Tag: student loans

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Career & Education Education Financial Loans

Will This Type of Student Loan Forgiveness Be Next?

Could This Type of Student Loan Forgiveness Be Next?

A group of over one hundred organizations representing student loan borrowers recently wrote an open letter calling on the Education Department to overhaul its income-driven repayment program. The goal of an income-driven repayment plan is to make payments more affordable and give borrowing who have already been paying for 20 to 25 years a way out. However, these plans are so poorly designed that only 32 people have qualified for forgiveness as of the beginning of 2021.

According to the National Consumer Law Center, a consumer advocacy group, the government made a promise to borrowers that federal student loan payments would be affordable and would not be a lifetime burden. Unfortunately, the Education Department’s income-driven repayment program has “failed to deliver on every aspect of that promise.”

What is an income-driven repayment plan?

An income-driven repayment plan sets your monthly student loan payment to an affordable amount based on your income and family size. There are several different income-driven repayment plans, but they all generally require borrowers to pay between 10 and 20% of their discretionary income for 20 or 25 years.

What are the downsides to this type of student loan?

Although income-driven repayment plans exist to help low-income borrowers, they come with several downsides as well.

You might not qualify

Most private student loans don’t offer income-driven repayment plans, so you will likely only qualify if you’re a federal student loan borrower. The qualifications can be confusing though: Federal Parent PLUS loans are not directly eligible for this type of repayment plan but may become eligible by including the loans in a Federal Direct Consolidation Loan.

Your loan balance might increase

It’s also possible for student loans to be negatively amortized under this type of repayment plan, which means the loan payments you are making are less than the interest that accrues each month. This results in a higher loan balance which can feel like you’re making zero progress when paying down your debt.

Married borrowers might have a higher payment

Some income-driven repayment plan payments may increase if the borrower gets married and their spouse has a job. This is typically seen as a marriage penalty and can result in a much higher payment than you’re used to due to your joint income.

Student Loan Forgiveness takes a long time

If you’re seeking forgiveness of your student loan debt, you won’t see it until after 20 or 25 years of payment on an income-driven repayment plan. This can feel like you’re in debt forever since you’ll owe money for longer than the standard repayment plan and will end up paying more interest in the long run.

What’s next for student loans?

Advocates are calling for massive reform to the income-driven repayment program since the current program is too complicated, requires too much paperwork, and is poorly managed by the loan servicing companies that run them. Only about 34% of borrowers manage to recertify every year, which is a dismal amount considering these repayment plans are supposed to be helpful.

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Career & Education Debt Education Financial

Is It Better To Finish College Faster Or Debt-Free?

Is It Better To Finish College Faster Or Debt-Free?

A college degree is a significant investment in your future, but no one wants to be saddled with student loan debt for the rest of their life. There are ways to finish your college education faster, but the cost of tuition can add up quickly. As you prepare to choose your college, it’s important to ask yourself: is it better to finish college faster or debt-free?

Working Through College To Be Debt-Free

One of your options to finish college with less debt is to work full-time while you attend classes part-time. If you’re supporting a family or already in a steady employment position, this can be a great option. However, attending school part-time means you will be in school longer, which can mean higher tuition in the long run.

To decide if this is the right option for you, consider how your earning power will increase once you graduate with your degree. Will the costs of attending full-time be offset by the increased income? If you have a lot of financial responsibilities, this might not be a factor as you have to meet your other financial obligations instead.

Applying for College Scholarships

If you qualify for scholarships and grants, you could attend school full-time and graduate faster without racking up student loan debt. There are so many scholarships out there that could help in whatever situation you’re facing, so before taking out student loans, be sure to search for scholarships you may qualify for.

Ask everyone you know if they’re aware of any scholarship opportunities or take your search online to any of several college scholarship search sites to figure out if you’ll qualify for any free money.

Taking Out Student Loans

Of course, if you don’t qualify for a scholarship or grant, you always have the option to take out student loans to cover your college expenses without working. Attending school full-time is expensive, but it also means you’ll graduate more quickly and can start earning more money faster.

