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11 Myths About Student Loan Forgiveness
If you have more student loan debt than you can handle, or if you’ve been paying and paying (and paying) and can’t make headway, chances are you’ve wondered about student loan forgiveness. As you look into your options, keep in mind that everything you read (or hear — even from your student loan servicer) may not be accurate. We asked experts who work with borrowers all the time to share the most common myths they hear about student loan forgiveness. Here are their top picks.

Myth: You have to pay someone to get loan forgiveness help.

“There are lots of online scams that charge borrowers for things that are available for free from the government. The truth is you don’t have to pay anyone,” says Pauline Abernathy, vice president The Institute for College Access and Success. Borrowers can use the free tools offered by the Department of Education — starting with the National Student Loan Data System. If more help is needed, they may want to seek advice from a reputable counseling agency or consumer protection attorney who is well-versed in student loan law.

Myth: Student loans can’t be wiped out in bankruptcy.

“The bankruptcy laws require you to show that being held responsible for the student loans will amount to what’s called an ‘undue hardship.’ Though this standard can be difficult to meet, it’s not impossible,” says Jay S. Fleischman, a lawyer who concentrates in the fields of student loan resolution and consumer bankruptcy. He goes on to explain that if you attempt to discharge your student loans in bankruptcy, you’ll have the advantage of dealing with an attorney, rather than a debt collector. “Those attorneys often have the ability to resolve payment disputes more readily than non-lawyer collectors,” he says. “Many people who seek a discharge of their student loans in bankruptcy end up settling on a reduced balance or affordable payment plan, which may accomplish your goal of bringing the payments in line with your financial abilities.”

Myth: Only Corinthian students get relief from debts involving school fraud.

Students may be eligible for cancellation of federal loans from schools that committed fraud or broke state laws. It’s called a “defense to repayment,” and the Department of Education is working on a process to make it easier for borrowers who attended other schools to apply for this relief. More information is available from the Department of Education. “The Education Department is developing a comprehensive system to assist students defrauded by any school and to hold schools accountable for their actions that result in loan discharges,” said Abernathy. Borrowers who have been victims of fraud by their schools may also want to look into state tuition recovery funds. StudentLoanBorrowerAssistance.org maintains a list of state tuition recovery funds.

Myth: Forgiveness applies only to federal loans.

While it’s true that private loan forgiveness programs are few and far between, some borrowers are able to settle private student loans for less than the full balance says Steve Rhode, founder of GetOutofDebt.org and a Credit.com contributor. “Settlement offers I’ve seen have been in the 45% to 50% range with up to two years to pay,” he says on his site.

Myth: Only consolidated loans can take advantage of public service loan forgiveness (PSLF).

Not true, says Joshua Cohen, aka The Student Loan Lawyer. “As long as all of your loans are Direct Loans, they qualify.”

Myth: Payments don’t count for PSLF until an employer certification form is completed.

Or until it is transferred to FedLoan (a student loan servicer), or until you’ve enrolled in the program etc. … “Where is this stuff coming from?!” Cohen asks. The employment certification form is encouraged, but not required. And the reality is that qualifying payments made on Direct Loans while working for a qualifying employer made after Oct. 1, 2007, currently count toward the 120 payments required under this program.

Myth: If you are a teacher, you automatically qualify for PSLF.

“There are specific requirements and if you work for a for-profit school you may be out of luck,” says Rhode. (Here’s more information on teacher loan forgiveness.) Similarly, those working in other professions that may be eligible but can run into some hurdles when trying to qualify. Nevertheless, is important for borrowers who are hoping to take advantage of PSLF to understand the requirements of the programs for which they may be eligible, so they don’t wind up missing out on an important benefit.

Myth: Student loan forgiveness is for everyone.

“In reality, it really only provides relief to those with very large debts and/or low incomes,” says Andrew Josuweit, founder of StudentLoanHero.com where this issue is explored in detail.

