Mentor

Author: it-teaam

  • Shark Tank Reject Makes Lemonade With Richard Branson, Raises $209 Million

    Shark Tank Reject Makes Lemonade With Richard Branson, Raises $209 Million

    If you’re a fan of Shark Tank, then you may remember Jamie Siminoff.

    In September 2013, he pitched his company, then called DoorBot, in hopes of raising $700,000 for his revolutionary video doorbell.

    However, the sharks were not biting and Siminoff walked away without an investment. Kevin O’Leary even delivered his signature “You’re dead to me” line.

    Their loss.

    Today, Siminoff’s company – now known as Ring – has raised $209 million from some of the world’s top investors, including Kleiner Perkins, First Round, Richard Branson, Goldman Sachs, DFJ Growth, Qualcomm Ventures, American Family Insurance, Amazon Alexa Fund and Shea Ventures, among others. This includes the $109 million Ring raised last month in its Series D round, which was led by DFJ Growth, Goldman Sachs and Qualcomm Ventures.

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    What is Ring?

    Ring makes, among other products, a wireless, video doorbell that connects to your smartphone so that you can remotely see and speak real-time to the person at the door through your mobile device – even if you are not actually home.

    Ring’s mission is to reduce crime in communities and empower consumers by creating a “ring” of security around homes and neighborhoods. Since burglars tend to ring the door bell before breaking into a home, Ring serves as a home security device that you can access from anywhere in the world.

    Siminoff, Ring’s founder and CEO, spoke with Mentor Money and Forbes about Ring, Shark Tank, Richard Branson, technology, reducing crime and more:

    Zack Friedman (ZF): Do you consider yourself an entrepreneur or an inventor?

    Jamie Siminoff (JS): I don’t consider myself an entrepreneur. I thought I was an entrepreneur after college, but as I have matured in business, I realized that I am and always have been an inventor. Conceiving new products that solve problems and bringing them to market is my passion.

    ZF: Why did you start Ring?

    JS: I was working out of my garage at the time and could not hear the doorbell ring anytime someone came by. I looked online for a Wi-Fi doorbell and could not find one available anywhere. So I built it.

    ZF: How did you start Ring?

    JS: I started Ring in an attempt to solve a problem I was having. It started as a small company in my garage. We successfully crowdfunded our first product, got some great customer feedback and  went on Shark Tank. Then, we went back to redesign and rebuild a better, more sophisticated device.

    ZF: Tell us about your Shark Tank experience. What was it like being in the tank and meeting the sharks?

    JS: It was amazing. I was always a fan of the show so when I went out there and really did it, it felt surreal. A lot of people don’t realize how cutthroat it actually is. You have one hour to pitch your idea, and no do-overs. None of the sharks are briefed ahead of time; it’s your job to sell the idea. A lot of time went into preparing for it, which is where I think why a lot of people fail in getting an offer – they just don’t prepare enough.

    ZF: How did it feel to walk away without a deal?

    JS: We were broke at the time. Literally, we had zero dollars in the bank, so it felt awful to walk away without a deal. I think I actually cried on the way home. I was so sure I was going to get a deal. I just remember going back to my garage (that we were running the company out of at the time) and having to tell the team that we did not get a deal and still had no money. That was a tough moment.

    ZF: How did you first raise capital? What do you think your investors saw in you and Ring’s potential?

    JS: Our first investors really invested in me and my passion behind the product/idea and its potential to help people. I do not think that they believed in the product so much in itself, but they believed I would figure out a way to make something work. Let’s just say we were both lucky I did!

    ZF: How did Richard Branson become an investor?

    JS: A Ring customer was on his island having dinner with Richard.  Our customer was showing Richard the app while also telling the delivery person where to put the package. He did that from Richard’s island, 3,000+ miles from his house. Richard loved it and thought it would be a great holiday gift for his friends and family. It was when Richard and I started talking that he learned about our mission of reducing crime in neighborhoods and really became interested in investing.

    ZF: How is Ring changing the landscape as a disruptor?

    JS: We are creating a “neighborhood watch for the digital age,” a proactive solution homeowners can use to protect their homes and families.

    ZF: Help us understand the technology behind Ring.

    JS: All of our products are built with the idea of “Always Home,” which is our customer promise. Whether you are in the back bedroom or halfway around the world, our products make you feel like you are right there in the home. More importantly, the visitor interacting with you through the product also feels that you are in the home.

    ZF: You started with a video doorbell and now you have expanded into other products. Tell us more.

    JS: Everything we create supports our mission of reducing neighborhood crime. In order to achieve that mission, we make products around three rings of security:

    1. The first ring is the most important, the ring of security around your front door. Most home burglaries start with a knock on the door or a ring of the doorbell. When you want to deliver on the promise of “Always Home,” the Ring of Security around your front door is really critical.  We currently have three products for this Ring: the Ring Video Doorbell Classic, Ring Video Doorbell Pro and Ring Video Doorbell Elite.

    2.  The second ring is the Ring of Security around your home. A burglar typically checks for occupancy by ringing the doorbell or knocking on the front door, but then breaks in through a side window or a back door where no one can see them. For this Ring of Security, we have our Stick Up Cam and Floodlight Cam.

