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Student Loans (Blog or Resources)

This Week in Student Loans: July 10, 2020

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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:

US Capitol

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

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

Source: Forbes

 


State Senate Chambers

Democrats Fail to Override Trump Veto on Student Loan Policy

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

Source: ABC News

 


question mark

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

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

 

Source: CNBC

 


note saying pay off debt

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

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

 

Source: CNBC

 

 

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

 


 

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

Dash Through the Debt: How a Shorter Student Loan Term Adds Up

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If you’re like most college graduates, you’re sick of your student loans. If you want to get rid of your debt once and for all, refinancing your loans and opting for a shorter student loan term is a smart strategy. You can secure a lower rate and pay off your loans years ahead of schedule while saving thousands. 

 

Here’s what you need to know about shortening your loan term, as well as how much shortening your student loan term could save you. 

 

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

When you graduate from college, you likely expect to pay off your student loans quickly. However, life often gets in the way of your plans, even if you make a good salary. 

 

While the Standard Repayment Plan for federal student loans is ten years, many students extend their repayment terms with income-driven repayment plans, forbearance or deferment periods, or by missing payments altogether. According to the One Wisconsin Institute, the average length of repayment for graduates with bachelor’s degrees is 19.7 years. If you have graduate student loans, the average repayment period is even longer. 

 

With such a longer repayment term, you’ll pay thousands of dollars in interest charges on top of what you initially borrowed, adding to your loan’s total cost. And, carrying such a heavy financial burden for decades can force you to put off other goals, like buying a house, starting a business, or even getting married. 

 

How to get a shorter student loan term

When you take out a student loan, you sign a loan agreement or promissory note where you promise to pay the loan back according to set repayment terms. The agreement will outline the loan’s interest rate, payments, and loan term. 

 

Many borrowers don’t realize that you’re not stuck with those terms forever. If you’re unhappy with your current loan’s repayment terms or your finances improve, there is a way to change them: student loan refinancing.* 

 

When you refinance your debt, you apply for a loan from a lender like Education Loan Finance for the amount of your total existing student loan debt. If you have both federal and private student loans, you can combine them so you’ll have just one loan to manage and one monthly payment to remember.* 

 

The new loan will have different terms than your old ones, including the interest rate and monthly payment. When you apply for the loan, you can choose your own loan term that works for your goals and budget. For example, if you currently have a ten-year loan term, you can select a five or seven-year loan if you’d prefer a shorter term. 

 

Benefits of a shorter student loan term

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

 

1. You can get a lower interest rate

When you have a long loan term, lenders consider you to be a riskier borrower and they charge you a higher interest rate. You’ll have a lower monthly payment, but the longer loan term will cost you more money in interest charges over time. 

 

By contrast, lenders reserve their lowest interest rates for credit-worthy borrowers who choose the shortest loan terms. If you want the best possible rate, opting for a shorter loan term will allow you to save money. 

 

You’re probably wondering, “How much can I save by shortening my loan term?” Let’s look at an example. 

 

Pretend you had $30,000 in student loans with a ten-year loan term at 5% interest. By the end of your repayment term, you would repay a total of $38,184; interest charges would cost you $8,184. 

 

If you refinanced your loans and chose a five-year loan and qualified for a 3.19% interest rate, you’d repay just $32,496 over the life of your loan. By refinancing your debt and selecting a shorter loan term, you’d save $5,688. 

 

Original Loan

Balance: $30,000

Interest Rate: 5%

Loan Term: 10 Years

Minimum Payment: $318

Total Interest: $8,184

Total Repaid: $38,184

 

Refinanced Loan

Balance: $30,000

Interest Rate: 3.19%

Minimum Payment: $542

Total Interest: $2,496

Total Repaid: $32,496

2. You’ll pay off your debt earlier 

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

 

3. You’ll free up cash flow

Once you’ve paid off your student loans, you’ll free up extra cash flow. You’ll no longer have to make your monthly loan payment, so you can instead direct that money toward other goals, such as saving for retirement, boosting your emergency fund, or buying a home. If you use the above example, you’d have $542 per month you could use to fund your financial goals. 

 

To put that in perspective, let’s say you paid off your loans by the time you turned 27. After that, you invested the $542 you were paying toward your student loans into your retirement nest egg. If you contributed $542 every month into your retirement fund and earned an 8% annual return, on average, your account would be worth over $1.8 million by the time you reached the age of 67. 

