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Student Loan Delinquencies Going Up + How to Start Repaying Your Student Loan

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Student loans that are at least 90 days delinquent or in default ballooned to a record $166.4 billion in the final quarter of 2018, according to Bloomberg analysis. That means the “seriously delinquent” debt continued to rise even as the unemployment rate fell below 4% — a sign that the robust job market hasn’t generated enough wage growth for recent graduates to make payments. “If you have a choice to pay your student loan or for food or housing, which do you choose?” asked a Bloomberg Intelligence strategist. Warren Taylor, Executive Vice-President at BankMobile, says it is time to start paying off your student loans. 

This blog post will not address all the various types of student loans (Federal, State, the private sector, etc.) and their repayment terms – as that would be a very long blog! This article is more about how to pay off your loans as quickly and as cheaply as possible.

Should You Consolidate?

First, you may want to explore loan consolidation. This is where all your student loans are reviewed, with their different interest rates and repayment terms, and then paid off by consolidating them into just one new loan with one monthly payment. For many, this is a good way to go. Your overall interest rate may be reduced, thereby saving you money. It helps that you have one payment to make each month, instead of five loan payments all with different due dates. The only real danger to consolidating loans is that you may lose some benefits that some of your loans may have – like loan forgiveness, loan forbearance, etc.

Choosing the Best Loan Term for You

When choosing a loan term, picking the shortest repayment time in order to get the lowest interest rate may not make sense. Your rate will be lower, true, but your required monthly payment will also be very high. This high monthly payment may hurt your chances of getting other loans – like a mortgage because your “back end” ratio is too high (see my first blog on budgets for an explanation). Picking the longest term may not be wise either. True, your monthly payment will be low, but because you are taking so long to pay off the loan, you will pay the most in interest since the term is longer and your rate will be higher (typically the longer the repayment term, the higher the interest rate). Just when you thought you were “getting” how this loan repayment term thing worked, I need to add another complication. It’s based on rewards. If a ten-year repayment term has a 5% rate, and a 15-year term has a 10% rate, it may be in your best interest to take advantage of the shorter loan term because your interest rate is cut in half.

How to Repay Your Student Loan Off Faster

Let’s get to repaying your loan – and sharing some “tricks” on how to repay a loan faster. The average college student graduates owing $27,000 in debt. This is the amount of the loan in our example. Most loan program terms range from 10 to 25 years – consolidated loans have some shorter terms as well. Your monthly payment for a ten-year loan, at 7% interest, on $27,000 would be $313.49. If you pay an extra $24.18 a month, you will shave a full year off your loan – paying it off in 9 years instead of 10! Making this slightly higher monthly payment will save you over $1,150 during the life of the loan. I use the iOS app “Loan Calculator – What If?” to calculate loan payments.

Using the same example above, I could get a ten-year loan @ 7% interest, or they offer me a 15-year loan at 7.5% interest. I might be inclined to go with the 15-year offer at 7.5% interest. Why? Well, my mandatory monthly payment would drop from $313.49 to $250.29. This lower payment might help keep me under my 36% back-end ratio, thereby allowing me to get a mortgage or other financing if needed. Second, if my spouse or I got laid off, if we had an emergency repair, a health crisis, having a required loan payment of $250.29 would allow me to keep my loan current and take the extra money to pay for the emergency. If you do take the longer term, and here is where you need this discipline, I would still recommend you pay the higher monthly payment of $337.67. By paying this extra $87.38 per month, you would pay off the loan in 9 years and four months.

General Guidelines

So what is the right choice?  Without knowing your ratios, income, debt levels, and other factors, it is very hard to tell you what to do.  However, here are some general guidelines to follow:

1. I would probably suggest going with a fixed rate loan instead of a variable rate loan. Why? Interest rates are at historic lows. There’s a greater likelihood that rates will go up than come down. So taking on a variable rate loan now will likely lead to higher interest rates, hence higher monthly payments, shortly. On a fixed rate loan, your payments will not go up if interest rates go up. Again, choosing the right loan depends on your income, debt, and discipline.

2. Whatever your required loan payment is, pay more. Think about it, in the example above, paying $24.18 more a month (that’s basically 80 cents a day), cuts a whole year off your loan term! Imagine if you paid an extra $54.62 a month (that’s $1.80 a day), you would shave two years off your loan term – paying your student loan off in 8 years instead of 10 years. Isn’t that worth not having one Starbucks coffee a day? Trade in a cup of coffee per day, shave two years off your loan repayment! Perhaps I’ll write another blog on easy ways to save $20 to $200 per month.

3. Always pay your debts on time – even paying them a day late or $1 short can hurt your credit rating. But, if you do want to pay off debt quicker than normal, start with paying the extra money on your highest rate loan. This means you use the extra money you have saved from not going to Starbucks anymore to pay off your credit cards first, student loans next, and your car loan will probably be your lowest interest rate loan. It’s amazing what an extra $1 a day can do to reduce a loan balance!

Maintaining a low level of debt is key to creating a successful financial life for yourself.  Now, let’s shed the debt!

Ash Exantus aka Ash Cash is one of the nation’s top personal finance experts. Dubbed as the Financial Motivator, he uses a culturally responsive approach in teaching financial literacy. He is the Head of Financial Education at BankMobile and Editor-in-Chief at Paradigm Money. The views and opinions expressed are those of Ash Cash and not the views of BankMobile and/or its affiliates.

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T-Mobile’s Dream of Telecommunications Domination Gets the OK + How to Create Mental Toughness While Pursuing Your Dreams

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T-Mobile’s $26 billion takeover of Sprint finally got approved by a federal judge, a move that will leave most wireless consumers with three major operators to choose from, including Verizon and AT&T. More than a dozen attorneys general had sued to block the merger that had already been approved by the Justice Department and Federal Communications Commission. The administration has required T-Mobile and Sprint to sell some units to pay-TV operator Dish Network as part of the deal.

