3 Warning Signs Your Student Debt Is an Emergency

For the first time since 2014, the interest rates on federal student loans are going up.

The average monthly student loan payment is more than $350. This can be a strain on anyone’s budget, but for some, it’s unsustainable and things can go downhill—fast.

If this sounds like an all-too-familiar struggle, you may have a student loan emergency on your hands. Here’s how to know for sure and what you can do to fix it.

3 Red Flags of a Student Debt Emergency

When your debt has become too much of a burden, you should prioritize paying off your student loan early. If you see any of the warning signs below, it may be time to take action.

1. You’re Uncomfortable with Your Balance

Douglas A. Boneparth, the president of Bone Fide Wealth and co-author of The Millennial Money Fix, emphasizes the fact that the numbers themselves, while important, aren’t the only part of the equation that matters.

In other words, it’s not just the balance you carry, but the way you feel about the balance. Some student loan borrowers, Boneparth continues, deal with high student loan balances but refuse to de-prioritize other goals. For example, even though Boneparth and his wife had six-figure debt, they also wanted to start a family—and that meant buying a home so they could get established in the right community for the next phase of their lives.

If you have a high balance but also other financial priorities, it’s okay to stick to your current payment plan so you can manage both. But if your balance makes you uncomfortable and even too scared to think about other priorities, then that’s something you should examine inwardly.

No one can tell you if your debt load is too high. It’s up to you to decide if you’re comfortable with your balance and repayment plan or if you want to accelerate your debt payoff.

2. Your Interest Rates Are in the Double Digits

Sometimes, the problem with student loans lies with the interest rate, not the balance. And if your interest rate is high, then it’s time to either get a lower rate or work on paying it off faster.

High interest rates are a game changer because they keep your monthly payments expensive and increase the total cost of your debt. The sooner you can lower your interest rate or pay the debt off, the more you can mitigate the problem.

If you refinance your student loans, you can reduce your interest rate and your monthly payments. In fact, the purpose of refinancing is to achieve a lower interest rate—and you’ll get new repayment terms at the same time.

When you choose your new terms, you can opt for lower monthly payments or a shorter repayment plan. So you can either take advantage of the flexibility of lower payments or use the shorter repayment plan as an impetus to get out of debt faster.

One thing to remember, though, is that refinancing federal student loans means buying them out with private student loans. You’ll no longer have access to benefits such as income-driven repayment plans, which could make it more difficult to meet your payments—bringing me to the next red flag.

3. You Can Barely Manage to Make Your Monthly Payments

Student loan debt might not be a problem if the bill is manageable, but if you have to choose between food and student loans, then it’s an emergency.

People with federal student loans can get help with an income-driven repayment plan, which caps your monthly payment at a certain percentage of your income. If that’s not enough, you can also turn to deferment or forbearance to temporarily stop or reduce your payments—options that are also sometimes available on private student loans.

If you decide to briefly pause or lower your payments, look for ways to improve your overall financial situation during the break. Deferment or forbearance can certainly help you when you’re running behind, but they can also keep you in debt for longer.

To increase your cash flow, consider taking on a roommate, working a side gig, or putting in a few extra hours of work when you can. If possible, consider making the switch to a more lucrative position in your field, in which case deferment or forbearance can offer you a little breathing room when you’re between jobs. And if you’re simply new to your career and know your income will grow as your experience does, then deferment or forbearance can give you some reprieve until your next pay raise.

There’s a Bright Side to Student Loan Debt

If you stay current on your loan payments, student debt can have its positives. For example, student debt can help your credit score when you consistently pay on time.

It contributes to your payment history to build, maintain, or repair your credit. So as long as you pay on time, there’s a bright side: you’re building a positive credit history as you go.

But whatever you do, don’t turn away from your debt because it scares you. It’s never fun to see a large balance or count the years left on a repayment plan, but ignoring the debt won’t make it go away. In fact, ignoring it and neglecting your payments can cause far greater problems if the loan goes into default, which can completely wreck your credit score.

As you chip away at your student loans, keep an eye on your credit score for free at Credit.com. You can also sign up for a detailed credit report card at no cost to you.

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How Student Loan Debt Affects Your Mental Health

Lenders can sell your loans whenever they want, so it’s important to have some safeguards in place. Here's what you need to know.

Feeling stressed about money isn’t uncommon, but for many people with student loans, the burden takes a toll physically and psychologically.

According to a Student Loan Hero survey of more than 1,000 student loan borrowers, respondents reported experiencing anxiety, insomnia, headaches, social isolation, and more as a result of their student loan debt.

How Student Loan Debt Stress Can Affect You

Starting your career with tens of thousands of dollars in student loan debt can make the goal of financial security seem unattainable. Among those who responded to the survey, 61% feared their worries over student debt were spiraling out of control.

