Even if it’s your best friend or closest relative, sometimes you need to learn to say no when it comes to co-signing. The singular most important thing to make sure is that you won’t lose out big by giving someone else the privilege of being their co-signer. Many times it actually does work out- for instance co-signing for a twenty year old’s car who has a steady job and pays it back timely giving him good credit. But when people have histories of bad credit, don’t pay back, don’t know anything about budgeting, and quit their job every other day it can be time to say no.

Some co-signers have had their lives severely disrupted when the borrower for whom they co-signed stopped paying, leaving it up to the co-signer to make the loan good. Most of the mail I get on the subject is from co-signers in this situation. They now regret they did it, and they invariably ask me how they can get out of it.Jack M Guttentag

In 2006, Emily Johnsen, a college student in New York, was hospitalized for stress just a few months shy of graduation. “It was the stress of putting together my master’s thesis, and my financial situation — knowing I was entering repayment for my loans,” she says.
High Anxiety

Over six years of undergraduate and graduate education, Johnsen had taken out $140,000 in student loans, which her grandmother co-signed against her mother’s wishes. After Johnsen earned her master’s degree from a prestigious arts program at New York University, she assumed she’d make the median salary cited by the school’s financial aid counselor — $65,000. Instead, she couldn’t find a position in her field paying more than $30,000.

Johnsen, 26, has both federal and private loans. She put them on forbearance twice, and has now exhausted all the forbearance offered during the life of the obligation. “The interest is capitalized at the end of each forbearance period, so at the end of two years there was an additional $20,000 to $30,000 on top of the loans I took out,” she says.

Johnsen recently started a new job as a media assistant at a New York art gallery that pays $35,000 — or just over $1,800 a month after taxes. On Sept. 1, she begins a 15- to 20-year repayment plan. For the first two years, her payment is $527 a month. “Then it increases to 900-something,” she says. “By that time I’m hoping to be able to further myself with the company.” She still takes medication for anxiety and depression.

A Subprime Education

It’s time to banish the notion that all student loans are “good” debt. These products unquestionably offer the opportunity to boost one’s career — college grads make 60 percent more than those with only a high school diploma. But the changing nature of the private student loan industry — which in recent years doled out dollars with the enthusiasm of subprime mortgage lenders — makes it critical for students to assess the risk, and borrow with a realistic idea of future earnings potential. In fact, these loans are worse than subprime mortgages, because they can haunt the borrower for life.

During the 1990s, average student loan debt doubled. Two-thirds of graduates now leave school in the red, with average borrowing of $21,000, according to the Project on Student Debt. Ten percent of graduates from four-year, private, nonprofit institutions had debt of $40,000 or more.

Private loans, which typically carry higher interest rates than federal loans, have grown at an average annual rate of 27 percent in inflation-adjusted dollars since 2000-2001, according to the College Board. Private loans comprised about one-quarter of the student loans made in 2006-2007 — up from 6 percent a decade earlier.

Risky Business

“Federal loans offer fixed, low-interest rates and a lot of borrower protections in repayment,” says Lauren Asher, associate director of the Project on Student Debt. “Private loans have limited consumer protections and variable interest rates that can go very high. It’s a little like going to a payday lender — you’re paying a huge amount to get cash, and that can follow you through your whole life. They can be even more risky than credit cards, because private student loans can’t be discharged in bankruptcy.”

Some 54 percent of students polled in 2004 said they would have borrowed less if they had to do it again — up from 31 percent in 1991, according to the Project on Student Debt.

While Johnsen is an extreme example, consider what happens to the 10 percent of students who leave four-year private institutions with $40,000 in loans. Let’s say the graduate earns the 2006 median income of $46,435 a year — or $3,382 per month after taxes. I asked Mark Kantrowitz, founder of FinAid, a college information website, to create a few scenarios contrasting public and private loans, paid back over different periods of time.

By the Numbers

The borrower who repays his loans over 10 years will face a monthly bill of $460 to $551, or 13.6 to 16.3 percent of his income. (See the tables below.) The borrower who repays over 25 years will pay $278 to $392 a month, or 8.2 to 11.6 percent of his income. The private-loan borrower who pays back his debt over 25 years will pay nearly twice the amount of the loan in interest.

