Tips for paying off your student loans if you didn’t finish college

You’ve decided to leave college. Maybe you’re becoming an entrepreneur, or youve concluded that higher education isn’t right for you. Or maybe you can’t afford to stay in school.

Whatever your reason, during this time of starting anew, don’t forget about those student loans. Leaving school early means you’re more likely to fall behind on payments than someone who has graduated, according to a 2015 survey by the Federal Reserve.

Here’s how to pay off your student loans without that degree.

Pay off accrued interest during your grace period

You might be tempted to ignore your loans until your first bill comes due, but if you do, you’ll be kicking yourself later. Why? Unless you have only subsidized federal loans, the amount you borrowed has been accruing interest since you first borrowed it. That interest will be capitalized, or added to your principal balance, when your grace period ends and your loan enters repayment — six months after you leave school, in most cases.

If you use your grace period to pay off your accrued interest and start making frequent payments — as little as $20 a week — you’ll begin reducing your balance, instead of having most of your money go toward interest. Learn more about how to optimize your debt payments.

Another way to save on interest: Put your loans on autopay. Typically, it’ll reduce your rate by 0.25%.

If you cant make payments yet, start by figuring out exactly where your loans stand. Make sure you know your student loan servicer — that’s the company that takes your payments. Then find out exactly how much you owe, your interest rates and the dates by which youll have paid off your loans.

Get on an income-driven repayment plan

Leaving school without a degree can make it harder to find a well-paying job, which can make loan payments difficult. Millennials aged 25-32 who have a bachelors degree or better earn a median salary of $45,500 per year, while those who have a high school diploma earn a median of $30,000, according to 2014 data from the Pew Research Center.

If you’re having trouble affording your federal loan payments, income-driven repayment plans can provide relief by lowering your monthly payments and spreading them out over 20 or 25 years. In fact, depending on your circumstances, your monthly payment could be $0. Plus, the government will forgive any balance remaining at the end of your new term. You can apply for an income-driven plan either through your servicer or on the Department of Education’s website.

If you have private loans and can’t make the minimum payment, ask your lender about your options. Accredited financial counselor Roslyn Lash suggests creating a budget and showing that you can’t afford all your payments, then asking your lender if it can reduce your interest rate.

Develop your professional skill set

College may not have panned out for you, but it probably helped you hone a few soft skills, such as teamwork or problem solving, that can help you improve your earnings potential, even if you cant find your ideal job right out of school. Start by identifying the skills you have and the ones you need to be successful in your chosen field, then seek out ways to fill in the gaps.

That could mean getting a mentor, looking into massive open online courses or taking advantage of training programs at your company, notes Hannah Morgan, a job search strategist and founder of CareerSherpa.net.

“There’s nothing that says employees can’t start a brown-bag lunch and work together to help each other learn skills,” she says.

Get a side job

If youre not earning as much as you need to make your payments — or you want to pay down your loans faster — consider taking on a side job that you can do remotely with relatively little time.

“The gig economy is exploding right now,” says Austin Lewis, a certified financial planner and founder of Rooted Financial Planning. Lewis notes that over half of his clients have multiple income streams. “You can drive for Uber and Lyft, you can do TaskRabbit. There’s so many gig-economy jobs emerging that you almost don’t need a full-time job.”

Ask for a deferment

If you absolutely can’t afford your monthly payments, a deferment — a period during which you don’t have to make payments — can be a useful tool while you figure out your finances. It can also alleviate some of the pressure if you’re between jobs. And the government might even pay the interest on your federal loans during your deferment, which is not the case if you choose a forbearance period instead.

But, as Lash cautions, interest on private loans will continue to accrue during a deferment.

“Dormant does not mean dead; you still have to pay it. And you either pay now, or you pay more later,” she says.

MORE: A guide to getting out of student loan debt

How Do Forgiven Student Loans Impact Your Credit?

The idea of having your student loan debt forgiven might sound like a dream come true, but there are a few things youll want to consider should you be among those eligible for student loan forgiveness.

