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Personal Finance From a Biblical Perspective

Four Student Loan Debt Options You May Not Have Considered

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In our current society, it has unfortunately become the norm to graduate from college with a large amount of student loan debt. Then the student struggles to find employment, and if they are lucky enough to do so, the salary is way below the expectation of the degree they earned.

Student Loan Debt

Thankfully, there are a number of options out there to help alleviate this debt that goes beyond the six month grace period after a student graduates. Some people may be qualified without realizing it, since some are pretty new, and haven’t considered getting help with the burden.

The important thing to realize is that this isn’t easy or free. There are extremely specific qualifications that need to be met in many cases, such as: debt to income ratio, specific time frames, length of employment, and consistent payment of existing loans. Also, only certain loans are eligible for these options.

Student Loan Debt Repayment Help and Forgiveness Options

1. Becoming a teacher in a low-income area. If you have a Stafford or Perkins loan, some or all of your debt can be forgiven if you work in a designated school (the government provides a directory of schools that qualify) as a teacher for five complete and consecutive years.

2. Join the military. Each branch has their own student loan debt forgiveness information, so check with the specific branch of the military for options.

3. A Public Service or non-profit job. This Public Service Loan Forgiveness option only applies to a Direct loan. For this loan you must have 120 qualifying payments (keep in mind that these payments will take you at least 10 years) while working full-time in these areas. Since this option came about in 2007, you can apply for this in 2017. “You must be working for a qualified public service organization at the time you submit the application for forgiveness and at the time the remaining balance on your loan is forgiven.”

4. Pay As You Earn. This program caps payments at 10% of discretionary income and forgives remaining loans after 20 years. For this plan, you must be a new borrower as of 2007, and only certain Federal loans apply. You must have at least a partial financial hardship and your payment amount may increase or decrease each year based on your income and family size.

Other Options for Student Loan Debt

These are a few of the most common plans out there, but please research through the government’s website, your loan program, even your employer to see if more options are available to you.

This is an important thing to do, especially if your debt is taking up more than 10% of your income.

 

 Have you applied for, or benefited from any student loan debt forgiveness or help? Do you know of any other student loan debt options?

 

Photo by FreeDigitalPhotos.net

What Your College Won’t Tell You About Your Money

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The following is a guest post from Martin of Studenomics, where he tackles what to do after college and anything else that could be on your mind when it comes to money.

September is here. As much as I hate to type this, it’s certainly true. The back to school commercials are up. It’s getting cooler outside. You have to wear a sweater at night. You now have to wake up before noon.

School is here.

Before you get depressed, let’s cheer up! Next summer is only a few months away or so…

I wanted to share with you what your college won’t share about going back to school so that you survive financially. I don’t want you to end up in thousands of dollars in debt. I don’t want you to be paying off student loans into your 40s. I want you to be debt-free early on. If I can do it, anyone can.

What Won’t Your College Tell You About Your Finances?

College Financial Literacy

You Can And Should Work.

Yes, you should be working. If you work even a little bit, this will help you out with your debt in the future. Every dollar today counts. You won’t get rich, but you’ll dent your debt while in school.

You also can’t fool me here. I always had an active social life and I still held a job. I know that you think you’re busy, but trust me, we all waste time. Working forced me to manage my time better and not to mess around. Those hour-long bus rides were my saving grace before finals.

But Martin! I can’t work, I swear.

If you’re program is too intense to even work a few hours per week, then you can work during your time off or apply for a work term. Either way, you should work during college. It will get you into the habit of being a real person when you graduate and it will help you cover some of your bills.

It’s also not too late to apply for a work term. You can try to get in for the next term or some time in the future. Please try to apply at least. You might have to give up your summer, but you’ll have money to help with bills!

There’s Free Money Available To You.

Money should never hold you back from a quality education. Every college offers all kinds of financial assistance. You can apply for any or all of the following:

  • Scholarships.
  • Bursaries.
  • Grants.
  • Awards.

You have nothing to lose from applying. I suggest that you take the next rainy afternoon to apply for all of these forms of financial aid. The worst case scenario is that they say no.

I dated a girl who would get insane amounts of financial assistance every year. She simply applied for everything because she was poor.

Think about it this way: if you get paid $12 an hour, how long would it take you to earn $2,000? Now imagine writing an essay in an hour that leads to $2,000. Not so bad, right?

Where do you find out more about financial help?

