This morning, a student group came in to talk with me about communications careers and social media. It got me thinking about advice I would offer to the graduating class of 2013. I can go on for hours about careers in communications, but instead, here, I’ll focus on financial advice for your future.

• Don’t spend what you don’t have. Plain and simple. Step one to being independent is setting up a budget and sticking to it. Sounds simple, but you’d be amazed at how often adults fail at this. Buying on credit is spending what you don’t have. Learn to live on what you earn, no matter how little. Learn how to say no. And learn to be comfortable living within your means.
• Save, save, save. Adopt a frugal lifestyle, no matter how much you earn. Sock money away before you ever see it with automatic deposits. Invest in a retirement fund. Yes, in your 20′s. It’s important to develop good saving and spending habits at this stage in the game, rather than be someone else’s mess later on in life.  
• Blaze your own trail. I have been living in an apartment since 2003, paying rent. This makes my family legitimately angry. A lot of my loved ones feel very strongly that home ownership is important. I feel that saving up for a down payment is important. I have a strong retirement fund and a lot of cash savings. I feel good about this decision.// … I didn’t drive until age 28, and I didn’t buy a car until age 31. People thought this was shocking. Some loved ones actually got upset that I would “put myself in danger” on public transportation. I made due just fine.// … And while we’re on expenses, man friend and I are saving up for a wedding, eventually. Which means I’m 33 and not married, with no kids. And I am training for a marathon, travel often, and love my job. And I’m doing great.// …  Sometimes, people’s best financial advice, while heartfelt and well-meaning, isn’t what is right for you. Do your research, and believe in your own brain.
• Determine what you value, and make it your true North. In college, I vividly remember doing an exercise where we had to rank our top priorities in life. At the time, mine went something like: 1) Education, 2) Family, 3) Friends. It was my signal that whatever happened, my education and family came above anything else. Now, many years later, the same exercise would have  a different, but not unfamiliar, outcome. Nowhere in there would you find material goods, a big house, a fat salary, or climbing the corporate ladder. Today, I value my loved ones, I treasure new life experiences, and I value my health. The way I spend my time directly correlates to those. It’s easy balancing your budget when it corresponds nicely with your values. 
• Treat others how you want to be treated. In business, and in life, this is of the utmost importance. Don’t cheat, steal, lie, or step on others to get to the top. Be kind. Invest honestly. Live a life that’s worth living, and help raise others up, not drag them down.

Congratulations to the class of 2013. You face a long road ahead that will no doubt be filled with challenges, and no road map or course catalog offers a guaranteed path to get you to a place of happiness and financial security. But if you make wise choices, commit to doing good, and stay true to yourself, you’ll be closer than you think.

Here are a few other Budgeting Babe posts college graduates might be interested in.

• 2012:  Be the heroine
• 2012:  How not to handle your student loans
• 2008:  The class of ’08 scrambles to find work

The post Advice for College Graduates appeared first on The Budgeting Babe.

Congrats! You graduated!

For those of you graduating this year, I want to first say CONGRATULATIONS. You have worked hard to earn your diploma, and I hope you get some time to celebrate and enjoy the accomplishment. Go to dinner with your friends or family, get a cake from a local bakery, and relish your well-deserved achievement.

Note, I did not say buy a plane ticket to Vegas or Europe, or splurge on bling (are we still calling it that?), or adopt a pet, or rent a yacht. While you might feel like you deserve this level of celebration, and lots of your friends will be doing things like this, the reality is that graduation, for most US graduates, also means that you owe somebody a lot of money, more than you can imagine. 

I remember sitting in an auditorium learning about the terms of my loan. I remember hearing that I would be paying $200 a month for 10 years, and calculating that with my starting intern salary, which was $10 an hour (and no benefits).  This was 10 years ago, and debt hadn’t ballooned as out of control as it is today, with some undergrads paying up to $800 per month towards loans. Still, the thought of owing $25,000 was terrifying. It was the biggest debt I had ever taken on, and to this day remains the biggest debt I’ve ever taken on.

But despite that overwhelming initial terror, I got over it, made due and ended up paying off my loan without going broke – ahead of schedule by a few months, even.

And so, when I read about the woman in the Tribune article who took on nearly $40,000 for student loans and now can’t pay it back because of financial mismanagement, I saw a good opportunity to share what not to do when you graduate with a lot of debt in a bad economy. The truth is this: you can pay back your loans. It will take a lot of work, but with smart choices and some good planning, you can do it.

