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Struggling With Student Loan Debt? Maybe You Should Move To New York

frustrated woman with credit card debtDoesn’t the term “loan forgiveness” have a nice ring to it? If you’re struggling under a huge pile of student loan debts than having them forgiven could be almost as good as having your sins forgiven. You have all that debt behind you and the rest of your life ahead of you. You could stop trying to live from paycheck to paycheck and actually start putting money aside for a new car, a wedding or even a house.

The lifelong effects of student debt

While you might think that getting those student loans repaid would be the end of things you’d be wrong. Student debts can have consequences that can drastically effect the rest of your life. For example, one recent study found that being in debt can cause you to choose a substantially higher-salary job and reduce the probability that you will choose a lower-paid “public interest” job. Why is this? It’s because if you have high student debts it’s most likely you’ll choose to work for a corporation in the private sector where you can earn high wages. If you have practically no student loans, you might be more willing to take a job involving public service such teaching or working for a nonprofit. Instead of being forced to put on a suit and tie and go to work every day, you might choose to move to one of the Third World countries and help fight hunger.

The same study found that high student debt can have a significantly negative effect on small business formation, which is sort of academic speak for people’s interest in becoming entrepreneurs. When you think about it, this just makes sense. If you go to work for a corporation you should have enough money to handle that student debt burden. But if you go out on your own, your income will be more volatile – at least to begin with. This can be harder to manage when you have student loans, which in turn can impact your credit rating.

Another consequence of student loan debt is that the average length that people are paying off these loans is up 80%. While it used to be the average length of repayment was 7.4 years it is now 13.4 years. If everything else is equal, a big increase in how long you will be repaying your student loans means that you’ll have to dedicate a bigger portion of your lifetime income to this. In turn, this can have a serious consequence on your ability to build wealth or just save for retirement.

Finally, another study found that every additional $10,000 in student loans decreases the probability of getting marriage by at least seven percentage points. Just think about this for a minute. If you added on $30,000 in student loans the odds of you getting married would drop by more than 20% or one in five.

So how does the state of New York come into the picture?

The state of New York is now offering some loan forgiveness programs on its own – separate from the ones offered by our federal government. If you are an attorney or an indigent legal services lawyer move to New York. You could earn an award designed to retain you if your are an experienced district attorney, an assistant district attorney or provide legal services to the indigent.

Licensed social workers can also earn an award if they have a minimum of one year of employment in a critical area of human services. Are you a nurse and could you teach? The state of New York has a nursing faculty loan forgiveness program the purpose of which is to attract more nursing faculty members and adjunct clinical faculty teachers in nursing.

What do you think about becoming a farmer? The New York State Young Farmers Loan Forgiveness Incentive Program is meant to inspire college students to become farmers in the state of New York. It provides awards for loan forgiveness to anyone who obtains an undergraduate degree from a New York state university or college and agrees to farm in the state of New York for five years on a full-time basis.

If you’re not an attorney, a social worker, a nurse and have no interest in farming

In this case, you would be better off staying where you are and trying for federal student loan forgiveness. This comes in three flavors.

Public service loan forgiveness

First, there is Public Service Loan forgiveness. To qualify for this program you would need to have certain types of student loans and make 120 qualified, on-time payments on those loans while working in a public service job. This could be working for a federal, state or local government entity or agency or for a nonprofit certified as a 501(c)(3) by the IRS. Those 120 on-time payments mean, of course, 10 years but at the end of that all your remaining balances would be forgiven.

Teacher Loan ForgivenessTeacher

Second, if you’re qualified to teach certain subjects, you could get as much as $17,500 of your student loan debts forgiven. You would need to teach for five complete and consecutive academic years in a certain elementary or secondary school or in an educational service agency that serves low-income families. What this translates into is that if you currently owe $30,000 in student loan debts this could reduce your burden to $12,500, which should be much easier to handle.

Perkins Loan cancellation

Since Perkins loans come from the school you attended you will need to contact it to apply for this type of cancellation. In general, you can usually have a percentage of your loan cancelled for each year that you work in one of these jobs.

  • Member of the US armed services serving in an area of hostilities
  • Medical technician or nurse
  • Teacher
  • Volunteer in the Peace Corps or ACTION program (including Vista)
  • Head Start employee
  • Corrections or law enforcement officer
  • Family services or child worker
  • Professional supplier of early intervention services

Programs that could assist you

If you don’t qualify for one of these three programs, don’t give up. There are some federal programs that could assist you in repaying your debts in return for a service commitment. This includes the US Office of Personnel Management Student Loan Repayment Program, the National Health Service Corp. Loan Repayment Program and the Armed Forces Student Loan Repayment Program. Each of these programs offers different rewards. For example, the US Office of Personnel Management Student Loan Repayment Program offers up to $10,000 a year for loan repayment to a maximum of $60,000. The National Health Service Corp. Loan Repayment Program offers an initial reward of $30,000 or $50,000 and the Armed Forces Student Loan Repayment Program could mean up to $65,000 of your eligible loans would be repaid – depending on your branch of service.

Income-based repayment

You say you wouldn’t qualify for any of these programs? There is a class of federal loan repayment programs called Income-driven Repayment that could help ease your burden. Here’s a brief video, courtesy of National Debt Relief, that explains what it’s all about.

