Tag: student loan

What Do I Need to Know About the Recent Student Loan Changes?

by Advantage One, posted in Budgeting, Lifestyle, Loans, Saving, Tips & Best Practices, Uncategorized

Q: There have been so many changes to federal student loans over the last few years, and I’ve heard there are more coming. As a college graduate with a federal student loan, what do I need to know about these changes and how will they affect my payment plan?

A: Student loans have undergone quite a few changes over the last few years. Backtracked statements and moving rollout dates have only made the headlines more confusing. As a borrower, though, it’s important to keep up with these changes and stay informed about how they will impact you. Here, we’ve outlined the important changes you need to know about and included steps you might need to take to benefit from these adjustments. 

A brief overview of recent student loan changes 

First, let’s take a look at the timeline of student loan changes of the last few years: 

  • Mar. 2020-Forbearance (a temporary pause) on student loans is enacted by the federal government in response to financial hardships caused by the coronavirus pandemic.
  • Apr. 2022-The Education Department announces an Income-Driven Repayment (IDR) plan and Public Service Loan Forgiveness (PSLF).
  • Oct. 2022-Congress passes the Joint Consolidation Loan Separation Act.
  • June 2, 2023- A debt-ceiling deal is passed by congress. A provision in this deal prevents any further payment pause extensions on federal student loans. 
  • June 30, 2023-President Biden’s proposal to erase up to $20,000 in federal student loans is struck down by the U.S. Supreme Court.
  • July 14, 2023-The Education Department announces that the first major wave of loan forgiveness is coming for over 804,000 borrowers.
  • July 30, 2023-Parts of the IDR plan goes into effect.
  • Sept. 1, 2023-Interest on student loans resumes accrual.
  • Oct. 1, 2023-Student loan payments resume.
  • July 1, 2024-The rest of the IDR plan goes into effect. 

Forbearance ending on Oct. 1, 2023

After more than three years of student loan pauses, payments are set to resume this October. In the meantime, though, interest will begin accruing again on Sept. 1. Borrowers who’ve grown accustomed to skipping their monthly payments will need to readjust their budgets for these “new” bills. 

Steps to take: If you have an open student loan, prepare for the change in your budget instead of waiting until it hits you by surprise. Review your budget to see whether you have room for this new expense or if you need to make some major adjustments. If you are unsure of how much your monthly payment will be, contact your loan servicer now to find out. 

PSLF account adjustment, or waiver

On July 14, the Education Department announced that loan forgiveness is coming for more than 804,000 borrowers who’ve been paying off their student loans for at least 20 years. In total, close to $39 billion in student debt will be automatically wiped out with this adjustment. Millions more borrowers will have three years of additional credit toward forgiveness under the new plans when their accounts are updated next year. 

If you’ve been steadily paying off a student loan for at least 20 or 25 years (including forbearance) you’ll be student debt-free after the adjustment. If you borrowed less than $12,000, you’ll be debt-free even if you’ve only been paying off your student loan for 10 years. 

Steps to take: The adjustment is mostly automatic. However, if you have a loan from the Federal Family Education Loan (FFEL) Program, Perkins or Health Education Assistance Loan (HEAL) Program, you must apply to consolidate them at StudentAid.gov by the end of 2023 to enjoy the full benefits of this adjustment. The consolidation process can take a while, so get started as soon as you can. 

A new IDR plan

The existing income-driven REPAYE plan is being replaced by a new, broader plan called Saving on A Valuable Education, or SAVE. SAVE is expected to halve the monthly payments for many borrowers. 

Steps to take: Borrowers can sign up for this new plan before forbearance ends this fall. However, the full plan will not take effect until July 2024. If you are already enrolled in the REPAYE plan, your loan will automatically be moved into the SAVE plan in October.

Also, if you qualify for the PSLF waiver above, but you’ll have a balance remaining after the adjustment, you’ll need to sign up for an IDR plan when payments resume this fall to keep building credit toward loan forgiveness. If you believe you are in this category, be sure to contact your servicer to get your paperwork submitted soon. This way, it’ll be set up to go into an IDR plan as soon as forbearance ends. 

Student loan servicer switches

In April, 2023, the Education Department signed contracts with five federal student loan servicers, which are expected to go live in 2024. Eventually, the department plans to launch a central servicer portal at StudentAid.gov, but for now, it’s important to know the name and contact info of your servicer. If the department transfers your loans to another servicer, your current and new servicers will notify you of the change.  

