How Not to Get Crushed by Student Loans

How Not to Get CRUSHED by STUDENT LOANS THERE IS A STUDENT LOAN BUBBLE... AND IT'S GETTING BIGGER Are you one of the borrowers who's been caught in the student loan bubble? Total Student Loan Debt $966 $872 $812 $722 TOTAL LOAN AMOUNT $640 ($ BILLIONS) $548 $507 2006 2007 2008 2009 2010 2011 2012 Borrowers 90+ Days Delinquent 12.4 9.8 % OF BORROWERS 9.3 9.0 8.1 8.3 (ALL AGES) 7.8 7.3 2005 2006 2007 2008 2009 2010 2011 2012 Nearly 60% There are approximately 20 MILLION 37 MILLION of that 20 million Americans attend student loan borrowers borrow annually to help cover costs. college each year. with outstanding student loans today. A You can get crushed by interest rates! Your loan can begin to accumulate interest as soon as you graduate school (or within 6 months) LOAN AMOUNT: LOAN AMOUNT ACCUM ULATED* ($) REMAINING* ($) $40,000 END OF AMOUNT INTEREST YEAR (#) PAID* ($) LOAN INTEREST: 4,200.00 2,468.60 38,268. 60 7.00% 12,600.00 7,534.50 34,934.50 MINIMUM PAYMENT: $350 21,000.00 12,108.60 31,108. 60 29,400.00 16,118.30 26,718.30 37,800.00 19,480.20 21,680.20 11 46,200.00 22,098.90 15,898.90 13 54,600.00 23,864. 80 9,264. 80 15 63,000.00 24,252.00 1,652.00 TOTAL REPAYMENT TIME: 15 YEARS, 5 MONTHS TOTAL INTEREST ACCUMULATED: $24,680.00 TOTAL AMOUNT REPAYED: $64,680.00 *Amounts are a pproximate By only paying the minimum payment on your loan, the amount of time it takes to pay off the loan can seem like forever. E What type of student loan do you have? Different types of student loans have different types of repayment options. Do you know which kind you have? FEDERAL LOAN PRIVATE LOAN > Interest rate is capped at 8.25% + Interest rate can be as high as 18-20% Interest rate is fixed and does Interest rate may be variable (meaning it fluctuates) not fluctuate > Eligible for Public Service Loan Forgiveness - Not eligible for federal loan VS. forgiveness programs - Eligible for Income-Based Repayment - Not eligible for federal repayment programs (but may offer equivalent programs) - May not be eligible for deferment or forbearance, depending on the lender > Eligible for deferment or forbearance ES How to Pay Your Student Loans Quicker and Easier Here are a couple examples of how being informed about your options can save you from being crushed: This is Bethany, a kindergarten teacher. She just graduated college and has $40,000 in federal student loans! She knows she needs to start repaying the loans but doesn't know where to start. Here is Bethany's monthly cash flow: STUDENT LOAN PAYMENT NET INCOME NET EXPENSES $3,000 $460 $3,200 BETHANY She can apply for the Income Based Repayment program, which will cap her monthly payments to 15% of her disposable income. This will help her meet her budget every month. Since she works in a qualifying public service job, she can also apply for the Public Service Loan Forgiveness program, which will forgive all her remaining balances after 10 years of on-time payments. Yay! Now she doesn't have to stress out about money all the time, and she can focus on her new job that she loves. This is Joseph, a recent grad. He just graduated and is still looking for his dream job in business marketing. In the meantime, he doesn't have any income. And he has $20,000 in private student loans. He can apply for deferment from his lender which will allow him to postpone his payments until he has the income to budget for his monthly student loan payments (up to 6 months). Great! Now he can focus on his job search instead of worrying about how to make those monthly payments. JOSEPH APR MAY JUNE JULY AUG SEPT Ready to Conquer Your Debt? Now you can pay off your student loans faster and build wealth sooner with Ready ForZero, which is a free tool for tracking and paying off debt online. You can even include other types of debt-like credit cards and auto loans–in your plan. Check it out at www.readyforzero.com O Ready ForZero Sources: Federal Reserve Bank of New York (newyorkfed.org), Chronicle of Higher Education, Federal Reserve Board of New York, Pine Grove Loan Calculator: http://www.pine-grove.com/online-calculators/loan-calculator.htm