Informare Wissen Und Koennen Fri, 12 Aug 2022 08:19:45 +0000 en-US hourly 1 Informare Wissen Und Koennen 32 32 Take out payday loans during inflation Thu, 11 Aug 2022 22:32:49 +0000

Inflation in the United States has reached a 40-year high in June. Although the rate of inflation eased slightly in July, consumers are feeling the pressure of higher prices, and there is no guarantee that the current inflation problem has peaked. Given the current economic conditions, many Americans are looking for loans and predatory lending is on the rise.

Payday loans are short-term, high-interest loans that must be repaid on your next payday. They are easy to obtain but difficult to repay, often with hidden fees and extremely high interest rates. Payday lenders are notorious for setting up storefronts in low-income areas and can throw people into a cycle of debt.

Although not all payday lenders are predatory, you should consider other options before getting a payday loan. Here’s everything you need to know about taking out a personal loan in times of inflation.

The impact of rising inflation

Consumer prices rose 8.5% in July, down 0.6% from June. Despite this slight slowdown, it is unlikely that the inflation rate has peaked. As the price of basic necessities like gasoline, food and housing continues to rise, consumers are feeling the pinch.

Two-thirds of Americans lived paycheck to paycheck in June. Meanwhile, US consumer personal debt is higher than ever. Given that the unemployment rate is currently the lowest since 1969, it is clear that rising inflation is putting severe financial pressure on consumers.

As gasoline prices have started to fall, food and housing prices are skyrocketing. “Consumers take a break at the gas pump, but not at the grocery store. Food prices, and in particular food-at-home costs, continue to soar, rising at the fastest pace in more than 43 years,” said Greg McBride, Bankrate’s chief financial analyst, “ Lower gas prices have been very welcome, but this does not solve the inflation problem.

Inflation leading to interest rate hikes

To combat this runaway inflation, the Federal Reserve has raised interest rates four times this year and is expected to raise them again before the end of 2022. These rate hikes have already pushed up average personal loan rates, and With more rate hikes on the way, new personal loan borrowers will likely see higher interest rates.

This does not bode well for those looking for payday loans, as these loans already have much higher rates than other personal loans.

Should I take out a personal loan?

Payday loans can be very tempting if you’re struggling financially due to inflation and need cash fast. If you can find a payday lender that offers decent rates and you’re pretty sure you can pay it back on your next paycheck, that might be a viable option. However, taking out a personal loan involves many risks and you should only do so as a last resort.

Payday loans have fixed interest rates, which means the rate you pay doesn’t change for the life of the loan. They are designed to be short-term loans that help people cover necessary expenses between paychecks or emergency expenses. Payday loans are generally for smaller amounts, $500 or less on average. However, they come with exorbitant interest rates. The average two-week payday loan comes with an APR of almost 400%. By comparison, the average APR for a regular personal loan is just over 10%.

The dangers of payday loans

Payday loans can attract borrowers with bad credit because most payday lenders don’t do credit checks. However, taking out a payday loan can further damage your credit and throw you into a cycle of debt that can be difficult to escape. It is extremely common for payday loan borrowers to have difficulty repaying the loan at the end of the loan term of two to four weeks, forcing them to take out an additional loan to meet the payment deadline.

Nearly 1 in 4 payday loan borrowers take out additional loans nine or more times after the first loan. Low-income communities are particularly vulnerable to payday lenders, and black and Latino communities are disproportionately targeted.

Alternatives to payday loans

There are several alternatives to payday loans, even if you don’t have strong credit.

Credit card

There is no minimum credit score to qualify for a credit card, although individual cards have requirements. Although you shouldn’t make a habit of racking up credit card debt, using a credit card to cover your expenses is a better option than taking out a payday loan.

Credit cards have much lower interest rates than payday loans, and you have 30 days to pay off your credit card balance before it incurs interest.

Borrow from a credit union

If you have time to join a credit union and go through the application process, borrowing from a credit union could be a valid option. Credit unions tend to have lower interest rates than traditional lenders, and many offer payday loan alternatives (PALs) that let you borrow $200 to $1,000 for one to six months. These loans have an APR ceiling of 28%.

Personal loans for bad borrowers

Online personal lenders tend to have fast approval and fund delivery times, and many online lenders are open to working with borrowers with bad credit. While borrowers with bad credit are likely to receive the highest interest rates from a lender, most personal loan borrowers cap their APRs at around 35%, which is still well below that of mortgage loans. salary.

If you want to take out a personal loan, you should compare the best lenders and prequalify with a few before making a decision. It’s also worth looking into small personal loans, especially if you don’t need to borrow a large amount of money.

Emergency rescue services

If you need help right away, federal and local programs are available to help. For example, the Emergency Rent Assistance Program is set up to help families cover rent and utility costs when needed. If food costs are a concern, it might be worth visiting your local food bank to ease the burden. It’s also worth checking to see if your local community has community service agencies that offer help with expenses like rent and back-to-school expenses for children.

Alternative ways to earn income

If you have items you are willing to part with and need money for necessities, it may be worth selling things like clothes and jewelry online or at a pawn shop to earn income. additional at a glance. If you have an extra room in your home, you might consider renting it out through Airbnb or hiring a roommate to reduce rent or mortgage costs.

At the end of the line

As inflation continues to soar, people are struggling to pay their bills and looking for ways to supplement their income. While payday loans are a quick and easy way to get food on the table or fill up on gas, they are incredibly dangerous.

A payday loan could put you in debt and ruin your credit. If you are having financial difficulty and are considering a payday loan, consider the alternatives listed above and see if they will work for you before making this decision.

Student loans will cost more this fall for students and parents Thu, 11 Aug 2022 21:06:55 +0000

As students around the world prepare to return to class, they and their parents also face bills for tuition and other college expenses.

