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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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TAKING STOCK – A FINANCIAL PICTURE

3x3 Credit ScoreJanuary is often a “holiday-hangover” month for many. February is a great time to take stock and move forward. This week, we will explore credit scores and reports and how they affect you.

What is a credit score and why is it important? Credit scores were initially set up as a way for large financial institutions to provide an algorithm for determining people’s credit worthiness. Most people have misconceptions about their credit and the credit scores. Credit scores are defined by a three digit number – although most Americans would prefer to see a grade: A, B, C, D and F for easier understanding.

• Excellent Credit: 750+
• Good Credit: 700-749
• Fair Credit: 650-699
• Poor Credit: 600-649
• Bad Credit: below 600

Will my credit go down if I keep checking it? How often should I check my credit reports or my score? No, checking your credit or applying to pre-approved offers will not impact your score. Multiple credit card inquiries or applying for a mortgage will show up as a “hard inquiry” and could lower your score a few points. You can check your credit every four months without repercussions, if you are monitoring to raise your numbers, but a good rule of thumb is to check it annually.

You can get your credit score free once a month at Credit.com.

Will my credit score affect getting a new job? No, when companies ask for permission to access your records, they are looking at your credit report to see your credit history.

How do I check my credit report?
You can review your full credit report for free at AnnualCreditReport.com, which provides you with a free credit report once a year from each of the three credit bureaus. You want to confirm that all the details are correct. If you find outstanding loans that do not belong to you or see that an account is listed as unpaid- when that account is in good standing; you can make corrections or stop any fraudulent activities. Another free website for checking your credit is Credit Karma.

How can I build my credit? Paying utility bills on time, open a savings account and take out a small, secured loan (using the amount you have in the bank). You repay that loan from your savings account. Be sure to set up automatic payments, so you are never late. You can also get a secured credit card that is tied to a set amount you have in savings.

Have a diverse financial path that includes paying bills on time, a car note and a credit card, on which you make weekly or monthly payments. Late payments will ruin your credit report and your score.

If you own three credit cards, only use 1 or 2 of them & keep the 3rd in reserve so that your % of debt stays low.

Being conscious of your “numbers” can provide you with the ability to see where you are NOW, helps you set your financial GPS to set new goals and to gives you the opportunity to make proactive decisions for an abundant life!