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10 Facts About Student Loans That Will Save You Money

August 23, 2018

Many millennials are first-generation college students, which is awesome! Going to college is a huge achievement, and you should be proud of your hard work. Navigating the financial side of college, however, can be a little tricky. There are definitely some basic facts you should know—all of them will save you money. We’ve compiled 10 facts about student loans that will save you money. Make sure you’re reaching out to your school to see what resources are available to you and read up on how you can make good borrowing choices.

  1. Not all student loan servicers are created equal.
  2. Small differences in interest rates and origination fees can mean BIG dollars down the road.
  3. Keeping an eye on your principal can help you understand the repayment process.
  4. It could behoove you to pay interest while in school
  5. Deferment is a short-term solution that you should avoid if possible.
  6. There are different reasons to consider fixed or variable interest rates.
  7. You pay taxes on forgiven loan amounts.
  8. You might qualify for loan forgiveness.
  9. There are options if you can’t pay. Don’t try to hide.
  10. Some borrowers save tons of money with refinancing.

 

Click Here to See What You Could Be Saving 

 

Not all student loan servicers are created equal

Some people think that getting a student loan from any company or bank is roughly equal. Maybe the interest rate will be a little different, but they all offer mostly the same thing. Sadly, too many millennials have found out the hard way that some student loan companies are not as reputable as others. Whether it’s a lack of payment options, little to no deferment even, or just plain difficult customer service, there are a lot of reasons why shopping around for the best service and best options can save you time and money in the end.

 

Small differences in interest rates and origination fees can mean BIG dollars down the road

The interest rate you pay for borrowing money is a percentage that’s calculated based on the principal or the amount borrowed. Interest rates might be fixed or variable, depending on your loan, and knowing the difference will save you big money. For instance, if you get a loan with a variable rate because it’s low now, you need to know how high the rate could go, which might affect your decision. When comparing loans, check the interest rate, but also look at the life of the loan and other associated fees. For example, some lenders or products charge an origination fee as well. Here’s a scenario to show how some of these variables play out:

  • A student takes out a $20,000 loan with a 7% interest rate & 0% origination fee. This loan accrues interest monthly and when it capitalizes at repayment 48 months from now, this student will have an outstanding balance of $25,600.
  • A student takes out a $20,000 loan with an 8% interest rate & 4% origination fee. This loan accrues interest monthly and when it capitalizes at repayment 48 months from now, this student will have an outstanding balance of $27,456.

It might look like a minor change, but these small differences matter a lot!

 

Keeping an eye on your principal can help you understand repayment progress

Your principal and payoff balance will appear on your loan statements and you should note those amounts each month. Obviously, you want to see them trending down, but sometimes watching your principal balance each month will help you realize how much more impact you could have on your loans if you increased or restructured your payments.

 

It could behoove you to pay interest while in school

There’s one reason why paying even just your interest payments on student loans while in school is a good idea: compound interest. Compound interest is when your interest gets added to the principal. When this happens, your principal is higher, and you end up paying more interest. To combat it, pay interest payments! If you make these small payments while in school, you won’t graduate with even more debt than you actually took out. If you continuously defer your loans, the debt grows and grows until you start paying. This is how some people get into a lot of trouble!

 

Deferment is a short-term solution that you should avoid if possible

Student loan deferral can sound like a great deal if you’re in dire straits, but there are a lot of reasons why you should avoid student loan deferral or forbearance if at all possible. These options increase your debt and add fees to your loan. If you’re in an extreme situation and have to defer payment or two that you can catch up on in a few months, you do what you have to do. But don’t opt to defer just because you want more money for something like a wedding when you could find other ways to save.

 

There are different reasons to consider fixed or variable interest rates

Government loans are always fixed-rate, but private loans can be fixed or variable. Knowing the benefits and possible downside of both options can help save you money when it’s time to decide which loan to get. With a fixed rate, you know what you’re going to pay for the life of the loan. Variable rates are not so certain. You might start with a low rate that goes up over time or vice versa, but they also generally start lower than the fixed rate. Consider how the variable rate is set and whether you’re okay with a variable rate or would prefer the fixed amount.

 

You pay taxes on forgiven loan amounts

Student loan forgiveness can be a great thing since your remaining balance after 10, 20, or maybe 25 years is forgiven. Many people don’t know, however, that current IRS rules require the forgiven loan amounts to be treated as taxable income. That means you could be on the hook for a hefty tax bill when you least expect it. Knowing this information could change the way you pay your loans, or at least prepare you for what’s at the end of the rainbow.

