Borrowing Money for College Without Your Parents’ Help: Student Loan Info for Students

For many college students, student loans are an inevitability. Scholarships, grants, and work study opportunities can only go so far to cover the major cost of most institutions of higher education. Often, college students take on the responsibility of federal or private student loans without fully realizing what they are signing up for. Before signing on for student debt, here are four things students should think about:

1. Understand Your Budget

When you take out student loans, understand that you will need to pay them off eventually, often with interest attached. So while it might feel like you are flush with cash after the loan hits your account, it is important to save student loan money for necessities in an attempt to spend less than what you have been loaned.

This money is earmarked for books, tuition, food, and transportation expenses. Spending student loan money on excess expenses like eating out and heading to the movies with friends can cause you to waste your financial resources. Plus, the more money from your loan you are able to save, the easier it will be for you to eventually pay off the loan entirely. Prioritizing how you spend your money now will help you be more prepared for your financial future.

2. Only Borrow What You Absolutely Need

The biggest mistake students make is borrowing more than what they actually need and can reasonably expect to be able to repay. Student loan providers are often more than willing to offer a student much more money than they actually need in the hopes that they will spend it and not be able to repay it right away, thus earning the lender a ton of money in interest fees.

You can choose how much of a loan offer you want to accept. If you leave a portion of a loan unclaimed, that amount will be returned to the lender. If you do opt to take the full loan and find that you do not need it all, you can return it to the lender as a payment.
REMEMBER: The more money you accept as a student loan, the higher your monthly payment will be.

3. Your Career Choices Will Be Impacted

Once you graduate and those student loan payments begin, you must quickly find a job with a salary that allows you to make your monthly payments. When bills are coming in monthly, the importance of your happiness at your job means a lot less than the money you are bringing in. This can prove limiting to students who discover they have entered a career path they do not like. Taking on additional student loans in order to change careers isn’t an option for everyone. The more money you borrow in student loans, the less wiggle room you’ll have to pursue different job options when you graduate.

4. Your Loan Balance Can Increase Even With Regular Payments

Even if you make your monthly payments on time and in full, it is possible that your loan balance will still increase over time. This happens mostly with an income driven repayment plan. If your monthly payments are based on your salary instead of the actual debt owed, it is possible that the payments you make will not be enough to cover the interest you accrue every month. THIS IS A HUGE PROBLEM.

If you anticipate entering the workforce in a low-paying field, you will need to take this into account when accepting student loan debt. It is crucial that you are able to pay off debt plus interest with your monthly payments.

Student loan debt can lead to anxiety, fear about finances, and regret. Many students feel weighed down by their student loan debt. If you are overburdened with student loan payments, or don’t know which choices are right for you, Veitengruber Law can help you find a workable solution. Whether you’re a parent or a student who needs guidance, give us a call to set up a Zoom consultation so we can help relieve your fears.

Should I Refinance My Student Loans During a Pandemic?

The recent trend in low interest rates has led some to refinance various loans. From home loans to student loans, refinancing has generally allowed people to reduce their interest rate and save money. But should you refinance your student loans? The answer to this question probably depends on what kind of student loan you have. Whether you have federal or private student loans, here is everything you need to know about refinancing.

Refinancing involves acquiring a new loan to pay off all or some of your existing student loan debt. With this refinancing, your student loan terms will change along with your interest rate. Depending on your payment history and your credit score, you may be eligible for a lower interest rate than you previously had, saving you money. Refinancing is not consolidation, which allows you to combine all or some of your loan together into one payment. Consolidation also allows you to change the terms of your loan to lengthier timelines that will decrease the amount you need to pay monthly. Consolidation won’t necessarily save you money, though, while refinancing likely will.

A word of caution: while it is absolutely possible to refinance federal student loans, it is not necessarily advisable to do so. Because there is no federal process through which to refinance your loans, you will have to go through a private lender. Utilizing a private lender may very well get you a lower interest rate and save you money in the long run. Federal loans, however, come with benefits. Government loans offer income-based repayment plans, forbearance options, and forgiveness programs. You will not have access to these programs if you refinance through a private lender.

