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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 Collegeboard.com, Collegenet.com and Fastweb.com.

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 Collegeboard.org 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 Collegeboard.com 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 fafsa.gov. 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 https://fafsa.ed.gov/fotw1415/pdf/Deadlines.pdf 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 (CouncilForEcoEd.org), 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 UTDallas.edu, 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 NYTimes.com, 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.

How To Avoid The New Student Debt Relief Scams

appearingDid you graduate a few years ago owing $20,000, $30,000 or even more on your student loans? That can be a pretty big burden when you’re just starting out in your career and are a low earner. Or worse yet, maybe you haven’t been able to find a job in your field of study and have become one of those “underemployed” – a fancy way of saying you’ve had to settle for working as a barista at Starbucks or as a call center employee. But then, Eureka! You receive a call from a friendly-sounding fellow who says that no sweat, he can get you out from under that load of student debt. He may even say he can get you a debt consolidation loan that will lighten your load and at zero interest. Would that sound like a great deal or what?

Watch out for predators

Former Presidential advisor Rahm Emanuel once said, “never let a crisis go to waste.” This could be the slogan of the scam artists that have picked up on the student debt crisis and are not letting it go to waste. These scamsters had seen that many young people are feeling desperate and confused about their student loans and have created new student debt relief scams you could fall for if not careful.

The scams

There are two very popular scams. The first is debt relief firms that make big promises of what they can do to restructure your loans so long as you are willing to pay their upfront fees. Some of these fees are so steep they would be equal to a very high interest rate if they were applied, say, to a $10,000 student loan. These companies often want you to turn over your personal information including your passwords, Social Security numbers and the personal identification (PIN) numbers of your student loan accounts.

The second type of scam is the loan consolidation scam. This is where they promise to get you a federal debt consolidation loan if, again, you agree to their fees. One of the easiest ways to spot this scam is if they ask you to provide a power of attorney. It‘s just not routine to have to provide a power of attorney to get a loan. As a matter of fact there’s never a reason to do this unless there is a clear need for it such as dementia or Alzheimer’s. The reason why a shady debt relief agency wants your power of attorney is so that it can apply for a federal consolidation loan for you. They’ll ask for all of the information that you would have to input into the website of FedLoan Servicing and then complete the application for you acting as if it were the borrower. But there is only one way to consolidate loans with a Direct Federal Consolidation loan. This is via the online consolidation application available on the US Department of education’ s website. (loanconsolidation.ed.gov). And completing this application is very simple and something you could certainly do yourself for free.

Second, a scam artist may try to get you to believe you that you can’t consolidate your loans yourself. In truth the Fedloan Servicing application is pretty straightforward. And Fedloan Servicing improved it recently to make applying for the loan even easier. It will take you just 30 minutes or less. If you have any questions about the application process you can always call Fedloan Servicing directly and get help.

A “unique” service

A second sign that you are probably speaking to a scam artist is if he offers you the “unique service” of a year of no payments after you consolidate with the new loan. The fact is that there is nothing exclusive about this at all. All the scam artist is doing is putting your loans into forbearance. Again this is something you can do yourself online free at the Fedloan Servicing website.

Third, you may be talking to a scamster if he offers only loan consolidation. He will push this as the only solution regardless of what student debt issue you have. In doing so, he neglects to tell you there are options besides consolidating. In fact, there are a number of different repayment programs available to you even if you’re a bit past due on your payments.

He’s very pushy

Shady debt relief agencies also tend to be very pushy and use sales tactics. They will try to rush you into consolidating your loans and might even have a “special offer” to get you to make a fast financial decision. It’s important to keep reminding yourself that what they are most concerned about is their financial bottom line and not your best interests.

Lying salesman or businessmanMost of these agencies will also be less than honest or ambiguous about what they charge. They will try to finesse the issue by telling you that their fees vary based on the amount of work involved and how much debt you have. They may also claim you will need to pay monthly fees in addition to an upfront lump sum payment– all just to consolidate your debts. If the so-called debt relief agency is ambiguous or less than honest about its fees, this is a huge warning sign regarding its lack of ethics.

Finally, many of these agencies will have a website they hide behind. You will not see pictures of their representatives or find direct phone numbers you could use to contact them. They don’t want to form a personal relationship with you. Their goal is to preserve their anonymity so that if you run into trouble or change you mind you can’t contact them.

What you could do yourself

As you have read if your goal is to consolidate your loans with a Direct Federal loan this is a fairly simple process you can do yourself. You can also restructure your debt yourself by changing to a different repayment program. To do this you will need to first go to the federal student loan database (https://www.nslds.ed.gov/) to get information about your loans such as their type, when the funds were disbursed, what you’ve paid so far and how much you still owe. You should save this information to your student debt portfolio for future reference.

With this information in hand you will need to next check out the federal loan repayment (https://studentaid.ed.gov/repay-loans#repayment-plans) programs to determine which ones you would qualify for and would give you the best terms and lowest monthly payments. One the most popular of these is Pay As You Earn. You might have read about this program recently when Pres. Obama signed an executive order making about 1.4 million more people eligible. If you are one of these people you could see your monthly payments capped at 10% of your disposable income.

