Home & Mortgage, Loans, Mortgage, Student Loans

COVID-19 Financial Relief and Protections Extended

By: CFPB

Are you struggling during the pandemic? The federal government is extending relief and protections for many student loan borrowers, renters, and homeowners who are having trouble making payments during the COVID-19 pandemic.

Keep reading to learn more about these important updates that may help you. But, remember the COVID-19 pandemic and relief efforts continue to change and develop. Check our COVID-19 webpage for more information.

Payments suspended for federally-owned student loans

Principal and interest payments on federally-held student loans are automatically suspended through September 30, 2021.

If you have federally owned student loans, you don’t need to contact your student loan servicer or take any action. However, make sure your servicer has your up-to-date contact information and continue to check your mail or email for updates or information about your loans.

Suspended payments through September 30, 2021, will count towards any student loan forgiveness programs, as long as all other requirements are met.

Learn more about protections for student loan borrowers.

Protection from evictions for renters

The Centers for Disease Control and Prevention (CDC) has announced an extension to their current order that halts certain residential evictions. The extension stops evictions until at least March 31, 2021.

If you already get rental help from HUD, and your income has changed, ask for income recertification.

Learn about help for renters and what you can do.

Mortgage relief protections and options

There are two primary federal protections: forbearance and a foreclosure moratorium.

Forbearance

If you have a mortgage-backed by VA, USDA, FHA, Fannie Mae, or Freddie Mac, you have the right to request an initial forbearance of up to 180 days on your mortgage and a forbearance extension for up to 180 days if you have a COVID-related financial hardship.

  • For mortgages backed by the FHA, USDA or, VA, the deadline to request an initial forbearance is June 30, 2021.
  • Mortgages backed by Fannie Mae and Freddie Mac do not currently have a deadline for requesting an initial forbearance.

If you are already in forbearance and need more time:

  • If your mortgage is backed by Fannie Mae or Freddie Mac: You may request one additional three-month extension, up to a maximum of 15 months of total forbearance. But to qualify, you must be in a COVID forbearance plan as of February 28, 2021, so don’t delay contacting your servicer if you’re having trouble paying your mortgage and are not in a forbearance plan.
  • If your mortgage is backed by FHA, USDA, or VA, you may request two additional three-month extensions, up to a maximum of 18 months of total forbearance. But to qualify, you must have received your initial forbearance on or before June 30, 2020. Check with your servicer about the options available.

Foreclosure

  • If your mortgage is backed by Fannie Mae or Freddie Mac, your lender or loan servicer cannot foreclose on your home until after March 31, 2021.
  • If your mortgage is backed by FHA, USDA, or VA, your lender or loan servicer cannot foreclose on your home until after June 30, 2021.

Learn about mortgage relief and options you may have.

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Credit Cards, Credit Counseling, Debt, Debt Consolidation, Debt Settlement, Finance, Loans, Money Management, Mortgage, Student Loans

Protect Yourself Financially from the Impact of COVID-19

By: Consumer Financial Protection Bureau (CFPB)

Steps to take if you have trouble paying your bills or meeting other financial obligations

If you have trouble paying your bills/loans or paying on time, there may be a number of options to help, especially if you reach out early to your lenders or creditors.

Contact your lenders, loan servicers, and other creditors

If you’re not able to pay your bills on time check their websites, to see if they have information that can help you.

The CFPB and other financial regulators have encouraged financial institutions to work with their customers to meet their community needs.

If you can’t make a payment now, need more time, or want to discuss payment options, contact your lenders and servicers to let them know about your situation. Being behind on your payments can have a lasting impact on your credit.

Credit card companies and lenders may be able to offer you a number of options to help you. This could include waiving certain fees like ATM, overdrafts, and late fees, as well as allowing you to delay, adjust, or skip some payments.

When contacting your lenders, be prepared to explain:

  • Your financial and employment situation
  • How much you can afford to pay
  • When you’re likely to be able to restart regular payments
  • Be prepared to discuss your income, expenses, and assets

Work with housing and credit counselors to understand your options

These trained professionals provide advice for little or no cost, and they will work with you to discuss your situation, evaluate options, and even help you negotiate with your lenders and servicers.

Warning: If you’re considering working with a debt settlement company to address your debts, be skeptical of any company that promises to do it for an upfront fee.

Trouble paying your mortgage?

If you can’t pay your mortgage, or can only pay a portion, contact your mortgage servicer.

It may take a while to get a loan servicer on the phone. Loan servicers are experiencing a high call volume and may also be impacted by the pandemic.

