Student loan | In <b>Student Loan</b> Default? How to Fix Your Credit | Refinance and <b>...</b> |
- In <b>Student Loan</b> Default? How to Fix Your Credit | Refinance and <b>...</b>
- Guide to Building Good Credit Using <b>Student Loans</b> | Refinance and <b>...</b>
- How to apply for the new <b>student loan</b> forgiveness program
- <b>Student Loans</b>: The Taxpayers Lose Again | Foundation for <b>...</b>
- Your Federal <b>Student Loans</b> Just Got Easier to REPAYE | ED.gov Blog
| In <b>Student Loan</b> Default? How to Fix Your Credit | Refinance and <b>...</b> Posted: 30 Dec 2015 05:33 PM PST When you go into student loan default, your credit takes a major hit. But if you're reading this, you probably already know that. If student loan default has happened to you, know that the world isn't over. You can fix your credit and you will be able to borrow money again in the future, so long as you take the steps necessary to repair your credit. These steps include getting out of default, paying your bills on time, paying off your debt, and eventually applying for credit as needed to improve your debt-to-credit ratio. I won't lie: this can be a lengthy process. Once you get started, however, you'll see that in just a few months, your score will start to go up. How to Recover From Defaulted Student LoansStep 1: Getting Out of DefaultIn order to repair your credit, you need to get out of student loan default first. When you default on your loan, it's sent to collections, and you will be notified. When you are notified, usually by mail, you should call the phone number on the letter sent to you to learn about your options. Typically, you have three options in this scenario:: 1. Pay Your Loans Off The one simple way to get out of student loan default is to pay off your loan in full. This is obviously easier said than done, as the average student loan balance is in the tens of thousands of dollars. However, if you have a family member who will help you out by loaning you money at a lower interest rate, or if you qualify for a personal loan, this might be a reasonable option. (Keep in mind getting a loan if you're already in default is unlikely). 2. Rehabilitate Your Loans You might be able to work with your loan servicer or collections agency on a plan to make smaller monthly payments. When you call, explain that you want to get out of default and can only pay a certain amount each month. The benefit of loan rehabilitation is that as long as you make your monthly payments on time for a certain period of time, as agreed upon with the collections agency, they will most likely be willing remove the default status from your credit report as well. 3. Consolidate Your Loans If you have several student loans, you can choose to consolidate them into one, which will count as a payment and bring you out of default. You usually have to make three on-time payments, work out a payment plan with your servicer, or enroll in an income-driven repayment plan before you're eligible to consolidate. Step 2: Pay Off Other DebtsYour credit utilization makes up 30 percent of your credit score, so if you have other debts such as credit cards, your next step should be to lower those balances once your student loans are under control.. If your credit card interest rates are well above your student loan interest rates, it would be wise to focus on paying those as quickly as possible, since mathematically speaking, paying off the higher interest rate debt first will save the most money over time. Additionally, if your credit cards are maxed out, it will not reflect well on your credit score. You need to have as much "space" -- or available credit -- as possible. Consider opening a new line of credit in addition to paying down your loans so you can increase your debt-to-credit ratio (just don't rack up any new debt). Step 3: Pay All Your Bills On TimeIf you struggle with your other bills, like your phone bill or your mortgage, it's time to sit down and take a long hard look at your finances to ensure you always pay your bills on time. It's more important than you might think: your payment history is the most significant factor of your score at 35 percent. If you are late on a payment, it will have a negative impact on your credit. Pay on time, every time and your credit score will improve as time passes. Step 4: Rinse, Repeat, and Be PatientUnfortunately, building up your credit is not an easy or quick process. You have to consistently repeat the steps above to make your score continue to rise. This means always paying your bills on time, maintaining low credit card balances, and periodically opening new lines of credit (that you don't max out) so that your debt- to- credit ratio and credit mix improve. If you do all of these things and are patient, you will be well on your way to repairing your credit after student loan default. Many people have done it before you, and although going into default is never a good thing, you definitely have options for having financial success in the future. Interested in refinancing your student loans?Here are the top 6 lenders of 2015!
