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How to Get Student Loan Forgiveness

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

Students throwing graduation hats

According to a recent CNBC article, 24% of millennials expect to receive forgiveness for their outstanding student loan debt balances. It’s a good thing, then, that the Consumer Financial Protection Bureau estimates that 25 percent of American workers could be eligible for student loan repayment forgiveness programs.

Here’s more good news: there are many ways of taking action to get a student loan forgiven. You can seek out programs that are career-based, meaning they provide aid for those in certain professions. Or you can look into plans based on your income level. Most of these are sponsored by the Federal government in one way or another (though some colleges do assist a select few of the students they graduate).

Those suffering the burden of student loans may qualify for one (or more) of the nine types of forgiveness programs listed below.

Public Service Student Loan Forgiveness

There are many programs available to help mitigate Federal student loan burdens — especially if you’re working in a public service position.

Specifically, employees of the government, non-profit organizations, and other public workers may qualify for the Public Service Loan Forgiveness (PSLF) program. You need to be employed full-time by a public service organization. You also are required to make 120 payments on your loans before being eligible for forgiveness.

Note that as long as you’re employed by an eligible public service organization, you’re covered. In other words, you probably qualify as a teacher — and you may also qualify if you work in a public school as an administrative staff member.

[17 Jobs That Don’t Qualify For Student Loan Forgiveness Programs]

Getting a Loan Forgiven Based on Income

Another way to get Federal student loans forgiven is to see if you qualify for an income-based program.

According to Sophia Bera, CFP and founder of Gen Y Planning, there are three income-driven programs:

  • Pay As You Earn Repayment Plan (PAYE Plan) – This plan is the newest option for those with student loan debt. It’s designed to help recent students entering the job market for the first time during the recession years, and provides an alternative to the Income-Based Repayment Plan and lower payments. The remaining balances will be forgiven after 20 years of qualifying payments and an interest subsidy. PAYE is only available for federal Direct Loans. Eligibility is often a result of student loans that are higher than a person’s annual discretionary income or makes up a significant portion of his or her annual income. So, $10,000 in student loans with a $60,000 annual salary would like make an individual ineligible for the plan. In addition, individuals are only eligible for the PAYE plan if:
    • He or she is new borrower as of Oct. 1, 2007,
    • Received a disbursement of a Direct Loan on or after Oct. 1, 2011.
  • Income-Based Repayment Plan (IBR Plan) – This is the original plan that was designed to help those who held student loan debt that equaled more than their annual income, or a “significant portion” of annual income. Eligibility includes demonstrating a partial financial hardship. Loans will be forgiven after 25 years of qualifying payments, five years longer than the PAYE plan. Like the PAYE plan, this IBR also offers an interest subsidy.

Keep in mind: for both IBR and PAYE, your payments are based on your adjust gross income (AGI). If you file joint taxes with a spouse, then your AGI will include your spouse’s income and impact your payments.

[Read more about taxes and student loans here.]

  • Income-Contingent Repayment Plan (ICR Plan) – This plan intends to help those who purposely chose low-income jobs but graduated with high levels of student loan debt. It provides another option for those who can’t qualify for either the Pay As You Earn Plan or the IBR Plan and is open to anyone with eligible federal student loans. Like with the IBR, the monthly payments are based on income and family size, however, the payments will likely be higher than those with IBR or PAYE. The ICR plan also forgives an outstanding balance after 25 years of qualifying payments. The debt discharged is treated as taxable income, so borrowers need to be prepared to pay taxes to the IRS.

[How to Set Up Income-Driven Repayment Programs]

While each of these programs has various stipulations, requirements, and limits, they all have one thing in common: they’re designed to help those with low incomes and excessive amounts of student loan debt.

They’re also a little different from the public service programs. While those in public service positions can have student loan debt forgiven after 10 years, these programs forgive loans after 20 or 25 years.

However, like the public service loan forgiveness program, these income-driven programs do require you to pay every payment on time – or you’ll be disqualified from the program. You also may need to pay taxes on the portion of your loans that are forgiven.

Use this calculator to see exactly what will happen with your payments and how much of your student loans may be forgiven.

Student Loan Forgiveness Programs for Professionals

Many student loan forgiveness programs are based on the career you choose after graduation. For those with professional degrees – think doctors, lawyers, and teachers – you have several options when it comes to shedding that student loan debt without paying it out-of-pocket and in full.

Doctors can look into the NIH Loan Repayment Program. This can help repay 25% of a doctor’s student loan balance per year with a $35,000 maximum. That’s limited to doctors conducting research and who meet certain eligibility requirements.

[Learn more about Medical Student Loan Forgiveness here.]

Lawyers can look into Equal Justice Works. This provides a list of law schools that offer loan repayment assistance programs. Afam Onyema graduated from Harvard University and Stanford Law School, and was able to decline corporate law job offers in order to establish a charitable organization thanks to repayment programs.

“I can afford to do this work only because of Stanford Law School’s uniquely generous Loan Repayment Assistance Program (LRAP),” explains Onyema. “The school is systematically paying off and forgiving 85% of my $150,000+ debt.”

[Learn more about Lawyer Student Loan Forgiveness here.]

Teachers can qualify for PSFL programs, they might also want to look into Teacher Loan Forgiveness. To get into this program, you need to teach at specifically designated elementary and secondary schools for five consecutive years to be eligible.

If you began teaching after 2004, you’re eligible for up to $5,000 in loan forgiveness if you were a “highly qualified” teacher, and you can receive up to $17,500 if you’re a “highly qualified” math or science teacher in a secondary school, or special education teacher.

Other Options

Don’t qualify for any of the above? Don’t despair yet. You have a few more options:

Volunteer programs: These qualify under public service student loan forgiveness: Options include working with AmeriCorps and serving 12 months or volunteering as part of their VISTA program, or joining the Peace Corps.

Enrolling in the military: Some branches of the US military offer student loan forgiveness programs. Stafford and Perkins loans are eligible (among others), and the Army and Navy will “repay the maximum allowed by law for non-prior service active duty enlistments.”

The Army will pay up to $20,000 for Reserve enlistments, and that includes the Army National Guard. If you’re interested in joining the Air Force, that branch can repay up to $10,000 for non-prior service, active duty enlistments.

Both the Air Force and the Navy require a minimum of four years of service. With the Army, the minimum service is three years, and the Army and Navy Reserves and Army and National Guard require six years.

The Pitfalls Associated with Getting a Student Loan Forgiven

If you’re having trouble making your student loan payments on time and in full, it’s worth your time to do some homework and research your options. Getting a student loan forgiven isn’t always the best answer or the only solution, and you need to proceed with caution.

Let’s be clear. “Forgiveness” doesn’t mean you sit back and let someone else take care of 100% of your loan. Nor does it mean getting to completely walk away from the financial responsibilities of borrowing that money in the first place.

You’ll first need to make sure you meet all the qualifications listed out in the fine print. As we’ve seen, that can mean fitting into very specific circumstances and stipulations. And short of drastic action like declaring bankruptcy – which is not the ideal solution – you may not qualify for any of the programs on student loan forgiveness out there.

In fact, even declaring bankruptcy doesn’t always work. According to Leslie Tayne, Esq. of Tayne Law Group, P.C., “Student loans are rarely dischargeable in bankruptcy and getting a student loan forgiven is a very particular process.”

“For Federal student loans, there is a way to get your loan forgiven,” she explains. “The public service forgiveness program may forgive the balance of your loans after 10 years working in a qualified public service job.

“Once your forgiveness is approved, you will not be required to make any more payments on the loan; however it is important to note that you may be subject to a 1099 by the IRS and thus have to pay taxes on the amount forgiven.” As Tayne notes, that could have an even worse affect on your finances.

Bera provided this example: “If you had $100,000 in Federal student loans and [use a forgiveness program], after 25 years of on-time payments the balance on your student loans might be $50,000. If the government forgives this amount, you’ll have to pay the tax on $50,000 of income in addition to your normal salary or wages for that year.”

If someone only makes $40,000 annually and suddenly his or her income increases to $90,000 in a given tax year, they’ll likely owe thousands of dollars to the government.

All this isn’t said to discourage you, but to make sure you’re in tune with the realities of the situation. If you have student loans and want to look into getting involved with a student loan forgiveness program, start by familiarizing yourself with what’s available to you and your situation. Once you’ve done a bit of research you can contact your loan provider to start taking action.

Interested in Refinancing Your Student Loans? Look at our Student Loan ReFi Marketplace.

