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Ways to get the money you need

January 30th, 2015

Consumers seek loans for different reasons. Their first need is usually for a student loan in college. Others can include personal, home purchase, home refinance, home equity and debt consolidation loans.

Loans have three components – interest rate, security and term. The interest rate is the lender’s charge for your use of the money and is usually a small percentage of the amount loaned. Fixed-rate loans lock in a certain percentage rate for the life of the loan. Variable or adjustable rates can change over time and are usually based on the prime interest rate.

Loans are either secured or unsecured. Secured loans require assets, or collateral, to guarantee the loan. With a secured loan, the lender is guaranteed repayment because it has the right to seize the collateral. Unsecured loans do not require collateral, have higher rates, and may require a co-signer to vouch for repayment.

A loan’s term is the length of time the borrower has to repay it. Most personal loans have terms from one to five years, while the majority of student loans have 10-year repayment periods. The longer the term, the higher the interest rate, although loans can always be paid off before the term is up.

As you consider lending institutions, ask each for a selection of rates and research the credit scores the bank or credit union will require for the best rates. Do not submit a formal application until you’ve selected the lender, because each time your credit score is checked as part of a loan application, the inquiry can result in a lower FICO score. The lower your score, the higher the rate you’ll be offered.

Of course, you should know your credit score in advance and correct any errors that may affect it. You can order a free credit report at annualcreditreport.com. If you find errors, correct them and re-check your score; a higher score can get you the loan you need.

Steps for Success

o Personal loans can be for almost any purpose. These are best if you want to borrow only a small amount and can repay it in a few years. Interest rates on personal loans can be high, usually between 10 and 12 percent

o When you use a credit card, you are taking out a loan. The amount of credit extended to you depends on your creditworthiness, which is determined largely by your credit score, and lines of credit can range between $300 and $10,000.

o When considering a loan, banks and credit unions should be your first choices. If you are a reliable, long-term customer, your bank may consider a signature loan, meaning that you need no collateral.

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Under pressure residents seek help over rising debts

January 30th, 2015

CALLS from people in Chester to a debt-help charity have soared by 25 per cent, new figures show.

Michael Irene: So-ludo and his double six gambit

January 30th, 2015

On the same token, the next CBN governor after Soludo, Sanusi Lamido, found wide gaps in the banking consolidation. Lamido mentioned eight weaknesses in the post-consolidation banking era which were: macro-economic instability caused by large and sudden capital inflows; major failures in corporate governance at banks; lack of investor and consumer sophistication; inadequate disclosure and transparency about financial position of banks; critical gaps in regulatory framework and regulations; uneven supervision and enforcement; unstructured governance and management processes at the CBN and weaknesses in the business environment. Two important weaknesses–major failure in corporate governance at banks and unstructured management processes–are worth discussing since we are talking about leadership and management.

After the consolidation, bank CEOs siphoned investors’ funds into their pockets, send their scions to international schools and build choice houses in choice areas with stolen funds under the careful watch of Soludo. Since he has scored the president an “F” what would his score be during this era? Again, how did Mr. Sebastin Adigwe (Afribank), Mr. Okey Nwosu(Finbank) Dr. Erastus Akingbola (Intercontinental Bank), Dr. Cecelia Ibru(Oceanic Bank) and Dr. Bath Ebong (Union Bank), get away with the CBN’s post-consolidation loans without checks? These are just peripheral questions that need answers.

One would have thought Soludo would make mention of this in his article. El-Rufai summarised his consolidation move thusly: “[…]the deformed baby called consolidation was a revolution, but today many of the poster-children of the policy like Intercontinental, Oceanic, Finbank and Spring Bank are history, the banking-stockbroking rock stars are facing prosecution, and with N4 trillion spent to prevent the collapse of his revolution.” Yet he makes no mention of this in his essay as if four trillion naira wont create a dent in Nigeria’s economy. That is pure fraud, to borrow again from his “internet” definition. It is ludicrous and at the same time, pretentious, therefore, when he says “Jonathan’s record on the economy is a clear ‘F’ grade.”

