College Students and Recent Grads, Strategies to Save

5 Ways to Make Extra Money That Don’t Take Much Time

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The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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We all want to make a little extra money, whether it’s to pay off debt, go on a vacation, or just have a little bit of a cushion. The problem arises when people have very little time to work on the side due to family responsibilities or other obligations. To combat this issue, I’ve compiled a list of ways to make extra money that don’t involve a lot of time.

1. Do One-Time Gigs

Sometimes it takes a long time to build up a substantial side business. Whether you are a freelance writer, car detailer, or dog walker, you often have to work for a few months to build a client base, which takes significant time and energy.

Instead of doing that, Grayson Bell of the blog DebtRoundUp recommends that you look in the Craigslist Gigs section. When Grayson was paying off $50,000 of credit card debt, he looked at his local Cragslist Gigs section every weekend. He said, “I would help people move, pull weeds in lawns, and remove stumps. These gigs can be almost anything and they don’t require you to invest any money, just look and find something you want to do. It also doesn’t require an ongoing time commitment. It’s not passive, but you can find ways to earn cash when you have free time.”

As always, when using Craigslist, use caution when applying for work and make sure the person offering the work is legitimate and safe to work for. Whether you want to clean houses, do yard work, or paint walls, there are probably many opportunities available in your town on any given weekend.

2. Give Your Opinion

Everyone loves giving his or her opinion, right? Well, it’s much better to actually get paid to give your opinion! Chonce, a writer at Single Moms Income has had extensive experience working as a secret shopper, survey taker, and in focus groups.

Her favorite focus group was when “a few other ladies and I met in a beautiful building in downtown Chicago where we received food and drinks while discussing several different hair care products. I answered questions based on my own personal experience and chimed in whenever necessary. After an hour long discussion, we each received $100 and went on our way.”

You can find these opportunities on Craigslist or on a website like Find Focus Groups. Although they do take time to complete, they are usually enjoyable, pay a high hourly rate, and don’t require any preparation.

3. Play Sick

My husband is in medical school and he often works with standardized patients when practicing for large board exams and also in the exams themselves. He just flew to Atlanta to take an 8 hour-long board exam where he had to work with 7 different patients, who were all actors. If you like to act, you can get paid to do this too.

Katharine Paljug is a freelance writer but she’s also an actor who has worked as a standardized patient before. She says “the companies that staff [the patients] want a diverse group to pull from. Best of all, they don’t require any specialized skills or experience, and they can pay anywhere from $15-$60 per hour! When I worked as a standardized patient, I earned $25 per hour, and every month I got to choose how many days I wanted to work.”

To get standardized patient jobs, follow the steps in this post. Essentially, you can look for jobs on Indeed.com or contact the medical schools near you to inquire about opportunities.

4. Work While You Run Errands

One of the best ways to make money without a lot of time investment is to get paid to do the chores and errands you’re already planning on doing that day!

For example, Gretchen of the blog Retiredby40 (and MagnifyMoney contributor) never pays for an oil change. She says that anyone who owns a Chevy, GMC, or a Buick can do the same. Essentially, she works at as a secret shopper using a company called Bestmark. She takes her car to get the oil changed and gets reimbursed for it and paid to write a review.

She says, “In my area oil change or tire rotation secret shops reimburse up to $45 and pay between $25 – $35. This means that you will have to pay out of pocket for the oil change at the location you’re assigned, but Bestmark will send you a check for the cost of the oil change, up to $45, as long as you complete the shop correctly.”

5. Sell Your Junk

Everyone knows that having a garage sale is a great way to make extra money. However, the time commitment involved in setting up the sale, advertising it, and pricing everything seems exhausting. Don’t worry though; there’s a way you can have a garage sale without much headache. Holly Johnson of ClubThrifty recommends that you piggyback off of your neighbor’s sales. Let them set up the signs and put in the work to advertise, and all you have to worry about is setting out your stuff. She also recommends grouping items that are the same price so that you don’t have to spend time individually pricing them.

Using these ideas, you’ll be well on your way to making some extra cash without the intense time commitment. It takes significant time build a side business in addition to your full time work and other responsibilities but with the tips above, you don’t have to!

Finally, Eliminate Credit Card Debt

If you have credit card debt, you are likely paying a very high interest rate to your credit card company every month. The average interest rate is 13%, and the average household has more than $10,000 of debt. That means the average household is likely spending more than $1,000 of interest every year. Another way to put extra money into your pocket quickly is to reduce the amount of money you give to credit card companies. There are two good strategies to reduce your interest rate. One way is to transfer your debt from a high interest rate credit card to a low interest rate credit card. You can find deals with 0% interest for 15 months, with no fee. The best balance transfer deals are updated here.

Another option is to consolidate your credit cards into a low interest rate personal loan. Interest rates start as low as 4%, and (unlike with balance transfer credit cards) you can shop around for the best interest rate without hurting your credit score. You can find personal loan companies here. You will probably discover that reducing your credit card interest rate gives you the biggest savings.

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College Students and Recent Grads, Pay Down My Debt

19 Options to Refinance Student Loans in 2017 – Get Your Lowest Rate

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The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

19 Options to Refinance Student Loans - Get Your Lowest Rate

Updated: April 4, 2017

Are you tired of paying a high interest rate on your student loan debt? You may be looking for ways to refinance your student loans at a lower interest rate, but don’t know where to turn. We have created the most complete list of lenders currently willing to refinance student loan debt.

You should always shop around for the best rate. Don’t worry about the impact on your credit score of applying to multiple lenders: so long as you complete all of your applications within 14 days, it will only count as one inquiry on your credit score. You can see the full list of lenders below, but we recommend you start here, and check rates from the top 4 national lenders offering the lowest interest rates. These 4 lenders also allow you to check your rate without impacting your score (using a soft credit pull), and offer the best rates of 2017:

LenderTransparency ScoreMax TermFixed APRVariable APRMax Loan Amount 
SoFiA+

20


Years

3.38% - 6.74%


Fixed Rate*

2.565% - 6.490%


Variable Rate*

No Max


Undergrad/Grad
Max Loan
apply-now
earnestA+

20


Years

3.75% - 6.74%


Fixed Rate

2.75% - 6.23%


Variable Rate

No Max


Undergrad/Grad
Max Loan
apply-now
commonbondA+

20


Years

3.37% - 6.74%


Fixed Rate

2.56% - 6.48%


Variable Rate

No Max


Undergrad/Grad
Max Loan
apply-now
lendkeyA+

20


Years

3.25% - 7.26%


Fixed Rate

2.43% - 5.85%


Variable Rate

$125k / $175k


Undergrad/Grad
Max Loan
apply-now

We have also created:

But before you refinance, read on to see if you are ready to refinance your student loans.

Can I Get Approved?

Loan approval rules vary by lender. However, all of the lenders will want:

  • Proof that you can afford your payments. That means you have a job with income that is sufficient to cover your student loans and all of your other expenses.
  • Proof that you are a responsible borrower, with a demonstrated record of on-time payments. For some lenders, that means that they use the traditional FICO, requiring a good score. For other lenders, they may just have some basic rules, like no missed payments, or a certain number of on-time payments required to prove that you are responsible.

If you are in financial difficulty and can’t afford your monthly payments, a refinance is not the solution. Instead, you should look at options to avoid a default on student loan debt.

This is particularly important if you have Federal loans.

Don’t refinance Federal loans unless you are very comfortable with your ability to repay. Think hard about the chances you won’t be able to make payments for a few months. Once you refinance, you may lose flexible Federal payment options that can help you if you genuinely can’t afford the payments you have today. Check the Federal loan repayment estimator to make sure you see all the Federal options you have right now.

If you can afford your monthly payment, but you have been a sloppy payer, then you will likely need to demonstrate responsibility before applying for a refinance.

But, if you can afford your current monthly payment and have been responsible with those payments, then a refinance could be possible and help you pay the debt off sooner.

Is it worth it? 

Like any form of debt, your goal with a student loan should be to pay as low an interest rate as possible. Other than a mortgage, you will likely never have a debt as large as your student loan.

If you are able to reduce the interest rate by re-financing, then you should consider the transaction. However, make sure you include the following in any decision:

Is there an origination fee?

Many lenders have no fee, which is great news. If there is an origination fee, you need to make sure that it is worth paying. If you plan on paying off your loan very quickly, then you may not want to pay a fee. But, if you are going to be paying your loan for a long time, a fee may be worth paying.

Is the interest rate fixed or variable?

Variable interest rates will almost always be lower than fixed interest rates. But there is a reason: you end up taking all of the interest rate risk. We are currently at all-time low interest rates. So, we know that interest rates will go up, we just don’t know when.

This is a judgment call. Just remember, when rates go up, so do your payments. And, in a higher rate environment, you will not be able to refinance to a better option (because all rates will be going up).

