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Pay Down My Debt

Introducing FICO 9: What This Means for You


Yesterday, FICO announced that it will be releasing FICO Score 9.  If you have unpaid medical bills or other collection items, this change will impact you.

What is FICO?

FICO is the most widely used credit score in the country. 90 percent of all credit decisions (mortgages, cards, credit cards, personal loans and more) use the FICO score in some way.

So, when FICO makes a change to its score, we should listen. This score has a big impact, because lenders use it and others (like CreditKarma) are trying to approximate it.

What are they changing?

This change is huge for people with unpaid medical bills and other collection items.

Unpaid medical bills

According to Experian, 64.3 million Americans have a medical collection record on their bureau. In the current world, this can significantly harm their credit score.

If you have an unpaid medical bill, it can be reported to a credit bureau in two ways:

  • The medical service provider can report to the bureau, or
  • A third party debt collection agency that has purchased the debt, or has been contracted to collect the debt, can report it

99.4 percent of cases have been reported by collection agencies. So, if your doctor is calling you to pay – it probably hasn’t been reported to an agency. But, once a collection agency starts calling you, you probably have a negative item on your credit bureau.

The purpose of a credit score is to help lenders understand the likelihood of someone being responsible and paying back on time. There has been a widespread belief that people have been unfairly punished for medical bills. In fact, the CFPB has proven that people have been unfairly punished, in a May 2014 report.

With the new score, FICO is agreeing with the CFPB. Medical collections will now be differentiated from non-medical collections. And people will be “punished less” for medical collections. This makes sense, for three reasons:

  1. The medical system is complex, and many people have been hit with small medical collections that they didn’t even realize they owed. For example, with a small co-pay that ended up with a collection agency.
  2. Historically, many responsible people could not get insurance because they had a pre-existing condition. And, when medical disaster struck, they had no way to pay the medical bills. They tried to be responsible, but couldn’t.
  3. Even with insurance, multiple emergencies in a family can lead to large deductible payments. Doctors and hospitals can quickly turn over bills to collection agencies, resulting in a negative remark on the credit bureau. Even people who are just paying back their medical bills, responsibly, over time can be punished.

This is a big win for the CFPB. Hats off. A government agency has done the math for the industry, and the industry has agreed. This should result in better access to credit, and lower rates on existing credit – once (and if) the changes are accepted by the industry.

Paid Collection Accounts will now be bypassed

Beyond medical bills, many other types of debt can end up on your credit bureau. For example, failure to pay your utility bill, your phone bill, your overdraft or any other type of debt can result in your account being sold to a collection agency. And the agency will usually report the collection account on your bureau. Having these accounts can seriously harm your score.

But, the older the collection item, the less impact it has on your score. I have regularly met people who felt confused. They have recovered and now had money. Should they pay back that five-year-old collection item, or just let it age. They wanted to pay it back, but would receive advice from some people not to do so. Why? Because activity on a collection item could make it appear more recent.

This change removes all ambiguity. If you pay back your collection items, your score will benefit. This is the way it should be.

When will I see the impact

Unfortunately it will take a while. FICO sells its credit score to banks. Whenever a new score is introduced, a bank has to decide whether or not to upgrade. In order to make this decision, they need to do a lot of analysis.

First, they will perform a “retro” analysis. This means they will look at the past few years of their portfolio history, and they will estimate how the portfolio would have performed if the new score was used.

They will then need to build strategies, which includes the cutoff (above what score will they approve accounts), the pricing and the extra rules that they want to build. In my experience, this takes 12 to 18 months (there are so many committees that need to approve this!).

Banks are very eager to “swap in” new customers. So, if previously rejected customers can now be approved, banks will be keen to proceed.

They are less keen to charge people lower interest rates. So, the CFPB needs to watch the banks closely. If people are truly lower risk, they should pay lower prices. But, banks are not eager to reduce pricing.

In Conclusion 

We fully support the changes. Medical bills are being severely punished. And people should not be afraid to pay off collection accounts.

We are realistic: it will be a while before we feel the impact.

And we are rightly skeptical: banks will be happy to approve more people and give more credit. They will be less excited to reduce interest rates.

Got questions? Get in touch via TwitterFacebook, email or let us know in the comment section below!

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Balance Transfer, Best of, Pay Down My Debt

9 Best 0% APR Credit Card Offers – October 2015

There are a lot of 0% APR credit card deals in your mailbox and online, but most of them slap you with a 3 to 4% fee just to make a transfer, and that can seriously eat into your savings.

At MagnifyMoney we like to find deals no one else is showing, and we’ve searched hundreds of balance transfer credit card offers to find the banks and credit unions that ANYONE CAN JOIN which offer great 0% interest credit card deals AND no balance transfer fees. We’ve hand-picked them here.

If one 0% APR credit card doesn’t give you a big enough credit line you can try another bank or credit union for the rest of your debt. With several no fee options it’s not hard to avoid transfer fees even if you have a large balance to deal with.

1. Chase Slate® – 0% Intro APR for 15 months, and $0 Intro fee for balance transfers

151_card_Chase_SlateThis deal is easy to find – Chase is one of the biggest banks and makes this credit card deal well known. You can get this offer if you complete the balance transfer within 60 days of opening the account. So it’s worth a shot to see how big of a credit line you get. If it’s not enough, move on to the other options below that are also no fee, but a little bit shorter in length.

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2. Alliant Credit Union Credit Cards – 0% APR for 12 months, NO FEE

logo_alliantAlliant is an easy credit union to work with because you don’t have to be a member to apply and find out if you qualify for the 0% APR deal.

Just choose ‘not a member’ when you apply and if you are approved you’ll then be able to become a member of the credit union to finish opening your account.

Anyone can become a member of Alliant by making a $10 donation to Foster Care to Success.

If your credit isn’t great, you might not get a 0% rate, so make sure you double check the rate you receive before opening the account, and they might ask for additional documents like your pay stubs to verify the information on your application.

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3. Edward Jones World MasterCard – 0% APR for 12 months, NO FEE

edwardjonesYou’ll need to go to an Edward Jones branch to open up an account first if you want this deal. Edward Jones is an investment advisory company, so they’ll want to have a conversation about your retirement needs.

But you don’t need to have money in stocks to be a customer of Edward Jones and try to get this card.

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4. First Tennessee Bank Credit Card – 0% APR for 12 months, NO FEE

275_card.275_card.Platinum_Premier_VisaIf you want to apply online for this deal, you’ll need to live in a state where First Tennessee has a branch though. Those states are: Tennessee, Florida, Georgia, Mississippi, North Carolina, and South Carolina.

You need to have an existing First Tennessee account to apply online, but if you don’t have one, you can print out an application and mail it into their office to get a decision. You’ll find a link to the paper application when the online form asks you whether you have an account or not.

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5. Logix Credit Union Credit Card – 0% APR for 12 months , NO FEE

If you live in AZ, CA, DC, MA, MD, ME, NH, NV, or VA you can join Logix Credit Union and apply for this deal.

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6. Capital One QuickSilver ONE – 0% APR until May 2016, NO FEE

quicksilveroneThere’s a catch here. While there is no balance transfer fee, this card has a $39 annual fee.

If you’re transferring a big balance of $2,000 or more, the $39 isn’t a big deal. But if it’s a small balance and one you don’t plan to pay off by May, then consider other options with no annual fee first.

Capital One tends to approve people with less perfect credit for this card than some of the other options and you might be able to check if you are pre approved by Capital One without hurting your credit score. Beware that after the 0% rate ends in May, 2016 your rate will ratchet up to a scary 22.9%.

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7. Aspire Credit Union Credit Card – 0% APR for 6 months , NO FEE

AspireYou don’t have to be a member to apply and get a decision from Aspire. Once you do, Aspire is easy to join – just check that you want to join the American Consumer Council (free) while filling out your membership application online.

Make sure you apply for the regular ‘Platinum’ card, and not the ‘Platinum Rewards’ card, which doesn’t offer the introductory deal.

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8. Elements Financial Credit Card – 0% APR for 6 months, NO FEE

To become a member and apply, you’ll just need to join TruDirection, a financial literacy organization.Elements 4c-horiz It costs just $5 and you can join as part of the application process.

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9. Consumers Credit Union – 0% APR for 6 months, NO FEE

consumers (1)Anyone can be a member of this credit union by paying a one-time, non-refundable $5 fee to the Consumers Cooperative Association, and then depositing and maintain a minimum $5 in a Membership Share/Savings Account.

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10. Power Credit Union – 0% APR for 6 months, NO FEE

Power Credit Union is based in Southern Colorado, but anyone can join by donating $5 to Relay for Life. The card also has an attractive fixed rate of 8.9% after the 0% promo period ends, so it’s a safe choice. The catch is they’re a really small credit union, and might not be used to getting a lot of interest from outside Colorado.

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Are these the best deals for you?

If you can pay off your debt within the 0% period, then yes, a no fee 0% balance transfer credit card is your absolute best bet. And if you can’t, you can hope that other 0% deals will be around to switch again.

But if you’re unsure, you might want to consider…

  • A deal that has a longer period before the rate goes up. In that case, a balance transfer fee could be worth it to lock in a 0% rate for longer.
  • Or, a card with a rate a little above 0% that could lock you into a low rate even longer.

The good news is we can figure it out for you.

Our handy, free balance transfer tool lets you input how much debt you have, and how much of a monthly payment you can afford. It will run the numbers to show you which offers will save you the most for the longest period of time.


The savings from just one balance transfer can be substantial.

Let’s say you have $5,000 in credit card debt, you’re paying 18% in interest, and can afford to pay $200 a month on it. Here’s what you can save with a 0% deal:

  • 18%: It will take 32 months to pay off, with $1,312 in interest paid.
  • 0% for 12 months: You’ll pay it off in 28 months, with just $502 in interest, saving you $810 in cash. That even assumes your rate goes back up to 18% after 12 months!

But your rate doesn’t have to go up after 12 months. If you pay everything on time and maintain good credit, there’s a great chance you’ll be able to shop around and find another bank willing to offer you 0% interest again, letting you pay it off even faster.

Before you do any balance transfer though, make sure you follow these 6 golden rules of balance transfer success:

  • Never use the card for spending. You are only ready to do a balance transfer once you’ve gotten your budget in order and are no longer spending more than you earn. This card should never be used for new purchases, as it’s possible you’ll get charged a higher rate on those purchases.
  • Have a plan for the end of the promotional period. Make sure you set a reminder on your phone calendar about a month or so before your promotional period ends so you can shop around for a low rate from another bank.
  • Don’t try to transfer debt between two cards of the same bank. It won’t work. Balance transfer deals are meant to ‘steal’ your balance from a competing bank, not lower your rate from the same bank. So if you have a Chase Freedom with a high rate, don’t apply for another Chase card like a Chase Slate and expect you can transfer the balance. Apply for one from another bank.
  • Get that transfer done within 60 days. Otherwise your promotional deal may expire unused.
  • Never use a card at an ATM. You should never use the card for spending, and getting cash is incredibly expensive. Just don’t do it with this or any credit card.
  • Always pay on time. If you pay more than 30 days late your credit will be hurt, your rate may go up, and you may find it harder to find good deals in the future. Only do balance transfers if you’re ready to pay at least the minimum due on time, every time.


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College Students and Recent Grads, Pay Down My Debt, Reviews

CommonBond Grad Student Loan Refinance Loan Review

CommonBond Grad Student Loan Refinance Loan Review

Updated September 21, 2015

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

CommonBond* began by servicing students from just one school, and has rapidly expanded. Today, CommonBond loans are available to graduates of over 2,000 schools nationwide. Although the business started servicing only students with graduate degrees, today CommonBond is also available to refinance undergraduate degrees as well.

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

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

Refinance Terms Offered

CommonBond offers low variable and fixed rate loans. Variable rates range from 1.94% – 4.93% APR, and fixed rates range from 3.74% – 6.49% APR.

It even offers a hybrid loan option, with APRs ranging from 4.22% – 5.64%. Note that these rates take a 0.25% auto pay discount into consideration.

There is no maximum loan amount. CommonBond will lend what you can afford to repay. CommonBond offers fixed and variable rates with terms of 5, 10, 15, and 20 years.

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

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

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

The Pros and Cons

CommonBond is available to graduates of 2,000 universities. While that is a very long list, not all colleges and universities are included.

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

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

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

What You Need to Qualify

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

  • You must be a U.S. citizen or permanent resident
  • You must have graduated

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

Documents and Information Needed to Apply

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

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

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

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

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

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

Who Benefits the Most from Refinancing Student Loans with CommonBond?

Borrowers who are looking to refinance a large amount of student loan debt will benefit the most from refinancing with them.


Apply Now

*referral link

Keeping an Eye on the Fine Print

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

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

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

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

Transparency Score

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

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

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

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

Alternative Student Loan Refinancing Lenders

The student loan refinancing market continues to get more competitive, and it makes sense to shop around for the best deal.

One of the market leaders is SoFi. It’s always worth taking a look to see if SoFi* offers a better interest rate.

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

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

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

SoFi logo

Apply Now

 *referral link

Another lender to consider is Earnest. There is no maximum loan amount, and Earnest has a very slick application process.

Its variable rates are currently 1.90% – 5.75% APR, and its fixed rates are currently 3.50% – 7.25%.

Apply Now

*referral link

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

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


Apply Now

*referral link

Don’t Forget to Shop Around

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

Since CommonBond does have strict underwriting criteria, you should continue to shop around and don’t be discouraged if you are not approved. The market continues to get more competitive, and a number of good options are out there.

Customize Your Student Loan Offers with MagnifyMoney Comparison Tool


*We’ll receive a referral fee if you click on offers with this symbol. This does not impact our rankings or recommendations. You can learn more about how our site is financed here.


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College Students and Recent Grads, Pay Down My Debt

19 Options to Refinance Student Loans – Get Your Lowest Rate

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

Updated: October 1, 2015

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

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

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

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

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

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

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

This is particularly important if you have Federal loans.

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

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

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

Is it worth it? 

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

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

Is there an origination fee?

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

Is the interest rate fixed or variable?

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

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

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

Places to Consider a Refinance

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

You should take the time to shop around. FICO says there is little to no impact on your credit score for rate shopping as many providers as you’d like in a 30 day period. So set aside a day and apply to as many as you feel comfortable with to get a sense of who is ready to give you the best terms.

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

  • SoFi*: Fixed interest rates start as low as 3.50%, and variable rates start as low as 1.90%. SoFi offers student loans to borrowers who graduated from a selection of Title IV accredited colleges and universities. You need to be employed, or have a job offer with a start date in 90 days. You also must be able to demonstrate a strong cash flow. To get the lowest rate, you need to sign up for automatic payments.
  • CommonBond*: CommonBond offers fixed rates from 3.74% and variable rates from 1.94%. You need a degree, a job and a stable cash flow. They will also review your payment history with other lenders. CommonBond is now available to students with both graduate and undergraduate degrees. There is no maximum loan amount.
  • DRB Student Loan*: DRB offers a variable APR range from 1.90% – 4.50%. Their fixed APR ranges from 3.50% – 6.25%. This is bank that started expanding aggressively into student loans two years ago, and has already booked over $950 million of student loans. If you do not sign up for automatic monthly payments, your rate will be 0.25% higher.
  • Earnest*: Earnest offers fixed interest rates starting at 3.50% and variable rates starting at 1.90%. Unlike any of the other lenders, you can switch between fixed and variable rates throughout the life of your loan. You can do that one time every six months until the loan is paid off. That means you can take advantage of the low variable interest rates now, and then lock in a higher fixed rate later. You need to have a job or an employment offer. You need an emergency fund of at least one month. You also must have a positive bank account balance and a budget that makes sense. If you have had credit in the past, you need a history of on time payments.

Below is an alphabetical listing of all providers we have found so far. This list includes credit unions that may have limited membership. We will continue to update this list as we find more lenders. (If you are counting, there are now more than 19 providers. Our list has continued to expand since we first created this post.)

  • Alliant Credit Union: In order to qualify, you need to have a bachelor’s degree. The minimum credit score is 700, and you need two years of employment and a minimum income of $40,000. They offer variable interest rates, starting at 6%. Anyone can join this credit union by making a $10 donation to Foster Care for Success.
  • Citizens One (Citizens Bank): To get the best deal, you should have at least a bachelor’s degree. They will look at your credit history, and want to make sure that at least the last three payments on your student loans have been made on time. If you don’t have your degree, you need to have made the last 12 payments (principal and interest) on time. You must make at least $24,000 per year. They offer fixed rates starting at 4.74% and variable rates from 2.33%.
  • CommonBond*: CommonBond was highlighted earlier in this post, with fixed and variable rates available. Variable rates start at 1.94% and fixed rates start at 3.74%.
  • CommonWealth One Federal Credit Union: Variable interest rates start at 3.04%. You can borrow up to $75,000 and need to be a member of the credit union in order to qualify.
  • CordiaGrad: Fixed rates range from 3.95% to 6.75% APR and variable from 2.75% to 4.95% APR. The lowest range is only available if you sign up for an automatic payment from a CordiaGrad Checking Account. You must have at least $20,000 of debt.
  • Credit Union Student Choice: This is a tool offered by credit unions. The criteria and pricing vary by credit union. The credit unions have limited membership, but you can find out if you qualify on this site.
  • LendKey*: You will need to have graduated from an eligible school in order to qualify. You need to make at least $2,000 per month, and they will review your credit history. Variable rates are available, starting at 1.93%. You will be matched with a community bank or credit union that anyone can join.
  • DRB Student Loan*: They will refinance undergraduate, Parent PLUS and graduate loans including MBA, Law, Medical/Dental (Post Residency), Physician Assistant, Advanced Degree Nursing, Anesthetist, Pharmacist, Engineering, Computer Science and more degrees. Variable rates as low as 1.90% with a rate cap and 3.50% fixed.
  • Earnest*. They will look at alternative criteria to try and approve you for a lower rate, like your employment history or bank account balances. Variable rates as low as 1.92%.
  • Eastman Credit Union: They don’t share much of their criteria publicly. Fixed rates start at 6.5% and you must be a member of the credit union. Credit union membership is not available to everyone.
  • EdVest: They offer refinancing options for private loans used to finance attendance at a Title IV, degree-granting institution. If the loan balance is below $100,000 you need to make at least $30,000 a year. If your balance is above $100,000 you need to make at least $50,000. Variable rates start at 3.580%, and fixed rates start at 4.40%.
  • Education Success Loans: You must be out of school for at least 30 months, and you must have a degree. You also need a good credit score, with on-time payment behavior. Variable and fixed loan options are available, with rates starting at 4.99%.
  • IHelp: This service will find a community bank. Community banks can actually be expensive. You need to have 2 years of good credit history, with a DTI (debt-to-income) of less than 45% and annual income of at least $24,000. Fixed rates are available, starting at 6.22%.
  • Mayo Employees Credit Union: You need at least $2,000 of monthly income and a good credit history. Variable rates are available, starting at 4.75% and you would need to join the credit union.
  • Navy Federal Credit Union: This credit union offers limited membership. For men and women who serve, the credit union can offer excellent rates and specialized underwriting. Variable interest rates start at 3.51%.
  • RISLA: You need at least a 680 credit score, and can find fixed interest rates starting at 4.49% if you use a co-signer.
  • SoFi*: You must have a bachelor’s or graduate degree in order to apply, and you must have demonstrated on-time payment behavior. Both fixed and variable rates are available, with rates starting at 1.90% and fixed rates starting at 3.5%.
  • Upstart*: You need to have a degree (or be graduating within 6 months). A minimum FICO of 640 is required. Fixed interest rates starting at 4.67%. This is more of a traditional personal loan than a long term student loan refinance.
  • UW Credit Union: $25,000 minimum income required, with at least 5 years of credit history and a good repayment record. Fixed and variable interest rates are available, with variable rates starting at 3.51% and fixed rates starting at 7.49%. You need to join the credit union in order to refinance your loans.
  • Wells Fargo: As a traditional lender, Wells Fargo will look at credit score and debt burden. They offer both fixed and variable loans, with variable rates starting at 3.49% and fixed rates starting at 6.74%. Wells Fargo does not have a tradition of being a low cost lender.

You can also compare all of these loan options in one chart with our comparison tool. It lists the rates, loan amounts, and kinds of loans each lender is willing to refinance.

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College Students and Recent Grads, Pay Down My Debt, Reviews, Student Loan ReFi

Understanding the Extended Repayment Plan

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Did you know that having Federal student loans gives you a host of repayment options to make paying back your loans easier? Along with income-driven repayment plans (Income-Based Repayment, Income-Contingent Repayment, and Pay As You Earn), you can also choose the Extended Repayment Plan.

Why is it beneficial? It does exactly what it says – it extends your repayment period from the standard 10 years to up to 25 years, resulting in a much lower (and more manageable) monthly payment.

How Does It Work?

While having a lower monthly payment sounds great, you should be aware that extending the term of your loan (and any loan, for that matter) would result in paying more money over the life of the loan. That’s because interest has a longer time to accrue. Let’s look at an example.

Say your student loan balance is $20,000 on a 10-year repayment term with a 4.29% interest rate. Your monthly payment is $205. Now, extend that repayment term to 25 years. You end up with a monthly payment of $109. It looks like you’re saving almost $100 per month, which sounds like a great deal.

Not so fast. We need to look at the interest being paid on the loan. In the first scenario, you’ll pay $4,630 in interest, for a total of $24,630. In the second scenario, you’ll pay $12,638 in interest, for a total of $32,638. That’s a difference of almost $8,300.

That’s not to say the Extended Repayment Plan isn’t worth it, but you should know exactly what it entails before signing up for it. Note there are two ways to make payments: you can choose a fixed monthly payment, where your payment stays the same each month, or a graduated payment, where your monthly payment increases at set points over the repayment term.

The graduated repayment is useful for graduates just starting out in their careers who aren’t earning much of a salary. As you gain more experience, your salary will grow, and you’ll be able to afford the increased payments in a few years.

The fixed repayment is good for those who would rather have peace of mind. The future is uncertain, and even if you advance in your career, you could decide to change paths and take a pay cut down the line. The consistent lower payments provide you with a nice buffer.

Regardless of which option you choose, the best way to use the Extended Repayment Plan is to pay the minimum payment (if that’s all you can afford) until you get yourself in better financial shape. As soon as you can afford to start paying extra toward your loans, you should. There’s no rule that says you need to take all 25 years to pay back your balance.

If you’re interested in doing the calculations on your own (and you should, to ensure you’re actually saving money in the long run), use this repayment estimator from the U.S. Department of Education. You can see which repayment plans you’re eligible for, and you’ll be able to compare monthly payments between all the plans to see which offers you the lowest payment.

Which Loans Are Eligible?

Even if you have Federal student loans, only select loans are eligible for the Extended Repayment Plan. It goes without saying, but if you have private student loans, they’re not eligible for any of the Federal repayment plans.

According to, if you have the following loans, you can enter into the Extended Repayment Plan:

  • Direct Subsidized or Unsubsidized Loans
  • Direct PLUS Loans
  • Direct Consolidation Loans
  • Subsidized and Unsubsidized Federal Stafford Loans
  • FFEL PLUS Loans
  • FFEL Consolidation Loans

Your loans need to have been disbursed after October 7th, 1998, and you must have an outstanding balance of $30,000 or more to be eligible. Direct Loans and FFEL Program loans are considered separate, so if you have $33,000 in FFEL Program loans, but only $15,000 in Direct Loans, you’d only be eligible for Extended Repayment for your FFEL Program loans. If the amounts were switched, you could only choose the Extended Repayment Plan for your Direct Loans.

How Can I Change My Repayment Plan?

The easiest way to make changes to your repayment plan is to contact your student loan servicer. Most will let you request this option online via your account, but if you’re unable to find it, call or email to inquire about it.

Who Benefits the Most from the Extended Repayment Plan?

Income-driven repayment plans typically have stricter requirements that need to be met, such as proof of financial hardship. They’re also calculated based on your annual income. The Extended Repayment Plan only requires you to have $30,000 in eligible student loans, making it easier to qualify for. If you’re struggling to make payments and don’t qualify for any other repayment plan, the Extended Repayment Plan could be a good solution.

To avoid paying more over the life of the loan, only take advantage of the lower monthly payment when you need to. Consider paying extra every month you can so you can pay your loan off sooner than 25 years. Keep in mind that the Extended Repayment Plan isn’t like income-driven repayment plans – your balance won’t be forgiven; you’re expected to pay your loan off within the amount of time given.

What if I Have Private Student Loans?

If you have private student loans, you’re not eligible for the Extended Repayment Plan, but you could look into getting a loan modification, or you could apply to refinance your loans. Either of these options can extend your repayment term, offering lower monthly payments.

Go With the Plan That Makes the Most Sense For You

Remember to use the Repayment Estimator to compare your options. The Extended Repayment Plan may not provide you with the lowest monthly payment, or you may not be eligible for it (the Estimator will show you). Educate yourself on your options first, and then contact your student loan servicer to see what advice they can offer you. They’ll be able to place you in the repayment plan that best suits your financial situation.

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Are Parent PLUS Loans Eligible for Income-Driven Repayment Plans?

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Income-driven repayment plans provide a way for student loan borrowers to seek a little relief from the burden of debt. These programs are primarily focused on student borrowers, which can leave parents saddle with Parent PLUS loans dealing with hefty monthly payments and seemingly no way to get them under control.

But there is a way to make a Parent PLUS Loan eligible for both an income-driven repayment plan and even Public Service Loan Forgiveness.

Current Income-Driven Repayment Plans

There are three income-driven repayment plans:

  • Income Based Repayment (IBR)
  • Pay As You Earn (PAYE)
  • Income Contingent Repayment (ICR)

Each plan comes with stipulations about which borrowers and which loans are eligible based on dates of disbursement, income and type of loan.

Parent PLUS loans are only eligible for ICR, but not in their current state.

[How to Set Up Income-Driven Repayment Plans]

What makes you eligible for ICR?

ICR is the loosest of the three income-driven repayment plans and therefore also has the longest repayment period before forgiveness and the highest payments.

IBR payments (for borrowers before and after July 1, 2014) will either generally be 15% or 10% of discretionary income and never more than what you’d pay on the standard 10-year repayment plan. PAYE will generally be 10% and never more than what you’d pay on the standard 10-year repayment plan.

ICR will generally be 20% or what you would pay on a repayment plan adjusted to your income with fixed payments for 12 years. ICR also doesn’t have income caps in order to enroll, anyone with eligible student loans can make payments with this plan.