Again, he goes ahead to praise his former boss’ achievements but fails to point his weaknesses. He painted Obasanjo as a clean and perfect president without flaws. How about talking about the more than two thousand lives lost in Odi, Bayelsa State under the very eyes of OBJ? How about talking about his involvement in the Halliburton scandal? How about pointing to his clamour for a third term in presidency? How about talking about the sentimental and near-whimsical vagary of Obasanjo’s role as a Nigerian political godfather?

Yes, it is true that both APC and PDP do not have “any credible agenda to deal with the issues, especially within the context of the evolving global economy and Nigeria’s broken public finance.” This might be that puppeteers, like his former boss, control certain aspects of election campaigns, the candidates and other strings that hold the country. After all, his former boss is one of the strongest godfathers in Nigerian politics.

Funnily, he adds that “Sadly the government’s economic team is very weak, dominated by self-interested and self-conflicted group of traders and businessmen, and so-called economic team meetings have been nothing but showbiz time.” Showbiz is when you borrow a foreign system of banking consolidation and impose it on the Nigerian banking system without good corporate governance. It is when Soludo, from his comfortable balcony, roll out a dice of criticism without actually looking at how he contributed to the failure of the economy. Showbiz is when you think you have the knowledge but don’t have the second chance to right your pass wrongs. One might also add, that there is a sound of “self-interest” in his article.

Soludo’s piece, however, is worth a read by every Nigerian; it completes and complements some part of political discourse, but displaces and discounts the ethos of political criticism. The latter is precisely because he is so summary in one context, yet so provocatively rich in the other, precisely because of that imbalance, one can question the motif behind his brilliant piece.

Nigeria is our country. Nigerians have, in one way or the other, contributed to her downfall. The onus is on Nigerians to start teaching their leaders the real meaning of accountability and integrity. Let the security man on Marina Street stop asking for bribes in car parks, and then he can talk of corrupt leaders. Let the businessmen cutting corners and then he can talk about bad leaders. We have, in our own little corner, a major role to play in sensitizing ourselves about the real meaning of leadership. In short, let us look inward to critically understand the external. Nigerians should be seeing both together.

When I Retire Will My Social Security Be Reduced Because of Student Loans?

January 29th, 2015

Huffington Post Reader Question

Dear Steve,

I took out Parent Plus loans for both of my children while they were in school. Each of them also have unsubsidized student loans which they are paying off. Once both children were out of college, I consolidated the Parent Plus loans into one and have been paying them regularly for the past 10 years.

I am 63 and was wondering if the consolidation loans are not paid off by the time I reach my full Social Security age (66), will it affect the amount of Social Security I receive?

Tracey

Do you have a credit or debt related question youd like to ask me? Just click here. Im happy to help for free.

Dear Tracey,

It would seem you may have elected a reduced or graduated repayment plan on the consolidated student loans. Under a standard repayment plan theyd be paid off after 10 years.

The only way the consolidated federal student loan would reduce the amount youd receive from Social Security would be if you defaulted on the loan and it eventually went into an administrative wage garnishment. In that case the US Government may also attempt to intercept any tax refund you might be owed each year.

But you appear to be a long way from those negative outcomes. In fact, when you do retire and your income is reduced, you might want to consider enrolling in an Income Contingent Repayment Plan (ICR) where your student loan payment will be potentially reduced and more affordable based on your retirement income. The ICR is the program available for consolidated PLUS loans. For more on that, see this.

The downside to this approach is it will extend the loan out further but the advantage is the payment will be reduced to fit in your future income.

So the bottom line is your Social Security will not be reduced because of the outstanding student loan payment.

Before I go I wanted to leave you with three easy action items you jump on right now to address your situation. Just click here.



Get Out of Debt Guy – Twitter, G+, Facebook

If you have a credit or debt question youd like to ask, just click here and ask away.

If youd like to stay posted on all the latest get out of debt news and scam alerts, subscribe to my free newsletter.

Source

When I Retire Will My Social Security Be Reduced Because of Student Loans?

January 29th, 2015

Huffington Post Reader Question

Dear Steve,

I took out Parent Plus loans for both of my children while they were in school. Each of them also have unsubsidized student loans which they are paying off. Once both children were out of college, I consolidated the Parent Plus loans into one and have been paying them regularly for the past 10 years.

