Direct Subsidized and Direct Unsubsidized Loans for Students

The difference between these two types of student loans

If you or a family member is in the process of applying to schools and seeking information about the various ways to cover tuition and the associated costs, you may have already learned that you can choose between applying for loans that are either subsidized or unsubsidized.

There are key differences between these two types of loans that you should learn to make sure you choose the type that better suits your financial needs.

One of the things that make the loan application process slightly more confusing is that different people or organizations may use different names when referring to the same loan. Direct Subsidized Loans and Direct Unsubsidized Loans are sometimes called Stafford Loans or Direct Stafford Loans, respectively, so if you’ve heard those terms, you should be aware that they are the same and not two additional loans out of four different types being discussed. Regardless of what these loans are called, when trying to figure out which type of loan is which, the most important criterion to look at is whether the loan is subsidized or unsubsidized.

Both loan types are offered by the U.S. Department of Education to eligible students who attend participating schools. They can be used at four-year colleges and universities, community colleges, and trade, technical and career schools.

Qualifying for either type of loan requires the student to be enrolled at least half time at a school participating in the Direct Loan Program. Typically, the student’s chosen program must be one leading to a degree or certificate.

Direct Subsidized Loans offer students slightly better terms. This is because they are intended to go to students with financial need.

The website run by Federal Student Aid, an office of the Department of Education, defines financial need as “[t]he difference between the cost of attendance [COA] at a school and your Expected Family Contribution [EFC],” and states, “While COA varies from school to school, your EFC does not change based on the school you attend.”

Although your EFC will not change depending on your chosen school, your school will be responsible for determining the amount that you can borrow. That amount may never exceed your financial need, however.

The biggest advantage of a Direct Subsidized Loan is that the Department of Education pays the interest on the loan while the student is still in school at least half time. The federal government will also pay the interest on the loan if the student has postponed his or her loan payments with an authorized loan deferral. Furthermore, the six months following the student’s graduation are considered a “grace period,” during which time the federal government continues to pay the loan interest. This is intended to make it easier for students to make payments while searching for a job.

Although the party responsible for paying the loan interest differs, the interest rate itself does not depend on the loan type.

“As of 2013, interest rates charged for Federal Direct Loans began to be tied to the 10-year Treasury note, with an additional margin added on to cover expenses,” states Mark P. Cussen, CFP, CMFC, AFC, in an article for Investopedia. “They do not depend on the borrower’s credit score.”

In order to qualify for a Direct Subsidized Loan, the income level of the student’s family must not be above certain levels. The exact criteria that define low family income and sufficient financial need are detailed in the Free Application for Federal Student Aid (FAFSA). More information about the regulations and processes of applying for student aid with FAFSA can be found at https://fafsa.ed.gov.

While Direct Unsubsidized Loans don’t have an income requirement, the student is responsible for the interest accrued during all periods. One advantage of Direct Unsubsidized Loans is that they are available to graduate students, which isn’t the case with Direct Subsidized Loans. A further advantage is that it is possible to take out more money with a Direct Unsubsidized Loan, so students with very large educational costs to cover may find it necessary to use a loan that is unsubsidized.

The cost of education is rising at an alarming pace, but thankfully there are many financial tools, including Direct Subsidized and Direct Unsubsidized loans, to help students and their families cover it. To delve more deeply into the details of these loans and explore the wealth of information available online for students and their families in the application process, visit https://studentaid.ed.gov/sa/.

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How a Personal Loan Impacts Your Credit

The relationship between loans and credit scores
It’s well-known that your credit score has a big impact on your ability to take out a loan, as marchfeatured_prsnllnimpactwell as on the total amount of the loan and interest rate your lender offers. But did you also know that the relationship works in the other direction as well?—that a loan can impact your credit score?

To understand this relationship, you have to consider where your credit score comes from. Your credit score is calculated using a variety of factors, including your payment history, the total debt you owe and the number of credit lines recently opened. When you take out a personal loan, the last two factors are affected.

Even just applying for a loan has an impact, since your credit score goes down slightly each time an inquiry is placed on your credit report by a lender checking your credit.

The financial advantage of finding a great loan far outweighs the negative impact that an inquiry has on your credit score. If you take out a personal loan to pay back a high-interest credit card, for example, you would benefit from the reduced interest and your credit score could be improved overall.