The best way to decide if you should refinance your federal student loans is to look at your potential savings. Check your credit score to see which lenders might be the best fit. Make sure you pre-qualify and try to determine what your interest rate would be. The prequalification process can also help you compare loan offers without negatively impacting your credit score.

It’s important not to solely focus on how much refinancing will save you month to month. You should also look into your overall savings and how quickly you could pay off the loan. Another option is to look into employer loan assistance. You may be surprised at what your employer offers. If you are looking for a job, try negotiating this into your benefits package.

Refinancing is not the only option for decreasing your monthly student loan payment or the time you spend paying back your loan. You can make extra payments or pay more than you owe each month to reduce the principal of your loan quicker and save on interest. Many lenders offer auto pay discounts. The savings you earn from these discounts can go towards extra payments on your loans.

While everyone wants to save money, take stock on whether or not saving money on your federal loans by refinancing is the right move for your specific situation. There are many different approaches to eliminating student loan debt as quickly as possible. If you are looking for help with debt management solutions, Veitengruber Law can help.

10 Personal Finance Challenges NJ Millennials are Facing

According to a recent survey done by Credit Karma, 61% of millennials said money was their #1 source of daily stress. Having grown up or entered the workforce during the Great Recession, millennials face some unique financial challenges. Even rising wages cannot keep up with the ever-increasing cost of living for this group of young consumers. When it comes to personal finance, NJ millennials face a number of burdens specific to their generation.

1. Higher Than Ever Student Loan Debt

Crushing student loan debt is so universal to the experience of millennials that it has spawned countless think pieces, endless memes, and has even influenced national political campaigns. The average student loan debt per graduate is $17,126 according to Business Insider. The number of students taking out loans to pay for college has increased by 10% since 2000 and students are borrowing more money now than ever before to afford their education. This kind of debt means millennials are often entering the workforce with major deficits.

2. Saving for a House Takes Longer

As home prices continue to climb, millennials buying homes today will pay an average of 39% more for their first home than baby boomers did. Home ownership for millennials is at an industry low as millennials avoid taking on more debt and spend years saving up for that 20% down payment. Buying a home has become less of a next step and more of a dream for millennials. This is true of many “milestones” ranging from buying a car to getting married and having children.

3. Living Paycheck to Paycheck

Besides struggling with more debt and higher costs of living than previous generations, millennials are also often unemployed or underemployed. 44% of recent college graduates report struggling to make ends meet with dead-end and low paying jobs. Making enough money to get ahead of their expenses is increasingly difficult. The “side hustle” has become a way for millennials to use their skills to make money to supplement their regular income, but even with a supplemental income, millennials continue to struggle to build wealth.

4. Caring for Elderly Parents

Despite earning less, millennials are spending much more on care for aging parents than previous generations. On average, millennials who pay for elderly care spend 27% of their income on care services. This is coupled with the fact that many millennials (53% according to the Country Financial Security Index) have had to receive financial assistance from parents or family members since turning 21. This generation is ill prepared for the burden of caring for elderly parents.

5. Poor Planning for the Future

Too many millennials have little or no savings, struggle with being un-insured or under-insured, and tend to put off retirement planning. Most millennials are only saving on average 5.3% of their income. Even if millennials are working towards the suggested $1 million retirement savings, things aren’t looking good for them. Based on inflation rates, $1 million dollars today will have the spending power of $306,000 in 40 years. These numbers mean many millennials will be facing poverty level finances in their golden years.

6. Ignoring Credit Scores

Many millennials don’t pay attention to their credit score until they need it to buy a house, a car, or to get a personal loan. It can be easy to ignore your credit score, and many generations struggle with bad credit. But for millennials, who are already dealing with higher debt and younger credit histories, it is especially important to spend some time working on building better credit. Good credit can be the pathway to making some of those sought-after big purchases millennials keep putting off—like buying a house.

Are you a millennial? Share in the comments what financial hurdles you’re experiencing, especially if it wasn’t mentioned in today’s post.