It turns out that there are many ways to get federal student loans forgiven. In fact, the Consumer Financial Protection Bureau a few years ago estimated that more than a quarter of working Americans are eligible for the Public Service Loan Forgiveness Program, but only a small percentage are actually using it.

And while student loan forgiveness in and of itself may not negatively impact your credit, the status of your loans before and after you enter into a forgiveness program could, so its important to thoroughly discuss with your lender how your loan discharge will be reported.

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Before entering into a loan forgiveness program, be sure you understand how the loan will be reported on your credit report, said Rod Griffin, director of Public Education at credit bureau Experian. For there to be no negative impact on your credit scores, the loan must be reported as if it were paid according to the original contract terms.

That means you might need to negotiate if youve made any late payments or gone into default.

Lets say you qualify for forgiveness because of a disability, and you fell behind on your student loans due to medical bills, inability to work and other factors that might impact your finances. If, when your loan is discharged, the servicer reports the missed payments to the credit bureaus, your balance will show up as zero, but those late payments will remain on your credit report.

You can try to persuade the lender (or collector if its gone that far) to remove the blemish from your reports, and they might consider it if you have a good explanation as to why it happened.

Also, if the lender indicates that the account was settled for less than originally agreed, that could also hurt your credit scores, Griffin said.

It should indicate it is paid in full and that there are no delinquencies in the credit history in order to not negatively affect your credit, he said.

Errors in your payment history also can negatively impact your credit score, so its a good idea to check your credit reports before entering into a student loan forgiveness plan. By doing so, youll be able to dispute any errors on your student loan accounts and have them corrected. You can start that process by checking your free credit scores, updated monthly on Credit.com, which will also show you major credit scoring factors like payment history. You can also get a free copy of your credit reports from each of the major credit bureaus annually.

[CREDIT REPAIR HELP: If you need help fixing your credit but don’t want to go it alone, our partner, Lexington Law, can manage the credit repair process for you. Learn more about them here or call them at (844)346-3295 for a free consultation.]

Will You Pay Taxes?

Certain types of student loans that are forgiven are not taxable, but other types are, so its good to know where you stand so you arent shocked by a big tax bill. A good place to begin your research is our primer on taxes after student loan cancellation. While President Obama’s 2017 budget proposal seeks to exclude Department of Education loan forgiveness programs from taxable income, it will require Congressional action to make that happen.

If you’re already behind on payments, there are some options available to help you get back on track, even if forgiveness isn’t one of them. To get out of default, you can combine eligible loans with a federal Direct Consolidation Loan, or you can go through the government’s default rehabilitation program. If you make nine consecutive on-time payments (these can be extremely low), your account goes back into good standing, and the default is removed from your credit report.

More Money-Saving Reads:

  • What’s a Good Credit Score?
  • What’s a Bad Credit Score?
  • How Credit Impacts Your Day-to-Day Life

Image: CareyHope

Obama Admin Announces New Rules That Will Forgive Billions In Student Loans

The Obama administration announced new rules Monday that, if enacted, will pave the way for thousands of students to have their student loans forgiven. The new rules are welcome news for students who claim they were scammed by shady for-profit colleges, but they may also leave taxpayers on the hook for billions of dollars.

Existing federal law allows for students to request loan forgiveness if they can prove the school they attended used illegal or fraudulent tactics to get them to attend. But this process is difficult, and many students burdened by debt dont even know about it.

Now, the Department of Education is planning to expand the criteria that allow debtors to seek forgiveness to include any breach of contract, court judgments against a school, or any substantial misrepresentation made by the school regarding its educational offerings or the job prospects and debt burdens of its students.

The proposal, which officials plan to finalize in November to take effect July 2017, will allow students to seek loan forgiveness up to six years after they discover alleged wrongdoing by their school, a big increase from the two-year limit the Department of Education was considering earlier this year. Instead of offering full forgiveness to every wronged student, the Department of Education will attempt to calculate the harm inflicted on students, providing only partial forgiveness for students who may have received at least partial benefit from their degrees.