What not to do as you start your new life with a college degree and lot of bills:

• Unless you are relying on income from your parents to support your lifestyle, what you make is what you can spend. No more than that. Do not put a ton of new clothes, furniture, rent payments, vacations, or anything else on a credit card until you can afford it. Within “what you make,” even if it’s $10 an hour, you must fit in: your rent, your loan payments, any other credit card debt you incurred in college, your living expenses like heat, groceries, and transportation. If you write this down on paper and you can’t cover everything with your new salary, you either need to cut some expenses or bring in new income (ie. take on a second job). You cannot spend more in one month than you make. This will be your mantra.
• If you don’t have a job, you can’t take on rent. Live with your parents until you figure out how to make money. In this economy, it’s not wise to rent a place with only a few hundred dollars saved up and hope you can grind it out until you find something. If you have the luxury of staying at home (I did for two years after college), do it. Yes, it will be miserable. But not as miserable as being even more in debt. Trust me on this.
• If, like the woman featured in the Tribune story, you have $100,000 in student loan debt, please do not plan to take on a mortgage of any kind until your income can handle both your student loan AND your mortgage.
• Same goes for a car. I waited until I paid off my student loans completely to buy my car. I never had one before that. If you really need a car, save up for a used one and buy it cheap. Not on your credit card and not with a loan if you can’t make the monthly payments.
• If you can’t make your monthly payments, also don’t take on pets that require lots of vet care. I can attest that they can be very costly.  Maybe try a plant first, or a goldfish? The woman in the article took on $4,000 in vet bills. I understand she felt she needed to. But if you’re in debt, don’t let it get to that point. Animals are expensive, that’s why there are so many of them in shelters right now, abandoned by owners who couldn’t afford them. Wait a few years for your pet, until you at least know you can give them a safe, healthy, and secure home for life.

In summary, the recipe for paying off your mega student loan bill goes like this: don’t spend money you don’t have. Don’t go further into debt for anything, except perhaps your health. 

I promise, promise, promise you, this does not mean you can’t have fun. There are free things to do everywhere, interest groups to be joined, clubs to be formed, and more. You might find that you end up loving your completely broke lifestyle. And most importantly, if you stick with the plan, you’ll be less stressed about your finances and a happier person overall.

Good luck to you and let me know how it’s going. I know you can handle this!

The post How Not to Handle Your Student Loans appeared first on The Budgeting Babe.

My cousin needed advice about consolidating private loans from Sallie Mae (which is not a government lender). Unable to give her much direction, I contacted the company directly and was able to correspond with Martha Holler, vice president of corporate communications at Sallie Mae.

Martha told me that private loans, even those called “student loans” or “education loans,” were never available to be consolidated through the government. If you have a student loan through Sallie Mae, and it’s a private loan, you will have to go through another lender to consolidate your loans. However, consolidation may not always be the best option for you if a lower interest rate isn’t available, and it’s important for you to note that consolidated private loans don’t always carry fixed rates (like consolidated government loans do).

She also told me that government loans (Stafford or PLUS loans) are still available for consolidation under the Federal Direct Consolidation Loan Program. However, Federal loan consolidation is no longer the “no brainer” that it used to be, because new Stafford and PLUS loans carry a fixed interest rate (it used to be variable) so consolidation is no longer necessary to “lock” a rate.

The bottom line here is that it’s important for parents and students to really understand the terms and conditions of any loans when signing on the dotted line. It’s difficult for 17-year-olds to comprehend what they’re getting into, and harder still for parents to keep up when the loan environment seems like it changes daily. Planning ahead is key, so whether you’re saving for your child’s college fund, taking out loans now or just starting your payments, don’t try to just “go with the flow” in hopes that you’ll always come out on top. Be an information sponge, and stay on top of your finances and loans. Only then can you (or your daughter) become the fierce, fabulous and ferocious diva that college degree entitles you to be.

For those of you interested, here is Martha’s complete response to my e-mail. There’s a lot of good information here for those in repayment. (And for those of you still planning for college, it happens to be National College Savings Month… visit www.CollegeAnswer.com/savings or www.upromise.com to learn about long-term savings options.)

********************
FROM: Martha Holler
DATE: Wednesday, Sept. 3, 2008
SUBJECT: Sallie Mae Follow-Up

Nicole,

Significant legislative cuts that went into effect on Oct. 1, 2007 created an environment in which federal loan consolidation generated a negative return for lenders. Many lenders stopped consolidating loans – either leaving the business altogether or suspending their participation n the federal consolidation loan program because the program was no longer economically viable. Sallie Mae was among them, announcing in April our decision to suspend participation in the federal consolidation loan program so that we could direct more of our resources to students entering school.

