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Student loan relief: what you need to know
Ah, student loans. Everyone’s favorite topic, right? But even if the idea of addressing our student loans makes us want to run away and hide, we do have to deal with them eventually. However, the best news is that we don’t have to deal with them alone. We have the latest info on student loan relief, how it affects you, and what you need to do next. Just read on for more information:
Know your loan
Before we get started with the current events of student loans, let’s take a minute to address those who are considering their first or newest student loans. It’s critical that you know what your loan means for you. You need to know the terms—like when you’re expected to pay it back—the interest, and how often payments need to be made, and all sorts of other details that will make a financial difference to you later in life. Be familiar with your loans so you don’t have any surprises down the line.
Research the differences
There are two different types of student loans—federal and private. This may seem like an elementary concept, but too many students don’t realize which type of loan they have until they are already locked in. Like we said above, you need to know your loan, which means you need to know which type of loan you have and who you are paying back. If you’re not sure, it’s okay—find someone at your school or a trusted colleague who can help you walk through the process. “Better late than never” definitely applies when it comes to learning about your loan—even though we think knowing the information ahead of time is even better than being late.
Think of your future
Students are always encouraged to think about the next several years of their lives while in school, mostly because they are choosing the academic path that will take them to their desired destination. But you also need to consider your job prospects when taking out a loan. Underwater basket weavers, while talented, may not have as many financial opportunities as a traditional job, so if that’s your goal, you need to take your loans into account. We’re not saying you have to change your entire career trajectory, but having a realistic expectation of what type of salary you will make is key to making smart loan choices.
Now that you have the prep work down pat, we can start learning about loan relief and how it affects you.
What is loan relief?
Past and current administrations have made decisions to incorporate and extend student loan relief. While it’s not guaranteed to everyone, many of those in student loan debt may find their budget loosening as a result of these programs. Essentially, loan relief is hitting the “pause” button on your loan. You don’t have to make payments, you aren’t collecting interest, and you can’t be penalized for late or no payments. While different circumstances can prompt these relief programs to become more necessary, the COVID19 pandemic has played a large part in necessitating loan relief and forgiveness, as many found themselves unexpectedly without a job at some point over the last two years.
Is my loan canceled?
No. Well, not necessarily. Loan relief means just what we said—you have a respite from payments with no penalties, but you will still owe the money eventually. President Biden has been rolling out a program that does totally forgive or cancel your loans, but not everyone is eligible. This link is a great resource if you’re wondering how to apply for loan forgiveness—just go through the steps and submit the info requested.
Does everyone get loan relief?
Unfortunately, student loan relief is only for federal loans. Those with private loans will have to continue making regular payments or risk significant financial penalties. However, this does not mean that all hope is lost. If you are struggling to make your private student loan payments, reach out to the company who provided your loan. Many of them have programs or options that can give you some financial slack for a little while. Don’t get yourself into even more debt, though—be sure to verify the terms of your private loan options just like you would for the loan itself.
How long does loan relief last?
As of right now, student loan relief has been extended to August 31, 2022. The previous relief deadline was May 1, 2022, until it was extended by the Biden administration. This means that the deadline could be extended again, but it’s not wise to count on that happening. You have a few months to work things out, so take a look at your budget and determine how you can make those payments again as soon as the relief period ends. It may be extended, it may not; either way, you don’t have to worry about being caught off guard if your payments are expected again after August 31.
Student loans can be a tricky subject to navigate, and we always recommend reaching out to a professional. Learn what you will owe, when you will owe it, how often you will owe it, and how much interest will be added before making any decisions. Look at your budget, look at your choices, and go with the loan that’s right for you.
Student loan forgiveness: separating fact from fiction
There is a lot of information out there on student loan forgiveness—but determining which material is the real deal takes a little bit of work. Luckily, there is plenty of accurate information available, and there are even steps you can take to determine what is legit. And once you are armed with that knowledge, you can move forward on the path of settling your student loans.
Consider the source
You don’t need us to tell you that celebrity magazines, while excellent for comparing who wore which clothing best, are not a good source of information for things like student loan forgiveness. The same goes for Facebook, Instagram, Twitter, and any app that allows you to turn yourself into a cartoon animal in a selfie.
Instead, look for reputable news sites and sites focused on helping people understand financial situations—consider resources like Forbes and Clark Howard, which can help you determine what kinds of resources are the best options.
