Money, Jobs, & Finances – Page 3

Where, Exactly, Did All of That Student Loan Money Go?

Posted on October 5, 2012 by Joe

You would probably be amazed how many times there are thoughts that I have in my head that I know I want to translate into entries on this blog, but never have the time (or memory) to get down on paper (or the electronic equivalent). That’s probably why I usually have so many half-finished entries in the “Drafts” folder of this blog – because I’ll start writing an entry and then not finish it in a timely manner since the thought that would finish the entry comes too late or when I’m not near a computer. For example, a few months ago I wrote about what I would have done with all of the money that I spent on student loans if I didn’t have to send it off to the loan companies and the government. Well, in the week since I wrote that entry I realized that I forgot to add a small addendum at the end of the post talking about where all of that money went.

And thus we have this entry. 🙂

Like the title of this entry says – where, exactly, did all of that student loan money go? There are a few ways to answer this question so I’m going to compartmentalize the response as best as I can. To answer this question one first has to understand that the money that I paid in student loans has been sent to four primary lenders: Monmouth University (MU), CitiBank, the New Jersey Higher Education Student Assistance Authority (NJHESAA), and the United States Department of Education (USED). With respect to the USED, the Department recently sold my loan to the Missouri Higher Education Loan Authority (MOHELA), so when I write about them I’ll reference MOHELA.

Monmouth University – Perkins Loan
This is the easiest one for me to discuss. Many years ago when I was an undergraduate attending MU I received a Perkins loan from the university. Perkins loans are provided by the government and can be offered from the university to help finance the cost of education. The university advanced a $1,400 Perkins loan which I repaid very soon after graduating in May 2003 (I can’t remember the date, but it was within the first 12 months of graduating; possibly within the first 3 – 6 months).

Where did that student loan money go? Well, the Perkins loan program is arranged to be a revolving loan fund at each university, so the money I repaid to MU was ultimately used to provide loans to other eligible students. And that’s not such a bad outcome for repaying this small student loan.

CitiBank – CitiAssist Graduate Loan
This was a private student loan that I took out from CitiBank while I was attending the Bloustein School of Planning and Public Policy at Rutgers University. In truth, I didn’t use all of these funds for tuition expenses. As I recall, I used the majority of these funds to pay for one semester of graduate classes at Rutgers and then used the balance to pay some living expenses as well as to purchase some textbooks.

Where did this student loan money go after I repaid it? This one is simple – the loan was a private loan fully-backed by the federal government so a full one hundred percent of the funds were returned to CitiBank. That includes the full $7,000 that I paid in principal as well as the $1,071.52 that I paid in interest. All of that interest money is profit to CitiBank that probably went towards paying someone’s salary or other forms of compensation (i.e. bonuses). Congratulations, CitiBank – you achieved a 15.3% return on your investment in me!

New Jersey Higher Education Student Assistance Authority (NJHESAA) – NJCLASS Loans
Is there anyone else out there on the internet who has blogged more about the NJHESAA organization than I have on this blog? I know that there are thousands of similar-minded current and former borrowers out there who are frustrated with the way that this organization treats its clients. To be fair, though, I haven’t been a client of this group for a few years now and I hope that they have learned from having their terrible customer service reported around the internet. In any event, I covered my relationship with this group quite a bit on this blog, not the least of which was a post I created on my final payment to the company, which you can read by clicking here.

With respect to where that student loan money went, it broke out as $40,095 repaid in student loan principal, $24,251.61 paid in interest, and $1,893.69 paid in fees. That’s a total of $66,240.30. The interest and fees were all profit to the NJHESAA organization so they could have used that money for whatever they wanted. As I understand it, the principal for the NJCLASS loan program while I was utilizing it was generating from the sale of tax-exempt bonds. So, one would hope that the principal I paid to NJHESAA was used to repay their bond financing, but who knows? What I DO know is that NJHESAA not only made all of its principal back off of my loan, but it made a 65% gain from interest and fees (because, you know, I didn’t need that to buy a house or a car or anything).

