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Student Loan Refinancing

Can You Refinance Student Loans While in School?

May 26, 2020

If you have student loans you probably have wondered what’s the best way to handle them. Should you wait to pay them after graduation or start paying them while in school? Or maybe you have heard about student loan refinancing and are wondering if it is right for you. Read on to find out one way you can manage your student loans that will benefit you right now.

 

What is Student Loan Refinancing?

When you refinance student loans you take out a new loan to pay off one or multiple federal or private student loans. You will have a new loan term and presumably a lower interest rate. You can refinance to a new loan with the same amount of years left as your old loan or stretch out the term to allow a longer time for repayment. If you increase the amount of time to repay this will lower your monthly payment but likely will cause you to pay more interest over the loan term. 

 

Can You Refinance Student Loans While in School?  

The short answer is yes, but it may be difficult to find a lender that you can refinance with if you are still in college. Many lenders require a Bachelor’s degree as an eligibility requirement for refinancing. The other requirements to refinance* with ELFI include: 

  • You must have a credit score of at least 680 and a minimum yearly income of $35,000. 
  • Must have a minimum credit history of 36 months.
  • Must be a U.S. citizen, the age of majority. 

 

If you cannot currently meet these requirements, you can have a cosigner that fits these requirements.  

 

If you have federal student loans some may argue you should wait to refinance them until you graduate because they offer more flexibility with deferment and forbearance. However, some private lenders also offer deferment and forbearance options. Some other things to consider are:

  • If you think you will get a job in the public sector that would qualify for Public Service Loan Forgiveness, you may not want to refinance because you would lose the benefit of having your federal student loans forgiven under the program. 
  • If you think you will want to take advantage of an income-driven repayment plan when you graduate, you may not want to refinance because this is only offered for federal student loans. Tip: Be aware that when you take advantage of income-driven repayment plans, your monthly payment is lower, but you will end up paying more for the loan in interest costs.   

 

There are many benefits to refinancing while in school to put you on a better financial path when you graduate. The average college graduate has $31,172 in student loans. However, you can work to reduce that amount by refinancing. Student loan refinancing can be beneficial for many reasons: 

  • Consolidate – Refinancing allows you to consolidate multiple federal and private student loans into one new loan. You can refinance some or all of your loans. Consolidation makes it easier to manage one loan as opposed to multiple loans. With only one loan you will be less likely to miss a due date, and avoid any associated late fees. 
  • Lowers Interest Rate – When you refinance you can potentially qualify for a lower interest rate. A lower interest rate saves you in interest costs over the life of the loan. 
    • If you have unsubsidized federal student loans (the ones where interest accrues while you are in school) your loans could be growing by an average of 4.53%. But if you refinance you may qualify for a lower rate, as low as 3.86%, and less interest would be accruing. 
  • Lower Monthly Payment – If you score a lower interest rate when you refinance you will be paying a lower monthly payment. To find out how much you could potentially save, use our Student Loan Refinance Calculator.*  
  • New Lender – Do you always have trouble with customer service when you want to ask a question about your loan? When you refinance, you can get a new lender if you choose. It’s great to find a lender with high customer reviews. At ELFI we pride ourselves on providing award-winning customer service. 
  • Fixed Interest Rate – if you have a loan with a variable interest rate it may be more advantageous to refinance and lock in a fixed interest rate. With a variable interest rate your payment can increase when interest rates increase, which could put a financial strain on your budget. 

 

Important tip: if you refinance while in school and after graduation your credit score and income increase, you can always try refinancing your loan again to possibly get an even lower rate.* 

 

Conclusion

Researching how to handle your student loans while still in school is a great initiative to set yourself up for a strong financial future after graduation. Student loans may seem like a heavy burden, but utilizing resources available to you will make the monthly payments easier on your budget.

 


 

*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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Man refinancing his student loans to a longer term
2020-09-23
Should You Refinance Student Loans to a Longer Term?

If your student loan payments are becoming overwhelming, it could be time to consider refinancing. When you refinance your student loans, you’ll not only have the option of consolidating multiple loans into one monthly payment; you’ll also have the chance to change your student loan repayment term.   When you take out private loans, you have the option of choosing to repay them over a short period of time or a longer period. We’ve compiled the pros and cons of both, as well as some situations in which a longer student loan repayment term might be the right fit for you.  

