More details from President Donald Trump’s long-awaited education budget leaked to the Washington Post on Wednesday. The proposed plan would slash $10.6 billion from federal education initiatives, including after-school programs, public service loan forgiveness, and grants for low-income college students, according to the Post.
Here’s what we know so far:
This May Be the End of Public Service Loan Forgiveness
Trump has long promised to dramatically scale back the role of government in education, a plan heartily supported by Betsy Devos, the embattled Education Secretary appointed by the president earlier this year.
Among the programs on the chopping block is the Public Service Loan Forgiveness initiative. Implemented in 2007, the PSLF sought to reward student loan borrowers who took jobs in nonprofits or the public sector by allowing them to discharge their federal student loan debt after 10 years of on-time payments.
Over half a million students were enrolled in the program, and the first cohort would have been eligible for loan forgiveness this October.
Now, the future of the initiative is uncertain. There are no details on whether eligible students will be grandfathered into the program, as has been the case when previous student loan assistance programs were phased out. A Department of Education representative didn’t immediately return a request for comment.
Disgruntled college graduates took to social media Thursday to cry foul.
Raise your hand if you were counting on the Public Service Loan Forgiveness program.
Changes are Coming to Income-Driven Repayment Plans
As it stands there are five different income-driven repayment plans available to student loan borrowers. The proposed budget calls for one single IDR plan, which could potentially be good news for borrowers.
Typically, under the current IDR plans, borrowers are eligible to have their loans forgiven after 20 years of on-time payments, and their monthly payments are capped at 10% of their income. Trump’s new budget would decrease the payment period from 20 to 15 years but would increase the payment cap to 12.5% of income, the Post reports.
But advanced degree earners wouldn’t be so lucky. Trump’s plan would not only raise the income cap for borrowers who earned advanced degrees, it would lengthen the repayment period. IDR plan payments would be maxed at 12.5% of their income, up from 10%, and they would have to pay for 30 years rather than 25.
Low-Income College Students Could Lose Child Care Services
Update: The official White House budget was released May 23 and does not seem to include this rumored budget cut.
Trump’s budget would slash the entire $15 million budget for CCAMPIS, a federal grant program that funds on-campus child care services for low-income parents. Dozens of campuses received grants under the program.
$700 Million Cut from Perkins Loans
While Pell Grant funding remains untouched under the proposed budget, the plan would slash more than $700 million in funding from Perkins loans, according to the Post. Perkins loans are low-interest federal student loans for low-income undergraduate and graduate students.
Federal Work-Study Programs Scaled Back
The Federal Work-Study program offers part-time jobs to college students who prove financial need. Their earnings help cover their education expenses. Under the proposed budget, the program would lose $490 million, or about half its budget.
We wait. The final proposed budget is still set to be released May 23, and the particulars could still change. After that, it will have to pass muster with lawmakers in Congress. To write a letter to your representatives, contact them here.
When it comes to saving money on rent, ZIP code is everything.
Using data from rental market research firm Yardi Matrix, rental listing service RentCafe analyzed how the cost of renting differs by ZIP code in 125 major U.S. metro areas.
The top 10 most expensive ZIP codes are located in just two cities — New York and San Francisco. In fact, Manhattan and San Francisco took all but one of the top 20 spots in the RentCafe ranking. New York City alone is home to 27 of the top 100 most expensive ZIP codes.
The priciest pads are located in Manhattan’s Battery Park City (10282), where renters pay an average $5,924 per month, making it the most expensive ZIP code in the country.
Right behind Battery Park were the Lenox Hill area (average rent: $4,898) and apartments on the Upper West Side near Lincoln Square (average rent: $4,892), which took the No. 2 and No. 3 slots on the most expensive list.
San Francisco had two in the top 10: ritzy neighborhoods Presidio and Main Post (94129), where average rental prices stand at $4,762, and the city’s South Beach area (94105) pulled in ninth at $4,380.
According to the ranking, Boston was the third most expensive city for renters. There, renters can expect to pay $4,227 to live in the city’s most expensive ZIP code, the Back Bay neighborhood (02199).
MagnifyMoney looked at RentCafe’s findings to figure out which cities had the most expensive ZIP codes. Here’s how they stacked up:
U.S. Cities With the Most Expensive ZIP Codes for Renters
Most Expensive ZIP Code
How to save on rent
Always comparison shop.
Comparison shopping is one of the most important things you can do to save money on your next move. Comparing prices in and around the area you want to live is one way to make sure you pay a fair price for your new space.
Back in the day, comparing prices on apartment would have involved calling several different management companies to compare quotes. Even then, you might have missed a good deal. With today’s technology you can (and should) easily search for and compare rent prices all over the world with interactive maps on sites like RentCafe, Apartment Finder, or Cozy.
Fly South for lower rent
Renters looking to pay as little as possible should look toward states like Kansas or Alabama. Two Wichita, Kan., ZIP codes (67213 and 67211) priced around $400 per month, while apartments in Decatur, Ala. (35601) will run renters on average $458 per month. So, for what you’d pay for one month of rent in Manhattan, you could rent a place in Kansas for a whole year.
Below are the top ten cities with the least expensive rental listings based on Yardi Matrix data.
U.S. Cities With the Least Expensive ZIP Codes for Renters
Confirming the fears of many, President Donald Trump’s recently proposed federal budget calls for the defunding of the Public Service Loan Forgiveness program. While those currently enrolled in the program would not be affected, anyone taking out loans after July 1, 2018, would not be eligible.
Proponents of the program, designed to attract candidates to the public sector by forgiving student loans after 120 consecutive payments, fear this cut would incentivize teachers, lawyers, nurses, and other professionals to seek out careers in the private sector where the salaries are significantly higher. Opponents say the program is too costly, and the proposed cuts would save taxpayers billions.
