With the Fate of Public Service Loan Forgiveness Uncertain, Here are Tips for Confused Borrowers

iStock

More than half a million Americans are working toward Public Service Loan Forgiveness (PSLF), a program that eliminates federal student loan debt for people with jobs in the public sector. But the proposed 2018 White House budget reportedly calls for ending PSLF for future borrowers — and even current participants’ status could be in doubt, with a lawsuit claiming the government has reversed previous assurances given to certain borrowers that their employment qualifies.

Final decisions have not yet been made in either scenario. But even with this uncertainty, there are steps both current borrowers and interested potential future PSLF participants can take to make themselves as secure as possible.

First, a quick primer on PSLF: The program began in October 2007 under George W. Bush, and it wipes clean the remaining federal student debt for qualifying borrowers who have made 120 payments, or 10 years’ worth (more information is available at StudentAid.gov/publicservice). So the earliest any public service worker could receive loan forgiveness under PSLF is October 2017.

“The idea is to avoid making debt a disincentive to choosing public service,” explains Mark Kantrowitz, a student loan expert and publisher at college scholarship site Cappex.com. “Think about a public defender. They might make $40,000 a year, but they’ll incur $120,000 in debt for law school. That debt-to-income ratio is impossible, so PSLF makes that career path possible — and attracts people who might have otherwise taken high-paying private-sector jobs.”

Public Service Loan Forgiveness — on the chopping block?

At this time, the biggest threat to the future of PSLF is President Donald Trump’s 2018 White House education budget proposal. The budget proposal would eliminate PSLF — citing costs — and replace all current income-based repayment/forgiveness plans with a single income-driven system. While existing borrowers would be grandfathered into PSLF, any new students who take out their first federal loans on or after July 1, 2018, would not qualify. Still, all of this can happen only if Congress passes the budget — and it remains to be seen whether this section will pass as currently written in the proposal.

If you’re one of the more than 550,000 borrowers who is already working toward forgiveness — that is, you have already taken out at least one federal loan and/or you’ve completed school and are working in public service — the proposed cancellation of PSLF won’t affect you. Again, if the program is cut, it will impact only students who take out their first federal loans on or after July 1, 2018.

But even existing borrowers working toward PSLF can’t fully relax. As first reported by The New York Times, the Department of Education added a serious wrinkle by sending letters to people saying their employment was no longer eligible for PSLF, after the borrowers had confirmed with their loan servicer that they qualified. Four borrowers and the American Bar Association have filed a lawsuit against the department, and the case is currently in progress.

That may leave many workers questioning whether or not they will ultimately be eligible for loan forgiveness after all — even if they work in the nonprofit or public sector. MagnifyMoney has spoken to experts and reviewed the rules of the program to help.

How Can I Be Sure I Qualify for Public Service Loan Forgiveness?

Qualifying for PSLF depends on meeting several specific requirements, so the first step in determining your eligibility is to make sure your loans and employment check all the boxes.

1. Your student loan must qualify for forgiveness.

PSLF provides forgiveness only for federal Direct Loans:

  • Direct Subsidized Loans
  • Direct Unsubsidized Loans
  • Direct PLUS Loans—for parents and graduate or professional students
  • Direct Consolidation Loans

Note that loans made under other federal student loan programs may become eligible for PSLF if they’re consolidated into a Direct Consolidation Loan, but only payments toward that consolidated loan will count toward the 120-payment requirement. And, according to ED, parents who borrowed a Direct PLUS Loan “may qualify for forgiveness of the PLUS loan, if the parent borrower—not the student on whose behalf the loan was obtained—is employed by a public service organization.”

2. You must be enrolled in the right type of repayment plan.

You must be enrolled in one of the Direct Loan repayment plans, some of which are income-based. The umbrella term for these plans is income-driven repayment plans, which include the Pay As You Earn and Income-Based Repayment plans. While payments under other types of Direct Loan plans, like the 10-year Standard Repayment Plan, do qualify and count toward your 120 payments, you’ll want to switch to an income-driven plan as soon as possible — because if you stick with a standard 10-year repayment, you’ll have paid off your loan in full after 10 years with nothing left to be forgiven under PSLF. Check the official PSLF site for more details. And note that private loans, including bank loans that are “federally guaranteed,” do not qualify.

3. You must make 120 on-time payments while employed full time by an eligible employer.

If you drop to part-time work, those payments won’t qualify. You must also be employed full time in public service at the time you apply for loan forgiveness and at the time the remaining balance on your eligible loans is forgiven. After you make your 120th payment you’ll need to submit the forgiveness application, which the Department of Education says will be available in September 2017.

4. Your employer must count as a public service organization.

This is the big one, and the most complicated step of the process for some borrowers to figure out. While the Education Department does address types of employers that fit under the PSLF program, there are some gray areas.  Broadly, the types of employers that qualify include governmental groups, not-for-profit tax-exempt organizations known as 501(c)(3)s, and private not-for-profits. That last category includes military; public safety, health, education, and library services; and more.

Pro tip: Certify that your employer is included in the program every year.

Each year and whenever you change employers, you should fill out and send an Employment Certification form to FedLoan Servicing. The form isn’t required to be submitted on an annual basis, but it’s highly recommended to fill it out annually so there are no unhappy surprises down the road.  It also helps you keep track of progress toward your 120 payments and gives you a chance to find out whether there is any change to your eligibility status.

What if you fear your job’s eligibility is unclear?

