Posted On: 2005-12-08Length: 29:08
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Good Thursday. it is December 8, 2005 episode number 133 of the Financial Aid Podcast. My name is Chris Penn welcoming you. It been out the last day or so a bit of a stomach but that I'm back in business. Back on the horse. It's good to be back, good to be back in the microphone. I hope that nobody was terribly bothered by yesterdays mechanically generated podcast. Although I have to say that computer generated voice was alarmingly close to mine. Actually it didn't do too bad of a job. One thing I thought was so interesting about the AT&T was that it really pays attention to punctuation so if you want your speech to natural, you have to punctuate it correctly. Who knows, it could mean that computers would actually enforce good punctuation in order to make things sound good. That means people might actually use punctuation which would be really cool. We got a lot to talk about today. We've got some financial aid news about foreclosures and things and how what happening in the mortgage market may have an impact on student loans and some hints for Congress. A bit on scholarship scam, it tuition scholarship today and a scholarship update. We've got news you can use, a ton of it because of stuff that I wanted to talk about yesterday but didn't get a chance to. And of course the Podsafe music. Some information about the Podsafe for Peace song and some from Bob Gentry and maybe a couple other artists. So, let's kick it off with the news
Congress once again displaying its complete lack of understanding when it comes to interest rate increase. The legislation that is currently in discussion for deficit reduction as well as the That involves interest rate changes. No matter which package, either the House or the Senate, or compromise between the two, I think we're going to see our student loan consolidation interest rates and possibly higher Parent Plus Loan rates. These interest rate hikes, Congress critters and the press would say, you know it's really not that big a deal, it's something that is just part of what happens, it's affordable still, student loans are still a good idea. They don't actually seem to be paying attention to another market which is going through a the other series of interest rate hikes right now, which of course is the mortgage and housing market. If Massachusetts alone, the number of foreclosures and a lot of small town like little, which is in the northern part of the state, have doubled in the last year. As the interest rates have gone up on adjustable rate mortgages the number of foreclosures have gone through the roof because people can't make payments on error debt. Likewise, if you look at statistical data, the liquid seas on adjustable rate mortgages shot up from 10.2% to 16.6% from this September through last September, so September 2004, delinquencies and delinquent payments(30 days late or longer) went from 10.2% to 16.6%.
Likewise in the sub prime lending, which is leading to people who basically don't have the greatest credit, leading to people who are not necessarily the best financial situation, which by the way is most students because most students don't have full-time jobs full-time employment things like that there were are not usually considered to be a great candidate for loans. The number of delinquencies sub prime lending is doubled in the last year. It's gone from 3% in 2004 two around 6.5% now. What does this mean for the student loan market? Well, essentially when you're talking about a1% rate hike you're talking about making loans more expensive, whether it's the Stafford Loan a Plus Loan or student loan consolidation. The more expensive you make a loan by hiking its interest rates, a) Fewer people will qualify for it because they won't be able to make the payments and, b) people who already have these loans will see their payments go up and the likelihood of them defaulting on the loan increases. I wish I had a figure that I would imagine it's probably something like 10% increase in default rate per 1% rate hike, something along those lines. It would be something interesting to see. So when it comes to Congress saying, oh well, you know it's no big deal to hike interest rates just 1%. What's one little percentage point? Well, one little percentage point for the average student works out to be about $5,800 over the life of the loan. When you look at longer loan terms, obviously think of that.
If you are interested in petitioning your Congress critters to reconsider the rate hikes in student loan consolidations, student loans, federal student loans in general, give them a ring www.house.gov, www.senate.gov, both websites will let's you get in touch with your life representatives and let them know. Among other things, interest-rate hikes will make loans less accessible. There will be people who will not qualify for them if the rates get higher. Particularly if the fee, that are associated with student loan, they are tearing teeth origination fees, if those fees go up as well because of pending legislation then you really, really you run the risk of cutting out a percentage of the population that simply cannot afford to pay them. Let them also know that defaulting on these loans basically increases the amount of unserviceable amount of debt that the country had a whole. And that is always a bad thing. If you have student loans, and you would like to do something about them, consolidating them is probably the best choice. We actually had a press release go out yesterday regarding student loan consolidation, but the short version is lock in your rates now and they'll be fixed rate for the life of the loan and no amount of legislation can change that because the loan will already have been issued and you will already have a signed promissory note with the terms of the loan. Basically, it's not written in stone per se, but it is a legally enforceable contract, which in today's litigious society is just as good as something written in stone. So, definitely go ahead and do that. You can consolidate at www.studentloanconsolidator.com or give a call here at the office at 877-328-1565 and ask for anyone of the customer service reps who will be more than happy to help the. Welcome, by the way to Kristen Poppsi who started this week. Welcome, so if you get her on the phone be a little gentle. She's just getting started but every indication looks like she's going to do a great job. I'm looking forward to some great things coming from her.
