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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.

What Crazy Thing Would You Do To Pay Off Your Student Loans?

Video thumbnail for youtube video 6 Tips For Simplifying Your Financial LifeThe statistics are overwhelming and appalling. Students graduated from college this year owing an average of more than $29,000. Student loan debt now totals more than $1 trillion. Sixty percent of recent graduates have been unable to find jobs in their fields. Graduates age 24 and younger face a very uncertain job future and many experts say it’s only going to get worse – even though employment numbers continue to improve.

Will you be 50 and still paying on your student loans?

Here are more scary statistics. There are 10.6 million people ages 30 to 39 that are still paying on their student loans, 5.7 million ages 40 to 49 and worst of all, 4.6 million people age 50 to 59 that still owe on their student loans.

How do you feel about your student loan debts?

How would you describe how you feel about your student loan debts? Some people say they feel as if they were stuck in a trap with no possibilities of escape. Others say they feel as if they were sinking in quicksand or living under a big, black cloud. Then there are those who were so tired of paying on their student loan debts that they found some wild and crazy ways to quickly repay them.

Canoed across Ontario

One guy will call Stan was so desperate to repay his student loans that he moved to Alaska and took a job as a tour guide. Over the next three years, he took some other odd jobs. For example, he once canoed across Ontario, Canada transporting “voyageurs” (people who lived and dressed as if they were fur traders in the 18th century). Stan eventually decided to go back to school but he was so determined to not take on any new debt that he not only slept in a 1994 Ford Van on the Duke Campus he even cooked his meals in it.

Became a lab rat

Here’s an idea you may not want to emulate. Another recent grad, will call him Robert, volunteered to become a human lab rat by taking part in paid medical studies. In one of the studies, Robert spent two weeks in a room with a bunch of other people. He was given arthritis pills every day and provided urine and blood samples every hour so researchers could learn how effectively the medication was being absorbed into his bloodstream. In another study he received breast cancer medication via injections so that researchers could determine how his heart reacted to it. While the drug companies doing the studies give him insurance to cover any complications caused by the drugs, Robert noted that being a human lab rat was still scary.

Got a “sugar daddy”

If you’re like me you’ve probably never heard of the website SeekingArrangement.com. It’s where young women can find “sugar daddies” or rich, older men willing to pay for their companionship. One young woman’s sugar daddy paid her full tuition of $1500 a month at the California school she attended. Believe it or not this is on the low end compared to what most college women on the site earn. There are 350,000 “sugar babies” on the SeekingArrangement site about 41% of which are college students. According to SeekingArrangement, these young women average $4200 a month – not small change by any stretch of the imagination.

Mystery shopped

Many people have earned extra money to pay off their student loans faster by mystery shopping. Despite what you might think, there really are legitimate mystery shopper jobs. If you sign up with one of the companies that offer these jobs your initial assignments will probably not pay very well – between $6 and $15 per assignment. But if you stick with the program, you’ll eventually get better paying assignments. For example, one mystery shopper was assigned to opening night at a local racetrack. He not only received general admission for two, valet parking and money for a couple of bets but also a buffet dinner and two alcoholic beverages and was paid $60 for his time.

You don’t want to be a lab rat or a sugar baby?

If you’re not interested in finding some crazy way to pay off your student loans there are alternative repayment plans that could help. If you’re typical you’re probably on the 10-Year Standard Repayment Plan. But there are other repayment plans available that would yield lower monthly payments. Pres. Obama recently signed an executive order making more people eligible for the Pay As You Earn repayment program. If you qualify for this program your monthly payments would be capped at 10% of your discretionary income. However, to qualify you would need to show that you had a “partial financial hardship.” If you are unable to do this there are still other repayment options including Income–Based Repayment, Extended Repayment and Graduated Repayment. Each of these programs has different eligibility requirements and includes different types of federal loans. You can learn what these are by clicking here.

