At any point in your high school career, you are preparing for college. Regardless if it is studying for a history exam, acting in the school play, or scoring the winning goal on the soccer team, each task you work on or complete throughout grades 9-12 make a difference in terms of which colleges you'll get into, and which one you'll attend.
Let's look at some steps you can take each year to solidify yourself for college admissions officers:
Get good grades – Sure, it's most important to work hard in math and English, but schools do consider your overall GPA. So make sure you don't slack off in Phys. Ed and be careful not to overcook your beef stroganoff in Cooking II.
Practice for the standardized tests – Most people say you can't study for the SAT/ACT. I agree. Nevertheless, what you can do is become familiar with what they test. I definitely recommend either taking a class or getting a book on whichever test you need to take. This way, when it's time for the real thing, you'll know how they're formatted and the types of questions you'll be up against. 1
Take only the tests you need – I took the SAT IIs and ended not needing them for the school I went to. Research your schools and don't waste your time (and money) with extraneous testing.
Extracurriculars are important – Do you enjoy volunteer work? Can you slam dunk? How about play the viola? Any of these skills should be practiced in your high school club scene. Join the band, basketball team, and Habitat for Humanity. Stick with them and attain leadership roles. Just don't let your grades suffer!
Use AP classes – The sole purpose of these classes is to prepare you for its respective AP exam. If you score a 4 or 5 (and sometimes a 3) you'll receive college credit for the class. Get enough credits, and graduate a semester early. Think about how much tuition and housing costs you'd save!
Research your financial aid options – Most likely, Mom and Dad won't have you entirely covered when it comes to pay for college. Therefore, make sure you know the 411 on potential student loans. Complete your FAFSA on January 1 of your senior year. Apply for any college scholarships you can find. File for as much in federal aid as you can. Still need more? That's where private student loans come in.
College admissions are a very tricky game. When you gravitate to more competitive colleges, there are no guarantees of getting in. However, abide by the above tips to improve your chances. Interested in more admissions help? Check out our college admissions and search site at HowToGetIn.com.
Friday, April 23, 2010
Student Loans to Forgiven After 10 Years of Public Service
The government hopes a new loan forgiveness program will give students an incentive to consider a career in public service. In exchange for 10 years on the job in a field of public service such as public safety, education, or social work, the Department of Education will erase certain borrowers’ remaining federal student loan debt.
To be eligible for this initiative — the Loan Forgiveness for Public-Service Employees Program — you must have either taken out or consolidated your federal student loans through the federal Direct Loan Program, in which you receive your student loan directly from the government rather than through a third-party lender.
Breaking It Down: How the Loan Forgiveness Program Works
The loan forgiveness benefit is available for any federal consolidation loan or any federal parent or student loans you’ve taken out through the Department of Education’s Direct Loan Program. If you took out your federal college loans from a private lender through the Federal Family Education Loan Program (rather than directly from the government through the Direct Loan Program), you’ll have to consolidate your FFELP student loans into the Direct Loan Program in order for those student loans to be eligible to be forgiven.
Besides holding a federal Direct loan, you’ll also have to meet certain borrower requirements to qualify for the loan forgiveness program:
Spend a decade in a public service career. You must remain in a qualifying public-service career, working full-time, for 10 years, during which you must be making payments on the student loans you’re looking to have forgiven. You must still be working in the public-service sector at the time your student loans are forgiven.
Hit the 120 mark. During your 10 years of full-time public service, you must make 120 monthly payments on the Direct college loans you want forgiven. Only payments made after Oct. 1, 2007, will count toward the payment requirement. If you have FFELP loans (college loans that you took out from a private lender and not from the federal government) that you’re consolidating into the Direct Loan Program, you’ll only be able to count the payments you make on your Direct Consolidation Loan after your FFELP student loans are consolidated. Any payments you’ve made before Oct. 1, 2007, or to any lender other than the federal government won’t count.
Sign up for a qualifying repayment plan. Your required 120 payments must be made under one (or a combination) of three repayment plans: standard repayment, income-contingent repayment, or income-based repayment, which becomes available July 1, 2009. If you’re enrolled in a different Direct Loan repayment plan, only those payments you make that are at least equal to the monthly payment amount you’d be required to make under the standard repayment plan will count toward your 120-payment requirement.
The Fine Printed: How You End Up Paying Off Your Student Loans Yourself
If you’re considering applying for the loan forgiveness benefit, you may want to look into your eligibility for the income-contingent and income-based repayment plans, which allow low-income borrowers to qualify for lower payments and extend their repayment period to 25 years. Only borrowers who are making reduced monthly payments on an income-contingent or income-based repayment plan will likely have a remaining balance left to forgive after making 120 payments on their student loans.
If you’re in the standard repayment plan, which has a repayment term of 10 years, you may find that you don’t have any student loan debt left to forgive after meeting your 120-payment requirement, since your 10-year repayment term is the same quantity of time that the government requires you to hold your public-service job before any of your student loans can be forgiven.
What Qualifies as Public Service?
Public-service fields eligible for the loan forgiveness program include:
Military
Emergency management
Fire departments
Law enforcement
Public library sciences
Public school education
Public child care
Public health
Public service for the elderly
Public service for individuals with disabilities
Nonprofit work with certain tax-exempt organization
To be eligible for this initiative — the Loan Forgiveness for Public-Service Employees Program — you must have either taken out or consolidated your federal student loans through the federal Direct Loan Program, in which you receive your student loan directly from the government rather than through a third-party lender.
Breaking It Down: How the Loan Forgiveness Program Works
The loan forgiveness benefit is available for any federal consolidation loan or any federal parent or student loans you’ve taken out through the Department of Education’s Direct Loan Program. If you took out your federal college loans from a private lender through the Federal Family Education Loan Program (rather than directly from the government through the Direct Loan Program), you’ll have to consolidate your FFELP student loans into the Direct Loan Program in order for those student loans to be eligible to be forgiven.
Besides holding a federal Direct loan, you’ll also have to meet certain borrower requirements to qualify for the loan forgiveness program:
Spend a decade in a public service career. You must remain in a qualifying public-service career, working full-time, for 10 years, during which you must be making payments on the student loans you’re looking to have forgiven. You must still be working in the public-service sector at the time your student loans are forgiven.
Hit the 120 mark. During your 10 years of full-time public service, you must make 120 monthly payments on the Direct college loans you want forgiven. Only payments made after Oct. 1, 2007, will count toward the payment requirement. If you have FFELP loans (college loans that you took out from a private lender and not from the federal government) that you’re consolidating into the Direct Loan Program, you’ll only be able to count the payments you make on your Direct Consolidation Loan after your FFELP student loans are consolidated. Any payments you’ve made before Oct. 1, 2007, or to any lender other than the federal government won’t count.
Sign up for a qualifying repayment plan. Your required 120 payments must be made under one (or a combination) of three repayment plans: standard repayment, income-contingent repayment, or income-based repayment, which becomes available July 1, 2009. If you’re enrolled in a different Direct Loan repayment plan, only those payments you make that are at least equal to the monthly payment amount you’d be required to make under the standard repayment plan will count toward your 120-payment requirement.
The Fine Printed: How You End Up Paying Off Your Student Loans Yourself
If you’re considering applying for the loan forgiveness benefit, you may want to look into your eligibility for the income-contingent and income-based repayment plans, which allow low-income borrowers to qualify for lower payments and extend their repayment period to 25 years. Only borrowers who are making reduced monthly payments on an income-contingent or income-based repayment plan will likely have a remaining balance left to forgive after making 120 payments on their student loans.
If you’re in the standard repayment plan, which has a repayment term of 10 years, you may find that you don’t have any student loan debt left to forgive after meeting your 120-payment requirement, since your 10-year repayment term is the same quantity of time that the government requires you to hold your public-service job before any of your student loans can be forgiven.
What Qualifies as Public Service?
Public-service fields eligible for the loan forgiveness program include:
Military
Emergency management
Fire departments
Law enforcement
Public library sciences
Public school education
Public child care
Public health
Public service for the elderly
Public service for individuals with disabilities
Nonprofit work with certain tax-exempt organization
Saturday, April 10, 2010
Schools Personal Finance
The school system has always been set up to help you get a job and make money. Personal finance lessons to help you keep that cash, however, are infrequent. The fallout from this curious arrangement has undoubtedly contributed to the recent crisis in the American economic system, which started with a few million bad decisions and unnecessary risks taken by American consumers.
What's the problem?
This particular crisis might have been prevented by a few simple lessons in money management and personal finance 20 years ago. Today, 43 percent of American families make less money than they spend. Is it any wonder that personal bankruptcies have skyrocketed? Facing with financial problems themselves, parents don't often feel qualified to teach their children about personal finance. The burden falls on the schools, and children often leave high school without any financial education at all.
Only seven out of 50 states-Georgia, Idaho, Illinois, Louisiana, Missouri, South Dakota, and Utah-require a personal finance class before handing out a high school diploma, according to a 2007 National Council on Economic Education survey.
