College Students and Recent Grads, Reviews, Student Loan ReFi

LendKey Student Loan Refinance Review

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

LendKey Student Loan Refinance Review

Updated April 13, 2017

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

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

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

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

Lendkey

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

Lower Payments

Refinance your way to a more manageable monthly payment.

Lower Rates

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

Simplified Finances

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

Different Repayment Options

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

Pros of Using LendKey

A Unified Application Process

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

Cosigner Release Available

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

No Origination Fee

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

Further Interest Rate Reduction

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

0.25% ACH Interest Rate Reduction

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

Federal and Private Loans Can Be Consolidated Together

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

Over 40,000 Borrowers Serviced

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

Excellent Customer Support

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

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

Eligible Schools

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

Return Policy

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

Cons

LendKey Doesn’t Give You the Complete Picture

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

The Fine Print You May Miss

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

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

The Application Process

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

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

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

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

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

Alternatives to LendKey

SoFi

SoFi stands out with a job placement programs, free wealth management for borrowers and even a dating app. More importantly, SoFi has low interest rates, with variable rates starting at 2.57% and fixed rates starting at 3.375%.

SoFi logo

Apply Now

Earnest

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

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

Fixed interest rates start at 3.75% and variable interest rates start at 2.76%.

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

Earnest

Apply Now

Final Thoughts

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

Lendkey

Apply Now

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Will Lipovsky
Will Lipovsky |

Will Lipovsky is a writer at MagnifyMoney. You can email Will at will@magnifymoney.com

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College Students and Recent Grads, Retirement, Strategies to Save

Why the ‘Save 10% for Retirement’ Rule Doesn’t Always Work

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

To keep saving simple, many retirement experts and financial planners tout a general 10% rule for most savers: If you start saving at least 10% of your income in your 20s, you should have plenty saved up by the time you’re ready to retire.

Why save for retirement?

Social Security might not be around to help you make ends meet in retirement; that’s even more likely for millennials and the cohorts that follow. With the nation’s current birth and death rates, it’s estimated that Social Security funds will be exhausted by 2034.

Whether or not the future retirees of America will have Social Security to rely on, their benefit check alone likely won’t be enough to meet all of their needs in retirement.

According to the U.S. Bureau of Labor Statistics, retired households need to bring an average $42,478 to meet their annual expenses.

And yet, as of March 2017, the average monthly Social Security benefit for retirees was $1,365.35, or about $16,384 annually. That’s only slightly more than the U.S. Census Bureau’s 2016 poverty threshold for two-person households 65 and older ($16,480). Even in households where two spouses are receiving Social Security income, that’s still less than $32,000 per year.

That’s why it’s so important for workers to set additional income aside during their working years. When Social Security falls short, those extra savings will be essential.

Who does the 10% retirement rule work best for?

It’s likely that 10% became the rule of thumb simply because it’s easy to remember and makes the mental math a lot easier. But it’s important to understand who the rule is targeting: younger workers.

Since younger workers have more time to let their money grow, they can afford to save a bit less in their early days. But the advice changes as workers’ savings windows narrow with age. A 40-something worker, for example, who never saved for retirement may be encouraged to save twice as much for retirement since they have a shorter timetable.

“Ten percent may be enough, it may not be enough, and it may even be too much,” depending on your age and financial picture, says Amy Jo Lauber, a certified financial planner in Buffalo, N.Y. Someone paying off student loans or high-interest credit cards simply may not be able to put away 10% of their income.

It gets increasingly complicated when you consider your personal income and ability to save as well as your retirement goals.

“Typically, younger clients do not have complex situations and can get by with simple strategies. Once there are competing priorities, such as saving for a home, kids, and kids’ college, then things get complicated and more sophisticated strategies are required,” says Howard Pressman, a certified financial planner and partner at Egan, Berger & Weiner.

As Pressman suggests, you might need to tweak the rule if you’re starting to stash away retirement funds at an earlier or later age or want to put more money away now for a more lavish retirement.

Timing is everything

This chart from JP Morgan’s 2017 Guide to Retirement demonstrates the power of saving early for retirement.

At a modest 6% annual growth rate, Consistent Chloe, a 25-year-old who puts away $5,000 a year until she reaches age 65 should have a retirement account balance of more than $820,000, according to the bank. And when all’s said and done, only $200,000 would have come out of her own pocket — the rest would have resulted from the power of compounding interest.

In comparison, Nervous Noah, a more timid 25-year-old saver, could put away the same $5,000 a year in a savings account earning far less annual interest on his cash. After the same 40-year period, he would only have a balance of $308,050.

