The total loan amount of students attending a college or university this year exceeded $1 trillion, making student loan debt greater than credit card debt for the first time. This is up from last year, when total loans exceeded $100 billion.
According to Janet Turner, head of financial aid at the University of Portland, the average amount of undergraduate debt for the 2010-2011 graduation class was $20,310 per student. The total student loan debt for UP undergraduate students for the 2010-2011 academic year was $10,769,045.
The devastating combination of high student loan debt and job unavailability is an economic detriment for students and families across the U.S.
"There's a lot of outcry on student debt because nationwide the economy has made finding a job difficult," Turner said.
On Oct. 26, President Barack Obama announced his plan to enact a law to ease the burden of student loan debt starting next year. The law was originally planned to go into effect in 2014 through Congress.
"We're not waiting for Congress," Obama said. "Last month, when I addressed a joint session of Congress about our jobs crisis, I said I intend to do everything in my power right now to act on behalf of the American people – with or without Congress. We can't wait for Congress to do its job. So where they won't act, I will."
The law will allow students with federal loans from 2008 and on to cap monthly loan payments at 10 percent of their discretionary income, which will replace the original 15 percent. It also enables debt forgiveness in 20 years instead of 25 years.
The new rules also allow borrowers to consolidate their government – backed student loans and pay a lower interest rate.
The changes apply solely to government loans and do not include private student loans issued by banks or loans that students have defaulted on.
"Our loan default list is 1.4 percent for UP, which is way below the national average, and used to be .9 percent," said Turner.
According to Turner, the amount of debt a student is advised to take on depends on their major – since some jobs are in greater demand or have higher pay than others – and the amount of financial support they receive from family and outside scholarships.
"It's an individual choice," Turner said. "We hope most families have saved for school, and debt is a family decision."
Senior Katie Doyle predicts her accrued student loan debt to be around $80,000 to $100,000 upon graduation in May 2012.
"I decided to go to a private school and major in education, so I'm going to exit without a job and when I find a job, a teacher's salary," Doyle said. "One of the things that makes me sad is our generation, who is excited to join the world and make a difference, is being stifled by this debt."
According to Turner, there has been an increase in parents borrowing money and students looking for jobs on and off campus to help pay for their education.
"I paid for all my living, food and free-time activities through working in the summer and working consistently through school," UP 2011 alumna Hannah Pike said. "I have $70,000 in debt, most of which is to my parents but some of it is to banks."
Pike graduated from UP with a degree in French studies and now works for Nike as a data administrator.
UP 2011 alumna Emily Dermann incurred about $16,000 worth of debt during her four years at UP after taking out several loans and receiving the President's Scholarship worth $54,000, a Pell Grant and a work study grant.
"Based off of what I've read so far, I'm grateful for Obama's decisions regarding loan debt and am interested to see how this plan unravels without Congress' full agreement," Dermann said. "Loan debt and money management in general are definitely major sources of anxiety for me right now."
Dermann graduated from UP with a degree in elementary education and is currently coaching middle school volleyball, working as a nanny and substitute teaching for Portland Public Schools.
Friday, November 4, 2011
Your Next Credit Card Is Your Last
You may remember when credit card machines weren't so reliable, so stores sometimes used that little aluminum contraption with a roller over your card, and you had to sign the printed copy hard enough to ink onto the carbon paper. This is one of the reasons some cards still have those raised silver numbers on the front alongside your name and expiration date.
Even in spite of innovations like the magnetic strip, embedded data chips and early NFC offerings, the tech behind credit payments in stores hasn't actually moved far beyond those raised plastic numbers. Until now. It looks like your old plastic might spend more time in your desk drawer than than your bag or back pocket.
Apple's In-Store App Store App For, Um, Not Apps
Today Apple rolls out an app that lets iOS users shop for products through Apple. The app is actually hooked up to physical retail stores. That means you can order something through your Apple device, then make your way later to a store to pick it up for speedier access to your new goods, with no delivery fees.
But the app's much more than a digital assistant. If you happen to be near an Apple store wanting to buy something, but don't want to wait in line, you can order it and get a coffee. Then 12 minutes later, when back-of-house staff have fished it off a shelf, you can pick it up in-store from a special desk, sign for the item, and leave. Because the payment is processed through your Apple ID account's registered payment (your credit card number), this should even work if you've left your card at home.
