Editor’s Note: Full texts of previously published student loan articles

Editor’s note: On April 24, 2018, The Chronicle for Higher Education reported that “Drew Cloud,” a widely quoted “expert” on student loans, was in fact a fictitious character created by the owners of The Student Loan Report and

LendEDU.com, a student loan shopping site.

In the course of researching whether we had quoted “Drew Cloud” in any of our own stories, we discovered that, in late 2016 and early 2017, the Ledger-Enquirer published a series of articles purportedly authored by either “Drew Cloud” or another fictitious Student Loan Report writer and published in connection with an advertising arrangement between the Ledger-Enquirer and LendEDU. While the Ledger-Enquirer was not aware that “Drew Cloud” and the other authors were fictitious characters, these stories should not have been published without full disclosure of the advertising relationship between the Ledger-Enquirer and LendEDU.

We profoundly regret that we failed to fully disclose the advertising relationship between the Ledger-Enquirer and LendEDU.

We have replaced the text of each of these articles with an editor’s note similar to this one. We have collected below the text from all of those articles here in the interest of complete transparency.

Millennials buried under student debt may get some relief from employers

Americans owe more than $1.3 trillion in student loans, and millennials hold most of that total – both in the number of borrowers and total amounts borrowed. About 65 percent of outstanding higher education loans are held by people who are 40 years old or younger, according to the New York Federal Reserve.

So, it’s not surprising nearly 90 percent of borrowers said they would commit to a job for five years in exchange for help with student loans, according to an American Student Assistance survey. And in a separate survey, 34 percent of borrowers said that student debt has forced them to put off starting a family.

Although some companies like Staples, PwC, ChowNow and Natixis Global Access Management offer a student loan repayment perk for employees, the Society for Human Resource Management still has found that only about 4 percent of all employers offer any kind of student loan benefit. Further, 75 percent of employers questioned by American Student Assistance said they did not offer any guidance or assistance on student loans.

That means most borrowers are currently left on their own to cope with student debt loads. More than half the respondents in American Student Assistance’s study said they worry about their debt burden, and 40 percent said that stress has weakened their health and their focus at work.

However, some of that could change if Congress passes some bills that would create incentives to employers to create student-loan repayment assistance programs to help employees manage and pay off educational debt. For example, the bipartisan Employer Participation Student Loan Assistance Act in the House of Representatives Ways and Means Committee, if passed, would allow employers to contribute up to $5,250 annually toward employees’ student loans tax free.

The deduction for companies would be comparable to the existing tax benefits for tuition reimbursement, Representative Rodney Davis of Illinois said. “This would be a simple change in the tax code that would be a net benefit to taxpayers,” he said, adding that ultimately, it would also help the government save money on student loan defaults.

A bill like this could increase the number of companies offering employees student debt help to 26 percent, said David Klein, head of loan refinancing firm CommonBond.

Lawmakers have proposed similar plans in previous sessions of Congress, but none have passed. This one, though, may have legs, some say, with more than 30 bipartisan cosponsors.

Still, it isn’t without its critics. Matthew Chingos, a senior fellow at the Urban Institute, calls the bill “a regressive handout to the wealthiest borrowers.” He notes “The largest benefits go to individuals with the most student debt, who are least likely to default on their loans. A worker with $10,000 in debt could only use the benefit for two years, whereas a worker with $100,000 in debt could use it for 20 years.”

U.S. student debt servicer Navient grows dominance with $6.9 billion portfolio purchase

Navient, the largest U.S. student loan servicer, just got even bigger. It agreed to buy JP Morgan Chase’s $6.9 billion student loan portfolio for an undisclosed sum.

The purchase adds to the company’s already $85.3 billion in government-guaranteed student loans and $22.6 billion in private loans, as of March 31. The new portfolio is comprised of approximately $3.7 billion in federally guaranteed student loans, of which $1.6 are securitized, and approximately $3.2 billion in whole private education loans.

“We welcome our new customers, and we commit to delivering best-in-class support to ensure a seamless transition,” said Jack Remondi, Navient president and CEO. “We will provide ongoing assistance to help our new customers continue to successfully manage their education loans.”

JP Morgan Chase’s educational debt portfolio is the second the company has purchased from a large U.S. bank in the past few years. In 2014, Navient bought an $8.5 billion portfolio of federally-guaranteed student loans from Wells Fargo.

This week’s acquisition “is a win-win for our company and our customers,” Remondi said, adding that the deal should also help the company grow its fee businesses. The deal is expected to be completed in stages in the second quarter and eventually, the new loans will move to the company’s servicing platforms. The deal should start adding to this year’s earnings, Navient said.

However, others are not as optimistic about Navient’s further push into the student loan servicing business being a win for borrowers. In January, the Consumer Financial Protection Bureau (CFPB) and the attorneys general in Washington and Illinois sued Navient, alleging the company did not work in the best interests of its customers. Among other things, the company was accused of steering struggling borrowers toward repayment plans that required them to pay more than necessary but lowered costs for the company and not allocating borrower’s payments as directed.

“It’s shocking that Navient could be allowed to take on a greater number of student loans when it has already failed so many Americans struggling to repay their loans,” Lisa Madigan, the attorney general of Illinois, said in a statement. “The impact of this sale could be devastating to student borrowers’ futures and our economy.”

