7 Common Student Loan Refinancing Questions Answered

January 16, 2020

By Kat Tretina

Kat Tretina is a freelance writer based in Orlando, Florida. Her work has been featured in publications like The Huffington Post, Entrepreneur, and more. She is focused on helping people pay down their debt and boost their income.

If you have student loan debt, you know how painful interest charges can be. High interest rates can cause your loan balance to grow over time, forcing you to repay thousands more than you originally borrowed.

Student loan refinancing ¹ is a strategy you can use to manage your debt and save money. In fact, ELFI customers have reported that they see an average savings of $13,940 after refinancing their student loans².

However, there are questions about student loan refinancing out there that may be preventing you from submitting a loan application. Here are some of the most common questions — and answers — you should know about.

1. Does refinancing student loans cost money?

One of the biggest myths is that refinancing student loans is expensive. And that’s because student loan refinancing is often confused with other forms of refinancing, such as refinancing mortgages. While refinancing a mortgage does involve closing costs, student loan refinancing should not.

Plus, most lenders don’t charge any application or origination fees. And with Education Loan Finance, there are no prepayment penalties, so you’re free to pay off your new loan as soon as you’d like.

2. How long does it take to qualify for student loan refinancing?

Some forms of loans can take months to process, but student loan refinancing is different. You can complete the application in minutes, and you can do everything online. Once you submit your application, the lender will review your information and make a decision. In most cases, you’ll find out whether or not you’re approved in as little as one business day.

If approved, the lender will work to disburse your loan. It can take a few days to a few weeks for that process to be completed, so keep making payments on your current debt until you receive a notification that the loan was disbursed. If you refinance your student loan with ELFI, you’ll have a personal loan advisor who will be your guide throughout the entire process.

3. Is savings from refinancing student loan debt significant?

You may think that student loan refinancing isn’t worth the work because it won’t save enough money for you. But taking just a few minutes to submit a refinancing application can help you save thousands over your loan repayment term.

For example, let’s say you had $30,000 in loans at 7.08% interest — the current rate for federal PLUS Loans. If you repaid your loans over the course of 10 years, your monthly payment would be $350. In total, you’d pay $41,948 by the end of your repayment term; interest charges would add nearly $12,000 to your loan balance.

Use ELFI’s student loan refinance calculator¹ to find out how much money you can save by refinancing your debt.

4. Will refinancing student loans affect my credit?

Some people hold off on student loan refinancing because they’re afraid it will damage their credit. However, lenders like ELFI allow you to get a rate quote (prequalify) with just a soft credit inquiry, which doesn’t affect your credit score.

If you find a quote that works for you and submit a refinancing application, the lender will then complete a hard credit inquiry, which can impact your credit. However, the effect is usually minimal. According to myFICO — the organization behind the FICO credit score — one hard credit inquiry will typically take less than five points off your FICO credit score.

5. Is refinancing federal student loans a good idea?

If you have federal student loans, you may have heard that refinancing your debt isn’t a good idea. However, that’s not the case for everyone.

When you refinance your loans, you will lose out on federal benefits like income-driven repayment plans and loan forgiveness. But those perks are only valuable if you’d actually use them. If you make too much money or don’t work in a qualifying field, you wouldn’t be able to take advantage of those programs.

If you can afford your monthly payments and feel secure in your job, refinancing your federal student loans can help you save money and become debt-free sooner.

6. Do only federal student loans have forbearance or deferment programs?

A big perk of the federal loans is the ability to enter into forbearance or deferment. With these options, you can postpone making payments on your debt without entering into default.

Few refinancing lenders offer forbearance benefits. However, there are some exceptions. With ELFI, you may be able to postpone your payments for up to 12 months if you’re facing a financial hardship, such as a job loss or medical emergency. That period can give you time to get back on your feet before you have to worry about making payments.

7. Can I refinance student loans more than once?

If you already refinanced your loans once, you may think you’re out of luck, and you’re stuck with your current interest rate. However, there’s no limit to how many times you can refinance your loans.

If your credit score improves or you get a raise at work, you can refinance your loans again to see if you qualify for a lower interest rate. As you progress in your career and your finances stabilize, refinancing multiple times can help you pay off your debt even faster.