To consolidate or not to consolidate?Man having financial problems

If you, like many Americans, have multiple types of federal loans there is yet another option called a Direct Consolidation loan. The benefits of consolidating your loans include the fact that you would have only one payment to make a month and you would have a lower monthly payment because you would have 30 years to repay the loan. Of course, if you were to choose this option you would make many more payments and would end up paying a lot more interest. In addition, you could lose the benefits that came with your original loans such as deferment and those repayment options. Also, not all federal loans are eligible for consolidation. Here are the ones that are:

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

Whatever you do don’t default

The sad fact is that about 15% of people with student loans go into default within the first three years. Whatever you do, don’t let this happen. You are literally in default the day after you miss a payment. However, this won’t be reported to the three credit bureaus until you’ve been in default for 90 days. When this happens your credit score will take a serious hit. Plus, your account could actually be turned over to a debt collector and trust us, you don’t want this to happen. Student loan debt collectors can literally make your life a living hell. They can garnish everything from your tax returns to Social Security payments and from wages to disability checks. If you default on a loan you can also be barred from the military, lose professional licenses and suffer other serious consequences. And if any of your loans do go into default you will be hit with extra fees and interest charges and will end up owing even more.

Send Sen. Tom Harkins a thank you note?

You may not be aware of this but it’s all but impossible to get student loan debts discharged through bankruptcy. If you owe $25,000 on student loans, you owe $25,000 on student loans and there’s not much you can do except repay the money However, Sen. Tom Harkins recently introduced a bill that would allow people who have student loans from private lenders to get them discharged through bankruptcy. This is only a small percentage of those who have student loans – like 10% to 15%. And the bill is unlikely to get passed until after the midterm elections. However, if you have a boatload of private loan debt, there may be help on the way.

Are Student Loans America’s Biggest Rip-off?

frustrated womanEveryone needs to go to college, right? Right. If you want any sort of job today – up to and including clerking or being an executive assistant – you’re told you need a college degree. On the other hand, some people believe that the whole idea that everyone needs to go to college is nothing more than ill-founded social engineering much the same as the idea in the early 2000s that everyone should own a house.

What this has lead to

Most young people who buy into this idea do not have enough money to pay today’s super-inflated college costs. The solution? They borrow the money. This year’s college students graduated owing an average of around $29,000 only to discover that due to the poor job market they have less of a chance than ever of actually getting a good job in a field commensurate with their degrees.

Young and naive

The problem begins when 18 and 19 year olds sign up for student loans without realizing that they’re agreeing to a relationship that’s more unbreakable then a mortgage. Plus, their debt usually starts relatively small with a loan of maybe just $3,000 or $4000 — but then four years later, surprise! That $3,000 has somehow ballooned to $20,000 or more.

Why college costs so much

The reason why colleges cost so much now has very little to do with the quality of the education they offer. In most cases it’s because the schools are building extravagant athletic facilities, hotel-type dormitories and other such embellishments and hiring big name professors as they race to become “prestige” schools. Why do schools raise their tuition and fees year after year? One reason is because most states are cutting back on financial aid to their schools. The other is the “easy money” that’s available through student loans that has become a huge subsidy for the education industry. In fact, in the last six years it spent between $88 million and $220 million lobbying the government. The cost of tuition at both private and public schools is rising faster than almost anything else in the US — energy, health care and even housing. Between the years 1950 and 1970 if you sent your child to a public university it would cost you about 4% of your annual income. Now, in 2010, it accounts for 11%. Moody’s recently released statistics that tuition and fees rose 300% versus the Consumer Price Index between 1990 and 2011

The secret behind the curtain

What the federal government does not want you to know is that it makes an enormous profit under the federal student-loan system — an estimated $184 billion over the next 10 years. Some critics of student loans say that it’s nothing more than a boondoggle paid for by super-inflated tuition costs and driven by the government-sponsored and predatory lending system. A second little secret is that the Department of Education (ED) actually profits if you default on your loans. This is because it makes money on students that default. It’s estimated that the ED collects an average of 100% of the principal on these loans, plus an extra 20% in fees and payments.

