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Student Loan Refinancing (Blog or Resources)

Student Loan Interest vs. Other Interest Types

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By Caroline Farhat

 

If you have student loans, you’ve probably been told at one point that it’s “good” debt. But what does that really mean? Is any debt actually good or is it all bad? Is the interest you pay on your student loans better than the interest you pay on your auto loan? 

 

As you accumulate more assets, you’ll encounter many different types of interest. It’s helpful to know how each type of interest differs so that you know exactly what you’re getting into when you borrow money. 


What is Student Loan Interest?

Student loan interest is essentially the cost you pay for borrowing the money. When you pay interest, you will be paying back the amount of money you borrowed plus the cost to borrow the money (the interest). The higher the interest rate, the more money you will have to pay in addition to the amount you borrowed. The amount you borrow is called the principal and the cost to borrow the money is called the interest. Interest is charged on both federal student loans and private student loans until the loan is paid in full. When you make a payment on a loan the interest is paid first, any amount of the payment over the interest is applied to the principal and lowers the balance of the loan. The types of rates and how interest is calculated are based on the type of student loan.  

 

Federal Student Loans: The Difference Between Subsidized and Unsubsidized

Federal student loans have fixed interest rates that are set by the government. They remain the same throughout the life of the loan. Also, federal student loan interest rates may be lower than auto loans or personal loans. Federal student loans have two different types of interest: subsidized interest and unsubsidized interest. A subsidized interest loan means the government pays the interest on the loan while you are in school or during deferment (a grace period from federal student loan payments granted for certain situations), which means the balance of the loan does not increase. Once you are out of school or the deferment period ends, you will be responsible for paying the interest on the loan. An unsubsidized federal student loan means the interest starts accruing from the day the loan is first disbursed. Although you may not be required to make payments on the loan while you are in school, you will end up with a loan balance higher than you initially borrowed. The interest on a federal student loan is calculated using the simple interest formula. Here is how to calculate the simple interest formula:

 

The principal (the amount of money you borrowed) X the interest rate = The amount of interest you will pay each year for the loan

 

Private Student Loans: The 411 on Fixed and Variable Interest Rates

Private student loans can have a variable interest rate or a fixed interest rate. A variable interest rate is based on the current market and economy and can change over the life of the loan. A fixed interest rate remains the same throughout the life of the loan. It’s important to note that rates can vary widely based on the student loan lender, which is why it is so important to do your research and only sign with a reputable company. The interest rate you receive on a private student loan is also based on certain financial factors, including your credit score. 

 

For example, ELFI customers who refinanced student loans report saving an average of $309 every month¹. If you currently have private student loans, you can check out our student loan refinance calculator to get an estimated rate and monthly payment for both fixed and variable options.² Whether you’ve taken out federal student loans or private student loans throughout your college journey, consolidating and refinancing could score you some significant savings.

 

Interest On Other Common Loans

If you’re in full adulting mode, odds are you have or are considering getting an auto loan or mortgage. Just like your student loans, these financial products come with interest as well. 

 

Interest rates on car loans can be variable or fixed rates and the rate you receive is based on factors such as your credit score and financial health. There are two ways interest is calculated on car loans: simple or precomputed. For simple interest, the interest is calculated based on the balance of the loan. If you pay extra on your car loan, the principal will be reduced and in the long run, you will be saving money in interest (woohoo). If you have a precomputed interest loan on a car, it will be calculated on the total amount of the loan in advance. This means that even if you make extra payments, you will not save any money on the interest over time. One big difference to note between student loan interest and auto loan interest is how it can affect your taxes. With student loans, the interest you pay may be a tax deduction you can take depending on your income and the amount of interest you have paid. With an auto loan, there is no such benefit.    

 

Interest on a house loan, otherwise known as a mortgage, is calculated similar to a simple interest car loan. An interest rate on a mortgage may be variable or fixed depending on which type of loan you choose. There are two major types of mortgage loans: 

  1. Principal and interest loans – You pay back the interest and the principal (the amount of money you borrowed) at the same time. This is the most common type of mortgage.
  2. Interest-only loans – This is when, for a certain period of time, payments towards the loan only go towards paying off the interest on the loan.

 

Mortgage loans are amortized, like some student loans, which means your payment goes towards more interest upfront. Then as the balance decreases, you pay less interest and the payment goes towards paying down the principal. Also, just as with some student loans, some of the interest you pay on your mortgage may be tax-deductible. 

