Should You Save for Your Child’s College Fund or Pay Your Student Loans?

As you start to grow your family, you may be wondering whether you should continue to aggressively pay down your […]

Millennials and Money: Surprising Facts You Should Know

When it comes to millennials and money, they have a bad reputation. The Pew Research Center defines millennials as people born between 1981 and 1996. Despite this wide age range, many stereotypes exist about millennials, including poor work and financial habits, especially when it comes to student loan debt, managing a monthly budget, and saving for the future. But you may be surprised by how frugal millennials really are. Here are some facts about millennials and money that you should know.

1. Nearly half of millennials have a side gig

During the 2008 recession, many millennials watched their parents lose their long-time jobs and investments. They learned the importance of diversifying their investments and of having multiple income streams. With that experience in mind, millennials are leading the charge when it comes to side hustles. In a BankRate survey, 48% of responding millennials said they earned extra money on the side. On average, people with side gigs earn $1,122 in extra income per month, working 12 hours a week. They use those additional earnings to boost their savings, pay down debt, and even afford their regular living expenses.

2. Millennials have one of the highest student loan balances of any generation

Millennials are dealing with unprecedented levels of student loan debt. However, that’s not entirely their fault. In recent years, college costs have skyrocketed. The College Board reported that from 1989-1990 to 2019-2020, the average cost of tuition and fees at a public four-year university tripled. With such high expenses, millennials have had to take out more in student loans to pay for school. In fact, the average loan balance for millennials is $34,505. That’s the third-highest average balance for student loan debt. Only Gen-Xers and Baby Boomers have more. Such a high loan balance affects millennials’ ability to pursue other goals, like buying a home, getting married, or starting a business.

3. Millennial households are earning more than ever before

Despite their substantial student loan debt, millennials have very high earning potential. According to the Pew Research Center, the median income for millennial households is $69,000. That’s significantly higher than the median household income for all age groups, which is just $61,937. While that’s good news, much of that higher income goes toward their student loan payments and living expenses, so the economy is not reaping the benefits of millennials’ salaries as much as you’d expect.

4. Millennial credit card debt is lower than average

After watching their families struggle with debt, millennials are notoriously wary of taking on consumer debt themselves. That’s especially true when it comes to credit cards. Experian reported that consumers carry $6,028 in credit card debt, on average. But for millennials, the number is much lower; they carry an average of just $4,712. That’s a good decision. Credit cards often have sky-high interest rates. According to the Federal Reserve, the average interest rates on credit cards that assess interest was 16.88% as of November 2019, the last available data. But some credit cards have interest rates of 25% or higher, which can cause you to owe far more than you initially charged on your card. Keeping your balances low — and paying off your statement balance in full each month — helps you reap the advantages of credit card rewards without paying interest charges.

5. Millennials are delaying home ownership

While previous generations considered home ownership a huge step in becoming an adult, millennials are delaying this milestone. According to CNBC, the home ownership rate for millennials is eight percentage points lower than it was for Gen X-ers and Baby Boomers when they were in the same age group. There are a few reasons behind their reluctance to buy:

Fear of commitment: Many millennials prize flexibility. They want to be able to take advantage of new opportunities that come along, like a dream job in a new city. They feel like home ownership would prevent them from being able to pursue those opportunities, while renting allows them to be more nimble.
Lack of starter homes: Business Insider reported that there is a massive shortage of starter homes in the real estate market. Baby Boomers looking to downsize and real estate investors making all-cash offers are swooping up available homes, making home ownership unattainable for many millennials.
Prevalence of student loan debt: With high monthly student loan payments and a high debt-to-income ratio, millennials struggle to qualify for a mortgage and keep up with their payments. Until they pay off a significant portion of their debt — or eliminate their loans entirely — many millennials simply don’t feel comfortable making such a large investment.

Millennials and money: Maximizing your finances

If you’re a millennial with student loan debt and it’s causing you to put off your other financial and personal goals, there are some steps you can take now to improve your situation:

Create a budget: If you don’t have one already, spend some time creating a budget. Make sure you earn more than you spend each month and look for areas where you can cut back so you can free up extra money to put toward your debt so you can pay it off faster.
Use your side hustle strategically: If you have a side hustle — such as graphic design, driving for a rideshare service, or delivering groceries — set aside your earnings solely for debt repayment. By using your extra income to make additional payments, you can pay off your student loans months or even years ahead of schedule — and cut down on interest charges.
Refinance your student loans: To pay off your student loans even faster, consider refinancing your student loan debt. With this approach, you consolidate your loans together by taking out a loan through a lender like ELFI. The new loan has different repayment terms; you could even qualify for a lower interest rate, helping you save money over time.

If you think that student loan refinancing sounds like a good idea for you, use ELFI's Student Loan Refinance Calculator to get a rate quote without affecting your credit score.*

*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.

2020-03-25

Current LIBOR Rate Update: March 2020

This blog provides the most current LIBOR rate data as of March 17, 2020, along with a brief overview of the meaning of LIBOR and how it applies to variable-rate student loans. For more information on how LIBOR affects variable rate loans, read our blog, LIBOR: What It Means for Student Loans.