Investing earlier can bring even greater success. If a person starts putting away $5,000 a year at 20, growing at 6%, their balance at 65 would be about $1,132,549, which we calculated using the U.S. Securities and Exchange Commission’s compound interest calculator. That’s more than $300,000 added to Consistent Chloe’s retirement balance for beginning just two years earlier.

The final balance at 65 drops below $1 million for anyone starting after 25. As you can see above, those who begin saving will have less and less to live on in retirement.

7 retirement savings tips

  1. Start early

The emphasis of this rule is starting early. The earlier you save, the more you can take advantage of compound interest.

“Compounding is earning interest on interest earned in prior periods and is the most powerful force in all of finance,” says Pressman. To make the most of this rule, start saving 10% of your income for retirement by the time you turn 25.
Start by maxing out your 401(k) or IRA contribution limits for the year. If you still have additional funds, it might be time to meet with a financial planner to find out how to best invest your surplus.

  1. Know your options

The best place to stash retirement savings is either an IRA or a 401(k). Your money simply won’t grow enough to beat inflation if you leave it in a low-interest-bearing account like a checking or savings account.

  1. Make debt and emergency savings a priority

“Before anyone starts focusing on retirement saving, the first thing they should do is to establish an emergency cash reserve. This is to protect them from a job loss, a health emergency, or even an expensive car repair,” says Pressman. He recommends saving three to six month’s worth of expenses in a savings account.

If placing 10% of your income in a retirement account is too much of an ask because you have more pressing financial obligations like higher-interest debts, or don’t earn enough to cover your expenses, you should address those before increasing your retirement contribution.

Generally speaking, if the interest rate on any debts you owe is higher than what you’d earn on your retirement savings, you’ll make more progress toward your financial goals by addressing the higher-interest debt first.

  1. Plan differently if you have irregular income

Lauber says those who are freelancing and cobbling together a living may need to put several financial policies in place to help them navigate with irregular income.

“The 10% rule works for them but only if other measures are in place for the immediate day-to-day needs,” says Lauber. You can still create a budget with irregular income, but you might need to approach retirement saving more aggressively when income is higher, and strategize your saving to compensate for months when income is nonexistent or low. Find more tips on how to manage irregular income here.

  1. Make the most of your match

Don’t leave free money on the table. If your employer offers to match your contribution, Kristi Sullivan, a certified financial planner with Sullivan Financial Planning in Denver, Colo., advises individuals to save as much as your employer matches immediately or 6% if there is not a match. That way, you won’t miss out on free additions to your retirement nest egg.

  1. Automate your contribution

Out of sight, out of mind. Automate your retirement contribution to ensure you pay yourself first.

“Typically, once it’s done through payroll deduction, the person seldom misses it,” says Lauber.

  1. Check in regularly

Don’t just “set it and forget it.” Mark R. Morley, certified financial planner and president of Warburton Capital Management, stresses “clients must be ‘invested’ in their own plan.”

He says to check periodically on your retirement account and make adjustments where necessary. If you have a financial adviser, you may want to schedule regular progress meetings.

“When a client is engaged in their own plan and can see real results, we can work on the two variables that affect the retirement accounts: time and money,” says Morley.

Brittney Laryea
Brittney Laryea |

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

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College Students and Recent Grads, Strategies to Save

9 Things Every 20-Something Should Know About Money

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

If you’re a “younger” millennial and find yourself struggling with your finances in your 20s, pay attention.

There’s no better time to learn about money than when you’re young and broke. The 10 years between 20 and 30 go by fast, and will be full of many important life changes that can shape your overall financial future. Whether it’s financial planning, saving, or investing, the sooner you start, the better off you’ll be.

If you can educate yourself on how to manage the little money you have now, you’ll be better prepared to manage your finances effectively when you earn more and life inevitably gets more complicated.

Lucky for you, today’s technology provides you with a wealth of (free) financial information at your fingertips, including this handy list of expert-approved money lessons to learn on your journey to dirty 30.

9 Things You Should Learn about Money in your 20s

#1: The magic of spending less than you earn

The first financial lesson you should learn is simple enough: spend less than you earn. Most people mess this one up.

At least, Pew Research shows 68% of Americans say they use credit cards and loans to make purchases that they otherwise wouldn’t be able to afford with their income and savings. This leads to more stress in your life, a dependency on debt, and an endless cycle of working to pay off or evade lenders.

Learn to follow a budget well and you’ll easily learn to live within your means. You may even take it a step further in your 20s — save more by living below your means, not just within your paycheck.