 

Understanding Interest Can Pay Off

It’s important to understand the different types of interests and loans when determining which debt to focus on paying off first. Being strategic about how and when you pay off your debt can save you hundreds and even thousands of dollars. A good rule of thumb is to pay off the debt with the highest interest rate and then focus on your interest rate debt. Of course, if you have the option to refinance, explore that first and then develop your debt reduction plan.

 


 

¹Average savings calculations are based on information provided by SouthEast Bank/ Education Loan Finance customers who refinanced their student loans between 8/16/2016 and 10/25/2018. While these amounts represent reported average amounts saved, actual amounts saved will vary depending upon a number of factors.

 

²Subject to credit approval. Terms and conditions apply. Variable rates may increase after closing.

 

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.

LIBOR: What It Means for Student Loans

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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 decide to refinance your student loans, you’re likely looking for the lowest interest rate possible. If you want to pay off your debt aggressively, you may get a lower rate by opting for a variable rate loan rather than a fixed-rate loan.

 

While a variable rate loan may be a smart choice, it’s important to understand how lenders determine your interest rate and what factors may influence it, such as the LIBOR rate.

 

Continue reading to learn more about the LIBOR rate and how it affects your student loan repayment.

 

What is LIBOR?

To understand LIBOR, you must first understand Eurodollars. Eurodollars are bank deposit liabilities — written as U.S. dollars — that don’t fall under U.S. banking regulations. Banks that offer Eurodollars are usually located outside of the United States, and play a big role in the financial industry.

 

The London Interbank Offered Rate (LIBOR) is a money market interest rate that is considered to be the standard in the interbank Eurodollar market. It’s a market for banks and financial institutions, rather than individuals. The LIBOR rate is the rate at which international banks are willing to offer Eurodollar deposits to one another.

 

That all may sound very complex and confusing, and you may be wondering why it matters to you. But the LIBOR rate can affect you directly. Many adjustable-rate loans and lines of credit, such as mortgages, credit cards, and student loans, base their interest rates on the LIBOR rate

 

How LIBOR affects your variable rate loans

When you apply for a loan, you can often choose between a fixed-rate loan and a variable rate loan. A fixed-rate loan has the same interest rate for the length of your repayment. It never changes, no matter what the market does. By contrast, variable rate loans usually have lower rates than fixed-rate loans for the same term at first. However, they can fluctuate over time to coincide with market changes.

 

If you have variable rate student loans, changes to the LIBOR impact the interest rate you’ll pay on the loan throughout your repayment.

 

Private student loans, including refinancing loans, have interest rates that are tied to an index, such as LIBOR. But that’s not the rate you’ll pay. The lender also adds a margin that is based on your credit; the better your credit, the lower the margin.

 

Your annual percentage rate, or APR, is a way of measuring the full cost a lender charges you per year for funds, and is expressed as a percentage. Your APR can be determined by adding the LIBOR rate to the margin, and including the cost of other fees and charges (if any exist) averaged over the term of the loan. If the LIBOR rate increases, the interest rate on your student loan will increase as well.

 

LIBOR Rate + Margin = Your Interest Rate

There are different maturities for LIBOR, including overnight, one week, one month, two months, three months, six months, and twelve months. Some student loan companies, including ELFI, adjust their interest rates every quarter based on the three-month LIBOR rate, while others adjust rates monthly as their loans are tied to the one-month LIBOR.

 

The LIBOR rate can fluctuate a great deal. However, most private student loan companies have caps on the interest rate, meaning your interest rate will never exceed that amount, no matter how high the LIBOR rate becomes.

 

Current LIBOR rates

As of Friday, November 22, 2019 — the last available data — the LIBOR rate is 1.917%. If the lender sets their margin at 3%, your new rate would be 4.917% (1.917% + 3.00%=4.917%).

 

The current LIBOR rate is significantly lower than it was at the beginning of 2019. On January 2, 2019, the LIBOR rate was 2.79%.

 

LIBOR rate trends

The LIBOR rate rises and falls along with market changes. Over the past 10 years, the three-month LIBOR rate has generally increased.

 

On December 2, 2009, the LIBOR rate was just 0.255%. As of November 22, 2019, the rate was 1.917%. If you had a variable rate loan during that time, that change means your rate would have risen by 1.662%.

