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Archive for the ‘Student Loans’ Category

Defaulting on Your Student Loans?

Brought to you by: The Frugal Buzz On January 31, 2011 No Comments

Student loans are one of the most common strategies to pay for college. As college gets more and more expensive, more and more people are turning to student loans. And with the economy in a bit of a recession, more and more people are struggling to make their payments. One consequence is to default on your loan.

What Does It Mean to Default?

Miss a payment or make a payment late and it’s a delinquency. Fail to make a payment on your student loans for nine months and it’s considered a default. It essentially means you’ve stopped making payments on your student loan.

Because a loan is an agreement between you and a financial institution, you have an obligation to uphold your end of the bargain. Stop making payments and you’ve broken your agreement.

There are some unfortunate consequences. Generally, you will receive a notice from your state’s department of education notifying you of the default. You’ll also be responsible for any fees incurred while they’re collecting this debt from you.

What Happens Next?

* You will no longer receive a tax refund – Generally, this is the first step. The department of state will contact the IRS and you will no longer receive a tax refund. Any money you might get will go straight to paying off your debt. This will continue until your debt is paid off or you’ve negotiated a repayment plan.

* You may have your paycheck garnished - The second step will be for the financial institution to garnish your paycheck. And while many agencies have to go to court to get a garnishment, the department of education does not. They can take up to fifteen percent of your disposable income.

* You can have your social security benefits reduced.

* They can sue you.

* Finally, they can also take away any professional licenses you obtained.

In short, there really is no way to not pay back your student loan. One way or another, they will get their money. Your best bet is to renegotiate a payment plan that fits your current needs. It’s much better than defaulting which can affect your credit score, your professional standing and your reputation.

If you’re in danger of defaulting on a student loan, investigate your repayment options. You may be able to consolidate or negotiate a new repayment plan. Don’t wait.  Act as quickly as possible to save your credit.

Frugally yours, Mary

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How to Payback Student Loans

Brought to you by: The Frugal Buzz On January 28, 2011 No Comments

Student loans can go a long way toward helping you achieve your educational goals. They can turn something that once didn’t seem possible into a reality. However, upon graduation, those loan payments typically begin.

That means balancing finding a job and the basic costs of living on your own with paying back your student loans. It can be overwhelming and sometimes even financially crippling. There are, however, some tried and true student loan payback strategies that can make even the largest debts seem manageable.

Consolidation

One of the most basic student loan payback strategies is to consolidate the loans. If you owe on more than one student loan, rather than balancing multiple payments which can be tough on cash flow, you can consolidate them into one payment. This means one bill each month and a much easier time managing your money.

Repayment Plans

There are four different types of repayment plans. Choosing the one that best meets your needs can mean the difference between barely making ends meet and living well. Here are the four most common types of repayment plans to consider.

* Standard Repayment Plan – This repayment plan means you repay your student loans over the course of ten years. You agree to a fixed monthly payment.

* Graduated Repayment Plan – This plan makes room for the fact that it may be difficult to find a job right after college. Your monthly payments are lower for the first two to five years. Then increase over the remaining years. The plan allows for ten years to pay off your student loans.

* Extended Repayment Plan – This allows for the smallest potential monthly payment and gives students the opportunity to repay their loan for up to thirty years. The downside to this payment plan is that you will pay more interest over the life of the loan.

* Income-Contingent Repayment Plan – Finally, this last payment plan offers a twenty-five year repayment plan and bases monthly payments on the borrower’s income and financial commitments, including family size.

Paying back student loans doesn’t have to be an overwhelming and financially crippling experience. Know what you owe, consider consolidating into one monthly payment and take a look at your repayment options.

You usually have from ten to thirty years to pay back your loan and your interest rates never go up. This makes student loans a viable option to pay for your education, however keep in mind, all loans have to be paid back.

Coming up: Defaulting on Student Loans

Frugally yours, Mary

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