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Private Student Loans (Blog or Resources)

#TorchStudentDebt Series: CMO Josh Phillips

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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.

Private Student Loan Repayment Options Explained (Video)

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So you’ve worked hard to get accepted to a great college, and you’ve taken out student loans to make this dream a reality. Now, it’s time to determine the best student loan repayment option before the academic year begins. This video explains the four common student loan repayment options, highlighting the pros and cons of each. These repayment options include:

  • Immediate Repayment
  • Partial Repayment
  • Interest-Only
  • Full Deferment

 

 

Immediate Repayment Plan

Let’s begin with the immediate repayment option. With this type of repayment plan, you’d begin to make both principal and interest payments as soon as the loan is fully disbursed. This allows you to save money on interest and speed up the repayment process since your loan will be paid off in less time. Keep in mind that immediate repayment is the only plan that does not provide you with a 6-month grace period.

 

Partial Repayment Plan

Next, there’s the partial payment plan. Here, you’d pay a low fixed monthly payment while you are in school, and then ramp up your payments after you graduate, or become a part-time student. This is more affordable on a month-to-month basis; however the interest you do not pay off will then be added to your loan balance after college, increasing your post-grad payments.

 

Interest-Only Repayment Plan

Another intriguing repayment plan option is interest-only, which means you’ll make payments only for the interest that accrues on your loan while you’re in school.  Once you graduate, you’d pay on the interest and principle of your loan. This helps you save money long-term since you’ll cover the interest while you’re in school. Some lenders may offer you lower interest rates if you agree to begin repaying your student loans while enrolled in college.

 

Full Deferment Plan

Finally, there’s the full deferment plan. This allows you to hold off on making any student loan payments while you’re a full-time student. It may sound great to delay payments while in school or during your grace period, but you’ll end up paying more for the loan overall since the interest continues to accrue during the deferment and grace periods. This then gets added to your total loan once you start making payments.

 

Of course, the best way to navigate the student loan repayment process is to consult a professional. Contact ELFI to connect with a Personal Loan Advisor who can walk you through your options.

 

Tips for Starting Your Student Loan Repayment Journey

 

5 Things to Do Immediately After Graduation

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By Kat Tretina

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

 

If you’re in your senior year and preparing for graduation — congratulations! Graduating from college is a huge accomplishment.

 

But after the hat toss, you have to start worrying about things like finding a job. And, if you’re like most college students, you probably have student loan debt to manage, too. As you start preparing for graduation, here are five things you should do to handle your student loans.

 

1. Find Your Loan Details

You likely needed to take out several loans to pay for school. It’s common for graduates to have as many as 12 different student loans when they graduate from college. Worse, your loans can be sold and transferred to different servicers, making it difficult to keep track of your debt.

 

After you graduate, look up all of your student loans and figure out who your loan servicers are, what your monthly payment is, and your due dates.

 

Federal Student Loans

To find your federal loans, use the National Student Loan Data System. Just enter your Federal Student Aid ID and password and you can view all of the federal loans under your name. The site will list your loan servicer and loan balance. Once you have that information, you can go to the loan servicer’s website and create an account and start making payments.

 

Private Student Loans

For private loans, you can identify the different loans and lenders by looking up your credit report at AnnualCreditReport.com, which allows you to get one free credit report per year. Your credit report will show what company currently manages your loan. When you find your loan servicer, you can contact the company directly to find out how to open an online account and make payments.

 

2. Create a Budget

Your student loan payments will likely eat up a significant part of your monthly income, especially when you’re just starting out in your career. To make sure you can afford the payments and your other living expenses, spend some time creating a monthly budget.

 

While you can use software like You Need a Budget (YNAB), you can also make a budget with just a simple pen and paper. List all of your monthly income, including earnings from your job and side gigs. Next, list all of your expenses, such as rent, utilities, internet service, student loan payments, car payments, and insurance.

 

Hopefully, your income exceeds your spending. If that’s not the case, you’ll have to look for areas to cut to give you some more breathing room in your monthly budget. Or, you can boost your income by freelancing or launching a side gig.

 

3. Sign Up for an Income-Driven Repayment Plan

If your starting salary is too low, or if you can’t afford the payments on your federal student loans, consider signing up for an income-driven repayment (IDR) plan.

 

There are four different IDR plans. While the specifics of each plan vary, the general concept is the same: the loan servicer extends your repayment term and caps your monthly payments at a percentage of your discretionary income. Depending on your income and family size, you can dramatically reduce your monthly bill. In fact, some people qualify for payments as low as $0.

 

After 20 to 25 years of making payments, the loan servicer will forgive your remaining loan balance. While the forgiven amount is taxable as income, IDR plan forgiveness can still help you save thousands.

 

You can apply for an IDR plan online.

 

4. Refinance Student Loans

If you have private student loans or a mix of both federal and private loans and want to pay off your debt as quickly as possible, look into student loan refinancing. By working with a private lender to take out a loan for the amount of your existing debt, you could potentially lower your interest rate, helping you save money. Or, you could get a longer repayment term and reduce your monthly payments, making them more affordable.

 

How effective is student loan refinancing? The savings can be significant. According to The Institute for College Access & Success, the average graduate has $29,200 in student loan debt. If you had that much debt with a 10-year repayment term and a 6% interest rate, your monthly payment would be $324. By the end of your loan term, you’d pay a total of $38,902.

 

But if you refinanced your debt and qualified for a 10-year loan at 4% interest, your monthly payment would drop to $296 per month. Over the course of your loan, you’d repay just $35,476. Refinancing your student loans would allow you to save over $3,400.

 

chart showing the difference between refinances student loan and original loan


While there are some drawbacks to refinancing your education debt, refinancing can be a smart way to manage your loans. If you decide that student loan refinancing is right for you, use ELFI’s Student Loan Refinancing Calculator
to get an idea of what your repayment plan could look like. Prequalification is 100% online, free, and won’t affect your credit score*.

 

5. Sign Up for Automatic Payments

Managing your different loans and their various payment due dates can be overwhelming. But missing a payment can hurt your credit, and you could be subject to costly fees and penalties.

 

Signing up for automatic payments is a great way to ensure you never miss a payment and improve your credit history.