Refinancing your student loans

While student loan refinancing can be an effective way to manage your debt, there are a lot of myths and misinformation out there. Now that these common questions have been answered, you can move forward with the refinancing process with confidence.

Use ELFI’s Find My Rate tool to get a rate quote without affecting your credit score¹.

¹ Education Loan Finance is a nationwide student loan debt consolidation and refinance program offered by Tennessee based SouthEast Bank. ELFI is designed to assist borrowers through consolidating and refinancing loans into one single loan that effectively lowers your cost of education debt and/or makes repayment very simple. Subject to credit approval. See Terms & Conditions. The interest rate and monthly payment for a variable rate loan may increase after closing, but will never exceed 9.95% APR. For example, a 10-year loan with a fixed rate of 6% would have 120 payments of $11.10 per $1,000 borrowed. Rates are subject to change.

² Average savings calculations are based on information provided by SouthEast Bank/ Education Loan Finance customers who refinanced their student loans between 2/7/2020 and 2/21/2020. While these amounts represent reported average amounts saved, actual amounts saved will vary depending upon a number of factors.

Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites 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.

Should I Refinance Private Student Loans?

Refinancing private student loans is very similar to the process of consolidating student loans, which is when you combine multiple student loans into one loan with a weighted average interest rate. However, there are several potential benefits of refinancing private student loans that student loan consolidation does not offer. Here are a few of the benefits of student loan refinancing.

Lower Private Student Loan Refinancing Rates

Above all, the primary benefit of refinancing student loans is the potential to save money by lowering your interest rate. When you graduated from your respective program, the interest rates on your private student loans may have been higher than what private lenders currently offer to refinance student loans. For example, if you took our $50,000 in private student loans at a 6.0% interest rate for a 20-year term, your monthly payment would be $358.22 per month, and you would pay a total of $85,971.73 over your loan term if all payments were made on time, with approximately $35,971.73 of that total being paid on interest alone. If you refinanced your $50,000 private student loans to the 20-year term with a 4.5% interest rate, your monthly payment would drop to $316.32 and you would pay just $75,917.93 over your loan term, with approximately $25,917.93 of that total being paid in interest. You would save $41.90 per month and $10,053.80 in interest costs. The interest rate that is offered to you depends on a variety of factors that are typical when taking out a loan, such as your credit score, credit history, debt-to-income ratio, among other factors. Raising your credit score 50 or 100 points could make a considerable impact on how much you could save by refinancing private student loans. See how much you could potentially save by using our student loan refinancing calculator.*

Adjusting Your Repayment Terms

In addition to lowering your interest rate, refinancing private student loans also allows you to adjust the length of your loan term to fit your goals and budget. Typically, shorter loan terms come with lower interest rates, allowing you to save on interest over your loan term, while longer loan terms come with slightly higher rates, but allow you to save on your monthly payments. Here are three ways that adjusting your repayment can help you better manage your student loans.

Simplify repayment by combining loans. When you refinance your private student loans, you can consolidate or combine multiple loans into a single loan with a single monthly payment. This can help you better track your total loan balance and get a clearer look at your repayment timeline.
Extend your loan term to save on monthly payments. By extending your loan term, you can spread out your payments over a longer period of time, often allowing you to reduce the amount you pay monthly. Having this extra cash can allow you to use that money for other financial goals, such as saving for retirement or purchasing a home.
Shorten your loan term to save on interest and pay off your loan faster. Oppositely of extending your loan term, shortening your loan term can often allow you to lower your interest rate and will shorten the amount of time that interest accrues, allowing you to save on interest and pay off your loans faster.

Choosing a New Lender

Another benefit of refinancing private student loans is the opportunity to switch to a new lender who may have additional benefits, such as forbearance options in the case of financial hardship or superior customer service. For example, with Education Loan Finance, if you are unable to repay your loan because of financial hardship or medical difficulty, Education Loan Finance may grant forbearance for up to 12 months. Additionally, Education Loan Finance offers superior customer service in the form of readily available Personal Loan Advisors who can help you through each step of the refinancing process and guide you toward the right repayment plan. Keep in mind that refinancing student loans for the sole purpose of switching lenders may not be the best decision, especially if it costs you money. If you're interested in refinancing student loans, learn more about Education Loan Finance.

