5 Websites Everyone with Student Loans Should Know

By Lynnette Khalfani-Cox, The Money Coach

It takes the average college graduate 15 years to repay his or her student loans, according to the College Board. A lot can happen over that time. So if you ever find yourself struggling to pay your college debts, or even just needing more information about the loans you’re carrying, the following five websites just might prove to be indispensable.

1. http://www.nslds.ed.gov
   This is the website for the National Student Loan Data System. If you’re confused about your college debt, or don’t even remember how many loans you took out and who you owe, this is the place to start.The NSLDS database gives you 24/7 access to an itemized list of all the federal loans you took out, including info about the loan status (in deferment, default, repayment, etc.), loan amount, date, the amount cancelled (if any), as well as the outstanding principal and interest you owe.

    

   Tip: To access the NSLDS, you must first obtain a four-digit PIN here from the Department of Education.

2. http://www.finaid.org/calculators
   This is the website for the online college loan calculators provided by FinAid. These calculators help you figure out how much principal and interest you’ll pay over time for various federal student loans, based on the four different loan repayment programs you can select:

    

   1. the standard loan repayment plan, where you pay a minimum of $50 a month and your payments last for as long as 10 years;
   2. the extended repayment option, which also requires at least $50 monthly payments, but which lets you pay off your educational loans over 12 to 30 years;
   3. the graduated repayment program, which lasts from 12 to 30 years and allows you to pay as little as $25 a month; and
   4. the income-contingent repayment plan, which permits you to make payments as low as $5 a month and which lasts for 25 years.
3. http://www.opm.gov
   This is the website for the Office of Personnel Management (OPM). Here’s where you can learn about the government’s Federal Student Loan Repayment Program.In a nutshell, this program allows any federal agency that you work for to pay off up to $10,000 worth of your student loans per year, up to a maximum of $60,000. So if you haven’t made a real dent in your student loans, get the government to pay off your college debts.

    

   For more info, call the OPM at 202-606-1800 or write: Office of Personnel Management; 1900 E Street NW; Washington, D.C. 20415.

   What’s the catch? You have to work for a government agency – any one, at any location in the country.

4. http://www.loanconsolidation.ed.gov
   This is the website for the Federal Direct Consolidation Loan Info Center. Go to this site to get answers to any questions you may have about consolidating your student loans. You’ll find information on who is eligible to consolidate college loans, how to handle defaulted student loans, and even tips on consolidating loans that have already been consolidated. (Despite many misconceptions on this topic, multiple loan consolidations can be done under certain circumstances)
5. http://www.ombudsman.ed.gov
   This is the website for the Federal Student Aid Office of the Ombudsman. This agency’s role is to help you, as a last resort, to resolve difficulties you may have with you lender or loan servicing company.To first try to resolve a problem yourself, use this online “Self Resolution Checklist” from the Ombudsman’s office.

    

   If you have complaints about your lender or disputes you haven’t been able to settle, the Ombudsman will listen to your grievances, and if they’re justified, the Ombudsman contact the lender on your behalf.

   To reach the Ombudsman’s office, call: 877-557-2575, or write: U.S. Department of Education; Debra Wiley, FSA Ombudsman; 830 First Street NE; Fourth Floor, Washington, D.C. 20202-5144.

Lastly, for more information on paying off your student loans, check out my book, Zero Debt for College Grads: From Student Loans to Financial Freedom. Get the book now at Amazon.com.

6 Guidelines to Help You Maximize Your Credit Score

By Lynnette Khalfani-Cox, The Money Coach

Anyone living in today’s society knows that it can be a drag to be turned down for credit. It’s no fun when your application for a car loan, a student loan, a mortgage, or even just a credit card is denied.

Learn how to boost your credit standing by knowing the ins and outs of how your score is determined by Fair Isaac Corp., the company that calculates your FICO credit score.