It makes sense that borrowers who are able to afford their payments aren’t going to be able to take advantage of the most popular forgiveness options, many of which require a certain number of payments under an income-driven plan. A recent report from Equifax found that the income group most at risk of defaulting on their student loans were those earning less than $ 30,000. “This rings true across all age groups, with those earning less than $ 30,000 suffering from triple or even quadruple the delinquency rates of their higher-earning peers within the same age group,” say the authors of the report, Dann Adams and Naser Hamdi.

But even high earners may run into a situation where they lose their income, and for anyone who isn’t working, even small debts can become unaffordable. Additionally, there are programs for lawyers, doctors, nurses and other higher-earning professionals, too. No one should automatically assume they aren’t eligible. (And don’t always rely on servicers to provide correct information. Sometimes they don’t.)

Myth: Parents are out of luck.

While it’s true parents with Parent PLUS loans aren’t eligible for Income-Based Repayment (IBR), they may be eligible for Income-Contingent Repayment (ICR), and that’s a “qualifying payment plan for PSLF,” Cohen points out.

Myth: Miss a payment or change jobs, and you start over.

If you miss a payment under one of these programs, “you just delayed it by a month for the missed payment, but you don’t start over,” says Cohen. However, if you were making payments under IBR and then consolidated you “ended the old loan and created a new loan. You start from Day One,” he notes.

Myth: I don’t have to worry about taxes on forgiven loan. (Or the reverse: Canceled student loans mean a tax bill.)

The truth is, it depends. Certain types of student loans canceled under PSLF are not taxable, but student loan debt discharged due to Total and Permanent Disability may be, unless you qualify for an exclusion. And currently, balances forgiven after completing an income-driven repayment plan are not tax-exempt. We’ve heard from borrowers who were shocked to learn that they owed large tax bill after they became disabled and were able to get their remaining balances canceled. Others were relieved to discover they qualified for the insolvency exclusion and wouldn’t have a tax bill to worry about. (Here’s a primer on taxes after student loan cancellation.)

Student loans can trap borrowers in debt for decades, and can make it difficult to buy a home or a car. If a student falls behind on payments, those late payments can ruin their credit scores for years to come. Even if loans are paid on time, debt can affect your credit scores. The programs today aren’t perfect and they can’t help everyone, but they can provide immediate relief for some. So borrowers will want to make sure they fully explore all their options for student loan repayment and forgiveness programs in order to take advantage of the programs available to them. It’s also wise to review your credit reports and scores (you can check two of your credit scores for free on Credit.com) to find out how your loans affect them.

Related Articles
This article originally appeared on Credit.com.

This article by Gerri Detweiler was distributed by the Personal Finance Syndication Network.

Personal Finance Syndication Network
August 27, 2015
We’re Paying Off $47,000 of Debt. Here’s How

Steve and Jennie Silha ended up in debt the way a lot of young couples do: They had children.

Steve, 44, is a realist, and says the problem was pretty simple.

“It really came down to the fact that we decided that my wife would be a stay-at-home mom, but we spent like we had two incomes,” he said.

And after 15 years of raising two children, the Chicago-area couple found themselves with $ 47,000 of unsecured debt – most of it credit card debt — last year. That’s when they made a commitment to make a change.

“I’ll say that it came down to irresponsibility on the surface. We just made very poor decisions over the past 10 years,” Steve said. “We have decided to ‘grow up’ and take the debt on.”
That was the first step. Step two involved Steve taking a new job with a higher salary. That helped a bit. Step three involved changes to the way the family spends money.

“We cook at home more and haven’t taken a vacation like we usually do,” Steve said.

But the biggest step of all was Jennie, 43, deciding to return to the workforce. With a 15-year-old son and 11-year-old daughter, the timing was right. She began this month.

The couple has pledged that 100% of the income from her job in home health care will go toward reducing their debt.

