I participated on a panel this week at the Campus Progress National Conference in Washington, DC, and the topic was “Surviving the Recession: How to Weather the Economic Storm.” The panelists addressed a ballroom packed with college students who were all eager to hear how they could avoid the traps of credit card and student loan debt. But we also answered questions about basic financial literacy. Given that we were up against a hiphop panel at the same time, I was really encouraged to see so many young people taking an active interest in their finances.
Much of the advice we gave will be common sense to Queercents regulars: avoid credit card debt, prioritize your spending, pay your bills on time, and track your expenses. However, all of these tips are worth repeating, even for the seasoned finance veteran.
Jason Alderman from Visa, Inc. advised the audience to know their FICO score and to check their credit reports on an annual basis. He also recommended placing credit cards on an automatic payment system so that consumers don’t wreck their credit score for simply forgetting to make one payment. Joseph also advised people to be proactive about talking to their creditors if they have gotten themselves into trouble, because it’s better to initiate the conversation about a repayment plan than to wait for the creditors to start hounding you on the phone.
Beth Koblinger, author of Get a Financial Life: Personal Finance in Your Twenties and Thirties, echoed much of Joseph’s advice, particularly about knowing your credit score and paying more than the minimum payment on your credit cards. Koblinger pointed out that even $10 over the minimum payment can make a substantial difference in the amount that you pay over the long term. In addition, Koblinger advised people to pay off the highest interest debt first.
Lisa Ransom from the Center for Responsible Lending provided insight on two pieces of upcoming legislation that would have major positive implications for consumers. HR 1456, the Consumer Overdraft Protection Fair Practices Act, is currently being debated in the House. The bill would require consumer consent before the bank could process a transaction that would cause an account to go into overdraft, thereby limiting the bank’s ability to impose overdraft fees. Banks have started raising the cost of overdraft fees as a result of the credit card limitations that were just passed, so HR 1456 is the next step in protecting consumers from unfair banking practices. Ransom urged the audience to get engaged on this issue, even though it’s not the most “sexy” piece of legislation working its way through Congress.
Ransom also mentioned the creation of the Consumer Financial Products Agency, which would regulate the sale of all financial products and hopefully reduce the predatory lending practices that have gotten us into the current economic recession. The CFPA is still a long way from becoming a reality. There is still a question about which executive agency would actually oversee the CFPA.
I had two major pieces of debt-related advice for the audience: avoid credit card debt, and minimize your student loan debt. People often take it for granted that credit cards are a necessary part of life. However, there are other ways to build your credit score. Paying utility bills, rent, and cell phone bills on time can all help consumers build credit without going into credit card debt. As far as student loans are concerned, students can talk to their financial aid adviser to see if they can convert study loans into work study. The benefit of work study money is that it doesn’t have to be paid back, and the students’ wages are not taxed. The student can build their resume by holding a work study job. And campus employers are required to work around a student’s class and exam schedule.
All of the panelists encouraged the audience to actively track their expenses and prioritize their spending. By tracking your expenses with an Excel spreadsheet or in your checkbook register, you can have an accurate idea of where your money is going each month. But you have to be vigilant about keeping receipts and making a note of how your cash is spent, especially if you put change in a vending machine or a parking meter. However, without a record keeping system you have no way of knowing how you are spending your money.
Despite the bleak economic forecast, I feel very optimistic about the current generation of college students. The fact that so many of them showed up for a crash course in personal finance speaks volumes about their willingness to get a handle on their finances before they find themselves piled under a mountain of debt. If only there were more people like them.
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