If you find you’re ineligible for Pay As You Earn there is another program called Graduated Repayment. If you are currently a low earner but know that your income will increase in the years ahead this can be a very good option. It allows you to start with low payments that gradually increase every two years.

There is also a program called Income-based Repayment where your monthly payments would be capped at 15% of your disposable income – again if you would be eligible.

The last step

If you are able to find a better repayment program than what you currently have, the final step in the process is to contact your lender and discuss this with it. Your representative should be happy to help you through the process of changing repayment programs and might even suggest a better option than the one you chose.

Best of all, none of this will cost you a single cent let alone a big upfront payment or monthly fees.

2 Factors That Will Keep Your College Debt From Ruining Your Life

graduate chained to student debtCollege debt will never be a prerequisite to getting a college degree. All it really takes are good planning skills from parents and great financial habits from the student. While a lot of students are not financially well off to be able to get assistance from their parents, that does not mean they can let student loans ruin their lives.

You do not need to hear some really bad news about student loan debt to decide that you need to make a smart choice about it. You owe it to your future self to make a wise choice about your finances period. Regardless if you are still in school or you have rich parents, you need to learn how to manage your money so you can go out into the world and make yourself wealthy through your own efforts.

College loans will be more costly this year

Getting a higher education without college debt seem like a tough thing to do – but it is not impossible. There are a lot of students who have gone through this phase in their life without having to borrow a single cent.

But if you think that is impossible for you to do because you do not have enough time to save up for your tuition fee, that is alright. You can borrow money to pay for your college education, but make sure that you will do it correctly. More than ever, the situation now requires each and every student who will borrow money to be wise when it comes to taking out student loans.

According to an article published in Forbes.com the interest rate for school year 2014-2015 will be higher than last year. It is expected to rise by 0.8%. It may seem like a small percentage but the bigger the loan, the bigger interest amount you will be forced to pay off. The article said that the Stafford Loan that is an aid reserved for undergraduates will go up from 3.86% to 4.66%. The rate for the Direct unsubsidized loans for graduate students will rise from 5.41% to 6.21%. Direct PLUS loans for both parents and graduate students will increase from 6.41% to 7.21%.

All of these data will really make life a lot harder for students who need a loan to go through college. But even if you are trying to wrap your head around this financial difficulty, you might be comforted to know that all is not lost. With some effort, discipline and self control, you can focus on two factors that will help keep college debt from ruining your future.

Your degree determines if you can afford your student loan payments

The first factor involves the degree that you choose to study. If you need to borrow money to get a particular degree, you must ensure that it will lead you to a career that can afford to pay it off. It does not matter if you study medicine, education or political science, you need to repay student loans.

Let us lay them out for you and connect how this is important in relation to your student loans.

  • Your degree will tell you the career path that you can take. The best way to choose a college degree is to determine what type of career you can work on for the next few decades of your life. Do you picture yourself being a teacher, a doctor, a lawyer or a businessman? Or do you see yourself being an inventor or a scientist? You want to look at the career you want to have before you choose the appropriate degree that will allow you to qualify for that career.
  • Your career will determine how much you will earn. Thanks to the Internet, you can easily see how much professionals are earning these days. If you want to be a doctor, you can check out the average earning potential. You can narrow it down to specialty and even location.
  • The expected earnings of your intended career should define if you can afford to pay off your college debt. Finally, once you know that national average, you should be able to make a smart decision as to whether you can afford the student loan payments that you are trying to apply for.

It is as simple as this: if you have chosen to be a teacher by profession, why would you put yourself through $100,000 debt when the average salary of a teacher is only $30,000 to $40,000 annually? At least, this is true when you are just starting your career. It does not make sense to pay so much when your salary is not expected to be at par with what you have to pay off.

Huffingtonpost.com revealed that 51% of Americans who have college debt through the Education Department (Direct Loans) have difficulties with their payments. A lot of those who are not making payments have said that the cause of that is financial hardship. Do not be a part of this statistic by making a wise choice about your degree in the first place. If your chosen career can only pay yourself this much income, then know the limit of student loans you can borrow. That will keep your debt from eating more than half of your monthly salary and making your life a living hell.

Your college expenses will set the pace for your financial future

The second factor that you need to look into is your college expenses. How you spend your money while you are studying will set you up for a life of debt or financial success.

According to CollegeBoard.org, the undergraduate budget for SY 2013-2014 are as follows:

  • Public 2-year Commuter: $15,933 ($3,264 tuition fees; $7,466 room and board; $1,270 books and supplies; $1,708 transportation; and, $2,225 other expenses)
  • Public 4-year In-State On-Campus: $22,826 ($8,893 tuition and fees; $9,498 room and board; $1,207 books and supplies; $1,123 transportation; and, $2,105 other expenses)
  • Public 4-year Out-of-State On-Campus: $36,136 ($22,203 tuition and fees; $9,498 room and board; $1,207 books and supplies; $1,123 transportation; and, $2,105 other expenses)
  • Private Nonprofit 4-year On-Campus: $44,750 ($30,094 tuition and fees; $10,823 room and board; $1,253 books and supplies; $990 transportation; and, $1,590 other expenses)

It may be safe to expect that these will the expenses that students of SY 2014-2015 will go through. The thing is, you do not have to borrow all the money needed to completely finance your way out of college. It is understandable if some students will find it hard to fully demolish student loan debt. But that does not mean you cannot lessen it.