 

The Bottom Line

Your college graduation may feel far off, but it’ll be here before you know it. When it comes to preparing for graduation, developing a student loan repayment strategy is essential. By creating a plan now, you can ensure you’re ready to handle your student loan debt when your payments are due.

 


 

*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.

Should I Save or Pay Down Student Loan Debt?

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This blog has been prepared for informational purposes only and does not constitute financial advice. Always consult a professional for guidance around your personal financial situation.

 

Whether it comes as a check from grandma, a bonus from work, or a tax return, extra money in your bank account is a great feeling. However, it can be surprisingly difficult to decide what to do with that extra cash. You’d be tempted to spend the cash frivolously, like booking a much-needed vacation or splurging on eating out. But if you’re in debt, you know that money belongs elsewhere. The only question you should face when you come into a windfall is whether to contribute to savings or pay extra on your student loan debt. Luckily, that question is relatively easy to answer.

 

Save First. Pay Student Loan Debt Second.

Saving money—to a point—is necessary to ensure you’re prepared for unexpected financial emergencies. Car accident? Broken bone? Laid off? You need a “rainy day fund” so you can pay the bills when life challenges you without warning. By not saving, you could end up living on credit cards with interest rates that are likely two or three times higher than your student loan debt. Then you’re burdened with even steeper financial obligations to pay off. 

  

It’s recommended that you save at least six months of your current salary to be fully prepared for emergencies. Once you get your savings stockpiled, turn your attention to paying down student loan debt.

 

To explore why this is the case, consider savings accounts usually offer rates around 2%. However, your student loan debt likely comes with an interest rate of around 4%-7% interest if you have loans through the federal government. If you keep depositing money in your savings account instead of reducing your loan balance, you accumulate more debt (in interest owed) than you save. 

 

 Basic savings accounts are fairly safe—your balance only grows, as long as you don’t withdraw money from the account. The payoff for this safety is a lower interest rate. Low risk equals low reward. 

 

So, you might be thinking, “What saving options make me more money?” 

 

Related: Yes, You Need A Side Hustle

 

Are Stocks worth the investment?

Stocks are a popular option that is high risk and high reward. When you buy stock in a company, you own a piece of that company. The benefit for them is that your money is an investment in developing new products and other growth-based projects. The benefit for you is that your money could grow with the company. The downfall, however, is that your money can be depleted if the company’s stock takes a downturn. 

 

Stocks can also be an intimidating game since companies like Alphabet (Google) and Amazon generally sell for more than $1,000 a share. However, some companies like Robinhood are trying to make stocks more accessible to the everyday investor, highlighted with their soon to be released fractional share trading options. With the new feature, you can buy one-millionth of a share or just $1 worth of any stock.

 

Could I place savings in a CD?

A more middle-of-the-road option is a CD. Not to be confused with a compact disc, these Certificates of Deposit are savings accounts that are typically federally-insured and usually have higher interest rates than traditional savings accounts. The beauty of placing your money in a CD is that it becomes harder to spend your money frivolously since there are predetermined dates for withdrawal. Common terms are 3, 6, 12, and 18-months, with penalties assessed if money is withdrawn before the maturity date. 

 

Ready to Save But Short On Funds?

Saving and paying off debt is great…when you have the extra cash to do so. But not everyone has a wealthy grandma or job that comes with a bonus. Here are some quick ways to save.

 

Student loan refinancing through companies like ELFI* could free up more money by lowering your monthly payment through loan consolidation and a lower interest rate. In fact, customers reported saving an average of $272 every month and an average of $13,940 in total savings after refinancing student loans with Education Loan Finance.

 

Related: 7 Benefits of Refinancing Student Loans

 

You could also save hundreds of dollars a month after canceling unused subscriptions. Banks or apps like Truebill and Trim can help you find and cancel subscriptions that are unused or that you forgot you signed up for in the first place. These apps also connect to your bank account to make automated weekly money transfers into a savings account. With automated transfers, think small—just $25 a week can turn into $1,300 a year.

 

Apps like Acorns can make your investments even more simple by setting aside leftover change from purchases you make. With the Acorns debit card, the spare change from each purchase is placed in an investment account of your choosing. And when you shop via the Acorns app or Chrome Extension at 350+ retail partners, a percentage of your total purchase is deposited into your selected savings account. 

 

At ELFI, we work hard to help you reduce student loan debt with great student loan refinancing options. By refinancing student loans with ELFI, you can pick the payment plan and terms that fit your life. See what you could save with our quick, no-obligation quote.

 


 

*Subject to credit approval. Terms and conditions apply.

 

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.

 

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.

Don’t Bet the House: Dangers of Paying Student Loan Debt with HELOCs

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This blog has been prepared for informational purposes only and does not constitute financial advice. Always consult a professional for guidance around your personal financial situation.

 

By Caroline Farhat

 

If you’re struggling with student loan debt, you have likely thought of a multitude of ways to pay off your loans as quickly as possible. If you have a house with equity, one way you may have considered is applying for a home equity line of credit (HELOC). But before you sign on the dotted line, first consider the dangers of using a HELOC for student loans.

 

 What is a HELOC?

A HELOC is a line of credit you borrow from the equity of your house. You may borrow up to a certain limit, but you’ll have to repay the amount borrowed plus interest. Here’s what you need to know:

  • The interest rate on a HELOC may be variable or fixed, but the vast majority of HELOCs have a variable interest rate. 
  • The limit of how much you can borrow is determined by the value of your home and the loan amount on your first mortgage. Generally, lenders limit the amount of the HELOC to 85% of the appraised amount minus any other loans on the house. This means if your home is valued at $300,000 and you owe $200,000 on your mortgage, you have $100,000 of equity in the home, but you will be limited to borrow $55,000 for the HELOC. 
  • Remember there may be fees associated with obtaining a HELOC, from closing costs to transaction costs. These need to be taken into consideration when deciding whether a HELOC is the right choice for paying your student loan debt. 

