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Student Loan Refinancing

9 Questions to Ask During the Student Loan Refinancing Process

August 18, 2016
Updated December 20, 2019
  1. Research student loan refinancing and loan consolidation. Check.
  2. Pay off credit card debt and increase credit score. Check.
  3. Reduce debt-to-income ratio. Check.
  4. Compile financial paperwork. Check.

 

Every student loan holder has a checklist — whether it is a mental or a paper list — that is intended to help them successfully obtain a newly refinanced loan and save money. This checklist is usually comprised of items and actions required to apply for student loan refinancing and obtain the best interest rates and terms. During this process, borrowers tend to become more aware of their financial landscape, which can be highly beneficial, but applicants can sometimes forget to ask some very pertinent questions regarding their new, soon-to-be refinanced student loan package. That is why we believe it is time for borrowers to start asking the right questions, to become more informed, and obtain the best deal in their refinanced student loan offer.

 

Ensure Your Needs Are Met by Asking Lenders the Following Questions:

 

What will my new term be?

Lenders typically offer repayment terms anywhere from five to twenty years. It is imperative that borrowers understand that while longer terms may mean smaller monthly payments, the additional interest spread over a longer loan-life creates a higher overall cost of the loan. Borrowers should, therefore, carefully weigh how much they can really afford to pay each month and then assess what a feasible loan term would be.

 

Is the interest rate variable or fixed?

Fixed interest rates eliminate the risk of loan interest rates rising during the life of a loan, but they also eliminate the possibility of them dropping (as they can with a variable rate). There are benefits and downfalls to each type of interest rate, so borrowers will have to decide and ask for guidance on which type of rate is best for them.

 

What are the other terms of repayment?

Remove all the surprises of repayment by asking specific details about the time and way in which payment is due. These questions could include:

  • What will monthly payments be?
  • When does repayment start?
  • Are there fees for late or missed payments? What are those fees?
  • What processes exist for payments (online, in person, over-the-phone)?

With Education Loan Finance, borrowers never pay application fees, origination fees, or prepayment penalties.*

 

Is there an origination fee?

A student loan origination fee is the amount that a lender will tack onto a loan for paying off a loan from another banking resource. For example, in order to pay off a $20,000 loan in the borrower’s name, a lender may add up to two percent to the refinance loan, making the new loan $20,400. If there is an origination fee, calculate how much the fee adds to the life of the loan. With Education Loan Finance, borrowers never pay application fees, origination fees, or prepayment penalties.

 

What are the loan requirements?

In general, most lenders typically look for borrowers with a credit score that is above 680 and a debt-to-income ratio of less than forty-five percent. For the best options, borrowers should attempt to align themselves with these figures before applying for student loan refinancing and/or consolidation. However, we recommend contacting your preferred institution — including us — for specific details.

 

What is the minimum or maximum amount that can be refinanced?

With Education Loan Finance, borrowers must have at least $15,000 in student loan debt to be eligible for refinancing. Maximum refinancing amounts are at the lender’s discretion and are typically determined by the borrower’s education level and schooling, debt-to-income ratio, and credit score. Keep in mind that each lender will be different with their minimum and maximum allowances.

 

What happens to my federal student loans? What will change?

Student loans that are refinanced with Education Loan Finance are consolidated into one loan, with one monthly payment. This means that if federal student loans are included in this package, the loan may lose special protections and benefits. Federal loans are not required to be included in a refinancing package, but if they are included for the ease of one monthly payment, borrowers must make sure they understand what will change and what benefits may be lost.

 

Is my degree or school eligible?

Some banks and financial institutions have restrictions on which type of degrees and what schools are eligible for educational loans. In Education Loan Finance’s case, applicants must have earned a bachelor’s degree or higher from one of these approved post-secondary institutions.

 

Are there any special benefits associated with the lender?

Along with unique rates and terms, some lenders offer special incentives, like referral programs. These referral programs offer cash for referring new clients to the lender. Check out Education Loan Finance’s referral program here.

 

Ask Us – We Are Here to Help

Now that you are armed with these questions, you can confidently find the best student refinancing loan — along with the best student loan refinancing lender — for your financial situation. Our team of Personal Loan Advisors would love to answer your questions about student loan refinancing. We want you to feel comfortable and confident with your financial and refinancing decisions.

9 Signs It’s Time to Refinance

 


 

*Subject to credit approval. Terms and conditions apply.

 

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.

