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Student Loans (Blog or Resources)

This Week in Student Loans: January 17

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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:

House of representatives

House Democrats Overturn DeVos on Student Loan Forgiveness

This Thursday, the Democrat-controlled House voted to overturn regulations introduced by Education Secretary Betsy Devos that eliminate the “borrower defense” rules introduced by the Obama administration. Critics have said the new regulations make it more difficult to get student loan forgiveness if a college suddenly closes. Sources say that the move to overturn Devos’ new regulations won’t pass the GOP-controlled Senate, however – and Trump is likely to veto the bill even if it does.

 

Source: USA Today

 


signing legislation

Could Elizabeth Warren Really Wipe Out $1 Trillion in Student Loans in a Single Stroke?

Democratic Presidential Candidate Elizabeth Warren recently vowed to eliminate hundreds of billions of dollars in student loans on her first day in office if elected president. Her plan was released just before Tuesday night’s Democratic primary debate. While the ability to erase debt is typically a decision left to Congress, student loans may be a different story due to a loophole involving the “Higher Education Act” passed in 1965.

 

Source: CBS News

 


can't pay student loans

Study: Barely Anyone is Paying Off Their Student Loans

A recent study revealed that very few people are making progress on paying off their student loans, along with shifting factors in the nation’s rising student loan debt. The study found that 51 percent of students who took out loans from 2010-12 haven’t made any progress in paying them off. Additionally, it showed that while in the past higher enrollment and rising tuition costs were the main drivers in the rising debt, slow repayments and amassing interest have now become the primary drivers.

 

Source: NY Daily News

 


IRS building

IRS Issues Tax Guidance On Discharged Student Loans

The Internal Revenue Service recently issued guidance for some taxpayers who took out federal or private student loans and qualified to have their loans discharged. Typically, having loans discharged is treated as a taxable event, in which the forgiven amount is treated as income – but the tax break from the IRS allows the discharged amount to not be recognized as taxable income.

 

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: January 10

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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:

Income-Driven Repayment Borrowers After Missed Deadlines to Recertify

Half of Income-Driven Repayment Borrowers Miss Recertification Deadlines

Over 8 million student loan borrowers use the Federal Income-Driven Repayment plan to help afford monthly payments. The plan can drop payments as low as $0 per month, depending on the borrower’s income and family size. However, in order to stay in these plans, borrowers must recertify annually to avoid consequences such as increased payments, a larger loan balance, and potentially defaulting on the loans. ABC News reported that according to Department of Education data, more than half of borrowers miss the deadline to recertify.

 

While they will likely have to recertify annually, a new law is being put in place to allow borrowers to opt into automatic recertification. The article encourages borrowers with income-driven repayment plans to watch for the option to become available.

 

Source: ABC News

 


Colorado weighs "get on your feet" bill to help in-state graduated with student loans

Colorado Weighs “Get On Your Feet” Bill to Assist College Graduates in State

New graduates of public colleges in Colorado may have more incentive to stay in-state following graduation due to a new bill in the works that could mandate the state to pay their student loan payments for two years. If passed, the “Get On Your Feet” bill will take effect for public college graduates who commit to staying in Colorado and enroll in an income-based repayment program.

 

Source: Denver Post

 


college student panicking because of FAFSA rumors

Filling Out FAFSA Won’t Get You Drafted, Experts Say

With tensions rising between the U.S. and Iran this week, a misinterpretation of the fine print within the FAFSA application led some college students to panic over the potential of being drafted. Despite the widespread social media panic, experts say that the federal form won’t actually increase your chances of being drafted.

 

Source: USA Today

 


student loan forgiveness tax implications

The Student Loan Forgiveness Tax Bomb

Forbes writer Robert Farrington published an article on January 6 highlighting the tax liabilities that borrowers who receive loan forgiveness through income-driven repayment plans will face. While it’s not widely known, forgiven debt is treated as taxable income during the year that debt is forgiven through an income-based repayment plan. The article outlines the surprising amount that borrowers might pay in taxes when having their loans forgiven.

