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Loans, Loans, Loans:

2021 FINANCIAL LITERACY SUPPLEMENT OCTOBER 14, 2021

A Quick Guide to Navigating Loan Procedures

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One of the building blocks of financial health is having a good understanding of credit – including how to use it responsibly. Wells Fargo is proudly sponsoring this month’s Financial Literacy supplement in the hope of exposing readers to financial tips and tactics that will help them not only manage their finances well but also make smart use of credit. Recently, we launched a video series called “Making it simple: A conversation about buying your first home.” The series was put together with the help of a variety of financial bloggers as well as Cy Richardson of the Urban League and Kristy Fercho, head of Wells Fargo Home Lending. Our hope was to help potential buyers – especially in the African American community – explore the homebuying process in a way that is engaging and informative. Readers can find the series by visiting our playlist on youtube (https://www.youtube.com/c/wellsfargo/playlists). In this supplement, we also explore two other very important topics that touch credit. The first is to help consumers better understand their credit scores. As we share in the article, a credit score is part of your financial power and it can be a valuable tool to help you achieve your future financial goals. The second topic is one that is important to many homeowners. We provide a step-by-step guide for homeowners who Wells Fargo is proudly sponsoring entered a forbearance payment plan during this month’s Financial Literacy the pandemic because of financial difficulties. Many of those plans will end this year, supplement in the hope of so it’s important for those homeowners to exposing readers to financial take action now and call the servicer for tips and tactics that will help their home loan so that they are exploring the best possible options to exit their plan. them not only manage their This is an important part of our commitfinances well but also make ment to sustainable homeownership, and we want to help as many homeowners smart use of credit. through this process as we can. As you can see, credit is a vital part of your overall financial health, and there are lots of topics to explore when it comes to getting credit, evaluating credit and keeping your credit healthy. Please take a look at the entire supplement and visit our resources online at www.wellsfargo.com/ myfirsthome or www.wellsfargo.com/ goals-credit/smarter-credit/ to learn more and continue your credit education!

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WORDS FROM THE EDITOR

To Be Worthy

Credit Worthiness Still Elusive for Many Dr. Shantella Y. Sherman Special Editions Editor One of the great misconceptions about financial literacy in America is that Black people are predisposed to poor money management. Unfortunately, a long history of discriminatory lending and banking practices that target non-Whites, is often overlooked by those who tout such theories. From 1933 to 1968, for instance, U.S. banks denied Black Americans access to financial services in a practice known as redlining. While this practice is illegal today, it had catastrophic, lasting results and forced Black families into relying on high-fee financial products such as payday loans and loan sharks to secure quick money. Without bank accounts and access to loans to purchase homes, African Americans faced the opening of what would be a wealth gap that has spanned generations. Additionally, credit scores – the three-digit number associated with credit worthiness – impacts almost every facet of our financial life and longevity but remain low for Black Americans. Credit scores were created in 1956 by Bill Fair and Earl Isaac — the name FICO is an amalgamation of their names (Fair, Isaac and Company).

But equally discriminatory, FICO scores do not factor in income, savings, utility bills, job status, or debit transactions. Instead, FICO uses data from individual bank accounts, mortgages, and savings – all of which Blacks have in fewer numbers through redlining -- to generate a score. When we consider that Black homeownership rates are 30 percent lower than white homeownership rates, it only adds to the wealth gap if apartment and utility bills have no value in the rubric. Credit scores are closely tied to someone’s ability to grow wealth and succeed financially in the U.S. since scores often determine eligibility for loans, apartment rentals, and even jobs. A low credit score may also result in lost job opportunities. Carmen Perez, founder of Make Real Cents, noted in a recent Business Week article that she had a job offer rescinded due to negative marks on her credit report. “At the time [the marks] included a defaulted student loan. The pay that I would have earned from this particular role would have helped me pay back my student loan debt faster, but that benefit was never realized.” So, how do we become credit worthy against seemingly stacked

odds? Invest in your financial future by taking courses and reading books about how credit, loans, and repayments work. Try products like Experian Boost, which launched in 2019 and helps you factor in lease payment histories with a goal of boosting your credit score. Find out if your area has legislation, like New York’s Stop Credit Discrimination in Employment Act, which prohibits most employers from checking an applicant’s credit history to make hiring decisions. If that legislation is not active, contact your local representatives to seek help. In this Quick Guide: Loans, Loans, Loans! we offer a few tips and information on how to navigate the loan system and ways of keeping your sanity while you do!

5 Dr. Shantella Sherman (Photo by India Kea)

Without bank accounts and access to loans to purchase homes, African Americans faced the opening of what would be a wealth gap that has spanned generations.

Read, Learn, Grow.

Homeownership more affordable. M&T has options to help you achieve homeownership. You may be eligible for solutions to help: • • • •

Reduce the cash needed at closing Lower monthly payments Save thousands by paying less interest Qualify with a less-than-perfect credit history

Get started with one of our mortgage specialists by calling 1-888-253-0993 or visit us at mtb.com.

5 Fair housing protest in Lake City, 1964 noted that without bank loans, few had the ability to establish a decent FICO score. (Photo courtesy of the Seattle Municipal Archives)

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THE WASHINGTON INFORMER 2021 FINANCIAL LITERACY SUPPLEMENT / WWW.WASHINGTONINFORMER.COM

My COVID Mortgage Forbearance Is Ending Soon…Now What?

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Your home is out there. A down payment as low as 3% on a fixed-rate loan could help you finance it. Each day, the sun rises on streets of houses. Neighbors wave to each other, people head off to work and school, new owners pull up to the home they’ve worked hard to buy. More than just buildings, homes are at the heart of a community. With Wells Fargo, you may be eligible for a range of home financing options, including low down payment loans, to help you reach your homeownership goals. Talk with a home mortgage consultant about loan amount, type of loan, property type, income, first-time homebuyer programs, and homebuyer education requirements to ensure eligibility. Having low down payment options does require mortgage insurance — an option that increases the cost of the loan and monthly payment. We’ll work together to find the loan that’s right for you. To learn more, call 1-877-937-9357 or visit www.wellsfargo.com/mortgage.

