December 11, 2017

Making Sense of Student Loans

Student loans are both a blessing and a curse for college. As much as they can help you pay for an education, they can also be confusing, complicated, and can put you in unnecessary debt if you don’t have some basic sense of how each works.

Common types of student loans:

  • Federal loans, including subsidized and unsubsidized loans
  • State loans
  • Private loans

Federal Student Loans

Federal student loans offer college students and parents some of the most affordable financial aid available, with attractive repayment terms and grace periods.

  • Subsidized loans are available to students with significant financial need. They are “subsidized” because the government pays the interest on the loan until students graduate or otherwise leave school.
  • Unsubsidized federal loans are not administered based on financial need and students are required to pay the interest as it accrues, or adds up.
  • The Stafford Loan is possibly the most popular and widely administered federal loan. This low-interest loan, requires no credit check, and comes in both subsidized and unsubsidized versions, making it valuable for nearly all students, undergraduate and graduate alike. It’s quite common for students to have loans for both subsidized and unsubsidized Stafford Loans, depending upon financial situation.
  • PLUS Loans are credit-based loans available to parents of college students and to graduate and professional level students.
  • The Perkins Loan program is a campus-based loan program available to limited numbers of students that can demonstrate exceptional financial need. Participating campuses have Perkins dollars available on a first-come, first served basis, so students should apply early for aid.
  • Federal Consolidation Loan is available for students that have multiple federal loans and may need to consolidate to save money and streamline their loan repayment.

Currently, all federal student loans are made available through the Federal Direct Loan Program—part of the U.S. Department of Education. To apply for federal student aid you can complete the FAFSA (Free Application for Federal Student Aid).

(As of July 2010, private banks and lenders ceased to administer any new federal student loans.)

State Student Loans

Many state higher education commissions provide college financial aid products, including scholarships and grants, as well as supplemental loans. You could very well find loans for undergraduates, graduates, and for students pursuing special career education such as teaching and nursing.

Private Student Loans

Private student loans are in limited supply, but where available they can help you pay the balance of a college tuition not covered by federal and state loans, and scholarships and grants. Make certain you borrow from a reputable lender and understand all terms of the loan before signing the master promissory note. Expect any private student loan to require you submit to a credit check.

Private college loans enjoyed a heyday just prior to 2007, thanks in large part to steep spikes in college tuitions and questionable “back door” relationships between some college financial aid officials and private lenders. Following an intensive investigation into the industry, many lenders ceased offering private student loans.

Student Loan Forgiveness – How To Erase Student Loan Debt

Erasing student loan debt is possible. Student loan forgiveness programs were started by the U. S. Government in order to give graduates a chance to get a good start in their new careers without having to worry about loan debt. This specifically refers to forgiveness of loans such as the Stafford and Perkins which are federally funded programs. For those who qualify, debts can be wiped away in exchange for service-based work.
Student Loan Forgiveness

There are many ways to become eligible for the loan forgiveness program. Participating in government-sponsored jobs or joining the Peace Corps or the military are three of the most common. These programs are often designed for those who have no specialty training. For professionals who are trained in the specialty areas, however, there are other program options.

Those with medical training, law degrees, or teaching credentials have forgiveness programs that allow individuals to work in their area of expertise where their services are needed most. One may become a public service lawyer or a teacher in a low-income school district and qualify for complete loan forgiveness. However, taxes are applied even on loan forgiveness programs.

Let’s say you work for a low-income school district. An $8000 loan which is forgiven will still show an additional $8000 annual income, which is taxable, for the year it was paid. Although this means extra taxes will have to be paid on this money, the benefits of reducing or eliminating school loans far outweigh the amount paid in a tax bill.

All of these programs require a commitment of time. For a teacher, public service lawyer, our public health medical official, a commitment of 10 years is typical. For those who elect to work in programs like the Peace Corps much less time is required to earn the credits needed to forgive loans. With the rising cost of tuition at the college and university level this is an important alternative that should be considered.

There are also instances where private student loans can also be forgiven. By contacting the lender and requesting information on the qualifications for eligibility for this type of program, one may find that their fear of being in debt for 30 to 40 years is erased in a very short amount of time. This allows one to begin life after graduation free from the constraints of a debt ridden a life.

The Department of Education Teacher Forgiveness Loan Program requires one consolidate their loan through the Direct Loan program. They still must make 120 payments, or 10 years worth, but the remainder of their debt is totally forgiven. It is the belief of program designers that paying for only 10 years instead of 30 is a good incentive for ensuring that qualified individuals serve for extended periods of time in the areas where they are most needed.

