which offers you -access to more than 5,000 shared branches and almost 30,000 ATMs.

To avoid costly fees when you get cash, see if your best option has its own or partner ATMs near your home and work. If you’ll use teller service, make sure the branch is easily accessible.

Of course, CUNA reports that 88% of credit union members are offered mobile apps and 55% allow check deposits via smartphone—so you might not need a teller after all.

See MONEY’s 2014 list of the Best Banks in America

Try out MONEY’s Bank Matchmaker tool to find the best bank for you

MONEY identity theft

Here Are the Companies That Have Been Hacked — And What to Do If You’re a Customer

You're not just imagining it: Lately, a new data breach has been reported almost every week. Here's how to find out if your information has been exposed.

By mid-October, the Identity Theft Resource Center had already identified more data breaches this year than it had in all of 2013. In other words, it’s more likely than not that some of your personal information has been compromised. “There are two kinds of consumers — there are those who know they’ve been breached, and those who don’t,” says ITRC president and CEO Eva Velasquez.

Source: Identity Theft Resource Center. Data as of Oct. 30, 2014.

Many Americans are in the first camp. According to a new Gallup poll, 27% of Americans say their credit card information has been stolen in the past year, and 11% say their computer or smartphone has been hacked. And the rest are scared: Almost 70% of Americans worry that hackers will steal their credit card numbers from retailers, and 62% worry that hackers will target their personal devices.

It’s hard to say whether there has really been an increase in the number of data breaches, or we’ve just gotten better at detecting and reporting incidents, Velasquez says. Either way, the outdated magnetic stripe technology in the United States probably makes it too easy for hackers to run off with your credit card number.

“Thieves are going to go where it’s easiest to steal,” Velasquez says. “We’ve got the most antiquated technology protecting the actual cards, and we’re the biggest issuer of those cards – we’re a treasure trove.”

At MONEY, we’re tracking the major data breaches that may have exposed your personal information in recent months. Read on to see if you’ve been affected. If so, we’ll walk you through what you need to know about protecting yourself from identity theft.

 

MONEY cellphones

Hey AT&T Customers: It May Be Time to Give Up Your Unlimited Data Plan

woman walking past AT&T store
Bloomberg—Bloomberg via Getty Images

AT&T and other wireless carriers may continue to offer unlimited data plans, but they're not the great deal they once were.

Almost half of all AT&T mobile customers are still clinging desperately to a grandfathered cellphone plan with unlimited data, according to a survey from Consumer Intelligence Research Partners (CIRP). But that choice is looking particularly unfortunate in light of the Federal Trade Commission’s latest lawsuit.

In a complaint filed Tuesday, the federal agency alleges that AT&T has been slowing data speeds for consumers on “unlimited” plans, in some cases by up to 95%. The practice of reducing data speeds for heavy users, called “throttling,” can make it very difficult to complete routine tasks like browsing the web or using GPS navigation. In some dense metro areas like New York and San Francisco, AT&T allegedly throttled users who consumed as little as 2 GB a month. Altogether, the New York Times estimates, about 25% of AT&T’s unlimited data plan customers were affected.

“AT&T promised its customers ‘unlimited’ data, and in many instances, it has failed to deliver on that promise,” FTC chairwoman Edith Ramirez says in a statement. “The issue here is simple: ‘unlimited’ means unlimited.”

AT&T calls the charges “baseless” and says it warned customers that heavy users could be throttled. But while AT&T’s alleged behavior is particularly egregious, the carrier wouldn’t be the only one to limit data use on so-called “unlimited” plans, as Ars Technica has reported.

For example, Sprint’s My Way plan promises unlimited data for the life of the line of service, but read the fine print: The carrier also throttles the top 5% of its users, as part of its “network management” strategy. Sprint says that users who consume more than 5 GB are generally at risk for throttling, though it varies by month.

Likewise, while T-Mobile has repeatedly said it does not throttle its unlimited customers, its fine print notes that the top 3% of users might see their data slowed “during times and in places of network congestion.”

Similarly, Verizon throttles the top 5% of customers still on 3G. Verizon had planned to slow speeds for the heaviest users on 4G, but it shelved that idea after receiving its own stern warning from the FTC. Maybe Verizon has less to worry about—according to CIRP, it has already moved the vast majority of its customers off unlimited plans.

In fact, Verizon hasn’t sold a single new unlimited cellphone plan in two years. AT&T hasn’t offered an unlimited plan in four years. The two biggest American carriers have been trying to wean customers off of unlimited data plans for a while now, or else the wireless companies risk becoming victims of their own success.