Kali Hawlk
Kali Hawlk |

Kali Hawlk is a writer at MagnifyMoney. You can email Kali at Kali@magnifymoney.com

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5 Signs You’re Probably Going to Default on Your Student Loans

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

A newly released New York Federal Reserve analysis sheds some insight on factors that may determine if student loan borrowers are more or less likely to default on their loans.

According to Fed data, 28% of students who left college between 2010 and 2011 defaulted on their student loans within five years. That’s significantly higher than the students who left school five years earlier, between 2005 and 2006, of which only 19% defaulted within five years.

Defaulting on a student loan is big deal. Not only will someone who defaults on a student loan need to deal with collections calls, but a default can seriously harm a borrower’s credit rating, making it difficult to qualify for a personal loan or other large credit purchases like a new home.

The New York Fed’s analysis highlights factors that could determine default rates years after students leave school. They range from things a student can’t necessarily control —  family background and how selective the college they attended was — to things students may have a little more control over, like the degree and major they pursue.

The data show students in these categories are more likely to default on their student loans between ages 20-33:

  1. Dropped out before earning a degree.
  2. Enrolled in an associate’s degree program.
  3. Majored in arts and humanities.
  4. Attended a for-profit institution, community college or nonselective college.
  5. Came from a low-income family.

A few of the factors relate to things a student has some control over, like the kind of school chosen and the degree pursued. Another big factor, family background, depends more heavily on chance.

Here’s what the Fed found about how the factors influence default rates.

The school

For-profit, public, or nonprofit?

If a student attended a private for-profit two-year institution, their chances of default were highest of all — just above 3% were in default at age 22, shooting up to 42% by age 33. Students at private four-year for-profits weren’t far behind, with a default rate of

38.8% by age 33.

On the other hand, students were much less likely to struggle to repay their student loans at nonprofit institutions, both public and private. Private nonprofit four-year student had the lowest default rate at 17.2%. They were followed by students who attended public nonprofit four-year institutions.

Source: FBNY

Selective vs. nonselective

The Fed’s analysis found students who attended colleges that were more selective or competitive defaulted at lower rates that those who attended less-selective colleges. The analysis used Barron’s Profile of American Colleges to classify colleges into selective and nonselective based on competitiveness.

The degree

Graduate versus dropout

Whether or not a borrower graduated was the second-strongest predictor of default among borrowers, according to the Fed analysis. Overall, students who dropped out had higher rates of default versus borrowers who graduated no matter what kind of degree they attempted. The analysis notes that may be attributed to the fact graduates are more likely to find more gainful employment that would give them the ability to pay off their loans after earning a degree.

Source: FBNY

Associate versus bachelor’s degree

No matter what kind of college a graduate attended, students in a two-year degree programs had higher default rates than their peers who enrolled in a four-year college, according to the New York Fed analysis.

But the gap between default rates of two-year and four-year students was widest among students who attended public schools — 21.4% to 36.5%, respectively— a difference of more than 15 percentage points

STEM versus arts and humanities

Students who majored in arts and humanities defaulted on their loans at the highest rates — 26.3% at nonselective schools, 14.6% at selective schools— while STEM majors at selective schools (12%) and business students at selective schools (11.5%) defaulted at the lowest rates.  Overall, default rates among students who majored in business or a vocational programs were closer to STEM students than to arts and humanities majors.

Arts and humanities majors defaulted at higher rates regardless of the college’s selectivity, but if students majored in STEM, business or a vocational program, selectivity may have factored in more. By age 33, the default gap between students who chose a best-performing major and a worst-performing major was three percentage points at selective colleges, while at nonselective schools the gap was eight percentage points.

Source: FBNY

The student

Advantaged vs nonadvantaged

The Fed’s analysis took a look into defaulters’ income and family background, too. The analysis looked at the average income for the ZIP code area at a borrower’s youngest available age based on available loan data. The analysis defined students who came from households earning below the mean income based on ZIP code as nonadvantaged, and students from households earning above the mean income.

The analysis found borrowers who came from less-advantaged backgrounds based on income had higher default rates no matter what type of college they attended.

Taking both a borrower’s background and college into consideration, the widest gap in default rates observed in the analysis were among advantaged students who attended private nonprofit colleges (13% of whom defaulted by age 33) and nonadvantaged students who attended private for profit colleges (42.1% of whom defaulted by age 33).

Source: FBNY
Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

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Top 6 Personal Loans & Student Loans for Career Development

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

Personal Loans & Student Loans

Updated November 03, 2017
A few years after graduating college you may find yourself in a weird spot. You don’t want to go back to school for another degree in the traditional sense, but you want to pursue certification in an area like coding or UX design to give your resume a boost. Or maybe you want to get formal training in an entirely new field through intensive boot camp programs.

Fortunately, there are options outside of “going back to school” that give us the opportunity to continue learning without committing to an entirely new degree. You can also find funding to help ease the burden of paying completely out-of-pocket for career development.

Check out a few of these loan options:

1. SoFi

Fixed rates starting from 5.49% APR

When considering loans for career development, SoFi should be a loan at the top of your list because of its customer service and loan perks. The application is completely online and once approved funds are wired to your account. It also doesn’t hurt your credit score to see if you’re pre-approved and your rate.

SoFi offers fixed and variable interest loans. You can borrow $5,000 to $100,000. Loan terms are 3, 5 or 7 years. There are no origination fees or prepayment penalties.

One feature of a SoFi loan that makes it stand apart from other loans is the unemployment protection. If you lose your job, there are resources like career coaching to help you find another position. You can also get payments postponed temporarily during your job search.

SoFi

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2. Earnest

Fixed rates starting from 5.25% APR

Earnest offers personal loans for multiple uses including career development. You can borrow from $2,000 to $50,000. Loan terms are 1, 2 and 3 years long with no hidden fees or prepayment penalties. Earnest does a hard pull to determine if you’re approved, so your credit score will be affected.

The loan application process is online as well and you’ll receive a response about your loan application within 2 to 3 business days. Earnest reviews many variables outside of just your credit score to qualify you for a loan. So, if your credit score is impacting the rate you get with other lenders, Earnest is worth checking out.

Earnest will take into account your savings, earning potential, education and your history of on-time payments to find you the best rate. Currently, this loan is not offered in Nevada, Idaho, Louisiana, Mississippi, Alabama, Kentucky, Iowa, Vermont, Montana, North Dakota or South Dakota. Although, plans are in motion to open up lending to these states.

3. Upstart

Rates starting from 9.45% APR

Upstart offers $1,000 to $50,000 in personal loans for courses or boot camps to further your career. Loan terms of 3 and 5 years are available. One negative of Upstart is it does have an origination fee of 3.655% to 8%. Similar to SoFi, Upstart does a soft pull of your credit report to determine if you’re pre-approved.

Upstart will accept borrowers with a credit score of 640 and above. If you have a limited credit history you may still be able to qualify. Similar to Earnest, Upstart reviews your credit score among other factors like your education, area of study and job history to determine if you’re eligible for a loan.

Once approved for an Upstart loan, you can agree to terms and get your money within a few days.

4. LightStream

Fixed rates starting from 5.99% APR

LightStream has loans from $5,000 to $100,000. Loan terms range from 2 to 7 years. There are no fees or prepayment penalties, but it will be a hard pull on your credit report to see if you’re pre-approved. One positive of LightStream is it’s very clear with how it determines interest rates.

You’ll get the most competitive rates with excellent credit. Since the term “excellent” can be subjective, LightStream outlines what’s considered excellent credit based on a profile of past excellent borrowers. These borrowers tend to have:

  • 5 or more years of credit history
  • A mix of credit accounts like various credit cards, auto loans and mortgages
  • Excellent payment history with no delinquencies
  • Proven ability to save
  • Stable income

Now, one important thing to mention, you can’t use a LightStream loan for college or postsecondary education. If you want to take out this loan for career development, contact customer service to double check that whatever course you plan to take is eligible for the loan.

5. Wells Fargo

Variable rates starting from 4.49% APR

Wells Fargo has a unique opportunity for students pursuing career training or non-traditional school education. This could be a good option if you’re looking to further your career in the form of certificates and licensing from a university.

There are no application, origination or repayment fees. Wells Fargo offers variable and fixed interest options. Rates include somes discount. You can get a 0.25% discount if you have a previous Wells Fargo student loan or another qualifying account. There’s another 0.25% discount if you set up automatic payment.

You can take out up to $20,000 depending on the type of training you’re getting and from what school you’re getting it from. No payment on the loan is required until 6 months after you leave school, but interest will accrue during any deferment.

Wells Fargo does allow cosigners and cosigner release. Cosigners can be removed from the loan after 24 consecutive, on-time payments are made and you meet other credit requirements.

