10 Guaranteed Ways to Retire Rich
A little planning and a lot of self-discipline can put you on the path to wealth, even if your income is modest.
A little planning and a lot of self-discipline can put you on the path to wealth, even if your income is modest.
While policy makers debate whether to grant widespread student loan forgiveness, President Biden has again extended the moratorium on repayment of federal student loans, this time until the end of August. Itâs the sixth extension of the suspension of payments, which began under the Trump administration at the beginning of the pandemic. Until the latest extension, borrowers were scheduled to resume paying loans on May 1.Â
In a statement issued April 6, President Biden explained that Americans are still feeling the economic effects of the pandemic. âIf loan payments were to resume on schedule in May, analysis of recent data from the Federal Reserve suggests that millions of student loan borrowers would face significant economic hardship, and delinquencies and defaults could threaten Americansâ financial stability.â
The Federal Reserve Bank of St. Louis last month published a memo projecting a spike in defaults if student loan payments resumed in May. âSerious delinquency rates for student debt could snap back from historic lows to their previous highs in which 10% or more of the debt was past due,â wrote data scientist Lowell Ricketts for the Institute for Economic Equity at the Federal Reserve.
The Department of Education said in a statement that the extension âwill provide additional time for borrowers to plan for the resumption of payments, reducing the risk of delinquency and defaults after restart. During the extension, the department will continue to assess the financial impacts of the pandemic on student loan borrowers and to prepare to transition borrowers smoothly back into repayment. This includes allowing all borrowers with paused loans to receive a âfresh startâ on repayment by eliminating the impact of delinquency and default and allowing them to reenter repayment in good standing.
âThe department will also continue to provide loan relief, including to borrowers who have been defrauded by their institutions and those eligible for relief through the Public Service Loan Forgiveness program. FSA will establish new partnerships to ensure that borrowers working in public service are automatically credited with progress toward forgiveness, eliminating paperwork that prevents many borrowers from getting help.â
The extension also leaves open the question of broad-based student loan forgiveness, an idea with significant support among progressive Democrats.
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Senate Majority Leader Chuck Schumer told reporters that the moratorium extension âis a very good thing. Students are suffering under a huge amount of debt.â But he said the president âshould go further and forgive $50,000 in student loans permanently.â
The average federal student loan balance, according to the Education Data Initiative, is about $37,000.
Republicans have been opposed to expansion of loan forgiveness. Some have come out against the suspension of payments as wellwith Arkansas Sen. Tom Cotton tweeting, âPresident Biden’s perpetual student loan payment moratorium is an insult to every American who responsibly paid debts.â The prospect of Congressional legislation to forgive debt is low, but the Biden administration could use executive action to do a cancellation â and thatâs what progressives are demanding. Â
So far, the Department of Education says it has provided more than $17 billion in relief to more than 700,000 student loan borrowers through executive action, including $6.4 billion to 100,000 borrowers through the revamped Public Service Loan Forgiveness Program. This also includes more than $1.5 billion to borrowers who have been taken advantage of by their institutions and $7.8 billion to more than 400,000 borrowers with a permanent and total disability.Â
Also, the department extended $1.26 billion in loan forgiveness to more than 107,000 borrowers who attended the now-defunct ITT Technical Institute. Another 66,000 borrowers who had private student loans through Navient had $1.7 billion in debt canceled as the result of a legal settlement with 39 states following allegations of predatory lending and illegal loan servicing.
In fact, if you have student debt of any stripe, itâs probably a good idea to keep an eye on the Department of Educationâs press releases, as more actions are likely forthcoming.
Andrew Pentis, a certified student loan counselor at Student Loan Hero at Lending Tree, says he expects targeted relief to continue to address different groups of borrowers.
Candidates for such programs could be teachers or healthcare workers, Pentis said, as well as parent borrowers who may be buckling under burdensome debt. People who are facing bankruptcy or are in bankruptcy may also be candidates for relief.
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But Pentis said people donât have to wait for the federal government to act. Many are not aware of programs that already exist on the state level and through their schools and other resources. Pentis also advised checking with your employer to see whether your workplace offers help repaying student loans.
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Pentis said most student loan repayment programs are under-utilized because people arenât aware of them. Student Loan Hero has a database of 120 resources you can check to see if you might be eligible for assistance toward student loan repayment.
He said people should consider consulting a student loan counselor who can help navigate available options. Pentis suggested non-profit credit counseling agencies can help borrowers figure out their options. These agencies will often provide counselors for a low fee or no fee at all.
When President Biden previously extended the moratorium on loan payments, he urged people to look for options to resume paying when it ends, including income-driven repayment plans. These plans are supposed to set monthly student loan payments at an affordable level, taking into account the borrowerâs income and family size and allow the loan to be forgiven at the end of a period of payments, regardless of whether the full outstanding balance has been paid.
