Richest black man in US to pay off graduating class's student debt

The 396 young men began the day as students in caps and gowns, ready to graduate from Morehouse College — full of hope, but burdened in most cases with the debts that financed their education.

Then their commencement speaker went off-script with an extraordinary pledge: the newly minted alumni of the historically black college in Atlanta would go forth into the world student debt-free.

Robert F. Smith, the billionaire investor who founded Vista Equity Partners and became the richest black man in America, told the crowd that he and his family would pay off the entire graduating class’s student debt.

“We’re going to put a little fuel in your bus,” Smith said near the end of his address Sunday at the school’s 135th commencement service.

“This is my class, 2019,” he said, personally claiming the graduating seniors as his own. “And my family is making a grant to eliminate their student loans.”

It seemed to take a moment for the immensity of what he had promised to sink in. Then the senior class, all male and mostly African-American, erupted in glee.

“We’re all in robes, hot, the sun was beaming on us,” said Ernest Holmes, who said he had about $10,000 in loans. “Everyone jumped up, cheered. People were crying. It was just the most amazing thing.”

“A blessing, a blessing!” were the words Brandon Manor offered as he imagined for the first time what life would be like without student loans to repay.

Smith, known for a range of philanthropic donations including one to Morehouse earlier this year to finance scholarships, told the audience Sunday that his gift was meant to set an example of paying forward.

“Let’s make sure every class has the same opportunity going forward, because we are enough to take care of our own community,” he said.

Many details remain unsettled, including how students will demonstrate the amount of debt they have and how it will be paid off. Also unclear is the total amount Smith will contribute. According to published figures, recent Morehouse classes have graduated with roughly $10 million in total debt.


2019 New York Times News Service

source: news.abs-cbn.com

Debt Repayment 101: How to Create a Repayment Plan

Are you in debt and unsure how to start getting out? Or are you in debt, and unsure of if you want to find a way out? If so, that’s okay—tackling debt can be a little scary, but it’s in your best interests to start working your way out of financial trouble like this.

Don’t you want to reclaim your paycheck, and not have to send a portion of it off to a creditor? You should enjoy the money that you earn! If you’re tired of living paycheck to paycheck and having maxed out lines of credit, you can (and should) take action.

Read on to find out how you can get started making good financial decisions, and how to start making a debt repayment plan.

Making the Decision to Get Out of Debt

Deciding that you’ve had enough of debt can be empowering and overwhelming all at once. On one hand, you can’t wait to kick your debt to the curb. On the other, you’re worried about how to get there and the sacrifices it might require.

Let’s get this out of the way: there’s no wrong or right way to get out of debt. Everyone should go their own pace and choose a method that works for them. Some people are okay with giving up many possessions and “wants” while living meagerly. Others still want room to enjoy life.

Before you start on a plan to pay off your debt, you should outline what you want your journey to look like. It’s okay if it changes, but it helps to have a list to go off of when things get rough.

Make a list of your values, your goals, and your wants. Ask yourself what you’re willing to go without—and what you’re not willing to sacrifice to achieve debt freedom. Be honest with yourself about what’s truly worth it. Once you determine the parameters, you won’t have to question your priorities (or be upset if others do).

It’s also important to understand what you’ll be able to do once you’re debts are repaid. You can devote more money to your other financial goals. You can accelerate your progress to your retirement goals, for example, or save up for a big purchase. Maybe you want to take a round-the-world trip, or you’re ready to start paying down your mortgage.

Use these other financial goals as your motivation to repay consumer debts from credit cards and student loans as soon as possible. When you’re free of these burdens, you’ll be able to reach other money goals even faster!

What Are Your Numbers?

It’s difficult to face the reality of your debt situation. But in order to move forward with a plan, you need to know exactly where the numbers stand.

