Student Loans in the News: Buying a House With Loan Debt
A brief round-up of recent articles and blog posts that discuss current student loan debates and data
About the author: Kevin Mahoney, CFP® is a fee-only financial advisor in Washington, D.C. Kevin's work with his clients focuses on paying off student loans, buying a house, investing savings, and budgeting. Kevin is the founder & CEO of Illumint, a virtual financial planning firm specifically designed to help couples and young families with their financial decisions.
How to buy a house despite student debt
Author Annie Nova writes:
"The student loans will affect your eligibility for a mortgage in two ways, said Mark Kantrowitz, the publisher of SavingForCollege.com.
For one, your payment history on the loans will impact your credit score, he said. If you fall behind on your monthly bills to your servicer, expect your score to drop.
“This can reduce your likelihood of loan approval and increase the interest rate you pay,” Kantrowitz said. As you save up for a down payment, or get ready to apply for a mortgage, staying current on your student loans will be important."
[Read the entire article over at CNBC]
Paying Student Loans With 529 Plan Funds
Author Emma Kerr writes:
"First introduced in 1996, 529 plans offer parents a way to save for college expenses for a designated beneficiary. Families contribute money after taxes to these accounts, which grows on a tax-deferred basis and can be withdrawn tax-free if it's used to pay for qualified education expenses. In addition, some states offer special tax benefits for 529 plan contributions.
A law signed by President Donald Trump in December 2019 added a new qualified expense that can be paid for by 529 plans: student loans.
The Setting Every Community Up for Retirement Enhancement Act, a spending bill known as the SECURE Act, established a lifetime limit of $10,000 from a 529 plan that can be used without any penalties or tax consequences to repay the beneficiary's student loans, including federal and most private loans. An additional $10,000 can be used to repay student loans held by each of the beneficiary's siblings.
Prior to these changes, any withdrawals for the purpose of student loan payments were subject to income taxes and other penalties. The new 529 plan rules begin retroactively, starting with the beginning of 2019."
Education Dept. Unveils Fix For Student Loan Program's 'Bureaucratic Nightmare'
Author Cory Turner writes:
"The move comes after a damning Government Accountability Office review, first reported by NPR. In that 2019 review, the federal watchdog found that during the expansion program's first year, the department turned away 99% of applicants.
The change — which the department posted to the Federal Register without a news release or other public announcement — will address one of the most alarming revelations in the GAO's review: 71% of denials were essentially due to a paperwork technicality. According to the GAO, more than 38,000 applicants were denied relief under the expansion — known as Temporary Expanded Public Service Loan Forgiveness (TEPSLF) — simply because they hadn't first applied for and been denied PSLF.
The department's fix is to consolidate the two programs into one application form so that borrowers applying for TEPSLF will no longer have to first file a separate application for PSLF.
In a statement, the department said of the fix: 'We believe borrowers will be better served by using a single form for both programs. So the point is to further reduce confusion and to eliminate the need for a borrower who completed the wrong form to complete a new form.'"
[Read the entire article over at NPR]