There is new legislation that is being created in an effort to stop this growing problem. For instance, a law was passed in February that banned companies from issuing credit cards to anyone under the age of eighteen. If someone under the age of eighteen wants a credit card, they must have an adult co-signer. Along with that, the law also created provisions that limit the amount of fees that a company can charge.

With college students, credit card companies have a good thing going. Oftentimes, all they have to do is offer free T-shirts, pizza or sandwiches to get the students to apply. Most of the students have little understanding of what they are getting themselves into. By the time they graduate, they are already facing thousands of dollars’ worth of debt. This leaves them in need of credit card debt help .

The college years are a crucial time to build good credit history. Without it, students will struggle to secure an apartment or buy a car. Some employers will even look at a person’s credit history before they decide to hire them. For this reason, legislative panels are hard at work trying to find a solution to this growing credit crisis. They are attempting to find a balance between limiting students’ ability to obtain cards, while also allowing them to have an entry point into the world of credit.

Besides legislation, experts also agree that the best way to tackle the student debt problem is by educating them. Most students do not realize how important it is to make good credit decisions. They tend to spend money that they do not have on items that they do not need. Therefore, education on the benefits and danger of credit cards is one of the best ways to tackle the student debt crisis.

For unsecured debts, there are two options, depending on the account status and overall amount.

Consumers can opt for credit counseling if their account is still current and the amount is not that huge. Credit counseling can teach consumers how to go about debt elimination for free and without entering a financial program. However, if it’s determined that the consumer’s financial situation need more than just earning more and being careful with finances, they are going to be encouraged to sign up for a Debt Management Plan (DMP) where their debts are going to be handled by debt negotiators.

Debt negotiation can be done d.i.y., meaning the consumer can do it themselves, if they are up to it and have the know-how. Otherwise, they can sign up for a DMP or a debt settlement.

What’s a DMP? It’s a program that negotiates the interest rates. Many consumers are not aware that creditors have what is called a “hardship program” in which, if it’s determined that the consumer is willing to pay the original amount owed, they are going to help out by modifying the interest rates. One example of this modification is the creditors can freeze the interest rates for a time, so the consumer can pay for the principal amount of debt. There are other modifications depending on the creditor and the consumer’s financial situation. Again, the consumer can do it themselves but, if they can’t, there’s the DMP, which would cost $25/month for three to five years.

The other debt relief option is debt settlement. Debt settlement negotiates the entire balance down to more or less half. This is not the same with DMP, because in DMP, it’s the interest rates that are being negotiated. Another difference between the two is the enrollment requirement. Debt settlement requires for the total debt amount to be $10,000 or more and the accounts past due or nearing it.

In a DMP, creditors are willing to negotiate, but only the interest rates because the total debt amount is not that high and the accounts are still current, meaning – the consumer can afford to pay. They just need help.

In a debt settlement, consumers are in a really tight financial situation, hence they defaulted for several months (5 months or more) – meaning, they cannot pay anymore. When accounts reach non-payment for that period of time, the creditors are forced to write-off the debt to the IRS, and they lose profit.

What they do to recover at least a portion of the amount owed, is endorse the charged-off account to a third party collector, where it’s understood that the value of the account is at least 25% lower than its original value.

Here’s where debt settlement comes in. Debt settlement can pull the amount owed down to 30% of the original amount – depending on the case. The consumer can be debt free in a debt settlement program in less than three years. How much does it cost?

Just recently, debt settlement companies are no longer allowed to ask for upfront fees, until a debt is settled. The industry standard rate is 15% of the total debt amount or 20-25% of the settlement amount – payable only when a debt is settled.

As you use a prepaid credit card, you immediately require depositing money into your card that operates just like a gift card. The amount of money you spend on purchases will be deducted from the balance reducing the amount. For example, you deposit $500 in your prepaid credit card and then you shop for $300, an amount of $200 will be left in your account for further purchases. As you exhaust that remaining account, you have to again reload your account with further balance. Since you are spending from a fixed amount, you know where to draw the line. There is no chance of incurring debt as you cannot purchase if there is no balance in your pre-paid credit card.

Managing a prepaid credit card account is more like managing a bank savings account rather than managing your credit card. Here, you need not worry about high interest rates, fluctuating finance charges and even outrageously high late fees and penalties. You’ll only be able to spend what you have in your account and there are no due dates to remember.

Will it help you rebuild credit rating?

Getting a prepaid credit card does not depend on your credit history. As most students do not have a long payment history, this factor is not taken into consideration. However, this is for you to know that using a prepaid credit card will not help you rebuild credit. A prepaid credit card speaks nothing about your spending and borrowing habits and thus the transactions are never reported to the credit bureaus.

