Baby Boomer Student Debt by State

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Millennials aren’t the only ones racking up billions of dollars in student debt.

Turns out, in three out of every four states, “the total outstanding student debt held by borrowers over age 60 increased by more than 50 percent [since 2012].” This data comes from the Consumer Financial Protection Bureau (CFPB), which also found that from 2012 to 2017, the number of baby boomers with student debt has increased by “at least 20 percent in every state.”

What’s even more shocking is the actual dollar amount of total baby boomer student debt for each state—Texas comes in at $6,760,220,000, and it didn’t even make the top three.

See how much baby boomer student debt your state has accumulated. (Hint: at the very least, it’s in the hundreds of millions of dollars.)

50. Wyoming

Total student balance for borrowers age 60 and older: $111,834,100

49. Alaska

Total student balance for borrowers age 60 and older: $147,871,000

48. North Dakota

Total student balance for borrowers age 60 and older: $185,125,700

47. South Dakota

Total student balance for borrowers age 60 and older: $266,013,100

46. Idaho

Total student balance for borrowers age 60 and older: $325,985,500

45. Montana

Total student balance for borrowers age 60 and older: $346,712,800

44. Vermont

Total student balance for borrowers age 60 and older: $347,352,700

43. Hawaii

Total student balance for borrowers age 60 and older: $387,892,000

42. West Virginia

Total student balance for borrowers age 60 and older: $416,178,800

41. Utah

Total student balance for borrowers age 60 and older: $467,623,300

40. Nebraska

Total student balance for borrowers age 60 and older: $521,516,000

39. Delaware

Total student balance for borrowers age 60 and older: $536,479,200

38. Maine

Total student balance for borrowers age 60 and older: $588,882,100

37. New Mexico

Total student balance for borrowers age 60 and older: $603,955,600

36. Rhode Island

Total student balance for borrowers age 60 and older: $609,235,400

35. Arkansas

Total student balance for borrowers age 60 and older: $620,612,800

34. Mississippi

Total student balance for borrowers age 60 and older: $672,880,700

33. Kansas

Total student balance for borrowers age 60 and older: $718,827,000

32. Nevada

Total student balance for borrowers age 60 and older: $735,935,000

31. New Hampshire

Total student balance for borrowers age 60 and older: $807,447,200

30. Kentucky

Total student balance for borrowers age 60 and older: $865,166,500

29. Iowa

Total student balance for borrowers age 60 and older: $881,100,300

28. Oklahoma

Total student balance for borrowers age 60 and older: $1,050,950,000

27. Louisiana

Total student balance for borrowers age 60 and older: $1,177,845,000

26. Oregon

Total student balance for borrowers age 60 and older: $1,249,198,000

25. Alabama

Total student balance for borrowers age 60 and older: $1,299,578,000

24. South Carolina

Total student balance for borrowers age 60 and older: $1,538,660,000

23. Wisconsin

Total student balance for borrowers age 60 and older: $1,542,771,000

22. Tennessee

Total student balance for borrowers age 60 and older: $1,653,585,000

21. Missouri

Total student balance for borrowers age 60 and older: $1,717,022,000

20. Arizona

Total student balance for borrowers age 60 and older: $1,854,555,000

19. Minnesota

Total student balance for borrowers age 60 and older: $1,873,396,000

18. Connecticut

Total student balance for borrowers age 60 and older: $1,902,854,000

17. Colorado

Total student balance for borrowers age 60 and older: $1,915,617,000

16. Indiana

Total student balance for borrowers age 60 and older: $2,029,478,000

15. Washington

Total student balance for borrowers age 60 and older: $2,056,024,000

14. North Carolina

Total student balance for borrowers age 60 and older: $2,489,550,000

13. Virginia

Total student balance for borrowers age 60 and older: $2,748,123,000

12. Georgia

Total student balance for borrowers age 60 and older: $3,345,422,000

11. Michigan

Total student balance for borrowers age 60 and older: $3,421,531,000

10. Maryland

Total student balance for borrowers age 60 and older: $3,559,640,000

9. Massachusetts

Total student balance for borrowers age 60 and older: $3,668,714,000

8. Ohio

Total student balance for borrowers age 60 and older: $4,637,882,000

7. New Jersey

Total student balance for borrowers age 60 and older: $4,742,573,000

6. Illinois

Total student balance for borrowers age 60 and older: $5,103,916,000

5. Texas

Total student balance for borrowers age 60 and older: $6,760,220,000

4. Pennsylvania

Total student balance for borrowers age 60 and older: $6,830,725,000

3. Florida

Total student balance for borrowers age 60 and older: $7,132,025,000

2. New York

Total student balance for borrowers age 60 and older: $9,181,882,000

1. California

Total student balance for borrowers age 60 and older: $11,274,120,000

Image: AIMSTOCK

The post Baby Boomer Student Debt by State appeared first on Credit.com.

The Truth About ‘Obama Student Loan Forgiveness’

Source: iStock

The average 2016 college graduate carries $37,000 worth of student loan debt today according to an analysis of student loan debt by Mark Kantrowitz, publisher of Cappex.com. Kantrowitz tells MagnifyMoney he expects that number to rise for 2017 graduates.

It’s no wonder that those drowning in debt can get desperate. And scammers have come up with a clever way to dupe these borrowers into spending money on services that promise to erase their debt. One of the most popular student loan scams today involves companies that charge borrowers to sign up for the so-called “Obama Student Loan Forgiveness” program.

The only problem is that there is no such loan forgiveness program.

The truth about “Obama Student Loan Forgiveness”

So-called student “debt relief” companies use “Obama Student Loan Forgiveness” as a blanket term for the various flexible federal student loan repayment programs implemented over the last decade by the Bush and Obama administrations.

What they don’t tell unwitting consumers is that these programs, which include income-driven repayment plans and Public Service Loan Forgiveness, among others, are free to borrowers and do not require paying for any special services in order to enroll.

Promising relief to indebted college graduates, these companies lead people to believe that enrolling in these programs requires special assistance — which they may offer for a sizable upfront fee and/or recurring monthly payments. Rather than getting the help they need, borrowers are duped into paying for something they could easily accomplish for free with a simple phone call to their student loan servicer.

While there are multiple ways you can get scammed by debt relief companies claiming to offer you “Obama Student Loan Forgiveness,” there are some red flags that can help you spot a scam.

6 ways to spot a student debt relief scam

It’s important to note that it’s not illegal for a company to charge a borrower to enroll them in a program that’s free to them. These companies are arguably taking some of the work out of getting enrolled, even if that “work” could easily be accomplished with a phone call to your student loan servicer.

Nonetheless, some debt relief firms take things a bit too far, and it’s important to be aware of scams out there. After all, student loan forgiveness scams are really only one part of a broad range of debt relief scams. Debt relief scams share many of the same qualities and employ similar tactics to mislead consumers into paying for their services.