Visit our blog on mortgage relief options for in-depth content to help you understand your forbearance options and avoid foreclosure in light of the coronavirus and the recently passed Coronavirus Aid, Relief, and Economic Security (CARES) Act.

If you are renting from an owner who has a federally backed mortgage, the CARES Act provides for a suspension or moratorium on evictions. Read more in our renter section of the mortgage relief blog.

Trouble paying your student loans?

If you have student loans, you have options.

If your loan is held by the federal government, your loan payments are postponed with no interest until September 30, 2020.

For other kinds of student loans (such as a federal student loan held by a commercial lender or the institution you attend, or a private student loan held by a bank, credit union, school, or other private entity) contact your student loan servicer to find out more about your options.

Read our FAQs to learn more about what you can do.

Trouble paying your credit cards?

If you’re unable to pay your credit cards, talk with your credit card company and let them know that you cannot make a payment. You may get relief.

You may also want to work with a credit counselor. Reputable credit counseling organizations are generally non-profit organizations that can advise you on your money and debts, and help you with a budget. Some may also help you negotiate with creditors. There are specific questions to ask to help you find a credit counseling organization to work with.

Trouble paying your auto loan?

Your lender may have options that will help. Our tips include changing the date of your payment, requesting a payment plan, and asking for a payment extension

How to work with your bank or credit union

With many of us staying home to help flatten the coronavirus curve, online banking allows you to handle your finances from the comfort of home. Here are some tips for people who are new to online or mobile banking.

Generally, all bank deposits up to $250,000 are insured by the Federal Deposit Insurance Corporation. Deposits at all federal credit unions, and the vast majority of state-chartered credit unions, are also insured up to $250,000 by the National Credit Union Share Insurance Fund (NCUSIF).

How to work with debt collectors

If you currently have a debt in collections, you can work with collectors to identify a realistic repayment plan.

The Bureau offers a number of resources for contacting and negotiating with debt collection companies, especially as we deal with the impact of the coronavirus.

What to do if you lose your income

State and local governments vary in the programs and offerings to help those financially impacted by the coronavirus.

You can look to your state’s unemployment policies to identify current options for benefits. The recently passed CARES Act allows states to extend benefits to self-employed and gig workers, and to provide an extra $600 per week as well as an additional 13 weeks of benefits. Your state’s public health office may also have information.

Older adults may be impacted by the coronavirus and quarantine procedures in different ways than the general public. There may be government benefits available to older adults who need financial help. Visit benefitscheckup.org for more information and to see if you qualify for any state or local assistance.

Be aware of potential scam attempts

Scammers look for opportunities to take advantage of the vulnerable, especially during times of emergencies or natural disasters. Be cautious of emails, texts, or social media posts that may be selling fake products or information about emerging coronavirus cases.

Click here for more information on scams specific to the coronavirus.

The Federal Trade Commission has tips to protect yourself from possible coronavirus-related scams. The FTC and the Food and Drug Administration have also cautioned consumers to be on the look-out for sellers of unapproved and misbranded products, claiming they can treat or prevent coronavirus.

Learn more about how to prevent, recognize, and report fraud and scams.

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Budgeting, Credit, Credit Cards, Credit Score, Debt, Money Management, Saving, Student Loans

Top 9 Money Mistakes People Make

By Jim Garnett, The Debt Doctor

After counseling average Americans about their financial problems for many years, I noticed early on that there is a common set of money mistakes people usually make.

Money Mistake #1: Being comfortable with debt.

Why would anyone choose to be a slave if he could choose to be free? One answer is because, over a period of time, one seems to develop a “slave mentality.” They have never known freedom and have gotten used to being slaves.

There is a very real sense that being in debt makes us slaves. The wise King Solomon wrote, “The rich rule over the poor, and the borrower is slave of the lender” (Proverbs 22:7 NRSV). Many in our society have been in debt so long, they have cultivated a “debt mentality.” Because they have never known financial freedom, they grow accustomed to being in debt and accept it as “the normal way of life.”

But just imagine what it would be like to be out of debt and not have a mortgage payment or car payment each month? Just think what you could do with all that money. Out of debt, you would not need as much money to live, and you would be free to use this money which was once tied up in debt payments for whatever you wanted.

Just think of being in your 30’s or early 40’s and being able to have discretionary monies of $2,000 to $3,000 a month. You could put a sizable amount away toward car replacement, house repair, or future education needs. And imagine what it would be like to be able to write checks to your church or charities that are sizable in amount.

Being debt-free would allow you the freedom to grow wealth quickly and give substantially.

