Fall is a Great Time to Prepare for Winter

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When I woke up this morning it was really cold outside.  It came on all of a sudden, as it tends to do in Pennsylvania.  So as we move toward the winter months (which seem to last from November through April in Pennsylvania), it’s a great time to think about things you can do to be prepared for winter.

First, it’s a good idea to check your home for places that cold may seep in.  If you have drafty windows or doors, you may want to add plastic over the windows, insulated drapes, and perhaps tuck a towel (or some other fancier draft stopper) under the door.  If you have cold walls, hanging a tapestry or quilt can add a layer of insulation.  If your floors are cold, area rugs can help.  And if you have houseplants, you should move them away from the windows a bit so they don’t get too cold.

It’s also a great idea to make sure you are ready when the snowflakes start flying.  I have seen several inches of unexpected snow in central Pennsylvania as early as mid-October.  If you have steps or a sidewalk that could get icy, now is the right time to procure a bag of salt or other ice melter.  If you have a car, make sure to throw in that ice scraper and snow brush now.  And if you don’t have a snow shovel, you may want to get one in case you have to dig out your car.

It doesn’t happen often, but sometimes a winter storm can be bad enough that we lose power.  Are you prepared for the loss of power?  Know where you have a flashlight or battery powered lantern.  Have warm clothing and blankets on hand in case your apartment gets too cold for the norm.  Have some shelf-stable food and plenty of water available in case you can’t get out for a few days.

As the foliage is just turning its glorious colors, it seems weird to be thinking about winter.  But preparing for winter in advance is much easier than heading into it without forethought.

What’s Up With My Student Loans?

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Federal student loans are in a bit of a state of chaos right now.  After a three year pause, interest started accruing again on September 1st, and payments are starting this month for anyone who was in repayment before the pandemic, and also for anyone who stopped attending school from March 2020 through April 2023.  That is a LOT of student loan borrowers.  All going into repayment at exactly the same time.

To keep things extra confusing, a lot of borrowers have had their loans shuffled around to a different loan servicer (the company that handles the management and collection of the debt) during the pause.  Several of the old familiar loan servicers, including Great Lakes, AES, and Navient (AKA Sallie Mae), have gotten out of the federal loan servicing business.  There are several new players in the federal loan servicing space including Maximus, Aspire, Ascendium, and bunch of other companies I hadn’t heard of before recently.  So we have new servicers at a time when millions of borrowers are entering repayment for the first time.

I’ve heard from several currently enrolled students that their in-school deferments have not yet processed for this year.  And that doesn’t surprise me at all.  The loan servicers are without question overwhelmed.  And the in-school deferments are not their top priority right now.  But I do have confidence that the servicers will eventually get these deferments processed retroactively to the start of the fall semester.  So if you are in school and receive notice that you have a payment due, what should you do?  I can’t believe I’m saying this, but you should ignore it.  The school has sent your enrollment verification.  The loan servicer has access to it.  And the deferment will eventually be processed.  If there is a mis-labeled missed payment jammed in there, there are protections in place so you will not suffer any consequences for this “missed payment.”  So, believe it or not, you should ignore it.

I’ve heard reports that wait times to get through to a loan servicer on the phone are hours long.  And nobody wants to be on hold for that long.  So what can you do to make sure everything is in order?  There are several things you can do that don’t involve calling the loan servicer.

  1. First you should make sure you know who your loan servicer is, just in case it changed during the pause.  You can always find this information at http://studentaid.gov in the “My Aid” section.
  2. If you have not yet established an online account with your loan servicer’s web portal, you should do so.  This portal should be able to provide the most up-to-date information about your student loan account.  This will be much more efficient than trying to get through to a human on the phone.
  3. If you have general questions about repayment plan options or repayment strategies, there are options outside your loan servicer.  You can reach out to the financial aid office at your school.  If you are a law school graduate, you can also get help from AccessConnex.
  4. If you have specific questions about your student loan, you may be doomed to wait on hold to talk to your loan servicer, but this should be a last resort after you try to work through options on their web portal.

