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Tips For Picking The Best Student Loan

student loan debtIf your child is a senior in high school we don’t have to tell you that it’s now the season for college financial aid. This means that among other things if you haven’t yet completed and submitted your FAFSA (Free Application for Federal Student Aid), you need to get cracking – even if you’re not yet sure whether or not federal aid will be the best option for your child. Most students do choose to get federal aid because the loans provided by the US Department of Education generally have the best interest rates and offer a number of attractive repayment options. But today, some of the banks that provide private student loans have made changes that make their loans more appealing. This can be especially true if you or your parents are creditworthy. In this case a private loan might have a better interest rate than those of federal loans.

Note: If you’d like more information on filling out a FAFSA and what to do to get the maximum amount of federal student aid, watch this brief video courtesy of National Debt Relief.

Why have the private lenders made changes in their loans?

There are several reasons for this. First, there has been a lot of pressure on these lenders to make changes. Second, it’s because they are looking to attract young customers that may be with them for their lifetimes and will eventually need mortgages and other financial products. Some of these lenders are now offering refinancing options that can actually lower the interest rate on student loans as well as modifications designed to help those of their borrowers that are having a tough time making their payments.

When you should get federal loans

If you’re borrowing on your own with no help from your parents, your best bet will always be federal loans. They’re cheaper because everyone gets the same fixed rate. Also, as mentioned above they have better repayment terms. If after you graduate you find that you are unable to repay your loans because you’re unemployed or have a low salary, you could qualify for repayment options that would keep you out of default. Also, federal loans could be a much better choice if you find you need to modify your payments after you graduate. Are you going to school to become a teacher or social worker? Federal loans offer a number of benefits including loan forgiveness in public-service jobs. With this translates into is that you would not have to pay back the full amount of whatever you borrow.

Hope you’ll get subsidized loans

The best federal loans are those that are subsidized. This means that while you’re in school the federal government will pay the interest on them. This includes both Stafford loans and Perkins loans. However, they are needs based meaning that you will have to demonstrate a financial need. If you qualify you could get a subsidized Stafford loan for the next school year where your interest rate would be just 4.66% plus an origination fee. However, be aware that there will probably be an interest increase on Stafford loans so that Perkins loans may once again be the cheapest federal education loan.

When a private loan might make sense

If your parents have a credit score of around 740 on the FICO scale a private loan might make sense. The reason for this is that if your parents were to get a Parents PLUS loan or if you’re a graduate student and need one of these loans the interest rate will be 7.21% plus an origination fee. If you go to a private lender you should qualify for a better rate. Be sure to note whether the loan has a fixed or variable interest rate. One of the best things about federal loans is that their rates are fixed. On the other hand, loans from private lender have both fixed and variable rates. The variable rates are the lowest just as they are with variable rate mortgages. However, this means the interest rate could increase in the years ahead. If you want a ballpark estimate of the interest rate you would pay over the lifetime of the loan just add four percentage points to the variable interest rate you’re being offered.

Compare the fees

There is currently a 1.073% origination fee for Stafford loans and the origination fee for a Federal PLUS loan is 4.29%. In comparison, most private loans don’t charge any fees these days. So if you were to amortize 4% in fees over a 10-year period, it will come out about the same as if you were to pay a 1% higher interest rate.

Things to keep in mind about federal loans and their repayment options

If you get a federal loan, you may be able to postpone repayment for three years or longer through what’s called deferment or forbearance – assuming you have a financial hardship such as medical expenses or unemployment. If you are unable to pay your monthly bills in full because of low income, you could apply for Income-based repayment or Pay As You Earn repayment. Income-based repayment would cap your monthly payments at 15% of your discretionary income while Pay As You Earn would cap them at 10% of your discretionary income. For that matter, if were unemployed, your monthly payment would be zero because 10% of nothing is nothing.

Refinancing federal loans

A few banks and non-banks are now offering to refinance any combination of private and federal loans. But if you were to consolidate your federal and private loans into one of these new loans you would give up all the benefits offered by federal loans such as debt forgiveness for public service jobs and income-based repayment programs. The upside is that you might be able to get a better interest rate by consolidating federal student loans through a private lender than with a Federal Direct Consolidation Loan.

Consumer running while carrying a briefcaseWhich makes the most sense if you’re a parent?

It doesn’t make much difference whether you cosign on a private loan for your child or get a parent’s PLUS Loan, you’ll still be required to take over the loan or loans if your child can’t or doesn’t make the payments. So that means as a parent you would be on the hook either way. On the other hand if your child takes out federal student loans only he or she will be responsible for repaying them and you as the parent will be off the hook. So no matter how tempted you might be to cosign on a loan or take out a Parent PLUS loan, it’s really better for you financially to let your child get the loans. This can be especially true if you’re nearing retirement. Students today are graduating with an average of nearly $30,000 in student loan debts and that’s probably a burden you might not want to assume as you near those golden years. You could always choose to help your child repay his or her federal loans when and if it makes sense to you financially. But you would not be committed to repaying that $30,000 or whatever.

Why You Should Be Paying The Interest On Your Unsubsidized Student Loans

student loan debtDo you have subsidized or unsubsidized student loans? It’s important to know which type you have and the difference between them. If you don’t know whether you have subsidized or unsubsidized loans it’s easy to find out. All you need to do is go to the National Student Loan Data System website as this is where you will find all the information regarding your federal student loans including their type, when the funds were disbursed and how much you owe on each – if you have more than one loan.

The one very big difference

The big difference between subsidized and unsubsidized federal student loans is that the government pays the interest on your subsidized loans while you’re in school. These loans are generally needs based. If you don’t qualify for needs-based loans, you will have an unsubsidized loan, which means you will be required to pay the interest on them while you’re in school. To make matters even worse, if you don’t pay the interest on unsubsidized loans it will continue to accrue and will be capitalized or added to your balance owed. You will then end up paying interest on interest and of course your balance or the amount you owe will grow.

Your best option

What all this boils down to is that if you have unsubsidized loans you should try to pay the interest on them instead of letting it accrue. The good news is that the interest on these loans is usually fairly low. For example, it could as little as $50 a month though you’d be better off paying as much as you can. We know that if you’re carrying a full 15 credit hours a semester it can be tough to take on a part-time job but you just might have to reprioritize and let your social life slide a bit as you probably don’t have much cash just sitting around. Downgrading your social life may not sound like much fun – to pardon the expression – but it’s a lot better to graduate owing as little as possible versus the average student loan debt of last year’s graduates. It was either $26,000 or $30,000 depending on which source of this information you choose to believe. That’s a lot of money these graduates will have to repay and this could have a negative effect on their lives for years to come.

