How to Save for Your Child’s College Without Breaking Your Own Bank

Here’s the understatement of the century: College is not cheap. In fact, the average tuition cost for in-state students at public universities is currently about $10,000 a year. And that doesn’t include room and board, meals or books.

Like we said, college isn’t cheap – and that’s why it behooves parents to begin saving for it as soon as possible. So how can you start saving for your child’s college education without having to live off ramen noodles and cheap beer yourself? Here’s a look at some tips and suggestions:

How to Save for Your Child’s College Education

529 Plans: 529 plans are available in every U.S. state and are purpose-designed to help parents save for college. You can select from two options with these plans. One plan allows you to lock in current tuition rates by purchasing credits. The other plan works similar to any other savings plan in that you just contribute regularly. These plans are only available to be used toward tuition, or room and board. If you withdraw funds from 529s for anything other than college expenses, you’ll be socked with a hefty 10 percent tax.
Work College Savings Into Your Budget: We get it, your paycheck is already a little exhausted when it comes to allocating for retirement, flexible spending accounts and even costs toward your employer’s benefits plan that you’re on. But it’s still important to work some sort of college savings into your budget, even if it’s just $20 a month that you allocate toward a 529 plan or separate savings account.
Savings Bonds: Encourage your family members to gift your child savings bonds on birthdays and for other milestone achievements (i.e. graduation, religious benchmarks, etc.). Savings bonds accrue interest over time and can represent a significant return on investment once they mature, which is usually 15 or 30 years.
Don’t Try to Finance College All by Yourself: While it’s only natural to want to help your children with education expenses, the reality of it is that you may still have to take out student loans in your child’s name. That’s OK, and it’s nothing to be embarrassed by.

How You Don’t Want to Finance Your Child’s College

While we’ve gone over some ideal ways to save for your child’s college expenses, let’s take a look at some options that you should absolutely stay away from:

Credit Cards: Never pay tuition bills with your credit card. Taking on this large of an expense can increase your credit utilization ratio and you’ll likely get socked with much higher interest rates than you would from a student loan if you can’t pay off the balance immediately. You’ll also likely be subject to an additional fee for paying with plastic.
Your 401K: Don’t withdraw money from your 401K to pay for tuition with the pledge of eventually paying it back. In addition to cutting into your retirement funds, you’ll be subject to a hefty tax penalty.

Top 10 U.S. States With Highest Credit Card Debt

Did you take out student loans? Do you own a home? Do you have unpaid bills that have gone to collections? Do you have a balance on your credit card?

If you’ve answered “yes” to any of these four questions, chances are you’re in debt of some kind. Debt isn’t necessarily a bad thing. For instance, mortgages and students loans are essential for the majority of Americans in order to get the education required to make other dreams (like owning a home) a necessity. However, maxing out credit cards, bills going to collections, and bankruptcies and foreclosures aren’t good things to have on your record.

When it comes to debt, however, you’re hardly alone – and debt varies on a state-by-state basis. If you live in Minnesota or either of the Dakotas, for instance, you live in a state where the fewest percentage of Americans are in debt. Elsewhere around the nation, it’s a different story. That said, here’s a closer look at the top 10 states with the highest percentage of Americans in debt.

Top 10 States According to Residents in Debt

The following data is based on a December 2017 report from Forbes, according to data tracked in 2016:

Louisiana: Louisiana leads the nation in this category, as nearly half of its residents (46 percent) are in debt.
Texas: Just slightly behind Louisiana, about 44 percent of all residents of the Lonestar State are in debt.
South Carolina: 43 percent of all South Carolinians are in debt.
West Virginia: 42 percent of West Virginia residents are in debt.
Nevada: Nevada rounds out the top five, with 41 percent of its residents in debt.
Alabama, Georgia, Kentucky, Mississippi, New Mexico: Though this is a top 10 list, the five states of Alabama, Georgia, Kentucky, Mississippi and New Mexico all tie for sixth place, with about 40 percent of residents, respectively, in debt.

