Oppenheimer & Co. Inc.The Israelite Group ofOppenheimer & Co. Inc.500 W Madison Suite 4000Chicago, IL 60661312-360-5624dan.israelite@opco.com

April 2016Protecting Your Business from Cyber Threats

What You Need to Know About PrivateStudent Loans

What's New in the World of HigherEducation?

What is the federal funds rate?

The Israelite Group Monthly NewsletterProtecting Your Business from Cyber Threats

See disclaimer on final page

Spring is in the air and the global marketsseem to be shaking off a bad winter cold.January and February were horrible forinvestors, while in March we saw a recoveryof oil prices as well as the stock market. TheFederal Open Market Committee decidedinvestment gains, higher than expected GDPand good employment numbers were notenough to raise interest rates again. We arenow looking at two anticipated rate hikes thisyear, down from four.

With oil seemingly more stable and marketshovering around even for the year we askourselves, "What will push markets higher?"Our answer is time! The longer we havestable oil prices and a growing economy weanticipate the markets will rise.

We caution everyone to remain patient andkeep expectations in line with your investmentobjectives.

Please contact us any time to discuss currentmarket conditions or your specificinvestments.

The Israelite Group

Risk management isa key component inany successfulbusiness plan. Intoday's world--wheredata breaches arecommonoccurrences--it'sespecially importantfor business ownersto understand the

digital risks they face. Are you doing all you canto mitigate the risk of a cyber attack?

Understanding the risksMany small-business owners may think theirorganizations hold little appeal to hackers dueto their small size and limited scope. However,according to the Small Business Administration(SBA), this naivete may actually make themideal targets. Small businesses are keepers ofemployee and customer data, financial accountinformation, and intellectual property. Theirsystems, if not adequately protected, may alsoinadvertently provide access to larger suppliernetworks. "Given their role in the nation'ssupply chain and economy, combined withfewer resources than their larger counterpartsto secure their information, systems, andnetworks, small employers are an attractivetarget for cybercriminals," reports the SBA onits cybersecurity website.

Consider the following tips compiled frominformation supplied by the SBA, the FederalTrade Commission (FTC), and the FederalCommunications Commission (FCC).

Cybersecurity tips1. Assess: To protect your organization, youmust first understand your vulnerabilities. Howare your systems protected? Do you collect andstore personal information of customers andemployees, such as credit-card information,Social Security numbers, and birth dates? If so,how is this information stored and who mayaccess it? Do you have a Wi-Fi accessible toemployees and customers? How do yourvendors and other third-party service providersprotect their information? It may help to engagea professional to help identify your risks.

2. Protect: Ensure you have firewall andencryption technology protecting your Internetconnections and Wi-Fi networks. Make sureyour business's computers have antivirus andantispyware software installed and updatedautomatically. Require employees and otherswho access your systems to use complexpasswords that are changed regularly. Keeponly personal data that you actually need anddispose of it securely as soon as it no longerserves a business purpose. Back up criticalinformation and data on a regular basis, andstore the backups securely offsite. Assignindividual user accounts to employees andpermit access to software and systems only asneeded. Be especially cautious with laptopsand company-assigned smartphones. Questionthird-party vendors to ensure that their securitypractices comply with your standards.

3. Document: Establish clear security policiesand procedures and put them in writing. Coversuch topics as handling sensitive or personalinformation, appropriate use of Internet andsocial media, and reporting vulnerabilities.Clearly spell out consequences for failing tofollow the policies.

4. Educate: Develop a mandatory employeetraining program on the importance ofcybersecurity. Explain the basics of personalinformation, as well as what is and isn'tacceptable to post on social media. Employeescould unknowingly release information thatcould be used by competitors or, worse, bycriminals. Ensure that employees understandthe risks associated with phishing emails, aswell as "social engineering"--manipulativetactics criminals use to trick employees intodivulging confidential information.

