But I’m someone who’s worn both the freelance writer and blogger hats for over a year and a half now. I’ve been able to build a solid six-figure freelance writing business. But, yet, you’re currently reading an article on my own personal blog — a blog which I invest time and money into each and every month.

Why pursue both at the same time? For me, it’s because I recognize that freelance writing and blogging each have a unique set of pros and cons. And, in many ways, I feel that my freelance writing business is actually beneficial to my blogging pursuits…and vice versa.

Freelance Writing vs. Blogging: The Pros and Cons of Each

Below, we take a close look at freelance writing vs. blogging. I’ll openly and honestly discuss the pros and cons of each. And I’ll explain how doing both simultaneously can benefit you in several ways.

Freelance Writing Pros and Cons

Here are several of the main advantages and disadvantages to freelance writing that you need to be aware of.

Pros

• Immediate income: You don’t have to worry about building an audience. The people you’re writing for already have the audience. You can start making money off your writing abilities right now.
• Guaranteed return on time: With freelance writing, you can know for sure that your time and effort will translate into income. You write the article and you get paid. Period. Somebody else gets to worry about how to monetize it, market it, build backlinks to it, and update it over time.
• Income diversification: I do believe it’s helpful as a freelance writer to become known as an “expert” in certain topics. But the truth is you can write about anything you want.  And you can diversify your income by writing for several different clients who each have different focuses and audiences.

Cons

• Trading time for money: There’s nothing passive about making money with freelance writing. You spend a few hours writing an article and you get paid for your labor.  If you don’t write, you don’t get paid. It’s as simple as that.
• Topics can be uninspiring or difficult: In my experience as a full-time freelance writer, 90% of my article topics are assigned. While I sometimes get assigned topics that I’m passionate about, other times the topics are incredibly boring. I’ve been assigned all kinds of “I want to gouge my eyes out now!” topics, like “X Places to Find a Notary Public Near You” or “How to Become a Pharmacist.”
• Income ceiling: While you can make an amazing living with freelance writing, there are limits.  You can only write so many articles per month. And while you can raise your rates as your credibility grows, publications can only pay so much per article. You’ll eventually hit an income ceiling.

Blogging Pros and Cons

Now that we’ve seen the pros and cons of freelance writing, let’s take a look at the benefits and drawbacks of blogging.

Pros

• Potential for passive income: You could technically write an article once and earn income on it for 10 years or more. Talk about an amazing return on your time!
• Outsource work: Once your blog is generating a steady income, you can begin to outsource some of the content creation, as well as other tasks like editing, social media scheduling, and backlink outreach. With freelance writing, you’re helping to build up somebody’s else’s asset. But, with blogging, you can pay others to invest in yours.
• No income ceiling: Let’s say you’re making $2,000 per month with 100 published articles. You could be making $4,000 per month a year from now by doubling your article-count to 200. With blogging, each and every article you write is like another income “block” being added to your business. With freelance writing, however, you’re giving those blocks away to someone else to help build their business a little higher.

Cons

• No income guarantee: While you could earn income on an article for 10+ years, it’s also possible that article will never make any money at all. In fact, you could spend hundreds of hours on your blog and never make any kind of significant monthly income, much less any profit.
• Writing will only be one of your many tasks: With freelance writing, you can focus solely on getting paid  to write great content (hopefully, handsomely). But blogging is so much more than that. You also have to think about your site hosting and theme, your social media presence, your backlink profile, site security and backup, finding and joining affiliate programs…and the list goes on and on.  There’s a lot to keep track of when you’re running your own site. And it can become exhausting and overwhelming.
• Lack of Diversification: In order to be successful as a blogger with SEO, you typically going to need to “niche down.” But isolating your blog content to only a few topics also comes with risk. For example, one of my writing clients only talks about student loans on his site. That’s great for ranking on Google today. But his income will also be decimated if the government ever passes nationwide student loan forgiveness laws.

How Blogging Can Help Your Freelance Writing Business

Here’s what really cool. Trying to choose between freelance writing vs. blogging may not be something you even need to worry about right now. No matter which way of making money you think is best in the long run, doing a little of both for awhile could be a smart move.

Let’s first consider how blogging can help your freelance writing business. In my case, I started my blog about 3 months before I reached out to my first freelance writing clients. I didn’t have any paid writing clips that I could link to in my outreach emails. So, instead, I included links to a few articles from my own blog.

And guess what? It worked! A few of the editors told me that they could tell that I had writing talent from reading some of the content on my site. So my blog articles helped me land writing clients in the short-term. But in the long-term, those same articles could generate revenue for me on their own.

This is why I highly recommend that aspiring freelance writers launch and publish articles on their own site instead of resorting to only searching for guest post opportunities.

But there’s another reason why I think creating articles on your own blog is better than guest posts. Many of the bloggers that you’ll reach out to as a freelance writer will want you to create the articles right inside their WordPress editor.  And, trust me, that don’t have the time or interest in teaching you how to do that.

But knowing that you have your own blog can put them at ease. And it may help you land the gig over someone else who’s only created content in Google Docs.

How Freelance Writing Can Help Your Blogging Business

While I firmly believe that blogging can help your freelance writing business, I believe that the opposite is completely true as well. The first reason that freelance writing can help your blogging business is that it gives you exposure.

Having your name pop up all over the web as a writer for authoritative sites help you build your own credibility. In many ways, freelance writing for the blogger is like getting paid to guest post! The only difference is that you usually won’t get a backlink. However, I can tell you that nearly every one of my clients has been gracious enough to give me a backlink or two from time to time…while still paying me for my work!

Freelance writing can also help your blogging business because you get the chance to see how top blogs are run. I’ve learned so much about keyword research and how to write SEO-friendly content from my writing clients. It’s like getting paid for free behind-the-scenes training on how to build a blog from people who’ve been highly successful at it.

The Bottom Line

When it comes to freelance writing vs. blogging, which is best? I say, why not both!