I was filling up my car this morning and realized that I haven't talked about this one quick gas mileage tip. We should probably cover the some winter gas mileage tips in the next show. If you have a choice of filling up your tank in the morning or filling up your tank in the evening, opt for the morning, especially in the morning before sunrise. Gasoline is a very interesting fluid. It expands and contracts much more rapidly than water does. So if you can fill your tank at the coldest point of the day, which is usually I think before sunrise, you'll get more gas in the same amount of volume. One volume of gasoline in the morning will actually have more gasoline in it then 1 gallon in the evening. So, if you have the option to fill up in the different time of the day, I know it's colder in the mornings especially now, but the extra gasoline you will get will offset, a little bit, the gasoline inefficiency in the in the winter time. We'll talk about that more tomorrow. We'll do it News You Can Use segment tomorrow about how to winterize and get more mileage out of your car.
Let's move to some Podsafe music. I want to kick it off today with a little bit of Bob Gentry. We've dated You've Changed Recently. Let to The Easy Way.
That was the easy way by Bob Gentry from the Podsafe Music Network at a www.music.podshow.com. A great song, I love Bob gentry is now a you have a little bit like Aerosmith with a sort of a Matchbox 25 to it as well and Bob always does sound a lot like Rob Thomas in spots. It's refreshing to have good Podsafe music that can give the mainstream music industry a run for its money. I'm very happy about that.
Alright first thing, as the New Year approaches, as FAFSA time approaches the number of scholarship scams increases. A couple of notes about that, 1) a paid scholarship service is not necessarily a scam as long as you know what it is you're paying for. If the case of The Student Loan Network's scholarship service, the paid one at www.gotscholarships.com, if you are paying for access to a database that has been put together by you can be or actually a whole bunch of human beings and the awards have been researched and compiled and basically we have a bunch of people surfing the web putting everything into a gigantic directory so that you don't have to, which is a fairly nice thing to have. We're putting together the free one as well which has many, many fewer awards at www.freescholarshipsearch.com. I thought about that a lot lately. The paid one, you're talking about 2 1/2 million awards, that's a lot of time that you're paying for that. You're also paying for the privacy guarantee. A lot of low-cost or no-cost scholarships are basically trading your personal information and little excepting money and then they can go on and sell those names to another vendor for money. Names go anywhere from $1 to $2.50 depending on who you're talking to and what the terms of the deal are. So be aware of that. The scholarship services that are almost certainly a scam are ones that indicate when you pay X amount of dollars you will get a scholarship. I don't think (if there is let me know), I don't think there's any scholarship service out there that can guarantee that by paying a certain amount of money you will get the scholarship. Unless of course, pay $500 and will issue a $500 scholarship in which case of course you're going to get a $500 scholarship, you just paid it and they're probably making money on interest in the backend. But most scholarship services do not do that. A pretty sure sign of a scam when it comes to scholarships, anyone that tells you that you are definitely going to get a scholarship if you paid a fee. It is very, very, very difficult to guarantee anything in the scholarship world and certainly paying money for false guarantees would qualify as a scam. Our site, of course, as I have mentioned, www.gotscholarships.com for the paid version and www.studentscholarshipsearch.com for the free version. Check those out. They are definitely getting good scholarship out to people who need them.
