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How To Take Charge Of Your Student Loan Debts

money and graduation cap in chainsYou’re out of school now, you’ve gotten a start on your career, you have a place of your own and life seems good … except for one thing. You have those student loan debts hanging over your head. If you’re typical you owe around $26,000 because that’s what last year’s graduates averaged. Of course, if you borrowed money for graduate studies undoubtedly owe much more than that.

A brief history of student loans

Back in the 1960s the federal government started offering big subsidies to private banks. In turn these banks were to loan money to students. This continued until the 1990s when President Clinton instituted changes that made it possible for students to borrow directly from the US Department of Education. These are called Direct Federal Loans. If you received student loans anytime in the past 15 years the odds are that they are Direct Federal Loans – unless they were Perkins Loans and came from your school.

In 2007 the federal government initiated a new student loan repayment program called Income-based Repayment. This capped the monthly payments on certain types of federal loans at 15% of a person’s discretionary income. In 2010 Congress got even more generous and passed a bill creating a new repayment program called Pay As You Earn. This program caps monthly payments at 10% of a person’s discretionary income and forgives any remaining balances after 20 years. To be eligible for Pay As You Earn you must not have had an outstanding federal loan as of October 1, 2007, you must have had a Direct Subsidized or Unsubsidized Loan and the funds must have been dispersed on or after October 1, 2011. Plus, you must be able to prove a Partial Financial Hardship. Finally, Pres. Obama issued an executive order last year that made more people eligible for Pay As You Earn by extending it to people that acquired their student loans before October 2007.

Could you take charge of your student debts with one of these programs?

To qualify for either of these repayment programs or a third one called Income-contingent Repayment you need to prove that you have a Partial Financial Hardship. The way this is calculated without getting too technical is to take your gross income and then subtract 150% times the poverty line. Note: The easiest way to determine if you have a Partial Financial Hardship is with an online calculator such as the one provided by the U.S. Department of Education.

If you’re just out of school and unemployed

If you’ve been out of school for six months (or more) and are still jobless, the best thing you can do is contact your loan servicer to discuss repayment options. Conversely, the worst thing you can do is not make your payments. (More about this later.) As you have read there are several income-driven repayment programs available and you should sign up for one of them. Both Pay As You Earn and Income-based Repayment use your income to determine how much your monthly payments will be. Since you have no income, your payments could be zero dollars per month. That’s nada, zero or nothing. And it’s legal.

Would debt consolidation make sense?

There are instances where student loan debt consolidation would make sense. If you have multiple federal student loans that qualify, you could consolidate them into one new loan. You would then have better repayment terms, which should make it easier to repay them. For example, if you were to consolidate your Federal student loans into a Direct Consolidation loan you would extend the term of your loans from 10 to 30 years. Naturally you would then end up paying more interest over the term of the loan but your monthly payments will be much lower. In addition, you might still be eligible for some form of income-based repayment on the new loan. To see if you would be eligible for a Direct Consolidation loan, go to Student

woman smilingGet a forbearance or deferment

If it turns out that for some reason none of the repayment options makes sense for you, try for a deferment or forbearance. If you’re not familiar with these deferment is a period of time during which you don’t have to make payments on your principal or interest. You could be eligible for deferment if you’re still enrolled in school or are unemployed. To see if you would qualify, you will need to ask your lender or loan servicer. You could ask for forbearance if you find you don’t qualify for a deferment. This would allow you to stop making payments on your student loans for up to 12 months. However, the interest on your loans will continue to accrue. If you have an economic hardship, you could qualify for forbearance. However, forbearance be granted only by your lender.

Whatever you do don’t default

You’ll remember we said earlier in this article that the worst thing you could do is not make payments on a student loan. This is called defaulting on the loan or loans and it’s something you absolutely do not want to do. You’re considered to be in default the day after you miss a payment. However, this won’t be reported to the three credit bureaus for probably six months. This gives you time to work with your loan servicer to get caught up. In the event that you don’t fix things then after 270 to 360 days your loan could be turned over to a debt collection agency and things could really get ugly. Your wages could be garnished or a portion of your income tax refunds could be withheld. You will be unable to get any more federal aid and your debt will grow due to the expenses associated with collecting your debt such as court fees and lawyer’s fees. You may not be able to enlist in the Armed Forces and you’ll be ineligible for deferment. You will be ineligible for assistance under most federal benefit programs and your defaulted loans will stay in your credit reports for seven years and this will have a very negative effect on your credit score.

Last but maybe not least when you default on a loan, whether it’s a student loan debt or some other type of loan, you’ve basically stolen money from taxpayers or a private lender. When you signed up for those loans it was to finance a valuable commodity –your education. In return for that education you assumed an obligation, which was to repay the money. Whether you like to look at it this way or not if you default on your student loans you’re not much different from a person that engages in credit card fraud.

