The right way to borrow universities

About recent college you no doubt have heard the story of graduates minimum wage work and six – figure student loans. Or parents who can not send their children to college, because they are still paying off their student loans.

These stories, while troubled, is an exception. About 40% of the student lender, who in the first quarter of 2012, the balance of less than $ 10,000, according to the Federal Reserve Bank of New York. $ 10,000 and $ 25,000 owed about 30%. Only more than $ 100,000 of the balance of 3.7% of people. And given without a degree, the widening gap between college graduates and college students who earn income gap E remains one of the best investments you made, even if you need to borrow money to get a diploma.

The key is wise to do, which means to borrow as little as possible, and find the best conditions for loans. This is New Berlin, Wisconsin Martha and Ken Odegard, we are trying to do. Their youngest daughter, Lauren, in the third year, want to participate in a small, private college, and eventually went to medical school. “It was always her goal,” said Martha.

Although Odegards want to help, they are also saving for retirement and, because they are self-employed (Ken owns a home remodeling business), they spend more than $ 27,000 per year health insurance. Their eldest daughter, Stephanie, to attend a public university in the state, so Odegards have been able to pay school fees without borrowing. This may not be the case with Lauren. She is willing to come up with her share of student loans, but “we are trying not to fall into excessive debt,” said Martha.

Federal loans first

Odegards and most other families, starting with the means to keep the federal government loan debt management. Not only federal loans offer flexible payment plans (see below choose repayment plan), but they also allow borrowers to defer for a period of time, such as payment, if the borrower unemployment. In addition, in some cases, loans qualify the loan forgiveness. In addition, federal loansProvide more protection against disasters than some other loans, do so because they can be discharged if the borrower death or disability.

From July 1, 2010, all federal student loans have been issued directly by the US Department of Education. Have access to these loans, you need to fill out the Free Application for Federal Student Aid (FAFSA), used to determine how much financial aid the student by the federal government, and some state universities to accept. Because the FAFSA can be a starting point for all of the financial aid, you should complete this form even if you do not want to qualify for need-based aid Susie Bauer, savings expert at the University for the Private Wealth Management Group, Baird said.

Perkins loans. These federal loans needed by the university administration and economy based. Not all schools offer them. They carry a fixed interest rate of 5%, WHILE interest paid by the borrower in government schools. Eligible borrowers can receive up to $ 5,500 undergraduate students each year, up to $ 27,500. Borrowers get a diploma (or leaving) begin to repay the loan, and have 10 years to pay off the nine-month grace period. Perkins loans can qualify for a pardon.

Perkins loan interest rate than the current rate of direct loans (formerly known as Staffords) is slightly higher. But Perkins loans do not charge any fees, after about 1% of direct loans and direct loans to borrowers who graduated only six months to begin to pay a fee for comparison.

Direct subsidized loans. Like Perkins loans, these loans are based on need, and the government pays the interest while borrowers in the school. FO loans interest rates between July 1, 2014, and July 1, 2015 R, 4.66%. This speed is still the same term of the loan; the rate of new loans, based on 10-year US Treasury bonds, recalculated every year July 1, you can borrow at subsidized loan of $ 3,500 the first year, second year $ 4,500 , while the third year exceed $ 5,500, up to $ 23,000 of undergraduate students. Loans

Direct subsidies. These loans are available to all undergraduate students, regardless of financial need. The current interest rate is 4.66%, the same as subsidized loans will reset next July 1 and subsidized loans, the government does not at the same time, borrowers pay interest at the university. Most students upBorrowed $ 5,500 the first year, $ 6500 second ah r and $ 7,500 in the third year and beyond, up to a maximum $ 31,000 undergraduates. If you receive a subsidized loan is less than the maximum loan amount in a particular year, you can take out a subsidized loan balance.

You received financial assistance from the school might include direct subsidies, direct subsidies and Perkins loans, for a total of up to $ 13,000 a year, according to the year in college, your financial situation.

Parent PLUS loans. Most federal loans to students to do, but there is an option on the menu for parents: a PLUS loan. Parents who take out PLUS loans can borrow the full cost of their child’s admission to the college, minus any financial aid. (Graduate PLUS loans are also eligible.)

Before heading down this road, pull over, and can afford to consider whether their child’s dream school. Who need more than they can get home loans through the federal direct loans “are looking at the wrong school,” Paul Bishop, financial aid consultant in Bellevue, Washington said. (See too much student debt?)

2014–15-year lending rate plus 7.21%. This rate is fixed loan term, but for the new multi-rate loans will be July 1, 2015 is reset on the basis, on a formula tied to the 10-year US Treasury bonds. Borrowers do not have pristine credit get a loan PLUS, but if they have a bad credit record, including qualified filed for bankruptcy in the past five years or walked home foreclosure, they will be canceled. A debt that more than 90 days past due nor reason for disqualification (the Obama administration has proposed eliminating the $ 2,085 or less delinquent).

Parents flawed credit history may still have to apply for multiple loans. If the loan application is rejected, because students can borrow an extra $ 4,000 a year unsubsidized student loans first and second year and third year in a row and after an additional $ 5,000.

Weigh alternative loans

Although the federal loans first and find the best places of higher education financing, other options may under certain circumstances it makes sense.

State loans. Many countries provide their own student loans. Some are supported by national institutions and by bonds issued by the state; others are private eating lending conditions set by the state. They are usually available to residents, and in some cases, they are willing to participate in non-residents of the state schools. Some offer better rates and terms than offered by commercial banks to private lending, but this is not always the case, so shop around Mark Kantrowitz, publisher, grants website said. Loans related to a particular country, talk to your school’s financial aid office or your state department of education information.