If you can’t feasibly work and attend college, consider increasing your course load to graduate faster. Reduce your expenses by living as cheaply as you can and working during the summer to reduce the amount of money you have to borrow each year.

Finding a Balance

So, is it better to finish college faster or debt-free? There’s no single right answer. Some students have a hard time trying to work while attending college, so they’ll work over the summer and save money to balance out the amount of money they have to borrow. Other people have financial obligations to meet outside of school, so they work full-time and attend classes part-time or over the summer instead.

Finding the right balance for your needs is crucial, and a lot of it will depend on your major, your expected income, and how much you end up having to borrow. No matter which option you choose, make sure to follow a college budget and keep your expenses down.

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Career & Education Education Financial Loans

What Is A Preferred Lender List?

What Is A Preferred Lender List?

A preferred lender list is usually used by colleges to help students find lenders for private loans. Private loans may be needed if there is a gap between federal loans and scholarships. Usually, colleges will have certain criteria for private loan companies and the preferred list allows them to show students who meet the requirements.

Preferred lenders will also offer some of the same benefits as federal funding, such as loan deferment and forgiveness. Customer service is usually also better because they have worked with thousands of students before.

Colleges do not benefit from the lenders in any way financially. This means these lists will always be reputable and students don’t have to worry about being scammed.

Is choosing a preferred lender required?

No. Students do not have to pick a lender off of the preferred lender list. They can use any company or financial institution to take out private funding. Always have students research any possible lenders and let them pick the best one for their needs.

Loans are not one-size-fits-all. Everyone may need something different. Consulting the preferred lenders’ list though can make choosing a lender much easier. Most of the companies have years of experience and reviews from other students.

This allows the student to see how they have helped people before and gives them peace of mind when it comes to reputation. It will also help students narrow down potential lenders faster. They can know that the list is reliable and takes away some of the burdens of having to do hours and hours of research.

Are private loans always needed

Not all students have to take out private loans to go to school. Some students will receive scholarships or grants. The federal loans may also cover the amount needed. However, private loans are becoming more and more popular and needed with the sharp increase in tuition rates.

There are a few things you can do before looking into private lending. Also files a FAFSA every year you are in school to see if you qualify for any grants or other money that you don’t need to pay back. You can also ensure that you get federally funded loans which may have less interest rates and longer repayment plans.

Federal loans will usually give you more protection and fixed interest rates. They also don’t usually require a co-signer or credit score, which gives the student more options when borrowing.

After trying FAFSA and federal loans, students can use the preferred lender list to ensure they pick a good lender with a good reputation. It will also help students narrow down the search for finding good lenders.

Not all colleges have extensive preferred lending lists though. Larger colleges tend to have more options than smaller schools. Always ask around and see what other students have used and what has worked the best for them. Financial aid officers should also be willing to advise students and make sure they are making good loan decisions.

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Career & Education Education Financial Loans

Understanding Student Loan Forgiveness

Understanding Student Loan Forgiveness

When tough times fall, some people are left with no way to stand up to the challenge of their financial obligations. Whatever the reason for these hardships, it’s good to know that there are some ways out of the mire. Student loan forgiveness may be one of these ways.

These days, the necessity of high education is as high as it has ever been. Unfortunately, the cost of higher education is just as high, which leaves some people having to take out expensive student loans- loans which they may eventually have trouble paying.

What is student loan forgiveness? Might you qualify? In this article, we’ll talk all about getting forgiven for your student loans- what it means, who qualifies, and what it will entail for your financial life.

What Is Student Loan Forgiveness?

When people can’t repay a loan, they have a number of options. So, in the case of student loans, you may be able to get your loans forgiven.

Student loan forgiveness essentially means that you are no longer required to pay some or even the entirety of your student loans.

This means that the debt you owe may not end up completely disappearing, and whatever you still owe on the end of everything else will persist. You will still end up having to pay the leftover debt, but the chunk forgiveness takes off may help enormously.

What Kinds of Forgiveness Are There?

