3 Warning Signs Your Student Debt Is an Emergency

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

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

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

3 Red Flags of a Student Debt Emergency

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

1. You’re Uncomfortable with Your Balance

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

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

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

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

2. Your Interest Rates Are in the Double Digits

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

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

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

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

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

3. You Can Barely Manage to Make Your Monthly Payments

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

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

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

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

There’s a Bright Side to Student Loan Debt

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

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

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

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

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10 Ways to Manage Your Student Loans

Manage Student Loans

Student loans are a hot topic these days, with everyone wondering the same thing: How are current college students or recent college graduates going to repay theses debts?

While millions of Americans have been navigating these waters for years, new graduates may be nervous about the total bill for their degree. Education is still a wise investment to make, and paying these loans back is very doable.

Here are a few tips to help you manage your student loans and keep them from overwhelming you:

Choose a career field that will pay you back

For those who aren’t 100 percent sure what line of work they want to go into, a career in public service can be rewarding, in more ways than one. No only will you get the benefit of the opportunity to improve your community, but working for a local, state, or federal government agency makes you eligible to apply for the Public Service Loan Forgiveness Program. If you qualify, some of your student loan debt may be forgiven. Additionally, since the public sector is about to experience a mass exodus in the form of baby boomer retirement, there’s predicted to be millions of vacant jobs in the coming years for millennials to fill.

Add a little to your monthly payment

If and when you can afford it, add $10-20 to each monthly payment you make. This amount will be applied directly to your principal amount, as opposed to paying off some of your interest. This also creates a small avalanche effect of its own, since reducing the principal amount also reduces the interest accrued.

Get a part-time job

It’s not ideal, but if you’re already employed full-time, and your loans are still overwhelming, there might be some part-time jobs out there that can help ease that burden. The side-hustle economy is booming, and there are hundreds of jobs out there that can be done on your own time and at your own speed.

Expand your job search

If you’re not finding full-time work in your area that pays enough to help you manage your student loans, consider expanding your job search… across the ocean. A lot of other countries, such as Japan, Korea, and China, are looking for native English speakers to educate students. These jobs pay well and often offer paid room and board, so you can send as much money home to your student loans as you want.

Cut out wasteful spending

Instead of buying a morning cup of coffee every day on your way to work, make your coffee at home instead. At the end of each month, calculate the money you didn’t spend on daily coffees (or other similar luxuries) and consider adding that amount to your student loan payment that month.

Consolidate your loans

Professional loan consolidation or credit repair may be a good option for those who have multiple loans from various lenders, and may be paying several different interest rates. Loan consolidation can be done in a variety of ways, but if you’re not sure where to begin, a specialist can help you.

Find employers that offer tuition assistance

Many different industries that didn’t exist twenty years ago have taken root in America, and they’re looking for the best talent, which makes them competitive with their benefits packages. Many employers will now offer tuition assistance or reimbursement. Try asking a new or prospective employer if they would consider putting this in your benefits package. The worst they can do is say no!

Apply the ‘avalanche’ method

If you have multiple loans, make the largest payment to the one with the highest interest rate each month, paying it down in a shorter amount of time. When this is paid off, move to the next highest interest rate, then the next, and so on. While already a popular method of paying off large sums of credit card debt, this can also help those who have multiple loans at varying interest rates.

Refinance through a different lender

If all you want is to simply lower the monthly amount of your student loan payment, try refinancing through a different lender. New loans generally get lower interest rates, so take advantage of this.

Bump your payments incrementally

During the first year of student loan repayment, you may not be able to pay more than the bare minimum due, and that’s ok. But if you get a raise, and you can afford it, use the raise to bump up your payment a small amount. Do this every year and before you know it, you’ll cut months or even years of repayment off your loan.

 

If you’re concerned about your credit, you can check your three credit reports for free once a year. To track your credit more regularly, Credit.com’s free Credit Report Card is an easy-to-understand breakdown of your credit report information that uses letter grades—plus you get two free credit scores updated each month.

You can also carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

 

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How to Stand Up to Your Student Loan Servicer

How to Stand Up to Your Lender

Perhaps there’s a bit of irony in the name “student loan servicer.”

You can easily find stories about the sometimes less-than-satisfactory customer service that student loan services provide. In fact, as of April 1, 2017, the Consumer Financial Protection Bureau (CFPB) had received about 44,000 complaints about student loan servicers since it began collecting complaints in March 2012.

Borrowers report frustrations with loan servicers when contacting customer service and complain that miscommunication sometimes resulted in costly errors, like missed or mis-processed payments. Payment issues like these result in borrowers paying more out of pocket, and they can also affect borrowers’ credit scores because payment history is the most important part of credit profiles.

An Indianapolis woman recently experienced these frustrations firsthand. Chris Boehm, a doctor of veterinary medicine, was six years into repaying about $138,000 in loans for four years of vet school. She never encountered problems until her loan was sold from one student loan servicer to another.

After five months of payment issues, including an accidental double payment, a missed payment, forbearance, and a huge jump in monthly payments, Boehm finally reported that her problems were solved—just before she filed a complaint with the CFPB. There are thousands of stories like this one, but many of them aren’t resolved so easily.

Although consumers may find comfort in the CFPB’s mandate to improve student loan servicers, the best advocate you have at your disposal as a borrower is yourself. Boehm and her husband dedicated time to calling customer service representatives and documenting loan payment activity to prove her case that error after error had affected her account, and it wasn’t her fault.

To avoid finding yourself in a similar situation, learn from Boehm’s story and follow in her steps.

1. Pay Attention to the Details

Boehm’s story began when her new loan servicer, Nelnet, debited her account twice for one monthly payment—the first of many Nelnet problems to come. When the previous servicer sold Boehm’s loan, she had set up automatic payments, so she knew something was wrong once she saw the double charge. She called customer service and spoke to a representative who told her she could do nothing but let the double payment stand, but at $714 a month, there wasn’t room in the budget. She instead filled out some paperwork to reverse the second payment.

Here’s what Nelnet didn’t tell Boehm: the reversal shut off her automatic payments. Although the servicer later told Boehm that she should have seen a notice about the auto-debit cancellation when she reversed the second charge, she didn’t. She also couldn’t find the notice online after the fact.

When the next payment due date came and the payment wasn’t automatically taken from her bank account, she paid close attention and paid the bill immediately. She also set up the automatic payment again.

“Thank God I printed the receipt for that,” Boehm says. When she made her request online to set up the auto-debit system, the site displayed a timestamp, which she printed. The next month rolled around, and again, no auto-debit occurred. This time, she didn’t notice right away and ended up paying her loan payment late.