Respondents also reported the following physical and psychological symptoms due to stress:

  • Social isolation (74%)
  • Headaches (72%)
  • Sleepless nights (65%)
  • Muscle tension (56%)
  • Apprehension or dread (55%)
  • Irritability (55%)
  • Restlessness (53%)
  • Depression (52%)
  • Tenseness (51%)
  • Nausea (50%)
  • Jumpiness (21%)

These debilitating effects can leave you feeling helpless about your student debt. What’s more, they can permeate your life and leave you less productive at work, more isolated from your family and friends, and less happy in general.

If you’ve felt any of these effects of student loan debt, here are three tips on how to get back on track.

1. Get On a Better Repayment Plan

If your student loan payments are pushing you to your limits, you might be able to find relief through an income-driven repayment plan or by refinancing your loans.

Income-Driven Repayment

If you have federal student loans, the Department of Education offers four income-driven repayment plans that can help lower your monthly payments to 10% to 20% of your discretionary income.

These plans extend your repayment term to up to 25 years, so you might end up paying more in interest in the long run, but you’ll get the relief you need now.

Keep in mind that private student loans don’t qualify for these repayment plans. If you have private loans, contact your lender to see if it offers relief for financial hardship.

Refinancing

Whether you have federal or private student loans, you might be able to refinance them to get a lower interest rate, a lower monthly payment, or both.

Several student loan refinancing companies offer low variable- and fixed-interest rates. But even if you don’t qualify for those rates, lenders also offer various repayment terms that can help you get more flexibility in determining your monthly payment.

For example, if you had $30,000 in student debt with a 6.00% APR and 10-year repayment term, your monthly payment would be $333. If you refinanced your loans with a 4.00% APR and the same repayment term, your payment would drop to $304. If you didn’t manage to get a lower interest rate but extended your repayment term to 15 years, your payment would still drop to $253.

Again, extending your repayment term could mean you’ll pay more interest over the life of the loan. But if your goal is to get relief now, it’s a viable short-term solution. And you can always refinance again in the future.

2. Get the Rest of Your Finances in Order

Massive student loan debt can be daunting enough. But if the problem is compounded by other financial woes, focusing on your student loans alone might not be enough.

For example, if you have bad credit, review your credit report to see if there are any areas you can start working on immediately. Delinquent accounts can damage your credit score the longer you’re late on payments. If you have any delinquent accounts, get them paid up to avoid worse consequences.

If things are really bad, consider working with a credit repair company to get the help you need and get back on track.

If you’re having trouble with student loan payments, create a budget to see if there are areas where you could cut back so you can manage your payments more easily.

To get started, calculate your income and monthly expenses. Then set goals for your monthly spending to make sure you can set aside extra cash for your student loans. Consider using a budgeting app to make the process go more smoothly.

Lastly, take stock of your other debt. If you have high-interest credit card debt, consider consolidating the debt with a low-interest personal loan or 0% balance transfer card. With less of your monthly payment going to interest, you’ll pay down your debt more quickly.

3. Seek Help if You Need It

If you’re suffering from the negative psychological effects of student loan debt, don’t rule out professional help. A financial therapist can help you put your student debt troubles into perspective and provide you with healthy ways to cope with your student debt and other financial issues.

The most important thing is that you have a plan. Using these tips can help you get started, but it’s up to you to set goals and follow through.

As you take steps to address your student debt and the psychological issues that come with it, you can develop the confidence to gain more control over your money—and your life.

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5 Things to Consider Before Paying Off Your Student Loan Debt

Credit cards are a super convenient financial tool, but they can often be confusing.

Paying off debt is often a top priority. Not only can too much debt hurt your credit score, it can impact your ability to achieve other important milestones in life, such as buying a home.

But when it comes to student loan debt, obsessing over repayment and devoting every spare penny to paying down balances can actually have negative consequences, particularly when you become so focused on repayment that you ignore all other elements of a sound personal financial plan.

“I’ve seen a number of individuals who have devoted unhealthy amounts of time and money towards paying down their student debt, people who are pinching every penny,” says Michael Lux, founder of The Student Loan Sherpa, a website focused on student loan education, strategy, and borrower advocacy. “You can’t just look at your student loan debt in isolation. You need to consider all of the things that paint the complete financial picture.”

As Lux indicated, there’s a variety of reasons why devoting too much of your hard-earned income to repaying student loans can be an unwise approach. Here are the top five.

1. It’s Not Sustainable in the Long Run

Denying yourself all of the day-to-day extras that you enjoy in order to pay off your student loan is not likely to work forever, says Lux.

“The key to success is making it sustainable for years,” he explains. “First, you have to know yourself. When you make a budget, you have to make a realistic budget. If you’re someone who loves the movies, you have to budget money to go to the movies.”

Another tactic that helps create a more balanced and manageable approach is to create milestone repayment goals for yourself and then reward yourself in small ways when attaining those goals, says Lux. For example, when a loan is half paid off, treat yourself to a fancy dinner. Or, when one loan is completely paid off, find another affordable and meaningful way to indulge in some positive reinforcement. 

2. Retirement Savings Should Also Be a Top Priority

Paying off student loan debt should not come at the expense of getting started on a retirement plan. But unfortunately for some, that’s exactly what’s happening.