Here are some red flags to watch out for:

  1. They ask for fees upfront. By law, debt relief services are not allowed to ask for payment until they have performed services for their customer. A legitimate debt relief service may ask for a fee upfront, but they will place that payment in an escrow account, and they will not officially receive the payment until they complete the work.
  2. They charge fees for free government services. This one is a bit tricky. So long as a company makes it clear that it is possible to gain access to a government debt relief program for free, it’s not illegal for them to charge consumers for their help in enrolling in those programs. However, the worst actors out there will keep that information to themselves, leading consumers to believe they need to pay a professional for access.
  3. They claim to be affiliated with the U.S. Department of Education. The Department of Education, which manages the federal student loan system, does not partner with any debt relief services. Any company claiming to be associated with the Department of Education is a scam.
  4. They “guarantee” that your debt will be forgiven. Services will try to entice customers by promising total loan forgiveness or a reduction in their student loan payments. But monthly payments for borrowers enrolled in federal student loan repayment programs are established by law and cannot be negotiated. Also, the legitimate loan forgiveness programs out there usually require making payments for several years, and there is no company that can promise loan forgiveness unless you meet those payment requirements first.
  5. They advertise “pre-approval” for debt relief programs. There is no “pre-approval” for federal income-driven repayment or loan forgiveness programs. They are free for borrowers, and so long as your loans are in good standing, it’s a matter of the types of loans you have when you took them out that qualifies you for the different programs. To see if you qualify for a given program, contact your loan servicer directly.
  6. They offer to make your student loan payments for you. You should be the only person submitting payments to your loan servicer. The Department of Education has contracted these loan servicers to manage federal student loans, and loan payments should be made directly through their websites. Never send your payment to a debt relief firm, even if they promise to pay your loans for you. The exception here is if you’re working with a debt relief firm to settle a debt with a lump-sum payment. In that case, they are legally required to hold your cash in an FDIC-insured account until they officially settle the debt. And if their client decides they no longer want their services, they have to return the funds to them in full.

Do your due diligence before working with any debt relief service, by keeping an eye out for these red flags, as well as checking sites like the Consumer Financial Protection Bureau, the Federal Trade Commission, or the Better Business Bureau for complaints against the company.

What to do if you’ve fallen for a student debt relief scam

If you’ve been scammed by a debt relief company, there are certain steps you need to take to prevent further financial damage. However, know that it is possible you may never get your money back.

Submit a complaint to the Consumer Financial Protection Bureau and the Federal Trade Commission. Reporting scams, can not only help others from losing their money, but if an investigation by the CFPB or FTC results in suit and judgment, then the debt relief company may be required to issue refunds, cease business, and ensure borrowers do not miss out on important repayment benefits.

Track your credit reports with all three credit bureaus to ensure your personal information is not used fraudulently. You can get one free credit report each year at annualcreditreport.com or use these free services to monitor your report for suspicious activity. If you fear a debt relief scammer has your Social Security number and other financial information, you might want to consider a credit freeze. That will stop anyone from being able to open a new line of credit without you knowing.

Contact your loan servicing companies and have any power of attorney authorizations removed. Some companies will ask borrowers to give them power of attorney so they can negotiate directly with their loan servicers. You don’t want to leave any company with this privilege because they will be able to make decisions about your loans without you knowing.

Contact your bank or credit cards to stop payment to the debt relief company and see if they can work with you to try and get your money back. It is common for debt relief services to charge monthly recurring fees for their services.

Change your Federal Student Aid password. Every federal student loan borrower has a unique login for the https://studentloans.gov site, where you can track all of your federal loans. If you gave a company your FSA information, consider that information compromised and change your FSA password immediately.

9 Legitimate Student Loan Forgiveness Programs

While there is no such program called “Obama Student Loan Forgiveness,” there are several legitimate student loan repayment programs that offer student loan forgiveness.

These programs have a wide range of requirements and payment terms, some as short as five years, others as long as 25 years, and can be available based on the types of federal student loans you have as well as your chosen career.

In addition to loan forgiveness programs, there are programs that offer loan repayment assistance or loan discharge. How much can be discharged and the amount of repayment assistance varies greatly depending on the program.

9 examples of legitimate loan forgiveness programs, loan repayment assistance programs, and loan discharge programs

What to do if you can’t afford your student loan payments

If you are struggling to afford your student loan payments, there are some actions you can take to ensure your loans remain in good standing and you avoid a default that could negatively impact your credit score.

Enroll in an income-driven repayment plan

If you are unable to afford your current payment, you can apply to change repayment plans. For example, if you are on a Standard Repayment Plan for your federal student loans, you could request to enroll in an income-driven repayment plan. If you are already on an IDR plan and your income has changed significantly, you can request to have your payment amount recalculated.

Ask for a deferment or forbearance

If you are going through a temporary financial hardship, you can ask your loan servicer to apply a deferment or forbearance, which would not require you to make payments during the deferment or forbearance. While both a deferment and forbearance offer you relief from making payments, with a forbearance you will be required to eventually pay back the interest that accrues during that time. Also, it’s important to note that while you are in deferment or forbearance, you aren’t making payments, which means you might be missing out on forgiveness programs like PSLF if you are working in public service or for a nonprofit.

Consider refinancing or consolidating your loans

Refinancing involves taking out a new loan from a private lender and using that loan to pay off your old loan. The pros of refinancing include a reduced interest rate and the ease of having just one payment. If you refinance a federal student loan, you will lose all of the benefits that federal student loans offer.

Alternatively, you could consolidate your federal loans. A Direct Consolidation Loan combines all your loans using the average weighted interest rate into one loan. So instead of dealing with multiple loan servicers and multiple loan payments each month, you only have one student loan payment to make each month. You can apply for a Direct Consolidation Loan at no cost through the government’s Federal Student Aid website.

Work with your loan servicer

If you have private loans, your lender may not offer as many repayment options as federal loans. Reach out and work with your lender anyway. They may offer a financial hardship program that would lower your payments. Your loan servicer would much rather work with you to ensure they get paid.

Consider bankruptcy if you can pass the “hardship test”

While it is highly unlikely you will be able to discharge your student loans in bankruptcy, it isn’t impossible. You must either show that your loans would impose an undue financial hardship that will not go away or that the loan was not a qualified student loan in that it did not fit the definition or was in an amount that exceeds the school’s cost of attendance. An example of where this argument has been successful would be a private bar loan, a loan taken out to cover the expenses of taking the bar exam.

The post The Truth About ‘Obama Student Loan Forgiveness’ appeared first on MagnifyMoney.

Sallie Mae Graduate School Loans vs. Direct PLUS Loans

Taking out a federal Direct PLUS Loan for grad school may not be a bad idea if you need to borrow money for your education. Federal repayment options such as Income-Based Repayment, Revised Pay As You Earn, and Public Service Loan Forgiveness can make Direct PLUS Loans an attractive option for student borrowers.

However, these loans currently come with a high interest rate of 7%. On top of that, you will have to pay an origination fee between 4.264% and 4.267% just to take out the loan in the first place.

Recently, Sallie Mae put a new line of loans on the market that may outperform what is available to grad students through the federal government. While there are some negatives, like not qualifying for the aforementioned repayment programs, there are some major positives, like no origination fees and potentially lower interest rates, which could save students a lot of money over the long haul.

In this review, we’ll see how Sallie Mae grad school loans compare to federal Direct PLUS loans.

Sallie Mae vs. Direct PLUS Loan

Sallie Mae’s recent releases include three classes of loans: one for MBA programs, one for dental and medical school students, and a separate loan program for other health care professionals.

In order to qualify for any one of these loan programs, you must be enrolled in a program at a degree-granting institution with the intent of getting a degree. These loans are not for certificate programs or continuing education.

It is worth noting that you do not have to be enrolled half-time to qualify, which differs from the standards for federal PLUS loans.

Interest rates and terms

With any one of these loans, you can borrow between $1,000 and the maximum your school charges for your degree — as long as you qualify either on your own or with a co-signer. Interest rates and loan terms will vary depending on which loan you take out, though.