6 Important Student Loan Resolutions For 2015

National Debt Relief now offers Student Loans ConsolidationThere‘s a brand new year upon us and with it comes the need to make some New Year’s resolutions. By this we don’t mean the standard lose weight, give up smoking or get a new job. What we mean is that if you’re a college student or will be entering college next year there are some resolutions you need to make for 2015 that are specific to your situation. If you choose to make these resolutions you can graduate from college either debt-free or owing very little in student loans. This is important because student loan debts can be a drag on your life for the next 10 years if not longer. Recent college graduates owe an average of anywhere from $16,500 to $30,000 depending on which source you want to believe.

Even if you were to graduate owing just the $16,500 that’s a lot of debt to have to pay back when you’re just starting work. For that matter, you may not even be able to get a job as the Economic Policy Institute recently reported that about 8.5% of college graduates between the ages of 21 and 24 were unemployed. Or you could end up part of the roughly 44% of recent graduates that had a BA degree or higher but were in a job that technically did not demand a bachelor’s degree and were, thus, “underemployed.”

Resolution #1: I resolve to check out all possible alternatives

Go back and read the previous paragraph. Suppose you were unable to get a job or became underemployed. While this might be bad news it would be even worse news if you owed $16,000 or more in student loans.
Before you sign up for any student loans check out the options. Assuming that you didn’t get a big fat scholarship from your school you should go to a website such as The College Board where you could search for information on thousands of different college scholarships, grants and internships. There is also CollegeNET, which is a searchable database of more than 600,000 awards. Does your mom or dad belong to a fraternal or social organization such as the Elks, Moose or Rotary International? These organizations often have scholarships available to the children of their members. The company that your mother or father works for may have scholarships available to the children of their employees. All these alternatives are certainly ones you need to check out before you start borrowing money.

Resolution #2: I resolve to get a part time job

Almost every college student will qualify for some sort of financial assistance. For example, if you are unable to get a full ride scholarship you might be offered a part scholarship or a grant of some kind. Beyond this, you need to think seriously about getting a job to supplement whatever financial assistance you’ve been given. There’s hardly a college town that doesn’t have part-time jobs available from waitressing to sales clerking in mall stores. These jobs generally don’t pay a lot per hour but if you were to work 20 hours a week at eight dollars an hour you’d be earning better than $600 a month pretax. This could go a long way towards paying your tuition and maybe even put a dent in the cost of your room and board.

Resolution #3: I resolve to live at home – for at least two years

While most high school graduates can’t wait to go away to college it’s better to stay at home at least for your first two years. When you live at home you basically eliminate all room and board charges, which can cost from $7500 to $9000 per year depending on whether you attend a public or private university. Many of today’s smart students are living at home and attending a two-year college before going away to school. Your first two years at college will consist mostly of taking “basic” courses that are generally the same whether you attend a two- or four-year school. If you were to do this you would save around $15,000, which might be $15,000 less in student debt. If you’re lucky enough to live in a town with a good four-year college or university then living at home for those four years could save you as much as $30,000.

Resolution #4: I resolve to understand student loans

One of the biggest downsides of student loans is that for most people they are just too darn easy to get. All you generally need to do is walk into your school’s financial aid office, sign a paper called a note and presto! You have money available to pay for your next semester. If you will be required to take out a student loan or loans you need to know the different types. All federal student loans are now called direct loans because they come directly from the Department of Education (ED). These loans come in two types. They are either subsidized or unsubsidized. Subsidized loans are where the federal government covers the interest on them while you’re in school at least half time or are in a period of deferment. These loans are based on financial need, which is determined by your college or university. In comparison, unsubsidized student loans are not needs based but require that you do pay the interest on your loan or loans during all periods that you be in school.

Resolution #5: I resolve to not ask my parents to get Parent PLUS Loans

These loans are unsubsidized and available to the parents of dependent students as well as graduate/professional students. They are to help pay for educational expenses up to what it costs to attend the school minus any other financial assistance. Since they are unsubsidized, your parents would be required to pay the interest on them during all periods that you are in school. There are several reasons why you should not ask your parents to take out one of these loans. First, the interest rate is currently 7.21% for loans disbursed after July 1, 2014. In comparison your parents might be able to get a home equity line of credit with an interest rate as low as 2.99%. But second and more importantly do you really want to stick your parents with a pile of debt that could take them 10 or 20 years to pay off? Assuming that your parents are in their early 40s, a Parent PLUS loan could keep them tied up in debt until they were ready to retire.

Resolution #6: I resolve to graduate in four years

Did you know that according to a recent study only 19% of students graduate in four years? This might explain why so many of them graduated owing $16,000 or more. If you were to take an extra year to graduate this would increase your cost or debts by at least 20%. You could avoid this by buckling down, taking a full 15 credit hours or more a semester and graduating in four years. For that matter, if you’re really smart and a hard worker you might be able to graduate in just three years, which would reduce your costs dramatically. And if you don’t think that going to college for a fifth year will have serious consequences, watch this short video on the true cost of not graduating in four years …

Older Americans And Student Debts — A Bad Combination

Elderly coupleAre you one of the estimated two million Americans age 60 or older that still owe on their student loans? It can be tough to be saddled with student debts when you’re in your 30s or 40s but it can be lots worse if you’re in your 60s. You could even find that those old student debts are jeopardizing your Social Security benefits. This is because Uncle Sam can be a very unforgiving relative as our government has the right to seize portions of the Social Security checks of those that failed to repay their federal student loans. In fact, over the past year the government has withheld the Social Security benefits from 140,000 borrowers that were delinquent on their student loans. To make matters worse the federal government relies more and more on private collection agencies to go after delinquent borrowers and these agencies can make a person’s life nothing short of a living hell.