    3. The Ring of Security around your neighborhood is the third ring. This is where we leverage our large and ever-growing network of neighbors (internally, we call our customers our neighbors) and tie it together to make the actual neighborhood safer.  We have a feature in our app for sharing Ring recorded videos and comments now, we are integrated with next door and we are investing a lot around this area.

    ZF: What’s the most important lesson you have learned as an entrepreneur and CEO?

    JS: To empower everyone. It is amazing how many people grow and achieve success when you take off the management handcuffs.

    ZF: What’s the hardest thing about being an entrepreneur?

    JS: Initially, it was just trying to get the company going, and all of the stress that goes along with that. Now, as it’s getting bigger, it is the responsibility I have to the team to continue to drive the business in the right direction. I sometimes think to myself, “If I make a big mistake at this point, I will lose my investors, $209 million, and 1,000 people on my team will be out of jobs.” That does weigh on me.

    ZF: Which other entrepreneurs or CEOs do you admire?

    JS: James Dyson. He is the magical blend of brand and product.

    ZF: What’s the biggest mistake you’ve made and what did you learn?

    JS: Trusting any of our product development to third parties. With our first product, before we introduced the Ring Video doorbell, we trusted a few outside shops to work on things like our Wi-Fi antennas. Those were always the areas where we had the most trouble. We now do all of that in-house and control our products end to end.

    ZF: What can we expect from Ring in the future?

    JS: Safer neighborhoods at a global scale powered by Ring and made possible by our awesome neighbors (customers)

    ZF: What message can you offer to the young entrepreneur who wants to follow in your footsteps?

    JS: I have seen many different routes to success. My only “advice” – and this is more of an observation – is that if you follow your passion, even if you fail, you at least did something that you found interesting. You will spend a lot of time doing your business away from family and other things, and numbers show that more than likely you will fail.

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  • Will Public Service Loan Forgiveness Be Eliminated?

    Will Public Service Loan Forgiveness Be Eliminated?

    According to The Washington Post, which reviewed draft budget documents prepared by the Trump administration, federal education initiatives may be cut by $10.6 billion in a push to expand school choice.

    The budget also calls for about $400 million in spending for charter schools and for vouchers for private and religious schools, as well as $1 billion for public schools to incorporate school choice policies.

    The budget documents, which have not been reviewed by Forbes, have been described as a “near final version,” and are expected to be made public next week when President Trump releases his budget.

    Here is what you need to know, including which programs may be impacted.

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    Which programs may be impacted?

    Some of the programs that could be reduced or eliminated include, but are not limited to:

    • Funding for college work-study programs (reduced)
    • Public Service Loan Forgiveness (eliminated)
    • Public school funding (reduced)

    Special education and Title I funds would remain unchanged compared to federal funding levels in the first half of fiscal 2018, although at least 22 programs could be cut, including some after school programs that serve 1.6 million children.

    Other potential cuts include a $15 million program that provides child care for low-income parents in college, $12 million for Special Olympics education programs, and some arts and foreign language programs, among others.

    What’s the impact to federal financial aid?

    The impact to federal financial aid could include:

    • $700 million in cuts to Perkins Loans for disadvantaged students
    • $487 million in cuts to federal work-study programs
    • $16.3 billion over 10 years in additional spending for Pell Grants and support for year-round Pell Grants (although $3.9 billion would be taken from the Pell program’s reserves).
    • $8 billion in cuts to subsidized student loans

    The Congressional Budget Office estimates that ending subsidized federal student loan lending – in which the federal government pays the interest cost for certain student loans while a borrower is in school – would save $26.8 billion over 10 years.

    What is the fate of Public Service Loan Forgiveness?

    Under the proposed budget, the Public Service Loan Forgiveness program would be eliminated.

    The Public Service Loan Forgiveness program is a federal program that forgives federal student loans for borrowers who are employed full-time (more than 30 hours per week) in an eligible federal, state or local public service job or 501(c)(3) non-profit job who make 120 eligible on-time payments over 10 years.

    While more than 550,000 borrowers have signed up for Public Service Loan Forgiveness, no student loans have been forgiven under this program, which began in 2007 and requires 10 years of employment in public service.

    This is not the first sign that Public Service Loan Forgiveness may be under review within the Education Department, which is led by U.S. Secretary of Education Betsy DeVos.

    In a legal filing March 23, the Education Department said that student loan borrowers could not rely on approval letters for Public Service Loan Forgiveness sent by the program’s administrator, FedLoan Servicing, because any approvals are considered tentative.

    Although there is no guarantee, existing borrowers could be grandfathered in to the current Public Service Loan Forgiveness program, since they borrowed with the expectation of entering public service and qualifying for loan forgiveness.

    What is the future of student loan repayment?

    Last October, then-candidate Trump proposed an income-based repayment plan that would allows borrowers to cap their monthly student loan payments based on their income, and then have their student loans forgiven after a certain period of time.

    Today, the standard federal government student loan repayment period is 10 years.

    Under the Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE) income-driven repayment plans, borrowers pay 10% of discretionary income each month toward their federal undergraduate student loans for 20 years, at which point any remaining balance on federal undergraduate student loans is forgiven.

    Under REPAYE, for borrowers who have graduate school student loan debt, the repayment period is 25 years before the remaining student loan debt is forgiven.

