Why do Students Borrow so Much?

Trends in student loan lending may explain why students are borrowing so much to attend college.

Trends in student loan lending may explain why students are borrowing so much to attend college.

Let’s face it: to afford attending college in this day and age, many students need to take out a loan (or several). Each year, more and more students are graduating college with thousands in student debt that they need to pay back.

In fact, between 2007 and 2012, student loan amounts increased 75 percent, according to a TransUnion study. It’s one of the biggest causes of debt as in 2010, student loan debt surpassed credit card debt for the first time, rising to more than $800 billion.

Specifically, the amount of undergraduate loan recipients has grown substantially, going from 19 percent in 1989-1990 to 35 percent in 2007-2008. The amount being borrowed per person has also risen. Research shows the amount of postsecondary education students who borrowed using federal student loan programs increased from $24 billion from 1994-1997 to $33.7 billion in 1999-2000. In addition, the amount of debt for those getting their master’s and other advanced degrees more than doubled.

So what’s the deal?

“Increases in federal grant aid have not kept pace with rising costs, and students’ financial needs have increased as educational costs have risen,” explains an excerpt in the Eric Institute of Education Sciences, an online database of education research and information, sponsored by the Institute of Education Sciences of the U.S. Department of Education.

While the obvious answer for the increased borrowing is the rise in tuition costs, research says it may also be that loan programs are expanding, allowing those from middle and upper income families to borrow with little difficulty.

“Increases in loan limits and the ease of borrowing have allowed more students to receive loans,” the study states.

“Because students may receive unsubsidized loans regardless of their families’ incomes, a large share of the added loan dollars appear to have gone to students from middle- and upper-income families,” notes an article on http://www.education.com.

According to the U.S. Department of Education, the percentage of undergraduate students from families who make an annual income of $60,000-$79,000 who used federal student loans jumped from 56 percent in 1992-1993 to 67 percent in 1995-1996. And since students from middle- and upper-class families who may not have necessarily qualified to receive Stafford Subsidized Loans have become eligible, studies predict some students may be borrowing more than they need in order to attend postsecondary education.

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Is Online Bill Pay Right For You?

Pros and cons of Online Banking

Pros and cons of Online Banking

This day and age is evolving into a largely digital era, and included in that evolution is finances. Online bill pay is an electronic payment service that allows you to set up secure accounts on the Internet to make one-time or recurring bill payments. Many love this innovative technology for its simplicity and economy, and a few shun it for big businesses’ hidden fees, the possibility of making mistakes and the risk of scams, insecurity and viruses. Read on to see for yourself if online bill pay is right for you.

The first thing a potential online bill payer needs to do is to figure out his or her needs. Do all of your billers accept electronic payments? If not, you will need a bill pay site that will accommodate that by issuing them paper checks. If that is the case, you also need to know to schedule that bill to be paid a little earlier to account for the time your bill pay company needs to send that live check out via the mail (usually about five days).

Furthermore, are your bill amounts the same every month? If not, a scheduled — not automatic — payment through your financial institution might be your best bet; that way, you have access handily to your checking and/or savings account information for variable amounts so as to avoid overdrafts.

There are many free online bill pay websites available to consumers; there are also many financial institutions that offer it via their websites, as well. Be sure to read all disclaimers and fine print to alleviate the fear of hidden fees. It may be a good idea to choose your next financial institution based in part on if they do offer free online bill pay, if that is what strikes you.

Similarly, you can put the control into the hands of the lenders and have the billers debit your account by signing up on the creditor’s own site. Whichever way you choose, automatic, scheduled payments help avoid late fees; they also have the potential to be a very well-organized way to manage your bills.

Dan Kadlec, a personal finance journalist for TIME Magazine, recommends doing all of your banking online for its personal and environmental efficiency.

“Stamps, envelopes and physical checks are an obsolete expense. You’ll save time, too,” Kadlec said. “But best of all, your bank will automatically keep track of what you spend and where you spend it for easy review, which makes budgeting a lot simpler.”

Reducing paper waste by banking and paying bills online does more than save the trees; it helps save the planet by reducing the fuel used by the vehicles that transport the paper statements, bills and checks. Javelin Strategy & Research found that if every U.S. home viewed and paid its bills online, the switch would cut solid waste by 1.6 billion tons a year and curb greenhouse-gas emissions by 2.1 million tons a year.