Those who wish to consolidate their federally guaranteed student loans may still do so. While there are virtually no lenders who still participate in the federal consolidation loan program (see this link that amalgamates lenders’ program participation changes), the U.S. Department of Education can and will consolidate your student loans under its Federal Direct Consolidation Loan Program.

A few other points for consideration: Federal loan consolidation is not the “no brainer” that it used to be. New Stafford and PLUS loans carry a fixed interest rate and so consolidation is no longer necessary to “lock” a rate.
In addition, there are several other repayment options available (extended repayment among them, which allows you to extend your term to 25 years) to help you manage your monthly payment amount. Remember, anytime you extend your repayment term beyond the standard 10-year period (whether by consolidating your loans or by selecting an extended repayment option), you will pay more over the life of the loan. So, I encourage consumers to ask themselves what they are hoping to achieve? Lower monthly payment amount? Single bill? Would a temporary break from making payments suffice? If so, another option (such as a deferment or a forbearance, both authorized periods of time – usually 6 month increments – when you don’t need to make payments on your loan) may be a better bet. Then you can get on with successful repayment of your loans.

While it’s not quite as simple as saying “pick the amount you’d like to repay each month,” student loan repayment does have a number of flexible options – you can pay interest only, a percentage of your monthly income, you can extend your repayment term, you can stop making payments altogether for a short period of time. Consolidation was a popular option about 5 years ago when student loans carried variable interest rates that happened to approach 40-year lows – because it allowed you to lock a low rate. But much has changed since then to make it less attractive (new student loans already carry fixed interest rates), so I must highlight that it is not the only option available to help you manage the repayment of your loans.

Now, with regard to private loans – those are the consumer loans that students typically take out to cover any remaining financial need after federal student loans have been exhausted: these loans never were eligible for federal loan consolidation because Congress limited loan eligibility to federal student loans only (Perkins loans, Stafford loans and PLUS loans, primarily).

It was possible to consolidate private loans – essentially a refinancing into another consumer “education” loan that would allow you to extend your repayment term and (possibly) lower your interest rate. In most cases (I can’t speak for other lenders, but I can speak for Sallie Mae), private consolidation loans carried a variable interest rate (note the difference from the fixed interest rate on the federal consolidation loan program). Again, repayment options existed to allow you to extend repayment of your private loans – so I would ask someone who wants to consolidate their private loans what they are looking to achieve? Lower monthly payment amount? Lower interest rate? A single bill for all of their loans?

If the rationale is purely rate related, then they could refinance into another consumer loan, although we always counsel customers to read the fine print and fully understand what the interest rate would be, how it could change over the life of the loan, whether there is a prepayment penalty, etc.

If it is monthly payment amount related, well, you don’t need to consolidate to achieve that goal. And you can always ask your lender to send you a single bill for all of your loans with them so that you only have one check to write each month.

######

Martha Holler began her career with Sallie Mae in 1996. In her current role as vice president of corporate communications and officer of the company, Holler serves as Sallie Mae’s media spokesperson on a range of corporate and consumer topics, including the company’s core business of saving, planning and paying for college. In addition, she directs communications to business-to-business and other external audiences. The corporate communications department produces executive speeches and corporate publications, including the Annual Report. Prior to this position, Holler helped analyze merger and acquisition opportunities as a member of Sallie Mae’s business development unit.

The post Trouble Consolidating Sallie Mae Loans, Part 2: I talk to Sallie Mae appeared first on The Budgeting Babe.

She went to see her family’s banker to find out how to lower her monthly payment – which, by the way, was the cost of a mortgage. The banker, likely unaware of what it actually costs to go to college these days, chastised K for spending too much on her education and taking out too many loans. She basically said, “Good luck. There’s nothing I can do.”

K felt totally taken aback, helpless and frustrated. Nothing she had done throughout her long education had prepared her for this. Her parents, though upset, had no answers. And so, on a random Wednesday morning, I received a frantic call from K, pleading to meet with me and learn more about how to consolidate loans.

I directed her to this site, to my consolidation post. I told her that a lot of people have a similar debt upon earning a master’s degree, and that many of my friends in similar situations had consolidated their loans for lower monthly payments. I encouraged her to look into consolidation options.

