After College
Credit Surprises from Your Student Loans
If you are considering taking out some student loans to pay for college, then you are certainly not alone. Over 60 percent of all college graduates have some level of student loan debt, and that number is growing each year.
For many people, student loans are a given. They feel that it is the only way that they will ever be able to afford college. This is, in and of itself, debatable. However, many people believe it is a fact of life -- particularly if they hope to attend an expensive, private school.
However, even if you pay every single penny of your student loans on time once they come due, they can still affect your credit negatively. Most people do not realize this when they are deciding how much money to take out.
Student Loans and Credit Repair
If you have allowed your student loans to fall into default, then you are already aware of how serious a stain this is on your credit. And in reality, it is more serious than you may have thought since student loans, unlike most other credit damage, do not "fall off" your report after 7 years.
That default -- and the collectors -- will haunt you forever.
Here are some other ways that student loan debt is different from other types of debt:
*Creditors can garnish up to 15 percent of your wages without a court order.
This means that at any time, they can contact your employer and legally start taking out as much as 15 percent of each paycheck -- with no warning and you will have no legal recourse.
*Student loans can be collected via income tax refund.
Pitfalls in Student Loan Consolidation
If you are like the majority of college students today, you will graduate from college carrying some student loan debt. While the amounts vary, most students have well over ten thousand dollars in debt by the time they graduate, and it is often spread out among multiple lenders.
When these notes come due, it can be a complicated, time-consuming, expensive and stressful process to keep track of them all and pay just the monthly minimums. When it comes to paying over or paying off early, the process can become nearly impossible to monitor effectively.
As a result, many people opt to consolidate their student loans when they leave college. This results in a single monthly payment that is nearly always lower than the individual loans' payments combined.
Evaluating the Viability of a Career Change in Light of Your Student Loan Debt
Changing careers can be a very exciting time. The prospect of learning something new that you are confident you will love is very exhilerating. You are full of hopes and dreams -- often not only about the joy you will find in your new profession but about the new, increased income that you will be making.
Often the dreams of this new profit-center based around you can make student loans sound like an awfully good idea. After all, the sooner you get done learning your new field, the sooner you can get started earning the big bucks, right? Not necessarily.
Unfortunately, you need to take a very close look at your career change before you decide if student loans are appropriate. Here are some things to consider:
*How is the job market in your field?
How Career Changes Can Affect Your Student Loan Situation
If you have been in the work force for a while, you may be starting to realize that you miscalculated when you planned your career. For some people, they lose interest in the field that they graduated in. For others, they discover an unforeseen passion for a new area of work and study. Others simply discover that the job market in their arena is too thin to survive.
Any of these issues can lead you to decide to make a career change. However, if you are still paying off student loans from your first time in college, you may be hesitant to return to school. It can impact your work schedule, and prevent you from working as many hours as you were before. It may even require that you take out more student loans.
A Long-Term Look at Income Based Repayment (IBR)
When you first look into the IBR program to help you with student loan repayment, you likely are most concerned with keeping your head above water. This program is designed to help you limit your monthly payments so that you can keep a roof above your head and feed your family. In the short term, it certainly accomplishes that if you qualify. IBR will limit your payments to small percentages of your income based on family size, the poverty level and your family’s earnings in any given year. In the long term, however, there are some additional ramifications – positive and negative – that come with participation in the IBR program.
Here are a few things to consider:
• The government may pay your interest – for the first 3 years.
What to Do If You Do Not Qualify for Income Based Repayment (IBR)
A lot of people are pinning their hopes on IBR. IBR stands for income based repayment, and the program is designed to set limits on the amounts of monthly payments that borrowers must make based on family size and income. This can be a lifesaver for families struggling to support themselves and make enormous student loan payments each month. It can even free up enough time and money to make a major difference in someone’s career path.
Potential IBR Pitfalls
If you follow student loan legislation, then you are probably familiar with the new IBR (Income Based Repayment) program that was released in July 2009. This program uses a sliding scale that factors in family income and size as well as student loan debt volume to help borrowers establish monthly payments that will enable them to support their families. There are even stipulations for loan forgiveness if you pay reliably for a period of ten to twenty-five years.
At first glance, this program looks like it could literally be a lifesaver. For many people it is. However, you do need to be aware of some potential pitfalls before you get involved that could complicate matters for you.
• You and your spouse’s income will be factored in
Understanding Income Based Repayment
At first, Income Based Repayment (IBR) sounds pretty simple. This new plan released in July 2009 is designed to help borrowers pay off their student loans in a responsible manner that will not prevent them from also supporting themselves and their families. If you are struggling to repay your student loans and living at or below the poverty level, then you probably qualify for IBR.
Does IBR Make Sense for You
IBR, or Income Based Repayment, is a new take on student loan repayment. In July of 2009, the program was initiated to help student borrowers having trouble recovering from their student loan debt. Massive monthly repayments can actually prevent college grads from succeeding in their careers and in their lives due to stress, overwork and the simple inability to support themselves or a family. IBR is designed to take real life into account and help students establish a payment plan that works with their income and their lives.