Some things to look out for

The main concern for anyone doing absolutely anything online these days is security.  But it doesn’t have to be distressing. Make sure your computer has the latest virus protection, never access your account from a public wi-fi system or on any sort of shared device and change your passwords regularly. Also, be on the lookout for messages that claim to be from your financial institution or bill pay company; they could be phishing scams from con artists trying to gain access to your account information. Don’t give out any personal or account information without confirming the source first. As mentioned before, monitor your accounts and statements and watch out for any transactions that you didn’t authorize.

Additionally, one must be careful of typos while paying bills online. You wouldn’t want to accidentally pay $36,000 for a $360 bill, right? Misplaced decimals are small, but frightening. Also alarming is the possibility of forgetting to hit the “Submit Payment” button at all. About 0.18 percent of online bill payments are challenged for mistakes every year (not including errors consumers catch and fix on their own), which translates to millions of snafus when taking into account the billions of payments submitted online each year.

Most of the time, financial institutions or companies will help sort out any problems, but Nessa Feddis, a senior vice president at the American Bankers Association, confirmed that it is much more efficient to just do it correctly the first time.

“It is very easy in this electronic world to get caught up and move quickly, hit the send button before we mean to. We all need to take time, pause — and make sure the transaction is accurate,” Feddis said. Feddis recommends signing up for the bill pay site’s e-mail alert system, and that of your financer, as well, to be notified when a payment or change in your account has been made. This will help catch any mistakes or fraudulent behavior.

Weighing the pros and cons

In short, the positive qualities of online bill pay are abundant, but the practice is not without its difficulties. There are a lot of aspects to consider, such as the convenience factor based on your specific circumstances. It can be a very quick and efficient way to disseminate money because it can be done all in one setting, and it also saves the environment in more ways than one.

On the other hand, Internet security is always a concern for any interaction done online, and mistakes are an inevitable part of life, so vigilance and awareness are a huge necessity in managing finances online. The responsibility of weighing these options and making an informed decision is that of each consumer individually.

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Retreat Away for a Good Time

Have you ever wanted to have a family gathering but didn’t have a space big enough to host everyone that you wanted to invite? How about being able to quilt or scrapbook with a large group of friends but never had the space to use your creativity to the max? Well don’t fret; you can do all of this at Glad Gatherings.

Glad Gatherings, which opened November 2013, is a retreat house in Spring Valley, Minnesota, that is perfect for crafters but can be rented out for any occasion. “It is the perfect space for bridal showers, baby showers, graduations, weekend getaways, girls’ weekend, and much more,” said Co-Owners Denise Erichsen and Jenny Gurenwald.

According to co-owner Alissa Gibson, “It sleeps 12 people comfortably and has a dedicated craft space which comfortably accommodates 12 people plus their craft supplies.”

Denise Erichsen with her sister, Dolores Bierbaum, niece, Jenny Gruenwald, daughter, Alissa Gibson, are all co-owners of Glad Gatherings.

What started off as a special family occasion for the owners and their family is now a successful retreat away for families or big groups that are looking to be crafty or looking for a big enough space to fit all of their guests. The girls would get together a couple times a year to quilt or scrapbook and had done so in many other retreat houses. “We just really loved the memories we were making and we thought it would be really fun to find a place we could do our crafts that was big enough for all of our nieces and daughters. It is something really special that we wanted to share with everyone.” Erichsen said.

When it came to relying on a lender to help with getting Glad Gatherings started, Levi Livingood from the Merchants Bank Rochester, Northwest Plaza, location was an easy choice and is highly recommended by the owners. “He has been so helpful every step of the way,” stated Erichsen.

“He is fantastic, answers my emails right away, and has been here to visit us in Spring Valley multiple times already. Merchants Bank is great to work with because they make you feel warm and welcome. We would highly recommend any start up business to work with Merchants Bank. They really help make what may seem like work, easy.”

 

Loans are subject to credit approval.