For more informationBusiness owners who want to learn more canfind a wealth of helpful information online. Inaddition to visiting theSBA's cybersecurity website, business ownersmight want to review "Protecting PersonalInformation: A Guide for Business" and "Startwith Security: A Guide for Business," bothavailable on the FTC's website.

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What You Need to Know About Private Student LoansIt's an unfortunate trend in college pricing--theaverage cost of tuition and fees at four-yearpublic and private institutions are significantlyhigher than they were just a decade ago. Forexample, the average published tuition and feeprice of a full-time year at a public four-yearinstitution is 40% higher, after adjusting forinflation, in 2015-16 than it was in 2005-06.(Source: Trends in College Pricing, CollegeBoard, 2015) As a result of these rising costs,many individuals have to rely on student loansto help fund their college education.

Will I have to take out private loans tofinance my college education?What can be surprising to many first-timestudent borrowers is how little federal studentloan debt they may be allowed to take on.Currently, the maximum amount students canborrow for college in federal Direct StaffordLoans is $5,500 during their first year, $6,500during their second year, and $7,500 duringtheir third and fourth years. (Source: FederalStudent Aid, U.S. Department of Education,2015)

In most cases this amount is not nearly enoughto cover the cost of attending a four-yearcollege, and many student borrowers must lookto private student loans to help close this gap.And while taking out private loans to pay forcollege is a fact of life for many individuals,there are some important questions you'll wantanswered before taking out these types ofloans.

What is the interest rate on the loan?Private student loans tend to have higher fixedinterest rates than federal Direct StaffordLoans. However, depending on the lender, youmay be able to choose a loan that offers alower variable interest rate.

Keep in mind that with a fixed rate, the interestrate remains the same from the day you takeout the loan until the day you pay it off. With avariable rate, your interest rate may initially belower than a fixed rate but then will be adjustedperiodically to keep up with changes in marketconditions. If your interest rate rises, yourmonthly payment and/or the number ofpayments required will increase.

What repayment options are available?Unlike federal student loans, which offerrepayment programs such as pay as you earn,income-based repayment plans and studentloan forgiveness, private lenders are notrequired to offer specific repayment assistanceto borrowers struggling to make payments.

However, most private student loan companiesdo offer limited forms of repayment options,such as loan forbearance or extendedrepayment schedules. The types of repaymentprograms offered will vary from lender tolender.

Is a co-signer required?Some private lenders may require borrowers tohave a co-signer guarantee a loan, especially ifa borrower has little or no credit history. Havinga co-signer may also help you obtain a lowerinterest rate for your loan and improve yourchances for loan approval.

The good news is that the co-signer doesn'tnecessarily have to be tied to the loan forever.Most lenders will allow borrowers to apply for aco-signer release after a certain number ofon-time payments have been made and otherloan conditions have been met.

Are the terms of the loan favorable?As a result of recent increased regulatoryscrutiny surrounding private loans, many of thelarger lenders have improved the lendingprocess by offering more attractive loan terms.

For example, certain lenders have eliminated"auto defaults," which is when a co-signer diesor declares bankruptcy and the lender demandsthat the loan be paid back immediately by theborrower. Others have made the process forobtaining a co-signer release easier and moretransparent. Loan costs, discounts, terms, andconditions can differ greatly, depending on thelender. It's important to thoroughly researcheach potential lender and carefully compare alloffers before signing a loan agreement.

Are other financing options available?When it comes to using private loans to pay forcollege, student borrowers should try tograduate with the least amount of privatestudent loan debt possible. It's generally a goodidea to exhaust all federal student loan optionsand avoid taking out loans for the maximumamount that is offered by private lenders unlessabsolutely necessary.

Additional financing options should also beconsidered, such as:

• Parent PLUS loans• Grants or scholarships• Parent/family loans• State-sponsored student loan programs• Part-time employment

Students and parentsborrowed $106.1 billion ineducation loans in2014-2015. (Source: Trendsin Student Aid, CollegeBoard, 2015)

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What's New in the World of Higher Education?If you're a parent or grandparent of a collegestudent or soon-to-be college student, youmight be interested to learn what's new in theworld of higher education.