But in later conversations, we hit a bump in the road. K had taken out her loans through Sallie Mae. She thought that meant they were government loans when she took them out. (Like many, she thought “student loans” automatically meant they were borrowed from the government.) But it turns out, they’re through a private bank. The interest rates are much higher than they should be, but she wasn’t sure if she could consolidate them through the government Web site, which appeared to be only for government loans. What’s a girl to do?

I consulted my bookshelf, but all the books I found only talked about government loans. Most of my friends my age had government loans, but as I spoke with our younger interns and my brothers, I realized something had changed in recent years. Everybody has Sallie Mae loans now. But I got the sense that nobody really knew why they had them, and that the borrowers thought they had government loans.

So, what is Sallie Mae? Are Sallie Mae loans government loans?

Sallie Mae was originally created as The Student Loan Marketing Association in 1972 as a “government sponsored entity.” According to its Web site, it began privatizing operations in 1997, and in 2004 “terminated its ties to the federal government.” It is now a publicly traded, for-profit company, and is the leading provider of student loans and administrator of college savings plans. It currently owns or manages loans for 10 million people in the US.

Got that? It’s a private company that lends money to 10 million people, NOT a government entity.

Interestingly, I visited the consolidation portion of the Sallie Mae site today, and got this message:

“Thank you for your interest in Sallie Mae, the nation’s leading provider of saving- and paying-for-college programs. Severe legislative cuts made by Congress made federal student loan consolidation uneconomical. This, combined with the credit market deterioration, has caused us to suspend participation in the federal consolidation loan program.”

And below some corporate babble about the mission of the company, this:

“Sallie Mae reserves the right to modify or discontinue loan programs at any time without notice.”

I went on the student loan site, where I consolidated my loan, and found nothing about Sallie Mae loans. Only a list of what is an “eligible” loan (mostly looked like Direct Loans, Stafford Loans, etc.) and what is “ineligible,” including private loans.

So how do we make sense of this all? I’m no expert, and truth be told, I found most of the information online to be very confusing and hard to navigate. This was the closest article I found:

From SmartMoney, April 2008
Sallie Mae Halts Student Loan Consolidation
…As a result, borrowers will have to pay the price. Former students who want to consolidate their loans can now only turn to the government and a small pool of lenders.

Read the whole article here: SmartMoney

I’m going to do some more digging, and certainly if you have more information, post it here. For the time being, my brother, who used to work at a bank, advised my cousin K to look into Chase Bank’s Private Student Loan Consolidation options. He has a similar amount of debt, but consolidated all his loans through Chase and they are roughly $600 to $1,000 cheaper per month than hers were expected to be through Sallie Mae.

For those of you wading through the student loan waters, check out www.FinAid.org to learn more. For me, the student loan process was easy, but talking with K and others about their trouble has been an eye-opening experience.

The post Trouble Consolidating Sallie Mae Loans, Part 1 appeared first on The Budgeting Babe.

I’m going to reflect on those themes and share learnings from the workshop in coming days, so look for more on that. In the meantime, I noticed that many of the women attending the session were grappling with the issue of funding and student loans. Serendipitously, I had already been working on a story about college loans with the good folks at Simply College, a company that specializes in simplifying financial aid for those applying to college and graduate school.

Since the job market’s looking pretty glum these days, and the news about student loans has been drab as well, I posed some questions about loans to Rene Bolti, Vice President of Simply College, and an educator with 17 years’ experience creating and administering programs and services for elementary, secondary and higher education. I hope you find her answers helpful.

Here’s the Q&A…

1. In layman’s terms, what’s changed in student loans over the past six to twelve months?
Probably the most significant change is a new trend toward eliminating loans from financial aid packages of students below certain income levels. As a result, students at many top-name colleges may find themselves being awarded grants (which don’t need to be repaid) instead of loans.

But, the vast majority of students attend colleges that still include loans in the financial aid equation, so unless you are accepted at one of the top-tier, no-loan colleges, you’re likely to have to grapple with the question of student loan debt.

Although some lenders are exiting the student loan market, there are still many education loans available through a variety of lenders, including federal loans. In fact, the maximum annual limit on federal loans and grants for undergraduate and graduate students has recently increased, making the loans go further toward paying for a year of school.

2. What are three things I should know about college loans today?
1) There are many different types of college loans.

- Federal Stafford loans are available to students who complete a Free Application for Federal Student Aid (FAFSA).

- A family’s financial situation determines whether a student qualifies for subsidized or unsubsidized Stafford loans. (In subsidized loans, the government pays the interest while you’re in school; in unsubsidized loans, you’re responsible for the interest that accrues while you’re in school.)

- Federal PLUS loans are a low-cost option available for parents of students.