Here are some tips that you can use to lower your college debt.

  • Get a part time job. You can probably pay for your daily expenses through the money that you will earn. Or, you can build up your emergency fund so you do not have to be financially short when an emergency strikes.
  • Budget your money. Learning how to budget is very important because it allows you to identify your finances and decide where it should go to. You can prioritize your expenses and make sure that your money is not wasted an only spent on the important purchases.
  • Study hard. Another way to lower your expenses is to just study hard. You may be able to qualify for a scholarship the next year so make sure your grades are up.

Here is a video from ABC News about how you can increase your source of cash and lower your expenses while you are in college.

If you need help with student loans, National Debt Relief offers a consultation service that will help you select the right debt relief program to make your payments easier. The company can help you find the right program based on your financial situation, employment conditions and college debt. National Debt Relief will even help with the documentation. There is a one-time service fee involved that will be deposited in an escrow account. When you are happy with the service and the paperworks, only then will the payment be released.

Why Student Loan Debt Is Like The Ghost Of An Old Relationship

Broke woman student holding books and empty walletAlmost all of us have ghosts that continue to haunt us. For some of us it might be the ghost of an old relationship while for others it might be the ghost of a failed business or the ghost of those stocks you should have sold before they crashed. Whichever the case it may feel as if that ghost will never stop haunting you. Unfortunately, student loan debt is just like your ghost. It can and will haunt you forever.

There’s just no escaping it

You’ve probably heard that old saying that there are only two sure things in life – death and taxes. Well, you could actually add a third to that – federal student loan debts.

The fact is that there is basically no way to escape federal student loan debts. It’s not even possible to get these debts discharged in a chapter 7 bankruptcy unless you can prove a serious financial hardship and have a sympathetic bankruptcy judge. Why can’t you discharge these debts in a bankruptcy? It’s because Congress changed the law several years ago to protect us taxpayers whose money fund these loans. People have even fled the US to escape their student loans only to find they were arrested when they tried to return to America.

The government has more powers than a rabid collection agency

If you owe on student loans you can literally be pursued to your grave. This is because there is no statute of limitations on collection activities as there are on most other unpaid debts. In addition, the federal government has powers that any private collection agency wishes they had. If you go into default on a student loan, the government can seize your tax refunds, garnish your wages without getting a court order or even take part of your Social Security checks.

Miss just one payment and you’re toast

It’s much easier to go into default on a government-backed loan than you might think. If you miss or are late on just one payment you are in default. However, your lender will probably not report you to the three credit bureaus until you are 90 days past due. If this happens your entire balance will be due immediately, collection fees can be added to your balance, you will lose your eligibility for any more federal loans and any unpaid fees or interest can be capitalized. If this happens they will be added to your outstanding balance and you’ll end up paying interest on them as well.

What happens to your credit report is really horrible

A default on a student loan can be one of the very worst things to appear on your credit report and can be worse even than late payments. If this happens

  • You may not be able to lease an apartment, buy a home or get any credit cards
  • The interest on your existing loans or credit cards may increase
  • You may not be able to open a checking account
  • Your car and home insurance may cost more
  • You may be denied a job

What to do, what to do?

If you have a student loan or loans that go into default there are three options. The first is to repay those loans. A second option is what’s called loan rehabilitation. You could do this if you have a Direct Loan or FFEL Program loan. What this requires is that you and the Department of Education must agree on an affordable and reasonable repayment plan. Your loan would then be rehabilitated after you have made the payments you agreed to on time and a lender has purchased one of your loans. If you choose this option, make sure you understand that outstanding collection costs could be added to your outstanding balance. If you are able to successfully rehabilitate your loan, you may regain those benefits you had before you defaulted. This could include forbearance, deferment, loan forgiveness and a choice of repayment plans. There are some other benefits of loan rehabilitation including:

  • The default status on your defaulted loan will be removed
  • Your new status will be reported to the national credit bureaus
  • If your wages are being garnished, it will stop
  • If any of your income tax refund is being withheld by the internal revenue service, you will receive it

Loan consolidation

The third option for dealing with student loans in default is to get a debt consolidation loan. This would allow you to combine all of your outstanding student loans into one new one with a single monthly payment and a fixed interest rate. However, you cannot include a defaulted federal student loan into the new loan until you’ve made arrangements with the Department of Education and a few voluntary payments. In most cases you will be required to make three consecutive, on time and voluntary payments before you can consolidate.

If you’d like to know how to do a Direct Consolidation loan yourself, watch this short video courtesy of National Debt Relief.