    The draft budget seeks to combine the current federal repayments plans into a single repayment plan – consistent with Trump’s campaign promise.

    The repayment plan, however, would apply differently to undergraduate and graduate student loan borrowers.

    For undergraduate student loan borrowers, monthly student loan payments would be capped at 12.5% of income. After 15 years of monthly payments, any remaining student loan debt would be forgiven.

    However, graduate student loan borrowers would not receive the same benefit. While graduate student loan borrowers would have monthly student loan payments capped at 12.5% of income, student loan forgiveness would not occur until after 30 years (5 years later than the current repayment period under REPAYE).

    How will student loan borrowers be impacted?

    Here are some takeaways, although there are many others:

    • If subsidized student loans are eventually reduced or eliminated, the cost to attend college and graduate school could become more expensive
    • A reduction of multiple repayment plans to a single repayment plan may simplify the student loan repayment process
    • Undergraduate student loan borrowers could have their student loans forgiven after 15 years (five years sooner), which potentially can save interest costs for the borrower and eliminate student loan debt five years sooner than the current repayment plan.
    • However, graduate student loan borrowers could have their student loans forgiven after 30 years (five years later).
    • Public servants would not be able to rely on Public Service Loan Forgiveness to have their student loans forgiven after 10 years, and alternatively would participate in the proposed 15-year or 30-year repayment plan (depending on undergraduate or graduate degree)
    • Year-round Pell Grants could enable students to attend three semesters of college per year, which can help students borrow less and graduate faster.

    Is this budget plan final and will it become law?

    No. This is a draft budget proposal that is subject to change before it is released by the Trump administration next week.

    Importantly, while the President proposes a budget, only Congress passes appropriation bills. Therefore, the President will present his budget to Congress, and the budget will be further debated before any spending or spending cuts are initiated.

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  • This Fearless Girl May Change Wall Street

    This Fearless Girl May Change Wall Street

    On the eve of International Women’s Day, State Street Global Advisors, the asset management business of State Street Corporation, called on over 3,500 companies with an aggregate market capitalization of $30 trillion, to increase the number of women on their corporate boards.

    In conjunction with this call to action, State Street placed a bronze statue of a determined young girl staring down the sculpture, Charging Bull – a long-standing symbol of Wall Street – in Bowling Green Park in Lower Manhattan.

    “One of the most iconic images on Wall Street is the charging bull,” Lori Heinel, State Street’s deputy global chief investment officer, told Business Insider. “So the idea of having a female sort of stand against the bull or stand up to the bull just struck us as a very clever but also creative and engaging way to make that statement. Even though it’s a little girl, her stance is one of determination, forwardness, and being willing to challenge and take on the status quo.”

    According to State Street, although there has been progress regarding the inclusion of women on corporate boards, one of four Russell 3000 companies has no women on its board of directors, and women comprise less than 15% of the boards of directors of nearly 60% of Russell 3000 companies.

    “We believe good corporate governance is a function of strong, effective and independent board leadership,” said Ron O’Hanley, president and chief executive officer of State Street Global Advisors, in a statement. “A key contributor to effective independent board leadership is diversity of thought, which requires directors with different skills, backgrounds and expertise. Today, we are calling on companies to take concrete steps to increase gender diversity on their boards and have issued clear guidance to help them begin to take action.”

    According to an MSCI study cited by State Street, companies with strong female leadership generated a return on equity of 10.1% per year versus 7.4% for those without a critical mass of women at the top, which is a 36.4% increase of average return on equity.

    “Most large-cap company boards in [Australia, the U.K. and the U.S.] have at least one female director but have yet to fully embrace gender equality in their ranks,” said Rakhi Kumar, head of corporate governance at State Street Global Advisors. “We believe boards have an important role to play in increasing gender diversity and believe our guidance can help directors take action now.”

    State Street Global Advisors, which manages nearly $2.5 trillion in assets, partnered with New York City officials to install the Kristen Visbal-designed sculpture, which is expected to remain at least for one month in Bowling Green Park. Charging Bull was designed in December 1989 by Italian-born artist Arturo Di Modica.

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  • 7 Financial Moves To Make Now

    7 Financial Moves To Make Now

    Investing is one of the best strategies to build and preserve wealth and save for retirement. Here are 7 financial moves that you can make right now.

    These money moves are easy investments that you can make to improve your financial life, save you money and lower your tax bill:

    1. Defer your income

    If you have a choice between receiving income this year or next year, you should opt for next year to defer the income taxes associated with that income. Why? Income tax is due in the year in which it is incurred. Therefore, if you receive income after January 1, then it will be taxed as next year’s income and you can defer the tax liability.

    If you are self-employed or a consultant, you have more control over when you bill customers and therefore can defer income more easily than if you are an hourly or salaried employee. However, you may be able to defer your bonus to next year if your company offers this option.

    This strategy only makes sense if you expect to be in the same or lower tax bracket in 2019. If you expect to be in a higher tax bracket next year, then you may be better off receiving the income this year and paying income tax in the lower tax bracket.

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    2. Sell Portfolio Losers

    Tax loss harvesting, or selling stock that has declined in value to realize a tax loss, is an optimal strategy at year end. Why? Tax loss harvesting enables you to offset all investment losses against your investment gains, thereby lowering your tax bill.

