How to Qualify for Student Loan Forgiveness

To most, loans are the only solution to pay their tuition fees and complete education. Student loans also help students pay for books and living expenses while schooling. Even though these loans are refunded at low interest rates, they can be a burden depending on the job, salary, or how fiscally savvy an individual is.



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If you find yourself forced to live below your means or struggling to pay bills, applying for loan forgiveness will ease the financial encumbrance. Not everyone qualifies for loan forgiveness but most public servants do. Public Service Loan Forgiveness (PSLF) can be a thank you gift to public servants for dedicating their time and energy serving their country.

Organizations that offer student loan forgiveness

The following are not the only organizations that will offer loan forgiveness. Therefore, it's wise to consult with your employer, or carry out research online to find if your profession qualifies for loan forgiveness.

• The Association of Medical Colleges

• The American Federation of Teachers

• Providers of Intervention Services for Disabled Students 

• Peace Corps Financial Benefit and Loan Deferment

• Nursing Education Loan Repayment Program (NELRP)

• National Health Services Corp

• Head Start Staff Student Loan Forgiveness Program

• College Cost Reduction and Access Act

• Child Care Provider Loan Forgiveness

• Armed Forces Student Loan Forgiveness Programs

• Americorps

• American Bar Association

According to the AES, “loan forgiveness programs encourage students to pursue an education that will lead to employment in specific occupations.” Loan forgiveness programs focus towards forgiving all or part of the loan as long as the borrower fulfills specific professional requirements.  The government also uses loan forgiveness to increase personnel in areas that lack enough. An example is nursing shortage in the U.S.

The programs are only applicable to students who secured loans through the government. Such loans include Federal Ford Loan, Federal Stafford Loan, Federal Consolidation Loans, and Federal PLUS Loan. However, you qualify for Public Service Loan Forgiveness only if you have already made 120 payments under any of the programs while still employed although they don’t have to be concurrent.

To qualify for Indian Health Service Loan Repayment Program, health professionals should sign a two-year contract with an Indian health program. The program offers up to $48,000 coverage on student loans.

The Child Care Provider Loan Forgiveness Program will cover 20% of a borrower’s loan after serving two years, 20% for the next three years, and 30% onwards. To qualify, one must have served in a childcare facility and hold an early childhood education bachelor's or associate degree.
 
For vets, the Veterinary Medicine Loan Repayment Program (VMLRP) can offer up to $25,000 yearly. For approval, one has to serve in the National Institute of Food and Agriculture (NIFA).

Nursing Education Loan Repayment Program helps qualified nurses pay up to 60% of their education loan balance. The catch is they have to commit to a two-year contract and get 25% for a third year.

 More information on Public Service Loan Forgiveness (PSLF) is available at studentaid.ed.gov.

By Eileen Eva
 

Choices Are Everywhere: Why Can't We Just Have It All?

Each month the Federal Reserve Bank of St. Louis publishes a newsletter titled Page One Economics, which is a selection of useful economic information, articles, data, and websites compiled by the librarians of the Federal Reserve Bank of St. Louis Research Library.

 

There is a classroom version of Liber8 available to teachers for free at: http://research.stlouisfed.org/pageone-economics/uploads/newsletter/2013/PageOneClassroomEdition0113_Opportunity_Cost_Scarcity.pdf

 

To subscribe to their newsletter or for more information and resources, visit their website and archives at http://research.stlouisfed.org/pageone-economics/

 

The views expressed are those of the author and do not necessarily reflect the official positions of the Federal Reserve Bank of St. Louis, the Federal Reserve System, the Board of Governors, the University of Missouri, the Personal Financial Planning Department or The Office for Financial Success.

 

Scott A. Wolla, Senior Economic Education Specialist

 

“You can’t always get what you want.”—The Rolling Stones

 

The public debate about the best way to reduce the level of government debt highlights our difficult situation: Our wants greatly exceed our ability to pay for them. In the case of government, purchases require current revenue through taxation or borrowing; the fiscal cliff arose from a level of debt caused by wanting more (and purchasing more) than we can pay for.