 

You might qualify for loan forgiveness

Speaking of loan forgiveness! Only you can figure out if you qualify, grasshopper. The government doesn’t keep track of this, and the rules for qualification are rigid. Be sure that you know your qualification status before you start planning your “student loan forgiveness day” party. Check out our blog on student loan forgiveness.

 

There are options if you can’t pay. Don’t try to hide (other word choices for ‘hide’ – run, ignore it, lie, pretend it’s not there).

The worst thing you can do is ignore student loan payments. Student loan companies have ways of getting money from you even if you’re hiding under a blanket in mom and dad’s basement. If you ever can’t pay your student loans, call them immediately and talk about options. You might be able to set up a new payment option or refinance to save some cash and keep making payments.

 

Some borrowers save tons of money with refinancing

There are many ways to save money with refinancing. For instance, if you consolidate private and federal student loans into one monthly payment, you might be able to score a lower payment. If you have several loans with high-interest rates or if rates have gone down since you borrowed, refinancing your student loans can save you bundles.

 

Common Misconceptions About Student Loan Forgiveness 

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2019-07-03
Measuring the Costs of Employee Turnover

Best-selling business management author Jim Collins was asked during a 2001 interview if he had identified a good business response to the economic slowdown that had gripped the nation. His widely quoted answer is as relevant today as it was at the time:   “If I were running a company today, I would have one priority above all others: to acquire as many of the best people as I could [because] the single biggest constraint on the success of my organization is the ability to get and to hang on to enough of the right people."   Nearly 20 years later and in a highly improved economic climate, Collins’ words still encapsulate the biggest challenge facing HR departments of corporate giants and small start-ups alike: finding and retaining quality team members. In an era of competitive recruitment and job-hopping staff, your company risks losing monetary and human capital each time a valued employee chooses to leave. Employee turnover impacts your bottom line and your company's culture. To set wise employee retention policies, you first need to assess the costs of staff turnover accurately and measure the full impact of employee loss.  

Direct Costs of Replacing Employees

A talented employee exiting your company costs you money. Estimates of how much employee turnover costs can vary by industry and employee salary. A study by Employee Benefit News estimates the direct cost to hire and train a replacement employee equal or exceed 33% of a worker’s annual salary ($15,000 for a worker earning a median salary of $45,000). Cost estimates are based on calculatable expenses like these:
  • HR exit interview & paperwork
  • Benefit payouts owed to the employee
  • Job advertising, new candidate screening & interviewing
  • Employee onboarding costs
  • On-the-job training & supervision
You can track the expenses of your company’s employee turnover using this online calculator, or create a spreadsheet to determine how actual costs add up to affect your bottom line.  

Full Impact of Employee Loss

Josh Bersin, a human resource researcher, writing for LinkedIn, refers to employees as a business’s “appreciating assets.” Good employees grow in value as they learn systems, understand products and integrate into their teams. When one of these valuable employees leaves, the business loses more than just the cost of hiring and training a replacement. Bersin cites these additional factors contributing to the total cost of losing a productive employee:
  • Lost investment: A company typically spends 10 to 20% of an employee’s salary for training over two to three years.
  • Lost productivity: A new employee takes one to two years to reach the level of an exiting employee. Supervision by other team members also distracts those supervisors from their work—and lowers the team’s collective productivity.
  • Lost engagement: Other team members take note of employee turnover, ask “why?” and may disengage.
  • Less responsive, less effective customer service: New employees are less adept at solving customer problems satisfactorily.
  According to Bersin, studies show the total cost of an employee’s loss may range from tens of thousands of dollars to 1.5 to 2 times that employee’s annual salary.  