 You could be shocked

If you’re 60 or older and one of those two million Americans that still owe on their student loans you could be shocked when your Social Security check arrives and you find it’s been slashed by $100 or more. If you’re typical you depend a lot on that check to either support you or to supplement your savings. A $100 hit might not seem like much to some people but for those living on Social Security it could mean buying fewer groceries or having to cut back on some other necessity of life.

 If you’re not in default

If you are in default on a student loan meaning that you just quit paying on it some years ago that’s one thing. If your loans are in good standing but you’re struggling to meet your payments you could opt for Income-driven repayment. There are actually three Income-driven repayment programs available one of which would set your payment at no more than 15% of your discretionary income. In case you’re wondering about your discretionary income Uncle Sam defines it as the difference between your adjusted gross income and 150% of the federal poverty line, which corresponds to your family size and the state where you live.

There is an even better Income-driven repayment program called Pay As You Earn that would cap your monthly payments at just 10% of your discretionary income. However, this program is available only to those that took out loans very recently. And if you have older Federal Family Education Loans you would not be eligible for this program. However, you could use a similar one called Income-sensitive repayment. This is where you choose a monthly payment amount between 4% and 25% of your monthly income. Unfortunately, you can only use this plan for five years. But you could consolidate your existing Federal Family Education Loans into a new Federal Direct Consolidation Loan and this would then make you eligible to take advantage of the Income-based repayment plans.

 Did you take out Parent PLUS loans to help your child?

If you did take out Parent PLUS loans things get a little stickier. These loans are technically not eligible for Income-based repayment but if you were to consolidate them into a Direct Consolidation Loan, they would then become eligible for the Income-contingent Repayment program. While this program also bases your payments on your income and family size your payments would generally be higher than those under Income-based Repayment.

 If you are in default

If you just stopped paying on a federal student loan some years ago you are in default. This means you could see up to 15% of your social security benefits garnished. Sadly enough, according to the GAO (Government Accountability Office) more than 150,000 people receiving Social Security benefits saw their Social Security garnished in 2013 as a result of their student loan debts. And of this group 36,000 were over the age of 65.

The good news

If your Social Security benefits are being garnished you could take advantage of some of the options outlined above to reduce the amount being taken out of your check. Under certain circumstances, your payment could be as few as zero dollars. But you will first have to get your loan or loans out of default – either through consolidation or rehabilitation. If you want to do this you will need to contact your lender or loan servicer to discuss your options. Consolidation is fairly self-explanatory but rehabilitation is a bit trickier. To get a loan or loans rehabilitated you and the US Department of Education would have to agree on an affordable and reasonable payment plan. You would then be required to voluntarily make those payments on time and a lender has purchased your loan. At that point your loan will have been rehabilitated and you would again be eligible for benefits such as the Income-driven Repayment programs.

Private student loans

Stamp Shows Consolidated Loan approvedIf you cosigned on a private student loan for one of your children then, as you may have learned, you’re on the hook for repaying it. Since private student loans don’t offer the same repayment options as federal student loans you should consider either refinancing or consolidating it. Both Wells Fargo and Discover recently announced that they’d be offering modifications on private student loans for borrowers that are having a tough time financially. You could also contact your lender and see about postponing your payments although your interest will continue to accrue and you may be charged a fee for this.

The worst-case scenario

Failing everything else there is always the “nuclear option” of filing for bankruptcy. Although it is very difficult to get student loans discharged through bankruptcy it is not impossible. There’s what’s called the Bruner test. It’s a three-part test the bankruptcy judge would use to determine whether or not to discharge your student loans. The first part of this is that you must be able to show that you cannot maintain a minimal standard of living based on your current income and expenses if you are forced to repay your loan(s). Second, you must be able to demonstrate that this situation is likely to persist for a large portion of your repayment period. And third, you must be able to show that you have made what’s called a good-faith effort to repay your loans.

 It may not be easy

Repaying student loans may not be easy at any age but it can be particularly difficult if you’re an older American. However, if you learn about the alternatives and options available to you this can go a long way towards earning you some peace of mind as you head into 2015.

Are You Over 50 And Still Struggling With Student Debt?

tired looking womanOf the $1.2 trillion in student loan debts that are outstanding, more than 16% of it is that of people over the age of 50 – according to the New York Federal Reserve Bank.

It has been known for some time that student debt can be a real problem for the young. It can cause them to delay buying a home, working multiple jobs or even defaulting on their loans. But it can also impact older Americans, too.

People over the age of 50 are getting near retirement age. This means that having to struggle with student loan debts can really be more of a problem compared to young people that graduated recently. We know of one 62-year-old woman that would like to retire soon. Unfortunately she still owes more than $70,000 on her student debts from loans she got 40 years ago. This couple does not own their home and has minimal savings. The fact that when you factor in her student loan debt their debt worth is less than zero.

The problems just compound

If you are facing retirement, you’ll have to make a change in your financial planning. You will be transitioning from earning money and working to being on an income that’s fixed and consists of your retirement accounts and payments from Social Security. This can be tough. If you add student loan payments to this, it becomes even tougher.

It’s the Roach Motel of debt

You might have seen or heard commercials for a product called the Roach Motel. Its slogan is, “roaches check in but they never check out.” Unfortunately, student loan debt is like that. If you or your spouse has debts from the 1970s or 1980s, you just can’t “check out.” These debts will come back to haunt you. In the event you just forgot about your loans or didn’t make your payments, you could see your tax refunds and Social Security checks and garnished to repay your debts. The US government can get really ugly when it comes to student loan debts and garnish as much as 15% of your benefits to repay your debt. If you’re living on a fixed income, this can be a large amount. When you add these reduced benefits to the increased cost of medical expenses, the cost of living and even more, this could leave you in a serious financial condition.