6.Sallie Mae

Variable rates starting from 3.25% APR

Sallie Mae has a program relatively similar to the Wells Fargo career-training program. Sallie Mae will fund up to 100% of the cost to attend school for training.

Both fixed and variable rate loans are available. There are no prepayment penalty or disbursement fees. You can apply with a cosigner and your cosigner can be released after you make 12 on-time payments, pass a credit review and meet other criteria.

Prepayment begins 6 months after you’re finished with classes. One perk of the Sallie Mae loan is while taking classes you have the option to pay interest or you can pay a fixed $25 per month to reduce your repayment schedule in the future.

How to decide

The world we live in today is constantly evolving, so naturally our skills will have to evolve as we move forward in our careers. Before choosing a personal loan or student loan for career development, get a good sense of your end goal.

Do you want to simply learn a new skill or do you want to gain a new credential (i.e. certification) from a university for your resume? Deciding your end game will help you choose the loan product that’s best for you.

Taylor Gordon
Taylor Gordon |

Taylor Gordon is a writer at MagnifyMoney. You can email Taylor at taylor@magnifymoney.com

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4 Best Options to Refinance Student Loans – Get Your Lowest Rate

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

Updated: November 1, 2017

Are you tired of paying a high interest rate on your student loan debt? You may be looking for ways to refinance your student loans at a lower interest rate, but don’t know where to turn. We have created the most complete list of lenders currently willing to refinance student loan debt. We recommend you start here and check rates from the top 4 national lenders offering the lowest interest rates. These 4 lenders also allow you to check your rate without impacting your score (using a soft credit pull), and offer the best rates of 2017:

LenderTransparency ScoreMax TermFixed APRVariable APRMax Loan Amount 
SoFiA+

20


Years

3.35% - 7.125%


Fixed Rate*

2.815% - 6.740%


Variable Rate*

No Max


Undergrad/Grad
Max Loan
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earnestA+

20


Years

3.35% - 6.39%


Fixed Rate

2.57% - 6.19%


Variable Rate

No Max


Undergrad/Grad
Max Loan
APPLY NOW 
commonbondA+

20


Years

3.35% - 7.12%


Fixed Rate

2.81% - 6.74%


Variable Rate

No Max


Undergrad/Grad
Max Loan
APPLY NOW 
lendkeyA+

20


Years

3.15% - 7.26%


Fixed Rate

2.58% - 6.32%


Variable Rate

$125k / $175k


Undergrad/Grad
Max Loan
APPLY NOW 

You should always shop around for the best rate. Don’t worry about the impact on your credit score of applying to multiple lenders: so long as you complete all of your applications within 14 days, it will only count as one inquiry on your credit score.

We have also created:

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

Can I Get Approved?

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

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

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

This is particularly important if you have Federal loans.

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

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

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

Is it worth it?

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

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

Is there an origination fee?

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

Is the interest rate fixed or variable?

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

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

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

Places to Consider a Refinance

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

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

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

1. SoFi: Variable Rates from 2.815% and Fixed Rates from 3.35% (with AutoPay)*

SoFi

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

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on SoFi’s secure website

2. Earnest: Variable Rates from 2.57% and Fixed Rates from 3.35% (with AutoPay)

Earnest

Earnest (read our full Earnest review) offers fixed interest rates starting at 3.35% and variable rates starting at 2.57%. Unlike any of the other lenders, you can switch between fixed and variable rates throughout the life of your loan. You can do that one time every six months until the loan is paid off. That means you can take advantage of the low variable interest rates now, and then lock in a higher fixed rate later. You can choose your own monthly payment, based upon what you can afford (to the penny). Earnest also offers bi-weekly payments and “skip a payment” if you run into difficulty.

3. CommonBond: Variable Rates from 2.81% and Fixed Rates from 3.35% (with AutoPay)

CommonBond

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

4. LendKey: Variable Rates from 2.58% and Fixed Rates from 3.15% (with AutoPay)

Lendkey

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

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

  • Alliant Credit Union: Anyone can join this credit union. Interest rates start as low as 4.50% APR. You can borrow up to $100,000 for up to 25 years.
  • Citizens Bank: Variable interest rates range from 2.79% APR – 8.14% APR and fixed rates range from 3.35% – 8.33%. You can borrow for up to 20 years. Citizens also offers discounts up to 0.50% (0.25% if you have another account and 0.25% if you have automated monthly payments).
  • College Ave : If you have a medical degree, you can borrow up to $250,000. Otherwise, you can borrow up to $150,000. Fixed rates range from 3.35% – 7.50% APR. Variable rates range from 2.75% – 7.25% APR.
  • Laurel Road (formerly known as DRB) Student Loan: Laurel Roadoffers variable rates ranging from 2.99% – 6.42% APR and fixed rates from 3.95% – 6.99% APR. Rates vary by term, and you can borrow up to 20 years.
  • Eastman Credit Union: Credit union membership is restricted (see eligibility here). Fixed rates start at 6.50% and go up to 8% APR.
  • EdVest: This company is the non-profit student loan program of the state of New Hampshire which has become available more broadly. Rates are very competitive, ranging from 4.29% – 7.89% (fixed) and 3.18% – 6.78% APR (variable).
  • First Republic Eagle Gold. The interest rates are great, but this option is not for everyone. Fixed rates range from 1.95% – 2.95% APR. You need to visit a branch and open a checking account (which has a $3,500 minimum balance to avoid fees). Branches are located in San Francisco, Palo Alto, Los Angeles, Santa Barbara, Newport Beach, San Diego, Portland (Oregon), Boston, Palm Beach (Florida), Greenwich or New York City. Loans must be $60,000 – $300,000. First Republic wants to recruit their future high net worth clients with this product.
  • IHelp : This service will find a community bank. Unfortunately, these community banks don’t have the best interest rates. Fixed rates range from 4.75% to 9.00% APR (for loans up to 15 years). If you want to get a loan from a community bank or credit union, we recommend trying LendKey instead.
  • Navy Federal Credit Union: This credit union offers limited membership. For men and women who serve (or have served), the credit union can offer excellent rates and specialized underwriting. Variable interest rates start at 3.55% and fixed rates start at 4.00%.
  • Purefy: Purefy lenders offer variable rates ranging from 2.79%-9.56% APR and fixed interest rates ranging from 3.35% – 10.65% APR. You can borrow up to $150,000 for up to 15 years. Just answer a few questions on their site, and you can get an indication of the rate.
  • RISLA: Just like New Hampshire, the state of Rhode Island wants to help you save. You can get fixed rates starting as low as 3.49%. And you do not need to have lived or studied in Rhode Island to benefit.
  • UW Credit Union: This credit union has limited membership (you can find out who can join here, but you had better be in Wisconsin). You can borrow from $5,000 to $60,000 and rates start as low as 2.87% (variable) and 3.99% APR (fixed).
  • Wells Fargo: As a traditional lender, Wells Fargo will look at credit score and debt burden. They offer both fixed and variable loans, with variable rates starting at 4.49% and fixed rates starting at 6.24%. You would likely get much lower interest rates from some of the new Silicon Valley lenders or the credit unions.

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

Nick Clements
Nick Clements |

Nick Clements is a writer at MagnifyMoney. You can email Nick at nick@magnifymoney.com

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Best of, College Students and Recent Grads, Credit Cards

Best Student Credit Cards November 2017

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

Getting a credit card while you’re in college might seem dangerous or confusing. But if you are able to use a student credit card responsibly, you do not need to be afraid, and you can set yourself up for financial success after you leave school.

Fortunately, learning how to choose and use the right student credit card is relatively simple. Make sure you avoid annual fees and go with a bank or credit union you can trust. When you get the card, make sure you use it responsibly and pay the balance in full and on time every month. If you do these things consistently over time, you can leave school with an excellent credit score. And if you want to rent an apartment or buy a car, having a good credit score is very important.