Over the long-term, I do believe that its potential for unlimited passive income makes a full-time career in blogging the ultimate goal. But if you’re still in the building phase of your blog, freelance writing could help you make money today while giving you the exposure and education that you need to become a successful blogger tomorrow.

The post Freelance Writing vs. Blogging: Which is Best? appeared first on The Wallet Wise Guy.

Ideas for student loan benefits have been discussed and discarded so quickly that it’s been hard to keep up. But now that both houses of Congress have passed the $2 trillion stimulus bill to help the economy recover from the COVID-19 crisis, it’s time for us to look at where it leaves the student loan landscape.

What You Need to Know About the Coronavirus Student Loan Stimulus

In short, if you have federal loans, the next six months are going to be really nice reprieve for you. But if you have private student loans, you aren’t going to get any help whatsoever. Here’s what you need to know.

1. Payments On Federal Student Loans Are Suspended for 6 Months.

That’s right, for the next 6 months, you aren’t required to make any payments toward your federal student loans. You may be thinking “But wasn’t it already possible to suspend payments by applying for forbearance?”

Yes, it was. But interest continues to accrue during a forbearance period. However, the new legislation that’s just been passed waives all student loan interest charges during the suspension period.

This means that all federal borrowers can pay $0 on their students loan until September without having their balance go up by even a cent.

2.  Non-Payments Will Somehow Count as Payments Towards PSLF

This one is pretty crazy. Ok, so currently, Public Service Loan Forgiveness (PSLF) is the most generous student loan forgiveness plan available to U.S. student loan borrowers.

With PSLF, you only need to make 120 payments while working for a qualifying employer to have your entire remaining balance forgiven. But what’s astounding about this stimulus bill is that it will count these 6 months of non-payment as 6 months of payments towards PSLF.

So the rich just get richer with this bill. If you’re working towards PSLF, it now technically only takes 114 payments before you can qualify for forgiveness instead of 120.

3. Non-Payments Count Toward Income-Driven Repayment Forgiveness Too

If you’re currently on an Income-Driven Repayment (IDR) plan, you’ll qualify for student loan forgiveness after 20 to 25 years of payments, depending on the plan you choose and your loan type.

Once again, these next 6 months of payments will count as qualifying payments towards these IDR forgiveness plans. If you were on schedule to receive IDR forgiveness in January of 2030, that will still be your forgiveness date after these 6 months of non-payment have elapsed.

4. Private Student Loan Borrowers Are Left Out In the Cold

If you have private student loans, this stimulus bill doesn’t take you into consideration whatsoever. And that’s a real crime.

Private student loan borrowers are the ones who will be hurt the most during the coronavirus crisis.

Why? Because they don’t have access to Income-Driven Repayment (IDR) plans!

With federal student loans, unemployed borrowers can always join an IDR plan and lower their payments to $0. But not so for private student loan borrowers. Yet, they were completely disregarded by this stimulus bill.

What about federal student loan borrowers who refinanced their loans in February? Too bad, you can’t take advantage of these new benefits. It’s an absolute outrage that private student loan borrowers have been shafted when they really need the help the most.

This bill DOES provide funding to other private entities that need money during this crisis, like the airlines. Why not include a private lender reimbursement policy in this bill so that lenders could suspend borrower payments for 6 months without being financially harmed?

Note: These benefits don’t apply to federal loans made under the old FFEL program either.

Do NOT Refinance Your Federal Student Loans Right Now

Let me make this clear. No one should refinance their federal student loan for at least the next 6 months. There’s absolutely NO incentive to.

Even if you could land a great interest rate, you’re interest rate is already ZERO right now. Plus, if Congress decides to extend these benefits past September or add other goodies down the road, rest assured that private student loan borrowers will once again be left out of the fold.

Last week, I said that with interest rates dropping, it could still be a good time to refinance student loans. But now that these benefits have been extended so long, my advice has changed. In fact, I just removed my refinancing page from the menu bar of my site.

Here’s the thing. Once federal student loan borrowers have grown accustomed to not making payments, it’s going to be hard to ask them to start paying again. And you can rest assured that one or both presidential candidates are going to campaign on the idea that federal student loans should just be completely canceled.

If you have private student loans, refinance away! But, for everyone else, I say don’t you dare call a refinancing lender. Another student loan freebie could be just a few months away…unless you have private student loans.

The post Coronavirus Student Loan Stimulus: What You Need to Know appeared first on The Wallet Wise Guy.

Nevertheless, 47% of Americans still aren’t saving or investing any of their hard-earned dollars. And the main reason for this remains the same as its always been—fear. Fear of losing money they’ve worked so hard for, not to mention the frustration and embarrassment they expect they’d feel if they did actually lose money.

If you find yourself in this group and wish you knew more about investing, check out our lineup of the best micro-investing apps below. There’s at least one app below that can help you learn more about investing in a fun, safe, non-intimidating way with others just like you—for free.

Once you’re done checking out our micro investing app reviews, don’t miss the end of this article where we answer some common questions about micro investing apps to help get you started.

1. Acorns

• Cost: $1/ month
• Account Min.: $0
• Types of Investments: U.S. listed exchange traded funds (ETFs)

If you’re looking to get your feet wet as a beginner investor and wondering where you’ll find the money, it might be with the Acorns app. That’s because Acorns is really 3 apps in one including a:

• Purchase round-up app
• Cash-back app, and a
• Micro-investing app

Simply connect the cards you make purchases with to the app. Acorns will then start rounding up your purchases to the nearest dollar. Once at least $5 has accumulated in your Acorns account, the money is deposited in one of 5 different Acorns portfolios that are comprised of a mix of 7 possible ETFs (ETFs can include stocks and bonds).

For cash-back, check out Acorns’ list of over 350 companies to see if you shop regularly at any of their merchants including Walmart, Nike, Lyft, Groupon, etc.

If you do, why not get rewarded for your purchases—in cash—through their Found Money extension that gets deposited in a portfolio selected for you? It’s a smart way to earn cash-back and put that money to work for you before you’re tempted to spend it. Get started with Acorns.