Strategies to Slow Employee Turnover Rates

An effective exit interview helps you and your HR team pinpoint the drivers of your company’s employee turnover. You may find that hiring practices need to be refined or employee engagement should be enhanced. Changes to the break room space, such as fresh fruit or games, will allow your employees to relax and come back to work with fresh eyes and a better attitude. This will keep up the workplace morale, shaping your company culture to include perks appealing to younger workers and will lead to increased job satisfaction. Today’s employees are career-oriented and highly motivated. Keep them on your team with other opportunities such as:  
  • Pathway for advancement within the company
  • Professional development & advanced education
  • Flex-time & work-from-anywhere options
  • Management support & recognition
  • Lifestyle rewards or amenities like catering & concierge services
  • Culture of shared values & volunteerism
 

Add Student Loan Benefits Through ELFI

Student loan repayment tops the financial-worries checklist of many recent graduates. Older team members question their ability to pay for educating their children. New, highly desirable HR benefits like student loan contributions and financial literacy education are emerging from these employee concerns—and ELFI for Business is leading the way for employers to incorporate them into hiring packages. You can connect with ELFI directly from your HR portal and access multiple ways to contribute to employees’ student loan debt. We offer new-hire onboarding booklets, educational newsletters and onsite consultations filled with information for you and your employees. Reach out to us at 1.844.601.ELFI to add cutting-edge benefits to your HR employee package!  

Learn More About ELFI for Business

  NOTICE: Third Party Web Sites Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the web sites that have links here. The portal and news features are being provided by an outside source – The bank is not responsible for the content. Please contact us with any concerns or comments.
2019-06-17
Why Do Employees Leave?

Today’s tight labor market and frequent employee turnover are challenging U.S. employers to view company cultures with a critical eye. A report by the Work Institute found that some 42 million (one in four) employees would leave their jobs in 2018. What is the cost of replacing so many experienced people in an organization? According to the report, last year’s “employee churn” costs hovered at $600 billion—a figure that could increase to $680 billion by 2020. Of further concern to companies is the growing realization that young team members are most inclined to move on after a relatively short period of employment. In a recent survey, 59% of respondents felt they should begin looking for a new position after only one to two years on a job. Older employees continuing to work past retirement age or re-entering the workforce are adding stability to many companies, but the turnover trend has serious implications for the long haul. Why are employees leaving and what can employers do to stem the tide? Data gathered by HR organizations and research firms reveal some interesting trends about motivating and retaining current and future employees.  

Top 4 Reasons Employees Leave a Company

The current employee shortage has upended traditional hiring models. Companies are racing to reshape their corporate cultures and embrace the values of a more limited workforce. Although improved pay and benefits packages continue to be important, these four workplace problems are the leading reasons why employees pick up—and move on.  
  • Not enough work-life balance. Team members value their time and don’t want employers to waste it. Their enthusiasm and performance will wane if they are weighed down with busy work and meaningless meetings. Younger employees appreciate flexible schedules, the ability to work from home, and a workload that is challenging without spilling over into personal time.
  • Poor management. Supervisors who are unable to engage their employees or unwilling to help them grow by providing positive feedback are commonly cited as reasons to leave. Today’s professionals respond to personal interaction and appreciate public shout-outs and ancillary rewards like gift cards, tickets, and free meal vouchers.
  • Lack of recognition & career advancement. Employees who excel like to be recognized for their extra effort. They also need to see a clear pathway for furthering their careers. Today’s staff members expect companies to help them grow professionally while providing access to career development and mentorship programs.
  • No company engagement. When a company does not have (or cannot properly communicate) its goals and values, employees lack a shared sense of purpose. Businesses fostering a sense of community are better able to inspire, engage, and retain employees.
 

Create a Satisfying Workplace to Keep Valuable Team Members

In many ways, today’s workforce is looking for the same type of job satisfaction as high performers of past generations. Respect, appreciation for a job well-done, opportunities for advancement, challenging work, and monetary rewards still lead to employee satisfaction and engagement. According to Gallup research, 34% of employees are engaged at work, but 53% are not engaged and likely to leave a job for another offer. To involve these employees and access their potential, employers are putting greater emphasis on corporate culture assets like these:  
  • Relevant workplaces with a clear mission & shared values
  • New-hires who contribute to the corporate community
  • Greater creative freedom & autonomy for staff when possible
  • Updated technology to support performance
  • Employee input as valuable business partners
 

Learn More About The Act Regarding Student Loans and Employers

 

Student Loan Benefits Appeal to Workers of All Ages

Many young employees begin their careers with a heavy burden of student loan debt. They worry about the monthly toll payments will take on their starting salary. Will they have enough money to travel, buy a home, or start a family? Worries about student debt repayment are not limited to the youngest workers. Some data suggest that these concerns cut across age groups and include professionals over age 55. Older workers may have taken on student loan debt to fund advanced degrees or send a child to college. Widespread student loan debt suggests that companies offering repayment contributions and other related benefits have a distinct advantage in attracting and engaging their workforce.    