Reasons Not to Refinance Private Student Loans

Refinancing private student loans can be beneficial to many people, however, there are certain circumstances in which this may not be the case. It's important to understand whether refinancing private student loans will help you save on your student loans or pay them off faster. For example, if you attempt to refinance private student loans and the interest rate you qualify for doesn't either help you save in total interest paid, nor helps you lower your monthly payments, you may want to wait some time and improve your borrowing credentials before refinancing. In some situations, even if you are able to lower your monthly payments, but will be paying a significant amount more in total interest costs, you may want to consider if it's the best solution. Likewise, if you are saving in total interest, but your monthly payment will be unmanageable, you may be at risk of missing payments or, even worse, defaulting on your loan. Additionally, refinancing with a new lender may cost you certain benefits that your current lender offers.

Consolidating Private Student Loans vs Refinancing

When you are attempting to adjust your student loan repayment terms, you may come across student loan consolidation options. While student loan refinancing and consolidation are similar in that you are combining multiple loans into one loan with a single lender, the two are not exactly the same. Learn more about the difference between student loan consolidation vs. refinancing.

Can I Refinance My Private Student Loans?

Anyone with private student loans can refinance them as long as they qualify by meeting a private lender's specific eligibility requirements for refinancing student loans. For example, in order to refinance with Education Loan Finance*, you must meet the following criteria at a minimum:

be a U.S. citizen or permanent resident alien without conditions and with proper evidence of eligibility.
be at the age of majority or older at the time of loan application.
have a minimum loan amount of $15,000.
have earned a Bachelor’s degree or higher.
have a minimum income of $35,000.
have a minimum credit score of 680.
have a minimum credit history of 36 months.
have received a degree from an approved post-secondary institution and program of study.

In conclusion, refinancing private student loans can be very helpful to individuals who qualify and are interested in saving money in interest or lowering their monthly payments. Learn more about student loan refinancing with ELFI to see if it's right for you.

2020-10-20

Engineering School Student Loan Refinancing

Student loan refinancing is a fantastic option in many high-earning professions, and engineering is no exception. Most engineering students pursue bachelor’s degrees, and the average engineer’s student debt falls roughly in line with the national average of $35,173. While engineers work hard to earn their degrees, the payoff is oh, so worthwhile. The average entry-level salary for engineers is $57,506, and the average salary across all experience levels is $79,000. This varies by the type of engineering you choose, as well. Big data engineers are among the highest-paid in 2020, with a median salary of $155,000. Engineering students are often top candidates for student loan refinancing because of their low debt-to-income ratios. Here are a few more things you should consider refinancing your engineering student loans:

Benefits of Student Loan Refinancing for Engineers

Student loan refinancing is a strategy that can help engineers better manage and pay off debt. When you refinance your engineering student loans, a private lender will “purchase” your debt from your original lenders. You can request rate quotes from several different lenders, then refinance with the one that offers you the most competitive rate. Decreasing your interest rate means you’ll pay less over the life of the loan. Here are just a few of the benefits of student loan refinancing for engineers:

Ability to consolidate student loans into one monthly payment
Option to choose between fixed and variable student loan refinancing interest rates
Chance to earn a lower interest rate, potentially lower than federal student loans
Opportunity to change your student loan repayment term

To see how much you could save by refinancing your engineering student loans with Education Loan Finance, try our Student Loan Refinance Calculator.*

How to Refinance Engineering Student Loans

Refinancing your student loans is normally a quick and simple process, and you can apply in minutes at home. If you’re curious about the process of refinancing, take a look at our student loan refinancing guide. Researching lenders has very few downsides. Most lenders prequalify applicants using a soft credit check, which won’t hurt your credit score. Just know that before you can officially refinance your loans, your lender will likely need to do a hard credit check. Here are the next steps to take if you’re thinking about refinancing your engineering student loans:

Figure out which how much or which loans you’d like to refinance.
Make sure you meet student loan refinancing eligibility requirements.
Shop around and compare pre-qualified rates from multiple lenders.
Submit an application to refinance your student loans
Finalize the loan application by reviewing the loan terms & signing the documents provided by the lender.