Is it time to refinance your student loans?

Refinancing your student loans is a great way to lower your interest rate and earn financial freedom more quickly. You can refinance both private and federal loans, and if you’re tracking a multitude of payment dates and timelines, consolidating your loans through refinancing can be a great way to simplify your financial life and work toward becoming debt-free.   You can refinance your loans as many times as you’d like, so even if you’ve already refinanced once, it never hurts to explore new lenders! Now is an especially good time to refinance your student loans, as interest rates have recently dropped as a result of the COVID-19 pandemic. As of September 18, 2020, student loan refinancing rates are as low as 2.39% for variable interest rate loans and 2.79% for fixed interest rate loans.   If you think now is the right time to refinance your student loans but you’re not sure, keep reading for more insights. We’re here to support your journey toward financial freedom and applaud your researching smart money moves!  

Signs it might be time to refinance your student loans:

  • You think you could earn a better interest rate. If interest rates recently dropped or your credit score has gone up, research your options to see if refinancing could be the right choice for you.
  • You have mostly private student loans. If your loans are through private lenders, now could be the time to consider refinancing, as you won’t risk losing any federal benefits.
  • You need more financial flexibility. If your student loan payments are keeping you from accomplishing other financial goals, refinancing could help by lowering your interest rate and extending your student loan repayment term. To learn more about the pros and cons of a long student loan repayment term, read on.
 

What happens when you change your student loan term?

A student loan repayment term calculates how long you have to pay back your loans in full. ELFI, for example, offers varying repayment terms for student loan refinancing.   When you consolidate and refinance your student loans, you’ll have the opportunity to change your student loan repayment term. This is especially useful if you’ve taken out several loans with different amounts and timelines.  

Choosing a longer term for your student loans

Opting for a longer student loan repayment term means you will pay more in interest over time. Each monthly student loan payment, however, will have a lower balance than if you had opted for a short repayment term.   If you're looking to accomplish several financial goals, like saving for a down payment on a house or purchasing a new car, lengthening your student loan repayment term may give you the flexibility you need to work toward those goals. Be advised, however, that if you do opt for a long student loan repayment term, the total amount you’ll pay in interest will go up. At the end of the day, the right student loan repayment term for you depends primarily on your long-term financial goals.

It might be time to refinance your student loans to a longer term if:

  • You want the financial flexibility of a lower monthly student loan payment
  • You’re expecting a drop in income and need to lower your monthly expenses
  • You’re having difficulties keeping up with your current student loan payments
 

What about shortening my student loan repayment term?

If none of the above scenarios apply to you and your most pressing question is “how can I pay off my student loans faster?” then a short student loan repayment term could be right for you.   Unlike a long student loan repayment term, you’ll make larger monthly payments but will pay less in total interest. Opting for a short student loan repayment term is the right choice for borrowers who have the financial flexibility to make larger monthly payments for a short period of time.   Learn more about short student loan repayment terms in our recent blog, “Choosing the Right Student Loan Repayment Term.”  

Refinancing student loans with ELFI

Ready to explore your student loan refinancing options with ELFI? Great! We’re excited to help. In addition to potentially lowering your interest rate and choosing a new student loan repayment term, when you refinance with ELFI, you’ll also work directly with a Personal Loan Advisor who will help provide a seamless, personalized refinancing experience.   Don’t take our word for it. Check out recent customer reviews on Trustpilot! If you’re ready to explore potential interest rates by refinancing with ELFI, check out our 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.
Man contemplating which student loans to refinance in 2020
2020-09-10
Which Student Loans Should You Refinance in 2020?

With interest rates favorable to student loan borrowers, right now can be a great time to refinance. But not all loans are created equal. In fact, it may be better to wait to refinance certain types of loans. Keep reading to find out which student loans you should refinance in 2020.    By Caroline Farhat  

Refinancing Rates at All-Time Lows. Should You Refinance?

