Debt Loans – PSP Book http://pspbook.com/ Tue, 21 Jun 2022 14:58:00 +0000 en-US hourly 1 https://wordpress.org/?v=5.9.3 https://pspbook.com/wp-content/uploads/2021/05/default1-150x150.png Debt Loans – PSP Book http://pspbook.com/ 32 32 Expansion financing helps small businesses grow faster https://pspbook.com/expansion-financing-helps-small-businesses-grow-faster/ Tue, 21 Jun 2022 14:58:00 +0000 https://pspbook.com/expansion-financing-helps-small-businesses-grow-faster/ As your business grows, you may need financing to achieve your goals. Expansion financing refers to all types of financing used to grow your business. There is no one type of financing that is the best. Here we will cover the types of expansion financing that may be available and which may be right for […]]]>

As your business grows, you may need financing to achieve your goals. Expansion financing refers to all types of financing used to grow your business. There is no one type of financing that is the best. Here we will cover the types of expansion financing that may be available and which may be right for your business.

What is expansion funding used for?

Expansion funds are intended to help you grow your business. You’ll use the funding for everything your business needs to take to the next level. This may include:

  • Opening a new location
  • Launch of a new product line
  • Enter a new market (including export)
  • Establish an online presence
  • Increase your customer base through advertising
  • Hire more employees
  • Invest in new and better equipment

Because expansion funds can be used for so many things, it’s a good idea to have an up-to-date business plan for your growing business. Having a clear plan that shows you know how your funds are going to help your business continue to grow is a plus. It shows lenders, angel investors, or venture capitalists that you’ve thought through your strategy and have clear plans for expansion.

What type of financing is typically used for small business expansion?

Most small business lenders prefer to lend to businesses with at least two years in business and solid income, as evidenced by bank statements and/or business tax returns. Most companies looking for business expansion loans have the advantage of being able to show investors, banks, etc. a profitable business as well as a proof of concept.

Being able to present documents showing that your business is financially stable and doing well can help you negotiate loan terms, credit increases and new leases.

Many lenders also check credit. You may need good personal credit and/or good business credit. (If you haven’t established trade credit, here’s how.)

There are several types of small business financing to consider to grow your small business:

Lines of credit

Lines of credit give you access to funds that you can borrow if needed. You will only pay interest on the amount you borrow. They are best for short-term borrowing needs such as inventory or working capital.

Term loans

Term loans offer a fixed amount of financing with a fixed repayment period. Term loans can be short-term loans (less than two years) or long-term loans (2 to 25 years). There are a variety of options available, including online loans, bank loans, and SBA loans.

Equipment financing

If your business needs equipment to grow, consider equipment financing. Pay for equipment over time and increase cash flow in the meantime.

Business credit cards

Business credit cards are a relatively simple financing option. As long as you have good personal credit scores and meet minimum income requirements, you may qualify. Unlike other types of financing, credit cards are often available to startups. However, you may need to get multiple cards in order to get enough available credit, and the costs can be high. (Consider a 0% APR credit card.)

Microcredits

Microcredits are a type of loan but deserve a mention. They are often made by non-profit lenders such as Community Development Financial Institutions (CDFIs) and are available to entrepreneurs who have difficulty obtaining financing. They come with attractive terms and lower interest rates, not to mention that they usually offer mentoring to borrowers. However, the amounts can be smaller ($50,000 or less), which may not provide enough capital for some businesses.

Other types of financing

Subsidies

Grants provide money that does not have to be repaid. Some grants are for relatively small amounts, while government grants can offer large amounts of funding. Many small business owners want grants, which means they are competitive. However, if you are able to get one, it is basically free expansion capital.

Crowdfunding

Crowdfunding comes in many forms, including debt funding, investor (equity) crowdfunding, and reward crowdfunding. Raising money through crowdfunding takes work, but it can be an attractive way for some start-ups and established businesses to obtain funds to grow.

The benefits of financing a business expansion

If your business balance sheet is strong, you have strong cash flow and ample working capital, you might be tempted to forgo the hassle of getting a small business loan. But it’s important to weigh the pros and cons of self-financing versus financing through a lender.

Advantages of self-financing:

  • No interest charged
  • No monthly payments
  • Good credit score not required

Benefits of getting a business expansion loan:

  • Keep funds available for working capital or other needs
  • Grow faster than with self-financing
  • Some types of funding may come with mentorship or other benefits

If your business is growing, consider business expansion financing to help your business get the capital it needs to reach the next level of success. Nav can help your business find the right options based on your job qualifications.

This article was originally written on June 21, 2022.

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Dartmouth eliminates student loans for undergraduates https://pspbook.com/dartmouth-eliminates-student-loans-for-undergraduates/ Sun, 19 Jun 2022 23:16:20 +0000 https://pspbook.com/dartmouth-eliminates-student-loans-for-undergraduates/ Donating financial aid through The Call to Lead campaign has reinforced Dartmouth’s commitment to making a college education accessible and affordable to the most promising and talented students around the world and from all economic backgrounds. “Thanks to this extraordinary investment from our community, students can prepare for lives of impact with fewer constraints,” says […]]]>

Donating financial aid through The Call to Lead campaign has reinforced Dartmouth’s commitment to making a college education accessible and affordable to the most promising and talented students around the world and from all economic backgrounds.

“Thanks to this extraordinary investment from our community, students can prepare for lives of impact with fewer constraints,” says President Hanlon. “Eliminating loans from financial aid programs will allow Dartmouth undergraduates to pursue their purpose and passion in the widest possible range of career opportunities.”

