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Your Student Loan Paid for a Shady School? New Rules May Bring Relief

The Department of Education announced final regulations Friday aimed at making it easier to get federal student loan forgiveness if your school misleads you or your college closes.

Most of the new rules are effective July 1, 2017, but some take effect Nov. 1. That should be welcome news for borrowers who formerly attended a for-profit school owned by now-defunct Corinthian Colleges. Corinthian filed for bankruptcy in 2015 after the Education Department fined the company for misrepresenting its job placement rates. Some former Corinthian students have already been approved for forgiveness under existing regulations known as “borrower defense to repayment,” but many more likely qualify under both the old and new regulations.

What is borrower defense?

Under existing borrower defense rules, you can apply to get your federal student loans forgiven if you believe your college defrauded you in some way. Currently, state law determines whether those who make borrower defense claims actually qualify for forgiveness. Effective July 1, 2017, the new rules create a federal standard for those claims.

Although the regulations have existed since 1995, few people applied for borrower defense forgiveness until recently. In the fallout after Corinthian’s collapse, tens of thousands of former students filed borrower defense claims.

So far, about 16,000 former Corinthian students have been approved for borrower defense forgiveness, and almost 8,000 have been approved for forgiveness under another regulation known as “closed school discharge.” With thousands more still awaiting relief and others likely unaware they may qualify for this type of forgiveness, the Education Department elected to overhaul the system for handling more borrower defense claims.

» MORE: What students can do when for-profit schools close

New rules that will help former Corinthian students

To help former Corinthian students currently seeking forgiveness, the department aims to implement certain rules before the full regulations take effect next year. They include:

  • Eligible borrowers with federal Perkins loans or Federal Family Education Loans can get borrower defense forgiveness if they consolidate their federal debt first; effective Nov. 1.
  • Eligible borrowers who were enrolled in a college that closed in November 2013 or after and who haven’t enrolled in another school within three years will get automatic federal loan forgiveness. This will be implemented “as soon as operationally possible,” according to a department news release.
  • Students who used Pell Grants to pay for a school that closed can have their Pell Grant eligibility restored. There are typically limits to the amount of Pell dollars students can get over their lifetime. There’s no timeline on when this will happen; the department said it’s “still exploring the operational changes required to implement this policy.”
Smoother debt relief process for future borrowers

Other parts of the new rules are effective July 1, 2017, but the department believes they may inform the borrower defense process for all borrowers, including former Corinthian students. They include:

  • A federal standard for providing borrower defense relief. By this standard, you’re eligible for borrower defense forgiveness if your school breaks its contract with you; gets a court judgment against the educational services that your loan paid for; or “substantially misrepresents” information about its services or its graduates’ outcomes.
  • A process to give student loan relief to groups of borrowers if the department identifies widespread misrepresentation.
  • Regulations that make it easier for students to sue their school. For instance, colleges will not be allowed to forbid students from filing class action lawsuits, nor will they be allowed to require students to pursue an internal process before taking an issue to court.
How to seek borrower defense forgiveness

The department is still working to finalize a form that borrowers will use to apply for borrower defense forgiveness. In the meantime, you can apply via email by sending your claim to FSAOperations@ed.gov or by mailing your claim to U.S. Department of Education, PO Box 429060, San Francisco, CA 94142. The borrower defense page on the Federal Student Aid website has a list of information you should include, such as documentation to prove your former enrollment and details about your school’s misconduct or legal violations.

After you apply for borrower defense forgiveness, your federal student loans will be placed in forbearance until your claim is resolved, unless you request otherwise. That means that you won’t be required to make monthly loan payments, but your debt will continue to accrue interest. In many cases, the debt relief you get through closed school discharge or borrower defense forgiveness will not count as income for tax purposes.

Teddy Nykiel is a staff writer at NerdWallet, a personal finance website. Email: teddy@nerdwallet.com. Twitter: @teddynykiel.

Why Your Investment Strategy Benchmark Matters

By Stephen Hart

Learn more about Stephen on NerdWallet’s Ask an Advisor

What if I told you that I am a superior investment manager who’s had fantastic results: Last year my clients averaged a 2% return. That doesn’t sound that great — unless it’s 2009. In that case, my clients made money during one of the worst financial crises we’ve ever seen.

Without the proper context, it’s hard to gauge the success of your investment performance return. That’s why all portfolio strategies should have an appropriate benchmark against which you can evaluate them.

Benchmark basics

Think back to your high school science class. When you did an experiment, you always did a “control” test first. That was so you had a constant to compare different outcomes against. A benchmark acts in the same way.

Investment managers look for ways to create as much return as possible for clients, given their risk tolerance. A benchmark gives us a constant to compare a portfolio’s performance against. In some cases, we can use a pre-existing benchmark, but sometimes we need to create one specifically for a client. That’s because the right benchmark depends on how the money is invested — the type and mix of assets a portfolio contains and the investment strategy it follows.