 

Source: Forbes

 


ELFI team celebrates $1 billion in refinanced student loans

ELFI Surpasses $1 Billion in Student Loan Refinancing

Education Loan Finance (ELFI), a division of SouthEast Bank, announced the successful funding of over $1 billion in student loan refinancing and consolidation loans. This funding has positively impacted over 14,500 graduates, parents, and cosigners since they began offering student loan refinance products in December of 2015. ELFI maintains an industry-leading “Excellent” 4.8/5 rating on Trustpilot.com and has been named one of NerdWallet’s Best Student Loan Refi Companies for Customer Service for 2019.

 

Source: Education Loan Finance

 

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.

Resolutions: How to Erase Your Student Loan Debt by 2025

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By Kat Tretina

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

 

If you’re like most college graduates, you left school with student loan debt. According to The Institute for College Access & Success, graduates have $29,200 in student loans, on average. Depending on your repayment term, you could be in debt for a long time. In fact, you could make payments for anywhere from 10 to 30 years. 

 

Having such a large burden on your shoulders can cause you to put off other goals, like starting a business or buying a home. To free yourself from your student loan debt, think of repayment strategies to pay off your student loans as soon as possible. 

 

If you’re determined to become debt-free, here’s how to pay off your student loans by 2025. 

 

1. Create a budget

To pay off your student loans early, you need to have a complete picture of your finances, so you know exactly how much money you have to work with. Creating a monthly budget is an essential first step. 

 

You can use programs like Mint or You Need a Budget (YNAB) to craft a budget and track your spending. Hopefully, you make more money than you spend each month. If that’s not the case — or if money is tight— you’ll have to make some changes to your lifestyle. 

 

2. Cut Corners 

To free up more money for debt repayment, you’ll have to take a hard look at your expenses and make some significant cuts. These life changes are not just for recent college students or those just starting out in their careers. If you’re committed to changing your financial situation in a short amount of time, some drastic life changes may be called for. Some things to consider include: 

  • Getting a roommate: While having a roommate may not be ideal, it can be a worthwhile decision. Considering that the average one-bedroom apartment costs $1,025, getting a roommate can help you save over $500 per month. That savings could make a big dent in your student loan balance. 
  • Taking public transportation: If possible, skip buying a car and rely on buses and trains, instead. You’ll be able to save money on a car payment, insurance, and repairs for a vehicle. 
  • Moving to a cheaper area: While moving to a more affordable area isn’t feasible for everyone, it can be a great way to save money. Moving to a less trendy area or even to another state can help you drastically reduce your living expenses. 

 

>> Related: U.S. Cities With the Most Student Loan Debt

 

  • Cooking at home: According to the Bureau of Labor Statistics, the average American spends $3,469 per year on food consumed away from home, such as restaurants or fast food locations. If you skip eating out and brown-bag your meals, you could save thousands. 
  • Negotiating bills: You’re probably paying more than you need to for your cell phone, cable, and internet. You can use a service like Trim to negotiate your utility bills for you, reducing your monthly expenses.

 

3. Increase Your Income

Exploring ways of increasing your income isn’t just for new college graduates. Even if you’re gaining a firm foundation in your career and just want to attack your student loan debt with voracity, putting in extra work hours could accelerate your financial goals. 

 

With a side gig, you can earn a significant amount of money. According to a BankRate survey, the average side job earns an individual $1,122 per month — which can make a big difference in knocking down your student loan debt. Here are some ideas to help you get started: 

  • Deliver groceries: If you have a car and a smartphone, you can make money delivering groceries for services like Shipt or Instacart. Depending on your location and speed, you could make up to $22 per hour. 
  • Rent out extra space: If you have a spare bedroom, closet, or empty garage, you can earn cash by renting out your extra space to locals who need to store items with Neighbor. 
  • Tutor online: If you have a computer and reliable internet, you can earn money by tutoring online. With services like Tutor.com and Chegg, you can make up to $20 per hour. 
  • Assemble furniture: If you have a knack for assembling Ikea furniture or toys, you have a lucrative side hustle. You can find clients with TaskRabbit or Takl
  • Walk dogs: If you love dogs, you can earn an hourly fee for walking them while their owners are at work. Create an account on Rover or DogVacay to get started. 
  • Work overtime: Public service officials, medical professionals, and educators can make a substantial amount of money on the side by working overtime. 
  • Offer consultation services: If you’re a savvy marketer or have a knack for e-commerce, create a side business of setting up social media accounts for local businesses. 