Two recent donations capped efforts to eliminate student debt through the campaign. In May, Anne Kubik ’87, a member of the President’s Commission on Financial Aid and an early supporter of the initiative, added $10 million to an earlier pledge to bring the effort closer to reality. An anonymous donor then committed $25 million to complete the campaign, establishing one of the largest scholarship endowments in Dartmouth history.

“Our gratitude for these extraordinary acts of generosity knows no bounds,” said President Hanlon.

“Both donors have told me of their enthusiasm for ensuring that more applicants can pursue an education at Dartmouth without worrying about their financial means.”

– President Philip J. Hanlon ’77

Currently, Dartmouth undergraduates from families with annual incomes of $125,000 or less and with typical assets are offered need-based aid with no loan component required. Dartmouth now waives the loan requirement for undergraduate students from families with annual incomes over $125,000 who receive need-based financial aid. This will reduce the debt burden of hundreds of middle-income Dartmouth students and their families by an average of $22,000 over four years. This will in turn open up opportunities for recent graduates to consider career opportunities or higher degrees that they might not otherwise have been able to pursue.

More than 65 families have supported the campaign’s goal of eliminating loan requirements from Dartmouth’s undergraduate financial aid scholarships, committing more than $80 million in donations to the endowment.

“This gift honors Dartmouth’s tradition of service,” says Kubik.

“Over the years, I’ve been fortunate to serve alongside alumni who dedicate hundreds of hours to making Dartmouth stronger for future students. The presidential commission embodied the best of this altruism of the elders. Dartmouth is more welcoming than ever because of it.

-Anne Kubik ’87

Successful applicants to the Class of 2027 will be the first undergraduate students to enroll through this historic investment in Dartmouth’s endowment.

Over the past week, members of the Dartmouth community have rallied to pledge an additional $5 million to eliminate required loans in financial aid scholarships for all current AB students, many of whom have seen their university experience disrupted by the global pandemic. President Hanlon thanked several families for their commitment to extending the no-loan policy to current students: Dana Banga and Angad Banga ’06; Leslie Davis Dahl ’85 and Robert Dahl; Katherine Dunleavy and Keith Dunleavy ’91; Karen Frank and James Frank ’65 (in honor of Peggy Epstein Tanner ’79); Julie McColl-McKenna ’89 and David McKenna ’89; Hadley Mullin ’96 and Daniel Kalafatas ’96; Robin Bryson Reynolds ’91 and Jake Reynolds ’90; and Victoria Ershova and Mike Triplett ’96.

“Dartmouth’s commitment to meeting 100% of demonstrated need for all students is longstanding and a source of pride,” says Lee Coffin, Vice Provost, Admissions and Dean of Admissions and Financial Aid. “These new policies reinforce this deep and enduring commitment to full and equal access to an education in Dartmouth. Expanding scholarships by removing loans from all aid programs further levels the playing field as we invite students from all socio-economic backgrounds to join the Dartmouth community.

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Pakistan follows Sri Lanka’s path to Chinese debt trap: report https://pspbook.com/pakistan-follows-sri-lankas-path-to-chinese-debt-trap-report/ Sat, 18 Jun 2022 05:00:05 +0000 https://pspbook.com/pakistan-follows-sri-lankas-path-to-chinese-debt-trap-report/ The Italian publication said China had been strict in recovering money from Pakistan. Islamabad: Pakistan’s already fragile economy suffered another setback when China recently demanded the repayment, by November 2023, of $55.6 million for the Lahore Orange Line project, Italian publication Osservatorio Globalizzazione reported. . Meanwhile, at the end of March, foreign exchange reserves held […]]]>

The Italian publication said China had been strict in recovering money from Pakistan.

Islamabad:

Pakistan’s already fragile economy suffered another setback when China recently demanded the repayment, by November 2023, of $55.6 million for the Lahore Orange Line project, Italian publication Osservatorio Globalizzazione reported. .

Meanwhile, at the end of March, foreign exchange reserves held by the State Bank of Pakistan fell by $2.915 billion, due to repayment of external debt. Thus, Pakistan faces a bleak economic future when it comes to relations with China.

The Chinese company China-Railway North Industries Corporation (CR-NORINCO) which completed the Lahore Orange Line project in 2020 demanded from the Punjab Mass Transit Authority an outstanding amount of $45.3 million by the end of March 2023 and the remaining outstanding amount of $10.5 million by the end of the year. CR-NORINCO insisted that all dues be refunded before the contract expires on November 16, 2023, Osservatorio Globalizzazione reported.

China has struck a tough bargain with Pakistan over the repayment of its loans and other investments in Pakistan. In fiscal year 2021-22, Pakistan paid about $150 million in interest to China for using a $4.5 billion Chinese trade finance facility. In the 2019-20 financial year, Pakistan paid USD 120 million in interest on USD 3 billion in loans.

The Chinese request for the Lahore Line payment was made in the first week of April 2022 when the new political dispensation under Prime Minister Shehbaz Sharif had just taken office. Earlier, in early March 2022, China granted Pakistan’s request to roll over a huge $4.2 billion debt repayment to bring major relief to its all-time ally, Osservatorio Globalizzazione reported.

China was quite strict in recovering the money from Pakistan. Take for example the energy sector in Pakistan, where Chinese investors have repeatedly insisted on solving problems with existing project sponsors in order to attract new investment.

