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Q&A: Student loans and forgiveness

Oct 20, 2014 | | Comments Comments Off

Dear Liz: I have a rather ugly student loan predicament. You mentioned “the possibility of forgiveness” in a recent column. I feel very strongly that I am deserving (if I dare use that word) of partial or full forgiveness of my undergraduate loans, although the loans from my graduate studies sting quite a bit too. I am not sure whom to contact to tell my story. Do I ask my lender, or do I contact the federal government education department? I get beyond frustrated talking to my lender, as they have employees who can only read from a script and can never help with particular issues.

Answer: You don’t win federal student loan forgiveness with an effective sob story. You get it by volunteering, working in a high-need area or following the relatively new rules for erasing remaining balances after many years of on-time payments. You also can get your federal (but not necessarily private) loans discharged if you’re totally and permanently disabled, you die or your school closes before you get your degree.

FinAid.org maintains a list of some of the forgiveness and stipend options available. People who teach full time in low-income districts, for example, can have up to $17,500 of their Stafford or PLUS loans forgiven under the National Defense Education Act. Forgiveness options exist for health workers and attorneys who serve high-need areas. Students in the Army National Guard may be eligible for its repayment program, which offers up to $10,000 for repaying student loans. AmeriCorps, the Peace Corps and Vista also have stipend programs for student debt repayment.

In addition, the federal Public Service Loan Forgiveness program promises any remaining federal student loan balances can be erased after 10 years of payments. Eligible public service jobs include employment with federal, state or local governments or not-for-profit organizations designated as tax-exempt by the IRS. You can find more information about this program at the U.S. Department of Education’s Federal Student Aid site.

Even if you work in the private sector, you can qualify for forgiveness after 20 to 25 years of on-time payments, depending on when you incurred the debt. Again, see the education department’s site for details.

If you’re finding your payments onerous, you may qualify for the “Pay as You Earn” or other federal income-based repayment plans. If you have private student loans, though, you have far fewer options and consumer protections. You may want to visit the Student Loan Borrower Assistance site run by the National Consumer Law Center to learn more about strategies for coping with this debt.

Categories : Q&A, Student Loans
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Q&A: The benefits of loose change

Oct 20, 2014 | | Comments Comments Off

Dear Liz: I just had to giggle at the husband who wanted to save his coin change for an emergency. Yes, this seems so silly now, but back in the day prior to debit cards my mom started saving all her loose change in a coffee can when my husband and I got engaged. Ten months later, she had saved enough for my wedding dress! When we had our first child, we started saving all our loose change, and 10 years later, we had saved enough for a trip to Disneyland. Obviously, we are saving less and less change since we so seldom use cash anymore, but we still keep a coffee cup to collect the loose change and still manage to turn in about $100 a year to the bank.

Answer: The key is to regularly deposit the coins, rather than letting them pile up. But a few readers cautioned that it might be worth carefully sorting through older stashes of coins:

Dear Liz: You gave a good answer to the question about cans of coins. You also should advise the party that if the cans have older coins — pre-1965 — the value of those dimes, quarters and half-dollar coins is tied directly to the price of silver. At $20 per ounce, 90% silver coins are worth about fourteen times their face value. A dime would be worth about $1.40, a quarter about $3.50, and a half-dollar about $6. At the same silver price of $20, 40% silver half-dollars are worth about $2.50 each. If you use a commercial sorting service you will lose the value of these coins. If you sort them while watching TV as I do, you will recover it. Lastly, if you do roll the coins, return them to the bank immediately. If your house is burglarized, as mine was, the rolls of coins on your desk will be gone in an instant.

Answer: Ouch. Sorry for your loss. You aren’t the only one to find gold (or rather silver) in your coins:

Dear Liz: I inherited much loose change. I started going through it and found a nice can of Buffalo nickels (each worth more than a nickel) and 22 pounds of silver quarters (made before the sandwich coins) worth $7,744 less handling and processing fees. It still came to a tidy sum. Let your letter writer know that it may pay to sort through that mountain of loose change.

Categories : Banking, Q&A, The Basics
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Friday’s need-to-know money news

Oct 17, 2014 | | Comments Comments Off

imagesToday’s top story: Why couples should consider keeping some of their finances separate. Also in the news: Ten ways to give your credit score a boost, six ways to save $1000 by the end of the year, and what the financial world could look like in 2019.

Why Couples Shouldn’t Merge All Their Finances
The benefits of financial autonomy.

10Best: Ways to improve your credit score
Easy steps that could give your score a boost.

The 2019 Forecast: Way More Millionaires, Way More Inequality
What will the financial world look like five years from now?

6 ways to save $1,000 by the end of the year
It can be done!

How much should you tip housekeeping? A travel tipping guide
Unraveling the mysteries of tipping while traveling.

Categories : Liz's Blog
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Thursday’s need-to-know money news

Oct 16, 2014 | | Comments Comments Off

Zemanta Related Posts ThumbnailToday’s top story: Four questions you need to ask before renewing your health insurance. Also in the news: Retirees share their nest egg regrets, how you may be killing your retirement dreams, and how networking on LinkedIn could cost you a job.

4 questions to ask before renewing health coverage
Preparing for 2015.

Real Retirees Dish: My Biggest Nest Egg Regret
Retirees share their their savings regrets.

5 Ways You’re Killing Your Retirement Dreams
Behaviors that are hurting your financial future.

Could LinkedIn Cost You a Job?
The popular social network can reveal more than you’d like to potential employers.

Should Grandparents Worry About Their Credit?
One word: Yes.

Categories : Liz's Blog
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Wednesday’s need-to-know money news

Oct 15, 2014 | | Comments Comments Off

847_interestrates1Today’s top story: The everyday things that are hurting your credit. Also in the news: Whipping your 401(k) into shape, how to cope with low interest rates, and the ten best places to retire on Social Security alone.