 

The bottom line

While extending your loan term may seem like a good idea to get a lower monthly payment, that can be a costly mistake. You’ll have to pay a higher interest rate and, over time, the longer loan term will cause you to pay back far more in interest charges. 

 

Instead, consider refinancing your loans and selecting a shorter student loan term. You’ll be debt-free sooner, and you may save a substantial amount of money. 

 

To find out how much you can save, use the student loan refinance calculator.*

 


 

*Subject to credit approval. Terms and conditions apply.

 

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

Should You Keep Paying Federal Student Loans During CARES Act Suspensions?

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

 

Option 1: Take Advantage of That 0% Interest

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

 

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

 

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

 

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

 

Option 2: Wait Until September And Resume Payments

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

 

Option 3: Refinance and Take Advantage of Low Interest Rates

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

 

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

 

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

 


 

*Subject to credit approval. Terms and conditions apply.

 

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

Looking Back on How COVID-19 Has Impacted Student Loans

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The COVID-19 pandemic has affected everyone’s life in one way or another. For many Americans, this included their student loans. Whether you are unable to make payments or benefiting from a lower interest rate, it can be confusing to know how all of the ways the pandemic may be affecting your situation. 

 

By Caroline Farhat

 

The impact on student loans is different depending on whether you have federal or private student loans. If you do not know what type of loans you have, you can log in to your account on the StudentAid.gov site that will show you any federal loans you have borrowed. If you think you have any private loans, be sure to request your free credit report to see the information on them.

 

COVID-19 Impact on Federal Student Loans

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. The CARES Act impacts most federal student loans, but not all. Perkins Loans and FFELP loans that are not owned by the U.S. Department of Education are not included in the benefits provided by the Act. Most federal student loans are covered. Here’s how the CARES Act affects all other federal student loans: 

 

Administrative Forbearance

The covered student loans were automatically placed on administrative forbearance from March 13, 2020, through September 30, 2020. This means no payments are required during that period and no action was required to receive this benefit. If you decide to make payments during this time the amount will go towards the principal of the loan after the interest accrued as of March 13 is paid. Any payments made after March 13 through September 30 can be requested for a refund.  

 

Interest Rate

The interest rate on the covered federal loans is temporarily set at 0% from March 13 through September 30. You do not have to do anything to receive the reduced interest rate. This reduced interest rate is beneficial because your loans will not be increasing during the paused period.  

 

Student Loan Forgiveness

The non-payments during the March 13 to September 30 timeframe count towards payments made for student loan forgiveness. This is especially beneficial if you are in the Public Service Loan Forgiveness (PSLF) program. As long as you are employed at a qualifying employer, you do not have to make any payments during the period and the months will still qualify towards your required number of payments. 

  • For example: if you have 48 payments remaining until you are eligible for loan forgiveness under the PSLF and you do not make any payments from March 13 to September 30, your required number of payments until forgiveness will be reduced to 42 payments.

 

Collection on Defaulted Loans

If you currently have federal defaulted student loans, the collection on those loans is paused from March 13 through September 30, 2020. You should not receive letters or phone calls regarding the collection of these debts. In addition, your tax refund, social security benefits and wages cannot be garnished during this time. However, keep in mind after this paused period, collections will resume on your defaulted loan.

 

Rehabilitating Defaulted Loan

If you are in a rehabilitation agreement for your defaulted loan, the suspended payments will count toward your rehabilitation during the suspended payments period.

 

Employer Educational Assistance Programs

The CARES Act allows employers to contribute up to $5,250 per year towards an employee’s student loans tax-free through December 31, 2020. This is a savings for the employee who can have extra money paid on their student loans with no taxes owed on the money. This provision of the Act allows employers to use student loan assistance as a benefit to offer to employees, while not having to pay payroll taxes on the money. Corporations looking to add this benefit for their employees can find out more information here.

 

COVID-19 Impact on Private Student Loans

Private student loans are not covered by the CARES Act, however, you may still be eligible for some relief if you have been financially impacted by COVID-19.

 

Lender Relief Measures

Many lenders are providing relief measures, such as forbearance, in which you will not be required to make payments for a certain period. Every lender is different so be sure to check with your provider if you need any assistance.