In the table below, we’ve compared rates for Sallie Mae’s grad school loans against the current rates for the Direct PLUS Loan program.

Keep in mind that variable rates may be lower at first, but have the potential to change significantly over the course of repayment. Fixed rates, on the other hand, tend to start out higher, but will stay stable and predictable for the course of your loan.

None of the loans come with origination fees, and you can pay them off early without incurring a penalty.

3 options to repay your Sallie Mae grad school loan

When you take out any one of these three loans, you can pick how you’ll repay. You have three options:

  1. Deferred Repayment. With this option, you make zero payments while you’re in school and during the six months following graduation — the time frame known as the “grace period.” While it’s nice that you won’t have to shell out any money while you’re focused on your studies, you will accrue interest to be paid later. This option also gives you the highest interest rate of the three options.
  2. Fixed Repayment. Maybe you can’t afford to make full monthly payments while you’re in school, but you can afford to throw a little bit of money at the interest. During your education and grace period, you’ll make nominal, interest-only payments. You will still have back interest applied to your account when your grace period is over, but the amount will be less than if you chose the Deferred Repayment plan.
  3. Interest Repayment. When you choose this plan, you’ll get the lowest interest rate that your credit history and income qualify you for, but you’ll have to make full, interest-only payments while you’re in school through your grace period. After that, you’ll start making interest-plus-principal payments just like the other two options, but your payments will be smaller as there won’t be any back interest to tack on.

Graduated Repayment Period

Worried that you’ll struggle to find a job immediately after graduation? Sallie Mae does offer a principal deferment option called Graduated Repayment Period. For the first 12 months following graduation, you have the option of making interest-only payments, but it’s not automatic. You have to opt in, and there is only a small time frame where you’ll be allowed to do so. Your monthly billing statement will alert you when you’re eligible. Start looking for the notification beginning two months before your grace period is over.

Residency and internship deferment

If you have a Dental and Medical School Loan or a Health Professions Graduate Loan, you may qualify for deferment for the entirety of your residency or internship. If you chose Deferred Repayment, you won’t have to pay anything during this time, though interest will still accrue. If you chose Fixed Repayment, you’ll continue making nominal interest payments, and if you chose Interest Repayment, you’ll continue to make full interest payments while you’re completing this necessary step.

In order to qualify for this deferment option, your residency or internship must meet one of the following three criteria:

  1. Require a bachelor’s degree.
  2. Be a supervised program that leads to a degree or certificate.
  3. Be a supervised program that is required for entry into your field.

How to qualify for a Sallie Mae grad school loan

To qualify for one of Sallie Mae’s graduate-level student loans, you must be a U.S. citizen or permanent resident, or be a nonresident with an American co-signer. U.S. citizens and permanent residents can use the loan to study abroad, but all studies for nonresidents must be completed in the U.S. at American institutions.

If you have any other Sallie Mae loans, you must be current on them in order to qualify. That includes not being in forbearance or deferment. You won’t meet this requirement if you’re on a modified payment plan.

Sallie Mae grad school loans vs. federal PLUS loans

Pros and cons of Sallie Mae grad school loans

This new set of graduate school loans from Sallie Mae has a lot of good things going on, but as with any financial product, there are both pros and cons.

Pros

  • You could potentially score a lower interest rate than federal PLUS loans.
  • No origination fees.
  • Ability to pay back early without penalty.
  • Quite a few options for repayment — including deferment options after graduation.
  • The 20-year repayment term on the Dental and Medical School Loan gives you a more realistic timeline for paying back your debt.
  • You can take out a loan even if you’re taking a credit-by-credit approach. Federal student loans require you to attend at least half-time.

Cons

  • There is the potential of getting an even higher interest rate than you’d find on a PLUS loan, though you’d still have no origination fees. This is most likely to impact those with a spotty credit history — especially if they opt for the Deferred Repayment option.
  • Dental and medical school students should take note that while a 20-year term is attractive, you will end up paying more over the course of your loan than if you had a shorter repayment term. Take advantage of the fact that there is no early repayment penalty, if at all possible.
  • Because these are private loans, you will not qualify for advantaged repayment options like the Department of Education’s REPAYE, IBR, or PSLF. Direct PLUS Loans do qualify for these programs.
  • The window for enrolling in Graduated Repayment is short. You may miss it if you’re not paying attention.

How to apply

You can complete the application process online. Before you start, make sure you’re armed with this information:

  • Your address
  • Your Social Security number
  • The name of your school
  • Your enrollment status
  • Your intended degree/course of study
  • How much money you want to borrow
  • Information on any other financial aid you’re receiving
  • Current employer information
  • Current salary information
  • Bank account information
  • Monthly mortgage/rent payments
  • Contact information of two personal references

If you’re a permanent resident, you’ll have to furnish some additional paperwork. Be prepared with either your Alien Registration Receipt Card, or its conditional counterpart accompanied by INS Form I-751. If you don’t have either of those, you can also furnish an unexpired foreign passport with an unexpired stamp certifying employment, or a Permanent Resident card.

If you’re a nonresident, you’ll need to provide an unexpired passport, an unexpired student visa, or an Employment Authorization card. You’ll also need all of the above bulleted information for your co-signer.

There is a separate application page for each loan type: Health Professions Graduate Loan, MBA Loan, and Dental and Medical School Loan.

Who are Sallie Mae’s new grad school loans best for?

Sallie Mae’s new student loans have an extremely targeted audience. If you’re studying in one of the specified fields, they can be a good option for you if you have a good credit history and can qualify for an interest rate lower than the one offered on PLUS loans. Just be mindful that while the repayment options are plentiful, they’re not quite as generous as some federal student loan programs that allow you to repay based on your income or even forgive a large portion of your debt after dedicating a portion of your career to public service.

The post Sallie Mae Graduate School Loans vs. Direct PLUS Loans appeared first on MagnifyMoney.

How These Student Loan Borrowers Are Getting Their Debt Dismissed in Court

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Student debt is only forgiven or discharged in special cases, but a new report by The New York Times might offer a glimmer of hope to some student loan borrowers struggling to manage their debt.

If a student loan lender or servicer can’t prove that they own the debt that they are attempting to collect from a consumer, it’s possible that the debt can be dismissed in court.  That’s what happened in a recent case profiled by New York Times reporters Stacy Cowley and Jessica Silver-Greenberg involving private student lender National Collegiate Student Loan Trusts, one of the nation’s largest owners of private loans.

National Collegiate sued dozens of former students who had defaulted on their private student loans. But in court National Collegiate failed to prove they owned the loans. This happens often when loans are sold to another lender, or otherwise handed to another account manager and paperwork gets lost. Ultimately, the courts dismissed the lawsuits, citing the fact that National Collegiate had no way of proving they owned the debts in the first place.

This isn’t always how the scales tip in cases against consumers for unpaid debts.

If consumer debts are left unpaid for an extended period of time, consumers can and often are taken to court by the companies they owe. Often, consumers don’t answer these lawsuits at all. And when lawsuits aren’t answered, judges usually rule in favor of the plaintiffs. With those judgments in place, companies can then push to have the consumers’ wages or federal benefits like Social Security garnished.

The outcomes in these National Collegiate lawsuits are proof of what can happen if consumers simply show up at court and try to fight back.

“Individuals trying to get rid of student loan debt should be proactive in demanding proof of ownership of the loan documents from the lender that is collecting or trying to enforce the [loan],” says Attorney Evelyn J. Pabon Figueroa, based in Orlando, Fla.