    For example, let’s say you recently sold 100 shares of Company ABC stock and made a $1,000 profit. If you owned the stock for more than one year, you would pay long-term capital gains tax on your profit. However, there is a way to offset your stock gain and not pay capital gains tax.

    Let’s say that you bought 100 shares of Company XYZ for $100 per share for a total cost of $10,000. Unfortunately, the share price of Company ABC declined and its current share price is $90. On paper, you lost $1,000 ($10,000 – $9,000). If you sell all your shares of Company ABC today, you can recognize that $1,000 loss on your income taxes. Your gain on Company ABC and loss on Company XYZ offset each other, and there is no capital gains tax liability.

    There are two main limitations on the above example. First, the “wash sale” rule prohibits you from selling your Company XYZ shares, harvesting the tax loss and then repurchasing Company XYZ stock (or a stock substantially identical to Company XYZ) within 30 days.

    Therefore, if you sold Company XYZ at $90 per share and then decide you want to purchase more shares of Company XYZ at $85, for example, you would need to wait 30 days from the date of sale if you want to claim the tax loss. Second, after offsetting your investment losses, if you are single or a married couple, you can use $3,000 of capital losses each year to offset ordinary income (and $1,500 if married filing separately).

    For example, if you have $9,000 of capital losses and no capital gains in the current tax year, you can use $3,000 to offset ordinary income this year, and $3,000 in each of the next two years to offset ordinary income in those years.

    3. Never buy a mutual fund in December

    If you’re looking to buy a mutual fund now, wait until the new year. Each December, many mutual funds pay out dividends and capital gains that have accrued during the year. It may be tempting to buy the mutual fund right before the mutual fund makes such a distribution. However, while you would receive the distribution for each share you own, you must pay tax on the distribution. This is called “buying the dividend” and is a poor investment strategy.

    For example, let’s assume Company ABC declared a $1 per share dividend and will pay investors on December 20. On December 15, in anticipation of receiving this dividend, you decide to buy 100 shares of Company ABC at $10 per share. Therefore, you are entitled to $100 in distributions (100 shares multiplied by $1 dividend per share).

    Typically, all else equal, the price of the underlying stock will fall by the amount of the dividend. In this example, Company ABC should trade at $9 per share ($10 – $1). That means you not only have a lower share price, but also a tax liability.

    The smarter move is to wait until after the dividend is paid to purchase the mutual fund. You can contact the mutual fund company and ask them when the next dividend distribution will be made so you don’t buy the dividend (and the tax liability).

    4. Max out your 401(k) contributions

    Due to the power of compounding, tax-deferred retirement accounts are an optimal strategy to grow your wealth. If your company matches a portion of your 401(k) contributions, then even better.

    Make sure that you contribute the maximum amount each year to your 401(k). In 2019, you can contribute $18,000 (or $24,000 if you are over 50). At a minimum, try to contribute as much as you can to qualify for an employer match.

    5. Convert to a Roth IRA

    A Roth IRA is a retirement account that allows you to contribute after-tax earnings now and keep all the appreciation tax-free. That means when you retire and start permitted withdrawals from your Roth IRA, the funds will not be taxed.

    For example, if you put $10,000 of after-tax earnings into a Roth IRA at age 30, you would have $106,766 at age 75 (assuming a 7% annual return and no further contributions). If you are a millennial, a Roth IRA makes good financial sense because you are relatively early in your career and can generally expect your income and tax bracket to increase over time.

    If you have a Traditional IRA, you may want to consider converting to a Roth IRA. If you choose to convert to a Roth IRA, you will owe taxes on the current balance of your Traditional IRA. One major factor that may drive your decision is your expected tax rate in retirement.

    If you expect your tax rate to increase in retirement, then it may be better to pay taxes now on the existing balance in your Traditional IRA and convert to a Roth IRA. If you expect your tax rate to decrease in retirement, then keeping your Traditional IRA may be the better decision. Another advantageous time to convert is a tax year in which you have low income because you will be in a lower tax bracket.

    With tax rates likely to fall next year, waiting until the start of 2019 might be the optimal time for a Roth IRA conversion. Why?

    Once you convert to a Roth IRA, you have until the last date, including extensions, for filing your prior-year tax return, which is typically on or about October 15, to change your mind and undo (or “recharacterize”) your Roth IRA conversion. Therefore, during this period, you can monitor the stock performance of your converted holdings and decide to recharacterize your Roth IRA to a Traditional IRA if the value of your stock portfolio declines.

    6. Make charitable contributions

    In addition to making a positive difference, you can deduct the amount of your charitable contribution on your income taxes. While cash is the traditional currency for charitable giving, you can also donate stock that has appreciated in value.

    Rather than sell the stock and donate the after-tax proceeds, you can gift the stock to the public charity of your choice and take a tax deduction on the full fair market value of the stock (if you owned the stock for at least one year). You can deduct up to 30% of your adjusted gross income. Plus, when you donate appreciated stock, you will not owe any capital gains taxes.

    7. Use your flex spending

    Flexible spending accounts are pre-tax accounts offered by many employers. If you have health insurance through your employer, you can use your flexible spending account to pay medical and dental co-payments, deductibles, medicine and other health care costs. You can contribute up to $2,550 per year per employer. If you are married, your spouse can also contribute $2,550.

