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Common Misconceptions About College Without Student Loans

student loan and financial aidAre you trying to determine how to pay for your college education? This is one of the most controversial debts today because it is not only compromising the finances of the youth, it is also jeopardizing the future of the economy.

A lot of our youth are graduating from college with a lot of debts to their name. Student loans get most of the graduates through to college and that is one of the biggest debt problems that they are facing. They accumulated this debt even without a proper job yet. That is why their first decade of earnings will have to carry the burden of paying off these college debts.

With their money tied up with debt, they are unable to make investments early on in their life. It is difficult for them to buy a house, a new car and other things that will make their lives more comfortable. Some of them are even delaying life events like marriage or parenthood because they know that they have to prioritize paying off these student loans.

This is why a lot of incoming college students today are trying to find ways to go to college without having to apply for any college loan.

This issue came further into the limelight when Germany recently announced that all their universities will be free to all students – local and international. According to the article published on, higher education across the country is now free for all. The tuition fee was actually already low to begin with. But with this announcement, it is not more possible for financially struggling students to get an education.

Of course, not everybody is open to the idea of going to another country to get an education. Some parents are not ready to let their kids go too far while other kids are just too immature to be left alone in a new country.

That only means they must find a way to try to go to college without getting into any, if not a lot of student loans.

The good news is, there is a way to go to school without college debt – as long as you know the difference between fact from fiction.

Common myths for those who want a college degree without the debt

According to an article published on, the Class of 2014 is now the most indebted class. The average debt that a graduate has to pay off is at $33,000. This will take more than the standard decade to pay off for some graduates. If compared to the debt 20 years ago, this average debt is almost double than what they had to pay back then.

Getting into college without student loans is not impossible but you need to understand your options. Some incoming college students can actually qualify to get higher education without debt – but they failed getting it because they believed in a couple of misconceptions.

Misconception 1: Community colleges do not have scholarships.

Despite the fact that they charge really low tuition fees, that does not mean these colleges forego scholarships. They still give this away to qualified students. Even if it is a $1,000 scholarship, it will still help you spend on other expenses apart from your tuition fees and books. Anything that you save here can be put aside to grow in an investment fund for two years. That way, you can use the money to pay for your schooling once you enter into a state or for profit university.

Misconception 2: The only way to avoid student loans is to go to a community college first.

In truth, going to a community college will decrease the chances of you needing a student loan. However, this is not the only way. There are a lot of schools out there that offer scholarships to qualified students. State universities offer great scholarship programs if you have the talent and grades to qualify for it. You may want to ask your high school counselor to give you a list of scholarship programs that you can apply for so you can identify the schools that you can qualify to go to. If you do qualify, you do not have to go through the hassle of going to two schools just to complete your education without student loans.

Misconception 3: Students can only financially prepare for a debt free college education.

This is true – you need to be financially prepared to go to college without debt. However, that is not entirely true. There are students who can go to college even if they or their parents did not prepare financially for it. If they did good in school, it will be easier for them to get a college education without the need to borrow money.

Misconception 4: Filling out the FAFSA is only to get help for student loans.

According to, the federal government’s student aid program offers financial aid in various forms. If the parents of the child serves in the military, he or she is qualified to get aid from the government. You can also apply for work study and tax benefits to lessen the load. If you get a grant, it will help you pay for your college education without borrowing money at all. So do not skip that FAFSA (Free Application for Federal Student Aid).

Strengthen your financial position despite student debt

It is really a dream of high school students to go to college without student loans. However, the reality for some students is, they cannot escape borrowing money to go through college. Sad as it may seem, there are those who really have no choice about it. While a lot of scholarships and grants are there, not everyone qualifies for it.

So if you are one of these unlucky few, do not lose hope. There are still ways for you to demolish student loan debt – or at the very least, minimize the negative effects of the debt to your financial future. Here are some tips that we have for you.

  • Get a job. Believe it or not, you will not spend every waking moment of your college life studying. You will find a lot of free time that you can use to earn some decent money. You can use this money to help pay off some of your expenses. Or you can use it to grow your savings. If you borrowed money, you can pay it off while you are still in school. That should lessen the amount that you have to pay off when you graduate.
  • Do not accumulate more debt. Some college students get into trouble because not only do they have student loans, they also have credit card debts. There are many things that you can do to cut credit card debt but it all begins with you being wise about how you use it. We are not really saying that you do should not use your credit card. You can do so to help you build up your credit score. However, make sure that you can pay it off immediately so you do not accumulate a balance on it.
  • Budget your money. Whether your money is coming from student loans, your parents or your part-time job, make sure you learn how to budget it. That way, you can prioritize your payments and eliminate those that are unnecessary. It will also allow you to monitor if you are going beyond your means or you are doing alright with your money. Through your budget plan, you can see if your money is already running short. You can do something about it before you run out.

If you need help with your student loans, National Debt Relief offers counseling to those who want to solve their debts. The service includes helping the borrower find the best debt relief option that will help them pay off their student loans. The company will even help you with the documentation. This will only cost you a one time service fee that you do not have to repeat. It will be placed in an escrow account that will only be released when you are satisfied with the paperworks done by the company. There are no upfront or maintenance fees.

Borrowing Money For College Is A Bad Idea For A Reason You’ll Never Guess

Three tough decisionswoman thinking

If you or your son or daughter is nearing college-age, you have some difficult and confusing decisions ahead of you. Three of the most important are choosing a school, determining how to finance its cost and deciding on a field of study. These are difficult decisions to make because making the wrong ones could have a very negative affect on you or your child’s entire life.

Should you or your child even go to college?

We have heard it drummed into our heads over and over that every child should have a college education. Unfortunately, this is simply not true. We are all different, we all have different skill sets and we all have different abilities. So the first question you need to ask yourself or your child is whether she or he really needs to go to a four-year college. He or she might be better off in a two-year community college or in a trade school. You need to have a frank discussion with your child regarding his or her interest in college and whether or not they are committed enough to make it worth investing in what today’s four-year college education costs.

STEM or something softer

When choosing a college or helping your child choose a college you need to think about whether he or she would be best choosing a major in one of the STEM (science, technology, engineering, math) curriculums or in something softer. Study after study has shown that a STEM major will lead to a higher paying career than most other majors. However, again it’s important to factor in your interests, skills and abilities. Not everyone is cut out to be a math or engineering major regardless of potential earnings. On the other hand, if your child’s or your interest lies in areas such as photography and television arts, fine arts psychology or pre-K education you need to understand that he or she likely won’t be able to earn more than $25,000-$30,000 right out of school, which will make paying back any student loans very troublesome.

Food for thought

While this may not apply to psychology or social studies majors, a study of people in engineering and science and their earnings revealed some very interesting findings. What this research found is that the biggest single thing that has the most affect on salaries is variations in GPA or grade point average, And that students borrowing money for college generally end up with lower grades than those that didn’t have to borrow money and that this is the most important reason why they end up earning less. What this translates into is that borrowers don’t end up earning less due to financial restrictions or demographics that require them to go to inferior schools. In fact, students that are required to borrow money to finance their educations are 50% more likely to choose a more expensive program or a private school. This means they are betting more on the advantages they will benefit from these programs in their futures.

What are the results of this? It’s that non-borrowers that are disadvantaged and that attended lower-ranked schools leave schools with salaries that are more than 10% higher than those that were required to borrow money to finance their educations.