Here are 6 guidelines to help you maximize your credit score:

1. Pay Your Bills on Time
Since the single-biggest component (35%) of your credit score is based on your payment track record, the best way to boost your credit score is to simply pay your bills on time. Not some of them; all of them. Even if you can only make minimum payments, that’s better than being late with a bill because late payments of 30 days or longer can drop your FICO score by 50 points or more.

2. Don’t Max Out Your Credit Cards
Some people mistakenly think that simply paying their bills on time each month will give them a stellar credit rating, but that’s not true. Your FICO score also considers how much credit you use on a regular basis.

Having a lot of debt signals that you are a potential risk for getting into financial trouble and not paying bills on time. If your credit cards are at or near their limits, you can raise your credit score by knocking down your balances.

In general, try to keep your balances to no more than 25% of your available credit limit. For instance, if you have a card with a $10,000 credit line, make sure you don’t carry a balance of more than $2,500 on that card. If you can pay off your credit cards each month, that’s even better. But if you can’t, it’s better to spread out debt over a few cards, to maintain lower balances, rather than max out any one card.

3. Get financial help with debt
Having lots of credit card debt lowers your credit score. So if you’re struggling to pay off debt or are living paycheck to paycheck, consider getting help from a trustworthy credit counseling agency.

One reputable resource is the National Foundation for Debt Management, a non-profit agency that negotiates with creditors, gets your interest rates lowered, and creates a plan to quickly get you out of debt.

For speedy help, contact NFDM at: http://enroll.nfdm.org/ or call them toll-free at 866-409-6336, and a HUD-approved credit counselor from NFDM will get back to you within 24-48 hours for a free, no-obligation assessment of your situation.

4. Keep Older, Established Accounts Open
It feels good to pay off a credit card and finally get that statement showing a zero balance. However, if you pay off a creditor, don’t make the mistake of closing that account because 15% of your FICO score is based on the length of your credit history. The longer a credit history you have, the better it is for your score.

5. Avoid “Bad” Forms of Credit
You’ve probably walked into a department store and been offered 10% off, or some other discount, just for opening up a credit card with that retailer, right? Did you take the bait? If so, realize that you might have hurt your credit score. Here’s why:

The FICO scoring model rates some forms of credit more favorably than others. For instance, the presence of a mortgage on your credit report will help your score, but too many consumer finance cards (i.e., the cards issued by department stores and retailers) can hurt it. For this reason, do yourself a favor and say “No” to those credit card offers from stores you patronize. Just use a major credit card, such as a Visa, MasterCard, American Express, or Discover Card, if you need to use credit to make your purchases.

6. Only Apply for Credit When You Truly Need It
Just because you get a pre-approved offer in the mail, or some telemarketer calls you to solicit for a credit card, doesn’t mean you should accept it.

You should only seek out credit when you absolutely need it because taking on too much new credit – or even just applying for it – will lower your credit score. Each time you apply for a loan, whether it is a credit card, an auto loan, a mortgage, or a student loan, the lender pulls your credit report and generates an “inquiry” on your credit file. That inquiry remains there for two years. One inquiry can drop your score as much as 35 points.

Also, beware that you may sometimes generate an inquiry without even knowing it! That happened to me, when I recently rented a car with Avis, using my debit card. Rental car companies frequently run your credit report if you use a debit card instead of a credit card. That single inquiry lowered my FICO score by 16 points.

5 Factors that Determine Your FICO Score

By Lynnette Khalfani-Cox, The Money Coach

You hear a lot about your credit score being a strong factor behind your eligibility for credit cards, car loans or mortgages, but do you know how the Fair Isaac Corp., the company that calculates your FICO credit score, determines this number?

Here are the basics:

Your FICO credit score ranges from 300 to 850 points; the higher your score the better. A high FICO score means you’ll get the best rates and terms on all kinds of loans. You’ll also save a bundle on expenses like auto insurance and life insurance.

The 5 Factors
Under Fair Isaac’s credit scoring model, your FICO credit score is based on five primary factors:

1. 35% of your score is based on your payment history
2. 30% of your score is based on the amount of credit you have used
3. 15% of your score is based on the length of your credit history
4. 10% of your score is based on your mix of credit and income
5. 10% of your score is based on inquiries and new credit you’ve taken on

Learning how to “work” the FICO credit scoring system can work in your favor. Check back here for my “6 Guidelines to Help You Maximize Your Credit Score.”

