For the first time since 2014, the interest rates on federal student loans are going up. Loans disbursed between July 1, 2017 and June 30, 2018 will carry the new rates, which are 0.69 percentage points higher than those of federal loans that have gone out since July 1, 2016. Here are the new rates:
Direct subsidized loans for undergraduate borrowers: 4.45%
Direct unsubsidized loans for undergraduate borrowers: 4.45%
Direct unsubsidized loans for graduate or professional student borrowers: 6%
Direct PLUS loans for graduate and professional student borrowers: 7%
Why Did the Interest Rates Change?
Legislation that went into effect in 2013 tied federal student loan interest rates to the 10-year Treasury note. Every year, the undergraduate loan rates are calculated by adding 2.05 percentage points to the high yield of the 10-year note at the last auction prior to June 1. Add 3.6 percentage points to the high yield to determine unsubsidized graduate loan rates, and for PLUS loans, add 4.6 percentage points.
How the Rate Change Affects You
If you’re getting a federal student loan in the next year, these are the rates you’ll pay for the life of the loan. Borrowers with existing federal student loans won’t experience a rate change, unless they have a variable interest rate, which is rare.
While the rates have gone up, they could be much worse: The 2013 legislation caps federal student loan interest rates at 8.25% for undergraduates, 9.5% for unsubsidized graduate loans and 10.5% for PLUS loans. Since the 2008 financial crisis, the benchmark rate has remained historically low, but if it rises, future student loan borrowers will pay. So if you’re going to college in the next few years, or will borrow on behalf of someone who is, keep tabs on the 10-year Treasury yield.
How to Change Your Student Loan Interest Rates
Whether you’re a new borrower or have been repaying student loans for a few years, you should know there are a few options for changing the interest rates on your student loans.
You could apply for a federal Direct consolidation loan, which combines multiple eligible loans into a single loan. The interest rate on that loan is the average weighted interest rate of the loans you consolidated, rounded up to the nearest 1/8th of 1%. Whether this strategy will save you money on interest depends on the balances and interest rates of the loans you’re consolidating.
Let’s say you have three loans with the following balances and interest rates: $3,500 at 4.66%, $6,500 at 4.29% and $7,500 at 3.76%. The weighted average interest rate of those loans is 4.14%. But if you switch the interest rates on the largest and smallest loan balances, the weighted average would be 4.36%. The math matters when considering consolidation.
You could also refinance your student loans at a lower rate with a private lender (there’s no federal refinancing option beyond consolidation), but you will lose many of the benefits federal student loans offer, like income-driven repayment plans and student loan forgiveness.
There’s also a simpler way to cut your student loan rates: Set up automatic payments. The savings may not be as significant as they can be with consolidation or refinancing, but most student loan servicers offer a rate discount to borrowers who enroll in auto-debit. If you’re looking for other ways to make your loan payments more affordable, here’s a list of your options.
It’s crucial you stay on top of your student loans, as missing payments can trash your credit and result in significant financial obstacles. You can see how your student loans and other accounts affect your credit by reviewing your free credit report summary on Credit.com.
There’s no need to sugarcoat it: Student loans are complicated, and everyone from new borrowers to those who’ve been paying them for more than a decade find them confusing. As much as you might want to not think about them, it’s important you understand your student loans, and that starts with knowing the meaning of the terms you’re likely to encounter in the student-loan world. Here are 13 confusing loan terms you need to know.
Your student loan servicer is the company to whom you send your student loan payments. It may or may not be the place you got your student loans in the first place, and your servicer could change as you repay your loans. Federal loan borrowers can find out their student loan servicer by logging into the National Student Loan Data System. If you have private student loans, your student loan servicer is the institution from which you borrowed the money.
2. Repayment Options
Federal student loan borrowers can pay back their student loans in several ways, and they can change their plan at any time for free (though it can take some time). The options include plans that allow you to lower your payments based on your income and plans that allow you to spread out your payments over a longer term. You can read more about your student loan repayment options here.
Forbearance is a temporary suspension or reduction of your student loan payments when you are unable to make payments as a result of financial problems, medical expenses, unemployment or “other reasons acceptable to your loan servicer,” according to the Education Department. Your loan will continue to accrue interest during this time and will be added to the principal balance when you exit forbearance. You must apply for forbearance. There are several circumstances under which your servicer is required to grant forbearance (mandatory forbearance), including a medical or dental internship or residency, National Guard duty and many others. You can only receive forbearance for 12 months at a time. If you have a private student loan, check with your lender to see if they offer forbearance.
Deferment is a temporary suspension or reduction of your student loan payments during certain situations like unemployment, economic hardship, enrollment in school or active military duty, among others. You are not responsible for paying the interest that accrues on some student loans during deferment, but you are for most. You must request deferment, and you can stay in deferment as long as you meet the requirements. If you have a private student loan, check with your lender to see if they offer deferment.
5. Student Loan Forgiveness
There are several programs that allow you to get rid of some or all of your federal student loans, and you can read about them here. Keep in mind you may have to pay taxes on the forgiven balance, as the IRS may see it as income.
You are delinquent on a student loan when you haven’t made a payment on your student loans for 30 or more days since your last payment’s due date. Your student loan servicer will most likely report the late payment to the major credit reporting agencies, which will hurt your credit. (You can see how your student loans affect your credit standing by viewing your free credit report summary on Credit.com.) Delinquency also tends to come with late fees.