2. Stash

• Cost: $1, $3, or $9/month plans to choose from
• Account Min.: $0
• Types of Investments: U.S. exchange-listed stocks and ETFs

Stash is another app that’s great for beginner investors. It’s similar to the Acorns app in terms of fees and micro-investing but without the cash-back feature from merchants.

Instead, Stash offers its investors a reward called Stock-Back in the form of partial or fractional shares in the affiliated companies that investors are making purchases from.

For example, if you make a purchase from Amazon, Stash rewards you with a fractional share of Amazon based on the cost of your purchase. If the affiliated company you make a purchase from is not publicly traded, Stash will invest your reward in a diversified ETF instead.

The downside is Stash’s fees are higher than some other micro-investing apps or investment brokerages. Check out Stash.

3. Robinhood

• Cost: Free and commission-free
• Account Min.: $0
• Types of Investments: U.S. exchange-listed stocks and ETFs, options contracts for U.S. exchange-listed stocks and ETFs, cryptocurrencies (including Bitcoin and Ethereum), and American Depositary Receipts (ADRs) for over 250 globally-listed companies

Robinhood is a great app if you’re a more seasoned investor and require little help picking your investments. Unlike most some micro-investing apps, Robinhood allows investors to engage in cryptocurrency trading and options. And best of all, these investments are completely commission-free.

It’s important to note that Robinhood doesn’t offer bonds or mutual funds to invest in. If you’re looking for those types of investments, you’ll have to check out one of the other apps.

Another shortcoming is that Robinhood only permits investments to be held through an individual taxable account. Tax-advantaged accounts such as 401(k)s and IRAs aren’t supported currently.

It makes better financial sense to max out your 401(k) or IRA before putting money into a fully taxable account. After all, it’s about keeping as much money in your pocket as possible.

4. Axos Invest (formerly WiseBanyan)

• Cost: Free basic pkg., fees vary for premium pkgs.
• Account Min.: $0 ($1 to open an account)
• Types of Investments: ETFs

Axos Invest (formerly WiseBanyan) includes the assistance of a robo-advisor which may be an ideal low-cost way for you to get started if you’re new to investing and need some help figuring out the best investments for your risk tolerance and financial situation.

Axos Invest’s platform prompts you to answer several questions about your financial status and investment risk tolerance when you enrol. Based on your answers to these questions, Axos Invest’s automated robo-advisor selects from over 1400 ETFs to compile a diversified investment portfolio for you (which is important for reducing your overall investment risk).

Axos Invest’s user-friendly app is also easy to navigate, which makes the investment process much more comfortable for first-time investors.

5. Invstr

• Cost: Free for basic pkg., premium service is extra, $0.99/fractional trade, $2.99 full trade
• Account Min.: $0 (start investing with $1)
• Types of Investments: U.S. exchange-listed securities, including stocks, ETFs, and ADRs

If you know nothing about investments and the stock market but want to have fun learning through gaming and a social network with other learners, Invstr is the micro-investing app you’ll want to check out.

Invstr members are given $1 million of virtual money to use while learning to invest in the Fantasy Finance game that’s part of the app. Members who do well in this investing and learning game are eligible to earn monthly prizes in the Invstr Fantasy League (IFL) leaderboard. You’re promoted in “rank” from Apprentice to Guru on the Profile Scorecard as your investment ability improves.

Invstr members are also encouraged to complete the 10 interactive modules in Invstr Academy before investing real money through the app. By completing Invstr Academy, members learn a great deal about stocks, the stock market and financial markets as well as cryptocurrency.

FAQs About Micro-Investing Apps

Unfamiliar with micro-investing? Below you’ll find the answers to some of your most burning questions.

What is Micro-Investing?

Looking for a good micro investing definition? Here’s how Investopedia defines it:

“A micro-investing platform is an application that allows users to regularly save small sums of money. Micro-investing platforms aim to remove traditional barriers to investing, such as brokerage account minimums, to encourage people to invest even if they have limited incomes and assets.”

Traditional investments can require minimum account balances such as $500 or even $5000 which some people don’t have. Micro-investing allows people to invest without these hefty account balance requirements.

High investment fees have also been common with more traditional investments making them unattractive for potential new investors with smaller amounts of money. Micro-investing removes many of these barriers now by offering several apps and investing services for free.

Can You Make Money on Investing Apps?

That’s a really good question—and the answer is yes. You can make money on investing apps. Keep in mind though that if you’re investing small amounts of money, your dollar return will be small as well.

Also, it’s important to remember you can lose money even with the best investment apps if you’re putting your money in non-guaranteed investments such as stocks, mutual funds, ETFs, etc.

Are Investment Apps Worth It?

If you’re still wondering “Is micro investing worth it?, the answer depends on what you’re trying to achieve by using a micro-investing app.

If you’re a newbie investor and want to connect with other like-minded people to start learning about investing, Invstr would be an excellent place to start.

If you like the idea of rounding up your spare change after your purchases and earning cash-back from merchants you shop at anyway, Acorns could be an great fit for you.

What is the Best Investment App?

Not surprisingly, the best micro-investing app for you will depend on what your investment goals are. All other things being equal, be sure to look for the app or company with the lowest fees (ideally none!).

Look at some of the online reviews of different investment companies you’re interested. Check to see if members have had any difficulty transferring money out of an account. And pay attention to people are saying about the customer service quality.

Some well known investment apps did not make our list above because during our research. We came across customer reviews indicating people had difficulties with some investment companies. So be sure to do your homework before making your choice.

Whatever you do though, just get started! Some of the best micro-investing apps above offer lots of education about investing so it doesn’t cost you a dime to get started on your path to a richer financial future.

Where are you at when it comes to saving and investing?

The post 5 Best Micro-Investing Apps (for Beginners to Savvy Investors!) appeared first on The Wallet Wise Guy.

In addition to revealing things like drive-thru testing and an upcoming economic relief package, another benefit was briefly mentioned — a federal student loan interest waiver.  Immediately, I began hearing from borrowers who were excited to hear the news. And some borrowers reached out to me to say they were putting any plans to refinance their student loans on the back-burner.