“A personal loan may help your credit score by moving credit-card debt over to the installment loan column,” states NerdWallet staff writer Amrita Jayakumar. “The way credit scores are figured, borrowers who use all or most of the available credit on their cards get hit with a significant penalty.”

Another thing to know about the impact that loan applications have on your credit score is that each inquiry may not count fully against your credit score if you are just comparing the rates of more than one loan. For example, if a car dealership places an inquiry on your credit score in the process of offering you an auto loan, and you want to check with your local financial institution to find a better deal, the second inquiry may not count against you.

“Generally any requests or ‘inquiries’ by these lenders for your credit score(s) that took place within a time span ranging from 14 days to 45 days will only count as a single inquiry, depending on the credit scoring model used,” according to the U.S. Consumer Financial Protection Bureau. “You can minimize any negative impact to your credit by doing all of your shopping in a short amount of time.”

Once you have taken out your loan, it is important to make regular payments in order to maintain and improve your credit. A strong payment history goes a long way toward achieving a good credit score, and as you pay down your loan, your overall debt will decrease, further benefiting your credit.

So if you are considering taking out a loan, don’t let fear of a negative impact on your credit score stop you from exploring your options.

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The Dangers of Taking a Personal Loan to Finance Your Wedding

Consider the long-term costs of taking a loan to pay for one day of happiness

The cost of weddings has risen in recent years, leading to couples taking out loans or paying for items with credit cards. Yet starting your married life in debt could be a dangerous financial decision for more reasons than one.

Weighing the Costs
According to a survey conducted by renowned wedding resource site TheKnot.com, the average cost of a wedding in 2015 was $32,641. While some will gladly pay this amount for the wedding of their dreams, most Americans do not have enough money saved up to do so without resorting to borrowing.

In an article on TheKnot.com, contributor Rachel Torgerson advises against taking out a personal loan to finance your wedding, agreeing with financial planners on the dangers of taking on such large debt for one day of your life.

“The problem with personal loans is that most often people are taking them out because they’re trying to spend cash they don’t have. I would also lump in credit card spending here, because I think a lot of people pay for wedding-related things with a credit card and they may or may not have the cash to pay it off in full,” says CFP Laura Lyons Cole, personal finance contributor for financial planning website MainStreet.com.

If you’re considering taking out a large-sum loan, it means you probably don’t have the money to afford such a high-cost wedding in the first place. In general, money and financial stress are top issues that couples will argue over. In fact, studies have shown a high correlation between high-cost weddings and divorce rates.

Additionally, Josephon advises to consider how your ability to put money toward other savings, like a retirement savings account or your future children’s college savings, may be hampered when you start your marriage off with serious debt.

Paying Long Term for a Short-Term Event
With a consumer installment loan, you will be required to make payments for both principal and interest through the wedding loan term, Karimi explains. This means you will end up spending more for your wedding day than the actual cost of the event.

Karimi notes that a $32,000 loan at a 7.5 percent APR would take 48 months to pay off, with minimum payments at a bit under $775 per month-and that’s for buyers with excellent credit.

Even if you can afford such high monthly payments, think of the time it would realistically take to pay off this single-day event. Additionally, you would be carrying debt during a time of major change in your life; you may want to buy a home or a new car, or start a family, and such debt could prevent you from being able to open other lines of credit to pay for these expenses.

Don’t forget that creditors and lenders will look at your current financial standings, including other loans and lines of credit you have out. With a majority of young adults saddled with high student loan debt, their loan amount and interest rate offered will be affected by their total debt.

While you can get a loan with a lower credit score, you will ultimately pay more for it because of higher interest rates. Most financial advisors warn against taking such a loan, known as a bad credit personal loan.

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Understanding Lease Terminology

Motor vehicle financing terms to know before going to the dealership

Before steppingleaseterms_featured into a dealership to lease a car, it’s important to understand lease terminology to make sure you get the best deal possible and aren’t taken advantage of by a dealer.

Understanding the basics
Cars are often advertised with much lower payments for leases than for purchases. According to a February 2012 article from J.D. Power and Associates contributed by Jeff Youngs, this is because lease payments are based on the depreciation value of the vehicle during the contracted term of operation.