Refinancing interest rates for student loans are at an all-time low in history. This is due to the Federal Reserve lowering interest rates in response to the COVID-19 pandemic. When the Federal Reserve lowers interest rates, this impacts rates that lenders will use on loans that you borrow. This change affects private student loans with variable interest rates and any new loan that you want to take out, including refinancing rates. This makes it an ideal time to refinance if you have certain loans.      As of September 8, 2020, student loan refinancing rates are as low as 2.39% for a variable interest rate loan and 2.79% for a fixed interest rate loan. If you refinance now you could potentially be saving thousands of dollars over the loan term because you will be able to lock in a low interest rate. This will also save you on your monthly payment.   

Example of Savings When Refinancing

Here is an example of how much can be saved by lowering your interest rate:    If you have $60,000 in student loans and an interest rate of 9% with 10 years remaining on your loan term, your estimated monthly payment would be $760.00. If you took advantage of the low interest rates now and qualified for a fixed rate of 3.76% you could save as much as $159.00 per month and over $19,000 in interest over the remaining 10 years.    To find out your possible savings, use our
Student Loan Refinance Calculator* where you can put in your specific loan numbers to obtain an estimate of the amount of savings for your specific situation.   So now that you see how beneficial it can be to refinance student loans, which ones should you try to refinance in 2020?   

Considerations for Refinancing Federal Student Loans

Federal student loans are currently benefiting from the protections provided by the CARES Act and the subsequent Executive Order signed on August 8, 2020. The benefits provided include: 
  • 0% interest - Right now federal loans are not accruing any interest because of the lowered interest rate. This means the loans are not increasing and can actually be paid off faster if payments are made while the interest rate is 0%.
  • Administrative forbearance - This means no payments are due during forbearance. Payments are set to resume in January 2021. 
  • During the administrative forbearance, payments that you would have made during this time but are not required to make, still count towards forgiveness for loans in the Public Service Loan Forgiveness program. 
  All of these benefits are set through December 31, 2020, making it more ideal to wait until 2021 if you want to refinance any federal student loans. If you have federal loans and were to refinance them now, you would lose these federal benefits. During this time if you have a federal student loan it is best to use the money that you would normally be paying on your loans to save for an emergency fund, pay off other high interest debt, or use it to make a lump sum payment on your loans when payments resume.    

Best Student Loans to Refinance in 2020

The loans that would be best to refinance now in 2020 include:  

Private Student Loans

If you obtained private student loans in the early 2000s you could have an interest rate as high as 9%. Refinancing older student loans would greatly benefit from the much lower interest rates. Even if you have newer student loans with a lower interest rate than 9%, with rates so low you may be able to refinance with a shorter term length and still be able to see savings and cut time off your student loan.    Here is how that could work: with a student loan balance of $60,000 with 18 years remaining at 7% interest you would be paying approximately $489 per month. But if you refinance the loan and qualify for a rate of 4.07% you could save an estimated $43 per month, over $25,000 in interest, and cut your loan term down to 15 years. That’s saving you time and money on your student loans!  

Variable Interest Loans

If you have a variable interest rate loan, you may also be experiencing the benefits of the interest rates being lowered. However, just as rates can be lowered, they can be raised. If you want the security of knowing your rate cannot go up, now would be a good time to lock in a low fixed interest rate.    

Bottom Line

Refinancing is a great way to save money on your loans. Knowing the current student loan environment is helpful to determine the best financial move for you now. With the current CARES Act, refinancing only your private student loans and not your federal student loans may be the most financially savvy move you can make this year.  
  *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.
Woman smiling at college graduation
2020-09-08
7 Actions to Take Before Your Grace Period Ends

Congratulations! You graduated from college and have hopefully settled into the start of your career. If it has been almost 6 months since your graduation, it’s most likely your student loan grace period is nearing the end if you have federal student loans. Are you prepared for when your grace period ends? Luckily we have some actions you can take to prepare.      If you have federal student loans, there is a six month grace period before you have to begin making payments after you graduate, leave school or drop below a half-time student. Not all federal student loans have a grace period. The loans that do include: direct subsidized and direct unsubsidized. PLUS loans for graduate school have a six month deferment period after graduation where payments are not required. Some private student loans also have a grace period but it may not be six months. Be sure to check with your lender to determine if any grace period exists.   

