AGEC 235 Exam 2

What are the limits for Federal Subsidized & Unsubsidized student loans for dependent Seniors?

$7,500 Annual Loan Limit $_31,000 Lifetime Loan Limit

FICO Formula

- record of paying bills on time over time (35%) - debt-to-credit ratio (30%) - length of credit history (15%) - new accounts and recent applications for credit (10%) - mix of credit cards and loans (10%)

Liability Insurance

-Damages/injuries from a car accident you caused. -Required by state law!

There are 3 Steps to buying a new car

1. Agree upon a new car price 2. Agree upon a Trade-In Price 3. Select your Financing

You May Have the Most Bargaining Power

1. At the end of the month (monthly bonuses) 2. At the end of the year (yearly bonuses and taxes) 3. When the next year's model comes out

List major credit bureaus

1. Equifax 2. Experian 3. Transunion

New Car Price Negotiation Tactics

1. Let the dealer make the 1st offer. 2. Make sure your first counteroffer is low. 3. Don't be afraid to haggle (use another dealers' offer). 4. Bring the Hulk with you. 5. Agree on a sales price before discussing rebates. 6. Ask for the "out the door" price (all costs)

List the 5 steps that the Career Center recommends that you take when preparing for a professional interview:

1. Reread the position description 2. Check the employer's website 3. Know the employer's services, products, and goals 4. Use online tools like Career Shift 5. Find and contact Aggies working for the employer

Car Buying: Do I really need a new car?

1. What is wrong with my current car? Are the problems dangerous, inconvenient, or not really problems at all? 2. Do I need more car space (children)? 3. Do I need a more dependable car (travel long distances)? 4. How much time do I spend in my car? 5. Does my car need to be presentable? 6. Am I ready to begin making new car payments? 7. Can I handle the stress of buying a new car right now? 8. Why should I wait?!?

Federal student loans are considered in default after _____ days of missed payments

270

There are _____ negotiations which should occur when purchasing a new vehicle.

3

FICO Scores range from

300-850

Motor Vehicle Sales Tax of ___________ is an additional cost that should be considered when buying a car.

6.25%

Skimmer

A device used to steal credit card information at ATMs, gas stations, etc.

Expected Family Contribution (EFC)

A measure of your family's financial strength and is calculated according to a formula established by law. Significantly considers • Income and Assets, # in College, # in Household' • Not expenses or liabilities

Affinity Card

Association allows logo use for a fee

Scholarships

Awarded By: • Scholarships & Financial Aid • Corps of Cadets • Texas A&M Foundation • Colleges & Departments • Outside orgs & Businesses Awarded Based On • Academic Merit • Financial Need • Talent • Association • Leadership and participation • Any combination of the above

Bank Card

By far the most common credit cards

What if I don't repay on time?

Consequences of Default: (270+ days past due) • Credit score damaged • Wages garnished • IRS tax refunds withheld • Professional licenses withheld • Loans and interest due immediately • Loss of loan benefits and no additional aid • Debt will increase (more interest and fees) • Turned over to collections agency (+ fees)

1. ________ is credit purchases for personal needs other than home mortgages.

Consumer Credit

Fraud Alert

Creditor must contact you to verify legitimacy of credit request

Collision Insurance

Damages to your car due to accidents with others Often required for leased/financed cars.

Comprehensive Insurance

Damages to your car due to hail, etc. Often required for leased/financed cars

Step 3: Select your Financing

Decide on a Down Payment • Typically, 10-20% of car price up front • May not be required, but should improve car loan interest rate • You can fund a down payment in several ways... -Savings, Family Contributions, Trade-in Vehicle, Cash Rebate

Fill in the blanks regarding the Standard Repayment Plan for Subsidized & Unsubsidized student loans:

During college, these loans are considered to be in _Deferment_ and no payments are required. After graduation, or dropping below _half___ - time enrollment, the Grace Period begins and lasts ___6____ months. Afterwards, Repayment begins and is scheduled to last ___10___ years.

