Credit
Credit: Refers to the ability to borrow money or access goods or services with the agreement to pay for them later, often with interest (an extra charged percentage) (ex. Examples using a credit card to make purchases and paying the balance off monthly).
A credit report provides you with all the information in your credit file (“credit history”) maintained by a credit bureau that is provided about you by a third party, such as a lender. Generally, a credit report will reflect your behavior pattern for seven years. A credit report will also include information on everyone who has received a report about you from the reporting company within a certain time period, depending on the bureau (“inquiries”).
- There are 3 credit bureaus in this country, Equifax, Experian, and TransUnion. You may request a free report once every 12 months from each of the three bureaus.
- Adopt a review system that staggers reviewing one report every four months (i.e. January, May, and September). Bundling the reports and reviewing them on the same day restricts your free access for twelve months.
- Articles on Credit/Finance Management
- Credit reports impact lender decisions, with excessive inquiries risking rejection. Share credit information only when applying for credit. Credit scores offer fair risk assessment, reflecting repayment likelihood based on credit history and status.
- The best way to request a FREE credit report is through an annual credit report. The 3 credit bureaus links are contained on this website. You can also request a free annual credit report by phone or mail, and it will be mailed within 15 days.
- Requesting a credit score involves a nominal processing fee and is not necessary every time you request a credit report.
“Credit Report” Is a credit report the same as a credit score? NO, A credit report is a record of your credit history. It can show lenders and others how you manage your financial responsibilities.
Good Debt vs Bad Debt?
How to Improve Credit Fast
| Interpretation or Meaning | Score Ranges |
|---|---|
| Indication of a very risky borrower (Poor) |
<580 |
| Some lenders will approve borrowers with these scores (Fair) |
580 - 669 |
| Some scores in this average U.S. range are considered good borrowers (Good) |
670 - 739 |
| Indication of a very dependable borrower (Very Good) |
740 - 799 |
| Indication of an exceptional borrower (Excellent) |
800+ |
Loans
Loans: Are sums of money borrowed with an agreement to repay them, often with interest, over a set period. They're commonly used for various purposes like purchasing homes, covering education costs, or managing unforeseen expenses.
Entrance Counseling: Is mandated for federal student loan borrowers, educates them about loan terms, responsibilities, and consequences, ensuring informed decision-making before loan disbursement.
Exit Counseling: Is required for federal student loan borrowers upon leaving school, educates them about loan repayment options and responsibilities.
- Direct Subsidized Loans: These loans are available to undergraduate students with demonstrated financial need. The government pays the interest while the student is in school at least half-time, during the grace period after leaving school, and during deferment periods.
- Direct Unsubsidized Loans: These loans are available to undergraduate and graduate students, regardless of financial need. Unlike subsidized loans, interest accrues on unsubsidized loans while the student is in school, during grace periods, and deferment or forbearance periods.
- Direct PLUS Loans: These loans are available to graduate or professional students and parents of dependent undergraduate students. They are credit-based loans that allow borrowers to cover expenses not covered by other financial aid. Interest accrues during all periods for PLUS Loans.
- Direct Consolidation Loans: These loans allow borrowers to combine multiple federal student loans into a single loan, resulting in a single monthly payment. This can simplify repayment and potentially lower monthly payments through extending the repayment term. However, it may result in paying more interest over time.
*You can also use private loans apart from campus, they usually have a higher interest rate.
Keep track of how much you have borrowed by visiting the National Student Loan Data System (NSLDS). NSLDS provides you with borrowing history, information on your current loan servicer, including their contact information.
- Standard Repayment Plan: This plan offers fixed monthly payments over a 10-year period. It's the default option for most federal student loans.
- Extended Repayment Plan: Borrowers can extend the repayment period up to 25 years, resulting in lower monthly payments. This option is available for borrowers with a large loan balance.
- Graduated Repayment Plan: Payments start low and increase every two years over a 10year period. It's suitable for borrowers who expect their income to increase gradually over time.
