PopSugar

Guess How Much: Average College Grad's Student Loan Debt

SavvySugar — Wed, 09 Sep 2009 04:30:57 -0700

Recent grads have been having a rough go of the recession-ridden real world. They're competing in a reduced job market and facing increased expenses as student loan repayment rears its head, plus interest. Can you guess how much the average college graduate has to pay back in student loans?

Take the quiz

Ask Savvy: Should I Apply For a Personal Loan?

SavvySugar — Tue, 07 Oct 2008 12:30:51 -0700

Dear Savvy,

I've been meaning to take a $5,000 personal loan. However, as you may know, my bank WaMu was bought by JP Morgan Chase. I'm not sure what kind of effects this would have on me or my bank. Should I hold off or go to different banks? Also, since we are in economic crisis, will it harm me in the future if I do consider going through with this?

See my answer when you read more.

The fact that you've been meaning to take out the loan, and aren't in desperate need of the money, tells me that a personal loan might not be the best option for you. Also, there is one major detail that hangs unanswered: It isn't guaranteed that you will be approved for the loan. Banks have been tightening their credit and have heightened their lending standards, meaning they are lending less and only to borrowers with excellent credit.

Borrowing money affects your personal credit, no matter the state of the economy. The loan will appear on your credit report and any late payments will negatively affect your credit score. You only want to take out a loan if it's absolutely necessary because you are paying interest on the loan - $5,000 is only the principal loan amount and does not take in to account any interest owed.

If you decide to pursue a loan of any kind, it's necessary that you shop around to make sure you're getting the best interest rate. The fact that JP Morgan bought WaMu simply means that JP Morgan would be your lender, not WaMu. Instead of borrowing the money, I would recommend saving up for whatever it is you need. Open a high-yield savings account and put away as much as you can each month.

Source

Should You Pay Off Student Loans ASAP?

SavvySugar — Fri, 29 Aug 2008 14:00:37 -0700

Because 70 percent of you are dealing with student loans, a Motley Fool article called "Die, Student Loan, Die!" caught my eye. The article has some good tips on how to assess whether you should focus on putting more money toward savings or more toward student loans. Here's what they say you should consider when deciding whether or not to pay off student loans early.

Pay off ASAP if you're stuck in a high-interest private student loan, but sit on it if you're locked in a low, fixed-interest rate.
If the the interest you're paying is not tax deductible, pay off the loan ASAP.
Pay off immediately if you have enough cash to pay off your loans and still have money left over to start your emergency savings account.
Sit on your student loan if you have other higher-interest debt. Compare the interest rates on all of your debts to determine which should be paid down first.

Source

Ask Savvy: I Regret Co-Signing on a Friend's Car

SavvySugar — Fri, 08 Feb 2008 06:36:40 -0800

Dear Savvy,

I did a stupid thing about two years ago. One of my best friends was going through a life crisis and she needed help purchasing a car. (Her own credit score was bad because an old car dealership screwed her over.) So, she asked me to co-sign on her new car purchase. I don't know how I could be so stupid as to agree to it back then, but I did, thinking I was helping out a friend who was in dire need.

Long story short, she was late three times on her payments and of course my credit score has been affected. I've had to pay for her twice so that my credit score would be protected. She has her life back together now and she hasn't been late in a while but it's still something always on my mind.

Would it be better for her to continue to keep the car and make timely payments to improve my credit score? Or should I ask her to sell the car?

To see my answer please read more

A: It's terrible when good intentions turn into regret, and even worse when a friend takes advantage of your willingness to go above and beyond. Co-signing may seem like a benevolent thing to do when you're helping a friend in need, but you've seen what can happen when the person making the payments isn't reliable. Your credit score is affected, and as a co-signer there's nothing you can do on your own to get out of the mess.

As a co-signer you guarantee the loan but your name isn't on the car's title, and you agreed to make the payments if your friend flaked. The creditor wanted a co-signer so that they would have a more credit-worthy borrower, and when your friend missed three payments she proved to you and the lender that she's indeed a risky person to grant a loan. The loan stands whether or not the car is in your friend's driveway or back on a lot for sale somewhere.

You can't be removed from the loan unless your friend refinances the loan by herself, but she'll find that rates will be sky high with her poor credit history. She may be able to extend the amount of time on her refinanced loan to lower her monthly payments. This should be the first step in getting the loan wrapped up and have her do it as soon as possible - the last thing you want is a car repossession in your credit history.

The other option would be for her to sell the car, use the money to pay off the current loan, then your friend can figure her transportation out on her own. For peace of mind and the sake of your credit score, get out of this situation as soon as possible.

