Don’t Fall For These Unfair Student Loan Practices

If you’re one of the over 40 million Americans dealing with student loan debt, most likely you’re working with a student loan servicing company as your primary contact to help manage your loans.

What you probably don’t realize is that some of those servicers are actually violating laws about how they’re supposed to be treating borrowers like you.

That’s according to a new report from the Consumer Financial Protection Bureau (CFPB) highlighting 6 common, but not legal, loan practices that these servicer’s are using when dealing with people who have outstanding student loans. If that includes you, we put together a list of the worst of these offenses  below so that you know what you need to look out for to protect yourself. Enjoy.

1. Late fees, especially on multiple loans. When you can’t pay your monthly payments in full you usually end up paying substantial late fees and, to minimize those fees, many borrowers instead make partial payments. The problem is that many assume that this minimal payment will cover all of the loans they have with the same servicer, which isn’t exactly true.

In many cases these companies end up taking a partial payment and dividing it evenly across several outstanding loans. This can result in two things; late fees on every loan and, in some worst-case scenarios, every loan going into default.

This practice violates the Dodd Frank Act and is illegal. If your servicing company is doing it, demanding that your partial payments be treated correctly is definitely within your rights.

2. Incorrect minimum payments. On almost all student loans there’s usually a minimum payment due monthly but, when a loan is in deferment, that changes. The problem is that some servicers charge late fees even if you have paid the correct amount based on your particular loans. If that happens you need to first contact your servicer and, if they don’t help you, submit a complaint to the CFPB.

3. Not honoring grace periods. On some student loans there are grace periods where the lender isn’t allowed to charge late fees, even after the due date has passed. Some lenders charge late fees anyway however, which is illegal. If you’ve been promised a grace period, your lender has to honor it and, if they don’t, you should contact the CFPB.

4. Not providing necessary tax data. In many cases consumers with student loans are allowed to deduct the amount they pay in interest on their taxes. In order to do that correctly they need the information from their loan servicer. Some of these companies however are making it more difficult to get that information, which often results in the loss of a tax write off, sometimes as high as $2500. If your loan servicer is making it difficult to get that information, contacting them and letting them know that you will contact the CFPB might persuade them to help you more.  If they don’t then, by all means, contact the CFPB yourself.

5. Incorrect information about bankruptcy rights. Many consumers incorrectly believe that student debt cannot be discharged through bankruptcy but, contrary to that information, and to what some servicers will tell you, it’s not always impossible. If your loan servicer has already said that it’s not possible, you might want to check because many are using deceptive practices and they might be misleading you.

6. Servicers who use improper collection tactics. Unfortunately, many student loan servicers also double as collection agencies and, from what the CFPB has seen, use illegal practices to collect on student loans, including illegally calling at impermissible times. Knowing your rights, and asserting them, is necessary in this case.

Those are 6 of the worst practices that some loan servicers are engaged in and, if you find that yours is one of them, letting them know that you are aware, and that you will contact the CFPB if they don’t stop, is definitely within your rights. If they don’t, you should definitely contact the Consumer Financial Protection Bureau and advise them of the situation.

Trying to Consolidate your Debt? Use these 3 Strategies to do it Right

Millions of people across the United States have credit problems for one reason or another. If that includes you, and you’ve grown tired of juggling all your credit card balances and outstanding loans every month, there are a number of strategies that you can use to consolidate your debt, and slowly but surely become debt free. Three of the best strategies are outlined below. Enjoy.

Strategy #1: Take out a Line of Credit.

If your credit rating is still good you might consider using a personal line of credit from either your bank or your credit union in order to consolidate all of your debts. The good news is that in order to qualify for a personal line of credit you don’t need to own a home and, in many cases, the bank’s decision to give you credit, and access to the cash you need to pay off your debts, might come in under a week.

Once you have the money you can pay off all of your debts in one fell swoop and, instead of several different accounts to worry about, you’ll only have one single bill to pay every month. Of course the interest rate that you will get on your personal loan depends on the actual credit score that you have and, the higher it is, the better interest rate you will get.

Strategy #2: Consolidate all of your Credit Cards.

Many American consumers have several credit cards and struggle to keep track of all of them, and make payments on time, every month. This strategy  consolidate all of those smaller credit card bills onto one single card and, if you can find one with a 0% transfer rate for 12 or 18 months, you’ll not only be able to pay only one credit card bill every month but pay less in interest fees as well.

Of course this means paying off as much of that debt as possible during the low rate balance transfer period that the credit card gives you. If you don’t do that, you might only have one credit card bill to pay every month but you’ll still be paying a lot of money in interest.

Strategy #3: Take out a Personal Loan.

If you have good credit and a good relationship with your bank or credit union, you can take out a personal loan to pay down your debt. The average personal loan usually comes with a fixed interest rate that is lower than the typical credit card interest rate and, once you qualify, you can simply choose the amount that fits your budget and pay off that amount every month.

