Archive for 'Loans'

College graduation season is upon us, which means that soon students will need to start repaying their school and education loans.student loan repayment

Here are some tips to help keep you on track as you start to pay back your loans:

Make sure your information is up to date. You need to inform your lender as soon as possible if any of your personal information changes like your address, name, etc.

Save all your paperwork. Keep all your student loan paperwork and information organized. Start a file or folder where you can keep everything. Read everything that you receive in the mail or online! If you don’t understand something, make sure you ask your financial advisor or call the loan lender.

Make a payment plan. Decide how you’ll pay for you loans. Most lenders allow students to make payments several ways like online, over the phone, by check, or having it automatically deducted from their checking account each month. To avoid penalties for late payments chose the same day each month to pay your loan off. Write it down in your planner or calendar.

Check your student loan account online. Most lenders will offer students online access to their student loan accounts, so you can check the balance of your loan, see when payments are due, and make sure your payments went through. Regardless of the way you have decided to pay your loan bill, you will be able to easily check your account if anything comes up.

Ask questions. Student loans can be confusing, so don’t be afraid to ask questions if you don’t understand something. Ask your parents, financial advisor, bank, or loan lender for help or clarification with your student loan.

Make sure you pay your loans on time! There are consequences if you are late on your loan payments.

To learn more, please read: What Happens If You Default On Student Loans

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Heads up to any of our readers who are paying off student loans: ECMC, a federal student loan agency, made an announcement last week that said the names, addresses, Social Security numbers and dates of birth for 3.3 million people were stolen from its headquarters about three weeks ago. No savings, checking or credit card information was included in the data, but if you are one of their borrowers, you can still be at risk for identity theft. So far, they haven’t found any evidence that the data has been used, but it’s better to take precautions now to secure your information.

How do you find out if your information has been compromised? Here are 3 options:

  • Head to and fill out your information
  • Call ECMC at 1-877-449-3568
    • Monday-Friday between 9 a.m. and 9 p.m. ET
    • Saturday from 9 a.m. and 6 p.m. ET
    • Sunday 10 a.m. to 5 p.m. ET
  • Visit, a national student loan database where you can log in and check on information about your loans

ECMC is also working with Experian to offer affected borrowers free credit protection and monitoring for a year. If you are affected by the data theft, you will receive a letter soon, if you haven’t already. You’ll need a code from this letter in order to activate your credit protection services.

What can you do to protect yourself in the meantime?

  1. Keep in contact with your bank & credit card companies. Double check your existing accounts for any unauthorized purchases, and make sure no new accounts have been falsely opened in your name. Go one further and create new passwords & PIN numbers for your accounts, just to be safe. Make sure these passwords and PIN numbers are complicated and not easy to guess. Don’t use birthdays, years, names, phone numbers, or other obvious identifying information to create a new code.
  2. Check your credit report. Like we said, no misuse has been reported yet, but it doesn’t mean you are in the clear. Run your credit report to double check that no questionable accounts or loans have been opened in your name.

If you default on your student loans, meaning that you are more than 270 days delinquent on your loan repayments, there are serious consequences!default on student loans

Here are 10 things that could happen if you default on your student loans:

  1. You Could Get Sued. Private lenders and the government could sue you to collect defaulted student loans. And unlike other debts, there is no time limit on suing to collect back student loans, so you could possibly be sued indefinitely.
  2. Your Federal Benefits Could Be Taken. The government can take some of your federal benefit payments (like Social Security retirement benefits & Social Security disability benefits) to use as reimbursement for student loans.
  3. Your Credit Rating Will Be Ruined. Your credit rating will be wrecked for at least seven years, so trying to borrow money for a car, home, or expensive items is out of the question.
  4. Tax Refund Offsets. Until your student loans are paid in full, the IRS can intercept any income tax refund that you may be entitled to. This is one way the Department of Education annually collects hundreds of millions of dollars, and is a popular method to collect payment on defaulted loans.
  5. Your Paycheck May Dwindle. The government can take a limited portion of your wages, if you don’t pay student loans back (up to 15% of your disposable income).
  6. You’ll Be Harassed by Collection Agencies. Collection agencies will call your home, work, your family members, and anyone else they can track back to you. Until you start to pay, they will continue to harass and call.
  7. Forget Renting Apartments. When you submit an application to rent an apartment, usually realtors, apartment owners, or rental agencies run a credit check on you to ensure you will make payments and pay rent on time. You may run into trouble finding a place to live if you haven’t been paying your student loans.
  8. No More Federal Financial Aid. It will be nearly impossible to receive more federal financial aid until you repay your student loan in full.
  9. Associated Collection Fees. Loan agencies may charge you collection fees on your unpaid student loans. Also, collection agencies charge the Department of Education a commission, which you end up paying. So in the end you actually have to pay back your student loan with interest, the collection fees, and the commission.
  10. Dropping Out of School Won’t Help. Even if you drop out or switch schools, you will still need to repay the student loans you took out.

For more information:

Student Loan Repayment: Stay on Track!

Federal Student Loan Consolidation

Debt Negotiation/Elimination

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Are you setting yourself up for debt?

I’ve harped on the importance of filing a FAFSA in my last few blog posts, but’s team reminded me of another source of trouble students face when it comes to paying for college. The number two mistake they list: Choosing a school that costs too much.

“You have to look at two cost comparison points — how much is the cost minus gift aid such as grants and scholarships, then how much is the total cost with loans,” says Tally Hart, senior adviser of economic access at Ohio State University. “Compare the total debt you will have to take on to graduate from each school.”

It’s important to do a real apples-to-apples cost calculation of all the colleges […] This comparison isn’t as simple as deducting the financial aid package from the school’s sticker price because the aid package usually includes student loans.

The true price of paying for college is what you’re paying now plus the debt you must take on over the four or five years until graduation, Hart says.

There are plenty of people out there who may assume they do not qualify for financial aid, but this advice from Bankrate addresses the other side of the coin – those people who do not think long-term about their college choice and the debt they may face once they graduate.

student loan debtHere’s my soapbox: When shopping for your college education, it’s essential that students today think about the industry they are going to go in to and the income level they should expect to be in with an entry-level job. It makes no sense to accept the burden of loans just because you don’t have to think about it for 2-4 years. You wouldn’t buy a house without figuring it into your existing budget, and you shouldn’t invest in a college education without doing the same. If you can’t go to a certain college without taking on a drowning debt, then that particular college shouldn’t be on your list.

Do your research, and keep in mind that few industries are “safe” (i.e. not every industry will flourish all the time; our economy has taught us that over the last two years). Be realistic about the salary you can expect by looking at sites like and PayScale, which offer you income averages for your geographic location and the level of employment.

Have you reconsidered entering a certain industry because of the long-term debt you might face after earning your degree? Or have you reconsidered your choice of college because you knew it wasn’t good for you financially in the long run?

cynthiatiemann150feb22010Two years ago, Cynthia M. Tiemann of St. Peters, MO, took out seven college loans in her daughters’ names totaling nearly $140,000. She had no intention of paying their tuition with this money, as she forged the names of her two daughters and 71-year-old mother as a cosigner. Instead, she gambled it away at a local casino.

How’d they find out? The girls’ father suggested to one of them that she learn about her credit, so he suggested that she pull her credit report online. That’s when she found out about the student loans that were taken out in her name nearly 18 months prior, according to

Cynthia, who suffers from a gambling addiction, was was sentenced Monday to five years in prison. The loans have been cleared from her daughters’ credit reports, but surely the emotional stress will take some time to pass.

Lesson of the day: Pull your credit report annually!

See also: What NOT To Do With Your Pell Grant

An article I read about young Americans stuck on a hamster-wheel of debt was so compelling, I was surprised to see that it dated back to February 2006. It’s just as relevant today as it must have been four years ago—perhaps more so, given the recession that’s affected the country between then and now.