    A dependent care flexible spending account allows you to use pretax dollars to pay for eligible expenses related to care for your child or other dependents up to $5,000 per year for individuals or married couples filing jointly (or $2,500 if you are married filing separately).

    The good news is that you do not pay taxes on any contributions to your flexible spending account.

    Make sure to use all your flexible spending benefits because the remaining funds in your account are forfeited when the plan year ends. If December 31 marks the end of your plan year, then now is not too late to visit a doctor, refill a prescription or buy a pair of new glasses.

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  • Bill Gates Tweets This Life Advice To College Grads

    Bill Gates Tweets This Life Advice To College Grads

    On Monday, as first reported by Business Insider, Bill Gates tweeted some advice to new college graduates.

    Here are his words of wisdom, in 14 tweets:

    1/ New college grads often ask me for career advice. At the risk of sounding like this guy…

    2/ AI, energy, and bio sciences are promising fields where you can make a huge impact. It’s what I would do if starting out today.

    3/ Looking back on when I left college, there are some things I wish I had known.

    4/ E.g. Intelligence takes many different forms. It is not one-dimensional. And not as important as I used to think.

    5/ I also have one big regret: When I left school, I knew little about the world’s worst inequities. Took me decades to learn.

    6/ You know more than I did when I was your age. You can start fighting inequity, whether down the street or around the world, sooner.

    7/ Meanwhile, surround yourself with people who challenge you, teach you, and push you to be your best self. As @MelindaGates does for me.

    8/ Like @WarrenBuffett I measure my happiness by whether people close to me are happy and love me, & by the difference I make for others.

    9/ If I could give each of you a graduation present, it would be this–the most inspiring book I’ve ever read.

    10/ @SAPinker shows how the world is getting better. Sounds crazy, but it’s true. This is the most peaceful time in human history.

    11/ That matters because if you think the world is getting better, you want to spread the progress to more people and places.

    12/ It doesn’t mean you ignore the serious problems we face. It just means you believe they can be solved.

    13/ This is the core of my worldview. It sustains me in tough times and is the reason I love my work. I think it can do same for you.

    14/ This is an amazing time to be alive. I hope you make the most of it.

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  • The Ultimate Guide To Student Loan Forgiveness

    The Ultimate Guide To Student Loan Forgiveness

    There are various student loan forgiveness programs ranging from Public Service Loan Forgiveness to Teacher Loan Forgiveness.

    The Ultimate Guide To Student Loan Forgiveness can help make student loan forgiveness simpler. If you’re looking for student loan forgiveness, you have several options. The type of student loan forgiveness may depend on whether you have a Direct Loan, a FFEL Program Loan or a Federal Perkins Loan. Since each type of student loan has different forgiveness, cancellation and discharge options, it is important to understand the types of loans you have before making any assumptions.

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    Teacher Student Loan Forgiveness

    Teachers are public servants who are often underpaid, but who create significant positive impact in our communities.

    To give back to teaches for their selfless service to others, the federal government created a teacher student loan forgiveness program. The goal of the Teacher Student Loan Forgiveness Program to encourage promising individuals to enter into the teaching profession and to give back to their communities in low income schools.

    What are eligibility requirements for Teacher Student Loan Forgiveness?

    You must be a full-time teacher for five consecutive years in a designated elementary or secondary school or educational service agency that serves students from low income families. Also, your loans must have originated after October 1, 1998.

    Which loans are eligible for Teacher Loan Forgiveness?

    Federal direct loans and Stafford Loans are eligible for teacher loan forgiveness, whereas Parent PLUS loans are not eligible.

    How much of your student loan will be forgiven?

    If you are eligible, you can have up to $5,000 forgiven (up to $17,500 for elementary/secondary special education teachers and secondary math and science teachers). If you have a direct consolidation loan or FFEL consolidation loan, then only the portion used to repay the original Direct or FFEL Loan will qualify for student loan forgiveness.

    How do I apply for teacher loan forgiveness?

    You can apply by using the Teacher Loan Forgiveness Application.

    Public Service Loan Forgiveness

    What Is Public Service Loan Forgiveness?

    Public Service Loan Forgiveness forgives federal student loans for borrowers who are employed full-time in an eligible state, local or federal public service job or 501(c)(3) non-profit job who make 120 eligible on-time payments after October 1, 2007. This equates to 10 years of student loan payments.

    The 10 years of student loan payments can be made under several qualifying plans:

    • Standard Repayment
    • Income-Based Repayment (IBR)
    • Pay As You Earn Repayment (PAYE)
    • Revised Pay As You Earn (REPAYE)
    • Income-Contingent Repayment (ICR)

    Most borrowers prefer an income-based repayment plan because they can lower their monthly student loan repayment, thereby taking full advantage of the Public Service Loan Forgiveness by having a larger amount of their student loan forgiven. To qualify for public service loan forgiveness, you must make at least a majority of your student loan payments while enrolled in an income-driven repayment plan such as IBR, PAYE, REPAYE and ICR.

    What are eligibility requirements for Public Loan Forgiveness?

    To be eligible, a borrower must either have a direct loan or a consolidated student loan, including loans under Family Federal Education Loans (FFEL), which existed before direct loans were introduced. To remain eligible for Public Service Loan Forgiveness, FFEL (as well as Perkins Loans) must be consolidated under direct loans. You do not have to be employed at the same employer continuously for 10 years.

