A few weeks ago, my super talented, creative and beautiful cousin, K, 23, called me in tears. She just graduated from the Harrington Institute of Design in Chicago, and like most of us, was blown away by the cost of her monthly payments on her loans.

She went to see her family’s banker to find out how to lower her monthly payment - which, by the way, was the cost of a mortgage. The banker, likely unaware of what it actually costs to go to college these days, chastised K for spending too much on her education and taking out too many loans. She basically said, “Good luck. There’s nothing I can do.”

K felt totally taken aback, helpless and frustrated. Nothing she had done throughout her long education had prepared her for this. Her parents, though upset, had no answers. And so, on a random Wednesday morning, I received a frantic call from K, pleading to meet with me and learn more about how to consolidate loans.

I directed her to this site, to my consolidation post. I told her that a lot of people have a similar debt upon earning a master’s degree, and that many of my friends in similar situations had consolidated their loans for lower monthly payments. I encouraged her to look into consolidation options.

But in later conversations, we hit a bump in the road. K had taken out her loans through Sallie Mae. She thought that meant they were government loans when she took them out. (Like many, she thought “student loans” automatically meant they were borrowed from the government.) But it turns out, they’re through a private bank. The interest rates are much higher than they should be, but she wasn’t sure if she could consolidate them through the government Web site, which appeared to be only for government loans. What’s a girl to do?

I consulted my bookshelf, but all the books I found only talked about government loans. Most of my friends my age had government loans, but as I spoke with our younger interns and my brothers, I realized something had changed in recent years. Everybody has Sallie Mae loans now. But I got the sense that nobody really knew why they had them, and that the borrowers thought they had government loans.

So, what is Sallie Mae? Are Sallie Mae loans government loans?

Sallie Mae was originally created as The Student Loan Marketing Association in 1972 as a “government sponsored entity.” According to its Web site, it began privatizing operations in 1997, and in 2004 “terminated its ties to the federal government.” It is now a publicly traded, for-profit company, and is the leading provider of student loans and administrator of college savings plans. It currently owns or manages loans for 10 million people in the US.

Got that? It’s a private company that lends money to 10 million people, NOT a government entity.

Interestingly, I visited the consolidation portion of the Sallie Mae site today, and got this message:

“Thank you for your interest in Sallie Mae, the nation’s leading provider of saving- and paying-for-college programs. Severe legislative cuts made by Congress made federal student loan consolidation uneconomical. This, combined with the credit market deterioration, has caused us to suspend participation in the federal consolidation loan program.”

And below some corporate babble about the mission of the company, this:

“Sallie Mae reserves the right to modify or discontinue loan programs at any time without notice.”

I went on the student loan site, where I consolidated my loan, and found nothing about Sallie Mae loans. Only a list of what is an “eligible” loan (mostly looked like Direct Loans, Stafford Loans, etc.) and what is “ineligible,” including private loans.

So how do we make sense of this all? I’m no expert, and truth be told, I found most of the information online to be very confusing and hard to navigate. This was the closest article I found:

From SmartMoney, April 2008
Sallie Mae Halts Student Loan Consolidation
…As a result, borrowers will have to pay the price. Former students who want to consolidate their loans can now only turn to the government and a small pool of lenders.

Read the whole article here: SmartMoney

I’m going to do some more digging, and certainly if you have more information, post it here. For the time being, my brother, who used to work at a bank, advised my cousin K to look into Chase Bank’s Private Student Loan Consolidation options. He has a similar amount of debt, but consolidated all his loans through Chase and they are roughly $600 to $1,000 cheaper per month than hers were expected to be through Sallie Mae.

For those of you wading through the student loan waters, check out www.FinAid.org to learn more. For me, the student loan process was easy, but talking with K and others about their trouble has been an eye-opening experience.

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Debt Relief is something that many people need. In our consumer centered society, many people do not know how to manage their finances, while others simply do not care. As a result, the vast majority of people have a large amount of debt (credit card or otherwise) and minimal to no savings. Once a person is in that position, it is only a matter of time until their debt consumes them.

The good news is that you do not have to wait until that point in order to take action. We are all aware of credit counseling, debt consolidation, and bankruptcy as possible options for debt relief, but there are other options that are available.

One such option is to visit freedomdebtrelief.com and read about their debt relief program. Their “no-nonsense” approach to debt relief could have you saving thousands of dollars in interest payments and fees. The best part is, you will pay no service fees unless Freedom Debt Relief saves you money.

If you are unsure about trying a new company because you have been let down in the past by debt relief programs, you can read all of the testimonials from past clients. Additionally, Freedom Debt Relief is a Better Business Bureau accredited business.

If you have tried the conventional methods of debt relief and none of them have worked, you should go over to Freedom Debt Relief and see how they can help you take back control of your financial affairs.

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Riding home from work on the train, simultaneously wolfing down a burrito fresco from Taco Bell, finishing up my work and blogging, and suddenly half the burrito is in my dry-clean-only, multitasking lap. Great. I am currently in the midst of a vacation hangover of the “Did I pay my credit card/student loan/phone bill?” variety. The bliss that results from a week outdoors is gone, the tan has faded and reality sets in. This is my life.