“Many people put paying off student loans ahead of retirement saving,” says Ryan Farnung of New York–based GPS Financial. “So while they are saving some interest on student loans, and ultimately freeing up some monthly cash flow, they may also be . . . missing out on the potential to tap into the power of compounding interest.”

Carrying some student debt is all right, says Farnung, if it means using your money elsewhere in ways that will provide a greater long-term benefit.

3. Establishing an Emergency Fund Is Also an Important Part of a Healthy Financial Plan

A sound personal financial plan also includes establishing emergency savings accounts, ideally two separate accounts—one with six months of living expenses and a separate liquid emergency fund.

“Student loan rates are so low right now, under 4 or 4.5%,” says Oliver Lee, owner of Michigan-based The Strategic Planning Group. “So I always recommend my clients pay the very bare minimum. Then, create a six-month or one-year living expense shelter so if something goes wrong when you get out of school or you can’t find a job, you have the money you need. And once you have that, you also need a liquid emergency fund—in case the tires go bad on the car or the transmission goes. This account should have $1,000 to $3,000.”

Those who don’t have such emergency funds are likely to rack up costly credit card debt in order to pay for life’s unexpected expenses. And the interest on a credit card is almost always far more than the interest on a student loan.

“You could have your student loans completely paid off and yet have $10,000 to $15,000 in credit card debt because you had no emergency funds,” says Lee. Making savings a priority can help prevent unnecessary credit card debt.

4. Real Estate Is a Better Investment

Devoting too much money to student loan repayment often leads people to put off other investments that come with valuable rewards of their own. Home purchases are a prime example.

Real estate has historically given returns far above the interest rate of student loans, says Lyn Alden, founder of Lyn Alden Investment Strategy. So it’s beneficial to prioritize building these sorts of investment assets, even if it means keeping low-interest student loan debt around for a while. 

5. Missed Life Experiences

There are many variables to consider when deciding how much money to devote to student loan repayment, but according to Farnung, they revolve around one primary question: what are you giving up today in order to improve cash flow tomorrow?

It’s easy to measure how much it costs to carry student loans by determining how much interest you pay annually and what that looks like after taxes. But what’s far more difficult to measure is the experiences you may miss out on or the opportunities for real financial growth you may be overlooking when focusing solely on student loan repayment.

“If you’re postponing funding and maintaining an emergency fund, contributing to your retirement savings, getting married, buying a home, or any number of other life goals and aspirations, you need to take a step back and really think about what the interest on your student loans is costing you,” says Farnung.

To learn more about smart strategies for managing debt, visit our Managing Debt Learning Center.

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Earn Frequent Flyer Miles for Refinancing Your Student Loans? You Bet

Get a lower rate plus miles and get flying.

It used to be that rewards points and frequent flyer miles were primarily associated with credit cards. But those days went the way of the dinosaur long ago, and one of the most recent examples of that fact comes in the form of the new partnership between JetBlue and SoFi, a direct lender best known for student loan refinancing.

Members of JetBlue’s TrueBlue program can now earn one TrueBlue point for every $2 of student loan debt refinanced with SoFi. The offer, which caps at 50,000 points and is only available to new SoFi customers, was described by JetBlue as a first of its kind in the airline industry.

While airlines have long been creatively partnering with mortgage lenders, online retailers and others, the student loan market has remained largely untapped.

But with record levels of student loan debt, (the average 2016 graduate has about $37,172 in debt) and millennials putting off travel in some cases because of that debt, this partnership addresses a growing market opportunity.

“Members of the global legacy programs like United and American have been able to earn points for mortgages and other loans for decades, but their rosters of partners do not specifically include an education loan specialist like SoFi,” said Kate Hogenson, who designed loyalty programs for United Airlines and now works as a strategic loyalty consultant at Kobie Marketing. “Airlines have flirted with college and young adult programs in years past, but they’ve been shuttered; United closed down their College Plus program in 2010.”

For its part, JetBlue has been dipping its toe in the financial product space more and more over the past year, beginning with offering points for personal loans through Best Egg. And when looking at the demographics of their customers, moving into the student loan arena made sense, said JetBlue’s Director of Loyalty, Scott Resnick.

“We see this as a great opportunity for customers who have student loans to refinance them while doing something that benefits them in another part of their life,” said Resnick. “Any time there’s an opportunity for customers to earn points doing something they would be doing otherwise in life, there’s natural tendency to look for partnerships there.”

The other part of your life that benefits of course, is your travel habit. Here’s what you need to know about the offer.

The Fine Print

The program doesn’t have a lot of hidden details. There are no blackout dates for using the miles earned through the refinancing offer, and no expiration date either.

In addition, there’s no application or origination fee for refinancing through SoFi, officials said.

“You can apply for free in fewer than 20 minutes,” said SoFi’s Catesby Perrin, vice-president of business development. “Our borrowers save an average of $22,000 over the life of their loan.”

SoFi offers various refinancing options, including both fixed and variable rate interest and loan terms of five, seven, 10, 15 and 20 years.

