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5 Ways Student Loans Are Jeopardizing Our Future

problematic graduate sitting on moneyIf you think that student loans are affecting only students and new graduates, think again. That is what you may want to think but it is farther from the truth. It is a continuously rising debt that is creating a ripple effect of botched financial opportunities both for the borrower and the economy in general.

The tricky part about this type of debt is the fact that it is being sold as a good debt that everyone is supposed to benefit from. There is some truth to that because pursuing a college degree is effective in raising a person’s earning capabilities. Compared to high school graduates, degree holders have better salaries and opportunities to grow their personal wealth.

But despite that, the rising student debt continue to be a problem because it restricts new graduates in so many ways. More than ever, it is important for you to understand student loans because although it will raise your income possibilities, it can also hold you back to a certain level.

5 different ways that student debt is undermining your future

There are many ways that college loans can undermine your future both on a personal and national level. Before we can discuss the effects that it has on a national economic scale, let us focus on how it affects your own life.

Here are 5 ways that student loans can jeopardize your future.

Reduces your lifetime wealth.

In a study done and published by Demos.org, it is revealed that the average student loan amount of $53,000 can lead to a whopping $208,000 worth of wealth loss. This is true for dual income households who have a 4 year bachelor’s degree. That wealth loss is equivalent to what you could have acquired over a lifetime. That loss could have been invested in a small home that would have earned you a passive income. Or it could have been added to your retirement fund. But because of your student loans, you lost that financial opportunity.

Keeps you from making investments.

Since your income will be tied up to your student loan payments, you will lose a lot of chances to make investments that will help you grow your personal wealth. These can be a house, or even a car. It can even be your retirement fund. If you fail to invest in these things, especially the last one, you are seriously jeopardizing your future. The sad part is, you know that it cannot be helped because defaulting on student loans has serious consequences too.

Hinders your financial independence.

Another way that student loans can endanger your future is to hinder you from being financially independent. There are various stories of new graduates who have opted to stay with their parents so they can cut back on costs. Their intention is to grow their disposable fund so that they can pay more towards their debts. While this will help them pay off their debts, it will keep them from developing as an independent manager of their finances. In some way, they are relying on their parents – even if they are contributing at home. It is still different when you live in your own home and make the major financial decisions around the house.

Delays you from experiencing important milestones.

Yet another delay is in the milestones that you should have been experiencing. While there are some people who really delay things like marriage because they want to concentrate on their careers, that is not entirely the case today. There are a lot of situations wherein the new graduate is forced to delay marriage or even parenthood because of student loans. In a study done by the American Student Assistance and published on ASA.org, 29% of their study participants had to delay marriage. 43% of them also revealed that they have opted not to start a family yet because of this particular debt.

Develops fear in young adults.

The last effect of student loans is instilling the fear of debt in young adults. Whether you like it or not, there are investments like a home loan that will help you acquire assets. But your student loan problems can sometimes instill a fear of debt. While you want to keep your debts manageable, you should realize that debt is okay if it remains under your control. As long as you are getting debt that will put money in your pocket, that is a good debt. You need to keep student loans from instilling unnecessary fear of debt in you.

Effects of college debt to the national economy

While that may seem to be alarming already, we still have some really bad news about student loan debt. Not only will it affect your personal life, it can also affect the national economy in general. Here are three ways that we see it to be destructive.

  • Student loans are making college education a big turn off. Reports are being published about high school students who have begun to enter the workforce without pursuing a higher education. Some of them have pursued their own businesses. While we applaud their ingenuity, study shows that those with a higher education tend to earn more. And take note that not all of the kids skipping college are pursuing businesses. Some of them are going straight to blue collar jobs. These jobs offer very low salaries that will keep the young adult in poverty.

  • Student loans that hinder borrowers from purchasing home or cars can affect the respective industries. If the government will not do something about this, the inability of young adults to invest will have an effect on the growth of some business sectors. When one industry fails, you can assume that jobs creation will be affected and households depending on them will suffer. In an economy that is 70% driven by consumer spending, the lack of spending can lead to negative results.

  • Student loan programs backed by the government spend federal budgets that could have been given to other programs that will develop the nation. The rising student debt problem will force the government to allot a budget to help bail out those who are unable to pay off their own credits. Any increase in the budget that is sent towards the student loan programs will come from anywhere. We have seen how the NASA budget had been cut thus keeping that government agency from sending more crafts to explore the universe. And according to the NYTimes.com, there are plans by the government to cut back on food stamps and medicaid.

All of these are fully or partly caused by student loans. In borrowers do not do something about their own college debt problems, it can lead to a whole lot of crisis in the future.

What can you do to avoid the bad effects of student loans?

Learning how to deal with student loan debt is not as complex as you think. However, you have to realize that it will involve a certain amount of sacrifice. Here are some tips that we have for you.

  • Practice proper financial management. This includes learning how to save, budget and spend your money wisely. In the end, you will realize that debt is not really the problem. It is how we decide to use our finances and react to our debt that puts us in trouble.

  • Keep a tight rein on other debt types. We are actually talking about credit card debt here. Make sure that you keep this debt low so that it will not jeopardize the payments you are making towards your student loans.

  • Know your options. You also have to know your options when it comes to getting out of your student debt. There are programs that can help you lower your payments while maximizing the reduction on your principal debt.