The validity of that FedLoan Servicing certification form is at the center of the lawsuit against the Department of Education. Although it’s important to have your employer’s eligibility certified by the department, the Education Department has said the form isn’t necessarily binding and the eligibility of employers can possibly change. As The New York Times put it, the department’s position implies “that borrowers could not rely on the program’s administrator to say accurately whether they qualify for debt forgiveness. The thousands of approval letters that have been sent … are not binding and can be rescinded at any time, the [DOE] said.”

That puts existing borrowers in a tough spot, says Joseph Orsolini, CFP and president of College Aid Planners: “[PSLF] is sort of an all-or-nothing in that you can’t apply for the forgiveness until you’ve already done your 120 payments. So to have someone choose this career path and work for years only to be told, ‘never mind, you no longer qualify even though we said you did,’ it would be hard for them not to see that as reneging on a deal.”

That possibility is “terrifying” for Frances Harrell, 35, a preservation specialist who works for a nonprofit that supports small and medium-size libraries in caring for their collections. She completed a library graduate school program in 2013 and emerged with a total of about $125,000 in debt, including her undergraduate loans.

“Everyone I know is in public service, and we all saw the Times article [about the PSLF lawsuit] and flipped out,” says Harrell, who currently lives in Gainesville, Fla. “I felt like I had been dropped in a bucket of ice. We’re making life decisions based on this understanding, and it feels so precarious not to have any true confirmation that we’ll get the forgiveness in the end.”

Christopher Razo, 22, who this month will begin classes at Chicago’s John Marshall Law School, plans to take advantage of PSLF while working toward his dream of becoming a state attorney. (Photo courtesy of Christopher Razo)

Harrell has also dealt with confusion from loan servicers and other experts — and based on incorrect advice, she nearly consolidated her loans in a way that would have reset the clock on her years of payments.

Christopher Razo, 22, who this month will begin classes at Chicago’s John Marshall Law School, is relieved that he is enrolling before the 2018 uncertainty begins. Razo is one of Orsolini’s clients, and he plans to take advantage of PSLF while working toward his dream of becoming a state attorney.

“[PSLF] is complex as it is, so my initial thought was, ‘Wow, great timing for me that I’m starting in 2017,’” Razo says. “But I understand the program affects way more than just me. [PSLF] gives you comfort to pursue public-service goals without having to make your employment about the money. I’m optimistic that [lawmakers] will see the good in the program so it can continue.”

When in doubt: Follow the ‘3 phone call rule’

While borrowers may think their loan servicer has all of the answers, Harrell’s situation isn’t uncommon, says Orsolini. He recommends “the three phone call rule”: Call three times and ask the same question, documenting whom you spoke to and when.

“These programs are complicated — which is one of the issues that critics [of PSLF] bring up — and you don’t always get the right information,” Orsolini says. “Before you plan your whole life around the [first] answer you get, you have to double- and triple-check that it’s right.”

If you’re taking out your first qualifying loan on or after July 1, 2018, Orsolini says “there’s not much to do besides hurry up and wait” to see what happens with the White House budget as it relates to PSLF.

“The important thing to remember is that a proposal is just a proposal, and these don’t always see the light of day,” Orsolini adds. “It doesn’t do any good to be overly worried, but you’ll want to keep a close eye on the news.”

Other types of loan forgiveness, cancellation, or discharge:

PSLF isn’t the only option. But not all types of federal student loans offer the same forgiveness, cancellation, or discharge options. See the chart below and check out StudentEd.gov pages here and here for more details.

Still, borrowers should know Trump’s desire to streamline federal programs into a single option means some of these loan types and forgiveness plans could be changed or canceled as well.

The post With the Fate of Public Service Loan Forgiveness Uncertain, Here are Tips for Confused Borrowers appeared first on MagnifyMoney.

11 Ways to Lower Your Monthly Student Loan Payments

Student loans are a huge burden but they don't necessarily have to be. It's possible to lower your monthly student loan payment with the right tips.

Student loan debt is a huge burden for millions of Americans, representing the second largest form of consumer debt in the country. A large monthly student loan payment can make it difficult to afford your other living expenses. Luckily, there are many ways to make that monthly payment more affordable.

Here are 11 ways to lower your monthly student loan payment.

1. Income-driven Repayment Plans

Federal borrowers with insufficient income should consider an income-driven repayment plan, which lowers your monthly payment based on your income and family size. There are several income-driven repayment plans, including the Revised Pay As our Earn Repayment Plan (REPAYE), Pay As You Earn Repayment Plan (PAYE), Income-Based Repayment Plan (IBR) and Income-Contingent Repayment Plan (ICR).

Each plan is different, but they all reduce your payments to a set percentage of your discretionary income. You can work directly with your loan servicer to determine which plan is right for you.

2. Loan Consolidation

If you have multiple federal loans, a direct consolidation loan will combine them and allow you to make a single monthly payment. Consolidation can also extend your repayment period up to 30 years, reducing your monthly obligation. Keep in mind that this would increase the amount of money you pay in the long run.

3. Pay Ahead of Time

If you’re still enrolled in school or you just graduated, it could be beneficial to start paying on your loan now. Many federal student loans do not accrue interest until the grace period after graduation expires. If you start making small payments now, you’ll reduce the principal of your loan and the overall interest you’ll pay.

4. Employer Student Loan Repayment Assistance

Many government employers have offered loan repayment assistance for some time, but even private companies are getting in on the game to attract millennial workers. Before you jump at a job offer from an employer with a student loan assistance program, you’ll want to check the details to see if the program actually reduces your monthly payment.