“Gain peace of mind that you’re being responsible by setting up guidelines for your spending and savings early in your 20s,” says Dan Andrews, certified financial planner and founder of Well-Rounded Success. The website provides financial guidance geared toward a millennial audience.

If you get those guidelines set early in your life, you’ll likely have an easier time addressing more complicated money topics like homeownership and having kids. If not, a large unexpected bill or the birth of a child could destroy your finances.

#2: Eventually something will go wrong

In the savings hierarchy, your emergency fund should be your first priority.You are bound to run into an emergency eventually.

“I know when you’re a 20-something, you feel invincible, but the fact is, emergencies are still going to arise, it’s not a matter of if, but when,” says Gen Y financial expert and author of The Broke and Beautiful Life Stefanie O’Connell.

The rule of thumb says to set aside 6 to 12 months’ worth of fixed expenses in case of an emergency. You can stash this money in a checking account, savings account, or any of these other options.

If you don’t plan for a financial emergency, you’ll find yourself in a tight spot when an emergency undoubtedly happens. If, for example, you lose your income, a liquid savings buffer might save you from turning to your parents for money or taking on high-interest debt to survive. That’s not an improbable crisis to imagine, as almost half of American households experience volatile income.

“By setting aside money, you can live off this savings while you look for new work, or better yet, have the flexibility to pursue the work you want,” says Andrews.

After the dust settles, you can high-five yourself for handling your crisis on your own.

#3: “YOLO” is a pretty terrible financial strategy

One of the hardest parts of your 20s is learning to think past “today” when making money decisions — especially when everyone seems to want to live in the moment.

Really ask yourself what goals you have for the future: Starting your own business? A family? Now is the time to stop thinking and start planning for how you’ll afford those life milestones when the time arrives.

Make it a habit to plan and save early for these stages before you reach them. When you’re planning, think about what’s most important to you and nearest in your life’s timeline. Don’t forget to consider the time it would take to save for larger expenses.

O’Connell gives the following example: If you decide to start saving for a $50,000 home down payment just two years before you plan to buy a home, you’ll have to save $25,000 a year. That’s tough. But if you think about that milestone money goal from 10 years out, you only have to save $5,000 a year, which is much more manageable.

Not every account has to be for a huge savings goal like a mortgage payment. You can practice the habit of planning ahead with any large purchase you plan to make.

“Create fun savings accounts, like a travel fund or to save up for that Dr. Seuss painting that you really want. These savings accounts motivate you to stash away more money for the financial milestones in your future,” says Andrews.

#4: The key to getting a killer credit score

Don’t get bogged down trying to understand everything about your credit score and why it’s so important right now. Just remember a few key facts so that you don’t mess up your score early and spend the next decade trying to undo the damage.

  • Use your credit card, but pay it off in full each month.
  • Don’t max it out. In fact, never use more than 30% of your total available limit.
  • The best strategy: Put one small bill or recurring purchase (like coffee) on your credit card, and pay it off each month. Use cash for everything else.

If you focus on those things, you should easily avoid derogatory marks on your credit report and quickly build a healthy credit score. Learn more tips to build your credit score here.

#5: One day you will get old and want to retire

Remember how we said it’s hard to think far into the future in your 20s? Well, this is going to be challenging. But it’s crucial to start saving for retirement as early as possible. Your biggest advantage to saving for retirement is your age. The younger you are, the more time you have to take advantage of compound interest on your retirement savings and other investment accounts.

So figure out what retirement savings options your employer offers (typically a 401(k)) and open an account. If your employer offers a match, then that is amazing and don’t miss out — it’s free money.

Contact your employer’s human resources department for help working through your options. That is what they are there for. A great, hands-off option for young savers is a Target Date Fund. Then set up an automatic payroll deposit at least high enough to capture any match your job offers.

Don’t worry about the swings of the stock market. Don’t worry about picking the perfect portfolio. Just put money in your retirement fund as early as possible and get to the complicated stuff later. The point is that you start saving for retirement — not that you become the next Warren Buffett right away.

“Too many young people don’t take advantage of all the benefits they can get at their workplaces. Simply ask your HR department if there’s a match on 401(k) contributions,” says Andrews.

Once you get a good grasp on retirement savings, you can upgrade to more sophisticated investing strategies.

#6: How to be your own “tax guy”

Do your own taxes at least once. The experience will give you a better idea of how the tax system works and can save you an average $273 you’d otherwise spend on tax preparation fees. Many free and low-cost options exist to e-file your taxes, including free filing options found on the IRS website.

