Younger people, like recent college graduates, are optimistic about their future, even though they expect to not be as well off as their parents. Photo Credit: apermanentwreck/Flickr.com/CC-BY-SA

People of college student age are expecting to be less wealthy than their parents but more satisfied with life, according to a recent survey. An Associated Press survey of people ages 18 to 24 revealed that younger people, especially those saddled with higher amounts of student debt, expect a lower quality of life than their parents.

Younger generation expects less money, more happiness

The college age set is less optimistic about how much money the future may bring but is confident that the long term course of their lives won’t be doom and gloom, according to MSNBC. A poll conducted by the Associated Press and Viacom of 18- to 24-year-old people found that 40 percent of survey subjects thought that traditional goals like raising a family and purchasing a home would be more difficult than it was for their parents. About 25 percent believed that life would be easier for them than their parents. About 90 percent of the survey subjects believed they would eventually find a career they find fulfilling.

Student debt increases the burden

The people in the AP survey indicated that they believed making a living would be harder because of increased costs. Among costs steadily increasing for people in that age group is student debt. The average college graduate has about $24,000 in loan debt, according to the New York Times, which at an interest rate of 6.8 percent demands a payment of $276 per month, and student loans cannot be discharged in bankruptcy. The Department of Education reports that 65.6 percent of all undergraduates from 2007 to 2008 received some sort of financial aid, and 38.5 percent of all undergraduates had student loans of some sort. The Department of Education found that 30 percent of all undergraduates took out subsidized Stafford loans and 22 percent borrowed non-subsidized Stafford loans.

Investment that does pay off

The average wage earner with a college degree grosses about $53,000 per year, according to the Bureau of Labor Statistics, but few people earn that much upon graduation. A college degree is not a guarantee of immediately falling into a healthy income, but it increases the likelihood that a person will earn a solid middle class income during their lifetime. People with college degrees also tend to have lower rates of unemployment; Americans with bachelor’s degrees had a 4 percent lower rate of unemployment than those with only a high school diploma in 2009. However, the cost of the security that a college diploma offers is going up.

Sources

MSNBC

Department of Education

New York Times

Bureau of Labor Statistics

Student loan debt is expected to rise even faster as tuition increases and federal financial aid options dwindle. Image: Flickr/grifray's photostream CC-BY-SA

More students are going to college, and most of them are going into debt. Student loan debt outpaced credit card debt in 2010 and is expected to pass $1 trillion in 2011. Student loans, long considered a “good debt,” may morph into a bad debt for graduates faced with decades of payments.

Student loan debt rises with tuition

In 1993, less than half of students earning a bachelor’s degree graduated with student loan debt. By 2008, the number of students graduating in debt had risen to two-thirds. In 2009, college graduates left school with an average of $24,000 in student loan debt. Total student loan debt is expected to reach $1 trillion this year and grow at at even faster rate. Republicans in Congress want to cut Pell grants, a form of federal financial aid for lower-income students. As cash-strapped states cut funding to universities and colleges, tuition increases will add to a mountain of debt that is expected to have a profound impact on the current generation of college students. As student loan debt grows, so does the rate of student loan default. Credit damage, as well as burdensome student loan payments for those who don’t default, will limit the range of options when it comes to buying a home or having children. Those who have children may have to choose between paying off their student loan debt or saving for their children’s college education.

Good debt versus bad debt

When it comes to debt, student loans have always been considered “good debt,” as opposed to “bad debt” such as credit cards, auto loans or payday loans. In the aftermath of the recession, any kind of debt has become undesirable. But even as the average cost for a four-year private education has reached more than $37,000 a year, according to the College Board, student loans can be good debt if the degree results in a salary that allows the debt to be paid in a reasonable amount of time. A simple rule of thumb among financial advisers is not to borrow more than you expect to make in the first year on the job after graduation. That rule of thumb, however, highlights the risk of taking on student loan debt. Finding a job that pays off the average cost of college with a degree in sociology or history is unlikely. The risk may be lower for fields such as engineering or medicine, but the costs, and the debt, will likely be higher.

Bottom line: debt is risky

When it comes to good debt versus bad debt, the bottom line these days is simple: all debt is bad if you can’t pay it off. Default rates are rising — to almost 50 percent — among students who attended for-profit colleges. Student loans usually can’t be discharged in bankruptcy. For federally guaranteed student loans, the government can garnish wages, withhold tax refunds or dock Social Security payments. The Obama administration did make it easier for student loan debtors stuck in low-paying jobs by forgiving the balance on debt for those who have dutifully paid 15 percent of their income toward their student loans for 25 years — or 10 years if they work in public service.

Sources

New York Times

Creditcards.com

care 2

If you're a student loan co-signer and the student fails to pay, this could be you. (Photo Credit: CC BY-ND/How to Get a Student Loan)

Have you ever agreed to be a co-signer on a friend’s student loan but regretted having done so after the fact? Let’s say you don’t talk to the person anymore, and fear risking a damaged credit rating if they default on the loan. Thankfully, Bankrate reports that all is not lost. There are ways to have your name removed from those student loan documents and improve your credit score in the process.

Student loan co-signer, know what you’re getting into

Becoming a co-signer on a student loan means you are guaranteeing the loan or the debt. If the student fails to repay the loan, it becomes your responsibility. Thus, it is wise to make sure that you’ll be able to make the payments, in the worst case scenario. If not, collectors will come to call and your credit rating will suffer severe damage, which in turn will make it much more difficult for you to obtain other forms of credit.