About the same as a new pair of shoes

When you stop to think about it paying off your student loan interest at the rate of $50 a month is about the same as buying a new pair of shoes. You should be able to easily do this by getting a job either on- or off-campus. While these jobs typically pay minimum wage or a bit more it still wouldn’t take many hours a week or month to accumulate that $50. Where we live the minimum wage is currently $8 an hour. At this rate you might need to work less than seven hours a month to pay the interest on your unsubsidized student loans. Of course, if you were to work more hours you would have more money available to pay on those loans. Plus, working a part-time job would allow you to earn some extra cash for living expenses and also builds your resume, which could help when it comes to getting a job after you graduate.

restaurant-3_lShould you work on or off-campus?

Just as there are only two types of student loans there are only two types of jobs – on-campus and off-campus. There are pros and cons to both of these. One of the most popular of the on-campus jobs is those available through the Federal Work-Study Program. Unfortunately, this is also a needs-based program, as you would have to demonstrate a financial need, be enrolled in a degree program and maintain satisfactory academic process. The downside of an on-campus job like this is that with some schools the money you earn automatically goes towards your tuition fees. In others you’ll receive a paycheck just as if you worked off-campus. You could then use the money to pay the interest on your loans and to help with your living expenses.

The advantages of an on-campus job

One of the biggest advantages of an on-campus job is that if you go to a relatively small school you should be able to just walk from class to your job. In addition, it’s usually fairly easy to get an on-campus job. This can make it a lot easier to work 15 or even 20 hours per week. Plus, you might be able to get a job where you would work a couple of hours per day between classes instead of a four or eight hour shift at an off-campus job.

The pros and cons of an off-campus job

If you go to school in an urban area there is practically an unlimited number of possibilities for a job. You could work in a restaurant or clothing store or for a doctor or lawyer as an office assistant. For that matter, you could even create your own job by mowing lawns, babysitting or running errands. With all of these different options available, it’s likely you would be able to earn more than with an on-campus job. And you can use the money anyway you please instead of it automatically going to pay for part of your tuition.

An off-campus job can also be very good work experience. These jobs give you better exposure to the “real world” than working in your school’s library or some other on-campus job. If you were able to get a job working retail or as an office assistant this would look very good on your resume. You could also look for jobs that would be more related to your career when you graduate.

The biggest downside of an off-campus job is that transportation could be a problem. You would need to have a reliable ride, good public transportation or a car to get to that job. The cost of getting to and from your job could quickly reduce the amount of money you would get by working off-campus. In addition, you would probably be required to work a full four or eight-hour shift and you could find it hard to successfully juggle your classes and those shifts.

So which would be better?

The answer to this question is some “depends.” It will depend on whether or not you feel the convenience of working on-campus outweighs the additional income you would earn working off-campus. It may also depend on whether you would be able to get that perfect off-campus job that would be a boost to your career and would make sacrificing your social life worthwhile. Of course, there’s nothing that says you couldn’t do both at the same time or both off and on. The important thing is to weigh your options and make sure that whatever choice you make will help you earn your degree and ultimately start a career.

Restarting Your Education? Check Out These Four Important Tips

This year resolutions conceptHave you made your New Year’s resolutions for 2015? Is one of them restarting your education? The problem with New Year’s resolutions is that it’s easy to get a full head of steam going at first but much more difficult to complete them as the months go by. If one of your resolutions is restarting your education to complete your degree it’s important to understand that any student loans you had before haven’t gone away. They’re like that Roach Motel where roaches checked in but they never checked out. Once you have student loans, there’s no getting away from them. They will stay with you until you repay them or if you could get them canceled (more about this later).

Given the fact that your goal is to return to school this year it’s important that you do it the smartest financial way you can. As a nontraditional student there are three things to understand that would help you do this.

1. Get any existing loans in order

If you borrowed money when you were in school before it’s important to know the status of your loans. The website National Student Loan Database System has all the information on any federal student loans you had including the type of loan, when the money was disbursed, the last payments you made and your balances. When you check out your status in this database you may find you have some problems. If so, you will need to get these taken care of before you can get any additional federal aid. This is especially important if you find you have a student loan in default. Unfortunately, it’s very easy to default on a student loan because all you have to do is be one day late on a payment.

If you do find you are in default on a federal student loan you will be ineligible for any more federal student aid. You will also lose the benefits that come with federal student loans including Extended Repayment, Graduated Repayment and Income-based Repayment. Plus, a loan default is one of the worst things to have in your credit reports.

What to do if you have a loan in default

There are three different ways you can get a student loan out of default. They are loan consolidation, loan rehabilitation and, of course, loan repayment. If you were to choose to rehabilitate your Direct Loan or FFEL Program loan, the Department of Education and you must agree on an affordable and reasonable payment plan. (Note: if you have a Perkins Loan you will need to contact your school.) Your loan will have been rehabilitated when you have voluntarily made the payments you agreed to and on time and a lender has agreed to buy your loan. If you are able to and is and is one of the back-to-school problem with New Year’s resolutions is that it’s easy to get going for a do this before the last day of classes of your school year you may be able to retroactively get aid for the entire year. Of course, if you need to rehabilitate a loan this may mean you’ll have to delay the start of your schooling.

2. Understand the differences between federal and private student loans

As eager as you might be to restart your education you need to be careful the type of loan you sign up for. There are really only two types. They are private loans and federal loans. Private loans are just that. They come from private lenders such as a credit union or bank. Two of the biggest private lenders are Wells Fargo and Discover. However, as a general rule these loans do not come with the same repayment benefits as federal loans. They generally have a fixed interest rate and a fixed term. In comparison, federal student loans offer a number of different repayment options as well as postponements, cancellation and loan forgiveness. If for some reason you can’t get enough federal aid to cover your schooling you may have to get a private loan. However, it’s best to exhaust your options for federal student loans first and then shop around for the best deal you can find in a private loan.

3. Be smart about which program you choosestudent loan debt

You’ve probably seen dozens of advertisements for different kinds of degree programs. The important thing is to do the research so you will know what to expect before you sign up for any one of them. Your goal should be to borrow sensibly for the educational program that will be best for you. For example, since you’re returning to school you might decide to take a different route to your degree such as attending a community college first to complete your lower-level course requirements. While this can be an excellent option just make sure that your credits will transfer.