5 Everyday Things That Hurt Your Credit
Your furry best friend could be trouble.

How to Whip Your 401(k) Into Shape
Unlocking your 401(k)’s full potential.

4 Strategies for Coping with Low Interest Rates
Counteract low interest rates by avoiding risky investments.

10 Best Places to Retire on Social Security Alone
The locations may surprise you.

8 secrets to building a budget you can live with
Budgeting doesn’t have to be painful.

Categories : Liz's Blog
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Tuesday’s need-to-know money news

Oct 14, 2014 | | Comments Comments Off

321562-data-breachesToday’s top story: Yet another data breach hits a major retailer. Also in the news: Five costly Social Security mistakes, which tax breaks will be making a comeback in 2015, and why you should still save money even if you’re in debt.

The Kmart Data Breach: What You Need to Do
Here we go again.

Five Costly Social Security Mistakes
Avoid these at all costs.

Will Your Favorite Tax Break Be Restored?
The clock is ticking on restoration for 2015.

Why You Should Still Save When in Debt
Emergency funds are essential no matter how much you owe.

Tips for Giving Money to Needy Family Members
Making the difficult decision to say yes or no.

Categories : Liz's Blog
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Monday’s need-to-know money news

Oct 13, 2014 | | Comments Comments Off

AA-hommeToday’s top story: How to discover what personal finance nerds know. Also in the news: How to get a judgment off of your credit report, the high cost of college tuition convenience fees, and what’s really behind all of your financial fears.

10 Things Only Personal Finance Nerds Would Understand
We could all stand to be a little nerdy when it comes to personal finance.

How to Get a Judgment off Your Credit Report
Difficult but not impossible.

Is Convenience When Paying Your Tuition Worth a 2.62% Fee?
Not when it could add up to over $1000 a year.

Common Money Fears and How to Get Over Them
What’s really behind those nagging financial fears?

Five apps to help you organize your personal finances
Something to do on your phone that isn’t Candy Crush.

Categories : Liz's Blog
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Q&A: Debt obligations and voluntary surrender

Oct 13, 2014 | | Comments Comments Off

Dear Liz: My husband returned a car to the dealer when he lost his job. Now the company says he owes it more than $7,000 (the difference between what he owed to the dealer and the price for which the car was sold). He refuses to pay any amount, but recently he received a letter from a law office demanding payment or they will take him to court. Is he obliged to pay this money? What options does he have to get rid of this debt?

Answer: A debt doesn’t disappear simply because someone decides not to pay it.
Your husband signed loan paperwork to buy the car, and this paperwork obligated him to repay a certain amount. Voluntarily surrendering the car didn’t change his obligation. Also, the surrender probably is being reported to the credit bureaus as a repossession, which is a big negative mark on his credit reports. Some people mistakenly believe that a voluntary surrender avoids credit damage. Typically, it does not.

Your husband could make matters worse if he continues his stubbornness. The law firm can take the collection to court, where it’s likely to win. That will add a judgment to your husband’s credit files and cause further damage to his scores. His wages could be garnished to pay the debt.

Your husband may be able to settle this debt for less than he owes, especially if he can offer a substantial lump sum, but negotiations with a collector can be tricky. He may want to consult an attorney for help or at least arm himself with more knowledge about what to do from sites such as DebtCollectionAnswers.com.

If this is just one of a number of unpaid bills, though, you both may benefit from talking to a bankruptcy attorney about your options.
In the future, keep this experience in mind when you go to buy another car. Making at least a 20% down payment and limiting the loan term to four years or less will help ensure that you’re never “upside down” like this again.

Categories : Credit & Debt, Q&A
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Q&A: Roth IRA

Oct 13, 2014 | | Comments Comments Off

Dear Liz: I have a 401(k) that has a required annual distribution because I am over 71 1/2 years old. Can I use this distribution as qualified income to invest in a Roth IRA? I have no W-2 earnings, although I do have other income sources that are reported on 1099 forms.

Answer: To contribute to a Roth or other individual retirement account, you must have taxable compensation, which the IRS defines as wages, salaries, commissions, tips, bonuses or net income from self-employment. The IRS also includes taxable alimony and separate maintenance payments as compensation for IRA purposes.

So if the money reported on one of those 1099 forms is from self-employment income, then you can contribute to a Roth IRA. If the form is reporting interest and dividends or other income that doesn’t meet the IRS definition of taxable compensation, then you’re out of luck.
If you don’t have income that meets the IRS definition of taxable compensation, but your spouse does, you may still qualify for IRA contributions, provided you file a joint return that meets the required income thresholds.

Categories : Investing, Q&A, Retirement
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Q&A: Social Security spousal benefits

Oct 13, 2014 | | Comments Comments Off

Dear Liz: I am 13 years older than my wife. Is it possible for me to receive Social Security spousal benefits based on her earnings when I reach full retirement at age 66? I’d like to shift to my benefit when it reaches its maximum at age 70. If I can do this, what impact, if any, would there be on the benefits she ultimately receives?

Answer: Spousal benefits wouldn’t reduce her checks, but she has to be old enough to qualify for Social Security for you to get these benefits. Given your age gap, waiting for that day probably isn’t an optimal solution.

On the other hand, she could file for spousal benefits when she reaches her own full retirement age (which will be somewhere between 66 and 67, as the full retirement age is pushed back). That would give her own benefit a chance to grow, and she could switch to that amount if it’s larger at age 70. If she starts benefits before full retirement age, she would lose the option to switch.

AARP’s free Social Security calculator can help you figure out the claiming strategy that makes the most sense for your situation.

Categories : Q&A, Retirement
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