If you agree to co-sign on a student loan, the creditor is obligated by federal law to provide an explanation of your obligations as co-signer. You’ll want to make sure that you obtain copies of the loan contract and Truth in Lending Disclosure agreement for your records.

Release or refinance that student loan

Begin by pursuing a standard student loan co-signer release. Some private student loans allow a co-signer to cut ties if the student has made enough consecutive monthly payments on time (anywhere from 12 to 24). The student must also meet the lender’s credit standards and other requirements. Thus, the hope is that the estranged student has kept their credit history tidy.

If the lender will not allow you to obtain a co-signer release, then the student will have to refinance the loan. Refinancing enables the student to obtain an entirely new loan at a lower interest rate, and this loan pays off the original student loan. This can be done via the original lender, or through another lender if better rates and terms are available. Unfortunately, the student must have good enough credit to qualify for a refinance in the first place.

Why the student may not want you to leave

Obviously, abandoning a co-signer opens the student up to greater financial risk. If they are suddenly unable to repay their student loans and do not have a co-signer as a fallback, the lender can take them to collections. In the case of government loans, even tax return money isn’t safe.

Sources

Bankrate

eHow Family

Whalehook Loans

No co-signer? No credit history? No problem.

Student loans for middle-income students are available for those willing to put in the legwork. (Photo Credit: CC BY-ND/Federal Student Loan Debt)

Financial aid is a necessity for many low- to middle-income students and their families. Thankfully, there are student loan programs designed specifically for people who fall within the low- to middle-income brackets. Banknote suggests those looking for ways to pay for college use this three-pronged attack.

Aim high for need-based qualification

If a student doesn’t qualify for student loans at one college, it is quite possible that student could qualify at a more expensive university. Sally Donahue, Harvard’s director of financial aid, points out to Banknote that need-based financial aid is contingent upon income and assets, relative to admission costs. Thus, not qualifying at a $20,000-per-year school doesn’t mean a $60,000-per-year option is out of the question.

“We have probably 600 families with incomes over $180,000 receiving grant aid right now, and that’s usually because they have two or three students in high-cost colleges,” says Donahue. “It just depends on where you go.”

Harvard happens to be a “no-loan” school that enables students to obtain the necessary financial aid via grants, scholarships and work-study programs. The Institute for College Access and Success indicates that there are more than 50 such no-loan schools across the U.S. from which to choose. Keep in mind that most require family income to be below $50,000 annually.

Tax credits offer long-term help

Carol Stack, co-author of “The Financial Aid Handbook,” claims that 2011 is a banner year for student loan tax credits. Specifically, the American Opportunity Credit is one to watch. Extended through 2012, this credit can mean an extra $2,500 for families, as long as at least $4,000 is spent each year on college-related expenses. Intended for the first four years of post-secondary education, the American Opportunity Credit applies 100 percent to the first $2,000 spent during the tax year, and 24 percent to the next $2,000. At least half-time enrollment is required and family income must not exceed $160,000 per year. Check with the IRS for more information.

The Lifetime Learning Credit is great for part-time students and those who attend college for more than four years. Approved college expenses up to $10,000 are reimbursed at a 20 percent clip.

Good aid for good students

Merit-based aid exists for men and women who may not qualify for need-based student loans, grants or scholarships. Collegiate financial aid search engines, like College Navigator and Meritaid.com, state that $11 billion in merit-based aid is distributed annually. Thus, there are plenty of opportunities for good students to take advantage. Chris Long from Cappex, a Meritaid.com sister company, advises students to find schools outside their geographic area that would benefit from their test scores and GPA.

“You should also apply to schools where you’re at the upper end of the academic scale. You’re going to be very attractive to those schools because they want to increase their average GPA, SAT and ACT (scores),” he said.

Sources

Bankrate

Cappex

College Navigator

IRS.gov

Considering scholarships and grants

Direct Loan Program

With the Direct Loan Program, students and parents borrow directly from the federal government instead of through a private lender. The loans are made available via the college’s financial aid office. Like most federal student loan programs, Direct Loans typically offer low fees, low interest rates and lenient payback policies. Federal loans are usually available for students with poor credit.

Stafford Loan

Stafford Loans are also provided by the federal government and are based on students’ financial needs. Most students qualify for some type of financial aid via the Stafford Loan program. To be eligible, students are required to be enrolled at least half-time in college. The loans are available to both undergraduate and graduate students.

Subsidized Stafford Loans: These are also need-based loans. One huge benefit of these loans is that the government pays the interest while the student is attending school and during a six-month grace period upon graduation. No credit check is required for these.

Unsubsidized Stafford Loans: These loans are not based on financial need, and students are responsible for accrued interest as soon as the loan is disbursed. However, they have the option of deferring the payments until after they graduate from college, and there is a six-month grace period after graduation.

Perkins Loan

Perkins Loans are another need-based program operated by the Federal government. They’re low interest, low cost loans that are available through individual colleges and universities. It’s up to the schools to determine which students are most financially deserving of Perkins funds. Money is provided on a first-come, first served basis. Perkins Loans are available to undergraduates and graduate students.

Perkins Loans have no fees and no credit checks. Like subsidized Stafford loans, the government pays the interest on the loans while the student is attending school as well as during a nine-month grace period after graduation. Undergraduate students are limited to $4,000 per year, with a lifetime limit of $20,000. Graduate students are limited to $6,000 per year and $40,000 over the course of their lives.

Parent PLUS Loan

Parents take these loans out specifically to pay for their kid’s college education. Parent PLUS Loans are provided by the federal government at a low interest rate. Students must be dependents and younger than 24. After the full loan is dispersed, the parent is required to begin paying it back within 60 days.