We typically recommend fixing the rate as much as possible, unless you know that you can pay off your debt during a short time period. If you think it will take you 20 years to pay off your loan, you don’t want to bet on the next 20 years of interest rates. But, if you think you will pay it off in five years, you may want to take the bet. Some providers with variable rates will cap them, which can help temper some of the risk.

Places to Consider a Refinance

If you go to other sites they may claim to compare several student loan offers in one step. Just beware that they might only show you deals that pay them a referral fee, so you could miss out on lenders ready to give you better terms. Below is what we believe is the most comprehensive list of current student loan refinancing lenders.

You should take the time to shop around. FICO says there is little to no impact on your credit score for rate shopping as many providers as you’d like in a single shopping period (which can be between 14-30 days, depending upon the version of FICO). So set aside a day and apply to as many as you feel comfortable with to get a sense of who is ready to give you the best terms.

Here are more details on the 5 lenders offering the lowest interest rates:

1. SoFi: Variable Rates from 2.565% and Fixed Rates from 3.375% (with AutoPay)*

sofiSoFi (read our full SoFi review) was one of the first lenders to start offering student loan refinancing products. More MagnifyMoney readers have chosen SoFi than any other lender. Although SoFi initially targeted a very select group of universities (it started with Stanford), now almost anyone can apply, including if you graduated from a trade school. The only requirement is that you graduated from a Title IV school. You need to have a degree, a good job and good income in order to  qualify. SoFi wants to be more than just a lender. If you lose your job, SoFi will  help you find a new one. If you need a mortgage for a first home, they are there  to help. And, surprisingly, they also want to get you a date. SoFi is famous for  hosting parties for customers across the country, and creating a dating app to  match borrowers with each other.

Go to site

2. Earnest: Variable Rates from 2.75% and Fixed Rates from 3.75% (with AutoPay) 

EarnestEarnest (read our full Earnest review) offers fixed interest rates starting at 3.75% and variable rates starting at 2.75%. Unlike any of the other lenders, you can switch between fixed and variable rates throughout the life of your loan. You can do that one time every six months until the loan is paid off. That means you can take advantage of the low variable interest rates now, and then lock in a higher fixed rate later. You can choose your own monthly payment, based upon what you can afford (to the penny). Earnest also offers bi-weekly payments and “skip a payment” if you run into difficulty.

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3. CommonBond: Variable Rates from 2.56% and Fixed Rates from 3.37% (with AutoPay)

CommonBondCommonBond (read our full CommonBond review) started out lending exclusively to graduate students. They initially targeted doctors with more than $100,000 of debt. Over time, CommonBond has expanded and now offers student loan refinancing options to graduates of almost any university (graduate and undergraduate). In addition (and we think this is pretty cool), CommonBond will fund the education of someone in need in an emerging market for every loan that closes. So not only will you save money, but someone in need will get access to an education.

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4. LendKey: Variable Rates from 2.43% and Fixed Rates from 3.25% (with AutoPay)

lendkeyLendKey (read our full LendKey review) works with community banks and credit unions across the country. Although you apply with LendKey, your loan will be with a community bank. If you like the idea of working with a credit union or community bank, LendKey could be a great option. Over the past year, LendKey has become increasingly competitive on pricing, and frequently has a better rate than some of the more famous marketplace lenders.

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In addition to the Top 4 (ranked by interest rate), there are many more lenders offering to refinance student loans. Below is a listing of all providers we have found so far. This list includes credit unions that may have limited membership. We will continue to update this list as we find more lenders. This list is ordered alphabetically:

  • Alliant Credit Union: Anyone can join this credit union. Interest rates start as low as 3.75% APR. You can borrow up to $100,000 for up to 25 years.
  • Citizens Bank: Variable interest rates range from 2.37% APR – 8.16% APR and fixed rates range from 4.74% – 8.24%. You can borrow for up to 20 years.
  • College Avenue: If you have a medical degree, you can borrow up to $250,000. Otherwise, you can borrow up to $150,000. Fixed rates range from 4.75% – 7.35% APR. Variable rates range from 2.63% – 5.88% APR.
  • Credit Union Student Choice: If you like credit unions and community banks, we recommend that you start with LendKey. However, if you can’t find a good loan from a LendKey partner, this tool could be helpful. Just check to see if you or an immediate family member belong to one of their featured credit union and you can apply to refinance your loan.
  • DRB Student Loan: DRB offers variable rates ranging from 3.89% – 6.54% APR and fixed rates from 4.50% – 7.45% APR.
  • Eastman Credit Union: Credit union membership is restricted (see eligibility here). Fixed rates start at 6.50% and go up to 8% APR.
  • Education Success Loans: This company has a unique pricing structure: your interest rate is fixed and then becomes variable thereafter. You can fix the rate at 4.99% APR for the first year, and it is then becomes variable. The longest you can fix the rate is 10 years at 7.99%, and it is then variable thereafter. Given this pricing, you would probably get a better deal elsewhere.
  • EdVest: This company is the non-profit student loan program of the state of New Hampshire which has become available more broadly. Rates are very competitive, ranging from 3.94% – 7.54% (fixed) and 2.56% – 6.16% APR (variable).
  • First Republic Eagle Gold. The interest rates are great, but this option is not for everyone. Fixed rates range from 2.25% – 4.10% APR. Variable rates range from 2.43% – 4.23%. You need to visit a branch and open a checking account (which has a $3,500 minimum balance to avoid fees). Branches are located in San Francisco, Palo Alto, Los Angeles, Santa Barbara, Newport Beach, San Diego, Portland (Oregon), Boston, Palm Beach (Florida), Greenwich or New York City. Loans must be $60,000 – $300,000. First Republic wants to recruit their future high net worth clients with this product.
  • IHelp: This service will find a community bank. Unfortunately, these community banks don’t have the best interest rates. Fixed rates range from 4.75% to 9% APR (for loans up to 15 years). If you want to get a loan from a community bank or credit union, we recommend trying LendKey instead.
  • Navy Federal Credit Union: This credit union offers limited membership. For men and women who serve, the credit union can offer excellent rates and specialized underwriting. Variable interest rates start at 3.13% and fixed rates start at 4.00%.
  • Purefy: Only fixed interest rates are available, with rates ranging from 3.50% – 7.28% APR. You can borrow up to $150,000 for up to 15 years.
  • RISLA: Just like New Hampshire, the state of Rhode Island wants to help you save. You can get fixed rates starting as low as 3.49%. And you do not need to have lived or studied in Rhode Island to benefit.
  • UW Credit Union: This credit union has limited membership (you can find out who can join here, but you had better be in Wisconsin). You can borrow from $5,000 to $60,000 and rates start as low as 2.49% (variable) and 4.04% APR (fixed).
  • Wells Fargo: As a traditional lender, Wells Fargo will look at credit score and debt burden. They offer both fixed and variable loans, with variable rates starting at 3.99% and fixed rates starting at 6.24%. You would likely get much lower interest rates from some of the new Silicon Valley lenders or the credit unions.

You can also compare all of these loan options in one chart with our comparison tool. It lists the rates, loan amounts, and kinds of loans each lender is willing to refinance. You can also email us with any questions at info@magnifymoney.com.

 

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College Students and Recent Grads, News

Watch Out for This 16% Student Loan Fee

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The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Watch Out for This 16% Student Loan Fee

The Trump administration has made it possible for debt collectors to once again charge hefty fees to some student loan borrowers who miss several payments in a row — even if those borrowers make an effort to get back on track right away.

These fees, which can be as high as 16%, are typically levied against the borrower’s entire outstanding loan balance and accrued interest charges. The so-called “collection charges” are meant to help recoup losses incurred by pursuing unpaid debts.

In a recent letter, the U.S. Department of Education rescinded an Obama-era rule that forbade guaranty agencies — debt collectors charged with recouping unpaid federal student loan debt — from charging defaulted borrowers collection fees if the borrowers began a repayment plan within 60 days of defaulting on their loans. In the new letter, the agency said the previous guidance should have included time for public comment and review before it was issued.

The reversal comes days after the Consumer Federation of America released an analysis of Department of Education data that shows the rate of student loans in default has grown 14% from 2015 to 2016.This certainly isn’t the first Obama-era rule or legislation the new administration has sought to undo, with an Obamacare replacement plan on its way to a vote in the House and plans to unravel regulations meant to crack down on for-profit colleges and universities.

A Department of Education spokesperson declined to comment.

Bad news for 4.2 million borrowers

The changes will impact borrowers who took out federal student loans under the old Federal Family Education Loan (FFEL) Program. The FFEL Program was phased out in 2010 and replaced with the current Direct Loan Program, but millions of borrowers are still paying back FFEL loans issued prior to that change. Those who have loans under the Direct Loan Program will not be impacted by the changes.

As it stands, some 4.2 million FFEL borrowers are currently in default on loans that total $65.6 billion, according to Department of Education data. Loans are considered to be in default after 270 days of nonpayment.

The changes will raise the stakes for borrowers struggling to make payments on their federal student loans, and make it even more important for those borrowers to avoid missed payments.