The easiest way to do this is to list out all the debts you have, like so:

Type	Lender	APR	Balance	Min. Payment	Due Date
Credit Card	Chase	11%	$3,020.17	$75.00	4th
Credit Card	Discover	8%	$7,385.28	$130.00	8th
Student Loan	Nelnet	8.5%	$11,274.32	$220.00	11th
Car Loan	Dealership	3%	$21,295.23	$250.00	20th

You don’t have to follow a spreadsheet layout. This is just an example to help you get started. Some people like putting their numbers on a whiteboard, while others people have found creative ways to measure their success with paying off debt. Pick a method that will keep you motivated.


Creating a Repayment Plan

Now comes the fun part: strategizing! Again, there’s no wrong way to repay debt. All that matters is that you’re erasing the red on your balance sheets. There are a number of options you can choose from: pick the one that makes the most sense for your situation.


    The snowball method requires paying off the loan with the smallest balance. (In the example above, it’s the Chase card). This gives you a quick win and added motivation to keep going. Once Chase is paid off, you snowball the amount you were paying to Chase into the balance with the Discover card. If you paid the minimum amount, you’d be able to put $205 toward Discover from paying off Chase.

    The avalanche method requires paying off the loan with the highest interest rate first (in this case, Chase again). The reason for doing this is that the loan with the highest interest rate is going to cost you more down the road. Interest is ugly; the quicker you can get to paying off the principal balance, the better.

    You can also try a combination of both the snowball and the avalanche methods. Maybe you want to tackle the loan with the highest interest rate to get that out of the way, but then you want to target the loan with the lowest balance to get a quick win after all your hard work.

    The emotional method isn’t an official strategy, but it’s still an option worth covering. For some people, there is a certain debt that they absolutely despise. They would do anything to get it out of their lives. If you have one like that, feel free to attack it with a vengeance and let numbers go out the window. Then get down to strategy with the rest of what you owe.


At the end of the day, what matters is that you make progress and do what is best for you. Don’t be afraid to tweak things if one method isn’t working for you. Financial plans are rarely ever set in stone because life gets in the way.


The trick is to not give up and adapt to changes, no matter how hard it may seem at first. Share your plans with supportive friends and family members – this isn’t a journey you have to take alone.

source: totalmortgage.com

A Proposal to Radically Simplify Student Loan Payments

Whether students leave college with a degree or without one, they face a dizzying array of challenges -- where to live, how to get a job, and increasingly, how to repay their loans. Five organizations, including the National Association of Student Financial Aid Administrators and Young Invincibles, have a proposal that aims to answer that last question with a streamlined and automated alternative to the complex system of repaying loans.


As of now, and with few exceptions, borrowers must start paying back their loans six months after they leave school and repay according to a standard 10-year schedule. If their monthly payment is too high, things get complicated quickly. The government has six other repayment options. Two are pretty straightforward: Borrowers can reduce monthly costs either by extending payments over 25 years or by keeping the 10-year period but starting with smaller monthly payments that gradually increase over time.


Four more plans tie payment schedules to how much the borrower earns, each with different thresholds, eligibility, and terms. Those plans are far from perfect,

but advocates for student borrowers generally like them because they provide graduates with flexibility and typically forgive the remainder of the debt after 10 to 25 years. For a long time, the Department of Education struggled to get students to use the plans, though recently borrowers are signing up in greater numbers.



The proposal rolls up a number of suggested improvements into one comprehensive attempt to fix the two biggest problems: the complexity of having so many options, and the relatively low participation by borrowers. Taking a page from the successful effort to encourage automatic enrollment in retirement savings plans, the groups advocate what they call "auto-IBR," short for income-based repayment. The plan would change the default payment option from the standard 10-year term to a repayment schedule that's tied to a percentage of the borrower's income and eventually forgives the remaining balance after a certain period of time. It also suggests the payments be automatically deducted from a borrower's paycheck, similar to the way Social Security is collected, an idea championed last year by Rep. Tom Petri, a Republican from Wisconsin.