People who are going through the bankruptcy process and are attempting to have student loan debt discharged should also ask their lenders for proof that they own the debt, Figueroa says. If proof isn’t provided, they should dispute the debt.

Figueroa says in some cases borrowers should even stop making payments if they believe the lender doesn’t have the right documents to prove they own the loan. Instead, send the lender a debt verification letter, which asks lenders to provide proof that the debt belongs to a person. You can download a sample debt verification letter from the Consumer Financial Protection Bureau website.

The CFPB suggests asking these three questions in your letter:

  • Why a debt collector thinks you owe this debt.
  • The amount of the debt and how old it is.
  • Details about the debt collector’s authority to collect this money.

If the lender can’t provide proof, you should consider disputing the debt, either in court (if the lender has filed a lawsuit against you at that point) or through the three major credit bureaus (if the debts are appearing on your report and subsequently hurting your credit score).

How student lenders lose track of their debts

If the National Collegiate debacle sounds familiar, it should. It’s similar to the same issues mortgage lenders encountered during the 2008 subprime mortgage crisis. Lenders took borrowers to court to pursue unpaid mortgage debts, but when the lenders could not provide proof that the borrowers owed the debt, courts often ruled that the loans were not collectible. The lack of documentation was so pervasive that many borrowers intentionally defaulted on their mortgage loans on the off chance a lender could not prove they owned the debt.

National Collegiate is already anticipating that it will face the same problem — that borrowers will simply stop paying their debts — as word spreads of its inability to win lawsuits against borrowers. “[A]s news of the servicing issues and the Trusts’ inability to produce the documents needed to foreclose on loans spreads, the likelihood of more defaults rises,” the company said in a recent legal filing.

What to do if you’re sued by a student lender or debt collector

First, don’t panic. The last thing you want to do if you’re ever sued is admit in writing or verbally that you owe the debt. In the event the lender can’t prove they own the debt, this may come back to haunt you. By taking these few key steps, you can protect yourself both legally and financially in the event you’re served with a lawsuit from a lender:

  1. Ask them to verify the debt. If you’re already suspicious your loan lender may have lost your paperwork and can’t prove the debt, start by sending out a debt verification letter. If the lender doesn’t respond (give them 30-60 days), they must cease attempting to collect the debt. If they don’t stop, you’ll likely need to contact a lawyer. You may not need to hire one, but a quick consultation for legal advice for your best course of action will be well worth it.
  1. Never discuss the debt over the phone. If a lender or collection agency contacts you via phone before you are served a lawsuit or receive anything in the mail, be sure to get the the caller’s name, company, and license number. Once you have this information, it’s best to communicate via certified USPS mail to track and document that every correspondence has been received by the legitimate collections company and lender. If you end up in court, this is important, as it establishes a paper trail for your communications. (Email and electronic timestamps can easily be forged.) Keep in mind you don’t ever have to answer the phone if you don’t recognize the number, and you have a legal right to tell debt collectors to stop contacting you entirely.
  1. Contact a lawyer. Lawsuits involving large sums of money are no small game to play in a courtroom. Most consumers don’t know the intricacies of the laws that actually protect them (and sometimes may not know how to read the contracts they signed), but a lawyer versed in contract law or one who specializes in bankruptcy can easily help dispute the debt and, if it’s valid, negotiate a settlement without ever stepping into a courtroom. The CFPB keeps a handy list of legal aid groups so you can find an affordable lawyer in your state.

 

The post How These Student Loan Borrowers Are Getting Their Debt Dismissed in Court appeared first on MagnifyMoney.

Student Debt Confessions: How I Got Kicked Off My Income-Driven Repayment Plan

Liz Stapleton wrote about her experience getting kicked off her income-driven repayment plan for MagnifyMoney. Overnight, her monthly student loan payment skyrocketed from $365 to nearly $2,000.

I graduated from college at the onset of the recession in 2008 and graduated from law school just in time for the recession to hit the legal market in 2011. By the time I finished with both my degrees I had $193,000 of federal student loan debt, which has since grown to over $250,000. Needless to say, I’ve never been financially able to make student loan repayments under the standard repayment plan.

Once my six-month student loan grace period ended in 2011, I immediately signed up for an Income-Driven Repayment Plan with each of my three loan servicers.

Every borrower enrolled in one of these plans has to renew their eligibility through their loan servicer every year. Since I have three servicers, that means at this point I have been through the renewal process 18 times. The first 17 recertifications went off without a hitch.

So I was stunned when I found out my 18th and most recent submission for recertification through one of my three loan servicers was denied. That was it — I was kicked out of the program. Suddenly, my monthly payments of $362 were going to balloon to nearly $2,000.

I got on the phone with the lender right away, determined to find out why I was booted from the program. In the end, I was able to successfully re-enroll.

Why my income-driven repayment renewal was denied

It turns out my status as a self-employed worker was to blame.

After I was laid off from my job as a solutions consultant at the end of 2016, I started a business as a freelance writer in 2017. One of the requirements to recertify your eligibility for income-driven repayment plans is to submit proof of income. When I was working full time, that was no problem. I just used records of my pay stubs to verify my income.

But now that I was self-employed, I didn’t have pay stubs. Early in 2017, when my deadline to recertify with one of my loan servicers was approaching, I called them and asked what documents I could use to verify my income.

I was told that all I needed was a self-certifying letter stating that I’d been laid off and was now self-employed as a freelance writer. I also needed to include my gross monthly income. I wrote the letter and stated what my approximate monthly income was thus far, and my submission for recertification on the Income-Driven Repayment (IDR) Plan was approved, no problem.

But remember that I have three different loan servicers. So I had to go through the same process with the other two as well. Unfortunately, when I tried to use the same strategy to renew my certification with my second servicer, I was denied.

I was shocked and stressed out, to say the least.

Resubmitting my application

I called this loan servicer and asked why I had been denied. At first, the representative I spoke with told me there wasn’t sufficient documentation of income. When I asked why my self-certifying letter wasn’t enough, the representative on the phone explained that it usually was enough. I pressed her to find out what exactly was wrong with my letter that had resulted in a denial. It turns out, they didn’t like that I used the word “approximate” when stating my gross monthly income. They needed a firm number. Additionally, they wanted a work address.

I rewrote the letter to take out the word “approximately” and explained that as a self-employed freelance writer I worked from home and had no additional company address. I submitted my forms again and crossed my fingers.

In the meantime, my loan servicer agreed to put my loans into deferment for one month. That would ensure that I wouldn’t get hit with my new larger payment the following month.

Here’s what the application looks like to re-certify your enrollment in an income-driven repayment plan. Download a copy at https://studentaid.ed.gov.

The long wait for news

After I resubmitted my IDR Plan recertification application, I was told I would hear back within 10 days. It was nearly a month before I heard back from them in June. It was good news – my documents were approved, and I would be enrolled in my new IDR Plan starting in August.

But the celebration was short-lived.

Since I had only been granted a one-month deferment, which covered me for June, and my new IBR Plan wouldn’t kick in until August, that meant I would have a gap in July. And I’d have to pay my new, larger monthly payment. I couldn’t afford the payment of nearly $2,000 and to miss it would mean defaulting on my loans. Defaulting on federal loans could mean losing access to the income-driven repayment plans as well as forbearance and deferment options, not to mention it would wreak havoc on my credit.

