May Credit Score

My credit score for May is 719 which is down from last month’s score of 737.  The 737 score in April was down from 781in March which was a large drop.  That drop was presumably from my putting $4,000 of student loan debt on a credit card with a low balance transfer rate.  I thought the 737 score fully reflected that but I guess not since my score went down again this month.  It should stabilize at this level.  This is still a decent credit score and shouldn’t affect me since I don’t plan to apply for any credit. The exception will be my federal student loans but those rates are fixed and my credit score has not impact on that.

April Credit Score

My credit score for April is 737 down from 781 in March. The drop is most likely because of my taking a credit card advance to pay down one of my student loans. Since I don’t plan on borrowing any money other than student loans this year the drop in my credit score doesn’t concern me. A score of 737 is still pretty good and I’d probably be able to get the same credit with this score as I could get with the 781.

Do Reward Cards Actually Reward You?

There are many different reward cards and most pay between 1% to 5% back. These cards could still be costing you money though. This is because people generally spend more when paying with credit cards than paying with cash. The most often quoted percentages I see are from 12-18% but I couldn’t find the actual study these figures are based on. It does make sense to me though that people in general probably spend more when using credit cards and the percentage is probably higher than what they would receive back from a reward card.

That being said just because it is true for people in general doesn’t mean it is true for you. When using your reward card you just need to be sure that you aren’t spending more than you would otherwise. I occasionally spend money with my credit card that I know I wouldn’t have spent otherwise because I didn’t have any cash with me. This doesn’t mean I’m spending more money overall though because otherwise I probably would have just made the purchase later and if I didn’t have a credit card I would be carrying more cash with me to spend. I keep my spending quite low overall and don’t feel that using credit cards increases my spending. If I make an excessive purchase using my credit card it will probably be offset by reduced spending somewhere else. I’m confident that my reward cards actually reward me. If you’re using reward cards you should make sure the same is true for you.

The CCRAA and Law School Loan Forgiveness

The College Cost Reduction and Access Act offers a loan forgiveness program for those who work in public service.  As I am strongly considering a career in public service when I graduate from law school I decided to do more research on the loan forgiveness program.

The details of how the program works are somewhat complicated but this fact sheet from Brooklyn Law School and this one from NASFAA give a good overview of the program.  First, you need to consolidate your loans(private loans aren’t eligible) with a Federal Direct Consolidation Loan.  Next you need to make payments for 10 years(120 payments) while employed in a public service job.  The remaining debt then will be forgiven.

In order for this to work you need to be on the income-based repayment plan.  Otherwise,under the standard repayment plan after 10 years the loan would be paid in full and there wouldn’t be any balance remaining to be forgiven.  The income-based repayment plan limits your annual debt repayment to 15% of your discretionary income-adjusted gross income minus 150% of the poverty level.  By my calculations this would result in $37,035.00 in payments for someone making $40,000 a year.  Since I expect to have around $70,000 total in loans I would have about half my debt forgiven.  Over the 10 years one’s income would most like rise though which would also increase the total of payments.

There are some drawbacks.  If you don’t stay in public service for 10 years than you won’t receive any loan forgiveness and any interest that remains unpaid because of IBR payments is capitalized when the borrower leaves the program. You don’t have to be in public service to use the IBR program though and it forgives any remaining debt after 25 years.  Another potential pitfall is that the amount of forgiven debt is treated as income in the year it is forgiven.  This could result in a huge tax bill.  They may address this issue but I’m not aware of any solutions yet.

All in all it is a good deal though and I’m worrying a little less about my huge student loan debt.  Make sure you get all the relevant information if you wish to take advantage of this program.

Accounting for Student Loans

My student loans are messing up my monthly total of income and expenses.  I don’t include my student loans as income because they aren’t income.  Right now though some of my living expenses are being paid from my student loan surplus.  When I pay back my student loan this will result in the surplus being counted as an expense twice.  The easy way to avoid this would be to not use my student loans for anything except tuition but I can’t quite do that right now.  I might be able to replace the money I used from the surplus when I receive my tax refund and tax rebate.  If I did that then I would use all of my student loan surplus towards paying off my higher rate student loan.  That would make my student loans just count as one expense and keep my accounting straight.  I don’t think I’ve done a very good job of explaining this but if anyone can understand it and has any suggestions I would be happy to hear them.

March Credit Score

My credit score for March is 781 which is down from 787 in February.  I’m not sure why it went down but that small change would be unlikely to make any difference if I were to apply for credit.  Next month my credit score will likely go down quite a bit since I transferred $4,900 of my student loans to my credit card.  The hit on my credit score won’t really matter though because the only credit I expect to use in the near future are Stafford loans for school in the fall.  My credit score won’t affect the interest rate I receive on those.