How Blogging Paid Off My Student Loans

How Blogging Helped With Paying Off Student Loans

How Blogging Helped With Paying Off Student LoansIn July of 2013, I finished paying off my student loans.

It was a fantastic feeling and something I still think about to this day. Even though I have a success story when it comes to paying off student loans, I know that many others struggle with their student loan debt every single day.

The average graduate of 2015 walked away with more than $35,000 in student loan debt, and not only is that number growing, the percentage of students expected to use students loans is on the rise. Plus, if you have a law or medical degree, your student loan debt may be in the hundreds of thousands of dollars.

This is a ton of money and can be quite stressful.

After earning three college degrees, I had approximately $40,000 in student loan debt.

To some, that may sound like a crazy amount of money, and to others it may seem low. For me, it was too much.

At first, paying off student loans seemed like an impossible task, but it was an amount I didn’t want to live with for years or even decades. Due to that, I made a plan to pay them off as quickly as I could.

And, I succeeded.

I was able to pay off my student loans after just 7 months, and it was all due to my blog.

Yes, it was all because of my blog!

Without my blog, there is a chance I could still have student loans. My blog gave me a huge amount of motivation, allowed me to earn a side income in a fun way, and it allowed me to pay off my student loans very quickly.

I’m not saying you need to start a blog to help pay off your student loans, but you might want to look into starting a side hustle of some sort. Blogging is what worked for me, and it may work for you too.

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I believe that earning extra income can completely change your life for the better. You can stop living paycheck to paycheck, you can pay off your debt, reach your dreams, and more, all by earning extra money.

This blog changed my life in many other ways, besides just allowing me to pay off my student loans. It allowed me to quit a job I absolutely dreaded, start my own business, and now I earn over $50,000 a month through it.

If you are interested in starting a blog, I created a tutorial that will help you start a blog of your own for cheap, starting at only $2.95 per month (this low price is only through my link) for blog hosting. In addition to the low pricing, you will receive a free blog domain (a $15 value) through my Bluehost link when you purchase at least 12 months of blog hosting. FYI, you will want to be self-hosted if you want to learn how to make money with a blog.

Below is how blogging helped me pay off my student loans.

Quick background on my student loans.

In 2010 I graduated with two undergraduate degrees, took a short break from college, found a job as an analyst, and in 2012 I received my Finance MBA. Even though I worked full-time through all three of my degrees, I still took out student loans and put hardly anything towards my growing student loan debt.

Instead, I spent my money on food, clothing, a house that cost more than I probably should have been spending, and more. I wasn’t the best with money when I was younger, which led to me racking up student loan debt.

After receiving my undergraduate and graduate degrees, the total amount of student loans I accumulated was around $40,000.

Shortly after graduating with my MBA I created an action plan for eliminating my student loans, and in 7 months was able to pay them all off. It wasn’t easy, but it was well worth it.

The biggest reason for why I was able to pay off my student loans is because I earned as much money as I could outside of my day job. I mystery shopped and got paid to take surveys, but the biggest thing I did was I made an income through my blog.

I worked my butt off on my blog.

Any extra time I had would go towards growing my blog. I woke up early in the mornings, stayed up late at night, used lunch breaks at my day job, and I even used my vacation days to focus on my blog.

It was a huge commitment, but blogging is a lot of fun and the income was definitely worth it.

While I was working on paying off student loans, I earned anywhere from $5,000 to $11,000 monthly from my blog, and that was in addition to the income I was earning from my day job.

This helped me tremendously in being able to pay off my student loans, especially in such a short amount of time.

My blog allowed me to have a lot of fun.

One reason why I was able to work so much between my day job and my side hustling is that I made sure my side hustles were fun. Because I didn’t like my day job, I knew I just didn’t have it in me to work extra on something everyday if I didn’t enjoy it.

That’s where blogging came in.

Blogging is a ton of fun, and I have made many great friends. At times it can be challenging (the good type of challenging!) but also a lot of fun. I love when I receive an email from a reader about how I helped them pay off debt, gave them motivation, taught them about a certain side hustle, and more. Helping others along the way is another part of what really makes it worthwhile.

The fun I had blogging made it feel like a hobby, and that’s why I was able to put a crazy number of hours into it.

I focused on growing and improving my blog.

I knew I had to keep earning a good income online in order to pay off my student loan debt, so I made sure that I spent time growing and improving my blog as well. Since I love blogging so much, this was a fun task for me.

Improving my blog included learning about social media, growing my website, knowing what my readers want, producing high-quality content, keeping up with changes in the blogging world (things change a lot!), and more.

I put nearly every cent from side hustling towards paying off student loans.

One thing I did with the extra income I earned each month was putting as much of it as I could towards paying off student loans, and this way I wasn’t tempted to spend the income on something else.