For instance, with a portfolio consisting of only 30 U.S. large-capitalization stocks, the Dow Jones industrial average, which tracks the performance of 30 large U.S. companies, would make sense as a benchmark. But the Dow wouldn’t be a good fit for a diversified portfolio that mixes various investment types across different asset classes and markets around the world.

A benchmark must be a good fit for your portfolio to tell you whether it’s successful.

How to evaluate your benchmark

Ask your investment advisor the following questions to help make sure you understand your benchmark and to figure out if it’s right for your portfolio:

What is the benchmark we’ll use to gauge success, and why is it right for my portfolio?

Your portfolio should be evaluated against appropriately weighted indexes that closely resemble your portfolio’s construction. For example, a risk-adjusted, globally diversified portfolio shouldn’t be evaluated against the Dow, S&P 500, Russell 1000, Russell 2000 or any other broad index.

Say a portfolio is 40% bonds and 60% equity, and the equity is subdivided into 20% U.S. large stocks, 20% developed international stocks and 20% emerging markets. If the S&P 500, which is composed entirely of U.S. stocks, returns 10%, the portfolio would see a 2% boost rather than 10% — assuming all other sectors remain flat — because U.S. stocks make up only 20% of the portfolio. A manager would need to look at other benchmarks to gauge the success of the other segments of the portfolio, or compare the portfolio against a blended benchmark that incorporates all of them.

Did you create the benchmark or is it pre-existing?

Many large mutual fund companies provide pre-existing benchmarks for their funds. So do other companies, like investment research firm Morningstar. It’s much easier to track these kinds of benchmarks than it is to craft one specifically for your goals and risk tolerance. However, your advisor may have to create a blended benchmark that more accurately depicts the mix of investments in your portfolio.

Discuss with your advisor the pros and cons of each approach.

Given the objectives of my portfolio, what’s an appropriate time frame for comparison?

The time frame for evaluating your portfolio’s performance can vary greatly, depending on your investment strategy. It would make sense to evaluate a portfolio monthly if it’s aggressive and actively traded, because the manager will make short-term investment moves.

It would be hard to gauge relative performance of a more passive portfolio over a couple of years; it would need a longer term — say, 10, 15 or 20-plus years. It’s unlikely you’ll have to wait 20 years to see if your portfolio is working, but if you have a 20-year horizon, you may want to wait a few years before reading too much into its performance. Discuss these expectations with your advisor.

Is your goal to match or beat the benchmark?

This may seem a little silly. If you’re not trying to beat a benchmark, you could just buy low-cost index funds, which use passive strategies that track the components of an index like the S&P. Still, it’s best to ask and make sure you’re on the same page as your advisor.

How do you calculate portfolio performance?

There are several ways to evaluate performance. Two calculations you might use are a time-weighted return or a dollar-weighted return.

  • A time-weighted return disregards the flow of money into and out of the portfolio, or cash flows. This calculation should be used to compare a portfolio manager’s performance to a benchmark, since it’s independent of whether an investor adds or withdraws money.
  • A dollar-weighted return accounts for changing portfolio size due to cash flows. It may be more appropriate for goal-based planning since it shows the return on your dollars over time, including how adding or taking away money affects your overall wealth.

These two methods can provide vastly different results. Ask which one your advisor will use and write it down so you’ll able to tell if your advisor changes it or the numbers don’t seem to add up.

Missing the mark?

If your manager isn’t beating the benchmark, perhaps it’s time to part ways. If you do, though, you may be subject to capital gains taxes, transfer fees and a lot of headaches.

Before making a hasty decision, request a meeting with your advisor to discuss your options. Maybe you need to adjust your strategy, but maybe you need to give it more time. Be sure to ask questions to make sure you fully understand the benchmark and what it means for your investment performance. After all, it’s your money.

Stephen Hart is a senior financial planner and wealth management advisor at Talis Advisory Services in Plano, Texas.

This article also appears on Nasdaq.

The Benefits of Credit Counseling for Homebuyers

Buying a home is a complicated process. It’s usually the biggest financial transaction of a person’s life, and often involves taking out a mortgage to pay for the new digs.

Paying off such a large debt is a serious commitment, but it’s not the only financial consideration. Saving up for a down payment, improving your credit score, making room in your budget for unforeseen expenses — it can take years to financially prepare for homeownership. So it’s no surprise that there’s a desire for guidance and education.

Many nonprofit credit counseling agencies offer counseling for homebuyers as one of their services. David Atkinson, certified financial counselor at Consumer Credit Counseling Service of Buffalo and member of NerdWallet’s Ask an Advisor network, explains how credit counseling can help with the homebuying process.

What kind of credit counseling is available to homebuyers?

Credit counseling for homebuyers covers a number of topics, including:

  • Budgeting: Establish a current budget and a budget for after your home purchase.
  • Analyzing your credit report: Determine what steps you’ll need to take to get the best financing on your home.
  • Selecting a home: Assess your income and financial obligations to determine what mortgage payment, and therefore which homes, you can afford.
  • Financing a home: Learn what loan options are available and what the qualifications are.
  • Home maintenance and taxes: Plan to set aside money for taxes and maintenance costs. 