  • Get professional help. Lastly, you may want to consider getting professional help. Some people can afford to pay their debts but their lack of knowledge hinders them from making progressive payments towards it. This is where a professional can be of assistance.

National Debt Relief recently released a new program through www.StudentLoanDebtConsolidation.com that target consumers who are struggling with student loans. They have trained debt experts that are specifically versed on how to solve student debt problems. These experts provide consultation services that can help point the consumer towards the right direction. Apart from the consultation, they can also help with the documentation that is oftentimes quite confusing. This service has a one time, flat fee in an escrow account that will only be released if the client approves of the paperwork that the company will help them with. There is no maintenance fee or any other charges. The intended result is to help consumers burdened with student loans to enter a program that is suited for their unique financial, student loans and employment conditions.

Understanding The ABCs Of Student Loans

family with teenage daughter

Maybe you’re about to graduate from high school, you’re already in college or you’re the parents of an about-to-be college student. Whichever of these categories you might fall into, you’re undoubtedly facing the big question of how you’re going to pay for that higher education. If you’re like most of us, you’ll need some type of loan to finance it. But the whole issue of student loans can be very confusing. There are some things that you need to understand and here to help you are the basics or ABCs of student loans.

 Direct and FFEL loans

These are loans made under the Federal Family Education Loan program (FFEL Program) and the William D. Ford Federal Direct Loan (Direct Loan) Program. Both of these programs have about the same conditions and terms. You may receive Direct Loans, FFEL Loans or both – depending on the school that you are attending and the program in which it participates.

The William D. Ford Federal Direct Loan Program – these are loans provided by the US Department of Education (DOE). Their purpose is to enable students to pay for their education after high school. If you were eligible for one of these loans you would borrow directly from the US Department of Education. Direct Loans include the following kinds of loans: Direct Unsubsidized Loans, Direct PLUS Loans, Direct Subsidized Loans, and Direct Consolidation Loans.

Federal Family Education Loan (FFEL) Program – these are loans that come from private lenders but are guaranteed by the federal government. This includes the following kinds of loans: Federal Plus Loans, Subsidized Stafford Loans, Unsubsidized Stafford Loans and Federal Consolidation Loans. If you get one of these loans, you’ll pay it back to the secondary market, the actual lender, guaranty agency or the US Department Of Education. In the event your loan is sold to the US Department of Education, you will repay it to he DOE.

To be eligible for a federal loan you must complete the FAFSA (Free Application for Federal Student Aid) and must meet academic progress as determined by your Financial Aid Office and have a cumulative GPA of at least 2.0. You must be enrolled in school at least halftime, which is defined as six semester hours in a term and must be either a citizen or eligible non-citizen. You must also not be in default on any federal loan or owe a refund back to a Federal program. Finally, you must not have already exceeded your combined loan limits.

What are the limits on federal loans?

Here are the Federal Loan Maximums for loans first disbursed on or after July 1, 2008

Classification Dependent Undergraduate Independent Undergraduate
Freshman (0 to 30 credit hours) $5,500 – No more than $3,500 of this amount may be subsidized $9,500 – No more than $3,500 of this amount may be subsidized
Sophomore (31 to 72 credit hours) $6,500 – No more than $4,500 of this amount may be subsidized  $10,500 – No more than $4,500 of this amount may be subsidized 

NOTE: The amounts shown in the chart above are the maximum amounts that you may borrow as a full-time student (12 hours per semester) for the academic year. All annual loan limits are subject to proration and cannot exceed the Cost of Attendance

A definition of terms

There are several terms associated with student loans and it is important you understand their meanings. Here’s a list of those terms.

Principal

This is the amount of your loan plus any capitalized interest. When you repay your loan, your principle is generally referred to as your outstanding (unpaid) principal balance.

Disbursement

This is a portion of your student loan that your school pays out by either applying the money to your school account or by paying you directly. Generally speaking, students get their federal student loans in several disbursements.

Interest

Interest is what it costs you to borrow the money. It’s calculated as a percentage of your outstanding principal balance.

Repayment

This is paying back the money you borrowed by making scheduled payments to the loan servicer.

Repayment Period

Your Repayment Period is the maximum amount of time you can take to repay your student loan. Your Repayment Period can range anywhere from 10 years to 30 years, depending on your loan amount, repayment plan and loan type.

Repayment guidelines

• You are expected make payments on a monthly basis
• Your minimum monthly payment must be at least $50 unless your lender agrees otherwise.
• The maximum time you will have for repayment is generally 10 years
• Your minimum annual payment won’t be less than the amount of interest due and payable.
• You can repay your loan at any time with no penalty. This will reduce the total amount of interest you will be required to pay on your loan. Your lender will offer you the opportunity to choose from among these options: A standard, a graduated, an income-sensitive, or extended repayment schedule.

Loan Fee

This is a fee that’s charged for every federal student loan you get and will be a percentage of the total amount you are borrowing (gross amount). This is deducted equally from each disbursement you receive. It reduces the actual loan amount you receive (net amount). However, you must pay back the gross amount. Your loan fee amount will be in the disclosure statement you receive after the first disbursement of your federal student loan.

