4 Tips to Help You Tackle Student Loan Debt

Bobbi : August 22, 2015 5:15 pm : financial aid, school stuff

Student Loan DebtHigher education is expensive — and prices continue to rise. Because of this climbing tuition and inadequate parent savings, student loan debt now plagues 40 million Americans. Your student loans were an investment in your education and career, but now you need to start making your payments. It’s important to not get overwhelmed, intimidated or discouraged in your journey to becoming free from student debt. Check out these methods to help you repay these student loans faster or more easily for your personal situation.

1. Personalize Your Plan

When your federal loans are due, your payments will automatically be based on the standard 10-year repayment plan. If that makes monthly payments or interest too high for you, you may want to change the repayment plan so it better fits your situation. You can even get income-based repayment so that you are not paying too high a percentage of your earnings toward debt.

Private student loans don’t have all the same options, but some lenders will offer some type of forbearance or allow you to make interest-only payments for a period of time. It’s a good idea to try to create a three- to five-year plan for paring down college debt and sticking to it so you can make a dent before other big life expenses. Keep in mind that forbearance comes with downsides too — just because your payments are paused, doesn’t mean that the debt isn’t accruing interest.

2. Automate Payments

Making your payments automatic takes any decision-making and room for error out of the question. It helps you avoid late payments because you do not have to be reminded to pay. The money is simply deducted from your account monthly for the payment amount you set. You can set up a reminder ahead of time to ensure you have enough money in your checking account so you are not charged for insufficient funds. Some debt holders will even shave a small portion of interest off for those using automatic payments since it lowers the chance of missed or late payments for the lender. This would result in a reduction in the total amount you have to pay. A missed or late payment damages your credit score, which in turn could mean you pay higher interest rates if you need credit after college. (You can see if late payments are impacting your credit scores for free on Credit.com.)

3. Consolidate or Reduce Your Loan

A consolidation loan combines multiple loans into a single monthly payment with one fixed interest rate. This can simplify the process and sometimes get you lower interest payments, but it’s generally not a good idea to consolidate federal loans into a private student loan or you will lose out on some repayment options and borrower benefits.

You can also reduce your student loan debt through public service by working for the Peace Corps, Americorps, government organizations or certain nonprofits for 10 years and making 120 on-time monthly payments through Public Service Loan Forgiveness.

4. Lump Sum or Extra Payments

If you find your checking and savings accounts looking extra healthy or get a sudden financial boost, you pay want to use that money to accelerate paying off your student loans. You can make a lump-sum payment that makes a big dent in your debt balance at one time or make extra payments each year to help you reduce the amount of money you pay in interest and speed up your loan payoff time frame. These payments will likely still qualify for a tax deduction, but can reduce your deduction eligibility going forward since you will have less years with the loan.

The most important steps are making peace with your debt, creating a budget that accounts for student loan repayment, and sticking to it. The key is finding a method that works with your life and financial situation. You can even pick up a side job to earn some extra cash to put all toward your loans. The better your plan matches your needs and abilities, the less trouble you will likely have repaying what you owe.

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This article originally appeared on Credit.com.

This article by AJ Smith was distributed by the Personal Finance Syndication Network.

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5 Things That Affect Your Chances for Financial Aid

Bobbi : August 13, 2015 6:25 pm : featured, financial aid, school stuff, Uncategorized

If you are planning to go to college – or have a child who will soon be heading to college – you will likely be hoping to get some type of financial aid. It’s important to understand the major factors that will determine your eligibility for aid.

Your EFC

Financial aid eligibility – and the amount of aid you will receive – is determined mainly by your EFC. Your EFC is your Expected Family Contribution. This number is critical in determining your financial aid, or whether you get any at all. It’s important to know what factors are considered in the formula to determine your EFC. (Note:  we are focusing mainly on the EFC calculated by the FAFSA. Many schools also use other forms to determine financial aid eligibility.)

 

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A 5-Minute Guide to Student Loans

Bobbi : August 10, 2015 5:29 pm : financial aid, school stuff, Student Debt

You may have heard that college in this country isn’t cheap. Maybe you’ve even encountered this firsthand for yourself, a child or another family member. But knowing that getting a degree is going to be expensive doesn’t mean you know how to pay for it. When you are a student or even parent of a student starting the college search, it’s a good idea to calculate how much you will have to pay in student loans.

