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FASFAA

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FASFAA The FASFAA Graduate Professional Committee Welcomes You To The Train The Trainer Webinar Financial Literacy * * I m definitely not safe at McDonalds or ... – PowerPoint PPT presentation

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Title: FASFAA


1
FASFAA
  • The FASFAA Graduate Professional
  • Committee Welcomes You To The
  • Train The Trainer Webinar
  • Financial Literacy

2
What is todays agenda?
  • What are the barriers to implementation?
  • How do I reach these students?
  • How do I select what to teach and what not to
    teach?
  • What is my lesson plan?

3
What does that mean to me?
  • Given these characteristics, what challenges do
    you face in getting them to focus on issues of
    debt management and financial literacy?

4
What are the barriers to implementation?
5
What are the strategies you can use?
  • What strategies could be implemented that
    successfully overcome these barriers or
    challenges?
  • Refer back to the list of characteristics and
    challenges developed earlier today.

6
How do I reach these students?
7
How do I reach these students?
  • The best way to pre-empt problems and challenges
    is to be well-prepared to teach.
  • Preparation prevention.
  • Preventative measures
  • Set up a positive, safe, and supportive learning
    environment.
  • Learn and use students names.
  • Take a few minutes to personalize your
    instruction.
  • Reinforce students when they make positive
    contributions.

8
How do I reach these students?
  • Determine how much time you have to teach the
    material.
  • Prioritize what you decide to teach.
  • Encourage active student involvement.

9
How do I reach these students?
  • Make it engaging and entertaining.
  • Ask questions.
  • Ask open-ended questions.
  • Once youve asked a question, wait.
  • Direct questions to particular students.
  • Ask why or how questions.
  • Probe for consequences or implications.
  • Ask students to share their feelings.
  • Ask students to indicate what they gained or lost
    from their experiences.

10
How do I reach these students?
  • Speak with authority. Stay in control.
  • Use oral footnotes.
  • Admit when you dont know.
  • Respect and listen to your students.
  • Make every effort to remain positive and show
    that you care about them.

11
How do I select what to teach and what not to
teach?
  • Time constraints will differ among schools.
  • Logistical constraints will differ by
    institution.
  • Number of students will differ.
  • Not all students have the same needs and concerns.

12
How do I select what to teach and what not to
teach?
  • How much time do I have?
  • How important is the information for this group?
  • What do my students already know?
  • How long will it take to teach what I want to
    teach?

13
How do I select what to teach and what not to
teach?
  • How comfortable do I feel delivering this
    information?
  • How easy/difficult is the information to learn
    independently?
  • What environmental constraints exist?

14
What is my lesson plan?
15
Changing Role of the FAA
  • Brenda M. Brown
  • Director of Financial Aid
  • University of Miami School of Law

16
Changing Role of the FAA
  • Evolution from a financial aid counselor
  • Financial aid application process
  • Financial aid programs
  • Grants/Scholarships
  • Loans
  • Work

17
Changing Role of the FAA
  • Evolution to a financial advisor
  • Borrower Rights and responsibilities
  • Loan Repayment options
  • Credit
  • Financial Literacy Money/Debt Management
  • Financial Planning

18
Top Five Money Mistakes College Students Make
  • Credit Card Debt
  • Ruining Their Credit Score
  • Lack of Budgeting
  • Using Student Loan Money Inappropriately
  • Reaching for an Expensive College

http//financialplan.about.com/od/students/a/colle
ge-student-money-mistakes.htm
19
Budgeting
  • Travis Brown
  • Director of Student Financial Services
  • American InterContinental University

20
Budgeting
  • Gather all records and statements
  • Record Monthly Income vs. Monthly Expenses
  • Make adjustments to Expenses
  • Needs vs. wants
  • Track expenses and then review
  • Live like a student
  • Borrowing wisely

21
Assisting students to adapt to finances
  • From high school to undergraduate
  • Understanding COA
  • Direct costs
  • Indirect costs
  • Learning concepts of money and budgeting
  • Needs vs. wants
  • 24-hour rule
  • Parents role vs. students role

22
Responsible borrowing
  • Do you need loans as undergraduate?
  • From undergraduate to graduate/professional?
  • No more federal grants only loan options!
  • Loans are not a replacement for income.
  • Loans are for students educational expenses
    only!
  • Limit borrowing to finance your education, not
    your lifestyle!