Capitalized Interest

This is interest that you have not paid and that has been added to your outstanding principal balance. And you pay interest on the increased outstanding principal balance. In other words this means you’re paying interest on interest as well as your principle balance. Under most repayment plans this will increase your monthly payments and the total amount you will be required to pay over the life of your loan.

Loan Holder

Your loan holder is the financial entity that has or holds your loan promissory note and has the right to collect from you. In the case of Direct Loans, your loan holder will be the US Department of Education. In some cases a reference to your loan servicer might mean the federal loan servicer, your loan servicer or your loan holder.

Loan Servicer/Federal Loan Servicer

This is the financial entity that collects payments from you on your loan, responds to any questions you might have and performs other administrative tasks that are associated with maintaining a loan on your behalf. A federal loan servicer is a loan servicer for the US Department of Education.

Subsidized loans vs. Unsubsidized loans

If you were to choose an Unsubsidized Loan, you would not be required to prove financial need. The US Department of Education does not pay interest on these loans and you will be paid by your school through at least two installments per semester. The school will use this equation in order to determine the amount of your unsubsidized loan.

Cost of attendance minus Federal Pill Grant (if you’re eligible), minus subsidized Stafford/Direct Loan amount (if eligible), minus any other financial aid you are receiving.

In comparison a Subsidized Stafford/Direct Stafford Loan is for students who have proved a financial need through their FAFSA. With one of these loans you would be paid through your school in at least two installments per semester. Plus, the US Department of education will pay the interest on your loan so long as you are a half-time student, for a grace period of six months after you leave school and during a period of deferment, which an approved postponement of your payments.

If you’re having a problem with student loan debtfrustrated looking woman

National Debt Relief will consult with you to evaluate your financial situation, outstanding federal loan debt and your employment situation. If you’re struggling to pay back your student loans, you should go to http://www.studentloandebtconsolidation.com/. One of our experts will recommend a program to help you deal with those debts and do all document preparation. You will be charged a one time, flat fee that will be completely performance-based. This fee will be deposited into an escrow account and we will not withdraw our fee from that account until you have approved all the paperwork. If we aren’t able to get you into a program, we will not charge you a cent. Once you pay your initial one time fee, there will then be no monthly maintenance fees. This is unlike our competitors that charge upfront fees and monthly maintenance fees as well – even after the job is done.

How To Prepare For School Year 2014-2015 College Costs

books with a mouseWere you aware that college costs rise faster than the inflation rate? The increase of higher education costs rose to 4.8% in 2012 – more than double of the inflation rate that is only around 2%. This is the reason why a lot of students are thinking about skipping a college degree to avoid the inevitable student debt. Some of them opt to go straight to the blue collar workforce that will give them a lower income – but will keep them from the bonds of debt.

As the overall student loan balance rises, you may be wondering about the future of college education. Will it still be worth it to be in debt during the first 10 to 15 years of your work life for a chance to earn more monthly income? Apparently, some colleges want you to think so.

Before we can throw stones at these heartless college institutions for continually raising tuition fees, you need to read the 2012 article from the Associated Press website.

According to the AP Big Story, there are some colleges who have heard the cries of the student population and are willing to provide them with a bit of reprieve. Some of them offer a tuition plan that will freeze their rates for 4 years. These fixed-rate tuition fees will allow families to budget for their student’s school expenses. Others went a step further to offer a lower fee for the school year 2012 to 2013. The total number of colleges who did this in the last school year involved 320 universities and colleges all over the country.

The main benefit of having a fixed tuition is the student gets to analyze and anticipate their overall college costs. By having a figure to target, they will know how much they need to raise to add to their savings. They should be able to decide whether they need to get a student loan or getting a part time job will help pay for the shortage.

The real cost of getting a higher education

Whether you are an incoming college student, coming back for another year or going to a graduate school, the first step to prepare financially is to understand what you are paying for. Do not just accept the amount that the school will give you. It is very important that you do not rely on the myths of college costs and you should scrutinize what you are paying for in school.

But what exactly is the real cost of going to college? More importantly, why does it cost a lot of money to get a higher education?

In 2011, Richard Vedder, a professor of economics in Ohio University and the director of the Center for College Affordability and Productivity released an article through the CNN website. Together with Matthew Denhart, the Center for College Affordability and Productivity administrative director, he discussed various issues that makes college very costly.

The article published through the Edition.CNN.com provides the following insights about college costs.

  • The country’s higher education structure needs a reform to address the rising cost to go to school.

  • Colleges and universities lack the incentive to improve administrative processes to help lower their overhead cost.

  • A college or university president is viewed to be successful if they take care of the needs of the faculty, alumni, trustees and key administrators or politicians. This makes them prioritize earning more off the students through tuition fees than to make sure more students can enter the school.

  • Some of the Ivy League schools are trying to be “selective” to raise their status as providing the best education. They turn away qualified students so their elite status can allow them to raise their tuition fees.

  • Since the faculty is important to the education of the students, schools bribe them with high salaries and low teaching tasks.

  • The alumni that provide the school with some funds are appeased through intercollegiate athletic programs that bring pride and bragging rights for the school. These programs are oftentimes very expensive.

  • The presence of student loans do not help regulate the prices of the schools. Since students can borrow money anyway, there is no need to make schooling more affordable.

  • Students must learn how to measure their chances to earn profit against the tuition they are paying to get that privilege. It has to be measured in accordance with the industry their degree will fit into, the overall job market conditions and the rising cost of living.