Actions to Take

Here are a few actions you should take before your grace period ends to ensure you are prepared.  

Determine Your Debts

  First, it’s important to understand the types of student loans you have. For example, do you have private or federal loans? If you have federal student loans, you’ll need to determine whether you have subsidized or unsubsidized loans. Subsidized loans mean the U.S. Department of Education will pay the interest on the loan during the grace period for most loans. (Note: If you have a direct subsidized loan that was disbursed between July 1, 2012, and July 1, 2014, you are responsible for the interest during the grace period.) If you have a Direct Unsubsidized loan you will always be responsible for the interest, even the interest accruing during the grace period. This means that if you don’t need the grace period you may want to think about at least paying the interest on the loan.    Be sure to take stock of your other debts, such as a car loan or credit card payments, and their minimum payments.  

Make a Budget

Determine a budget that includes your new student loan payment and all other debt payments. Once you determine your budget, start following it before your grace period ends. The money budgeted for your student loan can be put aside to use as an emergency fund. Or use the money you saved during the grace period to make a principal-only payment to get ahead on your repayment.    

Set Up Auto-Pay 

Another great action to take during your grace period is setting up auto-pay through your loan servicer. Setting up auto-pay will ensure your student loan payment is always made on time. Another great benefit of using the auto-pay feature is that federal student loans are given a 0.25% interest rate reduction. Some private student loan lenders also provide a discount for auto-pay so check with your lender if any discount is available.   

Establish a Debt Repayment Plan

Your grace period is a great time to establish a student loan debt repayment plan. A debt repayment plan will help you decide exactly how you will pay off your debts. There are two main types of student loan debt repayment plans, the snowball method, and the avalanche method. You have to decide which method would work better for your financial situation and motivation. Either method will be helpful if you have multiple student loans or other debts to pay off. Once you decide on your method, you will know how to allocate any extra money you have in your budget for debt repayment. When it comes time for your grace period to end you will be more than ready to start paying down your loans efficiently!   

Research Repayment Options

  1. If you have multiple student loans you can pay each loan, keeping track of each loan individually and their due dates. 
  2. Another option is to consolidate your federal loans into one loan. The average interest rate of the consolidated loans becomes the fixed interest rate on the new consolidated loan. This is consolidating your federal loans into a Direct Consolidation Loan through the U.S. Department of Education.  
  3. Refinance student loans. Once you start getting your finances in order you may realize your student loan payment is not going to fit in your budget or has a much higher interest rate then what is available now. That’s where refinancing your student loans can help. Refinancing your student loans means you will borrow a new private student loan to pay off any previous student loans (including federal and other private student loans). Refinancing can save you money because interest rates can be much lower than for federal loans. A lower interest rate means you are saving money in interest costs monthly and over the life of the loan. To find out how much you could save use our Student Loan Refinance Calculator.*
 

Learn About Borrower Protections and Programs

When you have federal student loans you are provided benefits that are not always provided by private student loan lenders. The grace period of your loans is a good time to find out about any federal borrower protections you may want to use in the future, such as deferment and forbearance for your loans. Also, if you work for a non-profit or government agency, your loans may qualify for forgiveness under the Public Service Loan Forgiveness (PSLF) program. During the grace period, it is helpful to learn about the requirements for the program so when your payments begin you can be sure they qualify under the specific rules of the program.    

Learn About the Repayment Plans

If you are shocked by what your monthly payment will be on the standard repayment plan, check into the other student loan repayment plans provided for by the U.S. Department of Education. Certain loans are eligible for an Income-Driven Repayment Plan, where your payment will be based on your income. Or you can elect to have your loans on the Graduated Repayment Plan that will extend your loan term to provide for a smaller monthly payment. However, keep in mind that you will end up paying more interest over the loan term.   

The Bottom Line

Taking these actions will help you be prepared for the end of your grace period. You are already a step ahead by thinking about this now. This preparation will start you off on a bright financial future knocking out your student loans. Good luck!  
  *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.