I’ve been ignoring my financial life for a full few weeks, freely spending on vacation-related purchases and generally trying to avoid my mailbox/inbox at all costs. But now that I’m back, I have no more excuses. I went through all my mail on Friday and realized that I was severely behind on a few doctor’s bills. Luckily, I set up all the rest of my bills to pay automatically when we were gone, but seeing the dent in my wallet from the trip as I was visiting all my cards’ Web sites was a wince-worthy experience. You know how when you were little, you watched scary movies with one eye shut and only focused on the bottom corner of the screen? (OK, I still do that.) Well, that was how I felt looking at my “current activity” statements!

I’ve been ignoring a host of other things too, my inbox isn’t the only one. I promised my mom I’d do some research on the benefits of an IRA vs. putting some more money into her 401K and I also need to research how to consolidate Sallie Mae loans for a cousin who got some bad information from her family’s banker. I’m hoping to be able to write about both of those.

Plus, I’m so far behind on the news! I haven’t posted good articles in forever, nor have I been following my beloved newsprint/newsmagazines/financial web sites. I can only imagine what’s taken place in the financial world in the last few weeks: the housing market, gas prices, financial scandals and important statistics about Americans and the economy, I’m sure!

So the point of today’s article is this: you can’t ignore personal finance for long without feeling totally behind. Nor should you try! It’s easy to get caught up in life’s bliss or the daily grind (pick your poision), but two reliable facts are that the bills keep coming in, and your financial life never stops.

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A credit score has many components. Each component weighs differently on your credit score. For example, having a late payment recorded on your credit report will cause more damage to your credit score than will having too many inquiries on your credit report. However, it is important to know that regardless of what the negative information is, such information will stay on your credit report for many years. As such, you will want to weigh the consequences of the negative impact on your credit score against the advantage of applying for and obtaining a loan.

Applying for a loan can negatively impact your credit score in more than one way. First and foremost, whenever you apply for a loan (whether it is for a house, a car, a student loan, a personal loan, etc.) the bank or lending institution to which you applied is going to run a credit check on you to calculate the risk involved in lending you the money. The riskier you are, the higher your interest rates and/or fees will be. If you are too risky, you will be denied a loan.

When the bank or lending institution conducts a credit report check to calculate the risk level involved, each check is recorded as an “inquiry” on your credit report. Banks and lending institutions look to see how many inquires are on your credit report for a set period of time. If you have “too many” inquiries, this tells the bank or lending institution that you are trying to borrow money and thus, this means that you are acquiring or attempting to acquire a lot of debt. As such, you may not have the money to pay back a loan. Therefore, this makes you a risky loan and you will either have to pay more interest and fees or will be denied outright.

However, even though these inquiries are recorded on your credit report, this does not mean that every one of them negatively affects you credit score. The key is not to get “too many.” The exact number that crosses the “too many” threshold is not exact, but to be on the safe side, you should try to keep the inquiries to no more than 3 per year. Remember, every time that you apply for a credit card or any type of loan, an inquiry is recorded on your credit report.

The other way that applying for a loan can damage your credit score is if you are approved for the loan. If you are approved for a loan, it will affect your credit to debt ratio. If you get a loan, this will create more debt. The closer you are to “maxing out” your credit limits, the worse off your credit score will be. The reason for this is because if you have no available credit, banks and lending institutions will be concerned that you have reached your limits and will have trouble paying off your debt. As such, there is a higher chance that you will default and thus, a higher chance that the bank or lending institution will not get paid.

As stated above, because of these negatives, you have to weigh the cost of getting a loan against the benefits of obtaining the same. Make sure you are applying for and receiving a loan for a good purpose (buying a home that you can afford, getting a college education, making a good investment) and are not obtaining a loan for something you do not need.

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We’ve geared up at REI, booked budget b&b’s all on the pacific coast, arranged for a housesitter (B’s mom) and spent the last week working insane hours and making preparations at home, and right now we’re driving out of Seattle, rocking out to Pearl Jam, making our way to the San Juan islands for a week of rest, biking, kayaking and enjoying the great outdoors. “>This is why I work the way I do. This is living. Enjoy your week, and I’ll post when I’m back to the grind.

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During this hottest week of summer, an anonymous reader asks a steamy question about relationships:

“How do you and your boyfriend handle finances? I am in a relationship and I am pretty frugal and I enjoy working on finances. This can be pretty tricky in a relationship and I was interested to know how you balance that.”

OK, I lied. Her question was not steamy in the traditional risque sense … but have you ever gotten into a fight about finances? (Read that one, it’s worth it.) Finance fights are the hottest it will ever get in your relationship (outside of the bedroom). Tempers flare, spending habits collide and the strongest of couples can feel like they’re living life in a pressure cooker of expectations.
So while I usually try not to pull B too much into my writing at his request (hee-hee, at least I tell him that), I’m willing to take this question for the frugal Ms. Anon. You should know that what works for me most certainly won’t work for everyone else, but since a lot of us are living in the crazy co-habitating space and our parents didn’t, I suppose it’s important for me to share.

