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How These Student Loan Borrowers Are Getting Their Debt Dismissed in Court

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Student debt is only forgiven or discharged in special cases, but a new report by The New York Times might offer a glimmer of hope to some student loan borrowers struggling to manage their debt.

If a student loan lender or servicer can’t prove that they own the debt that they are attempting to collect from a consumer, it’s possible that the debt can be dismissed in court.  That’s what happened in a recent case profiled by New York Times reporters Stacy Cowley and Jessica Silver-Greenberg involving private student lender National Collegiate Student Loan Trusts, one of the nation’s largest owners of private loans.

National Collegiate sued dozens of former students who had defaulted on their private student loans. But in court National Collegiate failed to prove they owned the loans. This happens often when loans are sold to another lender, or otherwise handed to another account manager and paperwork gets lost. Ultimately, the courts dismissed the lawsuits, citing the fact that National Collegiate had no way of proving they owned the debts in the first place.

This isn’t always how the scales tip in cases against consumers for unpaid debts.

If consumer debts are left unpaid for an extended period of time, consumers can and often are taken to court by the companies they owe. Often, consumers don’t answer these lawsuits at all. And when lawsuits aren’t answered, judges usually rule in favor of the plaintiffs. With those judgments in place, companies can then push to have the consumers’ wages or federal benefits like Social Security garnished.

The outcomes in these National Collegiate lawsuits are proof of what can happen if consumers simply show up at court and try to fight back.

“Individuals trying to get rid of student loan debt should be proactive in demanding proof of ownership of the loan documents from the lender that is collecting or trying to enforce the [loan],” says Attorney Evelyn J. Pabon Figueroa, based in Orlando, Fla.

People who are going through the bankruptcy process and are attempting to have student loan debt discharged should also ask their lenders for proof that they own the debt, Figueroa says. If proof isn’t provided, they should dispute the debt.

Figueroa says in some cases borrowers should even stop making payments if they believe the lender doesn’t have the right documents to prove they own the loan. Instead, send the lender a debt verification letter, which asks lenders to provide proof that the debt belongs to a person. You can download a sample debt verification letter from the Consumer Financial Protection Bureau website.

The CFPB suggests asking these three questions in your letter:

  • Why a debt collector thinks you owe this debt.
  • The amount of the debt and how old it is.
  • Details about the debt collector’s authority to collect this money.

If the lender can’t provide proof, you should consider disputing the debt, either in court (if the lender has filed a lawsuit against you at that point) or through the three major credit bureaus (if the debts are appearing on your report and subsequently hurting your credit score).

How student lenders lose track of their debts

If the National Collegiate debacle sounds familiar, it should. It’s similar to the same issues mortgage lenders encountered during the 2008 subprime mortgage crisis. Lenders took borrowers to court to pursue unpaid mortgage debts, but when the lenders could not provide proof that the borrowers owed the debt, courts often ruled that the loans were not collectible. The lack of documentation was so pervasive that many borrowers intentionally defaulted on their mortgage loans on the off chance a lender could not prove they owned the debt.

National Collegiate is already anticipating that it will face the same problem — that borrowers will simply stop paying their debts — as word spreads of its inability to win lawsuits against borrowers. “[A]s news of the servicing issues and the Trusts’ inability to produce the documents needed to foreclose on loans spreads, the likelihood of more defaults rises,” the company said in a recent legal filing.

What to do if you’re sued by a student lender or debt collector

First, don’t panic. The last thing you want to do if you’re ever sued is admit in writing or verbally that you owe the debt. In the event the lender can’t prove they own the debt, this may come back to haunt you. By taking these few key steps, you can protect yourself both legally and financially in the event you’re served with a lawsuit from a lender:

  1. Ask them to verify the debt. If you’re already suspicious your loan lender may have lost your paperwork and can’t prove the debt, start by sending out a debt verification letter. If the lender doesn’t respond (give them 30-60 days), they must cease attempting to collect the debt. If they don’t stop, you’ll likely need to contact a lawyer. You may not need to hire one, but a quick consultation for legal advice for your best course of action will be well worth it.
  1. Never discuss the debt over the phone. If a lender or collection agency contacts you via phone before you are served a lawsuit or receive anything in the mail, be sure to get the the caller’s name, company, and license number. Once you have this information, it’s best to communicate via certified USPS mail to track and document that every correspondence has been received by the legitimate collections company and lender. If you end up in court, this is important, as it establishes a paper trail for your communications. (Email and electronic timestamps can easily be forged.) Keep in mind you don’t ever have to answer the phone if you don’t recognize the number, and you have a legal right to tell debt collectors to stop contacting you entirely.
  1. Contact a lawyer. Lawsuits involving large sums of money are no small game to play in a courtroom. Most consumers don’t know the intricacies of the laws that actually protect them (and sometimes may not know how to read the contracts they signed), but a lawyer versed in contract law or one who specializes in bankruptcy can easily help dispute the debt and, if it’s valid, negotiate a settlement without ever stepping into a courtroom. The CFPB keeps a handy list of legal aid groups so you can find an affordable lawyer in your state.

 

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Survey: Nearly 40 Percent of Students with Loans Consider Dropping Out of College

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What To Do if a Student Loan Refinancer Rejects You

Today’s college student bears the weight of trying to succeed academically as well as his growing debt from student loans.

According to a new MagnifyMoney.com survey, nearly 40% of current students with loans have considered dropping out to avoid racking up more student loan debt. And of the students who thought about leaving before earning their degree, over half were more than $20,000 in debt.

It’s no secret that student debt is causing many individuals to consider whether their degree is even worth the financial stress. An analysis by The Hechinger Report revealed that 3.9 million people with student loan debt dropped out of college during the 2015 and 2016 fiscal years alone.

For fall 2017, total undergraduate enrollment dropped by nearly 224,000 students from a year ago, according to the National Student Clearinghouse Research Center. The center said it’s the sixth consecutive year of total enrollment declines and does not cite reasons, but our survey found financial concerns seem to play a role in student enrollments and dropouts.

The survey was conducted via Google Consumer Surveys’ online student panel from April 23-May 7, 2018. It included responses from 3,069 college students. Approximately 2,000 of respondents had at least some student loan debt.

Key findings: Work, kids add to financial strain

In our survey, 39% of our respondents with student debt said they have considered stopping college before graduating so their financial situation wouldn’t get worse. For those students, balancing school with part-time work was also a major worry, with more than half citing the juggling act as a main reason they considered quitting.

Nearly 45% of those who contemplated dropping out said they worked 20 hours or more per week, with 20% saying they worked more than 40.

Still, 35% of the students in our study who had thought about leaving weren’t working at all, signifying that loan debt is still a major stress for those who don’t earn extra money while in college.

Concerns such as children and expected income seemed to play a large role in these anxieties as well: 30% of students listed balancing work and family as a main reason they had thought about quitting, while 26% said they considered quitting because they were worried about not making enough in their chosen career field.

Debt amounts hit $50,000 and up

In addition to the 52% of our in-debt respondents who owed $20,000 or more, nearly 25% were facing at least $50,000 in total loans. Additionally, almost 10% owed $100,000 or more.

Loan structure varies widely among these students. Based on our survey, 48% of our respondents said they had at least some private loans, while 52% were exclusively using federal aid.

No one-size-fits-all plan for paying off debt

There was no clear favorite strategy for paying off debt. While 39% of people said they would use an income-based plan to manage their loans, 25% said they would use a standard repayment plan. Still, another 26% weren’t yet sure how they would deal with the debt.

Despite the stress caused by student loans, most of our respondents were generally positive about their job prospects after school.

Nearly half said they thought they would make at least $20,000 extra per year as a result of their degree, with 34% of them saying they expected to earn at least $30,000 extra.