  • A more transparent way of college spending must be enforced so schools will be more cautious of how they spend their money.

  • College tuition fees cannot rise faster than the income being offered by the corporate world.

These points help shed light to the many improvements that must be implemented to make college costs more affordable. Obviously, the need to get education is there. We just have to work on reforming the current system.

How to save a couple of hundred a month to help finance college expenses

While there is nothing that we can do at the moment to lower college costs for the next school year, the task is left to the students and their parents to make college more affordable. Here is a video from CNN where Christine Romans provide a helpful advice to keep student loan debt down.

You really have to take seriously the bad effects of student loan debt. You want to make sure that you save up enough money to help finance it. If you are still in high school or you have a child that is about to go to college, you can target to save a couple of hundred dollars every month to add to your college fund. $100 every month will help save you $1,200 a year. $200 will save you $2,400 and so on as so forth.

Here are some tips to help you save up for college costs.

  • Bundle your cellphone plan. Some companies will provide you with an all inclusive plan on your phone that will provide you with unlimited calls, text and even Internet access for only $40. This will save you $60 a month since usual cellphone fees amount to $100 a month. That can save you $720 a year.

  • Let go of your gym membership. The average cost of a membership is $10 a month. Although this is a small amount, it is still $120 a year. You can jog or use the community gym to get in shape.

  • Do your own nails. The average cost of a manicure and pedicure can amount to $25 to $30. If you get one every week, that can cost you $100 to $120 a month. If you learn to do your own nails, you can save up to $1,440 a year.

  • Be cautious about using a card for purchases (even debit or ATM cards). The average charge is $2.60. If you swipe your card once a day, you waste $18.20 a week. That is $72.80 a month. If you use cash instead, you can save up to $873.60 a year.

  • Get rid of the cable. A cable subscription can cost you $100 a month. That is $1,200 a year. If you have an Internet connection, just opt for this and let your cable go.

If you do all of these saving tips, you can slash $362.80 from your bill. That can total to $4,353.60 savings a year. If a parents starts to save for their childs tuition when they start high school, the 4 years before college can help them save up to $17,414.40 before they go to college. With the average student loan amounting to $24,000, you only have a few thousand to finance. The $7,000 can be something that the college student can earn by doing part time jobs.

How To Mess Up Your Student Loan Debts In 5 Easy Steps


Student debts are getting to be a lot like opinions – almost everyone has some. In fact, the average student now graduates from college owing around $30,000. Why this much? Experts believe there are several factors to blame. First, student loans are very easy to get. They’re not like scholarships because almost everyone can qualify for a student loan. Second, there is now so much of an emphasis on getting a college degree that many people who really don’t need a four-year degree are borrowing the money to finance one. And, of course, college gets more expensive every year. While a report from the College Board showed that the cost of college increased again in 2013-14, the good news is that it was the smallest percentage increase in 30 years. However, many students are paying more in fees and tuition because federal and state aid has not kept pace.

 If you want to really get in trouble your student debt

Many people carrying thousands of dollars in student debt are managing their loans sensibly and even getting them paid off within a reasonable amount of time. We read one article recently of a couple that had $100,000 in student debts and was able to pay them off in just two years. On the other hand, there are people who manage to really mess up their student debts and here’s how they do it.

Step 1: Lose track of how much you owe and to whom

The first good way to get in trouble with your student debts is to lose track of whom you owe and how much you owe. It’s pretty easy to do this. All you have to do is stop paying attention to your loans and any notices you receive regarding them.

On the other hand, if you’re serious about repaying your student debts you need to make a list of how much you owe and to whom. It’s possible that you may have to make multiple payments and maybe even to different parties such as lenders, servicers or both. For that matter, you may even be making multiple payments to the same loan servicing company. These loan servicers can help you with your loan repayment. They usually provide customer service for your loans during repayment, offer online account access and accept your payments. But it’s important to know whether you’re making payments to a lender or to a servicer or if you have multiple lenders or servicers because your loans were resold.

Step 2: Don’t select a repayment plan

A second thing you could do if you really want to mess up your student debts is to not select a repayment plan. This is where you could really be dumb. But if you want to be smart about your student loans you will select a repayment plan. There are many different options available meaning that you will have some decisions to make. For example, you may need to decide how long you want to take to pay off your loan and how much you want to pay each month. You may also need to decide how much interest you would be willing to pay over the life of the loan.

Step 3: Be dumb about credit

You probably have other credit in the form of a credit card or credit cards or an automobile loan. One great way to get in trouble with your student debt is to let the rest of your credit get out of control. If you run around willy-nilly charging stuff on your credit card or cards you’ll eventually run up so much debt that it will become virtually impossible for you to make the required payments on your student loans. But if you want to be smart, you’ll never charge more in a given month then you can pay off either when your statement arrives or before the end of your grace period, which is the number of days you have before the credit card company begins charging you interest on your new purchases. This is normally 20 to 25 days.