Debt collector hollering into micDefaulted loans may be turned over to debt collectors

There’s a third dirty, little secret of student loans that if you do default, your loan will likely be turned over to a debt collector. Student loan debt collectors have powers that would make a dictator envious. They can garnish everything from your tax returns to Social Security payments and from wages to disability checks. If you default on a loan you can also be barred from the military, lose professional licenses and suffer other serious consequences that a private lender could not possibly throw at you.

Interest rates are irrelevant

While you may think you’re getting a good deal when you take out a low-interest student loan, nothing could be further from the truth. The reforms that Pres. Obama was able to make in 2010 eliminated the possibility that interest rates would double permanently so it was nice that this was avoided. It was at least theoretically a good thing when the president took banks and middleman out of the federal student-long game so that all loans now come directly from the government. But interest rates are largely irrelevant. Is not the cost of the loan that’s the problem. It’s the principle – due to those staggeringly high tuition costs that have been soaring at two to three times the rate of inflation. This is very reminiscent of the way that housing prices skyrocketed in the years before 2008. And look what happened to the housing market.

The truth about Pres. Obama’s recent executive order

Pres. Obama recently issued an executive order that would make more people eligible for the Pay As You Earn repayment program. If you have what’s termed a “partial financial hardship” your monthly payments would be capped at 10% of your discretionary income. However, you would be required to document your income every year meaning that your monthly payments could increase or decrease annually. Also, it would take you much longer to pay off your loan, which means you would end up paying more interest. This could be of some help if you have the right kind of federal loans and have had trouble repaying them. However, all of these reforms really do nothing to attack the basic problem, which is your balance or the amount of money you owe. There are people well into their 50s who are still paying on their student loans. As of the first quarter of 2012, people under the age of 30 had the most borrowers (14 million) followed by the age 30 to 39 group with 10.6 million who owed on their student loans. In the category of age 40 to 49 there were still 5.7 borrowers and 4.6 million in the age 50 to 59 category.

What should you do?

The whole student loan thing may be a rip-off but that doesn’t mean you should just walk away from yours. As noted above, there is a serious price to be paid if you default on your loans. If you have not already done this, you need to go to the National Student Loan Database System (NSLDS) and check up on your federal loans – how much you owe and to whom. Once you’ve done this you will need to make a plan for paying off your debt as quickly as possible. There are a number of different repayment options available in addition to the aforementioned Pay As You Earn program. For example, there is Extended Repayment, Graduated Repayment and three other Income-Based Repayment programs. It can be seriously confusing and you might need help, If this is the case, National Debt Relief offers a program  designed to help people find the best debt relief program given their student loan debts. It’s a consultation service where we match your specific situation to the best debt elimination program. We take into consideration factors such as your employment, financial capabilities, amounts owed, types of loans and salary. We then recommend what we believe will be the debt relief program given your circumstances. We even prepare all of the paperwork necessary to get you into the new repayment program. This service requires just a one-time payment that we put into an escrow account. There are no other fees or charges. And we don’t take your payment out of the escrow account until you’re totally satisfied with the repayment program we’ve recommended and the paperwork we’ve prepared. In the event you are not satisfied with one or the other, we refund your money. So, this is basically a no-lose proposition.

8 Seriously Unconventional Ways To Pay Off Student Loans Fast!

student holding a past due envelopIf you graduated from school owing a boatload of student loan debts we might not have to tell you the effect this can have on your life. But it might be even worse than you think. American Student Assistance recently surveyed young college graduates and found.

  • 27% of respondents to ASA’s survey said that they found it difficult to buy daily necessities because of their student loans;
  • 63% said their debt affected their ability to make larger purchases such as a car
  • 73% said they have put off saving for retirement or other investments; and
  • The vast majority—75%—indicated that student loan debt affected their decision or ability to purchase a home.

Survey respondents indicated that in addition to limiting their ability to make major purchases, student loan debt also impacts their important life decisions:

  • 30% responded that their student loan debt was the deciding factor, or had considerable impact, on their choice of career field
  • 29% indicated that they have put off marriage as a result of their student loans
  • 43% said that student debt has delayed their decision to start a family

If you’re on the 10-year Standard Repayment Plan you’ll be paying on those student loans for 10 years. That’s a long time to be struggling with debt. The simple fact is that the faster you can get your student loans repaid, the better your life will be. While there are a number of “conventional” ways to earn extra money to pay off student loans such as getting a second job, pet sitting, substitute teaching or starting an online store, there are also some seriously unconventional  asways to pay off those loans and much faster than 10 years.

