Friday, 12 September 2014

Student loan | Report: Student Loan Debt Isn't Just An Issue For Young Americans ...

Student loan | Report: <b>Student Loan</b> Debt Isn&#39;t Just An Issue For Young Americans <b>...</b>

Report: <b>Student Loan</b> Debt Isn&#39;t Just An Issue For Young Americans <b>...</b>

Posted: 11 Sep 2014 08:20 AM PDT

Report: Student Loan Debt Isn't Just An Issue For Young Americans – Consumerist
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8 Ways to Pay Off Your <b>Student Loans</b> Faster - Morningstar

Posted: 09 Sep 2014 05:00 AM PDT

Question: I'm a recent college graduate who would like to start saving for retirement, but right now my college-loan payments take up a big chunk of my paycheck. Any ideas about how I can pay them off faster?

Answer: Trying to pay off loans from the past in order to begin saving for the future is an all-too-common predicament among young adults these days. About seven in 10 graduating seniors leave school with loan debt, with the average amount owed around $30,000. Meanwhile, nearly 70% of people age 18-29 say they have yet to start saving for retirement. Clearly, many young adults have put retirement savings on the backburner while focusing on making their monthly student-loan payments.To help you and others in your situation clear this financial hurdle, we offer the following tips for paying down your student loans faster. They may not all apply to you, but chances are you'll find something here that can help you get out of debt sooner than you would by continuing to make minimum payments each month on your student loans.Make Extra Payments, Even If Just a Little: Both federal and private student loans can be prepaid without penalty, which means you are allowed to pay more than the required minimum each month and have the extra amount applied to the loan's principal. (To do this, include a letter with your payment telling the lender what the extra money is for so it doesn't get applied to next month's payment by mistake.) Any extra amount that you can put toward prepayment gets you that much closer to saying goodbye to your loans. For example, let's say the monthly minimum payment on your loans is $345 (which is the amount someone who borrows $30,000 at 6.8% interest would owe each month if he or she is repaying over 10 years). Rounding up and paying $400 per month, with the extra $55 applied to the principal, shaves nearly two years off the length of the loan. Target your highest-interest loans for prepayment first and then work your way down as loans are paid off. That way, you'll save more in interest payments overall than you would by prepaying smaller amounts on all your loans simultaneously. Look Into Loan Forgiveness Programs: Borrowers who go into certain career fields may be eligible to have part of their loans forgiven, or wiped away. The federal Public Service Loan Forgiveness Program is open to those who pursue careers in the military, public safety, public health, education, and other fields and kicks in once they've made 10 years' worth of on-time payments. Other programs, such as the Teacher Loan Forgiveness Program, which forgives up to $5,000 in loans for those who teach for at least five consecutive years in low-income schools, also are available. And some colleges offer their own loan forgiveness programs for graduates who go into public service. The Short Answer took a closer look at student loan forgiveness here. Don't Wait to Start Paying: Borrowers typically have six months after graduation or after leaving school before their first student loan payments are due. The problem is that interest on unsubsidized federal loans continues to accrue over that time and eventually is added to the loan principal, thus increasing the overall borrowing costs. If you can at least pay interest on the loans during that grace period, you'll be saving yourself additional money down the road. Consider using cash gifts you received for graduation for this purpose.  Put Your Tax Break to Good Use: Interest on student loans is deductible on your federal income tax return up to $2,500. That means that if you pay $1,000 in interest charges on your loan in a given year and you are in the 25% tax bracket, you will save $250 in taxes. If you receive a tax refund, avoid the temptation to blow it on a weekend getaway and use the money to make extra payments to pay off your loan faster. Leverage a Cash Gift or Bonus: Still getting a yearly birthday check from Aunt Gertie? Using those funds and any other cash gifts or work bonuses you receive to help prepay your loans boosts the value of the windfall by saving you interest costs down the road. And trust me: It'll make your aunt proud.  Make a Personal Budget: Few things will help you pay off your loan faster--as well as help you manage your financial life--more than setting a personal budget. You may be accustomed to glancing at your checking account balance each month and doing little else; but by taking a closer look at your spending habits, you can better assess your financial priorities and identify places to cut spending. The good news is it's easier than ever. Many credit card companies provide cardholders with a breakdown of their spending by category, and services such as Mint.com (which is free and online) and Quicken (which charges a fee for its downloadable software) can help you easily track your monthly spending. Once you have a handle on your budget, you can prioritize making extra student-loan payments. That may mean some financial belt-tightening--cooking at home more, canceling an underused gym membership, and looking for a cheaper cell phone plan, for instance--but you'll have a better handle on where your money goes each month. Take a Roommate--Even If It's Your Parents: Many college grads would rather not move back home with Mom and Dad for the long term, yet it has become commonplace. The New York Times recently reported that one in five people in their 20s and early 30s lives with his or her parents. While it may cramp your style, living with your parents is a great way to pay down your loans more quickly, even if you are chipping in to help pay for groceries and other household expenses. Alternatively, living with roommates in a place of your own (well, sort of your own) can also be a big money-saver as compared with living alone. Sharing your living space may feel a bit like college to you--for better or worse--but if it helps you get out of debt sooner and into a place of your own, it's probably worth the hassle. Work a Side Job: Finding a good-paying, full-time job is a real challenge for today's recent college grads. Nearly half are working jobs that don't require a college degree. But even if you aren't exactly in your dream job just yet, the fact remains that the more you work the more you make, and the more you make the faster you can pay off your student loans. If you are working a nonsalaried job that offers overtime, make the most of the opportunity. Also, consider making extra money on the side through part-time gigs such as providing child care, working for a retailer that needs extra help around the holidays, or doing odd jobs. It may not be what you pictured when you were pulling all-night study sessions as an undergrad. But working extra and earmarking the money to pay off your loans early will provide you with greater financial flexibility down the road. Have a personal finance question you'd like answered? Send it to TheShortAnswer@morningstar.com.