Texas A&M Shot-Term Loans

Emergency Tuition & Fee Loan • Pays tuition and fees (no cap) • Due n 3 months • 5% interest (annually) Short-Term Loan • Pays $1,000-$1,500 • Due in 1 year • 8% interest (annually) No credit score, cosigners, or collateral Charge a $10 application Fee plus interest

529 Savings Plan Withdrawals can be made at any time for any reason without penalty

False

A power Train Warranty covers issues found anywhere on the interior or exterior of the vehicle.

False

According to the DMV, a dealership will offer more money for your car (trade-in) than an independent buyer

False

Dependent Loan Limit

Freshmen Annual Limit $5,500 Sophomore Annual Limit $6,500 Junior/Senior Annual Limit $7,500 Undergraduate Lifetime Limit $31,000

Independent Loan Limit

Freshmen Annual Limit $9,500 Sophomore Annual Limit $10,500 Junior/Senior Annual Limit $12,500 Undergraduate Lifetime Limit $57,000 Graduate/Professional Annual Limit $20,500 Graduate/Professional Lifetime Limit $138,500

If you're paying with a loan

Get preapproved for a bank loan--> Bring proof of preapproval to negotiate price--> Get a check from the bank --> Meet seller at the DMV and complete the steps from previous page --> Get the car's title to the DMV --> Get new title with lender's name on it from DMV--> Pay off the loan and get a new, clean title form the DMV

10%

Inquiries

Open (Revolving) Credit

Is a line of credit extended before you make a purchase that can be used and paid back at any pace so long as the minimum balance is paid each month. Example: Credit Card

Who is involved in Repayment?

Lender--> Department of Education • Leant you (the Borrower) the money Borrower--> You • Must repay the money borrowed to the servicer 3rd Party • Collects the money from you and returns it to the lender You could have multiple servicers to repay your student loans to unless you consolidate your loans • Federal loans are combined • One monthly payment • Fixed interest rate (weighted average) • May extend repayment beyond 10 years First estimate what your annual gross income will be after graduation

15%

Length of credit history

The FAFSA does not consider __ when calculating a student's Expected Family Contribution

Liabilities

________ Car Insurance is required by the state of Texas.

Liability

12. What might the National Student Loan Data System (__nslds.ed__.gov) tell you about your student loans?

Loan Status Principal Amounts Interest Rates , Interest Accrued, Servicer Info

The National Student Loan Data System (NSLDS.ed.gov)

Loan Status, Principal Amounts, Interest Rates, Interest Accrued, Servicer Info

Closed Credit

Loans typically provided for a specific purpose that have pre-set loan amounts and must be repaid in full by a specific date. Example: Auto Loan

If you're paying without a loan...

Meet the seller at the DMV --> Pay the Seller with a check --> Get the car's title (Check the VIN!) --> Submit an application for Title and Registration and proof of insurance

________ is a disadvantage of leasing a vehicle.

Mileage restrictions

Circle the Satisfactory Academic Progress Requirements for federal financial aid eligibility for Undergrads:

Minimum GPA 2.0 Minimum Completion Rate 75% Maximum credit hours attempted (as a % of hours required for degree) 134%

Repayment

Monthly payments Last 10 years after Grace Period • Capitalized interest can increase your monthly payment and the total amount you pay over the life of the loan.

Step 1: Figure out how much you can afford to pay?

My Resources • Savings • Family Contributions • Income • Emergency Fund Common Car Costs • Down Payment • Car Payment • Gas • License/Safety Inspection • Insurance • Parking • Maintenance

A _________ car will typically have higher insurance premiums.

New

Determine how much you need to borrow

New Car Price - Trade-In Allowance - Cash Rebate - Down Payment + Tax, Title, and License =Finance Amount

10%

New accounts and recent

Credit Freeze

New creditors can't access your credit report

Grace Period

No payment Last 6 months after graduation (or falling below half-time) Paying during the Grace Period will save you money in the long run!