I am 63 and was wondering if the consolidation loans are not paid off by the time I reach my full Social Security age (66), will it affect the amount of Social Security I receive?

Tracey

Do you have a credit or debt related question youd like to ask me? Just click here. Im happy to help for free.

Dear Tracey,

It would seem you may have elected a reduced or graduated repayment plan on the consolidated student loans. Under a standard repayment plan theyd be paid off after 10 years.

The only way the consolidated federal student loan would reduce the amount youd receive from Social Security would be if you defaulted on the loan and it eventually went into an administrative wage garnishment. In that case the US Government may also attempt to intercept any tax refund you might be owed each year.

But you appear to be a long way from those negative outcomes. In fact, when you do retire and your income is reduced, you might want to consider enrolling in an Income Contingent Repayment Plan (ICR) where your student loan payment will be potentially reduced and more affordable based on your retirement income. The ICR is the program available for consolidated PLUS loans. For more on that, see this.

The downside to this approach is it will extend the loan out further but the advantage is the payment will be reduced to fit in your future income.

So the bottom line is your Social Security will not be reduced because of the outstanding student loan payment.

Before I go I wanted to leave you with three easy action items you jump on right now to address your situation. Just click here.



Get Out of Debt Guy – Twitter, G+, Facebook

If you have a credit or debt question youd like to ask, just click here and ask away.

If youd like to stay posted on all the latest get out of debt news and scam alerts, subscribe to my free newsletter.

Source

Financial-services firm earns number one ranking

January 28th, 2015

The financial-services firm Edward Jones ranked number one in a recent evaluation of brokerage client statements by DALBAR, said Phillip McGrath.

McGrath is an Edward Jones financial advisor in Anna.

The number one ranking was part of DALBAR’s 17th annual 2014 Trends and Best Practices in Investor Statements report. 

DALBAR develops standards for, and provides research, ratings and rankings of intangible factors to, the financial-services industry.

DALBAR’s report evaluates brokerage statements to address both the needs of the investor and the financial advisor. 

The ranking is given to firms most effective in creating statements that will guide investors in making critical decisions regarding their financial well-being, according to a statement issued by DALBAR.

The Edward Jones investor statement includes a section focused on the investor’s goals and personal financial situation.

“Called ‘Your Financial Foundation,’ this feature covers clients’ goals, goal details, risk tolerance and the date of the previous portfolio and goal reviews,” according to DALBAR. 

Is There a Better Way to Deal With Student-Loan Debt?

January 26th, 2015


Chip East/Reuters

The process of taking out student loans can be nerve-racking, but the reality of paying those loans back can be downright sobering–especially when a looming, large number suddenly becomes very real during the repayment period.

Between 2003 and 2013, the share of 25-year-olds with government and/or private-student-loans climbed from 25 percent to 45 percent. In the 2011-2012 academic year, 10 percent of college graduates had more than $50,000 in student loan debt–in 1999-2000 that number was only about 1 percent. Growing debt is largely the result of climbing tuition prices, which lead many students to lean more heavily on borrowing than they once did.

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But even though the cost of tuition is rising, borrowing more money to bridge the gap can become problematic. “Increases in student borrowing and default rates raise concerns that some students may be borrowing too much,” according to a new paper from NBER, which takes a look at student-loan debt and instances of student-loan-debt default in an effort to uncover the best approach to repayment for both borrower and lender.

Along with the growing cost of tuition is a growing group of former students who have difficulty making their payments on time, or at all. According to the study, for people under the age of 30, the share who were late on their payments climbed to 35 percent in 2012, up from 20 percent in 2004.

Default is bad news for both borrowers and lenders. It can lead to damaged credit, garnished wages (for defaulting on federal loans), not to mention a mountain of stress. And while large lenders dont suffer the same strain as the individual in default, its still bad for business since lenders lose an income stream and may become involved in lengthy legal actions if they attempt to collect the debt.

