Tomorrow's Teachers -- 2003

Money

Give Yourself Credit

No doubt you're bombarded with credit card applications every time you open your mailbox or stop in the campus bookstore. Low introductory rates are attractive, but it's the fees and penalties hidden in the fine print that'll make you wish you had reached for your magnifying glass sooner! Prevent surprises by closely examining a card's terms and conditions such as:

Killer Penalty Rates: If you're late on one payment your annual percentage rate (APR) could shoot up to 26.99 percent! So, on-time payments are more important than ever.

Vanishing Grace Periods: The standard interest-free grace period used to be 25 days, but now many card issuers are reducing it to 18. When selecting a credit card, look for the longest grace period you can find.

Cash "Poor" Advances: Watch out! With fees of 2 to 5 percent, or a minimum of $3 to $10, cash advances also can carry an interest rate that soars way beyond your regular APR.

One Cycle IS Better Than Two: Beware of offers with two-cycle billing. If you fail to pay the full balance at the first billing, the interest becomes retroactive to the purchase date--so you pay two months' worth of interest! Definitely look for single-cycle billing.

Whose Wheels Are They Anyway?
A car will probably be your first major purchase, but should you lease or buy? Generally, if you plan to keep the vehicle for less than three years and not drive it hard (i.e., lots of heavy loading or high mileage), then leasing could be the way to go. But don't let high-pressure salespeople or ads promoting low monthly lease costs fool you--most leases have stringent limitations and fees. Before you sign on the dotted line, make sure you understand the differences:

Cover Your Assets
Most renters don't realize that apartment owners insure their buildings only, so if disaster strikes, all your possessions could be history. That's why renters insurance is so important.

Renters insurance (referred to as an HO-4 policy) is economical and provides coverage for your personal belongings, personal liability, and for expenses incurred if your dwelling becomes unlivable. It may also cover loss of possessions due to theft. Many auto insurers also provide renters insurance, and often a multipolicy discount will apply.

Dealing With Federal Loan Debt
The big news about federal student loans is lower interest rates. If you have a Stafford loan from July 1998 or later, your interest rate is now 4.06 percent instead of 5.99 percent. This means a savings of $120 a year on the average undergraduate federal loan debt of $17,000. On the average graduate education loan tab of $23,000, you'll save about $240 annually.

Another boon for borrowers--many private lenders now offer the opportunity to refinance old federal loans and consolidate them into one fixed-rate loan at the new, lower federal rate. You'll need to do this, though, before July 2003, when the rates change again.

Loan consolidation isn't for everyone. If you have only a few years left on your loans, you could end up paying more interest because the repayment term will be extended. You also could lose special lender discounts, like payment deferment options. Check with your lender about your individual situation.