The Drawbacks

There seem to be few downsides to the JetBlue offer. But there are some basic considerations to keep in mind.

“JetBlue’s route system is limited to the U.S., the Caribbean, and select destinations in Latin America,” said Hogenson. “You have to be in a major JetBlue city for this to make sense.”

Hogenson suggested visiting JetBlue’s website and researching the number of points needed to travel to a city you’re interested in visiting, to help determine whether this offer makes sense for you. And while perusing the site, spend some time reviewing the route you may have to travel on JetBlue to get to where you want to go.

“To get from New York to Las Vegas, you might find yourself routed through Fort Lauderdale,” she said.

Should You Refinance Student Loan Debt in Pursuit of Frequent Flyer Miles?

Obviously, you should never make student loan refinancing decisions based solely on earning frequent flyer miles. A serious financial decision like this should still be approached with the same amount of research, caution and common sense you would use otherwise.

“You should make your refinancing decision based on saving the most money, meaning finding the lowest interest rate,” said Brandon Yahn, founder of the website Student Loans Guy. “Additional perks like miles are great, but shouldn’t be the driving factor in which lender you ultimately choose, unless all else is equal.”

Put another way, student borrowers should look beyond the sparkle of free flights and focus on the student loan consolidation product itself, said Hogenson.

Qualifying for Refinancing

One last important point to keep in mind, in order to qualify for any refinancing program, it’s critical that you have a good credit score, have a history of paying your bills on time and have a solid, steady income. If you don’t know where your credit stands, you can get your two free credit scores on Credit.com.

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Meet the Man Who Makes $600 a Month Selling Crickets

When Jeff Neal’s wife told him she wanted to quit her job to stay at home with their kids, he had to think about how to make one income work.

When Jeff Neal’s wife told him she wanted to quit her job to stay at home with their kids, he had to think about how to make one income work. With over $21,000 in student loans, there wasn’t much extra money lying around. Losing another income stream would be difficult.

But rather than give up hope, Neal did something no one expected. He launched a side business that helped bring in extra money: selling crickets online.

Yes, you heard that right. Crickets.

Now, Neal makes $600 a month selling bugs online at The Critter Depot, which helps him pay off his debt. Read on to learn more about this odd side hustle and how Neal has turned it into a steady income stream.

Searching for a Side Hustle

Neal graduated from Temple University and got a job as a project manager. While he made a good salary, he had student loan debt and a growing family. When his wife decided she wanted to stay home with the kids, Neal knew he had to make changes.

“My wife wanted to stay home, so I had to take full responsibility as the sole provider,” he says.

Since his full-time job involves e-commerce, he focused his side-hustle search on online jobs. After doing extensive research, he decided to put all of his efforts on one specific niche.

The area that he identified was in the pet industry; reptile and exotic animal owners need live crickets to feed their pets, but getting them can be difficult — and expensive. So, Neal’s site caters to pet owners, selling crickets of various sizes in bulk.

But before you rush out and buy tanks and crickets to replicate Neal’s success, you should know his approach is even more interesting. He actually doesn’t deal with the crickets at all. Instead, his business is a drop shipping company.

What Is Drop Shipping?

Drop shipping is a business model where the store doesn’t stock any of the items it sells. Instead, when a customer purchases a product, the drop shipper works with a manufacturer — or in this case, a cricket supplier — to fulfill the order. The drop shipper never comes into contact with the product, so wrangling crickets isn’t part of Neal’s day.

“I don’t know anything about raising crickets,” he admits. “They have short life spans and unique nutritional and environmental needs. It’s a lot of work that takes a lot of knowledge. When I set up my business, I found someone who breeds crickets. He takes care of them and ships them; I just handle the orders.”

For customers, drop shipping is a seamless process, whether it’s through Amazon or a private site. Most of the time, you don’t know when you’re buying from a drop shipper. Once your order is placed, the drop shipper works with the supplier to place the order, and you receive the item like you normally would.

Drop shipping can be a mutually beneficial relationship between the seller and supplier. In Neal’s case, he has the marketing expertise and skills to build a successful website and business. That gets the cricket farmer more exposure and more orders than he would get on his own. Neal estimates that he generates about $3,000 in sales each month from The Critter Depot and his cut is $600.

Previously, Neal primarily sold crickets on Amazon. But meeting Amazon’s strict standards is hard when you’re shipping live insects. He ended up taking his sales to just his website, which requires more work for him each day to build traffic.

His new income stream allows him to take advantage of other opportunities, too. He recently purchased the site Jason Coupon King, which generates another $700 a month in revenue.

Balancing a Side Gig With Life & Work

While Neal’s side hustle is successful, he has to balance his work with his full-time job and his family. But that’s why he says drop shipping is a great option. It gives him the flexibility he needs while still allowing him to earn extra money.

“I don’t have a television, so when I come home from work, I just spend time playing with the kids and catching up with my wife,” says Neal. “Once they’re in bed, I work on optimizing my websites, contributing to forums and building links to my sites.”