- Private loans, made directly by banks or specialized lenders, which tend to be the most expensive option, are available to students and parents to fill any gaps that remain once financial aid has been awarded.

2) Not all education loans are taken in the name of the student; some are student loans, some are parent loans, some need to be co-signed by the student and a credit-worthy adult.

3) Private education loans need to be researched for terms of repayment, length of repayment, total cost over the life of the loan, special qualifying characteristics (like minimum grade point average), and whether all terms and special offers (like interest reduction based on a certain number of on-time payments) are guaranteed for the life of the loan.

3. Can’t parents help their kids navigate the process?
The financial aid process is complex and overwhelming, even for parents who are college-educated and highly motivated. It is a multi-step process requiring attention to timing and detail, with many significant decisions compressed into a very short period of time. To minimize the anxiety and stress inherent in the process, it is beneficial for parents and students to work together, using trusted resources, to be sure they pay attention to each critical component.

Our program, Simply CollegeTM offers a step-by-step workbook/organizer, “Financial Aid Simplified”, to guide students and parents through the entire financial aid process beginning as early as January of junior year in high school, including researching scholarships and loans, completing required forms, comparing financial aid award offers, building a “college life” budget, and more. Go to www.simply-college.com to view video segments that accompany each tab of the workbook.

4. Is the financial aid process different for grad students?
The financial aid process for graduate students typically includes the FAFSA (to make federal loans accessible), but also may include looking for fellowships, assistantships and private loans. FinAid.org has a page dedicated to information for graduate students, including information on specialized loans.

5. Are working professionals at a disadvantage when it comes to loans?
While it is true that income will determine eligibility for certain loans and grants,
working professionals might consider financing their graduate degree through a combination of: employer tuition reimbursement, fellowships, grants, loans.

If you research the possibilities, you’re likely to be able to put together a package that meets your needs. In addition to discussing all possible funding sources with your selected university’s financial aid office, be sure to discuss assistantship and fellowship opportunities with your selected department.

If you are currently employed, talk to your human resources department about tuition reimbursement options (even if you’re unsure whether your employer has a tuition reimbursement program). As mentioned above, finaid.org is a good source of information and fastweb.com has loads of scholarship opportunities, including some for graduate students.

6. If I’d like to quit working and go to school full-time, using student loans, what special considerations might I have to take?
Giving up a salary and returning to the classroom full time will mean making some adjustments to your current lifestyle as student loans are unlikely to equal your salary. Each person needs to weigh personal responsibilities, career aspirations and financial goals when considering full time graduate study and how best to finance it. Here are some specific questions you should ask.

- Is there an alternate source of support available while you’re in school, like a spouse or parent? Even if it’s a loan from a family member, the terms of repayment and amount of the loan would likely be more favorable than any formal education loan.

- Is it possible to work part-time to cover basic living expenses while in school?

- Will a post graduate-degree job in your field draw a salary sufficient to afford and justify educational loan payments?

- Do you already have employment prospects that will be enhanced by a graduate degree?

- If you need to take an educational loan, how soon will you be expected to begin repayment?

# # #

To read some of my personal thoughts and other research on college loans and education, click here and here and here.

Good luck with your applications!

The post Simply College Answers Our Student Loan Q’s appeared first on The Budgeting Babe.

Q: I’m an avid reader of your blog and I appreciate your sound ability to put the financial jargon in lamen’s terms. But your current blog does not apply to me yet, so I was wondering if you could lead future university students like me that are getting no financial help from parents or relatives to make good decisions on taking out a student loan. Where do I start researching and what I’m looking for is where I’m stuck. Thanks again for all the help you’ve given and I look forward to your response.

Well, it’s been a long time since I’ve actually thought about applying for student loans, so I asked someone much more qualified to answer the question. That would be Mark Kantrowitz, publisher of www.finaid.org, an award-winning Web site that’s the most comprehensive annotated collection of information about student financial aid on the web. Here’s Mark’s answer.

A: “If your parents are not providing any financial help, at least try toconvince them to complete the Free Application for Federal Student Aid(FAFSA), http://www.fafsa.ed.gov/. Completing the FAFSA does not obligate themto provide you with financial assistance, but is a prerequisite for you to obtain federal student aid, such as the Federal Pell Grant,Federal Perkins Loan and Federal Stafford Loan. Talk to your college’s financial aid administrator, as they can sometimes intervene with your parents and convince them to complete the FAFSA. (FinAid.orgalso has a collection of tips for students in this situation.)