Should I Pay Off My Credit Card Debt With Excess <b>Student Loans</b>?

Posted: 12 Sep 2014 10:06 AM PDT

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If you're a college student on a tight income, you know that every penny counts, and freeing up cash is paramount. As such, you may be tempted to end your stint on the credit card minimum payment hamster wheel by paying off your consumer debt with excess student loans. But before you do, read on for the potential issues with this plan.

It may be in violation of your student loan agreement

Student loans are meant to pay for your tuition and fees, as well as the other expenses of attending college. This may include necessary living expenses — like transportation, room and board, and miscellaneous personal expenses. And while personal expenses can be defined differently for different people, the vacations or bar tabs you ran up on your credit card probably wouldn't count by most people's definitions. Therefore, you aren't supposed to use this money to pay off your credit card.

Understand that these rules aren't well enforced, so you can likely pay off your credit card with student loans without consequences. However, it's important to know that this may be a violation of your student loan agreement and you could be pursued by your loan facilitator for incorrect loan usage.

Student loans aren't eligible for bankruptcy

Unlike credit card debt, student loan debt isn't eligible for bankruptcy (in almost all cases). That means if you stay unemployed or underemployed for an extended amount of time after graduation, your options for reducing your debt will be limited. Of course, you can defer these loans until you're making adequate income, but this won't stop the onslaught of student loan interest from accumulating on a balance that just keeps growing every month.

Moving debt isn't the same thing as paying off debt

Mathematically, it makes sense to move debt from high-interest financing to low-interest financing. And the Nerds love math! However, it doesn't make sense mathematically to put off paying off debt and let the interest accumulate for years to come without the option of bankruptcy for those in a really tight spot. But there's also the chance you'll pay your loans off right away and that low interest will save you cash! Let's examine two scenarios.