“When you do your own taxes it also helps to demystify the process. If you decide to pay for help in the future, you’ll be able to vet your future accountant and hold your own in conversations,” says O’Connell.

She advises young people to take the opportunity to learn about how the tax system works and any tax strategies you can use to save money in the future, like making Roth IRA contributions, tuition payments, or charitable donations.

Another reason to learn now: Your taxes may never be simpler to understand. There may be special circumstances that require you to hire a tax professional when you’re older, like getting married, investing in the stock market, or owning your own business. If you feel like you need professional help, look for a tax preparer since their rates are typically cheaper than hiring a Certified Public Accountant.

#7: When to ignore social media


Don’t get caught up in spending your money to catch up with whatever your other friends are doing. You don’t know what anyone’s financial picture looks like behind all those Instagrammed vacations or a wedding album fit for a princess.

“Your day will come when you make your friends jealous, but that’s not the point. The point is to focus on your financial life to give you the foundation to live your great life,” says Andrews.

He advises 20-somethings to gain resilience while young, because you’ll likely compare your lifestyle to others at every age.

#8: Your debt won’t go away if you ignore it

If you do decide to ignore your debts, you could suffer consequences even worse than a dinged credit score.

Debt collectors can sue you for payment. If you ignore a debt lawsuit, the resulting judgment could result in garnished wages or lost assets.

“You’ve got to become proactive about your debt. It has to go from being something you procrastinate to something you prioritize. And a priority is something you build your life around,” says O’Connell.

O’Connell suggests you change your mindset to think of debt as an emergency that needs to be addressed immediately.

“In moments of crisis we don’t make excuses, we get ruthless because we have to. Excuses like, ‘but it’s a special occasion’ or ‘I can’t give up my vacation’ don’t even cross our minds,” says O’Connell. She adds getting ruthless might mean making some sacrifices and hustling to earn more income, but it’ll be worth it when you’re debt-free.

Struggling to make your student loan payments? You’ve still got options.

#9: How and when to negotiate your salary

Remember, the salary you earn at your first real-world job “will serve as the anchor from which you negotiate future raises, making your starting salary, arguably, the most important of your career,” says O’Connell.

That in mind, it’s worth negotiating a bit to get the best deal you can when you’re presented with your first employment offer. Hiring managers and recruiters expect candidates to negotiate; to them, it demonstrates initiative. The experience will also give you an opportunity to educate yourself about negotiation skills and get valuable, real-world practice.

Again, the internet is your friend here. You can learn salary negotiation tactics from numerous online resources, then practice with friends or mentors so you’re ready when a real offer is on the table. One word of warning: Don’t bite off more than you can chew. Remember, you can ask for much more than more money (think: commuter benefits, education credit, etc.).

If you’re asking for a raise with a current employer, consider the average pay raise for salaried employees in 2017 is 3%, according to the Economic Research Institute, a think tank that provides salary survey data to Fortune 500 companies. So asking for a salary hike from $50,000 to $60,000 is pushing it at a 20% pay raise without much experience to justify your ask.

To sum it all up…

Just do your best. Focus on learning these concepts, but don’t beat yourself up. If you stray from your path to financial freedom every now and then, it’s all right. You can’t expect to be a perfect money manager — even accountants have accountants — but if you correct yourself when you make mistakes early on, you’ll be glad you made the effort later on in life.

Brittney Laryea
Brittney Laryea |

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

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College Students and Recent Grads, Strategies to Save

13 College Costs You Don’t Think About

Advertiser Disclosure

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

When families think of financing a college education, they usually think about covering tuition costs. It’s easy to home in on tuition — after all, it’s an obvious, in-your-face expense. But tuition and fees don’t make up the largest portion of the average cost of college attendance.

In the College Board’s most recent Trends in College Pricing, researchers found non-tuition-related expenses at public four-year schools account for 61% of a total $24,610 average cost of attendance.

Here are a few hidden college costs for families to consider before the school year starts.

Housing

Room and board make up about 42% of the total cost of attendance at four-year public institutions, according to the College Board. After tuition, housing is the second-largest expense students will encounter.

For students who choose (or for whom it is required) to live in on-campus housing, room and board might be a non-negotiable expense. The cost to live in a dorm can vary from as low as $5,326 for the school year to more than $18,000 according to U.S. News Short List rankings. Generally speaking, it’s cheaper to live on campus in areas with higher rent, while off-campus housing is cheaper in areas with lower rental costs.