For many homeowners, the option to suspend their mortgage payments during the pandemic offered a great option for temporarily cutting their expenses until they could get to a firmer spot financially. As of mid-summer, more than 1.75 million homeowners across the country remained in a COVID-19 related forbearance plan, according to Black Knight’s July 2021 Mortgage Monitor. However, the report says many of those active forbearance plans are expected to come to an end before the end of the year, potentially impacting an estimated 1 million homeowners. This is especially significant for the Black community, which was hit hard financially as a result of COVID. A recent Pew Center Research report indicated that fourin-10 Black adults live in households that have lost jobs or wages since the start of the coronavirus outbreak. So – if you’re a homeowner whose forbearance plan is coming to an end – what now? While the answer may differ based on individual circumstances, one thing is clear: homeowners in this situation need to take immediate action to find out what options might be available in their unique situation. Here are some tips to consider as you look at the path ahead: STEP ONE: Understand who

services your loan so you can take action. As you may know, the company to whom you send your home loan payments is called your mortgage servicer. Your servicer is responsible for collecting and applying payments to your loan, handling escrow accounts (if applicable), communicating loan information to you, and assisting you when you are facing financial difficulty. If you don’t already know who services your home loan, you should be able to find the name and contact information for your servicer by simply looking at your bill. STEP TWO: Contact your servicer to discuss the timing around when you need to plan to start making payments again and what your options for resolving the missed payments. Because servicers are required to apply investor or insurer rules when servicing your home loan and determining the options available to resolve missed payments, it’s important to know who owns or backs your loan. It could be a government sponsored entity like Fannie Mae, or Freddie Mac, a government agency such, FHA, VA or USDA, or a bank or private company. STEP THREE: The specific steps you will go through with your servicer depend on who owns or backs your loan, whether you were current on your payments when you entered forbearance and if you can resume your previous payments. In some cases, it CONTINUED ON PAGE FS5

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Maintaining A Healthy Credit Score Can Help You Achieve Your Future Financial Goals Heather Philp Head of Cross Product and New Product Development Strategies Wells Fargo Cards and Merchant Services A credit score can be thought of like a grade that’s given to your credit report. It helps lenders understand your ability to repay your debt, which helps them understand whether you are a good candidate for a loan. Basically, if you have a history of repaying your loans in a timely fashion, that generally means your credit score will be higher. And, a strong credit score gives you access to more borrowing options for the things you want and need, such as buying your dream home or small business expenditures, at the best possible interest rate or terms. In other words, a credit score is part of your financial power and it can be a valuable tool to help you achieve your future financial goals. There are many benefits to having good credit. In fact, lenders aren’t the only ones who look at your credit score. Insurance companies, landlords, utility providers and cell phone providers may check your credit score or credit history before they determine your financial qualification and eligibility. Here are five tips to help you build and maintain a healthy credit profile:

4 KNOW YOUR CREDIT SCORE AND MONITOR YOUR CREDIT REPORTS REGULARLY

Monitor your credit score monthly and review your credit reports at least once a year. Doing this can ensure you have the opportunity to catch any errors or fraud and correct them before they impact your credit score negatively. There are many ways you can monitor your credit score for free, including if you have a loan with Wells Fargo. And, remember, you shouldn’t have to pay to see your credit report, either.

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4ALWAYS PAY YOUR BILLS ON TIME AND PAY NO LESS THAN THE MINIMUM PAYMENT

Your payment history makes up approximately 35% of your credit score, so making timely payments is one of the biggest factors in building a good credit score. Be sure to prioritize and schedule your monthly payments on time on all your accounts.

4KEEP YOUR CREDIT BALANCES LOW AND AVOID MAXING OUT YOUR CREDIT CARDS

How much credit you have available is another critical factor, which makes up roughly 30% of your credit score. Financial experts recommend staying below 30% of your credit utilization ratio while still actively using your credit. To help keep your balance low and manageable, make sure you maintain a realistic budget and only spend what you can afford to repay in full each month. Consider setting balance alerts to help you stay on top of your spending.

4ENSURE YOUR CREDIT CARD FITS YOUR LIFESTYLE

Using credit responsibly can be a great way to build and maintain a healthy credit score, but it’s important that the card fits your lifestyle and spending habits. This is particularly true today because many consumers’ spending and buying behaviors changed in response to the pandemic. Make sure your card is relevant to

your lifestyle and can help you make the most of everyday spending. For example, visit wellsfargo.com to see various credit card options that fit your lifestyle, from the new Active CashSM Card, which offers 2% cash rewards on purchases without revolving categories or rewards caps, to the recently launched ReflectSM Card that gives consumers an extended introductory APR when they make on-time payments.

4THINK BEFORE CLOSING ACCOUNTS AND DIVERSIFY YOUR CREDIT HISTORY CONTINUED FROM FS4 may be as simple as restarting the payments you were making prior to the forbearance and deferring your missed payments to the end of your loan term. However, depending on the investor or insurer for your loan and/or if you were already delinquent when you went on forbearance, your situation could be more complex. Options might include a loan modification program, which involves changing certain terms of the loan – such as the interest rate or time allowed for repayment – to make payments more affordable. At Wells Fargo, we are committed to working with homeowners to find options – with the goal

The length of your credit history accounts for 15% of your credit score and recent credit activities, such as opening or closing accounts, make up 10% of your score. Closing credit accounts may actually lower your available credit and hurt your credit score in the short term, so if you’re in the process of applying for a new card, consider keeping your existing accounts open to maintain the length of your credit history. The last 10% of your score is based on the types of credit you currently have. It can help your score to show that you have had experience handling several different kinds of credit accounts, such as installment loans

and revolving credit accounts. Building a healthy credit history is a financial journey that takes time and effort, but will most certainly payoff in the long-term.

of keeping homeowners in their homes. However, it is important for homeowners to contact us right away, so that we help you understand your situation and begin exploring options. It’s also important for homeowners to keep engaged as we work through the process. If you need help dealing with broader financial challenges, you can also reach out to a local HUD-approved, non-profit housing counseling agency for financial education, mortgage help services, and other free assistance. Information is available at HUD.gov or you can call 1-800-569-4287 (TDD 1-800-877-8339). We also advise homeowners avoid anyone who asks for a fee for

counseling or a loan modification, asks you to sign over the deed to your home, or asks you to make your mortgage payments to anyone other than Wells Fargo Home Mortgage. Fraudsters may be working to take advantage of you, so it’s important that you work directly with us or with a trusted adviser, such as a HUD-certified counseling agency. With so many homeowners coming out of forbearance plans right now, it’s really important that homeowners don’t delay in understanding their situation and working with their servicer about options. We want to start today in doing everything we can to help get back on track with your home loan.

THE WASHINGTON INFORMER 2021 FINANCIAL LITERACY SUPPLEMENT / WWW.WASHINGTONINFORMER.COM

DYK (Did You Know…?) Payday Loans By Lindiwe Vilakazi WI Staff Writer Payday loans have become a way for some people to secure cash when they need it fast, but it can come with a heavy cost and quickly recreate a “quicksand” effect where borrowers take out additional loans to cover overdue current loans. While demand for small-dollar loans fell 67 percent during the COVID-19 lockdown, the trade group Online Lenders Alliance believes recovery to pre-Covid levels may not come for some time. Here are a few facts about payday loans:

12 million Americans use payday loans each year As of 2017, there were 14,348 payday loan storefronts in the United States (there were only 14,027 McDonalds locations). The typical payday borrower is in debt five months out of the year and the average income of payday loan borrowers is $30,000 annually.

7 in 10 of those who take out payday loans use them for regular recurring expenses such as utility bills and rent payments and averages $375. Every year, $9 billion is paid in payday loan fees, with only 14 percent of borrowers able to afford repayment of their loans The average annual percentage interest rate (APR) for payday loans is 396 percent.

Payday loans are used by all genThere are 21.1 million outerations, but predominantly Millennials and Gen-Xers. Millenstanding personal loans in nials’ use of payday loans (Earnin, Dave, and Chime) has led the U.S. to a rise in online payday loans and cash advance apps.