Steps to take: Make sure your contact information is up to date with your current servicer. 

Other student loan changes underway

There are several other changes underway for student loans:

  • Fresh Start program for delinquent or defaulted loans. Borrowers with past-due loans now have more opportunity to get them back on track through the new “Fresh Start” program. Eligible borrowers must sign up for Fresh Start within one year of the end of forbearance on myeddebt.ed.gov or by calling the Education Department at 800-621-3115.
  • Updated bankruptcy guidance. The departments of Education and Justice jointly released updated bankruptcy guidance in November 2022 to standardize the requirements for borrowers to discharge their federal student loans in bankruptcy.
  • Joint Consolidation Loan Separation Act. Passed in October 2022, this law allows consolidated student loans of spouses to be separated so that each partner can access debt relief for their loan. 

Use this guide to stay informed on recent student loan changes. 

Getting Ahead on Your Student Loan Before You Graduate

by Advantage One, posted in Budgeting, Credit, Lifestyle, Loans, Tips & Best Practices

young woman working at a laptop in an officeAs you prepare for graduation and begin scouting different employment opportunities, be sure to look at the larger picture before you accept a position.

Hopefully, you’ve chosen a career path that will bring you joy and gratification. Equally important, though, is a job that can support your lifestyle choices. While the positions you consider for your first post-college job will likely offer the opportunity for growth, you’ll still need to pay your bills—and make your student loan payments—as soon as you graduate. A job that brings you satisfaction and a pleasant working environment will not last long if the salary it offers causes you to sink into debt.

How do you determine what kind of salary will be large enough to support your desired lifestyle?

To get this information, you’ll need to create a mock monthly budget for your post-college self.

Using a spreadsheet or paper and pen, create two columns, one for expenses and one for actual dollar amounts. In the expense column, list your typical monthly expenses, including housing costs, transportation costs, health insurance, groceries, entertainment costs, clothing costs, dining out, savings, etc. In the dollar column, list the amount of money you expect to pay every month for each expense.

Your budget should look something like this:

ExpenseMonthly Cost
Housing$1,200
Transportation$300
Health Insurance$250
Groceries$350
Student Loan Payments$350

It will take some research and some hard, honest thinking to come up with these numbers. For housing costs, take a moment to think about where you see yourself settling down after college. You don’t have to know the exact neighborhood you’ll live in, but it’s good to know the city that will work best for you in terms of lifestyle, career path, and family plans. You can narrow this down to a few choices so long as you keep it reasonable. Once you’ve chosen your desired location, research the median rental prices in the area on real estate sites like Zillow and Redfin.

Next, work on transportation costs. If you already own a car, you’ll have an idea of what it costs you each month. Otherwise, spend some time thinking about what kind of car you want to drive. You can find listings on Carfax.com. Include costs like auto insurance, gas, and upkeep, in this category.

Or, if you plan on living somewhere with reliable public transportation, you might choose this route instead. Make a calculation of how much you’ll spend on bus and/or train rides, along with the occasional cab or ride-share ride.

Complete your budget using your best estimates for each category. Once you’ve filled out each expense amount, add up your total and multiply it by 12 to give you the amount of money you’ll need each year for supporting the lifestyle of your choice. (This number will increase with inflation, but since current salaries will likely increase along with the inflation rate, this exercise can still give you an idea of the annual salary you’ll need.)
Now that you have these numbers, you’re ready to go ahead with your job search. When considering possible positions, you don’t have to choose the one that pays the highest salary if there are other things about the job you don’t love. However, it’s best to pursue positions that can actually support you.

Your Turn:
Are you choosing your first job for the salary or for other factors? Share your take with us in the comments.

Learn More:
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Four Mistakes People Make With Student Loans

by Advantage One, posted in Budgeting, Loans, Tips & Best Practices

Stay smart with a student loan strategy
Going to college is a life-changing experience that can open doors to new careers and increase your lifetime earning potential. If you are looking for a new student loan or are trying to make the best out of the repayment period, make sure you are avoiding these common student loan mistakes.

