Farnoosh Torabi's Blog, page 80

Student Loans & Bankruptcy Protection

As a follow-up to my recent post on the student loan "bubble," I chatted with Alan Collinge, author of The Student Loan Scam: The Most Oppressive Debt in U.S. History — and How We Can Fight Back. Collinge is also the founder of studentloanjustice.org and a self-described "complaint box for the [student loan] industry."

It goes without saying that Collinge is not a fan of the current lending practices (he calls them "predatory") and likes to reference the rising student loan default rates as evidence of a deteriorating student loan market that will soon, like other inflated bubbles, burst. It's only a matter of time, he says.

Collinge's primary proposal to alleviate the problem is reinstating bankruptcy protection laws for student loan borrowers. (In 2005 lawmakers issued an amendment making it nearly impossible to discharge student loans in bankruptcy protection without "undue hardship.")  Collinge supports proposed legislation, the Private Student Loan Bankruptcy Fairness Act of 2010, which aims to reverse part of the 2005 law by allowing private student loans – which offer far fewer repayment options than federal loans – to be discharged in bankruptcy.

Proponents like Collinge believe bankruptcy protection on a loan instrument will make lending practices more fair. "Bankruptcy is a fundamental free market mechanism…not so borrowers can run off and avoid their debts, but for two critically important reasons," says Collinge. "One, it keeps lenders honest and working in the interest of borrowers and two, [bankruptcy protection] controls market prices." Critics predict the opposite. They think lenders would raise interest rates in that environment to offset their losses.

While passionate, Collinge is skeptical that the proper reform will take place – at least not from within the system. Instead, he foresees fed-up borrowers joining forces. "Consumers are going to just stop paying regardless of the powers that be. People are at some point simply not going to put up with…the lending system."

This article originally appeared on Credit.com and continues to evoke comments and dialogue among its readers. Join in on the conversation at Credit.com/blog

MoneyWatch: Great DIY Holiday Gifts

Do-it-yourself gifts are a terrific way to budget around the holidays. But to do it right, you'll need effort, thought and novelty; the days of overwhelming your gift recipients by throwing an old picture into a frame and slapping a red bow on it are long gone.

Here are a few out-of-the-box DIY ideas to get your creative juices flowing.

For all seven of my ideas visit MoneyWatch.com

#1 Regift in a Positive

Way Can't find anything at the mall for your sister? Wrap something of yours that she's always admired, something that you and she both honor. Examples could include an heirloom vase, a certain doll from her childhood that she thought she'd lost (you may need to go through your mom's attic to find it), a piece of art from your art collection, your childhood Polaroid camera you never let her play with, etc.

#2 The Gift of Time

Your best friend, aka superwoman, has no time for herself. Between working full-time, driving her kids to afternoon sports and taking care of her parents on the weekends, she could really use a day to herself. Offer to take over parental duties starting one afternoon through the evening so that she can pamper herself and go to dinner with her husband … or even just use that time to catch up on sleep! It's a generous gift that costs nothing but your time and patience.

#3 Unique Calendars

I got inspired by this Christmas Advent Calendar I found on Etsy.com. All I need is a mini muffin pan and some stickers or I can buy the artist's DIY kit for $6. Canon also has these free downloadable triangular desk calendars on its website – a great gift for co-workers.

#4 Vacation Getaways

If your second home at, say, the Jersey Shore is vacant, you may wish to treat one of your very trustworthy family members or close friends to a weekend getaway there. Wrap up a local souvenir, for example, a box of saltwater taffy, and in the card mention that the real gift awaits them this summer – at your beachfront address.

Want more ideas? Visit the full story at MoneyWatch.com

The Price to Live in NYC

From 2002 through 2004 I lived on a tree-lined block on Manhattan's Upper West Side. I had my own room, own bathroom and even a 24-hour doorman downstairs. My rent? $500 a month, about half the price my friends were paying for a shared two-bedroom, one bath in a fifth floor walk-up building situatied in a less than desirable neighborhood.