Changes in the law under the Obama Administration, called the College Cost Reduction and Access Act, may open up new opportunities for loan forgiveness for those currently in school or newly graduated. One of these changes may be an income-based repayment plan. There are stringent guidelines currently in place the primary of which is that a time commitment must be made at the inception of the agreement. Researching student loan forgiveness options will provide many students with a plan for how to repay a debt that often appears overwhelming at the onset.

Learn more, click here: http://www.mass.gov/?pageID=mg2homepage&L=1&L0=Home&sid=massgov2

How To Get Direct Student Loans

There are two primary sources of funding for federally funded direct student loans. One is the Federal Direct Loan program and the other is through the Federal Family Education Loan program. The direct loan program is run by the U. S. Department Of Education whereas the other program is serviced by individual lenders.

Direct Student Loans

Both programs include Stafford loans, PLUS loans, and Federal consolidation loans. Some colleges and universities participate in one program whereas others will utilize services provided by the other. More colleges today, however, are using both sources of funding as the need to find alternatives for covering the every-growing costs of higher education continues.

With the Direct Student Loan program one works directly with the Federal government’s office that administrators that program. This U. S. Government managed and operated loan program has flexible repayment terms and can accommodate many needs. Stafford loans, PLUS loans, and consolidation loans are all included. The account is managed online and has fixed loan fees and interest rates.

To qualify for this type of loan students must be U. S. Citizens, eligible non-citizens, or residents. These loans are primarily designed for students in lower socioeconomic income brackets who have never defaulted on a loan before. Therefore, it’s important to check in advance what the income eligibility criteria of the direct loan service as well as the school are as each will have their own scale.

Applying for these loans is fairly easy nowadays with the addition of online services. One must have completed the FAFSA and filed it at the earliest date possible. High school counselors as well as college financial aid officers are more than happy to assist in the completion of documentation required to qualify for this program. They will also inform students of the supporting evidence required that will need to be submitted in order to complete the process.

Once accepted to a college or university award letters will be issued. These will include an itemized list of the types of financial aid available to an individual. The direct Stafford loans or PLUS loans require completion of a Master Promissory note as well. This is a legal contract between the Department Of Education and the student. The Department Of Education serves as the lender and they will be the one to whom they debt is repaid.

As with most student loans, that direct loan comes with a six-month grace period after graduation. There are four repayment plans from which to choose. With a standard plan there are fixed monthly payments over a 10 year period. An extended plan is designed for those with $30,000 or more of debt. Repayment is established with fixed or graduated amounts over a 25 year period. With a graduated repayment plan payments are made within a 10 year period, but the payments increase over the life of the loan. Finally, and income-contingent loan is reconfigured annually based on income. As an individual’s income increases, so does this size of the payment.

Many students opt to consolidate their loans once they graduate in order to make repayment more manageable. The newest option available is the Income-Based Repayment plan. This has many advantages that will help to ensure individuals are only paying as much as they can afford based on the income earned. Direct student loans have helped many complete their educational goals as well as survive the transition from graduate to career professional. The best place to begin, however, is with research into the options available.

Additional resource links: http://www.direct.ed.gov/student.html

What You Should Know About Student Loans

There are many people who would like to continue their education in order to achieve career goals as well as ensure their preferred lifestyle can be enjoyed. Unfortunately, many are still unaware of the student loans available which can ensure that individual dreams come true. It is easier today than ever to finance higher education if one knows where to look.

Student Loans

Government loans and personal loans all serve to assist those who wish to continue their education. Often this involves an easy application process and, possibly, writing an essay identifying plans for the future, in order to qualify. Those from lower economic incomes often qualify more easily than those from higher incomes. However, money is available regardless of the financial status of the family.

Pell grants and Stafford loans are government funded. By completing an online application and submitting requested paperwork, money can be made available for the next school year. It’s important to note with these types of loans and grants that stringent timelines as well as guidelines must be followed in order to qualify for these funds. However, they not only frequently cover the cost of tuition, books, and school fees, but they also often add additional money to pay for transportation, housing, daycare, and other expenses.

Pell grants are money that, often, does not have to be repaid. One of the most common is associated with teacher education programs. Upon graduation if one works in a socio-economically depressed area for at least five years, funds borrowed through this source are waived for repayment. This makes this source of funding extremely desirable.

Stafford loans are also government loans, but these must be repaid. These also cover the cost of tuition, books, and other expenses that may be charged by a college or university. With the cost of higher education today, one should use this as well as personal loans only as a last resort. It is not uncommon for students to end up with bills that range from several thousand dollars to several hundred thousand dollars at the end of their journey.