 

Dangers of Using HELOC

  1. You’re putting your house at risk. Since your house is the collateral for a HELOC you risk losing your home to foreclosure if you cannot make the payments. If you have an unstable income or suddenly cannot afford the payments should the interest rate rise, you jeopardize losing your home. This differs from student loan debt in that student loans have no collateral. This is not to say that you get a free pass when you miss student loan payments. After 270 days of missed payments on your federal student loans, your debt goes into default, which will affect your credit score and may lead to the garnishment of wages. The federal government can even sue you and force you to sell your home, though this is less likely to happen than if you miss payments on a HELOC.
  2. You don’t have as much payment flexibility. If you ever have trouble making payments on your HELOC, it may be nearly impossible to change your payment options. However, with federal student loans, you have the option of deferment or forbearance. 
  3. Your payments can vary based on the market. Generally, a HELOC has a variable interest rate that can increase during the time of the loan, and in turn, increase your payments. There is no predicting if or when your interest rate may rise. Typically HELOC interest rates are based on the prime rate which is affected by the market. While your payment could decrease, it could also increase. Although there is typically a cap to the interest rate, it can vary greatly and be as much as a 15% difference from your initial interest rate.   

The bottom line is the danger of using a HELOC to pay off student loan debt is you are taking an unsecured loan, your student loan, and making it a secured loan, by putting your house as collateral. This is dangerous if your financial situation changes and you are unable to make the payments.    

 

Better Ways to Pay Off Student Loan Debt

There are many other options to consider before you decide to take out a HELOC to pay for your student loan debt. Some options require little to no extra time to help pay off your loans quicker. You could consider the following: 

 

1. Refinance Student Loans

Refinancing student loans* may be a great option to pay them off quicker. You could be eligible for a lower interest rate which can save you thousands of dollars over the life of the loan. You can see just how much you can save each month, and over the lifetime of your loan, by using our student loan refinancing calculator.

 

2. Consider a different repayment plan

Unless you selected a different repayment plan when your grace period ended, you are making student loan payments based on the 10-year standard repayment period. If you need to change your payment plan, you may be eligible for different plans, such as income-based repayment and graduated repayment. Contact your lender to find out what options are available to you.   

 

3. Start a Side Hustle

A side hustle is an additional job that you hold outside of your normal employment. A side hustle could be a side business you start to sell items you hand-make, dog walking, babysitting, and endless other options. Depending on your side hustle, you could be earning serious money to make extra payments towards your student loans. 

 

Related: Yes, You Need A Side Hustle  

 

4. “Found money” can be used as an extra payment

Ever been given cash as a gift, received a cash rebate or earned cashback on your credit cards? All those could be considered “found money,” money you weren’t expecting to find but received. Take that found money and make an extra payment toward your student loan debt. Any extra payment towards your student loans can help pay it off quicker, just remember to apply the extra payment towards the principal of the loan.  

 

5. Auto-debit your student loans

Some lenders allow you to set up auto-debit and in return give you an interest

rate reduction, typically between 0.25-0.50%. It’s important to note that some lenders, like ELFI, build in cost savings based on your good credit, rather than applying a discount for auto-debit, so don’t worry if your lender does not have this option. You might automatically be saving more money just by having good credit. 

 

Bottom Line

Obtaining a HELOC to pay off your student loans is a risky move. As you can see, you have many other options to explore before betting your house to pay down your student debt.    

 


 

*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.

U.S. Cities With the Most Student Loan Debt

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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.

 

You’ve heard it on the news: student loans are a national epidemic. According to Experian, Americans carry $35,359 in student loan debt, on average. However, where you go to college and where you live can have a big impact on how much you need to borrow to pay for school and how much you’ll owe after graduation.

 

10 Metropolitan areas with the highest levels of student loan debt

While student debt is pervasive, it affects some metropolitan areas more severely than others. Experian reported that people who live in or near college towns tend to have the highest student loan balances.

To understand where education debt is the worst, we looked at 10 cities with the highest average levels of student loan debt based on Experian’s latest data.

 

 

10: Charlottesville, VA

Average Student Loan Debt: $42,476

 

Charlottesville is home to a number of universities and colleges including the American National University and the University of Virginia.

 

Among people aged 25 years and up, 54 percent have a bachelor’s degree or higher. That’s far greater than the 37 percent of all Americans who have earned a bachelor’s degree or higher.

 

The large number of people with a degree is likely why people working in Charlottesville earn more money than the typical person, too. The median income for all Americans is $32,838. In Charlottesville, that number jumps to $36,400.

 

The biggest industries in Charlottesville are management and business services, accommodations and food service, and sales.

 

Related: The Average Cost of College

 

 

9. Atlanta-Sandy Springs-Marietta, GA

Average Student Loan Debt: $43,290

 

There are dozens of universities in the Atlanta area, including Georgia State, Emory University, and Morehouse College.

 

Atlanta residents tend to be highly educated; over 43 percent of its population has a post-secondary degree. That benefit turns into higher salaries. The median earnings for the area is $38,400.

 

Finance, healthcare, and manufacturing are three of the biggest industries in the region. The largest employers, based on employee headcount, are Northside Hospital, The Home Depot, Emory University & Emory Healthcare, and Delta Air Lines.

 

 

8. San Francisco-Oakland-Fremont, CA

Average Student Loan Debt: $43,674

 

Many well-known and expensive universities are located in or near San Francisco, such as Stanford University and the University of California, Berkeley.

 

The Bay Area in California — which includes San Francisco — has grown by 600,000 people since 2010. That growth is because the San Francisco metropolitan area is the base for many major companies, including Salesforce, Wells Fargo, and Uber.

 

Because of the prestigious employers in the area, San Francisco has much higher levels of degree attainment. Over 53 percent of the population has a post-secondary degree, and the median earnings are $50,900.

 

Related: Best Cities for Young Professionals

 

 

7. Washington D.C.-Arlington-Alexandria, DC, VA, MD

Average Student Loan Debt: $43,797

 

The Washington D.C. area has many elite universities and colleges, including Georgetown University and American University.

 

The biggest industries are government, public school administration, and healthcare. To succeed in these fields, you need higher education, so it’s no wonder that over 58 percent of the population has received a college degree.

 

The median earnings are $56,700. However, the cost of living in Washington D.C. is quite high, so people may struggle to afford both their living expenses and student loan payments.

 

 

6. Santa Barbara-Santa Maria-Goleta, CA

Average Student Loan Debt: $44,294

 

If you live near Santa Barbara, you may have gone to school at the University of California, Antioch University, or Westmont College.

 

The top industries in the area are in education, hospitality, and healthcare. Major employers include the Four Seasons, the University of California, and Pacific Diagnostic Lab.

 

About 52 percent of the population has a college degree, and the median earnings are $38,800.

