Have you ever looked at your monthly bank statement and found yourself surprised by what you spent your money on? Are you unsure of where your money is really going and find yourself struggling to pay your bills and set aside savings?
Using a spending tracker can help you make decisions that can help meet your goals and give you clarity around your spending habits. Once you’ve got a clear idea of how you spend your money, you’ll be ready to start building a budget.
Budget tool: Spending tracker
Fill out this spending tracker for one week. After that week, take a look at your spending and consider:
What expenses surprised you?
Are there areas where you spent unnecessarily?
Are you paying for services or subscriptions that you’re not really using?
Are you paying service fees on your credit card, subscription service, or other financial service that you could eliminate?
How does your weekday spending differ from what you spend on weekends?
It’s important to take a look at your obligations and wants to set priorities when it comes to your budget. Obligations typically include things like rent and utilities, as well as any payments like spousal or child support.
Wants may be a little more difficult to identify. A want may be something like a gym membership, cable, or going out for coffee each morning rather than making it at home.
Once you’ve broken down your spending habits, you can analyze them more carefully. Knowing what you owe on a monthly basis, and knowing where you actually spend your money, can help you prioritize so you can pay your bills on time, get control of your debt, and start saving for the future.
Take control of your finances
The Get a Handle on Debt series gives you tools to manage your debt by budgeting smarter, paying your bills on time, tracking your spending, paying down existing debts, and earning extra income. You can also get money management strategies sent directly to your inbox by signing up for our Get a Handle on Debt boot camp.
You get a call saying your electricity or water will be shut off unless you pay a past due bill. You may not think you have a past due bill. But the caller sounds convincing, and you can’t afford to ignore it, especially if you’re running a small business.
Actually, you can’t afford to believe it.
The FTC has been hearing about scammers impersonating utility companies in an effort to get your money. Here are some warning signs of a utility scam:
If you know you already paid, stop. Even if the caller insists you have a past due bill. That’s a big red flag.
Never give out your banking information by email or phone. Utility companies don’t demand banking information by email or phone. And they won’t force you to pay by phone as your only option.
Did the caller demand payment by gift card, cash reload card, wiring money or cryptocurrency? Don’t do it. Legitimate companies don’t demand one specific method of payment. And they don’t generally accept gift cards (like iTunes or Amazon), cash reload cards (like MoneyPak, Vanilla, or Reloadit), or cryptocurrency (like bitcoin).
If you get a call like this, here are some things you can do:
Concerned that your bill is past due? Contact the utility company directly using the number on your paper bill or on the company’s website. Don’t call any number the caller gave you.
Never give banking information over the phone unless you place the call to a number you know is legitimate.
Tell the FTC. Your reports help us fight these scams. And report it to the real utility company. If you already paid, tell the payment provider – such as the wire transfer or gift card company. You may not get your money back, but it’s important to tell them about the scam.
The Federal Trade Commission is mailing more than 430,000 checks totaling more than $10 million to people who could nit access money deposited to their NetSpend reloadable prepaid debit cards. According to an FTC complaint, many NetSpend customers were unable to access their funds, either because NetSpend denied or delayed activation of their card or because NetSpend blocked them from using it.
To settle the FTC’s charges, NetSpend Corporation agreed to notify and provide refunds to eligible customers who requested them before October 7, 2017. NetSpend also agreed to remit to the FTC any fees collected from NetSpend debit cards that were eligible for refund, but were not paid out during the consumer redress period. The FTC is using this money to send checks to customers who did not receive a refund previously in this case.
Recipients should deposit or cash checks within 60 days, as indicated on the check. The FTC never requires people to pay money or provide account information to cash a refund check.
If consumers have questions about the refund program, they should contact the FTC’s refund administrator, Analytics Consulting LLC, at 888-684-4858.
The study defined financial skills as knowing how to find, process, and act on information when you need it. Here are ways to apply the skills that help you face any money decision.
1. Know when to look for information
The first “how-to” that you need is the ability to recognize when there’s a gap in your knowledge. Maybe you have incomplete information, or maybe your information is one-sided or unbalanced, when you consider the source it came from.
How to do it: One way to apply this skill is to pause before a financial decision to think and gather new or more reliable information.
2. Know where to find trusted information
Once you recognize your need for information, you need to know where to find it. For example, if you want to speak to a personal financial planner, you need to know how to locate that person and set up a convenient meeting time. Then, you need to understand the sources of the information they have, and the reasons different organizations may offer financial facts.
How to do it: We provide unbiased financial education to help people take control of their financial lives. Check out our answers to hundreds of financial questions, or browse our guides to financial topics. Other sources for information include schools, libraries, and financial institutions such as banks and lenders. They all offer different perspectives.
3. Know how to act on your decision and stay on track
Once you locate reliable information about a money decision, you need to know how to apply it to your individual situation.