Parent PLUS Loan repayment options

Graduated Repayment Plan: A parent can begin with lower monthly payments that gradually increase over time until the loan is paid in full.

Extended Repayment Plan: Eligible parents are provided payment relief via an expanded repayment term of up to 25 years.

Income Sensitive Repayment Plan: Monthly payment is based on parents’ yearly income and loan amount. Parents are eligible for this plan if their monthly loan payment is greater than 10 percent of their annual gross income.

The Parent PLUS Loan website provides more information.

Parent PLUS Loan versus private atudent loans

If your child has reached the annual maximum for Stafford Loans, a Parent PLUS Loan or private student loans are your options. The Parent PLUS Loan has a fixed interest rate, whereas private student loans typically have a variable interest rate. Currently, interest rates are low and parents may be able to obtain a private loan at a lower interest rate than a Parent PLUS Loan. Many banks also offer special incentives. Private loans may have additional fees, however, so keep this in mind.

Federal student loan consolidation

Students who have taken out multiple federal student loans have the option to consolidate these loans into one payment. A consolidation loan reduces monthly payments and provides a longer term for the loan. The borrower’s loans are paid off, and a new consolidated loan is created. The interest rate may be lower than one or more of the previous loans.

Co-Signing a student loan

Private student loans are awarded based on a person’s credit history. Because many undergraduate students don’t have much of a credit history, they will typically need a cosigner for the loan. If you go this route and your son or daughter defaults on the loan, you’ll have to make the payments.

Career training student loans

Private, credit-based career training student loans are provided to students attending technical or trade schools. They offer some attractive incentives as well as interest rates that reward good credit. Students can use these loans for expenses in addition to tuition, such as room and board. Some of these loans may have extra fees that you should keep in mind.

Many active-duty servicemembers are facing even tougher financial realities if they bank with JPMorgan Chase. Image: Flickr / troismarteaux / CC-BY

JPMorgan Chase is facing tough questions about its treatment of servicemember finances. JPMorgan Chase has foreclosed on many active servicemembers’ homes under questionable circumstances. Now, Chase is re-thinking how they handle active duty servicemembers’ student loans.

JPMorgan Chase and active service members

JPMorgan Chase is a mega-finance bank that provides financial services such as student loans, mortgages, checking, savings and lines of credit. Congressional committees and federal prosecutors are both investigating how JPMorgan Chase has handled the finances of active-duty military service members, including military loans. The accusation is that Chase is overcharging active duty servicemembers.

Student loans for service members

Active-duty servicemembers who have their student loans through JPMorgan Chase received surprising news over the last few weeks. Their student loans, which had previously been deferred, were coming due. The policy of JPMorgan Chase had been to defer all student loans while military members were on active duty. This short term loan policy was reversed in late January 2011. Some servicemembers were informed that they would owe over $400 per month extra, starting in just weeks. After multiple complaints from servicemembers saying they would need to take out a payday loan to cover these costs, and the threat of additional congressional inquiries, Chase re-reversed the policy.

Congressional inquiry into Chase mortgages

JPMorgan Chase was the subject of an ABC News investigation that kicked off congressional inquiries just a few weeks ago. Chase has admitted that they overcharged and wrongly foreclosed on several service member’s homes, including homes in Reno, Nevada and Irving, Texas. These actions, and possibly the student loan policy, may violate the Servicemembers Civil Relief Act. The act limits the legal and financial actions for which servicemembers can be held responsible while they are on active duty.

Sources

MSNBC

A recent Department of Education study found that students who attend for-profit colleges default on student loans the most. Image from Wikimedia Commons.

The rate of default on student loans is higher for students who attended a private, for-profit university. New data from the U.S. Department of Education indicates 25 percent of students who attended for-profit schools defaulted on their student loans. Public school attendees had a default rate of less than 11 percent.

Nonprofit school students default the least on student loans

Students who attend institutions of higher education often get saddled with a lot of debt. The huge loans students have to borrow to finance education means some are going to default on repayment. Those who attend a private, for-profit university are most likely to default on the unsecured loans needed to cover tuition, according to Reuters. A recent report by the Department of Education examined default rates from the year 2008 and found students who were borrowing money to fund an education at a private, for-profit college defaulted 25 percent of the time. Students at public universities had a default rate of 10.8 percent.  Students from private, non-profit universities defaulted least, defaulting 7.6 percent of the time.

Government could pull funding

Pending legislation could yank the rug out from under private, for-profit colleges when it comes to federal funding. A new proposed rule would cancel any federal advance cash to any university with a loan default rate of 30 percent or more. Numerous for-profit universities already fit that criteria. A trade group of for-profit universities, the Association of Private Sector Colleges and Universities, protested the proposed ruling and the DOE report, saying that the dismal economy contributed to those figures. The APSCU also contends that data from 2008 doesn’t apply to 2011.

Students under growing strain

Worries about post-education employment and debt, among other factors, has led to far more students having a negative view of their own mental health, according to the New York Times. Whether someone is off to be an Arizona Wildcat or to roll with the tide in Alabama, having to take out larger loans and come out of college needing debt consolidation is not the most pleasant prospect.

Sources

Reuters

New York Times

College students have to larger personal loans to pay for school, and have fewer good paying jobs to look forward to, leading to more defaults. Image from Wikimedia Commons.

College students have to take out personal loans these days with increasing frequency and size to fund their educations. A college education is great to have, but the huge expense that has to be taken on may have led to a rising rate of default. The students profit least from the current system.