Student loan forgiveness comes in many forms and is not homogenous across the board in any sense. This means that there are different types of loan forgiveness may occur under different circumstances. Here are a few of those circumstances:

Teacher Loan Forgiveness

To encourage people to teach primary school children, despite the low-paying salaries, oftentimes teacher loan forgiveness will be offered.

Under the terms of teacher loan forgiveness, those who teach five consecutive and complete academic years are eligible for student loan forgiveness of up to $17,500. This means that if your federal student loans tallied up to $30,000, you would have over half of your loans forgiven.

Public Service Loan Forgiveness

Working for a government or non-profit organization may also qualify you for loan forgiveness. After ten years of payments, or 120 qualifying payments, you may benefit from Public Service Loan Forgiveness.

Military Service

Military service may also qualify you for special benefits and repayment plans. These may include interest rate caps and other forms of special loan assistance.

AmeriCorps Benefits

Completing a term of service in AmeriCorps may also qualify you for Segal AmeriCorps Education Award. So, this may help you to repay some of your student loan debt.

Income-Driven Repayment Plans

Under these plans, those under a repayment plan that is based on their income may qualify for forgiveness on any remaining balance on their loans. After you make a certain number of repayments over a certain period of time, they may offer this.

Other Forms of Forgiveness

Other forms of student loan forgiveness may be found on the FSA’s Student Loan Forgiveness page.

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Career & Education Education Financial Loans

Student Loans: How Long Does It Take To Pay It Off?

How Long Does It Take to Pay Off Student Loans?

With the costs of school steadily rising and the necessity of a college education growing even more ruthlessly, many people are choosing to take on student loans. These loans- designed to help people who can’t pay out of pocket get access to education- are a godsend to some.

Still, having a loan hanging over your head is no one’s idea of a fun time. For one, loans tie you to an institution and limit your freedom. You might also feel more vulnerable to things like market instability if your loans are high and your funds low. So, how long will that loan be with you? How long does it take to pay off a student loan?

What Is The Size Of Your Loan?

To figure out how long it might take you to pay off your loan, you should first consider how big your loan is going to be and how much you’ll be able to pay monthly.

Loans are paid off in small installments, with interest and possible fees tacked on. This means that if you have a loan of $30,000, you’ll be paying in small increments of that loan for a period of time.

If you can pay more per month, you’ll end up with a shorter time to repayment. This will also help you in other sectors of your financial help. Student loans may come with different terms and different interest rates, meaning that your loan time might vary depending on who you get it from and what kind of contract you sign onto.

Overall, if you’re able to make larger monthly contributions, your loans will dissipate much faster. Choose to pay them piecemeal, and you could be stuck with them for a much longer period than if you chose to take off big bites.

What Is The Term?

A loan term designates how long you will be taking to pay off any given loan. If your loan has a term of, say, 15 years, that means that your bank has set up your payments so that you will have paid off your loan in that among of time- plus interest.

Many student loans come with a term of about ten years. This means that students who start college in 2022 will optimistically finish off their loans somewhere around 2032- or when they’re 28 years old.

But this estimate doesn’t always pan out. Loan recipients often take 20 years or more to finish paying off their loans, which, again, will depend on how much they’re willing to pay and how much they can spare for their bank or loan service at the end of the month.

So, if you’ve got a loan of $30,000 with a term of ten years, you’ll be paying big parts of that loan every month- plus interest. If you’ve got the same loan with a term of 20 years, you’ll be paying much smaller rates- half as much.

Thus, how long a loan will last is a combination of term length and how much a debtor can pay.

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Career & Education Education Financial Loans

How Student Loans Affect Credit

How Student Loans Affect Credit

How Do They Affect Your Credit?

Student loans can have a major effect on your credit score. Taking out loans and paying them back will vastly improve your credit score, but it is detrimental when you so much as miss a payment—in fact, it can drop your score by more than 100 points!

The credit score affected is the one of the person who took the loan out; sometimes by parents and others by co-sign with parent and child. For example, if your parent took out a loan to help you pay for school, it would only affect their credit, not yours.

