Student Debt Management

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Student Debt Management
Welcome (Cindy Best)
2
Presentation Overview

• Student Borrowing Trends
• Student Credit Card Use
• Credit Reports
• Identity Theft

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Borrowers Perception Of Debt
Wells Fargo Committed to helping you On the
road to your future And throughout your life
Source College on Credit How Borrowers Perceive
Their Education Debt, Results of the 2002
National Student Loan Survey, Nellie Mae
Corporation, Final Report, February 6, 2003
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Median Student Loan Debt 19,300
Source Trends in Higher Education, CollegeBoard,
2006
5
2003 2004 Median Debt Of Undergraduates
Source Trends in Higher Education, CollegeBoard,
2006
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Debt Burden Borrowing Trends

• Proportion of federal student loans guaranteed by
  the government
• and private education loans from banks

Note Components may not sum to 100 due to
rounding.
Source Trends in Higher Education, CollegeBoard,
2006
7
Debt Burden Borrowing Trends Continued

• Average student debt

If a student doesnt charge anything more to the
account and pays only the minimum monthly payment
on credit card charges of 7,000 at an 18.9
interest rate it will take more than 16 years to
pay off the original card balance. The student
will have paid 7,173 in interest.
Source Educating Undergraduates on Using Credit
Cards, Nellie Mae, 2006
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Student Credit Card Use
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Graduate Credit Card Use

• 92 of graduate students in 2006 have at least
  one credit card
• Average outstanding balance on graduate student
  credit cards was 8,612 an 10 increase from
  2003
• 67 took out their first credit card as an
  undergraduate student
• 28 of graduate students reported using credit
  cards for tuition
• 93 of Graduate students responded they would
  have liked more information on financial
  management topics before they started school

Source Graduate Students and Credit Cards Fall
2006 An Analysis of Usage Rates and Trends,
Nellie Mae, August 2007
10
Graduate Student Credit Card Use Continued
Source Graduate Students and Credit Cards Fall
2006 An Analysis of Usage Rates and Trends,
Nellie Mae, August 2007
11
Graduate Student Credit Card Use Continued
Source Graduate Students and Credit Cards Fall
2006 An Analysis of Usage Rates and Trends,
Nellie Mae, August 2007
12
2006 Graduate Student Credit Card Use
Source Graduate Students and Credit Cards Fall
2006 An Analysis of Usage Rates and Trends,
Nellie Mae, August 2007
13
2006 Graduate Student Credit Card Use Continued
Source Graduate Students and Credit Cards Fall
2006 An Analysis of Usage Rates and Trends,
Nellie Mae, August 2007
14
How Much Credit Card Debt Is Too Much?

• Consumer credit card debt has almost tripled over
  thelast two decades from 238 billion in 1989
  to 800 billion in 2005
• If a family owing 9,000 on a credit card with an
  18 interest rate never uses it again and only
  pays the minimum 2 of the outstanding balance
  each month plus accrued interest, it will take 47
  years and close to 33,000 to pay off the
  9,000 debt

Source Escaping the Credit-Card Quagmire,
Newsweek Business, MSNBC.com, August 18, 2006
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Managing Credit Wisely

• Check monthly statements carefully
• Pay ALL bills on time
• Review credit reports regularly
• Always call credit company to negotiate interest
  rates and fees

Source Escaping the Credit-Card Quagmire,
Newsweek Business, MSNBC.com, August 18, 2006
16
Credit Reports
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Fair and Accurate Transaction (FACT) Act

• The FACT Act amended the Fair Credit Reporting
  Act
• (FCRA). The intent of the Act is to
• Increase consumers ability to combat identity
  theft
• Improve the accuracy of credit reports
• Require credit reporting agencies to stop
  reporting fraudulent account information after
  consumers establish they were victims of identity
  theft
• Require creditors or businesses to provide copies
  of business records of fraudulent accounts and
  transactions to consumers who are victims of
  identity theft
• Allow consumers to report accounts affected by
  identity theft directly to creditors in addition
  to credit reporting agencies

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What Is A Credit Report?

• A credit report
• Provides a detailed credit history of a
  consumers various credit experiences
• Lists types of credit used, when the accounts
  were opened, and whether bills were paid on time
• Shows how much credit is or was used and if the
  consumer is seeking new credit
• Gives a broad view of a consumers credit history

Source Understanding Your FICO Score, Fair
Isaac Corporation, July 2006
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What Is A Credit Score?

• A credit score (AKA FICO Score) is
• A method of evaluating and identifying the level
  of future credit risk
• Based on data in a consumers credit report from
  the three major credit reporting agencies
  Equifax, Experían, and TransUnion

Source Understanding Your FICO Score, Fair
Isaac Corporation, July 2006
20
What Determines A Credit Score?