Some Chinese projects in Pakistan are facing insurance issues for their loans in China due to Pakistan’s massive circular energy sector debt of around $14 billion.

Pakistan has to pay about $1.3 billion to Chinese power producers and so far only $280 million has been paid. Another example of tough Chinese negotiation over monetary relations with Pakistan is well documented in the case of the Dasu Dam project. Last year, China demanded $38 million to compensate the families of 36 engineers who died in the Dasu Dam terrorist attack.

Compensation became a precondition for the resumption of work on the project. To appease China, Pakistan later agreed to pay $11.6 million in compensation.

While China is heavily responsible for Pakistan’s debt problem, it is the mismanagement of Pakistan’s economy by successive governments that has led to the current impasse.

Large loans from China, Saudi Arabia and Qatar, as well as 13 IMF loans over 30 years (most loan programs being canceled mid-term for non-compliance with loan conditions), are a major cause of the economic downturn.

The $6 billion IMF loan in 2019 is also on hold, and China has responded to Pakistan’s frequent requests for help.

This strategy has not borne fruit and only pushes Pakistan deeper into debt. Pakistan needs to watch developments in Sri Lanka closely as it could be the next country to face the consequences of poor economic policies and a heavy debt burden, Osservatorio Globalizzazione reported.

(Except for the title, this story has not been edited by NDTV staff and is published from a syndicated feed.)

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Buyout loans sell at a discount as recession fears rise https://pspbook.com/buyout-loans-sell-at-a-discount-as-recession-fears-rise/ Thu, 16 Jun 2022 14:17:10 +0000 https://pspbook.com/buyout-loans-sell-at-a-discount-as-recession-fears-rise/ Placeholder while loading article actions Last week, bankers led by JPMorgan Chase & Co. applied the biggest discount seen in 2022 on a leveraged loan just to get the $1.5 billion deal off the books and into the hands of investors. . The debt was sold at a price equivalent to 89 cents for every […]]]>
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Last week, bankers led by JPMorgan Chase & Co. applied the biggest discount seen in 2022 on a leveraged loan just to get the $1.5 billion deal off the books and into the hands of investors. . The debt was sold at a price equivalent to 89 cents for every dollar borrowed to support the merger of two private equity firms, Material Handling Systems Inc. and Fortna Inc., Bloomberg News reported. This promises a handsome return for investors – but it will be disappointing, and possibly costly, for the banks involved.

This is not a bad one-time transaction. Borrowers and investors are seeing a sharp rise in interest costs and slashed prices in the market for risky and poorly rated loans. Soaring inflation and fears of potential recessions ravaging stocks, bonds, currencies and crypto are also hurting lending. This is a problem for banks that take out loans and resell them to investment funds. The average discount on loans sold over the past month is the highest in a decade with prices averaging 95.5 cents on the dollar, according to Citigroup Inc. analyst Michael Anderson.

JPMorgan, for its part, has significantly reduced its exposure to the leveraged loan market over the past year. Daniel Pinto, chief operating officer, recently told investors that the bank had reduced its share of deals done but not yet sold to 6% of the market in May, from more than 20% at the start of 2021. That share has fallen further since, according to a senior banker at the company who declined to be identified as the risk of being stuck with unwanted and unsellable debt has steadily increased.

When the market freezes or slows, banks may end up having to sell loans at low prices, which may reduce their fees or lead to outright losses, or they may have to keep them on their balance sheets, which reduces their ability to generate new revenue. new offers. At worst, they find themselves stuck lending to a company that cannot repay its debt. Banks guard against this by agreeing in advance with borrowers the option of selling loans at a discount or raising interest rates before selling, with the business bearing the costs. If a borrower disagrees, the loan is not taken out – and it happened this year.

Sales of new loans this quarter are at lower volumes even than during the start of the Covid pandemic in 2020. Two weeks to the end of June, the US market at $149 billion is on track for its most weak quarterly issuance since the first three months of 2015, according to data compiled by Bloomberg. In Europe, issuance currently stands at 5.9 billion euros ($6.1 billion), which is expected to be the worst since the first quarter of 2009.

It is above all the worries linked to the recession that make investors nervous. Leveraged loans pay a floating interest rate that increases with higher central bank rates. It’s good for investors up to a point; but when rates rise rapidly, higher debt service charges can quickly put borrowers in trouble.

For all risks, it’s not redux 2008 for leveraged loans for several reasons. During this crisis, banks around the world found themselves stuck with hundreds of billions of dollars in debt representing more than a quarter of the total market. Today, the volume of loans made and not sold is both lower value and a much smaller fraction of a much larger market.

Additionally, some investors are more willing to grab cheap deals when the market is in trouble. Citi’s Anderson notes that there is a flurry of so-called “print and sprint” transactions being made by secured loan bond managers. These debt-funded investment vehicles are created to quickly redeem existing loans that are trading at low prices, rather than spending weeks slowly buying new loans as they are created. As quick investors, they can help support prices in a jittery market.

Another difference over the past decade is the growth of private credit funds, which have become an industry of around $1.5 trillion. Some of the biggest managers, such as Blackstone Credit, Stone Point Capital or Antares Capital have become loan arrangers as well as investors, with the aim of increasing returns with additional fees and ensuring that they get a much of the loans they want. That means they’re in direct competition with investment bankers: In a recent deal for software company Kofax Inc., private lenders accounted for about half of the loan arrangers, according to Bloomberg. This might help spread the pain in a worsening downturn.