Don’t borrow to finance your kids’ education

You could have paid off your student loans and think that all this doesn’t apply to you. But you could be in your 40s or early 50s and thinking about getting some parent PLUS loans to help finance your kids’ college educations. So even if you repaid your own student loan debt, you need to be careful or you could be getting yourself right back into debt and just before retirement.

As you might guess, this just isn’t good common sense. As you become closer to retirement you need to be paying off any remaining debts and saving as much money as you can. What you shouldn’t be doing is taking on new loans to pay for you childrens’ educations. It will just make it that much tougher to make ends meet when you’re living on a fixed income.

There is no just solution

If you’re in your 50s and still owe on your student loans, there is no real solution to this. There have been laws passed recently or updated that can help people better understand the consequences of the student loans they got back in the 70s or 80s. However, many of them weren’t in existence when you were taking out your student loans. This means that you, like many others, may not have known exactly what it meant to get student loans, how your would repay them or the fact that they can never be discharged – even through bankruptcy. This is the reason why many seniors are seeing a lot of debt rearing its ugly head as they reach Social Security age.

Work till you’re 75?

Unfortunately, if you’re over 50 and in this condition the only real solution is work as many years as possible so you can pay off your debts. This could actually mean working until you’re 70 or older. Of course, the longer you avoid taking Social Security the more time it will be before it could be garnished by the federal government. Plus, it provides additional time where you could be earning and paying off your student debts.

Video thumbnail for youtube video 6 Tips For Simplifying Your Financial LifeIf you’re still in your 20s or 30s

If you’re in your 20s or 30s and facing a load of student debt, one of the best moves you can make is to increase your student loan payments. As an example of this, if you’re on 10-Standard Year Repayment and owe $25,000 at 5% your payment would be roughly $265 a month. However, if you were to up that payment to $300, you would have your loan paid off in eight years and seven months. And if you were to boost it to $350 a month, it would be paid off in about seven years.

What to do before you boost those payments

However, experts say that there are three financial things that you need to do before you increase your student loan payments.

The first of these is to make sure you’re saving for retirement. If you’re working for a company that offers a 401(k) with an employer match, take advantage of it. While it’s great to get that student loan debt paid off, you’re doing it at the cost of leaving “free” money on the table. And if your employer does match your contributions, make sure you contribute up to that match as no amount of extra repayment on that student loan will make up for the money you’re leaving behind.

Get rid of high interest credit card debt

Second, before you boost your student loan debt payments make sure you pay off any other high interest debt, which is typically credit card debt. However, it could be a car loan or even a private student loan. But don’t make more than the minimum required payments on your lower interest loans until you’ve gotten rid of the higher interest ones that are costing you more money. For example, if you have a credit card with an interest rate of 9.9% it just makes good sense to pay that off first with any extra cash you have rather than your student loans which are typically at 6.8% or less.

Have an emergency fund

Another thing you need to do before you start boosting the monthly payments on your student debts is to create an emergency fund. This is to cover unanticipated events like unexpected medical costs, an automobile accident or the loss of your job. If you don’t have an emergency fund and suffer one of these calamities, you would most likely have to finance it through credit card debt or a personal loan, which means laying on more debt. In a worst-case scenario if you were to lose your job would you be able to support yourself and make the minimum payments on your student loan debts until you find another job? In most cases the answer to this will be “no.” So, don’t start making those extra payments on your student debts. Instead, take the cash and put it into an emergency savings account until you have the equivalent of six months’ living expenses.

Once you’ve done all this, you can start boosting your student loan payments and get out from under that load of debt.

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.

Should You Go Social To Consolidate your Student loans?

Video thumbnail for youtube video How To Be A Smart Credit Card UserIf you don’t think student loans have become something of a crisis, consider this. There are now more than $1 trillion outstanding in student loan debt. The reason for this is fairly simple. Approximately 20 million Americans go to college each year and of that 20 million, close to 12 million or about 60% borrow annually to help cover the costs of their educations. Seven out of 10 college seniors (71%) that graduated last year had student loan debts that averaged $29,400 per borrower. And debt at graduation (combining federal and private loans) increased an average of six percent each year from 2008 to 2012.

Going social

Are you laboring under the weight of student debts totaling $20,000, $30,000 or even more? If so, there could be help available through a relatively new entity named SoFi (Social Finance, Inc.). It is dramatically different than any other institution offering debt consolidation loans in that it is more of a social community as it consists of a network of 550 colleges and universities and offers loans only to those that are an alumnus of one of these schools.

How SoFi does business

SoFi is based on peer-to-peer lending. It promotes itself as a leading edge marketplace that connects high quality borrowers with alumni investors. SoFi offers rates that are lower than conventional loan consolidation companies because it’s certain that its borrowers will repay the community that backed them. As of this writing SoFi had fixed and variable rate loans beginning at an interest rate of 3.625% (with Autopay) and with terms of five, 10 and 15 years.

More than just a lender

SoFi is also different from conventional lenders in several other ways. As an example of this it offers unemployment protection. When a member becomes unemployed SoFi will pause her or his payments and even help the person find a new job. In addition, SoFi provides complementary coaching for its members to help them reach their career goals. It also helps its members find jobs and creates opportunities for entrepreneurs. In fact, qualified applicants that are interested in creating a new business can get their payments deferred for six months, access to a cohort of like-minded entrepreneurials and professional mentorship.