What is LIBOR?

The London Interbank Offered Rate (LIBOR) is a money market interest rate that is considered to be the standard in the interbank Eurodollar market. In short, it is the rate at which international banks are willing to offer Eurodollar deposits to one another. Many variable rate loans and lines of credit, such as mortgages, credit cards, and student loans, base their interest rates on the LIBOR rate.

How LIBOR Affects Variable Rate Student Loans

If you have variable-rate student loans, changes to the LIBOR impact the interest rate you’ll pay on the loan throughout your repayment. Private student loans, including refinanced student loans, have interest rates that are tied to an index, such as LIBOR. But that’s not the rate you’ll pay. The lender also adds a margin that is based on your credit – the better your credit, the lower the margin. By adding the LIBOR rate to the margin along with any other fees or charges that may be included, you can determine your annual percentage rate (APR), which is the full cost a lender charges you per year for funds expressed as a percentage. Your APR is the actual amount you pay.

LIBOR Maturities

There are seven different maturities for LIBOR, including overnight, one week, one month, two months, three months, six months, and twelve months. The most commonly quoted rate is the three-month U.S. dollar rate. Some student loan companies, including ELFI, adjust their interest rates every quarter based on the three-month LIBOR rate.

Current 1 Month LIBOR Rate - January 2020

As of Monday, March 17, 2020, the 1 month LIBOR rate is 0.75%. If the lender sets their margin at 3%, your new rate would be 3.75% (0.75% + 3.00%=3.75%). The chart below displays fluctuations in the 1 month LIBOR rate over the past year.

(Source: macrotrends.net)

Current 3 Month LIBOR Rate - January 2020

As of Monday, March 17, 2020, the 3 month LIBOR rate is 1.05%%. If the lender sets their margin at 3%, your new rate would be 4.05% (1.05% + 3.00%=4.05%). The chart below displays fluctuations in the 3 month LIBOR rate over the past year.

(Source: macrotrends.net)

Current 6 Month LIBOR Rate - January 2020

As of Monday, March 17, 2020, the 6 month LIBOR rate is 0.91%%. If the lender sets their margin at 3%, your new rate would be 3.91% (0.91% + 3.00%=3.91%). The chart below displays fluctuations in the 6 month LIBOR rate over the past year.

(Source: macrotrends.net)

Current 1 Year LIBOR Rate - January 2020

As of Monday, March 17, 2020, the 1 year LIBOR rate is 0.86%. If the lender sets their margin at 3%, your new rate would be 3.86% (0.86% + 3.00%=3.86%). The chart below displays fluctuations in the 1 year LIBOR rate over the past year.

(Source: macrotrends.net)

Understanding LIBOR

If you are planning to refinance your student loans or take out a personal loan or line of credit, understanding how the LIBOR rate works can help you choose between a fixed or variable-rate loan. Keep in mind that ELFI has some of the lowest student loan refinancing rates available, and you can prequalify in minutes without affecting your credit score.* Keep up with the ELFI blog for monthly updates on the current 1 month, 3 month, 6 month, and 1 year LIBOR rate data.

*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.

2020-03-23

How to Appropriately Ask for a Raise

So you’ve been taking on more responsibility at work, your boss says you’re a real asset to the company, but your salary hasn’t changed in a few years. If this describes your current work situation, it might be time to ask for a raise. According to PayScale’s “Raise Anatomy” report, only 37% of workers have asked for a raise. Of those that did ask, 70% received some sort of increase in compensation. Those are pretty good odds so if you’re excelling at your job, you should ask! The average raise in 2019 was 3%, according to the 2020 Compensation Best Practices Report. This means that if you are earning $40,000, your raise would increase your income by $1,200 per year. The amount of a raise depends on the sector of work, location, and demand for the position. Typically, jobs in the private sector usually receive higher raises than jobs in the government. As a best practice, you should usually wait to request a raise after you have worked for the company for at least one year. Additionally, in most cases, you should not ask for a raise more than once a year. If you feel it is time to ask for a raise, here are some tips on how to appropriately request one.

Prepare for a Meeting

When you are ready to ask for a raise, request a meeting with your boss and let them know you’d like to discuss your salary.

1. Plan your request at the right time

When you want to ask for a raise, pay attention to the timing of the meeting with your boss. An appropriate time for a meeting would be:

After you successfully completed a big project that brought value to your company
During a performance review meeting when you have exceeded expectations. Performance review meetings are a typical time when companies award raises. Being prepared to ask for a raise during this time could allow you to negotiate for more than the planned raise.

Times to avoid a meeting:

During a busy season of work when your boss will not be able to focus on your request
When you are behind on your work. If you are not able to perform your current workload, it will be hard to justify a raise to your boss.

2. Prepare talking points

Go into the meeting prepared to advocate for yourself. Although you don’t have to memorize a speech, it’s good to be prepared with the following information:

Specific examples of accomplishments you have achieved at work recently. This could be anything from securing a big client to implementing an idea that brings in extra revenue for your company.
How you have exceeded expectations for your position.
Additional responsibilities you have undertaken. If you have taken on more responsibilities by taking initiative, be sure to highlight those.
The value you will continue to bring to the company in the future and examples of how this will be accomplished.