 

 

5. Gainesville, FL

Average Student Loan Debt: $44,508

 

Gainesville, a city in northern Florida, is well known as the home of the University of Florida. It’s a relatively small college town, with just over 133,000 residents.

 

Over 52 percent of Gainesville residents have a college degree. However, the median income is lower than the national average, mostly because the biggest employers are in the service and retail industries, which can have lower wages. In Gainesville, the median income is just $30,800, which can make repaying your student loans difficult.

 

 

4. Santa Cruz-Watsonville, CA

Average Student Loan Debt: $45,396

 

The Santa Cruz area has one major college: The University of California-Santa Cruz. It’s also one of the region’s biggest employers, along with local government and administration offices and hospitals.

 

More than 50 percent of the metropolitan area’s population has a bachelor’s degree or higher. The median income for Santa Cruz is $40,200.

 

 

3. Ann Arbor, MI 

Average Student Loan Debt $45,668

 

Located outside of Detroit, Ann Arbor has a number of universities in it. The largest is the University of Michigan, which has over 28,000 undergraduate students.

 

Besides being the biggest school, the University of Michigan is also the area’s top employer, followed by Trinity Health and Ann Arbor Public Schools.

 

Ann Arbor has the highest percentage of college educated people on this list; 72 percent of the population have a bachelor’s degree or higher. With so many people getting degrees, it’s no surprise that Ann Arbor is among the top three in terms of student loan debt.

 

Read More: 5 Financial Tips for After You Refinance Student Loans

 

 

2. Corvalis, OR

Average Student Loan Debt: $46,164

 

Oregon State University is based in Corvalis, with over 24,000 undergraduate students enrolled. Corvalis is a relatively small town, with just over 50,000 residents, so the University is a major economic driver for the area.

 

Oregon State University is the biggest employer, followed by the Good Samaritan Regional Medical Center and Hewlett Packard.

 

Corvalis has a remarkably high number of people with college degrees. Over 61 percent have a post-secondary credential. However, the median earnings are relatively low; it’s just $36,100.

 

 

1. Durham, North Carolina

Average Student Loan Debt: $47,955

 

Known for its technology and educational facilities, Durham has a number of elite universities in or near the city. Some of the biggest schools include Duke University, the University of North Carolina at Chapel Hill, and North Carolina Central University.

 

Those schools can be quite expensive. A single year at Duke University for an undergraduate student can cost $78,608 before financial aid. With such steep tuition fees, it’s no wonder that Durham leads the country in student loan debt.

 

Over 48 percent of the population has at least a bachelor’s degree, and the median earnings are $37,000.

 

Paying Off Your Student Loans

Whether your city is one of the 10 cities with the most student loan debt or not, paying off your education loans is key to your financial freedom. If you’re looking to pay off your debt as soon as possible and save money, consider student loan refinancing.

 

You can use ELFI’s Find My Rate tool 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.

Student Loan Repayment: Debt Snowball vs. Debt Avalanche

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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.

 

To cope with the high cost of college, you likely took out several different student loans. According to Saving For College, the average 2019 graduate left school with eight to 12 different student loans.

 

With so much debt and so many different individual loans, you may be overwhelmed and can’t decide where to start with your repayment. If you want to pay off your loans ahead of schedule, there are two main strategies that financial experts recommend: the debt avalanche and the debt snowball.

 

Here’s how each of these strategies work and how to decide which approach is right for you.

 

The difference between the debt snowball and debt avalanche strategies

Both the debt avalanche and debt snowball methods are strategies for paying off your debt early. However, how they work is quite different.

 

Debt avalanche

With the debt avalanche method, you list all of your student loans from the one with the highest interest rate to the one with the lowest interest rate. You continue making the minimum payments on all of your loans. However, you put any extra money you have toward the loan with the highest interest rate.

 

Under the debt avalanche, you keep making extra payments toward the debt with the highest interest rate. Once that loan is paid off, you roll over that loan’s monthly payment and pay it toward the loan with the next highest interest rate.

 

For example, let’s say you had the following loans:

  • $10,000 Private student loan at 7% interest
  • $15,000 Private student loan at 6.5% interest
  • $5,000 Direct Loan at 4.45% interest

 

In this scenario, you would make extra payments toward the private student loan at 7% interest first with the debt avalanche method. Once that loan was paid off, you’d make extra payments toward the private student loan at 6.5% interest, and then finally you’d tackle the Unsubsidized Direct Loan.

 

Debt snowball

The debt snowball method is more focused on quick wins. With this approach, you list all of your student loans according to their balance, rather than their interest rate. You continue making the minimum payments on all of them, but you put extra money toward the loan with the smallest balance first.

 

Once the smallest loan is paid off, you roll your payment toward the loan with the next lowest balance. You continue this process until all of your debt is paid off.

 

If you had the same loans as in the above example and followed the debt snowball method, you’d pay off the Direct Loan with the $5,000 balance first since it’s the smallest loan. Once that loan was paid off, you’d make extra payments toward the $10,000 private loan, and then you’d pay off the $15,000 private loan.

 

Pros and cons of the debt avalanche method

The debt avalanche strategy has several benefits and drawbacks:

 

Pros

  • You save more in interest: By tackling the highest-interest debt first, you’ll save more money in interest charges over the length of your loan. Compared to the debt snowball method, using the debt avalanche method can help you save hundreds or even thousands of dollars.
  • You’ll pay off the loans faster: Because you’re addressing the highest-interest debt first, there’s less time for interest to accrue on the loan. With less interest building, you can pay off your loans much earlier.

 

Cons

  • You don’t see results as quickly: Because you’re tackling the debt with the highest interest rate rather than the smallest balance, it can take longer before you can pay off a loan.
  • You may lose focus: It takes longer to pay off each loan, so it’s easier to lose motivation.

 

Pros and cons of the debt snowball method

The debt snowball method has the following pros and cons:

 

Pros

  • You get results quickly: Since you’re targeting the loan with the lowest balance first, you’ll pay off individual loans quicker than you would with the debt avalanche method.
  • Frees up money to pay down the next loan: You’ll be able to pay off loans quickly and roll the payments toward the next loan, helping you stay focused on your goals.