2. Document Everything

Boehm later found out her loan went into forbearance, pushing her next payment forward two months. At this point, she had started printing every bit of information that popped up when managing her loan. Even when payments are suspended due to forbearance, loans accrue interest, and Boehm saw her monthly payment jump up by $50. About $300 in capitalized interest (which is essentially the sum of any interest payments you failed to pay) was added to her balance because of the forbearance, but the added $50 didn’t make sense to Boehm.

“We ran it through an amortization program, and it should have only cost $3 or $4 a month, not $50,” Boehm says. “That $300 mistake was worth like $12,000 over the life of the loan.”

She again called customer service, and a representative explained the situation and told her she could write a letter to Nelnet’s correspondence department. In that letter, she cited the company’s mission, vision, and core values: “Customers are #1” and “We strive to provide consistent, clear support for all of our customers.” She then outlined her requests in detail:

  • Reverse the interest added to the loan principal
  • Erase the forbearance from the account
  • Revert the payments back to the amount before the incident
  • Resume the auto-debit process

Boehm sent her letter along with documentation of her account transactions and activity, and eight days later, the extra interest was removed. Boehm’s next payment was automatically deducted and the situation was solved—after at least five phone calls, a letter, and four payment periods after her first attempt.

“If you have your documentation to show the payments you made or the notes of what was agreed to, that’s going to go a long way to helping you fix the problem,” says Gerri Detweiler, Credit.com’s director of consumer education.

“The other thing to keep in mind is if this mistake has damaged your credit, and they won’t fix it, you may have a basis for a credit damage lawsuit.”

Boehm said her credit wasn’t affected, but Detweiler makes an important point: late payments reported to credit bureaus—which give significant weight to payment history—will hurt your credit scores.

3. Don’t Let the Lenders Get You Down

Despite a story like Boehm’s, Nelnet reviews of customer service aren’t the worst.

In the CFPB’s most recent review of the largest student loan servicers, Nelnet had the third-highest complaint average over a three-month span (between November 2016 and Jan 2017).

Interestingly, Great Lakes Educational Loan Services reviews in the CFPB report were better than Nelnet’s, and Nelnet is in the process of acquiring Great Lakes to ostensibly “enhance borrower experience.”

“When someone doesn’t have the experience that we hope to live up to, we’re disappointed,” says Ben Kiser, a spokesman for Nelnet, which serves more than six million borrowers. “We’re very happy that it was resolved.”

Boehm’s story speaks to some of the most common complaints borrowers have with student loan servicers: payment problems and poor customer service. Boehm was lucky to have been able to clearly state her case. And although it took time and effort to fix the error, her later interactions with Nelnet representatives were better.

“The young lady who called me was really apologetic,” Boehm says. “That felt really nice. I felt like I was banging my head against the wall every time I called.”

Boehm said the most frustrating part of the process wasn’t the service—it was the fact that she had no control over who she worked with. The Boehms had never experienced issues with their other loans, making the whole thing seem that much more unreasonable. With a credit history including eight mortgages (they moved a lot), a student loan in repayment, and a home equity line of credit, she was surprised by how frustrating the process was.

“It’s kind of crazy,” says Boehm. “If someone is treating you poorly, you should be able to choose your loan servicer.”

In reality, that’s often not the case. Remember the Boehms’ story and follow this advice: pay attention to the details, document everything, and don’t let borrowers get you down. While the CFPB continues to watch servicer activity, it’s up to you to protect yourself.

More on Student Loans:

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5 Little-Known Ways to Get Your Student Loans Forgiven

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.

If you feel burdened under the weight of student loan debt, we have some good news: you may be able to get those student loans forgiven. In 2017, the Consumer Financial Protection Bureau released a report estimating that up to one in four Americans may be eligible for the Public Service Loan Forgiveness program, but only a small percentage are actually using it.

Most student loan forgiveness programs aren’t a secret—but it might seem like they are because so few people take advantage of them. If you’d like to wave a magic wand and make your student loan debt disappear, here are five ways to help make that happen.

1. Loan Forgiveness Programs for Health Care Professionals

If you’re a doctor or a nurse, you could get a significant amount of your student loans forgiven in exchange for your service. Here are a couple programs to check out.

  • The Health Professionals Loan Repayment Program: This program is for health-care professionals who serve in the military. You could get up to $50,000 of student loan debt forgiven for each year of military service.
  • Maine Dental Loan Repayment Program: Get up to $20,000 of your student loan debt paid for if you’re a dental professional who sets up shop in an underserved area in Maine. Other states offer similar programs for medical professionals in underserved areas.

2. Perkins Loan Cancellation and Discharge

Those who took out a Perkins loan to help pay for college and work in a qualifying career could have their entire debt wiped out after five years. All Perkins loan borrowers are eligible for potential loan cancellation or forgiveness. Here’s a look at some of the professions that qualify.

  • Active Duty Military Service: If you served in a hostile fire or imminent danger pay area before August 14, 2008, you could have up to 50% of your loans forgiven. Those who began serving on or after that date may qualify for 100% loan forgiveness.
  • Full-Time Public Service: Police officers, firefighters, and other law enforcement personnel may be able to have 100% of their loans forgiven. Attorneys that work in a community or federal public defender organization may also qualify for total loan forgiveness.
  • Educators: Teachers of certain subjects, special education teachers, and teachers serving low-income students may all be eligible for loan forgiveness up to 100% of the loan. Librarians and speech pathologists in Title I schools may also be eligible.

3. Teacher Loan Forgiveness Programs

There are a number of loan forgiveness programs available for teachers who work in underserved areas. Some are state specific, and others are federal programs. Find out if you qualify for either of the federal programs for teachers.

  • Teacher Cancellation: As noted above, teachers who work full-time at a low-income school may be able to have their Federal Perkins Loan cancelled. This option is also available to teachers of certain subjects like math, science, or bilingual education.
  • Teacher Loan Forgiveness: This program was designed to encourage people to enter the education field. If you’ve been a full-time teacher for five consecutive years in a designated school or agency, you may be able to have up to $5,000 of Direct and Stafford loans forgiven. Secondary teachers who teach math or science, as well as special education teachers in elementary or secondary schools, may have up to $17,500 of Direct and Stafford loans forgiven. Unfortunately, PLUS loans are not eligible for this forgiveness program.

4. Forgiveness Programs for Volunteering

Some student loan forgiveness programs are related to volunteer work instead of your nine-to-five profession. If you’ve got a penchant for community service, then you might be able to get a little help with your student loans from these organizations.

  • AmeriCorps and VISTA: When you volunteer for AmeriCorps or VISTA (Volunteers in Service to America), you can qualify to suspend your student loan payments for the duration of your service. You can also earn time that will help you qualify for the Public Service Loan Forgiveness Program.
  • Peace Corps: If you want to volunteer across the globe, the Peace Corps can help you make a difference and move you closer to paying off those student loans. Volunteers receive forbearance of loan payments during their service, and they earn over $8,000 of readjustment allowance and partial Perkins loans cancellation upon completing their service.

