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College Students and Recent Grads

MagnifyMoney.com Study: College Students Face High Interest Rates on Student Credit Cards

Paying with credit card

It is that time of year: millions of students will be heading to college. For many students, this will be the first time that they will be the targets of banks’ marketing departments.

While the CARD Act changed how lenders can offer college students credit cards, young adults are still able to acquire these potentially expensive products. A study of college student credit cards by MagnifyMoney.com shows that a student new to credit is likely to pay an average APR of 21.4%. And taking out cash is even more expensive, with an average APR of 24.1%.

  • We reviewed the Top 50 banks in the US by deposits
  • We reviewed credit cards specifically targeting students and actively marketed on the banks’ websites
  • All credit cards, with the exception of Capital One Journey, offer a range of Purchase APRs. CapitalOne offers a single, flat APR of 19.8%
  • For credit cards that offer a range of APRs, the average range is nine percentage points
  • The lowest possible APR is 10.99%, offered by Bank of America on the BankAmericard Credit Card for Students

Note: Bank of America charges higher APRs on student products that earn rewards. A no rewards card has a range of 10.99% – 20.99%. The cash rewards card has a range of 12.99% – 22.99%. The travel rewards card has a range of 14.99% – 22.99%. Remember: rewards can be very expensive!

  • The highest possible APR is 23.99%, offered by Citi (both the ThankYou Preferred for College Students and Dividend Platinum Select Visa for College Students)
  • If your student credit card is your first credit product, then you will likely have no score. No score means you are the highest risk, and it is highly likely that you will receive the highest price point. The average of the highest price points is 21.4%

If a student charges $1,000 on a credit card and only pays the minimum due at the average rate of 21.4%, it will take 7.6 years to pay back the debt. And the total amount repaid would be $1,941.

Noticeably absent from the list of banks offering credit cards that target students are American Express and Chase. Chase recently exited the business, recognizing that earning interest rates more than 20% on students still in college didn’t feel right.

The CARD Act restricted, but certainly did not eliminate, credit cards that target students. In 2012, applications for student credit cards were at 43.5% of 2007 levels. The CARD Act put the following restrictions into place:

  • No pre-approved offers to people under 21, without consent
  • If you are under 21, you need to prove that you have income (a part-time job, for example), or have a cosigner older than 21
  • Credit card companies can no longer give out free gifts on campus to induce people into signing up for a credit card. No more frisbees or beer mugs

However, there are still plenty of student credit card offers out there. While they don’t give out frisbees, they do offer sign-on bonuses. Citi, for example, gives you 2,500 Thank You points if you spend $500 within 3 months of opening the card. We find that worse than the free frisbee. Before, they would incent you to open a card. Now they are incenting you to spend on the card!

While credit cards can be a great way to build your credit while in college, they can turn into expensive traps that send you down a dangerous path.

The only reason you should apply for a student credit card is to build your credit score. And follow these three tips:

1.Your statement balance should never be more than 30% of your limit. High utilization, early in your credit history, can have a meaningful negative impact. So, just make one to two purchases a month on the card.

2.Pay your balance in full. Credit cards are expensive, and you should not use them to borrow.

3.Never use a credit card for a cash advance. It may seem like easy money, but you will be paying for it.

Have questions for us? Get in touch via TwitterFacebook, email info@magnifymoney.com or in the comment section below!

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College Students and Recent Grads, Reviews

Visa Classic Secured Credit Card by Justice FCU Review

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Need to repair your credit history and score? Then a secured card is a good place to start. These secured cards are offered to consumers with no credit or poor credit as a tool to build positive history with limited risk for the lender. You’ll put a deposit into a savings account, which then acts as your credit line. If you fail to repay your debts, then the lender will simply keep your deposit.

If you make consistent, on-time payments the card issuer may bump up your credit limit. Or you can eventually apply for a regular credit card and have a better chance of getting approved. The Visa Classic Secured Credit Card by Justice FCU can help you boost your credit history. It requires a low minimum deposit, but it is a little heavy on fine print details.

Basics of the Credit Card Offer

The Justice FCU Visa Classic Secured Card has 16.90% APR and requires a minimum deposit of $110. The card offers cash advances for a fee, worldwide acceptance, travel assistance and emergency card replacement.

You must be a member of the credit union to apply. Justice FCU provides financial services to people affiliated with the Justice Department, Homeland Security and other law enforcement agencies. If you’re a part of that community (or have relatives who are) you can join with a $5 deposit into a Justice FCU share savings account. For a full list of Justice FCU eligibility requirements head over to its membership page.

Don’t worry, if you’re not affiliated with any of the organizations or companies on the list. Anyone can become eligible for membership by joining the National Sheriffs’ Association as an auxiliary or student member for $38. So in this scenario you should expect to pay at least $153 in dues and deposits to open an account.

Fine Print and Fees

You should be aware of a few details in the miscellaneous fees section of the credit card terms especially when it comes to disputing charges.

If you dispute a bill you can be charged $15 per hour for account research if the charges are found to be correct. If you request statement copies that aren’t related to a valid credit card dispute it’ll cost you $1 per page. You may also be held liable for unauthorized charges to the card that occur before you notify the credit union. However your liability won’t exceed $50.

Requested replacement cards cost $10. The late fee is $25 and applies if your payment is over 10 days late. You may be subject to a finance charge if the minimum payment isn’t received within 23 to 26 days of the card closing date. The returned payment fee is $30. The foreign transaction fee is 1%. There are no balance transfer fees or annual fees.

Pros and Cons

This card requires a low minimum deposit, which is a benefit if you don’t want to use up a lot of cash to rebuild your credit. Keep in mind that if you close your account in good standing you’ll get your deposit back. You’re also given a decent grace period before late fees and finance charges kick in. Plus there’s no balance transfer fee or annual fee.

On the flip side, the interest offered is higher than the interest of some other secured card competitors. Of course to rebuild your credit you should avoid interest altogether by paying your card off in full each month. But if you do carry a balance you can find lower interest elsewhere. Lastly, as mentioned this secured card has fine print fees and conditions that you need to consider.

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Alternatives to the Visa Classic Secured Credit Card by Justice FCU

The Visa Secured Card by MidSouth Community FCU and the EMV Savings Secured Visa Platinum Card by State Department FCU are two cards that we’ve given a top transparency score here at MagnifyMoney because of the straightforward terms.

First the Visa Secured Card by MidSouth FCU requires a $200 minimum deposit and offers APR at 8.90%. This card has no annual fee and the foreign transaction fee may be up to 1% depending on the transaction. Membership to the MidSouth FCU is limited to people who work, live, worship or go to school in Middle Georgia and you have to be a member to qualify for the card. If you’re not eligible for this offer the EMV Savings Secured Card is another good option that anyone can apply for.

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The EMV Savings Secured Visa Platinum Card by State Department FCU requires a $250 minimum deposit and offers 6.99% APR. There’s no annual fee, balance transfer fee or foreign transaction fee. Anyone can gain membership to the credit union by joining the American Consumer Council for $15. You may also qualify if you’re an employee (or family member of an employee) who works at one of the affiliated organizations.

1245_card.EMV Secured Visa Platinum Card By State Department FCU

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Who Will Benefit from the Visa Classic Secured by Justice FCU?

If you’re looking for a secured card to build credit with a low minimum deposit and no annual fee this one should be on your shopping list. It is a little heavy on the fine print so you should still take care to understand the ins and outs of the terms before committing. But if you plan to carry a balance, which you shouldn’t, you can save yourself some money with the EMV Savings Secured Card because it has a lower interest rate.

[Check our secured credit card table here.]

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College Students and Recent Grads, News

2015 Study Reveals Best And Worst Student Credit Cards

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The CARD Act of 2009 made it much more difficult for credit card companies to target college students. The law created the following restrictions:

  • Credit card companies are restricted in their ability to market on-campus or near-campus. The days of credit card companies handing out free beer mugs and t-shirts have ended.
  • Any college student under the age of 21 would have to prove that he or she is independently able to make payments. If the student has a job that generates income, he or she could apply. But students can no longer receive a credit limit based upon “parental income,” which was common before the law. Students under 21 without a job can still receive a credit card, but they would need to have a cosigner who is older than 21 and can demonstrate an ability to make payments.
  • Pre-approved offers can no longer be sent to college students under 21, unless the student consents to receive such offers.

Student credit cards had become a public relations nightmare for banks and universities. Not only were banks making a lot of money, but many universities were generating significant revenue by signing marketing partnerships with banks. Countless stories of 18-year-old students drowning in high interest credit card debt became common. Two tragic stories of student suicides were highlighted in the film Maxed Out.

Since the law was enacted:

  • American Express and Chase decided to exit the business completely.
  • Marketing agreements between universities and credit card companies have declined 70%
  • Cards issued to students younger than 21 have reduced by 56%

However, student credit cards remain on the market and remain potentially expensive. Some of the largest banks and credit card issuers in the country continue to market and issue credit cards to students (including Bank of America, Capital One, Citibank, Discover and Wells Fargo).

In addition to the the largest banks, many smaller banks, community banks and credit unions offer student credit cards. MagnifyMoney reviewed 163 credit cards targeting college students and found that:

  • The average APR ranges from 12.12% to 21.64%. Incoming freshman with no credit history are much more likely to have interest rates closer to the 21.64%
  • The average cash advance APR ranges from 21.42% to 22.54%.

In short, credit cards remain incredibly expensive borrowing tools for college students.  Note: MagnifyMoney has no financial agreement to market college credit cards. The data in this study was obtained by reviewing the terms and conditions listed on bank websites. Where information is not available, a member of MagnifyMoney’s team would call the bank directly.

In this review, we will explain:

  • The reasons a college student should consider a credit card while still in college
  • A review of the products offered by the major banks
  • The biggest credit card traps to avoid
  • Alternatives to consider

At MagnifyMoney, we remain very cautious about credit cards targeting students. Credit card debt remains incredibly expensive. College students have limited earnings potential (while still in college), and the introductory offers and rewards scheme exist to encourage the accumulation of debt.

Reasons College Students Should Consider a Credit Card

There are only two reasons a college student should consider a credit card:

  • To get an early start building a credit score, and
  • To have a convenient method of payment for online purchases and traveling abroad (for example, if a student participates in an overseas study program)

Credit cards should not be used for the accumulation of debt.

Credit Score

Having a good credit score when graduating from college can be enormously helpful. Graduates often have to rent apartments, purchase automobiles, buy auto insurance and apply for jobs. A good credit score can help with apartment rentals, auto loans and even auto insurance premiums. And a good credit report can help with job applications.

A credit card in college can help students get a head start on building credit, which can help a student start to save money immediately upon graduation. To build a credit score, a college student should:

  1. Make at least one purchase every month. Ideally, the total value of the purchases should not be more than 20% of the available credit limit. Credit limits on student credit cards are often small. If the limit is $500, the student should never spend more than $100 per month on the card.
  2. Make the payment on time and in full every month. Paying on time means that expensive late fees are avoided and a good credit score is built. Paying in full means that the borrower will never be hit with interest charges.

If a student repeats recommendations #1 and #2 above during four years of college, he or she is likely to have a credit score above 700 at the time of graduation.

Online Purchases and Travel

To receive the most protection, consumers should generally use credit cards instead of debit cards. When students make purchases online or travel overseas, a credit card can be helpful.

When selecting a card, students should focus on student cards that offer no foreign transaction fees, so that any purchase made while outside of the country does not accrue costly transaction fees.

Product Reviews

MagnifyMoney believes that the primary purpose for obtaining a college credit card is to build a credit score. A card can also be useful for shopping online or traveling abroad. As a rule, the student should only charge an amount that he or she can afford to pay back in full. We believe these are the primary criteria a student should use when selecting a card:

  • No annual fee
  • No foreign transaction fee
  • Real FICO provided

There are two cards from leading issuers that meet all 3 requirements:

  • Capital One Journey Student Credit Card
  • Discover it Chrome for Students (one warning: international acceptance, particularly in Europe, is limited when compared to the Capital One Visa or MasterCard network)

Below is a summary:

College Credit Cards

Biggest Traps To Avoid

Credit cards are filled with traps. Here are the biggest traps to avoid:

  • Credit limits are usually a multiple of an individual’s income, and the credit limit will grow as on-time payment behavior continues. Credit card companies want to ensure that you can afford to make the minimum payment, which means you will be in debt for nearly 30 years. Given the high credit limits, it is easy to spend more than you should.
  • When people pay with plastic, they tend to spend more than if they use cash. Countless studies have demonstrated this finding over the years, and you should be honest with yourself about your own level of self-control.
  • Spending habits start early. If you start buying things you can’t afford while in college, and make only the minimum due, you will probably continue that behavior after college.
  • The interest rates on student cards are high. Although banks have lowered the low end of the interest rate range, most freshman in college will not qualify for that rate. Expect to pay close to 20%.
  • Late fees are incredibly high, typically between $35 and $38.
  • If you do not have the self-discipline to handle a credit card responsibly in college, you can end up hurting yourself after college. Student who max out their student credit cards and pay late will end up with a bad score. When graduating from college, a bad score is worse than no credit score.
  • College students should generally not worry about credit card rewards. Rewards typically offer a return of much lower than 1% of spend. Student credit cards have low credit limits. And if you are managing your utilization properly, you will be putting very few transactions on the credit card. As a result, the rewards value will be small. If you spend $100 per month on the Capital One Journey credit card, you would earn $15 of cash back in 12 months. It is a nice bonus, but certainly not life-changing.
  • 0% introductory bonuses and point sign-on bonuses for college credit cards should not be celebrated. These introductory offers exist to tempt students into spending more money than they should.

Alternatives To Consider

If you do not trust yourself with a credit card while in college, do not worry. There will be plenty of time later in life to build a credit score. You will be fine.

If you actually have to borrow money, beyond your student loan debt, you should consider visiting a local credit union. For example, Apple Federal Credit Union (restricted membership) offers a flat 9.99% interest rate to college students. Visit your local credit union (many universities have one), and see if there are opportunities to borrow at a lower rate.

However, even if there are options to borrow at lower rates, you overwhelming goal needs to be the avoidance of debt wherever and whenever possible.

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College Students and Recent Grads, Pay Down My Debt

19 Options to Refinance Student Loans – Get Your Lowest Rate

Mixed Race Young Female Agonizing Over Financial Calculations in Her Kitchen.

Updated: August 27, 2015

Are you tired of paying a high interest rate on your student loan debt? Are you looking for ways to refinance student loans at a lower interest rate, but don’t know where to turn?

Below, you’ll find the most complete list of lenders currently willing to refinance student loans. You can also go directly to our comparison tool, which lets you see student loan terms all at once, with no need to give up personal information.

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

There is good news: in recent years, the student loan refinancing market has started to come back. Not just with traditional banks, credit unions and finance companies, but even the addition of new businesses that specialize in refinancing student loan debt.

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 loan 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, than 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, than 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 30 day period. 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.

Below we highlight the student loan refinance companies that offer the lowest interest rates.

  • SoFi*: Fixed interest rates start as low as 3.50%, and variable rates start as low as 1.90%. SoFi offers student loans to borrowers who graduated from a selection of Title IV accredited colleges and universities. You need to be employed, or have a job offer with a start date in 90 days. You also must be able to demonstrate a strong cash flow. To get the lowest rate, you need to sign up for automatic payments.
  • CommonBond*: CommonBond offers fixed rates from 3.74% and variable rates from 1.94%. You need a degree, a job and a stable cash flow. They will also review your payment history with other lenders. CommonBond focuses on people with graduate degrees, and can offer up to $220,000. They will not refinance undergraduate degrees.
  • DRB Student Loan*: DRB offers a variable APR range from 1.90% – 4.50%. Their fixed APR ranges from 3.50% – 6.25%. This is bank that started expanding aggressively into student loans two years ago, and has already booked over $950 million of student loans. If you do not sign up for automatic monthly payments, your rate will be 0.25% higher.
  • Earnest*: Earnest offers fixed interest rates starting at 3.50% and variable rates starting at 1.90%. 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 need to have a job or an employment offer. You need an emergency fund of at least one month. You also must have a positive bank account balance and a budget that makes sense. If you have had credit in the past, you need a history of on time payments.

Below is an alphabetical 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.

  • Alliant Credit Union: In order to qualify, you need to have a bachelor’s degree. The minimum credit score is 700, and you need two years of employment and a minimum income of $40,000. They offer variable interest rates, starting at 6%. Anyone can join this credit union by making a $10 donation to Foster Care for Success.
  • Citizens One (Citizens Bank): To get the best deal, you should have at least a bachelor’s degree. They will look at your credit history, and want to make sure that at least the last three payments on your student loans have been made on time. If you don’t have your degree, you need to have made the last 12 payments (principal and interest) on time. You must make at least $24,000 per year. They offer fixed rates starting at 4.74% and variable rates from 2.33%.
  • CommonBond*: CommonBond was highlighted earlier in this post, with fixed and variable rates available. This is only for graduate degrees.  Variable rates start at 1.94% and fixed rates start at 3.74%.
  • CommonWealth One Federal Credit Union: Variable interest rates start at 3.25%. You can borrow up to $75,000 and need to be a member of the credit union in order to qualify.
  • Credit Union Student Choice: This is a tool offered by credit unions. The criteria and pricing vary by credit union. The credit unions have limited membership, but you can find out if you qualify on this site.
  • LendKey*: You will need to have graduated from an eligible school in order to qualify. You need to make at least $2,000 per month, and they will review your credit history. Variable rates are available, starting at 1.90%. You will be matched with a community bank or credit union that anyone can join.
  • DRB Student Loan*: They will refinance undergraduate, Parent PLUS and graduate loans including MBA, Law, Medical/Dental (Post Residency), Physician Assistant, Advanced Degree Nursing, Anesthetist, Pharmacist, Engineering, Computer Science and more degrees. Variable rates as low as 1.90% with a rate cap and 3.50% fixed.
  • Earnest*. They will look at alternative criteria to try and approve you for a lower rate, like your employment history or bank account balances. Variable rates as low as 1.92%.
  • Eastman Credit Union: They don’t share much of their criteria publicly. Fixed rates start at 6.5% and you must be a member of the credit union. Credit union membership is not available to everyone.
  • EdVest: They offer refinancing options for private loans used to finance attendance at a Title IV, degree-granting institution. If the loan balance is below $100,000 you need to make at least $30,000 a year. If your balance is above $100,000 you need to make at least $50,000. Variable rates start at 3.580%, and fixed rates start at 4.40%.
  • Education Success Loans: You must be out of school for at least 30 months, and you must have a degree. You also need a good credit score, with on-time payment behavior. Variable and fixed loan options are available, with rates starting at 4.99%.
  • IHelp: This service will find a community bank. Community banks can actually be expensive. You need to have 2 years of good credit history, with a DTI (debt-to-income) of less than 45% and annual income of at least $24,000. Fixed rates are available, starting at 6.22%.
  • Mayo Employees Credit Union: You need at least $2,000 of monthly income and a good credit history. Variable rates are available, starting at 4.75% and you would need to join the credit union.
  • 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 3.51%.
  • RISLA: You need at least a 680 credit score, and can find fixed interest rates starting at 4.49% if you use a co-signer.
  • SoFi*: You must have a bachelor’s or graduate degree in order to apply, and you must have demonstrated on-time payment behavior. Both fixed and variable rates are available, with rates starting at 1.90% and fixed rates starting at 3.5%.
  • Upstart*: You need to have a degree (or be graduating within 6 months). A minimum FICO of 640 is required. Fixed interest rates starting at 5.7%. This is more of a traditional personal loan than a long term student loan refinance.
  • UW Credit Union: $25,000 minimum income required, with at least 5 years of credit history and a good repayment record. Fixed and variable interest rates are available, with variable rates starting at 3.51% and fixed rates starting at 7.49%. You need to join the credit union in order to refinance your loans.
  • 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 3.49% and fixed rates starting at 6.74%. Wells Fargo does not have a tradition of being a low cost lender.

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.

Don’t forget to follow us on Twitter @Magnify_Money and on Facebook.

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College Students and Recent Grads, Pay Down My Debt

When You Shouldn’t Aggressively Pay Off Your Student Loans

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If you’ve been reading posts about student loan debt pay off, it’s likely you’ve seen two distinct camps on the issue: prioritize your student loan debt and pay it off as soon as possible, and there’s no rush in paying off your student loans – invest instead.

There’s article after article published on how certain graduates have paid off their student loans in record time, possibly making you feel like you’re doing something wrong if getting debt free is not your sole focus.

Who’s right? It can be hard to determine what you should do when people are so divided over the issue. The truth is, it depends on your individual circumstance.

I’ve chosen to prioritize my student loans because aside from retirement, I have nothing else to save for, and no other debt. My emergency fund (and then some) is covered, and I’m tired of my student loans being the only debt I have to pay each month. The amount of interest they accrue is a pretty big motivator, too. I’m happy with the amount I have going toward retirement, and the extra amount I can pay toward my student loans.

However, not everyone should (or can) follow this route. There are a number of factors worth considering before you decide to aggressively pay off your student loans. Go through each of these and see where you stand so you can properly evaluate your situation.

What Are Your Interest Rates?

If the interest rates on your student loans are low (around 2%-4%), some would say you’re better off investing the extra money to see a higher return. In theory, this is true, but you have to be 100% committed to actually investing your money to realize those returns.

Being younger means time is on your side as far as compound interest goes. The sooner you start saving for retirement, the larger your balance will be when the time comes to say goodbye to the working world. You shouldn’t hold off on this, especially if you’re enrolled in a 401(k) program at your job that offers matching contributions. You should seriously consider prioritizing this over paying extra on your student loan debt if that’s the case.

If your balances are low and you have lower interest rates, it might make you happier to save for things more important to you, such as a wedding, starting a family, or a home. In this case, interest isn’t accruing as badly. If you can live with that and can’t wait to get started on your savings goals, then prioritize those instead.

One big thing you need to consider is any other debt you have. Credit card debt tends to have enormously high interest rates – around 15%-20%. That’s clearly much higher than student loan debts. If your credit cards are racking up too much in interest each month, then you should absolutely focus on paying them off first.

[The Fastest Way to Pay Off $10,000 in Credit Card Debt.]

The best mathematical way to approach debt pay off is to target the debt with the highest interest rate first, as this is likely your most expensive debt. Choosing to pay off your debt this way is called the “avalanche method.” You put all of your extra money toward paying off that one debt, and once it’s done, you move on to paying off your next highest interest rate debt. Rinse and repeat.

Are You Anticipating Large Expenses Soon?

While debt isn’t any fun to carry, sometimes student loans have to take a backseat to the other priorities we have in life.

Saving for a wedding, home, or family was mentioned briefly before. Those tend to be large expenses, and having a savings cushion is essential in each situation. You probably don’t want to start married life or parenthood off being in a boatload of debt, and having to pay PMI on your mortgage because you didn’t put a certain amount down isn’t great, either.

Perhaps your savings goals are a little less overwhelming. Maybe you want to save for a yearlong trip around the world, or for a newer car. The more you can save, the better off you’ll always be.

Unfortunately, you might have a limited amount of money to work with. Saving and paying extra on your student loans might not be possible. You need to be honest with yourself about your priorities so you can figure out which should come first: saving, or paying off your student loans.

There’s no right or wrong answer here. If starting a family, buying a home, or traveling is what makes you happy, and you find yourself wishing you were saving up for these things now, then that’s a sign you should focus your efforts there. You don’t want to end up regretting not taking the trip of a lifetime or starting a family earlier.

Do You Have Other Debt That’s Flexible?

Federal student loans come with many benefits such as deferment, forbearance, forgiveness (touched upon below), and income-based repayment plans. Some private student loan lenders offer these benefits as well. At the very least, there’s always the option to refinance your student loans to make them more affordable.

[How to Set Up Income Based Repayment Plans.]

You won’t readily find this type of flexibility with most types of loans or credit card debt. That means if something else comes up in the future, you can adjust your student loan payments accordingly to lessen the financial difficulty you’re experiencing. This is yet another reason to focus on paying off other debt before your student loans.

Do You Have an Emergency Fund?

The first thing I did when I got a full time job after graduating college was to save up for a rainy day. I learned the importance of having an emergency fund the hard way after watching my parents struggle to afford repairs on their home. They ended up charging everything, which perpetuated a vicious cycle of debt.

An emergency fund is your first line of defense should anything go wrong. If you have credit card debt, I’d argue it’s even more important to have one in place. Think about it – if your car broke down, your pet needed surgery, or you needed to fly back home for a family matter, how would you afford it?

Most people would swipe their card without a second thought, but that only gets you into (or further into) debt. It’s better for your sanity and your bank account if you have that emergency fund to use.

As a recent graduate, you probably don’t need much – $500 to $1,000 is a good place to start. For those who value peace of mind (and possibly have less student loan debt), go for 3 to 6 months of your living expenses.

Are Your Student Loans Eligible For Forgiveness?

We spoke about the other benefits of federal student loans, but if you qualify for loan forgiveness under one of the many programs out there, paying off your student loans aggressively isn’t worth it.

However, you should be absolutely certain you can get your loans forgiven before you form a plan. There are several stringent requirements that need to be met to qualify.

Note that we’re not talking about the loan forgiveness that can occur if you’re on an income-based, income-contingent, or pay as you earn repayment plan after 20 or 25 years. If you’re looking to pay off your student loans aggressively, you likely don’t need the aid these plans provide. In addition, this type of forgiveness shouldn’t be relied upon and the amount forgiven is taxable.

[How to Get Student Loan Forgiveness.]

Always Make Your Payments

With all that said, it’s critical to note you should still make your minimum monthly payment – on time, and every month. While you may not be paying down your student loans aggressively, you should stay on track with them. Treat your student loans like any other bill you have. The consequences of paying late or defaulting should be avoided at all costs.

Also, don’t be afraid to change your plans. Your circumstances may change in a few years, causing your priorities to change. If you’ve saved up for an emergency, any purchases that were important to you, and have nothing left on your plate but your student loan debt, by all means, focus on paying them off!

What Should You Do?

Ultimately, only you know what’s best for your financial situation. If you don’t have an emergency fund, save up for one. If you have high interest debt, pay it off before your student loans. If you have low interest rates, or a great 401(k) plan, take advantage of compound interest and invest. If you have other financial goals that are more important, then save.

Take all of these factors into consideration, and you should have a better idea of what to do with any surplus money you have left at the end of the month. Whatever you do, paying extra on your student loans shouldn’t come at the cost of your overall financial health. Keep the big picture in mind.

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8 Steps for Possibly Discharging Your Student Loans Through Bankruptcy

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Student loans are the one type of debt you can never discharge through bankruptcy. Or are they?

For years that’s been the case, largely because of a court ruling from 1987 that set an almost impossible standard for student loan borrowers to meet. But the student loan landscape has changed dramatically since then, and in recent years there have been some signs that borrowers in tough spots may in fact be able to find some relief.

If you’re struggling under the weight of your student loans, read on. In this post you will learn:

  • What the current (and strict) criteria are for having student loans discharged through bankruptcy.
  • Commonalities from recent cases where individuals were successful at having their student loans discharged.
  • A step-by-step process for getting on track with your student loans and improving your chances at discharge.

The Current Standard

Individuals hoping to have their student loans discharged through bankruptcy typically have to show “undue hardship” by passing the three-part Brunner test. This test was born from a court ruling in 1987 and it requires the individual to:

  1. Show that he or she has made a good faith effort to repay the loans.
  2. Show that he or she cannot maintain a reasonable minimum standard of living while paying back the loans.
  3. Show that this condition is expected to last for most of the repayment period.

It’s that third criteria in particular that has made student loans so difficult to discharge. After all, how can you convincingly demonstrate that your prospects aren’t likely to improve, especially when student loan repayment periods can extend for as many as 30 years?

It’s proven challenging, but a few recent rulings can give borrowers hope and may even provide a road map for at least opening up the possibility of discharging your student loans through bankruptcy.

Two Commonalities Between Successful Student Loan Discharges

Looking at a few high-profile stories of borrowers who successfully discharged their student loans, there appear to be two big commonalities that may show the path forward for others:

Time: In two cases of successful discharges from 2013, the student loans were 10 and 15 years old. Clearly these were not recent grads at the beginning of their repayment journey.

Significant current hardship: One woman had been unemployed for almost a decade and was caring for her elderly mother. Another woman was 64, on Social Security, working multiple jobs, and cited mental and physical ailments.

In other words, they seemed to be struggling with some of the same factors you might consider when filing bankruptcy for any reason. Which means that if you’re struggling with your student loans and your financial situation in general, it may in fact be possible to have them discharged through bankruptcy as a last resort.

With that in mind, here are some steps you could take to put you in the best situation to either repay your student loans or to successfully have them discharged so you can hit the reset button.

Step 1: Get Organized

Get a complete list of all your debt, both student loan and otherwise, in one place so that you know exactly what you’re dealing with. The most important information you need to know for each type of loan is:

  • The amount you owe
  • The interest rate
  • The minimum payment

For student loans specifically, you will also want to know the type of loan and when it was issued, as that information may impact your repayment options.

You can collect your student loan information from the national student loan data system, and information on your other debts from annualcreditreport.com.

Step 2: Pay the Minimums on All Debts

This one is for both you and the courts.

For you, this will keep your credit history in good shape and keep your debt from spiraling out of control.

For the courts, this is one step towards showing a good faith effort at repayment.

Step 3: Look into Income-Driven Repayment Plans

Just like the previous step, this will both help you immediately and help if you eventually move to bankruptcy.

In the short-term, income-driven repayment plans may help to lessen the burden of your student loans by decreasing your monthly payment. They can even provide a path to eventual discharge without bankruptcy.

And if you do end up in traditional bankruptcy, this will serve as more evidence that you have made reasonable efforts to repay.

Step 4: Track Your Expenses

Tools like mint.com and You Need a Budget will help you stay on top of where your money is going now so that you can make more informed decisions about how you want to use it going forward.

Many of my clients, when they sign up for a tool like this for the first time, are shocked to find out how much they’re spending in certain categories and can quickly find some big ways to cut down on their monthly expenses. If you can find one or two of those big wins, you may find that your loans become a little easier to handle.

Step 5: Create a Repayment Plan

Creating a repayment plan for your student loans will not only give you a better shot at repaying them in full, but will give you another thing to point to if the courts want to see that you’ve made a strong effort to repay.

Hopefully you’re able to enroll in one of the income-driven repayment plans mentioned above, but if you have any extra money available you should consider how you want to prioritize it. That is, which loans should you put your extra money towards first? A thoughtful strategy could save you a lot of money in the long-term.

Don’t forget to keep other financial goals in mind here. For example, taking advantage of a 401(k) employer match or setting up a starter emergency fund could be better uses of your extra money, depending on your situation.

Step 6: Find Ways to Free up Cash

There may be some relatively easy ways to free up cash that could either help with your regular living expenses or help you pay down your loans even faster.

Things like switching to a lower cost cell phone provider, cutting cable, or even bringing lunch to work are relatively small changes that could reduce a significant amount of financial burden.

Step 7: Find Ways to Earn More Money

It doesn’t have to be all about cutting costs. Could you negotiate a raise at your job? Could you start a side hustle? Even a small amount of extra income could give you a lot more breathing room.

Step 8: Consider Bankruptcy

If you’ve been doing all of the above for a number of years and your student loan debt still feels like too much to overcome, it may be worth considering bankruptcy.

Keep in mind that there are some real, negative consequences to bankruptcy, so it’s not a cure-all. And it’s likely still a long shot that you could get your student loans discharged.

But for many it can be a huge relief to hit the reset button on their financial situation, and as recent court cases have shown it is possible to have your student loans discharged. If you’ve been diligently taking the steps above, you’ll have a strong history of attempting to pay them back that the courts may look favorably upon and it may be worth giving it a shot.

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College Students and Recent Grads

Student Loan Disbursement 101

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If you have student loans, then there are certain terms you need to know in order to understand what you’ve gotten yourself into. One important term to know is “student loan disbursement”.  This refers to how you’ll actually receive the money you’ve borrowed – and that’s pretty important!

What is student loan disbursement?

Student loan disbursement is the pay out of funds (loan proceeds) to the borrower (student) by the school. Your school disburses both Federal student loans and private student loans alike (that is to say, whatever sources you borrow money from will be disbursed by your school). Students typically receive their federal student loan in two or more disbursements.

Generally, the school will disburse your loan by crediting your student account. This means that your school will use your student loans to pay tuition and fees. Any remaining balance will be credited directly to you (by check, direct deposit, etc). Contact your school to determine the exact method of disbursement.

How will you know about your disbursement?