So, as I earned money from my blog, I put it towards paying off student loans as quickly as I could.

This is probably easier said than done, though.

When you start earning a side income it can be very tempting to buy yourself some things. After all, you are tired, you have been working a lot, and therefore you may justify purchases to yourself.

But before you know it, you may have just a fraction of what you’ve earned left and able to put towards paying off your student loans.

It’s better to think about WHY you are side hustling and put a majority of the income you earn towards that instead.

I stayed positive when paying off student loans.

It was hard to manage everything. I was working around 100 hours each week between my day job and my side jobs, which left little time for sleep or seeing loved ones.

Luckily, I love blogging and that made it much easier to spend so much time on my blog. Watching my student loans get paid off and the debt going down was a huge motivator.

At first I thought it was impossible, and now I know it wasn’t!

Paying off my student loan debt has been one of the best choices I have ever made.

Do you have student loan debt? How are you paying off student loans?

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FAFSA Simplification: 8 Changes to Expect

Long-awaited changes to the Free Application for Federal Student Aid form aim to make completing the form easier, unlocking aid to pay for college. The simplification effort also expands eligibility for many types of student aid.

Changes include a much shorter form where the number of questions is based on your family’s financial situation.

The FAFSA Simplification Act was bundled into the Consolidated Appropriations Act of 2021, which included the second coronavirus relief bill. The changes to the FAFSA are effective as of July 1, 2023, for the 2023-2024 academic year and afterward.

Here’s what’s in store for the new FAFSA and other updates to financial aid:

1. The FAFSA will have fewer questions

There are currently 108 questions on the FAFSA.

On the new FAFSA form, the total number of questions you answer will depend on your financial situation, but the maximum will be 36. Some questions have multiple parts.

2. Two roadblock questions will be removed

Students no longer must register for the Selective Service in order to complete the FAFSA, and the question will be removed from the application.

Drug-related convictions alone will no longer disqualify applicants, and the question won’t be included on the FAFSA.

3. The application will be translated into more languages

The current FAFSA is in only English and Spanish. FAFSA simplification aims to make the application easier for more students and their parents who don’t speak those languages.

The new form will be available in at least 11 languages.

4. It will be clearer if you need to include assets

Currently, aid applicants have to include their own or their parents’ assets when applying for federal student aid to provide a full picture of their financial situation. Otherwise, applicants must answer a series of questions about taxable income to apply without consideration of assets (called the Simplified Needs Test).

The act exempts applicants from having to disclose assets if they meet any of the following requirements (tax information will be imported to the application directly from the IRS):

  • They’re a non-tax filer.

  • They qualify for an automatic zero or negative Student Aid Index (and subsequently are set to receive the maximum Pell Grant award).

  • They (for independent students) or their parents (for dependent students) have an adjusted gross income of less than $60,000 (and do not file a tax return with lettered schedules A-H or file a Schedule C with net business income over $10,000 loss or gain).

  • They received a means-tested benefit, such as the Supplemental Nutrition Assistance Program, or SNAP.

5. More factors added to cost of attendance

The amount of financial aid you’re eligible for is calculated by subtracting your Expected Family Contribution (soon to be Student Aid Index) from the school’s cost of attendance.

The FAFSA simplification effort adjusts cost of attendance to include more factors and rules:

  • Colleges can no longer set the housing allowance to zero for students living at home with their parents.

  • Meal plans must assume students are receiving three meals a day.

  • Colleges must include the cost of obtaining a professional license, certification or other professional credential.

  • Private student loans are no longer included in the allowance for loan fees (however, private loans often don’t charge fees as federal loans do).

6. Student Aid Index replaces the EFC

The Expected Family Contribution, or EFC, is getting a new name: Student Aid Index, or SAI.

The SAI, like the EFC, is used to calculate most financial aid (all except Pell Grants). Your need will be calculated as cost of attendance minus Student Aid Index and other financial assistance.

The makeover is meant to correct the assumption that the calculation equals the amount your family can contribute, as the name suggests. Most families pay more than the EFC amount after taking loans to fill aid gaps. In reality, the EFC (soon to be SAI) is an index number used by college financial aid offices to determine your need for aid.

The information you include on the FAFSA determines your SAI; it equals the sum of your parents’ available income, your income and your assets.

7. Receiving a Pell Grant award will get easier

Pell Grant eligibility will be simplified. Maximum annual grants, for example, will go to students — or, if dependent, their parent or parents — who fall below the income thresholds for tax filing. Maximum grants will also go to those with adjusted gross incomes below 225% (single) or 175% (married) of the poverty line.

The act also extends Pell Grant eligibility for students who previously received a Pell Grant if they were unable to complete their studies due to the closing of their school or if their loans were discharged under borrower defense to repayment. It also restores Pell Grant eligibility to incarcerated students.

