Many students who exit college often have some form of student loan debt. It’s becoming more common, however, for college graduate to have multiple student loans that must be repaid in the months after they graduate due to the rising cost of attending a university or college.
It’s for this reason that many students will seek a student loan consolidation in order to make their multiple student loans more affordable when payments began to come due a few months after they graduate. While there are people who are against consolidating debt and any student that may have only two or three loans might not benefit from a student consolidation, there are benefits of seeking a consolidation loan for student debt.
Keep in mind that there are certain types of student loans that will not consolidate so it will be important to look at the type of loans you have and be sure that they will consolidate, otherwise you may not benefit from consolidating. Keeping student loans separate can be more affordable in the long run because even with multiple interest rates there is a smaller principle amount on which interest is charged.
However, anyone with multiple student loans may benefit from consolidating simply because federal student debt consolidation loans often come with a low interest rate. These types of consolidation loans can be more affordable, but any student who gets a student loan consolidation needs to make sure that they do all they can to pay off their consolidation loan as quickly as possible.
Paying the minimum monthly amount can be affordable but it can also cost more over the life of the repayment loan. It will be in a college graduate’s best interest to pay as much as they can each month in order to get out of debt faster. A consolidation loan doesn’t have to cost much more over the long run, as long as you make sure you’re paying as much as you possibly can from month-to-month.
If you are having trouble repaying student loans it’s probably not a bad idea to talk to your student loan lender about various options that range from student loan consolidations to income-based repayment plans. College debt is often necessary but it doesn’t have to follow you around for years after you exit college.
Source
Saturday, August 28, 2010
Sunday, August 15, 2010
Student Loan Forgiveness Programs
There can be no better news for a student loan borrower than to hear that their loan has been forgiven. This means that a portion, or perhaps all of the loan is cancelled and you no longer have to budget part of your income towards making your monthly student loan payments. Keep in mind that this option is not available to every student loan borrower, but there are special situations in which all or part of a loan can be forgiven.
You must remain realistic and realize that there are only a few specific circomstances in which your student loans may be forgiven. These situations are outlined below.
Volunteering
If you volunteer for certain organizations, you may qualify for loan forgiveness.
-$4,725 can be used toward your student loans if you serve in AmeriCorps for 12 months or more.
-Peace Corps volunteers can have 15% of their Perkins loan cancelled for each year of volunteer service, up to 70% of the total loan amount. They can also have their Stafford and consolidated loans deferred.
-For 1700 hours of service, Volunteers in Service to America may receive $4,725.
Teaching
Students who become full time teachers may have part of their student loans forgiven in certain circumstances.
If you become an elementary or secondary school teacher with students from low-income families, a certain portion of your Perkins Loan can be forgiven, depending upon the length of your service.
- 15% for years one and two
- 20% for years three and four
- 30% for year five
Check with your school district administration to determine whether your school is eligible for loan forgiveness under these provisions. Teachers may also be eligible for other loan forgiveness programs depending upon the state in which they teach.
Legal Professions
If you take a public service or a non-profit position after graduation, some law schools will forgive your loans. Visit the Equal Justice Works website for more details regarding cancelling your law school loans.
Medical Professions
The National Health Service Corps will forgive student loans for registered nurses and physicians who work in medically underserved areas.
Be aware that the criteria for forgiving student loans may differ between federal and private student loans, and among the groups forgiving the loans.
If you find you don’t qualify for any of these forgiveness programs, but you would still like to lessen your payments, consider consolidating your loans. This will allow you to spread out the payments over a longer period of time, thus lowering your monthly payments.
Source
You must remain realistic and realize that there are only a few specific circomstances in which your student loans may be forgiven. These situations are outlined below.
Volunteering
If you volunteer for certain organizations, you may qualify for loan forgiveness.
-$4,725 can be used toward your student loans if you serve in AmeriCorps for 12 months or more.