Certain types of pre-purchase counseling might also be helpful once you own a home. For instance, delinquency housing counseling — which you can often receive for little to no cost — can help if you fall behind on your mortgage (more information on the HUD website). A housing counselor can also help with reverse mortgages, a type of home loan for homeowners age 62 or older that requires no monthly mortgage payment. They can help you understand the costs, eligibility requirements and steps involved in the process.

Fees for housing counseling, including homebuying counseling, typically range from $0 to $150. 

How does credit counseling aid the homebuying process?

A housing counselor is an unbiased advocate who can provide information and tools. This, in combination with the information you may receive from a real estate agent or a mortgage sales representative, can help you make an informed choice.

Counselors can help you calculate affordable mortgage payments and establish a budget that can accommodate home repairs and maintenance costs. They may also provide information on different types of loans — including state and government loans like Veterans Affairs loans and Federal Housing Administration loans — and help you figure out which would be the best fit for you.

You might also receive information about state, federal or local grants for homebuyers. For instance, in Hamburg, New York, it’s possible to get a $10,000 town grant, while New York state has a first-time homebuyers grant of $7,500. Grants may have income requirements, or may be limited to first-time buyers or limited to specific uses — closing costs and escrow or down payments, for instance. In some cases, buyers must participate in housing counseling to qualify for grants.

In what cases would you want to utilize this type of credit counseling?

The main reason is to save thousands or even tens of thousands of dollars on your mortgage. So in that sense, most potential homeowners would benefit — and the sooner they work with a counselor, the better. I would advise most people to contact a housing counselor two or three years before they plan to purchase a home, to come up with a plan to improve their credit score and see if they can qualify for any grants.

It’s best to work with a real estate agent and mortgage sales professional in combination with a housing counselor, so you can make the most informed choices possible when shopping for a home. Visit the National Foundation of Credit Counseling’s website to get a direct referral to a counseling agency in your area.

CCCS of Buffalo is a nonprofit credit counseling agency and member of the National Foundation for Credit Counseling.

Mortgage Rates Today, Friday, Oct. 28: Up Across the Board; Report Cites Almost 30 Million Homes in Danger of Wildfire

Thirty-year fixed, 15-year fixed and 5/1 ARM rates all increased Friday, according to a NerdWallet survey of mortgage rates published by national lenders this morning.

Mortgage Rates Today, Friday, Oct. 28 (Change from 10/27) 30-year fixed: 3.76% APR (+0.02) 15-year fixed: 3.17% APR (+0.03) 5/1 ARM: 3.63% APR (+0.01)  California and Texas have highest number of homes at extreme wildfire risk

Out of 13 western states, California and Texas have the highest number of single-family residential homes in extreme risk wildfire areas, according to a CoreLogic report released on Wednesday. CoreLogic’s scale has four categories: low, moderate, high and extreme risk, and 1.8 million homes across 13 western states fall into the high and extreme risk category. While only a small percentage of the millions of homes that fall somewhere on the scale, these 1.8 million homes represent a combined total reconstruction value of nearly $500 billion, according to the report. The other 27 million homes on the scale — those at low and moderate risk — have an estimated reconstruction cost value of $6.7 trillion.

Among metro areas, Southern California’s Riverside-San Bernardino-Ontario area has the highest number of homes at extreme risk (51,775), while Northern California’s Sacramento-Roseville-Arden-Arcade area comes in second (41,937) and Colorado’s Denver-Aurora-Lakewood area comes in third (33,226).

Last year marked the first time that wildfires burned more than 10 million acres in the US, according to the report. For the previous 20 years (1995-2014), the average burned acreage per year was 5,820,402 acres.

“The drought conditions that have plagued the western U.S. for the past several years, and continue to impact California, only serve to increase the threat of damaging fire events,” the report says. “However, historic records of wildfire activity indicate that even without drought conditions, both [California and Texas] — and the other western states — would still continue to have areas of high wildfire risk each year.”

Homeowners looking to lower their mortgage rate can shop for refinance lenders here.

NerdWallet daily mortgage rates are an average of the published APR with the lowest points for each loan term offered by a sampling of major national lenders. Annual percentage rate quotes reflect an interest rate plus points, fees and other expenses, providing the most accurate view of the costs a borrower might pay.

Michael Burge is a staff writer at NerdWallet, a personal finance website. Email: mburge@nerdwallet.com.

Need help around the house? Companies offer costumed cleaners

If you want to tidy up your house without breaking out of the Halloween spirit, a handful of specialty cleaning businesses may have what you're looking for. Multiple companies are offering cleaners in costume.

>> Read more trending stories

Here's a look at a few of them:

My Model Maid, Connecticut: My Model Maid launched this month in Connecticut with 11 maids and three costumes. The company hires models between the ages of 19 and 30 to clean people's homes while dressed as a French maid, Wonder Woman, a cheerleader or a schoolgirl.