8. Applicants may get more need-based aid

Applicants will see their Student Aid Index set to zero automatically if they’re eligible for the maximum federal Pell Grant. The new formula would also allow an SAI of less than zero (negative $1,500). Both changes will allow applicants to receive more need-based aid.

Source: nerdwallet.com

How to Escape Debt in 2016

How to Escape Debt in 2016

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The new year is right around the corner and if you’re like most people, you’ve probably got a running list of resolutions to achieve and milestones to reach. If getting out of debt ranks near the top, now’s the time to starting thinking about how you’re going to hit your goal. Developing a clear-cut action plan can get you that much closer to debt-free status in 2016.

1. Add up Your Debt

You can’t start attacking your debt until you know exactly how much you owe. The first step to paying down your debt is sitting down with all of your statements and adding up every penny that’s still outstanding. Once you know how deep in debt you are, you can move on to the next step.

2. Review Your Budget

A budget is a plan that sets limits on how you spend your money. If you don’t have one, it’s a good idea to put a budget together as soon as possible. If you do have a budget, you can go over it line by line to find costs you can cut out. By eliminating fees and unnecessary expenses like cable subscriptions, you’ll be able to use the money you save to pay off your debt.

3. Set Your Goals

At this point in the process, you should have two numbers: the total amount of money you owe and the amount you can put toward your debt payments each month. Using those two figures, you should be able determine how long it’s going to take you to pay off your mortgage, student loans, personal loans and credit card debt.

Let’s say you owe your credit card issuer $25,000. If you have $500 in your budget that you can use to pay off that debt each month, you’ll be able to knock $6,000 off your card balance in a year. Keep in mind, however, that you’ll still need to factor in interest to get an accurate idea of how the balance will shrink from one year to the next.

4. Lower Your Interest Rates

Interest is a major obstacle when you’re trying to get out of debt. If you want to speed up the payment process, you can look for ways to shave down your rates. If you have high-interest credit card debt, for instance, transferring the balances to a card with a 0% promotional period can save you some money and reduce the amount of time it’ll take to get rid of your debt.

Refinancing might be worth considering if you have student loans, car loans or a mortgage. Just remember that completing a balance transfer or refinancing your debt isn’t necessarily free. Credit card companies typically charge a 3% fee for balance transfers and if you’re taking out a refinance loan, you might be on the hook for origination fees and other closing costs.

5. Increase Your Income

Keeping a tight rein on your budget can go a long way. But that’s not the only way to escape debt. Pumping up your paycheck in the new year can also help you pay off your loans and increase your disposable income.

Asking your boss for a raise will directly increase your earnings, but there’s no guarantee that your supervisor will agree to your request. If you’re paid by the hour, you can always take on more hours at your current job. And if all else fails, you can start a side gig to bring in more money.

Hold Yourself Accountable

Having a plan to get out of debt in the new year won’t get you very far if you’re not 100% committed. Checking your progress regularly is a must, as is reviewing your budget and goals to make sure you’re staying on track.

Photo credit: ©iStock.com/BsWei, ©iStock.com/marekuliasz, ©iStock.com/DragonImages

Rebecca Lake Rebecca Lake is a retirement, investing and estate planning expert who has been writing about personal finance for a decade. Her expertise in the finance niche also extends to home buying, credit cards, banking and small business. She’s worked directly with several major financial and insurance brands, including Citibank, Discover and AIG and her writing has appeared online at U.S. News and World Report, CreditCards.com and Investopedia. Rebecca is a graduate of the University of South Carolina and she also attended Charleston Southern University as a graduate student. Originally from central Virginia, she now lives on the North Carolina coast along with her two children.
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Source: smartasset.com

Deferment and Forbearance of Student Loans

Deferment and Forbearance of Student Loans – SmartAsset

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Deferment and forbearance are options that people struggling to keep up with their student loans can use to make sure they don’t get into serious trouble. Falling behind on your payments can hurt your credit or lead your lenders to garnish your wages, neither of which outcomes anyone wants. If you are struggling with loan payments, a financial advisor may be able to help.

Deferment and Forbearance Defined

Both deferment and forbearance allow you to temporarily stop making payments or reduce your payments on your student loans without causing you to fall behind on what you owe. However, each program differs in the type of relief it provides.

Even though both allow you to halt or reduce your student loan payments, you may not be responsible for interest that accrues during deferment. This depends on the type of loan you have and if it’s subsidized or unsubsidized:

Interest Responsibility for Deferment
– Direct Subsidized Loans
– Subsidized Federal Stafford Loans
– Federal Perkins Loans
– The subsidized portion of Direct Consolidation Loans
– The subsidized portion of Federal Family Education Loans (FFEL) Consolidation Loans
– Direct Unsubsidized Loans
– Unsubsidized Federal Stafford Loans
– Direct PLUS Loans
– FFEL PLUS Loans
– The unsubsidized portion of FFEL and Direct Consolidation Loans

In forbearance, you’re on the hook for the interest that accrues on any type of loan while you aren’t making payments.

