UPDATE

Focus on Finance

By Yvonne Chilik Wollenburg

College loans get a bit more affordable

Student loan rates have dropped to their lowest level ever, says the US Department of Education. The new rate for borrowers repaying Stafford loans issued since July 1998 fell to 3.42 percent, down from 4.06 percent. The rate is even lower—2.82 percent—for students who are still in school, in deferment, or in grace periods. The new rate for PLUS loans for parents, which is always a little higher, is 4.22 percent. All the new rates took effect on July 1, and will last until June 30, 2004.

The rate cut is good news for parents getting tuition bills in the mail. The average tuition at private colleges and universities is going up by 5.8 percent for the 2003-04 school year, says the National Association of Independent Colleges and Universities.

Biggest traffic danger might be YOU

Nearly every driver polled admits to taking at least one careless risk behind the wheel over the past six months. Seven in 10 drivers confess they speed, and believe that it's okay to exceed the speed limit by 5 mph, says a survey sponsored by a coalition of highway safety advocates headed by the American Automobile Association. Nearly one in three men say it's fine to go 10 miles an hour above the speed limit.

To learn how safe you are behind the wheel, take the test by Drive for Life: The National Safe Driving Test & Initiative at www.safedrivingtest.com.

Should you buy or lease your next car?

There isn't much financial difference between purchasing and leasing, says Runzheimer International. The management-consulting firm ran the numbers on a 2003 midsize sedan. Bottom line? Buying the car for $28,000, with 10 percent down and 6.5 percent financing over four years will cost you $24,327, after getting $11,461 back in a trade-in allowance. Leasing the same car will cost you $24,920 after four years, with a $519 down payment, assuming you don't exceed mileage limits or turn it in with lots of nicks and dents. For more on leasing vs buying, see "A car-leasing primer" in our Aug. 8 issue.

Falling behind on even one bill could cost you

Missing a deadline on a car loan or other bill could send the interest rate on your credit cards skyrocketing, warns the advocacy group Consumer Action. More than one-third of credit card issuers surveyed this year say they increase interest rates for cardholders with a bad credit record with other creditors, no matter how well the cardholder keeps up with the card in question. (To check up, the issuers do credit reviews—some as often as every month.) So unless you don't mind getting slapped with a penalty that will push your credit rate as high as 29.99 percent, pay all your bills on time, not just the credit card bills.

Annuities can be loaded with risks and fees

Unscrupulous brokers are scaring some investors into buying variable annuities, says the National Association of Securities Dealers. The NASD has issued an investor alert for the complicated investments at its Web site at www.nasdr.com . Variable annuities can provide a guaranteed income for life. But there's no guarantee that you'll earn any return on your investment because the annuity's earnings vary with the stock market. They also can carry fees of up to 2 percent or more of the annuity's value, and penalties for early withdrawal. While earnings do accrue on a tax-deferred basis, you'll get more tax advantages from a 401(k) or other retirement plan than from an annuity, says NASD.

 

Yvonne Wollenberg. UPDATE: Focus on finance. Medical Economics Jul. 25, 2003;80:11.