 

The chart above displays fluctuations to the 3-month LIBOR based on the U.S. dollar from 2010-2019.

 

Future of LIBOR

LIBOR has been the gold standard that lenders have used for years to determine their rates. However, LIBOR is slowly being phased out and will be replaced with a new index.

 

LIBOR is based on transactions that aren’t as common as they used to be, so the index is considered to be less reliable than it once was. LIBOR is expected to be discontinued sometime after 2021.

 

How will that affect interest rates? The Federal Reserve has convened a committee to facilitate the transition and has recommended a new index to replace LIBOR. Lenders will likely replace LIBOR with the recommended index, or with the U.S. Prime Rate. Be sure to check your student loan documents (typically your Application & Credit Agreement) to better understand the terms of replacing the LIBOR index with a replacement index if you have a variable rate loan.

 

Managing your debt

If you’re planning on refinancing your student loans and are trying to decide between a fixed-rate loan and a variable rate loan, learning about the LIBOR rate can help you make an informed choice. If you want to see how much money you can save with refinancing and what interest rate you can qualify for, use ELFI’s Find My Rate tool to get a quote.*

 


 

*Subject to credit approval. Terms and conditions apply. Variable rates may increase after closing.

 

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: December 2

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

 

This week in student loans:

Personal Loans Are the Fastest Growing Category of Debt in U.S.

With a fair amount of hype surrounding student loans, CNBC reported that neither student loans or credit card debt were the fastest growing categories of debt. Instead it was personal loans, growing at a clip 11% over the past year. In the article they share the reasons why personal loans can be appealing to individuals with good credit, why they may be less appealing to those with bad credit, as well as how personal loan debt differs from credit card debt.

Source: CNBC

 


Fraud in Federal Income-Based Repayment Plan?

This past July, the Government Accountability Office reported that the Education Department’s lax vetting of income and household information had been leaving popular student loan repayment programs, such as the Income-Based Repayment program, susceptible to fraud and errors. This “lax vetting” came in the form of borrowers not being held accountable for the income and number of household members they reported in their applications, which are prominent factors in qualifying. It’s since been said that this was due to the Department of Education not having access to IRS data, making them unable to verify the necessary data. This past week, Senator Patty Murray (D-Wash.) has asked the Education Department to suspend an expanded initiative to ensure that borrowers qualify for popular student loan repayment plans, claiming that the verification process “ensnares students in a jungle of red tape,” and that “The [Education] Department’s efforts to impose verification procedures on borrowers are based on unsupported assumptions.”

 

Source: Washington Post

 


Colorado Joins in Lawsuit Against Department of Education

The Denver Post reported that Colorado joined 19 other states and the District of Columbia in filing a brief in the case of Weingarten v. U.S. Department of Education. Like the other states, they are supporting those who have been denied by the Federal Service Loan Forgiveness after 10 years of public service work, claiming the Department “committed ‘pervasive errors’ in administering the Public Service Loan Forgiveness Program.”

 

This case has arisen in the midst of reports that 845 out of 900,000 applicants have been approved to have their student loans forgiven through the program. The article provides comments from Colorado Attorney General Phil Weiser’s office on the matter.

 

Source: Denver Post

 


Employers Continue to Join in on Student Loan Debt Repayment

This Seattle Times article highlights a number of employers that are offering benefits to help employees pay down their student loans, conveying that there appear to be a variety of benefit structures, ranging from allowing employees to swap their paid time off for student loan payment compensation, to awarding points for customer service that can be exchanged for items of cash value, including payment toward their student loans.

 

Source: Seattle Times

 


See Where Presidential Candidates Are Standing on Student Loans

Student Loan Hero’s Rebecca Safier breaks down where all 2020 presidential candidates stand on the basis of college affordability and student loan debt reform, both of which, she writes, “have become hot-button topics.”

 

Source: Student Loan Hero

 

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


 

Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.

So I’ve Refinanced My Student Loans – Now What?

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By Caroline Farhat

 

Congratulations! You just made the big step of refinancing your student loans. Your wallet is fatter and you’ve likely shaved off thousands of dollars from what you will have to pay on your student loans. That’s a huge achievement that will positively impact your financial life.

 

You may be tempted to use your new found moolah on brunches and vacations, but don’t start spending lavishly quite yet. While present you may be saying “yes!” to fancy dinners, future you would really benefit from spending this extra cash in a smarter way. If you’re feeling financially empowered, you’ll love these five financial tips for what to do after you refinance to maximize your money.