Interest that accrues during deferment and forbearance can be capitalized, or added to your principal balance, or you can pay it off as it accrues. If you have it added to your principal balance, the total amount you owe and your monthly payments may cost more. This means it could take you longer to pay back your loans.

Deferment Eligibility Requirements

To qualify for deferment, you’ll need to meet a few requirements.

  • You’re enrolled at least part-time and you’ve received a Direct PLUS loan or FFEL PLUS loan as a graduate or professional student. Deferment is allowed for an extra six months after you’ve dropped below half-time enrollment.
  • You are a parent who received a Direct PLUS loan or FFEL loan on behalf of a student who meets the above requirement.
  • You’re enrolled in an approved graduate fellowship program.
  • You are enrolled in an approved rehab training program for the disabled.
  • You’re unemployed or not able to find full-time work for up to three years.
  • You are going through an economic hardship for up to three years.
  • You’re in the Peace Corps for up to three years.
  • You are on active duty military service. Deferment is also allowed up to 13 months following that service or until you return to college or a qualifying school at least half-time (whichever is sooner).

Remember that even if you qualify for deferment, you might still be on the hook to pay for the interest that adds up during that deferment period, depending on the type of loan.

Forbearance Eligibility Requirements

If you’re exploring forbearance as an option, there are two different types: general and mandatory.

General forbearance is available if you’re experiencing problems affording your basic needs or medical expenses. It may also be available if you’ve had a recent change in employment. It may be wise to talk to your loan provider to see if your specific situation qualifies you for forbearance.

On the other hand, only Direct and FFEL loans qualify for mandatory forbearance. It becomes available if:

  • You’re serving a medical or dental internship or residency program.
  • The total amount you owe each month for all your loans is 20% or more of your total monthly gross income (available up to three years, and qualifies on Perkins loans, too).
  • You’re serving in AmeriCorps and received a national service award.
  • Your current teaching status would qualify you for teacher loan forgiveness.
  • You qualify for partial repayment through the U.S. Department of Defense Student Loan Repayment Program.
  • You’re a member of the National Guard, but not eligible for military deferment.

Both general and mandatory forbearance can be granted for up to 12 months at a time. If you have a Perkins loan, you have a three-year cumulative limit for general forbearance. Direct and FFEL loans don’t have the same limitation, but your loan provider may have its own limitations.

Since there is a 12-month term, you’ll need to apply for forbearance each time you need it. Some loan providers may set a maximum limit on how many times you can receive general forbearance, but mandatory forbearance doesn’t have the same restrictions.

Deferment and Forbearance Alternatives

If you don’t qualify for deferment or forbearance, you may be able to access other debt assistance programs, such as:

  • Income-Driven Repayment (IDR) Plans – These are federal student loan repayment plans that are based on your monthly income and family size. There are four IDR plans for which you may qualify.
  • Direct Consolidation Loan – This option allows you to combine all your federal student loans into one loan. You’ll have one monthly payment rather than many different payments spread out across different loans. You may get a lower monthly payment because your new loan terms can be up to 30 years, rather than the standard 10-year repayment term.
  • Refinance – Refinancing is when you take out one new loan, pay all your outstanding loans, and then make one monthly payment to your new lender. You can refinance both federal and private student loans. Your new interest rate is based on your creditworthiness, so if you don’t have excellent credit, you could end up paying more in interest than if you didn’t refinance. Before refinancing, compare lenders to see if they offer benefits best for you.

Bottom Line

Falling behind on student loan payments can hurt your financial future for years to come. You may be able to avoid this, though, by using deferment or forbearance to hit the pause button on your payments. While these programs are meant to help you, interest may still add up while you’re not making payments, which can potentially raise the cost of your payments down the road.

To find out if you qualify for either deferment or forbearance, you’ll need to submit a request on the U.S. Department of Education’s website. Your specific financial situation will dictate which choice is best for you. Most requests have their own unique form to complete, meaning there is no form for both deferment and forbearance.

Tips for Paying Back Student Loans

  • If you’re not sure of the best strategy for paying back your student loans, consider working with a financial advisor. Finding the right financial advisor that fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area in five minutes. If you’re ready to be matched with local advisors that will help you achieve your financial goals, get started now.
  • It may sometimes seem as if your student loan payments will never end. A good start is to pay more than the minimum monthly payment every month, which will pay off the loan faster and save you money in the long run.