• Payment History
• Amounts Owed
• Length of Credit History
• New Credit
• Types of Credit in Use

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Paying Bills On Time

• Approximately 35 of a credit score is
• based on payment history.
• Payment information on many types of accounts
• Public record and collection items reports of
  events such as bankruptcies, foreclosures, suits,
  wage attachments, liens, and judgments
• Details on late or missed payment
  (delinquencies) and public record and
  collection items
• How many accounts show no late payments

Source Understanding Your FICO Score, Fair
Isaac Corporation, July 2006
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Total Amount Of Debt

• Approximately 30 of a credit score is
• based on amounts owed.
• The amount owed on all accounts
• The amount owed on different types of accounts
• Whether theres a balance on certain types of
  accounts
• How many accounts have balances
• How much of the total credit line is being used
  on credit cards and other revolving credit
  accounts
• How much of installment loan account is still
  owed, compared with the original loan amounts

Source Understanding Your FICO Score, Fair
Isaac Corporation, July 2006
23
Time-Span of Credit History

• Approximately 15 of a credit score is
• based on length of credit history.
• When general and specific credit accounts were
  established
• How long since consumer has used certain accounts

Source Understanding Your FICO Score, Fair
Isaac Corporation, July 2006
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Recent Credit Applications

• Approximately 10 of a credit score is
• based on new credit.
• The number of new accounts
• How long since a new account was opened
• How many recent requests for credit were made(as
  indicated by inquiries to the credit reporting
  agencies)
• Length of time since credit report inquiries were
  made by lenders
• Whether good recent credit history follows past
  payment problems

Source Understanding Your FICO Score, Fair
Isaac Corporation, July 2006
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Credit Combinations

• Approximately 10 of a credit score is
• based on credit in use.
• What kinds of credit accounts are in use
• How many of each

Source Understanding Your FICO Score, Fair
Isaac Corporation, July 2006
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Factors Not Considered In A Score

• Race, color, religion, national origin, sex, and
  marital status
• Age
• Salary, occupation, title, employer, date
  employed, or employment history
• Where you live
• Any interest rate on particular credit cards or
  other accounts
• Any items reported as child or family support
  obligations or rental agreements
• Certain inquiries requesting credit report or
  scores
• Any information not found on your credit report
• Any information that is not proven predictive of
  future credit performance

Source Understanding Your FICO Score, Fair
Isaac Corporation, July 2006
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Five Steps To A Higher Credit Score

• Be punctual with payments
• Check credit reports regularly and remove
  inaccuracies
• Manage debt
• Give it time
• Avoid excessive credit inquiries

Source Five Steps to a Higher Score, TrueCredit,
www.truecredit.com
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What Is A Good Credit Score?

• Scores range from 300 850
• Most people score in the 600s and 700s
• Higher scores are better
• Most lenders consider scores above 700 very good
• Scores below 600 indicate risk

Source Average Credit Statistics, www.myfico.com
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Cannot Repair Credit

• Credit repair services cannot improve the
• situation any faster than responsible payment
• Negative credit remains on a credit report for7
  10 years
• Review credit reports and make corrections
• Free resource www.annualcreditreport.com
• Dispute inaccurate information
• Update personal information
• Improve credit behavior
• Pay off credit cards each month
• Make payments on time
• Reduce the number of credit accounts

Source Understanding Your FICO Score, Fair
Isaac Corporation, July 2005
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Identity Theft
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Fair And Accurate Transaction (FACT) Act

• The FACT Act amended the Fair Credit Reporting
  Act
• (FCRA). The intent of the Act is to
• Increase consumers ability to combat identity
  theft
• Free credit report every 12 months upon request
  from each of the major credit reporting agencies
  to review accuracy
• Improve the accuracy of credit reports
• Require creditors to let a consumer know they may
  report late or missed payments to a credit
  reporting agency
• Allow consumers to exercise greater control over
  marketing solicitations
• Requires lenders to respond to victim statements

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Identity Theft And Fraud

• 9 million Americans have their identities stolen
  each year
• 674,354 complaints to the Federal Trade
  Commission in 2006
• 36 identity theft
• 64 fraud

Source www.ftc.gov/idtheft
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Defining Identity Theft

• Occurs when someone steals personal information
• (name, credit card number, Social Security
  number, etc.)
• and uses it fraudulently.
• Costs time and money
• May destroy a persons credit
• May ruin a persons reputation

Source Fighting Back Against Identity Theft, The
Federal Trade Commission, www.ftc.gov/idtheft
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Defining Identity Theft Continued

• The Identity Theft and Assumption Deterrence Act
  was enacted by Congress in October 1998.
• Identity theft is a federal offense when someone
  knowingly transfers or uses, without lawful
  authority, a means of identification of another
  person with the intent to commit, or to aid or
  abet, any unlawful activity that constitutes a
  violation of federal law, or that constitutes a
  felony under any applicable state or local law.
• Under the Act, a name or Social Security Number
  is considered a means of identification. So is
  a credit card number, cellular telephone
  electronic serial number or any other piece of
  information that may be used alone or in
  conjunction with other information to identify a
  specific individual.