7. Auto Debit
Many student loan servicers call automatic payments “auto debit,” meaning your payment is automatically taken from your bank account on the due date every month. You can often get an interest rate reduction by enrolling in auto debit. It’s usually at least 0.25 percentage points.
Default means you have not made student loan payments in a long time, and as a result, your entire student loan balance is now due. Your loan will have likely been sent to a debt collector at this point. For federal student loans, you enter default after you’ve failed to make a payment for more than 270 days. That time period is generally shorter for private student loans. You can learn more about the (very) negative consequences of student loan default here, as well as how to recover from it.
Refinancing your student loans means taking out a new loan to pay off your existing loans, ideally to make your loans more affordable. For example, you can take out a student loan that has a lower interest rate than the average interest rate of all your existing student loans, which can save you money over the life of the loan. Student loan refinancing requires taking out a private student loan, as the federal government offers no refinancing option. You could also refinance a student loan by paying it off with a home equity line of credit.
A federal consolidation loan combines all your eligible federal student loans into a single loan with one payment. The interest rate on that loan is the weighted average of all the included loans’ interest rates, rounded up to the nearest one-eighth of one percent.
With a subsidized loan, the government pays the interest on your student loan while you are in school or in deferment.
With an unsubsidized loan, you are responsible for all the interest that accrues on your loan during school, deferment and forbearance. If you do not pay the interest during that time, it is added to your principal loan balance.
13. Capitalized Interest
Any interest you accrue while not in repayment can be added to your principal balance, meaning you will pay interest on top of that interest. That’s capitalized interest.
While senior year of college is hectic, it’s crucial for new grads to stay on top of their finances. Sure, you need to find a job and a place to live, but you can’t wait until those things fall in line to start paying attention to your bills and your budget. Of course, that’s exactly what some people do, which can lead to debt, a lack of savings and credit problems.
To help you (or the new grad in your life) stay focused, we put together a list of money tips to keep in mind during the transition from college student to full-time adult. We asked Alex Sadler, managing editor of personal finance site Clark.com and the money-basics series “Common Cents,” to share her top tips for managing money after college.
1. Spend Less Than You Make
This one sounds obvious, but it’s easy to lose control when you have an apartment to furnish, want to live a vibrant social life or haven’t quite gotten the hang of grocery shopping. And to know whether or not you’re spending less than you make, you have to track your spending.
“It’s easier said than done, but it’s something you can live by for the rest of your life,” Sadler said. “If more is going out than coming in, find ways to pick up extra cash.”
Keep in mind a large component of spending less than you make is saving properly. Sadler suggested automating your savings by participating in an employer-sponsored retirement plan, especially if your employer offers a savings match. You may also be able to set up automatic transfers to a savings account, so you’re less able to money on things you don’t need.
2. Don’t Ignore Your Student Loans
A huge part of spending less than you make is knowing your exact expenses. If you’re like most college students, you have student loans to repay soon. Even if your first payment isn’t due for a few months, you need to know what you’re dealing with now.
“Most college graduates don’t know how much they owe until their first bill comes in the mail,” Sadler said. And because of accrued interest, you may owe more than you recall borrowing. “Figure out exactly how much you owe and what your options are: Do you qualify for loan forgiveness? Income-based repayment?” Your student loan repayment options vary depending on the kind of loans you have. Get a handle on them now, so you don’t miss a payment and damage your credit. Here’s a helpful guide to understanding student loan repayment.
3. Know You’re on Your Own
Being responsible with money doesn’t mean you can’t have any fun, but it is on you to understand how to balance your needs and wants.
“Nobody wants to say, ‘I’m on a budget, I can’t go out,’ or ‘I can’t do that, I’m on a budget,’ when you’re 22 and you’re super excited about being in the real world,” Sadler said. At the same time, you have to own your decisions. “At some point, there won’t be anyone there to help you. Once you figure that out, it gives you a sense of motivation to really have control of your money, and it motivates you to understand the fact that money is what gives you freedom in life.”
4. Pay Attention Now — Or Regret It Later
“How you handle your money in your early 20s is so much more important than you realize at the time,” Sadler said. “Those choices will impact your finances for the next 10 to 15 years.”
Sadler speaks from experience. In her early 20s, Sadler had a couple hundred dollars on a store credit card that she ignored. She let the late payments stack up, which is one of the worst things you can do to your credit. “When I realized it at like 26 or 27, I paid it off in full, but there’s nothing you can do about those late payments,” she said. “I’ve fixed it, but it took a lot.”
A lot of young people adopt the mindset that they’ll pay off debt or save more later when they have more money. “But later never comes,” Sadler said.
5. Plan for Everything
You’ll never have more time in front of you than now, so start planning. Incorporate long-term goals like buying a house or saving for retirement into your regular budget, as well as short-term goals like vacation or large purchases. Planning ahead is the only way you can make those goals happen.
“I was knocked upside the head in my 20s when I asked my dad for $1,000 to go to a bachelorette party in Mexico,” said Sadler. “He looked at me and said, ‘Have you lost your mind?’ And I said, ‘I can’t pay for it.’ And he said, ‘Then you can’t go.’ ”
Doing the things you want to do requires discipline and may involve more planning than you realize. “It’s not never going out or eating ramen noodles, but it’s paying attention,” Sadler said.