In response to the CFPB litigation, Navient said in a March court filing to dismiss the case “There is no expectation that the servicer will act in the interest of the consumer.” Besides, the CFPB is an unconstitutional agency, the company’s lawyers argued. Navient has denied all the allegations and said it would continue to vigorously defend itself.

Federal Reserve governor called for “fairness and transparency” with online lending practices

A Federal Reserve governor is now calling for fairness and transparency in online lending practices while cautioning fintech firms regarding the risks associated with non-traditional data. Such data includes social media information that could be used to determine creditworthiness. According to Fed governor Lael Brainard, the use of such factors to judge creditworthiness could result in companies performing an end-run around fair lending laws.

More and more lenders are now seeking to move away from traditional credit scoring models while looking for new methods, such as education levels and social media connections for the purposes of evaluating prospective applicants who do not have traditional credit histories.

Ms. Brainard has warned that the use of social media data could result in consumer protection issues. He went on to state that the use of relatively new forms of data has also raised a concern about transparency. Consumers and even regulators might not be aware of how certain types of information might be used in the decision-making process or even the types of behavioral changes that consumers might be able to make in an effort to improve their credit scores.

For the most part, Brainard was positive about the potential of fintech to offer benefits to the public, including making improvements regarding how people are paid, when they are paid, and how they manage their money. With that said, there are still serious concerns regarding the possible negative impacts of how information is used and the effects that this information could have on the financial lives of consumers.

Fintech offers a wide range of promise, including the potential to expand across a variety of financial and credit services for small businesses and consumers. Through the reduction of underwriting and loan processing costs, financial services providers may be able to offer loans in a more cost-effective manner than was previously possible. Furthermore, lenders may be able to better evaluate the creditworthiness of applicants due to a broader analysis of data. This type of analysis makes it possible for lenders to provide loans in a more responsible manner.

With that said, it’s important to make sure that risks are managed appropriately while protecting consumers. Despite the fact that the innovation in the fintech space certainly holds promise, it is essential that associated risks be mitigated.

Some fintech firms have begun to explore the use of rather non-traditional data in pricing and underwriting credit products. Such non-traditional data could help in the evaluation of consumers who otherwise lack credit histories. Yet, at the same time, certain types of data might raise concerns regarding consumer protection issues. This type of data often includes social media usage and education levels.

In a similar manner, the innovations within the fintech industry could also result in privacy, security, and even data-ownership risks, despite the increased convenience such innovations provide to consumers. Such concerns have become even more heightened in light of large-scale cybersecurity breaches. Data privacy is expected to become an increasingly growing concern as the data sets utilized by financial institutions expands beyond the information typically used to evaluate consumer credit histories. Concerns have also emerged over the way data ownership will be handled and even whether consumers will have any input regarding how such data is used, whether it will be shared and whether consumers are able to view such data for accuracy. A request was recently issued by the Consumer Financial Protection Bureau to gain improved understanding regarding both the risks and the benefits of the latest financial services. Banks that collaborate with fintech firms will need to take control of the risks related to new products introduced by the fintech space.

According to Brainard, the rapid pace at which the fintech industry is developing has raised questions regarding how the Fed will handle regulatory activities. Even so, she believes that the organization is in a good position to assist in shaping this rapidly growing innovation as it continues to develop.

Ultimately, it will be necessary for regulators to be prepared to customize supervisory or regulatory expectations as the fintech space continues to develop. This means making adjustments on an as-needed basis to manage correlating risks.

It certainly cannot be denied that the new products and services introduced by the fintech industry can be beneficial for both lenders and consumers. Even so, moving forward, it will be necessary to exercise caution to ensure that the rights of consumers are not breached through the use of data that could be privacy sensitive.

State-level student loan refinancing bill dead in state Congress

A student loan refinancing bill that could potentially have assisted tens of thousands of borrowers in the state of Virginia with refinancing their student loans is now dead in the state congress. The bill was sponsored by Del. Marcia “Cia” Price and Del. Marcus Simon. Had the bill passed, it would have created a state entity that borrowers would have been able to tap into for refinancing their student loans at lower rates. Similar programs are already available in other states. According to sponsors of the bill, the economy is being hampered by student debt. Young people are being held back as a result of the burden of student loan debt they carry. Even after they have graduate college and obtained good jobs, borrowers still find themselves in situations where massive amounts of their paychecks are going toward paying back the loans they took out to fund their education. This is money that could have been spent in improving the local community and economy.

Supporters of the legislation have been concerned about the impact of rising student loan debt on the economy at large as well as the effect that this debt is having on an entire generation. Millennials, in particular, have proven to be hesitant about buying vehicles and homes. Some have even postponed starting families while others have been forced to choose jobs based on the ability to pay back their loans rather than their passions.

In many ways, it’s a Catch-22 situation. In order to obtain good-paying jobs, young people need college degrees. Yet, as the cost to attend college continually rises, most students and their families find they simply have no choice but to take out loans. Students are now graduating with an average of more than $28,000 in student loan debt. As a result, some students have begun to consider whether it is even worth it to attend college when they know they will have to take on so much debt in order to do so. The bill that was recently killed in the Virginia congress might have been able to encourage more young people to obtain the education they need, according to supporters of the bill.

