The Ugly Truth About Student Loan Debt-Part 2-Ways on Managing Your Student Loan Debt

In the previous post, there was discussion about what causes student loan debt and its staggering statistics. Now, that many of us have taken out student loans to finance our college education, we have to pay it back. As a result, there are ways on managing that student loan debt.

But how?

One way of managing your student loan debt is through student loan forgiveness programs. This way is not usually very easy to get, however, there are a few ways on getting your loans forgiven. First, it depends on which career path that you have taken, e.g. healthcare and lawyer, just to name a few. More ways of managing student loan debt are based on the number of years that you have made payments on time on a qualifying repayment plan and the ability to work steadily and to make your student loan obligations. The first two options that I mentioned can only be achieved with federal student loans and the last option can apply to those that have private student loans.

There are a few of these programs that are available for you to manage your student loan debt: Public Service Loan Forgiveness Program,or PSLE, Loan Forgiveness after twenty or twenty-five years of On-Time Payment, and of course, Student Loan Discharge.

Public Service Loan Forgiveness, or PSLE: This program was established for the purpose of encouraging qualified college graduates to pursue career in the public service sector and at the same time reducing their debt. However, to get this type of loan forgiveness, you must have employment in the public service sector, consolidate your federal student loans with a qualifying repayment plan, and be making on-time payments for ten years.

To meet the requirements for this loan forgiveness program, you have to be making payments either from the income-contingent, income-based, pay-as-you-earn, or the standard repayment plan. As of 2015, there has been no individual that has received loan forgiveness under this particular plan. The first batch of individuals that will qualify for the Public Service Loan Forgiveness program will meet these requirements will be a couple of years from now--in 2017--and is only available to federal student loans. This is not available to private student loans.

The following career paths that are eligible for the Public Service Loan Forgiveness program are: education, law enforcement, health, public law, and veterinary medicine.

Loan Forgiveness After 20 or 25 Years of On-Time Payments: This loan forgiveness programs also depends on the numbers of years that you have been making payments on time for over ten years under a qualifying repayment plan. In contrast to the Public Service Loan Forgiveness program, you are not required to work in a particular career field to meet the requirements for loan forgiveness based on your repayment history.

In order to meet the qualifications for this loan forgiveness program, you have to be part of the pay-as-you-earn repayment plan within your twenty years of payments and be enrolled in the income-contingent or income-based plans. Under this program, you will have the lowest monthly payments. However, you have to meet the requirements of financial hardship, such as unemployment. You can stay in this program even after your hardship situation has been resolved. Like the Public Service Loan Forgiveness program, this is only available to federal student loans. Private student loans are not eligible.

Student Loan Discharge: This is another way of getting student loan forgiveness. However, this is only used in special and really rare circumstances, as in if you are disabled permanently or death. This type of loan forgiveness is generally awarded by a judge. Federal student loans and private student loans can qualify.

Although many people that have borrowed student loans in the past feels like there is no hope for repay their student loans, now there is hope in repaying your student loans. One of these option are through student loan forgiveness programs. Best in luck for repaying those burdensome student loans!

I will talk to you later. Until then, Happy Savings! :-)

Next post: The Ugly Truth About Student Loans-Part 3-Student Loan Consolidation

The Ugly Truth About Student Loan Debt-Part 1-Student Loans and What Leads to This Debt

There will be a 3-part series of "The Ugly Truth About Student Loan Debt." This post will focus on Part 1-Student Loans and What Leads to This Debt. .

image courtesy of AarinFreePhoto.com

Many of us dream of pursuing a higher education in order to build our careers. But unfortunately, the vast majority of us do not have enough of our own money to fund education or do not qualify for a grant. What do we do? We resort to taking out student loans. As a result, many of us college graduates have a degree and a lot of financial mess, which can often include credit cards and no job lined up.

Yet, here are some staggering facts on student loan debt that I have read:

• Overall student loan debt in the United States: $1.2 trillion
• Student debt amount accrued each second: $3,000
• 2014 average student loan debt from graduates: $33,000

Unfortunately, my student loan debt is around $45,000 (I am paying them back)!