"I wanted a fun alternative to housecleaning," owner Josh Dailey, 31, told the Connecticut Post.

Have My Model Maid help host your next party or have your own personal cheerleader on GameDay! We'll serve all your drinks/apps and even handle the cleanup. Contact Us today to book or additional information www.MyModelMaid.com 860-806-7777 A photo posted by My Model Maid (@mymodelmaid) on Oct 18, 2016 at 9:22am PDT <script async defer src="//platform.instagram.com/en_US/embeds.js"></script>

The company has gotten some criticism from people who believe the cleaning service is degrading for women; however, 29-year-old Model Maid Katie Weinstein told the Post that isn't the case.

"I find it a little funny," she told the newspaper. "In Connecticut, it's a little conservative. This would be wonderful to have in Manhattan."

Meanwhile, she said she's only gotten positive reactions from customers.

"They're like 'Oh my God, I can't believe you're here,'" she told the Post. "People just love costumes. It's a novelty; it's no different than a singing telegram. It's similar to having a clown at a children's birthday party."

The Costumed Cleaners, California: In the San Luis Obispo area, a cleaning business offers customers the chance to get their homes tidied by anything from a French maid to a Marvel superhero.

"Our main goal is to provide a fun way to clean your house using homemade eco-friendly cleaning products, and we pride ourselves on being able to put a smile on your face in the process," wrote The Costumed Cleaners owner Rocky De La Rosa on the company's website.

<script>(function(d, s, id) {  var js, fjs = d.getElementsByTagName(s)[0];  if (d.getElementById(id)) return;  js = d.createElement(s); js.id = id;  js.src = "//connect.facebook.net/en_US/sdk.js#xfbml=1&amp;version=v2.8";  fjs.parentNode.insertBefore(js, fjs);}(document, 'script', 'facebook-jssdk'));</script> Finally got some "sample" pics to share. These are only SOME of the costumes.Posted by The Costumed Cleaners on Monday, August 31, 2015

The cleaning service offers 14 costumes for customers to choose from, a combination of De La Rosa's passion for dressing up, making her own products, cleaning and making people happy.

"We pride ourselves (on) being professionals, and operate our business by the book," the company said on its Facebook page. "All of our costumes are sexy, but tasteful."

Men in Kilts, multiple locations: Across the U.S. and Canada, multiple men don black shirts and kilts as part of the Men in Kilts outdoor cleaning workforce. They provide a variety of services, including window washing, gutter cleaning and pressure washing. Their uniforms include black shirts with a teasing slogan on them: "No Peeking!"

<script>(function(d, s, id) {  var js, fjs = d.getElementsByTagName(s)[0];  if (d.getElementById(id)) return;  js = d.createElement(s); js.id = id;  js.src = "//connect.facebook.net/en_US/sdk.js#xfbml=1&amp;version=v2.8";  fjs.parentNode.insertBefore(js, fjs);}(document, 'script', 'facebook-jssdk'));</script>

"All the guys are stand-up guys, but the girls love to flirt. I'll tell you that. They love to flirt," Houston Men in Kilts franchise owner Bob Cavnar told the Austin American-Statesman in April. "(People) like to joke about the guys wearing kilts and being up on ladders, and what are you wearing under the kilt. But of course, we never answer that question."

Canadian Nicholas Brand, the son of a Scottish immigrant, launched his window cleaning company in 2002 and chose to put his cleaners in kilts to "put a visual to the otherwise faceless window cleaner."

The company has since opened multiple locations, including shops in Massachusetts, New Jersey, North Carolina, Pennsylvania, Texas, Ohio, California and Washington.

Ask Brianna: How Can I Get Help Paying for Graduate School?

“Ask Brianna” is a Q&A column for 20-somethings or anyone else starting out. I’m here to help you manage your money, find a job and pay off student loans — all the real-world stuff no one taught us how to do in college. Send your questions about postgrad life to askbrianna@nerdwallet.com.

This week’s question:

“I want to get an advanced degree, but I’m not sure how to pay for it. How can I get financial aid as a graduate student?”

When I was unhappy at my job in my mid-20s, I daydreamed about going back to school the way some people long for a vacation to Costa Rica. I wanted to spar intellectually with professors instead of eating sad, solo lunches at my desk.

I know this makes me a big nerd, but I’m not the only one. Between 2014 and 2015, enrollment among first-time graduate students increased 3.9% at schools that responded to a recent survey by the Council of Graduate Schools. That was the fourth straight year of growth in graduate enrollment.

Before you run to the campus store to buy grad-school swag, make sure an advanced degree is right for you. Resources like PayScale’s College Salary Report can show you what salary you might earn when you graduate. Ask professional connections in your chosen field about their career paths and scan job descriptions to see whether a graduate degree is required.

Once you’ve committed to grad school, paying for it isn’t easy, especially if you don’t have a ton of savings or help from your parents. I went to grad school for journalism in 2013 on the cheap by getting in-state tuition and generous scholarships from a city school. You can get financial aid and even student loan forgiveness, depending on your field — you just have to know where to look. Here are three ways to get help paying for grad school.