The good news is that seven states is much more than the single state that had this requirement in 1998, and at least 40 states at least spell out standards for personal finance education to their teachers, up from 21 in 1998. If we continue down this track, the next generation of American savers, borrowers, and consumers stands a chance of doing better than today's adults.
Finding money to teach money
Should school boards nationwide divert funds from education in science, history, the arts, and physical education to jumpstart more personal finance projects? It's a tough battle to fight, as all these subjects deserve funding. Nevertheless personal finance is a topic that affects everyone, every day. We can't go far wrong with a dash of education on money and how to manage it, so it won't go "poof" and disappear soon after your children cash their first paychecks.
Money problems can break up marriages and serious relationships, cause severe damage to career plans, and generally lead to untold amounts of personal misery. With a damaged credit report from the early years, you may not be able to get back on your feet again for decades. On a grander scale, the economy suffers when millions of young Americans walk into today's complicated financial world completely unprepared to make the tough choices that shape their financial futures.
If your children's school doesn't teach personal finance, it's your responsibility to teach them the ABCs of APRs and responsible credit use. Only one in three adults know what deductions are taken out of their paycheck every month. Together, we could get closer to 100 percent and a brighter financial future.
What's the problem?
This particular crisis might have been prevented by a few simple lessons in money management and personal finance 20 years ago. Today, 43 percent of American families make less money than they spend. Is it any wonder that personal bankruptcies have skyrocketed? Facing with financial problems themselves, parents don't often feel qualified to teach their children about personal finance. The burden falls on the schools, and children often leave high school without any financial education at all.
Only seven out of 50 states-Georgia, Idaho, Illinois, Louisiana, Missouri, South Dakota, and Utah-require a personal finance class before handing out a high school diploma, according to a 2007 National Council on Economic Education survey.
The good news is that seven states is much more than the single state that had this requirement in 1998, and at least 40 states at least spell out standards for personal finance education to their teachers, up from 21 in 1998. If we continue down this track, the next generation of American savers, borrowers, and consumers stands a chance of doing better than today's adults.
Finding money to teach money
Should school boards nationwide divert funds from education in science, history, the arts, and physical education to jumpstart more personal finance projects? It's a tough battle to fight, as all these subjects deserve funding. Nevertheless personal finance is a topic that affects everyone, every day. We can't go far wrong with a dash of education on money and how to manage it, so it won't go "poof" and disappear soon after your children cash their first paychecks.
Money problems can break up marriages and serious relationships, cause severe damage to career plans, and generally lead to untold amounts of personal misery. With a damaged credit report from the early years, you may not be able to get back on your feet again for decades. On a grander scale, the economy suffers when millions of young Americans walk into today's complicated financial world completely unprepared to make the tough choices that shape their financial futures.
If your children's school doesn't teach personal finance, it's your responsibility to teach them the ABCs of APRs and responsible credit use. Only one in three adults know what deductions are taken out of their paycheck every month. Together, we could get closer to 100 percent and a brighter financial future.
Saturday, March 27, 2010
guide to student loans
Federal student loans are an even better deal than before. Rates are fixed now, rather than variable, and students with the most need will see rates as low as 3.4% in the future. Limits on how much you can borrow have been raised a bit, and parents who take out parental student loans now can defer payments while their kids are still in school. Although some lenders have exited the federal student loan market, the U.S. government has stepped into make sure the remaining lenders had access to cash to make loaning.
"The government averted the crisis," said Mark Kantrowitz, the publisher of FinAid and a co-author of "FastWeb College Gold: The Step-by-Step Guide to Pay for College." "You don't have to worry about getting (federal) student loans."
Don't ask your lender for a consolidation loan. Consolidation allows you to make one payment instead of many, and you may be able to lower your payments by stretching out the repayment term from the usual 10 years to as many as 30. You still can consolidate your federal student loans, but you'll need to do so through the federal government. Lenders that used to make these loans have fled the market, saying they aren't profitable anymore. Visit the U.S. Department of Education's loan consolidation site to get starting.
More from MSN
Your 5-minute guide to college costs
Where to stash college savings
6 reasons not to save for kids' college
A survival guide for college grads
Find that first apartment
Private student loans are harder to get. If you want to borrow more than the federal student loan limits (which range from $5,500 to $7,500 a year for college students, depending on their year and type of loan), you typically would turn to private student loans. These come with variable rates that currently average 11% to 12%. Nevertheless lenders are demanding higher credit scores plus a co-signer these days.
"You used to be able to get a (private student) loan with a 620 FICO score," Kantrowitz said. "These days you need at least a 650 or even a 700."
Even if you qualify, you need to be extremely cautious about how much private student loan money you borrow. Here's why:
Those variable rates are only going to shoot higher when the economy recovers and interest rates rise, Kantrowitz cautioned. Typically, private student loan rates aren't capped, so the sky's, the limit.
Private loans don't come with the forgiveness and income-based repayment options now available for federal loans.
Private lenders will still loan you far more money than you can comfortably repay. They know you can't escape this debt, so they're comfortable piling it on. Student loaned debt typically can't be erased in bankruptcy court, and there is no limit on how long private lenders can pursue you for collection.
So it's up to you to set limits on how much you'll borrow and search for the best deals.
"The government averted the crisis," said Mark Kantrowitz, the publisher of FinAid and a co-author of "FastWeb College Gold: The Step-by-Step Guide to Pay for College." "You don't have to worry about getting (federal) student loans."
Don't ask your lender for a consolidation loan. Consolidation allows you to make one payment instead of many, and you may be able to lower your payments by stretching out the repayment term from the usual 10 years to as many as 30. You still can consolidate your federal student loans, but you'll need to do so through the federal government. Lenders that used to make these loans have fled the market, saying they aren't profitable anymore. Visit the U.S. Department of Education's loan consolidation site to get starting.
More from MSN
Your 5-minute guide to college costs
Where to stash college savings
6 reasons not to save for kids' college
A survival guide for college grads
Find that first apartment
Private student loans are harder to get. If you want to borrow more than the federal student loan limits (which range from $5,500 to $7,500 a year for college students, depending on their year and type of loan), you typically would turn to private student loans. These come with variable rates that currently average 11% to 12%. Nevertheless lenders are demanding higher credit scores plus a co-signer these days.
"You used to be able to get a (private student) loan with a 620 FICO score," Kantrowitz said. "These days you need at least a 650 or even a 700."
Even if you qualify, you need to be extremely cautious about how much private student loan money you borrow. Here's why:
Those variable rates are only going to shoot higher when the economy recovers and interest rates rise, Kantrowitz cautioned. Typically, private student loan rates aren't capped, so the sky's, the limit.
Private loans don't come with the forgiveness and income-based repayment options now available for federal loans.
Private lenders will still loan you far more money than you can comfortably repay. They know you can't escape this debt, so they're comfortable piling it on. Student loaned debt typically can't be erased in bankruptcy court, and there is no limit on how long private lenders can pursue you for collection.
So it's up to you to set limits on how much you'll borrow and search for the best deals.
Saturday, January 30, 2010
Student Loans After 10 Years of Public Service
If you’re in a different Direct Loan repayment plan, Only borrowers who are making reduced monthly payments on their repayment period to 25 years.
The Fine Printed: How the Loan Forgiveness Program Works
The loan forgiveness benefit is available for Any payments you’ve made before Oct. 1, 2007, or to any lender other than the federal government won’t count. Only those student loans to be eligible to be forgiven. If you took out or income-based repayment, which becomes available July 1, 2009. If you’re enrolled in the standard repayment plan, which has a repayment term of 10 years, you may find that you don’t have any student loan debt left to forgive after meeting Your required 120 payments must still be working in the public-service sector at the time your student loans are at least equal to have forgiven. You must be made under the standard repayment plan will count toward your 120-payment requirement. Student Loans Could Be Forgiven after Oct. 1, 2007, will count toward the payment requirement. If you took out your federal college loans from the federal government) that you’re consolidating into your eligibility for the income-contingent and income-based repayment plans, which you must be eligible for this initiative — the Loan Forgiveness for Public-Service Employees Program — you must have either taken out from a private lender and extend their student loans. In exchange for 10 years on the job in a field of public service such as Public Service?
Public-service fields eligible for the loan forgiveness program include:
Military
Emergency management
Fire departments
Law enforcement
Public library sciences
Public school education
Public child care
Public health
Public service for the elderly
Public service for individuals with disabilities
Nonprofit work with certain tax-exempt organization
Breaking It Down: How You End for the loan forgiveness benefit, you may want to look into the Department of Education will erase certain borrowers’ remaining federal student loan debt.
Besides holding a federal Direct loan, you’ll also have to meet certain borrower requirements to qualify for the loan forgiveness program:
Spend a decade in a public service career. You must remain in a qualifying public-service career, working full-time, for 10 years, during which allow low-income borrowers to qualify for lower payments and not from a private lender through the Federal Family Education Loan Program (rather than through a third-party lender.
Sign Up Paying Off Your Student Loans Yourself
If you’re considering applying for a qualifying repayment plan.
