'The Financial Issue' by The Badger Herald

STUDENT MEDIA AT THE UNIVERSITY OF WISCONSIN

THURSDAY, MARCH 30, 2017 · THE FINANCIAL ISSUE · BADGERHERALD.COM

The Financial Issue With a hefty price tag on college, read more about taking personal finances into your own hands.

THE FINANCIAL ISSUE

@badgerherald

PERSONAL FINANCE APP STARTER PACK

by Tyler Lane Publisher

Currently, the financial services industry is experiencing a “FinTech” revolution. New technology start-ups are recreating how traditional financial services operate and making them more accessible and cheaper to the end user. The Badger Herald recommends these personal finance apps to help college students stay financially savvy. Mint is an app developed by Intuit (maker of Quickbooks and TurboTax) that helps you manage all your personal finances. Connect any account you have money in and Mint will track all your purchases and income, create a budget for you and track your net worth. Acorns has caught on as a go-to savings-starter app. After setting up your account, you connect a card you frequently use for purchases. Acorns will round up each charge you make to the nearest dollar, add it to your account and invest it in a diversified portfolio. And oh yeah, they waive all fees for college students. Venmo is possibly the most downloaded personal-financerelated app on campus. Venmo may not really help your personal finances, but it will let you easily send and receive money from friends. This helps with splitting checks, the electric bill and maybe even payment for a March Madness bet. Looking to trade stocks but only want to invest a couple hundred or a couple thousand (if so, good for you!) dollars? Robinhood allows anyone to buy stocks with no transaction fees. Where most other brokers charge $6-10, Robinhood cuts costs through new technology and gives you free trades.

While apps that manage your money are great for their ease, the most important step toward a healthy financial life is keeping up with the news. The Wall Street Journal offers a great deal for students to get access to their content, which actively reports on financial markets and economic news. 2 • badgerherald.com • March 30, 2017

TABLE OF CONTENTS

152 W. Johnson Suite 202 Madison WI, 53703

Find us online at

http://badgerherald.com

Telephone 908.257.4712 Fax 608.257.6899 11,500 copies printed Tuesdays. Published since Sept. 10, 1969

Like us on Facebook

http://facebook.com/badgerherald

Herald Editorial Editor-in-Chief Managing Editor Managing Editor News Editor Digital News Editor Features Editors City Editors State Editor Opinion Editors Opinion Associate Sports Editors ArtsEtc. Editors Copy Chief Associate Copy Editors Photo Editors Design Director Comics Editor Social Media Coordinator Banter Editor Video Directors

THE FINANCIAL ISSUE

Herald Business

Hayley Sperling Publisher Nina Kravinsky Business Manager Emily Neinfeldt Business Associate Vidushi Saxena Community Outreach Coordinator Alice Vagun Marketing Manager Teymour Tomsyck Maija Inveiss Montana Leggett Helu Wang Dana Kampa Yusra Murad Advertising Director Connor Touhey Advertising Manager Aly Niehans Advertising Executive Ben Cross David Hayes Celeste Benzschawel Kristin Washagan Madeline Sweitzer Izabela Zaluska Chairman Frances Smith Vice Chairman Brighton Lindberg Vice Chairman Riley Steinbrenner Vice Chairman Katie Cooney Members Greta Zimmermann Joshua Duncan Melanie Tobiasz Dan Chinitz Matthew Norman Amos Mayberry

Tyler Lane Bobby Zanotti Luke Presberg Briana Reilly Billy Maloney

Herald Advertising John Batterman Sam Streeck Jacob Bawolek

2 PERSONAL FINANCE APP STARTER PACK 4 FINANCIAL FEATURE: THE COST OF KNOWLEDGE 6 IMPACT OF THE FEDERAL RESERVE 7 STUDENT LOAN DEBT

Board of Directors

Advisers

Briana Reilly Hayley Sperling John Batterman Tyler Lane Emily Neinfeldt Nina Kravinsky Yusra Murad Emily Hamer Jacob Bawolek Alice Vagun Teymour Tomsyck Bobby Zanotti Kevin Bargnes Stacy Forster Benedict Will Haynes Jason Joyce Davy Mayer Polo Rocha Paul Temple

