College Brings Not Only Hopes, But Lots of Worries

June can be a very busy and exciting month especially if your child just finished high school: There are commencements and graduation parties; and if your graduate is college bound he or she will participate in a freshman orientation. Then a little later they will be asked to pick and register for their first semester classes. It’s a crazy-busy emotional roller-coaster for everyone.   

If your child is going to be a high school junior or senior in the fall and has a college degree in their sites you are climbing into that roller-coaster too. There is going to be a lot on your plate including college entrance exams, school selection, and college visits. After that there will be the application process to look forward to, followed by ‘the wait’ before you find out if your child gets into his or her first-choice school. Then, when you finally know where he or she will be going—you will need to figure out how to pay for it.

Earlier this year, The Princeton Review put out a press release reporting the results of their annual “College Hopes & Worries Survey.” Over 10,000 people (80 percent college applicants, 20 percent parents of applicants) responded to this year’s survey.

According to the posted results a lot of applicants are in the same boat and share very similar hopes and fears: Almost three out of four (72 percent) reported ‘High’ or ‘Very high’ stress levels about their applications and nearly 9 out of 10 (88 percent) said financial aid will be ‘very’ or ‘extremely’ necessary to pay for college.

I’m not surprised. I just read in the CNBC article, “This is what keeps students, parents up at night” by Jessica Dickler that expenses for the 2015-16 school year went up to about $20,000 per year from $12,000 a year a decade ago. That’s for a public four-year university.  Four-year private universities are way more expensive—over double—averaging almost $44,000 per year, up from $29,000 ten years ago.

“College costs have increased two times to three times faster than the rate of inflation every year consecutively for the last 20,” said Robert Franek, senior vice president and publisher of the Princeton Review.

That explains why this year’s biggest concern was ‘Level of debt to pay for the degree’ followed by ‘Will get into first-choice college, but won’t have sufficient funds/aid to attend.”  Ten years ago, the biggest worry was ‘Won’t get into first-choice college.”

According to debt.org, 70 percent of college graduates leave school with student loan debt and in 2014 the average debt was $33,000. With numbers like this I can totally understand their worries. Fortunately, there is quite a bit of financial aid available. Isn’t that good news?  Last year the U.S. Department of Education provided more than $150,000,000,000 (150 billion dollars) in grants, loans, and work-study funds. Students who want a piece of that pie will need to complete a Free Application for Student Aid (FAFSA) form to see if they qualify. Oftentimes colleges and states use the information from FAFSA to award their own student loans and grants as well.

The Princeton Review survey isn’t only about worries, it also reports hopes. 51 percent of parents hope their kids choose a school that is ‘less than 250 miles from home’ and 69 percent of students think one that is ‘250 to 1000 miles from home’ would be better. Main benefit of college?  44 percent said ‘Potentially better job and income.”

Bottom line? 99 percent say college will be ‘Worth it.’

A. Alliance Collection Agency, Inc. is a full service, licensed accounts receivable management and debt collection agency providing highly effective, customized one on one management and recovery solutions for our business partners.  Founded in northern Illinois in 2005, we have been proudly improving the bottom line on behalf of our business partners in and around Chicagoland for over 10 years.

 

“Regrets, I’ve had a few…” Do You Have Financial Regrets?

“Regrets, I’ve had a few / But then again, too few to mention…”

-Frank Sinatra, “My Way”

A couple weeks back I wrote a blog about the most recent New York Federal Reserve’s report on consumer credit. Yes, I know, you read it thoroughly (along with the actual New York Fed report) with keen interest and attention. 

Admittedly it was a bit wonky. So if you missed it by chance, the takeaway was that while consumer debt is at or near all-time highs, for the moment at least the level of debt seems sustainable given low unemployment and the fact that consumers have been able to keep paying on their outstanding debts.  Delinquencies have decreased to 5%, which on the surface also seems good news for businesses. 

Good news for the economy too, or at least it would seem.  And yet there are apparently…regrets.  In the context of Mr. Sinatra’s famous line, however, these do seem worth mentioning.

Recently Bankrate published a new nationwide survey they did regarding the financial regrets of our fellow Americans.  Claes Bell, wrote an article about the survey posted on Bankrate.com entitled “Most Americans have financial regrets, particularly about saving.”

So while we seem to be going along happily accumulating a significant amount of new debt, it does come with a price.

“It’s hard to get through life without at least one major financial regret.” writes Bell.  There are a fortunate few:  17% of the survey respondents report having no financial regrets at all.
The rest* (60% of respondents) listed the following as their top six financial regrets:

  1. Not saving for retirement early enough (18%)
  2. Not saving enough for emergencies (13%)
  3. Taking on too much student loan debt (9%)
  4. Taking on too much credit card debt (9%)
  5. Not saving enough for your children’s education (8%)
  6. Buying more house than you could afford. (3%)

*The remaining 23% had other concerns or would not answer.