‘Generation Debt’ is going deep into the red, by Vanessa Richardson at, highlights the financial frustrations facing Generation Y, including heavy loads of student loan and credit card debt and an insecure economy with poor job prospects.

The article also offers candid feedback from graduates about how they’re coping with their overwhelming financial obligations and some practical advice from finance experts on how to get off your own hamster-wheel of debt. College and high school graduates alike will find these personal finance tips helpful. (Stay tuned to for information on upcoming changes to credit card laws.)

Thanks to Penelope Trunk for the reference to this article.


Stafford Loans are student loans the federal government makes available to undergraduate and graduate college students. There are two kinds of Stafford loans: subsidized and unsubsidized. Subsidized Stafford loans are restricted to applicants with low incomes, but unsubsidized Stafford loans are available to any eligible applicant who wants one, regardless of income level. The interest rate on unsubsidized Stafford loans is fixed at 6.8% for all applicants.

Unsubsidized Stafford loans are a good deal for undergraduate students whose incomes are too high to qualify for subsidized Stafford loans. The maximum loan amounts may not seem like much, but may in fact cover all or almost all your college costs if you attend an in-state public university or community college.

Annual Stafford loan limits for dependent students are:

  • $5,500 for your first year of school (no more than $3,500 subsidized)
  • $6,500 for your second year (no more than $4,500 subsidized)
  • $7,500 for your third year (no more than $5,500 subsidized)
  • $7,500 for your fourth year (no more than $5,500 subsidized)

Annual Stafford loan limits for independent students are:

  • $9,500 for your first year of school (no more than $3,500 subsidized)
  • $10,500 for your second year (no more than $4,500 subsidized)
  • $12,500 for your third year (no more than $5,500 subsidized)
  • $12,500 for your fourth year (no more than $5,500 subsidized)

2 Federal Loan Methods: Direct Loan Program vs. Bank-based FFELP

Unsubsidized Stafford loans are currently offered through two federal loan programs, the Direct Loan Program and the bank-based Federal Family Education Loan Program (FFELP). The loan funds for the Direct Loan program are supplied by the U.S. Treasury. Loan funds for the FFELP are supplied by private financial institutions, who get subsidies from the government for making their money available for federal student loans at interest rates and fees set by the government. There’s a good chance the FFELP will be shut down some time next year, however, because the Obama administration believes the Direct Loan program is more cost-efficient.

The Student Loan Market

The administration’s decision to stop the subsidies to private lenders and offer federal loans solely via the Direct Loan program has caused a lot of unhappiness among the financial institutions and financial aid administrators who benefited from the FFEL program. If you read any news stories about their protests, you’ll see complaints about how the federal government is trying to “drive private lenders out of the student loan market” and how the “lack of free market competition” caused by the government’s soon-to-be “monopoly” on student loans will deprive students and families of student loan choice.

But the truth is, the federal government providing federal student loans through the Direct Loan program doesn’t have anything to do with the availability of private (or, alternative) student loans. There is nothing in the FFELP shut-down plan that says that private lenders will be barred from offering their own student loans. Nothing that says college students MUST take out federal student loans and are not allowed to take out private student loans if they wish to. Nothing that says private lenders cannot continue to offer student loans from the private sector, just like they already do.

If the new Direct Loan plan goes into effect, federal loan money will come from a federal source and private loan money will come from private sources, and the two will compete for student loan business. No one is forcing private lenders out of the student loan market— they will still be able to offer all the student loans they want. Just not through the government’s program.

Public-Sector/Private-Sector Competition Benefits the Student:
Federal Unsubsidized Stafford Loans vs. Commercial Lender Student Loans

In fact, the only impact the elimination of FFELP may have on private lenders (assuming they want to stay in the student loan market) is to motivate them to lower their interest rates and fees and increase their borrower rights and protections in order to be competitive with the federal Direct Loan program. Private lenders could even undercut the federal loan program by offering even lower interest rates and fees and even better borrower rights and protections than the federal government does. Then everyone will want a private loan instead of a federal loan.

