Student Loans in the News: Reading Your Loan Statement
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 Read Your Federal Student Loan Statement
Author Meghan Lustig writes:
"First, your statement provides a payment summary that includes your current payment amount and when it is due. The total monthly payment will be the same each month, unless you change your repayment plan or make payments in excess of what is due.
While your total monthly payment remains the same, the way that it is applied to principal and interest will change over time. Your student loan repayment follows an amortization schedule, and you can check your student loan statement each month to see how your payment is applied.
If you are concerned about your ability to pay, your statement includes information about how to change your repayment plan and possibly lower your total monthly payment. Use the contact information provided on the statement to contact your student loan servicer to learn more about your options.
The final key detail that your statement provides is itemized loan information, such as your current balance, original balance, interest rate for each loan and the amount of interest you have paid for each loan. This information will help you understand how you are paying down your debt over time.
You can use this information to consider changes like whether to make payments beyond what is due to pay off specific loans with higher interest rates or adjust your monthly payment to pay your loans off faster."
[Read the entire article over at U.S News]
Why Did My Credit Score Drop When I Refinanced my Student Loans?
The website notes:
"When you refinance student loans, you’re not making changes to the terms of your current loans—you’re actually creating a brand new loan. The new loan pays off the balances of your old loans. To refinance your student loans, you’ll have to submit an application to a lender. The lender will then pull your credit report to decide if you qualify for the new loan. This is known as a hard inquiry, and one can lower your credit score. This may be why your score dropped when you refinanced your student loans.
Everyone’s score reacts differently to credit activity, so the impact of one or more hard inquiries will vary. If you rate-shopped for your refinancing by applying to multiple lenders, your credit report may show several hard inquiries. If you plan to rate shop for your student loans or any future loan, try to complete all your applications in a short time period (ideally, two weeks). This can help limit how many hard inquiries appear on your credit report."
[Read the entire article over at TransUnion]
The student debt squeeze: A look at 3 people’s budgets
Author Annie Nova writes:
"Today, more than two-thirds of college graduates have student debt, compared with less than 50% in the early 1990s. And, back then, the average balance was $9,000 – now it’s $30,000. The typical monthly bill is nearly $400. Americans are more burdened by student debt than they are by credit card or auto debt.
For many borrowers, it’s a challenge to keep up with payment after payment.
That’s because as student loan bills have climbed over time, incomes haven’t. The average hourly wage in 2018 had no more purchasing power than it did in 1978, according to the Pew Research Center.
As a result, people are paying off their student loans at a slower rate. The typical borrower takes 16 years to emerge-debt-free now, compared to less than 14 years in 2013.
People are also finding it harder to purchase houses, amass savings and start families.
'There’s just a lot of uncertainty in my future,' said Travis Margoni, 39, who owes around $80,000. A quarter of people with education debt say they couldn’t come up with $2,000 in the next month, according to government survey research analyzed by Mark Kantrowitz, the publisher of SavingforCollege.com."
[Read the entire article over at CNBC]