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Caroline

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Remember your senior year of high school, when all anyone could ask you was "Where are you going to college?"

Well, now that you're in college, the questions keep on coming, but this time you get it from every new person you meet (which is a lot your freshman year): "What's your major?"

If you're undeclared, that gets to be a pretty short conversation. And eventually you do have to settle on a major. So how are making the major decision? Here are some ideas to get you started:

1. Take some career aptitude tests. Check with your academic advisor to see if he or she can recommend some good tests. You can find a number of these tests online, but beware — they may be commercially linked, so it's probably best to get some advice before diving in.
2. Ask the people who know you best. I majored in journalism on the recommendation of my brother. I loved to write, so I don't know why journalism hadn't occurred to me. I guess at the time, I wasn't thinking about my talents as much as I was thinking about what I "should" major in to get a good job.  Entertain the ideas of those who see you from the outside looking in. They shouldn't make your decision, of course, but they may have some good insight for you.
3. Explore potential jobs. Check out potential jobs as a way to explore different majors. Do some volunteer work, get an internship, do some job-shadowing — and always ask people what they majored in. You're likely to find some surprises along the way — and you might get some career-path ideas.
4. Do some research. Thumb through your school's course catalog, check around online, browse some career-books, read articles and reports about fast-growing career fields  and list anything that catches your eye. It's a good way to gauge your interests, and remind yourself what's out there.
5. Know what you're getting into. As you're making your decision, definitely follow your heart and your talents, but be realistic and know what you're getting into.  Think not just about the major but about the career path you plan to follow. Consider what jobs in the field will pay and compare it to what you're paying (and borrowing) for school. Be sure that reality plays some part in your decision and that you're keeping the future in mind.

Have you decided on a major? How did you make your decision?

Barbara

May grads, you knew this was coming. It's almost time to start repaying those student loans. Your six-month grace period on Federal Stafford loans is dwindling — it's time to think about the details of repayment, if you haven't already.

To help you out, here are some items to check off your list of repayment to-dos.

1. Make a plan. Calculate how much your monthly student loan payments will be (be sure to calculate any private student loan payments as well). Make sure you have at least this amount in your budget. Can you allocate a bit more to your loans? Remember paying a little more each month can mean paying less over time. Does it look like your monthly obligations are going to be tough? Then check out the next to-do.
2. Explore your repayment options. There are tons of repayment options for Federal Stafford loans. You can stay on a standard payment plan, extend your repayment if you have a certain amount of federal student loan debt, have your payments based on income if you qualify, combine your loans into one new loan or delay your payments in some circumstances.

Take some time to learn about all your options starting with these:

• Standard, extended, graduated and income-sensitive repayment plans
• Income Based Repayment
• Federal student loan consolidation private student loan consolidation
• Deferments and forbearances

As you explore your options, remember just because you can delay your repayment doesn't mean you should.

3. Know how to contact your lenders. Staying in touch with your lender is a vital part of repayment. Keeping the lines of communication open will help your repayment go as smoothly as possible. Plus, if you hit a bump on your repayment road, talking with your lender about your options can help you get through the situation together.
4. Decide how you'll make your payments. In this technological age, there are more options for payments than the traditional check through the mail. You may be able to manage your loan online. Check with your lender to see if they offer the option to make payments automatically or through your bank's online bill pay service. Making on-time payments is super important, so find the payment option that works for you to ensure your payments arrive to your lender on time.
5. Keep your cosigner informed. I threw this one on the to-do list for those of you with private student loans. Chances are your private loan also has a cosigner whose credit is tied to the good repayment of that loan. Talk through your repayment plan with them to ease their mind a bit. After all, they did put their credit on the line for you.

So let us know: Are there any other items on your repayment to-do list?

Staci

Just a few weeks ago, Wells Fargo launched a new online student loan application with several improvements to make applying for a student loan easier.

What's so special about the new application? For one, you — our customers — had a hand in designing it! See, you told us what some of your pain points were, and we listened to that feedback and used it to design something that works better.

Here are some of the changes we made:

• Up front, the application suggests which student loan products might best meet your needs, based on your school, grade level, program, and cost of education.
• The application itself has been condensed so there are fewer pages to click through.
• Throughout the application, there are hyperlinks to define any terms that might be confusing, as well as clearer instructions for cosigners on private student loans (and we know you have many questions about cosigners!).
• Finally, the application clearly details the next steps in the process so you know exactly what to expect before, when, and after you apply.

All in all, very solid improvements that we hope will make your customer experience even better.

Speaking of customer experience, have you used the new online student loan application? If so, any feedback to share? We're listening!

