Tag: Student Loan

Student Loan Forbearance

Posted on by Melanie Datu
Student Loan Forbearance

What is Student Loan Forbearance?

Student loan forbearance is a short term way to pause or lower your monthly student loan payments. If you suffer from financial stress, a forbearance may offer 12 months or less of student loan relief. 

Due to the pandemic, students who took out federal student aid in loans may qualify. On Feb. 1, 2023, the federal government put in place an administrative forbearance. Will student loan forbearance be extended? The program put a freeze on federal student loan payments and set the loan interest rate at 0% until Sept. 30, 2023. That means, your loan balance may not increase even if interest rates do.

There are two types of forbearance available from the U.S. Department of Education. Each comes with a set of criteria and a form to file your request with. A general forbearance is also known as discretionary forbearance. That’s because it is up to your student loan lender to decide whether to grant your request for a suspension of payments. 

If it’s granted, the period cannot last more than 12 months at a time. When it expires, you may put in a new request as long as you’re within the cumulative limit of 3 years.

Mandatory forbearance means your lender has to grant the relief. Again, for no more than 12 months at a time. If you continue to meet the terms, you may put in a request for a new one once it expires.

Private student loan forbearance is different. In general, private lenders set less flexible terms compared to federal loans and options vary with each lender. For example, a lender may allow you to make interest payments only.

How Does Student Loan Forbearance Work?

Student loan forbearance works by providing a temporary pause on paying back your loans each month. You must qualify for one and then make a request by filling out a form based on your eligibility. Keep in mind, if you’re in default on your student loans, then forbearance may not be an option. 

A forbearance either allows you to make smaller payments or delay your payments for a specific period of time. As a result, unpaid interest on the principal balance adds up or accrues. Thus, each month you typically don’t pay the accrued interest.

Let’s say you receive a forbearance, but good favor hits and times get better. You could still repay your loans or even make smaller payments if this is an agreed upon option. On the other hand, if your period of forbearance ends and you’re still in distress, you may be able to reapply.

Who Qualifies for Student Loan Forbearance? 

Eligibility for student loan forbearance differs with each type of loan and student loan lender. If you have a private lender, some grant a forbearance period to students who take part in a medical residency or internship. Many also offer a six month grace period after graduation. This leaves you time to find a steady job and income.

As a federal student loan borrower, you may qualify for general forbearance for Direct Loans, Federal Family Education Loans (FFEL), and Perkins Loans. Some of the qualifying reasons are:

  • Financial hardship
  • Medical expenses
  • Change in employment (loss of job, working less) that causes economic hardship

Mandatory forbearance may be available for Direct Loans and FEEL program loans. You may be eligible for one of these reasons:

AmeriCorps: You serve in an AmeriCorps position for which you earned a national service award.

U.S. Department of Defense Student Loan Repayment Program: You qualify for partial repayment of your loans under this program.

Medical or dental internship or residency: You serve in one of these programs and meet specific requirements. 

National Guard Duty: If a governor activates you, and you are not eligible for military deferment. 

Student loan debt burden: For Direct Loans, FEEL program loans and Perkins Loans. In this case, the total amount you owe each month for all the federal student loans you received is 20% or more of your total monthly gross income, for up to three years.

Teacher loan forgiveness: For those who perform an eligible teaching service.

Coronavirus and Student Loan Forbearance

When the pandemic hit, it became harder for many students to repay their loans. As a result, the government initiated the Cares Act to provide some relief.

According to the Federal Student Aid, on Feb. 1. 2024, all federal student loan payments and collections were put on pause. And, the interest rate set at 0% due to the financial impact of COVID 19. President Biden signed an executive action on his first day in office to keep this relief going.

That said, if it’s possible for you to make payments, it could help you pay off your loan faster and lower the total cost of your loan over time.

What are the Differences between Federal Student Loan Forbearance vs Private Student Loan?

Both federal student loan forbearance and private student loan forbearance are short term ways to cope with lack of funds to repay a loan. You should contact either loan servicer right away if you are having trouble making payments so as not to default. 

In the case of federal student loans, forbearance is usually granted for 12 months at a time and may be renewed for up to three years. The law mandates conditions and payment amounts for some types of these loans. 

For example, due to COVID 19, the law set the interest rate at 0% as of 2021 and studentaid.gov updates the site as changes unfold. Unpaid interest is capitalized only on Direct Loans and Federal Family Education Loan FFEL Program loans, but never on Federal Perkins Loans. 

Private lenders such as Sallie Mae may offer forbearance if you request it. The period may go to 12 months, but many lenders may not offer renewal. Each lender sets different conditions and amount for private student loans. Interest rates may vary too.

What are the Differences between Student Loan Deferment vs Forbearance?

Both deferment and forbearance allow you to temporarily postpone or reduce your federal student loan payments. You have to request both and wait for a yes or no from the lender. 

The main difference is if you are in deferment, no interest will accrue to your loan balance. If you are in forbearance, interest does accrue on your loan balance.

Student loan deferment is a temporary postponement of payment on a loan that is allowed under certain conditions and during which interest does not tend to accrue on. The following student loans may qualify for deferment:

  • Direct Subsidized Loans
  • The subsidized portion of Direct Consolidation Loans
  • Subsidized Federal Stafford Loans
  • The subsidized portion of FFEL Consolidation Loans
  • Federal Perkins Loans

All other federal student loans that are deferred will continue to accrue interest. You must still make payments until you receive a confirmation that your request is granted. Otherwise, you may risk delinquency (being late for even one day) and default (being late for 90 days or more). 

According to the Federal Student Aid, being in default could affect your credit score as the loan servicer will report delinquency to 3 major national credit bureaus. Credit score matters if you ever need to finance a house, car, rent an apartment, etc.

How is this different from forbearance? A forbearance is a period during which your monthly loan payments are temporarily put on hold or reduced. Your lender may grant you one if you want to make payments but have a qualifying reason that explains you cannot afford to do so.

During forbearance, principal payments are postponed, but interest continues to accrue. Unpaid interest that accrues during the forbearance will be added to the principal balance (capitalized) of your loan(s), increasing the total amount you owe.

Different Types of Student Loan Deferment

How long are student loans deferred and getting deferment extension vs forbearance? Forbearance may last up to one year with the possibility to renew. Deferment periods vary and depending on the qualifying reason:

Cancer Treatment Deferment: You may be eligible during cancer treatment and for the 6 month period after it ends.

Economic Hardship Deferment: You may qualify for up to 3 years deferment if you receive a means tested benefit such as welfare. You may be eligible if you work full time but your earnings are below 150% of the poverty guideline for your family size and state. If you serve in the Peace Corps, this is another reason. 

Graduate Fellowship Deferment: If you’re enrolled in an approved program that provides financial aid to graduate students.

In School Deferment: This deferment tends to be automatic. As a rule, to be eligible, you must be enrolled at least half time at an eligible college or career school. If you’re a graduate or professional student with a Direct PLUS Loan, you may qualify for an extra 6 months once you stop being enrolled at least half time. 

Military Service and Post Active Duty Student Deferment: For this deferment, you must be on active duty military service tied to a war, military operation, or national emergency. If you’ve completed eligible active duty service and grace period you may also qualify.

Parent PLUS Borrower Deferment: This deferment is for the parent who received a Direct PLUS Loan to help pay for their child’s education. The student you took out the loan for must be enrolled at least half time at an eligible school. 

Rehabilitation Training Deferment: For those enrolled in an eligible career, mental health alcohol or drug abuse rehab training program.

Unemployment Deferment: This deferment may be available for up to three years. It is for those who receive unemployment benefits and are seeking but unable to find full time work in their job search. 

Private Student Loan Deferment vs Forbearance

It may be possible to defer your student loans or request a period of forbearance from a private lender. Each lender may set different terms and conditions but you typically have to request it and get their approval. Unlike federal loans, private ones are not included in the CARES Act.

Here’s an example with Sallie Mae student loans. If you request a deferment, Sallie Mae won’t ask you to make principal and interest payments while you’re in school or during your internship, clerkship, fellowship, or residency.

During deferment, your Sallie Mae loans return to the repayment option you chose when you took them out (i.e., interest, fixed, or deferred). That means if you were making either monthly interest only or fixed payments when you first took out your loan, you continue to make those throughout your deferment period.

That said, when you defer, interest grows while you’re in school, and increases your total loan cost. So, making any extra interest payments could lower this balance.

Is There a Difference between Student Loan Forgiveness vs Forbearance?

While loan forgiveness and forbearance help manage loans and payments, they are very different. Forbearance is short term only. Forgiveness, cancellation and discharge of your loans mean you no longer owe or have to repay part or all your loan. 

There are various types of forgiveness, cancellation, and discharge available for the different kinds of federal student loans. If you are eligible, it may help your credit score and have a zero loan balance. Compared to forbearance where you still owe and risk being in default. 

Different Types of Student Loan Forgiveness

PSLF is for eligible full time employees of U.S. federal, state, local, or tribal governments or nonprofits. There’s a specific form to fill out in order to request and potentially receive, forgiveness.

It forgives the outstanding balance on Direct Loans. You must make 120 qualifying monthly payments under a qualifying repayment plan. You also must work full time for a qualifying employer. 

Teacher Loan Forgiveness: This type of federal student loan forgiveness awards up to $17,500 in forgiveness. It may be available for Direct Loans and FEEL Program loans. You may be eligible if you teach full time for 5 consecutive academic years. This work must be in a low income elementary, secondary or educational service agency. 

Closed School Discharge: If the school you attend closes while you’re enrolled or soon after you withdraw, you may be eligible for discharge of your federal student loan. Eligible are Direct Loans, FEEL loans and Perkins Loans. 

Federal Perkins Loan Cancellation and Discharge: The basis for this kind of cancellation is eligible employment or volunteer service and the length you were in the position. Teachers, nurses, military personnel and other professionals from federally approved jobs that may qualify.

Total and Permanent Disability Discharge: This option may be available for holders of Direct Loans, FEEL Program loans, and Perkins Loans. You may qualify if your disability is total and permanent. In addition, you may be eligible for a discharge on TEACH Grants. 

Discharge Due to Death: Federal student loans are discharged upon death. Whether of the student on whose behalf a PLUS loan was taken out. Or, of the borrower. It may be available for Direct Loans, FEEL Program loans, and Perkins Loans.

Bankruptcy: It is rare, but you may be able to have your federal student loan discharged after you declare bankruptcy. This is not automatic and may be available for Direct Loans, FEEL Program loans, and Perkins Loans.

Borrower Defense to Repayment: You may be eligible for discharge of federal Direct Loans for this reason if you took out loans to attend a school (let’s say the school was a scam). And the school did or failed to do something related to your loan or the education you took out the loan to pay for.

False Certification Discharge: This is for those whose school falsely certified your eligibility to receive a loan. Direct Loans and FEEL loans to be exact.

Unpaid Refund Discharge: For Direct Loans and FEEL loans only. In this case you withdrew from school and the school didn’t make a required return of loan funds to the loan servicer. If you do qualify it is likely for the portion of your federal student loan(s) that the school failed to return.

Alternate Student Loan Repayment Options

Before you consider forbearance, there are alternative ways to repay federal and private student loans. You should assess each option to see which one you qualify for and is in your personal best interest.

Refinancing 

If you have private student loans and qualify for a better interest rate, you might consider refinancing. Lower interest rates means you pay less each month. That said, not all lenders offer this option. 

Consolidation

If you have a few student loans, you may be able to combine them into one loan with a fixed interest rate based on the average of the interest rates on the loans being consolidated. For example, a Direct Consolidation Loan allows you to blend multiple federal education loans into one loan at no cost to you.

Income Driven Repayment Plans

IDRs aim to make your student loan debt easier to manage by lowering the amount you pay each month. These plans base your monthly student loan payments on your income and family size. 

The federal government offers 4 plans but private loans don’t qualify for any of them.

  1. Revised Pay As You Earn Repayment Plan (REPAYE Plan): Generally 10% of your discretionary income.
  2. Pay As You Earn Repayment Plan (PAYE Plan): Generally 10% of your discretionary income. But never more than the 10 year Standard Repayment Plan amount
  3. Income Based Repayment Plan (IBR Plan): If you are a new borrower on or after July 1, 2014, the terms are the same as the PAYE Plan. But if you are not a new borrower on or after July 1, 2014, it tends to be 15% of your discretionary income and never more than the 10 year Standard Repayment Plan amount.
  4. Income Contingent Repayment Plan (ICR Plan): Whichever is less than 20% of your discretionary income. Or, what you would pay on a repayment plan with a fixed payment over a span of 12 years, adjusted to your income.

What Option is a Good Choice to Help Pay off Student Loans?

There are a few tactics that may help pay off a student loan and hopefully avoid either forbearance or deferment.

  • Try to make extra payments when possible
  • Set up automatic payments so you don’t forget
  • Pay off capitalized interest because it brings your balance up
  • Use any gift money to repay your student loan

If you did all these things and find yourself unsure, you should first contact your loan lender. The lender could inform you which option you qualify for and how to request it plus other next steps. 

Remember that both forbearance and deferment allow you to reduce or postpone payments in the short term only. While forgiveness is ideal (who doesn’t want the magic wand that takes debt away?) you may not qualify at all. 

Forbearance on federal student loans now has favorable terms with the 0% interest which means your total amount owed won’t go up. There’s also no impact on your credit score. Before you choose this route, compare with an IDR. These plans tend to be more long term.

On the other hand, if you qualify for a deferment, interest grows and adds up which may make it that much harder to repay. This could set you up for delinquency and default which is not ideal and affects your credit score. Still have questions? Check out our section on student loans.

 

How to Spend Your Student Loan Money

Posted on by Melanie Datu
student loan money

What can you use student loans for? It’s that time of the year when students start to receive their financial aid refunds. This typically occurs when students have either secured enough money through grants and scholarships to cover their tuition and fees, or they have borrowed more student loan money than they actually needed.

What Can You Use Student Loans for?

If you fall into the second category, don’t rush out and spend that money just yet. Unlike the money you may have received from a scholarship or grant, your student loan money will eventually need to be paid back. I know it can be tempting to splurge a little, especially if you have been strapped for cash the last few weeks, but trust me when I say you’ll regret it after graduation.

Why? Student loans carry substantial principal and interest payments which can come back to haunt you later if you’re not careful and don’t budget accordingly. If you find you have a little extra money coming back to you this semester, here are few do’s and don’ts to consider when deciding how to spend your student loan money.

Do use your money to…

  • Purchase food for your dorm or apartment.
  • Pay housing or rental fees and room and board. 
  • Cover your books and supplies for the semester.
  • Pay for transportation or vehicle maintenance.
  • Cover your utilities and other necessary living expenses.
  • Pay tuition and fees for the summer semester.

Don’t use it to pay for…

  • A weekend getaway to Las Vegas.
  • Drinks for everyone at the club.
  • The new spring collection at Forever 21.
  • Pizza for the entire dormitory.
  • Black lighting and a disco ball in your dorm room.
  • Concert tickets to your favorite bands.
  • Spring Break in Cancun.