Look it up
Now that you know which websites and resources are the best for gathering information, it’s time to get to work. Get on your favorite search engine and start reading. Don’t just take the word of the first article you read—look for different sources and the consistencies they each report. You can also consult with your student loan officer to see what they can tell you. But we know you have a lot going on, so we did some research for you:
Watch for scams
Even resources that pass your initial test for legitimacy may still need a second glance to ensure they are a reputable business. It’s not uncommon for scammers to create websites or other marketing materials that look like an agency that can help you, but the truth is that they may wind up costing you a lot of money.
If a company asks for sensitive information, promises that your student loans will be immediately forgiven, or wants payments made upfront before they provide you with services, run, do not walk, to the nearest state attorney general’s office and report the company for the scam.
Find the right people
There is a bright spot in the student loan forgiveness world, and that is those resources that can guide you to actual, real aid when it comes to your loans, whether that means reducing your loan amount or working with you to repay your loan on a schedule that works with your income.
Head to the Federal Student Aid website to submit a request for an income-driven payment plan for your student loans. And while you’re on the website, check out the sections on how federal aid works and the aid estimation calculator to get a better sense of how the process works.
What about possible political changes?
You have probably heard that one of Bernie Sanders’ campaign platforms centers around total student loan forgiveness. His plan is to cancel all current student loans, regardless of how large or old the debt is. Everyone would be eligible, and he has not mentioned any type of limit to the loan amount.
While Bernie may out of contention for 2020, the idea continues to gain momentum in certain political circles. There are still questions remaining in regards to how exactly the $1.6 trillion of student debt could be canceled, such as the timeline and whether it’s feasible for universities to give up those funds.
It’s important to note that cancelling student loans would not mean they would be canceled forever—what people are talking about is current student loan cancellation, which means only those loans that have been currently taken out by students, parents, etc.
If a student needed a loan to continue their education, or decided to go back to school at a future date, they would still be responsible for procuring and paying the funds. There is also no repayment for those who have already paid off their loans.
Yes—just like your budget, you have to have a plan for your student loans. They will not go away because you ignore them. In fact, you are more like to end up in collections and will then have to deal with potential legal repercussions.
None of these steps will help you with your loans if you are not an active participant in making it happen. Start by opening up all that mail your student loan company sends you – they can probably answer a lot of your questions right off the bat.
Student loans aren’t anyone favorite topic to think about, but there are ways you can take control. Look for reputable resources that can guide you through paying off your student loan dent on a schedule that makes financial sense for you.
Seven strategies for paying off student loans
Graduation is a time of celebration. You’ve finished four—ok, maybe five years of school, and you’re ready to conquer the world. Do you know what else you should be ready to conquer? Your student loan debt.
In 2018, the total amount of student loan debt in the U.S. was at an all-time high at nearly $1.5 trillion. Spread over 44 million borrowers, you can take comfort in the fact that you’re not alone. While the idea of repaying your debt may be overwhelming and a seemingly impossible feat, take heed. We’ve got a few words of wisdom that can help you get started. With some self-discipline and a little sacrifice, you’ll be able to wipe out that I.O.U. sooner than you think.
Here are some practical strategies you can use to get your finances in order, knock down that debt, and be well on your way to financial freedom:
1. Live like a college student
You’re eager to venture out into the real world and live on your own. You want to rent a cool apartment that doesn’t include a hand-me-down couch and four other roommates. We get it. But if you can stand it, try not to inflate your current lifestyle too quickly. By keeping the same penny-pinching habits you used in college, you’ll be able to send a bigger chunk of your paycheck to your lender. The quicker you pay it down, the faster you’ll graduate to a more comfortable lifestyle that doesn’t include a repayment plan.
2. Send more than the minimum payment
If you continue to send the required minimum loan repayment each month, it’ll take the full term of your loan to pay it off. You’ll also wind up paying the maximum amount of interest. Consistently sending more than your $50 minimum payment, for example, will not only help you pay the balance down more quickly, it will significantly reduce the total amount of interest you pay over the term of the loan. Increasing your payment by any amount will save you both time and money, and who wouldn’t want that?
3. Pick up a side hustle
If you need more money, find a way to bring in additional income. Maybe you DJ on the weekends, wait tables at night, or work as a freelance photographer. Whatever your talent, parlay it into a side hustle. The key here is to have enough discipline to take the extra income and pay down your student loans. It’s not a way to save for a vacation, to buy a new car, or a Louis Vuitton bag—right now, anyway. If your objective is to tackle your student loans, keep your eye on the prize!
