A recent article in the online version of the Wall Street Journal caught my attention. It was called “Clients From Venus.”

It began by pointing out that women are becoming increasingly involved in personal finance. “Women control $8 trillion in assets in the U.S., and by 2020 are expected to control $22 trillion, according to TD Ameritrade Institutional, a division of TD Ameritrade Inc.”

Naturally the financial services industry is trying to figure out how to capture their share of this market. And as part of that attempt they’ll study women to try to find out what works for them.

The same WSJ article provides an interesting glimpse on how women relate to money and personal finance. “A 2010 Boston Consulting Group study found that women globally identified financial services as the industry they are most dissatisfied with on a service and product level. Those surveyed said the industry doesn’t understand that women view money and wealth differently from men. For example, women don’t seek to accumulate money, the study reported, but see it as a way to care for their families, improve their lives and find security.”

As someone who has worked in the area of personal finance for decades I can verify that women do look at money differently than men. And that there are some tools that can make it easier for women to manage their financial affairs. So let’s look at some of those tools.

Begin by selecting your goals. For most of us this is easy. Providing for our ongoing monthly needs. Saving for a vacation, car, house or baby. Saving for a college education. Saving for retirement. Some are short-term. Others may be decades away.

But, they all have something in common. You can estimate how much money you’ll need and when you’ll need it. So you have a goal and you know how much time you have to achieve it.

There are a wide variety of online calculators to help you figure out how much money you’ll need and how much you’ll have to save to get there. Some of my favorites come from Bankrate.com/dls. They’ve been an unbiased research source for decades.

Why is it important to start with goals? Let’s state up front that not all women are the same. But, for many the study is right. Finances are about security. That means that the recognition of goals is especially important for them. Picturing their baby getting a diploma is the kind of motivation that will cause them to take the necessary steps to make it happen.

Working as a financial planner back in the 1980s I noticed that on average women weren’t much interested in the beating the market or having water cooler bragging rights for their latest stock pick. What women wanted was evidence that they and their families were financially secure (or at least becoming financially secure).

That meant that their investment style was different from men. Guys were much more willing to be aggressive. More willing to take risks if the possible rewards were big enough.

Women were much more likely to choose a slow but steady path. They were happy playing tortoise to the men’s hare. In fact, more than once I heard a wife suggest her husband’s investment ideas were ‘hare brained’!

As a financial planner I was always more comfortable with the ladies’ approach. There are fewer surprises and disappointments on the slow but sure road. To that extent I often encouraged them to use a strategy that’s commonly known as ‘asset allocation management.’ When used with mutual funds it becomes a two layer diversification strategy.

The concept of diversification is important to successful wealth accumulation. Diversification is a way of saying that all your investments are not the same. They’re diverse or different. The fact that they’re different is the key. Because they’re different they won’t go up or down together.

If you were a stock investor you might own ten different stocks. If one stock ran into trouble, the other nine would cushion the loss. One way to easily achieve diversification among stocks is to invest in a mutual fund that holds many stocks. So-called index funds are an excellent example.

Now while a fund protects you from one stock performing badly, what heppens when the whole stock market collapses? Something that we’ve seen twice in the last 15 years. In that case a stock mutual fund would drop.

That’s where the second level of diversification comes in. The asset allocation model. Different types of investments respond differently to changes in the economy. For instance, inflation is bad for cash and bonds. But it’s good for hard assets like real estate and metals.

By diversifying your investments in different types you protect yourself from surprises. An example was the stock market crash of 1987. At the time I was a financial planner. Asset allocation protected clients throughout that turbulent year. While one type of mutual fund went down, another went up to offset the loss.

We don’t have space here to get into how to allocate between different asset classes. The Securities and Exchange Commission (SEC) has a pretty good explanation here.

You’ll want to adjust your allocation as your age and goals change. Economic situations can also be a reason to tweak the allocation.

The approach is cautious, but one that works well. Especially over a number of years and in uncertain economic times.

