One of the main complaints many students have when looking to close the college funding gap have is that it is increasingly difficult for them to get approved for private loans . People Capital is hoping to help students by providing a metric that can help lenders get an idea of a student’s potential through a Human Capital Score. Alan Samuels, the Chief Product Officer for People Capital, spoke with me about this new credit score .

“Our metric looks at someone’s potential,” he said. “It takes into account high school attended, GPA and achievement scores and then projects a probable income path , offering insight into the likelihood that they will be able to repay loans.”

The score will be used on People Capital’s forthcoming P2P student lending platform. “We plan to provide a platform where lending rates are set by auction method, bidding rates down for students and providing them with access to additional capital.”

I looked at my own income projection, leaving off the fact that I have gone on to get a Master’s degree. I simply filled out the form as if I were finishing up my B.S.

You can see on either side how the green indicates a range. I am happy to say, though, that for being 7 years out, I have exceeded the projection offered by my Human Capital Score.

Samuels says that the score is mostly designed to be ideal for undergraduate students . Graduate funding is a different animal altogether. It will still be possible to obtain graduate loans through People Capital, but the metrics aren’t optimized for graduate students. “We are developing a graduate model, though,” Samuels said. “That model will probably be used in conjunction with the FICO score , since students will have had opportunity to build credit profiles.”

In the end, this is another way to try and reduce human behavior down to something that can be easily quantified. But for students looking for a little more help in getting approved for education loans, this might be helpful.

You know about your credit score . And you know that it is used, in general, to give a number of people, from landlords to lenders to employers, an idea of how fiscally responsible you are. But your credit score is not the only financial score being used to assign you risk. In fact, there are other “secret” scores used in conjunction with your credit score to determine what sort of financial person you are. And, unlike the credit score, companies are not required to disclose this stuff under the Fair Credit Reporting Act . If you ask me, there is waaaaaay too much of our information that we don’t have access to.

At any rate, Cash Money Life offers a list of eight secret scores that take your personal financial information and use it to make a number of determinations:

1. Response score - This is a score based on the probability you’ll respond to an offer they send you.
2. Application score - This score incorporates all the data on your application.
3. Bankruptcy score - This score tries to predict how likely you will to declare bankruptcy.
4. Revenue score - This score tries to predict if and how profitable you will be to the institution.
5. Attrition-risk score - This score tries to predict how likely you will stop using their products.
6. Behavior score - This score tries to predict future behavior, as nebulous as that sounds.
7. Transaction score - Every time you charge something to your card, a transaction score is calculated to determine whether to approve the charge.
8. Collection score - This score is used on accounts in collections by collection agencies to determine how “collectible” it is.

Honestly, I think the scariest of these are the revenue, behavior and transaction scores. These seem especially invasive. Especially since it would only take a little bit of tweaking for the transaction score to compile every spending choice you make . What happens if a night on the town, via transaction and behavior score, was used against you in the future? Maybe I’m starting to sound paranoid, but the fact that we don’t have a clear view of these scores — and that there are no immediate efforts to make them more transparent — does worry me. Does it worry you?

Image source: VolatileChemical via Wikipedia

One of the issues affecting many people with car leases is to get out of them. If you are looking to get out of your lease , you can go to LeaseTrader.com and try to sell your lease. The company matches those looking to get rid of their leases with those who are interested in taking over a lease. While the trades offered on the site are mostly for luxury cars , it is possible to find lower-end cars as well.

Basically, LeaseTrader works by helping you find someone suitable to take over your lease . If you can no longer afford your lease (as many are finding in this recession), or if you just want to move on to something else, most dealers charge hefty fees for you to exit — unless you can find someone suitable to take over the lease. Unfortunately, it might be difficult for you to locate someone easily. LeaseTrader.com, though, screens buyers for credit history and income, and approves them to take over leases. This way, you are more likely to find someone qualified to take over your lease quicker .

It does cost money to list a lease on LeaseTrader.com, and the site takes a fee when the lease is transferred. To buy a lease on the site, a membership fee must be paid.

Overall, I think it’s a good concept, and one that could be useful for a number of people. Just make sure that you double check the terms of your lease agreement to make sure that you can make the transfer, and make sure you check the terms and conditions at LeaseTrader. Fox Business also has information on LeaseTrader.com .

Have you tried LeaseTrader.com? What do you think?

This is a guest post from Peter Passell, author of Where to Put Your Money Now, in the form of a reprint from a NYT column. I thought it was worth sharing with you. It has some very good advice, and makes some good points.

The greatest financial fraudster of all time has gone to the slammer, and isn’t scheduled to be released until he reaches the age of 221. That’s OK by me. Bernie Madoff, after all, was no Robin Hood. Sure, he stole from the rich (the struggling middle-class need not apply). But he stole from the poor, too, slurping up billions from the endowments of charities. And apparently the only beneficiaries of this vast involuntary transfer of wealth were family members struggling to maintain the lifestyles of the rich and infamous.