5. Total and Permanent Disability Discharge

While no one plans to be disabled, it’s reassuring to know that student loan help is available if you have a terrible accident or become ill. In the worst cases, your entire student loan debt can be wiped out, eliminating this extra worry during an already trying time. There are three ways to demonstrate that you are “totally and permanently” disabled.

  • Military-Related Disability: Veterans can qualify if the U.S. Department of Veterans Affairs (VA) has determined that you cannot work because of an injury incurred during your military service.
  • Social Security Disability: People who receive Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) may also qualify to have their student loans discharged.
  • Medical Disability: If a doctor determines that you’re unable to work due to a mental or physical disability, then you may be able to get your student loans discharged. The disability has to have lasted for more than 60 months or be expected to last for more than 60 months.

The Bottom Line

If you’re having trouble paying off your student loans, it’s important to find a workable solution so you don’t default on them. Even if you file for bankruptcy, it can be difficult to have your student loans cancelled, and falling behind on your payments can hurt your credit and may even lead to wage garnishment. If you’re worried that your student loans might be affecting your credit, get a free credit report so you can see exactly what’s going on. Get your free credit score now to make sure your student loans aren’t getting you in trouble.

Student loan forgiveness programs are not an instant solution. For example, one important thing to note is that if you do have your student loans forgiven, you will then owe taxes on the amount forgiven. This is because the IRS counts forgiven student loans as income. So while you might be able to escape your student loans, you should still budget to pay the associated taxes. But loan forgiveness programs can help you rebuild your financial peace of mind. Most people don’t realize that they might qualify for a student loan forgiveness program. Don’t end up in a bad situation where you risk default without looking into the options that are available.

More on Student Loans:

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How Student Loan Debt Affects Your Mental Health

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

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

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

How Student Loan Debt Stress Can Affect You

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

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

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

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

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

1. Get On a Better Repayment Plan

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

Income-Driven Repayment

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

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

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

Refinancing

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

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

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

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

2. Get the Rest of Your Finances in Order

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

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

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

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

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

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

3. Seek Help if You Need It

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

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

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

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The post How Student Loan Debt Affects Your Mental Health appeared first on Credit.com.

What Is the NSLDS? A Tool to Keep Track of Student Loans

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Over the course of a college career, a student may take out multiple education loans of different amounts and term lengths. Loans are often granted on an annual basis, and by the time you graduate, it’s easy to lose track of your total borrowing.

What’s more, holders of federal loans get a short reprieve from repayment after graduation — up to six or nine months, depending on the loan time — making it can be easy to forget that you’ve got money due. It’s smart to use that grace period to begin planning for repayment, rather than viewing it as a vacation from thinking about your college loans.

One of the best ways to keep track of your federal student loans and payments is through the National Student Loan Data System, a centralized database for federal student loan and grant information managed by the U.S. Department of Education. By checking in regularly on the NSLDS, you can stay on top of how much you owe, the repayment terms of your loans and the monthly payment amounts.

For new graduates making a budget — sometimes for the first time — this student loan information can help them understand how much money they need to set aside for monthly payments, or if they need to look into alternative loan repayment programs.

“It’s a helpful tool, and so often as humans, we’re inclined to denial or procrastination,” says Melinda Opperman, executive vice president with Credit.org, a nonprofit organization focused on personal finance education. “By ignoring that tool, you could have a problem compounding. See what’s in there, and get yourself anchored and prepared.”

What’s the purpose of the National Student Loan Data System (NSLDS)?

The NSLDS was authorized as part of the 1986 Higher Education Act (HEA) Amendments and is administered by the Office of Federal Student Aid. It was formed with three purposes:

  • To better the quality of student aid data and its accessibility
  • To decrease the administrative work required for Title IV Aid
  • To decrease fraud and abuse of student aid programs

The NSLDS initially focused on federal loan compliance but eventually expanded to encompass detailed data from federal student loan and grant programs in which students are enrolled.

Where does the NSLDS get its information?

The NSLDS gets information from several government and loan processing services. Here are the sources for NSLDS data:

  • Guaranty agencies, which are state agencies or private, nonprofit organizations that provide information on the Federal Family Education Loan (FFEL) Program
  • Department of Education loan servicers
  • Department of Education debt collection services (information about defaults on loans held by the Department of Education)
  • Direct loan servicing (information on federal direct student loans)
  • Common origination disbursement (information on federal grant programs)
  • Conditional disability discharge tracking system (information on disability loans)
  • Central processing system (information on aid applicants)
  • Individual schools (information on federal Perkins loan program, student enrollment and aid overpayments)

When data from these sources are combined, you can get a comprehensive overview of your outstanding loans, repaid loans and repayment schedules.

The NSLDS is updated according to each organization’s loan reporting schedule. Some report monthly, and many report data more frequently.

What you’ll find on the NSLDS

After signing up for an FSA ID (Federal Student Aid ID), you can log into the NSLDS to see the updated status of your federal student loans and grants, as well as your college enrollment status and the effective date of your status.

Loans are listed from newest to oldest, and you can find more information about each, including the loan servicer’s name and contact information, by clicking on the loan number. You also will have access to an array of details about each of your federal loans and grants:

  • Name
  • Disbursed amount
  • Date of disbursement
  • Last-known balance
  • Outstanding interest
  • Status (e.g. repayment, in grace, paid in full)
  • Status effective date
  • Interest rate
  • Progress toward the 120 qualifying payments needed for Public Service Loan Forgiveness
  • Income-driven repayment plan anniversary date

“It gives a centralized, integrated view of the loans and grants under the student’s complete life cycle,” Opperman says. “Everything is there.”

You may see a lot of terms and abbreviations you don’t recognize, but there’s a glossary to help you understand them.

What you won’t find

The NSLDS only provides information about federal loan programs, so you will not see details about private loans. To get that information, you’ll need to contact your private loan’s servicer or your school’s financial aid department. You also can review your credit report (you are entitled to one free credit report annually) to find the information.

You also won’t find:

  • Real-time balance accounts. You should see the outstanding principal balance for each loan, but this number may not include the most recent data. Contact your loan servicer for the most up-to-date numbers.
  • Information about nursing and medical loans. While these are federal loan programs, they are not included in the NSLDS. Contact your school’s financial aid department for information about nursing or medical loans.
  • Loans you are not responsible for paying. Any federal loans your parents took out on your behalf, including federal PLUS loans, will not be listed on your NSLDS account. For information about federal student loans that they are responsible for paying, your parents will need to create their own FSA ID and password to access the NSLDS data.