 

4. Research Student Loan Repayment Assistance Programs 

Depending on your major and location, you may qualify for student loan repayment assistance. 

 

For example, highly qualified teachers who teach for at least five years at an eligible school can receive up to $17,500 in loan help through Teacher Loan Forgiveness, a federal program. 

 

Healthcare providers in Pennsylvania can receive up to $100,000 in student loan aid through the state’s Primary Care Loan Repayment Program. In exchange, participants must agree to a service term in a high-need area. 

 

In Florida, lawyers who work for a legal aid organization can receive up to $5,000 per year through the Loan Repayment Assistance Program

 

To find programs you may qualify for, check out the federal government’s list of forgiveness programs, and visit your state’s Department of Education website. 

 

5. Use Windfalls Strategically

Using windfalls — unexpected influxes of cash — strategically can cut off years from your loan term.

 

For example, the IRS reported that the average tax refund in 2019 was $2,860. To put that number in perspective, let’s say you had $30,000 in student loans with an interest rate of 5% and ten years left in your repayment term. If you made a lump sum payment of $2,860, you’d pay off your student loans 14 months early. And, you’d save $1,722 over the length of your loan. 

 

6. Consider Student Loan Refinancing

If you’re determined to pay off your debt as quickly as possible, student loan refinancing can be a smart strategy. 

 

To refinance student loans, you work with a private lender like ELFI* to take out a new loan for the amount of your existing debt. The new loan has different repayment terms than the old ones. You’ll have a new interest rate, loan term, and minimum monthly payment. 

 

If you have good credit and steady income, you could qualify for a lower interest rate and save money. 

 

Let’s say you had $35,000 in student loan debt at 7% interest with a 10-year repayment term. By the end of your repayment term, you’d pay a total of $48,766. Interest charges would cause you to pay back $13,766 more than you originally borrowed. 

 

If you refinanced your student loans and qualified for a 10-year loan at just 5% interest, you’d repay $44,548. Refinancing your debt would help you save $4,218. 

 

ELFI’s Student Loan Refinance Calculator can help you determine how much you could save by refinancing.

 

7. Avoid Lifestyle Inflation

As your career advances and you start to pay off some of your loan debt, you might be tempted to splurge on a new car, bigger apartment, or fancier electronics to reward yourself. However, try to avoid the urge. Instead, allocate any extra money you have toward your loan payments. You’ll pay off your student loans faster, so you can become debt-free and enjoy more freedom. 

 

The Bottom Line

While your debt may be stressful, you can conquer it by coming up with detailed student loan repayment strategies. With some sacrifice and hard work now, you can eliminate your debt years ahead of schedule.

 

If you decide to refinance your student loans, use ELFI’s “Find My Rate” tool to get a rate quote, without impacting your credit score.

 


 

*Subject to credit approval. Terms and conditions apply.

 

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

7 Top Student Loan Moments From the Past Decade

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2019 has come to an end, which means it’s the end of another decade. The past 10 years have been staggering in terms of changes to the student loan system. From 2010 through 2019, student loan debt reached an all-time high, new repayment plans were introduced, and the Department of Education cracked down on for-profit schools. Here are seven of the most significant student loan moments of the past decade.

1. The government introduces changes to income-driven repayment plans

Income-driven repayment (IDR) plans were first introduced in 1994. With an IDR plan, federal loan borrowers could reduce their monthly payments, making the payments more affordable. But over the past 10 years, the Department of Education made significant changes to IDR plans

  • Pay As You Earn: In 2010, the government introduced Pay As You Earn (PAYE). Under this program, borrowers’ payments would be capped at 10 percent of their discretionary income, and they would receive loan forgiveness after making payments for 20 years. 
  • Income-Based Repayment: The government updated Income-Based Repayment (IBR) in 2014. With the new guidelines, borrowers would pay 10 percent of their discretionary income, and receive loan forgiveness after 20 years. Only available to borrowers who took out loans after July 1, 2014, the payments under the new IBR plan would never exceed what the payment would be under a 10-year Standard Repayment Plan. 
  • Revised Pay As You Earn: The Department of Education launched Revised Pay As You Earn (REPAYE) in 2015. With REPAYE, borrowers’ payments are limited to 10 percent of their discretionary income. For undergraduate borrowers, the loans would be forgiven after making payments for 20 years. For graduate borrowers, the loans would be forgiven after 25 years.