So far, they have paid off about $ 7,000.

The new austerity measures haven’t left the family wanting more fun. Instead, their renewed commitment to paying off debt is a challenge that’s been good for their relationship, Steve said.

“Since June, we have drastically changed our lives — in many ways. Getting our financial life in order is one big way we are changing everything. It feels great. Paying off the first (credit) card was amazing,” he said.

The turning point came when the couple discussed declaring bankruptcy last year, Steve said. They had tried another debt reduction plan four years ago, but didn’t stick to it because they “hadn’t hit rock bottom” yet, he said.

“I think that was where we said, man, we are either going to destroy our personal financial life or we are going to fix this once and for all,” he said.

The key to success this time will be both increasing their income and lowering their spending, he said. Doing only one or the other “is like trying to lose weight without lowering your intake of calories and working out to burn more,” he said. In addition to their new jobs, both Steve and Jennie have side jobs where they earn a little extra income. All that will go toward paying debt, too.

Steve hopes the positive changes will help teach his children about spending wisely and investing for the future.

“I talk to my kids every week — if not every day — about the dangers of personal debt,” he said. “While I hope they listen, I know the most powerful thing will be them watching Jennie and me pull ourselves out of this pit.”

There’s a long road ahead. Right now, Steve and his wife hope her income boost will make them debt-free within two years. But that will require sticking with the plan. Steve says he’s ready.

“I believe that so much of doing this … and anything else … is having the right attitude,” he said. “We finally decided that we had enough and are going to attack this debt with passion … we are both doing this as a team … this has brought us closer together. No doubt.”

Carrying a high percentage of credit card debt relative to your credit limits can have a negative impact on your credit scores. The poorer your credit, the more you tend to pay on interest rates which can cost you a lot more money over time. As you pay down your debt and build your credit, it can be helpful to track your progress. You can do that by getting your free credit scores – which you can do every 30 days on Credit.com.

Inset image courtesy of Steve and Jennie Silha

This article originally appeared on Credit.com.

This article by Bob Sullivan was distributed by the Personal Finance Syndication Network.

Personal Finance Syndication Network

August 27, 2015
Nine Winning Personal Finance Apps to Help You Manage Your Money

If you have found yourself researching personal finance apps, you can find something interesting among nine winning personal finance apps providing assistance from managing budgets to reducing debt to easier bill payment to streamlining the food stamp application process. There is always work on the cutting edge dreaming up new solutions to ongoing financial problems. Below, you can learn about nine winning companies and their apps as announced in the Center for Financial Services Innovation (CFSI) and American Banker’s EMERGE Conference in Austin, Texas in May. Announced by the Financial Solutions Lab, you can find more information here: www.finlab.cfsinnovation.com.

Companies found motivation to enter for a chance to win $250,000 from the inaugural $3 million competition. The competition is aimed at identifying solutions that help households better manage their finances on a tight budget. They were chosen from a pool of over 300 applicants from across the country. Entrants competed in presentations in New York before a group of experienced financial professionals.

“Tough problems like managing income volatility need to be addressed by all sectors –technology, nonprofits, academia, and financial services,” said Dalila Wilson-Scott, Head of JPMorgan Chase Foundation. “JPMorgan Chase is committed to being a part of the solution by supporting the Financial Solutions Lab to help all consumers manage their financial lives and achieve their long-term goals.”

The Financial Solutions Lab is a $30 million, five-year initiative managed by the Center for Financial Services Innovation (CFSI) with founding partner JPMorgan Chase & Co. to identify, test and expand the availability of promising innovations that help Americans increase savings, improve credit, and build assets. The FinLab is launching a series of competitions to identify solutions to specific consumer financial challenges. It will provide incentives for entrepreneurs, businesses, and nonprofits to enhance financial products and services that address these challenges and improve consumers’ financial health.