23
Responsible borrowing
  • Resource for assisting students
  • Smart about Money.org
  • (Under the Economic Survival Tips link.)
  • http//www.smartaboutmoney.org/economicsurvivaltip
    s/Spending/tabid/562/Default.aspx
  • Practical Money Skills
  • (www.practicalmoneyskills.com)
  • http//www.practicalmoneyskills.com/wizards/credit
    /index.php

24
Teaching Your Students to Borrow Strategically
  • April Halaychik, Assistant Director
  • Loan Operations and Debt Management
  • Nova Southeastern University

25
Tracking Student Debt
  • How much can the student afford to borrow
    overall?
  • 10 to 15 of their annual salary to cover
    student loans.
  • How much do they expect to earn?
  • http//swz.salary.com/

26
SWZ.SALARY.COM
48,441
27
Projected Salary Affordable Payments
  • What monthly payment can your students afford to
    pay based on their projected salary?
  • 48,441 annual Salary
  • 48,441 x .10 4,844
  • 4,844 / 12 months
  • 404 monthly repayment (10).

28
Affordable Payments Overall Debt
  • How much overall debt will result in the
    students affordable monthly payment?
  • Student loan repayment calculator
  • http//www.finaid.org/calculators/loanpayments.pht
    ml
  • Estimate an approximate loan balance (i.e.
    50,000)
  • Enter this amount into the loan calculator

29
Affordable Payments Overall Debt
  • How much overall debt will result in the
    students affordable monthly payment ? (cont)
  • Compare Payment result to target payment
  • Target payment 404 vs. Resulting payment 575
  • Adjust estimated balance upward or downward as
    needed

30
Affordable Payments Overall Debt
  • How much overall debt will result in the
    students affordable monthly payment ? (cont)
  • 35,000 402.98 per month payment
  • Target payment 404
  • 35.000 in overall debt is manageable based on
    the projected salary

31
Sticker Shock Scenarios
  • Scenario 1 Matilda
  • Evening MBA program 4 Semesters
  • Subsidized Stafford 17,000
  • Unsubsidized Stafford 24,000
  • TOTAL 41,000

32
Sticker Shock Scenarios
  • Loan Repayment Schedule for 41,000
  • Loan Interest Rate 6.80 (fixed Stafford rate)
  • Loan Term 10 years
  • Monthly Loan Payment 472
  • 56,619 annual salary (at least)

33
Alternative Repayment Options
  • Some students are unable to achieve their target
    debt level
  • Prior student loans
  • Tuition rates
  • etc
  • Introduce loan repayment alternatives
  • Extending repayment
  • Lower monthly payments
  • Higher overall interest costs.
  • Repayment Comparison Calculator
  • http//www.usafunds.org/borrowers/resources/calcul
    ators.htm

34
Tracking Prior Student Debt
  • Students should be aware of their existing
    student loan debt
  • Introduce NSLDS (www.nslds.ed.gov)
  • Contains all federal loans
  • All schools attended
  • Undergraduate through Graduate.
  • Contains federal grants

35
Accessing NSLDS
36
Accessing NSLDS
37
(No Transcript)
38
(No Transcript)
39
Tracking Student Debt
  • Provide students the tools to determine whether
    they are on the right track
  • What would their monthly payment be if they
    stopped borrowing today?
  • How much more can they afford to borrow from this
    point forward?

40
Aggregate Limits
  • Introduce Aggregate Limits (Stafford Loans)
  • 65,500 Subsidized
  • 73,000 Unsubsidized
  • 138,500 Combined

41
Recap
  • Recap the steps to strategic borrowing?
  • Identify their projected salary
  • Identify target monthly payment based on salary
  • Identify debt amount that equals target payment
  • Identify current loan balances
  • Monitor aggregate limits

42
Questions
?
43
Credit . . . What, Why, When How
  • Christopher Miller
  • Debt Management Consultant
  • USA Funds

44
What is credit?
  • Credit is the arrangement for the purchase and
    ownership of something of value or the use of
    goods and services for which payment is deferred
    to a later date, which also includes the
    borrowing of money and the use of money through
    the ownership of credit cards and lines of credit.