How to do it: Match the information you have to the opportunities available to you. For example, if you decide to save 10 percent of your pay for retirement, you need to determine what steps to take, considering your situation. The next step may be determining how to enroll in your employer’s retirement plan. But if that’s not an option, the next step is finding an alternative—for example, finding a way to open an individual retirement account and taking the steps needed to move money into the account.
As you develop your skills, you can apply them to a variety of money decisions. The skills are useful and practical whether you’re facing a one-time decision or ongoing choices, whether the decision is straightforward or complex. Here are more resources to help you on the path to financial well-being:
If you’re facing a money decision, download the SAVED brochure for help getting started
Create an action plan to meet your money goals with our worksheet
If you are among the thousands of financial coaches, educators, and others who are helping people manage money, budget, save, and plan, consider how you can help people practice the three skills more frequently and effectively. We offer resources to help:
Dear Dollar Stretcher,
Some months I can save some money and some I can’t. I have heard the saying “always pay yourself first”. When I do that it seems that I have to withdraw that money later on in the month to pay the bills. So how does this actually work? Should I always pay myself first? Any help would be appreciated. James
James is trying a strategy that many people use to force themselves to save money. Instead of saving whatever is left at the end of the month, they ‘pay themselves first’ at the beginning of the month. And, surprisingly, there are a lot of families that swear by this method.
Why does it work? It seems that in nature certain events will continue until they run out of fuel. Wild fires are an example. They will continue burning until there’s nothing left to consume.
Your expenses can work the same way. Many families will continue spending until all the money is gone. No matter how much money comes in some bill or new purchase will take it. Raises and bonuses all seem to vanish without a trace.
In other families, expenses will consume all the money and the credit, too. Again, there will never be any money available after all the monthly minimums are paid.
Paying yourself first turns this problem into an advantage. If you take 1% of your income and put it in a savings account at the beginning of the month, the amount of money available for spending is less. At the end of the month you’ll wonder where all the money disappeared. Just like you do now. Only this time you’ll know where at least 1% of it has gone. It’s sitting in a savings account earning interest.
For some people this plan works wonderfully. Their spending seems to automatically adjust without any real effort. They have a little less in their pockets and so they spend a little less. One less candy bar or impulse buy. It just seems to work out. Gradually they begin to accumulate savings. Unfortunately, James doesn’t appear to be one of those people.
Remember, the idea of ‘paying yourself first’ doesn’t create any magic. You’ll still get a bill from the electric company each month. And they’ll expect you to pay it.
James’ problem could be in a couple of places. Perhaps he’s getting to the end of the month and his money and won’t cut back on unnecessary expenses. A certain amount of self-discipline is required. You need to resist that candy bar. Empty pockets are an acceptable part of the deal and an incentive to stop spending.
Another possibility is that James has tried to save too much. It could be that he hasn’t left enough money to pay for the basic monthly expenses. In that case, he’ll either need to make some adjustments to his basic expenses (like selling a second car) or plan on paying himself less each month.
Unexpected repairs and expenses could also be sinking James’ plan. You know the kind I’m thinking of. The ones that we all know will happen. We just don’t know when or how much they’ll cost. Home and auto repairs are often the culprit.
Your budget plan needs to cover this type of expense. Put some money away each month for these ‘big hit’ expenses. If your car is getting old, protect yourself by putting $100 away each month. You’ll need it for that ‘unexpected’ $1,000 repair bill.
Where James puts his savings is important, too. It’s really wise to have two savings accounts. One that’s readily available for those big hit expenses. Don’t use this money for a fishing boat or a new spring outfit! It’s for repairs and expenses that you cannot avoid.
The second savings account is your long-term savings. It should be harder to get at. Only take money out in a true emergency. This money should be for long-term goals like a college education or retirement.
Some people think so. They believe that once you’ve started to save money you’ll continue to save. And there’s some truth to that. Using your savings account for the unusual expenses gets you out of the habit of reaching for a credit card when a crisis occurs.
But, it does seem a little crazy to be borrowing money at a higher interest rate than you’re getting on your savings. Achieving a debt-free lifestyle is important, too.
There’s another way to look at the issue. Reducing your debt is actually a way of saving money. For every dollar that you repay this month, you’ll reduce next month’s interest charge. So you’ve really saved money by paying part of your credit card balance.
Sure, the next time your car breaks down you’ll probably need to pull out the plastic to pay for the repair. But, if you’ve developed the habit of reducing that balance each month, you’ll get right back on track.
One final thought. Starting a ‘pay yourself first’ program is always easiest when you get a raise in pay. Just take the increase and put it in your savings account. You’ll still have the same amount of money available as you did last week. But, don’t let the lack of a pay raise keep you from starting. You can begin with $5 this month. Most of us spend that much impulsively sometime during the month.
Should James continue to pay himself first? That depends on what he hopes to accomplish with it. If he’s looking for the strategy to magically reduce his mortgage payment he’ll be disappointed. But, if he’s hoping to give himself that little extra incentive to reduce expenses at the end of the month he’ll do quite well.
