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Millennials Opt for Cash, Thriftiness Over Credit Card Debt

May 20th, 2013 · Credit Cards

None of us like credit card debt, but one demographic seems particularly good at avoiding it — Millennials. Having experienced both an economic boom and subsequent bust, studies show that Millennials — also known as Generation Y — are understandably leery of taking on debt when it’s become crystal clear to them that the financial future is such an unknown.

As reported by The Los Angeles Times, instead of using credit cards for everyday expenses, Millennials tend to opt for cash, made easier by their spendthrift nature. To stretch cash its furthest, they clip coupons, shop thrift stores, and make what they can from scratch.

Beyond the impact of the boom-to-bust economy, Millennials are further financially jaded by student loan debt that now exceeds credit card debt for the first time in U.S. history. In fact, college graduates are having such a tough time paying off the rising cost of tuition that many experts believe student loan debt — representing the education of Americans intended to help us grow the economy — could pose the biggest of all economic threats. Not only do Millennials avoid charging up credit cards, but they also prefer to to forego the purchase of bigger ticket items, including homes, which could prove particularly harmful to the still-struggling housing market.

This frugal behavior among Millennials is the polar opposite of older Americans who are increasingly in need of help getting out of debt. Those 50+ have an average credit card debt of $8,278, while those under 50 carry credit card balances totaling just $6,258.

If you are of the Millennial generation, what’s your take on credit cards, and debt in general? Does this attitude and behavior extend to other types of loans? Why or why not?

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Student Loan Debt Delinquency Rates Exceed 13 Percent In 13 States

May 17th, 2013 · Consumer Debt, Student Loans

College graduates all over the country are struggling to pay back their student loan debt, which collectively is nearing the $1 trillion mark, exceeding credit card debt for the first time. Some parts of the country, though, have it particularly bad. A new report shows that thirteen states have delinquency rates notably higher than the national average.

As reported by The Huffington Post, 11.7 percent of graduates with outstanding student loan debt are at least 90 days delinquent on their monthly payments. That’s quite a bit lower than the more than 13 percent delinquency rate among thirteen U.S. states:

  1. Nevada
  2. Idaho
  3. Arizona
  4. New Mexico
  5. Texas
  6. Oklahoma
  7. South Carolina
  8. Rhode Island
  9. Arkansas
  10. Mississippi
  11. Florida
  12. Louisiana
  13. West Virginia

What’s important to note, though, is that these delinquency rates are not reflective of just how many people are having trouble making their payments each month. Many are in deferral programs; excluding them from the figures, it’s estimated the nationwide delinquency rate could be as high as 30 percent.

A couple of factors contribute significantly to rising student loan delinquency rates, state-by-state and nationwide. First, the cost of tuition continues to rise as there is no cap on how much students can borrow to pay for school (i.e., no cap on how much colleges can charge). Second, though the recession is behind us, the job market still reflects tough times. There simply are not enough jobs out there with the kind of earning potential college grads need to cover the cost of their education.

How are you, or the grads you know, doing with student loan debt?

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Is Your Discharged Bankruptcy Debt Reflected In Credit Reports?

May 16th, 2013 · Bankruptcy

When you file for bankruptcy, you expect discharged debts to be reflected as such in your credit reports. Historically, though, that’s not always the case; not for any exception to the rule, but for a mistake on the part of credit reporting bureaus. However, thanks to a recent crackdown on the system, discharged debts are evidently more accurately reflected in credit reports these days.

As reported by The New York Times, the credit bureaus agreed in 2008 to put into place a more effective system for ensuring accurate reporting of discharged debts on credit reports. This action came as a result of multiple lawsuits in 2005 and 2006 stating that “the major credit bureaus – Experian, Equifax and TransUnion – issued credit reports stating that consumers were delinquent in making payments on debts that had been eliminated in bankruptcy.”

While a $45 million settlement has since been overturned, the system improvements are evidently still in place, with fewer filers finding discharged debts sticking around to haunt them. While they don’t actually owe the debt, having unpaid debts on a credit report lowers credit scores. Although a bankruptcy filing itself means a big hit to the score, consumers can start to rebuild credit within a couple of years, but not so much if discharged debts are dragging them down.

On the flipside, Lifehacker reports that an FTC study in December 2012 found that 25 percent of a sample 3,000 reports had at least one error. Five percent had “serious” errors — the kind that can dramatically impact a borrower’s ability to secure a loan or, at the very least, good loan terms.

The takeaway? Whatever your credit situation, keep a watchful eye on your credit reports. While most mistakes may be minimal, it only takes one serious mistake to drastically lower your credit score, the last thing anyone needs no matter their current credit standing.

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CFPB Recommends K-12 Finance Education Standards for States

May 15th, 2013 · Your Money

I have long-marveled at the lack of financial education in our public school system. I don’t know about you, but I recall plenty of lessons on counting money, and not-a-one on money management. It’s a complaint I’ve heard echoed by friends regarding their own education, as well as that of their children. And while there are all sorts of reasons Americans find themselves deep in credit card debt or, worse, filing personal bankruptcy, the state of our nation’s finance education is surely some reflection of that.

So, it’s exciting to hear that the Consumer Finance Protection Bureau is turning their attention to this issue of national import. While states regulate their own K through 12 public school systems, a new report from the CFPB includes recommendations for finance education that states may find instructive and encouraging.

To improve the financial education of our nation’s children, the CFPB recommends:

  • Introducing key financial education concepts early and continue to build on that foundation consistently throughout the K-12 school years. Also, making a stand-alone financial education course a graduation requirement for high school students.
  • Including personal financial management questions in standardized tests.
  • Providing opportunities throughout the K-12 years to practice money management through innovative, hands-on learning opportunities.
  • Creating consistent opportunities and incentives for teachers to take financial education training with the express intention of teaching financial management to their students.
  • Encouraging parents and guardians to discuss money management topics at home and provide them with the tools necessary to have money conversations with their children.

Just how far would the states have to go in order to adopt the CFPB’s new recommendations?

Current Finance Education By the State (as of 2011)

Student testing of personal finance concepts is currently required in:

  • Idaho
  • Kansas
  • Louisiana
  • Tennessee
  • Georgia

Standards are currently required to be implemented in:

  • Oregon
  • Nevada
  • Montana
  • Idaho
  • Utah
  • Arizona
  • Wyoming
  • Colorado
  • North Dakota
  • South Dakota
  • Oklahoma
  • Texas
  • Minnesota
  • Wisconsin
  • Iowa
  • Missouri
  • Illinois
  • Louisiana
  • Michigan
  • Indiana
  • Kentucky
  • Tennessee
  • Missouri
  • West Virginia
  • Virginia
  • North Carolina
  • South Carolina
  • Georgia
  • Florida
  • New York
  • New Jersey
  • Maryland
  • Vermont
  • New Hampshire
  • Maine

High school personal finance course is currently required to be offered and required for graduation in:

  • Idaho
  • Utah
  • South Dakota
  • Missouri
  • Illinois
  • Tennessee
  • Louisiana
  • New York
  • New Jersey
  • West Virginia
  • Virginia
  • North Carolina
  • Georgia

In Mississippi, a personal finance course is currently required to be offered but not required for graduation.

Personal finance is currently not included in state standards in:

  • California
  • New Mexico
  • Washington D.C.
  • Rhode Island
  • Alaska

What do you think of the CFPB’s recommendations? Unnecessary, not enough, or right on the money? To read the report in full, go to ConsumerFinance.gov.

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