6. Manage Your Basic Expenses
Maybe you feel like there’s hardly any money left over for fun things after you’ve budgeted for bills and loan payments. Remember, you’re not necessarily stuck with those fixed expenses. Sadler recommended re-evaluating your cellphone plan, shopping around for competitive insurance rates and finding cheaper entertainment options, whether that means cutting a subscription or switching service providers. The research is worth the time if the savings can give you more flexibility.
7. Get a Credit Card & Use It Responsibly
Your credit standing plays more of a role in your day-to-day life than you may realize. It factors into your insurance premiums in most states, affects your ability to get an apartment and can even come into play when you’re getting a new job. If you haven’t started building credit, now’s the time to start. You can see where your credit stands and track your progress toward a better credit score with a free credit report snapshot from Credit.com
Sadler emphasized the importance of using a credit card wisely and cautiously: “You need to pay the balance in full every month to avoid interest, so just use it to charge things you know you can pay off,” she said. “Understand the implications of using a credit card irresponsibly — one missed payment can seriously damage your credit.”
It may not be your first priority, but preparing to repay your student loans should be on your pre-graduation to-do list. How you manage your student loan payments will shape your finances for decades to come, so know what you’re dealing with before you get swept up in the day-to-day demands of post-graduate life.
Before you leave school, also make sure you know the answers to the following questions. Good news: We’re giving you them (or at least telling how to find them on your own).
1. What Kind of Loans Do I Have?
You either have private student loans or federal loans. You can look up your federal loans using the National Student Loan Data System (NLDS). You should have the paperwork from your lender or student loan servicer (private and federal) from when you took out the loan. Private loans generally come from traditional banking institutions, while federal loans are issued by the government. Common federal loans include Direct subsidized loans, Direct unsubsidized loans and Perkins loans.
2. Whom Do I Owe?
You can find this information in the resources referenced above. Your financial aid office should have information on file as well, since they receive the money. If you haven’t gone through student loan exit counseling at school, you need to before you graduate. They’ll explain whom to pay, and it’s the perfect time to ask any questions. Once you know who’s managing your loans, set up an online account to access all your information.
3. What Are My Repayment Options?
This depends on the type of loans you have. Private student loan repayment tends to follow a typical installment loan repayment structure, in which you make monthly payments for a fixed loan term. Federal student loans offer more options. The default play is called standard repayment: fixed monthly payments for 10 years. If you want a lower monthly payment when you start out, you can change your repayment plan at any time for free, though the change may not take effect immediately. If you want to enroll in an income-driven repayment plan, graduated repayment or extended repayment, be sure to request a new plan through your student loan servicer as soon as you can. You can learn more about student loan repayment options here.
4. How Much Are My Monthly Payments?
For loans with a set repayment term, the payment will be the same every month if you have a fixed-interest rate (as all federal loans do), or your monthly payment amount will change if you have a variable-interest rate (as some private loans do). Monthly payments through income-driven plans will depend on how much money you make. You should be able to get this information from your lender or servicer.
5. When’s My First Payment Due?
Federal student loans generally have a grace period of six months, meaning your first payment comes due six months after you graduate, leave school or drop below half-time enrollment. Some grace periods are nine months. If you have a private lender, you may not have a grace period — find out as soon as possible.
6. How Do I Pay?
You’ll start hearing from your lender or servicer soon if you haven’t already. Like most bills, you can go the old-school route of sending a check, or you can pay online. Keep in mind you don’t have to wait till your grace period ends to make a payment, and you can also enroll in automatic payments to make sure you don’t miss any. On that note: You don’t want to miss any student loan payments, because it will damage your credit, and your credit score plays a role in how much you pay for other credit products, as well as renting a home or buying a cellphone. You can keep tabs on how your student loans are affecting your credit by getting two free credit scores every month on Credit.com. If you’re thinking about getting a credit card after college, here are a few good options for new grads.
7. What’s My Interest Rate?
This should be in your loan paperwork and in your online account. Make sure you know if it’s a fixed- or variable-interest rate.
8. How Can I Make Repaying My Loans Easier?
If you have multiple federal student loans, which most borrowers do, you can consider consolidating them. With a federal Direct consolidation loan, you can qualify for certain loan forgiveness and loan repayment options (though you may not have to consolidate to qualify), and you’ll only have to make one monthly payment, rather than several to multiple servicers.
You could also consider refinancing multiple loans with a private lender, but know that you’ll be giving up many of the benefits that come with federal loans if you do this. There is no federal refinancing option. You can also enroll in automatic payments to make your life a little easier — just be sure to check that it goes through every month and that your bank account has enough money to cover the bill.
9. How Can I Make My Loans More Affordable?
Among the benefits previously noted, enrolling in automatic payments usually gets you a 0.25% discount on your interest rate. Private loan refinancing could also help you save money if you have good credit and can qualify for a lower interest rate. Additionally, changing your repayment plan to a longer term or an income-driven plan can lower your monthly payments.