The plan recommends various ways to make this work. One option is to require borrowers to pay 18 percent of everything they earn above $25,000 a year; another sets the payment level at 10 percent of income above $10,000 a year. The proposal also suggests longer terms for borrowers who take out a lot of debt, at least $50,000 or $60,000 in different scenarios. That's to minimize giving a disproportionate benefit to students who borrow a lot -- looking at you, law students! -- and could see huge amounts forgiven. While this all may sound a bit complicated, it's far simpler than the current situation.

 source: dailyfinance.com

Four Real Folks Who Overcame Their Debt

If you’re one of the millions of people engrossed in debt, it may seem like financial freedom is a distant dream.  The number of individuals living with debt in the UK has grown exponentially. In part, this is because of rising living expenses and unchanging wages. Based on a recent study, one in three Britons is in debt. That equates to £1.424 trillion in outstanding personal debt, this year alone. Although these statistics may sound menacing, it is possible to reduce and even eliminate your debt.  To prove that it’s possible, here are four average people who won their fight with debt.

Carrie Smith

Carrie Smith’s financial wake-up call occurred the instant she acknowledged her situation. At 28, she found herself with a staggering £9,300 in credit card debt. Eager to regain control of her finances and financial future, she managed to pay it all off in a year through hard work and strict budgeting. Carrie’s approach was to start with the cards which carried the highest interest rates. Most people immediately tackle the cards with the highest balance, but it’s wiser to evaluate the interest rate fees on a monthly and annual basis because that’s where you’ll be hit the hardest. To stay on track Carrie even made a timeline of her progress using a payment tool. And of course, she had to cut her frivolous spending– holidays, salon visits, cable, and dining out. The spending cuts were temporary, but the results enduring long past that year, Carrie points out.

Shari Gordon

Armed with a Master’s degree and a mountain of student loans to accompany it, Shari was unsure how she would repay the £20,000 she owed. She admits that at first she was in debt denial. When bills arrived, she barely paid the minimums. She soon realised that this approach was making no real headway so she broke down the balances into more manageable amounts and created a strict budget. In time, she was promoted at work and started looking for side jobs to make some extra money. It wasn’t easy, but Shari paid off her debt and now advises others on how to do the same.

Grayson Bell

Grayson Bell had dreams of owning his own business with his wife Jane. To bring his dreams to fruition, Grayson financed £33,000 with four different credit cards. When the economy took a turn for the worse, Grayson’s business unfortunately went under, leaving him with no substantial cash flow. As the debts piled up, Grayson continued to spend in hopes that the business would eventually recover. Two years later, his finances were still in ruin so he made the conscious decision to seek help. Grayson opted for debt consolidation as a way to fast track his financial recovery.  Consolidated Credit provided him with the tools necessary to create a budget, lower his balances, and pay off his cards. Today he’s proud to be debt free and on the road to building a new business.

Kate Flanders

Maxed out and looking for a way out, Kate was in over her head by age 25. With very little in her bank account and bills pouring in month after month she did what most people dread—moved back in with her parents.  Within a matter of month, she eliminated all the shopping trips, weekend getaways, and drinks with friends. After 6 months, she saved enough money to pay off her cards in full. Kate’s advice to people suffering from debt is to ask for help sooner rather than later.

Whether you have to create a budget, cut your spending habits, or seek debt consolidation it’s important to get a handle on your debt. It won’t resolve itself so it’s your responsibility to do your part in management and elimination.

source: everythingfinanceblog.com

4 Tips to Help 30-Somethings Handle Student Loan Debt

By the time most college graduates reach their 30s, they've been dealing with student loans for years. Yet increasingly, even 30-somethings still face big challenges from their outstanding college debts, and those challenges are affecting the way they manage the rest of their financial lives. Homeownership rates among 30-year-olds have fallen much more dramatically since 2008 for those with student loan debt than for those without it, according to a recent Federal Reserve Bank of New York study.



Yet many people in their early 30s have either already started a family or plan to do so in the near future. That raises the question of how to balance your own financial needs against those of your children in order to reduce the odds that your kids will suffer under the crippling weight of excessive student loans of their own.