What Does This Mean?
Adam Minsky, a Boston, Mass.-based attorney who specializes in student loans and consumer issues, cautioned that President Trump’s budget proposal is just that — a proposal.
The president can propose a budget, but it’s up to Congress to finalize and ratify it. The Republicans currently have a majority in both the House of Representatives and the Senate, and the federal budget only needs to have a simple majority for it to pass. Still, that would require about eight Democrats to vote yay, something they’re unlikely to do unless the final draft takes a more bipartisan turn.
The process of getting a budget approved through Congress is a long road. Each chamber of Congress has to approve the bill internally, then the bill goes to a committee that looks at both the Senate and House of Representatives bills to reconcile any differences. Finally, the bill is sent to both houses of Congress for a final vote.
Budget proposals rarely make it through Congress unaltered. Trump’s proposal is more like a polite nudge from the executive branch, not a firm decree.
Budget talks will continue throughout the summer and fall, and it’s not clear when a final proposal will be announced.
What Is the Public Service Loan Forgiveness Program?
Started in 2007, the Public Service Loan Forgiveness program allows borrowers who took out federal student loans to have their loans forgiven after 120 consecutive payments (10 years), as long as they served in a government or nonprofit role while all those payments were made. Graduates who utilize the program are on a mandated income-based repayment plan, so their payments are often much lower than they would be on the standard plan.
Careers such as law, nursing, social work, teaching, law enforcement, firefighting, and the military would all be affected by this shift. Many who choose to enter these professions have the option of working for the private sector where salaries are higher, but choose the public route because of this program. Not having the PSLF program could mean a dearth of candidates entering these fields.
“You have people making major life decisions based on the existence of this and other programs,” Minsky said.
The program incentivizes people to work in the public sector where salaries are lower and the demand is greater. If people don’t have a reason to take a lower-paying job, some experts worry that the gap between the rural and urban communities and other low-income areas will continue to increase.
Who Is Affected by This?
Only borrowers who take out federal student loans after July 1, 2018, would be affected by this change, and anyone who took out loans before this would be grandfathered in. The first crop of students who will have their loans forgiven will be this fall. Currently, over half a million people are enrolled in the PSLF program.
What’s the Problem?
The problem with Trump’s proposal is that the Public Service Loan Forgiveness program is a federal law. A budget proposal can’t change the law, but it can defund the program. That’s where the legal confusion arises.
“That’s the million dollar question,” Minsky said. “How can you have a program that is legally allowed to exist without funding it?”
He anticipates that if a budget passes defunding the PSLF program, several lawsuits would immediately come about.
“The way they’re going about doing it is problematic from a legal point of view,” Minsky said.
What Can People Do?
If you oppose the president’s proposal, you should contact your local representatives to tell them how you feel. Each citizen has one House representative and two Senators. Minsky recommends calling, writing a letter, and setting up a meeting with their spokesperson.
When you call, “you want to identify yourself as a constituent and as a voter,” he said.
If you have coworkers who would also be affected by this, try to rally them to take action. Ask your boss if the organization you work for can take a public stand on these issues. Post about it on social media and encourage your friends to reach out to their elected officials. Strong public opinion could sway politicians to listen to the people and not include this proposal in their own budget.
Renting a home or condo has become a status symbol for some wealthy Americans.
Karen Rodriguez, an Atlanta, Ga., real estate agent, says people frequently contact her who are interested in condos renting for $10,000 to $15,000 a month in properties such as the Ritz-Carlton Residences, which have floors of condos above upscale hotel rooms.
“I do see a lot of high-net-worth renters,” says Rodriguez, with Berkshire Hathaway HomeServices Georgia Properties. “They have the disposable income to pay top dollar.”
Renter households increased by 9 million during 2005-2015, reaching nearly 43 million in 2015, according to the State of the Nation’s Housing report, an annual study by Harvard University’s Joint Center for Housing Studies that analyzes U.S. Census Bureau data. Of those, 1.6 million renter households earn $100,000 or more, representing 11% of all renters.
“Indeed, renter households earning $100,000 or more have been the fastest-growing segment over the past three years,” the report stated.
Here are four reasons why high earners are choosing to rent.
They’re frustrated with market trends.
Rob Austin, a biotech account manager in the Los Angeles area with a household income of over $350,000, rents a 1,700-square-foot townhome with his wife and two children.
In the last 10 years, 1.2 million households that earn $150,000 became renters, up from 551,000 in 2005. Using data from the U.S. Census Bureau’s 2015 American Community Survey, RentCafe.com reported in late 2016 that “wealthy households” that earn more than $150,000 annually increased by 217%, compared to an 82% rise in homeowners in the same income bracket.
The $150,000-and-up dollar amount served as the benchmark for “wealthy” renters because that’s the top of the bracket used in the American Community Survey to identify renters and homeowners.
Even when they had their second child in 2016, Austin says they were more steadfast to keep renting the two-bedroom, two-and-a-half bath townhome instead of buying. Prices are increasing so much that they’re “priced beyond perfection,” he says.
“It’s gotten worse,” he says. “Everything is mispriced at this point.”z
They want the next best thing.
Some buyers’ mindset is, “I don’t love it, so I’m just going to go rent a house,” says Atlanta, Ga., real estate agent Ben Hirsh.
Some may be bored with what’s on the market and are holding out for a home or condo with even more extravagant features or amenities. “They’re not happy with what’s out there,” says Rodriguez, also founder of Group Kora Real Estate Group, which sells new and luxury condos.