First Unlimited Calls, Then Unlimited Data

The unlimited model was born in the late 1990s, when AT&T launched its first One Rate phone plan, explains Kirk Parsons, senior director of telecom services at J.D. Power. Customers loved the certainty: the same bill, every month, with no separate charges for roaming or long distance calls.

That model still made sense when the phone carrier introduced data plans for smartphone users—so much sense that by 2008, AT&T actually forced all iPhone 3G customers to buy an unlimited data plan. Back then, it was a moneymaker: You could offer unlimited data because people wouldn’t use a lot of it, and it didn’t cost a lot anyways. That’s all changed.

“When smartphones started coming out, the networks weren’t up to snuff,” Parsons says. “You couldn’t actually enjoy the experience of videos and downloads. Once 3G coverage widened, then we transitioned from 3G to 4G, that’s when you really saw people using data on their phones, streaming music, watching shows.”

Now, the carriers have created a nation of data addicts. As of December 2013, Americans consumed 269.1 billion MB of cellphone data a month—far more than double what they consumed a year before. It’s just too expensive to keep up with our insatiable demand. The carriers have to buy or lease radio frequencies all around the country to provide good service, says Logan Abbott, president of Wirefly.com. There’s only so much bandwidth.

“Consider it like a nationwide wifi network,” Abbott says. “If you have everyone in your house on one wifi connection—downloading, streaming Netflix, doing data-intensive stuff—your bandwidth is going to get used up … It’s going to put drag on your network.”

Of course, if AT&T acted as the FTC claims, consumers got a really raw deal. While the other carriers say they throttle just a small fraction of the heaviest users for network management reasons, AT&T is accused of slowing service for 3.5 million of its 14 million subscribers.

Still, limited data is the way of the future. Not that AT&T customers want to hear it—there’s a reason 44% of them haven’t changed cellphone plans in over four years. “It doesn’t necessarily make sense, but they like the security blanket of never being overcharged,” Abbott says. “They have a vintage product, and they don’t want to let go.”

Paying for More Data Than You Actually Use

The truth is, if you’re an AT&T user, it might be time to give up your unlimited plan. The first thing to do is check your account to see how much data you really use—it may not be as much as you think.

Slate has prepared some handy interactive charts that show how much data you’d have to use before an unlimited plan pays off, but this is the main takeaway: If you’re only using 1 or 2 GB of data—like most typical users—you’re likely overpaying for the unlimited option. You simply don’t need that much.

If, on the other hand, you’re using a lot more, the FTC says you’re being throttled—in which case, you might as well shell out a little more money for a data plan that actually delivers the speeds advertised.

Related:

Read next: This Is the Best Wireless Carrier for You

MONEY Out of the Red

Have You Conquered Debt? Tell Us Your Story

140618_money_gen_13
iStock

With patience, you can pay off large amounts of debt and improve your credit. MONEY wants to hear how you're doing it.

Have you gotten rid of a big IOU on your balance sheet, or at least made significant progress toward that end? MONEY wants to hear your digging-out-of-debt stories, to share with and inspire our readers who might be in similar situations.

Use the confidential form below to tell us about it. What kind of debt did you have, and how much? How did you erase it—or what are you currently doing? What advice do you have for other people in your situation? We’re interested in stories about all kinds of debt, from student loans to credit cards to car loans to mortgages.

Read the first story in our series, about a Marine and mother of three who paid off more than $158,169 in debt:

My kids have been understanding. Now I teach them about needs and wants. The other day, I was coming home from work, and I said, “Do you need anything from the store?” My son said, “We don’t need anything, but we’d like some candy.” If they want a video game, they know they need to save their money to get that video game—and that means there’s something else they won’t be able to get. They understand if you have a big house, that means you have to pay big electricity and water bills. I’m teaching them to live within their means and not just get, get, get to try to impress people.

Do you have a story about conquering debt? Share it with us. Please also let us know where you’re from, what you do for a living, and how old you are. We won’t use your story unless we speak with you first.

MONEY Out of the Red

How I Paid Off $158,169 in Debt

G. McDowell Photography

Think there's no way to get out from under your obligations? This first in a series of profiles of people getting "Out of the Red" proves that it's possible.

Rachel Gause just wanted to give her three kids more than she had growing up. So, though she was receiving a secure income along with child support, she found herself living beyond her means every month—eventually racking up six figures in debt. With a whole lot of determination and almost a decade’s worth of belt-tightening, she’s climbed most of the way out. This is her story, as told to MONEY reporter Kara Brandeisky.

Rachel Gause
Jacksonville, N.C.
Occupation: Master Sergeant, United States Marine Corps
Initial debt: $179,625
Amount left: $21,456
When she started paying it down: 2006
When she hopes to be debt-free: November 2015

How I got into trouble

“I was just trying to keep up with everybody else. I’m a single parent to three kids, ages 10, 14, and 16. I was always spending extra on Christmas and on birthdays. Also, growing up, I didn’t have new clothes and new shoes at the start of every school year. But I wanted to make sure my kids always did.