Let's look at some tips for getting your own debt paid down and for preparing for potential family educational costs down the road.

1. Put Student Loans in Their Place.

Many borrowers assume that they should always pay down their student loans as quickly as possible. Yet even though paying off those loans can give you a psychological boost, it's not necessarily the smartest move if you have other debt with less generous terms and higher finance charges. By understanding the terms of your student loans as well as credit-card agreements, car loans, mortgages, and other debt you might have, you can identify the highest-cost debt you have and prioritize getting that paid off first. Even if that means waiting longer to retire your student loans, doing so will still save you money in the long run.

2. Don't Skimp on Savings.

Whether to put money toward savings and investing when you have outstanding student loan debt is a subject of debate, with good arguments on both sides.

But to take advantage of the tax deductions and free employer-matching contributions you get from contributing to a retirement account, it's worth diverting extra money away from paying down student loans, especially those with low interest rates in the 3 percent to 4 percent range. As your income increases, you'll be able both to stay current on your loan obligations and to set money aside for other important financial goals.

3. Make Your Employer Pay for More School.

As you advance in your career, getting more education and boosting your skills might be a lucrative move. But once you're in the workforce, you don't necessarily have to pay for those classes yourself anymore. Many employers have recognized the value of investing in their employees through tuition reimbursement programs, which will pay you back for all or part of your costs. Availability and conditions differ from company to company, and typically, the education has to be connected to your job. But they're a great way to avoid adding to your student loan debt.

4. Don't Let Student Loan Debt Hit You Twice.

As heavy a burden as today's young graduates carry, educational debt among their parents is also reaching epidemic levels. In 2011, parents received $10.6 billion in Parent PLUS loans, a 145 percent increase since 2000, even adjusted for inflation, according to a study from The Chronicle of Higher Education and ProPublica. And the size of average individual loan is up as well, by about a third to nearly $12,000 in constant dollars. If you have kids or plan to, you'll want to take steps to ensure you don't end up facing a huge loan burden a second time around.

Put time on your side by setting up savings programs for their college educations now. As your income grows and you rise into higher tax brackets, the advantages of using a tax-favored college savings strategy such as a 529 plan increase in value. As with any market-based investment and saving strategy, 529 plans work best when you give them as much time as possible to produce strong returns. Moreover, 529 plans have very small minimum starting investments, so you can start a account without placing too big a burden on your finances.

source: dailyfinance.com

U.S. Congress Finally Votes to Cut Student Loan Interest Rates

WASHINGTON - U.S. college students will likely pay a reduced interest rate of 3.86 percent on their student loans for the new school year, after lawmakers on Wednesday finally passed a compromise bill that would reverse a recent rate hike.

The House of Representatives voted 392-31 in support of a bipartisan deal to lower interest rates on millions of new federal student loans. The Senate passed the bill on July 24 and President Barack Obama is expected to sign it into law.

The action followed months of partisan bickering, with Democrats and Republicans blaming each other for a politically embarrassing delay that had the potential to cost students and their parents thousands of dollars.

The legislation replaces a system in which Congress fixed interest rates every year and substitutes it with a market-based mechanism tied to the government's cost of borrowing and capped to protect borrowers in the event of a severe spike in rates.

The legislation passed just two days before Congress recesses for five weeks, after several failed efforts in the House and Senate.


Interest rates on student loans automatically doubled on July 1 to 6.8 percent after Congressfailed to meet the deadline to prevent the rate increase. Congress has since incorporated a retroactive fix that would keep borrowers of loans originated since July 1 when rates had doubled from paying the higher rate.

The measure passed Wednesday pegs interest rates on student loans to the 10-year Treasury note plus 2.05 percentage points for undergraduates, and plus 3.6 percentage points for graduate student loans.

The interest rate would roughly work out to 3.86 percent this year for undergraduates and 5.42 percent for graduates.

Supporters of the bill say it gets politicians out of the business of setting student loan rates and provides certainty for students and their families.