Other on-campus living requirements such as enrollment in the school’s meal plan, a security deposit, and dorm fees can also add up.

Don’t assume the university’s housing cost estimate is correct, as schools use different factors to calculate costs. A 2015 Trulia analysis found “schools often underestimate the cost of off-campus housing, sometimes by thousands of dollars for the school term.” For example, the University of California, Berkeley, estimates a student would spend $7,184 to live off campus, while Trulia’s data showed it would cost $12,375 for two students to share a two-bedroom apartment for nine months.

Tips to save on off-campus housing:

Compare costs to on-campus housing. Depending on where you attend school, a 9- or 12-month off-campus lease plus utilities and internet might actually be more expensive than room and board in a university dorm.

Look for roommates to help ease the burden of utilities and other bills.

Use search engines like Uloop and College Student Apartments to filter through housing options near your school and find even more savings.

Furniture and decor

Plan to budget a few hundred bucks for furniture and decor. If you’re lucky, your dorm or apartment might include a few pieces of furniture. Even then, you’ll need bedding, curtains, linens, and other staples. Plan to spend funds on furniture and decorations to make the new space feel like home.

The good news is that any college town where students are constantly moving in and leaving each year are great for the resellers market. Check out Craigslist in your area to save on furniture, or resale sites like AptDeco, Furnishare, or Furnishly. Facebook’s new marketplace feature is a good idea, too.

Pro tip: Consider starting a college registry. Target’s College Registry offers a 15% discount on any items that aren’t purchased. Also, don’t forget your student ID card. Some retailers may offer student discounts.

Parking fees

If you plan to commute or keep a vehicle on campus, set aside money for parking ahead of time. Schools typically offer a range of parking packages for students. For example, student parking permits at Boston University go for as low as $266.40 per school year for evening commuters, to $1,905.50 for those who live on campus and need to park overnight.

You may be required to pay a lump sum for parking at the beginning of each semester. Check if your school prices parking passes by location. If they do, research on-campus transit. You may be able to pay for cheaper parking farther from your classes, then hop on campus transit to class. Consider cheaper parking options like city parking lots or curbside options if there are any nearby.

Study abroad and other travel

College years are prime time for travel. Whether you’re hitting the beach with friends on spring break or considering an extended study abroad program, you could easily spend thousands of dollars on travel over the course of four years.

Study abroad programs, complete with room, board, instruction, and sometimes internships, can get pricey. For example, Northwestern University estimates a year studying abroad in Brazil to costs about $21,000 for students, while a summer abroad in the University of Georgia’s UGA en Buenos Aires program costs $4,294, plus about $3,000 in tuition and fees.

Often, students finance study abroad trips with financial aid. Just think it through before you take on more debt, especially if you’ve taken on a lot of student debt already. Many school study abroad offices offer scholarships for students. Another good source is Cappex.com, which tracks college scholarships.

Food

The average college and university charges about $4,500, or $18.75 per day, for a three-meal-a-day dining contract for a typical 8- or 9-month academic year, according to the Hechinger Report, an independent, nonprofit education news site.

If you want to use the meal plan but the standard campus meal plan is too expensive or wasteful for your budget, you could find savings in a lower-cost plan. Many post-secondary institutions offer lower-cost meal plan packages. Schools may also require first-year students or those living on campus to sign up for a meal plan, but allow upperclassmen and commuters to decide to what extent — if at all — they want to participate.

For example, at New York University, a student can pay $2,800 per semester for an all-access meal plan (28 meals per week) or as little as $1,210 per semester for a so-called “flex” plan (5 meals per week).

Books, fees, and supplies

Textbooks and class fees don’t come cheap. The average full-time student at a four-year public institution will spend $1,298 per year on books and supplies, according to the College Board.

Sometimes, fees come as a surprise. In an ongoing study, Wisconsin HOPE Lab researchers tracked the cost experiences of students at four public universities in Wisconsin. At one school, students on the waiting list for a required English course that was full were told to sign up for the online version. Without a heads up, the students were charged an unexpected $250 online course fee.

A student might also need to purchase special equipment or software essential to a course or course of study. Science and technology courses may tack on lab fees, while art students may shell out cash for studio time or class materials.

If you can get hold of a course syllabus early, you should. Don’t only look for what’s required to pass. Check carefully for any fees or payments needed to take the course before you show up. If you can’t get a copy of the syllabus and are unsure, you can usually reach the professor to ask via email.

Your family’s changing financial picture

stressed worker job work

You could be surprised by a rise in your cost of attendance if you or your family’s financial picture changes.