 

1. Reexamine (or create) your budget

Any time you have a change in your financial situation, such as a raise or a new recurring bill, it’s important to evaluate your current budget. If you don’t already have a budget, getting a little extra money each month can be a great motivator to start one. We’re fans of the zero-based budget system. With zero-based budgeting, you allocate each dollar you make to a specific expense or goal so it can help curb unnecessary expenses you may regret later. For example, say you bring in $4,000 a month after taxes. You spend $3,000 on fixed expenses such as rent, utilities, and food. Your monthly payment for student loans is $600, leaving you with $400 extra each month. Under zero-based budgeting, you would allocate the extra $400 to other goals (such as contributing to a savings account) or wants (such as a travel budget). Once you have figured out exactly where each dollar will go, you should set up an automatic transfer to a savings account so that you never get tempted to spend money that you should be saving.

 

Of course, budgets aren’t one size fits all. If you have a method that works for you, then use that! The important things to know and keep track of are:

  1. How much money you have (after taxes and health insurance payments)
  2. Your essential fixed expenses (such as housing, utilities, food, student loan payments)
  3. Your non-essential fixed expenses (such as gym memberships, Netflix, etc.)
  4. Your long-term financial goals (buying a house, saving for a child, retirement)
  5. Your short-term financial goals (dining out, travel)

 

2. Start or pad your emergency savings account

If you don’t have at least three months of living expenses saved up, you need to start right now. We don’t want to set off alarm bells, but an emergency savings account is the number one thing everyone needs to have on their financial to do list. Depending on your situation, you may benefit from stashing away six to nine months of living expenses, but start with at least three months and build from there. Be sure to have this money easily available, so put it in a savings or checking account that does not incur any fees or penalties for withdrawing money. For example, you do not want to put your emergency savings in a CD, even if it will yield you a higher interest rate, because getting your money out can be a costly and sometimes time-intensive process. That said, find a savings account that will pay you interest so you don’t lose all your earning power on that money.

 

3. Pay down other high-interest debt

After you have a healthy savings account, paying off high-interest debt should be your next priority. Just like how refinancing your student loans helped you save money in the long run, paying off debt with high interest rates such as credit card debt or a personal loan will help you shave off hundreds or possibly even thousands of dollars that you would have to make in interest if you just paid the minimum monthly payment. Even putting an extra hundred dollars a month to this debt can pay off big time in the future. Additionally, lowering your debt load can help bolster your credit score, especially if you are carrying a lot of credit card debt. Your debt-to-income ratio is critical if you want to get a mortgage or other big-ticket items so paying down high-interest debt can only work to your advantage.

 

4. Contribute to your retirement

Say you have a healthy emergency savings, you’ve paid off all of your credit cards, and you have enough to cover your living expenses with a little bit of extra fun money. First, congrats! That’s a big feat and you’re killing it with your finances!

 

Set your future self up for success is by starting or increasing your contribution to a retirement account such as a 401(k) or IRA. Retirement accounts benefit from compounding interest so the sooner you start, the better. Plus, many employers have matching programs that help you pad your retirement account. Remember the free money you can make from a high-interest savings account? This is similar, but your future self will be the one to reap the benefits.

 

5. Treat yourself, responsibly

If you have refinanced your student loans, it’s safe to say that you’re clearly on top of your financial game. Let’s be real — there will always be a list of things you can and should do with your money. But it shouldn’t all be about the work. You deserve to treat yourself! Just be sure to do it responsibly. Should you suddenly move into a budget-busting luxury penthouse apartment? Probably not. But you absolutely should treat yourself to that nice dinner or new pair of sneakers you’ve been eyeing. The keys to a successful financial life are staying informed and staying balanced. Just like any other goal, providing little rewards along your journey can help you stay motivated. So take this as our encouragement to enjoy yourself! Just do it responsibly with an eye on your financial independence.

 

 

Meet the Personal Loan Advisors of ELFI: Part 2

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This Thanksgiving, we’re thankful for the individuals who help Education Loan Finance continue to serve those with student debt with top-notch customer service – our Personal Loan Advisors! Navigating student loans can be tricky, but our PLAs are ready to answer any question you can think of when it comes to refinancing student loans. Here’s a look at a few of our dedicated Personal Loan Advisors who make ELFI great.