Fortunately, federal student loan borrowers are eligible for several flexible repayment methods, as well as forbearance and deferment.

An Ongoing Debate

The debate over a servicer’s right to charge borrowers a default fee has gone on for several years.

In 2012, student loan borrower Bryana Bible sued United Student Aid Funds after she was charged more than $4,500 in fees after defaulting on her loans. She started a repayment agreement to resolve the debt within 18 days, but was still charged fees.

The Department of Education sided with Bible and said companies had to give borrowers 60 days after a loan default to start paying up before they are charged fees. The Obama administration backed the Department of Education and issued the letter when the court asked for guidance on the issue.

There is one clear winner with this rule change: debt collectors.

“Rescinding the [previous guidance on collection fees] benefits guarantee agencies at the expense of defaulted borrowers,” says financial aid expert Mark Kantrowitz. He adds the change may increase the cost of collecting defaulted federal student loans, since borrowers will have less incentive to quickly rehabilitate their defaulted student loans.

What Happens If I Default on My Federal Student Loans?

Federal student loans are considered to be in default after a borrower misses payments for 270 days or more.

About 1.1 million federal student loans were in default status in 2016, according to Department of Education data.

The consequences of going to default are severe.

  • The entire balance of your loan + interest is immediately due
  • You lose eligibility for deferment, forbearance, and flexible repayment plans
  • Debt collectors will start calling
  • Your credit will suffer
  • And … your wages and/or tax refunds could be garnished

Are you missing federal student loan payments?

You’ve got options.

  • Contact your loan servicer ASAP
  • Find out if you’re eligible for a flexible repayment plan
  • Or ask about forbearance

Already in default?

  • Ask your loan service about loan rehabilitation
  • If you make 9 on-time payments over the course of 10 months, your default status will be lifted

You’ve only got one shot to rehabilitate your federal student loans after going into default. Don’t miss it.

 

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College Students and Recent Grads, Featured

60 Years Old and Still Paying Off Student Debt

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The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

60 Years Old and Still Paying Off Student Debt

Like a growing number of student loan borrowers, 60-year-old Beatrice Hogg will be paying off her loans well into her 80s.

“I’ll probably die before I pay off the loan,” says Hogg, a social worker living in Sacramento, Calif. In total, she owes $46,000 in outstanding federal student loan debt. She borrowed the money in the early 2000s in order to finance her Master of Fine Arts degree in creative nonfiction, which she received in 2004 from Antioch University of Los Angeles.

With monthly payments of $251, Hogg says she doesn’t expect to pay off her loans until well into her 80s. That could easily change if she runs into the same bouts of unemployment that have dogged her over the last decade, leading her to defer her payments several times.

Hogg
Beatrice Hogg, 60, will be paying off her loans into her early 80s. Source: Beatrice Hogg

Hogg’s story is further proof that student debt has become a multi-generational issue. A recent report by the Consumer Financial Protection Bureau found the share of Americans 60 years and older who carry federal student loan debt has quadrupled over the last 10 years — from 2.7% of all borrowers to 6.4%. In total, this group of borrowers carries roughly $66.7 billion — or 5.4% — of all outstanding federal student loan debt in the U.S.

According to the CFPB’s report, borrowers who carry student debt late into their lives have more trouble repaying them, reflecting other possible financial issues. Borrowers over the age of 60 were twice as likely to have missed at least one student loan payment compared to the same group in 2005, the CFPB found, and 2 in 5 of borrowers 65 and older have loans in default.

The CFPB reports older Americans burdened with student loan debt are also more likely to skip important health care purchases like prescription medication, doctors’ visits, and dental care because they can’t afford it. As an example, the report cites a separate, 2016 study that found 39% of older borrowers said they skipped those needs compared to 25% of those without a student loan in 2014.

As student loan borrowers have grown older, the number of borrowers who have their Social Security benefits garnished because of student loan payments increased from 8,700 to 40,000 from 2005 to 2015 according to the CFPB. The U.S. government can garnish up to 15% of a borrower’s Social Security benefits as long as the remaining balance is greater than $750 each month.

How did we get here?

Nearly two-thirds, or 73%, of student loan borrowers 60 and older said they took on student debt for a child’s or grandchild’s education. More than half (57%) of all those who co-signed student debt are 55 and older.

Adding to the burden of debt, says Betsy Mayotte, an expert in student loan repayment strategies at American Student Assistance, is the fact that families are now borrowing more than ever to pay for rising college costs. For example, between 2006 and 2016, in-state tuition and

fees at public four-year institutions outpaced inflation by about 3.5% per year according to the College Board. In 2016, the average in-state student at a public four-year institution paid $3,770 in tuition and fees compared to $2,220 in 2009.

“You can have families with a lower income level end up taking out six figures in student loan debt,” Mayotte says.

Another reason student loan borrowers are getting older is because they now have the option to extend their repayment terms if they are struggling to make payments. The Obama administration rolled out several of these income-driven repayment plans in the years after the Great Recession.

The lasting impact of senior student loan debt

It’s simple to understand how paying student loans leaves less to save for retirement.

“For every dollar that you pay toward your student loan payment, it’s a dollar that you’re not putting toward retirement,” says Mayotte.

Hogg now works as a county social worker and began making payments again in December 2015. She says she’s “been current ever since,” but she has yet to contribute to a retirement plan.

“I’m sure that if I didn’t have the [student] loans, I could have probably set myself up better for retirement,” says Hogg. “Hopefully I’ll be able to stay at my job until I’m vested in their retirement plan.”

Tips for struggling student loan borrowers

If you have federal student loans and are struggling with your payment each month, you may want to consider requesting an income-driven repayment plan through your loan servicer. The plans can reduce your payment to as little as $0. You can also request to defer your loans or place them in forbearance if you’re going through financial hardship. Just keep in mind that interest is still accruing.

“It could be tempting to try to get the lowest payment on your student loans,” says Mayotte. But remember, “you’re trying to win the war and not the battle. The longer you pay over the life of the loan, the more you pay in interest.”

Mayotte recommends creating a budget to figure out the most you can afford to pay toward your loans each month. The Department of Education has a calculator on its website that you can use to see your estimated payments under each repayment plan.

When you’re on a income-driven repayment plan, you should keep in touch with your loan holder, and don’t forget to apply for renewal each year.

Unfortunately, if you have private loans, there’s not much you can do to reduce your monthly payment outside of consolidating or refinancing your loans with a lender like SoFi, Earnest, or LendKey. Mayotte says she sees those with private loans and those who don’t complete their degree or program struggle most with repayment.

“The people that I haven’t been able to help almost exclusively have had private student loan debt,” says Mayotte. She says it’s because they don’t have the many repayment options federal student loans do and “life can happen.”

The final word

Despite her debt burden, Hogg says she’s happy as a social worker and says she doesn’t regret getting her master’s. She regrets that she used student loan debt to finance it.

“I regret that I had that big of a gap in my payments from being unemployed. I just wish there were more grants available for getting a higher degree,” says Hogg.

TAGS:

College Students and Recent Grads, Reviews, Student Loan ReFi

LendKey Student Loan Refinance Review

Advertiser Disclosure

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

LendKey Student Loan Refinance Review

Updated April 13, 2017

Could you imagine trying to find the best student loan refinancing rate from community banks and credit unions on your own? How would you do it? Would you call every bank and credit union and ask for help? What a nightmare.

LendKey has relationships with 300+ community banks and credit unions all over the United States. LendKey* can issue loans to residents in any of the 50 states. This keeps you from having to pound the pavement by your lonesome. LendKey’s website will show you the best rate for refinancing your student loans.

Since 2007, LendKey has been a one stop shop for student loan refinancing. It also offers other types of loans. But for the sake of this review we’ll be focusing on how LendKey takes care of graduates looking to improve their debt situation. Fixed APRs range from 3.25% – 7.26%. Variable rates start as low as 2.43%. (All of these rates include the auto-pay discount). LendKey is one of the top four lenders in MagnifyMoney’s survey of where to refinance your student loan.

Who can benefit from using LendKey? Anyone hoping to refinance their student loans should consider LendKey. It is easy to apply:

Lendkey

Apply Now

 

If you’re on the fence about refinancing, here are some of the benefits to be gained:

Lower Payments

Refinance your way to a more manageable monthly payment.

Lower Rates

Spend less on interest by getting a lower rate than the aggregate of all individual student loans.

Simplified Finances

Making payments on multiple loans to multiple institutions at different times of the month can be quite the hassle. It’s much easier to remember just one payment. Many lenders even let you consolidate both private and federal loans.

Different Repayment Options

Different lenders offer different repayment options. It’s wise to explore all the options to determine what makes the most sense for your particular situation.

Pros of Using LendKey

A Unified Application Process

This is hugely important. With LendKey, you’re not shuffled through tons of screens on different domains – all using different logons and different (confusing!) user interfaces. Within 5 minutes, a person can navigate through LendKey’s application process. This means after 5 minutes, you can see how much you can save by refinancing. You can even choose what loan you want.