Your credit card statements will also include a ” minimum payment due.” This is what you must pay on your credit card to stay in good standing with the card issuer. The way it’s calculated is usually as a percentage of your new balance. How this is determined varies from credit card issuer to credit card issuer. But it will be a formula that is exclusive to that company. One credit card bank might calculate your monthly minimum as the interest you owe plus 2% of your balance. On the other hand another bank might use 2.5% of your outstanding balance. But whatever is your minimum due, you must at least pay that much and by your due date in order to protect your credit. If not, you will have a late payment on your credit report, which will damage your credit score. It’s even worse if you miss a payment as this could drop your credit score by as many as 60 points.

Understand that you would never get out of debt

If you make the minimum payment before your due date, you will remain in good standing with the credit card issuer but this could keep you in debt practically forever. As an example of this, if you owed just $2000 at 19% and made the minimum payment of $40 every month, it would take you 335 months or nearly 28 years to completely pay off that debt.

Step 4: Ignore those late payment notices

Student Holding Past Due EnvelopeAnother thing you could do to really mess up your student loan debts is to ignore your payment notices. I mean, what the heck? Would it really hurt to miss just one payment? Would some rep from Sallie Mae call and scold you? Would you get stuck with a huge fee or see your already fragile credit score take a hit? Well, there are bits of truth to these. For example, your credit report will take a hit as late payments on student loans are typically reported to the three credit bureaus – Experian, Equifax and TransUnion. However, this can vary depending on the loan and the lender. For example, Sallie May generally doesn’t report delinquent private loans until after 45 days. So if you are 35 days late you may not get a black mark on your credit reports.

Student loan debts like credit care debts typically have a grace period before you’re hit with a late fee. Sallie Mae’s late fee is 6% of your minimum payment after you have one late payment that is at least 15 days past your due date.

Step 5: Default on one of your loans

You can really screw up a student loan if you default on it. A default is when you fail to repay your loan based on the terms of the promissory note you signed. However, there is a period of time before the federal government and lenders officially consider you to be in default. Most federal student loans won’t be moved into the status of default until you have gone 270 days without making any payments – or about 45 months.

What happens if you default?

Defaulting on a student loan has serious consequences. This will make it difficult for you to get an auto loan, a mortgage or even lease an apartment because your credit will have been severely damaged. You’ll owe even more because your lender will probably be allowed to charge you interest on your unpaid interest. You could see your debt turned over to a collection agency that will likely hound you unmercifully and you could even see part of your paycheck seized. Your state and federal tax-free funds, Social Security and disability income could also be seized and you would lose your eligibility for all federal aid

Be proactive

If you would rather keep your student loan debts under control you need to be proactive in dealing with them. The best and easiest way to do this is to set up automatic payments so that they will be debited from your account before your due date. And you should communicate with your lender or lenders. Don’t stick your head in the sand and hope for things to get better. As soon as you know that you need to make a late payment, contact your lender. If you have been making your payments consistently up until then, your lender might not report your delinquency to the credit reporting bureaus and even waive your late fee.

Is student loan debt stupid?

Dave Ramsey. the noted financial guru believes that student loan debt is stupid in the first place. Here’s a video where Dave explains why he feels this way.

College Finances: Where To Get Money When You Need It

frustrated womanThere are a couple of debt problems that you will face in college but that does not mean you should let yourself be a part of the statistics. Students usually end up with two type of debts: student loans and credit cards. The first is used mostly for school related expenses while the other is for the daily expenses that the student will encounter. The former is necessary but the latter is usually curbed by students to keep debt levels low.

But no matter how much you plan or prepare for it, you will always find something that will deviate from your budget. These unexpected expenses are usually the reason why some students are forced to use their credit cards. The “emergency” expenses can sometimes pile up to become a significant debt that can spiral out of control. Students must take extra care when it comes to their college finances because it will set the pace for their financial life in the coming years.

Smart ways to earn money in college

Since the unexpected expenses cannot be avoided, you need to be prepared for it. While calling mom or dad will get you out of a tight spot, the fact that they are far away will mean you will not be able to get help immediately. Most will quickly resort to credit cards to pay for purchases.

However, if you want to keep your credit spending low, there are smart ways for you to boost your college finances so you can save the cash for these emergency needs. When it comes to earning more, we obviously mean getting a job.

There are various benefits to earn while in college and you will not only get more money to spend, you will also learn various habits that will prove to be useful when you  graduate. The job experience will be noticed by your future employers and carrying that responsibility will bring you bigger opportunities. College students and even new graduates can look for jobs through websites like CollegeRecruiter.com or CoolWorks.com. Try to browse for job openings that are not particular about work history and can partial to your flexible work schedule.

Here are other suggestions that will help you earn more for your college finances.

  • Join behavioral study projects and similar surveys/experiments. There are professors and students on campus who are probably looking for groups that they can study and you can volunteer if you qualify. This usually varies between schools and projects but you can earn a decent amount for these one time projects. Look at the community boards in your campus for these opportunities.

  • Focus groups. Corporations and even local businesses sometimes need the opinion of focus groups and you can see if you can join these. All you have to do is to get in touch with companies and register to be a part of their focus group. You get to try their new products or provide your honest opinion about certain campaigns that they want to release.

  • Use your skills. If you have a particular skill like playing a musical instrument or being academically advanced, you can use this to tutor others.

  • Sell your possessions. Even someone as young as students sometimes accumulate a lot of junk. If you have things that you are not using, sell them off. Or you can trade. That will lower the need for you  to spend.