 

Cons

  • You’ll pay more in interest fees: By paying extra toward the loan with the smallest balance rather than the highest interest rate, you’ll pay more in interest fees than you would if you followed the debt avalanche method.
  • It could take longer to pay off your debt: Because you aren’t targeting the loans with the highest interest rate first, more interest can accrue over the length of the loan. The added interest means it will take longer to pay off your loans.

 

Which strategy is best for paying off student loans?

So which strategy is best for paying off student loans: the debt avalanche or the debt snowball? If your goal is to save as much money as possible and pay off your loans as quickly as you can, the debt avalanche method makes the most financial sense.

 

Psychologically, the debt snowball may have the advantage. According to a study from the Harvard Business Review, the debt snowball method is the most effective approach over the long-term, as borrowers are more likely to stick to their repayment strategy. However, which strategy is best for you is dependent on your mindset, motivation level, and your determination to pay off your debt.

 

Managing your student loan debt

Regardless of which repayment strategy you choose, you could save even more money or pay off your loans earlier by refinancing your student loans. When you refinance student loans, you apply for a loan from a private lender for the amount of your current student loans, including both private and federal loans.

 

The new loan has completely different repayment terms than your old ones, including interest rate, repayment term, and monthly payment. Even better, you’ll only have one student loan with one monthly payment to remember.

 

Use ELFI’s Find My Rate tool 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.

Tips for Starting Your Student Loan Repayment Journey

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Once you graduate from college, leave college, or drop below half-time enrollment, it’s time to start thinking about when your student loan repayment period kicks in. Understanding the repayment process for your student loans is very important for a number of reasons – for one, if you don’t pay, your interest will accrue. Second, if you don’t pay, it will affect your credit score, which can hinder your ability to buy a home, buy a car, qualify for credit cards, take out a personal loan, or refinance your student loans.

 

If you graduated this past spring, your student loan repayment period will likely start around this time of year (if they haven’t kicked in already). Follow these tips to master student loan repayment and get yourself to a strong financial start after college.

 

Know How to Access Your Loan Information

A good first step is to acquire your loan information. This can typically be accessed via an online login. Monitoring your loan information will be essential during the course of repayment. If you took out Federal Student Loans, you can likely access your info at https://myfedloan.org/. If you took out private student loans, check with your lender for how to access your information. Tracking your loans will give you a gage on the status of each loan, the balance you owe, as well as interest rates for each loan. By understanding the status of your loans, you can make more informed decisions about how you want to prioritize repayment, what type of repayment plan you want to choose, or even whether you want to consolidate or refinance your student loans. 

 

Know When Your Payments Start

Immediately following graduation, you’ll likely have a grace period, or a period of time before your first payment is due. This can vary depending on the type of loan you have, and they can be different for each loan. Subsidized and Unsubsidized Federal loans have a six-month grace period. Perkins loans have a nine-month grace period. There is no grace period for PLUS loans; however, if you are a graduate or professional student PLUS borrower, you do not have to make any payments while you are enrolled at least half time and (for Direct PLUS loans first disbursed on or after July 1, 2008) for an additional 6 months after you graduate or drop below half-time enrollment. Private student loans will have differing grace periods so contact your loan servicer for more details. Knowing when your loan will be due is imperative to starting off on the right foot when it comes to your student loans.

 

Weigh Repayment Options

When you take out federal student loans and your grace period is complete, you will automatically enter the Standard Repayment Plan. This plan allows you to pay off your debt within 10 years, with the monthly payment remaining the same over the life of the loan. If standard repayment doesn’t work for your budget, you may want to consider some other options, or perhaps even refinance your student loans. The federal student loan program offers the following Income-Based Repayment plans: 

  • Graduated Repayment Plan – Gives you a smaller payment amount in the beginning and gradually increases the payment amount every two years.
  • Extended Repayment Plan – Allows you to pay the least possible amount per month for 10 to 25 years.
  • Revised Pay As You Earn Repayment Plan or REPAYE Plan – Bases the monthly payment on you (and spouse’s) adjusted gross income, family size, and state of residence.
  • Pay As You Earn or PAYE – Monthly payments are based on your adjusted gross income and family size. You must be experiencing a financial hardship to qualify. You must also be considered a “new borrower” as of 10/1/2007 or after, or be someone who received an eligible Direct Loan disbursement on 10/1/2011 or after.
  • Income-Based Repayment or IBR – Monthly payments based on your adjusted gross income and family size. Must be experiencing a financial hardship to qualify.
  • Income-Contingent Repayment or ICR – Based on your monthly adjusted gross income and family size. Typically chosen if an individual can’t qualify for the Pay As You Earn Plan or Income-Based Repayment.Any changes to your income or your spouse’s income will affect your student loan payment. For example, if your salary increases, your student loan payment will as well. If you are married, both your income and your partner’s income are combined. Two combined incomes will increase your total income, likely increasing your monthly payment. 

 

Keep in mind that each repayment option will have positives, negatives, as well as eligibility requirements. Research each option before making a decision, and consider contacting your loan servicer if you have questions or need more information. 

 

Automate Your Payments (If you can)

Setting up automatic payments will make student loan repayment less of a hassle, will avoid late payments, and may even score you an interest rate reduction. Just be sure you have enough money in your account month-to-month to endure the payments without overdrawing. 

 

Make Extra Payments

When you make your monthly payment, it will first apply to any late fees you have, then it will apply to interest. After these items are covered, the remaining payment will go toward your principal loan balance (the amount you actually borrowed). By paying down the principal, you reduce the amount of interest that you pay over the life of the loan. Applying extra income by making larger payments or double payments will reduce the total amount you’ll end up paying. 

 

Reach Out for Help if Necessary

If you’re having trouble making your monthly payments, particularly on your federal student loans, contact your loan servicer. They will work with you to find a repayment plan you can manage or help determine your eligibility for deferment or forbearance. If you stop making payments without getting a deferment or forbearance, you risk your loan going into default, which can have serious consequences to your credit. 

 

Weigh Refinancing & Consolidation Options

If you have multiple student loans that are all accruing interest at different rates, you may want to consider student loan refinancing or consolidation to make repayment more manageable. The federal student loan program offers student loan consolidation, in which they combine your loans into one loan with a weighted average interest rate, rounded up to the nearest 1/8th percent. You can also consolidate your federal and/or private student loan with a private lender through the process of refinancing. Refinancing your student loans is much like consolidation, however it offers the opportunity to start new repayment terms and possibly lower your interest rate. Keep in mind that refinancing with a private lender may cause you to lose access to certain federal student loan repayment options that are listed above. 