“About 4% of employers are now offering employer-paid student loan repayment assistance,” said Mark Kantrowitz, Publisher and VP of Strategy at Cappex.com. “However, the employer payments are almost always in addition to the borrower’s payments and the borrower may be required to make at least the standard monthly payment. So, the main impact is on shortening the repayment term, not in reducing the monthly payment amount. “

5. Graduated Repayment Plans

Graduated repayment plans will temporarily reduce your monthly payments, increasing them every two years. This is a good choice if you currently can’t afford your payments but have confidence that your income will steadily increase over the next ten years.

Graduated repayment “starts off with very low payments, just above interest-only, and increases the monthly payment every two years. No payment will be more than three times any other payment,” said Kantrowitz.

6. Extended Repayment Plans

Extended repayment plans increase the lifetime of your loan up to 25 years. This will drastically lower your monthly payment if you’re currently on a ten-year payment plan. You will end up paying much more over the life of the loan.

7. Refinancing

Refinancing your federal loans with a private lender can help you get a better interest rate, which could lower your monthly payment and save a lot over the life of your loan. For this option, you’ll need good credit. To see where your credit stands, you can check two of your scores for free on Credit.com.

You’ll also want financial stability. That’s because private lenders don’t offer income-driven repayment plans, deferment or forbearance and many other options available to federal borrowers. If you fall on hard times with a private loan, you’ll have fewer tools at your disposal.

8. Roll Your Loan into Your Mortgage

If you have a home with some available equity, you could roll your student loan into your home equity line of credit (HELOC). This can reduce your interest rate, but will likely require good credit.

9. Automatic Payments

Many lenders offer payment or interest reduction as an incentive to sign up for automatic payments. Check with your loan servicer to find out if they offer this option.

10. Use Credit Card Rewards

Some credit cards offer rewards that can be put directly toward your student loan. For instance, the Citi Thank You Preferred Card for College Students earns points that can be redeemed for a check that is issued to your loan servicer.

11. Deferment or Forbearance

If you’re desperate to reduce your payment, deferment or forbearance can pause or significantly reduce your monthly payments for a limited amount of time. Deferment also pauses interest, while loans in forbearance will continue to accrue interest.

You must work directly with your loan servicer to apply for deferment or forbearance. Qualifying circumstances may include financial hardship, unemployment or military deployment.

Image: Jacob Ammentorp Lund

The post 11 Ways to Lower Your Monthly Student Loan Payments appeared first on Credit.com.

Sallie Mae Graduate School Loans vs. Direct PLUS Loans

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

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

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

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

Sallie Mae vs. Direct PLUS Loan

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

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

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

Interest rates and terms

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

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

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

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

3 options to repay your Sallie Mae grad school loan

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

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

Graduated Repayment Period

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

Residency and internship deferment

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

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

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

How to qualify for a Sallie Mae grad school loan

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

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

Sallie Mae grad school loans vs. federal PLUS loans

Pros and cons of Sallie Mae grad school loans

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

Pros

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

Cons

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

How to apply

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

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

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

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

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

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

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

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

It’s Now Easier for Millions of Student Loan Borrowers to Get a Mortgage

Student loan borrowers who are making reduced income-driven repayments on their loans will have an easier time getting mortgages under a new policy announced recently by Fannie Mae.

Nearly one-quarter of federal student loan borrowers benefit from reduced monthly student loan payments based on their income, Fannie Mae says. However, there’s been some confusion about how banks should treat the lower monthly payments when they calculate a would-be mortgage borrower’s debt-to-income ratio (DTI): Should banks consider the reduced payment, the payment borrowers would have to pay without the income-based “discount,” or something in between?

It’s a tricky question, because student loan borrowers have to renew their qualification for the lower payments each year, meaning a borrower’s monthly DTI could change dramatically a year or two after qualifying for a mortgage. The banks’ confusion over which payment amount to use can mean the difference between a borrower qualifying for a home loan and staying stuck in a rental apartment.

There’s even more confusion when a mortgage applicant qualifies for a $0 income-driven student loan payment, or when there’s no payment amount listed on the applicant’s credit report. Previously, in that situation, Fannie Mae required banks to use 1% of the balance or a full payment term.

As of last week, Fannie has declared that mortgage lenders can instead use $0 as a student loan payment when determining DTI, as long as the borrower can back that up with documentation.

That announcement followed another Fannie update issued in April telling lenders that they could use the lower income-based monthly payment, rather than a larger payment based on the full balance of the loan, when calculating borrowers’ monthly debt obligations.

“We are simplifying the options available to calculate the monthly payment amount for student loans. The resulting policy will be easier for lenders to apply, and may result in a lower qualifying payment for borrowers with student loans,” Fannie said in its statement.

Taken together, the two announcements could immediately benefit the roughly 6 million borrowers currently using income-driven repayment plans known as Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), Income-Contingent Repayment (ICR), and Income-Based Repayment (IBR).
Freddie Mac didn’t immediately respond to an inquiry about its policy in the same situation.

What This Means for Student Loan Borrowers Looking to Buy

Michigan-based mortgage broker Cassandra Evers said the changes “allow a lot more borrowers to qualify for a home.” Previously, there was a lot of confusion among borrowers, lenders, and brokers, Evers said. “[The rules have] changed at least five or six times in the last five years.”

The broader change announced in April, which allowed lenders to use the income-driven payment amount in calculations, could make a huge difference to millions of borrowers, Evers said.