To be fair, I did make some compromises for that unbeatably low rent. My roommates were a newly married older couple. They were very nice, but it wasn't exactly the same as having a friend or co-young adult as a roomie. I pretty much just stuck to my bedroom and rarely used the common living space. It didn't really feel like it was "mine." And then the couple would fight…and later make up. Let's just say things sometimes got awkward!

A year into living there developers began constructing a new high rise condo apartment right next door. I mean, exactly next door. That meant one of my windows would have to get sealed up to allow for the new building to rest against ours. It also meant waking up each morning to noise pollution.

A year later, the married couple split and their cat passed away. Living there became kind of sad. But man, who could beat $500 a month in Manhattan?

Looking back, these were just small sacrifices this 20-something made to be able to work in New York City. And as the New York Times reported over the weekend, my slightly older generation of New York imports had it slightly better back then. "Statistical evidence suggests that today's new arrivals have a tougher struggle to live well, or even adequately, compared with their counterparts of just a decade ago. Battered by the one-two punch of persistent unemployment and the city's high housing costs, they are squeezing into ever smaller spaces and living in neighborhoods once considered dicey and remote," writes Constance Rosenblum.

Here's some budgeting advice when you're just starting to live in a pricey city:

Add a Room

With your landlord's permission, you may be able to put up a wall in your apartment (around $1,000) to create a second room. That way, you can rent out the space to a roommate.

Search Near Schools

Come to think of it – I wasn't just lucky to nab a $500-a-month deal back then. I was also looking in a neighborhood near Columbia University.

Here's my tip – search rental locations near college or university campuses in your area.  Those listings are often much cheaper, since landlords know the majority of applicants are either students or recent grads without deep pockets. The accommodations may not be as fancy, and you may have to shack up with a few roommates, but you'll make up for it in savings.

Some schools may also have their own off-campus housing Web sites, where neighboring landlords post listings.  For that, you'll need to find a friend who goes to the school who can help you gain access to the site's listings.

Sublet

Sublet listings sometimes come furnished and are more likely to be negotiable, since you're dealing with a lessee – who may be trying to sublet his or her apartment quickly. Just make sure you get a written letter from the building manager acknowledging your sublease; you don't want to wind up getting evicted.

Search "No Fee"

Fee-free listings usually mean you don't have to pay a broker's fee on top of rent. In New York City, this fee can be as high as 15% of your annual rent.

Artists: Co-Habitate

Many cities from Minneapolis to Seattle, Austin and New York have artist cooperatives where if you're a designer, actor, poet, musician, painter, younameit, you may qualify to live in a shared space with other artists that costs very little. The living spaces may not be much to write home about, but you could be looking at paying just a fraction of what it costs to live in a similar apartment across the street.

This Holiday, Haggling Works!

On Monday I traveled to a New Jersey mall with ABC 7's Nina Pineda to see if retailers would be willing to give us discounts…just for asking. Let's just say it was a very fruitful trip. And as I discuss in Psych Yourself Rich, being your biggest financial advocate pays!

Graduate in Four Years? Good Luck!

My recent column for Newsweek.com highlights what I believe to be a pricey myth regarding college graduation. While it's typically sold as a four-year stint, going to college full-time is often a much longer endeavor. Stats show that colleges and universities, both public and private, are only sending 37% of their graduates out into the real world after four years. And experts say it's only going to become harder to finish "on time."

Here's an excerpt…

Kiyan Rajabi, 19, a pharmacology major at University of California, Santa Barbara, was excited about his study-abroad program in Spain this fall. His plans were foiled, however, when earlier this year he realized that a basic biochemistry course he needed as a prerequisite for higher-level science classes was offered only in the fall. If Rajabi didn't stay put in Santa Barbara, he was likely looking at an extra year of college. Barcelona and the Sagrada Familia Church would have to wait—for a while. Rajabi's summer session is booked, too. "Summer classes have become the norm for the majority of students seeking to graduate in the traditional four years," he says.

