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Archive for November, 2011

First it was raising the interest rate, now student loans backed by the federal government are changing how they loan out the money. The old student loan program, the Federal Family Education Loan Program (FFELP) required students to borrow money from an actual bank, and the bank was reimbursed from the federal government. It was a mess. Interest rates were all over the place and banks could sell the loan to other banks, adding further confusion to student borrowers.

Today’s new student loan system, the Federal Direct Loan system, is streamlined for students’ protection. Student loans are now going through the federal government directly, without a bank’s involvement. One tradeoff is a higher interest rate than students saw in the early 2000s, but this interest rate is fixed and won’t fluctuate higher when economic conditions change. Once students graduate, they still have the power to consolidate their student loans with another company for a lower interest rate.

Right now everyone is in a transition period, and any current students with loans in the old FFELP system need to visit their school’s Financial Aid office immediately. The financial aid officer will help the student sign a new Federal Direct Loan Master Promissory Note, which makes sure your federally funded student loans come in correctly next semester. Students who have already graduated, or who will not receive federal student loan monies in the future will not need to sign a new master promissory note. A master promissory note is the legal document you sign acknowledging the student loan is yours and your intent to repay it without defaulting on the loan.

New students should still fill out a Free Application for Federal Student Aid (FAFSA) as soon as they know their tax information and their parents’ tax information (if still a dependent). The FAFSA doesn’t just qualify the student for loans, but also federal and state grants, and need-based financial aid unique to the college or university attended. Before you file your FAFSA you should have your final school list fairly narrowed down.

Regardless of your federal loan status, you should visit your schools financial aid office once a semester if you receive any kind of scholarship or loan. They have information on new financial aid options, and you can make sure your class registration isn’t held up from a snafu in your award status.

Here’s another tip, keep an eye on your credit hours. The federal student loan program prescribes the amount available for borrowing based upon a student’s credit hour status. The thought is the more credit hours a student has completed, the more likely he or she will finish school and not default on the loan. Therefore, someone with Freshman status can borrow less money than someone with Sophomore status. If you took college classes in high school, or over the summer session, and your class status has changed, let your financial aid officer know. By borrowing more money on your federal student loan you might be able to reduce your work hours or other financial strains so you can focus more on getting good grades, not how you will pay your tuition.

A West Virginia home equity loan can be an excellent source of financing for almost any homeowner. That said, you should be careful to research exactly what it means to make home equity payments on top of your current mortgage payment. The last thing you want to do is squander your equity or find yourself in trouble financially.

Affording the Payment

When most people think about getting West Virginia home equity loans, their first question is: how much is it going to cost me. This is a great question, because it is very important for you to be confident in your ability to afford the monthly payments. There is no one answer to this question, as your payment depends on how much you have borrowed and the rate that you borrowed it at.

Repaying Your Home Equity Loan

Currently, the rates on home equity loans in West Virginia average 7.50 percent. If you borrow $30,000 at this rate for 60 months, your payments would be $601.14 every month. If you wanted a smaller payment, you could borrow less money or spread the payments out over a longer period of time. It is not unusual for homeowners to get a West Virginia home equity loan that has a 10, 15, or 20 year term.

Watch Home Equity Loan Rates

As you are making payments on your home equity loan, you will want to keep a careful eye on average home equity loan rates. If you see the average rate drop down below what you currently pay, you may want to consider refinancing your West Virginia home equity loan to take advantage of the rate decrease. By dropping a point or two, you could save yourself a lot of money over the life of your equity loan.

Many students and former students have probably heard about loan consolidation, federal student loan consolidation or other ways of combining student loans into a more manageable payment.

At the same time, it is a misunderstood topic because of the wide array of student loans that are given to students, and the different rules regarding their consolidation. In this article, I’ll attempt to clear up some of the difficulty regarding this topic, and provide some insight into those wishing to consolidate.

What is student loan consolidation? – While many of you have undoubtedly heard or seen TV commercials for bill consolidation, debt consolidation and other types of payment relief, loan consolidation has nothing to do with any of those options. Simply put student loan consolidation is designed for one type of debt, those loans that were obtained specifically for the purpose of going to school, almost always for higher education.

Unlike Auto loans or Mortgage loans, students will often access a wide variety of loan types to obtain the total funding needed to complete the financial picture of obtaining a degree. Loans are obtained from different sources, such as the Federal government, private banks, and other entities at different times during the course of a college career. Usually, once the degree is completed, or the student has otherwise separated from school, they may have a confusing patchwork of loans with different amounts, rates and terms. Usually, this can add up to a hefty payment once school is complete and the 6 month grace period has expired. Consolidation allows students to combine all of these loans into one loan with a lower, single monthly payment.

Which is better Private or Federal Student Loan Consolidation? – The short answer is that Federal student loan consolidation is always going to be a lower rate and less expensive option because the government backs the loans and consolidating federal loans is easy, painless, and essentially cost free as long as you are qualified. The key element to remember here is that most students have combination of private and federal loans. Because you cannot include private loans in a federal consolidation, a federal consolidation only partially solves the problem for many students.

A private consolidation may also help you out in terms of your monthly payment, but is not assured to do so primarily because the entire consolidation has higher qualification requirements and is not backed by the Federal government or the Department of Education.

Hopefully, this brief overview has helped you sort out some of the differences between the different type of consolidation loans that are available for students. To learn more detail about these private student loan consolidation and federal student loan consolidation, check out the link below.