N I J O HERALD E H T badgerherald.com

THE FINANCIAL ISSUE

@badgerherald

facebook.com/badgerherald

The cost of knowledge

THE FINANCIAL ISSUE

As the price tag associated with higher education rises, students increasingly grapple with managing loan debt after graduation by Emily Hamer Contributor

by Cyan Zhong Contributor Editor’s note: This article originally appeared in the March 15, 2016 issue of The Badger Herald. Some information ah been updated for the purpose of accuracy. These changes appear in brackets. Colton Wickland, like an increasing number of college students in recent years, faces anxiety about how to pay for college. When he was accepted into University of Wisconsin, Wickland knew his parents would not be able to support him financially. “My parents don’t have any money,” Wickland said. “I wouldn’t say we’re financially bad-off or poor, but [we have] no funding left for college, no savings or anything like that.” As a freshman, Wickland [took] initiative to try to support himself financially. He works at University Health Services as an undergraduate assistant for alcohol and drug prevention and also chairs the Green Fund of Associated Students of Madison. But aside from his jobs, the need-based aid he receives and $7,000 in scholarships, he still needs to take out about $6,000 in student loans every year. But he said getting a college degree is worth taking a risk with student loans. He works to help

pay off his student debt, and through ASM, he actively helps other students who have similar, or even worse situations than him. In 2013, even before coming to college, Wickland testified during the Senate hearing of a bill called “Higher Ed Lower Debt,” which would allow people in Wisconsin with student loan debts to refinance their loans at a lower interest rate. Wickland expects to have $20,000 in loan debt by the time he graduates. In addition to his undergraduate debt, Wickland plans to attend medical school after graduation, which will probably cost him an additional $100,000. “It definitely freaks me out, because if something goes wrong, then I’m basically done for,” Wickland said. “If I were to slip up and drop out of medical school or something, and I didn’t get a decent job, I would have student loans for the rest of my life basically.”

Loan debt realities

Wickland is far from the only student facing student loan debt worries. Many students face far higher costs. While Wickland expects $20,000 in loan debt by the time he graduates, the average debt of a UW graduate is $28,768, according to Michelle Curtis, UW’s [former] Office of Student Financial Aid associate director. The national average in 2014 was $28,950, she said. Wisconsin ranked third in the nation for number of college students graduating with student loan debt, with 70 percent of graduates having debt when they get out of college, according to a 2015 report by the Institute for College Access and Success.

According to UW’s 2014-15 Data Digest statistics, more than 50 percent of undergraduate students who graduated in 2013-14 carry loan debts at rates that have steadily increased between 2004 and 2015. But financial aid has not been increasing as quickly as the cost of living, leaving students without enough support, Drew Anderson, postdoctoral researcher at the Wisconsin Harvesting Opportunities for Postsecondary Education Lab, said. Therefore, a college education is also more challenging for low-income students to afford. Students from families with low incomes have lower rates of getting to college and lower rates of completing college, Anderson said. As more students seek out a college education with cost-of-living expenses on the rise, the issue of college affordability continues to be a focal point for politicians. Lawmakers’ efforts to address college affordability Wisconsin legislators from both sides of the aisle have honed in on student debt in recent years, but Republican and Democratic policies vary greatly. One of the most recent legislative efforts to make college more affordable is Gov. Scott Walker’s college affordability package, the majority of which is expected to be signed into law after it is voted on in the Senate March 15. The package includes bills that would increase grants for technical schools, create an emergency grant program, give students tax deductions on interest, increase internship opportunities and provide students with financial literacy learning

opportunities. When the Assembly passed the bills Feb. 17, Walker said in a radio address they pushed Wisconsin one step closer to making college more affordable for students and his tuition freeze has already saved students an average of $6,311 per year. “These proposals are a critical part of our work to lower the cost of higher education and ease the burden of student loan debt,” Walker said. Rep. David Murphy, R-Greenville, said Walker’s college affordability package is just a start, and the student loan debt crisis is something that will continue to be addressed in the future. “College affordability is something that needs constant work and really somebody keeping an eye on it, somebody really caring about what kind of shape our students are in going forward,” Murphy said. But Rep. Katrina Shankland, D-Stevens Point, said Walker’s affordability package “doesn’t even scratch the surface” of the student loan debt crisis. Throughout the past year, Democrats have proposed competing policies including ones that would allow students to refinance their loans, increase need-based aid and make the first 60 credits of college debt-free. None of the proposals made it through the Legislature this session.