It is high time we stop treating debt like an old family friend that has moved in to stay with us forever! We need to kick him out and send him on his way! There is no reason to remain enslaved to debt when we can be free.

Money Mistake #2: Not knowing what we spend each month.

The only part of the budget process that many people know is the “what I make” part. Most people are totally in the dark about the “what I spend” part. This money mistake is one of the main reasons why 40% of Americans spend more than they make each month. Sadly, most of that 40% are unaware that they do.

How can this be? Because by using credit cards each month, an illusion is created that makes us think we are doing fine financially. After all, the bills are getting paid on time. This may be true, but if the credit cards were put in a drawer and not used for two months, the bills would not, nor could not, be paid on time. Without the constant use of credit, we would see that we are running out of money before we run out of the month.

Being smart with our money, no matter what amount that might be, includes knowing how much we spend in relation to how much we make. Using credit hides that fact from our eyes. Once we determine what we are spending, we can bring our spending in line with our earnings by either spending less or making more.

To get to a destination, we must know where we presently are. That’s why the first step in money management is always to know what we spend.

Money Mistake #3: Behaving like credit cards are money.

Many people say they know that credit cards are not money, but their actions betray their words.

A college sophomore once told me, “No matter how broke I am, I always have money in my pocket with my two credit cards.” Like many, he was confusing the “buying power” of his cards with money.

But when we use a credit card, we are not spending money but borrowing money in as much the same manner as when we take out a loan at a bank. The buying power of our credit card originates from borrowing money from a creditor – we call that borrowed money “credit.” If that credit is not repaid within a certain amount of time, a high-interest rate is added to the debt.

I am convinced that if we actually viewed our credit cards as the ability to borrow money – money that must be repaid – we would greatly restrain ourselves in their use.

Money Mistake #4: Being satisfied with only making minimum monthly payments.

Interest.com calculates that paying off a $2,000 credit card balance with an 18% interest rate at a minimum payment of 2% would take 288 months or 24 years to pay off. So, if at age 30 you closed the card and just paid on it at monthly minimums, you would be 39 years old when you finally pay it off! But note, you would not have paid just $2,000 but $6,396.40 because of the added interest charges. I don’t know about you, but I work far too hard for my money to spend it like that.

Money Mistake #5: Borrowing to “pay off” debt. 

Borrowing to pay off debt normally backfires! It has similar results to digging a hole in our front yard so we can fill in the hole in our backyard.

This “money mistake” yields some pretty disastrous results:

  • Our borrowing does not actually “pay off” debt – it merely moves the debt to a different location. Now we have a second mortgage on our home or a loan against our 401(k).
  • The debt we pay off by borrowing usually reappears within 3 years. This occurs because our borrowing makes it unnecessary to change our spending habits.
  • Borrowing against our home equity turns an unsecured debt into a secured debt. That’s why the interest rate is now less – the bank would rather loan against our house than loan against our name because it is less risky.
  • Borrowing against our 401(k) often has a 10% penalty if we are not 59.5 years old, plus the monies we borrow are taxed as income. At times, 40% of the monies taken from a 401(k) loan will “disappear” in penalty and taxes.
  • If we move again, our house produces very little profit because we have increased the mortgage balance, plus there is little to put down for a down payment on our new home.
  • When we are old enough to retire, we often cannot because our home is not paid off. We still have house payments to make because we borrowed against it to “pay off” debt.

Borrowing to pay off debt does not decrease our debt, and often we are worse off than we were before.

Money Mistake #6: Co-signing a loan.

It’s great to help somebody get a loan, but it’s critical to understand the risks before doing so. There’s a reason the lender wants a cosigner: The lender isn’t confident that the primary borrower can repay in full and on time. If a professional lender isn’t comfortable with the borrower, you’d better have a good reason for taking the risk. Lenders have access to data and extensive experience working with borrowers.

The co-signer promises to repay the other person’s debt if, for any reason, he does not. The liability assumed is for 100% of the debt, thus, if $5,000 is the total amount borrowed, the co-signer is responsible for the entire $5,000 if the other person defaults.

Also, the co-signer’s credit score can be affected if the primary signer makes late payments or misses payments on the loan. Currently, 75% of student loan co-signers end up making payments on the student loan.

Money Mistake #7: Having no emergency savings.

A recent survey asked people if they could get $2,000 for an emergency. The results revealed that 55% of the respondents said they could get the money within 30 days, but 92% of those people said they would need to borrow the money from family, friends, bank loans, or credit cards.

