Advertiser Disclosure

News

Study Shows Student Debt Can Kill 75% of Millennials’ Average Net Worth

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

It’s no secret that millennials are swamped with student loan debt. While more millennials have obtained bachelor’s degrees than those in generations past, they also borrowed the most to earn those degrees. As of 2018, outstanding student loan debt in the U.S. surpassed $1.48 trillion, almost one-and-a-half times what Americans owe on credit cards.

According to a MagnifyMoney analysis of Federal Reserve data, all this debt is hampering millennials’ chances for long-term financial success.

In fact, this study revealed that the average net worth of a millennial with student loans is only 25% of the net worth for a fellow millennial without them. What’s more, the data suggest student loan debt is preventing some millennials from saving for retirement or buying homes.

And while it’s likely that those without student loans tend to include more people from wealthy homes, the massive disparity between those who owe and those who don’t suggests that educational debt can supercharge the difference in income.

If you’re a millennial, your financial journey since graduation has probably been an uphill battle. Here’s how student loan debt has held your generation back, along with our advice on how to conquer your debt once and for all.

Key facts

Millennial households with student loan debt have…

  • An average net worth of $29,087, compared with $114,376 for student loan-free households.
  • 46% less in their savings and checking accounts (median balance of $5,500 vs $10,180 for those without student loans).
  • $21,160 in retirement savings versus an average of $39,905 for those with no student loan debt.

 

Student loans weigh heavily on millennials’ net worth

The wealth divide between households with student loan debt and those without it has been widening over the past few decades.

In 1989, under-35 households with student loan debt had just 13% less in average net worth than households without any student loan debt.

That difference had nearly tripled by 1998, when under-35 households with student loan debt had a net worth 36% less than their debt-free peers. The former had an average net worth of $68,687, while the latter held an average of $108,146.

In 2016, the gap had grown to 75%, with student loan-saddled millennial households having an average net worth of $29,087, compared with $114,376 for student loan-free households. In other words, millennials unburdened by student loans held over $85,000 more than those who still had debt from college or graduate school.

Even though a college degree typically leads to a higher-paying job, the student loans that often go with it can significantly undermine your ability to build wealth after graduation.

Student loans mean less money in the bank (and more credit card debt)

If you’ve got student loans, you know those payments can be a struggle to make month after month. According to our analysis, millennials with student loans are putting a significant amount of their paychecks toward their debt — leaving them with less money in the bank.

In fact, holders of student loans had 46% less in their savings and checking accounts in 2016 than millennial college graduates without debt. The former group had a median bank balance of $5,500, while the median for other millennial grads was nearly twice that, at $10,180.

Perhaps because millennial borrowers have less liquid cash, they also end up taking on more credit card debt. Fifty-five percent of those with education debt also had credit card debt, compared with just 32% of those without student loans. They also carried larger balances — $2,888 — as opposed to $1,476 for debt-free millennial graduates.

If student loan bills are eating up a big part of your income, you might use credit cards to finance big purchases. But credit card debt tends to be even harder to pay off than student loan debt because of high interest rates and the temptation to overspend. Caution is key when it comes to paying with plastic.

Student loans get in the way of saving for retirement

Considering that millennials with student loans have less money in the bank, it should come as no surprise that they also have less saved for retirement. After all, once you’ve paid your student loan bill and other recurring monthly expenses, you might not have much left over to contribute to your 401(k), individual retirement account (IRA) or other nest egg account.

Our analysis found that millennials with education debt have an average of $18,745 less in retirement savings than their debtless counterparts. The average grad with debt had saved $21,160 in 2016, while those without student loans had an average of $39,905 in their retirement savings accounts.

When it comes to preparing for the future, the earlier you can start, the better. Thanks to the power of compound interest, any amount you can set aside today can grow significantly over time.

Student loans seem to be an obstacle to homeownership

When it comes to buying a home of their own, millennials can encounter many challenges.

The high cost of rent is one of them, with nearly 21 million households paying more than 30% of their income on rent, according to Harvard’s Joint Center for Housing Studies. While rent costs have gone up, wage growth has remained stagnant, even for those with college degrees. This makes it all the more difficult to save for a down payment and other costs associated with buying a home.

And student loans create further obstacles, resulting in lower rates of homeownership among millennial graduates with student loans (34%) than among those without (36%). Those who have managed to buy a home end up with a lower-value home and a bigger mortgage, compared to their contemporaries who don’t carry education loans.

According to MagnifyMoney’s analysis, the home values of millennials younger than 35 with student loan debt are 5% lower than those without student loan debt. The median value for those with student loans was $157,000 in 2016, while millennial homeowners without student debt had homes with a median value of $165,000.

What’s more, homeowners with student loans had to take on even more debt to buy their homes, possibly because they weren’t able to save as much for down payments. Their median mortgage was $104,000, versus $98,000 for those without student loans.

Not only does student loan debt get in the way of buying a home, but it also forces millennials to take on even more debt to realize their goal of owning a home.

Get proactive about reducing your student loan burden

Although you might feel you got tricked into taking on debt at a young age, burying your head in the sand about your student loans will only make a difficult situation worse. Instead of giving up hope, try to get proactive about paying off your debt.

If you can make extra payments, you can get out of debt faster and save money on interest. Create a budget to see if you can spare any extra cash each month. Look for areas where you can cut down on spending. Some people even take drastic steps, such as downsizing their apartment or selling their car, to get rid of debt as fast as possible.

If you’re working, find out what steps you can take to get a pay raise. Or consider changing jobs altogether to boost your salary. Alternatively, you might take on a side hustle, such as driving for Lyft or running errands for TaskRabbit, to increase your income and throw that extra money toward your loans.

Another option is to move into a career that could qualify for student loan forgiveness. For instance, those who work in public service fields or as teachers in qualifying schools could be eligible for federal student loan forgiveness.

You can also look into state-based and private programs that offer student loan repayment assistance for your private or federal student loans. And some employers even offer a student loan matching benefit to help you pay off debt.

Finally, some borrowers could benefit from refinancing their student loans. If you have decent credit and a steady income — or can apply with a cosigner who does — you could qualify for a lower interest rate than what you have now, as well as choose new repayment terms. As a result, refinancing could save you money on interest and help you pay off your student loans ahead of schedule.

Whatever you decide, make sure you’re being strategic about the best way to manage student loan repayment. Even though student debt has held back millennials in major ways, there are steps you can take to overcome this obstacle and reclaim your financial freedom.

Methodology: MagnifyMoney examined the Federal Reserve’s Survey of Consumer Finances to compare households headed by someone under age 35 with student debt versus those without. All monetary amounts are expressed in 2016 dollars (the date of the latest survey).

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Rebecca Safier
Rebecca Safier |

Rebecca Safier is a writer at MagnifyMoney. You can email Rebecca here

TAGS:

Advertiser Disclosure

News

What the Election Results Mean for Your Student Loans

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

From health care to the economy, voters had many concerns in mind as they headed to the polls for this year’s midterm elections.

But one major issue that might not have gotten as much attention in news coverage was the government’s handling of student loans, a subject which impacts 44 million Americans. As our national student debt has exceeded $1.5 trillion, many borrowers are hoping for relief.

But while Democrats call for an expansion of financial aid and forgiveness programs, conservatives warn that increasing aid could be a burden for taxpayers.

Given the election results that gave the Democratic Party a majority in the House of Representatives, we might see them looking to influence the education policies moving forward. Still, they won’t have much hope for passing their own legislation without working out deals with the Republican-led Senate and White House.

On the other hand, a few ballot measures across the country and the presence of some lawmakers with a personal interest in student debt are enough to cast educational debt in a bigger spotlight.

Whether you’re a student, loan borrower or parent preparing for the costs of colleges, find out what the 2018 midterm election results could mean for you.

Democrats to weigh in on education policies

While some races are still too close to call, Democrats have locked in a majority in the House of Representatives, taking the gavel from the Republicans, while the GOP has added to its majority in the Senate.

This shift in the House could mean Democrats have greater influence when it comes to Department of Education policies, particularly those related to for-profit colleges and student loan forgiveness programs.

Critics of Secretary of Education Betsy DeVos have accused her of protecting for-profit schools at the expense of students. They have also objected to her efforts to scale back certain Obama-era protections, such as borrower defense to repayment, which discharges loans for defrauded borrowers.

Democrats have sent letters objecting to education policies under the Trump administration, but as the minority, they were unable to conduct oversight of the department. Now that they lead the House, however, Democratic members will likely be active on this front.

“Expect a Democrat-led House, for instance, to conduct hearings, demand documents and press the Trump administration on its appointment of officials with ties to for-profit colleges — and its reversal of Obama-era policies meant to crack down on the industry,” wrote Michael Stratford, education reporter for Politico on Tuesday.

Ally Bernstein, legislative counsel for the Association of Young Americans (AYA) agreed, “The [Democrats will] hold the department’s feet to the fire on its controversial rewrites of rules governing for-profit institutions, including whether federal student loan borrowers are protected from continuing to repay loans if these institutions committed fraud against them.”

The free-college movement shows up at local level

When running for president in 2016, Sen. Bernie Sanders (I-Vt.) supported the movement to provide free public college for all. In 2017, Sanders and Sen. Elizabeth Warren (D-Mass.) proposed a bill that would provide $41 billion a year to states to help eliminate tuition.

While there hasn’t been much progress on the national level, various state politicians have voiced their support for free community college during this midterm election season. For example, Ned Lamont, who won his bid for governor of Connecticut, supports two years of community college for state residents who agree to remain in state following graduation.

In fact, both the Republican incumbent Larry Hogan and his Democratic opponent for the governor’s seat of Maryland, Ben Jealous, proposed expanding Maryland’s free tuition college program, which currently provides no-cost community college to residents. Hogan, who won the race, said he supported expanding the tuition-free program to include four-year institutions.

And it’s not just the state governments. Seattle voters approved a measure to offer two free years of community college for public school students. The move will be funded by a property tax hike which the city predicts will raise over $600 million over several years.

So although the free college movement hasn’t gained much traction nationally, these city- and state-level victories could be signs of changes to come.

Politicians have student debt, too

For some politicians in this election, student loans are a personal issue. According to CNBC, one in 10 current members of Congress are repaying student loans, either for themselves or a family member.

Some of them are also trying to address the issue more broadly. Consider Rep. Tom Reed (R-N.Y.), who was re-elected to the House Tuesday.

