Category Archives: student loan assistance

What is a Private Student Loan?

Posted on May 7, 2012 by admin

Getting the education you need to succeed in life is going to be costly. Many people cannot afford to pay for their college education, or graduate school, without some kind of financial aid or student loan. Student loans can come from various sources, including the Federal government. Private student loans are also available, and these can be obtained through various lending institutions. A private student loan is similar to a regular private loan and it will have many of the same requirements. Your credit history and credit score will be checked. These may also be called alternative student loans. Some student loans will enable you to opt out of making payments while in school, and interest will most likely be charged the whole length of the loan. Private student loans are going to be higher in interest rates than any student loans available from the government and they often do not come with many options when it comes to repayment. Because of the higher interest rate, a private student loan should only be considered after you have tried to get all of the Federal student loans possible. Forbes warns that interest rates on a private student loan are often variable . On a Federal loan, they are fixed and will remain at that rate for the duration of the loan. Interest rates on private loans typically reset every quarter, and there is no limit to how high the interest can rise to. In addition, if there is a problem with repayment, the legal agency Nolo says that a Federal student loan provides you with several possible options including deferment, forbearance, or even loan cancellation. Some private student loans may only offer limited options and they will generally not be as good. Student loans that are available from the private sector have been changing, and some of them now offer some interesting options. SmartMoney mentions that some private education loans may even offer to forgive up to 25 percent of the student loan if all payments are made on time – and if they graduate. The article also mentions, however, that caution needs to be given when looking at this type of loan with “great features” because they may have other extra fees, rising interest rates, and longer debt repayment periods – which increases the amount of the money loaned. Federal loans should always be considered before ever even thinking about a private student loan. The government’s Student Aid website provides amounts of Federal student loans that can be obtained for both undergraduates and graduates. If you qualify, you should try and get all you can in the way of Federal loans first, and then meet the remaining needs with private student loans. There may also be charges for originating the private student loan, too. SmartMoney also mentions that it could be as much as 10 percent, which could amount to about $900 on average. A private student loan may also have other charges, and the repayment period is typically 20 years – which will mean higher payments than the 30 years allowed on Federal student loans. If you ever need to get a private student loan, be sure to shop around before signing on it. This will help you get a better deal with better terms – and possibly even better interest rates. Continue reading →

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What Is A Student Loan?

Posted on May 3, 2012 by admin

Getting an education is a very important part of preparing for a successful future. Apart from having to invest at least four years (or more) of your life for that college degree, there is also going to be a lot of cost involved. Knowing what is a student loan is a crucial step in that education.  Many students take out student loans to pay for their education which can be paid back after graduation. There are two main types of student loans available – the subsidized and the unsubsidized. Student loans may come from the Federal government (offering both subsidized and unsubsidized) and the other ones come from the private sector – which may also offer both types. A subsidized student loan is one which accumulates interest only after graduation and an unsubsidized loan charges interest during the entire time of the loan. Student loans can be used to pay for most school expenses, including the tuition and fees, the room and board, your books, supplies and even your transportation. After graduation, it will be necessary to start repaying back the loan you took out for your education. With a Federal student loan, you do not need to begin repayment for six months after you complete your schooling. The Department of Education says that the government also provides a number of repayment options, which could make repayment easier than with other options. The advantage of getting Federal student loans to get your degree is that these loans have lower interest than any other kind. This can enable you to save many thousands of dollars if you borrow most or all of the money needed to go through college. Eligibility for student loans is usually based on your financial need and some other considerations. The official student aid website provides several qualifications, which includes: Being a US citizen, or an eligible noncitizen. Possess a valid Social Security number. Males who are between 18 and 25 must be registered with the Selective Service. Have completed high school. Maintain academic standing (good grades). All applicants of Federal student loans have to fill out the Free Application for Federal Student Aid (FAFSA) forms. This form can be filled out online. Once completed, this will determine the amount of eligibility a student has for a loan and it will also determine how much can be borrowed. The amount of money that can be borrowed partly depends on whether you are considered a dependent or an independent. It also will depend on whether you are taking undergraduate or graduate classes. Charts are available that show the amounts and limits of Federal student loans . Several different types of education loans are available from the government. Some of these loans (Direct PLUS) are also available to parents who want to help pay for their child’s education. Interest rates are determined by the government. After graduation, government loans can be consolidated with other government loans for better terms, but they cannot be combined with any private loans. Before applying for any student loans, a student should try to get as much free money for education as possible. This can come in the form of grants and college scholarships. By getting available free money first, the amount of money that needs to be borrowed in student loans with interest can be minimized – allowing the graduate to get out of debt faster after graduation.  Understanding what is a student loan may, in fact, help you find an answer to the meaning of life. Continue reading →

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Student Loan Principal-Only Payments: The Basics