Defferment

No payments • If you don't pay during deferment or the grace period, the interest is capitalized (added to the outstanding principal balance) -During college Must be enrolled half-time

35%

On time payment

Option 2: Education Savings Plan

Open an investment account to save for the beneficiary's future qualified higher education expenses - tuition, mandatory fees, room and board. Withdrawals may be used at any college or university, including sometimes at non-U.S. colleges and universities. Can be used to pay up to $10,000 per year per beneficiary for tuition at any public, private or religious elementary or secondary school. Earnings aren't subject to federal income tax if withdrawals are used for qualified education expenses, otherwise subject to income taxes and a 10% penalty. Choose an investment portfolio (mutual funds, ETFs, etc.); age-based available. Can switch plans if you don't like the one, you're in.

Parents may apply for the ____________ Loan, which currently accrues interest at _______, and which must be repaid by the _________. Seniors may receive an additional ________ in Federal Unsubsidized Loans for each year that their parent applies for and is denied this type of loan.

Parent PLUS 7.08 % Parent $5,000

5 factors that contribute to a person's credit score and the percentage weight of their impact:

Payment History 35% Amounts Owed 30% Length of Credit History 15% Types of Credit 10% New Credit 10%

Phishing

Posing as a business or government official to scam information

Closed Credit Card Loan

Preset amount, due by a specific date, and often for a specific purpose.

Used Cars

Pros • Lower price • Slower depreciation • Certified Pre-Owned Cons • Higher Rates • More maintenance • Harder to find the right car

Step #4: Decide if you're going to buy a new car, buy used car, or lease a car

Pros • New Car Smell • Warranty • Higher Resale Value Cons • Higher Price • Higher Insurance • Value Drops ~ 40% in 3 years

Option 1: Prepaid Tuition Plans

Purchase units/credits at participating colleges (usually public and instate) for future tuition and mandatory fees at current prices for a beneficiary. May have state residency requirements for the saver and/or beneficiary. Could lose funds if college has financial struggles, or if beneficiary attends a different school

Credit

Receiving cash, goods, or services with an obligation to pay later.

Secured Card

Requires a deposit

Amortization Schedule

Shows how loan payments are being applied to principal and interest. • Interest only accrues on unpaid principal!

Indicate which of the following student loans do not require a cosigner or parent borrower.

Subsidized Loans Short-Term Loans Unsubsidized Loans

529 Plans- College Savings

Tax advantaged savings plans sponsored by states and educational institutions and authorized under section 529 of the federal tax code. 1. Option 1: Prepaid Tuition Plans 2. Option 2: Education Savings Plan

Can I afford a standard repayment?

The National Student Loan Data System (NSLDS.ed.gov) o Loan Status, Principal Amounts, Interest Rates, Interest Accrued, Servicer Info • Then estimate your monthly student loan payment(s) under the Standard Plan using Federal student Aid's • Repayment Estimator: The plan Estimates change based on the information you provided -StudentAid.ed.gov Finally, do the math and calculate if you can afford the Standard Repayment Plan • Estimated Monthly After-Tax Income ($ 2,001.35) - Estimated Monthly Student Loan Payment ($ 238.47) = Remaining Money for Other Monthly Expenses $ 1,762.88 • Is this enough to cover your other monthly expenses? oThe example above assumes gross income of $30,000. Unsubsidized loans totaling $23,063 at 4.45% interest

Residual Value

The estimated value of the car at the end of its lease.

Annual Percentage Rate (APR)

The true, simple interest, rate paid over the life of a loan o Consider interest & most fees o Disclosed on loan agreements o Fixed or variable rate (prime +a%) o Lower score= higher rates o Teaser rates (6-12 months) o Frequent Compounding of interest (daily!)