If they’re in a location or price range that’s hot, they could get more for their home if they sell now. Some wealthy homeowners take advantage of the resale market by going ahead and selling a home or condo and biding their time while renting. For example, if they’re sold on news about ultraluxe condos that have been announced, but are not under construction, they don’t mind renting in the interim.
“People think there’s more coming,” Rodriguez says.
Some clients have so much wealth that they’re willing to pay for the entire year up front for an unfurnished condo, she adds. Investors also have noticed the market trends and are buying condos for $1 million to $2 million with the intention to rent them out.
They don’t want a long-term commitment.
Some wealthy homeowners are ready to sell their million-dollar estates for a lock-it-and-leave-it lifestyle, but aren’t sold on townhome or condo living.
Instead, they’re willing to spend what can amount to the down payment on a starter home for monthly rent to experience the luxury condo lifestyle with privacy and ritzy amenities, like 24/7 room service and spa access.
“They want to test out a high-rise,” Rodriguez says. “They are people who definitely can afford to buy.”
A 2016 report by the National Association of Realtors identified the top 10 markets in the U.S. with the highest share of renters qualified to buy. The study analyzed household income, areas with job growth above the national average, and qualifying income levels (a 3% down payment in each metro area’s median home price in 2015) in about 100 of the largest U.S. metro areas. The markets that are above the national level (28%) were:
Toledo, Ohio (46%)
Little Rock, Ark. (46%)
Dayton, Ohio (44%)
Lakeland, Fla. (41%)
St. Louis, Mo. (41%)
Columbia, S.C. (41%)
Atlanta, Ga. (40%)
Columbus, Ohio (38%)
Tampa, Fla. (38%)
Ogden, Utah (38%)
The short-term mentality also may be the nature of the industry that brings people to a city. Some prospective renters whom Rodriguez meets are planning to live in Georgia for a couple of years because of work, such as jobs in the growing entertainment sector. Films such as the “Avengers” and TV shows such as “The Walking Dead” shoot in metro Atlanta.
They don’t want to live out of a suitcase in a hotel and have the income to afford high-priced rentals, joining political figures and international executives who also are among those making the same choice, Rodriguez says.
They want cash in the bank.
Townhomes sell for about $800,000 in Austin’s neighborhood in California. To make a 20% down payment, he’d have to shell out $160,000 up front.
“Why would I want to tie up $160,000 in cash in an asset that most likely is not going to go up a lot more — and more than likely has topped and has nowhere to go but down in the next cycle?” Austin asks.
Austin says he’s not wavering from his decision, although he’s “taking heat” from friends since he has the income to purchase a home.
“We’re bucking the trend by saying, ‘No thanks, we don’t want to play (the real estate market),’” he says. “We’ll just wait.”
At what age will you retire? How much can you expect to receive each month when you do? These are important questions even if you are decades away from retirement, and there’s an easy way to get answers anytime. We’re going to show you how to get your Social Security benefits statement online and what to do with it once you’ve got it.
A little background:
Depending on your age, you may remember getting a printed Social Security benefits statement in the mail. Prior to 2011, the Social Security Administration (SSA) mailed statements to all workers every year. Those annual mailings were discontinued in 2011 as a cost-saving measure. The following year, the SSA made the statements available online, but their decision caused a bit of an uproar. Despite the agency’s outreach campaign, far fewer people registered for an account than there were eligible workers. So in 2014, Congress required the agency to resume sending printed statements every five years to workers age 25 and older who hadn’t registered for an online account.
That schedule remained until earlier this year when the agency announced that due to budget restraints, paper benefit statements will only be mailed to people who are 60 or older, have not established an online account, and are not yet receiving Social Security benefits. Simply put, don’t expect to get a printed statement anytime soon.
How to get your Social Security benefits statement
Accessing your Social Security benefits statement online is pretty simple, as long as you have an email address and can provide some basic identifying information.
If you’ve never created an online account with the SSA, you’ll click on “Create an Account.” If you’ve set up an account before, you won’t be able to create a new account using the same Social Security number. If you’ve forgotten your username or password, the SSA website offers tools to help recover them.
When you select “Create an Account,” the site will lead you through a few questions to verify your identity. You’ll need to provide personal information that matches the information on file with the SSA as well as some information matching your credit report.
Ryder Taff, a Certified Financial Adviser with New Perspectives, Inc. of Ridgeland, Miss., helps many of his clients set up Social Security accounts and says the questions often have to do with past residences or vehicles that may have been registered in your name.
If you have trouble setting up your account online, you can call the SSA for help at 1-800-772-1213.
Information in a Social Security benefits statement
Your Social Security benefits statement provides several valuable pieces of information:
A record of your earnings, by year, since you began having Social Security and Medicare taxes withheld.
Estimated retirement benefits if you begin claiming Social Security at age 62, full retirement age, or age 70.
Estimated disability benefits if you became disabled right now.
Estimated survivor benefits that your spouse or child would receive if you were to die this year.
Here’s a sample of what your benefits statement will look like:
Keep in mind that the estimated benefits shown are just that — estimates. The amounts shown are calculated based on average earnings over your lifetime and assume you’ll continue earning your most recent annual wages until you start receiving benefits. They are also calculated in today’s dollars without any adjustment for inflation. The amount you receive could also be impacted by any changes enacted by Congress from now until the time you retire.
What to do with your Social Security benefit statement
It’s a good idea to check your earnings record for errors once per year. It’s not uncommon for earnings from certain employers or even all of your earnings from an entire year to be missing, and you’ll want to get that corrected right away because benefits are calculated on your highest 35 years of earnings. “Any missing years will be just as damaging as a zero on a test was to your GPA,” Taff says. “Gather your documents and correct ANY missing years, even if they aren’t the highest salary. Every dollar counts!”