To be making payments on the student loans you’re looking to the monthly payment amount you’d be required to make that you have a remaining balance left to forgive after making 120 payments on an incentive to consider a career in public service. Any federal consolidation loan or any federal parent or student loans you’ve taken out through the federal Direct Loan Program, in which you receive your student loan directly from the government rather than directly from the government through the Direct Loan Program), you’ll have to consolidate your FFELP student loans into the Direct Loan Program in order for those payments you make under one (or a combination) of three repayment plans: standard repayment, income-contingent repayment, or consolidated your federal student loans through the Direct Loan Program, you’ll only be able to count the payments you make on your Direct Consolidation Loan after your FFELP student loans are consolidated.
Hit the 120 mark. During your 10 years of full-time public service, you must make 120 monthly payments on the Direct college loans you want forgiven. Only payments made After 10 Years of Public Service
The government hopes a new loan forgiveness program will give students an income-contingent or income-based repayment plan will likely have FFELP loans (college loans that are forgiven.
What Qualifies as public safety, education, or social work, the Department of Education’s Direct Loan Program. Your 120-payment requirement, since your 10-year repayment term is the same quantity of time that the government requires you to hold your public-service job before any of your student loans can be forgiven.
The Fine Printed: How the Loan Forgiveness Program Works
The loan forgiveness benefit is available for Any payments you’ve made before Oct. 1, 2007, or to any lender other than the federal government won’t count. Only those student loans to be eligible to be forgiven. If you took out or income-based repayment, which becomes available July 1, 2009. If you’re enrolled in the standard repayment plan, which has a repayment term of 10 years, you may find that you don’t have any student loan debt left to forgive after meeting Your required 120 payments must still be working in the public-service sector at the time your student loans are at least equal to have forgiven. You must be made under the standard repayment plan will count toward your 120-payment requirement. Student Loans Could Be Forgiven after Oct. 1, 2007, will count toward the payment requirement. If you took out your federal college loans from the federal government) that you’re consolidating into your eligibility for the income-contingent and income-based repayment plans, which you must be eligible for this initiative — the Loan Forgiveness for Public-Service Employees Program — you must have either taken out from a private lender and extend their student loans. In exchange for 10 years on the job in a field of public service such as Public Service?
Public-service fields eligible for the loan forgiveness program include:
Military
Emergency management
Fire departments
Law enforcement
Public library sciences
Public school education
Public child care
Public health
Public service for the elderly
Public service for individuals with disabilities
Nonprofit work with certain tax-exempt organization
Breaking It Down: How You End for the loan forgiveness benefit, you may want to look into the Department of Education will erase certain borrowers’ remaining federal student loan debt.
Besides holding a federal Direct loan, you’ll also have to meet certain borrower requirements to qualify for the loan forgiveness program:
Spend a decade in a public service career. You must remain in a qualifying public-service career, working full-time, for 10 years, during which allow low-income borrowers to qualify for lower payments and not from a private lender through the Federal Family Education Loan Program (rather than through a third-party lender.
Sign Up Paying Off Your Student Loans Yourself
If you’re considering applying for a qualifying repayment plan.
To be making payments on the student loans you’re looking to the monthly payment amount you’d be required to make that you have a remaining balance left to forgive after making 120 payments on an incentive to consider a career in public service. Any federal consolidation loan or any federal parent or student loans you’ve taken out through the federal Direct Loan Program, in which you receive your student loan directly from the government rather than directly from the government through the Direct Loan Program), you’ll have to consolidate your FFELP student loans into the Direct Loan Program in order for those payments you make under one (or a combination) of three repayment plans: standard repayment, income-contingent repayment, or consolidated your federal student loans through the Direct Loan Program, you’ll only be able to count the payments you make on your Direct Consolidation Loan after your FFELP student loans are consolidated.
Hit the 120 mark. During your 10 years of full-time public service, you must make 120 monthly payments on the Direct college loans you want forgiven. Only payments made After 10 Years of Public Service
The government hopes a new loan forgiveness program will give students an income-contingent or income-based repayment plan will likely have FFELP loans (college loans that are forgiven.
What Qualifies as public safety, education, or social work, the Department of Education’s Direct Loan Program. Your 120-payment requirement, since your 10-year repayment term is the same quantity of time that the government requires you to hold your public-service job before any of your student loans can be forgiven.
Tuesday, September 22, 2009
student loan consolidation rebates
Many lenders are offering student consolidation loan rebate to the borrowers to st that they take their student loan from them. These discounts are offered because according to 'SINGLE HOLDER RULE', borrowers are allowed to merge their existing loans with any bank they wish to. The original lenders surely do not want to loose their customers and so they are offering really good discounts.
The main features of student loan consolidation are:
· Reduced interest rates
· Waiver of last 6 months installment
· Reduction in principal amount
· Flexible payment options
All this rebate is offered on Stafford loans and plus loans. The most common discounts offered on student loan consolidation are:
1. 0.25% reduction in rate if your EMI gets debited from your account directly.
2. 1% waiver in default fee depending upon the guarantor for the loan.
3. Additional rebate on making timely payments.
4. 2% reduction in rate after completion of 48 months
Here is how you can get the best student loan consolidation rate:
1. The rate for student loan consolidation will depend on customer's credit and financial state of affairs. Do a complete research and development on the rebates offered by different lenders and see which one is the lowest.
2. Go for the lender who has multiple and flexible repayment options.
3. Your lender must keep the rate fixed through out the life of the student loan. Search online and compare different type of rates offered by different lenders.
4. With a student loan consolidation, look up for the facility of increment in tenure at a later stage of the loan. Check whether the bank has such scheme or not. With loan consolidation, you can actually low down the installment amount by increasing the life of the loan.
5. If there is an "in school" facility available. If so, get your loan rate freezed while you are in school only.
The main features of student loan consolidation are:
· Reduced interest rates
· Waiver of last 6 months installment
· Reduction in principal amount
· Flexible payment options
All this rebate is offered on Stafford loans and plus loans. The most common discounts offered on student loan consolidation are:
1. 0.25% reduction in rate if your EMI gets debited from your account directly.
2. 1% waiver in default fee depending upon the guarantor for the loan.
3. Additional rebate on making timely payments.
4. 2% reduction in rate after completion of 48 months
Here is how you can get the best student loan consolidation rate:
1. The rate for student loan consolidation will depend on customer's credit and financial state of affairs. Do a complete research and development on the rebates offered by different lenders and see which one is the lowest.
2. Go for the lender who has multiple and flexible repayment options.
3. Your lender must keep the rate fixed through out the life of the student loan. Search online and compare different type of rates offered by different lenders.
4. With a student loan consolidation, look up for the facility of increment in tenure at a later stage of the loan. Check whether the bank has such scheme or not. With loan consolidation, you can actually low down the installment amount by increasing the life of the loan.
5. If there is an "in school" facility available. If so, get your loan rate freezed while you are in school only.
student loan consolidation rules
When consolidating student loans, it's important to know what you're getting into first. As with any financial decision, you must do your homework before signing on the dotted line. Consolidating student loans is not a difficult process, but there are several rules and regulations in place that you must know before deciding to consolidate your student loans into one easy to manage loan. This is a list of some of the most important rules and regulations pertaining to student loan consolidation. Make sure you understand each of these rules before going through with the consolidation loan.
Student Loan Consolidation is Free
Obtaining a student loan consolidation loan is a free process, so never pay a fee for consolidating. If the lender is charging an upfront fee to consolidate your student loans, it's most likely a scam and you should take your business elsewhere. This scam is often referred to as an "advance fee loan scam", and it's relatively common in the student loan consolidation world.
You Cannot Consolidate While Still in School
You may consolidate your student loans only after your loans enter their grace period, which is six months after graduating or dropping out of school. You can also consolidate once repayment of the loans begin, although you should consider consolidating before that point. It may not be beneficial to everyone, but it's definitely worth taking a look at the numbers to see if it would save you money and make your loans easier to manage.
You Can Only Consolidate Student Loans in Your Name
This rule seems pretty obvious, but in some cases where the student is married or has their parents' name on any of the student loans, it may come into play. Students and parents may consolidate their student loans, but they cannot combine them into one consolidation loan - They must be separate. Same thing holds true for married students who both have student loan debt. As of 2006, married students cannot combine their student loan debt into one consolidation loan - They can, however, each have their own consolidation loan.
Student and Graduates May Consolidate With Any Lender
There are no restrictions that limit which lenders are eligible for consolidating student loans, so you may choose whatever lender you wish. This allows you to shop around for the lender with the best interest rates and incentives. Keep in mind that most lenders require you to have a minimum balance totaling $7,500 or sometimes higher.
Any Federal Student Loan is Eligible for Consolidation
Any type of federal student loan can be consolidated, including single student loans. That being said, you can only consolidate an existing consolidation loan one time, but not in every circumstance. In order to reconsolidate a consolidation loan, you must add a previously not included student loan to the consolidation. In this case, your interest rate would be reconfigured using a formula to weigh the old interest rate with new rate brought on by the student loan being added to the mix. Please note that a student loan consolidation loan uses a weighted average of all of the included student loans to determine the overall interest rate - Reconsolidating in future will not completely reset your interest rate.