It is not uncommon to take out student loans to pay for your studies. But the interest rate you will pay for these loans will increase this fall. Vicki Beam is a financial advisor at Michigan College Planning in Traverse City. “A lot of them are probably getting their bills right now and wondering how to pay them.”

Carol Crawford is a parent of a high schooler and has another student who is rising fast in high school. “My oldest son is now 20. And he’s at Michigan Tech,” she says. The idea of ​​paying for college is hard to escape. “How are we going to pay for this? We knew student loans existed. We hoped we wouldn’t have to, and he certainly didn’t want to. He didn’t want to struggle with that when he graduated.

Crawford’s eldest son double-enrolled through NMC, getting college tuition for free while still in high school. “He double-enrolled in high school and that helped. So he had an associate’s degree from NMC before he left Traverse City. It helped tremendously financially,” she says. “He also works full time. He is very motivated. We helped him where we needed it, but luckily we didn’t need to get a student loan.

And while tuition itself isn’t going up this year, the cost of student loans is. It’s because of interest rate hikes from the Fed, which is raising rates across the board. “Part of how they pay is usually with student loans. And now they find that student loan interest rates have gone up, like all other interest rates,” says Vicki Beam. “A year ago, it was 3.73%. And the student loan interest rate is 4.99%. It therefore increased by a little more than one percent.

That means it will cost more to pay off those loans — although it’s generally cheaper to get a student loan than for parents to take out a private loan for four years, Beam says. “Freshmen, they can borrow $5,500, sophomores $6,500, then junior and senior years $7,500 each.” Ferris College

“The important thing to know is that your student will probably end up walking away with four individual loans that will have four interest rates. This interest rate stays with the loan for the entire term until it is paid off,” Beam says. “Parent PLUS loans have also increased this year. And we notice private loans…that you co-sign, these depend on the credit rating of the parent. These rates can therefore be quite high, (even) in the double digits. »

Beam says it’s intimidating for parents and students. “You plan to borrow between $80 and $100,000 for four years.” She says scholarships and grants exist, even for current students. “We hear from a lot of scholarship boards (saying) that they have no applicants. And so they don’t give that money. They need someone to apply for the scholarship.

Ferris College 2Many college graduates have seen some relief from having to repay their loans during the pandemic. But those days may be coming to an end. “We haven’t had any interest charged, or any loans requiring payment since COVID. March 2020. This is expected to expire at the end of this month,” Beam says. This break could still be extended, but there is no word yet. And it’s hard to predict what interest rates will do in the years to come. “It could go up. And if interest rates were to drop once someone left school, they might want to consider refinancing to try to consolidate and end up getting a lower interest rate.

As for the talk among politicians about canceling student debt? “I would say whatever you borrow, you should plan to pay it back. If it’s forgiven, it’s an incredible gift,” Beam says.

Michigan College Planning offers free workshops and consultations at its Traverse City office.

The Michigan Department of Treasury’s Student Assistance Team urges students and their families to be vigilant and informed when considering student loans.

“Michigan students and families cover a significant portion of their higher education costs,” said state treasurer Rachael Eubanks. “When student borrowers become their own financial advocate, they can better understand how to manage and benefit from the financial aid they receive. Please consider carefully only accepting loans that are necessary. The choices students make today will have results later in life.

To make the best decision about student loans, MI’s student support team recommends seven best practices when considering student loans:

  1. Complete the Free Application for Federal Student Aid (FAFSA). Colleges use FAFSA information to determine their financial aid awards. By completing and submitting the FAFSA, students maximize all of their financial aid options.
  2. Understand that loans must be repaid. Not all financial aid included in a financial aid award letter is free money. Many financial aid scholarships will include federal student loans. Unlike grants and scholarships, loans must be repaid with interest.
  3. Check the amount of interest offered on a loan before accepting it. Federal student loans, parent loans for undergraduate students (PLUS), and private loans have varying interest rates and repayment terms. Before taking out loans, students should identify and compare the interest rate of each loan, then accept the loans with the best interest rates and repayment terms.
  4. Accept only the amount you will need. Students can either decline a loan or request a lower loan amount, and the financial award letter should include instructions on how to do this.
  5. Beware of loan scams. In a typical student loan scam, a scammer will request banking information from a student seeking loans. The scammer usually claims that they will use the information to make a direct deposit to the student’s account in exchange for an upfront fee paid through gift cards. Instead, the scammer accesses the student’s bank account and withdraws funds.
  6. Visit the school’s financial aid office once per semester. Even though students don’t have to start repaying their loans while they’re in school, they don’t have to wait to understand their responsibilities. Students should know the status of their college or university’s student account and keep track of the types of aid they receive. By making it a habit, students can avoid over-borrowing and stick to their budget.
  7. Create a account. The website, operated by the US Department of Education, is a one-stop-shop for managing federal student aid. With a account, students can track their federal student loans, check the interest rate for each, and the total interest accrued to date. Students can also review different repayment options, estimate monthly payments, and find out who their loan officer is when repayment begins.

For more information on Michigan student loans, click here. For more information from the Michigan Treasury on how to be informed when considering student loans, click here.

Refinancing My Student Loans Helped Me Free Up My Mom As A Co-Signer Thu, 11 Aug 2022 11:46:30 +0000

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  • My mom co-signed $82,000 of my private and federal student loans, and it nearly ruined our relationship.
  • After eight years of paying off student loans and rebuilding my credit, I finally qualify to refinance my student loans.
  • Refinancing my student loans also means I can release my mom as a co-signer on my loans.
  • Find the student loan refinance rate that’s right for you with Credible.

In college, my mom co-signed for $82,000 of my federal and private student loans. At the time, none of us really knew what we were getting into.

My family moved to the United States from the Philippines in 2003. By the time I started college in 2010, my parents were just getting used to our newfound financial stability. My mother co-signed my student loans because she was always supportive of all my creative pursuits.

Eight years after I graduated, my private student loans alone are costing me $670 a month and most of it is in interest. To be fair, I haven’t always made payments in those eight years. Only in the last year and a half, during the federal student loan payment break, have I been able to pay the minimum monthly payments.