What Teachers Should Know About Loan Forgiveness Programs

Last year, students loans made up the highest delinquency rate of any kind of household debt. It is safe to say that many graduates are struggling to pay back their school loans. But if you’re a teacher, you might be in luck! The Teacher Student Loan Forgiveness program may allow you to have some of your student loan debt forgiven—but there are specific rules and strict repayment schedules you will need to follow. Today’s blog post takes a look at loan forgiveness rules for educators in New Jersey.

 

In order to take advantage of the Teacher Student Loan Forgiveness program, you need to have one of these loans: a Subsidized Federal Stafford Loan, an Unsubsidized Federal Stafford Loan, or a Federal Direct Consolidation Loan. It’s also important to note that you cannot qualify for loan forgiveness if you are in default on your loan unless you have previously made arrangements with you loan provider for a repayment plan going forward. Under the Teacher Student Loan Forgiveness program, administrative staff, school counselors, librarians, and other school staff are not considered “teachers” and therefore are not eligible for loan forgiveness.

 

However, even if you meet all of the above criteria, you must have worked as a full-time teacher at a low-income school for five academic years consecutively after the 1997-1998 school year to qualify for the program. (Did you catch all that?) The award amount you will receive depends on the subject you teach, how long you have been teaching, and what level of qualifications you have. The maximum award for science, math, and special education is $17,500, while all other subject educators can receive a maximum of $5,000. You can apply online at ifap.ed.gov.

 

Considering not many teachers will qualify for the Teacher Student Loan Forgiveness program, and those that do may still have a lot of debt left, it is a good idea to look into alternatives for teacher loan forgiveness. Luckily, you can stack loan forgiveness programs, but typically you cannot apply for more than one loan simultaneously. Take the time to look over all of your options to ensure that you are choosing the right loan forgiveness program or programs for you. Here are some of the more common loan forgiveness programs for teachers:

 

Perkins Loan Teacher Cancellation: This forgiveness program is specifically designed for teachers with Perkins loans. While the Perkins Loan Program ended in 2017, if you have outstanding Perkins loans, you could qualify to have 100% of the loan canceled over a period of time. You must teach at either a low-income school or within the following subjects: math, science, foreign languages, special education, or a subject that is experiencing a shortage of qualified teachers in your state. To apply, you will need to contact your alma mater for the specific rules of the Perkins Loan.

Public Service Loan Forgiveness: With only 1% of applicants getting accepted to the program, there is a very specific criteria that must be met for Public Service Loan Forgiveness. While teachers are not limited to specific schools or subjects, there are four major criteria that must be met.

1. Your loans must be federal direct loans.

2. You must have an income-driven repayment plan.

3. You must be employed by a qualifying employer, AND

4. You must have already made at least 120 payments (or 10 years of monthly payments). The online Public Service Loan Forgiveness tool will help you determine if you qualify and allow you to apply if you meet all qualifying criteria.

State and School Forgiveness Programs: Every state has at least one student loan forgiveness program for those who work in public service fields. Colleges and universities also sometimes provide teacher loan forgiveness programs. Reach out to your alma mater’s financial aid or alumni office to find out if they sponsor and loan forgiveness programs.

If you are a teacher struggling to pay back your student loans, these forgiveness programs can help you get ahead of your debt. If you have student loans that do not qualify for these forgiveness programs, Veitengruber Law can help. Our debt resolution team offers individualized advice and comprehensive debt solutions to get you back on the road to financial health.

Getting Savvy About Your Student Loans

You did it! You got the degree, graduated college, and are ready to branch out into your career. Graduation is a time to look forward to your bright future after years of hard work. But it’s also worth taking a look back—especially at your student loans. Many college students graduate without really knowing how much they owe, when payments are due, or even who they owe. How long will these loan payments be in your life? Organizing your student loan debt is a big first step towards your bright future after graduation. Here are six steps you can take to get on top of your student loan debt.

1. Who do you owe?

Are your loans federal or private? This is a good time to figure that out. Most college students have some kind of federal student loan debt. Go to studentloans.gov and enter your FAFSA information to see what loans you have and to find the government-hired company that services the loan. This will be the company you contact for all future interactions concerning your loan.