Meet the Nine Winners
● Ascend Consumer Finance, Inc. (https://www.ascendloan.com) (San Francisco, CA) – Ascend reduces risk on current loans and rewards the borrower by lowering interest payments for positive financial behaviors, such as reducing debt, decreasing credit card spending and increasing savings.

● Digit (https://digit.co) (San Francisco, CA) – Digit analyzes a user’s spending habits and automatically allocates available funds from checking to savings.

● Even (https://even.me) (Oakland, CA) – Even turns the inconsistent income of hourly and part-time workers into a steady salary by saving money from above average paychecks (in a separate savings account) and boosting low paychecks automatically.

● LendStreet (https://lendstreet.com) (Sunnyvale, CA) – LendStreet is a marketplace-lending platform which helps borrowers reduce their debt and rebuild their credit, and allows investors to buy the loan at a discount.

● PayGoal by Neighborhood Trust (http://neighborhoodtrust.org) (New York, NY) – PayGoal is a workplace tool that enables financially underserved workers to improve the allocation of wages toward their principal financial goals using a simple, guided mobile experience that leverages behavioral insights.

● Prism (https://www.prismmoney.com) (Bellevue, WA) – Prism is a comprehensive bill payment and management app that helps people across the country better manage their personal finances and pay their bills from their smartphones.

● Propel (http://joinpropel.com) (Brooklyn, NY) – Propel’s technology simplifies the food stamp application process by streamlining the initial enrollment form, eliminating the hassle of submitting paper documents, and providing a phone-friendly interface.

● Puddle (San Francisco, CA) – Puddle is a platform for reputation-based borrowing, allowing anyone with a debit card to make small short-term loans to other trusted borrowers.

● SupportPay (http://supportpay.com) (Santa Clara, CA) – SupportPay is an automated child support payment platform that enables parents to share child expenses and exchange child support directly with each other.

In addition to the capital prizes, each winning team will receive the following benefits:
● National partnership opportunities to help innovators increase the reach of their products
● Access to the CFSI network and to JPMorgan Chase expertise
● Direct, ongoing mentorship from industry leaders

These nine organizations represent the next generation of consumer champions. Their winning solutions embrace consumer-friendly design, promote consumer success, build trust, and create opportunity in order to generate mutual benefit for providers and consumers. To learn more about the winners, visit http://bit.ly/1PQ662q.

Commentary: This group of apps looks like it spans a good ground that can help consumers in a variety of personal finance situations. It is great to see institutions backing competition like these that foster innovation and help new companies develop their products. I will be looking forward to hearing more from these companies, learning about their products and learning about future winners.

If you use any of these apps, let us know. We would love to hear about your experiences. If you know someone that might benefit from one of these apps share this article. Everyone appreciates a new app to try, especially if it can help them with their money.

Image Attribution:
Featured Image (up top): Sean MacEntee
Iphone App Swirl: Blake Patterson

July 30, 2015
How to Choose a Prepaid Debit Card and Save Money in the Process

A prepaid debit card is a prepaid debit card, right? I mean, they all look pretty much the same and can be used the same places, right? Well, not exactly… They are definitely very close in appearance and usage, but understanding their important features and fees and how they differ is the key to deciding which prepaid card, if any, to choose.

She spoke with the sort of energetic enthusiasm of someone who had just discovered gold, platinum or a shipwrecked pirate ship loaded with goodies off the coast. In a casual coffee-break chat, a co-worker told me she uses prepaid debit cards to help manage their family’s spending. Where it really got interesting was learning with that budgeting tool, she and her husband saved nearly $2,000 in only two months.