Ask for tuition reimbursement at work

If you plan to continue working when you go back to school, find out whether your company will help pay for your degree. More than three-quarters of U.S. employers that responded to a 2015 survey by the International Foundation of Employee Benefit Plans said they provide educational assistance to workers. Survey respondents most frequently offered an annual benefit valued at $5,000 to $6,999.

This perk often takes the form of tuition reimbursement, which means you’ll pay for your program upfront and receive a lump sum to pay for education expenses after your grades have posted. If you can’t pay all your tuition in one go, ask the school if it will let you pay in installments. Make sure you understand all the rules and limitations of your company’s program. You might have to return the funds if you leave within a year of completing your coursework, for instance.

On the job hunt? Negotiate for tuition reimbursement when you receive a job offer if it’s not already on the table, says Mary G. Morris, chief executive officer of Virginia529 College Savings Plan, an independent state agency that helps families plan and pay for college.

Fill out the FAFSA

The Free Application for Federal Student Aid, the elaborate financial aid form that plagued your college years, is back — and it’s just as important now as it was then. Graduate students who attend school at least half time are eligible for federal student loans, federal grants aimed at prospective teachers, and work-study funds, which you’ll have access to only if you fill out the FAFSA.

A few things have changed since undergrad: You’re considered an independent student now, so your parents’ income and assets won’t affect how much financial aid you receive. You can borrow up to $20,500 a year in federal unsubsidized loans, which is more than you had access to in college. Look for ways to reduce your living expenses or work part time to avoid overborrowing and getting a shocker of a loan bill when you graduate.

The FAFSA for the 2017-18 school year is available now, so you won’t have to wait until Jan. 1 as in years past. You can also use your income from 2015, which means you won’t have to wait to do your 2016 taxes to add your financial information to the form.

Look forward to forgiveness or refinancing

Graduate school might help you switch careers, like I did, or increase your earning power in your chosen field. It’s an investment in your future — and if that means taking out loans, in some cases, you’ll be able to find relief later through student loan forgiveness or refinancing.

If you work for the government or a 501(c)(3) nonprofit organization, the Public Service Loan Forgiveness program will eliminate your federal student loan balance tax-free after you make 120 monthly loan payments, or 10 years’ worth if you make the payments consecutively. Teachers have access to federal loan forgiveness if they work in certain school districts or teach particular subjects.

Workers at for-profit companies with solid incomes and good credit can refinance their student loans at lower interest rates through private lenders. Those with graduate degrees are often particularly good candidates for refinancing. But know that you’ll lose various forgiveness and repayment benefits if you refinance federal student loans; refinancing private loans is a safer bet.

Brianna McGurran is a staff writer at NerdWallet, a personal finance website. Email: bmcgurran@nerdwallet.com. Twitter: @briannamcscribe.

This article was written by NerdWallet and was originally published by The Associated Press.

6 Big Mistakes People Make When Settling Debt

If you can’t pay back a debt you may be able to settle it for less than what is owed. The goal in doing so is pretty straight forward — you want to get the creditor to accept a lower payment amount than the current balance on the loan or account. However, getting there can prove to be a challenging task and there are some mistakes you’ll want to avoid when trying to settle a debt.

1. Having Unrealistic Expectations

You may have heard you can settle a debt for pennies on the dollar, in the 10-25% range. That may be idealistic, so you shouldn’t expect it to go that way.

“While you may be able to negotiate down your debt, it’s important to remember that lenders are typically for-profit businesses accountable to shareholders,” John Schneider of the Debt Free Guys, and Credit.com contributor, said.

2. Overlooking Tax Consequences

Any time a debt is forgiven or settled, the IRS treats the forgiven amount as taxable income, and the creditor will most likely issue you a 1099-C. If you don’t keep this in mind, you may be faced with a surprise when Tax Day comes along.

“You’re not done paying for your debt when you send your settlement check,” Schneider said. “However, the amount of tax you may owe on this income or settlement amount will depend on other assets you have.”

3. Negotiating Too Early

“It seems counter-intuitive, but the more you demonstrate your inability to pay your lender back, the more inclined your lender will be to negotiate,” Schneider said. “Missing a few payments wouldn’t qualify.”

Missed payments and prolonged delinquencies will have a big effect on your credit, but it’s important to understand going in that many credit card companies may not be willing to negotiate with you until you are at least 90 days delinquent. In addition, being premature in the process may refer to the fact that you don’t have a full grasp on your financial situation.

“The ‘too early’ would be that you should have a budget and [know] what is possible before negotiating,” Thomas Duffany, an Accredited Financial Counselor, said. (For more, you can read this guide on tips for negotiating with creditors.)

4. Not Getting Help Negotiating

The person you talk to on the other end of the line at the credit card company or the collections firm is a professional whose skills may be intimidating.