There are also a huge variety of online programs and for-profit colleges available but again be sure to do your research before you sign up for any of these. You should be especially careful in the case of for-profit schools. As an example of why this is true, the federal government recently forced Corinthian College to shut down 97 of its US campuses by withholding access to any more federal money. The school was in trouble financially plus the government thought its ads and claims were misleading. The Department of Education has also targeted schools such as ITT Technical College and the Art Institutes chain.

4. Know it’s possible to get federal loans cancelled

As noted above another benefit of a federal student loan is that it’s possible you could get it canceled. In fact all of your federal loans will be canceled if you become totally and permanently disabled. You may also be eligible to have your loans canceled or discharged if the school falsely certified that you would be eligible to receive the loan based on your ability to benefit from its training or if it signed your name on a promissory note or application without your authorization. You could also have your federal loan canceled if the school certified your eligibility but due to a mental or physical condition, age, criminal record or other reason you would be disqualified from employment in the occupation in which you were being trained. And you might be able to get your Direct Loans or FFEL Program loans canceled if you withdrew from a school but it didn’t pay a refund that it owed to the lender or to the US Department of Education.

How To Pay Off Your Student Loans Without Having To Live On Mac & Cheese

money and graduation cap in chainsWe understand that you really do want to pay back those student loans. The problem is you never seem to have enough money to make those loan payments and yet have a decent lifestyle. You worked hard to get through college but you’ve learned one of the sad facts of life, which is that a starting salary is just that – the lowest salary you will probably ever earn. So what can you do in the meantime about those stupid, err, student loans?

#1. Understand your options

Whether you realize this or not when you graduated you was automatically put on what’s called 10-Year Standard Repayment. This is where you have a fixed interest rate and a fixed monthly payment for 10 years. If you are struggling to meet those fixed monthly payments the good news is that you have options. One of the best of these is called Graduated Repayment. This is where your payments start low and then gradually increase every two years. This repayment plan could be an excellent option if you believe that your income will also increase over the next 10 years. A second option, Extended Repayment, is just what the name suggests. It’s a way to extend the term of your loans to as long as 30 years. This would probably result in the lowest possible monthly payments but then do you still want to be paying on your student loans when you’re in your 50s? Finally, there are three Income-driven programs. If you were eligible for one of these, Pay As You Earn, your monthly payments would be capped at 10% of your discretionary income.

Here, courtesy of National Debt Relief, is a brief video that explains more about the repayment options available to those that have federal student loans …

 

#2. Remain organized

If you’re not careful the task of managing your student loans can become like trying to herd cats. You need to stay organized which means keeping track of your loan information. If you’re not sure of how much you owe and on which loans you should go to the National Student Loan Data System for Students (https://www.nslds.ed.gov/). Here is where you will find all the information regarding your federal student loans including the types of loans, when the funds were disbursed, how much you owe on each of your loans and your interest rates. This is the fundamental information you need in order to manage your student loans and make sure you keep current.

#3. Have a plan

Many experts say that when you’re first out of school you should try to limit your required payments as much as possible. This is because it’s equally important to have an emergency savings fund in the event the transmission falls out of your car or you have a medical emergency. You should definitely try to sock away enough money to cover at least three months of expenses. After you’ve done this, you could then consider increasing your loan payments though you will want to ensure that this doesn’t mean incurring penalties and that any extra payments you make will go towards your principal loan balance. You might also consider consolidating or refinancing your student loans and what it is you would need to do to qualify. As noted above, there are a number of different repayment programs for federal loans. You could make your payments more affordable with just a little planning. As an example of this when you’re collecting information to prove your income level be sure to provide the most accurate information as your situation may have changed radically since you filed your taxes.

#4. Automate your payments

We understand that repaying your student loans can seem less important than buying food or paying rent but it is critical that you stay current. Federal student loans are considered to be in default the day after you miss a payment. However, you won’t be in serious trouble until you haven’t made a payment for 270 days because this is when your loan may be turned over to a federal debt collector. Trust us when we say you don’t want this to happen. Once your loan goes to a debt collector you could see a portion of your wages garnished as well as a portion of your income tax refunds. You would lose your eligibility for any additional student loans and all those nice options such as Graduated Repayment would go away. A better solution than trying to remember to write a check every month is to automate your payments. This is where your loan servicer automatically deducts the money from your bank account every month. Of course, for this to work the money has to be there. Assuming that it is, you will then never miss a payment and won’t ever have to worry about going into default. If you check with your loan servicer you might even find that it offers discounts and incentives for you to enroll in automatic payments.

#5. Check out all available options

The good news is that there may be options available to you that you’re not even aware of that would help you pay down your loans. For example, there are employers that offer assistance with student loans as part of their benefits programs. Other companies might be willing to provide you with some help if you ask. Believe it or not you could also volunteer your way to a debt-free life. Plus, you could deduct up to $2500 of your student loan interest from your income tax if you fall within a certain income range. It might be tempting to use your tax refunds to pay for a trip to Mexico or the Caribbean but it would be far better to use them to pay down your student loan debts.

Broke woman student holding books and empty wallet#6. Understand what’s happening with private student loans

If you had to get private student loans to finance your education you were pretty much stuck until very recently. Private lenders such as Wells Fargo and Discover offered zero options. You had a fixed monthly payment, a fixed interest rate and a fixed term and that was it. However, as Bob Dylan has sung, “the times they are a changin.” For example, Wells Fargo is lowering its interest rates to as little as 1% in a program that is now available to all eligible borrowers that are up to or around 120 days and 130 days behind in their payments. This new program is also available to those who had been on time with her payments but are in risk of falling behind because of unemployment, pay cuts or medical issues. If you have defaulted on your loan or are 130 days or more late with your payments, you would not be eligible for this program.

Discover has started allowing some borrowers to make interest-only payments for temporary periods of time. It has said that it will roll out permanent modification options early next year, which could include interest-rate reductions and even partial loan forgiveness. Right now, the interest-only option is only available to those that are less than 60 days late on their payments and were not previously in a similar repayment option.

Don’t wait. Act now

If you’re struggling to repay a private loan or loans don’t wait for these companies to come to you. Contact Wells Fargo or Discover immediately – especially if you are possibly headed for default.