It’s never a wise idea to use your student loan money to cover items that aren’t necessary for your education or daily living expenses. Why pay for a gym membership when you can use the campus facilities for free? There’s no need to purchase cable or satellite television, or splurge on the newest MacBook Pro, when there are more practical alternatives. Set a budget for yourself and stick to it.

Any additional funds you may have can be saved for future semesters, or you can start making payments on your current loans. You can even have the financial office reduce your federal or private loan if you know you won’t need the entire amount.

Some expenses may seem trivial, but they do add up.  For instance, if you spend $40 a week on fast food, over the course of four years that could add up to around $2,000. With a student loan interest rate of 6.8%, you’ll end up paying an additional $750 over the term of your loan (based on a 10-year repayment term).

If you extend your payments at any time, you’ll be paying even more. Be smart and follow these two simple guidelines: borrow only what you absolutely need, and restrict your spending to “needs” and not “wants.” If you don’t, you could be graduating with a lot more than just your college degree.

 

Being a Student Loan Cosigner Can Be Risky

Posted on by Melanie Datu

Last night, my daughter ran into my room brimming with excitement about a theatre school in New York City that she absolutely must attend next year. Being the proud ‘drama mama’ that I am, I didn’t simply shoot her down. Instead, we paid a visit to the school’s website. Everything looked amazing, but there didn’t seem to be any mention of tuition or fees.

Intrigued, I searched for the ever-elusive Net Price Calculator that schools are expected to post on their websites.

Surely this would tell me what my daughter’s dream school was going to cost me, right? I punched in our income figures, answered a few general questions, and up popped a number that made me suddenly sick to my stomach.

Even after scoring a potential $4,000 scholarship, and taking out the maximum in student loans ($5,500), our responsibility would be a whopping $35,000 per year. Ouch! The number, however, didn’t seem to deter my daughter. She simply turned to me and said, ‘You can cosign on a private student loan with me, right?’

Technically, the answer is yes. My husband and I both have good credit, but should we help finance this expensive dream? Before co-signing on any student loan, whether for your child or a friend, here are some things you should consider, the risks of being a student loan cosigner.

1. History May Repeat Itself

If the person requesting your help to cosign a private student loan has a history of not following through on promises, doesn’t have a history of making good financial decisions, or can’t seem to save any money, you may want to reconsider signing your name to a student loan agreement. Remember, you are equally responsible for paying back the loan. If the borrower fails to make his/her payments on time, you can be sure the lender will come looking for you.

2. Your Credit Could Be Damaged as a Student Loan Cosigner

You may have great credit right now, but taking out a large student loan could make it more difficult for you to take out other loans or credit cards. If you think you may want to make a major purchase, such as a car or a new home, you may not want to co-sign at this time.

Additionally, you must be prepared to have your credit score lowered should the other person fail to make payments on time. It only takes one missed payment to negatively affect your credit score.

3. The Loan Obligation Goes Beyond the Amount Financed

The amount borrowed is not the amount the borrower will end up paying over the life of the loan. Deferment, forbearance and interest can add a hefty amount to the total cost of the loan.

If you become responsible for repaying the loan, you need to consider that your obligation will include the amount borrowed, accrued interest and any other fees incurred during the course of repayment.

4. The Debt Could Hurt Your Relationship

It’s not uncommon for students to default on their loans. If you decide to co-sign on a student loan, you must be prepared to assume that debt if the borrower fails to make their payments.

If you are financially unable to make the payments, it can have serious repercussions. Not only will your credit suffer, but also your relationship with the other person on the loan. I have seen money pull families apart all too often, so think long and hard before you take out any loans you can’t afford to repay.

5. It’s Very Difficult to Remove Yourself From the Loan

Don’t co-sign a student loan with the expectation that you can simply remove your name at a later date. Although most lenders offer a co-signer release, there are some hoops the borrower must jump through first. One, depending on the lender, he/she must make consecutive, on-time payments. This can be as few as 12 months (Sallie Mae) or as many as 48 (SunTrust). In addition, the borrower must provide proof that he/she meets income requirements and has a satisfactory credit score.

There is no guarantee that even after payments are made on a timely basis that the lender will let you out of your commitment. There are even some cases where a borrower has died and the co-signer was still required to pay back the loan. And forget about bankruptcy; it’s nearly impossible to have student loans discharged. If you sign on the dotted line, expect to share the responsibility for that debt until it is paid in full.

Risks of Being a Student Loan Cosigner

Consider These Tips to Safeguard Your Credit

If you feel confident that your child (or other borrower) is responsible and you want to help by co-signing on a student loan, be sure to consider the following safeguards.

  •  Make sure the student exhausts all federal financial aid options including federal student loans before considering a private student loan.
  •  Encourage the student to diligently pursue scholarships and grant opportunities.
  •  Only borrow what is absolutely needed. Play it safe by not taking out more than one years’ anticipated salary (borrower’s) upon graduation. For example, if you expect your child to earn $35,000 at his/her position, don’t borrow more than $35,000 in total student loans while he/she is in college.
  •  Have the borrower sign an agreement that stipulates he/she will repay any missed payments and/or fees you cover over the life of the loan. This way, if you do end up in court, you may be able to recoup some or all of your losses.
  •  Take charge of the student loan payments. It could be months before a student loan servicer or creditor contacts you about missed payments. By then, the damage to your credit score has already been done. Save yourself the trouble by mailing in the payments or submitting them electronically online. In some cases, lenders offer an incentive for using automatic payments.

Although I would love to help my daughter pay for her dream college, taking on a potential debt of $140,000 just doesn’t make financial sense. If she were to default on the loan, we could lose our retirement savings, home and other assets. She may be a little upset with me right now, but I’m confident that we can find another ‘dream’ school that’s a little more within our family’s budget.

Saying no to your child (or a friend) is never easy, but in the end you must do what’s best for your financial security.

 

How Much Does College Cost?

Posted on by Melanie Datu
How Much Does College Cost?

The number one question that students and families ask about attending college is how much does college cost? The cost of attendance or COA is like the sticker price for college. Every year the cost of attendance goes up but merit and need based scholarships and grants may cover part of COA. College expenses could be tuition, fees, housing, books, supplies, transportation and other out of pocket expenses. 

According to NCES, the estimated total cost of college at a public institution is $28,297, $49,654 at private nonprofit institutions, and $26,261 at private for-profit institutions in 2022 to 2023.

How Much Does College Cost?

Each year for every state the cost of attendance keeps rising. It’s typically cheaper to attend an in state college rather than out of state. According to NCES, out of state students in the U.S. paid an average of $28,297 more in cost of attendance (COA) than in state students in 2022-23.

Also, the average cost of college may vary between public and private institutions along with two vs four year schools. Keep in mind to calculate other costs such as housing, books, supplies, transportation and other personal expenses. 

Massachusetts has the highest in state average cost of college which is $67,953. District of Columbia offers the lowest in state average cost of college at $6,152. The chart below shows the average cost of four year college in each state for in state tuition and out of state tuition.

  Public College Private College 
RankingStateIn State TuitionOut of State TuitionIn State TuitionOut of State Tuition
1Utah$15,286$22,244$16,003$16,003
2Wyoming$14,634$14,669N/AN/A
3Florida$15,810$18,344$43,140$43,140
4Idaho$17,275$24,754$15,963$15,963
5New Mexico$17,516$21,952$37,201$37,201
6Montana$17,292$27,435$42,910$42,910
7North Dakota$18,362$13,973$24,900$24,900
8Oklahoma$17,909$22,125$40,136$40,136
9South Dakota$17,459$13,194$36,145$36,145
10Wisconsin$18,295$27,024$48,660$48,660
11North Carolina$18,264$23,452$51,868$51,868
12Nevada$18,293$23,550$38,083$38,083
13Arkansas$18,803$21,981$33,035$33,035
14Georgia$19,057$23,345$44,846$44,846
15Missouri$20,534$22,812$40,501$40,501
16Mississippi$19,765$20,848$28,712$28,712
17West Virginia$20,011$22,915$22,236$22,236
18Kansas$18,803$21,981$33,035$33,035
19Texas$18,807$25,419$51,236$51,236
20Louisiana$20,622$23,395$57,334$57,334
21Washington$21,715$31,410$53,857$53,857
22Alaska$22,063$25,414$28,427$28,427
23Nebraska$19,851$21,953$37,285$37,285
24Tennessee$21,061$24,381$42,767$42,767
25Indiana$21,090$29,269$49,853$49,853
26Alabama$21,448$27,145$27,835$27,835
27Iowa$20,088$28,257$47,150$47,150
28Maine$21,126$30,099$54,613$54,613
29Minnesota$22,992$25,238$46,286$46,286
30Kentucky$22,575$25,325$37,019$37,019
31Hawaii$22,264$32,043$33,933$33,933
32Colorado$23,061$31,699$40,791$40,791
33Maryland$23,008$27,111$62,317$62,317
34Ohio$23,552$26,881$48,614$48,614
35Oregon$25,397$34,292$60,038$60,038
36California$24,349$34,454$54,795$54,795
37New York$25,082$20,304$60,677$60,677
38Arizona$24,896$26,025$23,249$23,249
39South Carolina$23,600$33,217$38,477$38,477
40Michigan$25,463$40,004$43,305$43,305
41Delaware$25,472$32,419$24,358$24,358
42Virginia$26,507$36,674$35,742$35,742
43Rhode Island$27,872$32,910$64,025$64,025
44Illinois$26,993$29,350$50,638$50,638
45Connecticut$28,816$37,414$60,408$60,408
46Pennsylvania$27,336$26,426$60,218$60,218
47Massachusetts$28,572$32,291$67,953$67,953
48New Jersey$28,633$29,681$53,717$53,717
49New Hampshire$29,381$32,035$33,197$33,197
50Vermont$30,921$41,914$64,274$64,274
51District of Columbia$6,152$13,004$62,714$62,714
 

How Much Does it Cost to Study Abroad in College? 

The range of programs and countries makes it hard to get an exact bottom line on whether a college overseas is cheaper. Just like in the states, there are private and public colleges. Also, the cost of living varies in different countries and cities.

When you do your math, you want to factor in the expenses that go into study abroad programs. Apart from tuition and fees, you need money for housing, food, travel and transport to and from college. Also, there is insurance to cover medical, dental and travel.

You also want to factor in the exchange rate for US dollars and if you are eligible for financial aid. That said, there are countries that offer free college or very affordable tuition. So, you may be able to satisfy your wanderlust while saving money.

7 Countries with Free College or Affordable Tuition

1. Germany

Tuition is free in most states, but you could pay tuition fees of about $1,793 USD and a semester contribution of up to $418 USD and living costs. The average German student has expenses of $979 USD. 

2. Iceland

Tuition is free, but at public universities you pay an annual administration fee which differs at each college. The cost of living for food and housing of about $1,613 per month. 

3. Norway

Tuition is free at public universities, but you might have to pay fees of $33 to $65 USD and the cost of living is high. It may be worth checking if financial support is available to offset your living expenses. 

4. Austria

If you have a Residence Permit – Student, the average per semester cost is $868 USD. Your housing costs (rent, food, etc.) are additional expenses as well.

5. France

Public universities in France may cost from $178 to $1075 USD per term. You also need at least $514 per month to survive but that is low and varies by region. Paris is usually on the high side.

6. Luxembourg

The University of Luxembourg is the only public university in the country. Here, you need a living budget of $1,405 USD. You also pay a registration fee of $478 for semesters 1 and 2. Then $239 for semesters 3 to 6.

7. Spain

Depending on the cost per credit at Spanish universities, international students might have to pay up to $7,172 USD per year for undergraduate programs. The average student also spends at least $956 USD per year on books alone, and cost of living tends to be high in big cities like Madrid.

Understanding Student Loan Borrower Benefits

Posted on by Melanie Datu
Student Loan Borrower Benefits

If you’ve exhausted your federal financial aid, and haven’t been lucky enough to win any scholarships to help cover your remaining expenses, chances are you are now researching private student loans to help pay for college. If so, there are several things you should consider before signing on the dotted line.

First of all, you’ll most likely need a cosigner, especially if you are a younger student or haven’t been working at a stable job for several years. Approximately 90 percent of borrowers will need a cosigner, so don’t take it personally. Next, you’ll want to be sure that you borrow only what you absolutely need.

Finally, consider the annual percentage rate being offered and any student loan borrower benefits that might be available. For those of you who may be unfamiliar with borrower benefits, these are perks you can earn based on a variety of factors.

Let’s take a look at some of the current benefits being offered by private student loan lenders and how they can affect your bottom line.

Automatic Payment Reduction of Student Loans

Most private student loan lenders offer borrowers anywhere from a 0.25% to 0.50% interest rate reduction for enrolling in automatic payment plans. This can translate into several hundreds of dollars in savings over the life of the loan.

For example, a $10,000 loan at a fixed rate of 8% paid over 10 years could result in a savings of approximately $237 (0.25%) to $463 (0.50%).

Savings may be less if you have a variable interest rate, a lower fixed rate, or choose a shorter repayment term. If you cancel the automatic payments at any time or a payment is returned for insufficient funds, the discount may be lost permanently, depending on the lender’s terms.

Student Loan Interest Rate Reduction

Existing Customers – If a private student loan lender offers an interest rate deduction for existing customers, it may be to your benefit to open a checking account with the institution, especially if it offers free banking services. As a loyal customer, you may be rewarded with either a 0.25% or 0.50% interest rate deduction over the life of your loan. As long as you maintain an account with the financial institution, you should continue to receive your discount.

On-Time Payments – Another way to earn a reduction in your interest rate is by making a certain number of on-time payments with your lender.

For example, Union Federal offers a 0.25% interest rate reduction after you have made 36 on-time payments (payments made within 10 days of the due date) and have enrolled in an automatic payment plan prior to the 36th payment. On a $10,000 loan over 10 years (8% fixed rate) that amounts to a savings of around $108.

Other – If you use Lend Key Student Loans to finance your college education, you may be eligible to receive a 1% interest rate reduction once you enter full repayment (after the grace period) and have repaid 10% of your loan principal (subject to a 2.99% floor rate).

Principal of Student Loans Reduction

Some private student loan lenders will offer you a principal reduction after certain conditions are met. For example, SunTrust will give you a 1% reduction under the Graduation Reward program, as long as you submit a certified copy of your college diploma within 90 days of graduating.

If you have made more than one late payment, you are no longer eligible for the reward. In general, a principal reduction is less valuable than an interest rate reduction because it is a one-time deal and not applied annually.

Cash Rewards from Paying Your Student Loan Debt

A few private student loan lenders offer cash rewards if you meet the qualifications for their programs. One of the most interesting right now is the Discover Student Loan 1% cash reward for good grades.

If you earn a 3.0 GPA or higher during the academic term covered by your student loan, you can submit a redemption request within 6 months of the final term covered by the loan.

The reward is calculated based on your disbursed principal balance and mailed directly to you. Keep in mind that you may owe tax on this type of reward since it may be considered income.

Another way to earn cash rewards is through the Sallie Mae Smart Reward® program, which gives you 2% of your scheduled monthly payments made on time while you are in school or during the grace period.

To receive this borrower benefit, you must have an active UPromise® account and select either the interest or fixed repayment option. Again, this type of reward may be subject to income tax, so the overall benefit may actually be much lower once that is taken into consideration.