Not considering private loans
Many would-be-students shy away from private loans because they have heard that they lack the protections and benefits that come with federal loans. While it’s true that federal loans offer a fixed interest rate in contrast to most private loans, it is often possible for a student to get a lower interest rate with a private loan, particularly if a parent cosigns. If you are able to obtain a much lower rate with a private loan, then it’s worth seriously considering whether the security of a fixed rate with a federal loan is worth it.

Ignoring retirement savings
It is understandable, and even laudable, to want to repay student loans as quickly as possible, but undertaking an ambitious repayment plan at the expense of completely ignoring retirement savings isn’t wise.

“A recent report from Morningstar Inc. subsidiary HelloWallet found that someone with a starting salary of $50,000 who pays off a $20,000 student loan ahead of schedule but skimps on retirement savings—by contributing only enough to an employer-sponsored 401(k) plan to receive half the employer’s 3% matching contribution—will wind up with a net worth at age 65 that’s $150,000 below where it would have been had he or she contributed enough to receive the full match and repaid the loan over a longer period, by making the minimum required payment,” states The Wall Street Journal Reporter Anne Tergesen in an article from Sep. 2016.

Not making automatic payments
One of the best steps you can take to make sure the student loan repayment process goes as smoothly as possible is to set up automatic payments. Some people delay setting up automatic payments because they have ambitious goals of paying more than the minimum each month, and want to wait to see what their bank account balance is before determining the payment amount. While it’s great to pay more when you can (as long as you aren’t sacrificing retirement savings), it’s not worth the risk of making a late payment or missing a payment all together. Setting up automatic payments that you can afford each month is the safest bet, and if you find you have extra money after the payment is made, you can always make a supplemental payment.

Paying for assistance
If you are having trouble affording your payments, you may have been tempted by ads that offer to help you figure out your options for paying on a different schedule or seeking loan forgiveness on your federal loan.

“If someone asks you to pay for these services, you are not dealing with the U.S. Department of Education or our loan servicers,” according to Nicole Callahan, a Digital Engagement Strategist at Federal Student Aid in an article for HomeRoom, the official blog of the U.S. Department of Education. “We don’t charge application or maintenance fees. If you’re asked to pay, walk away (or hang up).”

The cost of an education that can help you start a profitable career or get a better job in your current field is money well spent, and you can make sure you are getting the best return on your investment by avoiding these four common student loan mistakes.

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Three Things You Need to Do to Your Student Loans Right Now

by Advantage One, posted in Loans, Tips & Best Practices

Stay ahead of this big expense

Recent college graduates already have enough on their plates worrying about getting a job and supporting themselves — the last thing they want to do is stress over student loan repayment. For most, paying off student loans takes a long time, so no matter where you are in that process, there are three things you should stop and do right now.

1. Get organized
Take an inventory of your student loans. You can get a list by signing up at http://www.nslds.ed.gov/. After a short enrollment process, you will have a handy list of all guaranteed loans that were issued to you by the government, as well as those made by private lenders through June 2010. If you have a private non–guaranteed loan, those should all be present and detailed on your credit report, which you can find for free online.

Create a spreadsheet chronicling the name of each lender, the web address, your username and password (ensure your device is locked or encrypted), the loan balance, and the interest rate. The latter will be helpful if you opt to consolidate or pay off any interest early down the road. But be sure to keep your list up to date, as interest rates on student loans can be fixed or variable.

2. Know your repayment options
“The standard repayment schedule extends your loan payments over ten years, or 120 payments,” explained Maggie McGrath of Forbes. “However, if the standard monthly payments aren’t manageable on your budget — or if you’re unemployed or otherwise unable to repay your loans — the federal government has some alternative repayment plans for you, as well as some deferral options.”

Income-based repayment (IBR) and income-contingent repayment (ICR) extend your payment period to 25 years, capping your monthly payments at a fixed percentage of your income. The income on which payments are based and the actual percentage differ between the two plans. Pay-as-you-earn is a 20-year repayment period, with yet another varying percentage of your discretionary income.

You can read about other repayment options from the government here: https://studentaid.ed.gov/sa/repay-loans/understand/plans. Be wary, as these types of programs can cause your interest costs to increase over time, so always pay as close to your original amount due as you can.

3. Be aware of loan forgiveness opportunities
There are three primary programs that forgive the balance of your loan: Public service loan forgiveness, teacher loan forgiveness and Perkins loan cancellation.