The reason for this

It all really boiled down to grade point average. Those that borrowed money had dramatically poorer grades than non-borrowers and this completely eliminated the positive advantages of attending a better school.

Why do the students that borrow money have lower grades?

The answer to this has been hotly debated. It could be due to the fact that there is the stress of debt that often requires them to get a job to help finance their educations. It’s also very possible that those who borrow money to finance their schooling are overestimating how important school quality is on their prospects for employment. Or it could be that borrowers faced more anxiety when they were trying to get a job and ended up taking one that paid less or was more secure instead of waiting for a better one.

Another possible explanation is that going into a very competitive program may not be in you or your child’s best interest. There is research showing that in the more competitive math, technology and science programs there is a higher dropout rate than those fields that are less competitive. The ugly truth is that the smarter are your peers, the dumber you may feel. And the dumber you feel the more likely you are to drop out.

man carrying dollar signThe moral: Reconsider borrowing money to finance your schooling

The net/net of all this is that when it comes to your future your grades are more important than where you went to school. For whatever reason, it’s clear that students that borrow money will end up with worse grades. So the best bet for you or your child is to avoid student loans like the plague and just do the very best you can do in your studies.

Student debt is like the Roach Motel

You’ve probably seen that advertisement for the Roach Motel where roaches check in but they never check out. Unfortunately, the same thing is true of borrowing money for college. It’s very easy to get into but virtually impossible to get out of. Our federal government in coordination with our colleges and universities has made taking out student loans so easy it’s very difficult to avoid taking them. But our government isn’t so nice when it comes to repaying those loans. Six months after you graduate from college you will be required to start paying them back no matter how painful it might be. You were automatically put into what’s called 10-Year Standard Repayment unless you were smart enough chose another program. If you are in 10-Year Repayment you will have a fixed monthly payment for 10 long years. And, of course, the more you borrowed the higher your monthly payments will be. For example if you borrowed $10,000 at 6% interest, your monthly payment would be $111.10. And if you were in debt to the tune of $20,000, your monthly payment would be $222.04 for those 10 long years. That could be enough to keep you from buying a car or putting together a down payment on a house.

Not even bankruptcy can save you

In 2005 our Congress in its infinite wisdom changed the bankruptcy code to make both federally backed and private student loans non-dischargeable in a bankruptcy. This means that student loans can’t be written off or forgiven unlike other private debts. This puts them on the same level as alimony and child support payments – totally non-negotiable so that they stick with you forever. For whatever it’s worth there is one exception to this, which is if you were able to prove to your bankruptcy judge that you had a severe financial hardship. You would need to be able to show and prove you can’t maintain even a minimal standard of living if you are forced to repay your student loans and that this problem is likely to continue for most of the repayment period of your student loans. You would also need to show the bankruptcy judge that you had made really good faith efforts to repay your loans. Barring this, you’re stuck and you will need to repay those loans whether it’s for 10 years or even longer.

Should You Refinance Your Federal Student Loans Into A Private Loan?

Video thumbnail for youtube video Surprising Fact – Secured Credit Cards Are Not Just For The Credit TarnishedWe read recently that another bank is offering to refinance federal student loans into private loans. It’s currently offering these loans starting as low as 4.75% for borrowers that have a good credit score, long-term employment and that have a checking account at the bank. It is also offering variable rate loans as low as 2.31%,

How this compares with federal PLUS loans

These rates are dramatically lower than rates that parents got when they took out federal PLUS loans as they have interest rates ranging from 6.41% and 8.5%. Other federal loans generally have high rates and don’t offer many alternatives for getting them reduced.

Federal Direct Consolidation Loans

One option available to people with multiple student loans is to consolidate them into a federal Direct Consolidation Loan. However, the interest rates on these loans are the weighted average of the loans being consolidated rounded up to the nearest 1/8th of one percent. What this means is that if you were to opt for one of these loans your new interest rate would be higher than the loan with the lowest interest rate you’re currently paying but lower than the one with the highest interest rate. In other words, you might see a reduction in your interest rate but it probably wouldn’t be very dramatic vs. that loan at 4.75%.

Other options

Other banks are beginning to offer similar refinancing loans. For example, Discover Financial Services, Social Finance (SoFi) and Commonbond all offer to refinance federal loans. Social Finance is an especially interesting alternative. It’s currently offering fixed rate loans starting at 3.63% and variable rate loans as low as 2.66% APR (with AutoPay).

However, to qualify for one of these loans you must have graduated from one of SoFi’s 500+ colleges and universities and your loan would come not from SoFi but from the school’s alumni. In addition, you must be currently employed, a US citizen or permanent resident, have graduated from one of SoFi’s member schools and have a good credit and employment history.

Should you stay or should you go?

Should you refinance those student loans by converting them into a private loan or stay with what you’ve got?

Unfortunately, this is not an easy question to answer, as there are pros and cons to both of these options. Of course, the biggest pro to refinancing those student loans is if you could get a dramatically lower interest rate. As an example of what this could mean let’s suppose you owe $30,000 for 10 years at 8%. In this case your monthly payment would be about $363. If you were to refinance that federal debt to a loan at 4.75% your monthly payment would fall to about $314 — a savings of $49 a month or $588 a year. In addition, you would have a fixed interest rate for a fixed term, a fixed monthly payment and just one payment a month.

Would this be enough to tempt you to refinance?

The reasons to stay

As you have seen in the example given above, you probably need to have a lot of student debt at a very high interest rate to make refinancing an attractive option. But even if you do, it’s important to understand what you would be giving up – or those benefits that come with federal student loans.

Repayment options

Once you refinance federal student loans into a private loan you will have just one repayment program, which is to make the same payment every month for 10 years or whatever is the term of your loan. If you were to run into a serious financial problem you wouldn’t be able to change your repayment program to fit your new circumstances. In comparison, federal student loans have six repayment programs not counting the federal Direct Consolidation Loans mentioned above. While none of these will get your interest rates cut they could get your monthly payments reduced.

Graduated Repayment

One of the most popular repayment options available with federal student loans is Graduated Repayment. This can be especially helpful if you are just starting out in your career as your payments would start low and then gradually increase every two years. By the time you hit year six (or two increases), you’d most likely be earning more so your payments would still be affordable.

Income-driven repayment

In addition to Graduated Repayment, the US Department of Education (ED) offers three “income-driven” repayment programs where your monthly payments are tied to your income and family size. The programs are Pay As You Earn, Income-Based, and Income-Contingent.

Pay As You Earn

You may have read about this program last summer when Pres. Obama signed an executive order making about 5 million more people eligible. Prior to this order, only those who were newer borrowers were eligible for Pay As You Earn. However, starting next year borrowers who took out loans before October 2007 or stopped borrowing by October 2011 are also now eligible.

What’s the big deal about Pay As You Earn? It’s that this program would cap your monthly payments at 10% of your household income that exceeds 150% of the federal poverty guideline based on the size of your family. An example of how this works is if your monthly adjusted gross income were $4280, you would subtract 150% of the poverty line ($1480) yielding discretionary income of $2800. Multiply this by 10% and your monthly payment would be $280.

Income-Based Repayment

A second income-driven repayment program is Income-Based. If you don’t qualify for Pay As You Earn, you might qualify for this program, which would cap your monthly payment at 15% of your discretionary income. Take the example given above and multiply that $2800 by 15% and the monthly payment would be $420.