There are, however, additional terms and fees on top of the monthly lease payment. Some—like mileage allowance, purchasing options after the lease term ends and depreciation of the vehicle—are widely known, while others are not.

The following are those you should know that might fall in the latter category:

Acquisition/termination fee
Also known as the bank fee, this covers administration costs and is paid either at the beginning of the lease (acquisition) or at the end (termination), according to Youngs.

Capitalized cost
This is the negotiated total cost of the vehicle. “When leasing a model that is in high demand and low supply, the capitalized cost may be the Manufacturer’s Suggested Retail Price (MSRP) or higher,” Youngs said in an April 2013 article from J.D. Power and Associates.

Capitalized reduction payment
Also known as the cap-reduction payment, this is the down payment made on a lease term to help reduce the monthly payment amounts. It is nonrefundable, Youngs said.

Destination charge
This is the nonrefundable cost for the vehicle to be delivered to the dealership.

Drive-off fee
This is the total amount due at signing. Just as when purchasing a car, there will be title fees, registration fees and sales tax to account for, though leased vehicles incur sales tax on monthly payments only, said Tony Quiroga, Car and Driver magazine senior editor, in a February 2015 article.

Money factor
Also known as the finance factor or finance charge, this number is used to calculate your interest rate by multiplying the money factor by 2,400, Young said. For example, a money factor of .00350 would be an 8.4 percent interest rate.

Rent charge
“This is the amount of the lease payment that comes from interest charges,” Quiroga explained. “To calculate the rent charge, add the adjusted cap cost to the depreciation and multiply by the finance factor,” and then multiply by the total number of months in the lease term.

Residual value
According to Youngs, this is the “predicted value of the vehicle at the end of the lease.” Quiroga pointed out that with residual value, “the less it’s worth, the higher the lease payments.”

Subsidized lease
“Many advertised lease deals are subsidized leases, meaning that the auto manufacturer determines, in advance, the financial variables used to calculate the lease payment and takes on a certain degree of risk in order to create an attractive or class-competitive payment,” Youngs warned. He added that subsidized lease terms are nonnegotiable and often require a cap-reduction payment.

Additional lease information
There are a few other details to note in regard to leasing, depending on the vehicle you choose and any additional services you purchase.

Gap insurance is often included in lease terms as an additional fee. According to Youngs, this automotive insurance helps meet the gap between your insurer’s paid amount and the total residual value due to the leasing company in the even that your vehicle is stolen or damaged beyond repair.

A service contract is also offered as part of a lease contract, in which the consumer agrees to pay a discounted price up front to the dealership to have the vehicle serviced by the dealership for all of its future repair and maintenance needs.

“Before buying a service contract, make sure the brand of vehicle selected does not offer free scheduled maintenance for a limited time,” Youngs said.

Finally, it’s important to note that your base monthly payment is not the total amount you have to pay each month within a lease. The base monthly payment is simply the depreciation value plus the rent charged, divided by the number of months in the lease term. Your total monthly payment—what you actually pay each month—is the base payment plus tax.

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Is a Private Loan Right for Financing Your Education?

The private sector is one option to pay for schooling

In its most recent study,commercialstudentloans_featured the College Board found that the average cost of tuition and fees for the 2015-2016 school year for in-state public, out-of-state public and private institutions was nearly $22,000.

Where do they expect you to get that kind of money? Private loans are one option.

According to Investopedia.com, private loans are funds you can obtain from financial institutions, without government subsidies, that help cover college expenses not met by scholarships, grants, federal loans or other financial assistance.

“You can apply for a private loan at any time and use the loan proceeds towards college expenses in addition to tuition (books, computer, transportation),” Katie Adams writes in her Investopedia article.

Benefits of Private Loans
Obtaining a private loan is an attractive option to pay for college for a number of reasons:

  • The application process is easy. Most loans do not require you to complete the FAFSA or a federal aid application. If you’ve ever filled one of those out, you know that this is a huge advantage for private loans, as the FAFSA can be painstakingly brutal. Above and beyond the quickness and ease, it is also convenient. “Typically you can apply for a loan online or by phone – no in-person meetings are necessary,” Adams says.
  • Loan funds are available immediately after you are approved.
  • You are usually allowed a co-signer. This is a plus because it can help lower interest rates and improve your chances of approval.
  • Interest on a private loan may be tax-deductible.
  • Fees are low or nonexistent. Most loans do not include a prepayment penalty, or a fee assessed if the loan is prepaid within a certain period of time.