“The person who negotiates for the lender is an expert at negotiating,” Schneider said, so asking for help might be a good option. “If you need to bring in a friend or a colleague more skilled with negotiating to speak on your behalf it may be worth it.” There are also professional organizations that can help negotiate — if that’s the route you choose, consider reading this guide that goes over 14 questions you should be asking a debt settlement company.

“Navigating issues of debt can be stressful, confusing, and frustrating,” Rebecca Wiggins, executive director of the Association for Financial Counseling and Planning Education, said. “It is important that consumers know where to turn and who they can trust to guide them to financial security.” She recommended consumers “look for a trusted professional with reputable credentials and comprehensive training.”

5. Settling for an Amount You Cannot Afford

It’s no good negotiating a settlement if you wind up defaulting on the new agreement, essentially putting you back in the same stressful situation.

“It is essential that consumers have an updated spending plan to understand income, expenses and debt,” Wiggins said. “It will also help to determine how much they can afford to pay toward debt.”

6. Not Getting the Agreement in Writing

Getting a creditor or collection agency to agree to a settlement is only part of the process — once you get them to agree, it’s essential to get the agreement documented in writing. Oral contracts are extremely difficult to enforce, so having a written agreement spelling out the terms of the agreement exactly will help you should you need to enforce the contract in court.

According to Todd Christensen, the director of education at the National Financial Education Center in Boise, Idaho, it’s important that “… anyone setting a debt should get in writing that the creditor will not sell (send to collections) any remaining amount not paid.”

As you continue to work on paying your debts, it’s a good idea to monitor the effects it’s having on your credit. You can view two of your credit scores for free, updated every 14 days, on Credit.com.


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This article originally appeared on Credit.com.

Here's What Happened When a Seattle Bar Went Completely Cashless

When Sam Largent opened his second bar in the Seattle area, he thought he’d take a bold risk: No cash allowed. Well, no physical currency, anyway.

All customers must pay with plastic. Debit and credit only; no greenbacks welcome.

“Dealing with cash brings a lot of issues,” says Largent. Like making change, reconciling at the end of each wait staff shift, going to the bank. “If the till is short at the end of the night, it’s usually a simple error, but it can take half an hour to find.”

Largent opened his first bar, Flatstick Pub, with his brother Andy back in 2014. Located on Seattle’s posh east side, not far from Microsoft headquarters, it’s a relaxed place that serves only local microbrews and includes a nine-hole mini-golf course. And, it took cash.

But when the brothers eyed a second spot in Seattle’s Pioneers Square, near downtown, crime concerns were a factor. And that helped tip the no-cash scales. When the second Flatstick opened this June, it was a “cards only” establishment.

“I’d seen a few other places do it, so I thought we’d try it,” Largent said. He anticipated complaints, but he got hardly any. Things went so well that the original Flatstick went “cards only” this month.

“There was a little more pushback there, because we had been taking cash there. But overall, it’s working out well,” he said. So well that the additional credit card transaction fees are worth it. “I like the idea from any efficiency standpoint.”

Retailers refusing cash isn’t exactly new. Airlines have been doing it for years when fliers buy meals (A 2011 lawsuit against Continental Airlines for not taking cash was dismissed by a New Jersey Superior Court). Plenty of non-manned facilities, like parking garages, only take cards.

Traditional retailers have been slower to go cashless, however. Back in 2010, some Apple stores reportedly didn’t accept cash when selling iPads, though the firm reversed that policy.

There are scattered examples of cash-free shopping popping up around the country, however. A coffee shop chain on the east coast named Bluestone Lane announced recently it would go cashless on Oct. 31, citing faster checkout speed and enhanced store operations.

“It’s a more sustainable option. Less vehicles moving money around the city,” the chain says on its website.

The Drawbacks of Going Cashless

Going cashless is not without growing pains, though. The most obvious might be lower tips for wait staff, as consumers stop dropping loose change or dollar bills into tip cups. As Starbucks increasingly nudges its customers towards paying with their app, Starbucks employees have complained that tips there have plummeted.

Largent says it’s been a mixed bag for his bartenders. Consumers who tip 20% on a credit card bill full of $6 microbrew purchases might actually be giving more than the usual $1-per-drink tip formula.

There’s no denying the pain Uncle Sam brings to this equation. Tips left on plastic must be declared and taxed, while wait staff can evade taxes left in cash.

Employee theft might be another enticement for owners to push forward with cashless solutions, but Largent said that didn’t factor into his thinking – it’s not a problem for him. On the other hand, high-cash businesses like bars bring all sorts of opportunity for below-the-table transactions that he doesn’t have to worry about now.

“We try to do everything by the books, not cut corners,” he said.

And increasingly, it appears consumers are trying to do everything without cash. A recent survey by Accenture says the percentage of consumers who used cash regularly dropped from 67% to 60% in the past year.

Photo of sign inside Flatstick Pub taken by Bob Sullivan

What About People Who Don’t Use Plastic? Or Banks?