Thus, if you’re a parent of a teenager, you must make sure that your teen is using a prepaid credit card so that he does not get trapped in the vicious cycle of credit card debt. Try to avoid seeking professional debt help as it is a waste of money. Instead, use a prepaid credit card until you become a financially responsible teenager.

What is loan consolidation?
Loan consolidation means bundling all your student loans into a single loan with one lender and one repayment plan. You can think of loan consolidation as akin to refinancing a home mortgage. When you consolidate your student loans, the balances of your existing student loans are paid off, with the total balance rolling over into one consolidated loan. The end result is that you have only one student loan to pay on.

Both students and their parents can consolidate loans.

Should I consolidate my loans?
Loan consolidation offers many benefits:

Locks in a fixed, usually lower, interest rate for the term of your loan, potentially saving you thousands of dollars (depending on the interest rates of your original loans)
Lowers your monthly payment
Combines your student loan payments into one monthly bill

In addition, consolidated loans have flexible repayment options and no fees, charges, or prepayment penalties. There are also no credit checks or co-signers required.

You should consider consolidating your loans if the consolidation loan would have a lower interest rate than your current loans, particularly if you are having trouble making you monthly payments. However, if you are close to paying off your existing loans, consolidation may not be worth it.

How will the interest rate for the consolidated loan be?
The interest rate for your consolidated loan is calculated by averaging the interest rate of all the loans being consolidated and then rounding up to the next one-eighth of one percent. The maximum interest rate is 8.25 percent.

To figure your interest rate, visit loanconsolidation.ed.gov for an online calculator that will do the math for you.

How much can I save?
How much you save by consolidating loans depends on what interest rate you get and whether you choose to extend your repayment plan. According to Sallie Mae, the leading provider of student loans in the United States, consolidating student loans can reduce monthly payments by up to 54 percent. However, the only way to reduce your payment this much is to extend your repayment plan. You typically have 10 years to repay student loans, but, depending on the amount you’re consolidating, you can extend your repayment plan all the way up to 30 years. Remember that if you choose to extend your repayment term, it will take longer to pay off your overall debt and you’ll pay more in interest. There are no preypayment penalties, so you can always choose to pay off the loan early.

Am I eligible to consolidate my loans?
In order to consolidate your loans, you must meet the following criteria:

You are in your six-month grace period following graduation or you have started repaying your loans
You have eligible loans totaling over $7,500
You have more than one lender
You have not already consolidated your student loans, or since consolidation you have gone back to school and acquired new student loans

The following types of loans can be consolidated:

Direct Subsidized and Unsubsidized Loans
Federal Subsidized and Unsubsidized Federal Stafford Loans
Direct PLUS Loans and Federal PLUS Loans
Direct Consolidation Loans and Federal Consolidation Loans
Guaranteed Student Loans
Federal Insured Student Loans
Federal Supplemental Loans for Students
Auxiliary Loans to Assist Students
Federal Perkins Loans
National Direct Student Loans
National Defense Student Loans
Health Education Assistance Loans
Health Professions Student Loans
Loans for Disadvantaged Students
Nursing Student Loans

Where can I get a consolidation loan?
You can consolidate your loans through any bank or credit union that participates in the Federal Family Education Loan Program, or directly from the U.S. Department of Education. The loan terms and conditions are generally the same, regardless of where you consolidate. You may want to check first with the lenders that hold your current loans.

If all your loans are with one lender, you must consolidate with that lender.

If you decide to consolidate your student loans, remember that you can only do so once unless you go back to school and take out more loans. Therefore, you will want to make sure you get the best deal the first time. The interest rate will be the same from all lenders, but some lenders may offer future rate discounts for prompt payment and a discount for having monthly payments directly debited from your account.

Can my spouse and I consolidate our loans together?
You can consolidate your loans together, but it is not a good idea for a couple reasons:

Both of you will always be responsible to repay the loan, even if you later separate or divorce
If you need to defer payment on the loan, both of you will have to meet the deferment criteria

When should I consolidate my loans?
You can consolidate your loans any time during your six-month grace period or after you have started repaying your loans. If you consolidate during your grace period, you may be able to get a lower interest rate. However, since you will lose the rest of the grace period, it is a good idea to wait until the fifth month of the grace period before consolidating. The consolidation process usually takes 30-45 days.

This article is distributed by NextStudent. At NextStudent, we believe that getting an education is the best investment you can make, and we’re dedicated to helping you pursue your education dreams by making college funding as easy as possible. We invite you to learn more about Student Loan Consolidation at NexStudent.com.