45
Did You Know
  • Graduate Students and Credit Cards
  • In 2006, 92 of graduate students have at least
    one credit card. This is a 4 decrease from the
    96 who had credit cards in 2003.
  • The average outstanding balance on graduate
    student credit cards is 8,612, an increase of
    10 from the 2003 average of 7,831.
  • On average, older graduate students (age 3059)
    carry 12,593 in credit card debt, almost twice
    as much as their younger counterparts (age 2229)
    who carry an average debt of 6,479.
  • Ninety-four percent of graduate student survey
    respondents used credit cards to pay for some
    portion of their direct education expenses,
    primarily textbooks. Twenty-eight percent
    admitted paying for some portion of their tuition
    with credit cards.

46
Did You Know
  • Graduate Students and Credit Cards
  • As has been true in previous studies, students
    attending school in the Midwest region of the
    country tend to carry the highest credit card
    debt.
  • The majority of graduate students, 67, said they
    took out their first credit card as an
    undergraduate student.
  • Although 93 of graduate student survey
    respondents try to keep their credit card debt
    under control by making at least the required
    minimum monthly payments, only 20 said they pay
    off their cards in full each month.
  • Of the graduate student survey respondents, 93
    would have liked more information on financial
    management topics before they started school and
    would like financial management education made
    available to them now.

47
Undergraduates and Credit Cards
Did You Know
  • May 2005 Nellie Mae Study.
  • 56 percent of freshmen have credit cards.
  • 76 percent of undergraduates began school with
    credit cards.
  • Average outstanding balance on undergraduate
    credit cards was 2,169.
  • 21 percent of undergrads pay off cards each
    month.
  • 86 percent of students with credit cards have an
    outstanding balance.

48
Credit-Card Facts
Did You Know
  • Customers at fast-food restaurants spend 20
    percent to 30 percent more with cards than they
    would with cash.
  • 1.5 million personal bankruptcies filed in 2004.

49
Typical Uses of Credit Cards and Benefits
  • Uses of credit
  • Internet and phone purchases.
  • Airline reservations.
  • Hotel and car reservations.
  • Event ticket purchases.
  • Establishing a credit history.
  • Credit card benefits
  • Organize and manage expenses.
  • Safety.
  • Emergency funds.
  • Establish credit history

50
Example of Paying off Credit Card Debt
  • Balance of 15,000, Interest rate of 20 and
    making minimum payment amount of 2.5
  • How much do I have to pay and for how long?
  • - 375 per month
  • - 42 years
  • - Total cost of borrowing 44,500

51
Time and amount to pay off a credit-card balance
Example of Paying off Credit Card Debt
52
Successful Tips for Managing your Credit
  • Your debt, excluding your home mortgage, should
    not exceed 15 of your net income.
  • Student Loans.
  • Credit Cards.
  • Car Payment.

53
Fico Score
  • FICO scores are calculated to range between 300
    and 850. The average FICO score in the United
    States is 692. Anything below 620 is considered
    subprime, which means that if you get a loan, you
    will probably pay a higher than those with a
    score of 700 and above.
  • -Why is it important for me to maintain my
    credit while in school?

54
Top Things to know
  • 1. Americans are loaded with credit-card debt.
  • 2. Some debt is good and some debt is bad.
  • 3. Check you credit report and score at least
    once a year.
  • 4. Get a handle on your spending.
  • 5. Pay off your highest-rate debts first.
  • 6. Don't fall into the minimum trap.
  • 7. Watch where you borrow.
  • 8. Expect the unexpected.
  • 9. Don't be so quick to pay down your mortgage.
  • 10. Get help as soon as you need it.

55
Did we learn anything?
  • Are we on fire with knowledge?

56
QUIZ!
  • When youre desperate for cash, you should take
    an advance on your credit card.
  • ANSWER False. Cash advances generally have much
    higher interest rates. Youre better off revising
    your budget or looking for other ways to save
    money.