Income-Contingent Repayment

If you don’t qualify for either Pay As Your Earn or Income-Based Repayment, there is Income-Contingent Repayment. The biggest plus of this plan is there are no initial income eligibility requirements. If you have any eligible federal student loan, you could switch to this plan. Like Pay As you Earn and Income-Based, your payments would be based on your family size and income but will likely be higher than those under Pay As You Earn or Income-Based repayment. What would your monthly payment be under Income-Contingent Repayment? It gets a bit complicated so the easiest answer is to click on this link to calculate what it might be.

Note: Click on this link to see which types of federal student loans are eligible for any of these Income-Driven Repayment programs.

Changing repayment programs

Another important reason why you might want to stay with your federal student loans is that you always have the option to change your repayment plan. If you are on 10-Year Standard Repayment and are having a tough time making your payments, you could switch to either Graduated Repayment or one of the Income-driven repayment programs. Or maybe you’re on Graduated Repayment but have found that you are now eligible for Pay As You Earn. You could easily make the switch and see your monthly payments cut substantially. The

Man holding piggy bank and books. Cost, value of educationBefore you make your final decision

There are several things you should do before you decide whether or not to refinance your federal student loans. First, be sure to go to the Department of Education website and familiarize yourself with all the various repayment options available. Second, call your loan servicing company to discuss this with it. When you do this you will be assigned a counselor that will discuss all of the options with you and help you determine if there is a program that would be better than the one you currently have. Be sure to understand all of their options including interest rates and terms. Then with this information in hand it should be much easier to decide whether to stay or go – to a private debt consolidation loan.

Could Rolling Jubilee “Disappear” Your Student Debt?

young magician performing with wandYou might remember that about three years ago there was a whole bunch of people in New York City protesting income disparity. The movement came to be known as Occupy Wall Street. What, you might ask, ever happened to that movement? Well, it’s morphed into an organization called Strike Debt that has a program titled Rolling Jubilee that might be able to erase your student loan debt.

One lucky debtor in Kalamazoo Michigan woke up one day and found an odd letter in the mail. What it basically said is that, “we have good news. We got rid of some of your Everest College debt.” It went on to say that her private student loan in the amount of $790.05 had been forgiven outright by an organization called Rolling Jubilee.

About $15 million erased

Since November 2012, Rolling Jubilee has purchased and eliminated around $15 million of debt in the form of unpaid medical bills. It recently announced that it had also eradicated $3.8 million in private student loans for almost 3000 students.

How this works

While Rolling Jubilee can’t do much about federal student debt, it is able to help with private loans due to a quirk in the way debt works these days. When people stop paying on a debt it becomes delinquent. The lender usually writes off the debt after about six months and sells it off at a cheap price to a third-party debt collector. What Rolling Jubilee is now doing is buying some of this debt using donations it raises online. In most cases it’ s able to buy student loan debt for three cents on the dollar or less. Then, instead of trying to collect on the debt, Rolling Jubilee just makes it disappear.

Just a drop in the bucket

Student loan debt is now estimated to be about $1.2 trillion and more than 40 million Americans have some form of it. Rolling Jubilee understands that the number of people it has been able to help is only a drop in the bucket and doesn’t solve the actual problem. The group’s goal is to draw attention to the predicament of those millions of people that have unpaid student loans – especially loans with high interest from expensive for-profit colleges. It’s next step is to get a large number of people organized to push for policy changes that would allow debtors to get release from obligations such as student debt that they are unable to meet.

For-profit colleges have come under fire recently due to their disproportionate contribution to the $1.2 trillion in student loan debt. They’ve enrolled about 13% of all students but have been responsible for 50% of the students that defaulted on their loans. Strike Debt has deliberately targeted one of the largest, Corinthian Colleges, the company that owns Everest College and several other for-profit school chains. It was already having serious financial problems when the Department of Education put a hold on financial aid payments to the company – due to its failure to satisfy requests for information made by the Department. In fact, Corinthian Colleges currently has some 200 lawsuits pending for fraudulent practices. The Consumer Finance Protection Bureau announced recently yet another lawsuit against the company for alleged predatory lending. The Bureau’s goal in this lawsuit is obtain relief for borrowers because it believes the company misled students about job prospects, pressured them to take out private high-interest loans and then used high-pressure debt collection tactics.

Not even bankruptcy can help

One of the main reasons that Rolling Jubilee turned its attention to helping people with student debt is because these loans usually can’t be dismissed by a chapter 7 bankruptcy – whether it’s a private or federal student loan. Before 2005 it was possible to get private student loans dismissed through a chapter 7 bankruptcy just like any other kind of unsecured debt (think credit card debt). However, our Congress passed a law that year that changed the status of private student loans in a bankruptcy to be the same as that of federal loans. What this means is that if you want to have any kind of student loan discharged you must show that repaying it would cause you to experience an undue hardship.

What is undue hardship?

Most bankruptcy courts throughout the US use what’s called the Bruner test to determine undue hardship. This consists of three conditions you would need to meet in order to get your student loans discharged.

Poverty – The first is that you must able to show you cannot maintain a minimal standard of living for yourself and your dependents based on your current income while repaying your loans. In this case, minimal standard of living is not the same as a middle-class standard of living and is a much lower standard.

Persistence – Second, you must be able to show that your financial situation is likely to continue for most or all of your repayment period

Good faith – – And third, you must show you’ve made a good-faith effort to pay off your student loans.

Whatever you do, don’t default

As of 2012, 9.1% of student loan borrowers had defaulted on their loans within two years of graduating. This is up from 8.8% the previous year. And while 9.1% doesn’t seem like a significant number that translates into 375,000 borrowers. Even worse, 13.4% of borrowers defaulted within three years after they made their first payments.

Trust us when we say these people made a big mistake – especially in the case of federally backed loans.

Power that regular collection agencies would kill for

It’s not a good idea to default on any loan. But it’s especially bad to default on a federally backed student loan. Technically, you are in default on a student loan the day after you miss a payment. In reality, your debt won’t be reported to the three credit bureaus until you have missed your payments for 90 days or three months. If you have still failed to make a payment after nine months, the odds are that your debt will be turned over to a student debt collection agency. These collectors have powers that regular collection agencies would kill for. They can garnish your wages as well as your Social Security benefits without going to court. They can take part of your income tax refunds and even block the renewal of any professional licenses you hold.

What you can do if you’re in defaultwoman thinking

There are ways to get a student debt out of default. The first of these is probably the simplest answer and that’s to just repay the loan. There are several different ways to repay defaulted loans depending on the type of loan you have. You can learn more about repaying your loans by clicking on this link.

A second way to get a federally backed student loan out of default is called loan rehabilitation. To do this, you must first agree to a reasonable and affordable payment plan and then make at least three voluntary payments. A lender must then purchase your loan. The best thing about loan rehabilitation is that if you can do it, you will get back some of the benefits that came with your original loan such as income-driven and Extended Repayment. In addition, once you get your loan rehabilitated …

  • The default status on your defaulted loan will be removed
  • This default status that was reported to the credit bureaus will be erased
  • If your wages are being garnisheed, this will stop and …
  • If the Internal Revenue Service is withholding any of your income tax refund, this will also stop.