 

If we wish to reduce debt, we must make difficult choices. One choice is to cut government spending on goods and services—but which spending priorities should be cut? The other choice is to raise taxes—but who should pay more?

 

You might prefer one choice or the other or a combination of both. In fact, you may have very similar thoughts about your personal or family budget. These issues are based on understanding the economic concepts of scarcity and opportunity cost.

 

Personal and Household Spending

 

Let’s use a specific example to get a better grasp of these ideas. Suppose you receive a $20 gift card during the holidays. The $20 limit acts like a budget that constrains your spending. In other words, your resources are limited. How about your wants? Are they limited? If you are like most people, they are not—you would like to have much more than you can afford. This condition of limited resources and unlimited wants is called scarcity. The $20 limit means that you can’t have all the CDs, movies, or games you want; you must choose the one you want the most. Deciding between the recently released CD from your favorite band and the newest hit movie requires a choice, which involves an opportunity cost —the value of the next-best alternative when a decision is made. The opportunity cost is what is given up. So, choosing the CD from your favorite band means giving up the movie.

 

People make such decisions all the time. Managing a family budget is also an exercise in managing scarcity and opportunity costs. Household income determines the amount of money a family has to spend; that is, it constrains spending. And, unlike our gift card example, household wants are not limited to CDs, movies, and games. Rather, they include basics such as housing, medical care, education, food, and clothing. But, just like the gift card example, because our wants exceed our ability to spend, we must make choices, which involve opportunity costs. So, more money spent by a family on food might require less spent on clothing.

 

Credit cards and other forms of credit make it possible (and quite tempting) to exceed spending limits. Does debt negate scarcity? Does it permit you to buy more than your income would allow? It might seem so, but you still have a limit. Using debt means that you are borrowing your future income to buy goods today. As you repay the debt (plus interest) over time, you will have less income in the future to buy goods and services then. And remember that credit cards have limits, and lenders avoid lending beyond the borrower’s ability to repay the loan. At the end of the third quarter of 2012 (August 31), total consumer debt stood at $11.31 trillion.

 

Government Spending

 

In many ways, the government faces these same choices. Citizens have collective wants and the government attempts to satisfy these wants through its spending. Social Security, health care programs such as Medicare and Medicaid, and national defense are among the top federal spending categories. But the ability to satisfy our society’s wants is constrained by the level of government income, which is generated primarily by taxing workers and companies. Just like individuals who make spending choices, when the government chooses, there is an opportunity cost. If more money is spent on national security, the result might be less spending on health care. It is possible to raise taxes to provide additional income for the government to allocate, but that imposes further budget constraints on workers and companies who pay taxes—so, this policy choice also has opportunity costs. Of course, the government’s spending is not limited to tax revenue. Just as families can, the government can use debt to pay for some of its goods and services. At the end of the third quarter of 2012 (August 31), total federal debt stood at $16.07 trillion.

 

What is the downside of government debt? Using debt to buy goods and services today means the government is borrowing future income (that is, tax revenue)—which means less income in the future for buying goods and services then. In addition, there is a limit to how much credit lenders (or investors) will extend to a country; they will avoid lending beyond the government’s ability or willingness to repay the loan or will do so only at very high interest rates.

 

Conclusion

 

An understanding of scarcity and opportunity cost is crucial to making good economic decisions. Remember that scarcity describes the condition in which our wants exceed the resources necessary to satisfy those wants. Scarcity requires us to make choices and choosing involves an opportunity cost—the value of the item given up when a choice is made. So, making wise (and sometimes difficult) choices requires considering the opportunity costs.

 

GLOSSARY

Government debt: The sum of accumulated budget deficits. Also known as national debt.

Opportunity cost: The value of the next-best alternative when a decision is made; it’s what is given up.

Scarcity: The condition that exists because there are not enough resources to produce everyone’s wants.

 

 

 

Ryan H. Law, M.S., CFP® AFC®

 

Personal Financial Planning Department

Office for Financial Success Director

University of Missouri Center on Economic Education Director

 

162 Stanley Hall

University of Missouri

Columbia, MO 65211

 

573.882.9211 (office)

573.884.8389 (fax)

 

When Can I Get a Home Loan After Foreclosure or Bankruptcy?