At the moment, students in the United States have more than $1 trillion in student loan debt. A number of proposals have been floated for dealing with the problem, and the subject of student loan debt was a topic that was hotly debated in the recent presidential election.

For now, there appear to be no clear-cut solutions, at least not in terms of legislation. Borrowers and their families who are facing the prospect of paying back massive amounts of student loan debt may find they have few options available to them.

Among those options include trying to qualify for an income-driven repayment plan. This type of plan is based on the borrower’s income and could provide some financial relief for borrowers who have been struggling to meet their loan payments.

Other possible options include consolidating and refinancing student loans. Not all student loans qualify for such programs, but for many borrowers, these options could be worth exploring. Refinancing is not always a slam dunk, as borrowers will usually need to meet certain lending guidelines, including a minimum credit score requirement. If you are able to refinance your student loan, however, it could mean being able to take advantage of a lower interest payment. In turn, that lower interest payment could lead to lower payments and the ability to pay off student loans faster.

In some cases, borrowers may be able to qualify to have their student loans forgiven after a period of time. It’s important for borrowers to be careful, however. If they opt to refinance their federal student loans with a private lender, they could lose the right to have their loans forgiven through a government loan forgiveness program. Ultimately, such a move could cost borrowers several thousand dollars, so it is important to exercise caution when refinancing loans.

While there are some options available to assist borrowers at the moment, for many people, those options are simply not enough. Clearly, the level of student loan debt under which the country is struggling at the moment remains a serious problem. It is an issue that will most certainly continue to receive attention in the months and years to come. How lawmakers at both state and federal levels may choose to deal with this issue will remain to be seen.

U.S. Dept. of Education admits to overstating student loan repayment rates

In the final week before the Obama Administration left power, the U.S. Department of Education (DOE) released a memo admitting it has been overstating student loan repayment rates for most colleges since 2015. The bogus data, attributed to a coding error, was posted on the DOE’s College Scorecard. The revised data restated the repayment rates, which measure the percentage of borrowers with undergraduate student loans who have repaid at least $1 of their principal balance. The percentages group the borrowers by time period (one, three, five or seven years) since the loans first entered repayment, and defaulted loans – delinquent for one year or longer — are excluded.

The upshot is that the percentage of delinquent and defaulted loans is higher than previously claimed by the DOE.

Prior to the correction, DOE reported that more than half of the student borrowers at 477 colleges and vocational schools had defaulted or hadn’t paid down their debt within a seven-year period. That number was revised to 1,029 schools, and the seven-year repayment rate at some colleges dropped by as much as 29 percent. Repayment rates for three-year periods fell from 61 percent to 41 percent. The five- and seven-year rates dropped from 61 to 47 percent and 66 to 57 percent, respectively.

One of the hardest hit schools was the University of Memphis, which saw its seven-year repayment rate drop from 67 to 47 percent. The school commented that it “was not contacted by or made aware of the data changes” from the DOE. “Given the magnitude of the numerical changes in the report released by the Department of Education, the University of Memphis will be challenging the accuracy of the newly adjusted data.”

The impact of the corrections was felt greatest in the shorter time periods. This is perhaps explained by the introduction in recent years of income-driven repayment plans, which make less of a dent in principal for a given period than do the regular plans. In addition, the older groups have had more time in the work force and thus a greater opportunity to pay down their loans.

While the new figures corrected each school’s statistics, the categorization (above average, average, below average) of the schools with regard to repayment rates did not change much. Less than 10 percent of the schools were re-categorized due to the new numbers. Nonetheless, the new figures show that the DOE had overstated the repayment rates of virtually all U.S. trade schools and colleges.

Some analysts praised the Obama Administration for fixing the numbers before it left office. Others observed how much worse it would have been politically for the outgoing regime if the Trump Administration made the announcement. Given the Republican majority’s hostility to the DOE, it is reasonable to assume that this episode will be used as political fodder to change the federal student aid system. After all, it is the U.S. taxpayer who will have to foot the bill for defaulted student loans, and that bill will be hundreds of billions of dollars.

In December 2014, the Treasury Department predicted that as much as $3.3 trillion in student loans could be outstanding by the year 2024. No doubt these new numbers will cause that forecast to look overly rosy.

At best, this was an honest mistake, but others may see it as an attempt by bureaucrats to make themselves look good and advance their careers. We expect that kind of behavior in China, but in the U.S., not so much. Nonetheless, fingers will point and careers will suffer. Conspiracy theorists will no doubt call this another example of “fake data.”

How changes to bankruptcy code could affect your student loans

Student loan debt continues to be a cause for concern among American borrowers, despite recent shifts to make repayment easier on a substantial number of graduates. The majority of individuals have a difficult time paying for higher education costs out of pocket, given the nearly 6 percent inflation rate on tuition each year. To add to the financial pain, graduates over the last decade have experienced dismal prospects for high-paying, stable employment after earning an undergraduate or graduate-level degree. To combat some of these issues, the federal government made sweeping changes to repayment programs available to borrowers, including income-based options and forgiveness options after a set number of years.

