3 Reasons to File Your FAFSA Right Now

It’s October, and that means college-bound families can start applying for financial aid for the 2018-19 school year. the Free Application for Federal Student Aid, or FAFSA, opened Oct. 1.

Technically, families have until next summer — June 30, 2018 — to submit their FAFSA for 2018-19. But experts recommend filing as soon as possible in order to maximize the amount of aid students can receive. That’s because state, federal and school funding for various types of financial aid is often limited, and can run out.

Don’t leave money on the table. A recent study by social sciences researcher, Michael S. Kofoed at the United States West Point Military Academy found that each year, students who do not file miss out on as much as $9,741.05 in federal grant and student loan money, aggregating to some $24 billion annually.

“To get the most aid, you’re going to want to make sure you are doing it early,” says Jasmine Hicks, national field director with Young Invincibles, a nonprofit advocacy group for young adults.  Hicks has trained college-bound families on what they need to successfully fill out and submit the FAFSA.

Here are a few tips to help you file your FAFSA for the maximum amount of aid available to you.

1) Your state and college FAFSA deadlines might be even earlier than the federal cutoff.

Adding to your list of dates to remember, states and schools have their own FAFSA filing deadlines for grants and scholarships.

For example, for Delaware students to be eligible for state scholarships and grants for  2018-19, they must file their FAFSA by April 15, 2018. But the submission deadline for students who wish to be considered for Delaware State University scholarships and grants is even earlier, on March 15, 2018.

You can check here to see your state’s filing deadline. Be sure to enter your state of legal residence and the school year for which you’re applying for aid to view the cutoff date for your state. Be sure to double-check the deadline, as it could be earlier than the federal filing deadline and some states have different deadlines for different programs.

For example, Alaska’s Education Grant asks applicants to file the financial aid application as early as possible after the Oct 1 open date, since awards are made until the fund is depleted.

But the “official” FAFSA submission deadline for the scholarship is the same as the federal one.

Hicks says families should check a school’s website to check and see if there is a different filing deadline date than June 30, 2018. Some schools may require students to file earlier than June 30 to be considered for institutional scholarships and grants.

2)  The FAFSA is the key to unlocking more than just need-based aid.

If you don’t file the FAFSA, you might also remove yourself from the pool of eligible recipients for state and institutional aid, as well — even if they aren’t income-based. Many aid offerings require a FAFSA.

Here’s a list of all the federal aid for which you need to complete a FAFSA to be eligible:

  • Federal direct student loan
  • Federal work-study program
  • Federal PLUS loan (for parents)
  • Federal PELL grant
  • Federal Supplemental Educational Opportunity Grant (FSEOG)
  • Teacher Education Assistance for College and Higher Education (TEACH) Grant
  • Iraq and Afghanistan Service Grant

And that’s just federal aid. As we mentioned before, states and schools may use information from your FAFSA to determine if they will award you merit-based grants and scholarships. And they may have their own submission deadlines.

3) Financial aid money may run out.

Students may think they have tons of time to submit their application, but, if you wait to file, you may miss out on “free money” due to limited resources. Let’s put it another way: If the funds run out before you submit your FAFSA form, you could receive less money compared with what you would have gotten had you filed earlier — or you might get nothing at all.

If you know you will need scholarship or grant money to fund your education, you should make filing the FAFSA early your first priority. “There’s really no reason to wait,” says Hicks.

Fortunately, it’s become easier for families to tackle the FAFSA.  The Department of Education moved the application’s from January to October, beginning with the 2017 graduating high school class. Prior to the rule change, families could not submit their FAFSA until January for students attending college in the fall. The rule change allows families to submit the FAFSA form earlier, and use older tax information to fill out the form so they are able to meet early deadlines for financial aid.

Students can now use family tax information dating back as far as two years, so applicants no longer have to wait to file until their parents or guardians file their taxes for the current tax year.

On top of that, FAFSA forms now include a new  IRS data retrieval tool, which will automatically pull in your parent’s tax information from two years ago, so you don’t have to shuffle through a stack of papers looking for letters and numbers corresponding to the information you need to input.

Where to get help to finish up your FAFSA

The tax information may be easy to pull in electronically, but the FAFSA has more than 100 questions and isn’t the easiest form to decipher overall.

“Students often think of the FAFSA as a huge and daunting task,” says Hicks. “They don’t feel like they are able to do it or equipped to do it.”