For many college students today, Rajabi's predicament is commonplace. College is pretty much sold as a four-year stint. But take a look at the statistics and you'll find it's far from that simple. On average, both public and private schools are graduating just 37 percent of their full-time students within four years, according to a 2008 analysis by the American Enterprise Institute, a D.C.-based public-policy think tank. That's about a 3 percent slowdown from the 1990s, and a 10 percent drop from the 1960s, says the Higher Education Research Institute at the University of California, Los Angeles. But experts expect these dismal numbers to sink even further. With the economy in the dumps, school budgets being slashed, and more students than ever attending college, getting an undergraduate degree in four fast years could one day become as unlikely as finishing in three is now. "In the short run, the fiscal pressures on colleges and universities, particularly in the public sector, are likely to lead to a decrease in four-year graduation rates," says Andrew Kelly, American Enterprise Institute research fellow in education policy.

When colleges and universities report their graduation rates to the federal government, they are more likely to use a six-year benchmark, not four, because it's more realistic. But students tend not to think about timing when they sign up for college orientation. "Right now, most American students plan their futures and save money for college assuming that a bachelor's degree is a four-year commitment," says José Cruz, vice president of the Education Trust, a national student-advocacy group. "But that simply isn't the reality on most college campuses." What's more, that falling four-year grad rate may eventually shift the overall timeline approach to college down the road. "As more and more students fail to finish in four years, it is becoming acceptable to work 'toward' a degree," says education consultant Donald Asher, "rather than to have a plan and follow that plan to that finish line."

For most students, extending college by an extra year or two is probably not a worthwhile investment. "Students take on greater financial responsibilities the longer they stay in school," says James Boyle, president of College Parents of America, "because not only do they end up paying more money to graduate, they also have a longer period of lost or lesser income potential."

Sure, some young people may unwillingly—or willingly—drag their feet. Common issues that slow students down include changing majors, poor course planning, transferring schools, and dropping courses. But others who have planned their course load carefully still may not be able to avoid a growing number of factors getting in the way of a four-year finish. For one, campus life is a lot more crowded these days. College enrollment has risen 25 percent since 2000, according to the National Center for Education Statistics. Add in growing university budget cuts, and for most students with limited resources graduating in four years becomes a lot harder to achieve. "Schools are changing their requirements and class offerings constantly, and these forces are all working against the student who wants to get in and out in four years," says Asher. Many colleges have eliminated classes and instructors to save money, but graduation credit requirements haven't changed, leaving more students elbowing their way into fewer classrooms—if they're lucky enough to get in at all.

Read on at Newsweek.com and find out how to improve your chances of graduating on time here.

MoneyWatch: Holiday Items Worth Waiting For

No doubt the deals will be widely available this season. As one Consumer Reports expert told me today, "retailers are spending a lot of money this holiday to get you in their stores. They're going to do what they can to make sure you leave with a shopping bag or two." But in my latest MoneyWatch column I take a different approach to the traditional holiday shopping advice with some tips on what's best to buy post-holidays.

Here's an excerpt. For the rest, visit MoneyWatch.com

Champagne and Fine Wine

Bottles of bubbly and fine wine usually go on sale around the holidays and the prices get slashed even further the weeks that follow. This year, expect even steeper price cuts, says Lisa Lee  Freeman, editor-in-chief of ShopSmart Mag. "The recession has been hard on the high-end wine maker. French wines that were going for $50 you can get for $20."

Electronics

The Annual International Consumer Electronics Show runs the first week of January. That's when companies roll out all their new models of computers, cameras, cell phones, printers … you name it. While early adapters salivate over the newest and latest tech gadgets, January is a great time for everyone else to buy the most recent models – which will, no doubt, be discounted heavily to make room for the new.  "If you don't take advantage of the Christmas deals, don't worry. After Christmas, everything'll be on sale!" says Freeman. Last year Walmart offered shoppers a $50 gift card when they bought Microsoft Xbox 360 through January 1.

Winter Clothes & Accessories

There will be no shortage of discounts at department stores and clothing retailers – especially on hats, scarves, boots, winter coats and wool socks.  Invest wisely by opting for non-trendy staples that will last you another winter or three.

