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5 Ways To Have Your Student Loans Forgiven

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And Which Forgiveness Paths Could Close Soon

5 Ways To Have Your Student Loans Forgiven And Which Forgiveness Paths Could Close Soon
Does your student loan situation look hopeless? Don’t give up hope yet. Consider these alternative repayment programs that can provide manageable loan payments and lead to forgiveness of a portion of your loan in exchange for some form of service.

1. Public Service Loan Forgiveness (PSLF)

As it stands, the PSLF program allows those working in government organizations and certain non-profit organizations to achieve loan forgiveness.

To qualify for forgiveness, borrowers must make ten years of qualifying payments under one of the income-driven repayment (IDR) programs offered by the Department of Education.

These programs are popular with certain professions like police or fire department employees and public defenders where collegiate expenses aren’t in line with the pay provided by a public service position.

Legislative Changes

The 2018 Consolidated Appropriations Act, which was passed in March and funds the government through September, has created a one-time-only $350 million expansion of the PSLF program.

This fund will cover the cost of canceling the loans of public servants who unknowingly selected non-qualifying repayment plans.

These loans will be forgiven on a first-come, first-serve basis until the fund runs out.

Watch for Updates

The Department of Education is currently assessing the full impact of the Act on PSLF, so keep checking the official site for the latest updates.

Be warned: Although the latest spending bill ignored many of President Trump’s proposals, his administration still seems intent on eliminating the PSLF program eventually.

It isn’t clear whether this would also include eliminating the corresponding Teacher Loan Forgiveness program aimed specifically at teachers in low-income districts or service agencies.

2. IDR Programs

As with PSLF, the IDR programs may be subject to change within the next budget. Currently, there are four federal programs that generally offer loan forgiveness after twenty years of regular payments that represent 10 percent of your discretionary income.

The four are the Revised Pay As You Earn plan, the Pay as You Earn plan, the Income Based Repayment  plan, and the Income Contingent Repayment plan.

However, the proposed Trump budget seeks to combine all these programs into one program, changing the monthly payment to 12.5 percent of discretionary income but forgiving the remaining loan balance after fifteen years.

3. State Student Loan Forgiveness Plans

If the federal government won’t help you, perhaps your state can. Currently, there are only five states that do not offer at least one form of student loan forgiveness plan (Alabama, Connecticut, Tennessee, Utah, and West Virginia).

Texas leads the way with nine different programs targeted at specific groups such as physicians, nurses, and educators. Check the options in your state to see if any state programs apply to you.

4. U.S. Military Service

The Army, Navy, Air Force, and National Guard all have a series of programs for loan forgiveness for active-duty military members and veterans.

While some loan forgiveness programs may end up on the budgetary chopping block, it seems highly unlikely that the current administration – or most administrations – would accept cuts in forgiveness programs within the military.

If forgiveness does not apply, the military also offers deferment options on subsidized loans during active duty service.

5. Employer Programs

Some larger employers offer partial student loan repayment as a recruiting tool. Only 4 percent of employers offer these programs, according to an estimate from the Society for Human Resource Management — but if you find such an offer, take full advantage of it.

In special circumstances, other loan forgiveness programs may be available. If your school closes prior to your graduation, you may be able to have the loan discharged.

Students at for-profit institutions that engage in fraudulent or illegal practices may also qualify for student loan discharges.

Remember Taxes

While forgiveness can make a huge difference in your finances, don’t forget about taxes. Except for the PSLF and Teacher Loan Forgiveness programs, loan amounts that are forgiven are classified as taxable income for that year — and your tax bill may skyrocket as a result.

The President could suggest to do away with the PSLF and IDR programs again in the next budget proposal later this year.

Keep up with the latest developments to see what options are available to you – and make sure that you make your existing student loan payment on time to maintain eligibility for any forgiveness programs.

