Unable To Repay Student Loans
If you cant pay the full amount due on time or have to miss a student loan payment, your loan may be considered delinquent and you may be charged late fees. Contact your loan servicer immediately for help, and ask them about your options.
Learn about COVID emergency relief for federal student loans that has been extended through September 30, 2021.
Consider Switching To A Graduate Account
Once you leave university or college, you have the choice to keep your student account or switch to a graduate account.
You dont have to stay with the same bank, so its worth shopping around for a better deal.
Your first step is to switch to a graduate account to give you time to repay your student overdraft.
Find out how long your bank will give you to repay your overdraft and when the authorised limit will be reduced.
In most cases, your overdraft allowance reduces slightly every year.
Use this as an opportunity to rebalance your budget after you graduate. Once youve paid off your student overdraft, you can switch to an account that offers a switching bonus or better interest for savings.
When Refinancing Becomes The Ideal Choice
The simplest way to define refinancing is when you acquire a new lender to clear off your existing student loan debts. So you dont repay your initial debts because youve already paid them. Instead, you now make payments to your new lender who cleared off your first loan. Sounds simple, right?
So why should you consider refinancing?
There are two reasons to consider:
Refinancing becomes reasonable when the rate is more favorable than the rate you previously had. If you refinance with a poor rate, you could owe a lot of money, so dont go ahead with it.
The only time we recommend you refinance with a bad rate is if youre mainly focused on getting a low repayment. Youll take a long time to pay back your loans, but your payments will be small. We strongly advise that you avoid this option at all costs unless you dont have any other alternative. Even still, call us, and we might help you find a way: 800-881-0687.
In summary, if you have a private student loan, you should refinance when theres a better interest rate, and you can save a lot of money. If you have a federal student loan and want to refinance, you can do it, but remember that youll no longer be part of the federal plan.
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Do I Qualify For Student Loan Forgiveness
The main type of forgiveness for school loans comes through the Public Service Loan Forgiveness Program. This applies to borrowers who work in a public service profession, such as nursing, teaching or as a first responder.
This is the lengthy process that public servants must follow in order to qualify:
You cannot switch to a private sector job during the 10-year repayment period. After your loans are forgiven, you can change jobs without worrying about this.
There are other forms of loan forgiveness that apply specifically to military Service Members and Veterans. There are also forgiveness options if you work in the Peace Corps, AmeriCorps or as a volunteer through the VISTA program. These options only provide partial loan forgiveness up to a certain dollar amount, unlike PSLF that currently has no cap.
Pay Interest During Grace Periods
Paying interest during your loan grace period is a great way to prevent it from capitalizing, especially for federal student loans. With federal student loans, students have a six month grace period after leaving college, graduation, or falling below part-time enrollment before their loans come due. During this time, though you dont have to make payments, interest is still accruing on your unsubsidized loan funds.
At the end of your grace period, that interest will capitalize on your loan and you will now be paying interest on this new balance. If possible, paying the interest off during the grace period will prevent capitalization and keep your loan balance lower.
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How Parents Can Help Students Manage Debt
Whether or not parents choose to help their children pay for school, there a few things they can do to ensure their children are set up for success by the time they enter a postsecondary program.
- Talk with your children early. Once a child is in high school, its wise to open up the discussion about postsecondary options, including types of programs and the true financial cost of a degree or diploma.
- Be open to an array of postsecondary opportunities. It may be exciting for parents to imagine their children attending an Ivy League school or even just an out-of-state program, but its important that parents and children have an honest and open conversation about realistic opportunities and objectives. Is there a comparable program closer to home that may be more affordable? Is living at home an option during college? Is a four-year degree necessary for the career the student is pursuing? Could a community college program or a trade school offer the same opportunities?
- Encourage responsible saving. If their children have a part-time job in high school, parents can encourage or require them to put aside a part of their earnings to help pay for college. After all, its been proved that students who have a financial stake in their education are more likely to take their education seriously.
Parents who are looking to support their children financially through college may consider having a 529 plan in place and/or applying for a PLUS loan.
How To Overcome Crippling Student Debt
The Department of Education has basically become the largest bank.
My friend and business partner Jamion Berry was in corporate America the bulk of his career. He was climbing his way up the corporate ladder and was told a number of times that he didnt have quite the right business acumen to continue that trajectory so pursued his exec MBA. 6 figures in debt later and he realized he wasnt going to find the answers to ultimate dream if he stayed in corporate so decided to hire himself!
