Programs to Pay off Student Loans

College tuition increased from 1985 until 2013 by a whopping 538%. People started taking on more and more student loan debt to pay for college, and now it is a huge financial issue for Americans. Some stats that illustrate the problem include:

There is Help

There are thankfully some programs to help people pay off their loans.

Public Service Programs

Organizations such as the Peace Corp and AmeriCorp offer loan repayment assistance programs (LRAP). You work for these organizations for a certain amount of time, and then they help you with your loans. You also receive a salary (or stipend) as part of your employment. You can lose repayment benefits if you leave your employment early.

In addition to LRAPs, there are Public Service Loan forgiveness programs. If you are a Direct Loan Program borrower, you may qualify for income-based repayment and loan forgiveness after 10 years (and time spent in the Peace Corp or AmeriCorp could count toward these 10 years). You must continuously work as a public servant for 10 years. These are great options and can help people fields that include:

  • Emergency Management
  • Public Interest Law
  • Child Care

Private Volunteer Programs

Private organizations such as SponsorChange and ZeroBound operate on a basic premise that you exchange your labor for help paying off student loans. SponsorChange works this way: you volunteer at a designated nonprofit and donors pay your student loans. At ZeroBound, you come up with an idea (a program at a local hospital for instance), and people crowdfund your student loans when you put your idea in to practice. Donors know their money addresses an organization’s manpower needs and not administrative costs.

Military

The service branches also offers loan repayment programs. You must be in one the Military Occupational Specialties, not just an officer, to receive this benefit in the Army. Most of the programs highlighted here only help with federal loans. But the Army, for instance, also helps pay off private student loan debt.

Teachers and Health Care Professionals

Similar to public service programs, there are loan assistance programs for teachers and healthcare professionals. You may be eligible to cancel:

  • $17,500 for math and science teachers
  • $17,500 for special education teachers
  • $5,000 for full-time teachers in other specialties

Keep in mind, this program applies to Stafford loans and you are eligible for cancellation only after 5 years of service in certain low-income schools.

There are also programs that help people in the healthcare field. For instance the Nursing Education Loan Repayment program offers assistance to full-time RNs. If you work at certain nonprofit facilities, you can get:

  • Up to 60% of loans forgiven for 2 years of service
  • An extra 25% forgiven for an additional 3rd year of service

Additionally, the National Service Corp offers substantial assistance to people in healthcare professions that include:

  • Doctors
  • Dentists
  • Nurse Practitioners
  • Psychologists

If you know someone who is graduating with six figures of loan debt from a professional degree, this program offers qualified individuals who work in designated communities:

  • $25,000 per year in loan repayment for 2 years of service
  • $35,000 in loan repayment for an additional year

Review Your Options Carefully

As we noted earlier, some programs only help with specific federal loans, while the qualifications for others are complicated. Most programs pay little or nothing if you do not complete your term of service. For student loan borrowers that qualify, these programs offer solid debt relief for those willing to work in certain areas or in education.

The Importance of Credit

As a young adult making your first forays into the financial world, credit may not seem like a big deal – expenses are usually fairly easy to cover because you don’t have kids to look after or a mortgage to worry about. And, unless you are in need of credit, your credit rating may not seem like something that is all that important. It does, however, pay to take steps now to start building a good credit history so that when you actually do need to access credit, you can do so more easily and less expensively.

Having a good credit rating can save you thousands of dollars in interest and insurance premiums over your lifetime and can even give you a bit of an advantage when it comes to that management position that you have had your eye on.

It might seem paradoxical but having no credit history at all can out you in a similar category to people with poor credit for the simple reason that you will be an unknown entity to your potential creditors – you will have no means of proving that you are able to handle credit responsibly and so will be seen as a higher credit risk overall.

Having No History Can Be Damaging As Well

It might seem paradoxical but having no credit history at all can out you in a similar category to people with poor credit for the simple reason that you will be an unknown entity to your potential creditors – you will have no means of proving that you are able to handle credit responsibly and so will be seen as a higher credit risk overall.

What Credit Reports Are

Your credit report can actually be compared to a school report card, with the “exams” being your credit accounts and the score showing how well you have managed these accounts. The payment history gives a breakdown of whether or not you have paid your accounts on time every month and whether or not any payments are still outstanding. Paying late or not paying the full installment will negatively impact your credit rating.

The credit report shows a lot more than that though. It also shows what balance you owe your creditors and what your credit limits are. The total potential credit exposure, as well as the percentage of your credit utilization will also impact your score. Maxing out your credit limits affects your score negatively.