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| Guide to Building Good Credit Using <b>Student Loans</b> | Refinance and <b>...</b> Posted: 29 Dec 2015 12:37 AM PST It's easy to lament about student loan debt. Interest eats away at your hard-earned dollars and the payments can seriously cut into your monthly budget. But student loans aren't all bad news -- they can help build your credit. If you're curious about strategies for building good credit, learn how to use your student loans to your advantage. Why Is Credit Important?Credit affects your ability to borrow in the future (hello, mortgage!) and navigate adult life easily. Your credit score, which is a numeric value that represents your creditworthiness, is used in a variety of life situations. Looking to buy a home or car? Your credit will be checked. Need to move into your own apartment? Better have good credit. In some cases, your credit is a factor in employment decisions, too. "Many jobs check your credit history to see if you are responsible with your finances or are having any financial issues. It may be another factor in who gets the job," said Peter J. Creedon, a CFP with Crystal Brook Advisors. If you have poor credit, or no credit history at all, accomplishing basic goals like renting an apartment or getting approved for a credit card can be difficult. Plus, having good credit can help you get approved for better interest rates on student loan refinancing, credit cards, and more. How Do Student Loans Build Credit?Student loans are installment loans, which differ from revolving credit lines such as a credit card or HELOC. Installment loans are provided once, then paid back over a set period of time in regular installments. Installment loans affect your credit profile, but how it affects it depends on you. It doesn't matter if you have federal or private student loans -- what matters is that you are responsible with your debt and make on-time payments. Jason Reiman, CFP at GetFinFit.com, explained, "When it comes to credit, and thus, building a positive record and credit score, time and consistency are two of the most important factors. Thus, student loans play a significant part in building good credit." Being in good standing with your student loans can help build good credit even if you don't have a credit card or any other loans. I know this first hand. I was credit-averse and didn't get my first credit card until age 28. But I did have student loan debt and always made on-time payments. By borrowing for my education (which I had to do) and paying back my loans on time each month, my credit score was 720 — enough to get approved for my first apartment. Building Good Credit Using Student LoansIf you have student loans, there are a few things you can do to ensure your loans help build good credit and don't tarnish your credit profile. 1. Make payments 100 percent on time. Your payment history is a huge factor when it comes to building good credit. Creditors look at your payment history to determine if you are creditworthy — your past is an indicator of the future and if you have missed or late payments, it will affect your credit negatively. "Payment history makes up the largest share of the credit score algorithm – 35 percent," said Mary Monroy, a student loan counselor at ClearPoint Credit Counseling Solutions. "Student loan borrowers can use their loans to their advantage to build good credit by ensuring that payments are made on time once they go into repayment." Your FICO credit score, which is a commonly used score, is determined by a variety of factors in addition to payment history. Also considered are amounts owed (30 percent), length of credit history (15 percent), new credit (10 percent) and credit mix (10 percent). So while payment history isn't the only thing that affects your credit score, it is the largest determining factor. To help keep your payments on track, consider signing up for autopay through your loan servicer, which allows you to automatically deduct payments from your bank account each month. "Many servicers will offer an incentive to borrowers of a .25% interest rate discount if ACH payment method is chosen," said Monroy. If you don't think that's the right option for you, sign up for online reminders or put a notification in your calendar a few days before the due date. 2. Make your payments affordable. If your payments are overwhelming and you struggle to make them each month, you may skip a payment because you can't afford it. But remember, rule number one: always make on-time payments. So what can you do? "If you have private loans, see if you can qualify for a lower fixed rate," recommended Andrew McFadden, Founder of Panoramic Financial Advice. "If you have federal loans, there is a good chance that you can qualify for income-based repayment if your loans are substantial compared to your income." 3. If you can't make payments, contact your loan servicer immediately. If you really can't afford your student loan payments, talk to your loan servicer immediately and see what options are available. Don't wait. You may be eligible for an income-driven repayment plan or deferment until you get back on your feet. Having student loans can play a positive role in building good credit, so long as you make on-time payments and keep them under control. Doing so can help you in other areas of your life — with good credit, you may be eligible for student loan refinancing, lower interest rates and more. In the end, being a responsible student loan borrower can lead to other opportunities that can boost your finances. Photo credit: Got Credit Here are the top 6 lenders of 2015!