New report on student loans suggests solutions to ensure affordable education for all NC students

A recent report from the Center for Responsible Lending highlights the challenges of student debt and the challenges this creates for North Carolina graduates and the broader economy. It also highlights potential solutions. In light of recent policy discussions about the pressing issue of college affordability, the findings are particularly important to any policy decisions. Here are the highlighted findings:

  • While only 5% of North Carolina students attend for-profit institutions, these students are disproportionately low-income and African-American. NC for-profit students also have higher levels of student loan debt and poorer outcomes compared to other higher education institutions in the state. North Carolina for-profit schools have also faced several complaints and investigations at the state and federal level. For this reason, we recommend that North Carolina improve oversight of for-profit schools by requiring the institutions to report on how much they spend on tuition versus advertising and salaries, and improve other reporting requirements.
  • Historically Black Colleges and Universities continue to play a critical role in educating students of color and low-income students in NC, with lower financial costs than for-profit institutions, and better outcomes. For example, the average completion rate at public HBCUs is almost 3 times greater than the for-profit sector. We recommend that NC increase focus on funding HBCUs and support better marketing for HBCUs so that they can overcome recruiting efforts by the less successful for-profit schools targeting the same student population.
  • If North Carolina develops its own student loan refinancing program, an idea growing in popularity, it should focus that program to ensure it is competitive with existing federal options that work well for many borrowers, and provide rigorous loan counseling to ensure borrowers do not give up rights and privileges that come with federal loans. It is important to bear in mind that refinancing programs do not provide significant relief for low-income borrowers, who are struggling to repay small debt loads due to low earnings. It is also important to recognize that federal repayment programs already serve many graduates from public colleges and universities well.
  • The paper also recommends that NC consider implementing registration of student loan servicers and oversight of servicers and creating a student loan ombudsman at the state level.

To read the full report, click here.

What other countries can teach the U.S. about student loans

WASHINGTON — Americans owe more than $1trillion in student debt. Its a number fraught with anxiety, and it is driving concern over how the United States structures federal student loans.

Is there a better way? Critics often point to other countries#39; structures as models for an improved American system. But would those systems work in the US, with its deeply entrenched economic policies and unique brand of political and psychological conventions?

International researchers and policy makers from Australia, England, Germany and Sweden met at a conference here Monday to discuss those questions. The event, hosted by the University of Michigans Education Policy Initiative, explored how other countries structure student loans and how the US system might be improved.

Three of those countries — excluding Sweden — use income-based repayment methods, which tie student loan payments to a percentage of the borrowers income. While the US government has its own income-based repayment options, they are heavy on paperwork — and they are much less ubiquitous.

Some of the panelists argued that the US higher education market is simply too different to implement a system like that of Australia or England. But where, others countered, does that leave the millions of Americans who cant afford their payments?

The most important word here is lsquo;insurance. Contingent loans offer insurance to people, said Bruce Chapman, director of policy impact at Australian National Universitys Crawford School of Public Policy and a designer of Australias student loan program. If your circumstances change, your loan obligations change with it.

In the US, graduates default on their loans when their incomes arent high enough and they can#39;t make sufficient payments, Chapman said. And even when low-income graduates dont default, their payments can eat up huge portions of their monthly incomes.

In Australia, which debuted an income-based repayment system in 1989, students dont face those problems. Students who use the system dont pay anything up front and instead begin to pay back their tuition once they reach a certain income threshold. Repayments are based on income and are collected through the tax system. This way, students are protected if something goes wrong: a lost job, a family emergency or simply a lifetime income thats lower than expected.

If youve got a sick child and you want to take that time off, [there#39;s] no loan obligation, Chapman said. You pay a lot when youve got a lot. You dont pay anything when you dont have anything.