Every college has an office for this and a portion of the website dedicated to finances. It’s usually pretty easy to figure out. You can look for specific bursaries, scholarships, grants, or awards. They offer ones for each program and even for every specific niches.

All you have to do is print out the forms and submit them before the deadline.

There Are Plenty Of Free Resources (And Awesome Stuff).

There’s so much free stuff out there. You just have to look around.

For example, you can easily workout without a gym membership when you can’t afford it. However, as a student you might have a free gym membership as part of your package.

A Few Other Free Or Cheap Things To Look Out For:

  1. Concerts on campus.
  2. Student discounts.
  3. Health benefits.
  4. Resources (resume writing help, job search, etc.).

Don’t spend money that you don’t have on things that can be free to you or close to it.

This Is The Best Time To Live On The Cheap.

Let’s be honest here. One of the most charming aspects of college is the extreme frugality that we go through. This is the one time in your life where frugality is embraced. Being a poor college student will force you to make the most with the least.

For example, my brother can eat off nothing. Seriously, he’ll spend a $100 over a month sometimes on food. I have another friend who has had the same pair of shoes for years. He wears these shoes everywhere (formal events as well). I personally believe that he might be better off going bare foot at this point.

How cheap will you be as a student?

Watch Who You Hang Out With.

I know, that you’re a grown up. This doesn’t meant that you won’t make plenty of mistakes. All I’ll say is that you have to watch who you hang out with. If you get involved with the crowd, you can easily start spending money and racking up the debt on things that you don’t need. Your friends in college are very important.

I wish you all the best in college. I hope your grades are through the roof and that you manage to survive financially. Even if you apply one of these tips, you’ll thank me one day.

Don’t forget to check out Studenomics!

Why A Consolidation Loan May Be Worth Considering

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I know that many of you may think I’ve gone crazy with the title of this article – especially since I am trying to pay off debt myself – but I can assure you that I have not.

With interests rates being as low as they are right now, this may be a perfect opportunity to take out a loan in order to refinance debt or start up a business.

Don’t get me wrong, I still despise being in debt bondage, and I would still advise all of my clients, family, and friends to avoid debt whenever possible; but I also understand that taking out a loan isn’t always the worst option.

Here are a couple of situations for which getting consolidation loans might be the answer.

High Interest Credit Card Debt

Some people get into credit card debt because they decided to live above their means. For others, it may have been due to a few acts of desperation. Some may have even tried to take advantage of credit card benefits, and for some reason, were not able to pay off their debt.

No matter what the reason, if you are stuck with high-interest credit cards, it’s time to take action. First, call your bank(s) and try to negotiate a lower rate. If that doesn’t work, see if you have a card with a zero balance and a balance transfer offer. If your savings are higher than the transfer fee, do it!

If none of these options work, it may be best to take out a loan – be sure to take advantage of a personal loans comparison first from sites like http://www.comparethemarket.com/loans/ – and consolidate your credit card debt.

Student Loans

There are a growing number of people who are financing their higher education with the help of student loans. Unfortunately, many of those former students are then put into a difficult financial situation because of their high monthly student loan repayments.

Depending on whether you took out subsidized versus unsubsidized Stafford Loans (or some other instrument), you may end up owing a lot more than you realize once you’re out of the grace period.

Sometimes, the only option in these cases is to secure another loan, which will help you to lower your interest rate and/or extend the amount of time that you are given to pay back the loan – lowering your payments in the process.

Of course, your goal should always be to pay back any debt as quickly as possible, so don’t use your lower payments and a license to go wild with your spending!

Consolidation Loans For Your Car Note

Most people only think about refinancing their mortgage when overall interest rates in the economy drop. However, you can still save yourself thousands of dollars if you can get a new loan for your vehicle.

Don’t forget to compare any fees that you might have to pay with the amount of money you stand to save by refinancing.

The same exact things can be said about refinancing your mortgage – besides, people write about that so often that it gets boring! 😉

photo by Omar Omar

Reader Questions

  1. Have you ever had to take out consolidation loans for one or more of the reasons listed above?
  2. Do you think it’s a bad idea to try to fix a debt problem with more debt?

A Lawyer Is Forced To Become A Stripper To Make Ends Meet: How Far Would You Go?