Even with these gaps in information, the NSLDS is a great place to start when you’re not sure whom to contact with student loan questions or when you’re trying to get on top of your loan payments. It’s also helpful if you’re trying to figure out what type of loans you have, which is necessary when you’re applying for certain loan forgiveness programs.

How to sign up for the NSLDS

As mentioned previously, to use the NSLDS you must have an FSA ID username and password, which serve as your login information and allow you to access data about your federal loans and grants online. The ID and password also provide access to many other Department of Education websites.

To create an FSA username and password, visit this link. Opperman says the certified student loan counselors who work with Credit.org recommend you never give out your FSA number or password, even to credit counselors. This information carries the legal weight of a signature, and it can be used to commit identity theft. Credit counselors can get student loan information from you rather than by directly accessing your NSLDS account.

The FSA ID and password application requires your email address, mailing address, date of birth and Social Security number. A cellphone number can be provided if you’d like to bypass answering security questions to retrieve an FSA ID or password.

To look at your federal loan and grant information, click on “Financial Aid Review” after entering your FSA ID and password into the NSLDS website. You do not have to enter loan information, as agencies that issued your federal grants and loans will be responsible for reporting information to the NSLDS.

Is this site accurate?

While the information on the NSLDS generally is accurate because it is provided by loan servicers, it is usually not up to date. Organizations that provide loan information for the NSLDS report on different schedules..

What if the info is wrong?

The NSLDS is not infallible; it’s important to check your page regularly for errors and inaccuracies. Here are some common issues with the NSLDS and how to remedy them:

An error

Check the NSLDS record for this loan, and contact the data provider listed. You will need to give the data provider information that will help the organization look into the error and remedy it. If the data provider is uncooperative and will not fix the error, contact the NSLDS Customer Service Center at (800) 999-8219.

Missing data

If updated loan information is not available within 45 days of disbursement, contact a guaranty agency, the loan’s servicing center or your school’s financial aid office. Otherwise, allow for typical time lapses in reporting.

Frequently asked questions about NSLDS

Usually, no. Typically, only data providers can update information related to your loan when they make their reports to the NSLDS.

The site has an SSL certificate, which means all data passing between your web browser and the site server is encrypted (provided you’re using an SSL-compatible browser, like the latest versions of Chrome, Firefox, Safari or Internet Explorer).

The Department of Education does not charge a fee to use the site.

The site is designed to work best with Microsoft Internet Explorer. You can use other browsers, but keep in mind that the NSLDS pages may not function or display properly on other browsers. The NSLDS system requirements page provides help with browsers and a link to contact information for further assistance.

You are strongly advised not to share your FSA password — ever — as your FSA ID and password are for your use only. Anyone else who uses your FSA information is committing a security violation, and your user ID can be terminated. Organizations can lose access to the NSDLS if they share FSA IDs and passwords.

No. FSA ID passwords expire every 90 days. Fifteen days before the password expires, you will see a warning that it must be changed soon. Users can reset their passwords anytime during that 15-day window by clicking on the “change password” link on the FSA login page.

In this situation, call the NSLDS support number: (800) 999-8219.

You can call the Federal Student Aid Information Center at (800) 4FED-AID — 1-800-433-3243 — between 8 a.m. and 11 p.m. Eastern Time, Monday through Friday, and 11 a.m. to 5 p.m. on Saturday and Sunday. This helpline is not available on federal holidays. You can also contact the office by email or live chat through the website.

The post What Is the NSLDS? A Tool to Keep Track of Student Loans appeared first on MagnifyMoney.

Applying for Public Service Student Loan Forgiveness: A Step-By-Step Guide

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Public Service Loan Forgiveness (PSLF) is a program designed to attract workers to jobs in the public sector by wiping clean remaining federal student loan debt after 120 qualifying payments.

Those payments represent 10 years’ worth of work with a qualifying public service employer, so because PSLF began in October 2007, the first applicants are just beginning to submit their forgiveness forms.

Qualifying for PSLF means meeting specific requirements for the employer, the loan type and the repayment plan — and the details can be overwhelming.

With that in mind, here’s a step-by-step guide to applying for PSLF.

Step 1: Figure out if you qualify.

First, it helps to understand why PSLF exists.

“It’s meant to be a light at the end of the tunnel for public service jobs, when people know they could make much more money going private,” says Betsy Mayotte, director of consumer outreach and compliance at the nonprofit American Student Assistance. “A lot of the careers — social workers, teachers, public defenders — require advanced degrees. The problem there is that people would accrue all this debt, then find they couldn’t stay in these public sector careers because they didn’t pay well.”

But the definition of public service is strictly defined, and “it’s not your job that matters, but your employer,” Mayotte adds. “It matters who signs your paycheck. You can be a groundskeeper at a state school and qualify. Conversely, you can feel as if your job is public service, but if your employer doesn’t meet the specific definitions, you don’t meet PSLF requirements.”

Employers that qualify for PSLF, per the U.S. Department of Education

  • A government organization (including a federal, state, local, or tribal organization, agency or entity; a public child or family service agency; or a tribal college or university)
  • A nonprofit, tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code
  • A private, nonprofit organization (though not a labor union or a partisan political organization) that provides one or more of the following public services:
    • Emergency management
    • Military service
    • Public safety
    • Law enforcement
    • Public interest law services
    • Early childhood education (including licensed or regulated health care, Head Start and state-funded pre-kindergarten)
    • Public service for individuals with disabilities and the elderly
    • Public health (including nurses, nurse practitioners, nurses in a clinical setting and full-time professionals engaged in health care practitioner and support occupations)
    • Public education
    • Public library services
    • School library or other school-based services

Employers that DO NOT qualify for PSLF

  • For-profit organizations (this includes for-profit government contractors)
  • Nonprofits that are not tax-exempt under Section 501(c)(3) of the Internal Revenue Code or that do not provide a qualifying public service as their primary function
  • Labor unions
  • Partisan political organizations

You must work full time (whatever your employer characterizes that to be — though it must be an average of at least 30 hours per week by the PSLF definition) for one of these qualifying employers, or part time for two or more as long as it adds up to 30 hours per week, while you make your 120 on-time payments. You’ll also need to be in qualifying employment when you apply for your loan forgiveness.

Because you won’t be able to apply for PSLF until you have completed qualifying payments, it helps to build up a paper trail over the years. You should fill out and send an employment certification form (ECF) to FedLoan Servicing, which handles PSLF, each year and whenever you change employers. You’ll fill out personal information and have your employer sign the form before sending it in. The form isn’t required, but you’ll receive a response detailing your progress toward your 120 payments and confirming your eligibility — great for peace of mind as well as record-keeping.

“While you’re not required to submit the ECF at any point, it’s always a great idea to keep records,” says Adam Minsky, a Boston attorney who specializes in student loan and consumer issues. “An employer could go out of business, or lose the records of your employment. Mistakes can be made with paperwork. So if you find yourself having to make a case for yourself later, it helps to have all of this on record.”