If you have the credit necessary to qualify you’ll get a great low interest personal loan, be able to pay off your debts and, when the loan is paid in full, be debt free. You’ll also have some great credit history because you’ve taken a personal loan, paid it off on time every month and paid it in full.

Tips to Help You Pay Down Your Student Debt

If you’ve just recently graduated from college, congratulations! Best of luck finding a job and starting your career.

Right now is the best time to start thinking about paying off your student debt as quickly as possible to avoid huge interest charges and the inevitable stress of having a college loan bill arrive in your mailbox every month. Below are a number of excellent tips to help you do just that. Enjoy.

First, keep in mind that this debt will never disappear and, unlike other debts that you might face in your lifetime, you can’t get rid of these through any means besides paying them off.

If you haven’t already done so, sit down and read through your loan repayment guidelines. This will show you exactly when, for example, payments are due, how much your minimum payments will be and much more vital information.

Remember that, in order to pay down your student loan debt quickly, you may have to make some sacrifices now. By doing whatever you can to pay off as much of that debt as quickly as possible you’ll be saving yourself a huge amount of interest costs in the future. In other words, it’s well worth it to hang on to your older car, keep that old television and try to get as much use out of all of your electronic gadgets as possible.

Consider also making more than the minimum payment every month. If you can afford to do it, your best bet is to pay as much as possible now to pay down that student loan rather than getting a new home, putting that money into savings or, heaven forbid, spending it on things you don’t really need. There’s no way that, for example, the interest you would make in a savings or checking account, or even on other types of investments, will equal the amount of interest that you will have to pay over the next 20 years on your college debts.

If you haven’t already figured it out, starting to pay off your student loans immediately is an excellent idea. Many student loans give you a six-month grace period but you certainly don’t have to wait and, by starting to make payments as soon as possible, you’ll get into the excellent habit of doing it.

Lastly, do your very best to live below your means for the next few years. Trying to keep spending on things like recreation, entertainment and vacations down to a minimum. Yes, it might not sound like a lot of fun, but once that student loan debt is paid off a huge amount of stress will be taken off of your shoulders completely for the rest of your life. Two or three years of living frugally, in the opinion of most financial experts, is well worth the financial rewards that you will reap from not having to pay 20 years (or more) worth of interest rates.

Debt of any kind should be paid off as quickly as possible but, in the case of student loans, the interest rates are usually quite high and the penalties for not paying on time are high as well. Paying down this type of debt as quickly as possible is one of the most financially savvy moves that you can make in your adult life and, if you do, you’ll be well ahead of your peers in many ways.

Living with the Folks is the New Reality for Millennials

One of the biggest changes since the recession began in 2007 is that more millennial’s, defined as people between the ages of 18 and 31, are living at home with their parents than ever before. Right now a record 21.6 million are living with mom and dad, more than a third of all millennial’s in the United States, according to a Pew Research Center study that was recently released.

That’s 36% of millennial’s, a rise of 4% since 2007 and, according to Pew, the highest percentage in 40 years.

One of the biggest factors for this increase is the decline in employment. In 2013,  63% of 18 to 31-year-olds had jobs but, in 2007, 70% were working.

“You’re much less likely to be living with your mom and/or dad if you have a job, and job-holding still hasn’t picked up,” said Richard Fry, a senior research associate with Pew Research Center.

The analysis also showed that there’s a gender difference when it comes to millennial’s living with mom and dad. 40% of men are living at home whereas only 32% of women are doing the same.

The study also reveals that, where once the bills that a child created stopped once they graduated from college, these days those same bills, and new ones, continue long into adulthood. In fact, it’s become a major financial planning issue for many parents according to the managing partner at Ballou Plum Wealth Advisors, Lynn Ballou, out of Lafayette, California.

The fact is, many parents are already sacrificing their own retirement plans, as well as their savings accounts, in order to send their children to college. The hope is that their daughter or son will find a good job and graduation and, possibly, be able to pay them some of that money back in the future.

“Come to find out, your grad is unemployable and can’t even find a job at Starbucks,” said Ballou, who estimates that one-third of her clients are providing some financial support to an adult child.

These unexpected expenses are forcing parents to make big cuts in their own spending as well as delay their retirement plans and, in many cases, dig into their savings accounts. Ballou says however that parents shouldn’t feel obligated to continue providing the same kind of support that they did when their child was a teenager.

Sheryl Garrett, a certified financial planner and founder of The Garrett Planning Network, says that “They could be there forever if you don’t charge them some rent and make them do some chores”.  She added that any child unable to find work outside of their home should definitely be contributing to household duties and shores as much as possible.

One recommendation that many financial planners are giving to parents these days is that they beef up their emergency fund as much as possible, putting at least 12 months of cash aside for living expenses just in case.

“From where we’re sitting, it could be a good decade to work this out,” said Ballou. “Hope for the best and plan for the worst. Assume your child is not going to launch until they’re in their late 20s.”

Whether the job market picks up or not however, the fact is that the stigma among young adults about going back to live with mom and dad isn’t nearly as bad as it used to be. If and when the economy does make a full recovery, the tendency for many birds to return to their nest is still going to be strong.