Your school must notify you in writing of your student loan disbursement. The notice will include the amount of your loans and when and how you should expect to receive them. This notice will be sent before the disbursement is made. Your loan servicer will also notify you in writing of the disbursement.

How many days until you get your first disbursement?

Generally, you should receive your loans at least 10 days before classes start. However, if you’re a first-year undergraduate student and a first-time borrower, you may have to wait 30 days after the first day of your enrollment period for your first disbursement. Contact your school to determine whether this rule applies there and when you should expect to receive your loan disbursements.

How often are loans disbursed?

Your school will pay out your loan money in at least two payments (aka disbursements) that will cover a full academic school year. Usually, your school will pay out your loan disbursement once per term (this could be on a semester or quarterly basis, for example). If your school doesn’t run on semesters or quarters, contact your school to find out when it makes student loan disbursements (usually, it will be at least twice per school year).

What’s the difference between when federal loans and private loans are disbursed?

You will need to contact your private student loan lender and ask about your disbursement schedule. The private loan lender determines your private loan disbursements, which should be in the terms of your loan agreement.

What needs to happen before loans are disbursed?

If you’re a first-time borrower of a Direct Subsidized Loan or a Direct Unsubsidized Loan, you must complete entrance counseling before you receive your first loan disbursement.

Similarly, if you are a graduate or professional student taking out a Direct PLUS Loan for the first time, you must complete entrance counseling before receiving your first disbursement.

Can you cancel a student loan after disbursement? 

Yes, you can cancel your federal student loan after it’s been disbursed, but only within 120 days of the disbursement. No interest or fees will be charged if you cancel the loan within 120 days of disbursement. If you attempt to cancel your loans more than 120 days after disbursement, your loans will be treated as having been disbursed, fees and interest will apply, and you will have to repay your loans based on the terms (you can make a repayment with your full loan disbursement, but your loan will not be cancelled – it will be repaid).

Each private student loan lender will have its own policy as to whether you can cancel your loan prior to or after disbursement. For specific information regarding canceling your private student loans, contact your lender.

The Takeaway

Your student loans may be disbursed on a different schedule than someone else’s. It’s important for you to read any student loan correspondence you receive (and keep it in a safe place), so you know exactly what to expect. When in doubt, you should contact your school and student loan servicer and ask questions. When your school pays out (disburses) your loan money to you, it’s important that you understand the financial implications. The more you learn now, the more prepared you’ll be when it’s time to repay your loans.

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Best Bank Accounts for College Students

Best Bank Accounts for College Students

For most students, the college experience is like dipping one’s toes into the “real world”. Yes, a student may be living away from home but their parents are probably still helping financially. Before anyone blushes, it’s okay. According to a University of Michigan study, more than 60% of adults between the ages of 19 to 22 still receive financial support from their parents. They receive, on average, $7,500 per year. This includes costs like college tuition, rent, and transportation. This makes it important that parents find an economical, fee-free way to send money to their children.

But remember, college is typically a transition period in which child should begin having more control over their financial lives, which means finding the best checking and savings accounts. Our round up of bank accounts for college students below offer options for parents to send children money without fees, stellar overdraft protection and even foreign ATM reimbursements.

For Parents Sending Money to Students

Bluebird by American Express

You may have seen these blue cards at Walmart checkouts. They’re quite popular. The Bluebird card serves as a prepaid debit card of sorts. It’s free to set it up online. It costs $5 for an in-store Set Up Kit to begin using right away.

It doesn’t cost anything to send or receive money. Parents can load the card in a number of ways. The fastest way is to send money to the card via an electronic bank transfer (yes, there is an app). Simply connect a checking or savings account to the card and begin transferring funds. It’s just like transferring funds from one bank account to another. Funds can also be added at a Walmart checkout register via cash or debit. Finally, parents can also load the card even by sending in a paper check.

A cardholder can request money for free. They can simply send a request for ‘new shoes’ and a parent can simply transfer ‘x’ amount of dollars to cover the cost. It’s pretty simple.

Another unique aspect of this card is you can add Walmart Buck$. These are funds that can only be used at Walmart. The funds cannot be redeemed as cash, cannot be withdrawn at ATMs and cannot be transferred to a bank account. This may stop the hold holder from using the money irresponsibly.

Fees and Fine Print

  • No activation fee
  • No monthly fee
  • No annual fee
  • No overdraft fee
  • No ATM fees when in-network. Out of network ATM transactions are $2.50 each plus any surcharges from the bank that owns the ATM. $2.50 is a pretty high fee.

Bluebird

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Best Bank for Overdraft Protection 

Ally Bank

This is our pick because Ally Bank offers a unique overdraft protection plan. Simply link an Ally savings account to an Ally Checking account and it’s protected from overdrafts. However, if the savings account balance isn’t sufficient, an overdraft fee of $25 will be charged. The overdraft fee $25 and is charged a maximum of once per day. But that is still low compared with most banks, with the Big 4 Banks all charging over $30 per incident and often four or five incidents per day.

Ally also provides $10 worth of ATM fee reimbursements per monthly statement cycle, which enables you to take out money at out of network ATMs and still get refunded. But what about other fees?

Fees and Fine Print

  • No monthly maintenance fees
  • Free standard checks
  • Free cashier’s checks
  • No fee for having a zero balance
  • No incoming wire fees (domestic or international)
  • Free Allpoint® ATM usage (43,000+ in the US) plus $10 worth of ATM fee reimbursements each month.

ally

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Best Bank Account for Free ATM Reimbursements

Charles Schwab High Yield Investor Checking Account

Thinking about studying abroad? The Charles Schwab High Yield Investor Checking account reimburses all ATM fees, even internationally. This account is ideal for traveling students. Even for those not studying abroad, this may be a good option for any travel overseas.

Charles Schwab High Yield Investor Checking Fees

  • No ATM fees
  • No monthly service fee
  • No overdraft protection fee. Although owners must also have a Charles Schwab brokerage account or savings account to link for overdraft protection. Should funds in the overdraft account be insufficient, a $25 fee will be charged for up to 4 incidents daily. This overdraft protection is pretty abysmal when compared with Ally.

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Brick-and-Mortar Options

If the parent is more comfortable with having physical locations, there are still brick-and-mortar banks, which offer good benefits and low fees. Before committing to a big bank, check the local credit unions. They often offer a better value. Compare the credit unions with the other banks listed in this post. Ask about overdraft protection, overdraft fees, minimum account balance, and monthly maintenance fees. The good thing about a local credit union is the customer service. Don’t be too shy to ask about fees.

The downside to local brick-and-mortar options is the parent may be in one location and the child in another, making it difficult for one party to withdraw or deposit money. However, most credit unions today have good online banking systems. They may not have mobile deposits or an intuitive app but they have what counts. If ease of use is still a concern, look for a big bank with many locations. Fees will likely be higher and interest lower, but convenience is very important for a college student. After all, they need to spend their time studying.

Don’t Be Afraid to Break Your Routine

Technology has really changed the way banking works today and it’s provided an option for fewer fees and easier transactions. Just because you’ve always banked at a certain establishment, doesn’t mean you should stay there – especially if you’re trying to make it cost-efficient and simple to send money to your college-aged children.

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The Best Ways to Pay Back Student Loans While in School

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You may be anxious about a variety of things when starting college; from new classes to new faces to living away from their parents for the first time, your life is about to be drastically turned upside-down. For those attending college for the first time this fall, you’ve probably already delved into the payment options for offsetting the costs of college tuition. Whether you’ve taken out student loans to foot the bill or you’ve acquired enough financial aid to get you through the beginning years, there’s a wide gamut of financial burdens that you taken on to afford a college education.

While many students choose to forego the stresses of paying their way through college by simply relying on loans and trying to forget they’ll one day come due, others are opting for a more direct solution: structuring their student loan repayment schedule to coincide with their attendance. While this strategy requires a strong work ethic, motivated repayment mindset, and ambitious financial goals, the result can pay off dramatically. You can actually graduate college with little to no debt accrued. So how does one do it?!

1. Plan to take out as few loans as possible

While it may be too late for the start of this semester, the best way to set yourself up for structured repayment success while attending college is to create a financial plan that has the smallest amount of loan debt to begin with. Apply for scholarships, keep your grades high, participate in extracurricular activities, and continue to strive for financial assistance even during your tenure. In this manner, you’re likely to get some sort of assistance along the way, which can set your starting point of debt accumulation at a lower number – and one that’s likely easier to overcome.

2. Apply for employment while enrolled

Just because you’re a full-time student doesn’t mean you can’t be employed. Many college students looking to chip away at their debt will get (or retain) a job during their college tenure. This allows them to continue to keep their debts low and chip away at existing loans in the process. Be sure to explore options for employment on campus including ones that aren’t tied to work-study like being a resident advisor.

3. Structure repayment terms in conjunction with ongoing costs and projected income

For college students, there are many more costs than just tuition alone. These can include housing, textbooks, and any other myriad of daily living supplies. Rather than pulling out loans to cover all of these costs, calculate how much you plan to make at a part-time job during your college stay, and offset the balance of loans you’ll need to request then based on those costs and your planned income.

Additionally, instead of waiting until you’ve graduated to start paying off loans, you may find that your part-time or full-time job allows for you to pay more towards your costs than you initially expected! In this case, you can opt to start repaying some of your loans while you’re still attending college. For many, they simply need a loan to pay for the bulk cost of tuition but can structure their income to pay off that loan during that very same school year. It’s a matter of paying a huge chunk of money at once in the beginning for the tuition versus accumulating a little interest and paying over the course of the year itself.

4. Make interest payments while in school

So it might be a bit ambitious to expect one to pay off their entire loan balance while attending school, especially if you’ve chosen a school with a high cost of tuition. Unless your student loan is subsidized, it starts accruing interest right away. Remember, student loans are borrowed money that you have to repay with interest and – more importantly – that interest can capitalize, a fancy way of saying be added to your total balance. Paying off this interest by contributing even a few dollars a month towards your loan can really save you money down the road.

[Learn How Interest Impacts Your Student Loans.]

5. As much as this may sting, take a look at what your repayment schedule may look like once you graduate

It’s easy to shove your student loans under the rug to be mentally and emotionally dealt with once you’ve graduated. You want to live a carefree life while in college. But do yourself a favor and use a repayment calculator now to see what your monthly repayment options will look like with your current and projected loan debts along with the different options that may be available. Sure, this may be a heavy hit, but it could also be the motivation you need to restructure your life and pay a little more during your college stay.

Making a Dent, Even a Small One, Is Worth Doing

Structure your student loan repayment while in school in part or in whole by considering your costs, potential income while attending, and the different repayment options available. You don’t have to pay off your entire loan to make a lot of headway towards full repayment in a more timely fashion! Even a little extra allotment towards accrued interest can really pack a punch if done correctly.

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Federal Direct Consolidation Loan Review

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Does your student loan debt only consist of federal student loans? Do you make payments to so many loan servicers, you can’t keep track of how much is due and when? You might want to look into how the Federal Direct Consolidation Loan works, or if it’s even worth consolidating your student loans. It can help in some cases, and harm in others. Let’s take a look at what you should know before consolidating with the government. 

When Does It Make Sense to Consolidate?

With so many refinance options available through private lenders, such as Earnest* and SoFi*, when does it make sense to consolidate through the government?

The built-in benefits you receive from federal student loans will be the biggest factors in making a decision. For example, you have access to deferring your payments, entering into forbearance, income-based repayment plans, and more.

With private lenders, those benefits may be available, but aren’t guaranteed. You’re taking a risk when you refinance your student loans using that avenue as benefits can change at the discretion of the lender.

Additionally, the repayment term on a Federal Direct Consolidation Loan is up to 30 years – there are no private lenders offering repayment terms that long. 25 years is the maximum.

It’s a double-edged sword, as a longer repayment term means a lower monthly payment, but it also means the cost of the loan increases. You’ll end up paying more money back over 30 years than you would on a 20-year term. For that reason, it’s best to go into it with a plan to ramp up payments if you think you’ll be in a better financial situation later on.

This goes for consolidating or refinancing, but if you owe multiple lenders and are having a hard time keeping track of all your payments and due dates, consolidating can make your repayment process easier. Once you consolidate, you’ll only have to make one payment per month to one lender. Essentially, refinancing or consolidating means your old loans are paid off, and a new one is formed.

Just in case it’s not clear – consolidating and refinancing pay off your old loans, and you get a brand new loan. That means you can’t undo the consolidation or refinance.

Overall, consolidating with the Federal Direct Consolidation Loan, rather than a private lender, makes the most sense for those struggling to make their minimum monthly payments. Should they ever need assistance, the guaranteed benefits offered through the government will help give them peace of mind.

Pros and Cons of the Federal Direct Consolidation Loan

No loan is without its downsides, and consolidating does have a few that those in special circumstances should take into consideration.

Pro: There’s no application fee or cost associated with the loan. Some private lenders charge an origination fee, so be on the lookout.

Con: You won’t be saving a lot of money by consolidating as your interest rate won’t change much. The fixed rate offered is based on the weighted average of all the loans you’re consolidating, which is then rounded up to the nearest 1/8th of 1 percent.

Pro: If your loans are in default, you may be eligible to consolidate them. This will actually bring your loan out of default.

Con: Different types of federal student loans have different types of benefits, adding a bit of uncertainty to the mix. Ultimately, you need to know whether or not these benefits apply to you. For example, if you have a Perkins loan, it can be forgiven when you join the military, enter the Peace Corps, or join a law enforcement agency. If you’re not planning on taking this route, then the loss of this benefit doesn’t affect you.

Pro: Unlike with private lenders, you will not have to undergo a credit inquiry if you consolidate through this program.

Con: If you choose to consolidate during your grace period, you will lose it and repayment will begin immediately after the consolidation goes through.

Pro: Because consolidating your loans effectively gives you a new loan, everything resets, including deferment and forbearance periods. Additionally, your loan term can be “extended” as it’s reset. If you’re on year 3 of a 10-year repayment plan, you’ll start at year 1 out of 10 years, giving you a lower monthly payment without actually extending your loan term.

The Application Process and Eligibility

First, you need to make sure your loan is eligible for the direct consolidation program. Most federal student loans are, but it’s worth checking:

  • Direct subsidized and unsubsidized loans
  • Subsidized and unsubsidized Federal Stafford Loans
  • Direct PLUS loans
  • PLUS loans from the Federal Family Education Loan Program
  • Supplemental loans for students
  • Federal Perkins and Nursing loans
  • Health Education Assistance Loans
  • Select existing consolidation loans

If you’ve already left school, fell below part-time employment, or graduated, you can consolidate your loans.

There’s no application fee if you’d like to consolidate your federal student loans, and you can do so online through studentloans.gov. There are only five steps to the application and it shouldn’t take you very long to complete. The downside is the entire process can take sixty to ninety days, so you’ll have to continue making your regular scheduled monthly payments in the meantime.

If you have any questions about the process as you’re going through it, contact the Loan Consolidation Information Call Center by calling 800-557-7392.

Repayment Programs Available

When consolidating your student loans, you might think you need to use income-based repayment plans, but that’s not always true. You can still keep the standard 10 year repayment plan when consolidating, depending on the amount you’re consolidating, which is great if you don’t want to extend your repayment plan and pay more interest.

You’ll also have access to the graduated repayment plan, the extended repayment plan, the Pay As You Earn plan, and the Income-Contingent and Income-Based repayment plans.

[Learn how to set up these programs here.]

The graduated repayment plan is a good option for those just getting started in their careers. If you’re not making much now, but expect to rise the ranks and have a higher salary in a few years, the graduated repayment plan will work well for you. You have 10 to 30 years to repay your loans under this plan.

The extended repayment plan has two options with a 25-year term. You can make fixed monthly payments for the entire length of your loan, or you can have a graduated repayment option, where your payments rise periodically.

The pay as you earn repayment plan is only on a 20-year term and typically has the lowest repayment amount out of all the income-based repayment plans. You must meet certain eligibility requirements to qualify, though. When applying for consolidation, you’ll have to choose “income-based repayment plan,” and then you’ll need to contact the loan servicer you end up with to see if you’re eligible.

The income-contingent repayment plan is what it sounds like – your payment is based on your income, amount of student loan debt, and family size. You have 25 years to repay it.

The income-based repayment plan is similar to the income-contingent plan, except you must show you’re experiencing partial financial hardship at the time of consolidating.

For more information, and for examples on what your repayment might look like, check out the FAQ section on Direct Consolidation Loans.

Consolidating Can Help You Get Out of Default

Did you know that consolidating with the government has one big bonus? If your loans are in default, then consolidating can get them out. However, there are a few things to be aware of.

You can’t just apply for consolidation. Typically, you need to make arrangements with the Department of Education first. You should be able to make three consecutive and timely payments on your loans before applying to consolidate. This shows you’re serious about getting out of default, and can afford to make some sort of payment.

You’ll be making payments under either the income-based, the pay as you earn, or the income-contingent repayment plan.

Should You Consolidate?

Overall, if you’re not having any trouble making your payments, and you’re managing them well, consolidating may not be worth it. This is especially true for those who are already making decent headway on their loans. If you’re close to paying off your loans, there’s not much to gain from consolidating.

You should think about consolidating if you want simpler monthly payments or lower payments. Remember that consolidating through the government over a private lender allows you to keep your benefits so you don’t need to worry as much about financial hardship should it happen.

Lastly, when applying to consolidate, keep the different servicers you can choose from in mind. Go with a servicer that has a good reputation that offers interest rate discounts. Some offer 0.25% discounts for autopayment, for example. Take the discounts and rebates where you can to keep costs low.

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College Students and Recent Grads, Life Events

Finding Success Without Going to College

Senior Couple Talking To Financial Advisor At Home

Millennials were born between 1980 and 2000, and grew up to be the most educated generation in history. No other group of adults holds as many postsecondary degrees as Generation Y.

It makes sense why this demographic would focus on higher education. College and advanced degrees have historically led to higher earnings after graduation. And many millennials who faced trying to find a job post-2008 and continuing on to more advanced degrees chose to just stay in school in an attempt to ride out the recession.

While millennials may be more highly educated than any other group of adults, they’re also dealing with the consequences of acquiring so many degrees. Collectively, America’s student loan debt burden is in the trillions and many young adults struggle to find financial stability after school. Student loan repayment eats away a big chunk of their earnings — even when their college degrees do allow them to bring in bigger incomes than their less educated peers.

But not everyone from younger generations like Gen Y (and Gen X) fresh out of high school went the traditional path of graduating high school, going to college and attaining four-year degree from a university. Some chose not to pursue those four-year degrees at all and found a different path to success.

Making Conscious Decisions to Avoid Debt

Jordani Sarreal chose not to attain a four-year degree for financial reasons. “I didn’t want to be in debt,” she explains.

Instead, the 24-year-old pursued a two-year associate’s degree. Then she spent the last four years building a business that now makes six figures in revenue. She started Le Pique Nique with $200 and handmade products and her bootstrapped company has, to date, sold over 22,000 bags.

Because she was able to start a successful business, Sarreal knew that a university degree wasn’t a requirement to enter the workforce and achieve her goals. She enjoys being free from student loan debt and the ability to travel while earning a comfortable salary from her company.

Choosing What You Can Afford

Chris Lynam jokes that he’s a “classic case” of someone who became a business owner after an injury sidelined him in his chosen sport. “My parents couldn’t afford college,” says Lynam. “I opted for a junior college to play basketball.” And then came the injury.

After his injury put an end to his collegiate basketball career, Lynam discovered dance — and eventually became a dance teacher. He took the step to business owner when he started opening studios.

“My wife and I own 5 Arthur Murray dance studios in the Bay Area,” Lynam says. “We’ve helped two of our management teams open two additional locations, and I’ve become a thought leader and worldwide consultant for our company.”

After going to a private high school where most of his classmates came from money (and went to universities like Harvard and Stanford) Lynam felt a bit out of place with his choice to go to a junior college. But by his 10-year high school reunion, he was a successful business owner and a competitive dancer – and won the “Best Job” award from his former peers.

“I have always wondered what would have happened if I had taken the traditional route to college,” says Lynam, “but I’m so glad I didn’t.”

Considering the Financial Flipside

While it’s always nice to avoid student loans, some students have other reasons than “avoiding debt” on their minds when they choose alternative paths. It’s a different aspect of the financial impact that matters.

“The financial aspect didn’t influence my decision in terms of what I had to spend to get my degree, but on the financial opportunities I was going to miss out over the next 4 to 6 years from my already established businesses,” says Tance Hughes.

Hughes dove into entrepreneurship early. He started a lawn care business with a friend at 16. Then he started a printing business that he still runs today, at 24. Focusing on his business allowed him to pursue opportunities that he might have missed out on had he continued on to get a four-year degree.

“When I left college I returned to work full time at my printing business,” Hughes shares.  “We are projecting to have revenues of $750,000 this year and projecting to be at $1,000,000 within two more years. We currently employ 12 people. We have expanded into custom home decor products that are cut out of steel and we are selling online primarily.”

Finding the Right Path Through Work Instead of Classes

Lauren Fairbanks didn’t plan to drop out of her university program, but after moving from Hammond, Louisiana to New York City she decided her new home was a better fit for her. She initially went to NYC for an internship, and when it was completed, she asked for a job and received a position.

Fairbanks knew she wanted to stay in NYC once she got there. She also knew that wouldn’t be financially feasible without a full-time income. “At the same time, I wasn’t entirely sure what I wanted to do career-wise, so I figured working full-time and even job-hopping was a good opportunity to try out a few things and see what stuck,” she explains. “Ultimately, what I realized is that I like the risk and thrill of starting my own thing was what I really wanted to do.”

“That was basically the launching pad for me jumping around to a bunch of different positions and ultimately ending up in journalism — after around 5 years,” she continues. “From there I ventured off to start my content marketing consultancy, taking what I learned from working in the media and using those same principles to create branded content for companies.”

Fairbanks started Stunt and Gimmick’s, the content marketing agency, in 2010. Thanks to little overhead and minimal startup costs, that company was easier to start than her next venture – a mobile device repair shop.

If that sounds a little unexpected, it probably should: Fairbanks says the second business was a “sort of an experiment.”

“My fiance and business partner was a Director of Marketing for a chain of repair shops based in NYC,” she explains. “We had an idea for a different take on the traditional repair shop.” The couple found a good location while visiting Fairbanks’ parents in her home state of Louisiana, and opened the first Digital Remedy shop a few months later.

“It took us about a year to feel comfortable with our processes and to iron out the kinks in our business model before we rolled out to a larger market in downtown Charleston, South Carolina. And we have our third store opening in Miami, Florida in a month,” says Fairbanks.

Sticking to the traditional path of college and a (hopefully) steady paycheck is still admirable, but young millennials are proving that it’s okay to take risks and see if you can accomplish a goal without the backing of a college degree.

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College Students and Recent Grads, Life Events

How to Go to College for Free

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My education cost me a whopping $206k in student loans. I cannot begin to tell you how painful this financial burden is for me. But as it turns out, there are actually places where you can go to college for free and avoid the pain of student loans. Who knew?

You may be able to go to college for free if: 1) the college offers free tuition to everyone, 2) the college offers free tuition based on academic scholarship, 3) the college offers free tuition based on your background (ethnicity or location), or 4) the college offers free tuition for low-income families. It’s also important to look at whether the school offers full-tuition free or a free ride. Both are nice, but they’re different – the former means you’re responsible for room and board and the latter means that room and board is generally covered. This post discusses both types of free tuition, so for some of the colleges listed below, even if they’re “free”, you may still have to pay for room and board.

Free College for Everyone

Macaulay Honors College at CUNY

In the United States, you can go to Macaulay Honors College at CUNY for free. To qualify, you must be a New York State resident. If you meet the residency requirement, then as a Macaulay Honors College at CUNY student, you will receive a full tuition scholarship. This excludes living expenses and some additional fees (for technology and activities, which tend to be under $350). For more details see this page.

Webb Institute

The Webb Institute, located in Glen Cove, New York is a private engineering college that only offers one degree – naval architecture and marine engineering. This may sound limiting but if you go there, you receive a full tuition scholarship for academics. You will have to pay for room and board, but you may qualify for financial aid.

Barclay College

Barclay College is a Christian college in Haviland, Kansas, where you can earn a degree in a number of pastoral fields. You can attend Barclay College for free if you live in campus housing.

U.S. Air Force Academy

You can go to the U.S. Air Force Academy in Colorado Springs, Colorado for free. That’s the easy part. The hard part is getting in. To get in, you must be nominated by a member of Congress or the Vice President of the United States (talk about competition)! But once you’re in, you will receive a scholarship that’s valued at $416,000 for your tuition and living expenses. You are expected to fulfill a military service commitment for eight years after graduation.

Cooper Union

Cooper Union for the Advancement of Science and Art, located in New York City, New York, offers half-tuition scholarships to all its students. Prior to 2014, full tuition scholarships were awarded, but under financial pressure, the college changed the program to awarding half-tuition scholarships. Getting in to Cooper Union, however, is very difficult – only 7% of applicants are accepted and acceptance is based solely on merit. But once you’re in, part of your tuition is paid for.

Germany

You can go to college for free in Germany because Germany no longer charges tuition for college – even for international students (more on this story here). It’s quite incredible. One caveat is that “free” is mostly free –there are some fees for cover health insurance and living expenses that you’ll have to pay. Even if you spend $6,000-$7,000 a year on these expenses (like in this story), that is still be a huge financial win compared to paying for college in the United States. And this doesn’t mean you need to be fluent in German. There are English-speaking programs available.

Free College for Academics

Curtis Institute of Music

At the highly competitive Curtis Institute of Music, in Philadelphia, Pennsylvania, you will receive a merit-based full tuition scholarship if you attend the school (regardless of need). You can even have your living expenses paid for by applying for financial assistance (awarded based on need).

National Merit Scholar (or Semifinalist)

There are over 50 colleges that award full tuition scholarships for National Merit Scholars or National Merit Semifinalists (and room and board is included at some institutions). The College Matchmaker published a list of 53 colleges that offer this award. If you become a National Merit Scholar or Semifinalist, you have tremendous opportunities to go to college for free.

State School Scholarships

Many state schools offer full academic scholarships based on merit. For example, at Louisiana State University at Shreveport, freshmen are eligible for the Louisiana Scholarship, which pays for full tuition. To qualify, you must have an ACT score of 30 or higher and a GPA of 3.5 or higher. Another example is at the University of Alabama, where you can receive a full tuition scholarship if you have an ACT score above 30 and a GPA of 3.5 or higher by applying for the Presidential Scholar Award. There are many more states that offer similar scholarships, but keep in mind that these scholarships usually have a residency requirement (and different rules for out of state residents). This is something to be mindful of as you apply for in-state or out-of-state schools. These scholarships are huge, so don’t miss an opportunity and be sure to research your state and school before committing.

Free College for Background

You may be able to go to college for free if you come from a particular background. Some schools offer free tuition if you’re from a particular region or from a particular ethnicity.

Native American Students

In Michigan, students with a Native American Background can attend college for free through the state’s Michigan Indian Tuition Waiver program. To qualify, you must be a state resident and you must be at least 25% Native American and enrolled in a Federally recognized tribe. This program pays for full tuition at any public Michigan 2 year or 4 year program.

Other states besides Michigan offer similar tuition waivers for Native American students, such as New York and North Carolina. It’s worth your while to research whether your state has this benefit (or gets it in the future) if you are Native American. Similarly, there may be tuition waiver programs for other backgrounds, like Eskimo and Aleut. If you have a minority background or a background that could receive tuition waiver, keep this in mind as you apply for schools so you don’t miss out on free tuition.

Appalachian region

The Alice Lloyd College, located in Pippa Passes, Kentucky, offers free tuition to students who reside in the Appalachian region (108 counties). As a student, you must complete at least 160 hours of work-study in the community each semester. Otherwise, if you come from the Central Appalachian County Service Area, you will receive free tuition.

Berea College, in Berea, Kentucky, offers full tuition scholarships to all students with financial need. Berea College “admits only academically promising students, primarily from Appalachia, who have limited economic resources.” Also, if you participate in the work-study program at Berea, you can earn enough to cover your room and board.

Free College for Low Income

There are many schools that offer free tuition to students whose family income is below a certain dollar amount. Below is a list of examples of schools that do this, but there may be more schools that offer free tuition for low-income families that are not listed below. If you’re applying to schools and your family is low income, then make sure to research whether you can get tuition for free.

Ivy League Schools

If you get into an Ivy League or, similarly prestigious school, and your family is considered low-income, then you may be on your way to college for free. In this CNN article, you’ll see that you can get tuition for free at Stanford if your family has an annual income and assets of less than $125,000. Free room and board is included if your family makes less than $65,000.

Similarly, at Harvard, if your family makes less than $65,000, the tuition is free, and if your family makes between $65,000 and $150,000 the contribution expectation is 0-10%.

Yale students whose families make less than $65,000 receive free tuition, and Princeton students whose families make less than $140,000 do not pay tuition.

College of the Ozarks

College of the Ozarks is located in Point Lookout, Missouri and offers free tuition to all of its students. However, only students with financial need are admitted. In order to receive free tuition, students must work at least 15 hours per week when school is in session and 40 hours per week for two weeks when school is not in session. Tuition is free, but you have to work for it!

Soka University

At the liberal arts college, Soka University, located in Aliso Viejo, California, all students whose family income is $60,000 or less receives free tuition (room and board fees still apply).

Texas A&M

Texas A&M University, located in College Station, Texas, offers free tuition to families with income less than $60,000.

Doing Your Homework Can Pay Off Big Time

As it turns out, it is possible to go to college for free. Some colleges offer free tuition to all students, while other colleges offer free tuition based on academics, background, and income. The point to take away from this is that you can avoid tremendous student loan debt and still get a college education. It pays off to do your research.

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College Students and Recent Grads, Student Loan ReFi

How to Get Student Loans Out of Default

Depressed man slumped on the desk with his hands holding credit card and currency

Have you been struggling to make the minimum payments on your student loans? If so, you might be at risk of defaulting on them. The worst thing you can possibly do with any debt is end up in default, as there are dire consequences that could wreck your credit for years to come.

If you’re wondering what happens when your student loans are in default, what that means for you, the difference between being delinquent or default on your loans, or how you can get out of default, read on for some advice.

Defaulting vs. Delinquency

There’s a huge difference between simply being delinquent on your student loans and defaulting on them.

Your student loans are considered delinquent as soon as you fail to make a payment on them. After 90 days, the lateness is reported to the credit bureaus.

Some private student loans have different rules – missing one payment may cause your loans to go into default. It’s important to understand the terms of your agreement for that reason.

Defaulting typically means your loans haven’t been paid for 270 days or more (if you pay on a monthly basis). If you pay less than once a month, your loans are considered default after 330 days of no payments.

Why exactly can a loan be considered “in default”? When you borrowed the funds for your student loans, you signed a master promissory note, which was a promise to make good on repaying the loan under the terms you agreed upon. Failure to pay directly violates that agreement.

[6 Things to Know About Defaulting on Student Loans]

Consequences of Defaulting on Your Student Loans

There are several severe consequences of defaulting on your student loans. You may or may not know that the government can garnish your wages and keep your tax refunds to collect payments if you have any debt in default. It’s not a good feeling to know your income can be taken away like that – in a sense, it doesn’t even belong to you.

Both the government and private lenders can also sue you. Your credit may take a major hit, and this will make it incredibly difficult to qualify for any financing. Additionally, you might not get approved for utilities, an apartment, a cell phone plan, or renter’s / homeowner’s insurance. As you can see, the negative effects of a bad credit score are far more than just access to credit. Plus, a late payment can take up to seven years to drop off your credit report.

With federal and private loans, your lender can go through the normal process of sending your student loans to collections. You may receive calls from debt collectors, and you’ll also incur late fees or returned payment fees, and thus, bank fees (if your account is negative or overdrawn). Interest will continue to accrue as well.

With federal student loans, your entire remaining balance becomes due once you’ve defaulted. Talk about overwhelming! You also lose access to all federal student loan benefits such as forbearance, deferment, and alternative repayment plans.

If you’re thinking about going back to college, you also won’t be eligible for more aid.

Are you a federal employee? 15 percent of your disposable pay can be offset by your employer to go toward repaying your loans.

As for private student loans, again, make sure you check and understand the terms of your agreement. If you have any questions, contact your loan servicer so they can explain how their system works. Private lenders generally have to go through some more hoops to collect payment, but that doesn’t mean they won’t. Each lender is different.

How to Get Out of Default

You may have heard that you can’t include student loan debt in a bankruptcy – that’s not exactly true, but there’s an easier way to rehabilitate your loans.