Consolidation Loans Offer Longer Repayment Terms
Federal student loans feature standard 10-year repayment plans. When consolidating student loans, you can extend these terms to 12-30 years depending upon how much is owed. As with any loan, though, it's not recommended to extend the terms of the loan, because interest charges will be greater the longer the loan exists. It's recommended to pay off the loan as soon as possible. That being said, extending the consolidation loan repayment plan can help people to better afford the lower payments brought on by a longer repayment plan.
There's No Prepayment Penalties
You may pay off your student loan consolidation at anytime without any risk of prepayment penalties. I highly recommend paying off the consolidation loan as soon as possible to avoid some of the interest charges and to relieve yourself of the financial burden as quickly as possible. Just make sure that when making additional payments each month, you inform the lender that the additional amount should go towards the principle of the loan rather than future payments.
Student Loan Consolidation is Free
Obtaining a student loan consolidation loan is a free process, so never pay a fee for consolidating. If the lender is charging an upfront fee to consolidate your student loans, it's most likely a scam and you should take your business elsewhere. This scam is often referred to as an "advance fee loan scam", and it's relatively common in the student loan consolidation world.
You Cannot Consolidate While Still in School
You may consolidate your student loans only after your loans enter their grace period, which is six months after graduating or dropping out of school. You can also consolidate once repayment of the loans begin, although you should consider consolidating before that point. It may not be beneficial to everyone, but it's definitely worth taking a look at the numbers to see if it would save you money and make your loans easier to manage.
You Can Only Consolidate Student Loans in Your Name
This rule seems pretty obvious, but in some cases where the student is married or has their parents' name on any of the student loans, it may come into play. Students and parents may consolidate their student loans, but they cannot combine them into one consolidation loan - They must be separate. Same thing holds true for married students who both have student loan debt. As of 2006, married students cannot combine their student loan debt into one consolidation loan - They can, however, each have their own consolidation loan.
Student and Graduates May Consolidate With Any Lender
There are no restrictions that limit which lenders are eligible for consolidating student loans, so you may choose whatever lender you wish. This allows you to shop around for the lender with the best interest rates and incentives. Keep in mind that most lenders require you to have a minimum balance totaling $7,500 or sometimes higher.
Any Federal Student Loan is Eligible for Consolidation
Any type of federal student loan can be consolidated, including single student loans. That being said, you can only consolidate an existing consolidation loan one time, but not in every circumstance. In order to reconsolidate a consolidation loan, you must add a previously not included student loan to the consolidation. In this case, your interest rate would be reconfigured using a formula to weigh the old interest rate with new rate brought on by the student loan being added to the mix. Please note that a student loan consolidation loan uses a weighted average of all of the included student loans to determine the overall interest rate - Reconsolidating in future will not completely reset your interest rate.
Consolidation Loans Offer Longer Repayment Terms
Federal student loans feature standard 10-year repayment plans. When consolidating student loans, you can extend these terms to 12-30 years depending upon how much is owed. As with any loan, though, it's not recommended to extend the terms of the loan, because interest charges will be greater the longer the loan exists. It's recommended to pay off the loan as soon as possible. That being said, extending the consolidation loan repayment plan can help people to better afford the lower payments brought on by a longer repayment plan.
There's No Prepayment Penalties
You may pay off your student loan consolidation at anytime without any risk of prepayment penalties. I highly recommend paying off the consolidation loan as soon as possible to avoid some of the interest charges and to relieve yourself of the financial burden as quickly as possible. Just make sure that when making additional payments each month, you inform the lender that the additional amount should go towards the principle of the loan rather than future payments.
Student Loan Consolidation - How Does It Work?
If you've been to college and ended up with a bunch of student loans, then you know how much of a burden they can be. Not just financially, either - just keeping track of your loans, and making sure you pay them on time, can take up a sizeable chunk of your time each month. That's where consolidating your student loans into one single loan can make life much easier.
The first step is to shop around and find the best deal. This will vary depending on your own circumstances, but there are plenty of companies that handle student loan consolidation, so it's worth checking a few out. Once you've chosen the loan that best suits your needs and has the best interest rate, you'll need to put in an application. Like all loan applications you'll need some basic information, such as identification, income details, assets, any other loans you currently have. So make sure you have all this information before sitting down to fill out the application.
Once your application has been approved, you will be sent details of your payment amount, and when it is due. Generally, the first payment will be due between 30 and 60 days after your loan commences. Make sure you continue to make your payments on time every month, so that you don't end up defaulting on the loan by accident. If there's any change to your payment or due date, the finance company will let you know.
There are a number of different types of repayments that you can make on your loan, so be sure you understand what type your loan has, so that you don't make an error in your payments. These repayment types include:
- Standard payment - you pay the same amount every month for a predetermined period of time
- Graduated payments - your payments rise slightly every month, to help pay off the loan quicker
- Variable payments - these change when interest rates change, or when your income or financial responsibilities change
- Extended payments - the length of the loan is extended, allowing you to make smaller loan payments for a longer period of time
Also be on the look out for companies that will charge you a fee to consolidate your student loans. Shop around, because there are plenty of other companies that don't charge hefty fees upfront and still offer good interest rates. Be aware, too, that the finance company will do a credit check on you. If you have a poor credit score, you will find it harder to get a really low interest rate, but with some research you should still be able to consolidate your student loans.
Some finance companies also give you a discount if you repay the student consolidation loan early, while others will charge you a fee. So if you think you will be paying out the loan early, make sure you check the fine print of the contract before you sign anything
The first step is to shop around and find the best deal. This will vary depending on your own circumstances, but there are plenty of companies that handle student loan consolidation, so it's worth checking a few out. Once you've chosen the loan that best suits your needs and has the best interest rate, you'll need to put in an application. Like all loan applications you'll need some basic information, such as identification, income details, assets, any other loans you currently have. So make sure you have all this information before sitting down to fill out the application.
Once your application has been approved, you will be sent details of your payment amount, and when it is due. Generally, the first payment will be due between 30 and 60 days after your loan commences. Make sure you continue to make your payments on time every month, so that you don't end up defaulting on the loan by accident. If there's any change to your payment or due date, the finance company will let you know.
There are a number of different types of repayments that you can make on your loan, so be sure you understand what type your loan has, so that you don't make an error in your payments. These repayment types include:
- Standard payment - you pay the same amount every month for a predetermined period of time
- Graduated payments - your payments rise slightly every month, to help pay off the loan quicker
- Variable payments - these change when interest rates change, or when your income or financial responsibilities change
- Extended payments - the length of the loan is extended, allowing you to make smaller loan payments for a longer period of time
Also be on the look out for companies that will charge you a fee to consolidate your student loans. Shop around, because there are plenty of other companies that don't charge hefty fees upfront and still offer good interest rates. Be aware, too, that the finance company will do a credit check on you. If you have a poor credit score, you will find it harder to get a really low interest rate, but with some research you should still be able to consolidate your student loans.
Some finance companies also give you a discount if you repay the student consolidation loan early, while others will charge you a fee. So if you think you will be paying out the loan early, make sure you check the fine print of the contract before you sign anything
Consolidate Your Federal Government Student Loans
Consolidate Your Federal Government Student Loans
The idea of consolidating your federal government student loans is to take all your separate loans and consolidate them into one easy to manage loan. There are a number of reasons why you would do this, so let's take a look at them.
The problem with having federal student loans is that you also have multiple repayment dates and amounts each month. Apart from being really confusing, this can also add up to quite a large repayment amount overall. If you shop around, chances are you can get a better deal on the interest rate and save yourself some money. So your student debt becomes a lot easier to manage, and when you're starting out in the workforce, that's very helpful.
Also, by consolidating your federal student loans into one single loan, you only have to remember one payment date and amount every month. This is a lot simpler than managing multiple loans. After all, who wants to spend time every weekend keeping up with loan payments? One payment a month is a lot less hassle.
If you shop around before choosing your student consolidation loan, you might also be able to take advantage of other loan features. These include things like flexible repayment dates, an extended loan period or a cheaper interest rate. You can save yourself a substantial amount by finding a consolidation loan with these special features.
Remember, too, that by consolidating your student loans it appears on your credit history as you having paid them out early. So that gives your credit score a boost. It may not matter now, but down the track if you want to buy a home, a good credit score is very important. It makes it easier for your loan application to be accepted, and you qualify for much better interest rates. On a mortgage, a better interest rate can save you thousands, if not tens of thousands of dollars in interest payments.
Also, when applying for a mortgage, the lender will take a look at your current income and also any regular monthly debt payments. Many work with a rule of thumb that says if more than 8% of your income is used to pay student loan debt, you won't be eligible for a mortgage. Reducing your monthly payments by consolidating your student loans makes it easier to qualify for a mortgage.
So basically, when you consolidate your federal government student loans, you lower your monthly payments, simplify your life because you only have to remember one payment amount and date each month, you can quality for a lower interest rate and improve your credit score. So consolidating your student loans is a very smart financial step to take.
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The idea of consolidating your federal government student loans is to take all your separate loans and consolidate them into one easy to manage loan. There are a number of reasons why you would do this, so let's take a look at them.