The negatives

Becoming a member of SoFi may sound very attractive. However, you need to be aware that there are some negatives. First, as you have read you must be an alumnus of one of its 550 member schools. A second negative is the eligibility requirements. To get a loan from SoFi depends on a number of factors, such as your credit score, that you can show a strong monthly cash flow and that you’ve had a solid employment history. A third negative is that SoFi will consolidate federal student loans together with private loans, which many experts consider to be a no-no. The reason for this is that once these loans have been consolidated, you lose all the benefits that come with federal student loans such as forgiveness, cancellation, deferral and the multiple repayment programs available.

Young black college graduate with tuition debt, horizontalYou can’t borrow your way out of debt

Finally, as a wise man once said, you can’t borrow your way out of debt. If you were to consolidate, say, $30,000 in student loans via SoFi you would still owe $30,000. Plus, you would have a fixed term and fixed monthly payment with no ability to change your repayment plan should that become advisable. It is for these reasons that many student loan borrowers opt to restructure their federal student loans rather than consolidate them.

Repayment options

What many borrowers don’t realize is that there are a number of repayment options besides 10-Year Standard Repayment. One of the most popular of these is Graduated Repayment. This can be a very attractive option for young people who are still low earners as the payments start low and then gradually increase every two years.

Income-based Repayment

There are also several repayment programs for federal loans that are based on your income. One of these is Pay As You Earn. You may have read about this program when president Obama recently signed an executive order that made about 1.6 million more people eligible for it. The best feature of this program is that it caps your monthly payments at 10% of your discretionary income. In addition, if you make your qualifying payments and have a remaining balance after 20 years it will be forgiven. Alternately, if you work for a public service organization you might be able to earn loan forgiveness after just 10 years.

Eligibility requirements

To be eligible for Pay As You Earn you must have one of the following types of loans.

  • Direct Unsubsidized Loans
  • Direct Subsidized Loans
  • Direct Consolidation loans that were not used to repay any plus loans that were made to your parents
  • Direct Plus loans made to graduate or professional students
  • Subsidize Federal Stafford loans
  • Unsubsidized Federal Stafford loans
  • FFEL PLUS Loans made to graduate or professional students
  • FFEL Consolidation loans that were not used to repay any PLUS loans made to parents
  • Federal Perkins Loans

Do you know what types of loans you have?

If you’re typical and have multiple student loans you may not actually know which types you have. If this is the case you will need to go to the Department of Education’s student loan database (https://www.nslds.ed.gov/) where you can learn what types of loans you have, when the funds were disbursed and how much you currently owe.

Your payments under Pay As You Earn

Generally, your monthly payment amount under Pay As You Learn will be a percentage of your discretionary income, which will be different depending on the plan and when you took out your federal student loans. To determine if you’re eligible you must also calculate your discretionary income as defined under this law. Without getting technical, suffice it to say that the way you determine this is by taking your gross income and then subtracting 150% times the federal poverty line.

Income-based Repayment

If you are ineligible for Pay As You Earn Repayment there are two other income-driven options. The first is Income-based Repayment. This is essentially the same as Pay As You Earn except your monthly payments would be capped at 15% of your discretionary income.

Second, there is Income-contingent Repayment. It is much like Income-based Repayment except it is only available under the Federal Direct Loan Program. Like Income-based Repayment your monthly payments would be a percentage of your discretionary income.

However, its monthly payment is usually higher than those under Income-based Repayment. In fact, it can be higher than the payments you are probably now making under 10-Year Standard Repayment.

The downsides of income-driven repayment programs

While one of these income-driven repayment programs could be a good choice it’s important to understand that they do have their negatives. For one thing you will pay more total interest over the life of your loan. Second, you will be required to submit updated information on the size of your family and your income to your loan servicer every year. If you do not do this, your monthly payments will no longer be based on your income and any unpaid interest will capitalize. Third, only Direct Loans are eligible and finally if you have a portion of your debt forgiven after the 10 or 20 years, you may have to pay taxes on it.

In summary

If your objective is to get lower monthly payments through loan consolidation, SoFi could be a good choice. Of course, this assumes that you would be eligible for one of its loans. If so, you would probably end up with a lower monthly payment than what you have now and might be able to get your loan paid off quicker. Plus, you would be eligible for the “extras” offered by SoFi including unemployment protection, career support, career services and its entrepreneur program.

If you would not be eligible for a SoFi loan or if your goal is to pay off your student loans without borrowing more money, a better option would be one of the income-driven repayment programs available through the Department of Education. You could end up with a lower monthly payment and would still be eligible for loan forgiveness, cancellation, deferral and the ability to change repayment programs should the need arise.

Untruths And Downright Lies About Student Loan Debt

woman thinkingStudent debt has become one of America’s most serious problems. It’s estimated that we have more than $1 trillion – with a T – outstanding in student loans. It’s become so bad for individuals that an estimated 10% of recent borrowers defaulted on their loans within two years of graduation. And one in seven went into default within the first three years of required payments. Given these statistics it’s no wonder that there is so much information floating around about student loans Unfortunately, not all of it is true. So here to set the record straight are some of the most important facts and myths about student loan debt.

Myth: You can get rid of your student debts by declaring bankruptcy

The truth is that you can’t get rid of your student loans by declaring bankruptcy. Congress decided some years ago that since the money to fund these loans come from U.S. taxpayers and not from banks or private corporations that we should be protected. It rewrote the law so that it’s virtually impossible to get student debts discharged in a chapter 7 bankruptcy. If you were to file for bankruptcy, you could plead with the judge to discharge your student debts but it’s highly unlikely you’ll succeed unless you can prove a “special hardship,” which includes: You are unable to maintain even a minimal standard of living if you have to repay your loans These circumstances will continue for a large portion of your loan repayment period You’ve made a good faith effort to repay your loans

Fact: Student loans can be forgiven

You can get student loan debt forgiven (erased) after 20 years if you work for a public service organization such as the federal, state or city government and have made all your payments as scheduled and on time – but still have a remaining balance. This is called Public Service Loan Forgiveness IPSLF). If you are a teacher you could get up to $17,500 of your loans forgiven after teaching five complete and consecutive years of qualifying teaching service. Click here to learn more about this type of forgiveness.