United States Department of Education (USED) – Direct Loan
This one is interesting and it’s not a loan that I’m fully ready to discuss or breakout yet. Part of that reason is because the USED sold my loan to the Missouri Higher Education Loan Authority (MOHELA; the Missouri equivalent of NJHESAA). I didn’t ask for that loan to be sold, I didn’t want that loan to be sold, and I’m not happy that the loan was sold. I wanted to finish up repaying this loan to the organization that originally advanced it to me – the USED. However, I was repaying the loan so quickly that the USED considered me a strong investment and sold my loan to a private loan company. Wonderful.

My early figures show that I took out $57,575 in USED principal, capitalized some $1,445.15 in interest, and paid $205.04 in consolidation fees. Those numbers aren’t worth talking about, though, since I’ve paid an incredibly amount of interest since this loan started and that figure isn’t captured anywhere. Plus, this loan will ultimately have to be broken out between both the USED and MOHELA.

What a pain in the ass.

Anyway, there are some figures for you – where did my student loan money go? Well, the one thing that we know for sure is that it didn’t go towards building the economy and it mostly did not go towards helping other higher education students achieve their academic goals. What a wonderful waste of money and, more importantly to me, my time.

The True Dirty Details On Your Gross, Disgusting Desk At Your Office

Posted on October 1, 2012 by Joe

Sometimes, folks send me infographics to consider posting on the blog. Some of them are good, some irrelevant, and some are so engrossing that I have to post them here for your consumption. Take a look at the infographic below and see if it doesn’t make you want to clean your desk the next time you go to the office!

This information is courtesy of LearnStuff.com. And now that you’re thoroughly sick to your stomach – clean your damn desk tomorrow!

What Would I Have Purchased If I Wasn’t Saddled With Student Loans?

Posted on July 26, 2012 by Joe

Show me one person who says they haven’t sat around and thought about what it would be like to win the lottery or strike it rich and I’ll show you someone who is lying. Daydreaming is one of humanity’s favorite pastimes! Who doesn’t love to sit there and say stuff like, “If I hit the Mega Millions, I’d buy my Mom a house, myself a house, everyone in my family new cars, I’d give a bunch of money to charity, and then I’d invest most of the remaining money and live off the interest.”

Wait until the next time the Powerball lottery gets to one of those outrageous dollar amounts and I guaranty that you’ll hear those conversations going on all around you.

For those of us who graduated college or graduate school with inordinate amounts of student loan debt and have successfully completed or been engaged in a repayment plan, we have a slightly different version of daydreaming. The truth is that this small cohort of student loan borrowers doesn’t sit around and wonder what it would be like to have millions of dollars to play with; instead we sit around and daydream about what it would be like to have all of those student loan payments that we sent off to play with instead.

This isn’t one of those entries where I’m going to bore you with intricate financial statistics or complex equations talking about the amount of money that I lose everyday to interest expenses on my student loans ($3.32). Instead of all of that stuff, I’m going to eyeball a round number to indicate how much I think I’ve spent on student loan principal payments, interest payments, origination fees, transfer fees, and consolidation fees. I’m going to suggest that this estimated round number is between $135,000 and $145,000.

What this range doesn’t calculate is what I might have gained if I would have had the opportunity to invest these funds, but that’s another post for another day.

Those of us who willingly took on exorbitant amounts of student loan debt with the full knowledge that we would be saddled with a repayment obligation that we always intended to meet (lots of qualifiers in the beginning of this sentence…) get a bittersweet feeling when we sit around and think of what we could have done with years and years of student loan payments (which are usually over-payments each month). This past weekend, several of my college buddies stayed over at my place after a group of us went out to the bar. The next day when a few of us were sitting around and talking about different things, the topic of student loan payments came up and it got me back to this familiar form of daydreaming: What would I have done with all of those payments if I didn’t have these student loans?

Immediately, three things come to mind.

