Before you pause your student loan payments, consider the risks

Silhouette Portrait of a graduate in cap and gown

 

Yet when your payments resume, they’re often higher because your debt has swelled, thanks to interest.

The Associated Press, citing a 2017 Department of Education audit, reported this week that Navient, one of the country’s largest student loan servicing companies, steered tens of thousands of struggling borrowers into costly delays of their payments, known as “forbearances.”

Made conscious decision to focus on quality, not quantity of loans: SoFi CEO Anthony Noto   4:00 PM ET Tue, 23 Oct 2018 | 03:12

The Consumer Financial Protection Bureau alleges that Navient added more than $4 billion in interest to borrowers’ debt through the misuse of forbearances between 2010 and 2015. Navient disputes the allegations in the audit and those by the CFPB.

Despite the fact that putting off payments increases their debt, nearly 70 percent of people who began repaying their student loans in 2013 had their debt in forbearance for some period, according to an April report by the Government Accountability Office.

What else can a borrower do?

Borrowers should first ask whether a deferment is available before they opt for a forbearance, said Bruce McClary, vice president of communications at the National Foundation for Credit Counseling.

That’s because interest does not accrue on subsidized student loans during an economic hardship deferment, for example, as it does with a forbearance. There are also deferments for cancer patients now.

If your difficulty repaying your student loans is unlikely to come to an end any time soon, you might want to enroll in an income-driven repayment plan, which caps your monthly payment at a percentage of your income. Some monthly bills wind up totaling nothing.

Is a forbearance ever a good idea?

Borrowers who find themselves in a short-term difficulty, such as a medical leave or temporary unemployment, might want to consider forbearance, said Mark Kantrowitz, an expert on financial aid and publisher of SavingForCollege.com.

A forbearance typically lasts a year, and borrowers can use the option up to three times.

If possible, however, people should request a partial forbearance and keep up with at least their interest payments during the break.

“This will prevent your loan from growing larger during the forbearance,” Kantrowitz said.

Can I trust my lender?

Given that student loan servicers might not always provide borrowers the best information, it helps to review your options with a nonprofit such as The Institute of Student Loan Advisors, an organization that offers free advice and dispute resolution.

[“source=cnbc”]

Top 5 must-knows for education loan tax deduction

Gaurav Aggarwal

Education plays a crucial role in the economic development of all societies. While there is a universal acknowledgement to the need for public funding of primary and secondary education, public funding of higher education in a developing country like India is not feasible.

Thus, recognising the importance of higher education and the role of institutional funding to deal with rising cost of higher education, the policymakers came out with tax deduction on education loans under Section 80E.

The objective was to relieve interest burden from education loan borrowers through tax incentives. However, to claim the tax deduction, the borrowers have to meet certain conditions.

Here is a list of ‘must-knows’ regarding tax deduction on education loans:

Principal component does not qualify for tax deduction:

Borrowers often misunderstand tax exemption provisions available on education loan. This stems from tax exemptions available on home loan where both principal and interest components of EMIs qualify for tax deductions under Section 80C and 24b, respectively.

[“source=marketingweek]

Student loan debt isn’t just a millennial problem

How to deal with college debt

As most now know, skyrocketing student debt can be particularly devastating for young adults.

But it’s not just millennials who are delaying life’s major milestones because of their loan burdens, according to a new report by the Association of Young Americans, or AYA, and AARP, an association representing the interests of Americans over age 50.

Debt from student loans is also standing in the way for Generation X and baby boomers, the report said.

“The trillion dollar student loan crisis is having a tangible impact on all Americans across all generations,” said AYA founder Ben Brown.

“Student loan debt has been a barrier in making key life decisions and planning for the future,” Brown said. AYA and AARP polled nearly 5,000 adults, including millennials, Gen Xers and boomers, between July and August.

Here’s a look at some of the long-term consequences:

Saving for retirement
Four in 10 respondents said student loan debt stopped them from saving for retirement, including 41 percent of millennials, 38 percent of Gen Xers and 31 percent of boomers.

Buying a home
About 1 in 3, or 32 percent, said college debt prevented or delayed them from buying a home, including 36 percent of millennials, 26 percent of Gen Xers and 32 percent of boomers.

Helping a family member
One-quarter of those polled said student loans stood in their way when it came to financially helping a family member, including 23 percent of millennials, 29 percent of Gen Xers and 26 percent of boomers.

Having health care
Nearly 1 in 5, or 16 percent, said their debt burden hindered them from getting the health care they need, including 17 percent of millennials, 16 percent of Gen Xers and 9 percent of boomers.

Overall student debt reached a record $1.5 trillion this year, according to the Federal Reserve. Seven in 10 seniors graduate with debt, owing about $29,650 per borrower, according to the most recent data from the Institute for College Access & Success.

To ease some of the burden, Brown recommends sending in a little more than the minimum payment each month toward principal of the loan — by even $10 or $20 — to pay off your loan faster and spend less in interest.

“The sooner you can repay your student loans, the less you have to pay,” he said.

[“source=forbes]