Join the Peace Corps

Would you be interested in both paying down your student loans and seeing the world? Then join the Peace Corps. This could lead to the cancelation of up to 70% of your Perkins student loan debt. However, if you have a Stafford or consolidated loan this program is not quite as wonderful but you would get a full deferment for up to 27 months. Plus, this would give you something positive to put on your resume and would be earn as you learn.

Become a human lab rat

One young man who was more than $100,000 in debt volunteered to become a human lab rat for pharmaceutical companies. He participates in paid medical studies such as one where he was paid $3000 to stay at the facility of a pharmaceutical company in a room with seven other people for 14 days. During those two weeks he took arthritis pills every day and then provided urine and blood samples every hour so researchers could study how effectively the medication was being absorbed into his bloodstream.

In yet another study, this young man received a breast cancer medication via IV injections so that researchers could see how his heart reacted to it. The pharmaceutical companies provide insurance to cover any complications caused by the drugs that he takes but he says that being a lab rat is still kind of scary.

Do mystery shopping

You can actually make decent money as a mystery shopper. However, when you first sign up you’ll probably get sent only to places such as fast food restaurants, oil change outlets and other opportunities that do not pay very well – probably between six dollars and $15 per assignment. However, if you stay with the program you will eventually get sent to more highly paid shops and stores. One mystery shopper was recently sent to evaluate opening night at a local racetrack. His compensation not only included general admission to the track, valet parking and money for three bets but also a buffet dinner and alcoholic beverages for two. In addition, he earned $60 for his time.

There is also a new kind of mystery shopping opportunity called Beer ID. If you are age 30 or younger your job would be to try to purchase beer and cigarettes and then record if the clerk asked for your ID. These assignments pay anywhere from $5-$30, plus you are reimbursed for any items you purchase. We know of one person who was able to earn $5000 in one month through Beer ID.

If you think you’d like to be a mystery shopper here’s a video courtesy of National Debt Relief that explains its basics.

Get a job overseas

The job market in some overseas countries is much healthier than here in the states. There are jobs outside the US where you would get your meals and accommodations free at least for a few months, along with a tax-free salary. We know of one young woman who did this and was able to pay off her student loan debts in less than two years. As it turned out she liked life abroad so much that she decided to settle down in the Bahamas.

Find a “sugar daddy”

If you’re a young woman with a huge stack of student loan debts you might consider getting a “sugar daddy.” There is a site called SeekingArrangement where women can find men willing to support them financially. There are currently 350,000 “sugar babies” on the SeekingArrangement site. About 41% are college students and say they’re using their sugar daddies as a primary or secondary way to pay for college. According to SeekingArrangment, these women receive an average of $4,200 a month, which is certainly nothing to sneeze at.

Sell your virginity or your sperm

There are actually auctions where women can sell their virginity. One woman recently netted $1 million by selling her virginity. She did this in conjunction with the Moonlight Bunny Ranch, a legal brothel in Nevada. When she was asked how her family felt about this, she said her mother was a bit disturbed but that everyone else saw it for what it was – simply a business transaction.

On the male side, you might be able to earn extra money to pay off your student loans by selling your sperm. We heard of one Californian who earned $2600 for making sperm donations over the course of a year at a California Cryobank. While we can’t promise this there probably is a sperm bank somewhere near where you live.

Get a job in the public sectorFederal Eagle

If you were to get a public sector job you could have a lot of your debt eliminated through the Public Service Student Loan Forgiveness program (PSLF). If you were to qualify for the program the remaining balances of your federal loans would be forgiven after you’ve made 120 qualifying payments on them.
To qualify for this program you would need to work full time in:

A government organization (including a federal, state, local, or tribal organization, agency, or entity; a public child or family service agency; or a tribal college or university).