5 Ways to be Successful in Your Debt Settlement Program
Did you recently enroll in a debt settlement program? Congratulations! You’ve taken the first step toward resolving your debt and getting your life back.
A debt settlement company can help you receive total or partial forgiveness of your debt, usually within 24-36 months. But your debt settlement company is going to need your full cooperation to make this transition as seamless as possible and to achieve the best possible results.
So rather than expecting your debt settlement company to take care of everything for you, you should view this as a partnership. To help you get a better understanding of what is needed on your end, let’s break this partnership down into actionable steps.
Understand What You Signed up For
Like any other matter involving your finances, a debt settlement program requires a lot of effort on your part. It’s not enough to just fill out the debt settlement application and then pay no attention to the terms and conditions. You need to make sure you fully understand what you are getting yourself into.
Often, people enter into debt settlement with preconceived ideas about what the process will be like. So they don’t ask any questions and then they become confused and angry when the actual process doesn’t live up to their expectations. This can lead to poor communication between you and your debt negotiators and can slow the entire debt settlement process down.
And once you know what you are getting into, it’s important to remain an active and engaged participant. This will help the process go more smoothly and — most importantly — get your outstanding debts resolved as quickly as possible.
Provide Current Contact Information
Your debt negotiator must be able to reach you at any time in the event that something pops up and they need information only you can provide.
Likewise, your debt negotiator could receive news of a possible settlement and they will need to consent to sign off on a creditor’s offer. Debt settlement offers are time-sensitive so you need to be available in order to avoid missing out on a good offer.
If your contact information changes during the debt settlement process, make sure you give the new information to your debt settlement company right away.
Provide Accurate Financial Data
Nobody enters into debt settlement because their finances are in great shape. But unfortunately, people are often embarrassed by the financial position they are in and as a result, have a hard time being upfront about certain details.
But by withholding or misrepresenting important financial information during the pre-qualification stage you may wind up in a debt settlement plan that is not suited to your needs. Likely, one of the following two scenarios would occur:
The plan is too easy on your debt
The plan is too hard on your budget
If it’s the first scenario, then you won’t be able to pay your debt down as quickly as possible. Whereas the second scenario would cause too much of a financial burden and you may just quit altogether. Either way, your plan won’t address the root problem: resolving your debt.
It is always our goal to provide a customized plan to fit our clients and their budget. So be honest and provide accurate, relevant financial data.
If you think the proposed payments are too steep and you won’t be able to afford them, speak up. That’s your best chance for getting the plan that’s right for you.
Opt For an Aggressive Debt Settlement Plan — Budget Permitting
In order to settle your debts as quickly as possible, you should choose the most aggressive plan your budget will allow for.
What do we mean by “aggressive?” This means putting everything you are able to toward your savings account. So if you receive extra money from a side job or bonus, deposit it into your trust or escrow account.
Doing so will help you save more quickly, which means your debt negotiators can begin the negotiation process with your creditors as soon as possible.
The reason this is important is that having a lump sum of cash in your savings account is an advantage during the negotiations process. Your creditors will prefer a lump sum payment rather than staggered payments so if you have a large cash reserve, negotiators can use it as leverage to get you the best deal possible.
And once a settlement has been negotiated and a debt settlement letter has been signed, the repayment period begins. If you agreed to staggered payments, try to avoid adjusting or missing payments altogether. Otherwise, your creditor may withdraw the settlement offer altogether and you’ll be stuck with the original debt.
Know How to Handle the Debt Collection Process
Once you enroll in a debt settlement program, most creditors will begin to pursue aggressive tactics to collect the money you owe them. Your creditors may threaten you, intentionally harass you, and they may pursue legal measures to collect the money. This can feel very overwhelming but it’s important that you stay grounded and don’t panic when this happens.
Hopefully, these tips have helped give you a glimpse at what the debt settlement process is like and have shown you the steps you can take to be successful.
In 1897, Dr. Philip O’Hanlon, a coroner’s assistant on Manhattan’s Upper West Side, was asked by his then eight-year-old daughter, Virginia O’Hanlon (1889–1971), whether Santa Clause really existed. O’Hanlon suggested she write to The Sun, a prominent New York City newspaper at the time, assuring her that “If you see it in The Sun, it’s so.”
“In so doing, Dr. O’Hanlon had unwittingly given one of the paper’s editors, Francis Pharcellus Church, an opportunity to rise above the simple question and address the philosophical issues behind it.”
The Sun’s Editor, Francis Pharcellus Church made the historic statement “yes Virginia there is a Santa Clause” based on zero evidence and espousing “faith, fancy poetry, love (and) romance” as the answer to little Virginia’s finding the truth about the reality of Santa Clause.