Many payday loans have maturities of just a few weeks and carry an astonishing annual interest rate up to 300 percent.

MORTGAGE LOANS

Total outstanding personal loan debt in the United States is $143 billion.

The Consumer Financial Protection Bureau report states that more than 80 percent of payday loans are converted into new loans before they are fully repaid.

Seventeen states and the District of Columbia have banned payday lending or set interest rate caps.

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Monthly borrowers are disproportionately likely to stay in debt for 11 months or longer.

The average interest rates for personal loans vary between 10 percent and 28 percent.

WE WERE THERE WHEN THE OLD HOUSE GOT TOO SMALL. WE’LL BE THERE WHEN THIS ONE GETS TOO BIG. Let’s talk about your options. Call us at 800.399.5919 or visit sandyspringbank.com/mortgage.

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10/5/2021 4:02:43 PM

Advance the 2021 Advance Payments Payments ofofthe 2021 Child ChildTax Tax Credit Credit THE THEBASICS BASICS WHAT? WHAT?

WHEN? WHEN?

For tax year 2021, families claiming the Child Tax

Advance payments of the 2021 Child Tax Credit will payments of the 2021 Child Tax Credit will beAdvance made monthly from July 15 through December 15be to made eligiblemonthly taxpayersfrom who July have 15 a main homeDecember in through the United States for more than half the year. 15 to eligible taxpayers who have a main home in

For tax yearwill 2021, families claiming the Child Tax Credit receive: Credit■ will Up receive: to $3,000 per qualifying child between the ■

of 6 per and 17 at the end of 2021 Up toages $3,000 qualifying child between the ■ Up toand $3,600 qualifying under age 6 at ages of 6 17 per at the end ofchild 2021

the United States for more than half the year.

the end of 2021

■

HOW?

Up to $3,600 per qualifying child under age 6 at The total of the advance payments will be up to 50 thepercent end ofof2021 the Child Tax Credit.

The total of the advance payments will be up to 50 percent of the Child Tax Credit.

WHO?

The maximum credit is available to taxpayers with a modified adjusted gross income of:

WHO?

$75,000 or less for single filers and married personscredit filing separate returns, maximum is available to taxpayers with ■

The ■ $112,500 or gross less forincome heads ofof: household, and modified adjusted ■

■ $150,000 or less for married couples filing a joint $75,000 or less for single filers and married return and qualifying widows and widowers. persons filing separate returns,

Eligible taxpayers don’t need to take any action

■ ■

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$112,500 orthan lesstofor of household, now other fileheads their 2020 tax return if and they haven’t done so.for Taxpayers benefit filing from the $150,000 or less marriedcan couples a joint credit even if they don’t have earned income or return and qualifying widows and widowers. don’t owe any income taxes.

■

HOW?

Advance payments will be calculated and paid automatically. taxpayers who don’t to receive ■Eligible Advance payments will want be calculated

and paid

advance payment of the 2021 Child Tax Credit automatically. can unenroll from payments.

■

■Eligible Eligible taxpayers who don’t want receive taxpayers who don’t normally file to a tax

advance payment of monthly the 2021 Child Tax return can register for the advance payments using the Non-filer Sign-up Tool. can unenroll from payments.

■

Credit

Eligible taxpayers who don’t normally file a tax return can register for the monthly advance Visit IRS.gov/childtaxcredit2021 payments using the Non-filer Sign-up Tool. for more information and to access

the online tools.

Visit IRS.gov/childtaxcredit2021 for more information and to access the online tools.

Eligible taxpayers don’t need to take any action now other than to file their 2020 tax return if they haven’t done so. Taxpayers can benefit from the credit even if they don’t have earned income or THE WASHINGTON INFORMERtaxes. 2021 FINANCIAL LITERACY SUPPLEMENT / WWW.WASHINGTONINFORMER.COM don’t owe any income

Tips to Protect Yourself from Financial Fraud 4 Visit trusted websites such

By Sonsyrea Tate Washington Informer Contributor If you’ve ever mistakenly clicked on a link that might have provided personal information or answered a call and became a victim of fraud, you’re not alone. “The important thing to know is that fraud is real. If it hasn’t happened to you, it’s happened to someone you know,” said Jua Williams, Chase Skyland Branch Manager. According to The Better Business Bureau Scam Tracker online fraud rose during the Pandemic. In 2020, more than 46,000 scams were published on the BBB Scam Tracker, a 24.9% increase over the number reported in 2019. “We have to take the stigma out of fraud. People get so embarrassed that they allowed someone to gain their confidence and got them to part with their money. Don’t be embarrassed. Overcome that feeling. Report it. Speak up and speak out,” explained Williams, who has been in the banking industry for more than 20 years. “In times of crisis scammers tend to work double and triple-overtime.” But there are ways to protect yourself.

WHAT YOU NEED TO KNOW TO AVOID SCAMS: 4 Financial institutions will

never ask for confidential information—such as your name, password, PIN or other account information—when they reach out to you. Nor will they ask you to send money via popular payment platforms, wire transfer or check. 4 Experts suggest triple-checking any social message, bank email or solicitation you receive, especially if it mentions COVID-19 and provides links. When in doubt do

as the Federal Trade Commission and the Better Business Bureau for information and tips on avoiding the latest scams.

THINGS YOU CAN PROACTIVELY DO: 4 Keep your online banking profile contact information up to date. This way your bank can quickly notify you of suspected fraud. 4 If you participate in digital banking, sign up for account alerts. By quickly verifying transactions, it can help you spot suspicious charges.

4 Sign up for Chase Credit to scams, experts say.

Journey, a free credit monitoring tool for all consumers that sends you email alerts about critical changes to your credit that can help identify fraud. 4 Contact the Social Security Administration to request notification anytime your social security number is used. 4Contact the major credit score agencies and put an alert on your name so that you are notified whenever an account is opened in your name. Times of crisis – personal and public - render us more vulnerable

“They’re preying on residents at their lowest point,” said Brian Atkins, Chase Skyland Branch Community Manager. “When you’ve gone from underemployment to unemployment like many in Ward 7 and 8 have, you feel more desperate and might respond to a job inquiry that looks too good to be true, or click on a link that you shouldn’t have.” Atkins says education is key to keeping yourself safe. Learn what scams are trending and stay aware. For more information visit: https:// www.chase.com/personal/security-tips

Brian Atkins (L) and Jua Williams ( R ) at the Chase Skyland Community Center Branch in Skyland Town Center.

not click the link, go straight to the source. 4 Avoid emails or texts that have an urgent call to action or suspicious links. For example, the IRS recently issued an alert about an increase in scams involving stimulus checks. The IRS reports that scammers will send a text or email claiming the individual qualifies for a stimulus check and that they must click on the link provided immediately. This is a scam. 4 The government or your financial institution will never call out of the blue to ask for money or your personal information (Social Security number, bank account, or credit card numbers). 4 Financial institutions or businesses will never ask you to purchase gift cards to prevent or stop fraud. Gift card scams against the elderly are very popular but are severely underreported because most senior citizens don’t speak up or are embarrassed. Know that you’re not the only one. 4 Act quickly! As soon as you suspect you have been victim to fraud, contact your local police and bank to report it.