If you do spot any errors, grab your W-2 or tax return for the year in question and call the SSA at 1-800-772-1213. You can also report errors by writing to the SSA at:
Social Security Agency Office of Earnings Operations P.O. Box 33026 Baltimore, MD 21290-3026
Reading your statement is also a good reminder of how much you need to save for retirement outside of Social Security. Chances are, you won’t be happy living on just your Social Security income in retirement.
The good news is, the longer you delay taking your benefit, the higher your annual benefit will be. You can begin taking Social Security retirement benefits at age 62, but your payments will be smaller than they would be if you waited until full retirement age (FRA). Currently, your annual benefit increases by 8% for each year you delay taking your benefit from FRA until age 70.
Colin Exelby, president and founder of Celestial Wealth Management in Towson, Md., says that using your Social Security benefits statement can be particularly useful for retirement planning for couples. “Depending on your age, health, family health history, and financial situation there are a number of different ways to claim your benefits,” he says. “Each individual situation is different, and many couples have different views on the decision.”
If you are nearing retirement, you can use your benefits statement to work with a financial adviser to help you maximize total benefits, or run through various scenarios using a free online tool like the one provided by AARP.
Setting up your Social Security account is simple, free, and helpful for retirement planning, but it’s also a good security measure. It’s impossible to set up more than one account per Social Security number, so registering your account is a good way to prevent identity thieves from establishing an account on your behalf.
Take the time to set up your Social Security account and find out how much you might be entitled to receive in benefits. It could help you feel more empowered to take charge of your retirement plan.
When Lageshia Moore and her husband found their home in 2006, they thought it would be a perfect place to raise their family. The $549,000 Far Rockaway, N.Y., duplex even had future income potential if they could find a reliable tenant and rent out one half of the house.
In order to purchase the property and avoid primary mortgage insurance, the couple took out two mortgages to cover the costs.
Like millions of Americans who purchased homes at the peak of the housing bubble, their timing could not have been worse. Moore, a teacher, left her job in 2007. It soon became impossible to meet their $4,000 total monthly mortgage payments. By the summer of 2008, they were deep in default, and the recession sent their home value plummeting.
They were officially underwater on their house, and the family was living solely on Moore’s husband’s income as a driver. Eventually, they were notified that their lenders had begun the foreclosure process.
“Some people might say, ‘OK, just get a new house.’ But it wasn’t that simple,” Moore said. “This was the house where we were raising our family. My husband is very proud and homeownership means a lot to him — so we weren’t going to just let it go.”
Instead, Moore and her husband did what many families facing foreclosure do: They began looking desperately for “foreclosure relief” companies, law firms, and groups who promised help. A nonprofit connected them to a court-appointed attorney, but it didn’t stop the foreclosure process. So they turned to companies that advertised foreclosure relief on radio stations and online.
Over the course of six years, the family handed over thousands to a handful of relief groups they thought could stop the foreclosure. “We were desperate, and we thought, ‘OK, we’ll hand over this money to someone and they’ll just fix it,’” Moore said.
One of those foreclosure relief companies was Florida-based Homeowners Helpline, LLC. In 2015 the family gave the company a total of $6,000: an initial $2,000 down payment, and then $1,000 in four monthly installments. By that time Moore had found a new job, but the family hadn’t paid the full mortgage amount in years.
Moore shared the contract with MagnifyMoney, in which Homeowners Helpline says it will “perform a mortgage loan review and audit,” including actions like sending a cease-and-desist letter and a “Qualified Written Request” for information about the account to the family’s lenders.
Here’s what Moore says happened: Homeowners Helpline connected her family with a New York City lawyer who “kept asking for endless paperwork, month after month after month,” and who eventually stopped answering their calls, she claims. They finally got in touch with him just before the house was set to go up for auction, she said, and he told them the efforts to stop the auction had failed.
“We were horrified,” Moore said.
Homeowners Helpline told MagnifyMoney a different story. Sharon Valentine, a processor at Homeowners Helpline who worked on Moore’s husband’s case, said the family was slow to hand over needed paperwork and “unrealistic about their expectations.”
Crucially, Valentine said, the family didn’t tell Homeowners Helpline the house was actively in foreclosure until they mentioned the auction. “And then it was like, ‘Wait, what?’” Valentine said. The company would have taken different actions had they known about the foreclosure proceedings, she added.
“We can’t help you effectively if you don’t give us all of the information and the paperwork,” Valentine said. “In general, some clients come in and they hear their friend was able to get a 2% [mortgage] rate or cut their payments in half, and it’s like, ‘Well, that’s a very different situation.’ We try to help educate, but sometimes you can’t change that expectation.”
The Best Help is Free
But there is a free resource to educate panicked homeowners about expectations and provide foreclosure assistance — as well as help them avoid scam companies that will steal their money. NeighborWorks America runs LoanScamAlert.org, which aims to be a one-stop shop for people with questions about or problems with their mortgages.
The Loan Modification Scam Alert Campaign launched in 2009, when Congress asked NeighborWorks America to educate and help homeowners. LoanScamAlert.org offers resources including information about how to spot and report scams, and lists of trusted authorities who can help. Its main goal: Drive people to call the Homeowner’s HOPE Hotline, at 888-995-HOPE (4673), which is staffed 24 hours a day by counselors who work at agencies approved by the U.S. Department of Housing and Urban Development (HUD).
“We provide them with a single, trusted resource,” said Barbara Floyd Jones, senior manager of national homeownership programs at NeighborWorks America. “It gets confusing when you see companies with all of these similar names advertising on the radio or TV, and then you have to research them. We want to let people know they don’t have to pay a penny for assistance.”