The effects of this scenario are demonstrated in the Wisconsin Scholars Longitudinal Study, a six-year-long investigation of how Pell Grant recipients attending public institutions in Wisconsin experienced the price of higher education conducted by the HOPE Lab.

Researchers found the financial burden on students grows over time as tuition rises and families experience financial changes. Twenty percent of students in the study experienced a median $1,215 hike in the Expected Family Contribution — how much of the cost of attendance their household was expected to pay after their first year. When your EFC grows, it means you’re likely to be awarded less financial aid.

Many students, they found, also lost eligibility for the Pell Grant and other aid dependent on Pell eligibility.

Dried-up scholarships and grants

Additionally, students usually receive the most financial aid for their first year of college, but scholarships and grants may not stick around for all four years. They could be allotted for the first year only, or a student may lose academic or financial eligibility. Many universities use “front loading” to attract freshman to the school. They recruit incoming freshman with grants and scholarships and may not continue to fund grants for continuing students. On average this increases the net price from the first to second year of college by about $1,400.

Contact your school’s financial aid office early on if you expect a change in income to affect your EFC, as you may be able to explain your situation in an appeal. If you receive a scholarship or grant, carefully scrutinize the terms to make sure you know how long the money will last and what you’ll need to do to keep the award.

A new laptop

For many courses, having a laptop or access to a personal computer is crucial to success. Be prepared to pay $700 to $1,500 for that success, depending on the specs you need to excel in your major.

Some of the pricing is dependent on the laptop’s operating system. Students can get a Google computer for a couple of hundred dollars or a PC for less than $700, while an Apple Macbook Air starts at about $1,000. Always ask about a student discount. Some retailers like Apple offer discounted education pricing models for students and educators. Others, like Best Buy, periodically send out a newsletter with college student deals. You could save hundreds just by leveraging your student status.

Try using the school’s computers to complete work outside of class if they come with the software you need already loaded. You may also be able to rent laptops, tablets, cameras, and other technology from your school or local retailers. If you need to purchase software, and it can be downloaded on multiple computers, you could share a login with a classmate to share and split the cost.

Club and organization fees

Socializing comes at a price in college. Campus organizations often charge membership dues ($10-$25 at the low end), but it can get much more expensive for students looking to enter a sorority or fraternity. UCLA estimates the average annual cost of room, board, and dues to be about $7,650 for sororities and $8,328 for fraternities. That’s before adding in all of the other membership costs like clothing and fees to attend social functions.

While in an organization, there will likely be multiple occasions when you would need to buy merchandise, gifts, or clothing for events. If you’re into sports, for example, you may want to participate in an intramural sports league. You might need to pay a league fee, then purchase equipment and a team uniform.

Overall, keep your budget top of mind when faced with these opportunities. You might think twice about handing over thousands to your new “brothers” if it means skipping meals later on in the semester.

Internships


Internships — especially unpaid ones — can get expensive. Internships present a great opportunity for students to connect with others in their selected field and learn on-the-job skills, but they don’t pay much. For a student financing their education alone, an unpaid or low-paying internship could mean a missed opportunity. You could get offered the internship of your dreams with a large company, then have to turn it down if the pay is too little to cover your living costs.

Let’s say you accept an unpaid part-time summer internship offer (in exchange for course credit) from a firm in an expensive city like Los Angeles. It may be nearly impossible to make ends meet without financial assistance from your family or loans. Yes, you could probably cover some costs with another part-time position, or save money by staying in co-living community like Purehouse, but you’ll be scraping by to eat decent food or do anything outside of work.

The most competitive and best-paying internships are quickly filled. Apply to paid internships early on if an unpaid internship is out of the question. Periodically check for paid spring and summer internships with fall semester deadlines. Look for internships close to campus or your family to offset costs. If the internship is in another city, check to see if you have family or friends you can stay with for the time.

“Fun”

Social events present great opportunities to connect outside of class with others in your major or cohort. However, being a social butterfly is a quick way to deplete any bank account.

For example, student season tickets for the 2016 Ohio State football season ran students $180 to attend all five Big Ten conference games. To attend an additional two conference games, students would need to purchase a $252 package. That’s before you spend money on food, drinks, and an outfit for the pre-game tailgate.

You only have four to six years to make long-lasting relationships in college that could affect the rest of your life, so it’s understandable to feel pressure to attend parties, hang out at bars, go to dinners, and other activities. However, you could go broke or get into debt if you’re not careful.