Issues to be aware of if you are able to rehabilitate your loan successfully include the fact that your new payment may be more than what you are paying when you were rehabilitating the loan. Second, the total amount you owe may increase because collection costs may have been added to your principal balance. And finally, if your late payments (delinquencies) were reported to the credit bureaus before your loan defaulted, they will not be removed from your credit report.

Loan consolidation

The third alternative for getting student loans out of default is to get a Direct Consolidation Loan. This would allow you to pay off the balances on multiple student loans and end up with just one loan and one monthly payment. You will have a new interest rate that will be fixed for the life of the loan. And you will be eligible to choose a new repayment program such as Pay As You Earn, which would cap your monthly payment at 10% of your disposable income.

Who’s Really Responsible For the Student Debt Crisis?

graduate chained to student debtWe hear more and more about the student debt crisis. A few politicians argue that there is no student debt crisis though most others say there is. Whether this is a crisis or not, one thing can’t be argued. There is now more than $1 trillion outstanding in student debt. That makes student debt larger even than credit card debt. And it’s not going to get any better in the future, as the graduating class of 2013 owed an average of nearly $30,000

The real problem

The people that say there is not a student debt crisis point to the fact that most people will repay their debts though it may take them 10 to 20 years to do it. The real problem, these people believe is the escalating rate of default on student loans.

The US Department of Education recently released a report that the national two-year cohort default rate on student loans increased from 9.1% for FY 2010 to 10% for FY 2011 and that the three-year default rate increased from 13.4% in FY 2009 to 14.7% for FY 2110. Even worse, the average default per borrower was $16,697 and the total of outstanding loans in default as of the third quarter of this year is $95.9 billion. This, some experts contend, is the true crisis in that this is money that likely will never be repaid and it’s us, the taxpayers, that are on the hook for it.

Who’s to blame?

The easiest people to blame for these problems are, of course, the students. After all they are the ones that took out the loans. However, it’s not quite that simple. We here in the US have basically adopted the idea that everyone should have a college education. As a result, the vast majority of our high schools are dedicated to getting their students prepared for a college education whether they should have one or not. Forty-six percent of those that start college dropout before graduating and one of .the major reasons for this is undoubtedly the fact many of them shouldn’t have been in college in the first place.

Another part of the problem is that most 18-year-olds are not prepared to choose the right majors. Many choose majors that align with their passions such as film and video arts, pre-school education, psychology, anthropology, archaeology, fine arts and music that might be fun and rewarding but that don’t lead to well-paying careers. For that matter, many of the young people who choose these types of careers won’t even be able to find jobs. In fact, as of March 2012, 60% of college graduates were unable to find work in their fields of study.

The colleges and universities

Colleges and universities are also at least partially to blame for the student debt problem, especially the for-profit schools. They are in a competitive business and it’s clear that some of them have enticed students to take out loans they really couldn’t afford. As an example of this, students that borrow similar amounts to pay for their schooling end up defaulting at a much higher rate at for-profit institutions. In fact, 26% of for-profit students that took out loans between $5000 in $10,000 ended up defaulting versus the 10% of students at community colleges that defaulted and the 7% at four-year schools. Private schools are not immune to this either. They, too, must compete for students. The more aid they can offer prospective students, the more they are will attract. This puts pressure on them to accept “marginal” students and for their financial aid offices to promote federal student loans as a way to pay for their educations.

The federal government

It’s also clear that the federal government itself has played a part in creating the student debt crisis. It has not only helped fuel the idea that everyone should have a college education, it’s also made it very easy to get student loans. Every year high school seniors are encouraged by their guidance counselors to fill out and submit the Free Application for Federal Student Aid (FAFSA). This form not only goes to the Department of Education (Ed) it goes to every school for which a student has applied. The process then becomes automatic and sometime in late spring each student receives a notice of the federal financial aid it will receive based on its family’s financial situation. In most cases a large part of this aid will be in the form of federal student loans, which the average family will have a very difficult time not taking.

Not even a chapter 7 bankruptcy can help

If you were to run up $30,000 in credit card and medical debts you would be able to get them discharged through a chapter 7 bankruptcy. In fact, this form of bankruptcy can get almost all unsecured debts discharged except for alimony, spousal support, child support and… student loan debts. That’s right. Our Congress rewrote the law several years ago making student debts “bankruptcy proof.” If you have $30,000 in student loan debts, you have only two choices – to default on the loans or to repay them. And defaulting on federal student loans is a very bad idea. Student loan debt collectors have powers that conventional debt collectors can only envy. They can garnish your wages without going to court, seize your income tax refunds or a part of your federal benefits, deny you eligibility for new loans or grants – or even put liens on your property and bank accounts.

What could helpYes, debt negotiation works

While you can’t get student loan debts discharged through a chapter 7 bankruptcy, the federal government does offer the equivalent of a chapter 13 bankruptcy. If you’re not familiar with this type of bankruptcy its purpose is one of reorganization – to give you time to reorganize your finances and pay off your debtors. The federal government’s equivalent of this are its increasingly liberal loan-modification plans. For example, one of these programs is called Pay As You Earn. You may have read about this program earlier this year when Pres. Obama signed an executive order making as many as 1.4 million more borrowers eligible. This plan permits borrowers who are financially distressed to cap monthly payments at just 10% of their discretionary income and gives them as many as 20 years to repay their loans. Unfortunately, many people who would be eligible for this program are unaware that it’s available to them. In addition, some are not eligible because of technicalities in the program such as past-due payments or loans that started into repayment mode too many years ago. In addition, the companies that service student loans have been less than forthright about discussing these options with their customers. And if you have private loans they are precluded from this program.

Determining your eligibility

If you’re carrying a load of federal student debt, don’t be turned off by the phrase “financially distressed.” What this really amounts to is that your payments will be based on 150% of the federal poverty guideline and your family size. In addition, you must have gotten your first federal student loan after October 1, 2007 and you need to have gotten a Direct Loan or Direct Consolidation Loan after October 1, 2011. Note: If you’re wondering whether or not you would qualify for this program, the government has a Pay-As-You-Earn calculator you could use to determine your eligibility.

If you are not eligible

If you determine you are not eligible for Pay As You Earn, there are two other income-driven programs available that could make it easier for you to repay your student loans. One of these, Income-based Repayment, would cap your monthly payments at 15% of your discretionary income and Income-contingent Repayment caps it at 20%. There is more information on these income-driven repayment programs available on the Federal Student Aid website.

It doesn’t have to be a personal crisis

While student debt may or may not be a crisis, it doesn’t have to be a crisis for you. As you have read, there are increasingly liberal loan modification programs available that could make it much easier for you to manage and pay off those burdensome student loans.

What Those Overly Aggressive Student Debt Collectors Won’t Tell You

Debt collector hollering into micStudent loan debt has become almost out of control as it now totals more than $1 trillion. This makes this debt larger than even America’s total credit card debt. Depending on which source you want to believe students recently graduated from college owing an average of either $24,000 or $33,000. It’s not uncommon for people in their 40s to still be paying on their student loans. And one recent study revealed that 6.8 million Americans have defaulted on their student loans to the tune of $14,103,000.

It’s easy to default

One of the underlying reasons why so many people have defaulted on their student loans is that it’s very easy to do this. You’re considered to be in default when you miss a payment by just one day. However, your student loan servicer probably won’t report you in default until 90 days after you first missed a payment and it likely will be nine months of no payments before you start hearing from a collector.