Anyone — regardless of income or other factors — can contact the counselor network to receive free advice and help. Homeowners aren’t always aware of the myriad government-affiliated groups that can provide assistance, or of the federal and state programs created to speed loan refinances and modifications, Floyd Jones said.
“We can never promise that everyone will be able to save their home; there are a variety of circumstances,” Floyd Jones said. “But we can promise a trusted counselor will listen, take a look at your paperwork if you want, and tell you all of your options.”
In fact, if a homeowner grants permission, the counselor can contact the mortgage lender directly to discuss options to stop the foreclosure, modify the terms of the loan, or otherwise make a deal. If need be, homeowners will also be connected with vetted legal assistance — although Floyd Jones noted not every situation requires a lawyer.
True to LoanScamAlert.org’s name, the hotline counselors also take complaints about mortgage-related scams: third-party companies that take the money and run, or slip in paperwork that unwittingly gets homeowners to sign over the deed to the house.
The Federal Trade Commission received nearly 7,700 complaints about “Mortgage Foreclosure Relief and Debt Management” services in 2016 — down from almost 13,000 in 2014, but still a significant figure.
“Stopping phony mortgage relief operations continues to be a priority” for the FTC, said spokesman Frank Dorman.
Both the FTC and LoanScamAlert.org offer tips to avoid scams — and to make sure you’re taking advantage of all federal and state programs that could help.
They ask you to pay before any services are rendered.
Pressure to pay a fee before action is taken, sign confusing paperwork, or hire a lawyer off the bat. As with any scam, fraudulent mortgage relief services rely on high pressure to push vulnerable homeowners into taking action. Companies shouldn’t ask for “processing fees” or “service fees” early in the process, Floyd Jones said, as early foreclosure-stoppage efforts don’t cost anything. Be wary of signing any document, as you could unwittingly surrender the home’s title or deed to a scammer.
They make promises they can’t keep.
Promises or guarantees they’ll save your home from foreclosure — or even claims like “97% success rate!” No one can guarantee results.
They say they’re affiliated with the U.S. government.
Companies that claim to have an affiliation with a government agency. Some scammers may claim to be associated with the government, charging fees to get you “qualified” for government mortgage modification programs like Hardest Hit Fund. You don’t have to pay for these government programs — and lenders, particularly big banks like Wells Fargo and Bank of America, may be able to offer you their own modification options directly.
They want you to send your mortgage payments to them.
Companies that tell you to start paying your mortgage directly to them, rather than your lender. They may promise to pass the money along, but they could pocket it and disappear.Companies that ask you to pay them through unconventional methods: Western Union/wire transfers, prepaid Visa cards, etc., instead of a check. They’re trying to get your money in a way that’s hard to trace.
As for Lageshia Moore and her husband, the family ultimately filed for bankruptcy — a move that can stop the foreclosure process, but only temporarily — and are now working with a law firm on a loan modification she hopes will reduce their payments to a manageable monthly sum. In giving advice to others, she reiterates the simplest but most important tip: “Just do your research.”
“You’re panicked, but you have to do your due diligence,” she added. “Really sit down and weigh the pros and cons: foreclosure, short sale, etc. What does this process or contract really mean? It’s an emotional time, but you have to try to keep the emotion out of it. That’s what I would tell myself.”
What to Do if You’re Facing Foreclosure:
Call a HUD-certified counselor at 1-888-995-HOPE. You’ll get advice and help for free, and while counselors can’t ever promise to save a home, they’ll be happy to take a look at any paperwork or information about your case, contact your lender about options if you grant permission, and connect you with vetted legal assistance if need be.
If you’re not facing foreclosure yet, but you’re worried that you’re about to run into trouble, contact your mortgage lender’s loss litigation department. They may be willing to work with you. Your lender can also tell you whether you’ll qualify for government programs.
Overall, don’t let desperation stop you from taking the time to research any potential actions, including signing on with a relief company. Explore the company’s background and track record. Check online for reviews from other homeowners — and be sure to look up phone numbers too. Many scam companies simply shut down, reopen under a new name, and retain the same phone number.
The vast majority of student loan borrowers who default and rehabilitate their loans are set up to fail again because of bad advice, a new government study claims.
The Consumer Financial Protection Bureau says a stunning 9 out of 10 of these high-risk borrowers were not enrolled in affordable repayment plans, such as income-driven repayment — meaning their monthly payments were much higher than they had to be. Predictably, those borrowers were five times more likely to re-default on their loans, racking up $125 million in unnecessary interest charges along the way.
Conversely, students who were enrolled in income-driven repayment plans, which reduce payments based on the borrower’s income, were much less likely to have trouble making on-time payments. Fewer than one in 10 re-defaulted when enrolled in income-derived repayment, the CFPB said.
Loan servicers are responsible for informing borrowers about their options, but the CFPB has alleged previously that they do a poor job of it.
A Government Accountability Office report in 2015 found that while 51% of borrowers were eligible for a repayment program that could lower their payments, only about 15% were enrolled in it. The CFPB complaint database is littered with allegations that servicers make enrollment unnecessarily hard. And earlier this year, the CFPB and the state of Illinois both sued Navient — the nation’s largest servicer — and alleged the firm systematically failed to inform borrowers of their options. (Navient denied the allegation.)
Tuesday’s report focuses on a more narrow group — those who had stopped paying their student loans but had recently restarted payments and “rehabilitated” them. The group, which consists of about 600,000 borrowers, is considered the riskiest of the 43 million Americans who owe student loans.
Their plight shows the system is broken, said CFPB Student Loan Ombudsman Seth Frotman.