If your parents still refuse to or cannot complete the FAFSA, ask your school’s financial aid administrator about a dependency override. Parent refusal to help and student self-sufficiency are not sufficient grounds for the school to grant a dependency override, but sometimes there are unusual circumstances behind the parent refusal that may allow the school to grant a dependency override. If the school grants you a dependency override, you become an independent student and parent information is no longer required on the FAFSA. This will not only allow you to qualify for federal student aid on your own, but also increases the loan limits on the Federal Stafford Loan.

To choose the best loan, focus on the loans with the lowest interest rates and fees. The cheapest loan is the Federal Perkins Loan, with a fixed rate of 5.0%. Next is the Federal Stafford Loan, at 6.8%, followed by the PLUS loan (a parent loan) at 8.5%. Private education loans, which are not government-guaranteed, tend to be more expensive than the PLUS loan with higher fees and variable interest rates. But private education loans are less expensive than credit cards.

It pays to shop around. Many lenders offer loan discounts on the federal education loans, such as a 0.25% interest rate reduction forsigning up for EFT, where your monthly loan payments are direct debited from your bank account. Focus on the discounts that are immediate in nature (e.g., a rebate of the loan fees) or which can’t be lost (e.g., EFT discounts). Very few students qualify for the discounts that require them to make all their payments on-time.

Resist the temptation to increase the term of the loan. Although this reduces the size of the monthly payment by as much as 1/2, it substantially increases the total cost of the loan.

A good tip is to minimize your borrowing. Ask yourself if you really need to borrow that much money. Live like a student while you are in school, so you don’t need to live like a student after you graduate.

When evaluating private education loans, it is easy to get confused by the interest rates. The interest rates on private education loans are variable rates, pegged to an index rate like the LIBOR or Prime Lending Rate. Prime + 0% is about the same as LIBOR + 2.8%. It is better to have an interest rate pegged to the LIBOR index, as the LIBOR index is increasing more slowly than the Prime Lending Rate.

The FinAid.org site includes comprehensive information on student loans at www.finaid.org/loans/, including loan calculators, lists of all federal and private education lenders, and practical advice.

Finally, don’t overlook scholarships. Winning scholarships reduces the amount you need to borrow. I recommend searching for scholarships at FastWeb.com, the largest and most popular free scholarship search site.”

Thanks Mark! Your extensive student loan knowledge impresses us all.
***************************
Those of you who want to learn more about Mark and student loans should check out finaid.org. Here’s some additional info on Mark that I found interesting:

‘”FinAid was created by Mark Kantrowitz, a noted financial aid and college planning author. He is Director of Advanced Projects for FastWeb, the largest and most popular free scholarship search. Previously, he was a Research Scientist at Just Research, the US software laboratory for Just system Corporation of Japan. Mark has earned the praise of numerous college administrators, journalists and students and families for his dedicated work on the FinAid site; also, not surprisingly, he managed to fund his own schooling without spending a single cent of his parents’ money. In his spare time, Mark folds origami models, repairs antique battery-operated toys, creates stained glass windows, and plays with his cats, Joto and Tweety. He enjoys sampling gourmet chocolate. Mark was diagnosed with a rare form of cancer a few weeks after the birth of his son, and is currently disease-free after undergoing chemotherapy, an orchiectomy and a cholecystectomy. Mark is also a survivor of a direct lightning strike on his home. “

The post Student Loans: A Primer appeared first on The Budgeting Babe.

At midnight, the interest rate jumped from 2.77 percent to 4.7 percent for those in school or on deferment plans, from 3.37 to 5.3 percent for those of us paying off loans and from 4.17 to 6.10 percent for parent PLUS loans.

Ouch. Don’t say I didn’t warn you.

If you did consolidate, check your new billing statement carefully. Depending on how long you’ve been paying, your monthly statement may look a lot lower. That’s because when you consolidate, the loan department reverts your increments back to a 10-year payment plan.

To truely take advantage of low interest rates, continue to pay the same as before you consolidated.

For instance, I always pay $200 per month on my loan. After consolidating, my payment due decreased significantly. But I still continue to pay the $200 per month in hopes of paying off the loan in 2011 (or before then), rather than 2014.

Suze Ormon, on the other hand, recommends only paying the minimum due on student loans. She reasons that you’ll make more in the long-term investing that money rather than spending it to pay off loans now.

Ultimately, the length and manner in which you pay back your loan is up to you. But be knowledgeable about why it takes so long.

The post The Consolidation Clock appeared first on The Budgeting Babe.