Most Indebted States (By Value)

While the following list considers the percentage of residents in debt, we figured it would be noteworthy to include a separate list of the states where residents are the most indebted. Perhaps not surprisingly, the wealthiest states in the nation tend to lead this list because they’re buying more expensive properties, cars, etc. Unlike the list above, this one isn’t necessarily a bad list – just so long as the residents keep up with their payments in paying down debt owed. Here’s a look:

California: With all that Hollywood glitz and glam, and high coastal property values, the average California resident is in debt at just over $336,000.
Hawaii: Everything is more expensive in Hawaii, which is why the average resident is in the hole about $321,000.
Maryland: The average Maryland resident is about $263,500 in debt.
New Jersey: Though a bit surprising, the average New Jersey resident is some $257,500 in debt.
Washington: Rounding out the top five is Washington, where the average residents is $243,800

Student Operated Credit Unions – Provides Financial Education

by Nikitas Tsoukalis, President

Key Credit Repair

Students at the Notre Dame-Cathedral Latin (ND-CL) School of Chardon, Ohio, are taking money matters into their own hands with Student Operated Credit Unions. In a collaboration with the Cardinal Community Credit Union of Mentor, Ohio, students have the opportunity to run a credit union.

The program is headed by Cardinal CEO Christine Blake, who supervises the program. Blake notes in Crain’s Cleveland Business News, “The timing [of the program] could not be better. Students who are exposed to financial education in preparation for college are better prepared for life outside of the classroom. Learning how to manage their finances early on is a critical part of their long-term success.”

To participate, students must be active members of the ND-CL Business Club. The program serves as the foundation of financial literacy education for business-minded students. However, all interested students have the opportunity to be a part of the program in the form of banking customers. By using this innovative method for learning banking principles and money management techniques through hands-on simulated practice, students stand to gain valuable life skills.

During their days operating the credit union, students will learn the basics of checks and balances as they handle financial transactions. Additionally, they will be exposed to the operating system of banking institutes while gaining priceless training that they can use for supplementing their work experience when applying for college. Students in the program will also receive lessons in money management in the classroom setting, which will then be applied when they are working in the credit union. Topics to be covered include credit card debt and student loan defaults, which will provide students with useful debt management information.

ND-CL will also receive long-term benefits from the establishment of this student-run credit union. Thanks to the connection with the Cardinal Community Credit Union, the school’s state standards are set to increase. Blake adds, “Our community benefits when we can foster a new generation of savvy, money-smart savers. They’ll not only reap the benefits of smart money management, but through the process, they’ll learn to successfully manage their lives by making responsible choices.”

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Student Loan Debt Facts – Key Credit Blog

When you are trying to repair credit and open up new opportunities, nothing can slow you down like late or defaulted student loans. Learn more about this widespread type of debt and how it affects the finance picture for millions of American adults.

Student Loan Debt Is Huge

Americans owe more on student loans than they do on credit cards. The US student loan debt has risen to over $875 billion. That’s larger than the economies of over 200 countries.

Seven Million People Have Defaulted Loans

Of the 40 million Americans who have student loans right now, 7 million are in default. This can do a number on a person’s credit score, substantially limiting their ability to buy a home, qualify for certain jobs or get an auto loan.

As Many As 44% of Loans Are 90 Days Past Due or More

The federal government only tracks the numbers of defaults, so, there are no hard numbers available for past-due loans. But, the Student Loan Ranger estimates, based on aggregate data, that almost half of all loans are either 90 days past due or under deferment.

New College Grads Have a 9% Unemployment Rate

That’s fully 3% higher than the average unemployment rate in the US. The six-month grace period after graduation goes by fast. Without a job, many grads find payments unaffordable and wind up with debt management issues soon after graduation.

It’s Hard to Make Student Loan Debt Go Away

Student loans can’t be discharged in a bankruptcy, which makes credit repair difficult if you do not have the funds. They usually can’t be negotiated down like other debts, either. And, even though they are typically sold to collection agencies for pennies on the dollar, Sallie Mae refused to sell the debt to Strike Debt when they learned that the organization wanted to forgive the loans. Strike Debt did, however, manage to buy and forgive over $3 million in for-profit college debt in their September Rolling Jubilee.