FedLoan Servicing says my employer isn’t eligible. Can I appeal?

If the response to your ECF comes back and someone says your employer does not qualify you for PSLF, that’s generally the final decision, says Mayotte. “You can theoretically appeal, but these employer types are all pretty straightforward,” she adds. “The overarching rule is that there’s no wiggle room: You work for the government, a 501(c)(3) nonprofit or another qualifying nonprofit. The exception might be if you work for one of these other qualifying nonprofits, but you’ll need to make a case.”

To appeal, you can resend your ECF to FedLoan Servicing and ask for another review, or contact the Department of Education’s ombudsman unit. In both cases you should include evidence to show why you think your employer should qualify, Mayotte says.

But barring a clerical mistake by FedLoan Servicing, a change in decision is exceedingly rare.

Ensure your loan type and repayment plan qualify

PSLF provides forgiveness only for federal Direct Loans: Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans and Direct Consolidation Loans. Private loans, including bank loans that are “federally guaranteed,” do not qualify.

Loans made under other federal student loan programs, like Perkins Loans, aren’t eligible for PSLF on their own. They may become eligible, if they’re consolidated into a Direct Consolidation Loan — but it’s important to know that only payments toward that consolidated loan will count toward the 120-payment requirement.

Speaking of consolidation, here’s another thing you should know: If you consolidate qualifying loans, the clock resets to zero payments. A consolidation is considered a new loan, and again, only payments toward the consolidated loan will be counted toward your 120.

Don’t know which types of federal student loans you have? Check the Education Department site My Federal Student Aid. A pro tip from the Education Department: “Generally, if you see a loan type with ‘Direct’ in the name on My Federal Student Aid, then it is a Direct Loan; otherwise, it is a loan made under another federal student loan program.”

Additionally, you must be enrolled in the right type of repayment plan. Qualifying repayment plans include all four of the income-driven repayment plans, which base your monthly payment on your income and family size: Revised Pay As You Earn (REPAYE), Pay As You Earn (PAYE), income-based repayment (IBR); and income-contingent repayment (ICR).

Payments under the 10-year standard repayment plan qualify, but you’ll want to switch to an income-driven plan as soon as possible. If you stick with that 10-year repayment you’ll have paid off the loan, with nothing left to be forgiven under PSLF when you become eligible for it.

Make 120 qualifying payments

You’ll need to make all of those 120 payments during qualifying employment to apply for PSLF, but you don’t need to provide proof of those payments. Again, Minsky advises that it’s wise to keep your own records just in case there’s a clerical issue later — but generally, FedLoan Servicing will confirm the payments itself.

Note that the 120 payments do not have to be consecutive (nor, then, must be your employment with a qualifying public service employer). If you had periods of deferment or forbearance and stopped paying your loans, the count will pick up where you left off once you begin paying anew. Even defaulting on your loan payments doesn’t disqualify you, but you’ll need to rehabilitate the defaulted loan with your servicer before the payments can count toward your 120 again.

The payments do need to be on time, defined as “those received by your federal loan servicer no later than 15 days after the scheduled payment due date.” If your payment isn’t on time, or you pay less than what you’re required to that month, it won’t count toward your 120. You may make multiple smaller payments, but they must add up to at least the minimum payment amount for that month.

Step 2: Apply for loan forgiveness

After you’ve completed your 120 payments — phew, you did it! — go to the PSLF application here. The form is six pages long, but the actual application is only two. And you, the employee, must fill out only the first page: basic personal information like your date of birth, Social Security number and contact details. You’ll also need to certify under penalty of law that the information you’re submitting is truthful.

The second page is for detailing the employer’s information, and either you or your employer can fill out the top part. Here’s what it requires:

  • Employer’s name
  • Federal Employer Identification Number (FEIN, which can be found on your W-2 — or ask your HR department)
  • Your dates of employment
  • Whether you were a full- or part-time worker
  • Which category of public service your employer falls under

At the bottom of the page, there’s a section for your employer to sign, certifying that the information above is accurate.

You’ll need to repeat that process for every qualifying employer. (That’s why it’s smart to keep track of it all by submitting ECF forms annually and whenever you change employers.)

The remaining four pages of the application form reiterate the details of what it takes to qualify for PSLF. They also explain where to send the completed application form:

  • You can mail to

    U.S. Department of Education, FedLoan Servicing
    P.O. Box 69184
    Harrisburg, PA 17106-9184

  • Fax to 717-720-1628; or
  • Upload to MyFedLoan.org/FileUpload, if FedLoan Servicing is already your servicer.

In rare cases, you may not be able to obtain employers’ certification. There’s a checkbox on page 1: “Check this box if you cannot obtain certification from your employer because the organization is closed or because the organization has refused to certify your employment. The Department will follow up to assist you in getting documentation of your employment.”

“That’s another reason it’s prudent to send the ECF forms every year, because you’ll already have a signature on record,” Mayotte says. “I’ve heard of a few cases where employers were not comfortable filling out the form for privacy reasons, but usually if you show them the form and explain a bit, you can change their mind.”

Mayotte added that FedLoan Servicing will likely accept a tax return as proof of employment, but that solution is more of a “last-ditch effort” to satisfy the conditions.

FAQ and other things to know

It’s not yet clear, as the first qualifying borrowers are just now applying for PSLF. Mayotte says American Student Assistance is in touch with an early applicant, to see how the process goes, but no timetables for forgiveness have been confirmed. The Department of Education did not immediately respond to MagnifyMoney’s questions on the topic.

Yes. If you’ve made your 120 payments and are looking to switch to an employer who isn’t eligible, be sure to file your PSLF application first. You must also be employed full time at a qualifying employer or employers at the time the forgiveness is granted, according to the Department of Education.

“No concrete proposal seems imminent, but whenever something happens, there’s a general view among experts that a change to PSLF won’t be retroactive to existing borrowers,” Minsky says.

The payment count restarts, back at zero. The consolidated loan is considered a new loan, and only payments toward it will count.

Here are the employer certification form and the PSLF application.

While studentaid.ed.gov has all of the official information, it’s spread across different pages and can be unwieldy. American Student Assistance offers an excellent guide that breaks down the basics and also links to official webpages and forms.

