Federal vs Private: What to look for in a student loan

When it comes to student loans, I often hear people trying to make the case for private student loans by highlighting the “flexibility” and “versatility” of such loans compared to federal loans. While private student loans can be justified in the right circumstances, there is something to be said about the advantages federal student loans can offer student borrowers in the face of post-graduate uncertainty.

The federal government has implemented plans and programs designed to address the great financial burden student loans continue to have on student borrowers. Available to virtually all student borrowers of federal loans, plans like income based repayment, forbearance and deferment allow for the fair alignment of mandatory loan payments and student repayment abilities. Federal loans also come with grace periods, giving graduates a few months after graduation before they are expected to start making their monthly payments. But with private loans, students are often required to make payments while they are still in school.

Although not of great importance to most college-age students, taxes are treated differently under federal and private loans: federal student loans are tax deductible, where private loans are not. For those fortunate enough to exceed the monthly minimum repayment amount, federal loan student borrowers won’t be penalized for making early payments as these types of loans come without any prepayment penalty fees; this may not always be the case with private loans.

As we all know, one’s credit history is an important metric used by lenders when determining how much credit to extend to prospective borrowers whether it be a car loan, credit card, mortgage, or start-up funding. Private student loans are no different. Many private lenders will lend money based on a borrower’s or, in the case of private student loans, a co-signer’s credit history. A borrower’s credit history generally does not play a role in securing government-backed, subsidized student loans as these loans are needs-based. Although private student loans vary in cost, they are generally more expensive than federal student loans. My advice for students is to exhaust all other financial aid options before taking on private student loans when pursuing undergraduate studies.

Most government plans and programs designed to offer student borrowers a wide array of loan repayment options were enacted at least partly due to political pressure, something private lenders probably aren’t overly concerned with as they aren’t the ones seeking re-election. Having said that, the decision to take on ANY type of student loans involves rigorous research on the part of the borrower that deals with complex factors like interest rates, time horizon, chosen career path, major, principal amounts, post-graduation repayment options, etc. If you can find a private lender who can offer a fixed-interest rate with a greater degree of flexibility than a federal student loan would when it comes to terms of repayment, then it might be something to consider. However when planning for a future entrenched with years of student loan repayment, the resourceful student borrower will seek out loan terms that are more economical and allow for greater breathing room.

You can find more information on federal student aid and the options available to student borrowers at studentaid.ed.gov.

Millennials – The Next Great Client Base

In studying the US client base within the financial planning industry, millennials are projected to be the bulk of the next wave of new financial planning clients. In “ordinary” circumstances this would simply mean that millennials will be taking the place of their baby boomer parents as the nation’s premier wealth-holding clients of financial advisors. Given the the technological advancements that have come of age in the financial planning industry, and the expectations tech-savvy millennials have of service providers in general, this generational transformation signifies the necessary change financial advisors must endure in order to meet client demands and expectations in the age of Twitter, Instagram, and crowd sourcing. This article discusses (1) the eventual generational transformation in financial advising clientele, (2) how the repercussions of such transformation will affect the financial advisory business model, and (3) proposed problem-solving ideas for future implementation. This piece was co-authored by myself and Helen K. Simon, and is published in the June 2014 issues of  Life & Health Advisor.

Millennials – The Next Great Client Base

Tenancy by the Entirety

When it comes to property ownership in the name of more than one person, there are four legally recognized arrangements: community property ownership, joint tenancy, tenancy in common, and tenancy by the entirety. A tenancy by the entirety form of ownership particularly deals with married couples and stipulates that both spouses hold an undivided, equal ownership interest in joint ownership. It can sometimes be difficult to wrap our heads around the often complex nature of shared ownership, but in the case of tenancy by the entirety, it is best to view the married couple as a legal entity and not as two individuals; this legal entity ultimately holds all ownership rights pertaining to the property. Because tenancy by the entirety involves a legal entity and not two individuals, any actions or changes in the ownership interest must be approved by both spouses.


We can assume that married couples, in general, will most likely seek to establish a legal form of property ownership that is most advantageous to their financial needs, goals, and objectives. Tenancy by the entirety can provide protection of property from potential creditors seeking debt payments one spouse may be responsible for. In this circumstance, the non-liable spouse will not have their ownership interest at risk of seizure by debt collectors to satisfy debt payment. However, under tenancy by the entirety a property may be subject to debt claims if applied to both spouses jointly. In the event that a couple is subject to a debt claim jointly, a court-ordered sale might have the legal power to terminate a tenancy by the entirety. Married couples seeking the benefits that come with initiating a tenancy by the entirety will be happy to learn that the creation such arrangement and title transfer between spouses can be done with relative ease. With these advantages in mind, one should also take into consideration the drawbacks of such joint ownership. As with most laws and legal arrangements, the stipulations of tenants by the entirety will vary from state to state.

Although a tenancy by the entirety can be used to avoid probate, there are limitations. For instance, probate can be avoided only in the event that the first spouse passes on and cannot be avoided in the event that both spouses pass away at the same time. With regard to varying degrees of recognition across all states, roughly half of U.S. states do not make tenants by the entirety available to married couples where other states may recognize the application of such ownership beyond real estate. Keep in mind that although ownership in the form of tenancy by the entirety belongs to a legal recognized unit (the married couple), consent is required of both spouses if one spouse ever sought to change or modify their individual ownership stake in any way (i.e. sale, donation, ownership transfer). Within this legally recognized entity, both spouses must hold a half ownership stake.