Get help if you aren’t confident in filling out all the information on your own, so you don’t put off filing the FAFSA any longer. There may also be follow-up requests, like income verification, that, if overlooked or left incomplete, could delay your receiving all or part of your financial aid award.

Up to  40 percent of college-bound students who apply and are accepted to college fall prey to a phenomenon called ‘summer melt.’ They never make to campus their freshman year because of mistakes that trip them up in the process. Many of the mistakes have to do with the financial aid process and can be avoided if you get help early on.

Your high school guidance or college counselor may be able to assist you with your application.

If you feel you need more assistance than your counselor can provide, look to organizations or access programs that focus on helping students complete the forms required to give financial aid, like the College Goal Sunday Program hosted by the National College Action Network, or Reach4Success.

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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 To Talk To Your Kids About Student Loans

Student loans are much more of a reality for kids today than they were for their parents and other previous generations of college students. The cost of education has risen so quickly that in 2014 almost seven out of 10 students graduating college had loan debt—nearly $29,000 each, on average.

This means discussing student loans needs to be a key part of family discussions on college. The earlier these talks happen, the better. I know this first-hand, as my eldest daughter is a college freshman this year.

Affordability is key

The conversation about how student loans work can include talks about what your family can afford in terms of college. At one end, a family may decide that they will find a way to pay for the best colleges to which their college-bound student is admitted—no holds barred. Even if both parents have to get second jobs, they will pay for their child to attend the most prestigious college to which he or she is accepted.

In our family, the chat was quite different: We told our daughter what we could afford and invited her to apply to colleges that were reasonably within our budget range. There was no sense in having her look for her “College Charming” and then tell her we couldn’t afford it.

We also talked early—during her sophomore and junior years in high school— about student loans and the importance of limiting them as much as possible. Why? Heavy student loan debt can be a tremendous burden on new college graduates. It can limit their choices of jobs because they often must earn enough to pay off their debt, especially if they can’t count on financial help from parents or other family members. In the long run, significant student loan debt, like any other debt, might also delay or limit the borrower’s ability to buy a home, start a business, or even begin a family.

How much is too much?

Syndicated author and radio talk show host Clark Howard suggests students not take out more in student loans (in total over four years of college) than the entry-level salary they can expect to earn their first year after college. If the student expects to earn $30,000 in their first job, that number should be the ideal student loan limit in total. (College students can estimate entry-level wages in their field with online tools such as salary.com.) Of course, seeking advice from financial aid consultants might be helpful (if pricey), and many colleges offer financial aid resources.

Learning about loans

The U.S. Department of Education requires students to enroll in online counseling when they first take out federal student loans. Sitting through it with your student may provide opportunities to help explain the concepts covered, such as accruing interest and repayment rules.

The repayment calculator was a huge eye-opener for my daughter, as she was able to see what her student loans could cost her in actual monthly payments. Making the loans real is a great way to discourage overborrowing.

More things for students to consider

Emphasizing a few key factors may be helpful to your student in understanding the essentials of college loans. For instance:

  • Personal expenses. Loans aren’t intended to cover personal expenses. Your child could cover pocket money by working during college, even if that’s just five to 10 hours per week.
  • Quitting college. If your student leaves school or drops down to less than part-time status, there is only a six-month grace period before your son or daughter must begin paying back federal student loans.
  • Credit score. Paying loans on time and as agreed to helps your student keep his or her credit score healthy, which is important when attempting to rent an apartment, get a car loan and much more. Credit reports are available for free one time each year at annualcreditreport.com.
  • Declaring bankruptcy. It’s very tough to walk away from unpaid student loans. Even if other debts are discharged during a bankruptcy, you will usually remain responsible for any federal student loans. Again, this underscores the importance of not overborrowing.
  • Charging college expenses. Using credit cards is not a good choice for paying for college. A close relative of mine charged his entire senior year of college on credit cards. As you might imagine, the interest rates make paying back the loan amount incredibly challenging.
  • Private student loans. These loans should be considered carefully, and perhaps only as a last resort. According to Howard, private student loan interest rates may be much higher than federal loans, and a student often has little flexibility on repayment plans. Like other school loans, private loans are not usually discharged during a bankruptcy. Students short on money might be better off attending a less expensive community college for their first two years to satisfy many general education requirements. Others might consider working more hours and attending school part-time if necessary. Borrowing from family members such as grandparents might be another option.