Tips for dealing with student debt

Student loans don’t have to be such a headache, though. With the proper planning and preparation, students can work around the overwhelming costs of loan debt and keep the stress of repayment at bay from their daily lives.

Jeremy Wine, supervisor of student loan counseling services for Take Charge America, a Phoenix-based nonprofit credit consulting agency, shared tips for approaching the repayment process.

    • Think ahead. As our survey shows, worrying about loans during college can be a major source of anxiety among students. Still, Wine said it’s best to set up a plan of action long before you put on your cap and gown. “Realize that it’s there and that it’s something you have to pay back,” he said. He added that a nonprofit loan counselor can help you lay out a set of repayment goals and a budget that fits your financial situation.
    • Look at repayment options. If you have federal student loans, there are a number of flexible repayment options available to you. Contact your loan servicer to enroll.
    • Don’t waste money. It may be tempting to use the loan funds on items such as a new computer or a car payment. Wine said it’s best to only use the money for tuition and fees, even if that means getting a part-time job to pay for the rest.
    • Consider consolidation carefully. Student loan consolidation or refinance involves paying off each of your loans with a new loan. Refinancing your debt can help lower your interest payments and make your loans easier to manage. Typically, you’d take out the new loan with a private lender. Just know that if you refinance federal student debt with a private loan, you’ll lose access to flexible repayment programs offered to federal borrowers. There is a consolidation program available for federal loans specifically, however, which is another option.

 

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3 Online Alternatives to Warehouse Clubs

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With a 2-year-old daughter and a full-time job, life is hectic for Dallas mom and marketing professional Amanda Tavackoli. Often, there’s not enough time to think about or run to the store to pick up a pack of diapers, baby wipes or paper towels.

“Both my husband and I work full time, so it’s sometimes difficult for us to schedule everything that needs to happen,” says Tavackoli, 37.

Instead of squeezing a grocery run into her busy schedule, Tavackoli opens the Amazon Prime app on her phone, orders her household supplies, and within two days, they arrive at her doorstep.

Convenience, especially for families, is a factor in the popularity of purchasing household goods through subscriptions like Amazon Prime, says Paul Farris, a marketing professor at the Darden School of Business at the University of Virginia.

Amazon Prime reached 90 million U.S. subscribers, according to 2017 data from Consumer Intelligence Research Partners, a Chicago-based research firm. Almost 95 percent of these members said they will “definitely” or “probably” renew their subscription, according to a July to September 2017 survey by the firm.

At the same time, some of Amazon’s brick-and-mortar competitors are struggling to keep up.

Although Costco Wholesale has about 91.5 million cardholders as of November 2017 — 1.5 million more than Amazon Prime subscribers — the membership warehouse had only a 90 percent renewal rate in 2017, according to its annual report.

And Sam’s Club, the membership warehouse owned by Walmart, recently announced plans to close 63 of its clubs throughout the country and is converting as many as 12 of these facilities into e-commerce fulfillment centers. These closures reduced the company’s number of clubs to 597.

In recent years, Sam’s Club has also experienced low membership renewals. At the beginning of 2016, the renewal rate for its Plus members was only about 35 percent, from 2015 to 2016.

Farris says in addition to Amazon’s convenience factor, its free two-day shipping has helped the company dominate the playing field.

“Everybody in the world is trying to figure out how to handle free shipping,” he said. “Amazon has the (sales) volumes to make that work in a way that is much more difficult for other operations to generate.”

And Farris says Amazon’s ability to transcend local supply shortages has also made it and other e-commerce options more popular in comparison with traditional wholesale clubs.

One factor that favors brick-and-mortar Costco is price. In two separate price comparison studies conducted by investing news magazine Barrons in June 2017 and the San Francisco Chronicle in May 2017, Costco’s prices for a basket of top common household items were often cheaper than on Amazon.

However, the price difference doesn’t bother Tavackoli.

“It’s probably a little bit more expensive to go with something like Amazon, as opposed to running over to Sam’s Club,” she said. “But the convenience outweighs the cost for us, hands down.”

These online options for buying bulk are three alternatives to shopping at brick-and-mortar warehouse clubs.

1. Amazon Prime Pantry

One of the most popular perks of Amazon’s Prime membership ($99 a year) is its free two-day shipping. Amazon Prime also offers members in select cities free same-day delivery and same-day delivery for orders $35 and over. For some household essentials, subscription holders can have orders delivered within one to two hours.

Members have access to Prime Pantry, which ships bulky items like paper goods, trash bags, and oversized boxes and bags of snacks, such as chips and granola bars, that people traditionally purchase at warehouse clubs. Delivery boxes hold up to 45 pounds, and there’s a flat $5.99 fee per box.

“My own family’s use of Prime is that it’s so much more convenient,” Farris said. “You don’t have to worry about hauling it back home.”

Prime also gives its members much more than just fast delivery. Prime members can stream music, movies, and TV shows and gain access to Audible channels. There are also deals and exclusive opportunities for Prime members when shopping.

2. Boxed.com

Boxed.com was founded in 2013 by a group of tech entrepreneurs.

Boxed.com gives consumers another way to buy a large variety of brands in bulk online. In addition to simply buying in bulk, Boxed.com customers are offered curated boxes of products. For example, Boxed.com packages a wide range of snack options, like Cheez-Its, peanuts and Pop-Tarts, and ships them together in one box to customers.

With each order, Boxed.com users can choose to receive free samples, much like when shoppers walk down the aisle of a wholesale store like Costco.

And unlike Amazon, Boxed does not charge customers a subscription fee. Orders that meet a minimum price of $19.99 are shipped for free and ship within one business day.

3. Jet.com

Jet.com is another online one-stop shop that offers everything from household essentials to jewelry and patio furniture.

But Jet’s standout perk is its “real-time savings engine.” This tool allows Jet.com to pack specially marked items in boxes with other products, which the company says lowers the shipping costs for Jet.com and, in turn, lowers the price tag for its customers.

Farris says options like Jet.com could provide specific goods that local stores may not carry or have in stock when shoppers are there in person.

Jet.com, which does not charge a subscription fee, also gives users who know they won’t be returning an item the option to save money by opting out of the ability to return that item for free. Also, for orders over $35, Jet.com ships for free with delivery within two to five days.

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Buy, Sell, Wait? Solving the Move-up Home Dilemma

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Jeff Neal, 33, of Lancaster, Pa., bought a bigger house last year when his wife was pregnant with their third child.

They planned to sell their two-bedroom home first, but the buyer backed out of the deal after the couple made an offer on a four-bedroom house in the same city. Fortunately, Neal’s relatives pooled money and lent him the cash so he could pay off the 30-year mortgage on the first home. As a result, the Neals were able to buy their next home before selling the old one.

Neal, who runs an e-commerce website, eventually became the landlord of his first house for a painful eight months, during which time he drove 35 minutes most weeks between his new house and his old one to make sure things were running properly. The  total cost of maintenance, taxes, insurance and utilities for his old house amounted to more than $9,000. Owing not just money, but gratitude, to generous relatives left Neal feeling even more unsettled.

“It was challenging, nerve-wracking, and stressful,” Neal told MagnifyMoney.

This spring, Neal sold the old house and paid back his relatives. Although he liked the perks of buying before selling — namely a (relatively) relaxing moving experience — he said next time he would try to sell a house before buying anything new.

Second time’s a charm? Buying a home the second time around sounds easier — you’ve gone through the process before and understand the ups and downs — but the process of juggling two transactions at once can be daunting. You’re both buyer and seller now. The seller in you might want to take advantage of a standout spring real estate market, but the experts we talked to have said that personal circumstances matter more.

