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Paying Off Student Debt

Paying Off Student Debt

According to the Wall Street Journal: Should repayment of student loans be a family affair? For those who answer “yes,” there are ways to give financial assistance, while still holding the young adult accountable. Listen to this informative podcast from WSJ. Dive into an in-depth discussion of student loans and best options for becoming debt-free.

Parents who want to help their children paying off student debt need to be sure they have taken care of their retirement plans first. To avoid reaching out to their adult children for money as they age, it is essential that parents take control of their personal finances. Don’t allow well-intended emotions to dictate personal financial security.

Some parents offer to pay the loan payments until their child’s salary exceeds the loan amount. Then both parties can create a plan to allow the student to finish paying off the remainder of their student debt. Some parents agree to match payments made by the student. It is often best to pay off private loans, with set terms. Let students deal with the government loans, which may have negotiable terms. Parents need to be aware of the gift tax when assisting a student unless they co-signed the loan. Any payments made by either party would not be affect taxes. Parents should all pay the bills directly rather than giving cash to the young adults.

Other Options

One popular method for paying off student debt is the “debt snowball” method. Pay off the smallest loan. As that loan is canceled out, apply the same payment to the next smallest loan. If you currently owe money and need help, this resource from nerdwallet.com (below) is very helpful.

If you have excellent credit: Student loan refinancing can save you money by lowering your % of interest. Earnest is one of several companies that refinance student loans. To make sure you are getting the lowest rate, get several estimates before choosing a lender.

To qualify for refinancing, you typically need a credit score at least in the mid-600s and enough income to afford all of your bills every month. Not sure what your score is? Find out with NerdWallet’s credit score tool.

***Important fact: If you owe money to the government, you will lose access to income-driven repayment and forgiveness if you refinance federal loans.

Budgeting Tools for Today’s Students

If you have a student beginning their journey into higher education, be sure to check out the online budgeting resource from the affordablecollegesonline.org. This company specializes in ranking the best online college offerings and assisting people to earn college credits while keeping costs down.

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WHY WORRY ABOUT MY CREDIT SCORE?

A Snapshot of Your MoneyWhy Worry About My Credit Score?

Why should anyone worry about a credit score? I know many people who think that worrying about raising a credit score is so “Old School.” Many people think if they have a cell phone, pay their rent and lease a car, they must have “good” credit, but there is much more to this story!
Almost 49% of people polled don’t realize that a credit score measures credit risk. Do you know how a score affects your life? Do you know how to read a credit report? Why worry about my credit score? One reason: It is your responsibility to manage your credit, understand your credit score and know what’s being documented by businesses and institutions.

Your credit score is unique, much like your fingerprint. It identifies your risk & financial health and follows you everywhere. In fact, your credit score can fluctuate daily without you doing anything. Creditors report their data about you at different times during the month and depending on the data added to your report; your score will go up or down.  It is not an exact science, and each credit company has its own scoring models that can differ from each one. So you could have a different score on Experian, Transunion, and Equifax. You can check your credit score here: https://www.creditkarma.com/

Thus, it is critical to worry about your credit score and check the pulse of your credit situation every six months or at least annually. You need to have good credit to function in the world. Contrary to many “quick-fixes” you may read about, the best way of increasing your credit score is good payment behavior over time and a healthy mix of credit types.

Here are a few things that your credit score determines:
•    What kind of insurance rates you can receive
•    If you can qualify for a home mortgage and at what rate
•    Whether or not particular companies will hire you
•    If you are eligible for an auto loan and at what rate
•    What credit cards you can qualify for and if you will receive special rates or travel perks

Makes sense to schedule a summer check-up of your credit health today! Why worry about your credit score? It could save you tens of thousand of dollars when purchasing a home and getting the best credit cards with the most generous benefits!

Stay green, my friends!

~Bob