 


 

Colene Helveston

Meet Colene, an ELFI Personal Loan Advisor and major Florida Gators fan. With three children and three grandchildren, Colene has a deep concern for people working hard to pay off student debt. Her favorite part of working for ELFI is helping borrowers who have difficulty getting approved for refinancing – she is patient with them throughout the process and keeps them updated on all documents they need. She says it feels great when the borrower finally gets approved, is happy with their rate, and immediately leaves a good review.

Her latest review from a customer:

“Colene was wonderful in guiding me through the entire process. She was always quick to respond and explain what was needed and why.”

Thanks for all you do, Colene!

 


Drew Johnson

Meet Drew, an ELFI Personal Loan Advisor that assists customers through each stage of the refinancing process, from the application phase to the funding of their loan. His favorite part of working for ELFI is interacting with his customers and finding commonality.

Drew’s most recent review from a customer:

“Communication was top notch. Drew answered my questions quickly and clearly. I felt like I could trust him and the whole process moved along very smoothly.”

We appreciate you, Drew!

 

 


Amanda Scott

While Amanda is no longer a PLA, we are thankful for her taking on the role of Customer Service Lead! She enjoys to crotchet keepsakes for her friends and family, as well as for herself. Besides the snacks, her favorite part about working at ELFI is being able to help people navigate the student loan space.

 

Her favorite story with a customer involved dealing with a father and son – the son was applying to have his student loans refinanced, but didn’t quite meet the criteria. Amanda kept them in mind for some time and let them know when the criteria changed (which wasn’t required of her). Not only did the son qualify to have his student loans refinanced, but the father went on to refer his two daughters to Education Loan Finance, all because of the work Amanda put into helping them! Now that’s a good example of how helping others truly comes around!

 

Here’s a testimonial from one of Amanda’s former customers:

 

Great work, Amanda!

 


 

Leaders in Customer Service

These dedicated individuals and the rest of ELFI’s Personal Loan Advisors are to credit for our 4.8 out of 5.0 TrustPilot Rating and #1 Best Refi for Customer Service award from NerdWallet. As a team, they strive to provide elite service to everyone who inquires about refinancing their student loans.

 

Why Does ELFI Use Personal Loan Advisors?

There’s no one-size-fits-all solution for student loan refinancing. Personal loans often come with a fixed amount of time to pay them back – which means that if you’re in your twenties and just starting out on your career path, you want to be sure that your monthly loan payments are affordable. You also need to be aware that missing a payment could seriously damage your credit rating. Weighing all the refinancing options available to you can be difficult on your own, which is why we provide every customer with a dedicated Personal Loan Advisor to help them navigate the process from start to finish.

 

The appointment of a PLA is a unique feature of ELFI’s services. If you’re interested in refinancing your student loans, our PLAs are always available by phone, text, or email. One of our PLAs will be dedicated to you from the moment you apply and will work with you each step of the way to ensure your ELFI refinanced loan is the optimal fit for you. Contact us to get started!*

 

*Subject to credit approval. Terms and conditions apply.

The Average Cost of College

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When it comes to shopping, many of us have champagne taste and a beer budget. We shop with our eyes and our hearts before taking a peek at the price tag. The process of selecting a college is no different. We make decisions based on location, athletic teams, available programs of study, greek life, or even where our friends apply. Unfortunately, for many people, the cost of college lives at the bottom of the checklist, despite being a vital factor to consider. 

 

The average cost of college for the 2019-2020 school year, is $21,950 for public, four-year, in-state colleges and $49,870 for private universities. This is an increase of 2.6% and 3.3%, respectively, over the year prior, alone. 

 

Without question, college is expensive, and very few people are talented enough to get an athletic or academic scholarship to completely or partially cover the cost of education. An even smaller number of people are able to pay for a degree out-of-pocket. That leaves the majority of college students and their families to rely on loans to pay the bills.  

 

Further complicating matters, a lot goes into the cost of college, including your residency status, level of degree you seek (bachelor’s, master’s, or doctoral), where you live (on-campus, alone, or with a house full of roommates), and even how much you eat or how you commute to campus. 

 

To help you understand where you can save, as well as how you can cover expenses with financial aid, let’s dig into what comprises the average cost of college. 