Posted on April 30, 2012 by admin

The trick to getting ahead on loan payments, especially for student loans and mortgages, is making principal-only payments. Such payments are also called “prepayments.” Principal-only payments cause a loan to amortize sooner. If you have an adjustable rate or interest-only mortgage, principal-only payments can lower your interest rate. There are many ways to make principle-only payments. The first step is to review the loan contract. You can also call the lender and start asking questions. If the lender arranges to have your loan serviced by an agent, the terms regarding principal-only payments can change. If you get a notice that your loan servicer has changed, call the new servicer to determine how to continue making principal-only payments. The first question to ask is: am I allowed to make principal-only payments? Most lenders allow you to do so only if you are current on regular payments. Some lenders charge a fee for making a principal-only payment. Next, ask how to make a principal-only payment. Some lenders require you to send principal-only payments to a different address than regular payments. If you send a principal-only payment to the same address as a regular payment, the amount may only be applied to future regular payments. Some mortgage lenders provide debtors with a mortgage coupon to state the extra amount above the regular payment. If you phone in payments, direct the representative with whom you speak to make a principal-only payment. Write down their name, identification number, and time you spoke to them. If you mail in a check, write “principal-only payment” in the memo space. To avoid confusion, think of sending two checks: one for your regular payment and one clearly marked as a principal-only payment. Many lenders allow you to set up online bill pay with a bank or credit card. A number of these lenders apply overage from your regular payment to principal. Other lenders avoid confusion by offering a bi-monthly payment plan. This is a structured plan in which you pay every two weeks instead of every month. A bi-monthly payment plan allows you to add one extra regular payment per year. Lenders may get confused if you send a principal-only payment equal to or greater than a regular payment. They think you are trying to make a regular payment a month in advance. Debtors may be able to avoid this problem by sending a principal-only payment lower than their regular payment. If you can steadily make principal-only payments in addition to your regular payments, ask your lender whether they are willing to amend your loan contract. You may be able to negotiate for better terms on the loan. Check your state’s laws to determine if you need to put the changes in writing. Debtors should recognize that principal-only payments do not satisfy requirements to make monthly minimum payments or pay off penalties and interest. If a debtor has any outstanding charges, a lender may apply a principal-only payment toward these charges despite instructions to the contrary from the debtor. Continue reading →

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Is a Student Loan Still a Good Investment?

Posted on April 15, 2012 by admin

“Borrowing for college should be the best investment you’ll make,” says the student loan ombudsman, Rohit Chopra, of the newly formed Consumer Federal Protection Bureau, “but for many Americans, paying off those student loans is a real challenge.” Since the mid 1960’s when the federal student loan program was put into effect as part of Lyndon Johnson’s Great Society program, low to middle income college students have depended upon student loans to give them the opportunity they would not have ordinarily had to attend college. For the parents of those now attending college, student loans meant small low interest rate payments that could be paid off in a reasonable amount of time and not the unwieldy loans their children now face. For lower and middle class families, getting student loans became the defacto way to get a college education and as common and acceptable as getting a mortgage to buy a house. When it came time for recent generations of students to go to college, there was no question in parents’ minds about signing their children up for student loans to help with tuition. After all, it had worked for them. Why wouldn’t it work for their children? With both their parents’ and society’s blessing, today’s college students cheerfully obligated themselves for student loans that would haunt them for most of their adult life. Unlike the relatively painless experience college students of previous generations had with student loans, today’s student loans have been changed by a number of factors, the biggest one being the cost of a college education today versus the cost of a college education when their parents went to school. Since federally sponsored loans no longer cover all of the costs of college, so called “student loans” from private lenders have become more common, particularly for students from families with higher earning college educated parents. Although these families do not qualify for the lower cost federally sponsored student loans, most do not make enough money to write a check for today’s high college costs, thus necessitating a “student loan” from a private lender. Many of today’s private “student loans” lenders were under the same unregulated boom and bust cycle as mortgages and other credit products with the same kind of abuses that have since been curtailed on credit cards, mortgages, and other financial products. Add to that the relative lack of financial experience of most college students who take over the process of obtaining student loans after the first initial years of college and you have the makings of a financial crisis waiting to happen. For many, the money for student loans was used as a means to help buy a new computer or help finance a used car for transportation and possibly even less practical applications of the money. Because they did not have the same protections of the federally sponsored loans of their parent’s day, these loans were not as quickly and easily paid off as the student loans of their parents’ day. Today student loan debt has passed credit card debt and has hit $1 trillion mark and is “too big to fail” according to the CFPB ombudsman, Rohit Chopra, who is now taking complaints about private student loan companies. Is a student loan still a good investment? It still can be if approached with the right kind of caution and understanding of what the true long-term costs will be. However, students need have a thorough understanding of exactly what they are getting into before they sign the dotted line. Continue reading →

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Marriage and Student Loan Debt: The Basics