People who qualified for IDR theoretically will benefit from the pandemic moratorium as the 29 months worth of payments they werenât required to make will be counted as months in which they fulfilled payment requirements and will count toward the total amount of time they were required to pay their loans.
In effect, they will be given credit for 29 payments of the required amount of zero dollars each. That should also have the effect of lowering the total amount of money they repay over the life of their loans.
Whether IDR plans actually help borrowers in practice, however, is an open question. The plans have come under criticism from advocates who say the programs need reform because âbad servicing and complicated paperworkâ have prevented millions of borrowers from receiving promised relief.
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âWhile cancellation under IDR has been theoretically possible since 2016, reports have revealed how industry abuses and policy failures have resulted in only 32 borrowers ever successfully having their loans canceled via IDR,â according to a report from the Center for Responsible Lending, the Student Borrower Protection Center and the National Consumer Law Center. âMeanwhile, more than 4.4 million borrowers have been in repayment for 20 years or longer.â
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The advocates said IDR plans are ânotoriously difficult to navigate, both because of the administrative hurdles of the program and rampant servicer misconduct.â They called on the administration to reform the program.
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âMillions of student loan borrowers are buckling under the weight of a broken system,â said Persis Yu, Policy Director and Managing Counsel at the Student Borrower Protection Center. âThe failures of income-driven repayment have kept borrowers in unaffordable debt for decades too long.â
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Moreover, problems with the program disproportionately harm Black borrowers, according to a report by The Education Trust. That report was echoed by a report from the Brookings Institution that says the nationâs student loan system âresults in costly racial disparities.â That report found that Black households are more likely to hold student debt, contributing to an increasing racial wealth gap.
The federal governmentâs Public Service Loan Forgiveness program was changed in October following media reports that highlighted issues with borrowers who had trouble qualifying because they didnât receive credit for some past loan payments. The program is designed to help people who work for the government and non-profit organizations. Under the program, loans are forgiven after 120 qualifying payments are made.
According to the Department of Education, the PSLF program is âan important â but largely unmet â promise to provide debt relief to support the teachers, nurses, firefighters, and others serving their communities through hard work that is essential to our countryâs success. By canceling loans after 10 years of public service, PSLF removes the burden of student debt on public servants, makes it possible for many borrowers to stay in their jobs, and entices others to work in high-need fields.â
But before the recent changes, just 16,000 borrowers had received forgiveness through the program.
To try to address the issue, the department offered time-limited waivers to allow borrowers to count payments from all federal loan programs or repayment plans toward forgiveness, including types that were previously deemed ineligible. The changes also included adjustments to make it easier for people in the military to get credit toward loan forgiveness while they serve.Â
The Department estimated the limited waivers could help more than 550,000 borrowers, including about 22,000 who would automatically be eligible to have $1/7 billion in loans discharged with no further action. Another 27,000 borrowers could qualify for $2.8 billion in forgiveness if they certify additional periods of employment.
The Department says it has communicated with hundreds of thousands of public service workers to let them know the minimum number of payments they would gain credit for towards loan forgiveness under these temporary changes.
About 60% of borrowers who have certified employment for PSLF had loans from the Federal Family Education Loan Program, which was a program that ended in 2010 for government-guaranteed loans issued by private lenders. Borrowers under the FFEL program have received inaccurate information or were misled on how they could access public service loan forgiveness.
So the Department of Education said its waiver allowing different types of loan payments to be counted will be important to people who had loans from FFEL, because it allows payments they made under that program to count toward forgiveness, including payments made before they consolidated their loans into Direct Loans.
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All that said, most people wonât qualify for loan forgiveness. For them, the moratorium was simply a pause; the majority of people will resume payments after the moratorium is over and will have the length of their loan extended to compensate for the suspended payments. So, if you had five years worth of payments left when the moratorium began in March 2020, you will have five years beginning when your payments restart.
If you have a loan that youâre scheduled to resume paying, chances are, youâve already heard from the Department of Education. The department reported sending more than 125 million monthly email messages to about 35 million borrowers between August and November to begin preparing people to resume paying their loans. The department told the Government Accountability Office it has valid email addresses for 87% of all borrowers who were granted emergency relief because of the pandemic.
The Education Department told the GAO it expects coaxing people to start payments after a moratorium of more than two years will be a challenge. The department has created a communication plan and a plan to work with borrowers to assist them.
The department plans to ease the transition by temporarily not reporting missed payments to credit ratings agencies, according to a GAO report.Â
The department will also simplify the process in Income-Driven Repayment plans by not requiring borrowers to recertify their current income and family size for six months after repayment resumes. The idea is to make it easier to sign up for an Income-Driven Repayment plan. As of December, 160,000 borrowers had certified to start or continue their enrollment in one of the plans.