First, if you only have federal student loans, you may have an easier time getting out of default. That’s because consolidating your student loans with the Direct Federal Loan Consolidation program actually allows you to get out of default.

Yes, you can consolidate loans that are default, but you must make voluntary payments and arrangements with the Department of Education beforehand. Typically, that means three timely and consecutive payments.

Second, if you can get access to the money, repaying your remaining loan balance in full, all in one lump sum, will get you out of default.

Third, if you have federal student loans, then you can rehabilitate them through a government program. There are several steps involved in the process, and you must be in a position to make nine out of ten consecutive monthly payments. You can only miss one month, though ideally, you can make all payments without trouble.

Thankfully, your payments under the rehabilitation program should be more manageable. This is due to the fact you’ll be under an income-based repayment plan. If you were repaying under the standard 10-year repayment plan, then your monthly payment will be less than you’re used to.

Once those nine payments are made, you’ll be able to get the default off your credit report, restoring the status of your loan and your credit score.

Note that any payments made toward your loans via wage garnishment before you began rehabilitating your loan will not count toward your balance. Also, if any delinquencies were reported before you defaulted, they will not be removed from your credit – only information associated with the default is removed with rehabilitation. Lastly, if there are any collection/late fees due, they will be added to your total balance, increasing the cost of the loan.

Takeaway: Take Action As Soon as Possible

Again, if you’ve been struggling to make payments on your student loans, you need to get in contact with your loan servicer immediately. Some servicers will be willing to work with you, especially if you’ve already been paying on time. This is doubly true for those with private student loans.

Explain your situation to your servicer and how you would benefit from a lower monthly payment. They may be able to provide you with an alternative, such as lowering your interest rate, increasing the length of your term, or granting you a period of forbearance or deferment.

Even if your loans are already in default, you should get in touch with your loan servicer. They won’t be able to help you unless you talk to them and let them know you’ve been experiencing financial hardship. Don’t count on a lender to take the initiative – that’s up to you.

Also, in some rare cases, your loans may have been reported as default in error. If you’re certain you’ve been making payments and haven’t been late, get in touch with your loan servicer to see what records they have on file.

Remember – you have nothing to lose and everything to gain by contacting your loan servicer and ignoring your student loans won’t make them go away. The more days that go by without a payment, the worse your situation gets.

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Best of, Building Credit, College Students and Recent Grads

Best First Credit Card for Teenagers

Black woman using credit card and laptop

When it comes to credit cards, no two opinions are alike. There are the die-hard “no credit card” advocates, the avid credit card users, and those that fall somewhere in between.

And while both sides of the spectrum have very strong feelings about their preferred credit card usage, throwing a teenager with a credit card into the mix is sure to only make those opinions about credit card usage even stronger.

But if you can get past your fears about your teen mishandling credit, a teenager with a credit card can actually be a good thing. Giving your teenager a credit card not only helps them learn how to manage credit correctly; it builds your trust in them. Done correctly, giving your teen a credit card will actually help them build good credit for the future, and teach him or her sound money management principles that will benefit them for the rest of his or her life.

Safely Teach Your Teen How To Handle Credit

The CARD Act of of 2009 placed limits on when and how teenagers can open credit cards. The restrictions include:

  • Student Applicants Under 21 are now required to have a cosigner, like a parent, who is over 21. Or required to provide proof of income that could cover credit card bills.
  • Fewer Prescreened Offers: The CARD Act prohibits credit reporting agencies from releasing credit reports for individuals under 21 unless the consumer specifically requests it.

Even with restrictions from The CARD Act, there is no substitute for the teaching and learning relationship from parent to child. Here are some options to get your child started using credit responsibly.

Building Trust

Bluebird by American Express is less of a credit card and more a prepaid card that allows you to have more control over your child’s spending habits, while introducing the concept of using a card rather than cash.

Key Features:

  • Prepaid Card, not a credit card
  • Free online setup
  • Can send or receive money at no cost
  • Money can be added from a checking or savings account, or with cash at any Walmart register
  • No activation fee
  • No monthly fee
  • No overdraft fee
  • No ATM Fee –  If you stay in network of MoneyPass ATMs (includes Money Center Express Machines at Walmart). The ATM fee is high if you go out of network with a $2.50 charge on top of ATM surcharge.
  • Provides purchase protection (like a traditional credit card) for up to 90 days against theft and accidental damage on qualified purchases

While Bluebird does not build credit, it is an excellent option for the teenager who is completely new to using a card, or who lacks self control when it comes to spending. With this card you can add money easily without fear of overspending in order to develop trust and healthy habits.

Bluebird

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Maintain Control

The best way to maintain control over a teenager with an actual credit card is to add them as an authorized user to yours.

Doing so will allow you to monitor your child’s spending via statements and online banking while still keeping traditional credit card benefits in place, as well as earning rewards on your teenager’s spending. If you’re looking to generate rewards for yourself, then consider adding your teenager as an authorized user to the Citi Double Cash Card.

Key Features:

  • Unlimited 2% cash back: 1% when you make a purchase, and 1% when you pay on time
  • Price Rewind: If Citi finds a lower price on an item you purchased within 60 days, the price difference will be refunded to you.
  • No annual fee
  • APR ranges from 12.99% to 22.99%, depending upon creditworthiness

Citi_double

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Unfortunately, adding your teenager as an authorized user on your credit card will not help build their credit, but it will start to teach them to use a credit card responsibly.

Let Your Teenager Prove Himself or Herself

Once you are confident that your teenager is well on his or her way to developing healthy habits with a credit card, the next step is setting up a secured credit card. This gives your teen the freedom to prove him or herself and begin building credit.

A secured credit card requires collateral in the form of a cash deposit, which allows borrowers with no credit or bad credit to obtain a credit card. A secured card is for building credit, not for earning rewards. Explain how the system works and require your teen to use his or her own money as the collateral.

Below, we have given you a couple of options for secured credit cards.

CapitalOne Secured MasterCard

The CapitalOne Secured MasterCard has a hefty APR of 24.90%, but the cash deposit required ranges from $49 to $200, one of the lowest you’ll find anywhere.

Pros

  • Credit limit varies from $200 to $3,000, depending upon the security deposit
  • Can increase credit limit by making an additional security deposit
  • Reimbursement if you find a lower price on an item you purchased on the card within 60 days
  • Fraud coverage
  • Pick your due date
  • No annual fee
  • Helps build credit

Cons

  • Requires a deposit of $49 to $200, depending upon creditworthiness, which must be paid in full within 80 days of your account being approved
  • 24.90% APR

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State Department EMV Savings Secured Visa Platinum

With a 6.99% APR, the State Department EMV Savings Secured Visa Platinum is another excellent option for a teenager. There is no annual fee, and while you must be a member of the State Department Federal Credit Union to get the card, anyone can become a member.

Pros

  • 6.99% APR
  • No Annual Fee
  • Helps Build Credit

Cons

  • $250 minimum deposit
  • $1 to join the credit union (which may be covered by the State Department Federal Credit Union)
  • $5 to join the American Consumer Council if you are not a member of the State Department. ($15 lifetime cost of membership)

1245_card.EMV Secured Visa Platinum Card By State Department FCU

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Teaching your teenager to use credit responsibly can be daunting for a parent. But if you start by introducing the concept of using a prepaid card, then transition to allowing your teenager to become an authorized user on your credit card, and then finally help them obtain a secured credit card to build credit in his or her own name, you can set up your teen for successful credit management in the future.

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College Students and Recent Grads, Strategies to Save

5 Money Apps Every College Student Should Have

5 Money Apps Every College Student Should Have

For most teenagers, heading off to college is the first time they’re fully out on their own. It’s also the first time they’ll be responsible for managing their own money. It can get tricky to juggle classes, extracurricular activities, and maybe even some part-time work or internships. When you throw financial responsibility on top of that, things can start slipping through the cracks.

Thankfully, today’s undergrads can catch a break with the wealth of apps out there that are designed to help them do more with their money. Here are 5 money apps every college student should have.

1. Mint Screen Shot 2015-08-06 at 11.33.29 AM

No list of money apps can really get started without first addressing the fact that Mint is the tool to help college students (and everyone else) better track and evaluate their finances. Mint is especially useful for students because they’re just now learning how to manage money and multiple bank accounts.

Mint makes it easy to track spending and financial goals, and will even make suggestions on how to alter current behaviors to meet goals faster. The app provides real time information and graphs to help students visualize how they’re using their money — and what they’re using it on.

Screen Shot 2015-08-06 at 11.45.23 AM2. Digit

Some college students may have a little extra money to spare each month, but could lack the awareness, habit, and discipline it takes to actually transfer cash into savings. Digit makes savings easy by moving the money for you.

It’s a free service that has users connect a bank account to the app, which then analyzes deposits and withdrawals in that account. Based off the information, Digit will find “small amounts of money it can safely set aside.”

Every 2 to 3 days, Digit will transfer anywhere from $5 to $50 into a Digit account. According to their website, the app will never transfer more than a user can afford (again, that transfer amount is based off the activity in your account). It also states it will cover an overdraft fee if a Digit transaction causes you to overdraft. When you’re ready to access what Digit saved on your behalf, send them a text and they’ll transfer the money back to your bank account on the next business day.

We recommend cashing out your Digit money into an actual savings account each month because Digit offers 0% interest and you should be tucking your savings away in an account earning at least 0.99% like Ally or 1.25% like My Savings Direct.

Screen Shot 2015-08-06 at 11.47.25 AM3. Scoutmob or Living Social

When you’re a broke college student, a thriving social life full of pricey experiences, evenings out, and fun things to buy should not be on the top of your priority list. But that doesn’t mean enjoying local events and things to do should be completely out of the question, either.

Students can use Scoutmob to help budget in the fun stuff. The app offers two different options: access to unique items to buy, or deals from local small businesses. Either way, it promises to save users money on the things they want to purchase.

Screen Shot 2015-08-06 at 11.48.46 AMThe team behind the app works directly with local business owners and independent makers to give users “exclusive deals, crafted goods, and curated experiences.”

Alternatively, students can check out LivingSocial for a similar experience: deals on local events and businesses in their cities and coupons or discounts on gifts and items for sale.

Screen Shot 2015-08-06 at 11.49.37 AM4. PayPal

College students can easily exchange money with their friends by downloading PayPal’s mobile app. This makes it fast and simple to split restaurant tabs, pay someone back for tickets to the game, or get paid for odd jobs during the summer.

Screen Shot 2015-08-06 at 11.50.16 AM5. Close5

Admittedly, this one’s a bit of a stretch. While not technically a money app, it can help college students save and make money. Close5 is an app that’s on a mission to make buying and selling items simple and safe.

After downloading the app, students can list items by taking pictures on their phone and adding in a description and price. Once an offer is made or accepted on a listed item, users can privately message each other through the app to coordinate and complete the sale.

Students can also browse through listings that other users have posted to find great deals on furniture for their dorms or apartments.

In addition to these apps, students might want to download apps that are specific to their bank or institution where they hold credit cards so financial information is easily accessible anywhere, anytime. By using these tools, they’ll build good habits around managing their money — and simply being aware of their personal financial situations.

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College Students and Recent Grads, Earning Cashback, News

Discover Announces New Credit Card Perk for College Students

Black woman using credit card and laptop

Recently, Discover announced it would be expanding its existing credit card rewards program for college students by providing a cash incentive for good grades. Not unlike Mom and Dad forking over cash for each ‘A’ on a report card, Discover plans to pay $20 to college students who maintain a 3.0 (or equivalent) or higher during the school year. The offer will be good for each year a student is enrolled in school for the first five years after the account is opened.

Eligible Cards

The Good Grades $20 Cashback Bonus will be available if you use the Discover it chrome for Students or Discover it for Students cards. It will be added to any other cash back accrued during the year.

The Discover it Chrome for Students offers:

  • No annual fee
  • TransUnion FICO score on each monthly statement
  • 0% APR for 6 months
  • 12.99% – 21.99% non-promo APR
  • 2% cash back at gas stations and restaurants up to $1,000 per quarter
  • 1% on all other purchases
  • Double cash back for the first 12 billing cycles for new cardholders

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The Discover it for Students card offers:

  • No annual fee
  • Free TransUnion FICO score on monthly statement
  • 0% APR for 6 months
  • 12.99% – 21.99% non-promo APR
  • 5% cash back in rotating categories
  • 1% on all other purchases
  • Double cash back for the first 12 billing cycles for new members

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[Check out the Best Credit Cards for College Students]

The Catch

It’s nice Discover plans to offer a good grade incentive, but the true plan is to simply acquire more customers. This perk will only be available to new student card members who apply after July 23, 2015. Any students who currently have a Discover card will not be eligible for an extra $20 per year.

Proving Your Good Grades

Students interested in redeeming their cash back will be required to enter their GPAs in their account centers at the end of the school year. Discover does reserve the right to request additional documentation as proof of the 3.0 or higher GPA before crediting the bonus to a customer’s account.

Discover’s Second Time Launching this Type of Program

This is actually Discover’s second time launching a Good Grades Reward program. In 2014, the company provided a similar incentive to any Undergraduate, Health Professions, Law, MBA or Graduate students who submitted and received a student loan from Discover on or after May 1, 2014.

Discover student loan holders with a 3.0 or higher are eligible for 1% cash reward of the loan amount. Loan holders need to log in and submit to redeem the reward within 6 months after an academic term covered by the loan has ended.

Students can be eligible to receive both bonuses, but must apply for and redeem them separately.

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College Students and Recent Grads, News, Student Loan ReFi

Students Remained Confused About The True Cost Of College

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Understanding the true cost of college can be incredibly confusing. And a recent study, released by the New America Foundation, reveals just how confused American youth have become. Although 92% of families earning less than $50,000 a year can qualify for a Pell Grant, 48% of families who could qualify had never heard of the program.

The Department of Education has created a Net Price Calculator tool. Its purpose is to help prospective students understand the annual cost of an education after subtracting grants and scholarships. However, only 14% of students had ever used a net price calculator.

American students now have more than $1.2 trillion of student loan debt outstanding, which is more than credit card debt. Students have been adding to student loan debt at a dizzying pace, thanks in large part to the rapid increase in tuition over the last 20 years. Student loan debt remains with a borrower forever, because it is nearly impossible to eliminate in bankruptcy. High school students are forced to make very important choices. At a minimum, they should understand the true cost of their education and the potential help available to help reduce the cost. The results of this survey show that we have a long way to go.

Complexity Creates Confusion

63% of college students admit to having felt lost during the financial aid application process. And it is not a surprise. No one would have created the current system on purpose. Although colleges advertise a tuition sticker price, almost no two students end up paying the same price. Many colleges offer academic and athletic scholarships, which reduce the price of education. Families with income below $50,000 can be eligible for Pell Grants, which provide up to $5,775 of financial aid. Some states have scholarships or grants available. And then there are a range of student loan programs on offer for both students and parents from both the government and private financial institutions.

The key to unlocking a lot of the potential aid is the Free Application for Federal Student Aid, or the FAFSA.  However, you do not need to wait to get an estimate of your financial aid. The Department of Education has created a tool to help you estimate your aid, which can be found on their website. The tool will then help you estimate your Federal Pell Grant, Federal Work-Study amount, maximum Direct Subsidized Loan, and maximum Direct Unsubsidized Loan. You will find your estimated family contribution, and compare that by school and tuition.

College Is A Financial Decision

In its simplest form, college provides two valuable services for students. First, it provides the education necessary to build a successful career after graduation. And second, it provides an excellent life experience. Many schools talk about the value of living with a diverse student body and often gaining more outside of the classroom than from formal education. Historically, the calculation was clear. So long as you received a college degree, the benefits of college were worth the cost. However, as tuition has increased dramatically and rapidly, students would be wise to consider lifetime earning potential when selecting a college.

Studies have shown that your field of study is much more important than your institution when selecting a college. If a student graduates with a computer science degree, she will likely have many opportunities with a good salary. If an individual wants to study psychology and become a social worker, the lifetime earning potential will be much less. It becomes very important for people to be able to understand the actual cost of education so that they do not put themselves into excessive debt relative to their lifetime earning potential.

Although the government is trying, with multiple website tools, to help educate and inform the decision, the system remains excessively complicated. And the recent New America Foundation Study just reaffirms that students will continue to make suboptimal decisions and leave money on the table until simplicity is brought to the system.

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College Students and Recent Grads, Life Events

When Budgeting Can Actually Be Harmful

Mixed Race Young Female Agonizing Over Financial Calculations in Her Kitchen.

Budgets are often hailed as the end-all-be-all financial tool to help you be successful with managing your money, but are there better solutions out there?

I found myself asking that question when I decided to jump on the budgeting bandwagon in the middle of last year. Before that, I had been keeping a close eye on all of my expenses, making every effort to cut back where I could. My number one goal was (and still is) to pay off my student loans, and to do that effectively, I needed to free up more money to go toward them.

There were times when one month was more expensive than the last, and I figured setting up an actual budget and sticking to it would help even things out.

Unfortunately, in the process, I started focusing way too much on the numbers. I made it a habit to check in with my budget spreadsheet (I’m a little old school) at the end of every week to see how I was doing, and if I was over a dollar here or a dollar there, I’d beat myself up over it.

I’m a perfectionist by nature, and I’m also very frugal. Was there really a need for me to budget in the first place? Over the past few months, I learned there wasn’t. Budgeting was actually causing me more harm than good.

Budgeting Isn’t Always a Bad Idea…

Hear me out – I’m not against budgeting entirely. It’s one of the basic tenants of personal finance, and there’s a reason for that. Plenty of people have experienced financial success because they started budgeting.

If you have no idea how to start managing your money, getting a budget in place can give you a good idea of what to expect. Some people aren’t aware of their exact expenses month to month, and getting knee-deep in their statements and transactions can give them a better picture of their situation.

Those that rely solely on commission or have sporadic pay can also benefit from budgeting, as they’re more at risk of running low on funds and need to manage things tightly.

A budget is a tool that ultimately allows most of us to maximize our money and achieve our financial goals.

…But It Can Be, For Certain People

However, following a strict budget isn’t for everyone, especially when you’re already frugal.

I learned early on how to manage my money after watching my parents live paycheck to paycheck. I saw the amount of stress they were under, and vowed I would never let my own financial situation get that bad.

As a result, when I got my first part-time retail job, even though I was only making around $7.25 an hour, I still managed to save a few thousand in my savings account. How? Well, besides being naturally frugal and not wanting to spend money, I was happy with less. I didn’t feel the need to rush out and buy new clothes, or go out to eat with friends. My goal was to spend the least amount possible to bank as much as I could.

I didn’t feel like I had to keep a budget because my spending was never out of control.

Budgeting can also be tough for those who can’t keep up with constant monitoring of their finances. If you travel a lot for work, or have a hard time balancing work and family, keeping up with your finances is probably not at the forefront of your mind.

Sure, there are software programs that can help you, but we only have a limited amount of time in our lives. Some people can’t be bothered to check in often, and just the thought of creating a budget is enough to drive them mad. That has the opposite effect and isn’t very helpful when trying to get your finances under control.

Thankfully, there are easier methods we can use to manage our money.

How I Created a Plan to Spend Less

Going back to my spreadsheet – I had gotten lost in details that didn’t matter. Going $10 over my grocery budget wasn’t going to impact my bank account that much, but I was still getting hung up on it. I forced myself to stick to sales, and if I only had $20 left in my budget, I stuck to that, even if my checking account was padded.

promo-savings-halfNot only that, but unconsciously, I felt bad about myself and my inability to keep to the limits of my budget. It took me a while to realize that budgeting was taking an enormous mental toll on me.

Once I had that epiphany, I decided to shift my focus to the bigger picture instead. I wasn’t in any danger of living paycheck to paycheck, so why was I being so hard on myself? My freelance income has been increasing month-after-month, I have a sizeable emergency fund, and I’m still able to pay extra on my student loans. I’ve been heading in the right direction.

With that settled, I abandoned the traditional notion of budgeting. My time was becoming limited and more valuable, and I had faith I could stay in the black (besides my student loans) if I focused spending only on my values, while cutting everything else down.

The Value in Value-Based Spending

I’m happy to report it has been working. At the beginning of the year, I sat down and thought through what I wanted to spend my money on. Travel was a big one (I moved away from my family last year), and overall “quality of life” was another, meaning fun and reasonable splurges. I had been restricting my spending for so long, I knew I needed some breathing room.

Sure enough, if you look at my spending so far, I’ve spent a great deal on travel (while maximizing rewards, of course), treats are in there, and I no longer stress out at the grocery store. I still buy items that are on sale, but I’m also not afraid to stock up and spend more in one go as a result. I may spend more money one month, but it usually evens out the next.

I feel so much better now that I don’t have a budget to answer to. I still track my expenses and I’m giving Mint.com another try. My savings have been completely fine and I’ve had nothing to worry about.

Sometimes, it’s just a matter of changing your mindset. Money very easily influences our emotions, and it’s important to stay in control. Being in debt isn’t fun and can be depressing (I know!), but unless you’re in a dire financial situation, you shouldn’t slash your spending to the bare minimum. Frugality doesn’t equal deprivation, and that’s a lesson I had to learn the hard way.

Instead, I take the simple approach to spending on what’s important to me while still trying to save. You’ll never catch me going crazy with coupons, but that doesn’t mean I don’t look for deals or don’t practice delayed gratification. I try to manage my money in a smart and practical way – maximizing my dollars and my time.

[Reduce Stress: Learn to Budget with One of These 4 Easy Strategies]

Another Simple Alternative to Budgeting

If you lean more toward the “spender” side of the spectrum, rather than the “saver,” my method might not work for you. You could make a valiant effort to cut your spending on everything that isn’t important to you, get distracted by something shiny in a store, and blow it. Admittedly, I’ve been a little too focused on saving, and I know not everyone functions like that.

I still have a few tips on how you can spend less effort on managing your money with success.

First, I believe value-based spending is a critical component to any financial plan. If you take a look at your spending, it will tell you what you value. If your spending doesn’t align with your values, it’s time for a change.

Figure out what expenses you can cut back on so you can prioritize those values. The point is to spend on what’s important to you and reduce your spending elsewhere to keep everything in balance.

Next, if you can’t trust yourself to have money left over at the end of the month for savings, you should pay yourself first. Run the numbers and figure out how much money you can save, and set up an automatic transfer from your checking to your savings account at the beginning of the month. Leave yourself with enough money to cover all your expenses – including fun things! This way, you know what’s available to spend for the month, and you can have fun knowing you’re still saving.

It’s All About What Works For You

There’s a lot of conventional financial wisdom out there, but there are no blanket solutions that will work for everyone. Just because budgets are heralded as the best way to manage your money doesn’t mean that’s true for your particular situation. You need to experiment to see what works for you! Just keep your end goal of financial success in mind.

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Best Credit Cards for College Students

Pretty Young Multiethnic Woman Holding Phone and Credit Card Using Laptop.

College is a unique hybrid of fun, excitement, stress and time management. The academic transition is a struggle. Dorm life certainly takes some getting used to and if you’re working a job to try and keep your student loan debt to a minimum, you may be walking around campus in a constant state of sleep deprivation.

The potential money stress, and the fact that you’re young, likely handling a budget for the first time and much more likely to give into purchasing temptations creates a potentially disastrous mix to damage your credit. It’s important you only plan to open a credit card in college if you understand how to use it (pay your bill on time and in full) and are confident in your ability to be responsible with making payments and never charging more then you can afford.

Everyone handles youth and money differently in part because of their Time Perspective. Your relationship to time will play a role in whether you spend all your money, hoard it, or simply want to avoid dealing with budgets and bills. You can find your time perspective out here.

Your time perspective can help judge the likelihood of a credit card causing you financial pain. For example, a present hedonist shouldn’t get a credit card in college.

Those responsible enough to manage a credit card well have the opportunity to establish and build a respectable credit history without paying a penny to a bank. If that’s you, then you need to understand how to find the best credit card for your situation and a little bit about credit card regulations.

The CARD Act

The CARD Act was signed into law in May 2009, as a result of the credit card industry using practices that were not transparent to consumers. It was intended to uphold “basic standards of fairness, transparency, and accountability.”

Key points of the CARD Act:

  • Stricter Approvals: Student applicants under 21 are now required to have a co-signer like a parent or other adult over 21. If you’re able to document substantial income, then you aren’t required to have a co-signer. Those above 21 still need to prove a stream of income high enough to make credit card payments or else they will also need a co-signer.
  • Proof of Income: If college students wish to apply for a credit card independently, they must show evidence of income high enough to repay any charges they may put on the card
  • No Free Swag: The CARD Act outlawed the practice of giving away Frisbees, pizzas, or other freebies for credit card sign-ups on or near a college campus
  • Fewer Prescreened Offers: The CARD Act now prohibits credit reporting agencies from providing credit reports to credit card companies for consumers under 21 unless the consumer specifically requests it.
  • Restrictions on Affinity Programs: Many colleges and collegiate organizations receive payments or a portion of the proceeds from endorsing a particular credit card offer. With The CARD Act, these organizations are now required to disclose any and all affinity relationships with credit card companies.
  • College Policies: The CARD Act also encourages individual colleges to adopt policies that limit credit card marketing on their campuses, and that require personal finance and debt management courses as a part of curriculum.

The CARD Act, while not entirely perfect, has greatly limited credit card companies’ ability to market to college students who may have clouded judgment or little knowledge when it comes to money, debt, and of course, the potential dangers of credit cards.

[Click here to learn how to use credit responsibly]

But, if you do elect to starting building your credit, then take a look at our ranking of best credit cards for college students.

Step One: Check the Rates at Your Local Credit Unions

Before you do anything else, see what the annual percentage rates (APR) are for college student credit cards with your local credit unions. Utilizing your local credit union may yield the best terms on a credit card. You should never have to use the APR because you should be paying off your card on time and in full each month, therefore not be paying interest. But we get it – mistakes happen. So if you do have a misstep, it’s best that your safety net comes with the lowest possible APR.

You will have to pay a small membership fee to join most credit unions and have an active savings account (usually just by leaving $5 or $10 in it), but if you can score an APR lower than 10% on a credit card the the membership fee is well worth it.

Here are a few top college student credit cards from credit unions:

Teacher’s Federal Credit Union “Student No Frills” Card: This card offers credit limits from $100 to $750 and is designed to help college students establish credit. The application requires no credit history, and negative credit history is not allowed. You must have a part-time job and proof of income in order to apply, and if you’re under 21 you must have a parent or legal guardian co-sign for you.

  • No annual fee
  • 9.36% APR
  • Members must live, work, worship, or attend school in Nassau or Suffolk County, New York, or be the family member of someone who does.

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Apple Federal Credit Union’s Student Visa: With very few fees and straightforward terms, this student credit card is also a good option for students looking for a low APR as a safety net while building credit. As with all credit unions, you must be a member. Membership at Apple Federal Credit Union is open to select employee groups, as well as anyone who works, worships, lives, or is a student in Fairfax County, Fairfax City, Manassas City, Manassas Park, or Prince William County, Virginia, or anyone who has a family member who is already a member. The full eligibility requirements can be found here.

  • Fixed 9.90% APR
  • $1,500 maximum limit
  • No annual fee
  • No fees for cash advances or balance transfers
  • Visa Zero Liability Protection for fraudulent purchases
  • Integrated with Apple Pay
  • Must be a member of Apple Federal Credit Union

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Suncoast Credit Union’s Rewards Student Classic: This card is designed to help you build credit from scratch with low rates, a rewards program, and more. You can become a member of Suncoast Credit Union by having an eligible family member or by living, working, worshipping, or attending school in certain Florida counties.

  • 12.9% APR
  • Rewards Program
  • No annual fee
  • $500 credit limit
  • Cash Advance and Balance Transfer APRs apply

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 [7 Financial Must-Dos for Credit Cards]

Step Two: Compare Those Rates to Options from Banks

Those who prefer to just go directly to a bank and not bother with a credit union have a lot of options. But we suggest that you focus purely on using a credit card to build credit and not to try and churn rewards or chase bonus offers. Below are offers based ranked by standard, options for those interested in tracking their credit and students studying abroad. 

The Standard Options

BankAmericard for College Students: A no-frills, simple card perfect for a college student. It does offer a 0% APR period and no annual fee, but has a hefty penalty APR – so be sure that you can make your payments on time every single month.

  • No annual fee
  • 0% APR for 15 months
  • 10.99% to 20.99% after promo period
  • 29.99% penalty APR
  • No rewards program

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Wells Fargo Cash Back College Visa Card: Wells Fargo knows that building credit while you’re in college is important, because the good credit history you will develop will help you make responsible financing decisions down the road. The card offers:

  • No annual fee
  • 0% APR for 12 months
  • 11.15% – 21.15% non-promo APR
  • 3% cash back on gas, grocery, and drugstore purchases for the first 6 months, then 1% cash back on all other purchases
  • Rewards can be redeemed in $25 increments

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Citi ThankYou Preferred for College Students: Citi offers a card with a rewards program and a 0% APR for 7 months, but high APR after the promotional period ends. This card also has a high penalty APR, so be sure that you can make your payments on time every month in order to avoid it.

  • No annual fee
  • 0% APR for 7 months
  • 13.99%, 18.99%, 23.99% non-promo APR
  • 29.99% penalty APR
  • 2,500 bonus ThankYou points after you spend $500 in 3 months
  • 2 points for every dollar spent on dining and entertainment
  • 1 point per dollar spent on everything else

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 [4 Worst Financial Mistakes to Make in College]

Track Your Credit Score Option

More and more credit cards are offering your credit score with the monthly statement, an invaluable resource for college students who are working to build credit from scratch. The following is a list of credit cards that are not only ideal for college students, but who provide a free credit score.

Discover It Chrome for Students: Discover has fairly stringent approval standards, but the requirements on the Discover It Chrome student card are slightly less strict. The card features a free FICO credit score as well as a rewards program.

  • No annual fee
  • TransUnion FICO score on each monthly statement
  • 0% APR for 6 months
  • 12.99% – 21.99% non-promo APR
  • 2% cash back at gas stations and restaurants up to $1,000 per quarter
  • Double cash back for the first 12 billing cycles for new cardholders
  • No co-signer needed if you’re creditworthy, at least 18 and want to apply online. If you want to apply by phone you must be 21+ (You will need proof of income if you’re under 21)

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Discover It For Students: Also with a free FICO score on your monthly statement, the Discover It for Students gives you a 6-month promotional APR, has no annual fee, and doubles your cash back during the first 12 months if you’re a new member.

  • No annual fee
  • Free TransUnion FICO score on monthly statement
  • 0% APR for 6 months
  • 12.99% – 21.99% non-promo APR
  • Double cash back for the first 12 billing cycles for new members
  • 5% cash back in rotating categories

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For the Study Abroad Student

If you are currently studying abroad, or plan to and need a credit card, there are different factors to consider, such as foreign transaction fees. Also, a free FICO score is an added bonus when studying abroad.

Journey Student Rewards Card – Capital One: Use the Journey Student Rewards card to earn cash rewards and see your credit score monthly for free with no foreign transaction fees – a great way to build and maintain credit and embrace the studying abroad experience.

  • No annual fee
  • No foreign transaction fees
  • 8% APR
  • 1% cash back on purchases + 0.25% cash back for on-time payments
  • Free TransUnion credit score online through the Credit Tracker Dashboard

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If you are able to use only 20% of your credit limit, pay off your balance in full every single month, and never miss a payment, then getting a credit card in college can be a great way to build a solid credit foundation for life after college.

Just be sure you are 100% responsible, because you don’t want to add the burden of credit card debt to existing student loans or as a roadblock for your future financial goals.

Current students and graduates check out The College Graduate’s Financial Checklist.  

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College Students and Recent Grads

Should You Avoid College Sponsored Prepaid Debit Cards?

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The college experience requires some level of spending money. This can be achieved from earning money or through help from parents. In the case of earning money, it is more likely that the student will have a checking account (and corresponding debit card). However, if parents are contributing to the student’s spending money, then it may seem easiest to get a prepaid college sponsored debit card.

Should or shouldn’t you use a prepaid debit card? The answer is that there is no right answer – you will have to decided for yourself because every situation is different. The key point to keep in mind with prepaid college sponsored debit cards is that there are fees and they are highly unregulated. So, if you are thinking bout using a prepaid college sponsored debit card, weigh the pros and cons detailed below to make an informed decision.

What Is a Prepaid College Sponsored Debit Card?