The repayment options

As noted above one of the options to get a loan or loans out of default is to repay them. When you graduated or left school you were automatically put into 10-Year Standard Repayment unless you were smart enough to choose another program. Assuming you didn’t, you have six other repayment options. One of the most popular of these is Pay As You Earn Repayment. You may have read about this recently when Pres. Obama issued an executive order that made about 1.4 million more Americans eligible for this program. What makes it so popular is that it caps your monthly payments at 10% of your disposable income that exceeds 150% of the federal guideline given the size of your family. Since this program is based on your income, it can change each year as your income increases or decreases. It also includes loan forgiveness, which means that if you make all of your monthly payments and on time for 20 years but still have a balance remaining, it will be forgiven or eliminated.

If you are not eligible

There are other income-based repayment programs. For example, if you are not eligible for Pay As You Earn, you could switch to Income-based Repayment that would cap your monthly payments at 15% of your discretionary income, which is defined as the amount that your adjusted gross income is above the poverty line. This repayment program is also based on the size of your family and can increase or decrease every year depending what happens to your income.

Graduated repayment

Another popular repayment program is called Graduated Repayment. This is where your payments start out low but then gradually increase every two years. This program can be especially helpful to young people who currently have low incomes but that will increase in the years ahead.

It can be complicated

Whether or not you would be eligible for one of these repayment programs will depend on a number of factors including which types of federal loans you have and when you got them, as well as your income and family size. National Debt Relief recently inaugurated a new service designed to uncomplicate this. The way it works is that a National Debt Relief counselor analyzes your financial picture including your earnings, family size, debts, earnings potential and more. He or she will then review your student loan portfolio to see if there is a repayment program that would be a better fit than the one you currently have. If so, National Debt Relief will draw funds into an escrow account under your control and begin the student loan relief process by working directly with the Department of Education (DOE) to attain final approval on the best repayment option given your financial circumstances.

If this idea appeals to you, be sure to go to our new student debt consolidation page for more information or call us as 1-888-455-5007.

Revealed: Six Surefire Ways To Pay Off Your Student Loans Fast!

couple looking at a laptopThose student loans seemed like such a good idea at the time. All you had to do was sign a piece of paper and bingo! You were good to go in school for another semester. But then according to that legendary fighter, Rocky Balboa, “You wanna dance, you gotta pay the band, you understand? If you wanna borrow, you gotta pay the man.” And if you danced your way through school by borrowing money you’re now going to have to pay the band.

Three months to zero hours

If you graduated in May of this year, your grace period will likely end in November and you will need to begin paying back those student loans. If you’re typical you’ll want to get those loans paid off as fast as possible. So what can you do?

Move back in with dear old Mom and Dad

We understand that one of the last things you want to do is move back in with your parents … back to that old bedroom with those Pearl Jam posters and those tacky Star Wars curtains … and that dinky little study desk. But and here’s the biggest but – this is the number one way to pay off those college debts fast.

Do the math

If you don’t believe us, just do the math. Let’s suppose you owe $25,000 at 6% interest. While $25,000 is actually a bit below the national average for college graduates we’ll use this for the sake of our example. We’ll further assume that your net annual income is $30,000. If you live rent free with your parents you should be able to easily devote around 30% of your income to paying off those student loans. Do this and you would have that $25,000 paid off in three years and a month. And if you were to up those payments to 40% of your take home (net) salary you’d be debt free in a little more than two years. Just imagine. By November of 2016 you’d have all your student loans paid off and would be ready to go out, get your own place, maybe buy a new car and start living debt free.

Join the Peace Corps

You might remember the old Peace Corp slogan, “The toughest job you’ll ever love.” It was created back in the 1990s and as great a line as it might be, it doesn’t tell the whole story, which is what volunteering in the Peace Corp could mean to you personally. While this might make you a better person there are other more tangible benefits. For example, certain of your federal student loans may be eligible for deferment while in the Corps and for Public Service Loan Forgiveness. If you have Perkins loans they may be eligible for partial cancellation. Plus, when you complete your service, you will be given a “readjustment” allowance of $7,425 (pre-tax) that you could use any way you wish (hint: you could use the money to pay off some of your loans?).When you return to the U.S. the Peace Corps will also provide you with assistance related to jobs and education. It publishes online job announcements, information about graduate schools and articles related to possible careers and hosts career events throughout the year in Washington, DC and across the country. It will even help you translate you field experience for prospective employers.

Flee the country

Another way to get rid of those onerous student loans fast is to leave the country. There are countries where you could earn decent money but that have very low costs of living. You might be able to get a job teaching English somewhere in Central America or the West Indies that would pay well but where it costs next to nothing to live. For example, we read recently that a couple can live well in Nicaragua for $995 a month. If a couple can live well on this amount, just think would you could live on if you were single. Let’s suppose you could earn $2,000 a month teaching math to kids or as a software engineer. Go to the Bankrate Pay Down Debt calculator, plug in the amount of your student loans (again, let’s assume $25,000 at 6%) and your payment of, say, $600 a month, and you’ll be debt free in three years and 11 months. Boost that monthly payment to $800 and you’d be debt free in a little less than three years. Plus, you’d have had the experience of living somewhere exotic for three or four years – with lots of stories to share with your friends and family members when you get back to the states.