“For far too many student loan borrowers, the dream of a fresh start turns into a nightmare of default and deeper debt,” Frotman said. “When student loan companies know that nearly half of their highest-risk customers will quickly fail, it’s time to fix the broken system that makes this possible.”
The Student Loan Servicing Association, a trade group that represents servicers, didn’t immediately respond to requests for comment.
Roughly one in three student loan borrowers are late to some degree on their monthly payments. The Department of Education estimates that more than 8 million federal student loan borrowers have gone at least 12 months without making a required monthly payment and have fallen into default.
At-risk borrowers should know there are multiple programs designed to help them avoid default — income-contingent repayment, income-based repayment, and “pay as you earn” are all designed to keep payments at between 10% and 20% of income. Some offer payments as low as $5 per month, depending on income.
About two years ago, Brian LeBlanc was fed up. The 30-year-old policy analyst from Alberta, Canada, had struggled with his weight for years. At the time, he weighed 240 pounds and had trouble finding clothes that fit. He decided it was time to change his lifestyle for good.
LeBlanc started running and cutting back on fast food and soft drinks. He ordered smaller portions at restaurants and avoided convenience-store foods. About a year into his weight-loss mission, his wife Erin, 31, joined him in his efforts.
“The biggest change we made was buying a kitchen food scale and measuring everything we eat,” Brian says. “Creating that habit was really powerful.”
Over the last two years, the couple has shed a total of 170 pounds.
But losing weight, they soon realized, came with an unexpected fringe benefit — saving thousands of dollars per year. Often, people complain that it’s expensive to be healthy — gym memberships and fresh produce don’t come cheap, after all. But the LeBlancs found the opposite to be true.
Erin, who is a payroll specialist, also managed their household budget. She began noticing a difference in how little money they were wasting on fast food and unused grocery items.
“Before, we always had the best intentions of going to the grocery store and buying all the healthy foods. But we never ate them,” she says. “We ended up throwing out a lot of healthy food, vegetables, and fruits.”
Before their lifestyle change, Brian and Erin would often eat out for dinner, spending as much as $80 per week, and they would often go out with friends, spending about $275 a month. Now, Brian says if they grab fast food, they choose a smaller portion. Last month, they only spent $22 on fast food.
What’s changed the most is how they shop for groceries, what they buy, and how they cook. Brian likes to prep all his meals on Sunday so his lunches during the week are consistent and portion-controlled. They also buy only enough fresh produce to last them a couple of days to prevent wasting food.
Shedding pounds — and student loan debt
Two years after the start of their weight-loss journey, they took a look at their bank statements to see how their spending has changed. By giving up eating out and drinking alcohol frequently, they now spend $600 less a month than they used to, even though they’ve had to buy new wardrobes and gym memberships.
With their newfound savings, the LeBlancs managed to pay off Brian’s $22,000 in student loans 13 years early. Even with the $600 they were now saving, they had to cut back significantly on their budget to come up with the $900-$1,000 they strived to put toward his loans each month. They stopped meeting friends for drinks after work, and Erin took on a part-time job to bring in extra cash. When they needed new wardrobes because their old clothing no longer fit, they frequented thrift shops instead of the mall.
When they made the final payment after two years, it was a relief to say the least.
Now the Canadian couple is saving for a vacation home in Phoenix, Ariz., which they hope to buy in the next few years, and they’re planning to tackle Erin’s student loans next. They’re happy with their weight and lives in general, but don’t take their journey for granted.
“There were times we questioned our sanity and we thought we cannot do this anymore,” says Erin. But they would always rally together in the end.
“There are things that are worth struggling for and worth putting in the effort,” Brian says. “Hands down, your health is one of those things.”
How Getting Healthy Can Help Financially
Spending less on food isn’t the only way your budget can improve alongside your health. Read below to see how a little weight loss can tip the scales when it comes to your finances.
Spend less on medical bills. Health care costs have skyrocketed in the last two decades, but they’ve impacted overweight and obese individuals more. A report from the Agency for Healthcare Research and Quality stated that between 2001 and 2006, costs increased 25% for those of normal weight — but 36.3% for those overweight, and a whopping 81.8% for obese people. The less you weigh, the less you’ll pay for monthly health insurance premiums and other expenses.
Buy cheaper clothes. Designers frequently charge more for plus-size clothing than smaller sizes. Some people claim retailers add a “fat tax” on clothes because there are fewer options for anyone over a size 12. It might not be fair, but it’s the way things are.
Save on life insurance. Your health is a huge factor for life insurance rates. Annual premiums for a healthy person can cost $300 less than for someone who is overweight.
Cut transportation costs. Biking or walking to get around is not only a cheap way to exercise — it’s a cheap way to travel. You’ll be saving on a gym membership and limiting gasoline costs in one fell swoop. Bonus points if you go the whole way and sell or downgrade your vehicle.
Whether you’re getting an oil change, having your tires rotated, or facing a more complicated repair, like replacing the alternator, it’s possible your visit to the auto repair shop will end up being more expensive than you anticipated.
Automobile maintenance costs an average $792 per year, according to the AAA’s 2016 “Your Driving Costs” study, and you don’t need mechanics padding their bills with unnecessary repairs and charges.
Most technicians genuinely want to help, says Lauren Fix, who is known as “The Car Coach” and is the spokesperson for the nonprofit Car Care Council. But there are times when you should question what the mechanic tells you.
Here are five common lies and ways to combat them.
1. “You can use any kind of oil in your car.”
Technicians often say you can use any oil in your car despite what your service schedule or car manual states.
“Run the oil that your service schedule tells you,” Fix says. “Running the wrong oil in your engine can void your warranty.”
