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with Gary R. Miles
Q: What do you think aboiit Amazon now? Do you think
Amazon will break even by Q 4 of 2001 or Q 1 /Q 2 0f.2002?
A: The company is having a hard time keeping its cash flow.
There is no earnings growth to support price. No, they will not
break even.
Q: Do you think we` asien thel;ottiA%f the market as of
yet?
A: We pnkably won't see it until around July 4 f everything
stays status quo. . 1
Q: What do you think about the possibilities of irate cut
before May 15?
A: Very good.
Q: What NASDAQ stocks do you like?
A: Biomira, Microsoft, Intel.
Q: What do you have to say about small caps under
current market conditions?
A: As long as there is 15% growth with cash flow they're alc.
Miles graduated from Behrend with an accounting
major in 1973. He now clears through U.S. Clear
ing and is an arbitrator with the National Associa
tion of Security Dealers (NASD).
He currently works as an investment broker and
can be contacted at (814) 725 - 6446.
•
' l B l' '4l
4 "n,
Bankruptcy on the rise for young credit card users
by Michele Chandler
Knight-Ridder Tribune
April 10, 2001
Nguyen Matos got his first two
credit cards shortly after he arrived as
a freshman at Florida International
University
"Usually the first couple of days at
school, you run into 10 or 11 of them
offering you free stuff like coffee
mugs, T-shirts and posters," Matos
said, referring to the companies that
solicit on campus. "I thought, 'I don't
have a credit card. Let me fill out these
applications. Why not?' "
Within a year, Matos had charged
both Visa cards to their $5OO limits.
His minimum-wage job didn't bring
in enough to cover his car expenses
and phone bill and for him to make
his credit card payments, too.
"I missed three months of credit
card payments and found I owed an
other $300," an incredulous Matos
said.
With the number of young people
with credit cards increasing, their debt
sometimes mounting into the tens of
thousands and the number of bank
ruptcies among those 18 to 24 on the
rise, the issue of credit card debt is
gaining notice in Congress and among
lenders and debt counseling firms.
And with credit experts saying that
many parents aren't teaching their
children how to avoid credit pitfalls,
some colleges and universities, in
cluding HU, now require students to
complete a financial management
course that includes guidance on how
to handle debt responsibly.
Credit card firms are not limiting
their heavy marketing to students at
colleges, consumer credit experts say.
Anticipating fierce competition for
students on campus, "companies are
marketing to young people before
they even hit their senior year in high
school," said Harvard law professor
and bankruptcy expert Elizabeth War
ren. "They're signing on these kids
starting at 17, 16, even 15 years old."
Less stringent underwriting criteria
at major credit card companies,
coupled with the direct push to stu
dents, have led to easy access to credit
cards for students with absolutely no
credit history, according to a recent
report by Nellie Mae, a national pro
vider of student loans.
GROWING MARKET:• In 1998, 67
percent of college undergraduates had
credit cards, the company found. By
2000, 78 percent of undergraduates
had at least one credit card; 32 per
cent of those had four or more credit
card accounts.
Credit card balances held by col
lege students are also rising. While
undergraduates carried card balances
averaging $1,879 three years ago,
their credit card debt has jumped 46
All about student loans...part 2
In the last Money Page issue dated
March 23, I started an article on stu
dent loans. This is the second and
concluding part. Once again, this ar
ticle is only to give you a general
idea about student loans. If you need
to take out a student loan, please con
sult your financial advisor or your
local bank or credit union. This ar
ticle was written with help from
www.cnnfn.com,www.freschno.com
Penn State Behrend's Financial Aid
office and a fellow Beaconian, Ann-
Marie.
Some Things You Need To Know
About Student Loans
Balloon payment plans increase
the overall cost of the loan: Some
banks will set you up with a balloon
payment plan, where you pay
smaller amounts during the first few
years, and the amount increases over
the years. Since in effect you are
only making interest payments the
first few years, the principle does not
decrease significantly during time.
The amount of interest you end up
paying over the course of the loan
repayment can be as much as 18%
more than you would have paid if
you went with the flat-payment plan
(paying the same amount every
month for the life of the repayment).
You are not required to agree to a
balloon payment plan.
You do not receive the full
amount of the loan when you get
the check
"Origination Fees" and "Guaranty
Fees" are taken out of your check at
dispersement time. Currently, Origi
nation is 3% of the loan amount. This
money actually goes back to the Fed
eral Government. Then, 1% is taken
out for what is known as "Guaranty"
This is basically an insurance pre
mium. This money goes back to the
bank lending you the student loan.
Some banks will also take I% or
(more common) $lO-$25 out of the
loan amount for "document stamps."
These fees are perfectly legal, and
usually stated "up front" on your
loan . Just remember when you
are budgeting your school costs that
the actual amount of money you re
ceive from your loan is at minimum
4% less than the amount you borrow.
While this is money you never see,
you have to pay it back.
Depending upon your school and
the financial aid office's policies,
your school may take a "handling
fee" directly from the check, gener
ally $l5O-$225, The various fees are
legal and quite normal. Some lend
ers, in the name of competition, are
paying a portion of the origination
fees for the students.