Your Relationship with Money

                This is inspired by an excellent book from an author who visits Mizzou regularly, Ted Klontz.  The book is The Financial Wisdom of Ebenezer Scrooge, a book of readings/stories from various authors.   The authors tell their life story and how it has shaped their relationship with money.  (If you don’t think you have a relationship with money, try getting by without it!)

 

                The author proposes that Bob Cratchit (of Christmas Carol fame) had a relationship with money that was just as destructive as Ebenezer Scrooge’s.  Cratchit’s relationship with money was, however, different.  You recall that Mr. Ebenezer worshipped money and held on to every single penny he made.  On the other hand, Mr. Cratchit was quick to blow his paycheck on a single Christmas meal.  It also described that someone as talented and obviously qualified to work for Mr. Ebenezer, should not have too much trouble finding a better paying job, or starting his own successful business.  (Yes, to believe this, we need to forget that the 19^th century was quite different from our early 21^st century.)

 

                The book goes on to describe that we all possess a “money script” which determines how we view money and most of us inherit our money script from our parents.  It is no doubt that parents’ views of money vary widely and, within families, the views of the husband and wife can sometime be quite divergent.  Throughout the book, the point is made that money is nothing more than a resource.  It is a resource that we can use to buy things which bring us satisfaction including those things we require for sustenance.  The authors emphasize that money should be viewed as a means to an end, not the end itself.  (We doubt if Mr. Scrooge would have liked this part.) 

 

                Regardless, the authors implore us to consider the proposition that we all need a little Scrooge in us.  We don’t want to be Charles Dickens’ character Scrooge, of course, but we need to be enough of Scrooge to keep us from spending every dollar and that comes our way.  After all, it was Scrooge’s frugality that allowed him to amass so much money in the first place. 

 

                We must acknowledge that we, as Americans, have become spenders over the years.  It is hard to recall when we used to be savers.  Some of us even spend more than we make and some even justify it as the duty to help the country recover from the recession.  Those who spend excessively will often say, “If I just had more money, everything would be better”.  This is, simply, untrue.  Consider the multi-millionaires who have squandered and wasted their money to the point of poverty.  Many are professional athletes who did not learn the lessons of money management.  Athletes such as Kenny Anderson, Wally Backman, Charlie Batch, Riddick Bowe, Mark Brunell, Billy Buckner, Jason Caffey, Jack Clark, Derrick Coleman, Dermontti Dawson, Lenny Dykstra, Rollie Fingers, Ray Guy, Tony Gwynn, Steve Howe, Dorothy Hamill, Harmon Killebrew, Bernie Kosar, Terry Long, Darren McCarthy, Denny McLain, Greg Nettles, Jonny Neumann, Gaylord Perry, Andre Rison, Warren Sapp, Billy Sims, Leon Spinks, Lawrence Taylor, Duane Thomas, Bryan Trottier, Johnny Unitas, Michael Vick, Antoine Walker, Danny White, and Rick Wise are on this list (http://www.businessinsider.com/a-shocking-list-of-athletes-who-have-declared-bankruptcy-2012-10 ).

 

While we are inspired by the escalating salaries of professional athletes, the stories of their lack of success in controlling their money to support their goals are numerous.  Many overvalue their buddy with the “can’t fail” business idea. These athletes, the lessons of those who fail, are just as important as the stories of the people who get ahead in life by saving 20% of their income religiously.  Yet, saving 20% of your income over your lifetime is a certain way to have a better financial and consumption life when you are older than by spending your money in the hopes of being happier today, with a greater chance of being a financial failure when you are older.  This is certainly true if you use too much leverage (i.e., borrow too much) which can make the bad times worse, just like it can make the good times better.

 

                Just remember it’s not how much or how little money you have, it is your relationship with the concept of money that will determine the quality of your life.  Or, like an insurance friend of mine told me over lunch, “When I’m dead it won’t matter how much money I have.  All that matters then is whether I’m in heaven or hell.”  I will venture to guess that going bankrupt is a lot closer to hell, than it is to financial success, regardless of your religious persuasion.

