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student loans

Adulting Student Life

How to Prioritize (Not) Paying Off Your Student Loans During the Moratorium

May 24, 2021

Student loans have been in the news recently as there has been buzz surrounding some sort of government relief soon. If you are a borrower looking for relief, you may be wondering what your best move is regarding repayment. How you act now could help you gear your finances up for any upcoming legislation on the matter.

What you are about to read will seem counterproductive – but stick with it till the end.

Hold Off On Repayment Until the Moratorium Expires

It may seem crazy not to take advantage of our current relief period to pay down some of those federal loans, but, instead, consider taking what money you would be paying, interest included, and putting it into a separate savings account.

This interest-free period means that the total amount you have to pay back won’t increase in the interim. By putting the money you would typically use for loans aside, you can create a pool of funds that will amount to a significant sum whenever the moratorium is allowed to expire.

The Political Future of Student Loans is Uncertain

President Biden has stated that he is open to $10,000 of blanket student loan forgiveness, eliminating some of the economic strain for many borrowers. However, there is reason to believe that the relief will be much broader.

The last major stimulus bill extended the moratorium until March 2022 and made any future loan relief tax-exempt. Though we are not quite sure what will happen, there is strong evidence that lawmakers are gearing up for some type of comprehensive action regarding student loans. We also know that student loan relief has some bipartisan support, though disagreements exist.

The Scenario You Want to Avoid:

Let’s say you owe $15,000, and pre-COVID, you were paying $300 a month, including interest. You decided to make monthly payments throughout the pandemic even though the interest was frozen and payments were paused.

Now we’re over a year into the pandemic, and the moratorium on student loan repayment is extended until at least March 2022. Let’s imagine that the progressive wing of the democratic party can convince Joe Biden to raise the initial offer of $10,000 to $25,000 of loan forgiveness.

You’ve essentially wasted all the money you’ve been paying back throughout the moratorium because your loans were forgiven.

If you had put that money aside, you’d have a significant amount of cash.

What If Nothing Gets Forgiven?

If there is no action taken to combat the student loan crisis, then we can assume payments, as usual, will resume in March 2022. If you had been saving your monthly payment amount, then in February of 2022, you can make a large lump sum payment that puts you back on track as if nothing happened.

Why Not Paying Right Now Makes Sense

Because we know something will likely happen regarding the student debt crisis, and because we don’t know exactly what that something will be, the best course of action is to save that money you would normally use for repayment.

You either have some (or all) of your loans forgiven and have a large sum of money available, or you resume payments like nothing ever happened. By not paying during the moratorium, it’s a win. However, by paying, there is a chance you’ll lose.

BIO: Veronica Baxter is a writer, blogger, and legal assistant operating out of the greater Philadelphia area. She writes for the Law Offices of David Offen, who is a successful bankruptcy lawyer in Philadelphia.

Other Student Life

How to Take Charge of Your Finances

July 15, 2019

You’ve done it! You’ve graduated! Now that your textbooks are sold and you are starting out your career, it’s time to take a look at your financial situation. Now is the time to take control of your finances.

Pay off your student loans

The average college student graduates with over $37,000 in student debt. That can seem incredibly daunting as you are just starting your career; however, when you break it down into a reasonable payment plan for your finances, you can chip away at that debt over time. By breaking your student debt into bite-sized pieces every month, you can pay it off within a reasonable amount of time. 

The key is consistency and to never skip a payment. Kathryn Casna, a financial expert from TermLife2Go.com, provides three ways to make paying off your debt a priority: 

  • Avoid missing payments by setting up autopay through your bank. 
  • Eliminate debts faster by paying more than the minimum.
  • Make loan payments non-negotiable: cover them before budgeting for anything else. 

No one wants to have their student loans follow them around their entire life. You can avoid that by creating a payment plan that will get you out of debt and moving forward. 

Create a budget

If you don’t watch where your money goes, you will be stuck always wondering where your money went. After living life on ramen, you may feel like you can forget your college budget when you get your first paycheck. However, if you want to be living the high life in the future, you need to be disciplined now. Creating and sticking to a budget will help you keep those unnecessary purchases in check while helping you to pay for what’s important. 