For those of you who are new to my blog here, let me give you a brief summary of my student loan debt history. Three years ago, at the age of 67, retired, disabled, unemployed, living on social security and a small federal pension, (both of which were being “garnished” by the Department of Education), I was living with my youngest child and her husband on just $1,200.00 a month. My income was being offset by the U.S. Treasury in an attempt to pay the interest on my consolidated and defaulted 27-year old student loan. A debt which originally was $55,000.00 borrowed when I returned to earn a bachelors degree when I was 40 years old.
Of that debt, I had paid back nearly $14,000.00 in spite of the fact that from 2002 until I turned full retirement age, the Social Security Administration was deferring my loan due to my being awarded SSDI (Social Security Disability Insurance/Income). Once I reached what was described as “full-retirement status” my SSDI was changed over to “a straight social security annuity”. Then I was notified that my student loan was now due in full and had grown to nearly $130,000.00. And then I was notified that my monthly annuities were going to be garnished. The reality is that the 15% they are allowed to garnish was not enough to cover the interest, that keeps growing adding to the principal each and every day!
With the reality of never seeing my loan paid off in my lifetime, I began to look for answers as to how to stop the nonsense by the loan servicers of garnishing nearly a third of my income to pay interest that was not even the needed amount to cover the “true interest” every month. What kind of insanity is that?
No Easy Outs
One thing that I did gain from a college education is that I learned how to do research. So with computer access, I began to look for answers. I looked at every possible way to deal with trying to negotiate for a better deal regarding the student loan debt. The result was I learned that the deck was stacked against me in so many ways there was no way out — at least from the standpoint of the so-called loan servicing agents and lenders who I soon learned do not care one iota about any one’s situation!
I looked into the so-called “Loan Forgiveness” programs, and all of it. Based on my disability, I tried twice to seek a full discharge under the TPD (Total Permanent Disability) allowed by the Department of Education. However, I was denied. The loan forgiveness programs are restrictive and I did not meet the requirements for any of the plans offered. At that point, I realized I may just have to live with the folly being perpetrated against me and allow the nonsensical garnishing continue until I died.
Having made several inquiries to lenders, loan servicers, the Department of Education, and a phone call to the “Omsbudman” for student loan issues, I soon ran out of options for help. Not one agency or person was able to offer me a solution or a plan to help me.
At some point in my research, I learned about the Bankruptcy rules regarding student loans. Having filed personal bankruptcy twice before in my lifetime, I was not too keen on doing it again. Besides, on those two occasions, I was told by my attorney that student loans were not allowed to be discharged in bankruptcy. Why would these lawyers say that if there were rules governing student loans within the Federal Bankruptcy Code? More on this later!
With the discovery of the rules known generically as “the undue hardship clause” , and further defined under 11 U.S.C. §523 (a)(8) “Exceptions to Discharge”, I learned that there is a way to possibly have the debt from student loans discharged through a personal bankruptcy.
Alright then… if there was a “possibility” within the law, then how does one go about using the law to remove the debt? Well, the law says that the student debtor must prove “undue hardship”. That is where the real work began! I had to learn what the courts meant by undue hardship, and what was required to prove I was “suffering” from “undue” hardship. I knew I was having a hard time financially — so what else was involved?
All I can say is at that point in time my work and research went to a new level! For the next year, I spent nearly every waking moment trying to understand and learn what it was going to take to prove that I was never going to be able to pay off the debt, and the court needed to be convinced that what I was saying was fact.
What I discovered nearly shocked me! I discovered that not even the courts could agree on what constituted an undue hardship and what criteria they should use to make a standard ruling on when the metric of hardship was met by the debtor. Unbelievable! (While I could provide details of my findings here I will defer and ask that you read my other blog articles regarding this — in fact, my very first blog article written on May 5, 2015, covers the topic fairly well.
At this point, I knew I had to not only file another Chapter 7 personal bankruptcy, but in order to “prove undue hardship” I would need to file what the Court calls an “Adversary Proceeding” (basically a claim or a lawsuit against the creditor(s) as a plaintiff in a Federal Bankruptcy Court). WOW! Just think about ‘that’ for a minute!
My ‘chapter’ as they refer to a case of bankruptcy, was going to be filed in the Eastern District of Virginia United States Bankruptcy Court. Yes, it is “Federal Court” and can be intimidating! As part of the court’s rules, I would have to agree to and attend a Bankruptcy Clinic. Now as I had stated, I had been working nearly a year preparing myself ahead of filing a chapter 7. In fact, I had contacted several lawyers who specialized in Bankruptcy, asking them if they could help me via a “pro-bono” arrangement since I had no money to pay for legal help. I also contacted the area Bar Association who advertised they have attorneys who offer services pro-bono. What I learned was — there is No Santa Clause!