There are a lot of things that could go wrong with leveraged loans, especially if Western economies tip into recession. And some banks are always going to make bad calls to the companies they’re trying to bring to market. But for now at least, leveraged bankers appear to be facing a slowdown in earnings rather than impending balance sheet disasters.

More from Bloomberg Opinion:

• Decisive people are not better decision makers: Thérèse Raphaël

• The stock market has one more shoe to drop: John Authers

• How close are we really to the inflation of the 1970s? : Burgess, He and Winger

This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.

Paul J. Davies is a Bloomberg Opinion columnist covering banking and finance. Previously, he was a reporter for the Wall Street Journal and the Financial Times.

More stories like this are available at bloomberg.com/opinion

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After years of public service, some still can’t apply for student loan forgiveness https://pspbook.com/after-years-of-public-service-some-still-cant-apply-for-student-loan-forgiveness/ Tue, 14 Jun 2022 07:22:12 +0000 https://pspbook.com/after-years-of-public-service-some-still-cant-apply-for-student-loan-forgiveness/ A short-lived program in the early 2000s allowed married couples to consolidate their student loans at a lower interest rate. Now many are missing thousands of dollars in loan forgiveness. Teachers, firefighters and government workers are clamoring to disentangle their student loans from those of their spouses in time to clear their debt with Civil […]]]>

A short-lived program in the early 2000s allowed married couples to consolidate their student loans at a lower interest rate. Now many are missing thousands of dollars in loan forgiveness.

Teachers, firefighters and government workers are clamoring to disentangle their student loans from those of their spouses in time to clear their debt with Civil Service Loan Waiver (PSLF). President Biden revamped the program last October, but in order to receive the benefits – including the cancellation of student loans after 120 eligible payments – borrowers must have their documents in October this year.

“We keep getting these notices about, ‘Hey, waiver of public service loan forgiveness, you might qualify. Try it,’” says Becki Vallecillo, a longtime kindergarten teacher in Anderson, SC.” And it’s heartbreaking every time.”

Vallecillo and her husband, Eric, found out early on that they didn’t qualify. As a kindergarten teacher and school counselor, she meets all the criteria, except one: her loans are consolidated.

She was on the phone several times with her loan officer. “The last time I did it, I was literally in tears at the end. I had spent about four hours on a Saturday getting transferred and bouncing back: ‘Go to this website, do this paperwork, talk to that person'” Vallecillo said. But the answer is always the same.

More than 14,000 borrowers combined their student loan debt in the late 1990s and early 2000s through a process called spousal consolidation. It offered borrowers the allure of a single monthly payment and a lower interest rate.

But there was a fundamental flaw: the program had no way to separate the original loans once merged. Even in the event of divorce or domestic violence, these debts cannot be unwound. Congress eliminated the spousal consolidation option in 2006, but never created a system for dealing with participating borrowers.

Today, many borrowers – regardless of their marital status – are missing thousands of humanitarian aid. In many cases, the combined debts exceed $100,000, and in some cases the couples owe more than $200,000.

Two Democratic lawmakers: Sen. Mark Warner of Virginia and Rep. David E. Price of North Carolina say they have a simple solution: change the wording and allow loan separation. They first introduced a bill to do so in April 2021, but since then the bill Joint Consolidation Loans Separation Act became embroiled in the broader debate over student loan forgiveness.

“I’m not saying you should just get rid of all student loans, which would be great, right? says Patrick Shattuck, an English teacher at Santa Ynez High School in California. “I just say, ‘Can I please pay my share?’ That’s all I want to do.”

Shattuck is divorced and still owes over $170,000 in combined debt to his ex-wife, the vast majority of which is not his.

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A few months ago after an NPR article looked at the program, affected borrowers began working together to coordinate their lobbying efforts. They formed a Facebook group, now with nearly 400 members from across the country, hoping to reframe the issue. It worked. Their efforts brought the bill back to the Senate with renewed hope in May.

“It’s almost like the minute this comes to the politicians’ attention, they’re like, ‘this is a slam dunk,'” Shattuck said.

But the invoice is already blocked again. And with the prospect of broader loan cancellation looming, borrowers and lawmakers are getting nervous.

“I want to cry because I’m like, ‘Oh my God, what have we done?’ “says Cynthia Malone. She is a licensed clinical social worker with the Office of the Public Defender in Columbia, Missouri. She works with the death row population and the appeals process to review claims.

She is married to a probation officer. Between them, they have decades of public service — and more than $110,000 in student loans combined.

Malone says the hardest part of their situation is watching co-workers with the same experience — but not spousal consolidation — have their debts forgiven. She feels left out because of a choice they made long ago at the behest of their loan officer.

But the confusion around PSLF is not limited to joint consolidation borrowers. A new estimate from the Center for Student Borrower Protection suggests that, of the 9 million borrowers eligible for the new PSLF waiver, only 2% have received relief.

Even if President Biden extends the PSLF waiver past October, to give borrowers more time to qualify, joint consolidation borrowers will continue to wait. The only thing that can change their situation is an act of Congress. Until then, Malone says she and her husband are trying not to think about all that debt too much.

When asked how their lives would change if they qualified for the PSLF, nearly all joint consolidation borrowers NPR interviewed wanted the same thing: a savings account.

They hope to start saving for the future, rather than paying interest on the past.