 

Tuition

Average Cost: $10,440 (public) | $36,880 (private)*

Tuition is the amount you pay your university to enroll in classes. The total changes based on the number of credit hours you take and if you take courses with additional charges like science labs or residential academic programs that let you attend smaller classes in your dorm. Offers like the Western Undergraduate Exchange (WUE) can help students save money by providing in-state tuition to out-of-state students. Despite programs like this, the average cost of college is always rising because tuition increases each year based on inflation, school budgets, and a variety of other factors. 

 

Mandatory fees are lumped into tuition and include contributions toward campus construction and access to things like:

  • Student rec center
  • Athletic events
  • Career services
  • Student activities
  • Computer labs
  • Bus passes
  • Etc. 

 

Room and Board

Average Cost: $11,510 (public) | $12,000 (private)*

Many colleges require you to live on-campus for at least your first year of attendance. The benefit of this requirement is that you’re close to classes and resources, including dining halls and bodegas that can be paid for with your room and board fees. These costs aren’t typically part of the bill for community colleges or schools with a high population of daily commuters. However, students will still need to cover living expenses like rent, utilities, and groceries if they chose not to live at home with their parents and amounts vary based on eating habits and geographic locations. For example, rent in California is higher than in Tennessee and the general cost of living in an urban setting is higher than it is at a rural school. 

 

Books

Average Cost: $1,240 (public and private)*

Books can be a secret killer when it comes to college expenses. No one ever anticipates the sticker shock associated with their first $300 textbook. These costs also include necessary technology like tablets or laptops for note-taking and essay writing. It also can include special supplies like graphite pencils and drawing paper for art majors or scrubs or stethoscopes for nursing majors. These semesterly shopping trips can do real damage to your checking account and add to the average cost of college. 

 

Transportation

Average Cost: $1,230 (public) | $1,060 (private)*

So far, we’ve focused on what you’ll need to pay to get by on campus, but we haven’t talked about the expenses associated with getting to campus. These costs impact resident and commuter students and range from airplane tickets and bus fare to parking passes and tanks of gas.  

 

Financial Aid 

When factoring the average cost of college, the other side of the ledger is represented by financial aid in the form of scholarships and need-based grants. With these awards, that don’t have to be repaid, the cost of tuition is reduced. 

 

In addition to scholarships and grants, federal and private loans are available to help cover the cost of college. Private lenders offer student loan options for undergraduate students, graduate students, and even parents. Loans cover everything from tuition to personal expenses that you’ll occur during your college years, like cell phone bills, clothes, laundry, or even a bed for your apartment. The biggest thing to keep in mind when taking out loans is to borrow only what you’ll need. It’s necessary to have money to pay bills while you’re a full-time student, but borrowing too much can put you in a bind when it comes time to pay back those loans.

 


 

* Source: https://research.collegeboard.org/pdf/trends-college-pricing-2019-full-report.pdf

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.

The Importance of a Good Debt to Income (DTI) Ratio

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It is evident to most people that having more income and less debt is good for their finances. If you have too much debt compared to income, any shock to your income level could mean you end up with unsustainable levels of debt. Every month you have money coming in (your salary plus additional income) and money going out (your expenses). Your expenses include your recurring bills for electricity, your cell phone, the internet, etc. There are also regular amounts that you spend on necessities, such as groceries or transportation. On top of all of this, there’s the money you spend to service any debts that you may have. These debts could include your mortgage, rent, car loan, and any student loans, personal loans, or credit card debt.

 

What is the Debt-to-Income Ratio (DTI)?

The Debt-to-Income Ratio (DTI) lets you see how your total monthly debt relates to your gross monthly income. Your gross monthly income is your total income from all sources before taxes and other deductions are taken out. Below is the formula for calculating your DTI:

DTI = (Total of your monthly debt payments/your gross monthly income) x 100

 

Example: Let’s suppose the following. Your gross monthly income is $5,000, and you pay $1,500 a month to cover your mortgage, plus $350 a month for your student loans, and you have no other debt. Your total monthly payments to cover your debts amounts to $1,850.

 

Your DTI is (1,850/5,000) x 100 = 37%

Here’s a handy calculator to work out your DTI.

 

Why is Your DTI Important?

Your DTI is an important number to keep an eye on because it tells you whether your financial situation is good or if it is precarious. If your DTI is high, 60% for example, any blow to your income will leave you struggling to pay down your debt. If you are hit with some unexpected expenses (e.g., medical bills or your car needs expensive repairs), it will be harder for you to keep on top of your debt payments than if your DTI was only 25%.