 

2. National default rate reaches 11.5%

In 2014, the national federal student loan cohort default rate — a measure of how many borrowers of Federal Family Education Loans or William D. Ford Federal Direct Loans defaulted on their debt — hit 11.5%, an all-time high. Of the millions of students who entered repayment, hundreds of thousands defaulted on their loans, meaning they didn’t make payments for at least 270 days. 

 

According to the most recent data, the default rate has decreased slightly to 10.8%. However, student loan default remains a major issue for thousands of borrowers amidst the student loan debt crisis.

 

3. Department of Education announces Borrower Defense to Repayment

Over the past 10 years, several for-profit schools have been sued due to misleading tactics. Millions of students were left with student loans and a degree that couldn’t help them secure a job. 

 

In 2016, then-President Obama’s administration announced new regulations that were designed to protect borrowers from institutional misconduct. Called Borrower Defense to Repayment, the new regulations allowed borrowers to have their loans discharged if the school was found guilty of fraud, or if the school gave the borrower misleading information. 

 

Borrowers who think they are eligible can apply for Borrower Defense to Repayment online.

 

4. First borrowers become eligible for loan forgiveness through Public Service Loan Forgiveness

In 2017, the first borrowers became eligible for loan forgiveness under Public Service Loan Forgiveness (PSLF). While the program was launched in 2007, borrowers have to work for a qualifying non-profit organization or government agency for 10 years while making payments on their loans to be eligible for PSLF. 

 

Was the program successful? That depends on your perspective. As of June 2019, over 90,000 borrowers submitted PSLF applications. But to date, only 1,216 applications for loan forgiveness have been approved.  That means 99% of PSLF applicants are rejected. 

 

5. Student loan debt crosses $1.5 trillion mark

In the first quarter of 2018, the national outstanding student loan debt reached $1.5 trillion for the first time in history. If that doesn’t sound that remarkable to you, consider that the total outstanding loan debt was just $600 billion a decade ago. In only 10 years, national student loan debt more than doubled. 

 

Student loans are more prevalent than ever. According to The Institute for College Access & Success, 65 percent of college seniors who graduated from public and private colleges in 2018 had student loan debt. On average, borrowers had $29,200 in student loans.

 

6. Several for-profit schools close down

Over the past decade, for-profit schools have faced increased scrutiny and pressure from the U.S. Department of Education. As a result, several of the biggest for-profit schools closed down. 

 

  • Corinthian College: A school that operated 28 campuses across the country, Corinthian College closed in 2015. The closure came after the Department of Education fined the school for misrepresenting job placement rates. Over 16,000 students were affected. 
  • ITT Tech: In 2016, ITT Tech shut down its 130 campuses, impacting over 43,000 students. The closure came after multiple federal sanctions and after the Department of Education prohibited the school from enrolling new students who use federal financial aid. Students affected by the closure could pursue closed-school discharge, with over $500 million in federal student loans at stake. 
  • Education Corporation of America: In 2018, the Education Corporation of America shut down its 70 campuses, leaving over 19,000 students scrambling for solutions. The closure occurred after the Accrediting Council for Independent Colleges and Schools suspended the school’s accreditation over concerns about institutional management and student progress. 

 

7. President Trump grants automatic loan forgiveness to disabled veterans

In 2019, President Trump signed a Presidential Memorandum to help totally and permanently disabled veterans with their student loans. With the new process, the Department of Education would automatically forgive the federal loan balances belonging to eligible veterans under Total and Permanent Disability Discharge

 

Previously, veterans could qualify for Total and Permanent Disability Discharge. However, the process required veterans to know about the program and fill out extensive paperwork. Under President Trump’s order, their loans were eliminated automatically, simplifying the discharge process.

 

timeline of top student loan moments from the 2010s decade Timeline depicting the top student loan moments from the past decade.


 

Looking ahead

The past decade produced major changes to the student loan systems. As the 2020 election nears, more and more politicians will be paying attention to student loan issues since they impact millions of borrowers. Many presidential candidates will be introducing their educational policy proposals, which could signal new changes for borrowers in the next few years.

