Student loan | <b>Student Loan</b> Reform Is Now a Major Political Issue | Minding The <b>...</b> |
| <b>Student Loan</b> Reform Is Now a Major Political Issue | Minding The <b>...</b> Posted: 26 Aug 2014 01:33 PM PDT As student debt continues to climb and reform fails to materialize, it's not surprising that some politicians are capitalizing on their constituents' frustration. In fact, some of the brightest stars on both sides of the partisan divide are taking up the cause of student loan reform. Senator Marco Rubio, who seems likely to run for president, understands that Mitt Romney's economic message failed to connect with voters—especially millennials. To attract these younger voters, many of whom have grown disillusioned with the Democrats, he's embracing student loan reform. Rubio is familiar with the problem of student debt. After graduating law school, he amassed over $100,000 in student loan debt. "At one point in my life," he recently claimed, "it was the single-highest expenditure in our personal budget." Rubio only was able to pay down his debt in 2012 with proceeds from his autobiography. He can therefore identify with the many students whose student loan repayments prevent them from entering adulthood. So far, he's proposed two solutions. The Know Before You Go Act, pushed for greater disclosure on schools' graduation rates and their graduates' loan debt, employment prospects, and future earnings. The Investing in Student Success Act seeks to create a legal structure for income-share agreements (ISAs), private arrangements in which investors front tuition cash to students in exchange for receiving a portion of the student's future income. More recently, Rubio called for an automatic enrollment of federal borrowers into an income-based repayment system. Though income-based repayment is most often associated with Democrats, Rubio calculates that adjusting the way (not whether) student debt is repaid will appeal to indebted young voters. On the other side of the aisle is Senator Elizabeth Warren, whose embrace of economic populism has also led her to pursue student loan reform. In May 2013, Warren introduced the Bank on Student Loans Fairness Act, which offered the incredibly low interest rate government offers to large private banks to student borrowers. Warren has also lamented the amount of money the federal government makes off student loan borrowers. In July 2013, Warren claimed that the government would make $51 billion off of student loan interest. A year later, Warren's estimate ballooned to $184 billion. To be sure, government's accounting of student loans is very arbitrary, and the same government agency which at one time forecast the $184 billion profit also predicted a $95 billion loss. Experts have also disagreed with her. But to public hungry for economic populism, her critique makes for excellent headlines. Warren cast the choice of supporting her bill, which didn't pass, in very stark terms. "Anyone who says that we can't afford this amendment," she argued, "is saying, in effect, it is more important to keep making profits off the backs of our kids than to ask millionaires to pay just a tiny bit more." More recently, Warren proposed a bill which would allow some borrowers with federal student loans to refinance at lower rates. Warren proposed paying for this fix by levying new taxes on individuals earning over one million dollars per year. And in August, Warren was one of only two other Senators (the other was Dick Durbin, D-IL) to support Senator Sheldon Whitehouse's (D-RI) medical bankruptcy bill that, among other things, proposed that "medically distressed" students be allowed to discharge their student loans. Rubio and Warren's competing approaches to student loan reform reflect their respective political convictions. Rubio hopes to promote innovative, market-driven ideas like ISAs that can help middle-income Americans without over-involving the government. Unlike some of his colleagues on Capitol, his willingness to work with Democratic senators on these proposals indicates that he's not a strict partisan warrior. Warren, who trades in economic populism, is interested in top-down government interventions to alleviate student debt. Though they might disagree on the best solution to the debt crisis, one thing seems certain. Given growing discontent over this issue, their student loan reform efforts might make the difference when they seek their party's nomination for the upcoming presidential election.