The Parent PLUS loan itself is not eligible for ICR, but you could use Federal Direct Consolidation in order to enroll in ICR. Both Federal Family Education Loans (FFEL) PLUS and Direct PLUS loans are eligible for consolidation and therefore refinancing with ICR.

Which loans are eligible for Federal Direct Consolidation?

These loans are all eligible for Federal Direct Consolidation:

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

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

Private loans are not eligible.

[Learn How to Track Down all Your Student Loans Here.]

How many loans do you need to consolidate?

Consolidation seems like it would imply needing more than one loan, but you can actually consolidate just one loan. You need to have at least one Direct Loan or FFEL Program loan that’s either in repayment or a grace period.

How much will it cost?

There is no application fee for consolidating your loans. You can also prepay your loan at any time without a penalty.

How much will my monthly payments be?

ICR is typically based on 20% of your discretionary income. Discretionary income is calculated as the difference between your income and 150 percent of the poverty guideline for both your family size and state of residence. You can also use the Repayment Estimator to get an idea.

How is family size determined?

According to’s Repayment Estimator:

“Family size includes you, your spouse, and your children (including unborn children who will be born during the year for which you certify your family size), if the children will receive more than half their support from you. It includes other people only if they live with you now, they receive more than half their support from you now, and they will continue to receive this support from you for the year that you certify your family size. Support includes: money, gifts, loans, housing, food, clothes, car, medical and dental care, and payment of college costs. For the purposes of these repayment plans, your family size may be different from the number of exemptions you claim on your federal income tax return.”

How long will consolidation take?

It could take two to three months to finalize the consolidation process and begin repayment, so this isn’t an immediate fix. You will also need to continue making minimum payments on your loans until the consolidation takes effect.

Can I lose benefits by consolidating?

Parent PLUS loans aren’t exactly full of benefits to begin with, but consolidating does make some loans ineligible for interest rate discounts, principal rebates, or some loan cancellation benefits. It’s unlikely you have these benefits with a Parent PLUS loan, but if your child is interested in consolidating, you should review if he or she would lose any benefits.

What are the steps to get a Parent Plus Loan on ICR?

Step 1: Apply for Federal Direct Consolidation Loan

You can do it electronically or via snail mail.

If you prefer to keep everything digital, you can complete the electronic version of the Federal Direct Consolidation Loan Application and Promissory Note by logging into

Those who would rather handwrite all the information and mail it in can download the Federal Direct Loan Consolidation Application and Promissory Note here.

Step 2: Choose the loans to consolidate and the servicer

Fill out which loan (or loans) you plan to consolidate and your loan servicer.

The loan servicers responsible for Federal Direct Consolidation are:

You can also list any loans you don’t want to consolidate on the form.

IMPORTANT: If you’re planning to do Public Service Loan Forgiveness (PSLF), then you want to work with FedLoan Servicing (PHEAA) as that’s the servicer for PSLF.

Step 3: Pick your repayment plan

Those filling out the application online can select ICR when prompted.

If you’re using the paper form, you’ll need to complete the Income-Driven Repayment Plan Request form that accompanies the application. You may need to contact your servicer to get the paper form.

Step 4: Review the terms & conditions of your consolidation

This step is self-explanatory. Be sure to read all that fine print!

Step 5: Borrower and reference information

If you’re filling out the paper form, this step is at the top of your form.

Those filling it out online will now need to submit personal information including:

  • Name
  • Social Security Number
  • Date of birth
  • Address
  • Phone number
  • Driver’s License State and Number
  • Employer’s name and address
  • Work phone number

The references need to be two people with different U.S. addresses that do not live with you and have known you for at least three years. You’ll provide their names, addresses, phone numbers and describe their relationship to you.

Step 6: Review and sign

Check to make sure all your information is accurate and then sign and submit your forms.

[Have more questions? Check out or]

Tax Implications of ICR

The IRS could tax student loans forgiven after 25 years of repayments. By current IRS regulations, any outstanding balance forgiven can be considered income and therefore taxable. Outstanding balances forgiven under the Public Service Loan Forgiveness program are not consider income and thus aren’t taxable.

You can also refinance Parent PLUS Loans

Those with excellent credit could be eligible for competitive rates by refinancing a Parent PLUS loan with private companies like SoFi or Citizens Bank. This means you will need to repay the loan and it won’t be forgiven after 25 years of payments. But a lower interest rate could also help make your monthly payments more manageable.


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Can You Get Retroactive Credit for Public Service Loan Forgiveness?

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There are a myriad of student loan forgiveness programs, repayment plans and ways to refinance student loan debt. Unfortunately, there is nothing simple about these programs and a few missteps could mean you’ve made yourself ineligible for student loan forgiveness or you never took advantage of a program when you had the chance. So, what happens if you worked in public service for 10 years? Can you still get credit towards Public Service Loan Forgiveness?

The Short Answer

No, you cannot get retroactive credit for Public Service Loan Forgiveness if you worked those jobs prior to 2007. You may be able to on jobs worked since October 1, 2007 and took out the eligible loan after 2007.

The Longer Answer

Public Service Forgiveness Program launched October 1, 2007. Anyone who worked eligible jobs before that date could not retroactively count his or her service towards PSLF. You also can’t get credit if you put in time after 2007, but are unable to get your supervisor from the job to sign off. For each job you worked, you’ll need to file an Employment Certification for Public Service Loan Forgiveness form. You could wait the full decade to fill these forms out, but it would require tracking down supervisors who may have retired from positions or moved on to other jobs or are just impossible to get in touch with. It’s also important to keep in mind, working in public service alone doesn’t make you eligible.

Deciphering Eligibility

Requirements to be Eligible for Public Service Loan Forgiveness

Only Federal loans disbursed after the program went into effect are eligible for Public Service Loan Forgiveness, private loans such as those with Discover or Wells Fargo are not eligible. In addition, you must have certain types of Federal loans. These include:

  • Loans received under the William D. Ford Federal Direct Loan Program. This includes: Federal Direct Stafford/Ford Loans (Direct Subsidized Loans), Federal Direct Unsubsidized Stafford/Ford Loans (Direct Unsubsidized Loans), Federal Direct PLUS Loans (Direct PLUS Loans)—for parents and graduate or professional students, Federal Direct Consolidation Loans (Direct Consolidation Loans).
    • It should be noted that parents who work in public service and receive a Direct PLUS loan could be eligible for this program. But it’s a little complicated. In order to have a remaining balance after 10 years, you’d need to enroll in an income-driven repayment plan. Parents are not eligible for income-based repayment (IBR) nor pay as you earn (PAYE). The only eligible plan would be Income-Contingent Repayment (ICR). In order to be eligible for ICR, the parent would need to have the Direct PLUS loan be turned into a direct consolidation loan. Then the loan eligible for ICR.
  • Other federal loans that have been consolidated into a Direct Consolidation Loan
  • Payments made on Federal Family Education Loans or Federal Perkins Loans do not count towards the 120 required payments

WARNING: Don’t wait too long to do a direct consolidation and enter an income-based repayment program, because consolidation restarts the clock. You’ll only be getting credit towards your 120 payments once you have consolidated the loans and started your income driven repayment plan. Any payments you made prior are not eligible. You can learn more about this in the Payments that Count Towards PSLF section below.

[How to tell if your loans are federal or private]

You must have full-time employment (typically at least 30 hours a week) with a qualifying employer.

Qualifying employers include: government organizations at any level (federal, state, local, or tribal), not-for-profit organizations that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code, and some other not-for-profit organizations will count if they provide certain qualifying public services – you’d need to reach out to your loan servicer for details.

You must make 120 qualifying monthly payments in order to get forgiveness. These payments do not need to be consecutive, but have to have been after October 1, 2007. Qualifying payments cannot be made when you are: in-school status, in the grace period, in deferment, in forbearance or in default. Making a larger payment than required also doesn’t count for two. There is one catch: certain rules do allow AmeriCorps or Peace Corps volunteers to use their Segal Education Award or Peace Corps transition payment to make a single “lump sum” payment that may count for up to 12 qualifying PSLF payments.

[Find more details on]

You must be in a qualifying repayment plan in order to be eligible.

Payments that Count Toward Public Service Loan Forgiveness

  • Pay As You Earn
  • Income Based Repayment
  • Income Contingent Repayment
  • The 10-year standard repayment plan – however, under this plan you actually wouldn’t have any loans left to forgive at the end of ten years when the forgiveness kicks in to cover the remainder of your loans. If you’re repaying on this plan, you should switch to an income-drive repayment plan.

[How to set up income-driven repayment plans]

What if I Have a Graduated Repayment Plan or Extended Repayment Plan? 

The graduated repayment plan starts with low payments that increase every two years. The repayment period can last 10 to 30 years. The extended repayment plan provides fixed or graduated payments that are made for up to 25 years.

Payments made under these plans are not eligible for credit towards PSLF. If you’re currently enrolled in a graduated or extended repayment plan and believe you’d otherwise be eligible for PSLF, you can switch to an income-driven repayment plan in order to make qualifying monthly payments.

What if I Change Jobs During the 10 Years?

Let’s be realistic, odds are not high you’ll stay with the same employer for the decade it will take you to become eligible for PSLF. Each time you change jobs, you can submit the Employment Certification for Public Service Loan Forgiveness form to both prove eligibility and ensure you’re on track.

It’s highly recommended that you submit this form annually or at least each time you change jobs. If you don’t do it when you switch jobs, you will be required to submit this form for each job you held during the ten-year period when you officially submit for forgiveness.

Let’s use an example:

You worked at Happy Helpers (an eligible non-profit) from December of 2011 until August of 2014.

In September of 2014, you started working in the Parks and Recreation department of your local government (an eligible government position).

You didn’t fill out an employment certification form while you worked at Happy Helpers, but you were making payments under the IBR program. As long as you can get your supervisor from Happy Helpers to verify your employment and sign off on the Employment Certification for Public Service Loan Forgiveness form, then you can get retroactive credit.

However, if during your time working at Happy Helpers, you were making payments on a Federal Perkins Loan that wasn’t rolled into a Direct Consolidation Loan, your time in public service won’t help because you weren’t making qualifying payments.

What Happens at Forgiveness Time?

Loan Forgiveness Won’t Just Be Automatic 

No one can guide you through the end of PSLF yet, because not a single person has become eligible. The program launched in 2007, so the first wave of forgiveness won’t happen until 2017.

Currently, the government has stated you will need to submit the PSLF application in order to receive loan forgiveness. You can’t even get a sneak peak at the application though, because it’s still under development.

Just be sure you have all your Employment Certifications filled out. You can also allow the government to keep track of your progress towards forgiveness. Submit your employment certifications to FedLoan Servicing, which is the U.S. Department of Education’s federal loan servicer for the PSLF Program. This should also help prevent any nasty surprise of discovering part, or all, of your services was ineligible.

Will I Get Taxed?

One of the biggest perks of PSLF is that the IRS won’t consider the forgiven debt income. This means the forgiven amount will be tax-free. That’s a big win, especially for people with tens-of-thousands of dollars that will get forgiven.

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Balance Transfer, Pay Down My Debt

Slash Interest Rates and Then Use the Debt Snowball

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There are two common ways you can focus on debt repayment. The first, known as debt avalanche, makes mathematical sense. You chip away at the debt with the highest interest rates first to minimize the overall damage it can do to your wallet. Then you work your way down. The second, called debt snowball, makes psychological sense. Popularized by the personal finance expert Dave Ramsey, the debt snowball plan encourages you to pay off your smaller debts first, regardless of interest rate, and then use the psychological empowerment to keep motivating your debt repayment journey.

Ramsey refers to the use of the debt snowball as “behavior modification over math.” He’s also anti-credit cards, which makes balance transfers a no-go and even the use of credit cards for regular spending frowned upon. At MagnifyMoney, we understand the rational behind removing the temptation of credit cards, but we also want to see you get out of debt as quickly and efficiently as possible. So, we propose a modification to the traditional debt snowball method.

[Why This Dave Ramsey Fan Still Uses Credit Cards]

The Slash then Snowball Method

You can list your debts in order from smallest to largest, but we’d also encourage you to write the interest rates next to the debts.

Take a look at the largest interest rates. Do you have credit card debt sitting at 20+ percent?

$5,000 of credit card debt at 20% APR paying only $250 a month will take you over two years to pay down and cost you $1,131 in interest.

Multiple credit cards at high interest rates will likely cost you hundreds to thousands of dollars over the course of your snowball repayment journey. It’s prudent to get at those high interest rates as fast as possible. But that would mean you’re doing the debt avalanche instead of debt snowball.

Instead, here is a twist on the modern snowball method. Don’t focus on the smallest debts alone; also consider slashing the interest rates and then snowballing.

[How Much is the Debt Snowball Method Costing You?]

Slash and Snowball in Action

You have five credit cards you’re trying to pay off. You’ve written the list of your debts from lowest to highest.

  • Credit Card A: $700 – 16% – minimum payment $25
  • Credit Card B: $1,200 – 15% – minimum payment $25
  • Credit Card C: $2,400 – 20% – minimum payment – $50
  • Credit Card D: $2,850 – 18% – minimum payment $85
  • Credit Card E: $3,000 – 16% – minimum payment $100

TOTAL: $10,150 in credit card debt with an average interest rate of 17.00%

Each month, you’re currently paying $285 towards just the minimums. You’ve decided you can afford to pay $350 per month towards your debt.

In the traditional debt snowball method, you’d pay your minimum balances until you’ve paid off the first debt and then take the amount you were paying on the paid off debt and add it to the payment towards the next debt in line.

For example, once you pay off the $700 debt, you’d put that $25 a month you were paying and add it to the $25 a month on the $1,200 debt so you’re now paying $50 a month. Once that’s paid off you add the $50 a month to the $50 minimum on the $2,400 so it’s $100 and so on.

In the slash then snowball method, you first see if you can lower the interest rate on your smallest debt or first few debts. The easiest way to do this would be with a 0% balance transfer offer.

If you were approved for a $2,000 with a 0% balance transfer offer at no fee, you could move your $700 debt and the $1,200 to 0%. You’d then pay $115 a month towards your debt, because you’d be combining both minimums and the extra $65 a month you’re committing to your debt repayment.

By paying $115 per month towards the debt at 0% interest, you could knock down $1900 worth of debt to $150 in 15 months. Even if you paid a balance transfer fee, typically around 3% of the transferred balance, you could’ve knocked down the balance of two debts to $207 in 15 months. Keep in mind, you’re still paying the minimums on the other debts.

Electing to not do the balance transfer and paying $90 a month towards Credit Card A (that’s the minimum plus the additional $65 a month committed to debt repayment) would take 9 months to pay off the $700 and cost $44 in interest. In those 9 months, barely a dent has been made in Credit Card B because you’re only paying the minimum.

Assuming you completed the first balance transfer, the next move would either be to transfer the remaining balance and the balance of the next card (or two) to a new 0% balance transfer offer. Or you could stick with the traditional snowball method and use the $115 per month to pay off the remaining $150 balance in two months and then snowball that $115 to the $2,400 credit card debt. Combine the $115 with the $50 minimum payment, and you’re paying $165 a month.

By forgoing the debt snowball, you could pay off the balance in 17 months and then snowball the $165 to the next debt. But it would cost you $359 in interest.

If you did a balance transfer, like the Citi Simplicity at 0% for 21 months and a 3% fee, it would cost you $72 for the fee and it would be paid off in 15 months.

Who Should Use this Method?

Using balance transfers to help get yourself out of debt faster shouldn’t be used by everyone in debt. If you’ve ended up in credit card debt due to a shopping compulsion or because you’re unable to handle access to credit without spending more than you earn, then stay away from using a balance transfer. Cutting up credit cards would be the best course of action for you. But, if you’re in credit card debt because an emergency happened that you couldn’t afford or you elected to finance a purchase on credit cards and couldn’t pay it down, then the slash before snowballing method could work for you. Balance transfers are an incredibly effective tool, but only if you use them correctly, avoid the traps and commit to paying down your debt and not spending on the cards.

customize balance transfer offers with MagnifyMoney Comparison tool

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Life Events, Pay Down My Debt

Practical Advice For Those Facing Bankruptcy, From Someone Who Has Been There

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My journey to bankruptcy began in 2003 after I was in a major car accident that left me unable to work for several months. Injured and unemployed I was forced to move back home with my mother, younger brother and three foster brothers. As I slowly began to regain my financial independence our family was dealt another blow.

In December of 2004, after what should have been a routine knee replacement surgery, my mother contracted a MERSA staff infection and became gravely ill. Needing around the clock care and help with my four younger brothers, I became a full-time caretaker while my mother fought for her life. It took her over a year to win back hear health. Unfortunately Murphy’s Law was not done with its assault on our family just yet.

In the spring of 2006 I had just gone back to nursing school when I had an emergency appendectomy, which left me with an additional $15,000 of debt. Having no insurance I was responsible for the entire amount due. This surgery was the tipping point in which my debt became too much for me to handle and I had to begin looking for a different solution.

I spent the next several months educating myself on how to handle harassing debt collectors, ways to work with your creditors and how to rebuild your credit score. After struggling to send my creditors every spare penny I had I finally came to the conclusion that filing for Chapter 7 bankruptcy was the best solution for my situation.

Walking into bankruptcy court was one of the most nerve-racking things I had ever gone through, but I am so glad that I did.

If you find yourself at a crossroads contemplating bankruptcy there are a few important things you need to take into consideration in regards to your own situation.

Evaluate Your Financial Habits

Before you file for bankruptcy you need to take a long hard look at your finances, your spending habits, and any other situations your currently facing that is causing you financial hardship. Until you know how you wound up in the situation you can’t have a clear plan on how to fix it. This is also the time to decide if going bankrupt is really the right thing for you to do.

[When Should You Consider Bankruptcy?]

Gather All Your Information

Once you have decided to move forward you need to spend some time gathering all of your information. This will include: all of your bank accounts, retirement accounts, your personal property and other assets. Having this information will help you figure out which type of bankruptcy for which you qualify.

Know Your Options

It is very important to know your bankruptcy option and what each will mean for you.

A Chapter 13 bankruptcy does not wipe out your debt. Instead the court will calculate your disposable income and use that number to make a payment plan for you. Over the course of three to five years you will be required to make payments on your debt until it is paid in full or to the agreed upon amount.

A Chapter 7 bankruptcy wipes out your debt completely. There are however a few specific debts that cannot or rarely can be eliminated with a Chapter 7 including back taxes and student loans. It is also important to note that you must qualify for a Chapter 7 bankruptcy. You must prove that you are unable to pay off your debt either because your income level is below the state median or your living expenses are so high that you simply cannot repay your debt.

[8 Steps for Discharging Student Loans Through Bankruptcy]

Find A Reputable Lawyer

There are many websites out there suggesting that you can file for bankruptcy on your own, and that there is no reason to pay a lawyer. What those sites fail to mention is if you make a mistake on your paperwork you may have to start the process over. You may even find that some of your debt was not included in your bankruptcy leaving you responsible for the payments regardless of what type of bankruptcy you filed.

While hiring a lawyer does increase the expense of filing for bankruptcy it is his or her job to make sure that everything is in order and goes as smoothly as possible. Speaking from personal experience having a lawyer by your side during your proceeding can also help you feel more confident when facing the judge.

Have an After Bankruptcy Game Plan

There is a life after bankruptcy, while it may not feel like it in the moment things will get better. You however need to have a plan for how you will handle your finances from this point on. If you do not make a conscious decision to change the way you have been handing your money you will find yourself right back in the financial mess you have just escaped.

Going bankrupt can seem like the end of your financial life, and you may be wondering how you will ever recover from it. The good news is that you can. If you learn from your mistakes and make the decision to move forward with good money habits it is possible. I went from being financially devastated to a credit score of 740 in just a few short years. It took hard work and dedication to my financial health but I did it and so can you!


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When You Shouldn’t Aggressively Pay Off Your Student Loans

mortar board cash

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

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

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

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

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

What Are Your Interest Rates?

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

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

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

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

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

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

Are You Anticipating Large Expenses Soon?

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

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

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

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

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

Do You Have Other Debt That’s Flexible?

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

[How to Set Up Income Based Repayment Plans.]

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

Do You Have an Emergency Fund?

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

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

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

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

Are Your Student Loans Eligible For Forgiveness?

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

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

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

[How to Get Student Loan Forgiveness.]

Always Make Your Payments

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

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

What Should You Do?

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

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


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How Student Loans Affect Your Credit Score

Credit score large

If you’re part of the 70% of people who are graduating with student loan debt, then you need to understand how your credit score will be affected by your student loans.

How and to what extent your student loans affect your credit depends on your circumstances, including your credit history. Your FICO score is determined by a calculation that looks at all the information on your credit reports. This information includes: your payment history, the amounts of money you owe, the length of your credit history, new credit, and the types of credit that you use (or have used).

The purpose of your credit score is to indicate how likely it is that you’ll pay back your debt. Lenders use your credit score to determine whether to lend to you. This means that your student loans may impact whether and on what terms you receive lending in the future. This is why understanding how student loans affect your credit is critical.

Student Loans are Installment Loans (not Revolving Loans)

Your student loans are a type of debt that is considered an “installment loan” on your credit report. An installment loan is a loan that has a fixed payment for a fixed amount of time. Examples of installment loans include a mortgage, car loan, and student loan.

Contrast an installment loan with a “revolving loan”, which has a loan limit but does not require the full payment to be repaid every month (think of credit cards as revolving debt).

Both installment loans and revolving loans affect your credit. However, in the case of installment loans, you’re not going to see the credit benefits in the same way you would with a revolving loan. For example, if you pay off your student loan, it will not be a big credit boost, but paying off your monthly credit card bill keeps your score healthy. You can have many student loans and still have a great credit score, but multiple credit cards with outstanding debt can hurt your score.

Having various types of credit helps improve your credit score. This means student loans in combination with other debts (like a credit card or auto loan) can help you earn a higher score. Your “credit mix” makes up 10% of your credit score. So, variety is considered better as opposed to just having student loans or just having credit cards.

The Impact of Student Loans on Your Credit Score

Your student loans will impact your credit score in the same way that any other installment loan would impact your credit score. For installment loans, it’s the payments that affect your credit score (not the balances, like revolving loans).

Your total student loan balance will not affect your credit score because it’s the payments that matter. However, your balance will affect your ability to get other loans because your debt affects your debt-to-income ratio, which lenders use to determine creditworthiness.

If you become delinquent and default on your student loans, your credit score will be negatively impacted because the lender will report that you are not in compliance with the terms of your loans. Generally, delinquency of any debt can take 50-100+ points off your score, and the same is true for student loans. Over time, bringing the account current can bring back those points, but it will take a few years to have the impact completely eliminated.

[How to Get Student Loans Out of Default]

For example, if you started with a credit score of 742 and defaulted on your student loans, then your score could drop roughly 77 points, according to a Credit Karma calculation.

Conversely, if you are on a repayment plan that the lender agrees to, including going on forbearance or deferment, you will not be violating your loan terms, and therefore, your credit score will not be negatively affected.

How much your student loans impact your credit score will depend on your specific situation and your current score. For example, if you default on your loans and you started with a credit score of 650, then the impact will be different compared to if you had a credit score of 790 to begin with. It’s hard to say exactly how many points your score will improve or drop from repaying or defaulting on your student loans, but it is clear that your credit score will be affected. Typically, the higher your score, the harder you’ll fall when there’s a misstep. On time payments is the single biggest indicator that you’ll be reliable in the future, so one mistake can send your score tumbling.

What Happens When You Pay Off Your Loans

While you’re in college, if you are not making payment on your loans, then they aren’t helping build your credit because you don’t have any positive information reflected on your credit reports (for installment loans to improve your credit score you must be making payments). Once you begin making payments on your student loans, then that information will show on your credit reports and improve your credit score. Payment history accounts for 35% of your credit score, so it’s critical that you pay your student loan monthly payments on time.

Paying off student loans helps build your credit score, but you need more than student loans to maintain a 700+ score. Once you pay off your student loans, you’ll need another way to be pumping positive information onto your credit reports. You must have at least one open line of credit to be building and maintaining your credit score. If your only debt is student loan debt, and you repay that debt, you’ll suddenly be without a way to prove you can responsible use credit. You will need to open another line of credit in order to improve your credit score. A credit card is the most efficient and cost effective way maintain a strong score. You can have a card with no annual fee and if you never carry a balance, then it will never cost you anything to maintain that healthy credit score.

You’re Unique

Keep in mind that your credit is unique to you, and remember that your student loans will affect your credit differently than your friends, siblings or partner. The best thing you can do is to pay your student loans monthly to improve your score and avoid any negative impact from delinquency or default.



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8 Steps for Possibly Discharging Your Student Loans Through Bankruptcy

Students throwing graduation hats

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

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

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

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

The Current Standard

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

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

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

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

Two Commonalities Between Successful Student Loan Discharges

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

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

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

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

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

Step 1: Get Organized

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

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

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

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

Step 2: Pay the Minimums on All Debts

This one is for both you and the courts.

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

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

Step 3: Look into Income-Driven Repayment Plans

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

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

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

Step 4: Track Your Expenses

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

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

Step 5: Create a Repayment Plan

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

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

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

Step 6: Find Ways to Free up Cash

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

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

Step 7: Find Ways to Earn More Money

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

Step 8: Consider Bankruptcy

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

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

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


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Getting a Mortgage After Bankruptcy

Purchase agreement for house

Whether you’re drowning in loans, unemployed, racking up medical bills, or guilty of too much online shopping, one thing’s for certain — we all hate debt. And when debt becomes impossible to pay back, bankruptcy may seem like the only way to escape.

While filing for bankruptcy may be the right solution, it can negatively affect your finances for years to come. But, fortunately, life moves on. And despite this financial setback, you may want access to credit in the future. Without it, large purchases like a home can be difficult. It’s not impossible, but applying for a mortgage post-bankruptcy means working through a particular set of challenges. Prepare yourself by knowing these important guidelines.

Know the Difference: Chapter 7, 11, & 13 Bankruptcies

We constantly hear about bankruptcies in the media, but what does filing for one actually mean? Bankruptcy is a legal procedure that can help you wipe out or repay debt under the protection of the United States bankruptcy court.

Chapter 7 and Chapter 13 are the main types of consumer bankruptcies. But what are the key differences?

Chapter 7 is typically the preferred type of bankruptcy because involves liquidation and eliminates all your eligible debt. This means your nonexempt property will be sold and the proceeds will be distributed to your creditors. Exempt property varies from state-to-state, but part of your property may be subject to liens or mortgages, promising it to other creditors. It’s important to know Chapter 7 bankruptcies may, but not frequently, result in a loss of your property. You may lose your home outside of bankruptcy to foreclosure if you fall behind on your mortgage payments.