'Long-Term Fix'
Critics of a market-based system say it fails to offer enough protection against increasing rates as the economy improves.

"This bill provides American college students immediate debt relief on upcoming studentloans," said California Representative George Miller, the senior Democrat at the House Committee on Education and the Workforce. "Families battered by the recent recession should have received this relief over a month ago."




In 2007, Congress lowered the interest rates on federal subsidized Stafford loans to 3.4 percent. That lower rate was due to expire last year, but Congress extended it for another year rather than argue about a replacement for it during an election year.

Under the caps in the new plan, if market rates rise, undergraduates could pay as high as 8.25 percent and graduates as much as 9.5 percent. The rate could go to 10.5 percent for PLUS loans for parents who borrow to pay for their children's college.

"We wanted to get out of the partisan squabbling that has been happening in this city every year - let the market do it in a way that is fair to students and the taxpayer," said Education Committee Chairman Representative John Kline, a Minnesota Republican.

"After months of great uncertainty, students can finally breathe a sigh of relief knowing that interest rates on subsidized federal loans for college won't double from last year and a long-term fix will be in place to avoid these annual political chess matches over the loan program," said Peter McPherson, president of the Association of Public and Land-grant Universities.

source: dailyfinance.com

Senate Passes Student Loan Deal

The Senate passed legislation Wednesday that would make it less expensive for college students to borrow money to pay for classes, housing and books. But interest rates could soon start climbing.

The proposal, that passed by 81 votes to 18, would link interest rates on federal student loans to the financial markets. That means student loans for the next few years would have lower interest rates. Higher rates would come in later years if the economy improves as expected.

Liberal Democrats opposed the White House-backed proposal as a bait-and-switch measure that would lure in new borrowers. Republicans supported the measure and helped the bill win passage. The bill is similar to one the House has already passed.

The White House and its allies said the new loan structure would offer lower rates to 11 million borrowers right away and save the average undergraduate $1,500 in interest But there was no denying the new structure could cost future students if the economy improves as expected and interest rates climb. The White House's allies instead suggested the new formula is better than the status quo.

After the bill's passage the White House released a statement from President Obama applauding the vote.

"This compromise is a major victory for our nation's students," the statement read. "It meets the key principles I laid out from the start: it locks in low rates next year, and it doesn't overcharge students to pay down the deficit. I urge the House to pass this bill so that I can sign it into law right away, and I hope both parties build on this progress by taking even more steps to bring down soaring costs and keep a good education - a cornerstone of what it means to be middle class - within reach for working families."

Rates on subsidized Stafford loans doubled to 6.8 percent July 1 because Congress could not agree on a way to keep them at 3.4 percent.

Liberal members of the Democratic caucus were vocal in their opposition over the potentially shifting rates included in the Senate measure, which passed with support from both parties. The bill passed with support from 45 Republicans, 35 Democrats and Sen. Angus King, the independent from Maine who helped negotiate the deal.

Sen. Mike Lee, R-Utah, joined 16 Democrats and Sen. Bernie Sanders, the Vermont independent who caucuses with Democrats, to oppose the legislation.

Sen. Claire McCaskill, D-Mo., did not cast a recorded vote.

"This permanent, market-based plan makes students' loans cheaper, simpler and more certain," said Sen. Lamar Alexander, the top Republican on the Senate education panel. "It ends the annual game of Congress playing politics with student loan interest rates at the expense of students planning their futures."

Under the bipartisan deal, undergraduates this fall could borrow at a 3.9 percent interest rate. Graduate students would have access to loans at 5.4 percent, and parents could borrow at 6.4 percent. Those rates would rise as the economy picks up and it becomes more expensive for the government to borrow money.

The compromise could be a good deal for students through the 2015 academic year. After that, interest rates are expected to climb above where they were when students left campus in the spring, if congressional estimates prove correct.

As part of the compromise, Democrats won a protection for students by capping rates at a maximum 8.25 percent for undergraduates. Graduate students would not pay rates higher than 9.5 percent, and parents' rates would top out at 10.5 percent.