The problem with having federal student loans is that you also have multiple repayment dates and amounts each month. Apart from being really confusing, this can also add up to quite a large repayment amount overall. If you shop around, chances are you can get a better deal on the interest rate and save yourself some money. So your student debt becomes a lot easier to manage, and when you're starting out in the workforce, that's very helpful.
Also, by consolidating your federal student loans into one single loan, you only have to remember one payment date and amount every month. This is a lot simpler than managing multiple loans. After all, who wants to spend time every weekend keeping up with loan payments? One payment a month is a lot less hassle.
If you shop around before choosing your student consolidation loan, you might also be able to take advantage of other loan features. These include things like flexible repayment dates, an extended loan period or a cheaper interest rate. You can save yourself a substantial amount by finding a consolidation loan with these special features.
Remember, too, that by consolidating your student loans it appears on your credit history as you having paid them out early. So that gives your credit score a boost. It may not matter now, but down the track if you want to buy a home, a good credit score is very important. It makes it easier for your loan application to be accepted, and you qualify for much better interest rates. On a mortgage, a better interest rate can save you thousands, if not tens of thousands of dollars in interest payments.
Also, when applying for a mortgage, the lender will take a look at your current income and also any regular monthly debt payments. Many work with a rule of thumb that says if more than 8% of your income is used to pay student loan debt, you won't be eligible for a mortgage. Reducing your monthly payments by consolidating your student loans makes it easier to qualify for a mortgage.
So basically, when you consolidate your federal government student loans, you lower your monthly payments, simplify your life because you only have to remember one payment amount and date each month, you can quality for a lower interest rate and improve your credit score. So consolidating your student loans is a very smart financial step to take.
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The Benefits of Consolidation Your Student Loans
There are many benefits to consolidating student loans. Receiving a lower monthly payment is perhaps the best reason to consolidate your loans. Other benefits include saving money by paying interest on one loan instead of two or three, extended loan repayment terms, and a lower interest rate.
If you are living on a tight income, you may qualify for a repayment plan that will start out lower and gradually increase over the time of the loan. Payments are considered graduated payments because they will increase a little over time. You may also qualify for longer loan terms. When you consolidate student loans, you will be eligible for these programs. This is another benefit to loan consolidation. If you do not consolidate your student loans, you may not be able to make graduated monthly payments.
Saving money and earning a lower interest rate are the biggest benefits to consolidating your loans. You will have the convenience of making one payment each month, which will be easier to remember, you will receive a lower interest rate, and you will be able to build your credit score by making these payments on time each month. This will come in handy when you are ready to buy a new car or a home.
If you are living on a tight income, you may qualify for a repayment plan that will start out lower and gradually increase over the time of the loan. Payments are considered graduated payments because they will increase a little over time. You may also qualify for longer loan terms. When you consolidate student loans, you will be eligible for these programs. This is another benefit to loan consolidation. If you do not consolidate your student loans, you may not be able to make graduated monthly payments.
Saving money and earning a lower interest rate are the biggest benefits to consolidating your loans. You will have the convenience of making one payment each month, which will be easier to remember, you will receive a lower interest rate, and you will be able to build your credit score by making these payments on time each month. This will come in handy when you are ready to buy a new car or a home.
Monday, September 21, 2009
Private student loans
These are loans that are not guaranteed by a government agency and are made to students by banks or finance companies. Advocates of private student loans suggest that they combine the best elements of the different government loans into one: They generally offer higher loan limits than federal student loans, ensuring the student is not left with a budget gap. But unlike federal parent loans, they generally offer a grace period with no payments due until after graduation (this grace period ranges as high as 12 months after graduation, though most private lenders offer six months). However, some higher education advocates are private loan detractors because of the higher interest rates, multiple fees, and lack of borrower protections private loans carry that are not associated with federal loans.[7][8]
Private student loan types
Private student loans generally come in two types: school-channel and direct-to-consumer.
School-channel loans offer borrowers lower interest rates but generally take longer to process. School-channel loans are "certified" by the school, which means the school signs off on the borrowing amount, and the funds are disbursed directly to the school.
Direct-to-consumer private loans are not certified by the school; schools don't interact with a direct-to-consumer private loan at all. The student simply supplies enrollment verification to the lender, and the loan proceeds are disbursed directly to the student. While direct-to-consumer loans generally carry higher interest rates than school-channel loans, they do allow families to get access to funds very quickly — in some cases, in a matter of days. Some argue[citation needed] that this convenience is offset by the risk of student over-borrowing and/or use of funds for inappropriate purposes, since there is no third-party certification that the amount of the loan is appropriate for the education finance needs of the student in question.
Direct-to-consumer private loans are the fastest growing segment of education finance and under legislative scrutiny due to the lack of school certification. Loan providers range from large education finance companies to specialty companies that focus exclusively on this niche.[citation needed] Such loans will often be distinguished by the indication that "no FAFSA is required" or "Funds disbursed directly to you."
Private student loan rates and interest
Private student loans typically have variable interest rates while federal student loans have fixed rates. Consumers should be aware that some private loans require substantial up-front origination fees. These fees raise the real cost to the borrower and reduce the amount of money available for educational purposes.
Most private loan programs are tied to one or more financial indexes, such as the Wall Street Journal Prime rate or the BBA LIBOR rate, plus an overhead charge. Because private loans are based on the credit history of the applicant, the overhead charge will vary. Students and families with excellent credit will generally receive lower rates and smaller loan origination fees than those with less than perfect credit. Money paid toward interest is now tax deductible. However, lenders rarely give complete details of the terms of the private student loan until after the student submits an application, in part because this helps prevent comparisons based on cost. For example, many lenders will only advertise the lowest interest rate they charge (for good credit borrowers). Borrowers with bad credit can expect interest rates that are as much as 6% higher, loan fees that are as much as 9% higher, and loan limits that are two-thirds lower than the advertised figures.[9]
Private student loan fees
Private loans often carry an origination fee. Origination fees are a one-time charge based on the amount of the loan. They can be taken out of the total loan amount or added on top of the total loan amount, often at the borrower's preference. Some lenders offer low-interest, 0-fee loans. Each percentage point on the front-end fee gets paid once, while each percentage point on the interest rate is calculated and paid throughout the life of the loan. Some have suggested that this makes the interest rate more critical than the origination fee.[citation needed]
In fact, there is an easy solution to the fee-vs.-rate question: All lenders are legally required to provide you a statement of the "APR (Annual Percentage Rate)" for the loan before you sign a promissory note and commit to it. Unlike the "base" rate, this rate includes any fees charged and can be thought of as the "effective" interest rate including actual interest, fees, etc. When comparing loans, it may be easier to compare APR rather than "rate" to ensure an apples-to-apples comparison. APR is the best yardstick to compare loans that have the same repayment term; however, if the repayment terms are different, APR becomes a less-perfect comparison tool. With different term loans, consumers often look to "total financing costs" to understand their financing options.
Private student loan cosigners
Eligible loan programs generally issue loans based on the credit history of the applicant and any applicable cosigner/co-endorser/coborrower. This is in contrast to federal loan programs that deal primarily with need-based criteria, as defined by the EFC and the FAFSA. For many students, this is a great advantage to private loan programs, as their families may have too much income or too many assets to qualify for federal aid but insufficient assets and income to pay for school without assistance.
Many international students in the United States can obtain private loans (they are usually ineligible for federal loans) with a cosigner who is a United States citizen or permanent resident. However, some graduate programs (notably top MBA programs) have a tie-up with private loan providers and in those cases no cosigner is needed even for international students.
Private student loan terms
The terms for private loans vary from lender to lender. A common suggestion is to shop around on all terms, not just respond to "rates as low as..." tactics that are sometimes little more than bait-and-switch. However, shopping around could damage your credit score.[10] Examples of other borrower terms and benefits that vary by lender are deferments (amount of time after leaving school before payments start) and forbearances (a period when payments are temporarily stopped due to financial or other hardship). These policies are solely based on the contract between lender and borrower and not set by Department of Education policies.
[edit] Private student loan consolidation
Several lenders offer private consolidation programs. Borrowers of privately subsidized student loans may face the same restrictions to bankruptcy discharge as for government based loans: New legislation makes clear that these loans are, like federal student loans, not dischargeable under bankruptcy. Even before the legislation was passed, private student loans that were guaranteed "in whole or in part" by a nonprofit entity are non-dischargeable in bankruptcy (and most private loans, regardless of the lender, were guaranteed by a nonprofit).
[edit] Discharge of student loans
US Federal student loans and some private student loans can be discharged in bankruptcy only with a showing of "undue hardship." Bankruptcy Code Section 523(a)(8) determines what loans can and cannot be discharged. The undue hardship standard varies from jurisdiction to jurisdiction, but is generally difficult to meet, making student loans practically non-dischargeable through bankruptcy. While US Federal student loans can be discharged for total and permanent disability, private student loans cannot be discharged outside of bankruptcy.