When You Are Missing or Behind on Payments

Most student loans are installments, which means that you pay a certain amount for an allotted time period. The good news is that your score won’t start to decrease until after the missed payment has been reported by the lender:

  • Federal student loan servicers can wait up to 90 days to report
  • Private student loan servicers can wait up to 30 days
  • They still have the option of charging immediately, however

Another consequence of missing/late payments is that it can increase your debt-to-income ratio (DTI):

  • It represents the amount of your monthly income that goes towards paying off debts (higher is worse)
  • Since the amount of debt you owe accounts for a large portion of your credit score, the DTI is a good reflection of your debt repayment status, though it does not directly change your credit score
  • Too much installment debt (ie. student loan debt), can impact your ability to take out more loans in the future because it determines whether or not you can afford their payments

In the worst-case scenario, you could end up in default:

  • Federal student loans usually consider this to begin at 270 days behind, and private at 120 days
  • This stays on your credit report for seven years
  • You will likely face collection and legal action in order to collect on the debt

If your student loan payments become unfeasible and you are becoming concerned about going into default, there are several options:

  • You may contact the lender to see if there is an alternative payment plan available. For example, extended deferment period or income-driven repayment.
    • This is based off of your current income
  • See if you are eligible for a student loan forgiveness program—this can get rid of your student loan debt
  • Look into refinancing your student loans (replacing existing debt with another lower-costing loan through a private lender)
  • This may decrease your monthly payments, but it can also extend your payment period by a number of years, which then adds to your interest costs

Student Loans and Improving Credit

Though there are many negative consequences to neglecting your student loans, there is also the potential for achieving greatness within your credit. Because most college students haven’t yet had many credit cards or loans taken out—if any—they could serve as the foundation for your credit history. Granted they are paid regularly and on time:

  • Student loans can be add to your credit mix (types of credit used) to increase eligibility for future loans—lenders like to see diversity in credit history
  • They can also add to positive payment history, which is the bulk of your credit score
    • Some lenders even allow for small payments during deferment, which is when you are not required to make payments yet
    • This is usually when you are enrolled in school and the subsequent grace period
    • However, if you choose to start paying these installments during deferment, they still show up as payments in your credit history, thus raising your score

Conclusion

As long as you make sure to pay your student loans off on time and in full, they can be an extremely beneficial asset when building a line of credit. If you neglect them, however, it will take years to recover from the damage. Making a solid plan for your future payments or reallocating your finances are the best ways to assure that your student loans work in your favor rather than against you.

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Career & Education Debt Education Financial Loans

Student Loans for Bad Credit

student loans for bad credit

When you are figuring out how you will be funding your education for the next several years, having bad credit can really impact your options. Federal student loans are a great option to start with, but they only go so far, and many still have a tuition gap to fill. If there is a concern with the credit history and score for the student applying, there are still some viable methods for getting the funding needed to get the education they are aiming for.

The federal loans do not require any credit history and they have a wide variety of flexible repayment options. However, borrowing limits are often too low for many state or private universities, and so there are still significant costs due from the student before term. Often private lenders will require student borrowers to have a credit score minimum of 690, which can exclude many potential students. Here are some tips for those with bad credit, or simply limited credit history:

1.   Always Start With Federal Loans

No matter what the credit condition of the applicant, they should always start with the FAFSA and federal student loan programs. This will also put the student through an eligibility check for additional funding sources such as grants and scholarships, as well as work-study programs. The interest rates of federal loans are often fixed and below 5%. One of the additional bonuses is the flexible repayment options, like income-based repayment.

2.   Do Everything You Can To Get A Co-Signer

This will dramatically improve the overall interest rates and terms of all loans that the student will qualify for, and will often allow them to qualify for additional loans their credit alone would not allow. The big caveat with this is that it is frequently difficult to find anyone other than perhaps a parent or grandparent to be your cosigner. This is because the cosigner will become responsible for the debt as well if the primary signer defaults.