Refurbished Goods

Expect stores' "refurbished" bins – where returned appliances and gadgets get a 10 to 20% discount – to be well-stocked after the holidays, as people return unwanted gifts. One note of caution: Only buy refurbished items from reputable dealers that offer a manufacturer's warranty. Sony, Dell, Amazon, Apple and Kitchen Aid are all in the refurbishing business.

Photo Courtesy: ShutterBugMike's photostream on Flickr

2010 Holiday Shopping: Online Savings Tips

I plan to do most of my holiday shopping online this year. I just don't have the patience of a 25-year-old shopping-obsessed City girl anymore. In case you feel the same, here are my top tips for saving (and protecting) your money on the web this season.

Gift a Daily Deal. Unless specifically noted, social buying sites like Groupon and LivingSocial let you transfer your vouchers and coupons to others as gifts. So id you're looking for a fun gift for a friend or relative this holiday from restaurant vouchers to spa treatments to local wine tastings, check out the social deals going on in his or her town or city.

Shop Sites With Free Shipping. RevolveClothing.com, an online fashion boutique, is known for its hassle-free and wallet-friendly shipping and return policy. Shipping carries no cost and if you're not happy with the item, the retailer provides pre-paid mailing labels. Same goes for footwear retailers Zappos.com and PiperLime.com. Department store Nordstrom.com also provides a free mailing label if you want to exchange an item.

Shop Sites With Free Returns or Local Returns. Just because an online site has a physical retail location doesn't mean you can always return online purchases in the store. For example, if you arrive at your local Victoria's Secret with that silk robe you bought on its Web site, the sales associate will refer you to the store's strict policy of not assisting with online returns. Stores like J. Crew, Nordstrom and Macys are open to accepting online returns, saving you the cost of shipping and handling.

Use a Free Online Personal Shopper. Know you want to get your mom a cashmere sweater and your husband a leather jacket? Use free online personal shopping sites that scour the web for you for the newest deals on precisley the items you seek. Shop It To Me is great for women's clothes and accessories and likewise Trunk Club for men.

Choose Credit Over Debit. Disputing incorrect charges on a credit card is theoretically less of a headache. If a merchant makes an unauthorized charge, federal law says the credit card company must investigate. In the meantime, you owe nothing. Also, if you're unhappy with a product or service you were charged for, again, the law protects you from having to pay. With debit card billing disputes the money's already been taken out of your account, so it's much harder to recover those lost funds.

5 Ways to Trim Your Cell Phone Bill

The Federal Communications Commission calls it "bill shock": the moment when you get your monthly cell phone bill and, gasp, it's far more than you thought you had to pay based on the monthly plan. One in six of us has experienced this, according to theFCC's survey, and much of it is due to overage or roaming charges.

Here are five ways to keep bill shock to a minimum – and actually save some money:

1. Call Customer Service

Call and ask for a better deal. It costs the companies far less to negotiate with you than to lose you as a customer all together. So cell phone companies have customer retention departments for the purpose of offering you perks, deals and discounts to keep you happy. Mention competitors' deals and that you've been a longtime customer.

2. Monitor Usage

While the FCC is pushing to force cell phone companies to alert us before we exceed our monthly minutes, it's still our responsibility to pay close attention. Otherwise, going over the allotted minutes in your cell plan can cost anywhere from 40 to 50 cents per minute. Reach out to your cell provider to get alerts either via text or by dialing (both free). Verizon users, for example, can call #MIN and get an update via text message. There are also a growing number of free iPhone apps for AT&T customers – like Cell Minute Tracker and OverMyMinutes -that help you track usage and monitor your monthly bill.

3. Try Friends & Family Plans

The term "friends and family" can include anyone you know – it could be a roommate, a boyfriend, girlfriend, or even an upstairs neighbor. If there's someone you want to pair up with to qualify for the friends and family rate, the savings could be worth it. Just make sure it's someone you trust: One of you will be on the hook for the entire bill. (You can try to get the bill split up, but the policy varies carrier.) What's the payoff? At T-Mobile, an $60-per-month personal plan drops to $50 when you add another line: a $120 annual savings. Verizon andT-Mobile, meanwhile, have plans that let you add up to five phone numbers that you can connect to free of charge – regardless of the other person's carrier, and even if it's a land line.