Or …

A not-for-profit, tax-exempt organization under section 501(c)(3) of the Internal Revenue Code

A private, not-for-profit organization (that is not a labor union or a partisan political organization) that provides one or more of the following public services:

  • Emergency management
  • Military service
  • Public safety
  • Law enforcement
  • Public interest law services
  • Early childhood education (including licensed or regulated health care, Head Start, and state-funded pre-kindergarten)
  • Public service for individuals with disabilities and the elderly
  • Public health (including nurses, nurse practitioners, nurses in a clinical setting, and full-time professionals engaged in health care practitioner occupations and health care support occupations)
  • Public education
  • Public library services
  • School library or other school-based services

Join the French Foreign Legion

If you’re really desperate to get rid of your student loans – or away from other issues –you could join the French Foreign Legion. It literally encourages you to create a new identity and offers the opportunity to visit foreign lands. You would have to enlist for five years and would earn only about $1400 a month. But once you completed your five-year stint, you could apply for French citizenship and would have legal protection from your creditors along with very liberal state-run universal healthcare.

Two Crazy Ways To Pay Off Student Loans And 9 Conventional Ones

girl-on-chair-with-bubble-400Are you one of the 20 million people who attend college each year? If so, the odds are that you’ll graduate owning money on student loans. In fact, of these 20 million, around 12 million or about 60% borrow money via student loans to help pay their costs. There are about 37 million Americans with outstanding student loans today. And here are even scarier statistics– as of 2012’s first quarter, the under 40 age group had the most borrowers (14 million) followed by 10.6 million in the age 30 to 39 group, 5.7 million in the category of 40 to 49 and 4.6 million in the age 50 to 59 category. I mean can you even imagine that 30 years from now you’d still be paying on your student loans? Ouch.

How much do you owe?

If you graduated this year the odds are you owe around $29,000 as this is the average amount of debt for today’s graduates – which is up from $23,450 just six years ago.

Get the facts

If you graduated in the past two or three months, you’re still in your six-month grace period or that number of months before you need to start repaying your loans. If you’re typical you probably have multiple loans from multiple lenders. If so, you need to go to the National Student Loan Database (https://www.nslds.ed.gov/) as it will have all the information on your federal student loans including.

  • Type of loan
  • Original amount of loan
  • Date the loan was first issued
  • Amount of money distributed
  • The loan holder or servicer
  • Amount you currently owe

Make a plan

The NSLDS also includes a Student Loan Portfolio. Make sure you store all the information about your federal student loans in your Portfolio so you can then make a plan for paying off your debts.

Two crazy ways to pay off student loans fast

There are a number of “conventional” ways to repay your student loans and some that can only be called crazy.

The first of these is selling shares in yourself. That’s right. You might actually be able to sell shares in yourself – an idea that was first proposed nearly 60 years ago by the economist Milton Friedman.

The way this works is that you’d get people to give you money upfront in exchange for a percentage of your future earnings. These are called Income Share Agreements (ISAs) and new companies such as Lumni, Upstart and Pave are promoting this invest-in-people option to help talented persons get money for their educations. Representative Tom Petri and Senator Marco Rubio have introduced legislation that would increase the use of these investment alternatives by formally defining ISAs.

A second crazy way to pay off student loans is to do what one University of Buffalo graduate did. He had $32,000 in student loan debts with useless degrees in History and English – leaving him with no real job prospects. He was determined to make money and moved to Alaska where he worked as a maid between his fourth and fifth years of college and then went back after he had graduated as a van tour guide. At one point he canoed across Ontario, Canada to transport people called “voyageurs,” and did other odd jobs until he was able to totally pay off his loans in just three years.

9 conventional ways

If you’re not interested in canoeing across Ontario or selling shares in yourself, there re other, more conventional ways to pay off your student loan debts are here are nine of them.

Is A Frugal Budget Really HelpfulMake a Budget

The first important step towards paying off your student loans is to make a budget. This isn’t just an important part of repaying your loans, it’s a critical part of achieving financial independence. When you have a budget, you can allocate money for repaying your student loans and everything else you need to pay for in life. A budget will not only help keep your spending under control, it can serve as a road map for achieving your short- and long-term goals.

