by Persia Walker
Wednesday, July 1, 2009, will be remembered as an important date for in the battle for student loan debt reform and student debt help. That's the day on which the government's new Income-Based Repayment Plan (IBR) became available.
Under IBR, you might be able to substantially lower your monthly student loan repayments you might even be able to cut them out entirely!
IBR covers direct federal loans and federally-guaranteed student loans made through private lenders. It does not matter, whether the loan is old or new, whether it was used for undergraduate, graduate, or job-retraining studies.
Under IBR, you could see your monthly payments capped at rates realistically adjusted downward for your income. Remaining balances would be forgiven after 25 years. Better still, those who go into relatively low-earning fields, such as public service, could enjoy student loan debt forgiveness after only 10 years.
Your income, loan size and family size help determine your monthly payments under IBR. It's your lender who makes the decision, but you can get an idea of what's what at www.ibrinfo.org, where you'll find an IBR calculator.
For low-wage earners, IBR could really be a boon. People who earn $16,000 a year, for example, (or 150 percent of the poverty level) won't have to pay more than 15 percent of their income. People who earn less won't have to make any monthly payments at all.
But not everyone eligible will enjoy all benefits under the program.
Most people, for example, probably will have paid off their loans within 25 years, and so the loan forgiveness aspect won't apply to them.
There is incentive to pay off the loan, too, since the accruing interest could increase the cost of the loan. The faster you pay off the loan, the less expensive it is.
The government's Income-Contingent Repayment Plan is similar to IBR, but it's less generous. It only applies to direct federal loans. It caps payments at 20 percent of income that surpass 100 percent of the poverty level. If you're in the income contingent plan, you can apply to switch over to IBR.
Unfortunately, IBR cannot be applied to Parent PLUS loans, the federal loans parents take out to help pay for their children's studies.
Showing posts with label private student loans. Show all posts
Showing posts with label private student loans. Show all posts
Stimulate The Economy: Forgive Student Loan Debt
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Jul 20, 2009
by Grace Foster
Sadly, many people, primarily those who struggle to make ends meet while continuing to pay off mountains of student debt, will be left out in the cold. Worse yet, they will be out in the cold with higher tax bills as they
struggle to pay for other people's luxury staff retreats, office re-decorations, and foreclosures.
Many of these people I know first hand. They are good friends with whom I went to college, and while we may all be different, we all share one thing in common - we are all paying student loans. We took these student loans out as investments in our futures. It's a slippery and complex slope: you are told to go out and get a degree from a good school, so that you can get the credentials necessary to gain employment after graduation. Unfortunately, this often puts you in debt creating a situation where you have to take a job (any job) just to pay the bills.
Sadly, many of the people I went to college have told me that, if they had it to do all over again, they would have gone to trade school or skipped college all together. Still others, who have a good job and are making ends meet, are still saddled with a huge mountain of education debt that will take over 20 years to repay.
But there is a beacon of hope in all of this, and it is in the form of a Facebook page. Robert Applebaum, an attorney from New York, has come up with an ingenious way to help ease the financial burden of student loans while putting more money into the flagging economy. His Facebook Page, Cancel Student Loan Debt to Stimulate the Economy, makes a convincing, common sense argument for why erasing student loans could be a win-win situation for all involved parties.
In a nutshell, Applebaum argues that, by erasing education debt and forgiving student loans, the people who need the money most (hardworking, middle class people saddled with loan payments) will get the relief necessary to create more expendable income every month. After all, a large portion of that $500 that goes towards loan payments could be stimulating the economy trough purchases, vacation, home improvements, etc.
But what about the banks? Is it fair that they should be saddled with canceled student loans? The bailout money that is currently funding the luxury vacations and huge corporate salaries of these banks would be replaced by money used in forgiving student loans. So, rather than getting blank check, the banks would, essentially, be getting a check to make up for the forgiven education loans. It would be money used for good (helping middle class people get out of debt and therefore stimulate the economy) replacing money used for the fiscal irresponsibility that we are seeing now.
The sister site to Applebaum's Facebook page is Kevin Bartoy's petition site called Stimulate the Economy forgive student loans!. At the time I wrote this article, the petition had been going strong for just over a month and already had nearly 25,000 signatures.
The petition will be used to present an argument to political higher-ups, including President Obama, that change is needed - not another continuation of the blank check policy that bails out the corporate elite, but real change that could positively affect the lives of millions of Americans and, in turn, the entire US economy.