Alternatives to Pay Off Engineering Student Loans

If student loan refinancing doesn’t seem like the right fit, you have plenty of alternatives to explore. From student loan assistance to student loan forgiveness, engineers may qualify for a variety of repayment options.

Student Loan Forgiveness for Engineers

Select engineers may qualify for Public Service Loan Forgiveness (PSLF). If you do qualify, you’ll make payments for a specified amount of time, normally 10 years, then the remaining balance will be forgiven. You will, however, still have to pay taxes on the forgiven amount. Here are a few ways in which engineers may qualify for Public Service Loan Forgiveness:

Working in areas of national need could provide up to $10,000 in loan forgiveness over five years of service
Working for a non-profit, government agency, or other eligible employers could provide loan forgiveness after 120 payments (10 years)
Working as a teacher could provide up to $17,500 in loan forgiveness if working at a low-income school or other eligible agencies

If you aren’t sure which is right for you, research student loan refinancing vs. PSLF. While both may help decrease your debt, it’s important to know how they compare before taking the next steps.

Income-Based Repayment Plans

If you don’t qualify for Public Service Loan Forgiveness, you may also choose to pursue an income-based repayment plan. These types of plans set a monthly payment as a percentage of your income. Income-based repayment may be a good fit for entry-level engineers who are still working toward higher salaries. Here are a few types of income-based repayment plans available to engineers:

Pay-as-You-Earn (PAYE): PAYE plans are based on a percentage of your adjusted gross income and family size. They are available to individuals who borrowed after 10/1/2007, or those who received eligible Direct Loan disbursements after 10/1/2011.
Revised Pay-As-You-Earn (REPAYE): REPAYE plans are similar to PAYE plans, but do not have date restrictions on the loans. They do take your state of residence into consideration, however.
Income-Based Repayment (IBR): IBR plans require you to be experiencing financial hardship. If you qualify, they are based on a percentage of your adjusted gross income and family size.
Income-Contingent Repayment (ICR): Many individuals who can’t qualify for PAYE or IBR plans apply for ICR. These start as a percentage of your adjusted gross income, then grow as your income grows.

State Student Loan Assistance Programs

Engineers are highly valued in the professional world. Some states and private organizations have created student loan repayment assistance programs for STEM professionals, with the goal of encouraging students to pursue these careers. If you’re an engineer looking for student loan assistance, here are a few examples of state-driven programs you may be eligible for:

Harold Arnold Foundation
Wavemaker Fellowship
North Dakota DEAL Loans

Employer Student Loan Repayment Assistance Programs

Some employers provide student loan repayment assistance as a job benefit, which operates similarly to a 401(k). You designate a certain dollar amount to your student loan payments each month, and your employer matches your contribution up to a cap amount. These types of benefits can help improve employee retention rates while supplying necessary financial aid.

Refinance Your Engineering Student Loans with ELFI

If you’re ready to refinance your engineering student loans, ELFI can help. By refinancing your engineering student loans with ELFI, you’ll enjoy benefits including:

No application fees
No origination fees
No penalty for paying loans off early
If approved for refinancing, ELFI has a referral bonus program

Ready to get started? Learn more about student loan refinancing with ELFI and apply today: https://www.elfi.com/student-loan-refinancing/.*

Woman struggling with student loan refinancing misconceptions

2020-10-16

7 Common Student Loan Refinancing Misconceptions

Refinancing is kind of like leveling up. After months or even years of working hard to become debt-free, you then gain access to a higher tier of borrowing - better terms, a lower interest rate or a smaller monthly payment. Many people have misconceptions about student loan refinancing, however, which keep them from taking advantage of the benefits that student loan refinancing has to offer. If you're new to borrowing, it's easy to get scared of changing anything about your loan repayment process - even if that means losing out on the money that refinancing can save you. Here are some of the most common student loan refinancing myths - and what you need to know instead.