Another survey revealed that 28% of the 1,000 people surveyed have absolutely nothing in savings. In other words, many people are simply not prepared for emergencies.

Money Mistake #8: Creating debt for tax benefits or to establish credit.

Debt for Tax Benefits. It is good to claim every deduction that you can on your taxes, but it is often not good to spend money in order to get a tax deduction. An example would be the deduction one is allowed to take for interest paid on a mortgage loan. If I paid $10,000 of interest and was in a 25% tax bracket, I would receive a tax deduction of $2,500. If I absolutely had to pay the interest, I would surely deduct it. But if I had the choice of paying my home off and having no interest to pay, that would be my choice by far. I would rather have the $10,000 non-spent money in my hand than receive a $2,500 tax deduction. I may pay more tax, but on the other hand, if I gave monies to charities, I would receive the same deduction. Remember, you often have to spend your money to receive tax deductions. If you are not careful, you can “tax deduct yourself into the poor house.”

Debt for Establishing Credit. One of my clients followed the advice of her financial counselor and bought a house in order to build up her credit score! In order to establish credit, you simply need to pay your bills on time. You do not need to maintain debt to do this. You can establish your credit just as well by paying your credit card balance in full each month.

Money Mistake #9: Thinking that good credit is the most important thing in life.

Good credit is important, but it is not the most important thing in life. The main benefit of having good credit is being able to go into debt with good terms. But what if we decide we are not going to go any further into debt and work out a plan to get out of debt and stay out of debt? Then the benefits of good credit are not nearly as important to us.

To me, the benefits of living debt-free are much more important than the benefits of having good credit. It is true that most people who live debt-free also have good credit, but it was not their good credit that allowed them to become debt-free. It was their living within their means and discontinuing the use of credit to create any further debt.

Mind you, I am certainly not advocating that one should have bad credit. I am simply stating that getting out of debt and staying out of debt is much more important than having good credit.

The benefit of observing and sharing these money mistakes is that they allow us to learn from the mistakes of others.

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Budgeting, Christian Credit Counselors, College Debt, Consumer, Coupons, Credit, Credit Cards, Credit Counseling, Credit Score, Debit & Your Credit Score, Debt, Debt Consolidation, Debt Settlement, Goals, House, Kids & Money, Money Management, Personal Goals, Saving, Student Loans, Uncategorized

Use the Start of the School Year to Set the Stage for Your Child’s Financial Success

By: Brittany Frost

Where did the summer go? As the school year rapidly approaches, children are preparing for the academic and social journey of the next grade level while parents are bracing their financial situation for the costs of continuing education. Parents can take this golden opportunity to go above and beyond just shopping for school supplies at Wal-Mart and, instead, show their children how to budget, save, and spend their money in order to teach them how to financially prepare for school (which will undoubtedly come in handy for college).

Alarmingly, a study released in July by the FINRA Foundation estimated that almost two-thirds of Americans couldn’t pass a basic financial literacy test, including calculating interest payments correctly (See Ref. 1). When you pair that with the fact that public, in-state college tuition, room, and board has risen 1300% since 1971 (See Ref. 2) and a recent survey showing that 75% of U.S. workers have student loan debt so high that they contribute less to their retirement (See Ref. 3), it is easy to see why parents must take every opportunity to educate themselves and their children so they do not end up in pools of unmanageable student loan debt. It is never too early to avoid the debt cycle and teach your children to financially prepare for school. Think about it: Did you or do you still struggle with enormous student loan debt? Did you avoid college altogether because you couldn’t afford it? Or did you have the financial means or knowledge to keep your student loan debt to a minimum? Either way, think of your financial mistakes, trials, and triumphs and use the start of this school year to teach your children everything you’ve learned about financially preparing for school. Use your experiences along with the following resources and ideas as motivation to set the stage for your child’s financial success or, perhaps, to change your own path.

So how can you do this? Include your child in the financial process of preparing for school. Sit down and discuss with them. Educate them on the difference between a “want” and “need” so they can decide what they need for school. Ask for their opinion and listen. Use free online budgeting tools available on www.christiancreditcounselors.com to set a budget together. Discuss and research ways to stick to that budget by using free resources such as Passionate Penny Pincher’s Free Back-to-School Cheat Sheet for a complete list of back-to-school deals. Record and track your spending. Make back-to-school shopping a learning experience through mathematical games. In “7 Smart Ways to Save on Back-to-School Clothing,” Deacon Hayes also suggests tips like assessing your child’s current school inventory, visiting thrift stores first, and adding in a fun but frugal activity such as stopping for an inexpensive lunch or treat to make back-to-school shopping a happy experience (See Ref. 4). Above all, just enjoy spending time and working toward your financial goals together as a family. By doing this, you will not just be buying more pencils and notebooks, but you will be setting the stage for the financial success of your children AND yourself. Here’s to a successful school year!