Even with income-base repayment programs in place across all federal student loan programs, borrowers graduating in 2016 are burdened with an average of $37,172 in loans to repay over the course of their lifetime. Some borrowers who take out student loan debt to complete higher degree programs are apt to have two to three times more in outstanding loans – a financial burden that is hard to champion even when no other consumer debt is owed. When other lending tools are used to finance life’s expenses, managing student loan debt becomes even more of an issue for some struggling borrowers.

One of the methods to get out from under the vicious cycle of debt payments is bankruptcy. Through a court process, individuals have the opportunity to cancel or negotiate down their outstanding debt due to financial hardship. However, as promising as bankruptcy may be for some indebted borrowers, consumers with student loans rarely had the option to utilize the courts to cancel or negotiate down federal or private debts used to finance their education. That may be changing soon.

Proposed Bankruptcy Amendments

Recently, democratic lawmakers proposed changes to legislation that would provide student loan borrowers the ability to discharge their education debt through the bankruptcy process. Under current law, borrowers filing bankruptcy do not have the option to cancel student loan debt unless they could adequately prove they experienced an undue hardship. For most, meeting this burden of proof is a near impossibility, leaving student loan balances and ultimately, repayment, still a reality after bankruptcy is filed.

The proposed amendment would allow borrowers to include student loan obligations in a bankruptcy filing if the lender servicing the loans failed to offer a debt relief option. The federal government offers the Pay As You Earn program, also known as PAYE, which gives borrowers the opportunity to cap student loan payments based on a percentage of their monthly income. After 20 years, the remaining balance of that borrower’s student loan debt is forgiven under the program. If private student loan lenders did not offer a similar program to borrowers, student loan debt could be canceled or significantly reduced through bankruptcy filing for qualified borrowers under the proposed legislative changes. To take things a step further, some lawmakers have introduced changes that would allow student loan borrowers to include all education debt in bankruptcy filing, even if a debt relief program similar to PAYE was offered directly from the lender.

While the efforts to reverse the student loan debt crisis are commendable in some circles, others fear the added bankruptcy protection paves the way for a downward spiral affecting the other side of the student loan coin.

Impact on Lenders and Investors

A shift in the lending marketplace has taken place steadily over the last ten years, with an influx of online lenders making the ability to apply for and secure affordable loans a reality for the vast majority of consumers. Online lenders like SoFi, Lending Club, and Common Bond have taken the reigns in the student loan arena, offering more attractive rates and repayment terms to borrowers who were dissatisfied with their private or federal student loan terms. While these new lenders have proven to be beneficial to borrowers from one standpoint, they do not offer flexible repayment programs that are linked directly to income nor do they provide any option for forgiveness after years of consistent repayment.

However, the inability to change repayment terms on a refinanced student loan makes for an attractive investment to outside investors. Protection of student loans against discharge through bankruptcy means that the balance of the loan will be repaid at some point in time, and investors are drawn to the less risky portfolio of online lender loans that include student debt than other packaged consumer debt portfolios. Online lenders have created billions of dollars worth of portfolio of student loans to sell to investors, known as SLABS. These bundled debt securities have received an investment-grade rating from agencies like Moody’s and Standard & Poor’s not only because of their inability to be dissolved in bankruptcy filings but because the lenders require fairly strict underwriting requirements to be met by borrowers prior to approving new loans.

With the proposed change in bankruptcy law under review, investors and lenders face an uphill battle in maintaining the value and the high rating of securitized student loan portfolios. Should the protection through bankruptcy disappear, borrowers may be more apt to default on their loan repayment knowing that discharging the debt is an option. If that were to take place in droves, the SLABS created by lenders would face a widespread downgrade, and investors would have cause to sue lenders offering the securitized debt as a way to recoup undue losses.

The proposed amendments to the bankruptcy laws may ultimately be beneficial to some student loan borrowers who are faced with an insurmountable burden of repayment. Being able to discharge debts through bankruptcy wipes the slate clean in terms of monthly debt obligations and capitalizing interest charges; however, borrowers filing bankruptcy face years of credit issues that are not easily overlooked by new creditors, including mortgage lenders, auto finance companies, and personal loan providers. Time will tell if the proposed changes to bankruptcy law will go into effect in the near future, but investors, student loan lenders, and borrowers all face continued challenges in the event the laws are changed.

Eight tax deductions you shouldn’t miss taking this year

Doing your taxes is not a walk in the park; after all, there are so many variables that you need to consider. It can be so painful to realize that you forgot to include a tax deduction that would have lowered your tax bill. Some people fear the tax process and overlook some of the details when filing tax returns, and thereby, they miss certain crucial tax deductions.

The good news is that there are several tax deductions that you can take advantage of to reduce the overall tax expense this year. You should consider looking at the following tax deductions:

1. State sales taxes

One tax deduction is for the sales taxes. Deducting sales taxes off your federal income tax can be a huge money saver. You can properly itemize your deductions and claim either the state or local income taxes paid in the last year. If, for instance, you made a major purchase (e.g. a car or pricey office furniture) taking a sales tax deduction can be a good deal. The IRS has a calculator that can help you know clearly your potential sales tax deduction based on your income, state, and local sales tax rates.

