Staying Out Of Trouble With Student Loans

Once you graduate and find a job, the reality of paying back your student loans hits. Below are some steps you can take to help keep the payments from causing you heartache.

The first rule is to stick to a payment plan. Set aside a certain amount every month for your loan payment. Making a larger payment than required each month can help you pay back the loan sooner, thereby saving you a great deal of money on interest. If you think you may "forget", set it so the payment is electronically transferred each month. Though interest rates of student loans are low compared to credit cards and other loans, it's still a frustrating reality to deal with. But there is hope, if you're making under $65,000 on your own or less than $130,000 if filing jointly you can deduct up to $2,500 of the yearly interest you're paying on your student loan.

If you're simply can't come up with your monthly payment, there are options. Since your salary is only going to grow as you climb the corporate ladder, you can schedule graduated repayment plans with your lender. You start with a low monthly payment that will gradually get larger over the term of your loan. If you're absolutely out of options, you might be able to temporarily suspend your payments. If you lose your job or go back to school for an advanced degree, you can request a deferment of your loan payments. If your request is granted and you have a Stafford loan, the government will actually take care of the interest that accrues during your deferment.

If you can't get a deferment, try forbearance. You can suspend payments for up to a year, though you'll still be responsible for the built up interest.

Stafford Loans

One of the primary sources for student loans is the federal government. These are called Stafford loans. There are two types, direct and FFEL. These differ in a number of respects and have the same eligibility requirements. The major differences are how the loans are repaid and the needs.

The direct student loan program receives its funds from the federal government. The FFEL uses private lenders such as banks and credit unions for funding. Not all private lenders participate in the FFEL program. The repayment options also depend upon which institution is used and their particular requirements. There are two types of loans, subsidized, and unsubsidized.

A subsidized loan is based on financial need. The federal government subsidizes the interest on these loans. This interest does not get applied during the period prior to repayment or during authorized repayment periods.

An unsubsidized loan is available to almost anyone. These loans have the interest start to accrue from the moment the loan is authorized until the loan is paid in full. In addition these loans can be capitalized. This means that the interest will be added to the principle and the interest will then be applied to this higher amount. To keep this at a minimum, it is suggested that at least the interest be paid as it accumulates.

The amount of money available is dependent upon whether you are a full time or half time student. No Stafford loans are available to students who are enrolled for less than one third of an academic year. Your financial aid department will assist in determining the amount of money available. Both the direct and FFEL loans are in addition to other monetary sources such as grants and scholarships. Because these are interest-accumulating loans it is best to consider any available grants, gifts or scholarships first and then base the loan upon the remaining balance.

Scholarships An Alternative To Student Loans

A scholarship is money given to pay or offset school expenses and lower the number of student loans you need. The amounts can range from only a few dollars to an all expenses type. This latter one is often referred to as a full ride. The counseling offices of most high schools will have a book that lists the more common scholarships available. Below are descriptions of some of the most often used sources.

Many companies offer scholarships through the local school systems. This is a way for a company to encourage students to study subjects applicable to that companies business. Some of these scholarships are free but others have a stipulation of working for that particular business upon successful completion of studies. This is a type of student loan, as you need to repay it by working off the debt.

Minority groups encourage members of that particular minority by offering money for education. Other groups specify that it is designed for women or of a particular faith. Scholarships of this nature usually do not define the subject matter to be studied.

Local universities often court outstanding athletes by having their abilities tied to the scholarship. These students receive the money but are expected to also use their athletic talents at the school offering the award. This is also a type of student loan, with the payment being performance in the sport. .

Most of the scholarships discussed here are offered at the high school level. Talent scouts notice good athletes and companies and minority groups maintain close ties to many schools. This community involvement helps to ensure a vital workforce and top-notch sports teams. Keep in mind that, while actual money may not be needed in return, many of these are student loans requiring payment in some form.

Saving Money On Your Student Loan

Anyone that has gone through college knows it cost a lot, which leads to many take out student loans. Just as with any type of loan, it is important that you do your research to find the best student loans for your situation.

Different loans will get you different amounts of money with various circumstances behind the loan. However, there are a few things you can do with any student loan to save money.

With student loans, the interest rate is adjusted every July 1st making it difficult to know how much you really are going to have to owe when getting out of college. There is, however, a way to lock your interest rates to avoid having them raised after a certain period of time.