This is a less than ideal time to be a student loan borrower.  The system is not working at its best.  But your school’s financial aid office will always be your ally in working through the process.

How to Have Anything You Want

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I go to a lot of music festivals and concerts.  Particularly bluegrass music.  That’s really my thing.  Everybody has their thing.  It seems like I’m spending a lot of money on live music.  And I am.  But that’s because live music is a priority for me.  I’ve made tradeoffs in other areas of life to make room in the budget for the thing that is important to me.  I live in a very small house.  I buy most of my clothes secondhand.  My “newer” car is 12 years old.  I buy store brands at the grocery store.  I’ve never been to Europe.  I don’t spend much money on beauty products or self-care rituals.  These are the things that are not a very high priority for me.  I have what I need.  I don’t need new or fancy or high end.  I DO need live music for my life to be satisfying and happy.

Every financial decision comes with a trade-off.  Your home may have the space you like and the location you like, but come with a roommate you didn’t initially want.  Your food may be delicious and nutritious, but you may be substituting cheaper proteins for more expensive options.  You may have chosen a less expensive college than your dream school, or you may have taken on student loan debt in order to afford your dream school.

Adulthood is full of decisions.  Some decisions are big.  Others are small.  But every decision comes with a tradeoff of some sort.  Every single thing you spend money on makes it so you can’t spend that money on something else.  I’m sure there are wealthy folks who can spend freely on absolutely anything without thinking about it, but even those folks are making the decision not to invest those funds or donate them to charity.

The next time you face a financial decision (which could be anything from selecting a box of pasta at the grocery store to deciding which job to accept), remember this:  You can have anything you want.  You just can’t have everything you want.

 

Student Loans: They’re Baaaaaack!

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The last few years have been a very weird time in the financial aid world.  At the start of the Covid-19 pandemic, the federal government put a pause on federal student loans.  All loans in the Federal Direct loan program stopped accruing interest.  And no payments were required on these loans for borrowers who were in repayment status.  At the time when this started, we all expected the pandemic to be short-lived and everything would go back to normal in short order.  But we all know that the pandemic (and the student loan pause) continued for quite a while.  Covid-19 has become an endemic and we’ve accepted that it is something we will just have to deal with going forward.  And the student loan pause extended many times.  But it has finally come to an end.

Starting September 1st, federal student loans began accruing interest again, for the first time since March 2020.  For borrowers who are in school (or in their six-month grace period following leaving school), this means that the loan servicer has started keeping track of the interest that is accruing each month, and when the loan goes into repayment that accrued interest will be added to the principal balance of the loan (this is called capitalization).  For borrowers who are already in repayment, this means that October is not only going to bring fall foliage, pumpkin spice latte, and spooky decorations.  October is going to bring a student loan payment.  For many this will be their first student loan payment ever.  For many more, this will be their first payment in several years.  This is going to take a little getting used to!

Thankfully, along with this new era of interest accrual and required payment, this fall also brings us a new income-driven repayment plan (IDR). IDRs base the amount of monthly payments on the amount the borrower is earning, instead of on the amount that was borrowed.  The Saving on a Valuable Education (SAVE) plan is replacing Revised Pay as You Earn (REPAYE), and it is without question the most favorable of the assorted income-driven payment options.  This plan boasts the following benefits:

  • The portion of the borrower’s income protected from being included in the calculation of the monthly payment is 225% of the federal poverty guideline, as opposed to the 150% offered by most other IDR plans.  This will yield the borrower a much lower monthly payment.
  • If the borrower’s monthly payment is not large enough to cover the accruing interest, the excess interest will be forgiven rather than being tacked onto the principal of the loan.  There will be no negative amortization!  Even if you only ever pay interest on the loan, the total balance due will never grow larger.  This is a game changer.  Gone are the days where a student borrows $40,000 for their education and then after years of payments find themselves owing $152,000.  The balance will never get bigger than where you started in repayment.
  • Married borrowers will have a way to remove their spouse’s income from the calculation of the monthly payment.  Borrowers will no longer have to make a choice between having the lowest monthly payment or legally wedding their soulmate.  If a borrower is married and wants to exclude their spouse’s income from the calculation, they simply need to file their federal income tax as married filing separately.