Photo credit: ©iStock.com/zimmytws, ©iStock.com/Anchiy, ©iStock.com/MonthiraYodtiwong

Dori Zinn Dori Zinn has been covering personal finance for nearly a decade. Her writing has appeared in Wirecutter, Quartz, Bankrate, Credit Karma, Huffington Post and other publications. She previously worked as a staff writer at Student Loan Hero. Zinn is a past president of the Florida chapter of the Society of Professional Journalists and won the national organization’s “Chapter of the Year” award two years in a row while she was head of the chapter. She graduated with a bachelor’s degree from Florida Atlantic University and currently lives in South Florida.
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Source: smartasset.com

How I Paid Off $38,000 In Student Loan Debt In 7 Months

How I Paid Off $38,000 In Student Loan Debt In 7 Months

How I Paid Off $38,000 In Student Loan Debt In 7 MonthsLately, I have received many questions asking how I was able to pay off my student loans so quickly. I haven’t talked much about my student loans since I paid them off in July of 2013, but I know many struggle with their student loan repayment plan each and every day.

Due to this, it is a topic I am always happy to cover. Paying off your student loans is a wonderful feeling and I want to help everyone else experience the same.

Background on my student loans.

To start off, I am going to provide a quick background on my student loans.

I worked full-time all throughout college. I worked as a retail manager from when I was a teenager until I graduated with my two undergraduate degrees (I was a double major). Then, I was lucky and found a financial analyst position right when I graduated. I took around six months off from college, then I went back to get my Finance MBA, all while still working full-time and building my business.

Even though I worked full-time, I didn’t really put any money towards my student loan debt while I was in college.

Instead, I spent money on ridiculous things like going to my favorite Mexican restaurant WAY too many times each week and spending money on clothing that I didn’t need.

I didn’t have a realistic budget back then, at least not a good one. I didn’t think about my student loan repayment plan at all either!

So, when I finished my Finance MBA, I finally came to terms with the fact that I needed to start getting real about my student loans. I had six months after the day I graduated with my Finance MBA until my student loans would come out of deferment.

I knew I had to create an action plan to get rid of my student loans.

And that’s when I took a HUGE gulp and decided to add up the total of what I owed.

After adding all of my student loans together, I realized I had $38,000 in student loan debt. No, this might not be as much as some of the crazy stories you hear out there where others have hundreds of thousands of dollars worth of student loan debt, but I wasn’t exactly near the average of what others owed either. I also wasn’t happy because I kept thinking about how I had been working full-time for many years, yet I didn’t even put a dent on my student loans.

After totaling what I owed, I decided to buckle down and start my debt payoff near the end of 2012.

I ended up finishing paying off my student loans in early July of 2013, which means it took right around seven months for me to pay them off completely.

It’s still something I cannot believe is true. I always thought I would have student loans hanging over my head for years, so I am extremely grateful that I was able to eliminate them so quickly.

Now, you may be wondering “Well, how do I do the same?” Or you might even be thinking that it’s not possible for you.

However, I believe you CAN do the same and that it IS possible for you.

For some, it might take longer to pay off your student loans or it might even take less. It depends on how much you owe, how much time you can spend on making more money, and honestly, it also depends on how bad you want it.

Related tip: I highly recommend SoFi for student loan refinancing. You can lower the interest rate on your student loans significantly by using SoFi which may help you shave thousands off your student loan bill over time.

Related content: How Do Student Loans Work?

Here are my tips to pay off your student loans quickly:

Do you know how much student loan debt you have?

Like I said above, the first thing that made me jumpstart my student loan repayment plan was the fact that I took the time to add up how much student loan debt I had.

It shocked me so much that I probably wanted to throw up. That’s good though because it can be a good source of motivation for most people. I know it was for me!

When you add up your student loans, do not just take a guess. Actually pull up each student loan and tally everything down to the exact penny.

I highly recommend that you check out Personal Capital (a free service) if you are interested in gaining control of your financial situation. Personal Capital is very similar to Mint.com, but 100 times better as it allows you to gain control of your investment and retirement accounts, whereas Mint.com does not. Personal Capital allows you to aggregate your financial accounts so that you can easily see your financial situation, your cash flow, detailed graphs, and more. You can connect accounts such as your mortgage, bank accounts, credit card accounts, investment accounts, retirement accounts, and more, and it is FREE.

Understand your student loans.

There are many people out there who do not fully understand their student loans. There are many things you should do your research on so that you can create the best student loan repayment plan.

