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Private Student Loans: Borrower Beware

Privately financed college loans were less than 10 percent of the $1.3 trillion in unpaid student debt last year, according to the Consumer Financial Protection Bureau. The bulk of student loans are funded by the federal government. But the minority who borrow from private financial institutions often learn painful lessons after graduation: it is much more difficult to negotiate affordable repayment plans with private lenders. Private loans are unlike federal student loans, which have standardized repayment options and procedures.

This blog is intended to help parents and future college students avoid getting into difficult situations in the first place with private loans. Squared Away interviewed two student loan experts at Clearpoint Credit Counseling, an Atlanta non-profit: Terrence Banks, a counselor who works directly with borrowers, and Thomas Bright, a blogger.

Question: Graduates trying to renegotiate their private loans conveyed some harrowing stories in Clearpoint’s 2013 blog post. Have things improved since then?

Terrence: The complaints are still valid and still rampant. But some – not all – private lenders have stepped up to the plate to make private loans a bit more financially feasible.

Q. What would you advise parents and matriculating students do when making their first borrowing decisions?

Terrence: Exhausting the federal loan option is paramount before you go to the private loans. If you find yourself in trouble where you can’t make a payment, you have more options under the federal than the private loans. Also try to find out the potential income for your future profession before going down this road and borrowing at all. And then look for grants – there’s a slew of grants that are untapped each year because people don’t take the time to access them because student loans are so readily available.

Q. How do borrowers get themselves into the situations like this one, described on your blog? “I am able to consolidate my federal loans (big help on the monthly payments) but not my private loans.” Borrowers also talk about inflexible private lenders and being harassed with phone calls from these lenders. … Learn More

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A Familiar Dilemma: to Work or Retire

This profile is the first in an occasional series about individual baby boomers who either have retired or are facing the retirement decision.  

Jane Kisielius

Jane Kisielius is at that age – 63 – when she is being pushed and pulled between the work world and the retirement lifestyle that her husband already inhabits.

She retired once – temporarily – in August 2014 from a stressful job as head of the nursing team for the public schools in Quincy, a suburb southeast of Boston. But with her administrative and nursing skills in such demand, she was quickly sucked back into the labor market, this time as a part-time coordinator of a wellness program for Quincy residents. She was asked to help run the new, grant-funded education program after bumping into the commissioner of the Quincy Health Department.

“The job fell in my lap,” she said. “It was kind of hard to pass it up.”

So here Jane sits, wrestling with when she’ll really retire, as she drinks her morning coffee at the kitchen table in her orderly home, a stone’s throw from the historic home of presidents John Adams and John Quincy Adams. …Learn More

Study: College Debt Hurts Retirement

College graduates learn very quickly that paying hundreds of dollars toward student loans each month makes it difficult to afford things like a nice apartment or a car.

But they might not appreciate the long-term consequences of their record levels of borrowing: college debt is an added threat to their retirement security, according to a new study by the Center for Retirement Research.

Chart: More Young Adults Today are in DebtThe researchers gauged the debt’s impact by looking down the road to retirement and projecting what would happen if working people of all ages had started out with the same profile as young adults: 55 percent of today’s 20-something households have student debt, and they owe $31,000, on average.

College debt has a bearing on retirement security through two avenues. First, money going into loan payments is not available for a retirement savings plan. Second, lenders place limits on how much total debt a homebuyer can have, forcing many borrowers to delay home purchases; and getting a home loan would be very hard for the 17 percent of student loan borrowers delinquent on their debt.

Based on these assumptions and using 2013 data, the Center’s National Retirement Risk Index shows that those at risk of a lower standard of living when they retire would increase sharply to about 56 percent of working U.S. households – compared with 52 percent at risk when the student loan projection isn’t figured into the NRRI calculation.

This “represents a substantial increase in the already alarming rate of households at risk,” said the Center, which supports this blog. …Learn More

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Rising Rents Slam the Middle Class

Chart: Renters are paying moreFirst it was the Irish, then Portuguese, then Brazilians – for more than 150 years, Somerville, Massachusetts, absorbed wave after wave of immigrants. Today, hipster professionals are pouring into this city next door to Boston.

Somerville rents have shot up as much as 50 percent in 15 years, and a two-bedroom apartment for under $2,000 in a shabby chic neighborhood is a rare find.

A similar trend is playing out all over the country – from Boston and Miami to Los Angeles and Seattle – and it’s squeezing working- and middle-class families the most, according to the Joint Center for Housing Studies at Harvard University. …Learn More

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Loneliest Seniors Vulnerable to Fraud

“Lost my husband to 9/11 terror attack” – using heartbreaking stories like these, a U.K. scam that became public last month persuaded some lonely older men to turn their money over to widows.

This report is a dramatic illustration of a relationship between loneliness and fraud that has been uncovered in recent research. That study found that people over 50 have been vulnerable to being victimized by fraud in recent years – but the prevalence of fraud was three times higher among people who are extremely depressed or lonely.

The 2013 study in the journal Clinical Gerontologist might be the first to examine financial exploitation from the point of view of psychological vulnerability. It was based on a general survey of older Americans that asks each participant if they’ve “been the victim of financial fraud in the past five years.”

The psychological survey questions pin down whether they suffer from depressive symptoms and whether their social needs are fulfilled. The social needs questions address loneliness and a lack of social affirmation, asking the survey’s respondents whether they “have people to turn to, people to talk to, people to feel close to” and are “part of a group” and “appreciated.” …Learn More

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Home Equity: a Retirement Resource

The National Council on Aging (NCOA) has redesigned its website providing information for “house rich but cash poor” older people who want to think about tapping their home equity.

Home equity – the house’s market value minus the amount owed on the mortgage – remains a largely unused source of income that many older Americans could be putting toward their medical care or to improve their lives.

wagesHome equity held by Americans age 62 and over reached $5.76 trillion last year – an increase of nearly 30 percent since 2013. A marker of how much of this retirement resource remains untapped is the small number of federally insured reverse mortgages – about 50,000 – that seniors take out every year against the value of their home equity. Reverse mortgages, which are available to homeowners at age 62, are equity loans that do not have to be repaid until the senior permanently leaves their home. …Learn More

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8 College Repay Plans – and Counting

This was going to be a quick blog post about the new student loan repayment program rolled out by the federal government in January. But the differences between it and the seven plans that preceded it were too confusing to figure out on a tight deadline.

This isn’t just the view of one cranky blog writer. Craig Lemoine, a financial planning professor and student loan expert at the American College of Financial Services, which trains financial planners, also admits to being confused about the repayment options, which keep increasing in number.

If Lemoine were a student, he asked, “How on earth would I know which one to pick?”

His confusion pales in comparison with that of a lovely and loved young member of my family. She’s vague on the details of how her own student loans work. Here’s a rough approximation of our recent telephone conversation: …Learn More

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