When it comes to repaying your student loan debt, you must choose the options carefully so that it suits your financial needs. Check out the student repayment options that’ll help you repay your financial obligations and protect your credit score.

* Graduated payments: If you’ve taken out multiple educational loans for financing your education, you must be aware that your repayments will first be added to the interest rate and then towards the principal balance. With graduated repayment option, you can enhance your repayment procedure by starting off with the lowest monthly payment. You’ll have to make payments towards the interest rate within the first two years. By the third year, the payments will increase to installments of interest rate and principal.

* Forbearance option: The student borrowers who apply for this forbearance option are allowed to put off their student loan payments for a particular span of time. However, the interest rate will continue to accumulate despite the grace period. A graduate may qualify for the forbearance option if his student loan repayments are above 20% of their monthly income. If they have been suffering from illness or have faced some unexpected personal hardship, they can even apply for the forbearance option.

* Income-Based Repayment Plan: If you’re going through a hard time getting a job after school and you have student loan debts to pay off as well, you can seek the help of this option. Under this scheme, your monthly payments will vary according to the change in your income level. Your gross annual income will be taken into consideration while deciding your monthly payments.

It is important for students to remember that debt settlements and bankruptcy will never help their financial state. Reap the benefits of the above mentioned repayment options and repay your financial obligations to lead a stress free student life.

Federal student loan consolidation is a re-financing program that allows you to combine all of your existing federal student loans into one new single loan. There are no application fees, credit checks, or cosigners required for a student loan consolidation. Benefits of consolidation include:

•Lower monthly payments. Student loan consolidation provides a longer repayment term, which in turn lowers your monthly payment. This will free-up more money to use for other expenses such as rent or mortgage payments, food and car expenses, utility expenses, and credit card payments. Depending on your total balance, you could reduce your monthly payments up to 53%. Because there are no penalties for early or extra repayment, you can make larger payments when it becomes affordable to.
•Lock in a low fixed interest rate. Currently, unconsolidated federal student loans have a variable interest rate which changes each year on July 1st based on the Treasury bill. By consolidating your student loans, you can lock in a fixed interest rate for the life of your loan.
•Customize a payment plan. By consolidating your student loans, you’ll have the opportunity to choose a payment plan that best fits your current income level. Plans such as the Graduated Repayment Plan start out for the first several years as a lower interest only payment, and then increase to a level repayment plan. This plan is helpful for those who need payment relief right out of school, while they look for a job and get established.
•One payment per month. By consolidating, you eliminate the need to make multiple monthly payments to each of your federal lenders. With all of your loans combined, you will only need to write one check each month.
•Maintain your deferment and interest subsidy benefits. Because federal student loan consolidation is simply a new federal loan, you will not lose your loan deferment and forbearance benefits. Additionally, you will maintain your interest subsidy benefits on any subsidized FFELP or subsidized Direct loans that you consolidate.
•Help your credit. Consolidation takes all of your existing federal student loans, pays them off in full, and combines them into one new loan. Instead of having multiple open loans with limited payment history, you will have just one loan. Your older student loans will be listed as paid in full. In a nutshell, consolidation helps eliminate open lines of credit.
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When should you consolidate?
You can consolidate during your grace period or during loan repayment. Your grace period is a six month no-payment window after you graduate or drop below half-time enrollment, before your loans go into repayment. Additionally, apply before July 1st – interest rates are expected to increase, so take advantage of this year’s lower rates.Click here for more Frequently Asked Questions

Eligible Federal Loans
Here is a list of federal loans that are eligible for federal student loan consolidation:

•Stafford Loans
•Perkins Loans
•Federal Direct Loans
•Federal Parent Loans for Undergraduate Students (PLUS)
•Federal Grad PLUS Loans
•Federal Supplemental Loans for Students (SLS)
•Federally Insured Student Loans (FISL)
•National Direct Student Loans (NDSL)
•Loans for Disadvantaged Students (LDS)
•Auxiliary Loan to Assist Students (ALAS)
•Health Education Assistance Loan (HEAL)
Author: Christopher S. Penn

Because of the additional benefits of federal student loans, federal and private loans must be consolidated separately. If you have both types of loans, it’s recommended that you begin
by consolidating your federal student loans first, as this will result in the greatest cost savings.

Step 1: Verify your current loan standing
Your current student loans must be in good standing and not in default status. If they are, you’ll need to make the payments required to get them paid up to date before consolidating student loans.