After rebuilding my credit, I am finally eligible to refinance my private student loans, which total $64,000. While refinancing federal student loans means giving up any future ability to get federal student loan forgiveness, I refinance private loans – they will remain private and continue to be ineligible for forgiveness.

Here are three productive and healing conversations I had with my mom while weighing my options.

First I told him about the math

My mom is great at math — after all, she’s a data analyst who studied statistics in college — but I felt like I had to tackle this one on my own. I opened apps with SoFi and Laurel Road to compare my interest rates and terms to what I’m currently paying, and to calculate how much I’d pay until the loan ended.

Note that these numbers below are for me and my specific loans – different borrowers will likely get different numbers.

Learning that I could save up to $84,000 over the term of the loan through refinancing was a major red flag for me. Besides paying a lower interest rate and shortening the term of the loan, an added benefit is that I would release my mother as a co-signer.

My mother encouraged me to choose the most realistic payment plan

For the past year, my mother has been helping me pay $230 a month for my student loans so that I can pay the monthly payments.

Even though the calculations clearly show that I would save $15,000 to $20,000 over the term of the loan by choosing a shorter repayment plan, my mother encouraged me to choose the 20 year refinance with Laurel Road because it was the closest I can currently afford.

She told me to pick the most manageable monthly payment amount so I wouldn’t be intimidated. She also encouraged me to add more to the minimum payment if I had extra money each month.

I blame myself for not having this conversation with her 12 years ago when I signed my student loans, but I no longer want to judge my past decisions with today’s knowledge. It’s unfair and mean to my younger self to think that way.

We talked about what it means to remove her as a co-signer

During our conversation, my mother kept saying, “So marry pay less money. Marry get a lower interest rate. I asked him, “Why do you keep saying we?” The whole point of refinancing is that your name would no longer be on the loans.”

My mom replied, “I’m just emotionally attached to this because I know the quality of your life will be so different when those student loans go away.” When I read her the total amount we would have paid had we met our current payment terms, my mother and I agreed that the student loan system was predatory.

“If I had the money back then,” she told me, “if all of us parents had the money, we’d just send you to school. It shouldn’t have cost so expensive. It shouldn’t be so expensive to provide for your children, and that they can do what they want in life.”

Fig Personal Loans Review 2022 Thu, 11 Aug 2022 10:58:07 +0000

Insider’s experts choose the best products and services to help you make informed decisions with your money (here’s how). In some cases, we receive a commission from our partners, however, our opinions are our own. Terms apply to offers listed on this page.

Fig personal loans

Regular APR

35.99% to 211% APR, depending on your condition

Regular APR

35.99% to 211% APR, depending on your condition


  • No credit check
  • Low minimum loan amount
  • No late fees
  • Quick funding

The inconvenients

  • Very high APRs
  • Only available in 8 states
  • Low maximum loan amount
  • Income requirement

More information

  • Loan amount between $50 and $500, up to $1,000 for returning customers with a good payment history
  • Customer service by email or SMS, not available on weekends
  • Loans available to residents of California, Florida, Illinois, Missouri, New Mexico, Ohio, Texas and Utah
  • Need at least three months of direct deposits into your bank account of $1,400 per month or more

Depending on the state you live in, the terms of your loan vary:

Borrowers in certain states seeking larger loans (up to $1,000) may see their limit increased after developing a strong payment history with Fig.

Advantages and disadvantages of personal loans Fig

Who is Fig most for?

Fig is a good option for borrowers who might not qualify for a personal loan elsewhere due to their credit history. Fig primarily bases its lending decisions on your transaction history and income, as shown on your bank account statement. You will need to show approximately three months of direct deposits of $1,400 per month into your account.

However, Fig’s interest rates are closer to payday loan rates than traditional personal loan rates – so be very careful before taking one out. A payday loan is a short-term, high-cost unsecured loan with principal as part of your next paycheque. They can end up costing more than you borrowed and can trap you in a cycle of debt.

Comparison of personal loans Fig

All three lenders market themselves as alternatives to payday loans and offer slightly lower rates than their high-interest counterparts (many payday loans have interest rates around 400%). However, you will still pay a much higher interest rate with these three lenders than you would with a traditional personal lender.

Possible only has one term: two months. Opploans terms range from nine months to 24 months, depending on which state you live in. Fig has terms ranging from one to six months depending on where you live.

None of the three companies check your credit score, so they might be a good option for borrowers who have been turned down by other companies due to a bad credit history.

Compare personal loan rates

Is Fig trustworthy?

Fig Loans is currently not rated by the Better Business Bureau, a non-profit organization focused on consumer protection and trust. The BBB rates companies by evaluating their response to customer complaints, honesty in advertising and openness about business practices. Fig is not rated because the BBB does not have sufficient information to give a rating.

Fig has not been involved in any recent controversy or scandal. Although Fig isn’t rated by the BBB, his clean story may put you at ease about borrowing from the lender. Reach out to friends and family members before doing so to understand their experiences with Fig.

Frequently Asked Questions

Is Fig a legit company?

Yes, Fig is a legit company that offers personal loans to borrowers without checking their credit scores.

How hard is it to get a Fig loan?

It depends on your financial situation. To get a loan, you will need to show about three months of direct deposits of $1,400 per month into your bank account. If you do not meet this condition, you will not be able to obtain a loan.

How fast do you get a Fig loan?

Almost all borrowers get their funding within three business days, and 94% of borrowers receive their funds the next day after submitting their application, according to the FAQ section of Fig.

Can you repay a Fig loan early?

Yes, you can prepay a Fig loan without penalty.

Private Student Loans vs. Parent PLUS Loans: Which is Best for You? Tue, 09 Aug 2022 18:53:11 +0000

Our goal at Credible Operations, Inc., NMLS Number 1681276, hereafter referred to as “Credible”, is to give you the tools and confidence you need to improve your finances. Although we promote the products of our partner lenders who pay us for our services, all opinions are our own.