There are potential downsides as well. You will typically have to pass a credit check to be approved, so having adequate credit history is important. You could possibly get around this point by having a co-signer, as mentioned above. Furthermore, private loans tend to have higher interest rates than federal loans, which could affect the amount you borrow and, in turn, have an impact on where you obtain your loan.

“Worse, student loans are not like credit card debt and mortgages, which can be canceled if you file for bankruptcy,” reads the College Loan Center page on the U.S. News & World Report website. “Most bankruptcy courts will not cancel them unless your situation is extremely dire. In addition, most private loans come with floating interest rates, so payments will rise if interest rates rise, which they generally do from time to time.”

What About a Federal Loan?
The official website for Federal Student Aid lists Direct Subsidized Loans and Direct Unsubsidized Loans, Direct PLUS Loans (for graduate and professional students or parents) and Federal Perkins Loans as your options for government-enabled student loans.

Benefits of federal loans include a low, fixed interest rate and flexible repayment options; plus, there’s no prepayment penalty. You also don’t need to pass a credit check for these loans. On the other hand, drawbacks of federal loans include low amount limits, the dreaded FAFSA, limitations on how funds are utilized, strict enrollment stipulations and a small loan fee.

In the end, a private loan may be the only option available for some, in which case it does carry merit to explore it as an education-funding alternative.

“College payments are going to be a substantial investment into the future of an individual. Schooling decisions go beyond just the financial numbers and move into the territory of bettering oneself,” Adams says. “Even so, finances cannot be ignored. Exploring your options can save headaches and money now and in the future.”
Stop by today to find out more about the options we have in store for you.

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FAFSA Changes

What to know about the new FAFSA schedule

The process for applyingfafsachanges_featured for financial aid has been changed, so if you are planning on filling out the Free Application for Federal Student Aid (FAFSA) soon, here is some information you need to know.

On Sept. 14, 2015, President Obama announced a new set of regulations that would change the schedule for applying for student aid through the FAFSA process. These changes will impact millions of students who will submit an application when the 2017-18 cycle begins.

Now, students who are submitting a FAFSA will have the opportunity to do so three months earlier than students in previous years could. Instead of submitting the 2017-18 FAFSA on Jan. 1, they will be able to get the process over with in the fall and submit it as early as Oct 1. There is no change to the schedule for the 2016-17 FAFSA, which became available Jan. 1, 2016.

“The earlier submission date will be a permanent change, enabling students to complete and submit their FAFSAs as early as October 1 every year,” states the website maintained by Federal Student Aid, an office of the U.S. Department of Education.

Families that have gone through the process in previous years now need to get used to this new schedule. Furthermore, it means that earlier income and tax information must be used when filling out the applicable financial information.

“For example, on the 2017-18 FAFSA, students (and parents, as appropriate) will report their 2015 income and tax information, rather than their 2016 income and tax information,” states the Federal Student Aid website.

This change doesn’t just mean you need to pay extra attention when reporting tax information; it has far-reaching implications for families looking to plan their taxes and educational finances most effectively.

“To secure the best aid offer, you may need to tweak the way you manage income and assets that have an impact on financial aid,” says Kaitlin Pitsker in an article from Kiplinger’s Personal Finance. “For example, if you plan to realize capital gains on your stocks or bonds, you’ll want to do so before January 1 of your student’s sophomore year of high school to avoid having the money count as income on the FAFSA – a year earlier than on the old timeline.”

Students frequently pay for school using a combination of sources. Money obtained through the FAFSA process is often supplemented by savings accounts from family members, such as 529 educational savings plans. Grandparents who hold 529 savings plans should be aware that the new FAFSA schedule also impacts them.

“Previously, withdrawals from such accounts counted as student income during the first three years of college,” states Pitsker. “Now, distributions made during the last two years aren’t reported on the FAFSA. So if you can, delay cashing in on the grands’ generosity until those final years.”

While adjusting to the new schedule, make sure to reach out to your financial institution for answers to any questions you have about paying for your child’s education. You can also refer to the table outlining these changes that is provided by the Federal Student Aid website at https://studentaid.ed.gov/sa/resources/2017-18-fafsa-process-changes-text.