Source Take Charge Fighting Back Against
Identity Theft, The Federal Trade Commission,
www.ftc.gov/idtheft
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Methods Of Stealing An Identity

• Identity thieves may
• Go through trash or dumpster diving
• Skimming credit/debt cards with a special
  storage device when processing charge.
• Steal unsecured mail and/or submit a change of
  address
• Use phishing or fake emails to get consumers to
  provide personal information
• Steal from wallet or purse. Also happens with
  personnel records from their employers
• Pretexting info from financial, service groups.

Source Fighting Back Against Identity Theft, The
Federal Trade Commission, www.ftc.gov/idtheft
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Preventing Credit Card Fraud

• Keep cards secure
• Sign new cards upon receipt
• Do not write PIN on cards
• Limit number of cards you carry
• Cross-shred monthly statements and card offers
  received in the mail
• Contact the card company whenever a statement is
  incorrect or not received

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Tips For Deterring Identity Theft

• Cross-shred financial documents and paperwork
  with personal information before discarding
• Protect Social Security Number dont carry card
  in wallet or write number on a check give out
  only when absolutely necessary
• Dont give out personal information over the
  phone, through the mail, or over the internet
  unless you initiated the contact

Source Facts for Consumers Fighting Back
Against Identity Theft, The Federal Trade
Commission, www.ftc.gov/idtheft
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Tips For Deterring Identity Theft Continued

• Never click links sent in unsolicited email
  messages instead type the websites address in
  browsers address box
• Use up-to-date firewalls, anti-spyware, and virus
  software on computers (www.OnGuardOnline.gov)
• Dont use obvious passwords like birth dates,
  mothers maiden name, or last four digits of a
  Social Security number

Source Facts for Consumers Fighting Back
Against Identity Theft, The Federal Trade
Commission, www.ftc.gov/idtheft
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Tips For Deterring Identity Theft Continued

• Be alert to signs that require immediate
  attention
• Bills that do not arrive as expected
• Unexpected credit cards or account statements
• Denials of credit for no apparent reason
• Calls or letters about purchases you did not make

Source Facts for Consumers Fighting Back
Against Identity Theft, The Federal Trade
Commission, www.ftc.gov/idtheft
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Tips For Deterring Identity Theft Continued

• Inspect credit reports annually
• If you request it, the law requires each of the
  major nationwide credit reporting agencies
  (Equifax, Experían, and TransUnion) to provide
  free copies of credit reports every 12 months
• Use one of the following methods to order credit
  reports
• Visit www.AnnualCreditReport.com
• Call 1-877-322-8228
• Write Annual Credit Report Request Service PO
  Box 105281 Atlanta, GA 30348-5281

Source Facts for Consumers Fighting Back
Against Identity Theft, The Federal Trade
Commission, www.ftc.gov/idtheft
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Credit Reporting Agency Contact Information
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Defending Against Identity Theft

• If you believe identity theft has occurred place
  a fraud alert on credit reports with any
• major credit reporting agency (Equifax,
• Experían, and TransUnion)
• An alert tells creditors to follow certain
  procedures before opening an account or making
  changes
• Entitles consumer to free copies of credit
  reports to review for inquiries from companies
  consumer didnt contact, accounts consumer didnt
  open, and debts consumer cant explain
• Placing a fraud alert on a credit report may
  cause delays in credit applications

Source Facts for Consumers Fighting Back
Against Identity Theft, The Federal Trade
Commission, www.ftc.gov/idtheft
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Defending Against Identity Theft Continued

• File a report with law enforcement officials for
  creditorswho may want proof of the crime
• Report the theft to the Federal Trade Commission
  to help law enforcement officials across the
  country in their investigations
• Online www.ftc.gov/idtheft
• Phone [phone] (TDD 1-866-653-4261)
• Mail Identity Theft Clearinghouse Federal
  Trade Commission 600 Pennsylvania
  Avenue Washington, DC 20580

Source Facts for Consumers Fighting Back
Against Identity Theft, The Federal Trade
Commission, www.ftc.gov/idtheft
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Identity Theft Resources

• Federal Trade Commission
• Phone [phone]
• Websites
• www.ftc.gov
• www.consumer.gov/idtheft
• Mail Consumer Response Center Federal Trade
  Commission 600 Pennsylvania Avenue NW,
  H-130 Washington, DC 20580
• Wells Fargo
• wellsfargo.com, Keyword fraud

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Protecting Schools And Students

• Whenever possible, use a unique number to
  identify students
• Do not post grades using Social Security Numbers
• Secure campus PO Boxes
• Limit workers access to students personal
  identifying information
• Qualify any vendor or group who wishes to do
  business on campus

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Protecting Schools And Students Continued

• Review office and campus security procedures
• Are computers password protected, who has access,
  and how often are the passwords changed?
• Secure browsers and firewalls
• Lock files at all times
• Identify what types of information are allowed to
  leave the premises
• Prepare an executable plan for when information
  is compromised

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School Plan When Theft Is Suspected

• Notify and clearly explain whats known to
• Law enforcement
• Determine timing
• Affected businesses
• Individuals
• Explain appropriate responses
• Designate contact person and telephone number

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Questions?
Thank You