Not only did I not find one Attorney to offer to help me from the legal community, even the Attorney who held the required Bankruptcy Clinic, flat out told the class — “Student loans are not dischargeable in Bankruptcy”
Now being who I am, I spoke up and challenged this lawyer! What she said next was also not completely the facts… She said, “Well, yes, you can try and file what is called an Adversary Proceeding, but no one ever wins a discharge!” And she said, “no lawyer will take your case.”
Well, she got part of that right! No lawyer I could find would take my case. Now let me give you why I think that…
Number One — Most lawyers (even those who claim to specialize in Bankruptcy – BR), know that in order to seek a discharge using 11 U.S.C. §523, that they will have to spend a tremendous amount of time on the case. And if you ever dealt with a lawyer who works on Bankruptcies, (as I have), you will know that they have a system which they use over and over to file chapters and that it is practically a “rubber stamp” operation between the Court (i.e. BR Judge) and the BR Attorney. Believe me, it is a system!
Number Two — The second reason no lawyer will tell you that you can’t discharge your student loans is that I believe they believe it! I actually think most BR Attorneys have been told or taught in Law Schools, that student loans are not dischargeable! Now even If they do know, they have made the conscious decision to go ahead and tell a lie, so as not to have to deal with it! (My opinion of course— but I am entitled to my opinions)
Number Three — Even if you could get a lawyer to take your case and file all the required documents, not one of them will do it for you for free! How does it makes sense that you are filing Bankruptcy to get rid of personal debts and your student loans and you have the money to pay an Attorney upwards of $300-$600 an hour? Now Virginia… ‘THAT’ IS FANTASY!
‘That’ Virgina is the “Philosophical Issues Behind It!
No Virginia there is no Santa Clause in the sphere of Student Loan Discharge! There are no ‘benevolent fairies” or Santa’s little helpers to make your wish come true! The plain and simple truth is… You have to work very long and very hard and very smart to beat the system set up by the greedy and corrupt Department of Education (DOE) and their minions with whom they have contracted to keep you in debt for the rest of your days!
The DOE also has their own ‘vicious cadre’ of ‘voracious high paid lawyers’ to fight you! And they do not give you a break — they will spend thousands of dollars and tie you up in court for years to keep you from winning a discharge. In my case, I won because I had spent months reading cases — both of winners and more importantly of losers!
My case was prepared even before I filed my Chapter 7. I had my “complaint’ written already (my 65 page Adversary Proceeding and over 2,500 pages of exhibits and proofs) complete with law citations and a full defense of my proof of undue hardship based on not only the 3-part ‘Brunner Test’, but also referring to the ‘Johnson Test’ and the ‘Totality of Circumstances Test’ — “Tests” used by other courts across the United States. In short, I became my own Attorney as a Pro Se Plaintiff.
To the point that the clerk of courts complimented me on more than one occasion for having my paperwork correct, even to saying “You do better work than most lawyers”. I have also been complemented by a good friend and fellow student loan blogger, Dr. Richard Fossey, who has written, “Mr. Precht should have been a lawyer!” Dr. Fossey also included my case in his recent book: “The Student-Loan Catastrophe: Postcards From the Rubble”. Fossey also told me once that my win against the DOE “was a Miracle”!
Miracle? Yes perhaps! In that regard I will have to agree with The Sun’s Editor, Francis Pharcellus Church who told Virginia “that only faith can push aside that curtain” Yes Mr. Church, “faith” did play a role in my being able to push aside the curtain of doubt that I could beat the adversary we know as the DOE. As a Christian, I relied on my faith to help me. I could never have written and won my case without God’s help. Yes, it was a miracle!
Is There No Santa?
Yes perhaps… But only for those who are not afraid to work for what they have. Looking for someone to give you something for nothing is pure childish behavior. Even the fictional story of Santa asks the question “have you been naughty or nice?”
I was recently emailed by someone who asked me to “give them” a copy of my adversary proceeding! This person claims to be an Attorney, and stated that they are seeking to get a copy of my adversary proceeding to “help” other student loan debtors? This person wrote me three emails attempting to persuade me to “give” over my work. Here is part of one of the emails: “(Mr. Precht), I think it’s so important that your story and adversary proceeding be shared further. Thousands of borrowers despair that they will ever be released from their debts. Further, the professionals working to assist borrowers cannot create a new process for each of the millions of people dealing with their educational debt. It is simply not possible to get the work done in this manner. It is essential that we create reusable templates.”
While I may find it plausible to give some degree of accolades to this Attorney for their implied desire to help student debtors, I, on the other hand, find it a bit unprofessional to ask someone to just turn over a year or more worth of work.
This person states: “It is essential that we create reusable templates” Gee, that would be nice! No one provided me a “Template”… I spent over a year reading and re-reading thousands of cases both winners and losers in order to develop my own case! I thought that is what lawyers did?
So now… High paid ‘legal eagles’ work from templates? And they just want to go to a Bankruptcy Court and present this “template” and get a pass and ‘a rubber stamp’ approval?