3. Do your research

It’s important to know that the salary you are requesting is realistic for your position and your location. A great resource is Glassdoor. You can compare salaries for your sector or receive a personalized salary estimate based on your market and position.

4. Practice, practice, practice

Asking for a raise can be a nerve-wracking conversation. By preparing and practicing before your meeting, you can walk in confidently and armed with data to back up your request. In addition to practicing your talking points, you will want to be ready for any questions or negotiations that may arise. While it’s good to have a specific salary in mind, you should also be open to other numbers or benefits that your boss may offer. For example, the company may offer you work from home or extra vacation time in place of a salary increase.

In the Meeting

You’ve requested a timely meeting, prepared extensively, and now it’s go-time. Once you’re in the meeting here’s what you should focus on:

1. Your Demeanor

Pay attention to your tone and body language when speaking. You want to appear confident in yourself and your abilities. Show a positive attitude about the value you bring to the company, but do not appear arrogant. If you get questioned about why you deserve a raise, keep your cool and answer with the talking points you prepared.

2. Communicate Your Accomplishments

Instead of just rattling off a laundry list of accomplishments, focus on a few incredible examples and, if possible, bring proof of your work. Here are a few ideas of what you can present in the meeting:

Two-three examples of big projects you accomplished
Work you did that was beyond the scope of your job
Specific examples of when you took the lead and were successful
Examples of work brought that brought monetary value to the company
Ideas for your future at the company. Companies value loyal workers so be sure to point out how you have demonstrated loyalty and your desire to remain with the company.

3. Explain Why You’ve Earned It

Be sure to avoid talking about why you need the extra money and instead focus on how you have earned a raise. For example, if you are in sales, instead of saying you need the money because of increased living costs, say you have earned this raise because you are the most successful sales associate, have brought in $100,000 in revenue, and receive great reviews.

4. Bring a Specific Number

It’s best to have a specific number you are requesting, according to a study by Columbia Business School, instead of a range. For example, you want to request $55,000 as opposed to saying $52,000 to $57,000. Provide the reasoning for how you arrived at that number and, if applicable, give examples of how it is in line for the type of work you do.

Bottom Line

If you have been in your role for over a year and are killing it at your job, you should seriously consider asking for a raise. But before you do so, preparation is absolutely critical. Follow the steps above and you’ll be in a great place to have this discussion with your boss. Good luck!

2020-03-20

A Lawyer’s Guide to Student Loan Refinancing

When Matt Sembach, an assistant public defender, graduated from law school, he had a mix of both private and federal student loans — some with interest rates as high as 10.75%.

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.

“In terms of law school, I took out an estimated $135,000,” he said. “When I graduated from law school, I owed about $147,000. The $147,000.00 figure is higher than the amount that I actually took out because my big loan was unsubsidized and the interest was accruing while I was still in law school.” Sembach’s situation isn’t unusual. According to the AccessLex Institute, the vast majority of law school graduates borrow money to pay for school. On average, they leave school with $142,870 in student loan debt. While attorneys take on a significant amount of debt, their earning potential is immense. The National Association for Law Placement reported that the overall median first-year salary in private practice was $155,000 in 2019, a $20,000 increase from 2017. With large balances but six-figure incomes, lawyers are good candidates for student loan refinancing, especially if you have high-interest student loans.

When refinancing law school debt makes sense

When you refinance your law school debt, you take out a loan from a lender like Education Loan Finance for the amount of your current debt. The new loan has different terms, including interest rate and length of repayment. While refinancing isn’t for everyone, it’s a good idea in the following scenarios:

1. You have high-interest student loans

As Sembach found out, graduate, professional, and bar exam loans can have extremely high interest rates. Over time, those high rates can cause your loan balance to balloon, adding thousands to your loan cost. When you refinance your debt, you can qualify for a lower interest rate and save money over the life of your loan.

2. You want to pay off your loans early

If you refinance your loans and qualify for a lower interest rate, more of your monthly payment will go toward the principal rather than interest charges. If you keep making the same payment that you had before you refinanced, you can pay off your loan months or even years early.

3. You want to simplify your payments

If you’re like most graduates, you had to take out a number of different loans to pay for school. “When I graduated law school, I had 10 to 15 different loans that I needed to consolidate,” said Sembach. Unfortunately, that’s very common. Graduates often have several loans to manage, with multiple payment due dates and loan servicers to remember. By refinancing your debt, you consolidate your loan together. After that, you have just one loan and one payment to handle.

4. You want to reduce your monthly payments

If your payments are currently too expensive, refinancing may provide you with some relief. When you refinance your debt, you can extend your repayment term. For example, if you are currently on a 10-year repayment plan, you could opt for a 20-year repayment plan. You’ll pay more in interest charges with a longer term, but your monthly payments will be much more affordable.