Speaking of which, we have today another teaching scholarship from Boston College, The Bank of America Boston College Teachers Scholar Award. This award is created through the generosity of Bank of America which bought out Fleet Bank which used to be Bank Boston, which used to be Bay Bank of Boston, anyway, the award is created to support the teacher education program. 10 academically talented students per year from groups underrepresented in the profession and academic areas such as math and science and Spanish where there are critical shortages of qualified teachers. Some shortages like Spanish are regional wall those and mathematics and science are depressingly nationwide. The award represents a partnership between Bank of America and the Lynch School of Education at Boston College to increase the number of well-prepared teachers to teach in urban schools. It comprises six credits us tuition remission. So basically six credits of paid tuition and a stipend of $15,000. A portion of the award is a direct grant and another portion is forgivable loans following graduation of service in an urban school system. Again, like the previous award we talked about from B.C., this one is by nomination at the time by the faculty at the Lynch School of Education at Boston College and then if your qualifications are considerably better than the average bear, you'll be likely nominated by the faculty for the award. So today's scholarship update, besides the warning about scammers is the Bank of America teachers scholarship award. You can find more information about this and a number of other awards that we've been putting together at www.studentscholarshipsearch.com, our free site.
Alright let's move onto the next piece of Podsafe music. I feel like a little bit of Christmas music. I know it's starting to get old with just the amount of Christmas music out there but it's alright. You can always fast forward. Let's do Matthew Ebel Walk 1000 Miles.
Want 1000 miles by Matthew Ebel from the Podsafe Music Network. A great, great piece of Christmas music. He has such a really good voice. Alright let's talk about news you can use. I wanted to talk today about re-examining asset liabilities. We talked about this a long time ago. I think it was summertime at one point, it's worth bringing up again not only because there's a lot of new listeners to the financial aid podcast but also because as tax time comes around people start to think about their finances, the new year, 32 years resolutions to get finances in order and I thought this would be a good time to bring out this idea of assets and liabilities. There's two versions, there's the IRS version which is the one you put on your tax return and then there's the version that impacts your wallet. Assets and liabilities are financial terms basically for things that bring in money and things that take money away from you. The framework that I like best actually comes from a book by a guy named Robert Kiyosaki called Rich Dad Poor Dad. The insights in the book are a little dodgy at time. But the financial portion is actually pretty good. Basically he talks about assets and liabilities as beings that generate money and things that take money out of your pocket. That is the simple list framework to put it in.
So income and expenses. Assets bring in income. Liabilities are expenses that take money out of your pocket. That's an interesting way of looking at it because a lot of things that you would normally think of as assets, like a house, really in that case are not. And the reason for that is because unless you're selling your house, unless you're putting it on the market, it's not generating income it's actually taking money away. So your house is technically an expense unless you sell it. If you don't plan on selling it then it's really not an asset so you really should be counting it on your ballot sheet. If you think about it, asset have to be greater than liabilities over a period of time. How do you become wealthy? The more time that passes the more money you have coming in and going out and the wealthier you become. Poverty is when assets drop below liability so money going out exceeds money coming in. It sounds straightforward but it's actually not because you have to track that kind of thing. Software like financial planning program and there are some free whether there is a paid ones or even just a checkbook or spreadsheet will all help in tracking what goes in and what comes out and whether you have positive income or negative income.
So the first step toward making use of this framework, the first well is to figure out what your assets and liabilities are. You basically take a period of time, it can be a week it could be a month it could be an entire year, and figure out where the money is coming in from and where the money is going out to. It will take some time. It's not easy but it is worth doing.
The second goal is to immediately try and get your assets to be greater than your liabilities. You want to find as many ways as possible to get the money coming in the door to be greater than the money going out the door. There's a couple ways to do that. You can decrease liabilities or you can increase assets or you can do about. How do you decrease liabilities? Very simple to, spent less money. The biggest area that America can reduce its spending in if any payment of debt and the servicing of debt. Pay off as many deaths as you can starting with the highest interest rates first very, very straightforward. How do you increase assets? You've got to get more money coming in the door. That means saving, that means investing, investing wisely I should add. That means employment, asking for raises asking for bonuses, looking for jobs that include raises and bonuses so that you're motivated to not just come in and punch a clock but actually to really go out and perform the best you can. Not only will you get the satisfaction of it job well done but shall get financial compensation for it as well. That's why a lot of people who are in the field of sales, really enjoy it so much because they feel, and in many cases they are, directly rewarded for the amount of work they put in. The harder they work, the more they work, the more money comes in from sales and that why sales can be a very satisfying profession.