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Tips for Getting the Best Auto Loan

Doing your homework before walking into a dealership can help you save

You’ve decided to buy a carbestcarloan_featured — whether new or used — and all you keep thinking about is how exciting it will be to drive home with a new toy. While car buying can be fun, doing your research before you walk into the dealership can help you save money. Consider these tips when planning your new purchase.

According to a September 2014 article on NBC’s “Today” show’s website by consumer expert Herb Weisbaum, before walking into the dealership, you should know your credit scores from the three major credit reporting agencies: Experian, Equifax and TransUnion.

“You want to check all three because you don’t know which one the lender will use and you want to give yourself time to fix any mistakes,” says Director of Consumer Education for Credit.com Gerri Detweiler. “I found a mistake when I went to buy a car a few years ago, and if I hadn’t straightened it out, it would have cost me a lot of money.”

You can use AnnualCreditReport.com, set up by the federal government, or free credit sites like CreditKarma.com or Credit.com.

Shop around first
Don’t make the mistake of walking into a dealership without first checking out auto loans from other financers, including local financial institutions. You can even get preapproved for a loan, so you know what your best possible rate is going in.

“A lot of people just assume they’re getting the best rate and terms from the dealer, and that’s the last assumption you should make,” says Liz Weston, author of the book “Deal with Your Debt.” Shopping around for an interest rate can also protect you from hidden dealership fees.

“Dealers are legally allowed to add to your interest rate in order to compensate themselves … in effect, hiding the size of their profit from the buyer. The only way you’re going to know if you’re getting the best rate out there is if you’ve gotten quotes from other lenders,” reports a June 2012 article in Time magazine by writer and editor Martha C. White. The Time article also warns consumers about dealers who offer to pay off the loan on your trade-in vehicle. In some cases, the dealership will pay it off but then add and hide the loan cost in your new loan.

Choose the shortest loan term you can afford
Those 60- and 72-month loans may look great in the dealership with their low monthly payments, but you’ll end up paying more in the long run with extended months of interest.

“Try to limit your car loan to about 48 months. That’s the optimal amount of time you should pay for your car,” says Automotive Content Specialist Mike Quincy with Consumer Reports Autos.

Make a down payment
Don’t be fooled by the signs and flyers at your local dealership promising low monthly payments with zero dollars down; very few people end up qualifying for these deals. If you can afford to, make a down payment on your purchase to save money in the long run.

“Having a down payment will help you qualify for a loan and may help you obtain a lower interest rate. Lenders tend to look favorably upon borrowers prepared to make a down payment because it makes default on the loan less likely,” reports Experian, global leader in consumer and business credit reporting, in its FAQ section.

Buy add-ons separately
Would your car look cooler with a nice set of chrome rims or a leather interior instead of fabric? Most likely, but adding these upgrades to your auto loan will only increase your monthly payments and possibly your interest rate.

“About 50 percent of a dealer’s profits come from the finance office,” says Chris Kukla, senior counsel for government affairs at the Center for Responsible Lending, in a June 2012 article for Time. As a result, car salespeople will upsell their add-on services because they’re looking to increase their profit, not help you with your costs.

Purchasing add-ons after your loan is finalized will also allow you to better evaluate the need versus cost for each, helping you save money and purchase only those services that fit within your budget.

If you have additional questions on how to get the best auto loan, contact us and one of our representatives will be happy to help.

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Careers That Can Help You Pay Back Student Loans

Six jobs that will help you pay for your education

A college graduate fromCarersLoans_featured the class of 2016 will leave school with $37,173 in education-related debt, Student Loan Expert Mark Kantrowitz estimated in a May 2016 report for CBS News.

Up six percent from last year, that average is only expected to grow. But it doesn’t have to be insufferable. While it may be too late for the 2016 grads, future college students should take notice that there are certain jobs that can help an individual eliminate student loan debt by simply being hired.

1. Teachers – According to the Federal Student Aid website (https://studentaid.ed.gov), teachers at public schools can get up to $17,500 in student loans forgiven when they instruct math or science classes five years in a row at a secondary school designated as “low income” by the government. Special education teachers are awarded the same if they work for five years at a federally designated low-income elementary or secondary school.

