Student Loans Payments Paused Again

According to Forbes, there are over 44 million Americans with student loan debt totaling a staggering $1.5 trillion. The only other debt larger than student loans is mortgage debt. Student loan debt creates a drag on the economy by reducing the amount of take-home pay young adults have to spend on housing, retirement, household formation, and general living expenses. This money-squeeze is especially acute for the Millennial generation because they possess the greatest amount of student loan debt. In an effort to accelerate student loan repayment and also encourage borrowers to start contributing towards their retirement, one unknown company applied for and received an IRS Private Letter Ruling (PLR) on August 17, 2018 allowing that company to match employee student loan payments, similar to what most companies do with 401k plans.

In short, the PSLF program allows borrowers to have their federal student loans entirely forgiven if they make 120 qualifying (not consecutive) payments while they work in a non-profit/government sector job. The PSLF program was created in 2007 and the first cohort of individuals with 120 qualifying payments became eligible last year for the generous loan forgiveness program. Some people are concerned whether the PSLF program will get cut under Donald Trump’s presidency. Others have heard that some borrowers were denied relief even if they met the 120 qualified payments. There have been no official announcements from the Department of Education or the White House on changes to the PSLF program. The media has inaccurately reported that the Tax Cuts and Job Act (TCJA) defunded the PSLF program, but that is not true; there is no mention of the PSLF program in the text of the passed TCJA bill. While the 2019 federal budget proposed by President Trump does eliminate the PSLF program, the budget proposes an alternative more “streamline[d]” solution to borrowers: the streamlined version would “cap a borrower’s monthly payment at 12.5 percent of their discretionary income” and the debt would be forgiven after 15 years. Graduate debt would be forgiven after 30 years. More importantly, this would only affect “loans originating on or after July 1, 2019,” hence, current borrowers would be grandfathered in.

Recently, the New York University (NYU) School of Medicine announced that all current and future medical school students will receive full tuition scholarships, “regardless of their need or merit.” This is great news, not only for medical students, but for higher education and society as a whole, because according to the American Association of Medical Colleges, doctors are graduating with approximately $300,000 of student loan debt. Hopefully the move by NYU will motivate other universities, including non-medical, to pursue similar programs to lessen the burden on young adults just starting out their careers.

1. Can I use my credit card to pay my mortgage or student loan?
This question comes up for those savvy credit card users who want to accumulate as much reward points as possible. It's not possible to directly pay your mortgage or student loan with your credit card, but there are some online companies out there who offer such services. The service is not cheap and usually entails a high percentage charge. ACap generally discourages consumers to use debt to pay debt, especially if you use a revolving unsecured debt like a credit card to pay an amortizing secured debt like a mortgage. If you choose to pursue this route, you MUST be very diligent with your credit card debt and make sure to pay off your entire balance every month.

1. Does checking my own credit report affect my credit score?
When shopping for a car, a home, or even applying for a new job, the worst thing that can happen is that you realize there is a mistake on your credit report. It is important to note that your credit report and your credit score are two different things. The credit report is all the information credit reporting agencies have about you while your credit score is the quantitative assessment of that information to rate your likelihood of paying back debt. Therefore, your credit score is based on the content of your credit report. Because employers and lenders use your credit score to judge your character, it is extremely important to check your credit report annually to ensure there are no mistakes and correct errors before they cause you problems. The law entitles you to one free credit report every 12 months from each credit reporting agency (Equifax, TransUnion, and Experian.) Despite common myths, checking your credit report does not affect your credit score. If you identify an error in your report, the Federal Trade Commission has very detailed checklists on how to correct your report.

1. What is a HSA and do I need one?