It can get ugly

Federal student debt collectors have an enormous amount of power. They are entitled by law to garnish your wages without taking you to court, seize your tax refunds or even take up to 15% of certain types of Social Security payments. Plus, unlike other types of debts, there is no time limit on student loan debts. Collectors could literally hound you forever.

They can be too aggressive

The National Consumer Law Center has said it feels the Department of Education is not doing what it should to crack down on debt collection agencies that are too aggressive about seeking payments. The problem is, of course, money. How much these collectors earn correlates strongly with the amount of money they are able to collect from people who have defaulted on their student loans. And here’s the important part, they don’t always tell people about the options that are available to them.

You could have your loan discharged

If you defaulted on one or more of your federal student loans and are being harassed, you still do have options although the debt collector may not make this clear to you. You could actually get your federal student loans canceled if you are totally disabled. It’s also possible to get them discharged or cancelled if …

  • You withdrew from school, but the school didn’t pay a refund that it owed you or the U.S. Department of Education
  • Your school falsely certified that you were eligible to receive a loan based on your ability to benefit from its training, and you did not meet the ability
  • You were victimized by identity theft
  • The school signed your name on an application or promissory note without your authorization or endorsed your loan check or signed your authorization for electronic funds transfer without your knowledge
  • The school certified that you were eligible for the loan but because of a physical or mental condition, age, criminal record, or another reason you are excluded from employment in the job for which you were being trained

Loan rehabilitation

Assuming you can’t qualify for loan discharge, you could rehabilitate one or more of your federal student loans. However, this applies only to a direct loan or FFEL program loan The way this works is that both you and the Department of Education agree on a practical and affordable repayment program. Your loan will be rehabilitated after you’ve voluntarily made the agreed-upon payments on time and the loan has been purchased by a lender. Note: Outstanding collection costs may be added to the principal balance.

Once you have had your loan rehabilitated, it’s possible you can regain eligibility for the benefits that were available on your loan before you defaulted. This can include forbearance, deferment, a choice of repayment plans, and loan forgiveness. In addition, you will have removed:

  • The default status that was reported to the national credit bureaus.
  • The default status of your defaulted loan
  • Any garnishment of your wages
  • Any of your income tax refund that had been withheld by the Internal Revenue Service.

How To Make Debt Consolidation Loan EffectiveLoan consolidation

Another option if you’ve defaulted on a federal student loan is loan consolidation. This is where you pay off any outstanding balances you have on your federal loans and end up with a new one that will have a fixed interest rate. You could choose to include a defaulted federal student loan in the new loan but only after you’ve made arrangements with the Department of Education and have made several voluntary payments. This is usually at least three consecutive, voluntary and on-time payments before you are allowed to consolidate the defaulted loan into the new direct loan.

The types of loans that can be consolidated

Almost every type of federal loan can be consolidated but not private loans. Some of the more popular types of federal student loans eligible for consolidation include Direct Subsidized and Direct Unsubsidized loans, Subsidized and Unsubsidized Federal Stafford loans, Direct PLUS Loans and Federal Perkins Loans.

Eligibilty for a Direct Consolidation Loan

As you have read, almost every type of federal student loan can be consolidated. However, there are some eligibility requirements you should be aware of. As noted above, you must have at least one Direct or FFEL Program loan and it must be in a grace period or in repayment. You must make satisfactory repayment arrangements with your loan servicer on the defaulted loan before it can be consolidated. And you must agree to repay the new Direct Consolidation Loan under one of the following

  • Income-based Repayment
  • Pay As You Earn Repayment t
  • Income-contingent Repayment

The interest rate on a Direct Consolidation Loan

These loans have a fixed interest rate. The way it is calculated is by using the weighted average of your existing loans rounded up to the nearest 1/8 of 1%. The easiest way to understand this without doing all the math is that the interest rate on your Direct Consolidation Loan will be higher than the loan with the lowest interest rate you are currently paying but lower than the loan with the highest interest rate.

The options for repaying a Direct Consolidation Loan

One of the best things about choosing to consolidate your federal student loans into a Direct Consolidation Loan is that it offers several options for repayment as indicated above. For example, you could choose Income-based Repayment where your monthly payments would be capped at 15% of your disposable income. Pay As You Earn Repayment was a hot topic recently when Pres. Obama signed an executive order making approximately 1.4 million more people eligible for this program. It’s even better than Income-based Repayment as if you qualify you would see your monthly payments capped at just 10% of your disposable income. How do you calculate disposable income? The short explanation is that it’s your adjusted gross income minus 150% of the federal poverty level times 10 percent.

Income-contingent Repayment

If you are unable to qualify for either Pay As You Earn or Income-based Repayment there is Income-contingent Repayment. It’s designed for people with lower salaries such as those who work in public service. It helps by pegging monthly payments to your family size, income and the total amount of money you borrowed. Its monthly payment is adjusted annually based on changes in the size of your family and your annual income – just as are Income-based and Pay As View Earn Repayment.

Three Facts About Student Loan Debt That May Totally Surprise You

grandma looking shockedStudent loans have become a very hot topic even in politics. We read recently that there even being discussed in the Iowa Senate race where one candidate wants to increase the amount of money available in Pell Grants while the other wants to abolish the Department of Education and get the government totally out of the student loan business. It’s even been debated as to whether or not the student loan crisis is really a crisis though one thing is clear – outstanding student loans now total more than $1 trillion. This makes them bigger than even US credit card debt. But regardless of which side of the debate you come down on there are three surprising facts you need to know about student loans and student loan debt.

1. Your Social Security payments can be garnished

Are you aware of the fact that retirement isn’t going to get you out of repaying student loan debts? In fact, it doesn’t matter whether you’re disabled or retired, if you default on a student loan you can have 15% of your checks garnished. And this is an increasingly common problem. In fact, one leading non-profit group worked this year with more than 1000 Americans that had their Social Security payments garnished to repay their student loans. And for retirees any cuts in their social security benefits can really hurt.

Making matters even worse is the fact that these may have been small student loan debts to begin with but have grown much larger over the years because of compounding interest rates. The amounts taken out of these checks aren’t small either. Social Security monthly checks average $1200 and the amount taken out is typically $180. This can have a serious effect on a retiree’s food, shelter and medication.

Most of these loans are parent PLUS loans owed by a sizable number of boomers and others that were forced to retire earlier than they had anticipated because of the economic downturn.

Bankruptcy can’t help

While you can get unsecured debts such as credit card debts and medical debts discharged via a chapter 7 bankruptcy, the same is not true for student loan debts. Congress changed the law a few years ago making it very difficult to get student debts discharged through bankruptcy. This is only possible if you can convince a bankruptcy judge that you have a very serious financial hardship. In addition, most of these loans cannot be refinanced and are locked in at interest rates of 7% or even more – despite the fact that rates have fallen to below 3% in recent years.

If you have outstanding student loans

If you still have student debt you need to make sure the loan or loans don’t go into default. There are a number of repayment options available that would allow you to lower your monthly payments. If you have been impacted by student loans, the first thing you should do is contact your loan servicer to work out a more affordable repayment plan. In the event this doesn’t work, the US Department of Education has an ombudsman you could contact..