“Imagine you have $60,000 in student loan debt and are on IBR with a payment of $150 a month,” she said. Before April’s guidance, lenders may have used $600 (1% of the balance of the student loans) as the monthly loan amount when determining DTI, “basically overriding actual debt with a fake/inflated number.”

“Imagine you are 28 and making $40,000 per year. Well, even if you’re fiscally responsible, that added $450-a-month inflated payment would absolutely destroy your ability to buy a decent home … This opens up the door to a lot more lenders being able to use the actual IBR payment,” Evers said.

The Fannie Mae change regarding borrowers on income-driven plans with a $0 monthly payment could be a big deal for some mortgage applicants with large student loans. A borrower with an outstanding $50,000 loan but a $0-a-month payment would see the monthly expenses side of their debt-to-income ratio fall by $500.

It’s unclear how many would-be homebuyers could qualify for a mortgage with an income low enough to qualify for a $0-per-month income-driven student loan repayment plan. Fannie did not have an estimate, spokeswoman Alicia Jones said.

“If your income is low enough to merit a zero payment, then it is probably going to be hard to qualify for a mortgage with a number of lenders. But, with the share of IBR now at almost a full 25% of all federally insured debt, it’s suspected that there will be plenty of potential borrowers who do,” Jones said. “The motivation for the original policy and clarification came from lenders’ requests.”

The post It’s Now Easier for Millions of Student Loan Borrowers to Get a Mortgage appeared first on MagnifyMoney.

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

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

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

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

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

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

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

Why my income-driven repayment renewal was denied

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

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

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

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

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

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

Resubmitting my application

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

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

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

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

The long wait for news

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

But the celebration was short-lived.

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

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

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

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

What to do if your recertification is denied

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

The Bottom Line: Not all loan servicers are created equally

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

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

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

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

When Your Student Loans Are Sold: What You Need to Know

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.

While I was working on paying off my student loans, I checked my account balances weekly. One day, I logged into my account and the $10,000 I had in outstanding loans had disappeared.

At first, I was elated. Had some generous benefactor swooped in to pay off my debt? Then I realized I couldn’t be nearly that lucky — so I tried to figure out what happened.

Many people, including a financial professional, told me not to look a gift horse in the mouth and ask too many questions. But I didn’t think loan servicers were likely to have forgotten about my debt.

Tracking Down My Loans

I tried emailing my loan servicer to find out what happened, but didn’t get a response for a few weeks. I was afraid my loan payments would become due and I wouldn’t know where to make payments, so I decided to check my credit report to see if I could find my loan. (You can view two of your credit scores for free on Credit.com.)

Sure enough, my credit report showed my loan had been moved to a new loan servicer. When I reached out to the issuing bureau, they said my old lender had mailed me a letter as notice of the change, but I never received a letter.

It’s possible they had an old address on file, or I accidentally tossed it in the trash, but I’m glad I pursued it. If I hadn’t continued digging, I never would have found out and could have defaulted on my debt.

What Happens When Your Student Loan Debt Is Sold

My situation is not unique. Federal and private student loans can be sold to other lenders at any time. There’s a market of organizations that specialize in buying and servicing student loans.

When your loan is sold to a new lender, you’re indebted to the new owner of the loan. You have no more contact with the old one. While the new servicer might offer some new benefits, the basics of your loan — such as the interest rate or repayment term — will not change.

The original lender will send you a letter notifying you of the upcoming switch. Then, you’ll get a second letter from the new lender that explains why your loan was sold, who your new loan servicer is and how to make payments.

How to Protect Yourself

Because lenders can sell your loans whenever they want, it’s important to have safeguards in place. You don’t want to miss a notification and end up falling behind on your payments. Here’s what you can do to protect yourself:

Update your contact information. If, like me, you’ve moved around, it’s important to make sure your lenders have your most recent contact information. Log in regularly and check to see they have the right mailing address and phone number.

Read all mail. Read every piece of mail that comes from your lender. Don’t just assume it’s a monthly statement and toss it. It could be an important notification.

Check the notification for accuracy. If you receive a notice that your loan is sold, make sure the balance and terms of your loan are accurate.

Contact your lender with any problems. If you can’t find your loan or make payments, call your lender’s customer service line right away.

Track your loans with the National Student Loan Data System (NSLDS). The NSLDS is a database that tracks your federal loans. It will list which loans are under your name and the loan servicer for each one.

Check your credit report. If you aren’t sure if your private loan has been sold, you can find out by checking your credit report for free at AnnualCreditReport.com. It will list all your current loans and who owns each debt. Once you have the name of the lender, you can contact them to get your login information and start making payments.

By keeping your information up to date and checking your account regularly, you can prevent any confusion when managing your loans.

What to Do If You Hate Your New Loan Servicer

In my case, my new loan servicer was an improvement over the old one. Their online platform was easier to use and their customer service department was more responsive.

Some people don’t have the same experience. The Consumer Financial Protection Bureau reported there are thousands of calls each year from consumers about their student loan servicers.

If you have problems with your new loan servicer, such as delays in getting a response for an issue you reported, here’s what you can do:

Contact the student loan ombudsman. If you can’t get your problems fixed, you can contact the student loan ombudsman. An ombudsman is a neutral third party that will work with you and your lender to identify a solution.

Refinance your loans. If you’re simply looking for more features or want to reduce your interest rate, refinancing your student loans might be a smart approach. If you refinance, you’ll work with a private lender to take out a new loan for the amount of your old one. You can get a different repayment term, monthly payment and interest rate.