Origination and Guaranty fees are
only refundable if your disbursement
is cancelled or repaid in full within
120 days of receiving it.
The check is not given to you
It is mailed directly to the college
percent, to an average of $2,748 last
year, according to Nellie Mae's study.
And 9 percent of the students had bal
ances of more than $7,000 last year,
the study found.
"We noticed in the mid-1990s that
students were starting to get credit
cards, where in the early 1990 s they
did not have credit cards unless they
were older students and independent,"
said Nina Prikazsky, vice president of
operations at Nellie Mae.
A major indicator of trouble: rising
bankruptcy rates among people 18 to
24. Two years ago, 118,000 people in
that age range filed for bankruptcy
nationwide, research by Warren
found. That's up 51 percent from
1991. Credit card debt, Warren said,
was the main problem cited when
those people were asked why they
filed for bankruptcy.
"I've helped people who have never
had a job, but have $30,000 in credit
card debt," said Mark Blomquist, di
rector of counseling for Auriton So
lutions, a financial counseling firm.
LEGISLATION PROPOSED: The
rising tide of young people tussling
with credit card debt has attracted at
tention from lawmakers.
Last week, U.S. Rep. Louise
Slaughter, D-N.Y., who has co
authored legislation that would tighten
up on student credit, pitched her bill
to members of Congress. Her pro
posal, called the College Student
or university you are attending,
where they then disperse it to you.
Assuming you are attending a
school using the semester system,
usually you will receive half of the
loan amount at the start of the fall
semester, and the other half at the
start of the spring term.
The college or university will take
whatever you currently owe them
from the check first, and then give
you whatever is left over. The Law
allows the school the option of re-
turning any remaining amount to the
lender to be reapplied to your loan
amount. This decreases the amount
of loan you have taken out, however
the fees you have paid (origination
or others) may not necessarily be re
duced or refunded.
The loan can and probably will be
sold
It is very common after you begin
repayment on your loan for the is
suing bank or agency to sell the loan
to another bank or finance corpora
tion, although sometimes your loan
will be sold before you begin to re
pay.
Your lender does not need your
permission to sell the loan. If you do
not pay attention to notices that your
loan has been sold, the impact can
be far more negative. It is your re
sponsibility to make sure you are
sending your payment to the right
place.
More than a few students have
found themselves in default because
they did not pay attention to the let
ter their lender sent them informing
them that their loan had been sold.
Hardship deferments are available
Most banks will allow you, under
the guidelines set up by the federal
government, "hardship" deferments.
Usually this is only approved for
extreme hardship (unemployment is
not necessarily considered a hard
ship!) and for only six months at a
time up to a total of three years.
Do not default your loans
Defaulting on a student loan has
serious and negative repercussions
on your life
You cannot receive any other loans
or grants offered by the Federal gov
ernment. This includes student loans,
PELL grants, government funded or
secured mortgages, Small Business
Administration loans, and others.
Private lenders will usually refuse
to provide you with unsubsidized or
PLUS student loans.
In most states, you are not eligible
for any financial aid offered by the
State and some schools will not al
low their financial aid offices to help
you find financial assistance while
you are in default.
Your default will be reported to all
the major credit reporting agencies.
You will have much difficulty in
getting any kind of loan and/or credit
card. When you do find a lender, you
Credit Card Protection Act, would
limit credit lines to 20 percent of a
student's annual income and require
parents to approve before credit lim
its are increased on cards for which
they have co-signed.
The bill is now before the House
subcommittee on financial institu-
tions and consumer credit
"Credit card issuers are raining
down solicitations on college stu
dents," Slaughter said, dumping bags
of credit card solicitations into a laun
dry basket on the House floor. "As a
result, a lot of college students end
up taking a crash course in debt man
agement."
In a move making credit cards even
more familiar on campus, universities
are partnering with banks to offer
cards to students and alumni, person
alized with the school's logo.
FlU's Mastercard, for example, is
emblazoned with the school's mascot,
the golden panther. The card is offered
through an exclusive deal with
MBNA America Bank, one of the
nation's largest issuers of credit cards.
The university agrees to allow
MBNA's card to be promoted on cam
pus through brochures tucked in bags
from the campus bookstore and
through direct mail to students and
alumni. In return, the university re
ceives a payment for every credit ac
count opened, plus a fee for every
transaction that students and alumni
Financial
Outlook
Amortya Sinha
will often pay much higher in
terest rates, due to your default.
Your income tax returns and
paycheck will be garnished to
repay your loans.
You will find it difficult to
get a conventional mortgage
and liens may be placed on any
houses or cars you own or buy. Pro
fessional licenses may be denied be
cause of your student loan default.
Bankruptcy will not forgive the
Your obligation to repay Title IV,
HEA student loan and grant liabili
ties can no longer be canceled (dis
charged) due to bankruptcy, accord
ing to a law passed in 1998. There
are no exceptions to this.