 

State Relief

Some states’ attorney general offices have made agreements with private student loan lenders to provide relief to borrowers impacted by the pandemic. As of this writing, nine states plus Washington D.C. have made agreements with lenders. Some of the benefits in the agreements may include:

  • 90 days forbearance, which means no payments would be due 
  • Waiver of late fees 
  • No negative reporting to credit bureaus 

If you do not live in a state that is helping to provide relief, refinancing your student loans may be a great option for you. Refinancing can reduce your monthly payment to make it more affordable for you. Refinancing allows you to borrow a new loan to pay off your old student loan. The new loan can save you money by having a lower interest rate or obtaining a new loan with a longer term length to lower the payments, but extend the number of months you have to pay. Check out our Student Loan Refinance Calculator to see how much you may be able to save.*  

 

During this unprecedented time, it’s helpful to have some relief from student loan payments if you are unable to make them. Explore all your options to see what works best for your financial situation. 

 


 

*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.

This Week in Student Loans: June 18, 2020

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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:

photo saying legislation

NAACP And 60 Other Groups Call On Congress To Cancel Student Debt

After the federal government has provided student loan relief to all federal student loan borrowers through the CARES Act, a coalition of over 60 organizations including the NAACP, American Federation of Teachers, and the National Consumer Law Center are now calling Congress to cancel student loan debt altogether in their next stimulus package.

 

Source: Forbes

 


low rates on federal student loans

Student Loans: 3 Ways To Get A Lower Interest Rate

This Forbes article lays out the three ways to get a lower interest rate on your student loans, covering options such as refinancing, borrowing a new student loan, or even switching to a variable rate loan.

 

Source: Forbes

 


question mark

How to Pay Off Student Loans When You’re Broke

With many individuals struggling to pay off their student loans due to lack or income or overwhelming expenses, this Fox Business article lays out options for paying down student debt when faced with difficult financial circumstances.

 

Source: Fox Business

 


student debt in america

How Student Loans Became a $1.6 Trillion Problem

With the cost of college increasing almost 25% in the past decade and total student loan debt reaching $1.6 trillion, this CNBC video offers a historical view of the path the U.S. took to arrive at this state.

 

Source: CNBC

 

 

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

 


 

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

Current LIBOR Rate Update: June 2020

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This blog provides the most current LIBOR rate data as of June 9, 2020, along with a brief overview of the meaning of LIBOR and how it applies to variable-rate student loans. For more information on how LIBOR affects variable rate loans, read our blog, LIBOR: What It Means for Student Loans.

 

What is LIBOR?

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

 

How LIBOR Affects Variable Rate Student Loans

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

 

LIBOR Maturities

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

 

Current 1 Month LIBOR Rate – June 2020

As of June 9, 2020, the 1 month LIBOR rate is 0.19%. If the lender sets their margin at 3%, your new rate would be 3.19% (0.19% + 3.00%=3.19%). The chart below displays fluctuations in the 1 month LIBOR rate over time.

 

Chart Showing Current 1 Month LIBOR Rate – June 2020

(Source: macrotrends.net)

 

Current 3 Month LIBOR Rate – June 2020

As of June 9, 2020, the 3 month LIBOR rate is 0.31%. If the lender sets their margin at 3%, your new rate would be 3.31% (0.31% + 3.00%=3.31%). The chart below displays fluctuations in the 3 month LIBOR rate over time.

 

Chart displaying Current 3 Month LIBOR Rate – June 2020

(Source: macrotrends.net)

 

Current 6 Month LIBOR Rate – June 2020

As of June 9, 2020, the 6 month LIBOR rate is 0.46%. If the lender sets their margin at 3%, your new rate would be 3.46% (0.46% + 3.00%=3.46%). The chart below displays fluctuations in the 6 month LIBOR rate over time.

 

Chart displaying Current 6 Month LIBOR Rate – June 2020

(Source: macrotrends.net)

 

Current 1 Year LIBOR Rate – June 2020

As of June 9, 2020, the 1 year LIBOR rate is 0.63%. If the lender sets their margin at 3%, your new rate would be 3.63% (0.63% + 3.00%=3.63%). The chart below displays fluctuations in the 1 year LIBOR rate over time.

 

Chart displaying Current 1 Year LIBOR Rate – June 2020

(Source: macrotrends.net)

 

Understanding LIBOR

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

 


 

*Subject to credit approval. Terms and conditions apply.

 

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

This Week in Student Loans: June 12, 2020

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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:

will there be a second student loan stimulus package?

Will There Be A Second Student Loan Stimulus Package?

The CARES Act passed in wake of the coronavirus pandemic provided relief to many federal student loan borrowers, but the payment suspensions are set to end on September 30. However, the newly proposed HEROES Act included provisions that will provide relief to borrowers through September of 2021. This Forbes article provides detail as to whether their will be a second stimulus package for borrowers.

