The Ugly Head of the Student Loan

Student Loans, Paying for College 2 Comments »

Student loans are great when you are in college, and don’t have the money to pay for school. But once you graduate and your 6 month grace period is over, then the payments start. Most people think that when you get out of school, you are going to have a $50/month payment, which is a drop in the bucket. Well, this is not always the case, and is getting harder to find with the cost of school spiking upward. The reality of it is, most student loans are about as bad as a car loan, if not worse, here’s why:

High Payments:

Let’s say you spent $50,000 in student loans, and you got a great consolidation loan after you graduated which put you at 3% interest. Well, even with a 15 year note, your payments are still going to be around $350/month. Ouch! How many of you out there have more money tied up in student loans?

Long Repayment Periods:

The previous example is pretty close to real life. My student loan repayment plan was 15 years. So when you compare that to a car loan, which typically is no more than 7 years in a repayment period, you are looking at the equivalent of buying 2 nice vehicles!

No Way Out:

That’s right, there is almost no way of getting out of paying for student loans. If you don’t already know, student loans survive bankruptcy! You can’t even go bankrupt and rid yourself of that ugly student loan. So the best way out of student loans is to be educated about them before going in to school.

The Solution:

You’ve seen the bad news, now let’s look at how to avoid this fiasco. As a high schooler, and I mean, even as a freshman, start seeking out the free money. There are an unbelievable amount of grants, scholarships and other means of acquiring money for college that you don’t have to pay back. Check out How to Find Scholarships for links and information on starting your quest to find that free money for school. It is well worth the investment.

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Options are a Viable Option Right Now!

Paying Off Debt, Student Loans, Tax Planning, Paying for College, Options 3 Comments »

by guest author Nicholas

This is the beginning of a multi-part series because options are generally thought of as complex transactions. Do you think options are risky? Options were originally created to reduce risk. I preface the next few days postings by saying, do not rush out to invest in options until you understand the risks involved.

What is an Option?
An option is a contract to buy or sell a specific financial product officially known as the option’s underlying instrument. The underlying instrument that I will focus on is a stock. The contract itself is very precise. It establishes a specific price, called the strike price, at which the contract may be exercised. It has an expiration date. Upon expiration, it no longer has value and no longer exists.

What does an Option Consist of?
An option is either a call or a put.
A call gives the owner the right to buy the underlying security at a specified price (its strike price) for a certain, fixed period of time (until its expiration). For the writer of a call option, the contract represents an obligation to sell the underlying stock if the option is assigned.
A put gives the owner the right to sell the underlying security at a specified price (its strike price) for a certain, fixed period of time (until its expiration). For the writer of a put option, the contract represents an obligation to buy the underlying stock if the option is assigned.

What does that Mean?
I will start today by only discussing call options from the buyers point of view. Let’s take an example. Say I want to purchase 1000 shares of XYZ stock. XYZ closed today at $26.95. I could purchase those 1000 shares, and I would pay $26,950.
Question: Why does anyone buy a stock?
Answer: Because they think it will move up.
With options, the question that I have to ask myself is when will it move?
I personally believe that XYZ stock will go up to $31.00 by the middle of December. So instead of risking my $26,950, I could buy 10 call contracts (one contract equals 100 shares of the underlying instrument) of the $30 December strike price. Each December call is currently valued at $0.65 per share. These expire on the 21st of December. So if each call is $0.65 and I want 10 contracts of 100 shares each, I will pay $0.65 x 1000 for a total of $650. So I now control, that is not to say own, 1000 shares of XYZ until the 21st of December.
Looking to the future if:
XYZ goes down to $22.00: my 10 calls will expire worthless, and I lose my $650 had I bought the options.
Had I bought the stock, it would be worth $22,000, and I would have lost $4,950.

XYZ goes up to $34.00: my 10 calls give me the right to buy those 1000 shares at $30, and I could sell them on the open market for $34. The calls are then worth at least $4 per share. So I sell them for $4 a share x 1000 shares for a total of $4,000. I subtract my $650 for a gain of $3,350 or a 515% return on my money.
Had I bought the stock, the 1000 shares would be worth $34,000 minus my initial $26,950 for a gain of $7,050 or a 26% return on my money.

XYZ stays at $26.95: my 10 calls expire worthless, and I lose my $650 had I bought the options.
Had I bought the stock, the 1000 shares would be worth $26,950, and I lose nothing other than the time value of money.