Post-college plans and opportunities

We emphasized to our daughter that paying off student loans should be her first priority after college. Our family places a high importance on living free of debt, and she’s getting the message that student loans are no exception to this rule. We are encouraging her to plan on “living like a student” for several years after she graduates so that she can put every dollar possible toward paying off her student loans.

Depending on your graduate’s line of work, he or she may also want to look into student loan forgiveness programs. Many teaching and public service jobs offer this as a benefit to encourage college graduates to work in underserved communities.

As Mary Hunt, author of the book Raising Financially Confident Kids, wrote: “It’s not as if student loans and big credit card balances are mandatory graduation requirements. … It is possible to graduate debt-free, but it does take a lot of work. And you’ll have to buck a financial system that encourages students to take the easy way out by diving into a lifetime of debt.”


Best Student Loans for Both Students and Parents

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Navigating the world of student loans can be daunting. Not only are there several criteria you should evaluate before you sign on the dotted line, but there are also different options available to you depending on where you are on your life’s journey.

Today we’ll walk through some of the best options out there depending on your current circumstances.

Students About to Enter School

Before you apply to school, you should fill out and submit your FAFSA. It’s the best way to get your hands on free grant money, work-study opportunities and federal student loans. Before taking out any student loans, you should talk to your school about any additional financial aid packages it may provide including scholarships and grants, both of which you never have to pay back.

After you’ve exhausted all the avenues for free money, you can start to consider student loans. Federal student loans are widely considered the best option as they provide opportunities like deferment, income-driven repayment and, in some cases, forgiveness or cancellation. With all of these advantages, you should max out all of your Federal student loan options prior to looking at private student loans.

Criteria for Private Student Loans

If you’ve gotten all you can from grants, scholarships, work-study and Federal loans and still don’t have enough to cover the cost of college, you may want to look into private student loans. Before taking out a loan you’ll want to evaluate:

  • Interest Rates
  • Upfront Fees
  • Grace Periods/Interim Periods
  • Repayment Assistance Options

You do want to shop for the lowest possible interest rates and avoid any loans that require fees aside from late fees for late payments, but be sure to recognize the value in the other criteria, too.

Grace Periods

Grace periods, sometimes referred to as interim periods, give you some time between graduating school and making your first payment. This gives you time to locate and secure employment. The grace period typically also starts if you drop below half-time enrollment in school. Keep in mind that interest is likely to still accrue during the grace period, so it’s wise to consider making interest-only payments during this time period.

Our favorite pick for student loans with a grace period? Discover. Discover Student Loans have a six-month grace period for undergraduate degrees and a nine-month grace period for professional degrees. If you drop below half-time, you’ll have a six-month grace period, too.

Discover Student Loans tick many of the other boxes, as well, including:

  • Competitive interest rates.
  • Zero fees (not even late fees.)
  • Flexible repayment options.
  • Repayment assistance in the form of deferment, extended grace periods and forbearance.

Explore more top picks for private student loans with grace periods

Repayment Assistance Options

Many private student loan providers are starting to offer options akin to Federal programs. Typically, these repayment assistance options will provide opportunities for forbearance and deferment, though you should read all the fine print carefully on your individual loan offer; the terminology will not necessarily carry the same meaning for private student loans as they do for federal student loans.

Discover Student Loans are top of the list for repayment assistance options as mentioned above with deferment, extended grace periods and forbearance (which isn’t always the case with private loans), but another good alternative is Citizens Bank. It offers forbearance and deferment on a case-by-case basis, so it is not as easily accessible as with Discover, but the fact that they even offer the option is still progressive.

Citizens Bank Student Loans also have a lot of other things going for them:

  • Lower interest rates.
  • No fees.
  • Repay over the course of 5, 10 or 15 years with the option to pay interest while you’re in school.
  • Six-month grace period.
  • Ability to release your co-signer from their obligation after 36 months of full, on-time payments.

Explore more top picks for student loans for future students

Options for Graduates

After you’ve graduated college, hopefully you’ll land a job that allows you to pay back your loans and then some. If that doesn’t happen, you won’t be the first person to walk the path of needing extra assistance. Even if you can afford payments, you may have taken out your loans at a time when interest rates were much higher than they are today. Here are some options to better your financial situation when it comes to the student loans you already carry.