Get into a better repayment plan

If you do nothing, you will automatically be put into the 10-year Standard Repayment Plan. As you could guess, you’ll have 10-years to repay your debts with a fixed monthly payment. But that might not be your best option. There are a variety of other repayment plans including Extended Repayment, Graduated Repayment and Income-Contingent Repayment. You should check these out, as one of them could be a much better option – and with lower monthly payments – than the 10-year Standard program.

Ask your employer

This won’t help with current loans but if you’re planning on going on to grad school, your employer might be willing to pay for it. While colleges are most likely to offer this benefit, there are other companies that have pay-for-school programs. Even if your employer doesn’t have such a program, it wouldn’t hurt to ask and you might be surprised at the answer.

Consolidate

If you do have multiple federal loans you might be able to save money with a Direct Consolidation Loan. The interest rate on these loans would be the weighted average of the interest rates on your existing loans rounded up to the nearest 1/8th of a percent. This means it would be higher than your lowest interest rate but lower than your highest. Plus, you’d have many more years to repay the loan so would have lower monthly payments.

Sign up for auto-deductions

If you were to enroll in auto-deduction, your loan servicer will automatically deduct your payment from your bank account every month. The benefit of this is that some loan servicers will give you a discount just for enrolling.

Volunteer

Volunteering in the Peace Corps or AmeriCorps would help you pay off your student loans while doing some good. Both these programs offer some type of education award or partial loan cancellation, plus they will pay your living expenses during the time you’re serving.

Talk with your co-signer(s)

The odds are that the co-signer on your student loans was your Mom or Dad. This means they’re probably also responsible for them. Since they were there to help you attend college, they might be willing to help you succeed in life. If you’re having a tough time repaying your loans, your parents might be willing to supplement your payments or match your funds.

Pay More Than Required Each Month

This might be a bit obvious but the fastest way to get rid of those student loan debts is by paying something extra every month. As you may know when you make a payment, you first pay off whatever interest accrued since your last payment and the rest goes to reducing your principle balance or the amount you owe. If you pay more than required, you could have the extra amount used to pay down your loan principle.

Get Rewarded

There are programs and websites where you earn rewards for paying down debt or spending money. In some cases, the money you earn can be used to pay down your loans. In fact, some of these programs are education specific so you put any credits you earn directly to paying down your debt.

Has The Department of Education Asked You To Consolidate Your Loans?

Video thumbnail for youtube video 6 Tips For Simplifying Your Financial LifeDid you recently receive a call or letter from the US Department of Education (ED)? If you have some type of federal loan, you probably did — thanks to reforms recently made to the Health Care and Education Reconciliation Act.

$400 billion outstanding

Did you know that all federal loans are now Direct Loans? This includes the $400 billion still outstanding in Federal Family Education Loans (FFEL). The problem with these loans is that they offer fewer options for repayment and are unreasonably costly for taxpayers. Plus, there are about six million student loan borrowers that have at one FFEL loan and a Direct Loan. This means they must keep track of and make at least two different monthly payments — which, in turn, puts them at a greater risk to default.

The ED wants you to consolidate

The ED is encouraging those of you that have two loans to move their guaranteed FFEL loan into their Direct Loan. If you have split loans, this program actually requires you to do nothing. In January of 2012 the ED began reaching out to borrowers that qualified to let them know of this new opportunity so you may have already heard from the ED.

The consolidation initiative

This consolidation initiative will keep the conditions and terms of your loan identical — except, of course, you’ll be required to make just one payment a month. If you take advantage of this program you will also get a half of a percent reduction to the interest rate on part of your loans, which could translate into reduced monthly payments and a savings of hundreds of dollars in interest. Any FFEL loans you consolidate would have their interest rates reduced by 0.25%, plus your entire consolidated FFEL and Direct Loan balance would have an additional 0.25% interest rate reduction.