Bottom line? Part of sound personal finance is understanding how you relate to money. And then tailoring a plan that works with your personality and the uncertainties of the world we live in.

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Gary Foreman is a former financial planner who currently edits The
Dollar Stretcher website . You can follow Gary on Twitter . For more on personal financial management. Source: Women and Financial Security

Articles on www.debtplan.org have been acquired from a variety of sources.  No content on this site should be considered financial or legal advice

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1. Millennials and Social Security

Let me start with a confession. I’m not a millennial. I’m a baby boomer. Been working since I was 15. For over 40 years I’ve been paying into Social Security. In return for my hard-earned money I’ve received promises about future payments. And, I’m not alone. The Population Reference Bureau says that there are 76 million of us boomers.

What does that have to do with Millennials? We all know (or at least should know) that Social Security is running out of money. Recently Reuters did an interview with the chief actuary of the Social Security Administration. They reported:
“Social Security is not in imminent danger of running out of money, but it faces a financial crunch a bit further out – around 2035. That is when Social Security’s Trust Fund is projected to be exhausted due to the drawdown of benefits by the baby boom generation. At that point, the program would have sufficient tax revenue to pay only about 76 percent of promised benefits.”
Clearly something will need to be done. There are only three ways to close that gap:
- cut benefits that were promised to seniors
- increase social security taxes on younger workers
- shift funding (and the problem) to the general U.S. budget (which will lead to deficit spending and inflation)

I’ll leave it up to you whether you should contact the President, your senators or representatives and suggest that they work on a solution now. But, given the fact that they’ve taken the opposite approach and lowered FICA rates lately to reduce the pain of a bad economy, it’s probably safe to assume that they won’t take any action in the near term that would close the gap between promises and expected revenues.

So what can a millennial do today to avoid trouble later? There are a number of things that you can do to put yourself in a better financial position for your future.

First, save as much as you can today. Don’t assume that it’ll be easier to save ten years from now when you’re making more money. It tax rates go up that might not be true. Or if inflation is consuming your paycheck it will be harder to save.

So save all you can today. Aim to save at least 10% of your take-home pay. Better still 15%. Not only will you be establishing the savings habit early, you’ll also have the magic of compound interest working in your favor. A dollar saved today is worth about twice as much as one saved 10 years from now.

Then guard your savings carefully. There are two major threats to your savings: taxes and inflation. Let’s look at each one separately.

First, taxes. Taxes can play a major role in the performance of any long term savings plan. The reason is simple. Taxes slow down the benefits of compound interest.

Let’s take an example. Let’s suppose that your money is earning a steady 8% per year. At that rate it will double every 9 years. Pretend you’re 23 years old today and received $1 as a birthday present. You save it for retirement. That $1 will double when you’re 32 ($2). Again when you’re 41 ($4). Again when you’re 50 ($8). Again when you’re 59 ($16). Again when you’re 66 ($32). And again when you’re 75 ($64).

Now let’s suppose that taxes take 25% of your earnings each year. So your $1 birthday gift only earns 6% each year. Now it will double every 12 years. So it will double when you’re 35 ($2). And double again when you’re 47 ($4). And again when you’re 59 ($8). And again when you’re 71 ($16).

So avoiding those taxes are critical. There are two ways to do that. The obvious is to make your investments within a retirement account like an IRA or 401k plan. As long as your money stays within the plan it grows without taxes.

Another way to avoid taxes is to buy and hold investments that don’t pay interest or dividends, but increase in value over time. Income and dividends are taxed as ordinary income. But an increase in value is considered a capital gain and taxed at a lower rate (assuming that Congress doesn’t raise the capital gains rate). Plus, the gains are only taxed at the time you sell the investment, not each year as it appreciates.

The second main threat to your savings is inflation. And, there’s good reason to think that we’ll see more inflation in the future. In part because of government deficits. Inflation allows a borrower to repay a debt with dollars that are worth less. And, government has the ability to print dollars that cause inflation. So you don’t have to be a conspiracy nut to think that there’s a good chance that we’ll see some inflation fairly soon.