4. Use In-Network or Mobile-to-Mobile Minutes

In a similar vein: Ask the people you talk with most who their providers are. If several of them share your carrier - be it AT&T, T-Mobile or Verizon – you could get free calls to them if you sign up for an "in-network" minutes plan. This can help avoid running over your minutes each month.

5. Go Prepaid

Pay-as-you-go phones typically cost 10 cents per minute plus a small daily access fee – say, $1 each day the phone is used. It's like a cell phone with training wheels – and a smart option if you're on a tight budget, or for parents who want to control their kids' cell phone usage. Just make sure whatever plan you choose allows you to rollover any minutes you don't use to the next month.

How Much to Donate to Church?

My Learnvest piece for today focuses on charitable donations and how much you should give to your place of worship, specifically.

Here's what a reader recently asked me:

Dear Farnoosh,

I attend church on a regular basis and am not sure what is a respectable amount to give as an offering. I have gone to a few different churches, and I found one that I like, but they ask [for money] every week, and for various reasons. This week they asked for a contribution to the normal dues, and a contribution for missionary work abroad. I enjoy the service, so I don't want to short-change the church, even though that money could go towards paying off my debt. What do you recommend?

Ana

Here is my response….

Dear Ana,

I brought in a special guest expert on this topic to help answer your question, since I don't have a ton of experience donating to a place of worship. There's no doubt many people are as equally puzzled as you.Kimberly Palmer, author of the new financial book Generation Earn: The Young Professional's Guide to Spending, Investing, and Giving Back, weighs in with some terrific advice for you and everyone considering joining and giving back to their place of worship. She starts with a disclaimer: "Giving is always entirely optional, although in certain circumstances, including churches you attend regularly, you're expected to give something to help support the community. As long as you're trying out different churches, though, don't feel pressure to give more than a nominal amount, because you're considered a guest."

Give What You Can And What Feels Right.

It's entirely up to you to decide how much you can give and what is appropriate given your monthly budget. If you're curious to know, though, on average college graduates give about $1,200 a year to charity, according to the Center on Philanthropy at Indiana University. That comes out to just over $20 a week. "And serious church-goers sometimes commit 10% of their incomes to the church," says Palmer. But don't let that pressure you if you simply can't afford it. Never compromise your ability to pay off debt and save. Address those needs first. Finally, says Palmer, give what feels right. "Ideally, giving should feel good—not like a chore—because it's aligned with your larger goals."

Keep It Consistent.

No matter what amount you decide on, try to give on a regular basis, advises Palmer. "Once you choose to commit to one church, you'll probably want to contribute something each week so you feel fully part of the community."

Keep It Discreet.

Remember that you can put your donation in an envelope ahead of time to avoid the scrutiny of fellow churchgoers in your aisle.

Offer Help, Instead.

If your budget is tight, don't feel too much pressure to break the bank to give back. Instead, considering offering your time and energy to the group's initiatives and causes. Volunteer on the weekends or during church-related events. "If you have a specific skill, such as accounting or graphic design, consider offering your services," suggests Palmer.

Know How You're Helping.

Whether you're giving your money or your time, make sure to understand exactly what you're supporting. "You deserve to know how the money is being spent, including how much goes towards the actual cause you're contributing to versus administration or overhead costs," says Palmer. Organizations and non-profits, including religious ones, typically have this paperwork handy since they need to file it anyway. Don't be shy. Your church should be willing and happy to share the information to donors. If you're giving to a nonprofit, you can look it up on charitynavigator.org to see how it spends its money.

Photo courtesy: SmartCommunityFife's photostream on Flickr

Psych Yourself Rich on Moneywatch

Thanks to my CBS Moneywatch friends for featuring Psych Yourself Rich. Jack Otter and I went through a great deal from the book including how to measure the value or worthiness of our financial choices – from buying a home to purchasing a car to paying for a graduate degree. Check out the full interview below.