But the student loan interest waiver has been widely misunderstood. And, unfortunately, it won’t provide tangible relief to as many borrowers as some may think. Let’s take a look at four different student loan scenarios to see which borrowers will (and won’t) benefit from the student loan interest waiver.

Scenario 1: You Want to Lower Your Monthly Payments

Here’s a surprising fact about the student loan interest waiver. It won’t lower your monthly payments. Confused? Don’t feel embarrassed. I was confused too until I read this excellent New York Times piece by Ron Lieber.

Here’s the deal. Going forward (until the waiver is canceled), 100% of your monthly payments will go towards principal instead of principal + interest. Let’s say you’ve been paying $500 per month, of which $150 was going towards interest. Effective immediately, all $500 will start going towards paying down your principal.

On one hand, that’s a nice benefit that could help you pay off your student loans sooner. But, on the other hand, this waiver won’t provide any extra cash flow to your budget. And that’s probably what you’d be looking for if you suffered a job loss or an hours reduction as a result of the coronavirus crisis.

In short, Trump’s student loan interest waiver won’t help you if you’re looking to lower your monthly payments. If that’s your goal, you have three options: Join an Income-Driven Repayment (IDR), apply for forbearance, or refinance your student loans to a lower rate.

Scenario 2: You Want to Save Interest Over the Long-Term

If you were planning to refinance your student loans, that may seem silly now. After all, why would you take out a new student loan at a 2% to 4% interest rate, when you’re federal student loan interest rate is currently at zero?

But, keep in mind, this student loan interest waiver is intended to be temporary. The idea is to provide relief for Americans while they deal with the fallout of the coronavirus crisis. But there has been no discussion (as of yet) to make this a permanent change.

Meanwhile, the Fed just cut its interest rate down to zero to as an economic stimulus. When the Fed rate goes down, refinancing rates on things like student loans, mortgages, and other products generally go down as well. What that means is we’re currently seeing historically low student loan refinancing rates.

With federal student loan repayment plans lasting 10 to 25 years, a few months of 0% interest won’t have a dramatic effect on your overall cost. So if you’re looking to save interest over the long-term, locking in a low rate via refinancing could still be a smart move.

Scenario 3: You Want to Maximize Student Loan Forgiveness

If you’re currently on an Income-Driven Repayment (IDR) plan, there’s a chance that a large majority (if not all) of your student loan payment is going towards interest. In fact, your balance may be growing each month.  I have a friend who’s a physical therapist and has been paying on her loans for 6 years. She hasn’t cut into her principal by even $1.

However, in my friend’s case, she’s not concerned because she works at a non-profit hospital and is pursuing Public Service Loan Forgiveness (PSLF). You may be working towards PSLF as well. Or perhaps you’re planning to pursue IDR forgiveness. Borrowers are eligible for forgiveness on IDR plans in 20 to 25 years.

In either of these cases, Trump’s student loan interest waiver could have a surprisingly negative effect. It could cause your tax bill to go up. Here’s why. Borrowers receive a tax deduction for the student loan interest they pay. But if a larger portion of your student loan payments go towards principal this year, that tax deduction will go down.

On one hand, the student loan interest waiver isn’t expected to stay in effect long enough to make a serious difference in your overall repayment timetable. Yet it could stay in effect just long enough to cause a sizable increase to your 2020 tax bill.

Scenario 4: You Want to Pause Payments Completely

If you’ve made in this far into the article, you may assume that I’m totally against Trump’s student loan interest waiver. But that’s not the case.

I do think it could have been a bit more thought out. But there’s one group of people that stand to benefit from the student loan interest waiver in a major way. And that’s borrowers who will need to place their loans in forbearance.

If you need to pause payments on your student loans, President Trump’s student loan interest waiver could save you a lot of money. Typically, interest continues to accrue during a forbearance. But that won’t be the case for the foreseeable future. And that’s a big deal.

Will Trump’s Student Loan Interest Waiver Help You?

If you’re looking to lower your monthly payments, reduce your long-term interest cost, or maximize student loan forgiveness, the president’s student loan interest waiver may fall short of your expectations.

But if you need to place your loans in forbearance at any point during the coronavirus crisis, the student loan interest waiver could be a godsend. It could give you precious time to focus on other financial needs without having to worry about a growing student loan balance.

The post Trump’s Student Loan Interest Waiver: What You Need to Know appeared first on The Wallet Wise Guy.

Plus, once you’ve completed your repayment schedule on an income-driven repayment plan, the remaining balance will be forgiven. Speaking of forgiveness, you’ll need to be on an income-driven repayment plan in order to qualify for Public Service Loan Forgiveness (PSLF).

But income-driven repayment isn’t right for everyone. It has its share of pros and cons. This guide will cover everything you need to know about income-driven repayment so that you can decide if it’s the right decision for you.

1. How Are Payments Calculated on Income-Driven Repayment Plans?

There are four main income-driven repayment plans.

• IBR: Income-Based Repayment
• ICR: Income-Contingent Repayment Plan
• REPAYE: Revised Pay As You Earn
• PAYE: Pay As You Earn

Here’s how your monthly payment is calculated under each plan.

Still a bit confused? Yeah, I don’t blame you.

In order for the above table to make any sense, you need to understand what exactly the term “discretionary income” means.

How to Determine Your Discretionary Income

For federal student loans, your discretionary income is whatever money you bring in that’s over 150% of the federal poverty guidelines.

Here is a quick table that shows the federal poverty guidelines for 2019.

Remember, to determine a family’s student loan repayment discretionary income, you need to take the numbers listed above and multiply them by 150%.

I’ve gone ahead and made those calculations for you and they’re listed below.

This means that for a family of one, your discretionary income is any income that you bring in over $18,735.  So, if you have a $35,000 annual income, you would subtract $18,735 from that number, making your discretionary income $16,265.