The reasons for lack of payment are varied: Sometimes its economic hardship, sometimes its lack of knowledge about how loan repayment works. Sometimes loans are simply forgotten about in the haze of post-school transitions. Whatever the cause, delinquent student loans arent a rarity. For those who entered repayment in 2005, 57 percent have had periods where they did not make expected payments, according to the study.

The paper attempts to isolate borrower characteristics that help determine who is more likely to default on their student loans, though it doesnt go into detailed explanation of why some are more likely than others. The most significant discrepancies occurred among racial groups. Ten years post grad, black borrowers were more likely to be in default, owed 22 percent more on their loans, and had defaulted on 11 percent more loans than their white counterparts. The repayment habits of Hispanic borrowers more closely resembled white Americans, while the habits of Asian Americans more closely resembled blacks, with the exception that most defaults in the Asian group occurred after a larger portion of debt had been repaid.

There were also some differences when it came to majors. Ten years after graduating, engineering majors owed less than those who majored in social sciences or humanities. Humanities majors were the biggest culprits when it came to nonpayment and business majors were least likely to default on their debt.

The economy, to be certain, is a part of the issue: An unstable job market makes it more difficult to make payments consistently as grads struggle to find employment, are underemployed, or face layoffs. The larger amount of debt that modern grads carry, which can make repayment challenging even for someone who is working full time (but still earning meager wages), also plays a part. According to the repayment estimator provided by the Department of Education, a student graduating from a four-year, private, for-profit university can expect to owe an average of $34,722 and have a monthly bill of $350 in standard repayment.

Post-school income alone is not the tell-tale factor as to who wont make their loan payments. In the study, both low-income and high-income borrowers defaulted on their debt. What did play a role, particularly for low-income borrowers, was financial support. “Borrower income has small and statistically insignificant effects on the likelihood of repayment problems for those with modest savings and access to family assistance,” the study found. Among low-income borrowers without savings or financial help from their families, 59 percent faced difficulty repaying compared with less than 5 percent of low-income borrowers who had both savings and family assistance.

That might help explain the high rates of default among black Americans, a group with low wealth levels that could leave them unable to save and financially assist family members, according to the study.

The myriad of factors surrounding default may help make the case that shifting to a different standard for repayment could create a better system for both borrowers and lenders. The study found that “the optimal student loan arrangement must exhibit a flexible income-based repayment schedule to provide the maximal amount of insurance while ensuring proper incentives for borrowers to exert effort and honestly report their income.” Some flexible plans already exist. For instance the Pay As You Earn plan for federal loans allows borrowers to tie repayment to income, and to halt payments when their income drops below 150 percent of the poverty line, around $17,500 for a single individual based on 2014 figures, with the possibility of loan forgiveness after 20 years. But this type of flexible-repayment plan isn’t always widely available, particularly when it comes to private lenders who almost universally require more stringent, standard payments, and often have fewer options for troubled borrowers.

But the best payment structure is about more than just singular income thresholds, as the study notes. “Students of different abilities, making different investments, and borrowing different amounts should generally face different repayment schedules,” the study finds. That may mean that creating more nuanced grant and aid programs, as well as tailored lending and repayment programs that fit individual students, their earnings, and their financial resources–rather utilizing one-size-fits-all lending–could lead to better outcomes for everyone.

Cuomo proposes plan to forgive student debt, stimulate economy

January 26th, 2015

A new plan proposed by Governor Andrew Cuomo could release Syracuse University graduates from their first two years of loan payments.

Last week, Cuomo announced his new Get on Your Feet Loan Forgiveness Program as part of his 2015 Opportunity Agenda. The plan has the potential to affect 60 to 65 percent of SU graduates, said Mike Cahill, director of Syracuse University Career Services.

To be eligible for the program, students will have to be a graduate of a New York state university or college, must remain living in the state after graduation and must be enrolled in the federal Pay As You Earn program, according to a Jan. 21 syracuse.com article.

Additionally, in order to take advantage of the program, graduates could not have an income of more than $50,000 a year, and the program will begin with graduates in the class of 2015.

The federal Pay As You Earn program is open to students with Stafford, Direct PLUS Loans and consolidation loans, according to Debt.org, a website that helps people understand their debt. If any of the loans were made to parents, they are ineligible.