“This is an area that affects the futures of so many young men and women, and it’s time to address the issue before it gets even worse,” Reed told Student Loan Hero in an interview earlier this year. “We’re shackling our children and grandchildren to debt if we don’t do something.” (Note: Student Loan Hero and MagnifyMoney are both part of LendingTree.)

Reed introduced a bill this year that would force some universities to use a portion of their endowments to help low- and middle-income students.

And there may be more such elected officials on the way, as millennials join the political arena and move up the ranks of state government.

Natalie Higgins of Massachusetts and Matt Lesser of Connecticut are two re-elected state representatives who have been open about their struggles with student debt.

Higgins, for example, borrowed more than $130,000 to pay for law school.

Lesser, also a student loan borrower, has made student debt a signature issue in his past few years on Connecticut’s state senate. In 2015, he sponsored a “student loan bill of rights,” aimed to make student loan companies follow consumer protection rules.

Committed to easing the burden for student borrowers, both Higgins and Lesser introduced a state bill requiring student loan servicers to abide by consumer protections.

“Having representatives who have experienced or are still experiencing student loans and understand the burdens and problems is really important,” said Ben Brown, founder of AYA.

Student loan legislation remains murky

With divided affiliations in Congress, competing visions for higher education from the Republicans and Democrats look less likely to become law.

Late last year, Republicans proposed the PROSPER Act, which would reduce regulation of for-profit schools, limit student loan forgiveness and increase funding for community colleges and apprenticeships, among other things.

Democrats, meanwhile, have proposed the Aim Higher Act, which would expand Public Service Loan Forgiveness (PSLF), increase funding for Pell Grants and revise income-driven repayment plans.

While the Republicans could pass PROSPER during the “lame duck” session before the new Democratic-majority House sits, any overhaul of the student loan system by the new Congress would require a deal between the two sides.

Student loans have become a political issue

With millions of Americans dealing with student loans, and with the cost of college higher than ever, it’s not surprising that higher education issues are increasingly part of the political conversation.

Now that Democrats have won a majority in the House, the current push to roll back Obama-era protections is likely to come under a lot more scrutiny. Likewise, previous plans for major changes to student debt through the PROSPER Act might need bipartisan consensus to move forward.

As a student loan borrower, make sure to stay informed about any changes to federal programs, such as income-driven repayment or loan forgiveness. Also know that even though the election is over, you can still make your voice heard. Contacting your elected officials is easy and can have an impact if enough people take action.

Even if these debates feel far away, they could have a very real effect on your life and finances.

This report originally appeared on Student Loan Hero. Both MagnifyMoney and Student Loan Hero are part of LendingTree.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Rebecca Safier
Rebecca Safier |

Rebecca Safier is a writer at MagnifyMoney. You can email Rebecca here

TAGS: , , ,

Advertiser Disclosure

News

Ebates for Groceries: 4 Grocery Rebate Apps Reviewed

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

iStock

People who frequently use rebate websites may have wondered if there are equivalent sites for grocery shopping — sure there are, and plenty of them.

As a quick refresher, popular sites like Ebates offer coupons and cash rebates to customers who shop at partner retailers such as Macy’s or Walmart. San Francisco-based Ebates is owned by Rakuten Inc., one of Japan’s largest online shopping malls. When you click on an Ebates link through the website or app, an email, or by installing its browser extension to start shopping, you’re eligible to receive cash back. You can also receive cash back at the store by linking a credit or debit card to your Ebates account.

Grocery store rebate apps work much the same way, with an extra step of submitting your receipts after you shop. There are a slew of such apps including Checkout 51, SavingStar and Receipt Pal, plus the four we’re reviewing below. Each of these turns your grocery receipts into cashback awards and each has its own special features, strengths and limitations.

Ibotta

Ibotta allows users to earn cash rewards for everyday purchases, both in-store and online. Partnering with almost 200 grocery store chains in the country, the Denver, Colo., based company offers rebates on a wide variety of fresh produce, liquor, processed foods and personal care products and household supplies.

How it works

Step 1: Find offers

Before your trip to the grocery, find offers on products from that particular grocery store listed on the app, and claim the ones you’ll need. Each deal is worth between 25 cents and $5. Some deals are only valid for items at selected stores, but there are also offers applying to products sold at any partnering grocery store. From time to time, there are rewards worth 25 or 50 cents just for submitting a receipt, even though you didn’t purchase anything eligible for cash back.

Step 2: Go shopping

You go buy groceries, including items that you’ve claimed cashback offers on. Keep the receipt.

Step 3: Redeem awards

Redeem your offers by taking a photo of your receipt via the Ibotta app. The app will match the items on the receipt to the offers previously claimed and deposit the cash into your account within 48 hours.

Note: your receipts are valid for rebates within 7 days of purchases, so don’t wait too long to submit your receipt.

You can also link your loyalty card or account with Ibotta, so that the app receives an electronic submission of your receipt to be automatically reviewed for cash rewards.

Step 4: Receive cash

Ibotta will deposit your credit within 48 hours. You can withdraw the funds from your account and transfer them to your Venmo or PayPal account every time once you’ve accumulated $20 of cash credit. Another option to use your earnings is to buy gift cards from stores partnering with Ibotta.

Where it works

Ibotta partners with nearly 200 grocery stores, drug store and wholesale markets. To name a few: Whole Foods Market, CVS, Walmart, Kroger and Costco. Find the entire list of stores where you can use Ibotta here.

Extra bonus

Beyond regular offers, you have opportunities to earn additional credit through special offers. A few examples below:

  • Once you redeem your first in-store offer, you earn an extra $2 cash from Ibotta.
  • You get a $5 bonus when a friend signs up through your referral.
  • When you reach $10 in credit, Ibotta will match the earnings with an extra $10.

Pros and cons

Pros

  • Cash rewards are straightforward and are deposited to your account within 48 hours.
  • Deals are available on a variety of groceries — it’s the only app we reviewed that offers rebates on fresh foods.
  • You can use Ibotta in some of the biggest grocery chains in the country.
  • Beyond groceries, you can earn cash credit from purchasing electronics, clothing, gifts, home and office supplies, restaurant dining both online and in-store.
  • Ibotta is the most outstanding among the four apps we reviewed when it comes to interface and design.
  • Ibotta offers generous bonus awards.

Cons

  • It takes time to browse deals every time before you go grocery shopping.
  • You can’t cash your rewards unless you reach $20, which can take a while to accumulate.
  • It doesn’t work with every grocery store — you can’t use it at mom-and-pop shops or bodegas.
  • Offers don’t last forever; sometimes they expire before you remember to redeem them in time.
  • After you claim offers, Ibotta will often ask you personal questions such as your age, gender, race and consumption references. You can’t proceed without answering, but Ibotta is not transparent as to why they are collecting such data and how they will use such information.

Receipt Hog

Receipt Hog is unique in the sense that it pays you for uploading pictures of your receipts for market research. Any receipt will work, whether it’s from a large grocery chain or corner bodega.

How it works

Step 1: Submit receipts

You earn coins from your receipts from any store, depending on the amount of money you spent. You earn:

  • 5 coins for a receipt total of less than $10
  • 10 coins for a receipt total of $10 to $50
  • 15 coins for receipt total of $50 to $100
  • 20 coins for a receipt total of more than $100

Note: A receipt must be uploaded to the app within 14 days of the transaction date. You can submit up to three receipts from the same store with the same transaction date and up to 20 receipts per week.

Step 2: Redeem points

Once you reach 1,000 coins, you’ll be eligible for a PayPal cash redemption or an Amazon gift card.

  • 1,000 coins = $5
  • 2,900 coins = $15
  • 4,300 coins = $25
  • 6,500 coins = $40

The more coins you redeem, the higher the payout — it’s worth waiting until you earn 6,500 coins to maximize your earnings. The redemption request will be approved within seven days.

Where it works

You can submit receipts from any store within the U.S., Canada and the United Kingdom.

Extra bonus

Receipt Hog offers extra points-earning opportunities:

  • You can earn additional rewards and bonuses by completing surveys or challenges, or by uploading more receipts.
  • You can connect your Receipt Hog account with your email address and Amazon to earn bonus points and awards.

Pros and cons

Pros

  • Uploading receipts is the simplest way to earn money, among these selections — you don’t need to spend time looking for eligible offers or deals with Receipt Hog.
  • It’s the most widely applicable app among the four. It can be used in all stores that sell groceries, big and small, and in three countries.
  • You won’t need waste money on items you don’t use just to get cashback rewards.
  • Receipt Hog also allows users to earn rewards from retailers that sell clothes, home improvement and furnishings, office supplies, electronics and arts and crafts and sporting equipment.
  • The company is transparent about its data collection purpose.

Cons

  • If you are a new user, you have to complete an introductory survey before you can access the cash-out page.
  • The reward system is a bit complicated: you earn points based on how much you spend on groceries on one receipt, and then you have to convert from points to dollar amounts to get rewards.
  • Because you earn points primarily by submitting receipts, your earnings from Receipt Hog may not be as substantial compared with other product- or band-oriented rebate apps.
  • There is a waiting period of up to seven days to receive funds, the longest cash-out wait of all apps reviewed.

Fetch Rewards

Unlike Ibotta, which has a limited choice of grocery stores and specific offers on products, Fetch Rewards allows you to scan any receipt from any grocery store in the U.S. Its offers are based on specific brands, not products or stores. Most of the brands partnering with Fetch Rewards are popular consumer brands that sell processed food or personal care items.

How it works

Step 1: Upload receipts

Scan your grocery receipt from any grocery store, convenience store, drug store or liquor store.

Note: Receipts must be scanned within 14 days of the transaction date. You can upload up to 14 receipts in a rolling seven day period.

Step 2: Earn points

If you have purchased a product from one of Fetch Rewards’ participating brands, you’ll earn points for that item. There are three categories of points: base, bonus and special.

Step 3: Redeem rewards

As your points accumulate, you can redeem them for gift cards to popular retailers that work with Fetch Rewards. Every 1,000 points are worth $1. There are four tiers of rewards: 5,000 points, 10,000 points, 25,000 points and 50,000 points; you can earn gift cards with a cash value of $5, $10, $25 and $50, respectively.

Where it works

Any U.S. grocery store that carries the 200+ popular brands in the app.

Extra bonus

You receive 2,000 points after you refer the app to a friend and their first receipt has been approved and accepted.

Pros and cons

Pros

  • Anyone who lives in the U.S. can potentially take advantage of the app.
  • The brands are common enough that most grocery stores carry them.
  • The gift-card options are extensive.
  • Deals don’t expire.

