Articles

From guidance counselors and parents to your soccer coach and nosy neighbors, everyone seems to be interested in where you’re planning on going to college. And with good reason — there’s a lot to consider when making this important decision, beyond just picking the right university or vocational school and figuring out your major. Education costs money … a lot of it. But with some practical planning, there are ways to rein in college costs even if your college fund hasn’t caught up with your dreams quite yet.

Figure out What You’ve Got to Work With

Have the “money talk” with your parents. Find out if they — or your grandparents — have funds put aside for you like a tax-advantaged 529 college savings plan. If they do, know that the impact on your financial aid is different based on whether your parents or your grandparents started the account. And don’t forget to ask for money toward your college fund for birthday presents and holiday gifts to bolster your savings.

Stretch Your Budget

Rather than going straight to a four-year school, consider spending your first year or two at a community college. Community college can cost much less — plus, you could potentially save on living expenses by commuting. You can then transfer to the school of your dreams in a year or two to dig into your major.

Plan Your Way Out of a Jam

Talk to your college advisor about the feasibility of graduating early. Look into concurrent enrollment programs that allow you to take reduced-cost college classes while in high school. AP testing and CLEP tests can also help you receive credit at a reduced rate and speed up your graduation date. Graduating even one semester early can save you thousands of dollars in tuition, housing and other expenses.

Scholarships Are Free Money

In addition to academic and sports scholarships, there are also community-based, gender and subject area scholarships. Once you’re in college, you can work with your major department or honor society to take advantage of these programs. Look into smaller scholarships as well. Sometimes they’re easier to get, and a lot of small scholarships can add up to more money. And don’t forget about grants if you have financial need. Many states and colleges offer their own need-based grant, research and scholarship programs that you can apply for.

Work-study and Summer Jobs

Instead of taking out more student loans, look for opportunities to participate in federal work-study. These are programs that provide you work during the semester and can help you reduce the need for debt. A summer job can build up your resume and help toward paying your college expenses for the coming year.

Get Ahead of Debt

Make sure you fill out the Free Application for Federal Student Aid each year to take advantage of grants, work-study and some scholarships. Speak with a financial professional to help you take steps now to sidestep serious debt and make your transition into life on your own as smooth as possible.

From guidance counselors and parents to your soccer coach and nosy neighbors, everyone seems to be interested in where you’re planning on going to college. And with good reason — there’s a lot to consider when making this important decision, beyond just picking the right university or vocational school and figuring out your major. Education costs money … a lot of it. But with some practical planning, there are ways to rein in college costs even if your college fund hasn’t caught up with your dreams quite yet.

Figure out What You’ve Got to Work With

Have the “money talk” with your parents. Find out if they — or your grandparents — have funds put aside for you like a tax-advantaged 529 college savings plan. If they do, know that the impact on your financial aid is different based on whether your parents or your grandparents started the account. And don’t forget to ask for money toward your college fund for birthday presents and holiday gifts to bolster your savings.

Stretch Your Budget

Rather than going straight to a four-year school, consider spending your first year or two at a community college. Community college can cost much less — plus, you could potentially save on living expenses by commuting. You can then transfer to the school of your dreams in a year or two to dig into your major.

Plan Your Way Out of a Jam

Talk to your college advisor about the feasibility of graduating early. Look into concurrent enrollment programs that allow you to take reduced-cost college classes while in high school. AP testing and CLEP tests can also help you receive credit at a reduced rate and speed up your graduation date. Graduating even one semester early can save you thousands of dollars in tuition, housing and other expenses.

Scholarships Are Free Money

In addition to academic and sports scholarships, there are also community-based, gender and subject area scholarships. Once you’re in college, you can work with your major department or honor society to take advantage of these programs. Look into smaller scholarships as well. Sometimes they’re easier to get, and a lot of small scholarships can add up to more money. And don’t forget about grants if you have financial need. Many states and colleges offer their own need-based grant, research and scholarship programs that you can apply for.

Work-study and Summer Jobs

Instead of taking out more student loans, look for opportunities to participate in federal work-study. These are programs that provide you work during the semester and can help you reduce the need for debt. A summer job can build up your resume and help toward paying your college expenses for the coming year.

Get Ahead of Debt

Make sure you fill out the Free Application for Federal Student Aid each year to take advantage of grants, work-study and some scholarships. Speak with a financial professional to help you take steps now to sidestep serious debt and make your transition into life on your own as smooth as possible.

You just graduated college, so congratulations are in order and so is a big warm welcome to adult life.

First order of business? Pay your bills!