Why Paying Off Your Student Loans Might Be Your Best Investment By Far

money and graduation cap in chainsIf you’re a millennial you may view the Great Recession about the same way as your grandparents viewed the Great Depression. You saw what could happen as a result of one of the biggest financial meltdowns in our history. Given this, it would not be a surprise if you stayed away from the stock market as if it were a patch of poison ivy.

Investing in stocks

Of course, that doesn’t mean you should avoid the stock market entirely. The thing about stocks is that they tend to increase in value because they represent a corporation’s ability to increase value. We humans are continuously finding ways to generate more value. So, unless companies stop finding ways to get that value, stocks are a pretty darn good investment over the long haul. And since you’re young, this would be a good time to buy stocks, as you will have many years to see them grow in value.

Investing in a house

One alternative to investing in the stock market is to buy a house. After all, isn’t homeownership the great American dream? Unfortunately, it isn’t a really great investment. When you own a home, this leaves you vulnerable if you were to get fired, see your income reduced or your home nosedive in value. Home ownership is really an investment that keeps you stuck geographically and is undiversified, meaning you’ve put all your precious eggs in a single basket..

A better alternative

A third way to invest that can be great for millennials and represents an even better option than investing in stocks or buying a house is paying off your student loans. If you’re a typical millennial you have a huge amount of student debt. Much of your debt probably has a surprisingly high interest rate. For example, the interest rate on the cheapest type of federal student loan is now 4.66%. On the other hand, the most expensive type of loans, Direct PLUS loans, have an interest rate of 7.21%.

When you compare this to the 17%, 19% or even more you’re paying on your credit cards this may not seem very high. But keep in mind that a 30-year treasury bond has a yield or return of only about 3%.
The best way to think about paying down a student loan is as in investment. It’s really the same as buying bonds or stocks. If you have a student loan where the interest rate is 7% and you pay down $1000 of it, you’ve basically gotten a 7% return on your investment.

Comparing this with stocks

The biggest problem with investing in stocks is the way the stock market swings as its typically bigger than what’s called its average return. If you invest in stocks and they plummet, as occasionally happens, and you need to sell quickly – you might take a huge loss. And it just isn’t true that stocks always bounce back.

Paying down student loans is risk-free

In comparison, there is no risk if you pay down your student loans and they offer a better return than you could get with stocks. Of course, there could always be a change in interest rates. If they were to increase a great deal, then 4.66% or 7.21% could look very cheap. Plus, if inflation were to suddenly occur it could reduce the value of your student debt. This means if you were to prepay your loans you could end up looking like a fool. Of course, these possibilities are fairly unlikely. Right now there is not a single sign of inflation, it appears that interest rates will remain where they are for quite some time and the idea of student loans suddenly being forgiven is clearly much more of a myth that a reality. So, if you are a millennial and struggling to repay your student loans, then paying them down is probably a much better investment than putting your money in stocks.

student loan debtHow to pay down those student loans

There are a variety of ways to pay down those loans. Unfortunately, the best and quickest one is probably to take on a second job or a second shift where you work. Or maybe your partner could go to work. There seem to now be a large number of part-time jobs available. While they usually pay only $9 or $10 an hour, you could work 20 hours a week and earn somewhere around $600 a month after taxes. Apply all that money to pay down your student loans and you might be able to become debt free in just five years or even fewer.

If a part-time job isn’t your cup of tea there are other ways to increase your earnings. We know of one young woman who has completely paid off her credit cards selling weight loss products in her spare time. Many people have earned extra money to pay off their student loans by selling stuff on eBay. If you’re into vintage or handcrafted items, the website Etsy could be a good place to earn extra money. Sometimes the best solution is to think outside the box. We know of one woman who spent a year couch hopping from apartment to apartment and saved enough in rent to pay off her student debts. Another lived and taught abroad in a nation that has a much cheaper cost of living than the US. She was able to save enough to completely pay off her student loans in just three years. Plus, she had the fun and experience of living in a foreign country. There is also the story of the graduate student at Duke who lived in his van for a year. While that might not appeal to you a little thinking outside box like this and you could get your student loans paid down in no time at all.

Cancellation and forgiveness

If you join the National Guard you could earn up to $10,000 to pay off your student loans. Volunteer for the Peace Corps and you could get deferment on your federal student loans and your Perkins Loans partially canceled. The way this works is you would get 15% cancelled for each year of service up to 70%. So, serve in the Peace Corps for three years and you could get 45% of your Perkins loans canceled. You could also earn a stipend of $4725 to pay down your loans by serving in AmeriCorps or Volunteers In Service to America (Vista). If you have the credentials necessary to teach and are willing to teach in a low-income school you could earn loan forgiveness. The way this works is that you must make 120 on time payments after which time any of your remaining balances would be forgiven.

You could also earn loan forgiveness by working in the public sector. There is a program called Public Service Loan Forgiveness. You could have almost any kind of job so long as you were working for a federal, state or local government or a non-profit organization recognized as a 501(3)(c) by the IRS. Make 120 qualified on-time payments and just as is the case with teacher loan forgiveness any of your remaining balances would be forgiven.

Paying For Grad School With Student Loans Is A Whole Different Ballgame

smartphone anxietyOne interesting fact is that while enrollment in graduate schools is going down, applications are going up. As of 2012 (the last year for which this information is available) there was about a 1.7% drop in graduate school enrollment for first-time students but a 4.3% increase in graduate school applicants. Why is this? Several reasons have been cited. For one thing, public funding is dropping in the educational area. For another thing, with fewer schools offering funding for students it would appear that those that got accepted chose to not enroll because they didn’t receive any funding. Also, student loan debt has grown to the point where many students could decide not to go to grad school and run up their student debts even further. On the other hand, students with no student loan debt are more likely to go to grad school.

Employers like people with graduate degrees

While graduate school enrollment may be dropping, many employers still favor those that have graduate degrees. There are two reasons for this. First, these people will have specialized knowledge and skills. Second they completed a degree, which shows they are motivated and dedicated individuals.

An average of $60,000

If you decide to go to graduate school be prepared for a bit of sticker shock. It will probably cost you around $60,000 to get a Masters degree. In fact, this is the average amount of money students borrow to get a Master’s degree. When you finish your graduate program and your grace period ends, you may find that you’re repaying bigger and more complicated loans than you did as an undergraduate.