 

-          Matthew Ott, recent graduate Personal Financial Planning

-          Robert O. Weagley, PhD, CFP^®, Personal Financial Planning

 

“We plan for what we can, and we figure it out as we go, too.”

by Lucy Schrader

It's the beginning of a new year, and I'm going through financial papers at home to prepare for taxes, clean files and look ahead for the coming year.  I had our college fund statements out when my 9 year-old son asked what they were.  Then of course, he wanted to know how much he had in his account.  After I told him, he very dramatically told me, "Mom!!  That's not enough. That's not anywhere CLOSE to enough.  How can I go to college? I don't have a job.  I don't have that kind of money!!"

At first I was impressed—wow, he's actually developing a sense of how much things cost and learning that money doesn't grow on trees.  My next actions were to try to help him realize that no, it's not anywhere near the full amount to cover college and that's ok; that we're saving what we can and will have more by the time he goes; that there are different ways to pay for college (scholarships, loans, that he may have to help pay for some of it with a job, but he'll gain new skills as he grows and can do more than he does now, etc); and that we will figure it out as we go.  We do not have to have all of the answers right now.

Now, being realistic, my very logical reasons did not completely calm him. What I hope, though, is that we're beginning those many conversations and repeated messages of "we plan for what we can, and we figure it out as we go, too."

I also have to admit, that I had a gut wrenching moment just the week before–we're not saving enough; we don't have everything planned out; "they" [magazines, media, etc] say we need more.  And that's where I get stuck.  How on earth am I supposed to know how much I'll need in the future and in retirement?  How can I truly guess at all of these things?  I don't know for sure what tomorrow holds, let alone in 30 years. 

I also had to talk myself through those moments and remind myself of several points I found very comforting to follow from the book The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money by Carl Richards (I was also lucky enough to see him speak at the 2012 MU Financial Symposium).  Mr. Richards, a Certified Financial Planner™, reminds us that we cannot control everything.  There are so many global and national events that happen that are out of our control, so we have to look at our personal lives and own financial lives and find what we do have control over. Have a plan, but be willing to adapt to the present situation.

In his book, he relays a story that he was working with a client and asked the client how much was enough to save for the kids' college.  The man replied that in his mind it's not about what's enough—it's about saving what he can at this time and that will be enough, because that is all he can do.  In my "it's not enough" moment, I had to remind myself that, yes, we've got a plan.  We're saving what we can.  It might not be enough to cover all expenses, but it's what we CAN do right now.   Maybe in a few years we can save more, but at this moment it's what is reasonable for our family. 

Mr. Richards also suggests that once you have a plan, focus on shorter time frames and look at the next year or two years (or the next day, week or month). Find what you can control in those time frames, since we don't know for sure what will happen in the future.

Instead of thinking "I don't have enough saved," think "what can I control right now to stay the course on my plan?" One example might be, I can bring my lunch today instead of going out to eat to save money on the food bill.  That in turn will help us save money for the college funds this month.  Spending is easy and saving can be more difficult, so give yourself credit for these day-to-day actions.  Instead of negative thinking that you are not saving more, shift your focus and thoughts to the positive, which helps reinforce the actions you want.

When I or my son start down that negative path, we need to help each other to "keep calm and carry on."  Have a financial plan and follow it as you can, but realize you might not have all of the answers.  Follow through with things that make sense for your family.  Small steps DO make a difference.

 

Reference

Richards, C. 2012. The behavior gap: simple ways to stop doing dumb things with money. Penguin group: New York.

 

Lucy Schrader
HES Associate State Specialist and
Building Strong Families Program Coordinator
University of Missouri Extension
162 Stanley Hall
Columbia, MO  65211
573-882-4071 or SchraderL@missouri.edu

http://extension.missouri.edu/bsf

 

Are Consumer Purchased Credit Scores Different from Financial Institution Credit Scores?