There are more changes to follow starting next summer, but the three listed above are already in place, and will have the greatest impact on law school alumni.  You can find a detailed description of the SAVE plan here, and a great description of how SAVE differs from the old REPAYE here.

Getting ready for student loan repayment after a three-and-a-half-year break will likely feel daunting.  You can find some guidelines here and here.  And your friendly neighborhood financial aid advisor is also here to provide help if you need it.

Big changes are arriving right now.  But with a little focus and a little help from available resources, this will be manageable.

 

The Ins and Outs of Health Insurance

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Health insurance is complicated and confusing.  It’s one of those things that you rarely think about until you need it.  But when you need it…you had better be prepared.  Best case scenario:  you need it, you have it, and it covers everything flawlessly.  Worst case scenario:  you need it and you don’t have it, and you end up with a tremendous debt.  Typical scenario:  you need it, you have it, and you learn surprising lessons about how much you still need to pay out of pocket.

There are four basic ways that you have to pay when it comes to your healthcare:

  1. You pay the premium on your health insurance policy.
  2. You likely pay a co-payment (usually $20 or $30 on typical doctor’s office visits) on office visits and prescriptions.
  3. If you have to have medical procedures done, you likely have to pay an annual deductible amount before your insurance starts covering things.
  4. After your deductible is met, your insurance likely still will not pay the full remaining bill.  They will pay a certain percentage (80% is a good example) and you are responsible for the remainder.  This remainder that you need to pay is called co-insurance.

Thankfully, there is one more health insurance term you should know about, which may be your saving grace in the case of a catastrophic illness.  Once you have reached the annual maximum designated by your insurance policy (note:  not all policies will offer an annual maximum), you will not have to pay any more out of pocket for co-insurance for the rest of that calendar year.  (You will still need to continue to pay co-payments, however.)

So, for example, assume you have a surgery done that costs $50,000.  You have a deductible of $500 and your co-insurance is 20% (the insurance pays the remaining 80%), and your annual maximum is $2,000.  For this surgery, you will have to pay the first $500.  The insurance will pay 80% of the remaining $49,500, or $39,600.  At first glance it looks like you will need to pick up the remaining $9,900.  Thankfully, your out-of-pocket annual maximum is $2,000, so you only need to pay a total of $2,500 ($500 deductible plus the $2,000 annual maximum on the co-insurance) for this adventure in medical care.  But if you had that $50,000 surgery without having health insurance, your out of pocket expense would be quite painful!

Tomorrow is the last day that you can purchase the Penn State Student Health Insurance Plan for fall semester.  Health insurance is expensive.  But trying to live without it can be even more expensive.

Fresh Start with a Spending Plan

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How do you plan to manage your money this semester?  The beginning of a new academic year is a great time for a fresh start when it comes to juggling your finances.  For students, each semester typically begins with a fresh lump sum of money to be used for books and for the semester’s living expenses.  And how a student manages that lump sum is not very different from the way anyone manages their regular paychecks (or direct deposit….I don’t remember the last time my pay actually came in a check).

Developing a spending plan requires that you know how much you are spending on things.  There are countless ways to track how much you are spending, ranging from financial computer programs to spreadsheets to old fashioned ledger books.  How you keep track of things is much less important than the fact that you need to keep track of things.  Some expenses occur once a semester (like tuition or books).  Many expenses occur once a month (like rent and utilities).  Some expenses occur even more frequently (like food or auto fuel).

The other part of developing a spending plan is knowing how much money you have available to work with.  For many of my readers this may be a big chunk of student loan funds that is about to refund to you to carry you through the entire semester.  For some others it may be withdrawing from a savings account.  For some it may include funds from a job.  But you need to know how much you have so you can determine how much you can spend.

