Free Yourself From Your Students Loans
Student Loan Consolidation
When we talk about college graduation, several promising life changes occur in our minds potential careers, independence as well as new beginnings. However, although it means beginning of something, it still signifies something less enjoyable too the repayment of student loans.
On the other hand, if you want to rebuild your credit as quickly and securely as possible, Chapter 7 can make sense. After you obtain a Chapter 7 discharge, you're debt free, except possibly for past-due taxes, student loans, and some types of judgments. Instead of plugging 300 to 3,000 a month into paying off debt, you can put that money into savings. Within a year or two, you'll be much further ahead financially than if you were still stuck in a payoff plan. As to credit profile, cash in the bank and no (or very limited) debt give you a better credit profile. Fannie and Freddie will each consider Chapter 7 bankrupts two years after discharge. FHA VA will consider such persons after one year. In other words, when you're really drowning in debt, Chapter 7 can put you on the path to mortgage approval and financial stability faster and more effectively than a debt repayment plan.
Another type of contingent liability is student loans, which do not require payment until six months after the borrower ceases his or her formal studies. With student loans, monthly payments will be taken into consideration if payments must begin within the next 12 months.
In other words, Elmer continues, we'll give buyers a no-down-payment, 100 percent loan, if, say, those buyers (or close relatives) move enough of their 401(k) funds to our bank to offset 20 or 30 percent of the property's purchase price. Last week, we closed a loan for a young couple in their thirties who bought a 365,000 duplex. Between them, they had good credit and earned 90,000 a year, but little savings because they're rapidly paying off student loans. We financed their full purchase price without PMI, and the wife's mother deposited 85,000 of her 401(k) monies with us.
We always paid a lot of money for rent each month, says Lynne, probably comparable to a mortgage payment, but instead of a mortgage we took out student loans to cover school expense. We hated throwing money down the drain for rent and couldn't see any long-term benefits of paying rent. We always took as much care of the property we rented as we would have our own home. Every time we would go outside and work in the yard or paint a room, it made us cringe because we could have been doing these things to our own place instead.
Student loans are installment debts, with special features. In the U.S., student loans are typically delayed payment programs. While the student is attending college or graduate studies, no payments will be due on the student loan. When the student ceases his or her formal studies, however, loan payments will normally begin after a six-month grace period. It is assumed that the borrower will have a found a steady job within this time. However, some student loans do allow extensions of this grace period. Mortgage lenders will sometimes omit student loan payments from consideration if payments will not be beginning in the next 12 months.
How was this possible Simply because MBIA aggressively began insuring a wide range of bonds backed by subprime loans on new and used autos, aircraft leases and equipment trusts, credit card receivables, investor-owned utilities, health care equipment financing, student loans, emerging market CDOs, credit default swaps, and, most ominously, structured finance products based on U.S. mortgages like residential mortgage-backed securities (RMBSs) and collateralized debt obligations (CDOs). In 1990, MBIA hadn 't guaranteed a single structured finance product, but by the end of 2008 it had over 200 billion of exposure, equal to 25.8 percent of its total insured portfolio.
The solution a CDO, which is structured just like an RMBS, but instead of owning actual loans, it owns tranches of other asset-backed securities like RMBSs. As Table 12.2 shows, there are many different types of CDOs, just as there are many different types of asset-backed securities, because Wall Street securitizes many different types of debt not just mortgages, but also credit card debt, student loans, auto loans, corporate debt, commercial real estate, and so forth. Our analysis of MBIA will focus on CDOs that are comprised of tranches from RMBSs.
Future research includes applying this method to other MBS-like securities, since the PA method proposed in section 3 is a very general framework. These include other asset-backed securities, e.g. securities backed by student loans, car loans, credit card receivables. It is pretty straightforward to expand this framework to those securities, since all that is required is to apply a specific interest rate model and prepayment model.