Wednesday, 14 May 2014

Student loan | Sallie Mae, Navient To Pay $97M To Settle Servicemember Student ...

Student loan | Sallie Mae, Navient To Pay $97M To Settle Servicemember Student ...

Sallie Mae, Navient To Pay $97M To Settle Servicemember Student ...
Debt Forgiveness: How to Get Out of Paying Your Student Loans
Student Loan Debt – It's Not Just Impacting Finances Anymore ...
Plan proposed to help lower student loan interest rates | WQAD.com

Sallie Mae, Navient To Pay $97M To Settle Servicemember Student ...

Posted: 13 May 2014 02:04 PM PDT

Sallie Mae, Navient To Pay $97M To Settle Servicemember Student Loan Violations – Consumerist

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Debt Forgiveness: How to Get Out of Paying Your Student Loans

Posted: 12 May 2014 12:30 PM PDT

With student loan figures soaring, debt-saddled students and graduates are desperate for any strategy that may help them escape their burden. For many, the prospect of debt forgiveness may seem like a dream come true. In reality, only some borrowers may be eligible for forgiveness – and their window of opportunity may be closing.

Earning Debt Forgiveness

Student loan forgiveness can be earned in two ways: by working in public service or by making payments through income-contingent payment plans for a (long) period of time. Each has its own conditions, requirements and limitations. Neither route is quick or easy.

Still, borrowers have rushed to get on board. According to figures released by the Department of Education, there are currently more than 2.2 million Americans enrolled in income-based repayment plans that offer a chance of forgiveness. These borrowers account for a total outstanding debt of more than $108 billion.

The surge in enrollments can likely be attributed to the two-pronged appeal: the possibility of lower monthly payments now, plus the chance for balances to be forgiven later.

Potential Pitfalls

Experts and lawmakers fear there might now be an unintended consequence of these plans, in that borrowers will take forgiveness for granted and intentionally incur more debt than they can afford to repay. At the same time, there's the worry that colleges will take advantage of this mindset and charge students more or coerce them to take on debt by promoting these forgiveness programs.

In an apparent attempt to limit the potential financial fallout, the President proposed a cap of $57,500 in total forgiveness per borrower.

How Public Service Forgiveness Works

In order to get some debt forgiven under the public service program, you must first make 120 qualifying payments (meaning, required payments made on time). These payments must be made while you are working for a qualified employer – generally, a government organization or a non-profit with tax-exempt status. Only payments made after October 1, 2007, qualify towards earning eligibility so borrowers won't reach the 120-payment milestone to qualify for forgiveness until 2017.

Other Debt-Forgiveness Programs

If you aren't working in a public service position, you may still be able to get some of your student debt forgiven – but it will take longer. Federal income-based repayment plans allow for some debt forgiveness after a minimum of 20 years (terms and conditions vary by program).

Which Loans Are Eligible?

Only direct loans made by the federal government are eligible for forgiveness. If you have other federal loans, you may be able to consolidate them all into one Direct Consolidation Loan that would make you eligible. Non-federal loans (those handled by private lenders and loan companies) aren't part of this program.

Finding a Plan

All federal repayment plans allow for eligibility for public service forgiveness. The income-based repayment plans also include forgiveness for borrowers not in the public sector after a certain period of time. These plans include:

Income-Based Repayment (IBR): Maximum monthly payments will be 15% of discretionary income. Forgiveness eligibility after 25 years of qualifying payments.
Income-Contingent Repayment: Payments are recalculated each year based on gross income, family size and federal loan balance. Forgiveness eligibility after 25 years of qualifying payments.
Pay as You Earn Repayment (PAYER): Maximum monthly payments will be 10% of discretionary income. Forgiveness eligibility after 20 years of qualifying payment.

How to Enroll

Your student loan servicer handles the repayment for your federal student loans, so work with the servicer to enroll in a repayment plan or change your current plan. You can usually do this online via the company's website. To apply for the public service forgiveness program, both you and your employer need to complete and file a specified form.

The Future of Forgiveness

As with anything related to the federal government, the terms related to student loan forgiveness are subject to change. As mentioned previously, the President is already proposing a limit to the total that can be forgiven for each person.

Mark Kantrowitz, senior vice president and publisher of Edvisors.com and author of "Filing the FAFSA," suspects it's unlikely that this particular provision will pass. However, some changes are possible – and it's not known how they will affect borrowers currently in repayment. "It is unclear whether or how existing borrowers will be grandfathered in," he says. "Congress could make changes effective only for new borrowers as of July 1, 2015. So it isn't clear whether borrowers can do anything to retain eligibility for the current version of public service loan forgiveness."

Regardless of any changes that may be on the horizon, Kantrowitz warns borrowers against betting their financial future on the hope of debt forgiveness, especially the kind that's tied to public service. For one thing, there's a rigid time limit: "Public service loan forgiveness occurs after 10 years of full-time service. It is an all-or-nothing benefit, so borrowers who stop working before reaching the 10-year mark will get no forgiveness."