In addition, the department is requiring loan servicers to add weekend and evening call center hours to respond to borrower questions about resuming payment. But borrowers should be prepared to be patient. Some loan servicers reported to the department that they had hired additional staff, but that the increase in new employees may contribute to a ânegative customer experienceâ as the new staff may be inexperienced and have trouble answering some questions.
If you have a loan that youâre scheduled to resume paying, chances are, youâve already heard from the Department of Education. The department reported sending more than 125 million monthly email messages to about 35 million borrowers between August and November to begin preparing people to resume paying their loans. The department told the Government Accountability Office it has valid email addresses for 87% of all borrowers who were granted emergency relief because of the pandemic.
The Education Department told the GAO it expects coaxing people to start payments after a moratorium of more than two years will be a challenge. The department has created a communication plan and a plan to work with borrowers to assist them.
The department plans to ease the transition by temporarily not reporting missed payments to credit ratings agencies, according to a GAO report.Â
The department will also simplify the process in Income-Driven Repayment plans by not requiring borrowers to recertify their current income and family size for six months after repayment resumes. The idea is to make it easier to sign up for an Income-Driven Repayment plan. As of December, 160,000 borrowers had certified to start or continue their enrollment in one of the plans.
In addition, the department is requiring loan servicers to add weekend and evening call center hours to respond to borrower questions about resuming payment. But borrowers should be prepared to be patient. Some loan servicers reported to the department that they had hired additional staff, but that the increase in new employees may contribute to a ânegative customer experienceâ as the new staff may be inexperienced and have trouble answering some questions.
If youâre carrying a credit card balance, knowing your interest rate might seem like a no-brainer. Unfortunately, for many cardholders, itâs not. In a December Bankrate study, 41% of card-holders carrying a balance didnât know their interest rate. Currently, the average interest rate on cards is about 16%, but rates can go as high as 25% or more.Â
The Federal Reserve Board is expected to start raising short-term interest rates in March in an effort to keep inflation in check. As those rates increase, interest rates on credit cards, home equity lines of credit and other loan products will go up as well, which means it will cost you more to pay off your debt.Â
If youâre carrying a balance on a high-interest-rate card, plan to pay it off as soon as possible, without adding any new purchases. If you receive a tax refundâand most taxpayers doâuse that money to pay down your debt. Even if the refund doesnât pay off the balance in full, the reduced total will trim the amount of interest assessed.
Another option is to apply for a balance-transfer card. Recently, cards from Wells Fargo, Capital One, Bank of America and others allowed balance transfers with an introductory rate of 0% for five to 18 months. You can also check to see if any current cards in your wallet are offering balance-transfer promotions.Â
Chase, for example, recently offered current Freedom cardholders a 0% promotional rate for transfers made by March 31 (new applicants are no longer being accepted). The 0% rate lasts through the April 2023 billing cycle, with a transfer fee of $5 or 4% of your balance, whichever is greater. And you canât transfer a balance from one Chase-issued credit card to another; the transfer must be from another financial institution or retail card.Â
Keep in mind that with any balance transfer, if you donât pay your balance by the time the promotion ends, any balance left over is generally subject to your cardâs normal interest rate. And read the fine printâyour balance could be subject to retroactive interest charges
If your miles or points are expiring too soon, see if you can reset the clock by transferring some to another loyalty program.
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Are you struggling to pay your credit card debt? Perhaps you’re considering a balance transfer credit card to help you pay off your debt faster? If so, you’re not alone. In fact, the average American household owes $6,194 in credit card debt and many are seeking strategies to reduce that number. It may be […]
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How to Get Your Free FICO Score Do you want access to the same FICO credit score information lenders, landlords and even employers use to evaluate you? Good news, now you can get that information for free. Thatâs right, FICO credit scores are now available for free. You just have to know where to look […]
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s Transferring your debt to 0% interest balance transfer credit cards seems like a no-brainer right? You’ll pay no interest for a promotional period of time so 100% of your payment will go to the principal. Sounds like a win to me. And quite often it is a win. But not always. When you know […]
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Many people overspend on their loved ones during the holidays, even going into “holiday debt” to do so. If that sounds like you, donât worry â youâre not alone. In fact, a recent survey found Americans racked up an average of $1,054 in debt this past holiday season. We want to help, so here are seven […]
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One of the biggest frustrations that come with paying down your credit cards, is that a large amount of your money goes towards the interest on the account. With so much money tied up in interest, itâs very difficult to make headway and ultimately pay off your cards. And if you arenât able to pay […]
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