- Income-Driven Repayment Plans: These plans adjust monthly payments based on the borrower's income and family size. Options include Income-Based Repayment (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), and Income-Contingent Repayment (ICR). Payments are typically capped at a percentage of the borrower's discretionary income.
- Loan Consolidation: Borrowers can consolidate multiple federal student loans into a single Direct Consolidation Loan. This can simplify repayment by combining loans into one monthly payment and extending the repayment term.
Each repayment option offers different terms and benefits, allowing borrowers to choose the plan that best fits their financial situation and repayment goals.
- Compare: your monthly payment options using the repayment calculator.
- Want to consolidate?: Consolidation simplifies repayment for multiple loans, potentially improving repayment options. Consider both pros and cons.
- Apply for consolidation through this NSLDS student access.
- Choose/Apply: for an affordable repayment plan. If you take no action, you’ll be placed on the 10-year standard repayment plan. If you need a lower payment, apply for an income-driven repayment plan.
- Set Up: your payments. You will not pay the U.S. Department of Education directly. In most cases, you will make payments to your federal loan servicer.
- TIP: Ask your servicer how to sign up for automatic payments. You could receive a 0.25% interest rate deduction for enrolling!
- Know who to contact: If you need help with your student loans. You never have to pay for student loan help! Your federal loan servicer will never charge fees and can help you for free.
- TIP: Save your servicer’s phone number in your phone. Contact your loan servicer to Postpone repayment on Federal Loans: Deferment, forbearance, and other forms of payment relief
- Continuing your education?: Contact your loan servicer to request an in school deferment. If you have unsubsidized loans, it is even more important to consider making student loan payments while you are in school to prevent interest from accruing (accumulating).
- Beware: of student loan scams -- You never have to pay for help with your student loans. As you are researching repayment and forgiveness options, make sure you are getting information from trusted sources, like .gov websites or your servicer’s website. The government and your servicer will never charge application or maintenance fees, so if you are asked to pay, walk away. Contact your servicer for free assistance.
- Do you qualify for loan forgiveness?: Ask your loan servicer if you qualify for any of the loan forgiveness programs available. All loans must be repaid, however, there are some situations when the loan(s) can be forgiven, discharged, or canceled. Contact your loan servicer for more information on: Public Service Loan Forgiveness, Discharge/cancellation, and Teacher Loan Forgiveness.
Stay up-to-date with Loan Forgiveness Options on FSA (Federal Student Aid) Website.
Teacher Loan Forgiveness: Teachers with federal student loans have four loan forgiveness program options: Public Service Loan Forgiveness, Teacher Loan Forgiveness, Perkins Loan cancellation for teachers, and state-sponsored student loan forgiveness programs.
Biden Administration's Response to Supreme Court Decision on Student Debt Relief: Update
In response to the Supreme Court blocking the one-time student debt relief plan, President Biden has expanded and enhanced the SAVE Plan. Key features include:
New Benefits:
- Lower Payments: Monthly payments reduced by raising income exemption to 225% of the poverty line.
- Interest Benefit: Government covers 100% of remaining monthly interest after full payments.
- Spouse's Income Exclusion: Simplifies application by excluding spouse's income for separate tax filers.
- Forgiveness: Borrowers with original debt of $12,000 or less may receive forgiveness after 10 years.
- Automatic Enrollment: Existing REPAYE Plan borrowers automatically enrolled in the SAVE Plan.
- Eligibility: Open to various loan types, excluding loans currently in default.
Overall, the SAVE Plan offers tailored repayment options and aims to alleviate student loan burden effectively.
Additional Resources
- Visit the Federal Student Aid website to learn more on what the SAVE plan offers.
- Apply for a new income-driven repayment (IDR) plan.
- Visit the Federal Student Aid website to learn more about Loan Debt Relief.
Your Guide to Student Loan Repayment Plans
Repayment: What to Expect
Saving on a Valuable Education (SAVE) Plan
Filing Taxes
Involves reporting your income, deductions, and credits to the government, typically annually, to determine if you owe taxes or are eligible for a refund (ex. reporting income from a part-time job, claiming education-related deductions, and declaring investment earnings).
Updated: April 03, 2024