 

Source: Forbes

 


low rates on federal student loans

Take Advantage of Low Student Loan Interest Rates

The interest rate on federal direct student loans for undergraduates for 2020-2021 is 2.75%. These historic lows can be attributed to the coronavirus pandemic, and this U.S. News article explains why those planning to attend college should take advantage.

 

Source: U.S. News & World Report

 


question mark

Should You Continue Paying Private Student Loans if Payments Are Suspended?

With many wondering whether they should continue to pay federal student loans during the CARES Act suspensions, there has also been some question around private student loans, as a multi-state pact that emerged recently provides relief to private student loan borrowers.

 

Source: Fox Business

 


debt relief

Student Loan Debt Relief: What Are Your Options Now?

With many changes happening in the world of student loans as of late, from the CARES Act passed months ago to the newly proposed HEROES Act, this Forbes article outlines the current options available for student loan borrowers to obtain relief.

 

Source: Forbes

 

 

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.

This Week in Student Loans: June 5, 2020

Posted on

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:

around 1.5% of applicants were approved for public service loan forgiveness.

Why 147,000 People Were Rejected For Student Loan Forgiveness

Out of 150,545 borrowers who have applied for Public Service Loan Forgiveness, just 2,215 borrowers (about 1.5%) have been granted forgiveness. Forbes writer Zack Friedman breaks down the details behind this low approval rate in the article linked below.

 

Source: Forbes

 


Government and mass debt cancellation

Student Loan Expert on Mass Debt Cancellation: ‘We don’t need these blunt solutions’

With around 44 million borrowers across the country holding more than $1.6 trillion in student loan debt, there is much talk about mass student loan forgiveness or cancellation. Jason Delisle at the American Enterprise Institute explains why he believes mass debt cancellation isn’t the answer for the U.S. economy.

 

Source: Yahoo Finance

 


college student upset about not being able to afford college due to the financial impact of the coronavirus.

More than Half of Students Probably Can’t Afford College Due to COVID-19

According to a new survey by OneClass, the coronavirus crisis has already had a significant impact on many families’ ability to pay for college. The survey found that more than half, or 56%, of college students say they can no longer afford their tuition. Nearly half of those surveyed said they needed to find a new way to pay for college due to the impact of the coronavirus on their financial situation.

 

Source: CNBC

 


millennial debating whether to pay student loans during CARES Act suspension of loan payments

Student Loan Borrowers In CARES Act Forbearance Can’t Buy Or Refi Homes

According to this Forbes article, certain mortgage lenders are considering the forbearance caused CARES Act suspensions on federal student loans a reason to deny mortgages or mortgage refinancing, during a time where mortgage rates are lower than they have been in years.

 

Source: Forbes

 

 

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.

How HENRYs Can Achieve Debt-Life Balance

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If you are a HENRY (High Earner, Not Rich Yet), you may feel the struggle of wanting it all while still having to contend with paying off debt. You earn a good salary and deserve to reward yourself for your hard work, but you can’t forget about your debt. Paying down debt doesn’t have to take over your life! In fact, it’s completely possible to pay down debt faster while still maintaining the type of lifestyle you enjoy. Keep reading for ways to balance your debt payoff journey without sacrificing fun. 

 

By Caroline Farhat

 

Ways to Achieve Debt-Life Balance

Many people that are considered HENRYs are facing debt, most likely from student loans. The average student loan debt for HENRYs is $80,000. But HENRYs, like millennials, enjoy living for the present. Money spent on experiences and travel is a high priority. So how much should be allocated to paying off debt while balancing the lifestyle you enjoy? There are different budget methods that can help achieve this balance. 

 

50-30-20 Rule

With the 50-30-20 budgeting method, your take-home pay is allocated in three major categories. 

    • Fifty percent is for paying for all basic needs, including housing costs, car or transportation costs, food, utilities, and minimum payments on your debts. 
    • Thirty percent of your take-home income goes to your wants. With this amount you can continue to live the lifestyle you like within your means. 
    • The last 20% goes towards savings and debt payment. Part of it can be used to start and build an emergency and the other towards making additional payments towards debt. The additional debt payments will save you money in interest over the lifetime of the loan.