If you’re working inflation isn’t so bad. Prices go up. Your wages go up. No harm done. But, if you’re a saver that’s different. Inflation is like a tax on savings. Every rise in prices means that your savings buy less.

What can you do to be prepared for inflation? Mainly be sure that some of your savings are invested in things that will appreciate if inflation occurs. Typically physical things like gold, silver, real estate.

Consider something called an “asset allocation model” when you invest your savings. It’s a balanced approach. The design is such that if economic events are bad for one type of invesment they’re also good for a different type. So you don’t hit home runs, but you don’t strike out either. Long-term it’s the safest way to invest.

We don’t have the time or space to suggest individual investments. Plan on doing some online studying or contact an investment professional for help in deciding where to stash your savings.

Bottom line? There’s a financial crunch ahead. Both boomers and millennials would be wise to start taking action now. Waiting could mean a very rough time in just a few years.

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Gary Foreman is a former financial planner who currently edits The
Dollar Stretcher website . You can follow Gary on Twitter . Find out 6 Squirrely Ways to Save. Source: Millennials and Social Security

Articles on www.debtplan.org have been acquired from a variety of sources.  No content on this site should be considered financial or legal advice

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It’s a subject that none of us want to think about. Whether we’re young and just starting life or older and approaching the end, we don’t want to think about our own death. And, adding money to the mix only makes it worse.

But, the truth is that all adults need to think about what will happen to their financial affairs when they die. Failure to do so could leave a real mess for those who survive you. And could cost those survivors quite a bit of money.

So let’s do something today that we don’t want to do. Let’s evaluate your estate planning and see if it’s adequate for the job. For the record, I am not an attorney and this is not meant to be legal advice. I have been a financial planner and often referred clients to get competant legal advice. This is meant to do the same.

First, let’s create working definitions for a couple of commonly used terms. “Estate” refers to what financial and physical assets that you own (or partially own) at the time of your death. “Estate planning” is the planning that you do before your death to make sure that your wishes are followed after death. A “will” is the most commonly used document to make your wishes known to those who survive you and any appropriate government authorities.

We’ll begin with estate planning. You’ll need to decide what you want your estate plan to do. Someone will need to be named the “executor” or boss of your estate. They’ll assume the responsibility of executing your last wishes. That person does not need to be a lawyer. Any adult with good judgement will do. Often a family member is chosen. But, you may want someone from outside the family like a lawyer or bank to do the job.

You’ll want something that will provide instructions on how to distribute your financial assets and physical property. You may want specific items to go to designated persons. Or you may want to make it clear that certain persons are to be excluded from any inheritance.

If you have children you’ll want to specify who you want to raise your kids. Remember that they’ll need someone to take care of them both physically and to manage their finances until they reach adulthood. Quite often minor children are left financial assets in a parent’s estate.

You’ll also want to consider whether any estate taxes could apply. If so, you may be able to take steps to reduce the tax burden your heirs will face.

OK, now that we’ve spent some time thinking about what we want to happen after we’re gone, let’s talk about how we make sure that it does happen.

In most cases the primary document is a ‘will’ or ‘last will and testament.’ A will is a very specific document. It’s not a list of items with names next to them that you keep in your safe deposit box. Or post it notes pasted on a silver tea service that you want to go to little Sally.

A will is a legal document that contains certain elements that are required by state law. While none of these elements are difficult, failure to include them could invalidate the will. And, to complicate matters, each state has slightly different requirements. Make sure that your will is legal in your state of residence. And, have it rechecked if you’ve moved to a new state since it was written.

Many single adults think that they don’t need a will. Typically they’re wrong. Without a will it take could months to have someone assigned to sell a car owned by the deceased or pay any bills. There could even be a problem finding someone to pay funeral expenses.

Another common misconception is that married couples can solve the problem by putting everything into joint accounts. Unfortunately not everything can be titled jointly (think of jewelry or home electronics). And, even if everything is held jointly, what happens if both spouses go in a joint accident?