    Which types of student loans are eligible for the Public Service Loan Forgiveness Program?

    Direct loans or a consolidated student loan are eligible. This includes:

    • Federal Direct Subsidized Stafford/Direct Loans
    • Federal Direct Unsubsidized Stafford/Direct Loans
    • Federal Direct Consolidations Loans
    • Federal Direct PLUS Loans (for parents and graduate and professional students)

    How much of my direct federal student loan can be forgiven through Public Service Loan Forgiveness?

    100% of your student loan can be forgiven. There is no limit as there is with Teacher Student Loan Forgiveness.

    How can I apply for Public Service Loan Forgiveness Program?

    You will need to submit the Public Service Loan Forgiveness Employment Certification Form. Then, you should submit the form to FedLoan Servicing. FedLoan Servicing will inform you if you are eligible, how many qualifying student loan payments you have made, and how many qualifying student loan payments remain for you to qualify for Public Service Loan Forgiveness.

    The chart below summarizes other key types of student loan forgiveness and student loan cancellations, including the reason for discharge and the amount of the student loan that can be discharged.

    Federal Perkins Student Loan Cancellation For Teachers

    Who is eligible for a Federal Perkins Student Loan Cancellation Program? How much of your student loan can be forgiven?

    Federal Perkins student loans can be forgiven up to 100% for teachers who work full-time at a qualifying low income public or non-profit elementary or secondary school in subject areas such as math, science and special education for a period of five years.

    How is the student loan cancellation applied over the five years?

    Year 1: 15% of your student loan

    Year 2: 15% of your student loan

    Year 3: 20% of your student loan

    Year 4: 20% of your student loan

    Year 5: 30% of your student loan

    How do you apply for federal Perkins student loan cancellation if you are an eligible teacher?

    You should contact the school from which you borrowed your loan and the school will determine your eligibility under the program.

    Student Loan Forgiveness: Summary Thoughts

    It is important to understand your options with respect to student loan forgiveness. In addition to student loan forgiveness, you can consider the various student loan repayment plans, or even deferral or forbearance.Alternatively, you can look to federal loan consolidation or private student loan refinance.

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  • Student Loan Deferment and Student Loan Forbearance

    Student Loan Deferment and Student Loan Forbearance

    Student loan deferment and student loan forbearance are often confused with the many types of student loan forgiveness programs that a borrower might come across.  These two tools can be lifesavers for a borrower who is having trouble making his or her student loan payments.

    However, these tools are not the same as student loan forgiveness. First, student loan deferment and student loan forbearance will ultimately not result in automatic student loans forgiveness, student loan repayment or student loan cancellation. Second, these tools can, and generally do, extend the life of the student loan repayment period and in some cases, the total amount of the student loan to be repaid.

    With that out of the way, how can student loan deferment or student loan forbearance help you? If you are having trouble making student loan payments, applying for a deferment may be one option.

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    Student Loan Deferment

    A student loan deferment does just that – it defers student loan payments for a set period of time.  During that time, the borrower is not required to pay either the student loan principal or the student loan interest.  Depending on the type of loan you have, and the type of deferment you are looking at, the federal government may also pay the interest on your student loan during the deferment period.

    While some student loan deferments may be automatic, the vast majority are not. You have to apply for a student loan deferment and meet certain requirements before you will be accepted for this temporary delay in payments.

    The U.S. Department of Education can provide you with detail about various student loan deferment options that are available for federal student loans. Private loans usually do not have student loan deferment options, however, many student loan companies now offer student loan deferment options. If you are interested in a student loan deferment, you should contact your student loan servicer for Federal Direct and FFEL loans or the school you attended when you received your student loan if you are requesting a student loan deferment for a Perkins loan.

    Student Loan Forbearance

    The terms of the student loan forbearance process are usually, but not always, tougher than those granted with a student loan deferment.  You might apply for a student loan forbearance if you are having trouble making your monthly student loan payments, but you do not qualify for a student loan deferment, usually due to illness or financial hardship.

    While you can generally (although not always) apply for a student loan deferment whenever you qualify for as long as you qualify, most private student loan lenders have a limit on the amount of time that they will allow the loan to be in student loan forbearance. In certain very limited circumstances, detailed by the U.S. Department of Education, you may be eligible for a mandatory forbearance.  If that is the case, your lender must grant you the forbearance.

    Unlike student loan deferment, you will accrue student loan interest on any student loans in forbearance (including subsidized student loans).  You may choose to pay this student loan interest while your student loan is in forbearance, but you are not required to do so. If you don’t pay the interest as it accrues, your unpaid accrued interest will be capitalized and added to your principal balance.

    The U.S. Department of Education can help inform you if you qualify for a student loan deferment or a student loan forbearance. But remember – if you choose to apply for either of these options, be sure you have been approved before you stop making payments. You risk defaulting on your student loans if you stop paying prior to approval.

    Remember – before you make the call to apply for student loan deferment or student loan forbearance, there are other options to make student loan repayment more manageable, while still paying off student loan debt.

    Mentor’s Student Loan Repayment Guide and Student Loan Refinancing Guide both can help you understand what other options might be available to you.