Look for free or low-cost events to attend, then be selective about which events and activities are worth it for your budget. Keep an eye on your spending and always ask if you can save money on meals, clothes, or events with a student ID discount. You might get teased for seeming “cheap,” but you could avoid putting these expenses on a credit card.

Health insurance and medical costs

If you do not get health coverage through your parents, some schools may require you to sign up for a health plan. For example, New York University automatically enrolls students in its school-sponsored health care plan, but students can waive the plan if they can provide evidence they maintain alternate health insurance coverage that meets the university’s minimum health insurance criteria.

The cost of a basic plan for the spring 2017 semester: $1,654. If you’re an out-of-state student and don’t find alternative insurance coverage in time for classes, you could be stuck paying the bill as “NYU requires that all students registered in degree-granting programs maintain health insurance.”

Shop around to be sure you’re getting the best coverage at the best price possible. That may mean going outside of your school’s designated plan. You might want to consider signing up for coverage in the federal government’s Health Insurance Marketplace or your state’s equivalent insurance marketplace.

Brittney Laryea
Brittney Laryea |

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

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College Students and Recent Grads, Pay Down My Debt

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

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19 Options to Refinance Student Loans - Get Your Lowest Rate

Updated: May 9, 2017

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

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

LenderTransparency ScoreMax TermFixed APRVariable APRMax Loan Amount 
SoFiA+

20


Years

3.38% - 6.74%


Fixed Rate*

2.565% - 6.490%


Variable Rate*

No Max


Undergrad/Grad
Max Loan
apply-now
earnestA+

20


Years

3.75% - 6.74%


Fixed Rate

2.76% - 6.24%


Variable Rate

No Max


Undergrad/Grad
Max Loan
apply-now
commonbondA+

20


Years

3.37% - 6.74%


Fixed Rate

2.56% - 6.48%


Variable Rate

No Max


Undergrad/Grad
Max Loan
apply-now
lendkeyA+

20


Years

3.25% - 7.26%


Fixed Rate

2.43% - 5.85%


Variable Rate

$125k / $175k


Undergrad/Grad
Max Loan
apply-now

We have also created:

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

Can I Get Approved?

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

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

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

This is particularly important if you have Federal loans.

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

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

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

Is it worth it? 

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

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

Is there an origination fee?

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

Is the interest rate fixed or variable?

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

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

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

Places to Consider a Refinance

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

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

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

1. SoFi: Variable Rates from 2.57% and Fixed Rates from 3.375% (with AutoPay)*

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

Go to site

2. Earnest: Variable Rates from 2.76% and Fixed Rates from 3.75% (with AutoPay) 

EarnestEarnest (read our full Earnest review) offers fixed interest rates starting at 3.75% and variable rates starting at 2.76%. 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.

Go to site

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

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

Go to site

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

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

Go to site

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 4.00% APR. You can borrow up to $100,000 for up to 25 years.
  • Citizens Bank: Variable interest rates range from 2.60% APR – 8.39% APR and fixed rates range from 3.74% – 8.24%. 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 Avenue: If you have a medical degree, you can borrow up to $250,000. Otherwise, you can borrow up to $150,000. Fixed rates range from 4.75% – 7.35% APR. Variable rates range from 3.00% – 6.25% APR.
  • Credit Union Student Choice: If you like credit unions and community banks, we recommend that you start with LendKey. However, if you can’t find a good loan from a LendKey partner, this tool could be helpful. Just check to see if you or an immediate family member belong to one of their featured credit union and you can apply to refinance your loan.
  • DRB Student Loan: DRB offers variable rates ranging from 3.89% – 6.54% APR and fixed rates from 4.45% – 7.54% 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.
  • Education Success Loans: This company has a unique pricing structure: your interest rate is fixed and then becomes variable thereafter. You can fix the rate at 4.99% APR for the first year, and it is then becomes variable. The longest you can fix the rate is 10 years at 7.99%, and it is then variable thereafter. Given this pricing, you would probably get a better deal elsewhere.
  • EdVest: This company is the non-profit student loan program of the state of New Hampshire which has become available more broadly. Rates are very competitive, ranging from 3.94% – 7.54% (fixed) and 2.92% – 6.54% APR (variable).
  • First Republic Eagle Gold. The interest rates are great, but this option is not for everyone. Fixed rates range from 2.35% – 3.95% APR. Variable rates range from 2.50% – 4.30%. You need to visit a branch and open a checking account (which has a $3,500 minimum balance to avoid fees). Branches are located in San Francisco, Palo Alto, Los Angeles, Santa Barbara, Newport Beach, San Diego, Portland (Oregon), Boston, Palm Beach (Florida), Greenwich or New York City. Loans must be $60,000 – $300,000. First Republic wants to recruit their future high net worth clients with this product.
  • IHelp: This service will find a community bank. Unfortunately, these community banks don’t have the best interest rates. Fixed rates range from 4.75% to 9% APR (for loans up to 15 years). If you want to get a loan from a community bank or credit union, we recommend trying LendKey instead.
  • Navy Federal Credit Union: This credit union offers limited membership. For men and women who serve (or have served), the credit union can offer excellent rates and specialized underwriting. Variable interest rates start at 3.27% and fixed rates start at 4.00%.
  • Purefy: Only fixed interest rates are available, with rates ranging from 3.50% – 7.28% APR. You can borrow up to $150,000 for up to 15 years. 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 2.61% (variable) and 4.04% APR (fixed).
  • Wells Fargo: As a traditional lender, Wells Fargo will look at credit score and debt burden. They offer both fixed and variable loans, with variable rates starting at 4.24% 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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College Students and Recent Grads, News