5. You aren’t eligible for loan forgiveness

While student loan refinancing can be an effective tool for managing your debt, one of its biggest drawbacks is that you lose out on federal benefits when you refinance federal student loans. If you’re a public defender or work for a legal aid organization, you could be eligible for loan forgiveness through Public Service Loan Forgiveness (PSLF). But if you refinance your loans, you’ll lose your eligibility. However, lawyers who work in private practice or who have loans from private student loan lenders don’t qualify for PSLF. In that case, refinancing can make good financial sense.

How to refinance your loans

Refinancing law school debt is surprisingly easy. Just follow these three simple steps:

1. Check the eligibility requirements

Before refinancing, make sure you meet the lender’s eligibility requirements and collect the necessary documentation to speed up the process. With ELFI, you must meet the following criteria:

You must be a U.S. citizen or permanent resident
You must have at least $15,000 in student loans
You must have a bachelor’s degree or higher
You must have a credit score of 680 or higher
You must have an income of $35,000 or higher
Your credit history must be at least 36 months old
Your degree must be granted by an approved post-secondary institution

If you don’t meet the criteria on your own, you may still be able to get a loan by adding a co-signer to your application. A co-signer is usually a parent, relative, or friend who applies for a loan with you and is responsible for making the payments if you fall behind. Adding a co-signer increases your chances of qualifying for a loan and securing a lower interest rate.

2. Get a rate quote

Before submitting your application, get a rate quote. With ELFI’s Find My Rate tool, you can get an interest rate estimate and view loan terms without affecting your credit score.* Once you find a loan that works for you, you can proceed with the application process.

3. Submit your application

To complete the application, you should be prepared to enter personal information about yourself, including your name, address, Social Security number, employer information, and income. You’ll also need to submit documentation, including:

A copy of a government-issued ID, such as a driver’s license
Proof of income, like a W-2 or recent tax return
Bank account information if you’re signing up for automatic payments
Current billing statement or payoff letter for each current student loan

Alternatives to student loan refinancing

Refinancing can help you save money and pay off your debt early, but it’s not a great solution for all attorneys. If you don’t think that student loan refinancing is right for you, there are other ways to manage your debt more effectively.

1. Apply for PSLF

One option is to pursue loan forgiveness through PSLF. For many borrowers, like Sembach, PSLF can be a powerful debt relief tool. Previously, Sembach worked in private practice. But he switched career tracks to take advantage of PSLF. “I pursued PSLF to help get rid of the debt,” he said. “I took a $10,000 pay cut when I left private practice to become a public defender, but I took the pay cut because of PSLF.” To qualify for PSLF, you must have federal student loans and work for a qualifying non-profit organization or government agency for at least 10 years. During that time, you must make 120 qualifying monthly payments. If you meet those requirements, your remaining loan balance will be forgiven tax-free.

2. Apply for an income-driven repayment plan

If you can’t afford your monthly payments and you have federal student loans, you may be able to reduce your payments by applying for an income-driven repayment (IDR) plan. Under an IDR plan, your loan servicer extends your repayment term and sets your monthly payment at a percentage of your discretionary income. You can apply for an IDR plan online or by contacting your loan servicer over the phone.

3. See if you qualify for repayment assistance

Some states try to attract talented attorneys by offering student loan repayment assistance programs. They will repay some or all of your student loans in exchange for a service commitment. For example, attorneys in Vermont who work for certain civil legal aid organizations can qualify for up to $5,000 per year in student loan repayment assistance from the Vermont Bar Foundation. The American Bar Foundation hosts a database of student loan repayment assistance programs available all over the nation. You can search the database to find programs you may be eligible for near you.

Repaying your student loans

As a lawyer, you likely have a significant amount of student loans. While your loan balance can be a burden, student loan refinancing can help you save money and lower your monthly payments. To find out how much you can save by refinancing law school debt, use the student loan refinance calculator.*

2020-03-18

How to Plan a Wedding While Paying Student Loans

By Caroline Farhat Congratulations, you’re engaged! Planning a wedding is an exciting time! From choosing your attire to picking out a venue and decor, there are a lot of decisions to make and many that can be costly. If you’re starting to plan your big day, you might be wondering how you’ll pay all of these extra expenses while still paying your student loan debt and regular bills. Don’t worry, we’ve got your back! Read on for some tips on how to plan a wedding with student loans on your radar.

1. Set Realistic Expectations

A majority of the costs for a wedding are based on the number of guests, so you can save money by keeping your guest list relatively small. For example, if you plan a wedding for 350 people you will most likely need a bigger venue than you would for 100 guests. Venue costs typically account for one-third of ceremony and reception costs so this can be a major budget buster. Food and beverage and wedding favors are also typically charged per person. Because weddings can be expensive and extravagant or budget-friendly and low-key, it’s critical to discuss your desires and budget with your partner before you start planning.

Here are some good points to discuss:

Parameters for the guest list: Do you want to invite your college roommate you haven’t seen in three years and every cousin on your partner’s side? Or are you looking for a more intimate affair with just your closest family and friends?
Your near-term financial goals (besides the wedding): Are you saving for a down payment for a home? Considering starting a family? Understanding your joint financial goals is a great way to guide your expectations.
Location of the wedding: Agreement on location is key because it will drive all of your other planning. If you’re eyeing a destination wedding and your partner wants a backyard wedding, you will want to understand each other’s individual desires so that you can create a joint wedding that makes both of you happy!