May is the best month for home-selling, according to real estate research firm ATTOM Data Solutions. A recent report found that homeowners who cashed out in May received, on average, 5.9% above asking price. June was a close second, with sellers taking home a 5.8% premium. On the flip side, the housing market cools down in the fall and colder months (though homeowners in steamy Miami are reportedly better off selling in January). ATTOM data suggest that October and December are the best months to buy, when sellers received a 1.6% premium on average.

So, buy first or sell first? When is the best time to start the process? MagnifyMoney spoke with real estate experts who analyzed four common scenarios for move-up buyers and listed pros and cons of each.

Selling before buying, timing the market

From a pure economic standpoint, experts said it would be ideal for move-up buyers to sell their homes in the spring, and wait until fall to buy their next house. But real life is often far more complicated. Other factors go into the process of buying besides price, and the stress that comes with two moves may not be worth a better bottom line.

However, for those who can time the market this way, experts said this strategy does work to a homeowner’s advantage. When the two separate transactions are not contingent upon each other, you may enjoy much more freedom and peace of mind than if you sell and buy almost simultaneously.

“When you’re selling and you’re not contingent on the front end, it’s a pretty clean sale and you’re not worried about this other purchase,” said Daren Blomquist, ATTOM’s senior vice president. “On the back end, when you’re actually buying a property, you’re a non-contingent offer, which will put you ahead of the line of a lot of other buyers who are continuing on their home-selling.”

George Ratiu, who leads research for the National Association of Realtors, told MagnifyMoney that those who are in a position to sell in the warmer months and then purchase in the fall months may be working professionals without children. They have a lot more flexibility in timing, as they are not tied to the school calendar.

But there’s an inconvenience factor in delaying the time between when you sell and when you buy. You will have to factor in the housing costs during the gap, as well as the pain of moving more than once.

While such a delay could save you some money, Ratiu cautioned that trying to time the real estate market is about as fruitful as trying to time the financial market — both are unpredictable. Plus, local market conditions can vary from regional or national trends.

“I think trying to time the market is a difficult proposition and one which should take a backseat to a buyer’s circumstances,” Ratiu said.

Selling before buying, but almost simultaneously

In most cases, Blomquist said, move-up home buyers sell their old home first and take the profit from that sale and roll it into the purchase of another home later, but not that much later. The processes happens almost simultaneously because people don’t want to have an interruption in moving, he said.

But because these purchases are typically contingent upon the selling of the old home, three parties are involved in the process, which adds a layer of complication.

“It’s not just you as a buyer qualifying for a loan,” Blomquist said. “It’s another buyer qualifying for a loan on your home. That just multiplies the number of things that could go wrong, that would trip up the sale of the home.”

In hot markets, such as the San Francisco Bay Area, sellers fearful of not being able to find that new house wait longer, exacerbating an already tight inventory. And they have good reason to worry: If it takes longer than you thought to find another home, you risk paying more on intermediary housing expenses.

“You are sitting there without a permanent place to live and that is a risk in and of itself, although I would say that’s a lower risk then taking on two 30-year mortgages at the same time,” Blomquist said.

Buying before selling

This could indeed be a risky proposition for those who buy a new home before selling the old one. Upside: You can take your time moving, which offers a certain level of freedom.

“If the market tanks, you may not get as much profit out of that sale later on,” Blomquist said. “Or if you lose your job, you may not be in a position where you’d want to be owning a home” — much less two homes.

But for those who are close to paying off or have already paid off the mortgage on their first home, the circumstances change pretty dramatically: It’s a lot easier to see that old property as an income generator even if you are not able to sell it right away.

Experts say that people who have this flexibility in their timing and finances are most likely to be retirees. (More on them in a second.)

A bridge loan may tide you over. Younger families like the Neals who buy a house before selling the first, but perhaps lack interest-free financial assistance from relatives, may want to consider a bridge loan. A bridge loan provides the short-term funding required to purchase the new home, buying you time to get your current home ready for sale. Ideally, you would move into your new home, sell your old property, then pay off the loan quickly.

The strategy is not for every real estate buyer because it comes with risks. Plus, bridge loans are not easy to obtain for many. Borrowers in general need to have excellent credit, a low debt-to-income ratio and home equity of 20% or more.

Blomquist said bridge loans work best in tight housing markets where sellers are confident that their first home will sell easily. Read more about bridge loans in this guide.

Hold onto that first home as a rental instead of selling

Retirees who have paid off their first house, and therefore wouldn’t shoulder two mortgages when they buy their next home, may want to hold onto the first home as a rental instead of selling. Or, young professionals moving for a new job where home prices are significantly lower might be able to swing two house payments.

“If you’re able to hold on to that first home, it can become a rental that can generate positive income for you potentially if the numbers work out,” Blomquist said. “And over time, if you own it for another 20 or 30 years, it will likely appreciate in value as well.”

To be sure, not everyone can afford to do this. But if you are able to manage it, a lender will likely count your rental earnings as income, which will also help you to cover the mortgage payment.

However, as we learned in the last recession, home prices don’t always appreciate — sometimes they slide. Maintaining two properties is also no easy task. Ratiu suggested you check your financial goals and time horizon, and think through whether it’s realistic for you to manage all the headaches that may come with renting a residence before deciding to become a landlord.

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2018 Summer Flight Delay Study: Best and Worst Airports Ranked

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With the start of the summer travel season weeks away, a record number of travelers are again expected to flood airports from coast to coast. U.S. airlines enplaned 201.8 million passengers between June and August 2017, according to the U.S. Department of Transportation’s Bureau of Transportation Statistics (BTS).

As airline activity heats up so does the potential for flight delays, which can ruin even the best laid travel plans. In a new study, the MagnifyMoney research team took a look at which airlines have the worst summer delays to help travelers prepare for what’s to come.

To see which airports suffered the most delays during the summer travel season, MagnifyMoney.com analyzed Department of Transportation airport arrival data for the 50 busiest U.S. airports between 2008 and 2017.

Key findings include:

  • Summer is worse than winter for delays. More than half (52%) of airports have more summer than winter delays, although both seasons averaged an on-time rate of 77.1% for the airports we reviewed.
  • Don’t fly in June (if you can help it). June is the worst month for summer airport delays. Three-quarters (76%) of airports reviewed had the most summer delays in June. And the overall on-time rate for June was 76%, compared with the summer average of 77.1%.
  • Summer delays are getting worse. Some 54% of airports had worse summer arrival rates in 2017 than they did in 2016, with an average on-time rate across all airports of 76.1%, versus 76.5%.
  • Expect 3 out of 4 flights to be on time. The average on-time rate across all 50  airports in 2017 was 76.1%, versus 76.6% over the 10-year period between 2007 and 2016.
  • Delays are getting worse at the biggest airports. More than half (56%) of airports had worse on-time arrival rates in 2017 than they did over the previous 10 years.
  • It’s rough on the coasts. The numbers showed that Newark-Liberty, LaGuardia and San Francisco had the worst summer delays of all airports reviewed, while Honolulu, Salt Lake City, and John Wayne Airport in Orange County, Calif., had the least.

 

The worst airports for summer delays

Newark-Liberty International Airport (Newark, N.J.)

Rate of on-time arrivals over 10 years: 67%, down 2.3% from its 10-year average

A major United Airlines hub, an international U.S. gateway airport and an entry into New York City.

LaGuardia (New York City)

Rate of on-time arrivals over 10 years: 68%, up 0.7% from its 10-year average

A popular airport for those living in Manhattan.

San Francisco

Rate of on-time arrivals over 10 years: 69.2%, up 0.4% from its 10-year average

A United Airlines hub, an international U.S. gateway airport and a popular origin-and-destination market.