Cosigner Release Available

Yes, you can secure a low interest rate and then cut loose your cosigner. Once you prove you are responsible – LendKey no longer needs a cosigner tied to your account. This may help convince a cosigner to work with you initially. They won’t need to be on the hook for long. Once you’ve made 12 full and consecutive on-time payments, your cosigner may be released. LendKey does a credit check and examines your income to see if you are free to go it alone.

No Origination Fee

This is helpful since it means you are free to shop around without feeling committed.

Further Interest Rate Reduction

1% interest rate reduction once 10% of the loan principal is repaid during the full repayment period. This is subject to the floor rate.

0.25% ACH Interest Rate Reduction

Many lenders reduce interest rates by a quarter percent for borrowers who agree to automatic payments.

Federal and Private Loans Can Be Consolidated Together

However, you lose some federal benefits in doing so. Things like free insurance (provided with federal loans if you are killed or severely disabled), public service forgiveness and military service forgiveness as well as income-based repayment plans. Grace periods will likely be omitted when writing the new consolidated loan.

Over 40,000 Borrowers Serviced

As of January 2016, 40,000 people have used LendKey’s services.

Excellent Customer Support

According to cuStudentLoans (which LendKey owns so take this with a grain of salt), 97% of customers are satisfied. Customer support comes out of New York and Ohio. Phone support is available each day from 9AM to 8PM EST.

For what it’s worth, I called into support 5 times at random. The support I received from the sales team was really great. Even the gentleman with only 6 months of experience was quite knowledgeable.

Eligible Schools

This list of eligible schools is 2,200 and growing. Chances are your school is on the list. However, LendKey doesn’t encourage students to submit eligibility requests as other student loan refinancers do.

Return Policy

Yes, you can ‘return’ your loan. LendKey offers a 30 day no-fee return policy to allow you to cancel the loan within 30 days of disbursement without fees or interest. That’s pretty incredible.

Cons

LendKey Doesn’t Give You the Complete Picture

LendKey doesn’t help a lot with stacking institutions against each other. I suppose this is meant to not to play favorites. However, it would be nice to be able to read about each institution within the LendKey interface. I’d still advise opening up another tab to research the banks you are considering.

The Fine Print You May Miss

Since LendKey is a loan matchmaker, there isn’t a lot of fine print on the site. This means a person still needs to review the fine print of each institution before finalizing his or her loan as mentioned before. LendKey does a fantastic job of getting you 90% of the way. But that last 10% of fine print is between you and your lending institution. Read through everything before signing up for a new loan.

I read the Better Business Bureau complaint log for LendKey. There are only 11 complaints in the past 3 years. SoFi (a competitor) has 18 and another competitor, Earnest, has no complaints. These complaints were mostly small misunderstandings between the LendKey support team and the borrowers.

The Application Process

There are four steps to the simple application process. Step 1 is for estimating monthly payments for a private student loan. It’s simple. You identify the amount you’d like to borrow and fill in a radio button indicating your credit is fair, good, or excellent. The last part is where you enter which state you live in. This is because many programs are state specific. Step 1 takes 1 minute.

Step 2 takes 2 minutes. This is the step where you compare the rates and offers available to you. Choose what works best for your unique situation.

Step 3 again only takes 1 minute. This is the actual application. As mentioned earlier in this article, this process is done through the LendKey interface. And don’t worry, information inputted into LendKey is safe (privacy policy).

Step 4 takes 10 minutes. This is the step where a person verifies identity, school, and income (screenshots/pictures work so there’s no hassle with scanning!). You will know if you are approved during this step.

As with any company, there are competitors. Here are two worthy rivals also worth considering:

Alternatives to LendKey

SoFi

SoFi stands out with a job placement programs, free wealth management for borrowers and even a dating app. More importantly, SoFi has low interest rates, with variable rates starting at 2.355% and fixed rates starting at 3.375%.

SoFi logo

Apply Now

Earnest

If you have a low credit score but have potential to earn a good income, Earnest will treat you well. Earnest looks beyond a simple credit score. The application process examines employment history, future earning potential and overall financial situation.

Earnest seems to take a very personal approach to each customer. A customer states an amount they can pay each month and Earnest will give them a loan, accordingly. Earnest also lets borrowers skip a payment each year. This could come in handy if money gets tight around the holidays. Just keep in mind, this can increase your future payments to compensate for the missed on.

Fixed interest rates start at 3.75% and variable interest rates start at 2.55%.

However, Earnest isn’t available for all US residents.

Earnest

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Final Thoughts

LendKey runs a fantastic student loan refinancing division. The company offers many, many customizable options with very few downsides. With no application fee, it’s worth seeing what this student loan refinancing powerhouse can do for you.

Lendkey

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College Students and Recent Grads, Featured, News

How to Renew Your Income-Driven Repayment Plan

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Student Loan Borrowers: Here's How to Renew Your Income-Driven Repayment Plan

If you are on an income-driven repayment plan, it’s important to know that you must renew your plan each year in order to remain enrolled. And waiting on your student loan servicer to remind you of that fact isn’t the smartest idea

The Consumer Financial Protection Bureau recently filed a lawsuit against Navient, the country’s largest loan servicer. Among many other claims, the CFPB alleged Navient failed to adequately inform borrowers of their need to renew their income-driven repayment plans.

The outcome of the CFPB’s lawsuit is still unknown. Navient has already taken steps to improve communication with borrowers around repayment plan renewal time. Even so, the news serves as a prime example of why you should learn the details of the income-driven repayment renewal process on your own.

How to Renew Your Income-Driven Repayment Plan

The DOE began offering income-driven repayment, or IDR, in 2009 to help ease the burden of student loans on borrowers struggling to repay federal student loans. If you can meet certain income or family criteria, you could pay as little at $0. Another important benefit is for the first three years after enrollment, many borrowers qualify to have the federal government pay part of the interest charges if they can’t make payments.

IMPORTANT: If you are on an income-driven repayment plan, you have to renew your plan each year.

This will require you to submit updated information about your annual income and family size to your servicer. The time to renew your plan is typically a month or two before the 12-month mark.

If you do not renew your income-driven plan, you’ll get kicked out of your IDR plan and your payment may increase since it will no longer be based on your income.

There are two ways you can renew your IBR plan:

  1. Visit the Federal Student Aid website at studentloans.gov: This is the fastest and generally the most convenient way to renew your plan.

Steps:

  1. When you get to the website, follow the “Apply for an Income-Driven Repayment Plan” link. You will follow the same link if you need to renew your IBR. The form will prompt you to select a reason for your request once you begin.

Select “Apply for an Income-Driven Repayment Plan” to get started:

Select “Apply for an Income-Driven Repayment Plan” to get started

Choose “submit recertification”:

Choose “submit recertification”

  1. The application will ask you for information such as your marital status, household size, employment, and income. Once you are on the “Income Information” section, you’ll have the option to retrieve and use your most recent income information from your taxes if you filed them with the IRS.

Choose the “annual recertification” option:

Choose the “annual recertification” option:

The application asks for your personal information:

The application asks for your personal information

  1. Follow up with your loan servicer. If you have loans with multiple servicers, you only need to submit the request once. They should all be notified when you renew online via the Federal Student Aid site. Below is an example of a completed submission with one servicer; your other servicers will be listed if you have multiple servicers.

Completed submission:

screen shot 12

  1. Use the Income-Driven Repayment Plan Request form

Use the Income-Driven Repayment Plan Request form

Steps:

  1. Download the official income-driven repayment plan renewal form here on the Federal Student Aid website or on your servicer’s website.
  2. Once you print and complete the form, you can submit it to your servicer’s website if they allow. Navient allows you to upload the completed form. You also have the option to mail or fax the paperwork to your loan servicer.
  3. Your servicer should notify you once your request has been processed.
  4. You should be able to monitor the status of your renewal on your student loan servicer account.
  5. If you mail or fax the paperwork to your servicer, you’ll need to mail one to each servicer individually as they will not be automatically notified of your request.

How to Enroll in an Income-Driven Repayment Plan

The first time you apply for an IDR plan, you can either do so through the government’s website at studentloans.gov or contact your student loan servicer to help you enroll. You’ll need to log in to the platform and follow directions to fill out the application. It should take about 10 minutes, although you may be asked to mail in supplemental documentation to your servicer for review.

You can use the studentloans.gov website repayment estimator to estimate how much your payments, interest, and total amount paid would be under each plan option.

Repayment estimator results from studentloans.gov

Repayment estimator results from studentloans.gov

Your servicer will notify you once your request has been processed.

Choosing an Alternative Income-Driven Repayment Plan

When you renew your IDR plan, you can check to see if you’d qualify for alternative payment options. You might find an alternative could work better for your budget.

In addition to the two standard repayment and graduated repayment plans, borrowers have five income-driven repayment plans to choose from. It’s important to note that under most IDR plans, you’ll pay more over time than you would under the standard plans.