Tomorrow I will continue the discussion, but from the above example, one can see how an option will allow you control over a certain amount of shares of a stock for a specific time with a limited amount of money required, relative to buying the stock. The upside is that it is possible to execute many of these trades with the same amount of money required to purchase one stock. The downside is that the option is only valid for a specific amount of time.
Stay tuned for more. Feel free to ask questions, and I will answer them as best as possible.

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Consolidate Federal Student Loans

Student Loans, Paying for College 2 Comments »

Have a need to consolidate federal student loans, “fed” up with the rates? The truth is, college is an invaluable asset to have, and the cost to obtain a college degree rises every year, typically at a much faster rate than the corresponding year’s inflation rate. Most families today are unable to pay for college without some kind of financial aid, scholarship or student loans. There are several kinds of student loans, one of them being federal student loans, which obviously, are backed by the government. Federal loans are given at a variable rate, meaning that the interest rate rises and falls with the current position of the economy. Many may not realize the benefits of consolidating your federal student loans as soon as they can. Not only will it save you money every month, but it will also save you a lot of money in the long run as well. You are allowed to consolidate your student loans if the total amount exceeds $7,500 and you have borrowed from more than one lender.

Save Money Every Month

A statistic from Sallie Mae, the largest provider of student loans in the United States, says that loan consolidation can actually reduce your monthly payments by up to 54%. Doesn’t that sound worth it? Instead of making large monthly payments to several different borrowers, make one lower payment every month instead, with the same terms. On top of that, instead of having several different interest rates to pay on with the different borrowers, you’ll have one interest rate of concern.

Combine Several Monthly Payments

This is great for any college student. You have enough to worry about without having to remember a bunch of extra payments to several different lenders. Once you consolidate your loans into one, you will only need to worry about making one payment every month.

Save Money by Lowering the Interest Rate

Remember how I said before the Federal Student Loans have a variable rate? One of the greatest benefits to consolidating your federal student loans is that after the consolidation, the interest rate becomes fixed at the current interest rate, meaning you will be paying the same amount each month. No more rate fluctuations that can dramatically increase your payment. The amount of money you will save from consolidating should be very substantial. The money you save here can really help you to cover your other college expenses. Another great thing about federal student loans is that all interest is tax deductible, saving you money in your tax returns every year as well. The more deductions you have, the better.

As you can see, consolidating your federal student loans can be greatly beneficial to you financially. Look into it today, and start saving money on your monthly payments immediately.

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Xpress Loan Servicing

Student Loans, Paying for College No Comments »

Xpress Loan Servicing is a company that provides loans to pay for college.  Formerly known as Education Loan Servicing Corporation, Xpress Loan Servicing claims to raise the bar not only when it comes to helping students pay for college, but also sets a new higher standard in loan servicing. They are committed to providing you with excellent customer service as well as effective financial solutions for all of your education loan needs.  One seperation factor is their commitment to ensuring that students retain their good credit ratings through timely loan payments (I’ll explain more in a moment). Xpress Loan Servicing is a company worth considering if you are looking for college money, and here is a list of some of their features:

Borrower Options

Xpress Loan Servicing works to make everything as easy for you, the student, as possible. You can find forms online to cut down on application hassle, as well as eligibility information to receive a loan. Not only that, you can log into your own secure account which will provide you with updated loan information whenever you need it. It’s a great tool, and one that I made sure to have when I was looking at student loans. Not only that, they also provide loan calculators for use at your disposal, and the ability to make your payments online. From what I can tell, they will allow you to set up automatic payments from your bank account at no cost to you, if you like that sort of thing. Personally, I want to be the only one that knows my bank account information.

Payment Deferral Options

Another positive about Xpress Loan Servicing is that if you ever get in a tight spot and think you will have to miss a payment on your loan, they boast that their customer service will work with you to find options to keep you from missing a payment. This could be done through different types of payment deferrals. There are several types of payment deferrals you can use, such as:

  • In School Deferment
  • Education Related Deferment
  • Temporary Total Disability Deferment
  • Public Service Deferment
  • Unemployment Deferment
  • Parental Leave/Working Mother Deferment
  • Economic Hardship
  • PLUS Borrower with Dependent Student Deferment
  • A customer service representative will work with you to find out which deferment you qualify for, and will help to get the deferment approved to keep you from missing a payment. If you don’t qualify for one of them, and still intend to pay your loan in full, then you may still be able to temporarily suspend your payments, delay payments, or pay a smaller amount than previously scheduled through forbearance. 