How about these so-called ‘patron saints’ start to work to get the laws changed? And how about these “justice warriors” petition the Congress and the President to stop the Department of Education from hiring and paying billions of dollars to shills like ECMC (Education Credit Management Corporation) who’s high paid crooked lawyers even file “Motions to Intervene” into student loan cases that they never had any business being involved in? HELLO???
Who the hell is running this Ponzi Scheme anyways? And that is what it is! And who is benefiting? None other than lawyers! Go to hell Attorneys! We don’t need no stinking Attorneys!
Let me repeat… Sorry, Virginia… There is No Santa Clause!
The Department of Education under Betsy DeVos and the Trump administration is seemingly doing everything it can to eliminate consumer protections from schools of higher education that cause consumers to take out loans to attend.
Secretary DeVos has been pushing for rollbacks on the Borrower Defense to Repayment program that gave students a way to extract themselves from loans that were pushed on them in an attempt to defraud them. The Gainful Employment rule that is being significantly slashed was designed to make schools accountable that the cost of the school resulted in a benefit.
The Bankruptcy Trustee in the bankruptcy of ITT Educational Services paints a very vivid picture of why these borrower protections are needed. While the current argument why they are not needed is because students need to be responsible for the decisions they make to attend school and take out loans.
That sure sounds like common sense advice.
But what happens when students are not given all the facts to make good common sense advice decisions? Should schools be accountable for withheld information and students have a path towards recourse if they are misled?
Education Secretary Betsy DeVos says “No fraud is acceptable, and students deserve relief if the school they attended acted dishonestly.” And it’s not until it is. The Department of Education is dragging their feet and proposing only partial loan forgiveness now under their new Borrower Defense to Repayment program.
What makes the bankruptcy trustee action against the student loans lenders and funders interesting is that there has now been enough time to conduct substantial research and uncover what the facts were.
Here is what is now asserted about the actions of ITT Educational Services when it came to selling education.
“ITT’s PEAKS Loan Program was a for-profit education version of the sub-prime mortgage lending catastrophe, in which students rather than new homeowners were the victims. For the benefit of ITT insiders and Defendants, the PEAKS Loan Program allowed ITT to defraud students and evade regulators, while shielding the fruits of ITT’s fraud from claims of students through a complicated structure involving multiple trusts and a circuitous flow of funds between ITT and Defendants.”
“As with other for-profit colleges, much of ITT’s growth occurred after it became eligible to receive federal student aid loans and grants under Title IV of the Higher Education Act of 1965, 20 U.S.C. §§ 1070 et seq. (“Title IV”) [Federal Student Loans] in 1972. Before that year, only non-profit and public institutions were eligible for title IV student aid funds. Between 1970 and 1975, enrollment in for-profit schools increased by 112 percent, as compared with growth of 30 percent for all higher education sectors.”
“Throughout its existence, nearly all of ITT’s revenue was derived from student tuition and fees. Accordingly, ITT’s growth was dependent upon raising tuition and/or enrolling more students. Recruiting students was also of great importance because a large number of students who enrolled at ITT withdrew before completing their degree programs. According to the Senate Committee Report, “[o]verall, ITT’s withdrawal rate closely tracks the sector-wide withdrawal rate of 54 percent.”
“Furthermore, students at for-profit institutions like ITT defaulted on their federal loans far more often than students at non-profit schools. According to the Senate Committee Report, by 1990, the student loan default rate at for-profit schools was double that of higher education overall. Defaults by students at for-profit colleges represented almost half of the nationwide total. At the time of the Senate Committee Report, the expected defaults by ITT’s students for 2009 was approximately 34 percent.”
“As part of their efforts to drive profits (and thereby increase their own compensation), ITT’s Former Management committed substantial resources to advertising and marketing efforts to recruit new students. For example, in 2010, ITT’s Former Management caused ITT to employ 2,550 recruiters and to allocate $252 million — about 19.1% of ITT’s total revenue — to marketing and recruiting, according to the Senate Committee Report.”
“ITT’s recruiting efforts were aggressive. On information and belief, ITT’s Former Management pushed recruiters to maximize sales, requiring them to make around 140 calls a day to prospective students, and compensating recruiters based on results. As discussed below, there is substantial evidence that ITT’s recruiting practices frequently violated state and federal consumer protection laws.”
“Because the great majority of its students could not afford to pay the school’s tuition on their own, retaining and aggressively recruiting students was not enough, by itself, to make ITT’s business model work. The vast majority of ITT’s revenue — hundreds of millions of dollars annually — came from Title IV loans to students.”
“In 2013, for example, approximately 82% of ITT’s revenue came from Title IV funding. In the past ten years alone, ITT created, by a conservative estimate, $7.3 billion in student loan debt, both federal and private.”
“Because ITT received the Title IV funds so long as students took out loans and signed up for classes, ITT would profit from the increased availability of Title IV monies, even if it eventually turned out that many of the students would be unable to repay the loans they were induced to take out.”