Refinancing is an option for people who can afford their payments and have a steady record of being on-time. Some, though not all, lenders will also evaluate if you have a good credit score.

If your interest rates are steep, you may want to seriously look into refinancing. Be careful, though; while there is a push to be able to refinance with the government, you cannot currently refinance your federal student loans without consolidating or moving to the private sector. Doing so can disqualify you from advantageous programs such as income-driven repayment and forgiveness.

You can find which refinancing option is best for you with our comparison tool.

Income-Driven Repayment Plans

There are five major income-driven repayment plans. As we look at these plans, we’ll evaluate income eligibility, if you have to include your spouse’s income when filing taxes separately, how many years you’ll have to pay, how much you’ll pay, which loans qualify and if there is a cap to how much you’ll pay overall.

Traditional IBR (Income-Based Repayment) Plan

  • Income eligibility: Annual amount due on your loan must exceed 15% of your discretionary income, which is considered the difference between 150% of the poverty line in your state and your adjusted gross income (AGI.)
  • How much will I pay? 15% of your discretionary income.
  • How long will I pay? 25 years, after which your balance will be forgiven.
  • Is there a cap to how much I will pay? You will not pay more than you would have under the standard, 10-year repayment plan over the life of your loan.
  • Which loans qualify? All federal loans except Parent PLUS.
  • Must include spouse’s income if married filing taxes separately?

New IBR Plans (for borrowers who started taking out loans after July 1, 2014)

  • Income eligibility: Annual amount due on your loan must exceed 10% of your discretionary income.
  • How much will I pay? 10% of your discretionary income.
  • How long will I pay? 20 years, after which your balance will be forgiven.
  • Is there a cap to how much I will pay? You will not pay more than you would have under the standard, 10-year repayment plan over the life of your loan.
  • Which loans qualify? All federal loans except Parent PLUS.
  • Must include spouse’s income if married filing taxes separately?

Learn more about Traditional and New IBR Plans

ICR (Income-Contingent Repayment) Plans

  • Income eligibility:
  • How much will I pay? The lesser of 20% of your discretionary income or what you would pay on a fixed, 12-year repayment plan adjusted to your income.
  • How long will I pay? 25 years, after which your balance will be forgiven.
  • Is there a cap to how much I will pay? You could potentially end up paying more over the life of your loan than you would on a standard, 10-year payment plan.
  • Which loans qualify? All federal loans.
  • Must include spouse’s income if married filing taxes separately?

PAYE (Pay As You Earn) Plan

  • Income eligibility: Annual amount due on your loan must exceed 10% of your discretionary income, plus you must have been a new borrower after October 1, 2007 and received a disbursement on or after October 1, 2011.
  • How much will I pay? 10% of your discretionary income.
  • How long will I pay? 25 years, after which your balance will be forgiven.
  • Is there a cap to how much I will pay? You will not pay more than you would have under the standard, 10-year repayment plan over the life of your loan.
  • Which loans qualify? All federal loans except Parent PLUS.
  • Must include spouse’s income if married filing taxes separately?

REPAYE (Revised Pay as You Earn) Plan

  • Income eligibility: Annual amount due on your loan must exceed 10% of your discretionary income.
  • How much will I pay? 10% of your discretionary income.
  • How long will I pay? 20 years for undergraduate degrees and 25 years for professional degrees, after which your balance will be forgiven.
  • Is there a cap to how much I will pay? You could potentially end up paying more over the life of your loan than you would on a standard, 10-year payment plan.
  • Which loans qualify? All Federal loans except Parent PLUS.
  • Must include spouse’s income if married filing taxes separately?

Learn more about the difference between PAYE and REPAYE

Public Service Loan Forgiveness (PSLF)

If you work for the government or a non-profit with a 501(c)(3) tax classification, you may qualify for the PSLF program. In order to qualify, you must be set up and be in active repayment on one of the above income-based repayment plans and work enough hours at one or several qualifying employers to be considered full-time.

If you qualify, your loans will be forgiven after 120 payments, which adds up to 10 years. These payments do not necessarily have to be consecutive.

If you don’t qualify for PSLF, you may want to look into cancellation or discharge of Federal student loans.

Parents of Current Students

If you want to borrow money to help pay for your child’s education, you essentially have two options. The first is a Parent PLUS loan from the Federal government. Parent PLUS loans are currently only available via a Direct PLUS loan.