Dying without a will can leave a real mess. State law will determine who is the executor and how your property will be distributed. That might not produce the results you want. For instance, in some cases law dictates that some inheritance goes to children before the surviving spouse.

It’s especially important for unmarried couples. State laws are a patchwork. In some places they recognize commonlaw marriage the same as one registered with the state. In other places, a life-long live-in partner is accorded no more rights that a complete stranger.

State laws are also problematic for couples in a second marriage. You may think that certain assets that you brought into a second marriage should go to the children of your first marriage. The state might think otherwise.

Bottom line? Just about everyone who has reached adulthood should have a will.

Being frugal it’s tempting to want to write your own will or buy a form where you just fill in the blanks. Normally I encourage do-it-yourself efforts. But in this case that could be a mistake. Remember that if something isn’t done right no one will know until after you’re gone and can’t correct it. A small mistake could be very costly. This might be one of those cases where hiring a professional is good money management.

That doesn’t mean that you can’t shop around to save some money. And, if you’ve already thought about what you want your estate plan to accomplish you’ll reduce the number of hours the attorney will spend preparing your will. That will save you some money.

Finally, you’ll want to make sure that your executor has access to a copy of your will when you die. They will need it as proof that they can make decisions for you. Give them have a copy of the will, or, if you’d prefer that they not see it, give a copy to your lawyer and let the executor know who the lawyer is. Don’t put the only copy in your bank box. The bank will not let the executor enter just because they say they have a right. The bank will require proof. And that proof is locked in your box.

Planning for your estate does not need to be expensive. Unless your financial or personal affairs are complicated getting the documents prepared isn’t that expensive. But, it is important. Don’t leave a financial mess as a last memory of you for your loved ones.

_________

Gary Foreman is a former financial planner who currently edits The
Dollar Stretcher website . You can follow Gary on Twitter . For more on estate planning in a second marriage. Source: Writing a Will

Articles on www.debtplan.org have been acquired from a variety of sources.  No content on this site should be considered financial or legal advice

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Are student loans the next financial bubble we’ll face? Could be. The statistics are staggering.

Tuition and fees have have increased nearly 130% in the last twenty years (source IRS & College Board data).

According to the College Board’s Trends in College Pricingtotal costs (including tuition, fees, room and board) in the 2011/12 school year were $17,131 for students attending four-year public colleges and universities in-state and $29,657 out-of-state. For students at private schools the tab was $38,589. Plus students will spend another $4k for textbooks, supplies, transportation and other expenses.

Those higher costs are causing students to borrow more to finance their education. Total student loans are expected to top $1 trillion (yes, with a “T”) before 2012 is over. There are already more student loans outstanding than all the credit card debt combined.

And, it’s not just student loans. Undergrads are running up their credit cards, too. Over 20% had balances exceeding $3k. (Source: Sallie Mae, How Undergraduate Students Use Credit Cards, 2009)

So I spoke with Derek Haake, the founder of Compushift.com. Derek received a degree from The University of Texas at Arlington, then an MBA and JD from the University of Akron. He started Campus Shift looking for a better way to save on textbooks while in college. Along with helping students find the least expensive source for their books, Campus Shift also provides discount deals on food, concerts, campus activities, and clothing.

Given his expertise in the things that students buy I asked Derek about some of the ways that college students can reduce expenses.

Q: After tuition, what are the biggest expense categories for college students?

Derek: After tuition, the biggest expense is a student’s living expenses, but these can be managed by proper planning. The second biggest expense for the new student is their purchasing things that they really do not need – such as the biggest and best meal plan on campus. From there, entertainment expenses and spending money are probably equal to or right at the same cost for most students as textbooks.

Q: Which categories offer the greatest chance for savings for a student?

Derek: Smart living – i.e. living off campus, renting a house with classmates, and buying things from the University that you need / will use are probably the places where you can save the most money. Also, using the fact that they are a college student can save them on their daily expenses. Flash that student ID wherever you go and receive your student discounts and be sure to stay up to date on any campus deals.

