If you’ve got student loans, chances are at some point during the repayment period you’re going to have difficulty making your payments. Given today’s still-sluggish economy, you may have trouble making your payments shortly after you graduate from college or grad school. Don’t panic– you may have options. The worst thing you can do is do nothing. If you don’t make your payments, your loans can become delinquent or even defaulted. That has serious consequences (which I’ll be discussing in a subsequent post).
Different Federal student loans have different rights. The Perkins loan is an under-understood (and under-appreciated) federal loan that has a lot more rights and benefits than people might realize.
- It has a lower interest rate, generally at about 5%
- You don’t need a high credit score to get one
- You don’t need a co-signer to get one
- The government pays your interest while you’re in school
- It is serviced by your school, meaning you don’t have to deal with the large bureaucracy at the U.S. Department of Education
- It has a longer grace period (the “free” period after graduation) at nine months. That’s three months longer than Stafford loans, and Grad PLUS loans don’t even have a grace period.
- You can cancel the loan if you work in certain professions. This is, arguably, the biggest benefit of Perkins loans. For those with eligible occupations—for example, certain types of teachers, certain types of medical professionals, and certain types of lawyers—you can get your Perkins loan completed cancelled. Cancelled— as in, you don’t have to repay it.
If you have a Perkins loan, that’s great news. It is one of the best student loans you can have. Keep in mind that if you areconsidering consolidating your federal student loans and you want to include the Perkins loan, you will lose the post-graduation benefits of the Perkins loan–namely the extended grace period, the lower interest rate, and the cancellation rights. Make sure you know whether or not it makes sense to include your Perkins loan in the consolidation.
For-profit colleges have been coming under increasing scrutiny over the past couple of years. These schools have been accused of enticing students through misleading recruitment tactics, saddling them with enormous amounts of student loans, and then sending them off into the world with a degree that is near-worthless. Student loan default rates at for-profit colleges are astonishingly high, yet these institutions earn 90% or more of their revenue from federal and private student loans. Now, state attorney generals are investigating. Take a look at this Boston Globe article about what Massachusetts Attorney General Martha Coakley is doing about for-profit colleges:
It’s May. It’s Spring. The weather is warm. Summer is near. And millions of students are graduating from college and grad school. Most have at least some student loans. This is certainly an exciting time, but don’t let your student loan obligations surprise you in a few months. There are important things you need to know now so that you are prepared to manage your debt burden in the months ahead.
Do you have a large amount of federal student loan debt? Do you look at the obscene balance on your monthly statements and think to yourself, “Wow. I’m going to be paying this off for the rest of my life.” Well, you might not have to.
In 2007, Congress passed the College Cost Reduction and Access Act, which created the Income-Based Repayment program (also known as “IBR,” described in one of my earlier posts below). IBR and another repayment program, the Income-Contingent Repayment program (“ICR”), calculate a unique monthly payment amount for borrowers with relatively high amounts of federal student loan debt compared to their income. IBR and ICR keep your monthly payments low. The Act also provides two ways to get your loans forgiven.
Student loan debt outpaced credit card debt for the first time last year and is likely to top a trillion dollars this year as more students go to college and a growing share borrow money to do so.
While many economists say student debt should be seen in a more favorable light, the rising loan bills nevertheless mean that many graduates will be paying them for a longer time.
Recent graduate? Or graduating this spring? 6 reasons why you should think about consolidating.
If you’re like me (and millions of other student loan borrowers), you got through school with a wide variety of different federal student loans. Stafford Loans. Perkins Loans. Subsidized Loans. Unsubsidized Loans. Grad PLUS loans. Maybe others. Managing the repayment of each of these loans can really turn into a full-time job, and if you accidentally start missing payments, you’re in trouble.
You may be eligible to combine all of those loans into a single federal consolidation loan. Here are some of the benefits.
Income-based repayment (“IBR”) is a relatively new option available for federal student loan borrowers, and it can save you literally thousands of dollars. Unfortunately, many people who are still paying off their student loans don’t know about this program. Even if you are currently on a different repayment plan, you may be able to switch.
IBR is exactly what it sounds like it is: repayment plan that is based on your income; specifically, your adjusted gross income (AGI). The Department of Education uses a formula to calculate your monthly payment that takes into account your AGI, your family size, and your total federal student debt, and comes up with an payment amount for you that is generally between 10-15% of your monthly income, even if you have a large loan balance.
Loan Study on Students Goes Beyond Default Rates
By Tamar Lewin, New York Times
For each student who defaults on a loan, at least two more fall behind in payments on their student debt, a new study has found.
The Institute for Higher Education Policy, a nonprofit organization, said in a report that two out of five student loan borrowers were delinquent at some point in the first five years after they started repaying their loans.
Almost a quarter of the borrowers used an option to postpone payments to avoid delinquency…. Read more at: http://www.nytimes.com/
In general, most student loans will not be dischargeable in bankruptcy. There are some limited (and important) exceptions to this general rule which I will not be discussing in this posting, but for many people who have student loans, bankruptcy may not be an option.