Here’s a quick rundown of each:

1. Income-Based Repayment Plan

The traditional income-based repayment plan generally caps your payment at either 10% or 15% of your discretionary income. Your payments will never be more than what they would be on the standard 10-year plan. Payments are recalculated each year and are based on your updated income and family size.

After 25 years of payments, your loan balance is forgiven, although you’ll have to pay taxes on the forgiven amount when you file your taxes for the year.

2. Pay As You Earn (PAYE) Plan

Pay As You Earn increases your monthly payment as your annual earnings increase, but generally sets your monthly payments at about 10% of your discretionary income. Only those who took out their first federal loan on or after October 1, 2010, or who received a direct loan disbursement on or after October 1, 2011, can qualify for the PAYE plan. Applicants must also have a partial financial hardship (disproportionately high debt compared to current income). Your payment is recalculated annually based on your updated income and family size. The loan’s outstanding balance is forgiven after 20 years.

3. Revised Pay As You Earn (REPAYE) Plan

The Revised Pay As You Earn Plan expanded the PAYE plan to about 5 million more borrowers. You may qualify for REPAYE regardless of when you took out your first federal student loan. It doesn’t require you to have a partial financial hardship. REPAYE generally sets payments at about 10% of your discretionary income and doesn’t cap income. Spousal income is considered in calculating payments no matter how you file your taxes. Under this plan, undergraduate loans are forgiven after 20 years, while graduate loans are forgiven after 25 years.

4. Income-Contingent Repayment (ICR) Plan

This plan caps your monthly payment at either 20% of your discretionary income or the amount you would pay on a two-year fixed payment plan, adjusted for your income. The payments are recalculated each year and based on updated income, family size, and the amount you owe. After 25 years of payments, your balance will be forgiven.

5. Income-Sensitive Repayment Plan

The income-sensitive repayment plan serves as an alternative to the ICR plan for those who received loans via the Federal Family Education Loan Program (FFELP). It makes it easier for low-income borrowers to make their monthly payments. Under the ISR plan, you can make monthly payments based on your annual income for up to 10 years. The payments are set at 4% to 25% of gross monthly income, and the payment must be larger than the interest that accrues.

Currently, Federal Direct loans and Direct PLUS loans qualify for both IBR plans, but private loans and Parent PLUS loans do not qualify. Read more about your repayment options here.

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College Students and Recent Grads, Featured

The Pros and Cons of Subsidized Student Loans

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After you fill out the Free Application for Federal Student Aid (FAFSA) and apply to colleges, you’ll start getting financial aid award letters from each school that explain the types of aid you’re eligible to receive.

One of the offers you may get is the opportunity to take out subsidized student loans. These loans can be incredibly helpful in the right circumstances, but before making any decision it’s important to understand what they are, how they work, and how they compare to your other options.

What Are Subsidized Student Loans?

Subsidized student loans are federal loans offered to undergraduate students who have demonstrated financial need, meaning that the cost of the school they are applying to exceeds their expected family contribution.

The big benefit of subsidized student loans is that the government pays the interest on the loan while you are in school, for the first six months after you graduate, and during any periods of deferment.

With other student loans, including unsubsidized federal student loans, the interest accumulates while you are in school (assuming you aren’t making payments), which increases the loan balance that you eventually have to pay back.

All of which simply means that subsidized student loans are less expensive and easier to pay back than most other types of student loans.

Who Is Eligible for Subsidized Student Loans?

One of the downsides of subsidized student loans is that not everyone will qualify for them. Generally, you have to meet the following criteria in order to be eligible:

  • You must be enrolled at least half-time in an undergraduate program participating in the Direct Loan Program that leads to a degree or certificate. Graduate students are not eligible for subsidized student loans.
  • You must demonstrate the need for financial help in paying for school. This is done by completing the FAFSA and comparing your expected family contribution to the cost of attending school. You might qualify for subsidized student loans at one school and not at another if the cost of attendance is different.

If you are eligible, the school will determine the amount that you qualify for and will let you know how much you’re eligible to borrow as part of your financial aid package.

The Benefits of Subsidized Student Loans

If you’re going to borrow money for school, it generally makes sense to take advantage of any subsidized student loans you’re offered before borrowing elsewhere.

The biggest reason is that you’ll save money by not having interest accrue while you’re in school and for the first six months after you graduate. Depending on interest rates and the amount you borrow, you could save anywhere from a few hundred to a couple of thousand dollars over other types of loans.

Subsidized student loans also offer protection in case you run into financial trouble. They are eligible for income-driven repayment plans where your monthly payment is limited based on your income, and you may even be eligible for forgiveness. Also, the interest is subsidized during periods of deferment, meaning that you won’t be penalized for periods of financial hardship.

Finally, interest rates on subsidized federal loans are currently low and are fixed for the life of the loan, making them a relatively cheap borrowing option.

The Drawbacks of Subsidized Student Loans

Of course, there’s no such thing as a free lunch, and subsidized student loans come with some drawbacks as well.

The biggest is simply that no matter how many attractive features they offer, you’re still taking on debt. And while it’s certainly possible that the benefits of the education you receive will outweigh the costs, taking on debt is always a decision that should be made carefully.

The second is that you’re limited in the amount that you can borrow. Currently, most students are limited to taking out $3,500 in subsidized student loans in their first year of school, $4,500 in their second year, and $5,500 in their third and fourth years. This isn’t a reason to avoid subsidized student loans, but it does limit their usefulness.

Finally, only students who demonstrate financial need will qualify for subsidized student loans. Depending on the results of your FAFSA and the cost of the school you’re applying to, you may not be eligible.

Should You Take Out Subsidized Student Loans?

The decision to take on debt is a big one, and there’s no one-size-fits-all answer. The right move for you will depend on the specifics of your situation, your goals, and the options available to you.

With that said, here’s how you should think about it:

  1. Do your best to pay for school without debt. This could mean a combination of using savings, paying from cash flow, taking advantage of scholarships and grants, and attending a lower-cost college.
  2. Before taking on any debt, evaluate what the potential benefits of going to a higher-cost school might be. Will it lead to a more enjoyable career? Will it lead to increased income? If so, how much more can you expect to earn? Try to imagine a best-case scenario, worst-case scenario, and middle-of-the-road scenario to get a sense of all possible outcomes.
  3. Compare those potential benefits to the cost of taking on debt. How likely is it that the benefits will outweigh the costs?
  4. If you decide that student loans are the right choice, subsidized student loans are a good option. The cost savings and protections against future financial hardship are hard to beat.

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Building Credit, College Students and Recent Grads, Credit Cards, Featured

Here’s the Right Way to Use a Student Credit Card

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Here's the Right Way to Use a Student Credit Card

Credit cards can be a great way to build your credit while in college. But if you aren’t careful, they can quickly turn into a seductive debt trap, sending you down a path to poor credit.

If you are an inexperienced borrower, you could easily spend more than you are able to comfortably pay back each month and end up in delinquency or being hounded by debt collectors. You also run the risk of ruining your credit score before you really need it for important purchases after college.

If you’re ready to start building your credit, then that’s great. Before you do, you should get a good idea of what you’re getting yourself into before you apply for a credit card.

What Is a Student Credit Card?

A student card is a credit card specially designed by a lender to get college students started with credit. It helps them build a relationship with customers early on and helps you build your credit score.

The major difference between a student credit card and a regular credit card is that the student card will likely have a higher interest rate. That’s because the bank has no way to prove you are a reliable borrower yet since you have little to no credit history. Regular cards tend to average about 15% annual interest. In a recent MagnifyMoney study, we found the average student credit card carries an interest rate of 21.4%.

Why Should I get a Student Credit Card?

Your goal with your student credit card is to build your credit so that by the time you graduate, you have a healthy credit score in the high 600s to mid 700s. That way, when you graduate, you’ll be in a great position to make larger purchases like a new car or your first home. At that point you may actually want to earn rewards, and you’ll qualify for the best cards because you have a great score.

Many people look to credit when they need extra money.

However, you should only get a credit card if you want to build your credit score, not because you need extra money to make ends meet. This is important, so we’re going to repeat it again: You should only get a credit card if you want to build your credit score, not because you need extra cash to make ends meet.

If you can’t afford your monthly expenses as it is, a credit card might only make things worse. When you take out a credit card, you are paying a company to lend you money for a short while. If you can’t afford to pay the full balance on your card before your bill is due, the bank or credit card company will charge you interest.

Let’s say you charged $300 to your student card for books at the start of the semester. If you made a minimum monthly payment of $9, it would take four years and four months to pay off a card with a 21.4% annual percentage rate (APR). At that point you would have paid a total of $460, assuming your books were your first and only charge on the card.

Choosing Your First Credit Card Wisely

Because you likely have little or no credit history, your main goal with a credit card should be to build your credit score. There are two main criteria you should look for when shopping for your first credit card:

  1. No annual fee

Choose a card that has no annual fee, first and foremost. You shouldn’t worry about finding a card with the best rewards or even the best interest rate. You’re not getting a card for the perks, and since you don’t have much credit history, a low APR isn’t really an option for you right now.