4. Send extra payments
Did you get a tax refund, a bonus at work, a little extra cash in your birthday card? It might not be the most exciting thing to do, but paying down your loan with a windfall, no matter how big or small, is the financially smart thing to do. Making extra payments, whether it’s each month, every quarter, or whenever you happen upon some extra cash, will speed up your loan repayment and reduce your total interest expense. The faster you pay it down, the more money you save, and the quicker you get out from underneath that student loan debt.
5. Add loan repayments to your gift wish list
C’mon, how many Starbuck’s gift cards do you really need? When friends and family ask you for birthday or holiday gift suggestions, you might tactfully ask them for a cash gift to pay down your student loan balance. Check out sites like LoanGifting or Generosity, now a part of GoFundMe, to make it official. Services like these are exclusively dedicated to helping reduce student loan debt by accepting and processing loan repayment donations. Set up a profile, connect it to your loan account information, and gift-givers can help you on your road to financial freedom.
Be sure to read the fine print, though. Setting up an account is free, but there are some fees deducted from each financial gift.
6. Refinance your student loans
Consolidating and refinancing your student loans at a lower rate can help you reduce the amount of interest you’ll pay. It may also allow for a shorter repayment term and a quicker route to becoming debt free. With one loan, one monthly payment, and a more competitive interest rate, it’s worth a look. There’s no harm in evaluating your options, especially when there may be an opportunity to save some cash and reduce your debt more quickly.
7. Look for employers who can help
Student loan repayment assistance is an employee benefit that’s growing in popularity. In fact, according to Forbes, it was the hottest employee benefit of 2018. Check out their list of ten companies that are already on board.
There are other similar programs, too. Government employees may be eligible for the federal government’s Student Loan Repayment Program. Nurses and teachers may be eligible for the Nursing Education Loan Repayment Program and Teach for America, and public sector employees may be able to receive assistance through the Public Service Loan Forgiveness Program.
Weighted down with student loan debt isn’t the ideal way you’d like to begin this next chapter of your life, but it’s a reality for most college students. You can make the minimum payments, repay your loans as scheduled, and live happily in the process. But, if you’re anxious to finish those monthly payments and begin investing in your future, use these strategies and get started sooner than later.
Parents: Should you borrow for your child’s college education?
Congratulations! Your son or daughter was accepted into his or her top-choice university. You have an extra $175,000 lying around, right?
Your offspring’s education may cost that much or even more, now that the average cost of attending a private school has topped $42,000 a year, according to the College Board. If you can’t cover the whole bill with scholarships and savings, you may be tempted to borrow.
But should you? Ask yourself these questions:
How secure is your retirement?
Parents struggle with whether to put their child’s needs before their own. If you’ve followed the financial industry’s advice and prioritized your own retirement savings, you may not have been able to save much for college. Talk to a financial advisor about your retirement planning. This will help you decide whether you can handle education loans.
What’s your current debt level?
Are you still paying off your own education? If so, you wouldn’t be the only one. Many people are still chipping away at their college loans well into their careers, even as their own children near adulthood. Taking on more education debt may not be advisable if you haven’t eliminated your own.
Mortgage loans are also a consideration. Paying off your mortgage before retirement can help reduce the amount of monthly income you need once you stop working, so crushing this debt may be a big priority later in your career. If your home is worth significantly more than you owe, that equity may be a good source of college money. The interest rate on a home equity line of credit is likely to be lower than the rate on a federal loan for parents of college students. And, like other types of mortgages, the interest on home equity lines of credit may be tax deductible.
What are your other obligations?
If you buy your eldest a car as a 16th birthday present, your younger children will expect their own wheels, too. Over-extending yourself for one child’s education may be hard to replicate when the next kid enters college. Make a realistic plan that includes all your children’s likely college costs.
So should you borrow?
If your retirement savings are healthy, the rest of your finances are strong and you don’t have much debt, borrowing to pay for your child’s college might make sense. But it’s a last-resort option. Before you take out a loan, exhaust all possible financial aid options. Consider choosing a less expensive school, or having your child start at a community college and transfer to a four-year university later.
Many families find that it’s best for the student to be the borrower, rather than the parents. The interest rates on federally subsidized loans are better if they’re in the student’s name, and you can always help pay it off later if your own budget will allow it.
Your role as a parent is not coming to an end just because your son or daughter has earned a high school diploma. You still have to model good decision-making practices and healthy financial habits. That may include saying no to borrowing money for your child’s education.
