Tuesday, March 27, 2012

Student Loans and Bankruptcy

This economy has led more people to consider bankruptcy. You can eliminate most debts, including credit cards. But you cannot get rid of a student loan.

It may sound odd, but a private bank that loans you money with a credit card will have the credit card debt discharged at bankruptcy. But a private student loan from this same bank cannot be done away with. Beware of this fact if you get private student loans. These are the same rules as the Federal student loans.

Since all direct loans are handled by the federal government, when you borrow the money, you owe the taxpayers this money. It's essentially who you borrowed it from. Taxpayer debts are hardly ever discharged. Student loans are no exception. You cannot get a student loan discharged. You will owe the money basically forever, or until you pay it off.

Private student loans were not originally in this agreement passed by congress in 1976. Before this time, all student loans were eligible to be discharged at bankruptcy. In 1984, private student loans were also added.

Private student loans are really one of the most expensive loans you can get, as far as college debt goes. Avoid private student loans. Even though you cannot discharge a federal student loan, you have many more options as far as paying it back goes. You can get deferments, as well as get student loans forgiven for various public services.

The best thing is to really not get any loans for college. Borrow the least. And above all, only go for Federal student loans.

These rules were set up so that people could not just sign up for college, then declare bankruptcy to get out of paying the loan back. Also, it makes starting college a serious decision. Make it wisely.

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Monday, March 12, 2012

Financial Aid Letters

Look close at your financial award letter that spells out what you will get as far as a financial aid award.

Many times, the letter will not give the whole picture as to the cost of a college education at that school.

The biggest shock comes to students when they read their expected contribution. At first glance, it looks like an award. But in reality, it is the amount that is expected to come from you and your family. Many times this number will make it look like all your expenses are covered, when in reality you must make up quite a difference.

The best thing on this financial aid letter will be free money that does not have to be paid back. Like grants and scholarships. The more of these, the better.

Student loans can be a killer in the future. All loans need to be repaid. Federal student loans are cheaper than private ones. If you get private loans, beware of this fact. The less loans, the better. Many students do not think about payback. They only look at the upfront cash.

The bottom line is the cost of attendance at this college. Many colleges do not give this figure, leaving you what may be a huge out of pocket expense. This figure includes all fees that are normally paid by undergrads. From lab fees, to dorm and food, and all fees in between. You may need to rethink attending a college that is really more expensive than one you can afford. Sometimes it's the opposite. An expensive college can actually give more financial aid, making it cheaper.

Once you get your letter, you may contact the financial aid office for more explanations, and certainly ask for more aid if possible. If you are applying to more than one school, and are accepted to many, use the letters as leverage to get a better award. Many times colleges will "find" money for students they want.

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