Higher college costsTotal average costs for the 2015/2016 schoolyear increased about 3% from the previousyear: $24,061 for public colleges (in-state),$38,855 for public colleges (out-of-state), and$47,831 for private colleges.1

Total average costs include direct billed costsfor tuition, fees, room, and board; and indirectcosts for books, transportation, and personalexpenses. Together, these items are officiallyreferred to as the "total cost of attendance."Note that the cost figure for private collegescited by the College Board is an average; manyprivate colleges cost substantially more--over$60,000 per year.

Higher student debtSeven in 10 college seniors who graduated in2014 (the most recent year for which figuresare available) had student loan debt, and theaverage amount was $28,950 per borrower.2It's likely this amount will be higher for theclasses of 2015 and 2016.

Student loan debt is the only type of consumerdebt that has grown since the peak ofconsumer debt in 2008; balances have eclipsedboth auto loans and credit cards, makingstudent loan debt the largest category ofconsumer debt after mortgages. As ofSeptember 2015, total outstanding student loandebt was over $1.2 trillion.3

Reduced asset protection allowanceBehind the scenes, a stealth change in thefederal government's formula for determiningfinancial aid eligibility has been quietly (andnegatively) impacting families everywhere. Youmay not have heard of the asset protectionallowance before. But this figure, which allowsparents to shield a certain amount of theirnonretirement assets from the federal aidformula, has been steadily declining for years,resulting in higher expected family contributionsfor families. For the 2012/2013 year, the assetprotection allowance for a 47-year-old marriedparent was $43,400. Today, for the 2016/2017year, that same asset protection allowance is$18,300--a drop of $25,100. The result is a$1,415 decrease in a student's aid eligibility($25,100 x 5.64%, the federal contributionpercentage required from parent assets).

New FAFSA timelineBeginning with the 2017/2018 school year,families will be able to file the government's

financial aid application, the FAFSA, as early asOctober 1, 2016, rather than having to wait untilafter January 1, 2017. The intent behind thechange is to better align the financial aid andcollege admission timelines and to providefamilies with information about aid eligibilityearlier in the process.

One result of the earlier timeline is that your2015 federal income tax return will do doubleduty as a reference point for your child's federalaid eligibility--it will be the basis for the FAFSAfor both the 2016/2017 and 2017/2018 years.

School Year Tax ReturnRequired

FAFSA EarliestSubmission

2016/2017 2015 January 1, 2016

2017/2018 2015 October 1, 2016

2018/2019 2016 October 1, 2017

American Opportunity Tax Credit nowpermanentThe American Opportunity Tax Credit wasmade permanent by the Protecting Americansfrom Tax Hikes Act of 2015. It is a partiallyrefundable tax credit (meaning you may be ableto get some of the credit even if you don't oweany tax) worth up to $2,500 per year forqualified tuition and related expenses paidduring your child's first four years of college. Toqualify for the full credit, single filers must havea modified adjusted gross income (MAGI) of$80,000 or less, and joint filers must have aMAGI of $160,000 or less. A partial credit isavailable for single filers with a MAGI over$80,000 but less than $90,000, and for jointfilers with a MAGI over $160,000 but less than$180,000.

New REPAYE plan for federal loansThe pool of borrowers eligible for thegovernment's Pay As You Earn (PAYE) plan forstudent loans has been expanded as ofDecember 2015. The new plan, called REPAYE(Revised Pay As You Earn), is available to allborrowers with federal Direct Loans, regardlessof when the loans were obtained (the originalPAYE plan is available only to borrowers whotook out loans after 2007).