Private Student Loans vs. Parent PLUS Loans: Both allow you to help pay for your child’s college education. (Shutterstock)

As a parent, you have two main options to help pay for your child’s college expenses: Parent PLUS Loans and Private Loans. student loans.

The federal government offers Parent PLUS Loans and they offer unique benefits. Private loans come from private lenders, and they may have lower interest rates if you have good credit.

In this article, we’ll go over the key differences between the two types of loans to help you decide which is right for you.

Credible allows you compare private student loan rates from multiple lenders, all in one place.

PLUS Parent Loans vs. Private Parent Loans

Parent PLUS Loans and Private Parent Loans give you the ability to borrow money for your child’s higher education expenses. But they differ significantly in how interest rates are set and how you will repay them.

Parent PLUS Loans

The US Department of Education offers Parent PLUS Loans, which are more formally known as Direct PLUS Loans. Graduate or professional students can take out these loans, as well as parents of undergraduate students.

You usually apply for these loans online through the website. In most cases, you will not qualify if you have a bad credit history, such as bankruptcy or foreclosure within the last five years or a history of late or missed payments.

Parent PLUS loans have a fixed interest rate set by the federal government, which is currently 7.54%. This means that the interest rate will not change as long as you have the loan.

You can borrow up to the full cost of attendance, as determined by your child’s school, minus any other financial aid the student is receiving. When you take out the loan, you also pay a commission of 4.228% of the loan amount. To pay the fees, the government will deduct a portion of the funds from each loan repayment.

Private loans to parents

Private parent student loans have no standard requirements. Instead, individual lenders set their own qualifications, interest rates, and repayment terms. But in general, lenders determine the interest rate based on your credit score. People with higher credit scores will qualify for lower rates, while people with bad credit will get higher rates, if they qualify.

You can find fixed or variable rate private parent loans. Variable rate loans usually start with a lower APR, but this rate can increase over time. Fixed rate loans do not change as long as you have the loan.

You usually have the option of paying all of the principal and interest while your child is in school, or you can make interest-only payments to prevent interest from accumulating. Most private parent loans must be repaid within 15 years, although loan terms may be shorter depending on the lender.

The best private parent loans have no loan fees. Just as with Parent PLUS loans, you are solely responsible for repaying a private parent loan.

Co-signed student loans

A third option to help your child pay for college is to co-sign their student loan. When you do this, your child is the primary borrower of the loan, but you agree to be responsible for repaying the loan if your child defaults.

You may consider co-signing a private student loan with your child. In many cases, students are unable to qualify for a loan on their own, as they may have little or no credit history. By co-signing, lenders also consider your credit. Any missed payments will hurt both your credit and that of your child. Many lenders offer a co-signer release option, which allows you to opt out of the loan once your child has made a certain number of consecutive and one-time payments.

A co-signer is generally not required for federal student loans.

If you need private student loans, visit Credible for compare private student loan rates from various lenders in minutes.

When does it make sense to take out a Parent PLUS loan?

A Parent PLUS loan may make more sense if you have fair credit. With these federal loans, the interest rate is the same regardless of your credit score. If you don’t have major credit issues, but your score just isn’t the best, you can get a lower rate on a Parent PLUS loan than on a private loan.

A Parent PLUS loan may also be the best choice if you want to take advantage of one of the unique repayment plans offered by the government:

  • Standard repayment plan — This is the default repayment plan, where you repay the loan in equal monthly installments for 10 years.
  • Extended repayment plan — This plan offers terms of up to 25 years, much longer than most private loans. This can give you a lower monthly payment than you would with a shorter loan.
  • Progressive repayment plan — This plan can help you if you expect to have a higher income in the future. Your payments start low, but increase over time. Ideally, your earnings should increase with your payment. You also have up to 10 years to pay off your loan under this plan.

If your payments are still too high, you may have the option of combining any Parent PLUS Loans you have into a Federal Direct Consolidation Loan, which gives you the option to enroll in an Income-Based Repayment Plan (IDR ). With these plans, your monthly payment is capped at a certain percentage of your Discretionary Income. This can be a great option if your discretionary income is relatively low.

When does it make sense to take out a private parent student loan?

If your child has exhausted all of their options for federal scholarships, grants, and loans, and you have excellent credit, a private parent student loan may be the smartest choice. You will likely be able to qualify for a lower rate than you would receive with a Parent PLUS loan, saving you money in interest.

Private loans can also be a good idea if you want to opt for a variable interest rate. This option gives you a lower initial rate, although it may increase over time. If you expect to pay off the loan quickly, you may be able to keep the lower interest rate and pay off the loan before it increases.

Likewise, private loans can also make sense if you want a shorter loan term. The standard Parent PLUS loan term is 10 years, while private lenders often offer shorter terms, say three, five or seven years. This can save you money in interest and get you out of debt faster.

With Credible, you can compare private student loan rates without affecting your credit.

Student loans and taxes | Kiplinger Tue, 09 Aug 2022 09:30:07 +0000

Student loans are among the most common sources of debt in the United States. It has been reported that approximately one in five Americans has student loan debt totaling over $1.7 trillion.

If you’re one of those people, you’re probably waiting to hear if, in these times of high tuition and inflation, part of your federal student loan will be canceled or if the federal government’s pause on student loan payments and interest will be extended. (Stay tuned: news on the student loan forgiveness front is expected soon from the Ministry of Education.

In the meantime, however, it may be worth brushing up on some of the ways having a federal student loan can affect your taxes.

Student loans are not considered income

A typical question surrounding student loan debt is whether a student loan is income for tax purposes. The happy answer is no, the IRS does not consider student loans as income.

Taxable income generally consists of wages and salaries. The IRS also considers unearned income (for example, gains or profits from the sale of assets or stocks) to be taxable. Thus, since student loans are debts intended to be repaid with interest, they do not constitute taxable income and do not have to be declared as such on your income tax return.

