Category: Student Debt

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Starting Repayment of Student Loans

Congratulations to our recent UWW college graduates!  Your time and talents have resulted in a well-deserved diploma, but along the way, many have acquired student loans and are now wondering about the repayment process. Let’s break down the steps for our new graduates, and in addition, you are encouraged to utilize the Federal Student Aid’s repayment checklist:

  • Direct Federal Loans offer a 6 month grace period before entering repayment, which means repayment will not start until later this year.
  • During this grace period, you will need to select your repayment plan.  The standard repayment plan is 10 years; however, there are other plan choices.
  • Once a repayment plan is chosen, your lender(s) will provide you with a loan repayment schedule, the first payment due date, and the amount of payment.
  • You can choose to set up electronic payments or make payments by postal mail.
  • Payments can be made before they are due and can be more than the amount due each month.  Be sure to communicate the extra amount paid each month should be applied to the principal to ensure the loan is paid off faster.
  • If you are having trouble making your loan payment, contact your lender, and you may be able to change your repayment plan to allow for a longer repayment period or one that is income based.
  • If you do not make your loan payment, your loan becomes delinquent and will eventually go into default.  This will damage your credit, negatively affect your borrowing ability, and may lead to legal action resulting in garnishment of wages and withholding of tax refunds.

For more information on student loans, you are encouraged to schedule a coaching session with the UWW Financial Literacy Center.

 

 

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Student Debt: How Much Do I Owe?

Although not every student has to borrow money for college, most leave school with some level of student debt. It’s important to keep a running total in order to make future debt decisions and to develop a repayment strategy.

Finding the Balance on Federal Student Loans.  The National Student Loan Data System (NSLDS) is managed by the Department of Education, and gives information on how much you owe in federal student loans.  You can use the NSLDS to obtain your original loan amount, current balance, interest owed, and name of loan servicer. When accessing information, you will need your Federal Student Aid (FSA) ID, which is the same ID used when completing the FASFA.

Finding the Balance on Private Student Loans.  There is not a national database for private student loans, and finding balances on these types of loans can be more challenging.

  1. Ask the original financial institution.  If the loan has been sold to a different entity, the lender should have contact information on which company currently owns your loan.
  2. Ask the financial aid office:  If your original lender is unable to track down your loans, call the Financial Aid Office, and they can assist with identifying who is currently managing your debt.
  3. Check your credit report.  A credit report will list all of your current and past credit obligations, and this should include your student loans. The credit report lists the amount borrowed and loan servicer, and any further information can be obtained by contacting the loan servicer.  You can obtain a free credit report from the three main credit reporting agencies using annualcreditreport.com.

For more information, you are encouraged to schedule a coaching session with the UWW Financial Literacy Center.

 

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Refunds: What To Do With The Extra Money?

A financial aid refund is excess money left over from your financial aid package after your tuition and allowable fees have been paid.  Although it can be tempting to use this extra money on non-essentials, such as gaming consoles, vacations, or designer clothing, financial aid is meant for education-related expenses. In many cases, the refund check is actually a student loan which will need to be repaid in the future with interest.

Here are the recommended priorities for refund usage:

  1. Pay Outstanding Account Balance. Even though you may receive a refund, your student account may still have charges that need to be paid (see Note below).
  2. Purchase Essential School Supplies.  Depending on your course load, various school supplies are needed for class success such as books, calculators, and other materials.
  3. Pay for Living Expenses and Transportation.  Consider needs versus wants.  Depending on your personal situation, rent, groceries, meal plans, utilities, and basic transportation costs may be necessary expenses.
  4. Place Funds into Savings for Future Education-Related Expenses.  Although it may be tempting to use refund money on non-essentials, such as vacations or designer clothing, financial aid is meant for education-related expenses.
  5. Give Money Back.  If you have over-borrowed, consider giving the money back to reduce your overall student debt.

For more information and resources on financial aid refunds or other financial needs, reach out to the appropriate campus departments.

Note:  Due to financial aid restrictions, your student account in WINS may continue to have non-tuition charges that will need to be paid using personal funds.  Students are encouraged to authorize the Federal Title IV Financial Aid (WINS/Student Center/View Student Permissions) to pay additional charges on their student account such as parking permits, bookstore charges, health center services, and library fines.  Pay plan activation fees and finance charges cannot be covered with Federal Title IV permissions, therefore these will need to be paid with personal funds.

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8 Misconceptions About Student Loans

Many students need them, but misconceptions exist surrounding student loans.  To make the best financial decisions, students should be aware of common student loan myths.