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| How a Deferred <b>Student Loan</b> Could Keep You From Buying a <b>...</b> Posted: 28 Aug 2014 03:52 AM PDT The cost of your education isn't just evident in your student loan debt. No, in fact, there is an ulterior cost lurking in the mix: the possibility of being ineligible for a mortgage. If you have a deferred student loan, it usually be will be counted against your income when you apply for the big-ticket debt. If you have a student loan, or multiple student loans, in deferment you'll need to take extra precautionary steps, working closely with your lender to ensure your chances of getting approved for a mortgage. The Big Student Loan ObstaclesCredit ReportingMany student lenders report multiple credit accounts even if you have multiple loans through one lender to finance one education degree – since loans are applied for and disbursed on an enrollment-period basis. So your credit report will show multiple student loans with the same creditor broken down into each loan's respective payments. This is typical, and it will also likely appear that way on a financial services credit report used by your lender in conjunction with a mortgage application. Why it's a concern: If your student loan payment appears to be more, based on how it's listed on the credit report, the lender has to go by the credit report figures when trying to qualify you for the home loan. In a case like this, it's essential to get a letter from the creditor stating what the total balance is along with each minimum payment. Deferred LoansDepending on the type of student loan, you can be eligible for student loan deferment if you're enrolled in school at least half-time, or if you're having an economic hardship. In this case, the mortgage type you apply for is key. For conventional financing, you will need to provide a letter from the creditor identifying what the estimated monthly payments will be as the lender will use the estimated monthly payment in determining if you fit the requirements. Conversely, a government-insured loan type such as an FHA loan, is a bit more forgiving. If the student loan is deferred for 12 months or longer the lender does not need to account for the liability when qualifying you for the mortgage. The key here is it has to be a 12-month deferment on that the payment obligation associated with the student loan(s). Why it's a concern: A student loan could become very problematic if you try to qualify for the maximum loan size. Do your homework, erring on the side of caution by proactively obtaining an estimated payment letter from the creditor for any student loan account in deferment. Deferred, But Unable to Estimate PaymentsHaving difficulty in procuring an estimated payment letter from a creditor for the student loan? The lender will still have to account for the liability, so they will instead use a 5% payment factor. Why it's a concern: A 5% payment factor is 5% of the principle balance of the student loan, factored monthly! 99% of the time this payment is substantially higher than the minimum monthly payment the student loan obligation would otherwise be. This results in the borrower needing to show more income to qualify, or reducing the mortgage amount and purchase price.  Check Your Credit Before Consolidating DebtGet your FREE Credit Score and personalized Analysis. See where you stand & learn ways to better manage your score before consolidating your debt.Get Started. It's FREE. >>> Why Deferred Student Loans Are the WildcardStudent loans negatively affect your borrowing potential – as they are liability, counted against your income when calculating your ability to make a potential house payment. When you apply for a mortgage, lenders qualify you by taking your monthly pretax income divided by your current payment liabilities and proposed housing payment. This is known in the lending world as a DTI (the debt-to-income ratio), sometimes also called a payment-to-income ratio. Reducing the Deferred Student Loan BurdenLooking for a mortgage? If you have a student loan, then take heed.
Keeping your credit in good standing can also aid your cause, because it can result in lower interest rates, which translate into lower monthly payments. Before you search for a home, it's important to get your credit in good shape. Get your annual free credit reports to check for any problems that could be hurting your credit, and check your credit scores (which you can do for free on Credit.com) to see where you stand. It's also important to talk with your lender about your credit, and what moves you can make to get it in better home-buying condition. Depending on how much mortgage you are trying to qualify for, a deferred student loan may not adversely affect your qualifying chances, as long as your monthly debts (including the proposed mortgage payment) are not more than 40% of your income. Lenders may allow up to 45% of your income as the maximum debt ratio for both conventional and FHA mortgages types. By getting qualified with 40% or less in payment expenses, you're on the right track to successfully getting your new home loan. More on Student Loans:
Image: iStock Sign up for our weekly newsletter.Get the latest tips & advice from our team of 30+ credit & money experts, delivered to you via email each week. Sign up now. Scott Sheldon is a senior loan officer and consumer advocate based in Santa Rosa, Cali. His work has appeared in Yahoo! Homes, CNN Money, MarketWatch and The Wall Street Journal. Connect with him at Sonoma County Mortgages. More by Scott Sheldon |
David Wilezol is the co-author of "Is College Worth It?" with former U.S. Secretary of Education William J. Bennett.| You are subscribed to email updates from student loan - Google Blog Search To stop receiving these emails, you may unsubscribe now. | Email delivery powered by Google |
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