First, I would have a substantial savings structure including more equity investments (stocks), fixed investments (government-backed bonds and certificates of deposits), and liquid savings (regular savings account). Granted, I have different levels of these savings structures in place right now, but I’d definitely have more and more varied types of these savings accounts if I had all of that student loan money back.

Second, I would have a more secure housing situation. Now this one is a little bit trickier than just something as simple as, “I would have purchased a house by now.” The area of New Jersey where I live (the northern Jersey Shore area) does not produce reasonable real estate prices right now. Sure, I could have used some of those funds to purchase a home, but the amount, type, and location of the home that I would be able to purchase would not be as much, the type of, or in the area where I’d want to live – so I wouldn’t do it. Plus, the time period when I would have been buying a home would have put me right in the group where the value of the home would be declining quicker than the amount of the outstanding loan principal. So… I wouldn’t have purchased a home.

Instead, I would have set aside a substantial amount of money (around $20,000 to $30,000) to be my “housing reserve fund.” I would still budget my monthly rent from my monthly cash flow, but I would have these funds available in the event that I had to vacate my current place, that I wanted to move, or that I just needed funds for housing-related costs. That housing reserve fund would have provided me with the type of long-term stability that most renters don’t have the benefit of enjoying.

Third and finally, I would have either purchased or been in the final stages of building a vacation home. I know, I know – this one seems crazy. I get it. There are folks at my office who call me Mr. Austerity because of my strong discipline to strict rules and regulations when it comes to the financial aspects of our company. In other words, I hate spending the company’s money even if the company wants their money spent! And I’m a stickler for following a strict set of rules in the office because I think companies need structure and if they have that structure already in place, then they should follow it.

So… the idea of me taking some of this money and purchase a vacation home may seem somewhat insane. I assure you, though, it’s not crazy at all. In fact, there are a lot of reasons why I’d either be savings towards buying a vacation home or I would have already purchased one. Among those reasons are the fact that I would buy a home somewhere in or near the Poconos – where the real estate and property taxes are much, much cheaper than in New Jersey. Plus, there are a lot of beautiful areas in that part of Pennsylvania where you can have a wonderful home with gorgeous, wildlife views. Don’t get me wrong – I love living on the Jersey Shore, but I also really enjoy the peaceful feeling of being surrounded by nature.

I’d also be looking to get that vacation home to host group gatherings. In other words, it would be a nice place where my family could gather for events and holidays, where I could host barbeques and parties for my family and friends, and where I could host other events (planning sessions for my team at my company, annual strategy sessions for some of the nonprofit fundraising work that I do, etc). With respect to regular usage, I’m lucky that my company allows me to work from home on Fridays, so I would probably spend most weekends (weather permitting) up in the vacation home, especially during the summer months when the traffic down the shore is incredibly annoying.

The distance between my office and the general area of the Poconos is about an hour, which is a little bit longer than my daily commute so the distance isn’t a big deal at all. I could easily leave my office on a Thursday afternoon at 4:00pm, head to the vacation home for the weekend, and be there by 5:00pm. Then, I could just as easily leave the Poconos and get back to the office on Monday morning. In the event that I opted to do something like this, then I would probably move out of my current area of the state and, instead, move somewhere a little bit closer to my office. Not too close, though – I’d still like to be within close proximity of the northern Jersey Shore area due to attending Monmouth University basketball games, teaching at the local college, and attending other events in the Long Branch/Asbury Park area. My new apartment wouldn’t have to be too big or costly, either. A standard efficiency arrangement would be fine given that I’d have most of my nice stuff (like high-end electronics) up in the Poconos.

In short, I think I could definitely make that type of living scenario work out. And I’ve given it a lot of thought so I’m sure I’ve thought through most of the difficulties. Oh, and I wouldn’t worry abo-

Hey! Wake-up!

Those are just the daydreams from someone in my situation. You know, someone who has pushed more than $135,000 into student loans over a 6 year period; someone whose 12-month budget shows a whole lot of additional money getting pushed into student loan payments to finish these things off. And here’s the kicker of the whole situation: I might be 12 months away from being free of these students loans, but that doesn’t mean the financial daydreams you read above would be kicked into high gear. Not at all.