What this could mean

Here’s an example of what this could mean if you were to consolidate your FFEL loans into a Direct Loan. Let’s assume you’re repaying two $4,500 FFEL Loans at 6% as well as a $5,500 Direct Loan at 4.5%. If you repay those loans under Standard Repayment, you will pay $4,330 in interest until you’ve paid off your loans in full. But if you were to consolidate those FFEL loans into a Direct Loan, you would save $376 in interest payments and would be required to make just one payment a month rather than two.

Here’s a more dramatic example. Let’s assume you are repaying a $32,000 FFEL Consolidation loan at 6.25% and a Direct Unsubsidized Stafford loan at 6.8%. If you re these loans under Standard Repayment you will pay a total of $13,211 in interest. However, if you were to consolidate that FFEL loan you would save $964 in interest.

Struggling with your student loan debts?

If you’re struggling with your student loan debts, as are many Americans, there’s a free online tool that could help. It’s called the Student Debt Repayment Assistant and is available on the website of the Consumer Financial Protection Bureau (CFPB). This tool will first ask you whether you have federal or private loans. If you have only federal loans, it will next ask if you’ve ever missed one or more payments on your federal loan. Assuming you haven’t, the tool will then ask whether or not you believe you can make your full payments — considering your other living expenses. If you are struggling with your debts and answer, “no,” the Student Debt Repayment Assistant asks if you are on active duty in the military. Answer “no” to this question and it will suggest that you move to Income-based Repayment (IBR).

The benefits of IBR

If you choose to move to IBR (based on this tool), you would get several benefits. For one thing, if you work in a profession where you have a moderate salary and a lot of debt, and stay enrolled in IBR for 25 years, you could see any remaining balances cleared (eliminated). Second, with IBR you can pay more if you want to, which would save on interest and enable you to repay your loan faster. If you work in a public service job for 10 years, you could be eligible for loan forgiveness. But the most significant benefit of IBR is that you’d probably have a much lower monthly payment – because your payments would be based on your income, the state where you live, your debt load and the size of your family.

Here’s an example of what this could mean. Let’s suppose you’re currently paying $208 a month on a $20,000 student loan debt. If you were to move to IBR, had an income of $30,000 a year and a family of three, your payment could drop to just $28 a month. You read that right. Just $28 a month.

The disadvantages of IBR

You’ve probably heard that old adage that there’s no such thing as a free lunch. This is definitely the case when it comes to IBR. It has two significant “prices” or disadvantages. The first is that it will take you much longer to pay off your loan — probably 30 years vs. 10 years in Standard Repayment — and you’ll pay more in interest. But if you’re having a tough time repaying your student loans you might be better off switching to IBR to get that lower monthly payment even if it means it will take you a lot longer to repay your loan.

Would you be eligible for IBR?

If you used the Student Debt Repayment Assistant and were told you would qualify for Income-based Repayment it’s important to understand that this may not be the case. While the Student Debt Repayment Assistant tool can be helpful, you may not be eligible for IBR despite what it says. The reason for this is because to qualify you must show you have a partial financial hardship. The way this is defined is that the monthly payment you’re currently making under a 10-year Standard Repayment Plan needs to be higher than what you would pay monthly under IBR.

Lower monthly paymentsMan counting money

If you have newer loans you might be eligible for the Pay As You Earn (PAYE) repayment program that offers even lower monthly payments than the IBR program.

Even more options

In addition to IBR and PAYE, there are Income-Contingent Repayment and Graduated Repayment. While all of these plans have many things in common, they do have different eligibility requirements and provide different levels of debt relief.

Finding the best program

As you have read there are a number of ways to deal with student loan debts, plus others such as loan deferment and cancellation that we haven’t covered. Fortunately, there is a simpler way to determine which of these programs would be best for you. The company National Debt Relief recently introduced a consulting program where it will match your situation to the best student debt elimination program given your financial situation. In addition, National Debt Relief will do all the paperwork required to get you into that new program. There is just a flat, one-time fee for this service, which is deposited into an escrow account. National Debt Relief will not withdraw its fee from this account until you have approved both your paperwork and its recommended student debt relief program. If you don’t like the program National Debt Relief recommended or are unsatisfied with your paperwork, your money will be returned and you will pay nothing.

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