Here is a link to the freebie I mentioned on FOX yesterday: http://ping.fm/cKqRT

Do You Qualify to Refinance Your Mortgage Under Obama’s Making Home Affordable Programs?

By Lynnette Khalfani-Cox, The Money Coach

If you are a homeowner in good standing with your mortgage, but you can’t seem to get refinancing because your home has lost equity in this declining economy, you might instead qualify to refinance your mortgage to something more affordable under the Home Affordable Refinance plan if you can answer yes to all of the following questions:

1. Current on your mortgage? If you haven’t been more than 30-days late on your mortgage payment in the last 12 months prior to applying to the program, then yes, you are considered current on your mortgage.
2. Owner-Occupant? If you live in the home as your primary residence or at least in one of the units of a property you own with four or less units, then yes, you are an owner-occupant.
3. You owe about what your property is worth? If you owe on your current mortgage close to the appraised value of your property, but not more than 105% of the current market value of the property, then yes, you owe about what your property is worth. The current value of your property will be determined after you apply to refinance, but as an example, if you think your property is worth $200,000 but you owe $210,000 or less on your first mortgage you may qualify.
4. Fannie Mae or Freddie Mac own your loan? If your loan is owned by or has been securitized by Fannie Mae or Freddie Mac, you should qualify. To find out if either organization backs your loan, call 1-800-7FANNIE or 1-800-FREDDIE or enter your address online at the lookup tool here at Fannie Mae or here at Freddie Mac. Please double check the ownership with your lender or loan servicer. If you do not have a Fannie Mae or Freddie Mac loan, you will not qualify. Note, if your monthly statements come from say, CitiMortgage or Wells Fargo, your loan still could be backed by Fannie or Freddie, so be sure to check.

If You Answered Yes to All
If you were able to answer “Yes” to all of the above questions, you may qualify to have your loan refinanced under the Making Home Affordable — Refinance program and are ready for the next step, which is to call your lender or mortgage servicer at the number listed on your monthly statement. You can also apply through any Fannie Mae approved lender if your loan is backed by Fannie Mae.

If You Answered No to Some
If you could not answer “Yes” to all of the questions, don’t despair. You might qualify for the “loan modification” section of the Making Home Affordable program. To see if you qualify for that option, read my piece, “6 Steps to Determine If You Qualify to Modify Your Mortgage Loan to Lower Monthly Payments.”

Note: You have until June 6, 2010 to apply for and close on this refinance option.

Tip: To learn more about keeping your home, read my book, “Your First Home: The Smart Way To Get It and Keep It.” It has plenty of tips to suit even homeowners who are in their second or third home. See the table of contents and an excerpt in this downloadable PDF.

6 Steps to Determine If You Qualify to Modify Your Mortgage Loan to Lower Monthly Payments

By Lynnette Khalfani-Cox, The Money Coach

Under Obama’s “Making Home Affordable” loan modification program, owners who are in risk of losing their home or are on the verge of not being able to make their monthly mortgage payments may be eligible to have their monthly mortgage payments reduced down to as much as a 2% interest rate to help them meet their obligations.

To determine if you qualify for the program you must answer yes to ALL of the following questions:

1. Loan Date: Was your loan taken out (originated) prior to January 1, 2009?
2. Primary Residence: Is the property where you want the mortgage modified your primary residence? (If it is a vacation home or rental property where you don’t live, you will not qualify).
3. Number of Units: Do you own a single-unit property or one with four-units or less? (If you live in one unit of the building and rent out one or more units in the same building, up to three units, then you will still qualify).
4. Mortgage Balance: Do you have an unpaid principal balance that is equal to or less than $729,750? (This limit can be higher for four-unit properties.)
5. Monthly Payments: Do you have a mortgage payment (including property taxes, insurance, and home owners association dues) that is more than 31% of your gross (pre-tax) monthly income? If you’re not sure, use this tool to determine the percentage.
6. Cash-Strapped: Are you having trouble paying your mortgage or are on the verge of doing so? (Answer yes if you are 31 days or more late on your mortgage payments, have had a major reduction in your income since taking out your loan, or have suffered some major financial hardship such as mounting medical bills, financial issues related to divorce, or just had or are expecting a balloon payment coming due or mortgage rate increase from an ARM.)