Home equity line of credit. With the interest rate home equity line of credit is an average of 4.95%, a HELOC may be less expensive than private or parent PLUS loans. In addition, up to $ 100,000 of the loan interest is tax-free. However, parents should think twice before tapping home equity EIR day of college costs Gary Carpenter, Syracuse University-certified planners say, New York, home equity credit line can be used in case of emergency funds, funds an important source, if you borrow to pay college expenses for your home, will not be used, he said. Worse, if you fall behind in mortgage payments, you could lose your home.

Select a repayment plan

Joe and Lauren Quigley Scogin Mayo fail to repay your student loans will haunt you for a long time, you I forgot the name of your freshman roommate after. Federal student loan default trigger late fees, additional interest, which will raise the amount of money you owe and other expenses. The default will appear on your credit report affects your ability to borrow money from a house or car. Government can stop your refund, and may even garnish your wages or withhold social security benefits. In most cases, if you declare bankruptcy, you can not discharge your federal student loans.

Fortunately, you do not have to enter the kind of trouble in the first place. Federal loans offer, payment or cheaper option allows you to completely stop paying for some time. (Lower estimate provided by the Ministry of Education, different payment plan, your monthly payments, from 10 to 30 years calculator.)

federal loans, government or non-profit work who may qualify for the 10-year borrowers have to forgive the loan balance.

There are no penalties for prepaid your student loans, you pay off and the upcoming uh, less interest you pay. Set up automatic payment program will help you avoid missed payments, or by up to 0.25 percentage points, lower your interest rates.

San Antonio’s Joe and Lauren Quigley has been resolved to pay off $ 32,000 in student loans in 2018, they are doing their highest-interest loans to pay extra wages: direct subsidized loans 4.5% interest rate. They have another federal loan to pay off the 4.5% rate of increase.

Joe, 23, a computer programmer, computer work part-time family and friends, and instructed him to earn the money to the loan balance. He and Lauren, 22, nutritionists, live frugally. They do not have cable (they watch alternative to Netflix), they cook at home, eating out, instead. “We think twice before we spend money,” Joe said.

It is more difficult to pay off the loan if you can not find a job, or a low-wage job to stay in. But even so, you have a choice, we will describe below. “Before things you should contact your loan servicer’s bad,” Lauren Asher, college access and success for the Institute said. In order to keep track of what you owe, and find out who is to serve the loan to the National Student Loan Data System

– Unless you choose otherwise, you will be placed in the standard repayment plan for college loans. In this program, you pay a fixed monthly at least $ 50, depending on how much you owe, and have a repayment period of 10 years. With the progressive repayment, payments start low and gradually increase to ease the repayment period of more than 10 years. This option can be used to finance subsidies and direct and PLUS loans

– Extend the repayment plan to reduce your monthly payments. You can choose between fixed and graduated payment and repayment period of up to 25 years. This option can be used to finance and subsidies, as well as PLUS loans. The borrower must qualify more than $ 30,000 in loans. Remember, the longer your loan repayment, the more interest you will pay

– Iincome-based repayment stare at you repay what you can afford itSince the amount of (Uncle Sam decide, not you). To obtain this, you must have relative to your income high debt. If you qualify, your monthly loan payments will reach 15% oxygen ˚F your disposable income. Lower than the payment required by the 10-year repayment plan. If you do not have 25 years of income-based repayment to repay the loan, the balance will be forgiven (although you may owe taxes on forgiven debt). Direct loan qualifications federal subsidies, subsidies. This option is not available for PLUS loans taken out by the parents

– A new program, fee, you earn, is generous. The maximum monthly payment is 10% of your disposable income. The balance will be paid after 20 years of qualifying to be forgiven. Because the income-based repayment plan, this one is not applicable to the parent PLUS loans. Currently, the program is limited to who did not take any federal student loan borrowers before 2007 October 1, and from October 1st out a new loan, 2011. US President Barack Obama has proposed to relax these restrictions make extra 500 ten thousand borrowers will qualify.

You can find these programs in the application of You have to provide tax returns, so that the education sector can decide if you qualify

– A monthly payment directly merge lending program lets you put several federal student loans into one loan . Extended or graduated repayment plan under the consolidated loan term You can also extend. In the past, federal student loan consolidation can lower your interest rate, but the interest rate is fixed, this is no longer the case of most loans. (Payment is a weighted average of the loans underlying layer d) Perkins and PLUS loans qualify for consolidation loans. When you are not directly include any merger plan to consolidate private student loans

– If you’re unemployed or experiencing financial difficulties, you can apply for to postpone , and there are loans delayed for up to three years Federal student loan payments. If you have a subsidized or Perkins loans, while the loan is delayed, the government will pay the interest. For subsidized loans, the interest will be added to the balance. To apply for an extension for the subsidized loans or subsidies, contact your service provider. For Perkins Loans, contact the school to give loans

– If you do not qualify to apply for deferment or you are in Ha income-based payment program Yong trouble, consider asking put up. Your payments may be delayed or reduced up to 12 months. In the forbearance period excluding interest payments, even if you have subsidized loans. You can apply for mandatory forbearance from your service provider, if you owe more than your monthly total of 20% of all student loans total monthly income (rather than disposable income, and income-based program). You can also request forbearance, where appropriate, it is the discretion of the lender. In both cases, forbearance is not automatic. You must apply, should be prepared to provide documentation.

If you have a PLUS loan, you can choose standard, graduated or extended payment plan. Repayment terms range from 10 to 25 years, depending on the plan. You can choose to be postponed until six months after graduation to pay, but at this time accrued interest. In order to prevent the expansion of debt, try to pay at least you can pay only interest, and your child at school.