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Millennial reading news about student loans in coffee shop.
2020-07-10
This Week in Student Loans: July 10, 2020

Please note: Education Loan Finance does not endorse or take positions on any political matters that are mentioned. Our weekly summary is for informational purposes only and is solely intended to bring relevant news to our readers.

  This week in student loans:
US Capitol

GOP Concerns Over Costs Could Limit Student Loan Relief In Next Stimulus

GOP Senate leaders are showing increasing concern about the costs of additional economic relief, particularly when it comes to student loan relief, as they weigh a second stimulus bill.

Source: Forbes

 

State Senate Chambers

Democrats Fail to Override Trump Veto on Student Loan Policy

This Friday, House Democrats were unable to override the Trump Administration's veto on a proposal to reverse the Education Department's strict policy on loan forgiveness for students misled by for-profit colleges. The House voted 238-173 in support of the override measure, coming up short of the two-thirds majority needed to send it to the Senate.

Source: ABC News

 

question mark

Study Finds Gen Z Borrowers Are Unaware of COVID-19 Student Loan Relief Programs

While the CARES Act allowed those with federal student loans to pause payments until September, a recent survey from Student Debt Crisis shows that Gen Z borrowers, in particular, were the least aware of the relief program.  

Source: CNBC

 

note saying pay off debt

Author Shares Her Big 'Wake Up Call' That Led Her to Pay Off $81,00 in Student Debt

35-year-old Melanie Lockert, the author of "Dear Debt," shared with CNBS the story of how she was able to pay off $81,000 in student loan debt over 9 years, with her big wake up call coming five years into repayment.  

Source: CNBC

    That wraps things up for this week! Follow us on FacebookInstagramTwitter, or LinkedIn for more news about student loans, refinancing, and achieving financial freedom.  
 

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.

picture of different loan term lengths
2020-07-08
Dash Through the Debt: How a Shorter Student Loan Term Adds Up

If you’re like most college graduates, you’re sick of your student loans. If you want to get rid of your debt once and for all, refinancing your loans and opting for a shorter student loan term is a smart strategy. You can secure a lower rate and pay off your loans years ahead of schedule while saving thousands.    Here’s what you need to know about shortening your loan term, as well as how much shortening your student loan term could save you.   

How long does the average graduate take to repay their student loans? 

When you graduate from college, you likely expect to pay off your student loans quickly. However, life often gets in the way of your plans, even if you make a good salary.    While the
Standard Repayment Plan for federal student loans is ten years, many students extend their repayment terms with income-driven repayment plans, forbearance or deferment periods, or by missing payments altogether. According to the One Wisconsin Institute, the average length of repayment for graduates with bachelor’s degrees is 19.7 years. If you have graduate student loans, the average repayment period is even longer.    With such a longer repayment term, you’ll pay thousands of dollars in interest charges on top of what you initially borrowed, adding to your loan's total cost. And, carrying such a heavy financial burden for decades can force you to put off other goals, like buying a house, starting a business, or even getting married.   

How to get a shorter student loan term

When you take out a student loan, you sign a loan agreement or promissory note where you promise to pay the loan back according to set repayment terms. The agreement will outline the loan’s interest rate, payments, and loan term.    Many borrowers don’t realize that you’re not stuck with those terms forever. If you’re unhappy with your current loan’s repayment terms or your finances improve, there is a way to change them: student loan refinancing.*    When you refinance your debt, you apply for a loan from a lender like Education Loan Finance for the amount of your total existing student loan debt. If you have both federal and private student loans, you can combine them so you’ll have just one loan to manage and one monthly payment to remember.*    The new loan will have different terms than your old ones, including the interest rate and monthly payment. When you apply for the loan, you can choose your own loan term that works for your goals and budget. For example, if you currently have a ten-year loan term, you can select a five or seven-year loan if you'd prefer a shorter term.   

Benefits of a shorter student loan term

Instead of making payments for 20 years or more, it’s a good idea to select a shorter loan term, if you can afford it. Opting for a shorter student loan term has many advantages:   

1. You can get a lower interest rate

When you have a long loan term, lenders consider you to be a riskier borrower and they charge you a higher interest rate. You’ll have a lower monthly payment, but the longer loan term will cost you more money in interest charges over time.    By contrast, lenders reserve their lowest interest rates for credit-worthy borrowers who choose the shortest loan terms. If you want the best possible rate, opting for a shorter loan term will allow you to save money.    You’re probably wondering, “How much can I save by shortening my loan term?” Let’s look at an example.    Pretend you had $30,000 in student loans with a ten-year loan term at 5% interest. By the end of your repayment term, you would repay a total of $38,184; interest charges would cost you $8,184.    If you refinanced your loans and chose a five-year loan and qualified for a 3.19% interest rate, you’d repay just $32,496 over the life of your loan. By refinancing your debt and selecting a shorter loan term, you’d save $5,688.   