JFK

Rate of on-time arrivals over 10 years: 70.5%, down 0.2% from its 10-year average

A hub for JetBlue, a major U.S. international gateway airport and a popular origin-and-destination market.

Boston Logan

Rate of on-time arrivals over 10 years: 72.5%, down 3.5% from its 10-year average

A focus city for Delta Air Lines and JetBlue and a U.S. international gateway airport.

Chicago O’Hare

Rate of on-time arrivals over 10 years: 73.3%, up 3.4% from its 10-year average

A United Airlines hub and a major U.S. international gateway airport.

Airports with the fewest delays

Honolulu International, a popular origin-and-destination airport, again has the best summertime arrival rate, at 86.7%. It was followed closely by Delta’s Salt Lake City hub, at 86%. Both airports also have the best year-round arrival rates, at 85.9% and 85.7%, respectively. Out of all four seasons, Salt Lake City outperformed Honolulu in spring and fall.

The winner for most-improved: Los Angeles International Airport had the biggest improvement in summer flights landing on time, up 5.5% between 2016 and 2017, according to MagnifyMoney’s study. The airport is in the middle of a major construction project that included a major relocation of 21 airlines between May 1 and May 17, 2017, as Delta Air Lines moved from terminals 5 and 6 to terminals 2 and 3. These moves helped cut congestion on the airport’s taxiways and runways, leading to the improvement at LAX.

Other airports making the cut for the fewest summer delays include Detroit Metro, California’s Norman Y. Mineta San Jose International, Minneapolis-St. Paul, Oregon’s Portland International, Seattle-Tacoma and Phoenix Sky Harbor.

What’s driving delays?

Struggle in Newark

Only two of three planes landed on time last summer at Newark-Liberty International Airport. The airport had the lowest on-time arrival rate for all seasons of any of the 50 airports we reviewed, and, on average, 30.5% of its arrivals were late in 2017.

It doesn’t help that delays at Newark and LaGuardia, along with JFK, are exacerbated by them being located in one of the most congested airspace corridors in the world  — the Northeast. They’re also hurt by an antiquated air traffic control system that struggles to manage that airspace. Congestion in the New York airspace is responsible for nearly 75% of all air traffic delays in the country every day, according to New York-based advocacy group Global Gateway Alliance.

This could be a problem for travelers this summer, since Newark is one of United Airlines’ busiest hub airports, serving 14.6 million passengers in 2017. When there are delays at Newark, they tend to ripple across the U.S., which could cause inconveniences for passengers this summer.

West Coast woes in San Francisco

San Francisco International Airport is plagued by fog during the summer. When this happens, arriving aircraft can’t do parallel landings on the airport’s two runways due to reduced-visibility conditions. That means one runway is closed, causing delays.

The hurricane effect

The airport where on-time arrivals declined by the most was Houston Hobby, which saw a 6.8% year-over-year drop in summer on-time arrivals. That was likely driven by the aftereffects of Hurricane Harvey, which made landfall in August 2017 and snarled air traffic in the area. For the month of August alone, Hobby’s on-time arrivals dropped 22% year over year, the study found.

How to handle flight delays like a pro

Flight delays have become a normal part of air travel, but there are things you can do mitigate the damage as much as possible.

Be prepared. This is key is when booking your flights. Try to take early-morning flights because these are much less likely to be delayed or even canceled because the plane is usually already parked at the gate.

Know your rights. Every airline is required by the DOT to have a contract of carriage that outlines what they will and won’t do for passengers in case of flight delays or cancellations. In a nutshell, if the flight is delayed by weather or other acts of God, airlines don’t accept liability, as outlined in Delta’s contract of carriage. Similar clauses are followed by the major U.S. airlines.

Check the numbers. You can also check an airline’s on-time statistics and delay causes at the DOT’s Bureau of Transportation Statistics or look at the DOT’s monthly Air Travel Consumer Report, a summary of causes of delay numbers reported by each carrier. The FAA also has flight delay information on its air traffic control System Command Center website. The website has a map of the United States that shows airport delays by color code. It also allows you to search for delays by region, airport or major airport.

There’s an app for that. The FlightView app is a must-have for your travels. The free version offers the following: the ability to track flights by flight number or route; see a real-time map showing an inbound plane’s current position and national radar weather; get notifications on flight status, delays or cancellations; view a map showing a red-yellow-green delay status of airports in the U.S. and in Canada; check the percentage of current arrivals and departures that are on time, late and very late, as well as active FAA delay programs to foresee the direct or trickle-down effect that an airport delay will have on your own flight; and share your flight status via email, text or social media.

Get notified. Sign up for airline flight status notifications on your smartphone. You’ll get flight updates that can sometimes be more accurate that those given at the gate. And these notifications can give you a leg up on being reaccommodated during long delays or cancellations.

Canceled. Now what? If the worst happens, don’t go to a long line at an airline’s customer service desk for reaccommodation. Instead, either go online to a website or a smartphone app and reschedule your own flight. If you need help, call an airline’s customer service desk.

Use your status. One of the many perks of having elite status on an airline is access to a dedicated phone number you can call for flight issues. Airlines put their best agents on these lines because they want to accommodate their best customers.

Whip out your card. If you have a luxury credit cards like the Chase Sapphire Reserve®, you have extra protection when things go wrong. If you book a flight with the card and it’s canceled or cut short by things like severe weather, you can be reimbursed up to $10,000 per trip for your pre-paid, non-refundable travel expenses, including passenger fares. Or if your air travel is delayed more than six hours or requires an overnight stay, you and your family are covered for unreimbursed expenses, such as meals and lodging, up to $500 per ticket. Other cards with trip delay/cancellation insurance are here.

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Student Loan Interest Rates Are Going up Again

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Interest rates on federal student loans will go up for the second year in a row, with borrowers for the 2018-19 school year paying 0.55 to 0.6 percentage points more than last year to take out loans from the Education Department.

  • Direct subsidized loans for undergraduate borrowers: 5.00%
  • Direct unsubsidized loans for undergraduate borrowers: 5.00%
  • Direct unsubsidized loans for graduate or professional student borrowers: 6.60%
  • Direct PLUS loans for parent, graduate and professional student borrowers: 7.60%

Why loan rates are going up

Federal student loan interest rates reset every year. Per legislation signed into law in 2013, the rates are based on the high yield of the 10-year treasury note during the last auction held before June 1. The rates remain in effect for all loans disbursed in a 12-month period between July and June of the following year. On May 9, the 10-year note had a high yield of 2.995%.

Once the auction occurs, the rates are calculated by adding several percentage points to the 10-year treasury note yield, to cover the “administrative costs” of issuing the loans, according to the 2013 legislation that enacted this system. For undergraduate loans, the rate is calculated by adding 2.05 percentage points. For direct unsubsidized graduate loans, add 3.6 percentage points, and for PLUS loans, add 4.6 percentage points.

Interest rates, in general, have been on the rise over the last few years, so the bump in cost of borrowing isn’t a surprise. The good news is that Congress set a cap on student loan interest rates when it came up with the new formula. The bad news is those caps are pretty high, so student loan interest rates are likely to continue rising, as long as we remain in this rising-rate environment.

Interest rates cannot exceed 8.25% for undergraduate borrowers, 9.5% for graduate borrowers with direct unsubsidized loans and 10.5% for PLUS loan borrowers. Even though rates increased significantly this year, they have much more room to grow, which we may see if rates continue along the path they’ve been on recently.

What this rate change means

For the most part, borrowers with existing federal student loans will not see their rates change, as all federal student loans disbursed after July 1, 2006 carry fixed interest rates.