Another option on the education career path is teaching at any public elementary or secondary school, which can qualify you for up to $5,000 in loan forgiveness.

Furthermore, teachers with Federal Perkins Loans can get all of those loans forgiven if they are employed for five consecutive years at a school that serves low-income families; they teach special education, math, science, foreign language or bilingual education; or they live in an area where there is a shortage of teachers.

2. Civil servants – After 10 years of service at any federal, state or local government agency job, you can have the balance of your loans erased.

“The Public Service Loan Forgiveness (PSLF) Program forgives the remaining balance on your Direct Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer,” the FSA website stated.

3. Volunteers – While their career role may not technically be a “job,” certain volunteers with Federal Perkins Loans can get up to 70 percent of their loans paid once their service is completed.

“Didn’t get to study abroad in college? Join the Peace Corps and travel the world while also qualifying for student loan forgiveness,” wrote Senior Associate Editor at The Atlantic Matt Vasilogambros.

AmeriCorps volunteers also qualify under the PSLF Program.

4. Employees of a nonprofit – Similarly, people who work for charitable organizations qualify under the PSLF Program, but only if the nonprofit is tax-exempt through the IRS and is neither a labor union or partisan political organization nor a specified religious group.

5. Those working for the good of the public – Get all of your Federal Perkins Loans forgiven if you work as a public defender, nurse, emergency medical technician, firefighter, or law enforcement of corrections officer; if you serve in hostile zones in any branch of the military; or if you are a social worker for families in low-income and high-risk areas.

6. Various other job titles, depending on where you live – There are a number of state-specific loan forgiveness programs across the United States.

For instance, if you work in the health care field in many states, you can get some of your loans paid back. Eligible borrowers can even receive up to $160,000 in California from the California State Loan Repayment Program, according to a University of San Diego article, “60+ Ways to Get Rid of Your Student Loans.”

Meanwhile, working as a veterinarian, in a veterans’ home or in any STEM (science, technology, engineering and mathematics) job can take money off your loan balance in various states. And these are just a few examples.

There are also instances where simply moving to a different state or town can get your loans forgiven. Vasilogambros highlighted a program in which you can capitalize on the need of the city of Niagara Falls, New York, to attract young people, and receive $7,000 in loan forgiveness over two years. But wouldn’t qualifying thanks to the job that you secured with your college-earned degree make it all the more satisfying?

Stop by to find out more about the student loan options we have for you, and we’ll figure out exactly what you need.

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Should You Buy a Home if You Still Have Student Loans?

What to consider before adding a mortgage to your educational debt

Becoming a homeowner is a hugeCHomeStudentDebt_Featured life step, especially on the financial front, and it should not be taken lightly.

And if you are one of the 43.3 million Americans still with student loan debt, according to the Federal Reserve Bank of New York, it’s an even bigger decision. There are many factors to take into account before taking the plunge and adding a mortgage to your educational debt.

Here are a few of the main points to consider:

Debt-to-income ratio – The biggest hurdle you may face if you try to buy a home while maintaining a balance on your student loans is what is known as the debt-to-income ratio. The DTI ratio is how lenders judge your likelihood of defaulting on a mortgage. It compares your total household monthly debt payments to your total income. Lenders generally prefer that number to be less than 43 percent, according to the Consumer Financial Protection Bureau.

As Real Estate Columnist Kenneth Harney of the Washington Post reported, new rules from the Federal Housing Administration (FHA) could make it tougher to qualify for a low-down-payment mortgage through the FHA, as well as restrict down payment gifts. Previously, student loan debt was not taken into account in the DTI ratio, but now lenders are required to include 2 percent of student loan debt when computing the number. Considering the average class of 2016 graduate has a student loan debt of $37,172 according to Student Loan Hero, that 2 percent could drastically change the chances of getting approved for the FHA loan.

FHA Spokesman Brian Sullivan explains why the new requirements, though tougher, make more sense.

“Deferred student debt is debt all the same and really must be counted when determining a borrower’s ability to sustain both student debt payments and a mortgage over the long haul,” he says. Sullivan also adds that the agency’s primary goal is to put first-time home buyers “on a path of sustainable homeownership rather than being placed into a financial situation they can no longer afford once their student debt deferment expires.”