Refinancing Student Loans Takes Too Long

Don't fall prey to the misconception that student loan refinancing is a lengthy, tedious process. In fact, refinancing student loans is usually very straightforward. You fill out an application and wait a couple of days for the lender to run your credit report and verify your personal information. Once that’s been completed, you’ll be presented with the refinance offers you qualify for. The total length of time from beginning to end should take a couple of weeks. This also depends on how quickly you respond to questions from the lender and provide any additional forms or information they request.

Student Loan Refinancing Has Expensive Upfront Costs

Unlike mortgage refinancing, student loan refinancing has no upfront costs like application or origination fees. That’s also why there’s no downside to applying for a student loan refinancing multiple times. Plus, most lenders don’t charge a prepayment penalty, which is a fee for repaying the loan ahead of schedule. The only fee you’ll pay is the stated interest rate. You may owe a late fee if you make a payment after the due date, but that can be avoided if you set up automatic payments.

You Need a High Income to Refinance Student Loans

While some lenders require that borrowers have a high income to qualify for student loan refinancing, others are more lenient. All lenders, however, care about the debt-to-income (DTI) ratio, which is your monthly debt payments divided by your gross income. Most lenders want a DTI percentage below 50%. To calculate your DTI, add up your monthly debt payments including mortgage, car loan, personal loan, credit card payment and any other loans. Include a rent payment if you don't own your property. Then, divide that total figure by your gross or pre-tax monthly income. If your DTI is below 50%, then you’re likely a good student loan refinancing candidate. If it’s higher, then you need to increase your income, decrease your monthly housing payment or pay down some of your debts

You Need a Perfect Credit Score to Refinance Student Loans

Another misconception about student loan refinancing is that you need an excellent credit score to qualify, but lenders often accept borrowers with credit scores as low as 660. This is great news for young borrowers who haven’t built a strong credit history yet, or who ran up some credit card debt in college. What may hurt your chances of being approved are any recent late payments, bankruptcies, defaults, liens or recent applications for other loans or lines of credit. Before applying to refinance your student loans, check your official credit report at AnnualCreditReport.com. About one in five people have a mistake on their credit report, which can lead to an application being denied. Look at your credit report from all three credit bureaus - Experian, Equifax and TransUnion - and make sure you recognize all the accounts. If you notice a mistake, file a dispute directly with each of the credit bureaus. It may take a few weeks to have it removed from your credit report. Make sure to follow up and verify that it’s been deleted. You can check your credit score for free through a bank or credit card provider, or a service like Credit Karma. If your score is 660 or higher, you can feel free to apply for student loan refinancing. You can increase your shot of being approved by applying with a cosigner. A co-signer is someone who agrees to assume legal liability for your debt if you stop making payments and default. The loan will also show up on the cosigner’s credit report. Even if you can be approved to refinance by yourself, you may receive lower interest rates if you apply with a cosigner.

You Can Only Refinance Once

A common misconception is that you have only one opportunity to refinance your student loans. In reality, however, there’s no limit on how many times you can refinance. Many choose to refinance every time the Federal Reserve decreases interest rates because they can get a better deal on their student loans. The only thing that might affect how often you can refinance is your credit score. If your credit dips below a certain threshold, then a lender may not approve your application. Also, you may be denied if you lose your job or your income drastically plummets.

You Refinance All Your Student Loans

Many borrowers have a mix of federal and private student loans and assume they have to refinance all those loans at the same time. But borrowers can choose to refinance the loans they want. They can keep their federal loans as they are and only refinance their private loans. If they have a private loan with a low interest rate and one with a high interest rate, they can choose to only refinance the latter. In some cases, borrowers may have a better chance of being approved if they only refinance some of their loans instead of all of them.

Student Loan Refinancing is a Confusing Process

When you apply to refinance with ELFI, you’ll be matched to a member of the Personal Loan Advisor team. Every time you call ELFI, you can speak to that same person. This minimizes the confusion and frustration involved with the refinancing process. As of 10/19/2020, ELFI has a 4.9 rating on Trustpilot with more than 1,200 reviews. More than 90% of those are five-star reviews. ELFI also has an A+ rating from the Better Business Bureau.