Once you have established the resources available to you, then you can start subtracting out your expenses.  Start first with expenses that are required and relatively fixed—your rent and utilities and insurance.  Then you will know how much you have left to spend on things that are more flexible, such as food (which is required, but how much you spend is highly variable), entertainment, and clothing.  If your resources exceed your expenses, that is ideal.  Then you’ll have some to tuck away for an emergency or unexpected future expense.  If your expenses exceed your resources, you will need to rework things.  Figure out how you can spend less.  Or figure out how you can add more resources.  Maybe you need a job.  Maybe you need a student loan.  Maybe you need a roommate.  Maybe you need not to have a car.  There are many ways to make adjustments to your spending plan—and I’m fully aware that many of those choices are difficult to make.

As you start on your fall semester, I know you don’t want to spend a lot of energy on establishing your financial plan.  But if you put in the effort now, you’ll be much more financially secure when we get to final exams in December.  You can control your money rather than letting it control you.

 

The Cost of Convenience

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I’ve had very little control over anything in my life this semester.  Between illness, injury, and family issues, my life outside work has been less than ideal.  My time has been more overextended than I would like.

I’m not normally someone willing to pay extra for conveniences, but this semester has been an exception to that rule. When I had Covid-19 at the start of January I signed up for a free trial of a grocery delivery service.  It was exactly what I needed to get some food into the house without having to go out and share my germs with the world.  When I injured my leg later that same month and started hobbling around on crutches, I made the decision not to cancel that service.  By the time I felt physically able to resume grocery shopping, my time at home was suddenly very limited as I needed to spend a huge amount of time caring for my parents.  I’ve finally got my family situation to a comfortable place again, but next week I’m going to have surgery to correct the knee injury that put me on crutches back in January.  I’m just not willing to let go of my grocery delivery service yet.

Between the subscription for the delivery service and driver tips, I’m certain that I have spent at least a couple hundred dollars more on my groceries than I would have had I gone to pick them up myself. (And I’m using what I believe is the least expensive home delivery option.)  That extra money has been worth it to me due to my circumstances.  But this is not something that will be worth it to me for the long haul.  I’m pretty sure that I’ll be pushing a cart around the grocery aisles again come June.  My crazed life should have returned to a normal pace, and my knee should be recovered by then.  I definitely love the convenience of having my groceries dropped at my front door.  But I think about the extra money I’ve been spending, and I’d much rather be spending that money on different things—like concert tickets, music festivals, and camping adventures.

The price of convenience can be worth it from time to time (so don’t beat yourself up for ordering takeout while you are studying for exams).  But if you are paying for convenience on a regular basis, you have to take a moment to weigh out whether that extra money is really worth it to you.

Can I Be Replaced By AI?

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Artificial intelligence (AI) is a powerful tool that can be used for good or for evil. In recent years, there has been an increase in the use of AI for scams. Scammers are using AI to create fake voices, images, and videos that can be used to trick people into giving them money or personal information.

One of the most common ways that AI is used in scams is to create fake voices. Scammers can use AI to create a voice that sounds exactly like someone you know, such as a friend, family member, or even a government official. This can be used to trick you into thinking that the person you are talking to is legitimate, when in fact they are a scammer.

Another way that AI is used in scams is to create fake images. Scammers can use AI to create images that look like they were taken from a real person’s social media account. This can be used to trick you into thinking that the person you are talking to is real, when in fact they are a scammer.

Finally, AI can also be used to create fake videos. Scammers can use AI to create videos that look like they were taken from a real person’s news interview or documentary. This can be used to trick you into thinking that the person you are talking to is real, when in fact they are a scammer.

If you are ever unsure whether someone you are talking to is legitimate, it is always best to err on the side of caution. Do not give out any personal information, such as your Social Security number or bank account information, to someone you do not know and trust. And if you think you have been the victim of a scam, you should report it to the authorities.

Here are some tips to protect yourself from AI-powered scams:

  • Be wary of any unsolicited calls, emails, or messages.
  • Don’t click on links in emails or messages from people you don’t know.
  • Be careful about what information you share online.
  • Use strong passwords and two-factor authentication for your online accounts.
  • Keep your software up to date.
  • Report any suspicious activity to the authorities.