2. Charitable gifts

In most cases, people overlook the non-cash charitable contribution deduction when they are filing their tax returns. As you give cheerfully to charitable work, you should determine fair-market value for the items. These out-of-pocket expenses for charity work qualify for tax deductions. For instance, if you make cakes for a charity fundraiser, you can deduct the cost of the ingredients you used to bake the cakes. You also need to have the receipts or itemize the costs in case of an audit. It is also advisable to give appreciated stock than writing a check for charitable work.

3. Student loan interest deduction

Each year, Americans pay $80 billion in student loan interest payments. If you are a graduate or a current student who benefited from the qualified student loan, you are eligible to deduct the interest you paid for the loan. Some of the ways in which you can qualify for the deduction is if you have paid interest on the qualified student loan within the current tax year, your filing status is not married filing separately, you are no one else’s dependent on tax returns, etc. In addition to this, you do not have to itemize to benefit from this deduction. This deduction can be up to $2,500 of the student loan interest paid.

4. High education expenses deduction

If you or your dependents paid for higher education, you can claim the Lifetime Learning Credit that is worth up to $2,000 per tax return. You can also claim the American Opportunity Credit that is worth up to $2,500 for the qualified education expenses. This can be a great money saver for you this year. Do not let the burden of education wear you down.

5. Mortgage refinancing points

When you pay points to reduce your mortgage interest rate, it becomes tax deductible. However, there is a difference if you refinance compared to if you just bought your home. When you purchase a home, it is possible to deduct the points fully on the year you closed the loan while for a refinance, the deduction is spread out evenly over the period of the loan.

6. Child and dependent care credit

Credits are more beneficial than deductions since they reduce the tax bill significantly and you cannot afford to miss out on this one. If you pay for child care while you work, you can qualify for a tax credit worth between 20 percent and 35 percent of the amount you pay. It is even a better deal if you pay the child care with pre-tax dollar in a case where your boss offers a child care reimbursement account. Tax credits help reduce the burden of child care.

7. Self-employed tax deduction

If you are self-employed, you may find yourself paying huge self-employment taxes. Such a tremendous tax obligation can be so tough. However, you can reduce a sizable amount of the tax through self-employment tax deduction that helps to adjust your income. You can also benefit from self-employment health insurance deduction that enables you to deduct the full cost paid for health insurance you purchased for yourself, your spouse and/or your dependants.

8. Moving expense tax deduction

It is also possible to get tax deduction on job hunting expenses in the same trade or business that you have been in. Qualifying expenses are deductible even if you were not offered the new job. The job hunting expenses include resumes, postages, job counselling, telephone charges, and travel for interviews and employment agency fees that isn’t reimbursed by the prospective employer. However, these costs must exceed 2% of your adjusted gross income (AGI). To qualify for this deduction, you must be able to pass two tests i.e. distance test and time test. For distance test, you must be at least 50 miles farther away from your old home than your old job location was from your old home while in time test you must work full time for at least 39 hours during the first 12 months right after you arrive in the general area of your new job.

There are several tax deductions that you can take advantage of this year. Do not miss out. Most of them are hidden within the itemized deductions section. You can also visit the IRS website for more information on additional tax deductions. It is also important to note that tax laws change every year. You therefore need to keep on top of what is going on as far as deductions are concerned so that you can lower your tax bill significantly. Do not overlook most of the things as you do your tax returns. Keep to the details and consult when necessary. You can save a lot of money.

Consider this strategy for tackling student debt in 2017

Debt is a four letter word, and one that can leave you feeling anguished and frustrated. There are over 40 million Americans who are facing student loan debt. This debt can leave someone feeling frustrated, hopeless and anguished over the way that their earnings are being spent. In fact, when you are facing this type of debt, you may feel as though it may never end.

There are two types of student loans that you can get, one being a private student loan, and the other being a federal student loan. However, they have one thing in common, and that is high interest rates that sometimes make them hard to manage.

To overcome the challenge of paying these loans, there are student loan refinancing companies that offer loan refinancing with lower interest rates. They also have the added benefit of bringing down the monthly payment that is to be made. So, how can you tell if this is the right option for you?

New Repayment Terms

To pay back your loan with ease, all you may need is a new repayment term and you will be able to get back on your feet with the repayments. There are several things that you should review before making the decision to refinance your loan.

The first of these is the repayment period, to establish the length of time that you will be paying back the loan. For most student loans, you will be given ten year repayment to complete the payments. When you opt for refinancing, you can stretch this to up to twenty years. This has the benefit of bringing down the amount that you pay in each month down tremendously.

This then ties in with the interest rate that you are being offered, and here is where you need to be careful. You should look for a refinanced student loan that offers you a fixed interest rate, especially if you are not sure about the stability of the market. This will also make it easier for you to plan for the future, and the best way that you can manage your finances.

With repayment terms, ensure that you do a comparison on the monthly payment, to see whether it is favorable or not. This is the best way for you to tell if you will really be saving money in the long run.

Consolidated Finances

When you have a student loan, as well as other loans and a credit card, it can become confusing when it is time to make all the necessary payments that you need. However, when you choose refinancing of your student loan, it becomes easier to consolidate all of the loans that you have. The benefit of this is rather than making many small payments to service your loans, you can make just one payment per month that will manage all your loans.