 

Debt Snowball

With this budgeting method, you order your debt balances from smallest to largest. You pay the minimum on all debt payments and any extra money you have for debt payments goes towards the debt with the smallest balance. Once the smallest debt is paid off, the minimum payment and the extra amount that was being paid towards that debt now goes to pay the second smallest balance. With this method, you get fast wins by paying the smallest debt balance first. You also can still allocate money for wants and entertainment, knowing that all your debts are being paid. This method is good for people who are motivated by seeing continual progress.

 

Debt Avalanche

This budgeting method is similar to the snowball method, however, instead of ranking the debts by balance, they are ranked by their interest rate. The balance with the highest interest rate is the first focus, so any extra money you have for debt repayment is put towards the highest interest rate loan. Paying debts off with this method allows you to save money in interest costs, but takes longer to knock out balances. Just like all the other methods you can still budget for entertainment costs but still make progress on all debt balances. This method is good for people who prioritize saving money on interest.

 

Zero-Based Budget

To create a zero-based budget you subtract all your expenses, savings included, from your income to equal zero. Start with subtracting all the necessary basic expenses, including minimum payments on all debts. Then you can subtract savings, lifestyle expenses, and extra debt payments. If you run out of money while creating this budget before you set aside money for additional debt payments, take a look at your other categories to see if you can reduce any unnecessary expenses. On the flip side, you may find that you have money left over that you don’t know what you did with. That extra money can be put to paying down debts faster, enabling you to save money and be debt-free sooner.

                                                        

Pay Debt Off Faster

Looking to pay your debt off faster without sacrificing your lifestyle? Here are some strategies to try:

 

Refinance Student Loans

Student loan refinancing is extremely beneficial for many people with student loan debt because it can save you money on your monthly payment and save you in interest costs over the life of the loan. The savings can go towards debt balances to pay them off quicker. Refinancing is an easy process where you obtain a new student loan, presumably at a lower interest rate than your current one, to pay off your old loan(s). To find out how much money you may be able, to save check out our Student Loan Refinance Calculator.* 

   

Side Hustle

Earning extra money outside of your day job could be a great way to make extra debt payments. Afraid your side hustle could cramp your lifestyle? Try turning your hobbies into some extra cash. If you love photography, try selling your photos or offering photography services. Like finding a good deal? Use that to find items you can resell for a profit.     

 

Found Money

Do you shop online using a cashback site or earn cashback rewards from credit cards? When you receive that found money, put it towards your debts. Although they may be small checks you receive, when paying off debt, every little bit can help cut down on interest costs and pay the loan off quicker. 

 

Bonuses

If you receive bonuses from work, commit to putting at least half towards extra debt payments. This allows you to still use some of the money for fun items or experiences you are saving for, but helps you move towards a better financial future as well. 

 

Sell Unused Items

Have items around your house that you no longer want or need? Turn them into extra cash. Take a couple of days to declutter your house and you may find items you realize you haven’t used in a while. Try selling them through an app, Facebook Marketplace, or consignment stores if you have designer clothing you no longer want. 

 

Conclusion

If you have debt, you can still live the lifestyle you enjoy while paying it off. With a plan on how to tackle the debt, you will find that you can still balance your wants and entertainment in your life while making progress on paying down the loans. And if you are ready to knock out debts even quicker, try some of these strategies to help you reach your goal. Good luck!

 


 

*Subject to credit approval. Terms and conditions apply.

 

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

Are Refinanced Student Loans Dischargeable?

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If you have refinanced your student loans in the past, you may be wondering whether your refinanced loans can be discharged. The short answer is yes, but only under specific circumstances of which most individuals do not meet the criteria, and if you do meet the criteria, it can still be a very difficult process. Read on to see what circumstances allow for refinanced student loans to be discharged, and what you can do to ease the burden of private student loan debt if you don’t meet the criteria for discharge.

 

What is Student Loan Discharge?

To begin, it’s important to understand what the term “discharge” means in regard to student loans. Often used interchangeably with student loan forgiveness, these terms actually apply to different situations:

  • Student loan forgiveness is usually based on the borrower working in a particular occupation for a period of time, such as within the Public Service Loan Forgiveness (PSLF) Program. For private student loans, loan forgiveness is essentially non-existent.
  • Student loan discharge is usually based on the borrower’s inability to repay the debt or the borrower not being responsible for the debt because of fraud.

 

Discharging Refinanced Student Loans

Refinanced student loans are essentially new loans taken out with a private lender – so when talking about whether refinanced student loans are dischargeable, you should look at them like private student loans. Here are some situations in which private student loans may be dischargeable. Keep in mind that private student loans are very rarely discharged and that this shouldn’t be considered a realistic option.