 


 

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: January 3

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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:

New App, Pillar, Brings Crowdsourcing to Student Loan Debt Repayment

Former MBA student Michael Bloch founded Pillar in 2018 with the goal of helping tackle the national student debt crisis. The personal finance app links to student loan and bank accounts, analyzes income and spending patterns and customizes payment plans for each enrollee, then facilitates payments to the loan servicer through the app.

Late last month, Pillar launched “Boost” to introduce crowdsourcing as a solution to student loan debt. The service allows friends and family to gift loan payments.

 

Source: Yahoo Finance

 


Student Loan Debt Increased 107% This Decade

The Federal Reserve collected data that showed a 107% increase in national student loan debt over the past decade, an increase from $772 billion in 2009 to nearly $1.6 trillion today. The article also reveals additional interesting data surrounding the current status of national student loan debt.

 

Source: CNBC

 


Student Loan Debt is Ballooning for Those 50 and Older

While the national student loan debt crisis is typically thought to mainly affect millennials, Americans aged 50 and older are also seeing a significant rise in student loan debt, a Detroit Free Press article revealed. Nationwide, student loan borrowers in their 60s owed $33,811, and retirees are the fastest growing group of student loan borrowers across the nation.

 

Source: Detroit Free Press

 


Business Insider Writer Shares 6 Mistakes They Made While Paying Off $81,000 in Student Loans

After borrowing a total of $81,000 to complete two degrees, Business Insider columnist Melanie Lockert reflects on the six major mistakes she made while repaying her debt in full over 9 years. These mistakes could be considered somewhat common and could be useful to individuals in the midst of paying down debt.

 

Source: Business Insider

 

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.

Should I Save or Pay Down Student Loan Debt?

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

 

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

 

Save First. Pay Student Loan Debt Second.

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

  

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

 

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

 

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

 

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

 

Related: Yes, You Need A Side Hustle

 

Are Stocks worth the investment?

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

 

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

 

Could I place savings in a CD?

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

 

Ready to Save But Short On Funds?

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

 

Student loan refinancing through companies like ELFI* could free up more money by lowering your monthly payment through loan consolidation and a lower interest rate. In fact, customers reported saving an average of $309 every month and an average of $20,936 in total savings after refinancing student loans with Education Loan Finance.

 

Related: 7 Benefits of Refinancing Student Loans

 

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

 

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

 

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

 


 

*Subject to credit approval. Terms and conditions apply.

 

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

 

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

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

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

 

By Caroline Farhat

 

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

 

 What is a HELOC?

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

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

 

Dangers of Using HELOC

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

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

 

Better Ways to Pay Off Student Loan Debt

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

 

1. Refinance Student Loans

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

 

2. Consider a different repayment plan

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

 

3. Start a Side Hustle

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

 

Related: Yes, You Need A Side Hustle  

 

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

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

 

5. Auto-debit your student loans

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

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

 

Bottom Line

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

 


 

*Subject to credit approval. Terms and conditions apply.

 

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

U.S. Cities With the Most Student Loan Debt

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By Kat Tretina

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

 

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

 

10 Metropolitan areas with the highest levels of student loan debt

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

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

 

 

10: Charlottesville, VA

Average Student Loan Debt: $42,476

 

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

 

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

 

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

 

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

 

Related: The Average Cost of College

 

 

9. Atlanta-Sandy Springs-Marietta, GA

Average Student Loan Debt: $43,290

 

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

 

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

 

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

 

 

8. San Francisco-Oakland-Fremont, CA

Average Student Loan Debt: $43,674

 

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

 

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

 

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

 

Related: Best Cities for Young Professionals

 

 

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

Average Student Loan Debt: $43,797

 

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

 

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

 

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

 

 

6. Santa Barbara-Santa Maria-Goleta, CA

Average Student Loan Debt: $44,294

 

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

 

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

 

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

 

 

5. Gainesville, FL

Average Student Loan Debt: $44,508

 

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

 

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

 

 

4. Santa Cruz-Watsonville, CA

Average Student Loan Debt: $45,396

 

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

 

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

 

 

3. Ann Arbor, MI 

Average Student Loan Debt $45,668

 

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

 

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

 

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

 

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

 

 

2. Corvalis, OR

Average Student Loan Debt: $46,164

 

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

 

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

 

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

 

 

1. Durham, North Carolina

Average Student Loan Debt: $47,955

 

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

 

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

 

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

 

Paying Off Your Student Loans

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

 

You can use ELFI’s Find My Rate tool to get a rate quote without affecting your credit score.*

 

 


 

*Subject to credit approval. Terms and conditions apply.