Sadly, many people, primarily those who struggle to make ends meet while continuing to pay off mountains of student debt, will be left out in the cold. Worse yet, they will be out in the cold with higher tax bills as they
struggle to pay for other people's luxury staff retreats, office re-decorations, and foreclosures.Many of these people I know first hand. They are good friends with whom I went to college, and while we may all be different, we all share one thing in common - we are all paying student loans. We took these student loans out as investments in our futures. It's a slippery and complex slope: you are told to go out and get a degree from a good school, so that you can get the credentials necessary to gain employment after graduation. Unfortunately, this often puts you in debt creating a situation where you have to take a job (any job) just to pay the bills.
Sadly, many of the people I went to college have told me that, if they had it to do all over again, they would have gone to trade school or skipped college all together. Still others, who have a good job and are making ends meet, are still saddled with a huge mountain of education debt that will take over 20 years to repay.
But there is a beacon of hope in all of this, and it is in the form of a Facebook page. Robert Applebaum, an attorney from New York, has come up with an ingenious way to help ease the financial burden of student loans while putting more money into the flagging economy. His Facebook Page, Cancel Student Loan Debt to Stimulate the Economy, makes a convincing, common sense argument for why erasing student loans could be a win-win situation for all involved parties.
In a nutshell, Applebaum argues that, by erasing education debt and forgiving student loans, the people who need the money most (hardworking, middle class people saddled with loan payments) will get the relief necessary to create more expendable income every month. After all, a large portion of that $500 that goes towards loan payments could be stimulating the economy trough purchases, vacation, home improvements, etc.
But what about the banks? Is it fair that they should be saddled with canceled student loans? The bailout money that is currently funding the luxury vacations and huge corporate salaries of these banks would be replaced by money used in forgiving student loans. So, rather than getting blank check, the banks would, essentially, be getting a check to make up for the forgiven education loans. It would be money used for good (helping middle class people get out of debt and therefore stimulate the economy) replacing money used for the fiscal irresponsibility that we are seeing now.
The sister site to Applebaum's Facebook page is Kevin Bartoy's petition site called Stimulate the Economy forgive student loans!. At the time I wrote this article, the petition had been going strong for just over a month and already had nearly 25,000 signatures.
The petition will be used to present an argument to political higher-ups, including President Obama, that change is needed - not another continuation of the blank check policy that bails out the corporate elite, but real change that could positively affect the lives of millions of Americans and, in turn, the entire US economy.
Why You Should Pay Off Your Student Loan Early
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Jul 19, 2009
The cost of education is sky-rocketing, and no one can deny that. Tuition has consistently increased at rates well above that of inflation each year. Just 50 years ago when someone went to college, it might cost them about $300.00.
Now it's costing people $40,000 to go to college, and that's at subsidized in-state tuition rates. For more expensive programs, it's costing upwards of $100,000! For some of these programs, there is not enough financial aid in the world to pay for. Inevitably, most college students end up with some sort of student loan. Most of the time students get federal Stafford loans to help pay for their school, and often times get private loans on top of that to pay the remaining cost.
Recently there was an article telling you that you shouldn't ever pay off your student loans early. They had a couple of rather thought provoking reasons for this.
Their primary motivation was that in the event that you become permanently disabled or die before your student loans, you or your estate will not have to pay off your loans before you die. The article claimed that it was essentially a free disability and life insurance policy.
Is this a good reason to not pay off your student loans? The answer is no. The fact is that you are paying a lot of money for the privilege of this disability and life insurance policy. Let's say you have $25,000 in student loans at the current federal rate of 6.8% This means that you are paying $1700 a year or $141.67 a month for a $25,000 life insurance policy. Not even term insurance is that bad! If term policies were offered for that little amount of money, you could get it for just a few dollars a month. In essence, you are paying 70 times the going rate for this term and life insurance policy!
If instead you pay off your student loans you are getting a guaranteed 7% rate of return on your money, and that's a very good investment. Most other guaranteed investments are currently offering 4% or 5%, you are getting an addition 2% to 3% compared to any other guaranteed investments. It gets even better than that. You are not getting 7% back, you are getting 7% back per year for the life of your loan! This can often be ten or twenty years! The 7% turned into 386% after 20 years! When you pay money down on a loan, it is like you are saving the interest for the entire term of the loan!
Don't fall for the myth that you should not pay on your student loan so that you can get some sort of interest rate on your money!
Now it's costing people $40,000 to go to college, and that's at subsidized in-state tuition rates. For more expensive programs, it's costing upwards of $100,000! For some of these programs, there is not enough financial aid in the world to pay for. Inevitably, most college students end up with some sort of student loan. Most of the time students get federal Stafford loans to help pay for their school, and often times get private loans on top of that to pay the remaining cost.