Myth: Pres. Obama will soon sign a bill forgiving all student loan debt

This pops up on the Internet from time to time and if you’re swamped with student debt it could have you singing Hallelujah. However, it is just a myth. It’s not only unlikely that a president has the power to do this but if he were to do so, wiping out $1 trillion in debt equals about one-third of the federal budget. This is a huge amount that even if it were spread out over several years and would lead to even bigger deficits, tax increases and budget cuts. You just couldn’t wipe out $1 trillion in debt with the stroke of a pen without there being serious consequences.

couple going over billsFact: There are other and probably better options for repaying your loans

Six months after you graduated or stopped going to school, you were required to start repaying your loans under 10-Year Standard Repayment. This means you have a fixed monthly payment and 10 years to repay your loans. As an example of what this can mean, if you owed $30,000 at 6.80% your monthly payment would be somewhere in the neighborhood of $340. Your cumulative payments will be about $41,000 and you would pay nearly $11,500 in interest. You could reduce that $340 a month by changing to one of the other six repayment programs available. For instance, there is Graduated Repayment where your payments start out small and then gradually increase every two years. This could be a good choice if you are just starting out in you career but believe your earnings will increase over time.

Myth: Students graduate owing an average of $29,400

This is one of the most quoted statistics about student debt but is not exactly the case. A recent study revealed that this number is swelled by the nearly 1.7 million graduate school students that are taking out loans, many for degrees that may or may not lead to better salaries. And the median debt loans for these borrowers grew from $40,209 in 2004 to $57.000 in 2012 and have probably only gotten worse since then.

Fact: Pres. Obama did do something that can help people with student debt

While Pres. Obama did not sign an executive order forgiving all student loans, he did sign one that made many more people eligible for Pay As You Earn Repayment. This program caps the monthly payments of eligible borrowers at 10% of their disposable income and includes loan forgiveness after 20 years. However, to be eligible for this program you must have had at least one federal student loan that you got on or after October 1, 2011 and no loans prior to October 1, 2007. It is also available only for loans in the Federal Direct Loan program.

Myth: You can beat the student debt game by going to a cheaper school

The problem with this statement is that even colleges that cost less now cost more. In fact, the average total cost to attend “all institutions” (this includes private, public, four- and two-year schools) increased from $8,438 in 1982 to $19,9339 in 20212 – even after adjusting for inflation. In other words, even if you attend a less expensive college, it will still be expensive and you will likely have to borrow money to pay for it.

Fact: Consolidating federal loans together with private loans is a bad idea

First, you cannot get a Federal Direct Consolidation Loan to consolidate both federal and private loans. To do this, you would need to go to a private lender. The reason why you shouldn’t do this is because you will lose all the benefits associated with federal loans including loan forgiveness, deferment, cancellation and the ability to switch repayment plans. Instead, you would have a loan with a fixed monthly payment, a fixed term – and no ability to change things if your circumstances were to change dramatically.

Myth: It’s impossible to get a student loan cancelled

The truth is that if you have a Stafford loan, you could get it cancelled – if you die or become totally and permanently disabled. There are some other special circumstances where it’s possible to get a federal loan canceled. They are:

  • You were unable to complete your program of study because the school closed within 90 days of the time you enrolled
  • Your school did not qualify your status properly before you began your studies
  • You had a refund due you never received
  • The school forged your signature to a promissory note or some other important document
  • Your school failed to evaluate your ability to benefit from its coursework before you began school
  • You loan was certified falsely as the result of identity theft or some other crime

Fact: You can leave your debts behind

It is possible to move to another country to avoid repaying your student loans. If you have an international address, it just makes it a lot more difficult for debt collectors to find you. In fact, collection agencies usually have to hire a third party or international counsel to recoup the money you owe. Since this would cut deeply into their profits they have less of an incentive to find you. However, you would be basically living in exile away from your family and friends and might not ever be able to return to the US.

Myth: Student loans won’t have a long-lasting effect on your life

One study revealed that even after 25 years after graduation the students who borrowed more than $25,000 were less likely to enjoy their work and are less physically and financially fit than those who graduated without debt. In other words, borrowing $25,000 or more to finance you college will have a negative effect on just about all aspects of your life.

Facts And Myths About Student Debt

woman thinkingStudent debt has become one of America’s most serious problems. It’s estimated that we have more than $1 trillion – with a T – outstanding in student loans. It’s become so bad for individuals that an estimated 10% of recent borrowers defaulted on their loans within two years of graduation. And one in seven went into default within the first three years of required payments.

Given these statistics it’s no wonder that there is so much information floating around about student loans Unfortunately, not all of it is true. So here to set the record straight are some of the most important facts and myths about student loan debt.