That diploma wasn’t free and if you’re like 73% of the other 2017 graduates, you have student loan debt and need to figure out how to pay it back.

The good news is that you have choices. There are several student loan repayment plans to choose from. Some are based on a percentage of discretionary income, run for 20-25 years and may include loan forgiveness if all payments are made on time. Other start with low payments that increase over time as your income increases.

Regardless of which plan you choose, make sure you know who your loan-holder is, where to send payments and how much to pay. You may also have questions about discharging your loans or the consequences of missed payments. Get answers to your concerns before you fall behind, and join the 4.2 million borrowers who were in default at the end of 2016.

When must I begin repaying my student loans? Do I have a grace period?

Most student loans have a six-month grace period, which means you won’t have to start making payments until six months after you graduate, drop out or drop below half-time status. The grace period is meant to give you a chance to find a job and begin earning an income before you’re swamped with bills.

Tips to prepare for student loan payments:

• Use the grace period to research student loan repayment options,
• Create a budget built around your student loans
• Prioritize paying off student loans
• Communicate with your loan servicer
• Set up automatic payments to avoid late fees
• Avoid student loan default at all cost
• Know the exact date when you expect to pay off the loan and give yourself a target ahead of that to shoot for

The following types of loans have six-month grace periods:

• Direct Subsidized/Unsubsidized Loans
• Subsidized/Unsubsidized Federal Stafford Loans
• Some private student loans

PLUS loans have no grace period, and you must begin repaying them as soon as they are fully disbursed.

The grace period on Federal Perkins Loans depends on the school that gave you the loan. If you have this type of loan, check with your school to find out when you must begin repayment.

The grace period on a private student loan depends on the lender and your loan contract. Most private student loans have a short grace period, but you must check with your lender to make sure.

You may also choose to consolidate your student loans during the grace period. This will group your federal student loans into one payment and simplify matters considerably.

If you have federal student loans, you can choose to consolidate them with the department of education, through your loan servicer, or consolidate with a private lender. Private lenders offer lower interest rates, but only to those with high credit scores. If you have good credit and are looking to lower your interest rates on medical school loans, for example, working with a private lender may be the best option.

How much do I pay each month? Can I pay more?

Your minimum monthly payment is based on the type of loan, the amount you owe, the length of your repayment plan and your interest rate. You’ll typically have 10 to 25 years to repay federal loans entirely. Shorter lengths of repayment time or larger loans will result in higher monthly payments.

The Standard 10-year Repayment Plan is by far the most popular plan with 11.37 million borrowers enrolled in 2017, but that doesn’t mean it is the best plan for you. This is the default plan. Borrowers are automatically enrolled in the Standard Repayment Plan unless they choose a different one.

You’ll make fixed monthly payments for 10 years. It’s a great plan if you can afford the monthly payments and the cheapest option long term because you’ll pay a lot less interest. But, if you don’t have the income to support these payments, you should enroll in one of the income-driving repayment plans.

As for making additional payments, you can always pay any amount more than the minimum payment each month. There are no penalties for early repayment, and taking this approach can save you a significant amount of interest over time.

How do I make payments?

Once bills are due, you’ll be responsible for sending your monthly payments to the companies that hold your loans

If you don’t know where to send a payment, check with your school’s financial aid office. The financial aid office will be able to tell you who your loan servicers are. You can then contact your loan servicers directly with specific questions.

You can also retrieve loan information via the National Student Loan Data System.

Be aware that your payments are due even if you don’t receive the bills. If you move after graduation, tell your loan servicer your new address to ensure that you receive bills and can stay on top of your payments.

Consider changing your loan due date to make budgeting easier. The student loan payment might be due before you receive your paycheck each month. Contact your loan servicer to see if they can switch your payment date to directly after you get paid.

What are my options when I’m having trouble meeting minimum loan payments?

If your monthly required payment is more than your income allows you to pay, you may be eligible for income-driven repayment plans like the Income-Based Repayment Plan (IBR); Income-Contingent Repayment Plan (ICR); or Pay As You Earn (PAYE) or Revised Pay As You Earn (REPAYE).

The income-driven repayment plans are based on your income rather than the amount you owe, thereby lowering payment requirements for low-income borrowers. Generally speaking, these plans take into account your income, family size and state where you live. You pay between 10% and 20% of your discretionary income and plans run 20-25 years, depending on which program you choose

If you expect your financial difficulty to be short term, such as if you are in between jobs or are on medical leave, you can temporarily suspend payments on federal student loans. However, your loans will continue to accrue interest, meaning you will owe more when you resume payments.

You may also be able to extend the time you have to repay federal loans by using an extended repayment plan.