It is much harder to be eligible for Chapter 7 bankruptcy. If your income is above the median in your state and you prove you have sufficient cash flow to service some of the debt, then you’ll likely be forced to file Chapter 13.

Chapter 13 bankruptcy allows you to keep property, adjust debt, and to pay it back over time. This is a long process as the repayment period is typically three to five years. If you’re behind on mortgage payments, it may be easier to keep your home in Chapter 13 because you may be able to make up payments in your repayment plan.

What about Chapter 11 bankruptcies? If your business is a corporation, partnership, or you own a small business, Chapter 11 may give you a chance to reorganize. Chapter 11 also can help restructure debt so it can be paid back over time.

Unfortunately, bankruptcies may stay on your credit report for up to 10 years. Because of this, many people incorrectly assume bankruptcies ruin your chance at homeownership. This definitely isn’t the case, but it does mean the path to purchasing a home will take more time. 

The Waiting Period After Bankruptcy

Even if bankruptcy stays on your credit report for 10 years, you’re not expected to wait that long before trying to buy a home. However, Fannie Mae knows a bankruptcy increases your likelihood of a mortgage default. Despite this red flag, Fannie Mae encourages lenders to investigate the cause of these issues, make sure sufficient time has passed, and verify an acceptable credit history has been re-established. So, how long do you have to wait? The waiting periods begin upon the completion, discharge, or dismissal date of your bankruptcy.

Both Chapter 7 and Chapter 11 require a four-year waiting period. However, if you have documented extenuating circumstances, it’s possible it may be reduced to two years.

Chapter 13 bankruptcy requires either a two-year or four-year waiting period, depending on what step of the procedure you’re on (discharge or dismissal). If you’ve had more than one bankruptcy within seven years, a five-year waiting period is required. But remember, this time period kicks in after the Chapter 13 bankruptcy is complete, so that’s two to four years on top of the original three to five years working your repayment plan. It could be up to nine years total before you’re eligible.

If you’re anxious to start the home buying process, these waiting periods may feel inconvenient. But they offer a fantastic opportunity to clean up your credit and reduce your debt-to-income ratio before re-applying for a mortgage.

The Importance of Your Credit Score and Debt-To-Income Ratio

As soon as your bankruptcy case has been discharged and closed, it’s time to take a detailed look at your finances. Chances are, you have a lot of room for improvement. Luckily, Fannie Mae’s mandatory waiting period gives you the chance to prepare.

Here’s what you need to do:

  • Improve your credit score. First, get a copy of your credit report and a view of your credit score to see what work needs to be done. offers a free report every year, but this does not come with a credit score. You can find more information about how to access your score here. Do you know what steps to take next? 35% of your score is based on payment history. That means you need to pay every single bill on time. If you no longer have access to any lines of credit, then consider getting a secured credit card in order to rehabilitate your credit. Start doing this right away and you’ll see improvements. Going forward, you need to monitor your credit report regularly. Remember, your credit score will also affect what interest rate you’ll be able to secure, and consequently, which mortgages you’ll be able to afford.
  • Pay down outstanding debts. After the dust settles from your bankruptcy, do you still owe any money? Try to repay these debts as quickly as possible. Debt-to-income ratio is the single most important factor in getting approved for a mortgage. Looking for your best chance at approval? Aim for a debt-to-income ratio of 40% or less. Also, make sure you don’t take on any additional loans during this period of time.
  • Stick with your Chapter 13 repayment plan. Did you file for Chapter 13 bankruptcy? If so, don’t miss any of your court-ordered repayment requirements. Diligently follow exactly what you’ve agreed to.
  • Save as much as you can. Do you have an emergency fund? A health stash of cash reserves can help keep your debt repayment plan on track as unexpected expenses pop up. Don’t forget, you’re also going to need a chunk of change for your mortgage down payment.

Bankruptcy doesn’t have to create a barrier to homeownership. But bouncing back may take time. Whether you’ve filed for Chapter 7, 11, or 13, Fannie Mae’s mandatory waiting periods offer an opportunity to get your finances back on track. Use this time wisely by committing to improve your credit score and reduce your debt-to-income ratio. Save as much as you can. And when the time comes to reapply for a mortgage, be upfront with your lender. Be honest about your setbacks, show how much progress you’ve made, and explain how you’ve learned from past mistakes. Remember, bankruptcy was never meant to be a life-long penance; it’s a chance for you to start over.


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Just a Number: Why You’re More Than Your Credit Score

Just a Number: Why You’re More Than Your Credit Score

Written by Yee Lee, Co-Founder & CEO of Vouch

If you’re on the verge of making a major purchase, there’s probably just one thing on your mind – your FICO score. Named after credit pioneers William Fair and Earl Issac, FICO scores have become the benchmark on which nearly everyone’s creditworthiness is assessed. These days FICO isn’t the only game in town anymore, but it’s remained the leader when it comes to credit scores.

Your FICO score, a three-digit number that could shape the course of your financial life, is determined by a number of key factors. Nothing about your score is left to chance. Credit rating agencies determine your score by looking at:

  • Your payment history
  • How long you’ve been building your credit
  • What kind of credit you’ve had
  • How much you owe versus how much you’ve borrowed

That score becomes the focus of lenders, who use it to gauge the likelihood of a potential borrower repaying a loan.

Although FICO scores remain integral to determining creditworthiness, future lenders will need a richer data set that looks to a potential borrower’s social network. This community-centric view of lending will ultimately produce better borrowing rates and enable borrowers to save more cash.

Finding Credit Clarity

The FICO score has been around since the 80s – but three decades of history doesn’t make it the perfect metric for assessing creditworthiness. New algorithms allow us to incorporate more data points for a richer, more detailed picture of someone’s credit history. With the ability to judge someone’s creditworthiness from a multitude of factors, there’s no reason anyone should be forced to spend two to three years repairing their score for something as small as missing a single payment. There’s more to a person than just their past.

Even advanced algorithms can make mistakes, though. What’s more, an algorithm might not be able to factor in your goals, education, or the community supporting you. Data is focused around your borrowing history, and that’s it.

Friends and family often have the best insight into an individual’s creditworthiness. They can serve as a check against data-driven methods for evaluating credit, like the FICO score. Community information shouldn’t replace objective lending models, though. Instead, data and social factors should complement each other when seeking the fullest picture of someone’s credit.

It’s Decision Time

Algorithms are unlikely to ever fully understand humans and their behavior. Before technology caught up with finance, people decided who would get approved for a loan. Lenders consulted friends, family, neighbors and employers. We have the opportunity now to bring communities back into lending — and make it truly human again.

As we finally recover from the Great Recession, we are positioned to rethink lending for the better. The best way to improve lending would be to incorporate human feedback in every evaluation. Humans will never replace the importance of data for lenders, but the two channels can work hand in hand to complement each other in a way that more clearly reflects individuals’ creditworthiness.

It’s time to take lending back to its roots. We can ensure borrowers receive manageable interest rates that ultimately benefit lenders as well. We can consider people who know borrowers best when making a decision.

We can make lending social again.

Yee Lee is the Co-founder and CEO of Vouch*, the first social network for credit. He has been building Fintech and social communication applications for the last 15 years, including PayPal, Slide, and Skype. Yee holds engineering degrees from the University of California at Berkeley and Stanford University.

We’ll receive a referral fee if you click on the “Apply Now” buttons in this post. This does not impact our rankings or recommendations You can learn more about how our site is financed here.


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Why This Dave Ramsey Fan Still Uses Credit Cards


In 2010 my husband and I attended Dave Ramsey’s Financial Peace University at our local church. To date his program has helped us pay off more than $17,472.00 while living on a single income and raising a family. Dave Ramsey has helped thousands of families just like mine pay off debt and stay on track financially.

Those of you who are familiar with his philosophy know that Dave is strongly against the use of credit cards for any reason. Period. He believes the only thing you should be doing with your credit cards is cutting them up, pay them off and canceling the accounts. He teaches that cash is always better than credit and to truly have financial peace you too must get rid of plastic for good.

However, I disagree with Mr. Ramsey in this one major area when it comes to financial success. Even as longtime fans of Dave’s program my husband and I have chosen to keep our cards for two very important reasons.

A Credit Card Offers Protection That Cash And Your Debit Card Simply Can’t

Last summer we took our two sons to the Toledo Zoo on our way back home we stopped for gas. Unfortunately attached to the pump was a card skimming device used to steal credit card and bank numbers. Two months later we received a call from our bank asking if we were currently in Columbus Ohio and if we had just spent $510.00 at a Family Dollar store. In addition, we were being hit with bank overdraft fees totaling $250.00. After explaining that we were nowhere near Columbus the fraud department canceled the card and we immediately disputed the charges with our bank. Even though our bank was very helpful, it did not give us access to our money right away. It still took more than two weeks before we were able to get the money deposited back into our checking account.

Thankfully we were not held responsible for these fraudulent charges. However, others’ have not been so lucky. Bank debit and ATM cards can easily be skimmed and once the thief has access to your personal information they can quickly and easily drain your checking or savings accounts. Leaving you holding the bag for both the charges and the overdraft fees.

If the number is skimmed at the gas pump on a credit card and used later to make unauthorized purchases, you are not liable for them. All you need to do is call up your credit card company, and dispute the charges. The company will work with you and walk you through the process of getting the fraudulent charges reversed.

Carrying cash isn’t any safer. It can be easily lost and once it is gone, it’s gone. That is why when traveling, or going to a tourist destination we always use our credit cards.

[How Much Money Is the Debt Snowball Method Costing You?]

Using A Credit Card Is The Easiest Way To Build Or Improve Your Credit Score

Dave Ramsey argues that if you have cold hard cash in your bank account a credit score really is not all that important or even necessary. Having plenty of cash in the bank is a great thing; we should all strive for it. However, when is the last time a creditor just asked for your bank balance? That is not what the mortgage lender or car dealership wants to know, what they really care about is your FICO score.

In my experience, the average middle class American family needs to not only have a credit score, but a good one just to get by in life. Everyone from the cable company to your landlord will run a credit check as part of the application process. Without a good FICO score you may be paying higher prices for things like rent, utilities, cellphone service, and even cable TV. Car and homeowners insurance companies also rely heavily on your credit score to determine how much you will have to pay for coverage. If you have a bad credit score you may be charged higher premiums. You could even be deemed uninsurable and not qualify for insurance at all!

My husband and I use our credit cards to help build and keep our FICO scores in the high 700’s. This ensures that should we ever want to refinance our home, or need a personal loan then we will be eligible to get the best interest rates possible. It also helped us qualify for better premiums with our insurance company as well.

[6 Simple Steps to Improve Your Credit Score]

With these two very important factors in mind, we made the educated decision to keep and use our credit cards responsibly. Whenever we use our credit cards we stick to one simple rule that has worked well for us. We never charge something for which we don’t already have cash in the bank. If it is not in the budget, it’s not on the card. No exceptions.

Having credit cards is not a bad thing, the banks are not evil, and they are not out to get you. They are however providing you with a service that you can choose to utilize or not. You have to be the one who acts reasonably with credit cards or you will go into debt. If you decide that yes, we can control the way we use our credit cards, then you should research available credit cards and find the best card for your situation and family.

When traveling life’s financial highways remember, you get to decide how you achieve your financial goals. There is no right or wrong way; there is only what you deem best for you and your family.


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OneMain Financial Loan Review

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Updated July 27, 2015

OneMain Financial is owned by Citibank, and offers personal loans to borrowers via its branch network. OneMain Financial* will approve people with FICO scores as low as 600, and if you apply before noon you can have the money during the same day. However, the interest rates tend to be higher than other online lenders – especially if you have an excellent credit score.

In this review, we will share:

  • The terms of the loans offered
  • The minimum acceptance criteria
  • The loan application process
  • The fine print and traps that you need to avoid
  • Alternatives that you should consider

Loan Terms

OneMain Financial offers personal loans up to $10,000.

The interest rates are from 16.99% – 35.99%.

OneMain Financial loans are not available for business expenses or tuition. However, beyond those restrictions, you can use the proceeds of your loan for any purpose. The loan will be disbursed to you in the form of a check, which can be deposited into your bank account and then used for any purpose. Note: if OneMain Financial is made aware during the application process that you plan to use the funds for gambling or any illegal purposes, your application would be declined.

The loans are fully unsecured, and no collateral is required.

In addition to the loan, OneMain Financial will likely try to sell you insurance products. It offers several types of insurance:

  • Unemployment insurance: if you lose your job during the term of the loan, some of your monthly loan payments would be paid on time
  • Life insurance: if the primary borrower dies during the term of the loan, the insurance proceeds would pay off any remaining balance
  • Disability Insurance: if you become disabled, payments would be made on your behalf

Before buying insurance from OneMain Financial, you should seriously consider other options. For example, it is usually much cheaper to buy a term life insurance premium that would cover all of your needs, and not just the loan.

There is no prepayment penalty, and you can choose your due date to make sure that it aligns with your paycheck cycle.

Minimum Acceptance Criteria

Although OneMain Financial has a lower credit score cutoff, it still has some strict credit criteria. Here are some of the most important requirements:

  • You must be employed, and have verifiable income. It is easiest if you have full-time employment with paystups. If you are self-employed, you will likely be asked for a few years of tax returns. OneMain Financial is serious about making sure you have steady, recurring income. It could be difficult to be approved if you have highly volatile income or depend largely upon bonuses or other variable compensation.
  • You should have a credit score of at least 600.
  • No bankruptcy filings. If you filed bankruptcy in the past, you will be declined.
  • You are at least 18 years old (19 in Alabama and Nebraska)
  • You are a resident of the United States (but do not live in Alaska, Arkansas, Connecticut, Massachusetts, Nevada, Rhode Island, Vermont or Washington, D.C.)
  • You have some established credit, which means you have a history (it can be short) of making payments on time with some accounts.
  • You can demonstrate an ability to repay. OneMain Financial will talk to you about your income and your monthly expenses. Unlike credit card companies, it will go into much greater depth about where and how you spend your money. And it will look at both a debt burden ratio (the percent of your income that goes towards debt payments) and your cash flow. You need to prove that you will be able to afford all of your existing payments and your new loan payment, and still have money left over.

Note: If you are using the OneMain Financial loan to pay off other credit card companies, you can have OneMain Financial make check payments directly to the credit card companies. When you do this, OneMain Financial will not double count the credit card monthly payments (which you are going to pay off) and your new loan in the debt burden.

OneMain Financial is not a payday lender or title loan company. It’s willing to make loans to people with a lower credit score. But, OneMain Financial doesn’t approve everyone with a 600 credit score. You will have to provide documentation verifying your income and sit down with a loan officer. OneMain Financial will only make loans to people who prove that they can afford to repay. And its much more rigorous in its underwriting than credit card companies (which generally don’t verify information) or payday lenders (which generally don’t test affordability).

For these reasons, we give OneMain Financial a B rating in our Transparency Score.

Application Process

You can apply for a loan online. However, in order to actually get the loan you will need to visit a branch. To find out if a branch is near you, use this branch locator.

If there is a branch near you, start the loan application process online. It is a quick and easy process. However, it will result in a hard inquiry on your credit report (which typically takes 10 to 20 points off your score).

Once you complete the online application (which is fairly standard), you will get an instant response. If you are approved, you will be referred to a branch. In addition, you will most likely be required to bring in a few bits of information. OneMain Financial will usually ask you to verify your identification (a driver’s license usually works), your address (via a utility bill) and your income (via a paystub).

When you bring those documents into the branch, the employee will verify the information and then have you sign the loan documents. You will then be given a check that you can deposit into your bank account. If you bring all of the right documents, you can spend less than 30 minutes in the branch.

If you apply online before noon, you can usually get the loan on the same day. Otherwise, you will get your loan the next day.

After the loan is approved, you have 14 days to change your mind and return the loan proceeds. If you do that, you will not be responsible for any of the accrued interest.

At the time of the loan closing, OneMain Financial will try to sell you add-on insurance products. In addition, you will have to select your due date. We highly recommend selecting a due date that aligns with paycheck being deposited into your bank account.


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Fine Print Traps

Personal loans are relatively simple contracts. You borrow a fixed amount of money, for a fixed period of time at a fixed interest rate.

The loans offered by OneMain Financial are interest bearing, and interest accrues daily. You can take advantage of that by making payment more often. For example, if you pay your account weekly you will reduce the amount of time it takes to pay off your loan. However, if you pay late (especially early in the loan term), you could end up adding years to your loan. So, make sure you always pay on time. And it is to your benefit to pay earlier and more often than required.

OneMain Financial will service the loan from the branch where you booked the loan. However, a big part of the incentive scheme for the branch employees is to lend more money. That means they will constantly be tempting you with more cash. Once you are an existing customer making payments on time, OneMain Financial will make it very easy for you to borrow more money quickly. Just make sure you stick to your plan of paying off the debt.

The insurance offered by personal loan companies like OneMain Financial can offer questionable value. Make sure you do your homework before signing up for any insurance products.

OneMain Financial loans are incredibly convenient, especially if the branch is near you. However, as your credit score improves (especially above 600), you may be paying too much for a OneMain Financial loan. Make sure you shop around to see if you can get a better deal somewhere else.

Alternatives You Should Consider

For a long time, OneMain Financial and Springleaf were the only two companies making personal loans. And it targeted people with scores below 700. However, in the last few years a number of online personal loan companies have been created. These companies do not have the expense of a branch network, and can offer much lower interest rates. Even better, with most of these loan companies you can check your rate without hurting your credit score.

We encourage you to use our personal loan marketplace to consider other companies. If your score is above 750, you could probably get a rate as low as 5%. Including companies like SoFi*, which offers no origination fees, no prepayment penalties and no application fees. If your score is below 750, most of these companies will still beat OneMain Financial pricing. LendingClub* approves scores down to 620 and offers APR ranges of 4.99% – 32.99%. Even better, you will not need to go to a branch.

It only takes a few minutes to see if you can qualify at all of the online lenders listed in our marketplace. If you can’t find a loan that works for you, then OneMain Financial may be the right option.

However, if you need the money today (or even in the next few days), the online lenders are not for you. OneMain Financial still beats the internet-only lenders with its ability to make decisions and disburse funds same day. But you will pay for that convenience.


*We’ll receive a referral fee if you click on offers with this symbol. This does not impact our rankings or recommendations. You can learn more about how our site is financed here.


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How to use the Public Service Student Loan Forgiveness Program

Students throwing graduation hats

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

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

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

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

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

A Little Background

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

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

Finding a Job that Qualifies

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

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

When Public Service Loan Forgiveness Kicks In

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

After the 120th Qualified Payment Is Submitted…

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

Here’s something else worth noting (taken from the website):

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

Getting Started

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

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

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

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

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

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

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

Do the Math Carefully

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

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

Final Thoughts

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

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


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

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

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

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

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

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

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

Option 1: Renegotiate the Terms

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

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

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

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

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

Option 3: Bankruptcy (or at Least Suggest Bankruptcy)

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

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

How to Repair the Damaged Parent/Child Relationship

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

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

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

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

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

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

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

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

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Consumer Watchdog: What’s Wrong with a Parent PLUS Loan?


After the financial aid letters have gone out, scholarships have been granted and budgets have been crunched – parents and students may still come up short on college tuition. Enter the Parent PLUS loan. A Federal government backed education loan for parents. Because federal student loans are almost always superior to private student loans, one would think this would hold true for the Parent PLUS loan. It doesn’t.

What is a Parent PLUS Loan?

A Parent PLUS loan is an unsubsidized loan from the federal government that offers parents a way to bridge any gaps in a child’s college tuition. A credit check is run, but there are no income requirements. In fact, a parent can borrow up to the cost of attendance minus any other aid a child is already receiving.

The Issues with a Parent PLUS Loan

Federal student loans come with a lot of benefits, but the same can’t be said for the Parent PLUS Loan. 

Origination Fee

Unlike federal student loans, the Parent PLUS Loan comes with an origination fee. Loans disbursed on or after October 1, 2014 and before October 1, 2015 carries a fee of 4.292% and loans disbursed on or after October 1, 2015 and before October 1, 2015 carries a fee of 4.272%. 

Steep Interest Rate

Parent PLUS Loans first disbursed on or after July 1, 2015 and before July 1, 2016 carry an interest rate of 6.84%. This is more than 2% higher than undergraduate federal student loans, which currently have an interest rate of 4.29%. 

Only Eligible for One Income-Based Repayment Plan 

Students currently taking out federal student loans will be eligible to utilize the Income-Based Repayment Program, the Pay As You Earn repayment program or the Income-Contingent Repayment Program. The PLUS loan is only eligible for the Income-Contingent Repayment Program (ICR), if consolidated, which is the least affordable of the three options. Parents will first have to consolidate their loan(s) with the Department of Education into a Direct Consolidation loan. Then the loan can be eligible for ICR. This means a monthly payment can be no more than 20% of discretionary income and any remaining balance will be forgiven after 25 years of payments.

[Learn More about Income Based Repayment Programs Here]

Allows Parents to Take on More Debt Then They Can Afford 

One of the biggest problems with the Parent PLUS Loan is the ability for parents to take on far more debt then they can actually afford. There is no income check run on Parent PLUS Loans. A credit check does get performed, but even those with weak credit can still obtain a loan with a little help from either an endorser (fancy word for co-signer) or documenting to the Department of Education any extenuating circumstances for the adverse credit history.

A student can only borrow a maximum of $31,000 in Direct federal student loans (subsidized and unsubsidized). There are also limits on Perkins loans and other federally backed options. What if a child goes to a school that costs $50,000 a year for an undergrad degree, $200,000 over 4 years? He can borrow $31,000 in Direct Loans, $27,500 maximum in Perkins Loans (if eligible), but that still leaves $141,5000 remaining.

Perhaps he gets some scholarships from the university and through other sources and that brings the total down to $100,000. Mom and Dad saved some money, but only can offer $20,000. That leaves $80,000 remaining. So Mom and Dad agree to take on a Parent PLUS Loan. Even though Mom and Dad make a combined income of $65,000 a year – they can still take on $80,000 worth of debt at an age where they’re likely closing in on retiremeent.

Can’t Pass On to a Student or Consolidate It With Student’s Federal Loans

Once a Parent PLUS Loan is in a parent’s name it can’t be passed on to a student nor consolidated with a student’s federal loans. A parent can work out a deal with a child to have the child pay the parent directly, but the loan can’t be moved to the child’s name.

Ways to Avoid Parent PLUS Loans

The first step is to have your child max out Federal student loans as well as seek all grants and scholarships for which he or she is eligible.

Next is to consider getting a private loan or co-signing with your child on a private loan.

However, private loans should only be the option if you’re confident in your ability to repay the loan in 5 to 10 years and you have a high credit score. Private lenders offer lower rates than the government is providing on Parent PLUS Loans and some private lenders don’t charge an origination fee. But keep in mind; private lenders are far less forgiving if you hit a rough patch. Even worse, if the child passes away a Federal loan will be forgiven but a private loan won’t be.

[Find Out More about Private Lenders Offer Parent Plus Loans Here.]

How to Handle an Existing Parent Plus Loan

Are you already struggling with a Parent PLUS Loan? Here are three options for getting a handle on your repayment:


You can refinance a Parent PLUS Loan with a variety of private lenders (like SoFi*). You could get a lower interest rate and avoid paying an origination fee to refinance.

Consolidate to make Parent PLUS loan eligible for ICR plan

As mentioned above, Parent PLUS Loans can go through the Income-Contingent Repayment Plan, but first they must be consolidated. The ICR means you won’t have a monthly payment of more than 20% of your discretionary income.

Do you work as a public servant?

Parents are eligible for public loan forgiveness – but it still takes 120 payments (10 years) of on-time payments before forgiveness kicks in.

* We’ll receive a referral fee if you click on offers with this symbol. This does not impact our rankings or recommendations. You can learn more about how our site is financed here.

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

Woman trying to protect her saving

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

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

1. Private loans and Federal loans are treated differently.

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

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

2. First comes delinquency, then comes default.

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

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

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

3. Your credit is negatively affected. 

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

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

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

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

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

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

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

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

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

[3 Graduates Who Successfully Rehabilitated Their Student Loans]

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

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

The Point – Avoid Default if At all Possible!

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



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When Should You Consolidate Student Loans?

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

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

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

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

Quick Note on the Difference Between Refinancing and Consolidating

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

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

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

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

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

When Should You Refinance Federal Student Loans?

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

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

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

[How to Set Up Income-Driven Repayment Plans]

According to, even consolidating through the government can cause a loss of benefits, though it doesn’t name specific benefits, so it’s important to check before you consolidate. states that borrowers have access to the Income Contingent Repayment Plan and Income-Based Repayment Plan under the Direct Consolidation Loan. Additionally, “borrowers retain their subsidy benefits on loans that are consolidated into the subsidized portion of a consolidation loan.”

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

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

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

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

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

When Should You Consolidate Private Loans?

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

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

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

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

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

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

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

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

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

Are There Any Downsides to Consolidating?

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

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

Just as an example:

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

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

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

Is There a Perfect Time to Consolidate?

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

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

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



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


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

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

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

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

The Need for Life Insurance

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

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

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

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


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

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

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

Everyone Needs to Be Protected

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


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Student Loan Forgiveness Programs for Doctors

mortar board cash

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

National Health Service Corps (NHSC)

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

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

Public Service Loan Forgiveness Program (PSLF)

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

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


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

State Repayment Programs

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

Arizona Loan Repayment Program

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

Kansas State Loan Repayment Program

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

Do the Math Before Signing on the Dotted Line

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

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

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3 Graduates Who Successfully Rehabilitated Their Student Loan Debt

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

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

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

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

Taking on That $30,000 Worth of Debt

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Have Student Loans? Take These Steps Now

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

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

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

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

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Cash Advance Interest Rates: When It’s Cheaper than a Payday Loan


While it’s common knowledge that payday loans should be avoided at all costs, there are times when you might be completely unprepared for a huge expense. Emergency funds are great during these times, but what happens if you just can’t save the money? Unfortunately, it’s an all too common situation many Americans face.

That’s why we wanted to offer a slightly better solution to those who are strapped for money, but want to avoid the vicious cycle of debt perpetuated by payday and title loans.

When and Why Does a Cash Advance Make More Sense?

Cash advances offered by credit cards could be a better alternative than a payday loan, but you must check the interest rates beforehand. In some cases, they might not be the better deal.