For most of the income-driven repayment plans, you would then owe 10% annually on that number. So your annual repayment amount would be $1,626 ($16,265 x .10) and your monthly payment would be around $135 ($1,626/12).

If you made less than $35,000 per year, your payment would be smaller. If you had a larger family, your payment would be smaller as well.

On the other hand, as you make more money or your family gets smaller, your payment will go up.

But what if you make less money than the discretionary income floor for your family size? Then your monthly payment would be $0.

That’s right — $0.

For example, if you have a family of 4 and you make less than $38,625 this year, you would have no monthly student loan payment on any of the income-driven repayment plans.

2. How Long Do You Have to Pay Before You’re Eligible for Forgiveness?

Here’s how many years you’ll need to make payments on each plan before the remaining balance can be forgiven.

So with each of these plans, the earliest that you’re looking at being rid of your student loans is 20 years.

If the thought of that doesn’t sound appealing to you, you may want to stick with the Standard Repayment Plan and try to pay off your student loans as soon as possible.

3. What are the Eligibility Rules for Income-Driven Repayment Plans?

If you’re interested in applying for an income-driven repayment plan, you’ll need to make sure that you have eligible federal student loans.

Don’t worry, most loans are eligible right off the bat. A few loans, however, like Parent PLUS loans and FFEL loans, need to be consolidated before they can become eligible for income-driven repayment.

It’s also important to note that, even after consolidation, Parent PLUS loans are only eligible for the ICR (Income-Contingent Repayment) Plan.

Income Rules

Anyone, regardless of income, can make payments under the REPAYE and ICR plans.

But in order to qualify for PAYE or IBR, the payment that you would make must be less than what you would pay under the Standard Repayment Plan with a 10-year repayment period.

What this means is that if you have a high income, you may not be eligible for PAYE or IBR. But if your federal student loan debt is higher than your annual discretionary income or represents a major portion of your annual income, you should qualify.

It’s also important to note that once you’re on PAYE or IBR, you can’t be kicked off. Even if your income goes up and your payment becomes equal to what it would be on the Standard Repayment Plan, you can still make your payments under the PAYE or IBR income-driven repayment plans.

This is important if you’re working towards Public Service Loan Forgiveness (PSLF). If that’s you, you’ll want to stay on your income-driven repayment plan no matter what, so that you can be eligible for forgiveness in 10 years.

PAYE Rules

The PAYE plan has its own set of eligibility requirements that you’ll need to meet if that’s the plan you want to choose.

You’ll need to be considered a “new borrower.” Here’s how the Department of Education defines that:

• You took out federal student loans after Oct. 1, 2007.
• You didn’t have a federal student loan balance when taking out those loans.
• You received a Direct Loan on or after Oct. 1, 2011.

In layman’s terms, if you went to school in or after 2007, you should be eligible for PAYE.

4. How Do You Apply for an Income-Driven Repayment Plan?

If you want to apply for income-driven repayment, you’ll need to submit an application called the Income-Driven Repayment Plan Request.

You can also complete this form online, and I would recommend doing so.

When you submit your application, you’ll be asked some questions about your income. It’s important to understand that you need to put down your income from last year, not what you expect to make this year.

This is very important for new graduates. If you were a full-time student last year, then you very likely brought in little to no income last year. This is what you’ll want to put down on your application.

If you do this, your estimated first payment will most likely be $0.

This will give you several months to find a job. Then, the following year, when you recertify your income, you’ll start making payments.

Speaking of recertifying your income, let’s discuss that now.

Recertifying Your Income and Family Size

In order to stay on your income-driven repayment plan, you’ll need to recertify your income and family size each and every year.

Your student loan servicer should remind you about recertifying well in advance of the deadline. To recertify, you’ll simply need to submit another income-driven repayment plan application.

You’ll want to recertify as soon as you receive your reminder! I can’t stress this enough!

If you forget to recertify or miss the deadline, you will be kicked off your income-driven repayment plan. Not only will your payment most likely rise significantly, but any unpaid interest that you’ve accumulated will capitalize.

Make sure that you recertify with plenty of time to spare each and every year.

5. What are the Downsides of Income-Driven Repayment?

There are a few downsides of income-driven repayment that you need to be aware of.

You’ll owe taxes on the forgiven amount.

If your income stays relatively low throughout your entire repayment period, you’ll most likely have a hefty balance left unpaid at the end.

• The good news is that the federal government will forgive all of those loans.
• The bad news is that the forgiven balance will be taxed as income.

Depending on your income level at the time you receive forgiveness, you could be taxed anywhere from 10-35% on your forgiven balance.

So, if you had $50,000 of student loans forgiven and an income tax bracket of 24%, you’d owe the government $12,000. This is often referred to as the student loan forgiveness “tax bomb.”

It’s important to understand that under the Public Service Loan Forgiveness program, the forgiven amounts are not treated as taxable income. This is one of its biggest perks.

But for income-driven repayment plan forgiveness, you will owe taxes on your forgiven balance. For this reason, I recommend that you save a little each year so that you’re prepared for the “tax bomb” when it hits.

You’ll Most Likely Pay More Overall.

Since income-driven repayment plans draw your repayment period out an extra 10-15 years, you will pay a ton of extra interest on your loans.

And often, you’ll pay more overall than you would have paid by sticking with the Standard Repayment Plan (yes, even with taking the forgiven amount into consideration).

BUT…in the meantime, your cash flow situation will be much better.

I think we all know that we’d pay a lot less for our homes if we paid cash for them up front instead of spreading out payments (with interest) over 30 years. But when you’re talking about a purchase that large, that’s often just not possible. And many students are graduating with student loans that are the size of small mortgages.

Would I prefer that you pay off your loans sooner and pay less interest? Absolutely.

But if an income-driven repayment plan will make it possible for you to pay your mortgage and keep the lights on, I’m certainly not going to be the one to judge.

6. Who Should Apply for Income-Driven Repayment?

A good rule of thumb is that if your student loans are at least twice the amount of your annual income, you should strongly consider an income-driven repayment plan. The overall strategy for people in this position is: “Pay as little as possible and save up for the tax bomb.”