Barbara

Tomorrow will mark three years since we launched the Student LoanDown blog. It's kind of crazy for me to think about! For three years, I've been sharing my own financial saga and helping readers understand theirs.

To celebrate, I decided to give you a little behind-the-scenes peek at what happens on our end to bring you the information you find here on a day-to-day basis. Remember, none of us are full-time bloggers — we get to talk with you along with other daily responsibilities. So the time lapses are when I'm doing other tasks that are slightly less fun!

8:45a.m. After procuring a morning beverage, I log on to my computer and start to sort through emails and comments that have come in overnight. One of the highlights of my day is seeing your responses to what we've posted and the questions you have.

9:30a.m. Once I've got a handle on what I need to respond to, I identify the resources I need to answer your questions. Sometimes the questions you ask are pretty complex. So, I get to engage other team members throughout the business. Like when you wonder about deferments and forbearances (technical terms for ways to postpone your student loan payments), I get to talk with folks in our Account Maintenance department. Answering your questions has helped me understand tons of different areas of the business I wasn't familiar with at first.

12:00p.m. I have an idea for a series of posts, but first want to talk with our blog editor, Henrik, to get his feedback. After chatting about how to present the information best, I get started on the first post.

1:25p.m. As I'm drafting responses to the comments and questions I got in the morning, a new email comes in through our Ask the Expert feature. The customer has some specific questions about her student loan with Wells Fargo, so I engage our Executive Office. That's the group that handles escalated customer inquiries. And they can pull the details of the borrower's account for me.

3:15p.m. Ring, ring. Caroline is calling! She wants to have a quick brainstorm session for some post ideas. Along with drawing experiences from our daily lives, we also like to have timely conversations about what's going in the lives of students. Sometimes it helps to bounce ideas off another blogger.

4:45p.m. I realize my post ideas are going to take a bit more research, so I crank out a quick post about it being our anniversary, which you're currently reading! After I send the post to Staci, I wait to hear her chuckle over the cube wall as I am v. clever and v. funny (and v. modest).

6:00p.m. With another day of comments published and questions answered, I note what items are still outstanding for the next day and put them on my to-do list so I remember to follow up.

So there you are: A look into the glamorous life that is blogging for the Student LoanDown! Thanks for teaching me new things every day with your great conversations and questions. I've really had a lot of fun talking with you over the past few years, and we hope you're having fun, too!

Barbara

Lately, we've been getting a lot of questions about student loan cosigners — more specifically, how to get a private student loan without one. Unfortunately, this is one question where we don't have the answer most borrowers want to hear.

That's because generally, you're going to need a cosigner.

Here's the thing: Before lenders loan you a large amount of unsecured debt for your education, which usually won’t have required payments for several years, they're going to want to verify you meet certain credit requirements. It's reassurance that you'll have the means to give them their money back.

As a young person, you haven't had much time to establish a stellar credit history — which brings us to the cosigner. When you bring on a qualified cosigner who assumes equal liability for the loan, the lender gets someone who meets the needed credit requirements and provides the reassurance that the loan will be repaid.

A cosigner doesn't have to be a parent. In fact, by law lenders can't tell you who should cosign your loan. It could be a relative, a family friend, or just someone who's willing to make that financial commitment.

Now, it's no simple task to convince someone to put their credit on the line for you. So let's talk about having a conversation with your potential cosigner. What would you say to reassure them that you're worth the investment?

Here are some potential conversation topics to get you started:

• "I'm first using no- or low-cost options to pay for college."
  Show your cosigner that you're a responsible borrower. Tell them about scholarship and grant opportunities you've been given and that you're borrowing federal student loans before turning to private student loans to fill your funding gap.


• "I've chosen a college that's affordable given the financial aid I've received."
  Assure them that you're not over borrowing and attending a school that's out of your price range. If you can't make this statement, perhaps you should reevaluate your school choice so you're not taking on too much student loan debt to attend college.


• "I'll be able to afford my payments based on what I'll be making after graduation."
  It's important that your cosigner knows you'll be able to repay the loan. Because if you fail to make payments, it's not just your credit you're hurting, but the credit of your cosigner as well. Plus, your cosigner will be on the line for any payment you don't make. Tell them your estimated income after graduation and what your estimated monthly payments will be. Ideally, your student loan payments shouldn’t exceed 10% of your starting salary.


• "I'm already financially responsible with other accounts."
  Have a checking account or credit card? Tell your cosigner about how you balance your checkbook and avoid overdrafts or pay off your credit card each month to show that you're already financially responsible.


• "I'll stay in touch with you and my lender throughout the life of the loan."
  Your cosigner will want to know what's going on with the loan until it's paid off and no longer their liability. Assure them that you'll keep them (and your lender) updated on your situation so if anything happens you can find a solution together.