Cons

  • If an account is inactive for 90 days, the points will expire.
  • The deal options are limited to 200+ brands.
  • All offers are for processed foods. You won’t be able to get credit for buying fresh produce with Fetch Rewards.
  • You can’t convert points to actual cash that can be transferred to your own financial account.

BerryCart

BerryCart is a healthy answer to Fetch Rewards. Users earn rewards for buying organic, gluten-free or non-GMO foods. Rather than offering brand-based deals, BerryCart offers are based on specific products.

How it works

Step 1: Find deals

Browse BerryCart deals in the app. The deals are only valid for a certain period of time. It currently offers cashback rewards on nearly 50 items. The app tells you where the item is available near you based on your GPS location; most of the offers are worth from $0.25 to $2.

Step 2: Claim deals

In order to claim a specific deal that BerryCart offers, you have to click the “Fact” button on the offer page to learn information about that product.

Step 3: Upload receipts

After your grocery shopping trip, you can snap a picture of the receipt or the bar code to receive a rebate for the item you previously claimed. BerryCart will deposit the funds into your account within 24 hours.

Step 4: Get cash

Once your accumulated rebates reach $5, you can cash them out by transferring the money to your PayPal account, or you can buy a gift card to iTunes ($5 to $15) or Hotels.com ($10 to $20).

Where it works

You can use BerryCart in any store that carries the items BerryCart currently offers deals on.

Extra bonus

  • You can earn extra cash back by writing reviews on each product.
  • You earn $2 for each successful referral.

Pros and cons

Pros

  • If you buy mostly organic, all-natural, gluten-free and non-GMO foods, this app is for you.
  • It works at grocery stores across the country.
  • You can learn nutritional facts about the things you buy while claiming deals.
  • The credit you earn is deposited in 24 hours, the speediest among all four apps reviewed.

Cons

  • The app is limited, in that not many deals are available on BerryCart. Currently you can only earn cash back on about 50 products.
  • It requires many steps before you eventually receive the awards.
  • The BerryCart app is not very intuitive.

The bottom line

It’s fulfilling to earn cashback rewards just by scanning your grocery receipts. To maximize your earnings, you’ll probably want to check the apps when creating your shopping list. It’s even more gratifying if you can combine your app rebates with store discounts. But it’s also easy to overspend — squelch the impulse to buy something solely for the cash back because you may end up wasting money instead of saving it.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Shen Lu
Shen Lu |

Shen Lu is a writer at MagnifyMoney. You can email Shen Lu at shenlu@magnifymoney.com

TAGS:

Advertiser Disclosure

News

How 4 Teachers Use Side Hustles to Stay Afloat

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

iStock

It’s no secret that American educators as a whole aren’t well-compensated. Throughout 2018, in multiple states across the country, educators have publicly demanded salary increases, benefits and more funding for public education through staged walkouts and marches at state capitols. The protests have intensified a national debate about how we value teachers and the future of public education.And then there are the statistics:

  • The Bureau of Labor Statistics (BLS) reports the average annual pay was $58,780 in 2017 for the nation’s 4.2 million preschool, primary, secondary and special education teachers. The average annual expenditure per consumer — the average spending budget for American households — for 2017 was $60,060.
  • An analysis of teacher salaries by the National Education Association reports the average classroom teacher salary is up 15.2% over the past 10 years. However, after adjusting for inflation, the average salary has actually fallen by $1,823 or 3.0% over the same period.
  • In 2017, teachers earned 19% less than similarly skilled and educated professionals, what’s referred to as a “teaching penalty,” according to the Economic Policy Institute.
  • Nearly one in five teachers leave the profession because of low pay, according to the Learning Policy Institute.

Meanwhile, many teachers have taken on side hustles or second jobs as a solution to stagnant wages in their chosen profession. Some sell their expertise by sharing lesson plans and other tools to be used by other educators via platforms like Instagram and sites like TeachersPayTeachers.

Others have taken on side hustles in the gig economy. Airbnb, for example, reports nearly 10% of its U.S. hosts — more than 45,000 people — are teachers. And, based on a Brookings Institution analysis of BLS data, elementary and secondary school teachers are about 30% more likely to work a second job than non-educators.

With that in mind, MagnifyMoney spoke with four educators about what they do on the side to make ends meet at home, and to share their advice for any educators considering taking on a side hustle.

Lorri Lewis

The 12th grade English teacher worked as a driver for Uber and Lyft to fund her wedding planning business. Now she has a fully funded emergency fund and can afford to take vacations.

Lorri Lewis, 50, of Southfield, Mich., told MagnifyMoney she has always been an advocate for having multiple streams of income. So when the 12th grade English teacher and newly single mother of two saw an opening for a paid wedding coordinator at her church in 2002, she jumped at the opportunity to try out a longtime interest. Then, about five years ago, Lewis started driving for Uber and Lyft to raise the seed money she needed to launch her own wedding coordinating business. Lewis also made Instacart deliveries once her youngest son entered college.

“Having multiple streams of income is a big thing in my life now because I’m at the top of the pay scale and want to do other things in my life, like travel,” said Lewis, referring to educator salary schedules set by school districts. The educator notes because there’s no room for a raise, her pay technically decreased a couple of years ago when she and her co-workers started paying a larger portion of their health care expenses.

Earlier in 2017, Lewis ditched the gig economy in favor of running her business.

“The nice thing about being a wedding coordinator is that it allows me to work on the weekends and the summers, which is “off time” for teachers anyway,” said Lewis.

Where the side hustles help

Lewis’ teacher salary is just enough to cover the basics, including her mortgage, utilities and student loan payments. Until recently, the majority of her side income went to raising her kids as a single parent, completing necessary home repairs and funding her business. She said it was a struggle, but now that both of her sons are out of the house, Lewis has enough to build a financial cushion.

“I’m at the point now where I’m actually accumulating an emergency fund since becoming an educator,” Lewis told MagnifyMoney. Lewis’ career in education spans 20 years.

Advice to other teachers

Lewis’ main suggestion to other educators looking to start a side hustle is to find something you can do in the off-hours, like on weekends and during summers.

“Outside of the emails and phone calls, I schedule rehearsals on Fridays and weddings are on Saturdays, so I still have Sunday to regroup and organize for the new school week,” Lewis said. She added that it’s nice to do something that doesn’t involve working with students or children so teachers can get a break from their work environment.

Cecily White-Cooper

The middle school English for Speakers of Other Languages (ESOL) teacher tutors online, sells T-shirts she designs and creates teaching materials so she can travel and fund the holidays.

Image courtesy of Cecily White-Cooper

Cecily White-Cooper, 40, in Laurel, Md., told MagnifyMoney the predominant side hustle throughout her 18-year teaching career has been tutoring. It was a necessity, both when she started her career in California and when she moved to Maryland.

“I was on the bottom tier of the pay scale,” White-Cooper said. “I was not making enough money either here in Maryland or California in order to survive.”

In California, she began by finding clients on Craigslist and tutoring students at the local public library. After moving to Maryland, she tutored with a company based in Washington, D.C., until it became too much of a hassle to travel and find a babysitter after having twins in 2009. At that point, White-Cooper turned online, teaching English to students in China through VIP Kids.

Though tutoring has always been a staple side hustle, White-Cooper also has other income streams. She designs and sells T-shirts through Merch by Amazon, Redbubble and Etsy. White-Cooper also produces her own teaching material and sells that on TeachersPayTeachers.

White-Cooper’s experience as a lifelong side hustler inspired her blog, TeacherCes.com — from which she earns some advertisement income — and a podcast of the same name, where she shares advice and interviews with other moonlighting educators.

Where the side hustles help

“Initially when I started up until when I got married, every year I had to have something going on. It was hustle, hustle, hustle annually,” White-Cooper told MagnifyMoney. White-Cooper married about eight years into her teaching career. Having a dual-income household means the extra income is no longer a necessity, but she maintains her side hustles because they provide extra money she can use to travel or pay for seasonal expenses like holiday debt.

Advice to other teachers

“There will be something that will suffer,” White-Cooper said. “For me, it’s my social life.” But she makes up for the lost time with vacations once in a while, like a trip to Las Vegas with her friends.

White-Cooper added that having a side hustle and a family has also forced her to manage her time more efficiently to be successful.

“I’m very selective about what I do and where I go in order to get my tutoring projects and all of that finished,” she said. “I do my personal projects during my lunch hour. Then once the day is over at 3 p.m., I eat lunch.”

White-Cooper said she also gets to bed earlier so she can be up early on the weekends to work in her home office before the twins wake up.

Shannon Mitchell

The high school English teacher turned to multilevel marketing companies to get the money her family needed to fix their home sewer system. Now, she runs her own jewelry business.

Image courtesy of Shannon Mitchell

It was a poor housing market, low wages and a broken sewer system that drove high school English teacher Shannon Mitchell, 40, in Fredericksburg, Va., to seek side income through multilevel marketing (MLM) companies in 2013.

“With teaching, there’s no overtime — there is no other way to make money unless you get a second job,” Mitchell said.

Upon realizing there was no other option to earn the funds to fix the sewer system, she told herself, “‘Here I am, 35, and I have to ask my parents for money.’ I was like, ‘No way. I’m taking the bull by the horns.’”

Where the side hustles help

Mitchell became a representative for Rodan and Fields, where she said she quickly made the money she needed to repair the sewer system. She later worked for an MLM called Keep Collective before ending her side gigs with MLMs in 2016.

Although Mitchell says she and her husband have always generally lived beneath their means, she says the side income from her work with multilevel marketing firms helped them have a more flexible lifestyle and extra funds for life’s emergencies. Mitchell no longer has these income streams, but she started a porcelain jewelry business, which she runs outside of teaching, and hopes it will eventually become profitable.

Advice to other teachers

While many teachers seek extra-income opportunities within the world of education, Mitchell recommended not limiting yourself to the profession. She encouraged teachers to follow their interests.

“Don’t feel like it’s all or nothing with teaching,” Mitchell said. “You can be a good teacher and also explore other things as well.”

Finally, Mitchell warns any educators interested in multilevel marketing to “be smart about it” and weigh the pros and cons.

“Don’t buy into their hype,” said the MLM veteran, who mentioned that she didn’t have the control over her business the way she thought she would when participating in an MLM.

Jessica Cioffi

The 5th-grade teacher walks dogs with Wag! to fund humanitarian trips.

Jessica Cioffi, 32, an educator based in Los Angeles, told MagnifyMoney she first looked into dog walking in June 2017.