Branded Content Sponsored by JPMorgan Chase

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Take control of your financial future Building healthy financial habits is an important life skill that sets you up for success. Get ready for each step with tools and resources to help you along your financial journey. Learn how to create and manage your budget, save regularly, and build your credit score to help you along your path toward financial independence.

Save more See how saving money today can help you achieve your ﬁnancial goals and prepare for unexpected expenses in the future.

Visit chase.com/ college for tools and resources designed for students like you.

Spend thoughtfully Create a budget that helps you know where your ﬁnances stand and take control of your spending habits.

Borrow wisely Understand how credit works and see how your credit score can help you reach your ﬁnancial goals. Chat with a banker Schedule time to chat with a banker to learn more about how we can help you in your ﬁnancial journey. Visit Chase.com/meeting

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DCHFA Provides D.C. Government Employees With Down Payment Assistance For many aspiring homeowners, saving up for a down payment is the biggest hurdle to purchasing a home. The District of Columbia Housing Finance Agency (DCHFA) works to provide affordable housing solutions and provide homeownership opportunities for residents of Washington, D.C. DCHFA created DC4ME to provide District government employees with the necessary mortgage and down payment assistance to become homeowners in the city where they work. DC4ME is offered to current full-time D.C. government employees, including employees of District government-based instrumentalities, independent agencies, D.C. public charter schools and organizations, provided the borrower’s employer falls under the oversight of the Council of the

District of Columbia. The inclusion of all District government employees sets DC4ME apart and will allow for more homeowners. Many people who work in, and in this case for, the District government, cannot afford to live in the city. They have often been priced out of their city and forced to move to the suburbs and surrounding cities in Maryland and Virginia. More than 36,000 people work for the D.C. government, and it is DCHFA’s goal to make sure that any of them who want to live in this city have the means to do so. “Homeownership is the foundation to wealth building. DCHFA is committed to making the dream of homeownership attainable to D.C.’s workforce, and that includes government employees,” said Christopher E. Donald, Executive Director/CEO, DCHFA. “Many of these workers fall into what we call the Missing Middle, and it is our job to make sure that they are not forgotten and continuously priced out of the city they give back to daily.”

The DC4ME program helped Folashade Oladipo, an employee of the Deputy Mayor’s Office for Planning and Economic Development, achieve her goal of homeownership sooner than she thought possible. “DC4ME made it possible for me to purchase my dream home on a budget!” said Oladipo. “Most my best memories happened in D.C., and I look forward to making more awesome memories while giving back to a city that has given me so much.” Eligible applicants receive a first trust mortgage at a reduced interest rate. The rate comes with or without the option of three percent down payment assistance with a zero prevent deferred subordinate loan. An eligible applicant is someone

DC Open Doors Your Key to the City

who is a first-time homebuyer; a current full-time District government employee; has a maximum income less than 120 percent of the area median income; has a minimum 640 credit score; and has a debt-to-income ratio that does not exceed 50 percent. Borrowers can combine DC4ME with various other financial assistance programs to make sure they are getting the best deal possible. DCHFA has another down payment assistance program, DC Open Doors, that is open

to first-time and repeat homebuyers. DC4ME can be combined with DC Open Doors, as well as programs like the Home Purchase Assistance Program (HPAP) and the Employer Assisted Housing Program (EAHP). Aspiring homeowners can find more information on DC4ME at www.dchfa.org/homeownership.

DC Open Doors makes homeownership affordable in the District by offering qualified buyers home purchase loans, down payment and closing cost assistance. • • •

Open to first-time & repeat buyers Open to all neighborhoods & wards Open to both residents and non-residents of Washington, D.C.

www.dchfa.org/homeownership WWW.WASHINGTONINFORMER.COM / THE WASHINGTON INFORMER 2021 FINANCIAL LITERACY SUPPLEMENT

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Are you a D.C. government employee interested in becoming a District homeowner?

www.dchfa.org/homeownership DC4ME provides D.C. government employees a first trust mortgage at a reduced interest rate. The rate comes with or without the option of three percent down payment assistance with a zero percent deferred subordinate loan.

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THE WASHINGTON INFORMER 2021 FINANCIAL LITERACY SUPPLEMENT / WWW.WASHINGTONINFORMER.COM

Under the Hood: Car Loans Scrutinized as Discriminatory

By Lindiwe Vilakazi WI Staff Writer

DISB HELPS PROTECT YOUR FINANCIAL INTERESTS Take advantage of free programs and resources available through the District of Columbia Department of Insurance, Securities and Banking (DISB) that will help you evaluate and plan your financial future. w Are you interested in learning how to establish and maintain healthy financial habits? Visit welcome.financiallyfitdc.com and start your wealth journey today! w Having difficulty paying your mortgage? Facing foreclosure? Call our foreclosure prevention hotline at 202-265-2255. w Has COVID-19 hurt your finances? Get in touch with a Financial Navigator who will help you access free resources. Call 202-231-7908, email fn@upo.org or complete a form at finnav.org/interest-dc. w Have questions about your insurance policy, cryptocurrency, scams and other financial matters? Tune into DISB’s podcasts and videos and learn how to protect your financial interests at disb.dc.gov/ service/podcasts and disb.dc.gov/page/disb-media-2. w Wondering how to get funding for college? Join the DISB Student Loan Ombudsman for a series of webinars designed to help high school seniors prepare for college. Register today at bit.ly/3yzTDZr.

When it comes to cars, whether it is a buyer’s or seller’s market, research shows African Americans often come out cheated in the rinse. Car dealers often work with third-party lenders, such as banks or credit unions, to provide financing options to consumers. Once that “indirect” lender offers the car dealer an interest rate on an auto loan, the dealer is allowed to markup that rate to the buyer for additional compensation. The auto industry, according to a 2013 report continues to bait minority borrowers and offer them the costliest car loans, a development that threatens to exacerbate the economic distress in some Black and Hispanic neighborhoods. The practice, called reverse-redlining, further abuses the most vulnerable Americans through predatory lending. On loans made through the dealership, the dealer can markup the interest rate above the consumer’s credit worthiness. This interest rate markup, also known as “dealer reserve” or “dealer participation,” is described by dealers as the way they are compensated for time spent putting a financing deal together. However, since consumers usually do not know what they can actually qualify for, the markup is often a hidden cost to the consumer. The report found that in more than 60 percent of the cases, the nonwhite individuals who were more qualified than their white counterparts were given more costly options. As a result, people of color who faced discrimination paid an average of $2,662 more over the length of their loans. In one instance, Ally Bank, charged more than 235,000 minority borrowers higher interest rates for auto loans between 2011 and 2013.