Five facts about student loans that you need to know
The majority of students attending college will need to finance at least a portion of the cost required to further their education, most likely through student loans. While taking out a student loan may be a viable solution, there are both benefits and drawbacks of signing on the dotted line.
Here are five things you should know about the who, what, and how much of student loans.
1. Complete the FAFSA—NOW
FAFSA is the FREE Application for Federal Student Aid, and it’s the gateway to all federal financial aid, which also includes student loans. The Education Department offers scholarships, work-study, grants, and loans for eligible students in the amount of $150 billion each year. The only way to see if you qualify is to complete the application. The federal deadline is June 30, 2018, but the sooner you hit the submit button, the better, so don’t procrastinate.
2. Federal loan vs. private loans
Federal student loans often offer lower interest rates, a friendlier repayment schedule, and typically don’t require Mom or Dad to cosign to be your safety net. The income-driven repayment schedule is highly attractive, but if you have trouble making your monthly payments on that entry-level salary, you’ll also have deferment or forbearance options to consider. A private student loan is often used to fund the shortfall left by federal loans. They typically come with a higher interest rate compared to federal loans and your parents will need to cosign on the loan.
3. Parent PLUS loans
Every parent would love to save enough money to fund their child’s education, but if that’s not your reality, you might consider a Parent PLUS loan. This type of loan is available to the biological or adoptive parents of dependent students, and it does require a credit check. They’re not especially cheap, though. In 2017 the interest rate was 6.31%, the highest rate among all federal student loans.
4. Student loan default
Even with the generous repayment options, sometimes borrowers default on their student loan. You should be aware that if you default on your loan, you’ll lose all of the benefits that were so attractive when you applied. That includes deferment, forbearance, and any other repayment options that were offered in the past. You’ll also forfeit any future access to federal education aid while your loan is in default.
Sadly, it doesn’t end there. The lender may also report the loan default to the major credit bureaus so your credit score will take a serious hit and the government has the authority to garnish your wages and claim your annual tax refund. And don’t forget about your cosigner, if you have one. They’ll be subjected to the same actions.
5. Student loan forgiveness
Who doesn’t wish that their debt could just disappear? Sometimes it’s called loan forgiveness and other times it’s referred to as loan discharge or cancellation. They’re all a little bit different, but the result is essentially the same.
Loan forgiveness plans may be available for people in education, public service, healthcare, military and other professions. There are specific requirements that need to be met, and not all loans are eligible for forgiveness.
Student loans may also be discharged for personal reasons, although this is very rare. They include school closings, bankruptcy, disability, identity theft or false certification, unpaid refunds, and fraud.
School loans are an excellent means to help fund your education, but all options are not created equal. If you know the rules and can budget your repayment, it can be a wise investment in your future.
Should you borrow to get an MBA?
If you’ve decided that an MBA is an important investment in your career, then your next step should be to determine how to finance your next two years of study. While many students rely on a combination of their own savings, help from family and other outside sources, other students have only to rely on the availability of grants, loans, and employment. If you’re a member of the latter group, don’t be discouraged. There are multiple resources that can help you overcome the financial challenges.
Start where the money is free. Grants, also called fellowships, fall into this category because they do not need to be repaid. A grant is awarded from the government, a foundation, or a trust and is typically given to an institution, a business, or an individual. The criteria for receiving a grant is not necessarily achievement based and can be more general in nature.
A business degree makes you a valuable asset to your employer, which is why your company may be willing to finance your post-baccalaureate education. They may already have a tuition reimbursement program in place. If not, submit a proposal that highlights the benefits of investing in you and your future at the company. Interviewing for a new position? Consider using tuition reimbursement as a negotiating tool.
Student loans, the most popular education financing tools, fall into the opposite category because they require repayment. Federal student loans can be either subsidized or unsubsidized, which determines whether the government or the borrower is responsible for paying the interest while you’re in school, as well as the generosity and flexibility of the loan repayment terms.
Private loans designed to meet the needs of an MBA student can also be attractive options when it comes to supplementing other sources. In fact, if you have excellent credit, a private lender may be able to offer a more competitive interest rate and friendlier repayment terms. Most private lenders don’t charge application, disbursement or origination fees and you can refinance your loan if interest rates go down or your credit score increases.
While they may not be your first choice, don’t cross private loans of your list quite yet. They do have their advantages, especially when you combine them with other sources to create a flexible and smart financing package.