Rising tuition costs lead to more personal loans for students

There has been a somewhat unsettling trend at many universities across the nation for years now, which is the rising cost of attending and graduating from institutions of higher learning. It has meant more students have had to borrow some sizable personal loans to get an education. Loan lenders don’t mind it, of course. The lenders of the installment loans that students have to take out to get a college education have to bear in mind that student loan defaults are at about an 11-year high, according to Fox News. Unfortunately, the most common lender that students have to get a loan from is from Uncle Sam, which means that if students take on more debt than they can afford to  get an education, it’s the taxpayers who get stiffed.

Billions lost through defaults

Currently, the Department of Education has about $880 billion in federal loans on the books in 2011, and defaults have been on the rise at the same time that costs of tuition and room and board have. From 2005 to 2008, the cost of a year’s tuition and living expenses rose from $28,505 to $30,258. During the last three years, or the period of 2008 to 2011, the amount of loans that were defaulted on rose from $33.5 billion in 2008 to $58 billion in 2011.

College graduates enter unstable work force

Rising costs of tuition are just one of the daunting prospects students face today. More college grads have fewer jobs available to them, and at lower wages. This means that students have to borrow more just to have a smaller chance chance of getting a job — and a smaller paycheck.

Source

Fox Business

The constraints involved in borrowing money for higher education have become heated points of contention.  “For a long time, our student loan system has worked for banks and financial institutions,” Obama said. “Today, we’re finally making our student loan system work for students and all of our families.”

Banks take a hit

Under the new student-lending law, the government will make loans directly to students.  Private banks may continue to service and collect student loans, but they will no longer issue them. As a result, banks will lose a multibillion dollar income source. Needless to say, student-loan giant Sallie Mae and other private lenders staunchly oppose the reform.

Opponents fear over-governing and job losses

Opponents contend that the new law amounts to an unwarranted federal takeover of the student loan industry. It will, they say, reduce lending options for students and eliminate thousands of lending-industry jobs at a time when the nation cannot afford further employment losses. Democratic lawmakers have long sought to end bankers’ roles as student-loan middlemen and replace them with a direct federal-lending system. Never an overly partisan issue, however, the reform was proposed by President Bush several times during his tenure.

Proponents say all budget reforms create job losses

Proponents, of course, contend that the new student-lending law will create as many jobs as it eliminates. Moreover, they say, job losses are inherent in almost almost any kind of budget-reform measure. Livelihoods are dependent on all industries and all projects.

Proponents of the new law say that ousting the banks will save taxpayers $68 billion over the next 10 years. A significant portion of the money saved will be used to expand and strengthen federal grant programs for higher education. According to MSNBC (see http://www.msnbc.msn.com/id/36097649/ns/politics-white_house/), the new law will cap annual student-loan repayments at 10 percent of a college graduate’s income, allocate more funds for community colleges, and award $2.55 billion to historically black colleges and universities.

The struggle to handle student loans

There is a catch-22 for recent graduates who got their educations for higher-paying careers. Though many targeted law or medicine as their perfect careers, now they are having a hard time finding jobs. Without finding jobs, paying back the higher cost of their education is next to impossible.

There are a growing number of consumers who are falling into this category, and the economy isn’t doing much to help. When it comes to other forms of debt, there are some outs to help ease the strain. For example, mortgage payments can be negotiated or properties sold to ease the tension. Credit card debt can be paid off or eliminated in bankruptcy. Car loans can be eliminated via a discharge in bankruptcy, negotiation or payments, or if necessary, selling off the vehicle. Then there are student loans. There really is no such thing as getting rid of student loan debts. They can’t be discharged in bankruptcy or negotiated down. The amount can’t be touched and neither can the interest rate charged to hold them. That means that consumers are never going to find a way out of paying for their student loans without some legislative changes.

Reworking the student loan

Due to issues with student loan repayment there is a growing consumer base hoping to revamp rules regarding the debt. In fact, a Facebook group that calls themselves “Forgive Student Loan Debt” is making a case for an economic stimulus plan to forgive outstanding student loan debt. There are plans of attack to help manage mortgage, credit card and unsecured loans, so they believe there should be some relief with education expenses.

They are basing their argument on the fact that education is good for society. Elevating the skill sets of mass groups can be a powerful tool for economic advancement. By allowing some negotiation option or payoff, the Facebook group hopes that consumers under heavy student loan debt would be able to focus on using their education, rather than stressing over how to pay for it. They are calling on the government to make changes that would bring a stimulus target to former students under a capped level of debt.

Will negotiating student loan debt become a reality?

Whether student loan debt will be looked at by legislators has yet to be seen. With growing numbers of defaulting and deferred student loan accounts though, there is a strong call for some changes to benefit recent graduates who are struggling. The fact that those holding mortgage, credit card and unsecured loans have government-built options and those with student loans don’t may be the best argument for change.

Start your unsecured loan application HERE!

In rare cases repayment of student loans can cause extreme hardship

Yes, in rare instances, it is possible to cancel a student loan debt. For most borrowers, however, cancellation is not an option, although loan deferments or forbearances may be available and can be very helpful. Student loans can be much larger and harder to pay off than short-term personal loans. In those rare cases when a student-loan debtor is eligible for a cancellation of the debt, exercising the option to cancel can provide an enormous financial relief.

Canceling student loan debt means that a borrower does not have to pay back a loan obtained to pay for a college education. Eligibility for a cancellation depends on the kind of loan involved and the reasons why the debtor is unable to repay it.