Different repayment options

The good news of ending up with more debt is that you could take advantage of more repayment options. As an undergraduate you could have borrowed as much as $31,000 in unsubsidized and subsidized loans. However, as a graduate you can borrow up to the full amount of whatever it costs to attend the school of your choice. As an undergraduate the Standard 10-year Repayment program might have been good enough for you. But if you end up with $50,000 or more in student loans you could choose a different repayment program. There is Graduated Repayment, Extended Repayment and three Income-driven repayment plans. One of the most popular of the income-driven plans is Pay As You Earn. If you can qualify for this program your monthly payments would be capped at 10% of your discretionary income and you could earn debt forgiveness after 20 years – assuming you make all your payments on time.

They’ll have different terms

When you were an undergrad you might have gotten subsidized federal student loans. This means you were not required to pay interest on them so long as you were in school. But if you go to grad school you can’t get subsidized loans. Plus, the interest rates on unsubsidized loans are higher. In fact, as of this writing they are 6.21% for graduates versus 4.66% for undergrads. There are also PLUS loans for graduate students that have a 7.21% interest rate.

Check it out before you leap

Before you rack up more student loan debts to go to graduate school it’s a good idea to know how much money you owe at this point. If you have multiple loans at different interest rates and different types you need to go to the National Student Loan Data System For Students website to see how much you’ve borrowed and what you owe. Add this amount to the $50,000 or $60,000 you may need to borrow to pay for grad school and you’ll at least how far you’ll be in hock.

You’re not guaranteed a six-month grace period

If you get a Graduate PLUS loan you will not have the same grace period you did when you finished your undergraduate studies. However, you would be eligible for a deferment option post-enrollment, which is roughly the same as a grace period as it would delay your repayment by six months. But here’s an area where you need to be careful. If you used your grace period after you graduated you’re stuck. There is no such thing as a second grace period on undergraduate loans. So you would need to resume repayment immediately after grad school unless you get forbearance.

student loan debtThe big question – should you even go to graduate school?

Too many people have gone to graduate school just because they felt they needed to or, in some cases, because they couldn’t find a job in their field of study. Others believed that getting a Masters degree would help them get a job. However, experts say that none of these are really good reasons to go to graduate school and they can actually make getting a job more difficult and not easier.

Don’t go if you don’t know

If you don’t know what you are going to do with a graduate degree, you probably shouldn’t go to grad school. And you definitely shouldn’t go to graduate school because you think it would make it easier for you to get a job. In fact, this can actually harm your ability to get the job of your choice.

Does this sound counterintuitive? Not if you think of it this way. First, if you plan on a career that doesn’t really require a graduate degree, your prospective employers may think you don’t really want the job as you didn’t go to school for it. They’ll believe that you will leave the minute you find a job in your field of study’

Second, you won’t receive any full-time work experience while you’re in school. When you finish your graduate program, your peers that have been working for a year or two and will be more experienced and better positioned than you.

As noted above, you’re likely to rack up a large amount of student loan debt. This could limit your prospects, as you may feel forced to get a job you don’t really want but that pays more so you can pay back those loans.

Does it truly require a graduate degree?

The best question to ask yourself before you sign up for that graduate program is if the job you want truly requires a graduate degree. If you’re not sure this is true, talk with people who do the kind of work you want to do. Ask them how useful it would be to have a graduate degree. It’s possible they will tell you that the job won’t deliver the payoff you’re looking for and that experience is more valuable. On the other hand, you might learn that it will really help to have a graduate degree. If this is the case you should move on to the next questions such as are there certain graduate programs or schools that will help me the most? You should also ask if there are some programs that will not be of any help at all. Could you enroll in a cheaper program that would still offer the benefits you need? You need to get answers to questions like these before you sign up for grad school.

An internship could be better

If you learn that a graduate degree would not help you in your career, there are much cheaper and less time-consuming ways to figure out what you want to do for a living such as an internship, networking or just trying out jobs that sound interesting. You shouldn’t treat grad school as a way to determine what you want to do in life. If so, it could be a very expensive and long career counseling session where it would be better to get out and start working. Then if you find that you’re pursuing a career path that requires more schooling, go get your Masters degree then.

How To Get A Mortgage Despite Your Student Loans

money and graduation cap in chainsWe’ve all been hearing some really bad news about student loan debt. We hear of new graduates struggling with their finances because of huge amounts of college debt. They are forced to make a lot of personal sacrifices just so they have enough money to pay off this debt. They are stressed because they know they have to keep making payments because defaulting on student loans have major consequences. They can lose their money to wage garnishment. Not only that, their taxes and government benefits are in danger of being taken from them too.

This is probably why a lot of young adults burdened with this debt are choosing to delay a lot of investments like home buying. According to an article published on CNN.com, both Millennials and Gen Xers are unable to buy their first home because of student loans. Home purchases have declined by 8% among consumers between the ages of 20 and 39. According to the data provided, this is causing the housing market $83 billion worth of real estate investments.

If the student loan crisis continues, this trend might continue as well. In case that happens, it is bound to have a huge impact on the housing market. While student loans can be quite a burden, young adults should not let it keep them from making investments that will grow their personal finances.

Two things that will increase your chances to buy a home despite college debt

While it is difficult to buy a new home while you still have student loan payments to meet, it is not impossible to do so. When buying a house, you have to make sure that your finances are in order. You need to make sure that your current financial situation will allow you to be approved of a low interest mortgage loan. If you can do this, then owning a home and paying off your college debt can be managed quite easily.

But first things first, you need to increase your chances of being approved of a mortgage loan. Here are two things that you need to do.

Reduce your debt to income ratio

First tip is to lower your debt to income ratio. The rule is, the lower the percentage, the better it will be for you. That is because you have a lower debt compared to your current income. According to ConsumerFinance.gov, the ideal debt to income ratio should be 43% or lower.

To compute, you need to get the sum of all your monthly debt payments and then divide the total by your monthly income. Your incomes should be the gross amount – meaning your income before your taxes and deductions are removed. If your debt to income ratio is below 43%, it will allow you to get a Qualified Mortgage. This is a loan category that provides a lot of stable features that will make your home loan more affordable compared to other conventional loans.

If your student loans are causing your debt to income ratio to go beyond 43%, there is something that you can do to lower that. Try to switch to a repayment program that allows you make smaller payment contributions. For instance, if you are using the standard payment method – wherein you pay the same amount throughout the duration of the debt, you may want to change that to a graduated payment method. A graduated repayment method allows you to make smaller payments first and that gradually increases over time. The lower payments at the beginning of the repayment program could help you lower your debt to income ratio.