You can sometimes deduct interest on student loans

Another good news about student loans and taxes is that you may be able to deduct the interest you pay on your student loan on your tax return. This deduction can potentially save you some money at tax time.

Currently, due to pandemic relief, student loan payments and interest are suspended until the end of August. However, normally when you pay interest, the IRS allows you to deduct either the amount of interest you paid in a given tax year or $2,500, whichever is less. Also, you don’t have to itemize your deductions to claim student loan interest, because the IRS considers student loan interest an adjustment to your income.

To claim the student loan interest deduction, you must have paid interest on what the IRS calls a “qualified student loan.” It is basically a loan that has been taken out to pay for college fees for you, your spouse, or a dependent.

But whether you can claim a deduction for student loan interest depends on several other factors as well, including your filing status and income. This is partly because the student loan interest deduction is phased out based on the amount of your modified adjusted gross income.

For example, if you are married and want to claim the student loan interest deduction, you cannot file separately, and you and your spouse cannot be claimed as dependents on your tax returns. someone else. Also, your modified adjusted gross income must remain within a specified amount.

In 2022, if your modified adjusted gross income is less than $70,000 (if you are single) or $145,000 (if you are married and filing jointly), you can deduct the amount you paid or $2,500 , whichever is lower. However, single filers with adjusted adjusted gross income between $70,000 and $85,000 or married filers with income between $145,000 and $175,000 would see their student loan interest deduction reduced. This is because their modified adjusted earnings are higher.

More information about the student loan interest deduction can be found on the IRS website.

Student loan forgiveness may or may not be taxable

While it’s important to know whether student loans are income and whether you can deduct student loan interest on your taxes, the question of the day is whether federal student loans will soon be forgiven. What if part of your student loan is forgiven, it will be good news – if, of course, the cancellation of the student loan is not taxable to you.

Whether you are taxed on the amount of your federal student loan that is forgiven is complicated. This is partly because there are different types of student loan programs and repayment plans. And it’s unclear how a large-scale federal student loan forgiveness program would treat canceled or forgiven debt for tax purposes.

Generally, the IRS treats canceled and canceled debt as taxable income. There are a few exceptions to this that have applied to student loans recently, mainly due to legislation passed during the COVID-19 pandemic. For example, the American Rescue Plan Act (ARPA) suspended student loan forgiveness taxes from 2021 to 2025 for people whose student loans are classified under the income-contingent repayment program. ARPA has also provided similar relief under other reimbursement programs.

In addition, student borrowers whose loans have been canceled under the Public Service Loan Forgiveness Program are also currently exempt from tax on the canceled amounts. (Eligibility for this program was also expanded recently).

As a result, you’ll have to wait and see if a large federal student loan forgiveness materializes and, if so, whether the forgiven amounts will be taxable.

Employer repayment assistance may be taxable to you

In light of the pandemic in 2020, Congress passed the CARES Act, which contained provisions allowing employers to contribute money to their employees’ federal or private student loans.

Under CARES, employers could directly contribute $5,250 each year tax-free to employee student loans. This student loan repayment assistance from employers has been extended to 2025.

If your employer offers this benefit, it is currently a way to reduce your student loan debt that is tax-free for you. However, as this is a form of debt forgiveness, it is unclear whether after 2025, when the tax relief is due to expire, your employer student loan repayment assistance will be or not taxable to you.

Failure to repay your student loan can create tax problems

Data shows that a third of borrowers have already defaulted on their student loans, some more than once. But due to the recent pandemic relief (mentioned earlier), many borrowers who defaulted on their loans have been able to regain their good standing over the past couple of years. However, with the current runaway inflation and looming recession, it’s hard to say whether this so-called “fresh start” student loan relief will translate into fewer defaults.

Before default relief was introduced, the penalties associated with defaulting on student loans could be significant and included things like high negative points on your credit score and wage garnishment. The tax consequences of defaulting on your federal student loan were also severe. For example, the federal government could seize your tax refunds and even part of the refundable portions of certain tax credits.

Even though student loan payments are currently suspended, if you think you might not repay your federal student loan, contact the Department of Education or your loan servicer to inquire about any available loan rehabilitation programs.

Various tax forms are associated with student loans

When you have a student loan, the interest you pay on it is reported to you on Form 1098-E if you paid at least $600 in interest during the tax year. (But remember, you probably haven’t been paying interest lately due to the pause on interest and student loan payments).

Normally, Form 1098-E is mailed to you, but you can also find a copy of your Form 1098-E on your loan officer’s website or by contacting your loan officer. You use the information provided on the form to claim the student loan interest deduction.

Another tax form that may be related to your student loans is Form 1098-T, which reports the amount of qualified tuition and related education expenses you paid during the tax year. Form 1098-T can be useful for claiming education tax credits which could also help reduce your tax bill.

Can I use a 401(k) to pay off student loans? Mon, 08 Aug 2022 19:00:07 +0000

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If you’re struggling to repay your student loans, withdrawing funds from your 401(k) account may be an option. But it could cost you in the long run, both in penalties and in investment losses.

Here’s what you need to know before using a 401(k) to pay off student loans:

Can I withdraw from my 401(k) to pay off student loans?

You can withdraw money from your 401(k) and apply it to your student loan balance, but expect some limitations.

First, you can only withdraw money from the vested portion of your 401(k) – the portion you actually own. Your portion earned will depend on your employer’s plan and the length of your career with the company. Check with your human resources department or plan administration for advice.

You should also consider the inconveniences of withdrawing funds from your 401(k). If you decide to withdraw money, you will have to pay federal income taxes on the amount you withdraw. So if you’re in the 24% tax bracket and you withdraw $50,000, you’ll pay $12,000 in taxes.