Recently there was an article telling you that you shouldn't ever pay off your student loans early. They had a couple of rather thought provoking reasons for this.
Their primary motivation was that in the event that you become permanently disabled or die before your student loans, you or your estate will not have to pay off your loans before you die. The article claimed that it was essentially a free disability and life insurance policy.
Is this a good reason to not pay off your student loans? The answer is no. The fact is that you are paying a lot of money for the privilege of this disability and life insurance policy. Let's say you have $25,000 in student loans at the current federal rate of 6.8% This means that you are paying $1700 a year or $141.67 a month for a $25,000 life insurance policy. Not even term insurance is that bad! If term policies were offered for that little amount of money, you could get it for just a few dollars a month. In essence, you are paying 70 times the going rate for this term and life insurance policy!
If instead you pay off your student loans you are getting a guaranteed 7% rate of return on your money, and that's a very good investment. Most other guaranteed investments are currently offering 4% or 5%, you are getting an addition 2% to 3% compared to any other guaranteed investments. It gets even better than that. You are not getting 7% back, you are getting 7% back per year for the life of your loan! This can often be ten or twenty years! The 7% turned into 386% after 20 years! When you pay money down on a loan, it is like you are saving the interest for the entire term of the loan!
Don't fall for the myth that you should not pay on your student loan so that you can get some sort of interest rate on your money!
Finding Out If You Will Need A Student Loan Consolidator
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Jul 18, 2009
by Jessica Mousseau
A student loan consolidator helps lower your monthly payment from your loan in college. If you have several loan accounts with separate payments that you would like to combine into one convenient monthly payment. They make things easier so that you don't have to stress too much about paying a huge amount that you can not afford right of college.
Some fine details about rates
Student loan consolidator offices have fixed interest rates. The interest rate on consolidation loans is calculated by taking the weighted average of the interest rates for all the loans you want to consolidate and then they round it up 1/8th of 1%. The length of time you would have to repay a consolidation loan. The total amount of your education debt determines the maximum payoff period for your consolidation loan.
Debt ranges
A $10,000 - $19,999 loan gives up to 15 years to payback.
A $20,000 - $39,999 loan gives up to 20 years to payback.
A $40,000 -$59,999 loan gives up to 25 years to payback.
A $60,000 or more gives up to 30 years to payback.
Many student loan consolidator offices will not help you reduce your loans if they are less than $10,000. If this becomes on of your problems, you should ask your existing lender about combined billing for your accounts or alternate repayment plans that may temporarily provide lower monthly payments.
Different payment options
Standard payment plan- Your monthly payments are set for life, on the loan.
Graduated repayment plan- The first 2 years, your monthly payments will be low and interest-only. The next 3 years, you continue to pay the interest and also pay off the principal.
For the remainder of your loan, you will be put on a standard payment plan. Another payment plan is the Income-sensitive repayment plan, this is make your monthly payment amount vary each year (for up to 5 years) based on your annual income.
Now that you know a little but more about the payments rates, you can decide if going through a student loan consolidator is best for you.
A student loan consolidator helps lower your monthly payment from your loan in college. If you have several loan accounts with separate payments that you would like to combine into one convenient monthly payment. They make things easier so that you don't have to stress too much about paying a huge amount that you can not afford right of college.
Some fine details about rates
Student loan consolidator offices have fixed interest rates. The interest rate on consolidation loans is calculated by taking the weighted average of the interest rates for all the loans you want to consolidate and then they round it up 1/8th of 1%. The length of time you would have to repay a consolidation loan. The total amount of your education debt determines the maximum payoff period for your consolidation loan.
Debt ranges
A $10,000 - $19,999 loan gives up to 15 years to payback.
A $20,000 - $39,999 loan gives up to 20 years to payback.
A $40,000 -$59,999 loan gives up to 25 years to payback.
A $60,000 or more gives up to 30 years to payback.
Many student loan consolidator offices will not help you reduce your loans if they are less than $10,000. If this becomes on of your problems, you should ask your existing lender about combined billing for your accounts or alternate repayment plans that may temporarily provide lower monthly payments.
Different payment options
Standard payment plan- Your monthly payments are set for life, on the loan.
Graduated repayment plan- The first 2 years, your monthly payments will be low and interest-only. The next 3 years, you continue to pay the interest and also pay off the principal.
For the remainder of your loan, you will be put on a standard payment plan. Another payment plan is the Income-sensitive repayment plan, this is make your monthly payment amount vary each year (for up to 5 years) based on your annual income.
Now that you know a little but more about the payments rates, you can decide if going through a student loan consolidator is best for you.
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