If you answered yes to all of the questions above, you may qualify for the loan modification program and can move on to the next step, as outlined by the government at Making Home Affordable site.

If you are not in financial hardship and are current on your mortgage, but would like to take advantage of current low interest rates and can’t because there is not enough equity in your home, you might qualify for the Refinance plan under Making Home Affordable program. Check here for my article about the Refinance plan.

How to Fix Defaulted Student Loans

By Lynnette Khalfani-Cox, The Money Coach

In this tough economy, an increasing number of college graduates (and college drop-outs) are falling behind on their student loans.

Federal student loan defaults are up to 6.9% in 2009, well above their year-ago level of 5.2%, according to the Department of Education. For those people carrying private loans, defaults hit 3.37% in 2008 versus 1.47% in 2006, according to Sallie Mae, one of America’s largest providers of private loans.

As you probably already know, defaulting on a student loan is a very serious matter. A federal college loan falls into default status if you are supposed to make monthly payments, but have not done so for 270 days. For those whose student loan payments are less frequent, a default occurs once you haven’t made payments for 330 days.

If you fall into default on a federal student loan, the government can seize money from you to pay your bill. The government has the right to:

• take your federal tax refund check
• garnish up to 15% of your disposable pay

Defaulted student loans also negatively impact your credit.

To help you avoid default status, you can follow my 7 Smart Ways to help you pay of your student loans fast, but if you do find yourself in default there are other steps you can take.

Four Options to Cure a Defaulted Student Loan
Now, in order to get your student loan(s) out of default, you have four options:

• Consolidate the loan(s)
• Enter a loan rehabilitation program;
• Pay the loan(s) off completely
• Get the loan(s) totally discharged or canceled

The last two are probably not realistic options. I know you don’t have the money to pay off the loan(s); that’s why you’re in this predicament; and loan cancellations are rare (though they can be obtained).

You’ll likely have to “rehabilitate” your loan(s) or consolidate them. To learn whether rehabilitation or consolidation is better for you, read my article “Should You “Rehabilitate” Your Loans or Consolidate?“

Other Relief
You can also get help from a financial aid ombudsman. See my article “Get Help from an Ombudsman” for more information.

My article “Appealing a Wage Garnishment” tells you more about that option.

No matter what economic challenges you’re facing, you don’t have to live with wage garnishments and blemishes on your credit report because of defaulted student loans. Reach out for help today, and start the process of turning that college debt problem around.

For more information on paying off your student loans, check out my book Zero Debt for College Grads: From Student Loans to Financial Freedom. Get the book now at Amazon.com.

Should You “Rehabilitate” Your Student Loans or Consolidate?

By Lynnette Khalfani-Cox, The Money Coach

You can consolidate some of your student loans into one payment in an effort to reduce your monthly payments.

Before you can consolidate, you have to bring your loan(s) out of default status, if any are in default. You do this by making just three monthly payments — on time, and in any amount that you and your lender agree upon.

Do You Qualify?
To find out if you qualify for loan consolidation, contact the Federal Direct Consolidation Loan Info Center at 800-557-7392 or go online to http://loanconsolidation.ed.gov.

If you call, the staff there should be able to tell you what your monthly payment will need to be for those three months while your loan is in repayment.

Impact on Your Credit
The one drawback to consolidation is that your credit remains tarnished if your loans previously were in default. Even though your loan will be paid off and listed as “paid in full” on your credit report, you’ll get a new loan through consolidation and that previous default still shows on your credit report for seven years.