Our Top Pick

Discover it® for Students

APPLY NOW Secured

on Discover’s secure website

Read Full Review

Discover it® for Students

Annual fee
$0 For First Year
$0 Ongoing
Cashback Rate
up to 5%
APR
13.99%-22.99%

Variable

Credit required
fair-credit
Fair

Best for Commuter Students

Bank of America® Cash Rewards credit card for Students

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on Bank Of America’s secure website

Bank of America® Cash Rewards credit card for Students

Annual fee
$0 For First Year
$0 Ongoing
Cashback Rate
1% cash back on every purchase, 2% at grocery stores and wholesale clubs, and 3% on gas for the first $2,500 in combined grocery/wholesale club/gas purchases each quarter
APR
13.99%-23.99%

Variable

Credit required
fair-credit

Average OK

Best Flat-Rate Card

Journey® Student Rewards from Capital One®

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on Capital One’s secure website

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Journey® Student Rewards from Capital One®

Annual fee
$0 For First Year
$0 Ongoing
Cashback Rate
up to 1.25%
APR
24.99%

Variable

Credit required
fair-credit

Average Credit

Best Intro Bonus

Wells Fargo Cash Back College℠ Card

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on Wells Fargo’s secure website

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Wells Fargo Cash Back College℠ Card

Annual fee
$0 For First Year
$0 Ongoing
Cashback Rate
up to 3%
APR
11.90%-21.90%

Variable

Credit required
fair-credit
Fair Credit

Best Credit Union Card

Altra Federal Credit Union Student Visa

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on Altra’s secure website

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Altra Federal Credit Union Student Visa

Annual fee
$0 For First Year
$0 Ongoing
Rewards
1 point per dollar spent
APR
14.90%

Fixed

Credit required
zero-credit
New to Credit

Best for Studying Abroad

Bank of America® Travel Rewards credit card for Students

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on Bank Of America’s secure website

Bank of America® Travel Rewards credit card for Students

Annual fee
$0 For First Year
$0 Ongoing
Rewards
1.5 points per dollar spent
APR
15.99%-23.99%

Variable

Credit required
fair-credit
Fair Credit, Limited Credit history

Best Secured Card

Discover it® Secured Card - No Annual Fee

APPLY NOW Secured

on Discover’s secure website

Read Full Review

Discover it® Secured Card - No Annual Fee

Annual fee
$0 For First Year
$0 Ongoing
Minimum Deposit
$200
APR
23.99% APR

Variable

Credit required
bad-credit
Bad

Also ConsiderAlso Consider

Golden 1 Platinum Rewards for Students

Golden 1 Credit Union Platinum Rewards for Students:

This credit card offers a snazzy rewards program: rather than accumulate points, you’ll get a cash rebate instead. All you have to do is make a purchase. At the end of the month, you’ll get a rebate of 3% of gas, grocery, and restaurant purchases, and 1% of all other purchases deposited back into your Golden 1 savings account at the end of the month. You can join Golden 1 by joining the Financial Fitness Association for $8 per year and keeping at least $5 in a savings account.

What should I look for in a student credit card?

The most important thing to consider when looking for a student credit card is that it charges no annual fee. You should never have to pay to build your credit score. Fortunately, most student cards don’t charge you an annual fee, but it’s still something to watch out for.

The second most important thing you should keep an eye out for are tools that help you learn about credit or even promote good credit-building habits. For example, some student credit cards will give you a free monthly FICO score update. You can use this freebie to see in real time how your credit score changes as you build credit history by keeping the card open, or paying down your credit card balance, for example.

The last thing you should be considering when picking out a student credit card is the rewards program. I know, I know, it seems counterintuitive. But stick with me — I’ll show you why in the next question.

Why shouldn’t I be concerned about maximizing my rewards while in college?

Rewards cards are nice to have. But if you’re a college student, here’s the truth: you probably won’t spend enough to earn meaningful rewards.

Why? With a good rewards program, you can earn points or cash back. A small percentage of your monthly spending can add up quickly. However, given the tight budget that most college students live on, it will probably take a while to earn meaningful rewards. For example, if you earn 1.25% cash back and spend $300 a month on your card, you would earn $45 of cash back during the year.

College students are very good at making good use of $45. And our favorite card offers a great cash back rewards program. Just don’t expect to earn a lot of cash back, given the tight budget of a college student.

Why should I get a credit card as a college student?

There are a lot of great reasons why you should get a credit card, as long as you can commit to using it responsibly.

The single biggest reason why you should get a credit card as a college student is because you can start establishing a credit history now. When you graduate from college, you will need a good credit score to get an apartment. And your future employer will likely check your credit report. Building a good credit history while still in college will help prepare you for life after graduation.

Getting a credit card while in college can also train you to develop good credit habits now. But you need to be honest with yourself. If you find that you can’t avoid the temptation of maxing out your credit card, you might want to switch to a debit card or cash.

Finally, getting a credit card now can be the motivation you need to start learning about credit. These skills aren’t hard to learn, and they could save you thousands or even hundreds of thousands of dollars later in life (when you want a mortgage, for example).

What is the CARD Act and why should I care about it?

Many years ago, credit card companies would market on college campuses. You could get a free beer mug or t-shirt in exchange for a credit card application. And you would be able to qualify for a credit card without having any income. The Credit Card Accountability Responsibility and Disclosure (CARD) Act was signed into law in May 2009 to change a number of practices.

How did the CARD Act change student credit cards?

The CARD Act made a lot of changes in how credit card issuers do business with students. One of the biggest changes was requiring students to be able to demonstrate an ability to pay. If you are under 21 and do not have sufficient income (a campus job, for example), you would need to get a co-signer.

In addition, colleges must now limit the amount of credit card marketing on campus. The days of free t-shirts and pizzas in exchange for credit card applications are gone. But that doesn’t mean it is impossible for a college student to get a credit card. Some highly reputable banks and credit unions still offer student cards. And building a good credit score while still in college is still highly recommended.

How can I protect myself from racking up debt?

When used properly, credit cards are a very convenient method of repayment. However, when not used properly, you can end up deep in credit card debt. It is important to establish a healthy relationship to credit now, with your first credit card.

You should try to ensure that you pay off your credit card bill in full and on time every month. Ideally, you should set up an automatic monthly payment. And to keep yourself on track, take advantage of alerts offered by most credit card companies. You can even get daily text messages reminding you of your balance.

How can I automate my credit card usage?

If all of this sounds confusing, don’t worry. There’s actually a way you can automate your payments so you never even have to bother with the hassle of using a credit card. All it takes is a few minutes of upfront work.

First, you’ll need at least one recurring monthly bill of the same amount, such as Netflix or Spotify. Log in to your account and set up an automatic payment each month using your credit card. Make a note of how much your monthly bill costs.

Next, log in to your bank account. Set up a second automatic payment to go to your credit card each month for the same amount as the bill. If your bank doesn’t offer the option to set up automatic payments, you may also be able to set up your credit card to automatically withdraw the amount of the bill from your bank.

Because you know this bill will be for the same amount each month (barring any price increases), you can literally just leave this running in the background each month on autopilot. You don’t even have to carry your credit card in your wallet if you don’t want to. Then, when you graduate, you’ll automatically have an improved credit score!

What happens to my student credit card when I graduate?

Congratulations! You’ve made it to the finish line. But what about your student credit card? You will have a few options once you graduate.

First, you can simply keep it. You will want to keep the credit card open, because it helps you build a long credit history. However, you might want to call your credit card company and ask if you can migrate to a standard (non-student) credit card.

But if you have been using your credit card properly, you will have an excellent credit score when you graduate – and you will be able to get any credit card that you want.

Here is a summary of our favorite cards:

Lindsay VanSomeren
Lindsay VanSomeren |

Lindsay VanSomeren is a writer at MagnifyMoney. You can email Lindsay here

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College Students and Recent Grads

What Is the NSLDS? A Tool to Keep Track of Student Loans

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

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Over the course of a college career, a student may take out multiple education loans of different amounts and term lengths. Loans are often granted on an annual basis, and by the time you graduate, it’s easy to lose track of your total borrowing.

What’s more, holders of federal loans get a short reprieve from repayment after graduation — up to six or nine months, depending on the loan time — making it can be easy to forget that you’ve got money due. It’s smart to use that grace period to begin planning for repayment, rather than viewing it as a vacation from thinking about your college loans.

One of the best ways to keep track of your federal student loans and payments is through the National Student Loan Data System, a centralized database for federal student loan and grant information managed by the U.S. Department of Education. By checking in regularly on the NSLDS, you can stay on top of how much you owe, the repayment terms of your loans and the monthly payment amounts.

For new graduates making a budget — sometimes for the first time — this student loan information can help them understand how much money they need to set aside for monthly payments, or if they need to look into alternative loan repayment programs.

“It’s a helpful tool, and so often as humans, we’re inclined to denial or procrastination,” says Melinda Opperman, executive vice president with Credit.org, a nonprofit organization focused on personal finance education. “By ignoring that tool, you could have a problem compounding. See what’s in there, and get yourself anchored and prepared.”

What’s the purpose of the National Student Loan Data System (NSLDS)?

The NSLDS was authorized as part of the 1986 Higher Education Act (HEA) Amendments and is administered by the Office of Federal Student Aid. It was formed with three purposes:

  • To better the quality of student aid data and its accessibility
  • To decrease the administrative work required for Title IV Aid
  • To decrease fraud and abuse of student aid programs

The NSLDS initially focused on federal loan compliance but eventually expanded to encompass detailed data from federal student loan and grant programs in which students are enrolled.