You just need to make sure that the card won’t cost you anything annually to build your credit. Carefully read the fine print. Some lenders may waive the fee for a period, then start charging you.

  1. Easy to set up auto-pay

This next point is almost as important: look for a card that has an online platform that makes it easy to set up automatic payments. This will make it easy to make sure you pay your bill each month.

Three no fee options with well rated smartphone apps for easy payments are the Citi ThankYou Preferred Card for College Students, and Capital One Journey.

Your limit may not be very high as a student, but that’s fine because this card is for practice and to build your score. Your limit will likely land somewhere between $500 and $2,000.

The key is to make all your payments on time, and in full each month, which is why having a reliable smartphone app from your credit card provider is so important. Otherwise, penalty interest rates on these card are 29% or more.

You may also want to check with your parent’s credit union to see if they have a student credit card. The mobile apps aren’t always as easy to use for payments, but they can have lower rates in case things go wrong and many credit unions allow parents to cosign for students under 21.

Justice Federal Credit Union’s student card has a 0% rate for 6 months, and a  fixed 16.9% APR afterward with no annual fee. It allows parents to co-sign and anyone can join Justice credit union by becoming a member of the Native Law Enforcement Association for $15. You can apply for the card before you take care of membership formalities.

Since the implementation of the Credit CARD Act in 2010, lenders have been barred from promoting student credit cards on college campuses. As a result, the number of student credit card accounts have fallen by more than 60%. The Consumer Financial Protection Bureau found in its 2016 Campus Banking Report that lenders and institutions have shifted their partnerships to checking accounts or prepaid debit cards loaded with fees instead.

Using Your First Credit Card

Focus on making consistent, on-time payments, and keeping your credit utilization — that’s how much of your total credit limit you use — as low as possible. You should aim to use no more than 20% of your total limit. For example, if you have a credit card limit of $500, you should never charge more than $100 at a time to your card.

On-time payments and utilization make up 60% of your credit score, so it’s a big deal to miss a payment or max out your card.

Automation makes it very, very easy to achieve both these goals.

  1. When you get your card, figure out what 20% of your credit limit is. Example: 20% of $200 is $40.
  2. Find something that you pay for each month that costs less than that. This might be a payment for a streaming service such as Hulu, Netflix, or Spotify.
  3. Set up your account to take the payment from your credit card each month.
  4. Set up your checking account to pay your credit card balance each month.

After you set up all of the payments, you can forget about using your credit card. The automation is doing all of the work for you. Stash it somewhere safe (not your wallet) so that you won’t be tempted to use it.

Sit back and watch your score grow with free tools such as Credit Karma or the Discover Credit Scorecard. By the time you graduate, you should easily see your credit score in the high 600s or mid-700s.You’ll also have demonstrated your self-discipline and responsibility to banks, and will have an easier time getting a loan for a car or mortgage.

5 Other Ways to Build Your Credit Score

There are plenty of other ways to build your credit score if you aren’t quite ready to take on the responsibility of a credit card.

Become an authorized user on your parent’s credit card

Ask your parent to add you as an authorized user on one of their credit cards. If you are an authorized user, the behavior on that card (spending, payments, etc.) will be reported on your credit report as if it were your own, helping you build your credit. This strategy could also backfire. If your parents don’t use credit responsibly, it could hurt your credit score in turn. Negative behavior — even if it isn’t yours — will be reported as if it were yours as well.

Get a secured credit card

A secured card is a simple way to start building your credit history. This card can help prove to lenders you can be responsible without a lender having to take much risk. You’ll put down a deposit, and the lender will give you a line of credit. Typically, your line of credit will equal the amount of your deposit.

Get a co-signer

If for any reason you don’t qualify for a credit card on your own, you might be able to ask someone to co-sign the agreement with you. Big banks generally don’t offer this, but some credit unions like the Fort Knox Credit Union allow parents to cosign for students under age 21.

That means that they will be responsible for the payments if you can’t pay them. If you go this route, you’ll need to be very careful to only charge what you can afford to pay off each month. If you miss payments, it will negatively affect both of your credit scores.

Get a credit-builder loan

A credit-builder loan is similar to a secured credit card, but it requires no down payment. These loans are typically only offered by community banks and credit unions. When you are approved, the bank will deposit your loan in a savings account for you. You can’t access it until you’ve paid the loan back, however.

Build credit with rent payment

Paying your rent on time can help you build your credit score if it’s reported to the bureaus. Ask your property management company or landlord if they report rental payment data to Experian, TransUnion, or Equifax rental bureaus.

If they don’t, you can ask them to either start reporting or you can sign up for a rent payment service like PayLease or RentTrack that will let you pay for your rent online and give you the option to report your payments to the bureaus. The rent payment information will be included on your standard credit report and can help you build a score without a credit card.

A Final Word of Advice

We had to add this, because we know you just love it when a professor keeps talking after the lesson is over. But really, this is important so pay attention.

If you don’t think you have the self-discipline to handle a credit card right now, then don’t get one. College is full of opportunities to be a present hedonist — to say YOLO — and having a credit card can make it tempting to spend money you don’t really have.

Rebuilding your credit takes a long time and can get very expensive. It’s not worth ruining your credit score, and it will make it a lot harder to make those larger purchases when you graduate. If you can’t be disciplined enough to keep your utilization low and make your payments on time, then don’t get a credit card. You will have plenty of opportunities to build your credit after college.

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College Students and Recent Grads

The Ultimate FAFSA Guide: Maximize Federal Student Aid for College

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Over the past decade, college tuition rates rose an average of 5% per year. The average bachelor’s graduate in 2015 had over $35,000 in student loan debt. To graduate without burdensome debts, students must maximize their aid options. This means understanding the Free Application for Federal Student Aid (FAFSA), and using their knowledge to maximize student aid.

Starting with the 2017-2018 FAFSA, maximizing federal aid is easier than ever. The U.S. Department of Education now allows access to the FAFSA three months earlier (October rather than January). Applicants will also use an earlier year for income and tax information. This means it’s easy to incorporate FAFSA into the college application timeline.

What is the FAFSA?

The FAFSA is the Free Application for Federal Student Aid. It’s a dense form that students must complete to receive federal student aid.

The form ensures that federal student aid goes to students with the greatest need. However, this does not mean that only low-income families should fill out the form. Filling out the FAFSA is the only way to receive access to low-cost federal student loans. The FAFSA also gives families access to some scholarships, grants, and work-study programs. Some schools require a completed FAFSA for a student to apply for merit-based aid.

What do I need to fill out the FAFSA?

Filling out the FAFSA may seem daunting, but proper preparation will help families complete the application with minimal stress. One of the most important ways to ease the stress is to gather documents from the appropriate time. Use the chart below as a reference guide to understand the appropriate documents.

School attendance window FAFSA form FAFSA availability Income and tax year Assets and liabilities Born before this date for independent student status Homeless or self-supporting and at risk of homelessness after this date for independent status
July 1, 2016-June 30, 2017 2016-2017 January 1, 2016-June 30, 2017 2015 As of filing FAFSA January 1, 1993 July 1, 2015
July 1, 2017-June 30, 2018 2017-2018 October 1, 2016-June 30, 2018 2015 As of filing FAFSA January 1, 1994 July 1, 2016
July 1, 2018-June 30, 2019 2018-2019 October 1, 2017-June 30, 2019 2016 As of filing FAFSA January 1, 1995 July 1, 2017
July 1, 2019-June 30, 2020 2019-2020 October 1, 2018-June 30, 2020 2017 As of filing FAFSA January 1, 1996 July 1, 2018

Here’s a checklist of items you’ll need before filling out the FAFSA.

All Students

  • Social Security number
  • Alien registration number (if you are not a U.S. citizen)
  • Student’s federal income tax returns from the appropriate year
  • Student’s prior year W-2 or other earning statements from the appropriate year
  • Student’s records of untaxed income from the appropriate year
  • Student’s bank statements (checking, savings)
  • Student’s non-retirement investment account statements (after tax brokerage, 529 accounts, Coverdell ESA accounts, CDs, money market accounts)
  • Student’s record of non-taxed income (including income gifts that come from 529 plans owned by grandparents, income gifts to pay tuition, etc.)
  • Student’s records for investment real estate
  • An FSA ID to sign electronically

Dependent Students Only

  • Parent’s federal income tax returns from the appropriate year
  • Parent’s W-2 or other earning statements from the appropriate year
  • Parent’s records of untaxed income from the appropriate year
  • Parent’s banking and checking account statements
  • Parent’s non-retirement investment account statements (after tax brokerage, 529 accounts, Coverdell ESA accounts, CDs, money market accounts)
  • Parent’s records for investment real estate (not personal home)

Most students will be considered dependents. This is true even if a student is self-supporting for a period of time prior to starting college.