*If you found that this tip does not sound like my normal writing style, you are correct.  I used Google’s AI chat writer Bard to write the bulk of this post.  And frankly it’s a little unsettling that AI is this good at writing a blog post.  AI will never be able to add the personal stories that I throw into my writing.  But it definitely does a good job of finding facts and putting them into a grammatically correct format.  I don’t have any fear that my job will be replaced by a computer (at least before I am eligible to retire), but I can see the possibility of a change in how my job is done. The only thing certain in the workplace is change.  I’m hoping that any AI change is used for good rather than evil.

Preparing for the End

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I need to write a will.

Over the last few weeks since my father passed away, I’ve learned an awful lot about how money issues continue on after a person’s life ends.  I’m grateful that my dad had everything in order. He and my mom had wills drawn up several years ago.  They also had Power of Attorney paperwork done and signed and distributed to me and my siblings. My mom was already a joint holder on all of their financial accounts.  He even showed me where he had all of the income tax documents stashed so I would be able to file the taxes for him if he wasn’t able (which turned out to be the case).  My dad was an excellent record keeper (though the fact that he did that with paper ledgers rather than spreadsheets makes my head hurt).

But it turns out there is an awful lot of paperwork involved with the end of life. Changing joint accounts to single accounts.  Changing names on car titles. Filing for life insurance.  Updating information with Social Security. Updating information with my dad’s pension and health insurance.  Canceling magazine subscriptions.  And this is all long after dealing with the actual funeral arrangements.  Every time I turn around I’m learning about something else that needs to be done.  And my dad had everything in order.  This is about as easy as it gets. And it’s not easy.

My dad handled all of the financial stuff and every major decision.  My mom never did any of that for herself.  For the last 68 years.  But everything was left in order, so my brother and I were able to step in and figure everything out pretty easily.  I don’t have everything so in order for myself.  I handle all of the financial stuff and my husband is the one left largely in the dark.  If I had suddenly passed away before filing the income tax, my husband wouldn’t have had any idea where to find the things needed to do so.  He wouldn’t know how to log into our bank accounts or credit card accounts.  He wouldn’t know how to find anything.  My father’s passing was a financial wake-up call for me.  I need to get things in order and make sure my husband knows where to find everything.

I need to write a will.  I need to make sure my husband has my power of attorney if he should need it.  I need to get myself organized.  Nobody expects that they will suddenly pass away.  My dad’s death came after a long illness, so we all saw it coming.  But if we hadn’t, he had things ready.  I need to get things ready.  I need to write a will.

 

 

What’s Up With the Banks?

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The banking industry has been going through a bit of chaos lately.  During the financial crisis of 2007-08 it was several big banks that found themselves in trouble and needed a government bailout to survive. They had too much of their money invested in risky sub-prime mortgage loans that were falling into default.  This was getting them into a position where they didn’t have enough cash on hand to manage things if too many of their depositors were to come and withdraw their funds.  That’s why Congress passed the Dodd Frank Act, which required a higher level of oversight on banks.

Only two days after SVB failed, Signature Bank ran into a similar situation by having too much of their portfolio invested in the volatile crypto currency world.  Then came Credit Suisse, who lost some of their backing support for making risky investments.  Banks are failing more rapidly than I expected I would ever see again.

So what does all of this mean for you?  Probably nothing at all.  The average person in the U.S.  has much less than $250,000 deposited in any one financial institution.  Anything up to $250,000 is protected by the Federal Deposit Insurance Corporation.  And it is highly unlikely that anyone would need to take all of their money out of the bank at the same time.  That’s just not how the financial world works in the 21st century.  It’s entirely possible that more banks may fail.  It may be soon.  It may be far down the road.  But it will probably happen as long as banks are making poor investment decisions (always diversify your investments!!).  I suspect we may be in for a bit of a rocky road for the foreseeable future.  But I don’t think it will affect most average people. And right now I’m happy to be average.