Also, if you are under age 59.5, you will incur a 10% penalty for withdrawing your 401(k) early. The only exception to this rule is called the 55 year rule. This allows you to avoid the 10% penalty if you left your job and turned 55 or turned 55 in the current calendar year.

Check: How to repay $100,000 in student loans

What are the risks of withdrawing from a 401(k)?

The penalties and taxes you’ll have to pay are just the short-term inconvenience of withdrawing money from your 401(k) too soon. In the long term, you also need to consider other risks, including:

  • You will have less money for retirement. Not only are you withdrawing funds from your account, but you’re also reducing the amount that can be invested (and growing, thanks to compound interest). That could mean a lot less savings when you retire.
  • The rate of return is probably not equal. The typical 401(k) saw a nearly 15% gain in 2021, according to Mid Atlantic Capital Group. Paying off your student loans is unlikely to save you an amount equal to those earnings. Federal direct loans, for example, have rates of just 4.99% to 7.54% in July 2022. Private student loan rates, while higher, are generally well below that 15% mark.

Before using your 401(k) to pay off student loans, be sure to use a good student loan repayment calculator to understand the potential impact.

Estimate how long it will take to pay off your student loan using the calculator below. You can also use the slider to see how increasing your payments can change the payment date.

Enter loan information

Full payment

Total interest

Monthly payment

If you increase your payments by

monthly on your

ready to
%you will pay

per month and repay your loan in
Jan 2021.

Does refinancing make sense to you?
Compare offers from top refinance lenders to determine your real savings.

View custom pricing

Checking rates will not affect your credit score.

Additional options for repaying student loans

Using your 401(k) isn’t your only option if you’re having trouble repaying your student loans.

If you are facing financial difficulties, consider these other options. Note: Most of these options only apply to federal student loans.

  • Seek adjournment or abstention. Deferment and forbearance allow you to reduce or temporarily delay your payments. The difference between the two is in how interest accrues. With a deferral plan, you won’t be charged any additional interest while your payments are paused. With forbearance plans, your loan continues to earn interest.
  • Sign up for an income-driven repayment plan. Income-contingent repayment (IDR) plans adjust your monthly payment based on your income level. Sometimes your payment may even be zero.
  • Request loan forgiveness. In some cases, student loan forgiveness programs can eliminate the remaining balance of your student loan. This may be possible if you are a teacher or some other type of public employee or if your school closed while you were enrolled.
  • Rehabilitate your loans. This is an option if your student loans are in default. You will usually have to pay 15% of your discretionary income to rehabilitate your loan.
  • Consolidate your federal loans. Consolidating your federal loans into a direct consolidation loan involves combining several loans into one.
  • Refinance your loans. This can lower your interest charges and make payments easier.

You should also contact your loan manager. They can guide you through options that might help you in your specific situation.

Learn more: Reimbursement based on income: which plan to choose?

Can I use an IRA to pay off student loans?

If you have a Roth IRA, this may be a better option for paying off your student loans than a 401(k). With these accounts, you won’t pay a penalty as long as you only withdraw an amount equal to or less than your total contributions.

Keep in mind: If you withdraw income from your account, you will owe a penalty – 10%, the same as 401(k)s.

Roth IRA withdrawals are also not taxable. Since you’re funding them with after-tax money — money you’ve already paid taxes on — you can withdraw them tax-free at any time.

Despite these benefits, drawing from your Roth IRA means less money — and less growth — when you retire. Also, not everyone is eligible for a Roth IRA. For example, if you are single and earn $144,000 per year or more, you would not be eligible to contribute to one. For married couples filing jointly, the threshold is $214,000.

Check: 7 Ways to Lower Your Student Loan Interest Rate Now

Other ways to pay off student loans sooner

If you’re hoping to pay off your loans faster, refinancing them — replacing them with a new loan with a lower interest rate or better repayment terms — can help.

If you choose this option, shop around with your lender, as rates and terms can vary widely. You should also use a student loan refinance calculator to get an idea of ​​what refinancing might mean for your monthly payment and repayment schedule. (You might be surprised at the difference it can make.)

Step 1. Enter your loan balance

Step 2. Enter Current Loan Information

Step 3. Enter your new loan information to start calculating your savings

Lifetime savings
Lifetime Cost Increase

New monthly payment

Monthly savings
Increase in monthly cost

If you are refinancing your student loan at
interest rate, you
can save
will pay extra

monthly and repay your loan in
. The total cost of the new loan will be

Does refinancing make sense to you?
Compare offers from top refinance lenders to determine your real savings.

View custom pricing
Checking rates won’t affect your credit score

Finally, be sure to send an extra payment or two whenever possible, as this reduces your principal balance and the amount of interest your loan accrues. A good option is to allocate your tax refund to your loans. The use of holiday bonuses, inheritances and other bounties is also smart.

Learn more: 11 Strategies to Pay Off Student Loans Faster

About the Author

Aly J. Yale

Aly J. Yale is a mortgage and real estate authority. His work has been published in Forbes, Fox Business, The Motley Fool, Bankrate, The Balance, etc.

Read more

Your Money: Easing the Student Loan Burden Sun, 07 Aug 2022 19:15:00 +0000

In today’s environment, students have a variety of college options, from community colleges, to three- or four-year courses at colleges and universities, to technical, vocational, management, professional, arts, science, and certificate programs. Borrowing money to further your education usually pays off. A college education is a long-term investment. Let’s discuss the nuances of managing student loans.

Types of loans and repayment term
Higher education loans are available for full-time and part-time courses and even for working professionals. Basically, there are two types of student loans available. One is a collateral education loan in which the borrower pledges collateral to avail a loan. Collateral can be a house, non-agricultural land, apartment, fixed deposits, insurance policies, rated corporate bonds, government securities/bonds, etc. The second is the unsecured loan, under which the borrower is not required to give collateral. The non-collateral education loan is only offered for loan notes from Rs 4 lakh to Rs 7.5 lakh. But, the student and the financial co-applicant (usually the parents) must meet certain criteria such as income, CIBIL score, etc. Another important criterion for benefiting from these loans is the academic profile of the applicant.