The other main concern with cash-free retail is consumers who don’t have access to plastic through checking or savings accounts, a group sometimes referred to as the “unbanked.” The Federal Deposit Insurance Corp. estimates that 7% of U.S. households— about 9 million— are unbanked. While this group can’t get a traditional debit or credit card, use of General Purpose Reloadable cards —prepaid debit cards— is quickly filling that gap. Use of the cards jumped 50% from 2012 to 2014, according to the Pew Charitable Trusts.

Some 2.4% of the U.S. population are unbanked consumers with prepaid debit cards, meaning the number of people without access to any kind of plastic payment is less than 5%.

While those consumers aren’t complaining, Largent said, when I posted a picture showing Flatstick’s new policy on my Facebook page, readers didn’t care for it:

“I’d probably boycott on principal alone,” said one Oregon resident.

“That’s a place I wouldn’t shop. I refuse to be forced to use plastic,” said another.

Other readers were more sympathetic.

“One of the stores in the chain I work for took four counterfeit $100 bills in one day. That is enough of an incentive to do something like this,” said one.

But even before the change, Largent said cash sales at his original location were only about 10% of total sales — so in the end, the risk for his business was very small. Meanwhile, he and other retailers have a whole host of new, non-cash payment systems to worry about.

The Accenture survey mentioned earlier found that 32% of millennials had used mobile payment tools like person-to-person app Venmo. Other mobile wallet technologies like Apple Pay and Android Pay, while less popular with consumers, are making in-roads and helping squeeze out cash.

“I think the trend will be more and more options for people to make payments electronically,” Largent said. “We get very busy, and not taking cash really helps us keep the line moving, lets us focus on our customers.”

If you’re among the unbanked, but are thinking about opening a bank account, here are seven important questions to ask your banker before opening an account. And if you don’t have any credit cards but would like one, it’s important to remember that your credit scores will help determine what credit cards you qualify for. Being rejected for a card you don’t qualify for (if you apply but you have bad credit, for example) can actually ding your credit scores. If you don’t know what your credit scores are, you can see two of your free credit scores, updated every 14 days, on Credit.com)

Related Articles

This article originally appeared on Credit.com.

Some Careers Can Help You Conquer Student Debt Faster

Your job affects more than just what you do all day and how big your paycheck is. It can also influence your ability to repay your student debt.

That’s because borrowers in certain careers are especially good candidates for student loan refinancing. Refinancing student debt allows qualified borrowers to get lower rates and has grown in popularity in the past few years. If it’s the right move for you, refinancing can save you thousands of dollars in interest and help you become debt-free faster.

Best careers for student loan refinancing

If you’re in health care, law, business or engineering, you have a good shot at qualifying for refinancing. Those careers are very strongly represented among borrowers who refinance through Earnest, says Lian Chang, a data editor at the online student loan refinancing company. Of the company’s student loan refinancing clients, 44% have a professional degree, she adds.

At CommonBond, another online company that offers student loan refinancing, attorney, pharmacist, physician assistant, physician, registered nurse and physical therapist were among the most common occupations of borrowers who refinanced between Oct. 1, 2015, and Sept. 30, 2016, says Radhika Duggal, vice president of marketing. Teacher and project manager also made CommonBond’s list.

Why your career matters

Student loan refinance lenders typically look at three things when they underwrite potential borrowers: credit score, income and debt-to-income ratio, which is the amount of debt you owe relative to your earnings. In addition, your occupation helps lenders understand the likelihood that you’ll repay your loan.

“Physicians historically pay back their loans pretty responsibly,” says Jan Miller, an independent student loan consultant. “They get better [refinance] rates than someone else who has a different profession and the same income.”

Student loan borrowers with postgraduate degrees tend to have higher incomes and higher debt loads than borrowers with bachelor’s degrees, according to data from the Bureau of Labor Statistics and the National Center for Education Statistics.

Even if borrowers in high-paying fields have higher debt-to-income ratios or slightly lower credit scores compared with other borrowers, their job can help make up for it, Chang says. “If we know that [borrowers are] M.D.s and they’re currently in their residency, we know that they’re likely good for it,” she says. “We know what their trajectory tends to look like in the future.”

A fancy job isn’t everything

Doctors, lawyers and pharmacists stand to save the most, on average, by refinancing their student debt, according to a 2015 NerdWallet analysis. But you don’t need a professional degree to qualify for and benefit from refinancing.

“You could be a teacher or a librarian and be a great candidate for refinancing,” says Catherine New, senior editor at Earnest, “as long as your track record demonstrates that you’re financially responsible.” For Earnest, that includes having a history of paying your bills on time and contributing to a savings account.

Not everyone should refinance student debt. For example, hold off on refinancing federal student loans if you work for the government or a nonprofit. You’re eligible for the federal Public Service Loan Forgiveness program, but you won’t be if you refinance. Refinancing also disqualifies federal loan borrowers from accessing income-driven repayment plans and other federal forgiveness programs. Private student debt isn’t eligible for these programs, so that debt may still be worth refinancing if you have high interest rates.