Using Congressional Budget Office estimates, rates would not reach those limits in the next 10 years.

But even among those who voted for it, frustrations remained evident.

"The bill that is before us represents a number of compromises that were made on both sides," said Sen. Tom Harkin, the Iowa Democrat who chairs the Senate Health, Education, Labor and Pensions Committee, before the vote.

Harkin said the legislation is not what he would have written if he had the final say but he also said that he recognizes the need to restore the lower rates on students before they return to campus for classes.

"It's the best that we can do," Harkin said on the Senate floor. "If we don't pass this today, there will be one sure effect: student loans will be almost twice what they would be under this bill."

Most Senate Republicans who pushed for interest rates to be linked to the financial markets voted for the measure. It was negotiated by Democratic Sen. Joe Manchin of West Virginia and GOP Sens. Richard Burr of North Carolina and Lamar Alexander of Tennessee, the top Republican on the Senate Health, Education, Labor and Pensions Committee.

"They may come from different political parties, but they all really care about students. And this bill proves it," said Senate Republican leader Mitch McConnell of Kentucky. "And there's something else this bill proves, too: That Democrats can work with Republicans when they actually want to do it -- when they check their partisan, take-it-or-leave-it approaches at the door and actually talk with, rather than at, us."

The compromise negotiated in the Senate closely hews to what House Republicans passed this year, and that's a sticking point for some liberals.

Sen. Jack Reed, D-R.I., pushed for an extension of the current 3.4 percent rate so lawmakers could address the subject this fall during the revision of the Higher Education Act. Sen. Elizabeth Warren, D-Mass., has objected to students paying higher interest rates than the Federal Reserve offers to big banks.

"I understand that compromise isn't always pretty, but there isn't any compromise in this bill," Warren said last week when the deal was announced.

"In fact, I think the whole system stinks," she added during a Senate speech.

Sens. Patty Murray, D-Wash., and Al Franken, D-Minn., planned amendments that would redirect any profits made through the bill to help low-income students.

The Congressional Budget Office estimated the bill as written would reduce the deficit by $715 million over the next decade. During that same time, federal loans would be a $1.4 trillion program.

"We've got to get out of the business of making profits of struggling families who want nothing more than to be able to send their kids to college," said Sen. Bernie Sanders, a Vermont independent who caucuses with Democrats. "This legislation only makes a bad situation worse."

The Associated Press contributed to this report.

source: dailyfinance.com

Financial Considerations for Students

For many young people, starting college or university is not just the start of their higher education but also the start of their financial one. This is a time when many younger people have to start fending for themselves financially. With this in mind there are a number of financial considerations to think about as a student.











Avoid the hard sell on credit cards

There is nothing wrong with having a credit card as a student providing you use and repay it sensibly. However, one thing you should avoid is signing up to a credit card following the hard sell from a provider that targets vulnerable groups. These cards often come with freebies to entice students but can often end up being far more costly than many other cards on the market. Therefore, if you do plan to get a credit card, make sure you do your own research and make your own decision about which one is best for you. Credit card debt can become a huge problem for people of all ages, and while there are experts that can help to deal with debt issues such as those at Consolidated Credit, it is important to take steps to avoid this type of situation, particularly when you are just starting out in adult life.

Raising extra cash

Student loans and grants don’t always stretch as far as we would like them to. Many students find themselves in need of extra cash and some end up taking the dangerous route such as costly bank loans or even loan sharks. You should avoid the latter at all costs and even bank loans should be a last resort. Instead, think outside the box and look at options such as getting a part time or Saturday job, selling items you no longer want or need, or finding out about top up grants and loans.

Don’t waste money on brand new books

Buying textbooks for your courses can be costly. Of course, you need to get the textbooks required for your course but there are other options apart from buying them brand new. You can look at borrowing them from the library, getting online and finding a second hand copy, or even sharing with friends who have already purchased them for their course.