However, if your student loan totals are less than two times your annual income, income-driven repayment may not benefit you as much. And if your student loan/annual income ratio is near 1:1, this could be especially true.

If you are in these situations, your best bet may be to pay your student loans down as fast as you can. You may even want to consider refinancing into a lower interest rate.

Conclusion:

If you’re wondering which income-driven repayment plan would be best for your situation, ask your student loan servicer. They “should“ be able to give you good information.

However, if you’re not getting the answers you’re looking for from your servicer customer service department, you may want to set up a consultation with my friends at Student Loan Planner. Travis Hornsby and his team have advised on over $600 million worth of student loans and they will give you solid, unbiased advice.

Feel free to reach out to me with questions as well. You can leave a comment below or email me at clint@walletwiseguy.com.

General FAQ

The post Income-Driven Repayment Plans: Everything You Need to Know appeared first on The Wallet Wise Guy.

And when it comes to paying off student loans, a lot of people could use some extra motivation. According to College Board’s most recent statistics, 43% of public-two year college students who entered repayment in 2011 hadn’t even paid one dollar towards the principal five years later.  And a September 2019 study found that 25% of student loan borrowers defaulted over a 20-year period. 

It’s clear that many student loan borrowers are struggling to shake off their student loans. If you’re struggling too, keep reading to see if one of these student debt payoff apps could help.

7 Debt Payoff Apps to Help Eliminate Student Loans Faster

Ready to start crushing your student loans? The 7 debt payoff apps on this list could help! Below, we dive into how each app works and explain its key features.

1. Debt Payoff Planner

The Debt Payoff Planner is a great all-round app for all kinds of debt repayment. This app lets users manage all debt repayment in one place, saving time and hassle.

The Debt Payoff Planner gives users three choices for tackling their loans: the debt snowball (paying off the smallest loan first while making minimum payments on other loans), the debt avalanche (paying off the loan with the highest interest rate while making minimum payments on other loans), or a method the user chooses.

Cost: FREE

Devices: iOS and Android

2. Pillar

Pillar is one of the newest debt payoff apps that’s good for paying down all types of student loans. A huge benefit of this app is that you can make all your student loan payments in one place—saving time and avoiding missed payments.

Pillar also claims on its site that users “save on average $6200 in student loan interest and pay off debt three years faster” which makes this student loan app a must-have. Pillar also provides customized recommendations to help you pay off student loans faster based on your current financial situation.

Cost: FREE

Devices: iOS and Android

3. Sallie Mae

The Sallie Mae app is an excellent award-winning app for private student loans. Not only is it super secure (it requires fingerprint or facial recognition technology to log in!), you can also set up notifications about when your loan payments are due, overdue, or posted.

In addition to seeing all your private loan details, the Sallie Mae app provides your quarterly FICO score and you can set up notifications so you know when your score has been updated.

When you’re ready to begin paying off your Sallie Mae student loans, be sure to check out the tips offered on their site for making this process as smooth and easy as possible.

Cost: FREE

Devices: iOS and Android

4. Debt Payoff Assistant

The Debt Payoff Assistant app allows users to track an unlimited number of debts or loans including a mortgage and isn’t for paying off student loans exclusively.

The Debt Payoff Assistant lets users choose from a few different methods to pay off their student loans including the debt snowball method and debt avalanche method (discussed earlier). The unfortunate drawback for some users with this app is that it’s not available for Android devices.

Cost: FREE

Devices: iOS only (including iPad)

5. FedLoan Student Loans

If you have a federal student loan through the Pennsylvania Higher Education Assistance Agency, you’ll want to get the FedLoan Student Loans app from FedLoan Servicing to help you pay off these student loans.

To set up federal student loan repayments on the FedLoan Student Loans app, you’ll need to know who your loan servicers are. To find this information, contact the National Student Loan Data System (NSLDS).

It’s important to keep in mind that there’s no penalty for paying federal student loans early or making extra payments on these loans.

However, federal student loans usually have lower interest rates than private student loans so you’ll save money in interest charges if you pay off your private student loans with higher interest rates first.

When it makes sense though, be sure to take advantage of making extra payments on federal loans when you can so you pay off these student loans faster too.

Cost: FREE

Devices: iOS and Android

6. Unbury.me

The name says it all! Unbury.me isn’t an app though—it’s an online loan calculator. Users simply find the Unbury.me site through an online search and then follow the steps on the site to have their student loan payments (or any debt payments) calculated for them.

Unbury.me lets users select either the debt snowball method or the debt avalanche method when calculating student loan repayments.

Calculating different debt payoff scenarios on Unbury.me will help you reduce the amount of interest you pay and help you pay off your student loans faster.

Cost: FREE

Devices: in-browser website

7. Mint

Mint is a great choice for those looking to pay off student loans as just part of the larger financial picture that includes budgeting, saving, and investing as well. Also, Mint uses two-factor authentication (2FA) to keep your account information secure.

Plus, there are many helpful articles on the Mint blog about student loan repayment from real former students that provide tips for paying off your student loans faster.

Cost: FREE

Devices: iOS and Android

Can Paying Off Student Loans “Hurt” Your Credit Score?

Your credit score is calculated using different factors and one of these factors is the mix of installment loans (like student loans) and revolving credit (like credit cards) on your credit report. This makes up 10% of your credit score.

However, when one type of credit is removed from this mix, it can’t be used to calculate your credit score any more. So your credit score may drop a bit after you pay off a student loan if you don’t have any other installments loans (like a mortgage or auto loan) on your credit report.

Is this a big deal? Not at all! It’s much more important that you have a really good repayment history (aka-don’t miss a payment if possible). Missing payments affects your credit score in a negative way—big time!

A temporary dip in your credit score from paying off a loan is not a bad thing. Instead, celebrate your accomplishment and know lenders will see you in a very favorable light going forward.

Which Student Loans Should You Pay Off First?