Q: Is it generally cheaper for students to live on campus or off?

Derek: In most cases off campus is cheaper. First of all, a student can share rent with other classmates of a house or apartment, which can be a fraction of the cost of living in the dorms. Living in a house can also greatly reduce the cost, as many times rental prices of a home are less than that of an apartment. With the current economy, house rental prices are surprisingly inexpensive in a lot of communities. Finally, a student, if they want a meal package for on campus, they usually can still get one, even if they live off campus, but, buying groceries – buying non-perishables and other things that will get used and not “luxury items”, will save them substantially.

Q: What expense tends to be the most surprising to students?

Derek: Textbooks are one of those costs that a lot of students, especially those that are first-time college students in a family are surprising. Outside of college, students don’t have to buy books, and the $1000 per year that the average student spends can be a major surprise to a lot of students. Living expenses in a college town generally can be managed, and most people have an idea of how much these expenses will be, but these costs add up quickly.

Q: Paying for a college degree is a major expense. How can students increase the odds of finding jobs that will pay enough to make the expense worthwhile?

Derek: Students can look at fields that are hiring – especially hiring new graduates. Fields like medicine, engineering and business often will have high placement rates. Your other hard sciences will always be in demand at some level, but students should anticipate going to graduate school before they are able to truly find a job that will become a career for them.

Keep on Stretching those collegiate Dollars!
Gary

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Gary Foreman is a former purchasing manager who currently edits The
Dollar Stretcher website . You can follow Gary on Twitter . For more on the danger in student loans. Source: Reducing College Expenses

Articles on www.debtplan.org have been acquired from a variety of sources.  No content on this site should be considered financial or legal advice

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Whether you’re driving a hybrid compact or a SUV, most drivers are feeling the pain of higher gas prices. We won’t get into the causes or the politics of gasoline prices. That’s for economists, politicians and pundits.

But when Time magazineand the NY Timessuggest $5 gas is possible we will recognize that it could happen.

So is there anything that you can do besides waiting for the price to increase and then try to minimize the pain? I think so. There are steps that you can take today that will minimize the impact of higher gas prices.

First, if you haven’t already, begin to take all the normal gas saving steps. Pump up your tires. Shop for the cheapest price. Change your air filter regularly. Don’t drive aggressively. All the usual stuff.

Then go a step further. Consider ways to reduce the miles you drive and how much time you spend in your car.

Presumably you’re already combining errands to reduce your miles. It may be time to seriously consider carpooling. Gas costs twice what it did just a short time ago. If you can alternate days with a co-worker your gas bill will look more like the old days.

Also check with your employer about working four 10 hour days or working from home one day a week. With all the connectivity, you might convince your boss that you’d be more productive without all the office distractions.

Another way to lower your gas bill is to reduce the amount of time you spend driving. Sitting in rush hour traffic burns gas. See if you can shift to a schedule that puts you on the road when there’s less traffic. Better 10 to 7 than 8 to 5.

If your employer won’t allow that, adjust your personal schedule to avoid rush hour. Nothing says that you have to have breakfast at home before heading into work. You could bring breakfast with you and eat at the office after beating the traffic.

Same thing at the end of the day. You don’t have to go home right after work. Perhaps now is the time to get in the habit of taking a daily walk while traffic is heavy and then driving home after the rush.

Finally you come to a point where you’ve saved as much gas as you can. You might already be there. But that doesn’t mean that there’s nothing else you can do.

The reason we’re concerned about higher gas prices is because it causes us a money problem. So let’s not ignore the potential money solutions.

Adjust your budget now. You know how much you spend now for gas each month. Add 25% to it. Figure out today where in your budget that extra 25% will come from. Better yet, start taking it out of the other categories now. Put it in a savings account to help you weather the storm.

Finding that much to cut in your budget could be tough. Especially with grocery prices also rising. But it won’t get any easier if you wait until gas prices do go up. In fact, it will be even harder because you’ll need to make a quick decision.