2. Student loan debt can affect your credit score – positively

Your credit score is based on five different components in your credit reports. These include payment history, age of credit, debt levels and get diversity. So if you have a well-managed student loan this can actually have a good impact on your credit scores – assuming you handle them correctly.

The Credit Card Accountability Responsibility and Disclosure Act (CARD) of 2009 specified that young people need to prove the financial ability to repay their debts to get a credit card. If you have student loans and manage them correctly this helps establish a credit history, which can help you access revolving credit, which usually means a credit card. If you have credit cards, a student loan can improve the diversity of your credit profiles, which will also help your credit score.

Finding the best deal

Whenever you apply for a new student loan it results in what’s called a hard inquiry, which can ding your credit score by a few points. Do this often enough and you could see your credit score lowered by 10 or even 20 points. However, student loan inquiries are “de-duplicated” on credit reports just as with mortgages and auto loans. This means you can shop for the best deal among private lenders without hurting your credit score. If you haven’t seen how your student loans are impacting your credit, you can get a free copy of your credit reports via or individually from each of the three major credit bureaus. You can also get your credit score free from the three credit bureaus or from independent sites such as and also offer free credit scores.

Make your payments on time

If you make your student loan payments on time this can strengthen your payment history. On the other had, late payments will damage your credit scores. As you might guess, your goal should be to have a sterling credit history and this should provide you with the necessary motivation to avoid making any late payments or, worse yet defaulting on a loan.

The amount you owe doesn’t matter much

This may seem odd but the amount that you owe on student loans has very little of an impact on your credit score. What really matters is your payment history, which is why it’s critical that you take on a manageable amount of debt and then take advantage of loan repayment assistance when available and necessary.

3. You can get student loans forgivenwoman taking money out of wallet

In the event you have a massive amount of student loan debt it’s possible to get some of it forgiven by doing good. If you volunteer or choose to work in a service-oriented professional job in a lower income community you could see a huge chunk of your federal student loans cancel. In fact, you could knock off thousands and thousands of dollars after just a few years of service. The fact is that programs for loan forgiveness are available to everyone from the Piece Core and America corps volunteers to teachers, nurses, doctors and other young professionals that serve in communities that are in need. You may have to take home lower salaries but you could get some serious help in repaying your student loans.

National Health Service Corps

If you are a nurse practitioner, Dr., dentist, physician assistant, dental hygienist or a mental health professional you could get a big chunk of your educational debt wiped out by choosing to work for two years in an underserved community. In fact, you could get up to $25,000 in student loans repaid each year in exchange for two years of full-time employment. If you choose to serve beyond the two-year contract, you can earn even further loan repayment. And if you are a healthcare professional with really heavy student debt, you could pay down as much as $50,000 in just two years and as much as $85,000 of student loan debt in three years.

Nursing Education Loan Repayment

If you are a registered nurse and agree to work full time (32 hours or more each week) for two years in a non-profit facility that’s in need of nurses, this program repays up to 60% of your student loans. If you choose to work a third-year, you would have the opportunity to repay an extra 25% of your student loans. Just think about this. If you can repay 85% of your student loan debts after just three years, that’s a pretty sweet deal.

Teacher loan forgiveness

When you’re a teacher and make a five-year commitment to teach in a school that’s in need you will get some help with your student loans. However, the best rewards are reserved for those who teach science, math and special education. In fact, if you teach science or math in a low-income high school, you could get as much as $17,500 of your federal Stafford loans canceled. However, again you will need to teach for five years in a designated low-income school.

If you are a special education teacher that works in a designated low-income school for five years you will be eligible for as much as $17,500 in loan forgiveness for your federal Stafford loans. And other teachers who work full time in a designated low-income elementary or high school for five years might be able to get as much as $5000 of your federal Stafford loans canceled.

Public service loan forgiveness

In 2007 Congress passed the College Cost Reduction and Access Act that created a new student loan forgiveness program for public service employees. This program does require something of a commitment as you must work for 10 years as a public service professional. However, the payoff is big – you get all remaining federal direct loans canceled. The public service jobs eligible for this plan include everything from public health and safety to emergency management and from social of law enforcement. To be eligible you will need to have made 10 years of consecutive, on-time repayments of your federal direct loans. This includes Federal direc and then get your remaining loan debt canceled after 10 years of service. So one good strategy would be to consolidate your federal Stafford loans into a new direct consolidation loan and get your remaining loan debt canceled after 10 years of service.

Volunteer program loan forgiveness

If you volunteer for the Peace Corps you can get as much as 70% of your debt canceled after four years of service. If four years seems like too much of a stretch, you could complete a two-year term, which would wipe out 30% of your Perkins loans’ balance. Plus, your payments will be deferred while you are in the Peace Corps. If you volunteer for AmeriCorps you will receive education awards of $4725 for each year you serve. These awards can be used to pay down student loans or for future educational expenses. Even better, some 78 colleges and universities will match AmeriCorps education awards for their students. This means and if you continue your education after you complete your AmeriCorps service, you could see as much as $9450 available to pay your tuition.

Headed For College? Here’s What You Need To Do Beginning Your Sophomore Year Of High School

woman looking at billsYes, you read that right. If you believe you’ll be going to college there are things you should do beginning your sophomore or at the very least your junior year of high school. We know this sounds a bit early but as the saying goes, “the early bird gets the worm.” If you want to get in and then out of college with the least amount of student loan debt, you need to start by beginning a search for scholarships. There are some very good databases of college scholarships you should explore including, and

Does your Mom or Dad work for a good-sized company? If so, have him or her ask if it has scholarships for the children of its employees. There are also social organizations such as the Elks, IOOF and Moose that provide scholarships to the children of their members. If your parent does belong to one of these fraternal organizations be sure to check into this.

As you find scholarships you think you might qualify for, create a spreadsheet with the dates that applications become available and when they are due.

Next, draft a list of schools that you think you would like to visit. Use a net-price calculator tool such as the one available on on each of the school’s websites to get an idea of what each school might cost your family per year. Don’t forget to make sure that your travel plans fit your budget. For example, if you live in California but would like to attend school on the East Coast you will need to check out travel costs and whether or not your family’s budget could handle them.

Your senior year

In September of your senior year you will need to make a timeline of admission application deadlines and financial aid deadlines. Be sure to include all early-decision or early-action dates. Bear down now and concentrate on researching the college-specific scholarships available for the schools on your list. You also need to begin putting together documents such as bank statements, tax returns, your Social Security card and income tax forms including W-2s and 1099s that you will need when it comes time to fill out the dreaded FAFSA or Free Application for Federal Student Aid.

Depending on which schools you would like to attend, you may need to fill out the CSS profile that becomes available October 1 on the website. This is the form used by almost 400 private schools throughout the US. It’s a much lengthier document then the FAFSA and will take you more time and effort to complete.

In December you’ll need to complete your applications and apply for your FAFSA PIN (personal identification number) at You and your parents will need to have separate PINs in order to complete the form. You should have your tax return information ready as early in February as possible. This is because some schools require you to submit your tax forms very early. Be sure to check each school’s due dates.

Note: If you are interested in federal student aid you must complete a FAFSA form. The deadline for submitting this form online is June of next year. However, each college and each state may have different deadlines. Be sure to check with the colleges on your list and go to for your state’s deadline.