Enlist in the French Foreign Legion

This is by far the most radical way to get rid of student debts but here’s the deal. If you join the French Foreign Legion you would be given the opportunity to visit foreign lands. Plus, the Legion actually encourages people to choose a new identity. You could go from being Alex Hatfield to being Serge Simpson with the stroke of a pen and leave all your student loans behind. If you serve just one stint in the Legion you can apply for French citizenship, which would give you protection from those nasty creditors. In addition, you would be eligible for the French state run health care system, which we understand is pretty great.

Join the Military

You don’t have to join the French Foreign Legion to escape your student loan debts. You could enlist in the U.S. Army, Navy or Air Force as the military offers some great education resources. This includes the Montgomery GI Bill, which can cover more than half the cost of a college education. If you’re facing some heavy debts, the Army National Guard offers some sweet options including the Student Loan Repayment Program, which will pay as much as $50,000 of your loans – depending on your field of study. In addition, being in the Guard is only a part time proposition — every other weekend and two months in the summer – so you could still work a full time job and use some of the money you earn to pay down your student loans.

Volunteer for AmeriCorp/Vista

Vista would place you with a nonprofit group or groups while Americorps would put you in a variety of jobs from environmental cleanup to teaching school. In either case, you would earn a stipend of up to $7,400 for a one-year stint along with $4725 to pay off your student loans.

smiling womanIt doesn’t have to be 10 years

Unless you chose some other repayment plan, you were automatically placed into 10-Year Standard Repayment. This means you will be required to pay off your loans in 10 years at a fixed interest rate. But as you read in this article, there are a number of ways to get those loans paid off in less than four years. While some of them are on the exotic side (think French Foreign Legion) there are others like working abroad that could be both fun and financially rewarding. If none of these appeals to you, you could still make things easier by switching from that 10-Year Standard Repayment Plan to a different option. As you might have read Pres. Obama recently signed an executive order that makes many more people eligible for the Pay As You Earn repayment program. If you could qualify for this plan your monthly payments would be capped at 10% of your disposable income. It will take you the same number of years to pay off your loans but your monthly payments should be a lot lower, which would take some of the sting out of repayment.

Check out the other options

There are a number of other repayment plans available you might want to check out. In addition to Pay As You Earn there are three other income-driven programs, along with Extended Repayment and Graduated Repayment. Talk with your lender and you might be able to find the one repayment program that would be best for you given your earnings and financial circumstances.

How To Know If You Should Consolidate Your Student loans

How To Make Debt Consolidation Loan EffectiveIf you owe a ton of money on your student loans and to multiple lenders, the idea of consolidating them into one new loan can seem very tempting. You’ve probably seen ads from debt consolidation companies extolling the virtues of a debt consolidation loan. They usually focus on the fact that if you consolidate, you will have only one payment to make every month instead of the multiple ones you’re making now. And that payment will be “dramatically” be less than the total of the payments you’re now making.

This is all true but before you decide on a debt consolidation loan, there are some important things to consider.

The options

When it comes to consolidating student loan debts there are basically two options. You could get a Direct Consolidation Loan from the federal government or from a private lender.

If you were to choose a Federal Direct Consolidation Loan, you could consolidate the following types of loans.

  • Direct Subsidized Loans
  • Direct Unsubsidized Loans
  • Subsidized Federal Stafford Loans
  • Unsubsidized Federal Stafford Loans
  • Direct PLUS Loans
  • PLUS loans from the Federal Family Education Loan (FFEL) Program
  • Supplemental Loans for Students (SLS)
  • Federal Perkins Loans
  • Federal Nursing Loans
  • Health Education Assistance Loans

In other words, you could consolidate just about every type of federal loan if, and here comes the big if, and that’s you need to have at the minimum one Direct Loan or FFEL Program loan that is in repayment or in a grace period. In addition, you must either make repayment arrangements with your loan servicer that are satisfactory to it or you will need agree to repay the loan under Income-Based Repayment, Pay As You Earn repayment or Income-Contingent Repayment.

Calculating your interest rate

Both the interest rate and the term are fixed with a Federal Direct Consolidation Loan. The way interest rates are calculated is based on the weighted average of the loans being consolidated rounded up to the nearest 1/8th of one percent. The best way to think of this is that your new interest rate will be higher than the loan with the lowest interest rate you’re now paying but lower than your loan with the highest interest rate.

Note: The government has a calculator you could use to determine exactly what your new interest rate would be. Click here to access it.

The application process

If you decide on a Federal Direct Consolidation Loan, the application process is fairly simple. You go to StudentLoans.gov where you will find both paper and electronic applications. You can download the electronic application or download and print the paper version. You would then submit it by US mail. If you choose to file electronically, there are five steps as follows.