This article was provided by our content partners at MoneyTips.com. Photo ©iStockphoto.com/DanielBendjy

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Jumbo Student Loans Increasing — What Indebted Students Should Do

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Jumbo Student Loans Increasing What Indebted Students Should Do
Jumbo debt is usually associated with commercial borrowing along with large residential mortgages — not something that college students normally take on. Until now: Jumbo student loans account for 17 percent of academic debt.

There’s nothing inherently wrong with large student loans, and historically the default rate has been low on such loans. People who borrow large sums of money usually go for advanced degrees that translate into higher salaries.

However, a February 2018 study by the Brookings Institution found that large-balance student loan borrowers have increased dramatically in recent years – and the typical profile for such borrowers has changed.

Large Balance Borrowers Soaring

In 1992, only 2 percent of student loan borrowers owed over $50,000 upon leaving school. In 2014, that number rose to 17 percent. Just over half of total student loan debt is held by this small percentage of large-balance borrowers.

Default rates are low in this group (typically around 4 percent), but the consequences are large. Student loan borrowers with balances over $50,000 account for almost 30 percent of defaulted student loan dollars.

Large-balance borrowers aren’t making much progress on repayment. The median borrower in this group from 2010 owes 5 percent more on their debt than they did after leaving school.

Demographics and Deferments

According to the Brookings study, the change in borrower demographics and the increase in deferments and forbearances are largely to blame.

The share of large-balance borrowers attending for-profit schools – where the eventual salaries are less likely to cover borrowing costs – increased from 2 percent of borrowers entering repayment in 2000 to 15 percent in 2014.

If you are struggling to deal with a jumbo loan, these statistics don’t surprise you. Your greater concern is how to get out of the mess you’re in.

Limited Options

For borrowers with large balances and lower income levels – and no reasonable expectation of an income large enough to cover your debts – the options are limited.

Deferment and forbearance may help in the short term, but they only delay the inevitable.

Bankruptcy is not generally an option for student loans. A sound repayment strategy is the answer.

 

“If you’re in a tough position income-wise, though, it can make sense to start by getting on income-based repayment if you qualify,” said Miranda Marquit, a money expert with financial education website Student Loan Hero.

She continued, “While it’s not the best long-term strategy, it can at least help you get your feel under you and improve your cash flow while you work on your repayment strategy.”

You’ll need to reassess your budget, cutting spending to bare minimums and reducing other forms of debt.

Create Surplus

Create a monthly surplus and apply that to the student loan with the highest interest rate first. Make sure your student loan servicer is applying any extra payments per your wishes.

“You might actually have to call your servicer and specify that extra payments should go to principal,” Marquit said.

She continued, “Many servicers just apply to the next month’s payment, including next month’s interest. It’s more effective if the entire amount of your extra payment is reducing your principal.”

It’s important to avoid credit card balances during the repayment period. You’re going in the wrong direction if you’re accumulating credit at 16 percent interest or higher to pay off a student loan with a single-digit rate.

Loan Forgiveness Programs

If you have federal student loans, see if you qualify for income-based repayment plans or the Public Service Loan Forgiveness Program (PSLF).

Both programs provide avenues for forgiveness of remaining debt after 25 years of payments – and in the case of PSLF, the forgiven amount isn’t considered to be taxable income.

PSLF requires planning, since you must be working full-time for a qualified employer (government positions at any level along with certain non-profit jobs) and make ten years’ worth of qualifying payments. If you find this path appealing, find a suitable job and apply now.

Can You Refinance?

Refinancing may be an option, but only if you can secure a better rate – and if you are burdened with high student loan debts and are having trouble paying it off, the odds of qualifying for a lower rate than your student loan are grim.

“You need good credit and a solid income to qualify for many refinancing programs. They can be a great tool, but you might not meet the criteria,” ,” Marquit said.

“Instead, it’s important to carefully evaluate your education options before settling on school and then being aggressive in paying off debts when you finish.”

Jumbo debt should only be incurred when you’re likely to have a future jumbo income to pay it off. Make sure that you look at college as a value investment and not just a reason to avoid the real world for several years.