 “When consumers buy a credit score, they should be aware that a lender may be using a very different score in making a credit decision.” Richard Cordray,director of the Consumer Financial Protection Bureau (CFPB), said in an email statement.

The three main credit reporting agencies; Equifax, Experian & Transunion, use their own algorithms to calculate credit scores and they each have several ways to calculate it.  Fair Isaac Company also computes and sells credit scores, known as FICO Credit Score, has more than 50 scoring models.  This means that there are numerous variations of a credit score. The good news is, based on CFPB’s research found that most of the scores pulled by consumers and other organizations are consistent by at least 75%. Between 20% - 25% of the scores that consumers purchase were moderately different enough to move them into another credit grade that financial institutions use to determine what consumers may qualify for loan rates. The remaining 1% - 5% of the consumers’ scores was significantly different.

Note:  FICO offers a calculator that lists the range of interest rates offered based on FICO score.  This of course may differ based on the financial institutions rates offered.

What is not widely known is that there different types of scoring models that are based on the information the financial institution or business wants to analyze.  For example, a credit score for a credit report pulled by an auto dealership may differ from the credit score of a credit report that is pulled by a financial institution. This is because the auto dealer may mainly want to focus on a consumer’s payment history on auto loans, regardless of the financing company or financial institution.  However, the financial institution’s credit score may be based on a consumer’s entire payment history on all trades reporting on the credit report. Another familiar type of scoring model is the one used by Utility Companies.

Regardless the scoring model, the fact holds true that if you have good credit, you will have high or good credit scores on them all and if you have “colorful” or bad credit, you will have low or bad credit score on them all.  What important is that you understand the “Anatomy of the Credit Score.”

• 35% is based on your payment history.
• 30% is based on how much of your available credit you've borrowed against.
• 15% is based on the length of your credit history.
• 10% is based on the diversity of credit you carry.
• 10% is based on the number of “hard inquiries” from creditors to qualify you for credit or open an account.

Other types of scoring modes are Bankruptcy Scores and Fraud Shield Scores.  

A Bankruptcy Score determines the likely hood of a consumer to file for bankruptcy.  Many lenders use it to determine whether or not they will loan you money. A bankruptcy score also may influence the interest rate that you may qualify for on a loan. Bankruptcy Scores are not generally shared with the public.  The lower the Bankruptcy Score the better. A Bankruptcy Score of 1 – 100 is ideal. A score of 300 to 900 indicates that you need to improve your credit by paying down debt especially on revolving lines of credit, like credit cards.

A Fraud Shield Score identifies inconsistencies between application information and credit report data. Just as the credit score, the higher the score the better.  If you have low Fraud Score, the lending institution many request or require additional document to verify your identity.  Don’t give them a hard time though, it is for your protection.

As with anything, financial and credit knowledge is Key to your Prosperity. 

STEP 1: Understand where you are with your credit.

• Pull your credit report to see what is reporting.  You are able to get a least one free copy of your credit report from all credit bureaus. Go to AnnualCreditreport.com.
• If there are several past due payments or lots of collections reporting, you may want to save your money and work on restoring your credit.  Try the myFICO.com Credit Score Calculator to start. 
• If all accounts are paid as agreed with no collections reporting, you may want to invest in purchasing your credit score to see where you are. 

Start at FreeCreditScore.com.  The score may be free, but make sure you read the disclosures to ensure that you are not required to sign up for a monthly monitoring service.

STEP 2:  Ask for help.

Regardless of whether you need assistance with restoring your credit or improving your credit to increase your credit score, don’t be afraid to ask for assistance.  Below are a few great options to assist you.

Anngie Jenkins, Credit Score Queen

www.CreditScoreQueen.com

National Credit Educational Services

www.NCESNow.org

STEP 3: Assess your spending habits, budget and savings plan.

This is crucial with rebuilding or maintaining your credit.  Feel free to contact me for assistance through

• My monthly Common Cents Newsletter,
• My weekday Madam Money Minute Financial & Credit Tip Texts by texting MADAMMONEY to 46786,
• Registering for a Madam Money Financial BootCamp, or
• For One on One Financial Coaching contact me at the information below:

   

Tarra Jackson, Financial Coach

Prosperity Now Financial Management Services

Tarra@ProsperityNowFMS.com

(404) 852-6295

  
We are all looking forward to being a resource to you towards your Prosperity Now!