Original Loan

Balance: $30,000 Interest Rate: 5% Loan Term: 10 Years Minimum Payment: $318 Total Interest: $8,184 Total Repaid: $38,184  

Refinanced Loan

Balance: $30,000 Interest Rate: 3.19% Minimum Payment: $542 Total Interest: $2,496 Total Repaid: $32,496

2. You’ll pay off your debt earlier 

When you choose a shorter loan term, you’ll be able to pay off your debt years ahead of schedule. Not only will you save a significant amount of money in interest charges, but you’ll also have the psychological benefit of not having to worry about debt any longer. If your student loan balance was causing you stress, that’s a significant advantage, and a huge weight off your shoulders.   

3. You’ll free up cash flow

Once you’ve paid off your student loans, you’ll free up extra cash flow. You’ll no longer have to make your monthly loan payment, so you can instead direct that money toward other goals, such as saving for retirement, boosting your emergency fund, or buying a home. If you use the above example, you’d have $542 per month you could use to fund your financial goals.    To put that in perspective, let’s say you paid off your loans by the time you turned 27. After that, you invested the $542 you were paying toward your student loans into your retirement nest egg. If you contributed $542 every month into your retirement fund and earned an 8% annual return, on average, your account would be worth over $1.8 million by the time you reached the age of 67.   

The bottom line

While extending your loan term may seem like a good idea to get a lower monthly payment, that can be a costly mistake. You’ll have to pay a higher interest rate and, over time, the longer loan term will cause you to pay back far more in interest charges.    Instead, consider refinancing your loans and selecting a shorter student loan term. You’ll be debt-free sooner, and you may save a substantial amount of money.    To find out how much you can save, use the student loan refinance calculator.*  
  *Subject to credit approval. Terms and conditions apply.   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.
2020-07-02
Should You Keep Paying Federal Student Loans During CARES Act Suspensions?

You probably already know that the CARES Act has suspended Federal student loan payments for the time being. Until September 30th, you aren’t required to make payments, and the interest rate of your loans is set to 0%. This is primarily to help those with student loans who are struggling during these uncertain times. If your student loans are in forbearance due to the CARES Act suspensions, you have several repayment options based on your financial goals.

 

Option 1: Take Advantage of That 0% Interest

Normally, when making extra payments on student loans, your money is first attributed to any collections charges or late fees, then to accrued interest, then to the principal itself.

 

With the current 0% interest rates, however, if your account doesn’t have any fees or charges, you’ll save some money at that step. The more you can reduce your principal balance, the more money you’ll save over time in interest.

 

For example, let’s say you have $25,000 in student loans at a 4% interest rate and you want to pay it off in the next 10 years. Over that period, you accrue $5,373.54 in interest. However, if you take advantage of the CARES Act 0% interest, you can change the course of your repayment.

 

For instance, if you continue to pay your student loans during this period, the payments will be attributed straight to principal and will save you about $300 in accrued interest over the course of your repayment.

 

Option 2: Wait Until September And Resume Payments

If the coronavirus has affected your finances, don’t worry about paying down your student loans too quickly. Instead, use this time to get your other debts under control. Focus on paying back higher interest rate debt, like credit card debt, which will impact your long-term financial health.

 

Option 3: Refinance and Take Advantage of Low Interest Rates

During this time, many student loan refinancing companies are offering low interest rates. If you’re locked into an unfavorable rate, this would be a great time to consider refinancing student loans to save on interest costs.

 

This is an especially great option for borrowers with private loans, as these types of loans aren’t currently receiving any type of federal forbearance benefit. For a personalized look at how refinancing could improve your financial health, check out the ELFI Student Loan Refinancing Calculator.*

 

So, should you keep paying federal student loans during the CARES Act suspensions? The answer depends on your unique goals. Whether you choose to pay your federal loans, take care of other expenses, or refinance your student loans, this is a great opportunity to eliminate some additional debt before the September 30 deadline. Happy saving!

 
 

*Subject to credit approval. Terms and conditions apply.

 

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.