  1. Student loan debt is good debt. Potentially, it could be upon graduation and landing a job.  If you leave college prior to receiving a diploma, you are still required to pay back your student loans.
  2. Interest on my student loans does not start to accrue until after I graduate.  This may be true of federal subsidized loans, but this statement does not apply to federal unsubsidized loans and most private loans.  Interest starts to accrue upon receiving the unsubsidized loan; however, the interest does not need to be paid until the student drops below half-time status or after the 6 month grace period after graduation.
  3. My student loans automatically renew each year.  Generally, both federal and private loans are only good for one year.  If loans are needed again, students should reapply each school year.
  4. Since I am going to be a teacher, my students loans will be forgiven.  This statement applies to teachers who meet all the loan forgiveness program requirements.  To qualify, teachers need to have worked full-time for five consecutive years in a designated school or service agency that serves students from low income families.
  5. If I can’t pay my student loans, I can file for bankruptcy.  Only in rare extreme hardship cases will student loans be forgiven due to bankruptcy.  The collateral on student loans is your ability to earn in the future.  For this reason, even upon bankruptcy, you still have the ability to earn and the ability to pay something towards your student debt.
  6. My grades are not high enough to receive student loans.  Federal financial aid programs do not have any initial grade requirements.
  7. My parents have not filed their taxes yet, therefore I cannot complete the FAFSA.  Students can complete the FAFSA application using estimated tax information.  When the parents eventually file their taxes, students can go back and edit the application information.
  8. I am responsible to pay back the student loans my parents took out for me.  Ultimately, if a parent takes out the loan, the parent is responsible for repayment of the loan.

For additional resources on student loans,  visit the UWW Financial LIteracy Center or schedule a free and confidential one-on-one coaching session.  We look forward to working from you!

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Subsidized vs. Unsubsidized

When discussing financial aid, commonly used terms include subsidized and unsubsidized, but what is the difference between those two words in regards to student loans?

Direct Subsidized Federal Loans are available to undergraduate students who demonstrate financial need.  The US Department of Education pays the interest on your loan while you are in school (at least half-time status), for the first 6 months (grace period) after you leave school, and during any deferment (postponement) periods.

Direct Unsubsidized Federal Loans are available to undergraduate and graduate students.  Demonstrating financial need is not a requirement.  You are responsible for paying interest during the life of the loan.  While in school, during the grace period, and during deferment or forbearance, you may choose to let your interest accrue, as opposed to making payments. The accrued interest is added to the principal of the loan.

For more information, visit the Federal Student Aid website, the UWW Financial Aid Office, or the UWW Financial Literacy Center.

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Is College Worth It?

With the rising cost of higher education, you might wonder if college is worth the time and money.  Does additional education really make a difference in earning potential?

In a May 2018 article, using information obtained from the U.S. Census Bureau, Amelia Josephson, of SmartAsset, identified the average U.S. salary by education level.

Average Salary by Education Level:

  • Average Salary with Less Than a High School Diploma – $25,256
  • Average Salary with a High School Diploma – $35,256
  • Average Salary with Some College, No Degree – $38,376
  • Average Salary with an Associate’s Degree – $41,496
  • Average Salary with a Bachelor’s Degree – $59,124
  • Average Salary with a Master’s Degree – $69,732
  • Average Salary with a Professional Degree – $89,960
  • Average Salary with a Doctorate – $84,396

Although you may become a high wage earner without a diploma or degree, the statistics emphasize the overall benefit of higher education in relation to earning potential.   Remember, salary isn’t everything; therefore, only you can determine if college will truly be worth it.

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Student Loans: How Much is Too Much?

Think about the first 10 years after college graduation. You may want to purchase a reliable vehicle, rent an apartment, purchase a home, travel, get married, have children, etc.  You have worked hard to obtain your degree and land a good-paying job in an effort to provide for your future, yet too much student debt can inhibit your ability to afford the things or adventures you want.

About three-fourths of college students (4-year) graduate with loan debt.  According to the Institute for College Access & Success, the average Wisconsin graduate leaves college with $30,059 in student loan debt.  Although the total borrowed amount is a personal decision, there is a general ‘rule of thumb’ as to the amount of debt a college student should acquire.  Total student debt upon graduation should be less than your future annual income.  For example, if your estimated starting salary is $40,000, your total student debt should be less than $40,000.  Upon graduation, there is usually a 6 month grace period, but then you will have a student loan payment for the next 10+ years.  This monthly debt payment will reduce the amount of money available to pay for expenses of your choosing.

Remember, education debt is good debt.  Taking on student loans is an investment in your future; however, too much of a good thing can hurt you.  You do not want to spend a lifetime paying off your bachelor’s degree.  Do your research, and make good financial choices now to benefit your future.