Did you know that to the federal government, defaulting on your student loans is considered almost as serious as not paying your taxes? In today's worrying economic climate, many recent and soon-to-be graduates might be concerned about the possibility of student loan default. Here's the cold hard truth about going into default... and some good news for you if you're already in this situation.
First, it's important to know what student loan default is. You are considered in loan default when you have made no scheduled payments on your student loans for at least 270 days. This applies to anyone whose loans are currently considered in repayment. If your loans are being deferred because you are currently attending school at least half-time, or for any other reason, your loans will not go into default.
Student loan default can come with some pretty hefty penalties. These may include:
a) Serious damage to your credit report. - The negative effect on your credit report created by loan default cannot be underestimated. Even if you've never been in default, the ability you've shown to repay/manage your student loans is one of the first things a loan officer may look at in addition to your credit rating when determining eligibility for a car or home loan.
b) Withholding of wages and other income. - The government may decide to garnish your wages, a certain percentage being withheld from you and going directly to loan payments before the rest of your monthly paycheck reaches you. Other funds such as federal tax returns and lottery winnings can also withheld. Of course, if you win the lottery, paying off student loans should be on the top of your priority list anyway.
c) Professional license and transcript blocks. - If you have earned a professional license, such as a medical, cosmetology, or real estate license, you can be prevented from receiving that license while your loans are in default. An even more common problem is a transcript block. Many jobs available to college grads require that you submit a copy of your college transcripts as a part of the application process. If your loans are in default, the school(s) you've attended are not allowed to release official transcripts to other institutions until the default is resolved.
But the good news is...
For most of us, it's not easy to go into student loan default. No one (the schools, lender banks, guaranty agencies, or the federal government) wants you to go in to default. So you do have options and resources to help you keep that from happening. Some of these are:
a) Deferment and Forbearance - Deferment allows the postponement of payments in cases of economic hardship, re-enrollment in school, or disability. Forbearance is a similar condition which allows for the lowering of minimum monthly payments based on your situation.
b) Alternate payment programs. - Rather than a standard loan repayment schedule, you may choose an income sensitive, graduated, or extended plan. Graduated and income sensitive repayment plans may be a good option for those who are unsure how much they will be earning during their first years out of college or entering into an unstable job market. Extended repayment is an option available to borrowers with more than $30,000 in federal loans. It allows you to repay over a 25-year period, rather than the standard 10 years.
c) Consolidation - Under current federal loan programs you may be eligible to consolidate your student loans. In essence, consolidation involves taking out a new loan with a lender bank or servicer to cover all of your current student loans. This allows you to work with a single lender bank (rather than multiple banks if you took out your student loans through more than one lender), may lower your monthly payments, and opens up whatever new payment options your consolidation lender may offer. Many banks offer consolidation loans, some even marketing them aggressively through mail and phone solicitations. So it's important to approach this option with the attitude of an informed consumer to determine what offers might work best for you.
As always, the first and best resource you have when it comes to managing your student loans are the people who are there to help and work with you. If you've started missing payment, chances are your lender bank is already trying to contact you. It's best though if you speak with your bank's representatives before it reaches that point, and always make sure they have current contact information for you. Also, the financial aid counselors/administrators at your school should be available for you to consult with even after graduation. Repayment is a process that takes place primarily between you and your lender bank, but a school's FA counselor can at least point you in the right direction even if they don't have all of the details you are looking for.
Source:http://ezinearticles.com/
Sunday, April 20, 2008
Monday, April 14, 2008
Affordable Student Loans Need a Deferment Period
Going to college takes a bunch of money these days! Invariably, most students end up with an amount due after their graduation and this amount will be more than the original borrowed amount. This is due to the fact many student loan include a deferment period. After all, how affordable would a student loan be if the student had to come up with monthly payments while he was in college?
This article talks about the student loan deferments and how they affect the bottom line. Namely, how much the student will be liable for after his education.
What is a deferment period?
When student loans are made, the first payment will not be due until after graduation or until the student quits school. This means the student can spend 4 years in college, graduate, get a job and then start paying back the loan.
One aspect of this type of loan that cannot be overlooked is during the deferment period the loan is accumulating interest. This means a loan of $20,000 can become $30,000 by the time the student starts to pay it off. This is a dirty deal, but it comes under the heading, "there is no such thing as a free lunch."
The difference between a straight loan and a deferred one
Let's look at how this works. If a person takes out a regular loan for $20,000 at 7% for 7 years, or 84 payments, and he is going to start paying on the first month, his payment will be $301.85 each month.
If a person takes out a deferred student loan for $20,000 at 7% for 7 years, or 84 payments, but the first payment isn't due for 4 years, the total amount owed will have become 2,6441.08 by the time the first payment is due and the monthly payment will be $399.07. So, this is another wrinkle the student has to contend with to get that ever-important sheepskin.
It is important to get an accurate idea what the payments will be after graduation, you have to use a student loan calculator that includes an entry for the deferment period or else you won't be getting the actual amount owed or monthly payment due when the payback period begins.
Another example
Let's take another example. The student gets a loan for $35,000, which has a 10-year payoff period. The payments start after a 4 years and the interest rate is 7%. Here's the way the numbers look for this loan. When the payments come due the total loan will have ballooned to $46,271.89 and the payment will be $537.26.