And here's the best bit: If you're in-store and want to buy something off a shelf, you can pick it up then snap a picture of its bar code. The app does all the object recognition (with, we assume, location-awareness so it knows which store inventory you've depleted) and you simply click to buy it via your Apple ID. Having done so, you're apparently free to walk out of the store, purchase in hand. That's a huge amount of trust, but it's only for the cheaper items you can get off store shelves, and you can argue a bold innovation needs brave decisions like this.
There are a couple of big limitations: It only works in Apple Stores, and you need an Apple ID.
But what Apple's done is innovate and speed the entire purchase by replicating credit card processing, cash registers, and an in-store payment/inventory system in an app. It works because Apple's in control of both ends of the transaction: It happens through its devices, using its app and associated security, in its physical stores, selling its products and accessing its database (one of the biggest there is in the world) on your credit card details.
The vital detail is that the numbers relating to your credit card (that identify it, flag it as in-date, identify you as the owner) are all virtual. There's no need for NFC, no need to swipe your magnetic strip or type in a PIN. Even when paying for higher value items you merely have to prove you're the person who owns the relevant Apple ID associated with the transaction ... which is a signature, for now.
It has so many benefits that it's tempting to see Apple using its stores as a test-bed before rolling out something similar as an entire payments infrastructure ("iPay"?) to other retailers.
Square's "Say My Name" Model
Square is in the news beacause it's taking payments via Square hands-free and, in fact, free of any sort of need to swipe, sign, or wave anything at the cash register to pay. Instead at participating retailers (who've synced up to your iOS Square Card Case app, and thus know who you are and that you have a digital means of payment encoded in the app) you simply have to say your name. The salesperson will look you up on their iPad interface, check your face matches your name--to prevent a thief using your ID--and then tap to effect the payment.
It's enabled by iOS 5's geofencing, meaning the device can securely identify itself as being in a position within about 330 feet of an approved Square retailer. When you stroll near the shop, the system identifies that you may be about to drop by and thus opens a tab ready for you (again, this stops a casual thief from using your tab when you're somewhere else). The tab is closed if you move out of range.
Square's replacing the physical credit card (those 16 raised numbers again!), and traditional card interactions with cash registers, with a virtual transaction that uses your iPhone as part of a secure key to identify you.
To U.S. consumers--still used to credit card systems that have been surpassed with swifter, more secure versions in Europe and elsewhere--Square is often held up as an example of the future of payment tech.
But there are limitations: The number of retailers who've signed up is limited, the system could get confusing for retailers with a customer base of thousands of people, plus your photo isn't necessarily the most secure (or hack-proof) way to ID yourself. And if your name is Zbigniew or a name unfamiliar to the average American, then you may find the system stumbles at the salesperson interaction, particularly at a bigger retailer that's not as familiar with you as, say, your corner coffee shop (just talk to Google+ about its hugely embarrassing mis-treatment of foreign-sounding names).
Square certainly can innovate around these issues, though. And perhaps one way to boost security is to borrow an idea like Apple's "sign your signature with the corner of your iPhone" identity proof.
It's All About The Numbers
What Apple's system and Square's system have in common is that they are new ways to convey just a tiny sliver of data from your credit card company to a store's computers: They're just slicker, swifter, and perhaps less expensive ways to do so than printing the numbers off your plastic card itself, in person. Even the hot-topic NFC "wave and pay" system is just an iteration of current credit card tech--in its simplest version your actual card has a wireless loop in it that transfers those same relevant numbers, and in its cleverest version the numbers are encoded securely in an app on a smartphone.
Other firms have quickly latched on to the idea that it's this communications channel for data that will change how we shop. Scvngr is using QR codes to effect a clever mobile payments solution. PayPal has been trialing a system that is a little more similar to Square's (because it too has a database of approved credit card numbers and a way to securely ID the owner of the data), and had taken a firm anti-NFC position...until this week, when it's softened this stance and may embrace NFC wireless solutions in the future.