Posted on April 10, 2012 by admin

There are two primary ways to assume the student loan debt of a spouse or domestic partner. These are to be married to a partner in a community property state when the partner takes out a student loan or sign an agreement to repay a student loan for a partner. Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin are community property states. In these states, when one partner takes out a student loan during the course of the marriage, the other partner is liable for their debt. Texas law further provides that if one partner acts as an agent for the other, the partner who acted as an agent is liable for the other party’s debt. In both community property and common law (non-community property) states, creditors can reach a married couple’s joint assets. The difference between the two types of states is the extent to which a creditor can seize these assets. In community property states, a creditor can recover 100% of a joint asset. In common law states, a creditor typically is able to recover only 50% of a joint asset. This is the ownership interest of the partner who directly assumed the debt. Both joint bank accounts and items of personal property, such as a boat, are considered joint assets. In community property states, a creditor can recover 100% of an item of personal property even if only one partner’s name is recorded on the item’s title. A married couple can prevent the seizure of certain assets through a pre-nuptial agreement. The agreement should state that when the marriage takes effect, certain assets which were separate property before the marriage will remain separate property. Generally, state laws require that an agreement to repay a student loan for another person must be in writing. Many spouses who do not have an obligation to repay their partner’s debt do so in order to provide their partner with a benefit, such as a lower interest rate. The act of cosigning or signing as a surety on a student loan usually creates an obligation where none existed before. Sometimes, lenders send documents to a non-debtor spouse that make it appear as if that individual has an obligation to repay the loan. If you have received such documents, talk to a collections attorney or financial counselor before sending payments or signing any paperwork. One type of agreement that confuses many married couples is a consolidation agreement. When a non-debtor spouse cosigns or signs as a surety on a consolidation agreement, they can become liable for the entire amount of loans that have been consolidated. Even when a lender commits fraud by providing the non-debtor spouse with misleading or fraudulent documents, consolidation agreements can be tricky to undo. Accounting arrangements for consolidated loans tend to be extremely complex. Read the laws of your state to determine your potential and existing obligations for your partner’s student loan debt. The information you uncover may help you avoid unknowingly shouldering a greater burden. Continue reading →

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Details of Obama’s Pay-As-You-Earn Student Loan Plan

Posted on December 15, 2011 by admin

Obama’s Pay-As-You-Earn plan , announced October 26, 2011, will change how borrowers repay student loans.  The Pay-As-You-Earn plan is Obama’s response to the call for economic relief by students who will graduate during an economic downturn.  The Pay-As-You-Earn plan speeds up and modifies certain provisions of the U.S. Department of Education’s existing Income Based Repayment (IBR) plan . Only borrowers who have student loan debt that is high relative to their income and family size qualify for the IBR plan.  The U.S. Department of Education looks at a borrower’s income, family size, and state of residence to determine their monthly payment amount.  If a borrower has a monthly payment amount lower than the monthly payment amount they would have to pay under a 10-year standard repayment plan, they qualify for the IBR plan.  A borrower is notified of their eligibility for the IBR plan by their student loan servicer. The Pay-As-You-Earn plan, which will take effect in January 2012, is open to “new borrowers.”  A new borrower is a borrower who takes out a loan originating in 2012 or later.  Borrowers of Stafford and PLUS Loans can participate, as can borrowers of Consolidation Loans made through the Direct Loan or Federal Family Education Loan (FFEL) programs.  Borrowers of loans currently in default, parent PLUS Loans, and Consolidation Loans to repay parent PLUS Loans cannot participate.  Borrowers of private loans other than Consolidation Loans made through FFEL also cannot participate. With the Pay-As-You-Earn plan, students and recent graduates can reduce their monthly student loan payments and work toward total loan forgiveness.  The two main benefits of the Pay-As-You-Earn are a cap on minimum monthly payments at 10% of a borrower’s discretionary income and forgiveness of any remaining debt after 20 years in repayment.  Previously, the cap on minimum monthly payments was set at 15% of a borrower’s discretionary income and forgiveness would take place after 25 years. One of the other benefits of the Pay-As-You-Earn plan is a limited government subsidy on Subsidized Stafford Loans made through the Direct Loan or FFEL programs.  If a borrower’s monthly payment does not cover the interest that accrues on the loans each month, the government will pay the borrower’s unpaid accrued interest for up to three years from the start of repayment.  Another benefit is that borrowers working in public service are eligible to have payments made under the IBR plan count toward the 120 monthly payments required to receive loan forgiveness through the Public Service Loan Forgiveness program. There are two main downsides to the Pay-As-You-Earn plan.  The first is that borrowers may pay more in interest.  A reduction in the monthly payment lengthens the repayment period, causing a borrower to pay more than under other plans.  The second is that borrowers must provide documentation about their income and family size to their loan servicer every year.  If borrowers do not provide this documentation, their monthly payment amount will be set at the amount they would have to pay under a 10-year standard repayment plan. Continue reading →

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