Under REPAYE, monthly student loanpayments are capped at 10% of a borrower'sdiscretionary income, with any remaining debtforgiven after 20 years of on-time payments forundergraduate loans and 25 years of on-timepayments for graduate loans. To learn moreabout REPAYE or income-driven repaymentoptions in general, visit the federal student aidwebsite at studentaid.gov.

Tools for students

The Department of Educationand the Consumer FinancialProtection Bureau havelaunched the "Know BeforeYou Owe" campaign, whichincludes a standard financialaid award letter for colleges touse so that students can betterunderstand the type andamount of aid they qualify forand more easily compare aidpackages from differentcolleges. In addition, to helpstudents search for and selectsuitable colleges, theDepartment has launched itsCollege Scorecard online toolat collegescorecard.ed.gov.

Sources1 College Board, Trends inCollege Pricing 20152 The Institute for CollegeAccess and Success, StudentDebt and the Class of 2014,October 20153 Federal Reserve Bank ofNew York, Quarterly Report onHousehold Debt and Credit,November 2015

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Oppenheimer & Co. Inc.The Israelite Group ofOppenheimer & Co. Inc.500 W Madison Suite 4000Chicago, IL 60661312-360-5624dan.israelite@opco.com

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2016

The content herein should not beconstrued as an offer to sell or thesolicitation of an offer to buy anysecurity. The information enclosedherewith has been obtained fromoutside sources and is not theproduct of Oppenheimer & Co. Inc.("Oppenheimer") or its affiliates.Oppenheimer has not verified theinformation and does notguarantee its accuracy orcompleteness. Additionalinformation is available uponrequest. Oppenheimer, nor any ofits employees or affiliates, does notprovide legal or tax advice.However, your OppenheimerFinancial Advisor will work withclients, their attorneys and their taxprofessionals to help ensure all oftheir needs are met and properlyexecuted. Oppenheimer & Co. Inc.Transacts Business on all PrincipalExchanges and is a member ofSIPC.

Chart: Tracking the FedAlthough the prime rate has been closely aligned to the federal funds rate over the past 20 years,rates on conventional 30-year fixed mortgages have followed a more independent trajectory,generally trending downward over the period.

Source: Federal Reserve, 2016

What is the federal funds rate?In December 2015, theFederal Open MarketCommittee (FOMC) raised thefederal funds target rate to arange of 0.25% to 0.50%, the

first shift from the rock-bottom 0% to 0.25%level where it had remained since December2008.

The federal funds rate is the interest rate atwhich banks lend funds to each other from theirdeposits at the Federal Reserve, usuallyovernight, in order to meet reserverequirements. The Fed also raised a number ofother rates related to funds moving betweenFederal Reserve banks and other banks. TheFed does not directly control consumer savingsor credit rates, but the federal funds rate servesas a benchmark for many short-term rates,such as savings accounts, money marketaccounts, and short-term bonds.

The prime rate, which commercial bankscharge their best customers, is typically about3% above the federal funds rate. Other forms ofbusiness and consumer credit--such assmall-business loans, adjustable-ratemortgages, auto loans, and credit cards--areoften directly linked to the prime rate. Actual

rates can vary widely. Fixed-rate homemortgages and other long-term loans aregenerally not linked directly to the prime rate,but may be indirectly affected by it

The FOMC expects economic conditions to"warrant only gradual increases" in the federalfunds rate. Most Committee members projecteda target range between 0.75% and 1.75% bythe end of 2016, so you can probably expect aseries of small increases this year. Althoughrising interest rates make it more expensive forconsumers to borrow, higher rates could begood for retirees and savers who seek currentincome from bank accounts, CDs, bonds, andother fixed-interest investments.

The FDIC insures CDs and bank savingsaccounts, which generally provide a fixed rateof return, up to $250,000 per depositor, perinsured institution. The principal value of bondsmay fluctuate with market conditions. Bondsredeemed prior to maturity may be worth moreor less than their original cost. Investmentsseeking to achieve higher yields also involve ahigher degree of risk.

Source: Federal Reserve, 2015

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