By consolidating your interest rates you can have them permanently locked for the remainder of your studies. The next thing to look at to help you save money on your student loans is automatic payment. A lot of lenders will offer you incentives and reduced interest rates when you have your student loan payments automatically deducted from your account.

The reason being is that you are guaranteeing the lender that you will be paying the loan on time and in full amount by giving them access to your account. This also makes it more convenient for you allowing you to avoid missing a payment..

The most obvious way to save money with your loan is to be on time. The minute you are late with your payment the interest rates will go up and your credit will go down. If you do feel the pressure of making the payments on time, make sure to talk to the lender before getting too far behind to see if you can work out an arrangement of some sort.

Sallie Mae Student Loan Consolidation

When your student loans get the best of you and you're wondering how you're ever going to get out from under all that debt, take a look at loan consolidation. It may be the answer to a number of your problems.

Turn to Sallie Mae loan consolidation for a way to pay off your federal student loans, improve your finances, and put a little extra money in your pocket every month. A Sallie Mae loan consolidation replaces your existing multiple student loans with one loan, usually with a dramatically lower interest rate - as low as 4.75%. The difference a few percentage points can make in monthly payment amounts can mean the difference between scraping to pay bills and actually having a little extra pocket money.

It is not uncommon for a borrower to get a fixed interest rate that is up to 0.6% lower than their current rates. According to federal regulations, calculating the interest rate on a consolidated loan disbursed on or after July 1, 1994 involves the weighted average of the interest rates of the old school loans you are consolidating under the new one, rounded up to the nearest one-eight of one percent. Fixed interest rates on a consolidated loan cannot exceed 8.25 percent.

Every July 1, the interest rates on federal student loans are subject to change according to the annual fluctuations of short-term federal securities, and with them your monthly payment. One of the benefits of a Sallie Mae loan consolidation is that the interest rate is locked in for the length of the loan. While interest rates may be lower some years, when you are locked into an interest rate at least your payments will be predicable and will not rise in the years when the interest rates do.

A Sallie Mae loan consolidation also offers the opportunity to increase the length of the loan. The longer you have to pay it off, the smaller the monthly payments will be. Remember though, lengthening the life of your loan may mean paying out a larger total amount over time.

Applying on-line for a Sallie Mae loan consolidation is free, there are no fees, and there are no credit checks. A few minutes of your time can get you smaller monthly payments and better credit scores; when your Sallie Mae loan pays off your old student loans, your credit report reflects those paid off debts.

Things happen in life and in a crisis sometimes, those student loan payments don't get made on time, or at all. If you have used up your deferment and forbearance options on current loans, consolidating your debt under one Sallie Mae loan may mean a fresh start and a clean slate. If you are facing a situation where defaulting on one or more of your current loans is a very real possibility, acting now to take advantage of a Sallie Mae loan consolidation may save you a lot of problems and help you out of an overwhelming situation. If you decide that a Sallie Mae loan consolidation is what you want, there are four options for repayment plans, the Standard Repayment Plan, the Extended Repayment Plan, the Graduated Repayment Plan, and the Income Contingent Repayment Plan. The Standard Repayment Plan offers fixed monthly payments, but the life of the loan is limited to 10 years. The Extended Repayment Plan also offers fixed monthly payments, but spreads them over 12 to 30 years, depending on the total amount borrowed, which lowers the amount of the monthly payments. The Graduated Repayment Plan also spreads payments over 12 to 30 years, but the monthly payments increase every two years.

The Income Contingent sets a payment plan that is calculated on your annual gross income, family size, and total consolidated loan debt, figured into a period of 25 years to pay it off.

A Sallie Mae loan consolidation may be the best option for you, but be sure to explore your options thoroughly to make sure you get the best loan for your situation.

Private Student Loans

Federal student loans are based on both income and availability. What happens if you can't afford college yet don't qualify? An alternative choice for you or your parents is a private student loan. These are loans done through private lenders instead of the government. The advantage of these types of direct student loans is that they have many of the same kinds of benefits as federal loans.

These loans can be used for any and all college expenses. Things like tuition, books, supplies, computers, and living expenses are all things that qualify for private student loan funds. These loans are unsecured, meaning that no collateral is needed. The loans are credit-based instead. This can mean that you might need a co-signer if you have not established a credit history.