If you have private student loans this can be a little more difficult to track, especially if you weren’t exactly the world’s most organized filer when you were 17 years old. Your loan(s) also could have been sold to a completely different company than you initially used. In these instances, your college admissions office should be able to lend a helping hand. Your alma mater should have a copy of any loan agreements with your records that can tell you who your loan servicer is. Your credit report can also help you determine information about any private loans.

2. How much do you owe?

This is really a two-fold question: What is the amount you initially borrowed and what is the current amount of principal you owe? If you have been making some payments towards your loan, it is important to find out if these payments went towards the principal of your loan or if they went towards interest. Federal student loan balances are frequently not up to date, so contact the lender directly for the true amount of your loan. Private student loans should be up to date with your most recent statement, but it never hurts to make direct contact if you have any questions about what you owe and what you’ve already paid.

3. What is the interest rate?

Knowing which loans have higher interest rates can help you determine which loans should take priority as you begin repaying your debt. All federal loan interest rates after 2006 are fixed, meaning the rate remains the same over the duration of the loan. Private student loans as well as federal loans taken out prior to 2006 may have variable interest rates. Find out how often the rate changes and if there is a cap on how high the rate can go. If you have an unreasonably high interest rate, it is likely due to a poor credit score when you applied for the loan. Ask us how to refinance your student loan!

4. What are my payment options?

Your lender should be able to tell you the estimated payoff dates of your loans which can help you establish a payment plan that works for you.

• Federal loan monthly payments will automatically calculate based on a standard 10-year repayment plan. If you cannot afford these payments, there are many income-driven repayment plans that can allow you to make smaller payments more in line with your budget. It’s important to understand any special conditions of these plans and how smaller payments may impact your loan balance.
• Private loans are much less flexible when it comes to payment options. Review your loan agreement. Most private loans will spread out payment equally month by month for the duration of the loan. If you are struggling to pay back your private student loans, reach out to your lender to discuss payment alternatives. They would much rather you be making smaller payments than none at all.

Student loans will be part of your financial reality until you pay them off. It can be daunting to think about paying back this debt while you’re still establishing yourself professionally, finding a place to live, and making your mark on the world. Don’t panic! Answering the above questions can help you create a plan of action to pay off your debt and get back to planning for your bright financial future. If ever in doubt, reach out to Veitengruber Law. We can help you make sense of your loan repayment options.

Private Student Loans: What You Need to Know

You did it! You worked hard, got a college acceptance letter, and graduated high school with a crisp, new diploma. Now is when the excitement and celebration of getting into college typically starts to give way to some anxiety. College is expensive and very few of us can afford to pay for a degree out of pocket. Most people know how federal student loans work, but what’s the skinny on private student loans? Here we look at the difference between the two and when you might need a private student loan.

Federal Student Loans

If you will be borrowing money to attend school in the fall, you’ll want to start with federal loans first. Federal loans are much more flexible in the repayment process, offering income-driven repayment plans as well as loan forgiveness programs. The terms and conditions of federal student loans are set by law with fixed interest rates. You will not be required to make any payments until after you graduate, leave school, or if change your enrollment status to less than half-time. However, sometimes federal loans will not cover the entire cost of attending college. This is where private student loans come in.

Private Student Loans

Banks or credit unions issue private student loans, typically with less repayment flexibility than federal student loans. The biggest reason to go for federal loans first is because private loans typically end up being more expensive than federal loans. Because the terms of the loan are at the discretion of your individual lender, different private loans can vary greatly from lender to lender. Depending on your specific circumstances, you could have a higher or lower interest rate, it could be fixed or variable, you may have to start paying for your loan while you’re still in school, or you may be able to hold off on payments until after graduation. The biggest drawback of private student loans is their variability, which can lead to confusion.

That being said, many students every year will take out private student loans to cover the costs of attending college. If you find yourself in need of a private student loan, don’t panic. There are plenty of good private loans out there, you just have to find them. This means putting in the time to do your research to find a loan with the best rates, fees, and terms for your situation. Don’t just settle for the first private loan you find. Compare interest rates, fees, and borrower protections across different lenders to identify the most affordable offer.