When looking at which student loan to pay off first, there’s a couple different ways to do this, depending on what your goal is and what keeps you motivated when you have to pay off debt. Both work.

Regardless of which student loan you decide to knock off first, keep in mind you’ll still need to make all the minimum payments on your other student loans and credit cards. Then after all your bills and living expenses are paid, you can throw more money on the student loan you want to eliminate first.

Option 1: Start With the Highest Interest-Rate Student Loan

To save the most money possible in interest charges and pay off student loans faster, follow the steps above. Then use any extra money you have to pay off the student loan with the highest interest rate first followed by the next highest rate loan until all loans are paid. This is known as the debt avalanche method.

This usually requires paying off private student loans first since they often have higher interest rates than federal student loans. Also, private student loans don’t come with as many benefits as federal student loans, like Income-Driven Repayment (IDR) plans or federal student loan forgiveness programs. So if you had to pick one type of loan to knock out first, private student loans are typically the safer bet.

Option 2: Start With the Smallest Student Loan

If you need motivation to pay debts off and like to see quick success, you might prefer the debt snowball method instead.

Using the debt snowball method, you would make all your minimum loan payments and pay your other bills and living expenses first. Then you would focus on paying off your smallest student loan first.

Ideally, any extra money you have would also be put towards paying off your smallest student loan first, followed by the next smallest, and so on until all your student loans are paid.

Before using these or any other repayment methods, it’s important to find out what the repayment terms are on each of your student loans. You don’t want to be penalized for paying down one of your loans faster than your loan servicer allows.

Regardless of which loan you choose to pay off first, there are several apps that can help you pay off student loans and other bills such as credit card debt in addition to budgeting, saving, and investing.

Check out the 7 apps below to help you get back in the black with your finances before you know it.

Which Student Debt Payoff App Is Best for You?

So which of these apps is best for you? The best debt payoff app for your student loans will depend on a number of factors such as:

• The type of device you want to use the app on
• The type of student loans you have (federal and/or private), and
• If you want to combine student loan repayments with your other budgeting needs (most people do!)

Start by making a list of the device(s) you’ll be using to pay off and track your student loans, the type of student loans you have, and any other “must-haves” you can think of when it comes to a student loan app. Then review the list above to choose the apps that’ll work best for you.

Author Bio:

Leona Werezak is a freelance writer who enjoys writing about personal finance and health & wellness. When she isn’t writing or wearing her nursing hat, she’s coming up with new business ideas or scoping out her next rental property.

The post 7 Debt Payoff Apps to Help Eliminate Student Loans Faster appeared first on The Wallet Wise Guy.

While many of the Democratic candidates have introduced sweeping student loan forgiveness and free college for all plans, President Trump has taken a different approach. His proposed initiatives would actually result in a 7.8% decrease in the Department of Education’s budget.

Ultimately, President Trump’s student loan plan is all about simplifying programs and reducing bureaucracy. But are his suggested changes enough to satisfy student loan borrowers who are frustrated and disgruntled with the complicated student loan system? Let’s take a closer look.

President Trump’s Student Loan Plan: 6 Key Points

The full 2021 fiscal budget, along with all of Trump’s education initiatives is publicly available here. But if you don’t have time to comb through a 128-page document, here are 6 key actions the bill calls for.

1. Allow Faster Student Loan Forgiveness on Income-Driven Repayment (IDR) Plans.

Currently, there are four Income-Driven Repayment (IDR) plans. Depending on the plan that you join, you could be eligible for forgiveness in 20 to 25 years. Under President Trump’s student loan plan, borrowers would qualify for forgiveness after only 15 years of payments. This would increase the time to forgiveness for the typical borrower by 5 to 10 years.

2. Consolidate Income-Driven Repayment (IDR) Plans.

If you’ve had the pleasure of trying to join an Income-Driven Repayment (IDR) plan, you know that the program can be unnecessarily confusing. There are four different plans (PAYE, REPAYE, IBR, and ICR) and each have different requirements and features.  Trump’s student loan plan consolidates these four IDR plans into one.

3. Set Income-Driven Repayment (IDR) Plan Payments at 12.5% of Discretionary Income.

So far, the changes that we’ve discussed should please the majority of borrowers. But this change is sure to have the opposite effect. Currently, the majority of student loan borrowers who took out student loans after July 1, 2014 are paying 10% of their discretionary income on their IDR plan. The only exception are Parent Plus borrowers who are on the ICR plan.

But if President Trump’s student loan changes take effect, IDR payments for everyone would be changed to 12.5% of their discretionary income. This would result in slightly higher monthly payments for most borrowers. As mentioned earlier, loans would also be forgiven sooner. But, in the meantime, a borrower’s monthly cash flow would suffer a bit under Trump’s proposed IDR plan.

4. Impose Annual and Lifetime Borrowing Limits on PLUS Loans.

This initiative is very important. Currently, PLUS loans are the only federal student loans that don’t have any borrowing limits. Only parents can take out PLUS loans to pay for undergraduate degrees. But graduate students can take out Grad PLUS loans on their own.

The government launched the “Grad PLUS loan” program in 2005. And, since then, graduate programs have known that students essentially have blank checks from the federal government. In response, new graduate programs have proliferated at an astounding rate. And, for many graduate degrees, tuition increases have far outpaced inflation.

Under President Trump’s plan, PLUS loans would become subject to annual and lifetime borrowing limits, just like subsidized and unsubsidized student loans already are.

5. Eliminate Subsidized Federal Student Loans.

This is another change that’s likely to ruffle a lot of feathers. Currently, there are two main types of federal student loans for undergraduate borrowers: subsidized and unsubsidized student loans.

The interest rate is the same on both types of loans. But the government pays the interest that accrues on subsidized loans while the student is enrolled in school. To qualify for subsidized student loans, students must demonstrate financial need. And that requires sending the Department of Education a lot of paperwork to prove that you have a low income and aren’t receiving a lot of financial support from family or friends.