A private education loan is usually a low-interest loan. The money can be delivered in as little as five days, and the money is given to you instead of the school. You are then responsible for paying for their various educational expenses.

This kind of loan has other advantages similar to federal loans. The interest and principal payments can be deferred until you graduate from school. For most of these loans, you are required to be attending school at least halftime for the deferral of payments and interest.

When you do graduate, the loans can usually be deferred for six months until you finds employment, and then you will generally have a variety of repayment options available so that you can tailor your payments to your income.

Don't let the high cost of a college education deter you. There are options available even for those who do not meet low income standards required by federal programs. Take time to do some research and you will soon be on your way.

Pell Grants instead of Student Loans

There are ways you can lessen the amount of student loans you need. Once you are accepted at an accredited university, college, or community college, talk to the financial aid department. There are several scholarships and grants that are based on income and may make it possible not to need as high a student loan.

The Pell grant is one of the federal programs most schools automatically file for students. The maximum award is over four thousand dollars. However, not all students will get the maximum amount. Many factors are considered when a student applies. With few exceptions, a part time student must be carrying at least a half time load. Another factor that is considered is the actual college costs for both tuition and books.

Unlike a student loan, a Pell grant is just that, a grant. It is never repaid. It is up to the individual institution as to how the money is applied. You may either receive a check or have it applied directly to your school expenses. The various options will be discussed between the student and financial aid officer. Federal law required payments to be made a minimum of twice per academic year.

Another issue to consider when applying for a Pell grant is the type of institution. State colleges and universities are often less expensive than private colleges. Pell grants are available to Universities, private colleges and community colleges. The community college system is often the least expensive and can be used to earn Associate degrees and have many of the credits then be applied to a four-year institution. By using the Pell grant to pay many of these expenses the student can thus earn a degree that can be used to secure employment that can then be applied to the continuing education process.

Paying Off Defaulted Student Loans

If you have not made your federal Stafford, PLUS or Graduate PLUS loan payment in over 270 days, your student loan will be considered in default. What can you do about this to keep your credit from being ruined?

Having a defaulted Stafford, PLUS or Graduate PLUS loan on your credit report will cost you dearly in the long run. The bad mark will mean higher interest rates and credit denials until it is cleared, a minimum of 7 years. Even if you pay the loan in full it will still be marked as defaulted. There is only one way out of this predicament - loan rehabilitation.

Contact your lender and make arrangements to pay back your student loan and you are on your way to a clean credit report. Your lender wants to get paid, and they know the best way for that to happen is to work with you to come up with a payment you can afford. When you reach a satisfactory repayment agreement with your lender stick to it!

After nine full payments on your defaulted Stafford, PLUS or Graduate PLUS loan made within twenty days of their due dates (twelve full payments for Perkins loans) your loan will be taken out of default status and your credit record will be clean. These must be voluntary payments. Garnishment or other forced payments do not count. As soon as your default status is cleared you will be free to consolidate your loans and lower your payments even more.

While you may be able to consolidate after three consecutive payments your loan will not be taken out of default status. This will be marked on your credit record as 'defaulted, paid in full" and still considered a black mark so loan rehabilitation before consolidation is mandatory for a clean credit history

Other Types Of Student Loans

Not all loans for college are obvious. There are two sources for financial aid that are often overlooked. Each of these will be discussed in more detail below.

Parents tend to plan their children's future well before the child is even born. Although mom and dad just know their child will be a genius and will be offered full scholarships, they also try to be ready just in case that isn't quite the case. To that end, many parents will have life insurance and annuity plans in place that will mature in time for their offspring to take advantage of the financial rewards.

By taking out a permanent life insurance plan, it can be paid for in a certain number of years. This type of insurance can then be cashed in and the payout can be applied to the child's educational needs. Parents will also cash in this type of policy and invest it in an interest bearing account thus allowing for a growth fund that will grow as the child ages. As with retirement funds below, some companies allow loans against the face value of the policies that can then be applied to educational expenses.

One or both parents may also set up a retirement fund, such as a 401k. After a period of years, these monies can be taken out, pre-tax and applied to a child's education. Some company retirement funds allow the employee to just borrow against the fund for educational purposes. For tax purposes the Roth plan is also a possibility. To get a clearer picture of how either of these is best used, one should consult a tax professional. By knowing ahead of time the ultimate purpose of this plan, the professional can help direct the individual into setting up the proper deductions.