Choose a plan and get started

Regardless of whether you’re employed or not the best way to take charge of your student loan debts is by selecting a repayment program and getting started. For people just out of school one of the best options is Graduated Repayment. If you were to choose this program, your payments would start low but then increase gradually every two years. This can be an especially good solution if you know for sure that your earnings will also increase over the years. Beyond this, an income-driven repayment program such as Pay As You Earn should take the sting out of your monthly payments by making them very affordable.

Older Americans And Student Debts — A Bad Combination

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

 You could be shocked

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

 If you’re not in default

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

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

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

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

 If you are in default

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

The good news

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

Private student loans

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

The worst-case scenario

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

 It may not be easy

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

Are You Over 50 And Still Struggling With Student Debt?

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

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

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

The problems just compound

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

It’s the Roach Motel of debt

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

Don’t borrow to finance your kids’ education

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

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

There is no just solution

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

Work till you’re 75?

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

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

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

What to do before you boost those payments

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

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

Get rid of high interest credit card debt

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

Have an emergency fund

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

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

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.

How To Keep Student Debt From Ruining Your Life

graduate chained to student debtIt is estimated that some 20 million students are going to college this fall and that unfortunately some 12 million of them will be required to take out student loans to pay for their educations. Unless you’ve been hiding under a rock, you probably already know that student debt stands above $1 trillion making it even larger than our national credit card debt. Colleges and universities are not making things any easier either. The average tuition has increased 27% at public universities and 14% at private schools in the past five years, which would help explain why people are graduating owing an average of $25,000 or more.

But regardless of whether you’re just starting college or are already in school, there are things you can do to keep student debt from ruining your life.

Choose the most affordable school you can

In the event you’ve already started college this advice may come too late. But if you’re still a high school senior you should try to choose the most affordable school you can. This may not be the most prestigious of colleges but what many people have found is the secret is to go to an affordable school for four years and then get their graduate degrees at a more prestigious college or university.

Another way to keep from piling on so much debt it would ruin your life is to go to a community college for two years and then transfer to a more prestigious school. Whether you start at a two- or four-year college you’ll probably be required to take basically the same courses for the first two years so you really have nothing to lose by starting at a local community college. As an example of what this can mean, the cost to attend one of our local community colleges for a year is $6832 while the cost for an in-state student to attend our state university is $26,933. Do the math and you’ll see you would save approximately $40,000 by doing your first two years at the community college.

Choose your major carefully

Even if you’re already in college it’s not too late to consider changing majors if you’ve chosen one that would doom you to being a low earner for years. Recent studies have shown that if you get a degree in child and family studies, elementary education, exercise science, broadcast journalism or animal science you will be a low earner for life. For example, even the mid-career salary for a person with a major in child and family studies is just $37,200 and for elementary education it’s $45,300. The starting salary for a person with a major in exercise science is $32,600 with an estimated mid-career salary of $51,000 while the mid-career salary for a broadcast journalism major is just $68,800. Now compare this with the $100,000 or so that you will spend on your education and ask yourself the question would one of these majors be a good investment.

Also be careful about the college you choose

Believe it or not there are colleges that offer better values just as there are automobiles that are better values and the names of some of the schools might astonish you. For example, Harvard University is considered to be a good value because nearly 60% of its students receive need-based grants so that the average cost to them is just $15,486 a year. Brigham Young University is also considered to be a good value because the average cost of attending there for a year if you receive need-based grants is just $12,367. And the cost to attend the Massachusetts Institute of Technology for a year averages just $19,957 assuming you qualify for need-based grants. Now compare this to the cost of attending our state university for a year of $26,933 with little or no opportunity to get grants and you should be able to see why it’s important to be careful about which school you choose.

Score some scholarships

Fortunately, scholarship money being handed out by foundations, corporations and other private-sector benefactors has also risen as has tuition at universities and colleges. There are websites available that can help you and your family find scholarships for which you might qualify. However, it’s important to search early. If you’re a student your parents should check with their employers to see if maybe they offer its employees’ children scholarships. Don’t be afraid to aim high. Even though the competition for big scholarships can be very tough, you should give it a shot. They payoff can make it worth the effort. This is also an area where choosing a private school could be better than a public university. While it’s very difficult to score a scholarship from a public school it should be easier to get one from a private institution – just as it’s easier to get needs-based grants. As an example of this, the small private college I attended now costs – at least theoretically – a little more than $37,000 a year. However, 100% of its students receive scholarships or grants so that the true cost of attending it is clearly much less than the $37,000.