Funding higher education is one of the costliest investments that anyone can make in today's society, especially in the United States. This number has increased by over seven-hundred percent within a thirty-five year period. In addition, food and electricity costs have gone up tremendously; who can forget those ever-rising gas prices? None of us. Even that has increased by at least four-hundred percent.

Myths About Student Loan Debt

There are many myths about student loans debts and on different ways to repay them. Of course, many of us often turn to our family and friends for advice--in many cases, that can turn out to be a disaster (I know about !)this all too well. Therefore, there is a lot of bad information that is given.

Here are some of the most talked about student loan debt myths:

• It's debt well worth it. True, if you get and have a job that pays very well along with a degree. In reality, your student loan debt should not be more that your salary in the first year.
• Federal and private loans work the exact same way: No they do not! There are so many differences between federal and private loans--like day and night. Think about the interest rates, forgiveness programs and loan modifications, just to name a few.
• Declaring bankruptcy: The all-time popular student loan debt myth! Debunked! Unfortunately, bankruptcy cannot resolve student loan debt. In particular, federal and private loans cannot be forgiven,

Figuring Out Student Loan Interest Rates

When taking out student loans, one of the things that you must consider is the interest rates. Just think of student loan interest rates as the cost of borrowing money and how much you can afford to go to college and getting an education. 

Interest rates are calculated by the percentage of the unpaid principal that exists on a loan. The cost has its variations, depending on the interest rate and the loan type. For example, students that are taking out Subsidized loans do not have to pay interest six months following graduation. In addition, they do not have to pay interest during deferment. In contrast, students that are taking out Unsubsidized loans begin paying interest as soon as the money is given to them.

Here is a student loan interest rate scenario:

• $15,000 Direct Unsubsidized Loan with a 5.5% interest rate, the amount of interest that is accrued is $2.26 a day. (0.055/365) x $15,000=$2.26. If you put your loans on deferment or forbearance for six months, your loan will accrue interest totaling around $407.
• If you do not pay the interest, then it will be capitalized, or be added on to your principal balance. You will be charged interest in addition to the principal balance, which will be $15,407. The amount of the interest that will be accrued will increase to $2.32 a day. (0.055/365) x $15,407=$2.32

The vast majority of repayment plans, the capitalized interest will increase your payments on a monthly basis and the overall amount you pay over the existence of your loan.

If you want to invest in a higher education, especially when taking out student loans, then think about how much it will cost you and what you are expected to repay. In other words, stay ahead of the ballgame!

I will talk to you later. Until then, Happy Saving!

Next post: Ways on Managing Your Student Loans

Learning Everything About Credit-Part 3-Things to Do When You Have Bad Credit

This is the wrap-up on the 3-part series of "Learning Everything About Credit." The last series will focus on what to do when you have bad credit. In the previous two parts, we discussed everything from the importance of credit to credit cards and credit reports.

There are many reasons why many people have bad credit. But whatever the reason is, there is always hope in repairing your credit and getting your life back on track. Here are a few things that you can do:

• Check your credit report for discrepancies: You should get in contact with any of the three credit reporting agencies (Transunion, Experian, Equifax) and provide them with the following information:
• Name and address
• Check off the item(s) that is(are) incorrect
• Give documents to back up your claim
• Ask that the checked-off information be investigated and corrected
• For more information on correcting your credit and learning more about your rights, you can visit www.consumerfinance.org
• Find out the reason for you having bad credit: There could be many reasons--it could be anything from having low income to moving around and changing addresses on a frequent basis, or the most common---having too much debt.
• Getting your finances and your life back in order: You can begin with paying your bills on a timely basis. When you pay your bills on time, you are looked upon on being a good credit risk.
• Keep your debt at a minimum: If the majority of your monthly income is spent on paying off additional debt, then creditors will be very skeptical of extending credit to you.
• Do not have many credit accounts open: Cannot stress this enough--many people think that having many open accounts are a good thing--think again, it is the total opposite. As a result, you are more likely to get in way over your head and get deep in debt.
• Show those creditors that you are financially stable and creditworthy: If you are constantly changing addresses and/or employment may have a negative impact on your credit rating.
• Use a small portion of your available credit: Creditors want to see that you use your credit when necessary--not to the point of maxing out on your credit cards.