President Trump wants to eliminate subsidized student loans altogether.  In his mind, these loans require more government oversight and hassle than their worth. There may be some truth to that idea. But for students who qualify for subsidized student loans, eliminating the program will only serve to make college less affordable.

6. Eliminate Public Service Loan Forgiveness (PSLF).

And finally we have the biggie. Under President Trump’s student loan plan, the Public Service Loan Forgiveness (PSLF) program would be done away with.

Currently, PSLF is the fastest way (in theory) for borrowers who work in the public sector to earn student loan forgiveness. Under its current guidelines, government and non-profit workers can receive forgiveness in as little as 10 years (120 qualifying payments).

But to receive that forgiveness, you must remember to verify that you work for a qualifying employer each and every year. And the program has been marred by news reports of a staggering percentage of applicants being denied forgiveness for various reasons.

President Trump wants to eliminate PSLF and make forgiveness available to everyone at 15 years. His forgiveness plan would essentially “meet in the middle” between current IDR forgiveness and PSLF forgiveness. It would take public service workers 5 years longer to earn forgiveness with Trump’s plan. But everyone on IDR plans would get forgiveness 5 to 10 years sooner.

Note: The elimination of PSLF would only affect new borrowers. If you’ve already made qualifying payments towards PSLF, you’ll be grandfathered in.

How Does Trump’s Student Loan Plan Compare to Other Presidential Candidates?

President Trump’s plan stands in starkest contrast to the plans of Senators Elizabeth Warren and Bernie Sanders. Both Democratic nominees are advocating for massive student debt cancellation and free public college for everyone. There isn’t a whisper of either of these ideas in Trump’s student loan plan.

But his plan does bear some similarities to other Democratic nominees like Michael Bloomberg, Joe Biden, and Pete Buttigieg. Each of these candidates are also calling to consolidate the various IDR plans into one. But, unlike President Trump, most of them are calling for lower monthly payments while keeping forgiveness at 20 years.

Finally, President Trump stands alone in his call to eliminate Public Service Loan Forgiveness (PSLF). Even the candidates who aren’t stumping for student debt cancellation for all, have no plans to remove PSLF. Instead, most of the Democratic nominees promise to “fix” the program by simplifying it and speeding up the time to forgiveness.

Related: This is Michael Bloomberg’s Student Loan Plan

The post This is President Trump’s Student Loan Plan appeared first on The Wallet Wise Guy.

Nothing had been forgotten. Every apple and can of beans had been accounted for and every drop of gasoline. Literally, the entire month was planned out in advance. That’s how I felt.

And then life happened.

And it happened again… and again… and again. Month after month, our budget kept getting wrecked by something I hadn’t accounted for – non-monthly expenses.

And while I was worried about planning for our power bill and car insurance, I soon discovered that these non-monthly expenses were typically the cause of our budget blowing up. I call these non-monthly expenses “budget busters,” and the top 5 are listed below:

The top 5 budget busters

1. Car Repairs

2. Home Repairs
3. Birthdays and Holidays
4. Vacations

5. Health and Pharmacy

When I first started budgeting, these things kept popping up and ruining our budget. Every single month included some sort of financial stress. I found myself begging to just catch a break and get a “normal” month.  But at some point, an important realization dawned on me.

There’s no such thing as a “normal” month. Nearly every month will include at least one non-monthly expense.

Related: 8 Best Budgeting Apps for College Students

How to prepare for the budget busters

So if nearly every month will include at least one budget buster, what can you do? Below, I’ve included a 5-step process that should help you solve this big problem.

1. Estimate how much you will spend on an annual basis.

You may estimate that over the course of the year you will likely spend around $1,200 on car repairs. For birthdays and holidays,  $600 may be a better estimate. And, for health and pharmacy, you may decide that $1,400 sounds about right.

2. Divide your annual expense estimates into monthly savings goals.

This is very simple to do. Just take the annual number you decided upon and divide it by 12. So for the car repair example given above, you would take $1,200 and divide by 12 to leave you with $100 that you need to save each month toward car repairs.

3. Rollover unused funds to the next month.

After your first month budgeting for non-monthly expenses, you will most likely find that for at least a few of the categories, you have money left over. That money now rolls to the next month.

So if you have a $50 monthly budget for birthdays and holidays, and you didn’t spend any of it in January, you now have $100 available to use in February.

These types of rollover funds are commonly known as “sinking funds.” How do you keep track of them? Well, if you are someone who uses a cash envelope system, it’s very easy. You just have a different envelope for each budget buster category. Whatever’s left in each envelope at the end of the month, stays there, and you just add to it.

Most online budgeting platforms and apps also offer some way to create sinking funds. On Mint, for example, you just have to check the box that says “start each new month with the previous month’s leftover amount,” as shown below.

Most other budgeting programs have a similar option. You may just have to do a little digging or Googling to find them.

4. Learn and adjust.

As you first start trying to plan for the budget busters, you’re no doubt going to find that you underestimated certain categories. This will be especially true in the first few months. You will also have months at the beginning where your expenses outpace your saving.

For instance, you may have a $400 car repair hit you in February when you only have $200 in your sinking fund. So early on, you may still have to dip into your savings account once in a while to cover certain expenses, but that’s ok.

As you continue on, your sinking funds will grow and you will get better and better at accurately predicting how much you spend in each area on an annual basis. Just the fact that you are even planning at all for non-monthly expenses puts you MILES ahead of most people, so don’t beat yourself up when things don’t go perfectly according to plan!

5. Unwind!

When you start planning for the top 5 budget busters, you will be shocked at how much it will de-stress your life! It’s an amazing feeling to know that no matter what a month may bring, you will be able to handle it.

Still aren’t convinced yet that you need to do this? Well then, let me add one more thing.

Implementing this one budgeting change can also dramatically improve your marriage. A large majority of money conflict in marriage revolves around the budget busters that we’ve been talking about. Getting rid of the uncertainty around them can resolve many money arguments before they ever get started.

The bottom line: Non-monthly expenses will always be a part of your life. But with a little planning ahead, they don’t have to be your “budget busters” any longer.

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