Common questions and concerns:
Q. My loan is in forbearance or deferred; is this considered being “in good standing?”
A. Yes, as long as you have not defaulted on your loans, you can consolidate with ScholarPoint.

Step 2: Gather required information
You’ll need the contact information of 2 friends or family members and the names and addresses of your current loan companies. To save yourself a step, ScholarPoint can instantly access all of the necessary information about your current lenders from the National Student Loan Database system during the application process with your permission.

Common questions and concerns:
Q. Will those I list as references be responsible for paying my loan if I default?
A. No, your references are not cosigners. Like any lending institution, we collect reference information just in case we can’t reach you by mail or phone once you have a loan with ScholarPoint.

Step 3: Apply online
It’s important to note that just because you submit an application with ScholarPoint to consolidate student loans; this does not mean that you’re required to accept the loan. If, and only if you like the rates and payment terms, you can electronically sign for acceptance of the consolidation loan via ScholarPoint’s secure system. If you’d prefer to physically sign the application, you can print, sign, and mail it directly to ScholarPoint for processing.

Common questions and concerns
Q. The application asks for my social security number, will you run a credit check to consolidate my federal loans?
A. No – there is no credit check required at any point during the process of consolidating federal student loans.

There are several options that can be considered when looking for student loan relief. First, and foremost, college graduates wanting assistance should contact the lending agency or school where the financial aid was administered, and report that there is a problem. Ignoring bills, or letting an unpaid debt accumulate simply compound the debt and financial trouble. Communication is key and is always best. Contacting the financial department will give the financial department the opportunity to suggest help and identify appropriate assistance programs.

If a lending agency does not offer a student loans relief program when a borrower reports a situation of financial difficulty, another option to ask about is a deferment possibility. Deferment is a suspension of payments for a specific amount of time, and many lenders are willing to offer this assistance for a set amount of time, enabling the borrower to get back on their feet and then resume loan payments. Another student loan relief option is forbearance. With forbearance, the consumer will pay a reduced monthly payment amount, for a period of determined time, after which the monthly payment will return to the original amount. Both of these relief options can get the consumer through a rough financial time, and back on payment track at a later date, avoiding late fees and penalties.

Debt consolidation is another option for those looking for student loans relief. Consolidating debt into one payment monthly can help control the income and outgo of cash and often reduce the total interest charges. There are loan companies available online which offer various terms and conditions for debt consolidation. Whichever relief program one considers, remember to turn to God, who wants to help and give His peace. Cry out to Him and let His hope fill your heart. “But I will hope continually, and will yet praise thee more and more. My mouth will shew forth thy righteousness and thy salvation all the day; for I know not the numbers there of.” (Psalm 71:14-15)

For more information: http://www.christianet.com/studentloans

The government hopes a new loan forgiveness program will give students an incentive to consider a career in public service. In exchange for 10 years on the job in a field of public service such as public safety, education, or social work, the Department of Education will erase certain borrowers’ remaining federal student loan debt.

To be eligible for this initiative — the Loan Forgiveness for Public-Service Employees Program — you must have either taken out or consolidated your federal student loans through the federal Direct Loan Program, in which you receive your student loan directly from the government rather than through a third-party lender.

Breaking It Down: How the Loan Forgiveness Program Works
The loan forgiveness benefit is available for any federal consolidation loan or any federal parent or student loans you’ve taken out through the Department of Education’s Direct Loan Program. If you took out your federal college loans from a private lender through the Federal Family Education Loan Program (rather than directly from the government through the Direct Loan Program), you’ll have to consolidate your FFELP student loans into the Direct Loan Program in order for those student loans to be eligible to be forgiven.

In addition to holding a federal Direct loan, you’ll also have to meet certain borrower requirements in order to qualify for the loan forgiveness program:

Spend a decade in a public service career. You must remain in a qualifying public-service career, working full-time, for 10 years, during which you must be making payments on the student loans you’re looking to have forgiven. You must still be working in the public-service sector at the time your student loans are forgiven.

Hit the 120 mark. During your 10 years of full-time public service, you must make 120 monthly payments on the Direct college loans you want forgiven. Only payments made after Oct. 1, 2007, will count toward the payment requirement. If you have FFELP loans (college loans that you took out from a private lender and not from the federal government) that you’re consolidating into the Direct Loan Program, you’ll only be able to count the payments you make on your Direct Consolidation Loan after your FFELP student loans are consolidated. Any payments you’ve made prior to Oct. 1, 2007, or to any lender other than the federal government won’t count.