These loans have a fixed interest rate (currently 4.272%,) cannot be transferred into your child’s name, and can finance all of your child’s tuition and fees less any financial aid. Because you can borrow so much money, it’s important to be sure that you can actually pay it back. For its part, the Federal government checks to make sure repayment is likely by running a credit report on you before approval.

Keep in mind that the only income-driven repayment plan you could possibly be eligible for is ICR, and that you will be ineligible for PSLF unless you work in the public sector; your child’s occupation is irrelevant. You will be notified if you qualify for this loan after you apply for the FAFSA. If your child’s school does not participate, the government will tell you so you can put a request in with the educational institution to secure this type of loan.

Your other option is to refinance with the private sector. Be savvy when applying for private student loans, utilizing the same practices suggested to your children above. Two great options for parents are SoFi and Citizens Bank.

Citizens Bank offers a Student Loan for Parents that has no application fee, can be for a five- or ten-year term, and has competitive, fixed interest rates. While your child is in school, you can make full or interest-only payments, though payments cannot be deferred completely.

SoFi provides refinancing. In order to qualify, you have to have to have a great credit history and make solid money, making this an ideal option for parents who may be further along in their careers. You cannot switch between fixed and variable rates, but rates remain competitive with those of the Federal government.

Parents of Graduates

As you well know, just because your student has earned their degree, it doesn’t mean you’re done paying for their college. If you’re carrying a Parent PLUS loan, especially if it has an interest rate on the higher end, you may want to look at refinancing.

Because the only income-driven repayment plan you are eligible for with a Parent PLUS loan is ICR and you’re only eligible for PSLF if you work in the public sector, there aren’t quite as many consequences for you if you refinance in the private sector. ICR can be beneficial for parents approaching, or already in, retirement as it sets your payments based on your income. Federal student loans, including Parent PLUS loans, won’t be passed on to a child upon your death. Private student loans are not always so generous, so be sure to read the fine print of your agreement.

That doesn’t mean you should skip doing the math, though. Keep the length of the loan as similar to what you already have as possible, and then shop for a lower interest rate.

One great option for parents who are refinancing a Parent PLUS loan is the DRB Parent PLUS Refinance Program. Its interest rates are competitively low, you can request a term that will match your current pay off date and it is available in all 50 states.

If you cosigned on a loan with your graduate, you may want to look at getting released from that obligation. Doing so will not only release you from your financial responsibilities today, but it will also protect your grad from a potential financial nightmare should you pass away or for you if your child passes.

Some lenders, like Citizens Bank, will allow you to be released as a cosigner from the loan without refinancing after a certain amount of payments have been made on time and in full. With other loans, you may have to look at refinancing to get everything in your child’s name only. Three financial institutions that allow this type of refinancing are:

Read Up Now

The best time to get educated about your student loan options is before you take them out. Understand when you will have to pay them back, how competitive the interest rates are, what your repayment options will be further down the line, and how and if you can release your cosigner after you’ve established you’re a responsible party. Doing your homework now could save you hundreds to thousands of dollars further down the line.

The post Best Student Loans for Both Students and Parents appeared first on MagnifyMoney.

5 Reasons You Might Be Rejected For A Private Student Loan

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When you’re applying for money to pay for college, experts agree that federal loans are the best way to go. They’re less expensive and more flexible than private student loans.

But if you need more money than you’re being offered in federal aid, a private student loan may be your next best option. In the most recent numbers on private student loan borrowers, 45% of them could not have borrowed any more in federal Stafford loans, so they turned to private lenders, according to the Institute for College Access & Success.

If you’re thinking of applying for private money, however, you should know that being approved isn’t a slam-dunk. “Lenders are focusing their money on the borrower who is least likely to default and most likely to be profitable,” says Mark Kantrowitz, publisher and vice president of strategy for Cappex.com, which connects students with colleges and financial aid.

Here are a five reasons you might get the thumbs-down:

1. Your credit isn’t good enough

Many undergraduate students and some graduate students don’t have a robust enough credit history to qualify for a private student loan—or if they do, their score might be too low. It may be that you’ll need a co-signer on a private loan application to get it approved. “About 90% of our private education loans are co-signed,” says Rick Castellano, a spokesperson for Sallie Mae.