1. Choose Loans & Servicer
2. Repayment Plan Selection
3. Terms and Conditions
4. Borrower and Reference Information
5. Review and Sign

Once you’ve submitted your application electronically or by mailing the paper version, the consolidation service you selected will handle all the other actions necessary to consolidate your loans. It will also be your point of contact should you have any questions in the future regarding your consolidation application.

Repaying your Federal Direct Consolidation Loan

As noted above, you have three repayment options if you choose a Federal Direct Consolidation loan. They are Income-Based Repayment, Pay As You Earn repayment and Income-Contingent Repayment.

Private student consolidation loans

Given the fact that federal consolidation loans come with some pretty great features, why would you choose to refinance with a private lender? One way to determine whether this would make sense for you is to use this guideline: If your annual income is larger then the amount of student loan debt you have, you might take a look at private refinancing. You’ll also need to take into consideration other factors such as your credit history and other monthly expenses. However, comparing your income to your debt load is a good way to start.

More and more private lenders are entering the student loan consolidation market so that there are more and more options for refinancing. Be sure to keep in mind that once you consolidate your student loans with a private lender you will lose the benefits that come with a federal loan including loan deferment, repayment options, forbearance and loan cancellation. So before you take out a private debt consolidation loan, it’s important to ask yourself whether or not it’s worth it to give up those benefits just to get a lower interest rate.

Check out other options

Before you apply for either a Federal Direct or a private consolidation loan, do check out the other options available for handling your debts. For example, you could go to a credit-counseling agency for help. This is where you will be assigned a counselor that reviews all of your finances, helps you develop a budget and provides you with tips for better managing your money and your debts. There’s likely a credit-counseling agency near where you live. Just make sure it’s a nonprofit and offers its services either free or at very low cost. Also, if you choose this option do not let your counselor push you into a debt management program unless you totally understand it.

Snowballing your debts is another way to get student loans paid off without having to borrow money to do it. This is a technique developed by the financial guru Dave Thomas. The way it works is that you focus all of your efforts on paying off the student loan with the lowest balance. Once you’ve done this you will have more money available to pay off the loan with the second smallest balance and so on. This is called snowballing because as you pay off each loan you will gather momentum to pay off the next loan just like a snowball rolling downhill gathers momentum. If you choose to do this just make sure that while you’re paying off that first loan you continue to make at least the minimum payments on your other loans.

If you’d like to know more about debt snowballing here is a video with Dave Thomas himself explaining it …

Shop around

If you do decide that a private debt consolidation loan would make sense given your earnings and circumstances, be sure to shop around. There are, unfortunately, some debt consolidation companies that are basically scam artists. While they promise a consolidation loan, what they often do is push you into a debt consolidation program. On the other hand, there are honest and reputable debt consolidation companies such as National Debt Relief. We actually offer many of the benefits that come with a Federal Direct including repayment options and deferment in the event you become sick or unemployed. The repayment options offered by National Debt Relief include Extended and Graduated. If you were to choose Extended Repayment you would have up to 25 years to repay your loan, which would lower your monthly payments fairly dramatically. Graduated Repayment could be a good choice if you are not earning much now but believe your earnings will grow in the years ahead. This is because with Graduated Repayment your payments start low but then gradually increase every two years.

Advice and counsel

In addition to offering debt consolidation loans with a variety of repayment options, National Debt Relief also offers a counseling service designed to help people choose the federal loan repayment program that would best for them given their circumstances. The way this works is that the National Debt Relief customer is assigned a counselor that will carefully analyze the person’s salary, family situation, earnings potential and general finances and then recommend the best repayment program. The cost of this service is a flat, one-time fee, which is placed in an escrow account until the customer signs off on the recommended repayment program and the paperwork that we prepare to get that person into the new program. Anytime a customer is unsatisfied with National Debt Relief’s recommended repayment plan or with its paperwork, he or she can cancel out and won’t be charged a cent.

When It Comes to Student Loans There’s A New Player in Town

Graduation cap with moneyThe Student Loan Marketing Association (Sallie Mae) has long been the largest purveyor of student loans in the US. It began life as a government entity but is now a publicly traded corporation. It originates, services and collects on student loans and currently manages in excess of $180.4 billion in debt for more than 10 million people. While the company initially provided federally guaranteed student loans under the Federal Family Education Loan Program (FFELP), it now provides only private student loans. It calls this side of its business Navient.

The new player in town

There is now a new company that may be taking away some of Sallie Mae’s customers. The San Francisco-based company SoFi (Social Financing Inc.) is a peer-to peer-lender that is growing fast. It was founded by Stanford University graduate Mike Cagney and has now issued more than $500 million in loans to more than 5000 members.

What makes SoFi different from Sallie Mae is that it enables its highly qualified members to refinance their federal and private student loans. This, according to Cagney, has enabled SoFi members to purchase a home or even start a business and has helped its members save an average of $9400 over the life of their loans. Again, unlike Sally Mae, SoFi is community-based and offers its borrowers such unique benefits as entrepreneurship support, career coaching and protection against unemployment.