A prepaid college sponsored debit card is a debit card issued by a bank, in conjunction with your university that allows you to prepay or “load” the card for use. You can use the prepaid card anywhere that accepts the issuer (e.g. if you have a prepaid Visa, then you can use the card anywhere that accepts Visa). With a prepaid card, a certain amount is loaded onto the card and the user is unable to spend more than the amount on the card. This means that there is no overspending and no overdraft fees. However, there are fees associated with these cards have caused skepticism.

What Fees Are Associated With a Prepaid College Sponsored Card?

Each prepaid card is different. However, in general, prepaid debit cards have higher fees than traditional debit cards. Some of the fees associated with these cards include:

  1. Fees to activate the card
  2. Fees to load money onto the card
  3. Ongoing monthly fees
  4. Fees to use the card at ATMs
  5. Fees to speak with a customer service representative.

The specific fees associated with a prepaid card will vary based on the card.

Additionally, the school promoting the card may be getting paid large amounts of money (and the school may even get a cut of the profits the bank makes from students – see more here). This makes it very important to be smart about which card you sign up for. Read through all the terms and conditions. If you feel there is a lack of disclosure for whatever reason, then walk away. You do not want to sign up for something when you don’t know what you’re getting into. You should also do some research to see if anyone has complained about the card or experienced abusive practices from the bank.

Are There Laws In Place For Prepaid College Sponsored Cards?

Currently, there are no Federal laws in place regarding fee limits and requirements to disclose the exact terms of the card. Similarly, the FDIC may not cover your prepaid card. The FDIC insures up to $250,000 for regular debit cards. Whether the FDIC backs your card will depend on the specific terms associated with the card. The result of not being backed by the FDIC means that in the event of losing the money, you are out of luck.

The Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009 requires credit card companies to disclose contracts with universities; however, this law does not extend to prepaid debt cards. Therefore, the card companies do not have to disclose the contracts with college for prepaid cards (at least not yet).

How Do I Get A Prepaid College Sponsored Card?

You can sign up for a prepaid college debit card at your university. Most likely, your school will have stands on campus promoting these cards. If not, you can contact the registrar or bank at your university and ask them where you can sign up.

What Else Should I Know About Prepaid College Sponsored Cards?

Having a prepaid debit card means that you cannot spend more than you have in the account. This is good for spenders, however, it may not teach the user how to be responsible with money. Additionally, there are not credit benefits to using a prepaid debit card. That is to say, you do not build credit by using one of these cards. Finally, it is very important to look for the hidden fees associated with prepaid college sponsored cards – as these cards gain popularity, the fees are going up. It is important to consider your situation and whether using a prepaid card makes sense not only for your current needs but also for your future goals.

What Other Options Do I Have?

Parents who would like to be able to easily send their child money and aren’t comfortable with a child getting access to a credit card or account with overdraft options should consider a Bluebird family account.

Bluebird is an AMEX product partnered with Walmart to offer a banking alternative. There is no monthly or annual fee, no activation fee, no cost to send or receive money and no overdraft fees. There are no ATM fees at MoneyPass ATMs, which includes Money Center Express machines at Walmart. There is a high fee to take money out of other ATMs including a $2.50 charge from AMEX on top of the ATM surcharge.

You can find a full fee and limitations list here. Parents can transfer money to a student for free from a checking or savings account or add cash at a Walmart checkout register.

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College Students and Recent Grads

17 Jobs That Do Not Qualify for Any Student Loan Forgiveness Programs

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If you’re planning on relying on a student loan forgiveness program to forgive your loans after a number of years, then you better be sure you choose a job that qualifies. Otherwise, you will be out of luck.

There are several forgiveness programs out there where your loans are forgiven for public service jobs. For example, under the Public Service Loan Forgiveness Program, after making consecutive minimum student loan payments for ten years, your Federal loans are forgiven. You qualify for the Public Service Loan Forgiveness plan if you are employed with: 1) the government (working for any federal, state, or local government agency), 2) A non-profit organization (any 501(c)(3) organization, such as United Way or the Salvation Army), 3) AmeriCorps, 4) the Peace Corps, or 5) certain private organizations that qualify as “public service organizations”. The Department of Education defines “public service organization” to include the following: emergency management, military service, public safety, law enforcement, public health services, public interest law services, early childhood education, public education, public library services, school-based activities, and public service for people with disabilities and the elderly. However, your organization will not qualify if is: organized for profit, a labor union, a partisan political organization, or engaged in religious activities. To learn more about the details of qualifying and applying for the program, see this post.

A second loan forgiveness program is the Nursing Education Loan Repayment Program. Under this program, nurses can have up to 60% of their student loans forgiven after working in a needy area for two years (and up to 85% for working three years).

A third loan forgiveness program is the National Health Service Corps Loan Repayment Program. Under this program, health care professionals who work in needy areas for two to three years can have a large portion of their loans repaid – up to $25,000 per year or more, depending on the circumstances. Qualifying professions include: physicians, physicians’ assistants, dentists, dental hygienists, and certain mental and behavioral therapists.

A fourth loan forgiveness program is the Loan Forgiveness Program for Teachers. This program allows science, math, and special education teachers who work in needy areas for five years, to have $17,500 of their Stafford Federal loans forgiven. Teachers who do not qualify because of what they teach may still have up to $5,000 forgiven. Learn more about forgiveness programs for teachers here.

[How to Set Up Income-Driven Repayment Programs]

Finally, there are options for loan forgiveness through AmeriCorps, the Peace Corps, and the Army National Guard.

With so much forgiveness going on, you may be thinking you’re in luck and will have your loans forgiven in no time. Well, that is not the whole story. There are lots of jobs that do not qualify for loan forgiveness programs at all. While this does not limit your ability to have your loans on income repayment plans or ultimately forgiven after 20 to 25 years, you will be excluded from the short-term forgiveness programs. Below are 17 jobs that are generally not included in any of the forgiveness programs described above.

17 Jobs That Do Not Qualify for Any Student Loan Forgiveness Program

  1. Optometrist: Despite the many health care professions that qualify for student loan forgiveness programs, an optometrist is left out. You will not qualify for loan forgiveness programs as an optometrist. 
  2. Banker: Working for a for-profit institution, like a bank, will disqualify you from any short-term forgiveness program. So, if you work for a banking institution, you will not qualify for loan forgiveness.
  3. Private lawyer: If you become a lawyer and work in public service, then you can qualify for the Public Service Loan Forgiveness program, where your loans will be forgiven after ten years. However, if you work for a private law firm, you are ineligible for any type of short-term forgiveness program.
  4. Computer programmer: The tech world is cut-off from the loan forgiveness program, unless you find a way to work for the government or a non-profit.
  5. Physical therapist: As a physical therapist you will not qualify for any of the health care forgiveness programs.
  6. Accountant: If you become an accountant, unless you work for the government or a non-profit, you will be ineligible for any loan forgiveness program.
  7. Hair Dresser: If you took out student loans to go to beauty school, then you are going to be repaying them without any forgiveness. There are no programs that will forgive your loans if you are a beautician.
  8. Engineer: Engineers do not qualify for loan forgiveness. Like the other jobs, the only way this would not be true is if you worked for the government as an engineer or for a non-profit.
  9. Financial Advisor: Like bankers, financial advisors do not qualify for forgiveness because they usually work for for-profit firms. As a financial advisor, you will have to repay your loans without any short-term forgiveness.
  10. Pharmacist: Pharmacists are another group of health care professionals who do not qualify for loan forgiveness programs. By and large, as a pharmacist, you will not be eligible for student loan forgiveness.
  11. Dietician: Dieticians do not qualify for student loan forgiveness under any of the programs. So, if you’re thinking about going the dietician route, be prepared to repay all of your debt.
  12. Insurance Agent: If you go to college and end up working as an insurance agent after you graduate, you will not be eligible for any of the loan forgiveness programs.
  13. Real Estate Agent: As a real estate agent, you do not have to have a four-year degree. However, if you do graduate from a four-year school and then start working as a real estate agent, you will not find any relief from your student loans as a real estate agent.
  14. Human Resources Professional: Working in human resources generally means that you will work for a for-profit company that will prohibit you from qualifying for any of the forgiveness programs. However, if you work for the government or a non-profit organization, then you will qualify for forgiveness.
  15. Veterinarian: As a veterinarian, you are a health care professional, but you do not qualify for any of the student loan forgiveness programs. You will have to repay your student loans in full.
  16. Event Planner: Event planners do not qualify for any of the student loan forgiveness programs. Therefore, you will have to repay your student loan debt in full.
  17. Political campaign manager: If you work on a political campaign, you should not expect to have your loans forgiven. Working for a political campaign excludes you from loan forgiveness, and you will have to repay your loans in full.

The Key to Financial Success

Consider these seventeen jobs and any other jobs that you think might not qualify for the programs listed above, If you know that you want to pursue a job that does not qualify for loan forgiveness, think about how you can make college more affordable and take out less debt. Planning ahead will be the key to financial success. The less student loan debt that you have after college, the better off you’ll be.

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How to use the Public Service Student Loan Forgiveness Program

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Loans issued within William D. Ford Federal Direct Loan (Direct Loan) Program are eligible for the Public Service Loan Forgiveness Program (PSLF). These include Direct Subsidized Loans (Stafford Loans), Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans.

There are many loans that can be placed into the last category – the Direct Consolidation Loans – including:

  • Federal Family Education Loan (FFEL) Program loans, which include:
    • Subsidized Federal Stafford Loans
    • Unsubsidized Federal Stafford Loans
    • Federal PLUS Loans – for parents and graduate or professional students
    • FFEL Consolidation Loans (excluding joint spousal consolidation loans)
    • Federal Perkins Loans (this is a big deal)
    • Certain health professions and nursing loans

Parents who carry a Direct PLUS Loan may qualify if they are in a public service role.

All other federal loans (as well as private loans) are ineligible. But that’s okay because the loans that qualify are the most common. Anyone can view his or her federal loan information here.

A Little Background

Public service loan forgiveness was created as a way to encourage individuals to enter and continue working in the public sector. Basically, the federal government didn’t want graduates turning their backs on public service roles just because of money (or lack thereof).

At this point, it may be assumed that public service roles don’t pay very well. It’s fair to think, “The pay is so horrible in public jobs. Even if my loans are forgiven, I’d probably still do better off keeping my loans while working a private sector job.” But public service loan forgiveness spans many, many jobs. Even public sector attorneys can have their loans forgiven. There are many well-paying jobs included in this program.

Finding a Job that Qualifies

Federal loans can be forgiven for doing all sorts of jobs. They don’t even have to be federal jobs. Federal government, state government, local government, or any organization that has been given tax-exempt status by the IRS as a 501(c)(3) qualify. The exact job role does not matter.

Moreover, non tax-exempt private employers may qualify. If a private company provides public services, that may qualify its workers to join the PSLF program. These services include military service, public safety, public interest law services, early childhood education, and more.

When Public Service Loan Forgiveness Kicks In

As mentioned earlier, this program serves in part to motivate workers to “…continue working in the public sector.” Continue working… Yes, this means loans are not forgiven on the first day on the job. In fact, this process takes time to begin working. The first step is to accept a full-time job in the public service sector. After doing so, one may apply for the PSLF program. If forgiveness is approved, the wait begins. It takes 120 qualifying payments before the remaining balance of the loans are forgiven. Only payments made after October 1, 2007 qualify. It will take at least 10 years to earn forgiveness. A step-by-step guide for the path to forgiveness is provided later in this article.

After the 120th Qualified Payment Is Submitted…

What happens after the 120th qualified payment is submitted? Who knows. No one has ever submitted the application for forgiveness. It’s because there is no form to fill out. It hasn’t been written yet. The program is new. No one will be eligible until October 2017 at the earliest.

Here’s something else worth noting (taken from the studentaid.ed.gov website):

IMPORTANT NOTE: The PSLF Program provides for forgiveness of the remaining balance of a borrower’s eligible loans after the borrower has made 120 qualifying payments on those loans. In general, only borrowers who are making reduced monthly payments through the IBR, Pay As You Earn, or ICR repayment plans will have a remaining balance after making 120 payments on a loan.

Getting Started

This program may have its drawbacks but it still makes sense for a lot of young Americans. The following is a step-by-step guide to get the ball rolling. Step 1 will begins before any loans are taken out. Feel free to skip to step 2 if tuition payment has already been decided.

Step 1: Focus on paying tuition using qualified federal student loans. Avoid private loans and non-qualified federal loans, if possible.

Step 2: Get into a qualifying public service role as soon as possible. This will stop any unnecessary payments before being employed. Remember, payments made before starting a public service job do not count towards the program.

Step 3: Apply for the PSLF program. Use this fairly unintimidating form to apply. Bookmark this for the future, if necessary. Submit it to the student loan servicer.

Step 4: Keep good records of each payment. The Federal Student Aid website strongly encourages each person to keep good records of payments made while serving the public sector. It’s wise to keep copies of payments and receipts. Keep these in a person storage system.

Step 5: Keep making payments – but don’t pay too much. It’s worth paying as little as possible so there’s still a balance after the 10 years of waiting are up. Income Based plans help with this.

Step 6: Apply for forgiveness after 120 payments have been made. Keep an eye out for when this form is ready.

Do the Math Carefully

The last thing anyone wants to do is to find out his or her loans are paid before the 10 years of waiting expires. Students should carefully examine their student loan repayment trajectory. Things to examine:

  1. Will a public service role make the borrower feel fulfilled for 10 years?
  2. How much of the loan balance will remain once the 10 years are up?
  3. How much more money could be paid by taking a private sector position instead? Financially speaking, would that be the wiser option?

Final Thoughts

This program is a fantastic option for some people. It’s innovative, inviting, and inclusive to more positions that one may think. Information for employers and information for schools can be found here.

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CommonBond Grad Student Loan Refinance Loan Review

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Updated July 9, 2015

CommonBond was founded by three Wharton MBAs who felt the sting of student loans after they graduated. The founders decided to provide a better solution for graduates, as they thought the student loan system was broken and in need of reform. As a result, they strive to make the refinance (and borrowing) process as simple and straightforward for graduates as possible.

CommonBond* began by servicing students from just one school, and has since expanded to service other schools and graduate programs. It continues to grow today.

As you might be able to tell by the name, CommonBond thinks of its community as family. There is a network of alumni and professionals within the community that want to help borrowers. This alone sets it apart from other lenders, as members often meet for events.

While these are all great things, we know you’re more interested in how CommonBond might be able to help you make your student loans more affordable. Let’s take a look at what terms and rates they offer, eligibility requirements, and how they compare against other lenders.

Refinance Terms Offered

CommonBond offers low variable and fixed rate loans. Variable rates range from 1.94% – 5.18% APR, and fixed rates range from 3.74% – 6.74% APR.

It even offers a hybrid loan option, with APRs ranging from 3.99% – 5.64%. Note that these rates take a 0.25% auto pay discount into consideration.

You can refinance up to $220,000, and variable and fixed rates have terms of 5, 10, 15, and 20 years.

The hybrid loan is only offered on a 10 year term – the first 5 years will have a fixed rate, and the 5 years after that will have a variable rate.

CommonBond has a great chart listing repayment examples based off of borrowing $10,000, which can be found on its rates and terms page.

To pull an example from that, if you borrow $10,000 at a fixed 4.74% APR on a 10 year term, your monthly payment will be $104.80. The total amount you will pay over the 10 year period will be $12,575.90.

The Pros and Cons

CommonBond offers competitive interest rates, but the downside is that its loans are fairly niche. As you’ll see below, CommonBond is currently only lending to graduates from specific schools and programs.

To be clear, “graduates” means students who hold a Masters degree or higher in the following fields: Accounting, Dental, Law, Nursing, Healthcare Administration, Finance, Engineering, Business, Medicine, Optometry, Pharmacy, Physician Assistant, Public Policy, Real Estate, and Veterinarian.

If you graduated with a Bachelors degree, then you’re not eligible for a loan with CommonBond.

One pro to consider is the hybrid loan option available. It might seem a little confusing at first – why would someone want a variable rate down the road?

If you’re confident you’ll be able to make extra payments on your loan and pay it off before the 5 years are up, you might be better off going with the hybrid option (if you can get a better interest rate on it).

This is because you’ll end up paying less over the life of the loan with a lower interest rate. If you were offered a 10 year loan with a fixed rate of 6.49% APR, and a hybrid loan with a beginning rate of 5.64%, the hybrid option would be the better deal if you’re intent on paying it off quickly.

What You Need to Qualify

CommonBond doesn’t list many eligibility requirements on its website, aside from the following:

  • You must be a U.S. citizen or permanent resident
  • You must have graduated from a graduate school degree program in its eligible network

If your school is not listed, CommonBond encourages potential borrowers to reach out via email. It recently received another round of funding, so schools and programs are expected to expand soon.

CommonBond doesn’t specify a minimum credit score needed, but based on the requirements of other lenders, we recommend having a score of 660+, though you should be aiming for 700+. The good news is CommonBond lets you apply with a cosigner in case your credit isn’t good enough.

Documents and Information Needed to Apply

CommonBond’s application process is very simple – it says it takes as little as 7 minutes to complete. Initially, you’ll be asked for basic information such as your name, address, and school.

Once you complete this part, CommonBond will perform a soft credit pull to estimate your rates and terms.

If you want to move forward with the rates and terms offered, you’ll be required to submit documentation and a hard credit inquiry will be conducted. CommonBond lists the following as required:

  • Pay stubs or tax returns (proof of employment)
  • Diploma or transcript (proof of graduation)
  • Student loan bank statement
  • ID, utility bills, lease agreement (proof of residency)

CommonBond also notes it can take up to 5 business days to verify documents submitted, so the loan doesn’t happen instantaneously.

Once your documents are approved, you electronically sign for the loan, and CommonBond will begin the process of paying off your previous lenders. It notes this can take up to two weeks from the time the loan is accepted.

Who Benefits the Most from Refinancing Student Loans with CommonBond?

Borrowers who are looking to refinance a large amount of student loan debt and who have graduated from the list of schools and programs CommonBond serves will benefit the most from refinancing with them.

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Keeping an Eye on the Fine Print

CommonBond does not have a prepayment penalty, and there are no origination fees nor application fees associated with refinancing.

As with other lenders, there is a late payment fee. This is 5% of the unpaid amount of the payment due, or $10, whichever is less.

If a payment fails to go through, you’ll be charged a $15 fee.

It’s also noted that failure to make payments may result in the loss of the 0.25% interest rate deduction from auto pay.

Transparency Score

Getting in touch with a representative is simple and there is a chat and call option right on the homepage. Some lenders have this hidden at the bottom, or they don’t offer a chat option at all.

CommonBond also lets borrowers know they can shop around within a 30 day period to lessen the impact on their credit.

It does not list its late fees on its website, unlike other lenders. However, after making a chat inquiry, the question was answered promptly.

CommonBond does offer a cosigner release and is ranked with a A+ transparency score.

Alternative Student Loan Refinancing Lenders

Most student loan refinance lenders aren’t as niche as CommonBond. If you hold a Bachelors degree or your school isn’t on its list, there are other options to explore.

One such option is SoFi. While it also has a list of approved schools, its loans are available to those without a Masters degree. It’s always worth taking a look to see if SoFi* has your school on its list even if CommonBond doesn’t.

The two lenders are very similar – CommonBond offers “CommonBridge,” a service that helps you find a new job in the event you lose yours. SoFi offers a similar service called Unemployment Protection.

SoFi’s variable rates are currently 1.90% – 5.18% APR, and its fixed rates are currently 3.50% – 7.24% APR, which is in line with what CommonBond is offering.

SoFi also doesn’t have a limit on how much you can refinance with them.

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Another lender to consider if you have less student loan debt (or a Bachelors degree) is Citizens Bank. You can refinance up to $90,000 with them ($130,000 with a graduate degree, or $170,000 with a professional degree).

Its variable rates are currently 2.82% – 7.46% APR, and its fixed rates are currently 5.24% – 9.39%, slightly higher, but still competitive.

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Lastly, you could check out LendKey. It offers student loan refinancing through credit unions and community banks, but only offers variable rates in most states and fixed rates in a select few. The maximum amount to refinance with an undergraduate degree is $125,000, and the maximum amount to refinance with a graduate degree is $175,000.

All three of these options provide forbearance in case of economic hardship and offer similar loan options (5, 10, 15 year terms).

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Don’t Forget to Shop Around

As CommonBond initially conducts a soft pull on your credit, you’re free to continue to shop around for the best rates if you’re not happy with the rates it can provide. As the lender states on its website, if you apply for loans within a 30 day period, your credit won’t be affected as much.

Since CommonBond does service a certain section of student loan borrowers, check out other options if you’re not eligible for a loan with them. There are many lenders out there who aren’t as strict with their eligibility requirements.

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What Happens When a Borrower Defaults on a Co-Signed Loan

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When someone misses a student loan payment, a delinquency period begins. It then takes 270 days (9 months) of non-payment for a loan to go into default. At this point, things have been bad for a while. Upon default, it is determined by the lender that the borrower and co-signer (endorser) no longer intend to honor their obligation to repay. However, this doesn’t mean the lender washes its hands of the loan when it goes into default. Instead, the entire loan balance becomes due.

Both parties are responsible for paying back this loan. Do not expect gentler treatment as a co-signer.

The first thing the borrower/co-signer will likely notice is a downgrade in his or her credit score. The defaulted loan will show up right away on a credit report. This means making large purchases on credit will be put on hold for at least seven years (the amount of time a defaulted loan remains on credit reports). Loans may be obtained but they will be granted at exorbitant rates.

Defaulting on a loan may also affect job prospects and living situations. Employers and landlords often check credit reports. Yes, going into default can touch most major aspects of one’s life.

If the borrower or co-signer has any other debts to repay, those lenders may grow impatient upon seeing this default on a credit report. They see a default as a sign future bad news for them. The trust is broken. These other lenders may also want their money quickly. If there is any money to be had from the borrower, they want it! They will likely take a person to court if they are not paid quickly. Litigation costs are expensive.

Wages can be garnished and liens put on property that’s already owned. Penalties and interest keep adding up. Yes, one loan in default can touch the entire financial life of a person.

Make no mistake; co-signers are liable for repaying the debt. When a child defaults on a co-signed loan, the parent and child must create an action plan in order to remedy the situation. This is a scary situation but there are options of digging out of default.

Option 1: Renegotiate the Terms

Sometimes loans just don’t feel real. Maybe the borrower can afford to pay but has neglected to budget properly. Ask the lender if the loan can be refinanced into smaller payments. This may work. However, a person typically needs excellent credit to do so.

If the loan can’t be refinanced with the borrower’s credit, a co-signer can refinance alone. The co-signer takes complete responsibility for the loan. The original borrower can then pay the co-signer on his or her own terms. However, this is letting the child off the hook in a lot of ways. This may further damage the parent/child relationship. The child may not pay the parent anything after this happens.

Can a forbearance be put in place instead? A forbearance is a temporary reprieve from loan payments. Interest may or may not accumulate. On most loans, it’s a period of one or two months. With federal student loans, it can be much longer (6-12 months). It’s worth asking.

Option 2: Take out a Different Loan to Pay the Defaulted Loan

Co-signer release becomes a thing of the past once a loan goes into default. Or does it? There’s a clever way it can still be done. A debt consolidation company (read our article about the best consolidation loans) may be willing to issue a new loan to cover the old debt. This means new terms and even no co-signer if granted. This is a clever way for a parent to relinquish responsibility.

Option 3: Bankruptcy (or at Least Suggest Bankruptcy)

As mentioned earlier, many, many aspects of a person’s life are affected by a loan in default. Bankruptcy can sometimes clear the record. However, student loans are not dischargeable in bankruptcy in most cases. But bankruptcy works for other types of loans.

Even if the borrower/co-signer has a strict ‘no bankruptcy’ policy, they may still want to mention bankruptcy to the lender. The lender does not want anyone filing for bankruptcy! It may make a good bargaining chip when trying to renegotiate the terms.

How to Repair the Damaged Parent/Child Relationship

It’s important to consider why the loan was co-signed in the first place. The parent obviously cared and respected the child enough to risk severe financial repercussions. They risked a lot for their child. When a child defaults on a student loan, that’s quite the disappointment for a parent.

Fixing a relationship takes time. However, a defaulted loan waits for no one. This makes repairing the relationship difficult. It probably won’t fully recover until the debt is history. A default can be dealt with best when both the parent and child communicate their emotions. Try asking each other questions like:

“How can we create more debt-crushing income?”

“How can we lessen our expenses so we can put more money towards these loans?”

“How can we get our relationship back to the way it is one the day we created the loan?”

It’s important to keep egos aside. It’s time to admit failure. Both parties have failed. The lender has said so. It’s okay to show each other you’re bruised. Again, relationship rebuilding takes time.

Formulate a plan for getting rid of the debt. Choose from the above options 1, 2, or 3. The relationship can heal once that is done.

Remember, a co-signed loan was a partnership agreement. Stick together until the situation is remedied. Good luck. And in the future, think hard about whether or not it’s wise to get in another cosigner arrangement.

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6 Important Things You Need to Know About Defaulting on Student Loans

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College is really expensive, and for some of you that means taking out a lot of student loan debt. This is generally not a problem until it comes time to repay the student loans and you don’t have enough income to make your payments.

So, what do you need to know if you cannot repay your student loans, and you are either delinquent or have defaulted? Here are six important considerations that you need to know about defaulting on student loans if this applies to you.

1. Private loans and Federal loans are treated differently.

For purposes of student loan default, federal loans and private loans are treated differently. In general, it is harder for private loan servicers to take measures to get their money from you than it is for the Federal government. This is due to the fact that a private loan servicer has to sue you before taking action. The private loan servicer has to take you to court and get a judgment against you before it can pursue collection tools. The Federal government does not have to sue you before taking measures to get what it’s owed (although the Federal government can sue you – it just doesn’t have to sue you).

So, if you are behind on your student loans, the first step you need to take is to look at the details of your loan, specifically whether the loan(s) is private or Federal. This will help you know what to expect.

2. First comes delinquency, then comes default.

If you are delinquent on your student loans, this means that you are behind on your payments. As soon as you are one day late paying your loan, then you are delinquent. This continues until you are current. After 90 days of being delinquent, loan services report delinquencies to credit bureaus.

After you are delinquent for 270 days (9 months) you are in default of your student loans and your entire student loan balance becomes due immediately. Upon default, the following occurs: 1) you lose eligibility for future financial aid, 2) your loan is assigned to a collection agency, 3) you lose eligibility for deferment and forbearance, 4) your student loan debt will increase because of: late fees, collection fees, penalties, and interest. 

[Miss a Student Loan Payment? Where to Find Help and What Happens]

3. Your credit is negatively affected. 

The affect of being delinquent for 90+ days and having it reported to the credit bureaus means that it will stay on your credit report for a number of years, also affecting your credit score. The result of this will be detrimental if you plan on relying on your credit whatsoever. For example, lenders look at your credit whenever you: 1) rent an apartment, 2) put utilities in your name, 3) purchase a vehicle, 4) purchase a home, or 5) get a new job.

If you default on your loans, then you could have an extremely hard time doing anything that requires using your credit because your credit will be negatively impacted and you’ll see a significant drop in your score. This default status will remain on your credit report for seven years after you are out of default.

Remember, too, that your student loans are usually not dischargeable in bankruptcy. If you default on your student loans and subsequently go through a personal bankruptcy, then you will most likely come out of the bankruptcy still owing your student loans.

4. The Federal government can take your money in a variety of ways.

The Federal government does not have to sue you to take action against you (unlike private loan servicers). Upon default, the Federal government can do the following: 1) garnish up to 15% of your wages, 2) deduct money from benefits you receive, such as social security and disability, and 3) cause the IRS to withhold your tax refund. There is no statute of limitations for the Federal government to pursue courses of action against you, whereas the private loan servicer generally will have a statute of limitations (usually six years). 

5. To get out of default you must go through consolidation or rehabilitation.

You only get one chance to get out of default from your Federal student loans (that’s it!). To get out of default you have two options: 1) consolidate your loan(s) or 2) rehabilitate your loans. With consolidation you essentially combine your loan(s) into one new loan, onto which fees are added up to 18.5%. With rehabilitation you must make nine “reasonable and affordable” payments over the course of 10 months, upon the end of which you are released from default status (after the tenth month period, you are considered current).

After you are out of default, creditors will no longer call (harass) you and you will be current on your loans, eligible for the income plans that may make repayment affordable for you.

Here is a nifty chart from the National Consumer Law Center that compares the consolidation and rehabilitation programs.

[3 Graduates Who Successfully Rehabilitated Their Student Loans]

6. You can challenge the Federal government’s actions by requesting a hearing.

If you think the Federal government has wrongly pursued collections from you, you can challenge the government’s actions by requesting an administrative hearing. If you can show a great financial hardship, you may be able to put the garnishment on hold.

The Point – Avoid Default if At all Possible!

It is not hard to see that the consequences of defaulting on your student loans are severe and can last for years. If you are facing delinquency or default, try contacting your loan servicer to learn about alternative repayment or forbearance options. Once you are in student loan default, it is very hard and stressful – do whatever you can to avoid it!

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When Should You Consolidate Student Loans?

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Are you overwhelmed with your student loan debt? Do you make payments to three or four loan servicers each month, and can’t keep track of what’s due and when? Would extending your repayment term for a lower, more affordable monthly payment make things easier on you?

These are all reasons to consider consolidating your student loan debt. When you consolidate, you get to enjoy one simple payment to the lender you consolidate with. Many times, you can consolidate to get better terms on your loan as well.

It’s important to note that consolidating federal loans is a slightly different process than consolidating private loans, or private and federal loans. We’ll take a look at each and explain the ideal circumstances that make consolidation attractive.

Quick Note on the Difference Between Refinancing and Consolidating

You might have heard it’s also a good idea to refinance your student loans, so what’s the difference between the two?

There’s really not a huge difference, except when it comes to federal student loans.

When you consolidate your federal loans, you’re consolidating through the Direct Consolidation Loan program. It takes the weighted average of the interest rates on the federal loans being consolidated, and rounds it to the nearest 1/8th of 1 percent.

As a result, you’re not going to experience huge savings by consolidating your federal loans since your interest rate is mostly staying the same. However, consolidating federal loans can be cheaper because there are no fees associated with it.

When you consolidate with a private lender, you’re essentially refinancing your loans because you’re able to get new terms and rates on your loan. It’s an entirely new loan, not based on your previous interest rates.

When Should You Refinance Federal Student Loans?

As we covered, there are a few reasons to consider consolidating your federal student loans:

  • You could benefit from a lower monthly payment
  • You could benefit from paying one lender, as opposed to 3+
  • If you have older loans with variable interest rates, you can consolidate to a fixed interest rate

If you only have federal student loans, you should consider consolidating through the U.S. Department of Education and not a private lender. Consolidating with a private lender means you’ll lose the benefits associated with federal student loans, like income-based repayment plans, forbearance, forgiveness, and deferment.

[How to Set Up Income-Driven Repayment Plans]

According to studentaid.ed.gov, even consolidating through the government can cause a loss of benefits, though it doesn’t name specific benefits, so it’s important to check before you consolidate.

Loanconsolidation.ed.gov states that borrowers have access to the Income Contingent Repayment Plan and Income-Based Repayment Plan under the Direct Consolidation Loan. Additionally, “borrowers retain their subsidy benefits on loans that are consolidated into the subsidized portion of a consolidation loan.”

That just means you keep the benefits of a subsidized loan. For example, if you were to enter into deferment on a subsidized loan, you wouldn’t be responsible for paying the interest that accrues while you’re not making payments. (On unsubsidized loans, you’re responsible for paying the interest.)

When exactly should you consolidate? You’ll get more out of consolidating the sooner you do it after graduating. If you’ve been out of college for five years and are close to paying your loans off, it’s probably not worth going through the process.

However, if you’ve still got years (or thousands) left on your loan, and you’re struggling to keep up, consolidating might help. To be absolutely sure, you should always run the numbers. Thankfully, there’s a Federal Direct Consolidation Loans Online Calculator you can use to see if consolidation makes sense for you.

What if you’ve defaulted on your loans? You can still consolidate, as long as you follow the required guidelines. Studentaid.ed.gov says, “You must make satisfactory repayment arrangements on the loan with your current loan servicer before you consolidate, or agree to repay your new Direct Consolidation Loan under the Income-Based Repayment Plan, Pay As You Earn Repayment Plan, or Income-Contingent Repayment Plan.”

In other words, you need to be in good enough financial shape to begin repaying your loan back under the new terms offered to you. These repayment plans have extended terms, so your monthly payment will be more affordable.

When Should You Consolidate Private Loans?