This article was provided by our partners at moneytips.com. Photo ©iStockphoto.com/AldoMurillo

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The Geography of Student Loan Debt

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Map Shows Patterns of Educational Debt

The Geography Of Student Loan Debt Maps Show Patterns of Educational Debt
America’s outstanding student loan debt reached $1.52 trillion in the first quarter of 2018, according to information from the New York Fed. Have you ever wondered whether a significant amount of that debt is located in your city – or even in your zip code? Wonder no more.

The Mapping Student Debt Project at the Washington Center for Equitable Growth used extensive data from Experian and the annual American Community Survey conducted by the U.S. Census Bureau to create a color-coded interactive student loan debt map.

Map filters allow you to display color-coded average student loan balances, delinquency rates, and median incomes for more than 41,000 zip codes in America.

Joint Venture

This interactive is a project of the Washington Center for Equitable Growth with data made possible by Generation Progress and the Higher Ed, Not Debt partners.

You can hover the cursor over a particular zip code to find information on the average student loan balance and delinquency rate for that zip code, as well as the median income.

Racial demographics may also be included. If you prefer, you can type in your zip code or city and the map will zoom in on your designated area.

Compare Factors

What’s the value in such a map? By comparing all three factors (loan balances, delinquency, and income), researchers can distill useful relationships from the data.

You may think that higher student loan balances lead to higher delinquency rates, but the data shows that lower median income is a far greater factor.

Higher loan balances correlate more to high median incomes – suggesting that debtors with higher balances used their degrees to acquire higher-paying jobs that make repayment easier.  (Think of doctors and lawyers, professions that have high educational costs but great returns on investment.)

Delinquencies in Lower-Income Areas

By the same logic, the data shows lower-income areas are more prone to delinquencies even though loan balances are often lower as well.

Discrepancies tend to stand out in metropolitan areas as affluent zip codes mix with less affluent ones. The map of Washington, DC provides a clear example.

Zip codes with relatively low loan balances mirror the areas with low median incomes and clearly stand out as high delinquency areas on the delinquency map.

Rural Areas

Rural areas generally follow the same rules, but smaller populations can skew the data.

For example, the category of “astronomical” loan balances – constituting anywhere from 100 percent to a staggering 724 percent of the average loan balance – is often found in rural zip codes such as 67862 in far southwestern Kansas, 89412 in the northwestern corner of Nevada, and 59025 on the Montana/Wyoming border.

All three zip codes also have high or extremely high delinquency rates – possibly the result of a few large and delinquent student loans in a small population.

West Coast

Similarly, the West has a scattering of extremely high median incomes in sparsely populated counties – likely due to large ranches that cover a large portion of the county.

Overall, the data shows that student loan burdens are spread across all income levels, but the percentage of gross income consumed by student debt ranges from approximately 2 percent in the high-income areas to 7 percent in areas with median incomes of $20,000.

That shouldn’t be surprising – but what it does suggest is that too many residents of low-income areas did not receive significant value for the lower amounts they borrowed.

Either they didn’t graduate or couldn’t parlay their degree into a suitable paying job.

Policy for Debt

Anomalies aside, the Mapping Student Debt project provides useful information that can help policymakers devise innovative ways to address student loan debt.

In addition, it can let you know if you’re keeping up with your neighbors when it comes to student debt.

The Geography Of Student Loan Debt Maps Show Patterns of Educational Debt

This article was provided by our content partners at MoneyTips. Photo ©iStockphoto.com/baona

If you enjoy reading our blog posts and would like to try your hand at blogging, we have good news for you; you can do exactly that on Saving Advice. Just click here to get started.

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5 Worst Mistakes of Online Borrowing

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5 Worst Mistakes of Online Borrowing
Getting a personal loan online has grown into a multi-billion-dollar industry, with lenders ranging from individuals in peer-to-peer programs to big banks.

Although countless Americans have been helped by the ability to borrow money without leaving home, others have hurt themselves by being ill prepared for the process.