Englands system is similar: if graduates dont earn much, they dont pay much; if they earn a lot, they pay a lot. Under a certain threshold, low earners dont pay anything. Loan repayments are deducted directly from graduates salaries — and after 30 years, all loans are forgiven.

Lorraine Dearden, professor of economics and social statistics at University College London, gave an example of a UK-style loan in the US: say a low-earning BA graduate borrows $25,000. In the US, she would pay just over $250 per month for 10 years.

In Britain, she wouldnt start paying until she turns 27 — once her income meets a certain threshold. Her monthly payment peaks at just over $200, but shell be paying for 25 years. Thats a long time — but the payments never go above 3percent of her income.

Income-contingent loans work, and theyre really good at the bottom of the income distribution, Dearden said. How that transpires in the US system is really high default rates for dropouts and those earning low amounts of money.

But in income-based systems, most of the risk falls to the government — not to colleges and universities. That could also pose a problem if the US adopted a similar system: when colleges dont take on any of the risk, they are free to raise tuition indiscriminately. Thats why any widespread US income-based system would need to continue to cap borrowing at a certain level, said Susan Dynarski, a professor of public policy, education and economics at the University of Michigan.

An instrument we dont have available to us is caps on tuition, she said. We dont seem to have the political will for that. So barring that, we need to have caps on borrowing. In England and Australia, loans are used for tuition. But even countries that have done away with tuition have their own versions of student loans. Public universities in Germany and Sweden do not charge tuition, but students take out loans to cover the cost of living.

But theres a key cultural difference between Germany and Sweden that translates into both countries loan policies: parents role in their adult childrens education.

In Sweden, students are considered independent once theyre 18. In Germany, parental support plays a much larger role: even after German young people come of age, their parents are legally required to support them through school.

Not all German families can afford to support their children, of course. Students from poorer families can get financial aid, which is evenly split between grant money and zero-interest loans. The amount of support depends on parental income, and after 38,000 euros in annual net income, no support is awarded. Loans are repaid based on income, and they are forgiven after 20 years.

At the moment, 82percent of German students are debt-free. Of those who graduate with debt, 50percent have debt below euro;4,000.

But even if some Americans would be better off under an income-based system, would they want to use it? The US has a unique set of assumptions and cultural norms concerning education — and those can certainly translate into policy. Some of the panelists worried that income-based systems would face initial skepticism.

My sense is that Americans would be like, lsquo;Wait a minute, I dont want to pay for 25 years. Thats terrible. I want to be done in five, said Jason Delisle, director of New Americas Federal Education Budget Project. We did some focus groups around income-based repayment. Twenty years sounded awful to them.

And then theres the reality of a changing cost structure: many older Americans paid for their education by spending their summers waiting tables, and now their children feel cheated, said Rohit Chopra, a special adviser at the Department of Education.

The idea of paying for 20 to 30 years, he said, is not what they feel like their parents and their grandparents and their country promised them.

But other panelists argued that Americans simply misunderstand these systems, dwelling on the time period without taking the low repayment rates into account.

And then theres the matter of ease: often, income-based payments operate like Social Security payments. Borrowers see a deduction on their earnings, and they dont need to fill out complex paperwork.

Dynarski thinks that the US should integrate student loan repayments into existing systems — like taxes or Social Security.

It would save administrative costs, and besides, perhaps it makes sense to treat loan repayments like Social Security: imagine, Dynarski said, if you kept getting bills for Social Security after you lost your job.

With student loans, she said, the bills keep coming.

Student loans should not be repaid until the public service is given a living wage

Dear Editor.

Linden Forbes Sampson Burnham had the vision of free education from nursery to university, for he recognised that economic growth lies in an educated population.   In 1992 the PPP/C government thought otherwise and introduced tuition for tertiary education.