You might be fortunate and find some money by checking your home or auto insurance policies. But you might need to gut it out and finally give up on the premium cable channel or find that extra source of income. No matter what, it will be easier to make the changes now.

I understand that it’s tempting to sit back and let things happen. Hope that prices don’t go up any further. Who knows. Maybe they won’t.

What happens if the experts are wrong and gas doesn’t go to $5? Well, you’ve tuned up your car, cut your gas bill and saved some money in the process. Not a bad result.

Keep on Stretching those Gasoline Dollars!
Gary

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Gary Foreman is a former purchasing manager who currently edits The
Dollar Stretcher website . You can follow Gary on Twitter . For more on how to tame a gas guzzler. Source: What To Do Before Gas Hits $5

Articles on www.debtplan.org have been acquired from a variety of sources.  No content on this site should be considered financial or legal advice

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Understanding the basics of federal student loans and how they work can assist student borrowers in their loan application process. Federal student loans are loans that are offered directly from the government with no intermediary financial institution. Federal student loans are also called Direct Loans and usually have much lower interest rates than private loans issued from a bank or other financial institutions. Since federal loans are government issued, their interest rates and terms are set by Congress and are issued at a fixed rate. When applying for federal aid, the prospective borrower must complete and submit a FAFSA (Federal Application for Student Aid) in order to be eligible to receive any student loans.

Once the student borrower has been approved for a federal loan, there are a variety of different loan options available to them. These loan options include Stafford loans, PLUS loans, and Perkins loans. Stafford loans are issued to undergraduate, professional, and graduate students who are enrolled at least half-time in a post-secondary educational institution. They may either be subsidized requiring financial need or unsubsidized and requiring no financial need on the part of the borrower. Stafford loans have annual loan limits that vary based on the criteria of the applying student. Dependent students, independent students, and graduate students all receive various loan amounts however the interest rate for all Stafford loans is fixed at 6.8% for unsubsidized loans.

PLUS loans are available to parents of students applying for aid and also to graduate students (Grad PLUS). These loans are available regardless of need but they do require a credit check for approval. The credit check must show that there have been no delinquencies in the past 90 days as well as no bankruptcies in the last five years. These credit requirements can also be met by a co-signer and all families are required to complete a FAFSA form. There are origination fees for all PLUS loans of up to 4% as well as a standard fixed interest rate of 7.9%. Loan forgiveness is available through the PLUS loan program.

Perkins loans are offered through the issuing educational establishment and are repaid to the school by the government. These low interest loans are available to families that have exhibited extreme financial need. Perkins loans are available to both graduate and undergraduate students alike. The current interest rate is fixed at 5% and there are no additional origination fees or charges.

Discussing federal loans with the school’s financial aid office is an effective way for students to determine what the best loan options are for their individual financial situations. All students interested in receiving federal funding for school should fill out a FAFSA form by the deadline for the school year in which they will need funding.

Articles on www.debtplan.org have been acquired from a variety of sources.  No content on this site should be considered financial or legal advice

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Only student borrowers who are receiving a direct loan are eligible for loan forgiveness; however it is possible to qualify by consolidating into the direct loan program. Qualifying for a forgiveness loan through the direct loan program requires that the borrower not default on their existing loan as well as make 120 monthly payments after October 1, 2007. In this way no loans are eligible for forgiveness until after October 2017. This forgiveness program created by Congress is called the Public Service Loan Forgiveness program. The exact loans which can be forgiven under this program include subsidized and unsubsidized Stafford loans, federal direct PLUS loans, and federal direct consolidation loans.

There are many public service professions that will qualify for loan forgiveness. Some of these professions include emergency management, public safety, public education, military service, law enforcement, school library services and several other sub categories. In addition, professionals who are employed by an organization that meets the PSLF program requirements will also qualify for loan forgiveness. These organizations include government organizations, non-profit, tax exempt organizations under section 501(c)(3) of the IRS code and private non-profit organization that is not a labor union or partisan political organization.

