After College: Strategies for Your College Finance Plan

We’ve discussed why students and their families need College Finance Plans (CFPs) and IMG_9739summarized strategies to use in your CFP’s “Before College” and “During College” phases. Let’s review some “After College” strategies.

Almost 70% of college graduates borrow. They leave averaging more than $34,000 in student loan debt. Hence, most strive to keep their initial monthly payments as low as possible. Toward this end:

Ex-students also strive to reduce the overall amount they repay to free up money for other uses. To IMG_9744do this:

  • Prepay: Cut the total interest you repay by prepaying – i.e. paying early or paying extra — whenever possible.
  • Reassess Your Repayment Plan: Annually compare monthly payment amounts under your current plan to such amounts under other repayment plans. Switch plans if you can afford to pay more each month. This’ll create big savings.
  • No Negative Amortization: Some federal repayment plans allow you to pay less than the monthly interest charged on your debt. It’s better than defaulting, but you’ll pay more in the long run.
  • Use Loan Forgiveness: Washington offers some generous forgiveness plans on its loans. Pursue them if you qualify.

Being late or delinquent on your student loan payments generates extra fees and penalties. To avoidIMG_9747 this:

  • Call Your Servicer: Ask to change your repayment plan or due date or to explore repayment deferments and forbearances if you have problems making your whole payment on time.
  • Dispute Servicer Errors: There are steps you can take if your loan servicer causes you repayment or other problems.

It’s your debt. Manage it aggressively to avoid problems and save money.

Look here next Wednesday morning for a more extended review of a strategy for your CFP. Need some personalized guidance on one or more of these strategies. Contact College Affordability Solutions at (512) 366-5354 or collegeafford@gmail.com for a no-charge consultation.

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Special Bulletin: Does National Collegiate Student Loan Trusts Supposedly Own Your Loans? Make Them Prove It!

If you borrowed private student loans for your postsecondary education, and if an organization called National Collegiate Student Loan Trusts (National Collegiate) asserts you owe loan payments to it, double check everything it says about how much you owe and whether it actually owns your loans.

The New York Times reports that courts across the United States have dismissed IMG_7740many educational loan debts supposedly owed to National Collegiate because its was unable to prove that it had actually purchased those loans from lenders who originally made them. And in at least one case, a court dismissed part of a college graduate’s debt after finding that some loans for which National Collegiate was billing her were for enrollment at a school she never attended.

Note: National Collegiate is a “secondary market” that buys private student loans after they’re made, giving it the right to collect what borrowers owe in principal and interest on those loans. It has been particularly aggressive in going to court against private student loan borrowers unable to repay their debts.

National Collegiate contracts with American Education Services to provide its borrowers with services and do routine collections on its loans. The Times reports it uses a collection agency called Transworld Systems to collect debts when borrowers fall behind on their payments.

If any of your private student loans are being collected by either of these companies, determine whether National Collegiate Student Loan Trusts says it owns them. To do this, contact American Education Services and/or Transworld Systems to inquire. If they list National Collegiate as the owner of any of your loans, double check your records to confirm whether you actually borrowed them. If not, ask for documents proving you borrowed the loans and establishing what the courts call a “chain of title” to prove National Collegiate’s ownership.

Note: There are no reports of any federal or state student loans being dismissed by IMG_7739courts because of the irregularities described above.

Never stop making payments on and debt you really do owe. This can cost you big bucks and ruin your credit rating. And never, ever, use false or misleading information to try to get out of any of your debt obligations. That’s called a criminal offense called fraud!

But if there are questions about debts National Collegiate Student Loan Trusts says you owe it, retain a law firm or seek help from your local legal aid society if necessary. Don’t get ripped off!

We’re on summer vacation at College Affordability Solutions, but this issue was too important to ignore. Join us next month when we again begin publishing regular weekly blogs.

After College: “Late” and “Missed” are 4-Letter Words for Your Student Loans

If you graduated from college last spring after borrowing federal student loans, your loan servicer has already let you know the first of your monthly payment due dates. img_5066Chances are that date is this month.

This date is important. Pay on or before it and you’ll build a positive credit rating. Pay after it’s passed, or make no payment, and you’re immediately a delinquent borrower. Then your loan servicer may report your delinquency to the major credit bureaus right away (they must report it you when you’re 90 days delinquent). You’ll have an adverse credit history that’ll result in higher interest rates if you’re img_5065even able to borrow for a car or house; may stop you from renting an apartment or signing up for a cell phone or utilities; and could even stop you from getting a job.

As soon as you become delinquent, your loan servicer may also add collection costs equal to 18.5% of your debt to what you owe.

Fail to make any payment within 30 days of its due date and you’ll also pay a late fee equalling 6% of what you owe. Miss nine monthly payments in a row and you’re in default — at which point a government-hired collection agency will require you to repay your whole debt immediately. The government may also confiscate up to 15% of your salary and wages, your tax returns, and any money it owes you. It can also get permission from a judge to take real estate and other property you own. Finally, you’ll never be able to borrow another federal student loan while in default.

Fortunately, it’s easy to make your federal student loan payments on time. Enroll in an automatic debit plan and your payment will be deducted from your bank account on the same date every month. You’ll also reduce your interest rate by 0.25%.

If your monthly due date doesn’t work for you, contact your loan servicer and ask to change it. Do the same if you need to change your repayment plan to lower your required monthly month amount.

Need to postpone your payments for a while? You can do this without becoming delinquent. Contact your loan servicer and ask for a deferment or forbearance.