2. “You need to fix this now before it’s a problem.”
Sometimes a technician may exaggerate a problem because he wants to talk you into paying for a repair you may not need at that time.
Check your service schedule before saying yes, because it’s the “Bible for your car,” Fix says. If you’ve lost your service schedule or you bought a used car, check out carcare.org for a customizable service schedule specifically for your vehicle. This will act as your guide.
You can save more than $1,200 a year in repairs if you follow your service schedule and are proactive with any problems, the Car Care Council states.
Fix also warns that sometimes a technician will exaggerate to make you understand that there is actually a problem with your car. Ask for a second opinion if you’re unsure.
“Even if he finds a new problem with your car while working on a problem you have already discussed, you have to assume that it is possible,” Fix says.
3. “That damage didn’t happen here.”
Sometimes it’s just a small scratch or ding. Accidents happen, even by people who are paid to repair your car.
A California shop tried to cover up severe damage to Michelle and Albert Delao’s automobile after it fell several feet from a lift in 2015, the couple says. Employees didn’t tell the Delaos what happened to their car, instead saying that the shop was waiting on a part. The store offered to pay for a rental car while their vehicle was being worked on.
When they finally got their car, Michelle says she immediately knew something was wrong.
“I could tell from little things about the way the car was driving,” she says. “It was wobbly, and we could hear glass in the passenger window, which was weird, because we never had a glass or window problem before.”
To try to resolve the problems, they purchased a new set of tires to stop the wobbling. But they got a call a month later from a technician at the shop, they say. The couple learned that the car fell several feet onto its side, piercing the bottom and shattering the front passenger window, along with other damage to the car’s body. When the technicians could not get the car off the lift, a tow truck was called to pull the vehicle down, causing more damage, they say.
When she called the manager and store to ask about the incident, Michelle says both denied anything happened until she showed the owner the pictures from the technician.
After finding out the true extent of the damage, the Delaos took their car to the dealership, which confirmed all the damage at over $20,000, totaling their car. The couple has filed a lawsuit against the auto repair shop.
The incident has given the couple a severe distrust of technicians, Michelle says.
“It’s just sad, really,” Albert says. “It’s like when people need to go to the doctor. We have to have our car. We don’t know anything about it. We’re not mechanics.”
4. “This part cost more than we anticipated.”
An easy way for technicians to make more money is by overcharging for a part or repair. If you’re not sure how much a repair will cost, get multiple quotes in writing.
“Never do anything without getting a quote in writing,” Fix says. “That is how you know someone knows what they’re talking about and will uphold that when you get it in writing.”
If you don’t like to go in blind, you can get a general idea of what a repair or part will cost with research.
“Education and information are power,” Fix says.
Fix suggests RepairPal.com, which helps people not well versed in car mechanics be more prepared for when someone gives them a quote. You can type in your car’s mechanical issue to research the problem and the reliable cost for the part and labor for your area.
5. “The cheap tires will be just fine.”
When it comes time for new tires, technicians may try to talk you into buying the cheapest brands. Don’t listen, Fix says.
“When people come in saying they need to replace tires, they need to use the same tire brand and size,” she says. “The size and brands of the tires impacts your handling, traction, and safety for your car.”
Ask your friends and family. Personal experience is the best way to find a reliable technician, so ask the people you trust.
Check with a dealer. Along with specializing in your car, they can also help with recalls or possibly help find you a new technician if your warranty has expired.
If your vehicle is safe to drive, take it to another mechanic for a second opinion.
If your check engine light comes on, head to your local auto parts store, not a mechanic. Their equipment will find the issue, which empowers you with information before you schedule your car for service.
Married couples with student loans must make a difficult decision when they file their tax returns. They can choose to file jointly, which often leads to a lower tax bill. Or they can file separately, which may result in a higher tax bill, but smaller student loan payments. So which decision will save the most money?
First, let’s discuss the difference between the two filing statuses available to married couples.
Married filing jointly
Married couples always have the option to file jointly. In most cases, this filing status results in a lower tax bill. The IRS strongly encourages couples to file joint returns by extending several tax breaks to joint filers, including a larger standard deduction and higher income thresholds for certain taxes and deductions.
Married filing separately
Because married couples are not required to file jointly, they can choose to file separately, where each spouse is taxed separately on the income he or she earned. However, this filing status typically results in a higher tax rate and the loss of certain deductions and credits. However, if one or both of the spouses have student loans with income-based repayment plans, filing separately could be beneficial if it results in lower student loan payments.
For help figuring out which filing status is better for married couples with student loans, we reached out to Mark Kantrowitz, publisher and Vice President of Strategy at Cappex.com. Kantrowitz knows quite a bit about student loans and taxes. He’s testified before Congress and federal and state agencies on several occasions, including testimony before the Senate Banking Committee that led to the passage of the Ensuring Continued Access to Student Loans Act of 2008. He’s also written 11 books, including four bestsellers about scholarships, the FAFSA, and student financial aid.
Two Advantages to Filing Taxes Jointly:
Most education benefits are available only if married taxpayers file a joint return. This can affect the American opportunity tax credit, the lifetime learning credit, the tuition and fees deduction (which Congress let expire as of January 1, 2017, but is still available for 2016 returns), and the student loan interest deduction.
Couples taking the maximum student loan interest deduction of $2,500 in a 25% tax bracket would save $625 in taxes. But this “above the line” deduction also reduces Adjusted Gross Income (AGI), which could yield additional tax benefits (e.g., greater benefits for deductions that are phased out based on AGI, lower thresholds for certain itemized deductions such as medical expenses, and miscellaneous itemized deductions).