“ITT’s Former Management quickly took steps to attempt to ameliorate the impact of the worldwide financial crisis on ITT’s business. To help increase revenue, ITT’s Former Management redoubled its recruiting efforts to increase the pool of potential applicants. These efforts paid off, as enrollment soared from 48,155 students in 2006-07 to 88,004 in 2010-11. At the time of the Senate Committee Report, ITT was adding 8-10 new locations per year, and had identified 50 additional locations as “viable opportunities to continue to expand.”
“However, because Title IV loans could not be used to pay more than 90% of students’ tuition, increasing enrollment could not solve the crisis faced by ITT. For ITT’s business to survive, it also needed to provide potential students with a new source of “private” funding, so they could continue to obtain the federal loans that accounted for most of ITT’s revenues.”
“ITT was hit particularly hard by credit tightening during the recession because its aggressive recruiting efforts resulted in enrollment of a great many students with very poor credit profiles and low earnings, as ITT’s Former Management was acutely aware. According to Fitzpatrick, the average ITT student earned around $18,000 per year and had a credit score under 600 at the time he or she enrolled. Upon information and belief, the average ITT student without family earned only a few thousand dollars above the poverty line and had a deeply sub-prime credit profile, and the average student with a family lived below the poverty line.”
“There is overwhelming evidence, however, that ITT actively misled students regarding the Temporary Credits, the nature of the education they would receive, the transferability of class credits, and virtually everything else associated with ITT.”
“The Class Action Complaint further asserts that ITT’s army of 2,500 recruiters targeted prospective students who were in desperate circumstances, and regularly made misrepresentations to such students about ITT’s programs and their value, the transferability of its credits to other schools, and ITT’s loan programs and other financial aid.”
“The Senate Committee Report also concluded that “ITT recruiters were trained to mislead prospective students about the cost of attending the school.” Recruiters were encouraged to utilize a method of questioning students described as the “Pain Funnel,” in which students were made to feel they were not adequately dealing with life problems if they were not sufficiently “committed” to getting a degree at ITT despite its high cost. In this regard, tuition at ITT’s Indianapolis campus was $44,895 and $93,624 for Associate’s and Bachelor’s degrees, respectively, in business administration, versus $9,385 and $43,528 for the same two programs at Ivy Tech Community College and Indiana University in Bloomington, respectively.”
The Consumer Financial Protection Bureau (CFPB) had previously been involved in making sure schools were not harming consumers. “On May 18, 2012, ITT received a Civil Investigative Demand (“CID”) from the CFPB, which stated that the purpose of the investigation was, in part, “to determine whether for profit post-secondary companies, student loan origination and servicing providers, or other unnamed persons have engaged or are engaging in unlawful acts or practices relating to the advertising, marketing and origination of private student loans.”
The current CFPB no longer gets data from the Department of Education and Acting Director Mulvaney says the CFPB is no longer focused on issues involving federal student loans. – Source
“Unfortunately for the students who were defrauded by ITT, the Peaks Loan Program — with its complicated shuffling of funds and student notes among various trusts — was plainly structured to hinder and delay students’ attempts to recover damages from ITT and the lenders participating in the program, notwithstanding federal legislation designed for their protection.”
Nobody Should Be Surprised
It can’t come as a shock that for-profit schools have to drive revenue to make shareholders happy. But when it is done with federal student loans that then leave people trapped in debt that was deceptively sold, shouldn’t the student have some recourse to get out from under the deceptive debt? What does common sense say to you? What possible reason could the Department of Education have for eliminating that programs that provide student loan protection and forgiveness? Hum?
Person-to-person payment services and mobile payment apps have become part of everyday life for millions of people. Payment services and apps let you send money to people without having to write a check, swipe a card, or hand them cash. These services are becoming increasingly popular for things like paying a friend back for lunch, splitting the cost of rent with a roommate, or collecting money for a youth sports coach’s thank you gift.
Mobile payment services advertise to consumers that they provide increased security, ease of use, and speed over more traditional payment methods. However, many different forms and brands of these services exist—your friend may have told you about one mobile app, you may have used another to receive money from your brother, and your bank might have emailed you about their own app. You might have also heard about a different kind of service called a “mobile” wallet that lets you pay merchants. While payment apps all may appear to do the same thing, each of these services operates somewhat differently, and your experience with them may vary.
With the development of new payment methods come new risks. Mobile payment apps should have strong built-in protections to detect and limit errors, unauthorized transactions, and fraud. The federal Electronic Fund Transfer Act (EFTA) applies to a bank, credit union, or other provider’s mobile payment services, just like it does to an electronic bill pay service. Among other protections, this federal law requires these institutions to investigate errors reported by consumers. Other federal and state protections may also apply. Whatever service you end up using, keep the tips below in mind to make sure your money goes where you want it to and you receive money you’re owed.