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Czech Finance Minister outlines plan to allow companies to pay taxes in euros and consider more debt in euros | Investment News https://pspbook.com/czech-finance-minister-outlines-plan-to-allow-companies-to-pay-taxes-in-euros-and-consider-more-debt-in-euros-investment-news/ Fri, 10 Jun 2022 14:12:00 +0000 https://pspbook.com/czech-finance-minister-outlines-plan-to-allow-companies-to-pay-taxes-in-euros-and-consider-more-debt-in-euros-investment-news/ By Jan Lopatka and Jason Hovet PRAGUE (Reuters) – The Czech government’s plan to let companies pay their taxes in euros from 2024 will allow the state to increase its borrowing in euros and it expects “low tens of percent “Businesses are making the switch,” Finance Minister Zbynek Stanjura told Reuters. . The plan, which […]]]>

By Jan Lopatka and Jason Hovet

PRAGUE (Reuters) – The Czech government’s plan to let companies pay their taxes in euros from 2024 will allow the state to increase its borrowing in euros and it expects “low tens of percent “Businesses are making the switch,” Finance Minister Zbynek Stanjura told Reuters. .

The plan, which the government wants to push through parliament early next year, would allow value added tax and corporation tax in euros instead of kroner, he said, giving details on a plan the government announced when it took power late last year. .

The Czech Republic, one of eight members of the European Union outside the EU’s common currency area, has no firm date for adopting the euro, but the move would save the economy heavily dependent on exports to euroization.

“As we come up with this, we will, I believe, resolve a big conflict in the business community, where the smaller part, the exporters, will welcome it and want it for a long time, and the rest will not,” said Stanjura in an interview Thursday evening.

He said the government did not know how much government revenue from businesses would shift to the eurozone currency.

“We cannot automatically assume that every exporter…will choose to do so,” he said.

“If I had to make a rough estimate, it would be less than tens of percent… 10,20,30, it’s really rough, we don’t have a more detailed analysis.”

Last year’s Czech budget included 129 billion crowns ($5.53 billion) in corporation tax and 299 billion crowns in value added tax.

Stanjura said further steps towards joining the euro were not being considered because the ruling five-party coalition has varied approaches – from the very pro-euro Pirate and TOP09 parties to the more skeptical Civic Democrats of Stanjura.

If the change is approved, which Stanjura has said it wants to do under a new accounting law by early 2023, it could lead to a higher proportion of public debt in euros, he said. declared.

“We are starting a debate on, when we estimate an increase in public revenues in euros, how this will be reflected in the financing of the state debt,” he said.

“The key decision must be taken next year for the (funding) strategy from the year 2024.”

The government redeemed its last outstanding eurobond last month and has only €1.5bn of euro debt left under local law, the ministry’s debt chief said. to Reuters last month was the preferred way to raise debt in euros.

($1 = 23.3480 Czech crowns)

(Reporting by Jan Lopatka and Jason Hovet; editing by Philippa Fletcher)

Copyright 2022 Thomson Reuters.

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Private student loans rarely make financial sense https://pspbook.com/private-student-loans-rarely-make-financial-sense/ Wed, 08 Jun 2022 14:45:00 +0000 https://pspbook.com/private-student-loans-rarely-make-financial-sense/ With interest rates on federal student loans set to rise for borrowers attending college in the 2022-23 academic year, it’s natural to wonder if you could get a cheaper loan rate elsewhere. . After all, private student loan companies still advertise variable rates as low as 1.19%, and even fixed rates as low as 3.49%. […]]]>

With interest rates on federal student loans set to rise for borrowers attending college in the 2022-23 academic year, it’s natural to wonder if you could get a cheaper loan rate elsewhere. . After all, private student loan companies still advertise variable rates as low as 1.19%, and even fixed rates as low as 3.49%. With these types of rates still available, you might be inclined to skip the FAFSA and opt for private loans instead.

That said, students and their parents should really think twice about taking out private student loans over federal loans, if at all.

The reality is that federal student loans have major benefits that you don’t get when borrowing from an independent lender. Additionally, private loans make borrowing, over-borrowing, and extra borrowing for college education much easier and can or maybe not even worth it in the end.

Although private student loans can be useful if you really need them to pay for your college education, they rarely make sense as a first choice. Here’s why.

Lack of access to difficulty options

First, you may know that interest rates have been set at 0% and payments have been suspended for federal student loans since March 2020. This emergency deferment period, which was triggered due to the pandemic, is currently set to expire on August 31, 2022. However, the emergency deferment can (and likely will) be extended again, meaning borrowers will likely have even more time with zero interest and no payment on federal student loans.

Like other forgiveness measures, including the regular deferment and forbearance options offered by the government, this temporary suspension of student loan payments only applies to federal loans — not private ones. In fact, borrowers with private student loans have been responsible for payments and interest since the start of the pandemic.

And although some private lenders offered short-term deferment and forbearance options, none of them included 0% interest, and none lasted for years like the federal break.

No loan forgiveness for private student loans

You may also have heard that President Biden plans to forgive some student loan debt for eligible borrowers through executive action in the coming months. The amount forgiven is rumored to be about $10,000 per person with student debt, which would completely eliminate loans for about a third of student borrowers nationwide.

However, there will likely be income caps on any student loan forgiveness plans that come to fruition, limiting who qualifies. Anyway, it is more important to note that any discount offered will only apply to federal student loans and not private loans.

Also note that most other student loan plans that result in forgiveness are only for federal loans. This includes teacher loan forgiveness programs, various state-based loan forgiveness programs for borrowers who work in the public service, and, of course, the Public Service Loan Forgiveness (PSLF).