-Peace Corps volunteers can have 15% of their Perkins loan cancelled for each year of volunteer service, up to 70% of the total loan amount. They can also have their Stafford and consolidated loans deferred.
-For 1700 hours of service, Volunteers in Service to America may receive $4,725.
Teaching
Students who become full time teachers may have part of their student loans forgiven in certain circumstances.
If you become an elementary or secondary school teacher with students from low-income families, a certain portion of your Perkins Loan can be forgiven, depending upon the length of your service.
- 15% for years one and two
- 20% for years three and four
- 30% for year five
Check with your school district administration to determine whether your school is eligible for loan forgiveness under these provisions. Teachers may also be eligible for other loan forgiveness programs depending upon the state in which they teach.
Legal Professions
If you take a public service or a non-profit position after graduation, some law schools will forgive your loans. Visit the Equal Justice Works website for more details regarding cancelling your law school loans.
Medical Professions
The National Health Service Corps will forgive student loans for registered nurses and physicians who work in medically underserved areas.
Be aware that the criteria for forgiving student loans may differ between federal and private student loans, and among the groups forgiving the loans.
If you find you don’t qualify for any of these forgiveness programs, but you would still like to lessen your payments, consider consolidating your loans. This will allow you to spread out the payments over a longer period of time, thus lowering your monthly payments.
Source
Wednesday, July 28, 2010
Exactly What is Student Loan Consolidation?
Student loan debt consolidation, a method of simplifying finances and reducing the burden on students. Instead of making payments on several loans, the borrower makes a single affordable repayment to clear off his debts.
Two out of three graduating students graduates with a certain amount of loan(s) to be repaid yet. The rising prices, inflation might add to this and push you into mishandling the debts. All such alarming issues can be brought under control with the concept of consolidation of loans. In other words, debt consolidation, is a larger loan taken out over several existing loans. All the outstanding debts are consolidates into one single affordable monthly repayment.
Student loan consolidations are specifically designed to reduce the burden and provide relief to a student with more than one loan. A student with his busy schedule might forget or get exhausted to pay the multiple installments each month. In order to tackle with such situations and provide a solution, banks and financial institutions came up with an excellent idea, consolidation of loans.
Student loan debt consolidation ensures the following benefits – lower monthly payments and longer payment periods. However, the students are advised to ponder over a few points like is the amount of rate of interest on the consolidated loan, less than the amount of the rate of interest put together on all the individual loans. Do a bit of math and figure out the monthly payment after consolidation. Make sure that at the earliest available opportunity, you will come out of the debt by clearing it. Never hesitate while consulting a consolidator and do get all of your queries answered before you consolidate your loans.
Consolidation also liberated from inflating interest rates and paves way for stable financial management. It provides you with flexible terms and conditions, which helps in settling down all the financial liabilities in a jiffy at very inexpensive costs. The added advantages being, waiving off late fees, avoiding bankruptcy, having only one monthly payment and reduction or elimination of over-limit charges. The advantage which is worth noting is that the lower rate of interest lasts for the duration of the payment period.
However, there are certain things that cannot be ignored, like, extension of the loan term helps in reducing the monthly payments but prolongs the debt thereby resulting in more interest being paid over the full term. It is always advisable to clear off the debts as early as you can.
It is entirely possible to use student loan consolidation to help seek a more stable financial standing. Finding a reputable consolidation company, however, is paramount. Do your homework, take as much time available to research the many options. The best bet, however, is to go with reputable companies that are familiar and well known.
Individuals must do the necessary to develop good, responsible spending habits. The importance of budgeting can not be overlooked. It is better to avoid taking out more loans for debt relief – it simply makes matters worse.
A Student loan debt consolidation is a boon, it can reduce high interest rates and simplify monthly payments by reducing them to one.