If you’re familiar at all with cash advances, you know the APR associated with them is quite high. According to a recent survey conducted by, the average cash advance APR is 23.53%. Meanwhile, the average APR for regular purchases is 14.99%.

The interest on cash advances also begins accruing immediately – there’s no grace period, unlike with regular purchases. There are also upfront fees associated with cash advances.

However, it can still be better than borrowing from a payday lender.

Say you need $400. Taking the cash advance option might mean paying a $15 fee upfront, and then getting charged 23% APR from day one. That means your daily interest rate is 0.063% (23% divided by 365). You’ll end up paying $7.56 in interest if you can pay the loan off in a 30-day period, plus the $15 fee, for a total cost of $22.56.

That’s not horrible when compared with a payday loan. According to the Consumer Federation of America, expect to pay a fee of $15 – $30 for every $100 you borrow on a two-week term.

Let’s assume you have to pay the same $15 fee when borrowing $400 from a payday lender. You’ll be paying $60 in fees right off the bat. If you can’t pay your loan off in two weeks, you’ll have to pay another fee to get the term extended. Plus, if you don’t have enough money in your bank account, you might incur bank charges due to a bounced check or non-sufficient funds. It adds up quickly!

Here is a list of cash advances that will cost you less than a payday loan. If you’re in need of cash quickly, consider these creditors rather than a payday lender.

Best Cash Advance Interest Rates

PenFed Promise Visa Card: There’s no cash advance fee associated with this card, and the APR ranges from 7.99% – 16.99% for cash advances. This card doesn’t have an annual fee or a penalty APR fee, but you do have to be a member of PenFed Credit Union. Anyone can join PenFed by hitting eligibility requirements or making a one-time donation to either Voices for America’s Troops ($14) or National Military Family Association ($15).

Barclaycard Ring: There’s a flat $3 fee for each transaction, and the APR is 8.0% across the board (for regular purchases, balance transfers, and cash advances). There’s no annual fee with this card.

Quicksilver (Capital One): The fee is $10 or 3% of each transaction, whichever is greater. The APR is 24.90%, and the card doesn’t have an annual fee.

AMEX Blue Cash Everyday: The fee is $5 or 3% for each transaction, whichever is greater. The APR is 25.24%, and there’s no annual fee.

Bank Americard Cash Rewards: The fee is $10 or 3% for each transaction with a Direct Deposit or Check Cash Advance, whichever is greater. The fee increases to $10 or 5% of each transaction with an ATM, Over-the-Counter, Same-Day Online or Cash Equivalent Cash Advance. The APR ranges from 15.99% – 24.99% for Direct Deposit and Check Cash Advances, and is 24.99% for Bank Cash Advances. There’s no annual fee.

Chase Sapphire Preferred: The fee is $10 or 5% of each transaction, whichever is greater. The APR is 24.99%. An annual fee of $95 is waived for the first year.

Citi Double Cash: The fee is $10 or 5% of each transaction, whichever is greater. The APR is 25.24%. It doesn’t have an annual fee.

Chase Freedom: The fee is $10 or 5% of each transaction, whichever is greater. The APR is 24.99%, and there’s no annual fee.

Discover it: The fee is $10 or 5% of each transaction, whichever is greater. The APR is 24.99% and there’s no annual fee.

How Much Will a Cash Advance Actually Cost? An Example

Going back to our $400 example, you’ll pay a $12 fee on cards that charge 3%, and a $20 fee on cards that charge 5%. You might also be charged an ATM fee depending on which bank’s ATM you use. Those usually range from $2-$3.

To figure out how much a cash advance will actually cost you, use this formula:

APR / 365 x cash advance amount x # of days it will take you to pay off the cash advance + fees = total finance charges you’ll pay.

Since most lenders charge interest on a daily basis, you have to break down the APR. You can divide the APR by 365 to get your daily interest rate. Then you need to multiply the daily interest rate by your cash advance amount to see how much interest is accruing daily. Then multiply your daily interest amount by how many days it will take you to pay off your cash advance to find the total amount in interest you’ll pay. You also need to add in any fees.

Using the Quicksilver card as an example, the formula looks like this:

$400 x 3% = $12 fee.

24.90% APR / 365 = 0.068 (daily interest rate)

400 x 0.068 = 27 cents in interest accruing daily

27 x 30 (days) = $8.16 in interest over the course of a month

$8.16 + $12 + $3 ATM fee = $23.16 is the cost of borrowing $400 for one month. That beats paying $60 in fees if you went with a payday loan.

Do note that some lenders calculate interest differently than others. Be sure to check individual policies before making a final decision. This formula is only meant to give you a rough estimate of how much you’ll have to pay.

A Note if You Have Credit Card Debt

Be aware of how your creditor allocates payments if you have existing debt on a credit card you want to use for a cash advance. Some creditors apply payments made over the minimum to lower interest rate purchases first, and higher interest rate purchases last.

That means if you already have $1,000 in regular purchases on your credit card that you’re working to pay off, your extra payment might be applied toward that – not your $400 cash advance.

Shop Around for Other Alternatives

As with any financial product, it’s important to do your research to find the best credit card for your situation. If you already have a credit card (especially if it doesn’t have a balance), check the fine print to see how much the cash advance fee and APR is. It’s also worth checking with your local credit union, as they might have credit cards with lower fees. There’s no reason to apply for and open another credit card when one you have can work just as well.

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My New Forbes eBook: How To Crush Credit Card Debt

A few months ago, Forbes asked me if I would write an eBook on the topic of credit card debt. And I am pleased to announce that my book is being published today. “Secrets from An Ex-Banker: How To Crush Credit Card Debt” goes on sale today at Amazon and iBooks.

My New Forbes eBook: How To Crush Credit Card Debt

If you feel trapped in credit card debt, and want help building a plan to become debt-free, this book is for you.

We remain a nation addicted to credit card debt. The average American has 3.7 credit cards in their wallet. Yet that doesn’t seem to be enough, because we continue to open new accounts and spend more. Last year, over 40 million new credit card accounts were opened. In the first three months of 2015, we added over $20 billion to our balances in America. We just keep swiping.

I believe there are three big problems with credit cards:

  • Some people just spend more when they spend on plastic. Countless studies have demonstrated that people swiping a card can end up spending anywhere from 10% more to double their original intentions.
  • It is very easy to pay only 2% of the balance, commonly known as the minimum due. For cash-strapped families, the minimum due is incredibly tempting. And it means that you ended up financing your purchase over 30 years.
  • Credit cards remain obscenely expensive. Interest rates remain well over 15% for the vast majority of borrowers. The average American family in debt is spending over $1,000 each year in credit card interest alone.

The purpose of this book, along with the MagnifyMoney site, is to help people take control of their financial lives and eliminate credit card debt. Too many people are losing sleep over debt that doesn’t disappear. Credit card debt does not have to be a life sentence. I can help you build a plan to crush that debt forever.

In this book, I will help you answer the following questions:

  • Should you be trusted with a credit card? Gambling addicts should not move to Las Vegas. Equally, some people should never use a credit card again. I will ask you some tough questions to see if you can handle carrying that temptation in your wallet.
  • Are your fixed expenses too high? Credit card debt may just be the symptom of a bigger problem. You might have purchased a house or car that you can’t afford. As a result, you will always struggle to get through the month until you reduce your fixed costs. I will help you do the math and find the true source of your budget problems.
  • Do you have a credit score that can help you get out of debt faster? There are so many credit score myths out there that refuse to die. I spent a big portion of my career leading teams that built custom credit scores and used generic scores like FICO. I will help de-mystify credit scoring and show you how you can take steps today, even while you are still in debt, to build your score. You do not need to be rich to have a good credit score.
  • Can you refinance your debt to a lower interest rate? Getting a lower interest rate can take years off your debt. Marketplace lenders can help cut your rate by 30% or more. With balance transfers, you can get a rate close to 0% for 15 months or longer.
  • Should you consider consumer credit counseling or bankruptcy? If you are just too deep into debt, you may have to take more aggressive action. But it should all start with a non-profit consumer credit counselor. I will help you figure out if you should visit a counselor.

I hope you find the book helpful. And if you need help becoming debt-free, sign up for a free consultation with someone from the MagnifyMoney team. You can sign up here.


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Consumer Watchdog: Which Bills Can You Delay Paying?


It’s been a month of unexpected bills: a car broke down or a trip to the emergency room threw you off or a pipe in the basement burst. Whatever the reason, you’re suddenly struggling to make ends meet this month and trying to figure out which bills to pay and which you can delay paying. No one ever wants to be in this situation, but the reality is that it sometimes happens. So, what should you do when you don’t have enough to make all your payments?

There isn’t a clear-cut answer because this – like all things personal finance – is a personal decision. But your top priorities should be to protect both your home and your credit score to keep yourself falling deeper into financial distress.

Below, we’ll overview different bills you may consider paying late and the consequences of each.

Protecting Your Credit Score

Missing payments to lenders who report to a credit bureau could mean taking a big hit (even close to 100 points) on your credit score. Now, keep in mind that most of these lenders have a built in grace period before the payment incurs a late fee (typically 21 days for credit cards and 15 days for a personal loan). After this late period, credit cards usually have another 30 days before being reported to the bureaus. But just because there is a grace period, doesn’t mean you want to get in the habit of paying late 

Credit card payments

Credit card interest rates can vary drastically from low rates like 6% to painfully high rates tipping at 30%. But if you miss a payment for more than 60 days, you’re likely to find yourself in penalty APR. A second late payment will also be reported to the bureaus, causing more damage to your credit score.

Once you’re in the land of penalty APR (or even just high interest rates) it can be hard to get a handle on your credit card debt.

If you’re dealing with a budget crisis and know you don’t have enough to cover all your bills, it’s best to at least try to pay the minimum due on a credit. Paying the minimum due will keep you in good favor with the credit card company. Just keep in mind that it will ultimately start to cost you a lot in interest, so you need to start paying above the minimum (or the full balance) as soon as you’re able.

Loan payments

Similar to a credit card, loan providers will allow for a little wiggle room. But it’s often around 15 days before a late fee is levied against you. For example, SoFi* charges a late fee if a payment is more than 15 days late. The late fee is the lesser of 4% of the payment due or $5. But SoFi’s relatively minimal fee is more the exception than the rule. SoFi also offers unemployment protection, which is a way to defer your loan payments for up to six months if you lose your job through no fault of your own. Again, not a standard offer from a provider.

Wells Fargo, a more traditional lender, charges a $39 late fee.

If you feel that you simply don’t have enough money to make the entire payment, then don’t hesitate to reach out to your lender before the due date. Explain your situation and see if you can work out a deal for that month. 

Protecting Your Basic Necessities


Paying your mortgage should be considered a top priority. Not only will missing payments hurt your credit score, but you also don’t want to put your home in jeopardy.

A mortgage is similar to other loans in that you probably get a 15 day grace period from your provider, but at 30 days past due it will be reported to the credit bureaus.

Rent is another place you don’t want to mess around. If you owe a landlord money, he or she does have the legal right to charge you a late fee (this can vary by state) and ultimately to evict you. In many states, the landlord is required to give you 30 days notice of your eviction.

A landlord could also send your debt to collections at his or her discretion.

Cell Phone

If a cell phone is what you’d consider a basic necessity, then you should connect with your provider about scheduling a late payment (most likely with a fee) or ask how long you have until a notice of account past due is issued.

For example, Verizon will send customers a Notice of Account Past Due and will disconnect service if payment is not received within 5 days. Customers have complained in online forums about service being disconnected 10 days to two weeks after payment was due.

AT&T allows you to arrange a late payment with the company if you know you can make it at a future date, just not by your due date.

T-Mobile has been known to charge an account restoration fee on the billing cycle after a missed payment, even if the payment was only a few days late.


Connect with your utility providers before you go delinquent. Some of them, like Con Edison in New York, may allow for you to make installment payments. Others may offer you a little buffer if you’ve been consistent about paying on time.

Late utility payments are not reported to the credit bureaus like a credit card or loan would be, but you will likely lose power/water/internet and ultimately, the bill could go to collections.

The Danger: Bills Going to Collections

You should never get into the habit of playing it fast and loose with bill paying because there is no regulated standard for when outstanding debts are sold to collections agencies.

Sure, utility bills aren’t being reported to the credit bureaus. But if your electric, internet, gas, or water providers gets fed up with sending you pass due notices – then they might write you off and sell your debt to a collections agency.

An item in collections will get on your credit report and could demolish your credit score, making it harder to get back your financial footing. That collections item could (and likely will) stay on your report for up to seven years – even if you pay it off.

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Avoid Costly Parent PLUS Loans? See Low Rate Private Options

Students throwing graduation hats

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

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

We have a list of them below.

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


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

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


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

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

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

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

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

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

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

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

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

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


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

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

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

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

Variable rate:

5 year: 2.03% – 5.43%

10 year: 3.68% – 5.805% 

Fixed rate:

5 year: 4.5% – 6.74%

10 year: 5.165% – 7.75% 

Origination fee: None 

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

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

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Wells Fargo

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

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

Learn more about Wells Fargo parent loans here

Variable rate: 3.5% – 10.24%

Fixed rate: 6.24% – 13.24% 

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

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

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Citizens Bank

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

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

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

Learn more about Citizens Bank parent loans here

Variable rate: None 

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

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

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


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Final thoughts

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

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

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

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

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How to Negotiate Medical Debt

Couple Reading Letter In Respect Of Husband's Neck Injury

Medical debt makes up the largest portion of consumer debt in collections, which can of course negatively affect your credit score. But most people don’t know is that in some cases medical bills can be negotiated.

Here are a few tips to help you successfully negotiate medical debt:

Check for Accuracy

When you receive your medical bill:

  • Check the dates of services
  • Look for overcharges and duplications
  • Look for charges for care or services you didn’t receive
  • Make sure charges weren’t added after treatment concluded

Erroneous billing practices and even fraud contribute to overpayments. Studies show that a large portion of consumers may be overpaying on medical debts.

If you find any errors on your bill, contact the billing staff immediately and inform them of the error so that it can be fixed promptly. After the adjustment has been made make sure you request to have an itemized statement forwarded to you. Despite the fact that you may receive a summary bill that lists the total amount owed, you’re entitled to an itemized statement.

If you think that you were wrongly charged, file an appeal to have the charges reassessed. If the findings are in your favor, you may be eligible for reimbursement if you have already made payments.

Keep Good Records

Make sure that you keep your bills and insurance paperwork organized.

Take down the names of representatives you speak to on the phone and be sure to get their name and ID number so you can follow up within two to three weeks of the initial call. Make sure you also do this when communicating with representatives from your insurance company. If it becomes a your word against theirs situation having this information will make your case stronger.

Negotiation 101

Negotiating medical debt can be an intimidating process but remain friendly and be honest about your hardship and the factors preventing you from paying the bill in full. If you feel as though things aren’t going smoothly or you aren’t being heard, don’t be afraid to ask for a supervisor or manager. Continue until you find someone who can help without being too threatening or harsh.

Repayment Options

  1. The first thing you should do is attempt to reduce the amount owed. Find out if they are willing to waive any unnecessary fees.
  2. Ask for a prompt pay discount. Hospital billing departments and providers are eager to collect and get charges of their books so start off with an aggressive offer when paying a lump sum, for example, suggesting to pay 30% of the bill to have the remainder written off. Even if your initial offer is turned down, the provider may counter with an offer that is feasible. The only disadvantage with these options is that it generally requires you to pay your bill in full within a certain time period. This could be difficult with larger amounts.
  1. If you don’t have the funds to pay in full, find out if your provider is willing to offer a payment plan. If they agree, depending on the plan offered by your provider, you will most likely be responsible for monthly payments of a certain amount with the possibility of accumulating additional fees and/or interest charges. Try to work out an interest free arrangement.
  1. If these attempts are unsuccessful consider hiring a medical billing advocate to stop the clock from ticking. This person’s job is to save patients money and work out a solution between them and the provider. The advocate understands the actual costs of procedures and is able to leverage competitor pricing and Medicare to lower bills overall.
  2. You could go the crowdfunding route, but don’t anticipate it to complete save you from your debt. Several people have found success covering medical bills by using sites such as GoFundMe to fundraise for their medical bills. Even if you don’t successfully raise enough money to cover all of your medical expenses, everything counts.

What Happens If You Aren’t Able To Negotiate and Your Medical Debt Goes to Collections

In most cases, once an account has been delinquent for several months the medical debt will be sold to a collection agency.

Allowing your medical debt to go into collections will most likely harm your credit score. The debt will appear on your credit report as unpaid and remain on your credit report for up to seven years even if you pay the bill in full after it was placed on your report. Some companies will accept a pay for delete offer. This is one of the only ways to have the debt removed from your credit report. A pay for delete occurs when a company agrees to stop reporting a negative item on your credit report in exchange for immediate payment of the debt.

Although the collection process can be intimidating, The Fair Debt Collection Practices Act (FDCPA) outlines specific regulations that must be followed by medical debt collectors. If you believe a debt collector has violated the law, take action to report unfair practices within one year from the alleged violation however, keep in mind that the law does not apply to the original creditor.

It’s okay to trust your gut if you get a phone call about a debt in collections that you don’t think is yours. It’s within your rights to get a collection agency to verify that the debt is indeed yours before you proceed. Never divulge personal information over the phone, especially not until you get written verification that the debt belongs to you. Learn more about how to verify a debt in collections here.

Preventing Medical Debt

If you have insurance, make sure that you review the Summary of Benefits and Coverage for your plan. Familiarize yourself with your deductibles.

If you do not have insurance, look into signing up for health insurance through the health exchange. Health insurance is a costly expense, but medical expenses while uninsured are will land you in significant debt.



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Student Loan Forgiveness Programs for Lawyers

mortar board cash

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

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

Income-Based Repayment (IBR)

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

[Learn more about IBR here.]

Federal Public Service Loan Forgiveness (PSLF)

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

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

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

Department of Justice Attorney Student Loan Repayment Program (ASLRP)

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

Loans which are covered include:

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

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

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

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

John R. Justice Student Loan Repayment Program

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

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

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

Law School Loan Forgiveness Programs

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

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

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

State-Specific Loan Repayment Programs (LARPs) for Lawyers

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

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

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

Closing Arguments

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

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

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

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


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When Should You Consider Bankruptcy?

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If you’re drowning in debt and having trouble keeping up with your payments while still handling your living expenses, you may have at least begun to consider filing for bankruptcy.

Bankruptcy certainly has its benefits, potentially allowing you to wipe the slate clean and start anew.

But there are a lot of things to consider before making a decision, from the negative consequences of filing to whether bankruptcy would even provide relief for your specific situation.

This is a big decision that requires a significant amount of due diligence before moving forward, and in this post we’ll go over some of the key points to help you get started.

Are You Eligible?

There are two types of bankruptcy for individuals: Chapter 7 and Chapter 13.

There are some significant differences between the two programs, but here’s a high-level summary:

  • Chapter 7 allows you to completely discharge your debts, with some exceptions (such as student loans, certain tax obligations, and child support). But you may be obligated to sell some of your property to settle some of your debt obligation.
  • Chapter 13 allows you to create a payment plan to repay some or all of your debts over a 3-5 year period. So your debts are not discharged, but you will also not be obligated to sell any property in order to make your payments.

Either one could be more or less beneficial depending on the specifics of your situation. But the very first question is whether you qualify for either one, and each has its own set of criteria.

Chapter 7 bankruptcy has what’s called the “means test”, which is meant to ensure that only people who truly can’t afford their debt payments are allowed to file. There are two different wants to pass it, and therefore qualify for Chapter 7 bankruptcy:

  1. If your monthly income is less than the median monthly income in your state for your family size, you pass. You can find current median income numbers by family size here.
  2. If you don’t pass #1, you’ll have to go through a complex calculation to see whether your disposable income after subtracting out certain expenses is enough to satisfy your debt obligations. At this stage it would probably be best to talk to a professional who could help you navigate the process.

Eligibility for Chapter 13 bankruptcy is a little more straightforward. Here’s how it works:

  1. As opposed to Chapter 7, you need to prove that your disposable income is high enough to afford a reasonable repayment plan.
  2. Your secured debt (mortgage, auto loan) can’t exceed $1,149,525, and your unsecured debt (credit cards, medical bills, etc.) can’t exceed $383,175.
  3. You must have filed both federal and state income taxes each of the last four years.

There are some other requirements for each, but those are the major ones. Assuming you qualify for at least one of them, there are a few other things to consider.

What Kinds of Assets and Liabilities Do You Have?

Depending on the specifics of your financial situation, one type of bankruptcy may be preferable to the other. Or it may be that neither would actually be particularly helpful.

As an example, neither type of bankruptcy would likely help you all that much if your primary debts are student loans. They wouldn’t be discharged in Chapter 7 bankruptcy. And while your required payments might be reduced over the 3-5 year repayment period in Chapter 13 bankruptcy, once that was over you would have to continue paying them back as usual.

The type of assets you own and their value also matters, particularly if you’re going through Chapter 7 bankruptcy. During that process your bankruptcy trustee is allowed to sell your property in order to settle your debts, but certain property is protected.

For example, your house and car are protected up to certain limits. Employer retirement accounts like 401(k)s and 403(b)s are fully protected, while IRAs are protected up to about $1 million. But other accounts, such as checking, savings, and regular investment accounts may not have the same protections.

The rules here vary by state, and having a strong understanding of which assets you might be able to keep and which you might end up losing will help you make your decision.

What Are Your Alternatives?

Bankruptcy can have the big advantage of erasing your debts and allowing you to start anew. But there are also some serious consequences, such as a hit to your credit score and a mark on your credit report for up to 10 years. So it makes sense to evaluate your other options before making a decision.

One option may be to call up your lenders and see if you negotiate a lower interest rate, a reasonable payment plan, or a settlement for a smaller amount.

You could also work on making some changes to your spending habits, cutting out certain expenses and possibly selling certain possessions to make room for your debt payments.

If you have student loans, you should look into income-driven repayment plans as a way to decrease your monthly obligation and potentially have some of your debt forgiven down the line.

You could also look into getting some 1-on-1 help from a credit counseling company. Just make sure to stick with reputable companies like The National Foundation for Credit Counseling and to avoid the late-night infomercials promising to wipe your debt away.

Make the Best Decision for You

Filing for bankruptcy is a big decision, and in the end you’re the only one who will know what’s right for you.

Do your research, evaluate all of your options, and then make the decision that most helps you reach your personal goals.



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Best Consumer Credit Counseling Options

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Sometimes, even when you do your best to take control of your financial situation, you might need a little help getting back on track. This is especially true if you’re overwhelmed with debt and trying to figure out how you can make your monthly payments, or if you’re missing payments. Your credit can suffer, and so can your financial future.

If you’ve tried to make changes to your finances to no avail, credit counseling may be an option for you. Credit counselors can work with you personally to help you get your debt and financial situation under control.

Credit counseling can be worthwhile even if you’re not in debt. If your money management skills need a little work, counselors can help you set up a budget and advise you on what steps to take with your money. There’s no shame in asking for help, especially when it comes to straightening out your money.

Unfortunately, a lot of credit counseling organizations aren’t transparent. It’s imperative you do your research as opposed to going with the first one that pops up as a search result. We’ve done a little bit of research for you – below are some of the best consumer credit counseling options that are accredited and work as nonprofits, so you know your interests are being looked after.

Money Management International

With locations throughout the east and west coasts, Money Management International is the largest nonprofit credit counseling organization in the United States. Its mission is to improve the financial lives of those it helps.

Money Management International is a member of the National Foundation for Credit Counseling (NFCC) and Financial Counseling Association of America (FCAA), and is accredited by the Council on Accreditation of Services for Families and Children (COA).

According to its FAQ, a normal counseling session lasts between 45-60 minutes, and there’s no cost for this session. Counselors are available 24/7 by phone and internet.

Any information given to Money Management International is kept confidential – it doesn’t report to any of the credit bureaus, and won’t share your information without your consent.

If you choose to enter into a Debt Management Plan (DMP), you’ll be charged a monthly fee and a one-time set-up charge. However, if the monthly fee is unaffordable for you, you can tell your counselor and they will work with you.

Its services are wide ranging and include the following:

  • Budget and Debt Counseling
  • Debt Management
  • Credit Report Review
  • Student Loan Counseling
  • Foreclosure Prevention
  • Financial Workshops

It’s important to look for companies with varied services as this shows ongoing dedication to educating consumers. You don’t want an organization that’s only interested in helping you get out of debt – you want one that will help you stay out.

Along those lines, Money Management International also offers free resources from webinars to financial tools to help you manage your money.

GreenPath Debt Solutions

Accredited by the COA and a member of the NFCC and FCAA, GreenPath is certified to help consumers in all 50 states.

It claims to have no hidden fees and no voluntary contributions (common with some credit counseling organizations), and can help you manage all your debt – not just credit card or unsecured debt.

Free credit counseling sessions last 60 to 90 minutes, and an entire university full of financial education is provided to help consumers understand how to improve their financial situation.

GreenPath offers the following services:

  • Credit/Debt Counseling
  • Debt Management
  • Student Services
  • Credit Report Review
  • Bankruptcy Counseling

GreenPath doesn’t report any information to credit bureaus and your information is kept confidential.

The Debt Management Program offered by GreenPath comes with a one-time set up fee between $0 and $50, and the average monthly fee is $36.

ClearPoint Credit Counseling Solutions

As a member of the NFCC and BBB, and accredited by the COA, ClearPoint is a nonprofit that has been helping its clients manage their money for 50 years. Headquartered in Atlanta, GA, it also has 50 branches across the US.

ClearPoint offers a range of services:

  • Budget and Credit Counseling
  • Debt Management Program
  • Bankruptcy Counseling
  • Student Loan Counseling

The organization is very transparent about its fees. Budget and credit counseling are free, as is student loan counseling. Its DMP fee varies by state, though the maximum is $50.

Budget and credit counseling also provides you with your FICO score for free, and sessions typically last around an hour.

Similar to GreenPath, ClearPoint also offers a range of educational material through ClearPoint U. In fact, it prides itself on being an “education-focused agency.” It wants to give consumers the tools they need to succeed on their own.

Advantage Credit Counseling Service

With over 40 years of credit counseling service, Advantage Credit Counseling Service (ACCS) is a nonprofit organization accredited by the COA and is a member of the NFCC and the BBB.

Services offered include:

  • Credit Counseling
  • Debt Management Program
  • Credit Report Review
  • Online Budget Advisor
  • Bankruptcy Counseling

Credit counseling sessions are free and last around 60 minutes. Online credit counseling sessions are available at any time, though you can choose to call during business hours to speak with a counselor. If you live in PA, ACCS has six locations in the state you can visit.