Read also | Use a credit card? Not following these 5 disciplines will cost you dearly

As for repayment, most banks offer student loans with repayment up to 15 years both in India and outside India for higher education. In any case, if the student does not repay the amount of the loan, the financial co-applicant is held responsible.

Repay interest during the moratorium period
The repayment of the study loan does not start immediately, it starts after the moratorium period, which is 6 to 12 months from the end of the course. Although repayment does not begin until the end of the moratorium, interest on the loan begins to accrue from the moment the first installment of the loan is disbursed.

Read also | The key questions to ask yourself before applying for a mortgage

So, one of the best ways to manage is to start making payments for that interest while the student is still studying. Either the financial co-applicant, i.e. the parents, or the student, if working part-time, can start paying the interest.

Opt for a shorter repayment term
Although banks may offer loan repayment for up to 15 years, it is advisable to opt for a short-term loan. A shorter term may make you look like you’re paying higher EMIs, but it’ll save you a lot on the interest paid on your loan. However, the student should consider their net salary, living expenses, etc. while deciding on the duration and choose the shortest possible duration in which the student can get by.

Avoid Missing NDEs
Missing out on student loan repayments could hurt your financial reputation. This could possibly negatively affect your credit score and you could end up paying penalties, late fees, etc. It’s a good idea to set up direct debits from your salary account. This will ensure that there is no breach of IMEs and associated penalties. Regular repayments will also help maintain a healthy credit record. A good credit report helps in many ways when applying for loans in the future.

Vidya Lakshmi Portal
To assist all interested students to pursue higher education of their choice without any fund constraint, the Government of India has introduced a fully computer-based educational loan disbursement scheme through the Pradhan Mantri Vidya Lakshmi Karyakram. The Vidya Lakshmi portal ( IT mechanism provides students with a one-stop electronic platform for student loans.

The pandemic has affected everyone in the country and with the recent relaxations related to Covid restrictions, students can now travel abroad to pursue the education of their choice, using the loan facility.

The author is a professor of finance and accounting at IIM Tiruchirappalli. With contributions from A. Paul Williams, IIM Tiruchirappalli Research Staff Member

Are federal student loans even “loans?” » From forbearance to forgiveness to taxpayers’ expenses. Fairer: Authorize bankruptcy Sun, 07 Aug 2022 11:48:45 +0000

The educational and industrial complex laughs all the way to the bank.

By Wolf Richter for WOLF STREET.

One person’s loan is another person’s asset. If the loan is cancelled, the property is destroyed. It’s like that.

No one is making payments on government-backed student loans anymore, after two years of forever indulgences, countless campaign promises of forgiveness, various targeted forgiveness programs already in place, and now the big problem, the program of general forgiveness being abolished.

Total student loans outstanding, assuming they are still “loans,” remained at $1.59 trillion in the second quarter from the first quarter, according to the Household Debt and Credit Report from the Bank. New York Fed. They have been relatively stable since the first quarter of 2020, as new loans have been added, while hardly anyone has made payments, and the many rebate programs reduce the count on the other side.

Federal student loans.

Federal student loans account for about $1.3 trillion of that $1.59 trillion total in student loans, according to a separate New York Fed report. The rest is made up of Federal Family Education Loans (FFEL) held by commercial banks and private loans.

These are the $1.3 trillion in federal loans that were all moved into permanent forbearance in the spring of 2020, and are now due for forgiveness.

The median federal student loan balance is $18,773, which means half of federal student loan balances are below $18,773 and half are above.

The outliers everyone is talking about, the loan balances of $150,000 and $200,000, were accrued by a small percentage of borrowers going to law school, medical school, etc., whose most now have well-paying careers and do not need loans. sorry at all.

Delinquencies “resolved” forever.

The amount of student loans past due for 30 days or more has fallen from the official 9.4% of total pre-pandemic balances to just 1%.

For federal student loans, the delinquency rate is 0%. All were automatically enrolled in forbearance programs in the spring of 2020, which have been renewed many times and are still in effect. When a loan is forborne, it is reclassified as ‘open’, not ‘overdue’, regardless of the payment status.

FEEL and private student loans, which were not enrolled in forbearance programs, accounted for all of the defaulted loans.

Student loan forgiveness and cancellation.

In addition to the list of existing student loan forgiveness programs – public service loan forgiveness, teacher loan forgiveness, closed school discharge, and others – there is now forgiveness when students feel the complex educational-industrial fucked them.

So last Thursday, a federal judge granted preliminary approval for a settlement that would forgive $6 billion in student loans from more than 200,000 students who said they were defrauded at 153 mostly for-profit colleges.

Few of these schools have been held accountable. So it’s the taxpayers who will pay the $6 billion, not the educational and industrial complex that has gotten the $6 billion over the years, laughing all the way to the bank.

And the big problem, a general forgiveness program is currently being developed by the administration. The proposal started with $10,000 discount per borrower. But this taxpayer greed leaves many voters deeply frustrated, and the anger boils over, putting politicians under pressure to buy more votes, or buy back the same votes, by increasing the amount of the rebate to perhaps $50,000. with income caps.

Then the automatic loan forgiveness… Just kidding, sort of.

The average transaction price for new vehicles is nearly $46,000 and the average advertised price for used vehicles is $28,000.

By comparison, the median government-backed student loan is $18,773. Just another consumer loan. It’s not the end of the world to have to pay $200 a month for 10 years – and salary increases and inflation over 10 years will reduce that burden.

And if people can’t even make a $200 payment, they can’t make a $400 or $800 payment on an auto loan either. So when are we going to buy votes with promises of car loan forgiveness?

It is unfair that people who buy a car because they have to drive to work have to pay back those loans. We need a general car loan discount. The government could simply buy back all outstanding auto loans and then forgive them, up to $50,000 each, perhaps with certain income caps, like $250,000 per individual and $500,000 per married couple filing jointly.