In addition to these borrower benefits, some lenders also offer limited perks. Right now, SunTrust is offering a .75% interest rate reduction to students who submit a student loan application between June 1 and July 31, 2024. Once approved, the reduction will be applied on the initial disbursement date and be effective during the life of the loan.

Likewise, Citizens Bank is offering a 0.25% interest rate discount for applications for its TruFit Student Loan® received by June 30th, 2024.

In most cases, you can earn more than one borrower benefit, so the savings can really add up. Just remember to review your lender’s terms carefully and understand your obligations for maintaining these benefits.

Finally, when reviewing the repayment examples lenders provide, be sure to read the fine print to see if those examples include borrower benefits. We haven’t seen any that do, but when you are trying to compare you options, inclusion of benefits can make a noticeable difference in terms like APR.

Still confused? Get Informed About Student Loans Then, Get Matched To Online Schools Using Our Degree Finder!

 

Student Loan Identity Theft

Posted on by Melanie Datu
Student Loan Identity Theft

How to Spot Scams and Protect Yourself from Fraud

If you’re figuring out how to finance college, online resources can help you find student loans and scholarships that may help you afford your education. But how do you know when you’ve encountered a student loan scam?

While there are many legitimate online sources for college financing – including student loans, financial aid, and scholarships – potential scams may make you vulnerable to identity theft and other risks. Let’s go over how to spot a scam and what you can do to protect your sensitive personal information as you finance your college dream.   

What Are the Risks of Student Loan Scams? 

When applying for loans, students and parents often submit a lot of personally identifiable information to schools and lenders. Cybercriminals use these identifiers to learn as much as they can about you. Once scammers gain access to pieces of information like your Social Security number, driver’s license number, bank account number, and email address, they could potentially steal your identity and use it to commit crimes – at your expense.  

Student Loan Identity Theft Scams

Young adults and students between the ages of 17 and 25 are increasingly susceptible to student identity theft. But many students aren’t exactly sure what identity theft is, or how to protect themselves from it.  

Identity theft occurs when a thief steals your personally identifiable information in order to commit fraud. Identity thieves may:

  • Gain access to your bank account
  • Open new credit cards and accrue debt in your name
  • File fraudulent tax returns
  • Buy or rent property while posing as you
  • Perform other criminal actions

Before applying for, enrolling in, and accepting financial offers, it’s important to understand the risks involved. Make sure you only submit personal information to a trusted source. Authenticating websites, lenders, and awards before submitting your personal information can help you avoid identity theft.   Scams That Target Students Besides identity theft, scammers have other means of taking advantage of unsuspecting students. Watch out for these college financing scams that target students (and their parents!) before, during, and after graduation.  

New and Current Students

For brand new or first-generation college students, figuring out how to pay for college can be overwhelming. As you navigate the world of college financing for the first time, be aware of potential scams like:  

  • Advance Fee Scams:  This is where a student loan lender offers a lower interest rate and better loan terms if you pay an advance fee for their services. Don’t fall for this; legitimate public or private lenders never ask you to pay upfront. If expenses are incurred, these would be totaled into your monthly repayment schedule.
  • Scholarship Scams:  Just like advance fee scams, scholarship scams may ask you to pay money upfront to search or apply for scholarships. That’s a big red flag. Legitimate scholarship sites don’t cost anything, and you should be able to find plenty of scholarships to apply to, free of charge.

Recent Graduates and Young Professionals

Just because you’ve already graduated college doesn’t mean scammers will stop targeting you. As recent graduates and new professionals start tackling their college debt, they may be vulnerable to other types of scams, such as:  

  • Loan Consolidation Scams:  This is when scammers contact recent graduates offering low consolidation rates in return for an administrative or service fee. Instead of consolidating your loans, these fake lenders collect money from you and do nothing. Remember that you should never pay to consolidate your student loan debt. Consolidating government loans is a free service offered by the Office of Federal Student Aid. And, while private consolidation loans may charge something called an origination fee to refinance loans, this is relatively rare and would be included in the overall cost of your loan, not charged upfront.
  • Debt Elimination Scams:  If it sounds too good to be true, it probably is. While there are a few rare cases in which student loan debt may be forgiven, most borrowers have to pay back their student loans in full. Some exceptional circumstances may include the death of the borrower, institution closure, and falsified enrollment documentation resulting from identity theft. In addition, eligible students may have some of their loans forgiven through federal loan forgiveness programs, if they meet very strict requirements. But if you are approached by an individual or company offering to eliminate your student loan debt, it’s a scam.

6 Tips to Help Student Protect Their Personal Information

You don’t have to fall prey to scammers and identity thieves who target college students. These tips may help you stay safe and protect your bright future as you finance your educational goals.  

#1: Protect Sensitive Physical Records and Data

The danger isn’t just online. Keep physical documents like your Social Security card, passport, medical documents, and birth certificate in a safe place.

#2: Use Caution on Public Networks

It’s best to avoid exchanging personal or sensitive information through a public or unsecured Wi-Fi network, like the one at your favorite coffee shop. If a cybercriminal is monitoring a public network, your data could be intercepted and used against you.

#3: Stay Safe on Social

Don’t share private information over social media…especially the answers to the security questions for your sensitive accounts! Even seemingly harmless information, like the name of your pet or the street you live on, can help cybercriminals gain access to your accounts. Then, they can change your passwords and lock you out.

#4: Browse and Apply Safely

Use security software to protect yourself when browsing online or submitting information over the web. ID theft monitoring services, such as LifeLock, are always helpful, especially when exchanging personal information, applying for loans or scholarships, and shopping online.

#5: Defend Your Devices

A nabbed phone or laptop may be all it takes for a criminal to steal your identity. Always keep an eye on your devices and make sure they’re locked when not in use.

#6: Watch for Suspicious Activity

Keep an eye on your personal and financial records, including your credit report and bank statements, for signs of fraudulent charges or unauthorized activity. You may also want to watch your email spam folder, to learn if your email address is on an internet email list (making it easy for cybercriminals to find).

 

5 Steps for Student Identity Theft Recovery

By taking every precaution as you prepare for and finance your college education, hopefully you can avoid this worst-case scenario. But if you do become the victim of identity theft, it’s important to take action right away. Here are the steps you should take if you believe your identity has been stolen:  

#1: Determine the Type of Identity Theft You Experienced

Criminals use different strategies to gain access to sensitive financial and government records. A thief can drain or open bank and credit card accounts, collect government benefits and tax refunds, or even use a stolen ID to evade police. Before reporting fraud, gather as much information as possible about the specifics of your case.  

#2: File a Police Report

Immediately documenting your case is the best way to limit the damage done. Obtaining a police report will also help you establish credibility when reporting identity theft to lenders and major credit bureaus.  

#3: Notify the Federal Trade Commission (FTC)

You can complete and submit their form on the FTC website.

#4: Enable Fraud Alerts on Your Credit Files

Identity theft should be reported to all of your lenders, plus the three major credit bureaus: Equifax, Experian, and TransUnion. After contacting these credit bureaus, ask if they can enable automatic fraud alerts on your credit files.  

#5: Frequently Check Your Credit Reports

Keep monitoring your online accounts and financial reports. If you see something suspicious, report it immediately. Tell your financial lenders and creditors if there’s been any unauthorized access.

How College Students Can Stay Informed and Avoid Scams The world of college financing can seem scary, but by doing your homework, you should be able to avoid scams that target vulnerable students and recent grads. Follow these tips to stay safe, protect your personal information, and find legitimate sources of financial aid.   

  • Research Current Student Loan Scams.  Ask your college’s financial aid office if they know of scams currently aimed at students, and always thoroughly look into loans or financial aid offers before applying.   
  • Enroll with Trusted and Credible Lenders.  Avoid scams by entrusting your college financing needs to reliable lenders. First of all, always fill out the FAFSA and maximize any federal financial aid you may qualify for. Then, use the Student Loan Finder to find trustworthy private loans.
  • Become a Student Loan Expert.  Understanding how student loans work, as well as your rights and responsibilities as a borrower, can help you spot and avoid offers that don’t sound quite right. EducationConnection is home to plenty of informational resources on the college financing process, and StudentLoans.gov also offers a wealth of information.

  Embarking on your college journey is an exciting time in your life, and you should spend it pursuing new goals and experiences and not dealing with the aftermath of identity theft. By taking precautions as you finance your education, you can prevent scammers from getting in the way of your dreams. 

Where Do You Go if You Have a Student Loan Problem?

Posted on by Melanie Datu
Student Loan Problem

Earlier this month, the Consumer Financial Protection Bureau (CFPB) released a report detailing the types of complaints it has received over the last three years. This not only included information about credit card and mortgage complaints, but also issues with private student loans.

Resolve a Student Loan Problem

The majority of the complaints the CFPB received regarding private student loans involved problems with consumers repaying their debt. Nearly 46 percent of consumers cited issues with billing, fees or restructuring their loans, and another 22 percent had problems when they were unable to pay on time.

Since these are common complaints among student loan borrowers, I thought it might be a good time to address a question I often get on social media: “Where do you go if you have problems with your student loans?”

Start With Your Student Loan Lender/Servicer

For issues regarding payments or balances due, be sure to gather any and all supporting documentation you may have on file. This will include notes you have taken during phone calls, correspondence received through postal mail or email, and all payment receipts.

Copies of your bank statements or cancelled checks may also serve to help verify payments. In many cases, you can log into your student loan account and pull a payment history, as well. Carefully review your paperwork to ensure your complaint is valid. If you find there is still a discrepancy, contact your student loan lender or servicer and file a formal complaint. Be calm and polite, and provide copies of all materials to support your claim.

You should also contact your lender or servicer if you are having difficulty making your payments on time. Ask about other repayment options, such as forbearance or deferment. If you have a federal student loan, you may also be eligible for one of several different repayment plans that can significantly lower your current monthly payments.

Most lenders will require proof of your income, so be prepared to provide copies of your recent tax forms and pay stubs to document any recent changes.

Regardless of the type of complaint, it’s very important that you document your process from the start. Whenever you speak with someone, take down his/her name, the date and time of the conversation, and keep notes about what was discussed. Always follow up in writing (paper or email); a paper trail is essential.

Request a copy of your customer service history, too. These steps will help you in the event your issue is not resolved.

Seek Additional Help

If you have provided suitable documentation to support your complaint, but your lender/servicer is still unwilling to help or the issue has not been resolved to your satisfaction, you may still have other resources at your disposal. Depending on whether you have a federal student loan or a private student loan, the next step will vary.

For federal student loans, you’ll want to review the Self-Resolution Checklist to ensure you have taken all the necessary steps to resolve the issue yourself. If you still need help, your next step would be to contact the Federal Student Aid Ombudsman Group. Before reaching out to them, complete the Information Checklist, as it lists many of the questions that will be covered during your initial consultation.

You can contact the Ombudsman Group by postal mail, phone, fax or you can file a confidential complaint through the online Ombudsman Assistance Request Form. Once the department receives your form, it will collect information about your case and offer assistance in identifying a suitable resolution.

If, however, you have a private student loan dispute, you should contact the Consumer Financial Protection Bureau (CFPB). Whether your student loan is issued by a bank, credit union or school, the CFPB can assist with finding a resolution for just about any student loan complaint. The process is fairly simple, too.

You can register your complaint online and attach any supporting documentation. Once your complaint has been received, the CFPB will forward it to your lender. The lender will have 15 days to respond and, in most cases, no longer than 60 days to provide a resolution. The CFPB has a very good track record for getting results, with 97 percent of lenders responding to complaints in a timely fashion. Over the last three years, more than 11,400 borrowers have filed a complaint, and 73 percent were satisfied with the resolution provided.

Even More Help Available

If you did not take the initiative to find a resolution for your student loan problems before you started missing payments, you may find that your are now faced with default. Although there is little recourse for private student loan default, you can still get help with federal student loan debt resolution through the Federal Student Aid’s MYEDDEBT.

Through this portal, you can get information on how much you owe on your defaulted federal student loans, your payment history, and options for resolving your debt. You can also access forms to request a hearing, review, or discharge of your debt, as well as forms to submit a complaint. Ignoring your debt won’t make it go away, so do yourself a favor and seek help as soon as possible.

 

How to Remove a Cosigner From a Student Loan

Posted on by Melanie Datu
How to Remove a Cosigner From a Student Loan

Are you wondering on how to remove a cosigner from a student loan? With the rising cost of college tuition, more students are turning to private student loans to help bridge the gap between what is offered through financial aid and what they can pay out of pocket and their actual college costs.

Unfortunately, many young people have a limited credit and employment history, which means they will be unable to secure a private student loan on their own. In general, most lenders require students to have a credit worthy cosigner before they will be approved for financing. If a cosigner no longer wants to be responsible for a student loan, here are ways on how to remove a cosigner through a student loan cosigner release. 

How to Remove a Cosigner from a Student Loan

This person doesn’t necessarily need to be related to the borrower (student), but parents and other family members often step up to help out. But, being a cosigner can be risky. If the borrower fails to make payments, the cosigner will be legally obligated to repay the debt. There may even be some risk for the borrower, as well.

For example, should the cosigner die or file for bankruptcy before the loan is paid in full, the student loan servicer may place the loan in default and demand that the balance be paid in full, even if all payments have been made on time. Plus, removing a cosigner from a private student loan is not always an easy process. There are two primary ways a cosigner can be freed of their obligations under the promissory note they signed.

 

Student Loan Cosigner Release

Many banks and lenders offer cosigners the opportunity to be released from a private student loan, but borrowers need to be sure the option is available before consummating the loan. Those that do offer this escape clause typically require borrowers to make a minimum number of consecutive, on-time payments (usually between 24 and 48 months).

Borrowers must also provide evidence that they have sufficient monthly income to cover the payments, and generally must submit to another credit check.

Most lenders provide a form that must be completed, as well. If a borrower already has a taken a loan that was cosigned by another individual, he/she will need to contact the loan’s service to find out if obtaining a release for the cosigner is an available option and, if so, what steps need to be taken for the cosigner to be removed from the loan.

Refinance/Consolidation

For those who do not have the option of obtaining a cosigner release, refinancing or consolidating their  loans may be the only way to remove a cosigner from his/her obligation. Borrowers will need to have a good credit history, stable employment, and enough income to cover the monthly payments on their own in order to refinance or consolidate their loans.

Basically, this allows borrowers to pay off their previous debt and releases cosigners from any further obligation. The original loan will, however, remain on the cosigner’s credit history, but will indicate that the loan is closed and paid in full.

If neither of these options is available, cosigners should do their best to ensure payments are being made on time until the debt is paid in full. This may require them to even pitch in now and then, but it’s better than finding out that their credit has been ruined due to several late payments being reported to the credit bureaus, or worse, being required to pay late fees, penalties, and collection costs because the loan went into default status.

Financial Aid for High School Students & Finding College Money for High Schoolers

Posted on by Melanie Datu
Financial Aid for High School Students

The financial aid process is a little bit different for each student, but there are a few things that hold true for just about everyone, including high school students. Even though you’re still in high school doesn’t mean you shouldn’t start thinking about how you’ll pay for college.