Where does the NSLDS get its information?

The NSLDS gets information from several government and loan processing services. Here are the sources for NSLDS data:

  • Guaranty agencies, which are state agencies or private, nonprofit organizations that provide information on the Federal Family Education Loan (FFEL) Program
  • Department of Education loan servicers
  • Department of Education debt collection services (information about defaults on loans held by the Department of Education)
  • Direct loan servicing (information on federal direct student loans)
  • Common origination disbursement (information on federal grant programs)
  • Conditional disability discharge tracking system (information on disability loans)
  • Central processing system (information on aid applicants)
  • Individual schools (information on federal Perkins loan program, student enrollment and aid overpayments)

When data from these sources are combined, you can get a comprehensive overview of your outstanding loans, repaid loans and repayment schedules.

The NSLDS is updated according to each organization’s loan reporting schedule. Some report monthly, and many report data more frequently.

What you’ll find on the NSLDS

After signing up for an FSA ID (Federal Student Aid ID), you can log into the NSLDS to see the updated status of your federal student loans and grants, as well as your college enrollment status and the effective date of your status.

Loans are listed from newest to oldest, and you can find more information about each, including the loan servicer’s name and contact information, by clicking on the loan number. You also will have access to an array of details about each of your federal loans and grants:

  • Name
  • Disbursed amount
  • Date of disbursement
  • Last-known balance
  • Outstanding interest
  • Status (e.g. repayment, in grace, paid in full)
  • Status effective date
  • Interest rate
  • Progress toward the 120 qualifying payments needed for Public Service Loan Forgiveness
  • Income-driven repayment plan anniversary date

“It gives a centralized, integrated view of the loans and grants under the student’s complete life cycle,” Opperman says. “Everything is there.”

You may see a lot of terms and abbreviations you don’t recognize, but there’s a glossary to help you understand them.

What you won’t find

The NSLDS only provides information about federal loan programs, so you will not see details about private loans. To get that information, you’ll need to contact your private loan’s servicer or your school’s financial aid department. You also can review your credit report (you are entitled to one free credit report annually) to find the information.

You also won’t find:

  • Real-time balance accounts. You should see the outstanding principal balance for each loan, but this number may not include the most recent data. Contact your loan servicer for the most up-to-date numbers.
  • Information about nursing and medical loans. While these are federal loan programs, they are not included in the NSLDS. Contact your school’s financial aid department for information about nursing or medical loans.
  • Loans you are not responsible for paying. Any federal loans your parents took out on your behalf, including federal PLUS loans, will not be listed on your NSLDS account. For information about federal student loans that they are responsible for paying, your parents will need to create their own FSA ID and password to access the NSLDS data.

Even with these gaps in information, the NSLDS is a great place to start when you’re not sure whom to contact with student loan questions or when you’re trying to get on top of your loan payments. It’s also helpful if you’re trying to figure out what type of loans you have, which is necessary when you’re applying for certain loan forgiveness programs.

How to sign up for the NSLDS

As mentioned previously, to use the NSLDS you must have an FSA ID username and password, which serve as your login information and allow you to access data about your federal loans and grants online. The ID and password also provide access to many other Department of Education websites.

To create an FSA username and password, visit this link. Opperman says the certified student loan counselors who work with Credit.org recommend you never give out your FSA number or password, even to credit counselors. This information carries the legal weight of a signature, and it can be used to commit identity theft. Credit counselors can get student loan information from you rather than by directly accessing your NSLDS account.

The FSA ID and password application requires your email address, mailing address, date of birth and Social Security number. A cellphone number can be provided if you’d like to bypass answering security questions to retrieve an FSA ID or password.

To look at your federal loan and grant information, click on “Financial Aid Review” after entering your FSA ID and password into the NSLDS website. You do not have to enter loan information, as agencies that issued your federal grants and loans will be responsible for reporting information to the NSLDS.

Is this site accurate?

While the information on the NSLDS generally is accurate because it is provided by loan servicers, it is usually not up to date. Organizations that provide loan information for the NSLDS report on different schedules..

What if the info is wrong?

The NSLDS is not infallible; it’s important to check your page regularly for errors and inaccuracies. Here are some common issues with the NSLDS and how to remedy them:

An error

Check the NSLDS record for this loan, and contact the data provider listed. You will need to give the data provider information that will help the organization look into the error and remedy it. If the data provider is uncooperative and will not fix the error, contact the NSLDS Customer Service Center at (800) 999-8219.

Missing data

If updated loan information is not available within 45 days of disbursement, contact a guaranty agency, the loan’s servicing center or your school’s financial aid office. Otherwise, allow for typical time lapses in reporting.

Frequently asked questions about NSLDS

Usually, no. Typically, only data providers can update information related to your loan when they make their reports to the NSLDS.

The site has an SSL certificate, which means all data passing between your web browser and the site server is encrypted (provided you’re using an SSL-compatible browser, like the latest versions of Chrome, Firefox, Safari or Internet Explorer).

The Department of Education does not charge a fee to use the site.

The site is designed to work best with Microsoft Internet Explorer. You can use other browsers, but keep in mind that the NSLDS pages may not function or display properly on other browsers. The NSLDS system requirements page provides help with browsers and a link to contact information for further assistance.

You are strongly advised not to share your FSA password — ever — as your FSA ID and password are for your use only. Anyone else who uses your FSA information is committing a security violation, and your user ID can be terminated. Organizations can lose access to the NSDLS if they share FSA IDs and passwords.

No. FSA ID passwords expire every 90 days. Fifteen days before the password expires, you will see a warning that it must be changed soon. Users can reset their passwords anytime during that 15-day window by clicking on the “change password” link on the FSA login page.

In this situation, call the NSLDS support number: (800) 999-8219.

You can call the Federal Student Aid Information Center at (800) 4FED-AID — 1-800-433-3243 — between 8 a.m. and 11 p.m. Eastern Time, Monday through Friday, and 11 a.m. to 5 p.m. on Saturday and Sunday. This helpline is not available on federal holidays. You can also contact the office by email or live chat through the website.

Marty Minchin
Marty Minchin |

Marty Minchin is a writer at MagnifyMoney. You can email Marty here

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College Students and Recent Grads, Featured, Investing, News, Retirement

Where the Wealthiest Millennials Stash Their Money

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

There’s been much talk about millennials being fearful of the stock market. They did, after all, live through the financial crisis, and many are shouldering record levels of student loan debt, while grappling with rising fixed costs.

The truth is that historically, young people have always shied away from investing. A whopping 89% of 25- to 35 year-old heads of household surveyed by the Federal Reserve in 2016 said their families were not invested in stocks. That’s only two percentage points higher than the average response since the Fed began the survey in 1989.

MagnifyMoney analyzed data from the 2016 Survey of Consumer Finances, conducted by the the Federal Reserve, to determine exactly how older millennials — those aged 25 to 35 — are allocating their assets.

In 2016, wealthy millennial households, on average, owned assets totaling more than $1.5 million. That is nearly nine times the assets of the average family in the same age group — $176,400. Included were financial assets (cash, retirement accounts, stocks, bonds, checking and savings deposits), as well as nonfinancial ones (real estate, businesses and cars).

While the wealth of each group was spread across just about every type of asset, the biggest difference was in the proportions for each category.

To add an extra layer of insight, we compared the savings habits of the average millennial household to millennial households in the top 25% of net worth. We also took a look at how the average young adult manages his or her assets to see how they differ in their approach.

Millennials and the stock market

Despite significant differences in income, we found that both sets of older millennial households today (average earners and the top 25% of earners) are investing roughly the same share of their financial assets in the market – about 60%.

Among the top 25% of millennial households, those with brokerage accounts hold more than 37% of their liquid assets, or about $224,000, in stocks and bonds and an additional 26%, or $154,000, in retirement accounts. Meanwhile, just over 14% of their assets are in liquid savings or checking accounts.

By comparison, the average millennial household with a brokerage account invests a little over $10,000 in stocks and bonds, or 22% of their total assets, and they reserve about 21% of their assets in checking or savings accounts.

Millennial households invest most heavily in their retirement accounts, accounting for around 38% of their financial assets, although they have only saved $18,800 on average.

Wealthy millennials carry much less of their wealth in checking and savings, compared with their peers. Although wealthier families carry eight times more in savings and checking than the average family — $84,000 vs. $10,300 — that’s just roughly 14% of their total assets in cash, while for the ordinary young family that figure is around 20%

The Fed data show that those on the top of the earnings pyramid are able to save far more for the future, even though they’re at a relatively early stage of their careers.