Looking back, I wish I would have known not to rely on credit cards. I wish I would have known that it’s okay to keep your car for four or more years, as long as you maintain it.

I started going into debt when my first daughter was born, 16 years ago. I remember I had to get a furniture loan. By 2006, I had $55,848 in credit card debt and $76,711 in car loans. Then there were the personal loans. I had a consolidation loan that I used to pay off my credit cards. Altogether, it came out to $179,625.”

My “uh-oh” moment

“I wasn’t aware of how much debt I was in. The turning point for me was when I hit the 10-year point in the Marines, and I saw other people around me retiring. I wanted to sit down and see where I was at. And that’s when I realized I didn’t want to retire in debt. I didn’t want to be that person.

At the time, I had a Toyota Sequoia, and I couldn’t make payments on it. I knew I was in way over my head.

Even though I had three kids, we didn’t need that big truck. It was going to put my family at a financial challenge. So I spoke to a lady at my church, and I said, ‘I have this truck, and I’m going to trade it in for something smaller.’ And she said, ‘I always wanted a Toyota Sequoia.’ I sold it to her and got into a Corolla instead.

I realized buying that truck was a bad choice, and I knew I needed to develop better habits from there. That was my first step forward.

How I’m getting out from under

Now I put roughly $2,100 a month toward my debt.

For the rest of my income, I use the envelope system. Before I get paid, I do my budget. Then I have 13 envelopes—one for groceries, one for clothes and shoes, one for charity, one for dining out, one for gas, and so on. I go to the bank, take the money out, and divide it between the envelopes.

I don’t spend anything that doesn’t come out of those envelopes. Debit cards are nice, but swiping is less emotional. Cash makes me more aware of what I’m spending my money on. If I run out of money for something that month, I don’t buy it. But I’ve never run out of money for something important—now I’m more aware of how much I’m spending.

That’s because I also got a small composition book from Dollar General to track my spending. Every time I spend money, I write it in that book. Then I compare that to what I’m supposed to be spending, according to my budget.

I also do a quarterly audit on myself to make sure I’m not spending too much more on my cable or cell phone bills.

But it’s not all deprivation. We have a chart that we color in every time we reach a milestone, and we treat ourselves to something nice. For example, recently I went on a trip with my high school classmates to Atlanta—funded totally in cash.

My kids have been understanding about our debt-free journey. They know that mommy has made some bad financial decisions in the past. Now I teach them about needs and wants.

The other day, I was coming home from work, and I said, “Do you need anything from the store?” My son said, “We don’t need anything, but we’d like some candy.”

If they want a video game, they know they need to save their money to get that video game—and that means there’s something else they won’t be able to get. They understand if you have a big house, that means you have to pay big electricity and water bills. I’m teaching them to live within their means and not just get, get, get to try to impress people.

What I’ve learned that could help someone else

My advice would be to sit down, see where you’re at—first, you have to know how much debt you’re in—and then create a spending plan. (Some people are scared of the word “budget.”) You have to tell your money where to go, or it’s going to tell you where to go.

The numbers may scare you in the beginning. It takes two or three months before you can get the budget right.

And you have to be consistent. If you don’t put 100% into it, it’s not going to work. You can’t be half, ‘I’m trying to get out of debt,’ and half, ‘I still want to spend money.’ You have to sacrifice.

My hopes for the future

Once I become debt-free, I plan to build up my emergency fund and then start actively investing and saving for retirement.

Then I hope to get my kids off to a better start.

My daughter will go to college soon. We’ve talked about student loans.

The main reason I joined the military was to obtain my college degree for free. I earned my degree in business administration from the University of North Carolina-Wilmington last year. But while I was there, I saw so many kids taking courses for a second and third time because they were failing and they weren’t going to class.

So I told my daughter, you’ll pay for that first year, and we’ll see how you manage. Then I’ll assist you with your second, third and fourth years. But first, I need to make sure you’re dedicated.

After I retire from the military, I want to become a certified financial counselor so I can help people break the vicious cycle of being in debt and dying in debt. My passion is to put together financial classes for non-profit organizations like women’s shelters, churches, and organizations for military service members. There aren’t that many in this area, and I see a real need. I see so many people struggling to survive, living paycheck to paycheck.

I’ve already started counseling some people who ask for help.

Every now and then, I get a message on Facebook from someone I helped that says, ‘I just paid off another credit card’ or ‘I paid off my car.’ That’s my motivation now. I don’t want to stop – the need is out there.