Managing Your Loans

The student loan system can be incredibly complex. Trying to navigate it can be difficult, especially since your loans can be sold to a new lender at any time.

You can protect yourself by being proactive and monitoring your credit report. If you hate your loan servicer, know that you’re not stuck with them. You can identify a resolution or get a whole new servicer who offers more favorable repayment terms.

For more information on shopping for a new loan, here’s what to do if you hate your loan servicer.

Image: kajakiki

The post When Your Student Loans Are Sold: What You Need to Know appeared first on Credit.com.

How Much Have You Earned Over the Years? The Answer May Surprise You

Between housing, student loan payments, groceries and other expenses, you may sometimes wonder where all your money is going.

Between housing, student loan payments, groceries and other expenses, you may sometimes wonder where all your money is going.

Household debt can also be a drag on your income. With an average of $6,662 in credit card debt per U.S. household, you could be paying hundreds per month in debt payments. At the end of the month, it may feel like you didn’t earn anything at all.

But a tool from the Social Security Administration (SSA) shows you how much money you’ve really made over your lifetime. You may be shocked by how much income you’ve earned, especially if you don’t know where it all went.

How to Check Your Earnings Record

The SSA keeps track of your income and taxes paid for Social Social Security and Medicare using your tax returns. It uses this information to calculate your Social Security and Medicare benefits.

You can view your estimated benefits, along with your earnings record, through your designated my Social Security account. If you don’t already have an account, you can create one through the SSA website.

As you walk through the steps to create an account, you’ll need to provide the following:

● Full name, as shown on your Social Security card
● Social Security number
● Date of birth
● Home address
● Primary phone number

The SSA will then ask some multiple-choice questions to verify your identity. For example, you may be asked where you have lived in the past and to share information about your financial accounts.

Once you pass the verification test, you’ll create a username and password. The SSA will then ask for your email address to send you various communications about your account.

After you’ve created your online account, you can log into the site and see your estimated benefits at full retirement age (if you qualify), as well as your last reported earnings. There’s also a link to view your earnings record. Your earnings record includes a comprehensive list of your taxed Social Security and Medicare earnings for every year that you’ve worked.

You can then add up your yearly earnings to see how much you’ve earned since you joined the workforce. The tool is also helpful for seeing how your income has increased over time.

How to Keep More of Your Income

Now that you know how much you’ve made over the years, you may be wondering what happened to it all. Here are a few tips on how to keep better track of your money and hold onto more of it in the process.

1. Create a Budget

If you don’t already have one, then creating a budget is the first step to increasing your net cash flow, or the difference between your income and expenses. Keeping track of your transactions gives you a good idea of where you can cut back.

To set up your budget, start with your take-home pay (not gross income from your SSA earnings record). Then take a look at your expenses for the last month and categorize them. For example, you can create categories such as rent or mortgage payment, groceries, household items, entertainment, etc.

Next, determine areas where you can cut back and set a budget for each category for the following month. During that time, keep track of each transaction to make sure you stay within your spending limit for each category.

This process may be hard in the beginning, but it will get easier over time as you get used to your new habit. You can also compare and use budgeting apps to help make the process easier.

2. Tackle Your Debt

For some people, monthly debt payments make up a large portion of their expenses. Between credit cards, an auto loan and a mortgage, you may be paying hundreds or even thousands of dollars a month toward your household debt.

If you have student debt, for example, consider refinancing your student loans to lower your payment, interest rate or both. Also consider other strategies to pay off debt, such as the debt-snowball or avalanche methods. These approaches help you target one debt at a time, rolling your payments into other debts as you pay each one off. (You can keep tabs on how your debt is affecting your credit by viewing two of your credit scores for free on Credit.com.)

3. Use Bonuses & Tax Refunds Wisely

Once you get into the swing of budgeting, it can be easy to manage your monthly paychecks.

But getting a small windfall in the form of a bonus or tax refund can make it easy to rationalize spending money on things you don’t need. Instead of wasting that money, use it to pay off debt. You can also save it for a rainy day or a future goal.

4. Consider Moving

If you live in a state with income tax, you may be missing out on extra cash every year. There are nine states with no income tax on wages and earnings you could consider moving to — if that’s a feasible strategy for you:

● Alaska
● Florida
● Nevada
● New Hampshire
● South Dakota
● Tennessee
● Texas
● Washington
● Wyoming

Of course, where you live isn’t just a matter of how much you pay in taxes, as your family, friends and job won’t likely come with you. What’s more, some states may make up for having no individual income tax by taxing more heavily in other areas. Make sure you do your research before considering a big move.

Treat Your Money Like You’ve Earned It

You work hard for your money, and it can be devastating to look back at how much you’ve earned over the years and wonder what happened to it all. The better you manage your money, the more of it you’ll keep.

As you budget, pay down debt and learn other money-management techniques, you’ll be able to look back again a few years from now with confidence that you’re on the track toward financial independence.

Image: StockLib

The post How Much Have You Earned Over the Years? The Answer May Surprise You appeared first on Credit.com.

CommonBond Student Loan Refinance Loan Review

CommonBond Grad Student Loan Refinance Loan Review

Updated August 2, 2017

[CommonBondSL]CommonBond[/CommonBondSL] was founded by three Wharton MBAs who felt the sting of student loans after they graduated. The founders decided to provide a better solution for graduates, as they thought the student loan system was broken and in need of reform. As a result, they strive to make the refinance (and borrowing) process as simple and straightforward for graduates as possible.