Improve Retention With Cutting Edge HR Benefits From ELFI

As an ELFI business partner, you can add value to your benefits package with monthly contributions to student loan debt. You’ll also plug into resources like newsletters, webinars and onsite consultations. Connect with ELFI from your HR portal and discover how significant student loan benefits are to your team members—and how cost-effective they are for your company.  

Tops Ways to Engage Millennials at Work

  NOTICE: Third Party Web Sites Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the web sites that have links here. The portal and news features are being provided by an outside source – The bank is not responsible for the content. Please contact us with any concerns or comments.
2019-06-12
Should You Pay Off Student Loans Immediately or Over Time?

When you start your post-college career, you may be tempted to breathe a sigh of relief. Before you do that, you have important decisions to make. You’ll have to stretch your paycheck to cover your new lifestyle and associated expenses: a furnished home or apartment, vehicle, insurance, and hopefully a 401K contribution. If you are like 70% of college graduates, you also have student loans that need to be repaid.   In most situations, it's going to be most beneficial to pay off your loans as quickly as possible so that you are paying less towards interest. The average college graduate's starting salary, however often cannot allow for enough additional income to cover more than the regularly scheduled student loan payments.  Most student loans have a six-month grace period so you can do some budgeting and planning first - if you need to. We don't suggest using the grace period unless you find it necessary to organize your finances. During a deferment such as a grace period, the interest could still be accruing depending on the type of loan that you have.   If you determine that you may be better off establishing sound financial footing and a workable monthly budget before you begin repaying those daunting loans. Keep these tips in mind as you formulate a strategy for debt payoff.  

Student Loans Have Advantages

Varying types of debt are governed by different laws and regulations. Banks often base interest rates for consumer credit loans on your established credit rating. Interest rates for auto loans or credit card debt tend to be higher than a mortgage or student loan interest. As you review your debt load and make a plan, remember: student loan debt comes with a few "advantages" that other types of debt don’t offer.  
  • Preferential tax treatment: With a new job, you will be paying taxes on your income. Student loan interest is deductible up to $2,500 and can be deducted from pre-tax income.
  • Lower interest rates & perks: Federal student loans have lower interest rates and are sometimes subsidized by the government.
  • Lender incentives: Private student loans may come with incentives from the lender that make them a better deal than other credit types. These include fee waivers, lower interest rates, and deferment options.
  • Flexible payment plans: Options for lower payments and longer terms are available for both federal and private student debt.
  • Build your credit score: You can build your credit score with student loan debt. Now, depending on whether you’re making on-time payments or not, you could negatively or positively affect your credit. If you chose to make small payments during deferments, or a grace period, and regular on-time payments you will be more likely to establish a favorable credit record and reduce the amount of interest you pay overall.
 

Programs to Help You With Student Loan Payments

There are few options for loan forgiveness with regular debt, but student loans offer opportunities to reduce or eliminate your debt. These may come with commitments and tax implications, so be sure you fully understand them if you decide to take advantage of these programs.  
  • Loan forgiveness: Federal student loans may be forgiven, but you'll want to be sure that you're following all of the requirements needed of the program. Be sure before choosing this option that the federal loans you have qualify for the program. Also, keep in mind there could be taxes due on the amount that is forgiven. Some student loan forgiveness programs include PAYE (Pay as You Earn) and REPAYE (Revised Pay as You Earn), Public Service Loan Forgiveness, and Teacher Loan Forgiveness.
  • Loan Consolidation: Multiple student loans can be consolidated into one payment with the interest rate determined by a weighted average of your current loans - interest rates. Combining multiple loans may be easier to manage on a modest starting salary. Consolidating federal loans usually doesn’t require a good credit score, either.
  • Refinance, and you could achieve a lower interest rate: Lenders like Education Loan Finance specialize in student loan refinancing, and have options like variable interest rates and flexible terms. Refinancing your debt could make student loan debt easier to manage than other types of credit.
 

Pay Off High-Interest Debt First

Before you decide to pay off your student loans, think about the financial obligations you’ll be taking on. Instead of carrying a credit card balance or making low payments for an auto loan, it makes sense to continue your low student loan payments and pay off more expensive debt first or debt with a higher interest rate. In the long run, you’ll save money and build your credit score.   If you still have doubts about not paying off student debt first, consult a professional financial advisor for help prioritizing your goals and setting up a budget that lets you achieve them.  

Click Here to Learn More About Student Loan Repayment