Todd Christensen, an education manager at Moneyfit.org, breaks down his recommended budget: 

  • 10% Give: Donations, taxes, and acts of kindness
  • 50% Live: Rent or mortgage, utilities, transportation, cellphone, internet, groceries, and clothing
  • 10% Prepare: Emergency fund, care repair or replacement, travel, gift giving, furniture and appliances, and other short-term goals
  • 10% Plan: Retirement, down payment on a home and other long-term goals
  • 10% Improve: Increase your income-earning potential through education (or paying off student loans), training, or starting a business
  • 10% Enjoy: Have fun without the guilt of breaking your budget

Start investing

You’ve worked hard to earn your paycheck. Now let that money work for you. Investing is a way that you can literally make money in your sleep. By investing as often as you can, you can see your money increase without having to do anything. 

While you may think that investing is something that old, rich people do, you have the greatest advantage if you start investing now. Why? Because time is on your side. The longer you can let your investments grow, the larger your return will be.  

Robert Farrington, a financial expert at The College Investor said:

“If you get started investing at 18 years old, you only need to invest about $2,100 per year to be a millionaire by age 62. That number starts to go up a lot the older you get. If you wait until 30, that number becomes $6,900 per year you need to invest – over 3x the amount per year. All because of time.”

College finances are no joke and they are not always easy to figure out. With these tips from GradGuard, you are sure to get ahead of the game!

Other Student Life

Important Things to Know About Your Student Loans

April 10, 2019

With total student loan debt in the United States now over $1.5 trillion, students have to be prepared to pay off those student loans when they graduate. Knowing your available repayment, forgiveness and tax options will not only help you manage your student loans effectively—it may also save you money.

Many students fail to look into their repayment and forgiveness options, which can hurt their ability to pay off their loans on time. On top of this, some students don’t realize how private student loans differ from federal aid. To help you understand your student loans, here are some of the most important things to know.

Interest accrues while you’re in school.

When you take out an unsubsidized federal student loan or a private student loan, interest will start accruing as soon as the loan is disbursed. This means that although you can usually defer repayment until after you leave or graduate from school, the interest you owe on the loan will start to build up while you’re in school and will continue accruing throughout repayment. When you graduate, you will be responsible for paying off the interest accrued and your total loan amount.

There are multiple federal student loan repayment options.

Federal student loans have several repayment options. Upon graduation, you’ll be automatically enrolled in a 10-year standard repayment plan unless you opt for an income-driven repayment plan. With one of these plans, your monthly payments will be based on a percentage of your income, and your loan balance will be forgiven after 20 to 25 years of repayment.

Private loan repayment options are limited compared to federal student loan repayment.

Private student loan repayment options are a bit different from federal aid options. Generally, private lenders don’t base your monthly payments on your income. Instead, you will choose a loan term, usually between five and 20 years, with a monthly payment based on paying off your balance and interest by the end of your term. There are no forgiveness options for private student loans.

You may qualify for tax deductions or tax credits.

You may be able to claim certain education tax credits or deductions if you’re in school or paying off a student loan. If you are still in school, you may qualify for the American opportunity tax credit and lifelong learning credit. And if you’re repaying your student loan debt, you should look into the student loan interest deduction and the earned income tax credit. Tax credits and deductions typically have income and filing status requirements, but if you qualify, you stand to save hundreds or thousands of dollars on your taxes.

As graduation gets closer and those loans start to creep up on you a little faster, remember these financial tips from GradGuard to help you out!

Career Other

Flexible Side Jobs to Help Pay Off Student Loans

December 26, 2018

College is one of the most unforgettable times of your life; you’re independent to earn, learn, and grow. However, this brings a bundle of responsibilities that include not only your daily expenses but also the college fees, living costs, food, and so much more.

Most students find themselves stuck as they are unable to manage money in the smartest way. The need to socialize and to pay bills and fees have to be kept in a balance.

Students often opt for student loans and try to get the best possible loan offers. In the case of international students, the choices are less. Sometimes they have to only opt for risky private loans. Yet, you can check out student loan offers that best suit you.

Money management is an art that you must learn before you head to college. It’ll save you from graduating with a heavy amount of debt that is still pending. That means you will be paying off student loans from the first few job salaries until it has all been repaid.

To avoid that, students are considering the options of online or offline side jobs that have flexible hours and flexible pay scale. Here are 4 flexible jobs that you can begin to pay off the student loans:

  1. SAT or ACT Tutor:

If you scored well on the SAT or ACT, why not share your experience with the college students who are in search of an expert? To ace exams, we only need to learn some tricks rather than simply remembering memorizing the information. Tutors show us the best way to learn all the material in a minimum time available.