Across the board, older millennial families hold the greatest share of their financial assets in their retirement accounts. Although that share of retirement savings is smaller for wealthier millennial families (26% of their financial assets, versus 38% for the average older millennial family), they have saved far more.

When looking at the median amount of retirement savings versus the average, a more disturbing picture emerges, showing just how little the average older millennial family is saving for eventual retirement.

The median amount of money in higher earners’ retirement account is $90,000 (median being the middle point of a number set, with half the available figures above it and half below). But the median amount is $0 for the typical millennial family, meaning that at least half of millennial-run households don’t have any retirement savings at all.

Millennials and their nonfinancial assets

Most of millennial households’ wealth comes from physical assets, such as houses, cars and businesses.

While nearly 60% of young families don’t own houses today, the lowest homeownership rate since 1989, homes make up the largest share of the family’s nonfinancial assets, Fed data show.

For the average-earning older millennial family, housing represents more than two-thirds of the value of its nonfinancial assets — 66.4%. On average, this group’s homes are valued at $84,000.

The homes of rich millennial households are worth 4.6 times more, averaging $470,000 — though they represents a lower share of total nonfinancial assets — 50%.

Cars are the second-largest hard asset for the average young family to own, accounting for about 14% of nonfinancial assets.

While rich millennials drive fancier cars than their peers — prices are 2.4 times that of average millennials’ cars — their $42,000 car accounts for just 4.5% of their nonfinancial asset. In contrast, they stash as much as 31% of their asset in businesses, 20 percentage points higher than the ordinary millennial.

It’s worth noting that young adults in general are not into businesses. A scant 6.3% of young families have businesses, the lowest percentage since 1989, according to the Fed data. (Among those that do have them, the businesses represent just over 11% of their total nonfinancial assets.)

The student debt gap

Possibly the starkest example of how wealthy older millennials and their ordinary peers manage their finances can be seen in the realm of student loan debt.

A significant chunk of the average worker’s household debt comes in the form of student loans, making up close to 20% of total debt and averaging $16,000. In contrast, the wealthiest cohort carries about $2,000 less in student loan debt, on average, and this constitutes just about 4.6% of total debt.

With less student debt to worry about, it’s no surprise wealthier millennial families carry a larger share of mortgage debt. About 76% of their debt comes from their primary home, to the tune of $233,500, on average. This is 4.5 times the housing debt of a typical young homeowner.

In some cases, the top wealthy have another 11% or so of their total debt committed to a second house, something not many of their less-wealthy peers would have to worry about — affording even a first home is more of a struggle.

When is the right time to start investing?

For many millennials the answer isn’t whether or not it’s wise to save for retirement or invest for wealth but when to start. Generally, paying off high interest debts and building up a sufficient emergency fund should come first. Once those boxes are ticked, how much young workers invest depends on their tolerance for risk and their future financial goals.

“It’s never too much as long as you’ve got money for the emergency fund, and as long as they are funding their other goals not through debt,” says Krista Cavalieri, owner and senior advisor at Evolve Capital in Columbus, Ohio.

The biggest mistake that Cavalieri has seen among her young clients is that very few have been able to establish an emergency fund that will cover at least three to six months’ worth of living expenses.

Kelly Metzler, senior financial advisor at the New York-based Altfest Personal Wealth Management, said older millennials may not be able to save outside of retirement accounts yet, which can be a concern if they want to buy a house or have other large purchases or unexpected expenses ahead.

Cavalieri said that’s because young adults’ money is stretched thin by the varies needs in their lives and the lifestyle they keep.

“Their hands are kind of tied at where they are right now,” she said. “Everyone could clearly save more, but millennials are dealing with large amounts of debt. A lot of them are also dealing with the fact that the lack of financial education put that in that personal debt situation.”

Shen Lu
Shen Lu |

Shen Lu is a writer at MagnifyMoney. You can email Shen at shenlu@magnifymoney.com

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College Students and Recent Grads

Applying for Public Service Student Loan Forgiveness: A Step-By-Step Guide

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

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Public Service Loan Forgiveness (PSLF) is a program designed to attract workers to jobs in the public sector by wiping clean remaining federal student loan debt after 120 qualifying payments.

Those payments represent 10 years’ worth of work with a qualifying public service employer, so because PSLF began in October 2007, the first applicants are just beginning to submit their forgiveness forms.

Qualifying for PSLF means meeting specific requirements for the employer, the loan type and the repayment plan — and the details can be overwhelming.

With that in mind, here’s a step-by-step guide to applying for PSLF.

Step 1: Figure out if you qualify.

First, it helps to understand why PSLF exists.

“It’s meant to be a light at the end of the tunnel for public service jobs, when people know they could make much more money going private,” says Betsy Mayotte, director of consumer outreach and compliance at the nonprofit American Student Assistance. “A lot of the careers — social workers, teachers, public defenders — require advanced degrees. The problem there is that people would accrue all this debt, then find they couldn’t stay in these public sector careers because they didn’t pay well.”

But the definition of public service is strictly defined, and “it’s not your job that matters, but your employer,” Mayotte adds. “It matters who signs your paycheck. You can be a groundskeeper at a state school and qualify. Conversely, you can feel as if your job is public service, but if your employer doesn’t meet the specific definitions, you don’t meet PSLF requirements.”

Employers that qualify for PSLF, per the U.S. Department of Education

  • 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 nonprofit, tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code
  • A private, nonprofit organization (though not a labor union or a partisan political organization) that provides one or more of the following public services:
    • 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 and support occupations)
    • Public education
    • Public library services
    • School library or other school-based services

Employers that DO NOT qualify for PSLF

  • For-profit organizations (this includes for-profit government contractors)
  • Nonprofits that are not tax-exempt under Section 501(c)(3) of the Internal Revenue Code or that do not provide a qualifying public service as their primary function
  • Labor unions
  • Partisan political organizations

You must work full time (whatever your employer characterizes that to be — though it must be an average of at least 30 hours per week by the PSLF definition) for one of these qualifying employers, or part time for two or more as long as it adds up to 30 hours per week, while you make your 120 on-time payments. You’ll also need to be in qualifying employment when you apply for your loan forgiveness.

Because you won’t be able to apply for PSLF until you have completed qualifying payments, it helps to build up a paper trail over the years. You should fill out and send an employment certification form (ECF) to FedLoan Servicing, which handles PSLF, each year and whenever you change employers. You’ll fill out personal information and have your employer sign the form before sending it in. The form isn’t required, but you’ll receive a response detailing your progress toward your 120 payments and confirming your eligibility — great for peace of mind as well as record-keeping.

“While you’re not required to submit the ECF at any point, it’s always a great idea to keep records,” says Adam Minsky, a Boston attorney who specializes in student loan and consumer issues. “An employer could go out of business, or lose the records of your employment. Mistakes can be made with paperwork. So if you find yourself having to make a case for yourself later, it helps to have all of this on record.”

FedLoan Servicing says my employer isn’t eligible. Can I appeal?

If the response to your ECF comes back and someone says your employer does not qualify you for PSLF, that’s generally the final decision, says Mayotte. “You can theoretically appeal, but these employer types are all pretty straightforward,” she adds. “The overarching rule is that there’s no wiggle room: You work for the government, a 501(c)(3) nonprofit or another qualifying nonprofit. The exception might be if you work for one of these other qualifying nonprofits, but you’ll need to make a case.”

To appeal, you can resend your ECF to FedLoan Servicing and ask for another review, or contact the Department of Education’s ombudsman unit. In both cases you should include evidence to show why you think your employer should qualify, Mayotte says.

But barring a clerical mistake by FedLoan Servicing, a change in decision is exceedingly rare.

Ensure your loan type and repayment plan qualify

PSLF provides forgiveness only for federal Direct Loans: Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans and Direct Consolidation Loans. Private loans, including bank loans that are “federally guaranteed,” do not qualify.

Loans made under other federal student loan programs, like Perkins Loans, aren’t eligible for PSLF on their own. They may become eligible, if they’re consolidated into a Direct Consolidation Loan — but it’s important to know that only payments toward that consolidated loan will count toward the 120-payment requirement.

Speaking of consolidation, here’s another thing you should know: If you consolidate qualifying loans, the clock resets to zero payments. A consolidation is considered a new loan, and again, only payments toward the consolidated loan will be counted toward your 120.

Don’t know which types of federal student loans you have? Check the Education Department site My Federal Student Aid. A pro tip from the Education Department: “Generally, if you see a loan type with ‘Direct’ in the name on My Federal Student Aid, then it is a Direct Loan; otherwise, it is a loan made under another federal student loan program.”