Required Monthly Payment

Today's Price - Down Payment / Trade- In / Rebate = Adjusted Cost Adjusted Cost - Residual Value = Expected Depreciation Expected Depreciation + Rent Charge = Required Payment Required Payment / Lease Term = Required Monthly Payment

List 3 ways that Career Center can help you prepare for post-graduation success:

Virtual Mock Interviews Resume/Cover Letter Writing Salary Evaluation/ Negotiation

Step 2: Separate your needs from your wants

Wants • Tan Interior Color • Tinted Windows • V6 Engine • Heated Seats • Bluetooth Needs • Compact • 4-Door • Great Gas Mileage • Under 40,000 Miles • Electric Locks Windows

You could just rent a car instead...

What do you need to rent a car? o In order to rent from Enterprise Rent-A-Car I the United States and Canada, all drivers must meet the following requirements. - Meet the renting location's minimum age requirements - Have a valid driver's license - Be able to provide an acceptable form of payment

How much does a car depreciate in value?

You drive off: 11% One year: 25% Three years: 46% Five Years: 63%

3. ________ is an indication that identity theft has occurred

a. No longer receiving bills or other mail b. Unexplained charges or withdrawals c. Denied Credit d. All of the above Answer: D

30%

debt to credit ratio

Other Loan Forgiveness Programs

o Army National guard, AmeriCorps, Peace Corps, etc.

Public Service Loan Forgiveness

o Government and not-for-profit employees who have made 120 qualifying payments (10 years)

Teacher Loan Forgiveness

o Teachers who have worked full-time for 5 consecutive years in an eligible school (up to $17,500)

studentaid.ed.gov

provides a student loan repayment estimator, student loan program specifics, forgiveness options, and more.

annualcreditreport.com

website for your free annual credit report

Authorized User

• 15 or older and must have permission to use and/or carry another person's Credit Card. • Not legally responsible for paying the bill

Secured Credit Card

• 18 or older and must put down a security deposit (acts as your credit limit) • The deposit is a collateral and ensures that the Credit provider will be repaid

Pick a Loan Length

• 36, 48, and 60-month loans are common, but some lenders offer 72-84-month loans • The longer your loan length, the lower your payment (but the higher your total interest paid).

Vehicle Identification Number (VIN)

• A combination of 17 characters (numbers and letters) assigned to a car or truck during production. • Can normally be found: • Beneath the windshield (driver's side). • In the engine bay. • On a sticker on the driver's side doorjamb.

Dealer Holdback

• An amount of money, generally 2-3% of the car price, that the manufacturer gives the dealer after selling the car.

Fees

• Annual Fee (differs, AMEX may be hundreds of dollars) • Cash Advance Fee (2-4% + immediate, higher rate) • Late Fee (standard payment dates and times) • Over the Limit Fee (such transaction are limited) • Merchants Discount Fee (1.5-5%)

Open- End Lease

• At the end of the lease, you pay the difference between the actual market value and what it was originally estimated to be.

Close-End (Walk-Away) Lease

• At the end of the lease, you return the vehicle with no further obligations.

What are my Repayment Options?

• Change Repayment Plans • Ask to Postpone Repayment

Bumper to Bumper (Comprehensive) Warranty

• Covers almost everything between the bumpers (not glass, seating fabrics interior trim, etc.) • Typically, 3 years (or 36,000 miles)

Power Train Warranty

• Covers most items under the hood (not the battery, etc.) • Typically, 5 years (or 1000,000 miles)

Building Credit with your Card

• Credit cards are the gateway to affordable consumer loans for most new borrowers. • The trick is to find a credit card and then to never be charged interest

Select a Lender

• Dealerships • Credit Unions • Banks • Lenders aren't always competitive, so shop around! • Review Car Loan APRs on Bankrate.com

Car Buying overview

• Do I really need a new car? • How much can I afford? • What do I need from my car? • How do I find my car? • New, Used, or Lease?