The Affordable Care Act in Plain English

by Ryan Law

“At the end of the day, what everyone wants is a way to make sure we’re taken care
of when we’re sick, and that it doesn’t ruin us financially to get that care.”
– Jonathan Gruber, architect of the Affordable Care Act

There is a lot of controversy, confusion, misunderstanding and unfortunately, even blatant lies in the media about what the Affordable Care Act (ACA or Obamacare) is and how it will affect you, your insurance coverage, and the amount you pay for insurance.

Whether you like it or not the ACA is the law and it is important you understand what it is and how it relates to you and your family. After all, your health is one of your most important assets!

My attempt with this article will be to describe, non-politically, what the ACA is in plain English. If you want to hear a partisan description of the law you can tune in to your favorite Liberal or Conservative commentator. Trust me; they have plenty to say about it!

Jonathan Gruber, Mr. Mandate

The ACA was put together by Jonathan Gruber, an MIT Economist who has studied and analyzed the effects of health-care reform extensively. When Mitt Romney was governor of Massachusetts he called Gruber in to help design a health-care law for Massachusetts, which has become known as Romneycare.

In 2008 Obama called on Gruber to help him design the ACA. Gruber has written extensively about the law. He says it is the opposite of public health care and that insurance companies like the law because they get more customers, especially young, healthy ones that will pay insurance but not need as much healthcare. He says that the most important provision of the ACA is the individual mandate – without requiring people to get insurance it doesn’t work. There will be more on the mandate later in this article.

Goals of the ACA

§  Decrease the number of uninsured Americans. There are currently 44 million uninsured Americans[1], most of which are either young and they don’t think they need insurance, or they are poor and cannot afford insurance. The ACA should reduce this by 30 million.

§  Reduce health care costs

Important Provisions of the ACA

§  Pre-existing conditions: Requires insurance companies to cover all applicants of the same age at the same rate, regardless of pre-existing conditions or gender. This provision is something that will be extremely beneficial to millions of people who were denied coverage due to a pre-existing condition.

§  Coverage up to age 26: If you are under the age of 26 you can stay on your parent’s plan, regardless of whether you live at home or on your own, or are single or married.

§  Individual mandate: This is one part of the law that the government was sued over and that went all the way to the Supreme Court[2]. Because the Supreme Court upheld the Constitutionality of the individual mandate it will go into effect in 2014. Essentially it says that if you don’t buy insurance you will be charged a $95 penalty or 1% of income (whichever is greater) in 2014. That amount will increase until it reaches $695 per person or 2.5% of income in 2016. Regardless of your family size you will never pay more than three times the penalty amount if all your family members are without insurance. However, if health care coverage would cost you more than 8% of your income you don’t have to pay the tax.

§  Health Insurance Exchanges: By 2014 each state is required to set up a health insurance exchange (states that don’t set one up will use the national one) where consumers can compare health insurance policies and premiums.

§  Elimination of lifetime coverage caps: In the past health insurance plans typically had a maximum you would be covered for over your lifetime. It was often as low as $1,000,000. With the ACA coverage caps were eliminated.

§  Businesses must offer insurance: Businesses with 50 or more employees must offer health insurance or they will pay a $2000 fine per employee. They don’t have to provide it for employees working less than 30 hours a week. Businesses with less than 25 employees could qualify for a subsidy to offset the costs of insurance.
NOTE: Some companies have said they may have to lay off employees or reduce employee’s hours due to this portion of the law, the most famous of which was Papa John’s CEO John Schnatter. Schnatter later said he was taken out of context and plans to comply with the law and that his company is still doing analysis on how it will affect them.

§  Deductibles and out-of-pocket maximums: Employer plans have a maximum annual deductible of $2000 per person, or $4000 for a family. By 2014 the out-of-pocket maximum per person is $6000 per person per-year (out-of-pocket includes your deductible and co-pays).