Loan Payments Can Be Negotiated

If you only follow one of our credit tips, choose this one: do not be afraid to negotiate your student loan payment. If your loan is currently held by a collection agency, they have to accept reasonable offers. Loans that are in regular repayment may be eligible for alternate payment plans.

While student loan debt can be a substantial burden, it does not have to end your dreams of economic opportunity. Educate yourself about your options and create a repayment plan that works with your means.

Paying Student Loans: What Are the Options?

About 30% of people who have student loans are 90 days or more behind on payments. This can do a number on your credit and put home purchase plans at risk. If you have student loans, getting those payments under control is a big part of the credit repair process. What many people do not know is that there are many plans available to make payments fit your budget. Payment options include:

Standard Repayment is exactly what it sounds like. This is usually the highest out of pocket per month, but will frequently save the most in interest over time.
Graduated Repayment operates under the assumption that your income will increase over time. Early payments are lower than later ones. With these, you will pay more for interest over the life of the loan.
Extended Repayment stretches the repayment period from 10 to 25 years. Payments are lower throughout the life of the loan, but, it costs more in interest in the end.
Income Based Repayment uses a formula to arrive at affordable payments. Your payment will be equal to 15% of the difference between your income and 150% of the federal poverty level. After 25 years of payments, the balance of the loan is forgiven.
Income Contingent Repayment is similar to IBR. Your monthly payments each year are based on last year’s adjusted gross income and your family size. After 25 years, the balance is forgiven
Income Sensitive Repayment has payments that change as your income changes. The term of this loan is up to 10 years and the formula varies by lender.
Deferments and Forebearances temporarily allow you to reduce or postpone student loan payments. These can be helpful for avoiding default if you are temporarily unable to pay your student loans. If your inability to pay your loans is ongoing, it’s best to make arrangements for a different payment plan.
Lump Sum Payoffs are simply payoffs of one or more student loans and the capitalized interest. Many people will opt to pay off one or more student loans if they come into a large sum of money. On the plus side, this saves you interest that you would have paid over the loan and stops the debt from hanging over your head. On the minus side, putting that lump sum of money into a student loan means that it is not available for other purposes such as buying a house or investing in your retirement.

Talk to the holder of your student loan to explore which of the above options are available to you. Different loans have different options, and not everyone is eligible for all of the payment options above. By taking control of your student loan payments, you can tackle your debt and move on to your future plans.

For more information, tips and advised on what to do with your student loans click here.

Bankruptcy and Your Credit Score

There’s no way around it: a bankruptcy will unavoidably negatively impact your credit scores. However, there are a number of factors that will affect just how severe the effect is on your score, some of them unexpected. While there is no straightforward formula regarding how many points any one person will lose in a bankruptcy, there are a few factors that can help you make a healthy guess.

A few things to consider:

How High Was Your Score Before?

Ironically, someone with a higher FICO score will see a bigger drop as the result of a bankruptcy than someone with a lower score. In a mock scenario released by FICO in 2010, they compared two hypothetical scenarios: one person with a 780 and one person with a 680, both of whom file for bankruptcy. The person with the higher score lost 240 points while the person with the lower score lost only 150, leaving them both with scores in the mid 500s.

However, bankruptcy usually occurs after a long stretch of failing to pay bills on time, so, it is likely that late payments already negatively affected your score by the time that you file.

How Many Accounts Are Involved?

The more accounts that are included in your bankruptcy, the larger the effect on your credit score. The discharged debts each count as a negative filing. However, these will drop off your credit record seven years after filing, so, your credit rating will start to improve even before the bankruptcy is gone from your credit records.

How Long Ago Was the Bankruptcy?