End of story? Not quite. While it’s hard to imagine that anyone else is running a Ponzi scheme on this scale, I would argue the human weaknesses that made it possible for Madoff to keep the scam going for decades — greed, gullibility, laziness, money-driven politics — explain why most investors, most of the time get less than their money’s worth. At very least, then, the Madoff fiasco should remind us all of some unhappy truths about investing in America.

Government regulation is no substitute for personal vigilance. If you rob a bank, the chances are excellent you’ll be caught — and quickly. Indeed, the clearance rate on bank heists is so high that only unshakably optimistic crooks even try. How, then, was it possible for Madoff to get away with so much bigger a crime and for so long? One important reason is that modern business depends more on cultural constraints (as in, “I’m not a thief”) than on regulation (as in, “I’d never get away with the theft”) to keep it honest. And, unfortunately, the investment business attracts lots of folks who aren’t deterred by the injunctions they heard in Sunday school.

But surely, regulators will now be more vigilant. Don’t bet on it. The sort of regulation that could reliably deter the bad guys on Wall Street would be immensely intrusive and costly. And when push comes to shove, it’s not likely that either Congress, or regulators appointed with the tacit approval of big political campaign contributors, will have the stomach do what’s necessary.

The bottom line: You don’t always get what you pay for. If you want to invest in anything other than government-guaranteed CDs and bonds, you’ve got to stay on top of who’s got your money and where.

If it’s too good to be true, it isn’t. Most investment scams are of the get-rich-quick variety — as in “I’ll double your money in three months.” Madoff, by contrast, attracted big sums by offering something that seemed far more reasonable. No secret land deals in Wyoming for the former chairman of the NASDAQ stock exchange, no once-in-a-lifetime opportunities to profit from the coming boom in ruthenium (look it up, yourself . . . ). All he offered were 10-15 percent returns, year after year, regardless of the state of the stock market or the global economy.

You’ve got to give the devil his due here. The promise of low-double-digit profits without risk was just plausible enough to attract the sort of investment advisors who served clients by dressing well and mixing a terrific martini rather than by providing timely intelligence on matters financial. Meanwhile, Madoff was able to make the cash payouts needed to keep investors believing they were getting what they paid for as he was able to increase funds “under management” by a modest amount each year.

On closer look, though, the promise of a steady 10-15 percent was hardly more plausible than the promises of more conventional investment cons. For while plenty of investors do average annual returns in the low-double-digits, they only manage it by taking substantial risks. And the fact that Madoff never had a losing year should have been a dead giveaway.

How did he get away with it, then? Like all successful scammers, Madoff understood that almost everybody secretly feels entitled to something for nothing — and many are ready to deny reality to get one. To paraphrase Groucho Marx: Who you gonna believe, me or your lying eyes?

The scandal isn’t what’s illegal, it’s what’s legal. Yes, I stole that line from the great pundit Michael Kinsley. And yes, what Madoff did was illegal. But his most excellent adventure should not be allowed to obscure the reality that the $50 billion or so that Madoff lost on behalf of clients over the last few decades was far less than the sums that the financial services industry takes from investors every year for nothing much in return!

How dare I, an economist and (within reason) a believer in free markets, make such an outrageous claim? Try this on for size: In 1997 the after-tax profits of financial services companies was roughly $100 billion (a record high to that date). Over the next ten years it averaged a bit more than $170 billion — even after adjusting for inflation. So what did we get for the extra $70 billion annually? Wall Street sliced and diced a lot more “product,” managing everything from a great wave of corporate mergers to the issuance of hundreds of trillions of dollars worth of old- and new-fangled financial derivatives.

But it’s hard to see what extra investors got from the deal. And when you look closely, you can see what they didn’t get. Corporations paid hefty fees for securities issues — fees that never seem to go down in spite of what appears to be heavy competition for their business. Meanwhile fund investors paid humongous sums to shuffle assets in what economists call “zero-sum” games in which the gains of some came out of the pockets of others.

Bernie Madoff is gone, may he rest without peace. But the financial world that spawned Bernie is alive, and will soon be well enough to take your money with gusto.

©2009 Peter Passell, author of Where to Put Your Money NOW: How to Make Super-Safe Investments and Secure Your Future

Peter Passell, author of Where to Put Your Money NOW: How to Make Super-Safe Investments and Secure Your Future, is a senior fellow at the Milken Institute and the editor of the Milken Institute Review, and has been a columnist for the New York Times. He is the author of many guides to personal finance, including Where to Put Your Money, The Money Manual, and How to Read the Financial Pages.
For more information please visit www.peterpassell.com/.

Yesterday was the 4th of July. I hope you had a fun (and frugal!) celebration. Today, I thought a little levity was in order. This is a pretty cool version of our national anthem. JibJab and ThePartyParty.com put together this awesome rendition, with former presidents saying words that can be found in the Star Spangled Banner.

Enjoy!