All Public Loans,
6.8% Interest Rate Monthly Payment % of Take-Home Pay Total Interest Paid
10-year Repayment $460 13.6 $15,239
25-year Repayment $278 8.2 $43,288
All Private Loans,
11% Interest Rate Monthly Payment % of Take-Home Pay Total Interest Paid
10-year Repayment $551 16.3 $26,120
25-year Repayment $392 11.6 $77,608
Note: The federal Stafford loan has a 10-year repayment, but the term can increase to 12 to 30 years if the borrower consolidates and chooses extended repayment. Private student loans tend to have 20- to 25-year terms.

“Ten to 15 percent of income is typically considered affordable,” Kantrowitz wrote me in an email. “So $40,000 in debt is within the range of affordability, although one would probably need a 20-year term on a private loan to make it affordable. But do you really want to still be repaying your own education debt when your children are about to enroll in college?”

read more: laura rowley

Forget working hard for the money. Some factors that influence salary are beyond your control

It’s a rare individual who wouldn’t like to make a bit (or a boatload) more money each year. It’s not as if most people don’t try: They work hard. They endeavor to boost their performance—and, it seems to follow, their pay—with training programs and career coaches and workplace mentors. They even schedule weekly tête-à-têtes with their bosses to measure their progress and reassess benchmarks.

The truth is that some factors correlated to higher pay are impossible for a person to control. Studies show that taller people make more money, but can people increase their height? Similarly, can a man become a lefty after decades as a right-handed man? Can a woman become a man? What’s more, there are factors in how you behave outside the office that are associated with higher pay. For example: If you like rum in your Coke, you’ll make more money. (It is, at least, a good argument against prohibition.)

Men seem particularly affected by salary advantages and disadvantages that aren’t related to work performance. Consider the premium paid to some lefties. While researchers at Lafayette College and Johns Hopkins University found no wage difference between left-handed and right-handed women, left-handed men who have some college education average about 13 percent more than right-handed men. Lefty males who are college graduates average as much as 20 percent more than their right-handed counterparts.

A report from the Reason Foundation found that while male and female drinkers make more than nondrinkers, men who hit the bar at least once a month—thereby satisfying the definition of social drinkers—seem to make even more.

Married men tend to make more than men who have never been married. Researchers at the Federal Reserve of St. Louis found there may be a few reasons for this. For one thing, employers may have a bias in favor of married men because marital status might signify a man’s stability or responsibility. Old-fashioned or not, another possibility is that marriage frees men up to focus on work, rather than on household tasks. The most likely reason, however, is that the observable qualities that appeal to an employer are similar to those that appeal to a mate—characteristics such as background, education, and appearance.

Men who choose to go into Christian ministry will find that they dominate the field but make less than their female counterparts. A survey of church employees conducted by Christian Today International’s Your Church ministry found that women made up only 6.3 percent of full-time solo pastor positions, but they reported 10.4 percent higher total compensation.

Women are generally acknowledged to be underdogs in the compensation world, but a report from American Association of University Women Education Foundation noted that women choose college majors that pay less—majors such as education, psychology, and healthcare. Men choose more lucrative majors, like engineering and mathematics.

The pay difference has, however, undergone a surprising shift in some metropolitan areas. Andrew Beveridge, a sociology professor at Queens College, found that New York women in their 20s earned an average of $7,000 less than their male counterparts in 1970 but were making about $5,000 more in 2005.

A 2007 study from University of Northern Iowa looked at 2000 census data and found that cohabitating lesbians earn about 10 percent more annually than married women. They also earn more than cohabitating, unmarried, heterosexual women.

Perhaps the research that suggests the most potential for control over pay has to do with hours logged. Two MSN-Zogby polls found 37 percent of workers with household incomes of $100,000 or more report working between 41 and 50 hours a week, while only 8 percent of those with household income less than $25,000 work as many hours. Of course, there’s plenty that could explain this, as illness, old age, and disability can affect a worker’s hours. But there may be some hope that putting in the time will pay off.

Liz Wolgemoth

The good news: mortgage rates are down. The bad news: it’s much harder to qualify for a refinanced loan these days.

What’s more, the borrowers who need to refinance the most - because their adjustable rate mortgages (ARMs) are resetting to higher interest rates - are among those having the most trouble winning approvals.

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“I’m turning away about 60% to 75% of the clients who come to me for a refi,” said Bob Moulton, president of Americana Mortgage Group on Long Island, N.Y. “Some don’t have enough equity and others have bad credit scores.”

During the boom years, lenders approved most anyone with a pulse. Not so today. Mortgage brokers recognize this and are now being very selective about the clients whose applications they choose to submit to the likes of Wells Fargo or Bank of America.

If an applicant has poor credit, or a home whose value is rapidly deteriorating, they’re just not going to bother.