There are other repayment plans that you may want to look into that will help you lower your monthly debt payments. Do your research so you can see which of them you can use.

Improve your credit score

The second tip is to improve your credit score. According to Bankrate.com, the credit score is a very important number in home buying. It will help determine your interest rate for a home loan. A high credit score will benefit you every time you take loans because you can get a low interest on that loan. A good score makes you creditworthy. That means you can be trusted with a loan because you have a good record of paying back what you owe without being late or defaulting. For instance, a FICO score of 740 or higher can get you the best rates. A score of 700 will still be favorable (around 4.5%) but if you go two points down to 698, that could cost you thousands of dollars because you will be given a higher interest rate. Your interest rate will probably be 4.875% and that can cost you a lot of money throughout the duration of the loan. The lower your score, the bigger interest you will end up paying.

Now your student loans can help you improve your credit score – but only if you pay it off responsibly. The rules are quite simple. Make sure you are never late and that you always pay the required amount each month. If you do this even for just a couple of months, you will see improvements in your score.

It is very important that you choose the right financial aid to help you buy your own home. Here is a video from the Bank of America with some options for a home loan – especially when you cannot afford to get a conventional loan.

How to manage your finances to take care of both student debt and mortgage

There is a study that showed how student loans are not really the main cause of delayed homeownership among Americans. While that may be true, it is still a factor to consider.

In case you have successfully improved your finances and you were approved of a low interest mortgage loan, here are some tips that should help you manage your finances. These two loans are quite significant so you may want to make sure that it will not overwhelm you.

  • Have a solid payment plan in place. This is very important. You need to prioritize paying off these two loans. Defaulted student loans have serious consequences and unpaid mortgages could lead to the foreclosure of your home. Check on this payment plan every now and then to check if it is still affordable or not. If you find yourself stretching your budget too thinly, talk to your lenders for a better payment plan.
  • Spend only on what is very important. While you have huge amounts of debts, the more you need to be responsible with your spending. Choose to spend only on what is very important. If you can live without it, make the sacrifice and choose to put your money towards your debt payments or your savings.
  • Hold off taking on more debts. There are other debts that you can take. Credit cards and auto loans are some of them. Do not take in more unless you have paid a huge chunk off of your student or mortgage loan.
  • Have an emergency fund. You should also have an emergency fund in place. This will help you continue making payments even as unexpected expenses arise. It will also give you the security of knowing that you are financial prepared even if you have huge amounts of debt.
  • Increase your income. Lastly, you may want to try and earn more money. While some mortgage loans have prepayment penalties, student loans do not have them. You can pay as much as you can early into the repayment program so you can shorten your term. That should help you decrease your interest payments and save more in the long run.

Wiping Out Student Loan Debt Through Bankruptcy – The Pros And Cons

hands chained while holding coinsStudent loan debt recently surpassed credit card debt as it now stands at over $1.3 trillion dollars.

Does this represent a crisis or not?

Unfortunately, the answer to this depends on which financial experts you ask.

Some say that student loan debt is like the mortgage bubble and will soon burst. But others say it will never cause our economy to crash.

Millions of people trapped

Student loans do bear a resemblance to the housing crisis in that they have millions of people struggling to pay them back just as the mortgage crisis left millions of people
underwater – or owing more on their houses than they were worth. However, many experts say that student debt might be a problem for individual borrowers but won’t affect our economy, as there’s no bubble that could burst. One senior economist noted that the way that student loans have grown is important but this is its only similarity to the mortgage crisis. He went on to say that student loan debt and mortgage debt were growing at about the same rate per year but that’s where the resemblance ended.

A crisis for individuals

Student loan debt can certainly represent a crisis for some individuals. There are people stuck with $50,000 or more in student loan debt, people in their 50s that still owe on their student loans and people that have been forced to default on them. One example of what this can mean is that a person owing $30,000 in student loan debts at 6% would have a monthly payment of approximately $333 and for 10 long years. These debts have caused many young adults to forgo buying a house, having children or even getting married.

How did this happen?

There is no one simple reason why there is all this student loan debt. Part of the reason is clearly the increased cost of going to college. Just in the decade from 2002-03 to 2012-13 alone the tuition and fees at public four-year institutions rose at an average rate of 5.2% per year above the rate of inflation. And the cost of room and board increased by 2.6%. This means there was an average annual growth rate of 3.8% in total charges.

A second reason why student loan debt has grown so enormously is because how easy it is to get federal student loans. For example, just about anyone can get a Stafford loan, as they don’t require any kind of credit check. These loans have low interest rates and borrowers are not required to start repaying them until after graduation. Some Stafford loans are even subsidized meaning that the government pays the interest on them so long as the student is in school.

“Everyone needs to go to college”

A third reason why we have more than $1 trillion in student loan debts is because of the pervasive advice that everyone should go to college. The unanticipated consequence of this idea is that many kids go to college, find out it’s not for them and drop out owing thousands of dollars.

Why there’s no way out

Student loan debts are unsecured debts. This means borrowers are not required to put up an asset in order to get them. This makes them the same in many respects as credit card debt. The big difference between the two is due to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). What it changed is that bankruptcy could no longer be used to wipe out either federal or private student loan debts. The one exception to this is if the borrower can prove to a bankruptcy judge that he or she has what’s called an undue financial hardship, which is almost impossible to do. In other words once you take out a student loan you’re pretty much stuck with it – until you repay the money or get a job that offers federal student loan forgiveness such as teaching in a low income area or working in the public sector.

The pros of BAPCPA

The proponents of this act argued that it was necessary in order to prevent bankruptcy abuse – that people would borrow thousands of dollars, wait a couple of years after college, declare bankruptcy and walk away with a “free” education. The losers under this scheme would, of course, be US taxpayers as they would be footing the bill for these deadbeats.

Supporters of this bill also said that this would lead to cheaper loans so that more people could go to college. Part of this turned out to be true. It encouraged more people to go college but the loans didn’t get decidedly cheaper.

The cons of BAPCPA

Of course, the biggest con of this act is that it leaves people mired in debt defenseless with no ability to get it eliminated. It can be argued that these people got their student loans with their eyes wide open. They knew going in that they would have to repay them someday. However, 18- and 19-year-olds are not know for their maturity and are capable of making bad decisions – one of which could be borrowing thousands of dollars. To make matters worse, many of these students choose majors that will never pay off financially– leaving them not only deeply in debt but in careers that will cause them to be low earners practically forever.