Source
Two out of three graduating students graduates with a certain amount of loan(s) to be repaid yet. The rising prices, inflation might add to this and push you into mishandling the debts. All such alarming issues can be brought under control with the concept of consolidation of loans. In other words, debt consolidation, is a larger loan taken out over several existing loans. All the outstanding debts are consolidates into one single affordable monthly repayment.
Student loan consolidations are specifically designed to reduce the burden and provide relief to a student with more than one loan. A student with his busy schedule might forget or get exhausted to pay the multiple installments each month. In order to tackle with such situations and provide a solution, banks and financial institutions came up with an excellent idea, consolidation of loans.
Student loan debt consolidation ensures the following benefits – lower monthly payments and longer payment periods. However, the students are advised to ponder over a few points like is the amount of rate of interest on the consolidated loan, less than the amount of the rate of interest put together on all the individual loans. Do a bit of math and figure out the monthly payment after consolidation. Make sure that at the earliest available opportunity, you will come out of the debt by clearing it. Never hesitate while consulting a consolidator and do get all of your queries answered before you consolidate your loans.
Consolidation also liberated from inflating interest rates and paves way for stable financial management. It provides you with flexible terms and conditions, which helps in settling down all the financial liabilities in a jiffy at very inexpensive costs. The added advantages being, waiving off late fees, avoiding bankruptcy, having only one monthly payment and reduction or elimination of over-limit charges. The advantage which is worth noting is that the lower rate of interest lasts for the duration of the payment period.
However, there are certain things that cannot be ignored, like, extension of the loan term helps in reducing the monthly payments but prolongs the debt thereby resulting in more interest being paid over the full term. It is always advisable to clear off the debts as early as you can.
It is entirely possible to use student loan consolidation to help seek a more stable financial standing. Finding a reputable consolidation company, however, is paramount. Do your homework, take as much time available to research the many options. The best bet, however, is to go with reputable companies that are familiar and well known.
Individuals must do the necessary to develop good, responsible spending habits. The importance of budgeting can not be overlooked. It is better to avoid taking out more loans for debt relief – it simply makes matters worse.
A Student loan debt consolidation is a boon, it can reduce high interest rates and simplify monthly payments by reducing them to one.
Source
Thursday, July 15, 2010
Why the Need to Consolidate Student Loans?
To consolidate student loans debt can be the most important and responsible decision that you as a student can very well undertake in your life. If you have not done any college loan consolidation, you might ask – why is that? Is it an inevitable thing that I have to go through in my college life? What beneficial effects does it actually have in my finances? Is it more like another one of those student loans that I have already taken in the past?
If you are poised to consolidate student loans, then you are almost assured of a much easier financial position, far better than what you are now experiencing with all the federal and private debts that you already have.
Definitely with the pile-up of multiple debts under your name – there is no other way to do right but consolidate all them. You might ask – another loan again? I don’t think I need one more to further aggravate my financial miseries.
Think again. College loan consolidation is not just any other type of loans. Instead it is a special program intended to help out students who in dire need of help from all the financial burden that they carry because of their unmanageable loans.
What actually happens when you consolidate student loans?
Great things happen, as far as the financial aspect of your life is concerned. First of all, it lowers your monthly payment. In fact, it transforms all you monthly dues into a single payment because now of the new loan that you now have in place of the multiple loans. In effect, you are given a much lighter repayment responsibility because if this one monthly payment.
So now that you do not have to spend all your money on multiple payments, you now have more cold cash on your hands, ready for dispensing on any expense or purpose that you might have. If you are one who loves to save, then save it for future important use.
I believe that one of the most important benefits when you consolidate student loans is the positive effect that it has on credit ratings. Remember, with consolidation, your new lending company basically pays of your multiple loans –wholly. This means a lot when it comes to trying to improve on your credit ratings. Another thing, since you consolidate student loans with a single lender, this is a plus factor in the improvement of your credit standing.
Source
If you are poised to consolidate student loans, then you are almost assured of a much easier financial position, far better than what you are now experiencing with all the federal and private debts that you already have.