Credit Card Perks

• Emergency Money • Bill Consolidation • Internet Purchases • Identification • Rewards (Points) • Minimize Savings Withdrawals • Convenience

credit reporting agencies

• Equifax 800.865.1111 www.Equifax.com • Experian 888.397.3742 www.experian.com • Transunion 800.888.4213 www.transunion.com

What do I do if I'm an identity theft victim?

• FREE help from IdentityTheft.gov • Get a personal recovery plan that walks you through each step. • Create an identity theft affidavit that you can review and update at any time. • Get customized pre-filled letters to send to credit bureaus, businesses, and debt collectors. • Return anytime to update your plan and track your progress. • Get advice about what to do if you're affected by specific data breaches

Student Credit Card

• For College Students between 18 & 22 years old who lack credit history • No security deposit, but may need to have enough independent income to get approved • Starts with lower cred limit, but may be increased over time

TAMU Financial Aid- Emergency Aid

• I have been Impacted by Hurricane Harvey • Short-Term Loan • I need Temporary Help with paying Tuition and Fees • I am experiencing a Financial Emergency • Extenuating Family Circumstance • Student Assistance Services

Work Study

• Increases job eligibility by paying 75% of your wages. • Requires financial need and that you are enrolled half-time. • Must still find your own job and be on Texas A&M payroll. • You get a paycheck, just like normal (it does not pay to your student bill).

How does Identity theft happen?

• Information from businesses or institutions • Dumpster diving • Falsely obtained credit reports • "Shoulder Surfing" • Skimmers • "Phishing" (posing as a business person or government official to scam information)

Step 2: Agree Upon a Trade-In Price

• Know what your Trade-In is Worth Make sure your trade-in looks sharp! • Solicit bids for your car from different dealerships • "Oftentimes, a dealer will offer less money than the car could fetch on the open market."- Dept. of Motor Vehicles • If the trade-in price is too low, consider selling independently!

Research the Car's History

• Lemon Status • Accident History • Major Repairs • Lien and Ownership History • Warranties Remaining • Mileage and miles/year

Protect yourself after a Data Breach

• Monitor your existing credit card and bank accounts closely. • Check your credit reports. • Place a fraud alert on your files (credit grantors must verify ID before extending credit). • Place a credit freeze on your files (new creditors can't access your credit report).

Tax, Title, and License

• Motor Vehicle Sales Tax - 6.25% of the sales price (minus any trade-in allowance) • Title - Proves legal ownership is documented with the State. Costs around $100 total. • Registration - Required by the state and allows you to receive your license plates. - $36,270 * 6.25%= $2,267

Single-Purpose Card

• Must be used at a specific company • Avoids merchant discount • Typically, doesn't charge annual fees, but terms and conditions may vary

Co-Borrower

• Names appear on loan documents, income information is used, and credit history is pulled • Legally obligated to repay

fellowship

• No services required • Non-resident tuition waivers • Awarded by OGAPS, colleges, depts, & others • Lump sum or monthly payments

College Access Loan (CAL)

• Non-need based. • Accrues interest during college (5.2%) • Texas Residents only • Meet Satisfactory Academic Progress requirements. • Must have credit approved or have a cosigner who is credit worthy. • Hhloans.com

Correcting Credit Reports

• Obtain your Credit Report • Credit Reports often contain errors • If you find an error, contact credit bureau • Credit bureau has 30 days to process • If not resolved by credit bureau, contact business' customer service department • Business must share information with you and promptly investigate the problem

Alternative Loans

• Offered by banks and credit unions • Fixed and Variable interest rates • Borrower must have credit approved or have a cosigner who is credit worthy • Cosigner does not have to be a family member

How do I buy a used car?

• Online • Dealerships • The Newspaper • Neighborhood

Step #3: Find a car that you can afford that fits your needs (How do I find my car?)

• Online <--> Dealerships <--> The Newspaper <-->Neighborhood Find Car Ratings o Research New and Used cars, plus save money with the Build & Buy Car Buying Service. o Only $35/year!