Start tutoring the juniors by imparting your knowledge and experience to them. It will assist them in clearing the entrance exams. You can teach via Skype or other online portals to reach students from around the world.

  1. PowerPoint Presentations:

If you are good at making PowerPoint presentations and can come up with different variations in it, sell your services. In order to do this job, you can make an attractive portfolio and upload it on different freelancing websites such as Freelancer, Upwork, People Per Hour, etc. Many students, as well as companies, are looking for someone to make a good PowerPoint presentation for them. Thus, it can be a good source of income to help meet your other expenses.     

  1. Brand Ambassador

What is your favorite brand? Have the products been of any help to you? Then spread the word. If you get the chance to become a brand ambassador, share your experiences with the products and build potential client leads. It can later turn into a full-time career opportunity in the marketing field.

  1. Website Evaluator:

If you are an expert in discerning the areas of a website that need improvement, then become an evaluator for different websites. Help the website owners pace up their business. Along with being a website evaluator, you can evaluate search engine and social media platforms related to the website. This will help you establish a good user experience.

As life goes on, don’t let student loans run your life. Remember the tips from GradGuard and these side hustles help pay off those student loans a little sooner.

Taylor Hill works for a financial technology company Stilt located in San Francisco which is revolutionizing the way individuals with limited or zero credit history get loans in the U.S.

Adulting Other

How Can You Live Well While Paying Off A Student Loan?

April 10, 2018

Approximately 44.2 million Americans have student loan debt, with the average monthly payment being $351. Whether you’re still studying or you’ve completed your education, chances are you’re stressed out about having to pay off your student loan. You probably fear not being able to progress in life and enjoy milestones because you’re saddled with debt. For example, how will you buy a house, take out a mortgage, pay for health insurance, or start a family? While these are stressful considerations, your student loan doesn’t have to take over your entire life. There are ways to thrive while paying it off in the most efficient way.

Focus On Priorities

What’s important to you? Is it buying a new car or moving out of the city? Is it following an active lifestyle or having a great social life? When you focus on what your priorities are in life, the money you have after paying your monthly student loan can go towards them. That obviously means, however, that you’ll have to cut down your expenses elsewhere. It’s all about compromise and a bit of sacrifice, but if you know where you want your money to go, you’ll still be having a good, positive life because you’ll be funding what’s most important to you. Remember that it’s not so much how much you spend that makes you happy but the experiences you “purchase.” Research by Cornell University found that people are happier when they have experiences, rather than when they buy material goods.

Save For Retirement

Research conducted by Bankrate found that over half of people between the ages of 30 and 49 with student loans have postponed a life event such as getting married because of their debt and the desire to save for their retirement. It feels especially difficult to focus on saving for retirement when you’re trying to eliminate student loan debt. But it doesn’t have to be this way. There are ways to save for retirement while paying off student loan debt. These include focusing on your life goals and cutting costs, but there’s something else you can do that’ll make a big difference. While you’re tempted to kill off your student loan debt quickly, slowing it down can help you free up some of your finances so that they can go to retirement savings. Try to save 10 percent of your income every year and put it into a retirement savings account. When you earn more money, increase that amount to 15 and even 20 percent.

Don’t let student loan debt become an obstacle in your life path. If you want to get married, think creatively about how you can do so without letting student loan payments suffer. For instance, consider a low-budget wedding instead of a grand occasion that can easily notch up thousands and thousands of dollars and put you further into debt.

Consolidate Your Student Loan

If you’re battling to pay off your student debt while studying, consider consolidating the debt. What this means is that you’ll combine many loans into one, giving you the opportunity to pay one sum monthly and have one interest rate. This will increase your interest amount because you’ll be paying the loan for a longer time, but it definitely makes payments more manageable. Consolidating your student loan is, therefore, a good financial option. When you start earning more money after finishing your studies and getting a full-time job, you’ll be able to increase the amount that you pay.

If you’re really strapped for cash, switch to what’s known as an income-driven student loan repayment plan. How this works is that student loan repayments will take a bite out of your income. This means you’ll earn less money, but you’ll also pay less. A benefit of it is that it helps you eliminate monthly payments quickly while allowing you to use the rest of your income on living your life.