References

1.       Farber, Madeline. Fortune. Nearly Two-Thirds of Americans Can’t Pass a Basic Test of Financial Literacy. 12 Jul. 2016. http://fortune.com/2016/07/12/financial-literacy/

2.       Jacoby, Jeff. The Boston Globe. Making college ‘free’ will only make it worse. 13 Jul. 2016. 18-20. http://c.ymcdn.com/sites/www.ncher.us/resource/collection/6E4F0103-05C8-4F48-844E-BEEAC285C10B/db0714_2016.pdf

3.       O’Connell, Brian. The Street. 75% of U.S. Workers Say High Student Loan Debt is Crippling Their Retirement. 12 Jul. 2016. https://www.thestreet.com/story/13627148/2/75-of-u-s-workers-say-high-student-loan-debt-is-crippling-their-retirement-savings.html

4.       Hayes, Deacon. U.S. News Money. 7 Smart Ways to Save on Back-to-School Clothing. 15 Jul. 2016. http://money.usnews.com/money/blogs/my-money/articles/2016-07-15/7-smart-ways-to-save-on-back-to-school-clothing

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Activities, Budgeting, Christian Credit Counselors, College Debt, Community, Consumer, Credit, Credit Cards, Credit Counseling, Credit Score, Debit & Your Credit Score, Debt, Debt Consolidation, Debt Settlement, Economy, Finance, Goals, Holiday Tips, Money Management, National Debt, Personal Goals, Saving, Student Loans, Taxes

Managing Your Student Loans Wisely: A Great and Unique Gift for Mother’s Day

By: Brittany Frost

What greater gift is there than the joy of seeing your child become financially responsible and independent throughout and after their college years? If you are looking for a unique and great gift to give your mother on May 8th for Mother’s Day this year, consider the gift of managing your student loans wisely. Instead of spending money on the gift, you’ll be saving it. Managing your student loans during and after college can help you avoid extra costs and interest as well as reduce your overall debt. Saving money and achieving your financial goals is not only a great gift to the mothers who are able to contribute to their child’s education, but also for the mothers who so desperately want to help but don’t have the means to do so. Here are a few tips to manage your student loans wisely this Mother’s Day:

 

• Before you even take out a student loan, apply for as many scholarships and grants as possible. This alone can save you (and your mom) a lot of money. Visit your school’s website or www.studentaid.ed.gov to view federal grants and scholarships.

• If you still need a loan, research loan types and repayment plans to make an informed decision. In general, federal student loans can have more repayment options and lower interest rates than private student loans. For more information on federal student loans and repayment plans as well as budgeting resources and calculators, visit www.studentaid.ed.gov.

• Budget and plan ahead. For more help budgeting for your student loans, contact Christian Credit Counselors at www.christiancreditcounselors.org.

• Use other free resources. According to the recent article Baylor University Partners with iGrad to Implement Online Financial Literacy Education Initiative by Jo-Carolyn Goode, Baylor will team up with iGrad, a financial literacy leader, to offer interactive workshops about budgets, scholarships, student loans, applying for jobs to help students pay for school, and a seminar for seniors to discuss loan payment options after graduation through iGrad’s financial literacy platform. For more information, visit www.igrad.com.

• When repaying your loan, consider an automatic payment deduction to save money on your payment. Also, put as much money as you can toward your payments. Each extra dollar paid toward your student loan payment each month can help overall.

• Since it is tax season, remember that student loan interest is tax-deductible and there are credits and deductions for parents and students. According to the College Board in Danielle Douglas-Gabriel’s article in the Washington Post entitled Paying for college? Have student loans? Here’s what you need to know before filing your taxes, the average family saved about $1,460 in education credits and deductions in 2013. To research various options of increasing your savings through tax credits and deductions such as the American Opportunity Tax Credit and the Student Loan Interest Deduction, refer to www.irs.gov. See how much you can save!

By using these tips and managing your student loans responsibly, you will not only save money but you will provide valuable peace of mind for you and your mother. That’s something that you won’t be able to buy at the Hallmark store!