And conscious that its business as the supplier of credit card reading hardware to stores may evaporate if systems like Apple's and Squares became common, VeriFone, which makes a huge number of the machines used in the U.S., has just bought "a leading provider of next-generation mobile retail solutions, Global Bay," which will help it extend "new smartphone- and tablet-based shopping and payment experiences to retail organizations." Sound familiar?
Wireless Payments: It's All About The Data
Amazing though these innovations are, the real strength behind them seems to be overlooked in the press. Square's system hints at it overtly, as does Google's brand-new Wallet wireless solution--the abilty to integrate store loyalty systems into the exact same action as the payment is potentially powerful. Apple's system reveals another secret, if you think about it: A more streamlined product delivery service to stores should be possible if more people shop beforehand by apps.
But these are only the simplest benefits. What's to stop Apple from giving you a tiny discount on your purchase if you agree to download advertising to your phone at the point you walk out of the store with your new item? Why couldn't a coffee shop offer you extra loyalty points if you accept an ad for cakes at a nearby partner patisserie when you pay wirelessly, and that store itself offer you a money-off reward for following its invite?
That's why Apple's system, Square's system, and competing services from Google, PayPal, and even the credit card companies themselves aren't individually a model for how a post plastic-card payment system will work in the next five years. What we'll end up with will be a clever hybrid, possibly saddled with a slighly heavier proof-of-ID burden at the behest of credit card firms, but which may be even more frictionless than Apple's "use the app, then just walk out of the store" model. In the end though, the plastic credit card's days look numbered.
Even in spite of innovations like the magnetic strip, embedded data chips and early NFC offerings, the tech behind credit payments in stores hasn't actually moved far beyond those raised plastic numbers. Until now. It looks like your old plastic might spend more time in your desk drawer than than your bag or back pocket.
Apple's In-Store App Store App For, Um, Not Apps
Today Apple rolls out an app that lets iOS users shop for products through Apple. The app is actually hooked up to physical retail stores. That means you can order something through your Apple device, then make your way later to a store to pick it up for speedier access to your new goods, with no delivery fees.
But the app's much more than a digital assistant. If you happen to be near an Apple store wanting to buy something, but don't want to wait in line, you can order it and get a coffee. Then 12 minutes later, when back-of-house staff have fished it off a shelf, you can pick it up in-store from a special desk, sign for the item, and leave. Because the payment is processed through your Apple ID account's registered payment (your credit card number), this should even work if you've left your card at home.
And here's the best bit: If you're in-store and want to buy something off a shelf, you can pick it up then snap a picture of its bar code. The app does all the object recognition (with, we assume, location-awareness so it knows which store inventory you've depleted) and you simply click to buy it via your Apple ID. Having done so, you're apparently free to walk out of the store, purchase in hand. That's a huge amount of trust, but it's only for the cheaper items you can get off store shelves, and you can argue a bold innovation needs brave decisions like this.
There are a couple of big limitations: It only works in Apple Stores, and you need an Apple ID.
But what Apple's done is innovate and speed the entire purchase by replicating credit card processing, cash registers, and an in-store payment/inventory system in an app. It works because Apple's in control of both ends of the transaction: It happens through its devices, using its app and associated security, in its physical stores, selling its products and accessing its database (one of the biggest there is in the world) on your credit card details.
The vital detail is that the numbers relating to your credit card (that identify it, flag it as in-date, identify you as the owner) are all virtual. There's no need for NFC, no need to swipe your magnetic strip or type in a PIN. Even when paying for higher value items you merely have to prove you're the person who owns the relevant Apple ID associated with the transaction ... which is a signature, for now.
It has so many benefits that it's tempting to see Apple using its stores as a test-bed before rolling out something similar as an entire payments infrastructure ("iPay"?) to other retailers.
Square's "Say My Name" Model
Square is in the news beacause it's taking payments via Square hands-free and, in fact, free of any sort of need to swipe, sign, or wave anything at the cash register to pay. Instead at participating retailers (who've synced up to your iOS Square Card Case app, and thus know who you are and that you have a digital means of payment encoded in the app) you simply have to say your name. The salesperson will look you up on their iPad interface, check your face matches your name--to prevent a thief using your ID--and then tap to effect the payment.