So don’t ever let yourself run late on your monthly payments or, worse yet, miss them altogether. Both produce nasty results, and they’re way too easy to avoid!

College Affordability Solutions has extensive experience with the ins and outs of student loan repayment. Call (512) 366-5354 or email collegeafford@gmail.com if you need confidential advice on managing your college debt.

A Year of College Affordability Solutions

College Affordability Solutions is dedicated to helping families keep higher education spending within their means. It uses this website to highlight postsecondary educational cost-management strategies at the times of the year when you and/or your student are most likely to need them.

21-of-the-most-beautiful-college-campuses-in-amer-2-20243-1428837186-9_dblbigDespite those who’ll try to talk your student out of college, postsecondary education is still worthwhile even if he or she has to borrow to pay for it. But student loans increase the cost of college, so do everything possible to minimize their use.

Over the last year, we’ve covered several approaches to keeping college and college-related debt affordable. Click on any of the links below to learn more . . .

Before College

Various investment and savings programs can help you prepare for college bills. Among these are 529 plans and college savings bonds, but you should explore them all – the sooner the better.

And be sure to apply for financial for every year of college. Complete the Free Application for Federal Student Aid (FAFSA) as soon as possible after October 1 but, by all means, before your FAFSA priority deadline arrives.

Student dependency status plays a big role in who completes the FAFSA. Other family factors do, too. But it isn’t as hard to complete as you’ve heard, especially if you fulfill 5 key steps, gather all the documents you need, and get answers to your last-minute FAFSA questions before doing so.

Long before the FAFSA, your student needs to begin aggressively searching for scholarships. It’s critical to know about the when and where and the how of doing this.

Pay close attention after you file your FAFSA to make sure you handle what happens next. Then carefully assess your financial aid offers as they arrive from colleges.

But it’s not all about financial aid and scholarships. A critical factor in college affordability is for your student to enroll in a college and major that fits him or her well.

During College

Once college begins, you can help your student keep his or her expenses within reason.140815_FF_BestCollegeCard Limited spending and indebtedness is important even with today’s low college loan interest rates.

Some of the most effective strategies for minimizing student borrowing include your student getting through college in 4 years or less while carefully managing money and avoiding rip offs such as the recent “student tax” scam. A little-known but highly-effective cost-saver involves returning unneeded federal loan dollars with 4 months of disbursement.

Help your student keep college more affordable by giving him or her some holiday gifts that’ll lower his or her reduce expenses upon returning to school and by recommending he or she generate funds through seasonal employment instead of borrowing.

After College

Seven out of 10 students borrow before earning their degrees, and over 90% of their loans come from federal loan programs. Fortunately, the government has designed  post-graduation strategies to help keep educational debt manageable.

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Your student needs to understand what happens to college loans after graduation. It’s worthwhile to consider the pros and cons of student loan consolidation, an often-used tactic for reducing monthly debt payments. Equally important is knowing how your student might qualify for forgiveness on all or part of what he or she owes.

Coming in 2017

We’re taking a few weeks off for the holidays, but beginning January 4 we’ll start publishing again about plans for keeping college affordable. Here’s hoping you have the happiest of holiday seasons, and that you’ll rejoin us then!

 Find out more about College Affordability Solutions and its services at https://collegeafford.com, or by calling (512) 366-5354.

Hey Graduate! What’s Next for Your Student Loans?

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College commencement was fun, wasn’t it? It’s the only time in higher education when we celebrate academic achievement with all the gusto of a football victory. But if you borrowed while getting that degree, it was also when your student loan repayment process commenced. So, what happens next?

(1)  When does your repayment obligation begin? You get a full six-month “grace period” to find a job and get yourself established financially before you’re required to start repaying your federal student loans. A loan servicer hired by the government to collect your loans will contact you during this period to share vitally important information with you. This includes the exact date your first payment is due — generally within 60 days of the end of your grace period.

Private educational loans may or may not have grace periods. Review the “promissory note” you entered into with your private loan provider for anything you need to know about repayment including your first payment due date. If what you’re looking for isn’t there, contact your loan provider and ask.

(2)  When do your payments start? Virtually all student loans require once-a-month payments on the same date of each month. If the repayment date assigned to you doesn’t work, contact your loan servicer. Servicers will usually renegotiate this date upon request.

(3)  What do you need to do? Any time you move to a new address, or begin using a new email service, provide your loan servicer with your new contact information. Otherwise, information you need to repay your debt won’t reach you. But that won’t absolve you of your payment obligation and, if you begin missing payments, bad things happen to you!

(4)  What decisions do you face? Your biggest decision is your choice of repayment plans. The government offers six options. Its standard plan is the quickest and least expensive way to eliminate college debt. It requires you to repay your loan in 120 equal monthly installments. But what if those monthly payments are too high early in your career, when you’ll probably earn the least you’ll ever earn? Then you should request one of the income-driven repayment plans that limit your monthly payments to a small percentage of your earnings. Such a plan will cost you more in the long run, but it’ll minimize your monthly payments early on. And remember, you can change your repayment plan whenever you want.

You may also need to consider whether you want to consolidate your federal loans in order to qualify for the lowest possible payments and the longest possible repayment period. This can be especially helpful if you are interested in having what’s left of your debt forgiven after 10 or 20 years.

There’ll be more on repayment plans and loan consolidation in the future. For now, congratulations on earning that degree and getting on the road to jettisoning your educational indebtedness!

Up next — how to get your federal student loans forgiven.

College Affordability Solutions has 40 years’ experience in advising borrowers on how to manage their parent and student loans. Call (512) 366-5354 or email collegeafford@gmail.com for help.