Once again I was caught off guard and stressed out. And, once again, I called my loan servicer to find out why the new plan wasn’t being applied sooner. Apparently, the billing cycle had already passed for July.

To solve the problem, I requested another month of deferment for July, which I was granted.

Asking for a forbearance or deferment is never fun, but it is always better than defaulting on your loans and losing access to those options and flexible repayment plans.

What to do if your recertification is denied

  1. Be proactive. One of the biggest lessons I learned from this ordeal is that it pays to be proactive. Don’t count on the loan servicer sending the paperwork you need to fill out; you can find a recertification document here. If you are struggling with payments, you have to take action. Ask your loan servicer questions to find out what might work best for you, a new payment plan or a temporary forbearance or deferment. If your loan servicer is being stingy with answers, persist, do not hang up the phone until you have the answers you need.
  2. Don’t be shy about requesting deferment or forbearance. Loan servicers won’t necessarily anticipate that you may need a deferment or forbearance if your repayment plan is denied. So be sure to ask.
  3. Resubmit your application. It isn’t unusual to have your recertification denied for a number of reasons. For example, if you are a salaried employee, paid biweekly, and only submit one pay stub, you could be denied for not demonstrating an entire month’s worth of income. But remember, you don’t have to accept that denial as final; you can usually resubmit if something was wrong with your original submission.

The Bottom Line: Not all loan servicers are created equally

As I learned the hard way, some loans servicers are pickier about the language you use on your renewal forms than others.

“For those that are self-employed, some [servicers] will have specific requirements in the phrasing of the documents used to certify income,” says Columbus, Ohio-based financial advisor Natalie Bacon. “What works for one loan servicer may not work for another.”

The biggest lesson I learned was not to assume that just because one loan servicer accepted my documentation, the other loan servicer would as well. It’s always important to communicate with each of your student loan servicers.

The post Student Debt Confessions: How I Got Kicked Off My Income-Driven Repayment Plan appeared first on MagnifyMoney.

Should You Use a Mortgage to Refinance Student Loans?

Fannie Mae, the largest backer of mortgage credit in America, recently made it a little easier for homeowners to refinance their student loans. In an update to its Selling Guide, the mortgage giant introduced a student loan cash-out refinance feature, permitting originators that sell loans to Fannie Mae to offer a new refinance option for paying off one or more student loans.

That means you could potentially use a mortgage refi to consolidate your student loan debt. Student loan mortgage refis are relatively new. Fannie Mae and SoFi, an alternative lender that offers both student loans and mortgages, announced a pilot program for cash-out refinancing of student loans in November 2016. This new program is an expansion of that option, which was previously available only to SoFi customers.

Amy Jurek, a Realtor at RE/MAX Advantage Plus in Minneapolis/St. Paul, Minn., says people with home equity have always had a cash-out option, but it typically came with extra fees and higher interest rates. Jurek says the new program eliminates the extra fees and allows borrowers to refinance at lower mortgage interest rates. The policy change could allow homeowners to save a significant amount of money because interest rates on mortgages are typically much lower than those for student loans, especially private student loans and PLUS loans.

But is it a good idea?

Your student debt isn’t eliminated; it’s added to your mortgage loan.

This may be stating the obvious, but swapping mortgage debt for student loan debt doesn’t reduce your debt; it just trades one form of debt (student loan) for another (mortgage).

Brian Benham, president of Benham Advisory Group in Indianapolis, Ind., says refinancing student loans with a mortgage could be more appealing to borrowers with private student loans rather than federal student loans.

Although mortgage rates are on the rise, they are still at near-historic lows, hovering around 4%. Federal student loans are near the same levels. But private student loans can range anywhere from 3.9% up to near 13%. “If you’re at the upper end of the spectrum, refinancing may help you lower your rate and your monthly payments,” Benham says.

So, the first thing anyone considering using a mortgage to refinance student loans should consider is whether you will, in fact, get a lower interest rate. Even with a lower rate, it’s wise to consider whether you’ll save money over the long term. You may pay a lower rate but over a longer term. The standard student loan repayment plan is 10 years, and most mortgages are 30-year loans. Refinancing could save you money today, but result in more interest paid over time, so keep the big picture in mind.

You need to actually have equity in your home.

To be eligible for the cash-out refinance option, you must have a loan-to-value ratio of no more than 80%, and the cash-out must entirely pay off one or more of your student loans. That means you’ve got to have enough equity in your home to cover your entire student loan balance and still leave 20% of your home’s value that isn’t being borrowed against. That can be tough for newer homeowners who haven’t owned the home long enough to build up substantial equity.

To illustrate, say your home is valued at $100,000, your current mortgage balance is $60,000, and you have one student loan with a balance of $20,000. When you refinance your existing mortgage and student loan, the new loan amount would be $80,000. That scenario meets the 80% loan-to-value ratio, but if your existing mortgage or student loan balances were higher, you would not be eligible.

You’ll lose certain options.

Depending on the type of student loan you have, you could end up losing valuable benefits if you refinance student loans with a mortgage.

Income-driven repayment options

Federal student loan borrowers may be eligible for income-driven repayment plans that can help keep loan payments affordable with payment caps based on income and family size. Income-based repayment plans also forgive remaining debt, if any, after 25 years of qualifying payments. These programs can help borrowers avoid default – and preserve their credit – during periods of unemployment or other financial hardships.

Student loan forgiveness

In certain situations, employees in public service jobs can have their student loans forgiven. A percentage of the student loan is forgiven or discharged for each year of service completed, depending on the type of work performed. Private student loans don’t offer forgiveness, but if you have federal student loans and work as a teacher or in public service, including a military, nonprofit, or government job, you may be eligible for a variety of government programs that are not available when your student loan has been refinanced with a mortgage.

Economic hardship deferments and forbearances

Some federal student loan borrowers may be eligible for deferment or forbearance, allowing them to temporarily stop making student loan payments or temporarily reduce the amount they must pay. These programs can help avoid loan default in the event of job loss or other financial hardships and during service in the Peace Corps or military.

Borrowers may also be eligible for deferment if they decide to go back to school. Enrollment in a college or career school could qualify a student loan for deferment. Some mortgage lenders have loss mitigation programs to assist you if you experience a temporary reduction in income or other financial hardship, but eligibility varies by lender and is typically not available for homeowners returning to school.

You could lose out on tax benefits.

Traditional wisdom favors mortgage debt over other kinds of debt because mortgage debt is tax deductible. But to take advantage of that mortgage interest deduction on your taxes, you must itemize. In today’s low-interest rate environment, most taxpayers receive greater benefits from the standard deduction. As a reminder, taxpayers can choose to itemize deductions or take the standard deduction. According to the Tax Foundation, 68.5% of households choose to take the standard deduction, which means they receive no tax benefit from paying mortgage interest.

On the other hand, the student loan interest deduction allows taxpayers to deduct up to $2,500 in interest on federal and private student loans. Because it’s an “above-the-line” deduction, you can claim it even if you don’t itemize. It also reduces your Adjusted Gross Income (AGI), which could expand the availability of other tax benefits.

You could lose your home.

Unlike student debt, a mortgage is secured by collateral: your home. If you default on the mortgage, your lender ultimately has the right to foreclose on your home. Defaulting on student loans may ruin your credit, but at least you won’t lose the roof over your head.