Watch Out for This 16% Student Loan Fee

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

Watch Out for This 16% Student Loan Fee

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

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

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

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

A Department of Education spokesperson declined to comment.

Bad news for 4.2 million borrowers

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

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

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

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

An Ongoing Debate

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

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

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

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

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

What Happens If I Default on My Federal Student Loans?

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

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

The consequences of going to default are severe.

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

Are you missing federal student loan payments?

You’ve got options.

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

Already in default?

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

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

 

Brittney Laryea
Brittney Laryea |

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

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College Students and Recent Grads, Featured

60 Years Old and Still Paying Off Student Debt

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

60 Years Old and Still Paying Off Student Debt

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

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

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

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

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

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

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

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

How did we get here?

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

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

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

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

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

The lasting impact of senior student loan debt

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

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

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

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

Tips for struggling student loan borrowers

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

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

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

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

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

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

The final word

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

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

Brittney Laryea
Brittney Laryea |

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

TAGS:

College Students and Recent Grads, Featured, News

How to Renew Your Income-Driven Repayment Plan

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

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

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

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

How to Renew Your Income-Driven Repayment Plan

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

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

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

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

There are two ways you can renew your IBR plan:

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

Steps:

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

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

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

Choose “submit recertification”:

Choose “submit recertification”

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

Choose the “annual recertification” option:

Choose the “annual recertification” option:

The application asks for your personal information:

The application asks for your personal information

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

Completed submission:

screen shot 12

  1. Use the Income-Driven Repayment Plan Request form

Use the Income-Driven Repayment Plan Request form

Steps:

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

How to Enroll in an Income-Driven Repayment Plan

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

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

Repayment estimator results from studentloans.gov

Repayment estimator results from studentloans.gov

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

Choosing an Alternative Income-Driven Repayment Plan

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

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

Here’s a quick rundown of each:

1. Income-Based Repayment Plan

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

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

2. Pay As You Earn (PAYE) Plan

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

3. Revised Pay As You Earn (REPAYE) Plan

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

4. Income-Contingent Repayment (ICR) Plan

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

5. Income-Sensitive Repayment Plan

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

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

Brittney Laryea
Brittney Laryea |

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

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College Students and Recent Grads, Featured

The Pros and Cons of Subsidized Student Loans

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

student loans college

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

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

What Are Subsidized Student Loans?

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

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

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

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

Who Is Eligible for Subsidized Student Loans?

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

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

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

The Benefits of Subsidized Student Loans

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

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

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

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

The Drawbacks of Subsidized Student Loans

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

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

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

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

Should You Take Out Subsidized Student Loans?

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

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

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

Matt Becker is a writer at MagnifyMoney. You can email Matt at matt@magnifymoney.com

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

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

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

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

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

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

What Is a Student Credit Card?

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

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

Why Should I get a Student Credit Card?

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

Many people look to credit when they need extra money.

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

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

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

Choosing Your First Credit Card Wisely

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

  1. No annual fee

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

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

  1. Easy to set up auto-pay

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

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

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

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

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

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

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

Using Your First Credit Card

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

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

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

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

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

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

5 Other Ways to Build Your Credit Score

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

Become an authorized user on your parent’s credit card

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

Get a secured credit card

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

Get a co-signer

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

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

Get a credit-builder loan

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

Build credit with rent payment

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

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

A Final Word of Advice

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

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

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

Brittney Laryea
Brittney Laryea |

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

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