It's enabled by iOS 5's geofencing, meaning the device can securely identify itself as being in a position within about 330 feet of an approved Square retailer. When you stroll near the shop, the system identifies that you may be about to drop by and thus opens a tab ready for you (again, this stops a casual thief from using your tab when you're somewhere else). The tab is closed if you move out of range.
Square's replacing the physical credit card (those 16 raised numbers again!), and traditional card interactions with cash registers, with a virtual transaction that uses your iPhone as part of a secure key to identify you.
To U.S. consumers--still used to credit card systems that have been surpassed with swifter, more secure versions in Europe and elsewhere--Square is often held up as an example of the future of payment tech.
But there are limitations: The number of retailers who've signed up is limited, the system could get confusing for retailers with a customer base of thousands of people, plus your photo isn't necessarily the most secure (or hack-proof) way to ID yourself. And if your name is Zbigniew or a name unfamiliar to the average American, then you may find the system stumbles at the salesperson interaction, particularly at a bigger retailer that's not as familiar with you as, say, your corner coffee shop (just talk to Google+ about its hugely embarrassing mis-treatment of foreign-sounding names).
Square certainly can innovate around these issues, though. And perhaps one way to boost security is to borrow an idea like Apple's "sign your signature with the corner of your iPhone" identity proof.
It's All About The Numbers
What Apple's system and Square's system have in common is that they are new ways to convey just a tiny sliver of data from your credit card company to a store's computers: They're just slicker, swifter, and perhaps less expensive ways to do so than printing the numbers off your plastic card itself, in person. Even the hot-topic NFC "wave and pay" system is just an iteration of current credit card tech--in its simplest version your actual card has a wireless loop in it that transfers those same relevant numbers, and in its cleverest version the numbers are encoded securely in an app on a smartphone.
Other firms have quickly latched on to the idea that it's this communications channel for data that will change how we shop. Scvngr is using QR codes to effect a clever mobile payments solution. PayPal has been trialing a system that is a little more similar to Square's (because it too has a database of approved credit card numbers and a way to securely ID the owner of the data), and had taken a firm anti-NFC position...until this week, when it's softened this stance and may embrace NFC wireless solutions in the future.
And conscious that its business as the supplier of credit card reading hardware to stores may evaporate if systems like Apple's and Squares became common, VeriFone, which makes a huge number of the machines used in the U.S., has just bought "a leading provider of next-generation mobile retail solutions, Global Bay," which will help it extend "new smartphone- and tablet-based shopping and payment experiences to retail organizations." Sound familiar?
Wireless Payments: It's All About The Data
Amazing though these innovations are, the real strength behind them seems to be overlooked in the press. Square's system hints at it overtly, as does Google's brand-new Wallet wireless solution--the abilty to integrate store loyalty systems into the exact same action as the payment is potentially powerful. Apple's system reveals another secret, if you think about it: A more streamlined product delivery service to stores should be possible if more people shop beforehand by apps.
But these are only the simplest benefits. What's to stop Apple from giving you a tiny discount on your purchase if you agree to download advertising to your phone at the point you walk out of the store with your new item? Why couldn't a coffee shop offer you extra loyalty points if you accept an ad for cakes at a nearby partner patisserie when you pay wirelessly, and that store itself offer you a money-off reward for following its invite?
That's why Apple's system, Square's system, and competing services from Google, PayPal, and even the credit card companies themselves aren't individually a model for how a post plastic-card payment system will work in the next five years. What we'll end up with will be a clever hybrid, possibly saddled with a slighly heavier proof-of-ID burden at the behest of credit card firms, but which may be even more frictionless than Apple's "use the app, then just walk out of the store" model. In the end though, the plastic credit card's days look numbered.
Avoiding monthly debit card charges
Dear Action Line: I'm mad as hell, and I'm not taking it anymore! Banks and restaurants convinced us to use debit cards, instead of checks or credit cards, and now are charging monthly fees to use our own money! How are such fees avoided? - M.W., Tulsa
"No one wants to pay a monthly fee to use his own money, and if your bank added debitcard
charges, here are some other options," said Bill Hardekopf, CEO of LowCards.com.