[CommonBondSL]CommonBond[/CommonBondSL]* began by servicing students from just one school, and has rapidly expanded. Today, [CommonBondSL]CommonBond[/CommonBondSL] loans are available to graduates of over 2,000 schools nationwide. Although the business started servicing only students with graduate degrees, today [CommonBondSL]CommonBond[/CommonBondSL] is also available to refinance undergraduate degrees as well.

[CommonBondSL]CommonBond[/CommonBondSL] is one of the top four lenders identified by MagnifyMoney to refinance student loans.

As you might be able to tell by the name, [CommonBondSL]CommonBond[/CommonBondSL] thinks of its community as family. There is a network of alumni and professionals within the community that want to help borrowers. This alone sets it apart from other lenders, as members often meet for events.

While these are all great things, we know you’re more interested in how [CommonBondSL]CommonBond[/CommonBondSL] might be able to help you make your student loans more affordable. Let’s take a look at what terms and rates they offer, eligibility requirements, and how they compare against other lenders.

Refinance Terms Offered

[CommonBondSL]CommonBond[/CommonBondSL] offers low variable and fixed rate loans. [CommonBondSLAPR]Variable rates range from 2.80% – 6.73% APR, and fixed rates range from 3.35% – 6.74% APR[/CommonBondSLAPR].

Note that these rates take a 0.25% auto pay discount into consideration.

There is [CommonBondSLLoanAmt]no maximum loan amount[/CommonBondSLLoanAmt]. [CommonBondSL]CommonBond[/CommonBondSL] will lend what you can afford to repay. [CommonBondSL]CommonBond[/CommonBondSL] offers fixed and variable rates with [CommonBondSLTerm]terms of 5, 7, 10, 15, and 20 years[/CommonBondSLTerm].

The hybrid loan is only offered on a [CommonBondSLTerm]10 year term – the first 5 years will have a fixed rate, and the 5 years after that will have a variable rate[/CommonBondSLTerm].

[CommonBondSL]CommonBond[/CommonBondSL] has a great chart listing repayment examples based off of borrowing $10,000, which can be found on its rates and terms page.

To pull an example from that, if you borrow $10,000 at a fixed 4.74% APR on a 10 year term, your monthly payment will be $104.80. The total amount you will pay over the 10 year period will be $12,575.90.

The Pros and Cons

[CommonBondSL]CommonBond[/CommonBondSL] is available to graduates of 2,000 universities. While that is a very long list, not all colleges and universities are included.

One pro to consider is the hybrid loan option available. It might seem a little confusing at first – why would someone want a variable rate down the road?

If you’re confident you’ll be able to make extra payments on your loan and pay it off before the 5 years are up, you might be better off going with the hybrid option (if you can get a better interest rate on it).

This is because you’ll end up paying less over the life of the loan with a lower interest rate. If you were offered a 10 year loan with a fixed rate of 6.49% APR, and a hybrid loan with a beginning rate of 5.64%, the hybrid option would be the better deal if you’re intent on paying it off quickly.

What You Need to Qualify

[CommonBondSL]CommonBond[/CommonBondSL] doesn’t list many eligibility requirements on its website, aside from the following:

  • You must be a U.S. citizen or permanent resident
  • You must have graduated

[CommonBondSL]CommonBond[/CommonBondSL] doesn’t specify a minimum credit score needed, but based on the requirements of other lenders, [CommonBondSLCreditScore]we recommend having a score of 660+, though you should be aiming for 700+[/CommonBondSLCreditScore]. The good news is [CommonBondSL]CommonBond[/CommonBondSL] lets [CommonBondSLCoSigners]you apply with a cosigner in case your credit isn’t good enough[/CommonBondSLCoSigners].

Documents and Information Needed to Apply

[CommonBondSL]CommonBond’s[/CommonBondSL] application process is very simple – it says it takes as little as 2 minutes to complete. Initially, you’ll be asked for basic information such as your name, address, and school.

Once you complete this part, [CommonBondSL]CommonBond[/CommonBondSL] will perform a [CommonBondSLInq]soft credit pull[/CommonBondSLInq] to estimate your rates and terms.

If you want to move forward with the rates and terms offered, you’ll be required to submit documentation and a [CommonBondSLInq]hard credit inquiry will be conducted[/CommonBondSLInq]. [CommonBondSL]CommonBond[/CommonBondSL] lists the following as required:

  • Pay stubs or tax returns (proof of employment)
  • Diploma or transcript (proof of graduation)
  • Student loan bank statement
  • ID, utility bills, lease agreement (proof of residency)

[CommonBondSL]CommonBond[/CommonBondSL] also notes it can take up to 5 business days to verify documents submitted, so the loan doesn’t happen instantaneously.

Once your documents are approved, you electronically sign for the loan, and [CommonBondSL]CommonBond[/CommonBondSL] will begin the process of paying off your previous lenders. It notes this can take up to two weeks from the time the loan is accepted.

Who Benefits the Most from Refinancing Student Loans with [CommonBondSL]CommonBond[/CommonBondSL]?

Borrowers who are looking to refinance a large amount of student loan debt will benefit the most from refinancing with them.

Keeping an Eye on the Fine Print

[CommonBondSL]CommonBond[/CommonBondSL] [CommonBondSLPrepayFee]does not have a prepayment penalty[/CommonBondSLPrepayFee], and there are [CommonBondSLOrgFee]no origination fees[/CommonBondSLOrgFee] nor application fees associated with refinancing.