In addition to forgiveness loans offered through the direct loan program, other loan forgiveness opportunities exist through volunteer work. Some of the volunteer work that can qualify for loan forgiveness includes work with AmeriCorps where an individual can serve for 12 months and receive up to a total of $7400 in stipends as well as $4725 for use towards a student loan. Peace Corps volunteers can apply for deferment of their federal loans as well as partial cancellation of their Perkins loans. The Army National Guard is another organization which offers loan forgiveness in their loan repayment program which reimburses up to $10,000.

One of the main qualifications in most of the loan forgiveness programs is that the professional must be employed full time. This means that the individual must be employed full time in one or more jobs for a yearly average of 30 hours per week. The period of employment also does not have to be with the same employer and paid vacation days are not considered when considering the average hours worked.

Paying for college can create an extreme financial burden and loan cancellation and forgiveness programs provide some relief from this excessive debt. Many families are taking advantage of these incentive programs by making career changes into the public service fields. Having a comprehensive understanding of the loan forgiveness options available can assist students considering career paths to take these programs into consideration before selecting a major.  If you have student loans, see if you qualify.

Articles on www.debtplan.org have been acquired from a variety of sources.  No content on this site should be considered financial or legal advice

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When considering a bankruptcy filing for overwhelming student loan debt, it is possible to discharge some or all of the debt depending on your financial situation. You must prove to the courts that you are experiencing ‘undue hardship’ and that repaying your student loan is a virtual impossibility because of your financial situation. Different courts may make different determinations based on the presiding judge however a common test to determine undue hardship is the Brunner test. This test requires that the borrower demonstrates that he or she cannot maintain a minimal standard of living based on their current income and expenses. In addition, the debtor must also demonstrate that their financial condition is likely to persist throughout the time of their loan repayment. Lastly, the debtor must demonstrate that they have made good faith efforts to repay their student loans.   (Brunner v. New York State Higher Educ. Servs. Corp., 831 F. 2d 395 (2d Cir. 1987)

Proving undue hardship in a court of law is not very straightforward as there are several determining factors that the court may use to make a ruling. Because there are so many variables involved, many bankruptcy lawyers suggest that their clients not include their student loan debts into their bankruptcy filing. This is why many people assume they cannot discharge student loan debts during a bankruptcy filing. However the truth is that it isn’t impossible just very difficult and the outcome is not guaranteed.

If a debtor has already completed a bankruptcy filing and chose not to include their student loan debts the first time, they can go back and reopen the case at no additional cost. For more information about this, Chapter 7 of NCLC’s Student Loan Law manual contains a vast amount of information about discharging student loan debt during a bankruptcy filing. Additionally, filing a Chapter 13 bankruptcy may offer some relief for the debtor due to its ability to reorganize and restructure their student loan debt.  Within a Chapter 13 bankruptcy plan, the borrower adheres to a specific repayment schedule that is established under the plan. This offers the advantage of a three to five year payment plan during which time your payments are not determined by your loan holder. After the repayment plan is over, you may request that the remainder of your loan be discharged if you continue to experience undue financial hardship.

Discharging student loan debt is difficult but it can be done under certain circumstances. Exploring these options with a bankruptcy attorney can help you decide if this is the best option for your particular financial situation.

Articles on www.debtplan.org have been acquired from a variety of sources.  No content on this site should be considered financial or legal advice

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3. The Basics of Student Loan Consolidation

Although the overall economy is showing positive signs of improvement, there has been an increase in bankruptcy filings. Bankruptcy lawyers are seeing an increase in clients who are trying to absolve themselves of mounting student loan debts. Many filers have debt well into the thousands and are simply looking for a way out. The increase in filings related to student loan debt has bankruptcy lawyers and financial analysts alike wondering if this will be the cause of the next financial implosion. William E. Brewer Jr., president of the National Association of Consumer Bankruptcy Attorneys stated “Take it from those of us on the frontlines of economic distress in America, this could very well be the next debt bomb for the U.S. economy.”