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It’s been said that desperate times calls for desperate measures, and that can definitely been seen when we face financial problems. I’ve had between 15 and 20 jobs in my life – usually working 2 jobs at any given time. Since I dropped out of college (shhh…don’t tell anyone) at the age of 18, and didn’t have any trades under my belt, I was forced to take whatever jobs came along in order to pay the bills.

I’ve done door-to-door sales (twice), delivered auto parts in my own car (without being reimbursed up to the  standard mileage rate), and I’ve even scrubbed toilets (and other things) in a hotel overnight!

For much of my adult life I’ve been broke, stuck trying to pay off debt (even to the point of trying debt consolidation), and unable to do anything about it because of a lack of education and opportunity. However, I have never been forced into a job or position that has made me feel a lack of dignity.

A few days ago I came across a story on MSNBC about a lawyer who was forced to become a topless dancer in order to make ends meet. I was fascinated to find out how she ended up in this position, and what, if anything, she could have done to change things. Here is a part of her story:

When Carla graduated 10 years ago, she thought her law degree would be a permanent ticket to a high-paying job.  But instead of selling her mind, Carla is selling her body. After student loans, debt, a layoff and unemployment battered her bank account, she now finds herself in an almost unbelievable position – dancing in a topless bar.

“Did I ever think I’d be taking my top off for rent money? No. I was in my mid-30s and had never danced before,” said Carla, who asked that we use her stage name and withhold her identity and some personal details. “As a little girl, I never thought to myself, ‘I just want to grow up and be a stripper,’ or, ‘All I ever wanted to do in life is climb in the lap of sweaty stranger and take my top off.’

“But, with our economy the way it is, especially in smaller cities … you strip or you starve,” she said.

The first thing that I was reminded of by reading this story is that it is very unwise to judge people based on their external circumstances. I’m sure that when many people see her “working”, or hear of what she does for a living, they immediately get a number of [probably wrong] ideas about her. I know that I would be shocked to meet a exotic dancer with a law degree!

I am sure that many of us have been in desperate financial positions – or we may still be in them now. How far would you be willing to go if you lost your job and had no income? Before you answer that, consider how Carla went from respectable work to doing something that causes shame:

After graduation, she worked for nine years putting her degree to use, but she had entered the crowded legal profession at the wrong time. When she was laid off in 2009, she couldn’t find work.

“At first, I worked as a waitress, and a cashier in gas station,” she said.

As her prospects grew dim, she went back to school to earn a master’s degree, hoping to bolster her credentials. But her financial aid came in lower than expected, her credit was battered and she struggled to find part-time work in her new town to keep her afloat.

I’m sure that many of you can imagine going through this type of downward progression. She first got a couple of low-paying jobs, and then tried to go back to school. When that didn’t work out as she planned, she tried to find another low-paying job – but wasn’t able to find anything:

“I went around to see if could get a job as cocktail waitress, but there was not a single retail or waitress job.  No one was hiring, except for the topless places,” she said.  “It was an act of desperation.”

She started out serving drinks as a waitress, but moved quickly to dancing “because that’s where the money is, and that’s what I needed.”

This wasn’t someone who just took the “easy” way out; this is someone who tried many options before ending up where she is now. The article didn’t say if she tried other options than what is listed, such as becoming a part of the contingent workforce, applying for social welfare programs, or even living with friends. In order to choose a “profession” as demeaning and as looked down upon as stripping, I would hope that she looked into these other measures first.

I am not sure what her situation looked like before she was laid off, but here are a couple of things that you can do to help soften the blow if/when this happens to you.

How To Prepare For Financial Hardships

  • Have a Large Emergency Fund – Try to have between 9 months and a year of living expenses in a high-yield savings account.
  • Pay off Debt – It is much easier to adjust your living expenses than debt payments.
  • Have a Financial Contingency Plan – Whether it’s an old profession or side job, have a way to earn money that’s not connected to your current full time job. Also know what expenses you can easily cut and what services you can do without (it may be wise to just cut them now and build up your emergency fund, pay off debt, or save for retirement)!
  • Have a Support System – Know who you can count on in an emergency. You may need to consider taking loans from family or staying with loved ones; it’s good to know ahead of time, who you can rely upon.
  • Consider What You Can Sell – This doesn’t mean that you should start holding garage sales tomorrow, but it is important to have a discussion with your family members and decide what items can go if you fall upon hard times. It will be much easier to make this plan now, rather than when you are all under the stress of a financial hardship!

How Far Would You Go?