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| How to apply for the new <b>student loan</b> forgiveness program Posted: 31 Dec 2015 02:27 AM PST FERNDALE, Calif. (AP) — Another moderate earthquake in the Pacific about 30 miles offshore of far Northern California was felt lightly by so… PATHANKOT, India (AP) — An Associated Press photographer says fresh gunfire has erupted at an Indian air force base near the border with Pak… | ||||||||||||||||||||||||||||||||
| <b>Student Loans</b>: The Taxpayers Lose Again | Foundation for <b>...</b> Posted: 29 Dec 2015 05:00 AM PST Politicians typically try to win votes by giving away money. Being a political Santa Claus is usually seen as more rewarding than being a federal Ebenezer Scrooge. Which is why there's now a $1.2 trillion federal student loan program that, the New York Times politely observed, "has been removed from the norms and values of prudent lending." Federally subsidized student loans have become a political favorite, as Uncle Sam added $82 billion to his loan portfolio in 2015. An incredible 42 million Americans have outstanding debt; 6,100 schools have collected subsidized loans. Most of the money obviously has nothing to do with helping those in genuine financial need. Instead, Congress has created an educational "entitlement" akin to Medicare and Social Security, only for the young. A lot of that cash will never be repaid. Borrowers whose loans came due from 2010 through 2012 collectively owed more two years after they started repaying their loans. The New York Times profiled the incredible story of a teacher who graduated in 1994 with a student loan debt of $26,278 that has ballooned to more than $410,000, mostly due to interest when she took out additional loans for graduate school and her kids and thrice took advantage of temporary federal loan forbearance, which allows borrowers to stop making payments for up to 12 months while interest continues to accrue. As of 2014, 28 percent of those whose loans began requiring repayment in 2009 were in default. Almost half, 47 percent, of those who attended private schools were in default. Default rates were 51 percent at ITT and 53 percent at Kaplan. Anticipated lifetime default rates for cohorts 2007 through 2011 steadily increased from 15.9 percent to 18.4 percent. The Huffington Post's Shahien Nasiripour warned, "Federal student loans made in recent years resemble the toxic subprime mortgage loans that helped cause the Great Recession." After shoveling out money to people with little credit to attend schools unlikely to prepare them for work that pays, Uncle Sam provides multiple outs from having to repay the loans. For instance, people are entitled to three periods of forbearance. Try that one on your mortgage lender or credit card issuer. The federal government also forgives loans for students who it believes have been scammed in some sense by poor quality (typically for-profit) schools. Of course, not being good itself doesn't constitute fraud, and not every student looks carefully at the details of what he or she is choosing. But even in the case of outright, flagrant fraud, why are the taxpayers responsible? As journalist Megan McArdle pointed out, "People get taken by scams every day, often with the help of government money. Should Fannie Mae forgive the mortgages of people if the buyer misrepresented the condition of the house?" The Small Business Administration, Export-Import Bank, Overseas Private Investment Corporation, Federal Housing Administration, and many more public institutions underwrite what turn out to be very bad ideas. Indeed, asked McArdle, "what about people who go to a big, public party school and major in sports marketing or tourism?" People may need relief, but, she observed, that's what bankruptcy is for. "The government should change the law to make it easier to bankrupt student loans," she writes. Congress also has created a forgiveness program for "public service," which, of course, mostly means government work. This program is nonsensical: private jobs typically offer plenty of "service," and the government often pays more — and provides far greater job security — than private employers do for similar "service." Indeed, Alexander Holt, an education policy analyst for the think tank New America, suggested including farmers in the Public Service Loan Forgiveness program "because they are uniquely serving the public" by producing food. So do writers, I want to emphasize. We help keep the nation informed, so that republican government can operate! So far, some 300,000 people have taken advantage of the program, with the number increasing dramatically over the last three years. As a result, noted the Wall Street Journal, the program is yet another to spiral out of control, "encompassing far more workers