Tips for Finding Financial Aid for High School Students

There’s a ton of information about financial aid on this page, and yes, we know it looks intimidating, especially if you’re still in high school. Before you — students and parents alike — get too far into the guide, check out the flowchart that walks you step-by-step through every possible option you can pursue for financial aid.

Interact with the flowchart and answer the basic questions it asks to help you explore how you should tackle your financial aid game plan — and in what order.

Taking this first step should save you a ton of time and (and hopefully money) as you work through the process. Once you know where you stand, you can come back and research the funding options the most sense for you and your situation.

The Basics

Filing the Free Application for Federal Student Aid (FAFSA) is essential. There are many variables that go into determining eligibility, and there’s no way to know if you are eligible for assistance if you don’t apply.

So, even if you don’t think you’ll qualify for federal financial aid, file the FAFSA.

Here’s why:

  • The FAFSA is used by agencies and funding sources other than the federal government to determine your eligibility for scholarships, grants, loans and other financial aid programs.
  • The FAFSA is used as your application for federal student loans. Because of this, completing the FAFSA gives you two big advantages: you may be eligible for non-federal aid, and even if you don’t want a loan now, the paperwork is already done in case you change your mind.
 

Filing the FAFSA

The quickest way to file the Free Application for Federal Student Aid (FAFSA) is online at: FAFSA on the Web. Complete the FAFSA as soon as possible after January 1st of the year in which you will need funding.

It will be easier to fill out the FAFSA if you have these items handy:

  • Your Social Security card and driver’s license
  • Your W-2 Forms or other records of earned-income (and your spouse’s, if you are married) federal income tax return.
  • Your parent’s federal income tax return (unless you are filing as independent)
  • Records of other untaxed income you received, including welfare benefits, social security benefits, TANF, veteran’s benefits, and military or clergy allowances
  • Your current bank statements and records of stocks, bonds, and other investments
  • Your business or farm records, if applicable
  • Your alien registration card (if you are not a U.S. citizen)

Tip: If you or your parents have not completed federal income tax returns yet, use estimates from pay stubs and bank statements.

If you or your parents’ income has not changed significantly, you have a choice. You can use the amount of tax you paid last year or you can estimate. Here’s an easy way to estimate the amount of tax you owe:

  1. Take the line item from your federal income tax return titled “This is your total tax.”
  2. Divide it by your adjusted gross income.
  3. Multiple this number by your estimate of this year’s adjusted gross income to obtain an estimate of the amount of you tax owe.

Other Applications You May Need to File

CSS Profile

Incoming freshman may also need to complete the CSS Profile Application. Some private colleges require the profile because it gives financial aid administrators more information to determine your eligibility for need-based assistance and funding directly from the school. In other cases, they may need the profile to offer admission to very competitive programs for early admission where the admissions process is not need blind.

The Profile must be completed earlier than the FAFSA – usually in the middle of October of the year prior to the year you’ll need funding. Check with your college to see if you are required to complete the CSS Profile. You can register and apply online at: CSS Profile

Institutional Aid Applications

Some schools require you complete a form they provide you. This is called an institutional aid application. On this form you may be asked to tell the school about outside scholarships you expect to receive and whether you’re interested in other types of aid such as work study.

Often you can also use this form to explain any special circumstances not taken into account on the FAFSA (e.g. an unexpected recent loss of income, extraordinary medical expenses, etc.). If your school requires one of these applications, they will mail it to you.

Financial Aid Eligibility

Financial Need is a term used to describe how much need-based financial aid you’re eligible to receive. Your financial need is calculated by subtracting your school’s Cost of Attendance (COA) from your Expected Family Contribution (EFC). In order for you to receive need-based aid, your COA must be greater than your EFC.

Let’s take a look at how Financial Need is calculated.

COA – EFC = Financial Need

Schools use the processed data from the FAFSA and/or the CSS Profile to determine your financial aid eligibility. Whether you complete the FAFSA and, if required, the Profile, the basis for determining your award is a number referred to as the Expected Family Contribution (EFC).

The EFC is a measure of your family’s ability to pay for college based on student and parent income and asset information, your state of residence, household size, and number of household members in college. Some factors that go into determining your EFC include demographic, financial, and household data, among other things.

The next step in calculating your financial need is figuring out what the Cost of Attendance (COA) will be for the school you will attend. The school you attend establishes a COA for the academic period for which you will be enrolled. The COA includes tuition, room and board, fees and estimated living expenses. Variable costs like books and personal expenses are also included.

The Financial Aid Award Letter

The financial aid office at your school will use the need-based resources they have available to try to meet your Financial Need. They will use other funding sources that aren’t based on need such as the Unsubsidized Direct Student Loan to help cover the entire COA.

Of course, they won’t always be able to meet a student’s full financing need or cost of attendance. 

Follow-up Forms

Sometimes, even after a college has received your FAFSA data, additional information may still be required to complete your package/award. This process is called “verification”. If you are selected for verification, the school will ask that you fill out a Verification Worksheet.

In addition, they request physical copies of documents such as federal income tax returns, W-2′s and any other income statements (e.g. 1099′s) they may require.

Warning: the college will not process your financial aid, without this additional documentation.

If you plan on accepting a Stafford loan or Direct PLUS loans, you will also need to complete promissory notes. The college you attend will provide you with specific information on how to complete this part of the process.

If it’s your first time borrowing a federal loan, you’ll also need to complete an “entrance interview,” which is simply a session done online or in-person that informs you of your rights and responsibilities as a student loan borrower.

Read everything the college sends you carefully and respond to requests promptly. If you have questions or don’t understand something, call the financial aid office and ask! They’ll be more than happy to provide a helping hand.

Types of Financial Aid

If you aren’t familiar with the different types of financial aid that undergraduate students can pursue, we encourage you to do your homework and educate yourself using the links below. Financial aid comes from a variety of sources, so be sure to review each financial aid type in greater detail as you put together your plan.

What to Look For in a Student Loan Cosigner

Posted on by Melanie Datu
What to Look For in a Student Loan Cosigner

If you’re thinking about taking out a private student loan for college, chances are you’ll need a cosigner to get one. Very few students meet the qualifications for securing a loan on their own, so getting your student loans with cosigner may be a necessity.  In fact, “more than 90 percent of private student loans for undergraduate students…require a creditworthy cosigner” according to Mark Kantrowitz of Cappex. There are several student loan cosigner requirements to look into.

A good student loan cosigner cannot only help you secure a student loan, but also obtain a more favorable interest rate. It’s important, however, to understand the risks a cosigner assumes when he or she agrees to help you obtain a loan. He or she will be equally responsible for paying off the debt, even if you don’t finish college.

Should you fail to make payments, your cosigner will be required to not only cover the past due amount, but also any interest fees and other charges that have been assessed. You should only turn to private students loans with a cosigner once you have exhausted all other possible funding sources, such as federal student loans and scholarships. If you do need to pursue a private student loan, you should know who can cosign a student loan and also be aware of the student loan cosigner requirements before asking someone to set up as your cosigner.

What are the Student Loan Cosigner Requirements?

Cosigners for student loans typically need a good credit score, stable income, be in good health and be willing to help you if you are unable to meet your loan payments.

1. Credit History of Cosigner

After the financial and credit crisis of 2008, it became more difficult to qualify for unsecured consumer credit. In the case of private student loans, most borrowers will need a cosigner who has a favorable credit history and a reliable source of income. Your cosigner should have a low debt to income (DTI) ratio, as well as a history of making payments on time.

There are frequently student loan cosigner minimum credit score requirements.  Lenders are more likely to approve your loan if your cosigner’s credit score is 720 or higher. If your cosigner has a credit score between 680 and 720, he or she may still be able to help you secure a loan, but the interest rate will probably be higher.

2. Stability

Along with a good credit history, lenders will also look at the stability of your cosigner. This includes job history, as well as the length of time your cosigner has lived in his or her home.

You’ll want to choose someone who has worked for the same company for at least a year, if not longer, and has verifiable income. The longer he or she has lived in the area, and maintained a steady income, the better your chances are of securing a private student loan.

 

3. Good Health

Believe it or not, the age and health of your cosigner does matter. Maybe not so much to the lender, but it should be something you take into consideration. If you choose a cosigner who is in poor health, or over the age of 65, you may be in for an unpleasant surprise later on.

Why? Some lenders include a clause in your student loan agreement that allows them to demand your loan be paid in full upon the death of your cosigner. Or worse, the lender could place your loan in default, even though you have made all your payments on time.

This can happen automatically, without any notice, and effectively ruin your credit.

4. Relationship to Student Loan Cosigner

You may think that your parents are the only ones who can cosign a loan for you, but that is not the case. Other relatives, including siblings and cousins, as well as a friend or a spouse, may act as your cosigner. Basically, anyone with a good credit history and the willingness to help you could act as your cosigner.

Just remember that this is a binding contract. If you fail to make your payments or default, you run the risk of not only ruining your credit and your cosigner’s, but also destroying your relationship.

It might be a good idea to draft a contract prior to asking someone to act as your cosigner. You could include specific details about how you plan to repay the debt, such as setting up automatic payments, as well as a clause that states you will reimburse any missed payments and/or fees covered over the life of the loan.

It’s not required, but it may give your cosigner some peace of mind. Finally, don’t forget to thank your cosigner for helping you out. It’s a serious commitment to make and one that should not be taken lightly.

Do I Borrow Student Loans for One Year or For All Years

Posted on by Melanie Datu
Do I Borrow Student Loans for One Year or For All Years

First things first–let’s get the answer to the question out of the way.  A student may only borrow up to the cost of attendance determined by the school minus financial aid including other student loans.  The amount a student is eligible to borrow is the remainder of that equation and it can only be determined one academic year at a time.

Table of Contents

It might seem convenient or even cost-effective due to current low interest rates to finance an entire education up front.  However, the student would still be accruing or paying interest on the full amount borrowed while in school.

As you can imagine, the interest charges on $40,000 are much higher than on $10,000.  Let’s take a quick look at how eligibility is determined to see how the borrowing process works.

How Much Can You Borrow?

Borrowing a student loan for multiple years is not possible because eligibility can’t be calculated in advance. Things like the school’s cost of attendance will change from year to year as will the financial aid your student is offered.

Plus, the amount a student may borrow under the Direct Student Loan program increases from $5,500 for freshmen, to $6,500 for sophomores, to $7,500 for juniors and seniors.

The school will not only determine your student’s cost of attendance each year, but they will also certify the amount the student is eligible to borrow when the lender of the private student loan requests it.  The lender is required to ask the school for this certification for each academic year (or partial year) in which financing is requested.

It is the school’s job to ensure the student does not borrow more than eligibility allows.

Even if a student could take out one private student loan for all 4 years of college, it wouldn’t make financial sense to borrow more funds than would actually be utilized.  If a borrower defers all payments, interest will still be added to the original amount borrowed.

Even if a student makes interest-only payments while enrolled, the he would still be paying interest on the full amount borrowed.

Student loans do not work like a line of credit that you draw down as needed or like a credit card where you are only charged interest on the part of your credit limit that you access.  Assuming a loan with a 6% interest rate, the monthly payment of interest only on $40,000 would be $200 versus $50 on a $10,000 loan.

Another thing to consider is whether the student will make it all the way to graduation.  According to NCES, only 64% of first-time, full-time undergraduates seeking a bachelor’s degree at a 4-year degree granting institution in the fall of 2014 had graduated by 2020.

One final note, it’s very important for students to borrow only what they really need for any given academic year.  The school’s cost of attendance for each year includes not only the actual costs a student will be billed, but estimates of other expenses like books and room and board.

Take a careful look at both eligibility (how much you can borrow) and actual needs before borrowing a private student loan.

Be certain to pursue all other options for paying for college before borrowing at all.  Regularly searching and applying for scholarships, saving money earned at work, and buying used books whenever possible are all good places to start.

 

Federal Direct Unsubsidized Loans

Posted on by Melanie Datu

What is an Unsubsidized Student Loan?

An unsubsidized loan is a type of federal student loan for college or career school. The unsubsidized student loan means once loan funds are in a borrower’s account, the interest starts accruing while you’re in school and after you leave. Borrowers are responsible for the whole amount from day one through the life of the loan. This includes when you’re in school and during grace periods. 

As far as repayment options go, a borrower may choose to pay the interest charged each month. You may also allow it to add onto the outstanding principal amount in which case it adds to the total cost of the loan. A recent Sallie Mae study found that 3 in 10 students use loans from the federal government to pay for college.

What are the differences between subsidized and unsubsidized student loans? 

Subsidized vs unsubsidized student loans differ in who they are for, how to qualify and the interest payments. 

Who they are for: Unlike Subsidized Direct Student Loans, unsubsidized loans (also federal loans) do not require a borrower to have financial need to qualify. Financial aid may be available to those who qualify. However, only undergraduate students with financial need may be eligible for a Direct Subsidized Loan.

How to qualify: Unsubsidized loans are typically available to graduate and professional students too. Because they do not use financial need as a criteria, they have different terms regarding interest. 

Different terms regarding interest. A Federal Direct Subsidized Loan is also called subsidized Stafford Loans. The U.S. Department of Education may pay the interest for you for the following periods: 

  • while you’re in school (at least half time)
  • for the first six month grace period after you leave school
  • during a period of deferment 

This effectively could waive the need to pay back the interest during those time periods. Once you start your repayment plan the government may stop paying that interest. As a result, you must repay the original loan amount plus interest which begins to accrue from that moment.

Should I pay off unsubsidized or subsidized loans first? 

Your priority should be to pay the direct unsubsidized loans first because the interest accrues over time. For instance, let’s say you don’t pay the interest while you are in school. Then, each new month of interest starts to add to the loan balance. As the balance grows, the amount you pay interest on also goes higher. If you are a recipient of an unsubsidized loan, you may want to contact your loan servicer to set up a payment plan. Making these smaller installments is a way to keep the interest from adding to the principal balance of the loan.

How Do You Apply for Unsubsidized Student Loans?

To apply for an unsubsidized student loan, you may need to fill out a Free Application for Federal Student Aid. Once it’s submitted, schools use the information from the FAFSA to make any financial aid package that they send you. To be eligible to fill out the FAFSA, you must be a U.S. citizen or eligible non citizen with a valid Social Security number. You also must meet other requirements:

  • Registered with the Selective Service if you’re a male student
  • Be enrolled or accepted for enrollment as a regular student in an eligible degree or certificate program
  • For Direct Loan Program funds, be enrolled at least half time
  • Maintain satisfactory academic progress 
  • Attest you are not in default on any federal aid (including loans and grants)
  • Have a high school diploma or equivalent

When you are ready to complete the FAFSA, you typically use your Social Security Number to create an FSA ID, username and password. If you are a dependent student, you also need your parents’ SSNs in order to electronically sign the form. 

You must also have the following documents ready when filling out the FAFSA. 

  • Your driver’s license
  • If you are not a U.S. citizen, you must be an eligible non citizen and provide your Alien Registration number
  • Federal tax information for you and your spouse if married or for your parents if a dependent (IRS W-2, IRS 1040, foreign tax returns)
  • Records of any untaxed income (child support, interest income, veterans non education benefits for you and for your parents if a dependent)
  • Information on cash, savings and checking accounts (stocks, bonds, college 529, real estate with the exception of the home you live in.)
 