The sooner you know what you are getting into, the better decision you will be equipped to make when it comes to which school to go to, which loan to pick and which repayment method to employ. But who has time to research all the different types of loans you can get? Check out the following student loan options and learn the subtle differences that can make a not-so-subtle difference in your final price tag.

Stafford

This primary federal student loan option offers a low origination fee and the same interest rate across the board. That’s right, every student who receives a Stafford loan in the same academic year pays the same rate. However, there are two types: subsidized and unsubsidized. The former is available only to those who qualify for financial need. If you are not able to get subsidized loans, you can get unsubsidized Stafford loans that also have the low interest rate, but the government doesn’t fund any interest payments so interest accrues while you are in school. There are ceilings for both options.

PLUS

These loans are for graduate and professional students, but have a higher interest rate and origination fee than the Stafford loans. They also require a credit check. There is no specific limit for the loan, but the Department of Education says the maximum loan amount is the student’s cost of attendance (determined by the school) minus any other financial aid received. Parents of undergraduate students can also use PLUS loans to help pay for their child’s education.

Perkins

These are another form of low-interest federal loans, but they are offered straight from your college or university. The ceilings vary depending on graduate or undergraduate status and the school itself. It is important to note that not all schools participate in the program and the loans are only extended to students who qualify for financial aid. There are ways to get help paying back Perkins loans as well.

Private

While they generally offer less favorable terms, private loans can help secure any remaining funding you may need after exhausting all the federal loan options. Lenders offer varying rates, often higher than 10%. Your credit score will affect your ability to qualify for private student loans, as well as the interest rates. You may have to start monthly payments even as you are in school, as not all lenders offer deferment. You can check your credit scores for free on Credit.com to see where you stand before you apply.

Repayment

Just as there are different loan options, there are also different plans for paying the loans back to your lender. You can repay as scheduled, where possible. This means that you pay your bill every month until the balance is gone. You can also consolidate all your federal loans and qualify for extended repayment, which stretches out the term up to 30 years. However, this does mean you pay more in interest over time.

With federal loans, you can also consider income-based repayment where you pay back your loans based on how much you make instead of how much you owe. Repayment formulas vary.

Student loans can be a real drag especially during your first few years in the workforce, but the investment in your education can pay off big time in social, emotional and even future financial well-being.

Related Articles

This article originally appeared on Credit.com.

This article by AJ Smith was distributed by the Personal Finance Syndication Network.

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Colleges misleading students about financial aid requirements

Bobbi : February 22, 2014 9:04 pm : financial aid, Student Debt

As if paying for college isn’t already hard enough, it now looks like some schools are deliberately making it tougher for students to learn about and apply for aid that might be a big help to them. The Washington Post reported that a federal lawmaker is harshly criticizing some colleges.

A prominent House Democrat charged Monday that more than 100 colleges and universities, including some in the nation’s capital, are providing students with unclear or potentially misleading information about what forms they must submit to apply for federal financial aid.

 

Rep. Elijah E. Cummings (Md.), the ranking Democrat on the Committee on Oversight and Government Reform, identified the schools, with excerpts from their Web sites, after a staff investigation that began last summer.

 

Cummings said federal law makes it clear that the Free Application for Federal Student Aid, known as the FAFSA, is the only form needed to apply for that kind of aid. A well-known example of federal aid is the Pell grant for students in financial need.

Often colleges require students to submit additional forms — which carry a fee — to qualify for grants from the institutions themselves or from other entities. But too often, Cummings said, universities fail to spell out clearly what is required for which type of aid. He said that failure can leave students with the false impression that FAFSA is not the only application needed for federal aid.

 

Read the full story at the Washington Post

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Four sneaky college financial aid tactics that can backfire

Bobbi : February 18, 2014 5:42 am : financial aid, school stuff

It’s financial aid application time, and students (and parents) are eager to get as much help as they kind. To that end, they may even be tempted to skirt the rules a bit. But as this story notes, that can really come back to haunt you.

There are legitimate ways to get better offers, but here’s what you want to avoid:

1. Lying about income. (Just as lying to the Internal Revenue Service carries substantial penalties, so too does lying on a FAFSA – a fine of up to $20,000 and up to five years in prison.)

2. Hiding assets.

3. Buying annuities and life insurance to reduce assets

See #4 and read the rest of the story at Reuters.

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