“If the person is Sweet Polly Purebread - good income, good assets, high credit score - there’s money out there,” said Moulton. “But if not, then it’s harder.”

Interest rates are way down - 5.67% is the going rate for a a 30-year fixed loan this week, according to Freddie Mac. That has generated a spike in refinancing applications.

Total mortgage applications were up 73% last week from a year earlier, according to the Mortgage Bankers Association (MBA), and 69%of those applications were for refis. Last February, when interest rates were about 6.3%, about 46% of applications were for refis.

The make-or-break metric for anyone looking to refinance right now is home equity - the difference between what is owed on a house and what the house is worth. But with home prices down, many homeowners have little of that precious commodity left.

“If you have an 80% loan, with a 10% home equity loan, you may not be able to refinance,” said Peter Grabel, a mortgage broker in Connecticut - especially in down markets.

Consider a homeowner who bought in Miami a year ago with 20% down. Home prices have fallen 15% there in the past year, wiping out three-quarters of the equity. Lenders, who want collateral that’s worth more than the value of the loan, are wary about having so little cushion. If they have to repossess and resell the house, they’re on the hook for a big loss.

“No lender would take that deal,” said Marc Savitt, president of the National Association of Mortgage Brokers. “It’s a lot different from two years ago.”

The bar has also been raised for credit scores when it comes to refinancing, according to Grabel. And sometimes, it’s not a matter of whether someone can get refinancing but at what price.

“Those with high credit scores are getting very good rates, but the lenders have heightened the requirements to qualify,” said Grabel. Instead of a score of 680 for the best rate, a borrower might need 700 now.

For example, Grabel has a client who wants a cash-out deal. The client has lots of equity in his house but a dismal credit score - 552.

“I used to have 20 lenders I could send him to; now there’s maybe one,” said Grabel. “The rate, though, will be high, higher than what he’s paying now.”

The only reason that this client will take the deal is because he’s going through a divorce and needs to buy out his wife. He doesn’t have time to rebuild his credit rating, but he’s lucky that at least his house appraises well.

Indeed, appraisals are another tool that lenders are using to eliminate unqualified applicants.

“It used to be a formality,” said Grabel. “Now it’s, ‘Lets do the appraisal first and see what value comes in.” Lenders are scrutinizing them to a degree unheard of during the boom. They don’t want to lend $160,000 on an appraised value of $200,000 unless they’re sure the house is truly worth that.

Ted Grose, a past president of the California Association of Mortgage Brokers, said lenders now often conduct what he called “bench reviews” of appraisals. “They have an experienced, independent third-party go over the appraisal to make sure the numbers are accurate,” he said.

Grose called many of the applicants he sees “very challenging, mostly because of high loan-to-value ratios.”

Many of these people took exotic loans to get into high-priced properties. They used hybrid ARMs that are resetting to higher rates, or interest only loans.

Particularly deadly are option ARMs, which act as negative amortization loans; the payments don’t even cover the interest and the balance grows over time. Combine that with falling home prices, and the loan balance may be more than the home’s market value.

Under those circumstances, said Grose, few borrowers can be helped.

Source:yahoo personal finance

The above title might have scared you. For most of us, the ideal is to be as educated as possible and it’s a dream for us to also be able to send our kids to good schools.

That’s where the tag line comes in. What’s a good school? Will your child get a better job because he/she attended a prestigious four year university and received a B.A. in liberal arts?
I actually think not. Your child (or you, if that’s the more relevant case) will receive a huge debt, that’s what you can guarantee he or she will receive. The debt may take years to pay off.

Here’s a secret: The easiest thing to market in the world is education. “Without a good degree you won’t get any good job and won’t make any money,” is what every private or even public post high school recruiting agent will tell you. They essentially are experts at selling the American dream, which is not too hard to sell for many idealistically driven youth.

The reason why they are so successful is because what they’re saying has much truth. But that’s the difficulty in processing information. Truth mixed in with a little bit of lies is what ends up sounding as truth, but is actually quite different.

To fully comprehend what I’m saying, you’ll first have to understand the history of colleges, most notably the prestigious well established universities. These colleges were not intended (and in my opinion, are still not intended) for middle class and poor people to become educated in order to get good jobs. Universities were simply a social class symbol of pride. Previously you didn’t have to get straight A’s to get into Harvard, but rather come from the right family and have the right charisma and likeability to get accepted. Colleges were intended as a way for the wealthy to continue on with their education without ever having to get a real job, thanks to their family wealth and inheritance.