Very few student-loan borrowers qualify for cancellation

Normally, student loan cancellations are available only to persons who can prove that they are permanently disabled and to the estates of students who pass away with loans still outstanding. Other limited circumstances where borrowers may qualify for student loan debt cancellation include:

• Service in the United States military
• Employment in a law-enforcement profession
• Employment in a teaching profession for indigent populations
• Employment in a health-care profession for indigent populations when there is a shortage of professionals in the field
• And occasionally, service in the Peace Corps

Special program for childcare providers

According to the federal student aid website, part of an undergraduate Direct Stafford Loan or FFEL loan may be canceled under the Child Care Provider Loan Forgiveness Program, which is only available to qualified child-care providers who work with low-income populations and only when funding for this program is available.

Other special circumstances

Other special circumstances that may permit cancellation include:

• Closure of a school before completion of required course work
• Failure of a school to pay a lender a refund required under federal
• Forgery of a signature on a promissory note promissory note or authorization for electronic fund transfer
• Improper testing or false certification by the school of a borrower who lacked the ability to benefit from coursework

How to request a cancellation

If you think you may be entitled to cancellation of a Perkins-loan debt, you may apply either directly through the school or through the company servicing the loan. If you think you may be entitled to cancellation of a PLUS loan or a Direct Stafford loan, contact the Department of Education loan servicing center. Recipients of a PLUS loan or a FFEL Stafford loan may also contact the company that currently holds the loan and request information about canceling the debt.

A glimmer of hope

While everyone should plan on repaying student loans, there are situations where the obligation to pay creates an insurmountable financial hardship. Years after graduation, borrowers sometimes find themselves owing more on their loans than they did when they first graduated. In rare circumstances when the situation seems most hopeless, canceling student-loan debt may be possible.

Get the facts lined up before you decide to consolidate

Consolidating student loans may be a helpful alternative for someone struggling to pay off multiple loans, particularly if some have high variable interest rates. Although college loans are considered to be good debt because they are financing a person’s future, they can nonetheless be a burden to repay. Those who find themselves in deep student-loan debt after their educations are complete often find that consolidating student loans really helps with the bottom line.

The decision to consolidate student loans

There’s no right or wrong answer when it comes to whether or not you should consolidate student loans, but there are many factors to consider. The only answer that applies universally is that whether you should consolidate depends on your individual circumstances at the time, including type of loans you have and their interest rates. For instance, as of 1996, PLUS and Stafford loans have featured a fixed interest rate. For students with loans prior to 1996, however, the interest rates were variable. This means that the rates on these loans may continue to fluctuate each year. People with a variable rate often consolidate their loans in order to obtain a lower fixed rate.

Getting the best rate when consolidating student loans

Variable interest rates for student loans are established on July 1 of each year. Depending on current interest rates, a person planning to consolidate may want to wait until July 1 to do so, especially if interest rates have been falling.

Treasury-bill rates and student loans

One way to gauge how student loan interest rates are shaping up is to watch the government’s interest rate on the 91-day Treasury bill upon which student loan interest rates are based. You can do this very easily online at the federal government’s public-debt website . Note that special formulas apply to different loans. For instance, the rate announced on July 1 equals the Treasury bill rate from May plus 2.3 percent whereas the PLUS loan rate equals the May Treasury bill rate plus 3.1 percent.

Check your facts first

It is best to make sure that these formulas are correct before making the decision to consolidate student loans. You can do this easily with a little online research online or by speaking with a financial planner. If after studying current interest rates, it appears that a lower, fixed rate can be obtained by consolidating student loans, consolidating may be a good idea.

An online loan may help

Whether or not you decide that consolidating student loans is the best option for you, an online loan or cash advance is easy to obtain and can help you pay off student loans and other debt. Credit checks normally aren’t required, so people with bad credit can generally get online loans easily. However you approach repaying your student-loan debt, considered all the options, but don’t ignore the debt. Consolidating your student loans can help protect your credit rating, and in the long run, a good credit rating really pays off.

The word debt often carries negative connotations, but there are times when debt is considered a good thing. Student loans, for instance, can be considered good debts. It would, of course, be preferable not to have to borrow money to pay for college, but not everyone can finance a higher education with private funds, scholarships or grants. For many, student loans are the next best way to finance an education.

Perkins loan

There are several different kinds of student loans. One familiar type is the Perkins loan, which is funded by the federal government. This loan generally carries a low interest rate, but it also is one of the smaller loans. Perkins loans are small, low-interest loans available to students who demonstrate exceptional financial need.

Stafford loan

The Stafford loan is another popular student loan option. A Stafford loan is also variously known as a Federal Family Education Loan (FFEL), a direct loan, and a Ford loan. Stafford loans can be funded by banks, colleges, or the government. They may or may not be federally subsidized, depending upon a student’s individual circumstances.

PLUS loans

Parents’ Loans for Undergraduate Students (PLUS loans) are another common type of educational loan. PLUS loans are not made directly to students. Rather, as the name implies, PLUS loans are made to the parents of students. A PLUS loan carries a low interest rate and the loan amount is based directly on the student’s actual cost of attending school. Loans amounts are calculated based on the cost of tuition, books, supplies, fees, and transportation costs, after deducting the amount of any other financial aid obtained by the student. A PLUS loan helps bridge the gap between the actual costs of education and other available financial aid obtained by the student.

Student loans and bad credit

Students and their parents are sometimes hesitant to apply for educational financial aid because of bad credit histories. Often, however, student loans can be obtained even with poor credit. Generally speaking, bad credit does not automatically preclude an applicant from qualifying for financial aid so long as the credit history does not include previous defaults on student loans.

