7 Smart Ways To Repay Student Loans

For new college graduates who borrowed to help pay for their bachelor's degrees, the clock is ticking. These grads have six months before the federal government expects them to start repaying their students loans.

Here are seven tips to make sure that these young borrowers avoid any trouble as they begin paying down their debt: 

1. Identify outstanding loans
The first step for borrowers is to know what they've borrowed. Debtors can access all their federal loans by logging into the National Student Loan Data System. Keeping track of these loans can be harder than you think. Students could have eight federal loans (one for every semester) or more after graduating from college.
2. Consider the federal repayment options.
There are a variety of ways to repay student debt. The standard method is to make monthly payments over 10 years. Borrowers, however, can be eligible for other repayments plans. The graduated repayment option requires lower payments in the early years with the payments usually growing every two years. Individuals who have borrowed at least $30,000 can qualify for an extended repayment plan, which will stretch the payments to 25 years.
3. Check eligibility for income-based repayment.
One of the big benefits of borrowing through federal student loans is that the federal government provides a safety net for those whose salaries can't realistically cover their debt obligations. Eligible borrowers can essentially repay their student loans based on what they are making rather than what they owe. These programs can be invaluable for students who graduate without a job or are underemployed.
"Pay-As-You-Earn" is the newest repayment program and the one with the most favorable terms. Under the plan, participants pay no more than 10 percent of their discretionary income each month to cover their student loans. The federal government will forgive any debt still remaining after 20 years (unless you're a government employee...then it's only 10 years!).
Keep in mind that these repayment programs won't always be the cheapest solution because the interest keeps accruing throughout the repayment period. If a person loses eligibility for the plan by earning a higher salary, he or she could end up paying more over the life of the loan.
4. Use the Repayment Estimator
It can be confusing for individuals when faced with various repayment options. Before choosing, borrowers should use the "Federal Reserve Estimator" to see which would be the ideal plan for them. The estimator will calculate a person's monthly payments and the potential lifetime cost of the loans.
5. Check out the loan forgiveness program.
Individuals should also check to see if they might qualify for the federal and/or state public service loan forgiveness program. Americans who work for a government entity or a nonprofit can have their loans forgiven after 10 years of payments. Those eligible for the program work in such fields as public education, public libraries, law enforcement, public interest law, early childhood education and public health services.
Borrowers can find out if they are eligible for this loan forgiveness program by completing the Employment Certification form on the U.S. Department of Education's website.
6. Repay loans automatically.
The best way to avoid missing payments is to make them automatic.
7. Consider emergency options.
With all the safety nets, there is no reason for troubled debtors to just stop paying. It can lead to tough late fees and ultimately default, which will ruin a person's credit score and can lead to wage garnishments. Defaulting can also shrink the chances of getting an apartment, obtaining a cell phone plan and even finding a job.  To avoid default, borrowers should explore requesting a deferment or a forbearance from their loan servicer.  With a deferment, a borrower temporarily stops making payments and the government will pay interest during this period on federal direct subsidized loans and federal Perkins loan.
A second, less desirable alternative is obtaining a "forbearance" that allows a person to stop or shrink payments for up to a year. The borrower is responsible for all interest that accrues during this period.

 

This article is from MoneyWatch.com

The Pitfalls of Student Loans!

Whatever you do...don't ever IGNORE your student loans!

Here's 9 good reasons why:

1) You’ll get deeper in debt. Interest will continue to accrue and your balances that seem so daunting now will get even larger. Loans that go to collections will incur additional collection costs of up to 25%.

2) Your credit scores will suffer. Late payments will appear on your credit reports and your credit scores will go down. Negative information may be reported for up to seven years, and for many graduates their credit scores are more important than their college GPAs when it comes to real life.

3) You will eventually go into default. Most federal loans are considered to be in default when a payment has not been made for 270 days. Once you are in default, the government has “extraordinary powers” to collect, as we’ll describe in a moment.

4) You may lose your tax refund every year.  If you have a federal student loan in default, the federal government may intercept it. 

5) Your work income could be garnished.  If you are in default with a federal student loan, the government can garnish up to 15% of your pay. 