Definitely with the pile-up of multiple debts under your name – there is no other way to do right but consolidate all them. You might ask – another loan again? I don’t think I need one more to further aggravate my financial miseries.
Think again. College loan consolidation is not just any other type of loans. Instead it is a special program intended to help out students who in dire need of help from all the financial burden that they carry because of their unmanageable loans.
What actually happens when you consolidate student loans?
Great things happen, as far as the financial aspect of your life is concerned. First of all, it lowers your monthly payment. In fact, it transforms all you monthly dues into a single payment because now of the new loan that you now have in place of the multiple loans. In effect, you are given a much lighter repayment responsibility because if this one monthly payment.
So now that you do not have to spend all your money on multiple payments, you now have more cold cash on your hands, ready for dispensing on any expense or purpose that you might have. If you are one who loves to save, then save it for future important use.
I believe that one of the most important benefits when you consolidate student loans is the positive effect that it has on credit ratings. Remember, with consolidation, your new lending company basically pays of your multiple loans –wholly. This means a lot when it comes to trying to improve on your credit ratings. Another thing, since you consolidate student loans with a single lender, this is a plus factor in the improvement of your credit standing.
Source
Wednesday, April 28, 2010
Justices rule that pension loans must be repaid
CHARLESTON - School employees who borrowed on their pensions must fully repay the Consolidated Public Retirement Board even if they trimmed other debts through bankruptcy, the West Virginia Supreme Court of Appeals decided.
The Justices ruled March 5 that "pension loans were not 'debts' under bankruptcy law because the participants merely borrowed their own money."
They wrote that by the logic of Congress in pension law, a loan is nothing more than moving money from the right pocket to the left.
"Repaying the loan then becomes nothing more than shifting money back to the right pocket," they wrote.
Though they allowed the retirement board to recover loans from three individuals, they rejected the board's demand for interest.
That eased the pain of the three, for the loans linger from the 1980s.
The Justices wrote that "if one simply moves money from their right to their left pocket, it seems absurd for the right pocket to then demand that interest be paid for so long as the money sits in the left pocket."
School employees can no longer borrow from their pensions.
In the 1980s, they could borrow up to $8,000 from the former Teachers Retirement System, with five years to finance it by payroll deduction.
James G. Clay borrowed $3,830 in 1984, at 9.5 percent interest. He declared bankruptcy in 1986, owing $2,103.50.
Michael Corbett borrowed $6,403.17 in 1985, at 11.25 percent. He declared bankruptcy in 1987, owing $4,022.71.
Katherine Hoopengarner borrowed $6,503 in 1988, at 11.25 percent. She declared bankruptcy in 1989, owing $4,585.62.
As each bankruptcy case started, payroll deductions stopped.
All three would testify that they believed bankruptcy discharged the debts.
Pension managers believed it too, for an assistant attorney general wrote in 1990 that future petitions wouldn't discharge loans but past petitions probably did.
Out of the blue in 2003, demands fell on Clay, Corbett and Hoopengarner.
Clay paid $2,103.50, but received a demand for $7,671.24 in interest.
Corbett and Hoopengarner offered to pay their balances but balked at interest.
The board entered an order against them in 2005, and Kanawha Circuit Judge James Stucky affirmed it in 2008.
Stucky turned out right on principal but wrong on interest.
The Justices wrote that "the proper route would have been for the board to have immediately, in the 1980s, sought permission from the bankruptcy court to resume payroll deductions."
They wrote, "It was improper for the board to do nothing, and attempt to collect compounded interest decades after the fact."
Bradley Pyles of Logan represented Clay and Corbett. Timothy Sirk of Keyser represented Hoopengarner. Jeaneen Legato of Charleston represented the board.
Source
The Justices ruled March 5 that "pension loans were not 'debts' under bankruptcy law because the participants merely borrowed their own money."
They wrote that by the logic of Congress in pension law, a loan is nothing more than moving money from the right pocket to the left.