Looking at her situation made me wonder how far many of us would go in order to make ends meet. What would be the first steps you would take if you lost your job and ran through your savings?

Would you go back to school and live off of student loans until you graduate? Would you sell most of your possessions and live with a friend or family member?

Of course, I am not considering anything illegal or immoral, because that wouldn’t be appropriate for this discussion. However, I would like to hear from you on this issue.

What things would you do before you would be willing to swallow your pride and take a “demeaning” job, move back in with your parents/kids, or give up certain luxuries that you foolishly consider to be needs?

photo by Pat Shannahan for msnbc.com

The Article Was Featured In The Following Carnival(s):

The Best Of Money Carnival #122

Totally Money Blog Carnival Celebrity Roast Edition

Yakezie Carnival – Examples of Selflessly Helping Others Throughout History – September 25th, 2011 Edition

Subsidized Versus Unsubsidized Stafford Loans: Why Knowing The Difference Can Save You Thousands!

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It’s that time again! People are looking to go back to school and are searching for information on subsidized versus unsubsidized Stafford Loans. I’ve actually had two friends ask me about the difference already.

Although, I hate the fact that many of us graduate with student loan repayments, I know that it has now become a fact of life. There are two main differences, which we will discuss below. We will also take a look at many of the details that make these two options very similar.

Subsidized Versus Unsubsidized Stafford Loans

What Is A Stafford Loan?

Taken directly from the Federal Student Aid website:

Direct Stafford Loans, from the William D. Ford Federal Direct Loan (Direct Loan) Program, are low-interest loans for eligible students to help cover the cost of higher education at a four-year college or university, community college, or trade, career, or technical school. Eligible students borrow directly from the U.S. Department of Education (the Department) at participating schools.

These are different than the private student loans that you may receive from a bank or other financial institution. When evaluating the differences between subsidized versus unsubsidized Stafford Loans, it is important to remember that in both cases, you are borrowing directly from the federal government.

Eligibility For A Federal Direct Loan

Eligibility For Subsidized And Unsubsidized Stafford Loans

Since subsidized and unsubsidized Stafford Loans are part of a student’s federal financial aid package, there are a number of requirements that must be met in order to be eligible for a direct loan:

  • U.S. citizen or an eligible non-citizen with a valid social security number
  • Working toward a degree or certificate in an eligible program
  • Enrolled at least half-time as a regular student
  • At a school that participates in the Direct Loan Program
  • Have a high school diploma, GED or pass an approved ability-to-benefit (ABT) test
  • Register with the Selective Service if you’re a male between 18 and 25
  • Maintain good grades
  • Must not be in default on a federal loan

How To Apply For A Direct Stafford Loan

In order to apply for subsidized Stafford Loans (or even unsubsidized) you must complete the Free Application for Federal Student Aid (FAFSA). You can complete the application online, and the level of financial aid which you are offered will be determined by many factors.

Once you receive your award package, the details regarding what loans you are eligible for (as well as other types of financial aid) will be included.

Hopefully, you will receive enough in aid and grants to cover the cost of your education (when combined with any savings you may already have). If you have to borrow money for your education, then you should take advantage of the subsidized Stafford Loans first.

Borrowing Limits For Unsubsidized And Subsidized Stafford Loans

YearDependent Undergraduate Student (except students whose parents are unable to obtain PLUS Loans)Independent Undergraduate Student (and dependent students whose parents are unable to obtain PLUS Loans)Graduate and Professional Degree Student
First Year$5,500—No more than $3,500 of this amount may be in subsidized loans.$9,500—No more than $3,500 of this amount may be in subsidized loans.$20,500—No more than $8,500 of this amount may be in subsidized loans.
Second Year$6,500—No more than $4,500 of this amount may be in subsidized loans.$10,500—No more than $4,500 of this amount may be in subsidized loans.$20,500—No more than $8,500 of this amount may be in subsidized loans.
Third and Beyond (each year)$7,500—No more than $5,500 of this amount may be in subsidized loans.$12,500—No more than $5,500 of this amount may be in subsidized loans.$20,500—No more than $8,500 of this amount may be in subsidized loans.
Maximum Total Debt from Stafford Loans When You Graduate (aggregate loan limits)$31,000—No more than $23,000 of this amount may be in subsidized loans.$57,500—No more than $23,000 of this amount may be in subsidized loans.$138,500—No more than $65,500 of this amount may be in subsidized loans. The graduate debt limit includes Stafford Loans received for undergraduate study.