Personal loans are also not a first choice. For those who come from families with higher incomes, however, this is often the only alternative. Frequently, interest rates will be higher and repayment will be based on a shorter duration resulting in higher payments. Additionally, with governmental loans, repayment begins in January following the year one graduates. For example, if one graduates in June repayment will begin the following January. Studies have shown that this is the length of time it generally takes to get a job in the subject of interest.

Many applications can now be completed online. This makes it much easier for the agency to process as well as make it easier for the student to complete. When completed, individuals are notified by mail or e-mail for confirmation of the information contained therein or asked to make corrections then resubmit.

Governmental loan applications are due no later than March 1st. For those who are graduating from high school in June and are interested in completing their education through a college or university, taxes must be completed prior to that date in order to complete the online application. The final application must be submitted no later than that date determined by the governmental agency in order to have the money by September. For those graduating in June, it’s never too early to begin thinking about how to best utilize student loans to finance one’s future.

Learn more, click here: http://www.fafsa.ed.gov/

Student Loan Consolidation Will Save You Money Every Month

Graduating from college is a thrilling time in the life of many people. However, although many students may be aware of the accumulation on the balance of their student loan, they rarely think about the payback period. Student loan consolidation provides many ways to ensure that this money owed does not become a millstone around one’s neck.

Student Loan Consolidation

By understanding the consolidation process one will find that there are many ways to save money as well as make repayment more manageable. Taking all the money owed from schooling and putting it into a single loan ensures lower payments as well as provides many other benefits. This move will also lower ones debt-to-income ratio as well as raise credit rating scores. This does, however, require refinancing the loans.

One of the problems for student loans is that they are under a variable rate interest system. This keeps the monthly payments in constant fluctuation because the rate is set by the governments. With a consolidation program, however, one can lock in a low fixed interest rate that cannot change through the life of the loan. Although student loans originally were some of the lowest available, on July 1st, 2006, the government raised their rates significantly.

Consolidation of student loans works by stretching payments over a longer period of time. This can reduce payments as much as 60%, but it’s important to remember that the interest paid over a longer period of time will result in a higher payback in the long run. Much depends on the lender selected as they often have different types of loans available, incentive plans, and requirements that must be met to qualify for the lowest rates. Even something as simple as automatic payments from a checking account can result in great savings.

Although most students are unaware, because it doesn’t show in school financial records, each term or semester is actually a different loan. Upon graduation from a four year college, it would mean 16 different loans have been secured and would show on a credit report. Although this money is important when paying for college, the effects the accumulated loans can have on one’s credit become very apparent when trying to buy that first car or home. Through the consolidation process all student loans are close and replace by a single loan for the total balance. This not only reduces the monthly payment, but also lowers the debt-to-income ratio.

One of the advantages of refinancing a student loan is the fact that it is extended over a much longer period of time which, by itself, will lower the monthly payment. When looking to finance at a later point in time, this debit-to-income ratio is used along with credit scores to determine creditworthiness. A favorable ratio can also help to ensure lower interest rates on future purchases which can save thousands of dollars in the long run.

Upon graduation many students find a difficult transitional period. Suddenly there is no extra student loan money to depend on for the basics. With careers just beginning and expenses high, many graduates turn to high interest credit cards to sustain them until they become established. On average a college student carries no less than six credit cards that have a combined balance of around $2100 during school. Upon graduation many students max these out in a very short amount of time. These not only carry higher interest rates, but also limit the possibility of ensuring good credit upon graduation.

By pursuing student loan consolidation, credit card dependence will lessen freeing up hundreds of dollars on a monthly basis. This will not only allow the borrower to breathe a little easier, but have the cash needed to make ends meet and possibly even enough left over to apply additional money to the original loan each month. Paying $200 per month above the minimum can change a 30 year loan into a 10 year loan which will ensure the future is debt free. Consolidation itself is fairly simple and easy because the majority of applications are now taken online. It’s important, however, to research lenders who are offering this option as, in many cases, it’s a one shot deal.

For more information, click here: http://www2.ed.gov/offices/OSFAP/DCS/consolidation.html

How To Get Private Student Loans

For students who do not qualify for scholarships or Federal Financial aid, private student loans are a viable option for those who qualify. These are non-Federal monies that are designed to help with school expenses and often supplement funds received through other sources.

