September 12, 2012
We often get questions about repayment of student loans and loan consolidation options. Here is a quote from the Student Loan Network website:
“Student loan repayment should be seriously considered prior to taking on debt. Typically, it will take students 10 to 20 years after graduation before they are able to repay their student loans in full.”
Review all of your loan documents to insure you know how much you owe. Talk with your lenders about repayment plans. Do a budget and figure out where you are spending your money and if there are ways you can save.
The general advice is to make sure you pay off your high interest debt first. Generally federal loans have more favorable repayment terms than private loans – so weigh your options carefully. Finally, consider consolidating your loans to reduce the number of payments you have to make. (note: you will want to keep your private and federal loans in separate consolidation. Consolidating private loans with federal loans may eliminate the benefits of the federal loan programs).
For more information, visit: http://www.consumerfinance.gov/students/repay/
May 3, 2012
There has been a lot of news about student loan interest rates recently. Specifically, the Stafford Loan Rates, which are currently at 3.4%, are scheduled to increase to 6.8% on July 1. What does this mean for you?
In short, it seems both parties are in agreement to keep the rates as in for the next year (until elections are over). The disagreement is on how to pay for this during that period. The reality is that the government does not have additional costs to provide these low rates. The government is able to raise funds at a low fixed rate and should be able to pass these savings on to students. They just won’t make as much interest on the loans as they were expecting. This is a concern as the amount of debt they are carrying for student loans continues to increase.
What should be a greater concern to students is what will happen a year from July – after the elections. The bigger problem is the cost of education, which continues to rise at twice the rate of inflation. Contact your representatives and ask them to help lower tuition costs to lower the costs for all students.
August 28, 2011
Struggling with finding the last dollar to pay that college tuition bill??? Here is a good overview of the challenges and some options to manage them…
It is no secret that college is expensive and tuition costs are continuing to rise. We put together the infographic below to examine the costs associated with a college education, including the hidden costs you may not be factoring in like health fees, gas money, entertainment and all the Red Bull you’ll consume during finals. The graphic also outlines how funding occurs and how students can fill the gaps left in paying for college. Feel free to share with your fellow students, friends and family!
August 10, 2011
One question that comes up a lot from parents is how to fund the remainder of your child’s education, after federal loans of course. There are a variety of options out there including Federal PLUS loans and private college loans. It can be difficult to decide on which loan is right for your family, so to help you in the process, I’ve explained some of the major benefits and drawbacks of each below.
Parent PLUS Loans
Parent plus loans are available through the government and offer a variety of benefits. Benefits such as deferment, forbearance, and even some cancellation options are a perk of PLUS loans that are not always available with private loans. However, the interest rate is a fixed 7.9%, and higher than some private loans.
One of the most common questions from parents about the PLUS loan is in regards to the credit check. The credit check for PLUS loans is minimal and it’s mostly to make sure that there is no recent bankruptcy or adverse history on record within the past 5 years. If you’re still concerned that your credit will hinder your ability to receive the loan, you should continue with the application process, as students whose parent’s get denied a PLUS loan are entitled to further Stafford loans (at lower interest rates than the PLUS).
Private loans may actually be a better option than the PLUS loan for some families. Interest rates are now very competitive and come in both fixed and variable. This would allow for less interest over the lifetime of the loan than the Parent PLUS. You should also note that while the loan holder in this case is the student, most loans will suggest that a parent cosign for the student, which is generally a good idea anyway, as it improves approval chances and may lower the interest rate for the loan.
A downside of private loans is that many of the repayment benefits that you find with federal loans are not all available, however, the lower interest rates could outweigh this point. There are also other benefits of private loans to consider, such as the disbursal method. Unlike federal loans, private loans get disbursed directly to the student, so they can pay for immediate expenses such as books, or room and board.