2. Set a Budget and Stick to It

Before you plan a budget, it helps to know who will be contributing to the wedding costs. Will you be paying for wedding expenses equally with your partner? Do any family members want to help with costs? This information can help shape your budget. The average cost of a wedding in 2019 was $28,000 according to The Knot 2019 Real Weddings Survey. This figure only accounts for the ceremony and reception and can vary widely depending on your location. When you add in the average costs of an engagement ring ($5,900), a honeymoon ($5,000), and other wedding events such as the rehearsal dinner, bachelor/bachelorette parties, and engagement parties, the actual wedding costs can be much higher. If these numbers are making you want to elope in Vegas, don’t panic. There are some ways you can try to lower the cost of a wedding:

Going DIY - DIYing at least some elements of the wedding can save you a good chunk of money. If you’re a Pinterest aficionado, try creating your own wedding invitations or centerpieces. Better yet, homemade wedding favors would be extra special for your guests and can save you hundreds of dollars.
Barter - Do you have friends that are photographers, florists, musicians, or bartenders? Bartering can help keep your expenses down while still getting the services you need.
Timing - Are you dead set on having a June wedding or are you more flexible? In some areas, the month you pick can have a big impact on cost! Typically, June is a higher cost since it’s considered peak season, while winter weddings tend to be less expensive. Additionally, having your wedding on a Friday or Sunday can save you some money compared to a Saturday wedding.

Tip: It’s important to keep in mind that most wedding vendors do not require full payment upfront. Many vendors require a downpayment to secure their services and final payment closer to the wedding date. Open a separate bank account or flag any money you set aside for final wedding payments so that it doesn’t get used for other expenses that might pop up.

3. Cut Expenses

In the midst of all the wedding costs, it may seem like any money you had leftover at the end of the month is now going towards the wedding. If money gets tight, think of ways to cut expenses:

Refinance your student loans: Refinancing can be a great way to get extra cash now and set you and your partner up for a better financial future. Refinancing can save you on your monthly payment, as well as save you on interest costs over the life of the loan. For example, if you have a $35,000 loan with an 8% interest rate and get approved for an interest rate as low as 3.99% you could be saving up to $70 per month and over $8,000 in interest costs. Check out our student loan refinance calculator to see how much you could be saving.*
Cut cable or cell phone bill: If you still have cable, it’s easier now than ever to cut the cord and still watch the shows and sports you want to see. Still paying a high cell phone bill? Compare carriers and call your existing provider to see if you can lower your bill.
Reduce eating out or other entertainment expenses: It may not seem easy or fun to stop eating out or to cut back on entertainment, but reducing these expenses now could be just what you need to afford the band or DJ you really want at your wedding.

4. Start a Side Hustle

A side hustle is a way you can earn money outside of your day job. The possibilities for a side hustle are endless: You could babysit, walk dogs, pick up a part-time job, etc. The extra money can help pay for your wedding expenses or you could put it towards your future financial goals. Earning extra money is not only helpful during wedding planning when you will experience extra expenses, but it can also help you after the wedding to make additional payments on your student loans, save for a new car or fund a dream trip.

Bottom Line

Planning a wedding with student loans can be a stressful time. Don’t let your student loans be a part of the stress. With realistic expectations and a budget, you can manage to have the wedding of your dreams while still paying down your student loan debt!

2020-03-17

#TorchStudentDebt Series: CMO Josh Phillips

Welcome to the first episode of our #TorchStudentDebt blog series! At ELFI, our goal is to empower a brighter future for those with student loan debt. We do this by offering competitive rates and flexible terms for student loan refinancing* as well as sharing helpful tips for helping you achieve financial freedom. In this exclusive blog series, we’re sharing the stories of individuals who have torched their student loan debt, covering everything from the challenges they faced to the tactics they used to eliminate their debt. Hopefully these experiences can provide you with some insight on how you can eliminate yours. To kick this series off, we’re sharing the story of Josh Phillips, SouthEast Bank’s Chief Marketing Officer. Note: SouthEast Bank is the parent holding company of Education Loan Finance.

Background

Josh is a Brimley, Michigan native that decided to go to college for the same reason that many of us do – to learn and make more money. His first job was picking up shingles around construction sites for his father, who was a licensed builder. He worked at McDonald’s through high school, handing out food in the drive-thru and eventually moving up into the role of “maintenance man,” being in charge of facilities around the building.

“The variety of jobs I had growing up taught me a lot… although I did enjoy some parts of them, I also knew that they weren’t what I wanted to do for the entire adult experience.”

Like a good portion of millennials, Josh was a first-generation college student. This left him in somewhat of uncharted territory when it came to choosing a college and acquiring financial aid.

“Being the first person in my family to go to college, I didn’t really have any idea what I was doing in terms of the best way to approach it. This was in the early 2000s, so there were some resources online to help guide you through the process, but not nearly the amount of resources as there are now on the internet.”