What else do you think could ease a potential cosigner's mind?

Delenie

As the new school year rolls around, students are finalizing their financial aid packages for Fall 2009. Some students may have additional expenses not calculated into the Cost of Attendance (COA) that they're worried about paying. The COA is an estimate of the total cost of students' tuition, fees and living expenses on which the school bases financial aid awards. Many students are unaware that, at some schools, additional expenses during the academic year that exceed their financial aid package may qualify them to file a budget appeal  to increase their standard budget. Such expenses include:

• Books
• A computer purchase
• Uninsured medical, dental, or optical procedures
• Rent and utilities
• Transportation costs (car payments, insurance, repairs)
• Child care

If the recalculated COA is higher , students can increase the total amount they are able to borrow. A budget appeal may also allow students to qualify for additional work-study or more federal student loans prior to having to take out any private student loans.

Three years ago, I went through this pretty straightforward process by speaking with my financial aid advisor and getting it approved through the financial aid office. This allowed me to expand my standard budget by an additional $2,500 and purchase a computer of my choice.

This is highly beneficial to students who need to borrow because students may qualify for additional lower-cost options before turning to private student loans to cover additional costs.

Meanwhile, more fortunate students who have secured scholarships from high school may be facing an entirely different situation. Since students with financial need often receive financial aid packages full of grants from the university along with Federal Pell Grants , additional scholarships could jeopardize this nice package and supplement grants from their university. However, filing a budget appeal for qualifying expenses can help you reclaim some of your scholarship money and increase your Cost of Attendance. Since budget appeals are only offered in some schools in varying amounts, you should speak to your financial aid advisor as soon as possible.

Although you may file a budget appeal every year, there are limitations to how often you can purchase a computer. At UC Berkeley, computer purchases can happen every three years. Since three years have passed, I am able to repeat this process now as a senior. This time, I plan on purchasing the latest MacBook Pro , which comes with a free iPod Touch! Since the maximum amount that I can increase my standard budget by is $2,500, I can utilize the remaining amount to pay for medical and dental bills.

If you need to cover additional costs, check to see if budget appeals are offered at your school! For those who have gone through a similar process, what was it like?

Barbara

Does your current (or future) federal student loan payment seem a bit daunting? As of July 1, there's a new repayment option for federal student loans that may help.

Income Based Repayment  (IBR) is designed to help borrowers who find that their current income makes the required payments with a standard repayment term difficult to afford.

Here's how it works:

Loan eligibility: IBR is available for the Federal Stafford Loans, Federal PLUS Loans for graduate and professional students, and Federal Consolidation Loans, either with Direct Loans or a private lender like Wells Fargo through the Federal Family Education Loan Program (FFELP). However, there are a couple of exceptions: The loan cannot be in default, and IBR is not available for Federal PLUS Loans for parents or Federal Consolidation Loans that repaid a Federal PLUS Loan for parents.

Payment calculation: Through IBR, borrowers' monthly payments are calculated by taking into consideration their adjusted gross income , family size, and the state where they reside. If the IBR payment is less than the payment under a 10-year standard repayment plan, then the borrower is eligible for IBR. To see if you may qualify, calculate the payment with Income Based Repayment  and compare the payment with Standard Repayment.

How to apply: If you find that your payment with IBR may be lower than with a standard repayment period, you can apply for IBR directly through your lender. If your loan is with Wells Fargo, you can call 1-800-658-3567.

Now that you know how it works, here are some considerations for you:

Added benefits: A more manageable student loan payment is a big deal, but there are a couple other benefits of IBR. If you make qualifying payments on your loan under Income Based Repayment for 25 years, you may be able to have any remaining balance discharged. Also, if you have a subsidized loan and your IBR payment doesn't cover the monthly interest your loan accrues, that unpaid interest will be subsidized by the government for up to three consecutive years from when you first enter IBR repayment.

Possible drawbacks: Remember to consider the cons of IBR as well. A reduced payment through IBR usually means you're taking more time to pay off your loan, which can mean paying more interest over the life of the loan. Borrowers must also submit necessary paperwork each year to continue with IBR. And if you are no longer eligible for IBR, any unpaid interest that has accrued on your loan is capitalized (added to the principal balance) and will be charged interest.

Anyone have additional questions on Income Based Repayment? Leave them here!

Staci

Last week Barbara laid out a number of options for borrowers to extend or postpone student loan repayment — important information for new grads to have as they enter the real world. This is a topic that we get lots of questions on — probably second only to how to lower student loan interest rates.