The bank was subsequently ordered to pay $80 million in damages to harmed African American, Latin, and Asian and Pacific Islander borrowers and $18 million in penalties. Legislation introduced in 2013 was later rescinded under the Trump administration, returning car buyers to either an unleveled playing field or one with hidden and costly pitfalls. Delvin Davis of the Center for Responsible Lending, a nonprofit research and advocacy group for consumers, conducted the auto lending research. The author of Non-Negotiable: Negotiation Doesn’t Help African Americans and Latinos on Dealer-Financed Car Loans, said Black and Latino purchasers often get hoodwinked into costly additions and overcharged. “People of color are more likely to have the dealer indicate they are getting the ‘best rate available,’ and be told that add-ons are mandatory purchases. In addition, people of color are more likely to be unaware of dealer interest rate markups,” Davis said. “These three factors are also associated with higher delinquency rates, and therefore a greater chance of losing the car through repossession.” Like the old adage of an educated consumer being the best customers, Davis advises Black and Latino consumers to use their banks or credit unions to obtain preapproved auto loans before visiting a car showroom. He also suggests avoiding unnecessary “add-ons” including extended warranties, which may be cheaper when purchased from a third party. “Once you have that approval, you’re basically taking that check to the dealership and it can become a good negotiation chip that you can use,” Davis said. “It’s incumbent on the consumer to make sure you realize everything that’s in your contract and don’t be afraid to ask questions.” FS

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Discriminatory markups and lending have marred the car shopping experience for Black and Latino consumers for years. (Courtesy photo)

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Building Generational Wealth in the Midst of Gentrification 2. 3. 4. 5. 6.

By Lisa Miller Scott REALTOR®, GRI, SRS, CPRES, CDPE Board of Directors, Literacy Institute for Financial Enrichment (LIFE) The nation’s capital is one of the most highly gentrified cities in the country according to a 2019 study by the National Community Reinvestment Coalition based on U.S. Census Bureau and economic data.1 This is particularly evident in Wards 7 and 8, where homeownership among Black residents has been declining at an alarming rate. This is owing largely to the proliferation of development projects targeting a younger, wealthier ‘Creative Class’ of millennials, ages 18-34. Certainly such initiatives have the effect of driving up housing values to a point where many would-be home buyers are priced out of the market, but what about homes that have been Black-owned for decades? Grandma’s house. Where is the generational wealth that could and should have been built from the time before gentrification took hold? Although generational wealth assets passed by one generation of a family to another - encompasses stocks, bonds, and other assets, as well as businesses; estimates suggest that as much as two-thirds of a typical American household’s wealth comes from homeownership.2 For various reasons, however, these properties,

which could form the cornerstone of a wealthy legacy, often do not remain in the family past the original purchaser. Inherited properties are routinely liquidated in favor of short term cash over long term land holdings. Joint heirs may disagree on whether to keep or sell the home. There may be no one in the family who is able to take responsibility for the upkeep and property taxes. Younger heirs often prefer larger, more contemporary homes. And when they change hands, estate properties are frequently purchased by investors who renovate and resell them for much higher prices than many young, Black buyers are comfortably able to afford. Here are some proven strategies that may help to build and retain wealth for yourself and for future generations, even in an age of changing neighborhood demographics. 1. Invest in the stock market

Invest in real estate Build a business to pass down Take advantage of life insurance Create multiple streams of income Pay yourself first

Passing the wealth baton to the next generation and allowing them to build on your efforts can take many forms: gifting the down payment for a primary home or investment property; enabling them to graduate from college debt-free, providing seed money for a business venture, proper estate planning to preserve assets that will become their inheritance; and mostly importantly teaching your children about personal finance and generational wealth so that they can carry the baton for the next leg of the race, no matter who’s in the house next door. 1

National Community Reinvestment Coalition. “SHIFTING NEIGHBORHOODS: Gentrification and cultural displacement in American cities” 2

Economic Policy Institute. “The racial wealth gap: How African-Americans have been shortchanged out of the materials to build wealth.” Ms. Lisa Miller Scott is a Broker/ Owner with Elevation Realty, LLC in Lanham, Maryland.

Estimates suggest that as much as two-thirds of a typical American household’s wealth comes from homeownership.

Youth Money Matters: Young, Black, and Broke By Deetra Whatley Board of Directors Literacy Institute for Financial Enrichment (LIFE)

“Making Healthy Choices to Spend Less and Save More to Create Wealth, while developing Wisdom” I can be healthy, wealthy, and rich --- oops, I mean Wise; oh, that’s dope! Hmmmm, where can I go to get all three? Well, to be healthier, I can eat out less and cook more. Wisdom may come with life experiences, but what about wealth? I don’t know what wealth means? Isn’t wealth for rich, white people? Wealth to me is spending my money on a beautiful crib, cute clothes, and nice restaurants. Well, what is my Net Worth? Do you mean what I Am Worth? The Michael Kors bag cost $300, my Gucci Slides $400, my hair $600, my mani and pedi $150, plus my Fashion Nova dress. I AM WORTH more than a $1,000, right? One thousand dollars of Material Wealth? Gurl Bye. Material Wealth is Not your Net Worth. Material Wealth are things such as cars, clothes, shoes, furniture, and technology devices--THINGS that we may see among our neighbors, friends, family, and ourselves. Once money is spent on material things, that money is gone and the item may be worthless or worth a lot less. These items typically do not increase in value over time.

Once money is spent on material things, that money is gone and the item may be worthless or worth a lot less. Net Worth is everything you own (assets) minus everything you owe (liabilities). Your assets include your house, checking and savings accounts, 401K, mutual funds, cash value of life insurance policies and cash. Your liabilities and expenses include your mortgage, rent, utilities, car loans, credit card balances, payday loans, medical and dental expenses, technology expenses, childcare, and student loan payments. To begin to create wealth we need to understand what we own and what we owe. We can start with a spending journal to record everything that we spend our money on. Now let’s take the time and answer the 3Ws and 1H. • HOW are we spending our money? • WHAT are we spending our money on? • WHERE are we spending our money? • WHY are we spending our money? Begin making wise changes to your spending, and over time you may be able to change Young, Black, and Broke to Young, Black, and Wealthy. Ms. Whatley has been a financial writer and educator for more than seven years, and has served as a DFree trainer and coordinator for several financial cohorts in the DMV.