“Because the loans are being evaluated remotely, the chances of making a mistake are increased,” warns Todd Nelson, business development officer of LightStream.com, which offers personal loans ranging from $5,000 to $100,000 in value.

Nelson reveals the five worst mistakes you can make when borrowing money online.

Ignoring Inaccuracies on a Credit Report

Credit bureaus constantly receive information about your credit use and history, contributing to a profile that lenders consider to evaluate creditworthiness.

Says Nelson, “Your credit report indicates important items like, how much revolving debt are you carrying? Are your auto payments up to date? Any past bankruptcies? Is your mortgage being paid on time? The answers to these and other data points impact whether you’ll be approved for a loan and how much you’ll be charged in interest rates.”

Typically, the stronger and deeper your history of good credit, the less you’ll be charged to borrow funds.It is important that you look at your credit report to make sure that your record is accurate before you apply.

Work with the bureaus to fix any mistakes. A few small errors can mean the difference between approval and denial, or you may have to pay a higher interest rate than you should to fund the loan.

Not Shopping Around

Counsels Nelson, whose firm can fund loans on the same day of application, “The initial step many consumers take in looking for an online loan is to visit a search engine and then click on the first link that pops up.”

It’s important to research several options in order to secure the best deal. Pay attention to the details of the offer.

Rates and fees are separate items that contribute to the annual percentage rate (APR) in a loan.

“If you choose us or any other lender, make sure that you understand both rates and fees,” said Nelson. That leads to the next mistake on the list.

Not Locking in the Best Rates and Terms Combo

The smart financing strategy is to lock in the lowest APR over the shortest payback period.

Use an online calculator to help figure out the right balance of affordable monthly payments over time. Paying back your loan quickly may demand higher monthly payments, but your overall financing costs can be significantly lower in the long run.

Also, make sure your lender does not charge pre-payment penalties. That leads to the next mistake.

Skipping the Fine Print

Some companies blatantly boast “no hidden fees” in big headlines that apparently don’t mean much once you read their disclosures. That’s where you find out that the companies published their fees in small print somewhere on their site.

“Technically, those fees aren’t hidden —- you just need to search carefully to find them. As a result, you may wind up paying significant costs for application processing, closing points or account maintenance. You may also wind up with additional fees down the road, with late fees for a missed payment or a pre-payment fee if you decide to pay off your loan early,” Nelson explains.

Nelson is proud of the fact that LightStream does not charge fees or prepayment penalties.

Getting Out of Debt… Then Going Back for More

Debt consolidation financing is a popular solution offered by many online lenders. It makes a lot of sense to refinance high rate credit card balances by paying them off with a fixed-rate, lower-APR loan.

Nevertheless, Nelson warns that, “Many consumers make the mistake of running up their credit cards again after they’ve been paid off.” His advice? “Get out of debt, and cut up those cards.”

This article was provided by our partners at moneytips.com. Photo ©iStockphoto.com/fizkes

If you enjoy reading our blog posts and would like to try your hand at blogging, we have good news for you; you can do exactly that on Saving Advice. Just click here to get started.

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Give Thanks if You Have One or More of These Financial Things

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Thankful for Finance

Everyone has had a period of time that they have felt bad about their current financial situation. However, it isn’t usually all that bad. Of course, it could be better, but always remember it could also be worse. There are a few things you may have that you should be deeply thankful for.

A Steady Job

One of the things many people can be thankful for is having a steady job. Regardless of whether it’s part time or full time job, a job where you receive a paycheck each week is something to be very thankful for. Considering that many people are without steady income, even a little bit helps.

Having Insurance

If you have any type of insurance – health, homeowners, renters, car, etc. – you should consider yourself lucky. Even if you’re insurance isn’t the best plan available, you’re still better off than a lot of people who don’t have insurance. For instance, just imagine how much money you might have to pay out of pocket if something happens.

Investment Fees are Lower

If you invest your money, you must be happy that investment fees are lower than they were ten or twenty years ago. Investing can be a great way to accrue more money – provided your investments pay off, that is. Investment has changed a lot over the years and a lot of the chances have made a more positive financial impact for investors.