    Whatever company you are looking at to help you pay for college, Xpress Loan Servicing is one to consider. They really push their customer service as a cornerstone of their business. Loan companies are usually a big hassle, and you usually are picking the lesser of evils, but at least this company puts emphasis on their customer service. If they prove to treat you badly, you can always consolidate or transfer your loan to another loan service company.

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    Xpress Loans

    Student Loans, Paying for College 2 Comments »

    Xpress loans are another popular choice for students looking for ways to pay for college. Like the Astrive Student Loan, the Xpress student loans are another way to help you bridge the gap between all monies you receive from any grants, scholarships, Federal student loans, and even work study programs and the actual cost of your education. They offer competitive rates, customer service, good terms, and an instant answer on your approval for a loan. Like other student loan agencies, all payments are deferred until after your graduation or residency, and you have up to 20 years to pay off your loan. However, 0ne of the great things about Xpress student loans are that they have guides to help parents and students learn how to apply for financial aid and details about their eligibility. They are extremely helpful and ready to help you get ready for college, and are available to a variety of students, as listed below.

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    How to Find Colleges

    Paying for College No Comments »

    Growing up, there were several colleges around the state that I knew of, and I was pretty familiar with the layout of the campuses, but I didn’t really want to go to any of them.  I learned how to find colleges, and found one that suited my needs and degree plan. It’s sad, but many college freshman will readily admit that the only reason they are attending the college they are is simply because when they were applying to different schools, they merely went with the ones they knew, or the ones that were close by. My favorite excuse is that a particular friend was going there, and so they have decided to base their future off of where there friend is going to college. Not smart. Once they start choosing a career, they may find that they will need to transfer schools, and not all of the classes taken will transfer over.  This is a costly mistake.

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    How to Find Scholarships

    Paying for College 5 Comments »

    One of the top questions on any parents mind is how they are going to pay for college. But knowing how to find scholarships can ease the burden of college expenses. The truth is, it’s more expensive to attend college today than it has ever been. You may not have saved any money for college, or started too late, and now you and your college student are searching for ways to help pay for the expensive costs of tuition, books and other hidden fees. Of course there are always student loans out there you can get, but not many people are real excited about getting themselves more into debt than they already are. Plus with the average college costing about $15,000 a year for public colleges, and $30,000 a year and above for a private college, the debt you quickly rack up is astounding.

    What many parents and students alike don’t realize, is that there are plenty of government grants and scholarships available to anyone willing to look and apply for it. In fact, there are over a million different scholarships available for students of all ages, however most use the excuse that they just don’t know how to find scholarships, and that if they did then they would probably just be denied anyway. That’s a negative outlook, and there is plenty of money out there to help pay for school, made for people just like you. I’m going to give you some hints about where to look for it. After that, it’s your job to apply.

    10. ($39.95 charge, I have not tested this site)

    If you are not willing to do much with this list, at the very least, follow link number 1, and fill out your FAFSA. You may be shocked at just how much you are eligible to receive via government scholarships / grants, or subsidized loans. This will also give you a PIN that you can use in conjunction with the financial aid office of the school you will be attending.

    Good luck in your searching. It may take some time to set up your membership accounts at these sites, but it should be well worth the effort to find that free money for college. Write and let me know if you have a favorite site for finding scholarships that you don’t see listed above (you may comment at the bottom of this page).

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    529 Account Pros and Cons

    Paying for College No Comments »

    First of all, what is a 529 account really? And what advantages will it give me? These are good questions which I will attempt to answer today. A 529 account is a state sponsored plan that allows families to save money towards their children’s (or their own) college education, while being able to invest the money and gain a market return. The best part of the plan is that the money grows on a tax free basis, as long as it is used for education.

    The 529 account can be used at any accredited college or university, on anything from tuition and fees, to books, room and board, supplies, etc. needed for college. As I mentioned before, each state has different rules surrounding the 529 account, but you can shop any state’s plan, to suit your needs. The only negative consideration with using a different state’s plan is you may have to pay higher commissions with less investment options available under the proposed 529 account. Let’s take a closer look at some of the key benefits and problems:

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