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Christian Credit Counselors, College Debt, Consumer, Credit, Credit Cards, Credit Counseling, Debit & Your Credit Score, Debt, Debt Consolidation, Economy, Finance, Money Management, Student Loans

Student Loan Info You Need to Know

Learning Student Loans: Understand and Prepare for the Cost of Your Education

Looking for more information about student loans, their features, and repayment options? Christian Credit Counselors, a nonprofit 501(c)(3) with a mission to provide free financial education to individuals and families both locally and nationwide, is now offering a free online webinar titled Learning Student Loans: Understand and Prepare for the Cost of Your Education. Christian Credit Counselors is committed not just to helping people get out of debt, but providing them with free resources and education to STAY out of debt and live a life of financial freedom.

The Learning Student Loans webinar is designed to give you an overview of the types and features of student loans so that you can make the best, most informed decision on your journey to obtain the education you need for your career and life. The webinar will discuss free financial aid options, loan types, repayment plans, loan consolidation, forbearance, deferment, loan forgiveness, what to do if your loan is in default, and useful resources that will help you stay in control of your loan and payments. Whether you already have a student loan or you are thinking about getting one in the near or distant future, this webinar will help inform you of your loan and repayment options so that you are best prepared to pay back your loan successfully.

Click on the video below to view the webinar.

Click here to download the free handout.

When you are done with the video, take a quick survey to help us improve our webinar.

If you have questions or would like more information, email info@christiancreditcounselors.org.

credit card debt

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Debt, Loans, Money Management, Personal Goals, Student Loans

Student Loans: Preparation and Planning

Applying for Student Loans

News Flash: the most important part of your student loan occurs before you even get the loan.   What you do before taking out the loan can have the greatest impact on your life. It can mean the difference between paying back the loan in full to live a financially free life and being in default with mounting anxiety, stress and depression. This immense impact comes down to three main components:

  1. Your attempt to get as much free financial aid as possible before taking out a loan
  2. Your extent of knowledge and research on student loans
  3. Your creation of a repayment plan before you even apply for the loan

Before you borrow money, research and apply for as much free financial aid as possible. Grants and Scholarships are the main categories of free aid. Scholarships are often based on merit, meaning it depends on your academic worthiness or other accomplishments. Grants are often awarded based on financial need. Visit the financial aid website at your prospective university or college, local institutions (such as your credit union), the Federal Student Aid website at www.studentaid.ed.gov , and contact family, friends, and mentors to learn about other free aid opportunities. It is never too early to start researching. Always be aware and keep your grades up because many scholarships are offered based on GPA and performance throughout high school! Also look into a Work Study program, which allows students to work part-time to earn money for their education expenses.

Researching Student Loans

After this, if you find that you still are in need you can research student loans to cover the rest of your cost of attendance. There are multiple federal loan options including Direct Subsidized and Unsubsidized Loans, Direct PLUS Loans, and Federal Perkins Loans. Research the qualifications and decide the best option. For instance, if you can demonstrate enough financial need, you may qualify for a Direct Subsidized Loan where the U.S. Department of Education pays the interest. Also before acquiring the loan, study the repayment plans that are available. For more information, take the Student Loan Webinar that will soon be offered by Christian Credit Counselors at www.christiancreditcounselors.org or visit www.studentaid.ed.gov. If you decide on a private loan, research it thoroughly as well because they may have less repayment options and different terms.

Repaying Your Loan

Finally, make sure that YOU have a vision and plan of how you will repay your loan beforehand. Decide on a repayment plan offered by the loan servicer then calculate your monthly payment and the income you will need to start paying now or after the grace period (depending on the loan). Perhaps you need a part-time job on or off campus to help make payments during school. Even if you do not have to make payments until after graduation, a repayment and income plan could help you make decisions about your academic program and career choice.

In short, applying for as much free financial aid as possible, researching loan options, and creating a repayment plan before acquiring a student loan gives you the best chance to repay it in full and live a student loan-free and stress-free life!

 

Do you want to know more about debt and how you can make smart financial decisions now that will help you secure a more prosperous financial future? Sign up for our newsletter for monthly money tips.

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    Kids & Money, Loans, Student Loans

    Student Loan Forgiveness Options

    Student Loan Forgiveness

    After my last post about Student Loans, I received a question asking for more in depth information about student loan forgiveness.  I researched and found the following information.  These are the careers that can possibly eliminate your student loans.  If you decide to partake in one of these programs, make sure beforehand that you can use it towards loan forgiveness.

    Military Forgiveness

    Students who are in the Army National Guard may be eligible for their Student Loan Repayment Program, which offers up to $10,000.