There are times when you may need more help--I mean to the point when you will have to take extra measures to repair your bad credit. The last resort should be filing bankruptcy. (Unfortunately, I had to file bankruptcy eight years ago-I had gotten way over my head due to being involved in a domestic violence situation two years before I filed bankruptcy). Anyway, before you have to resort to bankruptcy, you should get in contact with your creditor and explore which options you can take to resolve your credit situation. You can contact the National Foundation for Credit Counseling (www.nfcc.org or call 800-388-2227. They can assist you to find the nearest Consumer Credit Counseling Services in your area.

If you follow these few things on repairing your credit, then you will be on your way to stellar credit.

I will talk to you later. Until then, Happy Saving!

Next post: The Ugly Truth About Student Loan Debt

Learning Everything About Credit-Part 2-Credit Cards and Credit Reports

In the previous post, we talked about the importance of credit and the different types of credit. In this post, we're going to discuss credit cards and credit reports, but first....

Many times we get those credit card offers either in our mailboxes or in our email inbox (usually in the spam folder). Those beautiful credit card designs (who can resist)--that' s what draws many of us to get a credit card--and get into major credit card debt! Ok, let us get to the nitty gritty of the credit cards.

Of course, you know what credit cards are--those plastic 2.5 x 3 cards that are given to us by a financial institution which permits us to make a purchase in case we do not have cash on us at the moment. The question is how do we know which credit card is right for us?

Just think about whenever you get a credit card, think about these few categories that make up a credit card and of course, these are the areas that many people fail to pay attention:

• Annual Percentage Rate, or APR: This is the yearly rate of credit.
• Periodic Rate: In the case of a periodic rate, this is the interest rate that is utilized to come up with the financial charge on your balance.
• Annual Fee: This is the amount in which you are paying to the cardholder. Think about it like a membership fee.
• Grace Period: Grace period is basically the number of days that are given for you to pay your bill prior to the financial charges begin to pile up. Grace period is usually around 22 to 30 days.
• Financial Charges: This is where many people go into credit card debt. Financial charges are calculated by using an average daily account balance. You want to seek offers that has an adjustable balance in which it subtracts your payment from your balance.
• Other Fees: Many credit cards charge you a particular fee either when you get a cash advance, making a late payment, or an overdraft on your credit limit.

Credit cards are convenient and very nice to have, but just like cold hard cash, if you are spending carelessly, then you will end up in a financial hole--this is where the credit card debts are made.

Next, the credit report...

What does Experian, Transunion, and Equifax have in common? They are all credit reporting bureaus, or agencies (whatever you want to call it). These are where your credit report is assembled.

What is a credit report?

A credit report is referred to as a document which includes information concerning you and your payment history. As I mentioned earlier, it is assembled by a credit reporting agency. It is available to anyone that wants to give you credit, as in issuing a credit card, a car loan, or a mortgage, just to name a few. 

What is exactly included in your credit report? The following is in your credit report:

• Personal identification number
• Employment information
• Adverse/collection account information
• Credit card information
• Inquiry information

The following is not allowed in your credit report:

• Race
• Religious affiliation
• Medical history
• Personal lifestyle
• Criminal record
• Checking/Savings account information

When many people think about credit report, they are often thinking about their credit score (Credit Karma, anyone). Credit score is usually separate from your credit report. It is a number that corresponds to the information provided on your credit report. This score is based upon your credit report history and is a tool for creditors to determine how likely it is that you will repay a loan and make payments on a timely basis.

Included with the credit score is credit rating. Credit rating--it is actually self-explanatory--the higher your credit score, it is likely that you are a better credit risk. As a result, if you have a higher credit score (think about the FICO score, which ranges from 350 to 850, with 850 being the higher score), you are more likely to receive a loan or a credit with a lower interest rate than those with a lower credit score.

