Students Now Pay for College Themselves

Now, most student pay for college themselves, Just as the Great Depression left a lasting mark on the generation who lived through it, the children of the Great Recession may already be shifting their world view about money, judging by a new survey that says about 80 percent of them are shouldering some or all of their college costs.

"I think kids are stepping up and it requires a degree of financial responsibility," said Linda Descano, the president and CEO of Citi's Women & Co.

"I think it's a huge financial wake-up call," she said. "I think they're really seeing, they really have to own themselves. They don't have the security their parents did.They see their grandparents struggling to cover health care. I think they're realizing those safety nets are no longer there. How are you going to stay relevant? You can't just go to one place and stay there forever."

Four out of five college students are now working while going to school, typically 19 hours a week while classes are in session, according to the 2013 College Student Pulse survey conducted by YouGov for Citi and Seventeen Magazine. The survey, released this week, was conducted online in July and considered the views of more than 1,000 college students and high school seniors. The YouGov findings are in line with a recent study released by SallieMae financial services company that found that parents now pay for about 27 percent of college costs, compared with 37 percent in 2010.

"The whole job outlook has been nothing short of bleak. That sort of had an effect on my outlook," said 20-year-old Zachary Lomas, who attends Colgate University.

Lomas, who hails from Buffalo, N.Y., gets a mix of grants and loans, including some in his name which he figures will amount to $5,000 to $10,000 by the time he finishes his undergraduate degrees in history and English literature. His parents help with costs, especially his mother, he said.
The university's full financial aid package brings down the cost from the top-level sticker price. "What it actually costs is so far out of my range it would be laughable," Lomas said.

During the school year, he works up to 10 hours a week as a research assistant, a job that started out at minimum wage his freshman year. This summer, he's working 25 hours a week for $9 an hour at a bathtub refinishing company. His first summer was spent working 40-hour weeks at an unpaid internship at a law firm. He has since changed his career goals and now plans to attend grad school for journalism.

Indeed, 60 percent of the students in the YouGov survey said they plan to pursue a graduate or professional degree. And fully 94 percent said they believe college will end up being a good investment.

About 62 percent of the students said they have set a budget for their expenses and 67 percent have a savings account. When it comes to college choice, 77 percent said money played an important role in where they applied, and one-third said that money was the single most important deciding factor in enrollment.

In line with the findings of a recent Pew report, the YouGov study found that of the college students surveyed, 35 percent live with their parents; 32 percent live in campus housing; 18 percent live off campus with friends and 4 percent live off campus by themselves.
The one expense parents are most likely to still pay is the students' monthly cell phone bills, according to the survey.

Despite the jobs outlook and the college costs, Lomas is certain his hard work will pay off even if the jobs front remains tough. "If I go in and work hard and prove that I'm one of the best at what I do, it's not going to matter," he said.

Src : http://www.entrepreneur.com/article/227802#ixzz2dcg43n26

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How to Start a Business With Student Loans

Is there a way to shrink my loan payments while we are trying to get off the ground?  I want to quit my job to pursue a startup, but have $35,000 of student loan debt 

Today student loans represent the single largest debt burden for people under 40. In fact, from 2004 to 2009, only 37 percent of federal borrowers managed to make timely payments without postponing or becoming delinquent. Those most likely to default are unemployed or underemployed. Startup life, where income is anything but certain, qualifies you for the high risk camp, so it's important to know your options.

There are a handful of alternatives to help you reduce your debt burden in the short term. The first step is to identify whether your student loans are federal, private or a combination of the two.
Federal loans can be consolidated to reduce monthly payments.

While you won't be able to lower your rate, extending your term from 10 to 25 years will reduce the amount you owe each month by 40 percent, from $402 to $267 per month. Selecting a graduated pay option can further minimize upfront payments. Borrowers start with a reduced monthly payment, which gradually increases after year two and four, settling into a higher standard monthly payment in year six for the duration of the loan.

Federal borrowers facing periods of low or no income can also file for Income Based Repayment (IBR) or Pay As You Earn (PAYE), which cap your monthly payments to a percentage of what you earn, not what you owe, according to Gary Carpenter, CPA and Executive Director of National College Advocacy Group, which supplies information regarding student loans. This means that if your income suddenly drops or stops altogether, you may have a zero monthly balance.

Monthly payments under IBR and PAYE repayment plans are capped at 15 or 10 percent of your discretionary income, based on federal guidelines. Borrowers must qualify and file an application annually with the Department of Education. And under new law, any balance remaining after 20 to 25 years of consistent payment will be forgiven.
As of 2012, only 700,000 borrowers were enrolled in IBR. The Obama Administration estimates that IBR could reduce payments for 1.6 million borrowers.

Options to defer private student loans are more limited. Few private lenders consolidate loans, and even those that do won't reduce your rate or extend repayment terms. Most will offer need-based forbearance, or a 12-month break from making payments. Some offer up to three 12-month grace periods to defer payments.

