Some of major changes include:

• Third-party collections that have been paid off no longer have a negative impact.
• Medical collections are treated differently than other types of debt. Unpaid medical collections will have less of a negative impact.
• One’s rental history, when reported, factors into the score, potentially beneficial for people with a limited credit history.

Even though some items are being weighed differently, the major components of your score won’t change:

• Your payment history = 35%
• How much you owe others = 30%
• Length of credit history = 15%
• Credit mix = 10%
• New credit = 10%

However, with any change to the calculation, it’s a smart idea to check your credit report and your score to see how you’re affected. About 20% of Americans are going to see their scores rise in August, and if you’re one of them, you could benefit a lot. With a higher credit score, you could be eligible for lower interest rates on everything from credit cards to a mortgage. It could make renting that apartment or applying for that job easier. You might be eligible for lower insurance rates or a new credit card with better incentives.

August could be the perfect time for you to take another look at your credit report and discuss with your financial coach how you might take advantage of these changes. You don’t want to look directly at the sun during the eclipse, but you might want to take a good look at your new credit report.

Some students might not even know there’s a student loan balance looming. Even those that know might be uncertain if their new paycheck will be able to cover it. Either way, for many new graduates, it’s a shock. Instead of figuring out how to just cover rent, a car payment, a new wardrobe or maybe the trip to the dive bar to see that super-popular because they’re “not popular” hipster band, now you have to budget in a loan payment too. On average, student loans are $351/month (for 20-30 year-old borrowers). Yep, that delicious craft blueberry/coffee IPA just got the axe, and those the ramen noodles you survived on in college are luxuries that you can’t afford anymore. ☹

In total, Americans have about $1.4 trillion (not an autocorrect typo) in student loan debt, and most recent graduates have some sort of debt.¹ So let’s review four tips for keeping the weight of this debt from holding you down.

Tip #1 – Be Proactive

Find out what your monthly payments are on your loans. Work them into your budget. Don’t have a spending plan? Get one. Goodbye, unlimited data plan. Hello, 2GBs per month. Just like any other payment, if you can afford it and make on time payments, you’ll avoid all sorts of headaches later. But if you realize that the payments are unaffordable based on your income, or think you might be headed for some trouble, it’s best to look into your options now and get any modifications requested right away. Falling behind on federal student loans can result in wage garnishments, lost tax refunds, or even reduced Social Security payments. A Lannister always pays his debts – and the government always gets its money. Being proactive on managing your loans can help you avoid unpleasant surprises.

Tip #2 – Modify, Refinance, or Consolidate

Private Loans
For private loans, your choices will be limited. You can reach out to your lender and ask for a modification or refinance it with another company. You can consolidate your existing loans into a single loan. You may even get a better interest rate, but lowering your monthly payment will usually require extending the term of the loan.

Federal Loans
For federal loans, future flexibility features include deferment or forbearance. This may allow you to temporarily stop or reduce your payments. Keep in mind that this is for temporary situations like a job interruption or attending school at least half-time. Remember that the loans don’t go away. They’re just waiting for you to get back on your feet.

You can also consolidate your federal loans into a private loan, but keep in mind that you may lose the flexibility features of deferment or forbearance.

In addition to consolidating your federal loans into a private loan, you can also consolidate your federal loans into a new federal loan. It’s a fairly simple process that you can start on the federal student aid website, and the benefit is that you can retain some options for future flexibility.

Tip #3 – Income-based Repayment

You might also benefit from income based repayment plans. This is where the monthly loan payment is lowered to fit your income. As your income grows, your payment may increase as well, but it helps keep the loan manageable over time. In order to see if any of these options are available, reach out to your loan servicer directly.

Tip #4 – Dealing with Default

Are you already late on payments? Reach out to your loan servicer right away and see if you can use some of the options mentioned already. But if you’re really late (more than 360 days), what we call “in default,” you’ll probably have to go down a different path.

For private loans, you may want to work directly with your lender to find a resolution, particularly since a private lender can sue you if you’re in default. Usually, there are few consolidation or refinancing options. However, you typically won’t have to worry about wage garnishment, tax refunds or Social Security reductions. Even going nuclear with bankruptcy may not help. Laws now make it hard to qualify for personal bankruptcy, and including student loans in the bankruptcy requires special circumstances.

For federal loans, there is a process called rehabilitation. You’ll call your loan servicer and ask to rehabilitate your loan. They will calculate a monthly payment for you and generate a contract. The contract will generally require a certain payment for nine months. You can’t be late on payments during rehabilitation or the whole thing goes “poof,” and you don’t get a second chance. So, make sure you can make each and every payment. After successfully paying for nine months, you’ll be considered out of default. The benefit of rehabilitation is that you’ll be able to stop wage garnishment and get on a path to improving your credit.

Dealing with final exams was difficult (unless you took Social and Cultural Impact of the Waterbed). Dealing with student loans shouldn’t be. The best strategy is to avoid problems before they arise, but you do have options no matter what situation you find yourself in. If you’re unsure of what to do, call your financial coach to talk about possible next steps. That ankle tattoo may be permanent, but your student loan doesn’t have to be.

¹https://studentloanhero.com/student-loan-debt-statistics/

How does it Work?

Starting Monday, August 21, and running through Friday, September 15, share your most creative money saving ideas for fall. Your submission should be brief – around 100 words or less – and pertain to our theme, Autumn Savings. Submitting your Money Hack is easy. Just connect with your financial coach via the website (via secure messaging or by setting an appointment) or calling them directly (1-877-230-0899). If you haven’t registered yet on www.financialwellbeing.com, please do so today, as only registered participants are eligible to participate and win prizes. You can choose to make your submission under your name or anonymously.

Key Dates:

• August 21st – Money Hacks Challenge goes live
• September 15th – Deadline to submit your Money Hack
• September 22nd (first day of autumn) – Top Money Hack submissions announced
• Week of September 25th – “like/heart” your favorite Money Hacks by logging into the website
• September 28th – most liked Money Hacks announced/prizes awarded

Communications:

Look for special Money Hack Messages throughout the challenge period for updates on prizes, answers to frequently asked questions and reminders of key dates.