Borrowing from Friends or Family

Do you have friends and family who have offered to lend you money in times of need? Not everyone has those opportunities, so be lucky if you have financially stable friends and family members you can rely on. In turn, they’re probably just as thankful if you’re someone who can offer to help them out.

Low Mortgage Rates

Anyone who is paying a mortgage, trying to refinance a house, or thinking of buying a house is probably happy to see that mortgage rates are incredibly low. Right now rates have dropped below 4% and economists expect that rates will remain low for the foreseeable future. Even the slightest dip in interest rates for mortgages is a financial relief.

Having a 401(k)

Those of you who work at a company that offers a savings plan are lucky, especially if your company offers a high percentage match. While this might be seen as money you’re not immediately seeing flow into your bank account, it will help you out once you retire. Considering the future of Social Security is up in the air, having a 401(k) to fall back on is a great thing to have. If your company offers a 401(k) plan that you’re not currently signed up for, you should look into it.

Scholarships, Sponsors, and Financial Assistance

Many people complain about certain state or federal programs that offer assistance to those with limited finances, and while some of these programs have their flaws, they also have some great advantages. For instance, financial aid or scholarships can help lighten a student’s tuition bill, financial assistance programs can help people have their medical bills or prescriptions covered, or sponsor programs can help children or adults achieve the school, career, or life goals they need to succeed. Anyone who has received help from these programs is almost always grateful for them.

You’re Debt Free

If you’re debt free, you’re one of the lucky few. So many people are swimming in school, medical, or credit card debt. Debt can be hard to get rid of, especially if you don’t have the funds to pay off those bills each month. Being debt free – or at least having a steady plan for paying off your debt without floundering – is one less thing for you to worry about.

Photo: Flickr: Cindi Albright

Are Credit Unions Better Than Banks?

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Credit Unions vs. Banks

Many people have become fed up with banks’ behavior and fees. A large number of people have been looking into alternatives. Banks seem to be losing popularity with more and more people looking into credit unions each year. However, are credit unions really offering you the best rates and the best services?

What is a Credit Union?

Credit unions are financial co-operatives that are owned and controlled by the members of the union. There are no shareholders with a credit union taking any cut and credit unions work to specifically benefit the credit union members. Credit unions are popular for their savings accounts and low loan rates on cars and mortgages. They were originally meant for people who shared a “common bond,” meaning they lived in the same area or worked for the same company. However, in recent years, credit unions have opened up to servicing just about any group of people.

Credit Unions are Great for Saving

If you are looking for a savings account, you may want to take a closer look at credit unions. In fact, the majority of unions pay out 2.5 percent gross dividend or more on their savings accounts, which is much better than your standard bank savings account. In addition to opening up credit unions to a wider variety of people, they’ve also changed the way they “multiply” your money. You can open an account that pay out dividends or pay out interest on your savings, which is very different from a “normal” bank.

Looking to Borrow?

Taking out loans is extremely easy and user-friendly through credit unions as well. When you take out a loan through a credit union, they obviously take a look at your credit score. They won’t, however, turn you down or hike up your rate automatically. After taking all of your income into consideration, the credit union may also expect you save within their institution prior to taking out a loan. Credit unions don’t have any hidden fees or costs, and they also won’t penalize you for paying the loan back early. In addition to those great perks, many credit unions also offer free life insurance for their customers, so in the event of your death, your loan will be paid off. Getting a loan from a credit union doesn’t mean it has to be huge amounts of money either. Actually, most credit unions will allow small loans for up to a year.

There seem to be credit unions popping up all over the United States, and many people are taking closer looks at them. There’s no wonder why either. With the borrowing regulations and payouts on savings accounts that credit unions offer, they are becoming much more popular than the regular run-of-the-mill bank.

Many people are switching their funds over to credit unions. If you are interested in opening a credit union account, check at a location near you and see if they can service your banking needs.