 

DTI and Your Credit Risk

DTI is typically used within the lending industry. If you apply for a loan, a lender will look at your DTI as an important measure of risk. If you have a high DTI, you will be regarded as more likely to default on a loan. If you apply for a mortgage, your DTI will be calculated as part of the underwriting process. Usually, 43% is the highest DTI you can have and likely receive a Qualified Mortgage. (A Qualified Mortgage is a preferred type of mortgage because it comes with more protections for the borrower, e.g., limits on fees.)

 

So, What is a Good DTI?

If 43% is the top level DTI necessary to obtain a Qualified Mortgage, what is a “good” DTI? According to NerdWallet, a DTI of 20% or below is low. A DTI of 40% or more is an indication of financial stress. So, a good rule of thumb is that a good DTI should be between these two figures, and the lower, the better. 

 

The DTI Bottom Line

Your DTI is an essential measure of your financial security. The higher the number, the less likely it is that you’ll be unable to pay down your debt. If there are months when it seems that all your money is going toward debt payments, then your DTI is probably too high. With a low DTI, you will be able to weather any financial storms and maybe even take some risks. For example, if you want to take a job in a field you’ve always dreamed about but are hesitating because it pays less, it will be easier to adjust to a lower income. Plus, debt equals stress. The higher your DTI, the more you can begin to feel that you’re working just to pay off your creditors, and no one wants that.

 

DTI and Student Loan Refinancing

Your DTI is one of several factors that lenders look at if you apply to refinance your student loans. They may also assess your credit history, employment record, and savings. Refinancing your student loans may actually decrease your DTI by lowering your monthly student loan payment. This may help you, for example, if you want to apply for a mortgage. ELFI can help you figure out what your DTI is and if you are a good candidate for student loan refinancing. Give us a call today at 1.844.601.ELFI.

 

Learn More About Student Loan Refinancing

 

Terms and conditions apply. Subject to credit approval.

 

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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.

How to Use ELFI’s Student Loan Refinancing Calculator

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Wondering if it’s time to refinance your loans? Our refinancing calculator can help you estimate how much you could save with ELFI. Here’s a breakdown of what you’ll need to enter in each field of the calculator.

 

Current loan debt.

How much do you still owe on your loan? Entering the correct amount here is vital to getting a more accurate estimate of your savings.

 

Monthly payment.

This is how much you currently pay each month on your loan. If you have a variable monthly payment, enter the average here.

 

Current interest rate or remaining term (in months).

Here you have the option to enter, as a percentage, how much you currently pay in interest on your loan. OR you can enter, in months, how much time you have left until your loan is paid off. For example, if you have 7 years of payments left, you’ll enter 84 months.

 

Loan type.

Here, enter the type of loan you’ll want after you refinance. This question isn’t asking whether you currently have a fixed or variable loan – it’s asking if you want your refinanced loan to have a fixed or variable rate. Choose the option that fits you.

 

Loan term in years.

Now tell us how long you want to spend paying off the loan – the answer could be anywhere from 5 to 20 years. Again, this is for your refinanced loan, not your current loan.

 

Current Monthly Payment | ELFI Monthly Payment | Monthly Savings | Lifetime Savings

You don’t have to enter any information into these fields. They automatically generate estimates based on the information you entered into the other fields on the calculator. Once you’ve entered your information into each field, you can look at these boxes to see a comparison of your monthly payment versus what you could save. You also have the option to go back and change any information you entered into the calculator when you’re done. Changing some of the options might reveal ways you could save even more.

 

Find my estimated rate.

Once you’re finished, click this button and ELFI will take you to our pre-qualification process if you’re interested in getting a quote or starting the refinancing process.*

 

Want to know more about refinancing with ELFI? Check out our FAQ’s page.

 

Try Our Student Loan Refinancing Calculator

 

Student Loan Scams: Voicemail Edition

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Robocalls. They’ve become so common and irritating that we rarely answer our phones if we don’t recognize the number. The voice messages these scammers leave range from humorous to threatening – from the “local police” waiting to take you into custody, to a stranger offering cash for your home. 