Using a co-signer may be the only way to get a private student loan, but this does come with a host of other potential issues. Should your co-signer pass away unexpectedly (or even expectedly), it’s quite possible your lender will request your entire loan balance get paid in full within a 30-day window. If you were to pass away, then your co-signer could be on the hook for continuing to pay your student loan debt. This is why it’s important for you to have life insurance if your private student loan has a co-signer.

2. You’ve borrowed a lot recently

Private lenders are now checking all three credit bureaus to see how much money you’re borrowing and what your total debt load looks like. Your debt-to-income ratio ideally needs to be 40% or less. If you have a lot of debt and not much income, you’re a riskier bet, leading private lenders to pass on your loan request.

3. You’re going into the wrong field 

“If you’re applying for private aid for a degree in a field that pays well, like an medical degree or in the sciences, and you’ve got a reasonably good credit background, you’re getting approved,” Kantrowitz says. On the other hand, if you’re pursuing a degree in a field that traditionally pays poorly—hence making it harder for you to repay a loan later—it’s a tougher call.

Keep in mind that your earning potential can also play into your likelihood of getting approved for student loan refinancing after you graduate. We aren’t telling you to avoid pursuing your dreams, but seriously consider how much of a debt burden you’re taking on if it’s a historically low-paying field.

4. You’re asking for too much

It could be that the private lender thinks your loan request is too high. “To ensure applicants borrow only what they need to cover their school’s cost of attendance, we actively engage with schools and require school certification before we disburse a private education loan,” Castellano says. In this case, you might not get rejected, but the school might certify a lesser amount.

But also keep in mind that you’re sometimes likely to get approved for more than you actually need. Don’t be using student loans to cover the cost of decorating your dorm, grabbing coffee after class and bar hopping. The true cost of using student loans to cover living expenses can add up quickly.

5. You’re a freshman 

If you’re only a year or two away from graduating, you’re more likely to get approved than someone who still has four years—at least—of undergraduate schooling ahead of him. “There’s less risk of you dropping out,” Kantrowitz says. Graduate students may also have an easier time because they’re more of a known quantity—they may have had a job, started to pay down debt, and established themselves as less of a risk.

In all circumstances, experts feel you should carefully weigh the costs and benefits of private loans—and even if you need them at all. Nearly half of private loan borrowers borrowed less than they could have in Stafford loans before going private, according to TICAS. Make sure you’ve exhausted other avenues before heading this way.

The post 5 Reasons You Might Be Rejected For A Private Student Loan appeared first on MagnifyMoney.

How to Qualify for Obama’s New Student Loan Forgiveness Measure


The Obama administration announced Tuesday a plan to forgive $7.7 billion in federal student loans held by an estimated 387,000 permanently disabled Americans, of which roughly half (179,000) are in default.

While the administration tried to streamline the discharge of student loans for the permanently disabled four years ago, few eligible borrowers took advantage. Now, the Department of Education is starting to identify and reach out to eligible borrowers to help them take the necessary steps to discharge their loans.

“In 2012, the Administration took steps to streamline the process to allow for Americans who are totally and permanently disabled (TPD) to use their Social Security designation to apply to have their loans discharged. But too many eligible borrowers were falling through the cracks, unaware they were eligible for relief,” U.S. Education Under Secretary Ted Mitchell said in a prepared statement. “Under the new process, we will notify potentially eligible borrowers about the benefit and guide them through steps needed to discharge their loans, helping thousands of borrowers. Americans with disabilities have a right to student loan relief. And we need to make it easier, not harder, for them to receive the benefits they are due.”

Starting April 18, borrowers identified in the match will receive a letter from the government explaining the steps needed to receive a discharge. They will not be required to submit documentation of their eligibility, unlike disabled borrowers who apply for the discharge on their own. Notification letters will be sent over a 16-week period and followed up with a second letter after 120 days.

The letters will inform borrowers of the tax implication of the discharge, since the government can tax the loan amount forgiven. While the President’s 2017 Budget proposal seeks to exclude TPD discharges and other Department of Education loan forgiveness programs from taxable income, it will require Congressional action to make that happen.