As with other lenders, there is a late payment fee. [CommonBondSLLateFee]This is 5% of the unpaid amount of the payment due, or $10, whichever is less[/CommonBondSLLateFee].

If a payment fails to go through, you’ll be charged a $15 fee.

It’s also noted that failure to make payments may result in the loss of the 0.25% interest rate deduction from auto pay.

Transparency Score

Getting in touch with a representative is simple and there is a chat and call option right on the homepage. Some lenders have this hidden at the bottom, or they don’t offer a chat option at all.

[CommonBondSL]CommonBond[/CommonBondSL] also lets borrowers know they can shop around within a 30 day period to lessen the impact on their credit.

It does not list its late fees on its website, unlike other lenders. However, after making a chat inquiry, the question was answered promptly.

[CommonBondSL]CommonBond[/CommonBondSL] does offer [CommonBondSLCoSigners]a cosigner release[/CommonBondSLCoSigners] and is ranked with a A+ transparency score.

Alternative Student Loan Refinancing Lenders

The student loan refinancing market continues to get more competitive, and it makes sense to shop around for the best deal.

One of the market leaders is [SoFiSL]SoFi[/SoFiSL]. It’s always worth taking a look to see if [SoFiSL]SoFi[/SoFiSL]* offers a better interest rate.

The two lenders are very similar – [CommonBondSL]CommonBond[/CommonBondSL] offers “CommonBridge,” a service that helps you find a new job in the event you lose yours. [SoFiSL]SoFi[/SoFiSL] offers a similar service called Unemployment Protection.

[SoFiSL]SoFi’s[/SoFiSL] [SoFiSLAPR]variable rates are currently 2.815% – 6.740% APR with autopay, and its fixed rates are currently 3.35% – 6.74% APR[/SoFiSLAPR], which is in line with what CommonBond is offering.

[SoFiSL]SoFi[/SoFiSL] also doesn’t have a limit on how much you can refinance with them.

SoFi

APPLY NOW Secured

on SoFi’s secure website

Another lender to consider is [EarnestSL]Earnest[/EarnestSL]. There is [EarnestSLLoanAmt]no maximum loan amount[/EarnestSLLoanAmt], and [EarnestSL]Earnest[/EarnestSL] has a very slick application process. [EarnestSLAPR]Interest rates start as low as 2.79% (variable) and 3.35% (fixed)[/EarnestSLAPR].

Lastly, you could check out [LendKeySL]LendKey[/LendKeySL]. It offers student loan refinancing through credit unions and community banks, but only offers variable rates in most states and fixed rates in a select few. [LendKeySLLoanAmt]The maximum amount to refinance with an undergraduate degree is $125,000, and the maximum amount to refinance with a graduate degree is $175,000[/LendKeySLLoanAmt].

All three of these options provide forbearance in case of economic hardship and offer similar loan options (5, 10, 15 year terms).

Don’t Forget to Shop Around

As [CommonBondSL]CommonBond[/CommonBondSL] initially conducts a [CommonBondSLInq]soft pull on your credit[/CommonBondSLInq], you’re free to continue to shop around for the best rates if you’re not happy with the rates it can provide. As the lender states on its website, if you apply for loans within a 30 day period, your credit won’t be affected as much.

Since [CommonBondSL]CommonBond[/CommonBondSL] does have strict underwriting criteria, you should continue to shop around and don’t be discouraged if you are not approved. The market continues to get more competitive, and a number of good options are out there.

Customize Your Student Loan Offers with MagnifyMoney Comparison Tool

*We’ll receive a referral fee if you click on offers with this symbol. This does not impact our rankings or recommendations. You can learn more about how our site is financed here.

The post CommonBond Student Loan Refinance Loan Review appeared first on MagnifyMoney.

Higher Student Loan Rates Take Effect in July. Here’s What That Means for Borrowers

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

For the first time since 2014, the interest rates on federal student loans are going up. Loans disbursed between July 1, 2017 and June 30, 2018 will carry the new rates, which are 0.69 percentage points higher than those of federal loans that have gone out since July 1, 2016. Here are the new rates:

  • Direct subsidized loans for undergraduate borrowers: 4.45%
  • Direct unsubsidized loans for undergraduate borrowers: 4.45%
  • Direct unsubsidized loans for graduate or professional student borrowers: 6%
  • Direct PLUS loans for graduate and professional student borrowers: 7%

Why Did the Interest Rates Change?

Legislation that went into effect in 2013 tied federal student loan interest rates to the 10-year Treasury note. Every year, the undergraduate loan rates are calculated by adding 2.05 percentage points to the high yield of the 10-year note at the last auction prior to June 1. Add 3.6 percentage points to the high yield to determine unsubsidized graduate loan rates, and for PLUS loans, add 4.6 percentage points.

How the Rate Change Affects You

If you’re getting a federal student loan in the next year, these are the rates you’ll pay for the life of the loan. Borrowers with existing federal student loans won’t experience a rate change, unless they have a variable interest rate, which is rare.

While the rates have gone up, they could be much worse: The 2013 legislation caps federal student loan interest rates at 8.25% for undergraduates, 9.5% for unsubsidized graduate loans and 10.5% for PLUS loans. Since the 2008 financial crisis, the benchmark rate has remained historically low, but if it rises, future student loan borrowers will pay. So if you’re going to college in the next few years, or will borrow on behalf of someone who is, keep tabs on the 10-year Treasury yield.

