Self-Educate Your Way Out of Debt

I applaud the Monitor's "Work & Money " section and would like to respond to "To Dig Out of Debt, Don't Diet and Binge" (Dec. 1). Steve Rhode of Debt Counselors of America is quoted as saying, "You cannot borrow your way out of debt" and that many people describe their debt consolidation loan as "the final nail in their financial coffin."

Sadly, this is often true. The fault, however, lies with what individuals do with the savings the loan creates. Consumers need more than a loan; they need to be educated so they can use the loan as a tool to eliminate debt.

It is possible to borrow your way out of debt much faster and pay less interest - by using the equity in your home. A home equity loan (not equity line of credit), also known as a "second mortgage," has advantages as a debt-elimination tool:

* Mortgage interest is generally tax deductible, while credit card interest is not.

* Second mortgages are usually compounded at a fixed rate, while credit card companies compound interest at a daily rate. A credit card balance of $3,000 at 19.8 percent interest would take 39 years to pay, if you made minimum payments and no new purchases. You'd pay $10,000 in interest.

A $3,000 loan at a fixed annual rate of 24 percent seems high, but with monthly payments of $75, it would take seven years to repay the loan, plus $3,096 in interest.

Don't let "low" interest rate credit cards fool you. While an 11 percent credit card is better than a 22 percent one, revolving credit is still the wolf in sheep's clothing.

A debt consolidation loan should lower the monthly amount paid to service the same debt. The purpose is not to extend debt for another 15 to 30 years, but to take a significant portion of the savings the loan creates and apply it to the principal of the loan every month, in a process known as acceleration.

Quinci Coates

Orlando, Fla.

Personal Financial Analyst

Primerica Financial Services

Misconceptions about charter schools

In regard to your article "Charter Schools Face Tough Test: Accountability" (Nov. 10): I have been involved in the charter-school movement for over two years now, and I couldn't help but notice some quotes and comments that help perpetuate misconceptions about charter schools.

You quote Intelli-School director Patti Shaw, who says, "Phoenix public schools are losing about $5,000 for every student that chooses to come to my school." I'm sorry that she believes this. This attitude - that charter school students "take" money away, as if charter school students come from "somewhere else" - is commonly used by school districts to counter attempts to start charter schools. The students that attend Ms. Shaw's school would, I assume, probably attend other Phoenix public schools if her school did not exist.

In all probability the $5,000 she gets for each student is less than the amount the Phoenix schools receive in per pupil revenue. This means her students, who are still considered district students for the purposes of local, state, and federal funding, are actually generating revenue for the district that is not being used to educate those students - a common condition in charter schools across the country. School districts dole out as little funding as possible to charter schools to educate district students, while retaining as much of the money generated as possible at the district level.

I also believe that the chief executive officer of the Sanchez Charter High School in Houston misses the point when he states, "Charters work best in niche areas." I could not disagree more. It has been my experience that, at its core, the charter school movement is about community. In a rural setting, the charter school is about creating a school out of the community. In an urban setting, the charter school is more often about creating a community out of the school.

Thomas W. Elliot

Guffey, Colo.

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