Income-Based Repayment Applies to Federal Loans Only

Private student loans are also not eligible for income-driven repayment plans, which have become incredibly popular over the past few years. Income-based repayment plans like Pay As You Earn (PAYE) and Income Based Repayment (IBR) allow you to pay a percentage of your discretionary income for your loans for 20 to 25 years before forfeiting remaining balances. Very low-income borrowers may even owe monthly payments as low as $0 for their loans during the program.

It is important to be aware that amounts forgiven through this program are treated as taxable income in the year they are delivered, which may lead to a student loan forgiveness tax bomb (which is currently suspended until 2025 and can be extended). Either way, having private student loans means you are not eligible for income-based repayment at all.

Private loans facilitate excessive borrowing

Most federal student loans come with annual loan limits that cap the amount you can borrow for each school year. While these caps may force you to get creative with education funding, they will hopefully cause you to take actions you probably should take anyway – things like choosing a more affordable college, earning a secondary income to fill funding gaps at school and use the savings you have to pay tuition and university fees.

On the other hand, many private student loans don’t have the same caps, so they can make it easier to overspend. In fact, many private lenders will allow you to borrow up to 100% of certified school costs to attend college, minus other financial aid received.

Private loans require good credit

Another disadvantage of private student loans is that they usually require good or excellent credit, which college borrowers are unlikely to have. Without a good credit score, you’re more likely to pay higher interest rates than advertised by online student lenders.

Additionally, 90% of private loans end up having a co-signer – simply because the primary borrower (i.e. the student) does not have the credit to be approved on their own.

As such, there are risks involved in this approach. For example, your co-signer will be as responsible for the repayment as you are, which can lead to issues if you have trouble keeping up with your student loan repayments in the future.

Fortunately, most federal student loans don’t require a credit check, let alone an excellent credit score. The exception is Federal Parent PLUS loans and Federal Grad PLUS loans for graduate students, which require borrowers to have decent credit.

Variable rates make students vulnerable

Finally, borrowers should be aware that federal student loans come with fixed interest rates. This means that the interest rate on federal student loans will remain the same for the life of your loan, although you may have different federal loan rates for each year you attend college.

On the other hand, the lowest advertised rates on private student loans are usually for variable rate loan products. These variable interest rates fluctuate with market conditions, which can put students at risk when it comes to paying exorbitant rates in the future.

The essential

While it’s easy to apply for and receive private student loans, that doesn’t mean they’re the best fit for your budget or long-term financial goals. In fact, private student loans give you far less protection than federal student loans, and they can cost more.

Just because a private student loan offers a lower interest rate doesn’t mean it’s the best choice for paying for college.

Be sure to research all your options before borrowing for school, and know that there will be consequences – well or bad – for whatever you decide.

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Cebu City to repay SRP loan in August and become debt free https://pspbook.com/cebu-city-to-repay-srp-loan-in-august-and-become-debt-free/ Mon, 06 Jun 2022 14:42:44 +0000 https://pspbook.com/cebu-city-to-repay-srp-loan-in-august-and-become-debt-free/ The Cebu City Government will be debt free if the loan used in the construction of the South Road Properties (SRP) is repaid in August as scheduled. Attorney Jerome Castillo, Special Assistant in the Mayor’s Office, told SunStar Cebu on Monday, June 6, 2022 that the budget and all necessary documents have already been secured […]]]>

The Cebu City Government will be debt free if the loan used in the construction of the South Road Properties (SRP) is repaid in August as scheduled.

Attorney Jerome Castillo, Special Assistant in the Mayor’s Office, told SunStar Cebu on Monday, June 6, 2022 that the budget and all necessary documents have already been secured and are ready for submission to the Local Government Finance Office (BLGF). ) in Manila.

Castillo said his target date for full payment of the outstanding balance of 960 million pesos was August 19.

“We’ll just let the mayor know the date is set, and then if he chooses to have a ceremonial payment, that’s also good for transparency to the public,” Castillo said.

According to Castillo, this is the city’s only remaining loan, and the settlement of this obligation would mean that the city is now debt-free.

“Yes, that would be the consequence. We are at zero debt because we have erased everything. This is the only existing loan. We are out of debt,” Castillo said.

In 1995, the city government received a loan of 12.315 billion yen, equivalent to 4.65 billion pesos at the time, from the Japan International Cooperation Agency through Landbank to build the SRP, a 300-hectare rehabilitation project.

The loan is repayable in 30 years or until 2025. But paying it off before its due date will save the city money by avoiding loan interest, Castillo said.

By February 2018, the city had already paid around 6 billion pesos, including 3.7 billion pesos for principal and 2.8 billion pesos for interest, among other charges.

Castillo said the loan settlement will improve the city’s credit rating and allow it to easily qualify for loans for future programs and projects.

“When you’re able to repay your loan on time, that says a lot about your credit ability or your credit score…It says a lot about the city’s ability,” Castillo said.

The attorney said the milestone should be credited to Mayor Michael Rama, who began working on prepaying the loan during his time as mayor in 2015.

During the time of the late Mayor Edgardo Labella in 2019, Labella was eager to fully repay the loan to get rid of the 1.5% interest rate on the loan, with the remaining balance of 1.7 billion pesos.

After Labella’s untimely demise in November 2021, Rama, who became mayor, included the SRP loan payment in his “21-gun salute plans” to honor the city’s late mayor’s legacy.