It is with horror and shame that I saw this audited delinquent student loan list published by the Kaieteur News which reads like the Forbes 500 List.  The brightest and the best were targeted in this name and shame list, less than 2% – 488 out of 25,335 – of the students, who would have gotten where they are through humongous personal sacrifice and perseverance, yet remained in Guyana to serve their country.  Can you put a price tag on that?   Government after government pays lip service to the brain drain problem, but does anyone really care? When the opportunity presented itself for positive action the delinquent list (of 488 persons) humiliated and embarrassed them.

But this audit omitted to publish the names of the thousands who graduated and cannot find employment or are underemployed or have been forced to migrate.  Starry-eyed students are fed the mantra that education is the key to success.   But while adding up this debt did the audit reveal the good news of the thousands of students who have nothing to show for the loan except a piece of paper that is worthless?

Many employers criticize the quality of the education they paid so dearly for; that a great number of graduates are functionally illiterate who cannot write a letter or do maths further than primary school level.

Keep in mind that student loans are profitable business for the government; this is a captive student population which must pay 5% interest on loans and daily accrued interest whilst the interest rate on deposit accounts at the commercial banks earn a mere 2 and 3 per cent.

The government knows that the students are on the hook for amounts borrowed plus interest. Did the forensic audit publish the statistics? Did it reveal that of the students who remained in Guyana how many are earning a living wage?  How many receive $100,000 per month (US$500)?   Public servants, degreed teachers, social workers and other indebted workers have suffered through a 5% salary increase year after year for decades. The previous government knew exactly what they were doing in allowing this high rate of delinquency.  Mr Sue Ho confirmed that he was not advised that the loan fund was a revolving one. So why now, and backdated too?

Now along comes this new government.  Did the loan agency or the Ministry of Finance contact the debtors by phone, mail or email about their loans that had been taken out since 1994 or ten and fifteen years ago before dropping this delinquent list like a ton of bricks on their heads?  No.

Scholarship students who go abroad to study must sign a contract to serve the Government of Guyana in the public service for five years.  Did the erstwhile forensic audit recommend an initiative that full-time workers in the public service with notoriously low wages should be treated equally and be granted a public service loan forgiveness programme after five years of service?  Or that interest should be waived to allow delinquent students an opportunity to try and honour their contract?

Furthermore student loans should not be repaid until (a) the public service is given a living wage; (b) all the degree certificates are given international certification; and (c) the quality of professors/lecturers is drastically improved.   No more must first degree lecturers be permitted in the University of Guyana.  Students should find their voices and speak out, or else get a recognised and worthwhile education from one of the private universities that are springing up all over the country.

Yours faithfully,

Hema Persaud

Consumer Financial Protection Bureau Can Help You With Student Loans

You’re not alone if you’re confused about your student loans or feel stymied by your student loan servicer. More and more resources out there can help, but you can’t use them if you don’t know they exist.

We talked to Seth Frotman, who works at the federal Consumer Financial Protection Bureau as student loan ombudsman and assistant director of its Office for Students and Young Consumers. The CFPB was created to help consumers after the financial crisis of 2008; Frotman’s office collects consumer complaints about student loans, publishes reports about the industry, and drafts policy recommendations to improve student loan servicing.

Here’s how Frotman says you can use the CFPB and other tools to get your loans in shape. This Qamp;A has been edited for length and clarity.

Youre the CFPBs student loan ombudsman. Lots of readers are probably wondering: What does an ombudsman do?

We protect consumers from harmful practices and take actions against companies that break the law. We were created in the wake of the financial meltdown — the mortgage crisis of 2008 to 2009 — and the president and Congress recognized the need to address widespread failures in consumer protection and the rapid growth in irresponsible lending practices. Congress then created a special position at the CFPB to work on behalf of the over 40 million student loan borrowers. That’s the office that I lead.

We take complaints directly from consumers, so we hear every day about the challenges they are facing with their student loans. We hear from too many student loan borrowers who, for one reason or another, can’t get the information they need from their student loan company or feel like they’re getting the runaround.