As with federal loans, you should consider consolidating private loans when:

  • You’re making too many payments and can’t keep track of them
  • You want to extend the term of your loan
  • You want to get a better interest rate
  • You want to switch from a variable interest rate to a fixed interest rate

If you have a variable interest rate and your income isn’t very stable, it might be stressful to anticipate how much you’ll owe from month to month. Fixed interest rates stay the same over the life of your loan, so you never have to worry about your payment increasing.

Variable interest rates may seem attractive at first because they start lower than fixed rates, but there’s no guarantee they won’t surpass those fixed rates in a year or two. If peace of mind and stability is what you’re after, then consolidating to a fixed interest rate can help you sleep better at night.

As with federal student loans, consolidating soon after you graduate is your best bet. This allows you to save money right away, and you won’t have to struggle with your payments for very long.

However, consolidating with a private lender can be a little trickier because there are fees to watch out for – namely, origination fees.

It’s common for private lenders to have around a 2.5% origination fee when consolidating student loans. That means if you want to consolidate $20,000 of student loan debt, you’ll be hit with a $500 origination fee (2.5% of $20,000).

The best thing you can do is to find a private lender that doesn’t charge an origination fee, like SoFi or Earnest.

The biggest bonus to consolidating private (or private and federal) loans is that you can lock in a lower interest rate, possibly saving you thousands over the life of your loan. If your current interest rates are above 6%, there are many private lenders offering fixed rates below 5%.

Are There Any Downsides to Consolidating?

If you consolidate through the Direct Consolidation Loan, it’s completely free. You don’t have to worry about any fees, unlike when you consolidate through a private lender. Factor the fees in when you’re figuring out whether or not consolidating will help your financial situation.

It’s also important to remember that when you extend your repayment term, you’re going to be paying more in interest over the life of the loan.

Just as an example:

Let’s say your current student loan balance is $18,000 over a 10 year repayment period, with a 4.5% APR. You’re paying $186.55 per month. If you extend that to a 20 year repayment plan, you’re paying $113.88 per month. However, you’ll pay $4,385.87 in total interest in the first scenario, and $9,329.99 in total interest in the second. That’s a difference of almost $5,000.

While you might not be in a position to make extra payments on your loans right now, do so whenever possible to combat paying more in interest. Most lenders don’t charge a fee for prepaying your loans.

If you choose to consolidate both federal and private student loans together, be aware of the benefits you may be giving up with your federal loans. While some private lenders are offering forbearance and other repayment assistance programs, they’re not guaranteed. You don’t want to end up regretting consolidating your loans, especially since once it’s done, you can’t go back.

Is There a Perfect Time to Consolidate?

There really isn’t a “perfect” time for anyone to consolidate. You have to do what’s right for you in your current situation. If you’re not having any issues paying your student loans right now, consolidating isn’t for you.

If having one payment instead of four or five would make managing your money easier, or if you need a more affordable payment until you can get a better paying job, consolidating is something you should look into.

Also, when consolidating private loans, be sure to shop around to get the best rates and terms to make the process worthwhile. With federal loans, double check to make sure you’re not going to lose any benefits that may make your student loans more manageable.

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Consumer Watchdog: Got a Co-Signed Loan? Get Life Insurance

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Understandably, many parents want to look after their adult children by helping them pay for college. Some parents will have money squirreled away in savings. Others may get a Parent PLUS loan. But when that isn’t enough, some will co-sign on student loans with their children. The loan will technically be in the child’s name, but the parent works as backstop. If the child can’t repay the loan and defaults, the lender will be coming to collect from mom and dad.

There is one other nasty catch when a parent co-signs on a private loan: should a child decease during the repayment of the loan, the parents are still obligated to pay down the debt.

The news has been littered with tragic stories of parents reeling from the shock of losing a child and then being smacked over the head with a bill for tens-of-thousands of dollars in student loans.

This is why it’s important for any student or graduate with a co-signed student loan (or any loan) to also have life insurance.

The Need for Life Insurance

You don’t need a massive life insurance policy, just enough to cover the loan (and don’t forget to account for any interest). This will protect your parents in the event you pass away and the loan becomes their responsibility.

However, this will not be the case with most federal student loans. Federal loans are automatically discharged in the case of death.

Some companies offer life insurance to employees or you can see if your auto-policy offers a discount to bundle in life insurance. It’s important to shop around and find the best deal. You should also prioritize term life insurance over whole life insurance (no matter how good the sales pitch for whole life sounds). You can also cancel your policy or change it as you hit different life milestones like getting married or having children.

But it isn’t just the student who needs the life insurance policy.

Auto-Default

Co-signers may need life insurance (or at least enough saved to cover the loan) as well. A 2014 report by the Consumer Financial Protection Bureau found that auto-defaults were a significant reason for complaints filed against private lenders.

An auto-default occurs when a co-signer dies or declares bankruptcy. Even if the student has been diligently paying bills on time for years, the change with the co-signer can cause the loan to default and be due immediately.

In some cases, these automatic defaults can also be reported to credit bureaus and wreck the student’s credit.

Everyone Needs to Be Protected

Given the major ramifications for both a co-signer and a student, it’s best if anyone with his or her name on co-signed student loan has a life insurance policy. This will serve to protect both the borrower and the co-signer in the event someone passes away (or declares bankruptcy) during the repayment of the loan.

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Student Loan Forgiveness Programs for Doctors

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Many medical professional’s struggle with the mountains of debt obtained on their journey to become a doctor. As they get closer to having the official title of MD next to their name, many begin to look for a way out. It was reported in 2014 by the Association of American Medical Colleges that the average indebted graduates in the class of 2104 carried $176,348 in loans, a staggering number for the cost of becoming a doctor. Many physicians consider the fact they will earn a six-figure income, but during residency the average income ranges from $40,000 to $50,000. That means the interest on their mountain of debt is equal to a paycheck. Fortunately, recent medical school graduates can help minimize the crushing debt by pursuing a student loan forgiveness program.

National Health Service Corps (NHSC)

The National Health Service Corps (NHSC) can provide up to a $50,000 to repay your health profession student loan in exchange for a two year commitment to a NHSC site in a high-need, underserved area. After completing your initial service commitment, you can apply to extend your service and receive additional loan repayment assistance. Each service option has a number of factors to consider including Full-Time vs Half-Time Clinical Practice and score of the Health Professional Shortage Area (HPSA). The 2015 Application and Program Guidance can tell you more to help understand the program.

The benefits of loan forgiveness go even further beyond the opportunity to receive loan forgiveness including furthering your education, training, and networking opportunities along with becoming a part of a community of providers that desire to care for underserved patients.

Public Service Loan Forgiveness Program (PSLF)

The PSLF Program is intended to encourage individuals to enter and continue to work full-time in public service jobs. Under this program, borrowers may qualify for forgiveness of the remaining balance of their Direct Loans after they have made 120 qualifying payments on those loans while employed full time by certain public service employers.

According to EducatedRisk.org in Obama’s 2015 Budget Proposals for Student Loans , Public Service Loan Forgiveness currently allows a loan forgiveness of $57,500 because the 120 qualifying payments have only been in effect since October 1, 2007, the first forgiveness of loan balances will not be granted until October 2017.

Military

The U.S. Navy Health Professions Loan Repayment Program (HPLRP) provides and incentive to new accessions and current active duty medical personnel to enter the Navy and receive payment of professional education loans. The maximum yearly loan repayment is $40,000 minus approximately 25% federal income taxes taken out prior to lender repayment.

State Repayment Programs

Many state specific programs are available. A good place to check the medical loan repayment and forgiveness programs available in your area is through the AAMC database. Here are a couple examples of state specific programs and what each entails:

Arizona Loan Repayment Program

The Arizona Loan Repayment Program: a new law just recently expands the legislation to make $65,000 available for a 2-year commitment from physicians. Many of the state programs have a tie into federally designated HPSA areas, but more information is available on each website.

Kansas State Loan Repayment Program

According to the Kansas State Loan Repayment Program Overview and Requirements the health care professional may receive up to $25,000 per year of contract towards the repayment of outstanding education debt according to each recipient’s profession. After completion of the initial two-year service obligation, health care providers may apply to extend their contracts in one-year increments.

Do the Math Before Signing on the Dotted Line

As you take a look at each possibility for the loan forgiveness programs that are available to you, it’s best to consider what options would best fit your needs and wants in a profession and living environment.

It also pays to do the math on your student loans and the amount of money you will be making and applying towards your student loan debt. If your medical loans add up to $400,000, then receiving a $25,000 forgiveness credit and $75,000 salary would lose out to a $200,000 salary with no loan forgiveness because the numbers don’t add up. The loan forgiveness program would generate a combined $100,000 each year and the regular salary alone would contribute $200,000 or double what you would be able to apply to your loan, before taxes. Don’t leap into a forgiveness program because it sounds appealing. Remember to do what makes the most sense to your personal situation.

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3 Graduates Who Successfully Rehabilitated Their Student Loan Debt

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If you’ve taken a college class at some point in the last decade or so, there’s a good chance you have (or had) some student loan debt to your name. You’re not alone — 40 million Americans are in the same boat

And many of those people don’t just have loans. They have a lot of student loan debt. The average balance hovers around $30,000. That’s about 66% of the average starting salary for grads, which doesn’t leave much left over for taxes, living expenses, and everyday bills, much less cash savings and investments for retirement.

It seems like a dire situation, but there is hope for those currently struggling with this burden. You can map out a plan of attack for your student loans, and take control of your financial situation. These three graduates did it — and they’re sharing their stories of how they successfully rehabilitated their student loan debt.

Taking on That $30,000 Worth of Debt

Dominic Alessi graduated from a public university with just over $30,000 worth of student loan debt. While he originally went to school to be a teacher, he later decided to get into sales — but still needed to deal with the loans he took on for his education.

“I took out the loans to pay for school because my parents couldn’t afford to foot the bill,” says Alessi. “They helped me out with books and things like that, but for the most part I was on my own. Like almost everyone else that started college from 2008 to 2010, the recession took a nice little chunk out of the money my parents did have saved up for school.”

He moved back home with his parents and started his own business, Box of Detriot, on the side of his full-time job. So far, he’s paid down $15,000 of his student loan debt. “Hopefully,” Alessi says, “by the end of the summer this second stream of income will get me debt-free or close to [it.]”

He admits that living with his parents hasn’t always been easy, and he wants to move out. But his priorities lay with finding success with his financial situation.

“I knew I had to repay my loans from the very beginning. What I didn’t realize though was how much interest was accruing while I was in school and the first few months before I started my repayment!” Alessi explains. “I figured if I moved home I could sock away as much money as I could to pay back my loans and created a timeline with a goal of 24 months to pay them back.”

Alessi suggests that for those with student loans, continuing to educate yourself is key. “There’s lots of programs out there you may qualify for depending on your situation but you’ll never know until you look into them,” he says.

A Master’s Degree and $130,000 in Student Loan Debt Later…

“I made a huge mistake and took out student loans over and above tuition amounts to cover my living expenses, and help out my significant other at the time,” says Mike Sturm. “At one point, I was receiving 5 to 10 collections calls per day on my loans. It was a mess.”

This is a scary situation to find yourself in, and Sturm knew he needed to take action as soon as possible. His earliest payments went mainly toward interest, which didn’t make much of a dent in the overall balance.

After landing a good job with upward mobility, he started using Mint to create budgets and set goals to repay his student loans. “After that,” Sturm says, “I consolidated my student loans for a slightly lower uniform interest rate, which will save me money over the long run.”

“The key thing that helped me was that the servicers are willing to work with you, because they want some money, rather than no money,” advises Sturm. “You can use that to your advantage. It is a sales process, like anything else.”

How a Husband and Wife Knocked Out $100,000 Worth of Loans

Kevin Benson of Bold Move Coaching & Consulting says that both he and his wife chose to earn their undergraduate degrees from private liberal arts universities. While their families supported their decisions and they each even received financial aid, that type of education didn’t come cheap.

“My wife and I began paying off our student and consumer debt when we got married,” Benson says. “Combined, we paid off nearly $100,000 in debt, and were able to pay cash for a masters degree over a 6 year period. It wasn’t pretty, but we gutted it out.”

They decided to tackle their student loan situation about a year after they got married. They wanted to as free from their debt as possible before starting a family.

“A family friend turned us on to Dave Ramsey’s Financial Peace University,” Benson explains. “We went with it because it was the first thing we were given. Luckily for us, it worked.”

The couple started budgeting down to the last cent, before it was spent. “We sit down on [the] 1st and budget the upcoming month,” says Benson. “For many years that meant that we would allocate a certain dollar amount every month to debt repayment.”

For those dealing with student loan debt, Benson advises consistency. “If you want to get out of debt, make it your number-one financial priority. That means that you might not buy a new car, take an expensive vacation, or upgrade other items like electronics or appliances,” he says.

“It’s not easy, it’s uncomfortable, but it works. It took our family 5 years of really hard work, but we were able to pay off all our student loans, buy a new home, and have much less stress about money.”

Have Student Loans? Take These Steps Now

Now that you’re properly inspired by these stories of successful student loan rehabilitation, it’s time to use that as motivation to get your own debt situation under control. It is possible — ready to make it happen?

“Borrowers should target the loan with the highest interest rate for quicker repayment,” says Mark Kantrowitz, Senior VP and publisher at Edvisors.com. “[They also] need to consider not just their student loans, but also other forms of indebtedness, such as credit card debt. Paying off a 4% student loan while continuing to maintain a balance on a 14% credit card does not make sense, since the latter costs more.”

Focusing on the debt with the highest interest rate first is the most effective way to deal with your debt, financially speaking. “The snowball method, where one targets the smallest loan for quicker repayment, will cost the borrower more in the long term,” Kantrowitz explains.

He also notes that this process isn’t necessarily easy, and that you may need to take drastic action to see more change to your financial situation in a shorter period of time. If you’re serious about getting your student loan debt under control, you may need to consider moving back in with your parents, getting a second job, selling possessions, or cutting back on luxuries and discretionary spending.

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Avoid Costly Parent PLUS Loans? See Low Rate Private Options

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If your child is going to college, you’ve probably been asked to consider taking out a parent loan to help bridge the financial aid package.

While the Federal Parent PLUS education loan is the option you’re most likely to see, there are now private lenders who can offer you a lower rate if you have decent credit that your college might not tell you about.

We have a list of them below.

But before you consider them you should know the pros and cons of the private parent loan route versus a Federal Parent PLUS loan.

Pros

Lower interest rates. If you have good credit, there’s a good chance a private parent loan will cost you less than a Federal Parent PLUS loan. The interest rate on a Federal Parent PLUS loan is a fixed 6.84%, while some private lenders offer rates of less than 5% fixed, and less than 4% for variable rate loans.

No origination fees. There’s 4.27% origination fee added to Federal Parent PLUS loans. So factoring that origination fee means on a 10-year Federal loan your all-in interest rate is 7.78% and on a 20-year loan it’s 7.382%. Most private loans have no origination fee, making the rate savings even more substantial.

Cons

Shorter repayment. The Federal Parent PLUS loan gives you up to 20 years to repay, while private loans currently available only let you repay up to 10 years. But a lower payment over 20 years will cost you more than a higher payment over just 10 years.

Less flexibility for hardship. You can consolidate a Federal Parent PLUS loan and take advantage of ‘Income Contingent Repayment.’ That guarantees your payment will never be higher than 20% of your disposable income as defined by the government, so if you run into a tough year your payment can adjust lower. And if it takes more than 25 years to repay, the balance will be forgiven. Private parent loans don’t offer this option.

No bankruptcy discharge. With Federal loans you can discharge them in rare cases if you have significant, ongoing hardship.

Higher rates for less than perfect credit. With Federal loans everyone gets the same rate and there are no minimum FICO scores required. With a private parent loan, you might pay a higher rate if your credit and income aren’t sufficient.

Need to pay during school. You can defer payments on a Federal Parent PLUS loan while your child is still in school, though interest accrues while you don’t pay. Private loans require you start repayment immediately.

Private parent loans are the better choice if you’re confident

If you have good credit, are confident in your family’s income, and can handle a 5 to 10 year repayment schedule, then a private parent loan is probably a better option with lower rates and fees.

There are 3 providers that currently offer private parent loans to pay for your child’s college expenses.

You’ll want to shop around with each of them to see which offers you the best rate and terms. There’s no additional impact to your credit score to shop around for more than one loan provider in a brief period (about 30 days).

(All rates are as of the date of this article)

SoFi

You might not have heard of SoFi, but it’s a lender known for offering some of the lowest rates for people with a strong credit history and income.

And it offers the lowest rates currently available for a parent college loan – starting at 2.93% variable and 4.5% for fixed rate loans.

While its highest fixed rate of 7.75% for a 10-year loan looks higher than the Federal rate of 6.84%, it’s actually cheaper because SoFi has no origination fee. The same Federal loan is a 7.78% rate when you factor its origination fee.

You can also check your rate without impact to your credit score.

Variable rate:

5 year: 2.03% – 5.43%

10 year: 3.68% – 5.805% 

Fixed rate:

5 year: 4.5% – 6.74%

10 year: 5.165% – 7.75% 

Origination fee: None 

Rate discounts: Automatic debit of your payment is a 0.25% discount – which is included in the rates quoted above. 

Maximum loan: No maximums – you can borrow up to the cost of attendance each year

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Wells Fargo

Wells Fargo’s rates are generally lower than Federal loans for good quality borrowers, but if you have some blemishes or not enough income you may find the rates are significantly higher than a Federal Parent PLUS loan, at up to 13.24%.

If you’re a Wells Fargo customer and use automatic debit you may find you get a discount of 0.5 – 0.75%, which could make it competitive with SoFi.

Learn more about Wells Fargo parent loans here

Variable rate: 3.5% – 10.24%

Fixed rate: 6.24% – 13.24% 

Rate discounts: 0.25% for automatic debit plus 0.25% – 0.50% for your Wells Fargo banking relationship. Discounts are not reflected in the rates above.

Maximum loan: $25,000 / year, $100,000 total

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Citizens Bank

Citizens Bank doesn’t have rate options as low as SoFi, but when you factor in discounts it can beat Wells Fargo if you have very good credit.

All of Citizens Bank’s parent student loans are at a fixed rate, and it’s aiming to be a bit lower than a Federal PLUS loan with the added benefit of no origination fees.

If you live in Connecticut, Delaware, Massachusetts, Minnesota, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, or Vermont you can get a discount if you have an eligible Citizens Bank account.

Learn more about Citizens Bank parent loans here

Variable rate: None 

Fixed rate: 5 year (6.19%), 10 year (6.29%) 

Rate discounts: 0.25% for automatic debit (factored in the rates above), plus 0.25% if you have an eligible Citizens Bank account.

Maximum loan: Up to $90,000 total borrowing for undergraduate education, higher amounts for graduate.

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Final thoughts

Borrowing to pay for your child’s education is a big decision.

Before you leap into a private loan, know that you’re losing some of the repayment flexibility a Federal Parent PLUS loan can offer.

And consider alternatives like a home equity loan or line of credit that might offer better rates.

Even some personal loan providers will offer large amounts at decent rates, and the ability to discharge in bankruptcy, something you can’t do with any education loan. You can review options here.

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Options for Taking on Law School Student Loans

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If you have to borrow money to go to law school, then you need to know what student loan options you have.

Your financial aid package for law school will most likely look different than your financial aid package for your undergraduate studies in that your law school financial aid package will most likely be exclusively student loans (no grants or other subsidies, for example).

This means that you will have to take on law school student loans without much help from the government. Scholarships are always an option, but you will have to apply for those separately from your Federal loans.

With respect to your financial aid package for law school, there are two main categories of student loans to look out for when you are applying to law school: 1) Federal loans and 2) private loans. There are three types of Federal loans to choose from (explained in more detail below), whereas each private loan will vary depending on your lender.

Federal Loans

It is likely that your entire Federal student loan package will include enough Federal loans to cover your law school expenses, even if they are very high (I should know – my Federal loans from law school stand at just under $131k right now). Only if your Federal student aid package does not cover your law school expenses will you have to apply for private loans. I know a lot of attorneys and none of them have private loans – they all have Federal loans. This is not always the case, however, and will depend on your specific circumstances, including your credit.

The Department of Education Student Loan Servicing Center (ACS), Direct Loan Servicing Center (ACS), FedLoan Servicing (PHEAA), Great Lakes Educational Loan Services, Inc., Nelnet, Navient, or Sallie Mae will most likely service your Federal loans. This means that when you log into your online account, you will be able to see all of your loans in one place. Your private loans may or may not be included in this account. Sometimes loans are transferred without your knowledge and the servicer will change. But other than that, you will be able to log in and view your loan details.

To apply for your Federal student aid package and all three of the Federal loans listed below, you will need to complete the Free Application for Federal Student Aid (FAFSA) application. To pay for law school, you may be awarded 1) Stafford loans, 2) Graduate PLUS loans, or 3) Perkins loans.

1. Direct Unsubsidized Loans (also called Stafford Loans)

The Stafford Loan Program is a direct loan program from the Federal government of the United States. If you are going to law school, then you can borrow up to $20,500 in unsubsidized loans. Graduate students applying for loans only qualify for unsubsidized Direct loans, which means that the interest begins accruing immediately (even while you are still in school). The interest rates on Direct loans are fixed each year. For example, for a loan disbursed between July 1, 2015 and July 1, 2016, the interest rate is 5.84%. A loan disbursed between July 1, 2014 and July 1, 2015 had an interest rate of 6.21%. For more details on interest rates, visit this page.

To apply as a law student, you need to complete the FAFSA application, just like you do for any other Federal student loan. There is no credit check for the Direct loans (unlike the Graduate PLUS loans), and graduate students do not need to show financial need.

Because the Direct Loan Program is a Federal loan program, when it comes time to repay your loans, you have the option of going on several income repayment plans, in addition to the benefit of your loans being forgiven if you die before they are repaid.

2. Graduate PLUS Loans

Under the Graduate PLUS Loan Program, you can borrow money to fund your entire law school education, including living expenses. The interest rate on Graduate Plus loans is fixed once you lock it in. The interest rate will be determined when you take out the loan and is based on the interest rate on the 10-year Treasury note on June 1, plus 4.6 percent. For example, for a loan disbursed between July 1, 2015 and July 1, 2016, the interest rate is 6.84%. Note, that these rates have been changing significantly. A loan disbursed between July 1, 2014 and July 1, 2015 had an interest rate of 7.21%.

To apply for a Graduate Plus loan, you need to complete the FAFSA application. You must first seek out Direct loans before applying for Graduate Plus loans. To qualify for the Graduate Plus loan, the government will run a credit check on you. If you have “adverse” credit, then you may be denied. An example of having adverse credit would be a recent bankruptcy. You can, however, reapply with a cosigner if you do not qualify on your own.

Like other Federal loans, the Graduate Plus loans come with certain benefits, including being forgiven if you die and several repayment plans based on income.

3. Perkins Loans

Under the Federal Perkins Loan Program, qualifying law school students may receive up to $8,000 per year of Perkins loans, at a fixed interest rate of 5%. Interest on Perkins loans does not begin accruing until nine months after you graduate from law school. Perkins loans are actually paid to the school that you attend, and then subsequently paid out to you (i.e., your school is the lender). Not all schools participate in this program, so you will need to research whether your school does to find out whether Perkins loans are an option for you.

The challenge with Perkins loans is qualifying for them. Perkins loans are only awarded to exceptionally needy students, with very limited resources, and they are not awarded very often. Like other Federal loans, you will know what loans you qualify for and have been awarded by completing a FASFA application.

Private Loans

You can borrow money from a private lender to go to law school in the form of a private student loan. Private student loans are not backed by the Federal government of the United States, which means that these loans do not have certain protections and payment plans that are available to Federal loan borrowers (read more on private loans here.

The specific terms of a private loan will vary depending on your lender. For example, you may have a lower interest rate than you could have with a Federal loan, but that interest rate may be variable (not fixed). Your private loan may require a cosigner, which means that another person will be on the hook for your payments if you default. If you have a cosigner on your student loans, then you need to consider life insurance. If you die with a cosigner on your loan without life insurance in place, your cosigner may still be on the hook for the loans. Private loan terms vary and your loan may or may not be forgiven upon death. This is a good example of how important it is to understand the terms of your private loans, if you are using private loans to help you fund law school.

Ultimately, borrowing a private loan to go to law school is an option, but one that should be considered carefully and only after reading the fine print very carefully. 

Understand What You’re Signing Up For

Keep in mind that it is hard to get Perkins loans for law school and Direct loans are only awarded up to $20,500. This means that a large portion of your law school debt could come from Graduate PLUS loans, which have an interest rate of 6.84% for this up coming year. This means that repayment over the course of 10 to 20 years will cost you a lot of money that you could otherwise invest.

It is also important to remember that student loans are rarely dischargeable in bankruptcy. This means that if you claim bankruptcy, while your other debts may be forgiven, you will still have to pay your student loan debt back after your bankruptcy. This is especially worth considering if you carry any debt from undergrad, because then you will have even more debt.

You can go to law school by funding your education via student loans, but if you do that, make sure you know the details of your loans because they will be with you forever.

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Student Loan Forgiveness Programs for Lawyers

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Given a lawyer’s propensity for high salaries, student loan forgiveness for lawyers isn’t often discussed. However, lawyers do have many forgiveness options. This article will cover the numerous ways lawyers can get their loans forgiven.

Before we dig too deep into the matter, it’s worth noting that all federal direct loans and federally guaranteed loans are eligible for loan forgiveness. Federal loans include subsidized and unsubsidized Federal Stafford loans, Federal Direct Consolidation loans, Federal Perkins loans (only when part of a Federal Direct Consolidation loan), and Federal PLUS loans. However, private loans are not forgivable. Let the proceedings begin.

Income-Based Repayment (IBR)

Under this method, a lawyer is able to keep payments low until the loans are eventually forgiven. Through this program, participants generally don’t pay more than 15% of their ‘discretionary income’ towards student loan repayment. ‘Discretionary income’ is anything you earn above the national poverty level (which is currently $11,490). A person need never pay more than the 10-Year Standard Repayment Plan amount. After 25 years of payments, the outstanding balance will be forgiven. Lawyer or not, everyone should look into this program.

[Learn more about IBR here.]

Federal Public Service Loan Forgiveness (PSLF)

Should you enter these types of careers, your loan may be forgiven:

  • The government (military service included)
  • A 501(c)(3) nonprofit
  • AmeriCorps or Peace Corps position
  • A private public service organization

To qualify for Federal Public Service Loan Forgiveness, loans must be in the William Ford Direct lending program. Loans under the FFEL program can be consolidated into Direct loans. With this program, a lawyer is still required to make 120 monthly payments. At which time, the remaining balances will be discharged in full. 120 payments sound terrifying but if you couple this program with income-based repayment, the dollar amount you’ll be paying is low compared to what you could be paying for these loans.

Department of Justice Attorney Student Loan Repayment Program (ASLRP)

To qualify, you must have at least $10,000 in federal student loans.

Loans which are covered include:

  • Stafford Loans
  • Supplemental Loans
  • Federal Consolidation Loans
  • Defense Loans (made before July 1, 1972)
  • National Direct Student Loans (made between 7/1/72 and 7/1/87)
  • William D. Ford Direct Student Loans
  • Perkins Loans
  • The Nursing Student Loan Program loans
  • The Health Profession Student Loan Program loans
  • The Health Education Assistance Loan Program loans

This is a recruitment and retention program. The DOJ conducts an ‘open season’ recruiting process each spring. Any aspiring or current employee may request consideration. The selection is competitive and even when you are accepted, reexamination of eligibility will occur each spring.

Upon acceptance, you are committed to a 3-year term with the Department of Justice. Anyone who cannot complete a 3-year term in their position (political appointees, occupying attorneys, etc.) shall not be accepted.

Federal loans will be repaid to the issuer, not the lawyer personally. Any attorney who does not complete his or her service obligation will be required to repay the loans that had been forgiven up to the point of resignation. This is a competitive program.

John R. Justice Student Loan Repayment Program

The John R. Justice Student Loan repayment program provides assistance for state and federal public defenders and state prosecutors for at least 3 years. It’s renewable after 3 years. Benefits cannot exceed $10,000 in any calendar year and cannot exceed $60,000 per attorney. Attorneys with the greatest inability to repay their loans have priority.

The program is administered by the states. Funds are given to each state based on its population.

All attorneys hoping to enter into this program must remain in practice for at least 3 years. Application deadline is in the spring. The 2015 deadline was April 13, 2015. There are many loan forgiveness programs for lawyers which come and go. I’m happy to say this program has stood the test of time. It shows no sign of slowing down or disappearing.

Law School Loan Forgiveness Programs

At New York University Law for instance, you can get ALL your federal student loans forgiven. You first need to work in an eligible public interest position. You must remain in a public interest position for 10 years. You cannot make more than $80,000 per year. While those are fairly restrictive requirements, it is pretty spectacular you can become a lawyer without needing to worry about federal student loan repayment.

These programs exist at more than 100 law schools. They are mostly to encourage lawyers to enter public service roles.

See a list of 102 schools by clicking here. Click the links within to read about each school’s loan forgiveness program. No two programs are alike.

State-Specific Loan Repayment Programs (LARPs) for Lawyers

Perhaps your school doesn’t offer a loan forgiveness program. Good news, the state your school resides in may still offer a program to you. Twenty-four states (plus the District of Columbia) offer state-specific loan repayment assistant programs. Click on each state to pull up more information. The states include:

Arizona, District of Columbia, Florida, Illinois, Indiana, Iowa, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Mississippi, Montana, Nebraska, New Hampshire, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, Texas, Vermont, and Virginia.

Note: This list is current as of 6/11/15. However, please check with your state before getting too excited about a state plan. Some states such as Kansas only offer the program if you practice in certain counties. Right now Kansas only offers the program in 50 of the state’s 105 counties. Kentucky, Nebraska, Missouri, and Washington’s programs are temporarily suspended due to lack of funding.

Closing Arguments

It’s worth noting how many loan forgiveness programs for lawyers lose their funding:

  • The John R. Justice Prosecutors & Defenders Incentive Act: Unfunded
  • The Legal Assistance Loan Repayment Program:Unfunded
  • The Loan Forgiveness for Service in Areas of National Need:Unfunded

However, the programs listed in this article seem to be here to stay!

To close, it’s worth repeating that it wouldn’t be right if teaching was the only profession eligible for student loan forgiveness. Rightly so, savvy lawyers can get assistance as well. Bundle as many of these forgiveness programs together as possible and you’ll be doing just alright. Who says lawyers have to be burdened with massive amounts of debt?

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Understanding the Difference between Forbearance and Deferment

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There are many differences between forbearance and deferment. I’m going to cut to the chase right now and say that deferment will always be the better option. It’s because interest doesn’t accrue during deferment as it does with forbearance.

This article will cover all facets of the question, “What’s the difference between forbearance and deferment of my student loans?” Your question is justified. It’s a confusing topic. The basic definitions are:

  • Forbearance– a refraining from the enforcement of something (as a debt, right, or obligation) that is due
  • Deferment– the act of delaying or postponing

Confusing, right? This post will cover which loans qualify, key differences between forbearance and deferment, when to take action, the application process, and how to restart regular repayment.

You’re probably reading this article because you’re in an unfortunate situation. You may feel helpless. But it’s important to give yourself credit. Instead of hiding from your loans, you’re facing them by reading this article. You’re attempting to better your situation. Things will get better. By the end of this article, you’ll know exactly what to do with your loans.

Loans which Qualify

Forbearance and deferment are available for all federal loans (Stafford, Perkins – you name it). They rarely apply to private loans. Since private loan forbearance and deferment is uncommon, contact the lender that originated your private loan(s). If you’re unsure who that may be, you may need to pull a credit report to find who originated your loans.

[Learn how to find all your student loans here.]

Key Differences between Forbearance and Deferment

Check out this free chart provided by the U.S. Department of Education Federal Student Aid Office:

Forbearance vs Deferment

Forbearance Will Be Granted if Any of the Following Pertain to You (Mandatory Forbearance):

  • You are enrolled in a medical or dental internship or residency.
  • You are serving in a national service position such as AmeriCorps, are part of the Department of Defense repayment program, are in the National Guard, or are eligible for teacher loan forgiveness programs.
  • Your monthly loan payment is 20% or more of your gross monthly income.
  • You are teaching in a program that qualifies for loan forgiveness.
  • You qualify for partial repayment under the U.S. Department of Defense Student Loan Repayment Program.
  • You are called into active military duty.