This mainly includes:

  • Your interest rate. Some student loans have fixed interest rates, whereas others might have variable rates. You’ll want to figure out what the interest rate on your loans are because that may impact the student loan repayment plan you decide on. For example, you might choose to pay off your student loans that have the highest interest rates first so that you can pay less money over time.
  • Student loan reimbursements. Some employers will give you money to put towards your student loans, but you should always do your research when it comes to this area. Some employers will require that you work for them for a certain amount of time, you have great grades, good attendance, and they might have other requirements as well. There are many employers out there who will pay your student loans back (fully or partially), so definitely look into this option.
  • Auto-payments. For most student loans, you can probably auto-pay them and receive a discount. Always look into this as you may be able to lower your interest rate by 0.25% on each of your student loans.

Create a budget.

If you don’t have one already, then you should create a budget immediately.

First, include your actual income and expenses for each month. This will help show you how much money you have left over each month and how much money should be going towards your student loan debt each month.

Cut your budget to create a quicker student loan repayment plan.

The next step is to cut your budget so that you can have a better student loan repayment plan. Even though you may have just created a budget, you should go through it line by line and see what you really do not need to be spending money on.

There’s probably SOMETHING that can be cut.

You might not have even realized it until after you wrote down exactly how much money you were shoveling towards nonsense until now. However, now is better than never!

We worked towards cutting our budget as much as we could. I can’t remember exactly how much we cut it by, but I know that it was enough to where I felt like I was putting a dent in my student loans.

Even if all you can cut is $100 each month, that is much better than nothing. That’s $1,200 a year right there!

Side note: If you are still in college, I highly recommend that you check out Campus Book Rentals. It allows you to get your text books for cheap. I almost ALWAYS rented my text books and it saved me a ton of money!

 

Earn more money as a part of your student loan repayment plan.

The month I paid off my student loans was a month where I earned over $11,000 in extra income. While this does sound crazy, I did start off by making just $0 in extra income. Everyone has to start somewhere.

Even if $11,000 a month isn’t possible for you, I’m sure something is. If you can make an extra $1,000 a month in extra income, that can help you knock out your student loans in no time.

Related articles:

Pay more than the minimum payment each month.

The point of all of the above is to help you pay off your student loans. However, you can always go a little bit further and pay off your student loans more quickly. The key to this is that you will need to pay more than the minimum each month for you to speed up your student loan repayment plan process.

It may sound hard, but it really doesn’t have to be. Whatever extra you can afford, you should think about putting it towards your student loans. You may be able to shave years of your student loans!

How much student loan debt do you have? What’s your student loan repayment plan?

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What Is a Parent PLUS Loan?

Parent PLUS Loans | Are They Right for You? – SmartAsset

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Paying for college is a challenge, and rising tuition costs certainly don’t help. According to College Board, the average cost of a four-year private college has increased by more than $3,000 over the last five years. Scholarships, grants and work-study programs can help bridge the gap, but it’s best to have a robust savings to back you up. Since some parents don’t want their child to take on too many loans themselves, the federal government created Parent PLUS loans. They stand out from other programs thanks to a fixed interest rate and flexible repayment options. Here we discuss what exactly a Parent PLUS loan is, how it works and whether you should get one.

Parent PLUS Loans Defined

Let’s start with the basics. A Parent PLUS loan is a federal student loan offered by the U.S. Department of Education Direct Loan program. Unlike other Direct Loans and most student loans in general, Parent PLUS loans are issued to parents rather than students. Also eligible for issue are stepparents, dependent graduate students and other relatives.

Whoever takes out the loan holds the sole legal responsibility for repayments, regardless of personal arrangements. This is very different than a parent cosigning his or her child’s student loan. The maximum PLUS loan amount is the cost of attendance minus any other financial aid received, which could equal tens of thousands of dollars per year. For PLUS loans distributed between July 2018 and July 2019, the interest rate is 7.60%. As such, the decision to get a Parent PLUS loan should not be taken lightly.

Who Should Get a Parent PLUS Loan?

According to the Office of Federal Student Aid, about 3.5 million parents and students have borrowed a collective $83.9 billion using Parent PLUS Loans from the federal government. To qualify for a Parent PLUS loan, you must be the parent of a dependent undergraduate student, dependent graduate student or professional student enrolled at least half-time in a participating college or university.

You and your child must also meet the general eligibility rules for federal student aid, such as proving U.S. citizenship and demonstrating need. Male students must be registered with the Selective Service. As with other Direct PLUS loans, you usually can’t secure a Parent PLUS loan if you have an adverse credit history. The Department of Education won’t approve a borrower with charged-off accounts, accounts in collections or a 90-day delinquent account with a balance of $2,085 or more.

You shouldn’t apply for a Parent PLUS loan just because you qualify. In fact, it’s usually best if a student gets all of the Direct Loans he or she is eligible for first. These loans tend to have lower interest rates and fees. A parent could always help his or her child with student loan repayments, anyway.

You should really only apply for a Parent PLUS loan if your child needs more financial aid than he or she has received from other sources. It’s also important that both students and parents are on the same page about expectations and repayment plans.