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From buying a house to building savings, the student loan payment break has changed the lives of these Minnesotans https://pspbook.com/from-buying-a-house-to-building-savings-the-student-loan-payment-break-has-changed-the-lives-of-these-minnesotans/ Sat, 04 Jun 2022 21:16:18 +0000 https://pspbook.com/from-buying-a-house-to-building-savings-the-student-loan-payment-break-has-changed-the-lives-of-these-minnesotans/ In more than two years since student loan repayments were halted, Ben Dufault has saved enough money to buy his first home. Yasin Mohamud has paid off other debts and saved up to move to his dream city. Melissa Finnegan continued to pay, bringing down her student loan balance by $10,000. The ongoing pause in […]]]>

In more than two years since student loan repayments were halted, Ben Dufault has saved enough money to buy his first home.

Yasin Mohamud has paid off other debts and saved up to move to his dream city.

Melissa Finnegan continued to pay, bringing down her student loan balance by $10,000.

The ongoing pause in federal student loan payments that began in March 2020 has changed the lives of some Minnesotans for the better. This gives them room in their budget to make big purchases, speed up student loan repayments, and catch up on other debt. More relief could be on the way as President Joe Biden considers an executive order to cancel $10,000 in student loan debt per borrower, despite opposition from Republicans and some economists.

Nearly 800,000 people in Minnesota have student loan debt, the nonprofit says Center for the Protection of Student Borrowers. Some of those Minnesotans have told the Star Tribune how their lives have changed since the payment break began.

A new house

Dufault thought he and his boyfriend wouldn’t be able to afford a house for several years. The 30-year-old, who works in the admissions office at the University of Augsburg, and his partner, who is a state employee, have both completed higher education and have a combined debt of around 120 000 dollars.

During the student loan break, they each put the $200-300 a month they had paid for their debt into savings for a down payment on the house. In March 2021, the couple purchased their first home together, in North Minneapolis.

“We could hardly have afforded this house without the break,” Dufault said. “It was the down payment cost that was always the problem.”

They expect their budget to tighten when student loan repayments resume. Biden’s supposed $10,000 debt forgiveness proposal wouldn’t hurt their balance much. But Dufault said he and his boyfriend are eligible for the federal Civil Service Loan Forgiveness Program, which would forgive any remaining debt after making monthly payments for 10 years.

A big decision

Leah Vogel has saved nearly $18,000 while not paying off her student loans — almost enough for a down payment on a house, but also enough to clear her remaining debt.

It’s a decision Vogel, 30, doesn’t take lightly. By erasing her student debt, she would no longer have to worry about interest accumulating each month. But Vogel, who rents a small apartment in Minneapolis, said the depletion of her savings will also put her “back to square one” on buying a home.

If Biden forgives $10,000 in student debt per borrower, Vogel said she could eventually afford to both buy a house and pay off her debt balance.

“It really totally changes the equation,” said Vogel, who graduated from the University of Minnesota in 2014 with an art degree and works as a project manager at a local financial services firm. “It’s been a constant back and forth over the last six months to a year about what I should do with this.”

Pursue his passion

For as long as he can remember, Mohamud has wanted to live in New York. But the more than $40,000 he owes for his undergraduate studies had previously prevented him from moving there.

With student loan repayments frozen, the 34-year-old Edina resident has been building up his savings and paying off his car and other debts. Mohamud, who emigrated from Somalia to Minnesota with his family as a child, said he can now look forward to life in the largest city in the United States.

A legal writer at Thomson Reuters who freelances for other media in his spare time, Mohamud hopes to move to New York soon and write for major city publications.

“I always wanted to work for magazines,” Mohamud said. “My dream is GQ.”

Long-awaited progress

Finnegan never stopped paying his student loan monthly. With interest rates stuck at 0%, she said she’s made nearly $10,000 in progress over the past two years, bringing her remaining student debt balance down to around $27,000.

The 40-year-old St. Paul resident graduated from the University of Minnesota in 2011 with a master’s degree in public policy and about $48,000 in debt. She was making regular payments before the break, but it took her nine years to reduce her principal balance to $37,000 due to accrued interest.

“It was like the amount of debt never moved or just moved very, very slowly,” said Finnegan, government relations specialist for Ramsey County. “Finally, I can see the amount of debt going down.”

Finnegan hopes Biden will consider wiping out all student loan debt. She said she and her husband would rather spend the money on childcare for their three children, which costs them around $2,600 a month.

“Our American Dream”

Oballa Oballa said he was able to realize his “American dream” thanks to the suspension of federal payments.

Born in Ethiopia and raised in a refugee camp in Kenya, Oballa used the money he saved over the past two years to build a house for his family in Austin, Minn. He, his fiancé and two children, aged 5 months and almost 2 years, moved into the new house last month.

Oballa, a 29-year-old supervisor at Hormel Foods who is seeking re-election to the Austin City Council, was also able to pay off a private student loan during this time.

“My family and I were relieved to have this break,” said Oballa, a 2021 College of St. Scholastica graduate with a bachelor’s degree in social work and who has about $25,000 in student loan debt. “Now we have our American dream that we built from the ground up [up].”

Saving for law school

Anisa Omar graduated from Minnesota State University, Mankato several months after student loan repayments were frozen and hasn’t had to make a single payment on her $21,000 debt balance.

Omar, a 23-year-old behavioral specialist from Hopkins Elementary School, said the break helped her pay her bills and save for law school. She will be attending the University of St. Thomas this fall and her loan repayments are expected to be deferred until she completes law school there.