So in one regard, it’s a way for individual borrowers to get answers and hopefully get their issues resolved. But what we hear from consumers also directly impacts the larger work we do at the bureau, whether that’s helping us prioritize what enforcement actions we should take — but also the issues we highlight to help clean up the marketplace.

What’s your office working on right now?

A top priority of our office is cleaning up the student loan servicing marketplace. We have estimated that 1 in 4 student loan borrowers is either behind or in default. And unfortunately, we see too many borrowers needlessly defaulting when there are affordable repayment plans that they have the right to under federal law.

One example of our work is around our Payback Playbook. [In April], we announced this initiative in conjunction with the Department of Education and the Department of Treasury.

The prototypes of this playbook are available online, and we’re asking for feedback from the industry, from consumers, from your readers to tell us what they think of them, how we can improve them. But essentially what they are are personalized disclosures [or descriptions of your choices] which will have information about the borrower’s repayment options so they can secure a monthly payment they can afford.

We hope that in the not-too-distant future that these [playbooks] will be available to borrowers on their monthly bills, regular email communications from their student loan servicers and when they log on to their student account. We’re hoping to get as much feedback as we possibly can by the June 12 deadline.

In your October 2015 annual report, you noted that many student loan borrowers complained about “servicing and debt collection practices that create barriers to enroll in alternative repayment plans, including income-driven repayment plans for borrowers with federal loans.” Can you talk more about that?

We have real concerns over the student loan servicing market. For those who don’t know, the student loan servicer is the company that you send your payments to and, if you’re struggling, you reach out to to try to figure out what your options are. And while we’ve seen borrowers in other products like mortgage and credit cards somewhat regain their footing after the economic recession, unfortunately that is not the case in the student loan market.

We saw some disturbing statistics recently come out of the top federal auditor, who found that of borrowers in default, 70% actually had the income eligibility to be in one of these income-driven repayment plans, but unfortunately wound up in default despite that protection available to them.

I think what we continuously hear from consumers is lost paperwork, misapplied payments and getting the runaround from their servicers. And unfortunately, what we have seen is an eerie similarity to the mortgage breakdown, when people were struggling to stay in their homes and they reached out to their servicers and were never able to get the information to get themselves set up for success.

What do you wish more people knew about their student loans?

If you are having a problem with your student loans, you can file a complaint with the CFPB. And our complaint system has already helped many borrowers when faced with billing errors, lost paperwork and other servicing issues.

I think the second issue is the real growth in student debt relief scams. So unfortunately, just as we saw in the mortgage context, when borrowers are struggling, too many unscrupulous businesses often find a way to prey on those vulnerable borrowers. The bureau and now a host of state law enforcement officials have taken action against these student loan debt relief scams.

Don’t pay for help with your student loans if you’re struggling or looking for an alternative repayment plan. Reach out to your student loan servicer or go to our website at consumerfinance.gov and check out the resources we have to help you get enrolled in a repayment plan you can afford, for absolutely no cost.

What advice do you have for families who are trying to figure out how to pay for college? How about for college seniors who just graduated?

For many people, the choice about where they go to school and the debt load they take on will be one of, if not the, largest financial decision they will make. Really understanding that decision and the corresponding amount of debt that will continue with you for 10, 15, 20 years — we just can’t emphasize enough the importance of making a sound decision around this choice.

For those who are just graduating, I think it’s really important to understand your repayment options. But due to breakdowns in the marketplace, unfortunately, we still see too many people needlessly ending up in default. I think that’s something that we are going to continue to work on.

Next steps

There is support available to you if you’re unable to make student loan payments or if you’re having trouble communicating with your servicer. Check out these student loan resources from the CFPB, the US Department of Education and NerdWallet:

Submit a complaint to the CFPB

Pick a student loan repayment option in 5 steps or less

How to get out of student loan default

4 ways to get federal student loan forgiveness

Brianna McGurran is a staff writer at NerdWallet, a personal finance website. Email: bmcgurran@nerdwallet.com. Twitter: @briannamcscribe.