If you think refinancing is for you, whether you’re in a high-earning career or not, you’ll save the most money by finding the lowest rate. Using a marketplace makes it convenient to compare rate estimates across multiple lenders. Try Credible, a NerdWallet partner, or LendKey, a refinance marketplace featuring community banks and credit unions.

Teddy Nykiel is a staff writer at NerdWallet, a personal finance website. Email: teddy@nerdwallet.com. Twitter: @teddynykiel.

4 Things a Good Credit Card Issuer Will Offer People With Bad Credit

Sometimes, bad credit happens to good people. To rebuild your credit, you need financial institutions to take you seriously, treat you with respect and give you another shot. What you do not need is a long series of rejected credit card applications or sketchy “instant approval” credit cards with high fees or unfair terms.

Even with a credit history that is less than optimal, you can still get approved for a credit card from a reputable issuer. Many major issuers are looking for ways to help people with bad credit — generally defined as a credit score below 630. And they’re not just doing it to be generous. A company that gives consumers a second chance and helps them rebuild their credit can earn their loyalty for years. That’s an appealing prospect for banks looking to build long-term relationships with consumers.

“Our customers run the gamut,” says Judy Teeven, head of general purpose credit cards for Wells Fargo. “We feel compelled to have something to meet the needs of each of these groups.”

When you go looking for a credit card for bad credit, here are four things you can expect a good issuer to provide:

  1. Good credit cards for bad credit
  2. Financial fitness programs
  3. Credit-tracking tools
  4. A way to move up to a better card
NerdWallet is a free tool to find you the best credit cards, cd rates, savings, checking accounts, scholarships, healthcare and airlines. Start here to maximize your rewards or minimize your interest rates. Virginia C. McGuire Get Your Free Credit Score Get your free score every week.Set goals and see your progress.Signing up won't affect your score. Get your credit score Get Your Free Credit Score Get your credit score 1. Good credit cards for bad credit

Most major issuers offer credit cards for bad credit, so don’t be shy about asking. If your credit is bad, the best choice is probably a secured credit card.

The major downside to secured cards is that you have to make a sizable security deposit, which the issuer holds as collateral in case you fail to pay your credit card bills. Usually the deposit is equal to your credit limit, so a deposit of $500 will get you a credit card with a $500 limit.

But that deposit is also what makes a secured credit card easier to get approved for, since it all but eliminates the risk to the issuer. With responsible use of a secured card, you may be able to transition to a regular unsecured card — one with no deposit requirement — in a year or even less. You get your deposit back when you close a secured card or convert the account to an unsecured card.

Secured cards may have an annual fee, but you shouldn’t pay more than $50 a year. Some secured cards don’t charge an annual fee at all. NerdWallet likes the Discover it® Secured Card – No Annual Fee, which has an annual fee of $0 and gives you the opportunity to earn rewards — a rarity for a secured card.

Avoid cards that require you to pay a processing or activation fee just to open the account or monthly “maintenance” fees just to keep it open.

» MORE: NerdWallet’s best secured credit cards

2. Financial fitness programs

It’s possible that you were doing everything perfectly and you got hit with some very bad luck that ruined your credit. It’s also possible that you made a mistake or two along the way.

Many issuers that offer credit cards for bad credit also provide financial education to help people learn to manage credit more effectively. For example, Digital Federal Credit Union offers specialized coaching for people in different financial situations. You can learn budgeting skills and debt management strategies, advice about student loans and tips for becoming a homeowner.

John LaHair, a spokesperson for DFCU, recommends that people track their expenses closely for a week to see where their money is going. “You’ll be amazed at what you find,” he says.

Sometimes, something as simple as looking at where your cash is going can help you trim your expenses and pay your bills on time.

» MORE: Digital Federal Credit Union Visa Platinum Secured Credit Card

3. Credit-tracking tools

Nothing builds your credit score faster than responsible use of a credit card. So once you’ve gotten approved for a credit card, you want to do two things:

    • Use your credit card carefully. That means making only a few charges every month — not maxing out the card — and paying them off in full and on time.
    • Keep track of your credit score. This is where your credit card issuer can help. Many issuers offer free credit scores and specialized tools that help you track your progress over time.

» MORE: What’s my credit score?

4. A way to move up to a better card

Because secured card issuers are holding onto a pretty big chunk of your money in the form of a security deposit, you probably want to move on to an unsecured card as soon as possible.

Some secured cards require the cardholders to close their accounts to get their deposits back. But closing one account and opening another can ding your credit score, so it’s better to find a card that allows you to transition to an unsecured card without opening a new account.

The Discover it® Secured Card – No Annual Fee is one such example. After your first year with the card, Discover will begin automatically reviewing your account monthly to see whether you’re ready to upgrade. When the time comes, you’ll be able to graduate to an unsecured card and recoup your deposit without opening a new account.

» MORE: Why applying for the wrong credit cards can make bad credit worse

Virginia C. McGuire is a staff writer at NerdWallet, a personal finance website. Email: virginia@nerdwallet.com. Twitter: @vcmcguire.

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