"Repaying the loan then becomes nothing more than shifting money back to the right pocket," they wrote.
Though they allowed the retirement board to recover loans from three individuals, they rejected the board's demand for interest.
That eased the pain of the three, for the loans linger from the 1980s.
The Justices wrote that "if one simply moves money from their right to their left pocket, it seems absurd for the right pocket to then demand that interest be paid for so long as the money sits in the left pocket."
School employees can no longer borrow from their pensions.
In the 1980s, they could borrow up to $8,000 from the former Teachers Retirement System, with five years to finance it by payroll deduction.
James G. Clay borrowed $3,830 in 1984, at 9.5 percent interest. He declared bankruptcy in 1986, owing $2,103.50.
Michael Corbett borrowed $6,403.17 in 1985, at 11.25 percent. He declared bankruptcy in 1987, owing $4,022.71.
Katherine Hoopengarner borrowed $6,503 in 1988, at 11.25 percent. She declared bankruptcy in 1989, owing $4,585.62.
As each bankruptcy case started, payroll deductions stopped.
All three would testify that they believed bankruptcy discharged the debts.
Pension managers believed it too, for an assistant attorney general wrote in 1990 that future petitions wouldn't discharge loans but past petitions probably did.
Out of the blue in 2003, demands fell on Clay, Corbett and Hoopengarner.
Clay paid $2,103.50, but received a demand for $7,671.24 in interest.
Corbett and Hoopengarner offered to pay their balances but balked at interest.
The board entered an order against them in 2005, and Kanawha Circuit Judge James Stucky affirmed it in 2008.
Stucky turned out right on principal but wrong on interest.
The Justices wrote that "the proper route would have been for the board to have immediately, in the 1980s, sought permission from the bankruptcy court to resume payroll deductions."
They wrote, "It was improper for the board to do nothing, and attempt to collect compounded interest decades after the fact."
Bradley Pyles of Logan represented Clay and Corbett. Timothy Sirk of Keyser represented Hoopengarner. Jeaneen Legato of Charleston represented the board.
Source
Thursday, April 15, 2010
Student loans will see changes in lenders, repayment options
Change is on its way this year to the 75 percent of Augustana students who rely on Federal Stafford Loans.
Last September, the Student Aid and Fiscal Responsibility Act (SAFRA) passed in the U.S. House of Representatives by more than 80 votes, advancing to the Senate for final approval. This bill determines whether the federal student loan program will undergo a nationwide transformation.
"The act passed in the House with flying colors," Brenda Murtha, director of financial aid, said. "Then it got to the Senate right when healthcare took center stage."
If the transformation happens, the government will terminate the Federal Stafford Loan program and replace it with the Federal Direct Loan program. The difference between the two is the lending source. Federal Stafford Loans require an external lender that students choose, such as Wells Fargo or Citi Bank, whereas Federal Direct Loans come straight from the government.
"Obama wanted to take over," Murtha said. "The Direct Loan program cuts out the middle man. Lenders have been mad, but they know they'll still have business with private loans."
A couple benefits of the Direct Loan program include public service cancellations and more repayment options. Direct Loans also do not require students to shop around for lenders.
Augustana sophomore Sawyer Vanden Heuvel accepted Federal Stafford Loans his freshman year. His lender was U.S. Bank, but in September the bank withdrew from the program.
"Between sophomore and junior year, we are all given more subsidized loans," Vanden Heuvel said. "After interim, I became junior status credit-wise. So instead of choosing a new lender, Financial Aid wanted me to test this Direct Loan program because most likely everyone will have to do it next year."
Because of this switch, Vanden Heuvel will have loans sitting in two places—one with U.S. Bank and the other with the government. Upon graduation, though, he has the option to consolidate.
"When I meet with seniors for their exit consultations, I don't like to see their loans in two or three different places," Murtha said. "The Direct Loan program allows students to consolidate, which will get all their loans coming though the federal government."