Want to own a home? Say no to student loans

Many Americans have traded a white picket fence for an education.

A study released Monday by the National Association of Realtors found 71 percent of non-homeowners with students loans said they believe their education debt has delayed home ownership.

About half of the 3,230 respondents said making monthly payments on student loans will delay ownership by more than five years.

The report comes out as student loan debt has become a topic in the presidential campaign and new research indicates, for some, they are worse off financially than if they never went to school.

“Even though they are making all the right decisions, just the burden of carrying this large student debt is postponing some of the realization of what people consider the American Dream,” said Lawrence Yun, chief economist of the association, by phone Monday. He had addressed congressional staff members about the issue in Washington, DC earlier Monday.

The association’s study, in partnership with nonprofit American Student Assistance, found four in 10 borrowers said student loan debt kept them from moving out of a family member’s home.

Although debt blocking home ownership is nothing new, Yun said what is happening now is differentfrom previous generations because student loan debt has tripled in the past decade. He said the average amount of debt students are carrying is rising, ahead of inflation — and could have a dire effect on the economy. The most common debt amount of those surveyed was $20,000 to $30,000.

A recent study from economists at the US Treasury Department and George Washington University found many students were worse off than if they never went to school, said the Wall Street Journal. The economists tracked the income of 1.4 million students who went to a for-profit college in the two years through September 2008, and those who enrolled in associate’s and bachelor’s programs earned an average $600 to $700 a year less than the six years before they entered.

The worst off among the students studied were those who took out loans but did not graduate.

Eighty-three percent of younger millennials, those born from 1990 to 1998, in the Realtor study said they could not save for a down payment because of student debt.

In a March study from Zillow of 10,000 renters and homeowners, millennials put the most emphasis, 65 percent, of any generation on home ownership as a way to achieve wealth — even more than the oldest Americans.

Yun said student loan debt should not be considered a solution to the lack of housing inventory, even in San Diego County where slowed homebuilding is already having an effect on supply.

“We should not deny the opportunity for home ownership to the millennial generation,” he said.

The study did not limit answers by geographical location, but Yun said student loan holders in the West, in general, have it harder because of higher home costs.

People with student loans are still buying homes, but the association found 41 percent of first-time home buyers still have some education debt.

In a prepared statement, association vice president Sherri Meadows said it is important for Realtors and the real estate industry to continue to bring up the topic.

Realtors work closely with our clients and consumers every day,” she said, “we understand the severity of the problem. This is not an abstract issue for us.”

Student loans in the United States make up an outstanding debt of $1.3 trillion and account for 10 percent of all outstanding debt, the study said. The average San Diegan is $78,282 in overall debt, said Bankrate.com.

Yun said borrowers with large amounts of debt should not give up hope of owning a home, in part, because he and others are advocating changes that would allow loan holders to refinance to lower interest rates.

phillip.molnar@sduniontribune.com (619) 293-1891 Twitter: @phillipmolnar

Harry Potter And The Curse Of The Student Loans

I had some vague idea that Hogwarts was expensive. But no one told me that when I graduated I would owe an amount equivalent to roughly 300,000 butterbeers. When I first embarked upon my wizarding degree, I had zero savings of my own and no one to co-sign my loans, so I took out a private loan on the recommendation of a “friend” who later turned out to be a Death Eater (long story). Anyway, after 10 years of fighting for my life, rescuing classmates and mentors alike, blah blah blah, my interest rate was the last thing on my mind. Frankly, by my final year I assumed I could just Expelliarmus any extra debt that had accumulated.

Little did I know someone had put a Cascading Jinx on those loans. So I decided to defer them for a couple of years while I figured out what I wanted to do with the rest of my life–turns out that the only professorships they give out these days are adjunct, even at Hogwarts. I slipped on a few payments, and now I owe 60,000 Galleons more than when I started. I’m getting Howlers every second from the Ministry of Credit. I can’t walk out my door without being accosted by a fucking owl!