Top Three Reasons Your Business Should Accept Credit and Debit Cards

Credit card processing can benefit any business

Credit card processing can benefit any business

Should your business accept credit or debit card payments? Big or small, brick and mortar or in-home business, thousands of employees or only two…the answer is yes! Businesses of all sizes can benefit from the ease and versatility of accepting credit or debit cards anytime, anywhere you choose. Here are the top three reasons you should accept credit or debit card payments:

  1. Convenience – Being able to accept major credit cards is expected by most of your customers. In TSYS’s 2013 Consumer Payment Choice Study, over half of respondents preferred a debit card as their overall payment method and 35% preferred a credit card. By using Merchants Bank’s Credit Card Processing, your business can meet customer expectations and provide options for accepting payments that are convenient for both you and your customers. Merchants Bank offers a variety of options for collecting payments including counter-top card readers, website interfaces and mobile card readers.
  2. Increase Sales – Accepting credit or debit cards greatly broadens your potential customer base to customers who no longer carry cash or checks with them. In addition, customers who pay by card can easily make impulse purchases without needing extra cash on hand or writing a larger check. Not offering this type of payment option could result in lost sales opportunities.
  3. Simple Pricing and Local Service – We understand that each business is unique, so we will work with you to determine the credit card processing pricing structure that makes sense for your business. Merchants Bank offers easy to understand, “all-in-one” discount fees based on the average dollar amount of your customer transactions (which is your average ticket size). Equipment costs will vary depending on your needs. As always, you’ll receive service and support from local bankers you know and trust. We promise to work with you to keep your costs as low as possible and customize Credit Card Processing to fit your individual business needs.
To get started with Merchant Bank Credit Card processing, simply contact your local branch to complete a Credit Card Processing Application and include two years of financials, or download the Credit Card Processing application here. Click here for more details on our credit card processing program.
 
Credit card processing is subject to credit approval.

Understanding Vehicle Financing

CarShopping for a new car is an exciting process, and contrary to popular belief, obtaining financing doesn’t have to ruin the fun. If you take the time to learn about the two basic types of financing, direct lending and dealership financing, before you take your first test drive, you’ll be setting yourself up for a smooth, efficient shopping experience.

After learning about the pros and cons of each type of financing, you will be ready to find the right car with the right financing.

With dealership financing, you make your agreement with the dealership when you want to purchase your vehicle. The dealer works with you to form an agreement on how much you will pay per month and how much you will pay overall, depending on the vehicle you want, your credit history and several other factors. Sometimes the dealer will sell your contract to a financial institution, and that financial institution will collect the payments.

One benefit of dealership financing is it can be convenient. Provided that you are able to find a vehicle you like and financing you like at one dealership, it can be one stop shopping. Furthermore, the fact that dealerships are open long hours and throughout the weekend may be more convenient if your financial institution has limited hours.

The United States Federal Trade Commission (FTC) states that another advantage of working with a dealer is that “dealers sometimes offer manufacturer-sponsored, low-rate or incentive programs to buyers.”

The FTC cautions that, “The programs may be limited to certain vehicles or may have special requirements, like a larger down payment or shorter contract length (36 or 48 months). These programs might require a strong credit rating; check to see if you qualify.”

Your other option for financing is direct lending, which means that you apply for and receive a loan directly from your preferred financial institution. This means that you’re able to work with your trusted community financial institution, a place where you know you will be treated well and have an established relationship. When you find a vehicle that you want, you form a contract with the dealership and use the loan to pay for it.

Another advantage to direct financing is that you have the opportunity to secure financing and determine exactly what you can afford before your emotions get involved with the shopping process, which can help you stay within budget. Furthermore, if you apply for financing at a dealership after deciding on a vehicle, the dealer has the upper hand by knowing that you’re already interested in the vehicle and that you most likely want to make a deal instead of walking away empty handed. When working with your financial institution, you have no pressure to make a deal, and the financial institution knows that you can comparison shop at other institutions, so it has incentive to give you a great deal.

“Any time you get preapproved, you help yourself out,” states Justin Pritchard from About.com Banks/Loans. “You learn what lenders are willing to offer, and you gain negotiating power. Preapproved auto loans, like any other loan, allow you to: know how much you can afford, shop like a cash buyer, and understand the costs you’ll pay.”