Josh used the U.S. News and World Report college tool to do his research, made a shortlist of schools, and began applying and going on college visits. He ultimately decided to attend Maryville College (TN), a private liberal arts college in East Tennessee.

Taking Out Loans

Going into college, Josh took the same view of his loans that many of us do – putting off the worry until after school.

“I definitely didn’t actively think about the amount of debt I was accruing throughout my college education. Four years seemed like a ways away, so I kind of took the approach of, ‘do what you have to do to get the education and experience you want,’ and worry about those minor details afterward.”

Facing Reality

Josh graduated with a double major in International Business and Political Science, but he also graduated with around $55,000 in student loan debt that consisted of both federal and private student loans.

“At that point in time, I had loans in a variety of places – so it was kind of like this slow, painful trickle of letters coming in telling me how much I owed different lenders. I wouldn’t say it was completely demoralizing, but it definitely made me understand that this was going to be one of the major payments that I’d be making on a monthly basis for a good length of time.”

This was in 2008, right before the bottom fell out of the market. Josh was lucky to find a job with a small startup prior to graduating and transitioned into that after school. He believed that working for a startup would give him the opportunity to potentially grow with the company and accelerate his career faster, but it was definitely a roll of the dice.

“I heard the rule that you shouldn’t go into more student debt than what your first year’s salary will be upon graduation… well, I broke that rule.”

The startup Josh worked for was a marketing and advertising agency that was going through a transition from traditional marketing to digital marketing. Josh was an Account Manager and had the opportunity to work with a number of their larger, newer customers and also assist with general business operations.

Strategy for Paying Down Debt

When Josh transitioned into his new role, he didn’t have much of a strategy for paying down his debt. He simply wanted a job that allowed him to meet the minimum monthly payments and afford his living expenses. As his role within the company grew, he began focusing more heavily on ways to eliminate debt.

Josh didn’t use an Income-Based Repayment plan because he didn’t want to accrue more interest than what he was already paying down. He always tried to make sure the number was “going in the right direction,” i.e., downward.
He applied any quarterly or annual bonuses as lump-sum payments toward his higher-interest student loans. This tactic is known as the debt snowball strategy.
He didn’t change his lifestyle as his career developed. He didn’t buy a new car. He did buy a house on a short sale, but he had roommates to help cover the cost of the mortgage. He didn’t go on any expensive vacations, but would instead stay with family and friends in other states.
He avoided credit card debt. He did use a credit card, but more for the points and rewards than out of necessity.

Using these strategies, Josh was able to pay down his $55,000 in student loan debt in just seven years.

Regrets Along the Way

Despite the impressive timeframe in which Josh paid off his student loans, he did mention that he had some regrets about how he went about it.

“Looking back, I took out extra money to cover living expenses while I was in college… If I had to do it again, I would have probably tightened those purse strings more when I was in school, because living on borrowed money just costs you more and more over time.”

He also mentioned that he wished he would have known about his ability to refinance student loans and lock in a better interest rate. He said that doing so would have allowed him to save on interest and possibly even extend his repayment period so that he could prioritize other financial goals, like saving for retirement. In hindsight, he also wished he would have looked into scholarships and financial aid earlier in the process, as many others with student loan debt do.

Being Debt-Free

As one would assume, Josh is happy to now be free from his student debt.

“I mean, it’s great – I think any time you can eliminate debt, it just opens up new options. Whether you want to go into more debt for a new car or a bigger house, or maybe you just want to get to the point where you don’t owe anyone anything, paying down debt almost gives you a bit of a high. It’s great to see the number going down, and once it’s gone, you kind of want to turn around and figure out what you want to pay down next. Currently, my last debt is my mortgage.”

Advice for Others with Student Loan Debt

When asked what advice he would give others with student loan debt, Josh emphasized the trade-off of having great experiences vs. being debt-free.

“Everyone loves doing new things and getting new experiences, but I would always counter that with the freedom you can feel from getting out of debt. There are plenty of things you can experience for free if you’re creative or thoughtful about how you do it… If you’ve got debt that keeps you worried or at a job you don’t like, it’s a good trade-off to delay your experiences and instead put that money toward your own financial freedom.”

#TorchStudentDebt

That wraps up our first #TorchStudentDebt blog! Stay tuned for more stories of how others put strategies in place to torch their student loan debt, challenges they faced along the way, and advice they have for others still on their student loan repayment journey. Thanks for reading!

About Education Loan Finance

Education Loan Finance, a division of SouthEast Bank, is a leading online lender designed to assist borrowers by consolidating and refinancing private and federal student loans into one simple, low-cost loan. Education Loan Finance believes that providing consumers comprehensive refinancing and consolidation options empowers the consumers on their financial journey. *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.

2020-03-13

This Week in Student Loans: March 13

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:

Low Rates Create Big Opportunity To Refinance Student Loans
Senate Rejects DeVos Rule Restricting Aid for Defrauded Students
Treasury Secretary Mnuchin Considers Suspending Student Loan Payments Amid Coronavirus
An Overwhelming Majority of Millennials Surveyed Regret their Student Debt

Low Rates Create Big Opportunity To Refinance Student Loans

According to Forbes, the Federal Reserve’s recent decision to cut interest rates in response to growing concerns about the economic impact of the coronavirus could be favorable for student loan borrowers, particularly those with significant student loan debt, such as dentists and doctors.