“To qualify for forgiveness, your loans can’t be in default, meaning they’ve gone unpaid for more than nine months,” noted higher education expert Brianna McGurran of Nerdwallet. “Also, private student loans don’t offer forgiveness, though some lenders will let you make interest-only payments or take a temporary interest rate reduction if you’re having trouble affording your bill.”

Public service loan forgiveness requires you to have been working for a nonprofit or the government for at least 10 years in roles including, but not limited to, firefighting, teaching, the military and nursing. In the teacher-specific program, you must work full time as an educator for five consecutive years. The Perkins loan forgiveness also cancels the balance of that loan if you’ve worked as a teacher, firefighter, nurse, police officer, school librarian or public defender for about five years or more. For a complete description of eligibility requirements, visit https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation.

If you take the time to do your homework and gather yourself before — or even while — you are repaying your student loans, the process will seem a lot less scary, and a lot more manageable.

Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.

Direct Subsidized and Direct Unsubsidized Loans for Students

by Advantage One, posted in Loans, Tips & Best Practices

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/.

Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.

Is a Private Loan Right for Financing Your Education?

by Advantage One, posted in Loans, Tips & Best Practices

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

by Advantage One, posted in Loans, Tips & Best Practices

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

by Advantage One, posted in Budgeting, Lifestyle, Loans, Tips & Best Practices

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.

Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.

Navigating the Free Application for Federal Student Aid Process (FAFSA)

by Advantage One, posted in Tips & Best Practices

A guide to some of the most important FAFSA questions

The heavy burdenFafsa_Featured of student loan debt that so many people in our country face is always in the news, so new students and their parents know exactly how important it is to minimize their costs. Obtaining financial aid is dependent upon filling out the Free Application for Federal Student Aid, which means there is a lot of pressure surrounding the task of filling it out correctly.

The first thing you should know is that the form is very important, and you should fill it out no matter what. This may seem obvious, since it is required for anyone who hopes to receive federal loans or grants or who may be admitted to a work-study program, but a surprising number of students do not submit the application at all.

“Unfortunately, the standard FAFSA has over 100 questions asking for everything from your net worth to your parents’ assets, causing many overwhelmed students to never complete it,” says Alexandra Rice for U.S. News & World Report.

The length of the application isn’t the only reason students might forgo submitting it. One of the most common reasons is that students think their parents’ income level is too high to qualify for financial aid.

“This is a costly misconception,” states Rice. “It’s important to be aware that many colleges offer merit-based aid that doesn’t even consider financial need; it’s based on achievements such as grades, SAT scores or athletics. In other words, the amount of money your parents make doesn’t matter for this type of aid, but you can’t get it if you don’t fill out the form.”

So when it comes time to fill out your FAFSA application, you should be aware of some of the most important questions and answer them carefully to help ensure you get the most aid that you are entitled to.

Kim Clark from Time Inc.’s Money.com points to questions 24 and 25, which deal with the education level of your parents.

“Don’t brag!” cautions Clark. “If either parent attended but did not graduate from college, then just click on high school. There are some extra scholarship programs for people whose parents never finished college.”

Question 31, dealing with work study, is another one to watch out for. You should answer yes regardless of whether or not you currently think you want to work while attending school. You aren’t obligated to take a work-study position even if you answer yes, and it keeps you in the running so your options are open when the time is closer and you can assess how you feel.

Not only do work-study jobs help you earn some money to put toward your tuition, but the income doesn’t impact your financial aid eligibility in future years. On the other hand, if you don’t try to gain a work-study position and later decide you need to work and take an off-campus job, those earnings could impact that future eligibility.

“Also, research shows that students who spend 10 to 15 hours a week on work-study jobs do better in college than those who don’t work,” states Rice.

Questions 41 and 42 deal with the student’s savings and investments, which have a big impact on how much aid you receive. It is important to pay extra attention to these questions in order to accurately calculate the exact sum of investments and savings that belong specifically to the student.

“Every dollar of savings in the student’s name reduces need-based aid by about 20 cents, while money in parents’ accounts — even if it’s designated for the student — reduces need-based aid by a maximum of 5.64 percent,” states Rice.

If you take the money that the student has saved up for college and contribute it to a 529 college savings account, you can make a big difference in how much need-based aid you are eligible for. This may seem strange, since that money is intended for the student to use during school, but 529 accounts are technically parental assets, which you will disclose in question 91.