As Cagney explained, “We lend to individuals who we believe have the potential to be great customers for the big lenders — but we get them two years early. They are in their early 30s with a high FICO score — high incomes and cash flow — but they do not yet satisfy the criteria to get loans from the big banks.”

SoFi claims that its customers repay their loans as they have more cash flow, higher FICO scores and higher incomes.

Not for everyone

If you owe a lot on your student loans and would like to have them refinanced, SoFi could be a good choice. However, it’s not for everyone. First, you’re basically borrowing money from alumni of your school, which means your school must be one of the 550 that participate in SoFi. You must reside in one of the company’s eligible states

Note: variable rate loans are not available in Minnesota and Tennessee and in Iowa the minimum loan amount is $50,000.

Plus, there are other factors that SoFi takes into consideration including your income, credit score and that you are either employed or have an employment offer. In addition, you must not have declared bankruptcy in the past three years and must not have been convicted of a felony.

The dangers of loan refinancing

Another factor that makes SoFi unique is that it will refinance both private and federally backed loans by consolidating them. For some people, this is “breaking the golden rule of student loans.” These experts point out that once you consolidate federally backed loans with private loans you lose the benefits that come with the federal loans. You would have a loan with a fixed interest and a fixed term but would lose the possibility of having your loan canceled, deferred or extended. In other words, it would pay to be very familiar with the terms of your SoFi loan because once you sign on the dotted line that’s pretty much it.

The biggest benefit of  federally backed loans

The biggest benefit you would give up if you consolidated your federally backed loans with a private loan is the various repayment options available with federally backed loans. In fact, there are a total of seven repayment programs, including four income-driven plans. The other three are the 10-Year Standard Repayment program, Extended Repayment and Graduated Repayment. Students with federal loans are automatically put into the 10-Year Standard Repayment program unless they choose another option. This program has a fixed monthly payment, a fixed interest rate and a fixed term of 10 years. In comparison, the Extended Repayment program lengthens the term of a student loan to 25 years, which should dramatically reduce its monthly payments. In the case of Graduated Repayment, the loan payments would start low but then gradually increase every two years. This can be an excellent option for people that are just starting out and that have careers with incomes that will continue to increase.

Income-driven repayment

Of the four income-driven repayment plans, the one that has gotten the most attention recently is Pay As You Earn. The reason for this is that Pres. Obama recently signed an executive order that makes nearly five million more people eligible for this program. In addition, it caps borrowers’ monthly payments at 10% of their disposable income. Your disposable income is determined by subtracting 150% of the poverty level from your total income.

Other things you need to know

There are some other things about Pay As You Earn you need to know. For one thing, it takes into consideration not just your income but also your family size as larger families mean lower monthly payments. Second, your payments will be scheduled according to a 20-year repayment term instead of 25 years. If you make all of your payments and on time for those 20 years but still have a remaining balance, it will be forgiven. Finally, you will be required each year to submit documentation proving your income, which means your monthly payments could go up or down every year.

How to know if you could qualify for Pay As You Earn

The reason why more people will soon be eligible for Pay As You Earn is because borrowers who got their loans before October 2007 or stopped borrowing by October 2011 are now eligible. Prior to this, only newer borrowers were eligible. However, it’s important to keep in mind that these changes do not kick in until 2015. So if you feel it would be advantageous to switch to Pay As You Earn, you might have to wait until these changes take effect.

If you’d like to more details about Pay As You Earn here’s a video courtesy of National Debt Relief with lots of more information.

Income-based Repayment

A second popular repayment program for federal loans is called Income-based. It is much like Pay As You Earn except monthly payments are capped not at 10% but at 15% of your disposable income. To qualify for this repayment plan, your payments must be less than what you would pay under 10-Year Standard Repayment. Generally speaking, you would be eligible for Income-Based Repayment if your federal student loan debt is higher than your annual discretionary income or if it represents a large portion of your annual discretionary income.

Again your payments would be based on your income and family size.

Income-Contingent repayment

The third form of Income-driven repayment is Income-Contingent repayment. This program was created to make it easier for people to repay their loans that intend to pursue careers with lower salaries, such as public service jobs. The way it does this is by fixing the borrower’s payments according to family size, income and the total amount he or she borrowed. As with Income-Based Repayment, the monthly payments under this program are adjusted each year depending on the borrower’s family size and income. It also offers loan forgiveness after 25 years of payments made on time.

Income-Sensitive Repayment

The fourth and final form of Income-driven repayment is called Income-Sensitive. This program is an alternative for loans that are serviced by lenders in the Federal Family Education Loan Program. Like the Income-Contingent program, this plan was created to make it easier for borrowers tha have low-paying jobs to make their monthly payments. The way it works is that payments are pegged to a fixed percentage of the borrower’s gross monthly income. This percentage will be between 4% and 25% and is determined by you the borrower. However, the resulting monthly payment must be larger than or equal to the interest that accrues. And it’s important to understand that some lenders set a minimum threshold on the percentage of your income, which will be based on your debt-to-income ratio.