There’s another way to look at loan affordability: long-term savings. For example, all the interest your loan accrued while you were in school will be added to the principal once your grace period expires, meaning you’ll have to pay interest on interest. You can avoid this by paying off the interest before your first loan payment comes due. You can also pay more than your minimum payment each month, which can help you pay off your loans early.
Student loans can be complicated, so reach out to your student loan servicer if you have questions. Conversely, if you’re having issues with your student loan servicer, you can file a complaint with the Consumer Financial Protection Bureau.
Credit.com can offer help with your student loans, too. If you have questions about them or other money stuff, leave your questions in the comments.
It was big news when outstanding student loan debt surpassed credit card debt and then later exceeded $1 trillion for the first time. That shocking statistic keeps climbing, with no sign of slowing down: Americans now have more than $1.4 trillion in unpaid education debt, according to the Federal Reserve.
Meanwhile, college-bound kids and their families try to avoid going into debt by heeding advice like “save more,” “apply for scholarships” or “go to a cheaper school.” Of course, none of those address the major issue of rising costs that have far outpaced wage growth.
It’s smart to avoid student loan debt if you can, because those loans affect your credit and your financial future. (You can see how much by checking your free credit scores on Credit.com.) However, strategically choosing a school isn’t quite as straightforward as comparing tuition and fees.
One thing you can do is check out an institution’s net price calculator, which should be on its website, to see how much a student like you would pay after grants and scholarships. Another thing you can do is look at how much student loan debt recent grads ended up with. (You can read more about options for repaying your student loans here.)
The response to that question is a little trickier to figure out, but organizations like The Institute for College Access & Success (TICAS) have compiled such data to help. According to their Project on Student Debt, 68% of 2015 bachelor’s degree recipients graduated with student loan debt. The average was $30,100 per borrower.
TICAS put together their project based on student loan debt figures from the “Common Data Set,” a survey of colleges used by college-guide publishers. The colleges voluntarily self report their data, which presents problems.
“Colleges that accurately calculate and report each year’s debt figures rightfully complain that other colleges may have students with higher average debt but fail to update their figures, under-report actual debt levels, or never report figures at all,” reads the methodology for the Project on Student Debt. “Additionally, very few for-profit colleges report debt data through CDS, and national data show that borrowing levels at for-profit colleges are, on average, much higher than borrowing levels at other types of colleges.”
For students who earned bachelor’s degrees in 2015, the most recent year for which data were available, TICAS determined the average student loan debt in each state by using data from 1,116 colleges. For comparison, there are more than 3,000 four-year institutions in the U.S.
Beyond that, the data were limited to bachelor’s degree recipients, meaning those who had debt but lacked a degree weren’t included, and if a student acquired debt at a different school before transferring to the one where they graduated, those numbers weren’t included in the totals. Still, as TICAS notes in the methodology for the Project on Student Debt, “CDS data are still useful for illustrating the variations in student debt across states and colleges.”
Here’s a state-by-state breakdown of the average student loan debt, from lowest to highest, for the class of 2015. The Project on Student Debt also lists student-loan-debt data by school. (Note: North Dakota is not included in this list, as TICAS did not include states where useable data reflected less than 30% of the state’s bachelor’s degree recipients in 2015.)
As confusing as credit scores can be, most people get the basic concept: You want a high score, not a low one. What qualifies as a good credit score depends on the scoring model you’re talking about (and there are dozens of them), but a common range is 300 to 850. The higher your score, the better. You don’t have to aim for an 850 to get the best terms on a loan or qualify for top-tier credit cards, but anywhere in the high 700s is a good place to be.
Ideally, you’re not anywhere near the bottom of the range, but it is possible to have a 300 credit score on a 300 to 850 scale. The good news: A very small portion of the population has such a score. The bad news: Some people do.
How Many People Have the Worst Credit Score?
There are 294 million “scoreable” consumers, and only 0.01% of them had a 300 credit score, according to data credit bureau TransUnion pulled for Credit.com in March 2017. (A scoreable consumer is someone with enough information in their credit files to generate a VantageScore 3.0. TransUnion said 4.28% of the population is not scoreable.) While 0.01% is a really small portion of consumers, it still means 29,400 people have the worst credit score (on the VantageScore 3.0 scale). In other words: It’s totally possible for your credit to hit rock-bottom. (You can see where you stand by getting two of your credit scores for free on Credit.com.)
Though it’s uncommon to have the worst credit score, having bad credit isn’t. More than a quarter (27.66%) of consumers have a credit score between 300 and 600, which is considered bad credit or subprime credit. Conversely, 20% have a super prime credit score (781 to 850). The average credit score was 645 when TransUnion pulled the data.
How to Deal With Terrible Credit
TransUnion didn’t identify common factors among consumers with a 300 credit score, but they pointed out some characteristics of subprime credit files: “Generally speaking people with poor credit (300-600 score) usually make late payments, only contribute the minimum amount, carry high percentage balances on multiple cards and apply for multiple lines of credit within a short period of time,” said Sarah Kossek, a spokeswoman for TransUnion, noting that the factors vary by individual.
So if you want to avoid joining the population of people with bad credit (or you want to get out of the club), it’s smart to make credit card and loan payments on time, pay down your debts, use a very small portion of your credit card limits and apply for credit sparingly. It’s also a good idea to regularly review your credit reports for accuracy, as errors may be hurting your credit. You can pull your credit reports for free each year at AnnualCreditReport.com.