To be classified as independent, a student must meet one of these qualifications:

  • Student turns 24 prior to January 1 of FAFSA start year (see chart above)
  • Student is starting postgraduate studies
  • Student is on active military duty (not for training purposes or for state service only)
  • Student is a military veteran
  • Student supports dependent children
  • Student is a legally emancipated minor
  • Parents died after age 13, foster child after age 13, or dependent or ward of the state after age 13
  • Student is homeless or self-supporting and at risk of homelessness after July 1 in the year prior to start year (see chart above)

When are the FAFSA deadlines?

College students need to fill out the FAFSA every year that they want to receive federal financial aid. A traditional student who spends four years in school can expect to fill out the FAFSA four times through their college career.

Starting with the 2017-2018 FAFSA, the U.S. Department of Education extended the FAFSA deadlines. Previously, the U.S. Department of Education released the FAFSA on the January 1 prior to the attendance window. Applicants could complete the form from January 1 through the end of the attendance window.

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Now, the U.S. Department of Education releases the FAFSA on October 1 prior to the attendance window. You may complete the FAFSA from the date it is released until the end of the attendance window. You can retroactively receive grants and loans for the school year provided that you complete the FAFSA by the end of the attendance window.

Deadlines for state and institutional aid

State and institutional aid organizations are not as lenient as the U.S. Department of Education. Most states require aid applicants to complete their FAFSA as soon after October 1 as possible. You can check your state-specific deadline on the FAFSA website.

Most states have just one FAFSA deadline, even if you plan to attend school on a delayed schedule. Often states give out aid on a first come, first served basis. Do not delay completing the FAFSA. You can work out changes based on your attendance after you’ve completed the FAFSA.

In general, you want to file the FAFSA as soon as you can to maximize institutional aid. Many universities grant institution-specific aid shortly after accepting students. Submit your FAFSA to all potential schools soon after you apply. Even if a school hasn’t accepted you yet, you should allow them to see your FAFSA responses.

Filling out the FAFSA alone may not be enough to get aid from your state or school. Many states require that you fill out additional forms to receive state-based aid. The most common form is the College Scholarship Service (CSS) profile. The CSS profile considers more data, and it offers students and their families the opportunity to flesh out their financial situation.

The CSS profile and other financial aid applications DO NOT replace the FAFSA. To get any federal student aid, you must fill out the FAFSA. You may also need to fill out additional forms. The Edvisors Network maintains a comprehensive list of state-based scholarships and grants. Students can research the forms that their state requires.

Students who are seeking college-based aid may have to complete institutional applications. These applications may be in addition to the FAFSA or in lieu of it. If aid details aren’t clear from the school’s website, contact the financial aid department to learn more. Many students find that their best chance at institutional aid comes right after applying to the school.

What happens after I fill out the FAFSA?

Three to five days after you complete the FAFSA, you will receive a Student Aid Report via email. This report is what schools will use to determine your eligibility for federal (and sometimes other) student aid.

Decoding your Student Aid Report

The most important number on the FAFSA is your Expected Family Contribution (EFC). Your family’s EFC is the amount parents and students are expected to allocate toward educational expenses. This amount can vary from zero dollars to more than the expected cost of college. This number is in the upper right-hand corner of the Student Aid Report.

In general, the lower your EFC, the more federal aid you will receive. Your specific eligibility for federal aid depends on your school’s cost of attendance.

The Student Aid Report also includes a Data Release Number (DRN). You will need this four-digit code to allow your school to change certain information on your FAFSA.

In addition to these two numbers, you will see your responses to questions on the FAFSA. If you find a mistake, you will need to correct it on FAFSA.gov. You can use your FSA ID to log in and submit changes. If your situation changes (such as the number of people in your parents’ household or your dependency status), you will need to update your FAFSA because it will change your EFC.

Schools submit awards packages to you

The U.S. Department of Education will send your Student Aid Report to any schools you have listed on your FAFSA. If you apply for another school after completing the FAFSA, you should log in to FAFSA.gov to submit your Student Aid Report to that school.

Once you’ve been accepted to the school, the school will use the EFC and their cost of attendance to determine your eligibility for federal aid. The school will send you a report that includes your eligibility for federal grants, subsidized and unsubsidized loans, and work-study programs. They may also send you details about other financial awards that you’ve received from the state or the institution.

You may need to contact the financial aid office at a school to see if you’re eligible for any scholarships or grants that they didn’t list. Be proactive in meeting other financial aid deadlines defined by your school’s financial aid office. Completing the CSS profile or institutional applications may allow you to earn more scholarships or grants or better loan rates. Check with schools where you’ve been accepted and your state’s website to learn more.

You can receive awards packages from multiple schools, even if you haven’t enrolled. Compare the awards packages to find the most cost-effective education. The federal aid will remain the same in every package, but the state and institutional aid can have a huge effect on your out-of-pocket costs.

Accept or decline aid

Once you choose a school, you will need to decide whether or not to accept the various forms of aid. Most people will accept grants and scholarships since those do not need to be paid off.

You will need to decide if accepting federal work-study or loans is best in your circumstances. You can work closely with a financial aid officer from your school to understand the pros and cons behind these options.

Once you make a decision, you’ll have the option to accept aid (including loans) through an online platform offered by your school.

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How is my federal aid package determined?

Federal aid is awarded based on expected family contribution (and to a lesser extent the cost of attendance at your chosen university). A lower expected family contribution means you’ll get more aid, including subsidized loans and possibly a Pell Grant for low-income students.

The expected family contribution accounts for four variables:

  • Student’s income (and spousal income for independent students)
  • Student’s non-retirement assets (and spousal income for independent students)
  • Parent’s income (for dependent students)
  • Parent’s non-retirement assets (for dependent students)

Parents and students can shelter a limited amount of their income and assets from the EFC. The sheltering limits change each year, and they are published within the FAFSA application.

Students are expected to contribute 50% of their income after sheltering. They are expected to contribute 20% of nonsheltered assets to their educational expenses. Students cannot shelter as much income or net worth as parents.

Parents are expected to contribute 22% to 47% of income after sheltering. They are expected to contribute 12% of nonsheltered assets.

Using the EFC and an expected cost of attendance, the U.S. Department of Education appropriates funds. The FAFSA4caster will help you determine your current EFC and an expected aid package based on current costs of attendance. This is a useful tool for students who are more than one year out from starting college.

Full-time students with an EFC less than $5,200 can expect to receive a Pell Grant worth between $600 and $5,185.

Students who demonstrate financial need (those with a cost of attendance greater than their expected family contribution) will be eligible for either direct subsidized or direct unsubsidized loans. Both loans for undergraduate students have an interest rate of 3.76%. Graduate students will pay 5.31% on their direct unsubsidized loans.
The federal government places limits on direct borrowing. The limits are in the table below. If you need to borrow more money, you will have to look to federal PLUS Loans (higher interest rates), private loans, or covering educational expenses through other means.

Year Dependent Student Limit Independent Student Limit
First Year Undergraduate $5,500 (up to $3,500 subsidized) $9,500 (up to $3,500 subsidized)
Second Year Undergraduate $6,500 (up to $4,500 subsidized) $10,500 (up to $4,500 subsidized)
Third Year + Undergraduate $7,500 (up to $5,500 subsidized) $12,500 (up to $5,500 subsidized)
Undergraduate Student Total Limits $31,000 (up to $23,000 subsidized) $57,500 (up to $23,000 Subsidized)
Graduate Students N/A $20,500 (unsubsidized only)
Graduate Student Total Limits N/A $138,500 (up to $65,500 in subsidized loans). Aggregate amount includes totals from undergraduate studies.

How can I maximize my federal aid?

You must use accurate information when you complete the FAFSA. However, careful planning and understanding the FAFSA can help you maximize your aid. Keep these steps in mind as you apply for aid.

Avoid common FAFSA errors

It’s easy to make errors when you’re filling out a 100+ question application, and the wording on the FAFSA can be unclear. These are mistakes to avoid.

  • Factor deductions out of your adjusted gross income (AGI): Questions 36 and 85 on the FAFSA ask for adjusted gross income.
    • A lot of people forget to take out their deductions when they report AGI. Your AGI should not include contributions to certain retirement accounts, contributions to a health savings account, or college tuition, fees, or student loan interest (with limitations). Use these directions to be sure you’re using the right numbers.
  • Some income from work is sheltered: Questions 39, 40, 88, and 89 ask about income earned from work.
    • This is not the same as your adjusted gross income. The FAFSA uses this number to determine how much of your income can be sheltered. The more income you earn from work, the more you can shelter. Use these formulas to list the correct number.
  • Understand the value of your investment assets: Questions 42 and 91 request the value of your investment assets.
    • Don’t include retirement accounts or educational accounts. The value of real estate should factor in debt (and your personal home should be excluded). Cash value in life insurance policies are not considered investment assets.
  • Your business and farm values are likely zero: Questions 43 and 92 ask for the value of investment farms or small businesses.
    • Most families will have a value of zero. Unless you employ more than 100 employees or your family has less than 50% of the voting rights, you don’t need to declare this. Likewise, farms can be excluded if you live and work on the farm.