Still, Omar said she was discouraged by her growing debt balance while in law school. She hopes Biden will consider canceling more than $10,000 in student debt.

“I would go for the cancellation of all student debt,” Omar said. “We should want the best for all individuals.”

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A crash course in student debt forgiveness https://pspbook.com/a-crash-course-in-student-debt-forgiveness/ Thu, 02 Jun 2022 20:58:00 +0000 https://pspbook.com/a-crash-course-in-student-debt-forgiveness/ So far, the administration’s actions have largely focused on students who have been defrauded by now closed schools, like Corinthian. But these measures have also sharpened the debate over whether the rising cost of higher education is an excessive burden on young adults. Opponents say simply forgiving students debt is moral hazard and penalizes people […]]]>

So far, the administration’s actions have largely focused on students who have been defrauded by now closed schools, like Corinthian. But these measures have also sharpened the debate over whether the rising cost of higher education is an excessive burden on young adults. Opponents say simply forgiving students debt is moral hazard and penalizes people who have already paid theirs.

Our conversation, conducted via email, is below.

WHAT MATTERS: What is this latest move by the Biden administration and how many people does it affect?

LOBOSCO: Wednesday’s action is the Biden administration’s biggest move to write off student debt yet, totaling $5.8 billion for 560,000 borrowers.

This will affect all borrowers who attended Corinthian College at any time in its existence, dating back to 1995, and who still have outstanding federal student loan debt.

Some former Corinthian students were previously eligible for student loan forgiveness, but the new measure will ensure that all borrowers will automatically receive debt relief. They will not have to intervene.

How is it possible?

WHAT MATTERS: How is the administration able to simply erase this debt? Why didn’t Congress need to weigh in?

LOBOSCO: The Department of Education has long had the power — granted by Congress in the Higher Education Act — to cancel federal student loan debt held by borrowers who were misled by their colleges or who were enrolled in schools that have engaged in other misconduct in violation of certain state laws.

But the department rarely used that power until 2015, when Corinthian Colleges and several other for-profit schools suddenly closed in the face of federal and state investigations into their practices. Many schools have been found to have misled potential students with inflated placement numbers and the transferability of their credits to other schools.

At that time, the Obama administration streamlined the process, known as borrower defense against repayment, which made it easier for such borrowers to file forgiveness applications with the Department of Education. The agency was inundated with requests and the Trump administration, which fought to change the policy, stopped processing requests for more than a year. More than 100,000 applications were pending when Biden took office.

Since then, the Ministry of Education has reduced the backlog, speeding up the process by granting forgiveness to groups of borrowers at a time.

What is a for-profit college?

WHAT MATTERS: What is the difference between a for-profit college and other colleges, which are also very expensive?

LOBOSCO: The big difference is that for-profit colleges are all about making money, unlike public and private non-profit colleges and universities.

Not all for-profit colleges are bad. They tend to confer certificates for trade-related professions that prepare students to enter the job market quickly. In this regard, they attract a lot of non-traditional students – like parents and military veterans who want to learn skills that make them marketable to new employers.

But many for-profit colleges left thousands of students with degrees that didn’t help them get better-paying jobs and saddled them with student debt.

How have for-profit colleges changed?

WHAT MATTERS: What is the state of for-profit colleges right now? How has this industry evolved in recent years?

LOBOSCO: For-profit college enrollments in 2020 has been about half of what it was in 2010, when more than 2 million students were enrolled, according to the College Council.

Corinthian Colleges – which operated schools under the names Everest, Heald College or WyoTech – enrolled more than 110,000 students on 105 campuses at its peak in 2010. It sold most of its campuses in 2014 and closed the rest in 2015.

A year later, another for-profit college, known as ITT Technology, also suddenly closed after facing state and federal investigations into its recruiting tactics.

What’s going on with debt cancellation in general?

WHAT MATTERS: It’s just an effort. What does the broader debt cancellation effort look like? How much student debt has been canceled and how much is left?

LOBOSCO: Under the Biden administration, the Department of Education said it approved the cancellation of $25 billion in student debt for 1.3 million borrowers as of this week.

Nearly $8 billion in rebates provide relief to 690,000 borrowers who were misled by their colleges. Over $8.5 billion has been automatically canceled for more than 400,000 borrowers who are permanently disabled and who previously qualified for debt relief but did not apply.

The administration also temporarily expanded eligibility for what’s called the Public Service Loan Forgiveness Program — which forgives remaining federal student loan debt after a public sector worker completes 10 years of eligible payments. The expansion resulted in the cancellation of $6.8 billion for more than 113,000 borrowers.

The Biden administration has also made changes to income-driven repayment plans, bringing millions of borrowers closer to forgiveness.

What about massive debt cancellation?

WHAT MATTERS: Canceling the debt of people who have been defrauded is one thing. Many Democrats want to see debt cancellation for people who also earned legitimate degrees. Where is this effort?

LOBOSCO: Many Democrats and advocacy groups continue to call on Biden to globally forgive up to $50,000 for each of the 43 million borrowers who have federal student loan debt.

To date, Biden has resisted that pressure and instead taken a piecemeal approach to canceling student debt by expanding existing remission programs.

In April, Biden said he was considering writing off student loan debt more broadly — though he also doubled down on his resistance to writing off up to $50,000 per borrower.

During the election campaign, he proposed canceling a minimum of $10,000 in student debt per person in response to the pandemic, as well as canceling all federal student debt related to college and university undergraduate tuition. public two- and four-year terms for these borrowers. earn up to $125,000 per year.

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