Ideally, you’ll never need to ride in the back of an ambulance. But if it happens, here’s what you should know: Ambulance services are extremely expensive.
Rick Santoro learned that the hard way.
After receiving a two-mile transport in February, Santoro experienced sticker shock: His ride added up to $2,691.50. Though insurance covered most of it, Santoro had to pay $770.30 out of pocket, and he wondered if that was right. The bulk of the bill resulted from the fact he hadn’t yet hit his annual deductible, but it still seemed pricey, he said, given the brief care he received.
“I just want an answer,” Santoro said. “If I gotta pay the 700 bucks, I gotta pay … It will be a lesson learned for me.”
‘I Didn’t Feel Well’
In early February, Santoro, 60, was at an orthopedist’s office for a small procedure, an injection in his knee. Afterward, he passed out, but once he regained consciousness, he continued to feel ill.
His doctor suggested he go to the emergency room, and Santoro, uncertain why he was having issues, agreed. An ambulance took him two miles to the nearest hospital, and a few weeks later, the bill arrived. The short ride cost more than the subsequent emergency room visit, which he estimates lasted about two and a half hours. That bill was $200.
Why Are Ambulance Services So Expensive?
Santoro’s inquiry isn’t the first Credit.com has received about a pricey ambulance ride. As we’ve previously reported, there are many reasons medical transport services cost hundreds or thousands of dollars. It’s difficult to pin down an average amount for an ambulance bill, because costs vary so widely by location, services and contracts between providers and insurers. But the core expenses generally result from the same things.
“Labor, training, readiness, equipment — all these things factor into the equation,” said Alan Schwalberg, vice president of emergency medical services at Northwell Health Center in Syosset, New York, which provided the ambulance that transported Santoro. (Schwalberg said he couldn’t comment on a specific patient’s case but could speak generally about the cost of ambulance services at Northwell.)
“[Patients] can’t fathom how it’s so expensive,” he said. “They compare it to Uber, but it’s not Uber.”
People who receive ambulance transportation pay not only for the services they receive but also for what it costs for ambulances to be readily available in the service area, in addition to the cost of training people who provide medical services in the vehicle.
“There’s two people for every one patient, minimum,” which is a different standard of healthcare than you’d find in an emergency room, Schwalberg said. “It’s labor intensive.”
Equipment and staff must also meet local and state regulatory requirements, and the cost of such maintenance adds up. All that factors into the base charge, or what Schwalberg referred to as “loaded miles.”
On top of that, there’s a mileage charge, but that generally makes up a much smaller portion of the final bill. In Santoro’s case, the base charge was $2,480 and the mileage was $84. (The remaining $127.50 was a surcharge imposed by New York state.)
Part of what shocked Santoro is the fact that he received what he considered very little care: An EMT took his vitals and gave him oxygen, he said. But Schwalberg said Northwelldoesn’t itemize medications and other care a patient may receive in an ambulance. Patients are charged for one of two types of care: basic life support or advanced life support.
Why Ambulance Costs Vary
While Schwalberg’s explanation gives insight into the high costs of ambulance transport, it’s really only applicable to Northwell Health Center on Long Island. As with many aspects of health care costs, base charges vary by provider, insurance coverage and location.
In Northwell’s case, ambulance rates were set after working with an outside consulting firm a few years ago, Schwalberg said. They compared prices throughout the region, determined the final rates, and then negotiated with insurance carriers what they would pay. They determined a patient’s final responsibility would rely not only on the type of insurance coverage they have but also on the terms their insurance carrier set with the provider.
For these reasons, it can be really difficult to know how much a health care service will end up costing you, unless you price it out with the provider and your insurer in advance. That’s something medical billing experts like Adria Goldman Gross recommend, but obviously that’s not an option in an emergency situation. In that case, Gross said you should be prepared to negotiate. (You can read more about how to avoid a high medical bill here.)
How to Handle a Massive Medical Bill
Gross said the first thing to do when you get a bill is check the medical billing codes to see if they match the services you received. (She recommends doing this with any bill, no matter the size, because errors are common.) If it’s wrong, that’s the first thing to challenge with the health care provider, but if it’s right, the next thing to do is research costs for similar procedures in your area. She said she uses the Medicare fee schedule as a benchmark.
Fair warning: While the fee schedule is publicly available, it’s not the easiest thing to read. If, based on those figures or other research, you feel like you’ve been overcharged, you can try to negotiate a lower bill. Again, this is easier said than done.
“Sometimes it could be one phone call, other times it could be 15 phone calls or it could be 20 phone calls, it depends,” Gross said. You’re in for a lot of work, she added, but if you really believe you’re being overcharged, it can be worth the fight.
“Say, ‘Look, I really feel that you’ve been paid the reasonable amount, and I really only owe you this much for the allowed amounts for your location,'” she said. Gross suggested working your way up the ladder and even calling the CEO of the hospital or an equivalent authority figure to make your case. If you truly can’t afford your bills, ask about repayment assistance. Schwalberg said Northwell offers such a program.