Options For Paying Your Student Loan.

There are mainly four options for paying back your student loan. If you land up with a good job once out of college, and can afford to make steep monthly payments, go with the standard payment schedule.

Under this option, you can pay off your debt within 10 years with the best interest rate. It's the quickest way to pay off your loans. However, it requires high monthly payments.

Graduated payment is an option if you expect to make a modest but steadily increasing wage. The payment requirements will start off gentle, and will gradually increase every couple of years for the next 10 to 30 years.

If you're in a commission-based or seasonal business, your income will vary accordingly. In this case, your monthly payment bill will be proportional to the amount you are currently making. You get a levy of get up to 15 years to pay it all off your student loan.

With a long-term payment option you'll be allowed to pay the least possible amount per month for 10 to 30 years. That however means that in 30 years you may have paid double the original amount of your loan. You have the flexibility of choosing to switch from one payment option to another, depending on your financial status..

Student loan consolidation is another well-trodden path chosen by graduates each year. It allows you to put together your separate student loans into one big loan. Debt consolidation will bundle your student loans into one, with a single loan amount which will be much lesser than paying multiple loans.

Some also choose consolidation because it's easier to keep track of the bill. Banks want their money and will often work with you to find the payment method that is easiest for you to keep paying. The bank gets their money and you can live within your budget.

No Credit, Bad Credit, No Problem You CAN get a Student Loan

Even if you have little credit or no credit rating at all, you can still get a student loan. Student loans are a good way to build credit as well, so once you obtain one, be sure to repay it.

Wonderful student loans for those with little or no credit are government-backed loans or loans offered through your university. One such option is the Stafford loan. When the student borrows these loans, most lenders do not look at the student's credit history. You can apply for a Perkins loan as well, which also does not look at your credit history. The government supplies the money for this type of loan, but it is reserved those who are most in need, so this option is not available for everyone.

Because Perkins and Stafford student loans are often limited to a particular amount each year and in total, there are also government-backed student loans for parents of students, called PLUS loans. Because these are government-backed loans, lenders - whether a financial institution or the government itself - do not look at anyone's credit score. These lenders do, however, take a look at your credit history to decide if you are late on any payments or in default. If so, you will not be able to receive a loan.

One thing to remember with government-backed loans is that, though you can defer payments and you may have very low interest rates, you must re-pay your loans. The government cannot only hire a bill collector, but they can confiscate your federal tax refunds or even deduct the payments from your wages. Also, if you declare bankruptcy, more often than not, your student loans will not be forgiven. If you have bad credit or no credit, student loans can be a good option for you.

International Student Loans

A lot of us may not realize it, but international student loans are what help the vast majority of students in our universities secure a first world education. Most of us labor under the mistaken belief that a lot of the international students on our campuses are from well off or even wealthy families. But this is not the case. In fact, if one were to examine the countries that they come from, the startling revelation would be that almost all of them come from developing economies. While it is true that a relatively small number of them might be self-financed and consequently from wealthy families, the vast majority are able to study in our universities only because of what has come to be known as international student loans.

As the name itself reveals, international student loans are monetary assistance provided by banks and other financial institutions that enable students from one country to go abroad to further their education. For all practical purposes, international student loans are very similar to other kinds of loans. Students who want to apply for international student loans need to first and foremost secure admissions or at the very least have an offer of admission from a university of their choice. Normally, the more reputed the university and the more in demand it is, the easier it will prove to get international student loans. But a whole lot more also depends on the background of the student, the kind of course selected and even the career potential for someone who successfully completes such courses.

Why are all these things important? Well, one reason could be that the student, whenever he or she applies for the international student loans, is not in a position to earn anything. Consequently, they will be unable to begin repaying the loan unless and until they get out of college and into a job that starts paying them back. Which is why typical international student loans start the repayment terms a couple of years after they are issued. Could any commercial loan serve as international student loans? Sure, but then why would someone pay a higher rate of interest for a commercial loan and use it as a student loan when the same amount of money is available without any collateral, at a much more subsidized rate and offers a staggered repayment term? International student loans sure make sense when seen from such a perspective.