When you work with a lender directly, there are no surprises. You walk onto the lot knowing exactly what you can afford, so you don’t waste time looking at cars out of your range. That way, you avoid getting lured by deals that are only applicable to car buyers who qualify for a lower rate than you do.

“You may spend hours looking at vehicles and negotiating with dealers, only to find out that you’re in above your head,” states Pritchard. “The auto buying process can be grueling, so focus your attention on what you know will work.”

Not only will there be no surprises about your qualifications, there will also be transparency when it comes to how much you end up paying.

“Dealers are notorious for trying to focus your attention on the monthly payment,” states Pritchard. “That way, they have room to fiddle with other parts of the deal. When you have a preapproved auto loan, the payment is none of the dealer’s business – so there are no games to play.”

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Three Ways Technology Is Changing Small Business Finance

New technology helps entrepreneurs get their products and services to customers more efficiently.

New technology helps entrepreneurs get their products and services to customers more efficiently.

Technology is an entrepreneur’s best friend. With the right tools, entrepreneurs are finding that it is easier than ever before to bring in customers, design new products and manage day-to-day operations. Here are a few of the latest ways that technology is changing the world of small business finance.

Mobile Payments
Before the era of mobile devices, if you didn’t want to alienate customers by only accepting cash, you needed a traditional register (point of sale) system. This left many entrepreneurs, such as those working booths at craft fairs or providing services outside of a brick-and-mortar setting, out in the cold.

Now, it’s possible to use a mobile device to accept plastic from customers anywhere you have reception, opening up a range of possibilities. Square is a device that allows you to swipe cards and process payments right on your smartphone or tablet. Its monthly subscription service is best for those who “do five-six digits in sales every month,” and “have very few transactions over $400,” and “key in very few transactions,” according to Forbes contributor My Say.

For those who make many monthly transactions, or those who have many transactions over $400, or those who don’t make sales in the five or six-figure range, Say recommends Breadcrumb by Groupon. Another excellent and flexible option to consider is PayPal.

3D Printing
When 3D printers arrived on the scene, they seemed like something out of a science fiction novel, but they quickly proved to be a tremendous asset in many fields. Businesses currently using 3D printers are quickly discovering just how many ways this tool can revolutionize the way they work.

“For some, it creates an opportunity to differentiate from the competition. For others, it’s a chance to improve internal processes, like design and development, and streamline production,” states Fox News Business contributor Elizabeth Palermo. “But in some industries, especially those that create highly customized products, such production methods are essential.”

Entrepreneurs who want to make a model of a product no longer have to find a factory able to produce it before they can show potential investors and clients. With the invention of 3D printing, the process is faster than ever, making it easier for would-be entrepreneurs to take the leap into the business world.

Fox News Business profiled the development of an ergonomic baby spoon called Spuni, which “owes its existence in large part to 3D technology,” according to Palermo. “The company was able to print the first versions of Spuni using medical grade, BPA-free plastics that could be tested safely by parents on their babies. The ability to test their prototypes helped Botha and his colleagues churn out a final version of the product much faster than if they had used traditional manufacturing methods for prototyping.”

Predictive Analytics
Predictive analysis uses technology to maximize sales opportunities by attempting to accurately predict the future behavior of customers. Entrepreneur.com contributor Mikal E. Belicove describes how he would use predictive analysis to make more money at a hypothetical pizza shop.

“If I knew exactly how many cheese, pepperoni or veggie pizzas I was going to sell on a given shift, I could have those ingredients on hand, and maybe even make them ahead of time, so the customers get their pies fast,” describes Belicove. “And if I knew that half my customers order a large soda with their pizza, I could offer them a pizza/soda special to keep them coming back.”

A Business Intelligence tool is necessary software to run these types of analytics. Entrepreneurs who know how to program can make use of free tools like R from Revolution Analytics. You don’t have to know how to program to use this technology, however.

“If you just want a way to visualize your data to make it easier to understand and follow, there are inexpensive dashboard tools like Geckoboard and Leftronic that you can try out for less than $100 a month,” states Belicove.

With technology like 3D printing, predictive analysis and mobile payments, more people than ever are realizing that they truly can start a business.

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