I can give you a couple of tips regarding the credit report--these are from my own personal experience with my credit reports--and it helps! Anyway, here are my tips:

• Request a copy of your credit report every year. This is free, or
• Request a copy of your credit report whenever you desire--you are paying a fee for this, usually $10.

As I said earlier regarding credit cards, if you are spending carelessly with a credit card, then you are more likely to have some credit card debt. Be smart with your credit cards. In terms of credit reports, you should obtain one at least once a year to check for discrepancies. When you do these two things, you will feel much better about your credit.

Next post: Learning Everything About Credit-Part 3-Things to Do When You Have Bad Credit

Until then, I will talk to you later. Happy Saving!

Learning Everything About Credit-Part 1-How Important is Credit and Different Types of Credit

image courtesy of AarinFreePhoto.com

This is part one of three series of "Learning Everything About Credit-How Important is Credit and Different Types of Credit."

We see these commercials on how to obtain your credit score for free, as in Credit Karma. In these thirty-second clips, they are making it like it is fun to get that score; in reality, it it a very important part in knowing about your credit history.

How important is credit?

When we think of credit, we automatically think about credit cards, credit reports, and credit score. That is part of it. It is very essential to settle with a good credit history basically by making your payments on a timely basis. Your credit worthiness will determine whether you are able to borrow money or buy different products and/or services on credit. In addition, it will have an impact on the following:

• Employment: Depending on which job that you are trying to pursue (especially if you are getting a job that will involve cash handling), there are some employers that will ask for a credit report. Having bad credit may prevent you from obtaining a job.
• Living accommodations: What this means that landlords are looking for people who will pay their rent on time. Often, they will acquire a credit report to determine whether they will rent an apartment unit to you.
• Finance rate: The better your credit is, the lower your rates are. Anyone with a good credit history are usually offered lower financial rates than those people that have a terrible credit history.
• Overall convenience: Convenience is everything to us, especially if we have the luxury and freedom to do that. For example, making hotel reservations and shopping online is very convenient if you have a credit card. However, credit cards may be difficult to get if your credit is a mess. It is not impossible to get a credit card, but it is not as easy.

While we are on the subject of the importance of credit, it is also good to know about the different credit types--in fact, there are three: short-term, installment, and revolving.

• Short-term credit: This type of credit is usually paid back within less than a year. Good example of short-term credit is a payday loan.
• Installment credit: With installment credit, you made the agreement with the creditor to pay back in monthly installments on a regular basis.
• Revolving credit: This is credit that is available in terms of having a pre-determined credit limit as long as payments are made regularly and on time. The classic example of this type of credit is our good and fairweather friend, the credit card.

Learning about credit is very essential if you want to have a healthy financial future. Being smart about credit will determine anything from getting that dream house (apartment, condo, townhouse, etc.) and/or getting that dream job. The bottom line: be wise about credit.

Until then, I will talk to you later. Happy Saving!

Next post: Learning Everything About Credit-Part 2-Credit Cards and Credit Reports

Best Items to Purchase in Bulk

When we go grocery shopping, usually our main aim is to get the food and household items that are needed at the present moment. But, sometimes, with some of the food (and household) items, we need to invest in a little bit more than needed at that particular time--I mean items that we use more than on a regular basis.

There are a few things that are a must-have in terms of purchasing in bulk:

• Paper products: This category would include toilet paper and paper towels. With purchasing toilet paper and paper towels, I guarantee you that you will save hundreds of dollars and a trip to the supermarket every hour!;
• Cleaning products: In this category, cleaning products range in everything from soap, laundry detergent to dishwashing detergent and everything cleaning. Since cleaning products are used on a regular basis (at least should be!) and have an extensive shelf life, bulk buying these products will make perfect sense (or should I say "cents!"). Only used what you would normally use. In other words, the extra cleaning products that are not in use, just put them in smaller, plastic containers. This way, you will not purchase more than what is really needed.
• Oral hygiene accessories: Don't forget your toothpaste (and of course, toothbrush)! I hope that you use toothpaste (or baking soda for that matter) every day and twice a day. Toothpaste and toothbrush are a few of the items that you should buy in bulk. It is suggested that you switch out your toothbrush every three months. (I usually change my toothbrush every couple of months--I am switching after this blog is written)

Now on to the food items....