Don’t Skimp On Insurance

Health insurance is a common worry for recent graduate students, with a poll by AgileHealthInsurance.com finding that up to 72 percent of students battle to afford medical aid coverage. However, you never know when you’ll need emergency health care, so maintaining health insurance is important. Luckily, there are options available to you. One of these is to keep yourself healthy with regular checkups with your doctor. Preventing illness as much as you can by doing that as well as leading a healthy lifestyle goes a long way to ensure you stay out of a hospital.

But it’s not enough to keep you safe. You never know when something will happen, such as an injury or accident. That’s where “catastrophic coverage” comes into play. It won’t cover all your health needs, but it will cover the big ones you can’t control. By having an insurance plan with a higher deductible amount and a high lifetime maximum, your monthly premiums can drop quite a bit, sometimes by several hundred dollars. So, while you won’t have enough money at your disposal for regular, routine healthcare, you will have a decent amount of out-of-pocket funds if you’re confronted by life’s curveballs.

You Can Qualify For A Mortgage

You’ve found a great place to live, but you’re worried that your student loan will get in the way of you getting a mortgage. It doesn’t have to! Your mortgage lender will check your front-end ratio and back-end ratio to determine how much you can afford to pay a mortgage. Front-end ratio is when you divide monthly mortgage payments by your gross monthly income. Your back-end ratio is when all your debt payments are combined and compared to your income. Your monthly debt payments – for your student loan and other debts – are added up and then divided by your gross monthly income. This will give your lender an idea of how much you can reasonably pay.

The best thing you can do to qualify for a mortgage is to have a good credit score. You can do this by making all your debt payments on time every single month. You’re entitled to a free copy of your credit report annually and can order it online at annualcreditreport.com.

Paying off student loan during and after your studies can be stressful. But there are ways to continue living a healthy and financially secure life. It’s also worth bearing in mind these stats from a Student Loan Hero survey: while paying off student loans can be terrifying, almost 18 percent of respondents said the debt allowed them to gain greater confidence with money. So, consider the benefits that student loans can offer you. They might make you more financially savvy and teach you the best way to live your life.

Other Transition

The Real Issue: Failing to Graduate Is Costly

August 26, 2014

 

David Leonhardt is the editor of Upshot at the New York Times and posted a useful article titled The Reality of Student Debt Is Different From the Clichés. It reminds me of the challenges our society has in dealing with complex topics captured in the headlines but that often inadvertently distort the real source of risk.

Leonhardt’s article conveys student loan debt is not the primary problem facing U.S. Higher Education. Though the Brookings research, on which his article relies is not without controversy, it does assert that despite the headlines on the rapid growth of student debt “the share of income that young adults are devoting to loan repayment has remained fairly steady over the last two decades.”

The article and Brookings are under some attack, but in my view it correctly focuses the discussion beyond student loan debt and onto the….”The vastly bigger problem is the hundreds of thousands of people who emerge from college with a modest amount of debt yet no degree. For them, college is akin to a house that they had to make the down payment on but can’t live in.”

Failing to graduate is costly. Roughly 4 in 10 students fail to graduate with a bachelors within six years. In fact, you can download an Infographic that illustrates non-graduate borrowers are 4x more likely to default on their student loans and 29% of students with student loans dropped out of college in 2009. Though it is clear that academic readiness is a fundamental problem, financial issues are frequently behind the reasons students are unable to complete their degrees; when you read the details closely, even the recently announced ASU and Starbuck’s partnership appears to be focused correctly on improving college completion.

Bottom line is that college is a great investment, but it isn’t risk free.

It is a big part of why Bill Suneson and I founded GradGuard with the mission to promote greater student success by helping students and their families overcome the financial losses that can result from unexpected events that may disrupt their pursuit of a higher education. In fact, other risks also interfere with college completion – such as unexpected life events such as student accidents or illness, the death of a family member and even theft.

In reality we should all be worried about over-borrowing for a college education, (for full disclosure from 2002-2006 I worked in the student loan industry and some ofNGI’s largest clients are lenders) but we should also give greater focus to the greater the more enduring problem of college completion.

For my higher education colleagues, (particularly those attending summer industry conferences such as ACUHO-INASFAA, Noel Levitz or NACUBO events) I ask:

    • What tangible activities are you involved with to promote college completion of students?
    • What is your campus doing to help protect the investment in education?
  • How is your campus helping students overcome the financial losses that may disrupt their education?

Please let me know what you think. I welcome a conversation with anyone who has suggestions for how to address these issues and how GradGuard can help support greater student success and college completion.