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  • Public Service Loan Forgiveness: The Ultimate Guide

    Public Service Loan Forgiveness: The Ultimate Guide

    If you work in public service, or are planning a career in public service, then you have the potential to save thousands of dollars on your student loans with Public Service Loan Forgiveness. This guide will help you learn everything you need to know about public service loan forgiveness.

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    What Is Public Service Loan Forgiveness?

    The Public Service Loan Forgiveness Program is a federal program that forgives federal student loans for borrowers who are employed full-time (more than 30 hours per week) in an eligible federal, state or local public service job or 501(c)(3) non-profit job who make 120 eligible on-time payments.

    This equates to 10 years of monthly student loan payments that are on-time and in full.

    Insider Tip: Only payments made after October 1, 2007 are eligible. Therefore, any student loan payments made prior to this date would not count toward the 120 payments.

    The 10 years of monthly student loan payments can be made under several qualifying student loan repayment plans:

    • Standard Repayment
    • Income-Based Repayment (IBR)
    • Pay As You Earn Repayment (PAYE)
    • Revised Pay As You Earn (REPAYE)
    • Income-Contingent Repayment (ICR)

    Insider Tip: To be eligible for Public Service Loan Forgiveness, you have to make the majority of the 120 student loan repayments under an income-driven repayment plan.

    Most borrowers prefer an income-based repayment plan because they can lower their monthly student loan repayment, and have a larger amount of their student loan forgiven. In contrast, the Standard Repayment plan assumes that all your student loans will be paid off in 10 years. Therefore, if you are enrolled in this repayment plan, there would not be any remaining student loans to forgive at the end of the repayment period.

    Which Types Of Student Loans Are Eligible For Public Service Loan Forgiveness?

    There are only two types of student loan that are eligible for Public Service Loan Forgiveness:

    • Direct Loans
    • Federal Direct Consolidation Loan

    Only Direct Loans issued by the federal government are eligible for Public Service Loan Forgiveness. Eligible Direct Loans include:

    • Federal Direct Subsidized Stafford/Direct Loans
    • Federal Direct Unsubsidized Stafford/Direct Loans
    • Federal Direct PLUS Loans (for parents and graduate and professional students)
    • Federal Direct Consolidation Loans

    What Types Of Student Loans Are Not Eligible For Public Service Loan Forgiveness?

    If you have one of the following student loans, they are not eligible for Public Service Loan Forgiveness:

    • Private Student Loans
    • Federal Perkins Loans
    • Federal Family Education Loans (FFEL)

    Insider Tip: Therefore, if you have a student loan that you borrowed from a private student loan lender such as Sallie Mae, then this type of student loan is ineligible.

    How Do I Know If My Federal Student Loans Are Direct Student Loans?

    You can check your federal loan type at My Federal Student Aid. If you see a loan type with the name “Direct,” then you have a Direct Loan. Otherwise, you have a student loan under a different federal program.

    Are There Any Exceptions For Public Service Loan Forgiveness?

    There are a few exceptions, including:

    • Direct Loans & Private Loans: While private student loans are not eligible for Public Service Loan Forgiveness, if you have a private loan and a Direct Loan, the Direct Loan portion is still eligible.
    • Federal Perkins & FFEL. If you consolidate your Federal Perkins Loans and/or Federal Family Education Loans (FFEL), then these student loans would become eligible. However, only payments toward your Consolidated Loan count toward the 120 payments. If you made any prior payments before consolidating your student loans, then those payments would not count.

    How Much Of My Direct Federal Student Loans Can Be Forgiven Through Public Service Loan Forgiveness?

    100% of your direct federal student loans can be forgiven.

    Insider Tip: You do not have to be employed at the same employer continuously for 10 years to qualify.

    If I Work In Public Service, Are My Student Loans Automatically Forgiven?

    No. Public Service Loan Forgiveness is not automatic. You have to apply once you have made qualifying payments each month for 10 years for a total of 120 payments.

    How Can I Apply For Public Service Loan Forgiveness?

    Make sure to complete an Employer Certification Form to the U.S. Department of Education each year and whenever you change jobs. This form will inform the U.S. Department of Education whether your employer qualifies under the program for public service loan forgiveness.

    After you make 120 qualifying monthly payments, you will then submit the application to receive loan forgiveness.

    In the interim, although not required, you should submit the Public Service Loan Forgiveness Employment Certification Form  annually or whenever you change jobs to help you track your progress toward meeting the eligibility requirements. This form verifies that you have completed the employment requirements each year for the program. The U.S. Department of Education will review your form to ensure it is complete and meets the employment requirements.

    Then, you should submit the form and employer’s certification to FedLoan Servicing, which is the U.S. Department of Education’s student loan servicer for the program. FedLoan Servicing will inform you if you are eligible, how many qualifying student loan payments you have made, and how many qualifying student loan payments remain for you to qualify for Public Service Loan Forgiveness.

    How Many Borrowers Have Submitted An Employment Verification Form For Public Service Loan Forgiveness?

    As of September 30, 2016, there are 494,200 cumulative Public Service Loan Forgiveness borrowers.

    While the first borrower for Public Service Loan Forgiveness will be eligible for the program starting in October 2019, FedLoan Servicing has tracked the number of borrowers who have self-identified as interested in Public Student Loan Forgiveness based on their (annual) submission of an employment certification form.