Instead, once my student loans are paid off I can then just begin to think about budgeting to start saving to meet just one of those daydreams.

And that is a splash of ice cold reality in the face of some fun daydreaming, don’t you think?

Why I Purchased a Brand New Car – The Full Story

Posted on July 6, 2012 by Joe

Again, this is another entry that has been wallowing in the “Drafts” folder of the blog for months on end and I’m not sure why I never scheduled it to upload to the website. Weird. Anyway, here is the story of why I went out and purchased that brand new car of mine!

If you’ve been reading this blog for a while, then you remember the disaster of a time that I had getting my Honda Civic fixed a few years ago. That experience has me sworn off of buying a Honda ever again. It’s just not going to happen. So when the time came around that I needed to buy a brand new car, I knew that I wasn’t going to go to a Honda dealership that screwed me over a few years earlier. Actually, I wound up going to the Ford dealership that is literally across the street from that Honda dealership (so take that, idiots at Honda!).

You can read the link above to learn more about the financial aspect of me buying a new car. This entry is being written to describe the story of why I had to buy the new car in the first place. And it all started with paying Sears Auto Center way too much to do… nothing.

A whole group of technicians inspecting my old Honda Civic

The picture above was taken sometime in early February at the Sears Auto Center in Ocean Township, New Jersey. As you’ll notice, the technicians are all standing around trying to figure out what the problem is with the Civic. This picture was taken on one of the third or fourth visits I made to that place – in about as many days. As I recall, the Civic was driving very shaky for a few weeks, but that wasn’t something that I didn’t expect for a car that was entering its twelfth year of service. Look, these cars start to make funny noises after a while – it happens!

After getting totally dicked over by the local Honda dealership (again, see the link above), I decided to go to the local Sears Auto Center to see if they could help with the weird feeling that I was getting from the Civic. They figured out that there was some belt that could use replacing, but that it wasn’t really the primary problem with the weakness that I was feeling from the engine. I asked them to go ahead and replace the belt and then we’d see if it helped with the general lack of “umph!” that I was feeling from the car. So… the guys kept the car for a night and replaced the belt. I got the car back the next day and went about my merry way.

Until the car stopped right in the middle of when I was driving it. On the same day I picked it back up from the shop.

Now don’t get me wrong – the car didn’t fishtail out of control on the highway and leave me stuck fending for my life against on-coming traffic or anything like that at all. Nope. Instead, I was driving the car on one of the major highways in my area (I believe it was US Highway 195 heading towards Trenton) and the car just stopped delivering power to the powertrain. The way I described it to the folks at the repair shop when I brought the car back to them was that I would be driving along at 60, 70, or 80 miles per hour and then I’d go to hit the gas again and nothing would happen. The car would just begin gliding. My way of combating that glide was to pop the car into neutral and work my way over to the shoulder and ultimately the median. The odd thing, though, was that once I allowed the car five or six minutes of “off” time (complete with me cursing and being furious inside the car), it would start back up and the energy would go back to the powertrain and I could travel for a short while again.

Bizarre.

And that picture above is of the mechanics and technicians checking the engine to see what the problem could possibly be. Suffice to say, they couldn’t figure anything out and told me to go about my business with the car. The guy who manages that shop was a nice guy and said that I should bring the car back in the event that it randomly stopped again. So I thanked him and went about my way.

A day later I was getting the car towed from my home back to the Sears Auto Center. That’s right – the car stalled out again. And, without going into the boring details, the guys at Sears Auto Center couldn’t figure out what the problem was again. I managed to drive the car off of the lot and back to my place with no problems. Maybe, I thought, the problem was over and I could actually drive this car to work without any problems. The next day came and I began driving the car north on Route 18 towards my new office and – you guessed it – it randomly stopped working again. After pulling off onto the median and getting the car to start again, I drove it to one of my coworkers’ houses that was on the way to my office and he led me to a local garage where he took his cars to get fixed when they were broken down.