Additional information about Stu
dent Loans
Late fees cannot exceed six per
cent. You can prepay your loan, or
pay it off early, with NO penalty. The
lender cannot put your loan in de
fault until you are over 180 days late
in payment.
If you use any part of the loan for
non-education-related expenses,
your lender can put you into default
and call for the entire balance to be
repaid immediately.
Recommendations
Shop around. Talk to credit unions,
banks, finance corporations, your
parents' employers, your school's fi
nancial aid office. Find the best deal
you can on your loan, even though
the "deals" do not vary very much
from lender to lender.
Your school may give you a list
of "preferred lenders." Quite often,
the "preferred lenders" are lenders
who are paying the school a fee to
be listed. Other times, the "preferred
lenders" are really preferred by the
school, because prior students have
had good service from these lend
ers. It is a good idea to look into the
loan products offered by the pre
ferred lenders, but you should also
look into other lenders, especially
your family's bank or credit union,
for comparison purposes.
Never overestimate your earning
capabilities! Just because as a fresh
man you plan on becoming a doctor
and making $300,000 a year when
you graduate, does not mean that you
will actually do that. Be sensible
when getting the loans. Take out as
few as possible.
Read everything you sign, at least
four times. Do not let anyone rush
you while you are reading anything
you must sign. The lender will usu-
make. The textbook for that course
urges students to develop a budget,
carry just one credit card, use it only
in case of emergency, pay bills on
time, and check the Yellow Pages for
credit counseling programs if prob
lems arise.
Some schools are counseling more
students struggling with credit card
debt. "They don't look at credit cards
as debt, they look at it as free money
for a while," said Pamela Deroian, as
sistant director of the University of
Miami's student counseling center.
"These students are not quite ready
to accept the responsibility of adult
hood. But credit cards are a major re
sponsibility and are just being pushed
on them like crazy.... It's very sad to
see these students come in and say, "I
don't know what to do. I have $4,000
in credit card debt, people are calling
me all the time, and I can't tell my par-
ents.' "
Catherine Pulley, spokeswoman for
the American Bankers Association, a
trade group that represents credit card
issuers, said that rather than blaming
the issuers, placing more emphasis on
credit education could reduce college
students' credit problems. She said her
organization is involved in such edu
cational efforts." Those are simple
things, like budgeting and determin
ing your needs vs. your wants," she
said. "Parents need to teach their child
, ,
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.-
''' .• ' 441 ,
ally explain to you "in plain En
glish" what you are signing, listen
to what they say, then read the pa
perwork: Does it really say what the
lender just said? Take all the time
you need to read everything, and be
sure you understand it. Remember
that you are a customer - you are do
ing them a favor by giving them your
business. They are not doing you a
favor by loaning you the money
Keep in touch with your lender.
Inform them promptly of address
changes and if you change schools.
Get everything in writing. Make
notes of who you talked to every
time you have a phone conversation
with your lender. If they have agreed
to a forbearance, get it in writing.
Most financial aid offices are go
ing to build your financial aid pack
age around loans first, then grants
and scholarships. Try to avoid this.
Negotiate with the school to ad
just your financial aid package so
that you receive as much possible
money in the form of grants and
scholarships first, then subsidized
loans, then unsubsidized loans, then
plus loans.
Make your payments on time and
read everything you sign!
And finally - the most important
thing: Save everything you receive,
everything you sign, every check
stub, everything!
Save it all. Never throw it out.
Think of the "worst case scenario"
that could happen: twenty years af
ter you pay your loan back, an error
is made somewhere and suddenly
the bank is calling you saying you
still owe them. If you threw out all
those check stubs and that final re
lease of loan, how are you going to
prove that you paid it off? With stu
dent loan default claims, the burden
of proof is on you. Be smart and be
prepared for the worst.
Deciding to get a student loan is
one of the biggest decisions you may
ever make. Do not take it lightly!
Student Loans will have a large im
pact on your life for at least ten
years, and possibly longer. Many
students have to hold a second job
or take a job that was undesirable
solely because their student loan
payments were way too much.
how to use money."
But for credit card companies,
granting a card to a college student
can lead to a lifetime of brand loy
alty.
And even younger students are an
swering the credit card call. Miami
resident Maria Moya,who just turned
18, has received more than a dozen
card solicitations in the mail in the last
few months.
She applied for only one, a Visa
card with a $5OO balance that pro
moted itself as being good for stu
dents. "The literature said since I was
in high school and going on to col
lege, it would help me because I could
start building up my credit," said
Moya, a senior at William H. Turner
Technical Arts High School in North
Miami-Dade. She plans to pay all her
bills in full.
That's advice that Matos, now a
sophomore at FIU, could have used.
After getting his cards shortly after
entering FIU, he bought items for his
car, computer and home and figured
he would pay them off later. But the
bills quickly rose.
While his first two credit card ac
counts have been closed as part of the
agreement with Auriton, he now has
another card with a smaller credit line.
"I don't go credit card crazy," he said.
"I use it to get gas once or twice, the
bill comes, and I pay it off and I don't
worry about it. I learned my lesson."