 

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

Yes, You Need a Side Hustle

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Side hustle. It’s a relatively new phrase, but a concept that’s older than you think. It’s simply a second job that helps people make ends meet or earn extra cash to supplement retirement plans, pay off student loan debt, save up to buy a car, etc. You might also hear these jobs referred to as gigs, which constitute the gig economy.

 

Why the Popularity?

If you wonder why you’re hearing so much about side hustles and the gig economy, it’s because these concepts have exploded in popularity. The U.S. Bureau of Labor Statistics estimates that 55 million people work in the gig economy, which is more than 35% of the country’s workforce. “Side hustlers,” as they’re called, take the form of teachers who write blogs for major companies, stay-at-home moms who moonlight as Uber® drivers, retirees who tutor school-age children, or even college students who design logos for local businesses.

 

But side hustles aren’t limited to these more typical archetypes. Even high-earning, highly skilled professions offer ample opportunities for “side hustling”. For example, the gig economy has increasingly penetrated the healthcare industry – doctors and nurses have the ability to work in temporary positions called “locum tenens” to fill staffing needs at healthcare facilities. These positions, often worked during shift downtimes, allow healthcare professionals to have more flexibility and control of their schedule while earning supplemental income. High-end software developers at major technology brands can also benefit from the gig economy, using sites like Upwork to maximize the return on their skills and to explore new projects.

 

A study on the Gig Economy & The Future of Retirement found that of people with a side hustle, 49% over the age of 55 are using it to save for retirement and 33% are using it to pay off student loan debt. Regardless of the reason, the answer to the question, “Do I need a side hustle?” is almost always, “Yes!” 

 

Check out the following scenario to see just how valuable a side hustle can be. The average student loan debt in America is around $37,000 with a loan term of 10 years and monthly payments of $380 a month. If you made an extra $100 a month ($1,200 a year), you could make three extra payments a year, helping you pay down your student loan debt up to two years early! If you want to see how much you can impact your loan with a side hustle, check out our student loan refinance calculator. 

 

Not only can you bring in extra income with a second gig, you can also diversify how you make that money. In other words, if you lose your full-time job, you will still have a way to pay bills.

 

Having a side gig is also a way for you to indulge hobbies or hone talents, giving more meaning to your work than perhaps your regular nine-to-five job. If you’re really good with computers, have a knack for photography, possess a knowledge of HVAC systems, or if you’re just really good at IKEA® assembly directions, you can pick up a side hustle by hawking your services on sites like Thumbtack®, Nextdoor®, TaskRabbit®, or Fiverr®.

 

The ideal hustle would allow you to “make money while you sleep.” It sounds hokey, but if you don’t have to trade working hours for money, you can reach your extra income goals to pay off student loan debt without sacrificing your full-time job, family, or social life to do so. These holy grail side hustles take the form of rental properties (that you pay someone else to manage), stock market investing, renting a room or parking space, publishing a book, creating an app, or other similar ideas that require little time to maintain.

 

One such example is with ELFI’s Referral Program. Simply sign up and create a personalized referral link to share with friends or family. When someone decides to refinance their student loans using your link, you’ll get a $400 referral bonus check and your friend will receive a $100 credit toward the principal balance of an approved Education Loan Finance loan1. There’s no limit on the number of people you can refer.

 

Downfalls of Side Hustles

While we started this blog by saying, “Yes, you need a side hustle,” there are several downfalls that you should be aware of. Sure, the hours for side gigs are flexible, but these jobs also don’t come with employer benefits. This means there is no safety net of unemployment claims should you not be able to find enough work. Also, if you don’t have a clear, effective contract and invoicing system set up, payment can get delayed or—even worse—lost in the shuffle. If you don’t work with honest people or established companies, both can run out of money or just simply disappear without paying money owed.

 

You also need strong personal motivation to work a side hustle. Like most jobs, side hustles rarely just fall profitably into your lap. You should realistically expect to spend a few hours a week promoting yourself and following up on leads. You need to be organized and disciplined to avoid double-booking yourself and to get the work done by agreed-upon deadlines.