Private Student Loans

Traditionally, for those who are U. S. Citizens or permanent residents, enrolled in a lender-eligible school, and are creditworthy or have a creditworthy co-signer, up to 100% of school costs can be covered. This includes tuition, fees, books, rent or room and board, transportation, trips home, food, and even a laptop computer. It’s important to remember, however, that eligibility requirements often vary between lenders.

One of the hardest things for many students to do when utilizing this option is to meet the requirements for credit worthiness. Since this is a credit-based loan, a credit history as well as information on employment and annual income is required as part of the application process. This can be problematic for those still in high school who have yet to establish a credit history. Many students must rely on a co-signer who will take responsibility for the loan should it not be repaid as agreed by the student.

There are many advantages to private loans over other options. Versatility and flexibility are two of the primary reasons many students opt for this type of loan. When one is away from home there are often unexpected expenses that come up during a term. Frequently, colleges even increase tuition during the school year. As opposed to governmental loans which have a set amount of money available for the entire year, these loans can pay all expenses related to education yet one has the flexibility to apply for more when needed.

Another advantage is that any student who can prove themselves trustworthy can be found eligible if meeting all the other requirements. They are not, therefore, limited two funds available based solely on financial need. Of course, for those who have not yet established a credit history finding a co-signer who is willing to support this endeavor greatly enhances the chances of being approved.

There is much free-money available to support educational pursuits which should be explored before private loans are sought. Even governmental financial aid has money which does not have to be paid back in certain instances. This is important to recognize as private loans are often more expensive in the long run.

The majority of private loans are based on variable-rates, which means the interest rates while be quite different depending on the lender. For these types of loans interest can be adjusted monthly, quarterly, annually, or at other intervals that have been determined by the lender. Often this is affected by an individual’s creditworthiness. Borrowers determined to be more creditworthy generally have lower interest rates.

In today’s world good jobs require higher education. Fortunately, money is now available through many sources to ensure that one is able to achieve their dreams. This process does require dedication and commitment as the application process is anything but easy. Beginning the process with thorough research of the governmental as well as private options available is always a great beginning.

Additional information at: http://financialaid.nd.edu/loans/graduate/private.shtml

Federal Student Loans – How Much Can You Get?

One of the most commonly used forms of financial aid for students pursuing higher education is federal student loans. Many high school students are reluctant to explore this alternative for various reasons. However, when one understands how much money is available, it makes a great deal of sense to research this option.

Federal Student Loans

The Federal student aid program was designed to ensure that students, regardless of socioeconomic income, could pursue higher education. This opened many opportunities or those from minority groups, students with disabilities, women, and other groups who previously were denied access to higher education.

How much can be received by individual students varies depending on several factors. Subjects studied, length of programs, grade point average, SAT scores, and socioeconomic status have all affect the amount of funding available to each student. One example would be comparing a nine month vocational course, which would qualify for much less, than a doctoral program.

Funding is often based on the subject study. For those completing degrees which require four years or more of education, much more money will be made available than for those who are completing a two year degree or less. It costs much more to educate a teacher, for example, than it does to complete a cosmetology degree. It’s important, therefore, when considering a loan to determine the total cost first based on this subject studied as well as the length of the program and degree to be earned.

If going to a two or four year college or university, the length of the program will vary depending on the type of degree desired as well as the subject matter. In some coursework, such as teaching, an extra year is required in order to provide on-the-job training. Loans will take this into consideration and ensure that money is available until the certification is received even after the degree has been earned. For those planning on attending post-secondary education, therefore, it’s important to talk to counselors in order to ensure that funding will be available until the goal is reached.

While in high school, especially during the senior year, it’s important to look to the future. This can be very difficult to do with the activities, events, and excitement surrounding this final year. Not only do many applications need to be completed for financial aid and college entrance, but grade point average needs to be maintained at a 2.5 or better and SAT scores need to reflect that one could be successful at the college level.

Of primary importance is the income level of the family. In order to increase equity at the college level, loans take into consideration the family’s annual income. Today college is a viable alternative for everyone. It’s important to remember, however, that the amount made by the family each year must be proved. This is done through family taxes for which copies of the forms will be requested by the lender before money is set aside.

No longer is higher education limited to the rich and wealthy. Today’s federal student loans are designed to ensure that those with the desire to excel have the opportunity to achieve their dreams. Maintaining a solid GPA, scoring well on SAT tests, carefully choosing degree programs as well as knowing the length will help determine how much money will be available to students when they apply. It’s OK to change your mind along the way. The important thing is to get started with the application process as early as possible.

Find out more: https://studentloans.gov/myDirectLoan/index.action