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Help! I’m a college student in debt!

How can a semiretired couple maximize their savings  and ensure security? Should a 21-year-old drowning in credit card debt file for bankruptcy? How do you improve your credit scores? TODAY financial editor Jean Chatzky addresses these reader questions and more.
/ Source: TODAY contributor

Financial emergencies are common, but here's help! This week, TODAY financial editor Jean Chatzky tackles reader questions about debt, improving credit scores, ensuring security and more. Have your own question for Jean? .

Q: My husband and I are semiretired at age 60 — we both work part-time jobs until we retire at 66. My husband receives a partial pension and has retirement accounts. I have about $75,000 in a savings account and will inherit a substantial amount within 10 years. What should we be doing with my savings to maximize growth and ensure security? — Cookie, Fairview, Texas

A: Cookie — You've got a minimum of six years before you need to even consider taking the money out of your savings, and even then you're not going to need to liquidate the whole account. So what it boils down to is that you have a long investment horizon for those funds. Given that, you should think about long-term investing. Without knowing what your inheritance is, I would say a reasonable beginning mix of 40% bonds and 60% stocks — which is, by the way, what most pension funds use as a default. You'll want to be sure that both components are fully diversified. And, you'll need to be prepared to live with some market volatility. But this mix will give you a good balance between trying to protect against inflation erosion and market volatility.

I wouldn't get fancy in the investments. For the bond portion, just a good quality; depending on your tax bracket, you could go with an intermediate muni bond fund. For stocks, you could probably put it into an ETF or Vanguard total market. If you're prepared to get fancier, go with two-thirds in S&P 500 and one-third in international index. Even a six-year horizon is a pretty reasonable time frame, but the reality is that you are going to have 20-30 years for the money to grow.

(I'm making the assumption that somewhere else you have an emergency savings account. If you don't, you should carve out a chunk of that $75,000 — perhaps $25,000 — and keep it in a short-term liquid account.)

Q: My husband has recently retired and I am working full-time. Our home mortgage will be paid in full in March 2011. The current balance is about $48,000. To pay the mortgage payment, I am withdrawing from one of my retirement accounts. Current obligations prevent me from paying out of cash for the next 6 to 12 months. Is there a better way? — Carol, Atlanta, Ga.

A: So, in order to answer Carol's question, I needed to know what those "current obligations" are. After calling her, I found they applied for a home improvement loan that will take a year to pay off. I also learned that she's 60 years old, so there won't be a penalty for taking money out of her retirement account — but that she only has $160,000 saved in her account and she doesn't know the balance of her husband's.

To me, it sounds like the relationship itself is more out of balance than their finances. Why is it up to Carol to take the money out of her retirement account? Why is this entirely on her and not on her husband? That's as much a question for a relationship counselor as a financial one. But it sounds like her husband needs to step up and contribute — and if he's not willing to take it out of his retirement assets, he needs to get a part-time job to help this family make ends meet.

Q: I am a 21-year-old college student with a lot of debt. I owe $15,000 and the credit card companies don't stop harassing me because I can't even pay the minimums. My income barely covers those minimum payments. I attempted to consolidate my credit but backed out last minute due to all the articles I read. Someone told me my best bet was to file for bankruptcy. Any advice? — Ivan, Miami, Fla.

A: The first thing you need to do is prioritize your bills. So, in spite of pressure from creditors, you need to commit to paying your living expenses first (rent or mortgage, utilities, food, insurance, medical, etc.) followed by any secured debts (car), and then the credit cards. If the money runs out before all the obligations are met, at least you've kept your home life stable. Next, I want you to see if there are opportunities to increase your income at all. Even if you can increase your wage by $1 an hour, over a month you'll have made real progress.Finally, you may want to look at credit counseling — an agency that is not-for-profit or a member of the National Foundation of Credit Counselors (NFCC) will be legitimate.  They should put you through an intake process and a series of questions, after which they'll tell you if they can actually help you or if you need to call a bankruptcy attorney instead. Bankruptcy is a serious legal and financial decision, and should be your last step, not your first. When looking for or checking out a credit counselor, here are some suggestions:

  • Are they affiliated with a national body like NFCC? That will ensure that they are legitimate, because these organizations require strict quality and financial/ethical standards for membership.
  • Are they accredited by the Council on Accreditation or another third party? Are they a nonprofit?

  • Board members shouldn't be paid by the agency, or be family members or friends.

  • Do they offer a wide range of services, including budget counseling for those not in debt, debt counseling, housing counseling for prerental, prepurchase, first-time homebuyers, reverse mortgage and foreclosure prevention?

  • What are the fees? They should be forthcoming about fees, and nothing should be charged prior to a service provided. Any setup/monthly fee should be less than about $50 (most monthly fees are in $25 range). The agency should be willing to waive all fees in cases of true hardship.

  • Do they offer in-person counseling, by phone, Internet? What are you looking for?

  • Are the counselors certified consumer credit counselors?
  • Do they provide educational classes or workshops?

  • Does the agency work with all of your creditors (some only work with those who agree to pay them)?

  • Is there a minimum amount of debt required? There shouldn't be.

  • What are the options? If a debt management plan is the only one, keep looking. Each situation is different, and the solution they come up with for you should be customized.

  • An initial session length of an hour is standard; any less and you should be concerned that they have an adequate idea of your situation.

  • Will the full amount of your payment go to creditors? It should, not into the agency's pocket.

  • Ask for written evidence that the agency is bonded and insured.

  • Check with the BBB and the state attorney general's office to see if there are any unresolved complaints about the company.

Q: My wife and I are looking to buy our first house and improve our credit scores. Her credit is worse than mine, and she has several defaulted credit cards that have gone to collection agencies. My credit is somewhat higher and my score is only low because of the amount of outstanding balances. Would it be better to focus on paying down the bills in my name first to improve my score or work on her defaulted credit cards? — Gene, Myrtle Beach, S.C.

A: First, and it sounds like you've done this already, but make sure you have recent copies of your credit reports. Then think about the size house you want to buy and whether you can qualify it based on your income alone. If you can, then focus on your credit. That means making sure your outstanding debt on your credit cards represents no more than one-third of the credit you have available to you. You can do that by paying down your debts or (rather sneakily) by asking your current credit card companies if they can increase your limits without pulling your credit report. Many companies will do this for good customers and a few thousand dollars in your credit line can pop your credit score.

If you need both incomes to qualify — and most people do — then look at your wife's report simultaneously. If your wife's defaults are near the seven-year mark, they will soon rotate off her credit report. So that negative won't show any more and if she's been more responsible with her debt since, her score may come up and be higher than you think. If that's too far away, she should pay those bills either in full (if she can) or through settlement. Regardless of how she pays, since it was a default it will still reflect on her credit report until that seven-year period is up. But a paid default is more favorable than an outstanding one. And in the meantime, she should keep clean by paying her bills on time and not running up any new debts or shopping for cards.

If you both are going to be applicants on the mortgage loan, you want to work to get both scores into a good place — over 700 — before you apply. A high score on your part might slightly offset her low one, but all in all, they'll obviously benefit more if both scores are high. I know the temptation is to buy the house now, but you'll be saddled with a high interest rate. Wait another year or two and you could get a much lower one.

Jean Chatzky is an editor-at-large at Money Magazine and serves as AOL’s official Money Coach. She is the personal finance editor for NBC’s TODAY Show and is also a columnist for Life Magazine. She is the author of four books, including 2004’s “Pay it Down! From Debt to Wealth on $10 a Day” (Portfolio). To find out more, visit her Web site, .