Other Considerations

Income-based plans can also have another downside – more interest will accrue because the repayment is stretched over a longer period of time. "Loan payments under IBR and PAYER can be negatively amortized, digging the borrower into a deeper hole," Kantrowitz notes. "Borrowers who expect to have a significant increase in their income a few years into repayment should perhaps prefer a repayment plan like extended repayment or graduated repayment, where the monthly payment will be at least as much the new interest that accrues and the loan balance will not increase."

Reyna Gobel, author of "CliffsNotes Graduation Debt: How to Manage Student Loans and Live Your Life, 2nd Edition," puts it more bluntly: "If you're currently racking up more debt because you expect these plans in the future: stop! You never know what will or won't exist for graduates if the law changes in the future. Ask yourself, 'Could I afford to repay this on a regular extended repayment plan?' If not, you could be getting yourself into very high debt and a difficult situation. Also, remember payments change annually based on income. When your income rises, your payment can, too."

The Bottom Line

Student loan forgiveness might be a welcome possibility, offering some relief to student borrowers toward the end of their repayment period, but its future is uncertain. Students should be wary of incurring debt beyond their means based on the assumption that a good chunk of it will be forgiven.

Follow @bobbidempsey

Bobbi Dempsey is a freelance writer/editor for numerous major publications and websites, including NY Times, Family Circle, CreditCards.com and many others. She specializes in personal finance, with a particular focus on paying for college, finding bargains and living on a tight budget. She is the founder of BrokeParents.com and is also the author of a dozen nonfiction books, including Don't Break the Bank: A Student's Guide to Managing Money (published by Peterson's). Her website is www.bobbidempsey.com

Student Loan Debt – It's Not Just Impacting Finances Anymore ...

Posted: 12 May 2014 03:43 AM PDT

PLAY AUDIO

For iPhone: http://ioneblackamericaweb.files.wordpress.com/2014/05/051214money.mp3

Mellody Hobson is President of Ariel investments, a Chicago-based money management firm that serves individual investors and retirement plans through its no-load mutual funds and separate accounts. Additionally, she is a regular financial contributor and analyst for CBS news.

Tom: We are talking about the student loan problem this morning?

Mellody: That's right, tom. It seems like every month or so we get more information that highlights just how out of hand the student loan debt problem is in this country, and how it is impacting young Americans. This month is no different. A recent study from Gallup and Purdue University has found that student loan debt not only stunts people financially, but it also impacts personal well-being.

Tom: What are we talking about when we say personal well-being?

Mellody: We are talking about the whole spectrum of an individual's life, tom. The survey asked over 30,000 college graduates about their finances, their health, their social lives, sense of purpose, and happiness within their community, and then inquired about whether grads like what they do every day and if they have enough money to meet their needs in these different categories. What the researchers found was that not only do students with higher levels of student loan debt face financial limitations – they are less likely to start a business, or own a house for example – they also suffered decreased well-being in all of these categories, across the board. Overall, college graduates without any student loan debt were seven times more likely to be happy in most areas of their lives compared to those with more than $40,000 in debt

There are many examples of the non-financial consequences of debt. Take marriage, for example. In the last few years, there has been a flood of stories that document how some individuals in relationships are postponing marriage due to the debt burden of their partner. One researcher found that women with student loan debt are less likely to get married than women without it. Another study found that high student loan debt leads to increased likelihood for depression, as well as physical illness. Alone, these are big problems, but when combined with the financial impact, the can obviously have very, very negative consequences for individuals.

Tom: There doesn't seem to be a solution on the horizon. Costs continue to rise – interest rates are expected to go up this year – and this hurts graduates.

Mellody: You are right, tom. Interest rates on loans are set to rise for students this fall. Students taking out government student loans could pay nearly a percentage point more in interest rates, based on rates set at Wednesday's Treasury bond auction.

But the broader problem is really that the cost of education is rising much faster than inflation. Since 1982 a typical family income increased by 147%, while college tuition prices have risen nearly 500%. According to the book the college trap, if the cost of college tuition was $10,000 in 1986, it would now cost the same student over $21,500 if education had increased as much as the average inflation rate. Instead that education now costs an average of $59,800 rising by over 2 ½ times the rate of inflation.

This is bad for all graduates, but it impacts minorities in America disproportionately. Education is the great equalizer in this country, but these costs are making it more difficult for students of color. For example, 27% of black bachelor's degree holders had more than $30,500 in loans, compared with just 16% of white bachelor's degree holders. more black students who left school without finishing a degree cited student debt as the reason than their white peers – 69% versus 43% – and 74% of Latinos who opted out of attending college cited finances as the reason. I believe wholeheartedly that college is worth it, and the data backs that up. However, when students have to saddle themselves with debt to get an education, there is an increasing belief that the short-term costs are not worth the long-term benefits, and that is a problem.