Neal says he spends an hour or two a day after work on his side hustle and that his business is still growing. The extra income is substantial enough to help him pay off his student loans early and give his family more wiggle room in their monthly budget. (You can keep tabs on your own finances by viewing two of your credit scores for free on Credit.com.)

Making Extra Money

While selling crickets might not be for you, Neal’s story is just another example of the many ways you can make money on the side. If you’re struggling to make ends meet, or need more income to pay down debt or boost your emergency fund, launching a side hustle can be the right approach.

Photo courtesy of Jeff Neal 

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How to Take a Vacation When You’re Juggling Student Loan Debt

With a little discipline and money management, you can travel responsibly.

Are your student loans keeping you from taking a much-needed vacation? While many put off planning a trip to pay down their loans, others find ways to do both. Student loans don’t need to feel like handcuffs restricting you from the excitement of traveling to a new or favorite destination. With a little discipline and money management, you can travel responsibly. Here’s how.

1. Live Within Your Means

While it’s always advisable to live within your means, taking on an extra-frugal mentality will not only help you save money for your vacation but also help you put more money toward your student loan debt. Living within your means starts with creating a budget.

Many dislike the word budget, or think it’s an impossible task. However, you may be surprised how much cash you free up when you limit your expenses to a set amount and cut unnecessary spending. When you have an idea of where your money is going, you see where you can make cutbacks. (Here are 50 things to stop wasting your money on.) Even a few cutbacks can free up enough cash for your vacation.

2. Start a Vacation Fund

If you don’t plan on traveling anytime soon, you may want to open a vacation fund where you put money aside each month. If you’re in a position to set money aside, even a small contribution a month will add up in no time. You may want to consider making automatic transfers so you’re not tempted to spend the money elsewhere. Just remember, saving money in an emergency fund (and for retirement) should take precedent.

3. Spread Out Purchases

For those looking to book flight and hotel accommodations with their credit cards, you may want to consider spreading out these purchases. Typically, flights and hotels will be the costlier part of your vacation. When you book these together, you’re making it difficult to pay back in full — add in your student loans and monthly bills, and this may break your budget. By planning ahead and spreading out these large vacation expenses, you’ll make your monthly credit card and loan payments a bit easier.

4. ‘There’s an App for That!’

If your travel and hotel accommodations eat up too much of your vacation budget, you may want to consider other options. Sites such as Airbnb let you rent out homes, apartments or even rooms, often for a lower price than a hotel. When traveling by air, consider downloading helpful apps like Hopper. The Hopper app predicts when flights to a specific location will be cheapest and notifies travelers when they should consider purchasing tickets.

5. Pick Up a Side Gig

A side hustle can be a great way to help supplement your current income. This extra cash can help pay for your vacation while helping you keep up with student loan payments. Between babysitting, tutoring, freelance writing or shifts at your local gym, there are endless possibilities. Consider finding something that interests you so it doesn’t feel too much like extra work.

6. Opt for a Staycation

While a staycation may not sound as appealing as an actual vacation, sometimes a trip around your own region can end up being surprisingly relaxing or adventurous. Consider researching what your own area has to offer. Between beaches, hiking trails and museums, you may find a staycation is just what you need to forget about those student loans.

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Moving to One of These 9 States Could Save You Thousands

Should you move to one of the nine states with no income tax? Here's how to decide.

Each year, taxpayers pay trillions in income taxes. In fact, the government collected approximately $3 trillion last year. If you’re like most taxpayers, you owe both federal and state taxes, which means an even bigger chunk of your paycheck goes to the government.

When you’re carrying debt — whether it’s student loans or a credit card balance — it can be frustrating to see so much of your hard-earned money leave your hands. That’s why many people consider moving somewhere with no state income tax.

According to a new study by Student Loan Hero, taxpayers could save an average of $1,977 a year by moving to a state with no income tax. But before you pack your bags, find out what factors you should keep in mind.

States Without Income Taxes

States that collect income taxes use them to fund essential programs and services for residents. More than 50% of state tax revenues go toward education and healthcare initiatives, such as Medicaid. State agencies also use collected income taxes to pay for services, including transportation and law enforcement.

Residents in most of the country must pay federal and state income taxes. However, nine states don’t levy any state income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. Because you don’t have to pay state taxes, you can get a significant yearly savings.

How Much Could You Save?

How much you could save by moving to a state with no income tax depends on your income bracket and where you live now. For example, Oregon workers have a state income tax of 7.75%, the highest rate of any state in the country. Someone earning the median salary in the state — $49,710 — would pay $3,851 in addition to their federal taxes.

Moving to another state to save that kind of cash can be tempting. So tempting, in fact, that 30% of survey respondents would move to a state with no income tax to save money. Moreover, 38% of respondents said they’d use their tax savings to accelerate their student loan debt repayment. (To see how student loans are impacting your credit, check out your free credit report snapshot on Credit.com..)

Using Your Savings for Debt Repayment

The savings you get from not paying state taxes can save you even more money in the long run. Using that money to repay your loan helps you pay off the loans faster, cutting down on interest charges. It can also save you thousands over the life of your loan.