If you complete and submit your FAFSA form in January, you should receive your Student Aid Report in March from the Department of Education. This will summarize your eligibility for federal aid.

Then, hold your breath, in April the admissions notifications will begin to roll in. Be sure to check for “unofficial” financial-aid awards in the student portals on the websites of the colleges you’ve chosen. You may also need to submit additional documents requested by a school such as tax returns.

When you have selected a school, be sure to keep submitting signed and dated documents and forms for financial-aid verification. Then check back for your official award letter.

The deadline for committing to a school is generally May 1. Make sure you notify any school where you’re declining an offer.

Finally, comes graduation and summer. In August you will probably receive your bill and this is when you’ll complete any loan documents required.

Financing college

When you compare the financial aid award letter you received against your estimated out-of-pocket costs you may find a shortfall or that amount of money you or your parents will need to come up with to pay for a year of school. Depending on your family’s financial circumstances this may not be a problem. Maybe your parents will be able to just write checks to make up the difference. However, if you’re like the 50% to 60% of students that don’t have parents this well off, you may have to borrow the money in the form of student loans. This is an area where less is definitely more. The less money you have to borrow the more better off you will be. Student debt has become a huge problem here in the US as outstanding loans now total more than $1 trillion. Seven in 10 college seniors or 71% that graduated this past year had student loan debts and they averaged $29,400 per borrower.

Too easy to get

One of the biggest problems with student loans is that they are just so easy to get. In most cases all you have to do is sign a promissory note and off you go. It’s sort of like writing a check that you may not have to cash for two or even three years. But the day will come when you will have to start repaying those loans, which can be a big drag on your life – especially when you’re just starting out in your career. Of course, this assumes you will be able to start out in your career, as according to one study, some 47% of recent college graduates were unable to find their first jobs in fields related to their majors. This could at least partially explain why about one in seven people default on their student loans within three years after graduation.

graduate chained to student debtHow to avoid student loan debt

Fortunately there are things you can do to either avoid having to take out student loans or at least minimize the amount of money you have to borrow. What many students now do is go to a community college for the first two years and then transfer to a more prestigious school. Regardless of where you go to school, you will probably be required to take about the same basic courses those first two years so you basically have nothing to lose except maybe $40,000. This is the difference between going to a community school for two years and then our state university for two years vs. going to that same state university for four years.

A second alternative is to choose a cheaper school. If you shop around you might find a school in your state that would be cheaper to attend then either your state’s university or a private college. As an example of this, it costs $26,933 for an in-state student to attend our state university but only $18,743 a year to attend a smaller university located in the western part of our state. For that matter, you could attend that school for two years and then transfer to our state university, graduate with a degree from it and save some money in the bargain.

Third, you could live at home – assuming you choose a college or university in your city or town. This might not sound like much fun but it would slash your college costs dramatically. As you have read, it costs $26,933 for an in-state student to attend our state university, which of course includes room and board and incidentals. If you were to live at home you would pay only the cost of tuition, which is $10,240 a year. Even when you add incidentals and textbooks to this, you’d be cutting the cost of your education by nearly 50%.

Finally, work part-time. Almost all college and university towns have an ongoing need for part-time workers. If you land the right kind of job you might earn enough to make up the gap between your financial aid and you’re out-of-pocket costs to graduate debt-free. And as Martha Stewart would say, “it’s a good thing”.

5 Financial Moves For Students Entering College

student with a notebook and calculatorWhen you are going into college, there are a lot of financial moves for students that you need to do. There is no such thing as being too young to implement the right financial habits that will set you up for a debt free future.

It is a sad scenario that most students feel like they need to borrow high student loans to get a job in the future. That is not true. You need a college education. That is the truth. But you do not have to borrow a lot of money just to get the higher education that will qualify you to earn a higher income.

Our students are mostly misinformed or completely ignorant of what they are facing before going to college. This is why they can easily be encouraged to sign in on those student loans that will keep them in debt for the next decade or so. It is very important that we educate these students or that they seek out on their own certain financial lessons that can set up their future correctly.

While the student loan debt scenario should raise some concerns about the nation’s future, there are efforts to help steer the next batch of students from the same fate. According to the data published on the website of the Council for Economic Education (, 17 states have already added personal finance in their course requirements. High school students are encouraged to take these personal finances lessons before graduating so they are educated on financial moves for students entering into college. Not only that, economics courses are also being set as a requirement before graduation in 22 states.

The data showed that only 6 of the 50 states implement testing the knowledge of students when it comes to personal finance. Somehow, this might help students be more aware of how they should manage their finances when they get into college. It might even help if they have specific lessons about student loans and their options to minimize the load of this debt.

5 moves you must make before going to college

While it is difficult to demolish student loan debt this is not impossible to do so. Some students have actually graduated without getting any debt at all. It is mostly a combination of their parent’s planning and preparation but the student themselves also did their part by learning how to manage their money wisely.

You may feel overwhelmed when your parents are not able to help you pay for college but do not be discouraged. Although you will need to borrow student loans, it does not have to ruin your financial future. You just have to make these 5 financial moves for students so you can head off any potential financial problems while you are getting your degree.

  1. Plan your finances. Everything should start with a plan. And take note, you should not stop with just one plan. The first that you need to create is a budget plan. This will help you identify how much money you have – whether it will be coming from your student loan or the funds that your parents have saved up for you. You need to determine the expenses that you will be making on a daily or weekly basis when you get to college. This will help you estimate how much you can afford to spend. You should also make a spending plan so you are guided on where your money should go to on a daily, weekly or monthly basis. Comparing it with your budget plan will help you decide if you need to add more money or cut back on some of your expenses. Lastly, for those who borrowed student loans, you may want to create a plan that will help you pay it off in the future. You can start paying off the interest on your student loans while you are still in school. That will help keep your debt payments to a minimum when you graduate.
  2. Build up your emergency fund. Nobody is exempt from emergency situations. Even if you are still young, you should be prepared to finance any unexpected event while you are still in school. It may be a sickness or a sudden expense that you have to make in the house where you are living. It can even be car repairs or the delayed release of your funds. It is always best to have an emergency fund so you will not be too stressed when something happens. Start with a small amount and gradually build it up as you get extra money.
  3. Apply for an account in a local credit union. Given your lack of credit history, it may be difficult for you to enjoy the products and services that traditional banks offer. But joining a credit union may be more beneficial for you. They are more customer oriented and do not usually ask for fees to maintain your checking account. They also have higher interest rates for savings accounts and lower rates for borrowers. Check out the local credit union near the school you will go to and see if their products are something that you can maximize.
  4. Work on your credit. It is a great idea to start developing your credit management while in school. If your parents helped you apply for a credit card, or you applied for a student or secured card, use it wisely and pay it off immediately. That way, you can build a strong credit history that will allow you to borrow money in the future with very low interest rates.
  5. Get a side job. One of the most common financial moves for students is getting a part time job. You may want to see if you can get a job waiting tables or in the retail industry as a sales crew. You can tutor or get work in the campus where you study. There are so many options for you to get the extra finances that you can utilize while you are still studying. Not only will this be beneficial in your finances, it is also something that you can put in your resume. According to an article published on, some college students have graduated without any student debt because they worked while in college. Some started their own business after high school while others entered paid internships. These students got their degree without incurring debt and were offered jobs immediately after graduating – no doubt because of their work experience in school.