Pros of Parent PLUS Loans

Flexible Loan Limits

Identified generally as “cost of attendance minus any other financial aid received,” Parent PLUS loans can be used toward tuition and fees, room and board, books, supplies, equipment, transportation and miscellaneous personal expenses. They do not have the same limits imposed on them as other federal student loans do. This makes Parent PLUS loans a great supplement if you have a mediocre financial aid package. Of course, you should still be cautious not to take on debt you won’t be able to pay back. Our student loan calculator can help you decide how much you should borrow.

Fixed Interest Rate

As with other federal student loans, the interest rate on a Parent PLUS loan stays the same throughout the life of the loan. It won’t alter based on national interest rates, the prime rate or other factors. Every July, the Department of Education sets the Parent PLUS loan interest rate based on that year’s 10-year treasury note. The fixed interest rate makes it easy for borrowers to predict expenses, make both short- and long-term financial goals and set a budget.

Multiple Repayment Options

Parent PLUS loans are eligible for several different repayment plans, one of which should work for you. This flexibility makes them one of the most accommodating programs for funding a college education. Check out your choices below:

  • Standard Repayment Plan: The most common option, which allows for fixed monthly payments for 10 years.
  • Graduated Repayment Plan: This starts with small payments that gradually increase over 10 years. In theory, this should coincide with growing income levels.
  • Extended Repayment Plan: This provides fixed or graduated payments over 25 years, as opposed to 10.
  • Income-Contingent Repayment: Borrowers pay 20% of their discretionary income or what they’d pay on a 12-year plan, whichever is lower. They also qualify for student loan forgiveness if they still have a balance after 25 years.

Cons of Parent PLUS Loans

Loan Origination Fee

Interest isn’t the only expense you’ll encounter with Parent PLUS loans. There’s also a loan origination fee. The fee amount is a percentage of the loan, and it varies depending on the disbursement date of the loan. For loans after October 1, 2018 but before October 1, 2019, the fee is 4.248% of the loan amount. That means that if you borrow $30,000 using a Parent PLUS loan, you’d pay a fee of $1,274.40.

This fee is proportionately deducted from each loan disbursement, which essentially reduces the amount of money borrowers have to cover education-related costs. Since many private student loans don’t have a fee, it’s worth looking into private options to determine which loan has the lowest borrowing costs.

Relatively High Interest Rate

Currently set at 7.60%, Parent PLUS loans certainly don’t have the lowest rate out there. If you have strong credit and qualify for a better rate, you might consider a different loan that will cost less in the long run. Direct Subsidized Loans currently carry a 5.05% interest rate, while Direct Unsubsidized Loans are at 6.60%. On the other hand, some private lenders have interest rates as low as 2.795%.

Limited Grace Period

Parent PLUS loan repayment normally begins within 60 days of loan disbursement, but borrowers have the option to defer repayment. This will last while their child is still in school and for six months after he or she graduates or if the student drops below a half-time enrollment status. Not only is this much less time than borrowers of other loan programs receive, but interest will also continue to accrue during the deferment period.

How to Apply for a Parent PLUS Loan

If a Parent PLUS loan seems right for you, file the Free Application for Federal Student Aid (FAFSA) at FASFA.ed.gov. Depending on the school’s application process, you will request the loan from StudentLoans.gov or the school’s financial aid office.

If you receive approval for a Parent PLUS loan, you will get a Direct PLUS Loan Master Promissory Note (MPN). You’ll have to review and sign the MPN before sending back. Funds are typically sent straight to the school, but you or your child may receive a check. All of the money must be used for educational and college-related purposes.

Tips for Your College Finances

  • Every state in the country offers one of more higher education tuition assistance programs called 529 plans. For many prospective college students and their families, this may be one of the best ways to overcome the incredibly high costs of a university degree. What’s better yet is that you can get a plan from any state, not just the one you reside in.
  • It’s extremely common for financial advisors to have some level of background knowledge in funding for higher education. The SmartAsset financial advisor matching tool can pair you up with as many as three such advisors in your area.

Photocredit: ©iStock.com/monkeybusinessimages, ©iStock.com/zimmytws, ©iStock.com/thodonal

Liz Smith Liz Smith is a graduate of New York University and has been passionate about helping people make better financial decisions since her college days. Liz has been writing for SmartAsset for more than four years. Her areas of expertise include retirement, credit cards and savings. She also focuses on all money issues for millennials. Liz’s articles have been featured across the web, including on AOL Finance, Business Insider and WNBC. The biggest personal finance mistake she sees people making: not contributing to retirement early in their careers.
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Hoping for Student Loan Forgiveness Won’t Pay the Bills

Federal student loan borrowers are waiting with bated breath to see whether loan forgiveness — which President-elect Joe Biden says he’ll make a priority — becomes a reality.