 

Look Into Loan Forgiveness

If you work in a public service position or for a non-profit, you may want to consider the Public Service Loan Forgiveness program or another loan forgiveness program offered by the federal government. Other options exist for volunteers, military recruits, medical personnel, etc. Some state, school, and private programs also offer loan forgiveness. Check with your school or loan servicer to see if you may qualify for student loan forgiveness.

 

Earn Your Tax Benefits

If you are paying your student loans, you may be able to deduct the interest you pay on your student loans when filing your taxes. Deductions reduce your tax liability, saving you money and serving as a nice tradeoff for having to pay interest on your student loans. 

 

Repayment of student loans can be a long, difficult journey – but by taking advantage of your resources and staying determined to pay off your debt, it is manageable. If you need more information on paying back your student loans or the options that are available to you, contact your loan servicer.

 


 

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.

This Week in Student Loans: November 22

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Welcome to our weekly roundup on all things student loans. Let’s take a look at some top happenings of the week (click to scroll to the story):

Filing Bankruptcy to Alleviate Student Debt?

LendEDU’s Mike Brown wrote a column for Business Insider regarding the Student Borrower’s Bankruptcy Relief Act, which was proposed in May by Senator Dick Durbin and was cosponsored by Democratic presidential candidates Bernie Sanders, Elizabeth Warren, and Kamala Harris. If passed, the bill would erase the current part of the bankruptcy code that makes private and federal loans non-dischargeable unless “undue hardship” is proven, which has been known to be very difficult.

 

This is especially relevant as a LendEDU study found that 32% of bankruptcy filers carried student loan debt, with student loans making up 49% of their total debt on average.

 

The proposed law would treat student debt the same as other forms of consumer debt in bankruptcy proceedings, which may lead some student loan borrowers to consider filing bankruptcy to start fresh from their debt, despite the negative connotations. Whether that’s a smart move for borrowers is up for debate.

 

Source: Business Insider

Employers Joining in on Student Debt Repayment

In the midst of rising student debt, The Chicago Tribune reported that more employers are launching benefits programs to assist their employees in repaying their student loans.

 

“According to a survey last year of 250 companies by the Employee Benefit Research Institute, 11% offered student-loan repayment subsidies and 13% planned to add it as a way to attract and retain employees,” the article states.

 

Among the corporations following the trend are Hulu®, HP®, and Fidelity Investments®.

 

The types of student loan benefits that are being offered vary from employers making direct payments to lenders, offering tools to manage repayment, and even matching employee’s student loan payments with contributions to their 401(k) retirement plan. Perhaps more businesses will continue to catch on to high demand for debt relief among recent college graduates and implement benefits to attract their talent.

 

Source: Chicago Tribune

Will the College Affordability Act Enable Government Refinancing?

With all the buzz surrounding the College Affordability Act that was introduced by House Democrats in October, it’s worth looking into the details of what the act will change. Forbes writer Zack Friedman explains the three ways this could change repayment, with the first being that the government will enable borrowers to refinance their student loans to “today’s interest rates.”

 

How these rates will compare with top private student loan refinancing lenders is yet to be known. If this plays out like the in-school funding market, well-qualified borrowers may still receive better rates in the private market. In addition, there are some other limitations to the proposed refinancing program, including strict limits on the dollar amount of private loans that could be refinanced through the government. 

 

The proposed program would also eliminate origination fees of federal student loans (joining many private lenders like ELFI, who already do this for borrowers) and would “simplify” student loan repayment by replacing the variety of federal loan repayment plans with just two plans: one fixed student loan repayment plan and one income-based repayment plan. This “simplification” comes at a cost for borrowers who will lose access to:

 

  • Revised Pay As You Earn Repayment Plan (REPAYE) 
  • Pay As You Earn Repayment Plan (PAYE)
  • Income-Contingent Repayment Plan (ICR Plan).

 

Source: Forbes

 

Trump’s Loan Discharges Halted for 24,000 Veterans

In August, President Trump called the U.S. Education Department to forgive student loan debt for veterans who are “totally and permanently” disabled. However, this process has been delayed due to regulatory complications, leaving 24,000 veterans who would qualify without student loan forgiveness. The number of veterans who have received discharges of their loans thus far has reached 3,300.

 

The hang-up is that the Education Department “could not legally move ahead with the automatic loan forgiveness until the agency first rewrote the regulations governing the program,” according to the internal memo. It has been reported that the department is taking steps toward doing so and that new proposed regulations were pending review at the White House.

 

Source: Politico

 

Boston Librarian Upset With Public Service Loan Forgiveness Program

NBC Boston shared an article surrounding Maija Meadows Hasegawa, a Boston librarian who is upset at the lack of information she was provided regarding the qualification requirements for the Public Service Loan Forgiveness Program.

 

“It was almost like unless you knew to ask, nobody would tell you,” she stated in the article.

 

Hasegawa notes that the rules of the program sounded simple at first: get a full-time public service or nonprofit job and make 120 qualifying payments. After applying and being rejected, she was surprised to find that she could have switched her loan type to qualify, which she eventually did. She also wasn’t aware that she needed to be in an income-based repayment plan, which she eventually did as well.

 

Hasegawa is like many of the 102,051 applicants who have filed for the PSLF program, of which only 1,216 have been accepted – frustrated.

 

Source: NBC Boston

 

Follow us on FacebookInstagramTwitter, or LinkedIn for more news about student loans, refinancing, and achieving financial freedom.

 


 

NOTICE: 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.

Student Loan Refinancing vs. Public Service Loan Forgiveness

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Graduates seeking enriching careers like doctors, nurses, and pharmacists can often graduate from school with a large amount of student loan debt. Student loan debt can be especially burdensome during residency. 

 

Many healthcare professionals look to Public Service Loan Forgiveness (PSFL) for relief. Public Service Loan Forgiveness is a federal government program under the U.S. Department of Education’s Direct Loan Program offered to forgive qualified candidates of their Federal Direct Loans. The PSLF program can be a good option for healthcare professionals, but it is vital to understand the qualifications.  

 

According to USA Today, the PSLF program has had 41,000 submissions, and only 206 applicants have qualified. When choosing how to proceed with your student loan debt, it is essential to be well informed and have all the facts before making a decision.