Myth: You can get rid of your student debts by declaring bankruptcy

The truth is that you can’t get rid of your student loans by declaring bankruptcy. Congress decided some years ago that since the money to fund these loans come from U.S. taxpayers and not from banks or private corporations that we should be protected. It rewrote the law so that it’s virtually impossible to get student debts discharged in a chapter 7 bankruptcy. If you were to file for bankruptcy, you could plead with the judge to discharge your student debts but it’s highly unlikely you’ll succeed unless you can prove a “special hardship,” which includes:

You are unable to maintain even a minimal standard of living if you have to repay your loans
These circumstances will continue for a large portion of your loan repayment period
You’ve made a good faith effort to repay your loans

Fact: Student loans can be forgiven

You can get student loan debt forgiven (erased) after 20 years if you work for a public service organization such as the federal, state or city government and have made all your payments as scheduled and on time – but still have a remaining balance. This is called Public Service Loan Forgiveness IPSLF). If you are a teacher you could get up to $17,500 of your loans forgiven after teaching five complete and consecutive years of qualifying teaching service. Click here to learn more about this type of forgiveness.

Myth: Pres. Obama will soon sign a bill forgiving all student loan debt

This pops up on the Internet from time to time and if you’re swamped with student debt it could have you singing Hallelujah. However, it is just a myth. It’s not only unlikely that a president has the power to do this but if he were to do so, wiping out $1 trillion in debt equals about one-third of the federal budget. This is a huge amount that even if it were spread out over several years and would lead to even bigger deficits, tax increases and budget cuts. You just couldn’t wipe out $1 trillion in debt with the stroke of a pen without there being serious consequences.

couple going over billsFact: There are other and probably better options for repaying your loans

Six months after you graduated or stopped going to school, you were required to start repaying your loans under 10-Year Standard Repayment. This means you have a fixed monthly payment and 10 years to repay your loans. As an example of what this can mean, if you owed $30,000 at 6.80% your monthly payment would be somewhere in the neighborhood of $340. Your cumulative payments will be about $41,000 and you would pay nearly $11,500 in interest. You could reduce that $340 a month by changing to one of the other six repayment programs available. For instance, there is Graduated Repayment where your payments start out small and then gradually increase every two years. This could be a good choice if you are just starting out in you career but believe your earnings will increase over time.

Myth: Students graduate owing an average of $29,400

This is one of the most quoted statistics about student debt but is not exactly the case. A recent study revealed that this number is swelled by the nearly 1.7 million graduate school students that are taking out loans, many for degrees that may or may not lead to better salaries. And the median debt loans for these borrowers grew from $40,209 in 2004 to $57.000 in 2012 and have probably only gotten worse since then.

Fact: Pres. Obama did do something that can help people with student debt

While Pres. Obama did not sign an executive order forgiving all student loans, he did sign one that made many more people eligible for Pay As You Earn Repayment. This program caps the monthly payments of eligible borrowers at 10% of their disposable income and includes loan forgiveness after 20 years. However, to be eligible for this program you must have had at least one federal student loan that you got on or after October 1, 2011 and no loans prior to October 1, 2007. It is also available only for loans in the Federal Direct Loan program.

Myth: You can beat the student debt game by going to a cheaper school

The problem with this statement is that even colleges that cost less now cost more. In fact, the average total cost to attend “all institutions” (this includes private, public, four- and two-year schools) increased from $8,438 in 1982 to $19,9339 in 20212 – even after adjusting for inflation. In other words, even if you attend a less expensive college, it will still be expensive and you will likely have to borrow money to pay for it.

Fact: Consolidating federal loans together with private loans is a bad idea

First, you cannot get a Federal Direct Consolidation Loan to consolidate both federal and private loans. To do this, you would need to go to a private lender. The reason why you shouldn’t do this is because you will lose all the benefits associated with federal loans including loan forgiveness, deferment, cancellation and the ability to switch repayment plans. Instead, you would have a loan with a fixed monthly payment, a fixed term – and no ability to change things if your circumstances were to change dramatically.

Myth: It’s impossible to get a student loan cancelled

The truth is that if you have a Stafford loan, you could get it cancelled – if you die or become totally and permanently disabled. There are some other special circumstances where it’s possible to get a federal loan canceled. They are:

  • You were unable to complete your program of study because the school closed within 90 days of the time you enrolled
  • Your school did not qualify your status properly before you began your studies
  • You had a refund due you never received
  • The school forged your signature to a promissory note or some other important document
  • Your school failed to evaluate your ability to benefit from its coursework before you began school
  • You loan was certified falsely as the result of identity theft or some other crime

Fact: You can leave your debts behind

It is possible to move to another country to avoid repaying your student loans. If you have an international address, it just makes it a lot more difficult for debt collectors to find you. In fact, collection agencies usually have to hire a third party or international counsel to recoup the money you owe. Since this would cut deeply into their profits they have less of an incentive to find you. However, you would be basically living in exile away from your family and friends and might not ever be able to return to the US.

Myth: Student loans won’t have a long-lasting effect on your life

One study revealed that even after 25 years after graduation the students who borrowed more than $25,000 were less likely to enjoy their work and are less physically and financially fit than those who graduated without debt. In other words, borrowing $25,000 or more to finance you college will have a negative effect on just about all aspects of your life.

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 Reduce Those Incredible Out-of-State College Tuition Fees

couple going over billsIf it seems to you that college just gets more expensive every year, it’s not your imagination. In a 15-state region that includes the state where we live the tuition fees for residents at four-year public schools increased an average of 3.1% in the 2013-2014 school year. However, that’s just chump change when compared to the 50.5% increase that’s occurred since the 2008-2009 academic year and the incredible 123.4% increase since 2003-2004.

And that’s for in-state tuition.

If you or your child is attending an out-of-state college, we don’t have to explain the phrase “those ridiculous out-of-state tuition fees.” You know only to well what this means.