Which Private Loans have the Best Rates?

To compare all of the available private loans, check out your local banks and credit unions, but don’t be afraid to look online too. Some of the better deals on private student loans can be found through online lenders. One of the best ways to do this is through Credible, an online private student loan marketplace. Students (and parents co-signing for their children) can enter basic information to see multiple loan offers online. Credible allows you to compare terms, interest rates, and fees all on their website. Because many of these lenders operate via the internet, their overhead costs are lower, which could mean lower interest rates and fees for you.

How Much Should You Borrow?

As with any student loan, you will want to minimize the amount you borrow. This is especially true with private student loans, which tend to have limited repayment or forgiveness options if you have financial difficulty in the future. It is very common for students to take out loans for more than they really need. People overestimate their income after graduation and end up with loans they cannot afford to pay back. Unlike federal loans, there is no cap on private loans. A lender may let you borrow much, much more than you can realistically afford. In order to avoid being crushed under a pile of debt after graduation, only borrow what you absolutely have to and keep yourself on a budget throughout the duration of your college career.

Pay Back Private Loans First

If you do end up with a private loan, make sure this is your top priority when you start the repayment process. Many private loans begin accruing interest from the moment they are disbursed. If you can start making payments on these loans while you are in school, it is a good idea to do so. This can help you save substantially on interest in the long run.

If you are having difficulty paying back your private student loans, you’re not alone. Managing student loan debt is a heavy burden for many Americans. Veitengruber Law is a NJ legal team experienced in all types of debt management. We can provide customized debt solutions for your specific needs so that you can get the degree you need without fear of financial ruin.

9 Smart Money New Year’s Resolutions for 2019

Everyone looks forward to the New Year as a fresh start. This year, use your New Year’s Resolutions to benefit your wallet! From big goals to small changes, these 9 tips can get your finances on track in 2019:

 

1. Eliminate/Reduce Credit Card Debt

If your credit card debt has gotten out of control in 2018, plan to make paying down your credit card balances a priority in 2019. With the Federal Reserve likely to increase interest rates this year, credit card debt is only going to become more expensive. Set a specific goal for yourself, (for example:  pay down 25% of your current debt). Focus on paying down the debt under the highest interest first to avoid income-draining interest rates. If you are struggling to make credit card payments, do not hesitate to reach out for help from Veitengruber Law.

 

2. Pay Down Student Loans

For a lot of people, student loan debt is a heavy financial burden. It’s a great idea to take 2019 as an opportunity to make a huge dent in your student loans. Start by reviewing your loans and determining which ones have the highest interest rates. Making extra payments on those loans will save you money on interest in the long run. Paying more than the minimum due each month is also a great way to make sure you are not spending more than you should on interest. If your interest rates are high or you have a lot of different loans, consolidating your loans may allow you to get a lower interest rate and create more manageable monthly payments.

 

3. Emergency Fund

In 2018, 39% of Americans paid for an unexpected $1,000 expense with their savings.* Many Americans end up in debt trying to cover unexpected costs. Most experts recommend having at least six months’ worth of expenses in savings, but if you are starting an emergency fund from scratch, make your goal something you think is reasonable to achieve. Even having a few hundred dollars in savings is better than nothing. You may want to consider setting up automatic transfers from your paycheck into a savings account so you are not tempted to spend this money.

 

4. Improve Your Credit Score

The first step to improving your credit score is to know what it is in the first place. Signing up for free and reliable credit score monitoring through services like Experian or Mint will help you see how healthy your credit score is now. Good credit scores range from 700-749 and scores of 750 and higher are considered excellent. If your credit is not where you want it to be, make raising it your priority in 2019. Small things like paying your bills on time, keeping credit card balances low, and setting up automatic payments right after you’ve gotten paid can help reduce your debt and improve your score.