Students and parent borrowers taking out federal education loans between July 1, 2018 and June 30, 2019 will pay the new interest rates listed above. The rates will remain in effect for the life of the loan.

How to lower your student loan interest rates

Student loan borrowers have few options for lowering their interest rates. You could either combine all or most of your federal student loans with a direct consolidation loan once you leave school, but that may or may not save you money (more on that in a minute). You could also refinance your student loans with a private lender, but in exchange for potentially lower interest rates, you give up the benefits exclusive to federal student loans, like income-driven repayment plans and student loan forgiveness. Private lenders may or may not offer loan deferment or forbearance (as federal loans do), which allow you to suspend payments if you go back to school, fulfill military service orders or experience financial hardship, among other qualifying circumstances.

You can preserve those benefits with a direct consolidation loan. Your interest rate on that loan will be the weighted average of the interest rates on the combined loans, rounded up to the nearest one-eighth of one percent. The weighted average is what makes this a tricky decision: If your loans with the highest unpaid balance have the lowest interest rate, you may end up with a lower interest rate when everything’s combined. But if your largest balances have the highest rates, you could actually receive a higher interest rate.

If you’re comfortable refinancing with a private lender, keep in mind you’ll need good credit to qualify for the best rates. You can check out our list of the best student loan refinance offers to get a sense of your potential savings.

How to reduce the amount of interest you pay on student loans

Refinancing and consolidating aren’t the only ways you can reduce how much you fork over to the Education Department. Consider committing to one or both of these strategies:

Pay the interest as you go

Unless you have a direct subsidized undergraduate loan, you will be responsible for paying the interest your loan accrues while you are enrolled in school at least half-time, in your grace period (the time between leaving school and entering repayment) or in deferment. When you enter repayment, that interest will be added to your principal loan balance, meaning you will end up paying interest on that interest. By paying the interest as you accrue it, you can avoid this situation, called interest capitalization.

Of course, many students may not have the means to make such payments while in school, but if you can, you may save yourself a lot of money in the long run. This generally only applies to borrowers of direct unsubsidized loans and graduate PLUS loans, as the Education Department pays the interest on subsidized student loans while the borrower is in school, grace period or deferment, and parent PLUS borrowers generally enter repayment once the loan is disbursed.

Pay more than the minimum

Once you enter repayment, your loan servicer will send you a statement saying how much you owe each month. You can pay more than that, and by making extra payments toward your principal balance, you can reduce the amount of interest you pay over the life of the loan. This is a nice alternative to refinancing your student loans to a shorter term, if you’re worried about taking on a higher, required monthly payment.

Make sure you tell your loan servicer that you’re making an additional payment and you’d like it to apply to your principal balance. Otherwise, the servicer may hold onto the money as a future payment. While that means you may not have to pay the next month, you’re also not saving anything by sending over your money early. It’s a good idea to check our account after making such a payment, to ensure the servicer processed it properly.

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I’m Always the Broke Friend in My Group — Here’s What I Do to Cope

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

 

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At some point or another most of us have had — or will have to —  miss out on dinners, nights out and events with our peers simply because we can’t afford to participate. In other words, we’ve all been the “broke” friend.

Whitney Griffin said she’s used to being the broke friend in her social circles. Griffin, 32, is college educated —  she earned a bachelor’s in art from Florida State University in 2009 — yet has never earned more than $19,000 in a given year. It’s not for lack of trying, she told MagnifyMoney, however, she purposefully chose a career path that is fulfilling yet not exactly lucrative.

“There’s something to be said for enjoying your life,” said Griffin, who lives in Asheville, N.C. and has worked various jobs in both art and business. “I’ve chosen jobs that I’ve enjoyed more so than I would make money at.”

It’s when she runs into friends who have more cash to burn that she’s reminded of the financial consequences of her professional decisions.

“When people say ‘oh you should visit Ireland’ or ‘you should take this cruise,’ I’m just sitting there in my head thinking, ‘I should really get health insurance.’”

Financial inequities can be difficult to deal with at any age, as evidenced by Michael Little. Little, a 71-year-old retiree in West Linn, Ore., told MagnifyMoney in his early days of marriage and starting a family, he realized how different his lifestyle was compared with friends who earned more and did not have children.

At a time when everyone’s lifestyles are made public on social media, it can be even more difficult to stay on a path of frugality when it feels as if your peers are doing exactly the opposite.

MagnifyMoney spoke to Little, Griffin and other self-professed “broke friends” to compile a list of strategies and tips they use to cope.

Stick to your values

Little, now retired from a career as a software developer and systems analyst, lived frugally from the start.

“I grew up pretty poor in Indiana,” Little said. “We had a roof, we had good food. I never felt any less than any of my friends. That influenced me — that you could enjoy yourself and be frugal when you have to.”

As a teenager, he hung with a group of friends he described as more well-to-do.

“They [would] just go out and do stuff, and I didn’t have any money,” he said. “I would say I’m not really hungry and go out and get a soft drink or something like that. I was a little uncomfortable with it as a kid.”

When he married his wife Debbie at 30, they had children right away and a lot of expenses. He was in school and again didn’t have as much money as his peers who didn’t have children.

“I learned a lot of financial discipline from my wife,” said Little. “She’s really good about saying ‘well, I can’t afford that.’”

Make the most of what you can get for free

Hunter Jamison, 19, said a scholarship is the only way he’s able to attend New York University, which can cost up to $72,900 per year, according to The College Board.

He learned to find ways to socialize with peers who have more disposable income than he does.

When a friend suggests they grab a bite to eat, he doesn’t waste an opportunity to use his prepaid campus meal plan.

“If someone wants to meet up and has the meal plan, I’d be like ‘hey do you just want to go to the dining hall,’” he said. “If they don’t, I suggest we cook something because it’s a lot cheaper to buy groceries and cook than to always eat out.”

He also takes advantage of school events where there will be free food and discounts all over the city for NYU students like free access to some museums.

Be the planner

When Heidi McBain, a licensed professional counselor in Flower Mound, Texas, was in graduate school, she had to make her dollars stretch. She decided to take the lead, planning ways to spend time with her friends so they wouldn’t have a chance to propose a super expensive activity.

She said she often suggested they do something outside, like bike riding or hanging out at the beach. If she wanted to have friends over, she’d cook at home or invite them to bring a dish and make it a potluck.

“I was in a very expensive area and I didn’t have any money but I’m also pretty extroverted so I like to be around people,” said McBain. “I had to be really creative in how I would spend time with people.”

Look for free or inexpensive family outings

Little and his wife would look for things to do around town that were free or inexpensive for their family. They had picnics instead of going out to eat at a restaurant and went to the movies on Tuesday afternoons as opposed to Saturday nights.

“Every vacation I ever went on as a kid … we went camping,” said Little. He did the same with his children and continues to pass his love for the outdoors down generations.

He often took his family on camping trips to the mountains. There, his children could get filthy playing in the sand and enjoy roasted marshmallows.

“Tomorrow, I’m taking my grandson up on the mountains and we are going to take him sledding.

It’ll cost me the price of a tank of gas and some snack food,” said Little in an interview with MagnifyMoney.

Don’t fall into the ‘drinks’ trap

“One of the easiest ways to kind of blow through money is dining out” and meeting up with friends at bars, said Griffin. “It’s really easy to blow through a tab without noticing.”

So she limits herself to having only one drink — and not finishing it so she’s not obligated to get the next round — and the cheapest thing on the menu. She says it’s often a salad or something else inexpensive.

While in graduate school, McBain realized if she signed up to be the designated driver, she wouldn’t have to deal with pressure to spend money on drinks.

“If I didn’t have money, I would always drive,” said McBain. “People always love having a DD, so that worked out really well.”