“Notice that the question asks how much the student’s savings and investments are worth ‘as of today,’” states Rice. “That means you have until the day you fill out your FAFSA to move the student’s money into a 529.”

This brings us to question 91, which is where one of the most common and expensive mistakes can happen. That error is mistakenly reporting parental assets as too high by double reporting certain assets as being owned by both the parents and the child. If the student’s parents are divorced or if they meet other separation criteria, the student needs to include only the assets of the parent they live with most of the time.

Another important thing to keep in mind with this question is that retirement savings and the net value of your home are exempt according to FAFSA’s fine print. This means that while you do need to include the value of 529 savings accounts and other taxable investment accounts, you do not need to include pensions, 401(k)s, IRAs or the value of life insurance plans.

Even though college hasn’t started, this is one questionnaire that it truly pays to take seriously, so keep these tips in mind when it comes time to fill out your FAFSA application.

Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.

The Economic and Social Cost of Student Loan Debt

by Advantage One, posted in Lifestyle, Loans

The wide impact of student loan debt and how to help the situation

The cost of studentStLoans_Featured loan debt is clearly felt by those directly involved, whether they are students themselves or family members who have taken out loans on behalf of the students. Student loan debt has a wider effect, however, with a large economic and social impact that spreads throughout the country.

“In a widely discussed brief last year (as widely discussed as briefs can be), data from the New York Fed suggested a macroeconomic drag due to student loan debt in the wake of the Great Recession,” according to Forbes Contributor Josh Freedman.

The brief also suggests that people who had more student loan debt were not as likely to purchase cars or homes as people were without a debt burden. This has a direct impact on the car and housing markets and a wider impact on the economy as a whole.

“Rising student debt levels are changing how millions of people approach major milestones and core financial decisions, affecting long-standing social and economic patterns,” states Kelley Holland in a contribution to CNBC. “Owning a home used to be a key marker of adulthood and maturity. But home ownership has plummeted among Americans under age 35, from 43.3 percent in the first quarter of 2005 to 34.6 percent in the first quarter of 2015, according to the Census Bureau.”

Due to student debt, first-time home buyers can only afford homes in the lower price range, which is limiting the market value of other homes. Builders and realtors are also being impacted due to the lack of market for higher valued homes.

People in their 20s are also delaying starting a family, a trend that has been going on for years. In the summer of 2015, the birth rate for women 20-29 hit a record low according to Pew Research. It isn’t possible to predict exactly what the economic impact of this trend will be, but it is clear that the social impact is already being felt, as the landscape of young parenthood already has a dramatic new look.

“Research has also found that the burden of student debt hinders innovation and entrepreneurship, a core component of the economic prowess of the United States,” states Holland. “Researchers at the Federal Reserve Bank of Philadelphia and Penn State studied the relationship between student debt and small business formation and found ‘a significant and economically meaningful’ link: more student debt led to fewer small businesses being formed.”

Experts have many ideas regarding how to improve the student loan situation. Due to the fact that the majority of student loans are federal loans, some experts feel that there would be less student loan debt overall if the balance shifted more toward private loans from financial institutions.

“First, private student loans arguably have the strongest consumer protection: a robust underwriting process that includes an ability-to-repay test,” says Richard Hunt, president and CEO of the Consumer Bankers Association, in a commentary on CNBC.com. “Government loans are subject to the Department of Education lending rules, which don’t require such a test.”

Another reason is that private lenders must provide a full and comprehensive disclosure of conditions and terms, and a summary of the full price of the loan over its lifetime. This can help students and their parents accurately weigh the costs and the benefits.

Students can also help decrease the burden they feel, as well as the larger social and economic impact of their debt, by taking the right steps to make home ownership easier sooner. A good start is talking to their financial institution about the steps they can take to reach a level at which they can be approved for a loan. This could include forming goals like saving up to a specific down-payment target. Then they can make use of one of the many free budgeting tools available online to help get their spending in check and save more efficiently.

Higher education is still a very important part of building a successful future. You can be in a better position to enjoy the rewards if you make thoughtful decisions about what type of loan to choose and practice careful budgeting to ensure that you can still meet all your life goals, like buying a home and starting a family.

Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.