If you have already built up a credit score and are adjusting to your new student lifestyle, we have some tips that can help you succeed.
Debt Settlement Options
There are ways to settle your debt if you have stopped making payments to credit card issuers. Debt settlement is a negotiation in which a creditor agrees to accept as payment in full an amount that is lower than what a debtor actually owes.
- Debt management is a plan to repay the full amount of debt owed. These plans are most often arranged by a third party credit counselor. The creditors will agree to stop any collection activities or even reduce the interest rate on a revolving account and waive reverse fees and penalties.
- Bankruptcy is legal protection from creditors. There are two options for consumers: Chapter 7 or Chapter 13 bankruptcy. Chapter 7 bankruptcy is only available for consumers who can prove that their family income is below a level specified by the state in which they live. Chapter 13 bankruptcy is when the consumer repays the debt through a court-administered three to five year repayment plan. People file under Chapter 13 either when they do not qualify for Chapter 7. In both types of bankruptcy, the consumer must complete a credit counseling course prior to filing for bankruptcy and a debtor education course before any debt is discharged.
Paying for the Additional Costs of Student Life
The cost of college can include much more than just tuition, housing, and books. Here are some ways you can cover the additional costs of student life.
- The American Opportunity Tax Credit provides a federal income tax credit of up to $2,500 per student based on the first $4,000 in postsecondary tuition, fees and course materials paid by the taxpayer during the tax year.
- Your employer may provide you with up to $5,250 in employer education assistance benefits for undergraduate or graduate courses tax-free each year. The benefits must have been paid for tuition, fees, books, supplies, and equipment.
- If you would like more information on tax benefits, check out the SmartStudent Guide on Financial Aid.
- The main federal loan for students is called the Stafford Loan and has two variations. Federal Family Education Loan Program (FFELP) loans are provided by private lenders, such as banks, credit unions and savings & loan associations. These loans are guaranteed against default by the federal government.
- Federal Direct Student Loan Program (FDSLP) loans or “Direct Loans”, administered by “Direct Lending Schools”, are provided by the US government directly to students and their parents.
Private Education Loans
- Help bridge the gap between the actual cost of your education and the limited amount the government allows you to borrow in its programs. Private loans are offered by private lenders and there are no federal forms to complete. Eligibility for private student loans often depends on your credit score.
- Private education loans tend to cost more than the education loans offered by the federal government, but are less expensive than credit card debt. The federal education loans offer fixed interest rates that are lower than the variable rates offered by most private student loans
- Peer-to-peer lending, also referred to as social lending, person-to-person lending, is a non-traditional form of lending involving unsecured loans between individuals.