Many of the bankruptcy filings are from parents who have taken out loans for their children and find themselves simply overwhelmed with debt. This can be a troubling predicament as middle aged parents should be lowering their debt to income ratio as they seek to prepare for retirement. The amount of parent loans for student loan assistance has increased 75 percent since the school year of 2005-2006. On average parents owe $34,000 in student loan debt which increases to $50,000 over a ten year period. Students graduating from a four year university graduate with an average debt of $25,250 which will also increase over the standard ten year period.

The student loan crisis has definitely escalated in recent years and bankruptcy offers little reprieve. Due to new laws enacted by Congress, it is virtually impossible to be absolved from student loan debt regardless of a person’s financial situation. A common solution many students resort to is the deferment option. However deferring ones student loans is not an indefinite possibility and does not offer a long term solution. Debt management companies may be able to assist student loan debtors who are seeking some type of debt relief. An established debt management company can negotiate directly with creditors on a client’s behalf.

Student loan debt is rapidly escalating and may become a new financial crisis for many Americans who are unable to repay their debts. Parents are at a distinct disadvantage as their time for repayment is even less due to age and other financial responsibilities such as a home mortgage and car payment. The best option for students and parents alike struggling with debt is to seek the services of a competent credit counseling agency or debt management company. This option may allow debtors to come up with creative solutions such as debt consolidations and refinancing.

Articles on www.debtplan.org have been acquired from a variety of sources.  No content on this site should be considered financial or legal advice

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1. The Basics of Student Loan Consolidation
2. An approach to deal with overwhelming student loan debt
3. Steps to take after student loan default

There are two main options for borrowers who have defaulted on a federal student loan and these are rehabilitation and consolidation. These two options can help the borrower to get back on track with payments and bring their loan current. Once this has taken place, they can then proceed to resume all payments or defer the loan if needed. Both consolidation and rehabilitation allow the borrower to avoid having their wages garnished as well as allowing them to keep any tax refunds owed to them during their repayment period.

Loan rehabilitation is an excellent option for student loan borrowers who have defaulted on their loans. In order to qualify for this repayment program, the borrower must make nine monthly payments within twenty days of the due date during a set period of ten consecutive months. This means that as long as the debtor makes nine payments in a ten month period, they will be eligible for loan rehabilitation. During the rehabilitation process, the guarantor must find a buyer for the loan while it is being rehabilitated. Once the process is complete, and you have made at least nine payments, your loan will be turned over to a traditional lender. Rehabilitation allows you to qualify for Federal Student Aid after six months of payments; however nine payments are needed to bring the loan out of default.

Consolidating a student loan is another option for defaulters seeking to bring their loans current. Consolidating your defaulted student loan allows you to avoid wage garnishments, collection calls and letters and other disruptive collection practices. After consolidation, the borrower will then be eligible for new loans and grants and even deferments. They will also be able to have the default removed from their credit report in most cases.

A borrower seeking to consolidate their student loan should do so using a government consolidation program also known as Direct loans. Attempting to use a private lender to consolidate student loans can become complicated as the borrower will lose their rights under the federal loans programs. These rights include forbearance, deferment, cancellation, and affordable repayment. A Direct Consolidation program allows the borrower to make three consecutive monthly payments or select a plan under The Income Based Repayment plan (IBR) or the Income Contingent Repayment Plan (ICRP).  Selecting either of these options can help to bring the loan out of default so the borrower can resume payments or apply for forbearance or deferment.

Understanding the advantages of student loan consolidation and rehabilitation can assist student loan borrowers who have experienced default find a workable solution towards repayment.

Articles on www.debtplan.org have been acquired from a variety of sources.  No content on this site should be considered financial or legal advice

Related posts:

1. Federal Student Loan Basics for Student Loan Borrowers
2. Understanding Student Loan Debt and Bankruptcy
3. Steps to take after student loan default