You may find that you have a higher monthly payment at the end of this exercise, but the benefit is that you save yourself time and countless calculations. All the difficulty of keeping track of your loans is taken care of with a consolidated loan, leaving you the time to focus on more important things. Like working hard and making a considerable amount of more money.

Financial Independence

When you were getting your student loan, you may have had a cosigner on your student loan to make the entire application process go much smoother. This is great in the short run, but in the long run, you find that you are tied down to this person. If the person has an excellent credit score, at least one that is better than yours, this may not be a bad thing. However, if they do not, you may find that your own credit score is affected as time moves on. As a new graduate, this could be detrimental, and it could mean that you have to repay back your loan with a higher interest rate, or a monthly installment that is high as well.

When you get refinancing, you are able to explore your loan without having a cosigner. This will give you the freedom that you need to be financially independent, and also allow you to change the terms of your loan. This means that you can alter the amount that you are paying back on a monthly basis, so that they can better suit your income. You may even be able to get a lower interest as well, which will automatically result in you saving some money. When you think about it, this could put you in an excellent financial position, and make it much easier for you to plan the future of your own money.

Final Thoughts

Before you jump into making the decision to refinance your loan, ensure that you have looked at all the things that could happen when you choose to do so. Remember, the decision that you will make is a big one which could have a serious effect on your future. The benefits that you can look forward to is increased flexibility in your repayments, which can help you build your finances for the better.

There are some things that you should keep in mind as you are making your decision. If you are unemployed, meaning that you have not reached the stage where you are getting stable income, you should avoid making this change. In addition, if you happen to be in between jobs, until you get yourself some stability, remain with the terms that you have been following. If you have just stepped out of college, give yourself some time to adjust to the way your student loan is working before you make the decision to change everything.

Speak to your peers and find out what the reputation of your potential lender is. They will give you reviews based on their own experiences which could prove to be invaluable. Then, you can make an informed decision.

Student loan companies’ post-election value skyrockets

While global markets did experience a drop overnight following the results of the U.S. presidential election, those same markets rallied by the next day. According to analysts, some industries showed significant improvement after the election. Among the stocks that experienced an increase in value was Navient, a company that services as well as collects on student loan debts.

The subject of student loan debt is one that received much attention during the election. During the current administration, student debt became a significant concern as college costs steadily increased and additional adult students opted to pursue a higher education, often at for-profit colleges. During the Obama administration, steps were taken to address the situation, including investigating for-profit colleges that many critics felt often preyed on students, leaving them with worthless degrees and high student loan debts.

Many critics feel that such steps have not been nearly enough, leaving far too many students continuing to struggle to pay massive amounts of debt from financing the cost of their education. In reality, student loan debt did show a significant increase during the last few years, a trend that has been blamed on states lowering investment in higher education, forcing a larger share of the costs onto students and their families. Regardless of the reason behind the crisis, Americans now hold $1.3 trillion student debt, a challenge the new administration will inherit. While president-elect Donald Trump has stated that the cost of attending college should not be an albatross around the necks of students for the rest of their lives, there are still many questions regarding exactly how he plans to handle the situation.

While campaigning for president, Trump proposed a number of changes that would directly impact the student loan situation, including putting an end to the federal government’s Direct Loan program. Under his plan, the program would be replaced with loans originated by financial institutions and banks. Eligibility for such loans would be based on the future earnings potential of students.

Other proposed changes include replacing all federal loan repayment plans. A new income-based plan would take the place of those plans, with monthly payments to be capped at 12.5 percent of the discretionary income of a borrower. Loan forgiveness of the remaining debt balance would occur after 15 years of payments rather than 20 years under the current system. Trump has also stated that he would consider reducing the size of or even shutting down the Department of Education altogether.

In addition, Trump has stated that he plans to lower college costs by reducing what he refers to as the administrative bloat resulting from compliance paperwork and federal regulations, making it possible to pass savings on to college students and their families.

Questions have also been raised as to whether Trump might have changes in mind for the Consumer Financial Protection Bureau, the federal agency responsible for keeping an eye on predatory student loan companies.

Currently, tens of thousands of student borrowers are requesting relief under a rule that allows federal student loan borrowers who were the victims of fraud at their schools to have their debts forgiven. Earlier this year, the process for filing borrower defense claims was streamlined by the Department of Education. However, some concern remains that work to address defrauded borrowers will not continue under the new administration, leaving thousands of people still facing what has become a crippling amount of debt.

A revamp of the student loan servicing system is currently underway by the Department of Education, with a goal of having the private companies responsible for managing the student loan repayment process to become more responsive to the needs of borrowers. According to critics, services rarely act in the best interests of borrowers.

In light of such concerns and a new incoming presidential administration, changes to the student loan servicing system could soon take place. Clearly, many investors feel this could be the case, as the value of companies like Navient has suddenly begun to skyrocket.

