5 Ways to Stop a Student Loan Wage Garnishment

Your wages are being garnished for a defaulted student loan. You need it to stop. Here’s how to stop an administrative garnishment quickly.

You’re looking at your paycheck. It’s short. There’s a garnishment. You don’t know what you’re being garnished for so you call HR. The HR rep tells you the garnishment is for a defaulted federal student loan. You’re not sure what to do but you know you need it to stop. You google: How to stop an administrative wage garnishment. Now you’re here.Read More

How to Financially Prepare for the Trump Administration

In January 2017, President-elect Donald Trump will assume his position in office as the 45th President of the United States. Whether this was the election outcome you expected or not, it shouldn’t interfere with your ability to achieve your financial goals. The best thing you can do is financially prepare yourself for the Trump presidency by informing yourself of his proposed policies and aligning your money (and your actions) with your future goals. Here are some ways to financially prepare for the Trump administrationRead More

The Ultimate Student Loan Guide Is Here

Student Loans. Most of us have them, yet few of us understand them.

I overwhelmingly receive questions about student loans on a weekly, if not daily basis.

I decided that I needed to create a comprehensive student loan guide that answers the most commonly asked-and a few not so commonly, but equally as good-questions. Read More

What is a 529 Plan & Is It Right For Your Family?

In 2010 less than 3 percent of families contributed to a 529 plan. A recent survey found that about 70 percent of Americans don’t know what a 529 plan is. With the growing costs of higher education, starting a 529 plan can help give you a head start when it comes to paying for your child’s college tuition and expenses.

What is a 529 plan?
According to U.S. Securities and Exchange Commission: “A 529 plan is a tax-advantaged savings plan designed to encourage saving for future college costs. 529 plans, legally known as “qualified tuition plans,” are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code.

There are two types of 529 plans: pre-paid tuition plans and college savings plans. All fifty states and the District of Columbia sponsor at least one type of 529 plan. In addition, a group of private colleges and universities sponsor a pre-paid tuition plan.”

There is a wealth of information out there that can be overwhelming. So let’s cover the basics to get you started:

Who can open a 529 plan?
Any U.S. citizen or resident over the age of 18 can open up a 529 plan for the intended recipient, including for oneself. Accounts can be started for as little as $25 depending on individual state requirements. Anyone can donate to the plan and there is no age limit on when you can create a 529 plan for a beneficiary.

In general, people open accounts for their children or grandchildren. More than one 529 plan can be opened in the beneficiary’s name as long as it doesn’t exceed the state’s maximum contributions for the account which range from $200,000 to $400,000. Once the maximum amount to the plan is reached, deposits will no longer be accepted.

What are the tax benefits?
As stated on the IRS website, one of the major benefits for creating a 529 plan is that “earnings are not subject to federal tax and generally not subject to state tax when used for the qualified education expenses of the designated beneficiary, such as tuition, fees, books, as well as room and board. Contributions to a 529 plan, however, are not deductible.”

Am I only restricted to my state’s plan?
Most people assume they can only sign up for their plan in their home state but that isn’t necessarily true. You can review different states’ plans at Saving For College.

Have you opened up a 529 plan? Comment below if you have more questions about starting a plan.

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SoFi: Shaking the Student and Personal Loan Game Up

Student Loans.

Mention those words in a room full of millennial’s and I can almost guarantee that a chorus of groans will follow.

As a financial educator I work with individuals who are struggling to balance their student loan payments and other debts. Dreams of a highly lucrative career were deferred, while expenses continued to materialize. Student loans are not only a psychological burden, they’re a financial burden that often prevent millennial’s from starting families, business, and purchasing their first home.Read More

4 Ways Student Loans Impact Your Credit Score

I officially have student loans.

Let me rephrase that. I am officially repaying my student loans.

storyville_i_make_it_rain_art_di1For a good part of my financial journey my student loans were in deferment because I was in graduate school. Considering when I started graduate school my salary was around $32,000 I gladly accepted deferment and took the opportunity to focus on the rest of my financial life.

Despite my personal circumstances, student loan questions are and remain one of the top categories I receive questions about and for good reason. Almost everyone I know who went to college has some type of student loan debt. I mean sadly, I know people who could buy a home with their student loan amounts. According to the Federal Reserve, in 2012 there was roughly between $902 billion and $1 trillion in total outstanding student loan debt in the United State. Approximately 60% of students had student loan debt.

While I plan to write more posts on student loans, to get us started here are four ways that student loans impact your credit.

1. For people who don’t have credit, student loans are a way to establish credit history.

Because virtually every US citizen is eligible for student loans, the loan administrators don’t have the liberty of turning folks down that have thin or less than stellar credit files (Federal loans are different from private loans). If you don’t believe in credit cards, student loans can be your opportunity to demonstrate your ability to reliably repay debt.

2. Student loans are considered installment loans and can boost your credit rating.

Before I understood credit the terms installment and revolving credit confused the mess out of me. So let me simplify it.

Revolving credit is credit that doesn’t have a specific number of payments attached to it and is usually used on a regular, as-needed basis. I call it flexible. Credit cards are the most well-known type of revolving credit. You spend, you pay off, you have the ability to spend again with a varying monthly payment based on your spending. Payments can go on for as long as the line of credit is open.

Installment credit is credit that is set. It has a specific, finite number of payments (referred to as terms) and usually comes in the form of loan that is taken out and paid back in even increments based on a number of months. Student loans, car loans, personal loans, and mortgages are examples of installment credit; payments on these loans don’t vary from month to month and are supposed to have an end date.

Because student loans are considered installment loans, they can add to your credit mix, which accounts for 10% of your credit score. While 10% may sound negligible, it can make a difference. So if you are like me and live in NYC and can’t afford a mortgage, student loans provide that opportunity to mix your credit up a bit.

3. Potential creditors consider student loans to be good credit

This doesn’t meant that regardless of your payment history, it’s viewed as good, so lets not get out of hand. This means that creditors look at it as a necessary evil that is an investment in your future. Having $35,000 in student loan debt vs. $35,000 in credit card debt is viewed differently by potential creditors and will be treated differently during the review process when lenders decide whether to grant a mortgage, auto loan, or small business loan.

4. You generally have about 60 days before federal loan lenders  report your account past due to the credit bureaus at the end of the month.

For some reason I didn’t receive paperwork after my loan came out of deferment post graduate school and I was 6 days late on the payment when I caught the error. I went into a panic, almost had a breakdown and thought my MyFabFinance badge was going to be snatched from me. I was relieved to find out that there is generally a grace period before your report is dinged. I do not recommend factoring this into your repayment strategy because a lenders repayment policy is up to them, but if you find yourself a few days late, you are generally okay. But get a payment in as soon as you are able. If you are finding it difficult to keep your payments organized I highly recommend the My Fab Finance Financial Organizer to get you in order.

 

As stated in the opening, I plan to cover student loan debt more as my experience with it goes on. Please feel free to send me your questions as well as comment below.

 

 

ABOUT
Created by nationally recognized millennial money expert Tonya Rapley, My Fab Finance is a leading financial education and lifestyle blog for millennials who want to become financially free and do more of what they love.
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