6) Co-Borrowers are in as much trouble as YOU. Anyone who co-signs a student loan for you is on the hook 100% for the balance. It doesn’t matter if it was your 80-year-old grandmother who co-signed for you; she is going to be pressured to pay and may be at risk for the same consequences you face.

7) You could be sued. Lawsuits are less common with federal loans than with private ones. (After all, why would the government sue when it has so many other ways to collect?) But a lawsuit is always a possibility especially if you ignore your student loans. If you are sued, you may find you need the help of an attorney experienced in student loan law to raise a defense against the lawsuit.

8) Student loan debt NEVER goes away!  Student loan debt will not go away if you ignore it. There is no statute of limitations on federal loans, which means there is no limit on how long you can be sued. State statute of limitations do apply to private student loans, however, limiting the amount of time they have to sue to collect. But it doesn’t stop them from trying to collect from you — and if you don’t know your rights it may go on indefinitely.

 

9) What to do...when you CAN'T afford to pay on your student loan?

For starters, get your free annual credit reports so you can see which loans are being reported by whom. Then get your free credit score using a service like Credit.com so you have a clear understanding of how this debt is affecting your credit. You can also use the National Student Loan Database to track down your loans.   For federal loans, you can get back on track with a reasonable and affordable payment plan. Start the process at StudentLoans.gov. (Be careful if you talk with a collector or servicer about your options. Some provide borrowers with accurate information, but some do not.) Here’s a guide to options for paying off student loans.

For private loans, you may want to talk with an attorney who understands how to discharge certain private student loans in bankruptcy. It can be tough to qualify, but not impossible. If that’s not an option, you may be able to try to negotiate a settlement.

This article was found on:   Thu, Jun 5, 2014, 4:09pm EDT 

What Happens If I Ignore My Student Loans?

By Gerri Detweiler

Good College Strategy: Roll Your Old 401k Into An IRA

One of the most exciting things about what I do is not only show families how to save thousands of dollars on the cost of college, but to show them financial and/or tax strategies that they'll greatly benefit from.

For example, I've had numerous families that have come into my office showing me an old 401k sitting out there with their former employer.  One of the first things I ask is, "How well is the old 401k doing, and do you think you may have to potentially tap into some of those funds for college expenses?"  Almost all families have the same response, "Well, we don't really want to touch our retirement dollars unless we have to."  I couldn't agree with them more. The sad part, however, is that many families have had to tap into their old 401k to help their kids with unforeseen college expenses.

If spending money out of your old 401k is something that could potentially happen to you, then you may want to seriously consider rolling that old 401k into an IRA position.  Doing it is easy!  And, it is NOT a taxable event.  Plus, turning it into an IRA can provide you with more college-friendly options that what an old 401k can afford.  The savings could be significant!

Here's why you may want to seriously consider turning your old 401k into an IRA:

1) First, the Internal Revenue Service is nice enough to allow greater flexibility with an IRA than they do with 401k's!  Believe it or not, the IRS will allow you to pay for you or your children's qualified college expenses with IRA money without having to pay a 10% pre-59 1/2 distribution penalty.  That's huge!!!  With a 401k, you'll have to either take a loan out (up to 50%) and pay the money back with interest within 5 years.  Or, you can take the money out to pay for college expenses and be charged the 10% IRS penalty tax! Remember though, with either plan you'll have to pay taxes on the money received.  But, with an IRA there is NO 10% penalty tax.

2) The IRA also has more flexibility in withdrawing money for other needs as well!  For example, if you lose your job (God forbid!) and you haven't turned 59 1/2 yet, you can still avoid the 10% penalty tax by using an IRS approved strategy.  Your old 401k won't allow you to do that.

3)  IRA's provide many more investment choices and opportunities than do 401k's!  Thus, your earnings potential could be much greater.

4) An IRA also can be a much better estate-planning tool!  One good example is that, if you die, your beneficiaries will have more tax-favored options in receiving those hard-earned dollars than they would with your old 401k.

5) Your old 401k probably has management fees and various charges.  Many IRA's don't have either - thus saving you a lot of money!

