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Archive for the ‘Zero Debt For College Grads’ Category

The main types of programs that will help you eliminate student loan debt include:
* service-based work activities, such as becoming a police officer, firefighter or social worker
* volunteer work, such as joining VISTA or the Peace Corps
* working for the federal government and taking advantage of the Federal Student Loan Repayment Program
* working in the medical arena as a doctor, nurse or other specialist, in places where there is a critical shortage of healthcare experts
* enrolling in the armed services (i.e. Army, Navy, Air Force or Marines)
Read this post on how to pay off student loans fast, including getting help from student loan assistance programs. Also, refer to my book Zero Debt for college Grads for an extended list of specific programs to help you tackle student loan debt.

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Congratulations on your the upcoming birth of your child. And hats off to you for managing those kids at the same time you are trying to manage your own finances. Unfortunately, I don’t know if any grants to help you pay off your student loans just because you are a cash-strapped mom. However, there are some possible relief programs you may qualify for that would allow you to get a forbearance or deferment on your student loans given your situation. For example, some lenders (like Sallie Mae) will give you a temporary break on making student loan payments while you are pregnant and can’t worry or even for new mothers re-entering the workforce. Read this post (and the others linked to it) entitled Seven Smart Ways to Pay Off Student Loans Fast for more ideas about getting deferments, forbearance or loan cancellations during times of economic hardship.

When you say “Direct Loan,” I believe you are referring to the U.S. Department of Education’s Direct Loan Program (www.dl.ed.gov), where you can transfer and consolidate your federal education loans into a single, new loan which offers lower monthly payments. Whether or not it makes economic sense to transfer the loans depends on a host of factors, including: how manageable (or unmanageable) your monthly payments are; how many payments are left on your existing loan; the amount of time and interest you are willing to pay over time; and the interest rates on your current loans.

If you have variable rates on those Stafford Loans, it may be helpful to consolidate them in order to get a fixed rate. On a Direct Consolidation Loan, the rate is based on the weighted average of all your combined loans, rounded up to the next highest 1/8th of a percent. Your loan rate can never go above 8.25%. There are two quick and easy ways to see the financial ramifications of transferring/consolidating your loans. You can use this online calculator provided by the Department of Education. Or you can simply call the Department of Ed at 800-557-7392 and a customer service representative will be able to tell you your new payments — as well as how much extra you will pay in interest charges by consolidating.

I don’t agree with the advice you’ve been given. I think it represents old-time thinking. Gone are the day when people had to (or wanted to) keep a home forever just for the sake of having a having a home that was owned free and clear. Don’t get me wrong: It’s still great to have a mortgage free property. But in your case, this sounds like a rental and perhaps not your primary residence. Even if you do live in one part of this two-family home, it sounds like the whole point of why you bought it was to pay off those student loans as quickly as possible. In other words, this property was an investment. Pure and simple. So you shouldn’t get emotionally wrapped up in it and feel like you need to keep it until it’s paid off.

Neither do you need to wait until the 30 year mortgage is paid off in order to get the financial benefits of property ownership. So if your goal is to quickly rid yourself of those student loans, by all means, I would encourage you to look into selling the property.

One caveat applies, however: You said you bought it with the hopes that it would appreciate and then you could sell it. I don’t know how long you’ve owned this home. But if you bought in in the past 2 to 5 years, it’s possible that it may have done the opposite of what you’d hoped — not appreciated, but actually fallen in value. If this is the case, your equity may have been diminished or wiped out completely, making a sale difficult. Under these circumstances, I would advise you to hold on to the property for a year or two longer – or at least until the real estate market turns around.

Here’s what to do right now. Get a local real estate expert to come see your property and give you a comprehensive market analysis, which will tell how you much you could likely sell the home for in the current market. If the home isn’t “under water” — meaning you own  more on the home than it’s worth — then you can consider selling it. If all works out, and you reap a chunk of money from your real estate sale, you’d be wise to pay off those student loans, or at a minimum to knock out a huge part of your college debt.

Keep some money from the sale of your home, if you can, just to have some extra cash in the bank. It’s always good to have additional savings, because you never know when unexpected circumstances may arrive that force you to tap into your emergency fund. Also, if something unanticipated happens – such as a job layoff – you’ll have some savings to tide you over, and you won’t wind up in credit card debt.

Since you are now working as a police officer, your best option may be to investigate whether you will qualify for student loan forgiveness. This is granted to certain individuals who work in public service fields. To be specific, look into the debt-forgiveness provisions of the College Cost Reduction and Access Act, which became effective July 1, 2008. Its purpose is to help eliminate the student loan burden of public services employees, ranging from school teachers and social workers to fire fighters and police officers like yourself.

I don’t know many key facts about your situation, like whether or not you had federal loans or private loans, the exact total of all your college loans, and how long you may have been paying on them in the past. Nor do I have any idea about your income and expenses, or how long ago it was that you filed for bankruptcy protection. So it’s hard for me to give you more individualized guidance. In any event, you can get additional information and advice about your
loans online from the federal government at: www.studentaid.ed.gov. Also, even though Sallie Mae appears to have told you that you can’t consolidate, I wouldn’t rely solely on their word. To find out if you are eligible for a federal direct consolidation loan (which would also help you qualify for loan forgiveness) call the Department of Education at 800-557-7392 or visit their loan consolidation page at: www.loanconsolidation.ed.gov.