Our student loan forgiveness program is enabling him to have a significant portion of his debt forgiven which will propel his entrepreneurial journey even more quickly by keeping more of his hard earning income in his OWN pocket. Corporations have been bailed out by the government programs for decades. It warms my heart to be able to offer the same thing to hard working American families.
We were not only able to help Jamion with this burden of student loan debt but through his partnership with us and our financial education platform, we are helping him OWN his power with money and becoming financially educated.
In the future when Jamion has new major life financial decisions, he will be educated and make better informed choices.
I love what I do and I love arming families with the tools to be their own boss, create their own stimulus check and educate our future generations about how money works.
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Debt Burden For The Class Of 2018
The Institute for College Access and Success issues a detailed annual report concerning student loan debt. Data for the class of 2018 is here. Relevant highlights of the report for the class of 2018 are:
- Borrowers owed $29,200 on average
- Nearly two-thirds of college seniors, or about 65% who graduated from public and private nonprofit colleges in 2018, carried college debt into their post-graduate world
- Connecticut held the dubious honor of the highest debt load $38,669, while Utah had the lowest burden $19,728
- California is considered a low-debt state because its students graduate with $22,585 in debt. Presumably, the low-cost in-state tuition for many California colleges and universities reduced the average amount of debt a student leaves school with
- If there is any good news, debt levels only increased 2% from 2017
Typical interest rates for educational loans run from 4.5% to 7%, with a term of about 10 years. If you have the average debt of $29,200, you will be required to fork over $324 each month and can expect to pay $9,702 in interest, assuming a 6% interest rate .
I doubt that anyone is surprised by the high cost of formal education . . . weve been hearing about soaring college costs for some time. The increase in costs, though, is sobering and begs the question of whether the current model still makes sense. No wonder so many young adults today graduate with both a degree AND a heavy debt burden. Its a far cry from when I attended school
How Are Monthly Payments Calculated
The average monthly payment on a student loan is $393.11 But how do loan companies come up with your monthly payment anyway?
That not-so-magic number is based on things like the total loan amount, interest rate, number of years it takes to pay the thing off, and any other requirements the lender of that loan might tack on .
Lets look at some averages and then some examples of how they affect your total payoff amount in the real world.
Dont want to crunch the numbers on a yellow notepad? Good newsyou dont have to! Just pop these numbers into our Student Loan Payoff Calculator. If youve got $38,792 total debt at a 5.8% interest rate and youre making a $393 payment each month, youll have that loan holding you down for 11 years.
But wait, the numbers get worse . Because at the end of those 11 years, youll have paid $14,052.09 in interest alone. Thats right, your $38,792 loan will actually cost you $52,844.09 when its all said and done. Ouch.
And most college grads arent raking in the dough either. Recent college grads earn an average salary of $53,889.16That means theyre bringing home roughly $3,400 a month . So, a $393 student loan payment will eat up around 11% of their monthly take-home pay!
Dont even get us started on what you could do with that kind of money. Talk about living and giving like no one else!
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Student Debt At $14 Trillion
Student loan debt isnt just a problem, its a crisis, but theres a good side to this crisis. Economists call student loans good debt, because they provide educational opportunities that otherwise might not be affordable.
Unfortunately, many graduates head out in the world with alongside their student loan debt.
Students owe an estimated $1.31-trillion for loans in 2017. Approximately $4,000 in student debt is accrued every second. The average student debt for a 2016 college graduate was $37,172 .
Living with student loan debt is not easy. Want a diploma? Its an expensive proposition.
According to 2016 statistics from the U.S. Department of Education, more than 20.5 million students are enrolled in college and the average tuition for in-state students at four-year public schools was about $9,410. For private schools, the total was about $32,405.
Add in another $11,000-$13,000 for room and board and you can figure its going to run you at least $20,000 a year to go to school and thats just for state colleges and universities. If youre aiming for the most elite schools, the costs are approaching $60,000 per year.
While much of a college students debt comes through loans, credit cards leave a dent in the balance sheet. According to 2016 data gathered by , 76% of people who had student loans also were carrying a credit card balance. In fact, credit card debt grows faster among young adults than any age group.
See the problems? Now, what can be done about them?