Who is Eligible to Receive Unsubsidized Loans?

Direct Unsubsidized Loans are for eligible students enrolled at least half time at a school that takes part in the federal direct loan program. Unlike subsidized loans, the unsubsidized student loan are available for

  • Undergraduate students
  • Graduate students
  • Professional students
  • Dependent undergrad students (if your parents are ineligible for a Direct PLUS Loan)

Let’s say your financial aid package includes federal loans, your school could tell you how to accept the loan. For first time borrowers this is a two step process. First, you go through entrance counseling. This is a tool to ensure you understand the obligation to repay the loan. Second, you sign a loan contract called a Master Promissory Note agreeing to the terms of the loan.

How Much Can You Borrow in Direct Unsubsidized Loans?

Your school determines the amount you may borrow based on your cost of attendance and other financial aid you receive. The school also sets the loan type(s) if any as well as the maximum amount you are eligible to borrow in any academic year. 

That said there are annual loan limits and total amounts that one may borrow for undergraduate and graduate study (aggregate loan limits). These limits reflect what year of school you are in and your status as a dependent or independent.

Unsubsidized Annual Loan Limits

The following loan limits may vary over time according to the Federal Student Aid.

First Year Undergraduate: Ranges from $2,000 to $6,000 with a total limit of $5,500 to $9,500.

Second Year Undergraduate: Ranges from $2,000 to $6,000 with a total limit of $6,500 to $10,500.

Third Year and Beyond Undergraduate: Ranges from $2,000 to $7,000 with a total limit of $7,500 to $12,500.

Graduate/Professional (Independent students): You may borrow up to $20,500 each year. 

Unsubsidized Aggregate Loan Limits 

Dependent (except students whose parents are unable to obtain PLUS Loans): $31,000

Independent undergrads (and dependent undergraduates whose parents are unable to obtain PLUS Loans): $57,500

Professional and grad students: $138,500

How Does Interest Accrue for Student Loans?

First off, interest (which you pay to a lender) is the cost of borrowing money. It is calculated as a percentage of the unpaid principal amount. Any loan fees associated with your account may also impact the interest that accrues. Direct loans are daily interest loans which means that interest accumulates or accrues daily. Any unpaid interest you are responsible for and do not choose to pay may add to the principal (capitalized). As for interest rates, these are fixed for the life of the (federal) loan. But, do vary by type of borrower and loan as well as the loan disbursement date.

The following shows the interest rates for federal loans first disbursed on or after Oct. 1, 2020, and before Oct. 1, 2024.

  • Undergraduate borrowers: 5.50%% for Direct Subsidized Loans / Direct Unsubsidized Loans
  • Graduate and professional borrowers: 7.05% Direct Unsubsidized Loans only
  • Parents, graduate and professional borrowers: 8.05% Direct PLUS Loans

All variable and fixed rates may vary over time.

How Do You Pay Back Direct Unsubsidized Loans?

Once you graduate, leave school, or are no longer enrolled half time, you may have a six month grace period before you begin to pay back your unsubsidized loan. During this period, your servicer should notify you of your first payment due date. Payments are usually due monthly. However, there are a number of different repayment plans available. We go into more depth on that topic on our Federal Student Loan Repayment Plans. 

Why You Should Consider Borrowing Federal Student Loans?

If you must take out a student loan for college, you are likely determining whether to borrow federal vs private student loans. Keep this in mind, remember to borrow only what you need, be clear on what you have to pay back and set a budget. Here are a few things to consider as you make this important choice.

1. Federal loans tend to cost less. 

According to the Consumer Financial Protection Bureau private loans from a bank tend to have variable interest rates which means interest and payments may go up over time. In contrast, the interest rate on federal loans is fixed.

2. Federal loans may be easier to repay.

When it is time to repay, private loans may not offer as many options to reduce or delay payments. You don’t have to begin repaying your federal loans until after you leave college or drop below half time enrollment. There are also various repayment options if you are having trouble making a payment.

3. Federal loans typically don’t need a credit check.

In order to receive a private loan you are likely to need a cosigner or credit check. If you don’t have a cosigner or a great credit score, you may not qualify.

4. Federal loans may offer larger amounts.

If you are a qualifying graduate or professional student, you may borrow up to $20,500 each year in Direct Unsubsidized Loans. For qualifying undergrads, the maximum amount you may be able to borrow each year in Direct Unsubsidized / Subsidized Loans ranges from $5,500 to $12,500 per year.

Average Debt in America

Posted on by Melanie Datu
Average Debt in America

Debt in America is not a new thing. In many ways, it has grown almost all years, meaning that consumers have more debt now than they did just a few years ago. Understanding the average debt in America may help provide some insight into the ways you may be able to work to reduce what you owe, providing the potential for financial freedom.

What Is the Average Debt in America Per Household?

The average amount of debt per household in the U.S. was $104,215 in 2023, according to a report conducted by Experian. That includes mortgages and vehicle loans. It is an increase of 3.4% over the previous year. The average debt also includes any loans and credit cards a person has. This often lumps student loans into the mix as well.

Another way to consider how much debt Americans have is to consider the amount of overall debt owed by all Americans. According to the Federal Reserve Bank of New York, in 2023, household debt across the county rose to $17.7 trillion. This includes mortgage debt as well as non housing balances. Of that, about $17.5 trillion in household debt, such as mortgage debt.

Overall, reports indicate that 340 million Americans have some type of debt, including mortgage and car loans. The Urban Institute notes that 64 million Americans have at least some credit card debt.

Why is Debt on the Rise in the U.S.?

There are many potential reasons why debt continues to increase. According to the Federal Reserve, a large amount of the debt consumers have is due to an increase in mortgage balances, thanks to the purchase of homes that cost more now than they did just a few years ago. However, it may also be due to the increase in inflation, which has reached a 40 year high in 2022, which means that many consumers are spending a lot more than they did before to maintain the same standards of living.

How Much Student Loan Debt Do Americans Have?

According to a report from Experian, the average consumer student loan was $38,787 in 2023. That decreased by -0.6% in 2020 from $38,792. According to White House data, the average student who leaves college with an undergraduate degree program has almost $25,000 in debt.

One of the reasons student loan debt did not increase as rapidly from 2020 to 2021 as it did in prior years is that the U.S. Federal Government put a pause on federal student loan repayment and interest rates. That, along with the hold on collections activity on those student loans, created a bit of a break for consumers on increasing student loan debt. However, for those individuals that did not pay down their debt during that break, it continues to be a component of their ongoing overall debt.

Why Is Student Loan Debt So High in the U.S.?

The cost of higher education continues to rise. According to White House information, the cost of both a four year private and a four year public school has tripled from 1980 through 2022. While many students may have benefited from Pell Grants, which used to cover as much as 80% of those costs, that type of financial aid only covers about a third of the cost of higher education now. Financial aid may be available to those who qualify. That means more students are paying out of pocket or through third party loans to cover their overall costs.

 

Will Student Loan Debt Forgiveness Help with Debt?

The Student Debt Relief Plan provides loan forgiveness for qualified borrowers of up to $20,000. The program may help some families to see relief from debt up to the amount of debt forgiven. The amount may differ for each student.

How Many People Have Student Loans?

The White House notes that there are more than 45 million student loan borrowers in the U.S. That may account for both those who just left school and those who have been out of school for a long time. The reports also indicate that, of those who have student loans, about 16% of them are in default. That includes about a third of all senior citizens who still have student loan debt that they have not repaid.

Consider a few key figures:

  • 45 million people have student loans in the U.S.
  • About 16% of all student loan borrowers are in default
  • About 1/3 of all senior citizens still carry student loan debt
  • The typical Black borrower still owes 95% of their student loans 25 years after they graduate
  • About 66% of people who have a Pell Grant come from a family that earned under $30,000 per year.

What Type of Debt Do Americans Owe?

There is a wide range of debt types that Americans owe. They commonly include mortgage loans, credit card debt, student loans, and vehicle debts. That is a combination of secured and unsecured debt that’s impacting monthly budgets for many of today’s consumers.

Take a look at how much debt the average consumer had in 2023, according to the Experian data:

  • Mortgage Debt: $244,498
  • Home equity loans or lines of credit: $42,139
  • Student loans: $38,787
  • Vehicle loans and leases: $23,792
  • Credit card debt: $6,501
  • Personal loans: $19,402

Americans owe a wide range of debt types, and having various forms of debt is not in itself a bad thing. However, those with mounting debt could struggle to continue to make payments.

How Much Debt do People Have Compared to Income?

Using just a dollar amount to represent the amount of debt a household has does not necessarily mean it is unaffordable. Those with a higher debt to income ratio, though, may have more of a struggle to combat. According to data from the Federal Reserve Bank of New York, In 2021, the overall debt to annual income ratio was 145%, which means that consumers had 145% more debt than they had income.

What Is Considered a Normal Level of Debt for Households?

The optimal situation is that consumers do not carry debt but instead pay off what they borrow each month. However, that is not always the case. There is no specific feature considered normal debt levels. However, the Federal Housing Association recommends having debt, including mortgage payments, under 43% of total income.

As noted by the Consumer Financial Protection Bureau, lenders set their own expectations for debt to income ratios. Some may have a significantly higher threshold than others. In general, the lower this figure is, the more funds a consumer has to manage their monthly expenses.

Average Debt by Income Percentile

There are many ways to consider how much debt Americans have. One way to consider this is to look at how much debt families have compared to their income. The Survey of Consumer Finances provides some insight into this. It looks at the amount of debt based on the net worth percentile. It found that the amount of debt a person has increases based on their net worth.

Here is a look at how much debt people have based on their income:

  • Those who have less than 25% of their net worth in debt, the average debt was $66,940.
  • For those who have between 25% and 49.9% of their net worth in debt, the average debt was $89,070.
  • For those who have between 50% and 74.9% of their net worth in debt, their average debt was $132,520.
  • For those who have been 75% and 89.9% of their net worth in debt, the average debt was $412,650.

Which States Have the Lowest Debt and the Highest Debt?

There are some states with lower household debt than others. Debt amounts range widely throughout the U.S. The states with the least amount of debt include:

  • Mississippi
  • West Virginia
  • Kentucky
  • Arkansas
  • Ohio

Some students have a higher amount of debt than others. The states with the highest amount of debt include:

  • District of Columbia
  • Colorado
  • Hawaii
  • California
  • Washington

Are There Americans That Live Debt Free?

Without a doubt, there are many people throughout the U.S. that do not carry debt. That means they do not have credit card debt or even a mortgage. The number of people who do not have debt changes each year. However, the Experian study indicated that under 25% of all American homes are living without debt. That does not include people who only have a mortgage and no other debt.

What to Do If You Need Help with Debt

Many people who have debt struggle to make payments each month on what they owe. This is financially taxing and may be hard to overcome. There may be some resources to help you.

Student loan forgiveness

If you have student loan debt, learn more about the numerous student loan forgiveness programs that are available. You may do that at the Department of Education website. It may be possible to earn debt forgiveness, discharge, or cancellation of your debts.

Student loan defaults

If you have debt that is in default from student loans, The Federal Student Aid department at the U.S. Department of Education offers insight into what your legal options may be.

Student loan forbearance

It may also be beneficial to consider student loan forbearance. This may allow you to stop making payments for a short period of time. You may learn more about forbearance at the Department of Education website as well.

Other debt help

More information on repaying your debt is available at USA.gov. You may also find a wide range of debt supportive tools and education at the Consumer Financial Protection Bureau.

How Do You Get Student Loans Without a Job?

Posted on by Melanie Datu
Get Student Loans

With a competitive job market, many people are wondering whether it is the perfect time to attend college. These students are unsure about present and future job prospects along with rising student debt. Also, you may not presently have a job. So you are unsure if you may be eligible for student loans without a job? Learn more about how to receive a student loan without a job.

Can You Get Student Loans Without a Job?

Getting a student loan without a job may be possible when you have a cosigner. A cosigner is someone who may be willing to make your payments. Private lenders will accept this payment arrangement. They are willing take on the financial risk when two people make payments. The recent COVID 19 pandemic has forced many businesses to close and furlough staff. This situation has forced students to worry about paying off their student loan debt. It may also force some students to postpone their college courses until the economy improves.

The U. S. Bureau of Labor Statistics conducted an student unemployment study in January 2020. Unemployed high school graduates made up 3.8 percent of the study. College graduates had a 2.9 unemployment rate during the same month. With these worries, students wonder how they may pay for their college expenses. Student loans without a job could fill in the gaps or pay the entire costs. Students may seek a loan from a private lender. You may also be eligible for federal aid if you qualify. Private loan lenders may offer student loans even if you’re unemployed or if you have bad credit history. Financial aid may be available to those who qualify.

How Do I Qualify for Student Loans Without a Job?

One way to qualify is to have a cosigner. Private lenders take into consideration a person’s employment history and credit history. This information allows lenders to figure out the amount of the loan. A cosigner is anyone who meets the eligibility criteria for the student loans without a job. The cosigner may be your parents, grandparents, or another family member. It may also be a spouse or family friend. The cosigner typically have to meet the following criteria:

Income minimum limits and debt to income ratios may vary between lenders. You may need a cosigner if you don’t have a job. Ensure that the cosigner is someone that you trust.

Can You Get Federal Student Loans and Private Student Loans Without a Job?

Both private and federal aid lenders may provide student loans to unemployed students. You should double check if you meet the eligibility requirements of each lender. 

What Federal Student Loans May You Receive Without a Job?

U.S. Department of Education will not review your credit report. The organization will also not check income history. They provide Stafford loans based on financial need. You also typically don’t need a cosigner. The only exception to this rule is if you plan to take out a Direct Plus loan with poor or no credit history. In these instances, you may need to have an endorser, which is similar to a cosigner.

Types of federal student loans that you may be eligible for if you don’t have a job include:

  • Direct Subsidized Loans: A federal student loan for undergraduate students. You may have to show financial need. The federal government will pay the fixed interest rate for the life of the loan.
  • Direct Unsubsidized Loans: A federal student loan for undergraduate and graduate students. You do not need to prove financial need. This federal student loan usually has fixed interest rates for the life of the loan.

Federal student loans typically have lower interest rates. This option also provides more variable payment options than private loans. You need to fill out a free application for federal student aid (FAFSA). Then you may send it to the eligible financial institution. The eligible financial institution may determine the amount of the federal loans.

 

What Private Student Loans Are Offered to Unemployed Students?

Private student loans may be available for unemployed students. You may need to have a cosigner to receive the loan. Citizens Bank and Sallie Mae may provide student loans. You may also seek out financial loans from a credit union. Private lenders may check your credit history and employment history for loan eligibility.

Other private lenders may check your future income potential instead of doing a credit check. This factor occurs when you don’t have a credit history or a co signor. Lenders understand that you may find employment after college. In this instance, you may be able to obtain one and submit a loan application.

How Do I Repay Student Loans Without a Job?