The rules for total and permanent disability discharge are undergoing major changes as a result of the Higher Education Opportunity Act of 2008. Loan holders will no longer be required to be unable to earn any income, but instead the standard will be "substantial gainful activity" (SGA) as a result of disability. Determination of disability will have essentially the same standards as the SSDI program. Comments on the proposed rules are open until August 24, 2009, and the new regulations will take effect July 1, 2010.
[edit] Criticism of US student loan programs
After the passage of the bankruptcy reform bill of 2005, student loans are not wiped clean during bankruptcy. This provided a risk free loan for the lender, but interest rates remained high, averaging 7% a year.
In 2007, the Attorney General of New York State, Andrew Cuomo, led investigation into lending practices and anti-competitive relationships between student lenders and universities. Specifically, many universities steered student borrowers to "preferred lenders" which resulted in those borrowers incurring higher interest rates. Some of these "preferred lenders" allegedly rewarded university financial aid staff with "kick backs." This has led to changes in lending policy at many major American universities. Many universities have also rebated millions of dollars in fees back to affected borrowers
Private student loan types
Private student loans generally come in two types: school-channel and direct-to-consumer.
School-channel loans offer borrowers lower interest rates but generally take longer to process. School-channel loans are "certified" by the school, which means the school signs off on the borrowing amount, and the funds are disbursed directly to the school.
Direct-to-consumer private loans are not certified by the school; schools don't interact with a direct-to-consumer private loan at all. The student simply supplies enrollment verification to the lender, and the loan proceeds are disbursed directly to the student. While direct-to-consumer loans generally carry higher interest rates than school-channel loans, they do allow families to get access to funds very quickly — in some cases, in a matter of days. Some argue[citation needed] that this convenience is offset by the risk of student over-borrowing and/or use of funds for inappropriate purposes, since there is no third-party certification that the amount of the loan is appropriate for the education finance needs of the student in question.
Direct-to-consumer private loans are the fastest growing segment of education finance and under legislative scrutiny due to the lack of school certification. Loan providers range from large education finance companies to specialty companies that focus exclusively on this niche.[citation needed] Such loans will often be distinguished by the indication that "no FAFSA is required" or "Funds disbursed directly to you."
Private student loan rates and interest
Private student loans typically have variable interest rates while federal student loans have fixed rates. Consumers should be aware that some private loans require substantial up-front origination fees. These fees raise the real cost to the borrower and reduce the amount of money available for educational purposes.
Most private loan programs are tied to one or more financial indexes, such as the Wall Street Journal Prime rate or the BBA LIBOR rate, plus an overhead charge. Because private loans are based on the credit history of the applicant, the overhead charge will vary. Students and families with excellent credit will generally receive lower rates and smaller loan origination fees than those with less than perfect credit. Money paid toward interest is now tax deductible. However, lenders rarely give complete details of the terms of the private student loan until after the student submits an application, in part because this helps prevent comparisons based on cost. For example, many lenders will only advertise the lowest interest rate they charge (for good credit borrowers). Borrowers with bad credit can expect interest rates that are as much as 6% higher, loan fees that are as much as 9% higher, and loan limits that are two-thirds lower than the advertised figures.[9]
Private student loan fees
Private loans often carry an origination fee. Origination fees are a one-time charge based on the amount of the loan. They can be taken out of the total loan amount or added on top of the total loan amount, often at the borrower's preference. Some lenders offer low-interest, 0-fee loans. Each percentage point on the front-end fee gets paid once, while each percentage point on the interest rate is calculated and paid throughout the life of the loan. Some have suggested that this makes the interest rate more critical than the origination fee.[citation needed]
In fact, there is an easy solution to the fee-vs.-rate question: All lenders are legally required to provide you a statement of the "APR (Annual Percentage Rate)" for the loan before you sign a promissory note and commit to it. Unlike the "base" rate, this rate includes any fees charged and can be thought of as the "effective" interest rate including actual interest, fees, etc. When comparing loans, it may be easier to compare APR rather than "rate" to ensure an apples-to-apples comparison. APR is the best yardstick to compare loans that have the same repayment term; however, if the repayment terms are different, APR becomes a less-perfect comparison tool. With different term loans, consumers often look to "total financing costs" to understand their financing options.
Private student loan cosigners
Eligible loan programs generally issue loans based on the credit history of the applicant and any applicable cosigner/co-endorser/coborrower. This is in contrast to federal loan programs that deal primarily with need-based criteria, as defined by the EFC and the FAFSA. For many students, this is a great advantage to private loan programs, as their families may have too much income or too many assets to qualify for federal aid but insufficient assets and income to pay for school without assistance.
Many international students in the United States can obtain private loans (they are usually ineligible for federal loans) with a cosigner who is a United States citizen or permanent resident. However, some graduate programs (notably top MBA programs) have a tie-up with private loan providers and in those cases no cosigner is needed even for international students.
Private student loan terms
The terms for private loans vary from lender to lender. A common suggestion is to shop around on all terms, not just respond to "rates as low as..." tactics that are sometimes little more than bait-and-switch. However, shopping around could damage your credit score.[10] Examples of other borrower terms and benefits that vary by lender are deferments (amount of time after leaving school before payments start) and forbearances (a period when payments are temporarily stopped due to financial or other hardship). These policies are solely based on the contract between lender and borrower and not set by Department of Education policies.
[edit] Private student loan consolidation
Several lenders offer private consolidation programs. Borrowers of privately subsidized student loans may face the same restrictions to bankruptcy discharge as for government based loans: New legislation makes clear that these loans are, like federal student loans, not dischargeable under bankruptcy. Even before the legislation was passed, private student loans that were guaranteed "in whole or in part" by a nonprofit entity are non-dischargeable in bankruptcy (and most private loans, regardless of the lender, were guaranteed by a nonprofit).
[edit] Discharge of student loans
US Federal student loans and some private student loans can be discharged in bankruptcy only with a showing of "undue hardship." Bankruptcy Code Section 523(a)(8) determines what loans can and cannot be discharged. The undue hardship standard varies from jurisdiction to jurisdiction, but is generally difficult to meet, making student loans practically non-dischargeable through bankruptcy. While US Federal student loans can be discharged for total and permanent disability, private student loans cannot be discharged outside of bankruptcy.
The rules for total and permanent disability discharge are undergoing major changes as a result of the Higher Education Opportunity Act of 2008. Loan holders will no longer be required to be unable to earn any income, but instead the standard will be "substantial gainful activity" (SGA) as a result of disability. Determination of disability will have essentially the same standards as the SSDI program. Comments on the proposed rules are open until August 24, 2009, and the new regulations will take effect July 1, 2010.
[edit] Criticism of US student loan programs
After the passage of the bankruptcy reform bill of 2005, student loans are not wiped clean during bankruptcy. This provided a risk free loan for the lender, but interest rates remained high, averaging 7% a year.
In 2007, the Attorney General of New York State, Andrew Cuomo, led investigation into lending practices and anti-competitive relationships between student lenders and universities. Specifically, many universities steered student borrowers to "preferred lenders" which resulted in those borrowers incurring higher interest rates. Some of these "preferred lenders" allegedly rewarded university financial aid staff with "kick backs." This has led to changes in lending policy at many major American universities. Many universities have also rebated millions of dollars in fees back to affected borrowers
Student loans in the United States
While included in the term "financial aid" higher education loans differ from scholarships and grants in that they must be paid back. They come in several varieties in the United States:
Federal student loans made to students directly: No payments while enrolled in at least half time status. If a student drops below half time status, the account will go into its 6 month grace period. If the student re-enrolls in at least half time status, the loans will be deferred, but when they drop below half time again they will no longer have their grace period. Amounts are quite limited as well. There are many deferments and a number of forbearances one can get in the Direct Loan program.[1] For those who are disabled, there is also the possibility of 100% loan discharge if you meet the requirements.[2] Due to changes made by the Higher Education Opportunity Act of 2008, it will become much easier to get one of these discharges as of July 1, 2010.[3] There are loan forgiveness provisions for teachers and health professionals serving low-income areas. Currently, certain loan forgiveness or discharges are considered income by the Internal Revenue Service due to 26 U.S.C. 108(f).[4]
Federal student loans made to parents: Much higher limit, but payments start immediately
Private student loans made to students or parents: Higher limits and no payments until after graduation, although interest will start to accrue immediately. Private loans may be used for any education related expenses such as tuition, room and board, books, computers, and past due balances. Private loans can also be used to supplement federal student loans, when federal loans, grants and other forms of financial aid are not sufficient to cover the full cost of higher education.
Federal student loans in the United States are authorized under Title IV of the Higher Education Act as amended.
These loans are available to college and university students via funds disbursed directly to the school and are used to supplement personal and family resources, scholarships, grants, and work-study. They may be subsidized by the U.S. Government or may be unsubsidized depending on the student's financial need. The U.S. Department of Education published a booklet comparing federal loans with private loans.[5] In this same document, the government describes what you may use the loan for:
You may use the money you receive only to pay for education expenses at the school that awarded your loan. Education expenses include school charges such as tuition; room and board; fees; books; supplies; equipment; dependent childcare expenses; transportation; and rental or purchase of a personal computer.