Apply For Scholarships Bursaries And Grants
Applying for scholarships, bursaries and grants to fund your education is honestly the best way to go about it. Education can be so expensive that it can seriously deter your future. Therefore, these forms of financial aid can be an opportunity unlike any other. We recommend every student consider applying for one of these funding options. To get into more details about the perfect option for you, check out our articles on scholarships or have a look at our scholarship programs.
Students may think that scholarships are for studentswho have really good academic results and that is partially true, but there arealso options such as bursaries that are provided based on the financial need ofthe student, not grades.
In addition to scholarships, you can start savingbefore starting college or university. When you are in high school you are mostlikely living with your parents so you can benefit by not having to worry aboutpaying for your basic needs like living expenses, food and travelling. Sinceyou do not need to pay for these expenses you can try finding a part-time joband start saving. You can even save from your monthly allowance, if you areprivileged to get one. Just think about it like this every penny you savetoday is a penny less than you will need to borrow in the future.
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Federal Student Loan Consolidation Vs Refinancing Vs Repayment
Student loans dont exactly function like your other debts. In turn, relief options like consolidation and refinancing function a little differently, too.
For most debts, you can refinance your loans to achieve a lower interest rate. The new rate that you qualify to receive depends on your credit score. So, if you have better than when you took out the loan, you get a lower rate. But in the world of student debt, that logic only applies to private loans.
For federal loans, rates are currently set based on the 10-Year Treasury Note Index. New rates are set on June 1 of every year. So, whether you have good credit or bad credit or no credit, everyone gets the same rate. If you use a federal consolidation loan or federal repayment plan, your servicer always sets the rate by taking a weighted average of your original loans.
Consolidation also works differently. When you consolidate credit card debt, one of the goals is usually to reduce or eliminate interest charges. But that doesnt apply here. Instead, Federal Direct Consolidation Loans do three things:
Using a Federal Direct Consolidation Loan is often the first step in setting up a repayment plan.
Strategies To Pay Off Student Loan Debt Faster
The video panel included: Andrew Josuweit: CEO of StudentLoanHero.com Shannon McNay: Director of Content at MyBankTracker.com Rod Griffin: Director of Public Education at Experian Mike Delgado:Director of Social Media at Experian.
We also featured student loan pay off tips on Snapchat with 4 Strategic Ways to Pay Off Student Loan Debt Faster.
Here are some tips we discussed in more detail
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Hit Higher Loans First
As with any debt-payoff strategy, it is always best to pay off the loans with the highest interest rates first. One common scheme is to budget a certain amount above the total monthly required payments, then allocate the overage to the debt with the biggest interest bite.
Once that is paid off, apply the total monthly amount on that loan to repaying the debt with the second-highest interest rate. And so on. This is a version of the technique known as a debt avalanche.
For example, suppose you owe $300 per month in student loans. Of that, a $100 payment is due to a loan with a 4% rate, $100 is due to a loan with a 5% rate, and $100 is due to a loan with a 6% rate. You would plan your budget with $350 to pay off your student loans every month, applying the extra $50 to the 6% loan.
Once it’s paid off, take the $150 used to pay the 6% debt each month and add it to the $100 being used to pay the 5%, thus paying $250 each month for the loan with a 5% rate and speeding up that payoff. Once you wipe off that loan, then the final loan at 4% would be paid at the rate of $350 per month until all student debt is paid in full.
Fear #: Never Having Enough Money
If you grew up in a household that was barely getting by, you might feel anxious about running out of moneyeven if youve achieved financial stability as an adult. Memories of missed rent payments, maxed-out credit cards or empty bank accounts can leave a lasting mark. I have friends who grew up in homes where money was scarce, and even though theyre financially comfortable today, they still overlook what they want on a menu and order the cheapest thing, says Leong.
The fix: If you have concerns about being able to meet your short- or long-term financial goals and youre not sure theyre rational, you could probably benefit from an outside perspective. It goes back to getting professional advice, because that objective opinion can really deal with the anxiety, says Dilys DCruz, vice-president and head of wealth management at Meridian. You might need someone to sit down and look it all over and say, youre really not in that bad of a shape here, or heres how to get you on track. If you dont already have a savings plan, youll need to figure out how to pay yourself first. For starters, this may involve enlisting a financial planner or money coach to help you zero in on your savings goals and determine how much of your discretionary income you can put away, and then setting up automated deposits into a high-interest savings account.
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