You may have to repay the personal loan using the funds from a savings account. The cosigner may also make monthly payments for you during your unemployment. Then you can take over the remaining loan amount or repay the cosigner. You could ask for forbearance or deferment for federal student loans. Forbearance may suspend your federal loan payments. The interest will still accrue on the loan as you will need to pay it later. Deferred federal loans will not accrue interest.

You may also qualify for loan forgiveness programs or an income driven repayment plan for federal loans. There might be less private student loan repayment options for unemployed students. Some student loan lenders may offer unemployment protection or economic hardship forbearance. You may check with specific loan servicers and student loan options. They may inform you about the length of their repayment term’s grace period. Also, don’t forget to check the repayment terms in the loan agreement which has the contracted interest rate. 

  • Loan Forgiveness Programs: Loan forgiveness programs may forgive the remaining loan amount. You may have to make a certain number of previous payments to qualify. Private loan providers typically do not offer loan forgiveness programs. Federal loan forgiveness programs include the Public Service Loan Forgiveness Program.
  • Income driven Repayment Plan: An affordable payment program based on your income and family size. The PAYE plan applies to federal loans. Sallie Mae offers a $25 payment option while you’re in school and during the grace period.
  • Unemployment Protection/Economic Hardship Forbearance Programs: Some private lenders may offer deferment or forbearance programs. They’re available if you may experience unemployment or economic hardships. The Citizen’s Bank Student Loan offers deferment options. They may defer interest and payments for 6 months after graduation.

What Other Options May Help Pay for College?

You may try to pursue other financial aid options. Grants and scholarships typically do not need you to pay back the funds if you graduate. Yet, certain grants, such as a Pell Grant, may need repayment if you drop out of college. Other options may include:

  • Waiting to go to college until after finding a job
  • Placing the extra money into a savings bank account until you have enough for college
  • Obtaining a part time job, either online or at a brick and mortar establishment

The pandemic has caused increased economic uncertainty on a global scale. Many students are reconsidering their career options right now. You may select the loan options that best fit your current job goals. Then you could receive the desired degree at a great college.

 

FAFSA: Parent and Student Assets

Posted on by Melanie Datu
FAFSA: Parent and Student Assets

Reporting Assets on the FAFSA

The FAFSA requires you complete sections regarding your family’s assets and net worth of investments. Many families are confused about what they should and should not include when responding to these questions. Here’s a simple breakdown of what you should and should not include.

What are Student Assets on FAFSA? What are Parent Assets on FAFSA?

Cash, Savings & Checking Account Balances

When asked to list your (and your spouse if applicable) and your parents’ (if applicable) current cash, savings, and checking account balances…DO respond with the combined amounts as of the date you are filing the FAFSA.  These cover parents assets on FAFSA. 

They ask you to report cash because some families actually keep sizable amounts of cash in safe deposit boxes or otherwise outside of banks.

Net Worth of Investments – Considered Assets

This is where the FAFSA gets tricky and sometimes confusing. DO include the following investments:

  • Real estate other than the home you live in
  • UGMA and UTMA accounts
  • Money market funds
  • Mutual funds
  • Certificates of deposit (CD’s)
  • Stocks
  • Stock options
  • Bonds
  • Other securities
  • Installment and land sale contracts including mortgages held
  • Commodities investments (gold, silver, etc)
  • Qualified educational benefits or education savings accounts such as Coverdell savings accounts, 529 college savings plans, the refund value of 529 prepaid tuition plans

DON’T include these investments as assets on the FAFSA:

  • The equity available in the home you live in
  • The value of life insurance
  • The value of retirement plans such as 401k plans, pension funds, annuities, non-education IRAs, Keogh plans, UGMA and UTMA accounts for which you are the custodian but not the owner

You will also be asked about the value of your businesses and investment farms. Business and/or investment farm value includes the market value of land, buildings, machinery, equipment, inventory, etc. However, business/farm value does not include the value of a small business your family owns and controls more than 50% if that business has fewer than 100 full time or full time equivalent employees.

Also, the value of a family farm does not include a family farm you (your spouse and/or your parents) live on and operate.

Remember also that the FAFSA is asking for net worth of investments–the value of the investments minus any debt owed against them. Debt here means only debt owed against a particular investment or in the case of a business or farm where the business/farm was used as collateral to secure the debt.

 

Student Loan Fraud – Don’t Get Scammed

Posted on by venessa Regali

Avoid Student Loan Fraud

Then, Get Matched To Online Schools Using Our Degree Finder!

Student Loan Fraud – Don’t Get Scammed

Beware of fraudulent schemes that claim to offer relief from student loan debt – these scams are designed to deceive and drain your finances. These unscrupulous companies cunningly present themselves as associates of the U.S. Department of Education, all while swindling millions from unsuspecting victims. Their modus operandi involves making enticing but false assurances of erasing student loan debt burdens.

In a recent case, scammers were brought to a halt by the Federal Trade Commission (FTC) for their fraudulent practices. This operation preyed upon students seeking debt relief, taking advantage of their vulnerability. These nefarious activities involved fabricating affiliations with esteemed institutions, like the U.S. Department of Education, and employing deceptive tactics to convince students to cease communication with their legitimate federal loan servicers. These scammers cunningly manipulated the concept of debt relief and lured students in with the allure of the “Biden Loan Forgiveness” plan, which they falsely claimed to offer, all the while collecting exorbitant upfront fees.

The FTC asserts that this group, operating under various names like Express Enrollment LLC and Intercontinental Solutions LLC, managed to amass a staggering $8.8 million in ill-gotten upfront fees since at least 2022. These fraudulent entities, led by individuals such as Marco Manzi, Ivan Esquivel, and Robert Kissinger, exploited the uncertainty surrounding student loan borrowers and preyed on their desire for debt alleviation. Through persuasive misrepresentations and bogus promises, they managed to convince individuals to part with their hard-earned money for services that were non-existent.

Fortunately, the FTC, armed with its Bureau of Consumer Protection, is relentless in its pursuit of such scams. The agency promptly filed a complaint against the defendants, prompting a federal court to take immediate action by imposing a temporary restraining order and freezing the assets of the culprits’ operation, known as Apex Processing Center.

It is essential to remain vigilant and informed to avoid falling victim to these fraudulent schemes. The FTC provides valuable resources to help individuals recognize and steer clear of student loan debt relief scams. Remember, legitimate assistance for student loans can be accessed for free through trusted channels like StudentAid.gov. With a unanimous vote of 3-0, the FTC continues its resolute efforts to shield the tens of millions of Americans grappling with student loan debt from such malicious scams.

Student Loan Fraud and Facts

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How to Avoid Student Loan Debt Relief Scams

Equipping yourself with knowledge about your student loan debt is your best defense against falling victim to the next potential scam. Here are some key pointers to bear in mind in order to safeguard yourself from falling prey to such fraudulent schemes.

#1 Be Aware of “Payment up Front” Scammers

Legally, companies are prohibited from charging you prior to offering assistance. While some companies might promise to alleviate your student debt burden, there’s truly nothing they can accomplish for you that you can’t achieve independently, and at no cost.

#2 Check Out Options for Financing College

Before resorting to a loan, it’s prudent to explore alternative sources of financial aid, such as grants, scholarships, and federal work study programs. A pivotal initial step involves completing a Free Application for Federal Student Aid (FAFSA). When creating your FSA user account, exercise caution not to share your ID, as unscrupulous individuals could exploit it to gain unauthorized access and compromise your account’s security.

#3 Learn About Student Loans

Student loans can be categorized into two types: federal loans offered by the government and private loans extended by entities like banks and credit unions. Federal loans come with certain safeguards, but private loans lack comparable protections. Irrespective of the source, repayment remains your responsibility.

#4 Understand Loan Forgiveness and Repayment

You may qualify for alternative repayment plans or even loan forgiveness based on your specific loan type and circumstances. These possibilities hinge on factors unique to your situation. It’s vital to recognize that no company possesses the ability to secure these options for you that you cannot secure on your own. Equipping yourself with this understanding serves as a bulwark against the tactics employed by scammers.

If you have federal loans, the Department of Education has a few free programs.

  • Income driven repayment plans – monthly payments based on how much money you make
  • Deferment and forbearance – you postpone payments though may incur more interest
  • Loan forgiveness or discharge – these programs let you off the hook, but you have to qualify (E.g. you become disabled or find out your school committed fraud)

For private loans, deal with reputable loan servicers. Keep in mind it is also unlikely the servicer will offer a loan forgiveness program. So, any third party claiming they can do this for you is likely a scammer. Don’t listen and don’t give any third party your account details either.

#5 Be Cautious with Consolidation

Consolidating a loan involves amalgamating multiple loans into a singular entity. This results in a fresh loan arrangement and altered repayment terms, which could potentially impact your interest rate.

When choosing to consolidate your loans through the federal government, this process is devoid of charges. Hence, if any company proposes a fee for this service, it’s advisable to firmly decline. In some cases, consolidating loans with a private lender may entail costs. However, it’s prudent to steer clear of entities that demand upfront payments. Furthermore, exercise prudence when encountering debt relief agencies and lenders who propose the consolidation of federal and private loans into a solitary new loan, promising reduced monthly payments or lower interest rates. The Federal Trade Commission (FTC) strongly advises against pursuing such arrangements.

Five Things to Remember About Scammers to Avoid Student Loan Fraud

  1. Only scammers promise fast loan forgiveness
  2. Never pay a fee upfront (Think: free not fee)
  3. Use trusted sites – scammers can make fake gov’t seals
  4. Don’t give or share your FSA ID with anyone
  5. You can’t roll federal and private loans together to lower payments
  6. Report scams so others don’t suffer: 1-877-FTC-HELP (382-4357)

Financial Aid Info

Student Loan Consolidation

Posted on by Shannon Fandler

IS IT SMART TO CONSOLIDATE YOUR STUDENT LOANS?

Loan consolidation involves merging multiple loans into a single one. If you’ve taken out several student loans during your college years, consolidating them can simplify your life in the following ways:

  • You can turn several loans into a single loan
  • You can make a single monthly payment instead of many
  • You can switch variable interest rates to a single, fixed interest rate
  • You might be able to lower your monthly bill
  • If you have loans that don’t currently qualify for a federal loan forgiveness program, you could turn them eligible

Students with federal student loans have the option to apply for a Direct Consolidation Loan. This allows them to merge various types of loans, including Unsubsidized and Nonsubsidized Federal Stafford Loans.

Often, students consolidate after their grace period is over. The grace period is when your loans are temporarily in deferment after you graduate.

What about private student loans? While not eligible for a Direct Consolidation Loan, you can consolidate your loans through a lender. This is called refinancing.

HOW TO CONSOLIDATE STUDENT LOANS

1. IF CONSOLIDATING FEDERAL LOANS, START AT STUDENTLOANS.GOV

You can to fill out a Federal Direct Consolidation Loan Application and Promissory Note online. You may need information such as your Social Security Number, driver’s license number, and two personal references.

2. CHOOSE THE LOANS YOU WANT TO CONSOLIDATE

You may not wish to consolidate all of your federal loans. Why? Because some may come with extra benefits, like Perkins subsidized interest, or cancellation and discharge programs. You’ll lose those benefits after you consolidate.

Plus, if you have a loan with a higher interest rate than the others, you may wish to pay that off on its own. That’s because the interest rate of your Direct Consolidation Loan depends on the weighted average of the interest rates for all your loans. It may be smart to pay off that higher interest loan quickly, instead of including it in your Consolidation Loan.

What about private student loans? Since these don’t come with federal benefits, you could potentially refinance them all with a private lender.

3. CHOOSE YOUR STUDENT LOAN SERVICER

For federal loans, you can choose from several servicers. One possible option is FedLoan Servicing, which manages the Public Service Loan Forgiveness program (PSLF). If you plan to work toward PSLF, it may make sense to choose FedLoan Servicing.

For private student loans, there are several private student loan companies that do refinancing. When choosing a company to work with, consider factors like:

  • Interest Rate Ranges: The interest rate you qualify for depends on your lender, your credit report/eligibility, and the market. As of 2018, variable interest rates range from about 2.5 to 9.09%. Remember that variable rates can get higher or lower over time. Fixed rates, which stay the same, range from about 3.35 to 9% in 2018.
  • Loan Amount: Some lenders have minimum or maximum amounts you can refinance.
  • Loan Period: How quickly do you want to pay off your loan? Refinancers may have a minimum loan period, usually from five to 15 years. They may also have a maximum loan period. Remember that the quicker you pay off your loans, the higher your monthly payments will be. But, you’ll save on interest if you pay off your loans quickly.
  • Hardship Options: Does your lender have deferment and forbearance options? If you have trouble paying off your loan due to an event like the loss of your job, these options could help.
  • Fees: Compare late fees or other kinds of loan servicing fees.
  • Extra Benefits: What extras make a particular lender stand out? For example, some offer interest rate reductions if you hit milestone goals – like repaying the first 10% of your principle.

4. DECIDE ON YOUR REPAYMENT PLAN

For federal loans, there may be several ways to repay your consolidation loan. These include:

Standard Repayment Plan – Fixed payments, made over a period of 10 to 30 years Graduated Repayment Plan – Payments start out low and increase over 10 to 30 years Extended Repayment Plan – Fixed or graduated payments; pay off your loans in 25 years Income Driven Repayment Plans – Payments are recalculated each year based on factors like your income and family size

Private student loan refinancing companies do not have the same kinds of repayment options. That said, some lenders may offer more flexible plans.

5. SUBMIT THE APPLICATION

Once you’ve fully understood your options, it’s time to take the next step. Contact the loan servicer if you have questions or need help with your application.

LOAN CONSOLIDATION VS. LOAN REFINANCE

Both student loan consolidation and refinancing are ways to simplify repayment and change your loan terms. Consolidating only works for your federal loans, though.

If you want to combine several private student loans (or private + federal loans), you’ll have to refinance. Student loan refinancing means applying for a new private student loan and using it to pay off your other loans.

There are pros and cons to both. For starters, consolidation typically won’t lower your interest rate. Refinancing usually does, meaning you could save money over the life of your loan.

That said, refinancing student loans depends on factors like your income, credit report, and debts. In other words, your loan terms are based on your creditworthiness. That’s not the case when you consolidate federal student loans.

And, refinancing federal loans with a private lender could mean you lose out on key benefits – like subsidized interest or loan forgiveness.

Depending on the types of loans you have, a combination of consolidation and refinancing may be the ideal plan.

 Student Loan ConsolidationStudent Loan Refinance
Which Loans Can I Combine?Most federal student loansBoth private and federal loans
Can I Lower My Rates?Can I Lower My Rates? The interest rate on Direct Consolidation loans is based on the weighted average of the interest rates of the loans you’re combining. The good news? This interest rate is fixed, which means it can’t get higher over time. Yes, you may qualify for lower interest rates. It helps if you (or your cosigner) have a high credit score and low debt-to-income ratio.Yes, you may qualify for lower interest rates. It helps if you (or your cosigner) have a high credit score and low debt-to-income ratio.
Can I Save Money?Probably not (though fixed interest rates could help). Consolidation usually increases the length of your repayment period. Taking longer to repay what you borrowed could mean you’ll pay more interest over the life of the loan.Yes, you could save money if you qualify for a lower interest rate. Paying off your loan quicker can also help you save money.
Can I Use Federal Loan Protections and Forgiveness Programs?