Though this bill still sits on the Senate's to-do list, Murtha, along with the rest of Financial Aid, anticipates the transition that seems to be inevitable.
"Financial Aid will get all the kinks out for students before the Senate passes the bill, and they'll already be experienced," Vanden Heuvel said.
What this transition means for Augustana students seeking Stafford Loans is to complete the Master Promissory note and the Entrance Counseling again. These are the first two steps necessary when accepting federal loans. Links to both can be found online at www.augie.edu/finaid.
"Direct Loans have worked well, and I'm pleasantly surprised so far," Murtha said. "What I fear, though, is that it will be more difficult to communicate with the government. People can call in, I just hope that if students have issues after graduation and during repayment they'll get help from the Department of Education."
Source
Last September, the Student Aid and Fiscal Responsibility Act (SAFRA) passed in the U.S. House of Representatives by more than 80 votes, advancing to the Senate for final approval. This bill determines whether the federal student loan program will undergo a nationwide transformation.
"The act passed in the House with flying colors," Brenda Murtha, director of financial aid, said. "Then it got to the Senate right when healthcare took center stage."
If the transformation happens, the government will terminate the Federal Stafford Loan program and replace it with the Federal Direct Loan program. The difference between the two is the lending source. Federal Stafford Loans require an external lender that students choose, such as Wells Fargo or Citi Bank, whereas Federal Direct Loans come straight from the government.
"Obama wanted to take over," Murtha said. "The Direct Loan program cuts out the middle man. Lenders have been mad, but they know they'll still have business with private loans."
A couple benefits of the Direct Loan program include public service cancellations and more repayment options. Direct Loans also do not require students to shop around for lenders.
Augustana sophomore Sawyer Vanden Heuvel accepted Federal Stafford Loans his freshman year. His lender was U.S. Bank, but in September the bank withdrew from the program.
"Between sophomore and junior year, we are all given more subsidized loans," Vanden Heuvel said. "After interim, I became junior status credit-wise. So instead of choosing a new lender, Financial Aid wanted me to test this Direct Loan program because most likely everyone will have to do it next year."
Because of this switch, Vanden Heuvel will have loans sitting in two places—one with U.S. Bank and the other with the government. Upon graduation, though, he has the option to consolidate.
"When I meet with seniors for their exit consultations, I don't like to see their loans in two or three different places," Murtha said. "The Direct Loan program allows students to consolidate, which will get all their loans coming though the federal government."
Though this bill still sits on the Senate's to-do list, Murtha, along with the rest of Financial Aid, anticipates the transition that seems to be inevitable.
"Financial Aid will get all the kinks out for students before the Senate passes the bill, and they'll already be experienced," Vanden Heuvel said.
What this transition means for Augustana students seeking Stafford Loans is to complete the Master Promissory note and the Entrance Counseling again. These are the first two steps necessary when accepting federal loans. Links to both can be found online at www.augie.edu/finaid.
"Direct Loans have worked well, and I'm pleasantly surprised so far," Murtha said. "What I fear, though, is that it will be more difficult to communicate with the government. People can call in, I just hope that if students have issues after graduation and during repayment they'll get help from the Department of Education."
Source
Monday, February 15, 2010
Paying off student loans requires smart decisions
Last June's college graduates face a tough choice this month. That's when the automatic six-month deferment on their student loans expires, forcing them to start repaying the money or beg for additional time.
Never have students been so deep in debt and so unprepared to pay.
The average student is carrying a record debt load of more than $23,000, according to a just-released report by the Project on Student Debt. Meanwhile, unemployment among college graduates ages 20 to 24 is the highest in recorded history, at 10.6 percent.
"With debt and unemployment at record levels, college graduates may feel stuck between a rock and a hard place," said Lauren Asher, president of the Institute for College Access and Success in Berkeley, Calif., a nonprofit advocacy group that is affiliated with the Project on Student Debt.