 

5. Do Taxes Early

Filing for your federal income tax returns as soon as you can is a great way to start the New Year. Not only will you get your refund faster, it can give you extra time to pay taxes you may owe or help you avoid needing a tax extension. If you are expecting a big life change in 2019—like returning to college or buying a home—filing early will help you get a head start on this paperwork. For instance, students can use the information on their 1040 form to apply for financial aid. Plus, the sooner you apply for your refund, the less likely it is that you will be the victim of tax return identity theft.

 

6. Cook More

Americans spend thousands of dollars a year eating out. A big way to save money in 2019 is to spend less time eating out and more time making your own food. Use 2019 as a chance to get more comfortable in the kitchen. Bring lunch from home, meal prep on the weekends, and spend some time researching quick-to-make meals. The more frequently you eat food bought from the grocery store, the less money you will spend—and the healthier you will be, too!

 

7. Retirement Savings Plan

It is important to start saving for retirement as soon as possible. There are many options for creating a savings plan for retirement and you can determine which one is best for your specific circumstances. Maybe your employer provides a 401(k) plan, but if not – you can open an IRA or, if you are self-employed, a Simplified Employee Pension IRA. If you already have a retirement plan in action, reassess the plan in 2019. Could you be saving more? Are you on track for retirement?

 

8. Home Improvements

While some home improvement projects will cost big and add value to your home, sometimes it’s the small projects that can have a big impact on your finances. Investing in energy-saving appliances in 2019 could allow you to save money every month on energy costs.  Energystar.gov has recommendations for energy efficient products and other home improvement ideas to get you thinking about ways you can save money on energy this New Year.

 

9. Focus on Your Health

The average American spends over $4,000 a year on health care. Make your health a priority in 2019! Join the gym, focus on eating well, and take the time you need to relax. Go to the doctor at the first sign of illness instead of waiting until your health has been severely diminished. Preventative healthcare measures can save you big in the long run.

 

 

 

*From Bankrate

Student Loan Relief for NJ Retirees

A growing number of people entering retirement are struggling to afford their student loan payments. Some older borrowers may have taken out loans for themselves to go back to school later in life, while others co-signed loans for their children or grandchildren. As of 2015, the average student loan debt owed by borrowers 65+ was $23,500 and nearly 40% of those loans were in default.* Carrying student loan debt into your 60’s can make it extremely difficult to sustain your standard of living through retirement.

 

Even worse news is that an increasing number of borrowers in retirement have had portions of their Social Security retirement and disability benefits garnished for nonpayment of federal student loans. If a loan is in default, lenders can take up to 15% of a retiree’s monthly Social Security benefits. This can affect retirees’ ability to buy food, pay for housing or afford needed medication. If you are struggling to make student loan payments under a retirement budget, consider the following options.

 

Many lenders offer loan modification options for borrowers struggling to keep up with their payments. Some offer ways to temporarily reduce student loan payments through deferment or forbearance. Deferment will allow you to put off your loans for a designated time period, usually no longer than three years. Borrowers approved for deferment will not have to make payments during that time. Under some loan agreements, you may even be able to defer interest accrued during the deferment period.

 

Forbearance is similar to deferment, with some slight differences. Under forbearance, your loans will be paused or reduced for up to a year. Your interest, however, will still continue to accrue under forbearance. Many times, lenders will allow borrowers to apply for an elective forbearance with the understanding that this kind of loan modification can only be utilized a limited number of times. It is important to note that these types of interventions are effective for momentary financial struggles, but are not long-term solutions. These options will allow you to postpone repayment, but they do not take away the debt.

 

Under some circumstances, you may be able to file a special request to get your student loan debt forgiven. This request must include a written Complaint indicating the student loan debt is causing undue hardship on the borrower. The official legal Complaint will be served in court together with a Summons on the applicable lender(s). A judge will then decide whether or not to forgive all or some of the student loan debt. This decision will be based on the borrower’s income, their financial hardships, any medical hardships and whether or not the individual has previously tried in good faith to make the loan payments.

 

While you can file this Complaint yourself, the document must be in a special format and include very specific information about the borrower’s financial situation. Up to 40% of these cases result in at least a partial loan forgiveness for the borrower. While law firms do charge a fee to assist in these filings, it’s easy to see that you’d likely get a huge return on your investment of the expert help of an experienced attorney. At Veitengruber Law, we know what judges are looking for in these filings and can help you present a detailed case that is likely to be decided in your favor.