ACCS also provides a list of states it serves under each service it offers so you can see if you’re eligible for a session with one of their counselors.

Additionally, ACCS offers a free online budget advisor tool that can help you stay on track with your spending and your financial goals. Beyond that, it has an educational library full of financial tips.

Characteristics of Reputable Credit Counseling Organizations

If none of these organizations work for you, continue to look for others. Just be careful to choose a reputable organization. These are the characteristics you should look out for to ensure an organization will work for and with you:

  • Low Fees: While even nonprofit organizations can charge fees for their services, you should make sure you’re not paying astronomically high fees ($25 monthly fees are standard according to the NFCC). You shouldn’t be going further into debt just to get out of it. Organizations should be transparent about the fees they charge as well – always read the fine print before you enter into an agreement with an organization.
  • Readily Has Educational Information Available: A good credit counseling organization wants to help you regardless of whether or not you’re a (paying) client. Educational material should be free on its website. You shouldn’t have to go through an initial consultation or jump through any hoops to obtain helpful resources. Information about the organization should also be easy to find on the website.
  • Proper Credentials: You want an agency that’s certified to help you. It’s best if counselors are trained/accredited by outside organizations. Look for accreditation by the Council on Accreditation, and membership to the National Foundation for Credit Counseling and Financial Counseling Association of America.
  • Debt Management Programs (DMP): If an organization is trying to sell you on the value of a DMP without thoroughly analyzing your situation, walk away. You should be able to receive a free credit counseling session first. During this meeting, a counselor will assess your debt, income, and expenses. Only after this is complete should a counselor feel good about recommending a DMP. They aren’t appropriate for everyone.

As you can see, all of the credit counseling organizations recommended above meet these criteria.

If you need any help in finding a credit counseling organization, the FTC recommends consulting with your state Attorney General or local consumer protection agency. The United States Department of Justice also has a list of approved credit counseling agencies by state.

Don’t Settle for Less Just Because It’s Free

Most credit counseling organizations offer credit counseling sessions for free, but that doesn’t mean you’re obligated to stick with them if you don’t think they’re a good fit. You should be able to talk with a counselor you trust, regardless of the price you’re paying.

As with any financial product or service, you should “shop around” to make sure you end up with the right credit counseling organization for your situation. Never let a counselor pressure you into anything you don’t feel comfortable proceeding with, and always ask questions to gain clarification before moving forward with an agreement.


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Understanding the Difference between Forbearance and Deferment

mortar board cash

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

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

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

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

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

Loans which Qualify

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

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

Key Differences between Forbearance and Deferment

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

Forbearance vs Deferment

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

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

Forbearance May Be Granted If (Discretionary Forbearance):

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

You May Qualify for Deferment If You Are:

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

Note: This list comes from: Some additional information was added by author.

When to Take Action

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

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

The Application Process for Deferment or Forbearance

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

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

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

How to Restart Normal Repayment

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

Final Thoughts

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

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

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

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

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Consumer Watchdog: The Cost of Just Paying the Minimum Due


About a year ago I received a phone call from my sister. She’d received her first credit card bill and wanted to confirm she was doing everything correctly. She wasn’t.

“Well, did you pay it off?” I asked, slightly confused about the call.

“Yeah. Well, I think so,” she said. “I paid the portion where it said minimum due.”

“Okay, you need to go back and pay the full bill,” I explained. “You never want to just pay the minimum due.”

“What? Why would they even put it on there if that wasn’t what you were supposed to pay?” she asked, slightly indignant.

I spent the next twenty minutes explaining the ins-and-outs of using a credit card effectively and the traps the issuers have created to get people to pay interest. Her misunderstanding of the minimum payment stemmed from a common misconception of what it meant to utilize your available credit in order to develop a strong credit score.

Most importantly, she needed to understand the trust cost of making a minimum payment.

Why People Think They Should Keep a Revolving Balance
(Spoiler: They Shouldn’t)

When I first told my sister she should get a credit card to build her credit score (which as a person without any open lines of credit was non-existent) I also emphasized that she needed to actually have money due on her monthly statement.

What this meant was that when she made a purchase, she shouldn’t immediately go online and pay off the charge. Instead, she needed to wait for the end of the month when her bill cycled so that it should show she owed the credit card issuer a balance.

This may sound counter-initiative. After all, why would you want to owe at the end of the month of you can pay it off early? But it’s important for your credit score.

By paying off a credit card throughout the month and having a balance of zero come bill time, it will report to the credit bureaus that you have 0 utilization. This means you aren’t demonstrating that you can responsibly use credit, because it appears you aren’t even using the credit to begin with.

Instead, you need to use no more than 20 percent of your total credit available and then pay off the bill on time and in full when the statement balance comes in.

So, if my sister has a credit limit of $1,000 – she shouldn’t spend more than $200 in a given month.

Unfortunately, this need to have a statement balance confuses many people who think they need to carry a balance on their credit card. These people only pay a minimum due or part of the total due and continue to have a balance. This in turn means accruing interest and owing their credit card company additional money – which the company of course loves.

All you need is a statement balance, but you can (and should) then pay it off in full to build that high credit score.

To answer my sister’s question: credit card companies put a minimum balance because they know:

  1. People will charge more than they can afford if there’s an option to do so
  2. A low payment seems manageable, so people will pay the minimum and keep accruing interest on the principal debt

What You Need to Know about Just Paying the Minimum Due 

The most important thing to know about paying the minimum is that a majority of that money is going towards interest alone. This means it will take ages to start chipping away at your principal debt. By sticking with your minimum only payments, you’ll be paying a significant chunk of change to your credit card company.

Scenario: Jake just moved into his first apartment. He decided to go out and buy a bed frame and mattress. He put $2,000 on his credit card. When his statement came in, he sees that he has the option to just pay $40 (the minimum payment). The interest rate on his credit card is 16%. Jake wants to buy a few more things for his apartment, so he decides to just pay the minimum due.

If Jake continued to just pay the minimum due, it would take him almost 7 years (83 months) and cost $1,317 in interest to pay off that bed.

The interest would cost over half of what he paid for the bed in the first place!

Granted, this may seem like an extreme example but with average household credit card debt tipping towards $10,000, it isn’t uncommon for people to only be paying $300 a month on that debt. At 16% APR, this would cost $3312 in interest and take 45 months to pay down. And that’s paying above what the minimum might be.

Put a Mental Block on Just Paying the Minimum Due

Just paying the minimum due should never be an option. You don’t need to do that in order to build a strong credit score. Even if you can’t make the full payment for whatever reason, try to at least pay above the minimum. And if you’ve gotten stuck in a cycle of credit card debt, but have a strong credit score, then you should consider a balance transfer to knock that interest rate down to 0% and have all your payments go towards the principal debt.



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How To Tell If Your Student Loans Are Private or Federal

How To Tell If Your Student Loans Are Private or Federal

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

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

What Makes Federal and Private Student Loans Different?

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

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

There are two different federal student loan programs available:

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

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

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

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

How To Determine if Your Loans Are Federal

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

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

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

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

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

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

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

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

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

[How to Set Up Income-Driven Repayment Programs]

How To Determine If Your Student Loan is Private

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

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

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

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

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

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

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

What Should You Do Once You Find Out?

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

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

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4 Options for Teacher Loan Forgiveness

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

According to an article published by The New York Times, many new teachers spend 25% of their income repaying student loans. The average teacher’s starting salary is $36,141. This leaves new teachers with just $27,105.79 to live on each year before taxes. However, thanks to loan forgiveness programs, many teachers are catching a much needed break. The following article is a resource for any teacher (or aspiring teacher) hoping to reduce (or eliminate) their student loan burden.

Teacher Loan Forgiveness Program

This program can forgive Direct Subsidized and Unsubsidized Loans and Subsidized and Unsubsidized Federal Stafford Loans. The combined total you can have forgiven is $17,500. Of course, with this kind of money at stake, there are plenty of requirements.

First, all federal loans taken out by the student must have originated after October 1, 1998. You must have also been employed as a full-time teacher for five complete and consecutive years. At least one of those years must have occurred after the 1997-1998 school year. This tenure must have occurred in a Title I school. All elementary or secondary education schools operated by the Bureau of Indian Education – or schools under contract with the BIE – are considered, in this case, Title I schools. You may also be eligible if you served at an educational service agency.

After a teacher has completed the 5-year teaching requirement, they are encouraged to complete the Teacher Loan Forgiveness Application. The chief administrative officer at the school(s) which you have worked must complete the certification section. Return the completed application to your loan servicer. A separate form must be completed for each loan.

Note that PLUS loans are not included in this forgiveness programs.

Federal Perkins Loan Cancellation Program

This program is the ticket to getting Federal Perkins Loans deferred and ultimately forgiven. The qualifications for this type of teacher loan forgiveness program are pretty straightforward. This can be done by either teaching in low-income schools and/or teaching in certain subject areas. Subject areas include any which are deemed by the state to be in short supply. These typically include the fields of mathematics, science, foreign language, or bilingual education. To see what shortages your state is having right now, see this guide.

Under this program, you only need to have been teaching for one full academic year. But, the longer you teach, the more money gets forgiven. Note: These numbers include interest:

  • 15% forgiven in years 1 and 2
  • 20% forgiven in years 3 and 4
  • 30% forgiven in year 5

Before forgiveness happens, many teachers defer loans through this program. This means, although the loans may take years to be completely forgiven, a teacher won’t have to ever start repaying them. Apply for deferment through the academic institution which issued your loan.

[Find Out How to Set Up Income-Driven Repayment Programs]

Many State Loan Forgiveness Programs

There are so many state sponsored loan forgiveness programs!

Although these are state-sponsored, they do count toward forgiving federal student loans. The eligibility is usually based on where you work and what subject you teach. Teachers at low income schools and/or teachers in high demand subjects are perfect candidates for these programs.




Illinois (2)

Illinois Special Education Tuition Waiver Program

Illinois Teachers Loan Repayment Program



Kentucky (2)

Higher Education Assistance Authority Teacher Scholarship Program

Minority Educator Recruitment and Retention Scholarship


Maryland (2)

Workforce Shortage Student Assistance Grant (WSSAG)

Janet L. Hoffman Loan Assistance Repayment Program (LARP)

Mississippi (3)

Graduate Teacher Summer Loan/Scholarship (GTS)

Mississippi Teacher Loan Repayment Program (MTLR)

William Winter Teacher Scholar Loan (WWTS)


Nebraska (2)

Attracting Excellence to Teaching Program

Enhancing Excellence in Teaching Program

New Mexico

New York

North Dakota (2)

STEM Occupations Student Loan Program

North Dakota University Teacher Shortage Loan Forgiveness Program


South Carolina

Tennessee (2)

Tennessee Teaching Scholars Program

Tennessee Math & Science Teacher’s Loan Forgiveness



West Virginia

Wisconsin (3)

Minority Teacher Loan

Teacher Education Loan Program

Teacher of the Visually Impaired Loan

Public Service Loan Forgiveness

This is the most inclusive loan forgiveness program. Heck, even if a person is not a teacher, they may still qualify. To qualify, you must be employed full-time in an eligible nonprofit or public service role. Here are some examples of careers (besides teachers) which qualify (as found on this page of

  • A government organization (including a federal, state, local, or tribal organization, agency, or entity; a public child or family service agency; or a tribal college or university).
  • A not-for-profit, tax-exempt organization under section 501(c)(3) of the Internal Revenue Code
  • Emergency management
  • Military service
  • Public safety
  • Law enforcement
  • Public interest law services
  • Early childhood education (including licensed or regulated health care, Head Start, and state-funded pre-kindergarten)
  • Public service for individuals with disabilities and the elderly
  • Public health (including nurses, nurse practitioners, nurses in a clinical setting, and full-time professionals engaged in health care practitioner occupations and health care support occupations)
  • Public education
  • Public library services
  • School library or other school-based services

[Learn about the Public Service Loan Forgiveness here.]

Although this process is simple and inclusive – there is one issue. This program was introduced in October 2007 to forgive the remaining balance due on Direct Loan Program loans. In order to qualify, you must make 120 eligible on-time monthly payments. 120 monthly payments… yes, that comes out to 10 years of repayment in order to get your remaining balance forgiven. And since the program was just introduced in 2007, no one has yet to qualify for this program. Not a single person reading this can take advantage of this program at this moment. But if you plan on still owing money in 2017, this program is for you. It’s a great program – once you qualify. The application for this loan forgiveness program can be found here.

Help Spread the Good News

Teaching is often dubbed as the most under-appreciated profession in America. This is unfortunate – and is becoming less-and-less true with each day. The US federal and state governments are taking major steps towards helping teachers carry out their mission while dismissing their student loans. It’s a monetary way of saying ‘thank you’ for the work teachers do.

If you know someone in the teaching profession who is feeling under-appreciated, consider linking them to this post. Show them that U.S. citizens appreciate teachers so much that we are willing to reward teachers in a very real way – by using our tax dollars to help them. It’s an awfully big sign of appreciation, don’t you think?


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How to Set Up IBR, PAYE, and ICR Student Loan Repayment Plans

How to Set Up IBR, PAYE, and ICR Student Loan Repayment Plans

Does the amount you earn on a yearly basis pale in comparison to your monthly student loan payments? Do you have federal student loans? Then you might benefit from setting up an income-based repayment (IBR) plan, income-contingent repayment (ICR) plan, or pay as you earn (PAYE) repayment plan.

These repayment programs are only available to those with federal student loans, and they’re collectively referred to as income-driven repayment plans. Setting your federal loans up under an income-driven repayment plan reduces your monthly payment amount because your payment is based on your income and family size. Your payment adjusts annually according to these factors.

Payment amounts are calculated from a percentage of your discretionary income. According to, for IBR and PAYE, discretionary income is “the difference between your income and 150% of the poverty guideline for your family size and state of residence.” For ICR, it’s 100% of the poverty guideline. (If you’re interested in looking at the poverty guidelines, those can be found here.)

Want to find out how to apply for an income-driven repayment plan? Read on for information on how the process works.

[Learn how to track down all your student loans here.]

Getting Started With Income-Driven Repayment Plans

Generally, if you want to set your student loan account up with an income-driven repayment plan, your best bet is to first contact your student loan servicer. (Not sure which loan servicer you have? You can check in the National Student Loan Data System.)

If you log into your account online, you should see a section for changing your repayment plan. At the very least, your servicer should address the issue in a FAQ section of its site.

It’s your loan servicers job to help you find the best plan for your situation, but you need to contact them as soon as you know you’re experiencing difficulty in making payments. You don’t want to miss any payments and end up delinquent (or worse, in default) because you couldn’t pay. Plus, loans that are in default aren’t eligible for income-driven repayment plans.

The application process is actually very simple and straightforward.

Income-Driven Repayment Application Process

The first step of the process is to request an income-driven repayment plan. You need to fill out the “Income-Driven Payment Request” form to do that. This can be done online by yourself, or you can apply with a paper application supplied by your student loan servicer.

When you make your request, you have to choose the specific plan you’d like to go with. You can select one yourself, or you can ask your loan servicer to choose the best plan for you. It will choose the one with the lowest monthly payment amount.

Since you’re applying for a repayment plan based on your taxable income, you do need to provide proof of income.

The easiest way to provide proof of your adjusted gross income (AGI) is with your most recent tax return, as long as your income hasn’t changed significantly from the last date you filed. You also need to have filed a federal income tax return for the past two years.

The online application makes it easy to find your AGI. You can just use the IRS Data Retrieval Tool to import your income information.

If you apply with the paper application, you’ll need to supply a paper copy of your most recent federal tax return, or an IRS tax return transcript.

If your income has changed a lot since you last filed, or if you haven’t filed two federal tax returns yet, there are other ways of proving your income.

First, if you don’t have any source of income at all, you just need to indicate that on your application. Only taxable income counts, so if you receive any government assistance or any other income that’s not considered taxable, you don’t need to report it here.

If you do earn an income, you’ll need to provide your most recent pay stubs or other alternative documentation that shows your salary.

Additionally, if you have federal loans with multiple loan servicers, you must request income-driven repayment for each individually. There’s a section of the application that asks if you have eligible loans with more than one servicer, so you can indicate that there.

Wondering how your payments are determined when you owe multiple lenders? First, your income-driven repayment plan amount is calculated. This amount is then multiplied by the percentage of total debt with each servicer.

For example, if you have loans with two servicers, and your income-driven repayment amount is $120, and 50% of your outstanding debt is with Loan Servicer 1, and the other half is with Loan Servicer 2, then you’d have to pay $60 toward each. (50% of $120 is $60.)

The application shouldn’t take very long to complete, but the entire process can take a few weeks depending on which loan servicer you have.

If you have an immediate need to lessen your payments, your loan servicer may apply a forbearance to your federal loans while the process wraps up. That’s why it’s important to contact your servicer as soon as you can’t make your payments.

You Have to Reapply Annually

You’ll be required to submit your proof of income on an annual basis after you apply the first time. As your income changes, so does your payment, so you need to provide this information continuously.

However, there’s no income limit for income-driven repayment plans. If you start earning more, your payment amount is simply capped at the amount you’d be paying under the standard 10-year repayment plan. It will never exceed that amount.

Technically, your loans will still be under your chosen income-driven repayment plan, but your monthly payment is no longer based on your income. You can still have your outstanding loan balance forgiven after your repayment term ends (if you don’t pay your loan off before then).

Who’s Income is Taken Into Consideration?

If you’re married and wondering if your spouses income will be taken into consideration, it depends on how you file your taxes.

Filing separately means only your income and loans will matter.

Filing jointly means your monthly payment will be based off of your joint income.

If you and your spouse file jointly and both have eligible federal student loans, both loans will be taken into consideration, but your spouse doesn’t have to choose to enter into an income-driven repayment plan.

Income-Based Repayment Plan Overview

You don’t qualify for IBR unless your payment amount will be less than what you’re paying under the standard 10-year repayment plan.

A good baseline for determining whether or not you’ll qualify is if your total student loan debt is much higher than your annual discretionary income. If your debt-to-income ratio is really high, you’ll probably qualify.

New borrowers (those that borrowed after July 1st, 2014, and didn’t have any loans outstanding prior to that) have a maximum of 20 years to pay back their loans, while old borrowers (those that had outstanding loan balances after July 1st, 2014) have a maximum of 25 years to pay back their loans.

Pay As You Earn Plan Overview

For PAYE, your monthly payment will be around 10% of your discretionary income, and never more than what you’re paying under the standard 10-year payment plan.

You have a maximum of 20 years to pay back your loans under this plan.

The qualifications for PAYE are the same as IBR – you must be paying less under PAYE than you were under the standard 10-year plan.

However, PAYE is only available to those who were new, first-time borrowers as of October 1st, 2007, and they also must have received a disbursement in the form of a Direct Loan on or after October 1st, 2011.

Income-Contingent Repayment Plan Overview

From, your monthly payment is the lesser of these two: 20% of your discretionary income, or “what you would pay on a repayment plan with a fixed payment over the course of 12 years, adjusted according to your income.”

Under this plan, you have a maximum of 25 years to pay back your loans. There are actually no initial guidelines you must qualify under – anyone can choose to repay their student loans under this plan.

However, the Federal Student Aid office warns that payments tend to be more expensive under this plan than IBR and PAYE – and possibly even more than the 10-year repayment plan. Make sure you’re going to be paying less if you want to go this route.

Benefits of Income-Driven Repayment Plans

A big bonus for all three of these repayment plans is that your outstanding balance is forgiven after your repayment term is complete. The Federal Student Aid office notes that if you qualify for forgiveness after 10 years through the Public Service Loan Forgiveness program, that takes precedence.

How can you still have an outstanding balance at the end of your repayment period? The monthly amount you owe will fluctuate with your income. You could end up repaying your loans before your term is up, or you could end up with a balance.

Under IBR and PAYE, if your monthly payment isn’t enough to cover any interest that accrues monthly on your subsidized loan, the government will pay the difference for the first three years. So if $30 in interest accrues every month, and your monthly payment under IBR and PAYE only pays for $15 of that, the government will cover the other $15.

You might want to use the estimated repayment calculator to see which plans offer you the lowest monthly payment. Income-driven plans aren’t guaranteed to give you the lowest monthly payment – all situations are different. There are still other repayment plans that aren’t reliant upon your income that could lower your monthly payment, such as the graduated or extended repayment plans.

Check With Your Loan Servicer First

Before applying for an income-driven repayment plan, it’s best to check with your loan servicer to get its input. You don’t want to end up owing more per month than you do now. These repayment plans are designed to help you, not hurt you. You may find that forbearance or deferment is a better option for you, especially if you’re only experiencing a temporary economic hardship.

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The Dangers of Debt Solutions

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If you are in debt and it feels like it is getting out of control, you may be at a point where you are ready to reach out for help. If you do, use caution and common sense. There are some upstanding companies looking to help you, and some predators looking to take advantage.

What Debt Solutions Companies Offer

Debt solutions companies exist to help you manage your debt and get out from difficult debt situations. Many people find themselves struggling to make ends meet after paying credit cards, student loans, and medical debts, and a debt solutions company may be able to help reduce, eliminate, or consolidate some payments to save cash each payday and save money in the long run.

Quality debt solutions companies will help customers understand and evaluate their debt, income, and expenses and use that information to plan a series of steps to remove the burdens of the debts through a combination of budgeting and debt payoff.

In some circumstances, if the debt load is beyond your ability to pay, the company will suggest debt consolidation or debt forgiveness to help you get out of debt. These options have serious ramifications to your credit, so they should never be taken lightly.

Debt consolidation is taking out a new loan to pay off existing loan balances. Credit cards generally have very high interest rates, typically over 20% per year, and consolidating outstanding debts to a lower interest loan can help simplify payments and save money. However, people with high revolving debt balances may have trouble qualifying for lower interest consolidation loans, so this is not always an available option.

Debt forgiveness is another option, and a near last resort for people with a serious problem managing their debt. In this case, a debt solutions company will reach out to lenders to ask for a reduction in outstanding debt balances in exchange for a lump payment or lower monthly payments. When a lender agrees to this, the account will show that a settlement was reached on your credit report, which will hinder your ability to receive new credit for seven years or more. In this case, borrowers may receive a debt reduction of 50%-60%.

As a last resort, some borrowers file for bankruptcy protection. Bankruptcy courts can lower or eliminate debt balances, but a bankruptcy leaves a bad mark on your credit report for ten years and may disqualify someone from any new credit or debt, such as a mortgage loan to buy a home.

What to Look For

If you are in a situation where you could benefit from the services of a debt solutions company, it is important to hire a company that will put your best interest first and stand by you as you work to get debt free.

First, any interaction with the company should leave you feeling like you are making the right steps. If you are being pressured to do something that makes you uncomfortable, you are not working with the right company for your needs. A debt solutions company should treat you with respect as you work through your difficult situation. They should not add more stress on top of your already stressful time.

Debt solutions and debt settlement companies offer a variety of fee structures. When choosing a company, the fees should be very clear and easy to understand. Do not agree to anything you do not understand or ambiguous.

Also look for online reviews. You can look to the Better Business Bureau to see if the company is highly rated or riddled with negative comments and complaints.

Warning Signs

While there are good debt solutions companies out there, the industry has garnered a bad reputation thanks to the many predatory agencies looking to profit from American’s bad fortunes. Here are some red flags to lookout for when choosing a debt solutions company.

  • Pushing for bankruptcy – If the first thing that happens out the gate when you speak to the company is a push towards bankruptcy, take a step back and evaluate if this company truly has your best interest in mind. Bankruptcy is the right choice in some situations, but should never be the first option discussed and you should never be pressured into doing so quickly.
  • Quick fix solutions – There is no quick fix to debt problems. Outside of medical bills, people rarely get into crippling debt quickly, and it takes time to get out of debt too.
  • High pressure – Your debt solutions company is not a used car lot. If you feel like you are being pitched by a seedy car salesman, take your business elsewhere.
  • Unclear fees – You should know and understand up front exactly what you will expect to pay for debt solutions services. If the fees seem high, call around to a few companies to compare.
  • Bad reviews – Companies get bad reviews even with the best of intentions from time to time, but a trend of more bad reviews than good ones shows that more people have had negative experiences than positive ones.

Try to Solve It Yourself First

Before you look for help solving your debt situation, look in the mirror and you will find the number one advocate that will help you get out of debt. You care more about your situation than any business, so put in the work to get yourself on track to getting out of debt before calling for help.

If you have higher monthly expenses than your income, look at your spending habits and get on a budget that leaves room for debt payments.

If you have several high interest rate loans, look for consolidation options on your own through a personal loan.

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Consumer Watchdog: Understanding the Student Loan Grace Period


College graduates around the United States are still enjoying the sweet relief of being done with homework, exams, philosophical questions and dining hall food. But as the summer speeds by, the ramifications of going to college in the first place will be lingering in the shadows. Those ramifications are of course student loans.

It’s common knowledge that recent graduates experience a little bit of wiggle room before their lenders come calling, but the generic “6 months” rule of thumb may not actually apply.

This time of non-payment, known colloquially as a grace period, varies based on lender and type of loan. While your lenders are required to make contact with you (they do want to get paid after all), it is still your responsibility to track down all your loans. Don’t assume you’re evading a student loan just because your lender hasn’t gotten in touch yet. That’s a quick way to end up in delinquency and default.

[How to Track Down All Your Student Loans]

When the Grace Period Begins

Your grace period begins after your school has registered you as graduated, which actually doesn’t always happen the day of graduation. But in general, it’s best to just assume your grace period will end 6 months after you’ve received your diploma. A grace period can also kick in if you’ve left school before graduating or dropped below half time.

The Duration of a Grace Period

Federal loans and private loans have different grace periods and even federal loans weren’t all created equally.

Federal loans

  • Stafford loan (subsidized and unsubsidized) – 6 months grace period
  • Direct Unsubsidized Loans – 6 months grace period
  • Direct Subsidized Loans – 6 months grace period
  • Perkins loan – must check with school
  • PLUS loan – no grace period

Private loans

There is no guaranteed grace period with private loans, so it’s imperative you reach out to your lender.

Interest During the Grace Period

Just because the federal government (and some private lenders) offers a grace period, it doesn’t mean you’re receiving a 6-month free pass. In fact, you’re starting to accrue interest on most loans. The interest accrued during the grace period will then capitalize (be added to the principal balance) once you start making payments.

Federal subsidized Stafford loans and a Perkins loan will typically not accrue interest during the grace period.