Refinancing student loans with a mortgage could be an attractive option for homeowners with a stable career and secure income, but anyone with financial concerns should be careful about putting their home at risk. “Your home is a valuable asset,” Benham says, “so be sure to factor that in before cashing it out.” Cashing out your home equity puts you at risk of carrying a mortgage into retirement. If you do take this option, set up a plan and a budget so you can pay off your mortgage before you retire.

The post Should You Use a Mortgage to Refinance Student Loans? appeared first on MagnifyMoney.

How Does Student Loan Deferment or Forbearance Affect Your Credit Score?

LendKey Student Loan Refinance Review

According to the latest annual report from the Institute for College Access and Success, 2015 college graduates showed a 4% increase in student loan debt over 2014 graduates. Among 2015 seniors, 68% who graduated had student loan debt, with the average balance being $30,100 per borrower.

With more college students graduating with student loan debt and balances continually increasing, it’s no wonder many are seeking deferment or forbearance. But if you are considering these options, there are some things you need to know first, including how it might affect your credit score.

What Is Deferment?

Student loan deferment is a period of time when the repayment of your loan’s principal and interest is temporarily delayed.

Unlike forbearance, when your student loan is in deferment, you do not need to make payments. And in some cases, the federal government may even pay the interest portion of your student loan payment. In order to qualify, you must have a federal Perkins Loan, a Direct Subsidized Loan, or a Subsidized Federal Stafford Loan.

Interest on your unsubsidized student loans or any PLUS loans will not be paid by the federal government. You will be responsible for interest accrued during deferment (if it’s not paid by the federal government), but you don’t have to make payments during the deferment period. If you’re not paying interest during deferment, it’s important to know interest may still be added to your principal balance. This may result in higher future payments.

There are several situations in which you may be eligible for student loan deferment:

  • If you are enrolled in college or career school at least half-time
  • If you are in an approved graduate fellowship program
  • During a period where you have qualified for Perkins Loan discharge or cancellation
  • During a period of unemployment
  • During a time of economic hardship (including Peace Corps)
  • During active military duty
  • During the 13 months following active military duty

Most deferments are not automatic, and you will need to submit a request for deferment to your student loan provider. If you are still in school at least part-time, you can apply through your school’s financial aid office.

What Is Forbearance?

If you are unable to make your student loan payments and don’t qualify for deferment, your loan officer may allow forbearance. When your student loans are in forbearance, you may be able to make smaller payments or skip payments altogether for up to 12 months.

However, before you apply for forbearance, keep in mind that interest will continue to accrue on all types of loans. This means your balance will grow, increasing the amount of time and money it will take to pay off your student loans. You can choose to pay the interest-only portion during forbearance. If you choose not to, the interest may be capitalized and added to the principal balance of your loan.

According to the Federal Student Aid office at the U.S. Department of Education, there are two types of forbearance, discretionary forbearance and mandatory forbearance.

Discretionary forbearance is when you, the borrower, request forbearance from your lender due to financial hardship reasons or illness. Ultimately, the lender decides whether or not to grant your discretionary forbearance request.

With mandatory forbearance, your lender is required to grant you forbearance on your student loans if you request it. However, you must meet the following criteria:

  • You are completing a medical or dental internship or residency program, and meet specific requirements.
  • The total you owe each month for all the student loans is 20% or more of your total monthly gross income.
  • You are serving in a national service position and received a national service award.
  • You are a teacher and qualify for teacher loan forgiveness.
  • You qualify for partial repayment of your loans under the U.S. Department of Defense Student Loan Repayment Program.
  • You are a member of the National Guard and have been activated by a governor, but you are not eligible for a military deferment.
  • Similar to deferment, forbearance doesn’t happen automatically. You must apply for forbearance and may be required to show proof of these situations in order to be granted forbearance.

What Happens to Your Credit Score When Your Student Loans Are in Deferment or Forbearance?

As long as you continue making your student loan payments on time and in full until your request for deferment or forbearance is approved, your credit score should not be affected.

According to Rod Griffin, Director of Public Education at Experian, “When a student loan is in forbearance it is not in a repayment status. As a result, the late payments would not be reported. If it is reflected as current and not in repayment, it likely would not have a negative effect on credit scores.”

What Happens if You Default on Your Student Loans?

If you miss a payment between the time you apply for and are approved for deferment or forbearance, you will be considered to be in default on your student loans, and your credit score could be negatively impacted by this missed or late payment.

“Defaulting on a student loan is no different than defaulting on any other installment loan. Failing to pay as agreed will severely damage your credit history and, therefore, your credit scores,” Griffin said.

Being 60 days late or more on a student loan or credit card payment could damage your credit score as much as 100 points.

The Bottom Line

If you are unable to afford your student loan payments, deferment or forbearance may be options to consider. However, it’s important to remember that your student loans will continue to accrue interest, which could result in your paying more over the long run. Between the time of application and the time you are approved for deferment or forbearance, you must continue to make your student loan payments in full and on time in order to avoid potential damage to your credit score.

The post How Does Student Loan Deferment or Forbearance Affect Your Credit Score? appeared first on MagnifyMoney.

How This California Couple Paid Off $100,000 of Debt in 2 Years

Illustration by Kelsey Wroten
Illustration by Kelsey Wroten

When 31-year-old Priscilla Jones completed her MFA in film in 2011, she was left with a total of $96,000 of student loan debt from both her undergraduate and graduate studies. (She requested that we change her name for privacy reasons). Over the next three years, thanks to compounding interest charges, the original amount ballooned to $118,000. On her current payment plan, it would take another 15 years to pay off all her debt.

Rather than dragging the process out, she and her husband (we’ll call him Nathan), decided to aggressively pay down her debt. Over the next 22 months, they paid off $100,000 of the original loan balance — all while raising a young child in Los Angeles.

Here’s how they did it:

Making a pact

While Nathan, 41, was fully aware of Priscilla’s debt load when they got married in 2011, it wasn’t until 2014 — on Valentine’s Day, to be exact — when the couple opened the hood on Priscilla’s student loans to uncover what was lurking underneath.

“For the first few years of our marriage, we just couldn’t afford to buckle down to pay them off, so we didn’t really take a close look,” says Nathan.

The catalyst for examining Priscilla’s loans? In less than two months, one of the largest loans Priscilla carried — a total of $88,000 — would come out of forbearance. The additional loan payment would triple their monthly bill from $300 to $900. Two weeks later, they decided to dump their savings accounts, putting $24,000 toward her largest debt.

And then they made a pact: They would do everything they could to pay off the loans within three years.

Working overtime

On top of working a full-time job in operations at a tech startup, Priscilla took side jobs, working an additional 20 to 30 hours a week. She kept $600 a month from her salary for personal spending and used the rest to pay off her student loans. She and Nathan made sure to keep $5,000 to $10,000 in an emergency fund at all times.

Bonuses and promotions

They lived off of Nathan’s salary in management at a tech startup, and Nathan’s work bonuses went straight toward paying off the debt. When Nathan started his current job in 2012, he earned $53,000, including bonuses. His company soon saw tremendous growth. As a result, Nathan quickly ascended the ranks, and his income spiked dramatically. The couple’s combined salary in 2014 was $170k and $160k in 2015, and every penny they could pinch went toward their debt load.

“We think of ourselves as being very fortunate,” says Nathan. “But even if my income hadn’t grown as it did, we would’ve used the same mindset and tactics to pay off our loans. Instead of it taking three years, it would’ve taken 10.”