Alternative loan forgiveness programs

Beyond PSLF, there are other federal programs to forgive or discharge federal student debt. These include:

Industry-specific forgiveness programs

  • Perkins Loan Cancellation and Discharge: This applies to people who perform certain types of public service or are employed in certain occupations. According to the Department of Education, for each complete year of service a percentage of the loan may be forgiven. That percentage varies by job/employer type, and the following workers qualify:
    • Volunteer in the Peace Corps or ACTION program (including VISTA)
    • Teacher
    • Member of the Armed Forces (serving in area of hostilities)
    • Nurse or medical technician
    • Law enforcement or corrections officer
    • Head Start worker
    • Child or family services worker
    • Professional provider of early intervention services
  • Teacher Loan Forgiveness: Teachers who work full time for five complete and consecutive academic years (in certain elementary and secondary schools and educational service agencies that serve low-income families, and meet other qualifications) may be eligible for forgiveness of up to a combined total of $17,500 on Direct Subsidized and Unsubsidized Loans and Subsidized and Unsubsidized Federal Stafford Loans. (Those who have only PLUS loans are not eligible.) Read more about loan forgiveness programs available to teachers, including TEACH Grants and state forgiveness programs.
  • Programs for lawyers: Lawyers with at least $10,000 in federal student loans may qualify for the Department of Justice Attorney Student Loan Repayment Program (ASLRP). Additionally, the John R. Justice Student Loan repayment program provides assistance for state and federal public defenders and state prosecutors for at least three years and is renewable after 3 years. Benefits cannot exceed $10,000 in a calendar year and cannot exceed $60,000 per attorney total. .) Read more about programs for lawyers, including forgiveness programs through specific law schools and certain states.
  • Programs for doctors and health professions: Several programs are available, including multiple military doctor loan forgiveness options through the Army, Navy and Air Force. Other options include state-specific forgiveness and the National Health Service Corps (NHSC), which can provide up to a $50,000 to repay a health profession student loan in exchange for a two-year commitment to a NHSC site in a high-need area.

Income-based repayment plans

  • This isn’t a traditional cancellation program like what’s above. These four federal income-driven repayment plans base your monthly payment on your income: Revised Pay As You Earn (REPAYE), Pay As You Earn (PAYE), income-based repayment (IBR) and income-contingent repayment (ICR).The payment terms vary, and your outstanding balance is forgiven after your repayment term of 20 to 25 years is complete. Because the monthly amount you owe will fluctuate based on your income, you could end up repaying your loans before your term is up, or you could have a balance that will be forgiven. However, if you receive student loan forgiveness this way, the canceled debt is taxable. (Only borrowers whose loan forgiveness stems from their employment are exempt from paying taxes on canceled student loan debt.)

Loan discharges for special circumstances

There are a few other times you may be able to get your student loans forgiven, but they’re relatively rare, and they’re generally because of bad circumstances. You can find out more about these discharges on the Department of Education’s website:

The post Applying for Public Service Student Loan Forgiveness: A Step-By-Step Guide appeared first on MagnifyMoney.

Is It OK to Spend Your Financial Aid Refund?

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Just a few weeks into their college education, many students receive funds totaling hundreds or possibly thousands of dollars — the “extra” money from the student’s financial aid package. Usually, the money comes with little to no information on how students should spend it, or how to return any funds they may not immediately need.What many students may not realize immediately is, the majority of the time, taking any extra money not truly needed to pay for educational expenses results in them owing even more student loan money and making payments over a longer period of time after graduation.

Simply learning about the money and creating a budget could prevent many students from adding to the average $34,144 student loan balance they are already expected to pay back.

What Is A Financial Aid Refund?

Your refund is the amount of money left over after all of your scholarships, grants, and federal and private student loans are applied toward tuition, fees and other direct educational expenses for the semester. The refund could come as a lump-sum direct deposit to your bank account, as cash or as a check.

The school legally has to disburse any leftover Federal Student Aid money you are awarded. “[Schools] cannot hold onto that credit balance unless the student gives written consent,” says Karen McCarthy, Director of Policy Analysis at National Association of Student Financial Aid Administrators (NASFAA). In the case of a PLUS loan, the parent must give consent for the school to hold the credit balance.

Most refunds most likely come from leftover federal student loans, but recipients of some grants may receive a refund for unused funds as well.

In fall 2009, Brooklyn, N.Y., resident Crystal Chery, was just beginning an associate’s degree program at Kingsborough Community College. She qualified for the Pell Grant, which covered $5,350 of her tuition and expenses for the school year. After tuition and fees totaling $1,550 were paid, Chery received a credit for about $1,125 to her bank account each semester.

While there is no official record of exactly how many college students end up with a positive balance on their account after all of their financial aid package is applied, each semester possibly thousands of U.S. college students in the United States find themselves in a similar position as Chery did her freshman year.

The total amount of financial aid that a student is able to receive is up to the institution’s calculated cost of attendance, which is a big part of the math that goes into calculating a student’s financial aid award. Sometimes colleges pad their total cost of attendance estimates to include things that aren’t directly paid to the school, like books, housing, transportation or child care. The idea is that the student will use any leftover funds for other things they need in order to go to school.

“Kids going to a $4,000 community college can walk away with about $5,000 of refunded money,” says college aid expert Joe Orsolini, especially if they find ways to save on expenses like housing. In Chery’s case, she lived at home, which meant she didn’t need any funds for housing.

If you received a refund from a mix of loans, scholarships and grants, carefully examine your refund to understand where it came from and if you’ll have to pay back that money.

Grant and Scholarship refunds

Grants and scholarships — truly “free money” — are usually applied to your institutional bills first. There may be restrictions on how you can use money from these sources, as rules vary widely by state, institution and scholarship program regarding how students are allowed to spend the funds they receive.

Usually the amount of “free money” a student gets is smaller compared to loans they receive and is depleted by direct institutional bills, so most students don’t get that money refunded to them. However, it’s possible for some students who received a large amount of scholarships to be refunded “free” money.

Chery isn’t required to repay the leftover Pell grant money she received for her education, as she doesn’t fall under any special circumstances like students who may have withdrawn early from their program, or dropped to part-time enrollment during the payment period. In addition, the school was legally required to issue her a refund credit for the excess federal funds.

Student loan refunds

If you receive a refund from unused federal student loan money, you’re free to keep it, but remember you’re still borrowing that money. You will need to pay any federal loan money refunded to you, with interest, starting six to nine months after you graduate.

Generally speaking, you should return any unused loan money that you don’t need right away to avoid taking out more in loans than you really need. But if you need to keep it, make sure you spend the money wisely.

Whatever you do, “don’t go buy a car or go on spring break with [your student loan refund],” says Orsolini. If you’re spending federal loan money, a $10 pizza today at 6.5% APR will cost close to $20 to pay off in 20 years.

Do that math for thousands of dollars in student loans. Make your best effort to limit any flexible, frivolous or impulsive spending to money you don’t have to pay back with interest.

How you handle your student loan refund may also depend on what kind of loan it is — unsubsidized or subsidized.

Subsidized student loans

Interest won’t begin to accrue on subsidized student loan money until six months after you have graduated. So, if you keep your refund, you don’t have to worry about racking up interest charges on the debt you owe while you’re in school.