As debt can often be a major hurdle for students, the opportunity to be free from student loan repayments for any length of time could help them stay afloat while adjusting to life after college, Cahill said.

The PAYE program limits monthly loan repayments to 10 percent of a graduate’s disposable income, forgiving the remainder of the loan after 20 years. If employed in a public service position, forgiveness occurs after 10 years, according to a June 11 US News and World Report article. The amount forgiven on the loan is taxed as income, unless you are in public service.

Cuomo’s initiative would pay for a graduate’s PAYE bills for the first two years post-graduation.

Despite these strict parameters, Donald Dutkowsky, an economics professor in the Maxwell School of Citizenship and Public Affairs, said Cuomo is taking “one good step” toward revitalizing New York state and keeping graduates in the area.

Dutkowsky said by tacking on these incentives, the government is trying to make the benefits of staying in New York outweigh the costs, such as high taxes and slower job growth, which are especially problematic in the upstate area. With this program, Dutkowsky said, Cuomo is trying “to encourage students to see New York state as a place to live.”

“This can’t be the only step,” he added, saying that the state government would also have to look into other ways to improve the state’s economy. But, he added, keeping college graduates in the state, helping them settle down and attracting businesses looking for skilled workers is a solid start.

Nayeli Jimenez, a sophomore biology major, said the new program could definitely sway her decision to stay in the state. If she cannot find employment in her field after graduation, Jimenez said during those two years she can look for another job, perhaps one that would be more aligned with her goals.

For some, however, other factors weigh more heavily in their decisions about their future. Hunter Longland, a sophomore economics major, said that his dreams of going out West trump Cuomo’s proposal. He also said that, “it depends a lot on the field you’re going into.”

While engineers will probably make more than $50,000, Longland said, this type of program could greatly assist educators and those in fields with lower starting salaries.

Cahill, the director of Career Services at SU, said the average starting salary of a college graduate is $43,000. He said that the program is definitely “something students should be aware of and consider.”

However, he said that he wouldn’t expect the number of students who stay in New York to increase significantly, which is consistently somewhere in the “50 percent range” of SU graduates.

He added that the government should “want to encourage education…[and] for people to [get an education] now it’s becoming more and more necessary to borrow money.”

Published on January 26, 2015 at 12:01 am

Contact Delaney: dovanwey@syr.edu

5 Ugly Facts About Student Loan Forgiveness

January 26th, 2015

If you have student loans, you may have heard that there are ways to have your student loan debt wiped out, or forgiven. But while student loan forgiveness is enticing, it is probably much harder than you expect to make it happen for you.

Here are five hard truths about student loan forgiveness:

#1: The Public Service Loan Forgiveness (PSLF) program only works for certain kinds of loans

The PSLF program is the broadest for student loan forgiveness. If you work full-time in the public service sector (either for a government or non-profit), you can submit an application through this program to have your loans forgiven. However, the loans need to be part of the William D. Ford Federal Direct Loan Program.

This can include Direct Loans, Direct PLUS Loans, Direct Consolidation Loans and Direct Unsubsidized Loans. Any other type of federal loan is not eligible. However, other federal loans can be consolidated into a Direct Consolidation Loan.  Loans from banks or private lenders aren’t included.

#2: The PSLF program requires 10 years of payments

The PSLF program also requires you to make 120 qualifying payments on the loan. Only then can you qualify for student loan forgiveness if you meet the other criteria. Your payments must be on-time and made monthly. Any pre-payments or lump sum payments don’t count.

Additionally, the payments must be toward the Direct Loans. If you consolidate loans into a Direct Consolidation Loan, your 120 payments begin with that first payment. Payments prior to October 1, 2007 don’t count toward the 120 payments, so the first eligible date for this program is October 2017.

#3: The PSLF program requires 10 years of public service employment

The program also requires you to have 10 years of full-time employment in the public service sector to be granted student loan forgiveness.

These 10 years don’t have to be consecutive, but must be as an employee with a federal, state or local government agency, a not-for-profit with 501(c)(3) status from the IRS or other specific public services.