6) Most 401k's have greater risk issues than do some IRA's since they are mostly tied to stock market values.  Some IRA's will offer you stock market gains without any downside risk.  In other words, there are some IRA's out there that will contractually grow your money along with the market but will lock your gains in each year.  If the market goes down, you don't lose anything.  Then, when the market goes up, you receive some of the gains.

But, before you throw your old 401k money into any IRA, please give our office a call.  We'll provide you with some great information and options that can provide the most college-favored programs available.  It's free, and there's no obligation!

College Costs Are Soaring!!

Colleges, year by year, are becoming more financially dependent on parents paying for out-of-pocket expenses than ever before! Endowments have taken a big hit, which has left even elite schools, including Harvard and Yale, facing steep cost-cutting. State universities are also facing steep slashes in government funding. All of which means  it will be even harder for colleges to meet demands for financial assistance next time around.

The bottom line...parents and/or student are going to need to find money to pay for college some how!

The current aid crisis only underscores the never-ending problem of soaring tuition costs. As MONEY magazine and many other publications have frequently pointed out, colleges are jacking up tuition costs at twice the rate of inflation; education expenses have far outpaced inflation for more than two decades.

Meanwhile, most families are less prepared than ever to meet those bills. Numerous surveys have shown that few have the cash stashed away to pay the five-figure tuition amounts required by many schools. So expect aid applications to soar again!

If there is ever a time to seek the help of college funding professionals, it is now!

How To Attend College "TUITION FREE!"

Did you know that there are OVER 100 colleges that will allow your student to attend TUITION-FREE?  Harvard is a good example!  If you make less than $60,000 per year but make excellent grades and score high on the ACT/SAT...you may qualify to attend TUITION-FREE!  It's called the "Harvard Initiative."  Another good example is College of the Ozarks!  As a "faith-based" school, it is also called "hard-work U."  Students work on campus instead of paying tuition.  This saves the student gas money and tax dollars, not to mention thousands of dollars in tuition costs!

For more information, call me at 816-739-9894 today!

How To Survive "The College Funding Maze!"

DID YOU KNOW...   COLLEGE COSTS HAVE BECOME THE "2nd LARGEST DEBT" IN AMERICAN SOCIETY TODAY?

Congress has correctly referred to it as "A CRISIS OF MAJOR PROPORTIONS."  As the cost of college continues to skyrocket and the financial aid dollars continue to dwindle, it has become more and more difficult for parents to get some kind of financial assistance. While there is more than $143 billion dollars available, only those parents who can understand the college funding process and use that knowledge to their advantage are going to receive the maximum amount of money possible. It is not uncommon for low income families who have assets in the wrong place to lose out on financial aid. And, it's not uncommon for families who make over $100,000 per year in income to receive some form of financial assistance. The real difference is their understanding of the process and what they need to do to position themselves to double, or even triple, their eligibility for aid.

You see, as more and more students enter college, the financial aid offices of these colleges are being forced to use their limited financial resources to attract the strongest applicants or to save their government-funded resources for the most needy. The strongest applicants and the most needy typically end up winning at the college funding process. However, like I said before, you can have a low income ($25,000 per year) and still NOT receive any assistance. It depends on a lot of things...things most parents aren't aware of.

15 Most Lucrative College Degrees Today!

According to a recent 2009 survey from the National Association of Colleges and Employers (which tracks college graduates and their job offers), the following are 15 of the highest paid areas for new college graduates:

1) Petroleum Engineering - $83,121
2) Chemical Engineering - $64,902
3) Mining Engineering - $64,404
4) Computer Engineering - $61,738
5) Computer Science - $61,407
6) Electrical Engineering - $60,125
7) Mechanical Engineering - $58,766
8) Industrial Engineering - $58,358
9) Systems Engineering - $57,438
10) Engineering Technology - $56,447
11) Actuarial Science - $56,320
12) Aeronautical Engineering - $56,311
13) Agricultural Engineering - $54,352
14) Biomedical Engineering - $54,158
15) Construction Management - $53,199

Of course, not every student earning an engineering degree is going to receive a large paycheck. However, graduates with a technology degree do have an advantage over many other fields.