Federal Parent PLUS Loan

• Parent must apply (not student). • Parent is responsible for repaying. • May receive loan funds up to COA. • Non-need based. • Accrues interest during college (7.08%). If denied, you received additional Unsubsidized o Freshmen & Sophomores - $4,000 o Juniors & Seniors - $5,000

Want to make extra payments?

• Prepayment can be done at any time; no penalty! • Reduces interest charges • Notify your Servicer(s) that you want the extra amount "applied to the Principal"

Consider Different Incentives

• Rebates • Low-Interest Financing

Fair Purchase Price

• Reflects the going market rate or price range of the car

Leasing

• Renting a car under contract for a specified number of years. Pros • Newer Car for.... • ...Lower Payments • Guaranteed Auto Protection (GAP) Insurance Cons • Perpetual Payments • Mileage Restrictions • Must pay for dents and dings

Auto Loan

• Secured (backed) • Possible repossession • 30-60-month loan • Fixed or variable rate

home equity loan

• Secured (backed) • Possible seizure • Up to 80% of equity • Lower rates

Personal Loan

• Secured or unsecured • No purpose necessary • Up to 5-year loan • Higher rates

Identity Theft

• Someone uses your personal information to open fraudulent accounts or steal from existing accounts

Student Employment

• Student worker positions can be found on jobsforaggies.tamu.edu. • More jobs available in January, June, and August • Community Service positions are frequently available. • Be picky! Consider talking to your academic department and college too.

Applying for Financial Aid

• Submit the Free Application for Federal Student Aid (FAFSA) on fafsa.ed.gov. • Applies students for Grants, Work Study, and Student Loans. • Opens October 1st, priority deadline of December 15th • Requires SSN, 2018 income tax figures, and asset information for student and parent(s)

assistantship

• Teaching, research, and non-teaching • Posted on jobsforaggies.tamu.edu • Paid monthly or bi-weekly • Tuition exemptions are possible

Federal Student Loan

• Texas A&M awards Federal Subsidized & Unsubsidized Loans automatically. • No cosigner or credit check required. Subsidized o Need based o Accrues interest after college (4.53%) Unsubsidized o Non-need based o Accrues interest during college (4.53%)

Texas Aggie Graduate Grant

• Texas Resident • Enrolled half-time or more • No major scholarships or tuition payments • Paper Application

Calculating Financial Need

• The Federal Government will calculate your EFC and send it to A&M • Texas A&M calculates your financial need in the following way: Cost of Attendance - Expected Family Contribution = Financial Need • Grants (Free money) are then awarded based on need and first come, first served.

Satisfactory Academic Progress

• The SAP Calculator can help you to predict your future SAP status. • You must maintain a 2.0 GPA, 75% Completion Rate, and have attempted less than 134% of the credit hours required to graduate in your program.

Repayment Estimator

• The plan Estimates change based on the information you provided -StudentAid.ed.gov

Manufacturer Suggested Retail Price (MSRP)

• The price set by the manufacturer. This is a "suggested" price.

How can I tell I'm an identity theft victim?

• Unexplained charges or withdrawals • Stop receiving bills and other mail • Receive inaccurate credit card bills • Denied credit • Receive calls from debt collectors • Credit Report errors

Invoice Price

• What the dealer pays for the car. • It could give you an idea of the salesperson's lowest price point. • MSRP* - Invoice = Dealership Profit? (Average markup is 6%)

Student Loan Repayment

• When do I start repayment? • Who is involved in repayment? • How much do I owe? • What are my repayment options?

Choose: 0% interest or the Rebate?

• You are interested in purchasing a car for the price of $20,000. Your trade in is valued at $4,250 and you do not have to make a down payment for the new car. The dealership has offered you the following financing options: o 0% on a 4-year car loan o 4% on a 4-year car loan and receive a $2,000 rebate • Over the long run, which is the better option? 1. Review the contract for errors 2. Pay with a check 3. Check for damage 4. Confirm you've got everything 5. Should have a full tank of gas