These are only some of the things that you can do to help raise the funds for your emergency stash of cash.

Sources of money that you should never rely on while in school

While there are options that we highly recommend, there are also those that we strongly advise against. If you need fast cash, never opt for any of these options because you will only make things worse.

  • Payday loans. If you are using payday loans to just get by, then you are putting yourself through a debt cycle that you will find difficult to get out of. The high interest rates of these short term loans will never bring you any good. It will only bury you in debt and the high interest will be robbing a huge amount of money from your college finances.

  • Cash advance. Getting a cash advance on your credit card is also a bad idea because of the high interest rate that you will have to pay off. If regular purchases have a high rate, credit card cash advances will have higher rates than that.

  • Get rich quick programs. There are so many of this online and you have to be very careful about it when you come across these. If they are too good to be true, then they probably are. Be cautious of these and do not, under any circumstances, give out vital information about yourself. If you really want to get rich, you have to work hard for it.

  • Gambling. Surprisingly, some students resort to this when they are in need of big money. This is never a good idea and you will just lose the little amount of cash that you have. You may win a couple of times but it is usually not worth what you will end up losing in the long run.

You have to realize that the quick cash are usually the ones that are most destructive. You do not want to make your college finances rely on these unreliable sources of income.

2 Debt Problems Your Child Have To Deal With In College

debt cut in halfKeeping students from debt problems is not impossible. Although student loans are oftentimes inevitable, there are ways to make it more manageable. You want to make sure that it will not ruin your life.

It is actually a joint effort between the parent and child. The parent will have to instill the right financial values in the child and help guide them as they take the first step towards financial independence. Although they are technically still spending the money being sent by their parents, students are still making their own decisions when it comes to how it is to be used. That has a certain level of independence that requires the right financial habits that will aid them in making money related decisions. The development of these habits will have to be done early on.

But although the student is taught the right financial management skill, you must understand that it still depends on how they will implement it when they are in college. There are things that they can do to keep 2 of the common debt problems from ruining their future.

How to keep your student loans from being a problem

The first debt problem that is raising a lot of difficulties for graduates are student loans. Unfortunately, this problem keeps on getting. Even as mortgage and credit card debts are continually going down, student loans are still rising.

No doubt about it, a student loan is still one of the debts that has all the potential to be good for you. But even so, this debt can still restrict your life and financial capabilities. Even if there are debt relief programs that can help you handle big student loans, you may want to practice certain habits that will keep this debt from spiraling out of control.

  • Monitor all your student loans. Usually, students take in a lot of loans to help finance their education. Even if you start with federal loans, these are oftentimes not enough to cover everything that you will need to spend on. Given that, it is important that you keep careful track of all the student loans that you have taken.

  • Make an early start on your payment plan. Even if you are still in college, it is wise to create a plan of attack for your debts. This will help you make better decisions about how you should spend your money now. Although the billing for your student loans will not start coming in until 6 months after you graduate, there may be somethings that you can do to keep your balance from being too big. It is up to you if you want to make one payment plan or you would like to separate plans for each of your debts.

  • Know the student debt solutions. There are many debt solutions that will help you pay down your debts and it is also a good idea to learn about them as soon as you can. Do your research through sites like the FinAid.org. The site can link you through any information that you need to know about student loans, financial aid, etc.

  • Start working on your interest. There are options for you to make small contributions that can help pay for the interest on your loan. This can be a great option for you in keeping your debts low.

Control credit card spending to avoid debt

The second of the debt problems that are plaguing students and graduates alike involve credit cards. Unlike the first, this is one of the debts that is viewed as one of the bad ones. The high interest rate, various fees and charges, and the convenience that it brings to purchase transactions make it a dangerous financial tool. If you are not careful you could end up with a debt that is very hard to get out of.

Most parents issue credit card to students entering college. Since their kids will be far from home, an emergency situation will render them without any fund to pay for it. To ease the worry, parents usually get these cards to help their kids pay for unexpected expenses. Although they can be of assistance, there are tips to help you keep the credit card debt from being a problem.

  • Choose the right card. It all begins with your choice of credit card. You can use comparison sites like CreditCards.com. They have a specific category for college student credit cards.

  • Know the billing cycle of the card. You can call the credit card company to understand the billing cycle of your account. That will help you understand when you should pay your dues. For instance, if you pay within the grace period of your debt, you will not be burdened with the interest rate – at least if you pay the balance in full.

  • Be strict about when the credit card will be used. Ideally, spending in cash should be preferred because it keeps you from wasting money on interest. However, there are emergency situations that can benefit from credit card use. Make sure you list these situations and be strict about using your cards.

  • Do not use it to buy unnecessary things. Buying clothes, make up, bags, shoes and paying for entertainment expenses through credit cards is usually a bad idea. These are the expenses that you want to control. Credit card purchases are not the easiest payment mode to control because you do not realize the amount of money you are spending – unlike when you pay in cash.

Here is a short video that we have created for you about getting help for your credit card debt.

What To Do About Those Student Loan Debts You Can’t Afford

Student Holding Past Due EnvelopeHow much student loan debt are you carrying? If you’re carrying a big load of student loan debt and can’t afford your payments, you do have options.