Having made several phone calls to the hospital to verify his bill, Santoro said he is on track to pay the full $770.30 in small monthly installments. He said he wishes he hadn’t taken the ambulance or at least knew how expensive it was going to be. Reflecting on the situation, he said he should have waited to see if he felt better or taken a car service instead of an ambulance, then acknowledged he isn’t sure how knowing the cost would have affected his decision at the time.
“Why can’t the guy that picks you up say to you, ‘This is going to be an expensive ride?'” Santoro said, seeming to replay the episode in his head. He added: “I don’t know what I would say. I just wanted to feel better.”
Haven’t filed your taxes yet? Good news: You can get a six-month extension to do them. Bad news: You still need to pay your taxes by April 18 (this year’s deadline), or you’ll owe interest and fees for making a late payment. You have to do your best to estimate what you owe and make or postmark the payment by April 18.
How to Get an Extension to File Your Taxes
You can request an extension from the Internal Revenue Service by either submitting an electronic payment of your estimated tax due, filing an electronic Form 4868 or filing a paper Form 4868. Each option automatically gives you a six-month extension for filing your tax return, meaning you have until Oct. 18 to send in your paperwork.
To make an electronic payment to the IRS, you can make an online direct payment from your bank account, use the Electronic Federal Tax Payment System (requires enrollment) or use a credit or debit card. Making an electronic payment means you do not have to file a Form 4868, as the payment triggers an automatic six-month extension. If you file a paper Form 4868, you should include your payment.
What to Do If You Owe But Don’t Have the Money
People often want an extension from the IRS because they don’t have enough money to pay their tax bill. But that’s not how it works.
If you don’t have the cash to pay your taxes, you can make a partial payment, though the unpaid balance will be subject to interest and a late-payment penalty (generally one-half of 1% of the unpaid tax each month the balance goes unpaid, up to 25%). You could also pay your taxes with a credit card, though there’s a processing fee to do so, plus the interest you’d owe your credit card company. You can learn more about paying your taxes with a credit card here. While the IRS offers installment plans, you must file your tax return to apply for one.
Not only can paying your taxes late get expensive due to interest and fees, it could potentially damage your credit: The IRS could place a lien against your property for unpaid tax debt, which will show up on your credit report as a derogatory item. That can drive up the costs of other things in your life, like loan rates and insurance premiums. (You can see what’s affecting your credit by getting a free credit report summary every 14 days on Credit.com.)
You’re motivated by a deadline, you’re busy, you’re still getting organized — whatever the reason, you haven’t filed your taxes yet. That’s not a huge deal (there’s a deadline for a reason), but still, waiting until the last minute to file your taxes means you might be rushed. And that means there’s a higher likelihood of making mistakes or overlooking something important.
To help you avoid making a mess of an already unpleasant task, we put together a list of things you should keep in mind as you get ready to face the job you’ve been putting off for months.
1. The Sooner You File …
… The sooner you can get a refund. The IRS says it issues nine out of 10 refunds in less than 21 days.
2. Waiting to File Puts You at Risk
Taxpayer identity theft is no joke. It generally involves someone using your Social Security number to get a fraudulent refund — preventing you from getting yours in a timely manner.
3. If You’re a Tax Fraud Victim, You Need to Prepare a Paper Return
“First, I would definitely contact the IRS, and you should also contact the credit bureaus, and then you would just have to paper file your return if they already e-filed using your Social Security number,” said Lisa Greene-Lewis, a certified public accountant and tax expert with TurboTax.
4. The Deadline to File …
… Is April 18. No, that’s not a typo. April 15 falls on a Sunday this year, and April 16 is a holiday in the District of Columbia. So Tuesday, April 18 it is.
5. It’s a Hard Deadline
Your paper return must be postmarked by April 18. An e-file must be submitted before midnight on April 18. Otherwise, the IRS could slap you with fees.
6. But You Can Get an Extension
You can file Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return, which gives you an additional six months to file.
7. The Extension Is for Paperwork, Not Payment
If you think you’ll owe taxes, you must make your best guess using previous years’ information and an online estimate calculator.
8. Unpaid Taxes Carry Fees …
Interest on unpaid taxes compounds daily from the due date of the return to the date they’re paid in full. The failure-to-pay fee is one-half of 1% of your unpaid balance for each month, or part of a month, up to 25%, until the debt is paid in full.
9. … & Even Affect Your Credit Score
If your unpaid-tax problem gets bad enough, the government may make a claim to your property until the debt is repaid. That’s called a tax lien, and it will show up on your credit report. (You can see how a tax lien and other factors affect your credit by reviewing two of your your free credit scores on Credit.com, updated every two weeks.)
10. Make Sure You Have All Your Forms
“Keep a list of all of your jobs during the tax year,” said Abby Eisenkraft, an enrolled agent and CEO of Choice Tax Solutions. “Some taxpayers receive numerous W-2s (think actors, temps, etc.). Freelancers — you may receive numerous Form 1099-Misc; be sure you received them all.”
11. But Report All Your Income, Even If You Didn’t Get a Form
“Some employers are sloppy and may not issue them to you by Jan. 31 of the following year. Regardless, you must report all of your income,” Eisenkraft said. You can ask an employer for a copy of a missing W-2 or ask the IRS for transcripts of forms you think you didn’t get. Of course, this takes time, so you may need to file an extension.