Industry experts say borrowers shouldn’t count on it.

“I think we’re closer to loan forgiveness than we’ve ever been before, but that doesn’t mean I think we’re close,” says Betsy Mayotte, president and founder of The Institute of Student Loan Advisors, a nonprofit group. Mayotte says other priorities such as the pandemic and its accompanying recession are likely to delay possible forgiveness.

Biden’s transition team on Jan. 8 reaffirmed his support for $10,000 in student loan forgiveness for each federal student loan borrower as part of additional coronavirus relief, but only through congressional action — quashing speculation about quick forgiveness via an executive order.

Currently, 45.3 million Americans — about 13.7% of the total U.S. population — hold federal student loans. Approximately 15 million borrowers would see their student loan debt wiped clean with $10,000 of broad loan forgiveness per borrower, according to a NerdWallet analysis of federal student loan data.

Is forgiveness still possible?

Crucial details around any potential forgiveness proposal remain unclear. The decision to go through Congress rather than use executive action means every facet is up for debate.

For example, it’s unclear if there will be an income threshold to qualify or if it would be a blanket forgiveness. There’s also no plan for what borrowing qualifies: Would parent or graduate PLUS loans get forgiveness — or commercially held FFEL or Perkins loans, for that matter? It appears that private student loans are off the table.

Even the amount of forgiveness could change: Soon-to-be Senate Majority Leader Chuck Schumer, D-N.Y., and Sen. Elizabeth Warren, D-Mass., proposed a more ambitious $50,000 blanket forgiveness last fall. But this seems less likely to pass in a divided Senate.

“It doesn’t seem like there will be massive forgiveness given concern among the more conservative Democrats in the Senate,” says Robert Kelchen, associate professor of higher education at Seton Hall University in South Orange, New Jersey.

“Modest forgiveness could happen,” he says.

Federal payment pause likely to be extended

Right now, federal student loan borrowers don’t have to make payments due to an interest-free pause, called forbearance, that’s been in effect since March 13 and extended twice by President Donald Trump. It is set to expire Jan. 31, but Biden’s transition team says he intends to extend the current federal student loan forbearance on day one.

It’s unclear how long this extension would last. For now, experts say it’s smarter to concentrate on a strategy for the day payments restart rather than to plan for forgiveness.

Repayment is expected to be messy when it starts again since the system wasn’t designed to turn on and off, according to Scott Buchanan, executive director of the Student Loan Servicing Alliance, a nonprofit trade association representing student loan servicers.

Kelchen agrees: “Whenever [payment] restarts there will be a large increase in delinquencies and defaults — some people may be hard to contact, some people may not be able to pay, some people may not want to pay. Starting this all at once is just an administrative nightmare.”

While the pause continues, here’s what you can do to prepare.

If you’re experiencing financial hardship

Those who are out of work or have experienced other financial difficulties due to the coronavirus should use the pause as a time to focus on paying for essentials like rent, groceries or utility bills.

Before repayment restarts, plan to contact your servicer to enroll in one of the following:

  • An income-driven repayment plan will set your payment amount to a portion of your income and extend how long you’ll repay the debt. If you don’t have a job, your payments could be as low as zero.

  • An unemployment deferment will allow you to defer payments for up to 36 months, but interest will accrue and be added to the loan total when you start making payments.

If you defaulted on your student loans before the pandemic, contact your servicer about loan rehabilitation. Each month you spent in forbearance counts toward the nine needed for rehabilitation.

If your finances are in OK shape

During the pause, if you haven’t experienced job loss or other financial insecurities, prioritize paying down any high-interest debt, such as a credit card. You could also pad your emergency fund with enough money to cover three to six months of expenses.

If you want to repay your loans

Mayotte encourages borrowers whose finances are in good shape to take advantage of this zero interest period by making extra payments.

“That’s an unheard-of opportunity that we’ve never seen before and we may never see again,” Mayotte says.

You can still repay your loans during the pause, but you’ll have to contact your servicer to do it.

Or consider setting aside the money you would otherwise spend on student loans and make a lump-sum payment on your highest-interest loan just before repayment and interest accrual resumes. You’ll preserve financial flexibility and get the same result.

If you prefer to wait and see whether forgiveness happens, make your required payments, but don’t pay extra until any amount of relief is firm.

If you have private student loans

Private student loan borrowers aren’t expected to receive federal relief, experts say. If you’re experiencing financial hardship, contact your lender about options for relief, such as a short-term forbearance (with interest accruing) or a temporarily lowered payment.

If you have private student loans and your finances are solid, you could consider refinancing to take advantage of historically low interest rates. Federal student loan borrowers shouldn’t refinance privately right now to ensure they don’t miss out on any potential future forgiveness.

Source: nerdwallet.com