 

Student loan debt can be hard to manage at any age, and especially so for those living on a fixed income. Don’t let student loan debt drain your financial resources in retirement. Call us today to get individualized advice on your specific case.

 

*Statistics from AARP

No Debt vs College Degree: Which Wins?

If you’re strategizing to keep your debt burden low throughout the first phases of your adult life, you’re probably considering whether or not it’s worth it to assume a large amount of student debt. After all, 70% of college graduates leave their alma mater with a burdensome level of student debt. Today, more than 44 million US residents are struggling to repay a collective $1.5 trillion in college loans alone.

For many people, a college degree is a necessary step toward creating the adult life they’ve dreamed of, and assuming some level of student debt is likely unavoidable. However, it’s absolutely imperative that students fully comprehend the long-term impact of the loans they’re agreeing to.

If a college graduate is unable to repay their loans in a timely manner, or doesn’t prioritize repaying them, financial disaster looms ahead. Graduates face severe financial penalties for not repaying their loans, including additional fees, mounting interest fees, potential wage garnishment, and negatively impacted credit ratings. Keep in mind that New Jersey is not an inexpensive place to live, so if you play to return to your home state after school, you’ll need a savvy financial plan to do so.

The following quick guide will help you determine whether the cost of student loans will make sense for you in the long term. The answer to this question varies from individual to individual, so it’s a decision you’ll need to make for yourself. Carefully weigh the pros and cons, advantages and disadvantages, and do your best to make the most beneficial decision for your situation.

Remember, too, that if you do end up (or have already ended up) with a significant amount of college loans, it’s going to be okay. You’re not alone by any means; as we’ve discussed, 1 in 4 adults in our country are still repaying their loans.

The Pros and Cons of Student Loans

Pros:

1. Student loans can make college possible, or make it possible for you to attend a school that would otherwise be unattainable. If a student loan makes the difference between you attending your dream school or a local state school, it may well be worth it to bridge the gap with a loan.
2. In certain fields, if pursuing a higher quality (or more widely respected) education positions you to earn significantly more over the life of your career, then your student loans may represent only a small fraction of your potential earnings. In such situations, assuming responsibility for a larger loan is almost certainly worth it. Study hard, network with grace and skill, and set yourself up to bring home the kind of money you’ll need.
3. Student loans can be spent on more than just tuition. Choosing a student loan may make the difference between you having to work full-time during your education and instead having the luxury of focusing solely on your studies. You can use student loans to pay your rent or car payment, purchase a laptop and textbooks, or even just buy groceries. Postponing your financial troubles until after you graduate can have a positive impact on your mental health and resources during the few years you’ll have to pursue your education goals.

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Remember, too, that even though student loans are pretty terrible, they’re still more affordable than credit card debt or other high-interest personal loans!

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4. Paying off student loans on time will help you build credit. You’ll need a positive credit rating to get a good interest rate on significant purchases like a car or home, so having this opportunity to build credit right out of college can be very positive. Please be aware that you will need to make prompt payments every month in order to benefit from an improved credit score.

 

Cons:

1. Interest is a pain in the neck. When you repay your student loans, you’ll be repaying the amount you initially borrowed plus the interest that’s accrued over the years you’ve been in college. As of 2018, interest rates on student loans range from 4.5% to 7% for federal to 11% – 15% for privately-held loans.

If you choose high-interest student loans, the interest rates can be almost as disastrous as those on credit cards! If you can afford college without assuming any student loans, clearly it is in your best interest to do so.

2. Choosing student loans will mean that you’ll begin your adult life with debt. Your financial freedom will be significantly impacted by this burden; you’ll probably need to delay other life goals like home ownership or international travel until you’re able to pay off a significant portion of your student debt.

Home prices in New Jersey don’t show any signs of halting their steady climb, so delaying your entry into the housing market could mean paying as much as tens of thousands more for your first home.