Here are a few examples. Where we live the tuition for an out-of-state student is $33,333 or roughly three times what a resident pays. And it’s just as bad in other states. In-state tuition at Arizona State University is $10,156 while out-of-state residents pay $24,502. If you live in California you would pay $12,872 to attend the University of California-Berkeley but if not, your tuition would be $35,750. The University of Washington charges in-state residents $12,394 while out-of-state residents pay $33,513 … and these numbers are just for one year!

Becoming a resident

Of course, you could beat this by becoming a resident of the state where you are going to school. Unfortunately this is not easy. You will have to prove that you are a permanent resident of the state and not just going to school there. You will need to show that you are financially independent to a degree. This means you may have to turn over statements from your bank, your parents’ tax returns and your W-2 forms. You may also need to register to vote, have an in-state driver’s license and show that you’re paying income taxes to that state. In fact, where we live the law requires that students that are less than 23 years old and doesn’t have a parent living here must prove emancipation or total residential and financial independence for one year to be eligible for in-state tuition.

A few options for relief

There are a few ways to get relief from these onerous costs. One of them is a tuition reciprocity program like the Western Undergraduate Exchange (WUE). This can save a lot of money for residents of certain states. The agreements made under this Exchange allow students to attend schools in other states at either in-state or highly discounted rates, and save thousands of dollars in tuitions bills. Over 150 two-year and four-year schools in 15 western states participate in this program. The way this works is that every member school offers eligible students from all other member states a discount on tuition. This often means charging students no more than 150% of the in-state rate. In the academic year 2013-2014 the savings that could be gotten from this program ranged from $925 to $13,400 per student and averaged $6150. However, be aware that each participating school has its own rules for eligibility. There are ones that automatically give students the WUE rate assuming they meet certain academic thresholds. However, many schools restrict the number of WUE awards each academic year by giving the rate only to a specific number of students or those that major in specific categories. In case you’re wondering which states belong to the WUE they are, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington, Wyoming, and the Commonwealth of the Northern Mariana Islands.

In-state Angels

If you don’t live in any of the states listed above, there is another alternative called In-state Angels. It guarantees that you will either get in-state tuition or you pay the company nothing. The way this works is that In-state Angels develops a customized action plan designed around your specific circumstances and then assigns you a personal In-state Angel. This person will work with you every step of the way to achieve in-state residency. He or she understands the process of getting in-state tuition and will help with a plan that requires you to do as little as possible. The company works for free until it is successful in getting you in-state tuition and then charges a percentage of the money it’s saved you each semester until you graduate. Because In-state Angels makes no money unless it can get you in-state tuition its motivation is to get this for you as quickly as possible. In-state Angels claims that undergraduates have saved up to $18,000 per year net depending on the college even after you subtract its fees.

Is this legal?

Given the fact that it’s illegal to make false claims about residency, which can actually be a crime, this raises the question of legality – is what In-state Angels does legal? According to the company, what it does is 100% legal and we guess you can’t get more legal than that.

Not for everyone

While the savings promised by In-state Angels makes the program sound very tempting, it’s clearly not for everyone. You will have to first submit all your information, You and your parents will have the opportunity to ask questions and get answers. You will ultimately receive a quote, review it and share it with your parents. You would then talk to In-state Angels to determine whether or not you would be a good candidate. If so, you’ll be required to sign the contract and then schedule a time to come into the In-state Angels’ office to get started.

frustrated looking womanIf you can’t qualify for one of these types of programs

In the event you don’t live in one of the states that belongs to the Western Undergraduate Exchange and if you find that you can’t take advantage of the In-state Angels program, what can you do? You’ll probably end up having to borrow a lot of money. There are two ways to do this — through public and private loans. The best deal by far is to get a public loan or a loan from the Department of Education (ED). It offers William D. Ford Direct Loans that are loans where the money comes directly from the federal government. You can learn more about these loans on the Department of Education’s website, http://www.direct.ed.gov/. The way you apply for one is by filling out the Free Application for Federal Student Aid (FAFSA). As a general rule, Direct Loans are usually part of a larger “award package,” which will come from the college or colleges where you applied for admission. This package may also contain other types of financial aid.

The two types

If you are offered a Direct Loan there are two major types – subsidized and unsubsidized. Subsidized loans are based on need. In other words, if you can demonstrate that you have a financial need as determined by federal regulations, you would not be required to pay any interest while in school at least half-time. If you can’t demonstrate a financial need, your loan would be unsubsidized meaning that you would be required to pay interest during all periods you are in school including even periods of grace or deferment.

PLUS loans

There are also PLUS loans. These are unsubsidized loans that would be taken out by your parents and that can also be used by graduate/professional students. These loans are designed to help pay educational expenses up to the cost of attending the school minus all other financial aid. Since the loans are unsubsidized, your parents would be required to pay interest during all periods that you are in school.

The best loan is no loan at all

Of course, the best type of student loan is no loan at all. If you can graduate from college owing nothing you’ll be well ahead of most people. In fact, according to recent statistics about 12 million students borrow money each year to help cover their college costs. As a result they graduate owing an average of more than $28,000 in student loans. So, how could you graduate debt free? The answer will be a combination of what’s in your financial aid package and what your parents will contribute. You will need to add up the aid offered by your college such as a scholarship, work-study grant or some other type of aid and then subtract this from the cost of attending that school. If your parents can make up the difference, you could actually graduate debt free. You should also check with your state to see what grants and scholarships it has available. If one of your parents belongs to a social organization such as the Elks, IOOF or Moose be sure to see if it has a scholarship program for the children of its members. And, finally, many companies have scholarship programs for the children of their employees.

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