How to Change Your Student Loan Interest Rates

Whether you’re a new borrower or have been repaying student loans for a few years, you should know there are a few options for changing the interest rates on your student loans.

You could apply for a federal Direct consolidation loan, which combines multiple eligible loans into a single loan. The interest rate on that loan is the average weighted interest rate of the loans you consolidated, rounded up to the nearest 1/8th of 1%. Whether this strategy will save you money on interest depends on the balances and interest rates of the loans you’re consolidating.

Let’s say you have three loans with the following balances and interest rates: $3,500 at 4.66%, $6,500 at 4.29% and $7,500 at 3.76%. The weighted average interest rate of those loans is 4.14%. But if you switch the interest rates on the largest and smallest loan balances, the weighted average would be 4.36%. The math matters when considering consolidation.

You could also refinance your student loans at a lower rate with a private lender (there’s no federal refinancing option beyond consolidation), but you will lose many of the benefits federal student loans offer, like income-driven repayment plans and student loan forgiveness.

There’s also a simpler way to cut your student loan rates: Set up automatic payments. The savings may not be as significant as they can be with consolidation or refinancing, but most student loan servicers offer a rate discount to borrowers who enroll in auto-debit. If you’re looking for other ways to make your loan payments more affordable, here’s a list of your options.

It’s crucial you stay on top of your student loans, as missing payments can trash your credit and result in significant financial obstacles. You can see how your student loans and other accounts affect your credit by reviewing your free credit report summary on Credit.com.

Image: diego_cervo

The post Higher Student Loan Rates Take Effect in July. Here’s What That Means for Borrowers appeared first on Credit.com.

How Your Credit Report Can Help You Manage Student Loans

Handling your student loan payments may not be easy, but here's where you can start to take control.

More than 1.8 million students graduate from college in 2017. While it’s a momentous achievement, many graduates will walk away with significant student loan debt. Though keeping up with monthly payments can be difficult, knowing how to budget for them can be an even bigger obstacle.

If you’re feeling overwhelmed and don’t know how to begin managing your loans, your credit report can be an essential tool. Here’s how your credit report can help you take control of your debt.

What’s in Your Credit Report?

Your credit report is a complete picture of your financial history. It contains information about your bills, loans and what credit cards you have open.

Lenders use your credit report to make decisions on your reliability and financial stability. They look at your report to evaluate whether to offer you a car loan, mortgage or a new credit card. However, your credit report is an invaluable source of information for you too, especially if you have student loans.

2 Ways Your Credit Report Can Help You Manage Your Loans

When you’re in school and take out federal or private student loans, it’s easy to lose track of who your lenders are or how much you borrowed — especially if you don’t have to start repaying them yet.

To make things more difficult, your debt can sometimes transfer to a new loan servicer. If that happens, you’ll have to make payments on a different website and you’ll have a new account. That’s where your credit report comes in handy. You can use it to locate your loans and their current status in the following ways:

  1. Identify your loan servicer: If you aren’t sure who your loan servicer is, use your credit report to identify who manages your loans. Your credit report will list all the institutions behind your debt. Once you have the name of your servicer, you can use that information to sign into your account and begin making payments.
  2. Find out your current balance: Thanks to interest, your loan balance could grow while you’re in school. If you’re unsure what amount you owe, your credit report will list the current balance on your loans.

Where to Get Your Free Credit Report

There are many services that will send your credit report for a fee. However, paying for your credit report is unnecessary. You can get a free credit report from each of the three credit bureaus — Equifax, Experian, and TransUnion — once a year from AnnualCreditReport.com.

It’s a good idea to stagger your credit reports throughout the year. For example, you could review one credit report from each agency every four months. That way, you can continually review your credit report for issues, rather than waiting a full 12 months. Catching problems early can save you money and protect your credit.

You can also check your credit scores for free on Credit.com. They’re updated regularly and can help you spot changes in your credit reports if they go up or down unexpectedly.

What to Do If There’s an Error

An essential part of checking your credit report is reviewing it for errors. Sometimes loans are reported incorrectly or, in cases of identity theft, fraudulent accounts can be put under your name.

If you find an issue, whether it’s a simple mistake or a more serious issue of theft or fraud, it’s important to take action right away. If the accounts in error become delinquent, those late payments can cause your credit report and score to plummet. That will make it more difficult for you to get a loan, a new credit card or get approved for a new apartment. The longer you wait to act, the longer it could take to correct.

To report a problem, write a letter disputing the errors and send it in the mail to the following:

  • Equifax: Equifax Information Services, LLC., P.O. Box 740256, Atlanta, GA, 30348
  • Experian: Experian, P.O. Box 4500, Allen, TX 75013
  • TransUnion: TransUnion LLC, P.O. Box 2000, Chester, PA, 19016

You should also notify the bank or financial institution that reported the error. Include copies of any supporting evidence you may have to prove your case.

To ensure you have a record of contacting the organizations, it’s a good idea to send the letter as certified mail as proof.

If you report the error and the credit bureaus and financial institutions do not fix the issue, you can escalate the problem to the Consumer Financial Protection Bureau.

Managing Your Credit

Graduating from college is a huge milestone, but it’s easy to get overwhelmed managing your student loans. From figuring out who your loan servicer is to learning how much your loans grew, the process can be complex.

Getting your credit report and credit scores and reviewing them thoroughly can help you keep track of your loans and stay current on your payments.

Image: g-stockstudio

The post How Your Credit Report Can Help You Manage Student Loans appeared first on Credit.com.