What to Do If You’re Eligible But Not Contacted

Eligible borrowers who do not receive notification from the Education department can initiate the necessary steps to have their student loans forgiven by following the steps outlined on an Education department website:

  1. If you are a veteran, you can submit documentation from the U.S. Department of Veterans Affairs showing that the VA has determined that you are unemployable due to a service-connected disability;
  2. If you are receiving Social Security Disability Insurance or Supplemental Security Income benefits, you can submit a Social Security Administration notice of award for SSDI or SSI benefits stating that your next scheduled disability review will be within five to seven years from the date of your most recent SSA disability determination; or
  3. You can submit certification from a physician that you are totally and permanently disabled. Your physician must certify that you are unable to engage in any substantial gainful activity by reason of a medically determinable physical or mental impairment that:
  • Can be expected to result in death;
  • Has lasted for a continuous period of no less than 60 months; or
  • Can be expected to last for a continuous period of no less than 60 months.

Initial notification letters will be sent over a 16-week period and will be followed up with a second letter that will be sent 120 days after the initial letter if a signed application is not received. Notification will also include information to ensure borrowers understand the potential tax implications for this benefit and can make an informed decision about electing a discharge.

Help for Non-Eligible Student Loan Borrowers

Defaulting on a loan seriously damages your credit score, and because student loans are rarely discharged in bankruptcy, the debt can beat down on you for decades. (You can see how your student loans are currently impacting your credit scores for free on Credit.com.)

There are some options for people who are behind on payments to get back on track, though, even if forgiveness isn’t an option. To get out of default, you can combine eligible loans with a federal Direct Consolidation Loan, or you can go through the government’s default rehabilitation program. If you make nine consecutive on-time payments (the payments can be extremely low), your account goes back into good standing, and the default is removed from your credit report.

More on Student Loans:

Image: Nick White

The post How to Qualify for Obama’s New Student Loan Forgiveness Measure appeared first on Credit.com.

“How I Saved Almost $18,000 in Student Loans by Refinancing”

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When Aaron LaRue, the founder of MortgageMonks.com, graduated from the University of California, Santa Barbara in 2011, he owed more than $50,000 in student loan debt. “I didn’t qualify for any financial aid or federally subsidized loans, and I took whatever private loan I could get because I just wanted to go to school,” he said.

By the time LaRue was done financing his schooling, he had ended up with three student loans, one for each year he was in school (he even graduated in three years on purpose in the hopes of cutting down on tuition costs). “Everything got lumped together when I consolidated the first time, but the loans were about $23,000 for the first year about then $13,500 for both my second and third years,” said LaRue. “So almost $50,000 on the nose.”

Since the variable interest rates on his loans were incredibly high, LaRue knew that he’d have to work throughout college in the hopes to pay down some of that debt he owed. “I worked as a teacher’s assistant for two different classes,” he said. “I was the photo editor of our daily school newspaper, and I worked in a computer lab on campus teaching video editing. At one point I had all three jobs at the same time, and that was on top of my crazy class schedule. On top of my consistent jobs, I also always had one-off side gigs going. I shot photos for magazines, photographed a wedding and would pick up freelance video editing jobs on the side.”

Needless to say, LaRue stayed busy — but the bills kept piling up.

Finally, after a few years of checkered payment history and a brief period of deferment, he decided to refinance. “Refinancing was really difficult for me,” LaRue admits. “I graduated high school in 2008, right when the economy was in free fall. By the time I graduated [college] in 2011, I was competing in a job market against people with tons of experience who had recently been laid off. It was difficult for me to get a good paying job, so I decided to go out on my own as a consultant and try to take on multiple clients. I’ve been doing that ever since.”

While LaRue found some success in his career after graduating, he admits that what many people often don’t understand is that when you’re self-employed, it’s very difficult to qualify for loans unless you have two years of tax returns as a self-employed person. “So the first time I tried to refinance my loan, I was denied,” he said. “I started doing more research and I came across a company — Earnest — that used a merit-based qualification system. They checked my earnings and my credit score, but they also dug through my bank accounts to see if I was managing my money properly. They could tell I was responsible, and I was able to qualify. This was huge for me, because it got me into a fixed interest rate loan, and my rate was 2% lower than what I was paying at the time.”

At the time of refinancing, LaRue had about $54,775 in debt, and he’s managed to save $17,990 over the life of the loan, which works out to over $1,200 per year during the repaying period. “I’m still making payments, but I’ve cut about four years off my repayment time and I’m saving money every month,” said LaRue.