Tom: How should parents and prospective students approach paying for college these days then?

Mellody: The most important thing is to begin preparing early, by saving up over time. But on this front, my first piece of advice might throw you for a loop: avoid a savings account. If you are working hard to put money away for college, the very least you can do is make that money work for you in return. Invest that money in stocks, so that you get a good return. When you run the numbers, this becomes very clear. If you invest $1,000 per year for 18 years in a savings account, on a good return of 1% you would have around $21,000 by the time your kid goes to college. If you invested the same amount in the stock market, at a low rate of return of 5.5%, you would have nearly $32,000. That is $11,000 that won't be student loan debt. So save up over time, and make your money work to pay for your children's future.

The second thing is to really consider all of the options. In the same study that showed student debt was correlated with negative impacts on well-being, researchers found that elite colleges are not correlated with graduate happiness. So perhaps your child can explore junior colleges, or in-state schools, for the first two year before transferring to her preferred school. This will help keep the need for large amounts of student loans to a minimum.

Tom: Great! Anything else you would like to share today?

Mellody: Tom, I really want to highlight the impact of the student loan debt on younger people, and our country as a whole. 60% of students incur student loan debt, with the average per person debt being over $24,000. Student loan debt has passed credit card debt to be the second largest debt category for Americans, after mortgages, with more than $1 trillion dollars in debt outstanding. These numbers are huge numbers, and the burden of paying off debt hurts other areas of the economy, such as the housing market and consumer spending. Graduates who are able to enter the workforce without a debt burden have huge financial and personal advantages, so it's important to remember this when considering your future or your child's future!

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Plan proposed to help lower student loan interest rates | WQAD.com

Posted: 09 May 2014 01:44 PM PDT

Posted on: 3:44 pm, May 9, 2014, by Angie Sharp, updated on: 05:45pm, May 9, 2014

More people have it than credit card debt.

Approximately 40 million Americans are paying student loans, according to U.S. Senator Richard Durbin, (D) Illinois, who was in the Quad Cities on Friday, May 9th, 2014.

During his visit, he spoke at Augustana College in Rock Island about a new piece of legislation that would help students dealing with education debt. The Bank on Students Emergency Refinancing Act includes three bills. The biggest allows students with higher interest rates to refinance to a lower rate.

"For some students and their families, this is the only way to escape what is an impossible burden when it comes to student loans and student debt," he told an audience of students and school leaders.

"We want to make sure that students from lower-income, middle-income, and working families have a fair shot at a higher education that they can afford," Sen. Durbin continued. "We want the college experience to be an enrichment for their lives and not shackle them to a debt that is going to drag them down for decades to come."

The other bill would create a "Student Loan Borrower Bill of Rights." Sen. Durbin says it would require colleges and universities to give students all the information they need to make an informed decision about their loans.

"A student should know the difference in the interest rate between a government loan and a private loan," he says. "The student should know the chances for consolidating loans later in life to bring them down to lower interest rates. The student should know if there's any forgiveness, because under some government loans there's forgiveness if you go into certain professions."

The final bill would make certain colleges and universities responsible if they are "sinking their students too far into debt," according to Sen. Durbin.

The legislation would help students like Cameron Onumah, who is graduating from Augustana College in two weeks.

"I had to take out a private loan this August so I could afford to continue my Augustana education and come November, it'll cost more for me to pay my student loans than it will for me to pay rent," he explained. "I'm willing to pay for my Augustana education, but I want it to be fair. I want a fair shot in this world. I want to be able to live comfortably. I want to be able to enjoy my youth. I want to be able to save to buy a home."

"I want that American dream."

The legislation would also help alum like Joshua Schipp, who says he graduated in 2010 with $80,000 in student loans.

"I've already chipped away $30,000 since graduating, but $10,000 of that alone was just in interest payments," he said. "It seems like I'll never be able to catch up.

"I should be spending my money more wisely by putting it towards a down payment on a home, saving for my retirement, planning for a family, or making larger purchases in my community. For me, this legislation would allow me to save nearly $15,000 over a lifetime of my repayment."

Schipp's interest rates are as high as 9.25%. If the bill passes, they would drop to 3.86%.

Augustana President Steven Bahls was also at today's press conference. He says loans are important, but they need to be more affordable.

"[If it weren't] for federal loans and the Pell Grant Program, 80% of students here today would not be here," President Bahls said. "For us to be accessible and provide you with the highest quality outcomes, we need to do it in a a way that you can afford affordable loans."

The cost of the legislation is controversial, though. Sen. Durbin says they want to use the "Warren Buffet Rule" to pay for it. The "rule" requires anyone who makes more than $1 million a year to pay a 30% income tax rate. Sen. Durbin says he expects Republicans to fight that idea, since it includes some to pay more in taxes.