Consolidating federal loans other than Direct Loans may give you access to:

  • Income-driven repayment plan options
  • Public Service Loan Forgiveness (PSLF)

But, consolidating your current loans means you’ll lose credit for any payments you’ve already made toward income-driven repayment plan forgiveness or PSLF.

And if you have Federal Perkins Loans, you’ll lose benefits like subsidized interest and cancellation/discharge options.

When you refinance federal student loans with a private lender, you lose federal benefits and programs. These include:

  • Income-based repayment options
  • Federal loan forgiveness programs
  • Interest discounts or rebates
  • Federal deferment and forbearance options (if you have trouble paying back your loans)
Will I Pay Only One Bill?YesYes
Who Offers These Loans?The U.S. Department of Education (often through consolidation loan servicers). Your first step should be to apply for a Direct Consolidation Loan at StudentLoan.gov.Private lenders, like banks and financial institutions

STUDENT LOAN CONSOLIDATION: THE BIG PICTURE

Average aid per full-time equivalent (FTE) student in 2022-23 was:

  • $15,480 per undergraduate student
  • $28,300 per graduate student

PRIVATE STUDENT LOAN CONSOLIDATION LENDERS

LenderWhy this LenderEligible DegreesEligible Loans
LendKeyChoose from flexible repayment plans, like interest-only payments for the first four years. And, pay no origination fees.Undergraduate and/or GraduatePrivate and/or Federal
CommonBondThey offer up to 24 months of forbearance over the life of your loan. And, you’ll pay no origination fees or prepayment penalties.Undergraduate and/or GraduatePrivate and/or Federal
College AveThey offer 16 loan term options. Choose how long it will take to pay back your loan, between five and 20 years. Plus, qualify for a lower interest rate when you use autopay.Undergraduate and/or GraduatePrivate and/or Federal

Repaying Student Loans

Posted on by venessa Regali

Repaying Your Federal Student Loans

Get Informed, Then Get Matched To Online Schools Using Our Degree Finder!

PICKING A STUDENT LOAN REPAYMENT PLAN

When dealing with federal student loans, you’re presented with a menu of eight distinct repayment possibilities. Familiarizing yourself with these options is crucial in order to pinpoint the one that aligns most favorably with your financial circumstances. To accomplish this, it’s imperative to evaluate your individual requirements, encompassing an understanding of both your monthly budget and the time frame available for settling your loan.

An online tool at your disposal for aiding this decision-making process is the Repayment Estimator offered by the Department of Education. By inputting specifics such as your loan balances, interest rates, tax filing status, income, and family size, this tool serves to generate a comprehensive array of potential strategies:

  • Which repayment plans you are eligible for
  • The amount of your first and last monthly payments
  • Total amount paid
  • Any projected loan forgiveness
  • How long you have to repay your student debt

Since there are different plans and grace periods, it is crucial to get to know the features of each choice. Often, a student loan servicer can work with you, but it is a good idea to go into a meeting prepared. For quick reference, the main types of student loan repayment plans are as follows. Before you start, these differ from the ways you’d pay back a private loan, which we discuss further on in the article.

  • Standard Plan
  • Extended Plan
  • Graduated Plan
  • Income-Driven Plans
  • Income-Sensitive Plan

STANDARD REPAYMENT PLANS (SRP)

The Standard Repayment Plans (SRPs) serve as the default payment arrangement for both Federal Direct Loans and Federal Family Education Loans (FFEL). These plans grant you the opportunity to clear your loan within a span of 10 years, during which you’ll be making fixed monthly payments. The exact amount of these payments is contingent upon your loan balance and is meticulously calculated to ensure complete repayment within the stipulated decade. However, it’s important to note that you might need to fulfill a minimum monthly payment of at least $50 throughout the entirety of your loan’s lifespan.

An appealing facet of the Standard Repayment Plan is its inherent flexibility. In the event of encountering financial hardships, you have the liberty to transition to an alternative plan. Conversely, if all unfolds as anticipated, you can bid adieu to student debt after the span of 10 years, subsequently diverting your focus toward other financial aspirations.

Another point to consider pertains to the matter of interest charges. When juxtaposed with the Income-Based Repayment Plans (which we shall delve into shortly), the Standard Repayment Plan tends to entail lower interest fees. This divergence can be attributed to the elongated duration of Income-Based Repayment Plans, which could potentially lead to higher accrued interest. Nonetheless, it’s worth noting that this plan’s monthly payments might surpass those associated with certain alternative plans.

INCOME-DRIVEN REPAYMENT PLANS (IDR)

For those grappling with student loan debt, income-driven repayment (IDR) plans can serve as a valuable tool. These plans achieve this by reducing your monthly payment obligations, offering immediate relief to your cash flow. Nevertheless, it’s essential to recognize that over the long haul, you might face implications like taxable income on forgiven loans and elevated interest fees.

Borrowers who qualify have access to four distinct income-driven repayment plans, designed to assist individuals who find it challenging to meet their payment obligations on their current income. In the overview provided below, the significance of your disposable income (discretionary income) becomes apparent when considering these options.

1. REVISED PAY AS YOU EARN REPAYMENT PLAN (REPAYE)

Under this plan, your monthly payments typically amount to 10 percent of your discretionary income, divided by 12. Any remaining balance is eligible for forgiveness after 20 or 25 years.

2. PAY AS YOU EARN REPAYMENT PLAN (PAYE)

Monthly payments, within the PAYE plan, are typically equivalent to 10 percent of your discretionary income, divided by 12. Any outstanding balance becomes eligible for forgiveness after 20 years.

3. INCOME-BASED REPAYMENT PLAN (IBR)

Within the Income-Based Repayment Plan, monthly payments usually correspond to 15 percent of your discretionary income, divided by 12. However, if you’re a new borrower, the payment percentage is lowered to 10 percent. Any remaining balance is subject to forgiveness after 20 or 25 years.

4. INCOME-CONTINGENT REPAYMENT PLAN (ICR)

This plan entails monthly payments equal to 20 percent of your discretionary income, divided by 12. Alternatively, it can be the amount you would pay under a fixed 12-year repayment plan (longer than the 10-year SRP). Any remaining balance becomes eligible for forgiveness after 25 years.

EXTENDED REPAYMENT PLAN (ERP)

The Extended Repayment Plan presents you with the option to spread out your loan repayment over a more extended timeframe compared to the Standard and Income-driven plans. In contrast to the 10-year term of the SRP, you have the ability to make payments over a span of up to 25 years. During this period, your payments can either remain fixed or follow a graduated pattern. Generally, this translates to more manageable monthly payments compared to what the Standard and Graduate Repayment Plans demand. Nonetheless, if your objective is to swiftly eliminate your student debt in order to allocate funds for purposes such as purchasing a house, retirement, travel, or other aspirations, this plan might not align with your goals.

GRADUATED REPAYMENT PLAN (GRP)

The Graduated Repayment Plan initiates your repayment journey with lower initial payments that increment every two years. In essence, you remain on a 10-year track (or a 30-year track for consolidated loans), but your monthly payments commence at a lower level and progressively rise. This payment structure assumes that as you advance in your career, you’ll be in a position to make more substantial contributions toward your loan.

UNDERSTANDING LOAN REPAYMENT

Your student loan billing is managed by your loan servicer, and each servicer follows its own payment procedure. It’s your responsibility to directly submit payments to your servicer; however, they often offer assistance if needed. In case you’re unsure about your servicer’s identity, you can verify it by checking your account on My Federal Student Aid.

How much will your payment be? Typically made on a monthly basis, your payment hinges on four key factors:

  1. The specific type of loan you obtained
  2. The total amount you borrowed
  3. The repayment plan you’ve selected
  4. The interest rate associated with your loan

WHAT IS A GRACE PERIOD ?

The time lapse after graduation and before you start making payments is a “grace period”. Usually it is a set time frame which gives you the space to settle your finances and select your repayment plan.

No grace period – PLUS Loans (possible eligibility for deferment)
6-month grace period – Direct Subsidized Loans, Direct Unsubsidized Loans, Subsidized Federal Stafford Loans, and Unsubsidized Federal Stafford Loans
9-month grace period – Federal Perkins Loans
Up to 3-year extension – Military service members

Caveat: While it may sound great to have this breathing room, interest will mount up if you have unsubsidized loans. It’s the same when you don’t pay a credit card balance on time.

In contrast, Perkins loans, direct subsidized loans, and subsidized Stafford loans don’t accrue interest during the grace period. You can, however, use your grace period to make interest payments. If this is easy for you to do, it’ll put you one step ahead when your grace period is up.

DEFERMENT OR FORBEARANCE ON FEDERAL STUDENT LOANS

Do you need to postpone your payments? In some cases, one may be eligible to receive a deferment or forbearance. These are temporary pauses which allow you to stop making payments. Or, reduce your monthly payment amount for a specified period.

For instance, there’s a provision in the Department of Education Appropriations Act, 2019 which allows cancer patients to get deferments while they are in treatment. Part-time students, military persons and others may also be eligible for a deferment.

One thing to remember is that with a deferment, you may not be responsible for paying the interest your loan amasses. This applies only to specific types of loans. During a forbearance though, you are responsible for paying the interest that accrues on all types of federal student loans.

LOAN CONSOLIDATION

Do you have many federal student loans? You may be able to merge them into one loan with a fixed interest rate. The amount of the loan depends on the average of all the joined interest rates and there is no cost to you. To do so, you need to file a Federal Direct Consolidation Loan Application and Promissory Note. Overall, this may simplify your repayment process.

PUBLIC SERVICE LOAN FORGIVENESS (PSLF)

The Public Service Loan Forgiveness Program is a federal program. It forgives the remaining balance on Direct Loans for eligible student loan debt holders. How do you qualify for public service loan forgiveness? To be eligible for PSLF, you’ll need to meet several criteria:

  • Where you work matters. Qualifying employers include the government or not-for-profit organizations.
  • You must first enroll in a qualifying repayment plan. Examples include REPAYE, PAYE, IBR, ICR and SRPs.
  • You need to be a full-time employee. This means more than 30 hours per week.
  • Under one of these plans, you’ll have to make 120 qualifying monthly payments.

UNDERSTANDING FEDERAL INCOME-DRIVEN REPAYMENT PLANS

Are your federal student loan payments high compared to your income? If so, you may want to repay your loans under an income-driven repayment plan. Most federal student loans are eligible for at least one (of the four) income-driven repayment plans.

If your income is low enough, your payment could be all of $0 per month. Remember though, you’ll need to make calculations using your discretionary income as a guide. To calculate your discretionary income, find the difference between your adjusted gross income and 150 percent of the annual poverty line for a family of your size and in your state.

You may also want to familiarize yourself with the different repayment periods and payments. The table below is an overview of this information.

Income-driven Plan NameTerm LengthMonthly Payment CapDescription
Income-based repayment (IBR)20 years if you’re a new borrower on or after July 1, 2014
OR
25 yearns if you’re not a new borrower
After July 1, 2014		10% of discretionary income (for new borrowers) on or after July 1,2014 but never more than the 10-year Standard Repayment Plan amount
OR
15% of discretionary income if you’re not a new borrower on/or after
July 1,2014
  • Low monthly payments
  • Loans eligible for forgiveness after repayment period
  • Possibility of higher interest fees
  • If your loans are forgiven, the balance may be taxable
Income-contingent repayment12 yearsThe lesser of either 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
  • No income eligibility requirement may make it easier to qualify
  • You may be eligible for loan forgiveness
  • Parents with PARENT PLUS Loans can qualify once they consolidate their loans into a Direct Loan
  • Highest potential payment amount of all 4 plans
  • If your loans are forgiven, the balance may be taxable
Pay as you Earn20 years10% of discretionary income
  • Lowest payment amount for eligible borrowers
  • Loans eligible for forgiveness after repayment term
  • Only new borrowers can qualify
  • If your loans are forgiven, the balance may be taxable n qualify
Revised Pay as you Earn (REPAYE)20 years if the loans are for undergraduate study
OR
25 years if the loans are for professional or graduate study		10% of discretionary income
  • Lowest payment amount for eligible borrowers
  • Loan forgiveness terms depend on whether you’re an undergraduate or graduate student
  • Monthly payments factor in your spouse’s income regardless of filing status
  • If your loans are forgiven, the balance may be taxable

APPLYING FOR INCOME-DRIVEN REPAYMENT

To apply for one of the Income-driven Repayment Plans, there are some easy steps to follow. You won’t need an application fee, but the process requires you to complete it in one session. If you’re nervous about filling out official forms, you can download a PDF version of the Request and do it manually. Otherwise, here’s how to prepare.

  1. Create an FSA ID (or have your ID number handy)
  2. If you are married, make sure you have your spouse’s SSN and information
  3. Have your personal information and income figures handy
  4. Set aside at least 10 minutes
  5. Go to StudentLoans
  6. Log in to start the application
  7. Complete the Income-Driven Repayment Plan Request

Each year you’ll need to recertify, in order to remain eligible for the lowest possible monthly payment amount.

BASIC FEDERAL STUDENT LOAN REPAYMENT PLANS

Basic Federal Student Loan Repayment Plans often balance a monthly payment you can afford today and a lesser total amount overall than income-driven plans. That said, an IDR may lower your payments today even though in the long run, you may be paying more.

Basic Repayment Plan NameTerm LengthDescription
Standard Repayment10 yearsFixed Monthly Costs
Graduated Repayment10 or 30 years for consolidated loansMonthly payment starts out low and gets higher over time
Extended Repayment25 yearsYour payments are either fixed or graduated for the term of the loan

PRIVATE STUDENT LOAN REPAYMENT OPTIONS

Private Student Loans do not qualify for federal income-driven repayment plans. Or forgiveness programs. Yes, a debt is a debt, but Federal Student Loans begin with the U.S. Department of Education. They also come with standard benefits and protections.

The reason for this is that to get a private student loan, you’ll usually deal with a bank. Or, you’ll borrow from a private financial institution. In general, neither comes with either income-based repayment plans or forgiveness options.

Also, because these institutions don’t have to offer financial assistance to student borrowers, there aren’t as many ways to repay the loan. This limits the ways you can repay your loan, although may have a few options if you start to struggle.

To help you better grasp how to potentially lower your private student loan payments, check out some suggestions below. These may give you some food for thought on how to better manage your monthly payments.

LOWER YOUR PAYMENTS YOURSELF

If you are up for giving it the ‘old college try’, setting a budget that covers your needs rather than wants is a good place to start. Some loan lenders also suggest that you make auto-debit payments which may lower your interest rate. This is useful if you can count on your income (and can generate more money). Not so good if you think you might be hit with overdraft fees.

LOAN REFINANCING

You do need to go through hoops (credit scores for e.g.) set by your financial institution. Yet refinancing student loans may help you manage any flux in your budget. This is where you’ll have to shop around for lenders to see what terms they offer – 5, 7,10, 15 and 20 are common. Some also allow you to merge private and student loans. As such, you may be able to find a lower interest rate, decrease your monthly payment, or both.