At the end of the day, LaRue has some advice for students struggling under the same weight of crushing student loan debt. “Don’t let the debt get you down,” he says. “If you understand how debt works and you can manage it, it’s really not that bad. Debt has allowed me to go to school and it’s helped me start my own business, and in both cases I’ve come out ahead. Having a monthly payment sucks, but I have definitely gotten a return on my investment.”

If you’re ready to consider saving money by refinancing your own student loans, check out this piece for 19 options to refinance and get your lowest rate.

The post “How I Saved Almost $18,000 in Student Loans by Refinancing” appeared first on MagnifyMoney.

5 Ways Your Money Could Be Affected By a Bernie Sanders Presidency


It may seem like it’s been going on forever, but the 2016 presidential election is finally getting started, for real. Several months of primary elections begin Feb. 1 with the Iowa caucus, and soon enough, we’ll know who will be on the general election ballot come November.

One of those people could be Sen. Bernie Sanders (D-Vt.). Whether or not you’re feeling the Bern, it’s important to know how a Sanders presidency could affect you and your money. Like all presidential candidates, Sanders has identified many things he’d like to change about life in the U.S. There’s no way to know how many of his proposals would become reality if he’s elected — making such changes is a lot more complicated than proposing them — but several have the potential to significantly impact Americans’ personal finances. (We’ll be covering other candidates’ impact on your money in the next few weeks.)

Here are some of the main issues Sanders would like to address and how it could impact your finances.

1. Single-Payer Healthcare

There’s a lot of debate over how a single-payer healthcare system would affect the average American’s budget, because overhauling the system would be complicated and therefore costly. Without getting into the details (partially because Sanders hasn’t shared all of those yet), here’s what he’s proposing: Sanders is calling it his “Medicare for All” plan, and it aims to simplify the process of getting and paying for healthcare while detaching insurance from employment.

“As a patient, all you need to do is go to the doctor and show your insurance card,” reads Sanders’ website. “Bernie’s plan means no more co-pays, no more deductibles and no more fighting with insurance companies when they fail to pay for charges.”

Sanders plans to pay for the program, which his campaign estimates to cost $1.83 trillion annually, through a tax increase on those making more than $250,000 a year, premiums paid by employers and some households (dependent on income), other tax adjustments and program savings.

2. A $15 Minimum Wage

Currently, the national minimum wage is $7.25 per hour. Sanders wants to raise it to $15 per hour over the next several years. For people working minimum wage jobs, that could make a significant difference in their earnings and overall financial health. At the moment, only Emeryville, Calif., comes close with its $14.44 minimum wage, though San Francisco and Seattle have plans in place to implement $15 minimum wages in the next several years.

3. Paid Family Leave & Sick Days

Maternity leave, paternity leave and medical leave are hot topics in politics right now. Many parents don’t have the option of taking paid time off to care for new or sick children, and for those that do, it’s often an unaffordable one. Sanders proposes 12 weeks of paid family or medical leave for all U.S. workers, as well as 7 days of guaranteed paid sick days.

4. Free College

Sanders has outlined six steps he would take to making college debt-free. One of those ideas is to eliminate tuition at public colleges and universities throughout the country. For the 2015 to 2016 school year, the average in-state tuition at a public institution cost $9,410, according to the College Board, which is a 13% increase from the previous academic year. Even with the other costs of education beyond tuition, eliminating that expense could make a college degree much more affordable.

The entire plan is estimated to cost $75 billion annually, according to Sanders’ campaign website. He plans to pay for the plan by imposing what is essentially a sales tax on stocks and other investment products.

5. Student Loan Refinancing

Part of the problem with high tuition costs is the student loan debt it generates. There’s more than $1.3 trillion in outstanding student loan debt in this country, and it continues to grow as new borrowers take on loans and current balances accrue interest.

Those interest rates are a huge point of contention in the student loan world. Student loan rates are high by most consumer loan standards, and for the most part, borrowers are stuck with them. Sanders not only wants to cut interest rates in the first place, he also proposes making refinancing available so borrowers with high rates from many years ago can take advantage of today’s lower rates. (You can see how your student loan debt may be affecting your credit scores by viewing your free credit report summary, updated each month, on Credit.com.)

More Money-Saving Reads:

Image: andykatz

The post 5 Ways Your Money Could Be Affected By a Bernie Sanders Presidency appeared first on Credit.com.