“The summer came and some of my travel plans had fallen through, so I had some extra time on my hands that I needed to fill,” said Jessica. With travel out of the picture, she said she decided to turn to her other love: dogs. She started walking dogs through an app called Wag!

Where the side hustles help

At first, dog walking was a fun way for her to exercise, hang with dogs and get paid, but when Cioffi realized the income could help her pay humanitarian trips she wanted to do, she was motivated to walk more often. She dog walks up to 8 miles a day on the weekends and in the summer.

Advice to other teachers

Cioffi advised using breaks to earn extra income with a side hustle.

“Summer is a great time to take on extra work, especially if it is something you can find joy in,” Cioffi said. “For myself, regardless of income, Wag! was a great way to interact with animals, get outside and meet incredible people.”

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

TAGS: , , , ,

Advertiser Disclosure

News

New Court Ruling Allows Obama-Era Student Loan Protections to Take Effect

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

A U.S. district court ruled Oct. 16 that Obama-era rules to protect student loan borrowers defrauded by colleges will take effect without further delay.

Initially slated for July 1, 2017, this policy was put on hold by Education Secretary Betsy DeVos, who said the rules made it too easy for borrowers to have their student loans canceled.

With this new ruling, the delay has come to an end, meaning that students who attended predatory for-profit schools might now qualify for cancellation of their student loans.

No more delays: Borrower defense to repayment will take effect

The legal decision impels the Department of Education to enact borrower defense to repayment, a policy approved during the Obama administration that offers student debt forgiveness to students found to have been misled by for-profit schools.

Critics of the decision to delay the policy say these schools target vulnerable populations such as veterans and those living in poverty, with former for-profit college enrollment officer Tressie McMillan Cottom telling NPR that these groups are the focus because they “qualify for the maximum amount of student aid.”

The policy is meant in part to address cases in which students take on debt to attend but leave without the skills or certifications they were promised or credits that could transfer to another institution. CNN cited an estimate from The Century Foundation that more than 1,400 schools closed between 2013 and 2015 and meet this description, and that their former students might now be eligible for loan forgiveness.

Almost 48,000 claims for debt forgiveness have been granted so far, most of which were processed under the Obama administration. Currently, 106,000 applicants are waiting for a decision, which should come faster with this latest ruling.

Consumer advocates celebrate ruling; conservatives uncertain

The latest court ruling is a major victory for students, according to consumer advocates.

“Today’s decision is a huge win for defrauded borrowers around the country,” said Julie Murray, an attorney who represented students who sued the Department of Education, in a statement after the announcement. “The rule is finally in effect. No more excuses. No more delays.”

Murray added, “Industry will continue to challenge the rule in court, but we will work as long as it takes to defeat those corporate interests and an administration beholden to them.”

But while students and their advocates support the ruling, it represents a defeat for DeVos and her fellow conservatives, many of whom claim loan cancellation could hurt taxpayers.

Although DeVos’ office said it wouldn’t argue against the ruling, it signaled that it intends to revise these regulations.

“Regardless of what the court decides, many provisions of the 2016 regulations are bad policy, and the department will continue the work of finalizing a new rule that protects both borrowers and taxpayers,” DeVos spokesperson Elizabeth Hill said in a statement.

The policy is one of many dealing with borrower protections that the Department of Education under DeVos has sought to roll back.

News comes on the heels of startling student loan statistics

Student protections such as the borrower defense to repayment policy are more important than ever, as the national student loan debt burden has never been heavier.

According to a report by Bloomberg based on data from the Federal Reserve, student loan debt, which stood at $1.5 trillion as of mid-2018, is the only debt category that has grown continuously since the Great Recession.

Student loan debt has increased by 157% in the past 11 years, while mortgage and credit card debt have gone down.

At the same time, rates of student loan delinquency and default have seen increases. This time last year, there were 4.6 million student borrowers in default on their educational debt.

Find ways to protect yourself as a student loan borrower

If you think you qualify for borrower defense to repayment, you can complete the application on Federal Student Aid.

You will need to provide documentation to support your case, including transcripts, enrollment agreements, promotional materials from the school and the school’s course catalog. If you have questions, contact your loan servicer or BorrowerDefense@ed.gov for guidance.

More generally, if you have student loans, educate yourself about your options for repayment and forgiveness. There are a variety of ways to get your loans discharged or forgiven, especially if you commit to working in a public service organization or a high-need area. Plus, some employers now offer a student loan repayment assistance benefit to help employees shed their debt.

Even if you don’t qualify for loan forgiveness, you could adjust your payments on an income-driven repayment plan or extended repayment plan. Or if your budget allows, you could make extra payments to get out of debt faster.

Many consider our national student debt to be a crisis, and Federal Reserve Chairman Jerome Powell has said it has long-term negative effects on borrowers and could hurt economic growth. But by finding the right strategy for your debt, you can avoid default and the harmful consequences that go with it. And hopefully, U.S. education officials will implement rules to help borrowers manage their debt and not stand in their way.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Rebecca Safier
Rebecca Safier |

Rebecca Safier is a writer at MagnifyMoney. You can email Rebecca here

TAGS: , ,

Advertiser Disclosure

News

The Best Place to Exchange Currency

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

The most affordable way to spend money in a foreign country is by using your credit card, exchange rate-wise. However, credit cards may not be widely accepted in your travel destination, or perhaps you simply want to have foreign money on hand before you arrive for peace of mind.

You can purchase foreign currency from your local bank, at an airport kiosk or from an online currency exchange. You tell them the particular amount of foreign currency you need and pay for it in U.S dollars just like buying anything else.

Not every place offers the same exchange rate, though, and some places charge extra fees. It’s important to compare rates and avoid additional fees to make sure you are not paying a high price on the foreign money.

In this post, we will compare the pros and cons, and the cost of each currency exchange option for you before, during and after your travel.

Ways to exchange currency before your trip

Bank or credit union

Exchanging foreign currency before traveling gives many people peace of mind. Ordering foreign cash from your bank or credit union is a common way to do so.

This will save you time and headaches from queuing up at money-exchange facilities at the airport and sweating over the math on the spot. Most banks and credit unions offer somewhat similar exchange rates. The trickier part is to compare fees. Some banks don’t charge fees, but others do. Fees will affect the exchange cost significantly if you don’t exchange much money in the first place.

Pros

  • Banks offer relatively competitive rates compared with retail currency exchange bureaus or airport exchange kiosks because of the bigger volume they sell and buy.
  • Some banks offer online currency order and delivery. Constraints and fees may apply. For example, Bank of America customers can order up to $10,000 in foreign currency online over 30 days. But if they need more, they have to stop by a Bank of America location.
  • You can choose to receive your order in small, large or mixed denominations depending on availability.

Cons

  • If you go to a bank branch, they may not have the amount of foreign cash you need. It would usually take a few days for the bank to get the money ready for you. Don’t wait too
    long to exchange currency. Call your bank in advance for availability of specific currencies.
  • Each institution limits on amounts. With Bank of America, for instance, your order amount must be at least $100.
  • Some banks charge additional service or delivery fees.
  • Banks offer less competitive foreign exchange rates compared with credit/debit card rates.

Costs

The difference in rates offered by different banks is small. So the major factor that will affect the efficiency of your exchange is fees. We look into the fees for four major banks (they’re the largest by assets):

Bank of America

Rate: On Sept. 19, Bank of America provided an exchange rate of 1:1.2304 between euros and U.S. dollars. Purchasing 1,000 euros would cost $1,230.40. You can check the daily rates BOA offers here.
Fees: If you choose to get the foreign currency delivered, there is a delivery fee of $7.50 on all foreign currency orders less than $1,000; this fee is waived if the currency you buy is worth $1,000 or more.
Ways to purchase: You can order online if you have a BOA checking or savings account. BOA credit card holders only can order currency at a physical bank branch, but the purchase needs to paid in cash.

Chase

Rate: The exchange rate for buying euros at Chase on the same day was 1:1.251. The cost for 1,000 euros would be $1,251.
Fees: $0.
Ways to purchase: You have to show up at a branch to make an order; you can’t order online and have to pick up the cash later if they don’t have the currency you need in stock.

Citibank

Rate: On Sept. 20, Citibank offered a rate of 1:1.2462 for you to buy euros. That means if you bought 1,000 euros, the cost in U.S. dollars would be $1,246. You can check the rate of the day by calling its 24-hour Exchange Rate Hotline: 1-800-756-7050, option #1.
Fees: If you are a client with the Citigold® or Citi Priority Account Package, there are no additional fees. But if you are not, $5 service fee will be charged if the transaction amount is $1,000 or less. Additionally, Citi charges a fee from $10-$20 to deliver to your address, depending on the delivery option.
Ways to order: You will have to be a Citi client to buy foreign currency. To order, visit your nearest Citibank branch or call 1-800-756-7050, option #2.

Wells Fargo

Rate: On Sept. 19, buying 1,000 euros would cost $1,229.80 at Wells Fargo, not much different than other major banks. You can check the rates of the day here.
Fees: No fees.
Ways to purchase: Besides physically visiting a branch, Wells Fargo clients can also exchange currency through the bank by ordering money online or by phone to get it delivered to your home or a branch near you within 2-7 days.

Order cash online

No other method can beat ordering foreign currency online in convenience. You just click buttons and purchase foreign currency at your fingertips. But the rates are slightly higher than what banks have. The major player that dominates the online currency exchange space is Travelex.

Travelex charges delivery fees if you order a small sum of foreign currency. If you are seeking the convenience of getting foreign currency delivered, you will be better off ordering foreign currency from a bank that offers free delivery or charges a lower delivery free.

Pros

  • You can exchange currency without having to step out of your house.
  • Rates are better than kiosks at airport or hotels.
  • You can earn United MileagePlus® bonus miles if you buy currency through Travelex.
  • You can pick up money in a retail facility or get currency delivered as early as the very next day after you put in an order.

Cons

  • There’s a $9.99 shipping fee if the transaction is less than $1,000.
  • You have to order in advance for delivery.
  • The exchange rates won’t beat what banks offer.
  • Travelex does not give small denominations of foreign currencies for delivery, so you’re limited to converting to round numbers in the foreign currency.
  • The minimum amount required in each order is $50.

Costs

Rate: On Sept. 19, the euro-U.S. dollar exchange rate provided by Travelex was 1:1.285. The price of 1,000 euros would be $1,284.69. That’s $54 more expensive than you would pay Bank of America for the same amount of euros.
Fees: A UPS Standard Delivery fee of $9.99 is charged if the order is less than $1,000. The fee is waived on transactions of more than $1,000.