Navient Corporation offers a variety of financial services and products, operating in three areas. Those areas include Federal Family Education Loan Program (FFELP) Loans, Business Services, and Private Education Loans. The company also holds the portfolio of education loans guaranteed or insured under FFELP, along with the portfolio of private education loans. Additionally, Navient offers asset recovery services for receivables and loans on behalf of FFELP loan guarantors and colleges and universities.

Federal student loan consolidation vs. student loan refinancing

If you have student loans, you might be wondering how you can reduce your monthly payments and make paying off your federal student loans easier.

Student loan refinancing and student loan consolidation are both strategies that are often used and, at first glance, they seem quite similar. Both involve taking out a new student loan that will pay off your other student loans and centralize your loan repayment.

But there are significant differences between these two options which are important for student loan borrowers to understand.

Student Loan Consolidation

The federal student loan program offers the option of consolidating your loans. By consolidating your loans, you are essentially taking all of your federal student loans and combining them into one big loan. That often makes it easier for you to repay your student loans since you only have one big loan to pay. When you combine your debt via consolidation, your new interest rate is the weighted average of your previous student loans.

There are a lot of reasons why you might want to consolidate your loans. For example, if you are in danger of defaulting on you federal loans, you can potentially consolidate them and enroll in an income-based repayment plan in order to reduce your payments.

You might also consider consolidating your student loans if you have a variable-rate loan that you want to consolidate into a fixed rate loan. While current student loans do not have variable rates, some loans that were disbursed prior to 2006 were variable rate loans. Borrowers often prefer the certainty of knowing what they will owe via a fixed rate loan versus of the unpredictability of a variable rate.

If you’re consolidating your loans through a federal Direct Consolidation Loan, you can only combine your federal loans and you cannot include your private loans in your consolidation loan. While you could consolidate all your loans via a private consolidation loan, you would lose some of the special benefits or protections if you consolidate your federal loans that way. Also, what is sometimes referred to as a private consolidation loan is generally a refinancing loan.

If you are thinking about consolidating your loans, be sure to find out what the consolidation origination fee will be. Most loans, including federal loans, will charge you a percentage of the loan balance as a fee for consolidation. You won’t have to pay this out of pocket, but it will be added to the loan balance.

Student Loan Refinancing

Student loan refinancing is not offered by the federal government, but there are many banks, and student loan refinance companies that offer loan refinancing options. Student loan refinancing is similar to student loan consolidation in that you get a bigger loan in order to repay all your other loans, but refinancing generally also involves getting a lower interest rate, especially if you have good credit and a stable job.

You can refinance both your federal and your private student loans or you can choose to just refinance your private student loans.

There are some risks to refinancing your federal student loansusing a private loan. For example, there are a lot of hardship provisions offered by the federal government that might not be offered by the private lender like income based repayment or student loan forgiveness programs. You also have more flexibility to change your repayment plan with federal loans.

But if you have a great job and fully expect to be able to repay your loans on time, then it could make sense to accelerate your repayment by refinancing your loans. By refinancing, you can reduce the amount you pay in interest over the life of your loan and you can accelerate your repayment since a larger percentage of your payment could go towards the balance of the loan.

Like with student loan consolidation, there is often an origination fee that you must pay when you refinance your loans. Make sure that you include that fee when calculating any potential savings you can get from refinancing.

Choosing What’s Right for You

If you’re looking for something you can do to help you repay your loans or lower your payments, student loan consolidation and student loan refinancing are both great choices.

When it comes to choosing what’s right for you, you have to weigh all the factors. Depending on how much you owe and how stable your job is, one option might end up being better than the other.

But you don’t necessarily have to choose between student loan consolidation and student loan refinancing. You might decide to consolidate your federal student loans and refinance your private loans.

More Employers are Offering Student Loan Assistance

When you’re looking for a job, you want to know what kind of salary and benefits a company offers. You might ask about their 401(k), health coverage, or pension plan during your job interview – but you might not think to ask if they help their employees repay their student loans.

It might surprise you, but many employers are now offering student loan repayment assistance benefits. This is largely in response to the large amounts of student loan debt that their millennial employees currently have.

According to a recent report, over 60 percent of current graduates are leaving campus with student debt. Companies have also been finding that those same graduates aren’t taking advantage of other benefits like 401(k)s because they are struggling to repay their loans. In fact, a study by T. Rowe Price found that 68% of millennials who are eligible to for a 401(k) don’t contribute to it.

That’s led employers to search out benefits that would be more attractive and beneficial to millennial employees and they’re finding that millennials are very excited about student loan repayment benefits. A study conducted by Willis Towers Watson, found that currently just 4% of companies have student loan repayment programs, but that by 2018 around 26% of companies will offer it.

Why They’re Offering It

By offering student loan repayment assistance, these companies are helping their young employees repay their loans which helps relieve them of the stress they feel about their debt. That allows their employees to concentrate on their work and be more productive.

But it’s also a great way for companies to differentiate their benefits offerings to make themselves more attractive to job applicants. By offering student loan repayment assistance, they’re distinguishing themselves amongst their peers and helping to improve retention.

As more companies sign on to offer repayment benefits, expect the rate at which new companies decide to offer them to increase as they realize that they also need to offer repayment benefits in order to be competitive with other companies in their industry.