For that reason Orsolini argues students shouldn’t give back any “extra” subsidized loan money until they are in their last semester of college.

“Until you know for sure that you’ve made it to the finish line, hang on to that money because you never know what is going to happen,” says Orsolini. He recommends placing excess financial aid funds into a 529 college savings account, where it can grow, and you can use the money if you plan to attend graduate school.

If students don’t want to open a 529 account, Orsolini recommends they stash unused subsidized loan money in an emergency savings fund, to help maintain as much flexibility as possible in paying for college.

Orsolini says this method provides a financial safety net for students, as you never know what can happen to your income. If you choose to do this, you should pay back any unused subsidized loan money the month before your graduation to avoid paying interest.

Warning: Orsolini’s method takes a lot of self-restraint.

Unsubsidized student loans

Students shouldn’t pocket any unsubsidized student loan money, as interest will begin to accrue immediately, and keeping the money won’t be worth it.

“Even if you put it in a savings account for a few months, it’s going to accrue more interest as a loan than it would in the savings account,” says Ashley Norwood, Consumer and Regulatory Adviser at American Student Assistance (ASA), a nonprofit student loan advocacy group that helps students finance and repay their student loans.

Avoid keeping unneeded unsubsidized loan money at all costs if you can.

If you find yourself keeping the loan because you need to live off of it, Betsy Mayotte, Director of Consumer Outreach and Compliance at ASA, suggests you do your best to reduce your cost of attendance.

You could make up some or all of the maximum $2,000 a student can receive in unsubsidized loans by getting a part-time job or a work-study job, for example. If cost of living is too high at the school you’re attending, look at a cheaper school or consider moving home if the school is close enough

Should You Spend Your Refund — or Return It?

Unless you have restrictions on how you can use it, what you decide to do with your refund money as a college student is really up to you.

“The assumption is that the student is using that credit balance to pay for those [indirectly billed] expenses,” says McCarthy.

But students don’t always do that.

“When I was in college, I remember all of my friends getting True Religions and all of this stuff [with their refund money] … I did not,” says Chery. “I was focused on other things.”

Chery used her fall semester “refund” to buy equipment to launch a DJ career, starting with a $1,350 MacBook, which she used to create her own mixes and to use at gigs she booked while in school. With the following semester’s refund, Chery purchased a Canon 60D DSLR camera for another $1,200 because she wanted to “dabble in photography and promote [her business].”

Chery says the investment paid off. After booking larger, professional gigs and gaining some experience, she was able to present work that helped her land an internship with Hollywood, Calif.-based media company, REVOLT TV, where she got to work with big-name music artists like Sean “Diddy” Combs and Damon Dash.

“When I started making these investments, I didn’t know that they were going to alter my career like that,” says Chery, who now hosts and books events with hundreds or thousands in attendance throughout the northeast United States.

After you’ve allocated funds to different areas of your budget, you need to figure out what to do with any extra funds. If the money is “free,” meaning you don’t have to pay it back later, you can keep it, but you may need to look into what you are allowed to spend it on, says McCarthy, as there may be restrictions on how you can use scholarship or grant money.

If you think you have enough money for your needs, the experts at ASA and NASFAA agree students should immediately send back any money they don’t think they need, since students can always ask for that disbursement again later on.

Giving money back or canceling a federal student loan won’t affect how much financial aid you are offered the following semester and if you need the money later on in the current semester, Mayotte tells Magnify Money.

“Let’s say you refused all of the loans. You can go back to the financial aid office and ask for part or all of that loan money up to 180 days after the last day of classes,” adds Mayotte.

As long as you were eligible to receive the student loan funds during that pay period, you can receive a federal loan for a prior or the current payment period without penalty if you ask for it within the 180-day period.

For example, you can technically still receive loan money you denied during the fall semester if you request a late disbursement for that money during your spring semester as long as it’s within 180 days after the end of the payment period.

Ask Yourself These 3 Questions Before Spending (Or Returning) Your Refund

Have you paid for all of your non-negotiable expenses for the semester?

Certain non-negotiable expenses (read: tuition and fees) are usually billed at the beginning of the semester, but the school won’t send you a bill for everything you can’t succeed without, like technology for classes, a working laptop, or sheets for your dorm bed. Here are a few possible spending categories you may or may not include in your budget:

  • Living expenses not billed by the institution
  • Books and other educational supplies you’re going to need over the course of the whole term
  • Transportation (gas, on- and off-campus parking)
  • Child care, if you need this so that you can attend school
  • Miscellaneous personal expenses

Do you need the money to cover other college-related expenses?

There are a host of hidden college costs college-bound families fail to consider for one reason or another, and they can dry an unsuspecting student’s checking account. They are all the little things families don’t think about during move-in, like organization membership fees and paying for food outside of a prepaid student meal plan. If you can’t cover those things with part-time income during the school year, tally up an estimate and keep what loan money you need.

Do you have an emergency fund?

You should have every reason to have savings, especially if you’re paying for school on your own. You won’t get many opportunities to stash away $1,000 in cash working for minimum wage as a barista in school. Pocketing some of the money now will help you steer clear of rainy days and expensive borrowing options in the future when those hidden costs creep up on you. Set one up ASAP.

How to return your refund to the Department of Education

The rule is simple: Return the loan within 120 days of disbursement, and it will be like you never took it out in the first place.

The rule is found in the text of the Master Promissory Note, which all FSA borrowers are required to sign promising to pay the loans back before they can receive any federal aid funds. The following information is found under “Canceling Your Loan”:

You may return all or part of your loan to us. Within 120 days of the date your school disbursed your loan money (by crediting the loan money to your account at the school, by paying it directly to you, or both), you may cancel all or part of your loan by returning all or part of the loan money to us. Contact your servicer for guidance on how and where to return your loan money.

You do not have to pay interest or the loan fee on the part of your loan that is cancelled or returned within the timeframes described above. We will adjust your loan amount to eliminate any interest and loan fee that applies to the amount of the loan that is cancelled or returned.

If you make the 120-day deadline, you’re in the clear. You won’t be required to pay loan fees or any interest already accrued on unsubsidized loans in that time. Sometimes, your university can send it back on your behalf, so your first point of contact should be the financial aid office at your institution. Check with them to see if they can send the unused federal student loan funds back on your behalf, or if you will need to send the money back to your loan servicer on your own.

After the deadline, you’ll need to simply make a loan payment back to your loan servicer. You can begin to pay your loans back while still in college. If you do, you won’t pay any interest on subsidized student loan money (it doesn’t begin to accrue until six months after you graduate), but you will pay any loan fees charged to your account.

When will I get my financial aid refund?