Airport kiosks

Departure or arrival terminals at major airports all have plenty of choices for exchanging currencies. Those are the places you should avoid because the exchange rates they offer are typically higher than bank rates and online rates. And oftentimes, those kiosks levy an additional transaction or service fee, making your purchase all the more expensive.

Take Travelex as an example, its physical locations offer different rates than its online rates. And the specific rate depends on the amount of foreign currency you order. The more you buy, the better the rate you will get. In addition, a flat $9.95 service fee applies to each transaction.

However, if you need cash but did not budget enough time ahead of your trip to order foreign currency from your bank, the currency-exchange kiosks would pretty much be your last option before departure. Many of these exchange facilities also have locations in downtown areas, hotels, train and bus stations. They may or may not carry the same rate and fees as the airports. One thing you can do to save money on exchanging money at the airport is to visit the airport’s website before you get there to compare fees from different merchants.

Pros

  • They are easily accessible at airports.
  • Their opening hours are long, if not 24 hours. Many stay open from 5 a.m. to 11:00 p.m. everyday.
  • Those physical kiosks usually have more denominations available than online orders.
  • There is no minimum amount required at a physical store; you can change small amounts of cash, but the transaction fee will still apply.

Cons

  • They offer worse rates than banks and online shops.
  • You likely will have to pay an added service fee

Costs

Rate: On Sept. 19, buying 1,000 euros at a Travelex kiosk would cost $1,370. The rate was 1:1.37. This is more expensive than what you’d get via its website (1:1.285). And if you buy 600 euros at the kiosk, the rate would be even higher — 1:1.38.
Fees: There is a flat service fee of $9.95 per transaction, however little money you exchange through Travelex. If you factor in the service fee, the cost for 1,000 euros would be 12% higher than what you would pay for the same amount of currency at Bank of America.

Ways to exchange currency during your trip

ATM

The least expensive way to access any local currency in cash is by using an ATM on the ground with a checking account that has no fee for out-of-network ATMs and no foreign transaction fees.

You would get the same exchange rate you’d get if you used a credit card at a merchant. Most ATM networks use either the Visa or Mastercard exchange rate, which is the best because it’s very close to the interbank rate banks give each other.

For example, the Mastercard euro-to-U.S. dollar exchange rate on Sept. 19 was 1:1.171, and the Visa offered a pretty close rate of 1:1.172, if the credit/debit card charges 0% fees. These rates were lower than rates of U.S. banks that day.

You don’t have to make this account your primary checking account — just transfer the money you need to your no-fee account in U.S. dollars before the trip, and withdraw on location in local currency.

For security purposes, it’s safer to withdraw cash on the ground as you need it than carrying a large sum of cash with you during the trip. It’s also better to have a separate checking account just for travel. That way if there is fraud, it’s less likely to hit your main account.

Aspiration Summit and Charles Schwab Checking are two nationally available accounts with no out-of-network ATM fees or foreign transaction fees.

With most U.S. debit cards, however, the banks levy a foreign transaction fee up to 3% of the withdrawal amount each time and a flat third-party ATM fee of $1-$5. The ATM operator may also charge a fee.

Still, ATMs would be a cheaper option than exchanging currency at banks or airport kiosks. Let’s say you withdrew 1,000 euros Sept. 19 through Visa at an ATM, if you factor in the exchange rate, the 3% transaction fee and the $5 ATM fee, the total cost would be $1,207 — less expensive than exchanging the same amount of euros at Bank of America.

To save costs on your trip, look for a debit card with low or no foreign transaction fees and no out-of-network ATM fees. If they do charge fees, try to take out a high amount of cash at one setting to avoid multiple fee payments if you need to access more cash later on.

Credit card

The reason why credit cards are the best option to spend money overseas is that a credit card’s exchange rate will certainly beat banks and kiosks, as we discussed above. More important, credit cards offer significantly better protection against fraud than debit cards. Many credit cards charge no foreign transaction fees, and even better, you may earn miles or cashback rewards by using credit cards. Here we’ve rounded up the best travel credit cards with no foreign transaction fees.

Pro tip: One of the key recommendations for international travelers is to make sure your transaction is done in the local currency, not in U.S. dollars. Your credit card will always have a better exchange rate in the local currency than what merchants can offer in U.S. dollars. Plus, a merchant may even slide in an extra fee that you might not know about.

Cash

If you have U.S. dollars in cash, you can also exchange the local currency when you are in your host country. In fact, exchanging money in your host country gives you a better exchange rate than exchanging foreign currency in the U.S. before you go.

This is because the local currency is more common than your U.S. dollar is in that country, and therefore it’s cheaper to buy there. Meanwhile, your U.S. dollars are worth more in a foreign country because it’s a less common currency. Therefore, you will get more local money for your U.S. dollars.

Banque de France, the central bank of France, showed that on Sept. 19, the euro-to-USD exchange rate was 1:1.1667. That means it would cost you $1,167 to get 1,000 euros in France, excluding fees, which is less than you would pay for the same amount of euros at a major U.S. bank.

What to do with your leftover currency after your trip

Try to use up the foreign currency before you return to the U.S. If you have leftovers after your international trip, there are several ways to handle it.

Sell it back to your bank or Travelex

Banks and Travelex will buy the major foreign currencies; but they may not be able to purchase some foreign currencies, such as Argentinian pesos (ARS) Cuban pesos (CUP) at Travelex.

The big caveat here is that you will inevitably lose money by returning the foreign currency. The banks and Travelex make money from the difference between the purchase and sale of foreign currency. The rate they would offer for buying foreign currency from you is always lower than their selling rate

For example, Chase would buy 1,000 euros for $1,085 on Sept. 19, whereas it sold 1,000 euros for $1,251. Travelex would buy 1,000 euros for $1,020 that day. But if you wanted to buy the same amount of euros from a kiosk, the cost would be $1,370.

On top of that, additional fees may be attached to your sale. Citi, for instance, charges $5 if you exchange less than $1,000. Travelex bureaus don’t charge a service fee when you return your foreign currency. However, if you choose to send your leftover currency in the mail, a $5 fee will be deducted from your final proceeds and a delivery fee may also apply.

Keep it

You will be better off keeping the leftover currency: you’ve already bought it with extra cost, and selling it at a cheaper price means you will lose even more money. Why not save the hassle and save it for your next trip?

Sell it to friends and family

Ask your friend, family and neighbors whether they have international travel plans. If they will make a trip to the country you have visited, offering to sell them the local currency at a better rate than what banks provide.

Donate it

You can donate your leftovers after you finish your vacation — brighten up someone else’s day.

On many American Airlines international flights, flight attendants pass around to collect unused currencies from travelers as donations to UNICEF “Change for Good” charity program.

“Change for Good” charity donation barrels are also available at 10 international airports. As you walk around the airport, look out for those barrels to drop your leftover currency.

If you were not able to donate your foreign currency on a flight or at an airport, you can still support the cause by sending your money to:

UNICEF USA
ATTN: Change for Good Program
125 Maiden Lane
New York, NY 10038

Key takeaway

International travel is expensive already. Finding an affordable way to exchange foreign currency can save you some money. For that, you want to look for the option with the most competitive rate and avoid extra fees. When you are on your foreign trip, use a credit card that carries no foreign transaction fees as often as possible. As far as cash goes, the best way to access foreign currency to withdraw money at an ATM using a debit card that doesn’t charge out-of-network ATM fees or foreign transaction fees when you are on the ground. If you need a small sum of cash on hand before traveling, your local bank would be your best option. Ordering foreign currency online can be convenient, but mind the delivery fee that may apply. Our last piece of advice: Avoid airport or hotel exchange kiosks whenever possible.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Shen Lu
Shen Lu |

Shen Lu is a writer at MagnifyMoney. You can email Shen Lu at shenlu@magnifymoney.com

TAGS: , ,

By clicking “See Offers” you’ll be directed to our parent company, LendingTree. You may or may not be matched with the specific lender you clicked on, but up to five different lenders based on your creditworthiness.

Advertiser Disclosure

News

Hurricane Florence Aftermath: The Best Financial Options for Repairing Your Home

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Hurricane Florence aftermath
iStock

More than two weeks after Hurricane Florence’s devastating crawl across the Carolinas and Virginia, many homeowners are assessing the damage and beginning to make repairs.

According to real estate data provider CoreLogic, the storm affected 624,000 homes, the vast majority unprotected by flood insurance. Standard homeowners and renters insurance policies do not cover damage from storm surges and other flooding. That requires separate policies, typically purchased from the U.S. government, but consulting and actuarial firm Milliman said fewer than 10% of homeowners in the Carolinas had such coverage.

Many families facing large out-of-pocket storm costs may be wondering what the next steps are to begin rebuilding. To help you get started, we’ve rounded up advice for how to proceed, sort out what insurance will — or won’t —cover and tap financial resources available to the underinsured.

Step 1: Figure out your coverage

Amy Bach, co-founder and executive director of United Policyholders, a national insurance consumer advocacy organization, said the first thing you should do is print out a complete copy of the most recent policies you may have on your home.

Many homeowners make the mistake of calling the insurance company and getting things started before they know what coverage they have, said Bach. “A lot of these adjusters, especially in a catastrophe situation, are overworked. They have lots of clients and sometimes they try to take shortcuts to tell you what coverage you have. Sometimes they may be right, but they may be wrong.”

She added: “You have the biggest stake in getting the most money out of your insurance so it’s up to you to do your homework.”

If your printer was ruined along with other belongings in the storm, you can generally contact the insurance company directly and ask them to email you a complete copy of your policy. If you worked with an agent, you can try contacting them directly for a copy, too. If you can’t remember who your insurer is or how to get in touch with them, Bach recommends you contact your state’s Department of Insurance for help.

The declaration page

Once you have a copy of the policy in hand, focus on the declaration page, a summary of the policy and how much coverage you have available.

Coverage is usually split into four main buckets:

  • Dwelling: Covers the home itself.
  • Contents (personal property insurance): Covers the items you own inside the home.
  • Other structures: Covers items that are not part of the dwelling but on the property such as detached garages, driveways, fences, sheds and pools.
  • Loss of use: Coverage for any expense you have to incur because you cannot live in your home.

You may or may not have each type of coverage and the extent to which you’re covered will depend on your policy. It may also include personal liability protection and coverage for guest medical payments (when someone else gets hurt at your home).