Are you climbing out of debt? Share your story of getting Out of the Red.

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MONEY Airlines

Get Ready for Cellphone Calls on Airplanes

Federal agencies consider new rules about inflight calls.

As if airplanes weren’t unpleasant enough, you might soon get an earful from your seatmate. Two different federal agencies are now considering revising the rules about inflight calls, and bureaucrats will meet Wednesday to debate the issue.

While the Federal Communications Commission currently bans inflight calls, last December the agency proposed a new rule that would allow passengers to use cell phones above 10,000 feet. Airlines could choose whether to install the necessary technology and allow calls on flights. The FCC has not made a final decision.

Meanwhile, the Department of Transportation announced that it was working on its own proposal — and the rumor is that DOT wants to institute a new ban on inflight calls. DOT has yet to release its proposed rule, but its advisory group, the Advisory Committee on Aviation Consumer Protection, is hosting Wednesday’s discussion.

Given that experts agree there is now little technological reason to limit cellphone use on airplanes, the big question is: Are the American people really mature enough to make discreet personal calls, in a cramped space, without disturbing their fellow passengers?

Members of Congress say no — and there’s bipartisan agreement on that point.

“Arguments in an aircraft cabin already start over mundane issues, like seat selection, reclining seats, and overhead bin space,” Rep. David B. McKinley (R-W.Va.), Rep. Dan Lipinski (D-IL) and more than 73 other elected representatives wrote to the FCC. “The volume and pervasiveness of voice communications would only serve to exacerbate and escalate these disputes.” (Read their full letter.)

If you feel strongly, tune in to the webcast Wednesday morning, when representatives from the DOT, the FCC, the cellphone industry and the Association of Professional Flight Attendants will debate the issue.

Until then, tell us what you think:

 

MONEY retirement planning

Millennials Feel Guilty About This Common Financial Decision—But They Shouldn’t

Sad millennials leaning on desks
Paul Burns—Getty Images

Young adults aren't saving as much as they think they should for retirement. But paying off debts is just as important.

Millennials are pretty stressed out about their long-term finances, according to Bank of America’s latest Merrill Edge Report. Some 80% of millennials say they think about their future whenever they pay bills. Almost two-thirds contemplate their financial security while making daily purchases. And almost a third report that they often ponder their long-term finances even while showering.

What’s eating millennials? Student loan debt. Even the very affluent millennials surveyed by Bank of America feel held back by student debt—and these are 18-to-34 year-olds with $50,000 to $250,000 in assets, or $20,000 to $50,000 in assets and salaries over $50,000. Three-quarters of these financially successful Millennials say they are still paying off their college loans.

Among investors carrying student debt, 65% say they won’t ramp up their retirement savings until they’ve paid off all their loans. But with that choice comes a lot of guilt: 45% say they regret not investing more in 2014.

Contrary to popular wisdom, millennials are committed to investing for retirement. Bank of America found that the millennials surveyed were actually more focused on investing than their elders. More than half of millennials plan to invest more for retirement in 2015. But 73% of millennials define financial success as not having any debt—and by that measure, even relatively wealthy millennials are feeling uneasy.

Fear not, millennial investors. You’re doing just fine. First off, you’re saving more — and earlier — than your parents’ generation did. A recent Transamerica study found that 70% of millennials started saving for retirement at age 22, while the average Baby Boomer didn’t start until age 35. On average, millennials with 401(k)s are contributing 8% of their salaries, and 27% of millennials say they’ve increased their contribution amount in the past year. Even if you can only put away a small amount at first, you can expect to ramp up your savings rate during your peak earning years.

For now, here are your priorities:

Save enough to build up an emergency fund. You could be the biggest threat to your retirement savings. A recent Fidelity survey found that 44% of 20-somethings who change jobs pull money out of their 401(k)s. (That’s partly because some employers require former workers with low 401(k) balances to move their money.) Fidelity estimates that a 30-year-old who withdraws $16,000 from a 401(k) could lose $471 a month in retirement income—and that’s not even considering the taxes and penalties you’d owe for cashing out early. If you have to make the choice between saving and paying off debt, at least save enough to get through several months of unexpected unemployment without draining your retirement accounts.

Pay off any high-interest debt first. When you pay off debt, think of it this way: You’re making an investment with a guaranteed return. Over the long term, you might expect a 8% return in the stock market. But if you have a loan with an interest rate of 10%, you know for certain that you’ll earn 10% by paying it off early.

Save enough to get your employer’s full 401(k) match. The 401(k) match is another investment with a guaranteed return. Invest at least as much as you need to get the match—typically 6%—with the goal of increasing your savings rate once you’ve paid off the rest of your debt.

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