It's important to note that short-term debt relief is not without long-term pitfalls. Reducing your monthly payments does not make the debt go away. Simply stretching the term of a $35,000 federal loan from 10 to 25 years triples the interest due over the lifetime of the loan, from $13,000 to $39,000. And when the amount you pay each month doesn't cover interest, negative amortization can cause your loan balance to grow exponentially.

Taking the easy road today may set you up for a tough climb later. "Young people often focus on today's cash flow, ignoring they have the work of their life ahead of them," says Eleanor Blayney consumer advocate for the CFP Board, a non-profit that qualifies investment professional to become certified financial planners. "Electing for a long repayment cycle can set you up for debt drag that eclipses other important milestones in life such as buying a home, preparing for retirement and saving for marriage and children."

As an alternative to dragging out your loans, consider crafting a pre-emptive savings strategy to help you stay current while income is influx. In Eric's case, that means you'd aim to save two years worth of payments or $10,000 for an outstanding balance of $35,000. To build your nest egg, consider working in your present job a little longer or take on a consulting gig to throw off extra income.
Budget six to eight months to earn more and make lifestyle sacrifices such as taking on a roommate, cutting down meals out and extraneous expenses to help you save. An easy to use monthly payment calculator can help you determine your budget.

Despite the inability to shake student loan debt, more than 14 percent of borrowers have loans that are overdue. "If down the road you get into trouble, don't ignore your student loans. They can't be discharged in bankruptcy. They will be around no matter what," says Carpenter. "Contact your lender to create an alternative payment plan They don't want to see your loan go into collection either."
The bottom line is that getting a pass today means you're electing to double-down on your future success. Adding $26,000 to your interest burden won't seem like a lot if your business is successful but there's no escaping the fact that you are digging the hole deeper and reducing your financial flexibility.

The preferred solution would be to find a way to save as much money as you can during the startup phase and leave the structure of your debt unchanged. Think about how you can really rein in personal expenses in the near term. You'll be better positioned to pursue the startup route and will maintain some of your financial freedom.

Src: http://www.entrepreneur.com/article/227715#ixzz2cxy1nDC7

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Student Loan Explanation

What Is Student Loan ?

A loan offered to students which is used to pay off education-related expenses, such as college tuition, room and board at the university, or textbooks. Many of these loans are offered to students at a lower interest rate, such as the Perkins loan or Stafford loan. In general, students are not required to pay back these loans until the end of a grace period, which usually begins after they have completed their education.

A student loan is designed to help students pay for university tuition, books, and living expenses. It may differ from other types of loans in that the interest rate may be substantially lower and the repayment schedule may be deferred while the student is still in education. It also differs in many countries in the strict laws regulating renegotiating and bankruptcy.

Student Loan In United States

In the United States, there are two types of student loans: federal loans sponsored by the federal government and private student loans, which broadly includes state-affiliated nonprofits and institutional loans provided by schools. The overwhelming majority of student loans are federal loans. Federal loans can be "subsidized" or "unsubsidized". Interest does not accrue on subsidized loans while the students are in school. Student loans may be offered as part of a total financial aid package that may also include grants, scholarships, and/or work study opportunities.
Prior to 2010, federal loans were also divided between direct loans (which are originated and funded by the federal government) and guaranteed loans, originated and held by private lenders but guaranteed by the government. The guaranteed lending program was eliminated in 2010 because of a widespread perception that the government guarantees boosted student lending companies' profits but did not benefit students by reducing student loan costs.

Federal Student loans are generally less expensive than private student loans. However, the federal student lending program still generates billions of dollars in profit for the government each year, because the interest payments exceed the government's own borrowing costs, loan losses, and administrative costs. Losses on student loans are extremely low, even when students default, in part because these loans cannot be discharged in bankruptcy unless repaying the loan would create an "undue hardship" for the student borrower and his or her dependents. In 2005, the bankruptcy laws were changed so that private educational loans also could not be readily discharged. Supporters of this change claimed that it would reduce student loan interest rates.

Student Loan In United Kingdom

Student loans in the United Kingdom are primarily provided by the state-owned Student Loans Company. Interest begins to accumulate on each loan payment as soon as the student receives it, but repayment is not required until the start of the next tax year after the student completes (or abandons) their education.
Since 1998, repayments have been collected by HMRC via the tax system, and are calculated based on the borrower's current level of income. If the borrower's income is below a certain threshold (£15,000 per tax year for 2011/2012, £21,000 per tax year for 2012/2013), no repayments are required, though interest continues to accumulate.
Loans are cancelled if the borrower dies or becomes permanently unable to work. Depending on when the loan was taken out and which part of the UK the borrower is from, they may also be cancelled after a certain period of time usually after 30 years, or when the borrower reaches a certain age.


Ref : http://en.wikipedia.org/wiki/Student_loan

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