Down payment woes – With down payments as low as 3.5 percent, according to an article on CNN Money, whether or not you qualify for the FHA loan will determine how much of your saved money will have to be used up front. This is important because higher down payments lower your monthly payments as well as your interest rate. At the same time, you can’t put all your savings toward the down payment because you have other home-buying needs such as closing costs, moving expenses, homeowners insurance and home furnishings.

Renting vs. buying – Some renters feel as though they are “throwing away money” by paying a landlord each month rather than investing that money in an asset all their own. However, rushing into buying a home for that reason alone is a mistake, especially if you still have student loan debt, as a mortgage would just add to your debt, possibly to the point that it cannot be surmounted.

Furthermore, you have to think about non-monetary aspects as well. For example, are you in a place in your life where you want to put down roots in one particular area?

“Low mortgage rates and high rents make buying an attractive option, but you should be ready to put some roots down,” says CNN Money. “If you’re planning to stay in a home for at least two years, buying is more financially advantageous than renting in 70 percent of housing markets, according to a recent report from Zillow.”

Homeowners’ responsibilities – Another aspect that differentiates buying a home from renting is the fact that with a home all the responsibilities are your own. You’ll likely need a lawn mower, and other landscaping tools. If the dishwasher breaks, you will have to contact a professional and pay for their services. You have to be ready, willing and able to take on those responsibilities — which all come with costs up front. Will you have the funds for that?

If you are set on buying a home despite your student loan debt, you do have some options to make it more manageable financially. Come talk to us today to find out if you can afford purchasing a home.

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Colleges That Don’t Make Students Take Out Loans

Are student loans a thing of the past?

Each year, more and more studentsCollegeLoans_062816 are graduating from college with thousands of dollars in student debt that they’re responsible for paying back. A 2014 study by The Institute for College Access & Success (TICAS) found that nearly 69 percent of students graduate with an average student loan debt of $28,950.

However, according to Edvisors, a college finance website, more than 70 schools have adopted “no-loan” policies, where grants replace loans within their financial aid packages. Additionally, other colleges have eliminated loans for those students who are eligible for financial aid. At these schools, the number of students who borrow is much smaller, and college graduates have loan balances that are much lower than the national average of nearly 70 percent (according to TICAS).

While these policies don’t necessarily eliminate loans in their entirety, the financial aid package is based on the school’s estimate of what the family can afford to pay. If a family chooses not to pay the full amount, the student must borrow money to make up the difference. Also, some students borrow to cover costs that aren’t included in their financial aid packages, such as health insurance or laptop computers.

Schools that don’t make students take out loans typically have a smaller number of students who borrow, and the college graduates who do take out loans have balances much smaller than the national average.

According to Kiplinger in May of 2015, these five schools are among the best when you want to graduate with minimal student loans:

Yale University
Students who are eligible for financial aid—families with incomes of as much as $200,000—can utilize Yale’s no-loan program. According to Kiplinger, the total annual cost to attend Yale is $60,850 and the average need-based aid is $44,268. However, the percentage of students with loans is 16 percent.

Vanderbilt University
In 2009, Vanderbilt decided to take on a no-loan policy. All students who are eligible for financial aid are able to use the policy. Almost half of students at the university receive need-based aid, and 87 percent of students take four years to graduate, which minimizes costs. The total annual cost is $60,294, and the average need-based aid is $39,373. The percentage of students with loans is 22 percent.

Davidson College
This liberal arts college provides 100 percent financial aid through grants and campus jobs to the 46 percent of students who receive need-based aid. The average need-based aid is $33,717, and the total yearly cost is $59,146. The percentage of students with loans is 22 percent.

Princeton University
As the first school to employ a no-loan policy back in 2001, Princeton has an average student debt that is very low compared with that of other colleges. The total annual cost to attend Princeton is $59,165, with the average need-based aid reaching $37,183. The percentage of students with loans is 24 percent.

Offering need-based financial aid to over 60 percent of attendees, Harvard also meets all of those students’ demonstrated financial need, all without loans. Families who make between $65,000 and $150,000 annually are generally expected to give a maximum of 10 percent of their income. The average need-based aid is $41,975, and the total yearly cost is $59,607. The percentage of students with loans is 26 percent.

Digging yourself into debt while going to college isn’t necessary. Contact us today to find out what the best steps are for your individual situation.

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