Flood insurance vs. homeowners insurance

While standard homeowners and renters insurance policies do not cover damage from storm surges or other flooding, they should cover damage from, say, a neighbor’s tree that fell on your house and left a hole on the roof where water came through. South Carolina residents with questions about claims may visit the S.C. Department of Insurance. North Carolinians can visit NCHurricClaims.com for information. Insured residential damages in that state may total as much as $7.5 billion while uninsured damages may nearly be twice as much. Total storm damage in the Carolinas and Virginia is expected to add up to $28.5 billion.

Flood insurance

Homes financed with a federally-insured mortgage in a high-risk flood area, also called a special flood hazard area (SFHA), are required to buy flood insurance from the National Flood Insurance Program, run by the Federal Emergency Management Agency (FEMA), or as a separate policy through a private insurer. SFHAs are areas that have a minimum 1% chance of flooding in any given year. These are also known as 100-year flood plains.

If you live in a moderate- to low-risk area or don’t have a federally-backed mortgage, purchasing flood insurance is optional. However, a lender can also require you to purchase flood insurance, even if you live in a moderate- to low-risk area.

National Flood Insurance provides up to $250,000 of coverage for the structure of a single-family home and up to another $100,000 for personal possessions. Alternatively, or in addition to NFIP flood insurance, you can purchase “first dollar” or primary flood insurance policy from a private insurer.

According to federal data, the average paid loss to NFIP policyholders after the four most-recent major hurricanes in 2016 and 2017 were:

  • $55,193 to 563 policyholders after Hurricane Maria in September 2017
  • $115,104 to 75,749 policyholders for Hurricane Harvey in September 2017
  • $46,989 to 21,749 policyholders for Hurricane Irma in September 2017, and
  • $39,217 to 16,542 policyholders for Hurricane Matthew in October 2016

Issues with flood insurance

“The problem with flood insurance is that it does have some very nit-picking requirements,” Bach told MagnifyMoney. “Many adjusters will say they only pay for damage from water physically coming into contact with the damaged object.”

Bach said that means sometimes flood insurance won’t pay for a damaged foundation or water that ran up a wall. Or, it may only provide coverage that can seem partial to homeowners. For example, the coverage may replace the lower cabinets in your kitchen, but they may not match the cabinets that weren’t affected by the flooding.

Problems meeting code. Flood insurance also may not cover code upgrades. If your home was built in the 1960s, for example, and had an old electrical system, the insurance company usually won’t pay to upgrade it, but the county may not allow you to put back old wiring either.

In those cases, Bach said to “go back to the policy and say ‘I cannot replace unless I comply.’” The insurer may require you to provide documentation from the local government as proof. And sometimes, flood insurance policies only cover code upgrades if the damage done to the system is 50% or more.

Finally, Bach tells MagnifyMoney flood insurance generally does not cover the costs of living elsewhere while your home is repaired. In those cases, your homeowners insurance policy may cover your displacement costs.

Wind. Wind must be insured separately and sometimes this coverage is available only from a state-run insurer of last resort. In North Carolina, the Coastal Property Insurance Pool is available to coastal homeowners, with a similar wind pool in South Carolina.

What if I don’t have flood insurance?

Excluded from homeowners insurance coverage is flooding caused by rising water, which Bach said is going to be most people’s problem. But, the United Policyholders executive director added: “A little argument goes a long way.”

Homeowners whose insurance does not cover hurricane-related expenses may qualify for disaster aid or low-interest loans, which we’ll cover below.

Step 2: Document the damage

Do the best you can to document all of the damage using pictures and videos. Do this before you start cleaning up or making repairs.

iStock

Step 3: Prevent further damage

Do what you can, within reason and with consideration of your health and safety, to prevent further damage to your home. At this point, you may want to reach out to the insurer and begin the claim process. If your policy covers the cost, the insurer can send someone to help drain the water, patch up holes and dry out your home.

“You want to try to get that done as quickly as possible so that you don’t have a mold problem,” said Bach.

If the insurer cannot get out to your area quickly or your coverage does not cover temporary repairs and drying out, then you may elect to do what you can on your own or hire a professional in your area.

Either way, take care to keep swatches of carpeting, wallpaper, furniture upholstery and window treatments — things that may impact the amount payable on the claim. Try to avoid tossing out damaged items until you file a claim and the insurance adjuster pays a visit to your home (described below). You can learn more about proper flood cleanup in this federal Homeowner’s and Renter’s Guide to Mold Cleanup After Disasters.

“If you can afford it, you should hire somebody and get them to do it as soon as you can,” said Bach. “But don’t hire the first person you can, because disasters do bring out scam artists.

If FEMA or state emergency services are in your area, they may be able to assist you with drying out your home. And, if there is a local assistance center set up near you, you can go there for help and information. Go here to find a disaster recovery center near you.

Step 4: File a claim with your insurance company

If you didn’t notify your insurance company before you started cleaning, you should contact them to file a claim as soon as possible. The insurance company should send you claim forms to fill out and you should try to return them as soon as possible to avoid delay in service.

The insurer should then arrange for an insurance adjuster to come out and assess the damage to the property. The adjuster will inspect the property to estimate how much the insurance company will pay for the loss. They will likely also interview you, too.

Be prepared to show the adjuster any structural damage and compile a list of damages so the visit is efficient and you don’t forget anything. If you have receipts for any of the damaged items you should present copies to the adjuster. Be sure to ask any questions you may have about your policy and the coverage it may provide.

Finally, if you had to relocate and your policy covers loss of use, keep those receipts and record all additional expenses you had to take on as part of your temporary relocation as you will need to provide proof of those costs.

Step 5: File for federal disaster assistance

If your home is in a declared presidential disaster area, you can apply for FEMA individual disaster assistance. If you do not have internet access, you can call 800-621-3362.

Disaster aid may cover:

  • Temporary housing
  • Lodging reimbursement
  • Home repairs
  • Home replacement
  • Permanent or semi-permanent housing construction
  • Child care expenses
  • Medical and dental expenses
  • Funeral and burial expenses
  • Essential household items, clothing, tools required for your job and necessary educational materials
  • Heating fuel
  • Cleanup items
  • Damage to an essential vehicle
  • Moving and storage expenses

However, FEMA disaster grants are generally low — see the following chart for average amounts from recent storms. The organization emphasizes that housing grant money is intended to help survivors get a roof over their heads and not to rebuild a home to its pre-disaster condition. FEMA encourages homeowners to consider the federal grant program as a last resort, after insurance and federal loan programs, and not to factor federal grant assistance into disaster preparedness planning.

Below is a breakdown of the average grant payout for recent disasters from the Individuals and Households Program, one the of several disaster assistance programs FEMA offers. The information provided by FEMA includes the average payout for Hurricane Florence as of this writing.

DisasterAverage IHP award

Hurricane Sandy (2012)

$7,950.17

Hurricane Matthew (2016)

$3,409.11

Hurricane Harvey (2017)

$4,365.75

Hurricane Irma (2017)

$1,354.72

Hurricane Maria (2017)

$2,666.10

Hurricane Florence (2018)

$3,467.22*

*As of Oct. 2, 2018

You can find information about other kinds of Individual Assistance FEMA provides like disaster unemployment assistance and crisis counseling in this factsheet.

As of this writing, DisasterAssistance.gov shows residents in the following North Carolina counties may be eligible for disaster assistance after Hurricane Florence:

  • Beaufort
  • Bladen
  • Brunswick
  • Carteret
  • Columbus
  • Craven
  • Cumberland
  • Duplin
  • Greene
  • Harnett
  • Hoke
  • Hyde
  • Johnston
  • Jones
  • Lee
  • Lenoir
  • Moore
  • New Hanover
  • Onslow
  • Pamlico
  • Pender
  • Pitt
  • Richmond
  • Robeson
  • Sampson
  • Scotland
  • Wayne
  • Wilson

In South Carolina, Chesterfield, Darlington, Dillon, Florence, Georgetown, Horry, Marion and Marlboro counties are federally declared disaster areas. As of this writing, there are no declared disaster areas in Virginia.

FEMA may require you to provide evidence that your insurance company declined your loss claim and will not cover your disaster-caused loss. When you apply for disaster assistance, you’ll need to provide identifying information like your Social Security number and a current mailing address.

Delays with disaster assistance.

It’s important to remember some FEMA funds are funneled through the state government, so depending on how your state allocates its resources, your reimbursement or assistance may take months. Some survivors are still waiting on FEMA disaster assistance aid from Hurricane Matthew in 2016.

According to a FEMA spokesperson, those still waiting on aid from a previous disaster may still qualify for FEMA assistance::

“No matter whether someone is waiting for assistance from FEMA’s Hazard Mitigation Grant Program or HUD’s Community Development Block Grants as a result of Hurricane Matthew, if they have damage as a result of Hurricane Florence and need assistance with housing or other unmet needs, they should register at www.DisasterAssistance.gov to see if they qualify for assistance from FEMA or other agencies. If they prefer, they can call 1-800-621-FEMA (3362) to register.”

Where else can you turn for help?

“It’s clear that more and more people do need to take on loans to get back on their feet after disasters because insurance does fall short a lot more than you would expect,” said Bach, who has been working in insurance consumer advocacy for 26 years.

Below are a few options you can turn to for help.

Government assistance programs

The U.S. government provides the following programs that may assist eligible borrowers who need assistance with home repair, replacement, restoration or improvement financing. Homeowners with an existing mortgage may also find relief with their loan servicer — many lenders will temporarily reduce or suspend payments in a process called forbearance. The Mortgage Bankers Association says one of your first calls following a hurricane should be to your mortgage servicer. The Consumer Financial Protection Bureau provides information on this and other financial problems following a natural disaster here.

SBA disaster loans

The U.S. Small Business Administration provides financial assistance to not only business owners, but also to homeowners and renters in federally declared disaster areas. These low-interest loans may cover up to $200,000 to repair or replace the primary residence to its pre-disaster condition. Collateral is required to secure loans over $25,000. Secondary homes and vacation properties are not eligible for an SBA home disaster loan. Homeowners may also borrow up to an additional $40,000 with a property disaster loan to replace damaged personal property.

For some homeowners, the SBA may be able to refinance all or part of an existing mortgage up to $200,000 if they:

  1. Don’t have credit available anywhere else.
  2. Suffered a substantial amount of disaster damage that isn’t covered by insurance.
  3. Intend to repair the damage.

If you were already paying back a previous SBA disaster loan, the SBA is offering loan deferments of up to nine months to those in federally declared disaster areas impacted by Hurricane Florence. If you already have an SBA disaster loan, you can take out another as long as your home was in a declared disaster area and you are current on all of your payments.