Forbearance May Be Granted If (Discretionary Forbearance):

  • You are enrolled less than half time (each school has their own definition of ‘half time’).
  • Poor health.
  • Unemployment (beyond the maximum deferment time limit).
  • A reduction in work hours.
  • A life-changing circumstance.

You May Qualify for Deferment If You Are:

  • Enrolled at least half time at an eligible postsecondary school.
  • In a full-time course of study in a graduate fellowship program.
  • In an approved full-time rehabilitation program for individuals with disabilities.
  • Unemployed or unable to find full-time employment (for a maximum of three years).
  • Experiencing an economic hardship (including Peace Corps service) as defined by federal regulations (for a maximum of three years).
  • Serving on active duty during a war or other military operation or national emergency and, if you were serving on or after Oct. 1, 2007, for an additional 180-day period following the demobilization date for your qualifying service.
  • Performing qualifying National Guard duty during a war or other military operation or national emergency and, if you were serving on or after Oct. 1, 2007, for an additional 180-day period following the demobilization date for your qualifying service.
  • A member of the National Guard or other reserve component of the U.S. armed forces (current or retired) and you are called or ordered to active duty while you are enrolled (or within six months of having been enrolled) at least half time at an eligible school.

Note: This list comes from: http://www.direct.ed.gov/postpone.html. Some additional information was added by author.

When to Take Action

Right now! Do not let your loans go into default. Default occurs when you are more than 270 days behind on your payments. If you are in default, you are not eligible for either forbearance or deferment. If it’s too late, get out of default as soon as you can. You can get out of default in a few different ways:

  • Cancel the Loan
  • Consolidate Loans
  • Get a ‘Reasonable and Affordable’ Payment Plan

The Application Process for Deferment or Forbearance

The rule to always follow when struggling to pay any debt is to keep in contact with the servicer. Be sure to keep the lines of communication open. You’ll need to work with your loan servicer(s) to apply for deferment or forbearance. Again, visit http://www.nslds.ed.gov/ to see who services your federal loans.

For deferments, payments are deferred in six-month intervals for up to three years. Forbearance can be granted for up to 12-months. Please, reassess your financial situation prior to the end of each period.

Note: Get ready to cheer! Putting loans into deferment or forbearance does not hurt your credit score! It is noted on your credit reports but has no impact on your credit. However, if you are late or miss a payment, expect repercussions.

How to Restart Normal Repayment

Before your deferment or forbearance term expires, contact the servicer of the loan. You will need to explain your current situation. Both you and the lender will create a repayment plan which will work for your new situation. Note that if your situation changes before your deferment or forbearance period expires, you can resume payments at any time.

Final Thoughts

Here’s your game plan: If you’re having trouble paying your student loans, contact your loan servicer(s). Keep paying towards the current agreement. Do not let your loans go into default. If they do go into default, you must get current before applying for either deferment or forbearance.

If your loans are current, begin the application process for deferment. Within 10-14 days, you will be notified as to whether or not you have been approved. If denied, go the forbearance route. You should be all set.

The United States now holds $1.2 trillion in student loan debt. Lenders want their money. They are willing to work with you in order to make that happen – even if payments are delayed. Talk with them. They will listen.

Whether you go with deferment or forbearance, what’s important is you’re improving your situation.

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LendKey Student Loan Refinance Review

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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. It currently offers an APR range of 1.90% APR to 6.92% APR.

Who can benefit from using LendKey? Anyone hoping to refinance their student loans should consider LendKey. 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 14 minutes, a person can navigate through LendKey’s application process. This means after 14 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 24 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 35,000 Borrowers Serviced

As of May 2015, 35,000 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

No 20-Year Term

15-year max to repay loans when the industry average is 20.

Misleading Marketplace

When using the marketplace, some lenders are listed who aren’t currently accepting new applicants.

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.

Only Certain States Offer Fixed Loans

All states offer variable loans. However, only a select number offer fixed as well: D.C., Delaware, Massachusetts, Maryland, New Jersey, New York, Pennsylvania, and Virginia. It’s because there is only one bank working with LendKey that offers fixed rate loans. Thus, LendKey can show you fixed rate loans if you live in a state where that bank operates.

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

Both LendKey and SoFi claim refinancing is available for a rate as low as 1.90% APR. However, SoFi stands out with a job placement program. Yes, SoFi has an entire career services division. It’s smart. Instead of spending money on collections, SoFi invests in its borrowers. Also, if you would like a 20-year loan, consider SoFi. As mentioned earlier, LendKey caps out at 15 years.

SoFi logo

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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.

However, Earnest isn’t available for all US residents. Check this list to be sure you’re covered:

AR, AZ, CA, CO, CT, FL, GA, HI, IL, IN, KS, MA, MD, MI, MN, NC, NE, NH, NJ, NY, OH, OR, PA, TN, TX, UT, VA, WA, Washington D.C., and WI.

Like SoFi but unlike LendKey, Earnest offers a 20-year term. 1.90% APR is also available.

Earnest

Apply Now

*referral link

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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How To Tell If Your Student Loans Are Private or Federal

How To Tell If Your Student Loans Are Private or Federal

Do you know if your student loans are private or federal? It’s an unfortunate fact that many college graduates don’t completely understand their student loans. You might not know who your student loan servicer is, or why the difference between private and federal student loans matters.

Let’s review a few methods you can use to determine if your student loans are private or federal, what makes each different, and why knowing what type of loan you have is important.

What Makes Federal and Private Student Loans Different?

In case you’re not sure why you should know whether your student loans are federal or private, let’s briefly go over the differences between the two.

Federal student loans are offered through programs funded by the federal government to those that demonstrate a need for financial aid. Typically, these loans are easy to qualify for – in most cases, your credit isn’t even checked.

There are two different federal student loan programs available:

The William D. Ford Federal Direct Loan Program: The lender under this program is the U.S. Department of Education. This program consists of 4 loan types – Direct Subsidized, Direct Unsubsidized, Direct PLUS, and Direct Consolidation. If you’re an undergraduate, you’ll only have Direct Subsidized or Unsubsidized loans.

The Federal Perkins Loan Program: The lender under this program is actually your school, and this is for students with an exceptional need for aid.

Individual banks or credit unions, such as Chase, Wells Fargo, Sallie Mae, Discover, Citizens Bank, etc, make private student loans. There are many lenders that offer private student loans, but the terms aren’t as favorable as those for federal loans. Private loans also require a credit check and may be harder to qualify for.

Additionally, federal student loans come with guaranteed benefits, such as being able to enter a period of forbearance or deferment with your loans (temporarily stops payments), income-based repayment plans, and loan forgiveness. Private loans don’t guarantee these benefits, and different lenders offer different benefits.

How To Determine if Your Loans Are Federal

The first thing you should do to see if you have federal loans is log onto the National Student Loan Data System. The only loans listed here are federal.

If you’ve never used the NSLD before, you’ll want to click the “Financial Review” button on the homepage, hit “Accept,” and then enter your credentials.

If you have an FSA ID, you can enter it here. If not, there’s an option to create one. In May of 2015, the government redesigned its student loan system. You can use your FSA ID to log into multiple government sites now. However, if you haven’t logged on in quite a while, you might need to create one.

In the event you forgot your credentials, you can click on the “Forgot my username/password” button and have the information emailed to you, or answer a challenge question. You’ll just be required to enter your Social Security Number, last name, and date of birth.

I had to go through this process myself and create a new ID as it had been a few years since I had last applied for FAFSA. The process is very simple. After entering your information to create an ID, you just need to link your PIN to your FSA account (you should have a PIN if you applied for FAFSA). If you’ve forgotten it, you can answer a challenge question to have it imported. You also need to confirm your email by entering in a secured code that’s sent to you.

Once you log on, you’ll see a list of all the student loans that were disbursed to you.

This page will also show you what your original loan amount was, and how much you currently owe.

Click on the numbered box to the left of your loan to determine your loan servicer. This will display all the information about that particular loan. Your loan servicer will be listed under the “Servicer/Lender/Guaranty Agency/ED Servicer Information” section. The name, address, phone number, and website should be displayed.

Additionally, this page will also inform you of your loan terms. Along with your original loan balance and current outstanding balance, it will tell you what type of interest rate you have (fixed or variable), your interest rate, and the current status of the loan.

[How to Set Up Income-Driven Repayment Programs]

How To Determine If Your Student Loan is Private

Private student loans are loans not made by the government – banking institutions such as Sallie Mae, Wells Fargo, Chase, Citizens Bank, etc make them.

As a result, there are more lenders to look out for when it comes to private loans. Unfortunately, there’s no central reporting system for private loans like there is for federal loans, which makes them tricky to track down.

Your first stop should be the NSLD to at least see if you have any federal loans. In 2012, only 20% of graduates had private loans, so chances are good at least some of your loans are federal.

Another way to check is to take a look at your credit report. You don’t have to pay for one if you haven’t ordered your three free reports from www.annualcreditreport.com. You can get your credit score within minutes of filling out your information on there.

Some lenders may not look familiar to you. Just conduct a Google search and see what comes up. Further investigation via phone may be necessary to obtain your loan information if you don’t remember making a login for your lenders website.

If you see “Federal Direct Loan,” “Federal Perkins,” “Direct Loan Consolidation,” or “Stafford” on your report, ensure it matches up with what’s on your NSLD account. These are federal loans.

You might also be able to call your school’s financial aid office to see if they have any records of your loans. Otherwise, hopefully you have your own records of the loans you took out.

What Should You Do Once You Find Out?

Knowing whether your student loans are private or federal will help if you ever decide to refinance or consolidate your loans. The process is slightly different if you want to consolidate your federal loans under a Direct Consolidation Loan (through the federal government), or if you want to refinance through a private lender.

Additionally, if you have federal student loans and you’re experiencing difficulty in making payments, you might be eligible for one of the income-based repayment plans offered. Not knowing what type of loan you have means not knowing the repayment assistance options available to you. You can learn more about the three types of income-based repayment plans here.

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5 Ways to Take Your Investing Skills to the Next Level

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If you’re just starting out, it’s pretty easy to find the boilerplate beginning investment advice:

It’s all great advice, and that’s definitely the way to start.

But what if you’re already doing those things? What’s the next step for someone who wants to go further?

Here are 5 advanced investment strategies for people who already have the basics in place and want to take things to the next level

1. Maximize Your Savings

Okay, this one isn’t so advanced. But it’s important so it’s going first.

For the first 10-15 years of your investment life the amount you save is far more important than the return you earn. So before doing anything else, make sure you’re not just contributing, but taking full advantage of the savings opportunities available to you.

For 2015 you’re allowed to contribute up to $18,000 to a 401(k) or 403(b) and $5,500 to an IRA. Those numbers bump up to $24,000 and $6,500 if you’re age 50 or over.

Maximizing those savings opportunities will do more than anything else to put you ahead.

2. Take Advantage of a Health Savings Account

This is one of those really cool opportunities that not many people know about.

If you have a qualifying high-deductible health insurance plan, which for 2015 means a deductible of at least $1,250 for individual plans or $2,500 for family plans, you have the option of opening a health savings account.

Technically these accounts are designed to make it easier to afford out-of-pocket medical expenses, but they have a few characteristics that can make them fantastic retirement accounts as well.

  1. The money rolls over from year to year. This is in contrast to the “use it or lose it” plans you may have through your employer.
  2. Contributions are tax-deductible (like a 401(k) or Traditional IRA).
  3. Money grows tax-free while inside the account (like all retirement accounts).
  4. The money can be withdrawn tax-free for medical expenses at any time.

What those last three points really mean is that it’s the ONLY account that offers a potential TRIPLE tax break. You can’t get that with a 401(k), IRA, or anywhere else.

If you have the opportunity to use a health savings account, it can be a great way to turbocharge your retirement savings.

3. Got a Side Gig? Open Your Own Retirement Account

If you freelance, have a side gig, or if you’re full-time self-employed, you can open your own retirement account specifically for that business income so that you can save even more money.

As long as you don’t have employees, the three main options are:

  • SEP IRA – This one is popular because it’s so simple. You can contribute up to 25% of your net business income per year.
  • Solo 401(k) – There’s a little more administrative work here, but the added flexibility can be worth it. You’re allowed to contribute up to 25% of your net business income per year PLUS up to $18,000 as an “employee” contribution.
  • SIMPLE IRA – Easy to set up and you can contribute up to $13,500 per year.

Here’s a good resource explaining these three options in more detail: SEP vs. SIMPLE vs. Solo 401(k).

If you do have employees, I would recommend talking to a specialist about your options, as the rules and choices get more complicated.

4. Open a regular old brokerage account

If you’ve exhausted all your tax-advantaged space within retirement accounts, you can open a regular old brokerage account to squirrel away some more money.

These accounts are a lot like IRAs in that you open them on your own and you have complete flexibility to choose your own investments. The big difference is simply that you don’t get any tax breaks, which means you should be a little more thoughtful about which investments you put inside these accounts (see tip #5).

A brokerage account is great not only for extra savings, but for money you may want to access sooner than you could with a retirement account. There are no rules about when you’re allowed to withdraw from these accounts, though you will have to take taxes into consideration.

You can open a brokerage account with any of the major investment companies like Vanguard, Schwab or Fidelity, or with an automated service like Betterment.

5. Invest Tax Efficiently

Once you venture into the world of taxable brokerage accounts, you’ll want to do what you can to minimize your tax costs while still sticking to your overall investment strategy.

The specifics of how to do this will vary based on your personal tax situation and investment options, but in general you can categorize your investments in one of two ways:

  • Tax efficient – These are investments that include natural tax-deferral. Stock index funds are a good example because capital gains are primarily only recognized when you decide to sell the fund, and can therefore be delayed for years on end.
  • Tax inefficient – Investments that recognize income every year are tax inefficient. This includes many bond funds, REITs, and actively managed stock funds with lots of internal trading.

In general you want to put tax inefficient investments into retirement accounts like a 401(k) or IRA so that you aren’t weighed down by annual tax costs. Tax efficient investments can then be put into taxable accounts.

Although it can be a little confusing to sort out, the results can be well worth the effort. Here’s a good overview on how to do this: Principles of tax-efficient fund placement.

Optimize Away!

Remember, handling the basics like maximizing your 401(k) and IRA and investing in low-cost index funds will do more than anything else to put you on the right track.

But if you’re looking to take the next step and really optimize your investments, these five tips will help you do it.

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4 Options for Teacher Loan Forgiveness

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According to an article published by The New York Times, many new teachers spend 25% of their income repaying student loans. The average teacher’s starting salary is $36,141. This leaves new teachers with just $27,105.79 to live on each year before taxes. However, thanks to loan forgiveness programs, many teachers are catching a much needed break. The following article is a resource for any teacher (or aspiring teacher) hoping to reduce (or eliminate) their student loan burden.

Teacher Loan Forgiveness Program

This program can forgive Direct Subsidized and Unsubsidized Loans and Subsidized and Unsubsidized Federal Stafford Loans. The combined total you can have forgiven is $17,500. Of course, with this kind of money at stake, there are plenty of requirements.

First, all federal loans taken out by the student must have originated after October 1, 1998. You must have also been employed as a full-time teacher for five complete and consecutive years. At least one of those years must have occurred after the 1997-1998 school year. This tenure must have occurred in a Title I school. All elementary or secondary education schools operated by the Bureau of Indian Education – or schools under contract with the BIE – are considered, in this case, Title I schools. You may also be eligible if you served at an educational service agency.

After a teacher has completed the 5-year teaching requirement, they are encouraged to complete the Teacher Loan Forgiveness Application. The chief administrative officer at the school(s) which you have worked must complete the certification section. Return the completed application to your loan servicer. A separate form must be completed for each loan.

Note that PLUS loans are not included in this forgiveness programs.

Federal Perkins Loan Cancellation Program

This program is the ticket to getting Federal Perkins Loans deferred and ultimately forgiven. The qualifications for this type of teacher loan forgiveness program are pretty straightforward. This can be done by either teaching in low-income schools and/or teaching in certain subject areas. Subject areas include any which are deemed by the state to be in short supply. These typically include the fields of mathematics, science, foreign language, or bilingual education. To see what shortages your state is having right now, see this guide.

Under this program, you only need to have been teaching for one full academic year. But, the longer you teach, the more money gets forgiven. Note: These numbers include interest:

  • 15% forgiven in years 1 and 2
  • 20% forgiven in years 3 and 4
  • 30% forgiven in year 5

Before forgiveness happens, many teachers defer loans through this program. This means, although the loans may take years to be completely forgiven, a teacher won’t have to ever start repaying them. Apply for deferment through the academic institution which issued your loan.

[Find Out How to Set Up Income-Driven Repayment Programs]

Many State Loan Forgiveness Programs

There are so many state sponsored loan forgiveness programs!

Although these are state-sponsored, they do count toward forgiving federal student loans. The eligibility is usually based on where you work and what subject you teach. Teachers at low income schools and/or teachers in high demand subjects are perfect candidates for these programs.

Alaska

Arkansas

Delaware

Illinois (2)

Illinois Special Education Tuition Waiver Program

Illinois Teachers Loan Repayment Program

Iowa

Kansas

Kentucky (2)

Higher Education Assistance Authority Teacher Scholarship Program

Minority Educator Recruitment and Retention Scholarship

Maine

Maryland (2)

Workforce Shortage Student Assistance Grant (WSSAG)

Janet L. Hoffman Loan Assistance Repayment Program (LARP)

Mississippi (3)

Graduate Teacher Summer Loan/Scholarship (GTS)

Mississippi Teacher Loan Repayment Program (MTLR)

William Winter Teacher Scholar Loan (WWTS)

Montana

Nebraska (2)

Attracting Excellence to Teaching Program

Enhancing Excellence in Teaching Program

New Mexico

New York

North Dakota (2)

STEM Occupations Student Loan Program

North Dakota University Teacher Shortage Loan Forgiveness Program

Oklahoma

South Carolina

Tennessee (2)

Tennessee Teaching Scholars Program

Tennessee Math & Science Teacher’s Loan Forgiveness

Texas

Virginia

West Virginia

Wisconsin (3)

Minority Teacher Loan

Teacher Education Loan Program

Teacher of the Visually Impaired Loan

Public Service Loan Forgiveness

This is the most inclusive loan forgiveness program. Heck, even if a person is not a teacher, they may still qualify. To qualify, you must be employed full-time in an eligible nonprofit or public service role. Here are some examples of careers (besides teachers) which qualify (as found on this page of studentaid.ed.gov):

  • A government organization (including a federal, state, local, or tribal organization, agency, or entity; a public child or family service agency; or a tribal college or university).
  • A not-for-profit, tax-exempt organization under section 501(c)(3) of the Internal Revenue Code
  • Emergency management
  • Military service
  • Public safety
  • Law enforcement
  • Public interest law services
  • Early childhood education (including licensed or regulated health care, Head Start, and state-funded pre-kindergarten)
  • Public service for individuals with disabilities and the elderly
  • Public health (including nurses, nurse practitioners, nurses in a clinical setting, and full-time professionals engaged in health care practitioner occupations and health care support occupations)
  • Public education
  • Public library services
  • School library or other school-based services

[Learn about the Public Service Loan Forgiveness here.]

Although this process is simple and inclusive – there is one issue. This program was introduced in October 2007 to forgive the remaining balance due on Direct Loan Program loans. In order to qualify, you must make 120 eligible on-time monthly payments. 120 monthly payments… yes, that comes out to 10 years of repayment in order to get your remaining balance forgiven. And since the program was just introduced in 2007, no one has yet to qualify for this program. Not a single person reading this can take advantage of this program at this moment. But if you plan on still owing money in 2017, this program is for you. It’s a great program – once you qualify. The application for this loan forgiveness program can be found here.

Help Spread the Good News

Teaching is often dubbed as the most under-appreciated profession in America. This is unfortunate – and is becoming less-and-less true with each day. The US federal and state governments are taking major steps towards helping teachers carry out their mission while dismissing their student loans. It’s a monetary way of saying ‘thank you’ for the work teachers do.

If you know someone in the teaching profession who is feeling under-appreciated, consider linking them to this post. Show them that U.S. citizens appreciate teachers so much that we are willing to reward teachers in a very real way – by using our tax dollars to help them. It’s an awfully big sign of appreciation, don’t you think?

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How to Set Up IBR, PAYE, and ICR Student Loan Repayment Plans

How to Set Up IBR, PAYE, and ICR Student Loan Repayment Plans

Does the amount you earn on a yearly basis pale in comparison to your monthly student loan payments? Do you have federal student loans? Then you might benefit from setting up an income-based repayment (IBR) plan, income-contingent repayment (ICR) plan, or pay as you earn (PAYE) repayment plan.

These repayment programs are only available to those with federal student loans, and they’re collectively referred to as income-driven repayment plans. Setting your federal loans up under an income-driven repayment plan reduces your monthly payment amount because your payment is based on your income and family size. Your payment adjusts annually according to these factors.

Payment amounts are calculated from a percentage of your discretionary income. According to studentaid.ed.gov, for IBR and PAYE, discretionary income is “the difference between your income and 150% of the poverty guideline for your family size and state of residence.” For ICR, it’s 100% of the poverty guideline. (If you’re interested in looking at the poverty guidelines, those can be found here.)

Want to find out how to apply for an income-driven repayment plan? Read on for information on how the process works.

[Learn how to track down all your student loans here.]

Getting Started With Income-Driven Repayment Plans

Generally, if you want to set your student loan account up with an income-driven repayment plan, your best bet is to first contact your student loan servicer. (Not sure which loan servicer you have? You can check in the National Student Loan Data System.)

If you log into your account online, you should see a section for changing your repayment plan. At the very least, your servicer should address the issue in a FAQ section of its site.

It’s your loan servicers job to help you find the best plan for your situation, but you need to contact them as soon as you know you’re experiencing difficulty in making payments. You don’t want to miss any payments and end up delinquent (or worse, in default) because you couldn’t pay. Plus, loans that are in default aren’t eligible for income-driven repayment plans.

The application process is actually very simple and straightforward.

Income-Driven Repayment Application Process

The first step of the process is to request an income-driven repayment plan. You need to fill out the “Income-Driven Payment Request” form to do that. This can be done online by yourself, or you can apply with a paper application supplied by your student loan servicer.

When you make your request, you have to choose the specific plan you’d like to go with. You can select one yourself, or you can ask your loan servicer to choose the best plan for you. It will choose the one with the lowest monthly payment amount.

Since you’re applying for a repayment plan based on your taxable income, you do need to provide proof of income.

The easiest way to provide proof of your adjusted gross income (AGI) is with your most recent tax return, as long as your income hasn’t changed significantly from the last date you filed. You also need to have filed a federal income tax return for the past two years.

The online application makes it easy to find your AGI. You can just use the IRS Data Retrieval Tool to import your income information.

If you apply with the paper application, you’ll need to supply a paper copy of your most recent federal tax return, or an IRS tax return transcript.

If your income has changed a lot since you last filed, or if you haven’t filed two federal tax returns yet, there are other ways of proving your income.

First, if you don’t have any source of income at all, you just need to indicate that on your application. Only taxable income counts, so if you receive any government assistance or any other income that’s not considered taxable, you don’t need to report it here.

If you do earn an income, you’ll need to provide your most recent pay stubs or other alternative documentation that shows your salary.

Additionally, if you have federal loans with multiple loan servicers, you must request income-driven repayment for each individually. There’s a section of the application that asks if you have eligible loans with more than one servicer, so you can indicate that there.

Wondering how your payments are determined when you owe multiple lenders? First, your income-driven repayment plan amount is calculated. This amount is then multiplied by the percentage of total debt with each servicer.

For example, if you have loans with two servicers, and your income-driven repayment amount is $120, and 50% of your outstanding debt is with Loan Servicer 1, and the other half is with Loan Servicer 2, then you’d have to pay $60 toward each. (50% of $120 is $60.)

The application shouldn’t take very long to complete, but the entire process can take a few weeks depending on which loan servicer you have.

If you have an immediate need to lessen your payments, your loan servicer may apply a forbearance to your federal loans while the process wraps up. That’s why it’s important to contact your servicer as soon as you can’t make your payments.

You Have to Reapply Annually

You’ll be required to submit your proof of income on an annual basis after you apply the first time. As your income changes, so does your payment, so you need to provide this information continuously.

However, there’s no income limit for income-driven repayment plans. If you start earning more, your payment amount is simply capped at the amount you’d be paying under the standard 10-year repayment plan. It will never exceed that amount.

Technically, your loans will still be under your chosen income-driven repayment plan, but your monthly payment is no longer based on your income. You can still have your outstanding loan balance forgiven after your repayment term ends (if you don’t pay your loan off before then).

Who’s Income is Taken Into Consideration?

If you’re married and wondering if your spouses income will be taken into consideration, it depends on how you file your taxes.

Filing separately means only your income and loans will matter.

Filing jointly means your monthly payment will be based off of your joint income.

If you and your spouse file jointly and both have eligible federal student loans, both loans will be taken into consideration, but your spouse doesn’t have to choose to enter into an income-driven repayment plan.

Income-Based Repayment Plan Overview

You don’t qualify for IBR unless your payment amount will be less than what you’re paying under the standard 10-year repayment plan.

A good baseline for determining whether or not you’ll qualify is if your total student loan debt is much higher than your annual discretionary income. If your debt-to-income ratio is really high, you’ll probably qualify.

New borrowers (those that borrowed after July 1st, 2014, and didn’t have any loans outstanding prior to that) have a maximum of 20 years to pay back their loans, while old borrowers (those that had outstanding loan balances after July 1st, 2014) have a maximum of 25 years to pay back their loans.

Pay As You Earn Plan Overview

For PAYE, your monthly payment will be around 10% of your discretionary income, and never more than what you’re paying under the standard 10-year payment plan.

You have a maximum of 20 years to pay back your loans under this plan.

The qualifications for PAYE are the same as IBR – you must be paying less under PAYE than you were under the standard 10-year plan.

However, PAYE is only available to those who were new, first-time borrowers as of October 1st, 2007, and they also must have received a disbursement in the form of a Direct Loan on or after October 1st, 2011.

Income-Contingent Repayment Plan Overview

From studentaid.ed.gov, your monthly payment is the lesser of these two: 20% of your discretionary income, or “what you would pay on a repayment plan with a fixed payment over the course of 12 years, adjusted according to your income.”

Under this plan, you have a maximum of 25 years to pay back your loans. There are actually no initial guidelines you must qualify under – anyone can choose to repay their student loans under this plan.

However, the Federal Student Aid office warns that payments tend to be more expensive under this plan than IBR and PAYE – and possibly even more than the 10-year repayment plan. Make sure you’re going to be paying less if you want to go this route.

Benefits of Income-Driven Repayment Plans

A big bonus for all three of these repayment plans is that your outstanding balance is forgiven after your repayment term is complete. The Federal Student Aid office notes that if you qualify for forgiveness after 10 years through the Public Service Loan Forgiveness program, that takes precedence.

How can you still have an outstanding balance at the end of your repayment period? The monthly amount you owe will fluctuate with your income. You could end up repaying your loans before your term is up, or you could end up with a balance.

Under IBR and PAYE, if your monthly payment isn’t enough to cover any interest that accrues monthly on your subsidized loan, the government will pay the difference for the first three years. So if $30 in interest accrues every month, and your monthly payment under IBR and PAYE only pays for $15 of that, the government will cover the other $15.

You might want to use the estimated repayment calculator to see which plans offer you the lowest monthly payment. Income-driven plans aren’t guaranteed to give you the lowest monthly payment – all situations are different. There are still other repayment plans that aren’t reliant upon your income that could lower your monthly payment, such as the graduated or extended repayment plans.

Check With Your Loan Servicer First

Before applying for an income-driven repayment plan, it’s best to check with your loan servicer to get its input. You don’t want to end up owing more per month than you do now. These repayment plans are designed to help you, not hurt you. You may find that forbearance or deferment is a better option for you, especially if you’re only experiencing a temporary economic hardship.

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College Students and Recent Grads, Strategies to Save

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

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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!

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Consumer Watchdog: Understanding the Student Loan Grace Period

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College graduates around the United States are still enjoying the sweet relief of being done with homework, exams, philosophical questions and dining hall food. But as the summer speeds by, the ramifications of going to college in the first place will be lingering in the shadows. Those ramifications are of course student loans.

It’s common knowledge that recent graduates experience a little bit of wiggle room before their lenders come calling, but the generic “6 months” rule of thumb may not actually apply.

This time of non-payment, known colloquially as a grace period, varies based on lender and type of loan. While your lenders are required to make contact with you (they do want to get paid after all), it is still your responsibility to track down all your loans. Don’t assume you’re evading a student loan just because your lender hasn’t gotten in touch yet. That’s a quick way to end up in delinquency and default.

[How to Track Down All Your Student Loans]

When the Grace Period Begins

Your grace period begins after your school has registered you as graduated, which actually doesn’t always happen the day of graduation. But in general, it’s best to just assume your grace period will end 6 months after you’ve received your diploma. A grace period can also kick in if you’ve left school before graduating or dropped below half time.

The Duration of a Grace Period

Federal loans and private loans have different grace periods and even federal loans weren’t all created equally.

Federal loans

  • Stafford loan (subsidized and unsubsidized) – 6 months grace period
  • Direct Unsubsidized Loans – 6 months grace period
  • Direct Subsidized Loans – 6 months grace period
  • Perkins loan – must check with school
  • PLUS loan – no grace period

Private loans

There is no guaranteed grace period with private loans, so it’s imperative you reach out to your lender.

Interest During the Grace Period

Just because the federal government (and some private lenders) offers a grace period, it doesn’t mean you’re receiving a 6-month free pass. In fact, you’re starting to accrue interest on most loans. The interest accrued during the grace period will then capitalize (be added to the principal balance) once you start making payments.

Federal subsidized Stafford loans and a Perkins loan will typically not accrue interest during the grace period.

Making Payments During Grace Period

Sure, a grace period could be seen as a sort of get out of jail free card for 6 months. You could avoid thinking about all the debt you owe and just enjoy some time of not factoring debt into your monthly budget.

But we wouldn’t advise you do this.

Instead, we suggest making payments.

Any extra money you can put towards loan payments during your grace period will help reduce the time it will take to pay back and how much you’ll be forking over in interest during the life of the loan.

You can make “interest-only” payments during your grace period to reduce the amount of accrued interest that would capitalize. If your loan doesn’t accrue interest, then you should 100% be making some payments to chip away at your principal balance before interest starts accruing.

Important Tip: You’ll have a minimum payment to make each month. If and when you make a payment higher than your minimum (even just by $10) – you need to tell your loan servicer that money is not intended to be put towards future payments. Loan servicers have a tricky way of avoiding putting extra payments towards your principal balance by putting it towards future payments instead. Be explicit that extra money should go towards your principal balance in order to dig out of debt faster.

[Learn More About Bi-Weekly Payments]

Fine Print of the Grace Period

You only get the grace period once. So if you graduated from undergrad, used the entire grace period, then went back for a Masters degree, your undergrad loans will no longer be eligible for a grace period after your second gradation.

You may also give up your right to a grace period if you consolidate your loans. Using a Direct Consolidation Loan will mean you revoke your right to a grace period and must begin repayment after your Direct Consolidation Loan is disbursed (aka paid out). The first bill is generally due about two months after the loan is disbursed.

However, if you don’t use up your entire grace period, you could be eligible to use it a second time and still get the full six months.

There are two major ways you can use part of a grace period and then reboot it later. Those are:

  1. You return to school before the end of your loan’s grace period – this could mean you left school for a semester and returned in undergrad or it could mean you graduated undergrad and then enrolled in a Master’s program 3 months later.
  2. You get called up to active military duty for more than 30 days before the end of your grace period. Once you return from active duty, you’ll get the full six months again.

Once it’s time to start making payments, you should enroll into Income-Based Repayment, or Income-Contingent Repayment or Pay As You Earn. You can also consider refinancing your loans to a lower rate, but beware you’ll lose federal loan perks.

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Questions You Need to Ask Before Refinancing Your Student Loans

Questions You Need to Ask Before Refinancing Your Student Loans

Are you drowning in student loan debt? Do you cringe every time you see how much money you’re paying toward interest?

You might have heard about the student loan refinance movement that’s been building up since last year. There are more companies offering student loan refinancing services than ever before, and these companies are attempting to make refinancing as accessible to borrowers as possible.

Some lenders also acknowledge that upon graduating, young professionals in their 20s might not have much of an established credit history. As a result, many make the decision to lend to potential borrowers based on other factors, such as education, employment history, degree, salary, and how much debt they already have.

Essentially, lenders want to make sure you can afford to pay back your loans, and they realize that your credit score is only a small part of a much larger picture.