Ask bank to waive fees: Some banks agree to waive debit card fees when customers keep higher minimum balances on checking accounts, open savings accounts or move to online banking. Bank ofAmerica waives the debit card fee for premium accounts and for Wealth Management/Merrill Lynch and U.S. Trust clients. Wells Fargo waives fees for customers maintaining high balances.
Use cash: There are no fees or interest payments with cash, and you might be able to use your debit card to get cash at network ATMs without fees. Cash can be inconvenient but can save you money. Consumers tend to spend less with cash because cash is the most transparent method of payment. Real pain and awareness of money spent comes when money is pulled from your wallet and handed to some merchant. There is no such pain with plastic cards or smartphone payments as they're "not real money."
Use credit cards: This is a good option but only if you pay off your balance every month. If you have a rewards card, you earn a little extra by using your credit card. Banks hope you choose this option as they make more money on credit card swipe fee transactions than on debit card monthly one-time fees. When you don't pay your minimum on time, they raise your interest rate, making money on your remaining balance.
Use checks: There is still no charge for check writing, and the bank keeps a check register of your account balance and spending.
Prepaid credit cards: Most prepaid cards have so many fees that a $5 monthly debit card fee is a bargain. But the American Express Prepaid card is a good option as it has no activation, transaction or monthly maintenance fees like other prepaids. Customers may make one free ATM withdrawal monthly and pay $2 for each subsequent ATM withdrawal. There is no charge for loading and reloading the card through checking or savings accounts. The AmEx prepaid also offers purchase and fraud protections.
ATM-only debit card: If you use your debit card just for getting cash from ATMs you avoid monthly debit fees when switching to ATM- only debit cards, but you won't be able to make everyday purchases with your debit card. Check with your bank on this.
Change banks: As only a few banks are charging fees for debit cards, it pays to shop around at smaller banks, online banks or credit unions. Investigate their restrictions and fees as they, too, will have fees you must compare to charges at your current bank.
"No one wants to pay a monthly fee to use his own money, and if your bank added debit
Ask bank to waive fees: Some banks agree to waive debit card fees when customers keep higher minimum balances on checking accounts, open savings accounts or move to online banking. Bank of
Use cash: There are no fees or interest payments with cash, and you might be able to use your debit card to get cash at network ATMs without fees. Cash can be inconvenient but can save you money. Consumers tend to spend less with cash because cash is the most transparent method of payment. Real pain and awareness of money spent comes when money is pulled from your wallet and handed to some merchant. There is no such pain with plastic cards or smartphone payments as they're "not real money."
Use credit cards: This is a good option but only if you pay off your balance every month. If you have a rewards card, you earn a little extra by using your credit card. Banks hope you choose this option as they make more money on credit card swipe fee transactions than on debit card monthly one-time fees. When you don't pay your minimum on time, they raise your interest rate, making money on your remaining balance.
Use checks: There is still no charge for check writing, and the bank keeps a check register of your account balance and spending.
Prepaid credit cards: Most prepaid cards have so many fees that a $5 monthly debit card fee is a bargain. But the American Express Prepaid card is a good option as it has no activation, transaction or monthly maintenance fees like other prepaids. Customers may make one free ATM withdrawal monthly and pay $2 for each subsequent ATM withdrawal. There is no charge for loading and reloading the card through checking or savings accounts. The AmEx prepaid also offers purchase and fraud protections.
ATM-only debit card: If you use your debit card just for getting cash from ATMs you avoid monthly debit fees when switching to ATM- only debit cards, but you won't be able to make everyday purchases with your debit card. Check with your bank on this.
Change banks: As only a few banks are charging fees for debit cards, it pays to shop around at smaller banks, online banks or credit unions. Investigate their restrictions and fees as they, too, will have fees you must compare to charges at your current bank.
prepaid, credit card programs to expand
U.S. banks that have lost debit card processing revenue due to new caps on fees will likely push customers into prepaid and credit cards and other types of account fees, executives said on Thursday.
Executives for regional banks -- including BB&T Corp , SunTrust Banks Inc , Fifth Third Bancorp and Sovereign Bank -- said at an industry conference that there is no one solution for recovering as much as $8 billion in lost revenue under new caps on what banks can charge merchants for processing debit card transactions.