Sign up for a qualifying repayment plan. Your required 120 payments must be made under one (or a combination) of three repayment plans: standard repayment, income-contingent repayment, or income-based repayment, which becomes available July 1, 2009. If you’re enrolled in a different Direct Loan repayment plan, only those payments you make that are at least equal to the monthly payment amount you’d be required to make under the standard repayment plan will count toward your 120-payment requirement.

The Fine Print: How You End Up Paying Off Your Student Loans Yourself
If you’re considering applying for the loan forgiveness benefit, you may want to look into your eligibility for the income-contingent and income-based repayment plans, which allow low-income borrowers to qualify for lower payments and extend their repayment period to 25 years. Only borrowers who are making reduced monthly payments on an income-contingent or income-based repayment plan will likely have a remaining balance left to forgive after making 120 payments on their student loans.

If you’re in the standard repayment plan, which has a repayment term of 10 years, you may find that you don’t have any student loan debt left to forgive after meeting your 120-payment requirement, since your 10-year repayment term is the same amount of time that the government requires you to hold your public-service job before any of your student loans can be forgiven.

What Qualifies as Public Service?
Public-service fields eligible for the loan forgiveness program include:

•Military
•Emergency management
•Fire departments
•Law enforcement
•Public library sciences
•Public school education
•Public child care
•Public health
•Public service for the elderly
•Public service for individuals with disabilities
•Nonprofit work with certain tax-exempt organization

But all that changed, says Harrison Wadsworth, special counsel to the Consumer Bankers Association, when Congress passed the College Cost Reduction and Access Act in the fall of last year, tilting the storied partnership squarely toward the public side, as the bill positioned the government to assume a larger role as lender and manager of student loans.

The legislation, which was aimed at increasing college affordability, raised Pell Grant award amounts for low-income students and lowered interest rates on certain need-based federal student loans — but in order to pay for these measures without passing the cost on to taxpayers, the bill also cut $21 billion in government subsidies to private lenders of federal college loans and doubled the fees that lenders are required to pay the government for every loan they issue.

These subsidy cuts and the resulting unprofitability of federal student loans, followed by the “spillover effect” of the subprime mortgage crisis into credit-based private student loans, have pushed the student loan industry to the breaking point. Liquidity for new student loans is scarce, credit restrictions on private student loans keep tightening, news continues to break almost daily of major lenders that have suspended either their federal or private student loan programs or both, and public confidence in the availability of student loans is shaken, despite the government’s efforts to allay families’ and schools’ concerns.

Government Still Working Out the Kinks
In an effort to counter spreading apprehensions about the viability of college financing, lawmakers passed emergency legislation in May that raised the college loan limits on certain federal student loans and that authorizes the Education Department to purchase federal college loans from private lenders as a way of providing struggling student loan providers with the liquidity they need to resume or to continue issuing federal parent and student loans.

This bill, the Ensuring Continued Access to Student Loans Act (HR 5715), was designed specifically, in part, to assure families and schools that federal student loans would be readily available.

But according to a recent survey, financial aid administrators are still concerned that the legislation is a short-term fix and doesn’t do enough to ensure the longer-term availability of college loans.

The survey, sent to members of the National Association of Student Financial Aid Administrators, found that despite the government’s assurances, worries persist that students may not be able to get the college loans they need to pay for school:

•52% of the NASFAA members who responded to the survey said that the emergency legislation hadn’t resolved the perceived “student loan crunch.”
•56% indicated that at least one lender they had used as a provider of federal financial aid would no longer issue federal college loans to students at their schools.
•More than half believed it would be harder this year for their students to obtain private student loans.
Sinking Economy Stands to Hurt Smaller Colleges the Most
The sustained credit crunch has led lenders in every sector to tighten their credit criteria, meaning that the financial resources that parents and students have traditionally turned to in order to supplement their federal financial aid and help pay for college — private student loans, home equity loans, stocks and investments, lines of credit — are becoming increasingly unavailable.

And with families’ savings and finances buckling under the additional strain of a slumping economy, record-breaking gas prices, rising food costs, surging unemployment, and a weak job market, colleges and universities may begin to see more students who are struggling to afford to go to college. As more students opt for less-expensive schools, it’s the small private colleges with higher tuition costs that may suffer the most, warns Moody’s Investors Service in a recent report.

The report from the international bond-rating agency reveals that more students may start choosing to live at home and attend a commuter school rather than an out-of-state university that would require living on campus and incurring thousands of dollars in room and board costs.

“There are a lot of hard choices,” says Larry Warder, chief financial officer for the Department of Education, “and if you can’t afford a Cadillac, you buy a Chevrolet.”