3.   Compare The Basic Features And Interest

Many of the independent companies will have a wide variety of interest rates and terms that will largely be dependant on the applicant’s credit specifics. Providers such as Ascent have interest rates that range from below 7% to over 14% on fixed rates, and 5.8% to 12.9% on a variable, while other popular bad credit student loan providers A.M. Money Private Student Loan and MPOWER Private Student Loan both strictly offer fixed-rate loans only.

A.M. Money Private Student Loan, MPOWER Private Student Loan, and Funding U Private Student Loan are all providers that will be able to service loans for without requiring a minimum credit score. They offer a variety of fixed interest rates as well as terms for their student loans. They will each use slightly different criteria to gauge loan approval, such as GPA, and some students with special status like DACA. Limitations often include availability limited by state or by the school.

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Career & Education Credit Education Financial Loans

Can You Pay Off Student Loans with a Credit Card?

paying off student loans with a credit card

Introduction

Though it may sound tempting, as the average person with student loan debt has about $30,000 of it, paying with a credit card is a bad idea long-term. It is technically possible to do this, but it comes highly unrecommended by any financial professional.

What Happens When You Try to Pay Loans with a Credit Card?

First off, federal student loan services don’t let you pay directly with a credit card; you must use an intermediary, which is essentially a middle man for lenders and buyers. The private loan services let you pay directly, but there is often a sizeable fee for doing so.

When you pay student loans with a credit card:

  • You give up student loan protections
    • Includes consolidation, deferment, forbearance, or loan forgiveness
  • Potentially move your debt to a credit product with an even higher interest rate than your student loans
    • Credit card rates sun substantially higher than student loan insurance rates—sometimes by 20% or more
  • You will likely be charged a fee (with interest)

Credit card companies do not design plans that let you pay off debt quickly because it is not lucrative. If you make a student loan payment and don’t pay it off by the time your credit card bill comes, you’ll be charged for interest both through the card and the student loan service.

What are the Best Ways to Use a Credit Card to Pay off Student Loans?

Some cards offer cash back rewards points that you can then use towards your student loans:

  • Look for cards with long-term cash back benefits (these are best for people with excellent credit)
  • If you are paying through an intermediary, make sure your credit card’s rewards program exceeds the intermediary’s fee
    • For example, Plastiq has a 2.85% fee for every transaction, so your card’s rewards program would need to be greater than 2.85% of your total payments
    • As most cards only give 1% to 2% on your purchases, this is fiscally unwise

You also have the option of making a balance transfer, which moves your payment over from the student loan lender and the credit card company.However, you do not often earn rewards with balance transfers.

  • Though you could get a temporary 0% interest rate, it often just buys time until you would have to pay even higher interest
  • Another downside to doing a balance transfer is that there is, of course, a fee—usually near 5%!

If a balance transfer isn’t an option, another is to use a convenience check:

  • These are drawn against your credit limit instead of your bank account
  • The student loan service processes this similarly to any other payment
  • But, you’ll still have to repay the money, and fees start at 3% to 4%

Conclusion

The only time it makes logical sense to pay your loans with a credit card is if you are, beyond a shadow of a doubt, able to pay off your balance in full every month. Or, if you find a card with a no-fee balance transfer that starts off with a 0% APR (annual percentage rate; the amount you pay each year to borrow money) financing, you may also benefit from this practice.But again, this must be paid off immediately lest the costs outweigh the benefits—make sure to stay on top of your loans and credit to avoid paying even more in the long run!

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Career & Education Debt Education Financial

How To Deal With Student Debt

student debt

It seemed like a good idea at the time, right? Getting a few student loans to make it simple to focus on college without having to worry about funding it with your already thin paycheck. But now you’re looking at graduation, or maybe you have already turned your tassel, and that loan balance is weighing heavy on your mind. It certainly can be a daunting situation, but it doesn’t have to be completely overwhelming.

The first thing you need is a plan, which is probably what brought you here. You’re intelligent, so you’re likely searching for some of the best ways to deal with what seems like a mountain of student debt. Don’t worry, we’ve got you. Here are some of the most effective ways to handle and pare down student debt:

1.   Keep The College Lifestyle

You just left what was in all likelihood one of the most frugal lifestyles that you have lived thus far. Why stop now? Many people learn to get by with so little in college, and when you leave school that can repay dividends.