5 Ways to Mine Free Money For College

College student  catching money in the airFree money in college refers to scholarships and grants that a college undergraduate can use to pay school expenses. Some people are saying that as the government increases the funding to support higher education funding, the cost of attendance in colleges and universities across the country are also going up. This has lead to more and more student having to borrow to be able to earn a college degree.

ASA.org shares that 60% of the total average enrolled college students in America needs student loans to get to and stay in school. This percentage boils down to about 12 million out of the 20 million students needing either a federal student loan or a private student loan or both to pay for college. This need produces students with a college degree and multiple student loan types and amounts.

The need to repay them has been nothing short of challenging for student loan holders who are already separated for school and has entered the repayment stage. There are approximately 14% of the 37 million college debt owners are trying to get current on at least one past due student loan account. This means that around 5.4 million borrowers with past due loans can become delinquent and default on their payments.

This has lead to some extreme and crazy things borrowers repay their student loans. Some has left the country to try their luck in a foreign land earning more and paying less in taxes. There are those that are packing back home and staying in their old room to save up on rent and food. While some are trying to juggle two to three jobs just to be able to make ends meet especially with their student loan payments. This is where free money in college could have made a big difference.

Getting free money for college expenses

Not all families are able to build up a college fund for higher education expenses of the children. For those that do, their kids are going to have a relatively easier time with their finances compared to those that are graduating every year with college debt. But free money is available for those that does not have a 529 plan or a college fund under their name.

Free money refers to scholarships and grants that a student can qualify for in college. It is free money simply because it is free and the entity giving it to the student does not require repayment. Comparing it to student loans that has to be repaid at a future date, free money is given to the student for use in college expenses without a repayment clause.

Briana McGeough is a testament to the effectivity of free money as shared by Huffingtonpost.com. Not only was she able to use free money to pay for cost of attendance in college, she was able to graduate debt free. To top it off, she was able to graduate with at least $16,000 refund after college expenses from all the scholarships and free money she used in school.

Of course, free money has to worked on. It may be free but it certainly is not easy. It does not grow on trees where student can leisurely pick and choose whatever they want. Hard work is also needed in securing free money for college. It will require time and commitment from the part of the borrower to identify possible sources of the funds.

Scholarships are merit-based while grants are need-based. This means that a borrower has to show proof of financial need to qualify for a grant while scholarships can have a variety of qualifications. The most popular are academic and sports scholarships where student in high school who has sterling grades or a promising athletic career are give a free ride in college.

Here are some steps to remember when actively pursuing free money for college expenses:

  • Free Application for Federal Student Aid or FAFSA. This is the primary step in receiving federal financial package. One of which are need-based Pell grants. It is important to fill out the FAFSA because in the absence of free money the a Pell grant, you can take advantage of lower interest rates in federal loans and probably some subsidy on interest payments while in-school.
  • Small over big scholarships. There are some who prefer using one hour preparing for a big amount of scholarship rather than use it to apply to three to four smaller amounts of free money. The idea is to get a balance with the priority on the smaller ones where the chances of getting some is better that being turned down for a one time big amount application.
  • Do not stop after year one. Once in school, continue to actively look for other scholarships or grants that you can use in college. Even when you are already in your second, third, or even senior year in college, you need to constantly be on the look out for free money. Especially so that cost of attendance usually increases as you progress through your years in college.
  • Under the parent’s name. For parents wanting to build up a college fund for the kids, it is advisable to put it under your name first rather than your child because when financial aid put more importance on a student’s list if assets rather than the parents.
  • Part time job. Consider looking for free money as a job. Treat it as if your are working for someone (yourself) and you need to continuously look up scholarships and grant providing companies. This might sound like a crazy way to pay for student loans but it can work to your advantage.

Here is a video about free money that can help you understand it better.

Extra tip in pursuing debt free college graduation with free money

With all the statistics that are around you on how graduates are wondering how they will pay for their student loans or the total number of the student loan debt, it might surprise you to know that the school also plays a big part in the total college expenses. With that being said, students should be open to the idea that first choice of schools might have to be changed to match cost of attendance with free money available.

Debt collection scams even with student loans

After Illinois filed a landmark case versus some debt settlement companies dealing with student loans, it couldn’t be even more evident that shady groups are present even with student loan industry. In fact, CNBC.com discussed recently how the Consumer Financial Protection Bureau are putting their foot down on illegal debt collections techniques that can include student loans among the rest.

The buy and sell of old unpaid debts, that can include student loans, is a common practice between and mostly private lenders. There are banks that sell to a collection agency. In turn, the collectors gets their hands on fresh piece of information on who owes money and how much they are behind for. Of course, there are other companies that are too quick to the draw and possibly forego background check on the debtor if they do still haven’t paid for the loan or it has been paid off before.

Free money is a great objective in paying for college expenses, It just takes commitment in holding on to the feeling that you do not want debt in graduation. But for those that had to lean on federal and private student loans, there are a few ways to detect college loan scams.

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