Making Payments During Grace Period

Sure, a grace period could be seen as a sort of get out of jail free card for 6 months. You could avoid thinking about all the debt you owe and just enjoy some time of not factoring debt into your monthly budget.

But we wouldn’t advise you do this.

Instead, we suggest making payments.

Any extra money you can put towards loan payments during your grace period will help reduce the time it will take to pay back and how much you’ll be forking over in interest during the life of the loan.

You can make “interest-only” payments during your grace period to reduce the amount of accrued interest that would capitalize. If your loan doesn’t accrue interest, then you should 100% be making some payments to chip away at your principal balance before interest starts accruing.

Important Tip: You’ll have a minimum payment to make each month. If and when you make a payment higher than your minimum (even just by $10) – you need to tell your loan servicer that money is not intended to be put towards future payments. Loan servicers have a tricky way of avoiding putting extra payments towards your principal balance by putting it towards future payments instead. Be explicit that extra money should go towards your principal balance in order to dig out of debt faster.

[Learn More About Bi-Weekly Payments]

Fine Print of the Grace Period

You only get the grace period once. So if you graduated from undergrad, used the entire grace period, then went back for a Masters degree, your undergrad loans will no longer be eligible for a grace period after your second gradation.

You may also give up your right to a grace period if you consolidate your loans. Using a Direct Consolidation Loan will mean you revoke your right to a grace period and must begin repayment after your Direct Consolidation Loan is disbursed (aka paid out). The first bill is generally due about two months after the loan is disbursed.

However, if you don’t use up your entire grace period, you could be eligible to use it a second time and still get the full six months.

There are two major ways you can use part of a grace period and then reboot it later. Those are:

  1. You return to school before the end of your loan’s grace period – this could mean you left school for a semester and returned in undergrad or it could mean you graduated undergrad and then enrolled in a Master’s program 3 months later.
  2. You get called up to active military duty for more than 30 days before the end of your grace period. Once you return from active duty, you’ll get the full six months again.

Once it’s time to start making payments, you should enroll into Income-Based Repayment, or Income-Contingent Repayment or Pay As You Earn. You can also consider refinancing your loans to a lower rate, but beware you’ll lose federal loan perks.

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Questions You Need to Ask Before Refinancing Your Student Loans

Questions You Need to Ask Before Refinancing Your Student Loans

Are you drowning in student loan debt? Do you cringe every time you see how much money you’re paying toward interest?

You might have heard about the student loan refinance movement that’s been building up since last year. There are more companies offering student loan refinancing services than ever before, and these companies are attempting to make refinancing as accessible to borrowers as possible.

Some lenders also acknowledge that upon graduating, young professionals in their 20s might not have much of an established credit history. As a result, many make the decision to lend to potential borrowers based on other factors, such as education, employment history, degree, salary, and how much debt they already have.

Essentially, lenders want to make sure you can afford to pay back your loans, and they realize that your credit score is only a small part of a much larger picture.

If you’re interested in refinancing your student loans, read on to find out what questions you need to ask before starting the process.

What Does It Mean To Refinance Your Student Loans?

First, you need to know exactly what it means to refinance your student loans, and why doing so may be a good option for you.

Refinancing your student loans is the process of applying to receive new terms on them. For example, if you need a longer repayment period for a lower monthly payment, then you can refinance to extend your term from the standard 10 years to 15, 20, or 25 years.

If your interest rates are high (say, 8%), you might be able to refinance to a lower interest rate, like 4.5%.

If your current loans have a variable rate, you can refinance to a fixed rate (and vice versa).

Lastly, if you owe multiple lenders, refinancing can help simplify your payments. You’ll only owe one lender – the one you refinance with. Your other loans will get paid off with the money from your new lender, and you’ll begin repaying your new lender for that one loan.

Refinancing is a great way to get better terms on your loans, but it’s not a magical cure-all solution. Here are a few other considerations to make before applying with a lender.

Do You Have Federal or Private Student Loans?

The distinction between federal and private student loans is critical for the purpose of refinancing.

If you refinance federal student loans, you’ll lose the benefits that are guaranteed with those loans. These benefits include repayment assistance such as deferment, forbearance, forgiveness, cancelation, discharge, and income-based repayment plans. You may also be eligible for additional benefits if you’re a service member.

Certain lenders offer these benefits to some extent or another, but they’re not guaranteed. That means your lender can change things up and decide not to offer them at any point in the future.

These benefits shouldn’t be overlooked, either. If your financial situation changes in the future and your income decreases or dries up completely, deferment and forbearance can help out a lot (you won’t have to make payments for a certain period of time). Not to mention if you become disabled and unable to work, you may be eligible for getting your loans discharged.

However, if your student loans are private, you have less to lose when refinancing. While many private lenders are improving their benefits, similar to refinancing, they’re not guaranteed. If the math works out in your favor, refinancing can be an easier decision when you have private loans.

Many lenders will also let you refinance both federal and private student loans together. Just keep tax deductions in mind. If you currently claim the student loan interest tax deduction, double check to make sure when you refinance, your student loans will still be considered student loans for that tax purpose.

What’s Your Credit Score and History?

While lenders have different algorithms to determine your creditworthiness, it’s still worth checking into what your credit score and history say about you.

Most lenders have loose credit requirements. For example, some may want to see a score above 600, while others want to see a score over at least 700.

Additionally, having late payments or delinquencies on your record generally isn’t good. If you have any recent dings on your history, you might benefit from waiting until they fall off or you repair your credit.

If you don’t have any credit score or history, don’t worry – a handful of lenders are willing to lend to you based off other criteria.

Do You Have a Fixed Rate or Variable Rate Loan?

Fixed rates don’t change over the life of your loan – the rate you have is permanently locked in. Variable rates can and do change over your loan term.

Those that currently have a variable rate loan may benefit from refinancing to a fixed rate loan for stability.

Not knowing what your monthly payments will be in the future could be a cause of financial stress. After all, how are you supposed to budget for your other expenses when your student loan payment could rise every few months or years?

If you don’t want to deal with any nasty surprises, refinancing to a fixed rate that stays the same may work better for you.

On the other hand, if you currently have a fixed rate payment, but can manage making extra payments every month, refinancing to a variable rate loan may actually benefit you.

That’s because variable rate loans start lower than fixed rate loans. If you can refinance to a variable rate of 3.50% (instead of a 5% fixed rate), and pay off your loan before the rate rises, you’ll end up paying less. Paying extra knocks the principal balance down quicker, so you’ll pay less in interest overall.

What Repayment Term Should I Choose?

Repayment terms can be tricky. Keep in mind that whenever you extend your repayment term, your loan becomes more expensive.

Let’s look at an example.

Say your current loan is $25,000 on a 6.8% fixed rate over 10 years. Your monthly payment is currently $287.70. The total amount you’ll end up paying over the life of the loan is $34,524.

Then, you refinance that $25,000 loan to a 4.5% fixed rate over 25 years. Your monthly payment will be $138.96, but the total amount you’ll end up paying is $41,688.

That’s a difference of $7,164.

So while the lower monthly payment with a longer repayment period may look like a good deal at first, remember how much money you’re paying toward your loan overall.

Of course, you can always pay your loan off early if your circumstances change. This cuts down on the cost of the loan, and most lenders don’t have prepayment penalties.

Are There Any Hidden Fees?

Here at MagnifyMoney, we hate to see borrowers pay any hidden or unnecessary fees. That’s why you should read the fine print before accepting any loan.

Here are a few fees you should be on the lookout for when refinancing your student loans:

  • Origination Fees: Paying for an origination fee is costly. Thankfully, a majority of student loan lenders don’t charge origination fees, but it’s important to know how they work. An origination fee is charged to cover the administrative costs of issuing a loan. This fee typically ranges from 1% to 3% of your loan amount. If you refinance that $25,000 loan and have an origination fee of 3%, your fee will be $750. Origination fees are usually bundled into the loan, so you’ll actually end up owing $25,750.
  • Late Payment Fee: As with any loan, if you pay late (generally 15 days past due), you’ll incur a late fee. These tend to be around $15-$25.
  • Unsuccessful Payment Fee: The most convenient way to pay for your loans is to have it automatically debited from your bank account. Unfortunately, if you don’t have enough money in your account, you’ll face fees not only from your bank, but also from your loan servicer.
  • Prepayment Penalty: Again, most lenders don’t have prepayment penalties, but it’s always worth checking. Some lenders make it difficult for you to make extra payments or to pay your loan off early, and they charge a fee for it since they’re losing out when you do this.

Are Cosigners Allowed?

If your creditworthiness isn’t enough to get you a loan, you may be able to apply with a cosigner that has more established credit, such as a parent.

Some lenders don’t allow you to apply with a cosigner, and some may or may not offer cosigner releases. In the event a lender does offer a release, after a set amount of timely payments (typically 36 payments or more), your cosigner can be released from his or her obligation.

What’s Your Education History?

Lenders have different education requirements for their refinance programs.

For example, SoFi* has a set list of schools and programs its program is available to, and CommonBond* only refinances graduate and professional loans. Citizens Bank refinances smaller amounts for bachelor’s degrees and larger amounts for graduate degrees.

Knowing your total student loan debt is a must when refinancing to know if you qualify or not, though there are a few lenders (like SoFi) that don’t have a maximum on the amount they refinance.

What Are the Values of Your Lender?

If you’ve been frustrated by your current student loan servicer, you know how big of a deal customer service is. Some lenders are great at it, and others aren’t very helpful.

Before going through the refinance process, get a feel for the potential lenders out there. It’s best to shop around regardless, but don’t be afraid to ask questions when you call to gauge how helpful and committed a lender is to serving you.

Our student loan refinance table is a good reference for this. We assign grades to lenders based on their transparency, so you know which ones are trustworthy.

Are There Other Options?

If you have federal loans, we recommend exhausting your options there first. There are income-based repayment programs you may be eligible for that could lower your monthly payments and extend your term. If you don’t have to go through the refinance process, save yourself the trouble and work with what you’ve got.

Have private student loans? It’s still worth calling your loan servicer to find out if they can do anything to assist you. As we mentioned, some may be able to give you the option of deferring payments. More and more lenders are trying to work with borrowers to make their payments affordable.

Overall, refinancing makes the most sense when you can secure terms that give you more manageable monthly payments. If you’re currently struggling to pay the minimum on your student loans, refinancing might be able to help.

Never Be Afraid to Ask Questions

If you find yourself with any extra questions, never be afraid to ask a lender for clarification. We try to make navigating the fine print easier, but lenders are constantly changing their policies and fee structure.

When you’re borrowing a significant amount of money, you want to be crystal clear on the terms. After all – that might be what got you into this situation in the first place, given that so many college students don’t fully understand the repercussions of student loans.

Finally, always remember to shop around and compare lenders. If you decide to refinance, it’s important to get the best terms and rates possible to make it worth your while. Some lenders use soft credit reports to give you an initial rate estimate, while others use hard credit inquiries. Shop around within a 30-day window regardless and your credit score won’t suffer as much.

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Balance Transfer Traps to Avoid

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Are you tired of paying a huge amount of interest on your credit card debt?

A balance transfer is a solution that will give you some relief from costly interest payments. A balance transfer is when you move the amount you owe on Credit Card A to Credit Card B, which is offering a promotion with very low or 0% interest for a set period of time. Taking advantage of transfer deals to manage your debt can help you chip away at the principal to repay debt faster.

Generally, balance transfers are a sweet deal, but there are some fine print details you must keep in mind. After all, credit card companies are in business to make money, so these low promotional interest rate deals are meant to win your business from competitors. And if you don’t read through the terms carefully and adhere to the conditions, you may end up paying more money than you save. Here’s how to avoid balance transfer traps and reap all the benefits.

1. Be Mindful of Transfer Fees

Some credit cards charge a fee each time you transfer a balance. Fees are typically around 3% to 5% per balance transfer. You should do the math before signing up for a new credit card to ensure transferring each of your balances won’t cost you more money in fees than it’ll save you in interest. Often the credit cards that charge a transfer fee also offer an interest free period, so it’s worth weighing your options. 

For instance, the Santander Sphere Visa Signature Card charges 4% per transfer, but gives you 24 months completely interest free. In this case, the benefit of 24 months without interest will likely outweigh the drawback of a transfer fee. However, there are other credit cards on the market that have 0% APR with a shorter promo period and a fee, including: 

  • The Regions Visa Signature and Visa Platinum Credit Card – 4% fee with 7 months interest free.
  • The Special Connections Visa by Commerce Bank – 5% fee with 6 months interest free.
  • The Signature Credit Card by Commerce Bank – 5% fee with 9 months interest free.

Depending on the amount of debt you’re repaying or consolidating, balance transfers with a fee and a short promo period may not save you much money, so you should keep searching for a better deal.

2. Transfer Balances Quickly

Usually balance transfer specials require you to make transfers within a certain timeframe in order to be eligible for the deal. Often the window is within 60 days. If you don’t transfer all of your balances quickly you run the risk of missing out on the deal and having to pay standard APR for your transferred debt. Move your debt over to the new credit card as soon as you open it to avoid falling into this trap.

3. Resist Temptation

Several cards with balance transfer specials also offer cash back rewards for new purchases. It seems like a great deal on the surface, especially if you’re making a dollar back for every dollar you spend. But beware, there’s fine print. New purchases outside of the balance transfer may not be eligible for the low or 0% APR deal.

Depending on the card, you may even be required to pay interest on your whole balance (including the transferred balance) if new purchases aren’t paid off in full each month. Making new purchases can be a slippery slope, so be careful. Always go into a balance transfer with the endgame in mind – paying off your debt. Accruing new debt on top of what you transfer can hinder you from repaying before the grace period ends.

4. Always Pay on Time

Missing a payment during your balance transfer promotion can result in cancellation of the deal and a loss of your promo interest rate. Ensure you pay on time every month otherwise your interest will bump up to the standard rate. Some cards even charge penalty APR over 20% if you don’t pay your bills on time.

Ultimately, a balance transfer isn’t an easy way out if you’re having trouble paying your credit card debt. Be prepared to fulfill your end of the agreement (paying on time) to benefit from low interest.

5. Plan for the Promotion’s End

All good things come to an end, right? The promo period on your balance transfer will expire faster than you think, so plan for it. If you can pay off your debt within the grace period, pat yourself on the back. If not, that’s okay too as long as you have a strategy. 

Plan to transfer your balance to another credit card that’s running a special when your promotions over to avoid paying standard interest. Start with the card that has the lowest interest first to jump start repayment. Then keep moving on to cards with the next lowest interest until your debt is repaid.

6. Be Cautious of Retroactive Interest

Occasionally when you’re offered 0% financing on a credit card (most commonly with a store card) the rate is deferred rather than waived. That means that if you don’t pay off your balance by the end of the deferred interest period you’ll be charged interest from your beginning balance. Be mindful of terms such as this so you can plan in advance how you’ll manage your debt before you get hit with back interest.

Bottom line: We recommend balance transfers to kickstart credit card debt repayment if you’re aware of the traps. Weigh your options carefully, search the conditions for fine print and develop a debt management strategy that makes the most sense for your situation.  

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The Dangers of Using Credit Repair Companies


credit scoreIf your credit is suffering from a few poor financial decisions, but you’re ready to take action to improve it — you need to be careful. Many companies promise to help consumers go through a credit repair process to improve their credit as they get back on their financial feet.

As Experian credit bureau explains, “there is nothing any credit repair clinic can legally do for you…which you can’t do for yourself for free.” And yet companies making big promises about making everything right (with very little work on your part) can charge you thousands of dollars for their services.

You need to educate yourself about the realities of credit repair and understand what your options are before relying on a business that could push you further into financial trouble.

What Is Credit Repair?

It helps to first understand what we mean when we talk about “credit repair.” This refers to a process that takes place when you find an error, incorrect information, or other issue on your credit report. It can also be useful if you’ve been a victim of identity fraud or some other problem that’s negatively impacting your credit.

You also need to know that there’s a limit to what credit repair can do for you immediately — or even in the short term. There’s no magic bullet that can instantly improve or fix your credit history, report, or score.

When Credit Repair Makes Sense

Again, keep in mind that the credit repair process is something you can work through on your own and for free. However, depending on your situation, you may find it worth paying a fee to have a professional (and reputable) company help you work through the following issues:

  • Resolving issues on your credit report and ensuring erroneous information is removed.
  • Working with lenders to negotiate new payment terms or consolidation.
  • Handling credit issues as a result of identify theft.

Some legitimate credit repair companies may even offer information and education to help you better manage your money in the future so that this doesn’t become a recurring problem. We recommend looking for non-profit credit repair agencies and doing a thorough job researching its reviews from other clients.

Using a credit repair company does make sense for those who don’t fully understand the process of correcting information or starting an investigation (which, yes, individuals are allowed to request from the credit bureaus). It may also be a smart option for those who simply feel overwhelmed and don’t want to take action on their own.

Remember that credit repair is never a guaranteed fix for credit issues or a way to raise your score. If any company makes guarantees or promises that you’ll receive a specific result, you need to look for another group to work with. The company simply can’t make — and keep — those promises.

When to Steer Clear

If you want to consider credit repair, you need to carefully avoid companies that are nothing more than scams. Look out for these red flags when seeking out a company to work with:

  • Requests for payment before the service is completed.
  • Lack of disclosure around your rights, and what you can do for yourself for free.
  • Recommendations that you shouldn’t reach out to the credit reporting company directly.

And of course if any service provider encourages you to commit fraud or otherwise break the law, you should run, not walk, straight out of their office.

Know Your Rights!

Before taking any action, familiarize yourself with some of the provisions from The Credit Repair Organization Act (CROA). Under the act, it’s illegal for a company to lie to you about what they can do to help you. Credit repair companies are also prohibited from taking money from customers until the service is complete.

They should also explain your legal rights in a contract. Additionally, the company should disclose how long it will take to get the results you’re hiring them to deliver and how much that will cost you. You have a three day right to cancel any signed contract without any charge to you.
Credit repair can provide a smart solution for you if you truly need help working through the process and getting results. Just keep in mind that no company has a secret to success that you missed out on, and that you can repair your credit on your own.

Learn More About Building Your Credit Here.


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Understanding the Income-Contingent Repayment Plan (ICR)

Understanding the Income-Contingent Repayment Plan (ICR)

If you have federal student loans, then you will have to choose a repayment plan when it is time for you to start making payments. There are many repayment plans to choose from, including a standard (10 year) repayment plan, an extended (25 year) repayment plan, and three other repayment plans based on your income. One of the three income repayment plans is the Income-Contingent Repayment plan (ICR).

[Learn more about Income-Based Repayment and Pay As You Earn plans.]

What Is the Income-Contingent Repayment Plan?

The ICR plan is an income driven repayment plan that sets your payments to the lesser of: 1) 20% of your discretionary income, or 2) what you would pay on a repayment plan with a fixed payment over a 12 year period, adjusted according to your income. If you file taxes individually or you are married filing separate, only your income will count. If you file jointly, both incomes will count.

After 25 years, your remaining loan balance is forgiven. However, you will owe taxes on the forgiven amount.

What Makes You Eligible for the Income-Contingent Repayment Plan?

In order to qualify for ICR, you simply must be a borrower with eligible federal student loans. That’s it. There is no initial income eligibility requirement. All federal loans qualify to be on the ICR plan (private loans do not qualify).

Each year, you must provide your income and family size to qualify for ICR. Your payments may increase or decrease based on whether your income and/or family size increases or decreases. Under ICR, your payment is always based on your income even if that means your payments are higher than what they would be on the Standard, 10-year plan (this is different than other income driven plans, which keep your payments capped once your payments would exceed what they would be under the Standard plan).

Pros and Cons of the Income-Contingent Repayment Plan

ICR was the first income driven repayment plan (created in 1993), and it was great until the Income Based Repayment (IBR) plan was created in 2009. Now, the only benefit of ICR over IBR is when you cannot qualify for IBR. For example, certain loans, like Parent PLUS Loans, do not qualify for IBR but do qualify for ICR.

On the ICR plan, your payments are generally lower than if you were on the Standard, 10-year plan. However, they are generally higher than other income driven plans, which is why most people do not use the ICR plan. The benefit of ICR compared to a standard plan is that lower payments mean your loans will likely be more manageable. The downside of ICR is that you will have to pay taxes on any debt that is forgiven, and you will likely pay more in interest over time. In fact, your payments may not even cover the interest you owe.

Most people do not use ICR these days, but for people with low incomes and Parent PLUS loans, ICR is still a good option.



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How to Find All Your Student Loans

How to Find All Your Student Loans

Congratulations, you graduated college. Whether you graduated Summa Cum Laude or with the minimum GPA allowed by the university, well done either way you are a college graduate. As you begin to look for your first job, you start to realize that the student loans you took out to pay for tuition, room and board, spring break to Cabo, and the bar tabs throughout the years of school are coming due. The problem is you have no idea where they all are, the only memory you have of student loans is signing some piece of paper and picking up a check with your name on it on each semester. The bad news is, these student loans are not going away, the good news is we are going to help you find your student loans right now.

First off we need to know if you have a federal student loan or a private student loan. If you are not sure it’s a safe bet to start looking first for your Federal Student loan. If you are 100% sure you have a private loan and do not have any federal student loans to speak of, scroll down to the bottom of the article under Private Student Loan to find out more. If you have both Federal and Private student loans, I suggest you read the whole thing, I think you are going to need it.

Federal Student Loan

Start by going to the National Student Loan Data System, this can be found at This is a great resource and has all of your federal loans in one place. The federal government wants to know how much is owed so the website is all in order and relatively easy to use. According to the website, the National Student Loan Data System (NSLDS) is the U.S. Department of Education’s (ED’s) central database for student aid. NSLDS receives data from schools, guaranty agencies, the Direct Loan program, and other Department of ED programs. NSLDS Student Access provides a centralized, integrated view of Title IV loans and grants so that recipients of Title IV Aid can access and inquire about their Title IV loans and/or grant data.

Once at the website select the Financial Aid Review button to see what loans are currently outstanding.

Screen Shot 2015-06-03 at 12.55.43 PM

To do this you will need a Federal Student Aid or FSA username and password. This FSA ID will give you access to a number of different government websites including the following:

At this point in the process of finding your student loans you will need to create a FSA ID, it’s pretty simple and only requires a few items of personal information including your:

  • Social Security number
  • Date of Birth
  • First Name, Middle Initial, and Last Name

After this information is confirmed, you will be asked to enter your PIN, if you do not want to link your PIN to your FSA ID, then select CONTINUE WITHOUT PIN.  However according to the NSLDS Frequently Asked Questions:

Only PINs with a verified match with the Social Security Administration (SSA) will be allowed to associate their PIN with their FSA ID. By associating a verified PIN with your FSA ID, you do not have to go through the SSA match, which can take up to 1-3 days.

If you have a PIN, but it was not verified (meaning SSA did not have a good match), then you cannot associate that PIN with your FSA ID and your identifiers will be sent to SSA for verification.

You will have limited access to certain applications until your information is verified with the SSA.

Once we complete verification with the SSA (1-3 days), you will be able to use your FSA ID to access your personal information on Federal Student Aid websites.

NSLDS also gives an option to select Forgot Pin, this will bring you to a *Pin Challenge Question.  While this information may not seem familiar, you most likely have entered this information while filling out your FAFSA application. Once this challenge question is answered correctly the FSA ID application will continue allowing you to create a username and password.

Next up in the FSA ID application is 5 Challenge Questions and Answers that you will create to protect your account for extra security. The last two steps in the FSA ID application require you to verify and accept your information as correct, following this you will need to complete the email verification process by entering the secure code into the Secure Code field on your web page.

Congratulations, not only did you graduate college, you also set up a FSA ID to look at all of your student loans that you are going to pay back ASAP!

Once logged in you will be able to see the Aid Summary, which provides all the details you could have ever asked for including the:

  • Type of Loan
  • Loan Amount
  • Loan Date
  • Disbursed Amount
  • Canceled Amount
  • Outstanding Principal
  • Outstanding Interest

Each loan provides a hyperlink with more individual details for each loan including: Amounts and Dates, Disbursements and Dates, and Servicer/Lender/Guaranty Agency/ED Servicer Information, which is all the information you will need to get started making payments. All of your federal student loans will be in one place. Now you just have to figure out a way to pay them all.

[Check out details on forgiveness programs and income-based repayment programs.]

Private Student Loans

The problem that you will run into with private student loans is it’s more difficult to find out the loan servicer. The federal student loans have a national website dedicated to them, private student loans will need a little more hunting and gathering.

[We Recommend Reading: 7 Things You Need to Know About Private Student Loans]

The first place you can start is with your financial aid office at your college or university, they may be able to lead you in the right direction. Although if you have attended another university during your college career it might be a little more difficult going with this strategy.

The best way to find your student loan servicer is through your credit report. The credit report will have any outstanding debt under your Social Security number, which will include private and federal student loans.

The best thing you can do is check your credit reports at all three credit bureaus:  Experian, Transunion, and Equifax. You can obtain a free copy of your credit report from each of the credit bureaus once every 12 months, through This will not provide you with your credit score, but it will show you the information needed to find your private student loan provider and more.

Congratulations are in order if you followed the steps outlined here because you are on your way to locating your student loans and will be paying them off in no time. Good luck!

Interested in refinancing your student loans? Check out our comparison table


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Pay Down My Debt, Personal Loans, Reviews

Peerform Personal Loan Review

Peerform Personal Loan Review

Peerform is the newest lender to enter the peer-to-peer online lending space. The other two peer-to-peer lenders you might be familiar with are Prosper and Lending Club.

If you’re unfamiliar with peer-to-peer lending in general, it’s fairly easy to understand. Instead of banking institutions lending borrowers money, individual investors lend you their money.

This means that when you apply for a loan, your loan may be funded from several different individuals. How do they determine where to invest their money? Peer-to-peer lenders give you a “grade” based on your preliminary information that helps investors decide whether or not they want to lend to you.

Peer-to-peer loans are usually available to a broader number of people because the credit requirements aren’t as strict as they are with other online lenders (or traditional banks). The downside is these loans usually come with higher APRs. Let’s take a closer look at Peerform’s personal loan.

Personal Loan Details

Peerform offers an unsecured personal loan with fixed APRs ranging from 7.12% to 28.09%. You can borrow $1,000 to $25,000, and the only term available is 3 years.

Once you fill out your basic personal information to apply for the loan, you’ll receive a grade. This lets you know what kind of APR you’ll be eligible for. Loan grades range from AAA (the best) to DDD.