There is no real answer to “what is the best loan” because this is too subjective and is different for everyone. There are a lot of different factors to consider when looking into funding your child’s education and it comes down to not which loan is the best, but which is best for your family. To help you decide, you’ll simply have to weigh the pros and cons of each option.
July 18, 2011
The first years after graduation can be stressful on students, but the stress cast on parents is often overlooked. Parents are faced with the ever-growing problem of how to help their kids land on their feet, and effectively start their own lives. While many are tempted to simply pay the student’s way, this is not always the best option for either parents or students. Parents need to start thinking about retirement, and may not be able to afford those extra years of financial support, and students need to learn financial independence. The problem is, what can parents do? Here are some ideas…
1. Teach Financial Literacy
It’s amazing how many students graduate without any idea what a 401K is or how to use a credit card correctly. These are some basic, teachable (and free) steps that can really provide a foundation for recent grads.
- Using basic accounts – Most students have checking/savings accounts well before college, but should still be aware of the basics. Are there minimum balances? What happens if you overdraft? Little tips like these can pay off big in the long run, and prevent avoidable fees while money is tight.
- One thing my parents taught me when I got my first credit card was don’t buy anything that you can’t afford right now. This has been a huge help, and while I may not get everything I want right away, I have never had an outstanding balance on my card. People may think, “well, what’s the point of having one, then?” To this, I would answer, beginners should be exceptionally careful, using the card only for what’s affordable (except, of course, for an emergency). This will help set a good foundation for lifetime credit use and help grads to avoid even more debt.
- How to save – Students hear tons of financial terms thrown about, (ROTH IRAs, 401Ks, Savings Bonds, etc.) but in most cases, have no idea what any of these things are. Sitting down with your grad to talk about different savings/investing options can be a huge benefit in the long term.
2. Stop the Pressure
With the job market at a low point (though better than last year) finding a job is incredibly stressful for many students. It’s important to keep them motivated during their application process, but do not pressure them or force them to take a job they don’t want. This, of course, is easier said than done, with student loan payments looming on the horizon. To help motivate them, think about setting goals or time limits. Knowing that they have only a certain amount of time to find a job can really help speed the process along.
On a side note: Today, more recent grads than ever are living at home after graduation. If this happens, remember that the house rules in high school may no longer apply. Your child is more adult than kid, and many fights can be avoided by bending some of the old rules, and realizing that your grad may be frustrated with answering to parents again. While this may not help with the finances, it will make this stressful time easier on everyone!
3. Keep Them Healthy
Since the Obama Administration’s recent law, grads are able to remain on parents’ health insurance until the age of 26. Saving students from the high cost of health insurance (or accidents sans-insurance!) can help while they begin to get their life in order. If they need insurance, consider: Graduate Student Insurance Plans.
4. Give Them Credit
College graduates are faced with a lot of firsts – first car, first apartment, first student loan payments, and having a solid credit history can help their future. After teaching basic credit card usage, parents can help students and grads attain their first card, which can now happen in 2 ways:
- Co-sign for a card – This provides independence, but with security. Just make sure that if you do co-sign, your child remains on top of payments, and be willing to help out a little should payments falter.
- Obtain a secured credit card – These require an initial deposit, and the amount of the deposit becomes the credit limit. These are great because you cannot spend more than you have, and teaches smart charging! A downside is that it’s more expensive up front, but you may save in the long-term.
5. Teach Them to Cook
Yes, really. Buying takeout every night, besides being unhealthy, can also really impact your child’s wallet. By teaching your grad to cook, they could save a lot of money on expensive take-out once they’re on their own!
July 1, 2011
Usually at this time of the year, students have applied for all the scholarships, grants and federal loans they are going to get. There is often a gap between what they have received in aid and what they are going to pay. A last minute option are student loans. Before applying we suggest you do two things: Review our Lenders and compare student loan offers.
Surprisingly, many people are unaware that there are privately funded student loans to help pay for college. In short, they offer students the option of borrowing to cover the cost of education including tuition, fees, room and board as well as other related expenses.