A Chapter 13 bankruptcy filing stays on your credit record for seven years, while a Chapter 7 bankruptcy stays for 10. The longer it has been since you filed and the more responsible you have been in the interceding time, the less your bankruptcy will depress your credit score.

Rebuilding After Bankruptcy

After a bankruptcy, you can rebuild your credit and achieve goals that include a home purchase. Some methods to use during your credit repair journey to improve your score:

Review your credit reports. Make sure that all debts that were discharged in the bankruptcy are reflected accurately. As many as 79% of all credit reports have at least one error, so, it is worth it to check.
Pay every bill on time. Late payments can snowball and destroy your credit over time. Try automating payments so you never forget one.
Look for a secured credit card. Cautiously add revolving loans so that you can show creditors that you can be trusted with credit.
Use cards sparingly but regularly. Build up a regular habit of responsible use. One good way to do this is to charge a small, regular bill like a gym membership to your card and pay it off in full each month.
Do not close old credit card accounts. If you have any credit card accounts from before your bankruptcy, keep them open. The age of your credit accounts is a factor in your credit score, and the older your accounts, the better.

While a bankruptcy is a challenge, it is not the end of your financial life. Educate yourself about your credit, and carefully rebuild to restore your financial future.

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Fixing Defaulted Student Loans – Tips

Defaulted student loans can put a real kink in your financial affairs. They can eat up your tax refund year after year, keep you from getting desirable jobs, and even eventually stand between you and your home purchase goals.

The process of getting out from under a defaulted loan is daunting, but, it is vital if your goal is credit repair. Student loans don’t go away with bankruptcy and the penalty fees can give anyone sticker shock. But, rehabilitating your defaulted student loans is possible. Follow these steps:

Who Do You Owe What?

The first thing you’ll have to determine is who holds your loans and how much they total. Your loans could have been purchased and sold by collection companies several times, so, even if you remember your original lender, they may not own your debt. Fortunately, you can look up your current student loan creditors at the National Student Loan Data System.

Negotiate a Rehabilitation Deal

Now that you know who owns your loans, it’s time to contact your creditors and negotiate a rehabilitation deal. You will be asked to make nine on-time payments to bring the loans out of default.

What many people do not know is that, if you are unable to pay the full loan amount, you can negotiate a lower number. The holder of your loan will consider your income, assets and expenses and accept or decline your offer.

In some cases, you will find that you cannot get your student loan holder to make a reasonable agreement, or that they are asking you to pay loans that you do not feel you owe. You have a powerful friend on your side: your student loan ombudsman. This is someone who can negotiate on your behalf and mediate discussions with your loan holder.

Make On-Time Payments

To get your loans out of default, you will need to make nine on-time loans. You cannot make payments in advance. A payment is considered on-time if it arrives within 20 days of your due date. Some lenders will want to set up an automatic payment. Others will allow you to make the payments manually each month. If you have trouble remembering to pay bills, the automatic payment might be a good choice for you. Schedule it right after your paycheck hits your bank account so that you have the funds available.

It is very important to stay on the course once you have begun rehabilitation, since you only get one chance to rehabilitate your loans.

Check Your Credit Record to Make Sure It’s Correct

After you have gone through credit repair with the student loan rehabilitation process, it will appear on your credit record that you never defaulted on the loans. But, sometimes lenders do not submit the changes in a timely manner. In other cases, the records might show up twice. At this juncture, you can personally dispute the negative records or enlist the help of a credit repair expert.

It can seem like a massive task, but, when you tackle this one step at a time, it’s doable. Keep positive, keep on track, and soon you will be pursuing home purchase and other financial goals.

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Student Loan Forgiveness – How its done.

In 2007, Congress created the Public Service Loan Forgiveness Program to encourage individuals to enter and continue to work full-time in public service jobs. Under this program, borrowers may qualify for forgiveness of the remaining balance due on their federal student loans after they have made 120 payments (10 years) on those loans under certain repayment plans while employed full time by certain public service employers. For more FREE information on how to tackle student loans feel free to contact Key Credit Repair. Student Loan Forgiveness is possible but you need to do the research.