Student Loan Interest Archives

What Borrowers Should Know About Refinancing Student Loan Debt

Posted on March 19, 2020by Admin

If you are facing reduced income as the coronavirus spreads, keeping up with your bills may become increasingly challenging—especially if you are among the more than 43 million people in the US who have student loan debt.

Student loan borrowers regularly receive email advertisements regarding the possibility of saving money on their loans by refinancing their student loan debt. The possibility of saving thousands in student loan interest paid on the debt is tempting, but not every refinancing option is legitimate. However, for borrowers who are paying on loans with rather high interest rates, refinancing through a reputable source can be an excellent way to lower how much interest they pay in the end.

Student Loan Debt Doubles Since the Great Recession

Posted on December 20, 2018by Admin

Student loan debt is at a record high, according to a recent Bloomberg study. It is reported that U.S. student loan debt is at a total $1.465 trillion, and financial analysts believe that this debt figure is so high that it is now raising significant fiscal risks.

Student loan debt was at $675 billion in June 2009 at the end of the recession, which means the total has doubled since that time. One problem that economists are pointing to involves the fact that more than 90 percent of all student loans are guaranteed by the U.S. Department of Education. In the event another recession hits, resulting in mass unemployment as well as defaults on student loans, the government budget could face a major loss.

Interestingly enough, Bloomberg’s study reported that student loans that were issued to students embarking on college in 2012 have defaulted on their student loans at a faster rate than any other group since the last recession. According to Bloomberg’s analysis, these loans have the highest cumulative loss percentage when compared to other loans, which means that these particular students have had a harder time keeping up with their monthly payments with their current incomes. This group of students could arguably be hit harder than others in the event another financial crisis occurs.

The individuals in this group are between the ages of 24 and 33 and are at a point in their lives when they are just starting out and beginning to establish their careers. They may have struggled with finding a job since unemployment was twice as high when they graduated as it is today. According to Bureau of Labor numbers, graduates in this group took three times longer than graduates today in finding a job following graduation.

Another cause for concern is the rising student loan interest rates. Currently, the interest rate for a direct student loan that was issued on or about July 1, 2018 and before July 1, 2019, has a basis point that is higher than those that were issued before 2012. Average federal student loan interest rates were: 4.81% for undergraduates. 6.38% for graduate students. 7.44% for parents and graduate students taking out PLUS loans.

Student loan debt is a widespread problem in the U.S. More than 2.7 million student loan borrowers have debt amounts in the six figures. Approximately 700,000 borrowers owe more than $200,000. Within this group, borrowers who were between the ages of 25 and 34 owed $489 billion as of the third quarter reported, while those who were between the ages of 35 and 49 years old owed $530 billion total.

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For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. There are ways to file for bankruptcy with student loan debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.

Bankruptcy Law, Debt Relief, Timothy Kingcade Posts

What you need to Know about Student Loan Interest

Posted on November 14, 2017by Admin

Most college students are unaware how loan interest or capitalization works, according to a recent study. Opting to delay payments after college or graduate school can determine how much you pay over the lifetime of your student loans.

When the interest on a student loan capitalizes, the accrued interest is added to the principal balance, which is the original amount borrowed. For that reason, the interest charges increase because it is now based on the new higher principal.

Here are 5 examples of when capitalization occurs with federal student loans:

Not making interest payments during school and during the grace period. For undergraduate and graduate unsubsidized Stafford loans, interest begins to accrue immediately after the loan is dispersed. Subsidized loans are the best option for students, where the federal government pays the interest while the borrower is in school.
Switching from an income-driven repayment plan. It is important borrowers know that just because they are enrolled in an income-driven repayment, Income-Based Repayment Plan or Pay As You Earn (PAYE), this may not be covering all of the interest accruing on the loan. While some income-driven plans stop capitalizing interest after 10 percent of the original loan balance has been paid, there are consequences from switching out of these plans. For example, unpaid accrued interest will capitalize when a borrower no longer qualifies for a financial hardship, fails to provide proper documentation for the plan’s annual enrollment or exits the plan.
Forbearance or deferment. A borrower needs to be careful when selecting these options and know the consequences. Interest is still accumulating on student loans even though the loans are in forbearance or deferment. This loan interest can accumulate quickly.
Consolidation of federal loans. Consolidating multiple loans into one direct loan, means you are creating an entirely new loan. It is important to consolidate right after graduating as a measure to reduce the capitalization interest that comes with federal loan consolidation. Waiting longer to do so typically increases the principal balance.
Defaulting on a student loan. Interest that was outstanding at the time of default will be capitalized. The principal amount will not only become larger, but the entire balance will be due and payable immediately.

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For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.

Bankruptcy Law, Debt Relief, Student Loans, Timothy Kingcade Posts

How Student Loan Debt Can Affect Your Tax Return

Posted on April 3, 2017by Admin

The average college student who graduated in 2016 will have approximately $37,00 in student loan debt, according to Forbes. Most college grads spend their time and energy on finding a job. However, another concern for new grads is how their debt will affect their 2017 tax filings. Here are a few tips on deductions and credits grads will be entitled to, and also what to do if you are filing as a dependent.

Student Loan Interest Deduction

If you paid interest on student loans in 2016, you most likely qualify for the Student Loan Interest Deduction. Also, if your student loan was not given to you by a family member or your employer, you were enrolled at last half-time in an accredited institution of higher learning and your modified adjusted gross income (MAGI) was less than $80,000, you can claim interest you paid on your loans as a deduction.

American Opportunity Tax Credit

You might also be able to claim a few education tax breaks if you meet the criteria. The American Opportunity Tax Credit allows undergraduate college students to claim the first $2,000 and 25 percent of the next $2,000 they spend on tuition, school fees, books, equipment and other non-living expenses.

Lifetime Learning Credit

The Lifetime Learning Credit can be claimed by college and vocational students. It allows eligible students to claim up to 20 percent of the first $10,000 they paid toward tuition and school fees. Eligible students can also claim 100 percent of the Lifetime Learning Credit if their MAGI is less than $55,000.

If You Are a Dependent

Your parents can claim you as a dependent if you are 19 years old or younger, live with your parents for at least half the year and they provided for at least half of your financial needs. You can also be claimed as a dependent if you are 24 years old or younger and you are a full-time college student. If you earned at least $6,300 in 2016, you have to file a return, even if you are being claimed as a dependent by your parents.

Click here to read more on this story.

For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.