Ohio Society of CPAs launches Podcasts to help college students manage debt

For More Information: Amy Johnson, Senior Manager, Public Relations E-mail: ajohnson@ohio-cpa.com 614.764.2727, ext. 341

(COLUMBUS, OH – November 3, 2008) – While the current economic challenges are affecting all consumers, college students may be carrying a particularly heavy financial burden.

According to the National Center for Education Statistics, the average college student today carries three credit cards with a total balance of $2,748. In addition, the number of students graduating with $25,000 or more in student loan debt has tripled since the early 1990s.

The Ohio Society of CPAs, through its Financial Fitness Ohio initiative, has created a series of timely Podcasts addressing debt management for college students.

“The cost of earning a college education has risen dramatically in recent years,” said Janice Zajac, CPA, and a financial education coach. “This makes students vulnerable to overusing their line of credit and incurring high debts before they graduate and begin to earn a steady paycheck.”

Zajac noted that establishing and maintaining a positive credit rating is more important than ever before and students should learn the ins and outs of how credit works to avoid problems down the road.

In each of the four Podcasts, Zajac, founder and CEO of Financial Responsibility Analysis Systems in Westlake, Ohio, helps students explore important topics related to establishing and using credit, including:

1. Do I need a credit card? Learn how and when to use credit cards in college to establish credit. For instance, choosing a gas card or department store card over a major credit card helps build credit while helping consumers avoid over-use of credit. Many cards have low “teaser rates” that increase substantially after introductory periods, so it’s important to pay them off every month.

2. Why is my credit score important? Understand how the use of credit affects credit scores, how bad scores can impact your life, and how to earn a high score. Creditors look at several factors when assessing credit including payment history, amount owed, recently opened credit and length of credit history. For example, if a consumer carries a high balance in relation to their card’s limit, it can negatively affect their score.

While having too many credit cards could hurt your credit score, Zajac warns that closing too many accounts all at once is also a red flag to creditors. Pay off cards; then cut them up. Close only one account per year to avoid a massive hit to your score.

3. How can I pay off my debt? Discover how to create a game plan for paying off credit card and loan debt, and find out when to use strategies such as debt consolidation. Before resorting to credit consolidation, assess your income and expenses to determine if you can do the following:

• Pay on time. One late payment can be extremely costly, often resulting in late fees and increased interest rates. Setting up automatic payments from your checking account insures you against these added costs.
• Round up when making payments. For example, if your student loan payment is $123 per month, round up to $150. It’ll be paid off faster and you’ll pay less.
• Tackle the high-interest accounts first. You’re paying less in the long run on the lower interest cards.

When deciding whether to consolidate student loans, read the fine print. While lower monthly payments are appealing, the focus should be on reducing the interest rate.

4. How do I keep myself out of financial trouble? Students often can’t see the need to save for a rainy day. In this podcast, they will learn how set achievable budgets that include building a nest egg for emergencies and reaching life goals.

Having a savings and spending plan is the best way to avoid a financial mess. Calculate income and expenses, and be sure to allot ten percent for savings in that calculation. If you come up with a negative balance, you are living beyond your means, and it’s time to figure out how to cut expenses.

“In recent years, it’s been far too easy for consumers to obtain a large line of credit and this has led many individuals down the road to financial crisis,” Zajac said. “But when it’s used with discretion, credit can be an important resource in one’s financial planning toolbox.”

The podcasts are available for download from http://www.financialfitnessohio.com/ where The Ohio Society of CPAs offers financial tips for every age and stage of life.

The Ohio Society of CPAs, established in 1908, represents more than 24,000 CPAs in business, education, government and public accounting. The Ohio Society’s members not only meet statutory and regulatory requirements as CPAs, but also embrace the highest standards of professional and ethical performance. This is achieved through ongoing professional education, comprehensive quality review and compliance with a strict Code of Professional Conduct.

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