If you’re not sure, what a question means, use the guide Completing the FAFSA to understand the definition. The wording of questions leads a lot of people to overestimate their EFC.

In addition to avoiding errors, careful planning can help you reduce your EFC and maximize your aid.

Reduce your assets

One of the best ways to reduce your EFC is to reduce the assets that you declare on the FAFSA. You can do this without destroying your wealth. These are a few options to consider.

  • Pay down consumer debt (reduces available cash).
  • Don’t cash out a life insurance policy.
  • Carry debt on rental properties rather than a personal house (your personal house isn’t an asset that the FAFSA considers, but rental properties are).
  • Accelerate needs-based purchases (reduces cash for spending you would have done otherwise).
  • Contribute money to retirement accounts.

Reduce your income

Smart income planning will help keep your EFC low. These are a few ideas that can help reduce the amount of income counted on the FAFSA.

  • Ask grandparents to delay financial help until the last year of school. Gifts from relatives are untaxed income that need to be declared on the FAFSA. The last year of school won’t appear on the FAFSA, so a gift in the last year goes a long way.
  • Avoid realizing capital gains (selling a rental property or a brokerage account) until the last year of college. Capital gains cannot be sheltered, and they are counted toward income. Most families should not realize capital gains during the college years to avoid FAFSA penalties.
  • Contribute to a pre-tax retirement plan like a 401(k) or a Traditional IRA.
  • Contribute to a health savings account.

Increase your ability to shelter income and assets

The FAFSA allows families to shelter some portion of their income and assets. Taking full advantage of these shelters may lead to more aid. These are a few things to consider.

  • Parents with small businesses should hire their students for up to $6,400 worth of work. This reduces parents’ income by $6,400 and increases the student’s income up to the sheltered amount for dependent students.
  • Parents of dependent students should keep assets in their name. Dependent students have to contribute 50% of available assets as opposed to 12% of parents’ available assets.
  • Delay college until independence. Students who get married or wait until age 24 to start college will not have to consider their parents’ income or assets.
  • Invest more in the family farm or business. A family farm or family business can help you build wealth, and you don’t have to declare these on the FAFSA.

Avoid high-cost strategies

Some families get tricked into high-cost strategies that don’t pay off. These are a few that you should avoid.

  • Don’t take out a whole life insurance policy. A whole life insurance policy reduces your available cash, but it comes at a high commission cost. Don’t bother purchasing one unless you actually want whole life insurance coverage.

Don’t try to shelter assets in a trust. A trust where you or your child is a named beneficiary needs to be declared on the FAFSA. It’s difficult to get around this. Unless you have a specific need for a trust, don’t create one.

How can I use FAFSA to plan for college costs?

The FAFSA is not a college-cost planning tool, but you can use other tools to plan for upcoming college costs. College Navigator offers free information on current college costs. Using it with estimated aid from the FAFSA4caster will give high school students a good idea of their aid options. You could also consider using a paid tool like EFC Plus for an easier college-planning tool.

Parents and students looking to keep student loan debt low will benefit from using the Family Budget Analyzer, which can help you find places to cut expenses. A college cost projector will help you know the costs that your family needs to cover. Sallie Mae also offers a long-range planning calculator that can help you estimate your total indebtedness upon college graduation.

Understanding the FAFSA is one small part of planning for college costs. It will pay for you to understand it, but federal aid is just one component of the college-planning picture. Most students will need to devote time to finding a cost-effective education and applying for grants and scholarships to supplement federal aid.

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How to Make a Payment On Your First Student Loan Bill

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The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

How to Make a Payment On Your First Student Loan Bill

So, you just received an email about your first student loan bill and need to make a payment? Don’t panic. Student loan payments are not as big and bad as they seem … if you’re prepared for them.

If you’re facing your first student loan payment due date and have no idea how to make a payment – or you don’t know if you can even afford a payment – this guide is for you.

Where did this student loan bill come from?

For the first six months after you graduate, your student loans are in a six-month grace period. That means you won’t have to make any payments. When that grace period ends, it’s time to start paying back your loans.

Here is an example from the FedLoan Servicing (PHEAA) website.

FedLoan Servicing (PHEAA) website

Get to know your loan servicer

The loan servicer is the company you will pay each month. The government has contracts with nine different loan servicers. You may have all of your loans with one servicer or several.

The servicer handles all of the billing and services associated with your loan, such as alternative repayment and consolidation. They can also give you general information about how, when, and how much to pay each payment period.

You can find out who your loan servicer is by creating an account or logging in to the federal student aid site. When you’re logged in, you’ll have access to information about your loan servicer and how to contact them.

It’s important to understand who they are and how to get in contact with your servicer. Be sure you sign up for electronic notices and add their email to your “safe” list so your important correspondence won’t wind up in your spam filter. Maintaining a good relationship with your servicer by responding to emails, letters, and calls from them and making each payment on time is helpful in the event that your circumstances change and you need to ask for deferment or forbearance.

Making your first payment

All of the loan servicers allow you to make payments online, by mail, or over the phone. Some servicers, such as Great Lakes, FedLoan Servicing, and Nelnet, even let you pay with a mobile app. You can go to your loan servicer’s website and create an account with them to find your payment options. The amount you pay will vary depending on the principle, length, interest rate, and the repayment plan that you choose.
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BONUS: Many servicers offer up to .25% off of your loans’ interest when you set up automatic payments.

How much should I pay each month?

You should at least make your minimum payment, if you can. Many people will have multiple loans to repay, and you should at least meet the minimum payment for each loan. If you miss a payment, you will badly damage your credit score. That can make it difficult to get approved for new credit, get an auto loan, or even be approved to rent an apartment.

When is my bill due?

Your due date will be on your first bill statement. Lenders often allow borrowers to choose a due date that better suits their finances.

Should I pay more than I owe?

The quicker you pay back your loan, the less you will pay in interest charges. Use this tool to see how making larger or smaller monthly payments will impact the cost of your loan. You can make larger payments if you want to pay off your loan faster, but make sure you have paid off expensive debt like credit card debt first. Credit card debt likely has a much higher interest rate than your federal student loan debt, and it doesn’t come with all the flexible repayment perks as your student loans.

If you have extra cash on hand — after you have met your minimum payment requirement, you’ve met all of your other debt obligations, and you’ve set aside cash for savings  — it could be wise to put it towards your student loan debt.

Target the loan that has the highest interest rate with extra payments you make. As pictured on PHEAA’s site below, you can specify exactly which loan you would like to pay. Speak to your servicer before you make extra payments so that your extra birthday money or cash from your tax refund doesn’t go toward the accrued interest for your other loans. Tell them the money is not intended to be put toward future payments, but toward the principal of the specified loan.

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What if I can’t afford my payment?

Don’t avoid your loan servicer because you can’t afford the monthly payment. You have options.

Standard repayment plans for federal student loans are set up to last a period of ten years. If you can’t afford your payments, you might be eligible for a longer income-based repayment plan that will give you a longer period to pay back your loans and reduce your monthly payment amount. Enrolling in an income-based plan can reduce your payments to as low as $0 per month. If you are an employee in the public or nonprofit sector, you may qualify for public service loan forgiveness. The program allows your balance to be forgiven after making 120 consecutive payments.

Find out more about all the different types of repayment plans here.

If you have private student loans, the federal programs will not be available to you. Your best bet is to either refinance your debt at a lower interest rate or call your lender to see if you can work out a more affordable payment.

What if I miss a payment?

Your loan will be considered delinquent if you don’t make a payment by the due date. It stays delinquent until you make up the missed payments. The loan will go into default if you go more than 270 days (9 months) without making a payment. If the loan goes into default, you may face some pretty stiff consequences, including wage garnishment. Wage garnishment allows your lender or debt collector to take a portion of your paycheck automatically every pay period.

A last resort: deferment and forbearance

If none of those payment options work for your situation, you can ask your servicer about delaying payments by placing your loans in deferment or forbearance.

Deferment

If you are having a hard time making your loan payment each month, you can ask your servicer to put the loan in deferment status. Deferment allows you to delay making a payment on your loan for up to three years, or longer if you’re actively serving in the military. If you have a subsidized loan or a federal Perkins Loan, the government will cover your interest payments during deferment. If you have an unsubsidized loan, your interest will continue to accrue.

Forbearance

You can apply for forbearance if you don’t qualify for deferment. Forbearance allows you to delay or cut down the amount of your loan payments for up to one year. The interest will still accrue on your loans, but you’ll get a break from paying each month. There are two types of forbearances: mandatory and discretionary.

You’ll need to keep making payments on your loans until your servicer grants your request for deferment or forbearance. If you stop making payments before deferment or forbearance is approved, your loans will become delinquent and you might default on them.

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