    Since 2012, 740,872 employment certification forms have been approved and 372,422 have been denied.

    Are There Other Types of Student Loan Forgiveness?

    Yes, there are other types of student loan forgiveness such as Teacher Student Loan Forgiveness and Perkins Loan Cancellation. There are also alternatives to Student Loan Forgiveness such as student loan refinancing and student loan consolidation, for example, which do not require employment in public service.

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  • How This 29-Year-Old Paid Off $113,000 In Student Loans In 7 Years: Part 2

    How This 29-Year-Old Paid Off $113,000 In Student Loans In 7 Years: Part 2

    Student loan repayment in less than 7 years. Meet Jessica Elberfeld – the Millennial who did it and shared her story with Mentor.

    Jessica Elberfeld paid off $113,000 in student loans in less than seven years.

    In Part 1 of How This 29-Year-Old Paid Off $113,000 In Student Loans In 7 Years, Elberfeld shared with Mentor (and Forbes) her inspiring student loan journey and her strategy for student loan repayment. With interest rates as high as 10.75%, Elberfeld knew she had to do something about her student loans than make an interest-only payment.

    Here is Part 2 of our interview, in which Elberfeld discusses student loan mistakes, Dave Ramsey, Robert Kiosakyi, IRAs, her financial goals and more:

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    Zack Friedman (ZF): What student loan repayment mistakes, if any, did you make along the way?

    Jessica Elberfeld (JE): My “extra payments” to Sallie Mae came in the form of lump sum payments to my savings account. So instead of putting my extra $200 one week directly toward a student loan payment, I would put it into my savings account. Then, I would only transfer my savings to repay my student loans once my savings reached a certain amount, which was usually $3,000 – $4,000.

    ZF: What would you have done differently?

    If I would have put every dollar directly towards a student loan when I had it and not put it into my savings account first, I could have avoided some interest.

    ZF: What student loan mistakes do you see your friends make?

    JE: Throughout this journey, I have found that some friends are pretty content with living paycheck to paycheck and some friends are 100% content with having debt.

    Some have student loans, car payments, mortgages and credit card balances; several of them have all of those combined, plus others. Once I found my way with debt payoff, I all but shouted it from the rooftop as I wanted those close to me to understand that this was the way we should be going. But, as time went on, I learned people are going to do what they want, and their want is not the same as mine.

    ZF: What advice would you offer to your friends?

    If I could suggest one piece of advice, it would be to stop financing everything just because the financing option is available; and on the items that are already financed, make a payoff plan. Knowing some friends will still have their student loans when they are in their mid-40s is tough to witness.

    ZF: What, if anything, would you have done differently in terms of student loan repayment?

    JE: I would have tried to refinance my loans again in 2014 versus 2015.

    Between 2009 and 2012, I tried refinancing with Sallie Mae, Chase and Wells Fargo. I was rejected 11 times total for the same reason: debt to income ratio. I kept all 11 rejection letters and possess 3 from Sallie Mae, 5 from Wells Fargo and 3 from Chase. That was a very discouraging time period for me so I knew I had to significantly increase my income and decrease my debt if I was ever going to qualify for student loan refinance.

    ZF: Do you have a 401(k)? Do you take advantage of your employer’s 401(k) match?

    JE: I have an IRA from a previous 401k that I rolled over. I do take advantage of my current employer’s match at 6%. I plan to open a Roth IRA this April and hope to contribute the maximum amount every year going forward.

    ZF: How did you choose between student loan repayment and retirement contribution?

    JE: When I decided to snowball my student loans, I read about Dave Ramsey’s advice to temporarily stop your 401k and stock contributions so that you focus all possible income on the loan payoff. Since it was only temporary, it made sense for my situation. However, throughout repayment, I never could quite commit to stopping so I always kept my 401k contribution at 1-2%. I understand this is not much, and it was definitely below the company match, but it was something.

    ZF: Now that your student loans are repaid, what are your other financial goals?

    JE: My first goal outside of being debt free is to fully stock an emergency fund in a money market account by this March.

    Then, I have three different plans in mind for my monthly discretionary income:

    1. Open a Roth IRA and make monthly contributions (around $450) until I have hit the contribution limit.
    2. I will be saving for a car, since I am still driving the same SUV I have had since I was 16. I am 29 now.
    3. I will be setting a little bit aside to get my feet wet in investing – whether that consists of stocks, low-cost index mutual funds or something else that I have yet to learn.

    ZF: Do you invest and, if so, what has been your investment strategy?

    JE: Other than retirement and an existing Employee Stock Purchase Plan, not at this current moment. There are two financial gurus who teach opposing investment practices, and it is my goal to keep learning more about both approaches.

    Dave Ramsey’s game plan (after fully stocking an emergency fund) is to play it safe by eliminating risk through diversification in low-cost index funds – all while being completely debt-free, of course.

    Robert Kiyosaki’s plan is to not save any money, but invest it all into income generating assets which are all fruitful, therefore eliminating the need to diversify– and in direct contract with Ramsey, use “good” debt to finance all of these investments.

    I’m on the hunt to see if I can find a middle ground between the two. Mentor can help you learn more about student loan options, investing and more:

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