Going out? Eat and drink ahead of time

When Griffin wants to go out to eat or out on the town with her friends, she plans to eat and drink a bit ahead of time, so she doesn’t spend as much money when she’s out.

“If I’m really wanting to go out and party, then I’ll bring my flask on the side,” she told MagnifyMoney. “I tend to pack my lunch box every day that I go to work anyway, so I have no problem filling up on snacks.”

Focus on the bigger picture — your goals

You may need to sacrifice going out to dinner once or twice to join your friends at another time at an event or on a vacation, and that’s OK.

“It’s about choices,” said McBain. “People get invited to stuff all of the time, regardless of how much money you have, it’s about being really choosy.”

During her graduate school days, she would cook at home or pack her lunches to save money so if something big came up, she could still go.

“If there was a new restaurant and everybody was going, I had saved money very rarely eating out so that I would have it for the bigger things,” said McBain.

Find your frugal tribe

“Find friends that are sympathetic to your situation,” said Jamison. In any environment, there definitely are people that are frugal like you.”

He said this makes it so that not spending money doesn’t mean you’re not socializing.

“There are definitely a lot of people — even if they have money — that don’t spend money left and right,” said Jamison.

You can even make frugality social. For example, Griffin suggests hosting clothing swaps when you need new wardrobe pieces in the name of environmental conservation. Everyone would clean out their closets before the event. During the event, the clothing is displayed and people can browse and take what they want, with no money involved.

There are also many online Facebook groups, like Frugal Homemaking and Living and Frugal Family Life where affordable-minded folks get together to share tips and support one another.

Be frank with friends who don’t understand your situation

There will always be that friend who just doesn’t understand when you have to constantly turn them down.

“I had one friend and he was one that didn’t get it,” Little told MagnifyMoney. “He came from a family with a lot of money.”

He would invite Little and his wife to go on couple’s vacations and out to $200 dinners.

If Little balked, his friend would respond with something like, “You guys have really nice jobs you should have the money.” But he was putting his money into retirement, something he knew his friend didn’t need to do because he inherited close to a million dollars. After an invite to Costa Rica, Little finally broke it to his friend.

“I told him if I’d inherited $700,000, a new car and a condo in Florida and had no kids, I would retire today,” Little said. “I think it finally woke him up.”

It can be frustrating to feel like you’re always playing the “sorry, I’m broke” card, but it shouldn’t be an issue for your real friends.

“If you have a good friendship, you should be able to say ‘I really would like to go but I just don’t have the funds to do that,’” said McBain.

“People need to give themselves permission when friendships change to not have to feel like they need to stick with it,” she added.  “Really, the heart of most friendships is spending time together.”

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What to Know Before You Sublet Your Apartment This Summer

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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We’ve all been there. You landed a summer internship or a new job in a different city, or you have to move into a new house before your lease is up.

Rather than doubling up on rent or losing your deposit, consider a sublease. Leasing your apartment to another tenant allows you to get out of Dodge and keep some cash, but you could find yourself in unwanted — and expensive — legal battles if done improperly.

Here’s how you can manage a sublet legally to avoid unnecessary stress and hassle.

Create a sublease agreement

Even if you find a reliable subtenant, it’s a good idea to get your agreement in writing. You can find sublease samples online. The samples are basic boilerplates where you can put in the amount of rent, due dates and what the security deposit is.

Some people are able to make a profit off a sublease. Some have to take a loss, such as renting for a price lower than the rent they pay, if they are in a rush to find a subtenant. And others take the same amount of rent to break even. It all depends on the specific sublease situation, said John Bartlett, executive director of the Metropolitan Tenants Organization in Chicago, a tenant advocacy group.

“It is best to rent the unit to a trustworthy person,” Bartlett said. “And if that means suffering a small loss, then that is better rather than holding out to get the full rent or renting to someone with a less than stellar rental record.”

To avoid unexpected costs while you’re away, you can add additional clauses to the agreement to make sure your subletter complies with the terms of the lease. A few common examples:

  • Require the subtenant to take responsibility for any damage to the apartment during the stay.
  • The subtenant should keep furniture in good condition, assuming you plan to leave personal items.
  • If you live in a city that has specific recycling requirements, you can ask your subletter to follow those rules to avoid fines.

Ask for a security deposit

If you are subletting your apartment, experts suggested you take at least one month’s rent as a security deposit. You can request more if you think it’s appropriate, but for tenants of rent-stabilized apartments in New York, you can only take one month’s rent as a security deposit by law.

Remove yourself from the lease, if you can

Bartlett said in many leases, the tenant and subletter appear on the same lease contract. As a result, they will be jointly liable for damages or missed payments. That means that the landlord can go after one tenant or both if things go wrong.

If you don’t plan to return to the apartment, Bartlett recommended you try to convince the landlord to take you off the lease and sign a new lease with your subtenant. That would be the ideal situation for you, but the landlord has little incentive to sign a new lease if they can get you, the tenant on record, to pay rent should things go awry with the subtenant, Rozen said. Your landlord may refuse, but it’s worth a try. Sweetening the deal by paying a negotiated fee to your landlord may be worth it, Bartlett said.

Things you should do before subletting your apartment

Subletting means you become the landlord to the subletter, and there’s no contractual relationship between the subletter and your actual landlord, Jennifer Rozen, a New York City tenant lawyer, told MagnifyMoney.

If a subletter fails to pay rent, or damages the apartment, as long as the lease is still in effect, you could still be on the hook for the full rent amount or the damages, tenants’ rights experts said.

Given the potential risks involved in subletting, here’s some homework you need to do before giving your apartment key to your subtenant:

Before you do anything, review your state’s landlord-tenant laws and regulations. Every state has its own sublet laws, so it’s a good idea to understand your rights and obligations as a tenant.

In some places, like Illinois and New York, you have the legal right to sublet as long as the landlord doesn’t reasonably deny it. In New York, requests must be in writing and sent by certified mail with an attached proposed sublease that includes the subletter’s information. The landlord has 10 days to look over your request and ask additional questions, but Rozen says the entire approval process could take as long as two months. In other states, including Iowa and Kansas, you cannot sublet unless your lease permits it.

No laws prohibit subletting, but the subletting procedure may vary greatly based on specific leases. You should see if your lease has restrictions on subletting. If the lease or the state law requires you to contact the landlord and go through a formal process, then you need to abide.

In many states, landlords cannot unreasonably deny a subtenant, but they do want to be involved in a sublease, according to Bartlett.

“They’re not going to want some person that they don’t even know who it is to live in their unit,” Bartlett said.

Once you are clear on your obligations and responsibilities, you can start looking for a subtenant. Experts interviewed by MagnifyMoney strongly advised that you interview your candidate(s) and do your due diligence.

One way to protect yourself as a tenant is to call your potential subletter’s previous landlords to inquire about his/her rent payment history, Bartlett said. Rozen said it’s legal for you to request W-2s, recent pay stubs and credit reports from the prospective subtenant, or recent bank statements if this person is a freelancer or unemployed.

“You definitely shouldn’t get yourself in a situation where you no longer have the right to be in the apartment because you find the sublease, [but] you don’t know whether the person is financially viable,” said Rozen, who has represented hundreds of residential and commercial tenants.

If you want to go forward with a subtenant whose financials are questionable, you could ask him or her to pay upfront the partial or full rent amount for the sublease. “That’s the safest thing to do because the only thing you can do as the tenant of record is pay the rent to avoid getting sued by the landlord, then you have to go after the subtenant,” Rozen said.

What’s the risk of subletting without asking your landlord?

Although it’s best to inform your landlord of the sublease and follow the rules, in reality, many people don’t do that. It’s fine if you don’t get caught, but the consequences could be severe if you do.