The hardest hit

However, these are not the people that are hardest hit by their student loans debts and by the BAPCPA. These are people that bought into the idea that everyone should have a college education, went to school for a couple of years and then decided higher education wasn’t for them. This left them stuck in debt and without a degree to show for the money. Others that have been hard-hit are those that fell for the advertisements of predatory for-profit schools, borrowed money to finance their schooling and then discovered that their degrees were basically worthless leaving them both unemployed and buried in debt.

There are options

If you’re stuck under a pile of debt there is one good bit of news. You should be able to find a federal loan repayment program that would at least ease your burden. If you’re typical you didn’t pay much attention to your loans after you graduated so you’re probably in what’s called Standard 10-Year repayment. If so and if you find your payments too burdensome you could switch to one of the other five repayment programs available. One of the most popular of these is called Graduated Repayment. Choose this program and your payments would start out low and then gradually increase every two years. A second option is Extended Repayment, which would give you up to 25 years to repay your loans. You would have a much lower monthly payment but, of course, would pay more in interest because of the loan’s longer term. Plus, you would still be paying on your student loans in your late 40s.

There are also three income-driven repayment programs. One of these, Pay As You Earn, would cap your monthly payments at 10% of your “disposable” income. If you find you’re not eligible for this program, you could choose Income-Based or Income-Contingent repayment, which would cap your monthly payments at 10% or 15% respectively of your disposable income.

For more information about federal loan repayment options and about effectively managing you student loans debts, be sure to watch this short video courtesy of National Debt Relief …

In summary

Whether you borrowed all that student loan money for good reasons or it was a big mistake, the same holds true. You can’t get rid of it by filing for a chapter 7 bankruptcy but there are other options that could at least reduce some of your pain.

Hey, Recent Graduate. The Grace Period On Your Student Loans Is Over And It’s Time To Pay Up

frustrated womanIf you graduated or quit school this past May or June, your six-month grace period is about to expire and Uncle Sam wants to start getting his money back.

Have you actually sat down to determine how much you owe on your student loans? Given the fact that they’re parceled out one semester at a time and that you might have gotten several different types of loans, it wouldn’t be surprising if you didn’t know exactly how much you owe. Fortunately, there is an easy way to figure this out and that’s the National Student Loan Data System (NSLDS). Go to its website, log in with your student ID and you’ll be able to see all of the information about your federally backed student loans. This will include the date the funds were disbursed, the amount you borrowed on each loan, the amount you owe and the type of loan. You can save all this information to your student loan portfolio, which is a good idea, as this will make it much easier to access the data in the future.

Look into deferment

If you don’t yet have a job or are a member of the “underemployed,” you could think about applying for a deferment or forbearance. A deferment would give you a temporary 12-month “timeout” before you would have to start repaying your loans. If you have a Direct Subsidized Loan, a Federal Perkins Loan, and/or a Subsidized Stafford Loan, the government will pay the interest on it during that 12-month period.
If you don’t qualify for a deferment, you could try for forbearance. This would also give you 12 months where you would not have to make your payments or it could mean a reduction in your interest rate. However, the interest charges will continue to accrue on both your subsidized and unsubsidized loans as well as any PLUS loans.

How do you get a deferment or a forbearance?

If you want to apply for a deferment and have a Direct Loan or FFEL Program loan you will need to call your loan servicing company. For Perkins loans contact the school you were attending when you got the loan. Forbearance is a bit different in that there are two types – discretionary and mandatory. You will need to discuss this with the company that services your loan as it will decide whether to give you a discretionary forbearance. On the other hand mandatory forbearance is just that. Your loan servicer must give you forbearance if you are serving a dental or medical internship, employed in a national service position, or teaching in a program that qualifies under teacher loan forgiveness.

Note: There are some other circumstances where you would be eligible for a mandatory forbearance and you can learn about them by clicking here.

Understand your repayment options

Assuming you did not choose another repayment plan you were automatically put into Standard 10-Year repayment. Under this plan you will have a fixed monthly payment and 10 years to repay the loan. If you believe you would have a hard time making those payments, there are alternatives. One of the most popular of these is Graduated Repayment. Choose this program and your payments would start low then increase gradually every two years. This can be a good option if you are just starting out in your career and are a low earner. The idea here is that your salary will also grow over the years so that it will be easier for you to make those payments as they get bigger.

A second way to reduce your payments is through Extended Repayment. Under this program you are given up to 25 years to repay your loans instead of the standard 10. While this would lower your monthly payments dramatically, you would end up paying more interest over the life of the loan because of its longer term.

There are also three income driven repayment programs – Pay As You Earn, Income Based and Income Contingent. As you might guess from their names all three of these programs base your monthly payment on your income. Pay As You Earn was in the news recently when Pres. Obama issued an executive order that made about 3 million more people eligible for the program. If you are one of them you could see your monthly payments capped at 10% of your disposable income. Income Based repayment also has eligibility requirements and caps your monthly payment at 15% of your disposable income. Income Contingent repayment basically has no eligibility requirements and also caps your monthly payment at 15% of your disposable income.

One of the biggest benefits

One of the biggest benefits of federally backed loans is that you can always change repayment programs. As an example of what this means, you could start with Graduated Repayment, wait six years until your payments have grown larger and then change to Income-based Repayment.

Look for ways to save

The best way to save on your monthly payments is to switch to a repayment program with lower payments. However, there are some other ways to save money on those payments. For example, you could save a bit if you sign up for auto pay where your payments are automatically taken out of your checking account each month. Also, you can deduct as much as $2500 of the interest you paid on your federal and private student loans on your federal income taxes.

Consider consolidation

Finally, you could consider consolidating your loans. There are several reasons to do this. First, you would then have just one monthly payment to make in place of the multiple ones you’re making now. Second, you would likely have a lower interest rate and you would definitely have more years to repay the loan, which translates into lower monthly payments. While there is a lengthy explanation of how the interest rate is calculated if you get one of these loans, the simplest way to put it is that your new interest rate will be higher than the lowest interest rate you’re currently paying but lower than the highest.

How To Make Debt Consolidation Loan EffectiveGet a private consolidation loan?