For example, say you had $35,000 in student loans with an interest rate of 6.31% (the current rate for Grad PLUS loans) and a minimum monthly payment of $400 a month. Now, take the average $1,977 you would save by moving to a state without income tax and divide it up over 12 months. That would give you an extra $165 in your pocket each month. If you put that additional amount toward your student loans, you could pay off your debt about three and a half years early and save more than $4,500 in interest.

Other Costs

Before packing up and moving to a new state, consider other costs that may eat into your savings. Between putting down a deposit on a new apartment, moving your belongings and registering your vehicle in a new state, you can spend thousands.

In addition, some states with no income tax make up their revenue through other means, such as sales tax. Florida has a 6% sales tax on goods and services, including essentials such as clothing or food. If you’re not used to paying taxes on groceries, the added sales tax can put a dent in your budget. That’s why it’s important to compare the cost of living when deciding if it’s worth it to move to a new state.

Moving to Save Money

Depending on your circumstances, moving to a state with no income tax can give you a substantial savings. You can use that money to pay off your student loans faster, boost your emergency fund or catch up on retirement savings. But before you make the leap, be sure you understand the added expenses of moving so your decision is financially sound.

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How to Build Wealth After Graduation

You've just graduated college and you'd like to be wealthy someday. Get started now.

You’ve just graduated college and you’d like to be wealthy someday. Problem is, you have no clue how to make it happen. First, you’re broke and may be drowning in student loans. Second, no matter what the experts might say, it feels like there are tons of fellow grads fighting over a handful of jobs. Third, though you don’t mind hard work, you don’t want wealth to come at the expense of a social life, a family and the chance to do some good in the world. Should you give up the dream and content yourself with an average life?

Not at all. It’s completely possible to become a multimillionaire before you retire. Right now you have an advantage you never will again: youth.

Many young people have no concept of how simple it is to build wealth. Not easy, because hard work and self-discipline are required, but simple. Any intelligent person with an ordinary career trajectory can do it. But now is the time to get started. With every year that passes, your window of opportunity closes a little more. Sounds good, right?

Understanding the Astonishing Power of Compound Interest

If you take a penny and double it every day for a month, how much would you end up with? A hundred dollars? A thousand dollars? How about a million dollars? Not even close. Starting with a single penny, if you double it every day for 31 days, you end up with $21,474,836.48. That’s compound interest. That’s how you get rich. And that’s why, when it comes to wealth building, your age gives you a major advantage.

Starting with your first job out of college, you can try investing 15% off the top. By the time you retire, you’ll be a multimillionaire. Yes, you’ve heard the “pay yourself first” principle before. But you probably don’t realize just how wealthy it can make you. Let’s say you start making an average graduate’s starting income (which, according to The National Association of Colleges and Employers, is $52,569 a year, as of 2016). Assuming you are good at your job and get consistent annual raises of 4%, you’d be making $77,815 a year 10 years from now, and $252,385 in 40 years. Not only will you be making more money, but you will also be able to save more money. If you consistently (and that means every year) deposit 15% of your income into investments, compound interest will begin to accumulate like you wouldn’t believe. Assuming a return of 10% a year, you’d be worth more than $5.4 million when you are ready to retire. (Assuming, of course, that you put this money aside and aren’t spending it on things you shouldn’t be.)

Where Should My Money Go?

First, pay the government because things can get troubling if you don’t. Second, pay yourself. Put the aforementioned 15% of your income in some sort of investment. Third, pay the interest on your debts, such as credit cards, student loans, car loan, etc. Keeping debt low is critical. (Your credit utilization level — the amount of debt you carry in relation to your overall credit — is a major influence on your credit scores. You can find out where yours stand by viewing two of your scores for free on Credit.com.) Fourth, pay for non-critical parts of your life like entertainment, travel and toys.

Don’t succumb to the temptation to pay for prestige. A big part of being able to save the requisite 15% involves not blowing your paycheck on expensive cars, high-dollar meals and trendy couture. But that needn’t mean depriving yourself. Beautiful, comfortable clothes are not cheap, but they don’t have to cost a fortune. You can buy a great pair of slacks for $150 or you can spend 10 times that amount. The difference will be the label on the waistband. The point is this: The best material things in life are affordable. They are not cheap (quality never is), but if you buy them selectively and use them with care, you can enjoy a life as materially rich as Mark Zuckerberg on an income that wouldn’t get him through lunch.

Landing That First Job

Of course, this advice hinges on your finding a decent-paying first job. (To start, you can read these 50 things recent grads can do to score their first job.) Depending on where you’re applying and your prospective industry, you may also want to consider the following ideas during the application process.

  • Forget the standard resume-cover letter program. Instead, write a direct marketing letter that lets your prospective employer know you understand what their problems are and that you have the solutions.
  • Call the office of your prospective future boss and ask for a short, informational interview. This is a great way to get in that locked door and find out a lot of personal and professional information about your prospect.
  • If you feel you might not get the job you are seeking, suggest that you can do a project for the company on a freelance basis, perhaps for free.