Both subsidized and unsubsidized loans are guaranteed by the U.S. Department of Education either directly or through guaranty agencies. Nearly all students are eligible to receive federal loans (regardless of credit score or other financial issues). Both types offer a grace period of six months, which means that no payments are due until six months after graduation or after the borrower becomes a less-than-half-time student without graduating. Both types have a fairly modest annual limit. The dependent undergraduate limit effective for loans disbursed on or after July 1, 2008 is as follows (combined subsidized and unsubsidized limits): $5,500 per year for freshman undergraduate students, $6,500 for sophomore undergraduates, and $7,500 per year for junior and senior undergraduate students, as well as students enrolled in teacher certification or preparatory coursework for graduate programs. For independent undergraduates, the limits (combined subsidized and unsubsidized) effective for loans disbursed on or after July 1, 2008 are higher: $9,500 per year for freshman undergraduate students, $10,500 for sophomore undergraduates, and $12,500 per year for junior and senior undergraduate students, as well as students enrolled in teacher certification or preparatory coursework for graduate programs. Subsidized federal student loans are only offered to students with a demonstrated financial need. Financial need may vary from school to school. For these loans, the federal government makes interest payments while the student is in college. For example, those who borrow $10,000 during college will owe $10,000 upon graduation.
Unsubsidized federal student loans are also guaranteed by the U.S. Government, but the government does not pay interest for the student, rather the interest accrues during college. Nearly all students are eligible for these loans regardless of demonstrated need. Those who borrow $10,000 during college will owe $10,000 plus interest upon graduation. For example, those who have borrowed $10,000 and had $2,000 accrue in interest will owe $12,000. Interest will begin accruing on the $12,000. The accrued interest will be "capitalized" into the loan amount, and the borrower will begin making payments on the accumulated total. Students can choose to pay the interest while still in college; however, few students choose to exercise this option.
Federal student loans for graduate students have higher limits: $8,500 for subsidized Stafford and $12,500 (limits may differ for certain courses of study) for unsubsidized Stafford. Many students also take advantage of the Federal Perkins Loan. For graduate students the limit for Perkins is $6,000 per year.
[edit] Stafford loan aggregate limits
Students who borrow money for education through Stafford loans cannot exceed certain aggregate limits for subsidized and unsubsidized loans. For undergraduate students, these amounts are $23,000 in subsidized and $34,500 in unsubsidized loans.[6] Once a student has borrowed the maximum amount s/he is eligible for (based on grade level, such as undergraduate, graduate/professional, etc.), in subsidized loans, the student has the option to take out a loan in an additional amount less than or equal to the amount s/he would have been eligible for in subsidized loans. Once both the subsidized and unsubsidized aggregate limits have been met for both subsidized and unsubsidized loans, the student is unable to borrow additional Stafford loans until a portion of the borrowed funds has been paid back to the respective lender(s). Once the student has paid back some of these amounts, s/he will regain eligibility up to the aggregate limits as before.
[edit] Federal student loans to parents
See PLUS loan
Usually these are PLUS loans (formerly standing for "Parent Loan for Undergraduate Students"). Unlike loans made to students, parents can borrow much more — usually enough to cover any gap in the cost of education. However, there is no grace period: Payments start immediately.
Parents should be aware that THEY are responsible for repayment on these loans, not the student. This is not a 'cosigner' loan with the student having equal accountability. The parents have signed the master promissory note to pay and, if they do not do so, it is their credit rating that suffers. Also, parents are advised to consider "year 4" payments, rather than "year 1" payments. What sounds like a "manageable" debt load of $200 a month in freshman year can mushroom to a much more daunting $800 a month by the time four years have been funded through loans. The combination of immediate repayment and the ability to borrow substantial sums can be expensive.
Under new legislation, graduate students are eligible to receive PLUS loans in their own names. These Graduate PLUS loans have the same interest rates and terms of Parent PLUS loans.
Parents should also be aware that legislation raised the interest rate on these loans significantly — to 8.5% on July 1, 2006.
[edit] Disbursement: How the money gets to student or school
There are two distribution channels for federal student loans: Federal Direct Student Loans and Federal Family Education Loans.
Federal Direct Student Loans, also known as Direct Loans or FDLP loans, are funded from public capital originating with the U.S. Treasury. FDLP loans are distributed through a channel that begins with the U.S. Treasury Department and from there passes through the U.S. Department of Education, then to the college or university and then to the student.
Federal Family Education Loan Program loans, also known as FFEL loans or FFELP loans, are funded with private capital provided by banking institutions (i.e., banks, savings and loans, and credit unions). Because the FFELP loans use private capital as their source, students who use FFELP loans are able to take advantage of payment options that are similar to those available to customers who take out a home loan or a consumer loan. For example, some institutions will allow a discount for automatic payments or a series of on-time payments. In 2005, approximately two-thirds of all federally subsidized student loans were FFELP.
According to the U.S. Department of Education, more than 6,000 colleges, universities, and technical schools participate in FFELP, which represents about 80% of all schools. FFELP lending represents 75% of all federal student loan volume.
The maximum amount that any student can borrow is adjusted from time to time as federal policies change. A study published in the winter 1996 edition of the Journal of Student Financial Aid, “How Much Student Loan Debt Is Too Much?” suggested that the monthly student debt payment for the average undergraduate should not exceed 8% of total monthly income after graduation. Some financial aid advisers have referred this as "the 8% rule
links:
U.S. Dept. of Education
Federal student loans made to students directly: No payments while enrolled in at least half time status. If a student drops below half time status, the account will go into its 6 month grace period. If the student re-enrolls in at least half time status, the loans will be deferred, but when they drop below half time again they will no longer have their grace period. Amounts are quite limited as well. There are many deferments and a number of forbearances one can get in the Direct Loan program.[1] For those who are disabled, there is also the possibility of 100% loan discharge if you meet the requirements.[2] Due to changes made by the Higher Education Opportunity Act of 2008, it will become much easier to get one of these discharges as of July 1, 2010.[3] There are loan forgiveness provisions for teachers and health professionals serving low-income areas. Currently, certain loan forgiveness or discharges are considered income by the Internal Revenue Service due to 26 U.S.C. 108(f).[4]
Federal student loans made to parents: Much higher limit, but payments start immediately
Private student loans made to students or parents: Higher limits and no payments until after graduation, although interest will start to accrue immediately. Private loans may be used for any education related expenses such as tuition, room and board, books, computers, and past due balances. Private loans can also be used to supplement federal student loans, when federal loans, grants and other forms of financial aid are not sufficient to cover the full cost of higher education.
Federal student loans in the United States are authorized under Title IV of the Higher Education Act as amended.
These loans are available to college and university students via funds disbursed directly to the school and are used to supplement personal and family resources, scholarships, grants, and work-study. They may be subsidized by the U.S. Government or may be unsubsidized depending on the student's financial need. The U.S. Department of Education published a booklet comparing federal loans with private loans.[5] In this same document, the government describes what you may use the loan for:
You may use the money you receive only to pay for education expenses at the school that awarded your loan. Education expenses include school charges such as tuition; room and board; fees; books; supplies; equipment; dependent childcare expenses; transportation; and rental or purchase of a personal computer.
Both subsidized and unsubsidized loans are guaranteed by the U.S. Department of Education either directly or through guaranty agencies. Nearly all students are eligible to receive federal loans (regardless of credit score or other financial issues). Both types offer a grace period of six months, which means that no payments are due until six months after graduation or after the borrower becomes a less-than-half-time student without graduating. Both types have a fairly modest annual limit. The dependent undergraduate limit effective for loans disbursed on or after July 1, 2008 is as follows (combined subsidized and unsubsidized limits): $5,500 per year for freshman undergraduate students, $6,500 for sophomore undergraduates, and $7,500 per year for junior and senior undergraduate students, as well as students enrolled in teacher certification or preparatory coursework for graduate programs. For independent undergraduates, the limits (combined subsidized and unsubsidized) effective for loans disbursed on or after July 1, 2008 are higher: $9,500 per year for freshman undergraduate students, $10,500 for sophomore undergraduates, and $12,500 per year for junior and senior undergraduate students, as well as students enrolled in teacher certification or preparatory coursework for graduate programs. Subsidized federal student loans are only offered to students with a demonstrated financial need. Financial need may vary from school to school. For these loans, the federal government makes interest payments while the student is in college. For example, those who borrow $10,000 during college will owe $10,000 upon graduation.
Unsubsidized federal student loans are also guaranteed by the U.S. Government, but the government does not pay interest for the student, rather the interest accrues during college. Nearly all students are eligible for these loans regardless of demonstrated need. Those who borrow $10,000 during college will owe $10,000 plus interest upon graduation. For example, those who have borrowed $10,000 and had $2,000 accrue in interest will owe $12,000. Interest will begin accruing on the $12,000. The accrued interest will be "capitalized" into the loan amount, and the borrower will begin making payments on the accumulated total. Students can choose to pay the interest while still in college; however, few students choose to exercise this option.