How Prepaid Debit Cards Work
Boiling it down to the most basic terms, here’s how most cards work. Users deposit money to their card account. You may hear people speak of funding their card – or “loading” them, which is the most common term in the prepaid card world for depositing money via a direct deposit, wire transfer, PayPal or a variety of other means. And once the card is loaded, it works basically the same as a credit card, debit card or check. Cardholders can shop at any retailer or restaurant that accepts their card brand, go online to shop, or get cash through the checkout line or via ATM withdrawals. So what is the main difference, you may ask, from credit cards and debit cards linked to a checking account? The key difference, the bottom line is that the users of prepaid cards cannot spend more money than what is loaded on the card. This means no NSF or non-sufficient funds fees! NSF fees are the bane of the checking world. For families or individuals attempting to run cash only households, prepaid debit cards are helpful for staying on budget and out of debt.

So… How Do You Choose the Best Prepaid Debit Card?
Well, here is the goal: find the card that fits your needs and costs you the least to operate. In order to find the best card while saving your hard earned money, take a look at the following things to consider when selecting the best prepaid debit card for you, and you will be well on your way to learning how to choose a prepaid debit card.

Average Monthly Usage Charges: When you take into effect your usage and any recurring monthly fees, you can be looking at an average cost from below $5 to up to $25 per month, so it pays to do your research.

Fees on Purchases and Cash Withdrawals: Look at the fee structure and how you will use your card for purchases and cash withdrawals. We summarize this information on our Best Prepaid Debit Cards listing pages. On the individual card review pages, we break this down into even more detail for you. You can also find this information by doing a little bit of digging on the card-issuer’s website and looking at their Cardholder Agreement or a Fees breakout page. Some websites make it really easy to find the fees and others, well, not so much. That is why we collect that information for you at our website. Our goal is to help you make your decision and save you time.

Cash Loading Fees: Look at how you will load your card. Things to consider are what are the local nearby resources or locations where you can easily and/or cheaply load your card. This can include banks, credit unions, and retail stores that offer card loading opportunities.

Primary Purchases: Look at how and where you will spend on your card. Most places take Visa and MasterCard and a lot of places, but not all, take American Express, for example. You can do a quick inventory on where you shop or like to hang out and next time you are there, make a mental note of what cards they take. If everywhere you go accepts American Express cards, there are some great cards from Amex that offer really low fees, such as the BlueBird card. If most places you frequent only accept Visa and MasterCard, an Amex-branded card may not be quite as convenient. You may feel it is worth it to pay a little more in fees for more convenient usage.

Cash Withdrawals: Look at how and where you will get cash off your card. These days, if you live near a store such as Wal-Mart or a grocery store, you can conveniently purchase your groceries and get a cash withdrawal at the checkout counter where they have the Point-of-Sale device (POS). You enter what amount you want, enter your PIN and voila, the nice person behind the counter or automated checkout service delivers your newly acquired cash directly to you.

Add it All Up – Average Monthly or Annual Usage Charges: Total it up and see what fees you are looking at on a monthly as well as an annual basis. I know, I know. I am asking you to do a bit of math, but it won’t hurt for long, and if done well and done correctly, you could save yourself quite a bit of money on a monthly and especially annual basis. You know what they say, “No pain, no gain,” right? We provide some standard measurements so you can see how cards rank against each other in terms of average monthly fees on the Best Prepaid Cards Listing pages, which should make it a lot easier. After you have done this exercise of looking at where you shop, plan to deposit money, get cash, etc. you can see how the various cards stack up for those typical fees. The ones that offer the best savings on fees and most convenience or finds the best middle-ground for you, well, that is your card. With these simple guidelines, you too, can answer the question: how to choose a prepaid card and save money in the process. Happy card shopping!

This article originally appeared on Debt Collection Answers.com.

BIO:

Shane Tripcony co-founded BestPrepaidDebitCards.com in March 2013 with Curtis Arnold, founder and CEO of CardRatings.com, a long-time consumer advocate in the credit area. They saw a need in the marketplace to help educate consumers about the best deals in the prepaid debit and secured credit cards space and to expose high fees among those products. Since launching the site, Shane has been blogging on personal finance topics and helping consumers improve their financial life through building or rebuilding their credit or saving money and budgeting with prepaid debit cards.