“We’re suffocating our next generation — our future leaders — with this crushing student loan debt. It’s hindering Wisconsin’s ability to grow economically, and it’s preventing graduates from realizing their dreams. ” Rep. Melissa Sargent, D-Madison

Rep. Melissa Sargent, D-Madison, said student loan debt impacts Wisconsin’s future. “We’re suffocating our next generation — our future leaders — with this crushing student loan debt,” Sargent said. “It’s hindering Wisconsin’s ability to grow economically, and it’s preventing graduates from realizing their dreams.” Sargent said she hopes her plan for debt-free college, called the “Wisconsin Promise,” is able to make it through the Legislature next session, along with the student loan refinancing bill, “higher ed, lower debt.”

On campus resources

UW has some resources to help students navigate their loan debt situations. The Office for Financial Aid is responsible for entrance and exit counseling for students with loans, Curtis said, with online tutorials and quizzes to guide them through the student loan

Photo · A program called Financial Aid Security, or FASTrack, attemps to provide security to students by offering them financial aid packages, ensuring they recieve the same level of funding through all years of study. Marissa Haegele The Badger Herald process. Curtis said there are other programs on campus that help reduce stress caused by student loans. A program called Financial Aid Security Track, or FASTrack, aims to provide security to students by offering them financial aid packages, ensuring they receive the same level of funding throughout their years of study. Center of Educational Opportunity helps students achieve academic success, and teaches students how to manage their money and make budget and career plans. She said students should take advantage of the benefits of federal loans, such as income-sensitive programs and forgiveness programs. But not all students access or even know about these on-campus resources. Wickland admitted he has not sought assistance from them, and doesn’t even know what his student loan interest rates are. [Former] ASM Chair Madison Laning said students need to be in the know and be responsible for their college funding plans. Laning said many students who have loan debt lack information about getting loans, such as the consequences of loan debts moving forward in their college career. She said financial literacy is important for students to have before they take out large loans.

Loan debt versus the value of education

The impact of excessive student loan debt extends into all spheres of student life, such as personal spending habits, which could influence

the economy in the years to come. Wickland said his student loan debt will keep forcing him to be frugal for years after college, without the ability to purchase a house or a car. Even when he finds a job, a large portion of his salary will be used to pay for the debt that accumulated from funding his college education. With this mounting debt, Wickland said he at times feels like he’s being punished for trying to better himself and society. When students enter the workforce, Laning said, they will not be able to buy things like housing and cars that stimulate the economy. She said UW needs to find more state funding, research money and donations instead of relying on tuition income to pay for the university’s needs. “I think the number one issue is the rising cost of tuition, and it’s coupled with the rising cost of living, so I think our institution needs to find funding sources besides tuition, and keep the entire campus [from] running on the back of students,” Laning said. Despite how daunting the expense of student loan debts can be, Curtis said the value of higher education makes it a worthwhile investment, and students need to be smart about their borrowing strategy. “Looking ahead for the generation that’s borrowing right now, [they need] to borrow smart,” Curtis said. “If you don’t end up getting your education, or you’ve added years on to going to school because you didn’t want to borrow some student loans, I would argue that you’ve lost.”

