The federal government offers a number of different ways to pay back your student loans. In this post we’ll look at income based repayment plans, some of their qualification requirements and tradeoffs to consider. The offerings I’ll mention here apply to government loan programs (not private loans).
Some people think that if you pick up bad financial habits in your teens and early adult life then you will always be bad with money, but Cat from Budget Blonde is living proof that people change their financial ways. Keep reading to see how Cat went from broke to budget and lived to tell the story.
College students make money mistakes and that’s ok
Cat wasn’t always a good saver. She admits that she let her credit card debt get out of hand when she was in her early 20s. She was in debt and didn’t have an emergency savings fund to dip into. If Cat could go back and give herself some financial advice in her 20s she would go back and tell herself “not to take out so many student loans and not to rent such a big apartment!”
Report finds 18 percent of students plan to leave college temporarily or permanently.
San Francisco, CA, July 30, 2013 — SaveUp (www.saveup.com), a national online financial rewards program for saving and paying down debt, today announced the findings of its July U.S. Consumer Savings and Debt Report. Findings from SaveUp’s student loan survey show that the doubling of interest rates on Federal Stafford student loans will affect individuals’ plans to attend or finish college, and it will greatly impact their lifestyle, savings and spending habits.
There has been a lot of buzz lately about the change in student loan interest rates. The July 1st deadline for Congress to act has passed, and rates will double from 3.4% to 6.8%. Congress and President Obama wanted to tie the interest rates for student loans to the market rate, but an agreement on how to do that couldn’t be reached.
This will impact students who are taking out federally subsidized Stafford loans. According to the WSJ, this change will “affect an estimated seven million students who take out certain federal student loans for the coming school year, representing about a third of all undergraduates.” It’s another real effect of the sequester. For other impacts, see this past post titled The Aftermath of the Sequester (And Its Effects on Our Finances).
In February, SaveUp compiled its first U.S. Consumer Savings and Debt Report titled “Gen X and Y Lead US Trend as a Nation of Debtors.” I found the report interesting and insightful. I’ll examine it from a personal financial planning perspective.
My Take on the Report’s Findings
The report states, “Over 60% of Gen Xer’s debt comes from mortgage and student loans, considered “good” debt, that helps build assets and job opportunities. Gen Yers however have close to half of their obligations, 48.4%, in non-asset building loans, mostly considered ‘bad debt.’”
Young adults are depositing more to savings accounts and paying down 57% more student loan debt than Gen X or Baby Boomers. Finger is pointing at the Great Recession.
San Francisco, CA, April 17, 2013 — SaveUp (www.saveup.com), a national online financial rewards program for saving and paying down debt, today announced the findings of its April U.S. Consumer Savings and Debt Report. This month’s major findings focus on the trends amongst young adults (22-32 years old) including recent college graduates.
Is all debt bad? Not necessarily. Certain types of debt are either beneficial or detrimental as we try to improve our finances.
For instance, you can pay off debt consistently (like paying off a credit card in full each month) and establish good credit so that you can qualify to borrow money at lower interest rates in the future. Or, in a worst case scenario, you could get stuck in a payday lending scheme. These loans have high interest rates that are meant to be short-term. If the loan lasts longer than you anticipated, you may end up paying over 150% APR (or more). This could be damaging to your finances for years to come.