Information, by the way, a quick plug for the Student Loan Network, if you're in the Boston area and you are looking for a position in customer service in student loans and financial aid, we are hiring. And we pay very well; specifically we pay very well not only in base salary but also in bonuses as well to help encourage you to do your best when it comes to things like student loan consolidation and things like that. So check out our website I will post a link to the job description in the show notes.
Finally, goal number three, you want to put a number out there. He want to say I want assets to exceed liabilities by X dollar amount. I want X number of dollars a month left over every month to more income than expenses. It could be modest at first, you can say you know I want to have $50 more in my pocket at the end of this month and last month. And next month you can say I want $75 left over in my pocket. I'm not in a suspended I'm not going to throw it out the door I just want to make sure I have that in a savings account or whatever so that eventually you increase that goal until you have a lot of money is being saved. At a certain point you'll have so much money coming in than going out, ideally, that you'll need to actually start looking at investing it. Right now, saving it is perfectly fine. You can save it at an Internet bank, at a regular brick and mortar bank, whatever. As long as you're saving it and not spending it. That is the basic framework for assets and liabilities for income and expenses. As you start putting together your financial goals for 2006, whether you're a student, a parent, a graduate, what ever, take the time to get a spreadsheet out, even just a couple sheets of paper or whatever, get them out your finances and figure out what goals you want to reach in 2006. It is going to be a rough year on the expense side. We can see that already. Interest rates, bla, bla, bla, you've heard me say that much of time. That doesn't mean it has to be a rough year for you. I don't think that it all. If you know what it is that you're doing with your finances, if you can manage your finances well, it could actually be the most successful year you've ever had. I think that's a very positive way to look at it is to say whatever else happens in society in 2006 is going to be a fantastic year for me. So if you could get through the rest of the holiday season without relying on the plastic, if they ask at the checkout, paper or plastic? Use the paper. I'm talking about the money not the bag you're putting your purchases in, by the way. If you can get through the holiday season without using the plastic anymore and get your house in order for 2006, I think it can be a great year for everyone. I certainly look forward to continuing this podcast in 2006 as well, finding more and better ways to help you get money for college, money for after college, deal with your student loans, you name it, but I think it can be a very good year. So it doesn't have to be all gloom and even though sometimes what comes out of Washington can certainly lead you to believe that.
I think looking at the media here we're actually not going to have time for another piece of Podsafe music. I'm going to wrap up today's show. Let's see, reminders, nothing going on right now. If you are a podcaster and if you have any kind of holiday greedy or any kind of New Year's greeting please feel free to send it to me I'd be more than happy to play it just mail it to financial aid podcast that Gmail.com. Even if you're not a podcast or even if you're an audience member and you want to say hello and wish everyone a happy holidays whichever your holiday inclination may be. Financialaidpodcast@Gmail.com. I'd be more than happy to play it. Feedback to the same e-mail address and show notes at www.financialaidpodcast.com. You can find also links there to our Christmas and the Podsafe for Peace song and you can also find it at www.Podsafeforpeace.com. It's $.99 at if unencrypted MP3 and your $.99 donation goes to UNICEF. So if in fact you are going to pirate the music just remember you're stealing money out of the mouths of hungry children all over the world. You should be ashamed of yourself. But I would imagine that most listeners of the financial aid podcast would not indulge in such behavior. Definitely check it out, $.99, it is probably the smallest holiday gift you're going to buy but it's also the one that can bring a lot of meaty and a lot of good to the world. So consider dropping the $.99 for the song and the proceeds will go to UNICEF. A great cause there as well.
That's about it so if you're not subscribed to the show, if you're listening to it on the website or someone forwarded it to you or it just fell out of the sky or what ever, get subscribed. Directions are on www.financialaidpodcast.com. It's really easy and it's worth doing so you never miss an episode. Get a friend subscribed too. Help them to find their way to the Financial Aid Podcast and to the rest of the great podcasts out in the world. I'm going to get the office started now, make another pot of coffee because I drink the first one, and I hope you have a great Thursday, and we will see you tomorrow for more stuff on winterizing your car and of course the latest in financial aid news. So, until next time, take care.