Get your loan deferred

A deferment won’t do anything to clear your student loan debt but it would give you a timeout during which you would not have to make payments. If your loan was subsidized, you would not accrue any interest during deferment. Unfortunately, if your loan was not subsidized, interest will continue to accrue. It’s also important to understand that any interest not paid during a deferment is “capitalized,” which means it will be added to your balance and you will eventually pay interest on it.

How you might qualify for a deferment

There are several ways you could qualify for a deferment. You could go on to grad school or a career school, be unemployed, suffer on economic hardship (such as joining the Peace Corps) or join the military. Click here for a complete explanation of student loan deferment eligibilities.

Apply for a forbearance

If you’re not eligible for a deferment, you might be able to get forbearance. This would allow you to skip payments for up to a year. However, interest will accrue on both unsubsidized and subsidized loans and will be capitalized. To be eligible for forbearance, you must be ill or be able to show financial hardship. There are also mandatory forbearances you could apply for if you are doing a dental or medical internship, serving in a national service position or performing a teaching service (click here to read more about forbearance eligibilities).

Income-based Repayment (IBR)

An Income-Based Repayment is one where, if you qualify, your monthly payments would be capped at 15% of your discretionary income. If you’re a recent graduate there is the new Pay As You Earn (PAYE) program, which caps payments at 10% of discretionary income. If you’re unemployed your payments could be as low as zero dollars. Plus, after 10, 20 or 25 years, your balances may be forgiven. With an IBR, if you have a subsidized loan, the government will pay up to three consecutive years of interest that is accrued but not repaid. Conversely, if your loan was unsubsidized interest will accrue.

Income-Contingent Repayment (ICR)

This program pegs monthly payments to your income, family size and the amount of debt you owe. If you have a remaining balance after 25 years, it will be forgiven.

A blessing or a curse?

Forbearance or deferment can be either a blessing or a curse. It may feel like a blessing if you can’t make your payments. But either of these could end up being a curse. While either could mean a short-term reprieve they provide no long-term relief. In fact, one person recently described forbearance and deferment as if you were putting a Band-Aid on a stab wound.

Even a bankruptcy can’t help

You could file for a chapter 7 bankruptcy and get most of your unsecured debts dismissed. But not even a bankruptcy will erase student loan debt. It is one of several types of debts that can’t be erased by a bankruptcy that includes child support and alimony, back taxes and loans obtained through fraud.

How we could help

We can’t help with student loan debts but may be able to help by settling your other unsecured debts – such as credit card debts, personal lines of credit and medical bills – which would free up money you could use to pay on your student loan debt. Contact us today to learn more about debt settlement and whether or not this could work for you.

“Should I Use Credit Cards To Pay Down My Student Loan?”

girl thinkingWhenever I see a college commencement ceremony, I think of all those young people so full of high hopes – and student loans. I read not long ago that college graduates begin life with an average of $30,000 in student loan debts. Since this is an average, it means there are some who are graduating with student loans of less than $5000 and others owing more than $50,000.

How to repay those loans

I recently saw a question posed by a young woman wondering if it was best to pay off her loan or sign up for credit cards and use them to pay it off. She had an outstanding balance of $22,000 and a 6.6% interest rate. She has been paying about $2,000 in interest each year.

Her payments will drop

Do the math and you’ll see that her interest is $1,452 a year. If she makes interest-only payments, her balance will never down. However, if she pays more than just the $1,452, she should see her payments reduced because she will be paying down principal over time.

Managing multiple credit cards

If you were to get a collection of credit cards to lower the interest costs on your student debt, this would have its own set of extra risks. For example, since you would not be transferring your balances from one card to another, you would have to find one that has a teaser rate on a cash advance. Also, if you apply for multiple credit cards over a short period of time your credit score will be negatively impacted.. In turn, this will make it even harder to qualify for that great credit card offer. You would also give up any tax deductibility of the interest payments and possibly some other loan payment options.

Stay where you are

If you have a student loan with a fixed interest rate of 6.6% or something comparable, your best solution would probably be to stay with the loan. It’s just much easier to manage one payment on that loan then payments on multiple credit cards. You should try to make additional principal payments each month so you could chop away at your outstanding loan balance. You should also set a target date for paying off your student loan.

The worst thing you could do

If you do the math and find you could cut your is a you interest costs by switching from a student loan to multiple credit cards, this might be a viable option. However, the one option you don’t want to choose is to default on that loan. Defaulting on a student loan has very dire consequences. You could have your tax refunds seized and used to help pay down your balance or could even see your paycheck garnished. Your loan could be turned over to a private debt collection agency and you could end up being sued. If the agency could get a judgment against you – which is most likely – it could put a lien on one or more of your assets, including your house. Collection fees of up to 20% can be put on top of placements, which could turn a 10-year loan into a 20-year-loan.

Even a bankruptcy won’t help

Even a chapter 7 bankruptcy will not eliminate your student loan debt or debts. While these are not secured debts, they fall into the same category as taxes owed and child support payments. They simply can’t be dismissed. You may be able to get a deferment, a forbearance or a reduction in your monthly payments but bankruptcy is not the answer.