You could also opt for a private consolidation loan. The interest rates on these loans are very low right now so you might be better off with one of them. However, as with many things in life, it’s important to shop around so that whether you get a federal loan or a private loan, you get the best deal and a payment you can live with –as you will need to live with it for as many as 25 years.

Think before you consolidate.

Don’t rush out to get either a Federal Direct Consolidation loan or a private loan until you understand the downside, which is that you would lose the perks that come with other types of federal loans. For example, you would no longer be able to change repayment plans. You wouldn’t be eligible for deferment, forbearance, forgiveness or loan cancellation. And you won’t be able to take advantage of any of the income-based repayment plans.

The one thing not to do

As you have read there are a number of different ways to handle your student loans but there is one thing you should definitely not do and that is miss a payment or be late making a payment. With federal loans you are considered to be in default the day after you miss a payment. This won’t be reported to the credit bureaus for 90 days but when it is reported it will have a serious effect on your credit score. Plus, the government can get very ugly when it comes to collecting arm defaulted student loans. It can garnish your wages without having to go to court, seize part of your income tax refunds or even prevent you from getting a professional license.

10 Things That College Admission Counselors Won’t Tell You

student with a notebook and calculatorIf you’re a high school senior or even a junior the time is near – when you’ll need to apply for admission to the colleges or universities of your choice. You’ll also soon to need to fill out the dreaded FAFSA or Free Application For Federal Student Aid. While the deadline for submitting the FAFSA is not until June 1, the earlier you complete and submit it the better. And, yes, you need to fill it out and submit it even if you don’t intend to get any federal student aid. The reason for this is your FAFSA will be sent to all the schools where you apply for admission and it will be used in determining whether to award you a scholarship, a work-study grant or some other form of financial help.

There are other things you need to know besides the importance of filling out your FAFSA and here are XX that college admission departments just won’t tell you.

1. It pays to be nice to your teachers

Given today’s skepticism about the value of GPAs and test scores, there are admissions department that are weighing more heavily on the recommendations from high school teachers and counselors. And it when it comes to recommendations the most useful ones are the ones that show that you’re intellectually curious and that you contribute to class discussions.

2. We only sound as if we were exclusive

Admission was offered to less than one-third of the applicants in 2013 by 100 US colleges. This can make a school look “exclusive” and it is believed that some schools try to manipulate this rate. The way they do this is by encouraging high schoolers to apply for admission even though they have no intention of intending. In addition, some schools count incomplete applications to increase their applications-to-acceptances ratios.

3. Politics can play a role

Whether we like it or not, the NACAC says that about 33% of colleges and universities consider race as a factor in accepting students. Some of our states have banned racial admission preferences but their schools have been accused of using workarounds against those bans. Unfortunately or fortunately – depending on your parents – one practice that is usually considered legal is “legacy.” This is where the kids of wealthy alumni or powerful lawmakers get special considerations in the application process.

4. We don’t trust it

In this era of “helicoptering” parents, many schools worry that the essays submitted by some students weren’t written by them. The way they weed out ghost writing is by asking students to supply other pieces of school writing that were graded by a teacher. One retired dean of admissions said that “if the essay looks like it was written by Maia Angelou but the school work looks as if it came from Loman, this will definitely raise eyebrows.

5. We prefer students that can pay full price

How many college freshmen come from outside of the US? In 2013 it was 10%. Colleges love these people because most of them pay full tuition. At publicly funded state schools, the higher tuition charged out-of-state students often works to subsidize the education costs for those who live in the state. As an example of this, the in-state tuition at the University of California – Berkeley is $13,000 a year. But for an out-of-state student or foreign resident, tuition is about $36,000 a year.

6. We need you more than you need us

Would you like to do some negotiating when it comes your tuition? This year the number of high school graduates leveled off at 3.2 million. And it’s expected to stay at that level until about the year 2020. As a result, more colleges will be chasing fewer students. If you are accepted to more than one school, you may be able to do some horse-trading on the cost of your tuition. In fact, you could view it as about the same as if you were to go to an automobile dealer and try to negotiate a better rate for a new car.

7. We laugh that you obsess over class ranking

Less than 20% of admissions counselors think of class rank as being “considerably important.” However, it is more likely to come into play at larger schools where it’s just not possible to do detailed reviews of applicants.

8. You could be admitted but not stay admitted

One sad fact is that about 22% of colleges and universities revoked at least one admission offer in 2009, which is the most recent year that was studied. The most common reason for these were final grades followed by disciplinary issues and then lying about application information. For that matter, the postings put on social media have prompted some universities to reconsider their offers.

9. All grades are not equal

Have you taken college prep courses? If so, the grade you got in them will probably be given more weight than other grades. The reason why schools are becoming more skeptical is due to what’s known as “grade inflation.” The College Board, which is the organization that administers the SAT has research showing that the average GPA for all high school seniors increased from 2.64 in 1996 to 2.90 in 2006 despite the fact that SAT scores remained about flat. This was seen as proof that there are teachers using grades to reward good effort instead of achievement.

10. Were wondering about the SAT

For almost as long as anyone can remember the SAT has been the big benchmark in forecasting how students will handle college-level work. However, today many people argue that the SAT gives wealthier students an unfair advantage as they could afford those pricy test prep classes. In fact, around 800 of America’s 2800 four-year colleges now consider the SAT to be optional. The NACAC endorsed a study done recently that looked at the performance of 123,000 students that had been admitted to college between the years 2003 and 2010. What this study found is about 30% of the applicants had not taken either the SAT or ACT … and that there was no significant difference in college GPAs or graduation rates between those who took on of these tests and those that took neither.

Young black college graduate with tuition debt, horizontalTo borrow or not to borrow, that is the question

Another decision you’ll have to make besides choosing a college or university is how to fund your education. Generally speaking about 50% of students graduating from college needed to borrow money to pay for their educations. Of course, it’s much better if you don’t have to borrow the money and can start plus, life after college free of debt. If this is just not possible, be sure to get federal student loans and not private loans. Student loans have a number of advantages over private ones, such as the ability to change payment programs. For example, instead of staying in the Standard 10-year Repayment program you could switch to Graduated Repayment where your payments would start low and then gradually increase every two years. This can be a real boon if you’re just starting out in your career and are a low earner. Or you could choose one of the income-driven repayment plans such as Pay As You Earn that would tie your payments to your disposable income. Plus, federally backed student loans also offer options such as loan forgiveness, deferment and cancellation that are normally not available in private loans.

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