Avoid the temptation to overspend on eating out

Many students find themselves eating out more often than not, but this can have an adverse effect on your health and your budget. Instead, buy yourself a student cookbook, which focuses on cheap yet nutritious meals, and learn how to rustle up some quick and tasty dishes at home.

Don’t become a party animal

Some students get carried away with parties, clubs, and nightlife when they begin their life at college. However, while this can be a novelty at first it can become a very costly habit in next to no time. Make sure you are careful about the amount you blow on going out and don’t spend more than you have budgeted each month on entertainment.

Being mindful about your spending and financial habits as a student will not only offer immediate benefits but can teach you valuable lessons for the future as well.

source: lifeandmyfinances.com

Five Tips for Paying Student Loans

You’ve graduated and you’re ready to take on the world. But what do you do about the college loan debt you’ve accumulated over the past four years? Depending on your financial situation and future plans, there are several options to make repaying student loans more manageable. Check out these five tips for paying student loans to help you combat the debt and reduce the amount of student loan interest you could owe.















1. Create a budget and automate payments: The most important thing you can do to repay your private student loans is to create a budget and stick to it. Set up automatic payments from online banking so that paying your student loan takes priority over other expenses. If you have a good month or get a bonus or raise, dedicate those funds to paying off the principal of the loan.

2. Defer college loans: If you’re planning to go on to graduate school, you have the ability to defer paying your student loans until after you receive your degree. Keep in mind you may need to borrow more to cover the cost of your continued education, so try to set aside savings each month in order to pay back your loans when you are done with school.

3. Join a program that agrees to pay your debts for you: Programs such as Teach for America and AmeriCorps offer tuition or loan reimbursement if you complete a set period of time with them. Usually these jobs have a lower salary and focus on cities in need, but if it’s something you’re passionate about, it can be good experience and provide coverage for your college loans. It is also possible to find employers who are willing to reimburse some or all of your loans. These may be harder to find, but it’s a question worth asking.

4. Consolidate debt: When it comes to federal loans, consolidating debt could get you a lower student loan interest rate, more reasonable payment schedule, or simpler repayment process. Talk to your loan administrator to determine how long it will currently take you to pay back your debt and discuss various consolidation options. Be sure to take your student loan interest rates and repayment schedule into account when you consolidate. Keep in mind that while you can consolidate multiple federal or multiple private student loans, you cannot consolidate federal and private debt together.

5. Enroll in an Income Based Repayment (IBR) plan: IBR can help make paying your Federal student loans more manageable. It reduces your monthly college loan payments by capping them at a percentage of your discretionary income. If you’re wondering how that works out, discretionary income is defined as your adjusted gross income minus 1.5 times the poverty rate for your family size. Plus, if you make on-time payments for 25 years, at that point any remaining college loan debt from federal loans is canceled.

Find a lender who will walk you through your student loan repayment

When you’re paying off your student loans, it’s a good idea to regularly communicate with your lender. Openly discuss whether you are having issues with repayment or if your income situation has changed. They can only help if they are informed. Depending on your original college loan agreement, you may be able to extend payments, thereby lowering your monthly payment, or consolidate for lower student loan interest rates.

source: 20smoney.com

Student Loan Deferment, Forbearance, & Forgiveness Options

Student loan debt is a problem in the U.S. It has surpassed $1 trillion, and even surpassed credit card debt for the first time ever. I do not carry any student loans, but my wife and I are still paying off her original loans. Recently, she has decided to change careers and has gone back to school to get a second degree. In the process, she has learned a thing or two about student loans and put together this guest post. If you have any student loans or are considering a new degree, you should find some value.

My Student Loan Automatic Withdrawal Payments Stopped

Last year, as I started my second degree, I noticed that my automatic withdrawal of student loan payments (from my previous degree) had stopped. I had not requested this, so I called my loan service provider, Sallie Mae, to inquire.



What I found was that I did not have to make payments as long as I was enrolled in school for at least half time. And they had automatically enrolled me. This had me wondering if there were any other life circumstances which would grant student loan repayment relief, so I did a bit of research.

