Student Loan versus Credit Card Funds - Which one would you go for?

Author: Sally Croft

Even a blind man can see that utilizing the services of a student loan is much better than using a credit card to fund your higher education. Yes, there may be some benefits offered with a credit card and banks try to lure customers to take their credit cards. However, the negative side effects of a student using a credit card for their tuition funding far supersedes the benefits. These negative effects relegate the credit card to a position of emergency support for student financial aid.

Few Pros and Lots of Cons of using a Credit Card – The choice is yours!

PRO Most banking institutions will offer benefit points for transaction with a credit card. Under this system, students can retrieve these points through discounts at organizations affiliated with these banks. The rate of expenditure from using your credit card to fund your tuition would give students many bonus points and save them some money for other purchases.

CON However, these credit cards have very high interest rates and charges for membership that simply eats the superficial benefits advertised by these banks.

CON If students are not disciplined with their credit card monthly repayment and just focus on paying the minimal monthly installments, in a short time their interest rate will be through the roof and they will fall into default of their payments.

CON Credit card also encourage spending sprees among students. Because using plastic removes the feel of actually seeing your money leave your pocket, students tend to forget their limits when spending with credit cards.

CON There is no grace period in the payments of moneys used from a credit card. All interest and sums used must be paid monthly to avoid excessive interest and penalties.

CON The interest rates charged by credit card may fluctuate through its life cycle, as they are susceptible to market forces.

PRO Credit card loans can be discharged under bankruptcy protection laws.

CON Because credit cards are from private institutions, there are no voluntary work mechanisms in place that card help to reduce your credit card debt.

Lots of Pros and a Con of the Student Loan

PRO The student loan is the best option outside of self-financing for any individual seeking to advance their education. Student loans offer a safe, stable and secure mechanism through students can receive an education loan at comparatively low interest rates. This interest rate will remain the same throughout the entire life cycle of the loan.

PRO Student loans give students a six-month grace period after graduation before they are required to start repaying their student loans.

PRO If students default on their payments and are being harassed by collectors, they can apply to the state’s education board to seek a cease and desist order that prevents the collector from calling them. This does not remove the debt but removes the stress from these creditors.

CON Graduates are prohibited from discharging their student loan debt by declaring bankruptcy. This is because the student loan falls under social services offered by the government.

PRO After graduation, students can reduce their student loans through many mechanisms. This can be done by working with various non-profit or governmental organizations.

Tags: Credit Cards, student loan
Posted in Credit Card Scam, Student Loan | No Comments »

Feb

Bankruptcy and Student Loan - How to Survive the pressure?

Author: Sally Croft

Many graduates of colleges and universities are affected by their inability to repay their student loans. Some may want to take the route of declaring bankruptcy with the hope of the student loan debt going away. However, because the loan was disbursed under a government initiative, applicants will be unable to relieve themselves of this loan as easily as when gained from private institutions.

Bankruptcy Code

Under section 523(a) (8) of the bankruptcy code, “an exception to discharge” (meaning a cancelation of the debt) will not be afforded to beneficiaries of loans made, insured or guaranteed by government agencies or paid in part by non-profit institutions for funds received as educational benefit, scholarship or stipend unless this payment will impose undue hardship on the debtor and their dependents. What this is basically saying is that student loan debtors can only relieve themselves of privately contracted student loans if they declare bankruptcy.

Undue Hardship

Proof of undue hardship is like pulling a camel through the eye of a needle. Standards vary from one state to another but generally, everyday excuses will not convince a judge to cancel your student loan debt. In addition, just the idea of you being able to afford an attorney is the first sign of your ability to service your student loan. No lawyer will take on your defense without charges as the profession is not government funded and legal aid attorneys are already overwhelmed with other court cases. Most attorneys will advise their clients that unless they have some form of disability that restricts their income generating capacity, they should forget about the route of declaring bankruptcy with the hope of getting their student loans canceled.

Declaring Bankruptcy

Declaring bankruptcy is a good mechanism for relieving yourself on some of your financial obligations. However, you first have to convince a bankruptcy court of your inability to meet your financial obligations and the steps you will adapt to in order to correct them while under bankruptcy protection. This is a good opportunity to focus on your student loan repayments as it will help to build your credit rating once your emerge from bankruptcy.

What to do after Declaring Bankruptcy

After declaring bankruptcy, your focus should be on recovery. There are several ways to reduce their student loan debt while under bankruptcy protection. One of the easiest mechanisms is to enroll in the National Guard. The National Guard has an incentive scheme that offers up to $10,000 in student loan cancelations. Training in the National Guard is only for a few weekends per year and your service is only required in times of war or natural disasters. Another mechanism is to offer voluntary service thorough one of the many social groups and organizations that receive government sponsorship. These organizations will pay a stipend and offer cancelation of some of your student loan debt. Another easy method of emerging from bankruptcy and repaying your student loan is by teaching in public schools for underprivileged, mentally and physically challenged students. Employment is this sector will realize 15% debt forgiveness for the first year of service and an additional 20% and 30% in the third and fourth years.

Consolidation Programs

Once you have emerged from bankruptcy and have gotten some of your debt relieved by social work, it is time for the next step. By this time your credit rating will have been repaired which qualifies you for student consolidation loans. By consolidating your loan, it relieves you of the student loan and gives you a longer period at lower monthly payments to service this new loan.

Tags: Bankruptcy, student loan
Posted in ALL About Students, Student Loan | No Comments »

Feb

How to locate College Aid – Handy tips for stressful students!

Author: Sally Croft

Locating the best college aid option can be really stressful if you do not have enough information about the sources of college financial aid programs. In order to help you save the stress and strain in finding the right financial aid option, read below the discussion on college financial aid.

Locating College Aid

While college aid is available from various sources, in most cases the real difficult lies in qualifying for the loan. Financial aid for college studies is inevitable given the rising cost of education and increased financial dependence on outside sources. While scholarships and grants help you fund the education at zero cost, more often they not sufficient to cover the entire cost of education.
The real impact of having taken a student loan is felt only at the time of repayment. Even a bachelor’s degree taken few tens of thousands of dollars to complete, leave alone the rest. The only place where the cost of tuition is never a problem is when you choose to go to a community college, but for that you should be aware of the many different sources from where you could fund your education.
Are you good at some sport or special talent? Check out your college or community about the various scholarship programs and if you qualify for any of them, then make it a point to apply. Scholarship amounts are completely free, which means no liability. What stops you from procuring the free money?
If you can afford to find a job in the university or college you study, there can be nothing like that. In addition to all scholarship and grant amounts, the amounts received from work while studying will help you meet up those extra unplanned expenses. Make sure you have sufficient time for both work and study.
Student loan is the best source for college education. As specified earlier, free money grants are not always sufficient to meet the cost of education. So, what should you do in such cases, opt for loans. Both federal and private loans are offered to students who wish to pursue their college education.
While where a choice exists between federal and private loans, it is a sensible option to go for federal loans both in terms of cost of loans and other benefits arising out of it, like deferment and loan forgiveness.
Federal student loan funding comes from huge sources of funds earmarked for this purpose. Hence those of you, who are into serious financial over haul please submit your FAFSA application form and obtain need based grants like PELL grants and Subsidized Stafford Loans.
What about taking classes online? There are several online colleges in existence, that offer excellent online coaching for various degrees namely associate, bachelors and masters. Online education costs much lesser than regular education and is an excellent choice of online learning.