    Teaching Forgiveness

    Students who become full-time teachers in an elementary or secondary school that serves students from low-income families can have a portion of their Perkins Loan forgiven under The National Defense Education Act. This program forgives 15% of your loan for the first and second years of teaching service, 20% for the third and fourth, and 30% for the fifth. Contact your school district’s administration to see which schools are eligible.

    See also the US Department of Education’s pages on Cancellation/Deferment Options for Teachers and Cancellation for Childcare Providers, as well as the Teacher Loan Forgiveness Form.

    The US Department of Education maintains a database of low-income schools eligible for teacher loan cancellation for Perkins and Stafford loans.

    Legal and Medical Studies

    Many law schools forgive the loans of students who serve in public interest or non-profit positions. For more information, contact Equal Justice Works.

    The US Department of Health and Human Services offers loan forgiveness programs through the National Health Service Corps and the Nursing Education Loan Repayment Program. These programs offer loan forgiveness to physicians and registered nurses who agree to practice for a set number of years in areas that lack adequate medical care (including remote and/or economically depressed regions).

    The US National Institutes of Health’s NIH Loan Repayment Programs repays up to $35,000/year of student loan debt for US citizens who are conducting clinical medical research.

    The US Department of Agriculture’s Veterinary Medicine Loan Repayment Program (VMLRP) offers loan forgiveness of $25,000 per year for three years for veterinarians who commit to work in a veterinary shortage area for three years. The application deadline is June 30.

    Federal Agencies

    The Federal Student Loan Repayment Program allows federal agencies to establish loan forgiveness programs to help recruit and retain employees. This is technically a loan repayment program and not a loan forgiveness program, as the agencies make payments directly to the loan holder and the payments represent taxable income to the employee. The agencies can repay up to $10,000 in Federal student loans per employee per calendar year, with a cumulative maximum of $60,000 per employee. Employees must agree to work for the agency for at least 3 years.

    Public Service Loan Forgiveness Program

    This program lets borrowers off the hook from their remaining student loan debt after 10 years of full-time employment in public service.

    To be in the program, borrowers must be employed by the federal, state or local government; or any nonprofit, 501(c)(3) organization; or work full-time for AmeriCorps or Peace Corps.

    To qualify for loan forgiveness, the borrower must have made 120 payments during a decade as part of the Department of Education’s Direct Loan program.

    But, if the payments fall short or the borrower stops working full time, then there is the same risk of being kicked out of the program, with no loan forgiveness.

    I hope this information helps you further understand your options for eliminating student loans.

    Information found on finaid.org and money.cnn.com

    Do you want to know more about debt and how you can make smart financial decisions now that will help you secure a more prosperous financial future? Sign up for our newsletter for monthly money tips.

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      Budgeting, Kids & Money, Loans, Saving, Student Loans

      Student Loans: A Necessary Evil?

      Student Loans and Debt

      More than ever before, a college degree has become a necessity.  But many parents and students wonder how they are going to pay for college.  With a high number of students graduating college with student loans, the average debt will likely hit a record $28,700, projected by Mark Kantrowitz, publisher of Finaid.org.  It is important to have the necessary information on student loans before signing on the dotted line.

      Government and Private Student Loans

      There are two types of student loans – government and private.  Government student loans have flexibility with programs to help students pay back the loan because they can change the rules whenever.  This can work towards the advantage of the borrower but can also hurt the borrower.  If the student will take out multiple loans, a government loan is better because it provides continuity.

      Private loans are provided by traditional banks and they do not have as many programs to help students repay their loans.  These loans come with a low interest rate but can hurt the borrower because it accumulates over time.  Also, most of these loans include a clause that does not allow the signer to file for bankruptcy.  After graduation, you get a six-month grace period during which you don’t have to pay back your loans giving you time to find a job.

      Financial Respoinsibility

      If you decide you need a student loan, you must decide who will be signing for it.  There are two options, the student, who must be at least eighteen years old, or a (step) parent.  If a step parent or parent decides to sign he or she is now responsible for the full payment of this loan.

      For example, if a step parent signs and afterwards gets a divorce, the step parent is still held responsible for the full payment.  Also, if a student signs for a three year loan for $30,000 but he or she drops out of school after the first semester he or she must still pay the full amount of the loan.  The result is parent and child is equally stuck.

      Budgeting for the Loan

      Ideally, the student should work while going to school and open a savings account.  This way the student will have a cushion for after graduation.  This cushion should include living money and money to make loan payments.  Proper budgeting and planning when a student begins school will be more beneficial than starting to plan after graduation.