FHA 203(h) mortgage

The Federal Housing Administration’s 203(h) loans are government-insured mortgages that may be used to purchase, improve, remodel or rebuild a home. To be eligible, the borrower must reside in a federally designated disaster area and the home must be damaged or destroyed to an extent that requires reconstruction or replacement.

One of the biggest benefits of a 203(h) mortgage is that it does not require a down payment. However, borrowers must pay closing costs — the seller could help by picking up 6% of the cost at most for those buying a new home — and mortgage insurance, which is collected as one upfront charge at the time of purchase and monthly premiums tacked onto the regular mortgage payment. FHA mortgage limits apply and can be found here.

Other types of government loans

SBA disaster loans and the 203(h) mortgage are programs specially designed for disaster victims, but there are other government programs — available to anyone — to help homeowners who want to make repairs.

FHA 203(k) loans

The Federal Housing Administration’s 203(k) program is designed to fund a home renovation — homeowners could use the loan to refinance their current mortgage in order to pay for repairs. The minimum credit score to qualify is relatively low, but there are several requirements you will have to meet, including working with an FHA-approved lender and, possibly, a 203(k) consultant. Read more about the different types of 203(k) loans here.

You can use the Section 203(k) rehabilitation mortgage program along with the HUD Title I Property Improvement Loan program, described here by LendingTree, MagnifyMoney’s parent company.

USDA Home Repair program

The Department of Agriculture offers the Section 504 Home Repair program for low-income homeowners. The program provides loans to repair, improve or modernize homes. It also provides loans or grants to low-income elderly homeowners to remove health and safety hazards.

The USDA offers repair loans up to $20,000 and grants up to $7,500. You can combine a loan and grant to borrow a total of up to $27,500. The property must be in an eligible area. To learn more about the home repair program, you can contact a USDA home loan specialist in your area. You can check income eligibility here.

VA rehab loans

The Department of Veterans Affairs in April 2018 updated its alteration and repair purchase and refinance loan program. The VA allows eligible borrowers to refinance a mortgage based on what the appraised value of the property would be after renovations, up to $227,500. The borrower can also finance closing costs. You can apply for a VA loan through a VA-approved lender.

Fannie Mae HomeStyle® Renovation mortgage.

Fannie Mae offers a HomeStyle® Renovation mortgage that can help finance home repairs. Homeowners could, for example, refinance the costs into an existing mortgage. Borrowers can finance up to 75% of the appraised value of the property after the renovations are completed. Read more about the HomeStyle® program here.

Nonprofit and charitable aid

You may be able to get assistance from national and local nonprofit organizations or charitable institutions. Such groups include the American Red Cross, Habitat for Humanity, Mennonite Disaster Service and the Saint Bernard Project.

Beyond meeting hurricane victims’ immediate needs, these organizations and others may help rebuild homes in your area, so it may be worth it to reach out to a local charity regarding grants and other services.

Habitat for Humanity helps low-income survivors rebuild or repair their home if they meet Habitat’s requirements. Contact your local Habitat for Humanity office.

Other financing options

If you have a good credit score and the project’s costs are relatively low (a few hundred to a few thousand dollars) you may want to consider taking out a personal loan or using a credit card to finance repairs. Bach told MagnifyMoney you may also elect to do this if you don’t have cash on hand to cover temporary living, cleanup and minor repairs that may be later reimbursed by insurance.

Personal loans

Personal loans typically have fixed rates and terms. You can usually borrow anywhere from $1,000 to $35,000 at rates between 6% and 36% APR. There are a few pros and cons with personal loans:

Pros

  • Unsecured: Meaning you won’t risk losing an asset if you are unable to repay a personal loan.
  • Fast turnaround: You can generally apply for a personal loan in minutes online and, if you qualify, you may receive the lump sum amount in your bank account as soon as 24 hours later.

Cons

  • Credit requirements: Borrowers generally must have a good credit score and a low debt-to-income (DTI) ratio to qualify. Borrowers with the highest credit scores and lowest DTI ratios generally receive the best terms.
  • Fees: You may be charged a loan origination fee or a prepayment penalty.

To get the best offer available to you, compare loan terms and rates at LendingTree.

Credit cards

If you plan to use a credit card for storm-related expenses, one idea is to apply for a new credit card with a 0% introductory offer on all purchases. Note that If you’re still carrying a balance once the promotion ends, the new interest rate on the card will apply to whatever balance is left, and some lenders may charge deferred interest, meaning they may charge interest on everything you’ve charged during the promotional period.

Credit cards charge an average 15.54% APR, according to the Federal Reserve, but there are cards with lower (and higher) rates. Generally, lenders offer the lowest interest rates to borrowers with the highest credit scores.

Credit cards generally charge a variable rate and it may change based on your daily balance, so the minimum amount you are required to pay back each month may fluctuate.

When to consider bankruptcy

John C. Colwell, a bankruptcy attorney and president of the National Association of Consumer Bankruptcy Attorneys, told MagnifyMoney a homeowner may consider bankruptcy in the event that the cost of repairs exceeds the value of the property, comparing it to a vehicle that’s been totaled in a car accident.

“If or when the insurance monies, if any, or the FEMA, federal or state relief funds are exhausted or not available, those lack of resources to financially recover would be indicators that a bankruptcy should be considered,” Colwell said.

But first, Colwell said, homeowners should check for any state protection that may make bankruptcy unnecessary.

California law, for example, protects homeowners after a foreclosure. If a $600,0000 house with a $400,0000 mortgage burns down in a fire, the homeowner can walk away and let the bank foreclose on the home. If the bank forecloses for $300,000, the original homeowner does not owe $100,000 to the bank to satisfy the mortgage. While the homeowner must face the consequences of a foreclosure, they would not need to file for bankruptcy. North Carolina has similar protections in place for homeowners.

But in most other states, including South Carolina, the mortgage company has the legal right to try and sue the homeowner to collect the remaining balance on the mortgage. Colwell said in those cases it may be appropriate for a homeowner to file for bankruptcy.

“Of course, there are other variables that impact the final decision, but that’s one strong indicator that a bankruptcy could help,” said Colwell.

In conclusion

If you were one of the estimated 624,000 homeowners affected by Hurricane Florence, help is available. Sources of financial assistance range from your own insurance policies to government assistance and loans to charitable organizations or simply borrowing from a private lender. Rebuilding may be costly and seem overwhelming, so look to resources like United Policyholders and the Insurance Information Institute or your state’s emergency management office. North Carolina residents may visit ReadyNC. South Carolina residents may go here.

If you need advice when deciding between options, consult a fee-only financial professional who has experience working with homeowners following a disaster.

If you are considering bankruptcy, it’s recommended you speak with a bankruptcy lawyer about the options available to you and any protections provided by your state.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

TAGS:

By clicking “See Offers” you’ll be directed to our parent company, LendingTree. You may or may not be matched with the specific lender you clicked on, but up to five different lenders based on your creditworthiness.

Advertiser Disclosure

News

Student Loans vs. Mortgages: Which Weigh Heaviest?

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

iStock

Student loan debt has mushroomed dramatically over the last two decades. The total amount of outstanding student debt just passed $1.5 trillion earlier this year, putting it second only to mortgages as the type of loan on which Americans owe the most.

The amount of average student debt per person has also exploded, with a substantial number of borrowers owing mortgage-like sums above $100,000, according to a recent student debt study from MagnifyMoney parent company LendingTree.

But, as the study also noted, this student loan burden isn’t spread evenly across the country.

“Student loan debt varies pretty widely between metros,” said LendingTree senior research analyst Kali McFadden. “With student loan balances shooting up, we wanted to know how these types of debt stacked up against mortgages for people who carry both.”

To find out, we compared student debt to mortgage debt, using borrower data from the 50 biggest metros. Specifically, we wanted to identify cities where borrowers’ student loans are more likely to rival — or even surpass — their mortgages.

Key takeaways:

  • Across all 50 metro areas surveyed, 5.7% of borrowers have a larger balance on their student loans than on their mortgage. The average student loan balance across these cities was $18,435.
  • In just 6 of the 50 metros we reviewed, more than 10% of borrowers carry a larger debt load on their student loans than on their mortgage. The Rust Belt and the South regions dominate the top of this list.
  • A whopping 12.6% of borrowers in Pittsburgh owe more for their educations than they do for their homes. Rounding up the top three are Buffalo, N.Y. (12.2% owe more on student loans) and Cleveland (11.7%).
  • The West Coast occupies the other end of the spectrum. In both Seattle and Sacramento, California, just 1.4% of borrowers owe more in student loans than on their mortgages. Los Angeles and San Diego are tied for third place, at 1.6%.

The 11 cities where student loan debt exceeds mortgage debt

The cities with the highest student loan debt compared to mortgage debt (looking only at borrowers that hold both types of loans) aren’t necessarily just the ones with the cheapest real estate, and therefore the lowest mortgages.

“Clearly, property values pay a part in the ratio of student loan to mortgage debt … [however] we do see that higher student loan balances are a factor where more people owe more for their educations than they do for their houses,” said McFadden.

Of course, the blend of these two influences — heavy school debt and low home prices — is different for each city. However, when student debt balances are high compared to mortgage debt, it does suggest a tough environment for student loan borrowers.

Here’s a look at these top-ranking metro areas.

1. Pittsburgh

People who owe more on student debt than mortgage debt: 12.6%

Pittsburgh tops our list, and for good reason — 1 in 8 borrowers owes more on their student loans than on their mortgage. Specifically, the median ratio of student debt to mortgage debt is 22.3%.

Here, the culprit could be the low median home price of $125,000, as reported by Kiplinger — tied for the lowest of the 50 metro areas we compared. This likely results in lower mortgage balances for Pittsburgh relative to the median student loan balance of $18,927.

2. Buffalo, N.Y.

People who owe more on student debt than mortgage debt: 12.2%

Buffalo joins Pittsburgh at the bottom of the median home-price rankings of the metro areas covered in this study, at $125,000. These borrowers are likely to owe less on their home and also have below-average student debt, at a median balance at $17,256.

It’s no surprise, then, to see that a typical Buffalo borrower’s student loan balance is equal to 21.9% of their mortgage debt.

3. Cleveland

People who owe more on student debt than mortgage debt: 11.7%

Cleveland borrowers have a median student loan balance of $18,743, compared to an average home price of $135,000, according to Kiplinger. With above-average student loan balances and lower home prices, a typical Cleveland borrower’s student loan balance is nearly a quarter (23.2%) of their mortgage debt.