The “Fairness For Struggling Students Act” Is Struggling

First, the good news

The good news is that a bill has been proposed by five US senators called the Fairness for Struggling Students Act. The purpose of this bill would be to give people who are unable to pay back college loans issued by private lenders an escape through bankruptcy.Student loans

Now, the bad news

This bill was introduced on January 23 of this year but is apparently going nowhere. In fact, the press secretary for Patrick Leahy who is Chairman of the Senate Judiciary Committee reported that she had never heard of the bill. Her committee is dealing with a number of different issues including gun violence and judges and other bills and is just not dealing with this one.

Legitimate efforts

There is no doubt about the fact that people have run up excessive amounts of debt while in college. There are provisions in this bill that would force those who have student loans to have made legitimate, good faith efforts to repay them before they could be part of a bankruptcy procedure.

These debts cannot be discharged

The problem is that as the law now exists a chapter 7 bankruptcy will not discharge these loans. They fall in the same category as criminal fines, alimony and child support. This is why many people who see no way to get out from under these huge loans simply give up.

Banks might be able to help

Senators Durbin, Harkin, Reed, Franken, Warren and Sherrod Brown sent a letter to 13 major banks on March 1 asking them to work to help lower the number of students who were defaulting on private loans. According to the Consumer Financial Protection Bureau there are about 850,000 students in this category and this totals about $8.1 billion in defaults. Reed is hoping to get all parties to the table to find workable solutions that would help control costs and reduce the debt burdens suffered by so many families and students.

Private vs. public

It’s important to understand that any act such as this would apply only to privately funded student loans. If you do have this type of loan, don’t hold your breath waiting for the Fairness for Struggling Students Act to pass. If your loans were government-sponsored, you wouldn’t qualify even if this act eventually passed.

It’s important to pay them off

Whether your student loans were privately or publicly funded, it’s important to pay them off. The alternative – to default on your loans – has dire consequences. Your credit will be seriously damaged and you will be subject to late fees and collection costs. You could see your income tax refunds seized and your wages could even be garnished. You will lose your eligibility for a student loan forbearance or deferment and your loan may be turned over to a collection agency. Even our federal government is now turning over to collection agencies some student loans that are in default. These agencies can be brutally effective at collecting on loans by harassing you unmercifully until you give in and pay. I have read stories of people who were called at home and at work five or six times a day by greedy debt collectors.

If you simply can’t pay

If you’re an unemployed, in a graduate program or working towards a medical degree, you may be able to get a loan deferment or forbearance. While neither of these will eliminate your student loan debts, they can give you breathing room of up to three years to get your finances in order and to start paying back what you owe.

The Two Most Critical Words About Student Loans – Repay Them

Young man trying to learn about debt reductionI read the other day that the average college student graduates owing about $30,000 in student loan debt. That’s a big load of debt. People who are either good or lucky or good and lucky land a good paying job and can pay back heir loans. But let’s suppose you weren’t so lucky (or fortunate). The only job you were able to find pays just $30,000 a year and you can’t see any way to pay back that $20,000 or $30,000 you owe.

Your alternatives

You might be tempted to just walk away or default on those loans. If this is the case, we have one word for you.

Don’t.

What it means to default on your loan

Once your grace period is up you’re responsible for repaying your loan. If you don’t make arrangements to pay back the loan and ignore all efforts by your lender or loan servicer to contact you about setting up a plan, you will be in default. You will also be in default if you fail to keep up with your payments.

How to avoid defaulting

Of course, the best way to avoid defaulting on your loan(s) is to keep up with your payments. If you realize you can’t keep making them for some reason, you need to contact your lender or loan servicer. You should also review you budget to see if there are places where you could cut your spending so you could continue making your payments. You could get a second job or try to switch to a less expensive payment plan.

Try for a deferment

If you can’t make any of these options work, you could try for a loan deferment or forbearance or file for bankruptcy. If you’re not familiar with a deferment, it’s a period of time during which you don’t have to make any payments. This is usually three years or less. To get a deferment you will need to fill out an application and meet certain eligibility requirements. For example, you would need to be enrolled at least halftime in an eligible school, be unemployed or in a graduate fellowship program. You could also be eligible if you were in the military or had suffered a severe economic hardship.

What is forbearance?

Forbearance is where you either postpone your loan payments or reduce them for a period of time, which is typically between one and three years. To qualify for a forbearance, you must show that your health is very poor or you have some other personal problem that makes it it tough for you to keep up with your payments. You might also qualify if you have a medical or dental internship or residency or if the amount you’re supposed to pay on your student loan is equal to or greater than 20% of your gross monthly income. As you might guess, only your lender can give you forbearance. You will need to contact it to learn if you might qualify.

The consequences are ugly

If you choose to default on a student loan, you may have to pay the full amount you owe and not just the amount you’re past due. You will owe late fees and collection costs. Your credit will be seriously damaged. Your income tax refunds could be seized and applied to your balance owed. Your wages could be garnished. You won’t be eligible for a student loan deferment or forbearance. And heaven forbid, your loan might be turned over to a collection agency.

The worst option

The worst option for dealing with student loan debt is to file for bankruptcy. However, this will not wipe out your outstanding student loan balance unless you can get what’s called a hardship discharge. This is very difficult to do. You must be totally broke and prove to the court that you have made a good faith effort to pay back the loan before you filed for bankruptcy. If you would be ineligible for a hardship discharge, you can still file a Chapter 7 and would not have to pay on your loan while you were in bankruptcy. However, once the bankruptcy is over, you would have to resume making your payments.