March 30, 2017 • badgerherald.com • 5

THE FINANCIAL ISSUE

@badgerherald

Federal Reserve lending rate can impact fixed, variable loans Small rate hikes can have impact on price of everything from sandwichs in local restaurants, to interest for funding for cars, homes, education by John Batterman Advertising Director

To most people, the Federal Reserve lending rate is just something that banks need to worry about — in reality, it affects almost every purchase you make on a day to day basis. Here’s how it works: The Federal Reserve, the U.S.’s independently run central bank, controls all monetary policy in the U.S. The Fed manages how much money is printed (and in turn, inflation), regulates banks and, most importantly, lends money to banks at a special rate called the “federal funds rate.” The federal funds rate is essentially used to stabilize the economy, meaning that the Fed will look to raise rates when the economy is doing well, and they’ll look to lower rates when the economy needs a boost. This is important to us as consumers because banks are able to loan out money at a lower or higher rate depending on which rate they get from the Federal Reserve. The rate banks give affects businesses, where the cost of your sandwich may increase because the restaurant got a higher rate loan. It also can affect individuals who are trying to get funding for a car, house or education. Here’s how it affects us as students: Banks and other student loan lenders are forced to quote you at a higher rate if the Fed raises their lending rate. Essentially, this means needing to pay more for your student debt down the road. According to Student Loan Hero, about 66 percent of all graduates from public schools have student loans, and those loans are typically structured in two different ways: fixed rate or variable rate. For those

of you with fixed rate loans (about 92.5 percent of students with loans), the current rate hikes won’t hurt you for now. If you are looking to take out more loans or refinance in the future, however, these rate hikes are something that you may want to pay attention to. For those of you that have variable rate loans (that’s about 7.5 percent of you), each Federal Reserve rate hike is undoubtedly resulting in your variable rate increasing and costing you more money in the future. The point is that no matter what type of loan you have, these rate hikes can affect you in the future. Let’s say you have $20,000 of student loans at a simple 4.0 percent annual rate. If you pay that off over 20 years, you’re going to be paying about $9,400 in interest on top of your $20,000 of loans. If your rate gets increased simply to 4.5 percent, however, you’d end up paying $10,750 in interest. As you can see, a small rate hike can do a lot of damage when added up over time. What to do: It’s simple — just keep track of your student loans and what’s happening with them. If you’re going to be taking out loans in the future to pay for school, a car or anything else, make sure to take into account when the Fed’s next rate rise might be — you could save yourself some money in the future by securing a lower rate earlier. If you have variable loans, keep track of the rate on them and what the expectations for the federal reserve rate are. It may be smart to refinance variable loans in the future, depending on what the Federal Reserve rates may be.

Photo · According to Student Loan Hero, about 66 percent of all graduates from public schools have students loans. Herald Archives The Badger Herald

facebook.com/badgerherald

THE FINANCIAL ISSUE

Despite rising cost, UW students graduate with less debt According to university report, 53.4 percent of undergrads left school in 2015-16 with no outstanding loans by Montana Leggett City News Editor

University of Wisconsin students are increasingly graduating with either less overall student loan debt or no student loan debt at all. Karla Weber, spokesperson for the Office of Student Financial Aid, said students have generally been borrowing more as the overall cost of college has gone up, so the decrease is a “big thing” for UW. According to the news release, 53.4 percent of undergraduate students graduated in 2015-16 with no student loan debt — a 3 percent increase from the previous year. Additionally, the average amount of student loan debt

students possessed when they graduated from UW in 2016 decreased from $28,768 to $28,255. This average falls below both the 2015 national average student loan debt of $30,100 and the 2015 Wisconsin average, which was $29,640. Weber said this decrease in student loan debt allows students to spend more money on life expenses when they graduate. “We want to do everything we can to not only keep the debt — to begin with — low, but also give them the tools to be able to repay it so that their credit stays healthy so that they can use their earnings for other things like buying cars and houses and being contributors to the general economy,” Weber said.

But many students still struggle to pay back their loans, Weber said. She said when students default, or do not pay back their loan, it can damage their credit. According to the release, the default rate for students at UW was 1.5 percent in 2012 and later decreased to 1.2 percent in 2013. The default rates for UW students also fall below the 2013 national default rate of 11.3 percent and 2013 Wisconsin default rate of 9.6 percent. Weber said OSFA has been doing small things such as working with targeted populations, and doing one-on-one advising with students to address issues related to student loan debt. OSFA is working on developing

larger programs for the upcoming year, Weber said. These programs will aim to keep student loan debt and the default rate low, she added. “The biggest concern is really just making sure that any debt that a student takes on is manageable so that they’re able to make their monthly payments after they graduate,” Weber said.