Does it make any sense to get a $100,000 loan to go to college (or even a $30,000) when the average person makes 7 career changes over their life-time and it may take a good few years until the person is established in a job which he likes and which pays decently (usually starting salaries aren’t that high, face it, regular people don’t make that much and it takes time until they are established and start making money.) The only thing it accomplishes is putting people in huge debt which can and usually does take years and years to pay off. Usually these payments need to be made in the years where every penny counts and people can least afford it. Globe, a Salt Lake City community newspaper discusses the financial difficulties pertained by students who have to make the tough decision of choosing to go to a prestigious university or opting community college.

Money is always a problem for college students. No matter which way you look at it, students will end up spending thousands of dollars each year for tuition. One positive is that SLCC is on the lighter side of the tuition scale. A full-time student at SLCC can expect to spend approximately $2,300 a year, where the tab at the University of Utah can tip the scale at about $5,000. More than double the cost, and for students on a budget $2,700 goes a very long way.

Do I advise not going to college altogether? Not at all. What I do advise, though, is going to community colleges. They are more career oriented, friendlier learning environments, and offer more practical classes. They also cut on big bucks.

The second, mostly over-looked issue reagarding college is the issue of maturity. Most 17 or 18 year olds are still too young to know what they want to study and do with their lives. Many students feel lost in huge universities where they don’t even know what they’re paying so much for. A common sentiment you’ll hear from university drop-outs is that if they had instead started out in a community college and then transferred they probably wouldn’t be drop-outs today.

Another separate issue to think about is what major to get into. A major in French Literature or Art History may be very fun and interesting, but honestly does not offer very many jobs. If your goal is to become a professor, so be it, but otherwise think through your options carefully.

Remember, it takes time until anyone- whether he is a graduate of Yale or Santa Monica College- to establish themselves and start making money. People generally don’t start making big bucks fast. Do you really want to have enormous loans sitting on your head while you need the money the most? I think not.

The only thing stopping Americans from achieving financial independence is ignorance. The typical American consumer’s dream is to make it big in order to go out and acquire a fleat of material posessions. Americans for the most part have no idea how to key in on basic money managing skills in order to build wealth.

There is a stark difference in those who have a basic understanding of finances and those who don’t. Those who do can be assured of living comfortably with enough saved for retirement, while those who don’t will probably be forced to work way after retirement age.

We basically live in an age of credit. We all know countless people who don’t really have money, but who are living the “rich life” all with fake money. In fact, it’s becoming more and more common for people who look that they’ve stepped up the rung and made it, living in million dollar homes and driving fancy cars, but in reality are a step away from the streets. These people buy homes on 1% interest for over 50 years, barely taken into account that their low interest rates will eventually go up, and lease brand new cars every year on elaborate credit plans that they can’t really afford.

It’s this world of credit we live in which is very tempting to just jump on the bandwagon and join all our neighbors in doing the same. We may ask ourselves, if so-and-so can afford it, there must be a way that I can to. The reality, though, is that this style of living is very dangerous. To put it very bluntly, it’s the gate-way to bankruptcy.

The constant credit card applications we get in the mail all promising endless goodness are nothing more than an aggressive marketing scam to get you to spend more than you have to, and essentially behind your back, suddenly raise premiums and interest rates.

It’s not a fun world to be in debt. Debt slowly creeps on and before many people even realize what is happening, they’re seriously drowning. What once looked like a great credit card deal is now simply a service which punishes you for owing money. The credit card companies many times will penalize you more and more as your debt adds up and payments come late.

To combat the growing phenomenom of “living rich on credit” is financial independence. Financial independence is the diametric opposite of what was outlined above. Financial independece means spending less money than you earn, which includes living in a house you can afford, driving a car you can afford which you didn’t buy on credit, shopping in economically friendly ares and having a wholesome attitude- spending consciously, yet not being stingy- towards money.

Once you make sure to spend less than you earn you’re already on your way to financial independence. It’s that simple. It means saving money instead of spending every penny you earn because you have “a burning whole in your pocket.” Eventually- it will not happen overnight- wealth will be acquired. Just be patient and persistent, and before you know it- within a couple of short years- you will have a nice net worth saved up. The recommended advice for building up net worth is by saving 10% of your earnings and investing in stable guaranteed money growth bonds and securities.

The Millionaire Nex Door, a book by Thomas Stanley and William Danko, offers real insight as to where and how millionaires are formed. And believe it, most are not formed from a spout of overly generous luck they’ve suddenly had.