How Student Loan Repayment Assistance Works

There are a few ways that employers help their employees through student loan repayment benefits. The most common is when they provide a certain amount of money to put towards an employee’s student loans every month. This is usually around $100 - $200 and is paid out monthly.

But some companies decide to use their repayment programs to boost employee retention. For example, many choose to give out their student loan repayment benefit once per year. Instead of paying out $100 a month then, they will provide a $1,200 lump sum. Still others choose to give out even larger lump sums to those who stay at the company for 3 or 5 years.

Some of these student loan repayment benefits are offered to all employees, whereas others only offer the benefit to those who have recently been hired, are in junior positions, or who recently graduated.

Repayment assistance benefits aren’t like 401(k) contributions as they don’t necessarily require that you make a matching contribution. But some companies will ask you for proof that you have used the funds for your student loans, whereas other companies use repayment assistance program management companies like EdAssist and Tuition.io which allow them to directly pay down their employees’ debts.

Is It Tax Free?

This is where the bad news comes in. Student loan repayment assistance is currently a taxable benefit. That means that you will have to pay taxes on any money your employer puts towards your loans come tax season. On the bright side, there are several pieces of legislation that have been proposed to make these benefits tax-free in the future.

Who is Offering These Benefits?

Some of the companies that were the first to offer student loan repayment benefits are in industries where there is a lot of competition for talent. For example, PricewaterhouseCooper, an accounting firm, was one of the first to sign on board. Other companies offering the benefits include Fidelity, and Nvidia. Many companies who are in the student loan refinancing or repayment space also offer it to their employees like CommonBond.

The Future

Expect more companies to start offering student loan repayment assistance as applicants begin to expect it. Also, expect legislation to soon pass to make repayment benefits tax-free. By 2025, this important new benefit will likely be mainstream and available as part of most company’s benefit plans – something which will greatly help employees.

What do rising interest rates mean for graduates with student debt?

With speculation in the news that interest rates could be on the rise, many student loan borrowers are wondering how rising rates might affect their student loans. Below, we cover the various ways in which student loan borrowers might be impacted by rising interest rates.

Why a Rise in Interest Rates?

Before looking at how student loan borrowers might be impacted by rising interest rates, it’s important to understand exactly why interest rates might increase.

The Federal Reserve, often referred to simply as the Fed, is an independently operated entity. Congress is responsible for overseeing the Fed, which is operated by a Board of Governors appointed by the president of the United States and subsequently confirmed by the Senate. That board, which is comprised of seven people, along with economists and support staff are responsible for composing policies that are designed to keep the economy stable. Ultimately, those policies are meant to safeguard the country’s financial and monetary system.

In addition, the Fed serves as a central bank for the country while ensuring that the nation’s financial systems operate in a way that protects consumers and the economy. One of the ways in which the Fed does this is by managing interest rates through the Federal Open Market Committee.

During times in which the country experiences an economic struggle, the Fed may take action by lowering interest rates. This is usually done in an effort to help the struggling economy. Conversely, the Fed may sometimes opt to raise interest rates in an effort to slow down the economy by making it more difficult for consumers to borrow money. This sometimes occurs if the Fed feels the economy is growing at too rapidly a pace.

Federal Student Loans

Whether your federal student loan is impacted by rising interest rates depends on a few factors.

Student loan borrowers who have loans that were originated prior to 2006 could be affected based on whether their Federal Stafford Loans were variable. That was based on such factors as whether you were in school, in repayment, or within the grace period. For loans that have a variable interest rate, you could experience an increase in your monthly payments. Current student loan borrowers with federal loans generally would not be affected by an increase in interest rates. However, Congress sets federal student loan interest rates each year. Rising interest rates will increase the costs of borrowing for future students.

Private Student Loans

The group most likely to experience the pain of rising interest rates is those with private student loans. This is particularly true if you have a variable rate loan. Those who have a fixed interest rate will not feel the pinch of rising rates, as their monthly loan payments will remain the same. For variable interest rate loans, that is not the case, however.

In the event that you do have a private student loan with a variable interest rate, you may wish to consider refinancing your loan to take advantage of a fixed interest rate. This strategy would allow you to hedge against rising interest rates in the future. The only instance in which this might not be the best course of action would be if you know you can pay off your student loans over the next couple of years. In this type of situation, a variable interest rate could potentially save you money, as it is usually lower than a fixed rate.

When it comes to student loan interest rates, most borrowers will not be impacted by an increase. Only those who have refinanced to a variable interest rate loan and private student loan borrowers will experience an impact because of increasing interest rates, and even then, the effect is likely to be relatively small.

Refinancing

One of the first ways in which student loans might be affected by rising interest rates is through refinancing. Many student loan borrowers seek to manage their student loan debt by refinancing their loans to a lower interest rate. This can be a good option if you have multiple loans and at least some of those loans have a high interest rate. By refinancing your loans, you can often roll them into a single loan with a lower interest rate, resulting in lower monthly payments. Along with paying less per month for your student loans, refinancing also presents the opportunity to pay off your loans faster and pay less over the duration of your loan term. Those benefits could be reduced if interest rates should rise in the future.

This story was originally published June 19, 2018 at 8:05 AM with the headline "Editor’s Note: Full texts of previously published student loan articles."