 

You’ll also need to be diligent when it comes to taxes2. The money made from your side job will need to be reported on a 1040 Form at tax time. If you fail to report your earnings, you might find yourself subject to tax assessments or penalties. On the plus side of tax time with a side gig, you may be able to deduct certain expenses like car mileage related to your business, necessary equipment, or even subscriptions to business-related organizations.

 

When it comes to side hustles, there’s no need to quit your day job to earn extra cash. The benefits outweigh the downfalls, and a bonus gig can actually benefit your day job by giving you additional skills and insights or by helping you make connections with clients you wouldn’t otherwise meet. You can work as little or as much as you’d like on your own schedule to pay down debts or save for big expenses.

 

Curious about how much you need to earn with a side gig to pay down your student loan debt? First, see how much you could save by using our Student Loan Refinance Calculator*. Once you know what your monthly payment could be, you can set a realistic target for your extra income. The Student Loan Refinance Calculator will show you your current vs estimated monthly payment, as well as estimated monthly and lifetime savings.

 

*Subject to credit approval. Terms and conditions apply.

 


 

1Subject to credit approval. Program requirements apply. Limit one $400 cash bonus per referral. Offer available to those who are above the age of majority in their state of legal residence who refer new customers who refinance their education loans with Education Loan Finance. The new customer will receive a $100 principal reduction on the new loan within 6-8 weeks of loan disbursement. The referring party will be mailed a $400 cash bonus check within 6-8 weeks after both the loan has been disbursed, and the referring party has provided ELFI with a completed IRS form W-9. Taxes are the sole responsibility of each recipient. A new customer is an individual without an existing Education Loan Finance loan account and who has not held an Education Loan Finance loan account within the past 24 months. Additional terms and conditions apply.

 

2This blog has been prepared for informational purposes only, and does not constitute tax or financial advice. Please consult your tax advisor for guidance on your personal tax situation.

 

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 13

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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:

How This Couple Is Paying Off $400,000 of Student Loan Debt in 5 Years

CNBC reported that Kayla and Ryan Anderson, a couple with degrees in physical therapy and prosthetics and orthotics respectively, have paid off $377,744 of their student debt and are on track to pay off $400,000 in five years using a “zero-based budget” combined with a “debt snowball” strategy.

 

The concept of zero-based budgeting is that your monthly income minus your expenses should equal zero, with all of your income being used for something of importance, eliminating frivolous spending. The debt snowball is a strategy from Dave Ramsey that involved paying off your smallest debt balances first.

 

Source: CNBC

 


Similarities Between Student Loan Debt Crisis and the Mortgage Crisis?

A Forbes article published this week involved the opinion of Mike Calhoun, who runs the nonprofit Center for Responsible Lending, in which Calhoun sees many similarities between the 2007-2008 mortgage crisis and today’s student loan crisis. Key similarities include the disconnect between borrowed debt and borrowers ability to pay off the debt and disproportionate impacts on minority groups.

 

Source: Forbes

 


University of Phoenix Cancels $141 Million in Student Debt in Settlement Over Deceptive Ads

The University of Phoenix has agreed to a $191 million settlement with the FTC regarding claims that students were harmed by deceptive advertising in which the University “touted relationships and job opportunities with AT&T, Yahoo!, Microsoft, Twitter, and The American Red Cross,” according to the FTC press release. Of the settlement, $50 million will be paid to the FTC and the remaining $141 million will cancel debts of students who first enrolled during the time that the deceptive ads ran.

 

Source: USA Today

 


Defrauded Borrowers Will Only Receive Partial Forgiveness Under New Devos Plan

Devos and the Trump administration have announced a new plan to address the backlog of over 210,000 student loan forgiveness claims for borrowers defrauded by for-profit colleges – but rather than providing full debt relief, they will now provide relief based on publicly available earnings data, in which they compare “median earnings of graduates who have made borrower defense claims to the median earnings of graduates from comparable programs.” If the median earnings of students from the school is lower than the median earnings of students from comparable schools, then it will be determined that the students have “suffered harm” and will receive relief, either full or in part based on how much lower the school’s median earnings are.

 

Source: US News

 

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.