If you’re expecting a refund, you aren’t likely to see that money until after the add/drop period for classes — the grace period during which you can change your choices without penalty — ends. That can be about three to four weeks into the semester, although some schools may disburse funds earlier. According to the Department of Education, schools must pay a credit balance directly to a student or parent no more than 14 days after the first day of class or when the balance occurred if it occurred after the first day of class.

Until then, you’ll have to cover your costs out of pocket.

“Students who are expecting refunds are very anxious for them,” says Norwood.

Norwood adds the anxiety may be because many students who see a refund check are lower income — they may see the money because they qualified for more aid. They may depend on the funds from the refund to pay for important costs related to their education such as rent for off-campus housing or educational supplies for classes.

If you missed something on your financial checklist — like signing the Master Promissory Note or completing Loan Entrance Counseling — over the summer, you may see funds even later than four weeks. Overall, if you’re hoping to use refund money to cover your rent or other school expenses, you may need to come up with the cash by other means.

“If [students] don’t budget well for the whole year, it’ll be the same thing in January,” says Mayotte.

There is a silver lining for you if you received Federal Student Aid (FSA). As of July 1, 2016, Title IV schools are required to provide a way for FSA recipients to purchase books and supplies required for the semester by the seventh day of the semester if:

  • The school was able to disburse FSA funds 10 days before the semester began, or
  • The student would have a credit balance after all FSA funds are applied.

The school doesn’t have to write you a check outright for books. Institutions can award the funds in school credit or bookstore credit, too, but must grant you the amount you are expected to spend on educational supplies according to the institution’s calculated cost of attendance by the end of the first week of classes.

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4 Financial Factors to Keep in Mind When Budgeting for College

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In the US, the amount of student debt has reached over $1.4 trillion. The bad news for students currently planning on attending college is that tuition isn’t getting any cheaper. Insofar as there’s good news, students are being more financially cautious when planning for college, researching their student loan options, opting to stay in state, or even taking time to earn residency for out-of-state public schools. But college costs aren’t just about paying the university itself. Here are some expected and some less obvious costs students need to budget for when heading to college.

1. Factor in Student Loan Interest

You already know to think about tuition (and perhaps how it compares to the amount of financial aid your top choices offer), but one thing many students don’t really think about until the first bill comes in is how much student loan interest can add to the overall cost.

For the average loan rate of $30,000 at 4% interest, the interest adds over $7,000 for the life of the loan. And that’s if you make all your payments on time—many students end up with loan amounts far higher than that. Some students learn the hard way that they’ll be paying about as much in interest as the amount they took out—or more. You don’t want to be taken by surprise when you get your first bill, so make sure you factor interest in early on.

2. Look into All of a School’s Required Expenses and Fees

Though tuition is the biggest expense, colleges routinely require a large number of other expenses. Textbooks and supplies can cost hundreds or thousands of dollars. Further, many schools expect students to live on campus and purchase a meal plan their first year, and these annual on-campus housing and meal plans can cost about $9,000.

According to the New York Times, mandatory fees are on the rise, and they cost students at four-year public colleges nearly $1,700 during the 2015–2016 school year. These fees range from understandable to seemingly arbitrary—schools charge for everything from dropping a class to “student success fees.” In fact, mandatory fees have risen 30% more than tuition since 1999, so make sure you look into what fees will tack on to your overall college expenses.

3. Consider Transportation

Wherever you go to college, you’ll need to get around. Some schools are located in areas with thriving public transportation or have compact enough campuses that you can bike or walk most of the time. In these cases, you should simply check how much public transportation costs (it could be free or heavily discounted for students), and consider bike maintenance expenses in your budgeting if relevant.

If your school is located somewhere where a car is necessary (or if you want the option of driving home on the weekends), then you have a number of additional expenses to consider—in addition to the car itself, of course:

  • Parking—Many colleges charge hefty parking fees (often to discourage crowding the campus with cars). However, some housing will include parking spaces or garages.
  • Insurance—If you’re staying in state for school, you can stay on a parent’s insurance policy (as long as your primary residence is still your home address). Make sure you consider coverage beyond the state-required liability coverage, and always make sure to compare quotes to find the best coverage at the best rate.
  • Gas—Pro tip: If your friends are bumming rides to the grocery store or elsewhere around campus, ask them to chip in for gas.
  • Maintenance—Take preventative care of your car, get regular check-ups, and keep supplies like jumper cables and an ice scraper in your trunk.

Don’t forget the wonders of modern transportation options. Consider ridesharing or check out car2go or Zipcar for on-demand driving alternatives.

Also, if you’re heading a longer distance from home to go to school, you’ll need to factor flights into your yearly expenses.

4. Don’t Forget the Fun Stuff

Yes, you’re there to learn, but college is full of new experiences, so don’t neglect budgeting for those as well.

Big sports fan? Season student tickets to football, basketball, hockey, etc. can cost a chunk of change. Into theater or music? College campuses draw great talent on small and big stages alike, and ticket prices can run a wide range.

Cold or hot beverage? Pitch in for a tailgate beer or two, and anticipate needing LOTS of caffeine. And ice cream can help get you through exams, so put a little change aside for these treats, too.

Spring break can also be expensive. Whether it’s a trip to the beach or the ski slopes, if a springtime trip is in your future, set some travel funds aside.

Bonus Build Good Financial Habits Now (and Thank Yourself Later)

In addition to budgeting, you can start building other good financial habits for long-term benefit.

Start earning. Think about work options—but don’t be overly ambitious. Working during your college years can help offset your expenses, but if you try to work too much, you risk letting your studies slip and not getting your money’s worth for tuition. Don’t assume you can pull off a full-time job and still finish in four years when you’re working out your budget. Consider a more realistic goal of 15–20 hours a week, and if you decide to do work-study, apply fast before the jobs get snatched up.

Start building credit.

College is the perfect time to seriously start building your credit so you can more easily navigate post-college life.

Consider getting a student credit card and responsibly using it so you build your credit during your four years. Start with a small credit line and choose a card that rewards you for making your payments on time. When you build your credit during college, you’ll be set up to smoothly maneuver the post-grad life experiences that require good credit, including finding housing, purchasing a car, saving on insurance, or starting your own business. Your credit score is partly affected by your track record of making credit payments over time, so you’ll be glad you started building your credit early.

College is expensive, and even if you do everything right, there’s still a good chance you’ll have loans hanging over your head for a while after graduation. It’s worth making cautious decisions based on financial considerations when choosing your college and budgeting for the next four years, but know that if you keep up with your studies, it will likely all pay off.

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5 Things to Consider Before Paying Off Your Student Loan Debt

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

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

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

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

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

1. It’s Not Sustainable in the Long Run

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

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

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

2. Retirement Savings Should Also Be a Top Priority

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

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

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

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

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

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

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

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

4. Real Estate Is a Better Investment

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

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

5. Missed Life Experiences

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

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

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

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

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