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Achieving Financial Goals in Diverse Communities By John Hope Bryant CEO of Operation HOPE and Wil Lewis Chief, Diversity, Equity and Inclusion Officer at Experian When it comes to achieving financial goals, there shouldn’t be any unknowns. However, the world of credit can be a tricky one to navigate if you don’t have a lot of experience with credit. At Experian, we are committed to helping individuals live their best financial lives and reach their fullest potential by providing tools, education and resources. Credit education is an essential component in driving financial inclusion and a key reason we release our annual State of Credit [hyperlink] report each year. We want people to understand the information included in their credit report and how it impacts credit scores. As we end the second summer since the arrival of COVID-19, our report is more important than ever to gain perspective on the financial health of the nation. And, despite a challenging year and a half, new data shows consumers are managing credit well with the average credit score climbing seven points to 695 – the highest it has been in more than 13 years. Though these figures are positive, as Chief, Diversity, Equity & Inclusion Officer at Experian, I know there is not a single report that accurately reflects the reality of everyone’s unique financial situation. Financial literacy and health begins with resources. It is difficult to understand what your credit score means and how it will affect your future when you were never given the resources to learn about money management. This is especially prevalent in underserved, racially diverse communities where there has historically been a lack of financial education and resources. According to Consumer News and Business Channel, about 54 percent of African Americans and 41 percent of Hispanics report having no credit score or a poor to fair score. Our goal is to change these percentages by providing the tools necessary to

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achieve financial freedom and success. In an effort to focus our effort on communities impacted the most, we have partnered with Operation HOPE because we share a common goal: financial empowerment for African American and Hispanic consumers. Operation HOPE is the nation’s largest nonprofit dedicated to improving financial literacy. They are committed to educating our communities about how creating a strong credit history and responsible credit management can help protect and improve your financial health. As the CEO of Operation HOPE, I know there are many communities in critical need of more financial education and resources, and by helping people raise their credit scores, we can shift their mindset from one of survival to thriving. And this is why we are excited to launch the HOPE Financial Wellness Index to highlight the average credit score in every state. The index will be a key asset in identifying communities in most need of financial education as well as developing programming that will give people from those communities the tools they need to build the future they want. I’ve always thought that if you don’t understand money, you are chained to a system that does not care about you. That is why our focus has always been and always will be financial dignity and inclusion at Operation HOPE. We equip young people and adults with the ﬁnancial tools and education to secure a better future—coaching them through their personal aspirations and life’s challenges, and facilitating their journey to ﬁnancial independence. African American and Hispanic consumers make up such an important part of our national economy and tips like the four below can assist you with achieving your financial goals that may seem out of reach:

to build and manage credit from Experian online, their free mobile app, or through Operation HOPE’s free workshops and one-on-one counselling services.

2. CHECK YOUR CREDIT REPORTS AND SCORES OFTEN.

You can check your credit report with each of the three credit bureaus for free once by visiting AnnualCreditReport.com. You can also get a copy of your Experian credit report and FICO score for free on Experian’s website or mobile app.

3. KEEP YOUR UTILIZATION RATE LOW.

Nothing will damage your credit scores faster or more than missed payments and high balances. Your total credit card balances should not be more than 30 percent of your total credit card limits, and you don’t want any one card to have a balance of more than 30 percent of the limit on that one card. Keep in mind 30 percent is not a goal or a target. If possible, paying your balances off in full and on time each month is the best way to protect your credit scores.

4. USE FREE TOOLS LIKE EXPERIAN BOOST.

You can potentially increase your credit score instantly by getting credit for paying your telecom, utility and streaming service bills on time with Experian Boost. Follow this link to learn more about your credit score and how Experian can help. To learn more about Operation Hope please visit OperationHOPE.org.

4John Hope Bryant, Founder and CEO of Operation HOPE

Proud to Support The Washington Informer At Operation HOPE, we’ve been working to disrupt poverty and empower economic inclusion for underserved communities throughout the U.S. Visit us at operationhope.org to learn more.

1. TAKE ADVANTAGE OF FREE RESOURCES AND EDUCATION.

If you have limited or no experience with credit, it can be hard to know where to start. There are resources available to help. You can learn about ways

THE WASHINGTON INFORMER 2021 FINANCIAL LITERACY SUPPLEMENT / WWW.WASHINGTONINFORMER.COM

New Refinance Options Helps Area Families: Expanded Guidelines for Those Earning Up to $80k per Year EagleBank, a community-minded and solution-oriented bank is excited to work with customers who also believe in their community and want to enhance and maintain their DC home. So, in conjunction with the Washington Informer’s OUR HOUSE initiative, EagleBank shares information on a new refinance option that may benefit some area homeowners.

By Maceo Clark EagleBank Mortgage Banker Mortgage rates in 2021 have not swung like Tarzan on a soda run and are holding steady just above historic

lows. For anyone whose income may have decreased, though, a refinance to a lower rate (which translates into a lower payment and less interest paid over time) could be tougher. A certain debtto-income ratio is needed to qualify, and a drop in earnings could topple the apple cart. That’s why EagleBank Residential Lending is jumping at a new opportunity to help more families gain access to today’s low rate environment. Fannie Mae and Freddie Mac recently banded together to help homeowners earning up to $80,000 a year. Those who may have hesitated to seek a lower interest rate now have a new loan option through banks like EagleBank who offer these loans providing expanded guidelines for debt-to-income ratio requirements. Freddie Mac and Fannie Mae have adopted these new refinance options for loans to borrowers with incomes at or below 80% of area median income and you may be eligible to take advantage of this program. If your mortgage is owned or guaranteed by either Freddie Mac or Fannie Mae, you may be eligible to refinance your mortgage under this refinance option. You can determine whether your mortgage is owned by either Freddie Mac or Fannie Mae by checking the following websites: https://loanlookup.freddiemac.com https://www.knowyouroptions. com/loanlookup#form Here are some things to keep in mind: 4 The new loan must provide the following benefits to the borrower: • a reduction in interest rate of at least a half a point (for example, 4% to 3.5%) • a reduction in the monthly payment of at least $50.00 (that includes principal, interest, and

the mortgage insurance payment, if applicable). 4 The existing loan must be a conventional mortgage loan already owned by Fannie Mae or Freddie Mac for at least 12 months from the original note date to new loan note date. 4 The debt-to-income ratio must be less than or equal to 65%. 4 Minimum credit score is 620 is required 4 Must have identical borrowers on the new loan as the existing loan (ask a loan officer about any possible exceptions). 4 Current loan cannot be subject to recourse of any sort (e.g. foreclosure) and cannot be an existing high loan-to-value refinance loan. 4 Conforming loan limits only (up to $548, 250 in the DC area) 4 For the loan being refinanced, no 30-day mortgage delinquencies in the most recent six-month period allowed, and no more than one 30-day delinquency in months 7 through 12. (If the borrower has missed payments due to a COVID-19 forbearance, and those payments have been resolved in accordance with the temporary eligibility requirements, then the missed payments are not considered delinquencies for purposes of meeting these payment history requirements). An EagleBank loan officer can help you determine whether Fannie Mae or Freddie Mac owns your current home loan, and can discuss eligibility for RefiNow or RefiPossible products, or any other mortgage product that may be beneficial to your family. A $500 appraisal credit is also given at settlement to defray the cost of any related property evaluation. Providing DC area residents

with tools that can potentially save them money is important in preserving an equitable housing force. EagleBank hopes to help all homeowners who have a stake in our area. Together, we hope to increase access to safe and stable housing for all, and put homeownership in reach for families across the income spectrum. To learn more about the new refinance loan options, please contact Maceo who can be reached at MClark@EagleBankCorp.com or 301-850-2655. Maceo Clark (NMLS# 807001) has extensive experience in the mortgage industry as a community lender and loan originator. He is also a long-time volunteer youth soccer coach, so EagleBank’s partnership with DC United truly hits close to home. His goal as a lender is to provide the best mortgage options and achieve the highest levels of satisfaction for his customers. As a community bank, EagleBank offers knowledge of Affordable Housing and First-Time Home Buyer resources, as well as refinance services. Contact us at HomeLoans@EagleBankCorp.com. This is not a commitment to lend. To be eligible, buyer must meet HUD minimum down payment, underwriting and program guidelines. All loan applications are subject to credit and property approval. Annual Percentage Rate (APR), and program, rates, fees, closing costs, terms and conditions are subject to change without notice and may vary depending upon credit history and transaction specifics. Property taxes, flood and/ or property hazard insurance may be required. This information is for educational purposes only and is not to be taken as guidelines or guarantees to improve your credit or financial situation or eligibility to secure a home loan.