Think of it this way: it would be a huge boost to the economy because instead of making car payments, these people could then waste their money on other things.

It ain’t fair, but fairness ain’t got nothing to do with it.

The government (taxpayers) financed these student loans by borrowing from the Treasury bill market. He then handed over this borrowed money to the educational and industrial complex via the students, expecting to be repaid most of the money, plus interest, by the borrowers after they started working. Their payments would have helped the government pay off debt incurred to fund student loans. But it’s over. Going forward, the taxpayer repays the borrower’s loan.

In other words, the server who would have liked to go to college but couldn’t afford it now has to pay off the student loans of the software engineers who went to college. It’s not fair, but fairness has nothing to do with it. It’s about buying votes. And they hope the server can’t figure that out.

Let the bankruptcy courts decide what is unloaded and how much borrowers have to pay each month.

Borrowers cannot currently obtain discharge of their student loans in the bankruptcy court system. But they found something much more attractive to get rid of their debts: politicians willing to buy votes with other people’s money, namely with taxpayers’ money.

But it doesn’t have to be that way. These same politicians could change the law to allow the release of student loans in bankruptcy courts.

So it would be a judge deciding how much that Stanford-graded coder can pay each month for the next 10 years, and how much that OSU-graded teacher can pay each month. And the judge can then acquit the rest that cannot be paid. Personal bankruptcy has operated this way since the Bankruptcy Reform Act of 2005. In personal bankruptcy filings, people cannot simply walk away from all of their debts.

Student loan borrowers would then consider whether to resist and make the payments; or declare bankruptcy, get the spot on the credit report, get a portion of student loans canceled, if any, and make payments under a court order for many years.

This system is already in place for personal bankruptcies. It’s not perfect, but it works. And that would relieve borrowers who really can’t pay. And that would be a lot fairer to everyone, including the waiter who can’t afford to go to college and doesn’t really want to pay off the student loans other people have taken out to get their degrees .

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New blockbuster plan to forgive student loans Fri, 05 Aug 2022 12:30:00 +0000

Republicans have proposed a blockbuster new student loan forgiveness scheme.

Here’s what you need to know — and what it means for your student loans.

Student loans

President Joe Biden is days away from announcing his decision on a broad student loan forgiveness. Before that happened, however, Republicans in Congress introduced major legislation to change the future of student loans and student loan forgiveness. As first reported by Business Insider, Reps. Virginia Foxx (R-NC), Elise Stefanik (R-NY), and Jim Banks (R-IN) introduced the Education Aid Reforms Act responsible through loans (REAL) to offer an alternative proposal to Biden’s student loan cancellation. Here’s what’s in their student loan forgiveness plan.

Student Loan Forgiveness: The Details

Specifically, this student loan forgiveness bill would provide, among other things, the following:

  • existing student borrowers enrolled in an income-driven repayment plan would only have to pay their original student loan balance plus 10 years of student loan interest;
  • ending the student loan payment pause;
  • ending the Civil Service Loan Forgiveness Program for new student borrowers;
  • no large-scale student loan forgiveness of any amount;
  • create a new single income-based reimbursement plan similar to Income-Based Reimbursement (IBR) to replace existing income-based reimbursement plans;
  • eliminate student loan forgiveness through income-based repayment plans;
  • ending Grad PLUS student loans, which would limit the amount that graduate student borrowers could borrow;
  • final capitalization of student loan interest, which is the addition of accrued student loan interest to your student loan balance;
  • helping defaulting student borrowers rehabilitate their student loans for the second time; and
  • prevent the U.S. Department of Education from using the negotiated rulemaking process to issue economically significant regulations (such as over $100 million), including large-scale student loan forgiveness .

Biden could announce student loan forgiveness any day

Biden is days away from one of the biggest decisions of his presidency: whether to cancel student loans for more than 40 million student borrowers. According to leaked student loan forgiveness documents from the US Department of Education, Biden is considering $10,000 in student loan forgiveness for student borrowers. Here’s who might qualify for student loan forgiveness. Although Biden has not made a final decision, the potential announcement of Biden’s signing into law of student loan forgiveness could come days before the student loan payment pause expires on August 31, 2022. Since that he became president, Biden set aside more than $25 billion. student loans. This includes $8 billion in student loan forgiveness for nearly 150,000 public servants. Biden is working to simplify student loans. He recently delayed a new student loan plan, which could rival the Republican proposal for income-contingent student loan repayment. Biden also proposed making the limited student loan forgiveness waiver permanent, which would benefit student borrowers requesting civil service loan forgiveness. In contrast, Republicans have proposed eliminating the cancellation of public service loans. Republicans want to limit Biden’s ability to use the negotiated rulesmaking process at the Department of Education to implement significant policy changes. However, Biden wants to make major changes to student loans, including a proposed reduction in student loan interest and major changes to student loan managers.

Student loans: next steps

Although this bill is unlikely to pass Congress, the proposal raises important questions about the future of student loans. Biden and Democrats in Congress want to expand access to higher education, provide more student loan forgiveness and help student borrowers find easier ways to pay off their student loans. In contrast, Republicans want to limit federal spending, prevent Biden from canceling more student loans, end costly student loan forgiveness programs and limit the president’s ability to make significant changes without the authority of Congress. If Republicans take control of Congress and the presidency, this proposal could offer a glimpse into the future of student loans. That said, student loan forgiveness is not the only issue that concerns student borrowers. The student loan payment will end in a few days. This means student borrowers should expect to resume student loan repayments as of September 1, 2022. Are you ready? Here are some of the most popular ways to pay off student loans faster and save money:

Student Loans: Related Reading

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What Your New Student Loan Manager Means for Student Loan Cancellation

Senators propose major changes to student loan forgiveness

Department of Education cancels $6 billion in student loans