§  Preventive Care: There will be no co-pay, co-insurance or deductibles for preventive care.
NOTE: This portion is sometimes referred to as the Contraceptive Mandate because under this portion of the law contraceptives and the “morning-after” pill must be free to people with insurance. Some groups, including the Catholic Church, have sued the government over this as they are religiously opposed to contraceptives. Other groups (Hobby Lobby being the largest) have sued the government because they are opposed to providing the morning-after pill to employees. There are currently 28 separate lawsuits about this provision. Under current rulings churches are exempt from providing contraceptives or morning-after pills, but church-run hospitals and schools are not exempt, and they were given until August 1, 2013 to comply. Hobby Lobby and others opposed to offering the morning-after pills were given until January 1, 2013 to comply or they will pay $1.3 million per day in penalties. Hobby Lobby has chosen to stand by its principles and pay the fine rather than offer the pill.

§  Insurance subsidies/tax credits: The Central Budget Office has predicted that insurance premiums may go up 10-13% due to the ACA. To offset this, low-income Americans will not pay anything for health insurance, and many in the middle-class will get some form of tax credits. Individuals making between $14,400 and $43,320 and couples filing taxes jointly making between $29,330 and $88,200 will receive some tax credits.

§  Insurance company profits: Insurance companies must pay out 80-85% of insurance premiums received in medical costs and can use 15-20% for administrative needs and profits.

Costs of the ACA

§  Jonathan Gruber claims that by his analysis the ACA should reduce the federal deficit by $143 billion by 2019 and by $1 trillion within 20 years.[3]
NOTE: Niall Ferguson in the August 19, 2012 Newsweek cover article[4] claimed that the CBO (Central Budget Office) and Joint Committee on Taxation have said net federal spending will be $1.2 trillion by 2022 even after all taxes and penalties have been collected. However, the CBO has actually said that it will decrease the deficit by more than they originally thought.[5][6] I believe the jury is still out on this one – in 2022 we will know for sure, but I struggle to see how it will actually reduce the deficit. I hope I am wrong, though!

Paying for the ACA

The following taxes, fees and penalties have been put into place to help pay for the ACA:

§  .9% tax on incomes over $200,000 (individual) or $250,000 (family).

§  3.8% tax on unearned income over $200,000 (individual) or $250,000 (family).

§  Insurance providers will pay an annual fee.

§  Pharmaceutical companies and other companies that manufacture medical devices will pay taxes and fees.

§  The 7.5% AGI floor for itemized deductions is being raised to 10% (You can deduct your medical expenses if they exceed 7.5% of your Adjusted Gross Income and itemize deductions – that is being changed to more than 10% of your Adjusted Gross Income).

I hope this article has helped you understand the law better and how it will affect your family and your insurance. I’m sure we will see more lawsuits and attempts to change portions of the law through legislation – if there are any major changes we will follow up with additional articles.

 

NOTE: If you are looking for more detailed information about the law I recommend you check out the following resources:

·         HealthCare.gov – this website contains the most comprehensive information about the ACA: http://www.healthcare.gov/index.html.

·         Gruber wrote a book titled Health Care Reform: What It Is, Why It’s Necessary, How It Works. This is actually a good book for understanding the ACA, and best of all, it is written in comic-book format. It’s worth checking out from your local library.

 

Ryan H. Law, M.S., CFP®, AFC®

 

Personal Financial Planning Department

Office for Financial Success Director

University of Missouri Center on Economic Education Director

 

162 Stanley Hall

University of Missouri

Columbia, MO 65211

 

573.882.9211 (office)

573.884.8389 (fax)

 

---

[1] http://www.pbs.org/healthcarecrisis/uninsured.html

[2] http://www.supremecourt.gov/Search.aspx?FileName=/docketfiles/11-393.htm

[3] Gruber, J., Health Care Reform: What It Is, Why It’s Necessary, How It Works, 2011 ISBN: 0809053977

[4] http://www.thedailybeast.com/newsweek/2012/08/19/niall-ferguson-on-why-barack-obama-needs-to-go.html

[5] http://www.washingtonpost.com/blogs/wonkblog/post/cbo-health-reform-to-cut-deficit-by-50-billion-more-than-we-thought/2011/08/25/gIQAXgPSES_blog.html

[6] http://www.cbo.gov/publication/43472

What to Do When You Can’t Pay Your Bills

There is no doubt that one of the most horrifying experiences is struggling with money and not being able to pay bills.  I've overcome and am still overcoming financial struggles but there are so many more people and families that are in a more difficult situation. 