July 14, 2015
Consumer Financial Protection Bureau’s Proposed Prepaid Card Regulatory Changes Inspires Industry Response
When the Consumer Financial Protection Bureau (CFPB) was created in 2010, nobody expected it to play nice with the financial services industry. Authorized as part of the Dodd-Frank legislation, the CFPB was tasked with protecting consumers from predatory lending and other Wall Street abuses that spawned the Great Recession. From the very start, the financial services industry and its allies in Congress resisted the formation of the CFPB, and even successfully torpedoed the choice of now-Senator Elizabeth Warren to lead the agency. Now, a new battle is about to commence: the CFPB is gunning for prepaid regulatory changes.

In the handful of years since the CFPB began its oversight of the financial services industry, it has scored a number of consumer-friendly victories. Largely unheralded by the media, the CFPB has managed to do everything from force credit card issuers to be more transparent about the interest charges related to balance transfers to handling hundreds of thousands of consumer complaints. More recently, the CFPB has placed the prepaid debit card industry in its crosshairs and, not coincidentally, triggered concern and angst from the Network Branded Prepaid Card Association (NBPCA), an industry trade group.

The proposals by the CFPB and the responses from the NBPCA are a classic illustration of the inherent adversarial relationship between regulators charged with protecting the interest of consumers and industry eager to help its businesses remain as profitable as possible. For example:
- The CFPB would like to apply the more rigorous regulations that apply to credit cards to certain prepaid products, especially those that allow customers to overdraft or overdraw their accounts. This application of what is known as the Federal Reserve’s Regulation Z to certain prepaid cards is opposed by the NBPCA, which says it’s the sort of restrictive regulation that limits options for consumers and may even result in customers opting for riskier products.
- The CFPB has proposed expanding the definition of what a prepaid debit card is, the result of which would be more an expansion of the number of products subject to government regulations. The NBPCA, by contrast, wants to limit the definition to only primary account transactions, which take the place of a debit card tied to a checking account.
- There is some overlap in what the industry and the government want to see in the realm of disclosure about fees. Both the CFPB want more disclosure, though the industry group wants a single template for disclosure while the government has proposed a number of them.
- Even the speed with which the government’s rules would go into effect is a matter of debate. The CFPB has said nine months is plenty of time for prepaid card issuers to adapt to the new rules while the NBPCA believes it will take between 18 and 24 months.
The final determination about the rules that will govern prepaid cards in the future is still being hashed out. And while it would be easy to decry this sort of back-and-forth as yet another instance of Washington paralysis, there’s a case to be made that this process is working just as it should. No industry wants to bear the increased time and money it requires to comply with new rules and regulations, especially when it comes at the cost of profits. But this adversarial relationship between the prepaid industry and the CFPB could and should result in a range of protections that ensure consumers aren’t victimized. At the same time, the input of industry should ensure that whatever new regulations get enacted don’t drive the efficiency and consumer value out of prepaid debit cards.

If both happen, then consumers will have more confidence in prepaid cards generally, which is a win for both the CFPB and the NBPCA.
July 14, 2015
Consumer Alert! New Credit Card Scam: Stealing Security Codes

This is a new credit card scam everyone needs to be watching out for. If you get a call from someone claiming to be from your bank, here’s what to do: If a caller claims to be from your card issuer’s fraud-prevention department, ask for the caller’s name and/or employee ID, hang up, then call the 800-number on the back of your card and ask to speak to the fraud-prevention department or that particular employee. If the call was not from the card issuer, explain that your account number likely has been stolen. The issuer will give you a new card with a new number.

Here is a link to the full article originally posted in the July 15, 2015 edition of Bottom Line Personal as well as on their website at the link below.
New Credit Card Scam: Stealing Security Codes
http://bottomlinepersonal.com/new-credit-card-scam-stealing-security-codes/

July 9, 2015