Dream chasing isn’t for the faint at heart. It can take years before one sees the financial payoff of what was once an idea. T-Mobile is probably patient on the outside, but internal it is jumping for joy. It took them a few years to get to this point, but I’m sure they will be relieved at the fruits of their patients.

When building a business, your goal has to be more than money, or you will ultimately fail. Your drive has to be based on principle, change, and something greater than yourself. Here is how to stay mentally tough while pursuing your dreams.

Personal Development. The road to success is paved with character and growth. Personal development is one of the key drivers that sustain you on the path of your dreams. Trustworthiness, keeping your word, and dependability are imperative to any industry. It doesn’t matter if you’re a musician or painter, lawyer or doctor, these traits and non-negotiable and forever transferable to success.

Take Breaks. To get there, you must rest one mile at a time. The grind is overrated. Reflecting on how far you’ve come energizes you for the road ahead. Burnout is a danger to your accomplishments and leads to a failure by default.

Stay Hungry. Stay Foolish. Steve Jobs popularized this quote from an ad in The Whole Earth Catalog. It read Stay Hungry. Stay Foolish. We come to a point when we are happy with a level of progress and think we’ve learned everything. Accepting the truth that we never stop growing, and there is no limit to our success gives us the ability to keep going. To continue, you must never settle. You must always seek new ways of fixing things and solving problems. Discover new opportunities and be open to learning more.

Faith. Steve Jobs also mentioned faith throughout his journey. Believing so deeply in an idea that you make it come to life. Belief takes ideas and materializes them; and when you realize you can actually make something come to life, the sky becomes your launching pad, not the limit.

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Amazon Plans to Add 15,000 Jobs + How to Prepare for the Job You Want

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Amazon says it will hire 15,000 more people at its Bellevue, Washington, campus, as part of the company’s effort to allocate new workers after it abandoned its plans for New York City. The e-commerce giant had issues in New York trying to open a facility there, called Bellevue, where 2,000 employees are already located, a “business-friendly city.” It’s also close to the company’s Seattle headquarters. This is good news for those in the job market but if this isn’t what you are looking to do then how do you make yourself valuable in the job market?

Here are four ways to prepare for the job you want no matter your age:

1. Focus on Your Strengths, Not What You’re Lacking

Whether you are 20 years old or over 40 instead of focusing on your age, you need to focus on your strengths. Many young people with limited experience or older people who may not be up to date with the latest technologies focus on what they’re lacking, and this is a big mistake. Do you have the qualifications for the job? Can you bring value to this position? Whatever your strong suits are you should play that up in your resume, cover letter or communications with the recruiter. It’s easy to focus on why you can’t get the job, but the trick is not to let that get to you. Focus on your value!

2. Attack Your Job Search from All Angles

Networking, Answering ads and/or working with recruiters are the most effective ways to land a job. It is important that you just don’t focus on one method but all three. Networking obviously is the ideal way because it allows you to communicate your value directly, but the other methods have their benefits as well. Be proactive and use each method effectively.

3. Show/Explain Your Leadership Abilities and/or Innovation

Leadership and taking the initiative have nothing to do with age. Young leaders and old leaders can be more or equally effective as those who have the “ideal” age. Focus on your leadership abilities and be sure to display this to your current or potential employee. Also, make sure you are keeping up to date with current trends in your industry. This will allow you to show your innovation and add more value to your company.

4. Ask For What You are Worth

Lastly, ask for what you are worth. Don’t let being “too young” or “too old” deter you from asking for a salary you deserve. In fact, trying to downplay your worth may very well backfire on you. Also, if you have been with a company for a long time and your salary outpaces what the position is worth making sure you are adding to your skill set and not staying complacent.

Following these four tips can help you gain or retain employment. What are some other ways? Comment below>>>

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New Survey Says that Young People Don’t Like Job Hopping + How to Get Paid What You’re Worth

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Contrary to popular belief young people are not keen on job-hopping as most people think. According to a new survey, U.S. millennials and Gen Zers want to stay at their current companies for an average of 10 years and six years, respectively. Additionally, they say work is a major part of their lives, with 65% of people in Gen Z and 73% of millennials saying it’s part of their identities, according to a Zapier-sponsored poll. The age groups’ actions reflect the findings: Seven in 10 say they constantly check work messages outside the office. This is great for corporations but what does that mean for business owners?

If you are a freelancer or entrepreneur you know all too well the fight to get what you are worth. You will constantly be bombarded with offers to work for less or even for “exposure” as many like to call it now. But how do you gain the confidence and know how to charge and get what you’re worth? Here are 3 tips:

Build Your Resume. It’s said that if you do what you love you’ll never work a day in your life. Pursuing your passions and getting paid for it is the ultimate professional dream. You may have to start by working for free or at a discount rate to builds skill, ability, and your resume but once you have some stats under your belt its time to get that money… Keep in mind that if you are only in it for the money it will be difficult to experience long term financial gains so make sure you are pursuing your passion not only the paycheck.

Set a Standard. Pioneers have the ability to set standards. And even if you are providing services already in the market, no one can deliver them quite like you. Style and quality set you aside from others opening up a field of buyers seeking exactly what you offer.

Don’t Give In. A colorist (a person who literally adds color by hand or digitally in films and visual media; yes, there is a path for everyone) from Brooklyn, NYC once told me he had to be firm with pricing because he didn’t want to become that guy who works for free. After you have put in the work and set a standard you must not give in to fees below your ability. Yes, flexibility is key but don’t short change yourself. Getting paid your worth is ultimately the result of you believing in your ability and knowing there are people who will pay for it.

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