3. It is nearly impossible to discharge student loans without paying them directly. Unlike many other kinds of personal debt, student loans cannot be eliminated by declaring bankruptcy. If you assume responsibility for a student loan, you will have to repay it.
4. Missing payments on your student loans can destroy your credit score, which will negatively impact your financial opportunities for many, many years to come. You’ll have difficulty renting or purchasing a home on your own, applying for a loan on a car, and could even lose your job along with your financial credibility.

 

The truth is that student loans can be a net positive in your life and can be relied upon to help you create a better future for yourself and others. In real-life application, though, slow job growth, high interest rates combined with punitive laws preventing struggling graduates from discharging their debts through bankruptcy, and skyrocketing tuition prices are factors that work against even the most well-intentioned students.

That’s why if you do decide to assume student loans, it’s important that you try to live frugally and limit the amount of debt you need to take on. If you can work part-time and still maintain your grades, consider doing so. Purchase clothing second-hand when possible, for example, and keep your wardrobe streamlined until you have more financial freedom.

You’ll find that the fiscally wise habits you can cultivate during these lean years will serve you well in the future, even after you’ve paid off your debts. Remember that being conscious and intentional about your spending is always a healthy decision. Frugality is never something you should be ashamed of!

Getting Out of Student Loan Debt: Public Service Employees in NJ

Are you working as a New Jersey firefighter, police officer, teacher, nurse, principal, or hospice care worker? Employees working these jobs, along with many others, have one major thing in common: a motivation to serve others. When people have access to services and education, even if they cannot afford them, society benefits. You’re playing a role in the well-being of society. Though it may seem like you could earn more money in another field, there are unmatched benefits to working as a public service employee.

Unbelievably, 40 million Americans have student loans to pay off; there’s a high chance that you’re one of those 40 million. The good news for you is that if you’re a public service employee, you could be eligible for student loan forgiveness. That sounds awesome, right?

In 2007, Congress formed the Public Service Loan Forgiveness Program (PSLF) to embolden individuals to enter the public service work force and to continue working as public service employees. Again, although these jobs may not be the highest paying, they are absolutely necessary, which is what Congress wanted to reinforce. To qualify for this program, your job must be in a nonprofit organization, the government, or a specific not-for profit program.

How can you qualify for student loan debt relief – is it enough to simply be a public service employee?

It’s necessary to be employed full-time by a public service program, and under certain repayment plans, it’s required that you have made at least 120 payments on the eligible federal student loans. Every payment must meet or exceed the required amount and must be paid on time, meaning no later than 15 days after the due date. October 2017 was the first month that any remaining loan balances were eligible to be eliminated. This program is not unique to New Jersey, but all New Jersey public service employees can apply to the program, as long as all stipulations are met.

In addition to the public service jobs already listed, employees in the following sectors can also benefit from the PSLF Program:

• Government organizations
• Non-profit, tax-exempt organizations (listed under 501(c)(3) of the Internal Revenue Code
• Private, non-profit organization that provides any of the following services:
• Law Enforcement
• Military Service
• Public Safety
• Public interest law services
• Early childhood education
• Public services for the elderly and disabled individuals
• Public library services
• Public education
• Public health (nurse practitioners, nurses, full-time health professionals in healthcare practitioner occupations)
• Emergency management

How do you know what loans fall under the PSLF Program?

All non-defaulted loans under the William D. Ford Federal Direct Loan Program meet the requirements. Basically all Direct Subsidized and Unsubsidized Loans as well as Direct Consolidation Loans are eligible. In addition, Direct PLUS Loans for parents and graduate or professional students fall under the PSLF Program.

To enroll in the PSLF Program, you need to print and complete the Public Service Loan Forgiveness Employment Certification Form, and Section 4 must be filled out by your employer. Once the form is completed, send it in to the U.S. Department of Education FedLoan Servicing. Each year, the form needs to be resubmitted.

If you have student loans and you meet the requirements for eligibility under the PSLF Program, don’t hesitate to enroll. You could potentially save a substantial amount of money each month – freeing up that capital to pay for your monthly expenses.

Image: “Teachers Union” by Kevin Dooley – licensed under CC 2.0