Right now, you may think becoming a millionaire is not a laudable goal. You might say money doesn’t matter. Well, it may not matter now, but it will when your kids are applying to colleges or when you’re approaching retirement. Financial independence frees you to live a rich, fulfilling, authentic life. And that’s the true definition of wealth.

This article originally appeared on The Dollar Stretcher.

Image: gradyreese

The post How to Build Wealth After Graduation appeared first on Credit.com.

MagnifyMoney 2017 Survey of Recent College Graduates

An estimated 1.8 million college students will make up the U.S. class of 2017. The first few years — even the first few months — after college can feel like a financial land mine as graduates figure out how to manage their finances independently.

To give this graduating class a leg up, MagnifyMoney asked 1,000 recent college graduates to tell us what they wish they had done differently in those crucial years after graduation.

Among the most popular regrets were not being careful about debt/missing debt payments (48%) and not building their credit score up sooner (40%). One in five graduates also said they wished they had been better about saving money.

Missing a credit card or student loan payment even once can result in lasting credit score damage, and a lower credit score can make it difficult to get approved for new credit down the road.

Looking closely at the results of our survey, we can understand why so many college graduates may be struggling to stay on top of their bills — especially those who graduated with student loan debt.

Student Debt: A gateway to credit card debt

The vast majority of our survey respondents (61%) said they left school with student loan debt. On average, graduates with student loan debt said they carried $35,073.

We found some troubling trends among those with student loan debt. Not only are they more likely to say that they did not feel like they were better off their parents at their age, but they are also more likely to carry large loads of credit card debt.

More than half (58%) of graduates without student loan debt say they believe they are better off now than their parents were at their age. Graduates with student loans were less likely to agree with that statement. Half (52%) of college graduates with student loans say they are better off than their parents were at their age.

According to our survey, college graduates who left school with student loan debt were more likely to wind up in credit card debt down the road, as well.

  • 59% of all college graduates reported having credit card debt.
  • But 67% of recent grads with student loan debt report having credit card debt, versus 44% of those without student loans.
  • 20% of recent grads with student loans report credit card debt of $10,000 or more, almost twice the rate of those without student loans (11%).
  • And 24% of recent grads with $50,000 or more in student loans report having $10,000 or more of credit card debt.

2 in 5 will need longer than 10 years to pay off their student loans

A significant percentage of student loan borrowers expect to take longer than the standard 10 year repayment timeframe to pay off their loans.

  • 40% of recent grads with student loans anticipate that they’ll need more than 10 years to repay their student loans. For context, the standard repayment period for federal student loans is 10 years.
  • Among the grads who report more than $50,000 in debt, just 26% say they will pay off loans within 10 years. And 41% believe they will take more than 20 years, or never pay off their student loan debt.
  • Among all student loan borrowers, 7% said they will ‘never’ be able to pay off all the debt.

Optimism for the future

One thing graduates seem to have in common — whether they carried student debt or not — is a shared sense of optimism for their futures.

  • 65% of grads without student loans feel they will be better off than their parents in the future.
  • 64% of those with student loan debt also feel they will be better off than their parents.

Even among recent graduates with the burden of $50,000 or more in debt, 60% believe they will be better off financially than their parents in the future.

Those with Master’s degrees are most confident, with 68% saying they will be better off than their parents, versus 64% of Associate’s and Bachelor’s degree recipients.

Top 3 tips to manage debt after college

Know your options. If you are struggling to pay down your student loan debt, find out if you qualify for flexible repayment options like income-driven repayment plans. Students with high-interest student loan debt can consider refinancing to lock in a lower interest rate.  Here are the top 19 places to refinance student debt in 2017.

Stay on top of your payments. Student loans will be reported on your credit report after you graduate. By making on-time student loan payments, you are already taking one of the most powerful steps toward building a solid credit score. If you fear you will miss a payment, contact your loan servicer right away. Even one missed payment can derail your credit score.

Build your credit score strategically. A 2014 study by MagnifyMoney found that the average college student will face credit card APRs of 21.4%. Carrying a balance with an APR that high can quickly lead down a long road of unmanageable credit debt. A simple way to build credit is to take out a credit card, charge small amounts each month and pay it off in full. To avoid relying on credit card debt, set money aside from your paycheck for emergencies.

Methodology

MagnifyMoney conducted a national online survey of 1,000 U.S. residents with college degrees who reported completing their most recent degree within the last 5 years via Pollfish from April 26 – 30, 2017.

The post MagnifyMoney 2017 Survey of Recent College Graduates appeared first on MagnifyMoney.

10 Ways to Reduce Your Student Loan Debt

Free yourself from student loan debt faster with these tips.

Student loans are an enormous economic burden for Americans, coming in right behind mortgages as the largest kind of consumer debt. And although student debt is often used as a political talking point, you can rest assured that for now, your student loans aren’t going away.