However, there is a potential downside to filing jointly for couples with student loans.
Income-driven repayment plans use your income to determine your minimum monthly payment. Generally, your payment amount under an income-based repayment plan is a percentage of your discretionary income (the difference between your AGI and 150% of the poverty guideline amount for your state of residence and family size, divided by 12).
If you are a new borrower on or after July 1, 2014, payments are generally limited to 10% of your discretionary income but never more than the 10-year Standard Repayment Plan amount.
If you are not a new borrower on or after July 1, 2014, payments are generally limited to 15% of your discretionary income, but never more than the 10-year Standard Repayment Plan amount.
Because filing jointly will increase your discretionary income if your spouse is also earning money, your required student loan payment will typically increase as well. In some cases, the difference is negligible; in others, this can add up to a pretty significant cost difference.
“Calculating the trade-offs of income-driven repayment plans versus the student loan interest deduction and other benefits is challenging,” Kantrowitz says, “in part because the monthly payment under income-driven repayment depends on the borrower’s future income trajectory and inflation, not just the inclusion/exclusion of spousal income.”
Fortunately, some tools can help you run the numbers.
An example: Meet Joe and Sally
Here’s a simple scenario that shows how a change in filing status can save on taxes but cost more on student loans:
Joe and Sally are married with no children.
They live in Florida (no state income tax).
Joe is making $35,000 per year and has $15,000 of student loan debt with a 6.8% interest rate.
Sally is making $75,000 per year and has $60,000 of student loan debt with a 6.8% interest rate.
First, we can estimate Joe and Sally’s tax liability for filing jointly versus separately. TurboTax’s TaxCaster tool makes this pretty easy. Here’s what we get when run their numbers using 2016 tax rates:
Filing jointly, Joe and Sally would owe $13,249 in federal taxes.
Filing separately, they would owe $15,178.
So they would save just over $1,900 in federal taxes by filing jointly. But how would filing jointly affect their student loan payments?
We can use a student loan repayment estimator like the one provided by the office of Federal Student Aid to find out. Here’s what we get when we run the numbers and choose the Income-Based Repayment option, assuming they are new borrowers on or after July 1, 2014:
Filing jointly, Joe’s minimum required monthly student loan payment under a standard repayment plan would be $143, and Sally’s would be $571, for a total of $714 per month.
Filing separately, Joe’s minimum required monthly student loan payment would be $141, and Sally’s would be $474, for a total of $615 per month.
Over the course of a year, Joe and Sally would only save $1,188 on their student loan payments by filing separately. Even with the additional loan payments they would have to make, filing jointly would save them $712 more than filing separately.
What’s best for your situation?
Every situation is different. The simple example above comes out in favor of filing jointly, but you will need to run your own numbers to figure out what is right for you. Here are additional tips to help you figure it out:
Know how much you owe. Make a list of all loan balances, interest rates, and the type of each student loan you have. You can find your federal student loans on the National Student Loan Data System. You can find information on your private student loans by looking at a recent statement.
Estimate your student loan payment options. Using a student loan repayment estimator like the one mentioned above, determine your required payments when filing separately versus jointly.
Calculate your tax liability. Use a tool like TurboTax’s TaxCaster or 1040.com’s Free Tax Calculator to calculate your federal and state tax liability when filing separately versus jointly.
Be aware of long-term consequences. Filing separately might result in lower monthly payments today but more interest paid over time. If you make it to the 20- or 25-year forgiveness point, that could have tax implications down the line. Kantrowitz points out that “forgiveness is taxable under current law, causing a smaller tax debt to substitute for education debt. The main exception is borrowers who will qualify for public student loan forgiveness, which occurs after 10 years and is tax-free under current law.” Keep those long-term consequences in mind as you make a decision.
Consider steps to lower your AGI. Your eligibility for income-driven student loan repayment plans depends on your AGI, which is essentially your total income minus certain deductions. You can reduce this number, and potentially lower both your tax bill and your required student loan payment, by doing things like contributing to a 401(k), IRA, or Health Savings Account.
Keep the big picture in mind. These decisions are just one part of your overall financial situation. Keep your eyes on your big long-term goals and make your decision based on what helps you reach those goals fastest.
Other unique situations
There are a few unique situations that make deciding whether to file jointly or separately a little more complicated. Do any of these situations apply to you?
Divorce and legal separation
Sometimes, determining marital status to file tax returns isn’t cut and dried. What happens when you and your spouse are separated or going through a divorce at year end? In this case, your filing status depends on your marital status on the last day of the tax year.
You are considered married if you are separated but haven’t obtained a final decree of divorce or separate maintenance agreement by the last day of the tax year. In this case, you can choose to file married filing jointly or married filing separately.
You and your spouse are considered unmarried for the entire year if you obtained a final decree of divorce or are legally separated under a separate maintenance agreement by the last day of the tax year. You must follow your state tax law to determine if you are divorced or legally separated. In this case, your filing status would be single or head of household.
Pay as You Earn repayment plans
Pay as You Earn (PAYE) is a repayment plan with monthly payments that are limited to 10% of your discretionary income. To qualify and to continue to make income-based payments under this plan, you must have a partial financial hardship and have borrowed your first federal student loan after October 1, 2007. Kantrowitz says the PAYE plan bases repayment on the combined income of married couples, regardless of tax filing status.
Unpaid taxes, child support, or defaulted federal student loans
If you or your spouse have unpaid back taxes, child support, or defaulted federal student loans, joint income tax refunds may be diverted to pay for those items through the Treasury Offset Program. “Spouses can appeal to retain their share of the federal income tax refund,” Kantrowitz says, “but it is simpler if they file separate returns.”