Basic lending requirements

• Basic lending requirements for a Perkins loan or a Stafford loan may  include:
• A valid social security number
• U.S. citizenship or be legal non-citizenship
• High school diploma or GED
• Enrollment in or acceptance to a college offering a degree or certificate
• Demonstrable financial need

Individual qualifications and financial need vary widely from person t person, and no one can guarantee that a loan request will be approved. However, students who meet these basic requirements are encouraged to apply for loans as needed.

Tax deductions

Student loans are considered to be good debts for a several reasons. Obviously, a student-loan borrower is investing in his or her own future. Additionally, the interest paid on student loans may be deductible for income tax purposes. To find out more about potential tax benefits, student-loan borrowers should get advice from a tax professional.

An investment in yourself

In the long run, there is no better investment than an education. Although most people work hard to avoid borrowing large amounts of money, some debts – and student loans in particular — are worth incurring. Even for people with bad credit, student loans are available to help those people who are interested in achieving high academic goals do exactly that.

If you’re in college or have a child who is, you know all too well how expensive it is to get a degree or diploma these days. Tuition, books, computers, housing, food, transportation – it all adds up to a boatload of money. If you’re eligible for a student loan, getting one can make a huge difference in your ability to afford a good education. Student loans have to be paid back, however, which can strain your finances after graduation, especially if you don’t land a good-paying job right away.

Grants are essentially free money

Before you start school, find out whether you’re eligible for a federal or state grant in addition to a loan. The great advantage of a grant is that it’s yours to keep, so long as don’t drop out of school when you’ve already received your money for that semester. Educational grants are based on financial need, of course, and not everyone can qualify for one. Even if you qualify, you can miss out if you don’t apply early, because there are only a certain number of grant dollars available each year.

Federal Pell grants

The Pell program accounts for the lion’s share of the student grants issued in the United States. Each college in the Pell system receives grant funds that it distributes to eligible students. Depending on your income and the availability of funds, your Federal Pell grant could be anywhere from a few hundred to several thousand dollars a year.

If you’re a science, math, or social science major and are receiving a Pell grant, you might also qualify for an Academic Competitiveness grant worth up to $750 in the first year of your academic studies, and $1300 in the second year. Third- and fourth-year math and science majors can apply for a National SMART grant that pays up to $4000 a year.

Federal Supplemental Education Opportunity grants

If you’re a student with demonstrable economic hardship, ask your campus financial aid office about Federal Supplemental Education Opportunity grants. Students who qualify stand to receive from $100 and $4000 a year.

State student grants

Each of the 50 states offers a variety of educational grant programs. Most states try to help low-income students who perform well academically by awarding grants based on a combination of their individual financial needs and GPA scores. Many states also offer grant money or loans with concessionary terms to students who are studying specific subjects or who belong to certain minority groups.

For example, if you get an education degree in California, you could have your loans reduced by as much as $19,000 after you graduate if you work in a low-income area, or teach a subject for which there aren’t enough teachers. In many parts of the country, there are grants specifically designed for adult students who didn’t get a college education in their youth, for disabled students, and for African-Americans, Hispanics, and Native Americans.

Your state government offices or student-aid website will have details about the state grants that might be available to you. In many cases, you can apply for student aid online.

Institutional grants

Many colleges administer privately funded grant programs. In additional to serving as a form of supplementary aid for needy students, institutional grants are sometimes used by colleges to attract students with exceptional academic records or athletic abilities. If you think your amazing athletic skills or perfect math scores may be of interest to a particular school, check to see whether the school has an institutional grant program that applies to you.

You may avoid student loans with these tips for saving for college

Throughout history, parents have used savings, unsecured loans and credit to get their children through college. Since 1996 however, a new savings vehicle has been on the market and growing numbers of parents are utilizing it. Section 529 plans offer tax-advantages for saving when it comes to college savings. One thing to remember is that college costs are not set to decrease any time soon. In fact, since the 80s, they have consistently risen straight across the board. Also, for parents who wait too long to start saving, many older savings options won’t help. For example, the Coverdell Education Savings Account has an annual contribution limit of $2,000. If parents don’t open it until a child is in high school, it most likely will only put a small dent in college funding. Finally, prepaid tuition plans sound good, but children have to go to schools that participate in the plan. That limitation could mean disaster for a student wanting a specific field of study.

The 529 Plan

State-sponsored college savings plans allow flexibility in choosing a school. In addition, parents starting to save later still have the opportunity to make a sizable investment. The Section 529 plans allow people to invest in a predetermined pool of stock and bond investments. Most plans involve dividing investments according to a given asset allocation that is determined by the child’s age. Younger children traditionally have more aggressive asset allocations and older children have more conservative ones.

The lifetime contribution limit for the 529 plan often times is greater than $200,000 and that affords a great flexibility in how much parents contribute. All earnings in the account are tax deferred and for parents living in the state when the plan is used, they also may be eligible for state tax deductions. Once the child reaches college age, the account can be used to pay for qualified higher education expenses. If money remains in the account after paying off college, the balance can be transferred to a younger sibling or other related family member headed for college.

The advantages and disadvantages of a 529

Older methods of paying for a child’s college meant dipping into savings, taking out unsecured loans or family assistance. Today, the 529 savings vehicle is offering a much less intrusive method of saving for college. The biggest advantage of the fund is that the plan is flexible and has few limits. Plus the state-sponsorship means that they are tax-deferred vehicles for saving money. The other big advantage is professional asset management. Each participating state contracts an asset management firm to handle the plan. You can find out what company your state uses by visiting SavingForCollege.com.

Disadvantages

When it comes to the disadvantages of the plan, there are a few to note. First, the plan is funded by various stocks and bond investments. With any stock or bond-funded account, there is a risk to be aware of. When it comes to the 529 Plan, returns are not guaranteed. That means that potentially your account could lose value, or remain the same. Companies cut back on the aggressive stocks and bonds as the child ages, but risk is never completely out of the picture.