Source

Rate Reduction on Variable Student Loans This July

SavvySugar — Thu, 26 Jun 2008 15:37:39 -0700

Forking over your monthly student loan payment is surely something that makes you sigh with irritation, but here's some news that may make those times of the month less brutal.

If you've already consolidated your student loans and haven't added any new ones then you're not eligible for a rate reduction, but if you haven't yet consolidated consider marking July 1 on your calendar. Find out what rates may be available as of the first when you read more.

Here's the deal: If you have federal variable-rate student loans that were issued before July 1, 2006 and have not consolidated, you are eligible to lock in rates of 3.62 percent to 4.25 percent on Stafford Loans and 5.13 percent on PLUS Loans for graduate students and parents. This doesn't apply to students still in school, and if you're in your six-month grace period you can lock in the lowest rate for loans from your first two years of school.

The lowest rate is about three percentage points lower than the current federal rates. To find out more about consolidating your federal variable-rate loans (as of July 1, 2008) visit the US Department of Education.

Source

How to Handle Parental Loans

SavvySugar — Tue, 18 Mar 2008 15:19:12 -0700

There are many sources out there that will tell you to consider any loan to a family member as a gift. And while going into the situation with low expectations would serve a relationship well, what about the loaning person's finances? Many 20-somethings are turning to their parents for help in the midst of a tougher mortgage scene, and are counting on them to pull through with a familial loan.

Any situation where money passes through related bank accounts should be handled with care. Especially when it's a large sum - a down payment for a new home or a heavy medical expense - where it's obvious that you're asking for a loan and not a gift, which means you intend to pay your parents back in full. These transactions should come with some guidelines. To see what you should consider before entering into this type of arrangement just read more.

Consider your parents finances and only ask them for help if you think they can afford it.
Be confident that you can repay the loan by coming up with a realistic payment plan.
Put all of the details in writing, including interest rate and payment schedule.
Sites like Nolo and LawDepot have promissory note templates that could serve as your IOU to your parents.
The Wall Street Journal suggests that you could formalize your loan through Virgin Money or ask an attorney to help draft a loan agreement.

Source

News Flash: Credit Crisis Seeps into Student Loans

SavvySugar — Mon, 18 Feb 2008 04:13:39 -0800

Lining up student loans may be a much tougher scene this Spring than it has been in past years. Many types of student loans were funded by lenders issuing securities backed by these loans. Now investors are shying away from this type of investment because of the negative way many mortgage-backed securities turned out. In this way, the credit crunch that began with mortgages is now affecting student loans. Because this was the main source of funding for private student loans, and especially for smaller companies, many loan providers will likely boost interest rates on private loans up to one percentage point, not accept borrowers with a credit score under 650, and insist that parents co-sign for their kids.

Sourc

Graduates Flee US to Escape Student Loans

SavvySugar — Sat, 25 Oct 2008 11:00:57 -0700

Student loans are increasingly necessary for many students to pay for college, but these massive debts are causing some graduates to flee the country. It may seem dramatic, but leaving the country sometimes seems like the only option for grads that have defaulted on their student loans and can't find another way to escape the debt collectors.

CNN Money profiled a student loan fugitive named Chris who got a foreign address to escape his $160,000 student debt from getting a master's degree in music. He anticipated his monthly payments to be around $600, but they turned out to be a completely unmanageable $2,400. Chris says, "I am upset at myself. I could have gone to a cheaper school. But I'm most angry at the fact that for anyone who has debt that's not student loan debt, there's relief."

In some cases, student loans are discharged or partially discharged because of hardship. Chris and other graduates who feel helpless should explore these options before fleeing the country.

Source

Guess How Much: Student Loan Debt For New Grads

SavvySugar — Mon, 22 Jun 2009 13:30:35 -0700

Higher education comes with a higher cost, year after year. Student loan debt is particularly problematic for new graduates because it's more difficult for them to find employment after graduation. While some can turn to their parents for help in making loan payments, it's not feasible for many families who have been affected by the recession. Can you guess how much debt the average grad has coming out of college?

Take the quiz

Most Shocking Headline: Graduates Flee US to Escape Student Loans

SavvySugar — Wed, 17 Dec 2008 13:30:41 -0800

Graduating with debt isn't the best way to start out in the real world, but it's a reality that many college graduates face. Most grads set up a plan to pay off their student loans within a certain time period, but some of the educated and in-debt have become too overwhelmed by their loans to repay them.

Instead of facing debt collectors, some students with massive debt are choosing to flee the country after they've defaulted on their loans. Grads who escape the US are running away from a problem that won't go away unless they figure out a way to fix it. There are certain cases in which some student loans are discharged or partially discharged because of hardship, and payment plan solutions for those who don't qualify for debt forgiveness - both of these are much better options than seeking a new address in another country.

Source