Scenario #1: Your student loan balance is low and you get a job directly after college and pay off your loans within a year. In this scenario, you'll come out ahead by paying off credit card debt with student loans.

Scenario #2: You paid off your credit card debt with student loans and then ran up more consumer debt. After all, you can just use excess student loans to pay it off and deal with the loans later. Then you don't get a job in your field after graduation and you end up underemployed making minimum wage. In this scenario, you're likely unable to make the minimum payments on your loans, which are much higher because you used the excess loans to pay off your credit card debt.

So you see there's a level of risk here. If you're comfortable with it, just keep in mind that you can't declare bankruptcy on student loan debt, and check your agreement to make sure your payments are legal. If you're risk averse, don't pay off your credit card debt with student loans.

Tough love coming your way: You have to pay off your consumer debt eventually — putting it off doesn't change that fact. If you want or need some interest relief, it's a better idea to get a balance transfer credit card and pay it off before the 0% introductory period ends. If you're struggling to pay off your debt — no matter the interest rate — you need to increase your income and/or decrease your expenses.

Bottom line: Though it typically comes with a lower interest rate, using a student loan to pay off your credit card debt may not be the best idea. It could be a violation of your loan agreement, student loans aren't bankruptable, and moving debt from one place to another isn't the same thing as making real progress. If you're having trouble paying off your credit card debt, consider a balance transfer card while also increasing the gap between your income and expenses by making more and/or spending less.

Coins with graduation cap image via Shutterstock

Retired and in hock for a <b>student loan</b> « Bankrate, Inc.

Posted: 11 Sep 2014 09:23 AM PDT

Student loan debt is burdening an increasing number of people age 65 and older, according to a report released Wednesday by the Government Accountability Office, or GAO.

While the percentage of people in this age group with student loan debt remains relatively small, growing from 1 percent in 2004 to 4 percent in 2010, the amount of the debt has skyrocketed -- from about $2.8 billion in 2005 to about $18.2 billion in 2013. The median student loan debt for those 65 and older is $11,800. That's not a huge amount, but it is enough to weigh you down if you are living in retirement.

About 20 percent of those with debt are paying off loans incurred by their children or grandchildren through government-backed Parent PLUS loans, but the majority -- about 82 percent -- are paying off their own loans. The GAO pointed out that payoffs of student loans can now be extended for as long as 25 years, so some of this debt could have been racked up when borrowers were much younger. Fortunately, only 1 percent of those aged 75 or older had student loan debt, the GAO says.

Older borrowers are less able to pay off their debt, with 27 percent of borrowers ages 65 to 74 defaulting, and more than 50 percent of loans held by people 75 or older in default. Borrowers were more likely to be current on loans they took out to help their children. In 2013, the GAO says, 17 percent of Parent PLUS loans held by borrowers ages 65 to 74 were in default, while 30 percent of the loans that this age group took out to fund their own educations had gone bad.

What happens when you are old and fail to pay your student loan? Nothing good. The government will let you get 14 months behind before it takes action, the GAO says. After that, it is likely to charge collection costs of up to 25 percent of the interest and principal.

Between 17 and 29 months after you stop paying, the government will certify the loan as "eligible for offset" -- garnishment of wages, Social Security, etc. Tax refunds are taken right away. Delinquent borrowers with with monthly benefits for offset (i.e., Social Security) get another 60 days to begin repayment.

In 2013, about 33,000 people 65 and older lost -- on average -- $130 a month of their Social Security payment to Uncle Sam because they were behind on their student loans.

The government can't take all your Social Security. It is limited to the lesser of 15 percent of your total benefit or the amount by which your benefit exceeds $750 per month. For instance, if you get a $1,000 per month, the government could take no more than $150, leaving you with an $850 benefit. But as the GAO points out, this is enough to put your income below the federal poverty level.

No matter what your age, if you owe money on a student loan, don't ignore the debt and hope it will go away. Here's what you can do to manage your student loan debt if you get behind.
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