Credit scores correspond to grades as follows (according to its website):

720+ – AAA

700-719 – AA+

680-699 – A+

660-679 – BBB

600-659 – CC+

An example payment: if you borrow $10,000 with a 10% APR on a 3-year term, your monthly payment will be $322.67.

The Pros and Cons

The biggest pro is that Peerform will loan to applicants with a minimum credit score of 600. If you’ve been unable to obtain a personal loan from other lenders with stricter requirements, you may be able to get approved here.

The con is that when compared to other lenders, the interest rates aren’t amazing. That’s the downside of lending to riskier borrowers and having lower credit requirements. However, the lower end of the spectrum is better than what you’d be paying on credit card debt.

It also takes just minutes to apply (and it doesn’t hurt your credit score) to find out if Peerform will lend to you and on what terms. If you’ve been shopping around, it doesn’t hurt to check.

Additionally, Peerform lets you postpone payments for up to 10 days – you just need to notify customer support 3-4 business days before your payment is due.

The last downside is all of Peerform’s loans are on a 3-year term. Lending Club and Prosper allow you to choose 3 and 5 year options in case you need more time to pay your loan back.

Application Process and Documents Needed

Peerform has a great overview of the steps you need to take to get a personal loan on its website, complete with pictures.

First, you need to register and provide basic personal information, such as your name, address, and salary.

Peerform then analyzes your information to see what rates and terms it can offer you. If you’re eligible for a loan, those terms and rates will pop up on the next screen. You just have to choose which one makes the most sense for you.

Once you’ve picked your loan, it will then be listed on Peerform so investors can view and fund it. Listings last a maximum of two weeks, and it can take anywhere from one day to two weeks to complete the funding process. The timeframe is mostly reliant on the investors.

Peerform does require verification of identity and salary (a form of photo ID and two most recent pay stubs), though you can easily take pictures of any documents with your phone and upload them. Your phone number and bank account information may also need to be verified.

Who Qualifies For a Personal Loan With Peerform?

Peerform doesn’t rely solely on your credit score when determining your creditworthiness. Instead, it has developed a special algorithm called the ‘Loan Analyzer’ that takes many different factors into account. That said, it still lends to applicants with scores as low as 600 – anything less and they’re automatically declined.

Potential applicants should have debt-to-income ratios below 40% and have no negative history (current delinquencies, bankruptcies, tax liens, or judgments) on their credit report within the past year.

Borrowers also need a minimum of one open bank account and revolving account (such as a credit card).

Peerform’s personal loan is only available in the following states at this time: Alaska, Alabama, Arizona, California, Connecticut, Florida, Georgia, Hawaii, Illinois, Louisiana, Maryland, Michigan, Minnesota, Missouri, North Carolina, New Hampshire, Nevada, New York, Ohio, Oregon, Tennessee, Texas, Virginia, and Washington.

Who Benefits the Most from a Personal Loan With Peerform?

If you have a lower credit score and haven’t been able to get approved for a personal loan elsewhere, Peerform might be a good choice for you.

Because Peerform has 3-year terms for its loans, if you can handle larger monthly payments and pay extra, it may be a better alternative than Lending Club and Prosper. Both of those companies also have higher maximum APRs.

The Fine Print

There is no prepayment penalty or application fee associated with Peerform’s personal loan.

As with Prosper and Lending Club, Peerform has origination fees ranging from 1% – 5%, depending on the grade your loan receives. Origination fees are subtracted from the loan amount, so if you borrow $10,000 and have an origination fee of 4%, you’ll only receive $9,600. So, should include the origination fee into the amount you want to borrow in order to receive the money you need.

If you’re more than 15 days late on your payment, you’ll incur a fee of 5% of the monthly payment due. The minimum you must pay for a late fee is $15.

If your payment is unsuccessful, Peerform will charge you $15 for each failed attempt. This amount may be less depending on where you live. You’ll receive an email notification when this occurs.

In case you want to pay by check, be aware Peerform charges $15 to process it.


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Alternative Personal Loan Solutions

As we mentioned, Prosper and Lending Club are the two other leading lenders in the peer to peer space.

Prosper’s APR range is currently 5.99% to 36.00%, and you can borrow $2,000 – $35,000 on 3 or 5-year terms. The minimum credit score you need to apply is 640.


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*referral link

Lending Club’s APR range is 6.48% to 32.99%. You can borrow on 2, 3, or 5-year terms and request $1,000 to $35,000. The minimum credit score you need to apply is 620.


Apply Now

*referral link

Both lenders have origination fees of 1% – 5% – the same as Peerform – but both offer flexible terms and you can borrow $10,000 more than you can with Peerform.

That said, Peerform’s APR cap is less at 28.09% – Prosper’s 36% and Lending Club’s 32.99% are much higher.

Thankfully, all three of these lenders use a soft credit inquiry when you first apply, so it’s worth checking to see which one can give you the best rates.

If your credit score is above 700, your best bet is applying with an online lender such as SoFi. It’s not a peer-to-peer platform, but with fixed APRs ranging from 5.50% to 9.99%, and variable APRs ranging from 4.04% to 8.04%, it’s a much better deal. The maximum term is 7 years, and you can borrow between $5,000 and $100,000.

There’s no origination fee and no pre-payment penalty with SoFi, and it also uses a soft credit inquiry when you first apply.

Reminder to Shop Around

There are many personal loan lenders out there to choose from, each offering different terms and rates. As so many will give you preliminary offers with a soft credit pull, it’s worth shopping around to get the best rates you can. Just keep in mind that if you choose to move forward with a loan (you’re not obligated to), lenders will use a hard credit inquiry to give you final terms. Also, some lenders will do a hard credit inquiry initially, but if you shop around within a 30-day window, your credit score won’t be affected as much.

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*We’ll receive a referral fee if you click on offers with this symbol. This does not impact our rankings or recommendations. You can learn more about how our site is financed here.


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Understanding the Pay As You Earn Plan (PAYE)

Students throwing graduation hats

If you have federal student loans, then you will have to choose a repayment plan when it is time for you to start making payments on your loans. There are many repayment plans to choose from, including a standard (10 year) repayment plan, an extended (25 year) repayment plan, and one of three repayment plans based on your income. One of these three income repayment plans is the Pay As You Earn plan (PAYE).

[Learn about Income-Based Repayment and Income Contingent Repayment Plans.]

What Is the Income Pay As You Earn Plan?

The PAYE plan was passed by President Obama on December 21, 2012, and is the newest income driven repayment plan. Under the PAYE plan, your student loan payments are capped at 10% of your discretionary income.

If you file taxes individually or you are married filing separate, only your income will count. If you file jointly, both incomes will count.

After 20 years, your remaining loan balance is forgiven. However, you will owe taxes on the forgiven amount.

Direct Loans and Direct PLUS loans qualify for PAYE, but private loans and Parent PLUS loans do not qualify.

What Makes You Eligible for the Pay As You Earn Plan?

In order to qualify for the PAYE plan, you must show a “partial financial hardship”. You must be a new borrower as of October 1, 2007 and you must have received a disbursement on or after October 1, 2011.

To show a partial financial hardship, you must show that the annual amount due on your loans exceeds 10% of the difference between your adjusted gross income (AGI) and 150% of the poverty line for your family size in the state you live.

Generally, people who qualify for PAYE will have borrowed for the first time in the 2008-2009 school year and will have borrowed after 2011 (basically, only new borrowers qualify for PAYE). This means that people who were freshmen in college in 2008 will qualify, as well as people who were sophomores, juniors, or seniors in 2008-2009 and then went to graduate school and took out federal loans.

Considering the limiting date restrictions, President Obama announced that the PAYE plan will be extended to borrowers who took out loans before October 1, 2007 in late 2015.

Pros and Cons of the Pay As You Earn Plan

PAYE is the most generous income driven plan. Like other income driven plans, on the PAYE plan, your payments are lower than if you were on a traditional plan. Lower payments mean that your loans will be more manageable, giving you more money to live on.

The downside of the PAYE plan is that it is only available to new borrowers (at least for right now). Additionally, you will pay taxes on any debt that is forgiven, and you will likely pay more in interest than if you were on a standard plan.

The fact that PAYE is a relatively new repayment plan that is set to change later this year shows how the government is still making strides to help student loan borrowers in ways that it hasn’t before. It remains to be seen how PAYE will benefit borrowers over time.



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Understanding the Income-Based Repayment Plan (IBR)

Understanding the Income-Based Repayment Plan (IBR)

If you have federal student loans, then you will have to choose a repayment plan when it is time for you to start paying back your loans. There are many repayment plans to choose from, including a standard, 10 year, repayment plan, an extended, 25 year, repayment plan, and three repayment plans based on your income. One of the three income repayment plans is the Income-Based Repayment plan (IBR).

[Learn more about about Pay As You Earn and Income Contingent Repayment Plans]

What Is the Income-Based Repayment Plan?

The traditional IBR plan is an income driven repayment plan that caps your payments at 15% of your discretionary income, but never more than what your payments would be on the Standard, 10 year, plan. If you file taxes individually or you are married filing separate, only your income will count. If you file jointly, both incomes will count.

After 25 years, your remaining loan balance is forgiven. However, you will owe taxes on the forgiven amount.

There is a new IBR plan for borrowers who took out their first student loan on or after July 1, 2014 (i.e., you must not have any student loan debt from before July 1, 2014). Under the new IBR plan, your payments are equal to 10% of your discretionary income, and your loans are forgiven after 20 years (not 25). Just like the traditional IBR plan, you will have to pay taxes on any forgiven amount.

Federal Direct Loans and Direct PLUS loans qualify for both IBR plans, but private loans and Parent PLUS loans do not qualify.

What Makes You Eligible for the Income-Based Repayment Plan?

In order to qualify for both the new and old IBR plans, you must show a “partial financial hardship”. To show a partial finance hardship, you must show that the annual loan amount due exceeds 15% of the difference between your adjusted gross income (AGI) and 150% of the poverty line for your family size in your state.

Additionally, you must provide your income and family size each year to qualify for an IBR plan. Your payments may increase or decrease based on whether your income and / or family size increases or decreases.

If your income increases years after you qualified for IBR, you do not lose your eligibility under IBR. You can continue to make payments under IBR even if your income later exceeds your debt (your payments will just be higher).

[Use the Repayment Estimator to see if you’re eligible]

Pros and Cons of the Income-Based Repayment Plan

The obvious benefit of an IBR plan (like other income driven plans) is that your payments are based on your income, which makes them lower than if you were on a traditional plan. Lower payments mean that your loans will be more manageable, affording you more money to live on every month. The downside of an IBR plan is two-fold: first, you will have to pay taxes on any debt that is forgiven, and second, you will likely pay more in interest.

To date, IBR is the most popular income driven repayment plan because of the substantive benefits of being on the plan and because of the requirements to qualify.



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Pay Down My Debt, Personal Loans, Reviews

PNC Personal Loan Review

personal loan_lg

With about 2,800 branches in 19 states and the District of Columbia, PNC is the fifth largest bank in the United States. It’s primarily located in the eastern half of the US, with most of its branches and its headquarters being in the northeast.

If you’re looking for a personal loan from a trustworthy, familiar source, PNC might be your answer. It offers an unsecured personal loan on par with most lenders, as well as a secured loan that allows up to $100,000 to be borrowed.

Most traditional banks haven’t been able to compete with online-only lenders in the personal loan space, so let’s see how PNC compares.

Personal Loan Details

PNC has three personal loan options – secured and unsecured installment loans, and a line of credit. For the purpose of this review, we’ll be focusing on the installment loans.

Most online lenders only offer unsecured loans. In case you’re not sure of the difference:

  • Secured loans require an agreement to let your creditor use your assets as collateral in the event you default on your loan. This protects the creditor as it can sell your assets and recoup the cost of the loan.
  • Unsecured loans are the exact opposite – there’s no collateral involved. There’s less risk for the borrower and more for the creditor.

While secured loans seem to take the creditor’s side, the bonus is they often have more favorable terms because creditors are taking on less risk. You may have access to better interest rates or more money.

A simple example of a secured loan is a mortgage loan. Your home (property) is used as collateral. If you don’t pay your mortgage, your mortgage lender can seize the property and sell it.

Now that you know what it means to have a secured or unsecured loan, we’ll take a look at the differences between the details.

PNC’s unsecured personal loan allows you to borrow between $1,000 and $25,000 on a variety of terms: 6 months, and 1, 2, 3, 4, and 5-year options are available.

PNC’s secured loan allows you to borrow much more – between $2,000 and $100,000. The collateral required for this loan is non-real estate (a vehicle, for example).

Both the unsecured and secured loans have fixed interest rates.

Unfortunately, you can’t check APRs or sample payments for secured loans online, and when we called, we were told they vary based on your credit. They were unable to give any APR range.

The APR for unsecured loans varies by the loan amount:

  • For a $5,000 loan, the APR ranges from 9.65% – 17.15%
  • For a $10,000 loan, the APR ranges from 8.34% – 15.84%
  • For a $15,000 loan and up, the APR ranges from 7.74% – 15.24%

A payment example: if you borrow $20,000 on a 5-year term with an APR of 7.74%, your monthly payment will be $403.04.

The Pros and Cons

Applying for a personal loan with a bank is typically a bit more time consuming than applying with an online-only lender. This is because banks are thorough with the documentation they request.

However, PNC states the application should take no longer than 15 minutes online.

Unfortunately, if you’re looking at the secured loan option, you can’t apply online. You can only apply by phone, or in person at a branch. You can apply online with the unsecured loan option.

PNC’s APRs are also quite high, especially for the loan amounts. Many online-only lenders are offering better rates starting in the 5% range.

An additional negative might be that PNC only offers fixed rates. While variable rates aren’t stable, they’re usually lower than fixed rates. If you’ll have the ability to pay the loan off soon after it’s disbursed, having the lower variable rate can be beneficial.

If you fall on hard times, there’s a possibility that PNC will allow you to defer your payments, but this is reviewed on a case-by-case basis.

PNC urges borrowers to contact the bank at the first sign of trouble – before their payment is due.

Application Process and Documents Needed to Apply

If you’re applying for an unsecured loan, you can easily apply online and be done within 15 minutes. PNC recommends having the following information ready:

  • Your photo ID
  • Annual income, plus any other sources of income you have
  • Employer information (if you’ve been working there for less than 2 years, have your previous employer information as well)
  • Address/proof of residence (if you’ve been living there for less than 2 years, have your previous address ready)
  • If you’re applying with a co-applicant, you’ll need the same information for them
  • If you’re applying for a personal loan to consolidate debt, you’ll need account statements as PNC needs to know your account number, monthly payment, and outstanding balance

PNC’s application is straightforward, and it also has a checklist available for you on the application in case you need to reference it.

PNC will use a hard credit inquiry when applying for a loan with them.

Who Qualifies for a Personal Loan With PNC?

To have the best chances of being approved for a loan with PNC, you need very good and established credit, along with a reasonable debt-to-income ratio. Your loan terms greatly depend on these two factors. Being a customer with PNC doesn’t increase your chances of getting approved.

Just a note – if you choose the secured loan and want to use your vehicle as collateral, it must be less than 8 years old and have less than 80,000 miles on it.

Who Benefits the Most from a Personal Loan With PNC?

Borrowers looking for a larger loan amount would benefit from the secured personal loan with PNC.

SoFi is the only other personal loan lender offering that much money, and while the loan is unsecured, it doesn’t have any physical locations. If you feel more secure applying in-person and receiving assistance from a trusted bank, you might prefer to go with PNC.

However, most borrowers will benefit from going elsewhere to get an unsecured personal loan.

The Fine Print

There is no prepayment penalty for either loan, so you can pay your loan in full at any time.

There’s no origination nor annual fee for the unsecured personal loan.

When called, a PNC representative wouldn’t disclose any other fees associated with the loan (late fees, returned payment fees, etc.).


Since there is so little information on its website about the secured loan, it was important to find out as many details as we could from a call.

Unfortunately, the PNC representative that answered the call wasn’t very helpful. The most she could offer was that the loan rates and terms were dependent upon credit, and that the credit score and debt-to-income ratio of an applicant was extremely important.

When asked about late fees for the loan, she said “another department” handles that, and was unable to transfer the call to the appropriate personnel, as you need to have a loan with PNC before fees can be discussed.

This was rather disappointing. Most lenders are open to discussing these details with potential borrowers – fees can make a huge difference when considering loan options. To be one of the few lenders unwilling to discuss fees and rates beforehand kicks PNC’s transparency down a notch.


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Alternative Personal Loan Solutions

As mentioned, SoFi* is the closest competitor as it allows borrowers a maximum of $100,000 as well. The minimum you can borrow is $5,000. Most personal loan lenders have limits of around $25,000 – $35,000.

SoFi offers fixed rates and variable rates, while PNC only offers fixed rates for its installment loans. SoFi’s fixed APR ranges from 5.50% – 9.99%, and its variable APR ranges from 4.04% – 8.04%.

There are no fees associated with SoFi’s personal loan except for a late fee, which is 4% of the amount due or $5 – whichever is less.

You can borrow funds on 3, 5, or 7-year terms, and personal loans are available in 46 states, including the District of Columbia.

SoFi also offers unemployment protection. If you lose your job through no fault of your own, you can apply for payment assistance.

SoFi uses a soft credit inquiry when you first apply to get your rates, which means your credit score won’t be affected. If you choose to move forward with the loan, a hard credit inquiry will be used.

SoFi logo

Apply Now

*referral link

If you’re looking for good alternatives to PNC’s unsecured loan, take a look at Earnest. You can borrow between $2,000 and $50,000 on a 1, 2, or 3-year term. Its fixed APR ranges from 4.25% – 9.25%.

There are no hidden fees associated with Earnest’s personal loan, and it’s offered in 23 states plus the District of Columbia.

You’ll need a minimum credit score of 720 to be eligible for approval with Earnest, and a minimum of 700 to be approved with SoFi, but both lenders take other factors into account, unlike PNC. Your employment history, education, and salary matter as well.


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It Pays to Shop Around

While it would be convenient to have the first lender you apply with be the best solution, that’s not always the case, even with a trusted lender like PNC. Personal loans from bigger banks are falling by the wayside as online-lenders are offering much better rates and terms. Do yourself a favor and shop around to get the best rates, even if you have a prior relationship with the bigger names out there. If you shop around within a 30-day window, your credit won’t take a big hit.


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What You Need to Know About Wage Garnishment

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Wage garnishment is the very last resort agencies use to collect a debt.

Employing this recovery tactic forces you to pay outstanding bills, child support or alimony directly from money automatically deducted from your paycheck. Fortunately, wage garnishments don’t happen overnight. There are several steps an agency must take well in advance before the money disappears from your check. Restrictions are also in place to limit the amount of money that can be taken from your wage to resolve outstanding debt.

If you are overwhelmed by debt and fearful that you are at risk of wage garnishment, actively seek a resolution by speaking with your debt collector or consulting with a legal professional.

How Wage Garnishment Happens

For ordinary debts such as delinquent credit cards a court order is required to garnish your wages. When a credit card company can’t collect on your debt it may be sold to a collections agency. Before this process begins, you’ll receive many letters concerning your debt and ample notice warning you of the court proceedings. Don’t ignore these letters, as they won’t go away. It is much easier to address a debt before it goes to judgment.

If the debt collector decides to sue you, you are at risk of having a judgment ruled against you. If they win the court judgment, you’re given time after the judgment to appeal. When that period passes, the creditor obtains a court order to garnish your wages. If it goes through, this judgment will appear on your credit report.

Having your wages garnished is an unpleasant situation to be in. Your employer is notified of your debt and receives a notice of wage garnishment. The employer is obligated to payroll deduct the money from your paycheck and the money goes toward repayment of the debt.

Wage Garnishment Limitations

Creditors can’t take your whole paycheck even if you owe a large sum of money.

Title III of the Consumer Credit Protection Act (CCPA) limits the amount of money that can be garnished from your paycheck and sets other restrictions to protect consumers. For instance, your employer can’t fire you for having your wages garnished – the first time. You are not protected from being fired if your wages are garnished for more than one debt.

The maximum amount that can be garnished is determined by your disposable earnings. According to Title III, disposable earnings is money left over after deductions required by law such as federal, state and local taxes, unemployment insurance, Social Security and certain retirement withholdings. Deductions including health or life insurance, union dues or charitable contributions are not required by law and may be considered disposable earnings.

Federal law states the limit that can be garnished from your paycheck weekly may not exceed the lesser of:

  • 25% of your disposable earnings, or
  • The amount by which your disposable earnings are greater than 30 times the Federal minimum wage

Let’s consider an example: If you have a weekly disposable income of $400 and minimum wage is $7.25, you get to keep $217.50 ($7.25 x 30) leaving $182.50 ($400 – $217.50) available for garnishment based on the first rule. However, 25% of $400 is just $100 and since it’s the lesser of the two, that’s what will be taken from your paycheck.

The Special Circumstances

There are a few exceptions when it comes to wage garnishment.

Title III doesn’t apply to cases of default child support or Federal and state taxes. In fact, owing back child support allows for significantly more money to be taken from your check. Garnishment law permits up to 60% of your disposable income to be withheld depending on how many other people you support.

A court order is not required to garnish a portion of your disposable income to pay taxes. A tax agency can go directly to your employer to begin withholding and Title III doesn’t restrict how much money it can take. However, it’s a requirement that you’re notified of pending garnishment, so you should attempt to make payment arrangements before it occurs.

Delinquent Federal student loan debt can also be collected through a process called administrative garnishment, which allows for federal agencies to collect non-tax delinquent debt. Just like with taxes, under Federal law a government agency can go directly to your employer to garnish wages without a court order for repayment of a student loan. Up to 15% of your disposable income can be withheld. Before an administrative garnishment happens, you are given an opportunity to attend a hearing. If you can plead your case for hardship you may be able to avoid it.

State Regulations

All states allow wage garnishments for unpaid child support and taxes. However, Pennsylvania, North Carolina, Texas and South Carolina don’t allow wage garnishment by creditors. Other restrictions, like how much of your income can be garnished varies from state-to-state. If your state’s law is different than the Federal law whichever law results in you paying less money is the one that takes precedence. Check your state laws and regulations to find the restrictions relevant to you.

Preventing Wage Garnishment

Communication is key.

If you’re receiving notices that a debt collector intends to sue, be proactive and do something about it right away. Negotiating a settlement or payment plan is a viable option. Wage garnishments are an expensive hassle for you and the debt-collecting agency, so arranging a mutually beneficial plan of action is convenient for both parties. Consider hiring a legal professional to guide you through the process of working out an arrangement that saves you from the consequences of a wage garnishment.


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Longest 0% Purchase APR Credit Cards


If you are looking to finance a big purchase, such as an appliance, a car repair, or even college costs, many banks offer low introductory APRs that you could utilize to finance larger purchases as low as 0%.

What is a 0% Purchase APR?

Banks will offer an extremely attractive introductory 0% purchase APR to entice customers to apply for a credit card. This means that for a limited time after the account is opened, you would not pay any interest on purchases charged to the card for a certain number of months. Typically, these 0% APR offers range from 6-21 months.

Along with the 0% purchase APR offer, many banks offer a 0% balance transfer APR. You could take advantage of the 0% balance transfer APR offer by transferring a balance from another credit card, that is currently accruing interest, to the new card offering a 0% APR and save a lot of money. Just like with a 0% purchase APR offer, the 0% balance transfer APR is only valid for a certain amount of time, which varies by bank.

Citi Simplicity

The Offer

  • 0% Introductory APR on purchases for 21 months
  • 0% Introductory APR on balance transfers for 21 months (a 3% balance transfer fee will apply)

The Fine Print 

To utilize the Citi Simplicity 0% Purchase APR you must first apply for the card and be approved. You can make the large purchase at any time during the promotional period, but the 0% APR on your purchase is only valid for 21 months from account opening. So, if you charged $5,000 of appliances to this card the first month after opening, you would need to pay $238 per month in order to pay it off before the 0% APR expires. However, if you made the purchase in month 10, you would only have 11 months before the introductory APR expires, and would need to pay $454 per month.

If you wish to complete a balance transfer with the card, you must do so within 4 months of account opening, or you will lose the 0% balance transfer APR.

If you are more than 60 days late making a payment, you could lose your promotional APR, and you cannot transfer a balance from another Citibank issued credit card. APR varies from 12.99% – 22.99% after the promotional APR expires, and you do not know your regular APR until you apply and are approved for the card.

The Citi Simplicity 0% purchase offer earns a B transparency score.


  • No late fees
  • No penalty APR
  • No annual fee
  • 0% APR on balance transfers and purchases for 21 months
  • Same APR for purchases and cash advances


  • 3% balance transfer fee
  • 3% foreign transaction fees
  • No rewards program
  • Up to $35 returned payment fee
  • Non-intro APR not known until you are approved for the card

If you are looking to make a large purchase and not pay it off immediately, the 21-month 0% APR period could save you months and hundred of dollars in interest, as opposed to making the purchase with an existing card with a high interest rate.


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Citi Diamond Preferred 

The Offer

  • 0% Introductory APR on purchases for 21 months
  • 0% Introductory APR on balance balance transfers for 21 months (a 3% balance transfer fee will apply)

The Fine Print

To utilize the Citi Diamond Preferred 0% purchase balance transfer offer you must first apply for the card and be approved. You will have 21 months from account opening where any purchases you make will not accrue any interest.

If you wish to complete a balance transfer with this card, you must complete the transfer within 4 months of account opening, or you will lose the 0% balance transfer APR. You cannot transfer a balance from an existing Citibank card.

Late payments or returned payments can result up to a 29.99% penalty APR, based on creditworthiness. In other words, a late payment could result in the loss of the 0% APR. You may also be charged a fee of up to $35 for late payments or returned payments, in addition to the penalty APR.

After the promotional period, APR varies from 11.99% – 21.99%, which you will not know until you apply and are approved for the card. The APR for cash advances is 25.24% plus a 5% fee, and a 3% fee is charged for foreign transactions.

For these reasons, the Citi Diamond Preferred card scores a B for transparency.


  • 21 Months of 0% APR on purchases and balance transfers
  • No annual fee
  • $0 liability for fraudulent purchases


  • 3% balance transfer fee applies
  • No rewards program
  • 3% foreign transaction fee
  • Up to 29.99% penalty APR if payments are missed or returned
  • Up to $35 fee for missed or returned payments
  • Cash advance APR of up to 25.24% plus 5% fee

The Citi Diamond Preferred card presents a great opportunity to finance a large purchase for nearly 2 years during the 21-month 0% APR period. However, because of the substantial foreign transaction, cash advance, and late payments fees, it is recommended that you utilize this card if you plan to use it only for the 0% APR, and know that you can make your payments on time.