Use caution when sending money to or receiving money from someone you don’t know
Scammers use mobile payment services to trick people into sending money or merchandise without holding up their end of the deal. For example, a scammer may sell you concert or sports tickets but then never actually give them to you. Or a scammer might purchase an item from you, appear to send a payment, and then cancel it before it reaches your bank account. Using mobile payment services with family, friends, and others you know and trust is the safest way to protect your money. The Bureau has more tips on how to avoid scams, as does the Federal Trade Commission (“FTC”).
Consider having your friend send you a request for payment first
If you’re sending money to someone for the first time, ask that they send a “request” from their app if that service is available. This helps ensure that you’re sending funds to the right person for the right amount. If the payment app does not have a request for payment function, consider sending a small, test payment to the recipient to confirm it is the right person before sending larger amounts.
Double check before you press send
A simple mistype can send money to the wrong person or in the wrong amount. Always double check the amount you entered and the person you selected to pay. Most payment apps use a username, phone number, or email address to identify payment recipients. Ask your recipient to be sure he or she has registered in the app with the information you intend to use to send them money.
Know how quickly you will receive your money—and how quickly money comes out of your account when you pay someone
Depending upon which mobile app you use and who sends you money, you may or may not be able to use money you receive immediately. In some instances, you may have to wait a few days to spend money you receive, even if the money shows up instantly in your app balance and you intend to spend the money within the same app. Many services let you transfer money to your bank account, and some will charge you a fee for the money to become available faster. For each app you use, find out how soon transferred money becomes available and then decide if that timing works for you.
Regardless of how quickly you can spend money you receive, when you send money via mobile apps, most payments you make get deducted from your balance immediately. You can sometimes put a “stop payment” on a check you’ve written, dispute a credit card charge, or cancel a bill payment. But new mobile payment services generally don’t have a recall or retrieval feature. For these reasons, again, it’s important to be certain you want to make a payment, for how much, and to whom before pressing send.
Set up your app to require a passcode, PIN, or fingerprint before making a payment
Most mobile payment apps allow you to set up a passcode, PIN, or fingerprint that you can use to authenticate yourself before making a payment. Setting up this feature helps to prevent anyone else that gets access to your mobile phone from making mobile payments from your account. In the event that your mobile phone is actually lost or stolen, be sure to notify your bank or payment provider.
Contact your bank or payment provider if you suspect an error
Under the federal law called the EFTA, banks, credit unions, and other financial institutions must investigate errors. In addition, a new Bureau rule explicitly applies the EFTA to prepaid accounts (including some payment apps) beginning in April 2019. If an erroneous transaction appears on your statement, you should notify your financial institution right away.
Many existing forms of payment offer protections in addition to those required by the EFTA. New mobile apps and forms of payment may not provide these same protections. That means it might not always be easy to get your money back if something goes wrong. Make sure you understand the protections and assurances your payment services provider offers with their service.
Contact us if you encounter an issue with a bank or payment provider
The Bureau enforces the EFTA, which requires banks, credit unions, and other financial institutions to investigate errors. Congress also gave the Bureau the authority to hold companies that provide consumer financial products or services accountable for committing unfair, deceptive, or abusive acts or practices.
If you’re having trouble with a payment service, you can submit a complaint online or call us toll-free at (855) 411-2372. If you have a question, and not a complaint, about payment services or other financial services, you can get answers to common questions through our Ask web tool.
The Bureau’s commitment to promoting safe and innovative payments
While the Bureau offers the tips listed above to help ensure your safety in the financial marketplace, people should be able to use new payment services with peace of mind and without fear of getting scammed or making honest mistakes. In concert with other regulators and industry stakeholders, the Bureau promotes the development of innovative payment services that offer people improved quality of life and that earn people’s trust and confidence.
A caller says that he’s from the government and your Social Security Number (SSN) has been suspended. He sounds very professional. So you should do exactly what he says to fix things…right?
The FTC has gotten reports about scammers trying to trick people out of their personal information by telling them that they need to “reactivate” their supposedly “suspended” SSNs. The scammers say the SSN was suspended because of some connection to fraud or other criminal activity. They say to call a number to clear it up – where they’ll ask you for personal information.
Thing is, Social Security Numbers do not get suspended. This is just a variation of a government imposter scam that’s after your SSN, bank account number, or other personal information. In this variation of the scheme, the caller pretends to be protecting you from a scam while he’s trying to lure you into one.
Here are a few tips to protect yourself:
Never give out or confirm personal information over the phone, via email or on a website until you’ve checked out whoever is asking you for it.
Do not trust a name, phone number, or email address just because it seems to be connected with the government. Con artists use official-sounding names and may fake caller ID or email address information to make you trust them. Besides, the government normally contacts people by postal mail.
Contact government agencies directly, using telephone numbers and website addresses you know to be legitimate.
If someone has tried to steal your personal information by pretending to be from the government, report it to the FTC.