What to do if you’re already deep in student loan debt

If you owe $20,000, $30,000 or more in student debt you can still keep this from ruining your life. For one thing, you could get a federal Direct Consolidation loan, which could lower your monthly payments dramatically by giving you more time to pay off your debt. The other advantage of this is that you would have just one monthly payment to make a month versus the multiple payments you’re currently making. The interest rate on these loans is computed as the weighted average of the loans you’re consolidating rounded up to the nearest 1/8th of a percent. The simplest way to think of this is that if you get a Direct Consolidation loan, your interest rate will be higher than the lowest interest rate you’re currently paying but lower than the loan with the highest interest rate.

Choose a different repayment program

You might also be able to make your life easier by changing repayment plans. There are six available in addition to the 10-Year Standard Repayment program. Three of these are income-based meaning that your monthly payments would be based on your income and family size. One of these is Pay As You Earn, which would cap your monthly payments at 10% of your discretionary income. Pres. Obama recently signed an executive order that makes about 1.6 million more people eligible for this program and you might be one of them – if you got your first federal student loan after October 1, 2007 and it was a Direct Loan or a Direct Consolidation loan you received after October 1 of 2011. The eligibility requirements for Pay As You Earn can be a bit confusing so be sure to watch this short video to learn more about them,

Other repayment options

In the event you aren’t eligible for Pay As View Earn, there are other options that could keep your student debt from ruining your life. The Income-based Repayment program would cap your monthly payments at 15% of your discretionary income or if you just recently graduated you might choose Graduated Repayment. This is where the payments start smaller but then gradually increase every two years.

The long and short of it is that you can get a good college education without it ruining your life. However, you will need to make some smart decisions when it comes to choosing a school and choosing a major. There are also options available that can make things easier in the event you have a considerable amount of student debt. As the old saying goes, “you don’t need to know a lot about money to be good with money.” The important thing is to think things through and make decisions that will enhance your life and not ruin it.

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

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

Three months to zero hours

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

Move back in with dear old Mom and Dad

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

Do the math

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

Join the Peace Corps

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

Flee the country

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

Enlist in the French Foreign Legion

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

Join the Military

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

Volunteer for AmeriCorp/Vista

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

smiling womanIt doesn’t have to be 10 years

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

Check out the other options

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

How To Know If You Should Consolidate Your Student loans

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

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

The options

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

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

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

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

Calculating your interest rate

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

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

The application process

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

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

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

Repaying your Federal Direct Consolidation Loan

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

Private student consolidation loans

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

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

Check out other options

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

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

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

Shop around

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

Advice and counsel

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

Are Student Loans America’s Biggest Rip-off?

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

What this has lead to

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

Young and naive

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

Why college costs so much

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

The secret behind the curtain

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

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

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

Interest rates are irrelevant

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

The truth about Pres. Obama’s recent executive order

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

What should you do?

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

8 Seriously Unconventional Ways To Pay Off Student Loans Fast!

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

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

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

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

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

Join the Peace Corps

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

Become a human lab rat

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

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

Do mystery shopping

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

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

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

Get a job overseas

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

Find a “sugar daddy”

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

Sell your virginity or your sperm

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

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

Get a job in the public sectorFederal Eagle

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

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

Or …

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

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

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

Join the French Foreign Legion

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

Congratulations On Graduating From College! Now, Send Us $33,000

Graduation cap with moneyIn the past month millions of young Americans graduated from college. However, most of them didn’t receive just a diploma.

They also received a bill – probably from the US government – regarding their student loans.

According to one recent study, the average student graduated in 2014 owing $33,000 in student loans. Those who had government-subsidized loans weren’t required to pay anything on them while they were still in school. But now, or at least in six months from now, it will be time to pay the piper. And if you owe just $20,000, you can look forward to making a $200 a month payment for the next 10 years to erase that debt.

Start a to do list

If you’re typical, you may not even have a job yet. Or you may have to complete an internship before you get an actual diploma. So what do you need to do about your student debts? First, you need to sit down and put together a to do list. Again, if you’re typical, you didn’t have a single loan. You had multiple loans at different interest rates. Before you do anything else, get your loans and your books in order. The Consumer Financial Protection Bureau has a tool on its site ( that can help you get your student loans organized. It also offers some information about repayment options including income-based repayment programs that are available if you have federal student loans.

Determine what types of loans you have

Once you’ve written down a list of your loans, you need to determine their types as they could be federally subsidized, unsubsidized or private loans. Go to the site National Student Loan Database System and look for your loans. Then click on each one to see who services the loan – or the company that will be collecting payments from you. It’s possible that your loan servicer could be a different company from your original lender. Also, keep in mind that the system will show only your federal student loans and not any private student loans.