240_cardCitDiamond (1)

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Chase Slate 

The Offer

  • 0% introductory APR for 15 months on purchases
  • $0 balance transfer fee for 60 days after account opening
  • 0% Introductory APR for 15 months on balance transfers

The Fine Print 

The Chase Slate intro offer of $0 balance transfer fee and 0% purchase balance transfer introductory APR is only valid when the balance transfer is made within 60 days of account opening. After that, a 3% fee is charged. You cannot transfer a balance from an existing Chase bank card. Once the 15 months at 0% APR is up, the go-to interest rate will depend upon your credit score. It will be 12.99%, 17.99%, or 22.99% variable.


  • No annual fee
  • Free monthly FICO score online
  • Zero liability on unauthorized purchases
  • $0 balance transfer fee for transfers completed within 60 days of account opening
  • 0% APR on balance transfer for 15 months
  • 0% APR on purchases for 15 months
  • No penalty APR


  • Rate is not known until you apply
  • 3% balance transfer fee applies after 60 days
  • 15 month 0% APR period – other banks offer longer timeframes
  • High APR, from 12.99% to 22.99% after 15 months

The Chase Slate 0% APR on purchases is a nice option for mid-sized purchases. There are longer 0% APR offers out there, though, so be sure that you can make high enough payments to pay off your purchase within the 15-month time frame.


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Chase Freedom 

The Offer

  • 0% Introductory APR for 15 months on balance transfers
  • 0% Introductory APR for 15 months on purchases

The Fine Print

A 3% fee applies to balance transfers. You cannot transfer a balance from an existing Chase card. Once the 15 month introductory period of 0% APR on purchase and balance transfers is up, an APR of 13.99% to 22.99% is applied. Your exact rate is not known until you apply. If your payment is made more than 60 days late, Chase will end your introductory 0% APR.

A 3% fee is charged on cash advances, as well as an APR of up to 23.99%. A 3% foreign transaction fee applies. A penalty APR of up to 29.99% may be applied to your account if you make a late payment, exceed your credit limit, or have a returned payment. Late payments and returned payments will be charged a fee of up to $35 for each instance.

The Chase Freedom offer scores a B for transparency.


  • 0% APR for 15 months on balance transfers
  • 0% APR for 15 months on purchases


  • 3% balance transfer fee applies
  • Exact APR after introductory period is not known until you apply
  • High APR after introductory period
  • Penalty APR up to 29.99% applies if payments are missed or returned
  • Returned or late payment fees up to $35
  • 3% foreign transaction fee

The Chase Freedom 0% purchase APR should only be used if you are positive you can make your payments on time every month. Late payments result in hefty fees, a penalty APR, and the end of the 0% APR. Still, 15 months at 0% APR is a great way to finance a large purchase that you are not able to pay off immediately.


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Discover It

The Offer

  • 0% APR on purchases for 14 months
  • 0% APR on balance transfers for 14 months

The Fine Print

The 0% balance transfer APR applies to transfers completed before 8/10/2015, and a 3% fee applies. You must complete the balance transfer within 60 days of account opening or risk losing the 0% APR. After the 0% APR period is up, an APR of 10.99% to 22.99% applies. Your APR after the introductory will be based on your creditworthiness and will vary with the market based on the Prime Rate. You will not know your non-promo APR until you apply.

Cash Advances have a variable APR up to 24.99% and will be charged a 5% fee. There is no fee for your first late payment, but after that you may be charged up to $35. Returned payments will be charged a $35 fee.

Late payments can result in the loss of the 0% introductory APR, and you can only transfer a balance from another bank.

For these reasons, the Discover It balance transfer scores a C for transparency.


  • No Annual Fee
  • 0% APR on purchases for 14 months
  • 0% APR on balance transfers for 14 months
  • Free FICO Credit Score each month on your statement
  • No fee charged on your first missed payment


  • High non-promo APR, from 10.99% to 22.99%
  • Balance transfer must be completed within 60 days.
  • 3% foreign transaction fee
  • 3% balance transfer fee applies
  • 5% cash advance fee plus 24.99% APR
  • Non-intro APR is not known until you apply

The Discover It 0% APR for 14 months offer is a good option if you know that you can pay off your balance by the end of the 14 months. If you need longer to pay off a purchase, then there are other banks that offer longer 0% APR periods and less fine print.


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Do the Math Before You Apply

If you choose to finance a large purchase with a 0% purchase APR offer, make sure that you can afford the payment. If you cannot make your payment on time every single month or cannot pay off the purchase within the introductory period, high APRs apply. You can find your monthly payment by dividing the total purchase by the number of month in the introductory period. A plan of action before making a big purchase can prevent you from falling deep into debt.

Find Other Low-Interest Rate Credit Cards Here. 


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Pay Down My Debt, Personal Loans, Reviews

Best Egg Personal Loan Review

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Best Egg is a personal loan company trying to make the borrowing process fast and simple for people looking to refinance credit cards or who need funds for personal use. In this review, we will examine the costs and loan application process for applying for a loan through Best Egg.


Best Egg offers unsecured personal loans. These are installment loans with a fixed monthly payment for the life of the loan, but like a credit card, are not secured with property such as a car or home. Meaning you don’t have to provide collateral in order to receive a loan.

Best Egg offers loans from $2,000 to $35,000 with a 3 year or 5-year payback period. Your interest rate is determined by your credit history and can range from 5.99%-29.99% with an origination fee ranging from 1%-5%.

Best Egg loans are originated through Cross River Bank, which is located in New Jersey. You do not need to be a New Jersey resident to apply for a Best Egg loan.


The best features of Best Egg are the simple terms and competitive interest rates for borrowers with a strong, positive credit history. Beyond the interest charge and origination fee, there are virtually no fees with Best Egg.

The company charges $15 for a late payment and $15 for a returned payment, which is lower than the typical $25 fee. There are no application fees and the origination fee is deducted from your starting loan proceeds, so there is no out-of-pocket cost to get started. However, this does mean you need to factor in the origination fee when you request the amount you need for a loan.

There are no pre-payment fees, so if you are able to make extra payments or pay off your entire balance early, you will not be charged any additional fees.


Best Egg only offers payback periods of 3 years or 5 years. If you want a shorter loan payback period than 2 years or a longer payback period than 5 years, Best Egg will not meet your needs.

As a borrower, your interest rate is based on your credit score and is locked in at the time of origination. While some borrowers may qualify for a 5.99% interest rate and 1% origination fee, Best Egg does not disclose the requirements to qualify for its best rates.

Even at 1%, the origination fee is certainly a negative considering other personal loans like SoFi offer no origination fee and no pre-payment penalty.

The highest interest rates are nearly 30% with a 5% origination fee. These rates are comparable to the worst credit card interest rates and may not offer you any benefit compared to using a credit card, which has no origination fee.

At the worst interest rates, this is still much better than typical payday loans or auto title loans, but you may have lower cost options available including lenders like Avant.

What Do I Need to Qualify?

Best Egg loans are approved based on your credit history. If you qualify, you are assigned a letter grade which corresponds to an interest rate between 5.99% and 29.99%. Current rates are available here.

The application process requires giving your email, and Best Egg uses a “soft pull” on your credit report to determine whether you qualify and find out your interest rate. A soft pull does not impact your credit score.

When you apply, you will need your Social Security number and current contact information handy for the application process, which is typical for any loan application.

Who is this Best For?

If you have credit card debt with a high interest rate, refinancing with Best Egg could save you a lot of money on interest over the life your debt. If you can lower your interest rate and set a fixed payback period compared to the open ended time frame on a revolving credit account, you could easily save thousands of dollars.

The site suggests using loan proceeds to help pay for a move, vacation, home improvement, debt consolidation, home purchase, or vehicle purchase. This product may save you money compared to credit cards, but it is a best practice to avoid debt where possible, particularly for optional luxury purchases like a vacation.

What About the Fine Print?

One of the biggest benefits of using Best Egg compared to competitors is that loans with Best Egg do not come with a mountain of fine print. There is almost no fine print actually.

You do not pay unless you get a loan and the only fees you will encounter are the origination fee and from late payments and rejected payments from your bank account. That is really it. There is no catch.

Unless you’re in Massachusetts, then the fine print states that your minimum loan amount is $6,000.

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One alternative for your personal loan needs is SoFi. SoFi charges no origination fee, no pre-payment penalty fees and offers larger loans up to $100,000. SoFi also offers longer loan terms with a 3, 5, and 7 year option.

The highest interest rate at SoFi is 9.99%, which is about one third the rate of Best Egg. However, SoFi is much more selective with lending criteria. You have to be a graduate of a university on a list of Title IV approved universities.

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Lending Club

Lending Club is a social peer-to-peer lending site where your loan is funded by a large group of investors who each contribute to your loan. A $3,000 loan could be funded by as many as 120 individual investors.

Lending Club loans assign a letter grade which corresponds to an interest rate, similar to Best Egg. Interest rates are similar, ranging from 4.99% to 32.99%. The largest loan available on Lending Club is $35,000.

If you are unhappy with your interest rate at Best Egg, it could be worth applying at Lending Club to see how your rate comes in. Depending on your history, your rate may be better or worse than Best Egg.


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Always Shop Around

It doesn’t hurt your score to see your offer with Best Egg, but there are other personal loan providers who also offer a soft pull. Don’t just take the first offer you receive. You should always be shopping around for the best possible rate, especially because lenders offering a soft pull don’t harm your credit score.

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Best of, College Students and Recent Grads, Pay Down My Debt

6 Lowest Fixed Student Loan Refinance Rates

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Do you want to refinance your student loans? You’re in luck.

The student loan refinance market has expanded to include many solutions for graduates who are stuck with high interest rates. (We’ve even found 19 lenders and counting that currently offer refinancing, take a look at the entire list here!)

When you shop around for a lender you’ll notice that most offer variable and fixed interest rates. There’s a big difference between the two. Variable interest fluctuates over time while fixed interest stays the same throughout the life of your loan.

We suggest you choose a fixed interest rate unless you can pay off your debt very quickly. Otherwise, you risk an increase in interest while you rebarpay the loan. Thankfully, there are lenders that offer very competitive fixed rates. Here are the lowest rates available.


SoFi offers refinancing and consolidation for both Federal and private loans with fixed rates from 3.50% to 7.24% APR. In order to get these low rates, you must sign up for autopay. Loan terms are available up to 20 years. The minimum loan amount is $10,000, but may be higher in some states due to legal requirements. The maximum loan amount you can obtain from SoFi is the balance of your qualifying student loans.

You must have graduated from an eligible Title IV accredited university or graduate program to be eligible for SoFi refinancing. Co-signers are accepted on a case-by-case basis. Both you and your co-signer must be U.S. citizens or permanent residents to apply. However, it does not offer co-signer release. SoFi has no application or origination fees plus no penalties for prepayment.

SoFi logo

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Earnest will refinance private and Federal loans with fixed rates from 3.50% to 7.25% APR if you sign up for auto-pay. Terms are available for 5, 10, 15 and 20 years. The minimum loan amount you can refinance is $5,000 and the maximum is $400,000. Earnest will accept co-signers to improve your chances of securing a low rate, but it’s not required.

In order to qualify, you must be a U.S. citizen or permanent resident. Your debt also has to be from a Title IV accredited school. You must live in CA, CO, CT, FL, GA, IL, MD, MA, MI, MN, NJ, NY, NC, OH, OR, PA, TN, TX, UT, WA, Washington D.C., or WI. If you don’t live in one of these states (or district), Earnest suggests you still apply so you can receive a notification once loans become available in your area. This refinance has no origination fees or prepayment penalties.


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DRB offers fixed interest at 3.50% to 6.25% APR if you sign up to make automatic payments from a DRB checking account. According to the website, you can easily open a checking account to receive the interest discount during the loan closing process. Loan terms are available up to 20 years. The minimum loan amount is $5,000 and DRB will fund up to 100% of outstanding private and Federal student loans.

You must be a working professional with a bachelor’s or graduate degree to be eligible. You must also be a U.S. citizen or permanent resident. A co-signer isn’t required, but you’ll likely need a co-signer to get approved if your gross annual income is less than $50,000. This refinance has no origination fee nor penalty for prepayment.


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CommonBond offers fixed interest from 3.74% to 6.74% on student loan refinances if you sign up for autopay. Terms are available for 5, 10, 15 and 20 years. With CommonBond you can refinance up to $220,000.

You must have obtained a degree from one of the graduate programs on the CommonBond eligibility list to qualify. Find out if your school is in the network on the CommonBond refinance FAQs page. Applicants must be U.S. citizens or permanent residents. A cosigner isn’t required, but if you don’t meet the underwriting requirements you can reapply with one. CommonBond charges no fees for application or origination. There’s also no penalty for prepayment of the loan.


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Citizens Bank

Citizens Bank will refinance both undergraduate and graduate loans. APR ranges from 4.74% to 8.90%. Loans are available from $10,000 to $170,000 depending on your education. Citizens Bank offers up to 0.50% in interest rate reductions if you sign up for autopay or have a qualifying account with Citizens Bank before applying. Terms are available for 5, 10, 15 and 20 years.

You must be a U.S. citizen, permanent resident or resident alien to qualify. A co-signer isn’t required but if you don’t have a strong credit history a co-signer may increase your chances of getting a low rate. Co-signers can apply for release if 36 on-time, consecutive payments are made. However, the borrower must meet certain credit eligibility requirements on their own at the time of release. Citizens Bank doesn’t charge application, disbursement or origination fees. There’s also no prepayment penalty.


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iHELP offers discounted fixed rates at 6.22% to 7.99% APR if you have a co-signer. Both private and Federal loans are eligible for refinance. The minimum loan amount is $25,000. The maximum loan amount is $100,000 for an undergraduate degree and $150,000 for a graduate degree.

Both you and your co-signer must be U.S. citizens or permanent residents to apply. Your co-signer may be eligible for release after 24 months of on-time payments if you meet credit requirements when he or she is released. You must have graduated from one of the iHELP eligible schools to receive a loan. iHELP charges a 2% supplemental fee upon loan disbursement. This is the only refinance to make the roundup that charges this type of fee.


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Education Success

Until recently, Education Success also offered a student loan refinance. It’s not available at this time because the original lender could no longer provide funding. Fixed rates were available as low as 4.99% APR for the first 1 to 10 years and variable interest thereafter from 5.24% to 8.24%. The minimum amount you could refinance was $15,000 depending on state requirements.

A loan with fixed and variable interest like this one is worth considering if you can pay off your debt within the fixed interest period. We’ll update this post if and when the refinance at Education Success becomes available.

education success


Is a refinance the right choice for you?

A refinance can give you a better interest rate and save you money in the long run, but there’s one factor you must keep in mind. A refinanced Federal loan may no longer qualify for Federal loan benefits like loan forgiveness, income-based repayment, forbearance or deferment. These are invaluable benefits to fall back on if you run into financial trouble in the future, so make the decision to refinance carefully.


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Best of, Pay Down My Debt, Personal Loans

Best Debt Consolidation Loans

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Are you stuck under an overwhelming pile of consumer or student loan debt? Do you feel like it might be impossible to get out?

We have good news: it’s not. Have you considered consolidating your debt? If not, it could be the solution you’re looking for.

Debt consolidation is typically used for two purposes:

  1. Make payments simple: If you owe a lot of lenders and are having a tough time keeping track of all the payments, then consolidating will make your life easier. You’ll only owe one lender and have to keep track of one due date. There’s less of a chance of anything falling through the tracks.
  2. Lower your interest rate: This is where you have to run the numbers to see if debt consolidation makes sense for you. What’s the average interest rate you’re paying on your debt? If it’s quite high (which is likely if you have a lot of consumer debt), you may benefit from consolidating under better terms. Having a smaller payment each month can help you manage your cash flow better.

If you think debt consolidation makes sense for your situation, we have a list of the best debt consolidation loans you can use to refinance your consumer debt, and we also have information on consolidating and refinancing student loan debt. Read on for our recommendations.

Personal Loans to Consolidate Credit Card Debt


You can borrow between $5,000 and $100,000, which is the most out of the personal loans recommended here. Its fixed APR ranges from 5.50% – 9.99% and its variable APR ranges from 4.04% – 8.04%. You can choose a term of 3, 5, or 7 years. You should have a credit score above 700 for the best chances of qualifying. There is no origination fee or prepayment penalty associated with a personal loan from SoFi.

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You can borrow between $2,000 and $50,000 with Earnest, and the maximum term is 5 years. Its APR ranges from 4.25% – 9.25%, but if you can find a lower rate offered elsewhere, you’re encouraged to email Earnest. You can borrow on terms of 1, 2, or 3 years. The minimum credit score to qualify is 720, though Earnest, like SoFi, takes other factors into account. There are also no origination or prepayment fees. However, you need a LinkedIn account to apply for a loan.


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Lending Club*

This is a peer-to-peer platform, which means individual investors are contributing to your loan. You can borrow between $1,000 and $35,000 with Lending Club, and its APR ranges from 4.99% – 32.99%, depending on the type of loan grade you’re eligible for. Be aware there are origination fees (ranging from 1% – 5%) associated with this personal loan, but there are no prepayment penalties. You can borrow on terms of 2, 3, and 5 years. The minimum credit score needed is 620.


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You can only consolidate credit card debt with Payoff right now. You can borrow $5,000 to $25,000 on a term of 2, 3, 4, or 5 years. Its APR ranges from 8.00% – 22.00%. There are origination fees ranging from 2% – 5% of the loan amount, but there are no prepayment or penalty fees. The minimum credit score needed to qualify is 660.

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[Check out other Personal Loans on Our Comparison Table Here]

Consolidating and Refinancing Student Loans

If you’re thinking about refinancing or consolidating your student loans, there are a couple of things to know.

First, what’s the difference between refinancing and consolidating?

  • Private Loan Consolidation: This involves combining all your loans into one loan so you only owe one lender and have to make one simple payment.
  • Federal Loan Consolidation (Direct Consolidation Loan): Only have Federal student loans? You can combine them through a Direct Consolidation Loan with the government. According to, “The fixed rate is based on the weighted average of the interest rates on the loans being consolidated.” This doesn’t save you much money, but your payments will be more manageable. For a complete list of Federal loans that can be consolidated, check here.
  • Refinancing: This is when you apply to a completely new lender for new terms – you’ll have a new loan, and your new lender will pay off your old loan.

The difference isn’t all that big – when you consolidate private (or private and Federal) student loans, you’re essentially going through the refinancing process.

If you currently have Federal loans, you need to be aware refinancing or consolidating means giving up certain benefits that come with federal student loans.

That means income based repayment, deferment, forgiveness, and forbearance options disappear. A few of these benefits are forfeited even with the Direct Consolidation Loan. These benefits could get you through an otherwise rough time, so make sure refinancing makes sense beforehand.

If you do have federal student loans, and you’re thinking of refinancing or consolidating, first see if you’re eligible for deferment or forbearance. There’s no reason to go through the process of having your credit checked if you can lessen your student loan burden another way.

If you have private student loans, you can also check with your lender to see if it offers payment assistance. Many lenders are making improvements to their student loan refinance programs and including forbearance and deferment options.

Also, once you consolidate or refinance your student loans, there’s no going back. This applies to the Direct Consolidation Loan as well.

Okay, still think refinancing or consolidating is right for you? Here are two options worth considering.


There’s no limit to the amount you can borrow with SoFi (the minimum is $10,000), which is nice for those with larger student loan debt. Fixed rates range from 3.50% – 7.24% APR and variable rates range from 1.90% – 5.19% APR. The maximum term you can refinance for is 20 years.

The additional benefit to refinancing with SoFi is that it offers unemployment protection. If you lose your job while repaying your loans, SoFi will help you get back on your feet through career counseling. You might also be eligible for forbearance during this time.

There is a school eligibility list – you can call or fill out the application to see if your school is on it.

SoFi takes into account your employment history, cash flow, and payment history – not just your credit score. However, having a score over 700 is recommended. If you need a co-signer, SoFi accepts them on a case-by-case basis, but there’s no co-signer release.

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Citizens Bank

You can borrow a minimum of $10,000, up to a maximum of $90,000 with a Bachelor’s degree, $130,000 with a graduate degree, and $170,000 with a professional degree. The maximum repayment term is also 20 years.

Its variable APR ranges from 2.83% – 7.47%, and its fixed APR ranges from 5.24% – 9.39%. If you already have an account with Citizens Bank, you may be eligible to receive a 0.25% interest rate deduction. If you enroll in auto-pay, you’re eligible for another 0.25% interest rate deduction.

There are no strict credit requirements with Citizens Bank, and it does accept co-signers. They are eligible for release after 36 consecutive on-time payments. However, if your loan entered into forbearance at any point (it offers payment assistance), then the loan is no longer eligible for a co-signer release.

Both of these options don’t have any hidden fees, meaning you don’t pay to apply, there are no origination fees, and there are no prepayment penalties. You can also refinance both private and federal loans with these two lenders. SoFi uses a soft credit inquiry to start, whereas Citizens Bank uses a hard inquiry.

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[Find other Student Loan Refinance Options on Our Comparison Table Here]

Shopping Around is a Must When Consolidating or Refinancing

The goal of refinancing or consolidating is to ultimately make your debt less of a burden on you. That means getting the best rates and terms offered. The easiest way to accomplish this is to shop around with different lenders. If you do so within a 30-day window, credit inquiries won’t count against you as much as they would if you shopped around for months. Plus, there are many lenders out there who will give you rates with just a soft credit inquiry (though a hard inquiry is required to move forward with a loan). Always put yourself first, as you’re never obligated to sign for a loan you’re approved for.



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The Dangers of Co-Signing a Loan

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When you first step out into the real world it is hard to ignore the marketing of what you need or want in your new life. You’ll find advertisements for colleges, credit cards and which car to buy are about as normal as a McDonald’s advertisement. Because money is currently not growing on trees, you may need to borrow some to make life happen. If you have ever applied for a loan before you received your first job or while in college, the application may have asked for a co-applicant or co-signer. The two terms may sound similar, but the obligations of a co-signer and co-applicant are different.

In a co-applicant the individual is attempting to get a joint loan with someone else, an example would be obtaining a mortgage. In most cases when buying a home, both incomes will be needed to obtain the loan and will feature both names on the mortgage loan and deed.

A co-signer is usually brought on if the applicant lacks income or good credit or for that matter any credit at all. Assuming the co-signer’s credit history meets the lender’s requirements, the co-signer will act as a default if the borrower or individual receiving the loan does not make payments per the loan agreement. A co-signer is required if the bank is worried you may not pay back the loan. To reduce the risk it requires someone who has a good credit history, income, and demonstrated they have paid their bills on time. So that doesn’t sound so bad, where’s the danger?

Who’s Responsible?

Co-signers are common with student loans as an 18 year old rarely has built a strong credit report with a history of good behavior. Both the student borrower and the cosigner are equally responsible for paying back the loan. Some private student loans offer the student loan borrower the option to release the cosigner, but this is usually at the financial institutions discretion after a certain amount of consecutive monthly payments are made on time and the borrower/student has meet certain credit requirements.

Even in the event the borrower has reached the consecutive monthly payments made on time the Consumer Financial Protection Bureau (CFPB) has received complaints that borrowers have experienced a challenge getting the co-signer released from a loan. One particular complaint noted that even after making the required 28-on time payments, and then finding out it was 36 on-time payments, to only be met with a policy change from the lender that requires 48 on-time payments before applying to release the co-signer.

Remember that co-signing a loan means the obligation is shown on your credit report and thus affects your credit score. So if little Johnny forgets a payment because he failed to set up automatic payments or is having trouble making the payments on time, then this also can negatively affect your credit score as the co-signer.

It’s also important to remember, if you co-sign for a $20,000 student loan during little Johnny’s freshman year in college, this loan has 4 years to grow and accumulate interest. If the borrower defaults on the payments, then you are responsible for paying back your new student loan.

What’s the Worst That Could Happen?

Any time you co-sign for a loan, it is in your best interest to consider that you are fully responsible for paying back the full amount of the loan, because in the eyes of the law and the financial institution you are. It could even be the case if the borrower passes away before repaying the debt.

In the unfortunate case the borrower passes away, Federal student loans are discharged after the death of the borrower.

Under the same circumstances with private loans, in many cases the co-signer is now fully responsible for the balance of the loan; this also works the other way as well if the co-signer passes away.

According to a April 2014 mid-year student loan update from the Consumer Financial Protection Bureau, from 2008 to 2011 there was a more than a 20% uptick in private loans being co-signed. In 2008 67% of private loans were co-signed often by a parent or grandparent, but by 2011, over 90% of loans were co-signed.

One scary highlight from the CFPB report found that borrowers  are discovering when a co-signer passes away, like a parent or grandparent, an automatic default occurs. This default can occur even if the borrower is in good standing and current on the loan. I’m sure you can imagine the confusion when borrowers received notices to pay the loan in full.

It never really occurred to me when I received my private student loan that if the borrower or co-signer of the loan were to pass away it could result in financial distress. If you are already in a private student loan with a co-signer, then it may be a good time to consider having life insurance on one another as a source of funds to pay off the loan in the event of a death.

Private Student Loans: My Story

I was accepted to study in Rome, Italy, but unfortunately I did not attempt to obtain anything more than Federal student loan funding for my study abroad trip, so I was forced to cancel. I told myself I would pursue my dream of studying in another country at any cost. I found a study abroad program in London and I was accepted. However I needed extra finances and more than the Federal government could spare. I started applying for private student loans, the university I planned to attend was a private university, which cost four times more than current in-state tuition. Because I did not have much of a credit score or any income to report, I asked my parents if they would co-sign to receive the funding I needed to study abroad.

After a short online application process with my parents, we were approved and the loan did exactly what I needed at the time; it helped pay for my tuition, room and board, and whatever other shenanigans London and the surrounding European countries had to offer. At that exact moment I could not have been happier, I was going to London and studying abroad in another country. But I didn’t focus on the fact my lender expected me to pay the loan back in full plus interest.

While I enjoyed my time in London, my private student loan put financial stress on myself and my parents. I never defaulted but I remember the pressure I felt to make sure it was never the financial responsibility of my parents. I couldn’t imagine putting my parents through a financial hardship all because I wanted to study abroad while I was in college. I made a commitment to pay off my private student loan first for a number of reasons, but most of all it was to make sure my family was not a story in the news that resulted in a son defaulting on a loan to only hurt my family’s financial situation.