Or, if you expect your earning power to increase significantly over the years, you can opt for a graduated repayment plan. This allows you to pay less at first, with monthly payments increasing over time.

What are the consequences of missed payments? Defaulting?

Student loans never disappear. There’s no statute of limitations, and student loans are rarely discharged even in bankruptcy. With few exceptions, your student loans will follow you through life, until you pay them off

If you make a late payment on a federal student loan, you may be responsible for a late fee of 6% of the payment.

Defaulting on federal student loans will result in more severe penalties. You are considered delinquent when you haven’t made a payment in 90 days. When you haven’t made a payment in 270 days (nine months), you go into default and suffer a lot of consequences for it.

The government can garnish up to 15% of your wages and Social Security benefits, as well as offset income tax refunds. The government may also deduct 25% of each payment for collection fees, making the loan cost significantly more.

Late or missed payments will also show up on your credit report and can harm your score.

If you cannot afford your payments, it is much better to contact your loan servicer and review your repayment options rather than simply not paying.

Can I cancel my student loans?

Federal student loans may be canceled under the following circumstances:

• Your college closed down while you were a student there or within 90 days after you withdrew.
• Your school owed you or your lender a refund after you withdrew but never provided it.
• The loan was a result of identity theft.
• The student borrower dies.
• You become totally and permanently disabled.

Can my loans be forgiven?

Federal student loans may be eligible for certain forgiveness programs depending on your profession.

If you have an IBR plan, any balance remaining after 10 years will be forgiven if you spend those years in a public service sector such as the military, public education or police work.

You can have up to $17,500 in loans forgiven if you teach in a low-income area for five years.

If you ever find yourself struggling with student loans, keep in mind that you always have options. Don’t wait until you’ve missed several payments or have already defaulted on your loans; get help as soon as possible to create a plan that works for you and your budget.

https://www.debt.org/students/how-to-pay-back-loans/

NFPR-2019-75 ACR#324822 08/19

No one could have foreseen the convergence of two of the most consequential economic events in our history – the mass migration of the Baby Boom generation into their final life stage and the tectonic shift of a declining global economy. Unhinged stock market volatility, rising health care costs and historically low interest rates on savings have caused millions of preretirees to rethink their plans and their vision, especially as they consider the prospect of having to stretch their retirement income over 25 or 30 years. As if that weren’t enough, now tens of thousands of retirees are finding that their only real safety net is threatened as a result of their decision to default on their student loans.

That’s right; at least 700,000 student loan debtors are over the age of 65, double the number just five years ago. Nearly 10 percent of these debtors are at least 90 days past due on their student debt payments up from 6 percent in 2005.1Unlike most other forms of debt, the federal government will not rest until it receives all of its money. And, because the federal government issues Social Security checks, they can also withhold what they need, leaving many retirees unexpectedly short of cash.

The government can deduct as much as 15 percent from each check until the debt is repaid. With the average monthly benefit being $1,234, that would mean about $200 less in available to meet tight monthly budgets. Needless to say, it can make life much more difficult, especially for retirees living on a fixed income.

The sudden increase in senior student debtors can be attributed to two key factors: In the last couple of decades, parents who wanted to ensure their children had a college education became mid-life borrowers; and many older adults took out student loans to continue their higher education later in life. Student loan defaults among seniors are accelerating as more Baby Boomers are crossing the retirement threshold with very tight budgets. What many of them may not have realized is that student loan guaranteed by the federal government is not dischargeable through bankruptcy.

Retirees facing tough decisions about their finances need to consider the long-term consequences of defaulting on student debt. Not only will a default result in automatic deductions from your Social Security check, it will also make it difficult to find employment or obtain financing if either become necessary at some point. It would be better to look for an additional source of income, perhaps through part-time work or even refinancing a mortgage.

Additionally, retirees can also look into the Income-Based Repayment (IBR) program which can reduce your payment or cap it at 15 percent of their income. As long as payments are made on time, the loan balance is forgiven after 25 years.

If a retiree can find full-time employment (30 hours per week) in certain public services, such as a public library, military organization, emergency service, child or elderly daycare, etc., the Public Service Loan Forgiveness (PSLF) will forgive the loan after 10 years of payments. The PSLF program can be combined with IBR to keep payment low.