"There's no one silver bullet," said Eduardo Tobon, CEO of U.S. cards and payments for Sovereign Bank, owned by Spain's Banco Santander .
But lenders will charge customers fees for their overall banking accounts, rather than just debit card use, and push the use of prepaid and credit cards not covered by new debit card rules, executives said at the ATM, Debit and Prepaid Forum.
On Oct. 1 new rules capped what banks can charge merchants to process debit card transactions at 21 cents, roughly half of the previous industry average.
Known as interchange fees, the cap was a key provision of the 2010 Dodd-Frank financial reform law.
Several large banks responded by testing or introducing monthly debit card fees on customers to recoup the lost revenue.
But banks ended the programs over the last week amid an intense backlash from customers, lawmakers, and U.S. President Barack Obama.
The industry has bristled at the response.
Whitney Stewart, SunTrust's senior vice president overseeing the bank's card programs, said the president's remarks were "uncalled for," and said the bank's debit card fee program was going well until consumers became outraged at Bank of America Corp's proposed $5 monthly fee.
This week, SunTrust abandoned its debit card fee and provided refunds to customers who were charged.
Instead of debit cards, executives said banks could adopt prepaid cards and emphasize credit card use. Unlike debit cards, those payment methods do not have their processing fees capped.
Jon Groch, Fifth Third's senior vice president and head of its card business, said the Cincinnati-based bank adopted a card that can serve as a debit and credit card in part to work around the new fee limits.
He also said the bank was examining "revenue adjacencies," like selling data to merchants on how their customers use cards.
Also, bank executives said the industry will likely adopt fees for total accounts, rather than just for debit use.
"If you think about it as just the card, you will lose," said Scott Qualls, BB&T senior vice president and manager of the bank's retail payments.
Qualls said interchange fees can only make up a part of the fees that can be generated from a client account, and banks should examine how customers use a bank's services when charging fees.
Several banks are adopting higher account fees or requiring customers to maintain higher minimum balances to avoid monthly maintenance fees.
Executives for regional banks -- including BB&T Corp , SunTrust Banks Inc , Fifth Third Bancorp and Sovereign Bank -- said at an industry conference that there is no one solution for recovering as much as $8 billion in lost revenue under new caps on what banks can charge merchants for processing debit card transactions.
"There's no one silver bullet," said Eduardo Tobon, CEO of U.S. cards and payments for Sovereign Bank, owned by Spain's Banco Santander .
But lenders will charge customers fees for their overall banking accounts, rather than just debit card use, and push the use of prepaid and credit cards not covered by new debit card rules, executives said at the ATM, Debit and Prepaid Forum.
On Oct. 1 new rules capped what banks can charge merchants to process debit card transactions at 21 cents, roughly half of the previous industry average.
Known as interchange fees, the cap was a key provision of the 2010 Dodd-Frank financial reform law.
Several large banks responded by testing or introducing monthly debit card fees on customers to recoup the lost revenue.
But banks ended the programs over the last week amid an intense backlash from customers, lawmakers, and U.S. President Barack Obama.
The industry has bristled at the response.
Whitney Stewart, SunTrust's senior vice president overseeing the bank's card programs, said the president's remarks were "uncalled for," and said the bank's debit card fee program was going well until consumers became outraged at Bank of America Corp's proposed $5 monthly fee.
This week, SunTrust abandoned its debit card fee and provided refunds to customers who were charged.
Instead of debit cards, executives said banks could adopt prepaid cards and emphasize credit card use. Unlike debit cards, those payment methods do not have their processing fees capped.
Jon Groch, Fifth Third's senior vice president and head of its card business, said the Cincinnati-based bank adopted a card that can serve as a debit and credit card in part to work around the new fee limits.
He also said the bank was examining "revenue adjacencies," like selling data to merchants on how their customers use cards.
Also, bank executives said the industry will likely adopt fees for total accounts, rather than just for debit use.
"If you think about it as just the card, you will lose," said Scott Qualls, BB&T senior vice president and manager of the bank's retail payments.
Qualls said interchange fees can only make up a part of the fees that can be generated from a client account, and banks should examine how customers use a bank's services when charging fees.
Several banks are adopting higher account fees or requiring customers to maintain higher minimum balances to avoid monthly maintenance fees.
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