Before I get into the nitty gritty of our finances, I want to share my perspective on living together. I know too many people for whom it has not worked, and trust me, it’s messy when it doesn’t. Unless you are truly comfortable with yourself, and have shown that you can live on your own with and without roommates, you should probably think twice before moving in without a committment. If your relationship is new, think twice. If you’re moving in because you have no where else to live, or it’s more convenient or just because it’s cheaper, think twice. These might be signs that you’re not ready to move in together, or that you’re taking things too fast. And in your 20’s, who wants to go fast? Life right now should be about developing a mature, healthy and happy you. So enjoy it while you can be your most fab.

But for certain situations, living together might be right. And when you live together without being married, the question comes up, how do you manage your finances together, separately?

For us, we think of each other as two equal individuals. We pretty much split everything home-related 50-50, like roommates (think heating, electric, renter’s insurance, car insurance). There are a few big line items that we scaled based on income (rent). Since B pays for the car and gas, I cover the groceries (they are about equal). When it comes to miscellaneous trips to the store for random stuff, we take turns paying. The same goes for dining out (though I think B usually ends up paying more often when we eat out).

We do not have a joint checking account or a joint credit account. We do have a joint cell phone plan that we split, but we itemize the charges. We also have a joint gym membership, but that’s pretty easy to split charges, too.

We typically go about our business paying the bills we each “own” and then typically two or three times per year, we put everything on a spreadsheet and figure out who owes who money. We should probably do this once per month, but we get too busy and we’re usually close to even when we tally up the totals anyway.

Our arrangement works well for a few reasons. First, though we split living expenses, we in no way tie or disposable incomes or savings accounts together. Therefore, if I go off on a spending binge (like I did this weekend), I have no one to answer to but myself. I am responsible for reconciling my own actions for my financial health. It might sound cliche, but it’s very empowering to only have to depend on yourself for financial support.

Another benefit to keeping separate finances is that should this relationship not work, I have a solid understanding of where my money comes from and where it goes. There would be no learning curve, no mystery accounts, no questions and no financial mess should we break up. Without a legal commitment, I’m protected from a potentially damaging situation. And while some people might find this unromantic, it’s really just pragmatic. Our relationship is based on love, trust and understanding, rather than financial support. Should that change, we could easily consider other options. (Blech. I don’t even like writing that.)

Another reason why our arrangement works is because we ‘re working towards mutual financial goals. Though our current lives aren’t legally tied together, we believe at some point they will be. Therefore, we work individually for the best shared future. For instance, my savings are going to a downpayment on a house or condo. B’s savings are primarily being used for law school. Both the house and the legal degree will help our shared future. And neither of us feels like we’ve had to stifle our dreams to achieve the other’s.

Finally, B and I have similar backgrounds and similar attitudes about money. I’m not sure whether this makes a difference or not, but I’ve never felt that buying material stuff was detrimental to my happiness. While B probably is a little more sensitive to being able to provide a future family with a secure and happy life, he’s the least material person I know.

All that said … It just occurred to me that Anon never mentioned that she wanted to move in together. If you’re not planning to move in together, I wouldn’t recommend combining finances. I would keep all your finances separate, and come to agreements about what you want to spend when you’re hanging out together. For instance, if you prefer to be frugal and he’s very spendy, that’s OK - he’ll either have to be spendy without you, or to spend a little more on you. He can’t ask you to spend your hard-earned money if you don’t want to.

For instance, if he wanted to go to Lollapalooza this weekend but you thought the ticket price was outrageous, he has three options: go with his friends while you listen to CDs at home, pay for your ticket or stay home with you. If I were you, I’d tell him to go enjoy the show with his friends, and I’d plan a cheap-o girls night with friends. (Having separate lives is just as important as separate finances!) This way, if he wants to pick you up a ticket, he can. But you’re secure enough with your relationship either way.

You should know that this approach flies in the face of a lot of couples, I think. My friend from India always thought I was “very odd” for wanting to be so financially independent. And many of the American women I know would probably freak if their bf told them he was going to Lolla alone. But my feeling is, if you don’t care enough to buy the ticket, you don’t really want to go. Why get upset about it?

As long as you both set expectations in advance, communicate about your needs and understand that one of you is a cheap-o and the other is a spendaholic, you’ll be able to lay some ground rules in advance to prepare for every situation. I think you should talk about this stuff every step of the way. Who knows… maybe you’ll find a happy middle ground somewhere.

… There was another part to the question saying that it might be tricky because Anoyn likes to do finances. Why is that? You will have to explain. I think most guys I know would be happy to have a significant other to discuss finance with. I was at a party two weeks ago and talked at length with friends about stagflation, investing, my finance questions and brokerage accounts. A lively, engaging discussion was enjoyed by all. So stick with your interests! You may becomes the life of the party.

And there you have it. My finance and relationships mini-manifesto. Or, what my friends call “one of Mladic’s lectures again” (they secretly love them). I’d love to know your thoughts. All discussion is welcome here!

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