While others are splurging on meal services and subscription boxes, you can still be eating on a tight budget and putting the extra money into your debt payments. Living like a pauper for a few years means you could be debt-free a lot sooner than many of your peers.

2.   Follow The Snowball

The snowball method of debt payment is a popular technique, and for good reason, it works well. First, you list all of your existing debts, from small to large. Every type of loan you have.

Maintain all minimum payments, and focus all additional liquidity on the smallest debt. When that one is done, move to the next smallest, and so on. Each time, gathering up the minimum payment from the previous debt and rolling it into the current one.

3.   Push Your Extras Right Into That Debt

This one’s simple. Did you get a bonus? Debt payment. Raise? Debt payments. Any other non-essential liquidity? DEBT. PAYMENTS.

4.   Sharpen A Side Hustle To Cut Your Debt Fast

If you can work up a profitable side hustle you can shrink your debt must faster than with your single income. Additionally, if you can create income streams from streaming, Patreon, or other paid content sites, you may be able to become debt-free incredibly fast, followed closely by being financially independent.

5.   Refinance Only If It Makes Financial Sense

This is something you should only consider if the interest rate variance makes the process truly worth it. Sometimes people are much too eager, and they run right to an unscrupulous lender, or even a lender who simply doesn’t care if it’s the right move for the consumer.

Make sure the result is going to be an improvement on what your loan terms and payments are currently. The last thing you want to do is refinance, only to find out your payment is now much higher than before and you cannot meet it.

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Financial Loans

Student Loans: The Top Loans For You

Best Student Loans

If you are planning to continue your education, you need to have a way to pay for school. College and universities can rack in high costs and many people take out student loans. Depending on what your living expenses while in school are and how quickly you want to get through your program, you may have to take out a lot of loans.

Public loans are an affordable way to get loans but they may not cover everything, especially if you are attending a private school or program. When you need to take out private loans that cover more than public loans, it is advantageous to look at your options.

Earnest

Earnest is a private loan lender that offers student loans to undergraduate and graduate students. With Earnest, borrowers can choose the length of their loan and how much they pay every month. Borrowers can also refinance their loans if they need to.

Education Loan Finance

Education Loan Finance, or ELF, offers loan refinancing options for undergraduate and graduate programs, including medical, dental, and law school. They also offer loans for students at select institutions.

College Ave

College Ave focuses on offering loans with quick approval. Applications are simple and people are approved for loans instantly. Borrowers can borrow as little as $1,000 or cover the full cost of going to school. Borrowers can also make payments while in school, pay only interest, or make flat payments, depending on what works best for them.

Sallie Mae

Sallie Mae is a consumer bank that also offers loans to cover undergraduate, graduate, and specialty programs. They also have savings programs to help families plan for college. They have loans for medical residency, career planning, and studying for the bar.

Discover

Discover has offered private student loans since 2010. Loans can be as small as $1,000 or cover all of your education costs. Discover loans apply to over 2,000 schools. International loans are also available, though they require a co-signer who is a citizen or permanent resident.

Splash Financial

Splash Financial is a student loan refinancing marketplace. They work with a wide network of banks and financial institutions to provide the best rates possible. They work with federal, private, and Parent PLUS loans.

U-fi

U-fi works with Nelnet to provide private loans and refinancing options to students in all states, except for Vermont. Borrowers can get up to 15 years to repay loans with flexible repayment options.

Laurel Road

Laurel Road has worked with KeyBank since 2019 and specializes in graduate loans. They also offer loan refinancing for several kinds of loans, including parent PLUS loans. Loans are available from $5,000 and up.

Summary

No matter what kind of loan you need or how much you need to be covered, there are private loan lenders that will work with you to ensure that you can pay for school. They will also work with you on repayment or refinancing options. Every situation is different and with some research, you can find the right lender for you.