 

A recent string of messages hits particularly close to home for the 45 million U.S. borrowers who owe $1.5 trillion in student loans. These calls claim changes to federal student loans or advertise offers of forgiveness of student loan debt. Some people who find these messages in their voicemail don’t even have student loans. But for the 45 million Americans who do, the offers can be a little too tempting. Student loan debt is a burden that we want to find a way out of and sometimes, what sounds to be too good to be true is in fact that. So much so, that we’re willing to put on earmuffs when it comes to a quick way out. 

 

These scammers are after social security numbers, credit card numbers, federal student aid IDs, or for a victim to contribute money to a loan assistance program that (surprise, surprise) has no intention of helping you with your student loans. A reputable company will never ask for any of these things over a voicemail or on the phone.

 

So how are borrowers supposed to know what offers to be wary of? Let’s run down a list of common tactics for student loan voicemail scams. 

 

Student Loan Scam Tactic #1: They Offer to Abolish Your Student Loans

This tactic is just what it sounds like: fraudsters offering to completely do away with your student loan debt. The scam is tricky because there are federal loan forgiveness programs that pay the balance of your loan under certain circumstances, like if you join the military or qualify and meet the requirements of the Public Service Loan Forgiveness (PSLF) program. We’ve outlined how the PSLF program works in a previous blog post

 

The offer from the scammer usually sounds something like, “we’ll release your student loans for a nominal, upfront fee.” The red flag is the advance payment – something legitimate organizations would never do. It’s actually illegal for companies to make you pay before helping you. This claim is even more suspicious when they offer “quick” student loan forgiveness. In actuality, the Public Service Loan Forgiveness program takes years to complete and includes detailed requirements for qualifying. To put it simply, if you have student loan debt, you must repay that debt. If you are having a challenge repaying your student loans, contact your lender or a reputable resource focused on assisting people in your situation. 

 

Student Loan Scam Tactic #2: They Offer “Exclusive” Access

Some voicemails promote programs for reducing student loan monthly payments or even your total balance as part of an exclusive offer. However, companies who have your real best interest at heart would never make promises or offers without first knowing your personal financial situation. 

 

Student Loan Scam Tactic #3: They Convince You to Act Quickly

These student loan voicemail scams work by telling you to call back “right away” or risk losing your offer. But you should never be pressured into an offer. You student loans will remain subject to your existing agreements with your student loan lender unless you take action to change them, such as by refinancing your student loans with a new lender. Don’t feel pressured to make a choice now. A company can only propose different rates or terms based on your applying for a new program. Take your time and do your research on who is making the offer and determine if they are a reputable organization with experience in student loans and student loan refinancing.

 

Student Loan Scam Tactic #4: They Use Political Buzz For Power

For borrowers with federal student loans, scammers sometimes claim transitions in presidential administrations have ushered in changes to student loan laws, for example, the switch from the Obama to the Trump administration. Scammers get fuel from the fact that many politicians are currently talking about student loan debt. They believe borrowers will get confused between the different proposals and plans and assume they’ve heard of the offer. Once you’ve given them your data, they have all they need.

 

Student Loan Scam Tactic #5: They Tell You That You Can’t Do It Without Them

This is the classic scammer line: you need me or else you will miss out on this great opportunity. We hate to break it to those scammers, but there’s nothing that they offer that you can’t do on your own – for free. You can explore lowering your student loan interest rate, negotiate new loan repayment terms, and even try to qualify for PSLF all on your own, without paying a company to assist you. 

 

How Do You Avoid These Scams? 

Now that you know what phony offers are out there, there’s one simple way you can avoid scammers: don’t answer the phone and don’t call them back. 

  • If you do answer the phone—and realize it’s a robocall—hang up and don’t push any buttons or engage in conversation. This is one situation where you should push manners to the side and get off the line as quickly as possible.
  • Do your research into who is calling you and reach back out to them through the official phone number from their website if necessary. 
  • Remember, anyone can build a website. Make sure you validate a student loan company is authentic by looking for indicators, such as sufficient user reviews on reputable sites and a listing on the Better Business Bureau.

 

The U.S. Department of Education has outlined steps you can take to avoid student loan scams and listed companies they’ve taken action against. 

 

If you’re looking to consolidate or refinance your student loans for a potentially lower interest rate or new repayment terms, the team at ELFI* can walk you through the entire process and help you decide if it’s right for you.  

 


 

*Subject to credit approval. Terms and conditions apply.

 

NOTICE: Third-Party Web Sites: 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.