than envisioned, many of them well paid. Thousands of workers with graduate degrees are on track to discharge five- and six-figure debts on their way to typically lucrative careers." One sponsor of the law, Rep. John Sarbanes (D-Md.), said it was supposed to benefit physicians in underserved areas, not higher-paid colleagues. The Obama administration has proposed capping the benefit at $57,500, the maximum an undergraduate can borrow. Yet the president and legislators constantly come up with new ways to sacrifice taxpayers to those who already enjoyed subsidized educational loans. Next year, the Pay As You Earn program (PAYE), passed by Congress but expanded via executive order, will cost Uncle Sam $22 billion in lost loan repayments. PAYE limits monthly payments to 10 percent of income and forgives the remaining debt after 20 years. (Why didn't I get that for my mortgage?) Sen. Elizabeth Warren (D-Mass.) has pushed a $60 billion refinancing plan to reduce borrowers' interest payments. But there'd be no cost, she explained. Impose a new tax and millionaires would pay — as they are supposed to do for everything else on the left's wish list. Taxpayers are already helping middle class kids attend college. Shouldn't they at least pay what they promised on their loans? So much money, so much effort to forego repayment. Why? Publicly subsidized student loans, whether directly from Uncle Sam or through private banks backed by Washington, make no policy sense. The "social" benefit from education is greatest at the lowest levels, when people learn to read and write: the building blocks for participation in society. Someone with little academic inclination isn't even likely to gain a lot from high school, which is why kids can leave early. College is viewed as the ticket to professional success, and graduating from college yields a large wage premium. But that benefits the individual, not society. Which is precisely why individuals, not government, should pay for school. The "social" benefit of piling up bachelor degrees — especially in the soft social sciences — isn't obvious. After all, what practical social value comes with yet another sociology or English literature degree? Even more so, advanced degrees primarily yield individual, not "social," benefits. It is particularly perverse to force lower income people to finance professional degrees for those destined to be part of the 1 percent. Indeed, one could argue that increasing the number of lawyers and PhD sociologists actually reduces society's productivity. The federal student loan program, like so many other federal programs, desperately needs to be rolled back. Students should borrow at market rates and finance their education through loans only if they are likely to repay their debts. They shouldn't receive endless opportunities to avoid repayment. They certainly shouldn't be able to get out of their obligations by taking a government job, or a government-favored job. Washington's operating principle is simple: the taxpayers always lose. It's time for someone in government to act in the interests of those who work and pay for everyone else. | ||||||||||||||||||||||||||||||||
| Your Federal <b>Student Loans</b> Just Got Easier to REPAYE | ED.gov Blog Posted: 17 Dec 2015 05:55 AM PST Beginning today, Federal Direct Loan borrowers can take advantage of a new repayment plan: REPAYE (the Revised Pay As You Earn Plan).Some of you may be familiar with the Pay As You Earn (PAYE) Repayment Plan, which caps payments at 10% of a borrower's monthly income and forgives any remaining balance on your student loans after 20 years of qualifying repayment. But this plan is only for recent borrowers. REPAYE solves this problem. Like the name implies, REPAYE has some similarities to PAYE. First and foremost, REPAYE, like PAYE, sets payments at no more than 10% of income. However, REPAYE—unlike PAYE— is available to Direct Loan borrowers regardless of when they took out their loans. Should I switch to REPAYE?If you can't afford your monthly payment under your current repayment plan, you should consider REPAYE or one of the other income-driven repayment plans. These plans can offer needed relief by ensuring that you will never pay more than a certain percentage of your income. If you can afford to pay more on your loan, you should, since this will save you more on interest costs over the life of your loan. If you're pursuing Public Service Loan Forgiveness, you should consider REPAYE. REPAYE is an eligible repayment plan for the Public Service Loan Forgiveness (PSLF) Program. If you're working toward PSLF and considering consolidating your loans in order to qualify for REPAYE, you should read this first. If you're currently on Income-Based Repayment (IBR) because you weren't eligible for PAYE, you should consider