Never ‘act your wage’

Although they were in a high income bracket, no one would have guessed as much by looking at their spending habits. They lived as frugally as possible to focus on paying off the student loans. They stayed in the two-bedroom, two-bathroom apartment in Venice that Nathan had locked down at a low rate during the recession. They drove two beat-up cars that were paid off in full and had good gas mileage.

“We really had to examine our needs versus wants,” says Priscilla. While they’ve never been big spenders, and value community and experiences, they had to put some of their wants on hold. For instance, Nathan, who loves to invest, contributed just the minimum toward his employer’s 401(k) to qualify for the full matching contribution. Priscilla curbed any frivolous spending on clothes. They also put off getting new carpet and furniture, both of which needed desperately to be replaced.

They shopped at the Dollar Store, didn’t buy clothes that required dry cleaning, and refrained from traveling for pleasure. They paid as many bills as they could on their credit cards, which were paid in full each month. Any reward points they racked up went toward gift cards for restaurants and movies. A rare dinner out would be at El Pollo Loco or In-N-Out Burger.

“We turned it into a game, and had fun with it,” explains Priscilla. For instance, the couple placed a chalkboard in their kitchen and wrote on it the outstanding debt amounts and interest rates, along with specific dates for hitting their goals.

The ‘avalanche’ method

To prioritize which debts would be paid off first, they decided to use the ‘debt avalanche’ method. They aggressively knocked off the loan with the highest interest rate first, then worked their way down. They would challenge each other to save as much as they could toward paying off the loan. “Working together to pay off debt helped us bond,” adds Nathan.

“To stay motivated, we would obsessively calculate how much interest we were paying each day,” says Priscilla. “At one point we were paying $37 a day in interest alone.”

Taking time to celebrate

When they reached a debt payoff total of $100,000 in February 2015, they decided to ease up on their loan repayments. To celebrate, they rented a limo and had a night out on the town. They also finally were able to give their apartment a facelift. “We no longer have to move furniture around to hide the holes in the carpet anymore,” Priscilla says.

In September of this year, the couple made their final loan repayment and are completely debt- free.

They say that it’s essential to maintain perspective when paying off student debt.
“Remember, you’re not dying,” Nathan says. “Just focus on paying it off, and your debt will get crushed.”

The post How This California Couple Paid Off $100,000 of Debt in 2 Years appeared first on MagnifyMoney.

Debt-Ridden ITT Tech Students Grapple with Uncertain Futures

Kevin Jackson, age 34, graduated from ITT Tech's Newtown, Va., campus in 2007. He is paying off $40,000 in private and federal student loan debt.
Kevin Jackson, age 34, graduated from ITT Tech’s Newtown, Va., campus in 2007. He is paying off $40,000 in private and federal student loan debt.

The news that for-profit university chain ITT Tech would shutter 137 campuses across the country this week amidst a federal investigation into predatory lending, recruiting practices left thousands of students’ futures uncertain. They have big choices to make and, in many cases, few options.

Roughly 35,000 of the school’s 45,000 students are eligible to have their federal student loans discharged, which could total as much as a half billion dollars alone, according to the Department of Education. But if students decide to continue their education at a different school, they may disqualify themselves from loan forgiveness altogether.

“We may be underestimating the potential impact of this and students filing for forgiveness of loans,” said Mark Kantrowitz, publisher and vice president of strategy for Cappex.com, a college and scholarship comparison site. “This isn’t the last we’ll see of this situation.”

Students who were still enrolled when the campuses closed — or withdrew in the last 120 days — can apply for a federal loan discharge. Those who graduated or withdrew several months ago or have private student loans, however, are likely still on the hook for their debt. Their only recourse is to file a borrower’s defense claim, a difficult process that would require them to prove they were defrauded by ITT Tech in some way.

“In a properly regulated environment, we don’t have 45,000 students left holding the bag and 8,000 staff members becoming unemployed,” said Barmak Nassirian, director of federal relations and policy analysis at the American Association of State Colleges and Universities. “If there’s any silver lining, it’s that this operation won’t be able to pull in any new victims.”

ITT Tech officials were unavailable for comment; however, the company pushed back against regulators’ allegations in a statement this week.

“We had no intention prior to the receipt of the most recent sanctions of closing down despite the challenging regulatory environment that now threatens all proprietary higher education,” the statement says.

MagnifyMoney reached out to ITT Tech students to find out how they are moving forward in the wake of the school closure.

ITT Tech Tyler

Unmet expectations

Like many people who enroll at for-profit universities, for Kevin Jackson, age 34, it all started with a commercial.

When Jackson, who studied computing at ITT Tech’s Newtown, Va., campus between 2003 and 2007, saw the iconic ITT Tech commercial, the timing was perfect. He was looking for a nontraditional college experience and a program that would prime students for jobs in their field. The first three semesters went smoothly. The administrators seemed to care, and teachers even called to check on him when he had the flu and missed class.

By the fourth semester, however, he noticed teachers were leaving, and eventually the campus dean departed. New teachers didn’t seem to know the class material, he said. One particularly troubling incident occurred in 2003, halfway through his program. He was called to the financial aid office and thought his paperwork was incomplete. Instead, the financial aid counselor asked him to cosign a student loan for someone in his class. He balked.

Tyler McCormick, age 34, graduated from ITT Tech’s Bessemer, Ala., campus in June 2015. He’s considering filing bankruptcy to relieve part of his $70,000 in federal and private student debt.

“I knew I would have problems paying my own loans, and I wasn’t going to put his education in my hands,” Jackson said. “They spent 45 minutes trying to twist my arm but finally dropped it and asked another student. When I said ‘no,’ that’s when they began to treat me differently.”

Jackson enrolled with ambitions of working in IT support. He graduated with $40,000 worth of federal and private student loans and no offers of employment. In job interviews, employers would question his decision to attend ITT Tech, he said. He took administrative jobs over the next decade until he finally landed a job in 2014 with Xerox. He processes applications for new Medicaid enrollees.

“[The loans] are constantly weighing on me now,” he said. “They’ll allow you to pile forbearance on top of forbearance, but that interest builds up.”

Tyler McCormick, age 34, graduated from ITT Tech’s Bessemer, Ala., campus in June 2015. He’s considering filing bankruptcy to relieve part of his $70,000 in federal and private student debt.

About 100 miles away in Norfolk, 31-year-old Michael Ragsdale says he has little to show for the $20,000 in student loans that piled up during his years at ITT Tech.

Ragsdale enrolled in ITT Tech in 2005 when he attended a recruitment fair at a mall near campus. What drew him in was a sign that offered a free laptop. His computer had recently died, and he couldn’t afford a new one. He signed up to visit the campus that day.

“[The laptop] wasn’t free, of course. That cost is rolled into your student loans,” he said. “They suckered me in then, and it’s tough to relive it all now.”

Ragsdale, who uses a wheelchair, applied for the game design program but was put into network design classes, which he stuck with at the time. After a year, Ragsdale withdrew from the program and decided to attend a local community college. He later transferred to a four-year college. He now works for the college’s Residence Hall Association.

Professionally, he tries to pretend like ITT Tech never happened. “Like many ITT students, I now only put my community college and four-year college on my resume,” he said. “I don’t work in my field of study, but I’m happy where I am.”

Ragsdale hopes to help others like him find a good career despite ITT Tech.

“You can turn your life around,” he said. “The world doesn’t end with the collapse of ITT.”

