Student Loan Deferment & Forbearance

Author: Sally Croft

Millions of students apply for student loans each year. They take these loans in the form of Stafford, Perkins, Plus and alternative student loans. The fact that a student must rely on a student loan to complete his or her education exposes the fact that there are some underlying financial difficulties that lead to the loan application in the first place. As a result, the possibility also exist that these students will also face financial difficulties after graduating if they are not in receipt of a well-paid job.

For these students defaulting on their student loan is not an option because by doing so they will destroy any little credit they have and that of their student loan cosigner. However, students should not despair, as there are many mechanisms in place to help students who have fallen into this hole. The government has put in place certain protection measures that can be employed to help these students through difficult times. Two of the most popular options that students can take are by applying for either a Deferment or forbearance on their student loan payments.

What is a Deferment?

A student loan deferment is a postponement in re-payments of your student loan. However, students must be reminded that for alternative student loans, although the payments on the principal have been suspended, students must maintain their monthly obligations to paying the required interest.

How one Qualifies for Student Loan Deferment

To qualify for deferment, students must first apply and meet the economic hardship criteria established by the lender. The criteria for deferment sometimes include if the student is still actively enrolled in a higher education facility, unemployed or on military deployment. For federal funded loans, the government pays the interest on these student loans while the loan is under deferment. In the case of alternative student loans, the student must pay the interest on student loans.

What is Forbearance on Student Loans?

If you were not successful in being granted a deferment on your student loan, the next option is to apply for forbearance. Under a forbearance of a student loan, the debtor is allowed to postpone repayments on their loan as long as they meet the creditor’s hardship criteria. However, unlike the deferral on the student loan, students must meet all interest payments every month to avoid defaulting on their loan. Students may qualify for student loan forbearance if they are unemployed, facing temporary financial difficulties, there is a natural disaster or on military deployment. Student loan forbearance is offered by all forms of lending institution whether government or non-government each of which will have their respective criteria.

How does Forbearance and Deferment affect my Credit Score?

Many be surprised that applying for student loan deferment or forbearance does more good than bad to your credit rating. Actually, applying for student loan forbearance or deferment saves your inability to meet your monthly financial obligations from being reported to credit agencies. However, this does not mean that these mechanisms should be abused, as creditors will only give so much latitude and no more.

Tags: credit score, Forbearance, Student Loan Deferment, Student Loans
Posted in Student Loan, credit score | 1 Comment »

Jan

College Scholarship Scams – Are they for REAL?

Author: Sally Croft

As students continue their educational growth, they sometimes have to rely on seeking scholarships to support their cost of tuition. These students hope for a world of well-wishers and individuals who are only interested in seeing them achieve success in life. Unfortunately, there are unscrupulous individuals lurking in the dark to fleece money from unsuspecting students through various scholarship scam offers. These scholarship scammers utilize various mechanisms that sometimes seem authentic to attract students and leave them holding the bag. Statistics show that every year thousands of students are scammed by scholarship fraud, with one estimate going as high as $100 million.

Common Student Scholarship Scams

Students and parents must keep their eyes peeled and ears to the ground to learn about scam scholarship services. Some of the more popular student scholarship scams are:

Money-Back Guarantee Scholarship Search: In this scam, scholarship hunters promise unsuspecting students guarantees of getting student scholarships for a fee ranging between $10 and $500. After some period of what they call processing time, they simply send you a list of scholarships that are available free on the internet. When you complain about this, they tell you that their money back contract states that you have to be rejected by the scholarship donor before you can be considered for refund. As a result, the frustrated student then drops the claim against them.
You are a Finalist!: In this scam, you get a correspondence that you have won a competition or some finalist in a scholarship program. They then request you supply them with a either a bank account or credit card number or cash for processing or to hold on to the scholarship on your behalf. Shortly after, you will notice unauthorized transactions on your student credit card or you may not hear from them again after they have received the cash. Students should remember you cannot win what you did not apply for.
Scholarship Matching Services: This scam works on the same principle of speed dating. These companies promise matching you to a scholarship for a fee starting at $49.95 based on how soon you expect a reply. They inflate their database and customer comments to convince students that they are a legitimate business. Reports from the Better Business Bureau show that most of these matching agencies advertise outdated and inaccurate information during their advertising campaigns. Moreover, you can forget about their money back guarantee and claim as they have more hurdles than the Olympics.
Telemarketers: The Department of Education has reported increases in the amount of telemarketing fraud since the financial meltdown. These telemarketers pose as representatives of the Department of Education who are offering students scholarships for a $249 processing fee. Either your credit card or bank account number must accompany this fee.

Getting a scholarship is the best thing that can happen to any student. However, students and parents must be vigilant and look out for the tell tale signs of a scam company. This can be done through various companies authenticating websites, the Department of Education or the Better Business Bureau.

Tags: College Scholarship Scams, College Scholarships, credit score, Scholarship Scams
Posted in Scholarship Scams | 6 Comments »

Oct

How to Maintain a Perfect Credit Score

Author: Sally Croft

In order to maintain a perfect credit score, you need to show plenty of discipline. To start with student needs to make sure that you pay all your bills on time. If you have three or four loans and are facing problem in repayment, go for loan consolidation. With loan consolidation, your monthly installment and rate of interest will decrease.

Monthly Expenses

Students are usually careless with their money matters; this creates problems in maintaining your finances. You need to keep a keen eye on your monthly expenses because, if you are not careful, it can have a negative impact on your credit score. Instead of spending too much, try to save some money in your bank account. If you do not have any bank account, open one and save money every month. Your credit score is going to increase when you save money.

Good Relations with your Lender

When you have good relationship with your lender, you are going to get plenty of benefits. It includes discount in interest rates, grace period and flexibility in terms of repayment schedule. To maintain a perfect credit score, it is quite important that you have a good relationship with your lender. It can come in handy when you are going to miss the monthly installment. When you miss monthly installments, your credit score is going to dip but if your lender gives you permission, there is going to be no negative impact on your credit score. The lender can offer you a grace period during which you are not required to pay monthly installments.

Selecting Loan Package

To maintain a perfect credit score, you need to select loan package very carefully. You also need to take into consideration the repayment schedule that is set by the lender. If you are not happy with the repayment schedule, it is better to move on and look for another loan package.

Paying Off Debt

You will only be able to maintain a perfect credit score when you pay off all your previous debts. With no debt record in your credit report, a lender will not treat you as a risk and you are going to get loans at low interest and with easy repayment schedules.

FICO Score

Your FICO score can have an impact on your financial opportunities. Whenever you apply for a new loan, student credit card or mortgage, the financial institution will take a look at your FICO score before giving you approval. With a high FICO score, you are going to get approval straightaway.

Tags: credit score, Debt, Fico Score, Loan Lender, Loan Package, Monthly Expenses
Posted in credit score | No Comments »