whether REPAYE might be a better option for you. REPAYE could lower your payments by one-third, from 15% to 10% of income. Before making your decision, use our repayment estimator to compare what your monthly payment would be under REPAYE and all of our other plans. Under any income-driven repayment plan, you'll need to "recertify" your income and family size each year. How is REPAYE different from the other income-driven repayment plans?So, you already know that your payment under an income-driven plan is a percentage of your income. But REPAYE is different from the other plans. Here are a few differences: There's no income requirement to enter the plan: Unlike with the PAYE and IBR plans, borrowers don't have to show that that their income is low compared to their federal student loan debt in order to enter REPAYE. In simple terms, that means that the amount of your debt and your income level won't keep you from qualifying. Borrowers with only undergraduate loans will have a different repayment period than those with graduate loans: Income-driven repayment plans forgive any remaining loan balance after a specific number of years of qualifying repayment—either 20 or 25 years, depending on the plan. REPAYE is a little different than the other income-driven repayment plans. With REPAYE, if you're only repaying loans you received as an undergraduate student, you'll repay your loans for up to 20 years. However, if you're repaying even one loan that you received as a graduate or professional student, you'll repay your loans (including any loans you received as an undergraduate) for up to 25 years. Of course, this difference doesn't matter if you later qualify for Public Service Loan Forgiveness, since your loans would be forgiven after 10 years of qualifying payments. Married borrowers' payments are calculated differently: The other income-driven repayment plans use the combined income of you and your spouse to set your payment amount only if you file a joint federal income tax return. If you and your spouse file separate tax returns, your payment amount is based on only your income. REPAYE (with limited exceptions) uses the combined income of you and your spouse to set your monthly payment amount, regardless of whether you file a joint tax return or separate returns. This could increase your monthly payment amount. For more information, read our Q&A. REPAYE payments are not capped at the 10-year standard payment amount: Generally, your payment amount under an income-driven repayment plan is a percentage of your discretionary income. However, this isn't always the case with the PAYE and IBR plans. Under PAYE and IBR, your payment will never be higher than what it would have been under the 10-year Standard Repayment Plan, no matter how much your income increases. With REPAYE, there's no cap on your monthly payment amount. Your payment will always be 10% of your discretionary income, no matter how high your income grows. This means that if your income increases significantly, your REPAYE payment could be higher than what you would have to pay under the 10-year Standard Repayment Plan. REPAYE provides a more generous interest benefit: If your payment doesn't cover all of your interest, REPAYE pays more of the remaining interest than PAYE or IBR. This can help prevent your loan balance from ballooning and limit the total cost of your loans. What else should I consider before applying?Determine whether you have Direct Loans before attempting to switch to REPAYE. If you're not sure which type of loans you have, you can log in to StudentAid.gov to find out. Loans labeled "Direct" qualify for REPAYE, loans without the "Direct" label don't qualify for REPAYE unless you consolidate them. You can apply for a Direct Consolidation Loan on StudentLoans.gov. Special considerations for borrowers who are currently on IBR:
How do I apply for REPAYE?You can apply for REPAYE—or any other income-driven repayment plan—on StudentLoans.gov. We've made some improvements to the way the electronic application works, so give it a spin. Looking for the lowest monthly payment? With four income-driven repayment plans, it's easy to overlook a plan or confuse a feature of one plan with another. Let us do the hard part for you. If you're looking for the lowest monthly payment, there's a box you can check on the application to request that your loan servicer evaluate you for all income-driven repayment plans, and put you on the plan with the lowest initial payment. Where can I get more information?There's more to know about REPAYE than what you see in this blog post.
Have a question that our resources can't answer? Contact your servicer. They're the best option for individualized advice. | ||||||||||||||||||||||||||||||||
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