Additionally, you must be enrolled in the right type of repayment plan. Qualifying repayment plans include all four of the income-driven repayment plans, which base your monthly payment on your income and family size: Revised Pay As You Earn (REPAYE), Pay As You Earn (PAYE), income-based repayment (IBR); and income-contingent repayment (ICR).

Payments under the 10-year standard repayment plan qualify, but you’ll want to switch to an income-driven plan as soon as possible. If you stick with that 10-year repayment you’ll have paid off the loan, with nothing left to be forgiven under PSLF when you become eligible for it.

Make 120 qualifying payments

You’ll need to make all of those 120 payments during qualifying employment to apply for PSLF, but you don’t need to provide proof of those payments. Again, Minsky advises that it’s wise to keep your own records just in case there’s a clerical issue later — but generally, FedLoan Servicing will confirm the payments itself.

Note that the 120 payments do not have to be consecutive (nor, then, must be your employment with a qualifying public service employer). If you had periods of deferment or forbearance and stopped paying your loans, the count will pick up where you left off once you begin paying anew. Even defaulting on your loan payments doesn’t disqualify you, but you’ll need to rehabilitate the defaulted loan with your servicer before the payments can count toward your 120 again.

The payments do need to be on time, defined as “those received by your federal loan servicer no later than 15 days after the scheduled payment due date.” If your payment isn’t on time, or you pay less than what you’re required to that month, it won’t count toward your 120. You may make multiple smaller payments, but they must add up to at least the minimum payment amount for that month.

Step 2: Apply for loan forgiveness

After you’ve completed your 120 payments — phew, you did it! — go to the PSLF application here. The form is six pages long, but the actual application is only two. And you, the employee, must fill out only the first page: basic personal information like your date of birth, Social Security number and contact details. You’ll also need to certify under penalty of law that the information you’re submitting is truthful.

The second page is for detailing the employer’s information, and either you or your employer can fill out the top part. Here’s what it requires:

  • Employer’s name
  • Federal Employer Identification Number (FEIN, which can be found on your W-2 — or ask your HR department)
  • Your dates of employment
  • Whether you were a full- or part-time worker
  • Which category of public service your employer falls under

At the bottom of the page, there’s a section for your employer to sign, certifying that the information above is accurate.

You’ll need to repeat that process for every qualifying employer. (That’s why it’s smart to keep track of it all by submitting ECF forms annually and whenever you change employers.)

The remaining four pages of the application form reiterate the details of what it takes to qualify for PSLF. They also explain where to send the completed application form:

  • You can mail to

    U.S. Department of Education, FedLoan Servicing
    P.O. Box 69184
    Harrisburg, PA 17106-9184

  • Fax to 717-720-1628; or
  • Upload to MyFedLoan.org/FileUpload, if FedLoan Servicing is already your servicer.

In rare cases, you may not be able to obtain employers’ certification. There’s a checkbox on page 1: “Check this box if you cannot obtain certification from your employer because the organization is closed or because the organization has refused to certify your employment. The Department will follow up to assist you in getting documentation of your employment.”

“That’s another reason it’s prudent to send the ECF forms every year, because you’ll already have a signature on record,” Mayotte says. “I’ve heard of a few cases where employers were not comfortable filling out the form for privacy reasons, but usually if you show them the form and explain a bit, you can change their mind.”

Mayotte says borrowers should contact FedLoan Servicing for alternatives if they find themselves in this situation.

FAQ and other things to know

The process is estimated to take up to 60 days, a Department of Education spokesman confirmed to MagnifyMoney.

Yes. If you’ve made your 120 payments and are looking to switch to an employer who isn’t eligible, be sure to file your PSLF application first. You must also be employed full time at a qualifying employer or employers at the time the forgiveness is granted, according to the Department of Education.

“No concrete proposal seems imminent, but whenever something happens, there’s a general view among experts that a change to PSLF won’t be retroactive to existing borrowers,” Minsky says.

The payment count restarts, back at zero. The consolidated loan is considered a new loan, and only payments toward it will count.

Here are the employer certification form and the PSLF application.

While studentaid.ed.gov has all of the official information, it’s spread across different pages and can be unwieldy. American Student Assistance offers an excellent guide that breaks down the basics and also links to official webpages and forms.

Alternative loan forgiveness programs

Beyond PSLF, there are other federal programs to forgive or discharge federal student debt. These include:

Industry-specific forgiveness programs

  • Perkins Loan Cancellation and Discharge: This applies to people who perform certain types of public service or are employed in certain occupations. According to the Department of Education, for each complete year of service a percentage of the loan may be forgiven. That percentage varies by job/employer type, and the following workers qualify:
    • Volunteer in the Peace Corps or ACTION program (including VISTA)
    • Teacher
    • Member of the Armed Forces (serving in area of hostilities)
    • Nurse or medical technician
    • Law enforcement or corrections officer
    • Head Start worker
    • Child or family services worker
    • Professional provider of early intervention services
  • Teacher Loan Forgiveness: Teachers who work full time for five complete and consecutive academic years (in certain elementary and secondary schools and educational service agencies that serve low-income families, and meet other qualifications) may be eligible for forgiveness of up to a combined total of $17,500 on Direct Subsidized and Unsubsidized Loans and Subsidized and Unsubsidized Federal Stafford Loans. (Those who have only PLUS loans are not eligible.) Read more about loan forgiveness programs available to teachers, including TEACH Grants and state forgiveness programs.
  • Programs for lawyers: Lawyers with at least $10,000 in federal student loans may qualify for the Department of Justice Attorney Student Loan Repayment Program (ASLRP). Additionally, the John R. Justice Student Loan repayment program provides assistance for state and federal public defenders and state prosecutors for at least three years and is renewable after 3 years. Benefits cannot exceed $10,000 in a calendar year and cannot exceed $60,000 per attorney total. .) Read more about programs for lawyers, including forgiveness programs through specific law schools and certain states.
  • Programs for doctors and health professions: Several programs are available, including multiple military doctor loan forgiveness options through the Army, Navy and Air Force. Other options include state-specific forgiveness and the National Health Service Corps (NHSC), which can provide up to a $50,000 to repay a health profession student loan in exchange for a two-year commitment to a NHSC site in a high-need area.

Income-based repayment plans

  • This isn’t a traditional cancellation program like what’s above. These four federal income-driven repayment plans base your monthly payment on your income: Revised Pay As You Earn (REPAYE), Pay As You Earn (PAYE), income-based repayment (IBR) and income-contingent repayment (ICR).The payment terms vary, and your outstanding balance is forgiven after your repayment term of 20 to 25 years is complete. Because the monthly amount you owe will fluctuate based on your income, you could end up repaying your loans before your term is up, or you could have a balance that will be forgiven. However, if you receive student loan forgiveness this way, the canceled debt is taxable. (Only borrowers whose loan forgiveness stems from their employment are exempt from paying taxes on canceled student loan debt.)

Loan discharges for special circumstances

There are a few other times you may be able to get your student loans forgiven, but they’re relatively rare, and they’re generally because of bad circumstances. You can find out more about these discharges on the Department of Education’s website:

Julianne Pepitone
Julianne Pepitone |

Julianne Pepitone is a writer at MagnifyMoney. You can email Julianne here

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College Students and Recent Grads, News

3 Reasons to File Your FAFSA Right Now

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

It’s October, and that means college-bound families can start applying for financial aid for the 2018-19 school year. the Free Application for Federal Student Aid, or FAFSA, opened Oct. 1.

Technically, families have until next summer — June 30, 2018 — to submit their FAFSA for 2018-19. But experts recommend filing as soon as possible in order to maximize the amount of aid students can receive. That’s because state, federal and school funding for various types of financial aid is often limited, and can run out.

Don’t leave money on the table. A recent study by social sciences researcher, Michael S. Kofoed at the United States West Point Military Academy found that each year, students who do not file miss out on as much as $9,741.05 in federal grant and student loan money, aggregating to some $24 billion annually.

“To get the most aid, you’re going to want to make sure you are doing it early,” says Jasmine Hicks, national field director with Young Invincibles, a nonprofit advocacy group for young adults.  Hicks has trained college-bound families on what they need to successfully fill out and submit the FAFSA.

Here are a few tips to help you file your FAFSA for the maximum amount of aid available to you.

1) Your state and college FAFSA deadlines might be even earlier than the federal cutoff.

Adding to your list of dates to remember, states and schools have their own FAFSA filing deadlines for grants and scholarships.

For example, for Delaware students to be eligible for state scholarships and grants for  2018-19, they must file their FAFSA by April 15, 2018. But the submission deadline for students who wish to be considered for Delaware State University scholarships and grants is even earlier, on March 15, 2018.