As you can see in the chart above, you are allowed to have both unsubsidized and subsidized Stafford Loans in the same year. This is good for those students for whom the out of pocket expense will be greater than the subsidized direct loans limit.

Repayment Of Federal Direct Student Loans

The one good thing about both of these types of student loans is that you aren’t required to pay them until after you drop below half-time status for a period of at least 6 months. If you maintain half-time status from start to finish, you will not be responsible for making any student loan payments until after you graduate.

Another good thing is that if you need to take a break from school for longer than 6 months and you begin to make payments (see “grace period” below), once you enter another eligible program (or continue on in the same one) your loan payments will be placed on hold once again. This is great for people who decide to go back to school after a break, or who are seeking an additional degree.

The main point to remember is that while you’re enrolled in an eligible program at least half-time, you are not required to make any payments on your federal student loans. Try to use a student loan calculator to determine what your monthly payments will look like after graduation.

Federal Student Loan Grace Period

Once you graduate, leave school, or drop below half-time enrollment, you have a period of time before you have to begin repayment. For federal Stafford Loans, that “grace period” is 6 months.

Theoretically, this gives a new graduate 6 months to find employment and cover their job hunting expenses, before they begin to repay their student loan. Although, I’m sure that many graduates would like much more than 6 months before those payments start up! Once the 6 months are up, they may considering becoming a part of the contingent workforce, in order to pay back the loan.

Although, with the current state of the economy, I can picture more and more graduates trying to get student loan forgiveness in order to wipe away their debt.

Unsubsidized Versus Subsidized Stafford Loans: So What’s The Difference?

Up to this point, most of the specifics regarding Direct Stafford Loans apply to both subsidized and unsubsidized. However, there are two distinct differences that makes one significantly more appealing than the other.

Interest Rate On Direct Stafford Loans

This is the first area in which you will find a difference between subsidized Stafford loans and unsubsidized Stafford loans. The date in which interest begins to accrue on the loan depends on which type you have received – which makes a huge difference in how much you will ultimately pay back to the government!

Unsubsidized Loans

As I mentioned above, you are not required to make any payments toward your federal student loan while you are at least a half-time student. However, from the moment your unsubsidized Stafford loan is dispersed, interest begins to accrue.

That means that once you graduate, you will owe more money to the federal government than you took out in loans! As you are taking your classes, interest is accruing on the money that you borrowed. This accrued interest adds thousands of dollars to the balance of your loan, making it that much harder to pay off.

Subsidized Loans

As the name implies, there is a “subsidy” attached to these loans. While you are in school (at least half-time), no interest is charged against your loan. For all intents and purposes, the loan is being subsidized by the government, who is paying the interest for you.

So, those thousands of dollars that get added to the balance of your unsubsidized student loan, aren’t added to your balance if you have a subsidized Stafford loan!

How Are They Awarded?

Subsidized Stafford loans are awarded based on your financial need. They are considered to be a part of your overall financial aid package, and therefore, you can be awarded less than the maximum amount. Here is an explanation of the difference from the government’s student aid website:

Depending on your financial need, you may be eligible to receive a subsidized loan for an amount up to the annual subsidized loan borrowing limit for your level of study. If you have education expenses that have not been met by subsidized loans and other aid, you may also receive an unsubsidized loan so long as you don’t exceed the combined subsidized and unsubsidized annual loan limits.

So, even if the federal government decides that you and/or your parents earn too much, and therefore, you do not qualify for a subsidized student loan; you can still take out an unsubsidized Stafford loan – up to the combined annual loan limits. This is important to remember especially if you are a broke college student – you can actually borrow more than the cost of your tuition to spend on books and other things.

Unsubsidized Versus Subsidized Stafford Loans: Which One Is Better?

Since the interest accrues immediately on an unsubsidized student loan, most students will want to avoid that option at first. However, since the subsidized Stafford loan is awarded based on the financial need of the student, many times the award is not enough to cover all costs.

The ideal situation – besides having more than enough aid and savings to cover all costs (learn how to save money on textbooks) – would be to only need to take out a subsidized Stafford loan. This way, you don’t have to worry about amassing interest on your loan until after you have completed your education.

If you must take out an unsubsidized Direct Stafford loan, then be sure to pay off (at least) the interest each month. That way, when you enter into the repayment phase of your loan, you will only owe what you initially took out.

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