 

Disability

While federal student loans are dischargeable for individuals who are “totally and permanently” disabled, private student loans aren’t necessarily subject to this rule. However, some private lenders do offer loan discharge in situations of disability. If this applies to you, contact your lender for more information – many lenders review requests for financial assistance on a case-by-case basis and will show compassion toward the situation.

 

Bankruptcy

If you’re seeking to have your refinanced student loans discharged, filing for bankruptcy could possibly be a last-resort option – however, it is very difficult and unlikely to happen because student loans aren’t categorized as dischargeable debt. According to the U.S. Bankruptcy Code, in order to have your federal or private student loans discharged through bankruptcy, you must prove undue financial hardship on yourself and your dependents, which is a difficult and expensive process that will most likely require a separate lawsuit and an attorney. This process is so difficult that most people who file for bankruptcy do not attempt to include their student loans. If you are unable to prove undue hardship, you will be obligated to continue repaying your student loans, and if you’re currently having your wages garnished due to default, they will continue to be garnished.

 

There are also some pretty substantial drawbacks to filing bankruptcy that could have a lasting impact on your life.

 

Drawbacks of Filing for Bankruptcy

It Could Hurt Your Credit Score

If you currently have a good credit score (700 or higher), filing for bankruptcy is likely to bring it down substantially, making it more difficult to obtain financing for a mortgage, car loan, or personal loan.

 

It Will Show on Your Credit Report for up to 10 Years

As if a ding to your credit score isn’t bad enough, filing for bankruptcy will show on your credit report for up to 10 years, which can not only affect your ability to obtain financing, but also could be seen by potential employers and affect your hireability or be seen by landlords and affect your ability to find rental housing.

 

Your Cosigners will be Liable for your Debts

If you have any cosigners on your loans, they will become responsible for your debts that you no longer owe.

 

Loss of Property and Real Estate

Occasionally, not all personal property and real estate will fall under exemption when bankruptcy is filed. This means that the bankruptcy court may seize your property and sell it for the purpose of paying your debts to creditors.

 

Denial of Tax Refunds

As a result of filing bankruptcy, you may be denied federal, state or local tax refunds.

 

Ways to Ease Private Student Loan Debt

If the burden of your refinanced student loans appear to be too much for you to handle, there are several actions you can take to help ease the pressure.

 

Take Stock of Your Finances

While this may go unsaid, making changes to your financial habits and budget may help you set aside the money to afford your monthly payments. Take stock of your income, savings and how you are currently spending your money. Perhaps you also have federal student loans that you could consolidate or refinance as well, or maybe you have a few subscriptions that you don’t need and can cancel. Making small changes to your financial habits can make a big impact.

 

Contact Your Lender

While you may not qualify to have your refinanced student loans discharged, you may find it useful to contact your lender to learn about the options available to you. Many lenders will offer a temporary deferment or forbearance in times of economic or financial hardship. Being transparent with your servicer may allow you to avoid missed payments, which can have pretty significant impacts on your credit score.

 

Consider Refinancing Student Loans Again

Did you know there’s no limit to how many times you can refinance your loans? While you may have already refinanced your student loans once, refinancing them again may be an option to consider, depending on whether your financial situation has changed or if interest rates have dropped. If your credit score improves or you get a raise at work, you may be able to qualify for a lower interest rate. Even if you haven’t seen a big change in your financial status, you may be able to extend your loan term and lower your monthly payments. Check out our Student Loan Refinancing Calculator to examine how changing the length of your loan term may help you save on monthly payments.*

 

Ask for Employer Assistance in Student Loan Repayment

In an effort to be competitive in recruiting and provide relief to employees, many employers are offering (or considering) student loan repayment assistance as an added benefit to employees. If your employer isn’t currently offering this benefit, consider asking if there’s potential for it to be added. Now is actually a great time to make this proposal, as a recent provision within the Coronavirus Aid, Relief, and Economic Security (CARES) Act allows employers to contribute up to $5,250 tax-free annually to their employees’ student loans until December 31, 2020. Send your HR department a well-written letter or have a formal meeting to discuss this opportunity.

 

Conclusion

You may find that getting your refinanced student loans or private student loans discharged isn’t any easy process. However, there are actions you can take to ease the financial burden that your student loans are causing. Visit the ELFI blog for more helpful tips and resources for paying off your student loan 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.