Federal student loans for graduate students have higher limits: $8,500 for subsidized Stafford and $12,500 (limits may differ for certain courses of study) for unsubsidized Stafford. Many students also take advantage of the Federal Perkins Loan. For graduate students the limit for Perkins is $6,000 per year.
[edit] Stafford loan aggregate limits
Students who borrow money for education through Stafford loans cannot exceed certain aggregate limits for subsidized and unsubsidized loans. For undergraduate students, these amounts are $23,000 in subsidized and $34,500 in unsubsidized loans.[6] Once a student has borrowed the maximum amount s/he is eligible for (based on grade level, such as undergraduate, graduate/professional, etc.), in subsidized loans, the student has the option to take out a loan in an additional amount less than or equal to the amount s/he would have been eligible for in subsidized loans. Once both the subsidized and unsubsidized aggregate limits have been met for both subsidized and unsubsidized loans, the student is unable to borrow additional Stafford loans until a portion of the borrowed funds has been paid back to the respective lender(s). Once the student has paid back some of these amounts, s/he will regain eligibility up to the aggregate limits as before.
[edit] Federal student loans to parents
See PLUS loan
Usually these are PLUS loans (formerly standing for "Parent Loan for Undergraduate Students"). Unlike loans made to students, parents can borrow much more — usually enough to cover any gap in the cost of education. However, there is no grace period: Payments start immediately.
Parents should be aware that THEY are responsible for repayment on these loans, not the student. This is not a 'cosigner' loan with the student having equal accountability. The parents have signed the master promissory note to pay and, if they do not do so, it is their credit rating that suffers. Also, parents are advised to consider "year 4" payments, rather than "year 1" payments. What sounds like a "manageable" debt load of $200 a month in freshman year can mushroom to a much more daunting $800 a month by the time four years have been funded through loans. The combination of immediate repayment and the ability to borrow substantial sums can be expensive.
Under new legislation, graduate students are eligible to receive PLUS loans in their own names. These Graduate PLUS loans have the same interest rates and terms of Parent PLUS loans.
Parents should also be aware that legislation raised the interest rate on these loans significantly — to 8.5% on July 1, 2006.
[edit] Disbursement: How the money gets to student or school
There are two distribution channels for federal student loans: Federal Direct Student Loans and Federal Family Education Loans.
Federal Direct Student Loans, also known as Direct Loans or FDLP loans, are funded from public capital originating with the U.S. Treasury. FDLP loans are distributed through a channel that begins with the U.S. Treasury Department and from there passes through the U.S. Department of Education, then to the college or university and then to the student.
Federal Family Education Loan Program loans, also known as FFEL loans or FFELP loans, are funded with private capital provided by banking institutions (i.e., banks, savings and loans, and credit unions). Because the FFELP loans use private capital as their source, students who use FFELP loans are able to take advantage of payment options that are similar to those available to customers who take out a home loan or a consumer loan. For example, some institutions will allow a discount for automatic payments or a series of on-time payments. In 2005, approximately two-thirds of all federally subsidized student loans were FFELP.
According to the U.S. Department of Education, more than 6,000 colleges, universities, and technical schools participate in FFELP, which represents about 80% of all schools. FFELP lending represents 75% of all federal student loan volume.
The maximum amount that any student can borrow is adjusted from time to time as federal policies change. A study published in the winter 1996 edition of the Journal of Student Financial Aid, “How Much Student Loan Debt Is Too Much?” suggested that the monthly student debt payment for the average undergraduate should not exceed 8% of total monthly income after graduation. Some financial aid advisers have referred this as "the 8% rule
links:
U.S. Dept. of Education
Student loans in Canada
Student loans in Canada help post-secondary students pay for their education in Canada. The federal government funds the Canada Student Loan Program (CSLP) and the provinces may fund their own programs or run in parallel with the CSLP. In addition, Canadian banks offer commercial loans targeted for students in professional programs.
[edit] Repayment assistance
CSLP offers a number of programs to assist students who find themselves facing financial difficulty during repayment. Among these programs are:
Interest Relief[9]
Interest Relief is designed to help students meet repayment obligations if they are temporarily unable to make payments on their government student loans because of unemployment or low income. Interest Relief is granted for periods of six months, up to a maximum of 30 months. Some exceptions, such as Canadian residency, may apply. Students may also be eligible for a further 24 months of Extended Interest Relief. Once approved for Interest Relief, students are not required to make payments on either the monthly interest or the outstanding principal of their loan(s) (the federal and/or provincial government will pay the interest on a student's behalf).
Debt Reduction in Repayment[10]
Debt Reduction in Repayment is designed to help students facing long-term financial difficulties manage the repayment of their Student Loan(s). DRR lowers the principal amount of a loan, thereby reducing the monthly loan payment to an affordable level based on family income. A student can receive up to three reductions (totalling up to $26,000) on their Canada Student Loan principal during their lifetime, depending on financial circumstances.
Revision of Terms[11]
Revision of Terms is a feature that provides students with the flexibility to manage loan repayment in a way that is responsive to individual situations. It can be used to decrease the monthly payments by increasing the repayment period (from the standard 10 years up to 15 years) should a student find the standard terms difficult to maintain. It can also be used to increase loan payments by reducing the repayment period, allowing more rapid repayment of a loan.
Permanent Disability Benefit[12]
Permanent Disability Benefit allows for the reduction of loans for students who are experiencing exceptional financial hardship due to a permanent disability. The eligibility criteria varies based on date of loan negotiation and lender. A recent Access to Information request indicated that over 60% of applicants to this program were denied loan forgiveness.
These programs are currently under revision and will gradually be replaced by the Repayment Assistance Program beginning in August 2009.
To qualify for these programs one must be a resident of Canada. Graduate students who are studying abroad and have exceeded their maximum allowable weeks of study do not qualify for any assistance in repaying their loans. Neither do other Canadians who no longer reside in Canada.
links:
CanLearn.ca
Canada Student Loans Program (federal)
Provincial/Territorial Student Loan Offices
Canada Student Debt Website -provides support for people with student loan problems.
Coalition for Student Loan Fairness - A coalition of groups requesting changes to the Canada Student Loan Program, focussing on repayment issues.
Canadian Alliance of Student Associations
Canadian Federation of Students
Ontario Undergraduate Student Alliance Issue Briefing
StudentAid BC - Ministry of Advanced Education - Province of British Columbia
[edit] Repayment assistance
CSLP offers a number of programs to assist students who find themselves facing financial difficulty during repayment. Among these programs are:
Interest Relief[9]
Interest Relief is designed to help students meet repayment obligations if they are temporarily unable to make payments on their government student loans because of unemployment or low income. Interest Relief is granted for periods of six months, up to a maximum of 30 months. Some exceptions, such as Canadian residency, may apply. Students may also be eligible for a further 24 months of Extended Interest Relief. Once approved for Interest Relief, students are not required to make payments on either the monthly interest or the outstanding principal of their loan(s) (the federal and/or provincial government will pay the interest on a student's behalf).
Debt Reduction in Repayment[10]
Debt Reduction in Repayment is designed to help students facing long-term financial difficulties manage the repayment of their Student Loan(s). DRR lowers the principal amount of a loan, thereby reducing the monthly loan payment to an affordable level based on family income. A student can receive up to three reductions (totalling up to $26,000) on their Canada Student Loan principal during their lifetime, depending on financial circumstances.
Revision of Terms[11]
Revision of Terms is a feature that provides students with the flexibility to manage loan repayment in a way that is responsive to individual situations. It can be used to decrease the monthly payments by increasing the repayment period (from the standard 10 years up to 15 years) should a student find the standard terms difficult to maintain. It can also be used to increase loan payments by reducing the repayment period, allowing more rapid repayment of a loan.
Permanent Disability Benefit[12]
Permanent Disability Benefit allows for the reduction of loans for students who are experiencing exceptional financial hardship due to a permanent disability. The eligibility criteria varies based on date of loan negotiation and lender. A recent Access to Information request indicated that over 60% of applicants to this program were denied loan forgiveness.
These programs are currently under revision and will gradually be replaced by the Repayment Assistance Program beginning in August 2009.
To qualify for these programs one must be a resident of Canada. Graduate students who are studying abroad and have exceeded their maximum allowable weeks of study do not qualify for any assistance in repaying their loans. Neither do other Canadians who no longer reside in Canada.
links:
CanLearn.ca
Canada Student Loans Program (federal)
Provincial/Territorial Student Loan Offices
Canada Student Debt Website -provides support for people with student loan problems.
Coalition for Student Loan Fairness - A coalition of groups requesting changes to the Canada Student Loan Program, focussing on repayment issues.
Canadian Alliance of Student Associations
Canadian Federation of Students
Ontario Undergraduate Student Alliance Issue Briefing
StudentAid BC - Ministry of Advanced Education - Province of British Columbia
Student loans
Student loans are loans offered to students to assist in payment of the costs of professional education. These loans usually carry a lower interest rate than other loans and are usually issued by the government. Often they are supplemented by student grants which do not have to be repaid. Students that have taken out loans in the 80's at extrememly high interest rates can not refinance their loans. It is locked
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