There are, however, some ways you can reduce the burden of your student loan debt by pursuing better loan terms, shorter repayment periods or lower monthly payments. Here are 10 potential ways to improve your student debt scenario:

1. Ask for Employer Assistance

Government employers have long offered loan repayment assistance or tuition reimbursement programs. But more private companies are now initiating student loan assistance policies, in part to attract millennial talent.

If you’re hunting for a job, pay attention to the benefits offered by potential employers. Some offer student loan assistance as part of their benefits package. If you’re already employed, double check with your current employer on the possibility you’re missing out on a valuable policy.

2. Consolidate Your Loans

Most federal student loans are eligible for consolidation, a process in which multiple student loans are combined into one loan. The interest rate is then calculated using a weighted average of the collective interest rates. While this won’t necessarily save you money on interest, it can simplify your repayment by consolidating them into one bill.

Consolidation could alter your monthly payments by changing your repayment period. Choosing a longer repayment period would lower your monthly payment but increase the overall amount of money you repay. Choosing a 10-year standard repayment plan would result in the highest possible monthly payment but minimizes the time and money required to pay off your loan.

You may also become eligible for alternative repayment plans and potential loan forgiveness that may have been unavailable before consolidation (more on those in a minute).

3. Pay Ahead of Time

Some federal student loans, like Perkins Loans, do not accrue interest while you’re enrolled in school and during the grace period after graduation. If you start making payments before interest kicks in, you can reduce the overall interest you’ll pay. And while it may be extremely difficult to do, paying the balance in full ahead of time will render your loan interest-free.

4. Pay Extra

In the same vein, paying down the principle on your loan by paying extra each month will reduce your balance faster and save you money.

“I began a very aggressive savings fund to pay down my loans,” said Katrina McGhee, Life and Budget Coach at Katrina McGhee, LLC. “Pre-paying your principle on a loan is a great approach if you are able to make it work for you … Reducing your balance saves you a lot of interest in the long run.”

If you have multiple loans to pay, you may want to pay more money toward your higher-interest loans first to get them out of the way.

5. Apply for Public Service Loan Forgiveness

If you work for a government organization or a qualifying not-for-profit, you may be eligible for public service loan forgiveness. You will have to be employed full time and have the right kind of loans and payment type. Under this program, your student loan will be forgiven after a certain amount of payments. (You can read more about how to get student loan forgiveness here.)

“This plan enables those in public service … to potentially get forgiveness after 120 qualifying payments,” said Robert Farrington, Founder of TheCollegeInvestor.com. “There are restrictions, so educate yourself, but that program can get you tax-free loan forgiveness after essentially 10 years.”

6. Sign Up for Auto Pay

You could get a small reduction in your loan interest rate by signing up for online statements and electronic payments, where your lenders will automatically deduct your monthly payment from your checking or savings account.

“Many lenders and loan servicers will offer an interest rate discount of 0.25% for signing up for direct debit and/or online statements. This is an easy way to save a little on interest over the course of your loan,” said Farrington.

7. Roll Student Loan Into Your HELOC

If you have a mortgage with some available equity, you could roll your student loan into your home equity line of credit (HELOC). This could reduce your interest rate and result in tax benefits.

“With $40,000 left to pay off on my MBA loan, I decided to roll my student loan into my HELOC,” said McGhee. “This had two big benefits: it reduced my interest rate from 8% down to just 3% and it also meant any interest I paid was now tax deductible.” (Student loan interest is also tax deductible, as long as your income is below a certain threshold.)

8. Pick a Different Repayment Plan

There are many repayment plans available to borrowers, including income-based repayment (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE) and income-contingent repayment (ICR). These plans will adjust your payment amount based on your income. Here’s what you need to know about some drawbacks to some income-based repayment plans.

“There are several different types of plans … but they all cap your monthly payment at a certain percentage of your discretionary income,” said Farrington.

There are also repayment plans that will adjust the repayment period (for instance, extend the lifetime of the loan) or restructure your payments (for instance, increase monthly payments over time).

Federal borrowers can change repayment plans at any time for free.

9. Apply for Deferment or Forbearance

Student loan deferments and forbearance let you temporarily pause or reduce your monthly payments. Deferment stops interest from accruing on certain types of loans during the deferment period, while loans in forbearance always continue to accrue interest.

You’ll have to work directly with your loan servicer to access these options. There are strict eligibility requirements, but they are wide ranging and could include financial hardship, unemployment, changing jobs, being deployed in the military or having medical expenses. Here’s a quick rundown on how deferment or forbearance can affect your credit.

10. Refinance Your Loan

You can refinance your federal student loans with a private lender to get a better interest rate, which could save you thousands of dollars in interest in the long run. To get the best interest rate, you’ll need good credit. Don’t know where your credit stands? You can check using Credit.com’s absolutely free credit report summary.

You’ll also probably want stable employment and financial security. That’s because refinancing to a private lender eliminates the access to federal repayment options like income-based repayment, deferment or forbearance and public service loan forgiveness. To give up these options, you should be reasonably confident you won’t lose your job or need access to alternative plans.

Here are some tips and guidance for refinancing your student loans.

Image: Jacob Wackerhausen

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