When November rolls around

If you graduated in May, your first payment or payments will be due in November. Make the payment(s) even if you have not yet received a coupon book. The government considers you to be in default on a federal loan the day after you miss a payment. This would mean an increase in your interest rate and possibly some penalties. In the event you go 90 days without making a payment on a federal loan loans, it will be reported to the three credit bureaus and will have a seriously negative effect on your credit score. It’s also important to understand the payments are not necessarily credited the day they are received. So if your payment is due the 15th of the month, it would be best to make sure it gets to your lender no later than the 12th.

Your grace period may not be six months

Most federal student loans come with a grace period of six months. The reason for this is to give you time to find a job, get on your feet and get ready to start repaying your loans. However, that grace period kicks in any time you drop below half-time status in your school. As an example of this, if your status changed to less than half time in the fall of 2013, it doesn’t matter how many courses you’re taking now. Your six-month grace period began then and the clock is ticking. On the other hand, if you had a Stafford loan and return to at least half time status within 180 days, you will preserve your a six-month grace period.

Perkins loans have a nine month grace period and then another six-months after most periods of deferment. If you have a Graduate PLUS Loan you would have something the equivalent to a grace period every time your in-school period ended. If your parents have a Parent PLUS Loan made on or after July 1, 2008, they could ask for the same. But they won’t automatically get a grace period the same as you would.

Given all this, it’s not uncommon for some students – especially those who have taken off a semester here and there – to have some loans in grace status while others are due for payment the minute they graduate.

Document everything

You need to monitor your loans to make sure that your payments are credited on time. If you discover a discrepancy, you can’t fix it with just a phone call. You’ll need to start documenting everything in writing. In fact, the best idea is to use the loan servicers’ online payment platform to target your payments against specific loans whenever possible.

To consolidate or not to consolidate?

If you feel overwhelmed by the idea of having to make half dozen different payments every month to a half dozen different loan servicers, there is an alternative. It’s a Federal Direct Consolidation Loan. If you were to choose this option, you would then have to make just one payment a month and to just one lender. While this can be a very tempting alternative, it’s nothing to rush into. The problem is that if you take out one of these loans you may lose some of the benefits that came with your original ones such as a low interest rate that significantly reduces the long term cost of your debt. For example, your current loans might have an average interest rate of 4%. But the interest rate for a Direct Consolidation Loan is the weighted average of the interest rates on the loans that you’re consolidating rounded to the nearest 1/8th of 1%. If you’d like to know what your interest rate would be on a Federal Direct Consolidation Loan, here’s the formula.

Step 1:
Multiply each loan by its interest rate to obtain the “per loan weight factor.”
Step 2:
Add the per loan weight factors together.
Step 3:
Add the loan amounts together.
Step 4:
Divide the “total per loan weight factor” by the total loan amount and then multiply by 100.
Step 5:
Round the result of Step 4 to the nearest higher one-eighth of one percent if it is not already on an eighth of a percent.

Alternatives to paying off student loansman chained to debt

While it may be in your best interests to just buckle down and start making payments on your student loans, there are some alternatives available. One of these is called loan deferment; another is loan forbearance. It’s possible that you could qualify for a loan deferment given circumstances such as being enrolled at least half-time in an eligible postsecondary school, in a full time rehabilitation program, experiencing severe economic hardship or serving in the military on active duty during a war or other military operation. (Note: you can find more information about student loan deferment by clicking on this link)

You might be granted a forbearance if you are unable to make your loan payments because of financial hardship or illness, if you’re serving a medical or dental internship or the total amount you owe each month on your Title IV student loans is 20% or more of your total monthly gross income. In addition, there are some other criteria where you might qualify for forbearance and you can get information on them by clicking on this link.

Loan cancellation

It is also actually possible to get a student loan canceled. This means you would not be required to pay anything on the loan and, in fact, might receive a refund for any payments you had made.

As you might expect, the criteria for getting a loan canceled are very limited. They are:

1. You die or are disabled
2. Your school falsely certified that you would benefit from the education and you don’t have a GED or high school diploma
3. You didn’t get a refund where appropriate
4. Your school closed
5. You work in certain occupations after graduation (like teaching or some public service jobs)

Good help is available

National Debt Relief recently launched a program that will help borrowers find a debt relief program for their student debt. It provides a consultation service that will match your specific student loan situation, employment conditions and financial capabilities with the right debt elimination program. It will also help with the paperwork that will allow you to enter into such a program. National Debt Relief charges only a one-time time flat fee that will be placed in an escrow account. There is no maintenance fee or additional charges. They will only withdraw your payment once you’re satisfied with the paperwork and the debt relief program you were recommended.

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