But I'm going to play devil's advocate  here, because I think it's important for you to consider another perspective. I'm going to tell you not to take advantage of these options unless you absolutely have to.

Michelle Singletary, one of my most favorite and down-to-earth personal finance columnists with The Washington Post , had this to say about extended student loan repayment in a piece published on May 17, 2009:

But can I give you some hard but well-meaning advice if you're one of the many graduates saddled with student loans?

Instead of immediately opting for repayment plans that will stretch your payments out until you're in middle age, try to find other ways to handle this debt.

I know these are tough times. Nonetheless start your loan repayment as soon as possible, even if it means taking a second job, or a roommate (or two or three), or yes, dare I say, moving back home for several years.

You could handle this debt if you delay going on to graduate school, which would only pile on even more debt. If you are going to have trouble finding a job to make the monthly payments on your undergraduate debt, how in the world are you going to find employment to service tens of thousands more as a result of an advanced degree? Trust me, an advanced degree doesn't guarantee a big salary.

You don't get to buy a new car, an upgraded wardrobe, waste your money on liquor at happy hours, or take vacations until this debt is extinguished.

And don't look at me with that face. Only after you've exhaustively scanned your budget and cut every possible expense (such as deleting the texting option on your mobile phone) should you consider extended repayment options.

Tough love from Michelle, but her advice is spot-on. Here's how she ends her column:

I've met an incredible number of people -- too many -- who really could have paid their student loans under the standard payback period but because they didn't want to live frugally, saw their loan balances jump significantly over the years.

If you truly can't afford to fully pay what you owe, take advantage of the extra breathing room. But remember the more you delay, the more you may pay.

Something to think about.

Barbara

We already talked about ways you could possibly lower your monthly student loan obligations. But if you're looking for a way to postpone your student loan payments, there may be an option for you as well.

Under certain circumstances, borrowers may be eligible for a deferment or be granted a forbearance. Now, in both cases, you aren't required to make payments to your student loan for a short period of time. However, there are some differences that are important to understand. I'll give you the scoop on each:

• Deferments: These are for federal student loans. There are several types of deferments for folks in different situations.  You need to meet the criteria of these situations in order to be eligible for the deferment. If you are granted a deferment, know that in most cases, you’ll still be accruing interest. (The exception is for subsidized Federal Stafford Loans, which are based on financial need — the interest accrued during deferment for those loans is paid by the government.) If you don’t qualify for a deferment, you may be able to postpone payments with a forbearance.
• Forbearances: Forbearances are available for both federal and private student loans. These are granted at the discretion of your lender. Interest will continue to accrue on your loan during forbearance (even for the subsidized Federal Stafford Loan). Federal forbearances are available for borrowers experiencing financial hardship and other situations. Private student loan forbearances vary by lender, so ask your lender what options are available for you.

If you're having difficulties repaying your loan, it's very important to talk with your lender about options and the paperwork you'll need to apply for them. You don't want to fall behind on payments, and a deferment or forbearance could help.

Barbara

Folks, we've made it through another graduation season. The gowns and mortar boards are packed away, and now many graduates are focused on their finances during the first months out of college. Student loan repayment is just down the road.

As you look ahead to that first student loan payment, you may be realizing that it's going to be a little tough to swing. You may have borrowed more than you can afford to repay or may not have secured employment quite yet. (Side note for those of you just starting to take out student loans: Make sure you budget properly so you don't borrow more than you can repay.)

Whatever your situation, there are options available to help make it easier to pay your student loan. Here are some ways you may be able to lower your interest rate or monthly payments:

• Choose a different repayment plan. For federal loans, there are a number of repayment plans other than the standard repayment plan. You may be able to have your payment based on your income, extend your repayment if you have over $25,000 in federal loans, or start out with smaller payments that gradually get larger over the repayment term. And check with your lender to see what repayment options are available for your private student loans.
• Take advantage of discounts from you lender. Ask your lender if there are any interest rate discounts available for your loan. For example, you may be able to save money if you have your monthly student loan payment automatically deducted from your checking or savings account.
• Consolidate your loans. By combining your federal student loans  together into a new loan with a longer repayment period, you'll usually lower your monthly payment. For private student loans you may even find that your interest rate is lower if your credit situation has improved or if you bring on a cosigner with excellent credit.

Remember that if you're lowering your monthly payment by extending your repayment period or paying just the interest, you may end up paying more interest over the life of your loan. However, in the grand scheme of things, if it prevents you from missing payments and defaulting on your student loan, it might be worth it.

Looking for a way to postpone your student loan payment? We'll talk about deferments and forbearances later this week, so stay tuned!

Meanwhile, hit me up with any questions you have about different repayment options.