ITT Tech Brandon

Waiting for answers

Brandon VanVorst, age 30, signed up for computer networking classes at ITT Tech’s Albany, N.Y., campus in 2009 because it offered him the option to continue working his full-time job in the restaurant industry and take both day and night classes. For the first few semesters, the arrangement worked. His employers knew he was taking classes, and his guidance counselors helped him find the best classes to fit his schedule.

After six months, however, staffing dropped, and the campus cut back on class offerings. The available classes didn’t fit VanVorst’s work schedule, but the guidance counselor signed him up anyway. To continue qualifying for federal financial aid, he had to take at least three classes. He failed several due to poor attendance, racking up $40,000 in student loan debt in the process.

Kandi Canales, age 46, was halfway through a two-year nursing program at ITT Tech's Norfolk, Va., campus when the school announced it was closing for good.
Kandi Canales, age 46, was halfway through a two-year nursing program at ITT Tech’s Norfolk, Va., campus when the school announced it was closing for good.

“They would sign me up for classes that I couldn’t take and wouldn’t work with me on flexibility,” he said. “The selling point of ITT is that adults can better their careers, but in reality, it doesn’t work for those who have real jobs.”

VanVorst put his federal loans in forbearance two months ago and filed a defense to repayment application in hopes that he can receive loan forgiveness. He’d like to be reimbursed for the classes that he couldn’t attend based on the scheduling, which shows up on his transcript as failures due to attendance.

“I do have a job in the IT world, and I’ve climbed the company chain because of my work ethic,” he said. “So many people have said they believe their degree is worthless, but to me, the person holding the piece of paper makes it worth it.”

Tyler McCormick, age 34, graduated from ITT Tech’s Bessemer, Ala., campus in June 2015. His $70,000 in federal and private student loans were in deferment through the end of August. Just days before ITT Tech announced its closing, McCormick received a bill for the entire amount of his loan. Now he’s seeing loan consolidation ads online for ITT Tech students.

“The vultures are trying to swoop in and take advantage of students,” he said. “I’m trying to take a breath and pause for a second.”

McCormick is contacting lawyers in his area for professional advice before making decisions and considering Chapter 7 bankruptcy as an option. He’s heard through several ITT Tech student groups on social media that lawyers have been reluctant to take cases because everything is still up in the air.

“I learned about computers, not bankruptcy,” he said. “I think we all need to step back and see what professional student loan experts say.”

ITT Tech Kandi

Finding a way forward

Kandi Canales, age 46, was shocked when she opened her email to find news about ITT Tech’s closing last Tuesday. Canales completed her first year in the nursing program at the Norfolk, Va., campus and planned to start the next quarter on Sept. 12. Instead, she no longer had a school to attend.

“I got sick to my stomach because I’ve worked very hard to get where I am,” she said. “I started crying and even threw up. It took me back to how I felt in 2011 when my 20-year marriage ended.”

She heard rumors about trouble at ITT Tech but hadn’t paid much attention to the media coverage. It was her psychology instructor who told her about the new student ban in late August.

“None of us thought anything about it, just that we wouldn’t have new students coming to the school,” she said. “But on Tuesday morning at 8 a.m., an email went out that ITT closed, effective immediately. That’s the only notice we received.”

Canales is one of many nursing students across the country struggling to figure out the next step. In the ITT Tech Warriors group on Facebook, several students are turning to their state nursing boards for permission to complete programs at other schools or sit for licensing exams. Canales scheduled an appointment to visit her local community college on Friday, take a placement exam, apply for new financial aid, and start again next semester.

“At my age, there is no option to sit back and say, ‘Woe is me.’ I have to keep moving forward,” Canales said. “I have to start from scratch all over again, but I’m going to get this degree.”

The post Debt-Ridden ITT Tech Students Grapple with Uncertain Futures appeared first on MagnifyMoney.

Credit Expert Confession: I’m Afraid of Retirement

retirement

I’m not easily rattled. When it comes to fear, I’m not shaken by spiders, horror movies or even unknown sounds on a dark city street. As a 30-something journalist, wife and mother, my greatest fear boils down to one word: retirement.

I’m not alone in my trepidation. A Transamerica Center for Retirement Studies survey revealed that 41% of Americans are doubtful about their ability to retire. For younger generations, the goal is more difficult than ever thanks to a new set of challenges.

Life Expectancy

According to the Center for Disease Control and Prevention, the current life expectancy for Americans is 78.8 years. Although living longer can be a comforting thought, it’s also financially complicated. A retiree who leaves the workforce at 65 reportedly needs approximately 80% of their final income to account for every year of retirement. Assuming you earn $100,000 per year, your savings should be — at minimum — $1.2 million. That certainly isn’t a subtle amount.

The Uncertainty of Social Security

While it’s likely that Social Security will exist in the decades ahead, don’t expect the payout to support your old age. A 32 year old earning $100,000 per year will only qualify for $1,830 in monthly benefits by the age of retirement, according to the Social Security Administration’s quick calculation tool. Unfortunately, this meager sum isn’t enough to sustain the average post-employment lifestyle.

Student Debt

My college days are long behind me, but the student loans that helped me fund my education are still very present in my life. Setting aside monthly funds for education debt can mean sacrificing retirement savings.

The Future for Children

Independence isn’t a given in today’s world. In fact, 32.1% of adults ages 18 to 34 live at home with their parents, according to a Pew Research study. The challenges of unemployment, a high cost of living and student loan debt have forced this generation back into the nest — whether they like it or not. Will circumstances change as my child ages, or can I look forward to a 30-year-old sleeping in my basement? I don’t know, but I worry about the answer and its impact on my retirement income.

3 Ways to Help You Address These Concerns

These concerns are common for people in every age group, and it begs the question, What is the solution? These risks aren’t likely to go away as time passes, but there are a few ways to minimize the consequences.

1. Save as Much as Possible

Time is a valuable asset when saving for retirement, and it’s never too soon to invest.

  • Pay Off Debt Sooner: Losing money to interest fees means you’ll have less to invest for the future. Talk to a financial planner about the best way to tackle debt and prioritize savings. A healthy balance is essential.
  • Max Out Your Retirement Contributions: Many companies match a percentage of their employees’ 401K contributions. Check with your employer and see if this is the case, and then take advantage of this as soon as you can. It’s a good idea to max out your matching contributions and consider upping your monthly investment as well. For example, suppose you currently set aside 10% of your income for retirement. Would a budget overhaul allow you to increase your savings to 15%? Think carefully about your daily spending choices and how they will impact your future.
  • Consider Tax Implications: Investment vehicles come in many forms, and taxation could save or cost you thousands of dollars. Strategize with your financial planner to determine the best way to invest.

2. Live Within (or Below) Your Means

The housing crash of 2008 taught us a valuable lesson about the dangers of overspending. It’s easy to risk your financial safety by splurging too often or borrowing too much. In reality, I feel it’s wise to keep 15% of your income in liquid savings and another 15% or more for retirement. Do you have the ability to funnel 30% of your income into savings? If not, perhaps it’s time to rethink your budget.

3. Focus on Credit Health

Retirement is one of many factors that benefits from credit health. A high score allows you to save money on variable and fixed interest rates, insurance premiums and even qualifies you for better employment. (You can see how your habits are affecting your credit by viewing two of your credit scores for free, updated each month, on Credit.com.)  

None of us can predict the challenges we’ll face as retirement nears. Although my doubts and fears are likely to rage well into my 60s, I’ve found that saving for those final years is the best way to prepare.

This story is an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its partners.

Image: Ridofranz

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