4. Memphis, Tenn.

People who owe more on student debt than mortgage debt: 11.0%

Borrowers in Memphis have the highest student loan balances relative to mortgage debt in any city we studied. In fact, the median $18,866 student loan balance is equal to 24.2% the median mortgage debt. Memphis is also among the cities with lower median home prices, at $137,000.

5. Birmingham, Ala. (tie)

People who owe more on student debt than mortgage debt: 10.2%

One of the main factors putting Birmingham at the top of this list is the high average student loan balance. A typical borrower in this metro owes $20,679, the fifth-highest median student loan balance among any of the cities we surveyed.

This amount is equal to 21.8% of the median mortgage debt balance in Birmingham, where the median home price is $131,000.

5. Detroit (tie)

People who owe more on student debt than mortgage debt: 10.2%

Detroit and Birmingham have the same percentage of borrowers who owe more on student loans than they do on their mortgages. However, borrowers in Detroit have a lower ratio of student debt to mortgage debt, at 19.9%.

This reflects both the lower student loan balances in this city, with the median at $18,552, as well as higher home prices (the median is $145,000, per Kiplinger).

7. Atlanta (tie)

People who owe more on student debt than mortgage debt: 9.5%

Atlanta tied with Oklahoma City for the No. 7 spot, due largely to borrowers with some of the highest student loan balances.

The city’s median student loan balance of $22,232 is second only to Washington, D.C. This high level of student debt is due largely to loftier levels of educational attainment among Atlanta residents.

These large student debt loads are high even when compared to Atlanta’s median home price of $190,000. For a typical borrower here, their student debt is about one-fifth (19.6%) of the balance on their mortgage.

7. Oklahoma City (tie)

People who owe more on student debt than mortgage debt: 9.5%

Oklahoma City residents have below-average student debt, with the median balance at $17,278. Overall, this median student debt is equal to 18.4% of the local median mortgage debt.

9. St. Louis

People who owe more on student debt than mortgage debt: 8.9%

The local median student loan balance in St. Louis is a relatively large $19,229, while the local median home price is $155,000, according to Kiplinger. Overall, a typical St. Louis borrower’s student debt is equal to 18.5% of their mortgage debt.

10. New Orleans (tie)

People who owe more on student debt than mortgage debt: 8.3%

The median student debt among New Orleans borrowers is $18,592, about on par with the average across all cities. This debt is equal to 19.0% of the median balance on borrowers’ mortgages.

10. San Antonio (tie)

People who owe more on student debt than mortgage debt: 8.3%

Borrowers in San Antonio have some of the smallest student loan balances overall among these cities in these rankings, with the median at $17,089. However, that balance is still 17.1% of the median mortgage debt for local borrowers who have both.

Cities where student debt is lowest, compared to mortgage debt

A look at the cities where student loan balances are smallest, compared to mortgage debt, also reveals some insights.

Not surprisingly, the list includes cities with some of the highest home prices in the nation. San Francisco, for example, has a median home price of $750,000. Los Angeles homes come in at $605,000, while San Diego’s median home prices is $530,000, and Seattle’s is $417,000, reports Kiplinger.

These significantly higher home prices mean that many local borrowers are taking out mortgages with much higher balances that overshadow their student debt.

But while higher home prices result in more mortgage debt, the high cost of living doesn’t necessarily affect how much local residents borrow in student loans.

In fact, borrowers in these 10 cities also tended to have lower median student loan balances overall. Providence, R.I., for example, had the lowest median student loan balance of the group, at $15,025, and Seattle and San Diego had median student loan balances of $16,003 and $15,984, respectively.

Dealing with high student loan balances

Mortgage debt is still larger than student debt for most Americans, both at the national and individual level. However, the results of this study show that in some places, a relatively large proportion of people face student debt that outweighs even their mortgage, which can be a significant financial burden.

No matter how your own mortgage debt compares to your student loans, you can benefit from taking steps to more effectively manage your school debt. It could be wise to pay off student loans faster, if you can afford to do so. You can also explore options such as student loan refinancing or pursuing student loan forgiveness.

On the other hand, it’s encouraging to see that many borrowers are buying homes while repaying student debt — even when they have enough student loans to eclipse their housing debt. While rising student loans are slowing the financial progress of many, it’s not stopping them in their tracks.

Methodology

We looked a sample of over 90,000 anonymized users who logged into My LendingTree (LendingTree is our parent company) in July 2018 and who had both active student loan balances of any size and mortgage balances greater or equal to $10,000 to calculate the ratio of student to mortgage balances. Median student loan balances were calculated using a sample of users who logged into My LendingTree during Q1 2018, and were originally reported here. These results were then aggregated with the 100 largest metropolitan statistical areas by population. My LendingTree has more than 9 million users. Credit report information is provided by TransUnion.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Elyssa Kirkham
Elyssa Kirkham |

Elyssa Kirkham is a writer at MagnifyMoney. You can email Elyssa here

TAGS:

By clicking “See Offers” you’ll be directed to our parent company, LendingTree. You may or may not be matched with the specific lender you clicked on, but up to five different lenders based on your creditworthiness.

Advertiser Disclosure

News

APR vs. Monthly Payment: Which Should You Focus On?

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

APR vs. monthly payment
iStock

When shopping for a loan, it’s tempting to cast your eyes to the monthly total. That low monthly payment may fit into your budget, but it’s more important to look at each loan’s annual percentage rate. The APR will provide a much clearer picture of how much the loan will actually cost you in the end.

The monthly payment is determined by the loan amount, the interest rate and your loan term, but it doesn’t tell you how expensive the loan is. While a low monthly payment on a loan may appear to be a good deal, the total cost of a loan may be much higher than you think if it carries a high APR and the payments are spread out over a long period.

What is APR anyway?

APR is the annual rate of interest paid on a loan. It tells you how much it costs to borrow for one year. The reason why APR gives you a true picture of how expensive your loan is is because it factors in not only the interest costs but other fees lenders charge for a loan. The APR is determined by lenders’ fees, the risk of the business that is borrowing the money and the length of the loan’s term.

If a lender doesn’t charge additional fees, the loan’s APR and interest rate are the same. But if the lender charges a 5% loan origination fee, the APR can be higher than the simple interest rate. For example, you can probably find a personal loan that has an 8% interest rate, but if the lender bundles fees into the total loan amount, the APR may be 9% or even higher.

Longer-term loans have higher APRs because the risk of default is somewhat higher. Lenders make lending decisions based on a borrower’s creditworthiness — the higher the credit score, the better the rates and terms. Lenders perceive those with subprime credit scores as risky borrowers, and that’s why those with less-than-stellar credit often are subject to higher APRs and longer terms.

Why a low monthly payment may not be cheap at all

A low monthly payment doesn’t necessarily mean the loan is inexpensive, but a high APR definitely means a higher cost of borrowing because it tells you how much interest and fees you pay on a loan.

Here’s an example of why the monthly payment is not the only factor you should consider while borrowing money:

Earnest, an online lender, offers no-fee personal loans with fixed rates from 6.99% to 18.24% APR. On a hypothetical $10,000 loan amount, the monthly payment is $210 if Borrower A gets a five-year loan with a 9.49% APR. The borrower will have to pay $12,598 by the end of the loan term. That translates to a total interest cost of $2,598.

In contrast, if Borrower B takes the same loan with a 6.99% APR — the lowest rate — and a three-year loan term, the borrower has a $309 monthly payment. Borrower B’s monthly payment is higher than Borrower A’s, but the total interest paid over the loan’s life span is only $1,114, less than half of what Borrower A will pay over five years in interest.

Now, let’s say Borrower C picks a $255 monthly payment for a five-year, $10,000 loan that carries an 18.24% APR, the highest rate. The total cost of the loan is $15,301, with $5,301 paid in interest — more than half of the loan principal and $4,187 more than Borrower B will pay. This is the most expensive loan option offered by Earnest, but the monthly payment isn’t the highest.

Borrowers A and C have the same five-year loan term, but because they qualify for different APRs, Borrower C ends up paying about $2,700 more in interest, or more than twice of what Borrower A pays in interest on the loan, even though their monthly payment amounts are closer.

 

Earnest personal loan

Scenario

Loan amount

Loan term

Monthly payment

APR

Total payment

Borrower A

$10,000

5 years

$210

9.49%

$12,598

Borrower B

$10,000

3 years

$309

6.99%

$11,114

Borrower C

$10,000

5 years

$255

18.24%

$15,301

Monthly payment vs APR: What should I focus on when shopping for a loan?

Your monthly payment doesn’t really tell you much about your loan. If you focus only on whether you can afford a loan on a monthly basis, you may be vulnerable to sneaky sales tricks that make it seem like you’re getting a good deal when you’re really not.

When you borrow money, If you are looking for nothing but a monthly payment that will fit your monthly budget, the easiest way is to stretch out the loan over a few more years. Instead of a two-year loan, you may take a five-year loan with lower monthly payments but a higher APR. Unfortunately, by doing so, you will end up paying more for borrowing money over the life of the loan.

Instead of settling on a monthly payment, you should look at the APR and the long term. Lower APRs on the same loan amount always mean lower interest payments. Although you won’t get the lowest monthly payment with the shortest-term loan, you will spend less in the end.

How do I reduce loan costs?

Improve your credit

Before you shop for a loan, check your credit score. Lenders offer better terms and lower rates to borrowers with higher credit scores because they are less likely to default on their debt. A recent LendingTree study estimated that someone with a fair credit score paid $29,106 more than someone with a “very good” credit score for the same $234,437 mortgage loan and $5,629 more in interest for the same $5,265 credit card debt. LendingTree is the parent company of MagnifyMoney.

If you have a subprime credit score, you can save money on loans by improving your credit score. The key to increasing your score is to make on-time payments on bills, keep your credit utilization ratio at or below 30%, have a mix of credit accounts and don’t apply for too many loans too frequently. Read more about how to improve your credit score.

Pay off your debt faster

If you have already taken on an expensive loan and if your lender doesn’t charge prepayment penalties, you can reduce your interest payment by paying off your debt fast. There are two ways to save money: pay extra each month or make a large lump-sum payment when you get a windfall.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Shen Lu
Shen Lu |

Shen Lu is a writer at MagnifyMoney. You can email Shen Lu at shenlu@magnifymoney.com

TAGS:

By clicking “See Offers” you’ll be directed to our parent company, LendingTree. You may or may not be matched with the specific lender you clicked on, but up to five different lenders based on your creditworthiness.