Rights, Limitations, and Stipulations

In addition to weighing the pros and cons of a tenancy by the entirety, it is important for property owners to understand the rights and limitations that come with such ownership arrangement. In the event that one spouse dies, the surviving partner will automatically gain full ownership rights to the property at hand. This automatic ownership enables the surviving spouse to become a sole owner in severalty, meaning that the surviving owner is “severed” from all other owners. Rights of survivorship for a married couple is naturally built into tenancy by the entirety. The nerve center of a tenancy by the entirety depends on the cohesiveness of the marriage unit, and when a couple decides to file for divorce, the termination of the tenancy by the entirety will ensue.

In the normal course of bankruptcy proceedings, one’s ownership interest in assets are confiscated by a bankruptcy estate, which in turn will provide the necessary payments to the respective creditors. However, just as is the case when debtors try to claim the assets of one liable spouse, a tenancy by the entirety would protect a property jointly owned by the marital entity; this is of course subject to whether or not a state recognizes tenancy by the entirety.

Comparison to Other Forms of Ownership

The difference between a tenancy by the entirety and a joint tenancy lies in the individual power of each spouse, or tenant, to modify or break the tenancy. While a tenancy by the entirety requires the approval of both spouses to perform such actions, a joint tenancy allows for this spousal, individual power. In a tenants in common (TIC) form of ownership, a deceased spouse’s fractional ownership interest in a property is retained by that deceased spouse’s estate and is not absorbed into the surviving spouses ownership stake, as is the case in a tenancy by the entirety. Unlike the ownership in a tenancy by the entirety, tenants in common ownership can be divided unequally. A joint tenants with rights of survivorship (JTWROS) is similar to a tenancy by the entirety in that a deceased spouse’s ownership interest is automatically absorbed into the interest of the surviving spouse. These various forms of property ownership help shed light on the array of choices married couples have when it comes to protecting assets of shared ownership throughout the course of a marriage.

Retirement & the Dissolution of Tradition: Understanding boomer financial decision making

This is an article that deals with the financial behavior of baby boomers when it comes to financial decision making. It is based on the original work of Helen K. Simon, DBA, CFP ®, RMA℠ titled Financial Behaviors of Clients in or Near Retirement: What Advisers Need to Know, which was published in the Retirement Management Journal in spring of 2014. You can read Retirement & the Dissolution of Tradition: Understanding boomer financial decision making here: http://www.lifehealth.com/retirement-dissolution-tradition/?sthash.WrZPU2s5.mjjo#sthash.WrZPU2s5.mioqfthI.dpuf

Tenants In Common

A tenants in common account is a type of joint account that has multiple individual owners, with each owner holding a percentage ownership of the account. This type of account ownership allows ownership stake to be retained by that owner’s estate and beneficiaries based on instructions in a will. It can be used to establish accounts for holding cash, securities, or real estate, while offering protection of assets when it comes to estate planning. In addition to offering advantageous investment features for those looking to pass down ownership to intended beneficiaries, a tenants in common account has its own set of regulations that are specific to the investment features it provides.

The North American Securities Administrators Association (NASAA) stipulates that once a tenants in common account owner has deceased, their share of account ownership will be legally retained by the decedent’s estate according to his or her will. This type of account setup prevents a deceased owner’s assets from being absorbed by the remaining surviving owners.

By establishing this type of joint account, a tenant’s heirs or beneficiaries can inherit the decedent’s assets without having the confusion and uncertainty that often arises in the events of an untimely death. These assets can consist of money, securities, and real estate property. It is possible for tenants in common to own unequal interests of the same joint account. Given that undivided ownership is bestowed upon the respective account owners, each can hold, buy, sell, mortgage, or transfer their portion of ownership.

Investment regulations set forth by the United States Securities and Exchange Commission (SEC) recognize joint accounts as being either joint tenants with right of survivorship, transfer-of-death, or tenants in common. Joint tenants with right of survivorship accounts stipulate that a decedent’s ownership stake be passed onto the surviving tenants of the account, where a transfer-of-death account will have a decedent’s assets transferred to named beneficiaries but not necessarily according to the decedent’s will. When establishing any type of joint account, signatures are required from all account holders.

Tenants in common as a real estate investment vehicle is used as a channel for investors to defer payment of capital gains taxes on investment property. This is where an investor is prohibited from having access to the proceeds generated from the sale of a real estate property. These proceeds must be held by an exchange intermediary before being used for further purchasing activity. With tenants in common real estate investment vehicles, adhering to compliance with Section 1031 of the Internal Revenue Code can be complicated and should always be carried out with qualified professional expertise.

Internet In 1994 May Be Similar To Bitcoin In 2013

I came across this video earlier today and thought that there might be something to be said about the confusion over the internet in 1994 (as demonstrated in this YouTube clip) and the similarities we encounter when enduring a present-day public dialogue over bitcoin and other virtual currencies. The initial confusion is met with immediate skepticism before complete dismissal of the new concept. Of course hindsight is 20/20, but everyone of those anchors at NBC are most likely embarrassed by this video and probably wish the clip was destroyed forever. Does 1994 and 2013 illustrate people’s inherent unwillingness to embrace change?