My coworker had been working with that mechanic for quite some time and had a great deal of faith in him. I explained to the mechanic what the problem was and he asked me to leave the car with him so he could inspect what was going on. In the mean time, my coworker took me to the local Enterprise Rent-a-Car and I rented a gigantic SUV until my Civic was back in full working order.

And here’s the most frustrating part of leaving the car with the mechanic – two days went by and he didn’t find any problems with the car. Like the guys at Sears, the mechanic said that everything worked well on the inside of the car and that he even test drove it around town and didn’t have any problems. At this point, I got the impression that these car people were beginning to think that I was nuts or something. Anyway, after dropping the rental car back at the Enterprise on a Friday morning, I was dropped off at the mechanic to pick up my car and begin the drive home.

Do you want to guess what happened next?

If you guessed that I began driving south on Route 18 and the car randomly stopped again, then you win! Correct! As I was sitting on the median of Route 18 (again) thinking about how totally f’ing inept these mechanics must be to not be able to figure out the problem, I began to realize that I needed a new car. Remarkably, the Civic was always uncomfortable, always too small for me, and I was never really happy driving the car. What the Civic was, though, was a free car with great gas mileage that fit into my financial preference of aggressive student loan repayments and my professional circumstances of having to drive hundreds of miles each week for work. As I’ve been engaged in this aggressive student loan repayment program, the Civic was the best option for me.

These were some of the many thoughts swimming through my head as I sat on the median and came to the realization that my next stop would have to be at a car dealership to start shopping.

The car dealership was my next stop. While I was driving the car home (the thing miraculously started again after five minutes of sitting on the median), I decided to stop at the local Ford dealership. I’m not going to get into the details of the 5+ hour negotiation that led me to purchase my new 2012 Ford Escape Limited Edition (the first brand new car that I ever purchased) or the fact that I spent over $1,000 getting the Civic “fixed” that week, but at least now you know the story of why I had to get a new car. In my world, when the car you’re driving breaks down six out of seven days in a week, you need to get a new vehicle. I couldn’t imagine driving on the Garden State Parkway for work and being over the Driscoll Bridge and having the car lose its “umph” like that – talk about a major, significant accident waiting to happen.

And that’s the story of why I needed to buy a new car. 🙂

A Secondary Comment to Yesterday’s Student Loan Update

Posted on June 7, 2012 by Joe

After re-reading yesterday’s entry regarding my most recent student loan debt drop I couldn’t help but think that I should add a brief explanation of why the debt drop was only $1 thousand over the course of a month and a half. Well, it’s actually quite simple and no, it’s not because I purchased a new car in February that requires me to pay about $525 per month.

The reason why my student loan debt hasn’t dropped to a greater extent is simple – the United States government demanded my money. That’s right. Remember the $3,690 that I paid to the Internal Revenue Service a few months ago? That’s the explanation of why my student loan debt hasn’t dropped more than $1 thousand in the last month and a half. The government demanded my money and – like any good citizen – I had no choice but to pay.

One could argue that the several thousand dollars that I put down on my new car could have also gone towards reducing my total student loan debt. The difference between the money I owed to the IRS and this down payment, though, is that I had been budgeting to buy a new car so the money for the down payment was available. On the other hand, the IRS tax liability was a very quick turnaround and required me to tap into my savings account. Sure, I’ve got more than enough savings to take care of the tax liability, but I’m anal about my savings account and investments so I really hate tapping into them. I’ve been spending the last few months replenishing the money I had to withdraw for taxes (as well as my regular deposits into the savings account). That’s what happens when the IRS ~~rapes~~ depletes your free cash flow.

If I didn’t need a new car and the IRS wasn’t greedy for this working man’s money, my total amount of student loan debt outstanding today would not be $28 thousand. Instead it would be $18 thousand. In fact, I’d be less than 12 months away from totally eliminating the student loan debt once and for all.

But the government called and my car failed. Your classic one-two punch.

Bastards.