Parents also should have a complete understanding of the contribution and withdrawal rules to the plan prior to signing up. Every state has its own rules in terms of procedures, so be sure to read up on what state is applicable. There are also penalties to be aware of if withdrawals are not used for higher education expenses.

Choosing the right plan

It takes some research to find the right savings vehicle for college funding. The Section 529 plan can be extremely helpful, but there are other options to consider. A prepaid tuition plan may make it possible to lock-in on a college’s tuition rate. That can cut down considerably on savings, unsecured loans and credit needed to fund a shortfall. Coverdell Accounts may be useful for parents who start saving early and commit to saving religiously every year. What plan a parent uses needs to be individualized to their specific financial situation. Research is key in finding the right solution to the problem of funding college.

If you could use unsecured loans, apply here!

the first to be hit by easy credit available to students as a way to meet the soaring costs of education. Americans relied on the financial products of the Wall Street boom to pay for higher education, but all of these shrank without a trace in the tsunami that engulfed the stock markets, not to mention the losses from the college savings plans, or 529 plans as they are called. Is it any wonder that students are now left wondering where their next payment for further education is going to come from? In the meantime, lenders have raised rates and dramatically curtailed the availability of installment loans, adding further fuel to the raging fire. As things stand at the moment, students can only hope for assistance from federally backed programs for student loans, while parents will have to seek solace in the form of installment loans.

A Bleak Future

One only has to look at the current circumstances to conclude that students will indeed face a bleak future. Most federally backed programs offer students $5,500 a year in loans, but costs have increased and this amount is no longer sufficient to obtain a four year degree. A new law will come into effect on February 22, 2010, which will ban students under 21 from being approved for credit cards, which will no doubt create further troubles for students in getting easy credit. Not having a job will make their life more difficult as they will not be eligible for installment loans. Perhaps the worst aspect of these circumstances will lead to students dropping out of college in order to earn a living. Even if they choose to continue their studies and hold onto their jobs, it will only result in lower grades. The white collar jobs they dream about will only remain as a dream that will never be achieved if they cannot focus fully on their studies.

Will The Government Step In?

It is now time that the federal government step in and come out with student specific plans, especially since parents are utilizing all possible resources that they can. If the students are the future of this country, helping them find better financial aid is a step in the right direction. The costs of education will remain high, and the only solution for the government is to offer long term installment loans to deserving students. This will not only bring about a change in the economy in the long term, but will also help retain jobs in the country.

Need an Installment Loan? Apply Here!

Many college graduates are using installment loans to make ends meet. Angela Trummell, college graduate in 2010, said, “A lot of my friends are planning on going back home because they can’t afford post-college life. I really don’t want to do that.” Trummell is like a lot of students. They build up debt going to college and have a difficult time envisioning financial independence in their near future.

What students need to know now

College students need to know that they are going to have problems if they don’t plan ahead. Sure, parents will be there, but a lot of parents are as financially strapped these days as their children. For college graduates it’s going to take a commitment to managing money wisely from the beginning to ensure a good future.

One of the best ways to spend wisely is to follow the 60 Percent Rule. Basically, this tells a consumer to keep their expenses to 60 percent of their income. That includes rent, taxes, car insurance, food, shelter, clothing and utilities. The next 10 percent should go to retirement savings. The rest should be used for emergency account funding, repaying student loans, short-term savings and entertainment.

Discipline and college graduates

The best thing to learn is discipline when it comes to finances and budgeting. If students are finding they have problems with sticking to the 60 percent Rule they need to look at their options and make some smart decisions. Here are some of the biggest things to look at with any budget:

1. Residence

Likely this will be the biggest expense people have for a good portion of their lives. The good news is that there are some ways to cut back. Getting a roommate can be one solution, or renting a room from a family member. Students can also consider moving back in with parents for a short period of time to save.

2. Transportation

This is another huge issue with a budget. A huge car payment can wreak havoc on any budget, much less the limited budget of a recent graduate. Consider downsizing to a smaller car or car-pooling. Another option is public transportation. When it comes to repairs, consider using small installment loans to pay cash up front, rather than putting them on credit. With credit, there are interest fees to pay off. With short term loans, there is a small fee, but it doesn’t affect credit.

3. Utilities

There are a lot of ways to save regarding utilities. Young people can get a roommate to share the bills, or just be wiser. Turn off lights, turn down the heat/air, and weatherproof windows to save money. Cell phones are also big money draws. Do some online searching and find plans that are more reasonable.

4. Personal spending

This is a big one and most people, graduate-age or not, overspend here. The best practice is to use a notebook and write down everything spent over the course of one month. That means everything from cigarettes to coffee. Once the list is there, consumers can cut out, or at minimum cut back, on overspending.

All four of these areas can mean the difference between a balanced budget and a wildly out of control one. College graduates need to start good practices early on and this is a great way to do it.

Installment loans come to the rescue

College graduates sometimes try as hard as they can to stay within budget but still miss the mark. An unforeseen bill or emergency can mess up a budget pretty quickly. Installment loans are one way to overcome immediate need, but it’s best to get right back on the plan. Turning to credit can cost. Just read the credit card fine print and see how quickly fees can add up. In the end, having a good plan is the only way to ensure a healthy financial future.

Apply for installment loans HERE

The Department of Education is beginning a program to help students with debt relief. The department is allowing consumers to apply for a program that will cap monthly student loan payments based on income and forgive balances still remaining after 25 years. If students are working in the public service sector, their loans could be forgiven after just 10 years.