12. *ahem* ALL of Your Income
“The easiest way to get an IRS notice is to omit reporting all of your income,” Eisenkraft said. “Also, remember that jury duty and prize money (lottery, etc.) are also taxable.”
13. Plan to Wait in Line
At the post office, at your local tax preparer’s office — anywhere that does anything having to do with taxes.
14. Take Advantage of Technology
There are several ways you can file your taxes for free without having to do them the old-fashioned way. Tax software can be a huge help when you’re facing a time crunch.
15. Affordability Is No Excuse
“Many people put off filing their taxes because they can’t pay the full amount,” said Samuel Brotman, a tax attorney and owner of Brotman Law in San Diego. “You’ll cause far more headaches if you don’t even attempt to play ball with the IRS, though.” See: aforementioned fees.
16. Make an Effort to Pay
“It’s in your best interest to file and pay as much as possible by the April 18 deadline,” Brotman said. “If you’re just not ready or able to file by the deadline, make sure you file for an extension. The IRS will automatically grant a six-month extension, giving you additional time to get your taxes in order.” Thinking about paying your taxes with a credit card? Read this first.
17. Or Get a Payment Plan
Keep in mind you must file your tax return before applying for a payment agreement, so get cracking if you think you’ll need one.
18. The Chances of an Audit Are Low
Of all the individual income tax returns filed in 2014, the IRS audited 0.8% and 1.3% of corporate returns. (You can read more about how to avoid an audit here.)
19. But You Still Need to Be Careful
Just because it’s unlikely you’ll get audited doesn’t mean you shouldn’t prepare your taxes as if you will. Not only could you get in trouble for a sloppy return, you could miss out on savings through deductions or credits you didn’t look into.
20. Watch Out for Scammers
Whenever people need help, there are other people out there waiting to take advantage of them. If you’re asking someone to prepare your taxes, make sure they’re qualified to do the job and that they have a good reputation. This guide can help you determine whether or not you need a pro to do your taxes.
21. Ask for Help
If you can’t afford or don’t want to pay for a professional, that doesn’t mean you’re totally on your own. “Go to trusted friends or family with last-minute questions on anything that might be confusing. With a little elbow grease, technology and friendly advice, you can get your maximum refund back — painlessly,” said Micah Charyn, a financial adviser with FTB Advisors in Nashville, Tennessee.
22. You’re Responsible for What You File
Keep in mind that, ultimately, you’re responsible for what’s in your tax return, even if you used software or an accountant to help you. Don’t zone out just because someone else is doing the heavy lifting.
23. ‘Do You Spell That With a C or a K?’
Of course, you know how to spell your name, but don’t leave anything to chance. This is especially important if you changed your name recently. Your tax return must have your legal name on it.
24. While You’re At it, Double-Check Your Address
This is an easy one to mess up if you’ve moved. “Your state may ask you where you lived by the close of the tax year you are filing, but you must file with your current address,” Eisenkraft said.
25. Your Social Security Number
“When you are tired or distracted, it’s so easy to transpose numbers,” Eisenkraft said. “And with so many numbers jumping out at you on the tax return, it’s easy to miss. The IRS will reject your tax return if the Social Security number is incorrect.”
26. Your Dependents’ Social Security Numbers
You must have the right Social Security numbers to get associated credits.
27. & Your Bank Account Info
You want that refund ASAP, right? “One mistake that we’ve seen before is listing the wrong bank details on your taxes,” said Jayson Mullin, the owner and founder of Top Tax Defenders, a tax resolution company in Houston. “This means your return won’t end up in your account. If you notice you’ve made this mistake, you’ll have to notify the IRS and wait an additional six weeks for a check to arrive in the mail.” The same goes for making a payment: You want that go to through.
28. Make Sure You Can Legally Claim Dependents
“There are relationship tests, gross income tests, residency tests, etc. Make sure the person you are trying to claim as your dependent passes all of the IRS tests,” Eisenkraft said. “And if your child is in school and working, remind him or her NOT to claim his own exemption.”
29. There Are Lots of Deductions You Could Potentially Take …
“I call this ‘looking for change in the sofa cushions,’” said Dominique Molina, a CPA in San Diego. “Go back through your bank and credit card statements and scan through, looking for expenses you haven’t been reimbursed for. These can be deducted on Schedule A under Unreimbursed Employee Expenses.”
31. Student Loan Interest
You can get the forms you need from your student loan servicer. They’re usually right there in your online account.
32. Medical Expenses
“You can deduct out-of-pocket medical expenses if you itemize (file Schedule A),” Eisenkraft said. “You cannot deduct any expenses that are reimbursed by insurance. If your medical premiums are deducted pre-tax at work, you cannot deduct them on your tax return. No double-dipping! Be sure to keep all of your receipts.”
33. & Job Search Expenses
You can deduct expenses associated with your job hunt, provided you’re looking for a new job in your current field.
So many people forget to do this, but it’s important. You can count charitable gifts made until April 18 of this year.
36. Or Do a Last-Minute Spring Cleaning
Say you didn’t get around to much charitable giving last year or you didn’t keep records — you could always procrastinate a little more by cleaning the house and donating things you don’t need. Don’t forget a receipt. (But then you really need to get on that tax thing.)