Despite its humble beginnings as an English drinking song, the music accompanying the Star Spangled Banner has evolved into something that sounds quite inspiring. I enjoyed this straightforward rendition from the United States Marine Band.

Another rendition of the Star Spangled Banner is this, which includes words highlighted so that you can learn them — and where they go.

Have a very Happy 4th of July!

The 4th of July is among the most frugal of holidays . All the traditional things that go with the 4th are simple and relatively expensive:

• Hot dogs
• Hamburgers
• Chips (which you can often get 2-for-1)
• Soda
• Paper decorations in red, white and blue

Even the packages of fireworks for home use are often inexpensive. And, when you get together as a family, everyone brings something to contribute. Last year, my husband and I put on a bash for my sister and brother and their families. We had a great time for less than $50.

It’s a good time to remember the birth of our country, why it is so great, and realize that even in a time of economic hardship and recession it is possible to enjoy a good celebration for very little money . I hope you will join me in remembering our founders, taking a few minutes to read a copy of the Constitution and thinking on how we can be better citizens.

Happy 4th of July!

Image source: ohad*

With the news that Americans are saving more and changing their lifestyles (at least for the duration of the recession), I’ve been thinking about needs vs. wants , and how the current situation is bringing this into focus for many. And I started looking at my life, and wondering whether or not some of the things I see as “needs” are actually wants. Here are some things our culture has come to see as “needs” in the past two decades :

• Second car
• Television with cable or satellite service
• Computer with Internet access
• Lots of activities for our kids
• Cells phones
• Eating take out (or going to a restaurant)
• Video game systems

I’m sure you can think of several other things that seem necessary. All of these items cost money. The advent of easy credit in the mid-1980s, and its acceleration in the 1990s, has made buying these things convenient. Indeed, instead of saying “no”, we as a society become prone to giving into temptation and pulling out the plastic.

But now, we, as a society, are realizing that many of our “needs” are actually wants . Everyone in the family does not need a cell phone. Unless you work from home, Internet access is not required. And, of course, there is very little use in having cable or satellite TV service. While I love our second car for the convenience it offers, I know that we don’t need it, and that it is really a luxury.

There is nothing wrong with enjoying luxuries and indulging in some wants. However, splurging should be done in moderation . Additionally, it is important make sure that you can afford the luxuries that you purchase. Recongnize the difference between needs and want s, and remember that if you can’t afford the wants, you should probably learn to say no.

Image source: William Hook via Flickr

Parents are starting to feel a greater pinch as more and more college graduates join the “boomerang” generation . The recession, along with the natural inflation that comes with tuition and rent, are squeezing college students and post-grads, sending them back home to mom and dad. An email I received from IBISWorld highlights this growing reality:

“We can expect to see a surge in the boomerang generation [ages 18-24] returning home and continuing financial dependency on parents due to a scarce and competitive job market,” said Toon van Beeck, senior analyst at IBISWorld. “This phenomenon has become more apparent in recent years, with higher costs in tuition and rent making transitioning into adulthood increasingly difficult. Thanks to the recession, many parents will get prolonged time with their kids until their debt is paid off or market conditions improve .”

For the most part, mom and dad pick up the bill. Additionally, it is worth noting that even married children are moving back in. The incident of foreclosures, job loss and other factors means that sometimes children, their spouses and their children are moving in further inflating costs.

Should you let your adult children have a free ride?

While it may seem cruel to charge rent and demand help around the house, the fact of the matter is that the costs of taking care of adult children (and sometimes their families) can become a burden on parents. The obvious solution is to ask for help with the cooking, cleaning and yardwork . Additionally, make it clear that you expect your adult children to look for jobs while they are staying with you. And, if they do have some sort of employment, you might ask them to chip in for utilities costs and groceries. After all, you are a victim of the recession as well.

Image source: Old Shoe Woman via Flickr

There are numerous blog posts and “how-to” guides aimed at helping you save money each month as you use less energy . However, there are precious few programs that actually pay you to reduce your carbon footprint. However, this is exactly what My Emissions Exchange proposes to do.

As you probably know, there is a carbon market out there, with cap and trade systems that allow participants to buy and sell carbon credits . (The U.S. carbon market is in Chicago.) But getting access to the market as an individual is a bit difficult. My Emissions Exchange is designed to help you “sell” your carbon savings on the market. After entering your energy usage for the past year, you update each month’s use and My Emissions Exchange will record it. The company then packages savings into credits, and sells them on the market. You are compensated a portion of the sale , paid to you via PayPal.

An email I received from My Emissions Exchange offers this insight into the motivation behind the program:

The idea is to influence individual consumer behavior by providing an extra financial incentive to minimize your carbon footprint . Consumers will already save considerably by reducing their utility bills; this program will provide them with advice, a built-in “support group” and cheering section in the form of the other users of the site, and an extra financial bonus for the resulting verified carbon credits.

It looks like an interesting program, and one I want to learn more about. After all, appears to be a step in the right direction in terms of rewards for desirable behavior , rather than punishment for undesirable behavior.