      However, if there was no proper budgeting or planning there are ways you can receive help.  Keep in communication with the lender, there are consolidation programs and government programs that can help.  Consolidation programs are for students who took out multiple student loans throughout their school career.  For example, John has four $100 monthly payments to different banks.

      Loans and Credit Consolidation

      With consolidation, his overall payments will be lowered and he will have the benefit of simplicity which will help him track the progress of his student loans.  With government loans, a student can work for a nonprofit organization or public agency for ten years which will reduce the amount owed on the account.  Also, if you are willing to commit a year volunteering for AmeriCorps, you get $4,725 to pay off your college debts, and a stipend up to $7,400.  For more information visit their website.

      In addition you can work for 27 months with the Peace Corps.  If you travel with the Peace Corps, you will get to defer most of your student loans until after you leave the program, and may get some of your loans reduced by as much as 70%. Visit their website for more details.  If you decide one of these programs is beneficial to you, make sure you have it approved before hand, know the rules, and always get it in writing.

      Other options for repayment include: pay in full, standard payment, graduated payment, income-based payment, and long-term payment.  In the majority of cases paying in full is never an option.  Standard payments are monthly payments with interest over a period of 10 years.  It gives you a great interest rate but high monthly payments.  For graduated payments, the payments will start low but increase every couple years for a 10-30 year period.  With income-based payment, your monthly payments are decided proportionate to your income and you get 15 years to pay it off.  The long-term payment method is a monthly payment plus interest for 30 years.

      Regardless of whether you decide student loans are for you or not, you now have the knowledge to make the right decision.

      Do you want to know more about debt and how you can make smart financial decisions now that will help you secure a more prosperous financial future? Sign up for our newsletter for monthly money tips.

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        Student Loans

        Student Loan Repayment Plans

        Repaying Student Loans

        Congratulations Class of 2011! You finally got that college degree! What an exciting accomplishment. However, that moving-over-of-the-tassel means you’ll need to face your student loan sooner rather than later.

        Typically, you get a six-month grace period after graduation before you need to begin the repayment process. But don’t wait until December to start considering your options. There are four main types of repayment plans for Federal Student Loans that apply to most student loans as well (if you filled out a FAFSA and then received money in the mail that you haven’t paid back, you have a federal loan).

        1. Standard Repayment: your payments would be relatively the same throughout the life of your loan (for federal loans this is 10 years). You will get a letter in the mail shortly after graduation with your monthly payment and interest rate. However, if you have a variable interest rate, your payments might fluctuate based on interest rate changes.
        2. Extended Repayment: this plan lengthens your repayment period, allowing you to make lower monthly payments. If you have a federal loan, your loan can be extended to 12 to 30 years, depending on the loan amount. However, you will end up paying more interest on the loan with this plan.
        3. Graduated Repayment: this allows you to make lower payments in the first few years of the loan and your payments will increase gradually over the duration of the loan. For example, many repayment plans allow you to only pay the interest for the first 2-4 years of the loan. However, the repayment period is the same as the standard repayment method (federal loans are 12 to 30 years, depending on the total amount borrowed).
        4. Income Contingent Repayment: this plan is based on your income. It is recalculated each year depending on your income: if your income is low, your monthly payment will be also. However, if you land an awesome job and your pay increases, your monthly payment will also increase. For federal loans, the loan term is up to 25 years and any remaining balance after that time is discharged.
        5. Forbearance: this allows you to reduce your payment amount, stop making payments temporarily or extend your repayment period. You lender will most likely ask you to provide documentation supporting this request. However, you still need to make interest payments while your loan is in forbearance.
        6. Deferment: this allows you to postpone your payments for a period of time. If you just graduated and haven’t made any student loan payments, your loan has been in deferment for the past four years (or 5 or 6 years depending on your “super senior” status). You can defer your student loan again under the following conditions:
        • You are enrolled in school at least half time (this is about 6 credits depending on the school)
        • You are actively seeking, but not able to find, employment
        • You have economic hardship

        A Financial Alternative

        If you have read through all of these options and realize that you don’t think you will have a well enough paying job by the time December rolls around, you might want to consider taking a couple classes and defer your student loan. Classes at community colleges are about $25 per credit, meaning you will only be paying $150 for the semester (if you take six credits/two classes) versus the $200 per month you might have to pay. That isn’t to say you should do this forever; once you have a full-time job, taking extra classes might  get in the way of your work rather than being an enjoyable learning experience.

        Do you have any student loans? What kind of advice would you give to recent grads?

        Do you want to know more about debt and how you can make smart financial decisions now that will help you secure a more prosperous financial future? Sign up for our newsletter for monthly money tips.

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