If you’re interested in refinancing your student loans, read on to find out what questions you need to ask before starting the process.

What Does It Mean To Refinance Your Student Loans?

First, you need to know exactly what it means to refinance your student loans, and why doing so may be a good option for you.

Refinancing your student loans is the process of applying to receive new terms on them. For example, if you need a longer repayment period for a lower monthly payment, then you can refinance to extend your term from the standard 10 years to 15, 20, or 25 years.

If your interest rates are high (say, 8%), you might be able to refinance to a lower interest rate, like 4.5%.

If your current loans have a variable rate, you can refinance to a fixed rate (and vice versa).

Lastly, if you owe multiple lenders, refinancing can help simplify your payments. You’ll only owe one lender – the one you refinance with. Your other loans will get paid off with the money from your new lender, and you’ll begin repaying your new lender for that one loan.

Refinancing is a great way to get better terms on your loans, but it’s not a magical cure-all solution. Here are a few other considerations to make before applying with a lender.

Do You Have Federal or Private Student Loans?

The distinction between federal and private student loans is critical for the purpose of refinancing.

If you refinance federal student loans, you’ll lose the benefits that are guaranteed with those loans. These benefits include repayment assistance such as deferment, forbearance, forgiveness, cancelation, discharge, and income-based repayment plans. You may also be eligible for additional benefits if you’re a service member.

Certain lenders offer these benefits to some extent or another, but they’re not guaranteed. That means your lender can change things up and decide not to offer them at any point in the future.

These benefits shouldn’t be overlooked, either. If your financial situation changes in the future and your income decreases or dries up completely, deferment and forbearance can help out a lot (you won’t have to make payments for a certain period of time). Not to mention if you become disabled and unable to work, you may be eligible for getting your loans discharged.

However, if your student loans are private, you have less to lose when refinancing. While many private lenders are improving their benefits, similar to refinancing, they’re not guaranteed. If the math works out in your favor, refinancing can be an easier decision when you have private loans.

Many lenders will also let you refinance both federal and private student loans together. Just keep tax deductions in mind. If you currently claim the student loan interest tax deduction, double check to make sure when you refinance, your student loans will still be considered student loans for that tax purpose.

What’s Your Credit Score and History?

While lenders have different algorithms to determine your creditworthiness, it’s still worth checking into what your credit score and history say about you.

Most lenders have loose credit requirements. For example, some may want to see a score above 600, while others want to see a score over at least 700.

Additionally, having late payments or delinquencies on your record generally isn’t good. If you have any recent dings on your history, you might benefit from waiting until they fall off or you repair your credit.

If you don’t have any credit score or history, don’t worry – a handful of lenders are willing to lend to you based off other criteria.

Do You Have a Fixed Rate or Variable Rate Loan?

Fixed rates don’t change over the life of your loan – the rate you have is permanently locked in. Variable rates can and do change over your loan term.

Those that currently have a variable rate loan may benefit from refinancing to a fixed rate loan for stability.

Not knowing what your monthly payments will be in the future could be a cause of financial stress. After all, how are you supposed to budget for your other expenses when your student loan payment could rise every few months or years?

If you don’t want to deal with any nasty surprises, refinancing to a fixed rate that stays the same may work better for you.

On the other hand, if you currently have a fixed rate payment, but can manage making extra payments every month, refinancing to a variable rate loan may actually benefit you.

That’s because variable rate loans start lower than fixed rate loans. If you can refinance to a variable rate of 3.50% (instead of a 5% fixed rate), and pay off your loan before the rate rises, you’ll end up paying less. Paying extra knocks the principal balance down quicker, so you’ll pay less in interest overall.

What Repayment Term Should I Choose?

Repayment terms can be tricky. Keep in mind that whenever you extend your repayment term, your loan becomes more expensive.

Let’s look at an example.

Say your current loan is $25,000 on a 6.8% fixed rate over 10 years. Your monthly payment is currently $287.70. The total amount you’ll end up paying over the life of the loan is $34,524.

Then, you refinance that $25,000 loan to a 4.5% fixed rate over 25 years. Your monthly payment will be $138.96, but the total amount you’ll end up paying is $41,688.

That’s a difference of $7,164.

So while the lower monthly payment with a longer repayment period may look like a good deal at first, remember how much money you’re paying toward your loan overall.

Of course, you can always pay your loan off early if your circumstances change. This cuts down on the cost of the loan, and most lenders don’t have prepayment penalties.

Are There Any Hidden Fees?

Here at MagnifyMoney, we hate to see borrowers pay any hidden or unnecessary fees. That’s why you should read the fine print before accepting any loan.

Here are a few fees you should be on the lookout for when refinancing your student loans:

  • Origination Fees: Paying for an origination fee is costly. Thankfully, a majority of student loan lenders don’t charge origination fees, but it’s important to know how they work. An origination fee is charged to cover the administrative costs of issuing a loan. This fee typically ranges from 1% to 3% of your loan amount. If you refinance that $25,000 loan and have an origination fee of 3%, your fee will be $750. Origination fees are usually bundled into the loan, so you’ll actually end up owing $25,750.
  • Late Payment Fee: As with any loan, if you pay late (generally 15 days past due), you’ll incur a late fee. These tend to be around $15-$25.
  • Unsuccessful Payment Fee: The most convenient way to pay for your loans is to have it automatically debited from your bank account. Unfortunately, if you don’t have enough money in your account, you’ll face fees not only from your bank, but also from your loan servicer.
  • Prepayment Penalty: Again, most lenders don’t have prepayment penalties, but it’s always worth checking. Some lenders make it difficult for you to make extra payments or to pay your loan off early, and they charge a fee for it since they’re losing out when you do this.

Are Cosigners Allowed?

If your creditworthiness isn’t enough to get you a loan, you may be able to apply with a cosigner that has more established credit, such as a parent.

Some lenders don’t allow you to apply with a cosigner, and some may or may not offer cosigner releases. In the event a lender does offer a release, after a set amount of timely payments (typically 36 payments or more), your cosigner can be released from his or her obligation.

What’s Your Education History?

Lenders have different education requirements for their refinance programs.

For example, SoFi* has a set list of schools and programs its program is available to, and CommonBond* only refinances graduate and professional loans. Citizens Bank refinances smaller amounts for bachelor’s degrees and larger amounts for graduate degrees.

Knowing your total student loan debt is a must when refinancing to know if you qualify or not, though there are a few lenders (like SoFi) that don’t have a maximum on the amount they refinance.

What Are the Values of Your Lender?

If you’ve been frustrated by your current student loan servicer, you know how big of a deal customer service is. Some lenders are great at it, and others aren’t very helpful.

Before going through the refinance process, get a feel for the potential lenders out there. It’s best to shop around regardless, but don’t be afraid to ask questions when you call to gauge how helpful and committed a lender is to serving you.

Our student loan refinance table is a good reference for this. We assign grades to lenders based on their transparency, so you know which ones are trustworthy.

Are There Other Options?

If you have federal loans, we recommend exhausting your options there first. There are income-based repayment programs you may be eligible for that could lower your monthly payments and extend your term. If you don’t have to go through the refinance process, save yourself the trouble and work with what you’ve got.

Have private student loans? It’s still worth calling your loan servicer to find out if they can do anything to assist you. As we mentioned, some may be able to give you the option of deferring payments. More and more lenders are trying to work with borrowers to make their payments affordable.

Overall, refinancing makes the most sense when you can secure terms that give you more manageable monthly payments. If you’re currently struggling to pay the minimum on your student loans, refinancing might be able to help.

Never Be Afraid to Ask Questions

If you find yourself with any extra questions, never be afraid to ask a lender for clarification. We try to make navigating the fine print easier, but lenders are constantly changing their policies and fee structure.

When you’re borrowing a significant amount of money, you want to be crystal clear on the terms. After all – that might be what got you into this situation in the first place, given that so many college students don’t fully understand the repercussions of student loans.

Finally, always remember to shop around and compare lenders. If you decide to refinance, it’s important to get the best terms and rates possible to make it worth your while. Some lenders use soft credit reports to give you an initial rate estimate, while others use hard credit inquiries. Shop around within a 30-day window regardless and your credit score won’t suffer as much.

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North Jersey Federal Credit Union Student Loan Refinance Review

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The North Jersey Federal Credit Union (NJFCU) doesn’t actually service its student loans in-house. Rather, student loan refinancing gets outsourced to a company called LendKey*. While this may be off-putting to some, there are major benefits gained by outsourcing student loan refinancing. LendKey works with over 300 credit unions. NJFCU takes its low interest rates and applies them to the powerhouse student loan-refinancing program, which is LendKey. It’s the low rates of a credit union, combined with the resources of a large servicer.

Program Overview

You are eligible for membership if you live, work, worship, attend school or regularly conduct business in Passaic, Morris, Hudson, and Bergen Counties or the underserved areas of Essex or Union Counties or the City of Newark. This area is bigger than most credit unions cover. I found this resulted in a pretty fantastic customer service team to help get your questions answered.

Student loan refinancing should never be taken lightly. There are many pros and cons to be considered. Keep these pros and cons in mind should you choose the NJFCU:

Pros

  • No loan origination fee
  • You can refinance both federal AND private loans with the NJFCU
  • Simplify your loans with one easy monthly payment
  • Cosigner release available after 12 consecutive on-time payments. Having a cosigner upon applying means a better chance for acceptance and probably a lower interest rate upon being accepted. This is strongly encouraged by the NJFCU.
  • Even lower payment possible with extended repayment plan
  • Competitive rate (what credit unions are known for) of 3.15% APR to 8.77% APR
  • Automatic payments may drop your interest rate by 0.25%.
  • Variable and fixed rates available

Cons

  • You must have graduated to be eligible.
  • All refinanced loans are subject to a 2.99% floor rate.
  • Credit will be pulled for both the borrower and the cosigner. This may ding your credit score about 5 points.
  • Not every school which issues loans is accepted. However, page one of the application reveals whether or not your school has been accepted. No need to complete the entire application just to find out.

The Fine Print

  • The minimum monthly payment is $50 – not out of the ordinary but something you should be aware of.
  • Your grades come into play. LendKey uses the Academic Credit Score to assign creditworthiness. There are many different methods used for creating a credit score. This one takes into account the student’s academic characteristics such as GPA, course of study, and class standing.
  • There are dollar amount parameters you must follow. The maximum you can borrow is $125,000 for undergraduate debt and $175,000 for graduate debt. Also, the minimum you can refinance is $7,500.

Who is an ideal fit for this program?

The NJFCU student loan refinancing program is for people who want to simplify their loans while also obtaining a single low interest rate. Before going through the process, visit the NJFCU website which offers suggestions as to whether or not you are a good candidate for refinancing.

The Ideal Candidate:

  • Applicants must have reliable gross monthly income of $2,000 to apply alone. To apply with a cosigner, applicants must have reliable gross monthly income (not specified) and cosigners must have reliable gross monthly income of $2,000.
  • The candidate must be a US Citizen or Permanent Resident.

You can also use this handy calculator to see if you can save money with refinancing by going with this institution.

What does a person need to qualify?

  • Be a member of the NJFCU.
  • The loans must have originated from an eligible school.
  • A person must provide proof of graduation.
  • A person must provide two most recent paystubs.
  • Depending on creditworthiness, a person may need a cosigner.

NJFCU

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Alternatives

Variety is the spice of life. There are alternatives to the North Jersey Federal Credit Union and LendKey partnership:

Garden Savings Federal Credit Union

This is one of the few local competitors of the North Jersey Federal Credit Union. Not many other New Jersey credit unions offer student loan. Its program is also radically different than NJFCU’s. First off, a person can only refinance up to $30,000. The minimum loan amount is $1,000. GSFCU also lends to anyone in the entire country.

With no application fee, you may want to see how its offer stacks up against that of the NJFCU refinance program.

Garden Savings FCU

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CommonBond

With variable rates as low as 1.94% APR, CommonBond deserves your attention. For this service, interest rates are all over the board. Some rates appear high, some low. It depends on what type of refinancing program you go with. It’s worth plugging in your numbers to see what CommonBond can do for you. As with all the programs being mentioned, there is no application fee.

CommonBond definitely stands out because it allows borrowers to refinance up to $220,000. However, it has rather strict underwriting and who is eligible for a loan based on school and degree (you must have a Masters). The organization also just does a ‘soft’ credit pull when considering your application. This does not affect your score. This may be helpful to know if you are trying to convince someone to cosign on your behalf. CommonBond assigns rates based on either you or your cosigners credit score (whoever’s is higher). However, once you’re ready to be assigned an interest rate, CommonBond will do a hard pull.

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SoFi

SoFi beats CommonBond’s lowest possible rate by .03%. Its website claims the organization refinances loans for as little as 1.90% APR. SoFi also offers something called Unemployment Protection. This means your payments will be paused, should you lose your job (but not if you quit). It’s worth noting that the minimum amount you can borrow is $10,000. It’s also interesting that with SoFi, the organization ‘occasionally accept’ cosigners. All the other student loan refinancing programs noted in this article have strongly encouraged cosigners.

One last convenient feature is a telephone number you can call to get a free consultation. It’s far less intimidating taking this route than jumping right into a loan application. For anyone looking to refinance, SoFi should be considered. After all, it’s hard to ignore a variable 1.90% APR!

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Final Thoughts

Do what’s best for your specific situation and comfort level. Don’t feel obligated to go with the local institution you’ve been loyal to in the past. Shop around. Often, the best rates either come from institutions which outsource the student loan refinancing or the online only organizations. ‘Going local’ is very hard to do with student loan refinancing.

If the application requirements are similar for each organization and the customer service is decent, go with whatever company can save you the most money. After all, that is probably the reason you’re refinancing.

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Understanding the Income-Contingent Repayment Plan (ICR)

Understanding the Income-Contingent Repayment Plan (ICR)

If you have federal student loans, then you will have to choose a repayment plan when it is time for you to start making payments. There are many repayment plans to choose from, including a standard (10 year) repayment plan, an extended (25 year) repayment plan, and three other repayment plans based on your income. One of the three income repayment plans is the Income-Contingent Repayment plan (ICR).

[Learn more about Income-Based Repayment and Pay As You Earn plans.]

What Is the Income-Contingent Repayment Plan?

The ICR plan is an income driven repayment plan that sets your payments to the lesser of: 1) 20% of your discretionary income, or 2) what you would pay on a repayment plan with a fixed payment over a 12 year period, adjusted according to your income. If you file taxes individually or you are married filing separate, only your income will count. If you file jointly, both incomes will count.

After 25 years, your remaining loan balance is forgiven. However, you will owe taxes on the forgiven amount.

What Makes You Eligible for the Income-Contingent Repayment Plan?

In order to qualify for ICR, you simply must be a borrower with eligible federal student loans. That’s it. There is no initial income eligibility requirement. All federal loans qualify to be on the ICR plan (private loans do not qualify).

Each year, you must provide your income and family size to qualify for ICR. Your payments may increase or decrease based on whether your income and/or family size increases or decreases. Under ICR, your payment is always based on your income even if that means your payments are higher than what they would be on the Standard, 10-year plan (this is different than other income driven plans, which keep your payments capped once your payments would exceed what they would be under the Standard plan).

Pros and Cons of the Income-Contingent Repayment Plan

ICR was the first income driven repayment plan (created in 1993), and it was great until the Income Based Repayment (IBR) plan was created in 2009. Now, the only benefit of ICR over IBR is when you cannot qualify for IBR. For example, certain loans, like Parent PLUS Loans, do not qualify for IBR but do qualify for ICR.

On the ICR plan, your payments are generally lower than if you were on the Standard, 10-year plan. However, they are generally higher than other income driven plans, which is why most people do not use the ICR plan. The benefit of ICR compared to a standard plan is that lower payments mean your loans will likely be more manageable. The downside of ICR is that you will have to pay taxes on any debt that is forgiven, and you will likely pay more in interest over time. In fact, your payments may not even cover the interest you owe.

Most people do not use ICR these days, but for people with low incomes and Parent PLUS loans, ICR is still a good option.

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How to Find All Your Student Loans

How to Find All Your Student Loans

Congratulations, you graduated college. Whether you graduated Summa Cum Laude or with the minimum GPA allowed by the university, well done either way you are a college graduate. As you begin to look for your first job, you start to realize that the student loans you took out to pay for tuition, room and board, spring break to Cabo, and the bar tabs throughout the years of school are coming due. The problem is you have no idea where they all are, the only memory you have of student loans is signing some piece of paper and picking up a check with your name on it on each semester. The bad news is, these student loans are not going away, the good news is we are going to help you find your student loans right now.

First off we need to know if you have a federal student loan or a private student loan. If you are not sure it’s a safe bet to start looking first for your Federal Student loan. If you are 100% sure you have a private loan and do not have any federal student loans to speak of, scroll down to the bottom of the article under Private Student Loan to find out more. If you have both Federal and Private student loans, I suggest you read the whole thing, I think you are going to need it.

Federal Student Loan

Start by going to the National Student Loan Data System, this can be found at https://www.nslds.ed.gov. This is a great resource and has all of your federal loans in one place. The federal government wants to know how much is owed so the website is all in order and relatively easy to use. According to the website, the National Student Loan Data System (NSLDS) is the U.S. Department of Education’s (ED’s) central database for student aid. NSLDS receives data from schools, guaranty agencies, the Direct Loan program, and other Department of ED programs. NSLDS Student Access provides a centralized, integrated view of Title IV loans and grants so that recipients of Title IV Aid can access and inquire about their Title IV loans and/or grant data.

Once at the website select the Financial Aid Review button to see what loans are currently outstanding.

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To do this you will need a Federal Student Aid or FSA username and password. This FSA ID will give you access to a number of different government websites including the following:

At this point in the process of finding your student loans you will need to create a FSA ID, it’s pretty simple and only requires a few items of personal information including your:

  • Social Security number
  • Date of Birth
  • First Name, Middle Initial, and Last Name

After this information is confirmed, you will be asked to enter your PIN, if you do not want to link your PIN to your FSA ID, then select CONTINUE WITHOUT PIN.  However according to the NSLDS Frequently Asked Questions:

Only PINs with a verified match with the Social Security Administration (SSA) will be allowed to associate their PIN with their FSA ID. By associating a verified PIN with your FSA ID, you do not have to go through the SSA match, which can take up to 1-3 days.

If you have a PIN, but it was not verified (meaning SSA did not have a good match), then you cannot associate that PIN with your FSA ID and your identifiers will be sent to SSA for verification.

You will have limited access to certain applications until your information is verified with the SSA.

Once we complete verification with the SSA (1-3 days), you will be able to use your FSA ID to access your personal information on Federal Student Aid websites.

NSLDS also gives an option to select Forgot Pin, this will bring you to a *Pin Challenge Question.  While this information may not seem familiar, you most likely have entered this information while filling out your FAFSA application. Once this challenge question is answered correctly the FSA ID application will continue allowing you to create a username and password.

Next up in the FSA ID application is 5 Challenge Questions and Answers that you will create to protect your account for extra security. The last two steps in the FSA ID application require you to verify and accept your information as correct, following this you will need to complete the email verification process by entering the secure code into the Secure Code field on your web page.

Congratulations, not only did you graduate college, you also set up a FSA ID to look at all of your student loans that you are going to pay back ASAP!

Once logged in you will be able to see the Aid Summary, which provides all the details you could have ever asked for including the:

  • Type of Loan
  • Loan Amount
  • Loan Date
  • Disbursed Amount
  • Canceled Amount
  • Outstanding Principal
  • Outstanding Interest

Each loan provides a hyperlink with more individual details for each loan including: Amounts and Dates, Disbursements and Dates, and Servicer/Lender/Guaranty Agency/ED Servicer Information, which is all the information you will need to get started making payments. All of your federal student loans will be in one place. Now you just have to figure out a way to pay them all.

[Check out details on forgiveness programs and income-based repayment programs.]

Private Student Loans

The problem that you will run into with private student loans is it’s more difficult to find out the loan servicer. The federal student loans have a national website dedicated to them, private student loans will need a little more hunting and gathering.

[We Recommend Reading: 7 Things You Need to Know About Private Student Loans]

The first place you can start is with your financial aid office at your college or university, they may be able to lead you in the right direction. Although if you have attended another university during your college career it might be a little more difficult going with this strategy.

The best way to find your student loan servicer is through your credit report. The credit report will have any outstanding debt under your Social Security number, which will include private and federal student loans.

The best thing you can do is check your credit reports at all three credit bureaus:  Experian, Transunion, and Equifax. You can obtain a free copy of your credit report from each of the credit bureaus once every 12 months, through www.annualcreditreport.com. This will not provide you with your credit score, but it will show you the information needed to find your private student loan provider and more.

Congratulations are in order if you followed the steps outlined here because you are on your way to locating your student loans and will be paying them off in no time. Good luck!

Interested in refinancing your student loans? Check out our comparison table

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Understanding the Pay As You Earn Plan (PAYE)

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If you have federal student loans, then you will have to choose a repayment plan when it is time for you to start making payments on your loans. There are many repayment plans to choose from, including a standard (10 year) repayment plan, an extended (25 year) repayment plan, and one of three repayment plans based on your income. One of these three income repayment plans is the Pay As You Earn plan (PAYE).

[Learn about Income-Based Repayment and Income Contingent Repayment Plans.]

What Is the Income Pay As You Earn Plan?

The PAYE plan was passed by President Obama on December 21, 2012, and is the newest income driven repayment plan. Under the PAYE plan, your student loan payments are capped at 10% of your discretionary income.

If you file taxes individually or you are married filing separate, only your income will count. If you file jointly, both incomes will count.

After 20 years, your remaining loan balance is forgiven. However, you will owe taxes on the forgiven amount.

Direct Loans and Direct PLUS loans qualify for PAYE, but private loans and Parent PLUS loans do not qualify.

What Makes You Eligible for the Pay As You Earn Plan?

In order to qualify for the PAYE plan, you must show a “partial financial hardship”. You must be a new borrower as of October 1, 2007 and you must have received a disbursement on or after October 1, 2011.

To show a partial financial hardship, you must show that the annual amount due on your loans exceeds 10% of the difference between your adjusted gross income (AGI) and 150% of the poverty line for your family size in the state you live.

Generally, people who qualify for PAYE will have borrowed for the first time in the 2008-2009 school year and will have borrowed after 2011 (basically, only new borrowers qualify for PAYE). This means that people who were freshmen in college in 2008 will qualify, as well as people who were sophomores, juniors, or seniors in 2008-2009 and then went to graduate school and took out federal loans.

Considering the limiting date restrictions, President Obama announced that the PAYE plan will be extended to borrowers who took out loans before October 1, 2007 in late 2015.

Pros and Cons of the Pay As You Earn Plan

PAYE is the most generous income driven plan. Like other income driven plans, on the PAYE plan, your payments are lower than if you were on a traditional plan. Lower payments mean that your loans will be more manageable, giving you more money to live on.

The downside of the PAYE plan is that it is only available to new borrowers (at least for right now). Additionally, you will pay taxes on any debt that is forgiven, and you will likely pay more in interest than if you were on a standard plan.

The fact that PAYE is a relatively new repayment plan that is set to change later this year shows how the government is still making strides to help student loan borrowers in ways that it hasn’t before. It remains to be seen how PAYE will benefit borrowers over time.

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Consumer Watchdog: Why You Should Make Bi-Weekly Student Loan Payments

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Making a monthly payment to chip away at student loan debt can seem as if you’re merely throwing money into the abyss. Those a few hundred dollars a month towards tens-of-thousands of dollars in debt (with interest attached) can take a decade or more to eliminate. But don’t start to despair quite yet. Yes, it can feel like an overwhelming amount of debt – but there is a small tweak you can make to your repayment plan to shave off time and interest owed.

This glorious student loan repayment hack is as simple as dividing in two: making bi-weekly student loan payments.

What are Bi-Weekly Payments?

Let’s say you have $30,000 in student loans at a 4% interest rate. You’re making a monthly payment of $225.

At this rate, it will take you 177 months (nearly 15 years) and cost $9,780.96 in interest to repay your loans.

But instead of making one monthly payment of $225, you can split your payment into bi-weekly payments of $112.50. Just divide your monthly payment in half. You’re still paying $225 a month, but this small tweak will save you $1,175.52 and shave 18 months off your student loan repayment. Both federal and private lenders usually allow for the bi-weekly payment structure.

Why Bi-Monthly Payments Work

So how does this financial miracle happen? Simple math of course.

The year is made of 52 weeks, so you’ll be making 26 of those bi-weekly (half) payments. This means you actually end up making 13 full payments a year instead of 12.

Before you freak out about how you can afford to make 13 payments instead of 12 keep in mind this payment structure probably applies to your job too. If you get paid bi-weekly, then there are 2 months a year you get paid 3 times.

Other Ways to Reduce Time and Money Spent on Student Loans

If you get a bonus or unanticipated money, never hesitate to throw more money towards your loans to help chip away the principal balance. Just make sure the money is being applied to the current principal debt and not future bills.

We’d also recommend you round up. If your minimum payment each month is $225, shoot for paying $250 per month. Adding 25 extra dollars per month will add up quicker than you think, especially if you’re paying bi-weekly.

One Potential Glitch to Keep in Mind

A bi-monthly payment structure can save you a lot of money, but you have to be sure to execute it correctly.

Both your half payments must make it to your student loan provider before the due date. If you fail to submit the payment on time, it could result in a penalty for paying below the minimum required.

A simple way to keep this process going smoothly would be to set up auto-pay. Just make sure that you readily have funds available in your checking account to cover the payment when it’s due. A best practice would be to time it with your bi-weekly paycheck getting deposited.

Looking to Refinance or Consolidate?

Dealing with a bi-weekly payment on just one student loan would certainly be easier than doing it for multiple providers. If you’re considering consolidating or refinancing your student loans, then be sure to check out our student loan refinance table. You should always do your due diligence and evaluate potential rates, benefits offered (like unemployment protection) and the perks you may lose by consolidation or refinancing. Keep in mind, refinancing federal loans comes with certain consequences like losing eligibility for forgiveness or income-based repayment programs.

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Crowdfunding Your Student Loan Debt

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While the standard repayment plan for federal student loans puts borrowers on a 10-year timeline to pay off their debt, research shows a far more drawn out repayment reality – with the average bachelor’s degree holder needing 21 years to pay off his or her loans.

Meanwhile, actor/director Zach Braff, who raked in enough per episode of the hit series “Scrubs” to cover the entire cost of tuition at a four-year private college, raised two million dollars in a mere 48 hours for his passion project, “Wish I Was Here” using Kickstarter, a crowdfunding platform.

College grads struggling to pay their way out of debt, deferring their own passion projects just to keep up with payments, are now turning to similar platforms. With the rate of student loan delinquencies rising to 11.3 percent in the final quarter of 2014, the number of borrowers rising 92 percent in the last ten years, and the average student loan balance up 74 percent, relief, in whatever form it takes, is welcome.

While policy makers argue over the sustainability of the current model of higher education, graduates are taking matters into their own hands, implementing new strategies to avoid default and the negative consequences that follow.

Understanding Crowdfunding

Crowdfunding is the practice of financing a project or cause through contributions, often small, from a large number of people. Typically, funds are raised through online platforms, giving individuals the opportunity to reach a wide audience and connect with those beyond their immediate network. While crowdfunding initially gained popularity funding entrepreneurial and artistic endeavors, offshoots have come to specialize in backing everything from charitable causes to personal goals to education.

Crowdfunding platforms specific to student loan debt are still fairly new, but the practice of asking for outside assistance in reducing personal education costs is on the rise. GoFundMe, a crowdfunding site that allows individuals to fundraise for various personal causes, reports the number of campaigns specifically mentioning “tuition”, rising 4,547 percent from 2011 to 2014.

It should be noted however, that not all crowdfunding platforms operate using the same model. Just like choosing an investment platform or a bank account, it’s important to fully understand the fine print before signing up.

Popular Crowdfunding Platforms for Student Loan Debt

Piglt, founded in 2012, is a crowdfunding platform specifically for education-related causes, be they on the front end- raising money for schooling costs – or after the fact- tackling student loan debt. At the end of a campaign, money raised goes directly to the loan servicer or educational institution.

Fees: Piglt takes a cut of 5 percent for successful campaigns and 8 percent for those that fall short of funding goals (though individuals raising money for their debt still benefit from whatever is raised, even if they fall short).

Zerobound, founded in 2012, is a crowdfunding platform for student loan debt that operates on a barter-like system. Individuals volunteer their skills and education in exchange for payment assistance from organizations and sponsors to tackle their loan balances.

Fees: In addition to the 5 percent cut Zerobound takes on successful campaigns and the 8 percent they take on those that fall short, their payment processor, Stripe, takes an additional 0.29 percent processing fee and a 0.30 fee on all transactions.

GoFundMe, founded in 2010, is a general crowdfunding site, but immensely popular in funding personal education costs. The site reports that in 2014, it hosted almost 107,000 education-related campaigns grossing more than $13 million.

Fees: GoFundMe charges a fee of 7.9 percent and 0.30 per donation.

Successfully Crowdfunding Student Loan Debt

After choosing a platform and launching a campaign, grads should be prepared to follow up with marketing and outreach efforts to build interest and circulate their campaign page beyond their immediate circles of friends and family.

Only 44 percent of all campaigns created through Kickstarter, one of the top crowdfunding sites, get fully funded. To enjoy the benefit of a successful campaign, grads can implement the following strategies.

Develop a Platform

Create an online presence beyond your campaign page. A blog, videos or hashtag associated with your fundraising efforts can draw increased interest, engaging the community and increasing your chances of getting funded.

Set a Realistic Goal

It might seem counterintuitive, but if you’re goal seems too far out of reach, people may be less inclined to contribute. Having a strong support group of core donors ready to give in the first week of the campaign can illustrate early success, breeding subsequent success.

Follow Up

Consistency is key. Track progress of the campaign and share updates often. The more reason you give people to return to your page, the more chances you get to have them contribute while they’re there.

Create a Sense of Urgency

Too long a timeline will give people an excuse to hold off on contributing, which too often results in not contributing at all. Limit your campaign to four to six weeks.

Crowdfunding for Good

Whatever your opinions on crowdfunding, it is an attractive alternative to twenty years of interest bearing student loan payments. Not only does crowdfunding student loan debt give grads the opportunity to start their careers in a better place, it gives community members a chance to give back to the causes and individuals they believe in too.

Not everyone may be on board with crowdfunding just yet, but using generosity and community support to help grads escape student debt certainly seems more practical than other gifting traditions… like bridal registries.

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Understanding the Income-Based Repayment Plan (IBR)

Understanding the Income-Based Repayment Plan (IBR)

If you have federal student loans, then you will have to choose a repayment plan when it is time for you to start paying back your loans. There are many repayment plans to choose from, including a standard, 10 year, repayment plan, an extended, 25 year, repayment plan, and three repayment plans based on your income. One of the three income repayment plans is the Income-Based Repayment plan (IBR).

[Learn more about about Pay As You Earn and Income Contingent Repayment Plans]

What Is the Income-Based Repayment Plan?

The traditional IBR plan is an income driven repayment plan that caps your payments at 15% of your discretionary income, but never more than what your payments would be on the Standard, 10 year, plan. If you file taxes individually or you are married filing separate, only your income will count. If you file jointly, both incomes will count.

After 25 years, your remaining loan balance is forgiven. However, you will owe taxes on the forgiven amount.

There is a new IBR plan for borrowers who took out their first student loan on or after July 1, 2014 (i.e., you must not have any student loan debt from before July 1, 2014). Under the new IBR plan, your payments are equal to 10% of your discretionary income, and your loans are forgiven after 20 years (not 25). Just like the traditional IBR plan, you will have to pay taxes on any forgiven amount.

Federal Direct Loans and Direct PLUS loans qualify for both IBR plans, but private loans and Parent PLUS loans do not qualify.

What Makes You Eligible for the Income-Based Repayment Plan?

In order to qualify for both the new and old IBR plans, you must show a “partial financial hardship”. To show a partial finance hardship, you must show that the annual loan amount due exceeds 15% of the difference between your adjusted gross income (AGI) and 150% of the poverty line for your family size in your state.

Additionally, you must provide your income and family size each year to qualify for an IBR plan. Your payments may increase or decrease based on whether your income and / or family size increases or decreases.

If your income increases years after you qualified for IBR, you do not lose your eligibility under IBR. You can continue to make payments under IBR even if your income later exceeds your debt (your payments will just be higher).