57
QUIZ!
  • 2. It doesnt really matter if you let the
    balance on your credit card roll over each month,
    as long as you make the minimum payment.
  • ANSWER False. The longer you take to pay off
    your balance, the more you will pay in interest
    charges.

58
QUIZ!
  • 3. If you have trouble paying cash for your rent
    or groceries, a credit card is an alternative.
  • ANSWER False. Something is wrong with your
    budget if you have to use a credit card to
    subsidize basic living expenses. Take another
    look at that budget and prioritize items.

59
QUIZ!
  • 4. Its a good idea to limit the number of credit
    cards you have.
  • ANSWER True and false. Creditors look at the
    total amount of credit available to you when
    calculating your eligibility for additional
    credit, like a car loan or a mortgage. But they
    also look at credit used compared to credit
    available.

60
QUIZ!
  • 5. Take advantage of all credit card offers that
    come to you in the mail.
  • ANSWER False. Read everything carefully before
    you decide to open any type of credit account.
    You might consider making a chart to compare the
    features important to you. Beware of low teaser
    interest rates which can jump dramatically after
    the intro period.

61
QUIZ!
  • 6. Its a good idea to limit the number of credit
    cards you carry.
  • ANSWER True. And always use the same credit card
    for any online purchases.

62
QUIZ!
  • 7. It is always a good sign when your bank
    increases your credit limit.
  • ANSWER False. Its good that a creditor thinks
    you are capable of handling additional credit,
    but a higher credit line might tempt you to
    charge more. It can hurt your chances, too, when
    you are requesting additional credit from other
    creditors.

63
QUIZ!
  • 8. Gold and platinum credit cards typically have
    higher annual fees.
  • ANSWER True. They typically offer little
    additional benefits. Read the fine print.

64
QUIZ!
  • 9. Whenever possible, substitute a debit card for
    a credit card.
  • ANSWER True. Debit cards give you access to
    money you have already earned or saved but be
    sure to check with your bank to make sure you
    understand fees involved in using their debit
    card.

65
QUIZ!
  • 10. Credit cards should be used as a last resort.
  • ANSWER True. Excessive credit card debt can
    become a real problem that gets in the way of
    your future planslike buying a car or a home.

66
Conclusion
  • Use credit cards wisely
  • Look for cards with low or no fees and low
    interest
  • Pay on time
  • Know what is in the fine print, i.e. late-payment
    fees and interest rate changes. Penalty rates are
    up by 25!
  • Limit number of cards
  • Never use for cash advances
  • Dont permit increases in credit limits
  • Pay off balances monthly.

67
Resources
  • National Foundation for Credit Counseling,
    www.nfcc.org, 1-800-388-2227
  • Association of Independent Consumer Credit
    Counseling Agencies, www.aiccca.org,
    1-866-703-8787
  • Association of Independent Consumer Credit
    Counseling Agencies, www.aiccca.org
  • www.annualcreditreport.com
  • http//www.nelliemae.com/library/research_8.html
  • http//money.cnn.com/pf/101/lessons/9/page5.html
  • http//www.consumerfed.org
  • www.ftc.gov/credit

68
Future planning
  • Further education
  • Buying home/car
  • Employment earnings
  • Potential earnings
  • Evaluate salaries
  • Evaluate income (gross vs. net)

69
Debt Evaluation
  • Student loans
  • Credit Card
  • Other loans (i.e. auto, etc.)
  • Best way to meet debt obligations
  • Loan Repayment options
  • Credit cards (best way to pay it back!)

70
Financial Planning
  • Benefits
  • Retirement Planning

71
Resources
  • National Endowment for Financial Education
  • www.nefe.org
  • www.cashcourse.org
  • www.spendster.org
  • www.smartaboutmoney.org
  • 40 Money Management Tips Every College Student
    Should Know

72
Resources
  • http//financialplan.about.com
  • www.mymoney.gov
  • www.360financialliteracy.org
  • www.jumpstartcoalition.org
  • www.practicalmoneyskills.com
  • www.financialliteracymonth.com
  • www.financiallit.org

73
Other resources
  • Guarantors
  • Lenders
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