Financial habits to develop while in college

As you work on these financial moves for students, you should also think about developing certain habits while you are at it. There are various habits that you can form while in college that will help set up your financial future. These habits will not only help you stay away from student and credit card debts, it will also train you to make smart financial choices all your life.

Here are some of the habits that you may want to form while you are in college.

  • Budgeting. This is something that you can practice if you implement the first of the financial moves for students that we discussed earlier in this article. You can apply this all throughout your life to ensure that you have full control over your finances.
  • Saving. This includes saving for your emergency fund and any expensive item that you want to buy. Make it a habit to pay for your expenses in cash. That way, you will not be working to pay for past expenses. You will be working to pay for future expenses. It will be a less stressful life.
  • Setting financial goals. Setting goals is a great way for you to make the right decisions because you know where you want to take your finances. It should be easy to make your decisions aligned.
  • Spending wisely. You have to understand that being a smart spender does not only mean you are saying no to the expenses that you cannot afford. It also means saying no to the expenses that you do not need – even if you can afford to pay for it in cash.
  • Investing. You do not have to be old to learn how to invest. The earlier you start, the more gains you will have in the future. When you have your emergency fund in place, put your extra money into investment funds.

Financial moves for students will help you set up for a wealthy future. Don’t you want to look back in your college years as something that helped propel you towards a better life? After all, a college degree will help you earn more as compared to those who skipped getting a higher education. According to, The value of getting a college degree is rising each year. Although the cost is also rising, your ability to get a high paying job can compensate for that. Even if you had to go through college through student loans, it is possible for you to minimize that debt and get more out of it through the development of proper financial management skills.

If you need help with any of your student loans, National Debt Relief can help. Their consultancy service will assist you in choosing and applying for the right student loan debt relief program. The service also includes helping out with the documentation. The consultation involves a one time service fee that will be put in an escrow account. If you are satisfied with the paperworks, that is the only time this payment will be released. There are is no upfront or maintenance fees.

How To Keep Student Debt From Ruining Your Life

graduate chained to student debtIt is estimated that some 20 million students are going to college this fall and that unfortunately some 12 million of them will be required to take out student loans to pay for their educations. Unless you’ve been hiding under a rock, you probably already know that student debt stands above $1 trillion making it even larger than our national credit card debt. Colleges and universities are not making things any easier either. The average tuition has increased 27% at public universities and 14% at private schools in the past five years, which would help explain why people are graduating owing an average of $25,000 or more.

But regardless of whether you’re just starting college or are already in school, there are things you can do to keep student debt from ruining your life.

Choose the most affordable school you can

In the event you’ve already started college this advice may come too late. But if you’re still a high school senior you should try to choose the most affordable school you can. This may not be the most prestigious of colleges but what many people have found is the secret is to go to an affordable school for four years and then get their graduate degrees at a more prestigious college or university.

Another way to keep from piling on so much debt it would ruin your life is to go to a community college for two years and then transfer to a more prestigious school. Whether you start at a two- or four-year college you’ll probably be required to take basically the same courses for the first two years so you really have nothing to lose by starting at a local community college. As an example of what this can mean, the cost to attend one of our local community colleges for a year is $6832 while the cost for an in-state student to attend our state university is $26,933. Do the math and you’ll see you would save approximately $40,000 by doing your first two years at the community college.

Choose your major carefully

Even if you’re already in college it’s not too late to consider changing majors if you’ve chosen one that would doom you to being a low earner for years. Recent studies have shown that if you get a degree in child and family studies, elementary education, exercise science, broadcast journalism or animal science you will be a low earner for life. For example, even the mid-career salary for a person with a major in child and family studies is just $37,200 and for elementary education it’s $45,300. The starting salary for a person with a major in exercise science is $32,600 with an estimated mid-career salary of $51,000 while the mid-career salary for a broadcast journalism major is just $68,800. Now compare this with the $100,000 or so that you will spend on your education and ask yourself the question would one of these majors be a good investment.

Also be careful about the college you choose

Believe it or not there are colleges that offer better values just as there are automobiles that are better values and the names of some of the schools might astonish you. For example, Harvard University is considered to be a good value because nearly 60% of its students receive need-based grants so that the average cost to them is just $15,486 a year. Brigham Young University is also considered to be a good value because the average cost of attending there for a year if you receive need-based grants is just $12,367. And the cost to attend the Massachusetts Institute of Technology for a year averages just $19,957 assuming you qualify for need-based grants. Now compare this to the cost of attending our state university for a year of $26,933 with little or no opportunity to get grants and you should be able to see why it’s important to be careful about which school you choose.

Score some scholarships

Fortunately, scholarship money being handed out by foundations, corporations and other private-sector benefactors has also risen as has tuition at universities and colleges. There are websites available that can help you and your family find scholarships for which you might qualify. However, it’s important to search early. If you’re a student your parents should check with their employers to see if maybe they offer its employees’ children scholarships. Don’t be afraid to aim high. Even though the competition for big scholarships can be very tough, you should give it a shot. They payoff can make it worth the effort. This is also an area where choosing a private school could be better than a public university. While it’s very difficult to score a scholarship from a public school it should be easier to get one from a private institution – just as it’s easier to get needs-based grants. As an example of this, the small private college I attended now costs – at least theoretically – a little more than $37,000 a year. However, 100% of its students receive scholarships or grants so that the true cost of attending it is clearly much less than the $37,000.

What to do if you’re already deep in student loan debt

If you owe $20,000, $30,000 or more in student debt you can still keep this from ruining your life. For one thing, you could get a federal Direct Consolidation loan, which could lower your monthly payments dramatically by giving you more time to pay off your debt. The other advantage of this is that you would have just one monthly payment to make a month versus the multiple payments you’re currently making. The interest rate on these loans is computed as the weighted average of the loans you’re consolidating rounded up to the nearest 1/8th of a percent. The simplest way to think of this is that if you get a Direct Consolidation loan, your interest rate will be higher than the lowest interest rate you’re currently paying but lower than the loan with the highest interest rate.

Choose a different repayment program

You might also be able to make your life easier by changing repayment plans. There are six available in addition to the 10-Year Standard Repayment program. Three of these are income-based meaning that your monthly payments would be based on your income and family size. One of these is Pay As You Earn, which would cap your monthly payments at 10% of your discretionary income. Pres. Obama recently signed an executive order that makes about 1.6 million more people eligible for this program and you might be one of them – if you got your first federal student loan after October 1, 2007 and it was a Direct Loan or a Direct Consolidation loan you received after October 1 of 2011. The eligibility requirements for Pay As You Earn can be a bit confusing so be sure to watch this short video to learn more about them,

Other repayment options

In the event you aren’t eligible for Pay As View Earn, there are other options that could keep your student debt from ruining your life. The Income-based Repayment program would cap your monthly payments at 15% of your discretionary income or if you just recently graduated you might choose Graduated Repayment. This is where the payments start smaller but then gradually increase every two years.

The long and short of it is that you can get a good college education without it ruining your life. However, you will need to make some smart decisions when it comes to choosing a school and choosing a major. There are also options available that can make things easier in the event you have a considerable amount of student debt. As the old saying goes, “you don’t need to know a lot about money to be good with money.” The important thing is to think things through and make decisions that will enhance your life and not ruin it.

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