In many leases, Bartlett said, there’s a clause stating that the unit is only for the person named on the lease. If the landlord finds out that a tenant has sublet their property while keeping it in the dark, the landlord could terminate the lease and demand that you leave the property. You could be liable for any damages or unpaid rent, experts said.

In New York, if your landlord finds out about a subtenant he or she didn’t approve, or simply doesn’t want the subtenant, the landlord may send you a legal notice requiring you to remove your subletter in 10 days. The landlord cannot directly evict the subtenant without getting you involved. Miss the deadline and your landlord could terminate your lease and try to evict you in housing court, which in turn, removes the subtenant. Or worse: “If you have a legal fee provision in your lease, then the landlord would be entitled to collect their legal fees from you if you go to court … and lose,” Rozen said.

What to do when things go wrong?

When she was in law school, Rozen sublet her apartment, but her subtenant wouldn’t leave the apartment when the lease was up and stopped paying rent.

In that situation, Rozen said the tenant would have to file a claim in court against the subtenant. Such cases often takes months, unless your subtenant voluntarily moves out after the case is filed. In Rozen’s case, her subletter finally left the apartment willingly, but he skipped on two months’ rent and left town. It was too late for Rozen to sue at that point.

“I will never make that mistake again,” Rozen said. “I was a poor law student.”

If your subletter doesn’t pay rent or damages your apartment, Rozen said the first step is to write a demand letter explaining the situation and threatening to sue if they don’t repay the rent or the costs.

If a demand letter doesn’t work, an easy and inexpensive way to handle the situation is to file a small claims lawsuit, which typically doesn’t require hiring an attorney, Rozen said. You could collect up to a few thousand dollars, depending on your state. In New York, for instance, the maximum is $5,000.

Resources for tenants

There are many housing advocacy groups across the country dedicated to helping tenants. When involved in disputes with your landlord or your subletter, you can turn to local organizations for legal advice and assistance. To find your local tenant advocacy groups, check out this Tenant Rights page on the U.S. Department of Housing and Urban Development website.

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The Best Cities to Be Young and Broke

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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When you’re young and just starting out your career, choosing where to live can truly make or break your finances.

Young people today already have to manage a host of financial stressors, like student loan debt and rising housing costs, with the usual demands of early adulthood, like starting their first retirement fund and learning to balance work and play.

When you couple these competing responsibilities with a location that only contributes more financial obstacles, you could be setting yourself up for failure.

On the other hand, some cities are affordable enough to give even the lowest earners a fighting chance at a decent quality of life.

With this in mind, MagnifyMoney decided to take a look at some of the biggest cities in the U.S. and determine which cities are the best places to be young and broke today.

We started by analyzing more than 100 U.S. cities to find the most favorable and affordable places for people between the ages of 18 and 24. Among other data points, we not only looked at obvious expenses like housing and food, but also unemployment rates, income taxes and the rate of young adults who are living in poverty.

Key findings: The top 10 cities for the young and broke

Of the 10 best places to make the most of a tight budget, five were in the Midwest —  Madison, Wis., Grand Rapids, Mich., and Dayton, Ohio.

Although Midwestern cities did not score highest on all of the features analyzed, when they were put up against what young adults said matters to them the most, low rents and short commute times pushed these places ahead.

“It’s not that these cities necessarily scored the highest on all the features we analyzed, but when we weighted those features according to what the young adults we surveyed said mattered the most, the lower-than-typical rents and price combined with modest commute times to bring Midwestern cities to the top of the list,” said MagnifyMoney Senior Research Analyst Kali McFadden.

#1 Madison, Wis.

Overall score: 73.2/100

It stands to reason that a renowned university town would be a draw for the young and broke, but Madison stands apart, thanks to a relatively low cost of living (median rent is $950, and goods run almost 5% cheaper than the rest of the country) and a fairly robust public transportation system.

About 4% of the population use public transportation, which may not seem like a lot, but that’s enough to rank 21 among the cities reviewed. Moreover, the average commute is just over 21 minutes.

Only two other cities (Provo, Utah and Springfield, Mass.) have a higher proportion of young adults, yet no other big city has more young people who either attended or graduated from college (70%), and the city ranks in the top 10 for lowest youth unemployment.

The bad news is that there are more young adults living in poverty in Madison than other city analyzed, but this may have to do with how college students and their families file their taxes.  When considering what city features young people in our survey said they care most about, Madison still places 1st, with an overall score of 73.2.

#2 Grand Rapids, Mich.

Overall score: 72.4/100

With an overall score of 72.4, Grand Rapids misses 1st place by a hair. Grand Rapids shines in many of the same ways that Madison does, such as the price of goods, relative to the rest of the country (almost 5% less), average commute time (just over 21 minutes) and low youth unemployment rates (6.7%).

Grand Rapids is also full of young, educated citizens, with over 10% of the population between the ages of 18 and 24, and 59% of those young people either college graduates or on their way.  Most young people are local, with fewer than 5% newly arrived from out of state.

Fewer than 2% of people use public transportation, which is pretty middle-of-the-pack, and statewide and income taxes are lower than most, ranking 42nd and 44th out of the 107 big cities.  Grand Rapids exceeds Madison in a few areas, such as median rent at $812, fewer young people in poverty and over twice as many pizza joints per capita.

The other Midwest cities that made the top ten were Des Moines, Iowa (6) and Akron, Ohio (8).

#3 Dayton, Ohio

Overall score: 72.2/100

It turns out that Ohio is a great place to be young and broke. Statewide, income and sales taxes are low, ranking 23rd and 33rd among the 107 big cities we reviewed, and Dayton’s modest median rent ($761) and low cost of goods (over 4% cheaper than the national average) add to Dayton’s affordability.

Of the 10% of Dayton’s young population who are between the ages of 18 and 24, 63% have or are working toward an undergraduate degree (13th highest).  Average commute times also compare favorably with the rest of the nation, coming in at just under 23 minutes.  Dayton does fall short in the areas of youth unemployment (11%) and youth living in poverty, ranking in the bottom half of all cities we reviewed.

#4 Syracuse, N.Y.

Overall score: 71.4/100

Our first city outside of the Midwest is another university town in the northern reaches. With a score of 71.4, Syracuse compares very favorably with the rest of the country in average commute times (21 minutes), statewide sales tax (4th lowest), and percentage of the population between the ages of 18 and 24 (11%).

As one would expect for a college town, a lot of young adults are newly arrived from out of state or country (11%), and Syracuse ranks 11 out of 107 for number of young people who attend or have graduated from college (64%).

Rents are low at $790, as is youth unemployment (8%), but as seen with the other top cities on our list, a lot of young people live below the poverty line (26%).

#5 Durham, N.C.

Overall score: 70.9/100

Durham-Chapel Hill is home to two large schools, Duke University and University of North Carolina, which helps explain why over 11% of the population is between the ages of 18 and 24.

It also helps to explain why 68% of those young adults either have or are pursuing a college degree (the 3rd largest proportion in our study), and why 11% of them arrived in the last year from another state or country. Durham is also relatively affordable, with a middle-of-the-pack median rent of $947 and prices almost 4.5% lower than the national average.

Commute times are also middle of the pack at under 25 minutes, but almost 5% of the population use public transportation.  Again, 5% may not sound like a lot, but it’s actually the 15th highest among cities with populations over half a million. Some 30% of young people live below the poverty line, although that may be because so many college students don’t have much, if any, income.

It’s not all roses in the Midwest

Ironically, the best five cities for the young and broke also have a high rate of young adults living in poverty, comparatively. As we said, the reason these cities have an edge is that they tended to rank well in the factors that young people said mattered most to them, like rent costs and commute times.