#4: Teachers have different student loan forgiveness requirements

To request student loan forgiveness as a teacher, you have to be, at a minimum, employed full-time with an eight-month annual contract. You have to also work full-time for five consecutive academic years. This specific program also requires that your educational employer serve low-income families. The program forgives up to $17,500 as long as you meet all qualifications and have federal student loans.

#5: Some programs dont offer complete student loan forgiveness

You also are eligible for federal student loan forgiveness if you are permanently and completely disabled, serve as a member of the US Armed Forces, work with Peace Corps or AmeriCorps or serve as a law enforcement officer or a corrections officer. Some programs only forgive a portion of the federal student loans instead of your complete remaining balance, so be prepared to still pay on your student loans.

To start any of these federal student loan forgiveness programs, talk with your student loan provider and request the necessary paperwork. If you are not eligible for a loan forgiveness program but having trouble paying back your loans, look into student loan consolidation options.

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Cuomo proposes plan to forgive student debt, stimulate economy

January 26th, 2015

A new plan proposed by Governor Andrew Cuomo could release Syracuse University graduates from their first two years of loan payments.

Last week, Cuomo announced his new Get on Your Feet Loan Forgiveness Program as part of his 2015 Opportunity Agenda. The plan has the potential to affect 60 to 65 percent of SU graduates, said Mike Cahill, director of Syracuse University Career Services.

To be eligible for the program, students will have to be a graduate of a New York state university or college, must remain living in the state after graduation and must be enrolled in the federal Pay As You Earn program, according to a Jan. 21 syracuse.com article.

Additionally, in order to take advantage of the program, graduates could not have an income of more than $50,000 a year, and the program will begin with graduates in the class of 2015.

The federal Pay As You Earn program is open to students with Stafford, Direct PLUS Loans and consolidation loans, according to Debt.org, a website that helps people understand their debt. If any of the loans were made to parents, they are ineligible.

As debt can often be a major hurdle for students, the opportunity to be free from student loan repayments for any length of time could help them stay afloat while adjusting to life after college, Cahill said.

The PAYE program limits monthly loan repayments to 10 percent of a graduate’s disposable income, forgiving the remainder of the loan after 20 years. If employed in a public service position, forgiveness occurs after 10 years, according to a June 11 US News and World Report article. The amount forgiven on the loan is taxed as income, unless you are in public service.

Cuomo’s initiative would pay for a graduate’s PAYE bills for the first two years post-graduation.

Despite these strict parameters, Donald Dutkowsky, an economics professor in the Maxwell School of Citizenship and Public Affairs, said Cuomo is taking “one good step” toward revitalizing New York state and keeping graduates in the area.

Dutkowsky said by tacking on these incentives, the government is trying to make the benefits of staying in New York outweigh the costs, such as high taxes and slower job growth, which are especially problematic in the upstate area. With this program, Dutkowsky said, Cuomo is trying “to encourage students to see New York state as a place to live.”

“This can’t be the only step,” he added, saying that the state government would also have to look into other ways to improve the state’s economy. But, he added, keeping college graduates in the state, helping them settle down and attracting businesses looking for skilled workers is a solid start.

Nayeli Jimenez, a sophomore biology major, said the new program could definitely sway her decision to stay in the state. If she cannot find employment in her field after graduation, Jimenez said during those two years she can look for another job, perhaps one that would be more aligned with her goals.

For some, however, other factors weigh more heavily in their decisions about their future. Hunter Longland, a sophomore economics major, said that his dreams of going out West trump Cuomo’s proposal. He also said that, “it depends a lot on the field you’re going into.”

While engineers will probably make more than $50,000, Longland said, this type of program could greatly assist educators and those in fields with lower starting salaries.

Cahill, the director of Career Services at SU, said the average starting salary of a college graduate is $43,000. He said that the program is definitely “something students should be aware of and consider.”

However, he said that he wouldn’t expect the number of students who stay in New York to increase significantly, which is consistently somewhere in the “50 percent range” of SU graduates.

He added that the government should “want to encourage education…[and] for people to [get an education] now it’s becoming more and more necessary to borrow money.”

Published on January 26, 2015 at 12:01 am

Contact Delaney: dovanwey@syr.edu