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HOMEOWNERSHIP Begins With FINANCIAL LITERACY Austin R. Cooper, Jr. Managing Editor Our House D.C. Newsletter The mission of the National Financial Educators Council is rooted in providing people with the knowledge and guidance they need to foster greater financial well-being. To accomplish that mission, the organization mobilizes a diverse global force of financial wellness champions and empowers them with resources and training so they can effectively support others in their communities to work toward greater financial security. (https:// www.financialeducatorscouncil.org) Operation HOPE is a nonprofit organization committed to disrupt poverty and empower inclusion for low and moderate-income youth and adults. With a mission of expanding economic opportunity and making free enterprise work for everyone, Operation HOPE partners with financial institutions, corporations, municipal agencies, and community agencies to deliver the financial tools and education on financial literacy necessary to ensure a better future for all. (www. operationhope.org) The National Financial Educators Council and Operation HOPE are two of the many organizations across the United States that provide the resources and tools to Americans to not only improve their financial health, but to become homeowners, as well. Indeed, there are many who are wary, and even fearful, of the qualification process for homeownership. For far too many, the American Dream of one day owning a home is out of reach. A distant and unachievable dream. Thankfully, there are organizations like The National Financial Educators Council and Operation HOPE that can assist interested homeowners achieve their dreams. At Operation Hope, for example, the first step for prospective home-

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buyers is to attend a workshop for potential homeowners, conducted by certified coaches from the U.S. Department of Housing and Urban Development (HUD). These coaches guide clients through the loan process. The goal is to help clients overcome a variety of common barriers to homeownership, including bad credit, lack of down payment, existing debt, and money management issues.

er-income versus wealthier families.” (www.councilforeconed.org) In an October 2019 article for Kiplinger, Craig Hawley reports that in 2009, the brokerage firm FINRA, in its State of U.S. Financial Capability study found that “42% of respondents were able to answer four or more questions correctly in a five-question survey on fundamental concepts of economics and personal finance. By 2018, this dropped 8 percentage points to 34%.” (https://bit. ly/3mBSR9t) Financial literacy is the knowledge and understanding of areas related to financial decisions, including personal finance, money and investing. More work remains among the American population in general, especially with young people. There has always been a direct correlation in understanding and appreciating financial literacy

and achieving the American Dream of homeownership. And the fact remains that nothing will change that reality. As former United Nations Ambas-

IMPORTANCE OF FINANCIAL LITERACY FOR YOUTH

One way to impact financial literacy in adults seeking to become homeowners is to make the teaching of financial education mandatory in school curriculums at an early age. The Council for Economic Education every two years examines the financial and economic education in the United States in grades K-12. The February 2020 report concluded that: • 21 states now require high school students to take a course in personal finance, an increase in 4 states from 2018. One state dropped the requirement. • 25 states require high school students to take a course in economics, an increase of 3 states. • 5 states, including the District of Columbia, require no personal finance classes in their curriculums. • While more states are requiring economics and personal finance to graduate, 6 fewer require economics testing and 2 fewer require such in personal finance. The report further offers that with states requiring financial education in schools, students exhibit more mature and informed behavior with budgetary decisions while in college, particularly those from economically and socially challenged communities. “In states without requirements, there is a 15-point gap in access to financial education between kids from low-

THE WASHINGTON INFORMER 2021 FINANCIAL LITERACY SUPPLEMENT / WWW.WASHINGTONINFORMER.COM

sador Andrew Young once said on the topic of financial literacy, “To live in a system of free enterprise, and to not understand the rules of free enterprise, must be the very definition of slavery.”

By Lee Ross WI Staff Writer

Recent & Recommended Books on Loans & Personal Finance

Destroy Your Student Loan Debt: The Step-by-Step Plan to Pay Off Your Student Loans Faster Anthony ONeal Debt sucks. Period. And that includes student loan debt. No matter what you believed—or were told— when you took out your loans, you need to get serious about getting rid of your debt fast, because it’s costing you more than you know. That’s why bestselling author Anthony ONeal wrote this motivating 64-page Quick Read—to show you why you need to dump your debt fast and how to do it. If you have student loan debt and have never heard of Ramsey Solutions or the 7 Baby Steps, this 64-page Quick Read is for you. Anthony will walk

you step-by-step through Baby Steps 1 and 2 to show you how to dump your debt forever.

I Wrote This Book to Pay My Student Loans Alexandria Bland Alexandria Bland has had enough of the student loan struggle and she’s ready to live a life of abundance. In this collection of essays, she shares her thoughts on topics like education, relationships, music and more in an attempt to raise funds to abolish her student loans. If you’re looking for a book about a bunch of random stuff that scatterbrained, student loan hating individuals can relate to, you’re in luck. I Wrote This Book to Pay My Student Loans is that and more.

The Money Challenge for Teens: Prepare for College, Run from Debt, and Live Generously Art Rainer Today’s teens are faced with more financial opportunities—and threats—than ever before, from summer jobs and scholarships to credit card applications and student loans. How are young people supposed to learn to avoid early pitfalls that could devastate their financial futures and instead take steps that can set them up for a future filled with security, contentment, and generosity? The Money Challenge for Teens can help. Author Art Rainer introduces readers to some fictional young friends who are navigating financial waters and learning how God would want them to face college choices and car loans and thoughts about retirement.

Personal Finance Vickie L. Bajtelsmit

Personal Finance, 2nd Edition offers essential skills and knowledge that will set students on the road to lifelong financial wellness. By focusing on real-world decision making, Bajtlesmit engages a diverse student population by helping them make personal connections that can immediately impact their current financial situations. Using a conversational writing style, relatable examples, and up-todate coverage on important topics like student debt, students gain the knowledge they need to avoid early financial mistakes. By the end of the course, students have identified their goals and developed the problem-solving skills they need to build on as they progress to the next stages of life.