Top-ranked Madison, Wis., for example, also boasts the highest rate of young adults living in poverty in Madison than any other city analyzed. Similarly, in Durham, N.C (5), 30% of young people live below the poverty line.

However, this doesn’t necessarily mean these cities are rife with homeless young adults. One explanation could be that these cities are home to several colleges and with a high volume of college students in the population, it’s easy to see how it could appear that young adults aren’t earning much.

“These two things are likely connected, as college students often have little or no income, but that doesn’t mean they’re not being supported through family assistance or loans,” McFadden said.

On the plus side, college towns are affordable

The list also boasts a number of college towns like the aforementioned Madison, Wis. (1) and Grand Rapids, Mich. (2). Rounding out the top five were college towns outside of the Midwest, Syracuse, N.Y. (4) and Durham, N.C. (5). The results suggest college towns may be more affordable destinations for young people who want to keep their expenses relatively low.

The 10 Worst Cities to Be Young and Broke

Methodology: What do young people want in a city?

To find city features most appealing to young people without a ton of disposable income, MagnifyMoney asked 100 young people (ages 18-24) to rank the importance of 12 city features that factor into quality of life for the young and broke. The responses were weighted according to which were the most important to the youth surveyed.

Here are the most important city features, according to this survey:

  1. Median rent
  2. Price of goods compared with the national average
  3. Average commute times
  4. Unemployment rate for young people
  5. Statewide income tax rates
  6. Statewide sales tax (we note that local sales tax may be higher)
  7. Percentage of the young adult population who live in poverty, by federal standards
  8. Percentage of the population between the ages of 18 and 24
  9. Percentage of young adults who have either completed or are pursuing a college degree
  10. Percentage of the population who use public transportation
  11. Percentage of young adults who moved from another state or another country in the previous year, and
  12. Availability of cheap food, as expressed in the number of pizza parlors per 100,000 residents.

Once we know what to look for, our team weighted the features of 107 metro areas with populations over 500,000 against what young people said they wanted most in the city.

Based on this information, the cities were then scored, for a highest potential score of 100 and a lowest potential score of zero to find the best places for broke young adults.

References

Advertiser Disclosure: The card offers that appear on this site are 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 card companies or all card offers available in the marketplace.

Brittney Laryea
Brittney Laryea |

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

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News

Zelle Fraud Protection: What You Need to Know Before Transferring Funds

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Credit cards. Debit cards. Zelle. One of these popular ways to spend money from your bank account is not like the others, and many consumers are finding out the hard way. Zelle is the big banks’ answer to Venmo  — a  consortium of heavy hitters like Bank of America and Wells Fargo lets account holders send cash to each other almost instantly via smartphones or email.

Zelle was a near instant hit: about $75 billion in transactions were made via the service last year, twice Venmo’s volume. But it’s popular with scammers, too. Criminals have flocked to the service because, like wire transfers, Zelle transactions cannot be disputed or reversed, and some consumers have been overly trusting of the service due to its affiliation with traditional banks.

Lauren Driver of Los Angeles sent $2,000 using Zelle in an effort to buy “Hamilton” musical tickets in December. When the seller turned out to be a scammer, she turned to Zelle and to Bank of America, expecting the usual fraud protections would apply to the transaction.  After all, Zelle commercials hawk the service as safe, because it’s “backed by the banks.”

No luck. Driver was told her transaction wasn’t covered by any kind of fraud guarantee.

Consumers have flocked to social media recently with similar tales of woe.  In many cases, banks are declining to help, citing Zelle’s policy. In an emailed statement, Bank of America reiterated that Zelle is intended for sending funds to friends, family and people customers know.

“Banks are saying there is no protection because the consumer initiated the payment,” Driver said.

Which bill pay services have fraud protection?

Zelle

Venmo

PayPal

Square Cash

PopMoney

Fraud policy

Limited. If you, the consumer, initiated the transfer of funds, you are not covered for fraud.
You are only covered if someone uses Zelle to hack into your account.

Venmo does not offer buyer or seller protection.

Limited. Some transactions, such as purchasing an item that was damaged or that you did not receive, are covered if you file a dispute within 180 days. Unauthorized transactions are covered, so long as you file a dispute within 60 days. Not covered: in-person transactions using PayPal are not covered by its purchase protection policy, as well as transactions involving real estate, motor vehicles, or money sent to family and friends.

Sellers protection only

Varies by state

Is Zelle unsafe to use? Yes and no.

It’s no less safe than sticking cash in an envelope and giving it to someone. If that person is someone you know, and you physically hand them the cash, that’s pretty safe. If you stick that envelope in the mail and send it to someone you don’t know across the country, that’s pretty unsafe.

Zelle should basically be handled the same way. In other words, Zelle should only be used for low-dollar, very personal transactions.

Some of the consumer confusion around Zelle was created by the product’s aggressive marketing, which initially touted its security features. In one TV commercial, performer Daveed Diggs rapped, “You can send money safely cause that’s what it’s for / It’s backed by the banks so you know it’s secure.” Citing such ads, Driver said she was surprised that she wasn’t covered for her incident.

What types of fraud are covered with Zelle?

How Zelle defines fraud

As defined by Zelle, this includes only certain kinds of fraud, such as account unwarranted transactions initiated by a hacker — similar to a criminal stealing your credit card and using it to make a fraudulent purchase. On the other hand, when a consumer initiates the transaction — such as using Zelle to send payment to an unknown seller — that is not covered.

The confusion lies in Zelle’s definition of “fraud.”

Zelle does provide some fraud protections to consumers, as required by the Federal Reserve’s Regulation E, which governs electronic transactions.

“Consumers are not liable for unauthorized activity on their accounts,” said Lou Anne Alexander, group president of payment solutions at Early Warning, the firm that operates Zelle for the banks, in an emailed statement.

“Use Zelle to split the bill with your friends for lunch… But never use it for any sizable transaction, or with anyone you don’t know.”

“Unauthorized activity” covers only certain kinds of fraud, however, such as account hacking — similar to a criminal stealing your credit card and using it to initiate fraudulent purchases. On the other hand, transactions initiated by consumers that later turn out to be fraud — when there really aren’t “Hamilton” tickets for sale — are not covered. Credit card issuers often call this “purchase protection” or “dispute resolution.” And Zelle doesn’t offer that.

“Sending money with Zelle is like sending cash, and consumers should only use the service for sending money to people they know and trust. We do not offer purchase protections available through credit cards, debit cards or available for a fee for purchase-specific payment technologies,” Alexander wrote.

It’s understandable that consumers might miss that critical distinction — after all, whether their accounts are hacked or a scammer lies to them, the end result is the same. With credit and debit cards, and even PayPal, consumers can get their money back in most cases by disputing the transaction. But not with Zelle, or its rival person-to-person payment system, Venmo.

Zelle said it is aware of the complaints, and is “working to improve our service, including requiring some consistent (user interface) changes that will help consumers confirm that they are sending to intended recipients.” Those changes might take some time, however.

The bottom line

So what should consumers do? It’s simple, really. Don’t trust Zelle any more than you trust the $20 bill in your pocket. Use Zelle to split the bill with your friends for lunch; it’s perfectly safe for transactions like that. If you’re afraid a hacker might break in and raid your bank account using Zelle, relax. You’re covered for that kind of fraud.

But never use it for any sizable transaction, or with anyone you don’t know. If you do, the banks won’t have your back.

 

Advertiser Disclosure: The card offers that appear on this site are 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 card companies or all card offers available in the marketplace.

Bob Sullivan
Bob Sullivan |

Bob Sullivan is a writer at MagnifyMoney. You can email Bob here

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