Graduates do have options that could make the debt more manageable, she added. But figuring out the best option with student loans, particularly loans with special bells and whistles, can be mind-boggling, said Lynn O'Shaughnessy, who writes the College Solution blog.
"College graduates have to be really smart about their loans because it is so easy to get in trouble with student debt," she said.
How do you make smart choices?
SEPARATE YOUR DEBT
If you have been borrowing all the way through school, you probably have a variety of loans with different interest rates and terms. Before considering repayment options, you need to examine the type of loans you have and separate your loans into piles. Gather your documents and sort them by loan type:
Perkins loans
Subsidized Stafford loans (the federal loans that you were granted because you had financial need)
Unsubsidized Stafford loans (federal student loans that anyone can apply for)
Stafford loans that you got before 2006
Why should each of these loans be in different categories? Because Perkins loans are issued at extremely low interest rates and offer deferment and loan forgiveness programs that are not available for other types of loans.
If you consolidate a Perkins loan with other types of student debt, some of these special features are lost, said Edie Irons, a spokeswoman for the Project on Student Debt.
Subsidized Stafford loans should be separated because the government pays the interest on them when you are in school and when your loans are in deferment, which means that deferring these loans when you don't have a job costs you nothing.
Unsubsidized Stafford loans, on the other hand, accrue interest while you are in school and while the payments are being deferred. As a result, the longer you wait to pay on them, the more you owe. If you can't pay back all your loans right away, these are the loans you should pay back first.
Finally, Stafford loans that were secured before 2006 are issued at variable interest rates that are at rock-bottom levels, now less than 2.5 percent. Consolidating these loans allows you to lock in that rate for the life of the loan.
Source
Never have students been so deep in debt and so unprepared to pay.
The average student is carrying a record debt load of more than $23,000, according to a just-released report by the Project on Student Debt. Meanwhile, unemployment among college graduates ages 20 to 24 is the highest in recorded history, at 10.6 percent.
"With debt and unemployment at record levels, college graduates may feel stuck between a rock and a hard place," said Lauren Asher, president of the Institute for College Access and Success in Berkeley, Calif., a nonprofit advocacy group that is affiliated with the Project on Student Debt.
Graduates do have options that could make the debt more manageable, she added. But figuring out the best option with student loans, particularly loans with special bells and whistles, can be mind-boggling, said Lynn O'Shaughnessy, who writes the College Solution blog.
"College graduates have to be really smart about their loans because it is so easy to get in trouble with student debt," she said.
How do you make smart choices?
SEPARATE YOUR DEBT
If you have been borrowing all the way through school, you probably have a variety of loans with different interest rates and terms. Before considering repayment options, you need to examine the type of loans you have and separate your loans into piles. Gather your documents and sort them by loan type:
Perkins loans
Subsidized Stafford loans (the federal loans that you were granted because you had financial need)
Unsubsidized Stafford loans (federal student loans that anyone can apply for)
Stafford loans that you got before 2006
Why should each of these loans be in different categories? Because Perkins loans are issued at extremely low interest rates and offer deferment and loan forgiveness programs that are not available for other types of loans.
If you consolidate a Perkins loan with other types of student debt, some of these special features are lost, said Edie Irons, a spokeswoman for the Project on Student Debt.
Subsidized Stafford loans should be separated because the government pays the interest on them when you are in school and when your loans are in deferment, which means that deferring these loans when you don't have a job costs you nothing.
Unsubsidized Stafford loans, on the other hand, accrue interest while you are in school and while the payments are being deferred. As a result, the longer you wait to pay on them, the more you owe. If you can't pay back all your loans right away, these are the loans you should pay back first.
Finally, Stafford loans that were secured before 2006 are issued at variable interest rates that are at rock-bottom levels, now less than 2.5 percent. Consolidating these loans allows you to lock in that rate for the life of the loan.
Source
Subscribe to:
Comments (Atom)