Source: Forbes

Senate Rejects DeVos Rule Restricting Aid for Defrauded Students

On Wednesday, the United States Senate voted to reject a student loan rule proposed by Education Secretary Betsy DeVos that would have changed how defrauded students sought relief. The bill reverses DeVos’ new rule on how her department processes debt relief claims made by students who had been defrauded by mainly for-profit colleges that were deemed predatory.

Source: Yahoo Finance

Treasury Secretary Mnuchin Considers Suspending Student Loan Payments Amid Coronavirus

On Friday, Treasury Secretary Steven Mnuchin said that the Trump administration is considering suspending people’s student loan payments as part of a larger strategy to mitigate the potential economic consequences of the coronavirus.

Source: CNBC

An Overwhelming Majority of Millennials Surveyed Regret their Student Debt

According to a survey from Business Insider Intelligence, only 15% of millennials with student loan debt don't regret their student debt. The survey also found that many millennials overestimated the salary of their first post-grad job, thinking they'll be able to afford monthly payments.

Source: Business Insider

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

2020-03-13

How to Compare Student Loan Refinancing Lenders

If you’re like most college students, you may have graduated from school with student loans. According to The College Institute for College Access and Success, graduates left college with $29,200 in student loan debt, on average.

By Kat Tretina

Even if you took out federal student loans, interest rates can be high, causing your loan balances to grow over time. If you want to save money and pay off your debt as quickly as possible, student loan refinancing may be a smart strategy for you. However, there are literally dozens of refinancing companies out there, so how can you find the right one for you?

What is student loan refinancing?

When you refinance federal or private student loans — or even parent student loans — you take out a loan from a company like ELFI for the amount of your existing education debt. The loan you take out has different terms than your old ones, including interest rate, length of repayment, and minimum monthly payment. When you refinance your debt, you can opt for a new loan term. You can extend your repayment term to up to 20 years to reduce your monthly payment and make it more affordable. Or, you can qualify for a lower interest rate and save money over the course of your repayment. You can even pay off your loans months or years ahead of schedule, freeing yourself from your debt. Just how effective is student loan refinancing? ELFI customers reported that they save $272 per month, on average, and should see an average of $13,940 in total savings after refinancing their student loans.¹

How to find the best student loan refinance companies

When you’re shopping around for a lender, there are five steps you should follow before selecting a loan:

1. Assess your loan eligibility

Because refinancing loans are offered by private lenders, eligibility criteria can vary from lender to lender. You may qualify for a loan from one lender, but not another. At ELFI, borrowers must meet the following criteria:

You must be a U.S. citizen or permanent resident
You must have at least $15,000 in student loan debt
You must have a bachelor’s degree or higher
Your income is at least $35,000
Your credit score is 680 or higher
Your credit history is 36 months old or older
Your degree is from an approved post-secondary institution and program of study

If you don’t meet the minimum lending requirements on your own, you may need a co-signer to apply for a loan with you. A co-signer is usually a parent, relative, or friend with good to excellent credit and steady income. The co-signer is responsible for making payments on the loan if you fall behind.

2. Get instant rate quotes to compare interest rates

Before submitting your loan application, it’s a good idea to compare offers from different lenders so you get the lowest student loan refinance rates. Some lenders — like Education Loan Finance — allow you to get a rate quote online in minutes without affecting your credit score.* With the prequalification tool, you can explore your options and choose what repayment terms and interest rate types work best for you before applying for a loan.

3. Look at what borrower protections lenders offer

When you refinance federal student loans, you lose federal benefits like access to income-driven repayment plans and federal forbearance programs, so it’s important to pay attention to what benefits the refinancing lender offers. Not all refinancing lenders have borrow protections, so make sure you read the fine print before selecting a lender. Otherwise, you could end up in a tough spot if you can’t afford your payments. For example, if you’re unable to pay your loan because of a financial hardship or medical issue, you may be eligible for a temporary forbearance with ELFI. You could postpone your payments for up to 12 months, giving you up to a year to get back on your feet without worrying about your loans.

4. Compare repayment terms

When comparing loan offers, there are a few key factors you should consider:

Interest rate types: Some lenders offer fixed and variable-rate loans. Fixed-rate loans have the same interest rate — and monthly payment — for the entire life of the loan. Variable-rate loans have lower interest rates at first than fixed-rate loans, but they can fluctuate over time, causing your payment to change, too. Variable-rate loans make sense if you want to pay off your student loans as quickly as possible because you can take advantage of the initial lower rate.
Interest rate: The rate you receive will affect how much interest accrues on your loan during your repayment.
Length of repayment: A longer loan term will give you a more affordable monthly payment, but you’ll pay more in interest over time. A shorter loan term will have higher monthly payments, but you’ll pay less in interest charges. And, shorter loan terms tend to have lower interest rates than loans with longer terms.