The program is called the IBR (Income-Based Repayment) program. It is determined by two things: the person’s income and the amount of his or her loans. The Department of Education is setting up a website, www.ibrinfo.org, to answer questions and help borrowers with the application process. The website should be available and fully functional in coming weeks. Lauren Asher, president of the Institute for College Access and Success, stated, “It’s a way to borrow for college without going to the poor house.”

The beginning of the program

This new Department of Education program comes from the Education Department’s College Cost Reduction and Access Act of 2007, which authorized a program catering to the incomes of borrowers at FFEL, (Federal Family Education Loan), and Stafford loan levels. In this new program, monthly payments are capped at approximately 10% of the borrower’s income and never exceed more than 15% of any annual income above $16,000. People earning under $16,000 are not required to make monthly payments.

The goal of the program

The goal of this program is to provide debt relief for people who have student loans and modest to low incomes. The IBR program stretches the payments over a longer period of time, thus bringing payments down. Although consumers won’t see savings throughout the course of the loan’s lifetime, they will have smaller payments to manage monthly without hurting their credit scores. Asher added, “IBR can lower costs and provide light at the end of the tunnel for such borrowers. It gives them a greater flexibility to save for retirement, buy a home or even pay for their own children’s education.”

Consumers must choose wisely

It’s up to consumers to do some homework, however, to see if this program is right for them. In some instances, the IBR program could push the cost of the loan to more than it would have been on the original payment plan. There are some accounts in which accruing interest increase the overall cost of the loan substantially. Also, since almost all student loans should be paid off before 25 years, this aspect of the program may not be beneficial to everyone.

Mark Kantrowitz, publisher of FinAid.org, stated that people can “save on interest costs more effectively by paying off loans faster.” Kantrowitz also stated that using the FinAid.org website can help consumers track their financial aid industry data to see if their payments are comparable to the current standard.

After approval

One additional note: If consumers have salary increases that disqualifies them for the program, they will be responsible for the cost of the loan and the additional interest accrued up to that point. But even then, the monthly payments could not exceed what they would have been under a standard repayment plan and consumers always have the option of paying off their loans faster.

The Department of Education is working hard to help consumers with student loans find some debt relief. The IBR program may be a good solution for consumers with unmanageable student loan payments. Some research and wise decision-making can help consumers bring their finances under control and find debt relief.

Keble College, a constituent college of the University of Oxford

The cost of higher education is spiraling skyward. At some private schools it now exceeds $50,000 a year. Lagging government support has resulted in steep tuition increases at public universities as well. Little wonder then that educational loans have become as indispensable to college students as low cost loans and extra cash are to the working class.

Different Types of Student Loans

There are three general types of student loans: private loans made by banks and other lenders without any involvement of the government, federal direct loans made by the government itself; and federally guaranteed loans made by banks and other lenders and insured by the government. Additionally, colleges and universities sometimes make educational loans, usually in partnership with banks or other financial institutions.

In the case of federally guaranteed loans, the government pays subsidies to the lenders who make the loans and then guarantees up to 97% of the loans. Lenders are thereby protected from almost all losses on the transactions. The interest rates on federal direct and federally guaranteed loans are fixed rates established by Congress. Private loan terms are typically less favorable than those of government loans, and interest rates on private loans can change over time.

A History of Problems

In recent years, the student loan industry – which finances tens of billions of dollars of educational expenses each year — has been beset with difficulties that have attracted publicity and debate. In 2007, several state attorney generals and lawmakers in Washington exposed questionable dealings involving the endorsement of particular private lenders by college financial aid offices and the siphoning of student-loan applicants to those lenders.

In 2008, the industry was badly shaken by the credit crisis, which threatened to cut off the supply of student loans from private lenders by making it impossible for them to sell loans.  Many student-loan lenders depend on being able to sell the loans they make in order to raise funds for new loans. Investor interest in buying student loans dropped off almost entirely, and it fell to the federal government to keep the industry afloat by stepping in and buying federally-guaranteed loans.

Squeezing Out the Banks

The Obama Administration has now proposed abandoning the guaranteed student loan program entirely so that all federal educational loans would be made directly by the government. Proponents of this change claim that over the next ten years it would save $94 billion in subsidy payments to lenders, which could then be used for Pell grants to students in financial need.

Highly Technical Banking Services . . .

In the recent subprime mortgage crisis Fannie Mae and her good friend Freddie Mac were placed in conservatorship by the US Treasury.

The proposal has ignited a particularly fractious political battle. Although they collect hefty fees on loans that are virtually risk-free, private lenders under the subsidized loan program, like Sallie Mae, Bank of America and Citigroup, argue that they provide valuable services in marketing, customer relations, billing, default prevention, and collection of delinquent loans.

Or a Risk-Free Ride

Critics, however, say that because of the financial crisis, the government is directly or indirectly financing almost all federal student loans and there is no reason to continue a program that was originally intended to inject private capital into the education lending system.

A Few Million Dollars Per Banker . . .

For lenders, the stakes are huge. According to a New York Times report, despite losing $213 million in 2008, student lender Sallie Mae paid its chief executive and its vice chairman a total of $17.8 million in cash and stock. The company, which did not receive money under the federal bailout system and is not subject to pay restrictions, also disbursed cash bonuses of up to $600,000 to other executives.

Or a Few Hundred Dollars Per Student

Under the president’s proposal, the additional Pell grant money that would be available to an individual student probably would not be more than a few hundred dollars. But the money would be distributed to a large group of needy students for whom a little more money may make a big difference.