It remains to be seen if the Obama administration has the right idea about offering only Direct Loans, but the hype about private lenders being driven out of the student loan market is misleading. In the meantime, until private lenders are willing to be more competitive, the fixed 6.8% interest rate, no credit check, and no loan payments until after graduation make unsubsidized Stafford loans the best student loan deal around.

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Consolidating Private Student Loans

If you took out a lot different student loans over your years in college, you may be feeling overwhelmed by trying to keep track of them all. One possible solution is loan consolidation, but like any other loan option, it requires a little looking before you leap. For example, you should understand how consolidating private student loans is different from consolidating federal loans, since the two types of loans cannot be consolidated together.

Carolyn Bigda of the Chicago Tribune Online provided a good overview, and some tips, on consolidating private student loans in her Your Money column last month:

Student loan consolidation makes sense, but federal, private debt has different rules

By the way, although consolidating private loans into a federal consolidation loan is not allowable, it sounds as though some students have consolidated, or tried to consolidate, their federal student loans into a private consolidation loan. The Student Loan Borrower Assistance Project at the National Consumer Law Center strongly advises students against doing this:

“WARNING: It is very dangerous to consolidate federal loans into a private consolidation loan. You will lose your rights under the federal loan programs once you choose to consolidate with a private lender. These include deferment, forbearance, cancellation, and affordable repayment rights. Also, federal consolidation loans generally have lower interest rates.”


Tips for Affording Student Loans

Student Loan ApplicationStudent loan debt is back in the news again. Based on data from the 2009 National Postsecondary Student Aid Study, the Project on Student Debt has recently publicized these numbers:

  • For the past 4 years, approximately two-thirds of students graduating from four-year colleges have student loan debt upon graduation
  • Nationwide, the average debt for graduating seniors with student loans rose to $23,200 in 2008, an increase of about 6%/year between 2004 and 2008
  • At some colleges, average debt soared to as high as $106,000

The good news is that there are ways to minimize and control student loan debt and many personal finance experts who offer tips on how to do this. These tips for affording student loans are not new—just a little dusty from not having been used for a while.

Liz Pulliam Weston, a personal finance advisor at MSN Money, wrote a terrific article with tips for affording college and student loans:

How much college debt is too much?

Two years later, with the country in a deep recession, that question is even more important. In addition to a refresher course on understanding your personal finances and federal loans vs. private loans, Ms. Weston also provides recommendations for student loan limits based on the degree you plan to pursue.

If you’re starting to think about going back to school next year, now is a good time to familiarize yourself with tips for affording your student loans after you’ve graduated.

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How to Check Your FAFSA Loan Status

NSLDS2The National Student Loan Data System (NSLDS) is the U.S. Department of Education’s online mega-database of federal financial aid accounts. This database keeps track of all federal student grants and loans (Title IV financial aid) awarded to students through the FAFSA program, including FFELP and Direct Lending student loans.

The information about all these student loans comes from the institutions that loaned or manage the money awarded to borrowers via the FAFSA, including banks, financial institutions, loan guaranty agencies, individual schools, and the U.S. Department of Education (Direct Loans).

The National Student Loan Data System provides you with a convenient way to check on the status of your FAFSA loan yourself, without having to go to a physical location or wait in line or on hold to speak to a bank teller or customer service rep. By logging in to the National Student Loan online database, you can see what your loan status is 24/7 and find information such as:

  • the FAFSA grant and loan amounts you were awarded
  • how much money was paid out to you or your school, and when
  • what your FAFSA loan’s outstanding balance is
  • whether you are up-to-date or falling behind on any required interest payments or loan repayments

You’ll need a FAFSA PIN (Personal Identification Number) to check your FAFSA loan status at the National Student Loan Data System site. If you filed your FAFSA online, you already have a PIN. If you mailed in a paper FAFSA, you’ll need to get a PIN before you can check your account status.

You can find more information about getting a FAFSA PIN and checking your FAFSA loan status on the Frequently Asked Questions (FAQ) page of the federal Student Aid website.

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