 

Let’s review the requirements of the Public Service Loan Forgiveness program, take a look at student loan refinancing, and review the qualifications of both programs to see which option could be right for you.

 

Facts About Public Service Loan Forgiveness

If you are a borrower of student loan debt and you work within the public or non-profit sector, you have probably heard of the PSLF program. 

 

If you ever played the game “telephone” as a kid, you’ll know that word-of-mouth from multiple individuals can get information and facts mixed up. According to Federal Student Aid, a division of the U.S. Department of Education, the “PSLF Program forgives the remaining balance on your Direct Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer.” 

 

To fully understand this Act, let’s review the legislative history. 

 

The program created under the College Cost Reduction and Access Act of 2007 (P.L. 110-84) was designed to encourage student loan borrowers to remain and pursue careers in the non-profit and public sectors, as salaries in the private sector tend to be higher.

 

Loans Eligible for Public Service Loan Forgiveness

Certain federal loans are eligible for PSLF. The eligible loans for PSLF are non-defaulted loans under the William D. Ford Federal Direct Loan Program. 

 

You may know this as the Direct Loan Program or Direct Loans. According to the Department of Education, the loans provided under this program are: 

 

Direct Stafford

Undergraduates, vocational, or graduate students. Must be enrolled half-time in participating schools.

 

Direct Unsubsidized Stafford 

Undergraduates, vocational, or graduate students. Must be enrolled half-time in participating schools. 

 

Direct PLUS 

For parents of dependent students accepted for enrollment half-time in participating schools. As of July 1, 2006, graduate students are eligible.

 

Direct Consolidation 

Individuals with student loans that have defaulted but have made satisfactory arrangements to repay the loans. 

The Federal Family Education Loan Program and the Federal Perkins Loan Program, don’t qualify on their own for the PSLF program. However, if you have a loan within one of these two programs and consolidate them into a Direct Consolidation Loan, they can qualify. Now that we understand the type of eligible loans we’ll take a look at some qualifications.

 

Qualifying Repayment Plan

Borrowers seeking the PSLF program must have federal Direct Loans and be on a “qualified payment plan” known as an Income-Driven Repayment Plan (IDR). 

 

The 10-Year Standard Repayment Plan qualifies for PSLF, but to have a balance remaining, you must enter into an Income-Driven Repayment plan. If you do not enter an Income-Driven Repayment Plan, you won’t have a loan balance left to forgive since you will have paid it off by the time you qualify for PSLF.

 

Income-Driven Repayment Plans

Income-Driven Repayment plans base your monthly federal student loan payment on your income. Income-Driven Repayment Plans Include:  

 

Revised Pay As You Earn Repayment Plan or REPAYE Plan 

Bases the monthly payment on you (and spouse’s) adjusted gross income, family size, and state of residence.

 

Pay As You Earn or PAYE 

Monthly payments are based on your adjusted gross income and family size. You must be experiencing a financial hardship to qualify. You must also be considered a “new borrower” as of 10/1/2007 or after, or be someone who received an eligible Direct Loan disbursement on 10/1/2011 or after.

 

Income-Based Repayment or IBR 

Monthly payments based on your adjusted gross income and family size. Must be experiencing a financial hardship to qualify.

 

Income-Contingent Repayment or ICR 

Based on your monthly adjusted gross income and family size. Typically chosen if an individual can’t qualify for the Pay As You Earn Plan or Income-Based Repayment.Any changes to your income or your spouse’s income will affect your student loan payment. For example, if your salary increases, your student loan payment will as well. If you are married, both your income and your partner’s income are combined. Two combined incomes will increase your total income, likely increasing your monthly payment. 

 

Keep in mind: On an Income-Driven Repayment plan, be aware of the overall loan balance. A review of the total debt amount will take place when applying for a mortgage, credit card, or auto loan. A standard evaluation process for financial institutions is reviewing a borrower’s debt-to-income (DTI) ratio. Borrowers who have high DTI ratios may receive higher interest rates on their loans because financial institutions view these borrowers as higher risk. Your federal student loan balance could end up costing you in terms of higher interest rates on other types of loans. 

 

120 Qualified Payments

If you are on a qualified repayment plan, the next step is making 120 qualifying payments. If the total student loan balance is of concern and you plan on paying extra monthly, do so with caution. When paying over the minimum amount you will need to contact the loan servicer. For example, a common federal student loan servicer is FedLoan Servicing. When you contact the federal student loan servicer, you have to request that the extra amount paid is not applied to cover future payments. To qualify for PSLF, you cannot receive credit for a qualifying Public Service Loan Forgiveness payment if no payment is due. You will also need to pay the full amount on the bill for it to be considered a qualified payment. 

 

A common misconception about the PSLF program is that payments need to be consecutive. Payments do not need to be consecutive to count as qualifying in some circumstances. For example, if you work for a qualifying employer and made qualified payments, but then begin to work for a non-qualified employer, you will not lose credit for the qualified payments made before working for the non-qualifying employer.1

 

It is essential to know that your payment cannot be any later than fifteen days after your due date to be considered a qualified payment. On loans placed into an in-school status, grace period, deferment, or forbearance, you cannot make a qualifying monthly payment. If your loan is in deferment or forbearance to make a qualified payment, you must contact the servicer and request the status waived. According to the federal government, the best way to ensure that you are making on-time payments is to sign up for direct debit with your loan servicer. You need to be working full-time for a qualified employer while making payments on the loan.

 

1 https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/public-service#qualify

 

Qualified Institution/Employer

Your employer plays a vital part as to whether or not you can qualify for PSLF. A qualifying employer should be a government agency or certain types of non-profit organizations. If PSLF is important to you and part of your financial plan, it is imperative that you verify this internally. If at any point your employer is no longer a qualified institution, they are not responsible for notifying you. For example, in the healthcare industry, it is not uncommon for hospitals to convert from a non-profit to a for-profit institution. 

 

To qualify for PSLF, you need to be working full-time for a qualifying employer. Requesting the Employment Certification Form annually from your qualified employer can keep you on track for the program. 