5. Research the lenders

Refinancing lenders vary widely in terms of customer satisfaction and accessibility. Before choosing a lender, research reviews online to get an idea of what to expect as a borrower. For example, ELFI has over 800 reviews on TrustPilot, and a 4.9 out of 5 TrustScore. You can contact ELFI for help by emailing answers@ELFI.com or by calling or texting 1-844-601-3534.*

Tackling your student loan debt

Refinancing your student loans is a great way to save money, lower your payments, or pay off your debt early. But choosing the right lender is key. If you’re not sure if refinancing is right for you, use the student loan refinancing calculator to find out how much you can save and how it would affect your monthly payments.*

¹Average 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. *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.

2020-03-10

5 Mistakes Millennials in Student Loan Debt Make

By Caroline Farhat Do you have student loan debt? You’re not alone. In fact, 45% percent of millennials are currently dealing with student loans. The average student loan debt amount for the 2018 graduating class was $29,800 per student. With this info in mind, it may come as no surprise that 17% of millennials surveyed regret taking on student loans, according to Bankrate’s May 2019 Financial Survey. But student loans don’t have to be something you regret! After all, they helped you obtain higher education and that’s a major accomplishment. Here are 5 mistakes to avoid while in student loan debt to brighten your financial future.

1. Not saving for retirement

You may think that you can’t afford to save for retirement while making student loan payments. Or even if you can save, you think retirement is so far off that you can wait to save after your student loans are paid off. However, that’s a huge mistake that could cause you to lose out on thousands of dollars. The earlier you can start putting money away for retirement the better because even a small amount in the beginning is better than nothing. Let’s take a look at an example to see just how powerful saving early can be. The fix: Let’s say you start saving $60 a month in a retirement account. How much difference can this really make? If you start saving $60 per month at age 23, assuming an interest rate of 7% and increased contributions when your income increases, you could amass $230,417 by the age of 66. But if you wait until age 33 when your loans may be paid off you would only have $106,605 at the age of 66. Starting earlier increases your savings by $123,812!

2. Not understanding the specifics of their student loan debt

Maybe when you obtained your student loans you were just trying to get your tuition paid and didn’t give a second thought to the terms of your loan. This could be costing you a lot of your hard-earned money. It’s important to know the interest rate of your loan, whether it’s fixed or variable, and the loan’s repayment term. If you have a variable rate your payment could rise if the interest rates rise. Therefore, it’s important to know what you’re facing. The fix: Read your latest statement or call your loan provider to get the details on your loan. Once you have that information it may help you avoid the next mistake on the list.

3. Not finding the best student loan repayment options

Just because you have student loan debt doesn’t mean you can’t save some money while paying it off. There are a lot of different repayment plans and programs that can help you save money monthly or over the life of the loan.

If you have federal student loans, an Income-Driven Repayment (IDR) plan may be a good option if you are having a hard time making your loan payments. With an IDR plan, your payment is based on a percentage of your income and your loan term is extended from the standard 10 years to 20 or 25 years in some cases. But be aware that extending your loan length means you will be paying more in interest over the life of the loan.
Student Loan Forgiveness: There are different programs available to have some or all of your loans forgiven based on your sector of work. If you work for a qualifying nonprofit or government entity and have federal loans you may be eligible for Public Service Loan Forgiveness if you are on the required payment plan. It may pay off to do some research on whether you are eligible for any forgiveness programs.
Student Loan Refinancing: Refinancing is obtaining a new loan to pay off your student loan(s). Your new loan presumably has a lower interest rate and can save you money monthly, as well as the total amount you pay. Student loan refinancing can be an easy process with the right company. At ELFI you get a personal loan advisor to help you through the process of refinancing your student loans. To refinance you have to meet minimum qualifications based on your income, credit score and credit history, along with other eligibility requirements that you can find here. Check out our student loan refinance calculator to see what you could potentially be saving.*

The fix: Evaluate whether you qualify for any forgiveness programs, if not refinancing may be a great option to not only lower your monthly payment but also save you money in the long term.

4. Not saving for emergencies

It’s not if an emergency will happen but when. Whether your car has an issue or you end up with unexpected medical bills, it’s wise to put some money aside for when these instances occur. Nineteen percent of those surveyed in Bankrate’s May 2019 Financial survey regret not saving enough for emergencies. The fix: Try to cut out going out to eat a few times a month (or any other non-essential expense) and put that money into a savings account for emergencies only. After a year you’ll have the beginning of a solid emergency fund. A good rule of thumb is to have an emergency fund with at least three to six months worth of your living expenses.

5. Incurring credit card debt

When you are just beginning a job after college your salary probably will not be as high as you expected. The average American millennial’s salary is $35,592 per year. With student loan payments and all the other expenses of life, it can be tempting to reach for a credit card to pay the expenses your income is not covering. However, credit cards come with high interest rates that will make getting out of debt harder. The fix: Create a budget that covers all your expenses so you can begin living within your means and won’t have to rely on credit cards to make ends meet. If you need help creating a budget, this blog post will walk you through the popular 50/20/30 budgeting rule.

Bottom Line

Having student loan debt doesn't have to prevent you from living your best life and building a solid financial future. Make a plan and you can avoid these mistakes in the future!