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5 essential things to know about private student loans

The following article is from NICHE

January 10, 2019

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You knew college would be expensive, but maybe you didn't realize it would cost quite this much.

If money in your college fund is coming up short, you may turn to private student loans to make up the difference. Many students do. In fact, per The Institute for College Access & Success, students took out $7.8 billion worth of private student loans in 2014-2015, up from $5.2 billion in 2010-2011.

But before you plunge into the private student loan pool, there are a few important things you should do. Here they are:

1. Make sure there's no other source of funding first.

Before you even think about taking out a private student loan, make sure you've squeezed all the money out of your federal (public) student loans first.

Find out: What is the difference between private loans and federal loans?

Abril Hunt is a national trainings manager of outreach and financial literacy for Educational Credit Management Corporation (ECMC), a nonprofit corporation with a mission to help students succeed. As she puts it: "ALWAYS expend Federal Direct Student Loan eligibility before looking into a private education loan. Private student loans don't have the same benefits as federal loans. They aren't guaranteed by the United States Government. There are usually no cancellation options for death or disability.

"And unless you have rock star credit," she warns, "your interest rate could be in the double digits."

Therefore, a private student loan isn't something to enter into on a whim.

Once you've ensured all your federal money is used up, "make sure you seek the advice of your school's financial aid office before taking out a private loan," Hunt adds.

Joe DePaulo, CEO and Co-Founder of College Ave Student Loans, agrees: "If your finances are coming up short to pay for the upcoming semester," he says, "it's never too late to contact your financial aid administrator about your personal circumstances. They may be able to help you find additional funding options to cover the gap."

2. Ask questions. Then ask more questions.

If a private loan appears to be your best or only option, it pays (perhaps literally) to do your homework.

Private lenders have the ability to set varying interest rates and terms, so it's essential you understand all the details of what a lender is offering before you take out the loan. The best way to do that? Research. Ask questions. Persist until you're 100% crystal clear on what you're agreeing to.

Hunt gives this advice: "Ask the lender what rate they base their interest on — U.S. Prime Rate or LiBOR — then make sure you understand the difference between the two. Is there a margin added to the rate? Is it Fixed or Adjustable? How often do they compound and capitalize interest?

Other questions she recommends you ask a lender:

  • Is there a Loan Origination Fee?
  • Are there interest rate reductions for ACH (automatic payments)?
  • Are there any prepayment penalties?
  • Are there charges or fees for changing due dates, or repayment plans.

Still stuck? "Search online for the terms you don't understand," Hunt suggests. "Better yet, make an appointment with your school's financial aid counselor for a quick private loans 101 chat."

"Sure, it can be overwhelming," she says, "but putting your head in the sand only makes things worse."

Students took out $7.8 billion in private student loans in 2014-15. Find private loan options now.

3. Have a (strong) cosigner on hand.

To get a truly good rate on a private student loan, Neil Sader, managing partner of The Sader Law Firm in Kansas City, recommends finding a cosigner. But that doesn't mean just any adult willing to do you a favor. They need to have good credit.

"If you do need to consider private student loans," he says, "applying with a cosigner with strong credit can help you get approved and may help you qualify for a better interest rate, which can mean a lower total cost of the loan."

"But note," he warns, "cosigners are equally obligated to pay back the loan."

Robert Farrington, a student loan expert and founder of The College Investor, has additional advice for the cosigner: "Make sure that you get a loan with cosigner release so that your cosigner can get off the loan in the future.

Also, he warns, "many people don't like to discuss death, but it does happen. The cosigner should get insurance on the borrower for the amount of the loan in case something happens."

4. Borrow as little as you possibly can.

When it comes to loans, less is more.

Sader says that if a private loan is the only kind of loan available to you, keep this general advice in mind: "It is appropriate to borrow for tuition, books, school fees. Don't borrow living expenses. Borrowing living expenses is usually when I find people run into problems."

"You should really be considering the value of the degree you're getting," says Farrington, "what you expect to make after graduation, and can you service the loan payments and live. A small private loan might work for you to cover the gap you need to finish school, but you should be leery in funding your entire education via private loans."

"A good rule of thumb," he adds, "is never borrow more than you expect to make in your first year after graduation. If you want to be teacher, great! But you probably won't make more than $45,000 per year early in your career, so you shouldn't borrow more than that to fund your college education."

Farrington stresses: "College is an investment — and you expect to get a return in terms of salary and career after graduation. If you borrow too much, you'll have a negative ROI and you'll struggle financially after graduation for years."

5. Start making payments now, even if they're not much.

Interest accumulation on private student loans typically starts right away, while you're taking classes. That means that by the time you graduate, you'll already owe thousands more than you borrowed.

To head that off at the pass, Brian Meiggs, founder of personal finance site MyMillennialGuide, suggests paying that interest while you're still in school, if you can. "This will keep your principal balance level," he says, "and when you graduate, you will only owe what you originally borrowed."

By contributing, if not every month, then at least whenever you can, "you can help ease the burden you will inevitably feel once you are required to start paying off your student loans," he says. "Make a small sacrifice now to help yourself out in a big way in the future."

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Maximize your scholarship potential with top 10 tips from ECMC

January Through March is Prime Scholarship Application Season

January 9, 2019

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The start of the year means the start of prime scholarship season for current and incoming college students. Educational Credit Management Corporation (ECMC) is offering a Top 10 list of tips to help students make the most of the season while potentially lowering their student debt.