37. Don’t Skip the City Tax
Local and other state taxes, which you can check for at the bottom of W-2 forms, refer to a wage or income tax and may not be automatically deducted from your paycheck if you’re self employed. If you haven’t paid them, be prepared to cut a check. Here’s a handy guide to understanding your paycheck.
38. Contribute to Your IRA
Want a last-minute way to reduce your tax bill? Unlike most other tax-saving strategies, which have to be in place by Dec. 31, you can contribute to your IRA up until tax filing day if you haven’t already contributed your maximum for 2016. As TurboTax notes, for example, you can contribute $5,500, the maximum amount for 2016, and save as much as $1,925 in taxes if you’re in the 35% tax bracket.
39. Don’t Overlook Credits, Either
The IRS estimates that four out of five taxpayers are eligible for the earned income tax credit but don’t take it. A tax pro or software can help you determine if you qualify.
40. Keep In Mind Things Change From Year to Year
Just because you got deductions last year or didn’t qualify for credits last year doesn’t mean the same is true for this tax year. Take time to think about what changed.
Even if you made less than the income threshold that applies to you, don’t ignore tax season completely. “If they had federal taxes taken out of their paycheck or qualify for the earned income tax credit, they may have a refund coming,” Greene-Lewis said of taxpayers.
43. Get a Past Year’s Refund You Forgot to Claim
You have three years to claim a refund.
44. Think About the Best Way to Use Your Refund
Need some motivation to get your taxes done? The average tax refund for tax year 2015 was $3,120. You can finally buy that thing you’ve wanted to splurge on, pay down debt, or even use the cash influx to help yourself build credit.
IRS audits generally go back three years but can potentially reach back six. Keep a copy of your return in a safe place. You may also want to hold onto W-2s if you’re planning on applying for a mortgage any time soon.
47. You Can Make Amends
If you made a mistake in your rush to file, you can amend your tax return. You won’t need to do this for math errors (the IRS can fix those), but you’ll have to file a Form 1040X if your filing status, number of dependents or total income is wrong or if you forgot to claim a certain exemption or deduction.
48. Make a To-Do List
Write down everything that gave you trouble this year or deductions you weren’t sure you could get because you didn’t document them. Maybe you won’t make the same mistake next year.
49. Get a File Folder
For storing all those receipts and documents you forgot to organize this time around.
50. & Set a Calendar Reminder
So you don’t end up in this situation again next year.
You’re probably going to die with some debt to your name. Most people do. In fact, 73% of consumers had outstanding debt when they were reported as dead, according to December 2016 data provided to Credit.com by credit bureau Experian. Those consumers carried an average total balance of $61,554, including mortgage debt. Without home loans, the average balance was $12,875.
The data is based on Experian’s FileOne database, which includes 220 million consumers. (There are about 242 million adults in the U.S., according to 2015 estimates from the Census Bureau.) Among the 73% of consumers who had debt when they died, about 68% had credit card balances. The next most common kind of debt was mortgage debt (37%), followed by auto loans (25%), personal loans (12%) and student loans (6%).
These were the average unpaid balances: credit cards, $4,531; auto loans, $17,111; personal loans, $14,793; and student loans, $25,391.
That’s a lot of debt, and it doesn’t just disappear when someone dies.
What Does Happen to Debt After You Die?
For the most part, your debt dies with you, but that doesn’t mean it won’t affect the people you leave behind.
“Debt belongs to the deceased person or that person’s estate,” said Darra L. Rayndon, an estate planning attorney with Clark Hill in Scottsdale, Arizona. If someone has enough assets to cover their debts, the creditors get paid, and beneficiaries receive whatever remains. But if there aren’t enough assets to satisfy debts, creditors lose out (they may get some, but not all, of what they’re owed). Family members do not then become responsible for the debt, as some people worry they might.
That’s the general idea, but things are not always that straightforward. The type of debt you have, where you live and the value of your estate significantly affects the complexity of the situation. (For example, federal student loan debt is eligible for cancellation upon a borrower’s death, but private student loan companies tend not to offer the same benefit. They can go after the borrower’s estate for payment.)
There are lots of ways things can get messy. Say your only asset is a home other people live in. That asset must be used to satisfy debts, whether it’s the mortgage on that home or a lot of credit card debt, meaning the people who live there may have to take over the mortgage, or your family may need to sell the home in order to pay creditors. Accounts with co-signers or co-applicants can also result in the debt falling on someone else’s shoulders. Community property states, where spouses share ownership of property, also handle debts acquired during a marriage a little differently.
“It’s one thing if the beneficiaries are relatives that don’t need your money, but if your beneficiaries are a surviving spouse, minor children — people like that who depend on you for their welfare, then life insurance is a great way to provide additional money in the estate to pay debts,” Rayndon said.
Poor planning can leave your loved ones with some significant stress. For example, if you don’t have a will or designate beneficiaries for your assets, the law in your state of residence decides who gets what.
“If you don’t write a will, your state of residence will write one for you should you pass away,” said James M. Matthews, a certified financial planner and managing director of Blueprint, a financial planning firm in Charlotte, North Carolina. “Odds are the state laws and your wishes are different.”
It can also get expensive to have these matters determined by the courts, and administrative costs get paid before creditors and beneficiaries. If you’d like to provide for your loved ones after you die, you won’t want court costs and outstanding debts to eat away at your estate.