You can check here to see your state’s filing deadline. Be sure to enter your state of legal residence and the school year for which you’re applying for aid to view the cutoff date for your state. Be sure to double-check the deadline, as it could be earlier than the federal filing deadline and some states have different deadlines for different programs.

For example, Alaska’s Education Grant asks applicants to file the financial aid application as early as possible after the Oct 1 open date, since awards are made until the fund is depleted.

But the “official” FAFSA submission deadline for the scholarship is the same as the federal one.

Hicks says families should check a school’s website to check and see if there is a different filing deadline date than June 30, 2018. Some schools may require students to file earlier than June 30 to be considered for institutional scholarships and grants.

2)  The FAFSA is the key to unlocking more than just need-based aid.

If you don’t file the FAFSA, you might also remove yourself from the pool of eligible recipients for state and institutional aid, as well — even if they aren’t income-based. Many aid offerings require a FAFSA.

Here’s a list of all the federal aid for which you need to complete a FAFSA to be eligible:

  • Federal direct student loan
  • Federal work-study program
  • Federal PLUS loan (for parents)
  • Federal PELL grant
  • Federal Supplemental Educational Opportunity Grant (FSEOG)
  • Teacher Education Assistance for College and Higher Education (TEACH) Grant
  • Iraq and Afghanistan Service Grant

And that’s just federal aid. As we mentioned before, states and schools may use information from your FAFSA to determine if they will award you merit-based grants and scholarships. And they may have their own submission deadlines.

3) Financial aid money may run out.

Students may think they have tons of time to submit their application, but, if you wait to file, you may miss out on “free money” due to limited resources. Let’s put it another way: If the funds run out before you submit your FAFSA form, you could receive less money compared with what you would have gotten had you filed earlier — or you might get nothing at all.

If you know you will need scholarship or grant money to fund your education, you should make filing the FAFSA early your first priority. “There’s really no reason to wait,” says Hicks.

Fortunately, it’s become easier for families to tackle the FAFSA.  The Department of Education moved the application’s from January to October, beginning with the 2017 graduating high school class. Prior to the rule change, families could not submit their FAFSA until January for students attending college in the fall. The rule change allows families to submit the FAFSA form earlier, and use older tax information to fill out the form so they are able to meet early deadlines for financial aid.

Students can now use family tax information dating back as far as two years, so applicants no longer have to wait to file until their parents or guardians file their taxes for the current tax year.

On top of that, FAFSA forms now include a new  IRS data retrieval tool, which will automatically pull in your parent’s tax information from two years ago, so you don’t have to shuffle through a stack of papers looking for letters and numbers corresponding to the information you need to input.

Where to get help to finish up your FAFSA

The tax information may be easy to pull in electronically, but the FAFSA has more than 100 questions and isn’t the easiest form to decipher overall.

“Students often think of the FAFSA as a huge and daunting task,” says Hicks. “They don’t feel like they are able to do it or equipped to do it.”

Get help if you aren’t confident in filling out all the information on your own, so you don’t put off filing the FAFSA any longer. There may also be follow-up requests, like income verification, that, if overlooked or left incomplete, could delay your receiving all or part of your financial aid award.

Up to  40 percent of college-bound students who apply and are accepted to college fall prey to a phenomenon called ‘summer melt.’ They never make to campus their freshman year because of mistakes that trip them up in the process. Many of the mistakes have to do with the financial aid process and can be avoided if you get help early on.

Your high school guidance or college counselor may be able to assist you with your application.

If you feel you need more assistance than your counselor can provide, look to organizations or access programs that focus on helping students complete the forms required to give financial aid, like the College Goal Sunday Program hosted by the National College Action Network, or Reach4Success.

Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

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Building Credit, College Students and Recent Grads, Credit Cards, Earning Cashback

I Got My First Credit Card One Year Ago – Here’s How I Already Have a Good FICO Score

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

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When I moved to the U.S. from my hometown, Hangzhou, an eastern Chinese city, in 2012 to pursue my undergraduate degree, the thought of establishing a credit history wasn’t even on my radar. I was, after all, an international student from China, where day-to-day credit card use has only recently caught on.  

It wasn’t until I returned to the U.S. a few years later to pursue my master’s in Chicago that I realized I’d need to establish credit if I planned to launch my career in the States.  

It’s been only a year since I opened my first card last September, and I already have a solid FICO score – 720, the last time I checked.  That’s not a perfect score by any means, but it lands me safely in the “good” credit range, meaning I probably won’t have trouble getting approved for new credit in the future. I still have work to do if I want to get into the “very good” credit category, which starts at 740, according to MyFICO, but for a credit card newbie I’m not disappointed in my progress so far. 

Here’s how I did it:  

I selected the right card for my needs
 

I wish I could say I diligently researched credit cards to choose the best offer and best terms, but honestly, I just got lucky: 

Shortly before graduate school started, I visited friends in Iowa. When we were about to split the bill after dinner at a Japanese restaurant, I noticed that all my friends had a Discover card with a shimmering pink or blue cover. The Discover it for Students card was known for its high approval rate for student applicants, and had been popular among international students. 

I thought, “Oh, maybe I should get this one, too.”  

One of the friends sent me a referral link that very night. I applied and got approved quickly. We both received a $50 cash-back bonus after I made my first purchase — an iPhone — using the card through Discover’s special rewards program. I even received 5 percent cash back from the purchase.  

Besides imposing no annual fee, the card has other perks, like rewarding me with a $20 cash-back bonus when I reported a good GPA, letting me earn 5 percent cash back on purchases in rotating categories, and matching the cash-back bonus I earned over the first 12 months with my account. For me, it was a great starter card, but there are plenty of other options out there.

Check out our guide on the best credit cards for students. 

I also could have explored other options of establishing credit, like opening a secured card, for example, which would have been a smart option if I hadn’t been able to qualify for the Discover it student card.

I never missed a payment

Despite my very limited financial literacy at the time, I attribute my current stellar credit score to the old, deeply ingrained Chinese mentality about saving and not owing. 

I never missed payments, and I always paid off my balance in full each month, instead of just making the $35 minimum payment. I didn’t want to pay a penny of interest. 

Credit cards carry high interest rates across the board, but student credit cards generally have some of the highest APRs. This is because lenders see students like me — consumers without much credit history — to be risky borrowers, and they charge a higher interest rate to offset that  risk. 

Best Student Credit Cards October 2017 

It wasn’t until much later when I learned that payment history is critical to credit establishment. In fact, it is the biggest factor there is. It accounts for as much as 35 percent of my FICO score. Naturally, I felt like I dodged a bullet! 

A Guide to Getting Your Free Credit Score 

I was careful not to use too much of my available credit

My friends with more experience advised me to use as little of my available credit as possible. They warned me that overuse had hurt their credit scores in the past. This didn’t much sense to me, but I followed their advice, for the most part diligently.. 

I later learned this is almost as important as paying bills on time each month. Your utilization rate is another 30 percent of the FICO score. Credit experts urge cardholders to keep their credit utilization ratio below 30 percent.  

That means if you have three credit cards with a total available limit of $10,000, you should try never to carry a total balance exceeding about $3,000. 

A Guide to Build and Maintain Healthy Credit 

I beefed up my score with on-time rent payment 

Keeping in mind the importance of not maxing out my credit card, I never considered paying my rent with the card. In fact, some landlords charge credit card fees for tenants who try to pay with plastic.  

But I did find a way to establish credit by paying rent using my checking account. 

I paid rent to my Chicago landlord through RentPayment, an online service. RentPayment gave me the option of having my payments reported to TransUnion, one of the three major credit-reporting agencies. Because I knew I’d always pay bills on time, I signed up for the program.  

This likely helped me improve my credit mix, another key factor influencing one’s credit score. The more types of accounts you show on your report, the better your score can be — providing you make all your payments on time.  

Yes, I made mistakes. This was my biggest one.

My first foray into the world of credit wasn’t completely blip-free.  

The only thing that hurt my credit, besides my short credit history, was that I had tried signing up for a Chase credit card and other ways to finance my iPhone just a few days before I applied for my Discover card.  

None of the other banks approved my applications, and my score went down from the very beginning due to the number of “hard inquiries” against my report. Hard inquiries occur when lenders check your credit report before they make lending decisions, and having too many inquiries in a short period of time can result in several dings to your credit score. 

I’ve learned my lesson, though. And I haven’t applied for a new credit card since. Today, as I said, my FICO score is a healthy 720, and I am on the lookout for a second credit card now that I’ve graduated and gotten a job. 

Shen Lu
Shen Lu |

Shen Lu is a writer at MagnifyMoney. You can email Shen at shenlu@magnifymoney.com

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