Some surprising insights Bell points out include:

  • “Those in or near retirement are much more likely to bemoan a late start on retirement-saving than younger Americans. More than a quarter of those 65 and older say it’s their biggest regret, versus roughly 16% of younger respondents.”
  • “A lack of savings for emergencies is a source of anxiety for many people, making it another top financial regret. Millions of Americans — 13% in our poll — consider not having an emergency fund their biggest money misgiving. That’s the 2nd most popular response overall and a particularly keen concern among young adults and those making less than $30,000 a year.”
  • “While student loans finish 3rd overall among Americans’ biggest regrets, it’s at the top for younger Americans, with just under a quarter of Americans aged 18 to 29 citing it as their No. 1 financial source of remorse. And, women list student loan debt as a regret at twice the rate men do.”

Lots of regrets.  Are we doing anything about them?  It does not seem so.   Another survey done by GOBankingRates late last year asked the question “How much money do you have saved in your savings account?”  In a measure of some good news, the survey reported that at least half of us have “something” in a savings account. 

The most troubling part of the survey, though, was the large percentage of us that have less than a $1,000 in savings.  According to the survey, 71% of the respondents reported this level of savings or less, with 49% reporting they have no savings account or if they do they have nothing in it at all.

Like the blog from a few weeks back, the takeaway for our clients is to be ever vigilant on the state of their delinquencies.  Good times or bad.  Doing so will not catch you unawares when inevitably things go south. 

A. Alliance Collection Agency, Inc. is a full service, licensed accounts receivable management and debt collection agency providing highly effective, customized one on one management and recovery solutions for our business partners.  Founded in northern Illinois in 2005, we have been proudly improving the bottom-line on behalf of our business partners in and around Chicagoland for over 10 years.

Obamacare’s Special Enrollment Period Creates Insurer Angst and Premium Increases

The plan to provide health insurance to every American is noble. But when held up to scrutiny, has providing health insurance without allowing insurers to underwrite for pre-existing medical conditions been a financially manageable prospect? To prevent a ‘death spiral’ of only insuring sick people once they learned they were ill—all people choosing a health insurance plan are supposed to do so during an annual open enrollment period of a few months (Nov, Dec, and Jan).

Unfortunately, Obamacare exchange insurers are discovering that all the taxpayer bailouts they’ve received (along with government subsidized premiums) may not be enough to pay claims for the sick and injured who enrolled in health insurance plans outside of the open enrollment window. 

Typically, the open enrollment period for health insurance plans is annually in the fall through the end of January. Once the open enrollment period is over, those who did not pick a plan and pay for it are uninsured.  At least that’s how it is supposed to work.  But then, what happens when a person without insurance becomes sick or injured and the open enrollment window has closed?  For too many the answer is they enroll in Obamacare during a Special Enrollment Period, or SEP.  

A SEP is designed to be open to people whose circumstances have changed, such as: getting married, having children, losing or changing jobs, divorcing, or moving to a new state. Up until this year there were 30 allowable circumstances that qualified people for a SEP in the Obamacare regulations—more than any other federal government program, including Medicare Advantage. 

Rightfully, SEP’s are intended to help individuals seek coverage outside of the normal enrollment period due to certain life qualifying events. However, there is little or no oversight in place to ensure that SEP requirements are satisfied.  It appears as if Individuals simply need to check a box and they are granted a Special Enrollment Period for purchasing their health insurance.  The consequence?  SEP’s are enabling many to only seek coverage when they need care the most—a more costly proposition for the patient and the entire healthcare system. 

As insurers obtain more experience on the exchanges they are finding that SEP enrollees cost 55% more in claims than those who sign up during open enrollment. Furthermore, SEP enrollees only stay enrolled on average of about 4 months.  This dumps claims on insurers without providing enough premium revenue to cover the costs.

“Insurance systems tend to get stressed when people can buy coverage when they know they need it and then drop it when they don’t,” Aetna CFO Shawn Guertin told the Associated Press in Feb. 2016.

Is offering and maintaining insurance plans under these conditions sustainable? Big insurers like Blue Cross Blue Shield are asking for large premium increases due to their well-documented exchange losses. United Healthcare is leaving the exchange business next year and Aetna has stopped offering plans in a couple states as well.  Additionally, many Obamacare Health Cooperatives are falling like dominos as they too feel the stress SEP’s have put on the system. 

The Center for Medicare and Medicaid Services (CMS) recently unveiled several changes it said it was making to help close exchange enrollment windows. CMS has removed 6 of the 30 qualifying events that allow consumers a SEP.  Healthcare.gov CEO Kevin Counihan said in his Jan. 19 blog post that SEP’s will not be available for “the vast majority of consumers.”  He writes, “For example, SEP’s are not allowed for people who choose to remain uninsured and then decide they need health insurance when they get sick.”  Healthcare.gov operates public insurance exchanges in 38 states.

Health insurance companies are paying very close attention to how the government deals with SEP’s going forward. Will reducing the amount of qualifying events from 30 to 24 solve the unprofitability of plans purchased during SEP’s? CMS believes it will help some, but insurers are skeptical.  The insurers believe there are still not enough regulations in place.  They think the SEP window is still open too wide, even if it is closed a little more.

A. Alliance Collection Agency, Inc. is a full service, licensed accounts receivable management and debt collection agency providing highly effective, customized one on one management and recovery solutions for our business partners.  Founded in northern Illinois in 2005, we have been proudly improving the bottom-line on behalf of our business partners in and around Chicagoland for over 10 years.