 

Applying for Public Service Loan Forgiveness

The Public Service Loan Forgiveness program is common among borrowers with federal student loans, but the qualifications are not well-known. For that reason, we have gathered some documents and information for you. First, you should complete and submit the Employment Certification Form for Public Service Loan Forgiveness annually. If you change employers, you should also have this form completed by your new employer. If you do not submit your Employment Certification Form yearly, you will need to submit it when you apply for the PSLF program. When applying for the PSLF program, you will need to submit one for each employer where you worked while making qualified payments. If you are looking for the Employment Certification Form you can download it here.

 

You can download the PSLF application here. Once you’ve completed your forms, you have three options for submission. Forms can be mailed, faxed, or submitted through your student loan servicer. Mail your completed application to:

 

U.S. Department of Education 

FedLoan Servicing 

P.O. Box 69184 

Harrisburg, PA 17106-9184 

 

To fax your information use 717-720-1628. The last option provided for submitting your Public Service Loan Forgiveness is uploading the application to the servicer. 

 

The Reality of Public Service Loan Forgiveness

The PSLF program only allows forgiveness for certain types of federal loans as described above. To date, the Public Service Loan Forgiveness program has rejected 99% of applicants2. If you want to qualify for PSLF successfully, you must pay close attention to the detailed eligibility requirements of the program. Many of the requirements of the PSLF program can be difficult to understand or even find. To the benefit of those who refinance, student loan refinance companies are obligated by law to disclose information regarding their offerings. Some would say that student loan refinancing has a straightforward process when compared to the PSLF program. Not only is student loan refinancing transparent and held to a number of standards, but it can also really empower borrowers with options. Borrowers who previously had little control over their student loans can now choose what repayment plan works best for their financial future.

 

There is no “one-size fits all” answer. You need to know your options for managing your student loan debt. Whether you choose to pursue Public Service Loan Forgiveness or refinance your student loans is your decision. Understand that if you choose to pursue PSLF, there is a possibility you will not qualify. Remember, according to an analysis done by USA Today, only 1 percent of student loan borrowers who applied for the PSLF program have qualified. 

 

When deciding what path to take, consider what your financial goals are and what sets you up for the most success in the future. 

 

2 https://ifap.ed.gov/eannouncements/091918FSAPostsNewReportstoFSADataCenter.html

 

Student Loan Refinancing 

Student loan refinancing has gained popularity within the last five years. Private companies are offering student loan refinancing as a way to make student loan debt more manageable. Many benefits can be achieved when qualified borrowers refinance their student loans. Most notably they can change repayment terms to fit their financial goals and lifestyle, and combine multiple federal and private loans into one single loan with a simple monthly payment, while likely reducing the amount paid over the life of their loans. 

 

The new interest rate provided is based upon a borrower’s credit history and credit score, in addition to other eligibility criteria, depending on the financial institution. Overall, refinancing student loans can have an impact on a borrower’s interest rate, repayment terms, and benefits. 

 

Interest Rates

When you take out federal studentloans, all borrowers receive the same interest rate on a given Federal Direct Loan. 

 

The federal government does not review a borrower’s or cosigner’s credit history or credit score. When you refinance your student loans, the private company will take a look over your credit history and credit score. The private student loan refinance company will also review additional information, like income. 

 

Many companies that refinance student loans will offer both variable and fixed rate loans. If you previously had a variable rate loan and qualify to refinance, you can select a fixed rate loan instead and vice versa.

 

Refinancing provides qualified borrowers the opportunity to make changes to existing student loan terms.

 

Repayent Terms & Cosigners

Federal student loans do not provide borrowers with an option regarding the repayment terms on the loan. Some federal loans provide a 10-year standard repayment plan, but other federal loans can span 25 to 30 years. When refinancing your student loans, you can select from the repayment terms offered by the company. Many companies offer repayment terms of 5, 7, 10, 15, and 20 years. 

 

Can you imagine paying off your student loan debt in five years? Many borrowers find that repaying their student loans faster has helped them to save money on interest. Having the ability to select repayment terms can allow borrowers the flexibility to reach other financial goals in their life. Generally, the repayment term selected will affect the interest rate on your new loan after you refinance.

 

If you took out a private loan for college, it is likely you may have needed a cosigner. When you refinance student loans, you could potentially remove the cosigner from the loan if you have established the necessary credit to take out a loan on your own. Removing a cosigner relieves the cosigner from the financial burden and responsibility of student loan debt and frees up the cosigner’s credit. Be prepared when refinancing your student loans in case there is a loss of benefits.

 

Loss of Benefits

Federal loans offer benefits for borrowers that may not be available through a private lender like a student loan refinance company. It’s imperative to read the guidelines and fully understand them before moving forward with refinancing your student loans. One of the biggest setbacks of student loan refinancing is that once you’ve refinanced your student loans through a private company, you no longer qualify for the PSLF Program.

 

When you refinance your federal student loan, the debt is paid off by the student loan refinance company, and a new loan is issued to you by the refinance company. Therefore, there is no federal student loan anymore. Since that loan is now paid off, there is no balance to forgive, and in turn, you cannot utilize PSLF. This is not the only drawback of refinancing.

 

Many student loan refinance companies offer different benefits regarding deferments or forbearances and make decisions on a case-by-case basis. Benefits that may have been utilized while repaying your federal student loan may no longer be available through a private lender.

 

Public Service Loan Forgiveness or Student Loan Refinancing? Which is Right for You?

Now that you have an understanding of the options available to you as a healthcare professional, consider what makes the most financial sense for your situation.

 

Student loan refinancing may be a better option if you want to pay off your debt quickly since student loan refinancing allows you to change repayment terms and may have lower interest rates. Changing repayment terms can allow you to pay down your debt faster or even extend repayment. 

 

Another situation where refinancing may be a more attractive offer is if rates achieved by refinancing are lower than rates on your federal loan or your private loans. By achieving a lower interest rate, you will be paying less interest over time. If you are not planning on applying for PSLF for your federal loans, or you have private student loans that carry high-interest rates, you should look into the options available for refinancing student loans. 

 

However, by refinancing your federal student loans you will lose many benefits and protections available to federal student loan borrowers. Keeping your federal protections may be more beneficial than refinancing your student loans. 

 

Whether you choose to pursue PSLF or student loan refinance, you should be knowledgeable about the requirements and the pros and cons of each option. 

 

See How ELFI Can Help You Refinance Your Student Loans

 

 


 

 

Subject to credit approval. Terms and conditions apply.

 

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