If you find yourself in a complicated life situation now or in the future consider some of these student loan repayment relief options: deferment, forbearance, and forgiveness. I’ll highlight each in more detail.

Student Loan Deferment

Student loan deferment is a period during which repayment of the principal balance of your loan is temporarily delayed. Interest will not accrue on subsidized loans during the deferment period. Since my loans were subsidized, they were automatically deferred.

I was a returning student, but there are other circumstances that could lead to deferment. Who is eligible for deferment?

According to Federal Student Aid, a U.S. Dept. of Education resource, you are eligible for deferment during the following life circumstances;

• You return to school and are at least half-time enrolled in a college, university, or career school
• You study in an approved graduate fellowship program or in an approved rehabilitation training program for the disabled
• You are unemployment or unable to find full-time employment for up to 3 years
• You experience a period of economic hardship (includes Peace Corps service) for up to 3 years
• You are under active military duty during a war, military operation, or national emergency
• It has been within 13 months following the conclusion of qualifying active duty military service, or until you return to enrollment on at least a half-time basis, whichever is earlier

You can apply for deferment online through your lender. If you are enrolled in school you will probably want to contact your school’s financial aid office at the start/end of each semester. Do not assume they will automatically enroll you (or un-enroll you).

Unbeknown to me, my deferment period incorrectly ended this spring when I completed a “milestone” in my degree program. The financial aid office made it appear that I had completed my degree, so Sallie Mae removed me from loan deferment and I didn’t find out until large sums of money suddenly began withdrawing from my bank account automatically.

Student Loan Forbearance

There is another option for relief of student loan repayment if you do not qualify for deferment – student loan forbearance. According to Federal Student Aid forbearance allows you to stop making payments or reduce your monthly payment for up to 12 months.

There are two types of forbearances – discretionary and mandatory.

Who is eligible for forbearance?

Discretionary forbearance: under these circumstances, your lender decides if you are eligible for forbearance:

• Financial hardship
• Illness

Mandatory Forbearance: under these circumstances, your lender is required to grant forbearance:

• You are serving in a medical or dental internship or residency program, and you meet specific requirements
• The total amount you owe each month for all the student loans you received is 20% or more of your total monthly gross income (additional conditions apply)
• You are serving in a national service position for which you received a national service award
• You are performing teaching service that would qualify for teacher loan forgiveness
• You qualify for partial repayment of your loans under the U.S. Department of Defense Student Loan Repayment Program
• You are a member of the National Guard and have been activated by a governor, but you are not eligible for a military deferment

Receiving loan forbearance does not happen automatically. You need apply by making a request to your lender.

Deferment vs. Forbearance

With both deferment and forbearance, your payments are delayed. The difference is that with deferment, your interest on subsidized loans does not accrue. With forbearance, your interest will continue to accrue on unsubsidized AND subsidized loans. This makes deferment the better of the two, if you qualify for it.

Note that if you are in default on your loan, you are not eligible for either deferment or forbearance.

Student Loan Forgiveness, Discharge, & Cancellation

If you are a public employee, have a low income, or meet certain other criteria, it is possible that your loan debt could be forgiven, discharged, or cancelled.

There are many different criteria for each. I won’t go into full detail here, rather, just give you a list and link to some resources for you to dig in to deeper.

• Death
• Permanent Disability
• Your School Shuts Down
• False Certification of Student Eligibility
• Bankruptcy
• Teacher Loan Forgiveness
• Public Service Loan Forgiveness

You may also want to look in to income based repayment, which allows you to legally cap your student loan payments at 15% of your income.

To become eligible for the income based repayment plan you must prove partial financial hardship as defined by your lender. But, it is possible to be making a substantial salary, even into six figures, and still qualify for Income-Based Repayment depending on your debt level. If you’re a public employee for 10 years, your loans could be forgiven after 10 years of repayment. After 25 years or 300 payments you could be granted loan forgiveness regardless of your career choice.

source: 20somethingfinance.com