Looking back, I wish someone had told me how all this worked. I was only 10 years old! I didn’t know what the hell “APR” stood for. And nobody told me how little people actually make from a degree in wizarding. Now that I’m out in the “real world,” so to speak, I’m finding it hard to snag even the most entry-level salary. Believe it or not, skills like “vanquishing” and “snitch-grabbing” don’t exactly translate. I finally got a position as a sandwich artist at a new shop called Blood ‘n’ Beans. (Rumor is, I only got the gig because I could Accio roasted tomatoes faster than everyone else.) I can barely pay off the interest on my loan, let alone touch the principle.

Even if I do find a job in magic, my degree is practically obsolete already because the technology moves so fast. I don’t know how do any of the latest defensive charms, and now that the damn Marauder’s Map went digital, everyone knows where I am all of the time.

Bill would make some forgiven student loans tax-free

Owing a debt you cant repay is bad. Owing federal taxes on that debt amount even after you no longer have to pay it back is even worse.

Federal tax law, however, requires in most cases that when a loan is forgiven, the amount that is written off by the lender is taxable income to the previous debtor.

Sen. Debbie Stabenow, D-Michigan, thinks thats wrong when the debt was incurred under fraudulent circumstances, specifically to pay for college. Stabenow has introduced the Student Tax Relief Act, a bill that would protect defrauded borrowers from being taxed on their forgiven student loans.

Corinthian College cause

Her bill, S. 3008, was drafted in the wake of the federal investigation into Corinthian Colleges, Inc. and its associated schools.

The Department of Education found that the now-defunct for-profit chain run by Corinthian defrauded students at more than 100 schools in more than 20 states across the country.

Following the fraud finding, the Education Department told students who borrowed money from Uncle Sam to attend Corinthian classes that they would not have to repay those loans. Affected students can apply for loan forgiveness through the departments Federal Student Aid division.

Thats a welcome step for the bilked students. The Education Department says that as of March 1 it had processed almost 9,000 claims from former Corinthian students nationwide, totaling more than $132 million.

Canceled, but taxable, debt

The forgiven debt provisions of the Internal Revenue Code generally require that such canceled debt is taxable. For example, folks who are able to negotiate down or away debt owed on credit cards face the same tax due on what is called phantom income.

A notable exception is in the case of some residential foreclosures or mortgage renegotiations, where a special, temporary law allows certain home-related canceled debt amounts to be tax free.

The Corinthian students also were provided special tax relief on the amounts cleared by the Department of Education.

Stabenows bill, which has 7 Democratic cosponsors in the Senate, would give the same tax relief to students in similar educational fraud cases.

When students take out loans to attend college, they should get a fair deal and a fair shot, said Stabenow in announcing the introduction of the Student Tax Relief Act. No student should be the victim of false advertising from a college that promises skills or job placement. And the last thing they deserve is to be hit with an enormous tax burden on their forgiven loans.

Time running out

Stabenows bill might be able to garner some additional support. The issue of burdensome student debt in general already is under a spotlight, thanks in large part to Vermont Sen. Bernie Sanders campaign to be the Democratic nominee for president.

But time is not on the side of Stabenows effort. The tax-writing Senate Finance Committee, where the bill is pending, has not scheduled any hearing on S. 3008.

And with the upcoming November elections, the House and Senate arent going to be in session much. The chambers schedules are reduced so that Representatives and Senators can return home to make their reelection cases.

If, however, enough constituents let lawmakers know of their student debt concerns, both on a wider scale and in connection with cases like Corinthian, there might be some action on Stabenows bill this year. That would be a welcome development for former students facing an unexpected tax bill next filing season on their forgiven school loans.

Have you ever faced a tax bill on forgiven debt? Do you agree with Stabenows proposal? Do you think the tax code is right, or should all forgiven debt be tax-free?

You can keep up with tax legislation and other tax news, as well as find filing tips, calculators and more at Bankrates Tax Center.

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