"While many scholarships open in September, January through the first part of March is the ideal time for students to apply for scholarships, with most of the deadlines occurring by March 15," said Abril Hunt, national trainings manager, outreach and financial literacy at ECMC. "Scholarships are a great way to reduce the cost of college. With the multitude of options available, students just need to know how to find them."

ECMC, which works to lower student loan default rates and sponsors financial literacy programs, developed the following tips to help students and families maximize their scholarship potential:

  1. Leave no scholarship stone unturned. To increase the likelihood of obtaining scholarships, look for options in every area of your life: field of study, extracurricular activities, geographic area, heritage, employer, etc.
  2. Don't put all your eggs in one basket. Applying for a large number of scholarships, versus a small number of high dollar offerings, can help you maximize chances of winning.
  3. Get to know yourself. The first step to create a compelling essay is taking time to reflect on your strengths, activities you enjoy, favorite subjects and what's important to you. Writing about something you care about is often easier and more enjoyable.
  4. Get involved in your community. Most scholarships request some type of community service. Working short periods for many different organizations is okay, but spending time volunteering at one or two key organizations gives you more depth of experience and can make for a stronger application.
  5. Don't sell yourself short. If you didn't have time to volunteer with a community organization but you worked and went to school, or you are a single parent and trying to juggle family/work/school, leverage those activities that illustrate your tenacity and ability to overcome obstacles.
  6. Be yourself. You may not have a specific example of every personal characteristic—some people consider themselves leaders, while others feel strongly about their academics or volunteerism. Don't focus on what you think might lead to a good essay. Make your personal story come alive, and be honest about your life experiences.
  7. Learn from past winners. Request sample winning entries from the organization administering the scholarship program. This can provide insight on the types of individuals and/or essays that won in the past.
  8. Work smarter, not harder. If possible, leverage your school work for your scholarship essays. Need to write a personal essay? Pen it with the application in mind. Or edit one that you've previously drafted. Of course, make sure the essay you submit is your work!
  9. Get through the "first look." The judges' first evaluation of your application is quick—usually 15 to 30 seconds—so make sure everything is complete. Also, be sure to craft an application that will capture the judges' interest right away.
  10. Be persistent. There are many kinds of scholarships available, including unique ones, if you know where to look and are willing to do some legwork. Some great resources include www.fastweb.com, www.scholarships.com, www.goldendoorscholars.org or simply search online for "weird scholarships." Apply to as many as possible, and don't discount a scholarship because it's "small." Smaller scholarships are less competitive. Think about the hourly rate earned if you receive a $500 scholarship that took you two hours to complete.

In addition to these tips, ECMC offers a free, downloadable Opportunities workbook that features a variety of worksheets and information in English and Spanish to help students throughout the college planning process.

For more information, visit www.ecmc.org/students.

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ECMC Group President and CEO Jeremy Wheaton appointed to Jeremiah Program's national governing board of directors

January 4. 2019

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Jeremy Wheaton, president and chief executive officer of ECMC Group, has been appointed to a three-year term on the national governing board of directors of Jeremiah Program.

"Jeremiah Program is incredibly fortunate to have Jeremy on the governing board," said Gloria Perez, president and CEO of Jeremiah Program. "His business acumen, compassion and understanding of college access and education will help the organization fulfill its mission."

Headquartered in Minneapolis, Jeremiah Program is a national nonprofit dedicated to transforming mothers and their children out of poverty two generations at a time through empowerment and life skills training, safe and affordable housing, a supportive community, quality early childhood education, and career-track, college education.

"The 20-year history of Jeremiah Program, as well as its plan for the future, is impressive as well as inspirational," Wheaton said. "I look forward to partnering with Gloria, her leadership team and the entire board as we continue to position families on a path to success."

Wheaton previously served on the Jeremiah Program Governing Finance Committee.

ECMC Group has provided support to Jeremiah Program through grants by its philanthropic arm, ECMC Foundation, and also through ECMC Group employee volunteer time.

About Jeremiah Program
Jeremiah Program offers one of the nation's most successful strategies for transforming families from poverty to prosperity two generations at a time. Jeremiah prepares determined single mothers to excel in the workforce, readies their children to succeed in school, and reduces generational dependence on public assistance.

Jeremiah's proven, holistic approach begins with establishing a supportive community for determined single mothers to pursue a career-track, college education. Through a combination of quality early childhood education, a safe and affordable place to live, and empowerment and life skills training, families find stability and a path out of poverty.

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Local business provides 78 kids with holiday gifts

The following story is from Sacramento Oracle

December 28, 2018

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Employees from local nonprofit ECMC Group spread holiday cheer last week by donating and delivering gifts for 78 children at Volunteers of America.

Employees purchased three gifts from each child's wish list and delivered them wrapped and ready to open. ECMC Group has sponsored the Holiday Angels program at Volunteers of America for the past six years, making sure all children living at the transitional home will have gifts this holiday season.

ECMC commits to making a positive impact on its communities through service, charitable giving and good corporate citizenship. ECMC Group is a nonprofit corporation with a mission to help students succeed through programs promoting financial literacy, college access and college completion.

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ECMC is making a change to our security cyphers

December 18, 2018

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On December 20, ECMC will no longer be supporting weak security cyphers. If you are experiencing issues when attempting to access our web applications, please check with your technical support team to ensure that you are using TLS 1.2.

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