An alternative, to fix your credit, and have all past negative information about your student loans completely deleted from your credit file is to go through loan rehabilitation:

In a nutshell with rehabilitation you make 9 or 12 on-time payments on your student loans in an amount you can afford. You make nine monthly payments on Direct Loans and Federal Family Education Loans, or 12 monthly payments on Perkins Loans. This, in my opinion, is the preferred route as it will help you restore your credit in a big way, so your past default won’t haunt you for years to come.

Further Reading
For more details about various alternatives to cure your student loan delinquency, check out the Department of Education’s guidebook called “Options for Financially-Challenged Borrowers in Default.” Here is a link to the guide online: http://www.ed.gov/offices/OSFAP/DCS/forms/2004.Borrower.Options.pdf

For more information on paying off your student loans, check out my book, Zero Debt for College Grads: From Student Loans to Financial Freedom. Get the book now at Amazon.com.

Appealing a Wage Garnishment for Defaulted Student Loans

By Lynnette Khalfani-Cox, The Money Coach

If you default on a federal student loan, the government has a right to garnish your wages in order to obtain payment.

The good news is that you can appeal a wage garnishment and request a hearing on the matter in order to demonstrate why it is that you can’t afford the payments and wage garnishment your lender or guaranty agency is seeking.

The U.S. Department of Education Debt Collection Services Office (DCS) holds the hearing after you fill out a “Request for Hearing” form regarding your wage garnishment, and send it to the Department of Education. Find the document online at: http://www.ed.gov/offices/OSFAP/DCS/forms/Request.For.Hearing.pdf

Your hearing can be done in-person, over the telephone, or in writing; the choice is up to you.

IMPORTANT NOTE: When you submit your Request for Hearing, make sure you also send another EXTREMELY IMPORTANT document. It is the “Financial Disclosure Statement,” a 3-page document in which you must document your income and itemize all your expenses. Here is a link to the document online: http://www.ed.gov/offices/OSFAP/DCS/forms/fs.pdf.

This “Financial Disclosure Statement” form will be critical in the hearing/appeal process, and will be closely evaluated, so take the time to carefully list all your bills, and provide copies of those bills as requested.

On page 3 of the Financial Disclosure Statement, you will notice a line that says:
“Based on this Statement, I think I can afford to pay $ per month.” This is where you have an opportunity to essentially offer a counter-proposal to the Department of Education about your student loans. Regardless of what you’ve been asked to pay in the past, here is where you should realistically evaluate your budget and come up with a number that you can undoubtedly pay (without a huge financial strain) month after month.

The Department of Education will make a decision about your case within 60 days after your hearing. But in the meantime, any wage garnishment that has already started will continue to be in force.

This link gives you more info about wage garnishments: http://ombudsman.ed.gov/garnishment.html.

For more information on paying off your student loans, check out my book, Zero Debt for College Grads: From Student Loans to Financial Freedom. Get the book now at Amazon.com.

Student Loan Tip: Get Help From an Ombudsman

By Lynnette Khalfani-Cox, The Money Coach

Should you ever have a dispute with your lender or loan servicer about anything related to your federal student loans, there is a government agency that may be of assistance in resolving that dispute. It’s called the Federal Student Aid Office of the Ombudsman (http://www.ombudsman.ed.gov).

However, always try to work things out first with your lender by using this online “Self Resolution Checklist” from the Ombudsman’s office: http://ombudsman.ed.gov/resources/toolschecklists/selfresolution-checklist.html.

But let’s say you think your loan was mistakenly placed in default by your lender – maybe you were in school at least half-time, you had a loan deferment or forbearance, or you actually made payments on your loan – and you can’t get a satisfactory resolution of the issue, then it’s time to reach out to the Ombudsman’s office.

Here is a link to the section of the Ombudsman’s website that gives you more information about handling defaulted student loans: http://ombudsman.ed.gov/loandefault.html.

For more information on paying off your student loans, check out my book, Zero Debt for College Grads: From Student Loans to Financial Freedom. Get the book now at Amazon.com.