LENDER-SPECIFIC REPAYMENT PLANS

Some lenders may offer Repayment Assistance Options to help students manage their loan repayments. Some of these are similar to federal loans, only you’ll have to qualify with a
Lender such as Discover.

  • Deferment – A temporary postponement of payments
  • Forbearance – postpones your loan payments for up to 12 months during the entire term of your loan, though there are stipulations
  • Hardship – A temporary reduction of interest rates for up to 12 months, subject to stipulations
  • Early Repayment Assistance Program – A 3-month postponement of payments
  • Payment Extension –Allows students to bring their loan current by making 3 minimum monthly payments (or the equivalent amount of 3 minimum monthly payments) within a 90-day period
  • Reduced Payment – The Minimum Monthly Payment is reduced, subject to a $50.00 minimum, for an initial period of six months.


5 WAYS YOU COULD PAY OFF STUDENT LOANS FASTER

If the prolonged duration of paying off your debt is causing frustration rather than financial strain, there are methods to expedite your journey towards repaying student loans. To initiate this process, acquaint yourself with your projected payoff date, and then strive to bring it closer. Do any of these alternatives seem like opportunities to achieve this objective?

1. MAKE ADDITIONAL PAYMENTS ON YOUR STUDENT LOAN

While the allure of discretionary spending is ever-present, consider redirecting windfalls such as overtime pay, commissions, or tax refunds toward supplementary or lump-sum payments on your loan. Remember, every bit contributes to achieving the goal.

2. EXCEED THE MINIMUM PAYMENT

Should you find yourself with extra funds, contemplate making payments exceeding the minimum requirement either weekly or monthly. This approach provides you with the flexibility to decide how much you wish to contribute beyond the minimum. Alternatively, set up automatic payments slightly above the minimum. Even forgoing the cost of five weekly coffees accumulates over time.

3. EXPLORE LOAN FORGIVENESS OPTIONS

For those embarking on careers in fields like teaching or public service, as previously discussed, loan forgiveness might be attainable. Certain states also provide Loan Repayment Assistance Programs (LRAPs). Naturally, eligibility criteria apply, but this avenue presents an opportunity to channel funds toward settling federal (and occasionally private) student loans.

4.UTILIZE TAX DEDUCTIONS

Ensure that you maximize any applicable tax credits and deductions. If you’re in the process of repaying student loans, you might qualify for the student loan interest deduction on your federal taxes. Assuming you receive a substantial tax refund, adhere to your plan while considering strategies 1 and 2.

5. REFINANCE YOUR STUDENT LOANS

Refinancing stands as a mechanism to expedite debt elimination while securing lower interest rates and monthly payments. To initiate this process, compare various refinance terms to identify the alignment with your goals. Notably, refinancing can alter your monthly payment structure. Therefore, verify that the revised payments are sustainable. If your financial situation is precarious, this step might exacerbate issues. However, if you possess solid credit and income stability, conducting research and exploring different options could prove to be a viable approach.

Financial Aid Info

Private Student Loans

Posted on by Shannon Fandler

Private student loans serve as a means to fill the financial gap between federal financial aid and the actual cost of your college tuition. Prioritize exhausting financial aid from other sources, such as grants, scholarships, work-study, and federal loans. If there’s still a need for additional funds, considering private loans could be the next step in your college financing strategy.

Here’s what you need to know before getting started!

FEDERAL VS PRIVATE STUDENT LOANS

Federal student loans receive funding from the federal government, while private student loans are provided by lenders such as banks and credit unions. Additional distinctions between the two types of loans include: 

  • Overall Cost of the Loan.  Private education loans tend to have a higher overall cost. 
  • Interest Rates. Private student loan interest rates may be higher than federal rates. Sometimes, private loans have variable interest rates that change over the life of the loan.
  • Loan Repayment Terms.  Private loans often come with less favorable repayment terms compared to federal student loans, which may offer income-based repayment plans and other benefits. 
  • Borrower Eligibility. For private student loans, your credit score may impact your eligibility, and you might need a cosigner. In contrast, most federal loans do not require a credit check or cosigner. 

Make sure to explore all available government financial aid programs before considering private student loans. However, if federal loans fall short in covering your college expenses, a private loan could be a viable option. 

FINDING LENDERS

Numerous banks, credit unions, and financial institutions provide private student loans. To find the best fit for you, it’s prudent to compare interest rates, terms, and conditions among a selection of top-rated lenders.

COMPARE THESE PRIVATE STUDENT LOAN LENDERS:

  • Sallie Mae
  • SunTrust 
  • College Ave
  • PNC
  • Citizens

APPLY FOR A LOAN

When exploring private student loans, it’s essential to consider that not all loans are alike, and different lenders may offer products, features, and terms that align better with your objectives. As you delve into potential lenders, here are some crucial factors to bear in mind:

  • Your Eligibility. Assess whether you seek private student loans without cosigner requirements or if your credit history presents challenges. Some private loans may suit your needs more favorably based on your citizenship status, income, part-time or full-time student status, and other criteria.
  • Loan Cost. Scrutinize factors such as the loan’s interest rate, interest type (fixed or variable), and associated fees. These elements contribute to the overall cost of your loan. For instance, be cautious when opting for a low, variable interest rate if you intend to repay the loan over an extended period. Variable rates can fluctuate with the market, resulting in higher payments than anticipated.
  • Loan Features. Certain private loans offer advantageous features, such as cosigner release, deferment options in case of financial hardship, or early repayment opportunities. Additionally, many lenders provide auto-pay discounts, often reducing the interest rate by 0.25 or 0.50 percent. Compare multiple lenders to explore the various features available to you.

HOW TO APPLY FOR PRIVATE STUDENT LOANS

Prior to considering private student loans, it’s crucial to complete your FAFSA and make the most of any federal grants or loans you are eligible for. Additionally, don’t overlook the opportunity to apply for scholarships! If you find that you still require additional funds, then you can initiate the process of selecting a lender and applying for private student loans.

IF YOU’RE ELIGIBLE, HERE’S HOW TO GET A PRIVATE STUDENT LOAN:

  1. Get Ready to Apply. Generally, you can apply for private student loans online. To start, you’ll need to prove your basic eligibility – like citizenship and college enrollment status.
  2. Submit Documentation. You’ll need to provide your personal and financial information to your lender. Your lender may require documents like your Social Security number, a pay stub for proof of income or your monthly housing costs. They may also as for your school’s cost of attendance, the amount of financial aid you’ve already received, your cosigner’s details (if applicable), and other information.
  3. You’ll Receive a Decision. Your lender will need to process your application and analyze your financial and eligibility information, to let you know whether you’re approved. If you’ve applied for your private loan online, you may receive a result pretty quickly – sometimes in minutes! In other cases, a lender may need more information from you to move forward.
  4. Choose and Accept the Loan Terms. Once you’ve been approved for the loan, you’ll need to decide on your interest rate type (fixed or variable), loan term, and repayment plan. You and your cosigner (if you have one) will then sign the loan agreement.
  5. Wait for Disbursement. Your private student loans will be sent directly to your college or university. If you have borrowed more than your tuition actually costs, your school will generally refund the difference to you. You can return that money to your lender. Or you could use it to cover other college costs, like room, board, or your textbooks. It’s always best to borrow the minimum amount you need to cover your education related expenses.

PRIVATE STUDENT LOANS ARE AN IMPORTANT RESPONSIBILITY

Opting for private loans to finance your college education can make your academic journey possible. College opens doors to new career opportunities and a promising future. Nevertheless, it is crucial to be aware of the risks and responsibilities as a borrower. You must ensure that you are prepared to take out and eventually repay your private loans.

 

Your Guide to Federal Student Loans

Posted on by venessa Regali

Federal loans for students offer you the chance to borrow funds for college that you must repay with interest. Often, these federal loans offer a lower interest rate and more flexible repayment terms than private student loans.

Learn all about what types of federal student loans are available to find the best option for you and don’t forget to discover grants and scholarships to help you earn free money for college.

In 2022-23, 85% of first-time, full-time degree / certificate-seeking undergraduate students were awarded financial aid. Overall, 72.3%of all undergraduates received some type of financial aid.

ec-federal-student-loans

TYPES OF FEDERAL STUDENT LOANS

There are two main types of federal student loans:

  • William D. Ford Federal Direct Loans
  • Federal Perkins Loan Program

These loans have unique requirements, interest rates, and maximum awards per year, which are explained below.

WILLIAM D. FORD FEDERAL DIRECT LOANS

This is the largest federal student loan program where the U.S. Department of Education is the lender. These loans include:

  1. Direct Subsidized Loans
  2. Direct Unsubsidized Loans
  3. Direct PLUS Loans
  4. Direct Consolidation Loans

Check out the table below to learn about the differences between these loans.

FEDERAL PERKINS LOAN PROGRAM

As opposed to direct loans, which have the Department of Education as the lender, the Perkins loans are school-based loans, which means that the individual school is the lender.

These loans are offered to undergraduate and graduate students with exceptional financial need. In addition, the amount awarded depends on the amount of funds available at a particular school.

Often, the students with the greatest financial need are awarded Federal Perkins Loans.

TYPES OF FEDERAL STUDENT LOANS

Federal LoanCollege Degree LevelFederal Student Loan Program DetailsInterest Rate (First Disbursed on or After July 1, 2018 and Before July 1, 2019)Maximum Annual Award
Direct Subsidized LoanUndergraduateFor those with financial need5.05%$5,500 (depending on grade level and dependency status)
Direct Unsubsidized LoanUndergraduate, graduate, and professional degree studentsFinancial need is not required5.05% (6.6% for graduate or professional)$20,550 (depending on grade level and dependency status)
Direct PLUS LoanParents of dependent undergraduate students; and for graduate or professional degree studentsFinancial need is not required; borrower must not have adverse credit7.6%Maximum amount is cost of attendance minus any other financial aid you receive
Federal Perkins LoanUndergraduate, graduate, and professional degree studentsEligibility depends on financial need and availability of funds at your school5.0%$5,500 for undergraduate students; $8,000 for graduate and professional students

PERCENTAGE OF GRADUATE STUDENTS WHO RECEIVE FINANCIAL AID

71.6% of all graduate students received some type of financial aid, including 44.2% of graduate students who took out some type of loan.

HOW TO APPLY FOR FEDERAL STUDENT LOANS

In order to apply for federal student loans, you must complete and submit a Free Application for Federal Student Aid (FAFSA). Based on these results, your college or career school will send you a financial aid letter, which may or may not include an offer of federal student loans.

This offer includes instructions on how to accept all or part of the loan. However, before you receive your loan funds, you will have to complete two steps:

  • Complete entrance counseling to ensure that you understand your obligation to repay the loan
  • Sign a Master Promissory Note (MPN), agreeing to the terms of the loan

As some students may not receive federal student loans as an option after completing the FAFSA, don’t forget about private student loans. While each lender and type of loan have different requirements than federal loans, private loans are available to all students.

BENEFITS OF FEDERAL STUDENT LOANS

Some of the benefits of federal student loans include:

  • Interest rate on federal loans is usually lower than private student loans
  • You don’t need a credit check or cosigner for most federal loans
  • You don’t need to begin repaying your federal loans until you leave college or drop below half-time
  • If you demonstrate financial need, you may qualify to have the government pay your interest while you are in school
  • Many federal student loans offer flexible repayment plans and options to postpone your loan payments if you’re having trouble
  • You may be eligible to have a portion of your federal loans forgiven if you meet certain conditions and work in certain jobs

FAFSA Application Deadline

Normally, online FAFSA applications must be submitted by midnight Central Time on June 30 of a given year. For instance, the 2023-2024 FAFSA deadline is midnight Central Time, June 30, 2025.

FEDERAL STUDENT LOANS – HOW MUCH SHOULD YOU BORROW?

Whether you’re taking out a private student loan or a federal loan, it’s important to consider the legal obligation you have to pay back then loans, so responsible borrowing is key.

Some of the things to consider when borrowing money for college:

  • Understand your total amount of loans and how this will affect your future finances
  • Research starting salaries in your field
  • Understand the terms of your loan
  • Make payments on time

Often there are flexible repayment terms for both federal loans and private student loans. This includes options such as, grace period, interest-only payments while in school, and interest rate reductions for automatic debit.

Looking for private student loans? Check out some of your options here!

Percentage of Students Stressed about paying for college

According to a 2017 study by The Princeton Review, 98% of college applicants and their parents said financial aid would be necessary to pay for college. Plus, 65% said financial aid was extremely necessary.

OTHER TYPES OF FINANCIAL AID

As the price of college tuition continues to rise understanding the types of financial aid and finding the right combination of financial aid to pay for your degree is just as important as finding the perfect program for you.

Luckily, there are plenty of other options of financial aid for you to choose from, including:

All of these options mean that you don’t have to worry if you need to supplement your federal student loan offer. Discover some private student loans to find the perfect one for you.

FIND THE FINANCIAL AID PACKAGE AND FEDERAL STUDENT LOAN THAT’S PERFECT FOR YOU

Finding the right mix of financial aid is one of the key aspects of earning your degree. That’s why it’s important to consider all of your options and be sure to do your research.

A good starting point is talking to your counselor or the financial aid office at your school, both of which should have specific details for you to explore.

In the meantime, check out some of our private scholarships and find the perfect degree for you.

© Education Connection 2024. All Rights Reserved.

*https://nces.ed.gov/programs/digest/d20/tables/dt20_311.15.asp

Sources for school statistics is the U.S. Department of Education’s National Center for Education Statistics.

Disclosure: EducationDynamics receives compensation for the featured schools on our websites (see “Sponsored Schools” or “Sponsored Listings” or “Sponsored Results”).  So what does this mean for you? Compensation may impact where the Sponsored Schools appear on our websites, including whether they appear as a match through our education matching services tool, the order in which they appear in a listing, and/or their ranking.  Our websites do not provide, nor are they intended to provide, a comprehensive list of all schools (a) in the United States (b) located in a specific geographic area or (c) that offer a particular program of study.  By providing information or agreeing to be contacted by a Sponsored School, you are in no way obligated to apply to or enroll with the school.

This is an offer for educational opportunities, not an offer for nor a guarantee of employment. Students should consult with a representative from the school they select to learn more about career opportunities in that field. Program outcomes vary according to each institution’s specific program curriculum. Financial aid may be available to those who qualify. The financial aid information on this site is for informational and research purposes only and is not an assurance of financial aid.

1 You must apply for a new loan each school year. This approval percentage is based on students with a Sallie Mae undergraduate loan in the 2018/19 school year who were approved when they returned in 2019/20. It does not include the denied applications of students who were ultimately approved in 2019/20.

2 This promotional benefit is provided at no cost to borrowers with new loans that disburse between May 1, 2021 and April 30, 2022. Borrowers are not eligible to activate the benefit until July 1, 2021. Borrowers who reside in, attend school in, or borrow for a student attending school in Maine are not eligible for this benefit. Chegg Study® offers expert Q&A where students can submit up to 20 questions per month. No cash value. Terms and Conditions apply. Please visit http://www.chegg.com/legal/smtermsandconditions for complete details. This offer expires one year after issuance.

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