When a potential creditor looks at your report, they will assess whether or not you are a responsible borrower – if they have none of the above information to work on, they will have nothing to base their decision on.

Building Your Credit Rating

If you want to start building a credit rating, you need to make use of some sort of credit facility. That is not to say that you should rush out and get a bunch of credit cards but rather that you should start by opening one or two credit accounts so that you can show that you are a responsible lender. Store cards are usually easier to get than credit cards so start there. You will probably be given a small limit at first but this will be increased later as you prove that you can handle the account.

With this credit facility, it is important to make all payments on time and to make sure that you pay the minimum monthly instalment at the very least. Aim to use no more than 30% of the credit limit as this will help to boost your credit score. Many department stores will treat a 6 month account as cash so you shouldn’t have to worry about paying interest at this stage in time.

As time goes by, look at diversifying your credit report by applying for a small instalment loan, a credit card or vehicle finance. For creditors to get an overall picture of you as a debtor, having different types of financing on your credit report is important – it shows them how you would handle each type.

It is quite important to start building your credit report early on – older accounts count for more when it comes to establishing credit worthiness as they paint a fuller picture than newer ones.

The key to building a good credit rating is to be consistent – live within your means and never borrow more than you can afford to repay. Make paying your monthly bills on time your number one priority and you will build an excellent credit rating.

I’m Not Even 30 Yet. Do I Seriously Need a Will?

When you’re in your 20s, you’re thinking about getting started in life. You’re typically not thinking about approaching the end of your life. As you start work, and you start accumulating things like your first home or a 401k, it’s crucial that you think about what would happen to these assets after you die. Dying without a last will and testament means that your state’s probate court, not you, will determine what happens to your assets. The people you leave behind could lose what you’ve earned, and they’ll face major hassles after you’re gone. Creating a rudimentary will, even in your 20s, is a smart financial decision.

Do I Seriously Need a Will?

Dying Without a Will

Certain assets, including life insurance benefits and retirement accounts, allow you to designate a beneficiary. If you die, the money passes directly to the beneficiary without going through probate. Other assets, like real estate, will have to be probated. If you have no will, you’re considered intestate, and the court will then divide your assets according to state law.

Although state laws differ, the division typically follows these patterns:

  • Single, no children. If you’re single and have no children, your parents and then your siblings will most likely get your estate.
  • Single with children. The court will appoint a guardian for your children. Your children will inherit your estate, but a guardian will hold the funds until they turn 18.
  • Married, no children. In some states, the surviving spouse inherits everything. In other states, the estate divides between the spouse and your parents.
  • Married with children. Your spouse will get one-third to one-half of your estate, and your children will get the rest, which will be held by a guardian until they turn 18.
  • In a relationship. If you’re living with someone but you’re not married, your partner won’t inherit anything unless you’ve filed for recognition as domestic partners. Similarly, if you’re in a state that doesn’t recognize same-sex marriage or civil unions, and you’re in a same-sex relationship, your partner won’t receive anything when your estate is probated.

What Happens During Probate

If you haven’t created a last will and testament, the court starts by inventorying your estate and using the proceeds to pay off all your creditors. If you owe money on a credit card or money for a vehicle, the court will either use your assets to pay off the debt or assign your debt to one of your family members. If you have federal student loans, your family won’t have to pay them off after you die. For private student loans, you family might be on the hook.

After paying your creditors, a court-appointed executor will divide your estate, minus probate fees, according to the law. If you have minor children, your children will go to a court-appointed guardian. Even if you’re married and your spouse remains guardian of your children, the court often appoints a separate guardian for their part of your inheritance. Your surviving spouse will get part of your estate, but they won’t be able to access the remainder for your kids’ expenses.

Who Needs a Will

If you have minor children, it’s almost unconscionable to avoid creating a will. You can use a simple online form, or you can consult an attorney to designate guardianship for your kids. The last thing you want is a judge deciding who gets to raise your children.

Also, creating a will helps you make sure that the right people inherit your estate. For instance, f you prefer that your spouse inherit everything and that your parents get nothing, it’s crucial to spell out your wishes in your last will and testament. If you have a niece or nephew to whom you’d like to give money, but you don’t want your sibling having access to the funds, you can use your will to set up a separate guardian for the money.

Finally, if you’re in a same-sex relationship in a state that’s not friendly to gay partnerships, you shouldn’t leave your partner high and dry in the event of your death. To ensure maximum protection for your partner, particularly if your family members aren’t accepting of your relationship, talk to an attorney about the best way to ensure your partner gets your assets.