There is no magic pill or “one size fits all” method of fixing financial struggles or what I call “financial dis-eases.”  However, here are a few tips to help you get started.

Tip # 1: Assess the Problem

The most important step is to assess why you can’t pay your bills.  This could be because of a job loss, a pay cut, increase in fixed expenses, unexpected medical bills, an expensive mistake or poor spending habits.  After understanding the cause of the problem, the next phase of this step is to write out your budget. I encourage you to download and read “5 Steps to Building a Budget That Works.”  You may of course see that you are spending more than you make.  By writing this down in detail, you will understand your fixed verses flexible expense. 

  

Tip # 2: Fix the Problem

Once you understand what the problem is, you can now begin the process of fixing the problem.  Most people’s problem (like mine was) may be overspending.  If this is your issues, the best cure for this financial dis-ease is financial abstinence by eliminating the use of credit cards or unsecured lines of credit.  Also, cut back on eating out and reduce or eliminate flexible bills like cell phone, land line phone, cable or any other unnecessary expenses.

However, many people aren't overspending at all.  They are dealing with being under paid.  Their income does not meet their baseline budget of their fixed expenses.  If this is your issue, it is now a matter of increasing your income.  This is not an easy cure and may require lots of hard work to find and work a part-time job. You may want to establish a home-based business that generates extra income. 

Here are few ways to handle your financial situation:

1. Ask your family or friends for a loan or gift to assist you during your short-term struggle. Make sure that you only ask them once and make it clear that it is a gift (you do not have to pay it back) or it is a loan (you will pay back).  If it is a loan, establish the payment arrangements and make sure you pay them back on time.  Don’t be that family member that everyone ignores phone calls from because they know you are just going to ask them for money.
2. Contact the company(ies) and creditors to explain your temporary financial hardship and request to skip a payment for the month to get back on your feet or to modify your payments, permanently or for a limited time.  Many financial institutions have a loan modification program that you may qualify for.
3. Contact a debt management organization, like CCCS, to assist you with communicating with your creditors to reduce your monthly payments.  There are many organization out there, some free and some with a cost.  Make sure you do your research before you commit to their services and program, especially if they are requiring a fee up front.  I recommend that you find a non-profit debt management organization that does not charge a fee to assist you.
4. Although I am not an advocate of and try to sway my clients away from this, you may need to consider a short-term loan, payday loan, title loan, etc.  This should be your LAST resort and make sure that you understand the terms, rates you will have to pay and all of the fees.  If this is used the wrong way, you could find yourself in a worse financial condition than you were before you got the short-term loan.  Proceed with caution.
5. When all else fails and you have honestly tried everything stated above as well as other tips you've learned, another last resort option is bankruptcy.  “Bankruptcy is a tool, nothing more, nothing less” says Bankruptcy Attorney & Trustee Angelyn Wright of The Wright Law Alliance, P.C.  When used appropriately it can be the financial major surgery necessary to rebuild your financial well-being and give you a Fresh Start.  If you are considering this option, please make sure you understand what bankruptcy is and does.  When done the wrong way or with the wrong attorney, it may put you in a worse financial situation than you are now.  Get educated and ask questions before you proceed with caution.

Based on personal experience as well as observing and working with others who are dealing with and have resurrected from financial struggles, your financial situation can change if you are willing to work hard enough and can be disciplined.

By the way, don’t be afraid to ask for help.  There are many banks, credit unions, non-profit organizations, and financial coaches like myself that want to assist you.  Contact me at info@ProsperityNowFMS.com for consultation.