Predatory Lending and the Destruction of the AfricanAmerican Dream Janis Sarra, Cheryl L. Wade Since the Great Recession of 2008, the racial wealth gap between black and white Americans has continued to widen. In this work, Janis Sarra and Cheryl Wade detail the reasons for this failure by analyzing the economic exploitation of African Americans, with a focus on predatory practices in loan processes. They also examine the failure of reform and litigation efforts ostensibly aimed at addressing this form of racial discrimination. This research, augmented by first-hand narratives, provides invaluable insight into the racial wealth gap by vividly illustrating the predation that targets African-American consumers and examining the intentionally obfuscating settlement terms of cases brought by the U.S. Department of Justice, states attorneys, and municipalities. FS

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Student Loan Debt: Implications on Financial and Emotional Wellness By Lee Ross WI Staff Writer A 2019 study from Prudential Financial on paying for college looks beyond the numbers to find out how student loan debt is actually affecting students and graduates in their daily lives. The findings are insightful, troubling, and encouraging. Troubling, because student loan debt for many graduates has become a profound source of both financial and emotional stress, compromising their ability to establish families and households, save adequately for retirement, and protect themselves against unexpected life events. It is insightful, in that conservative opinion suggests borrowers walk into loans intending to default, while the reality shows many simply are unable to establish adequate income to consistently make payments. Finally, the research proves encouraging because student borrowers are now more inclined to seek guidance before committing to loans. Beryl Plummer, a graduate student at American University, told the Informer that had she been privileged to a greater understanding of how student loans worked – who her lenders were and what was expected of her upon graduation, she would never have assumed as much debt as she did. “Financial planning should start in the crib and so whether it is a credit card, car financing, or student loan, we have to be better about how we will manage the repayments,” Plummer said. “I borrowed more than I needed to ensure I did not have to get a job while in school. I wanted the freedom of being a full-time student and finishing the program in three and half years. That extra loan money with its accrued finances, fees, and interest put me in a chokehold once I graduated that I have not been able to loosen.” Plummer said that though she stopped lamenting that loans “were the devil,” she has come to terms with the fact that she, like many others, refused the delayed gratification of working through school to negate the need for student loans – and that she didn’t really consider how the debt would impact her overall wellbeing.

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“I had collectors calling my home and my job because I could not make the payments in the amounts initially discussed. I developed headaches, acid reflux, insomnia, and an overwhelming fear that the education was not worth it,” said Plummer, whose entry-level position as a legal assistant did not pay enough to live comfortably. “I was drowning in debt and my credit score was being impaled by my lack of understanding.” Eventually, Plummer moved back home with her parents, traded her car in for a SmartTrip card, and spent three years paying the debt off. She said the reward was in regaining her mental and emotional health – as well as keeping her poor loan decisions from snowballing. “Loans are a legal obligation. When you sign on the dotted line, you have agreed to repay the money you’re given. In hindsight, I would have either borrowed less, or not borrowed at all. I learned a valuable lesson and I live stress and debt free now.”

Prudential assembled within its study a section of “lessons learned.” The series of action plans, outlined in its report, Student Loan Debt: Implications on Financial and Emotional Wellness, offer options for smarter choices about paying for college and minimizing the negative impact of any student loan debt they do assume. The advice, while fitted to student loans, applies to all loans and should be utilized to gauge financial readiness for repayment.

KEY TAKEAWAYS

Students and graduates now question whether student loan debt is a good deal. Among the more than 1,100 surveyed college graduates who had taken out student loans to help pay for their post-secondary education, only about four in 10 now say borrowing that money proved to be worthwhile, and only one in four now calls college debt “good debt.” Repayment struggles leave many borrowers afraid they’ll never right themselves financially. Among

Many student borrowers face mental and emotional stress related to the obligations of education loans well into their fifties. / Courtesy photo

graduates who borrowed to attend college and are still paying on their loans, a stunning 53 percent fear they will never dig themselves out of debt. Loan default rates help to explain their shifting views. Nearly half of college graduates who are still paying on their student loans—44 percent—say their loans have been in deferral or forbearance at some point in

time, as do 16 percent of graduates who have paid off their student loan balances. At first blush, these figures don’t appear to square with data from the Federal Reserve Bank of New York, which reports that 11.2 percent of aggregate student loan debt was 90 or more days delinquent or in default in the fourth quarter of 2016. FS

Risks & Responsibilities of Student Loans By Lee Ross WI Staff Writer If you decide to take out a loan, make sure you understand who is making the loan and the terms and conditions of the loan. Student loans can come from the federal government, from private sources such as a bank or financial institution, or from other organizations. Loans made by the federal government, called federal student loans, usually have more benefits than loans from banks or other private sources. Learn more about the differences between federal and private student loans. Before you take out a loan, it’s important to understand that a loan is a legal obligation that makes you responsible for repaying the amount you borrow with interest. Even though you don’t have to begin repaying your federal student loans right away, you shouldn’t wait to understand your responsibilities as a borrower. The U.S. Department of Education’s federal student loan program is

the William D. Ford Federal Direct Loan (Direct Loan) Program. Under this program, the U.S. Department of Education is your lender.

Direct Consolidation Loans allow you to combine all of your eligible federal student loans into a single loan with a single loan servicer.

FOUR TYPES OF DIRECT LOANS

How to Avoid Debt: Be a Responsible Borrower Keep track of how much you’re borrowing. Think about how the amount of your loans will affect your future finances, and how much you can afford to repay. Your student loan payments should be only a small percentage of your salary after you graduate, so it’s important not to borrow more than you need for your school-related expenses. Research starting salaries in your field. Ask your school for starting salaries of recent graduates in your field of study to get an idea of how much you are likely to earn after you graduate. You can also use the U.S. Department of Labor’s Occupational Outlook Handbook or career search tool to research careers and salaries. Understand the terms of your loan and keep copies of your loan documents. When you sign your promis-

Direct Subsidized Loans are loans made to eligible undergraduate students who demonstrate financial need to help cover the costs of higher education at a college or career school. Direct Unsubsidized Loans are loans made to eligible undergraduate, graduate, and professional students, but eligibility is not based on financial need. Direct PLUS Loans are loans made to graduate or professional students and parents of dependent undergraduate students to help pay for education expenses not covered by other financial aid. Eligibility is not based on financial need, but a credit check is required. Borrowers who have an adverse credit history must meet additional requirements to qualify.

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sory note, you are agreeing to repay the loan according to the terms of the note even if you don’t complete your education, can’t get a job after you complete the program, or you didn’t like the education you received. Make payments on time. You are required to make payments on time even if you don’t receive a bill, repayment notice, or a reminder. You must pay the full amount required by your repayment plan, as partial payments do not fulfill your obligation to repay your student loan on time. Keep in touch with your loan servicer. Notify your loan servicer when you graduate; withdraw from school; drop below half-time status; transfer to another school; or change your name, address, or Social Security number. You also should contact your servicer if you’re having trouble making your scheduled loan payments. Your servicer has several options available to help you keep your loan in good standing. FS

Thinking of buying a home? It’s an exciting and hopeful time, but you probably have questions too. Our My First Home® website is a great place to start. This site was designed with your home financing needs in mind: You can check your credit score, find out your debt level, review your savings, and more with just a few clicks. Knowing where you stand financially makes it easier to plan next steps. You can also tackle any areas that might need improvement. From start to finish, we’ll work with you. Because a home is more than just four walls. It’s where the celebration of the present meets the promise of the future. To learn more, go to https://myfirsthome.wf.com/.

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