Student Loans : News, Updates and Blog Posts

Tomorrow (January 31st) heralds two important events – the retirement of Federal Reserve Board Chairman Alan Greenspan after na 18 year tenure, and an almost certain increase in the federal funds rate, bringing it to 4.50%. What does this mean for you?

Well, remember that the federal funds rate drives the prime rate, which in turn drives many credit cards. If you carry a balance, your credit card payments will be going up. This is a great time to pay down your credit card debt and shred your credit cards.

Need more cash to do that? Consolidate your student loans to free up cash each month – that way you can both make payments on your student loans and pay down higher interest rate debts.

Get your FAFSA in by tomorrow – by now, you should have all your tax information, so get it in! The pool of free and low cost money is dwindling rapidly!

File your FAFSA now!

As reported on the Financial Aid Podcast yesterday, an interesting loophole in the drug conviction question on the FAFSA, Question 31. If your conviction for possession or distribution of drugs is a municipal court conviction, it will not impact your federal financial aid eligibility.

If, however, your conviction is a state court or federal court judgment, then it will impact your financial aid eligibility.

If you make less than $50,000 Adjusted Gross Income for tax year 2005, you may be eligible for the IRS “Free File” service, which is offered at the IRS web site, IRS.gov. One important thing to note: Free File is offered by a variety of commercial vendors, like H&R Block. One thing that is very likely as you’re going through the Free File service, should you choose to use it, is that you will be marketed to for virtually every add on service that the preparers offer, from insurance to guarantees to fast tax refund loans (often called advance tax refund or instant tax refund). These are the very worst of the lot, the equivalent of payday loans with annualized interest rates soaring as high as 1,700%.

Yes, you read that correctly. Interest rates as high as 1,700%. By taking advantage of Free File, chances are you will be able to file electronically, which means that you should have your refund in about 1 – 3 weeks anyway. If you can hold out, you can save yourself hundreds, maybe thousands of dollars in “refund loan” fees.

If you haven’t filed your FAFSA yet, you absolutely should before January 31, 2006! That’s 7 days away.

Every day you read in the news or hear on the news talk about wages, about wage growth, and terms like “nominal wages” or “real wages”. These are economic terms denoting two very different kinds of numbers. The first, nominal wages, are the numerical amounts of your pay. For example, let’s say your salary this year is $30,000. That’s your nominal wage – a numerical label indicating, essentially, how many sheets of paper with George Washington’s picture on it you receive each year.

Now let’s say you’ve been employed for 5 years. In that time, you’ve received a salary increase from $28,000 to $30,000. Sounds good, doesn’t it? That’s also the number that politicians like to talk about when they talk about how the economy is growing and everyone is doing better.

Real wages are a different matter. Real wages are a measure of what your dollar can buy. Let’s say that in 2001, you could buy an MP3 player for $100. Today, that same MP3 player would cost about $111.05. Even though you get paid more in 2006, you have to spend more to get the same item.

Here’s where it gets interesting – and somewhat depressing. Let’s take that nominal wage for 2001 – $28,000 – and adjust it for inflation. In order to keep up with inflation, meaning that you received the same real wages year after year, your pay increase in 2006 would have to be $31,100. In other words, even though you nominally make more money now than you did in 2001, the cost of items you buy has gone up faster than your wages have; you make less in real wages this year than you did in 2001.

So what does this have to do with student loan consolidation? Everything! Student loan consolidation puts more money in your pocket each month by reducing your monthly payment. That’s cash you can use today, right now. Inflation continues to eat away at our money supply, so by consolidating your student loans, you can make the most of your real wages – your purchasing power – today.

As an example, let’s say you consolidated your student loans in 2001 and cut your monthly payments by $150, or $1,800 per year. Adjusting for inflation since then, you would now need $2,000 in cash to match the purchasing power of the money you saved in 2001. Do you follow this? By consolidating today, your dollars will work harder and buy you more than they will next year, or the year after. Consolidating is a smart way to take advantage of the power of your money today.

Consolidate your student loans now by calling (877) 328-1565.

We’re working on clarifying the matter, but as it stands now, if you have existing student loans, the promissory note and terms under which you signed that loan governs that loan until it’s closed out. What does that mean? If you have federal Stafford or PLUS loans, the July 1, 2006 legislative rate change should not affect your loans. Good news, right?

… well… not so much, because the index by which your current variable rate loans continues to rise as well, the 91-day Treasury Bill (T-Bill). On Tuesday, the T-Bill closed out at 4.377%, which means that if student loan rates were set today, the rates would be:

+ Stafford in grace: 6.077%
+ Stafford in repayment: 6.677%
+ PLUS loans: 7.477%

As you can see, these rates are not significantly lower than the government-mandated rates for new loans. What does this mean for you?

Consolidating your student loans, no matter what terms your loans have, is the smartest thing you can do in the first half of 2006.

Consolidate today – call 877-328-1565 or consolidate online. It’s free and will keep you safe from interest rate hikes.

If you haven’t already filed your FAFSA, you still have two more weeks until the end of January. In previous posts, we talked about how the end of January is usually symbolic of the end of the pool of free or low interest money available, so make sure you file your FAFSA. If you don’t have your W-2 forms to estimate your 2005 income, the last paystub of the year makes a fine substitute!

Chris from the Financial Aid Podcast again.

Hey, guess how high credit card rates are going to go this year? Here’s some hints:

* The average credit card rate is Prime plus 5% – 15%.
* The current Prime Rate is 7.25%, which is Fed funds + 3%.
* The Fed is estimated to hit 5% on Prime.
* You could be looking at credit card rates starting at 10% APR, with subprime rates as high as 40%.

So what does this have to do with student loan consolidation? Well, put it simply: if you carry a balance on a credit card, the rates on your credit cards are going to vastly outpace your student loan rates. Every dollar you have that can be used to service debt needs to service debts in order of highest interest rate first. If you lock in your student loans now at 4.75%, 5.325%, or 6.125% (Stafford in grace, Stafford in repayment, PLUS), you can take the savings from your student loan payments and immediately begin attacking any credit card debt you have.

Oh, and once you’ve started servicing your high interest rate debt, take things like your credit cards and shred them into tiny pieces. For the next couple of years, credit cards will do nothing good for you or your personal finances.

Consolidate now online or call us at the office at 877-328-1565

The clock is ticking ever onward. Be sure you have filed your FAFSA! Remember that the most aid goes to the earliest qualified applicants, so file now!