Now let's complicate things a little more. The student may have to take a separate loan for each of the years he is in school. The lender may allow different deferment periods for each loan. So, he may end up with $20,000 deferred for 4 years, $20,000 deferred for 3 years, $20,000 deferred for 2 years and well, you get the idea.
In short, when dealing with student loans, don't forget the deferment aspect to it. It can make a huge difference in the final numbers.
Source:http://ezinearticles.com/
This article talks about the student loan deferments and how they affect the bottom line. Namely, how much the student will be liable for after his education.
What is a deferment period?
When student loans are made, the first payment will not be due until after graduation or until the student quits school. This means the student can spend 4 years in college, graduate, get a job and then start paying back the loan.
One aspect of this type of loan that cannot be overlooked is during the deferment period the loan is accumulating interest. This means a loan of $20,000 can become $30,000 by the time the student starts to pay it off. This is a dirty deal, but it comes under the heading, "there is no such thing as a free lunch."
The difference between a straight loan and a deferred one
Let's look at how this works. If a person takes out a regular loan for $20,000 at 7% for 7 years, or 84 payments, and he is going to start paying on the first month, his payment will be $301.85 each month.
If a person takes out a deferred student loan for $20,000 at 7% for 7 years, or 84 payments, but the first payment isn't due for 4 years, the total amount owed will have become 2,6441.08 by the time the first payment is due and the monthly payment will be $399.07. So, this is another wrinkle the student has to contend with to get that ever-important sheepskin.
It is important to get an accurate idea what the payments will be after graduation, you have to use a student loan calculator that includes an entry for the deferment period or else you won't be getting the actual amount owed or monthly payment due when the payback period begins.
Another example
Let's take another example. The student gets a loan for $35,000, which has a 10-year payoff period. The payments start after a 4 years and the interest rate is 7%. Here's the way the numbers look for this loan. When the payments come due the total loan will have ballooned to $46,271.89 and the payment will be $537.26.
Now let's complicate things a little more. The student may have to take a separate loan for each of the years he is in school. The lender may allow different deferment periods for each loan. So, he may end up with $20,000 deferred for 4 years, $20,000 deferred for 3 years, $20,000 deferred for 2 years and well, you get the idea.
In short, when dealing with student loans, don't forget the deferment aspect to it. It can make a huge difference in the final numbers.
Source:http://ezinearticles.com/
Wednesday, April 9, 2008
Bad Credit Student Loans - A Boon for Students With a Bad Credit
Bad credit student loans allocate loans for the higher education of students despite of an applicant's bad credit. They can be availed by the parents or the guardians on behalf of the students, if they think they have a better credit history. With the help of these loans, students pay their tuition fee and other expenses accrued on the studies or charges like hostel, food and lodging etc.
It is bisected into secured and unsecured and is released against a reasonable rate of interest. In secured bad credit student loans the borrower needs to deposit collateral against the loan amount applied for, whereas in an unsecured type the borrower is free from keeping any security.
Availability
Usually lenders take the tag of bad credit in a negative sense and refrain from providing financial assistance. But it is easily available online. It helps the applicants to get all the information as well as terms and conditions inhibited regarding loans in an easy and comfortable manner. The only requirement is to get a copy of your credit report. If any mistake is marked in it, get it rectified. On the basis of these credit scores, lenders provide bad credit loans to the students.
Bad credit student loans can be accessed by every means i.e. with or without collateral as it is designed with intensions to help the students. For best deal of loans, you can offer any of your assets to serve as collateral. Before opting for it the borrower must evaluate the entire cost of education and the other liabilities.
Benefits
• The loan is offered to the borrower at lower interest rates and easy pay back in small monthly installments.
• The borrower availing the loan also gets the benefit of repaying the loan after the course has been completed when he is capable of landing up with a job.
• The tag of bad credit can also be improved by the timely repayment of the loans.
• With bad credit student loans you can pay of your previous dues or debts.
Source:http://ezinearticles.com/?Bad-Credit-Student-Loans---A-Boon-for-Students-With-a-Bad-Credit&id=1068705
It is bisected into secured and unsecured and is released against a reasonable rate of interest. In secured bad credit student loans the borrower needs to deposit collateral against the loan amount applied for, whereas in an unsecured type the borrower is free from keeping any security.
Availability
Usually lenders take the tag of bad credit in a negative sense and refrain from providing financial assistance. But it is easily available online. It helps the applicants to get all the information as well as terms and conditions inhibited regarding loans in an easy and comfortable manner. The only requirement is to get a copy of your credit report. If any mistake is marked in it, get it rectified. On the basis of these credit scores, lenders provide bad credit loans to the students.
Bad credit student loans can be accessed by every means i.e. with or without collateral as it is designed with intensions to help the students. For best deal of loans, you can offer any of your assets to serve as collateral. Before opting for it the borrower must evaluate the entire cost of education and the other liabilities.
Benefits
• The loan is offered to the borrower at lower interest rates and easy pay back in small monthly installments.
• The borrower availing the loan also gets the benefit of repaying the loan after the course has been completed when he is capable of landing up with a job.
• The tag of bad credit can also be improved by the timely repayment of the loans.
• With bad credit student loans you can pay of your previous dues or debts.
Source:http://ezinearticles.com/?Bad-Credit-Student-Loans---A-Boon-for-Students-With-a-Bad-Credit&id=1068705
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