Lessons Learned -The unfortunate position of these retirees should provide valuable lessons for mid-life adults considering taking on student debt, either for their children or for their own continuing education. Parents especially should consider the viability of financing their children’s college education. Early planning and savings are the obvious solution for parents who are intent on sending their children to college; however, for parents who aren’t financially prepared, other options, such as community colleges and less expensive, and local public colleges can provide a quality education without the added financial stress.

http://www.asa.org/site/assets/files/3680/retirement_delayed.pdf

Tag: student loan, student debt, retirement

You think back fondly on those halcyon collegiate days--studying in the quad, late-night pizza, tailgating for the big tailgating game, dorm living, tossing your graduation cap in the air...beyond the lifelong friends and the parties and fun, college helped you get to where you are today. Looking ahead, your student is planning on following in your footsteps and will be receiving that admissions letter of acceptance sooner than you think.

Unfortunately, it’s getting increasingly more difficult to afford college. Formal higher education is the institutional stamp of approval that will grant your child the entrance into the workforce, but that stamp comes at a steep cost that has increased more than 500 percent since 1985. The average cost of tuition and fees for the 2015-16 school year was $9,410 for state residents at public colleges, $23,893 for out-of-state residents attending public universities, and a $32,405 at private colleges. These average tuitions mark a 2.9% increase in tuition over the 2014-15 school year (before adjusting for inflation). Student loans end up being the solution for most college-bound students which come tied to their own set of issues; 43 million Americans hold student loan debt at a collective total of $1.26 trillion as of Q1 2016. Plus, approximately 43% of Americans who took out federal student loans are not making any payments.

There are scholarships and grants that lower the price tag of higher education, but they also make navigating the complicated world of financing college even more challenging.

Take these tips into consideration as you help your student apply and prepare to pay for college:

Know your budget.

Like purchasing many large, expensive items like a car or a house, it’s wise to know your budget going into the search for the right fit. If you don’t, you run the risk of test driving luxury cars out of your budget or touring houses outside of your price range and then what you can actually afford seems not good enough. The same goes for schools. If your family cannot realistically afford Harvey Mudd College (the most expensive college in the country as of tuition year 2015-16), then don’t tour the campus. And sure, a full ride scholarship would be great...but isn’t likely. Narrow down choices within a reasonable range (and with 4,726 degree-granting institutions in the U.S. there are indeed plenty of choices), and then help your student decipher what’s important to them in relation to what’s offered at the options from there.

Start acknowledging affordability by running the numbers through the Expected Family Contribution (EFC) calculator to learn what colleges are likely going to say your contribution should be. If you calculate a high EFC number (meaning you are wealthier), you still won’t want to pay full price for school. In that case look for schools that are generous with merit scholarships for students (regardless of financial need). If you calculate a low EFC rate, look for schools that have substantial financial aid.

Understand the financial breakdown.

Your student likely won’t be paying the total sticker price for a year’s tuition at college. That means you’re looking at the total net price (sticker price minus total aid). When your child receives the acceptance letter with the financial aid award breakdown (scholarships, grants, etc.), it can be difficult to decipher what means what. For example, the line item “financial aid” can be used in the place of what are actually loans. Then there’s often a question around how much Expected Family Contribution there is and how it can be applied to what--is it just tuition or does that include room and board? Avoid confusion preemptively with a secure online tool like College Abacus allows for the comparison of net price estimates, given your personal situation, before financial aid is actually determined.

Expand the search.

Don’t be afraid to expand the search parameters for colleges. Some colleges are so popular they see such high applicant numbers they can afford to be selective in who they accept and who they offer money to, resulting in less generous overall financial aid. Schools with lower application rates are usually small, lesser-known, private colleges who may have higher reserves of financial aid to grant.

Learn from an expert.

Make an appointment with the financial aid offices at the colleges your student is considering to gain a better understanding of they will calculate financial contribution. They’ll be able to tell you if elements like home equity will be factored in. (This is not information required for the FAFSA, but is required information at some private colleges.) They will also be able to answer any specific questions that apply to your situation that a general college financial FAQs webpage cannot answer. Additionally, a meeting with your financial advisor well before your student pays that first semester bill is wise to ensure you won’t be met with any surprises when taxes comes due.

1. https://trends.collegeboard.org/college-pricing/figures-tables/tuition-and-fees-and-room-and-board-over-time-1
2. http://www.bloomberg.com/news/articles/2013-08-26/college-costs-surge-500-in-u-s-since-1985-chart-of-the-day
3. http://www.collegedata.com/cs/content/content_payarticle_tmpl.jhtml?articleId=10064
4. http://www.collegedata.com/cs/content/content_payarticle_tmpl.jhtml?articleId=10064
5. http://www.marketwatch.com/story/every-second-americans-get-buried-under-another-3055-in-student-loan-debt-2015-06-10

Tags: student loans, finance