• Nuts: Did you know that if you purchase nuts in bulk can save you a bundle of money--that's if you are a nut fanatic and eat them often. You can freeze nuts for up to a couple of years--in a container that is really uptight.
• Rice, beans, and pasta: Who can forget these tasty staple foods? Rice, beans, and pasta have a shelf life up to a couple of years--just place them in an airtight container to keep the pests out. The good news: they do not consume that much space. Buying these staple foods in bulk is a real lifesaver. Even with these basic staples, you can work your culinary magic in terms of creating different recipes.

As I said earlier, these are the bare essentials that are needed (or should be included) in everyone's household, whether with a family or single. Buying these items in bulk will not only save you a ton of money, but also your sanity!

Next post: Learning Everything About Credit-3 Part Series

Until then, Happy Saving!

5 Ways You Can Stop Living from Paycheck to Paycheck

Courtesy: Bettina Smith

Everyone that ever lived (of lives) from paycheck to paycheck knows how difficult it is just to live a normal life without any financial worries, as in knowing where your next meal is going to come from or simply having enough money to pay bills. There is hope on the way! Although it is not easy, it is feasible--if you are committed to doing it.

Here are five ways in which you do not have to live on paycheck to paycheck basis:

• Learn about the benefits of not living from paycheck to paycheck: If you have plans on not living from paycheck to paycheck, then you will have to make some major financial lifestyle adjustments. Rather than feeling like you have to sacrifice almost everything that you want, just think about your spending habits. When you begin to get a grip on your finances, you will reap the benefits of:
• Paying off your debts (whichever that is, credit cards, student loans, etc.) to lower your monthly payments.
• Be able to build up on your emergency fund in case of unexpected circumstances
• Make an investment for retirement
• Save for that large purchase, as in buying a house, buying a car, or even a vacation

When you understand these wonderful benefits, trust me, you will be very motivated in taking charge of your financial future and staying committed.

• Do not go crazy spending: In other words, have a very good reason for spending. Do not just spend just because you are in possession of a credit card or that cold, hard, green cash! This is how many people get burned financially. It is very important to understand your spending habits at the moment. You can do this by creating a budget worksheet--this is one way of keeping track of your finances, as in expenses. In addition to creating a budget worksheet, you can track your expenses by using an app such as You Need a Budget. When you get ready to create your budget worksheet, think about where you want your money to go.
• With smart budgeting, reduce your spending and costs: Another way of not living from paycheck to paycheck is just not spending all of your hard earned cash. Just think for a minute: do you have a gym membership that you have not used in over two years? Can you negotiate with some of your bills? These are the few things that you need to take into consideration. You can still have fun without spending all of that money. Suggestion: plan a get-together dinner with family and friends at your house rather than going to Spago's (sorry, Wolfgang Puck). It will be much more cost effective!

Some people may think just because you are reducing your spending habits that you will miss out on the greater things in life. In reality, you can be just as happy (or even happier and more financially free) than the ones that are "living large."

• Get some additional income: In many cases, you can also increase your finances by seeking additional income. This can range from getting a part-time job or even starting a side business, which is even better (just do not let your employers find out about your moonlighting endeavors). If a side business or getting a part-time job is not in the cards for you, then consider asking your employer for a raise. Or, you can fulfill your financial obligations by selling some stuff that you no longer use or need.
• More importantly, reward yourself with a payment: If you want to run away from the living from paycheck to paycheck regimen, then it is time to save, save, save! Set up a savings account (if you do not already have one) that has an automatic transfer--that way little money will go here from time to time.

The reason that the majority of people are living from paycheck to paycheck is due to the fact that they lack financial literacy and/or run across unexpected circumstances, as in a job loss or even major car repairs. If you want to get away from the paycheck to paycheck rat race, then you should live below your means. This way, you will begin to feel more financially secure and have the financial freedom that you have always desired. Until then, Happy Saving!

Next post: Best Items to Purchase in Bulk