Pros and Cons of the Income-Based Repayment Plan

The obvious benefit of an IBR plan (like other income driven plans) is that your payments are based on your income, which makes them lower than if you were on a traditional plan. Lower payments mean that your loans will be more manageable, affording you more money to live on every month. The downside of an IBR plan is two-fold: first, you will have to pay taxes on any debt that is forgiven, and second, you will likely pay more in interest.

To date, IBR is the most popular income driven repayment plan because of the substantive benefits of being on the plan and because of the requirements to qualify.

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CordiaGrad Student Loan Refinance Review

CordiaGrad Student Loan Refinance Review

CordiaGrad provides serious professionals with a Bachelor’s degrees or higher a way to secure lower interest rates on student loan debt through refinancing. If you’re considering a refinance, CordiaGrad has some of the lowest rates around for both fixed and variable loans.

Loan Refinancing Details

CordiaGrad will refinance private, Federal and Parent PLUS loans. (Caveat: You will lose Federal loan benefits like loan forgiveness and income-based repayment once you refinance with a private lender. Make sure you weigh the benefits of a Federal loan against the perks of a low interest rate before making a decision to refinance.)

The minimum amount you can borrow from CordiaGrad is $30,000 and the maximum is $350,000. Loan terms are available for 5, 8 and 12 years. Rates at CordiaGrad are determined by education level. Here’s the interest breakdown:

Undergraduate Degrees

  • Fixed APR – 4.15% to 6.25%
  • Variable APR – 2.90% to 4.95%

Graduate or Advanced Degrees

  • Fixed APR – 3.95% to 5.90%
  • Variable APR – 2.75% to 4.40%

Each of these rate ranges include a 0.50% discount for using autopay. To find out the loan interest rate you qualify for, head over to the CordiaGrad savings calculator. This calculator will give you an estimate based on the personal information you provide and doesn’t require a pull on your credit report.

CordiaGrad Student Loan Refinance Qualifications

You must be a U.S. citizen, permanent resident or resident alien to apply for a loan. In addition, the minimum age requirement is 23 years old. In terms of creditworthiness and income, CordiaGrad has the following standards:

  • Before applying you must be employed for at least two years.
  • You must show proof that you make at least $42,000 per year (or $25,000 if you have a co-signer).
  • You must have a strong credit history.
  • You must have a credit score of at least 700 if you’re applying by yourself. CordiaGrad will allow a credit score of 670 if you apply with a co-signer who has a score over 720.

Even if you qualify on your own, using a co-signer may help you get a better rate. CordiaGrad doesn’t allow for co-signer release. If a co-signer commits to signing your loan, he or she is in it for the long haul.

The Inside Scoop on Fees

If you take out a CordiaGrad loan, you’ll benefit from no origination or prepayment fees. The one fee you may run into is the $25 late fee that’s charged if your payment is received 30 days late. A late fee like this one is pretty standard across the board with all student loan refinances.

The Pros and Cons

CordiaGrad will refinance Parent PLUS loans which is fairly unique in the student loan refinance market. And the fixed and variable rates at CordiaGrad are very reasonable.

Customer service is responsive and there’s a convenient chat feature on the website that makes interacting with its representatives a breeze. In regards to benefits, CordiaGrad offers a 9-month forbearance period for unemployment which may come in handy.

A downside to refinancing with CordiaGrad is that its maximum loan term is just 12 years. It does offer attractive rates and a high loan cap at $350,000, but the loan terms may not be ideal if you have a large amount of student loan debt (unless you can make sizable monthly payments).

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Alternative Student Loan Refinances

If you’re looking for a refinance that will allow you to borrow a large sum for a longer period, look to DRB or SoFi. These refinances, and others, have comparable interest.

DRB* offers fixed rates from 3.50% to 6.25% APR and variable rates from 1.90% to 3.98% APR which includes a discount for autopay. It will fund up to 100% of your outstanding private and Federal loans. It also allows you to refinance Parent PLUS loans. Loan terms are available for 5, 10, 15 and 20 years. This refinance includes unemployment assistance similar to CordiaGrad for short-term economic hardship.

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SoFi* has variable rates from 1.90% to 5.19% APR and fixed rates from 3.50% to 7.24% APR, which also includes a discount for autopay. Loan terms are available for 5, 10, 15 and 20 years. There’s no limit to how much you can borrow at SoFi and you can refinance both Federal and private student loans. A loan with SoFi also includes free unemployment insurance which will cover you if you happen to be out of a job for a reason other than quitting.

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Who will benefit the most from this refinance?

The CordiaGrad refinance will benefit working professionals who have debt they can repay comfortably within 12 years. The low interest rates offered will allow you to save significant money if you’re currently paying a student loan with high interest.

Ultimately, applicants with a decent income, high credit score, strong credit history and low debt-to-income ratio will be approved by CordiaGrad. Before making any decisions, shop around for the best refinance terms for your unique situation.

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Consumer Watchdog: Student Loan Repayment Scams

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Student loans are one of the most frustrating and often confusing payments to handle. 22-year-old recent graduates who might barely know how to balance a checkbook are expected to suddenly know how to find all the federal programs geared towards helping with repayment (like income-Based repayment and forgiveness) and how to keep track of multiple loans across different vendors that could be handed off to another owner at any time. Does your head hurt yet? Filing your own taxes is often much simpler than getting the hang of student loans.

So, it’s no surprise that people are more than happy to pay someone else to handle the stress of student loans, which is why student loan repayment scams exist.

But you don’t have to pay anyone for help getting your student loan situation in order. In fact, you shouldn’t be wasting the money you could be putting towards getting debt free.

You should also be wary of any phone calls offering to help you gain access to a new federal program focused on student loan forgiveness. These are often predatory scam calls.

Get Help for Free

It’s important to note that most of the free help is centered on federal student loans. We’ll discuss private student loans later in this article.

There are several ways you can receive assistance on your federal student loans.

  • Use income-based plans to lower your monthly payments

These repayment plans include Income-Based Repayment (IBR), Pay As You Earn (PAYE) and Income-Contingent Repayment (ICR). Each plan works a little differently and not everyone will be eligible based on when you took out loans and how much you make. The programs all help reduce payments in accordance with your current income. As you earn more, you pay more on your loans. The programs all allow for remaining federal student loans to be discharged after 20 – 25 years of consistent payments.

  • Consolidate your loans

Consolidating your loans into one easy payment could help remove some of the stress from your repayment process. You can consolidate federal loans into a Direct Consolidation Loan. There is no fee for this process. Just be aware you could lose out on potential benefits on your existing loans if you consolidate.

  • See if you’re eligible for forgiveness programs

There are a myriad of forgiveness programs for federal student loans. Most are focused on your career. For example, teachers may be eligible for the Teacher Loan Forgiveness program by working at a designated elementary or secondary school for five consecutive years. You could earn between $5,000 and $17,500 depending on your subject. Doctors, lawyers and other specialized professions can be eligible for certain forgiveness programs. There are also volunteer programs and forgiveness for military personnel.

  • Rehabilitate yourself by getting out of default

If your loan ends up in default, you’re far more likely to be on the receiving end of scam calls about fixing your student loans or being eligible for a phony forgiveness program. Your loans need to be in good standing in order to be eligible for any forgiveness programs or refinancing. Work with your student loan servicer to get out of default. You can reach out to student loan counseling services, but look for non-profit organizations offering free consultations.

You can track your federal loans via the National Student Loan Data System .

[Miss a Student Loan Payment? Where to Find Help and What Happens Next]

Need Help with Private Loans?

Unfortunately, private loans are not as flexible as federal loans. You will not have the same options for Income-based repayment programs nor forgiveness programs.

However, you should always communicate with your loan provider if you feel you’ll have difficulty making a payment. There is no discharging student loans in bankruptcy, so burying your head in the sand and letting the situation build up will just create more pain. You should also see if you’re eligible for student loan modification.

You could consider refinancing your private student loans to another lender that may offer better interest rates and perks like forbearance in case you lose your job and can’t afford to make payments for a few months.

SoFi* offers unemployment protection for up to 12 months with fixed refinance rates as low as 3.50% and variable rates as low as 1.90% (with autopay).

Earnest* offers the ability to skip one payment a year without penalty (you make up for it over time), which certainly isn’t a long-term fix but could give you a little breathing room to figure out your financial situation.

[Sample Goodwill Letter to Remove a Late Student Loan Payment from Your Credit Report]

Already the Victim of a Scam?

You may have already become a victim of a student loan scam. If this is the case, you should report your situation to the Consumer Financial Protection Bureau.

Issues with Federal student loan servicers can be reported to the Federal Student Aid Ombudsman Group.

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6 Lowest Fixed Student Loan Refinance Rates

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Do you want to refinance your student loans? You’re in luck.

The student loan refinance market has expanded to include many solutions for graduates who are stuck with high interest rates. (We’ve even found 19 lenders and counting that currently offer refinancing, take a look at the entire list here!)

When you shop around for a lender you’ll notice that most offer variable and fixed interest rates. There’s a big difference between the two. Variable interest fluctuates over time while fixed interest stays the same throughout the life of your loan.

We suggest you choose a fixed interest rate unless you can pay off your debt very quickly. Otherwise, you risk an increase in interest while you rebarpay the loan. Thankfully, there are lenders that offer very competitive fixed rates. Here are the lowest rates available.

SoFi

SoFi offers refinancing and consolidation for both Federal and private loans with fixed rates from 3.50% to 7.24% APR. In order to get these low rates, you must sign up for autopay. Loan terms are available up to 20 years. The minimum loan amount is $10,000, but may be higher in some states due to legal requirements. The maximum loan amount you can obtain from SoFi is the balance of your qualifying student loans.

You must have graduated from an eligible Title IV accredited university or graduate program to be eligible for SoFi refinancing. Co-signers are accepted on a case-by-case basis. Both you and your co-signer must be U.S. citizens or permanent residents to apply. However, it does not offer co-signer release. SoFi has no application or origination fees plus no penalties for prepayment.

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Earnest

Earnest will refinance private and Federal loans with fixed rates from 3.50% to 7.25% APR if you sign up for auto-pay. Terms are available for 5, 10, 15 and 20 years. The minimum loan amount you can refinance is $5,000 and the maximum is $400,000. Earnest will accept co-signers to improve your chances of securing a low rate, but it’s not required.

In order to qualify, you must be a U.S. citizen or permanent resident. Your debt also has to be from a Title IV accredited school. You must live in CA, CO, CT, FL, GA, IL, MD, MA, MI, MN, NJ, NY, NC, OH, OR, PA, TN, TX, UT, WA, Washington D.C., or WI. If you don’t live in one of these states (or district), Earnest suggests you still apply so you can receive a notification once loans become available in your area. This refinance has no origination fees or prepayment penalties.

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DRB

DRB offers fixed interest at 3.50% to 6.25% APR if you sign up to make automatic payments from a DRB checking account. According to the website, you can easily open a checking account to receive the interest discount during the loan closing process. Loan terms are available up to 20 years. The minimum loan amount is $5,000 and DRB will fund up to 100% of outstanding private and Federal student loans.

You must be a working professional with a bachelor’s or graduate degree to be eligible. You must also be a U.S. citizen or permanent resident. A co-signer isn’t required, but you’ll likely need a co-signer to get approved if your gross annual income is less than $50,000. This refinance has no origination fee nor penalty for prepayment.

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CommonBond

CommonBond offers fixed interest from 3.74% to 6.74% on student loan refinances if you sign up for autopay. Terms are available for 5, 10, 15 and 20 years. With CommonBond you can refinance up to $220,000.

You must have obtained a degree from one of the graduate programs on the CommonBond eligibility list to qualify. Find out if your school is in the network on the CommonBond refinance FAQs page. Applicants must be U.S. citizens or permanent residents. A cosigner isn’t required, but if you don’t meet the underwriting requirements you can reapply with one. CommonBond charges no fees for application or origination. There’s also no penalty for prepayment of the loan.

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Citizens Bank

Citizens Bank will refinance both undergraduate and graduate loans. APR ranges from 4.74% to 8.90%. Loans are available from $10,000 to $170,000 depending on your education. Citizens Bank offers up to 0.50% in interest rate reductions if you sign up for autopay or have a qualifying account with Citizens Bank before applying. Terms are available for 5, 10, 15 and 20 years.

You must be a U.S. citizen, permanent resident or resident alien to qualify. A co-signer isn’t required but if you don’t have a strong credit history a co-signer may increase your chances of getting a low rate. Co-signers can apply for release if 36 on-time, consecutive payments are made. However, the borrower must meet certain credit eligibility requirements on their own at the time of release. Citizens Bank doesn’t charge application, disbursement or origination fees. There’s also no prepayment penalty.

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iHELP

iHELP offers discounted fixed rates at 6.22% to 7.99% APR if you have a co-signer. Both private and Federal loans are eligible for refinance. The minimum loan amount is $25,000. The maximum loan amount is $100,000 for an undergraduate degree and $150,000 for a graduate degree.

Both you and your co-signer must be U.S. citizens or permanent residents to apply. Your co-signer may be eligible for release after 24 months of on-time payments if you meet credit requirements when he or she is released. You must have graduated from one of the iHELP eligible schools to receive a loan. iHELP charges a 2% supplemental fee upon loan disbursement. This is the only refinance to make the roundup that charges this type of fee.

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Education Success

Until recently, Education Success also offered a student loan refinance. It’s not available at this time because the original lender could no longer provide funding. Fixed rates were available as low as 4.99% APR for the first 1 to 10 years and variable interest thereafter from 5.24% to 8.24%. The minimum amount you could refinance was $15,000 depending on state requirements.

A loan with fixed and variable interest like this one is worth considering if you can pay off your debt within the fixed interest period. We’ll update this post if and when the refinance at Education Success becomes available.

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Is a refinance the right choice for you?

A refinance can give you a better interest rate and save you money in the long run, but there’s one factor you must keep in mind. A refinanced Federal loan may no longer qualify for Federal loan benefits like loan forgiveness, income-based repayment, forbearance or deferment. These are invaluable benefits to fall back on if you run into financial trouble in the future, so make the decision to refinance carefully.

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The Dangers of Co-Signing a Loan

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When you first step out into the real world it is hard to ignore the marketing of what you need or want in your new life. You’ll find advertisements for colleges, credit cards and which car to buy are about as normal as a McDonald’s advertisement. Because money is currently not growing on trees, you may need to borrow some to make life happen. If you have ever applied for a loan before you received your first job or while in college, the application may have asked for a co-applicant or co-signer. The two terms may sound similar, but the obligations of a co-signer and co-applicant are different.

In a co-applicant the individual is attempting to get a joint loan with someone else, an example would be obtaining a mortgage. In most cases when buying a home, both incomes will be needed to obtain the loan and will feature both names on the mortgage loan and deed.

A co-signer is usually brought on if the applicant lacks income or good credit or for that matter any credit at all. Assuming the co-signer’s credit history meets the lender’s requirements, the co-signer will act as a default if the borrower or individual receiving the loan does not make payments per the loan agreement. A co-signer is required if the bank is worried you may not pay back the loan. To reduce the risk it requires someone who has a good credit history, income, and demonstrated they have paid their bills on time. So that doesn’t sound so bad, where’s the danger?

Who’s Responsible?

Co-signers are common with student loans as an 18 year old rarely has built a strong credit report with a history of good behavior. Both the student borrower and the cosigner are equally responsible for paying back the loan. Some private student loans offer the student loan borrower the option to release the cosigner, but this is usually at the financial institutions discretion after a certain amount of consecutive monthly payments are made on time and the borrower/student has meet certain credit requirements.

Even in the event the borrower has reached the consecutive monthly payments made on time the Consumer Financial Protection Bureau (CFPB) has received complaints that borrowers have experienced a challenge getting the co-signer released from a loan. One particular complaint noted that even after making the required 28-on time payments, and then finding out it was 36 on-time payments, to only be met with a policy change from the lender that requires 48 on-time payments before applying to release the co-signer.

Remember that co-signing a loan means the obligation is shown on your credit report and thus affects your credit score. So if little Johnny forgets a payment because he failed to set up automatic payments or is having trouble making the payments on time, then this also can negatively affect your credit score as the co-signer.

It’s also important to remember, if you co-sign for a $20,000 student loan during little Johnny’s freshman year in college, this loan has 4 years to grow and accumulate interest. If the borrower defaults on the payments, then you are responsible for paying back your new student loan.

What’s the Worst That Could Happen?

Any time you co-sign for a loan, it is in your best interest to consider that you are fully responsible for paying back the full amount of the loan, because in the eyes of the law and the financial institution you are. It could even be the case if the borrower passes away before repaying the debt.

In the unfortunate case the borrower passes away, Federal student loans are discharged after the death of the borrower.

Under the same circumstances with private loans, in many cases the co-signer is now fully responsible for the balance of the loan; this also works the other way as well if the co-signer passes away.

According to a April 2014 mid-year student loan update from the Consumer Financial Protection Bureau, from 2008 to 2011 there was a more than a 20% uptick in private loans being co-signed. In 2008 67% of private loans were co-signed often by a parent or grandparent, but by 2011, over 90% of loans were co-signed.

One scary highlight from the CFPB report found that borrowers  are discovering when a co-signer passes away, like a parent or grandparent, an automatic default occurs. This default can occur even if the borrower is in good standing and current on the loan. I’m sure you can imagine the confusion when borrowers received notices to pay the loan in full.

It never really occurred to me when I received my private student loan that if the borrower or co-signer of the loan were to pass away it could result in financial distress. If you are already in a private student loan with a co-signer, then it may be a good time to consider having life insurance on one another as a source of funds to pay off the loan in the event of a death.

Private Student Loans: My Story

I was accepted to study in Rome, Italy, but unfortunately I did not attempt to obtain anything more than Federal student loan funding for my study abroad trip, so I was forced to cancel. I told myself I would pursue my dream of studying in another country at any cost. I found a study abroad program in London and I was accepted. However I needed extra finances and more than the Federal government could spare. I started applying for private student loans, the university I planned to attend was a private university, which cost four times more than current in-state tuition. Because I did not have much of a credit score or any income to report, I asked my parents if they would co-sign to receive the funding I needed to study abroad.

After a short online application process with my parents, we were approved and the loan did exactly what I needed at the time; it helped pay for my tuition, room and board, and whatever other shenanigans London and the surrounding European countries had to offer. At that exact moment I could not have been happier, I was going to London and studying abroad in another country. But I didn’t focus on the fact my lender expected me to pay the loan back in full plus interest.

While I enjoyed my time in London, my private student loan put financial stress on myself and my parents. I never defaulted but I remember the pressure I felt to make sure it was never the financial responsibility of my parents. I couldn’t imagine putting my parents through a financial hardship all because I wanted to study abroad while I was in college. I made a commitment to pay off my private student loan first for a number of reasons, but most of all it was to make sure my family was not a story in the news that resulted in a son defaulting on a loan to only hurt my family’s financial situation.

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7 Things You Need to Know About Private Student Loans

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When you realize you will have to take out loans to finance your college education, your best bet is to take out Federal loans because you are afforded protections that you are not otherwise granted with private loans. But the best case scenario is not what always happens. If you do end up taking out private student loans, there are seven things you need to know to handle your student loan debt.

1. “Private Student Loans” Defined

Private institutions such as a bank, credit union or other type of lender are responsibly for funding private loans. This is different than Federal student loans, which are backed by the Federal Government of the United States. With private loans, the lender (the entity that extended you the loan) sets the terms of the loans, including the interest rate (based on your credit), loan limit, repayment options, etc.

Whatever you can do to learn about your repayment options and restrictions (including a prepayment penalty) prior to taking out your student loans, the better off you will be because you can plan accordingly.

2. How Do You Know if You Have Private Student Loans?

If there are any gaps in funding after you receive your financial aid package from your university or college, you will have to fill them in with private loans. If you do not remember whether you did this during college, you can simply log into your student loan account and look at the loans. The loans will either be categorized as federal or private. Alternatively, you can call your loan servicer (Navient or Sallie Mae, for example) and ask the provider whether you have any private loans in your account. A final way to know whether you have any private loans in your name is to get your credit report (which is a good idea to do annually, anyways). All of your loans will appear on your credit report, and you will be able to identify which are private based on the name of the loan and service provider.

You can get copies of your credit report from all three credit bureaus by going to annualcreditreport.com

3. Get Life Insurance If You Have a Cosigner

It is not uncommon to need a cosigner in order to get a private student loan because the lender is looking at your credit to determine whether you qualify. If this is the case for you, then you should consider life insurance that covers the loan amount. Here’s why: if you die, your private loans are not forgiven. This means that if you die, the cosigner on your private loans will still have to pay off your debt. There is no hardship requirement or loan forgiveness with private loans like there is with federal loans. (Often these stories make headlines – remember the story of the 27-year-old nurse who died and whose father was on the hook for a whopping $200,000 in student loan debt after he could not keep up with the payments? These stories are horrible, yet not uncommon.) If you have a cosigner on your private loans, be sure to read the fine print of your loan agreement. If the loans are not forgivable upon death, then you need to get life insurance in order to protect your cosigner if you die before the loans are repaid.

4. Repayment Options for Private Loans are More Restrictive than Federal Loans

Federal loans come with mandatory protections, including income-based plans and forbearance and deferment options, based on your circumstances. This is not the case for private loans. All repayment options are up to the lender, and private student loan lenders usually do not offer these flexible repayment options. That means you will be stuck with whatever the provider offers – possibly a standard, ten-year repayment plan or a longer, twenty-five year repayment plan. The point is that you are stuck with what they offer.

5. Pay Off Private Loans First Because of the Inherent Risk

If you have private student loans and Federal loans, you may be tempted to repay the loans by the highest interest rate first. This makes sense, mathematically speaking. However, it ignores the inherent risk of private student loans. If you have private student loans and something happens to you where you can no longer afford the payments, you may not be able to do anything about it if the lender is not willing to work with you. Conversely, with Federal loans, you have options based on your circumstances. This means your private loans are inherently riskier than your Federal loans. Because of the greater risk, you should prioritize repaying your private student loans, even if the private loans have a lower interest rate. This will reduce the risk you have associated with your student loan debt and put you in a better position financially.

6. Refinancing Your Federal Loans Turns Them into Private Loans

There is a lot of chatter lately about refinancing Federal student loans to get lower interest rates. This is especially the case for people who took out high interest rate loans for graduate programs, law school, and medical school. If you have Federal student loans with a 6.5%-8.5% interest rate, you can go through a company like SoFi*, Earnest* or CommonBond* and refinance these loans to get a lower interest rate (just like you would if you were refinancing a mortgage on a house). What you need to know about refinancing Federal student loans is that you are turning your federal loans (with lots of protections) into private loans (with little protections). This may not be a good move because it increases your risk, even if it does lower your interest rate. 

7. Private student loans are not dischargeable in bankruptcy 

Private loans are generally not dischargeable in bankruptcy. This is not different than Federal loans, but it is worth noting because of the inherent risk associated with student loans in general. This means that if you have to claim bankruptcy, you will still owe your student loan debt afterwards. The only exception to this rule is a finding of undue hardship that is so great that you have no chance of ever increasing your income. But barring extreme circumstances, this means that you are stuck repaying your student loans, no matter what.

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College Students and Recent Grads, Life Events

The Danger in Outsourcing Your Finances

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Miles Teller, the 28-year-old star of the 2014 hit movie “Whiplash”, has a net worth estimated around $2 million. With two major franchise films in the works for 2015, there doesn’t appear to be any imminent threat to the young star’s cash flow. And yet, in a recent interview with Vulture, Teller admits to not having paid off his NYU student loans. His reasoning- “My business manager says the interest is so low, there’s no sense in paying them off.”

While investing in place of debt payoff may make sense when investment returns beat out interest payments, I wonder whether Teller has seen the statements verifying such returns. According to the U.S. Department of Education, a direct unsubsidized loan taken out between 2006-2013 runs at 6.8 percent interest. With the market performance of the last few years, a return greater than 6.8 percent is actually quite feasible, but is it sustainable and perhaps, more importantly- is Teller asking himself these questions?

The people we trust with our money, “business managers” or otherwise, may not necessarily have our best interests at heart. In the case of Teller, his manager may get a commission on investments, making them a more attractive option for him personally than debt pay off, regardless of the relative costs and returns for Teller.

Money managers, advisors, websites, banks, etc., all stand to benefit from the choices we make with our finances. While we’ll ultimately choose someone to store, grow and help manage our funds- never should we surrender complete control of our finances or agree to a strategy with blind trust.

How to Use and Choose a Financial Planner

Not only should you look for a financial planner whose expertise align with your unique needs and goals, you should also look into their background, know their standards of compliance and understand their fee structure.

Background Check. Verify the credentials of your advisor and check for a clean compliance background with the Financial Industry Regulatory Authority (FINRA) or the Securities and Exchange Commission (SEC).

Standard. Ask what standard of compliance your prospective financial professional adheres to- fiduciary or suitability? Advisors under the fiduciary standard are legally bound to do what’s best for you, putting you first in their planning and selection of strategy. Planners who use the suitability standard are required to provide “suitable” financial solutions, but not necessarily those that are best.

Fee Structure. Know which fee structure your planner is using. Commission-based advisors get paid when buying or selling a stock or other form of investment on behalf of a client. These advisors may have a bias as they profit from advising you to choose particular products. Fee-based planners only make money when you pay them for their counsel- they don’t get a cut from fund companies or insurers.

Ultimately, your financial advisor should be a tool in your money management arsenal- a source of information and sounding board for insight, not the sole, unchecked manager of all your assets.

How to Choose Financial Products 

Like financial advisors, not all financial products are created equally. Take the time to shop around before handing all your valuable personal information over to any financial services company. According to the FINRA Investor Education Foundation’s National Survey, nearly two-thirds of all credit card holders reported that they did not compare offers to find the best rates or conditions. This kind of comparison and examination of the fine print however is essential to finding the best financial products to fulfill your needs.

Where to Compare. Marketing material, even third party websites often have a bias when recommending products as they stand to benefit from you choosing one product or service over another. Use tools like those at MagnifyMoney that aggregate information- yields, terms, costs, etc.- on various financial products without bias.

How to Read Fine Print. Neutral review sites can help distill the most important fine print points into an easily digestible format. It also helps to know what fine print you should be looking for- fees, conditions, flexibility, risks, etc.

Beef Up Your Own Knowledge 

Finally, don’t forget to foster your own financial education. By understanding the basics of financial fundamentals- credit, debt, savings, and investments- you’ll know which questions are important to ask when making financial decisions.

If you find yourself making justifications or explanations of your financial strategy along the lines of , “My business manager (or advisor or banker) says….”, it’s probably a sign that you’ve outsourced too many of your financial interests.

At the end of the day, you and you alone have the most to gain or lose from your personal finances. While seeking the help of a professional may seem like the responsible thing to do, having a basic understanding of personal finance and wealth management principles can help you better choose the people and products with your best interests at heart and oversee their performance.

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College Students and Recent Grads, Pay Down My Debt, Reviews

Eastman Credit Union Student Loan Consolidation Review

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Eastman Credit Union (ECU) is based in Tennessee and Texas. Unfortunately, its website offers little to no information about its student loan consolidation product. This review aims to shed some light on the details so you can make a smarter decision regarding your student loans.

Refinancing Details

The maximum amount you can consolidate with ECU is $125,000 – that’s for undergraduate and graduate loans. You can consolidate both federal and private loans as well.

You can get a 10, 12, 14, or 15 year term. All terms are offered on a fixed rate that currently range from 6.50% – 8.00% APR. You can see current rates here.

If you were to borrow $20,000 on a 6.50% APR on a 10 year term, your monthly payment would be $227.10.

Pros and Cons of Eastman Credit Union Student Loan Consolidation

As with any loan offered on a longer term, be aware it will cost you more. This is due to paying more in interest over the life of the loan.

Longer loan terms aren’t necessarily a bad thing, as they can drastically lower your payments, making them more affordable. Just try and pay extra whenever possible.

While consolidating your student loans makes it easier to manage payments, you need to know the benefits you may sacrifice in order to consolidate.

Federal student loans come with many perks that disappear once you refinance or consolidate them. These benefits include deferment, forbearance, forgiveness, discharge, and income-based repayment plans.

Essentially, the flexibility you get with Federal student loans is taken away when you consolidate. Calculate exactly how much you’re saving by consolidating, and take into account your current and possible future job situation. You don’t want to end up in a rough spot where you’re struggling to afford your payments.

ECU has an asset recovery group that evaluates loans on a case-by-case basis in case borrowers are experiencing difficulty in making payments, but you don’t want to rely on a service like this just in case you’re not eligible.

The Fine Print

ECU has no prepayment penalty, origination fee, nor application fee. There are fees to pay if you’re late on a payment or your payment doesn’t go through, but the fee depends on the amount you owe. ECU was not particularly forthcoming with this information in a phone call.

Eligibility Requirements

Who’s eligible to consolidate student loans with ECU? As with any credit union, you must be a member to be eligible. Those that reside within a community on ECU’s coverage map can apply for membership, and there are additional sponsor and contractor companies they service as well.

Considering it only has locations within two states, not many people will be eligible to apply. If you don’t live within the area of coverage, scroll down a few sections to take a look at alternative lenders.

If you are within the area of coverage, you need to be 18 years or older and have a valid social security number. While your credit score mostly determines your interest rate, ECU also looks at your debt-to-income ratio in comparison to the amount you want to borrow.

Documents Needed to Apply

Before you start filling out the application (which can be completed online), get the necessary documents together so applying goes smoothly. Note that when you fill out an application with ECU, it uses a hard credit pull, which can lower your credit score.

You should have the following:

  • Driver’s License
  • Your salary and employment information
  • You’ll need loan statements for each of the loans you wish you consolidate
  • If you’re paid bi-weekly, you’ll need your last two pay stubs; if you’re paid weekly, you’ll need your last 4 pay stubs (they need a month’s worth)
  • Are you applying with a co-applicant? Their pay stubs will also be needed

When you begin the application process, you’ll be asked how much you want to borrow. Terms will be given to you on the following page based on the amount requested.

ECU also lets you save any progress you make on your application. You just have to create a password to access your application – it’s only saved in the system for 7 days.

The entire application process can be completed fairly quickly. The sooner you submit the documents needed, the sooner your funds can be received.

Who Benefits the Most from Consolidating With Eastman Credit Union?

It makes sense for those that are already members of ECU to check with the credit union first when consolidating their student loans. If you’re wary of online lenders and have an established relationship with representatives at ECU already, you might find peace of mind in being able to make an appointment at a local branch.

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What About Other Alternatives?

While ECU doesn’t have bad rates, you can still do better with other online lenders.

SoFi is the first online lender we recommend because of its low rates and benefits. Fixed rates range from 3.50% – 7.24% APR and variable rates range from 1.90% – 5.19% APR. There’s no maximum set amount you can borrow, and it offers terms up to 20 years instead of 15 years.

The added bonus with SoFi is that it offers unemployment protection. If you’re laid off from your job, SoFi can temporarily pause your payments and coach you on how to secure another job. There are no prepayment penalties or origination fees.

The only downside is there’s a list of eligible schools and programs SoFi services, so if your school or program isn’t on there, you’re not able to refinance. SoFi has been working to expand its reach, so call to see if your school is eligible.

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Another option specific for graduates is CommonBond*. It offers a maximum loan amount of $220,000 with a term of up to 20 years. Its fixed rate APR ranges from 3.74% – 6.74%, and its variable rate APR ranges from 1.94% – 5.18%. These terms are very close to what SoFi offers, and both lenders initially use a soft pull of your credit to give you your rates. A hard pull will only be used once you agree to move forward with the loan.

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Lastly, if your school or program isn’t on either CommonBond or SoFi’s list, check out Citizens Bank. Undergraduates can refinance up to $90,000, graduates can refinance up to $130,000, and professionals can refinance up to $170,000. It offers the same 20 year term as the others. Its fixed rates range from 4.74% – 8.90% APR, and its variable rates range from 2.33% – 6.97% APR. Citizens Bank uses a hard credit inquiry.

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Aim to Get the Best Rates Possible

ECU doesn’t offer variable rates, and while variable rates are unstable, they do start off fairly low. If you know you can pay your student loans off quickly, you might want to look into the alternative lenders that offer a variable rate option.

ECU’s lowest rate – 6.50% – might be lower than what your current private and federal student loans are at (especially if you graduated several years ago), but most of these lenders start in the 3% or 4% range.

If you want to shop around, find lenders willing to use soft credit pulls initially, such as SoFi and CommonBond. You can get a feel for the kind of rates you’ll be offered, and you’re never under any obligation to accept a loan. Not satisfied with what they’re offering? Shop around within a 30-day window and your credit score won’t decrease as much.

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