Is Student Loan Refinancing a Good Idea?

With college years left behind, and the real world beginning to settle over your life, it's time to think about what to do about your student loans. Obviously, you want to pay them off as quickly as possible, but should you refinance them, and if so, how should you? That question may not be quite as easy as you think. Not all student loans can or should be refinanced, and here's why.

Tax Benefits- Simply put, the interest you pay on a student loan is tax-deductible every year. The same can't be said, though, for a personal loan or credit card debt, common ways of refinancing. For instance, let's say you have a $20,000 student loan that is federally promised. If you pay 5% interest per year, you'll pay about $1,000 in interest. Refinancing may reduce your interest to a 4% rate, and you'll pay $800 in interest, but your taxable income will be raised by $1,000. If this kicks you into a higher tax bracket, that $200 savings could easily be nullified.

Institution track record- Regardless of your personal credit history, if you have privately-issued student loans that aren't backed by the federal government, private refinancing banks may want nothing to do with them. This may be because the students' repayment history is available to the refinance banks, and if a great enough number of those students ended up defaulting on their loans, the company won't want to take a chance on you. Keep in mind, though, that that only applies to privately-issued loans. They're usually more than happy to refinance federally-funded loans because if you default on the loan, they can ask the government to cover their losses.

Interest Rate- Generally speaking, the interest rates for student loans are quite a bit lower than the rates you might be able to find for personal loans. The reason for this is that while credit cards and other personal credit lines are typically unsecured, and technically speaking, most student loans are unsecured, student loan interest rates subsidized through the government are set by congress. They might rise and fall occasionally, but since most policymakers see the inherent positives in a well-educated workforce, they want to make certain that such educational opportunities are readily available and affordable. In order to remain competitive in the field, many private student loan issuers keep their loan rates within a few points of the federal rate to entice borrowers.

Income-based Repayment- Income based repayment is a means of ensuring that regardless of how much a student borrows for their education, the amount they repay won't go above a set percentage of their current income. For instance, let's say that you have $100,000 in student loan debt, and have a hard time finding work for the first four years out of school. You end up working as a barrista pulling in about $20,000 per year. While your debt might call for you to pay a specified amount per year, income-based repayment holds your payments at 10% of what you make. That means you'll pay just $2,000 on your student loans until you find work in your field. The bonus is that there are two provisions to the plan that could relieve you of much of your student loan debt. If your work is in the public sector, then paying on the income-based repayment plan for 10 years will allow you to apply for loan forgiveness. If you work in the private sector, the plan provides forgiveness after 25 years.

Clearly, refinancing might make sense for certain students, but when you consider doing so, consider first the benefits you just might be throwing away.

Benefits of Writing Checks for Budgeting

The world is moving at a breakneck pace, and though there's something to be said for being quick and efficient, there are times when the best way to get a job done is the tried-and-true way. One of these ways is writing out checks when you do your bills rather than paying online. Sure, there's a convenience to zipping out a payment online, but have you considered the cost when compared to the price of a stamp, envelope, and the check? The following three benefits might just have you chucking the web and picking up your pen!

Cost Savings-

Most of the places that want you to pay your bill online avoid mentioning whether or not that will cost you extra to do so. In fact, most of them tout the “green” benefits of going to a paperless billing style without mentioning that this saves the company money without generally passing this savings on to you, the consumer. Utilities are particularly bad about this, as many of them outsource their payment processing. In order for the outside company to earn a profit for their services, they charge a per-transaction fee which is passed on to the customer. In some cases, this fee can range from just a few cents to over ten dollars per transaction. Other places that use such a system include the federal and state governments, though the fees are typically much higher, and in fact may actually be billed as a percentage of your income tax bill. Writing out a check to any or all of these groups allows you to skip the “convenience fee” associated with paying online, and may spare you hundreds of dollars over the course of a year.

Budgeting-

Simply put, writing a check means having to balance your checkbook. That also means you're already sitting at your desk or at the kitchen table, writing out the check, so you might as well note the payment and file the paperwork while you're at it. The problem with paying online is the thing that makes it most appealing- You can pay your bill anywhere, at any time. You may be at a computer at your local library, on your smart phone on a road trip, or even at your cousin's house having dinner. The point is that you're in a place where you may not be able to see your checking account, and may not know quite how much you have available to pay. You could easily overdraft your account, or in the best-case scenario, forget to note the payment in your check register and give yourself fits when you do sit down to balance your account.

Security-

Criminals have found an easier way than check fraud to steal your money. Identity theft has become the most prevalent form of fraud in the United States, and unfortunately, more often than not the problem exists because unwitting consumers hand over vital information without giving it so much as a second glance. Although it's true that the websites that accept online payments are continually updated to attempt to thwart information theft, hackers are literally working 24/7 on ways to get around such safeguards, and you might be surprised just how often they do get through. Today's checks incorporate numerous safety features, and even resist “washing,” a form of check fraud that has fallen the the wayside for easier, bigger scores for criminals.

While it may at first glance appear that writing a check to pay bills in an inconvenience, there are plenty of positives out there to make it worth your while. Think about it carefully next time you're asked to accept that “Convenience fee.”

Quick Ways to Earn Spare Cash

Living today is more expensive than ever before, practically necessitating the American middle class to pick up a second job in order to actually be able to make ends meet. A great number of families, however, simply don't have time. Between caring for the kids and finding a few hours to sleep, there's practically nothing left for the commute to and from a part-time job that may take up an additional six hours or more of your day, not to mention the weekend.

The internet has opened up a plethora of income-generating opportunities for making more money, from selling items online to working on a contract basis. In fact, there's a good chance that the hobby you enjoy so much could turn into a very enjoyable second income. Some have found so much success, in fact, that they have been able to make their hobby income their primary income.

Selling Opportunities

Opportunities for making extra money online are most plentiful in reselling items. From antiques to craft projects, there are numerous opportunities to sell goods on the internet. There are, however, a few things that you have to keep in mind. The first is that you can't duck income taxes because you're just making a few bucks on the side. The second is that by selling online, you'll have to put more thought into security, both at home and with your personal financial information. Putting yourself out there as a seller opens you up to identity theft and fraud that could quickly decimate both your personal and business finances.

Income taxes are generally reported through your payment options. Because Paypal is the number one way of accepting payments, the IRS has come up with a way of tracking the payments made through them. If your sales exceed $20,000 per year, or you have more than 200 transactions, you'll be issued a “Paypal 1099.”

Contract Opportunities

Marginally less numerous and somewhat more difficult to find are contract opportunities. If you have a specialty such as computer programming or technical writing, there are numerous opportunities out there within your field. Although you won't technically be holding a second “job” in the strictest sense, it does allow you the freedom of working on your own schedule while not having to commute or keep an inventory of product in your garage.

In order to find contract opportunities, try checking with the companies in your area to find out if they're outsourcing. If they are, there's no reason you can't throw your hat in the ring. Usually, all it takes is picking up the phone and asking. For specific online opportunities, check the trade journals from your profession to find websites that pay for contract work or act as middlemen.

Although it isn't very easy to get started, you'll find before long that with just a little dedication, you can avoid having to drag yourself home past midnight working for a kid younger than your own kid. After all, it's like they say, There's nothing quite like running your own business, even if it is a part-time gig!